temptation foods limited 08-09

8/8/2019 Temptation Foods Limited 08-09

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Temptation Foods LimitedAnnual Report 2008-09

its all in the


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COntentsIntroduction to Temptation Foods

2The Temptation of Sight 7

Our Products 10

Brands 12

The Temptation of Taste 15

The Year 2008-09 18

Q & A with the Managing Director & CEO 20Our Clientele 21

The Temptation of Touch 23

Profile of the Board of Directors 26

Our Social Initiatives 27

The Temptation of Smell

28Directors Report 32The Temptation of Hearing 43Management Discussion & Analysis 46Report on Corporate Governance 56

Auditors Report 66

Financial Statements

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FOrward lOOking statement

In this Annual Report, we have disclosed forward-looking

information to enable investors to comprehend our prospects

and take informed investment decisions. This report and other

statements - written and oral - that we periodically make, contain

forward-looking statements that set out anticipated results based

on the managements plans and assumptions. We have tried

wherever possible to identify such statements by using words

such as anticipate, estimate, expects, projects, intends,

plans, believes, and words of similar substance in connection

with any discussion of future performance.

We cannot guarantee that these forward-looking statements

will be realised, although we believe we have been prudent

in assumptions. The achievement of results is subject to risks,

uncertainties and even inaccurate assumptions. Should known or

unknown risks or uncertainties materialise or should underlying

assumptions prove inaccurate, actual results could vary materially

from those anticipated, estimated or projected. Readers should

bear this in mind.

We undertake no obligation to publicly update any forward-

looking statements, whether as a result of new information, future

events or otherwise.


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Temptatin is the rt f allpssibilities in life.

There is no morality attached to it.

Without temptation, there would be no progress,

advancement, or growth.

Everything would be as it were.Temptation provides man with the primary

motivation to change things from what is to what

one desires it to be.

It is the inner urge to do something, to make

something, to invent, innovate, to possess.

Temptation has spawned empires, bankrupted

nations, and enriched some beyond all imagination.

It feeds ambition, powers enterprise and provides the

adrenalin to go the extra length and achieve

the impossible.

Temptation is a sensuous experience.

It is perceived via the gateways of sight,

hearing, smell, touch, and taste.

Temptation is one of the most

fundamental of perceptions, and it is

symptom of life as we know it.

I am, therefre I am tempted.


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Temptation Foods Ltd. (TFL) is a major player and one of the largest organised

sector enterprises in the Indian food processing industry. The Company has

made a mark for itself in the Individual Quick Freezing (IQF) processed fruits

and vegetables segment. The Company employees over 256 employees in FY

2008-09; up from a mere 64 in FY 2005-06; and a turnover of Rs. 8,719.81

million. Currently, TFLs businesses include frozen fruits & vegetables,

processed foods, marine foods and ready-to eat foods for the domestic as well as

international markets.

Temptig GrowthTFL has had a remarkable transformation after having been declared as a sick

Company in 1999 due to teething problems and losses over the years. The

growth has been exponential after VBAPL (Venture Business Advisors Private

Limited the current promoters) stepped in. In the last 2 years, the Companys

total income increased by a stupendous 2,098.70% from Rs. 396.59 million

to Rs. 8,719.81 million! This quantum leap was achieved from a small base,

primarily on account of sustained international demand for frozen fruits and

vegetables, our entry into the marine business and the acquisition of the KarenAnand and Ever Fresh brands. TFL has now entered the domestic processed food

industry with an aim of becoming one of the dominant players in the sector.

Ackowlege qality staarsFor a Food processing unit, Quality and Hygiene are the most critical criteria

and TFL has been certied by BVQI for meeting the requirements of Global

Standard For Food Safety (i.e. TFL meets BRC - British Retail Consortium norms)

& achieved Grade-A. The Company has also been certied by BVQI for ISO

22000:2005 i.e. Food Safety Management System.

Expertise i Iivial Qick Freezig (-) 180CIndividual quick freezing is a process of rapidly reducing the temperature of

the fruit/vegetable/meat to between (-) 180C and (-) 240C. Rapid freezing halts

the activities of all micro organisms that cause decay and deteriorate food stuff.

Individual quick freezing of vegetables and fruits keep them farm fresh for up

to a year without the loss of any avour, texture, or colour. The big advantage

of Individual Quick Freezing is that you do not have to defrost the entire

package to take out a small portion, and the food remains fresh till the time of

consumption. Further, processing enhances shelf life of agricultural produce and

thus reduces wastages.

Growig market for froze foosFrozen foods have a growing market in India and in the

rest of the world.

The major market segments for frozen fruits include:

Retail outlets for direct consumption

Hotels, Restaurants, caterers and eateries.

Industries that use food as raw materials and

desire to process them in the lean season.

Export markets.

In the last 2 years, the Companys

total income increased by a

signicant 2,098.70% from

Rs. 396.59 million toRs. 8,719.81 million

02 AnnualReport2008-0

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TFL meets BRC - BritishRetail Consortium normsand has achieved Grade-A.The Company has alsobeen certied by

BVQI for ISO22000:2005 i.e.Food Safety Management System


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Missio StatemetBild a high perfrmance rganisatinvia empwering peple

Leverage cre strengths

fr accelerated scalability

Acire ality cstmers

Grw gemetrically

via accretive acisitins


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TFL ValesExcellece

At TFL we strongly believe that the only way to progress is by

offering the best products and the best services to customers. This

is a continuous process at TFL.

Service alog with the proct

We offer the right products, at right prices and at the right time.

Our service to customers is in-built and complimentary to ourproducts.

Cstomer focs

We respect our customers, listen to them and consistently offer

them the services they need. We always say YES to service

demanded by the customer, and have learnt that it is the only

way to develop customer satisfaction. With improved levels

of customer service, we raise the bar, and endeavour to work

towards customer delight.

Social Resposibility

We are committed to positively impact the society we live and

operate in, and realise that the long term success of a Company

is ensured only when it creates value for the shareholders as

well as the society. This includes the farmers who supply us,

our employees, our consumers and the communities where we

operate.

At TFL we strongly believethat the only way to progressis by offering the bestproducts and the best servicesto customers. This is a

continuous process at TFL.

05TemptationFoodsLimited


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The Temptati n

of sightY shall pssess and marry the mst beatifl wman in the wrld!

prmised Aphrdite, the Greek gddess f lve and beaty t Paris,

the handsme Prince f Try.

The trouble though, was that she was already married.

The most beautiful woman in the world then was Helen, the daughter of the divine

Zeus and the wife of King Menalus of Sparta, who was the younger brother of the

powerful King Agamemnon of Greece.



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Helens beauty was legendary. As a maiden, it is said that her fathers kingdom was

almost bankrupted by playing host to the never-ending stream of suitors who came,

seeking her hand in marriage.

The young prince Paris went to Sparta, as part of a diplomatic delegation from

Troy. He was accompanied by his righteous and brave elder brother Prince Hector.

He sighted Helen, and stood rooted to the ground, as though he was struck by

lightning. His eyes gleamed and his muscles froze. It was love at rst sight.

Temptatin had snk its sharp teeth int his sl and he cld nt resist its

sedctive call.

Unknown to the righteous Hector, Paris abducts Helen and takes her on board their

ship back to Troy. Much against the wishes of Hector, Paris married Helen once

they were in Troy.

This act enraged King Menalus and Agamemnon, who brought together all the ex

suitors of Helen and launched the biggest armada of a thousand ships to win back

Helen.


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This led to the erce battle for Troy that lasted ten years. After the deaths of

many valiant heroes, including Achilles and Ajax, and the Prince Hector and

Paris, the city fell to the ruse of the Trojan horse.

The legend of the fall of Troy is one of the most important Greek tragedies.

Christopher Marlowe, who wrote of the epic war stated:

Was this the face that launched a thousand ships

And burnt the topless towers of Ilium?

Sweet Helen, make me immortal with a kiss.

For Prince Paris, though, it was the kiss of death.

He saw Helen, and he sccmbed t Temptatin!



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OuRPROduCTS

TFL has grown remarkably, considering its small

beginnings. Today the Company offers one of the largestproduct ranges in the industry. The impressive product

bouquet consists of 50+ types of products, including

frozen fruits & vegetables (F&V), marine food and recipe

foods amongst others.


