3m india ltd-08

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3M India LimitedAnnual Report 2008

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3M INDIA LIMITEDREGD OFFICE : 48 - 51, ELECTRONICS CITY, HOSUR ROAD BANGALORE - 560 100

N O T I C E

The 22nd Annual General Meeting of the Members of the Company will be held on Wednesday, the April 29, 2009 at HotelThe Chancery Pavilion, 135 Residency Road, Bangalore 560 025, at 10.30 a.m. to transact the following business :

ORDINARY BUSINESS:

1. To receive, consider and adopt the Audited Accounts for the year ended December 31, 2008, together with the reports

of the Directors and Auditors thereon.

2. To appoint a Director in place of Mr. B.C.Prabhakar, who retires by rotation and, being eligible, offers himself for

re-appointment.

3. To appoint a Director in place of Mr. Richard Lee Becker, who retires by rotation and, being eligible, offers himself for

re-appointment.

4. To appoint Statutory Auditors to hold office from the conclusion of this Annual General Meeting until the conclusion of

the next Annual General Meeting and to authorise the Board of Directors to fix their remuneration. The retiring Auditors

M/s. Lovelock & Lewes, Chartered Accountants are eligible for re-appointment and have confirmed their willingness to

accept office, if re-appointed.

SPECIAL BUSINESS:

5. To consider and, if thought fit, to pass with or without modification(s) the following as an Ordinary Resolution:

"RESOLVED THAT pursuant to the provisions of the Articles of Association of the Company and the provisions ofSections 198,269,309, 310,311, Schedule XIII and all other applicable provisions, if any, of the Companies Act, 1956 (includingany statutory modification(s) or re-enactment thereof, for the time being in force), and subject to the approval of theCentral Government, consent of the Company be and his hereby accorded to the appointment of Mr. Ajay Nanavati asManaging Director of the Company for a period of five years commencing from October 1, 2008 on the terms andconditions including remuneration as under:

Salary including allowances, incentives and perquisites:

Salary including allowances and incentives (excluding perquisites) : Not exceeding Rs.15 lakhs per month.

Perquisites: Managing Director shall be entitled to all the perquisites listed herein below in addition to the Salary includingallowances and incentives mentioned above

Company Leased Accommodation: Furnished Company leased accommodation in accordance with the rules of the Companyas applicable to the senior managers.

Personal Accident Insurance: In accordance with the rules of the Company as applicable to the senior managers.

Club Fees: In accordance with the rules of the Company as applicable to the senior managers.

Company Car and Driver: The Company shall provide a car with the driver for business and personal use.

Telephone Facility at Residence: Telephone facility shall be provided as per Company policy applicable to thesenior managers.

The perquisites stated above shall be valued as per Income Tax Act, 1961, wherever applicable, and in the absence of anyprovisions in the said Act, the perquisites shall be valued at actuals.

Minimum Remuneration: Notwithstanding anything herein above stated where in any financial year closing on and afterDecember 31, 2008, the Company incurs a loss or its profits are inadequate, the Company subject to the approval of CentralGovernment shall continue to pay the same remuneration as stated above but subject to being within the overall limits onmanagerial remuneration as provided under Sections 198, 309 and other applicable provisions of the Companies Act, 1956read with Schedule XIII to the said Act. The Board of Directors shall communicate the Central Government approvalincluding any revision in the terms of remuneration to Mr. Ajay Nanavati for his acceptance.

No sitting fees shall be paid for attending the meetings of the Board of Directors.


NOTES:

1. Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 in respect of the Special Business is annexed.

2. A member entitled to attend the meeting and vote is entitled to appoint a proxy and vote instead of himself and the proxy need not be amember of the Company. Proxies should reach the registered office of the Company on or before 10.30 a.m. on April 29, 2009.

3. The Register of Members and the Share Transfer books of the Company will remain closed from April 23, 2009 to April 29, 2009(both days inclusive).

4. Any change in the address of the members, including those held in dematerialized form may please be intimated to the Company's Share

Transfer Agents, Karvy Computershare Private Limited.

By Order of the Board

Date : February 27, 2009Place : Bangalore

K. Ramesh ChandraCompany Secretary

Explanatory statement u/s 173 (2) of the Companies Act, 1956

FOR RESOLUTION NO. 5

Mr. Ajay Nanavati is a Bachelor in Chemical Engineering and has a rich experience in various industries, spanning over 30 years.He has held various senior positions in 3M Company, USA and in other 3M subsidiaries over the last 22 years of his careerin 3M Group.

Upon the recommendation of 3M Company, USA, your Board of Directors at its meeting held on September 10, 2008 appointedMr. Ajay Nanavati as a Director representing 3M Company and also as the Managing Director of the Company on the terms ofremuneration set out in the ordinary resolution. Mr. Ajay Nanavati took the position as Managing Director of the Company witha rich experience.

Mr.Ajay Nananvati holds 3,422 shares in the Company and does not hold directorships / memberships in any other Company.He is a member of Company's Shareholders' Grievance Committee.

No Director other than Mr. Ajay Nanavati may be deemed to be interested or concerned, in this regard.

The abstract of the terms of contract and memorandum of interest as required under Section 302 of the Companies -Act, 1956was circulated to all the members of the Company.

The Board accordingly recommends the resolution as set out in Item no.5 for approval of the members.

Additional information on Directors seeking re-appointment at the Annual General Meeting

Name of Director

Age

Qualifications

Expertise

Directorships held in other Public

Companies (Excl. Foreign andPrivate Companies)

Memberships/Chairmanships of

committees across PublicCompanies

Shareholding of Directors

Mr. B.C. Prabhakar

65 Years

Bachelor of Arts and Bachelor of Law

Expertise in legal

Wipro Limited

Automotive Axles Limited

Wipro Limited

Automotive Axles Limited

Nil

Mr. Richard Lee Becker

49 Years

Master of Business Administration

Finance and taxation

Nil

Nil

Nil

Date : February 27,2009Place : Bangalore

By Order of the Board



'CelebratingDiversity.

Pride inUnity.'A soeiety of enduring^differenees. Difference of Culture, Costume, Cuisine, Caste, Creed, Colour, Convictionand Custom. Yet a Nation with one soul.

India's constitution recognizes 22 languages, and then there are the numerous dialects. Home to every religionknown to mankind. Blessed with snow-clad mountains, sun-drenched beaches and everything in between.Abode of diverse cultures and an astonishing range of colors. India was never truer to herself when celebratingher own diversity.

In multifarious ways, 3M perfectly complements Indian Diversity. From facilitating safety on the road toenhancing the beauty and effectiveness of vehicles, from deploying solutions for the Oil & Gas andTelecommunication sectors to helping individuals get organized. From stepping up the standards of Indianhealthcare to making life beautiful with an array of home products. 3M truly complements the diversity of India,in more ways than one.

India. One land embracing many. 3M. One brand serving many.

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Contents

Message from the Chairman 2

Message from the Managing Director 3

Report of the Directors 11

Management Discussion and Analysis 14

Report of the Corporate Governance 18

Auditor's Report 29

Annexure to Auditor's Report 30

Balance Sheet 32

Profit and Loss Account 33

Schedules to Accounts 34

Notes to Accounts 40

Cash Flow Statement 53

Registered Office

Plot No. 48-51, Electronics CityHosur RoadBangalore - 560 100Tel : 080 - 28520203Fax : 080 - 28520576

Corporate Office

Concorde Block, UB City24, Vittal Mallya Road

Bangalore - 560 001Tel : 080-22231414Fax:080-22231450

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\i i°ur

VauesAct with uncompromising honesty and integrity in everything we do.

Satisfy our customers with innovative technology and superior quality, value and service.

Provide our investors an attractive return through sustainable, global growth.,-—/

Respect our social and physical environment around the world. j

jValue and develop our employees' diverse talents, initiative and leadership.

iEarn the admiration of all those associated with 3M worldwide. 1


MessThis would be the firstMeeting of theshareholders I wouldbe presiding after I

assumed responsibility of this august position in September 2008, from the outgoing Chairman Mr. Thomas P.Spencer and I look forward to dutifully fulfilling the same.

3M India also has a new leader at its helm, with Mr. Ajay Nanavati taking over from Mr. Bert O' Donoghue. I wouldlike to acknowledge Mr. Bert O' Donoghue's leadership in taking the Indian company to its current position ofbeing one of the fastest growing subsidiaries in the 3M World. Mr. Ajay Nanavati has a wealth of experience in3M and will prove to be a worthy successor in taking 3M India to the next level.

The year ended December 31, 2008 was a year of mixed fortunes for us. Amidst the global financial crisis whichhas hit governments, organizations and people from all walks of life alike, I'm happy to report that 3M India hasbeen able to maintain its topline growth. The profits however were lower than the last financial year mainlybecause of a change in product mix and lower margins. This clearly demonstrates that we have the ability anddiscipline to survive and thrive in this current challenging environment.

Exploring new markets and opportunities and transforming ideas into innovative products that are intuitive to localcustomer needs have helped us deliver during these tough times and these strategies will continue to keep ourmomentum going in the coming year. The company also expended substantial capital expenditure during the yearby setting up new facilities at Pune and undertaking expansion of capacity at its Ahmedabad plant.

I have to mention that 2008 was a significant year in 3M India's history as the company crossed a major milestone- 20 years of innovation in India. I would like to applaud the leadership as well as all our 3M India employees whohave shaped 3M India's path of progress this far.

There is no doubt that 2009 is going to be a tough year for us. An unprecedented global recession has descendedupon us. World leaders, institutions and the business community globally are working towards surviving thismeltdown. Our diversified businesses and strong foundation has enabled us to withstand such economic storms

in the past and we will continue to strive to ensure that we rise above thiscrisis and follow our goals of attaining global leadership in markets,products and manufacturing processes.

I would like to remind everyone that we are poised to take on thechallenges and the market opportunities offered by the current environmentand we will emerge competitive and stay focused on our vision to be themost innovative enterprise globally. In these turbulent times I am confidentthat we can rely on the 3M culture, our values, and our way of working andlooking at the world to meet the challenges in the years to come.

D. J. Balaji RaoChairman

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We enter the new financial year in turbulent times. 2009 offers toughchallenges as we come off a year that started off very well for us but endedwith a tough last quarter.

Despite the economic slowdown that set in, in mid 2008, your company endedthe year with a net sales increase of 21%, in line with our expectations. Wewere able to register this commendable growth, because of your company'sdiversified product portfolio and excellent results from the Health Care andDisplay & Graphics businesses. Though we did an excellent job of managingcosts and increasing prices, this was not enough to offset the rapid decline ofthe Indian rupee and it, in turn, adversely impacted our bottomline.

Our technology is focused on meeting local needs. Hence, localization hasbeen the key theme of your company's operations in 2008 and we have madesome strides with the development of products like the 3M™ Dust FreeVentura Adaptor and the 3M™ Pavement Markers, to name a few. It was alsothe first year when we made significant investments in developing our manufacturing capabilities which werewholly funded by your company's internal operations. I'm delighted to inform you that our new manufacturing facilityat Ranjangaon, Pune has started its commercial operations with its first commercial dispatch of a locally developedtape product (DC Tape 9109) from the Industrial Tapes division. The expansion of our facility at Ahmedabad is also

making steady progress. These developments will be key to our growth in the yearsahead.

Message _i i MM ^^ I^%X% V IX^^"romtheManaging

Director

Your company also completed 20successful years in India in 2008. For thepast 20 years, 3M India's growth hasbeen steady and upward and today weare one of the most admired companiesin India.

I applaud & congratulate 3M employeeswho have raised their bar of excellenceand continued to take 3M India to what it

is today. Your company has also been continuously focusing on people and processes to build leaders who cantide over these challenging times. Testament to this is that 3M Company was recently ranked as the No.1Company in its list of 2008 Best Companies for Leaders in a survey conducted by The Chief Executive Magazine.

I would like to thank my predecessor, Mr. Bert O'Donoghue, from whom I took over the reins of the company inOctober 2008, for handing over a strong company well on the path to growth. I'd also like to thank our Board ofDirectors for their continued support. Mr. Thomas P. Spencer resigned as Chairman of the Board in 2008 and Iwould like to thank him for his support and encouragement of all our efforts in India. I welcome Mr. D. J. Balaji Raowho has been appointed as our Chairman. We look forward to his inspired leadership and continued support forthe challenges we have ahead.

Ajay NanavatiManaging Director

.sansco.net

One Solution.3MIndia is the land of diversity. Truly multi-ethnic, multi-lingual and multi-religious. But driven by one spirit. The

unfailing spirit of oneness, the spirit of Unity. 3M India is a perfect match for India's multifaceted customer profile.

While our products serve distinct markets, they are guided by one over riding philosophy; to help our customers

succeed.

The ubiquitous diversity is common not only to India, but also to 3M. Indian roads, industries, homes & offices are

bedecked, sustained & facilitated by 3M products.

Let's take a tour of India; onto the roads first. Those bright road safety signs that you see there? Those are 3M

products. Vehicles on the road are enhanced with 3M products for performance, appearance and maintenance.

If those exciting car graphics grab your attention, small wonder they are 3M products. Those towering buildings

out there are certainly attention grabbing. From the outside to the inside 3M enhances their functionality & safety,

with a range of solutions for the construction market.

You see an Industrial plant? 3M is a part of the Industrial process with processes as varied as grinding, bonding,

masking, packaging, fluid filtering and more. This apart, 3M has products to enhance worker safety. And not to

forget the Oil & Gas Industry where 3M caters to exploration, production, transportation, refining, marketing and

employee safety.


Have you observed the number of new hospital chains that are coming up? 3M helps step up the quality of Indian

healthcare. Clinics, hospitals, medical practitioners and food safety companies benefit from a wide range of

3M products. Oh! These malls look so attractive. The product showcase is amazing; thanks to 3M's graphic

solutions.

Now let's step into an office. 3M's Post-il® and Scotch® brands have revolutionized communication at the

workplace. There has been a sea change in the way business is done. The telephone and the internet have

revolutionied business efficiency. However, Indian telecommunications is still at an evolving stage. 3M offers a

comprehensive suite of scalable solutions to telecom service providers.

3M enhances power utility functions too. It caters to sealing, connecting, terminating, shielding and insulating

applications even under extreme conditions. Finally, we are at home. Here life is beautiful, easy & manageable with

a slew of 3M's Scotch Brite® products like cloths, sponges, scrub pads, hand held cleaning tools for homes.

