United Phosphorus Ltd

TO,

THE MEMBERS OF

UNITED PHOSPHORUS LIMITED

Your Directors have pleasure in presenting their report and audited accounts for theyear ended on 31st March, 2011.

FINANCIAL RESULTS:

OPERATIONAL PERFORMANCE:

During the year, India received very good monsoon. The La Nina effect leading to highprecipitation resulted in bountiful rains throughout the country. Many crops recordedhigher production this year. There was bumper harvest in both kharif and rabi seasons.Prices of most of the inputs also stabilized during the year. All these factors led tooverall improvement in the economy of the country. The GDP growth was also higher.

Barring a few countries like Argentina, the rains were good and fairly widespread inmost of the countries around the world. However, there were political upheavals and publicuprising which saw end of dynasty rule in countries like Tunisia, Egypt, Libya, etc. Japansuffered national calamities like earthquake, tsunami and nuclear leaks. It led to highcrude oil prices which affected the economies of all countries. Fears of inflation arelooming large. Economies of some of the European nations continued to remain sluggish.

On the back of good monsoon, the sale of agrochemicals in India in the first half ofthe year were higher. However, contrary to the expectations, the sales in second half werenot so encouraging. On international front, the company did very good business in LatinAmerican market. The sales of company’s agrochemicals in these parts were high and infuture also, the sales of agrochemicals in the Latin American countries will go up.

Total net sales for the year were higher at 2809.14 crores as against 2453.39 crores.Profit before Taxes were at 210.23 crores as against 248.40 crores last year.

FUTURE OUTLOOK:

For the year 2011-12, normal monsoons are predicted in India. This should result inhigher sales and improved profitability. Further, economic situation in USA and manycountries in Europe are showing distinct signs of recovery. This will positively affectthe performance of agrochemical industry. With the population in India going up, foodproduction has to go up which can be possible only by increased and regulated usage ofagrochemicals. In the recent Union Budget, greater thrust is provided on agriculture,infrastructure and education. This will also help the Company to have better performancein the coming years.

DIVIDEND:

Your Directors have recommended dividend of 2/- per Equity Share of 2/- each for thefinancial year ended 31st March, 2011, which if approved at the forthcoming Annual GeneralMeeting, will be paid to all those Equity Shareholders of the Company whose names appearin the Register of Members as on 26th July, 2011 and whose names appear as beneficialowners as per beneficiary list furnished for the purpose by National Securities DepositoryLimited and Central Depository Services (India) Limited.

FINANCE:

During the year, the Company has raised funds of 600 crores by issue of unsecuredRedeemable Non-convertible Debentures.

FIXED DEPOSITS:

The Company has not accepted fixed deposits during the year. There are no fixeddeposits outstanding as at 31st March, 2011.

RECENT ACQUISITIONS:

During the year, the Company made following acquisitions: a) Global non-mixtureMancozeb fungicide business and related assets from DuPont, including existing inventory,manufacturing and formulation production facilities in Barranquilla, Colombia. Thisincludes rights to registered brands for non-mixture mancozeb products, trademarks, aswell as registrations and supporting regulatory data for those products, which includeManzate brand fungicides. Mancozeb is a leading fungicide and this acquisition will alsohelp the Company in strengthening its position in the high growth emerging marketsincluding South and Central America.This purchase will enhance the Company’s positionin the EBDC (Ethylene Bis Dithio Carbamates) segment. b) RiceCo LLC, USA along with itssubsidiaries and certain assets of the international business of its Affiliate Company.

RiceCo does business in more than 20 countries with major markets in the US and othercountries like Mexico, Thailand, Nigeria and Sri Lanka. RiceCo mainly caters to the ricemarket and has a wide range of product offerings based on the herbicide Propanil for thissegment. Propanil is a herbicide used for the control of many important annual grasses,broadleaf and sedge weeds in rice. RiceCo will add strong brands for the rice segment tothe Company’s branded product portfolio.