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Froze F&VFrits Mango (Alphonso, Totapuri, Rajapuri); Red &Yellow Papaya; Orange & Green Melons and Strawberry

among others

Vegetables Green Beans; Okra; Red/Green Capsicum;

Cauliower Florets; Green Peas; Karela; Guwar; Potato;Carrot; Onion; Yam (Suran); Drum Sticks; Tinda;

Tindora; Chillies; Garlic Crush; Chillies+Ginger Crush;

Garlic+Ginger Crush

Ethic Iia Vegetables Surti Papdi Beans; SurtiLilva; Valor papdi; Valor Vilva; Tuvar Yellow; Tuvar Lilva;

Tindora (Smooth Gourd); Punjabi Tinda; Parwal (Pinted

Gourd); Turia and Methi among others

Herbs Basil; Bay Leaf; Chervil; Chives; Fenugreek;Mint; Oregane; Parsley; Sorrel and Thyme

Marie FoosFrozen Tiger Prawns; Shrimps and Other Sea Foods

Recipe FoosJams, Conserves, Salad, Salad Dressings and Sauces

Today the Company offers one of the

largest product ranges in the industry.

The impressive product bouquet consistsof50+ varities of products



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BrasEverfreshTFL acquired the Everfresh brand from Chambal Fertilisers and Chemicals in 2007. Everfresh

is one of the biggest domestic brands in the frozen fruits and vegetables segment. Thebrand offers over 50 different types of IQF (Individually Quick Frozen) vegetables and fruits

such as Green Peas, American Sweet Corn, Baby Corn, Cauliower, Beans, Carrots, Mixed

Vegetables, Broccoli, Palak, Sarson ka Saag, Shredded Coconut and different varieties of fruits

like Alphonso Mango. Everfreshs uncompromising adherence to nutrition, taste, hygiene and

quality standards ensures that products reach the customers as fresh as it was in the farm.

delikaEverfresh is internationally known as Delika and has an impressive product range under

its umbrella. The brand comprises of products like, Green Peas, American Sweet Corn,

Baby Corn, Cauliower, Beans, Carrots, Mixed Vegetables, Broccoli, Palak, Sarson ka

Saag, Shredded Coconut and different varieties of fruits like Alphonso Mango. Everfreshs

uncompromising adherence to nutrition, taste, hygiene and quality standards ensures that theproducts reach the customers with the same freshness it has on the farm.

Kare AaKaren Anand was an acquisition of TFL from Karens Gourmet Kitchen Pvt Ltd. All of

Karen Anands products are meticulously designed to provide consumers with an authentic

international food experience.

Karen Anands product mix in proportion to their contribution to sales turnover

from this segment:

Taken together, these account for a nominal portion of TFLs total

revenues. Conserves, Sauces and Dressings constitute the main

segments under this brand.

Conserves 59%

Jams 10%

Marmalade 10%

Sauces 5%

Mayonnaise 8%

Salad dressings 2%

Honey 6%


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He affed a glden gblet f chctyl, and smiled indlgently,

as he ran his eyes amngst the wmen f his harem.

Who would catch his fancy tonight? Bestirred by the potion, his nerves came to

life, with a vigour that was the pride and glory of his empire! This was a daily ritual

for him. Chocotyl was his favourite potion, and there were whispers in the palace

corridors that it was the secret to his legendary sexual prowess and staying power.



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Montezuma, the mighty King Emperor of the Aztecs took no other beverage other

than chocotyl, a potation of chocolate, avoured with vanilla, and other spices,

reduced to a froth with the consistency of honey. He is reputed to have consistently

drunk over 50 goblets of his favourite brew every day!

The King Emperr did nt realise it then, bt he was histrys rstChchlic.

He had tasted the divine avrs and there was n lking back.

The 600 plus beauties of his harem bore testimony to the aphrodisiac prowess of

chocolate.

Such is the reputation of chocolate, that over the ages that even the legendary

Casanova swore by it. Even the mighty Napoleon is supposed to have chewed on it

before entering his Empresss bed chambers.

The rle f chclate in the mating rital f man and wmen is well

established tday. More recently it has been proven that it not only increases

sexual appetite, but also produces a sense of elation, akin to an orgasm.

Chocolate has been found to contain modest amounts of the stimulants caffeine

and theo-bromine. Chocolate is also known to generate increased levels of

serotonin, a chemical naturally produced by the brain, which is known to reduce

anxiety. The rush of endorphins produced by eating chocolates, particularly dark

chocolates, is most similar to the bliss associated with a healthy sexual relationship.

Chocolate also contains phenyl-ethylamine which is known to stimulate the release

of dopamine into the pleasure centres commonly associated with an orgasm.

From Montezuma to every callow lover during the Valentines day, men insinuate

their love for women with Chocolate in the hope that it will be love at rst bite..

She bit int it, and s she sccmbed t its temptatin!


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THE YEAR 2008-09Fiacial Performace

0 2000 4000 6000 8000 10000

2008-09

2007-08Year

2006-07

Total Icome Rs. million

8720

397

0 100 200 300 400 500 600 700 800

2008-09

2007-08Year

2006-07

EBIdTARs. million

800

323

71

0 100 200 300 400 500 600

2008-09

2007-08Year

2006-07

PAT Rs. million

527

238

58

0 500 1000 1500 2000 2500 3000

2008-09

2007-08Year

2006-07

net Worth Rs. million

2550

2029

307

0 5 10 15 20 25 30

2008-09

2007-08Year

2006-07

25.34

23.65

28.20

0 5 10 15 20 25

2008-09

2007-08Year

2006-07

EPS

21.96

11.42

4.59

growthin 08-09164%

growthin 08-09

growthin 08-09(Before Extra-ordinary Items)

121%

164%

growthin 08-0992%

growthin 08-0926%

3295

Return onAverage Capital Employed


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dEVELOPMEnTS &InITIATIVES duRInGTHE YEARRecet developmets

KGK shifted its production base to a dedicated facility at Nira, near existing

plant at Jejuri; in order to maintain operational synergies. It has launched new

premium branding and packaging initiative.

The Company declared its maiden dividend @ Rs. 0.60 per share.

The Company added new customers in Europe via the Private Label business

route.

Started mango pulp canning operations at a leased plant at Madanapalli. The

product is marketed under the Everfresh brand.

Invested Rs. 300 million to streamline the processing facilities and optimise the

product mix.

The Company was declared free from the sick status as per the July 2008 order

of AAIFR. The Company has therefore been relieved from the purview of SICA.

Acqisitios & IvestmetsThe Company incorporated Temptation Foods International Ltd. (TFIL) in the

British Virgin Islands. The Company will hold 100% shares of TFIL as and when

TFIL issues shares.

As on 31st March, 2009, the Company has acquired 2,856,632 shares,

representing 10.13% of the share capital of the Kohinoor Foods Limited, a

company engaged in Basmati rice and Ready-To-Eat (RTE) business with a global

foot print.


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Q: How do you think the global slowdown will affectTemptation Food?The past year was an exceptional one for the global

economies. There was unprecedented economic turbulence

and a nancial meltdown, and yet, the full impact of the

economic slowdown is still unknown. However in the

processed foods business, we are relatively insulated from

the impact of the slowdown. The industry is based on a basic

requirement, and thus, its demand is comparatively inelastic

compared to other industries.

Q: So, in a relatively at environment, what factorshelped you grow?I think our brand focus and ability to strategically acquire

more and more labels enabled us to have an enhanced

product base. This in turn, allowed us to expand across all

geographies, and add newer areas to our customer prole.

This plus a continuous focus on efciency and productivity,

helped us grow signicantly.

Q: Do you think this momentum will sustain across FY2010?Revenues from direct exports presently form a very small

component of total revenues. In FY 2010, it is likely that

some of our customers will face liquidity issue. However,

we see that as a temporary phenomenon. . We think this

is a short-term phenomenon, and underlying demand will

remain strong in the long term. Were not immune to the

overall economic conditions, but like I explained earlier, the

propensity of our business to get affected is relatively low.

Also, we see a distinct improvement in the global economic

scenario which has led to signicant optimism.

Q: What specic growth plans have you outlined forTemptation Foods?We are planning to expand our presence pan-India through

a mixture of our established acquisitive strategy and organic

growth. We will look going north to Uttaranchal, west

to Gujarat and extend this to the southern states as well.

Temptation Foods is actively evaluating investments in

Agri- Infrastructure, to emerge as an integrated player in ourdomain. In think the next few quarters will see us making

quite a few dramatic moves.

Q: What about the growth in the existing product prole?I think all our brands will grow fairly well, given our strategy to

ensure that the domestic market contributes at least 50 per cent

to our revenues. This is in line with our vision to occupy almost

10-12 per cent of the Indian kitchen. Our export markets will

be driven by the marine foods business. As of today, the KGK

range contributes a marginal portion; however plans are on the

anvil to add capacities and drive growth.

Q: You recently made an apparently unrelatedacquisition in the IT space. Tell us about the benets

you see accruing from it?We have always tried to leverage business relationships at

an equity level for long term value generation, rather than

booking expenses on service contracts, where we see long

term potential. Aptsource, in which we acquired a 70 per

cent stake in January, is a high-end enterprise solutions

consulting rm.

