Directors Report of Godfrey Phillips India Ltd.

Mar 31, 2025

Your Directors are pleased to present the 88^th Annual Report on the business and operations along with the Audited
Financial Statements of the Company for the financial year ended 31^st March 2025.

ECONOMIC ENVIRONMENT

Global macroeconomic conditions in 2025 reflect cautious optimism, as policymakers balance the twin objectives of
supporting growth and maintaining stability. Global GDP is projected to expand by 2.8%, in line with 2024, underscoring
the resilience of underlying economic fundamentals amid persistent global uncertainties. Advanced economies are
expected to grow by 1.8%, compared to 1.6% in the previous year, supported by steady performance in the United
States, where consumption and labour market conditions continue to drive expansion. The Euro area is projected to
regain some momentum following a subdued performance in 2024, aided by declining energy costs and improved
fiscal positions.

In contrast, growth in emerging and developing economies is expected to moderate slightly to 4.2%, reflecting tighter
external financing conditions and a slowdown in global trade. Despite these challenges, investment sentiment is showing
gradual improvement, supported by easing supply constraints and greater predictability in policy environments. However,
structural productivity gaps and region-specific vulnerabilities continue to warrant close monitoring.

Inflationary pressures continued to ease through 2025. Headline inflation is projected to decline to 3.4%, from 4.0%
in 2024, driven by stable commodity prices, improved logistics, and tighter fiscal controls in several major economies.
However, core inflation remains above central bank targets in a number of advanced economies, primarily due to
sustained cost pressures in services and wage growth. Central banks, including the US Federal Reserve and the European
Central Bank, are therefore expected to adopt a more measured approach to monetary policy, gradually transitioning
from restrictive stances while maintaining flexibility to respond to evolving inflation dynamics. While risks from geopolitical
developments and commodity price fluctuations persist, monetary authorities are better equipped to address them within
coordinated policy frameworks.

India continues to rank among the world''s fastest-growing major economies. Real GDP is projected to expand by 6.2%
in 2025, supported by robust domestic demand, rising capital expenditure, and favourable credit conditions. The United
Nations forecasts a slightly higher growth rate of 6.6%, citing sustained momentum in the manufacturing and services
sectors, complemented by ongoing public investment in infrastructure. While external challenges such as global trade
fluctuations, energy price volatility and climate-related risks remain, India''s policy consistency, fiscal discipline and
demographic profile provide a foundation for continued economic expansion and deeper integration into the global
economy. However, the current skirmishes on the international border with Pakistan could play spoilsport.

TOBACCO INDUSTRY

India continues to maintain its leadership as the world''s second-largest tobacco producer, with an estimated
production of approximately 800 million kilograms in FY 2024-25, reinforcing its critical contribution to India''s
agricultural economy. Tobacco cultivation occupies 0.24% of India''s total arable land, primarily in semi-arid and
rain-fed regions where alternative crops are economically less viable. This continued reliance on tobacco for farming
income underscores its economic importance to rural economies.

India''s tobacco production spans 13 states, with Andhra Pradesh, Karnataka, and Gujarat being major contributors.
The country produces a variety of tobacco types, such as Flue-Cured Virginia (FCV), Non-FCV, and other non-cigarette
tobacco products, catering to both domestic demand and global markets. In FY 2024-25, FCV production reached
304 million kilograms, accounting for approximately one-third of India''s total tobacco output.

India''s competitive advantage in the global tobacco trade is driven by low production costs and a wide product
offering. While cigarette exports remain modest, India has established a significant export presence in Bidis, Hookah
tobacco, Chewing tobacco, and Zarda, meeting regional preferences across international markets. In FY 2024-25,
India exported about 300 million kilograms of tobacco products, generating about ''12,000 crores in export revenues.
Projections for FY 2025-26 suggest that export revenues will likely exceed ''13,000 crores, driven by sustained global
demand and market diversification strategies.

The tobacco sector continues to be a key contributor to rural livelihoods, employing approximately 45.7 million
individuals across cultivation, processing, trading, and manufacturing. This sector also plays a major role in supporting
small landholder farmers, rural women, and tribal communities.

Despite its economic significance, the tobacco industry continues to face challenges due to higher taxation, health
awareness campaigns, and regulatory measures. These conditions have unwittingly contribute to the growth of the
illicit tobacco market, which undermines public health efforts and tax revenue collections. In FY 2023-24, illicit trade

was estimated to account for over 25% of the total tobacco market, contributing to a substantial loss in tax revenue.
For instance, FY 2023-24 tax revenues were reported to be ''72,788 crores, but illicit trade continues to hinder
additional revenue generation. Although enforcement agencies have seemingly stepped up actions such as seizures
and market surveillance, with over ''1,000 crores worth of tobacco products reported to have been seized in the last
year, continued collaboration between industry stakeholders and regulatory authorities is essential to address this
ongoing issue.

Looking ahead, the Indian tobacco industry is focusing on long-term, sustainable growth. Key priorities include enhancing
supply chain transparency, adopting best-in-class agricultural practices, and ensuring quality compliance across its
products. These efforts are expected to strengthen India''s position in the global tobacco market while contributing
to inclusive rural development. As India continues to innovate and adapt to changing consumer preferences and
regulatory changes, it remains well-positioned to continue leading the global tobacco industry in the years to come.

CONSUMER INDUSTRY

India''s consumer sector continues to make a significant contribution to the country''s economic growth. Supported by
favourable demographics, rising disposable incomes, urbanisation and accelerated digital adoption, this has emerged
as key contributors of consumption. Structural shifts in consumer preferences, reinforced by enabling policy interventions,
are shaping the future trajectory of this sector.

The Fast-Moving Consumer Goods FMCG market was valued at USD 245.4 billion in 2024 and is expected to expand
to approximately USD 615.87 billion by 2027, reflecting a CAGR of 27.9% from 2021. This growth is underpinned
by rising internet penetration, with over 886 million users online as of 2024. The increasing adoption of e-commerce
and direct-to-consumer formats is reshaping how consumers engage with brands. The online FMCG market is projected
to grow from USD 4,540 million in 2022 to USD 76,761 million by 2032. Digital marketing accounted for 44%
of the total USD 5.9 billion in digital advertising expenditure in 2024, underscoring its expanding role in brand
strategy. To address evolving demand, companies are strengthening supply chains, expanding distribution networks
and diversifying product offerings.

Looking ahead, India''s consumer sector is well-positioned to benefit from a convergence of supportive demand trends,
digital integration and investment activity. Sustained focus on innovation, agility and customer engagement will be
integral to driving long-term, inclusive growth and stakeholder value.

SEGMENTWISE PERFORMANCE IN 2024-25

Cigarettes

The domestic cigarette industry outlook in India remained reasonably optimistic. While the industry continued to grapple
with challenges such as escalating tobacco prices and input costs, it has shown resilience amidst global geopolitical
tensions and supply chain disruptions. Improving macroeconomic indicators, coupled with the prospects of a normal
monsoon, stable tobacco prices and a sustained recovery in rural demand, are expected to drive moderate volume growth
in the near term.

During the year, your Company has re-emphasized its focus on core brands and has taken specific actions to enhance
the brand image equity through product value adds and packaging enhancements. Four Square has demonstrated
remarkable resilience and strength and increased its market share. Similarly, legacy brands like Cavanders and North
Pole have also seen significant thrust in terms of improving consumer relevance and have seen a resurgence in the market.

We have also maintained our agility in investing behind variants like Shift and Define in Slim dia & FS Crush Tropical in
regular dia to focus our energies behind building on their success across the geographies. Their success highlights the
company''s strategic focus on innovation.

Strong distribution networks, including expanded permissible e-commerce channels and deeper penetration into untapped
markets, have also ensured wider product availability and enhanced accessibility to the consumers.

Going forward, our focus is on strengthening and expanding our market presence, increasing the consumer relevance of
our core brands, and staying ahead of curve in terms of addressing emerging consumer needs.

Confectionary Products

Company''s confectionary business has shown growth during the year and gross sales grew by 18% over last year
and operating profit grew by about 40%. Growth has largely come from Naturalz Imli which is the flagship brand
of the Company and hard boiled segment, backed by strong distribution network available across markets. We have
recently launched a new variant in the hard boiled segment by the name "Lemon Chaskaa", which seems to be
gaining some traction across launched markets.

Exports

The following table shows the status of exports for different products durina the year under report:

Commodity/Product	2024-25	2023-24
	Value (Rs. in crores)	Value (Rs. in crores)
Unmanufactured Tobacco/ Composite Leaf Blend	2010.19	1206.38
Cigarettes	67.87	108.65
Cut tobacco	42.23	28.37
Candy	0.11	Nil
Total	2120.40	1343.40

Like previous years, unmanufactured tobacco exports have grown this year too and your Company has done
commendably well by achieving the highest ever export revenue of Rs. 2010.19 Crores, registering a growth of
66.63% over the previous year. To expand the export footprint, your Company actively engaged with potential
customers and successfully secured additional orders. This initiative has not only enhanced Company''s revenue
stream but also strengthened its position in the global market. Also, your Company has identified and introduced
new crop varieties, including Sun-Cured Virginia, Kurnool Rustica, Lanka, and Lalchoupadia, alongside regular crops,
which further diversified its product portfolio and enhanced revenue growth. A focused approach, combined with
continuous monitoring of purchases, faster processing, and improved processing yields, has significantly enhanced
efficiency and operational effectiveness across the supply chain.

Retail

The Board of Directors of the Company, at its meeting held on 12^th April 2024 and after due consideration of the
stakeholders'' feedback, long-term performance of the retail business since its inception, prevailing market conditions
of retail sector and long-term business strategy of the Company, had decided to exit from carrying out the business
operations of its Retail Business Division. Subsequently, the Company has undertaken the necessary formalities for
an orderly exit and have closed the operations of the said division during the current year.

HUMAN RESOURCE DEVELOPMENT

Your Company''s Human Resource strategy centres on the "People First" philosophy. There has been continuous
emphasis on building progressive and contemporary people processes and practices, focused on delivering superior
business results and outstanding employee experience. The Company has continued to strengthen organization
capability through leadership development and succession planning. During the year, your Company has deepened
its investment in learning and development across levels through curated workshops. It is committed to fostering
a safe, inclusive and high performing culture and has also rolled out unique employee wellness interventions last
year. Your Company has been recognized for the 7^th time in a row, as a Great Place to Work, thereby instilling a
sense of pride in all its employees and stakeholders. The Company''s operating leadership remains connected to
the employees and has been instrumental in inspiring and motivating people to deliver their best. Your Company is
dedicated to building a future-ready inclusive workplace, aligned with its strategic priorities.

INFORMATION TECHNOLOGY (IT)

Your Company has continued to push the boundaries of technological innovation, focusing on transformative projects
that enhance operational efficiency and drive digital growth. This year, we have embarked on several key initiatives
which have significantly streamlined our processes and improved overall productivity.

There has been an increased focus on digitization of operational processes to improve visibility and deliver operational
efficiencies. We have modernized our Green Leaf Traceability system across the value chain. Key Business Intelligence
Dashboards have been implemented across various functions to enhance visibility and governance of compliances.
Further, with Generative Artificial Intelligence technologies gaining significant maturity in recent times and unlocking lot
more possibilities, few pilots are underway around these technologies to realize the potential for our internal processes.
Our IT infrastructure has been further strengthened with the expansion of SD-WAN (Software Defined - Wide Area
Network) solution across all the locations, improving scalability and resiliency. Our multi-cloud environment has also
been made more resilient to handle increasing data volumes, through network enhancements, thereby also ensuring

high availability of mission critical applications.

Our commitment to strong IT governance practices is reflected in the successful completion of ISO 27001 audit. We
have enhanced our cyber security posture to the next level through enhanced controls for data security. We continue
to focus on our employees as the strongest pillar of Information security through multiple initiatives in like Awareness
sessions, Quizzes, Simulation drills, etc. throughout the year.

TREASURY OPERATIONS

Your Company continues to enjoy the highest rating of ''CRISIL A1 '' for short term debt program, ''CRISIL AA /
Stable'' for long term loan, ''CRISIL AA /Stable'' for fund-based credit facilities and long term non-fund based facilities
& ''CRISIL A1 '' for short term non-fund-based facilities. With these ratings in place, your Company can raise funds at
most competitive terms. Following the principles of liquidity, safety and tax efficient returns, your Company has been
deploying its long term surplus funds primarily in debt-oriented schemes of reputed mutual funds. Also, the Company
continued to park its temporary surpluses in liquid/short-term schemes of various mutual funds.

FINANCIAL RESULTS

Continuing operations	2024-25	2023-24
	Rs. in Lakhs	Rs. in Lakhs
Profit before Depreciation and Tax from continuing operations	1,56,175.65	1,24,836.68
Less: Depreciation and amortization	11,970.13	10,516.83
Profit before tax from continuing operations	1,44,205.52	1,14,319.85
Less: Provision for tax
- current tax	30,673.51	21,126.88
- deferred tax	1,153.88	870.65
Profit after tax for the year from continuing operations	1,12,378.13	92,322.32
Discontinued operation
(i) Loss before tax from discontinued operation	(10,767.79)	(5,663.28)
(ii) Tax benefit from discontinued operation	2,710.03	1,425.33
Loss for the year from discontinued operation	(8,057.76)	(4,237.95)
Profit for the year	1,04,320.37	88,084.37
Add: Other comprehensive income/(loss)-net of tax	85.19	(383.43)
Total Comprehensive Income	1,04,405.56	87,700.94

During the year, the gross sales value registered a growth of 30.18% by reaching the level of Rs. 6,866.64 crores
from Rs. 5,274.68 crores last year. Similarly, the profit after tax is Rs. 1,043.20 crores as compared to Rs. 880.84
crores last year.

DIVIDEND

Your Directors are pleased to recommend the final dividend of 3,000 % i.e. Rs. 60/- per equity share of face value
of Rs.2/- each over and above the interim dividend of Rs 35 per equity share paid in December 2024. The proposed
dividend will absorb Rs. 311.96 crores. There is no amount proposed to be transferred to the general reserves.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence, no
details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are required to be reported.

ANNUAL RETURN

As required under Section 134(3)(a) and section 92(3) of the Companies Act, 2013, the Annual Return
as on 31^st March 2025 has been uploaded on the Company''s website and the same can be accessed at
https://godfrevphillips.co.in/sustainabililtv/annual-return.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

During the year under review, the Company has incorporated a wholly-owned subsidiary company by the
name of White Horse Realty Limited having its Registered Office at Mumbai, for the purpose of carrying out
business in the field of Real Estate Development.

As on 31^st March 2025, your Company had six operating subsidiaries, two associate companies and a
controlled entity. The basic details of these companies form part of the Annual Return as on 31^st March 2025,
which can be accessed through the link given above.

Form AOC-1 containing the salient features of financial statements of the Company''s subsidiaries and
associates is attached as ''Annexure - 1''. Note 47 of the consolidated financial statements shows the share
of each subsidiary, associate, and controlled entity in the consolidated net assets and profits of the Company.
The audited financial statements of these entities will be available for inspection during business hours at the
Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Indian Accounting Standard (IndAS-110)-Consolidated Financial Statements, Group Accounts
form part of this Annual Report. The Group Accounts have been prepared based on financial statements received
from the subsidiary, associate and controlled entities, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of
its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding
its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures which are in
line with the internal financial control framework requirements. There is an extensive programme of internal audit by
a firm of chartered accountants followed by periodic management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests
improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

During the year under review, the Company continued to deepen its commitment to Corporate Social
Responsibility (CSR) with a strategic focus on promotion of education, environmental sustainability, conservation
of natural resources, water management including maintaining quality of water, healthcare including preventive
healthcare, and support for good agricultural practices.

Large sum of money continues to be allocated to ongoing project for promoting education through programs aimed
at imparting special education and employment enhancing vocational skills. While tobacco farmers in Andhra
Pradesh remained a primary stakeholder in the community development programs, the Company expanded
its CSR footprint to include places like Delhi, Mumbai, Ahmedabad, and Jammu—with its healthcare program
reaching out to people in low-income bracket who form a critical yet underserved link in the distribution chain.

In drought-prone and rain shadow regions of Andhra Pradesh with poor groundwater levels, we maintained three
biodiversity parks spanning 23.5 acres, nurturing over 9,000 native trees. Our fourth biodiversity park in Vithamrajupalli
village was successfully handed over to the local community. Additionally, we ensured the healthy maintenance of
70,000 saplings planted in the previous year, with the majority now self-sustaining. Complementing these efforts, we
built 11 new check-dams across three districts and repaired 30 existing ones, enhancing our total number of check-
dams to 47. Along with providing an irrigation source for a second crop and supporting groundwater recharge, these
interventions have helped the Company meet its water conservation ESG targets, with current water storage capacity
standing at over 2,10,000 kilolitres. The Chairperson of the CSR Committee and CMD of the Company, Dr. Bina Modi,
visited the region to personally review the impact of our efforts in Andhra Pradesh.

In line with our ESG commitment to ensure access to clean drinking water for the farming community, the
Company undertook a scientific initiative to identify, map, and geotag all RO water plants across 839 villages
in Andhra Pradesh. The study also included secondary drinking water sources and will serve as a blueprint for
future interventions in fluoride-contaminated areas, enabling targeted support to communities lacking safe or
improved potable water. It will allow us to build further on our existing 63 RO water plants.

To strengthen livelihood infrastructure, the Company constructed 103 new community agri-sheds, directly
benefiting over 700 farmers and supporting thousands more indirectly. These structures provide crucial shelter
for crops like tobacco, chili, and gram, as well as protection for livestock.

In line with our broader goal of environmental sustainability, feasibility studies for water harvesting structures
were initiated in rain-starved areas such as Ghaziabad, Uttar Pradesh, to extend water conservation efforts to
newer geographies.

Recognising the need for inclusive healthcare, the Company organized over 100 health screening camps for
people in low-income bracket and their families at wholesale dealer locations, enabling convenient access to
medical services. The camps offered comprehensive check-ups, including screenings on some 100 odd health
parameters and consultations with physicians and ophthalmologists, benefitting over 2,500 individuals.

The CSR efforts of the Company are overseen by the CSR Committee of the Board, constituted in accordance

with Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules,
2014. The composition, terms of reference, and details of the Committee''s meetings are provided in the Corporate
Governance Report. A brief outline of the CSR Policy, overview of activities undertaken, the amount spent/unspent,
reasons for any unspent amount, and the Committee''s composition are disclosed in ''Annexure - 2'' to this Report.

DIRECTORS

Based on the recommendation of the Nomination and Remuneration Committee, Dr. Bina Modi was re-appointed as the
Managing Director of the Company for another term of five years w.e.f. 14^th November 2024 by the Board at its meeting
held on 7^th August 2024, which appointment was subsequently approved by the shareholders at the 87^th Annual General
Meeting held on 6^th September 2024.

Based on the recommendation of the Nomination and Remuneration Committee, Ms. Charu Modi was appointed as an
Additional Director of the Company with effect from 6^th July 2024 by the Board in its meeting held on 6^th July 2024 and
thereafter as an Executive Director for a period of Five years w.e.f. 7^th September 2024 by the Board in its meeting held
on 7^th August 2024, which appointment was subsequently approved by the Shareholders at the 87^th Annual General
Meeting held on 6^th September 2024.

Based on the recommendation of the Nomination and Remuneration Committee, Mr. Avtar Singh Monga was
appointed as Non-Executive Independent Director of the Company for a period of Five consecutive years with effect from
12^th November 2024 by the Board of Directors in its Meeting held on 11^th November 2024, which appointment was
subsequently approved by the Shareholders by way of Postal Ballot on 20^th December 2024.

Dr. Lalit Bhasin ceased to be the Director of the Company on completion of his term as an Independent Director at the
87^th Annual General Meeting of the Company held on 6^th September 2024.

Mr. Samir Kumaar Modi ceased to be the Director/Executive Director of the Company on his retirement by rotation at the
87^th Annual General Meeting held on 6^th September 2024.

The Independent Directors of your Company have confirmed that:

(a) they meet the criteria of Independence as prescribed under Section 149 of the Companies Act, 2013 and Regulation
16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''SEBI Listing Regulations''); and

(b) they are not aware of any circumstance or situation which could impair or impact their ability to discharge duties with
an objective independent judgement and without any external influence.

Further, in the opinion of the Board, the Independent Directors fulfill the conditions prescribed under the SEBI Listing
Regulations and are competent, experienced, proficient and possess necessary expertise and integrity to discharge their
duties and functions as Independent Directors and are independent of the management of the Company.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

Details pertaining to the manner of evaluation of the Board, its committees and individual Directors including
Chairperson has been carried out, form part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Based on the recommendations of the Nomination and Remuneration Committee and the Audit Committee,
Mr. Vishal Dhariwal was appointed the Chief Financial Officer of the Company w.e.f. 1^st March 2025 by the Board
of Directors at its meeting held on 11^th November 2024, in place of Mr. Sunil Agrawal, who assumed the role of an
Advisor on key Business and Strategic matters w.e.f. 1^st March 2025 and continues to be the Senior Management
Personnel of the Company.

Further, based on the recommendations of the Nomination and Remuneration Committee, Mr. Pumit Kumar Chellaramani
was appointed as Company Secretary and Compliance Officer of the Company with effect from 12^th November 2024 by
the Board of Directors at its meeting held on 11^th November 2024, in place of Mr. Sanjay Kumar Gupta, who demitted
office on his superannuation effective from close of business hours on 11^th November 2024.

Dr. Bina Modi, Chairperson and Managing Director, Ms. Charu Modi, Executive Director, Mr. Sharad Aggarwal,
Whole-time Director, Mr. Vishal Dhariwal, Chief Financial Officer and Mr. Pumit Kumar Chellaramani, Company
Secretary of the Company are considered to be Key Managerial Personnel of the Company as on 31^st March 2025 as
per the provisions of the Companies Act, 2013 and the rules made thereunder.

BOARD MEETINGS

During the financial year 2024-25, the Board of Directors met 9 (nine) times. Details of the meetings of the Board
held during the year, form part of the Corporate Governance Report.

The composition, functions and details of the meetings of the Audit Committee held during the year, form part of the
Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all
risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and
external environment and incorporates suitable risk treatment processes in its strategy and business and operating
plans. The details of practices being followed by the Company in this regard, form part of the Corporate Governance
Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some
of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of
this Report. Your Company has a Risk Management Policy in place and is available on the Company''s website at
https://godfrevphillips.co.in/sustainabililtv/policies. The Risk Management Committee reviews the Policy, its
effectiveness and adequacy in periodic manner.

Details regarding constitution of Risk Management Committee and its role and responsibilities, form part of the
Corporate Governance Report.

ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) COMMITTEE

The Company has made sustainability as part of its ways of working during the year. The Board has set up a
committee to monitor progress in this regard and the Business Responsibility and Sustainability Report attached
herewith provides the necessary information on it.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the ''Act''), the Directors, to the best
of their knowledge, confirm that:

(i) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along
with proper explanation relating to material departures, if any;

(ii) Appropriate accounting policies have been applied consistently and judgements and estimates that are
reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit of the Company for the period;

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

(iv) The Annual Accounts have been prepared on a going concern basis;

(v) The internal financial controls to be followed by the Company have been laid down and such internal
financial controls are adequate and are operating effectively; and

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that
such systems are adequate and are operating effectively.

The above statements were also noted by the Audit Committee at its meeting held on 15^th May 2025.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties
referred in Section 188(1) of the Companies Act, 2013 is attached as ''Annexure - 3''.

Details of related party transactions and related disclosures are given in the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The aforesaid details are provided in the financial statements of the Company forming part of the Annual Report.
Please refer to Note 52 of the standalone financial statements.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

Details of Whistle Blower Policy/Vigil Mechanism form part of the Corporate Governance Report.

NOMINATION AND REMUNERATION POLICY

The appointment and remuneration of the Directors is recommended by the Nomination and Remuneration Committee
and approved by the Board, subject to approval of the shareholders.

The remuneration payable to the Directors is decided keeping into consideration long term goals of the Company
apart from the individual performance expected from them in pursuit of the overall objectives of the Company.

The remuneration of the Executive Directors including Managing Director and Whole-time Director, may consist of
both fixed compensation (which may be subject to annual increments) & variable compensation and shall be paid
as salary, commission, performance bonus, perquisites and fringe benefits, as may be approved by the Board and
within the overall limits as may be approved by the shareholders.

In accordance with the provisions of the Articles of Association of the Company and the Companies Act, 2013, a
sitting fee (presently fixed at Rs. 1,00,000 per meeting) is paid to the Non-executive Directors, including Independent
Directors, of the Company who are not drawing any remuneration, for attending any meeting of the Board or of any
Committee thereof.

The remuneration payable to the Directors shall be governed by the ceiling limits specified under section 197 of the
Companies Act, 2013 and shareholders'' approval taken from time to time.

The remuneration policy for other senior management employees including key managerial personnel aims at
attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the
employees. The remuneration to management grade employees involves a blend of fixed and variable component
with performance forming the core. The components of total remuneration vary for different employee grades and are
governed by industry practices, qualifications and experience of the employees, responsibilities handled by them,
their potentials, etc. Remuneration of senior management employees is also being looked at by the Nomination and
Remuneration Committee.

The Nomination and Remuneration Policy is available on the Company''s website at
https://godfrevphillips.co.in/sustainabililtv/policies. There is no major change in the Nomination and Remuneration
policy of the Company during the year.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

As mandated by the SEBI Listing Regulations, the Business Responsibility and Sustainability Report has been included
separately, as part of the Annual Report.