A diverse nation. A truly diverse company serving its millions. Touching their

lives; be it at home, office, in a hospital or on the road.


A strong sense oflocalization driven bythe vagaries of Indianconditions and theversatile customerprofile that India offers.

Brand Owner Services

End to end solutions (fromdesign to execution) forBrand Identity Programs;including Facility Signs,Promotional Graphics, RearProjection on Glass, FleetGraphics and AmbientGraphics.

Polymer Processing Additives (PPA)

This locally manufacturedPPA for resin producersand compounders hasbeen developed keepinglocal requirements such aslogistics, price and qualityin mind.

Raised Pavement Markers

3M designed them keeping inmind product durability forhigh traffic conditions of theIndian market.

DiverseChallenges.

UniqueAnswers,

Fiber Management System

3M's Fiber ManagementSystem is customizedkeeping in mind the uniqueproduct requirements ofIndian Telecom Operators.

Unique Dust Free SanderDust Free Sanders, for drysanding of cars, developedusing the 'Ventura'technology features anadaptor with a dust collectionbag making the process lesstedious and less messy.

Median Markers

Keeping Indian trafficconditions in mind, 3M'sMedian Markers are tough,vandal-proof, dirt-resistant andretro-reflective providinghighest visibility to theroad-medians at nights.

Rubber Adhesive

An indigenously developedRubber Adhesive used forbonding vinyl sheets andwood laminates to meetthe local operating andprocessing environment.

Health Care Products3M has developed a rangeof locally produceddisinfectant and cleaningsolutions, keeping in mindhealth care practices inIndian hospitals.

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India, a civilization more than five thousand years old. 3M, a company of 75,000 people with a centuryold history.

India. One of the most ethnically diverse countries in the world. 3M. One of the most diversifiedcompanies in the world serving various ethnicities.

50,000 products globally and 5,000 products for the Indian markets.

Diversity.

For the last 20 years, every one of these products haveoffered a solution or two for a business or personal needof the Indian consumer. Our offices and facilities, spreadacross the length & breadth of the Indian Sub-continentensure that wherever the customer may be; 3M is not faraway. And serving the heterogeneity of India are thepeople at 3M who are as diverse as the markets they

serve. From Chandigarh up North toCochin down South and from Rajkot inthe West to Kolkata in the East, you willfind a 3M representative speaking yourlanguage, addressing your need.

The 1100+ army of 3M Indiaprofessionals have just one target - earn the loyalty of the Indian Consumer. Our Technology, our Innovationand our People are focused on meeting this.

3M in India. A Microcosm of 'Unity in Diversity'.

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DIRECTORS

COMPANY SECRETARY

AUDIT COMMITTEE

MEMBERS

SHAREHOLDERS'GRIEVANCE COMMITTEE

Mr. D.J. Balaji RaoMr. Ajay NanavatiMr. B.V. Shankaranarayana RaoMr. Thomas P. SpencerMr. B.S. IyerMr. B.C. PrabhakarMr. Richard Lee Becker

Mr. K. Ramesh Chandra

Mr. B.S. Iyer

Mr. D.J. Balaji RaoMr. B.C. PrabhakarMr. Richard Lee Becker

Mr. D.J. Balaji RaoMr. B.S. IyerMr. B.C. PrabhakarMr. Ajay Nanavati

ChairmanManaging DirectorWhole-time DirectorDirectorDirectorDirectorDirector

Chairman

Chairman

BANKERS

AUDITORS

LEGAL ADVISORS

SHARE TRANSFER AGENTS

WEBSITEINVESTORS' QUERIES

Citibank N. A.BNP ParibasCanara BankDeutsche BankHDFC BankHongkong & Shanghai Banking Corporation LimitedICICI Bank LimitedState Bank of India

M/s. Lovelock & Lewes, Chartered Accountants

J. Sagar AssociatesAdvocates & Solicitors4121/B, 19 'A' Main, 6th CrossHAL II Stage Extension, Bangalore - 560 038

Karvy Computer Share Private LimitedPlot no. 17-24, Vithal Rao Nagar,Madhapur; Hyderabad - 500 034Tel: 040-23420816 / 824 Fax: 040-23420814E-mail : [email protected]

www.3m.com/[email protected]

8

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3M India Limited

This page is intentionally left free

10


Annual Report 2008

REPORT OF THE DIRECTORS

Your Directors have the pleasure in presenting to you their 22nd Annual Report and Audited Accounts for the year ended

December 31, 2008.

FINANCIAL RESULTS

(Rs. in lakhs)

Particulars

Total Income

Less : Total Expenditure

Profit before Depreciation

Less : Depreciation

Profit before Taxation

Less : Provision for Taxation

Profit after Taxation

For the year ended For the year ended

December 3 1,2008 December 3 1,2007

75,240.48

65,415.28

9,825.20

722.92

9,102.28

3,356.79

5,745.49

61,905.47

50,653.40

11,252.07

589.22

10,662.85

3,894.57

6,768.28

COMPANY PERFORMANCE

The Company has recorded a good topline performance during the year under review. The total income was at Rs.75,240.48 lakhs for

the year ended December 31, 2008 as against Rs.61,905.47 lakhs for the same period during the previous year. This represents an

increase of 21%, a commendable growth rate considering the existing economic downturn.

Profit after taxation was at Rs.5,745.49 lakhs for the year ended December 31, 2008 as against Rs.6,768.28 lakhs for the same period

during the previous year. Slow down in the economy, rupee depreciation against all major currencies and change in business mix

compared to the previous year, significantly impacted the profitability.

DIVIDEND

In view of the execution of investment plans towards the expansion of our existing manufacturing facilities as well as towards

product localisation projects, it has been decided to conserve and retain our earnings.

MATERIAL CHANGES AND COMMITMENTS

There were no material changes and commitments that occurred affecting the financial position of the Company between

December 31, 2008 and the date on which this report has been signed.

DIRECTORS

Mr. Thomas P. Spencer resigned as Chairman and in his place Mr. DJ.Balaji Rao has been appointed as Chairman of the Company.

Mr. Bert O' Donoghue resigned as Director and Managing Director and in his place Mr. Ajay Nanavati has been appointed as Director

and Managing Director.

The Board places on record their sincere appreciation for the services rendered by Mr. Bert O' Donoghue during his tenure as

Managing Director.

Mr. B.CPrabhakar and Mr. Richard Lee Becker are retiring by rotation at the ensuing Annual General Meeting and being eligible, they

have offered themselves for re-appointment.

DIRECTORS'RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to the Directors Responsibility

Statement, your Directors state:

i) That in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper

explanation relating to material departures;

11


3M India Limited

ii) That they have selected such accounting policies and applied them consistently and made judgments and estimates that

are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company and of its profits for the

year ended December 31, 2008;

iii) That they have taken proper and sufficient care towards the maintenance of adequate accounting records in accordance

with the provisions of this Act, to safeguard the assets of the Company and to prevent and detect fraud and other

irregularities;

iv) That they have prepared the financial statements for the year ended December 31, 2008 on a going concern basis;

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with stock exchanges, a separate section titled "Corporate Governance" has been

included in this year's annual report, along with the report of Management Discussion and Analysis and additional shareholder

information.

FIXED DEPOSITS

During the year under review, the Company has not accepted any deposits under Section S8A and 58AA of the Companies Act, 1956

read with the Companies (Acceptance of Deposits) Rules, 1975.

AUDITORS

M/s. Lovelock & Lewes, Chartered Accountants, Bangalore Auditors of the Company will retire at the conclusion of the ensuing

Annual General Meeting and being eligible, offer themselves for re-appointment. The Company has received a certificate from the

Auditors to the effect that their re-appointment, if made, would be in accordance with Section 224(16) of the Companies Act,1956.

CONSERVATION OF ENERGYJECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

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 have been enclosed as Additional Information and forms an integral part of this Report.

LISTING

The shares of your Company are presently listed on the Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India

Limited (NSE). The delisting application has been filed with the Calcutta Stock Exchange Association Limited and the formal approval

is awaited.

PERSONNEL

The Board wishes to place on record its appreciation to all employees in the Company, for their sustained efforts and immense

contributions to the good levels of performance and growth that your Company has achieved during the year.

PARTICULARS OF EMPLOYEES

The Annual Report and Accounts are being sent to all the shareholders of the Company without the statement of Particulars of

Employees under Section 217 (2A) of the Companies Act, 1956 read with (Particulars of Employees) Rules, 1975. Members who are

interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation for the continued support and valuable co-operation extended by

all the stakeholders of 3M India Limited. The Directors also wish to express their gratitude to all the shareholders for the faith that

they continue to repose in the Company.

On behalf of the Board of Directors

Place : Bangalore AjayNanavati B.V.Shankaranarayana Rao

Date : February 27, 2009 Managing Director Whole-time Director

12


Annual Report 2008

ADDITIONAL INFORMATION AS 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

A. CONSERVATION OF ENERGY

The Company plant engineering team periodically reviews and monitors energy consumption and significant savings madeduring the previous year under review. No additional investments were made or implemented, for reduction of energy consumptionduring the previous year.

B. TECHNOLOGY ABSORPTION AND RESEARCH & DEVELOPMENT

1. Specific areas in which Research &Development carried out by the Company

Industrial Markets : Pressure sensitive adhesives developmentfor tape and label products for industrial and converter markets,new tape coaler installed and operational for production. Water-based glue development for Wood and Utility markets. Abrasivediscs development for metal working markets. Polymerprocessing aides developed for polyolefin manufacturersand processors.

Specialty Materials Markets: Coatings for corrosion protection ofpipelines, brand & asset authentication labels to prevent productcounterfeiting, RFID based solutions for library systems.

Consumer Office Markets: Floor, Kitchen, utensil & cleaningsolutions - wipes, scrubbers, mops. Repositionable notes, stationeryproducts and tapes.

Automotive Markets: Automotive graphics, attachment tapes forautomobiles, paint replacement films, and automotive aftermarketformulations for car detailing and body work.

Healthcare Care Markets: Wound dressings, cleaning infectionprevention products for use in hospitals:

Traffic and Safety Markets: Signage systems, traff ic safetyproducts including median markers and toll plazas:

2. Benefits derived as a result of the aboveResearch & Development

New applications development.Reduced cost solutions for our customers and end users.Business growth.

3. Future plan of action Continue localisation of products.

Development of products specific for Indian market needs,especially in the areas of Corrosion Protection, Automotive,Industrial, Medical and Consumer markets.

4. Expenditure on Research & Development

a) Capital

b) Recurring

Totalc)

d) Total Research & Development expenditureas a percentage of total turnover

(Rs.in Lakhs)

147.57

70.36

217.93

0.29%

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year, the Foreign Exchange earnings were Rs.438.83 lakhs and Foreign Exchange Outgo was Rs.1,123.69 lakhs.


Place : BangaloreDate : February 27, 2009


B.V.Shankaranarayana RaoWhole-time Director

13


3M India Limited

Investors are cautioned that this discussion contains statements that involve risks and uncertainties. Words like anticipate,

believe, estimate, intend, will expect and other similar expressions are intended to identify such forward, looking statements.

The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of

any subsequent developments, information or events. Besides, the Company cannot guarantee that these assumptions and,

expectations are accurate or will, be realised and actual results, performance or achievements could thus differ materially from

those projected in any such forward looking statements.

MANAGEMENT DISCUSSION AND ANALYSIS

3M India Limited is a diversified manufacturer, technology innovator and marketer of a wide variety of products. 3M continues to

manage its operations in five business segments; Industrial Markets; Automotive & Specialty Materials Markets; Health Care Markets;

Traffic and Safety Markets; Consumer & Office Markets, Construction Markets. 3M's five business segments bring together common

or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of

business resources. The Management of the Company presents the financial information and other disclosures relating to

3M's business segments.

a) INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian economy, like the rest of the world is showing signs of an economic slowdown, with weaker industrial production

growth, manufacturing and exports. Growth is expected to slowdown further in 2009 as the liquidity crunch and the global

slowdown will drive down business confidence and personal spending. Real GDP growth has also slowed down during the last

few quarters which is a far cry from the double-digit growth rates seen in the second half of 2006 and the first half of 2007.

This downturn in the economy, currency fluctuations and GDP growth will all have significant effect on the Company's

performance The Company continues its focus on Industrial Segments due to its technological advantage of products.

b) OPPORTUNITIES AND THREATS

The Company faces normal market competition in all its businesses, from Indian as well as international companies.

3M's globally competitive cost positions and well crafted business strategies have enabled it to retain its leading market

positions. 3M strongly believes in its brand equity.

c) SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

INDUSTRIAL MARKETS

The Industrial Markets Segment includes products like paper tapes, coaled and non-woven abrasives, and specialty

adhesives. Major industrial product applications range from grinding, surface conditioning and super abrasives for

packaging systems.

Financial Highlights

Highlights

Rs. in lakhs

31.12.08 31.12.07

Segment Revenue 13,615.68 11,314.26

Profit before Interest & Tax 1,168.28 1,924.24

Capital Employed 4,631.58 2,259.90

The Industrial markets grew by 20% in 2008 and this growth was mainly driven by:

Entry in the high volume retail segment with specific product line.

The growth in sales which is attributed to new account penetration and organic growth.

Continuous development and implementation of specific programs focused on marketslike Construction Components, Automotive, Auto-Parts, Metal Fabrication, Stainless Steel,Energy and Industrial Utility.

14


Annual Report 2008

AUTOMOTIVE & SPECIALTY MATERIALS MARKETS

Automotive and Specialty Materials Markets provides a wide range of design and engineered solutions to Automotive OEM's

and ancillary industries, corrosion protection and glass bubbles solutions for oil & gas pipelines etc. This segment includes

a wide range of automotive repair and car grooming solutions for the Automotive Aftermarket. 3M is acknowledged as an

innovative supplier of solutions and is a market leader in the non-paint consumables segment in the Automotive-Aftermarket

space. 3M is also a pioneer in the car care business and is forging partnerships with the majority of car dealerships by way of

Automotive OEM approvals.

Rs. in lakhs

31.12.08 31.12.07

Financial Highlights Segment RevenueProfit before Interest & TaxCapital Employed

24,902.293,199.45

13,56838

21,646.373,465.447,660.94

Highlights The Automotive and Specialty Materials Markets grew by 15% in 2008 and its growthwas driven by:

The focus on Automotive Aftermarket for growth to compensate for slow growth in theAutomotive Industry.