We seek to leverage that expertise and their intellectual

capital to create customised technology and supply chain

management solutions for Temptation Foods, which will

result in tighter operations going ahead. So, rather than

let IT be a cost centre, we have turned it into an equity

investment, which has an independent value, as well as a

signicant accrual to our core business.

Managing the supply chain for food products is a logistics

intensive exercise. Temptation Foods seeks to manage its

growth with critical inputs from information technology

and has, therefore, laid out a plan for advanced systemic

implementation. The acquisition of Aptsource Software is an

important step in that direction.

Q: A major portion of Temptation Foods revenuesare derived from exports. How do you counter theexchange uctuation risk?We cater to a large number of third party exports. We serve

Indian ethnic traders settled overseas. As a matter of fact,

when we began (4/5 years earlier), most of our customers

were ethnic Indian traders, settled abroad, but havingentities in India. As a result of this, they were eager to avail

of the various export incentives. Since then, as a matter

of principle, the billing is done in rupees and the dollar

rates are not taken into account. This unique arrangement

has insulated us from the problems of exchange rate

uctuations.

Q: But still, as your business grows, you may not be ableto exercise this option in all cases. How do you deriskthe business then?In the past couple of years, our major focus has been on

creating a risk-neutral business model. Today, we are

diversied against product because of our range, geography

because of our spread, and customers because of theexcellent relationships we preserve and newer ones that we

build every year. This is the core of the derisking mantra at

Temptation Foods, and I expect it to hold true in the years to

come.

Q: So if you were to sum up your future growth path,what would that be?We are presently on a sharp learning curve, with a focused

determination to provide the best in products and services to

our customers. We are committed to building and sustaining

a high performance organisation via people; leverage

core strengths for accelerated scalability; acquire quality

customers; and grow exponentially through acquisitions and

organic growth, in emerging as an admired and preferred

company in the foods business.

QA&WITH THE MAnAGInGdIRECTOR & CEO MR. VInIT KuMAR


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OuR CLIEnTELETFL has a diverse customer base both in domestic as well as international markets.

We serve giant global corporations in US, Canada, Germany, U.K., Japan and the

Middle East. The domestic patrons include a number of prestigious hotels as well as

large domestic retail chains.

International EthnicDeep Foods, Inc.(USA & Canada), Al Kabeer

International MainstreamFrenzel, Mondial Foods, DKSH

domestic InstitutionalTAJSATS, TAJ, Reliance Fresh , McDonalds, ITC, Radisson, Jaypee

Hotels, Sumeru, Oberoi Hotels & Resorts, Pizza Hut, The Park,

Haldirams , Holiday Inn

domestic Retail (Retail Chains)Big Apple, Metro, ShopRite, Spencers, Big Bazaar, foodworld



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Glbalisatin f trade was

cased by a series f events that

began in the ryal garden f the

famed Yellw Emperr f China

in 3000 B.C.



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Lady Hsi-Ling-Shih, wife f the mythical Yellw Emperr, sat in

her garden, nder a tree sipping tea. Sddenly there was a splash

in the tea cp, and she nticed a white ccn like bject in her

glass. Cris as t what it was, she dipped her ngers int the

tea cp and picked it p. She rlled it in her ngers, and she felt

the senss strands srrnding the ccn nravelling. They

were shiny and smth t tch.


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Lady Hsi-Ling-Shih did not realise it then, but she was the rst to touch silk.

The temptatin f tching and pssessing this senss fabric wld

create the wrlds rst glbal market and pen p the trade rtes

frm China t Central Asia, Arabia, and Byzantim all the way t

Rme!

This was the Silk Road. The worlds rst international trade route

that stretched 4,000 miles from end to end. Trade on the Silk

Rad was a signicant factor in the development of the

great civilizations of China, India, Egypt, Persia, Arabia, and

Rome, and in several respects helped lay the foundations for

the modern world. Although the term the Silk Road implies

a continuous journey, very few who travelled the route

traversed it from end to end. Cargo caravans would

traverse a distance and then be sold to another middle

man who would take it to the next leg. This ensured

the secrecy of the origin of silk- a zealously

guarded monopoly of the Chinese. So coveted

was this fabric by the wealthy lords and ladies

of Rome, that pound of silk sold at a price

equivalent to that of six healthy slaves!Temptation of touch, and the sensation of silk

forged global trade in ancient times.

They tched the fabric, andtherefre they sccmbed tits temptatin!


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Mr. Vinit Kmar, Chairman & Managing DirectorMr. Kumar represents the promoter group. He has over 20 years

experience working with Reliance Industries Ltd., Lummus

Crest B.V., Netherlands, Maharashtra Apex Corp. Ltd., Deki

Electronics Ltd. and Rohem Instruments Pvt. Ltd. He holds a B.E.

in Electronics and Communication from Manipal Institute of

Technology, and an MBA from University of Notre Dame, USA.

He has also attended a course in Corporate Strategy Analysis

from Notre, London.

Dr. (Ms.) Kala Pant, Non-executive DirectorDr. (Ms.) Pant has vast experience in the banking industry and

has been a Director/Consultant/Advisor to a number of Banks

such as IDBI, Dena Bank etc. She has carried out a number of

research projects in Banking, Shipping, Port and Infrastructure

and has published 15+ papers in domestic journals. She has

also presented papers at many seminars. She holds a B.Sc. and

has done her PG Doctoral Research in the eld of Banking andTransport.

Ms. Elizabeth Harringtn, Non-executive DirectorMs. Harrington has over 24 years experience working in Asia as a

Director, Senior Exec, Entrepreneur and Management Consultant

in various global consumer products, retail, healthcare, and

industrial product industries. She is on the board of Chicago

Mercantile Exchange and is a partner in PWC. She is the CEO of

Herrington Global and has published several articles and has had

several talks on China/Asia and Global business strategy. She did

her A.B at Cornell University; Magna Cum Laude and Phi Beta

Kappa.

Mr. E. David Ellingtn, Non-executive DirectorMr. Ellington has vast experience in the eld of fund management

with expertise in equity allocation, governance and Private Equity

& Venture Capital. He runs his own law rm in Beverly Hills

specialising in international, entertainment and new technology

law. He is also a Dotcom Entrepreneur. He holds an M.A. from

Harvard University and a BA, MA JD Law Ran.

Mr. R.V. Jshi, Non-executive DirectorMr. Joshi has over 40 years experience in the eld of Banking,

Finance and Capital Markets, including Security Trading. He has

held the position of a Managing Director at BOI Finance Ltd.,

and Securities Trading Corporation of India Ltd. He has travelled

extensively and has participated in Seminars and Conferences

both in India and overseas. He holds an M. A. in Economics.

Mr. G. Ramchandran, Non-executive Director

Mr. Ramachandran has vast experience in the nancial servicesector and capital market activities. He has held various positions

as Managing/Executive Director in leading industrial/nance

companies in India. He was the VP & CFO at Reliance Capital,

Times Guaranty, Mentor Capitalist and the Executive VP at

Citicorp, JM Morgan Stanley and Ranbaxy. He is a B.Sc. graduate

and a Chartered Accountant.

Ms. B. Gswami, Non-executive DirectorMs. Goswami is a well known Media artist, actress, model

and Compeer. She has 4 years of experience in General

Administration and Management. She holds a BA.

PROFILE OF

THE BOARd OFdIRECTORS


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OuR SOCIAL InITIATIVES

TFL has always nursed a keen desire to be a contributor to

the nations rural growth. In order to make its presence felt in

Indias endeavour of becoming a developed country at par with

the best of nations, Temptation Foods strives to bring about

meaningful changes to the lives of rural people in and around

its various plants. TFLs humble beginnings in the eld of social

responsibilities have kick started with a workable penta-fold

strategy:-

ROSHnITFLs dream project is designed to uplift a small percentage of our fellow

citizens from the bowels of poverty. Since the farmer is the mainstay of

our country, TFL wants to empower him by providing him a wholesomepackage.

Agriculture in India is still largely carried out with outmoded tools and

farming methods. Our immediate agenda includes:

providing the farmer the means to purchase the best seeds

spreading awareness of state-of-the-art machinery

disseminating know-how with the latest inputs and

giving farmers excellent training

Once the farmers reap in the reward of an excellent harvest, TFL will again

assist them by providing at their doorstep, the very best marketing tools

so that their ace harvest reaches the right place at the right time, thereby

fetching them a bountiful price. This will not only elevate their standard of

living, but also give them the necessary condence to proceed with more

such ambitious projects.

dISHAEmpowerment of Women is high on TFLs radar. A dozen fully sanitized

centres have been thrown open for ladies to earn money in their leisure time

by managing certain stages in the processing of TFL products.

