ESAB INDIA LIMITED

Global Solutions for Local Customers - Everywhere

Annual Report 2008

Contents Notice Five-year Financial Highlights Directors Report Corporate Governance Auditors Report Balance Sheet Profit & Loss Account Schedules to the Accounts Notes to the Accounts Companys General Business Profile Cash Flow Statement Attendance Slip/Proxy Form

Page 2 9 10 15 22 26 27 28 33 47 49 51

Annual Report 2008

Board of Directors

M G Foster G Hariharan N H Mirza P Mallick S Tandon J Templeman S N Talwar David J Egan

Chairman Managing Director

Chief Financial Officer Company Secretary Registered Office

B Mohan S Venkatakrishnan Plot No.13, 3rd Main Road, Industrial Estate, Ambattur, Chennai 600 058. Tel: 044-42281100 Fax:044-42281150 www.esabindia.com State Bank of India AXIS Bank Limited

Bankers

Auditors

B S R & Co. Chartered Accountants, No.10, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. Tel : 044- 3914 5000 Fax : 044- 3914 5999 Integrated Enterprises (India) Ltd. IInd Floor, Kences Towers, No. 1, Ramakrishna Street, North Usman Road, T.Nagar, Chennai 600 017. Tel : 044- 28140801 / 02 / 03 Fax : 044- 28142479 / 3378 E Mail : [email protected]

Registrar & Share Transfer Agents

Esab India Limited Annual Report 2008

Notice

NOTICE is hereby given that the Twenty Second Annual General Meeting of the Members of the Company will be held at the Narada Gana Sabha Trust Complex, No.314, TTK Road, Chennai 600 018, on Wednesday the 22 April 2009 at 3.00 p.m. to transact the following business: ORDINARY BUSINESS: 1. To consider and adopt the Balance Sheet as at 31 December 2008 and the Profit and Loss Account for the year ended on that date together with the Reports of Directors and the Auditors thereon.

be and is hereby accorded to pay such remuneration and to provide such benefits with effect from 1 January 2009 to Mr G Hariharan, Managing Director as may be determined by the Board of Directors from time to time not exceeding the applicable ceiling on remuneration as prescribed under the Companies Act, 1956 with respect to Managing Director and within the maximum limits specified below: Remuneration 1. By way of Salary, allowances (excluding HRA), special allowances, etc., hereinafter referred to as Remuneration subject to a ceiling of Rs.75,00,000/- per annum or such other amount as the Board may determine. 2. By way of Performance Linked Variable Pay / Long Term Incentive Compensation / Bonus / Commission on profits etc., subject to a ceiling of Rs.20,00,000/- per annum or such other amount as the Board may determine. Perquisites 3. By way of perquisites which shall be evaluated at actual cost to the Company and where it is not possible to ascertain the actual cost, such perquisites shall be evaluated as per Income-tax Rules, 1962, and as per details given below subject to a ceiling of Rs.20,00,000/per annum or such other amount as the Board may determine. (i) (a) The Company may provide, rent free furnished accommodation and also pay all rents, rates, and taxes. (b) The Company shall reimburse expenditure incurred towards electricity, fuel charges, water charges and all other expenses for the upkeep and maintenance of his residence. (ii) Leave Travel Expenses : For self and family (which shall include spouse, dependent children and parents) in accordance with the rules applicable to the Company. (iii) Reimbursement of expenditure incurred towards car drivers salary. (iv) Provision of assets / furnishings at the residence of the Managing Director, the valuation of which will be as per Income Tax Rules. The Company shall maintain these assets, the expenses towards which shall not be included in the computation of the limits for remuneration or perquisites as aforesaid. (v) Other allowances/benefits/perquisites : Any other allowances, benefits and perquisites as per the rules / policies framed, as may be applicable to the Senior Executives of the Company and / or which may become applicable in the future and / or any other allowances, perquisites as the Board may from time to time decide. The following benefits which shall be provided to Mr G Hariharan, Managing Director shall not be included in the computation of the limits for remuneration or perquisites as aforesaid.

2. To declare a dividend. 3. To appoint a Director in place of Mr Satish Tandon, who retires by rotation and being eligible, offers himself for re-appointment. 4. To appoint a Director in place of Mr Jon Templeman, who retires by rotation and, being eligible, offers himself for re-appointment. 5. To appoint Auditors to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting and in this regard to pass, with or without modification, the following resolution as an Ordinary Resolution: RESOLVED THAT the retiring auditors M/s. B S R & Co., Chartered Accountants, Chennai, be and are hereby re-appointed as Auditors of this company to hold office from the conclusion of this meeting till the conclusion of the next Annual General Meeting of the Company on such remuneration as may be fixed in this behalf by the Board of Directors of the company. SPECIAL BUSINESS: 6. To consider and if thought fit, to pass with or without modification, the following resolution as an Ordinary Resolution: RESOLVED THAT Mr Suresh N Talwar who was appointed as an additional director and holds office upto the date of this Annual General Meeting as per the provisions of the Companies Act, 1956, be and is hereby appointed as a Director of the Company, liable to retire by rotation. 7. To consider and, if thought fit, to pass with or without modification, as an Ordinary Resolution the following: RESOLVED THAT in supersession of the earlier Resolution passed by the shareholders at the Annual General Meeting held on 27 April 2007 and subject to the provisions of Section 198, 269, 309 and 310, read with Part A of Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956 consent of the Company

Esab India Limited Annual Report 2008

Notice

Company's contribution to provident fund not exceeding such percentage of the salary as may be fixed by the Central Government from time to time and contribution to gratuity and superannuation funds as per the rules of the Company. The company shall provide and maintain a car and telephone at office and residence for official use. Payment of club fees for two clubs and all actual entertainment expenses at the club reasonably incurred in or about the business of the Company shall be reimbursed. Medical expenses for self and family, which shall include spouse, dependent children and parents, shall be reimbursed at actuals. Mr G Hariharan, Managing Director may also avail leave in accordance with the policies applicable to Management Staff of the Company. He shall be entitled to encashment of leave standing to his credit as per applicable policies for Management Staff. The Managing Director shall be a beneficiary of the Group Medical Insurance and the Personal Accident Insurance Policies taken by the Company for the Management Staff of the Company. The Managing Director shall not be eligible to receive sitting fees for attending meetings of the Board of Directors or any Committee thereof. The aggregate of the remuneration and perquisites as aforesaid in any financial year shall not exceed the limits prescribed from time to time under Sections 198 and 309 of the Companies Act, 1956 read with Schedule XIII to the said Act or any statutory modifications or re-enactment thereof for the time being in force, or otherwise as may be permissible at law. RESOLVED FURTHER THAT where in any financial year, the Company has no profits or its profits are inadequate, Mr G Hariharan, Managing Director subject to the approval of a Remuneration Committee of the Directors of the Company shall be paid such remuneration not exceeding the ceiling limits specified under Part A of Schedule XIII of the Companies Act, 1956. RESOLVED FURTHER THAT the Board of Directors be and is hereby authorized to do all such acts, deeds, matters and things as may be deemed necessary to give effect to the above resolution." 8. To consider and if thought fit, to pass, with or without modification, the following resolution as Special Resolution: RESOLVED THAT in pursuant to Section 31 of the Companies Act, 1956, the existing Article 25 of the Articles of Association of the Company be deleted and substituted by the following new clauses: Funds of the Company may not be applied in purchase of shares of the company 25A. The Company shall not give whether directly or indirectly and whether by means of loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or any

shares in the company or in its holding Company: Buy back of B. (1) Notwithstanding anything shares and contained in the Act, but other specified subject to the provision of securities Section 77A and Section 77B, the Company may purchase its own shares or other specified securities (hereinafter referred as buyback) out of(i) its free reserves; or (ii) the securities premium account; or (iii) the proceeds of any shares or other specified securities; Provided that no buy back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities. Provided further that the buyback of equity shares in any financial year shall not exceed twenty five percent, of its paid up equity capital in that financial year or such other percentage as may be permissible pursuant to any amendment to the Act. (2) The ratio of the debt owed by the company is not more than twice the capital and its free reserves after such buyback or at such ratio as may be fixed by the Central Government from time to time in this regard; Explanation: For the purpose of this article, the expression 'debt' includes all amounts of unsecured and secured debts. (3) All the shares or other specified securities for buyback shall be fully paid-up; (4) The buyback of shares or other specified securities shall be made in accordance with the guidelines issued from time to time by SEBI in this behalf.

By Order of the Board of Directors Mumbai 19 February 2009 S Venkatakrishnan Company Secretary

Esab India Limited Annual Report 2008

Notice

NOTES: 1. The explanatory statements required pursuant to Section 173(2) of the Companies Act, 1956 in relation to Items 6, 7 & 8 above are annexed hereto. 2. A Member entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote instead of himself on a poll only and a proxy need not be a Member. Proxies, in order to be effective, must be addressed to the Company Secretary and received at the Registered Office of the Company at Plot No.13, 3rd Main Road, Industrial Estate, Ambattur, Chennai 600 058 not less than forty eight hours before the scheduled start of the Meeting. 3. The Register of Members and Share Transfer Books of the Company will remain closed from 14 April 2009 to 22 April 2009 (both days inclusive). 4. Dividend on Equity shares as recommended by the Directors for the financial year ended 31 December 2008, when declared at the meeting will be paid: a. to those Members whose names appear on the Register of Members of the Company after giving effect to all valid share transfers in physical form lodged with the Company on or before 13 April 2009, and b. in respect of shares held in electronic form, to those "Deemed Members" whose names appear in the Statement of Beneficial Ownership furnished by the National Securities Depository Limited (NSDL) and the Central Depository Services (India) Limited (CSDL) as at the end of business hours on 13 April 2009. 5. Queries on the Accounts and operations of the Company, if any, may be sent to the Company at its Registered Office (and marked for the attention of the Company Secretary) at least seven days in advance of the Meeting. 6. Members holding shares in physical form are requested to advise any change of address immediately to the Registrar and Transfer Agent, viz. M/s. Integrated Enterprises (India) Limited, II Floor, Kences Towers, No.1, Ramakrishna Street, North Usman Road, T. Nagar, Chennai 600 017 - Attention Mr Suresh Babu, General Manager. 7. Members are requested to bring their copies of the Company's Report and Accounts for the year ended 31 December 2008 to the Meeting. 8. Members holding shares under identical names (in the same order) in more than one Folio are requested to write to the Company Secretary at the Registered Office of the

Company, enclosing their share certificates, to enable consolidation of their holdings into one Folio. 9. Members who hold shares in the physical form can nominate a person in respect of all the shares held by them singly or jointly. Members who hold shares in a single name are advised, in their own interest, to avail of the nomination facility by completing and submitting Form 2B. Blank forms will be supplied by the Company's Registrars & Share Transfer Agents on request. Members holding shares in the dematerialized form may contact their Depository Participant for recording the nomination in respect of their shares. 10. Section 205C of the Companies Act, 1956 mandates that companies transfer dividend that has been unclaimed for a period of seven years from the unpaid dividend account to the Investor Education and Protection Fund (IEPF) established by the Central Government. Members are hereby informed that once such amounts are transferred to IEPF, no claim of the shareholders shall lie against the Company or IEPF. In accordance with the following schedule, the dividend for the years mentioned below, if unclaimed within a period of seven years will be transferred to IEPF.
Year Type of Dividend Date of Due date Unpaid / dividend per share declaration for transfer Unclaimed (Rs.) amount as on 31.12.2008 2005 Final 2007 1st Interim 2007 2nd Interim 2008 Interim 26.00 10.00 13.00 28.04.2006 02.06.2013 13.12.2007 17.01.2015 24.07.2008 28.08.2015 26,13,676 6,21,302 10,12,870 14,84,132 5.50 09.03.2007 13.04.2014

Shareholders who have not yet encashed their dividend warrant are requested to send the warrants to the Company immediately for revalidation. 11. As required under Clause 49 (IV) (G) of the Listing Agreement with stock exchanges, a brief resume of Directors who are proposed to be re-appointed / appointed, nature of their expertise in specific functional areas, their other directorships and committee memberships and their shareholdings in the company are given below : Mr Satish Tandon Mr Satish Tandon is a Chemical Engineer having graduated from I.I.T. New Delhi. He did his Post Graduate Diploma in Marketing & Sales Management from Delhi University. He has 39 years' experience in Alfa Laval (India) Limited having worked in various capacities. From January, 1998 till October, 2005 he had overall

Esab India Limited Annual Report 2008

Notice

responsibility as Managing Director of Alfa Laval (India) Limited. His directorships and committee memberships in other companies are : Name of the Company Modern Diaries Limited Precision Pipes & Profiles Company Limited Position held Committee Membership / Chairmanship Director Director Member of Investor Grivance Committee Member of Investor Grievance Committee and Audit Committee Member of Investor Grievance Committee and Audit Committee

Mr Suresh N Talwar Mr Suresh N Talwar, aged 70 years is a Bachelor of Commerce and Bachelor of Law. He is a solicitor and advocate by profession. Mr Suresh Talwar was a partner in Crawford Bayley & Co., till 31 March 2006 and was a special advisor till 31 December, 2006. He is now a partner in Talwar Thakore & Associates, Mumbai with effect from 1 January 2007. Mr Suresh Talwar has been an Alternate Director in the Company's Board since 1989. Mr Suresh Talwar specializes in various facets of Corporate Law, Corporate Tax, Foreign Exchange Laws, Monopolies and Restrictive Trade Practices Act, International Issue of Securities by Indian Companies, Commercial documents and Contracts, Power Projects etc. His directorships and committee membership in other companies are : Name of the Company PZ Cussons India Private Limited FCI OEN Connectors Ltd. Position held Committee Membership / Chairmanship

Kolte Patil Director Developers Limited

Mr J Templeman Mr J Templeman is a Bachelor of Arts (Oxford University) and Master of Arts (Oxford University). He is an Associate Member of the Institute of Chartered Accountants in England & Wales. He worked for 17 years with Price Waterhouse, London, in various capacities rising to Salaried Partner. He also worked for a time at Charter plc., as Director of Investor Relations. At present he is the Chief Exective Officer of Esab Holdings Limited. His directorships in other companies are as given below : Name of the Company ESAB Holdings Limited ESAB Group Russia Limited ESAB Russia Limited ESAB Hungary Limited Electrodes SA Conarco AlambrasY Soladiades SA ESAB Holdings SRO Fortunate Gestao E Servicos SA ESAB Industrial E Commercio ESAB Shanghai China Trading Ltd. ESAB SeAH ESAB SVEL Position held Committee Membership / Chairmanship Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil

Chairman & Nil Alternate Director Chairman & Chairman of Audit Alternate Director Committee

Transwarranty Finance Chairman & Nil Limited Alternate Director Armstrong World Chairman Industries (India) Pvt. Ltd. Merck Ltd. Collins Stewart Inga Pvt. Ltd. Romil Finance & Investments Pvt. Ltd. Sidham Finance & Investments Pvt. Ltd. 20th Century Fox Corpn (I) Ltd. Chairman Chairman Chairman Chairman Chairman Nil Chairman of Audit Committee Nil Nil Nil Nil Nil Member of Audit Committee Nil Nil Chairman of Audit Committee Member of Audit Committee

Chairman, Director Chairman, Director Director Director Director Director Director Director Director Director Chairman Director

Aon Global Insurance Director Services Private Limited Biocon Limited Director

Birla Sun Life Insurance Director Co. Ltd. Birla Sun Life Trustee Co. Pvt. Ltd. Blue Star Limited Blue Star Infotech Limited Director Director Director

Esab India Limited Annual Report 2008

Notice

Name of the Company Cadbury India Limited Chowgule & Company Private Limited Decagon Investments Pvt. Ltd. Emerson Process Management (India) Pvt. Ltd.