The growth in sales which was achieved by the change in the product mix and withthe introduction of new products.

The various new oil and gas pipeline projects that came up in 2008 which helped inthe growth of the Corrosion Protection Products Division. Products from theCorrosion Protection Plant at Ahmedabad, which support the pipeline manufacturingindustry, were introduced with a dual layer of coating that provided significantbenefits to our customers, both in terms of cost and productivity.

HEALTH CARE MARKETS

3M Healthcare is a global leader offering innovative products and solutions for Skin & Wound Care, Infection Prevention,

Dental, Orthodontic, Drug Delivery and Food Safety Markets. Our products enhance the practice, delivery, and outcome of

health care by providing innovative solutions and improve patient's lives.

Rs. in lakhs

31.12.08 31.12.07


12,128.49430.40

2,095.88

8,100.89294.97

1,132.56

Highlights Healthcare Business grew by more than 50 % in 2008. Some of the keydrivers of growth were

Continued focus and efforts on knowledge transfer and sharing with customers. Thiswas achieved through successful Indian and International KOL speaker programs andseminars etc.

Continued value enhancement for customers through new initiatives like formationof critical care nurses club and operating room nurses club etc across the country.

Successful launch of new products like handrub, disposable drape packs and expressXT impressioning system.

Entry into the dental lab and digital market with the launch of lava crowns.

Success in the drug delivery component supplies business to pharmaceuticalcompanies in India.

15


3M India Limited

TRAFFIC AND SAFETY MARKETS

The Traffic and Safety Markets segment serves markets that include electronic display, traffic safety, commercial graphics,security and protection services. Major products include commercial graphics systems, reflective sheeting for transportationsafety, optical films, solutions for electronic displays, occupational health and environmental products, passport readers andcomputer screen filters.

Rs. in lakhs

31.12.08 31.12.07


14,675.613,191.624,249.95

12,220.293,372.982,678.04

Highlights The Traffic and Safety Market grew by 20% in 2008 and this growth was mainly driven by :

The Company's Commercial Graphics Division which continues to be the preferred supplierof commercial fascia signage material to several large corporations and the banking Industry.In 2008, the growth was driven by big orders from banks.

Expansion of the road network at the national and state levels which resulted incontinued demand for the Company's reflective sheeting products for traffic signage.

During the year, the Company's Occupational Health & Environment Safety Divisionfurther strengthened its leadership position as the preferred supplier of respiratory andhearing protection products to the Indian industry.

CONSUMER & OFFICE MARKETS, CONSTRUCTION MARKETS

This segment offers an array of products that help keep homes cleaner, offices organized and buildings maintained. Thisbusiness segment features some of the world's best-known brands, from Scotch®, Scotch-Brite® to Nomad™ and Posl-it ®.

Rs. in lakhs


31.12.08 31.12.07

Segment RevenueProfit before Interest & TaxCapital Employed

8,521.00483.88530.29

7,376.38927.88787.87

Highlights During the year 2008, the segments grew by 16% and this was driven by :

- The Home Care and Office Supplies Division which achieved growth by expandinggeographical reach and by expanding the product range.

- The expansion of the Modern Trade in tier A / smaller cities which also helped 3M inachieving higher growth levels.

- Portfolio extension by introducing new range of Nomad™ modular matting and PrestigeSun Control films.

- The focus on renewable energy opportunities with 3M window film products.

OTHERS


Rs. in lakhs

Segment RevenueProfit before Interest & TaxCapital Employed

31.12.08

422.8566.00

-

31.12.07

397.6044.69

-

16


Annual Report 2008

d) OUTLOOK

Depreciating rupee, industrial production and weaker global demands have put pressure on the overall economic growth.

However, the Company will continue to strive to attain global leadership in markets, products and manufacturing processes.

Technology will be the key to success and products that respond to local market needs will need to be introduced at a fast pace

on a regular basis.

Forward looking statements are based on certain assumptions and expectations of future events that are subject to risks and

uncertainties. Actual future results and trends may differ materially from historical results, depending on a variety of factors.

e) RISKS AND CONCERNS

All key functions and divisions of the Company are independently responsible to monitor risks associated within their

respective areas of operations such as production, treasury, insurance, legal and others areas like health, safety and environment.

The Company's high levels of integration, globally competitive operations and domestic leadership position have helped it in

mitigating the adverse impact of generic industry risk factors. Foreign exchange rate volatility has also had an impact on the

business. The Company has identified various risks and procedures to mitigate the same.

f) INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate systems of internal control in place. This is to ensure that assets are safeguarded against loss from

unauthorized use or disposition, and that transactions are authorized, recorded and reported correctly. The Internal audit

function is empowered to examine the adequacy, relevance and effectiveness of control systems, compliance with policies,

plans and statutory requirements. The top management and the Audit Committee of the Board review the findings and

recommendations of the internal audit panel.

The Internal Auditor functionally reports to the Audit Committee and administratively to the Managing Director. The Audit

Committee periodically reviews the audit plans, audit observations of both internal and external audits, risk assessment and

adequacy of internal controls. The Company has developed adequate internal control systems commensurate to its size and

nature of its business. Reports of the Internal Auditor are submitted to the Management and Audit Committee. The Statutory

Auditors also review their findings with the Senior Management and the Audit Committee.

g) DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company believes that consistent employee performance and overall satisfaction and engagement will lead to the

growth of the company. In keeping with this philosophy, to enhance the employees potential, the Company has continued to

invest in training and developing employees. All new hires are inducted into the organization through a 3 day induction

program, conducted periodically during the year. Training needs for high potential employees are also identified by the

learning and development organization in the Company. Based on specific training needs, programs are conducted. In 2008,

over 1500 man days of training in the area of leadership, sales and technical skills were conducted for employees. The Company

has been continuously focusing on people and processes to encourage and realize their full potential. Cordial and harmonious

relations with employees continued to prevail throughout the year under review.


Place : Bangalore AjayNanavati B.V.Shankaranarayana RaoDate : February 27, 2009 Managing Director Whole-time Director

17


3M India Limited

REPORT ON CORPORATE GOVERNANCE

In Compliance with Clause 49 of the Listing Agreement with the Stock Exchanges, a report on the Corporate Governance for the year

under review is given below.

1. PHILOSOPHY ON CORPORATE GOVERNANCE

3M India Limited believes that transparent accounting policies, appropriate disclosure norms, best in class board practices and

consistently high standards of corporate conduct towards its stakeholders are essential for sustained corporate growth.

Corporate Governance comprises of a unique combination of factors like regulations, compliance, policies and economic

environments, voluntary practices and disclosures.

2. BOARD OF DIRECTORS

The Board of Directors of the Company was headed by the Non-Executive Chairman, Mr. Thomas P. Spencer till

September 10, 2008 and consequent to his resignation as Chairman, Non-Executive and Independent Director Mr. D.J.Balaji Rao

had been appointed as Chairman. The Board of the Company comprises an appropriate blend of Executive, Non-Executive and

Independent Directors, with professional background and experience in Business, Industry, Finance and Law. During the year

2008, five Board Meetings were held, the dates being February 27, 2008, April 28, 2008, July 25, 2008, September 10, 2008 and

October 29, 2008. The last AGM was held on April 28, 2008. The details of the Board composition, attendance, their other

directorships / committee memberships as of December 31, 2008 are appended below:

Name & Designationof the Director

Mr. DJ. Balaji Rao

(Chairman - Board of

Directors and Shareholders

Grievance Committee)

Mr. Bert O'Donoghue (a)**

(Managing Director)

Mr. Ajay Nanavati (a)***

(Managing Director)

Mr.Thomas P. Spencer

Director

Mr.Richard Lee Becker

Director

Mr. B.S. Iyer

(Chairman, Audit Committee)

Mr. B. C. Prabhakar

Director

Mr. B. V. Shankaranarayana Rao

(Whole-time Director)

Category

Non-Executive

& Independent

Executive

(Promoter Group)

Executive

(Promoter Group)

Non-Executive

(Promoter Group)

Non-Executive

(Promoter Group)

Non-Executive &

Independent

Non-Executive

& Independent

Executive

(Promoter Group)

No. of Meetings

Held

5

4

1

5

5

5

5

5

Attended

5

4

1

3

1

5

5

5

No.of Directorships and CommitteeMemberships/Chairmanships

OtherDirectorships*

10

Nil

Nil

Nil

Nil

Nil

2

Nil

CommitteeMemberships*

8

Nil

Nil

Nil

Nil

Nil

2

Nil

CommitteeChairmanships*

2

Nil

Nil

Nil

Nil

Nil

Nil

Nil

WhetherAttendedLast AGM

Yes

Yes

N.A.

Yes

Yes

Yes

Yes

Yes

* Excludes alternate directorship, directorship in foreign companies and private companies, which are neither a subsidiary nor a holding Companyof a public Company.

# Excludes committees other than Audit Committee, Shareholders / Investors Grievance Committees,(a) Nominee of 3M Company, USA.** Resigned as a Director and Managing Director on September 30, 2008.*** Appointed as a Director and Managing Director on October 1, 2008.

18


Annual Report 2008

Code of Conduct

The Company's Board has laid down a code of conduct for all Board Members and Senior Management of the Company. The codeof conduct is available on the website of the Company, www.3m.com\in. Requisite annual affirmations of compliance with respectivecodes have been made by the Directors and Senior Management of the Company.

3. AUDIT COMMITTEE

The Audit Committee of the Company functions in accordance with the requirements of Section 292A of the CompaniesAct, 1956 and the Listing Agreement

Constitution of Audit Committee : The current Audit Committee consists of four Non-executive Directors, three of which areindependent directors and all of them have financial and accounting knowledge. Mr. B.S. Iyer having financial expertise andexperience acted as Chairman of the Audit Committee. The Company Secretary acted as the Secretary to the Committee.At the invitation of the Committee, the Internal Auditor, the Managing Director, the Head of Finance, Head of LegalDepartment and Statutory Auditors attend the Audit Committee meetings, to answer and clarify the queries that are raised atthe Committee meetings.

Composition of Audit Committee and Number of Meetings Attended : During the year under review, four meetings of the AuditCommittee were held, February 27, 2008, April 28, 2008, July 25, 2008 and October 29, 2008. The composition of the AuditCommittee and the number of meetings attended during the year under review as under:

Nameofthe No. of Meetings held No.ofMeetingsCommittee Member during the tenure attended

Mr. B.S. Iyer 4 4

Mr. DJ. Balaji Rao 4 4

Mr. B.C. Prabhakar 4 4

Mr. Richard Lee Becker 4 1

The Terms of Reference of Audit Committee The role and terms of reference of the Audit Committee include the following :

Overview of the Company's financial reporting process and the disclosure of its financial information to ensure that thefinancial statements are correct, sufficient and credible.

Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the StatutoryAuditors and the fixation of audit fees.

Approval of payment to Statutory Auditors for any other services rendered by them.

Reviewing, with the management, the annual financial statements before submission to the Board for approval, withparticular reference to:

Matters required to be included in the Director's Responsibility Statement to be included in the Board's report in termsof clause (2AA) of Section 217 of the Companies Act, 1956.

Changes, if any, in accounting policies and practices and reasons for the same.

Major accounting entries involving estimates based on the exercise of judgment by Management.

Significant adjustments made in the financial statements arising out of audit findings.

Compliance with listing and other legal requirements relating to financial statements.

Disclosure of any related party transactions.

Qualifications in the draft audit report.

Reviewing, with the Management, the quarterly financial statements before submission to the Board for approval.

Reviewing, with the Management, performance of Statutory and Internal Auditors, adequacy of the internal control systems.

• Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffingand seniority of the official heading the department, reporting structure, coverage and frequency of internal audit.

Discussion with Internal Auditors any significant findings and follow-up there on.

Reviewing the findings of any internal investigations by the Internal Auditors into matters where there is suspected fraudor irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

19


3M India Limited

Discussion with Statutory Auditors before the audit commences, about the nature and scope of audit as well as post-auditdiscussion to ascertain any area of concern.

To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in caseof non-payment of declared dividends) and creditors.

Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

Powers of the Audit Committee: The Audit Committee has the following powers:

to investigate any activity within its terms of reference

to seek information from any employee

to obtain outside legal or other professional advice

to secure the attendance of outsiders with relevant expertise, if it considers necessary

Review of information by Audit Committee: The Audit Committee reviews the following information

Management discussion and analysis of financial condition and results of operations.

Statement of significant related party transactions (as defined by the Audit Committee) submitted by Management.

Management letters / letters of internal control weaknesses issued by the Statutory Auditors.

Internal audit reports relating to internal control weaknesses.

The appointment, removal and terms of remuneration of the Chief Internal Auditor.

REMUNERATION TO DIRECTORS:

The Company has not constituted a separate Remuneration Committee. None of the Non-Executive Directors have any pecuni-ary relationship with the Company. The Company has currently two Executive Directors, Mr. Ajay Nanavati, Managing Directorand Mr. B. V. Shankaranarayana Rao, Whole-time Director. The terms of appointment of the Executive Directors were fixed by theBoard and approved by the Shareholders.

Details of remuneration paid to Executive Directors during the year 2008:In Rupees

Name and Designation

Mr.BerO'Donoghue(Managing Director)

Mr. Ajay Nanavati(Managing Director)

Mr.B.V.Shankaranarayana Rao(Whole-time Director)

Period

January 1,2008 -September 30, 2008

October 1,2008 -December 31, 2008

January 1,2008 -December 31,2008

Salaries &Allowances

5,690,566

1,720,013

5,552,591

Contribution toProvident Fund& Other Funds

_

132,222

609,815

EstimatedValue ofBenefits

2,340,000

518,780

-

Total

8,030,566

2,371,015

6,162,406

Presently, 3M India Limited does not have a scheme for grant of stock options either to the Executive Directors or to other employees.

The Non-Executive Directors do not draw from the Company any remuneration other than sitting fees. Sitting fees paid to theNon-Executive Directors during the year 2008 are given below :

In Rupees

Name of the Director

Mr.B.S. Iyer

Mr.DJ. Balaji Rao

Mr. B.C. Prabhakar

Board Meeting

100,000

100,000

100,000

Committee Meetings

160,000

160,000

160,000

Total

260,000

260,000

260,000

Mr.Thomas P. Spencer and Mr. Richard Lee Becker waived payment of sitting fees.