UNCLAIMED SHARES

Status of the unclaimed shares as on 31^st March 2025 has been mentioned in the Corporate Governance Report.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate
Governance in line with the provisions of law and particularly those stipulated in the SEBI Listing Regulations. Its
objective and that of its management and employees is to manufacture and market the Company''s products in a
way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business
partners and the national economy in general.

Certificate from the statutory auditors of the Company regarding compliance of the conditions of Corporate
Governance as stipulated in the SEBI Listing Regulations, is enclosed.

Certificate from Dr. Bina Modi, Chairperson and Managing Director as the Chief Executive Officer (CEO) and
Mr. Vishal Dhariwal, Chief Financial Officer (CFO) in relation to the financial statements for the year along with
declaration by the Functional CEO regarding compliance with the code of business conduct of the Company by the
Directors and the members of the senior management team of the Company during the year, were submitted to and
taken note of by the Board.

STATUTORY AUDITORS

In compliance with the provisions of Section 139 and other applicable provisions of the Companies Act,
2013 and the Companies (Audit and Auditors) Rules, S. R. Batliboi & Co. LLP, Chartered Accountants,
(FRN 301003E/E300005) were re-appointed as the Statutory Auditors for another term of five (5) consecutive years
until the date of conclusion of the 90^th Annual General Meeting, by the Shareholders in the 85^th Annual General
Meeting of the Company held on 26^th August 2022.

Auditors'' Report on the financial statements (both standalone as well as consolidated) of the Company forms part
of the Annual Report and does not contain any qualification, reservation, adverse remark or disclaimer. However,
as an exception, the Auditors'' in their report, have commented on the audit trail (edit log) feature of the accounting
software used by the Company for maintaining its books of accounts. The Auditors'' Report along with Note 51 to the
financial statements of the Company, is self-explanatory in this regard. The Audit report is not modified to that extent.

In terms of Section 148 of the Act and the Companies (Cost Records and Audit) Rules, 2014, Cost Audit &
maintenance of Cost Records were not applicable on the Company during Financial Year 2024-25.

SECRETARIAL AUDIT

The Secretarial Audit Report from Chandrasekaran Associates, Practicing Company Secretaries, for the year under
report is attached as ''Annexure - 4'' and does not contain any qualification, reservation, adverse remark or
disclaimer.

REPORTING OF FRAUDS BY AUDITORS

During the year under report, the Statutory Auditors and Secretarial Auditors have not reported any instance of fraud
committed against your Company by its officers or employees, to the Audit Committee or the Board, under section
143(12) of the Companies Act, 2013.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETING

Pursuant to Clause 9 of Revised Secretarial Standard -1 (SS -1), your Company has complied with applicable
Secretarial Standards issued by the Institute of Company Secretaries of India, during the financial year under report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under report, no significant and material order was passed by the Regulators/Courts that could
impact the going concern status of the Company and its future operations.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act,
2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014
are attached as ''Annexure - 5''.

Pursuant to the provisions of Section 136(1) of the Companies Act, 2013 and as advised, the statement containing
particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection
at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the
same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is
being sent to the Members excluding the aforesaid information.

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

The particulars prescribed under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the
Companies (Accounts) Rules, 2014 are attached as ''Annexure - 6''.

DIVIDEND DISTRIBUTION POLICY

As mandated by the SEBI Listing Regulations, the Board has formulated a dividend distribution policy
and the same is attached as ''Annexure - 7'' and is also available on the Company''s website at:
https://godfrevphillips.co.in/sustainabililtv/policies

KEY FINANCIAL RATIOS

Key Financial Ratios for the financial year 2024-25 with comparatives for the year 2023-24, are disclosed in
''Annexure - 8'' attached herewith.

EMPLOYEES SHARE PURCHASE SCHEME

During the year under report, the Company has implemented a share-based employee long term incentive plan in
the name "Godfrey Phillips Employees Share Purchase Scheme-2024" ("ESPS 2024") which is being administered
through the irrevocable Trust in the name of "Godfrey Phillips ESPS Trust". ESPS 2024 is being supervised by the
Nomination and Remuneration Committee. The ESPS 2024 was implemented in compliance with the provisions of
the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

As at 31^st March 2025, the Company has two Employees Share Purchase Schemes viz: ESPS 2024 and ESPS 2023
and no change has been made in both the schemes during the year under report. The Company has received a
certificate from the Secretarial Auditors that the ESPS 2024 and ESPS 2023 have been implemented in accordance

with the applicable SEBI Guidelines and the resolutions passed by the shareholders. The Certificate will be placed
at the Annual General Meeting for inspection by the Members.

Details of the share based payments made during the year are provided in Note 48 to the financial
statements of the Company. Further, the disclosures pursuant to the SEBI (Share Based Employee Benefits and
Sweat Equity) Regulations, 2021 and Companies Act, 2013 are available on the website of the Company at
https://www.godfrevphillips.co.in/emplovee-benefit-scheme-documents.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION,
PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressal of sexual harassment of women at
workplace in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received
relating to sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under
this policy.

During the year under report, no complaint was filed with the Company.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF YOUR
COMPANY, WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE
OF THIS REPORT

No material changes and commitments have occurred between the end of the financial year and the date of this
report, affecting the financial position of the Company.

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year under review, there was no change in the nature of business of the Company except that the
Company discontinued carrying out the business operations of its Retail Business Division.

DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND
BANKRUPTCY CODE, 2016

During the year under report, no application was made against the Company nor any proceeding is pending
against the Company under the Insolvency and Bankruptcy Code, 2016.

THE FUTURE

Availability of best in the class manufacturing facilities with right blend of technology, vast distribution network,
adequate financial resources, stable tax regime and motivated manpower backed by ''people first'' policy, will
continue to facilitate your Company to drive growth across its various product categories both in domestic and
international markets. Your Directors are confident that the Company will continue to create value for its shareholders
and other stakeholders.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Company''s bankers,
customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors
are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in
the Company.

For and on behalf of the Board

DR. BINA MODI
CHAIRPERSON

Place: New Delhi
Dated: 15^th May 2025

---

Mar 31, 2024

Your Directors are pleased to present the 87^th Annual Report on the business and operations along with the Audited Financial Statements of the Company for the financial year ended 31^st March 2024.

ECONOMIC ENVIRONMENT

The global economy demonstrated resilience and robust performance in 2023. Despite challenges such as high inflation, tightening monetary policies, geopolitical risks, and elevated debt levels, global GDP achieved considerable growth, expanding by an estimated 3.2%. The US economy advanced with a growth rate of 2.5%, marking a significant improvement from the previous year. Similarly, the European Union saw a turnaround, registering a modest expansion of 0.4% after a contraction in 2022. This performance underscores the resilience and adaptability of these economies in navigating through difficult times. Looking ahead, while projections indicate a potential slowdown in growth for 2024, the momentum gained in 2023 provides a strong base for continued economic recovery. (Source: IMF WOE April 2024 Page No.10).

Inflation remained a persistent concern throughout 2023, with global rates showing signs of moderation but remaining elevated overall. From 8.1% in 2022, inflation dropped to an estimated 5.7%, reflecting efforts to mitigate inflationary pressures. Nevertheless, many economies continued to deal with inflation rates exceeding central bank targets, leading to gradual adjustments in monetary policies to achieve desired levels. Factors such as persistent disruptions in supply chains, ongoing adjustments in labor markets, and geopolitical tensions contributed to the inflationary environment, necessitating vigilant monitoring and strategic interventions to ensure stability and sustainable economic growth. (Source: UN WESP 2024 Executive Summary 4 and 5)

On the domestic front, the Indian economy consistently demonstrated strong growth and resilience throughout 2023. With an estimated GDP growth of approximately 6.3%, India maintained its position as one of the fastest-growing large economies globally. This achievement underscores the nation''s commitment to economic development and prosperity. However, challenges such as tightening financial conditions, balance of payments concerns, and potential impacts from climate changes posed significant hurdles. Nevertheless, strong domestic demand, along with government initiatives in infrastructure development, drove the economy forward, demonstrating India''s potential as a significant contributor to the global economic landscape. Looking ahead, with GDP growth expected to remain strong at 6.8% during 2024-25, India is well-prepared to navigate through challenges and capitalize on the opportunities. (Source: MF WOE April 2024 Page No.10)

TOBACCO INDUSTRY

India continues to maintain its position as the world''s second-largest producer of tobacco, a significant indicator of its role in global agricultural markets. With an estimated annual production of approximately 800 million kilograms, the tobacco sector remains a crucial component of India''s agricultural landscape, contributing to employment, revenue generation, and foreign exchange earnings. Tobacco cultivation occupies a modest 0.24% of the country''s total arable land area, predominantly in semi-arid and rain-fed regions where cultivating alternative crops is mostly economically unviable. Tobacco cultivation in India spans across 13 states, with diverse varieties cultivated under varying agroecological conditions. India''s production pattern, including Flue-Cured Virginia (FCV), Non-FCV, and Non-Cigarette Tobacco products, deviates from global trends, showcasing its adaptability to meet diverse market demands. India is the third-largest producer of FCV tobacco globally, with an annual production of around 230 million kilograms. (Source: https://www.tiionline.org/facts-sheets/tobacco-production/)

India has a competitive advantage in the global tobacco trade, owing to its low production costs and diverse product offerings. While the country''s share in world cigarette exports remains modest, it excels in exporting scented Bidis, Hookah tobacco paste, chewing tobacco, and Zarda, thus catering to diverse consumer preferences worldwide. Over the past five years, exports of tobacco and tobacco products have recorded an increase of 76% and 209% in quantity and value terms, respectively. (Source: https://www.ctri.icar.gov.in/for tobaccoEconomy.php)

The tobacco industry in India sustains livelihoods for millions of individuals, offering employment opportunities to farmers, laborers, and those involved in processing and manufacturing. Approximately 45.7 million people are directly and indirectly employed in the sector, benefiting small-scale farmers, rural women, and tribal communities. In FY2022-23, tobacco and tobacco products contributed Rs. 72,788 crores to the government''s tax revenue, underscoring its significance in fiscal planning and resource allocation. Additionally, tobacco exports generated approximately Rs. 9,700 crores in foreign exchange, highlighting its role in strengthening India''s trade balance. (Source: https://www.tiionline.org/facts-sheets/livelihood/)

Despite its economic importance, the tobacco industry in India faces challenges, including heightened health awareness, higher taxes, and regulatory restrictions. The implementation of higher taxes and regulatory measures has inadvertently fueled the growth of the illegal cigarette trade, posing threats to public health and national security. To address these challenges, the government has intensified its efforts to combat the illegal cigarette trade through regular raids and seizures. However, the scale of illegal trade remains significant, necessitating continued vigilance and collaborative efforts between industry stakeholders and law enforcement agencies.(Source: https://www.tiionline. org/publications/tii-booklets/).

Looking ahead, India''s tobacco industry remains ready for growth, leveraging its diverse product offerings and improving quality standards. By embracing sustainable practices and fostering innovation, the sector can further strengthen its position in the global tobacco trade, contributing to economic development and livelihood enhancement across the country.

CONSUMER AND RETAIL INDUSTRY

The Indian FMCG segment, plays a key role in propelling India''s economic growth. In 2023, the FMCG market was valued at USD 121.8 billion and is projected to surge to approximately USD 615.87 billion by 2027, achieving a compound annual growth rate (CAGR) of 27.9% from 2021. This strong growth trajectory is largely driven by India''s expanding internet user base, which reached around 780 million in 2023. This increase in connectivity is enhancing digital market integration and significantly influencing consumer behaviors, with the FMCG online market expected to grow from USD 4,540 million in 2022 to USD 76,761 million by 2032. Additionally, the sector''s emphasis on digital marketing is evidenced by its 42% share of the total USD 9.92 billion digital advertising expenditure in 2023, and it has also seen active investment activities aimed at enhancing production capabilities and market expansion. (Source: https://www.ibef.org/download/1714543650_FMCG_March_2024.pdf)

Despite the growth prospects, the sectors face several challenges that could influence their development trajectory in India. These include the need to adapt to rapidly changing technological advancements, need to manage supply chain disruptions effectively, thin margins, surging real estate rent, online business including quick commerce and need to navigate an evolving regulatory landscape. Furthermore, there is a pressing requirement to align with consumer preferences that are increasingly shifting towards more sustainable and health-conscious products. This shift demands continuous innovation and adaptation in product offerings and business models.

SEGMENTWISE PERFORMANCE IN 2023-24

Cigarettes

The domestic cigarettes Industry, after the strong bounce-back of FY23, showcased a volume consolidation on a high base and largely remained stable. The industry faced an increasing impact of the global geopolitical tensions which began last year and has caused further strain on the global supply chain. The industry also experienced sharp escalation in tobacco prices and other input costs which put pressure on margins. However, improving macro-economic indicators. Prospects of normal monsoon and recent trends in rural demand recovery after a long gap is expected to propel volume growth in near term.

During the year, your company not only managed these accentuated challenges but also leveraged our brand equity and regained back shares in one of our core markets. The Company continued its strong performance in Regular Size FilterTipped (RSFT) segment with core variants like Four Square Special and Four Square Crush showcasing good growth. Your Company has also established a foothold in King Size Filter-Tipped (KSFT) segment with some of our recent additions in the portfolio like Stellar in a contemporary format. This has been achieved by relentless pursuit of spends efficiency and effectively deploying support to these variants.

In continuation of Company''s mission to deliver consumer delight, the endeavour remains to make our brands more and more relevant to the target consumers. We remain committed to delivering higher value to our shareholders by improving the image equity of our core brands and adding pricing power to them, bringing more cost efficiency in our business, leading with innovation to gain market share and mind share of our consumers while using our sales & distribution strength and expanding our reach further into untapped markets.

Confectionary Products

Your Company''s confectionery business has shown growth during the year and gross sales grew by 30% over last year. Growth has largely come from Naturalz Imli which is the flagship brand of the Company, backed by strong distribution network available across markets. Funda Gumshums chewing gum is also gaining consumer traction.

Exports

The following table shows the status of exports for different products during the year under report:

Commodity/Product	2023-24	2022-23
	Value (Rs. in crores)	Value (Rs. in crores)
Cigarettes	108.65	149.71
Unmanufactured tobacco/CLB	1206.38	779.69
Cut tobacco	28.37	25.30
Total	1343.40	954.70

In line with other business goals, your Company has surpassed targets across all categories.

As like earlier years, unmanufactured tobacco exports have been growing year on year and this year your Company has done commendably well by achieving the highest ever export revenue of Rs. 1206 Crores, which is a 55% increase over the previous year. Your Company has now increased its customer base and started exporting to various new geographies. We are continuously focussing on strengthening our relationship with the non-FCV tobacco farmers and are aiming at bringing efficiency in both tobacco buying and processing processes.

Retail

The Company operates ''round the clock''s convenience store format under the name 24Seven having more than 150 stores/kiosks spread largely across Delhi NCR, Punjab, Telangana etc. Gross sales during the year were Rs.484 crores. However, the Board of Directors of the Company at its meeting held on 12^th April 2024, after due consideration of the stakeholders'' feedback, long-term performance of the retail business since inception, prevailing market conditions of retail sector and long-term business strategy of the Company, has decided to exit from carrying out the business operations of its Retail Business Division. The exit will be subject to completion of the necessary formalities.

HUMAN RESOURCE DEVELOPMENT

Your Company''s "People First" philosophy has been at the core of its Human Resources strategy. This has resulted in progressive and contemporary people processes and practices, aimed to deliver best in class business results and exemplary employee experience. Your Company''s consistent focus on building leadership and managerial capabilities, enhancing skills and competencies of the workforce, providing a safe and inclusive work environment and sustaining a strong performance culture, has accelerated organizational performance and helped deliver better business results. The recognition of your Company as a Great Place to Work, for the 6th consecutive year, reflects its "High Trust - High Performance" work culture. The Company''s unwavering commitment to its people instils a sense of pride and confidence in your workforce as well as all other stakeholders. The Company''s operating leadership has always been connected to employees and has played a pivotal role in inspiring and motivating people to do their best, and this has laid the foundation of the rising growth trajectory of the organization.

INFORMATION TECHNOLOGY (IT)

Your Company continues to leverage technology to increase digital footprint and realize operational efficiencies. It has made significant progress in digitization of core processes across the enterprise to improve visibility. There have been substantial initiatives to modernize and upgrade some of the core operational support systems including ERP and Data Lake platforms thereby ensuring scalability and improved user experience. Your Company continues to realize benefits of improved collaboration and productivity through its Digital Supply Chain planning platform.

Also, we have modernized our IT Infrastructure components to improve scalability and offer higher resiliency through deployment of SD-WAN (Software Defined - Wide Area Network) solution across locations. Your Company continues to build on its Green IT journey through cloud adoption and consolidation thereby enabling better manageability, efficiencies, and availability of core operational platforms.

We continue to improve on our IT security footprint across the enterprise by leveraging state-of-the-art solutions for cloud security, network traffic segmentation and ongoing threat assessment across its IT landscape. Your Company continues to emphasize on strong IT governance practices through well-defined processes and has been recently re-certified for ISO-27001.

TREASURY OPERATIONS

Your Company continues to enjoy the highest rating of ''CRISIL A1 '' for short term debt program, ''CRISIL AA / Stable'' for long term loan, ''CRISIL AA /Stable'' for fund-based credit facilities and long term non-fund based facilities & ''CRISIL A1 '' for short term non-fund-based facilities. With these ratings in place, your Company can raise funds at most competitive terms. Following the principles of liquidity, safety and tax efficient returns, your Company has been deploying its long term surplus funds primarily in debt-oriented schemes of reputed mutual funds. Also, the Company continued to park its temporary surpluses in liquid/short-term schemes of various mutual funds.

FINANCIAL RESULTS

	2023-24	2022-23
	Rs. in Lakhs	Rs. in Lakhs
Profit before Depreciation and Tax	122924.26	94025.32
Less: Depreciation and amortization	14267.69	15064.64
Profit before tax	108656.57	78960.68
Less: Provision for tax
- current tax	19798.34	18439.82
- deferred tax	773.86	(316.84)
Profit after tax for the year	88084.37	60837.70
Add: Other comprehensive income/(loss)-net of tax	(383.43)	191.57
Total comprehensive income	87700.94	61029.27

During the year, the gross sales value registered a growth of 23.89% by reaching the level of Rs. 5274.68 crores from Rs. 4257.65 crores last year. Similarly, the profit after tax is Rs.880.84 crores as compared to Rs. 608.38 crores last year.

DIVIDEND

Your Directors are pleased to recommend the dividend of 2800% i.e. Rs. 56 per equity share of face value of Rs.2/-each. The proposed dividend will absorb Rs. 291.16 crores. There is no amount proposed to be transferred to the general reserves.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence, no details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are required to be reported.

ANNUAL RETURN

As required under Section 134(3)(a) and section 92(3) of the Companies Act, 2013, the Annual Return as on 31^st March 2024 has been uploaded on the Company''s website and the same can be accessed at https://www.godfrevphillips.co.in/sustainabililtv/annual-return.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

As on 31^st March 2024, your Company had five operating subsidiaries, two associate companies and a controlled entity. The basic details of these companies form part of the Annual Return as on 31^st March 2024, which can be accessed through the link given above.

Form AOC-1 containing the salient features of financial statements of the Company''s subsidiaries and associates is attached as ''Annexure - 1''. Note 47 of the consolidated financial statements shows the share of each subsidiary, associate, and controlled entity in the consolidated net assets and profits of the Company. The audited financial statements of these entities will be available for inspection during business hours at the Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Indian Accounting Standard (IndAS-110)-Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared based on financial statements received from the subsidiary, associate and controlled entities, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures which are in line with the internal financial control framework requirements. There is an extensive programme of internal audit by a firm of chartered accountants followed by periodic management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

During the year under report, the Company has made significant progress in its Corporate Social Responsibility (CSR) efforts. The Company focused on analysing and assessing its CSR strategies to better align with its ESG goals and sustainability journey. The initiatives were tailored to address the urgent and long-term needs of the communities served, especially focusing on the well-being of non-FCV tobacco farmers. Efforts included initiatives for water and soil conservation, environmental enhancement, improved healthcare access, eradication of child labour, promotion of education, and support for sustainable agriculture.

The Company advanced toward its goal of providing safe drinking water by constructing 5 new RO water plants, bringing the total to 63 in the region. Additionally, 6 health camps were organized, benefiting 770 individuals, adding to the over 280 health camps that have directly benefited over 50,000 people.

To support livelihoods, the Company built 52 community agri-sheds, providing essential shelter for harvested produce and livestock for over 265 farmers. Since the start of our CSR operations, dedicated to good agriculture practices, the Company has constructed 36 check dams in water-stressed regions, ensuring additional water sources for irrigation and other purposes. Furthering efforts towards water conservation, this year the Company assessed all the existing check dams spread across our areas of operations to measure total and actual water storage capacity, identify needs of repair and map requirements for new check dams.

The commitment to education and eliminating child labour was demonstrated through awareness campaigns in 70 villages and awarding scholarships to 420 deserving students for their academic dedication and high attendance.

Environmental sustainability remained a priority, with the maintenance of 4 biodiversity parks that house 9450 trees of native species and the planting of new 70,000 saplings in a 300 acres of semi-arid region of Andhra Pradesh with the objective of turning it into a lush green space for the community.

Further, Dr. Bina Modi, Chairperson and Managing Director of the Company has been recognized by the Hon''ble Vice President of India for ''Outstanding Contributions to the cause of Corporate Social Responsibility''. These accomplishments underscore our unwavering commitment to holistic community development and the Company''s dedication to making a positive impact in the regions it serves.

The Company has constituted a CSR Committee of the Board in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The composition, terms of reference and details of meeting of CSR Committee forms part of Corporate Governance Report. The brief outline of the CSR policy, overview of the activities undertaken with amounts spent/unspent thereon during the year, reason for unspent CSR thereof and composition of the Committee has been disclosed in ''Annexure - 2''.

DIRECTORS

Based on the recommendation of the Nomination and Remuneration Committee (''NRC''), Mr. Ajay Vohra was appointed as Non-Executive Independent Director of the Company for a period of five consecutive years w.e.f. 1^st July 2023 by the Board at its meeting held on 27^th May 2023, which appointment was subsequently approved by the shareholders at the 86^th Annual General Meeting held on 1^st September 2023.

Based on the recommendation of the NRC, Mrs. Nirmala Bagri, Non-Executive Independent Director was re-appointed for the second term of five consecutive years w.e.f. 1^st April 2024 by the Board at its meeting held on 27^th May 2023, which appointment was subsequently approved by the shareholders at the 86^th Annual General Meeting held on 1^st September 2023.

The Independent Directors of your Company have confirmed that:

(a) they meet the criteria of Independence as prescribed under Section 149 of the Companies Act, 2013 and Regulation 16 of the SEBI (LODR) Regulations, 2015; and

(b) they are not aware of any circumstance or situation which could impair or impact their ability to discharge duties with an objective independent judgement and without any external influence.

Further, in the opinion of the Board, the Independent Directors fulfill the conditions prescribed under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (''SEBI Listing Regulations'') are competent, experienced, proficient and possess necessary expertise and integrity to discharge their duties and functions as Independent Directors and are independent of the management of the Company.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

Details pertaining to the manner of evaluation of the Board, its committees and individual Directors including Chairperson has been carried out, form part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Dr. Bina Modi, Chairperson and Managing Director, Mr. Samir Kumaar Modi, Executive Director, Mr. Sharad Aggarwal, Whole-time Director, Mr. Sunil Agrawal, Chief Financial Officer and Mr. Sanjay Kumar Gupta, Company Secretary of the Company are considered to be Key Managerial Personnel of the Company as per the provisions of the Companies Act, 2013 and the rules made thereunder.

BOARD MEETINGS

Details of the meetings of the Board held during the year, form part of the Corporate Governance Report.

AUDIT COMMITTEE

The composition, functions and details of the meetings of the Audit Committee held during the year, form part of the Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and external environment and incorporates suitable risk treatment processes in its strategy and business and operating plans. The details of practices being followed by the Company in this regard, form part of the Corporate Governance Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of this Report. Your Company has a Risk Management Policy in place and is available on the Company''s website at https://www.godfrevphillips.co.in/sustainabililtv/policies. The Risk Management Committee reviews the Policy, its effectiveness and adequacy in periodic manner.

Details regarding constitution of Risk Management Committee and its role and responsibilities, form part of the Corporate Governance Report.

ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) COMMITTEE

The Company has made sustainability as part of its ways of working during the year. The Board has set up a committee to monitor progress in this regard and the Business Responsibility and Sustainability Report attached herewith provides the necessary information on it.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the ''Act''), the Directors, to the best of their knowledge, confirm that:

(i) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(ii) Appropriate accounting policies have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period;

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

(iv) The Annual Accounts have been prepared on a going concern basis;

(v) The internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and are operating effectively; and

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

The above statements were also noted by the Audit Committee at its meeting held on 30^th May 2024.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties referred in Section 188(1) of the Companies Act, 2013 is attached as ''Annexure - 3''.

Details of related party transactions and related disclosures are given in the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered by the provisions of Section 186 of the Companies Act, 2013 (if any) are given in the notes to the standalone financial statements.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

Details of Whistle Blower Policy/Vigil Mechanism form part of the Corporate Governance Report.

NOMINATION AND REMUNERATION POLICY

The appointment and remuneration of the Directors is recommended by the Nomination and Remuneration Committee and approved by the Board, subject to approval of the shareholders.

