Castrol India Ltd

FOR THE YEAR ENDED 31ST DECEMBER, 2010

The Directors have pleasure in presenting their Report and Statement of Accounts forthe year ended 31st December, 2010.

PERFORMANCE

Sales increased by 18% over the previous year to Rs. 2735 crores mainly due to anincrease in unit sales realizations and higher volumes.

Costs of materials have increased by 23% over the previous year to Rs.1385 crores dueto an increase in Base oil prices and higher volumes.

Pro-active Cost Containment Strategies helped your Company to grow its gross profits by13%.

Operating & other expenses increased by Rs. 6 Crores only compared to 2009, thoughthere was an increase in spend on Advertisement & Sales Promotion expenses by Rs. 13Crores, the same being offset by savings in processing charges and miscellaneousexpenditure.

Profit before tax increased by 27% over the previous year to Rs. 738 Crores.

Tax rate for the current year has remained at nearly the same level as that of theprevious year. Profit after tax increased by 29% over the previous year to Rs. 490 Crores.

BONUS SHARES

As the members are aware, the Board of Directors had recommended, subject to theapproval of the shareholders, one Bonus Equity Share for every one Equity Share of Rs.10/- each held on the Record Date. Accordingly, the approval of the shareholders wasobtained by way of a Postal Ballot on 30th March, 2010. The Bonus Shares were thereafterallotted on 13th April, 2010.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, a Management Discussion and AnalysisReport and a Report on Corporate Governance are given as Annexure ‘A’ and‘B’ respectively to this Report.

A certificate from the Statutory Auditors of the Company regarding the Compliance bythe Company of the conditions stipulated under clause 49 of the Listing Agreement is alsoattached to this Report.

The declaration by the Chief Operating Officer pursuant to clause 49(1) (ii) of theListing Agreement stating that all the Board Members and Senior Management Personnel haveaffirmed their compliance with the Company’s Code of Conduct for the year ended 31stDecember, 2010 is also attached to this Report and marked Annexure "C".

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956 your Directors confirmthat:

(i) In the preparation of the annual accounts, the applicable accounting standards havebeen followed and no material departures have been made from the same.

(ii) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as on 31st December, 2010 and of theprofits of the Company for the year ended 31st December, 2010.

(iii) The Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act, 1956for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities.

(iv) The Directors have prepared the annual accounts on a going concern basis.

DIVIDEND

The Interim Dividend in respect of the year ended 31st December, 2010 of Rs. 7/- pershare on 24,72,80,596 Equity Shares was paid to the Shareholders of the Company whosenames appeared on the Register of Members on 2nd August, 2010.

The Directors recommend a payment of final dividend of Rs. 8/- per share on24,72,80,596 Equity Shares.

DIRECTORS

Mr. Amish Mehta resigned with effect from close of business hours of 15th November,2010 as the Wholetime Director of the Company designated as Director – Finance.

Mr Sujit Vaidya was at the Board Meeting held on 12th October, 2010 and was appointedwith effect from the said date as an Additional Director of the Company. At the said BoardMeeting, he was also appointed with effect from 16th November, 2010 as a WholetimeDirector of the Company designated as Director – Finance.

In accordance with section 260 of the Companies Act, 1956 (the Act), Mr. Vaidya holdsoffice up to the date of the forthcoming Annual General Meeting of the Company. Notice hasbeen received under section 257 of the Act along with the requisite deposit from ashareholder proposing Mr. Vaidya as a candidate for the office of Director.

Your Directors wish to place on record their gratitude for the guidance and advicereceived from Mr. Mehta during his tenure as a Director of the Company.

Mr. R. Gopalakrishnan and Mr. S. Malekar retire by rotation and are eligible forre-appointment.

The information on the particulars of Directors seeking appointment/re-appointment asrequired under Clause 49 of the Listing Agreement executed with the Bombay Stock ExchangeLimited and the National Stock Exchange of India Limited have been given under CorporateGovernance (Annexure ‘B’) of this Report.

(a) Energy conservation measures taken:

Energy conservation during the financial year has accrued as a result of the followingsteps taken at the various factories of the Company:

Patalganga:

1. Tube lights were replaced with compact fluorescent lamps

2. Variable Frequency Drives have been installed on pumps.

3. Energy savers have been installed on air conditioners.

4. Auto on /off system provided for street lighting with day light sensor.

Silvassa:

1. Installation of Variable Frequency Drive for transfer and filling pumps.

2. Automatic stoppage of blending agitators on completion of blending recipe.

Paharpur:

1. Automation of power factor panel to ensure high power factor close to one.

2. Optimising the thermopack efficiency by preventive maintenance.

3. Installation of solar lighting panel for street lights during the night.

4. Variable Frequency Drives installed for air compressor & thermopack pump whichhas led to energy efficiency.

5. Replacement of pumps with energy efficient pumps.

6. Optimising blending temperature of products which helped reduce energy consumption.

(b) Additional Investments and proposals, if any, being implemented for reduction ofconsumption of energy.