20


Annual Report 2008

5. SHAREHOLDERS' / INVESTORS' GRIEVANCE COMMITTEE:

During the year under review, four Shareholder's/Investors' Grievance Committee meetings were held, the dates being,February 27, 2008, April 28, 2008, July 25, 2008 and October 29, 2008. The attendance of the members at the Shareholders' GrievanceCommittee Meeting held during the year was as follows:

Name of theCommittee Member

Mr.DJ. Balaji Rao

Mr.Bert O'Donoghue*

Mr.Ajay Nanavati**

Mr.B.S. Iyer

Mr.B.C.Prabhakar

No. of Meetings heldduring the tenure

4

3

1

4

4

No. of Meetingsattended

4

3

1

4

4

* Resigned as Member on September 30, 2008** Appointed as Member from October 1,2008

Mr. D. J. Balaji Rao, Non-Executive and Independent Director is the Chairman of the Committee and Mr. K. Ramesh Chandra,Company Secretary is the Compliance Officer of the Company.

The Shareholders' Grievance Committee is authorised to :

1. Monitor the system of share transfer transmission, sub-division, consolidation of share certificates and issue of duplicate certificates.

2. Deal with all investor related issues including redressal of complaints from shareholders relating to transfer of shares,non-receipt of annual report, etc.

3. To delegate such powers to Company's officers, as may be necessary including powers to approve transfers, transmissions,authenticate share certificates and to take other actions in relation to Shareholders' related matters.

The Company through its Registrar and Share Transfer Agents has resolved most of the investor grievances / correspondencewithin a period of 7 days from the date of their receipt except in cases that are constrained by disputes or legal impediments.The statistics of Shareholders complaints received / redressed, during the year 2008, furnished below :

No. of complaints relating to non-receipt of dividend warrants, Redemption /Interest warrants, Annual Reports, Share certificates, endorsement stickers & othersreceived during the year

No. of Shareholders complaints resolved during the year

No. of Shareholders complaints pending as on December 31, 2008

35

35

Nil

6. General Body Meeting:

Details of Annual General Meetings of the Company for the last three years:

Date

April 24, 2006

April 27, 2007

April 28, 2008

Meeting

AGM

AGM

AGM

Location

Hotel Leela Palace 23, Kodihalli, Airport Road, Bangalore - 560 008

Hotel The Capitol, Raj Bhavan Road, Bangalore - 560 001

The Chancery Pavilion, 135, Resident Road, Bangalore - 560 025

Time

10.00a.m.

10.00a.m.

10.00a.m.

7.

Details of Special Resolutions passed in the previous three AGMs : Nil

Postal Ballot

During the year 2008, there was no business, which had to be conducted through a postal ballot. At present, the Company does not haveany resolution to be decided by the Members by Postal Ballot.

DISCLOSURES

Related party transactions

The Company follows the following policy in disclosing the related party transactions to the Audit Committee :

A statement in summary form of transactions with related parties at arm's length price in the normal course of business.

All material individual transactions with related parties, which are not in the normal course of business and which are not onan arm's length basis.

21


3M India Limited

Disclosure of Accounting Treatment

The guidelines/accounting standards notified by Section 211(3C) of the Companies Act, 1956 and relevant provision of theCompanies Act, 1956 have been followed in preparation of the financial statements of the Company.

Risk Management

The Company has identified various risks and procedures to mitigate the same. The Audit Committee and the Board have reviewedthe same. When new risks are identified, the same would be then assessed, controls designed, put in place and enforced within afixed timeframe, as set.

Subsidiary Companies

The Company does not have any subsidiaries.

Capital Issues

The Company has not made any capital issues during the year 2008.

Details of non-compliance by the Company, penalties, and strictures imposed on the Company by Stock Exchange or SEBI or anystatutory authority,on any matter related to capital markets, during the last three years:

There have been no instances of non-compliance by the Company on any matter related to listing agreement with the stock exchanges.

Compliance with Mandatory Requirements

The Company has complied with all the mandatory requirements of this clause. As regards the non-mandatory requirements theextent of compliance has been stated in this report against each item.

8. MEANS OF COMMUNICATION:

Quarterly financial results, including the half year results are published in Business Standard and Financial Express;Samyukta Karnataka and The Times of India (Bangalore Edition). The annual audited accounts are likewise published. The half-yearly report is not separately sent to each household of the Shareholders. In accordance with the listing regulations, theCompany's audited and unaudited quarterly / half yearly / annual results are also posted in the SEBI's website under EDIFAR(Electronic Data Information Filing And Retrieval System). The Company's financial results are also displayed in the Company'swebsite: www.3m.com\in

9. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis report on the Company's activities during the year is published as part of theCompany's Annual Report. This report has been placed to the Company's Audit Committee.

10. SHAREHOLDERS

Details of the Directors seeking appointment/re-appointment at the ensuing AGM are provided in the Notice convening the AGM.

11. GENERAL SHAREHOLDER INFORMATION:

Annual General Meeting 2009

Financial Calendar :

a) Date of Book Closure

b) Dividend payment date

c) Financial results

d) Listing on Stock Exchanges

April 29, 2009The Chancery Pavilion

135, Residency Road, Bangalore - 560 025Time 10.30 a.m.

April 23, 2009 - April 29, 2009 (both days inclusive)

N.A.

Third / Fourth week of April, 2009 - unaudited results for the quarter ended March 2009.

Third / Fourth week of July, 2009 - unaudited results for the quarter and halfyear ended June 2009.

Third /Fourth week of October, 2009 - unaudited results for the quarter and ninemonths ended September 2009.

Third / Fourth week of February, 2010 - Audited Results for the quarter and year endedDecember31,2009.

The National Stock Exchange Limited, Mumbai (Code-3M INDIA)Bombay Stock Exchange Limited, Mumbai (Code - 523395)The Calcutta Stock Exchange Association, Calcutta (Code - 12027) *

' applied for voluntary delisting. Final Certificate ofdelisting is yet to be received.

22


Annual Report 2008

The Company has paid annual listing fees, as prescribed, to The National Stock Exchange Limited and Bombay Stock Exchange Limited,Mumbai for the financial year, 2008-2009.

Registrar & Share Transfer Agents :

Share registration and other investor related activities are carried out by our Registrar and Transfer Agents, M/s. Karvy ComputersharePrivate Limited for both Physical and Demat securities. Their address is appended below :

Karvy Computershare Private LimitedPlot no.17-24, Vithal Rao Nagar, Madhapur;Hyderabad - 500 034Tel: 040-23420816 / 824 Fax: 040-23420814E-mail : [email protected] Contact person : Mr. K. Subba Reddy

Share Transfer System:

Shares sent for transfer in physical form are registered and despatched within 15 days of receipt of the documents, if documents arefound to be in order. Shares under objection are returned within 15 days.

Monitoring of Share Transfers and other investor related matters are dealt with by the Shareholders' Grievance Committee. TheCompany's Registrars, M/s. Karvy Computershare Private Limited process the share transfers in respect of physical securities ona fortnightly basis and the processed transfers are approved by the authorized Executives of the Company also on afortnightly basis.

All requests for dematerialization of shares, which are in order are processed within 15 days and the confirmation isgiven to the respective depositories, i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India)Limited (CDSL).

Stock Price Data:

January 2008

February 2008

March 2008

April 2008

May 2008

June 2008

July 2008

August 2008

September 2008

October 2008

November 2008

December 2008

Bombay Stock Exchange (BSE)(in Rs.)

High

1,979,00

1,974.00

1,875,00

1,899,20

1,874.85

1,717,00

1,649.00

1,625.00

1,439.90

983,00

916.05

990.00

Low

1,821.00

1,858.55

1,782.00

1,756.05

1,850.00

1,650.00

1,578.05

1,583.00

1,160.00

920.00

916.05

920.00

National Stock Exchange (NSE)(in Rs.)

High

1,849.00

1,795.00

1,794.00

1,853.00

1,825.15

1,631.00

1,571.00

1,564.00

1,370.00

925.00

926.95

920.00

Low

1,875.00

1,964.00

1,815.00

1,853.10

1,825.15

1,670.00

1,632.00

1,618.00

1,411.00

946.00

926.95

932.90

23


Stock Performance :BSE Sensex Vs. 3M Share Price(Monthly Closing Price)

Crisil Index: Not applicable

Sensex 3M

20,000

3M India Limited

Distribution of Shareholding as on December 31,2008

Range

1

5001

10001

20001

30001

40001

50001

100001

of Shares No. of Shareholders % to total Shareholders

to 5000

to 10000

to 20000

to 30000

to 40000

to 50000

to 100000

and above

TOTAL

8,661

22

11

3

3

2

2

6

8,710

99.44

0.25

0.13

0.03

0.03

0.02

0.02

0.07

100.00

No. of Shares held

913,174

162,868

172,598

74,875

97,996

94,920

182,809

9,565,830

11,265,070

% to total Shares

8.11

1.45

1.53

0.66

0.87

0.84

1.62

84.92

100.00

24


Annual Report 2008

Shareholding pattern as on December 31, 2008

Category of Shareholder

A

1

a

b

c

d

e

2

a

b

c

d

B

1

a

b

c

d

e

f

gh

2

a

b

c

C

Shareholding of Promoter and promoter group

Indian

Individuals/Hindu Undivided Family

Central Government/State Governments

Bodies Corporate

Financial Institutions/Banks

Any Other

Sub-Total (A)(1)

Foreign

Individuals (Non-Resident Individuals/Foreign/lndividuals)

Bodies Corporate

Institutions

Any Other

Sub-Total (A)(2)

Total Shareholding of Promoter and Promoter Group*

A = (A)(1)+(A)(2)

Public Shareholding

Institutions

Mutual Funds/UTI

Financial Institutions/Banks

Central Government/State Governments

Venture Capital Funds

Insurance Companies

Foreign Institutional Investors

Foreign Venture Capital Investors

Any Other

Sub-Total (B)(1)

Non-Institutions

Bodies Corporate

Individuals

1. Individual shareholders holding nominal share capital up to Rs.1 lakh

ii. Individual shareholders holding nominal share capital in excess of Rs.1 lakh

Any Other

Trust

Non Resident Indians

Clearing Members

Sub-Total (B)(2)

Total Public Shareholding

B = (B)(1)+(B)(2)

Total (A)+(B)

Shares held by Custodians and against which Depository Receipts have been issued

Grand Total (A)+(B)+(C)

Number ofShareholders

-

-

-

-

-

-

1

-

-

1

1

17

1

-

-

1

12

-

-

31

229

8,351

4

1

83

10

8,678

8,709

8,710

-

8,710

TotalNumber of

Shares

-

-

-

-

-

-

8,562,000

-

-

8,562,000

8,562,000

759,023

20

-

-

60

531,553

-

-

1,290,656

369,683

917,940

107,580

100

16,551

560

1,412,414

2,703,070

11,265,070

-

11,265,070

Percentage ofShareholding

76.00

76.00

76.00

6.74

0.00

-

-

0.00

4.72

-

-

11.46

3.28

8.15

0.95

0.00

0.15

0.00

12.54

24.00

100.00

100.00

None of the Promoters have pledged their shares as on December 31, 2008

25


3M India Limited

DEMATERIALISATION OF SHARES AND LIQUIDITY

22.68 % of the total equity capital was held in dematerialised form as on December 31, 2008.

Outstanding GDRs/Warrants, Convertible Bonds, conversion date and likely impact on equity: Not applicable

Plant Locations: Address for correspondence

Plot No. 48-51, Electronics City, Hosur Road, Bangalore - 560 100 C9'S ere

Plot No. 48-51, Electronics City, Hosur Road,Plot No.8, Moraiya Industrial Area;Tal Sanand, Bangalore - 560 100Sarkhej Bavla Highway, Ahmedabad - 382 213

Corporate Office:Plot No.B-20, MIDC; Ranjangaon Industrial AreaTal:Shirur, Dist: Pune; Pin :412 210 Concorde Block, UB City, 24, Vittal Mallya Road,

Bangalore - 560 001

NON-MANDATORY REQUIREMENTS

The Company has a Non-Executive Chairman and his official expenses are reimbursed. However, no separate Chairman office ismaintained at the Company's expense.

As on date, there is no Independent Director having term of office exceeding nine years on the Board of the Company.

Remuneration Committee

Presently, the Company does not have a Remuneration Committee.

Shareholders' Rights

The Company's half yearly results are published in English Newspaper having a circulation all over India and in Kannada newspaper(having circulation in Bangalore) the same are not sent to the shareholders of the Company. Significant events of the Company arebeing disclosed to the Stock Exchanges from time to time.

Audit qualifications

There were no qualifications by the Auditors in their report for the financial year ended December 31, 2008.

Training of Board Members

Presently, the Company does not have any training programme for the Board members.

Mechanism for evaluating non-executive Board Members

Presently, the Company does not have such a mechanism as contemplated for evaluating the performance of non-executive Boardmembers.

Whistle-Blower policy

Presently, the Company does not have a Whistle-Blower policy. No personnel of the Company has been denied access to any of theDirectors of the Company.


Place : Bangalore AjayNanavati B.V.ShankaranarayanaRaoDate : February 27, 2009 Managing Director Whole-time Director

26


Annual Report 2008

Certificate by Chief Executive Officer (CEO) and Chief Financial Officer (CFO)

We hereby certify that:

(a) We have reviewed financial statements and the cash flow statement for the year ended December 31, 2008 and that to the best of

our knowledge and belief:

(i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might

be misleading;

(ii) these statements together present a true and fair view of the Company's affairs and are in compliance with existing accounting

standards, applicable laws and regulations.

(b) To the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal

or violative of the Company's code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the

effectiveness of internal control systems of the Company pertaining to financial reporting and we have disclosed to the Auditors

and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the

steps we have taken or propose to take to rectify these deficiencies.

(d) We further confirm that:

(i) there were no significant changes in internal control over financial reporting during the year;

(ii) there were no significant changes in accounting policies during the year and

(iii) there were no instances of significant fraud of which we are aware and the involvement therein, of the management or an employee

having a significant role in the company's internal control system over financial reporting.


Place : Bangalore AjayNanavati B.V.ShankaranarayanaRaoDate : February 27, 2009 Managing Director Whole-time Director

27


3M India Limited

AUDITORS' CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCEUNDER CLAUSE 49 OF THE LISTING AGREEMENT(S)

To the members of 3M India Limited

We have examined the compliance of conditions of corporate governance by 3M India Limited for the year ended December 31, 2008,

as stipulated in clause 49 of the Listing agreement(s) of the said company with the stock exchange(s) in India.