The remuneration payable to the Directors is decided keeping into consideration long term goals of the Company apart from the individual performance expected from them in pursuit of the overall objectives of the Company.

The remuneration of the Executive Directors including Managing Director and Whole-time Director, may consist of both fixed compensation (which may be subject to annual increments) & variable compensation and shall be paid as salary, commission, performance bonus, perquisites and fringe benefits, as may be approved by the Board and within the overall limits as may be approved by the shareholders.

In accordance with the provisions of the Articles of Association of the Company and the Companies Act, 2013, a sitting fee (presently fixed at Rs. 1,00,000 per meeting) is paid to the Non-executive Directors, including Independent Directors, of the Company who are not drawing any remuneration, for attending any meeting of the Board or of any Committee thereof.

The remuneration payable to the Directors shall be governed by the ceiling limits specified under section 197 of the Companies Act, 2013 and shareholders'' approval taken from time to time.

The remuneration policy for other senior management employees including key managerial personnel aims at attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the employees. The remuneration to management grade employees involves a blend of fixed and variable component with performance forming the core. The components of total remuneration vary for different employee grades and are governed by industry practices, qualifications and experience of the employees, responsibilities handled by them, their potentials, etc. Remuneration of senior management employees is also being looked at by the Nomination and Remuneration Committee.

During the year under review, the Board of Directors reviewed the Nomination and Remuneration Policy and amended it to make it more comprehensive by adding detailed clauses on appointment, tenure, removal of Directors and also added the clause for review of the Policy. The Nomination and Remuneration Policy is available on the Company''s website at https://www.godfrevphillips.co.in/sustainabililtv/policies.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

As mandated by the SEBI Listing Regulations, the Business Responsibility and Sustainability Report has been included separately, as part of the Annual Report.

UNCLAIMED SHARES

Status of the unclaimed shares as on 31^st March 2024 has been mentioned in the Corporate Governance Report.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and particularly those stipulated in the SEBI Listing Regulations. Its objective and that of its management and employees is to manufacture and market the Company''s products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the statutory auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in the SEBI Listing Regulations, is enclosed.

Certificate from Dr. Bina Modi, Chairperson and Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Executive Vice President-Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the Functional CEO regarding compliance with the code of business conduct of the Company by the Directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

STATUTORY AUDITORS

In compliance with the provisions of Section 139 and other applicable provisions of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s)/re-enactment(s)/ amendment(s) thereof, for the time being in force), S. R. Batliboi & Co. LLP, Chartered Accountants, (FRN 30l0o3E/E300005) were re-appointed as the Statutory Auditors for another term of five (5) consecutive years until the date of conclusion of the 90^th Annual General Meeting, by the Shareholders in the 85^th Annual General Meeting of the Company held on 26^th August 2022.

Auditors'' Report on the financial statements of the Company forms part of the Annual Report and does not contain any qualification, reservation, adverse remark or disclaimer. However, as an exception, the Auditors'' in their report, have commented on the audit trail (edit log) feature of the accounting software used by the Company for maintaining its books of accounts. The Auditors'' Report along with Note 54 to the financial statements of the Company, is selfexplanatory in this regard. The Audit report is not modified to that extent.

COST AUDIT

The provisions of Cost Audit are not applicable on the Company.

SECRETARIAL AUDIT

The Secretarial Audit Report from Chandrasekaran Associates, Practicing Company Secretaries, for the year under report is attached as ''Annexure - 4'' and does not contain any qualification, reservation, adverse remark or disclaimer.

REPORTING OF FRAUDS BY AUDITORS

During the year under report, the Statutory Auditors and Secretarial Auditors have not reported any instance of fraud committed against your Company by its officers or employees, to the Audit Committee or the Board, under section 143(12) of the Companies Act, 2013.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETING

Pursuant to Clause 9 of Revised Secretarial Standard -1 (SS -1), your Company has complied with applicable Secretarial Standards issued by the Institute of Company Secretaries of India, during the financial year under report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under report, no significant and material order was passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations.

There is no proceeding pending under the Insolvency and Bankruptcy Code, 2016. There was no instance of onetime settlement with any Bank or Financial Institution.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as ''Annexure - 5''.

Pursuant to the provisions of Section 136(1) of the Companies Act, 2013 and as advised, the statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is being sent to the Members excluding the aforesaid information.

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

The particulars prescribed under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as ''Annexure - 6''.

DIVIDEND DISTRIBUTION POLICY

As mandated by the SEBI Listing Regulations, the Board has formulated a dividend distribution policy and the same is attached as ''Annexure - 7'' and is also available on the Company''s website at: https://www.godfreyphillips. co.in/sustainabililty/policies

KEY FINANCIAL RATIOS

Key Financial Ratios for the financial year 2023-24 with comparatives for the year 2022-23, are disclosed in ''Annexure - 8'' attached herewith.

EMPLOYEES SHARE PURCHASE SCHEME

During the year under report, the Company has implemented a share-based employee long term incentive plan in the name "Godfrey Phillips Employees Share Purchase Scheme-2023" ("ESPS 2023") which is being administered through an irrevocable Trust formed for this purpose in the name of "Godfrey Phillips ESPS Trust". ESPS 2023 is being supervised by the Nomination and Remuneration Committee.

The ESPS 2023 was implemented in compliance with the provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and there has been no change in the scheme during the year under report. The Company has received a certificate from the Secretarial Auditors that the ESPS 2023 have been implemented in accordance with the applicable SEBI Guidelines and the resolutions passed by the shareholders. The Certificate will be placed at the Annual General Meeting for inspection by Members.

Details of the share based payments made during the year are provided in Note 48 to the financial statements of the Company. Further, the disclosures pursuant to the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations in respect of ESPS 2023 are available on the website of the Company at https://www.godfreyphillips. co.in/sustainabililty/annual-reports

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressal of sexual harassment of women at workplace in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received relating to sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy.

During the year under report, no complaint was filed with the Company.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF YOUR COMPANY, WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THIS REPORT

Subsequent to the year end, the Board of Directors of the Company at its meeting held on 12^th April 2024, after due consideration of the stakeholders'' feedback, long-term performance of the retail business since inception, prevailing market conditions of retail sector and long-term business strategy of the Company, has decided to exit from carrying out the business operations of its Retail Business Division (''Division). The exit will be subject to completion of the necessary formalities.

THE FUTURE

Availability of best in the class manufacturing facilities with right blend of technology, vast distribution network, adequate financial resources, stable tax regime and motivated manpower backed by ''people first'' policy, will facilitate your Company to continue to drive growth across its various product categories both in domestic and international markets. Your Directors are confident that the Company will continue to create value for its shareholders and other stakeholders.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Company''s bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in the Company.

For and on behalf of the Board

DR. BINA MODI CHAIRPERSON

Place: New Delhi Dated: 30^th May 2024

---

Mar 31, 2023

Your Directors are pleased to present the 86th Annual Report on the business and operations along with the Audited Financial Statements of the Company for the financial year ended March 31, 2023.

ECONOMIC ENVIRONMENT

Global economic activity slowed in 2022 following a strong recovery in 2021 due to the pickup in trade and commerce backed by higher vaccination rates, robust consumer spending and an increase in investment which was further supported by the government''s favorable monetary and fiscal policies. According to the April 2023 report by the International Monetary Fund (IMF), the global gross domestic product (GDP) for 2022 was projected to have been affected by the conflict in Ukraine and the deceleration in China, resulting in a growth rate of 3.4%. (Source: IMF World Economic Outlook April 2023). In 2022, the US economy experienced a GDP growth of 2.1%, which represented a slowdown compared to the robust growth of 5.7% saw in 2021. Similarly, the European economy recorded a GDP growth of 3.5% in 2022, reflecting a slight deceleration from the 5.3% growth observed in 2021. In Asia, China recorded GDP growth of 3.0% in 2022, compared to 8.1% in 2021. (Source: IMF World Economic Outlook April 2023). Europe also experienced sluggish growth, as several economies in Central and Eastern Europe, along with energy-intensive industries, faced output declines due to the significant impact of soaring energy prices. During the latter part of 2022, US saw an uptick in its economic activities as its labor market remained resilient, mitigating the effects of increased interest rates on private investment.

Inflation at a global level is projected to slowly ease throughout 2023 and 2024. However, it is anticipated to remain above central bank targets until the latter half of 2024 in most countries. This is primarily attributed to significant increases in service prices and cost pressures arising from tight labor markets. The uncertainty surrounding the geopolitical conflict poses a significant risk that will influence monetary policy adjustments. It is crucial for countries to address and mitigate inflationary pressures, while fiscal support should be directed towards the vulnerable segments of the population. At domestic levels, implementation of structural reforms is essential to revive productivity and stimulate economic activities. Globally, countries must enhance international cooperation to alleviate supply constraints, thereby controlling the prices of commodities and managing energy shortage, as well as preventing low-income countries from falling into debt.

The Indian economy registered a robust recovery resulting in GDP growth of 6.8% in 2022 and was one of the fastest-growing economies in the world. However, the growth trajectory was impacted due to the dual challenges of two pandemic waves and geopolitical tensions in Eastern Europe. These factors significantly dampened expectations for economic growth and inflation in 2023. Retail inflation surpassed the tolerance range set by the RBI for ten consecutive months; however, it gradually declined and fell below the upper limit of the target range by November 2022. According to the IMF''s growth projections, the Indian economy is anticipated to sustain its strong performance, having achieved an impressive growth rate of 6.8% in 2022. The projections indicate a GDP growth rate of 5.9% in 2023, followed by a further increase to 6.3% in 2024. In spite of persistent global economic volatility, India is poised to maintain its position as one of the fastest-growing economies, supported by robust consumer demand and the government''s increased emphasis on infrastructure development.

TOBACCO INDUSTRY

India is the world''s second largest tobacco producer with annual production of 800 million kg and third major exporter of tobacco after China and Brazil. (Source: https://www.tiionline.org/facts-sheets/tobacco-production/). Indian tobacco accounts for 10% of the area and 9% of the total production in the world. (Source: https://ctri.icar.gov.in/ for tobaccoEconomy.php). Tobacco farming is drought tolerant and is a short duration crop. Tobacco, as one of the major commercial crops in India, contributes substantially to the socio-economic landscape by generating significant benefits in terms of employment, revenue generation, and foreign exchange earnings. India has an edge over other leading tobacco producers due to its low production costs, average farm and export prices. In India the tobacco is grown in 13 states and given its production is highly labour intensive, the tobacco industry provides employment directly and indirectly to more than 45.7 million people working in processing, manufacturing and exports of tobacco and products. (Source: https://www.tiionline.org/facts-sheets/livelihood/) The government earns more than Rs. 8,000 crores through tobacco and tobacco products export. Tobacco products make a substantial contribution to the tax revenue of the government. The government collects approximately R55,000 crores per year in tax revenue from tobacco products, with legal cigarettes accounting for more than 75% of the total tobacco tax revenue. In India, the consumption of legal cigarettes represents a mere 8% of the overall tobacco consumption, which stands in stark contrast to the global scenario where legal cigarettes account for 90% of tobacco consumption. The remaining 92% of tobacco consumption in India is comprised of multiple traditional products including chewing tobacco, bidi, Khaini, etc.

The implementation of higher taxes on cigarettes, mounting health awareness programs and stringent regulations on tobacco products in India, including the mandatory 85% pictorial warnings on packaging, play an important role in sale and consumption of cigarettes. Despite a 50% increase in tobacco consumption in India, the proportion of legal cigarettes has dwindled from 21% in 1981-82 to 8% in 2020-21. This decline indicates a continuing rise in the illicit cigarette trade. However, the government continues to curb the trade of illicit cigarettes through regular raids and seizures. It is our belief that any steps taken by the government in the directions of moderating the cigarette taxation will help in maximising tax collection and reducing shift towards cheaper illicit cigarettes.

CONSUMER AND RETAIL INDUSTRY

The Indian FMCG sector holds a prominent position in the Indian economy, ranking as the fourth largest sector with a market size of US$ 56.8 billion as of December 2022. This growth is propelled by factors such as the growing affluent population, increasing urbanization, rising incomes, and the flourishing e-commerce industry. The sector continues to encounter challenges including a fragmented market, relatively low per capita consumption, evolving consumer preferences and regulatory complexities. However, despite these obstacles, the sector remains highly appealing due to India''s growing population and somewhat flourishing economy. FMCG companies are addressing these challenges through strategies such as innovation, expanding their market reach, collaborating with e-commerce platforms, and forming partnerships with the government. By embracing these approaches and effectively navigating the evolving landscape, businesses in the Indian FMCG sector can position themselves for enduring success in the long term.

The Indian government has implemented several impactful initiatives to support and foster the growth of the FMCG sector. Notably, the Production Linked Incentive (PLI) Scheme has been introduced as a key incentive plan, designed to stimulate industry expansion and facilitate significant scaling up effort. Furthermore, the government has prioritized infrastructure development, offered tax incentives such as reduced corporate tax rates and import duty waivers, and actively encouraged exports to facilitate a conducive business environment for FMCG companies and propel the growth in the industry. Additionally, the government has approved foreign direct investment (FDI) measures, allowing 100% FDI in the cash and carry segment, single-brand retail and 51% FDI in multi-brand retail. These comprehensive incentives and FDI provisions will significantly contribute to establishing a resilient supply chain and mitigating potential disruptions for the FMCG sector.

The Union Budget of 2022-23 has emphasized the development of physical and digital infrastructure, facilitating the growth of the organized sector. The increasing dependence of consumers on internet and online sales platforms has presented favourable opportunities for FMCG companies to broaden their customer base. Enhanced infrastructure, competitive pricing, and the cost-effectiveness of digital platforms have significantly facilitated the reach and convenience in connecting with a wider audience. This paradigm shift has allowed companies in the FMCG sector to efficiently expand their market presence and enhance their customer reach, thus contributing positively to their overall growth and performance. The transition from unorganized to organized markets in the FMCG sector is not only driving competition and offering consumers a wider range of products at affordable prices, but also contributing to job creation and overall economic growth in India.

SEGMENTWISE PERFORMANCE IN 2022-23 Cigarettes

The domestic Cigarettes industry showcased further signs of recovery in FY23 with the economy bouncing back on account of restoration of normalcy in market operating conditions. However, global geopolitical tensions, hyper-inflation across raw materials as well as extended disruptions to supply chain were some fresh challenges that had to be solved for during the course of the year.

Despite the challenging situation faced by it, your Company was able to maintain its growth momentum in the Regular Size Filter Tipped (RSFT) segment and register decent growth in other segments that it operates in, backed by introduction of some new brands/variants in order to strengthen its presence in new geographies. Our main brands Four Square, Red & White, Cavanders, Stellar and Focus continue to perform strongly, especially in our core markets owing to concentrated efforts in increasing relevance to the evolving consumer needs and improving capabilities for faster product development and innovations.

Your Company is committed to driving enhanced shareholder value by pursuing various plans like portfolio expansion to address new growth opportunities, adding pricing power to flagship brands, investing into innovative product development and quick adoption of digital technologies across all modes of operation and improving distribution footprint across various states through expanded infrastructure.

Chewing Products

During the year under review, the Company has sold/assigned (a) Trademarks along with all the rights, titles and interests therein and (b) certain non-current assets including the rights in the Leasehold Land; used in relation to its Chewing business. This sale/assignment was in line with Company''s decision to exit from its Chewing business which was incurring losses.

Confectionary Products

Your Company''s confectionary business has made significant stride during the year with the gross sales growing by over 50% from last year. Growth has largely come from Naturalz Imili Candy on the back of expanded distribution network and availability across markets. We have recently test launched a new variant Funda Gumshums Mint Chewing Gum.

Exports

The following table shows the status of exports for different products during the year under report:

	2022-23	2021-22
Commodity/Product	Value (Rs. in crores)	Value (Rs. in crores)
Cigarettes	149.71	97.88
Unmanufactured tobacco/CLB	779.69	442.12
Cut tobacco	25.30	21.82
Total	954.70	561.82

In line with other business goals, your Company achieved targets across all categories. Covid had a severe impact on the business last year, but your Company bounced back with significant growth in overall terms.

Unmanufactured tobacco exports have been growing year on year and this year your Company has done exceptionally well by achieving the highest ever export revenue of Rs. 780 Crores. Your Company has now broad-based its customer reach and started exporting in various new geographies. We are continuously focussing on improving our raw tobacco procurement processes, faster processing and packing thereof and improving processing yields.

Retail

24Seven is India''s organized retail chain in the ''round the clock''s convenience store format with more than 145 stores/kiosks spread across Delhi NCR, Punjab and Telangana. Gross sales during the FY23 increased by 19% to Rs. 482 crores from Rs. 405 crores in the previous year. Operating performance was also better than FY22 due to sustained cost saving initiatives and improvement in product mix and therefore, margins. Efforts are being made to enhance the proportion of food and beverages and private label items in order to garner rise in gross margins.

HUMAN RESOURCE DEVELOPMENT

With people centricity at the Core of its philosophy, your Company has been consistently developing competencies and capabilities of its employees, building managerial styles that propagate employee involvement, fostering a culture of appreciation and engagement, building performance orientation, and encouraging work-life balance. This people focus has helped your Company achieve excellent business results and in building a foundation for positive future economic outcomes. Your company has registered significantly high scores on its human resource strategy, people practices, policies and systems, and continues to be recognized as a Great Place to Work, a feat achieved fifth time in a row. This recognition instills a sense of renewed pride in the workforce as well as the stakeholders associated with your Company. The Company''s leadership too plays a pivotal role in ensuring continuous personal connect that goes a long way in building trust with the workforce and inspiring and motivating employees to deliver their best in achievement of short and long term company objectives.

INFORMATION TECHNOLOGY (IT)

Your Company has made significant strides in leveraging technology to enable and support the business growth. It has a matured AI driven Digital Supply Chain Platform which is delivering efficiencies across our supply chain, is helping bring more predictability in our operations and has enabled the Company to further enhance its business performance through improvements in service delivery, collaboration and productivity. Also, we have modernized our overall IT infrastructure to fulfil the future needs of the organization and to minimize the emerging risks.

Your Company has embarked upon Green IT strategies such as multi-cloud migration and maximizing virtualization. It has migrated its core systems to cloud thereby further improving our scalability, adaptability and resiliency necessary to ensure all time availability of critical systems.

With the increase of IT footprint and remote working, the cyber threats have also increased. To minimize the risk and keep the IT landscape further secure, your Company has implemented many leading security solutions such as Microsegmentation, Email Security Layer and Zero Trust Exchange to provide seamless and secure access to our enterprise applications from anywhere. Recently we have been certified for ISO-27001in IT processes.

STRATEGIC INSIGHTS AND ANALYTICS (SIA)

The Strategic Insights function is a one of a kind in-house skill set of the organization to utilise the power of algorithms supported by computing process to ameliorate precision in Sales, Marketing, Human Resource Management and other functions. This has matured over the last several years and is now a way of working and decision-making for all our key functions. The Data Lake has feed from all our key systems and we have near real-time updates, thereby facilitating high quality decision-making. Our dashboards and algorithms constantly evolve with time and as per the demands of our ever-changing business environment.

With all the above, your Company has embarked on a structured digital transformation program for the organization, aligned to strategic business goals and enabled by cutting edge data science technology.

TREASURY OPERATIONS

Your Company continues to enjoy the highest rating of ''CRISIL A1 '' for Short Term Debt Programme, ''CRISIL AA / Stable'' for Long Term Loan, ''CRISIL AA /Stable'' for fund-based credit facilities and long term non-fund based Facilities & ''CRISIL A1 '' for short term non-fund-based facilities. With these ratings in place, your Company can raise funds at most competitive terms. Following the principles of liquidity, safety and tax efficient returns, the Company has been deploying its long term surplus funds primarily in debt-oriented schemes of reputed mutual funds. Also, the Company continued to park its temporary surpluses in liquid/short-term schemes of various mutual funds.

FINANCIAL RESULTS

	2022-23	2021-22
	Rs. in Lakhs	Rs. in Lakhs
Profit before Depreciation and Tax	94025.32	70375.75
Less: Depreciation and amortization	15064.64	14215.76
Profit before tax	78960.68	56159.99
Less: Provision for tax
- current tax	18439.82	13137.71
- deferred tax	(316.84)	(174.71)
Profit after tax for the year	60837.70	43196.99
Add: Other comprehensive income/(loss)-net of tax	191.57	7.12
Total comprehensive income	61029.27	43204.11

During the year, the gross sales value registered a growth of 32.41% by reaching the level of Rs. 4257.65 crores from Rs. 3215.33 crores last year. Similarly, the profit after tax is Rs. 608.38 crores as compared to Rs. 431.97 crores last year.

DIVIDEND

Your Directors are pleased to recommend the dividend of 2200 % i.e. Rs. 44 per equity share of face value of Rs.2/-each. The proposed dividend will absorb Rs. 22877.32 lakhs.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence, no details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are required to be reported.

ANNUAL RETURN

As required under Sections 134(3)(a) and 92(3) of the Act, the Annual Return has been uploaded from time to time on the Company''s website and can be accessed at https://www.godfrevphillips.co/companv/investor-relation/financials/ annual-return/.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

As on 31^st March 2023, your Company had five operating subsidiaries and two associate companies. The basic details of these companies form part of the Annual Return given as mentioned above.

Form AOC-1 containing the salient features of financial statements of the Company''s subsidiaries and associates is attached as ''Annexure - 1''. Note 46 of the consolidated financial statements shows the share of each subsidiary and associate company in the consolidated net assets and profits of the Company. The audited financial statements of these entities will be available for inspection during business hours at the Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Indian Accounting Standard (IndAS-110)-Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared based on financial statements received from the subsidiary and associate companies, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures which are in line with the internal financial control framework requirements. There is an extensive programme of internal audit by a firm of chartered accountants followed by periodic management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company''s CSR initiatives are largely focused on tobacco farmers in Vinukonda in Andhra Pradesh who are essential to our business. Many of these farmers are small or marginalised. The CSR program is integrated into the larger business with the objective of ensuring sustainable tobacco farming. In short-term goals to ensure farming efficiencies and impact earnings, Good Agriculture Practices has been initiated for the farmers wherein we provide technical advice, establish processes, and minimize hazards to ensure better yield and quality of crop. In long-term goals, we look at minimising climate change risk with environment management with focus on water.

The Company has built over 32 check dams, undertaken over 26 de-siltation of ponds, developed tanks for water conservation in past 6 years along with farm ponds and borewell recharge pits to lower impact on ground water. The Company has also created 3 bio-diversity parks over 23 acres where more than 9000 trees and over 30 flora species have been planted. Also, it has installed community RO water plants across 40 plus villages for access to safe potable water as Vinukonda area is dangerously high on fluoride and TDS. Health Camps are held in over 40-50 villages every year with specialists on board and free medicine distribution. Also, eliminating child labour is an essential element to our commitment to Sustainable Tobacco Production and our initiatives have led to zero child labour incidences in the past 4 years. The Company invests heavily in creating intensive community awareness year on year on the dangers of child labour and benefits to continuing education. Since the last two years, the Company has been investing in higher education of community children for the entire society''s holistic development.

The Company has constituted a CSR Committee of the Board in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The brief outline of the CSR policy, overview of the activities undertaken with amounts spent/unspent thereon during the year, reason for unspent CSR thereof and composition of the Committee has been disclosed in ''Annexure - 2''.

DIRECTORS

Mr. Sharad Aggarwal (DIN: 07438861) retires by rotation at the ensuing Annual General Meeting, in accordance with the provisions of Section 152 of the Companies Act, 2013 and being eligible, has offered himself for re-appointment.

Based on the recommendation of the Nomination and Remuneration Committee (''NRC'') the Board of Directors in its meeting held on 27th May, 2023 approved the appointment of Mr. Ajay Vohra (DIN: 00012136) with effect from 1^st July,

2023 as an Additional Director to serve as a Non-Executive Independent Director of the Company which appointment is subject to the approval of the Shareholders at the ensuing Annual General Meeting of the Company. Accordingly, a resolution proposing appointment of Mr. Ajay Vohra as a Non-Executive Independent Director of the Company for a period of 5 consecutive years will form part of the Notice of the ensuing Annual General Meeting.

As per provisions of the Companies Act, 2013, Independent Directors are required to be appointed for a term of five consecutive years and are not be liable to retire by rotation. Accordingly, a resolution proposing re-appointment of Mrs. Nirmala Bagri (DIN: 01081867) as Independent Director of the Company for another term of five years w.e.f 1^st April, 2024 forms part of the Notice of the ensuing Annual General Meeting.

The Independent Directors of your Company have confirmed that:

(a) They meet the criteria of Independence as prescribed under Section 149 of the Companies Act, 2013 and Regulation 16 of the SEBI (LODR) Regulations, 2015; and

(b) They are not aware of any circumstance or situation which could impair or impact their ability to discharge duties with an objective independent judgement and without any external influence.

Further, in the opinion of the Board, the Independent Directors fulfill the conditions prescribed under the Listing Regulations and are independent of the management of the Company.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

Details pertaining to the way evaluation of the Board, its committees and individual Directors has been carried out, form part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Dr. Bina Modi, Chairperson and Managing Director, Mr. Samir Kumaar Modi, Executive Director, Mr. Sharad Aggarwal, Whole-time Director, Mr. Sunil Agrawal, Chief Financial Officer and Mr. Sanjay Kumar Gupta, Company Secretary of the Company are deemed to be Key Managerial Personnel of the Company as per the provisions of Companies Act, 2013 and the rules made thereunder.