AALAPWe also dessiminate detailed technical know-how on converting

agricultural waste into Vermicompost (Organic Waste), which is useful

for Soil Enrichment. TFL not only educates them technically, but has also

facilitates bank subsidies for this project. The Jejuri Municipal Corporation

has also been roped in to provide the premises for this project. Temptation

delivers agricultural waste from their plant to the premise and arranges for

the Vermicompost produce to be sold in the nearby markets.

The AALAP project, at present, is benetting 40 families who were below

the poverty line. These are some of the baby steps that TFL is taking. More

such humane projects are in the pipeline.

Proviig Basic Ecatio

Proviig Marketig

a R&d Spport

to Farmers

Empowerig

Wome

Hygiee Awareess

& Traiig

Ehace the

Staar of Livig

of Farmers



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She ated dwn the river Nile n a barge with scented sails.

Along the shoreline near the royal jetty, he stood waiting. She was the consort of his

late mentor Julius Caesar and had left Rome on his death, to return to her Kingdom.

She was Cleopatra, the Queen of Egypt and the empress of perfume, in the words of

some. Her arrival was announced by a gust of perfume, just before her royal barge

docked alongside.


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32/100

Anthony, the veteran of innumerable wars, had no chance against this scented attack

on his senses.

Temptatin wafted its way int his heart, and nw Clepatra rightflly

pssessed it.

Fragrances captivate our minds, rejuvenate our senses, and bestow a feeling of

freshness and energy, by their mere presence. Our sense of smell is also part of our

memory as we associate smells with people.

Scents were rst used by priests in prayers as a supplication to the gods. It was rightly

believed, that these rened scents frankincense, myrrh, and sweet oils would tempt,

and persuade the gods to shower favours on man.

Modern perfumes are far more complex as compared to the naturally occurring

perfumes. They have three notes the top note being the one you imbibe when the

perfume is sprayed, the middle note is what remains when the top note evaporates and

what lingers on is the base note that represents the core aroma of the perfume.

What hit and captivated Anthony while he awaited her arrival was the top note, in our

way of thinking. His relationship with her owered into intimacy, delivering the middle

note. The lingering base note of their relationship was passionate love.


9


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So passionate was their love, that when the false news of her

death reached him, he committed suicide.

The lingering romance of their relationship and its tragic end

still reverberates in public memory.

He smelt her arma, and therefre hesccmbed t her temptatin!



34/100


9


35/100

To

The Members of

Temptatin Fds Limited

Your Directors have pleasure in presenting the 18th Annual Report together with the audited statement of accounts for the year ended

31st March, 2009.

1. FInAnCIAL RESuLTS:(Rs. in Million)

Particlars 2008-09 2007-08

Prot Before Tax, Financial Expenses, Depreciation and Extraordinary Items 799.63 324.21

Less: Financial Charges 143.11 4.68

Depreciation 81.34 45.93

Prot for the year before Extraordinary Expenses and Taxes 575.18 273.60

Less: Extraordinary Item 25.19 -

Prot for the year after Extraordinary Expenses and before Taxes 549.99 273.60

Less : Provision for Taxes 23.04 35.54

Prot After Tax 526.95 238.06

Balance Brought Forward from Previous Year 172.18 (-)65.88

Less: Interim Divided and Dividend Distribution Tax thereon 17.63 -

Surplus carried to Balance Sheet 681.50 172.18

2. OPERATIOnS:During the year under review, your Company has shown

sterling performance inasmuch as the sales turnover has

increased from Rs. 328.05 crores in 2007-08 to Rs. 870.07

crores in 2008-09, representing an increase of about

165% and the prot after tax has gone up from Rs. 23.81

crores to Rs. 52.70 crores, representing an increase of

about 121%.

3. dIVIdEnd:During the year, your Directors declared and paid an

interim dividend of Rs. 0.60 paise per equity share of

Rs. 10 each, fully paid up i.e @ 6%. In order to conserve

the resources of your Company in view of the tight liquidity

position, your Directors do not recommend any further

dividend for the year under review and, hence, the interim

dividend paid may be deemed to be the nal dividend for

the year under review.

4. BuSInESS PROSPECTS:During the year, your Company continued to show robust

growth in its business in all products categories, as the

nancial results reect. All the product categories showed

more than 100% growth in sales. The margins, however,

were under a pressure.

Though the food sector, especially the product categories

in which your Company operates, and the business of your

Company is largely unaffected by the current economic

turmoil and downturn trend all over the world, the

operating environment has become difcult and is expected

to continue to remain so till the situation improves.

The trend in the growth in business across all the product

categories is expected to remain good in the running year,

though the margins would remain tight. The endevour is

to achieve a change in the product mix by increasing the

proportion of the higher value added products and the

branded products.

All the product categories

showed more than

100%growth in sales



36/100

The operations of your Company have been discussed in

details in the Management Discussion and Analysis Report,

which is separately issued under the Corporate Governance

norms prescribed under the Listing Agreement with the

Bombay Stock Exchange.

5. ISSuE OF OPTIOnALLYCOnVERTIBLE BOndS/FCCBS/EQuITY SHARES:Your Company had taken your approval for issue of Fully/

Partly Convertible/Non-convertible Bonds, Equity Shares,

Preference Shares and/or any other nancial instrument in

India or overseas through a QIP/GDR/ADR, etc issue for an

amount up to UD$ 200 Million.

Your Company had initiated the process of issue of

Optionally Convertible Bonds/Equity shares for an amount

up to Rs. 800 crores to Qualied Institutional Buyers. The

terms of issue of the Bonds were nalised and necessary

legal opinions were taken. Bank guarantee up to sixty

percent of the face value was arranged through one of

the leading banks in India to make the issue marketable

and attractive to the potential investors. The Placement

Document for the issue was approved by the Bombay Stock

Exchange.

However, due to the drastic deterioration in the nancial

markets the world over, especially in the second half

of 2008, the issue could not be proceeded with as the

potential investors suspended all new investments and

thereby the long term investments to fund acquisitions

failed.

It is hoped that the situation would improve in the coming

months and the investors would return to the market

and your Company would be successful in raising the

aforementioned amount to fructify its acquisitions.

Your Company has invested in theshares of Kohinoor Foods Limited as along term investment. The peak holdingby your Company during the year wasof 3,634,148 shares, representing

13.47% of the thenshare capital of the Kohinoor FoodsLimited.


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6. ISSuE OF WARRAnTS OnPREFEREnTIAL BASIS:During the year, your Company has allotted 7,000,000

warrants to NRI Tax Services.com Private Limited, 150,000

warrants to the six independent and non-executive

Directors and 150,000 warrants to four of its businessassociates, on preferential basis. Each warrant shall entitle

the holder thereof to apply for one fully paid up equity

share of your Company within 18 months of the allotment

of the warrant. The issue price of Rs. 200/- per warrant

and the conversion price of Rs. 200/- per share are in

compliance with the applicable SEBI guidelines.

7. BORROWInGS:During the year, your Company has been sanctioned

funded and non-funded working capital limits/term loans

over Rs. 200 crores by some banks/nancial institutions

against the security of the movable and immovable assets

of the Company and the corporate guarantee from the

promoter Company. The limits have been draw-down

depending upon the requirements of your Company.

Your Company has also taken loans from certain Non

Banking Finance Companies and share brokers for part

funding of the investment in the shares of Kohinoor Foods

Limited, against, inter alia, the security of the shares of

Kohinoor Foods Limited and from some corporates for

meeting working capital requirements.

8. InVESTMEnT In THE SHARES OF

KOHInOOR FOOdS LIMITEd:Your Company has invested in the shares of KohinoorFoods Limited as a long term investment. The peak holding

by your Company during the year was of 36,34,148 shares,

representing 13.47 % of the then share capital of the

Kohinoor Foods Limited.

Your Company has made the requisite disclosures required

to be made under the regulations under Securities &

Exchange Board of India Act and has complied with all

other statutory / regulatory requirements in respect of

the acquisition of the shares. As mentioned above, your

Company has taken loans from some Non Banking Finance

Companies and some share brokers for part funding the

investment, against, inter alia, the security of the shares of

Kohinoor Foods Limited.