The compliance of conditions of corporate governance is the responsibility of the company's management. Our examination was

carried out in accordance with the Guidance Note on Certification of Corporate Governance (as stipulated in Clause 49 of the Listing

Agreement), issued by the Institute of Chartered Accountants of India and 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 Agreement(s).

We 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.

Usha A NarayananPartner

Membership Number 23997

For and on behalf ofPlace : Bangalore Lovelock & LewesDate : February 27, 2009 Chartered Accountants

28


Annual Report 2008

AUDITORS' REPORT TO THE MEMBERS OF 3M INDIA LIMITED

1. We have audited the attached Balance Sheet of 3M India Limited as at December 31, 2008, and the related Profit and LossAccount and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference tothis report. These financial statements are the responsibility of the company's management. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. 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 ouropinion.

3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment)Order, 2004 (together'the Order'), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of TheCompanies Act, 1956 of India (the 'Act') and on the basis of such checks of the books and records of the company as weconsidered appropriate and according to the information and explanations given to us, we give in the Annexure a statementon the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary forthe purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from ourexamination of those books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with thebooks of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply withthe accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors, as on December 31, 2008 and taken on record by theBoard of Directors, none of the directors is disqualified as on December 31, 2008 from being appointed as a director interms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financialstatements together with the notes thereon and attached thereto, give, in the prescribed manner, the information requiredby the Act and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the company as at December 31, 2008;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.



For and on behalf ofPlace: Bangalore Lovelock & LewesDate : February 27, 2009 Chartered Accountants

29


3M India Limited

ANNEXURE TO AUDITORS' REPORT

Referred to in paragraph 3 of the Auditors' Report of even date to the members of 3M India Limited on the financial statements for the

year ended December 31, 2008

1. (a) The company is maintaining proper records showing full particulars including quantitative details and situation of fixed

assets.

(b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the

items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and the

nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management

during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not

been disposed off by the company during the year.

2 (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year. In

respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency

of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and

adequate in relation to the size of the company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of

inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register

maintained under Section 301 of the Act and accordingly, paragraphs iii(b), iii(c) and iii(d) of the Order, are not applicable.

(b) The company has not taken any loans secured or unsecured, from companies, firms or other parties covered in the register

maintained under Section 301 of the Act and accordingly, paragraphs iii(f) and iii(g) of the Order, are not applicable.

4. In our opinion and according to the information and explanations given to us, having regard to the explanation that certain

items purchased are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations,

there is an adequate internal control system commensurate with the size of the company and the nature of its business for the

purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books

and records of the company, and according to the information and explanations given to us, we have neither come across nor

have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. In our opinion and according to the information and explanations given to us, there are no transactions made in pursuance of

contracts or arrangements entered into the register in pursuance of Section 301 of the Act and exceeding the value of Rupees

Five Lakhs in respect of any party during the year, which have been made at prices which are not reasonable having regard to

the prevailing market prices at the relevant time.

6. The company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the

rules framed there under.

7. In our opinion, the company has an internal audit system commensurate with its size and nature of its business.

8. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of

Section 209 of the Act for any of the products of the company.

9. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion,

the company is generally regular in depositing the undisputed statutory dues including provident fund, investor education

and protection fund, employees' state insurance, income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty, cess

and other material statutory dues as applicable with the appropriate authorities

30


Annual Report 2008

(b) According to the information and explanations given to us and the records of the company examined by us, the particulars

of dues of income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty and cess as at December 31, 2008 which

have not been deposited on account of a dispute, are as follows

Name ofthe statute

IncomeTax Act, 1961

Nature ofDues

Income Tax

AmountClaimed

23,124,330

Period to whichthe amount relates

Assessment year2005-06

Forum where thedispute is pending

Additional Commissionerof Income Tax

10. The company has no accumulated losses as at December 31, 2008 and it has not incurred any cash losses in the financial year

ended on that date or in the immediately preceding financial year.

11. In our opinion, and 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 during the year.

12. During the course of our examination of the books and records of the company, carried out in accordance with the generally

accepted auditing practices in India, and according to the information and explanations given to us, we have neither come

across any instance of fraud on or by the company, noticed or reported during the year, nor have we been informed of such case

by the management.

13. The other clauses, xi, xii, xiii, xiv, xvi, xvii, xviii, xix and xx of paragraph 4 of the Order are not applicable in the case of the company

for the current year, since in our opinion there is no matter which arises to be reported in the aforesaid order.



Place : BangaloreDate : February 27, 2009

For and on behalf ofLovelock & Lewes

Chartered Accountants

31


BALANCE SHEET AS AT DECEMBER 31, 2008

The schedules referred to above and Notes thereon form an integral part of the Accounts

This is the Balance Sheet referred to in our For and on behalf of the Boardreport of even date

3M India Limited

ScheduleNumber

SOURCES OF FUNDS

Shareholder's Funds

Capital 1

Reserves and Surplus 2

APPLICATION OF FUNDS

Fixed Assets

Gross Block 3

Less: Depreciation

Net Block

Capital Work in Progress

Net Deferred Tax Asset [Schedule 1 4, Note 1 8(b)]

Current Assets, loans and advances

Inventories 4

Sundry Debtors 5

Cash and Bank Balances 6

Other Current Assets 7

Loans and Advances 8

Less: Current Liabilities and Provisions

Liabilities 9

Provisions 10

Net Current Assets

Notes to Accounts 14

2008Rs.

112,650,700

3,364,903,708

3,477,554,408

1,668,548,542

508,598,909

1,159,949,633

273,269,625

1,433,219,258

51,248,757

1,059,699,112

1,085,957,006

524,835,661

149,697

613,997,909

3,284,639,385

1,169,499,371

122,053,621

1,291,552,992

1,993,086,393

3,477,554,408

2007Rs.

1 1 2,650,700

2,790,354,621

2,903,005,321

1,008,773,159

442,095,349

566,677,810

407,554,966

974,232,776

43,255,607

675,670,396

837,204,487

959,909,199

3,999,208

490,457,033

2,967,240,323

1,002,749,467

78,973,918

1,081,723,385

1,885,516,938

2,903,005,321

Usha A NarayananPartnerMembership No: 23997For and on behalf ofLovelock & LewesChartered Accountants

Place: BangaloreDate: February 27,2009




32


Annual Report 2008

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31,2008

ScheduleNumber

INCOME

Sales

Less: Excise Duty

Other income 1 1

EXPENDITURE

Materials 12

Manufacturing and Other Expenses 13

Depreciation

Profit for the year before taxation

Provision for Income Tax (Schedule 14, Note 18)

- Current Tax

- Deferred Tax

- Fringe Benefit Tax

Profit for the year after taxation

Profit brought forward from previous year

Profit carried to Balance Sheet

2008Rs.

7,800,789,363

374,197,645

7,426,591,718

97,455,820

7,524,047,538

4,267,603,309

2,273,923,928

72,292,207

6,613,819,444

910,228,094

317,099,409

(7,993,150)

26,572,748

574,549,087

2,692,139,621

3,266,688,708

2007Rs.

6,466,963,575

361,385,189

6,105,578,386

84,968,901

6,190,547,287

3,253,481,087

1,811,858,907

58,922,643

5,124,262,637

1,066,284,650

375,313,650

(6,747,403)

20,890,568

676,827,835

2,015,311,786

2,692,139,621

Earnings Per Share - Basic and diluted(Schedule 14, Note 20)

Notes to Accounts

51.00 60.08

14

The schedules referred to above and notes thereon form an integral part of the Accounts

This is the Profit and Loss Account referred to in ourreport of even date

For and on behalf of the Board






33


3M India Limited

SCHEDULES TO ACCOUNTS

2008Rs.

2007Rs.

SCHEDULE 1

SHARE CAPITAL

AUTHORISED

11,265,070 (2007 :11,265,070) Equity Shares of Rs. 10 each

ISSUED, SUBSCRIBED AND PAID UP

11,265,070 (2007 :11,265,070) Equity Shares of Rs. 10 each

Note: Of the above 8,562,000 equity shares (2007: 8,562,000 equity

shares) are held by 3M Company, USA, Holding Company

SCHEDULE2

RESERVES AND SURPLUS

General Reserves

Profit and Loss Account

Securities Premium account

112,650,700

112,650,700

112,650,700

3,225,000

3,266,688,708

94,990,000

3,364,903,708

112,650,700

112,650,700

112,650,700

3,225,000

2,692,139,621

94,990,000

2,790,354,621

34

SCHEDULE TO ACCOUNTS

SCHEDULES

FIXED ASSETS [Schedule 14, Note 1 (b) and (c)]

Particulars

Freehold Land

Leasehold Land

(Refer Note below)

Goodwill

Factory Buildings

Leasehold Improvements

Plant and Machinery

Data Processing Equipments

and Software

Furniture, Fixtures and

Office Equipments

Vehicles

2007

GROSS BLOCK AT COST

2007Rs.

25,153,562

45,809,456

60,017,170

98,731,151

177,289,780

434,479,816

96,130,247

68,447,723

2,714,254

1,008,773,159

793,730,647

AdditionsRs.

-

-

-

318,026,570

1,474,810

274,459,570

804,740

80,833,029

252,030

675,850,749

312,957,996

Sale/Deletions

Rs.

2,358,420

-

-

9,544,109

-

3,080,088

24,702

1,068,047

-

16,075,366

97,915,484

2008Rs.

22,795,142

45,809,456

60,017,170

407,213,612

178,764,590

705,859,298

96,910,285

148,212,705

2,966,284

1,668,548,542

1,008,773,159

DEPRECIATION/AMORTISATION

2007Rs.

-

-

60,017,170

24,600,136

14,266,861

199,034,197

95,097,580

47,190,825

1,888,580

442,095,349

475,370,162

AdditionsRs.

-

-

-

4,959,751

18,328,910

39,552,910

1,152,818

8,048,833

248,985

72,292,207

58,922,643

Sales /Deletions

Rs.

-

2,620,749

-

2,449,786

24,702

693,410

5,788,647

92,197,456

2008Rs.

-

-

60,017,170

26,939,138

32,595,771

236,137,321

96,225,696

54,546,248

2,137,565

508,598,909

442,095,349

Capital Work in Progress [including capital advance Rs. 22,191,849 (2007: Rs. 38,530,259)]

NET BLOCK

2008Rs.

22,795,142

45,809,456

380,274,474

146,168,819

469,721,977

684,589

93,666,457

828,719

1,159,949,633

273,269,625

1,433,219,258

2007Rs.

25,153,562

45,809,456

-

74,131,015

163,022,919

235,445,619

1,032,667

21,256,898

825,674

566,677,810

407,554,966

974,232,776

IDCD-ao

rooooo

Note: Leasehold land represents amount paid to Maharashtra Industrial Development Corporation for land to be purchased on 95 years lease, for which compliance with certain conditionsas mentioned in the License Agreement and registration is pending as on date.


3M India Limited


2008Rs.

2007Rs.

SCHEDULE4

INVENTORIES

[Schedule 14, Note 1(d)]

Raw Materials

[including in-transit Rs. 49,400,949 (2007: Rs.51,805,449)]

Packing Materials

Semi Finished Goods

Finished Goods

Traded Goods

[including in-transit Rs. 65,567,745 (2007 : Rs.54,159,459)]

Stores and Spares

SCHEDULES

SUNDRY DEBTORS

(Secured)

Over six months

Others

(Unsecured)

Over six months

- considered good

- considered doubtful

Others

- considered good

Less: Provision for doubtful debts

SCHEDULE6

CASH AND BANK BALANCES

Cash on hand

With Scheduled Banks:

- Current Accounts

- Deposit Accounts*

- Margin Money Accounts**

* Includes deposit of Rs.3,100,000 (2007 : Rs. 10,200,000) under lien

** Held against guarantees issued

412,820,169

15,594,856

30,225,132

199,649,644

398,223,143

3,186,168

1,059,699,112

3,953,843

35,277,175

16,793,292

43,594,853

1,029,932,696

1,129,551,859

43,594,853

1,085,957,006

161,856

320,360,712

203,204,000

1,109,093

524,835,661

245,648,651

10,490,759

19,487,755

130,435,608

265,418,737

4,188,886

675,670,396

4,437,118

28,717,870

524,701

63,110,233

803,524,798

900,314,720

63,110,233

837,204,487

115,900

172,171,114

786,700,000

922,185

959,909,199

36


Annual Report 2008


2008Rs.

2007Rs.

SCHEDULE?

OTHER CURRENT ASSETS

Interest Accrued but not due

SCHEDULES

LOANS AND ADVANCES

(Unsecured, considered good unless otherwise stated)

Advances recoverable in cash or in kind or for value to be received*

Taxation (Net)

Deposits with Government departments and others*

Balances with Excise and Customs Authorities

Less: Provision for doubtful advances

* Includes doubtful advances and deposits of Rs. 14,140,189 (2007 : Rs. 8,016,689)

SCHEDULES

LIABILITIES

Sundry creditors for goods, expenses and services

- Dues to Micro, Small and Medium Enterprises (Schedule 14, Note 12)

- Others

Advance from customers/distributors

Other Liabilities

SCHEDULE 10-

PROVISIONS

Employee Benefits

- Gratuity (Schedule 14, Note 14)

- Leave Encashment / Compensated Absences

Fringe Benefit Tax (Net)

Sales Tax (Schedule 14, Note 19)

Other Payables (Schedule 14, Note 19)

149,697

149,697

258,375,783

70,623,593

173,191,833

125,946,889

628,138,098

14,140,189

613,997,909

1,498,148

1,007,702,685

87,535,259

72,763,279

1,169,499,371

24,377,824

70,064,283

4,471,320

22,247,194

893,000

122,053,621

3,999';208

3,999,208

263,072",344

46,818,747

151,377,023

37,205,608

498,473,722

8,016,689

490,457,033

928,748

852,978,586

77,174,475

71,667,658

1,002,749,467

8,609,215

46,194,959

997,550

17,472,194

5,700,000

78,973,918

37


3M India Limited


2008 2007Rs. Rs.