BOARD MEETINGS

Details of the meetings of the Board held during the year, form part of the Corporate Governance Report.

AUDIT COMMITTEE

The composition, functions and details of the meetings of the Audit Committee held during the year, form part of the Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and external environment and incorporates suitable risk treatment processes in its strategy and business and operating plans. The details of practices being followed by the Company in this regard, form part of the Corporate Governance Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of this Report.

Details regarding constitution of Risk Management Committee, its role and responsibilities, form part of the Corporate Governance Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the ''Act''), the Directors, to the best of their knowledge, confirm that:

(i) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(ii) Appropriate accounting policies have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period;

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

(iv) The Annual Accounts have been prepared on a going concern basis;

(v) The internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and are operating effectively; and

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

The above statements were noted by the Audit Committee at its meeting held on 27^th May, 2023.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties referred in Section 188(1) of the Companies Act, 2013 is attached as ''Annexure - 3''.

Details of related party transactions and related disclosures are given in the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered by the provisions of Section 186 of the Companies Act, 2013 (if any) are given in the notes to the financial statements.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

Details of Whistle Blower Policy/Vigil Mechanism form part of the Corporate Governance Report.

NOMINATION AND REMUNERATION POLICY

The appointment and remuneration of the Directors is governed by the recommendation of the Nomination and Remuneration Committee and then decided by the Board subject to approval of the Shareholders.

The remuneration payable to the Directors is decided keeping into consideration long term goals of the Company apart from the individual performance expected from them in pursuit of the overall objectives of the Company.

The remuneration of the Executive Director(s) including Managing Director(s) and Whole-time Director(s), is governed by the recommendation of the Nomination and Remuneration Committee as per the criteria recommended by it and then approved by the Board subject to approval of the Shareholders.

The Non-executive Director(s) may be paid remuneration by way of commission either by way of monthly payments or specified percentage of net profits of the Company or partly by one way and partly by the other, as may be recommended by the Nomination and Remuneration Committee and then decided by the Board subject to approval of the Shareholders.

In accordance with the provisions of the Articles of Association of the Company and the Companies Act, 2013, a sitting fee (presently fixed at Rs. 1,00,000 per meeting) is paid to the Non-executive Directors of the Company who are not drawing any remuneration described hereinabove, for attending any meeting of the Board or of any Committee thereof.

The remuneration payable to the Directors shall be governed by the ceiling limits specified under section 197 of the Companies Act, 2013.

The remuneration policy for other senior management employees including key managerial personnel aims at attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the employees. The remuneration to management grade employees involves a blend of fixed and variable component with performance forming the core. The components of total remuneration vary for different employee grades and are governed by industry practices, qualifications and experience of the employees, responsibilities handled by them, their potentials, etc. Remuneration of senior management employees is also being looked at by the Nomination and Remuneration Committee.

The Nomination and Remuneration Policy is available on the Company''s web-site at https://www.godfreyphillips. co/company/investor-relation/corporate-governance/policies

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

As mandated by the Listing Regulations, the Business Responsibility and Sustainability Report has been included as part of the Annual Report.

UNCLAIMED SHARES

Status of the unclaimed shares as on 31^st March, 2023 has been mentioned in the Report on Corporate Governance.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and particularly those stipulated in the Listing Regulations. Its objective and that of its management and employees is to manufacture and market the Company''s products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in the Listing Regulations, is enclosed.

Certificate from Dr. Bina Modi, Chairperson and Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Executive Vice President-Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

STATUTORY AUDITORS

In compliance with the provisions of Section 139 and other applicable provisions of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s)/re-enactment(s)/ amendment(s) thereof, for the time being in force), S.R.Batliboi & Co. LLP, Chartered Accountants, (FRN 301003E/ E300005) were re-appointed as the Statutory Auditors for another term of five (5) consecutive years until the date of conclusion of the 90th Annual General Meeting, by the Shareholders in the 85th Annual General Meeting of the Company held on 26th August 2022.

Auditors'' Report on the financial statements of the Company forms part of the Annual Report and does not contain any qualification, reservation, adverse remark or disclaimer.

COST AUDIT

The provisions of Cost Audit are not applicable on the Company.

SECRETARIAL AUDIT

Chandrasekaran Associates, Practicing Company Secretaries, have been appointed as the Secretarial Auditor of the Company.

The Secretarial Audit Report for the year under review is attached as ''Annexure - 4'' and does not contain any qualification, reservation, adverse remark or disclaimer.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETING

Pursuant to Clause 9 of Revised Secretarial Standard -1 (SS -1), your Company has complied with applicable Secretarial Standards issued by Institute of Company Secretaries of India, during the financial year under review.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant and material order was passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations.

There is no proceeding pending under the Insolvency and Bankruptcy Code, 2016. There was no instance of onetime settlement with any Bank or Financial Institution.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as ''Annexure - 5''.

Pursuant to the provisions of Section 136(1) of the Act and as advised, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is being sent to the Members excluding the aforesaid information.

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

The particulars prescribed under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as ''Annexure - 6''.

DIVIDEND DISTRIBUTION POLICY

As mandated by the Listing Regulations, the Board has formulated a dividend distribution policy and the same is attached as ''Annexure - 7'' and is also available on the Company''s website at: https://www.godfreyphillips.co/ company/investor-relation/corporate-governance/policies/.

KEY FINANCIAL RATIOS

Key Financial Ratios for the financial year 2022-23 with comparatives for the year 2021-22, are disclosed in ''Annexure - 8''.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressal of sexual harassment of women at workplace in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received relating to sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy.

During the year under review, no complaint was filed with the Company.

THE FUTURE

Availability of best in the class manufacturing facilities with right blend of technology, vast distribution network, adequate financial resources, stable tax regime and motivated manpower will facilitate your Company to continue to drive growth across its various businesses and product categories both in domestic and international markets. Your Company has valiantly weathered the ill-effects of the COVID-19 pandemic which adversely impacted the business operating environment and had led to slowdown in the economic activity in past three years Your Directors are confident that the Company will continue to create value for its shareholders and other stakeholders.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Company''s bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in the Company.

Respectfully submitted on behalf of the BoardDR. BINA MODI CHAIRPERSONPlace: New Delhi Date: 27^th May, 2023

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Mar 31, 2022

Your Directors are pleased to present the 85^th Annual Report on the business and operations along with the Audited Financial Statements of the Company for the financial year ended March 31, 2022.

ECONOMIC ENVIRONMENT

Global economic activity recovered strongly in 2021 following a sharp contraction in 2020 due to unprecedented Covid-19 crisis which quickly morphed into financial crisis. World GDP output recorded a robust growth of 6.1% in 2021 compared to a decline of 3.1% in 2020. The US economy registered a GDP growth of 5.7% in 2021 compared to de-growth of 3.4% in 2020 and European economy GDP recorded growth of 5.3% in 2021 compared to de-growth of 6.4% in 2020. In Asia, China recorded a GDP growth of 8% in 2021, compared to 2.3% in 2020. Overall, the growth was primarily driven by pick up in the economic activity backed by higher vaccination rates, robust consumer spending and increase in investment which was further supported by government''s favourable monetary and fiscal policies. However, high commodity and fuel prices, rising debt level and spiraling inflation across the world continues to add pressure on the economic activity. The growth momentum slowed considerably by the end of 2021, including economies such as China, European Union and United States, due to the dissipation of fiscal and monetary stimulus and major supply-chain disruptions.

The global economy enters 2022 in a weaker position due to Russia and Ukraine crisis and its implications on the world economies. As a result, the global growth is expected to moderate from 5.9% in 2021 to 3.6% in 2022. Furthermore, the ongoing geopolitical tension and increasing trade sanctions continue to add to the series of supply shocks that have hit the global economy over the course of the pandemic, contributing to more shortages beyond the energy and agricultural sectors. Once again, many countries have reimposed select restrictions on mobility due to the rapid spread of Covid-19 variants. A rise in energy prices and supply disruptions has led to higher and wider-based inflation than expected, particularly in the United States and many emerging market and developing economies. Overall, the impact of Russia and Ukraine crisis, the withdrawal of broad-based extraordinary policy support and central banks'' initiatives to raise interest rates to curb inflation, are collectively expected to weaken the global economic activity in 2022.

The Indian economy in tandem with global economies, registered a robust recovery of 8.2% in 2021 and was one of the fastest growing economies in the world. The growth momentum was hit by the second wave of Covid-19 in April-June 2021 but its impact on the economic activity was limited due to state-wise restrictions. The broad-based recovery across sector and industries was visible from the second half of the year and the growth was well supported by Reserve Bank of India with favourable monetary policy support and greater push on infrastructure by government of India. India also registered world''s largest and successful vaccination program roll-out which allowed it to contain the effects of the Covid-19, while also pursuing its goal of economic recovery. However, the escalation of Russia and Ukraine crisis has once again dampened the economic outlook. Consequently, the sharp jump in the prices of crude oil and energy, food grains and other commodity prices have led to higher inflation globally. In May 2022, the Reserve Bank of India increased the repo rate 40 bps to 4.4% in an attempt to curb the inflation. The combination of these macroeconomic headwinds has led IMF to reduce its GDP growth target to 8.2% in 2022 as compared to 9.0% projected by it in January 2022. Despite ongoing global economic volatility, India is still expected to remain one of the fastest growing economies backed by strong consumer demand and greater push on infrastructural development by government of India.

TOBACCO INDUSTRY

India is the world''s second largest tobacco producer with annual production of 800 million kg and major exporter of tobacco after China and Brazil. Indian tobacco accounts for 10% of the area and 9% of the total production in the world. Tobacco farming is drought tolerant, hardy and short duration crop and contributes a major percentage of the total value of commercial crops in India generating huge socio-economic benefits in terms of agricultural employment, incomes, revenues and foreign exchange earnings. Due to its low production costs, average farm and export prices, India has an edge over other leading tobacco producer. Given that tobacco production is highly labour intensive, the tobacco industry provides employment directly and indirectly to more than 45.7 million people working in processing, manufacturing and exports of tobacco and tobacco products.

The Indian government earns foreign exchange of around Rs. 6,500 crores through export of tobacco and tobacco products. Cigarette tobacco (Flue Cured Virginia) contributes around more than 70% of India''s leaf tobacco export in value terms. Tobacco products are big contributor to the government tax revenue. On the basis of last three year average, government has collected around ^53,000 crores of tax revenue from tobacco products and 80% of tobacco tax revenue is from legal cigarettes. In India, the legal cigarettes account for 8% of the total tobacco consumption and this is in complete contrast with rest of the world where 90% of the tobacco is in the form of cigarettes. The remaining 92% contribution is from other traditional products, like chewing tobacco, bidis, Khaini etc. and illegal cigarettes.

Over the years, the pace of taxation on cigarettes and the regulatory framework governing the tobacco products in India, such as the 85% pictorial warnings that appear on the packs of tobacco products, have led to a significant decline in the sale of legal cigarettes in the country while illegal cigarette trade has grown significantly as they do not bear mandated warnings and consumer perceives it safer. The share of legal cigarette has declined from 21% in 1981-82 to 8% in 2020-21 despite 50% increase in tobacco consumption in India, this clearly reflects that illegal cigarette trade has increased significantly and now accounts for roughly 1/4th of the total cigarette market in India. Government continues to curb the trade of illegal cigarette through regular raids and seizures. It also focuses on stabilizing the domestic legal cigarette market and moderation in cigarette taxation may help optimize tax collection and reduce shift towards cheaper illicit cigarettes.

The tobacco and cigarette manufacturing industry were also impacted by the Covid-19 pandemic induced lockdown restrictions and was one of the industries to resume its operations at last after upliftment of Covid restrictions. The supply chain constraints, logistics problems, increased freight rates and delays in shipping schedules, all these has attributed to the decline in export of tobacco and tobacco products. Besides this, the tobacco industry is experiencing a slowdown globally due to more restrictions being placed on smoking and tobacco consumption. During the year, the cigarette demand started to recover with the opening of economy, increase in mobility and resumption of work in offices. The market serviceability also improved with the removal of inter-state restrictions and has led to recovery in the sales and demand of cigarettes.

CONSUMER AND RETAIL INDUSTRY

India''s FMCG industry is the fourth-largest sector of the economy backed by its demography and growing consumerism. The Indian economy is on the path to recovery after devastating waves of Covid-19 pandemic. Many sectors of the economy are back to their pre-pandemic levels of production. The pandemic had big impact on the FMCG sector especially during lockdown where companies were focused on re-inventing their strategies for customer acquisition, market penetration and maintaining demand-supply balance. In addition, the higher adoption of technology, digitalization, door to door delivery has given fresh impetus to FMCG sector in India. Offline sales also accelerated on the back of improved store footfalls and mobility. However, the recovery is still underway with different parts of the economy improving at varying rates. The Indian FMCG sector remained resilient in 2021 and delivered a nine -year high growth of 16%. The growth was driven by continued consumer demand and higher product prices.

The retail industry in India is witnessing a fast-paced growth, with retail development penetration expanding to tier II and III cities and not restricting to metro cities. Growing awareness, rapid urbanization, increasing working population, higher disposable income and changing lifestyles are the primary growth drivers for the sector. Business activity among micro-retailers is reaching near normal levels, as they are adopting digital business tools to boost efficiency and growth. Indian retail industry remains one of the fastest growing in the world, expected to reach to US$ 1,407 billion by 2026 compared to US$ 779 billion in 2019 and more than US$ 1.8 trillion by 2030. Furthermore, E-commerce is widely considered as a way to reduce penetration costs and drive convenience buying. Increasing affordability and proliferation of smartphones coupled with affordable data prices makes online platforms easier and more convenient to reach target consumers. The Government of India''s initiatives such as ''Digital India'' programme has contributed significantly to the growth of e-commerce segment and India is now home to more than 800 door to customer (D2C) brands and is expected to reach US$ 101 billion by 2025.

Government of India has taken several serious initiatives to encourage the FMCG sector in India. It has announced Production Linked Incentive Scheme (PLI) as incentive plans to encourage scaling up and to boost industry. Government has approved 100% FDI in the cash and carry segment and in single-brand retail along with 51% FDI in multi-brand retail. These measures will help the sector to establish a robust supply chain and reduce the risk of disruption.

Further, the decline in unorganized markets in the FMCG sector is expected to augment the growth of organised sector mostly due to the increase in brand awareness, coupled with the growth of modern retail and convenience. Following the Covid-19 pandemic, consumers have rapidly adopted new technologies. The predominant theme in the Union Budget of 2022-23 is its strong focus on the creation and development of physical and digital infrastructure. The internet enabled companies are likely to reach a wider audience using online sales promoted by an improved infrastructure, competitive pricing and reduced marketing and outreach costs associated with a digital platform.

SEGMENTWISE PERFORMANCE IN 2021-22Cigarettes

The domestic Cigarettes industry showcased resilience and signs of recovery in FY22 but it was hampered by the unprecedented headwinds of 2^nd Wave of COVID-19. Illicit and contraband continue to impact the industry, with the lockdown period allowing enhanced penetration of illicit especially in the semi urban and smaller urban sections of India.

In the backdrop of this challenging situation and restrictions which had led to lower customer footfalls across markets, your Company was able to maintain its growth momentum in the Regular Size Filter Tipped (RSFT) segment and register decent growth in other segments that it operates in, backed by performance of flagship brands in core markets and introduction of some new brands/variants to not only address new opportunities but also strengthen presence in new geographies. Our main brands Four Square, Red & White, Cavanders, Stellar & Focus continue to perform strongly, especially in our core markets owing to concentrated efforts in increasing relevance to the evolving consumer needs, improving capabilities for faster product development and innovations and an organization wide effort to increasing efficiencies through cost optimizations.

Your Company is committed to driving enhanced shareholder value by pursuing various plans like portfolio expansion to address new growth opportunities, adding pricing power to flagship brands, improving distribution footprint across various states through expanded infrastructure, accelerated customer acquisition along with higher efficiencies through cost optimization.

Chewing Products

Your Company''s Chewing business continues to focus on premium segment of the Industry, with a clear objective to make the business profitable. In view of the same, considerable efforts were made last year to bring Pan Vilas, our flagship brand, back on the growth path which had suffered volume losses on account of the COVID-19 pandemic.

Your Company''s Confectionary business has recovered well and the sales have grown over FY21 backed by two significant initiatives, first being to grow Naturalz Imli candy by focussing on distribution and availability across markets and second being introduction of new innovative candy called FUNDA C, which offers unique benefit of taste and Vitamin C, to cash on increasing importance of Vitamin C post pandemic.

Exports

The following table shows the status of exports for different products during the year under report:

	2021-22	2020-21
Commodity/Product	Value (Rs. in crores)	Value (Rs. in crores)
Cigarettes	97.88	139.57
Unmanufactured tobacco/CLB	442.12	421.35
Cut tobacco	21.82	36.53
Total	561.82	597.45

Financial year 2021-22 continued to pose challenges arising from the pandemic. Cigarette and cut tobacco export business suffered as we were faced with major logistic hurdles both on account of low availability of containers as well as rising freight rates throughout the year. Also, restrictions in various markets because of the pandemic took some time for the business to come on track. Despite the turmoil, we have been able to hold on to our key clients and hope to deliver better in times to come with some new product offerings.

Unmanufactured tobacco exports though have done reasonably well despite adverse conditions experienced due to COVID-19, by registering growth of 5% over last financial year. This was made possible by meticulous planning and stakeholder management. Also, the Company has started to make a foothold in the markets of Egypt, Russia and Taiwan.

Retail

24Seven is India''s only organized retail chain in the ''round the clock'' convenience store format with more than 100 stores spread across Delhi NCR and Chandigarh. Despite the 2^nd and 3^rd Wave of COVID-19 affecting the operating hours of business, Gross sales during the FY22 increased by 14% to Rs.405 crores from Rs.354 crores in the previous year. Operational performance was also better than FY21 due to sustained cost saving initiatives and improvement in product mix and margins. During the year, we have opened a few low capex modelled stores which are operationally efficient with lower breakeven period.

We continued to follow all safety protocols as mandated and recommended by the authorities to safeguard the health and well-being of our customers and employees.

HUMAN RESOURCE DEVELOPMENT

Your Company has yet again been recognised among ''India''s Best Companies to Work For''. This recognition is a testimony of your Company''s approach towards putting people first, be it pandemic times or business as usual scenario. Best-in-class people practices, desired managerial styles, inclusive culture and assenting employee experiences at work ensures high level of people centricity, teamwork and a passionate workforce focussed on delivery of business results. Alongside, your Company is constantly upgrading and digitizing its people processes to ensure seamless reach, quick access, transparency and ease of usage for employees. Your Company has also been introducing new forms of learning, leadership development and capability building measures to upskill and reskill the workforce on an ongoing basis. Strategic people and performance focus through several employee engagement initiatives and leadership connect ensured that employees remain energised, connected and motivated.

INFORMATION TECHNOLOGY (IT)

There have been rapid advances in the areas of Information Technology and Digital, offering new avenues for value creation. The Company has a strategic approach for leveraging modern technologies. We are well on our way in the Cloud Transformation journey with the nationwide Sales and Distribution system, already on AWS Cloud and being further enhanced with new capabilities/feature rollouts and Digitization. Our futuristic architecture is truly multi-cloud and will offer greater agility in our future deployments. We have enhanced our overall Infrastructure setup in our Data Centre and across the organization, to fulfil the performance demands of the organization and to enable Digital Transformation in the times to come.

We are in the process of implementing an end-to-end Digital Supply Chain solution that leverages AI and ML. All the core business processes starting from a centralised Demand and Supply Planning till the final Delivery to our Distributors will be fully automated and we will have advanced control tower capabilities built into the platform.

We have an advanced Data Lake Setup to facilitate our BI and Data Analytics needs. This has matured over the last several years and is now a way of working and decision-making for our key functions like Sales and Distribution, Supply Chain and Finance. The Data Lake has feed from all our key systems and we have near real-time updates, thereby facilitating high quality decision-making. Our dashboards and algorithms constantly evolve with time and as per the demands of our ever-changing business.

We have implemented complete Work-from-Home (WFH) solutions which were tested and enhanced during the multiple Covid waves and the entire employee base adapted to this in double-quick time. This was the initiation of moving towards a digital workplace, with further initiatives launched this year towards employee self-service, notably a Mobile App. All our key systems are now accessible remotely with appropriate access controls and in-built cybersecurity measures.

With all the above, your Company has embarked on a structured digital transformation program for the organization, aligned to strategic business goals and adopting the best of technologies, practices and methodologies.

TREASURY OPERATIONS

Your Company continues to enjoy the highest rating of ''CRISIL A1 '' for Short Term Debt Programme, ''CRISIL AA / Stable'' for Long Term Loan, ''CRISIL AA /Stable'' for fund-based credit facilities and long term non-fund based Facilities & ''CRISIL A1 '' for short term non-fund-based facilities. With these ratings in place, your Company can raise funds at most competitive terms. Following the principles of liquidity, safety and tax efficient returns, the Company has been deploying its long term surplus funds primarily in debt-oriented schemes of reputed mutual funds. Also, the Company continued to park its temporary surpluses in liquid/short-term schemes of various mutual funds.

FINANCIAL RESULTS
	2021-22	2020-21
	Rs. in Lakhs	Rs. in Lakhs
Profit before Depreciation and Tax	70375.75	60340.45
Less: Depreciation and amortization	14215.76	13845.10
Profit before tax	56159.99	46495.35
Less: Provision for tax
- current tax	13137.71	10235.44
- deferred tax	(174.71)	565.81
Profit after tax for the year	43196.99	35694.10
Add: Other comprehensive income/(loss)-net of tax	7.12	(135.95)
Total comprehensive income	43204.11	35558.15

During the year, the gross sales value registered a growth of 14.3% by reaching the level of Rs. 7325 crores from Rs. 6408 crores last year. Similarly, the profit after tax is Rs. 431.97 crores as compared to Rs. 356.94 crores last year.

DIVIDEND

Your Directors are pleased to recommend the dividend of 1400 % i.e. Rs. 28 per equity share of face value of Rs.2/-each. The proposed dividend will absorb Rs. 14558.30 lakhs.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence, no details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are required to be reported.

ANNUAL RETURN

As required under Section 134(3)(a) and section 92(3) of the Act, the Annual Return has been uploaded on the Company''s website and can be accessed at https://www.godfrevphillips.com/companv/investor-relation/financials/annual-return/.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

As on 31^st March 2022, your Company had seven subsidiaries and three associate companies. The basic details of these companies form part of the Annual Return as mentioned above.

Form AOC-1 containing the salient features of financial statements of the Company''s subsidiaries and associates is attached as ''Annexure - 1''. Note 46 of the consolidated financial statements shows the share of each subsidiary and associate company in the consolidated net assets and profits of the Company. The audited financial statements of these entities will be available for inspection during business hours at the Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Indian Accounting Standard (Ind AS-110) - Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared based on financial statements received from the subsidiary and associate companies, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures which are in line with the internal financial control framework requirements. There is an extensive programme of internal audit by a firm of chartered accountants followed by periodic management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY

The Company''s CSR initiatives are largely focused on tobacco farmers who are core of our business. In shortterm goals to ensure farming efficiencies and impact earnings, Good Agriculture Practices has been initiated for the farmers wherein we provide technical advice, establish processes, and minimize hazards to ensure better yield and quality of crop. In long-term goals, we look at environment management - of water, soil, waste etc. The Company has built over 26 check dams, 32 farm ponds and undertaken over 22 de-siltation of ponds and tanks for water management in past 6 years. The Company has also implemented bore well recharge pits to lower impact on ground water and has created bio-diversity parks over approx. 17 acres with over 26 species of trees.

Health has the biggest impact on livelihood. The Company has installed community RO water plants in over 35 villages for access to safe potable water as Vinukonda area is dangerously high on fluoride and TDS. Health Camps are held in over 40-50 villages every year with specialists on board and free medicine distribution. Also, eliminating child labour is an essential element to our commitment to STP (Sustainable Tobacco Production) and our initiatives have led to zero child labour incidences in the past 3 years. The Company run After School Program keeps children back in school until their parents return from farms especially during harvesting time. The program looks after the children in school itself and provides nutritious food, classes in yoga, coaching and help with homework, etc.

The Company also invests in marginalised communities in Delhi. The program endeavours to empower vulnerable urban poor communities through better educational approach, health, life skills and leadership development programs. Collaborating with government schools like SDMC, the project works on upgrading and developing school infrastructure to create friendly and safe spaces for children to learn in along with developing modern curricula, teacher training, enabling extra-curricular activities and integration programs for weak students and dropouts. Also, it runs awareness programs on various issues that impact children and youth, from bullying to gender roles, substance abuse and sexual abuse.

The Company has constituted a CSR Committee of the Board in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The brief outline of the CSR policy, overview of the activities undertaken with amounts spent/unspent thereon during the year, reason for unspent CSR thereof and composition of the Committee has been disclosed in ''Annexure - 2''.

DIRECTORS

Mr. R. A. Shah (DIN: 00009851), who retires by rotation but has expressed his unwillingness to seek re-appointment and therefore, would cease to be a Director of the Company on conclusion of the ensuing Annual General Meeting (AGM).

The Board, on the recommendation of the Nomination and Remuneration Committee (NRC), has resolved that the vacancy created by retirement of Mr. R. A. Shah be not filled up for the time being. Accordingly, a resolution for not filling up the vacancy caused by retirement of Mr. R. A. Shah, will form part of the Notice of the ensuing AGM.