Position held

Committee Membership / Chairmanship Member of Audit Committee Nil Nil Nil

Name of the Company

Position held

Committee Membership / Chairmanship Nil Nil Nil Nil Nil

Director Director Director Director

Swiss Re Shared Services Director (India) Pvt. Ltd. Swiss Re Healthcare Services Pvt. Ltd. TTK Healthcare TPA Private Limited Warner Bros Pictures (India) Pvt. Ltd. WAVE Suspension Systems India Ltd. Albright & Wilson Chemicals India Ltd. ELANTAS Beck India Limited Director Director Director Director

Epitome Global Services Director Pvt. Ltd. Greaves Cotton Limited Director India Debt Management Director Pvt. Ltd. India Value Fund Trustee Director Co. Pvt. Ltd. IVF Trustee Company Private Limited IVF (Mauritius) PCC John Fowler (India) Limited Larsen & Toubro Ltd. MF Global (India) Pvt. Ltd. Morgan Stanley India Capital Pvt. Ltd. Director Director Director Director Director Director

Nil Member of Audit Committee Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Chairman of Audit Committee Nil Member of Audit Committee Nil Nil Nil

Alternate Director Nil Alternate Director Member of Audit Committee

Garware-Wall Ropes Ltd. Alternate Director Nil Hindustan Gum & Chemicals Ltd. Alternate Director Nil

Johnson & Johnson Ltd. Alternate Director Nil Schenectady (India) Holdings Pvt. Ltd. SI Group-India Ltd. Uhde India Pvt. Ltd. Alternate Director Nil Alternate Director Nil Alternate Director Nil

IVF (Mauritius) Limited Director

Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 Item No.6 Mr Suresh N Talwar was appointed as an additional Director of the Company effective 30 April 2008 and holds office upto the date of this Annual General Meeting of the Company, in terms of Section 260 of the Companies Act, 1956. Notice has been received from a member of the Company under Section 257 of the Companies Act, 1956 along with a deposit of Rs.500/- signifying his intention to propose the candidature of Mr Suresh N Talwar for the office of Director and to move the resolution as set out in item no.6 of this notice. The Directors recommend the resolution as set out in item no.6 of the notice to be approved as an ordinary resolution by the shareholders. None of the Directors except Mr Suresh N Talwar is deemed to be interested or concerned in the resolution. Item No.7 The appointment of Mr G Hariharan, as Managing Director of the Company and the limits of his remuneration and perquisites

Rediffusion-Dentsu, Director Young & Rubicam Pvt. Ltd. Rakeen Development PJSc Rakindo Developers Private Limited Reva Electric Car Co. Pvt. Ltd. Sandvik Asia Ltd. Shrenuj & Co. Ltd. Solvay Pharma India Ltd. Director Director Director Director Director Director

Snowcem Paints Pvt. Ltd. Director Showdiff Worldwide Pvt. Ltd. Director

Sonata Software Limited Director

Esab India Limited Annual Report 2008

Notice

were approved by the shareholders at the Annual General Meeting of the Company held on 27 April 2007. During the tenure of Mr G Hariharan, as Managing Director the Company has achieved significant growth in sales and profitability and has maintained its leadership position in the industry at the end of 2008. The remuneration payable to Mr G Hariharan, is commensurate with his abilities and experience. Further taking into account the future prospects of the Company and in line with the remuneration packages to the Managing Directors of similar such manufacturing industries, the Resolution envisages fixing an overall ceiling limits of remuneration, perquisites and incentives payable to Mr G Hariharan, subject to the approval of the shareholders. Further the power to fix the salary, perquisites and incentives payable to the Managing Director from 1 January 2009 till the end of his tenure is sought to be delegated to the Board within the overall limits. This may be treated as an abstract under Section 302 of the Companies Act, 1956. Your Board recommends the passing of this ordinary resolution.

None of the Directors barring Mr G Hariharan, shall be deemed to be interested or concerned in these resolutions. Item No.8 The Companies (Amendment) Act, 1999 provides for buy-back of shares or other specified securities by the company pursuant to Section 77A. The relevant provisions of the Articles of Association of the Company are proposed to be amended in line with the said section of the Companies Act, 1956, bestowing powers to the Company to buy-back its shares or securities subject to compliance with the relevant provisions of Section 77A and Section 77B of the Companies Act, 1956. The Board of Directors recommends passing the special resolution as set out in item no.8 in terms of Section 31 of the Companies Act, 1956, to the shareholders for amending the Articles of Association of the Company. None of the Directors of the Company is concerned or interested in this resolution. By Order of the Board of Directors Mumbai, 19 February 2009 S Venkatakrishnan Company Secretary

Esab India Limited Annual Report 2008

Five year Financial Highlights

SalesSales and Other Income and Other Income

Profit Before Tax

Rs. Million
4321

Profit Before Tax

1000

Rs. Million

925 809

4,500

4,000

3504

900

800

3,500

2930
700

648 582

3,000

2481
2,500

600

1914

500

2,000
400

331

1,500

300

1,000

200

500

100

0 2004 2005 2006 2007 2008

0 2004 2005 2006 2007 2008

Profit After Tax

Profit after Tax

Distribution of Earnings 2008

Rs. Million

700

612

600

534

500

427 397

400

300

204
200

100

2004

2005

2006

2007

2008

Esab India Limited Annual Report 2008

Five year Financial Highlights

Highlights
Operating Results Sales and Other Income Materials Manufacturing, Selling and Administative Expenses Interest and Finance Charges Depreciation Operating Profit Exceptional/Extraordinary items Profit before Tax Taxation Profit after Tax Dividends Retained Earnings 2008 4,321 2,537 2007 3,504 1,993 2006 2,930 1,693 2005 2,481 1,332

Rs. Million
2004 1,914 1,034

783 9 67 925 925 (313) 612 279 333

637 9 56 809 809 (275) 534 277 257

529 13 47 648 648 (221) 427 427

518 5 44 582 582 (185) 397 456 (59)

488 4 53 335 (4) 331 (127) 204 204

Financial Position Sources of Funds Capital Reserves Net Worth Borrowings Deferred Tax Liability Total Application of Funds Fixed Assets Investments Deferred Tax Asset Current Assets Current Liabilities and Provisions Total

2008

2007

2006

2005

2004

154 1,216 1,370 5 1,375

154 884 1,038 15 1,053

154 614 768 5 773

154 187 341 113 3 457

154 247 401 110 511

799 120 1,098 (642) 1,375

674 167 779 (567) 1,053

560 77 662 (526) 773

412 2 935 (892) 457

380 2 8 541 (420) 511

Esab India Limited Annual Report 2008

Directors Report

Your Directors take pleasure in presenting the Twenty Second Annual Report together with the audited accounts of the Company for the year ended 31 December 2008. FINANCIAL RESULTS Particulars Sales and other income Earnings before interest, tax and depreciation Interest / Finance charges Depreciation Profit before taxation Taxation Profit for the year DIVIDEND The Board of Directors had declared an interim dividend of 130% in July, 2008 entailing a total outflow of Rs.234 million including dividend distribution tax. Your Board has also proposed a final dividend of 25% entailing an outflow of Rs.45 million. This is subject to the approval of the members at the ensuing Annual General Meeting. 2008 4,321 1,001 (9) (67) 925 (313) 612 (Rs. Million) 2007 3,504 874 (9) (56) 809 (275) 534

of design, development, testing and manufacturing support services for ESAB group Companies outside India. This Company employs close to 50 people and recorded a turnover of around Rs.68 Million and PBT of Rs.6.2 Million in 2008. During the year, the erstwhile subsidiary of the Company, Esab Welding and Cutting Systems Limited merged with the Company with effect from 1 July 2008 and with the Appointed Date as 1 January 2008. All the assets and liabilities of this Subsidiary Company vested on the Company with effect from 1 January 2008. Since this Company was a 100% subsidiary the merger did not involve any increase in the equity of the Company. The results for 2008 include those of the Subsidiary and the amounts involved are not significant. INCOME STATEMENT Mirroring the volatile trends in the economy, the Company recorded a robust growth during the first three quarters of the year followed by a downturn in volumes and price realisations in the last quarter. Overall the Company posted a strong growth of 23% in 2008 in Net Sales. Consumables business grew by over 25.6% over 2007 which growth was largely driven by better price realisations and favourable product mix. The Equipments business recorded a growth of over 17.2% with key contributions to the growth coming from Automation and Cutting systems businesses. Other income grew by 27% during the year with better realizations on scrap sales and growth in income from investments arising from better cash accruals. The Company has also concluded certain long pending assessments on indirect taxation matters resulting in reversals of provisions made with respect to these assessments. These are reflected under Miscellaneous Income. Pricing pressures, higher input costs and product mix contributed to higher materials consumption as a percentage of Net Sales at 60% as against 58.1% in the previous year. The Company continues to focus on localization of Raw Materials and Components. Manufacturing, Selling and Administrative Expenses for the year were in line with sales growth and comparable with the previous year in percentage terms at 18.5% of Net Sales. Personnel costs inclusive of staff welfare expenses were at 7.6% of Net Sales as compared to 7.4% in 2007. Payroll revisions were effected in 2008 towards maintaining parity with Industry standards. A decline in Interest rates towards the last quarter of the year resulted in higher provisioning for retirement benefits compared to 2007. The Company also celebrated 20 years of operations in India and a part of the expenses relating to the same is reflected under Staff welfare expenses. Sales incentives increased by Rs.27.7 million primarily on account of changes in schemes to adapt to changes in pricing parameters and product mix. Transportation charges increased only marginally due to recoveries from trade. Higher expenditure commensurate with growth on outsourced non manufacturing support services, testing charges, royalties

MANAGEMENT DISCUSSION AND ANALYSIS

In its twentieth full year of operations, your Company maintained its market leadership position. This was in a year which witnessed high levels of volatility in the business environment. Buoyant economic conditions and soaring commodity prices prevailed for the most part of the year followed by a sudden and drastic reversal of trends towards the last quarter. Recession in several customer segments together with tight liquidity conditions had an adverse impact on the performance of the Company in the second half of the year. In line with long term plans, your Company continued to invest in capacity expansions and also completed commissioning of its new Flux Cored Wires [FCW] facility at its Irungattukottai Plant. The Company's Wearplate manufacturing facility is scheduled to go on stream during the first half of 2009. The Company is embarking on a significant expansion at its Nagpur Plant to eventually achieve an installed capacity of 20,000 tonnes per annum. The Company is also in the process of implementing expansions at Taratala Plant for Gas Equipments with potential business opportunities coming up in markets outside India. Modernization and capacity additions are also in progress at the Khardah Plant which manufactures Electrodes and Wires. The Board is pleased to inform the members that the Company has internally funded all its expansions till date and continued to remain debt free at the end of 2008. ESAB Engineering Services Limited, in which your Company has invested Rs.4.9 million till date is primarily into the business

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Esab India Limited Annual Report 2008

Directors Report

and miscellaneous administrative expenses contributed to an increase in miscellaneous expenses from Rs.50.8 Million to Rs.73.2 Million. BALANCE SHEET The Company continued to incur significant amounts on capital expenditure on upgrading its facilities and on long term capacity expansions. Gross Block including Capital Work in Progress increased by over 15% to Rs.1.32 Billion. Key investments were at Khardah and Irungattukottai on additional / new capacities. The Company has also initiated civil works and ordering of key equipment for its project involving substantial expansion at Nagpur. Trade and non trade Investments fell by over Rs.47 Million during the year primarily due to the deployment of surplus cash predominantly in Bank deposits during the latter half of the year as compared to deployment of such surpluses in liquid / debt Mutual funds in 2007. Your Company has acquired about 1.1% stake in Ador Welding Limited during the year. This investment is viewed as strategic and in the long term interests of the Company. Tight control over Inventories in the wake of decline in volumes and volatility in commodity cycles resulted in Inventory holdings declining by 4 days in terms of Gross sales. Sundry Debtors were marginally higher at 13 days of Gross Sales as compared to 9 days in 2007 due to higher direct sales at the end of the year especially in the Equipments segment. Cash and Bank balances increased by over Rs.212 Million with higher short term deposits of short term surpluses with Banks. Your Company has placed safety ahead of short term considerations in deploying funds and the Management believes that these values would help in uncertain times. Provisions increased by over Rs.108 Million due to current taxation provisions and increase in provisions for dividends and compensated absence and Gratuity. As indicated elsewhere in the Report, the provisioning need relating to retirement benefits were higher due to reduction in Interest rates towards the end of the year. Other components of working capital are comparable with previous year after considering the business growth in 2008. Working capital at the end of 2008 was at 7 days of Gross Sales as compared to 5 at the end of 2007 primarily due to increase in Sundry Debtors. CASH FLOW Net cash generated from operations grew by 26.3% to Rs.591 million. After capital expenditure and dividend payout including taxes thereon aggregating to Rs.234 Million, overall cash and cash equivalents increased by Rs.213 million to Rs.368 Million at the end of the year. Strong cash flows have enabled the Company remain debt free throughout the year.