SCHEDULE 11

OTHER INCOME

Interest - Gross [tax deducted at source Rs.1 1,290,780(2007: Rs.1 2,1 91, 670)]

Exchange Gain (net)

Provision for doubtful debts written back (net)

Income from Sub-lease [tax deducted at source Rs. 2,334,603(2007: Rs.387,486)]

Balances / Provisions no longer required

Profit on Sale of Fixed Assets (net)

SCHEDULE 12

MATERIALS

Raw materials Consumed

Traded Goods - Purchased

50,629,407 53,802,733

11,140,583

19,515,380 10,277,769

10,302,750 1,710,000

4,807,000 8,037,816

12,201,283

97,455,820 84,968,901

1,585,991,347 1,382,668,278

2,894,367,781 1,900,115,859

Movement in Inventory :

Opening Stock

- Semi Finished Goods

- Finished Goods

- Traded Goods

Less : Closing Stock

- Semi Finished Goods

- Finished Goods

- Traded Goods

(Increase)/ Decrease in inventory

19,487,755

130,435,608

265,418,737

415,342,100

30,225,132

199,649,644

398,223,143

628,097,919

(212,755,819)

16,808,024

118,053,803

251,177,223

386,039,050

19,487,755

130,435,608

265,418,737

415,342,100

(29,303,050)

(212,755,819)

4,267,603,309

(29,303,050)

3,253,481,087

38


Annual Report 2008


2008Rs.

2007Rs.

SCHEDULE 13

MANUFACTURING AND OTHER EXPENSES

Employee Cost:

Salaries , wages and bonus [including provision for

Leave encashment Rs. 23,869,324 (2007: Rs. 8,823,700)] *

Contribution to Provident and other funds

[including provision for gratuity Rs. 29,604,695 (2007: Rs. 9,631,495)]

Staff welfare expenses *

Power, fuel and water *

Stores and spares consumed

Packing materials consumed

Excise Duty

Repairs and maintenance

- Building *

- Plant and machinery

- Others *

Lease rentals (Schedule 14, Note 17) *

Rates and taxes

Communication *

Travel and conveyance

Insurance

Legal and professional charges (Schedule 14, Note 5)

Selling, Distribution and Advertisement Expenses

Commission on sales

Freight outward (net)

Corporate Management Fees (Net) *

Interest to others

Directors' sitting fees

Bad debts written off

Provision for doubtful advances and deposits

Loss on Sale of Fixed Assets (net)

Exchange loss (net)

Miscellaneous expenses *

* Net of recoveries amounting to Rs. 20,087,168 (2007 : Rs. 18,632,524)recovered from 3M Electro & Communication India Private Limited,a subsidiary of 3M Company, St. Paul, USA.

782,200,793 635,208,272

96,224

67,524

20,252

27,575

11,814

,227

,586

945,949,606

57,063,751

30,141,072

111,267,094

6,389,585

,731

,213

,148 59,642,092

176,798,898

13,730,355

28,126,376

124,837,592

23,831,634

18,320,237

337,374,809

61,151,545

11,950,606

92,508,203

4,666,971

780,000

10,414,693

6,123,500

-

40,820,713

112,034,596

2,273,923,928

63,147,995

57,385,790

755,742,057

48,868,936

26,444,284

97,007,114

21,486,371

1 5,247,329

23,371,860

11,002,852 49,622,041

144,738,548

1 7,952,695

21,044,482

111,530,308

16,785,185

20,176,272

242,497,295

30,324,285

15,810,393

84,386,210

3,387,000

780,000

8,649,274

-

3,022,149

-

91,604,008

1,811,858,907

39


3M India Limited

NOTES TO ACCOUNTS

SCHEDULE 14

1 Statement on Significant Accounting Policies

a Method of Accounting

The Company adopts the historical cost concept and accrual basis in accordance with generally accepted accountingprinciples (GAAP) in India for the preparation of its accounts. The Financial Statements are prepared to comply in all materialaspects with all the applicable accounting principles in India, the applicable accounting standards notified u/s 211 (3C) of theCompanies Act, 1956 and the relevant provisions of the Companies Act, 1956.

b Fixed assets

Fixed assets are stated at original cost less accumulated depreciation. Cost includes invoice price and wherever applicablefreight, duties and taxes, related interest on specific borrowings upto the date of acquisition/installation and expensesincidental to acquisition and installation. Operating Software is capitalized along with fixed assets.

c Depreciation and amortisation

Depreciation on fixed assets other than leasehold improvements is provided on straight line method at the following ratesspecified which are equal to or higher than the principal rates specified in Schedule XIV to the Companies Act, 1956:

Buildings

Plant and Machinery

Data Processing Equipments and Software

Office Equipments

Furniture and Fixtures

Vehicles

Per Annum

3.34%

10.00%

20.00% to 33.33%

20.00%

6.67%

20.00%

Leasehold improvements are amortised over the period of lease as estimated by the management.

Application software are amortised over their useful life as determined by the management.

Inventories

Inventories are valued at lower of cost and net realisable value except in case of stores and spares which are valued at cost.

The costs are, in general, ascertained as under:

Raw Materials:

First in first out method based on actual cost.

Traded goods:

First in first out method based on actual cost. Goods lying at bonded warehouse are valued inclusive of customs duty.

Stock in transit is valued excluding customs duty.

Finished goods and Work in Progress:

Material cost on weighted average method plus labour and appropriate overheads and, where applicable, excise duty.

Provision for obsolescence is made wherever considered necessary based on the age of the stocks.

Foreign Currency Transactions

Transactions in foreign currency are recognised at the rates of exchange ruling on the dates of the transactions.

Liabilities/ assets in foreign currencies are reckoned in the accounts as per the following principles:

Foreign currency liabilities contracted for acquiring fixed assets are restated at the rates ruling at the year end and allexchange differences arising as a result of such restatement are adjusted to the profit and loss account.

All monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and allexchange gains/ losses arising there from are adjusted to the Profit and Loss Account, except those covered by forwardcontracted rates where the premium or discount arising at the inception of such forward exchange contract is amortised asexpense or income over the life of the contract.

Exchange differences on forward contracts are recognised in the Profit and Loss Account in the reporting period in whichthe exchange rates change. Any profit or loss arising on cancellation or renewal of such forward contracts is recognised asincome or expense for the year.

40


Annual Report 2008

NOTES TO ACCOUNTS

SCHEDULE 14

f Employee Benefits

Gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. TheCompany has an Employees Gratuity Fund managed by ICICI Prudential Life Insurance Company Limited. The Companyaccounts for the liability of Gratuity Benefits payable in future based on an independent actuarial valuation.

Superannuation

The Company makes contribution to the Superannuation Scheme, a defined contribution scheme, administered by ICICIPrudential Life Insurance Company Limited, based on a specified percentage of eligible employees salary. The Company'sobligation to the scheme is restricted to the contributions to the scheme.

Leave Encashment/ Compensated Absences

The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled toaccumulate leave subject to certain limits, for future encashment/ availment. The liability is provided based on the numberof days of unutilized leave at each balance sheet date on the basis of an independent actuarial valuation.

Provident Fund

Contributions payable in respect of Provident Fund, which is a defined contribution scheme, is charged to the Profit andLoss account. Refer Note 14 (i).

g Revenue Recognition

Sales are recognised when goods are despatched in accordance with the terms of sale and significant risks and rewards aretransferred and are recorded net of sales returns, trade discount, rebates and sales tax collected but includes excise duty,where applicable, interest and other income is accounted for on accrual basis except items of non recurring nature whichare accounted when received.

h Expenditure

Expenses are accounted for, on accrual basis and provision is made for all known losses and liabilities.

Excise duty and customs duty are accrued on the goods lying in the bonded warehouse at the year end.

Revenue expenditure on Research and Development is charged against the profit of the year in which it is incurred. Capitalexpenditure on research and development is shown as an addition to fixed assets.

i Leases

A lease is classified as an Operating Lease, if it does not transfer substantially all the risks and rewards incident to ownership.Lease rentals are charged to Profit and Loss Account on straight-line basis over the lease term, estimated by the management.

j Taxation

Taxes on income for the current year are determined on the basis of provisions of Income Tax Act, 1961.

Deferred Tax is recognized on timing differences between the accounting income and the taxable income for the year andquantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred Tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficientfuture taxable income will be available against which such deferred tax asset can be realised.

Fringe Benefit Tax is determined at current applicable rates on expenses falling within the ambit of'Fringe Benefit', asdefined under Income Tax Act, 1961.

k Provisions

Provisions are recognised when the company has a present obligation as a result of past events, it is probable that anoutflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where thecompany expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only whenreimbursement is virtually certain.

I Impairment

At the Balance Sheet date the company assesses whether there is any indication that an asset may be materially impaired.If such an indication exists, the company estimates the recoverable amount. If the carrying amount of the asset exceeds itsrecoverable amount, an impairment loss is recognised in the Profit and Loss Account to the extent carrying amount exceedsthe recoverable amount.

m Earnings per Share

Annualised Basic earning per equity share is arrived at based on net profit/(loss) after taxation to the basic/weightedaverage number of equity shares.

41


NOTES TO ACCOUNTS

SCHEDULE 14

3M India Limited

2008Rs.

2007Rs.

2 Contingent Liabilities not provided for :

a) Guarantees:

- issued by Company's Bankers

b) Letter of credit opened by banks

c) Claims against the Company not

- Customs Demands

for purchase of inventory / capital goods

acknowledged as debts:

27,605,733

-

3,119,000

- Employees State Insurance claim

- Income Tax matter

d) Sales Tax matters

3 Capital expenditure commitments (net of advances)

23,124,330

83,052,912

117,510,918

20,994,133

2,436,828

3,119,000

1,940,000

-

60,590,250

404,109,071

4 Quantitative Information in respect of goods manufactured and traded by the Company

A. Particulars of Capacity and Production:

LicensedClass of Goods Unit Capacity

[Note (iii)]

Self Adhesive Labels

Epoxy Resin

Paper and Paper Tapes

Paint Polishes

Abrasives

Nos NA

Kgs NA

Nos NA

Nos NA

Nos NA

InstalledCapacity[Note(i)]

50,000,000(40,000,000)

23,000,000(23,000,000)

NA

NA

NA

Production

47,140,296(33,596,758)

3,704,564(2,464,656)

28,831,643(26,192,548)

2,851,750(1,547,542)

45,219,169(53,821,238)

Notes:

i) Installed capacity is as certified by the management and relied upon by the auditors without verification as this is a technicalmatter.

ii) Figures in brackets relate to the previous year.

iii) Includes products which are non standard having various sizes and measurement.

42


Annual Report 2008

NOTES TO ACCOUNTS

SCHEDULE 14

B. Particulars of Opening and Closing Stock of Stocks in Trade

Class of Goods Unit* Opening StockQuantity Value

Rs.

Closing StockQuantity Value

Rs.

Manufactured

Self Adhesive Labels Nos

Epoxy Resin Kgs

Paper and Paper Tapes Nos

Paint Polishes Nos

Abrasives Nos

Others (individually less than 10% of the total stock)

Traded


Surgical and Dental Products Nos

Paint Polishes Nos

Abrasives Nos

Others (individually less than 1 0% of the total stock)

3,607,712(2,835,01 7)

21,723(54,857)

1,526,018(2,059,165)

224,484(325,443)

4,028,823(6,413,725)

13,835(9,683)

273,269(156,658)

133,270(469,283)

8,193,022(2,479,403)

30,816,601(20,539,092)

2,772,147(6,909,756)

20,356,659(20,131,146)

10,788,358(10,080,761)

21,832,525(32,647,441)

43,869,318(27,745,607)

130,435,608(118,053,803)

84,945,177(24,748,405)

62,345,953(55,087,538)

15,779,471(29,055,187)

57,396,047(43,490,588)

44,952,089(98,795,505)

265,418,737(251,177,223)

4,526,782(3,607,712)

7,726(21,723)

1,410,932(1,526,018)

199,099(224,484)

4,754,611(4,028,823)

102,247(13,835)

341,526(273,269)

150,992(133,270)

7,419,731(8,193,022)

58,634,963(30,816,601)

1,079,238(2,772,147)

30,101,319(20,356,659)

12,329,690(10,788,358)

34,211,763(21,832,525)

63,292,671(43,869,318)

199,649,644(130,435,608)

92,508,104(84,945,177)

91,588,476(62,345,953)

20,356,802(15,779,471)

88,609,244(57,396,047)

105,160,517(44,952,089)

398,223,143(265,418,737)

Note: Figures in brackets relate to the previous year

* includes products which are non standard having various sizes and measurement

43


3M India Limited

NOTES TO ACCOUNTS

SCHEDULE 14

C. Particulars of turnover

Class of Goods Unit*



Epoxy Resin Kgs

Paper and Paper Tapes Nos

Paint Polishes Nos

Abrasives Nos

Others (individually less than 10% of the total turnover)

D. Particulars of Purchase of Traded Goods

Class of Goods Unit*



Paint Polishes Nos

Abrasives Nos

Others (individually less than 10% of the total turnover)

Note: Figures in brackets relate to the previous year* includes products which are non standard having various sizes and measurement

2008Rs.

5 Auditors Remuneration*(Included under legal and professional charges in schedule 13)(excluding service tax)

- Audit fees 2,050,000- Tax Audit Fees 600,000- Certification and other services 1,160,000- Reimbursement of expenses 57,814

* excluding service tax

TurnoverQuantity Value

Rs.

46,628,856(33,007,225)

12,453,564(1,338,946)

3,718,561(2,497,790)

28,946,729(26,725,695)

3,985,823(2,321,968)

97,618,945(81,836,228)

Quantity

496,044(187,314)

12,521,821(1,455,557)

1,126,410(337,454)

52,352,273(31,343,707)

1,889,155,530(1,758,767,450)

1,118,938,618(806,265,955)

552,733,193(523,374,547)

856,955,576(698,224,467)

484,676,280(340,666,188)

1,275,865,164(1,130,405,231)

1,248,267,357(847,874,548)

7,426,591,718(6,105,578,386)

ValueRs.

518,042,502(502,780,313)

758,486,266(427,392,336)

128,818,118(80,175,306)

418,851,037(311,994,538)

1,070,169,858(577,773,366)

2,894,367,781(1,900,115,859)

2007Rs.