Dr. Bina Modi (DIN: 00048606) was appointed as President and Managing Director of the Company for a period of 5 (five) years effective from 14^th November, 2019. Presently she is not drawing any remuneration from the Company. However, considering her invaluable contributions to the growth of the Company and based on recommendation of the NRC, the Board has approved payment of remuneration during the unexpired tenure of her appointment i.e. from 1^st June, 2022 till 13^th November, 2024. Accordingly, a resolution to this effect shall form part of the Notice of the ensuing AGM.

Mr. Sharad Aggarwal (DIN: 07438861) was appointed as Whole-time Director of the Company w.e.f. 1^st October, 2017 for a period of five years. Further, he was also appointed as the Functional Chief Executive Officer of the Company with effect from 27^th December, 2021. Based on the recommendation of the NRC, the Board has approved the re-appointment of Mr. Sharad Aggarwal as Whole-time Director of the Company for a further period of five years with effect from 1^st October, 2022. Accordingly, a resolution to this effect shall form part of the Notice of the ensuing AGM.

Based on the recommendation of the NRC, the Board has approved the appointment of Mr. Subramanian Lakshminarayanan (DIN: 02808698) as Additional Director to serve as Non-Executive Independent Director of the Company. As per provisions of the Companies Act, 2013, Mr. Lakshminarayanan''s appointment is subject to the approval of the shareholders in the ensuing AGM. Accordingly, a resolution proposing appointment of Mr. Subramanian Lakshminarayanan as a Non-Executive Independent Director of the Company for a term of five years, will form part of the Notice of the ensuing AGM.

The Independent Directors of your Company have confirmed that (a) they meet the criteria of Independence as prescribed under Section 149 of the Companies Act, 2013 and Regulation 16 of the SEBI (LODR) Regulations, 2015, and (b) they are not aware of any circumstance or situation, which could impair or impact their ability to discharge duties with an objective independent judgement and without any external influence. Further, in the opinion of the Board, the Independent Directors fulfill the conditions prescribed under the Listing Regulations and are independent of the management of the Company.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

Details pertaining to the way evaluation of the Board, its committees and individual Directors has been carried out, form part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Dr. Bina Modi, Managing Director, Mr. Samir Modi, Executive Director, Mr. Sharad Aggarwal, Whole-time Director, Mr. Sunil Agrawal, Chief Financial Officer and Mr. Sanjay Gupta, Company Secretary of the Company are deemed to be Key Managerial Personnel of the Company as per the provisions of Companies Act, 2013 and rules made thereunder.

BOARD MEETINGS

Details of the meetings of the Board held during the year, form part of the Corporate Governance Report.

AUDIT COMMITTEE

The composition, functions and details of the meetings of the Audit Committee held during the year, form part of the Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and external environment and incorporates suitable risk treatment processes in its strategy and business and operating plans. The details of practices being followed by the Company in this regard, form part of the Corporate Governance Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of this Report.

Details regarding constitution of Risk Management Committee, its role and responsibilities, form part of the Corporate Governance Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the ''Act''), the Directors, to the best of their knowledge, confirm that:

(i) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(ii) Appropriate accounting policies have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period;

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

(iv) The Annual Accounts have been prepared on a going concern basis;

(v) The internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and are operating effectively; and

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

The above statements were noted by the Audit Committee at its meeting held on 28^th May, 2022.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties referred in Section 188(1) of the Companies Act, 2013 is attached as ''Annexure - 3''.

Details of related party transactions and related disclosures are given in the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered by the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

Details of Whistle Blower Policy/Vigil Mechanism form part of the Corporate Governance Report.

REMUNERATION AND NOMINATION POLICY

The appointment and remuneration of Directors is governed by the recommendation of Nomination and Remuneration Committee and then decided by the Board subject to approval of the shareholders.

The remuneration payable to the Directors is decided keeping into consideration long term goals of the Company apart from the individual performance expected from Director(s) in pursuit of the overall objectives of the Company.

The remuneration of Executive Director(s) including Managing Director(s) and Whole-time Director(s) is governed by the recommendation of Nomination and Remuneration Committee as per the criteria recommended by it and then approved by the Board subject to approval of the Shareholders.

The Non-executive Director(s) may be paid remuneration by way of commission either by way of monthly payments or specified percentage of net profits of the Company or partly by one way and partly by the other, as may be recommended by Nomination and Remuneration Committee and then decided by the Board subject to approval of the Shareholders.

In accordance with the provisions of the Articles of Association of the Company and the Companies Act, 2013, a sitting fee (presently fixed at Rs. 1,00,000 per meeting) is paid to the Non-executive Directors of the Company who are not drawing any remuneration described hereinabove, for attending any meeting of the Board or of any Committee thereof.

The remuneration payable to Directors shall be governed by the ceiling limits specified under section 197 of the Companies Act, 2013.

The remuneration policy for other senior management employees including key managerial personnel aims at attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the employees. The remuneration to management grade employees involves a blend of fixed and variable component with performance forming the core. The components of total remuneration vary for different employee grades and are governed by industry practices, qualifications and experience of the employees, responsibilities handled by them, their potentials, etc. Remuneration of senior management employees is also being looked at by the Nomination and Remuneration Committee.

DIVIDEND DISTRIBUTION POLICY

As mandated by the Listing Regulations, the Board has formulated a dividend distribution policy and the same is attached as ''Annexure - 7'' and is also available on the Company''s website at: https://www.godfreyphillips.com/company/investor-relation/corporate-governance/policies/

KEY FINANCIAL RATIOS

Key Financial Ratios for the financial year 2021-22 with comparatives for the year 2020-21, are disclosed in ''Annexure - 8''.

BUSINESS RESPONSIBILITY REPORT

As mandated by the Listing Regulations, the Business Responsibility Report has been included as part of the Annual Report.

UNCLAIMED SHARE CERTIFICATES

Status of the unclaimed shares as on 31^st March, 2022 has been mentioned in the Report on Corporate Governance.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and particularly those stipulated in the Listing Regulations. Its objective and that of its management and employees is to manufacture and market the Company''s products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in the Listing Regulations, is enclosed.

Certificate from Dr. Bina Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Executive Vice President - Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

STATUTORY AUDITORS

In compliance with the provisions of Section 139 and other applicable provisions of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s)/re-enactment(s)/ amendment(s) thereof, for the time being in force), S.R.Batliboi & Co. LLP, Chartered Accountants, (FRN 301003E/ E300005) have been recommended for re-appointment as Statutory Auditors for another term of five (5) consecutive years by the Board of Directors at its meeting held on 28^th May, 2022. Accordingly, a resolution for them to hold office from the date of conclusion of the Eighty Fifth Annual General Meeting until the date of conclusion of the Ninetieth Annual General Meeting, will form part of the Notice of the ensuing Annual General Meeting.

Auditors'' Report on the financial statements of the Company forms part of the Annual Report and does not contain any qualification, reservation, adverse remark or disclaimer.

COST AUDIT

The provisions of Cost Audit are not applicable on the Company.

SECRETARIAL AUDIT

M/s. Chandrasekaran Associates, Practicing Company Secretaries, have been appointed as the Secretarial Auditor of the Company.

The Secretarial Audit Report for the year under review is attached as ''Annexure - 4'' and does not contain any qualification, reservation, adverse remark or disclaimer.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETING

Pursuant to Clause 9 of Revised Secretarial Standard -1 (SS -1), your Company has complied with applicable Secretarial Standards issued by Institute of Company Secretaries of India, during the financial year under review.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant and material order was passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations.

There is no proceeding pending under the Insolvency and Bankruptcy Code, 2016. There was no instance of onetime settlement with any Bank or Financial Institution.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as ''Annexure - 5''.

Pursuant to the provisions of Section 136(1) of the Act and as advised, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is being sent to the Members excluding the aforesaid information.

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

The particulars prescribed under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as ''Annexure - 6''.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressal of sexual harassment of women at workplace in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received relating to sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy. During the year under review, no complaint was filed with the Company.

THE FUTURE

Your Company has valiantly weathered the ill-effects of the COVID-19 pandemic which adversely impacted the business operating environment and had led to slowdown in the economic activity in past two years. Your Company has taken all possible steps to get back to pre-Covid level of business. Despite prevailing uncertainty on account of this pandemic, your Company is highly optimistic of robust business performance in times to come.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Company''s bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in the Company.

Respectfully submitted on behalf of the BoardR.A. SHAH CHAIRMANNew DelhiDated: 28^th May, 2022

---

Mar 31, 2018

The Directors feel privileged to present the 81^st Annual Report on the business and operations of the Company along with the Audited Accounts for the financial year, ended March 31, 2018.

FINANCIAL RESULTS

	2017-18	2016-17
	Rs. in Lakhs	Rs. in Lakhs
Gross Profit	30993.53	29190.30
Less : Depreciation and amortization	9564.73	9412.82
Profit before exceptional items and tax	21428.80	19777.48
Exceptional Items	2000.00	-
Profit Before Tax	23428.80	19777.48
Less : Provision for tax
- current tax	7100.69	5136.50
- deferred tax charge	251.87	1005.64
Profit after tax for the year	16076.24	13635.34
Add: Other comprehensive income/(loss)-net of tax	474.84	(409.83)
Total Comprehensive Income	16551.08	13225.51

During the year, the gross sales value registered a growth of 7.7% by reaching the level of Rs. 5803 crores from Rs. 5389 crores last year. Similarly, the profit after tax jumped to Rs. 160.76 crores from Rs. 136.35 crores last year.

DIVIDEND

Your Directors are pleased to recommend the same dividend as last year of 400% i.e. Rs.8/- per equity share of face value of Rs.2/- each. The proposed dividend (including tax thereon) will absorb Rs. 5014.50 lakhs.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence, no details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are required to be reported.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return in Form MGT-9 as on 31^st March, 2018 is attached as ‘Annexure - 1’ to this Report.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

As on 31^st March, 2018, your Company had eight subsidiaries and four associate companies. The basic details of these companies form part of the extract of Annual Return given in ‘Annexure - 1’.

Form AOC-1 containing the salient features of financial statements of the Company’s subsidiaries and associates is attached as ‘Annexure - 2’. Note 46 of the consolidated financial statements shows the share of each subsidiary and associate company in the consolidated net assets and profits of the Company. The audited financial statements of these entities will be available for inspection during business hours at the Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Indian Accounting Standard (Ind AS-110) - Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared on the basis of audited financial statements received from the subsidiary and associate companies, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures which are in line with the internal financial control framework requirements. There is an extensive programme of internal audit by a firm of chartered accountants followed by periodic management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY

The CSR initiatives focus on inclusive growth with the Company striving to enhance the livelihood of the local communities and contribute to their economic and social well-being through various proactive community partnership programmes.

As part of various programmes for farmers, women, children and community development, your Company is supporting this cause by installing water purifiers, holding health camps, extending scholarships for meritorious children, connecting children with schools, conducting HIV awareness programmes, operating skill training centres for adult children, improving infrastructure of schools by building toilets, helping community through drainage construction and other cleanliness drive and thereby improving their living conditions.

The Company has constituted a CSR Committee of the Board in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The brief outline of the CSR policy, overview of the activities undertaken with amounts spent thereon during the year and composition of the Committee has been disclosed in ‘Annexure - 3’.

DIRECTORS

Mr. R.A. Shah (DIN 00009851) and Mrs. Bina Modi (DIN 00048606) will retire by rotation at the ensuing Annual General Meeting, in accordance with the provisions of Section 152 of the Companies Act, 2013 and being eligible, offer themselves for re-appointment.

The Securities and Exchange Board of India (“SEBI”) vide its notification dated 9^th May, 2018 has inserted Regulation 17(1A) to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI Listing Regulations’) with effect from 1^st April, 2019 whereby the listed Company shall not appoint or continue the directorship of a person who has attained the age of 75 years unless special resolution is passed to that effect.

Therefore, the re-appointment of Mrs. Bina Modi who would attain the age of 75 years during her proposed term and Mr. R.A. Shah who has already attained the age of 75 years, is recommended to be approved by passing special resolutions. Further, the Board of Directors, at their Meeting held on 11^th August, 2018, have recommended the continuation of directorship of Dr. Lalit Bhasin and Mr. Anup N. Kothari, Non-Executive Directors who have already attained the age of 75 years, by passing special resolution at the ensuing AGM.

The continuation of payment of remuneration of Mr. Ruchir Kumar Modi (DIN 07174133) is being recommended for approval of shareholders by way of special resolution in pursuance of Regulation 17(6) (ca) inserted vide Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 which will be effective from 1^st April, 2019.

The present term of appointment of Mr. K.K. Modi and Mr. Samir Modi as Managing Director and Executive Director is valid upto 13^th August, 2018 and 30^th September, 2018 respectively. The Board, subject to the approval of the Members in the forthcoming AGM, has approved the re-appointment of Mr. K.K. Modi as Managing Director and Mr. Samir Modi as Executive Director for another term of three years from the date of completion of their present term.Further re-appointment of Mr. Samir Modi is being recommended for approval of shareholders by way of special resolution in pursuance of Regulation 17(6)(e) of SEBI (Listing Obligations And Disclosure Requirements) (Amendment) Regulations, 2018 which will be effective from 1^st April, 2019.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

Details pertaining to the manner in which evaluation of the Board, its Committees and individual Directors has been carried out, form part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Mr. K.K. Modi, Managing Director, Mr. Samir Modi, Executive Director, Mr. Sharad Aggarwal, Wholetime Director, Mr. Sunil Agrawal, Chief Financial Officer and Mr. Sanjay Gupta, Company Secretary of the Company are deemed to be Key Managerial Personnel of the Company as per the provisions of Companies Act, 2013 and rules made thereunder.

BOARD MEETINGS

Details of the meetings of the Board held during the year, form part of the Corporate Governance Report.

AUDIT COMMITTEE

The composition, functions and details of the meetings of the Audit Committee held during the year, form part of the Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and external environment and incorporates suitable risk treatment processes in its strategy and business and operating plans. The details of practices being followed by the Company in this regard, form part of the Corporate Governance Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the ‘Act’), the Directors, to the best of their knowledge, confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) appropriate accounting policies have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period;

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

(iv) the Annual Accounts have been prepared on a going concern basis;

(v) the internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and are operating effectively; and

(vi) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

The above statements were noted by the Audit Committee at its meeting held on11^th August, 2018.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties referred in Section 188(1) of the Companies Act, 2013 is attached as ‘Annexure - 4’.

Details of related party transactions and related disclosures are given in the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered by the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

Details of Whistle Blower Policy/Vigil Mechanism form part of the Corporate Governance Report.

REMUNERATION AND NOMINATION POLICY

The appointment and remuneration of Directors is governed by the recommendation of Nomination and Remuneration Committee and then decided by the Board subject to approval of the shareholders.

The remuneration payable to the Directors is decided keeping into consideration long term goals of the Company apart from the individual performance expected from a director(s) in pursuit of the overall objectives of the Company.

The remuneration of Executive Director(s) including Managing Director(s) and Whole-time Director(s) is governed by the recommendation of Nomination and Remuneration Committee as per the criteria recommended by it and then approved by the Board subject to approval of the Shareholders.

The Non-executive Director(s) may be paid remuneration by way of commission either by way of monthly payments or specified percentage of net profits of the Company or partly by one way and partly by the other, as may be recommended by Nomination and Remuneration Committee and then decided by the Board subject to approval of the Shareholders.

In accordance with the provisions of the Articles of Association of the Company and the Companies Act, 2013, a sitting fees (presently fixed at Rs. 1,00,000 per meeting) is paid to the Non-executive Directors of the Company who are not drawing any remuneration described hereinabove, for attending any meeting of the Board or of any Committee thereof.

The remuneration payable to Directors shall be governed by the ceiling limits specified under section 197 of the Companies Act, 2013.

The remuneration policy for other senior management employees including key managerial personnel aims at attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the employees. The remuneration to management grade employees involves a blend of fixed and variable component with performance forming the core. The components of total remuneration vary for different employee grades and are governed by industry practices, qualifications and experience of the employees, responsibilities handled by them, their potentials, etc.

DIVIDEND DISTRIBUTION POLICY

As mandated by the Listing Regulations, the Board has formulated a dividend distribution policy and the same is attached as ‘Annexure - 8’ and is also available on the Company’s website.

BUSINESS RESPONSIBILITY REPORT

As mandated by the Listing Regulations, the Business Responsibility Report has been included as part of the Annual Report.

UNCLAIMED SHARE CERTIFICATES

Status of the unclaimed shares as on 31^st March, 2018 has been mentioned in the Report on Corporate Governance.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and in particular those stipulated in the Listing Regulations. Its objective and that of its management and employees is to manufacture and market the Company’s products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in the Listing Regulations, is enclosed.

Certificate from Mr. K.K. Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Executive Vice President - Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

STATUTORY AUDITORS

In compliance with the provisions of Section 139 and other applicable provisions of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s)/re-enactment(s)/ amendment(s) thereof, for the time being in force), S.R. Batliboi & Co. LLP, Chartered Accountants, (FRN 301003E) were appointed as Statutory Auditors at the Eightieth Annual General Meeting of the Company held on 15^th September 2017, to hold office for a term of five (5) consecutive years from the conclusion of the Eightieth Annual General Meeting until the conclusion of the Eighty Fifth Annual General Meeting, subject to the ratification at the Annual General Meeting in each of the subsequent years during the aforementioned term of their appointment. However, the requirement of annual ratification has been dispensed with under the Companies (Amendment) Act, 2017 which has been notified on 7^th May, 2018.

Auditors’ Report on the financial statements of the Company forms part of the Annual Report and doesn’t contain any qualification, reservation, adverse remark or disclaimer.

COST AUDIT

Since the Company has discontinued its business operations in Tea Products, there is no requirement for cost audit now on.

Further, the cost audit report for the financial year 2017-18 doesn’t contain any qualification, reservation, adverse remark or disclaimer.

SECRETARIAL AUDIT

M/s. Chandrasekaran Associates, Practicing Company Secretaries, have been appointed as the Secretarial Auditor of the Company.

The Secretarial Audit Report for the year under review is attached as ‘Annexure - 5’ and doesn’t contain any qualification, reservation, adverse remark or disclaimer.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETING

Pursuant to Clause 9 of Revised Secretarial Standard -1 (SS -1), your Company has complied with applicable Secretarial Standards issued by Institute of Company Secretaries of India, during the financial year under review.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant and material order was passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as ‘Annexure - 6’.

Pursuant to the provisions of Section 136(1) of the Act and as advised, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is being sent to the Members excluding the aforesaid information.

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

The particulars prescribed under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as ‘Annexure - 7’.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressal of sexual harassment of women at work place in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received relating to sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy.

During the year under review, no complaint was filed with the Company.

THE FUTURE

Availability of best in the class manufacturing facilities with right blend of technology, vast distribution network, adequate financial resources stable tax regime and motivated manpower will facilitate your Company to drive growth across its various businesses and product categories both in domestic and international markets. Your Directors are confident that the Company will continue to create value for its shareholders. Your Company will continue to explore new product offerings including reduced harm products in times to come.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Company’s bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in the Company.

Respectfully submitted on behalf of the Board

R.A. SHAH

CHAIRMAN

New Delhi

Dated: 11^th August, 2018

---

Mar 31, 2017

The Directors feel privileged to present the 80th Annual Report on the business and operations of the Company along with the Audited Accounts for the financial year, ended March 31, 2017.

FINANCIAL RESULTS

	2016-17	2015-16
	Rs. in Lakhs	Rs. in Lakhs
Gross Profit	29190.30	34782.64
Less : Depreciation	9412.82	10220.49
Profit before tax	19777.48	24562.15
Less : Provision for tax
- current tax	5136.50	7066.38
- deferred tax charge/(credit)	1005.64	329.35
Profit after tax for the year	13635.34	17166.42
Add: Other comprehensive income/(loss)- net of tax	(409.83)	(219.69)
Total Comprehensive Income	13225.51	16946.73

During the year ended March 31, 2017, the Company registered operating revenue of Rs. 4397 crores as against Rs. 4262 crores during corresponding previous financial year, giving a rise of 3.2%. However, the profit after tax was lower at Rs. 136.35 crores against Rs. 171.66 crores last year as the Company’s margins suffered due to its inability to fully pass on the cost and tax increases.

The trend of hike in indirect tax on tobacco segment on year-on-year basis continued with the Union Government increasing excise duty by 6% across segments in the budget presented on February 1, 2017. But, with the advent of GST, we are hopeful of stability in the indirect tax system in the times to come.

DIVIDEND

Your Directors are pleased to recommend the same dividend as last year of 400% i.e. Rs.8/- per equity share of face value of Rs.2/- each. The proposed dividend (including tax thereon) will absorb Rs. 5006.29 lakhs.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence, no details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are required to be reported.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return in Form MGT-9 as on 31^st March, 2017 is attached as ‘Annexure - 1’ to this Report.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

As on 31^st March, 2017, your Company had eight subsidiaries and three associate companies. The basic details of these companies form part of the extract of Annual Return given in ‘Annexure - 1’.

Form AOC-1 containing the salient features of financial statements of the Company’s subsidiaries and associates is attached as ‘Annexure - 2’. Note 47 of the consolidated financial statements shows the share of each subsidiary and associate company in the consolidated net assets and profits of the Company. The audited financial statements of these entities will be available for inspection during business hours at the Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Indian Accounting Standard (Ind AS-110) - Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared on the basis of audited financial statements received from the subsidiary and associate companies, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures which are in line with the internal financial control framework requirements. There is an extensive programme of internal audit by a firm of chartered accountants followed by periodic management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY

The CSR initiatives focus on inclusive growth with the Company striving to enhance the livelihood of the local communities and contribute to their economic and social well-being through various proactive community partnership programmes.

As part of various programmes for farmers, women, children and community development, your Company is supporting this cause by installing water purifiers, holding health camps, extending scholarships for meritorious children, connecting children with schools, conducting HIV awareness programmes, operating skill training centres for adult children, improving infrastructure of schools by building toilets, helping community through drainage construction and other cleanliness drive and thereby improving their living conditions.

The Company has constituted a CSR Committee of the Board in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The brief outline of the CSR policy, overview of the activities undertaken with amounts spent thereon during the year and composition of the Committee has been disclosed in ‘Annexure - 3’.

DIRECTORS

Mr. Samir Modi (DIN 00029554) retires by rotation at the ensuing Annual General Meeting, in accordance with the provisions of Section 152 of the Companies Act, 2013 and being eligible, offers himself for reappointment.

Mr. R. Ramamurthy Iyer (DIN 00030463) also retires by rotation but has expressed his unwillingness to seek re-appointment and therefore, would cease to be a Director on conclusion of the ensuing AGM.

The Board of Directors has recommended appointment of Mr. Sharad Aggarwal (DIN 07438861) as a Whole-time Director of the Company for a period of 5 years with effect from 1^st October, 2017 and he shall be liable to retire by rotation. The Company has received a notice pursuant to Section 160 of the Companies Act, 2013 from one of its members proposing his candidature for appointment as a Director.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

Details pertaining to the manner in which evaluation of the Board, its Committees and individual Directors has been carried out, form part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Mr. K.K. Modi, Managing Director, Mr. Samir Modi, Executive Director, Mr. R. Ramamurthy, Whole-time Director, Mr. Sunil Agrawal, Chief Financial Officer and Mr. Sanjay Gupta, Company Secretary of the Company are deemed to be Key Managerial Personnel of the Company as per the provisions of Companies Act, 2013 and rules made thereunder.

BOARD MEETINGS

Details of the meetings of the Board held during the year, form part of the Corporate Governance Report.

AUDIT COMMITTEE

The composition, functions and details of the meetings of the Audit Committee held during the year, form part of the Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and external environment and incorporates suitable risk treatment processes in its strategy, and business and operating plans. The details of practices being followed by the Company in this regard, forms part of the Corporate Governance Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the ‘Act’), the Directors, to the best of their knowledge, confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) appropriate accounting policies have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period;

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

(iv) the Annual Accounts have been prepared on a going concern basis;

(v) the internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and are operating effectively; and

(vi) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

The above statements were noted by the Audit Committee at its meeting held on 12th August, 2017.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties referred in Section 188(1) of the Companies Act, 2013 is attached as ‘Annexure - 4’.

Details of related party transactions and related disclosures are given in the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered by the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

Details of Whistle Blower Policy/Vigil Mechanism form part of the Corporate Governance Report.

REMUNERATION AND NOMINATION POLICY

The appointment and remuneration of Directors is governed by the recommendation of Nomination and Remuneration Committee and then decided by the Board subject to approval of the shareholders.

The remuneration payable to the Directors shall be decided keeping into consideration long term goals of the Company apart from the individual performance expected from a director(s) in pursuit of the overall objectives of the Company.

The remuneration of Executive Director(s) including Managing Director(s) and Whole-time Director(s) is governed by the recommendation of Nomination and Remuneration Committee as per the criteria recommended by it and then approved by the Board subject to approval of the Shareholders.

A Non-executive Director including a Non-independent Director may be paid remuneration by way of commission either by way of monthly payments or specified percentage of net profits of the Company or partly by one way and partly by the other, as may be recommended by Nomination and Remuneration Committee and then decided by the Board subject to approval of the Shareholders.