OUTLOOK, OPPORTUNITIES AND THREATS The outlook for 2009 is extremely unclear as interwoven macroeconomic parameters across the world are involved. The commodity cycle still does not appear to have bottomed out and the fiscal stimulus measures could take time to generate positive sentiments. Select customer segments have been more affected and liquidity conditions continue to be tight. Your Company has initiated steps to manage the downturn by way of strong and sustainable cost reduction initiatives across all its areas of operations. It is expected that a clearer picture on reversal of downtrend could take time to ascertain and materialize. A prolonged downturn could have an adverse impact on the Company's short and medium term performance. A stronger Balance Sheet together with a technology leadership position is of significant advantage in the event of an extended period of downturn. INTERNAL CONTROLS Internal controls are reviewed on an ongoing basis by the Management and evaluated by Internal Auditors. Findings and corrective actions are reviewed regularly by the Management and by the Audit Committee. The reviews by Internal Auditors cover the various manufacturing and office locations. The scope of their work includes review of controls on accounting and operational areas in addition to reviews relating to efficiency and economy in operations. The suggestions given are being implemented with requisite commitment and intent. The company during the year engaged an outsourced consultant to study its sourcing patterns and also the status on statutory compliances of all its plants. RELATED PARTIES Note 20 of Schedule O to the Accounts sets out the nature of transactions with related parties. Transactions with Related Parties are carried out at arm's length. Their details are placed before the Audit Committee at regular periodic intervals. FINANCE The Companys relationships with its consortium bankers viz. State Bank of India and AXIS Bank Limited have remained cordial throughout the year. Surplus funds were placed in debt / liquid schemes of mutual funds and bank deposits pending deployment for operational and capital servicing needs. CORPORATE SOCIAL RESPONSIBILITY The Company during the year earmarked a sum of Rs.2.00 million towards its Corporate Social Responsibility (CSR) initiatives. The Company has made a small beginning in this initiative and during the year had expended an amount of Rs.0.21 million for a few worthy causes. The Company would strive to enhance its contribution to such causes in the years to come.

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Esab India Limited Annual Report 2008

Directors Report

SUBSIDIARY Esab Welding and Cutting Systems Limited (EWCS) the 100% subsidiary of the Company merged with the Company with effect from 1 July 2008. All the assets and liabilities of the subsidiary Company vested on the Company with effect from the appointed date i.e. 1 January, 2008. ENVIRONMENT, HEALTH AND SAFETY The Company is committed to industrial safety and environment protection. Four of its manufacturing units are continued to be ISO 14001 : 1996 certified. In line with ESAB Global standards, the Company has also adopted the Environmental, Health and Safety policy and is taking adequate steps to get the OHSAS 18001 certification. Efforts are on to get the factory units of the Company certified for OHSAS 18001. In this connection, the consumables factory at Ambattur, Chennai and the equipment factory at Taratala, Kolkata, have been audited by DNV for OHSAS certification and no major non-conformities have been reported. DIRECTORS' RESPONSIBILITY STATEMENT To the best of their knowledge and belief, and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 217(2AA) of the Companies Act, 1956. 1. In the preparation of the annual accounts for the year ended 31 December 2008 the applicable accounting standards have been followed; 2. The accounting policies listed in Schedule O to the Notes to Accounts have been selected and applied consistently and judgements and estimates that are reasonable and prudent made so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year on 31 December 2008 and of the profit of the Company for that year; 3. 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; 4. The annual accounts for the year ended 31 December 2008 have been prepared on a going concern basis. CAUTIONARY STATEMENT Certain statements in this Directors Report may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied in this Report. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE The information required under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the Annexure and forms part of this Report.
12

DIRECTORS In accordance with the provisions of Article 130 of the Company's Articles of Association, Mr Satish Tandon and Mr Jon Templeman, retire by rotation at the forthcoming Annual General Meeting and, being eligible, have offered themselves for re-appointment. Mr Suresh N Talwar was appointed as an additional Director with effect from 30 April 2008. In terms of Section 260 of the Companies Act, 1956 Mr Suresh Talwar holds office till the conclusion of this Annual General Meeting. Mr Suresh Talwar being eligible for re-appointment has offered himself for being elected as a Director of the Company liable to retire by rotation. The details as required under Clause 49 of the Listing Agreement regarding the above said Directors are part of the Notice calling the Annual General Meeting. Mr S Sundar Ram, resigned from the Board with effect from 28 August 2008. Your Board of Directors would like to place on record their appreciation for the services rendered by Mr S Sundar Ram during his tenure as Director of the Company. Mr David John Egan was appointed as the nominee Director of ESAB Holdings Limited with effect from 28 November, 2008. AUDITORS M/s. B S R & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and are eligible for reappointment. The Directors recommend that B S R & Co., be appointed as the Companys auditors to hold office until the conclusion of the next Annual General Meeting. The Company has received confirmation that their appointment, if made, will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. PERSONNEL At the end of December 2008 the Company had 756 employees as against 758 at the end of 2007. The Company strives in its HR initiatives to create an environment conducive for high performance work culture and has a culture for retention of its must retain talents. As required by the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the name and other particulars of the employees are set out in the Annexure to the Director's Report. CORPORATE GOVERNANCE In terms of Clause 49 of the Listing Agreement with the stock exchanges a Corporate Governance Report is made part of this Annual report. In compliance of Section 292A of the Companies Act, 1956 and with the Listing Agreement, an Audit Committee consisting of three Independent Directors and one non-executive Director has been constituted. The Company also has an Investors Grievance Committee consisting of three Independent Directors and one non-executive Director. A certificate from the statutory auditors of the Company regarding compliance of the conditions stipulated for Corporate

Esab India Limited Annual Report 2008

Directors Report

Governance under clause 49 of the Listing Agreement is attached to this report. The declaration by the Managing Director addressed to the members of the Company pursuant to Clause 49 of the Listing Agreement regarding adherence to the Code of Conduct by the Members of the Board and by the Members of the Senior Management Personnel of the Company is also attached to this Report. ACKNOWLEDGEMENTS Your Directors place on record their appreciation for the confidence reposed and continued support extended by its

customers, suppliers and shareholders as well as the Bankers to the Company. Your Directors also place on record their appreciation of the efforts and contribution during 2008 of the Company's employees.

For and on behalf of the Board of Directors M G Foster Chairman

Mumbai, 19 February 2009

13

Esab India Limited Annual Report 2008

Directors Report

ANNEXURE TO THE DIRECTORS REPORT

Statement under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended 31 December 2008. A. CONSERVATION OF ENERGY Development of Thyristorized 400 AMPS MMA Rectifier with reduced power consumption. Introduction of alternate baking method, resulting in reduction in energy requirement per M.T. of electrodes for baking by more than 50% in all electrode factories. At Nagpur, for solid wire, the dry drawing and coppering machine has been converted to wet drawing and coppering process resulting in saving in energy by about 15% on a continuous basis. Introduction of skylite strips on the roofing to avoid usage of electrical lights at Irungattukottai FCW plant. B. TECHNOLOGY ABSORPTION Development of products with modified features against customer-specific requirements. Development of 1200 AMPS Thyristorized SAW Rectifier for Welding Automation Application. Development of Computerized Test Panels for Arc Equipments for de-skilling the final testing process and enhancing productivity. Development of Synergic control system as a value addition for existing 600 AMPS MIG Rectifier. Initial development of Microprocessor based control for TIG Machine with enhanced features like Pulsing controls. Upgradation of existing Multi Channel Data Acquisition and Report Generation System (Data Logger) for Multistation Pipe Mill Application (Welding Automation). Design modification in certain range of welding transformers to standardize on conductor size, reduce number of inventory items and increase current control range. Product Lifecycle Approach in the Product Development Stages. Technology transfers for two submerged arc welding fluxes viz. basic and high basic and one flux cored wire has been completed in all respects. C. FOREIGN EXCHANGE The company exports its products to South Africa, Singapore, Bangladesh, Sri Lanka, Uganda, Tanzania and the Middle East. During the year, the total foreign exchange expenditure amounted to Rs.362.60 million (which includes Rs.350.73 million for the import of raw materials, components and capital goods and Rs.11.87 million towards expenditure in foreign currency). Foreign exchange earnings during the year were Rs.120.73 million resulting in net foreign exchange outflow of Rs.241.87 million for the year.

For and on behalf of the Board of Directors M G Foster Chairman

Mumbai, 19 February 2009

Particulars of employees as per Section 217 (2A) of the Companies Act, 1956
SI.No. 1 Name B Mohan Age (Years) 43 Designation Chief Financial Officer General Manager Equipment Division Date of employment 1.2.2005 Remuneration Rs. 31,94,635 Qualification B. Com., ACA., ACS. B.E. Electrical Engineering Experience (Years) 22 Previous Employment GM - Finance and Company Secretary Amalgamations Valeo Clutch (P) Ltd. Asst. Manager Electronics Indian Oxgyen Limited

Gautam Banerjee

48

7.2.1991

25,53,208

26

Notes : 1. 2. 3. 4. 5. 6. Years of experience also include experience prior to joining the Company. Remuneration comprises salary, house rent allowance, contribution to provident fund and superannuation fund, medical reimbursement, medical insurance premium, leavel travel assistance, production incentive/ bonus and other benefits evaluation under Income-tax Rules. The above said employees are also entitled to gratuity as per rules. The above said employees are not related to any of the Directors of the Company. Terms of employment of the above said employees are contractual. The above said employees either individually or together with the spouse or children do not hold more than two per cent of the equity shares of the Company.

14

Esab India Limited Annual Report 2008

Corporate Governance

Your Company is committed to good Corporate Governance in all its activities and processes. The Board of Directors shall endeavour to create an environment of fairness, equity and transparency in transactions with the underlying objective of securing long-term shareholder value, while, at the same time, respecting the rights of all stakeholders. BOARD OF DIRECTORS Composition of Board In terms of the Corporate Governance philosophy all statutory and other significant material information is placed before the Board of Directors to enable it to discharge its responsibility of strategic supervision of the Company as trustees of the Shareholders

The Board of Directors currently consists of eight members. Mr David J Egan has been nominated by ESAB Holdings Limited with effect from 28 November 2008. 50% of the Board of Directors now consists of independent Directors. Other than the Managing Director, all the other members of the Board are non-executive Directors, including four who are independent Directors. During 2008, four Board Meetings were held on 4 March, 29 April, 24 July, 30 October and not more than four months elapsed between any two meetings. Particulars of the Directors attendance to the Board Meetings and the last Annual General Meeting and particulars of their other Company Directorships and Committee memberships are given below:
Other Directorships $ Membership of other Committees # Membership Chairmanship Nil Nil 8 Nil Nil 3

Director

Directorship

Attendance Board AGM

Mr M G Foster

Non-Executive Nominee, Esab Holdings Limited Executive Independent & Non-Executive Independent & Non-Executive Independent & Non-Executive Non-Executive Independent & Non-Executive Non-Executive Nominee, Esab Holdings Limited Non-Executive Nominee, Esab Holdings Limited

3 4 3

No Yes No

Nil 1 6

Mr G Hariharan Mr P Mallick

Mr N H Mirza

Yes

Mr S Tandon

Yes

Nil

Mr J Templeman Mr S N Talwar

3 1

Yes Yes

Nil 14

Nil 10

Nil 4

Mr S Sundar Ram*

Yes

Mr David J Egan@

Nil

Nil

Nil

* Resigned as Director of the Company with effect from 28 August 2008. @Appointed as a Nominee Director with effect from 28 November, 2008 only. $ Excluding Alternate Directorships and Directorships of Private Limited Companies and Foreign Companies, wherever applicable # Only the Audit and Investor Grievance Committees are considered for this purpose.

15

Esab India Limited Annual Report 2008

Corporate Governance

Directors compensation and disclosures The details of payment of remuneration to Directors during 2008 are as follows:
Non-Executive Directors Mr M G Foster Mr J Templeman Mr S Sundar Ram Mr N H Mirza Mr P Mallick Mr S Tandon Mr S N Talwar Mr G Hariharan Salary 39,87,088 Perquisites 3,22,342 Provident Fund 4,68,000 Sitting Fees Paid (in Rs.) 30,000 30,000 1,48,000 76,000 1,06,000 10,000 Commission (in Rs.) 10,42,000 7,75,000 7,45,000 5,18,000 12,25,000 Total (in Rs.) 30,000 30,000 11,90,000 8,51,000 8,51,000 5,28,000 60,02,430

The payment of Commission to Non Executive Directors up to 1% of the profit as calculated under the applicable provisions of the Companies Act, 1956 was approved by the Members at the Annual General Meeting held on 28 April 2006. The approval was based on their roles and responsibilities and their contribution to the Company in their respective capacities. Based on the above principle, Commission has been individually determined for each Non-executive Director based on their varying commitments of time and effort to the Board and to its Committees. Commission to Managing Director is based on his performance and contributions to Company's performance. During the year, the Company paid professional fees (including advances) amounting to Rs.45,000/- to Talwar Thakore & Associates, Advocates and Solicitors, a firm in which Mr S N Talwar, Director of the Company, is a partner. None of the Directors holds any equity shares of the Company, except for Mr. S. N. Talwar who holds 1440 equity shares as on 31 December 2008. The Company has not granted any stock options to any of its Directors or employees during the year under review. Code of Conduct The Board of Directors has adopted codes of conduct, applicable to Directors and to employees of the Company. The said codes of conduct have been posted on the Company's website. The Company has obtained declarations from all its Directors and senior management personnel affirming their compliances with the applicable code of conduct. The declaration by the Managing Director under Clause 49 affirming compliance of the code of conduct by all members of the Board and the Senior Management Personnel for the year ended 31 December 2008 is attached to this corporate governance report.
16

AUDIT COMMITTEE The terms of reference of the Committee are governed by a Charter, cover all applicable matters specified under clause 49 of the Listing Agreements dealing with Corporate Governance and Section 292A of the Companies Act, 1956. The members of the Committee are: Mr N H Mirza Mr P Mallick Mr S Tandon Mr J Templeman Chairman Member Member Member Independent director Independent director Independent director Non-executive & Non-Independent director

More than two-thirds of the members are independent Directors and all the members of the Audit Committee are financially literate. The Companys Managing Director, Chief Financial Officer, its Statutory Auditors and its Internal Auditors are permanent invitees to the Committee's meetings. The Company Secretary is Secretary to the Committee. The quorum for Committee meetings is two members or one third of the total strength of the Committee, whichever is higher. The Chairman of the Audit Committee was present at the Annual General Meeting of the Company held on 29 April 2008 to answer the shareholder queries. The brief description of the terms of reference to the Audit Committee is governed by a Charter. The text of the charter of the Audit Committee is available in the Company's website www.esabindia.com. The Audit Committee strictly adheres to the terms of reference which is prepared in compliance with Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement. As required under Clause 49 of the Listing Agreement, there were five meetings of the Audit Committee held during 2008 on 3 and 4 March, 29 April, 24 July and 30 October and not more than four months elapsed between any two meetings.