1,700,000600,000

1,450,00089,325

44


Annual Report 2008

NOTES TO ACCOUNTS

SCHEDULE 14

6 Value of imports on C.I. F basis:(excluding Goods in transit)- Raw Materials- Traded Goods- Stores and Spares- Capital Goods

7 Expenditure in Foreign Currency

- Travelling Expenses- Others (net of tax)

8 Raw Materials Consumed

Class of Goods Unit Quantity

Abrasives Linear Yard 413,908

Films Linear Yard 673,777

Films Rolls 43,974

Inks Gallons 41,228

Tapes Numbers 5,779,325

Epoxy Kilograms 2,731,791

Paint Polishes Gallon 198,260

Dyneon Sq Mtr 349,305Others (individually less than 10% ofthe total material consumed)

%

9 Value of Imported and Indigenous Raw Materialand Stores and Spares consumed(As certified by the Management)Raw Materials

Imported 83%Indigenous 17%

1 00%

Stores and SparesImported 25%Indigenous 75%

100%

10 Earnings in Foreign Exchange:

Export of goods calculated on FOB basis

Freight and Insurance on exports

2008Rs.

1,173,318,6391,959,093,221

5,376,364151,051,275

14,411,05997,957,946

2008Value

Rs

128,412,337

171,714,632

195,778,064

78,602,732

353,557,320

281,160,579

35,298,947

60,189,460

281,277,2761,585,991,347

2008Value

Rs.

1,316,372,818269,618,529

1,585,991,347

7,535,26822,605,804

30,141,072

2008Rs.

42,284,005

1,599,144

2007Rs.

796,288,4281,173,926,394

6,293,29732,310,008

17,693,71074,904,748

2007Quantity Value

Rs

380,424 78,407,883

916,846 225,036,240

32,288 161,440,402

110,591 115,696,202

3,615,201 187,758,151

2,786,563 354,311,372

1 25,499 38,076,397

93,293 30,374,378

191,567,253

1,382,668,278

2007% Value

Rs.

71% 981,694,47829% 400,973,800

100% 1,382,668,278

9% 2,379,98691% 24,064,298

100% 26,444,284

2007Rs.

39,140,519

1,753,162

45


3M India Limited

NOTES TO ACCOUNTS

SCHEDULE 14

2008Rs.

2007Rs.

11 Research and Development Expenses:

Recurring ExpensesCapital Expenditure

12 Disclosure of dues / payments to Micro, Small and Medium enterprises to the extent suchenterprises are identified by the company.

(a) (i) The principal amount remaining unpaid as at year end

(ii) Interest due thereon remaining unpaid as at year end

(b) The amount of interest paid by the buyer in terms of section 16 of the Micro, Smalland Medium Enterprises Development Act, 2006, along with the amount of thepayment made to the supplier beyond the appointed day during each accounting year:

(i) Delayed payment of principal amount paid beyond the appointed date duringthe entire accounting year.

(ii) Interest actually paid under Section 16 of the act, during the entire accounting year.

(c) The amount of interest due and payable for the period of delay in making payment(which have been paid but beyond the appointed day during the year) but withoutadding the interest specified under the Micro, Small and Medium EnterprisesDevelopment Act, 2006

(d) The amount of interest accrued and remaining unpaid as at year end

(i ) Total interest accrued during the year

(ii )Total Interest remaining unpaid out of the above as at year end.

(e) The amount of further interest remaining due and payable even in the succeedingyears, until such date when the interest dues as above are actually paid to thesmall enterprise, for the purpose of disallowance as a deductible expenditureunder section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.

Notes : The above information has been determined based on vendors identified by thecompany and confirmed by the vendors, which have been relied upon by the auditors.

13. The Company has not made provision for warranty in respect of certain goods consideringthat the company can claim the warranty cost from the original supplier.

14. Employee Benefits

i) The company has recognised, in the profit and loss account for the year endedDecember 31,2008 an amount of Rs. 66,619,532 (2007: Rs.53,516,500) under definedcontribution plans.

Benefits (Contribution to)

Provident FundSuperannuation Fund

Employee State Insurance Corporation

Total

ii) The company operates post retirement defined benefit plan for retirementgratuity which is funded.

iii) Details of the post retirement gratuity plan are as follows:

I Reconciliation of opening and closing balances of obligationa. Obligation as at the beginning of the yearb. Current Service Costc Interest Costd. Actuarial (Gain)/Losse. Benefits Paid

f. Obligation as at the end of the year

7,036,465 3,928,33014,757,362 13,241,302

1,208,164 742,147

289,984 186,601

180,177

109,807

143,319

43,282

31,144,302 25,102,95834,650,248 27,804,381

824,982 609,161

66,619,532 53,516,500

47,620,6416,885,2104,286,227

21,087,476(7,743,571)

72,135,983

37,325,5355,291,5442,883,6313,632,777

(1,512,846)

47,620,641

46


Annual Report 2008

NOTES TO ACCOUNTS

SCHEDULE 14

2008Rs.

2007Rs.

II Change in Plan Assets (Reconciliation of opening and closing balances)a. Fair Value of Plan Assets as at the beginning of the yearb. Expected return on Plan Assetsc Actuarial Gain/(Loss)d. Contributionse. Benefits Paid

f. Fair Value of Plan Assets as at the end of the year

III Reconciliation of fair value of assets and obligationsa. Present Value of Obligation as at the beginning of the yearb. Fair value of Plan Assets as at the end of the yearc. Amount recognised in the Balance Sheet

IV Expense recognised during the yeara. Current Service Costb. Interest Costc Expected return on Plan Assetsd. Actuarial (Gain)/Losse. Expense recognised during the year

The expense is disclosed in the line item-Contribution to provident and other funds.

39,011,4263,119,799(465,581)

13,836,086(7,743,571)

47,758,159

26,076,379

2,030,426

146,03112,271,436(1,512,846)39,011,426

72,135,983 47,620,641

(47,758,159) (39,011,426)24,377,824 8,609,215

6,885,2104,286,227

(3,119,799)21,553,057

29,604,695

5,291,544

2,883,631

(2,030,426)

3,486,746

9,631,495

V Assumptionsa. Discount Rate (per annum)b. Interest Rate (per annum)c Estimated Rate of return on Plan Assets (per annum)d. Rate of Escalation in Salary (per annum)

5.70%7.50 %

7.50%

5.00%

8.15%

7.50%

7.50%5.00%

Note: 1) The estimates of future salary increases, considered in actuarial valuation take account of inflation, seniority, promotionand other relevant factors such as supply and demand in the employment market.

2) As per management estimate, contribution of Rs. 15,000,000 is expected to be paid to the plan during the year endingDecember 31,2009.

15. (a) Managerial Remuneration paid by the Company *

Salary and Allowances

Contribution to Provident and other funds

Estimated value of benefits

12,963,170

742,037

2,858,780

16,563,987

14,061,712

543,416

3,432,562

18,037,690

Excluding contribution to gratuity fund and provision for leave encashment

b) Computation of profit in accordance with Section 198(1) read with Sec 309(5) of the

Companies Act, 1956 for calculation of Managerial Remuneration

Profit before Taxation (as per books) 910,228,094 1,066,284,650

Add: 1.

2

3.

4

5.

Managerial Remuneration

Depreciation charged in the accounts

Provision for doubtful debts

Loss on sale of Fixed Assets (net)

Directors sitting fees

16,563,987

72,292,207

6,123,500

-

780,000

1,005,987,788

18,037,690

58,922,643

-

3,022,149

780,000

1,147,047,132

47


3M India Limited

NOTES TO ACCOUNTS

SCHEDULE 14

Less: 1. Depreciation as per Section 350 of the Companies Act, 1956

2 Profit on sale of Fixed Assets (net)

3. Provision for doubtful debts and advances written back

Profit as per Section 198 of the Companies Act, 1956

10% of the above (2007: 10%)

Remuneration paid during the year

2008Rs.

72,292,207

6,412,634

24,322,380

103,027,221

902,960,567

90,296,057

16,563,987

2007Rs.

58,922,643

18,315,585

77,238,228

1,069,808,904

106,980,890

1 8,037,690

Note : Mr. Ajay Nanavati was appointed as Managing Director on October 1,2008 and the Company has applied for approval from Central Governmentwith respect to residential status as per Part 1 (e) of Schedule XIII of the Companies Act, 1956 and the approval is awaited. The above saidappointment is subject to approval from Shareholders in the ensuing Annual General Meeting.

16. Related Party Transactions

(A) Summary of the monetary value of the transactions with the related parties are as follows:

L Expenses:

ia. Purchase of Materials

ib. Sales promotion expenses

ic. Remuneration to Directors

id. Other Services

II. Income

iia. Sale of Goods

iib. Reimbursement of Cross Charges / Expenses

III. Purchase of Capital Goods

IV. Balances

iva. Advance Received

ivb. Outstanding receivables

ivc. Outstanding payables

ivd. Capital Advances Paid

Notes:

Holding

Company

[B(i>]

Rs.

911,331,818(822,618,365)

448,606(205,194)

-

-

-

-1

204,588(508,932)

-

-

22,869,364(202,871)

76,675,093(76,675,093)

667,055(1,098,479)

103,468,261(99,797,852)

-

(5,915,400)

1. The above does not include related party transactions with

Fellow Key Total

Subsidiaries Management

[B(ii)l

Rs.

1,782,181,081(909,609,171)

559,613(283,462)

-

-

92,619,690(74,195,023)

42,079,417(38,017,618)

20,087,168(18,632,524)

14,845,752(182,413)

-

-

35,161,635(29,777,906)

180,878,972(200,414,522)

-

-

retiral funds, as key r

[B(iii)]

Rs. Rs.

2,693,512,899(1,732,227,536)

1,008,219(488,656)

16,563,987 16,563,987(18,037,690) (18,037,690)

92,619,690(74,195,023)

42,284,005(38,526,550)

20,087,168(18,632,524)

37,715,116(385,284)

76,675,093(76,675,093)

35,828,690(30,876,385)

284,347,233(300,212,374)

-

(5,915,400)

nanagement personnel who aretrustees of the funds cannot individually exercise significant influence on the retiral funds transactions.The above information has been determined to the extent such parties have been identified on the basis ofinformation available with the Company and relied upon by the auditors.Figures in brackets relates to the previous year.

48


Annual Report 2008

NOTES TO ACCOUNTS

SCHEDULE 14

Disclosure of transactions which are more than 10% of the total transactions of the same type with related parties during the year.

Relationship 2008Rs.

2007Rs.

Sale of Goods

3M Italy

3M Gulf Ltd

3M Lanka Ltd

3M Indonesia Ltd

Fellow Subsidiary

Fellow Subsidiary

Fellow Subsidiary

Fellow Subsidiary

15,429,408

9,689,729

7,420,842

4,673,505

138,409

27,650,180

6,956,880

1,233,233

Reimbursement of Cross Charges / Expenses

3M Electro & Communication India Private Ltd Fellow Subsidiary 20,087,168 18,632,524

Sales Promotion Expenses

3M Taiwan Ltd

Sumitomo 3M Ltd

Fellow Subsidiary

Fellow Subsidiary

307,461

248,231

195,391

50,433

Remuneration to Directors

Mr. Bert O' Donoghue

Mr. Ajay Nanavati

Mr. B.V. Shankaranarayana Rao

Key Management Personnel 8,030,566 11,999,713

Key Management Personnel 2,371,015

Key Management Personnel 6,162,406 6,037,977

Purchase of Capital Goods

3M Taiwan Limited

3M Canada Company

Fellow Subsidiary

Fellow Subsidiary

5,669,336

9,070,093

182,413

Outstanding receivables

3M Italia S.p.A.

3M Gulf Ltd

3M Electro & Communication India Private Ltd

Fellow Subsidiary

Fellow Subsidiary

Fellow Subsidiary

3,977,073

10,058,407

19,434,815 28,437,152

Outstanding Payables

Sumitomo 3M Ltd

3M United Kingdom PLC

Fellow Subsidiary

Fellow Subsidiary

31,628,243

51,665,047

32,235,708

1,696,630

Purchase of Materials

3M Asia Pacific Pte Ltd

3M Health Care Ltd - Japan

3M Korea

Sumitomo 3M Ltd

Fellow Subsidiary

Fellow Subsidiary

Fellow Subsidiary

Fellow Subsidiary

228,940,518

198,627,146

202,150,093

312,408,481

98,830,570

122,061,233

191,334,419

Other Services

3M Asia Pacific Pte Ltd Fellow Subsidiary 92,619,690 74,195,023

49


NOTES TO ACCOUNTS

3M India Limited

SCHEDULE 14

(B) Names of related parties and description of the relationship:

(i) Parties where control existsHolding Company

(ii) Fellow Subsidiaries:3M (East) A.G.3M (New Zealand) Ltd3M (Schweiz) A.G.3MA/S3M Ait Ltd3M Argentina S.A.C.I.F.I.A.3M Asset Management S.a.r.l.3M Australia Pty. Ltd3M Belgium S.A./N.V.3M Canada Company3M China Ltd3M Corporate Services B.V.3MDeutschlandGmbH3MdoBrasilLtdSMEccEuropaBV3M Electro & Communication India Private Ltd3MEspana,S.A.3MESPEAG3M Europe S.A.3M Financial Management Company3M France, S.A.3M German Holdings GmbH3M Global Capital S.a.r.l.3M Gulf Ltd.3M Health Care Ltd.3M Health Information Systems, Inc.3M Hellas Ltd3M Hong Kong Ltd3M Indonesia Kbyt3M Innovative Properties Company3M International Group B.V3M International Trading (Shanghai) Co., Ltd.3M Investment Management Corporation3M Italia S.p.A.3M Korea Health and Safety Ltd3M Korea Ltd3M Limited3M Malaysia SON. BHD3M Manufacturera Venezuela, S.A.3M Material Technology Co., Ltd.3MMexico,S.A.deC.V.3M Netherland B.V.3M New Zealand Ltd3MNorgeA/S3M Oesterreich GmbH3MAUSTBIOTRACE3M Film Construction (Shangai) Company Ltd3M International Trading (Shenzen) Company Ltd3M International Trading (Tianjin) Company Ltd3M South Africa (Proprietary) Ltd

(iii) Key Management Personnel

3M Company, St Paul, USA

3M Optical System Mfg. Co.3M Philipines Inc3M Poland Spz.o.o.3M Precision Optics, Inc.3M Puerto Rico, Inc.3M Russia3MSanayiVETicaretAS3MSante3MSanvetec3M Singapore Private Ltd3M South Africa (Proprietary) Ltd3M Spain3MSvenskaAB3M Sweden3MTaiwan Ltd3M Taiwan Optronics Corp.3M Technologies Private Ltd3M Telecommunications, Pouyet3MThailand Ltd3MTouch Systems, Inc.3M Traffic Safety Material3M Turkey3M United Kingdom Holdings PLC3M United Kingdom PLC3M Unitek Corporation3M Vietnam3MUnitekGmbHCUNO Engineered Products, Inc.CUNO Filtration Asia Pte. Ltd.CUNO Filtration SASCUNO IncorporatedCUNO Pacific Pty Ltd.Dyneon GmbH & Co. KGDyneon LLCHighJump Software, LLCKyuno Kabushiki Kaisha SumitomoLaboratories 3M Sante SASNadco Japan LtdRiker Laboratories, Inc.Seaside Insurance LimitedSecurity Printing and Systems Ltd.Sumitomo 3M LtdSuomen3MOyYamagata3MLtd3M Asia Pacific Pte Ltd3MBRCKNELL3M Korea Hightech Ltd3M Lanka Private Ltd3M Pakistan (Private) Ltd

Notes:

3M Pharmaceuticals Pty Ltd

Mr. Bert O'Donoghue (up to September 30,2008)

Mr. AjayNanavati(w.e.f October 1,2008)

Mr.B.V.Shankaranarayana Rao

None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactionshave been entered into during the year.The above information has been determined to the extent such parties have been identified on the basis of informationprovided by the Company, which has been relied upon by the auditors.