(c) One-half of stake in Sipcam Isagro Brasil (SIB) , a company in Brazil. This companyis a niche local producer and distributor in the Brazilian agrochemicals market. It has aformulation plant in Brazil. This acquisition will help the Company to enter directdistribution business in Brazilian market for its products and help to target untappedmarkets.

RESEARCH AND DEVELOPMENT:

Research and Development has been given the highest priority in company’s businessplan. Company’s research laboratories at Ankleshwar, Thane and Vapi have beenupgraded by adding new equipment and instruments.

In pursuit of introducing new products in the market, R&D has focused on thedevelopment of process technologies for the fungicides, herbicides and insecticides.Efforts have also been focused on developing new safer and eco-friendly formulations forbetter efficacy and improved value for the farmers.

R&D has worked relentlessly in the quality improvement, cost reduction, batch cycletime and waste reduction of our existing products.

Various regulatory data generation and submission of registration dossiers have beenalso done by R&D during the year.

CORPORATE SOCIAL RESPONSIBILITY:

As a responsible corporate citizen, the Company is carrying out many social activitiesin diverse fields. In respect of education, it has set up schools and colleges in Vapi,Ankleshwar, Sivakasi, etc. It is also providing monetary help to other schools andcolleges situated near the factories of the Company. The Company has also set up postgraduation higher study education institutions at Vapi and Ankleshwar. At Vapi, managementand nursing colloges are set up. At Ankleshwar, new chemical engineering college is comingup.

In the fields of health and medicine, the Company along with Rotary club has startedstate of art hospital at Vapi with the latest modern equipments. At Ankleshwar, theCompany is helping the nursing homes and hospitals.

Environment and pollution control is a priority issue for the Company. TheCompany’s factories are located in chemical zones at Vapi and Ankleshwar. Seniormanagement of the Company including the Chairman and Vice-Chairman are actively involvedin effluent treatment companies in Vapi and Ankleshwar. With significant efforts of theseofficials in the areas of pollution control, Vapi has been removed from the list ofcritically polluted areas.

The Company is spending lot of money to help the small and medium scale units inmanaging their effluents by developing sophisticated COD measuring instruments. AtAnkleshwar, the Company has helped in setting up a state of art solid waste landfill sitewhich is considered to be the best in the country. For outstanding research anddevelopment work on pollution control and environment protection, the Chairman has beenawarded by the Department of Science and Research (DSIR). Various other initiatives whichwill help people and improve their life-style are supported and encouraged by the Company.This includes building gardens, parks and temples, providing rural electrification andtubewells, etc.

SUBSIDIARY COMPANIES:

In pursuance of Circular no. 2/2011 dated 8th January, 2011 issued by Ministry ofCorporate Affairs, the Company has attached the consolidated financial statements of theCompany and its subsidiaries. The same are prepared in compliance with the AccountingStandard-21.

The annual accounts of the subsidiary companies and related detailed information shallbe made available to the shareholders of the Company and its subsidiaries on request. Theyare also available for inspection by the members at the Company’s registered officeand administrative office.

In spite of the economies of many countries were under pressure, all the subsidiarycompanies of your Company have performed reasonably well. Subsidiaries in U. S. A., U.K.,Cerexagri group of companies, Argentina, Australia and Japan have done good business.

INSURANCE:

All the properties and operations of the Company have been adequately insured.

AUDITORS AND AUDITORS REPORT:

M/s S. V. Ghatalia & Associates, Chartered Accountants, the statutory auditors areretiring at the ensuing Annual General Meeting and being eligible for re-appointment haveexpressed their willingness to continue, if re-appointed. Your Directors recommend theirappointment as the Statutory Auditors and fix their remuneration for the year 2011-12.