Esab India Limited Annual Report 2008

Corporate Governance

The number of meetings attended by each member of the Audit Committee is as follows: Number of meetings Held Attended Mr N H Mirza Mr P Mallick Mr S Tandon Mr J Templeman REMUNERATION COMMITTEE The Company has not set up a Remuneration Committee (which is not mandatory). The remuneration of Directors is determined and approved by the Board of Directors and is subject to the approval of the Company in general meeting and of other applicable regulatory and statutory authorities. Interested Directors withdraw from the discussions, when their remuneration is being considered by the Board. INVESTORS GRIEVANCE COMMITTEE The Investors' Grievance Committee functions under the Chairmanship of Mr S Tandon, a Non-executive Independent Director. The other members of the Committee are Mr N H Mirza, Mr P Mallick and Mr J Templeman. Mr S Venkatakrishnan, Company Secretary is the Compliance Officer of the Company. The Directors review the position on all major investors' grievances at meetings of the Board of Directors and the Investors' Grievances Committee. The Committee met four times during the year on 4 March, 29 April, 24 July and 30 October, 2008 and the details of attendance of the Committee members in these meetings are given below : Number of meetings Held Attended Mr S Tandon Mr N H Mirza Mr P Mallick Mr J Templeman 4 4 4 4 4 4 3 3 5 5 5 5 5 4 5 3

were no pending share transfers (other than transfers sent under objections). All requests for dematerialization of shares were carried out within the stipulated time period and no share certificate was pending for dematerialization as on 31 December 2008. Disclosures 1. During the year, the Company has not entered into any transaction of material nature with the Directors, their relatives or management which was in conflict with the interests of the Company. The particulars of transactions between the Company and its related parties, as defined in Accounting Standard 18, is set out in Note 20 to Schedule O to the financial statements. 2. The Company follows the Accounting Standards as specified in the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The Company has not adopted a treatment different from that prescribed in any Accounting Standard, in the preparation of financial statements. 3. There have been no instances of non-compliance by the Company. During the last three years no penalties or strictures have been imposed on the Company on any matter related to the capital markets by stock exchanges or SEBI or any statutory authority. 4. The Company has laid down procedures to inform Board members about the risk assessment and minimization procedures. The Company has a Risk Officer and has identified major and minor risks and these risks are analysed by the Executive Management Team locally and the major risks and its minimization procedures are reviewed by the ESAB Global Management with a properly defined framework. 5. There has been no public, rights or preferential issues during the year. 6. According to the Articles of Association, one-third of the Directors retire by rotation and, if eligible, can seek reappointment at the Annual General Meeting of shareholders. In terms of the said Articles, Mr Satish Tandon and Mr Jon Templeman will retire in the ensuing Annual General Meeting. The Board has recommended the re-appointment of the retiring Directors. Mr Suresh N Talwar was appointed as an additional Director by the Board of Directors effective 30 April 2008. He holds office till the conclusion of this Annual General Meeting. A letter has been received from a member proposing the candidature of Mr Suresh N Talwar for the post of Director liable to retire by rotation. The detailed profiles of all these Directors are provided in the notice calling the forthcoming Annual General Meeting. 7. The Managing Director and the Chief Financial Officer of the Company certify to the Board every quarter on the financial statements and other matters in accordance with Clause 49 of the Listing Agreement.

During the year, the Company received 70 complaints from shareholders. The details of the complaints received from the shareholders are as given below: Sl.No. 1 2 3 4 Nature of complaint Non-receipt of share certificates Non-receipt of dividend warrants Non-receipt of annual report Others No.of complaints 10 58 2

All the complaints were responded to as per applicable guidelines and regulations. As at 31 December 2008 there
17

Esab India Limited Annual Report 2008

Corporate Governance

8. The Company has complied with the requirements of the revised clause 49 of the Listing Agreement. To enhance standards on corporate governance and strengthen controls, the Company has setup a whistleblower policy which is available for viewing on the Company's website www.esabindia.com and in terms of such whistleblower policy, it is affirmed that the employees have been given free access to the Audit Committee. In compliance with the clause 47 (f) of the listing agreement with the stock exchanges the Company has designated the mail id [email protected] and posted this in the Company's website. The investors can send their grievances, if any, to the designated mail id. GENERAL BODY MEETINGS The last three Annual General Meetings were held as per details given below:
Year Date Time Venue

A Management Discussion and Analysis Report, forming part of the Directors' Report, is included in the Annual Report. GENERAL SHAREHOLDER INFORMATION AGM : Date, Time & Venue Financial Year Approval of financial results proposed Dates of Book Closure 22 April 2009 at 3.00 pm Narada Gana Sabha Trust Complex, 314, T.T.K. Road, Chennai - 600018. 1 January to 31 December QE 31 Mar 2009 : Last week, April 2009 QE 30 Jun 2009 : Last week, July 2009 QE 30 Sep 2009 : Last week, Oct 2009 YE 31 Dec 2009 : Last week, March 2010 14 April 2009 to 22 April 2009 (both days inclusive)

Dividend Payment 30 April 2009 Date Listing on Stock Exchanges The Bombay Stock Exchange Limited. The National Stock Exchange of India Limited. The listing fees for the financial year 2008-09 were duly paid to the above stock exchanges. Stock Code Name of the stock exchange Stock Code The Bombay Stock Exchange Limited : 500133 The National Stock Exchange of India Ltd. : ESABINDIA ISIN allotted by depositories : INE284A01012

2006

28 April 2006

4.00 PM Mini Hall, The Music Academy No. 168. T.T.K. Road, Chennai - 600014. 4.00 PM Mini Hall, The Music Academy No. 168. T.T.K. Road, Chennai - 600014. 4.00 PM Mini Hall, The Music Academy No. 168, T.T.K. Road, Chennai - 600014.

2007

27 April 2007

2008

29 April 2008

All the proposed resolutions, including special resolutions, were passed by the shareholders as set out in their respective Notices. No special resolutions were put through postal ballot during the last year and the Company is not considering the introduction of a postal ballot for any resolution this year as well. COMMUNICATION The Companys quarterly financial results, after their approval by the Board of Directors, are promptly issued to all the Stock Exchanges with whom the Company has listing arrangements. These financial results, in the prescribed format, as per amended clause 41 of the listing agreement, are published in leading local and national newspapers; viz. The Business Standard in English and in Makkal Kural in Tamil and are also posted on the Company's website www.esabindia.com and also on the Electronic Data Information Filing and Retrieval System at www.sebiedifar.nic.in

Stock Market Price* Data & Stock Performance 2008 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mumbai High Low Rs. Rs. 544 495 475 469 450 407 405 436 447 425 339 274 359 442 375 387 387 340 318 350 400 290 250 239 National High Low Rs. Rs. 548 490 546 504 449 398 403 444 448 427 342 275 362 445 371 367 361 337 318 363 390 292 252 239 BSE Sensex High Low Rs. Rs. 21207 18895 17228 17481 17736 16633 15130 15580 15107 13204 10945 10189 15332 16457 14677 15298 16196 13732 12514 14002 12154 7697 8316 8467

Share prices are rounded off to the nearest rupee.

18

Esab India Limited Annual Report 2008

Corporate Governance

ESAB Share Price Vs.BSE SENSEX

ESAB Shareprice 550 BSE Sensex 22,000 20,000 18,000 16,000 400 14,000 350 12,000 300 10,000 8,000 6,000

500

450

250

01-Feb-08

18-Feb-08

16-Jun-08

01-Jan-08

16-Jan-08

02-Jun-08

01-Jul-08

02-May-08

16-May-08

16-Jul-08

01-Aug-08

18-Aug-08

01-Sep-08

16-Sep-08

03-Nov-08

17-Nov-08

01-Dec-08

17-Dec-08

Registrar and Transfer Agents

Integrated Enterprises (India) Ltd. IInd Floor, 'Kences Towers' No.1, Ramakrishna Street, North Usman Road, T.Nagar, Chennai - 600 017. Contact Person:Suresh Babu K., General Manager Tel: 044-28140801-03, Fax: 044-28142479, 28143378 Email:[email protected]

e. With a view to expediting the approval process, the Board of Directors has severally authorized the Chairman of the Board of Directors, the Chairman of the Investors' Grievance Committee and the Company Secretary to approve the transfer of shares. Distribution of shareholding as on 31 December 2008
Number of Shares % of total

Shareholding

Shareholders

Shareholders are requested to correspond with the share transfer agent for transfer / transmission of shares, change of address, queries pertaining to their shareholding, dividend etc., at their address given above. Share Transfer System a. The Company has appointed M/s. Integrated Enterprises (India) Limited as its Registrar & Transfer Agents. b. Share transfers are processed and approved, subject to receipt of all requisite documents. c. The Company seeks to ensure that all transfers are approved for registration within the stipulated period. Pursuant to Clause 47 (c) of the Listing Agreement with Stock Exchanges, certificates on half-yearly basis have been issued by a Company Secretary-in-practice for due compliance of share transfer formalities by the Company. d. Pursuant to SEBI (Depositories and Participants) Regulations, 1996, certificates have also been received from a Company Secretary-in-practice for timely dematerialization of the shares of the Company and for conducting a secretarial audit on a quarterly basis for reconciliation of the share capital of the Company.
19

Up to 500 501-1000 1001-2000 2001-3000 3001-4000 4001-5000 5001-10000 10001 and above

10,428 513 203 70 30 20 39 50

1,305,133 395,827 316,360 177,916 109,131 93,873 299,389 12,695,391

31-Dec-08

03-Mar-08

17-Mar-08

01-Apr-08

16-Apr-08

01-Oct-08

16-Oct-08

200

8.48 2.57 2.06 1.16 0.71 0.61 1.94 82.47

Total

11,353

15,393,020

100.00

Esab India Limited Annual Report 2008

Corporate Governance

Shareholding pattern as on 31 December 2008

Category Esab Holdings Limited Exelvia Group India BV Promoter Group Mutual Funds & UTI Banks and Financial Institutions Foreign Institutional Investors Corporate Bodies NRIs Directors & Relatives Indian Public Total Number of Shares 5,743,200 2,809,089 8,552,289 1,518,040 2,062 1,560,021 646,815 167,966 1,440 2,944,387 15,393,020 % of total 37.31 18.25 55.56 9.86 0.01 10.14 4.20 1.09 0.01 19.13 100.00

NON-MANDATORY DISCLOSURE The non mandatory requirements have been adopted to the extent and in the manner as stated under the appropriate headings detailed below: a. Chairmans Office The need for implementing this non mandatory requirement has not arisen. b. Remuneration Committee The Board has not set up a Remuneration Committee as the need for the same has not arisen. c. Shareholder rights The quarterly un-audited results of the Company after being subjected to a Limited Review by the Statutory Auditors, are published in newspapers and on the Company's website www.esabindia.com and also on the Electronic Data Information Filing and Retrieval System at www.sebiedifar.nic.in. These results are not sent to shareholders individually. d. Audit Qualifications The auditors have issued an unqualified opinion on the statutory financial statements of the Company. e. Training of Board Members/Mechanism for evaluating non-executive directors All the Non-Executive Directors have rich experience and expertise in functional areas and attend various programmes in their personal capacities that keep them abreast of relevant developments. There is no formal system of evaluating individual Directors but the Audit Committee evaluates its performance annually and takes corrective action. f. Whistle Blower policy The Company has setup a whistleblower policy which can be viewed on the Company's website www.esabindia.com. In terms of such whistle blower policy, the employees have been given direct access to the Audit Committee.

Dematerialisation

As on 31 December 2008, 97.04% of the total paid-up equity capital was held in dematerialised form. The Company has entered into agreements with National Securities Depository Limited and Central Depository Services (India) Limited to offer shareholders the option to dematerialise their shares with these depositories. The ISIN number of the Company's shares in demat form is INE284A01012 None Plot No.13, 3rd Main Road, Industrial Estate, Ambattur, Chennai 600 058. B.T. Road, Khardah, P.O. B.D. Sopan, North 24 Parganas, Kolkata 743 121. B-28, MIDC Industrial Area, Kalmeshwar, Nagpur 441 501. P-41, Taratala Road, Kolkata 700 088. G22 Sipcot Industrial Park, Irungattukottai, Sriperumbudur, Kancheepuram Taluk, Chengalput District, Tamilnadu - 602 105.