On a petition led by Kohinoor Foods Limited under

section 111A of the Companies Act, 1956, before the

Company Law Board alleging violation by your Company

of the SEBI (Substantial Acquisition of Shares and

Takeovers) Regulations, 1997, along with forty ve other

individuals/corporates, all of who were alleged by Kohinoor

Foods Limited to be Persons Acting in Concert in acquiring

shares of Kohinoor Foods Limited, the Company Law Board

had stayed the voting rights of your Company and the

other forty ve individual/corporates. However, pursuant to

proceedings before the Company Law Board, the Honble

Board was subsequently pleased to vacate the stay of the

voting rights and also stayed, till further orders, the holding

of the annual general meetings and other shareholder

meetings by Kohinoor Foods Limited. The Delhi High

Court, on appeal by Kohinoor Foods Limited against the

order of the Honble Board, conrmed the order of theHonble Board. Your Directors state that your Company has

not violated the SEBI (Substantial Acquisition of Shares and

Takeovers) Regulations, 1997, and any other regulation/law

in acquiring the shares of Kohinoor Foods Limited and are

condent that the proceedings before the Honble Board

would end in favour of your Company.

Your Company has led a petition before the Company

Law Board under sections 397 and 398 of the Companies

Act, 1956, against Kohinoor Foods Limited on the grounds

of oppression of minority shareholders and mismanagement

of the affairs of Kohinoor Foods Limited. The petition is

pending before the Honble Board.

9 EMPLOYEES STOCK OPTIOnS:During the year under review, your Company has issued

256,600 options to the employees of your Company

under the Employees Stock Option Scheme, 2008. The

disclosures prescribed under the SEBI (Employee Stock

Option Scheme and Employee Stock Purchase Scheme)

Guidelines, 1999 are annexed hereto.

10. FIXEd dEPOSITS:Your Company has not accepted any xed deposits

from public during the year under review. There are no

outstanding deposits, which have remained unpaid.

DuRING THE YEAR uNDER REVIEW,

YouR CoMPANY HAS ISSuED 256,600

oPTIoNS To THE EMPLoYEES uNDER

THE EMPLoYEES SToCK oPTIoN

SCHEME, 2008



38/100

11. TEMPTATIOn FOOdSInTERnATIOnAL LIMITEd:Your Company has incorporated a Company by the name

of Temptation Foods International Limited (TFIL), limited

by shares, in the British Virgin Islands of which it will hold

100% of the equity share capital as and when TFIL issues

its shares. As on 31st March, 2009, TFIL has not issued any

shares. Mr. Vinit Kumar, Chairman and Managing Director

and Mr. E. David Ellington, Director, are Directors of TFIL.

TFIL is intended to be used as a special purpose vehicle for

acquisitions of business overseas and/or for raising of funds

overseas.

As TFIL has not issued any capital and has not commenced

any business, the documents and the statements referred

to in section 212 of the Companies Act, 1956, are not

attached to the Balance Sheet as on 31st March, 2009.

12. dIRECTORS RESPOnSIBILITYSTATEMEnT:Pursuant to the provisions of Section 217(2AA) of the

Companies Act, 1956, the Directors hereby state:

a) That in the preparation of the Annual Accounts for

the year ended 31st March, 2009, the applicableAccounting Standards have been followed;

b) That the Directors 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 your Company at the end of the nancial year

and of the prot of your Company for the year;

c) That the Directors have taken proper and sufcient

care for the maintenance of adequate accounting

records in accordance with the provisions of this Act

for safeguarding the assets of your Company and for

preventing and detecting fraud and other irregularities;

and

d) That the Directors have prepared the Annual Accounts

on a going concern basis.

13. dIRECTORS:Ms. Bhairavi Goswami and Dr. (Ms.) Kala Pant retire by

rotation at the forthcoming Annual General Meeting, and

being eligible, offer themselves for re-appointment.

14. CORPORATE GOVERnAnCE:Pursuant to Clause 49 of the Listing Agreement, the

following are annexed to this report:

a) a Report on the Corporate Governance and a

Certicate from the Auditors of your Company

regarding compliance of the conditions of Corporate

Governance; and

b) Management Discussion and Analysis Report.

Mr. Vinit Kumar, Chairman and Managing Director,

declares that afrmations have been obtained from the

Directors and the senior management of your Companyas regards compliance with the Code of Conduct norms

prescribed by the Securities and Exchange Board of

India.

15. AddITIOnAL InFORMATIOnPuRSuAnT TO SECTIOn 217:a) Information as per Section 217 (2A) of the Companies

Act, 1956, read with the Companies (Particulars of

Employees) Rules, 1975 is enclosed herewith by way of

an Annexure.

b) Additional information pursuant to Section 217(1)(e)

of the Companies Act, 1956, read with Companies(Disclosure of Particulars) Rules, 1988 is enclosed

herewith by way of an Annexure.

16. AudITORS:M/s. Sharp and Tannan hold the ofce as Auditors of your

Company till the conclusion of the forthcoming Annual

General Meeting and have expressed their willingness to

be reappointed. Their reappointment, if made, would be

within the limits specied under section 224(1-B) of the

Companies Act, 1956. Members are requested to reappoint

them and x their remuneration.

17. ACKnOWLEdGEMEnT:Your Directors take this opportunity to place on record their

appreciation to the contribution made by the employees to

the working of the Company.

Yours Directors also express gratitude to the customers,

suppliers, shareholders, banks, nanciers and investors

for the condence reposed in your Company and for their

continued co-operation during the year under Report.

By Order of the Board of Directors

Place : Mumbai Vinit Kmar

Date : 27th April, 2009 Chairman & Managing Director036 AnnualReport2008-0

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CoMPANY HAS INCoRPoRATED

A CoMPANY BY THE NAME oF

TEMPTATIoN FooDS INTERNATIoNAL

LIMITED (TFIL), LIMITED BY SHARES,

IN THE BRITISH VIRGIN ISLANDS oF

WHICH IT WILL HoLD 100% oF THE

EquITY SHARE CAPITAL AS AND

WHEN TFIL ISSuES ITS SHARES



40/100

Disclsres prescribed nder the SEBI (Emplyee Stck optin Scheme and EmplyeeStck Prchase Scheme) Gidelines, 1999:

a Options granted : 256,600

b Exercise price : Rs. 150/-

c Options vested : Nil

d Options exercised : Nil

e Total number of shares arising on exercise of options : Nil

f Options lapsed : Nil

g Variations in terms of options : None

h Money realised on exercise of options : Nil

i Total number of options in force : 256,600

j Options granted to senior management personnel : Name and Designatin Nmberf optins

(i) Mr. Vipin Chandok, President Mergers and Acquisitions &New Initiatives

10,000

(ii) Mr. Nimish Thakore, President Corporate Affairs andCompany Secretary

15,000

(iii) Mr. Shyam Mahale President Corporate Planning

10,000

(iv) Mr. Sridhar Sarathy BusinessHead Everfresh

30,000

k Any other employee who during the year has been grantedoptions amounting to 5% or more of the options issued during

the year

:Name and Designatin

Nmberf optins

Mr Swapnil Shaha - VP - DomesticSales & Dist.

15,000

l Employees who have been granted options equal to or exceeding1% or more of the issued capital of the Company at the time ofthe grant

: Nil

m Diluted earnings per share considering the issue of shares onexercise of options

:Rs. 20.98

n Proforma Adjusted Net Income and Earnings per Share :Net Income after Taxes andbefore Extraordinary Expenses asReported

Rs. Mn. 552.15

Add: Intrinsic Value CompensationCost

Rs. Mn. 10.39

Less: Fair Value Compensation Cost Rs. Mn. 14.89

Differential EmployeeCompensation Cost

Rs. Mn. 4.50

Adjsted Pr frma Net Incmebefre Etrardinary Epenses

Rs. Mn. 547.65

Net Income after Taxes andafter Extraordinary Expenses asReported

Rs. Mn. 526.96

Add: Intrinsic Value CompensationCost

Rs. Mn. 10.39

Less: Fair Value Compensation Cost Rs. Mn. 14.89

Differential EmployeeCompensation Cost

Rs. Mn. 4.50

Adjsted Pr frma Net Incmeafter Etrardinary Epenses Rs. Mn. 522.45038 Ann

ualReport2008-0

9


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Basic Earnings Per Share afterTaes and befre EtrardinaryEpenses:

- As Reported Rs. 21.96

- Adjusted Pro- forma Rs. 21.78

Basic Earnings Per Shareafter Taes and EtrardinaryEpenses:



Dilted Earnings Per Share afterTaes and befre EtrardinaryEpenses:



Dilted Earnings Per Shareafter Taes and EtrardinaryEpenses:

- As Reported Rs. 20.94- Adjusted Pro- forma Rs. 20.78

o Weighted average exercise price of Options granted during theyear whose:

:

(a) Exercise price equals market price Not applicable

(b) Exercise Price is greater than market price Not applicable

(c) Exercise Price is less than the market price Rs. 150/-

Weighted average fair value of Options granted during the yearwhose:

(a) Exercise price equals market price Not applicable

(b) Exercise Price is greater than market price Not applicable

(c) Exercise Price is less than the market price Rs. 200.83

P Description of the Method and the signicant assumptions used

to estimate the fair value of the options:

: The fair value of the options granted has been

estimated using the Black-Scholes option pricingmodel. Each tranche of the vesting has been

considered as a separate grant for the purpose of

valuation. The assumptions used in the estimation of

the same have been detailed below:

Weighted average values of the options granted

during the year:

i. Stock Price i. Rs. 289.65

ii. Volatility ii. 51.81%

iii Risk free rate iii. 9.14%

iv. Exercise Price iv. Rs. 150

v. Time to maturity v. 4.20 years

vi. Dividend yield vi. 0.00



42/100

Particlars f emplyees as per sectin 217(2a) f the Cmpanies Act, 1956 read with theCmpanies (particlars f emplyees) Rles, 1975 and frming part f the Directrs Reprtfr the nancial year ended 31st March, 2009

Name & Age (Years) Designation/ Nature

of Duties

Nature ofEmployment

Remuneration(Rupees)

qualications Experience(Years)

Date ofCommencementof Employment

Last Employment& Designation

A. EMPLOYED FOR THROUGHOUT THE FINANCIAL YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING RS. 24,00,000/- OR MORE PER ANNUM

1. Mr. Vini t Kumar(44)

Chairman &ManagingDirector

Contractual Rs. 4,867,786/- BE (Elct. &Comm.), MBA

19 26-10-2007 Reliance Industries Ltd

2. Mr. Vipin Chandok(50)

President M&A& New Initiatives

Otherwise Rs. 3,226,077/- F.C.A., A.C.S.,LLB(G), B.Com(Hons)

28 01-04-2008 Orix Auto Finance(India)Ltd. (Chief FinancialOfcer & CompanySecretary)

B. EMPLOYED FOR A PART OF THE FINANCIAL YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING RS. 2,00,000/- OR MORE PER MONTH

1. Mr. Raj Halve(45)

President -Brands

Otherwise Rs. 2,025,003/- MMS & B.Com. 23 01-08-2008 BG Broadband India(Chief Marketing &

Strategy Ofcer)

Infrmatin nder sectin 217(1)(e) f the Cmpanies Act, 1956 read with the Cmpanies(disclsre f the particlars in the reprt f the Bard f Directrs) Rles, 1988 and frmingpart f the Directrs Reprt fr the year ended 31st March, 2009.

1 POWER AND FUEL CONSUMPTION

Sr.N.

ParticlarsYear ended

31st March, 2009Year ended

31st March, 2008

1. Electricity:

a) Purchased units 7,999,361 2,067,507

Total Amount (Rs.) 46,911,070 10,177,013

Rate/Unit (Rs.) 5.86 4.92

b) Own Generation Through Diesel Generators:

Units 803,212 343,595

Units per Litre of Diesel Oil Cost/Unit 8.83 8.90

2. Cal Nil Nil

3. Light Diesel oil:

Quantity (Litres) 1,743,771 1,173,969

Total Amount (Rs.) 72,272,137 40,176,560

Average Rate (Rs.) 41.45 34.22

4. other/Internal Generatin Nil Nil

2 CONSUMPTION PER UNIT OF PRODUCTION (MT)

Electricity (units) 340.66 243.62Diesel oil (Litres) 74.26 28.79

3 TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATON

NIL

4 FOREIGN EXCHANGFE EARNINGS AND OUTGO

Particulars relating to foreign exchange earnings and outgo appear in Note No. 20 (g) and (f) respectively of Schedule Q, being

Notes forming part of the Accounts.


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At the premiere f his Ninth Symphny, he had t

be trned rnd t see the tmlts applase f

the adience. Slwly, tears trickled dwn his face,

since he cld hear nthing.



46/100


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47/100

Beethoven, the worlds greatest composer of classical western music was deaf. Perhaps

it is a testimony to his acute sense of loss (or is it loss of sense?), that the symphonies

he wrote when he became deaf still give untold pleasure to the millions who listen tothem.

Hearing is the most under-rated of our senses. While in listening to music, it is elevated,

in normal life, we take it for granted. Beethovens loss was particularly tragic as he

played music for people to hear, and when he himself could not hear, discrimination

became difcult. All of Beethovens musical compositions were written and it is

widely believed, that Beethoven, could see his music, or visualise it. He did use

ingenious ways to listen to his music. Beethoven used a special rod attached to the

soundboard on a piano that he would bitethe vibrations would then transfer from the

piano to his jaw and increase his perception of the sound.Hearing is part f speaking. The capability f ne witht the ther is

meaningless. It is Temptatin betrayed by graticatin.

Hearing elevates the senses, enlivens the mood and helps us connect to the world

around us. We hear people, animals, birds, and we can decipher their feelings even

without understanding their language. Hearing music is one of the most abstract

experiences where mere melodies, beats and incantations communicate sensations.

Hearing is the very essence of life. It is when you stop hearing the rhythmic beat of the

heart that you know life has ended, the orchestration has stopped. In some ways, may

be that was the music that Beethovan continued to hear even after he became deaf.

He heard the divine rhythm that reired n ear andtherefre he sccmbed t the temptatin!



48/100


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InduSTRY STRuCTuRE And dEVELOPMEnTSEvolution of Global Food Demand

India is at an early stage in the evolution of food consumption patterns. Going forward, increase in demand is expected for

prepared meals, snacks and convenience foods. At the next stage, the demand for functional, organic and diet foods will

increase substantially. In future, the food consumption pattern of the burgeoning middle class is expected to change, therebysignicantly diversifying the mix of products being bought by the consumers.

processing industry ranks 5th in size. The food processing

industry accounts for 13% of the countrys exports and 6% of

total industrial investment. Food processing industry in India

has a dominant position as it is twice the size of the 2nd largest

sector (banking) and much larger than all the others. The sector

is estimated to grow at a steady rate into the future and reach

Rs. 13.5 trillion in terms of total business by 2014-15. During

this period, there is expected to be a clear shift in the product

mix from primary processed food to value-added food. It is

estimated that the level of processing and value addition will

improve by 2014-15. For instance in Foods and Vegetables

sector, it is estimated that the processing will improve from

1.4% in 2003-04 to 15% in 2014-15 with a 5% value addition.

Currently the total business in the processed food segment

accounts for Rs. 4,600 billion, making it the single largest

industry in India. Yet, the industry is at a basic level of

processing with miniscule value addition.

The Indian food market is estimated at over US$ 182 billion,

and accounts for about two thirds of the total Indian retail

market. Further, according to consultancy rm McKinsey & Co,

the retail food sector in India is likely to grow from around US$

70 billion in 2008 to US$ 150 billion by 2025, accounting for a

large chunk of the world food industry, which would grow from

US$ 175 billion to US$ 400 billion by 2025.

FOOd PROCESSInG InduSTRYGlobally, the processed food industry is estimated to clock

business of around US$ 3.6 trillion. Only 6% of the processed

foods are traded across borders compared to 16% of major bulk

agricultural commodities. U.S.A., EU and Japan accounts for

over 60% of total retail processed food sales.

In processed foods, Indias share accounts for only 1.3% of

global volumes of F&V (2.3% in terms of value) and 15% of

milk produced. Despite the low percentage volumes, the food

Diet/functional/

organic foods

North America,Japan, Western Eurpoe,

Australia

Convenience

foods Eastern Eurpoe

Snacks/prepared

meals

India, China

Latin America

Carbohydrate

staples

Africa

(Sub-Saharan)

Surviving

Source : Rabobank Research

Mass Market Convenience FoodService Snacking

Quality Hygiene High Technology

Dairy, meat, egg,

sugar, processedmass market



50/100

Poor infrastructure for storage, marketing and distribution

of food products are some of the key reasons for low level

of processing. These constraints are serious because, they

contribute to the post harvest loss of 25% to 40% of the

countrys agricultural produce.

Primary processing of agricultural produce stands at around

40% in China, 30% in Thailand, 70% in Brazil and 80% in

Malaysia. As compared to these countries, in India it accounts

for a meagre 20% with massive wastage. India is the second

largest producer of fruits (53 MMT) and vegetables (126 MMT).

The installed capacity for processing of fruits and vegetables

has gone up from 1.108 MMT in 1993 to 2.474 MMT in 2007.

However, the industry is still in nascent stage with secondary

processing level of around 2.20% of total fruits and vegetables

produced, which is signicantly lower as compared to U.S.A.

(80%), Australia (25%), and Germany (33%). Indias share in the

world trade of processed fruits and vegetables is still less than

1%. The government expects the processing in this sector togrow to 25% of total produce by 2025.

FMCG InduSTRYIn the midst of an economic slowdown, India is the victim of

apprehensions regarding decline in consumption expenditure.