In accordance with the provisions of the Articles of Association of the Company and the Companies Act, 2013, a sitting fees ( presently fixed at Rs. 1,00,000 per meeting) is paid to the Non-executive Directors of the Company who are not drawing any remuneration described hereinabove, for attending any meeting of the Board or of any Committee thereof. The remuneration payable to Directors shall be governed by the ceiling limits specified under section 197 of the Companies Act, 2013.

The remuneration policy for other senior management employees including key managerial personnel aims at attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the employees. The remuneration to management grade employees involves a blend of fixed and variable component with performance forming the core. The components of total remuneration vary for different employee grades and are governed by industry practices, qualifications and experience of the employee, responsibilities handled by him, his potentials, etc.

DIVIDEND DISTRIBUTION POLICY

As mandated by the Listing Regulations, the Board has formulated a dividend distribution policy and the same is attached as ‘Annexure - 8’ and is also available on the Company’s website.

BUSINESS RESPONSIBILITY REPORT

As mandated by the Listing Regulations, the Business Responsibility Report has been included as part of the Annual Report.

UNCLAIMED SHARE CERTIFICATES

Status of the unclaimed shares as on 31^st March, 2017 has been mentioned in the Report on Corporate Governance.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and in particular those stipulated in the Listing Regulations. Its objective and that of its management and employees is to manufacture and market the Company’s products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in the Listing Regulations, is enclosed.

Certificate from Mr. K.K. Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Executive Vice President - Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the Directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

STATUTORY AUDITOR

In terms of the resolution passed at the 77^th Annual General Meeting (AGM) of the Company held on 23^rd September, 2014, M/s. Deloitte Haskins & Sells, Chartered Accountants, the present statutory auditors, hold office until the conclusion of the ensuing AGM and can’t be re-appointed in view of the provisions of Section 139(2) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014.

Accordingly, the Board of Directors at in its Meeting held on 30^th May, 2017 recommended appointment of M/s. S.R. Batliboi & Co. LLP (part of Ernst & Young group), Chartered Accountants, Firm Registration No. 301003E, as the new statutory auditors of the Company to hold office for one term of 5 years commencing from conclusion of the ensuing AGM upto the AGM to be held in calendar year 2022.

The Company has received a certificate from M/s. S.R. Batliboi & Co. LLP to the effect that their appointment, if made, shall be in compliance with the provisions of Section 139 and 141 of the Companies Act, 2013. Accordingly, the Board proposes appointment of M/s. S.R. Batliboi & Co. LLP, Chartered Accountants as the statutory auditors of the Company in place of M/s. Deloitte Haskins & Sells, to hold office from the conclusion of this AGM until the conclusion of the 85^th AGM of your Company. Necessary resolution seeking approval of the Members in this regard has been incorporated in the Notice convening the ensuing AGM.

Auditor’s Report on the financial statements of the Company forms part of the Annual Report and doesn’t contain any qualification, reservation, adverse remark or disclaimer.

COST AUDIT

M/s. Chandra Wadhwa & Co., Cost Accountants (Firm Registration No.00239), have been appointed as the Cost Auditor of the Company for the financial year 2017-18 to audit the cost accounting records for ‘Tea’ business, at a fee of Rs. 2.50 lakhs plus applicable taxes and out of pocket expenses, subject to approval by the Shareholders at the ensuing Annual General Meeting.

Further, the cost audit report for the financial year 2016-17 doesn’t contain any qualification, reservation, adverse remark or disclaimer.

SECRETARIAL AUDIT

M/s. Chandrasekaran Associates, Practicing Company Secretaries, have been appointed as the Secretarial Auditor of the Company.

The Secretarial Audit Report for the year under review is attached as ‘Annexure - 5’ and doesn’t contain any qualification, reservation, adverse remark or disclaimer.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant and material order was passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as ‘Annexure - 6’.

Pursuant to the provisions of Section 136(1) of the Act and as advised, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is being sent to the Members excluding the aforesaid information.

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

The particulars prescribed under Section 143(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as ‘Annexure - 7’.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressal of sexual harassment of women at work place in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received relating to sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy.

During the year under review, no complaint was filed with the Company.

THE FUTURE

Availability of best in the class manufacturing facilities with right blend of technology, vast distribution network, adequate financial resources and motivated manpower will facilitate your Company to drive growth across its various businesses and product categories both in domestic and international markets. Your Directors are confident that the Company will continue to create value for its shareholders in times to come.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Company’s bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in the Company.

Respectfully submitted on behalf of the Board

R.A. SHAH

CHAIRMAN

New Delhi

Dated : 12^th August, 2017

---

Mar 31, 2016

The Directors feel privileged to present the 79th Annual Report on the business and operations of the Company along with the Audited Accounts for the financial year, ended March 31, 2016.

FINANCIAL RESULTS

2015-16 2014-15 Rs. in lacs Rs. in lacs

Gross Profit (after exceptional item) 33905.50 37365.53

Less : Depreciation 10220.49 10225.65

Profit before tax 23685.01 27139.88

Less : Provision for tax

- current tax 7042.00 9218.00

- deferred tax charge/(credit) 236.54 (462.76)

- current tax expense relating to prior years (91.89) 76.20

Profit after tax for the year 16498.36 18308.44

Add: Profit brought forward 100261.19 89369.31

Less: Adjustment for depreciation in transition - 410.27

Available for appropriation 116759.55 107267.48

Appropriations

Proposed Dividend 4159.51 4159.51

Corporate Dividend Tax 846.78 846.78

Transfer to General Reserve 2000.00 2000.00

Surplus carried to Balance Sheet 109753.26 100261.19

116759.55 107267.48

During the year ended March 31, 2016, the Company registered operating revenue of Rs.4348 crores as against Rs.4453 crores during corresponding previous financial year, a decline of 2.4%. The profit after tax was lower at Rs.164.98 crores against Rs.183.08 crores last year.

The Union Budget 2016 has yet again increased the excise duty on cigarette which works out to around 10% on weighted average volume base of your Company and this is apart from some State Governments hiking VAT rates.

DIVIDEND

Your Directors are pleased to recommend the same dividend as last year of 400% i.e. Rs.8/- per equity share of face value of Rs.2/- each. The proposed dividend (including tax thereon) will absorb Rs.5006.29 lacs.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence no details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are reported.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return in Form MGT-9 as on 31st March, 2016 is attached as ''Annexure - 1'' to this Report.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

As on 31st March, 2016, your Company had eight subsidiaries and three associate companies. The basic details of these companies form part of the extract of Annual Return given in ''Annexure - 1''.

Form AOC-1 containing the salient features of financial statements of the Company''s subsidiaries and associates is attached as ''Annexure - 2''. Note 43 of the consolidated financial statements shows the share of each subsidiary and associate company in the consolidated net assets and profits of the Company. The audited financial statements of these entities will be available for inspection during business hours at the Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared on the basis of audited financial statements received from the subsidiary and associate companies, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures which is in line with the internal financial control framework requirements. There is an extensive programme of internal audit by a firm of chartered accountants followed by periodic management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY

The Companies Act, 2013 mandates every company that meets certain eligibility criteria, to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities.

Our CSR initiatives focus on inclusive growth with the Company striving to enhance the livelihood of the local communities and contribute to their economic and social well-being through various proactive community partnership programmes.

Your Company, with the support of implementing institutions, is working with most vulnerable communities in target areas by way of providing various supports in the field of education, health, skill development, etc. As part of various programmes for farmers, women, children and community development, your Company is supporting this cause by installation of safe drinking water, holding health camps, extending scholarships for meritorious children, connecting children with schools, conducting HIV awareness programmes, operating skill training centres for adult children, improving infrastructure of schools, building toilets, helping community through drainage construction and other cleanliness drive and thereby improving their living conditions. Higher education is the prime driver for sustainable development and economic growth.

As part of women empowerment initiative, the Kashmir women''s program realized its target of enabling conflict ridden women with skill development and empowerment through livelihood. There were success stories of women moving to entrepreneurial ventures and independent projects.

The Company has constituted a CSR Committee of the Board in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The brief outline of the CSR policy, overview of the activities undertaken with amounts spent thereon during the year and composition of the Committee have been disclosed in ''Annexure - 3''.

DIRECTORS

Mr. R.A. Shah (DIN 00009851) and Mrs. Bina Modi (DIN 00048606) are liable to retire by rotation at the ensuing Annual General Meeting, in accordance with the provisions of Section 152 of the Companies Act, 2013 and being eligible, offer themselves for re-appointment.

Mr. Ruchir Kumar Modi (DIN 07174133) was appointed as Additional Director w.e.f. 19th March, 2016 and holds office upto the date of the ensuing Annual General Meeting. The Company has received a notice pursuant to Section 160 of the Companies Act, 2013 from one of its members proposing his candidature for appointment as a Director.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

The details pertaining to the manner in which evaluation of the Board, its Committees and individual Directors has been carried out, forms part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Mr. K.K. Modi, Managing Director, Mr. Samir Kumar Modi, Executive Director, Mr. R. Ramamurthy, Whole- time Director, Mr. Sunil Agrawal, Chief Financial Officer and Mr. Sanjay Gupta, Company Secretary of the Company are deemed to be Key Managerial Personnel of the Company as per the provisions of Companies Act, 2013 and rules made thereunder.

BOARD MEETINGS

The details of the meetings of the Board held during the year, forms part of the Corporate Governance Report.

AUDIT COMMITTEE

The composition, functions and details of the meetings of the Audit Committee held during the year, forms part of the Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and external environment and incorporates suitable risk treatment processes in its strategy, and business and operating plans. The details of practices being followed by the Company in this regard, forms part of the Corporate Governance Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of this Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the ''Act''), the Directors, to the best of their knowledge confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) appropriate accounting policies have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

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

(iv) the Annual Accounts have been prepared on a going concern basis;

(v) the internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and are operating effectively; and

(vi) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

The above statements were noted by the Audit Committee at its meeting held on 16th August, 2016.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties referred in Section 188(1) of the Companies Act, 2013 are attached as ''Annexure - 4''.

The details of related party disclosures form part of the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered by the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

The details of Whistle Blower Policy/Vigil Mechanism forms part of the Corporate Governance Report.

REMUNERATION AND NOMINATION POLICY

The details of remuneration and nomination policy for the Directors forms part of the Corporate Governance Report.

The remuneration policy for other senior management employees including key managerial personnel aims at attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the employees. The remuneration to management grade employees involves a blend of fixed and variable component with performance forming the core. The components of total remuneration vary for different employee grades and are governed by industry practices, qualifications and experience of the employee, responsibilities handled by him, his potentials, etc.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and in particular those stipulated in the Listing Obligations and Disclosure Requirement Regulations. Its objective and that of its management and employees is to manufacture and market the Company''s products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is enclosed.

Certificate from Mr. K.K. Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Executive Vice President - Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

STATUTORY AUDITOR

M/s. Deloitte Haskins & Sells, Chartered Accountants (Firm Registration No. 015125N), were appointed as the Statutory Auditor of your Company at the Annual General Meeting held on 23rd September, 2014 for a term of three years. However, as per the provisions of Section 139 of the Companies Act, 2013, their appointment is required to be ratified by the Shareholders at every Annual General Meeting.

Auditors'' Report on the financial statements of the Company forms part of the Annual Report and doesn''t contain any qualification, reservation, adverse remark or disclaimer.

COST AUDIT

M/s. Chandra Wadhwa & Co., Cost Accountants (Firm Registration No.00239), have been appointed as the Cost Auditor of the Company for the financial year 2016-17 to audit the cost accounting records for ''Tea'' business, at a fee of Rs. 2.50 lacs plus applicable taxes and out of pocket expenses, subject to approval by the Shareholders at the ensuing Annual General Meeting.

Further, the cost audit report for the financial year 2015-16 doesn''t contain any qualification, reservation, adverse remark or disclaimer.

SECRETARIAL AUDIT

M/s Chandrasekaran Associates, Practicing Company Secretaries, have been appointed as the Secretarial Auditor of the Company.

The Secretarial Audit Report for the year under review is attached as ''Annexure - 5'' and doesn''t contain any qualification, reservation, adverse remark or disclaimer.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant and material order was passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as ''Annexure - 6''.

Pursuant to the provisions of Section 136(1) of the Act and as advised, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is being sent to all the Members of the Company excluding the aforesaid information.

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

The particulars prescribed under Section 143(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as ''Annexure - 7''.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressal of sexual harassment of women at work place in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received relating to sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the year under review, no complaint was filed with the Company.

THE FUTURE

Your Company has a strong platform in the form of the state of the art manufacturing facilities, best in class technology, vast distribution network, adequate financial resources and motivated manpower to drive growth across its various businesses and product categories both in domestic and international markets. Your Directors are confident that the Company will continue to create value for its shareholders in times to come.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Company''s bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in the Company.

Respectfully submitted on behalf of the Board

R.A. SHAH

CHAIRMAN

New Delhi

Dated : 16th August,2016

---

Mar 31, 2015

The Directors feel privileged to present the 78th Annual Report on the business and operations of the Company along with the Audited Accounts for the financial year, ended March 31, 2015.

FINANCIAL RESULTS

2014-15 2013-14 Rs. in lacs Rs. in lacs

Gross Profit (after exceptional item) 37365.53 34122.98

Less : Depreciation 10225.65 8655.43

Profit before tax 27139.88 25467.55

Less : Provision for tax

- current tax 9218.00 9602.40

- deferred tax charge/(credit) (462.76) (1356.42)

- current tax expense relating to prior years 76.20 157.51

Profit after tax for the year 18308.44 17064.06

Profit brought forward 89369.31 79171.67

Less: Adjustment for depreciation in transition 410.27 -

Available for appropriation 107267.48 96235.73

Appropriations

Proposed Dividend 4159.51 4159.51

Corporate Dividend Tax 846.78 706.91

Transfer to General Reserve 2000.00 2000.00

Surplus carried to Balance Sheet 100261.19 89369.31

107267.48 96235.73

During the year ended March 31, 2015, the Company registered operating revenue of Rs. 4453 crore as against Rs. 4193 crore during corresponding previous financial year, a growth of almost 6.2%. The profit after tax was higher at Rs. 183.08 crore against Rs. 170.64 crore last year.

The Union Budget 2015 has yet again increased the excise duty on cigarette which works out to around 15% on weighted average volume base of your Company and this is apart from some State Governments hiking VAT rates. The trend of steep increase in taxation on cigarette as prevalent over the last several years is likely to continue.

SUB-DIVISION OF SHARES

Pursuant to the approval of the Shareholders obtained at last Annual General Meeting held on 23rd September, 2014, each equity share of nominal face value of Rs.10/- (Rupees Ten) each was sub-divided into 5 (Five) equity shares of face value of Rs.2/- (Rupees Two) each with effect from 1st December, 2014.

DIVIDEND

Your Directors are pleased to recommend the same dividend as last year of 400% i.e. Rs. 8/- per equity share of face value of Rs. 2/- each.The proposed dividend (including tax thereon) will absorb Rs. 5006.29 lacs.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence no details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are reported.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return in Form MGT-9 as on 31st March, 2015 is attached as 'Annexure - 1' to this Report.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

As on 31st March, 2015, your Company had six subsidiaries and three associate companies. The basic details of these companies form part of the extract of Annual Return given in 'Annexure-1'.

Form AOC-1containing the salient features of financial statements of the Company's subsidiaries and associates is attached as 'Annexure - 2'. The audited financial statements of these entities will be available for inspection during business hours at the Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared on the basis of audited financial statements received from the subsidiary and associate companies, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures, an extensive programme of internal audit by a firm of chartered accountants and management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY

As a long-standing business, led by a promoter family with philanthropy ingrained in them, your Company has always strived to be a responsible corporate citizen. As a successful cigarette manufacturing company, we feel an even greater obligation to take our social responsibility efforts further to cover a wide spectrum of social issues.

In its endeavour to benefit co-communities of the Company, the project Amodini is focussing on improvement of quality of lives of contractual women labourers engaged in leaf tobacco grading in Ongole, Andhra Pradesh. This initiative has not just made women financially aware with thrift and credit, but also supported them in becoming economically independent through vocational training and skill development and has been able to promote gender equality.

Another large project for conflict ridden women was initiated in Kashmir, a major market of the Company. Already equipped with traditional skills in Kashmiri handicraft, these women are being provided technical inputs on the aspects of marketing, design and financial management to ensure a sufficient and consistent income for sustainable livelihood.

Our commitment to be responsible to the environment from which we extract resources is reflected in our Good Agricultural Practices (GAP) initiative with farmers. And to minimise the impact of our business on the environment, we have ISO 14001:2004 (Environment Management System) certification for our manufacturing plants and use methods that have been proven to be environmentally safe.

Rabale factory was bestowed with 'Greentech Environment Gold' award for outstanding achievement in Environment Management, 'Super Achiever' award for outstanding achievement in Safety Management and also 'Silver' award in IRIM Global Manufacturing Competitiveness.

The Company has constituted Corporate Social Responsibility (CSR) Committee of the Board in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The brief outline of the CSR policy, overview of the activities undertaken with amounts spent thereon during the year and composition of the Committee have been disclosed in 'Annexure - 3'.

DIRECTORS

Mr. Samir Kumar Modi (DIN 00029554) and Mr. R. Ramamurthy (DIN 00030463) are liable to retire by rotation in accordance with the provisions of Section 152 of the Companies Act, 2013 at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Mr. Lalit Kumar Modi vacated his office as the Director of the Company with effect from 28th May, 2015 by virtue of the provisions of Section 167 (1) (b) of the Companies Act, 2013.

Mr. Atul Kumar Gupta (DIN 01734070) was appointed as Additional Director w.e.f. 20th June, 2015 and holds office upto the date of the ensuing Annual General Meeting. The Company has received notice pursuant to Section 160 of the Companies Act, 2013 from one of its members proposing his candidature for appointment as a Director.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

The details pertaining to the manner in which evaluation of the Board, its Committees and individual Directors has been carried out, forms part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Mr. K.K. Modi, President & Managing Director, Mr. Samir Kumar Modi, Executive Director, Mr. R. Ramamurthy, Whole-time Director, Mr. Sunil Agrawal, Chief Financial Officer and Mr. Sanjay Gupta, Company Secretary of the Company are deemed to be Key Managerial Personnel of the Company as per the provisions of Companies Act, 2013 and rules made thereunder. All of these officials were already in the office prior to commencement of the Companies Act, 2013.

BOARD MEETINGS

The details of the meetings of the Board held during the year, forms part of the Corporate Governance Report.

AUDIT COMMITTEE

The composition, functions and details of the meetings of the Audit Committee held during the year, forms part of the Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and external environment and incorporates suitable risk treatment processes in its strategy, and business and operating plans. The details of practices being followed by the Company in this regard, forms part of the Corporate Governance Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of this Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the 'Act'), the Directors, to the best of their knowledge confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) appropriate accounting policies have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

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

(iv) the Annual Accounts have been prepared on a going concern basis;

(v) the internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and are operating effectively; and

(vi) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

The above statements were noted by the Audit Committee at its meeting held on July 31, 2015.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties referred in Section 188(1) of the Companies Act, 2013 are attached as 'Annexure -4'.

The details of related party disclosures form part of the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered by the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

The details of Whistle Blower Policy/Vigil Mechanism forms part of the Corporate Governance Report.

REMUNERATION AND NOMINATION POLICY

The details of remuneration and nomination policy for the Directors forms part of the Corporate Governance Report.

The remuneration policy for other senior management employees including key managerial personnel aims at attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the employees. The remuneration to management grade employees involves a blend of fixed and variable component with performance forming the core. The components of total remuneration vary for different employee grades and are governed by industry practices, qualifications and experience of the employee, responsibilities handled by him, his potentials etc.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and in particular those stipulated in the Listing Agreement with the Stock Exchanges. Its objective and that of its management and employees is to manufacture and market the Company's products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreement with the Stock Exchanges, is enclosed.

Certificate from Mr. K.K. Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Executive Vice President – Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

STATUTORY AUDITOR

M/s. Deloitte Haskins & Sells, Chartered Accountants (Firm Registration No. 015125N), were appointed as the Statutory Auditor of your Company at the last Annual General Meeting held on 23rd September, 2014 for a term of three years. However, as per the provisions of Section 139 of the Companies Act, 2013, their appointment is required to be ratified by the Shareholders at every Annual General Meeting.

Auditors' Report on the financial statements of the Company forms part of the Annual Report and doesn't contain any qualification, reservation, adverse remark or disclaimer.

COST AUDIT

M/s. Chandra Wadhwa & Co., Cost Accountants (Firm Registration No.00239), have been appointed as the Cost Auditor of the Company for the financial year 2015-16 to audit the cost accounting records for 'Tea' business, at a fee of Rs. 2.50 lacs plus applicable taxes and out of pocket expenses, subject to ratification by the Shareholders at the ensuing Annual General Meeting.

SECRETARIAL AUDIT

M/s. Chandrasekaran Associates, Practicing Company Secretaries, have been appointed as the Secretarial Auditor of the Company.

The Secretarial Audit Report for the year under review is attached as 'Annexure - 5' and the observation of the Secretarial Auditor with regard to absence of one out of two Independent Directors at the Audit Committee Meetings held on 28th May, 2014 and 9th November, 2014, has been addressed in the para 3(ii) of the Corporate Governance Report for the year ended 31st March, 2015.

Except for one observation as mentioned above, the Secretarial Audit Report doesn't contain any qualification, reservation, adverse remark or disclaimer.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant and material order was passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as 'Annexure -6'.

Pursuant to the provisions of Section 136(1) of the Act and as advised, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is being sent to all the Members of the Company excluding the aforesaid information.

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

The particulars prescribed under Section 143(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as 'Annexure -7'.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressed of sexual harassment of women at work place in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received relating to sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the year under review, one complaint was filed with the Company and the same was investigated by the ICC and resolved as per the provisions of the Act.

THE FUTURE

Your Company has the requisite infrastructure, best in class technology, vast distribution network and talented pool of human resources to drive growth in various business and product categories both in domestic and international markets. Your Directors are confident that the Company will continue to create value for its shareholders in times to come.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Company's bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in the Company.

Respectfully submitted on behalf of the Board

New Delhi R.A. SHAH

Dated : July 31, 2015 CHAIRMAN

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Mar 31, 2014

Dear members,

The Directors have pleasure in presenting the Seventy-seventh Annual Report on the business and operations of the Company together with the Audited Accounts for the financial year ended March 31, 2014.

FIXED DEPOSITS

The Company has not accepted any Fixed Deposits from the public or members during the year. No amount was outstanding towards unclaimed deposits payable to the depositors as on March 31, 2014.

FINANCIAL RESULTS

2013-14 2012-13 Rs. in lacs Rs. in lacs

Gross Profit (after exceptional item) 34122.98 32490.35

Less : Depreciation 8655.43 8800.03

Profit before tax 25467.55 23690.32

Less : Provision for tax

* current tax 9602.40 5855.62

* deferred tax charge/(credit) (1356.42) 1136.03

* current tax expense relating to prior years 157.51 (249.11)

Profit after tax for the year 17064.06 16947.78

Profit brought forward 79171.67 69090.31 Available for appropriation 96235.73 86038.09

Appropriations

Proposed Dividend 4159.51 4159.51

Corporate Dividend Tax 706.91 706.91

Transfer to General Reserve 2000.00 2000.00

Surplus carried to Balance Sheet 89369.31 79171.67

96235.73 86038.09

During the year ended March 31, 2014, the Company registered sales turnover of Rs. 4132 crore as against Rs. 3598 crore during corresponding previous financial year, a growth of almost 15%. The profit after tax was marginally higher at Rs. 170.64 crore against Rs. 169.47 crore last year.

The Union Budget 2014 has yet again increased the excise duty on cigarette which works out to around 24% on weighted average volume base of your Company and this is apart from some State Governments hiking VAT rates. The trend of steep increase in taxation on cigarette over the last several years is likely to continue.

DIVIDEND

Your Directors are pleased to recommend the same dividend as last year of Rs. 40 per equity share of face value of Rs. 10 each.

INTERNAL CONTROL SYSTEM

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control system is supplemented by well documented policies, guidelines and procedures, an extensive programme of internal audit by a firm of chartered accountants and management reviews.

HUMAN RESOURCE DEVELOPMENT

Your Company modified the organization structures of its Businesses/ Core Functions to facilitate better performance outcomes. Simultaneously, it is also working towards building a working culture aimed at achieving higher performance orientation, openness in communication, structured succession planning and more empowerment. The Key business result areas of different functions are being integrated to ensure better synergy and intra and inter-functional effectiveness.

Initiatives such as training of female employees on personal safety and security issues, meeting other guidelines on the subject of prevention and prohibition of sexual harassment and its redressal, annual health check-ups for employees and building employee capabilities are helping your Company to better engage its employees and drive improvement in business outcomes.

CORPORATE DEVELOPMENT

Corporate Development division continued to serve towards fine-tuning the business model through long term planning for the Company and providing strategic inputs to the senior leadership as well as the business teams by continuously engaging in alignment of business objectives, long term planning for identification of key trends, monitoring the changes in the market and competitive landscape, understanding the industry trends and its impact on the business, analysing the regulatory environment and providing inputs on business portfolio optimization. The Corporate Development team of your Company is also engaged in working with external partners towards development of the envisioned growth strategy.

INFORMATION TECHNOLOGY

Your Company is continuing its investment in Information Technology to improve operational efficiencies and enhance productivity. It successfully completed ERP implementation for all businesses and implementation of state of art hardware technologies to provide uninterrupted services to the businesses. Your Company has decided to leverage IT in its sales and distribution functions to drive towards transformational phase aimed at achieving improvement in sales system efficiencies, converting sales information into actionable data points and integrating information across the enterprise.