50


Annual Report 2008

NOTES TO ACCOUNTS

SCHEDULE 14

17. Assets taken on lease

The company has taken office premises, warehouse, residential premises, vehicles and office equipment under operating leaseagreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease isgenerally for eleven months to ninety six months. The minimum rental payments under the operating leases undernon-cancellable lease term as at December 31, 2008 is as under:

2008Rs.

2007Rs.

Lease rental charged to profit and loss accountMinimum lease payments not later than one yearMinimum lease payments later than one year but not later than five yearsMinimum lease payments later than 5 years

The company has entered in an agreement for sublease of office premises.The sublease is for a term of three years, expiring on October 31, 2010. The futureminimum lease under this sub-lease agreement is as under:

Minimum lease rentals upto one yearMinimum lease rentals later than one year but not later than five yearsMinimum lease rentals later than five years

18. Taxation

a)

176,798,898107,725,848332,860,769105,736,400

10,817,88610,368,996

144,738,548101,051,568318,567,960182,349,456

10,302,75021,186,882

b)

The tax year for the Company being March 31, the provision for taxation for the year is the aggregate of the provision madefor the 3 months ending March 31, 2008 and the provision based on the figures for the remaining 9 months upto December31, 2008. The ultimate tax liability will be determined on the basis of the figures for the period April 1, 2008 to March 31, 2009.Accounting for taxes on Income disclosure as per Accounting Standard 22. Major components of Deferred tax assets andliabilities on account of timing differences as at December 31, 2008 are :

DepreciationProvision for doubtful debtsProvisions allowed on payments, write off

Net Deferred Tax Asset

Net Deferred Tax (Credit) / Debit for the year

The tax impact for the above purpose has been arrived by applying a tax rate of 33.99% (2007 : 33.99%) being the prevailing taxrate for Indian companies under the Income Tax Act, 1961.

19. In accordance with Accounting Standard -29 on Provisions, Contingent Liabilities and Contingent Assets, as notified u/s 211(3C) of theCompanies Act, 1956, certain classes of liabilities have been identified as provision and accordingly regrouped separately as under:

Asset2008

Rs.

14,817,89067,695,434

82,513,324

51,248,757

(7,993,150)

2007Rs.

21,196,13337,340,783

58,536,916

43,255,607

(6,747,403)

Liability2008

Rs.

31,264,567

31,264,567

2007Rs.

15,281,309

15,058,309

Particulars

Sales Tax

Other Payables

2007Rs.

17,472,194

5,700,000

AdditionsRs.

4,775,000

ReversalsRs.

4,807,000

2008Rs.

22,247,194

893,000

The company sets up and maintains provisions for other trade payables when a reasonable estimate can be made. Theseprovisions are made based on estimates made by the management that are reviewed periodically and involve quick settlementsnot exceeding a period of two-three years in most cases.

20. Earnings Per Share (EPS)Profit attributable to Equity ShareholdersWeighted Average number of equity shares outstanding during the yearNominal value of Equity shareBasic and Diluted Earnings Per Share

574,549,08711,265,070

1051.00

676,827,83511,265,070

1060.08

51


NOTES TO ACCOUNTS

3M India Limited

SCHEDULE 14

2008Rs

2007Rs

21. Segment Report:Segment Revenue (net sale / income)a Industrial Marketsb Automotive and Specialty Materials Marketsc Health Care Marketsd Traffic and Safety Marketse Consumer and Office, Construction Marketsf Others *Total Segment RevenueLess : Inter segment revenueNet Sales / income from operations

Segment Results (Profit before interest and tax)

1,361,568,0242,490,229,0671,212,849,3721,467,560,960

852,100,29042,284,005

7,426,591,718

7,426,591,718

116,828,474319,944,58143,040,479

319,161,50848,388,124

6,599,742853,962,908

4,666,97160,932,157

910,228,094

1,131,426,2602,164,636,710

810,088,9001,222,028,624

737,638,34239,759,550

6,105,578,386

6,105,578,386

192,423,609346,544,13629,496,688

337,298,27492,786,6624,468,966

1,003,018,3353,387,000

66,653,3151,066,284,650

a Industrial Marketsb Automotive and Specialty Materials Marketsc Health Care Marketsd Traffic and Safety Marketse Consumer and Office, Construction Marketsf OthersTotal Segment ResultsLess : Interest expenseAdd: Other un-allocable income net off unallocable expenditureTotal Profit Before Taxation

Capital Employed (Segment Assets-Segment Liabilities)a Industrial Markets 463,158,402 225,990,469b Automotive and Specialty Materials Markets 1,356,837,534 766,094,294c Health Care Markets 209,587,656 113,255,648d Traffic and Safety Markets 424,995,526 267,803,944e Consumer and Office, Construction Markets 53,028,510 78,787,328f OthersTotal Capital Employed in segments 2,507,607,628 1,451,931,683Add: Unallocable corporate assets less corporate liabilities 969,946,780 1,451,073,638Total Capital Employed by the Company 3,477,554,408 2,903,005,321"includesDomestic Sales/ Income - 619,031Export Sales 42,284,005 39,140,519

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account theorganisation structure as well as the differential risks and returns of these segments.Segment revenue, results and Capital employed figures include the respective amounts identifiable to each of the segmentsand also amounts allocated on a reasonable basis. Other unallocable expenditure includes expenses incurred on commonservices provided to the segments which are not directly identifiable to the individual segments as well as expenses incurred ata corporate level which relate to the Company as a whole.The Company operates mainly to the needs of domestic market and export turnover is not significant in context of totalturnover. Accordingly, there are no reportable geographical segments.

22. 3M Company, USA the holding company has offered an 'General Employees Stock Purchase Plan' to the employees of thecompany. In accordance with the plan, the company during the year has deducted for remittance a sum of Rs 4,139,045(2007: Rs. 6,748,341) and cumulatively amounting to Rs. 14,004,295 (2007 Rs: 9,865,250) from the salary of the employees who haveopted for the plan. As of the year end a sum of Rs. 265,773 (2007: Rs. 348,322) is pending remittance to the holding company and thesame is included under Other Liabilities (Schedule 9).The company has considered the same for necessary Fringe Benefit Tax.

23. Previous year's figures have been regrouped / reclassified wherever necessary to conform to current year classification.

For and on behalf of the board

Place : BangaloreDate : February 27,2009




52


Annual Report 2008

CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2008

A. Cashflow from Operating Activities

Profit before Taxation

Adjustment for

Depreciation

Provision for doubtful Advances

Provision for doubtful debts written back (net)

Balances / Provisions no longer requried

Unrealised Foreign Exchange Loss/(Gain)

Profit on sale of Fixed Assets (net)

Loss on sale of Fixed Assets (net)

Interest income

Interest expenses

Operating Profit Before Working Capital changes

Adjustment for

(Increase)/ Decrease in Inventories

(Increase)/ Decrease in Debtors

(Increase)/ Decrease in Loans and Advances

Increase/ (Decrease) in Current Liabilities and Provisions

Cash Generated from Operations

Direct Taxes paid (net of refund)

Net Cash flow from Operating Activities

B. Cash flow from investing activities

Purchase of Fixed Assets

Proceeds from Sale of Fixed Assets

Interest Received

Net cash from / (used in) investing activities

C Cash flow from financing activities

Interest Paid

Net cash from / (used in) financing activities

Net cash flows during the year (A+B+C)

Cash and cash equivalents (Opening Balance)

Cash and cash equivalents (Closing Balance)

2008Rs.

910,228,094

72,292,207

6,123,500

(19,515,380)

(4,807,000)

(8,460,830)

(12,201,283)

-

(50,629,407)

4,666,971

897,696,872

(384,028,716)

(227,488,728)

(104,188,662)

190,072,264

372,063,030

(364,003,233)

8,059,797

(516,378,743)

22,488,002

54,478,918

(439,411,823)

(3,721,512)

(3,721,512)

(435,073,538)

959,909,199

524,835,661

2007Rs.

1,066,284,650

58,922,643-

(10,277,769)

(8,037,816)

1 73,482

-

3,022,149

(53,802,733)

3,387,000

1,059,671,606

(13,987,223)

(195,480,009)

(98,360,020)

161,079,913

912,924,267

(419,496,919)

493,427,348

(584,018,351)

2,695,879

54,013,483

(527,308,989)

(2,751,069)

(2,751,069)

(36,632,710)

996,541,909

959,909,199

Notes:1 The above Cash Flow Statement has been compiled from and is based on the Balance Sheet as at December 31, 2008 and the

related Profit and Loss Account for the year ended on that date.2 The above Cash Flow Statement has been prepared under indirect method in accordance with the Accounting Standard 3 as

notified u/s 211 (3C) of the Companies Act, 1956.3 Cash and cash equivalent comprise of Cash and Bank Balance including a deposit under lien of Rs. 3,100,000 (2007 : Rs. 10,200,000)4 Previous year's figures have been regrouped wherever necessary to confirm to current year's presentation.

This is the Cash Flow Statement referred to in ourreport of even date

For and on behalf of the Board



AjayNanavatiManaging Director



53


3M India Limited

Information pursuant to Part IV of Schedule VI to the Companies Act, 1956

Balance Sheet Abstract and Company's General Business Profile

I. Registration Details

Registration No.

Balance Sheet Date | ^__

Date Month Year

II. Capital raised during the year (Amount in Rs. Thousands)

Public Issue Rights Issue

III.

IV.

V.

13543

31

State Code

12

08

2009

Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities

Sources of Funds

Paid-up Capital

Secured Loans

Application of Funds

Net Fixed Assets* | 1433219 Investments

Net Current Assets** 1993086 Net Deffered Tax Assets

Total Assets

Reserves & Surplus

Unsecured Loans

Includes capital work-in-progress

Net of current liabilities and provisions

Performance of Company (Amount in Rs. Thousands)

Profit / (Loss) Before Tax

Earning per Share (in Rs.)

Generic Names of Three Principal Products / Services of Companyfas per monetary terms)

Item Code. No. (ITC Code)

Product Description COATED ABRASIVES

MASKING TAPES

Total Expenditure

Profit / (Loss) After Tax

Dividend Rate (%)


Product Description


Product Description

Signature to Schedules 1 to 14For and on behalf of the Board

Place : BangaloreDate : February 27,2009




54


Annual Report 2008

3M INDIA LIMITEDRegd Office: 48-51, Electronics City, Hosur Road,

Bangalore - 560 100

ATTENDANCE SLIP

I hereby record my presence at the Annual General Meeting ofthe Company at The Chancery Pavilion, 135 Residency Road,Bangalore 560025, at 10.30a.m. on Wednesday, April, 29, 2009

Signature of the attending Member / Proxy :

NOTE:

1. Shareholders / Proxyholders wishing to attend the meetingmust bring the Attendence Slip to the meeting and handoverat the entrance, duly signed.

2. Shareholders / Proxyholders desiring to attend the meetingshould bring their copy of the Annual Report for referenceat the meeting.

3M INDIA LIMITEDRegd Office: 48-51, Electronics City, Hosur Road,

Bangalore - 560 100

PROXYFORM

I/We.. ..of

..being a

Member/Members of above Company, hereby appoint

of

or failing him of

as my/our Proxy to attend and vote for me/us and on my/ourbehalf at the Annual General Meeting of the Company,to be held on Wednesday, April, 29,2009 and at The ChanceryPavilion, 135 Residency Road, Bangalore 560 025, at 10.30 a.m.any adjournment thereof.

Signed.

day of 2009.

Reference Folio

No. of shares

NOTES:

The Proxy must be returned so as to reach the RegisteredOffice of the Company, 48-51, Electronics City, Hosur Road,Bangalore - 560 100, in not less than FORTY-EIGHT HOURSbefore the time for holding the aforesiad meeting.

55


Dematerialisation of Shares

Dear Shareholder,

We wish to inform that the shares of our Company.,3M INDIA LTD have been admitted for dematerialisation with Depositories.

The ISIN Number allocated to the Company's equity shares is INE470A01017. You may like to convert the shares now held by

you in physical form into electronic/demat form through any of the SEBI registered Depository Participants (DP's) any where in

India. The Following are the advantages of holding shares in electronic/demat form:

* No bad deliveries.

* Transfer of shares from one account to other account.

* Reduced Paper work.

* No risk of loss, mutilation or theft of share certificates.

* No stamp duty for transfer of shares in electronic mode.

* Regular account status updates available from the DP at any point of time.

In view of the above, you are requested to open depository account with any of the SEBI registered DP if not opened earlier and

submit your physical share certificate's through your DP for the purpose of converting from physical form to electronic form.

You may please,feel free to contact or write to our Registrar andTransfer Agents at the below mentioned address for any queries

or clarifications in this regard:

Karvy Computershare Private Limited

Plot no.17-24, Vithal Rao Nagar, Madhapur;

Hyderabad-500 034

Tel: 040-23420816 / 824 Fax: 040-23420814

E-mail:[email protected] Contact person: Mr.K. Subba Reddy

K.Ramesh ChandraCompany Secretary


3M India LimitedPlot no. 48-51, Electronic CityHosur Road,Bangalore - 560 100

3m india ltd-08

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