The auditors, without qualifying their Report have drawn attention of members that asper the Court order and the legal advice obtained by the company, the company has notadjusted tax benefit in respect of the amortization of the Product Registrations andProduct acquisition to the reserves. In this regard, your attention is invited to NoteNo.14 in schedule ‘T’ which is self-explanatory. The other notes to the accountsreferred to in the Auditors’ Report are self-explanatory and do not call for anyfurther comments.

In respect of consolidated accounts, the auditors have qualified their report fornon-inclusion of accounts of certain subsidiaries, joint ventures and associatedcompanies, and non disclosure of segment reporting. In this regard, your attention isinvited to Notes 1(b) and 18 of schedule ‘S’ of the consolidated accounts whichare self-explanatory.

COST AUDIT:

The Board of Directors appointed M/s. M.B. Ashtamkar, Cost Accountant, Mumbai as CostAuditor of the Company for conducting audit of the cost accounts maintained by the Companyin respect of the insecticides for the year 2011-12. They have submitted a certificate oftheir eligibility for such appointment. For the year 2009-10, they have filed their CostAudit Report on 25th September, 2010. The due date for filing the same was 30th September,2010.

DEPOSITORY SYSTEM:

97.98% of the total paid up equity shares of the Company are dematerialized as on 31stMarch, 2011.

DIRECTORS:

In accordance with the provisions of the Companies Act, 1956 and Articles ofAssociation of the Company, Mr. J. R. Shroff, Dr. P. V. Krishna, Mr. Pradeep Goyal andMrs. S. R. Shroff, Directors of the Company, retire by rotation at the ensuing AnnualGeneral Meeting of the Company, and being eligible offer themselves for re-appointment.

As required by Clause 49 of the Listing Agreement with the Stock Exchanges, the briefresume of Mr. J. R. Shroff, Dr. P. V. Krishna, Mr. Pradeep Goyal and Mrs. S. R. Shroff,Directors of the Company are provided in the notice convening the Annual General Meetingof the Company.

PERSONNEL:

The relationship with all employees and workers at all sites of the Company remainedvery cordial throughout the year. Your Directors would like to place their appreciationfor the contribution made by all the employees of the Company.

SAFETY, HEALTH PERFORMANCE AND ENVIRONMENT:

The Company ensures that compliance to statutory safety regulations is fully met withthe management support to manufacturing units. The Company has implemented various codesof practices under Responsible Care program, an initiative of Indian Chemical Council,which addresses broadly various aspects related to Safety, Health and Environment. TheCompany not only addresses its own issues related to SHE aspects, but also takes care ofvarious related problems faced by other industries in the region where the Units arelocated. All manufacturing units are operating with QMS ISO 9001, EMS ISO 14001 and OHSAS18001 certification. Various certificates are getting renewed from time to time afteraudits by respective accreditation agency.

The Company have all the material Consents & Authorization valid under differentenvironmental acts and rules. Various manufacturing activities are performed at the unitsas per Consents obtained from respective State Pollution Control Boards. Moreover, allUnits are complying to provisions of Factories Act and Company have taken steps to ensuresafe working place for all employees, and protecting their health.

During the last year, the Company has augmented Effluent Treatment Plants and airpollution control systems at the Units to meet stringent discharge norms being prescribedfor discharge of treated wastewater / stack emissions. The Company is already havingon-line monitoring system for TOC / TKN at two units i.e. Unit No. 00 at Vapi and Unit No.01 at Ankleshwar. For treating effluent with refractory COD, Company has set up separatetreatment system at Vapi and Ankleshwar. To take care of Ammonical Nitrogen problem,Company has incorporated additional treatment system which ensures that this parameter iswell within the prescribed limit. Treated effluent from the Units is discharged to CommonTreatment Facilities at Vapi, Ankleshwar and Jhagadia; and effluent discharge meets inletnorms of Common Treatment Facilities.

Measures taken by the Company for water conservation and recycling have paid goodresults. With operation of RO System at Unit No. 05 (Jhagadia), approximately 200 KL / Daywater has been recycled which has helped in reduction of water consumption.