Your Company is closely observing evolution in the digital space and looking at suitable opportunity to participate in this revolution to enhance its business landscape in times to come.

CORPORATE SOCIAL RESPONSIBILITY

''Amodini'', your Company''s flagship CSR initiative for women''s empowerment has grown from strength to strength impacting over 23,000 women directly. The program has been able to promote gender equality and address power imbalances by joining hands with many reputed NGOs. This initiative has not just made women financially aware with thrift and credit, but also supported them in becoming economically independent through vocational training and skill development.

In its endeavour to benefit the communities directly connected with the Company''s business, Amodini program is focussing on improvement of quality of lives of 650 contractual women labourers engaged in tobacco leaf grading in Ongole, Andhra Pradesh through water, sanitation, health, hygiene, thrift-credit and education related interventions. Another large project for conflict ridden women was initiated in Kashmir, a major market of the Company. Already equipped with traditional skills in Kashmiri handicraft, these women are being provided support for earning sustainable livelihoods from the same. It is an economic empowerment program which intends to provide technical inputs on aspects of marketing, design and financial management to ensure a sufficient and consistent income for about 1200 women over a period of three years.

Rabale factory''s Green initiative was recognized with ''Gold Rating'' by the IGBC and Ghaziabad factory was bestowed with ''Platinum Award'' by the Greentech Foundation for outstanding achievement in environment management and ''Gold Award'' by FICCI for quality awards in manufacturing.

CONSERVATION OF ENERGY

Several energy saving measures were taken during the year, details of which are given below:

1. Installation of LED lighting for pilot plant at Rabale has resulted in saving of energy consumption by about 30%.

2. Optimized use of energy on air handling units at SMD by reducing height of its duct at Rabale factory.

3. Optimized use of energy by H&V plant at PMD by interconnecting its usage with PMD machines'' running at Rabale factory.

4. Optimized use of energy for vacuum pump by interconnecting vacuum line for making and packing machines at Rabale factory.

TECHNOLOGICAL ABSORPTION, ADOPTION AND INNOVATION

1. Modified Tower Dryer to achieve optimum temp flash drying of cut tobacco at Rabale factory.

2. Installed high sensitivity metal detector at chewing products plant for food safety considerations.

3. Installed tea cleaning conveyor system to ensure teas are free from any impurities and remain untouched by hands during entire process.

4. Designed and locally developed inner frame registration units on cigarette packing machines to run pre- printed inner frames.

5. Designed and locally developed machine for cigarette packing and wrapping in 20''s ''Shoulder Box''.

6. Pan masala packing machine upgraded from the speed of 600 ppm to 1000 ppm.

7. Automated flavor dosing system installed for uniform dosage of flavor in pan masala.

8. Obtained IS0-22000 certification for the chewing products plant.

9. Introduced square corner extended cigarette pack of 77 mm length.

10. Dock leveller installed for direct loading of cut tobacco cartons in the containers for export.

RESEARCH & DEVELOPMENT

New Product Development

1. Carried out development work for some differentiated products in cigarette, cut tobacco and chewing categories for meeting requirements of both domestic and overseas customer needs.

2. Developed methods for testing of e-cigarettes.

3. Fully implemented the ''Agile'' software system for mapping the process of product development thereby increasing the pace of new offer development.

4. Scaled up the size of pilot plant to a 500 kg line.

5. Developed flavours in-house for use in pan masala and zarda.

6. Took up project to reduce cigarette densities of major brands.

Benefits derived as a result of this Development

1. Created and improved premium brands of cigarettes where we have marginal presence in the domestic markets.

2. Further enhanced existing tobacco blends in order to improve the smoke characteristics.

3. Reduced the delivery levels of our existing major RSFT brands.

4. Further increased the number of variants of cut tobacco blends and cigarettes in the library for domestic as well as export markets.

5. Agile software has helped in building the robust product development process.

Future Plan of Action

1. Continuous endeavour to improve the efficiency in terms of creating differentiated / innovative products for the cigarette and chewing business, thereby maintaining a healthy offer pipeline.

2. Developing new flavors for e-cigarettes.

3. Constituting expert panel for testing chewing products developed in-house.

4. Continue endeavour on smoke delivery reduction in cigarette brands.

DIRECTORS

Your Directors express their profound grief on the sad demise of two sitting directors of the Company, namely, Mr. O.P. Vaish and Mr. C.M. Maniar on September 18, 2013 and June 29, 2014, respectively. The Board has recorded its deep sense of appreciation for the valuable contribution made by them in course of their tenure as directors of the Company.

As per the provision of the Companies Act, 2013, Independent Directors are required to be appointed for a term of five consecutive years and shall not be liable to retire by rotation. Accordingly, resolutions proposing appointment of Mr. R.A. Shah (DIN 00009851), Mr. Anup N. Kothari (DIN 00294737) and Dr. Lalit Bhasin (DIN 00001607) as Independent Directors of the Company, form part of the Notice of the ensuing Annual General Meeting.

In accordance with the Articles of Association of the Company and pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. Lalit Kumar Modi (DIN 00029520) would retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

Mrs. Bina Modi (DIN 00048606) was appointed as Additional Director w.e.f. April 7, 2014 in terms of Section 161 of the Companies Act, 2013 and holds office upto the date of the ensuing Annual General Meeting. The Company has received notice pursuant to Section 160 of the Companies Act, 2013 from one of its members proposing her candidature for appointment as a Director.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors'' Responsibilities Statement, the Directors confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

(ii) appropriate accounting policies have been selected and applied consistently and judgements and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review;

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

(iv) the Annual Accounts have been prepared on a going concern basis.

The above statements were noted by the Audit Committee at its meeting held on August 2, 2014.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and in particular those stipulated in the Listing Agree- ment with the Stock Exchanges. Its objective and that of its management and employees is to manufacture and market the Company''s products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreement with the Stock Exchanges, is enclosed.

Certificate from Mr. K.K. Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Senior Vice President - Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared on the basis of audited financial statements received from the Subsidiary & Associate Companies, as approved by their respective Boards.

AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants(Firm Registration No. 015125N), Statutory Auditors of the Company, holds office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. In accordance with the provisions of Section 139 of the Companies Act, 2013, they can be appointed for a term of three years starting from the conclusion of the ensuing Annual General Meeting.

The Company has received letter from the Statutory Auditors to the effect that their re-appointment, if made, would be within the prescribed limits under Section 139 of the Companies Act, 2013 and they are not disqualified for re-appointment. Accordingly, the Board recommends re-appointment of M/s. Deloitte Haskins & Sells as Statutory Auditors of the Company from the conclusion of ensuing Annual General Meeting till the conclusion of Annual General Meeting to be held in the calendar year 2017, subject to the ratification of their appointment at each Annual General Meeting.

COST AUDIT

Ministry of Corporate Affairs, vide notification dated 30th June, 2014, has announced Companies (Cost Records and Audit) Rules, 2014. These rules supersede the rules notified under Companies Act, 1956 and specify the classes of companies that would be required to maintain cost records and which will be subject to Cost Audit. Your Company is not covered under any of the classes of companies mentioned under these rules.

In compliance with the erstwhile provisions of Section 233B of the Companies Act, 1956 read with MCA''s General Order dated 24th January, 2012 (as amended vide another Order dated 6th November, 2012), the Cost Audit Report for the year ended 31st March, 2014 will be submitted in due course.

SUBSIDIARY COMPANIES

Ministry of Corporate Affairs, vide its General Circular No. 2 dated 8th February, 2011 has granted a general exemption to companies under section 212(8) of the Companies Act, 1956, from attaching the documents referred to in section 212(1) pertaining to its subsidiaries subject to the fulfilment of conditions stipulated in the Circular. Your Company has satisfied the conditions specified in the Circular and hence entitled to the exemption.

In compliance of the aforesaid Circular, the annual accounts of the subsidiaries will be made available upon request by any shareholder of the Company and its subsidiaries. The annual audited accounts of the subsidiaries will also be kept for inspection during business hours by any shareholder at the Company''s Corporate Office as well as its Registered Office and at the offices of the respective subsidiaries. Further, as per the provisions of Section 212 of the Act, a statement of the Company''s interest in its subsidiaries and a statement summarising financial performance parameters of subsidiary companies are included under notes to the consolidated financial statements and forms part of the Annual Report.

EMPLOYEES

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 Act, the Report and Accounts are being sent to all shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

The relations with the employees of the Company continue to be cordial and the Directors wish to record their appreciation of their dedicated services at all levels of operations in the Company.

THE FUTURE

Your Company has the best in class manufacturing facilities, well established distribution network, committed pool of human resources and sound financial status which provides a sound base to drive growth in various business segments of the Company. Your Directors are confident that the Company will continue to create value for its shareholders in times to come.

Respectfully submitted on behalf of the Board

New Delhi R.A. SHAH Dated: August 2, 2014 CHAIRMAN

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Mar 31, 2013

The Directors have pleasure in presenting the Seventy-sixth Annual Report of your Company and the Audited Accounts for the fnancial year ended March 31'' 2013.

FINANCIAL RESULTS 2012-13 2011-12 Rs. in lacs Rs. in lacs

Gross Proft 32490.35 31986.62

Less : Depreciation 8800.03 6263.13

Proft before taxation 23690.32 25723.49

Less : Provision for taxation

- current tax 5855.62 8260.64

- deferred tax charge/(credit) 1136.03 (673.42)

- current tax expense relating to prior years (249.11)

Proft after tax for the year 16947.78 18136.27

Proft brought forward 69090.31 57988.33

Available for appropriation 86038.09 76124.60

Appropriations

Proposed Dividend 4159.51 4159.51

Corporate Dividend Tax 706.91 674.78

Transfer to General Reserve 2000.00 2200.00

surplus carried to Balance Sheet 79171.67 69090.31

86038.09 76124.60

During the year ended March 31'' 2013'' the Company registered sales turnover of Rs. 3598 crore as against Rs. 3349 crore during corresponding previous fnancial year'' a growth of 7.4%. The proft after tax was marginally lower at Rs. 170 crore against Rs. 181 crore last year.

The Union Budget 2013 has yet again increased the excise duty on cigarette by around 18%'' which has been followed up by some State Governments hiking VAT rates signifcantly. The continuous increase in taxation on cigarette over the last several years has been adversely affecting the volumes and therefore'' impacting proftability.

DIVIDEND

Your Directors are pleased to recommend the same dividend as last year of Rs. 40 per equity share of face value of Rs. 10 each.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal control commensurate with the size of the Company and the nature of its business'' which ensures that transactions are recorded'' authorised and reported correctly apart from safeguarding its assets against loss from wastage'' unauthorised use and disposition.

The internal control system is supplemented by well documented policies'' guidelines and procedures'' an extensive programme of internal audit by a frm of chartered accountants and management reviews.

HUMAN RESOURCE DEVELOPMENT

Your Company actively engages its workforce by building enduring relationships with employees through progressive'' transparent'' robust and fair systems and policies. In pursuance of the same'' new online Human Resource Information System called ''Hruday’ has been put in place for better and fast addressal of needs of employees. ''Hruday’'' developed by PeopleSoft'' is considered to be one of the best HR tools.

A job evaluation exercise for various managerial positions has been undertaken to understand the relative importance of various jobs and to assign true worth to each job position. This initiative will help your Company in creating a robust job hierarchy and providing appropriate placement to individual employees.

CORPORATE DEVELOPMENT

Corporate Development division continued to serve as the central strategy and planning team for your Company. Its primary objective is to provide business and advisory inputs to different business segments and senior leadership on industry dynamics'' regulatory challenges'' competitive landscape and developments in major markets in the world. The role of this division has been extended to include active business portfolio optimization'' developing and nurturing partnerships and alliances'' working with partners and business teams to develop alternate business models towards driving future growth and business sustainability'' designing and development of a robust go-to-market strategy'' understanding brand dynamics and strategising to regain lost market share in key markets. Going forward'' the division will also endeavor to take up initiatives in business intelligence'' knowledge management and risk management.

INFORMATION TECHNOLOGY

Your Company continues to invest in Information Technology to improve operational effciencies and enhance productivity. During the year'' Company implemented ERP core modules at its production facilities and sales establishments thereby making the entire supply chain ERP enabled. Your Company is currently exploring introduction of suitable IT processes in the sales function to enable the sales force to focus on their core activity of selling with better effciency. The Company will continue to leverage the Information Technology function to gain competitive advantage.

CORPORATE SOCIAL RESPONSIBILITY

Godfrey Phillips Bravery Awards continued to exhibit the Company’s commitment to recognizing common citizens for their acts of courage. The National Award ceremony held for the year 2012 saw the launch of the book ''A Billion Bravehearts’ that epitomizes bravery not only in physical form but also in the intellectual'' social and individual spheres'' as a selfess act and a contribution to the higher good. Social media has become a powerful platform to activate and increase participation in social campaigns. The ''Be Brave’ campaign on social media today is an active group of over 14 lakh members spreading the message of bravery'' courage and integrity.

Your Company is now also emphasising on programmes that contribute to sustainable development. ''Amodini’'' the women’s empowerment initiative now includes strategic activities and initiatives linking back to business. Amodini is now concentrating on communities associated with the Company’s businesses and is working towards improvement of quality of lives of 540 women engaged in tobacco leaf grading in Ongole'' Andhra Pradesh. The program is also focussing on provision of safe drinking water'' sanitation'' hygiene and health facilities'' adult education and thrift and credit facilities. In Murshidabad'' West Bengal'' 200 women beedi rollers have directly beneftted by health camps organised to mitigate occupational health hazards.

Your Company has evinced its keen interest in environment management with the launch of the new green factory at Rabale'' Navi Mumbai with a IGBC Gold-Green Factory Certifcation. The Company was recognized by the Greentech Awards for its consistent efforts towards Environment Management.

CONSERVATION OF ENERGY

Several energy saving measures were taken during the year'' details of which are given below:

1. Rabale factory building has been designed in line with the IGBC Green Factory norms with some unique features like LED based landscape lighting'' zero discharge as per CPCB norms'' use of friendly fuel PNG in Boiler'' etc.

2. Utilization of heat of compression and rejected heat of condenser coil in customized dehumidifcation system has resulted in reduction of electrical consumption by 15 KW per 5 TR dehumidifcation load at chewing products plants.

3. Installation of LED lights and VFD in supari dryer has resulted in lower power consumption at chewing products plant at Ghaziabad.

TECHNOLOGICAL ABSORPTION'' ADOPTION AND INNOVATION

1. Installed ERP enable automatic storage & retrieval system (ASRS) for tobacco and non-tobacco materials at Rabale factory for better inventory control.

2. Installed centralized UTILITY monitoring system (SCADA) at Rabale factory to control resource utilization.

3. Introduced fash drying of lamina portion of tobacco blend by installing latest generation ''Tower Dryer’ for improved product quality.

4. Introduced fully automated inventory / bin management system for Cut Tobacco.

5. Implemented oracle based ERP system in the areas of Production'' Engineering'' Quality Control to facilitate collection and analysis of reliable data.

RESEARCH & DEVELOPMENT

New Product Development

1. Carried out development work for some differentiated products in cigarette category for creating new consumer base for gaining domestic market share and for meeting the requirements of overseas customers.

2. Standardized the methods for determination of newer compounds in smoke.

3. Introduced a new technique of sensory evaluation of smoking products.

4. Developed more value added and differentiated products in chewing category.

5. Obtained NABL (ISO 17025) accreditation to R&D Foods Lab for chemical and microbiological analysis of Pan masala'' Zarda and Gutka.

6. Did some work on vitamin and mineral fortifcation of CTC Tea.

Benefts derived as a result of this Development

1. Further enhanced existing tobacco blends in order to improve the smoke characteristics.

2. Further increased variants of blends and cigarettes in the library for both domestic as well as export markets.

3. Further enhanced capability to generate new ideas and create differentiated products for domestic as well as export markets.

4. The launch of new variants in chewing segment will add potential to grow both top-line and bottom- line.

5. Improved the analytical facility to meet the future challenges and requirements.

Future Plan of Action

1. Develop cigarettes for premium category thereby creating base to gain space in the premium segment.

2. Improve the effciency in terms of creating differentiated / innovative products for the cigarette business'' thereby increasing the new offers and maintain a healthy offer pipeline.

3. Continuous endeavour on smoke delivery reduction of our existing cigarette brands.

4. Lay special emphasis on favor related development projects.

5. Intensify work on development of new products using R & D pilot plants.

FOREIGN EXCHANGE EARNINGS AND OUTGO

The earnings in foreign exchange during the year under report by way of exports and other income amounted to Rs. 361 crore (previous year Rs. 319 crore) as against the foreign exchange outgo on imports'' dividends and other expenditure aggregating to Rs. 136 crore (previous year Rs. 290 crore).

DIRECTORS

Mr. O.P. Vaish'' Mr. R. Ramamurthy and Mr. R.A. Shah'' Directors'' retire by rotation at the ensuing Annual General Meeting and being eligible'' have offered themselves for re-appointment.

The present term of Mr. Samir Kumar Modi as Executive Director of the Company will expire on 31st August'' 2013. The Board of Directors has re-appointed'' subject to approval of shareholders'' Mr. Samir Kumar Modi as Executive Director for a further period of 3 years with effect from 1st September'' 2013.

Brief resumes of the Directors offering themselves for re-appointment are furnished in the Corporate Governance Report and in the explanatory statement to the notice of the ensuing Annual General Meeting.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act'' 1956 with respect to Directors'' Responsibilities Statement'' the Directors confrm that:

(i) in the preparation of the Annual Accounts'' the applicable Accounting Standards have been followed;

(ii) appropriate accounting policies have been selected and applied consistently and judgements and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the fnancial year and of the proft of the Company for the year under review;

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

(iv) the Annual Accounts have been prepared on a going concern basis.

The above statements were noted by the Audit Committee at its meeting held on July 27th'' 2013.

CORPORATE GOVERNANCE

The Company is committed to maximise the value of its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and in particular those stipulated in the Listing Agreement with the Stock Exchanges. Its objective and that of its management and employees is to manufacture and market the Company''s products in a way so as to create value that can be sustained over the long term for consumers'' shareholders'' employees'' business partners and the national economy in general.

Certifcate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreement with the Stock Exchanges'' is enclosed.

Certifcate from Mr. K.K. Modi'' Managing Director as the Chief Executive Offcer (CEO) and Mr. Sunil Agrawal'' Senior Vice President – Finance as the Chief Financial Offcer (CFO) in relation to the fnancial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year were submitted to and taken note of by the Board.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements'' Group Accounts form part of this Report & Accounts. The Group Accounts have been prepared on the basis of audited fnancial statements received from the Subsidiary & Associate Companies'' as approved by their respective Boards.

AUDITORS

The Company’s Auditors'' M/s. A. F. Ferguson & Co.'' Chartered Accountants (Firm Registration No. 112066W)'' who retire at the ensuing AGM'' have expressed that they would not like to offer themselves for re-appointment as Auditors of the Company.

The Board in its meeting held on July 27'' 2013 considered and recommended for the appointment of M/s. Deloitte Haskins & Sells'' Chartered Accountants (Firm Registration No. 015125N)'' as Statutory Auditors'' in place of M/s. A. F. Ferguson & Co.'' after considering the recommendation of Audit Committee. Further the Company has received a certifcate dated July 25'' 2013 from M/s. Deloitte Haskins & Sells to the effect that their appointment'' if made'' would be in accordance with Section 224(1B) of the Companies Act'' 1956 and they are not disqualifed in terms of Section 226 of the Companies Act'' 1956 from being appointed as Statutory Auditors of the Company.

COST AUDIT

Complying with the provisions of Section 233B of the Companies Act'' 1956 and MCA general order No. F. No. 52/26/CAB-2010 dated 24th January'' 2012'' (as amended vide another order No. F. No. 52/26/CAB- 2010 dated 6th November'' 2012)'' the Board of Directors has appointed M/s. Chandra Wadhwa & Co.'' Cost Accountants (Registration No. 000239)'' as Cost Auditors of the Company for the fnancial year 2013-14'' subject to approval of the Central Government.

The Cost Audit Report for the year ended 31st March'' 2013 will be submitted in due course.

SUBSIDIARY COMPANIES

Ministry of Corporate Affairs'' Government of India has'' vide its General Circular No. 2 dated 8th February'' 2011 granted a general exemption to companies under section 212(8) of the Companies Act'' 1956 from attaching the documents referred to in section 212(1) pertaining to its subsidiaries subject to the fulflment of conditions stipulated in the Circular. Your Company has satisfed the conditions specifed in the Circular and hence entitled to the exemption.

In compliance of the aforesaid Circular'' the annual accounts of the subsidiaries will be made available upon request by any shareholder of the Company and its subsidiaries. The annual audited accounts of the subsidiaries will also be kept for inspection by any shareholder at the Company’s Corporate Offce as well as its Registered Offce and at the offces of the respective subsidiaries during business hours. Further'' as per the provisions of Section 212 of the Act'' a statement of the Company’s interest in its subsidiaries and a statement summarising fnancial performance parameters of subsidiary companies are included under notes to the consolidated fnancial statements and forms part of the Annual Report.

EMPLOYEES

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 Act'' the Report and Accounts are being sent to all shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

The relations with the employees of the Company continue to be cordial and the Directors wish to record their appreciation of their dedicated services at all levels of operations in the Company.

Consequent to the recent settlement made by the Company with unionized staff and workmen attached to its cigarette plant at Andheri'' Mumbai'' pursuant to the voluntary retirement schemes'' the production facilities from Andheri have been largely relocated to the new plant at Rabale'' Navi Mumbai. This is expected to improve operational effciency and productivity.

THE FUTURE

Your Company continues to be a prominent cigarette manufacturing company in India. While continuing to emphasise on tobacco segment'' the Company will focus on growing pan masala and other mouth freshening products'' tea and retail businesses as well. It is expected that high rate of taxation on tobacco products will continue to be a norm in India and is'' therefore'' likely to be a challenge in future.

Respectfully submitted on behalf of the Board

New Delhi R.A. SHAH

Dated : July 27'' 2013 CHAIRMAN

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Mar 31, 2012

The Directors deem it a privilege to present the Annual Report and Accounts for the year ending March 31, 2012.

GENERAL ECONOMIC ENVIRONMENT

As the FY 2011-12 started for all of us, global economy was recovering from political unrest in different parts of the world, and economic slowdown in the U.S. and Europe. The global economic environment has been tenuous through the year, particularly turning adverse post-September 2011, against the Euro-zone crisis, downgrades of sovereign credit rating of euro-zone and other advanced countries (including the U.S.), followed by political unrests, currency wars and the more recent oil crisis.

One clear and comforting sign was a relatively better performance by Indian Economy. Government of India also indicated that despite some weakness in the economy, the outlook was rather positive for the coming years, with economic activity having 'bottomed out' and 'a gradual upswing being imminent'. However, it was clear that managing growth and having price stability were going to be prime challenges for the Government. While agriculture and services sector provided support to overall growth, weakening industrial activity had pulled down economic performance resulting in India's real GDP growth decelerating sharply from 8.5% in 2010-11 to 6.5% in 2011-12. The real GDP declined to 5.3% in Q4 of FY 2011-12 as compared with 9.2% in the corresponding period last year. The Q4 GDP data validates that the growth trajectory is weaker than expected.

Exports from India have faced challenges on logistics and movements due to geopolitical disturbances. Infrastructure and public services need more impetus. Rising fuel costs have burdened the common man and industry. Yet, it is hoped Indian economy will rebound once more and achieve good, sustained and inclusive growth.

TOBACCO INDUSTRY

During 2011-12, Indian cigarette market has shown a growth of around 5% in volume and 11% in value over the previous year. Growth is largely seen in premium & economy segments. However, due to glut in the international market, Indian leaf tobacco exports were lower as compared to last year and the situation continues to be the same. Also, the industry continues to face the menace from non-duty paid cigarettes available across markets in India.

Regulatory Environment

Global regime continued to get stricter on tobacco during the year. UN bodies like WHO have been making strong efforts to ban or restrict use of specific ingredients, flavor and additives in manufacture of tobacco products, as well as to reduce acreage under tobacco cultivation. Different countries have looked at increased taxation, restriction on display, anti-smoking proposals etc. to discourage smoking. Australia and New Zealand are focusing on plain packaging in order to make the packs less enticing for people. U.K. has banned display of tobacco products at retail outlets.

India is also witnessing various anti-tobacco initiatives by various authorities and agencies with the new graphic health warnings coming into effect from 1st December, 2011. We respect such initiatives and shall abide by them as a responsible corporate citizen.

Taxation

The trend to increase Value Added Tax (VAT) rates at State level continued during the FY 2011-12 with more and more States resorting to tax tobacco products to bridge the revenue shortfall. And as an impact of that, VAT rates in India on cigarettes now vary from 12.5% to 50%. We are hopeful that unified VAT or GST regime in course of time will help the industry, trade and consumers by bringing rationality and clarity.

SEGMENTWISE PERFORMANCE IN 2011-2012 Cigarettes

The Industry is under pressure on account of rising excise duty coupled with increase in VAT rates by various State Governments. Despite this, your Company has registered a marginal increase of 0.7% in the domestic sales volume with the value being higher at Rs. 2776 crore as compared to Rs. 2627 crore in the previous year reflecting an increase of 5.7%. Various steps are underway to strengthen parent brands namely Four Square, Red & White and Cavanders. The current distribution system is also being leveraged to handle multiple product categories now being offered by the Company.