The measure mentioned in (a) above have led to reduction in fuel and electricityconsumption as well as improvement in the productivity.

Further energy efficient luminaries have been installed in the laboratory, supply anddispatch area.

(c) Impact of measures at (a) and (b) above for reduction of energy consumptionand the consequent impact on the cost of production of goods.

The measure mentioned above have led to reduction in fuel and electricity consumptionas well as improvement in the productivity.

TECHNOLOGY ABSORPTION

1. Site Safety and Security continued to remain an area of focus at the TechnologyCentre. The Technology Centre transitioned into the "Operating ManagementSystem" with a management of change to align with Global Standards.

2. The year 2010 was a year of site upgradation for the Technology Centre. The focus onsafety at all levels ensured that your Company completed the year without a singleincident.

3. The Research & Development centre was recertified to the latest ISOspecification of 9001 – 2008.

4. Huge emphasis was laid on technology protection and alignment with globalrequirements by ensuring that all product formulations and raw materials have global codesand are entered in databases like Streamline and Fusion.

5. Your Company secured business for various new products with OEM’s in India tofurther strengthen its partnership (TATA Nano, Mahindra & Mahindra, Maruti etc.).

6. Various products were launched throughout the year with superior properties andstronger differentiations. Some key launches were Magnatec 5W-30 and RX CNG. Work isalready in progress to make sure your Company has the pipeline managed for productlaunches throughout the years 2011 and 2012.

7. Formulation optimization initiatives by Technology team with support from SupplyChain and Marketing was an area of focus, which brought about significant savings in rawmaterial costs as well help to manage the security of supplies for our raw materials.

8. Your Company has developed and installed "Truck Driving Simulator" attheir Technology Centre to meet increasing requirement for fuel economy and safe drivingin India. The project, costing Rs. 4.8 million is aimed at providing such training todrivers. Fuel Economy is a key development area for all the OEM’s but limitations arebeing faced in significantly improving the same by conventional means. A two hour trainingsession of drivers can improve their driving habits resulting in fuel efficient and safedriving contributing to cleaner environment and reduced number of accidents.

1. Activities relating to Export

There were no significant exports by the Company during the year. However, some of thecountries where our products were exported were China, Saudi Arabia, and Thailand.

2. Earnings and Outgo

Members are requested to refer to note Nos. 18 & 19 and of Schedule L forming partof the Balance Sheet and Profit and Loss Account for the year ended 31st December, 2010.

PARTICULARS OF EMPLOYEES

The information required to be published under the provisions of section 217(2A) of theCompanies Act, 1956 (the Act) read with Companies (Particulars of Employees) Rules, 1975as amended, forms part of this Report.

AUDITORS

The Shareholders of the Company are requested to appoint Auditors and to fix theirremuneration. M/s. S. R. Batliboi & Co., Chartered Accountants, the retiring Auditorshave furnished to the Company the required certificate under section 224(1B) of theCompanies Act, 1956 and are therefore eligible for re-appointment as Auditors of theCompany.

PERSONNEL

The Board wishes to place on record its sincere appreciation of the efforts put in bythe Company’s workers, staff and executives for achieving excellent results underdifficult conditions.

STAKEHOLDERS

The Board also wishes to thank its Shareholders, Distributors, Bankers and otherbusiness associates for their support during the year.

Market Price Data - High/Low during each month in the Year 2010

*Note: Bonus shares were allotted on 13th April, 2010 in the ratio of 1:1

Annexure II

ANNEXURE C

In accordance with clause 49 sub clause (I) (D) (ii) of the Listing Agreement executedwith the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited, Iin my capacity as the Chief Operating Officer of the Company hereby confirm that allmembers of the Board of Directors and Senior Management Personnel of the Company haveaffirmed their Compliance for the Financial year 2010 with the Company’s Code ofConduct.

For CASTROL INDIA LIMITED,

R. Kirpalani

Dated: 27^th April, 2011

AUDITORS’ CERTIFICATE

To,

The Members of Castrol India Limited

We have examined the compliance of conditions of Corporate Governance by CastrolIndia Limited, for the year ended on December 31, 2010, as stipulated in Clause 49 ofthe Listing Agreement of the said Company with the stock exchange(s).

The compliance of conditions of corporate governance is the responsibility of themanagement. Our examination was limited to procedures and implementation thereof, adoptedby the Company for ensuring the compliance of the conditions of the Corporate Governance.It is neither an audit nor an expression of opinion on the financial statements of theCompany.

In our opinion and to the best of our information and according to the explanationsgiven to us, we certify that the Company has complied with the conditions of CorporateGovernance as stipulated in the above-mentioned Listing Agreement.

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

For S. R. Batliboi & Co.

Firm Registration No. 301003E

Chartered Accountants

per Ravi Bansal

Partner

Membership No. : 49365

Place: Mumbai,

Dated: 27^th April, 2011.

Shareholding Pattern as on 31st December, 2010