Outstanding GDRs /ADRs Plant Locations

REQUEST TO INVESTORS Investors are requested to communicate change of address, if any, directly to the registrar and share transfer agent of the Company. As required by SEBI, investors shall furnish details of their respective bank account number and name and address of the bank for incorporating in the dividend warrants to reduce the risk to them of fraudulent encashment. Investors holding shares in electronic form are requested to deal only with their respective depository participant for change of address, nomination facility, bank account number, etc. For and on behalf of the Board of Directors M G Foster Chairman

Address for correspondence

Company Secretary Esab India Limited Plot No.13, 3rd Main Road, Industrial Estate, Ambattur, Chennai - 600 058. Tel : 044 42281100 Fax : 044 42281150 E-mail: [email protected]
20

Mumbai,19 February 2009

Esab India Limited Annual Report 2008

Corporate Governance

Auditor's Certificate on Compliance with Conditions of Corporate Governance under Clause 49 of the Listing Agreement To The Members of Esab India Limited We have examined the compliance of conditions of Corporate Governance of ESAB India Limited ("the Company") for the year ended on 31 December 2008 as stipulated in Clause 49 of the Listing Agreement of the said Company with Stock Exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of corporate governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For B S R & Co. Chartered Accountants S Sethuraman Partner Membership No. 203491

Chennai,19 February, 2009

To The Members of Esab India Limited

Declaration by the Managing Director under Clause 49 of the Listing Agreement I, G Hariharan, Managing Director of ESAB India Limited, to the best of my knowledge and belief, declare that all the members of the Board of Directors and Senior Management Personnel have affirmed compliance with the Code of Conduct for the year ended 31 December 2008. G Hariharan Managing Director

Mumbai, 19 February, 2009

21

Esab India Limited Annual Report 2008

Auditors Report

Auditors' Report to the Members of ESAB INDIA LIMITED 1 We have audited the attached Balance Sheet of ESAB INDIA LIMITED ("the Company"), as at 31 December 2008, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditor's Report) Order, 2003 ("the Order") as amended, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 ('the Act'), we enclose in the annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments referred to in paragraph 3 above, we report that: (i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act; (v) On the basis of written representations received from the directors, as on 31 December 2008, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31 December 2008 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act, (vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Act, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: a. in the case of the Balance Sheet, of the state of affairs of the Company as at 31 December 2008; b. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

For B S R & Co. Chartered Accountants

Chennai, February 19, 2009

S Sethuraman Partner Membership No. 203491

22

Esab India Limited Annual Report 2008

Auditors Report

Annexure to the Auditors Report (Referred to in our report of even date) (i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified annually. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification. (c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption. (ii) (a) The inventory, except goods-in-transit and stocks lying with third parties, has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. For stocks lying with third parties at the year-end, written confirmations have been obtained. (b) The procedures for the physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material. (iii) The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. In our opinion and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company's specialised requirements and similarly certain goods sold are for the specialised requirements of the buyers and suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventories and fixed assets and with regard to the sale of goods and services. In our opinion and according to the information and explanations given to us, we have not observed any major weakness in the internal control system during the course of the audit. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.
23

(b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of rupees five lakh with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time, except for purchase of certain item of inventories and fixed assets which are for the Company's specialised requirements and similarly for sale of certain goods for the specialised requirements of the buyers and for which suitable alternative sources are not available to obtain comparable quotations. However, on the basis of information and explanations provided, the same appear reasonable. (vi) The Company has not accepted any deposits from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of manufacture of electric motors and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records. (ix) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted / accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Employees' State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Investor Education and Protection Fund. There were no dues on account of Cess under Section 441A of the Companies Act, 1956 since the aforesaid section has not yet been made effective by the Central Government. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees' State Insurance, Incometax, Sales Tax, Service Tax, Customs Duty, Excise Duty and other material statutory dues were in arrears as at 31 December 2008 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are dues in respect of Sales Tax, Excise Duty and Income-tax as listed below that have not been deposited with the appropriate authorities on account of disputes.

(iv)

(v)

Esab India Limited Annual Report 2008

Auditors Report

Name of the Statute

Nature of Dues

Amount (INR in Millions) (Net of amount paid under dispute) 2.63 2.35 0.65 0.82 0.32 40.16 49.67 7.71 0.14 0.29 3.11 3.38 0.92

Period to which the amount relates (Financial Year)

Forum where dispute is pending

Sales Tax

Non submission of Sales tax Declaration Forms

1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1999-00 1999-00 2000-01 2001-02 2003-04 2004-05 2000-02 1997-00 2003-06 1988-89 1989-90 1996-97 1997-98 1998-99 2000-01 2003-04 Commissioner Appeals Commissioner Appeals (Appeal filed on 28 January 2009) Income Tax Appellate Tribunal CESTAT High Court Commissioner Appeals High Court Assistant Commissioner Revision Board, Tribunal

Central Excise Act

Determination of Price on which Duty is Payable Disallowed Expenditure pertaining to Various years

7.11 100.97 2.16 1.17 2.56 0.12 8.60 4.60 3.73 2.54

Income Tax Act

64.00

2004-05

GRAND TOTAL

309.71

(x)

The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the immediately preceding financial year. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or to any financial institutions. The Company did not have any outstanding debentures during the year. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi/ mutual benefit fund/ society. (xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. (xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xi)

(xii)

(xvi) The Company did not have any term loans outstanding during the year. (xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the

24

Esab India Limited Annual Report 2008

Auditors Report

Company, we are of the opinion that the funds raised on short-term basis have not been used for long term investment. (xviii) The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Companies Act, 1956. (xix) The Company did not have any outstanding debentures during the year. (xx) During the current year, the Company has not raised any money by public issues.

(xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For B S R & Co. Chartered Accountants S Sethuraman Partner Membership No. 203491

Chennai, February 19, 2009

25

Esab India Limited Annual Report 2008

Balance Sheet
as at 31 December 2008

Schedule SOURCES OF FUNDS SHAREHOLDERS FUNDS Share Capital Reserves and Surplus DEFERRED TAX LIABILITY (Net) (Refer Note 15 of Schedule O)

2008 Rs.000

2007 Rs.000

A B

153,930 1,216,316 1,370,246 4,286 1,374,532

153,930 883,639 1,037,569 15,327 1,052,896

APPLICATION OF FUNDS FIXED ASSETS Gross Block Less: Depreciation/Amortization Net Block Capital Work-in-progress including Advances

1,194,166 517,191 676,975 122,156 799,131 119,790 396,047 168,144 368,426 165,009 1,097,626

1,075,662 464,956 610,706 62,939 673,645 167,044 367,269 97,469 155,568 158,306 778,612 498,966 67,439 566,405 212,207 1,052,896

INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Inventories Sundry Debtors Cash and Bank Balances Other Current Assets and Loans and Advances CURRENT LIABILITIES AND PROVISIONS Current Liabilities Provisions

D E F G H

I J

466,491 175,524 642,015

NET CURRENT ASSETS

455,611 1,374,532

Notes to the Accounts

The Schedules referred to above form an integral part of the financial statements

As per our report attached For B S R & Co. Chartered Accountants S Sethuraman Partner Membership No. 203491 N H Mirza Director S Venkatakrishnan Company Secretary Chennai, 19 February 2009 Mumbai, 19 February 2009

For and on behalf of the Board of Directors G Hariharan Managing Director B Mohan Chief Financial Officer

26

Esab India Limited Annual Report 2008

Profit and Loss Account

for the year ended 31 December 2008

Schedule INCOME Sales (Gross) Less: Excise Duty Sales (Net) Other Income

2008 Rs. 000

2007 Rs.000

4,759,458 533,248 4,226,210 94,901 4,321,111

3,920,032 490,488 3,429,544 74,608 3,504,152 1,993,266 636,626 8,792 56,123 2,694,807 809,345 (275,328) 534,017 427,164 961,181

EXPENDITURE Materials Manufacturing, Selling and Administrative Expenses Interest and Finance Charges Depreciation/Amortization

L M N

2,537,052 782,928 9,216 66,707 3,395,903

PROFIT BEFORE TAXATION Taxation (Refer Note 16 of Schedule O) PROFIT AFTER TAXATION Balance brought forward from Previous Year PROFIT AVAILABLE FOR APPROPRIATION APPROPRIATIONS Dividend Interim Final Total Dividend Dividend Tax Amount transferred to General Reserve Balance in Profit and Loss Account

925,208 (313,390) 611,818 631,154 1,242,972

200,109 38,483 238,592 40,549 61,182 902,649 1,242,972

238,592 238,592 38,033 53,402 631,154 961,181 Rs.34.69

Earnings per share (Refer Note 17 of Schedule O) Basic and Diluted Notes to the Accounts O Rs.39.75

The Schedules referred to above form an integral part of the financial statements

As per our report attached For B S R & Co. Chartered Accountants S Sethuraman Partner Membership No. 203491 N H Mirza Director S Venkatakrishnan Company Secretary Chennai, 19 February 2009 Mumbai, 19 February 2009

For and on behalf of the Board of Directors G Hariharan Managing Director B Mohan Chief Financial Officer

27

Esab India Limited Annual Report 2008

Schedules to the Accounts

31 December 2008

2008 Rs.000 A. SHARE CAPITAL Authorised: 17,000,000 Equity Shares of Rs.10 each 3,000,000 Unclassified Shares of Rs.10 each 170,000 30,000 200,000 Issued, Subscribed and Paid up : 15,393,020 Equity Shares of Rs.10 each fully paid up (Of the above, 999,000 shares were allotted as fully paid up pursuant to a Scheme of Amalgamation)

2007 Rs.000

170,000 30,000 200,000

153,930

153,930

B.

RESERVES AND SURPLUS Amalgamation Reserve Securities Premium Account Special Capital Incentive Subsidy General Reserve As per last Balance Sheet Add: Reversal of pension liability at the beginning of the year, arising on adoption of Accounting Standard 15 (Revised 2005) (Refer Note 22 of Schedule O) Less: Tax adjustment on reversal of pension liability Transferred from Profit and Loss Account

10,000 93,190 2,000

10,000 93,190 2,000

147,295

81,777

61,182 208,477

18,354 6,238

12,116 53,402 147,295 631,154 883,639

Profit and Loss Account

902,649 1,216,316

C.

FIXED ASSETS Rs.000 Particulars Freehold Leasehold Building Plant & Furniture & Motor Intangible Land Land Machinery Fixtures Vehicles Assets 34,820 1,881 32,939 32,939 34,820 14,078 213,390 8,086 14,078 221,476 5,633 50,597 89 6,323 5,722 56,920 8,356 164,556 8,445 162,793 757,132 122,803 16,727 863,208 391,821 52,942 14,239 430,524 432,684 365,311 19,694 6,496 273 25,917 7,383 1,431 233 8,581 17,336 12,311 9,229 9,229 3,881 1,371 5,252 3,977 5,348 Total Previous Year 910,200 173,838 8,376

GROSS BLOCK AT COST As at 1 January, 2008 Additions Deletions As at 31 December, 2008

27,319 1,075,662 137,385 18,881

27,319 1,194,166 1,075,662 5,641 4,551 10,192 17,127 21,678 464,956 66,707 14,472 517,191 676,975 610,706 122,156 62,939 415,684 56,123 6,851 464,956

DEPRECIATION / AMORTIZATION As at 1 January, 2008 Additions Deletions As at 31 December, 2008 NET BLOCK As at 31 December, 2008 As at 31 December, 2007

Capital Work in Progress including Advances Notes :

Intangible assets represents technical know how from ESAB Group Companies.

28

Esab India Limited Annual Report 2008

Schedules to the Accounts

31 December 2008

2008 Rs.000 D. INVESTMENTS (LONG TERM, UNQUOTED, NON-TRADE AT COST) (a) In a Subsidiary Company Esab Welding and Cutting Systems Limited Nil (31 December 2007 - 1,400,000) Equity Shares of Rs.10 each fully paid up. (Refer Note 26 of Schedule O) Less: Provision for diminution other than temporary, in the value of investment (b) Investment, in an Associate Company Esab Engineering Services Limited 497,980 (31 December 2007 - 497,980) Equity Shares of Rs.10 each fully paid up. (c) Investment, in Ador Welding Limited - * 145,285 (31 December 2007 - Nil) Equity shares of Rs.10 each fully paid up (d ) Other Investments Rural Electrification Corporation Bonds (* credited in the companys account subsequent to the Balance Sheet date) (CURRENT, UNQUOTED, NON-TRADE LOWER OF COST AND FAIR VALUE) Investment in Mutual Funds (Refer Note 21 of Schedule O for details of mutual funds purchased and sold during the year) ING Quarterly FMP 91 - Series A3 Institutional Dividend 3,500,000 units (31 December 2007 - Nil units) DSP Black Rock FMP - 3M Series 16 Institutional Dividend 3,500,000 units (31 December 2007 - Nil units) HDFC Cash Management Fund - Savings Plan - Daily Dividend Reinvestment Nil units (31 December 2007 - 2,003,140.65 units) ING Liquid Plus Fund - Savings Plan - Daily Dividend Reinvestment Nil units (31 December 2007 - 4,502,329.61 units) Reliance Liquid Plus Fund - Retail Option - Daily Dividend Plan Nil units (31 December 2007 - 19,994.92 units) ICICI Flexible Income Plan - Dividend - Daily Reinvestment Nil units (31 December 2007 - 4,280,398 units) Aggregate fair value of Companys investments in Mutual Funds Rs. 70,000 (31 December 2007 - Rs. 130,403) 70,000 119,790 35,000

2007 Rs.000

13,735 (11,424) 2,311

4,980 15,460 29,350

4,980 29,350

35,000

20,095

45,038

20,012

45,258

130,403 167,044

E.

INVENTORIES * Raw & Packing Materials Work-in-Progress Finished Goods Stores and Spare Parts 161,665 44,840 177,914 11,628 396,047 * Includes Goods in transit of Rs. 13,596 (31 December 2007 - Rs. 32,488) 173,186 28,057 159,045 6,981 367,269

29

Esab India Limited Annual Report 2008

Schedules to the Accounts

31 December 2008

2008 Rs.000 F. SUNDRY DEBTORS (UNSECURED) Over six months Considered Good Considered Doubtful Others, Considered Good Less: Provision for Doubtful Debts 4,432 18,725 163,712 186,869 18,725 168,144 Debtors include amount due from Companies under the same Management Esab Asia Pacific Pte Ltd., Singapore Esab Middle East LLC, Dubai Esab Middle East FZE, Dubai Esab Welding and Cutting Products, USA 1,772 5,942 7,807

2007 Rs.000

2,457 16,094 95,012 113,563 16,094 97,469

4,930 1,461 146

G.