Tea

Although the domestic tea business showed a marginal decline with the sales value during the year placed at Rs. 95 crore as against Rs. 97 crore during the preceding year, yet the margins were slightly better as compared to last year. Your Company is making all out efforts to achieve improved performance in this segment of the business and has taken various new initiatives to broad-base the distribution which include introduction of Super Cup tea bags to make inroads into the HORECA segment and coverage of HTS (Hot Tea Shops) channel in Chennai. Your Company has gained formal entry into Railways also which is the biggest institutional business of the country. Tea blending and packing units at Kolkata and Bazpur have been automated and modernised to help in maintaining current loyal customer base and attract new international customers. Super Cup franchise is being relaunched with rejuvenated packaging and a premium product option.

Exports

The following table shows the status of exports for different products during the year under report:

2011 - 12 2010 - 11

Commodity / Product Value (Rs. in crore) Value (Rs.in crore)

Cigarette 107.63 120.68

Unmanufactured tobacco 131.28 104.42

Cut tobacco 61.27 42.86

Tea 18.36 16.11

While cigarette exports in terms of value were lower by 11%, the cut tobacco exports increased by 43% over the previous year. Unmanufactured tobacco exports also grew by 26% during the year. Various initiatives to improve the unmanufactured tobacco exports are resulting into substantial new export orders and spurt in new businesses in South East Asia and other key global markets. With a view to give further impetus to the export performance of the Company, your Company is also looking forward to setting up offices in key overseas locations in next two years.

During the year, the Company has developed new markets and added many international buyers to our existing portfolio for tea. Tea exports grew to 1508 tons over last year's 1222 tons, in terms of volume. Export of private labels for Packet Tea and Tea Bags in Kazakhstan was initiated under the brand name "Bimker". Your Company got renewal of ISO 22000 Space & HACCP Certification to value add and meet minimal International Tea Export standards apart from receiving "Good Manufacturing Practices" certification from the Iran Health Ministry.

Chewing Products

Your Company had a challenging year for its Chewing Business. The industry needed to shift from plastic packaging to paper based packaging format and where the competition was scrambling for options, your Company introduced the first successful commercial paper package that held ground even during the monsoons. The impetus helped the Company's pan masala brand "Pan Vilas" close the year at a turnover of Rs. 121 crore against Rs. 24 crore in the last fiscal. Your Company captured roughly 12% share of the market and became leaders in the small pack segment in some markets/states. During the year, the Company also opened the West Bengal and the Punjab markets and currently it is operating in 10 states in India. Your Company also ventured in the difficult zarda segment with the brand "Swarn Vilas". The Company plans to continue the momentum and grow further by venturing into new markets and categories and by leveraging and further building upon technology and back-end infrastructure to support the engines of growth.

Retail

Company's foray into retail business through Twenty Four Seven convenience stores is making steady progress. The Company is currently operating through 11 own stores spread across Delhi and expects to more than double this number during the current year.

TREASURY OPERATIONS

Your Company continues to enjoy the highest rating of 'CRISIL A1 ' for Short-Term Debt Programme, 'CRISIL AA /Stable' for Long Term Loan, 'CRISIL AA /Stable' for Cash Credit Limit and 'CRISIL A1 ' for Non-fund based limits. With these ratings in place, your Company is able to raise funds at most competitive and attractive terms.

Guided by the policy of safe, liquid and tax efficient returns, the Company has been deploying its long term surplus funds primarily in debt oriented schemes of reputed mutual funds mainly consisting of Fixed Maturity Plans (FMPs). Out of the total investment of Rs. 358 crore as at March 31, 2012, investments of Rs. 303 crore stood in debt segment of various mutual funds with major chunk being into highly safe FMPs which are yielding decent tax efficient returns. The Company also continued to park its temporary surpluses in liquid schemes of various mutual funds.

FIXED DEPOSITS

At the end of the financial year, the balance on account of Fixed Deposits accepted from the Public and Members stood at Rs. Nil. Presently the Company is not accepting fresh deposits as it no longer deems it economical to raise money through this mode of finance.

FINANCIAL PERFORMANCE

FINANCIAL RESULTS 2011-12 2010-11 Rs. in lacs Rs. in lacs

Gross Profit 31986.62 28147.66

Less : Depreciation 6263.13 4000.29

Profit before taxation 25723.49 24147.37

Less : Provision for taxation

- current tax 8260.64 7720.00

- deferred tax (673.42) (175.98)

- fringe benefit tax - -

Profit after tax for the year 18136.27 16603.35

Profit brought forward 57988.33 47614.98

Available for appropriation 76124.60 64218.33

FINANCIAL RESULTS 2011-12 2010-11 Rs. in lacs Rs. in lacs

Appropriations

Proposed Dividend 4159.51 3639.57

Corporate Dividend Tax 674.78 590.43

Transfer to General Reserve 2200.00 2000.00

Surplus carried to Balance Sheet 69090.31 57988.33

76124.60 64218.33

The overall sales turnover was higher at Rs. 3349 crore as against Rs. 3057 crore in the previous year, registering an impressive growth of around 9.5%. After providing for tax, the net profit of the Company stood at Rs. 181.36 crore as against Rs. 166.03 crore in the previous year.

The Union Budget 2012 has increased the excise duty on cigarette by around 22%, which has been followed up by some State Governments hiking VAT rates significantly. The continuous increase in taxation on cigarette over the last several years has been adversely affecting the margins and therefore, impacting profitability.

DIVIDEND

Keeping in view the Company's overall performance for the year under report the Board of Directors of the Company is pleased to recommend a dividend of Rs. 40 per share.

INTERNAL CONTROL SYSTEMS

Your Company has an adequate system of internal control commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control system is supplemented by well documented policies, guidelines and procedures, an extensive programme of internal audit by a firm of chartered accountants and management reviews.

HUMAN RESOURCE DEVELOPMENT

Your Company believes that its employees are its partner in progress and ensures that they are treated well. To pursue this belief, your Company conducted an Employee Engagement Survey to seek opinions of its managerial level employees about their work-life issues and concerns at work. Further, a root cause analysis was done and issues/concerns are being addressed. Your Company also believes that long term growth and productivity is possible by investing in robust and right kind of long lasting people systems. To develop the internal functional capabilities, your Company has initiated the process of upgrading its existing Human Resource Information System (HRIS) which acts as an enabling gateway for servicing employee needs. In continuation of efforts by your Company to equip the sales force in persistently handling multiple products and to manage change with their stakeholders, various interventions were conducted on Multiple Product Handling and its related Change Management. Your Company is proactively investing in developing future talent pipeline. The ongoing initiative of Targeted People Development has put in place a detailed process of development planning and grooming for potential employees.

CORPORATE DEVELOPMENT

Your Company has continued to add to its advantage the strong corporate governance mechanism and processes for making new product offers, launching new products, developing business strategy and implementation thereof through effective engagement of Corporate Development division. The division provided regular support and inputs to all the business teams on industry dynamics, regulatory aspects and other components of business environment to help them to draw plans with 3-5 years' perspective. Detailed planning, appropriate methodology, support in execution and monitoring has helped each of the existing and new businesses add further to our market reach and in achieving better results. Automated Management Dashboards and Business Intelligence Tools have continued to provide seamless view to senior leadership on all critical performance parameters for timely action. The two ongoing corporate initiatives focusing on product offer development and multi-product distribution have progressed well during the year with initial pilots and outputs giving good results. All such efforts and forthcoming drives and rigor are expected to have long term positive impact on businesses of your Company.

INFORMATION TECHNOLOGY

Your Company continues to invest in Information Technology to improve operational efficiencies and enhance productivity. As a part of process improvement and improved control, your Company is currently implementing ERP system for its production facilities and sales establishments. This will make the complete supply chain ERP enabled for the Company. Also, Product Life Cycle Management System called AGILE is being implemented for R&D. During the year, your Company also consolidated its core IT infrastructure using new generation servers leading to significant reduction in energy and space requirements.

CORPORATE SOCIAL RESPONSIBILITY

Exhibiting commitment to recognizing common citizens for their acts of courage, Godfrey Phillips Bravery today has inspired millions with the message of hope, compassion and selflessness. To mark the completion of 20 years, nationwide campaign was launched on print, electronic, outdoor and social media to honor the occasion. The Be-Brave campaign on social media touched an impressive 5.5 lacs member participation within a year.

Along with Godfrey Phillips Bravery, Amodini, the women's empowerment initiative also has grown progressively. Since inception in 2007, over 23000 women have been benefitted by Amodini. Your Company works with renowned non-profit associates to help women beneficiaries become financially independent with various training and development programs. Amodini continues its commitment to women empowerment by using hand made products by women for all occasion gifting that has been highly appreciated.

Your Company also exhibited its commitment towards minimizing the impact of our business on the environment. It continues to lay emphasis on policies that encourage environment management and employees are also recognized for initiatives that take this commitment forward. The Company won prestigious Greentech Gold Award for Environment Management for its consistent efforts towards it.

CONSERVATION OF ENERGY

Several energy saving measures were taken during the year, details of which are given below:

1. Replaced CMD cooling tower at Andheri factory with the new one having flat belt and energy efficient motor, resulting in saving of 92,400 units per annum.

2. Constructed insulated roof with sky-lights at Rabale factory to reduce need for lighting energy.

3. Used low density concrete blocks with fly ash for the walls at Rabale factory for achieving better insulation properties.

4. Installed latest energy efficient HVAC systems for the shop floors and offices at Rabale factory.

5. Replaced 2 nos. CRT based OPC (Operator Panel) with LCD, resulting in lower energy consumption.

6. Installed new transformer at Andheri factory power house having lower no-load losses, resulting in saving of 7,000 Units per annum.

TECHNOLOGICAL ABSORPTION, ADOPTION AND INNOVATION

1. Table-top cigarette maker introduced in R&D for cigarette development purpose.

2. Flavor injection system 'Cjector' introduced in R&D for cigarette development purpose.

3. Installed print registration unit for inner frame on cigarette packing machines to support pack communication and enhance brand recall.

4. Made hard link-up of high speed cigarette makers and packers to improve the productivity and product quality.

5. Oil I PTFE free air compressors introduced for improved product quality.

RESEARCH & DEVELOPMENT New Product Development

1. Commissioned a plant to make reconstituted tobacco (RECON) in order to improve blend quality and optimize blend cost.

2. Carried out development work for some differentiated products in cigarette category for creating new consumer base for gaining domestic market share.

3. Developed some new tobacco blends and enhanced current blends in order to cater to varied consumer/ buyer base.

4. Developed more value added and differentiated products in Bidi and Chewing categories.

5. Initiated developmental work in Mouth Freshener category.

Benefits derived as a result of this Development

1. Improved premium brands in which the Company currently has marginal presence in the domestic cigarette markets.

2. Enhanced existing tobacco blends in order to improve the smoke characteristics.

3. Enhanced capability to generate new ideas and create differentiated products for domestic as well as export markets.

4. Created a range of products for consumers and thus add potential to both top-line and bottom-line growth.

5. Increased number of variants of blends and cigarettes in the library for both domestic and export markets.

Future Plan of Action

1. Improve the efficiency in terms of creating differentiated and innovative products for the cigarette business, thereby maintain a healthy offer pipeline.

2. Continuous upgradation of analytical facility to meet future challenges.

3. Intensify work on development of new products using R&D pilot plants.

4. Create strong knowledge base for chewing products' ingredients.

FOREIGN EXCHANGE EARNINGS AND OUTGO

The earnings in foreign exchange during the year under report by way of exports and other income amounted to Rs. 319 crore (previous year Rs. 284 crore) as against the foreign exchange outgo on imports, dividends and other expenditure aggregating to Rs. 290 crore (previous year Rs. 132 crore).

DIRECTORS

Mr. C.M. Maniar, Mr. Lalit Bhasin and Mr. Anup N. Kothari, Directors, will retire by rotation at the forthcoming Annual General Meeting and being eligible, have offered themselves for re-appointment.

The terms of appointment of Mr. K.K. Modi as Managing Director and Mr. R. Ramamurthy as Whole-time Director will expire on 13th August, 2012. Your Directors have recommended their re-appointment for a further period of 3 years.

Brief resumes of the Directors offering themselves for re-appointment are furnished in the Corporate Governance Report and in the explanatory statement to the notice of the ensuing Annual General Meeting.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors' Responsibilities Statement, the Directors confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

(ii) appropriate accounting policies have been selected and applied consistently and judgements and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review;

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

(iv) the Annual Accounts have been prepared on a going concern basis.

The above statements were noted by the Audit Committee at its meeting held on July 31, 2012.

CORPORATE GOVERNANCE

The Company is committed to maximise the value of its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and in particular those stipulated in the Listing Agreement with the Stock Exchanges. Its objective and that of its management and employees is to manufacture and market the Company's products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreement with the Stock Exchanges, is enclosed.

Certificate from Mr. K.K. Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Vice President - Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year were submitted to and taken note of by the Board.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements, Group Accounts form part of this Report & Accounts. The Group Accounts have been prepared on the basis of audited financial statements received from the Subsidiary & Associate Companies, as approved by their respective Boards.

AUDITORS

A.F. Ferguson & Co., Chartered Accountants, the retiring auditors, have offered themselves for re- appointment as auditors for the Head Office as well as branch offices at Ahmedabad, Mumbai, Kolkata, Ghaziabad, Guntur, Hyderabad, Chennai, New Delhi, Chandigarh, Baramati and Rabale (Navi Mumbai).

COST AUDIT

Pursuant to the various circulars issued by the Ministry of Corporate Affairs, the Company is required to maintain cost records and get the same audited by a cost auditor in relation to some of the products manufactured by the Company. Accordingly, Chandra Wadhwa & Co., Cost Accountants, have been appointed as the cost auditors for the financial year 2012-13.

SUBSIDIARY COMPANIES

Ministry of Corporate Affairs, Government of India has, vide its General Circular No. 2 dated 8th February, 2011 granted a general exemption to companies under section 212(8) of the Companies Act, from attaching the documents referred to in section 212(1) pertaining to its subsidiaries subject to approval by the Board of Directors of the Company and furnishing certain financial information in the Annual Report.

Accordingly, the annual accounts of the subsidiaries will be made available upon request by any shareholder of the Company and its subsidiaries. The annual audited accounts of the subsidiaries will also be kept for inspection by any shareholder at the Company's Corporate Office as well as its Registered Office and at the offices of the respective subsidiaries during business hours. Further, as per the provisions of Section 212 of the Act, a statement of the Company's interest in its subsidiaries and a statement summarising financial performance parameters of subsidiary companies are included under notes to the consolidated financial statements and forms part of the Annual Report.

EMPLOYEES

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 Act, the Report and Accounts are being sent to all shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

The relations with the employees of the Company continue to be cordial and the Directors wish to record their appreciation of their dedicated services at all levels of operations in the Company.

THE FUTURE

Your Company continues to be the second largest cigarette manufacturing company in India. The focus of your Company will continue to remain in tobacco segment comprising of cigarette, bidi and chewing products. Your Directors look forward to the future with cautious optimism.

Respectfully submitted on behalf of the Board

New Delhi R.A. SHAH

Dated : July 31, 2012 CHAIRMAN

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Mar 31, 2011

Dear Members,

The Directors deem it a privilege to present the Annual Report and Accounts for the year ending March 31, 2011.

FINANCIAL PERFORMANCE

FINANCIAL RESULTS 2010-11 2009-10

Rs. in lacs Rs. in lacs

Gross Profit 28147.66 20130.54

Less : Depreciation 4000.29 3390.97

Profit before taxation 24147.37 16739.57

Less : Provision for Taxation

- current tax 7720.00 4552.96

- deferred tax (175.98) 333.04

- fringe benefit tax - 15.10

Profit after tax for the year 16603.35 11838.47

Profit brought forward 47614.98 40307.99

Available for appropriation 64218.33 52146.46

Appropriations

Proposed Dividend 3639.57 2599.70

Corporate Dividend Tax 590.43 431.78

Transfer to General Reserve 2000.00 1500.00

Surplus carried to Balance Sheet 57988.33 47614.98

64218.33 52146.46

The overall sales turnover was higher at Rs. 3057 crore as against Rs. 2608 crore in the previous year, registering an impressive growth of around 17%. The operating margins improved leading to increase in overall profitability during the year. After providing for tax, the net profit of the Company stood at Rs. 166.03 crore as against Rs. 118.38 crore in the previous year.

Fortunately the Union Budget in February, 2011 did not propose any change in the rates of excise duty on cigarettes, which has provided much needed relief to the Industry.

DIVIDEND

Keeping in view the Company's overall performance for the year under report the Board of Directors of the Company is pleased to recommend a dividend of Rs. 35 per share.

INTERNAL CONTROL SYSTEMS

Your Company has an adequate system of internal control commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control system is supplemented by well documented policies, guidelines and procedures, an extensive programme of internal audit by a firm of chartered accountants and management reviews.

HUMAN RESOURCE DEVELOPMENT

Our employees are our assets. In order to nurture their ambitions and meet future leadership challenges in the organization, we have embarked upon an initiative called "Targeted People Development". Under this initiative, the developmental needs of a set of key employees have been scientifically assessed, a career orientation is defined and a development plan in sync with organizational goals is being worked upon. We also conducted a series of Leadership Development Programs to support this initiative. On the talent acquisition front, the Company has inducted young talent from reputed B-schools and is grooming them for managing the current and upcoming business needs. The Job evaluation exercise which was started last year, has been completed and we have mapped various job positions relative to their business worth. Also, we have won a Greentech silver award for Excellence in HR for Best HR Strategy category.

CORPORATE DEVELOPMENT AND INFORMATION TECHNOLOGY

Your Company has continued to leverage to its advantage the strong internal systems and processes for business planning and strategy formulation residing in Corporate Development division. On one hand, the division provided regular support and inputs to all the business teams on developments in the industry and business environment, it also drove the efforts to identify key capability development areas in the organization to propel it to growth path. Annual planning process and three year strategy formulation process were well adhered to, along with much deeper and analytic based efforts to identify new growth opportunities. Detailed planning, appropriate methodology, execution and monitoring has helped each of the existing businesses add further to our market reach and in achieving better results in the market place. Automated Management Dashboards and Business Intelligence Tools have enabled the seamless view of all performance parameters for the senior management to action timely. Further, two new corporate initiatives were conceived during the year, focusing on higher level of capabilities in the areas of product offer development and multi-product distribution. All these efforts are expected to have long term positive impact for business of your Company.

CORPORATE SOCIAL RESPONSIBILITY

This year was a milestone for Godfrey Phillips Bravery Awards as it completed 20 years. This unique award system, sustained over two decades, has brought common citizen to limelight and served to provide inspiration to live life with pride and dignity.

Along with recognizing and awarding individual acts of bravery, the Godfrey Phillips Bravery has grown into a movement with Amodini, the women's empowerment initiative under its aegis. In association with renowned NGOs, several major projects for underprivileged women have been underway that help train women to be financially independent. The projects, ranging from skill development in traditional handicraft and handmade products, rural business training to dairy farming, have ensured that the women are not only trained in production, but acquire equal proficiency in marketing the products also. Over 7000 women would have benefitted from the Amodini initiatives during the year.

As a conscientious corporate citizen, the Company is well aware of its responsibility towards the conservation of the environment. Along with the growth of business the Company encourages total commitment towards minimizing the impact of our business on the environment. Over and above the mandatory certifications to maintain standards of environment management, all the manufacturing units have adopted the use of environment friendly measures such as recycling water, rainwater harvesting and using solar power systems, steam heated hot water generator system and various automation and interlocking systems to save power. We won the prestigious Outstanding Achievement in Environment Management award by Greentech Foundation in 2010 for our efforts.

CONSERVATION OF ENERGY

Several energy saving measures were taken during the year, details of which are given below:

1. Panel air conditioner (1050 watts) for Focke cigarette packing machine was replaced with central air conditioning air flow, giving rise to savings of 189 units per annum.

2. Twenty four LED tube lights were installed over GD 121 cigarette making machine on experimental basis resulting in saving of 180 units per annum.

3. After studying light intensity in the passage areas, thirteen tube lights were removed resulting in saving of 3360 units per annum.

TECHNOLOGICAL ABSORPTION, ADOPTION AND INNOVATION

1. Installation and commissioning of 'print registration system' on cigarette packing machines for providing printed BOPP packs.

2. Installation and commissioning of RO Plant of 2000 ltrs per hour capacity.

3. Installation of 'acoustic guards' on high speed cigarette making and packing machines to reduce noise pollution.

4. Installation of high performance isopropyl alcohol 'leak detector' to enhance safety standards.

5. Installation of 'wonder ware software' on quality monitoring instruments for the cigarette making machines to enhance final product quality.

6. Installation of 'sifter' in pan masala making process to ensure product consistency.

RESEARCH & DEVELOPMENT

New Product Development

1. Initiated development work for some differentiated products for domestic markets for creating new consumer base for gaining market share.

2. Developed and implemented low ignition propensity cigarettes and tested the same for overseas customers.

3. Developed various new blends and enhanced current blends, thus creating a library in order to cater to varied buyer base.

4. Developed value added and differentiated products for the Bidi and Chewing categories.

5. Analysed cigarette samples on commercial basis from overseas customers.

Benefits derived as a result of this Development

1. Created premium brands, a category where we have only marginal presence in the domestic cigarette markets.

2. Enhanced capability in creating and analysing differentiated products for domestic as well as export markets.

3. Created a range of products for consumers and thus add potential to both top-line and bottom-line growth.

4. Increased number of variants of blends and cigarettes available for both domestic and export markets.

Future Plan of Action

1. Capability improvement in terms of creating differentiated and innovative products for the cigarette business thus widen the offering base.

2. Standardization of Bidi smoking method on smoking machine.

3. Continuous up-gradation of analytical facility and library to meet future challenges.

4. NABL accreditation of R&D food laboratory.

FOREIGN EXCHANGE EARNINGS AND OUTGO

The earnings in foreign exchange during the year under report by way of exports and other income amounted to Rs. 284 crore (previous year Rs. 317 crore) as against the foreign exchange outgo on imports, dividends and other expenditure aggregating to Rs. 132 crore (previous year Rs. 94 crore).

DIRECTORS

Mr. R. A. Shah, Mr. Lalit Kumar Modi and Mr. Samir Kumar Modi, Directors, will retire by rotation at the forthcoming Annual General Meeting and being eligible, have offered themselves for re-appointment. Brief resume of these Directors, as stipulated under clause 49 of the Listing Agreement, is annexed in the Corporate Governance Report.

Mr. Lalit Kumar Modi has ceased to be the Director in whole-time employment of the Company with effect from 1st August, 2010.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors' Responsibilities Statement, the Directors confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

(ii) appropriate accounting policies have been selected and applied consistently and judgements and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review;

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

(iv) the Annual Accounts have been prepared on a going concern basis.

The above statements were noted by the Audit Committee at its meeting held on July 30, 2011.

CORPORATE GOVERNANCE

The Company is committed to maximise the value of its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and in particular those stipulated in the Listing Agreement with the Stock Exchanges. Its objective and that of its management and employees is to manufacture and market the Company's products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

A certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreement with the Stock Exchanges, is enclosed.

A certificate from Mr. K.K. Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, as the Chief Financial Officer in relation to the financial statements for the year ended March 31, 2011 along with a declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during that year were submitted to and taken note of by the Board.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements, Group Accounts form part of this Report & Accounts. The Group Accounts have been prepared on the basis of audited financial statements received from the Subsidiary & Associate Companies, as approved by their respective Boards.

AUDITORS

A.F. Ferguson & Co., Chartered Accountants, the retiring Auditors, have offered themselves for re-appointment as Auditors for the Head Office as well as branch offices at Ahmedabad, Mumbai, Kolkata, Ghaziabad, Guntur, Hyderabad, Chennai, New Delhi, Chandigarh and Baramati.

SUBSIDIARY COMPANIES

The Reports and Accounts of the subsidiary companies are annexed to this Report along with the statement pursuant to Section 212 of the Companies Act, 1956. However, in the context of mandatory requirement to present consolidated accounts, which provides members with a consolidated position of the Company including subsidiaries, at the first instance, members are being provided with the Report and Accounts of the Company treating these as abridged accounts as contemplated by Section 219 of the Companies Act, 1956. Members desirous of receiving the full Report and Accounts including the Report and Accounts of the subsidiaries will be provided the same on receipt of a written request from them.

GROUP

Pursuant to disclosure received from the Indian Promoter of the Company, the names of the promoters and entities comprising 'Modi Group' are annexed to this Report for the purpose of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and otherwise.

EMPLOYEES

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 Act, the Report and Accounts are being sent to all shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

The relations with the employees of the Company continue to be cordial and the Directors wish to record their appreciation of their dedicated services at all levels of operations in the Company.

THE FUTURE

Your Company continues to be the second largest cigarette manufacturing company in India. Various corporate initiatives like new product development, expansion of distribution in Southern and Eastern Indian markets, strengthening presence in existing markets, multi-product distribution, etc. are being used as drivers for enhancing business value. Steady growth in domestic business, growing international presence and prospects in new product categories like chewing products and bidis, show promise to accelerate growth momentum. Robust sales & distribution network alongwith the best of the manufacturing facilities, including the new plant being built at Thane in Maharashtra will likely ensure sustained growth opportunities. Your Directors, therefore, look forward to the future with confidence and optimism.

Respectfully submitted on behalf of the Board

New Delhi R.A. SHAH

Dated : July 30, 2011 CHAIRMAN