In reality, while metros are witnessing 6-7% volume growth,

other tier 1 cities are registering growth rates at 10-12%, and

rural markets are growing at 20%+. The reducing relevance

of FMCG spend to the overall consumption spend (just 7-8%

of the wallet share) insulates FMCG spends from any pressure

of spending cuts. The shift to premium products and brands

in personal care and rapidly growing packaged foods market

is driving value growth. On the other hand, with 610 million

population residing in rural India, these markets are driving

volume growth as consumers shift their purchase preference

from unorganised and homemade to organised sectors.

FMCG spend in India is merely 7%-8% of the total consumer

spend and less than 5% of the overall income. Expenditure on

food is the largest among all the FMCG segments as depicted in

the pie-chart below

Source: Ministry of Food Processing; Annual Report 2006-07; IDBI Capital MarketServices

%

Processig

level

35

40

35

30

25

20

15

10

5

0

20

26

2

6

Fruits &Vegetables

MilkDaiy

Meat PoultryProducts

MarineProducts

Processig Level i IiaFoo-Processig istry

Source: Ministry of Food Processing; Annual Report 2006-07;IDBI Capital Market Services

Processed Foods,4600, 37%

Banking,2300, 19%

IT/ITES,1790, 15%

Pharma,1125, 9%

Automobile,1040, 9%

Telecom,850, 7%Construction, 460, 4%

Processed Foods Banking IT/ITES Pharma

Automobile Telecom Construction

Market Size of Istries i Iia(Rs. Billio, %)

Expeitre mix i FMCG sector

Source: Business World Marketing Whitebook

Food Home Improvement Rent, Fuel & Power

Health CareLeisure & Entertainment

Transportation & CommunicationOthers Grocery

Foods 39%

HomeImprovement 4%

Rent, Fuel & Po wer 13%

Leisure &Entertainment 4 %

HealthCare 8%

Transportation &Communication20%

Others 8%

Grocery 4%


9


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BuSInESS OVERVIEWCmpany Prle

TFL, with its Individual Quick Freeze Technology, is at the

forefront of the Indian food processing industry. In operation

since 1991, TFL now is one of the largest organised sector,publicly listed companies in the industry. Its impressive

product offerings include frozen Fruits & Vegetables, FMCG

food products like Conserves, Jams, Marmalade, Sauces,

Mayonnaise, Salad dressings, Honey and Marine Products. TFL

plans to use the acquisition route to enter the markets for edible

oil, rice and ready-to-eat segments.

COMPETITIVE STREnGTHSLcatinal Advantages

Temptation Foods Ltd. currently uses 9 facilities across India

to produce over 50 different types of products. Out of these

9 facilities, 5 are outsourced, 1 is leased and 2 are owned.TFL sources its raw materials from across the country with the

majority procured from North and West regions. The plants

are located near the sources of raw materials. Recently, a KGK

plant was shifted to Nira, near existing plant at Jejuri to maintain

operational synergies. Being closer to the source of raw material

is the biggest commercial benet that TFL passes on to its

consumers. The locations of the plants and the sources of supply

are shown below.

MARInE PROduCTSMarine business is a high volume and low margin business with average margins of around 5-6%. India is the third largest sh producer

in the world and second largest inland sh producer. Fish production has increased from 0.75 MMT in 1950-51 to 6.86 MMT in 2006-

07. Despite this, India exports only around 8% of its production. In 2005-06, its contribution to total GDP was around 1%. Indias

substantial shery resources are underutilised, despite the huge potential to increase the output from this sector. Processing of sh into

canned and frozen forms is carried out entirely for export purpose.

Proctio a export of marie procts

Source: Ministry of Agriculture of India, IDBI Capital Market Services

Producton Export Export as a Percentage of production

FY51

FY61

FY71

FY81

FY91

FY01

FY02

FY03

FY04

FY05

FY06

FY07

10%

8%

6%

4%

2%

0%

8

6

4

2

0

Volume(AMT)



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Brand Strategy

TFL offers branded food products across all of its product categories. It aims to extend its reach across all food categories and thus

acquire 15%-20% market share of Indian kitchen. As a part of its initiative to integrate with international markets, TFL follows a two-

pronged strategy

1. Bringing top-quality International brands to the emerging Indian markets

2. Successfully marketing the Indian ethnic brands abroad

TFL has been investing in, and consolidating its brands. During the year, the Company took steps towards maturating its brands

Everfresh and Karen Anand by adding to the product base while simultaneously increasing its distribution networks.

TFLs RAW MATERIAL SUPPLYING REGIONS

Uttranchal

Uttar Pradesh

Maharashtra

Andhara Pradesh

Fruits & Vegetables

Marine Products

Ready-to-eat

Punjab

Delhi

TFL PLANT LOCATIONS

Jallandhar (2 Plants)

Vishakhapatnam

Owned Plants

KarnalRudrapur (3 Plants)

Jejuri

Sonipat

Outsourced Plants

Leased Plants

Price Pints

Prdct

Reach

Rediline category

(play in broader category)

Extend existing brands in new categories

Launch India specic brands

Launch mass market brands

Low Value SKUs

Aggresively penetrate markets

Increase institutional sales

Out of home market050 AnnualReport2008-0

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Acquisition Strategy

TFL has been on an acquisition spree. Inorganic growth has

been the Companys mainstay in terms of strategy. It aims at

further acquisitions in order to increase its market share, widen

its product base, and create value for its shareholders. At the

same time, it wishes to ensure that it acquires and owns the

brand rather than merely producing or distributing products

belonging to brands owned by others. It proposes acquisitions in

India as well as abroad.

Supply Chain

TFL tries to bridge the gap between the manufacturing of

product to the consumer off take by continuously trying to

improve and channelise effective supply chain management

with faster distribution network. Also, stringent quality norms

are followed for procurement and processing of fresh fruits

and vegetables and then converting them into frozen fruits and

vegetables.

Procurement is done during the season and stored and sold

during non season periods. The products are transported by

refrigerated vans at (-) 180C and minimal handling is ensured

till the depots so that the temperature of the product remains

intact. The Cold Chain (owned/leased) is made of state-of-art

technology to ensure that proper temperatures and quality is

maintained throughout the year. TFLs supply chain is very

robust which ensures that best quality product reaches to the

consumers through its retail outlets and modern trade formats.

Performance Review

During the year 2008-09, the Company registered 164.44%

increase in the total income from Rs. 329.48 crores in 2007-

08 to Rs. 871.98 crores. The Companys EBIDTA increased by

147.86% from Rs. 32.26 crores in 2007-08 to Rs. 79.96 crores in

2008-09. The Companys PAT also increased by 121.34% from

Rs. 23.81 crores in 2007-08 to Rs. 52.70 crores in 2008-09.

Export Performance

During the year 2008-09, the Company made exports worth

Rs. 38.46 crores as against Rs. 30.51 crores in 2007-08, thusregistering an increase of 26.06%. Exports thus constitute 4.42%

of the total revenues of the Company in FY 09.

Present Financial Status

Net Worth Rs. 255.05 crores

Current Ratio 2.92

Debt-Equity Ratio 0.43

Stock Turnover Ratio 18.69 Times

Average Receivables Collection Period 69 days



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Strength

Entrepreneur led, professionally managed and experienced

management team

Strong Brand equity with wide variety of products

Locational advantage, with close proximity to raw material

sources, export points and domestic consumption centres

Wide geographic coverage

Large domestic and international customer base

Strategic relationships with suppliers, customers and supply

chain vendors

Adaptation to new and improved systems and processes

opprtnities

Offering other value-added products under existing strong

brands such as Everfresh & Karen Anand

Growth in the Indian retail space with a spurt in the

organised retail play by players like Big Bazaar, RelianceFresh, Six Ten etc. has increased demand for packaged foods

across income groups

Full integration of acquired companies/businesses will unlock

value in terms of economies of scale and group synergies

Favourable Government policies

SWOT AnALYSIS

Weakness

Exports business exposes the Company to exchange risk

Over dependence on marine business

Highly capital intensive business

Threats

Entry of major players into domestic market eg. Penguin

Inability to manage properly the high growth volumes as well

as the acquisitions

High volatility in prices of commodities which are raw

materials for the Company

Food safety and product liability issues because Companys

products are sold to various global chains

Domestic private label driving down margins and prices


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Internal Cntrl

The Company has adequate internal control procedures

commensurate with the size and nature of its business. These

business control procedures ensure efcient use and protection

of the resources and also compliance with the policies,

procedures and statutory requirements. The internal control

systems provide for well documented guidelines, authorisation

and approval procedures. During the year, the Company has set

up an independent Internal Audit Department, which reports

directly to the Managing Director. The Company also carries out

internal audit through an external agency. The prime objective

of such audit is to test the adequacy and effectiveness of all

internal controls laid down by the management and to suggest

improvements.