CASH AND BANK BALANCES Cash on hand Cheques on hand and remittances in transit Balances with Scheduled Banks : Current Account Deposit Account Margin Money 910 74,220 10,175 282,890 231 368,426 731 99,572 41,034 14,000 231 155,568

H.

OTHER CURRENT ASSETS, LOANS AND ADVANCES Interest accrued on Investments Secured, considered good Vehicle Loans to employees (Secured against hypothecation of vehicles) Unsecured, considered good Advances to Esab Engineering Services Ltd., an associate company (maximum amount outstanding during the current year Rs. 4,487, previous year Rs. 7,279) Advances to Esab Welding and Cutting Products, USA, (maximum amount outstanding during the current year Rs. 185, previous year Rs. 185 ) Advances recoverable in cash or in kind or for value to be received Considered Good Considered Doubtful 132,098 3,251 135,349 Less: Provision for doubtful advances Balances with Customs, Port Trust, Excise, etc. 3,251 132,098 28,309 165,009 126,016 3,251 129,267 3,251 126,016 27,934 158,306 3,362 2,906 1,221 19 1,221 44

185

30

Esab India Limited Annual Report 2008

Schedules to the Accounts

31 December 2008

2008 Rs.000 I. CURRENT LIABILITIES Sundry Creditors (Refer Note 23 of Schedule O) (i) total outstanding dues of micro enterprises and small enterprises; and (ii) total outstanding dues of creditors other than micro enterprises and small enterprises Deposits from Dealers Advance from Customers Other Liabilities Unclaimed Dividends *

2007 Rs.000

4,071 372,958 377,029 21,584 14,013 48,133 5,732 466,491

5,680 377,100 382,780 21,809 14,389 66,039 13,949 498,966

There is no amount due and outstanding to be credited to the Investor Education and Protection Fund.

J. PROVISIONS Provision for Income-tax (Net of advance tax and Tax Deducted at Source) Provision for retirement benefits : Gratuity Leave Encashment Proposed Dividend Tax on Dividend

39,305 21,756 69,440 38,483 6,540 175,524

11,861 10,035 45,543 67,439

K.

OTHER INCOME Interest income (Gross Tax deducted at Source - Rs. 236 (31 December 2007 - Rs. 672) Income from Investments Income from Sale of Scrap Commission Income Provision/Liabilities no longer required written back Profit on sale of fixed assets (Net) Miscellaneous

5,835 13,235 37,492 227 5,556 4,186 28,370 94,901

1,357 12,363 25,195 990 16,821 17,882 74,608

L.

MATERIALS Raw & Packing Materials Consumed Purchases of Finished Goods Increase in Finished Goods & Work-in-Progress Opening Stock Finished Goods Work-in-Progress 2,196,959 375,745 1,752,649 284,550

159,045 28,057 187,102

124,014 19,155 143,169 159,045 28,057 187,102 (43,933) 1,993,266

Closing Stock Finished Goods Work-in-Progress

177,914 44,840 222,754 (35,652) 2,537,052

31

Esab India Limited Annual Report 2008

Schedules to the Accounts

31 December 2008

2008 Rs.000 M. MANUFACTURING, SELLING AND ADMINISTRATIVE EXPENSES Salaries, Wages and Bonus Contributions to Provident and Other Funds* Workmen and Staff Welfare Expenses Consumption of Stores and Spare parts Power and Fuel Repairs : Buildings Plant and Machinery Others Rent Rates and Taxes Excise Duty Insurance Transport and Freight Communication Costs Travelling and Conveyance Legal and Professional Charges Printing and Stationery Commission Sales Incentives Advertising Sales Promotion and Selling Expenses Provision for Doubtful Debts Loss on sale of fixed assets (Net) Fixed Assets written off Exchange loss (Net) Miscellaneous Expenses 254,250 30,061 35,410 36,877 74,702 9,599 13,189 6,998 12,993 5,280 (6,044) 3,466 49,220 14,540 56,728 10,765 6,042 3,384 66,331 3,159 16,052 2,631 65 4,018 73,212 782,928

2007 Rs.000

219,083 9,987 23,875 28,460 66,035 8,753 9,805 5,024 12,086 2,731 5,690 3,657 48,186 13,720 52,157 12,496 4,586 4,447 38,637 1,418 9,342 3,842 627 110 1,053 50,819 636,626

* Net of reversals of contributions made in earlier years to the Companys Pension Funds of Rs.Nil (Previous year Rs. 2,831)

N.

INTEREST AND FINANCE CHARGES Interest : On Others Bank Charges 25 9,191 9,216 4 8,788 8,792

32

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

O. 1.

NOTES TO THE ACCOUNTS Background Esab India Limited (the Company) was incorporated on 10 November 1987 and commenced its business operations in July 1988. The Company is engaged in the business of welding consumables i.e. welding electrodes, copper coated wires and welding fluxes and of welding equipment i.e. welding machines and cutting equipment. 37.31% and 18.25% of the Companys shares are held by Esab Holdings Limited and Exelvia Group India BV respectively, being the significant shareholders, which are indirect subsidiaries of Charter International Plc. The remaining shares are held by institutional investors and the public. Accordingly the Company is a subsidiary of Charter International Plc.

2. a)

Significant Accounting Policies Basis of Preparation of Financial Statements The Financial Statements have been prepared and presented under the historical cost convention using the accrual basis of accounting and comply with all the mandatory Accounting Standards as specified in the Companies (Accounting Standard) Rules 2006, pronouncements of ICAI as applicable and the relevant provisions of the Companies Act, 1956.

b)

Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

c)

Fixed assets, Intangible assets, Depreciation and Amortization Fixed assets are stated at cost of acquisition or construction, less accumulated depreciation. Cost includes inward freight, duties, taxes and incidental expenses related to acquisition and installation of the asset. Borrowing costs related to the acquisition or construction of the qualifying fixed assets for the period up to the completion of their acquisition or constructions are capitalized. Depreciation for the year is provided on the straight line method at the rates and in the manner specified in Schedule XIV of the Companies Act, 1956, except for the following. The cost of leasehold land and improvements thereto has been amortized over the lease period. Computers and Cars are depreciated over their useful lives of 4 and 6 years, respectively. Lease rentals on assets taken on finance lease prior to 1 April 2001 are charged to the Profit and Loss Account.

Depreciation is charged on pro-rata basis for assets purchased / sold during the year. Individual assets costing less than Rs. 5,000 are depreciated at 100%. Intangible assets are recorded at the consideration paid for acquisition and are amortized over their estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. Technical Know-how fees are amortised over a period of 6 years. Advances paid towards acquisition of fixed assets and the cost of assets not ready to be put to use before the year end are disclosed under capital work in progress. d) Impairment of Assets The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount (higher of net realizable value and value in use) of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

33

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

e)

Operating Lease Operating lease payments are recognized as an expense in the profit and loss account on a straight line basis over the lease term.

f)

Investments Trade investments are investments made to enhance the Companys business interests. Investments are either classified as current or long-term based on the managements intention. Current investments are carried at the lower of cost and fair value. Long-term investments are carried at cost and provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment.

g)

Inventories Inventories of raw and packing materials are valued at the lower of cost on a first in first out basis and net realizable value. Work-in-process, stores and spare parts and finished goods are valued at the lower of cost and net realizable value. In the case of manufactured inventories, costs are generally calculated at standards adjusted to actual and include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The excise duty in respect of closing inventory of finished goods is included as part of inventory. The amount of CENVAT credits in respect of materials consumed for sales is deducted from the cost of materials consumed.

h)

Retirement benefits Gratuity and pension costs with respect to defined benefit schemes are accrued based on actuarial valuations, carried out by an independent actuary as at the balance sheet date. These contributions are made to registered trusts. Provision is made for compensated absence based on actuarial valuation, carried out by an independent actuary as at the balance sheet date. The Companys contribution to Provident Fund, Employees State Insurance Scheme, and defined contribution plans are charged to the Profit and Loss Account when incurred.

i)

Revenue recognition Revenue from the sale of goods is recognized on despatch of goods to customers which generally coincides with the transfer of all significant risks and rewards of ownership to the buyer. Revenue from service is recognized on rendering of services to customers. Sales amounts include excise duty but exclude sales tax and trade discounts. Dividend income is recognized in the year when the right to receive payment is established. Interest income is recognized on time proportion basis.

j)

Transactions in Foreign Currency Foreign Currency transactions are accounted at the exchange rates prevailing on the date of the relevant transactions. Exchange differences arising on foreign currency transactions settled during the year are recognized in the Profit and Loss Account of the year. Monetary assets and liabilities denominated in foreign currencies as at the Balance Sheet date are translated at the closing exchange rates on that date. The resultant exchange differences are recognized in the Profit and Loss Account.

k)

Taxation Income tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income tax law), fringe benefit tax and deferred tax charge or credit (reflecting the tax effects of the timing differences between accounting income and taxable income for the year). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantially enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realized. Current tax and deferred tax assets and liabilities are offset to the extent to which the Company has a legally enforceable right to set off. Company provides for and discloses the Fringe Benefits Tax (FBT) in accordance with the provisions of the Income Tax Act, 1961 and guidance note on FBT issued by the ICAI.

34

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

l)

Earnings per share Basic earnings per share is computed by dividing net profit or loss for the period attributable to equity shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share amounts are computed after adjusting the effects of all dilutive potential equity shares. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving basic earnings per share, and also the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing dilutive earnings per share, only potential equity shares that are dilutive and that decrease profit per share are included.

m)

Provisions, Contingent Liabilities and Contingent Assets The Company creates a provision when there is present obligation as a result of past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are neither recognised nor disclosed in the financial statements.

n)

Cash Flows Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing and investing activities of the Company are segregated.

2008

2007

Rs.000 3. Estimated amount of Contracts remaining to be executed on capital account and not provided for (net of advances) Contingent Liabilities For Disputed Taxes and Duties Claims Against the Company not acknowledged as debts 5. Auditors Remuneration Audit Fees Tax Audit & Tax accounts Other Professional Services Reimbursement of out of pocket expenses 1,200 300 1,000 170 2,670 190,430 70,164 158,610

Rs.000 96,223

4.

168,644 64,056

1,200 300 1,000 108 2,608

6.

Particulars of Licensed, Installed Capacity and Actual Production

2008 Products Unit Licensed Capacity 318,988 3,480 Installed Actual Capacity* Production 218,025 3,000 183,718 1,113 Licensed Capacity 318,988 3,480 2007 Installed Capacity* 218,025 3,000 Actual Production 200,885 151

Welding Electrodes

'000 mtrs Tonnes

Continuous Electrodes/Copper Coated Wires Welding Fluxes Gas & Electric, Welding & Cutting Equipment & Accessories

Tonnes Tonnes

15,240 4,061

10,500 2,440

7,340 1,579

15,240 4,061

10,500 2,440

7,520 2,136

Nos.

233,540

651,756

127,208

233,540

305,837

114,454

*As Certified by the Management and relied upon by the auditors

35

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

7.

Particulars of Closing Stock of Finished Goods 2008 Products Welding Electrodes Continuous Electrodes/ Copper Coated Wires Welding Fluxes Gas & Electric Welding & Cutting Equipment & Accessories Others Unit PCs ('000s) Tonnes Tonnes Tonnes Qty. 4,731 211 184 45 # # Value Rs. 000 16,990 41,689 23,578 2,916 90,881 1,860 177,914
# Quantity details have not been disclosed because the products are heterogenous in nature.

2007 Qty. 3,575 118 324 61 # # Value Rs. 000 10,614 28,898 18,753 3,303 95,883 1,594 159,045

2006 Qty. 2,528 219 115 02 # # Value Rs. 000 7,751 38,692 9,741 638 65,638 1,554 124,014

8.

Particulars of Sales 2008 Products Welding Electrodes Continuous Electrodes/ Copper Coated Wires Welding Fluxes Gas & Electric Welding & Cutting Equipment & Accessories Others Grand Total
Notes: i) Since the company is engaged in both manufacture and trading activities the details pertaining to trading activity have been included in the above quantitative particulars.

2007 Quantity 474,923 1,429 7,302 2,019 Value Rs.000 1,642,992 448,098 553,214 131,874 1,087,016 56,838 3,920,032

Unit PCs ('000s) Tonnes Tonnes Tonnes

Quantity

Value Rs.000 540,352 673,577 120,881 1,265,846 87,707 4,759,458

453,095 2,071,095 1,611 7,241 1,569

ii) Of the total traded purchases of Rs. 376 million (previous year Rs. 285 million), an amount of Rs.161 million (previous year Rs. 154 million) pertains to equipment and the balance pertains to consumables. Quantitative particulars pertaining to purchases of traded equipment are not disclosed because these are not measurable in homogeneous units. With respect to purchases of traded consumables, quantitative particulars are not conveniently available. iii) Quantitative data for spares have not been given as it pertains to a large variety of individually insignificant items. iv) Special electrodes, for which separate licenses were issued for some plants, are included with Welding Electrodes.

9.