Solid and Hazardous Wastes generated by the units are treated and disposed off atCommon Hazardous Waste Treatment & Disposal Facility. During the year, Company hasconstructed Hazardous Waste Storages at units as per the new guidelines.

The Company has set up Emergency Risk Teams at all its units. In case of any emergencylike flood, fire, accident, explosion or any other calamity, these teams swing into actionimmediately and bring the situation under control. Their work is greatly appreciated bythe government departments, fire brigade and the industries in these areas.

PARTICULARS OF EMPLOYEES:

In terms of section 217(2A) of the Companies Act, 1956, read with the Companies(Particulars of Employees) Rules, 1975, as amended, the names and other particulars of theemployees are set out in the annexure to the Directors’ Report. Having regard to theprovisions of section 219(1)(b)(iv) of the said Act, the Annual Report excluding theaforesaid information is being sent to all the members of the Company and others entitledthereto. Any member interested in obtaining such particulars may write to the CompanySecretary at the registered office of the Company.

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

The particulars relating to energy conservation, technology absorption, foreignexchange earnings and outgo, as required to be disclosed under section 217(1)(e) of theCompanies Act, 1956 read with the Companies (Disclosure of Particulars in the Report ofBoard of Directors) Rules, 1988 are provided in the Annexure to this Report.

DIRECTORS RESPONSIBILITY:

Your Directors confirm the following Directors Responsibility statements pursuant toprovisions of Section 217 (2AA) of the Companies Act, 1956: 1. in the preparation ofAnnual Accounts for the year ended 31st March, 2011, the Company has followed theapplicable accounting standards with proper explanations relating to material departures;2. appropriate accounting policies have been selected and applied consistently andjudgements and estimates are made prudently and reasonably so as to give a true and fairview of the state of affairs of the Company as at 31st March, 2011 and of the profit ofthe Company for that year; 3. proper and sufficient care has been taken for maintenance ofadequate accounting records in accordance with applicable provisions of the Companies Act,1956 for safeguarding the assets of the company and for preventing and detecting fraud andother irregularities; 4. the annual accounts have been prepared on a going concern basis.

GROUP FOR INTERSE TRANSFER OF SHARES:

As required under Clause 3(1)(e) of the Securities and Exchange Board of India(Substantial Acquisition of Shares and Takeovers) Regulations, 1997 persons constituting"Group" (within the meaning as defined in the Monopolies and Restrictive TradePractices Act, 1969) for the purpose of availing exemption from applicability of theprovisions of Regulation 10 to 12 of the aforesaid Regulations, are given in the Annexureattached herewith and forms part of this Annual Report.

CORPORATE GOVERNANCE:

Your Company and its Board has been complying with Corporate Governance to the extentset out in this respect as a separate report, in pursuance of requirement of Clause 49 ofthe Listing Agreement. The Management Discussions and Analysis Report forms part of thisReport. Auditor’s certificate regarding compliance of the conditions of the corporateGovernance as stipulated under the said clause is also attached to this Report.

LISTING OF THE COMPANY’S EQUITY SHARES:

The equity shares of your Company are listed on the Bombay Stock Exchange Ltd. andNational Stock Exchange of India Ltd. There is no default in paying annual listing fees.

ACKNOWLEDGEMENT:

Your Directors are thankful to all the stakeholders and various government agencies andministries for their continued support.

ANNEXURE TO DIRECTORS REPORT

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURES OF PARTICULARS IN THE REPORT OFBOARD OF DIRECTORS) RULES, 1988.

A. CONSERVATION OF ENERGY:

(a) Energy conservation Measures taken: - 12.65% energy saving achieved against targetof 10% with the following energy conservation measures taken during 2010-11.