Hman Resrces

The good performance of the Company requires a disciplined,

focused work culture and demands an ongoing effort to sustain

an engaged workforce. During the year, signicant resources

and efforts were devoted to people engagement initiatives

to support a performance driven culture and to enhance the

passion for a higher level of productivity. To empower talent

and prepare its people with necessary skills, the Company

continued to provide employees with appropriate access to

training and corresponding development plans including

international exposures, where feasible.

The Company recruited a large number of employees at all

levels during the year. The Company plans to continue to

institute internal climate surveys to ne tune the HR practices.

The Company works with a Key Responsibility Area based

review and recognition strategy that aligns efforts, while

rewarding results. An ESOP plan was instituted in 2008-09 and

256,600 options were issued to the employees of the Company.

The training needs of staff at various levels are periodically

assessed and training programmes are conducted using internal

resources and/or by engaging external trainers/facilities. TheCompany employed a total of 256 employees as on 31st March,

2009 spread over all its plants and at ofces.

otlk

India, with an arable land of 184 million hectares has an annual

production of 90 Million Metric Tone (MMT) of milk (highest in

the world), 179 MMT of fruits and vegetables (second largest),

204 MMT of food grains (third largest), and 6.3 MMT of sh

(third largest). Despite being one of the largest food producers,

India accounts for less than 1.5% of international food trade.

Domestic demand in the industry is expected to rise with

increasing per capita income, increased urbanisation, improved

standard of living, changing lifestyle of burgeoning middle class,

and increase in the percentage of women in the work force. It

is a well known fact that rising urbanisation increases and rising

per capita GDP within cities, provide companies with large

economies of agglomeration for any business activity.

Food production in India is expected to grow two-fold over the

next 10-years leaving immense scope for food processing sector.

Indian food processing industry is expected to grow at around

20% CAGR, becoming Rs. 15 trillion industry by 2015. Ministry

of Food Processing in its vision document 2015, has estimated

the size of food sector to triple, processing level of perishable

products to increase from 6% to 20% and Indias share in globalfood trade to increase from 1.5% to 3%.

The Indian food industry is mainly unorganised with 75% units

belonging to unorganised players. It has been identied that by

2014-15 a total of Rs. 910 billion investment will be required

in the Indian food processing industry to meet the growing

demand for processed food. Research shows that the announced

investments by the Indian government through their various

departments and agencies would only be to the tune of approx.

Rs. 60 billion. This huge gap between Investment Required vs.

Investment proposed creates an opportunity for the companies

in the food processing domain for future growth.

Driving growth in the food processing sector holds the key to

changing the labour intensive practices in the Indian agriculture

sector. Inefcient marketing systems are already being targeted.

Policies are now promoting the participation of private

investors who would promote efciency in food processing

and agriculture marketing systems. These are just the initial

stages of development and enhanced efciencies by improving

productivity and investments, will be a source of power for the

food processing sector in the future. In other words, the two

sectors share a symbiotic relationship and changes to either will

impact the other.

In this backdrop, the Government of India has a vision, strategy andaction plan for the food processing sector. This strategy addresses

issues of taxation, organised retail, infrastructure development,

marketing interventions and regulations, strengthening of

institutions and issues of food safety and regulations. The Vision

2015 strategy released in 2003-04 envisages:

A three fold increase in the size of the processed food sector

to close to US$ 300 billion by 2015

Increasing level of processing of perishables from 6% to 20%

Value addition to increase from 20% to 35%

Increase share in global food trade from 1.5% to 3%

Increase the share of value added products in food

consumption from the current 16% to 50% 053TemptationFoodsLimited


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RISK REVIEW

1 ECoNoMIC DoWNTuRNThe slowing global economy has impacted the Indian

economy as well. A slowdown in the economic growth

in India could cause the business of the Company

to suffer. The performance and the growth of the

Companys business are necessarily dependent on the

overall health of the Indian economy.

Mitigatin

The Company has a wide portfolio of products under

each of its brands. It is planning 4 more acquisitions to

widen its product base and extend its global reach.

4DEPENDENCE oN SuPPLY CHAINMANAGEMENT

The success of food processing business is dependent

on supply chain management as inefciencies could

lead to unavailability of raw materials. It is critical to

identify vendors who shall provide quality products in

proper time. This criticality increases especially in case

of perishable commodities.

Mitigatin

TFL has tried to keep optimum inventory at their

factories in order to control its working capital

requirements. Food items require efcient supply

chain management as this involves items which are

perishable or have limited shelf life. For some of

its products TFL also outsources the supply chain

management to third party sources.2INCoRRECT DEMAND FoRECASTINGSome of TFLs products are seasonal. So TFL has to

buy raw materials in anticipation of demand for the

same. This requires accurate demand forecasting. Any

mismatch between forecast and actual demand could

lead to excess inventories.

Mitigatin

In case of any excess inventory, some products are sold

either at a discount or are disposed off.

5GEo PoLITICAL RISKSTFLs ability to counter international competition forall or specic products could be adversely affected if

any country or countries propagate their goods more

effectively than we can.

Mitigatin

TFL is striving to diversify its products as well

as focusing on more than one market for its

products and keeps a close watch on any such

changes taking place.3FoREx RISKTFL is exposed to foreign currency risk as some portion

of the revenue is derived from exports.

Mitigatin

As a business policy, TFL strives to bill the exports

in Indian Rupees to avoid or reduce the exposure to

foreign currency risk.



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PREFACEYour Company endeavours to strengthen the Corporate Governance prevalent and practiced by the Company with the passage of time,

even going beyond what is required statutorily, treating the statutory requirements as the minimum requirement.

The objective is to be a well managed Corporate Governed Company working in the interest of its shareholders, investors and other

constituents.

A. MAndATORY REQuIREMEnTS:

1. Companys Philosophy on Code of Governance:Your Company is fully committed to the principles of transparency, integrity and accountability in all spheres of its operations

and has been practicing the principles of good corporate governance. In keeping with this commitment, your Company has

been upholding fair and ethical business and corporate practices and transparency in its dealings and continuously endeavours

to review, strengthen and upgrade its systems and processes so as to bring in transparency and efciency in its various business

segments.

2. Board of Directors and Board Meetings:

The Board is headed by Mr. Vinit Kumar, who is the Chairman & Managing Director. The Board is composed of eminent

persons with considerable professional experience in diverse elds. With the exception of Mr. Vinit Kumar, who is non-

independent, all the other Directors are Independent and Non-Executive.

The details of the Board of Directors as on the date and the meetings attended by them are as under:-

Name f theDirectr

Categryf Directr-ship

N. f Bard Meetingheld dring the year

dring his/her tenre as

Directr and nmber f

Bard Meetings attended

Attendanceat the

last AGM

N. fther

Directr-

ships as held

N. fCmmittees

f which

Member

Remarks

Held Attended

Mr. Vinit Kumar Non- Independent

& Executive

Director

6 6 Yes 2 - -

Dr. (Ms.)

Kala Pant

Independent

& Non-Executive

6 6 Yes 3 7 -

Mr. R.V. Joshi Independent

& Non-Executive

6 6 Yes 2 6 -

Mr. E. David

Ellington

Independe nt

& Non-Executive

6 1 No - - -

Mr. G.

Ramachandran

Independent

& Non-Executive

6 5 Yes 13 3 -

Ms. Elizabeth

Harrington

Independent

& Non-Executive

6 2 No 2 3 -

Ms. Bhairavi

Goswami

Independent

& Non-Executive

6 5 Yes 1 3 -

During the year under review, 6 (Six Board Meetings were held, the dates being: 5th April, 2008, 12th May, 2008, 29th July,

2008, 9th September, 2008, 31st October, 2008, and 28th January, 2009.



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3. Meetings of Committees of Directors:

(a) Adit Cmmittee:

The Audit Committee of the Company was constituted and made functional w.e.f. 6th January, 2006. The Audit

Committee at present comprises of the following four non-executive directors:

i) Dr. (Ms.) Kala Pant, Chairperson

ii) Mr. G. Ramachandran

iii) Mr. R. V. Joshi

iv) Ms. Bhairavi Goswami

The role and terms of reference of the Audit Committee briey include review of internal Audit Reports and the StatutoryAuditors Report on the nancial statements, general interaction with the internal Auditors and statutory Auditors, selection

and establishment of accounting policies, review of nancial statements, both quarterly and annual before submission to

the Board, review of Management discussion and analysis of nancial condition and results of operations and review of

performance of statutory and internal auditors and adequacy of internal control systems and other matters specied under

Clause 49 of the Listing Agreement a

temptation foods limited 08-09

Documents