Details of Raw & Packing Materials consumed 2008 Description Mild Steel / M S Wire Rods Non Ferrous Metals Minerals Chemicals Piece Parts Others Quantity (Tonnes) 19,914 407 8,141 4,144 Value Rs.000 919,559 136,463 191,526 310,227 507,103 132,081 2,196,959 Quantity (Tonnes) 21,025 368 8,391 2,553 2007 Value Rs.000 678,789 172,360 173,071 196,780 410,802 120,847 1,752,649

36

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

10. Value of Imported and Indigenous Raw & Packing Materials, Components and Stores & Spares consumed 2008 Value Rs.000 Raw & Packing Materials Imported Indigenous Total Stores and Spares Imported Indigenous Total 358,726 1,838,233 2,196,959 2007 Value Rs.000 378,243 1,374,406 1,752,649 2008 % age of Total Consumption 16 84 100 2007 % age of Total Consumption 22 78 100

3,404 33,473 36,877

2,866 25,594 28,460

9 91 100

10 90 100

2008 Rs.000 11. CIF value of Imports Raw materials Components Capital goods 277,902 69,322 3,508 350,732 12. Expenditure in Foreign Currency Travelling Technical Knowhow Royalty Others 1,935 3,744 4,714 1,475 11,868 13. Earnings in Foreign Exchange FOB Value of Exports Commission 120,502 227 120,729 14. Managerial Remuneration 2008 Rs.000 A) Computation of net profit in accordance with Section 198 of the Companies Act, 1956: Profit before Tax as per Profit & Loss Account Add:Directors remuneration Provision for Bad & Doubtful Debts/advances Loss on sale of Fixed Assets (net) Fixed Assets written off Less:Profit on sale of Fixed Assets (net) Maximum commission allowed as per the Companies Act, 1956 at 1% Commission to non wholetime Directors proposed 9,482 2,631 65 12,178 4,186 933,200 9,332 3,080 925,208 8,437 3,842 627 110 Rs.000 2007 Rs.000

2007 Rs.000

281,120 68,082 43,802 393,004 1,127 2,093 38 3,258 75,635 990 76,625

Rs.000

809,345

13,016 822,361 8,223 2,632

37

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

2008 Rs.000 B) i) Wholetime Directors Salary Contribution to Provident and Superannuation Fund Perquisites Incentive Bonus 3,987 468 322 1,225 6,002 ii) Non wholetime Directors Sitting fees Commission 400 3,080 3,480 Notes: Rs.000

2007 Rs.000 Rs.000

3,453 373 226 1,225 5,277

528 2,632 3,160

a) The above remuneration excludes provision for pension, gratuity and leave encashment costs, since these are based on actuarial valuations done on an overall company basis. b) In respect of certain fixed assets, the Company depreciates such fixed assets based on estimated useful lives which are lower or equal to the implicit estimated useful lives prescribed by Schedule XIV of the Companies Act, 1956. Thus the rate of depreciation in the books is higher than that prescribed as the minimum by the Companies Act, 1956 and this value has been considered as a deduction for the computation of managerial remuneration above. 15. Deferred taxation Deferred Tax Asset Current assets Current liabilities Investments Deferred Tax Liability Fixed Assets (64,048) (4,286) 16. Taxation Tax provision for current year Fringe Benefits Tax Deferred Tax charge 318,484 5,947 (11,041) 313,390 17. Earnings per Share Basic and Diluted Earnings per share Nominal value per share Earnings per share are calculated by dividing the Profit / (loss) attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year. Profit/(Loss) after taxation Weighted average number of shares outstanding during the year Rs.000 Nos. 000 611,818 15,393 Rs.000 Nos. 000 534,017 15,393 Rs. 39.75 Rs. 10.00 Rs. 34.69 Rs. 10.00 267,414 3,690 4,224 275,328 (56,316) (15,327) 14,194 45,568 59,762 11,191 27,209 2,589 40,989

38

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

2008 Rs.000 18. The Company has taken various residential and office premises under operating lease or leave & license agreements. These are cancellable; have a term of between 11 months and 3 years, and have no specific obligation for renewal. Lease payments are recognized as an expense in the profit and loss account on a straight line basis over the lease term. 19. Segmental Information The Primary and secondary reportable segments are business segments and geographical segments respectively. These have been identified by the type of their respective products and services, their differing risks and returns, the Company's Organisation structure and internal financial reporting systems. (i) Business Segments Consumables Equipment Particulars Revenue External sales (Net) Segment results Less: Interest (Net) Other common expenses (Net) Total profit before tax Capital employed Segment assets Add: Common Assets Total Assets Segment liabilities Add: Common liabilities Total Liabilities Segment capital employed Add:Common capital employed Total capital employed Capital expenditure Add: Common capital expenditure Total capital expenditure Depreciation / Amortization Add:Common depreciation Total depreciation Non cash expenses Add: Common non cash expenditure Total non cash expenditure Geographical Segments 1,454 1,564 1,560 2,317 47,600 40,507 14,671 13,668 115,756 155,344 19,722 15,258 873,961 714,360 312,721 251,336 175,828 197,060 172,541 175,719 1,049,789 911,420 485,262 427,055 1,535,051 481,496 2,016,547 348,369 297,932 646,301 1,186,682 183,564 1,370,246 135,478 1,907 137,385 62,271 4,436 66,707 3,014 66 3,080 3,074,312 783,187 2,447,009 661,396 1,151,898 187,355 982,535 190,427 4,226,210 970,542 9,216 36,118 925,208 : Welding electrodes, Copper coated wires, Welding fluxes : Welding machines and Cutting equipment Rs.000

2007 Rs.000 Rs.000

Rs. 000 Consumables 2008 2007 Equipment 2008 2007 Total 2008 2007 3,429,544 851,823 8,792 33,686 809,345

1,338,475 280,826 1,619,301 372,779 208,953 581,732 965,696 71,873 1,037,569 170,602 3,236 173,838 54,175 1,948 56,123 3,881 110 3,991

The Company caters mainly to the needs of Indian market and the export turnover being 2.53% (previous year 1.93%) of the total turnover of the Company and segment assets are 1.50% (previous year 0.58%) of the total assets. The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses which relate to the enterprise as a whole, and not allocable to segments on a reasonable basis, have been included under the heading "other common expenses".

39

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

20.

Related Party Disclosure (a) Parties where Control exists i) Esab Holdings Limited - Principal Shareholder - Holds 37.31 % of the paid up equity share capital of the Company as at 31 December 2008. Charter Overseas Holdings Limited, the holding company of Esab Holdings Limited is a subsidiary of Charter International Plc. Exelvia Group India BV - Holds 18.25 % of the paid up equity share capital of the Company as at 31 December 2008. Charter Overseas Holdings Limited, the holding company of Esab Holdings Limited is a subsidiary of Charter International Plc.,

ii)

(b) Charter International Plc Group - Related parties in the Charter International Plc Group where significant influence exists : Esab Engineering Services Limited, India Esab Asia Pacific Pte. Ltd., Singapore Esab Cutting Systems GmbH (Karben),Germany OZAS-ESAB Sp. Z.o.o., Poland Esab Cutting & Welding Automation (Shanghai) Ltd Esab AB, Sweden P.T. Karya Ysantara Cakti, Indonesia Esab-Mor Kft, Hungary Alcotec Wire Corporation-USA Conorco Alambres y Soldaduras SA, Argentina Esab International AB, Sweden (c) Key Management Personnel Mr G Hariharan, Managing Director (appointed on 1 September 2006 for a period of five years). Esab Middle East LLC., Dubai Esab Middle East FZE., Dubai Esab SeAH Corporation, Korea ESAB S.A. Industria e Comercio, Brazil Esab Saldatura S.p.a, Italy Esab Sp. Z.o.o., Poland Esab Vamberk S.r.o., Czech Republic Esab Group (UK) Ltd. Esab Welding and Cutting Product USA Esab Automation Limited, England and Wales

40

Esab India Limited Annual Report 2008

31 December 2008

20.

Notes to the Accounts

Related Party Disclosure (d) Transaction and outstanding balances with Related Parties.

Rs. 000

Nature of Transaction 2008 2,833 483 18,897 39,584 4,714 2,338 28,001 10,241 227 990 3,566 5,112 4,591 6,002 1,225 * 29,654 26,093 1,927 13,846 5,277 1,225 * 251,467 161,217 2007 2008 2007 2008 2007

Control Exists [a]

Significant Influence Exists [b]

Key Management Personnel [c]

Total 2008 251,467 1,927 29,654 7,945 3,566 227 4,714 6,002 41,292 18,897 2007 161,217 13,846 26,093 4,591 990 2,338 5,277 29,226 10,241

41

Purchase of goods

Purchase of Fixed Assets

Sale of goods

Reimbursement of Expenses

Payment of Technical Knowhow

Esab India Limited Annual Report 2008

Commission Income

Royalty

Remuneration

Outstanding payables (net)

Outstanding receivables (net)

The Companies listed above have been identified on the basis of information available with the Company.

* Note : Rs. 3.251 million recoverable from a former Managing Director is fully provided for.

Notes to the Accounts

31 December 2008

20.

Related Party Disclosure (e) Transaction with parties which form more than 10% of aggregate value of transactions Relationship/Name of the related party Description of the nature of transaction Rs. 000

Value of the transactions 2008 2007

Fellow Subsidiary Companies: Esab Welding and Cutting Product, USA Esab AB, Sweden Esab Zoo, Poland Esab AB, Sweden Esab Cutting Systems GmbH (Karben), Germany Esab Asia Pacific Pte Ltd., Singapore Esab Middle East LLC, Dubai Esab Middle East Fze, Dubai Esab SeaH Corporation, Korea Esab AB, Sweden Esab S.A. Industria e Commerico, Brazil Ozas Esab Sp Zoo, Poland Esab AB, Sweden Esab Engineering Services Ltd., India Esab Engineering Services Ltd., India Esab Asia Pacific Pte Ltd, Singapore Esab Middle East LLC, Dubai Esab Middle East Fze, Dubai Esab AB, Sweden Esab SeaH Corporation, Korea Esab Cutting & Welding Automation (Shanghai) Co. Ltd. Esab S.A. Industria e Commerico, Brazil Ozas Esab Sp Zoo, Poland Esab Welding and Cutting Product, USA Esab Cutting Systems GmbH (Karben), Germany Purchase of fixed assets Purchase of fixed assets Purchase of fixed assets Commission Income Commission Income Sale of goods Sale of goods Sale of goods Purchase of goods Purchase of goods Royalty Royalty Royalty Reimbursement of Expenses Outstanding Receivable Outstanding Receivable Outstanding Receivable Outstanding Receivable Outstanding Payable Outstanding Payable Outstanding Payable Outstanding Payable Outstanding Payable Outstanding Payable Outstanding Payable 268 1,659 227 5,123 7,319 13,958 49,017 113,257 2,691 921 1,101 5,112 3,362 1,786 5,942 7,807 9,542 5,550 11,559 852 452 4,568 12,256 710 15,932 9,953 27,770 70,879 1,522 212 359 4,591 2,906 4,930 1,461 3,842 3,864 3,987 11,992

42

Esab India Limited Annual Report 2008

21.
Rs.000 2008 2007 Sale Value No. of units purchased during the year 1,993,720 5,284 2,500,000 1,701,650 45,034 2,500,000 9,496,866 69,941 5,128,539 2,551,870 10,073 136,724 496,958 45,776 725,959 8,609,703 52,546,215 136,753 5,329 91,035 791,510 5,137,917 5,001,000 25,198 2,500,000 6,620,324 45,277,343 70,000 51,285 25,519 51,443 50,830 25,198 25,520 70,000 607,312 95,000 25,466 45,169 20,165 1,701,650 45,034 2,500,000 4,994,536 49,946 5,128,539 2,551,870 5,137,917 5,001,000 25,198 2,500,000 2,339,926 36,852,251 26,422 2,500,000 5,295 25,251 20,000 2,351,384 25,016 25,308 26,422 20,165 45,169 25,466 49,962 49,988 51,285 25,519 51,443 50,830 25,198 25,520 24,741 522,032 Purchase Value No. of units Sold during the year Sale Value Face Value No. of units purchased during the year 11,692,378 4,592,709 4,546,851 1,000,000 25,529 80,377 3,500,000 4,718,232 4,516,832 4,597,497 1,006,960 3,500,000 136,724 14,866 4,329,305 48,258,260 181 136,753 35,000 10,073 1,006,960 46,090 4,597,497 46,090 45,180 4,516,832 45,180 47,182 4,718,232 47,182 35,000 80,468 80,377 80,468 25,553 45,524 45,564 10,000 1,000,000 10,000 45,469 4,546,851 45,469 45,942 9,095,038 90,980 117,292 13,695,519 137,387 Purchase Value No. of units sold during the year

Details of units in Mutual Funds purchased and sold during the year

31 December 2008

Name of the fund

HDFC Cash Management fund - Savings Plus plan - Wholesale Daily Dividend Reinvestment 10 1000 10 10 1000 10 10 10 10 1000 1000 10 10 10 10 10 10 10 10 10 1000 10 10 10

Tata - Liquidity Management fund - Daily Dividend

Notes to the Accounts

HDFC Quarterly Interval Fund - Plan A Wholesale Dividend

ICICI - Institutional Liquid Plan - Daily Dividend Option

43

Tata Treasury Managership Daily Dividend

Tata Fixed Horizon fund - Series 10 Periodic Dividend

ING Liquid Plus fund - Institutional Daily Dividend

ING-Fixed Maturity Fund - 42 Institutional Dividend

ING-Quarterly FMP 91 Series A1 - Institutional Dividend

Reliance Liquid Plus Fund - Retail Option Daily Dividend Plan

Reliance Liquid Plus Fund-Institutional Option-Daily Dividend Plan

ING-Quarterly FMP 91- Series A3 Institutional Dividend

LIC Mutual Fund - Liquid Plus Fund Daily Dividend Plan

Esab India Limited Annual Report 2008

Fidelity Liquid Plus Fund-Institutional Daily Dividend

Sundaram BNP Paribas Fixed Term Plan - Series XXVI - Dividend

Sundaram BNP Paribas - Liquid Plus Institutional Dividend Reinvestment Daily

DSP Black Rock FMP-1M-Series 2 - Institutional Dividend

DSP Black Rock FMP-3M Series 16 Institutional Dividend

HSBC Liquid Plus Fund - Institutional Daily Dividend

UTI Fixed Maturity Plan Quarterly Series

UTI Liquid Plus Fund Institutional Plan - Daily Dividend Option

SBI Magnum Insta Cash Fund - Dividend Option*

ICICI FMP - Series 38 - Three Months Plan A - Retail Dividend

ICICI Prudential Flexible Income Plan Dividend Daily Reinvest Dividend

Total

*-Out of 496,958 Units of SBI Magnum Insta Cash fund 482,092 units were purchased by Esab Welding and Cutting Systems Ltd. which has been merged with Esab India Ltd. with effect from 1 January 2008 as more fully explained in Note 25 of Schedule O.