1. Specific energy consumption reduction for chilling plants with evaporative condenser

2. De-super heater for steam conditioning and energy saving

3. Reduction in flue gas losses by optimizing the oxygen level in boilers with solidfuel

4. Flash steam / condensate recovery to improve boiler efficiency

5. Use of solar energy for water heating.

6. Automation in filling machine for reducing compressed air consumption

(b) Additional/New Proposals for reduction of energy conservation: -

1. Heat recovery through condensing economizer for boilers

2. Fan-less/Fin-less jet cooling tower

3. Non chemical water treatment for cooling tower through ultra low frequency injection

4. Focusing more on process heat recovery

5. Direct ammonia chilling with screw compressors and variable frequency drive loadmodulation

6. Energy audit by external auditors and in house facility to study the GAP throughmodern energy auditing instruments (c) Proposed Benefits: -With the above energy savingproposals, energy bills are expected to come down from current level.

B. TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION:

The following efforts were taken by the company towards technology absorption,adaptation and innovation:

1. Technology of a new class of insecticide developed in-house was successfullyabsorbed on commercial scale during the year.

2. A new combination formulation for effective control of weeds in wheat crop wasdeveloped and commercialized successfully.

3. Improvements in the processes of five existing products were done and implemented inthe manufacturing plants.

4. Technology up - gradation was pursued by making linkages with scientists ofinstitutes of national and international reputes like ICT, CSIR laboratories, IIT andexperts in the industry.

5. The Company has entered into an agreement for import of technology for anintermediate during the year. However, no technology is transferred so far. a. Research& Development activities undertaken during the year:

i. Process development of new molecules in area of crop protection – Fungicides,Herbicides, Insecticides - and Speciality chemicals.

ii. Development of new safer and eco-friendly formulations like SC, WDG, CS and EW andcombinations and seed treatment formulations.

iii. Process improvement projects undertaken for cost reduction, quality improvementand productivity enhancement. iv. Development of methodology for waste reduction andeffluent treatment solutions.

b. Benefits Derived from R&D activities:

i. Two products were scaled up on commercial scale for launch in the market.

ii. Process improvement work has resulted in the cost reduction of the existingproducts as well as in waste reduction.

iii. New molecules and new formulations developed during the year will becommercialized in the coming years and will result in the increase of revenue andprofitability of the company.

c. Future Plan of Action:

i. Development of new molecules for future introduction.

ii. Continual improvement of existing products / processes.

iii. Development of green processes.

iv. Development of continuous processes instead of batch processes wherever feasible.

v. Development of new safer and eco-friendly formulations.

d. Expenditure incurred on R & D

ii. Total R & D expenditure – 1.54 % (as a percentage of turnover)

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

1. Activities relating to export, initiatives to increase exports, development of newexport markets for products and service and export promotion plans: -The Company’sthrust in the global market continued to grow during the year under review. Today, thename of the company is recognized for quality products, reliable supply capabilities andits ability to understand the needs of customers across the globe. Catering to the needsof customers through various global subsidiaries has been a very unique sellingproposition of the Company. With the additional acquisitions that have taken place duringthe year, the Company has been successfully integrating the various marketing functionsacross geographies successfully. Even though the year witnessed a relatively flat sale insome segments, Latin American countries, Africa, Asia Pacific and North America witnessedsignificant growth in percentage, both qualitatively and quantitatively. The Company isconfident, with additional registrations maturing and the benefits of integrationaccruing, the prospects appears encouraging in the long run. During the year, theCompany’s exports (FOB value) were 1445.75 crores.

2. Total Foreign Exchange earned and used: -

FORM ‘A’

Form for disclosure of particulars with respect to Conservation of Energy

Part ‘A’

Power and Fuel consumption

CONSUMPTION PER UNIT OF PRODUCTION - ALL PRODUCTS

"Group" for interse transfer of shares under Clause 3(1)(e) of the Securities& Exchange Board of India (Substantial Acquisition of Shares and Takeovers)Regulations, 1997.

"Family" – "Family" for this purpose includes spouse,dependent children and parent