Notes to the Accounts

31 December 2008

22. Retirement Benefits Effective 1 January 2007, the company adopted Accounting Standard ('AS') 15 (Revised 2005) - "Employee Benefits" issued under the Companies Accounting Standard Rules (2006). As per the transitional provision specified in the Standard, the difference in the liability as per the existing policy followed by the company and that arising on adoption of this Standard is required to be charged to opening reserves and surplus account. Gratuity Plan The following table sets out the status of the gratuity plan as required under AS 15 (Revised 2005) and the reconciliation of opening and closing balances of the present value of the defined benefit obligation: Particulars Change in present value of obligations Obligations at beginning of the year Current Service cost Interest Cost Actuarial (gain) / loss Benefits paid Obligations at the end of the year Change in Plan assets Fair value of Plan assets at beginning of the year Expected return on plan assets Actuarial gain / (loss) Contributions Benefits paid Fair value of plan assets at end of the year Actual return on plan assets Reconciliation of present value of the obligation and the fair value of plan assets Present value of the defined benefit obligation at the end of the year Fair value of plan assets at the end of the year Amount of liability recognized in the balance sheet Gratuity cost for the year Current Service cost Interest cost Expected return on plan assets Actuarial (gain) / loss Net gratuity cost (included in contribution to Provident and other funds of Schedule M) Assumptions Interest rate Estimated rate of return on plan assets Rate of growth in salary levels Investment details of plan assets Government of India Securities Corporate Bonds Special Deposit Scheme Insurer Managed Funds Others 32.00% 41.00% 16.00% 1.00% 10.00% 19.00% 53.00% 14.00% 8.00% 6.00% 5.50% 7.50% 5.00% 7.75% 7.50% 5.00% 2,125 3,361 (2,552) 11,287 14,221 2,291 3,388 (2,694) 1,521 4,506 54,976 33,220 21,756 48,488 38,453 10,035 38,453 2,552 (273) 2,500 (10,012) 33,220 2,279 41,490 2,694 (489) 2,900 (8,142) 38,453 2,205 48,488 2,125 3,361 11,014 (10,012) 54,976 49,919 2,291 3,388 1,032 (8,142) 48,488 2008 Rs.000 2007 Rs.000

44

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

Particulars Pension Plan

2008 Rs.000

2007 Rs.000

The following table sets out the status of the pension plan as required under AS 15 (Revised 2005) and the reconciliation of opening and closing balances of the present value of the defined benefit obligation: Change in present value of obligations Obligations at beginning of the year Current Service cost Interest Cost Actuarial (gain) / loss Benefits paid Reduction in the obligation, pursuant to change in the actuarial method Obligations at the end of the year 52,247 2,300 3,745 6,204 (8,415) 56,081 85,621 2,485 4,349 (13,254) (8,600) (18,354) 52,247

Fair value of Plan assets at beginning of the year Expected return on plan assets Actuarial gain / (loss) Benefits paid Fair value of Plan assets at end of the year Actual return on plan assets Reconciliation of present value of the obligation and the fair value of plan assets Present value of the defined benefit obligation at the end of the year Fair value of plan assets at the end of the year Funded status amount of liability recognized in the balance sheet Pension cost for the year Current Service cost Interest cost Expected return on plan assets Actuarial (gain) / loss Net Pension cost (included in contribution to Provident and other funds of Schedule M) Assumptions Interest rate Estimated rate of return on plan assets Rate of growth in salary levels Investment details of plan assets Government of India Securities Corporate Bonds Special Deposit Scheme Insurer Managed Funds Others 23. Micro, Small and Medium Enterprises

95,583 6,696 (1,263) (8,415) 92,601 5,433

105,773 7,318 (8,908) (8,600) 95,583 (1,590)

56,081 92,601 (36,520)

52,247 95,583 (43,336)

2,300 3,745 (6,696) 7,467 6,816

2,485 4,349 (7,318) (4,346) (4,830)

5.50% 7.50% 5.00%

7.75% 7.50% 5.00%

16.00% 38.00% 25.00% 11.00% 10.00%

17.00% 38.00% 24.00% 17.00% 4.00%

The management identified enterprises which have provided goods and services to the Company and which qualify under the definition of micro and small enterprises, as defined under Micro, Small and Medium Enterprises Development Act, 2006. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 December 2008 has been made in the financial statements based on information received and available with the Company and relied upon by auditors. Further, in the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material.

45

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

24. Outstanding forward contracts The Company does not use foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The Company does not use forward contracts for speculative purposes. The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: Particulars Euro (000) USD (000) SEK (000) SGD (000) DKK (000) GBP (000) Rs (000) Amounts receivable in foreign currency 2008 627 30,310 2007 3 81 3,342 Amounts payables in foreign currency 2008 182 535 7 10 47 2 39,488 2007 345 639 254 7 47,516

The above disclosures have been consequent to the announcement by the Institute of Chartered Accountants of India on 2 December 2005. 25. Amalgamation with ESAB Welding and Cutting and Systems Limited a) A Scheme of Amalgamation (the Scheme) between ESAB Welding and Cutting Systems Limited (transferor company) and ESAB India Limited (transferee company) and their respective shareholders was sanctioned by the Honourable High Court of Madras on 23 June 2008 and certified copies of the orders filed with the Registrar of Companies on 1 July 2008. Pursuant to this Scheme, the assets and liabilities of the transferor company were transferred to and vested in the transferee company with effect from 1 January 2008. Accordingly, the scheme has been given effect to in these financial statements. b) Since the amalgamation meets all the conditions specified in para 3(e) of Accounting Standard 14 (AS 14) on Accounting for amalgamations as specified in the Companies (Accounting Standard) Rules 2006, the amalgamation is in the nature of merger and have been recorded under the pooling of interests method. The Scheme has also prescribed that the transferee company shall account for the merger in its books as per the pooling of interest method. c) Accordingly as per the Scheme, the assets and liabilities of the transferor company as at 1 January 2008 have been taken over by the transferee company at their respective book values. d) Further, in accordance with the Scheme, the shortfall of assets over liabilities of the transferror company (represented by debit balance in Profit and loss account of the transferor company), transferred to the transferee company has been adjusted against the profit and loss account of the transferee company. e) The entire share capital of the transferor company is held by the transferee company, i.e. the transferor company, ESAB Welding and Cutting Systems Limited is a 100% subsidiary of the transferee company, ESAB India Limited. Hence, upon the Scheme becoming effective, the entire share capital of the transferee company has been cancelled against the investment of the transferor company. 26. On account of Scheme of arrangement and amalgamation with ESAB Welding and Cutting Systems Ltd., in the current year previous year figures are not strictly comparable. Previous year figures have been regrouped and reclassified wherever necessary.

For and on behalf of the Board of Directors N H Mirza Director S Venkatakrishnan Company Secretary G Hariharan Managing Director B Mohan Chief Financial Officer

Mumbai, 19 February 2009

46

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

Additional Information as required under Part IV of Schedule VI to the Companies Act, 1956: Balance Sheet Abstract and Companys General Business Profile:

I.

Registration Details Registration No. Balance Sheet Date 5 3 8 1 7 3 1 8 2 0 8 State Code 1 8

Date

Month

Year

II.

Capital raised during the year (Rs. 000) Public Issue N I L Rights Issue N I L

Bonus Issue N I L

Private Placement N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. 000) Total Liabilities* 1 3 7 4 5 3 2 Total Assets* 1 3 7 4 5 3 2

* Includes Deferred Tax Liabilities (Net of Deferred Tax Asset) Sources of funds Paid-up Capital 1 5 3 9 3 0

* Net of Current Liabilities & Provisions

Reserves & Surplus 1 2 1 6 3 1 6

Secured Loans N I L

Unsecured Loans N I L

Deferred Tax Liability* 4 2 8 6

* Net of Deferred Tax Asset

Application of funds Net Fixed Assets 7 9 9 1 3 1 Investments 1 1 9 7 9 0

Net Current Assets 4 5 5 6 1 1

Misc. Expenditure N I L

Accumulated Losses N I L

47

Esab India Limited Annual Report 2008

Notes to the Accounts

31 December 2008

IV. Performance of Company (Rs. 000) Turnover * 4 3 2 1 1 1 1 Total Expenditure 3 3 9 5 9 0 3

* includes other/extra ordinary Income

+/+

Profit/Loss Before Tax 9 2 5 2 0 8

+/+

Profit/Loss After Tax 6 1 1 8 1 8

Earnings per Share 3 9 . 7 5

Dividend Rate % 1 5 5

V.

Generic Names of Three Principal Products/Services of Company (as per monetary terms) Item Code (ITC Code) Product Description 8 W 3 E 1 L 1 D 1 I 0 N . G 0 E 0 L E C T R O D E S

Item Code (ITC Code) Product Description Item Code (ITC Code) Product Description

8 A 7 C

5 R 2 O

. C 2 P

1 W 9 P

5 E 9 E L 0 R D . C I 0 O N 6 A T E D W I R E S G M A C H I N E S

Schedules A to O form an integral part of the Accounts.

For and on behalf of the Board of Directors N H Mirza Director S Venkatakrishnan Company Secretary G Hariharan Managing Director B Mohan Chief Financial Officer

Mumbai,19 Februay 2009

48

Esab India Limited Annual Report 2008

Cash Flow Statement

for the year ended 31 December 2008

Schedule A. CASH FLOW FROM OPERATING ACTIVITIES Profit before Tax (Profit)/Loss on sale of Assets Interest Income Investment Income Fixed Assets written off Unrealised Exchange Differences Depreciation/Amortization Provision no longer required written back Interest and Finance Charges Provision for Doubtful Debts Operating Profit before Working Capital Changes Increase in Sundry Debtors Increase in Other Current Assets and Loans and Advances Decrease / (Increase) in Inventories Increase in Current Liabilities and Provisions Cash Generated from Operations Voluntary Separation Compensation and Related Payments Taxes Paid - Net Net Cash from Operating Activities CASH FLOW FROM INVESTING ACTIVITIES Capital Expenditure Sale of Fixed Assets Purchase of Investments Sale of Investments Investment in Subsidiary / Associate Interest received Investment income received Net Cash used in Investing Activities CASH FLOW FROM FINANCING ACTIVITIES Dividend Paid Dividend Distribution Tax Paid Interest and Finance Charges Paid Net Cash used in Financing Activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AS AT BEGINNING OF THE YEAR** CASH AND CASH EQUIVALENTS AS AT THE END OF THE YEAR* Notes: *Cash and Cash Equivalents include: (a) Cash and Bank balances other than those mentioned in (b) below. (b) Cash and Bank balances not available for use by the Company Cash and Bank balances not available for use by the Company include margin money, unclaimed dividend and debenture interest.

2008 Rs.000
925,208 (4,186) (5,835) (13,235) 65 (260) 66,707 (5,556) 9,216 2,631 974,755 (73,141) (4,254) (28,778) 20,275 888,857 (444) (296,988) 591,425

2007 Rs.000
809,345 627 (1,357) (12,363) 110 39 56,123 (16,821) 8,792 3,842 848,337 (7,565) (39,211) (109,145) 54,282 746,698 (800) (277,980) 467,918

B.

(196,602) 3,099 (741,247) 791,510 2,914 13,235 (127,091) (208,327) (34,009) (9,216) (251,552) 212,782 155,644 368,426

(171,177) 788 (607,312) 522,032 (4,475) 2,971 12,362 (244,811) (228,590) (38,003) (8,807) (275,400) (52,293) 207,861 155,568

C.

362,463 5,963 368,426

141,387 14,181 155,568

**Includes Rs. 76 (000) of opening cash balance of Esab Welding and Cutting Systems Limited which has been merged with Esab India Limited with effect from 1 January 2008 (as fully explained in Note 25 of Schedule O).

Notes to the Accounts The schedules referred to above form an integral part of the financial statements. As per our report attached For B S R & Co. Chartered Accountants S Sethuraman Partner Membership No. 203491 Chennai, 19 February, 2009 N H Mirza Director

O For and on behalf of the Board of Directors G Hariharan Managing Director B Mohan Chief Financial Officer

S Venkatakrishnan Company Secretary

Mumbai, 19 February, 2009

49

Esab India Limited Annual Report 2008

Regd. office: Plot No.13, 3rd Main Road, Industrial Estate, Ambattur, Chennai - 600 058.

ATTENDANCE SLIP
22nd Annual General Meeting on Wednesday 22 April 2009.

Name of the Shareholder I Certify that I am a registered shareholder of the Company

DP.Id/CI.ID/Reg. Folio No.

I hereby record my presence at the Annual General Meeting of the Company held on Wednesday 22 April 2009 at The Narada Gana Sabha Trust Complex, No. 314, T.T.K. Road, Chennai - 600 018.

Proxys name in Block Letters Notes:

1. 2. 3. 4.

Members/ Proxys Signature

This Meeting is of Members only; no person who is not a Member (or the duly appointed proxy of a Member) will be admitted. Shareholders/Proxyholders will be required to submit signed attendance slips upon entering the auditorium. If it is intended to appoint a proxy, the form should be completed and deposited at the Registered Office of the Company, at least 48 hours before the Meeting. ATTENDANCE SLIPS OF SHAREHOLDERS NOT ATTENDING THE MEETING WILL NOT BE ACCEPTED.

Regd. office: Plot No.13, 3rd Main Road, Industrial Estate, Ambattur, Chennai-600 058

PROXY FORM
22nd Annual General Meeting on Wednesday 22 April 2009.

DP.Id/CI.ID/Reg. Folio No. Mr./Mrs./Miss I/We......................................................................................................................................................................................................... of ................................................................................... in the district of ............................................................................................. ........................................................................................................being a member/members of Esab India Limited hereby appoint .................................................................................................. of ........................................................................................................... in the district of ............................................................................................................ or failing him/her ........................................ of ......................................................................................... in the district of ......................................................................................... as my / our proxy to vote for me / us on my / our behalf at the 22nd Annual General Meeting of the Company to be held on Wednesday 22 April 2009 at 3.00 p.m. at The Narada Gana Sabha Trust Complex, No. 314, T.T.K. Road, Chennai - 600 018 and at any adjournment thereof. Signed this.......................................................................................... day of ....................................................................2009
Re.1 Revenue Stamp

Signature........................................................................................

.................................................................................

Note: This form in order to be effective should be duly stamped, completed and signed and must be deposited at the Registered Office of the Company, at least 48 hours before the meeting.

ESAB INDIA LIMITED

Regd. Ofce : Plot No. 13, 3rd Main Road Industrial Estate, Ambattur, Chennai - 600 058 www.esabindia.com