MONSANTO INDIA LIMITED

 

Annual Report 2002 - 2003

From The Chairman

It feels very good to start my message for this Annual Report by stating that Monsanto India recorded its highest ever profit in the financial year 2002-03. It feels even better to say that this happened in a difficult year when the country experienced its worst drought in three decades.

Although sales were flat, thanks to a combination of steps we took in the previous financial year to sustain strong performance and lay the groundwork for long-term growth, this has been the best year ever from the profitability point of view, with profits rising to an all-time high of Rs 5059 Lacs from Rs 3110 Lacs last year.

Our sales mix has changed - we now sell more of seeds, where the profit margins are higher. We have managed costs and receivables better and are committed to an ongoing process of resource optimisation and effective cost management.

The next three to five years will be challenging for our company as we continue on our mission of becoming the preferred high-tech solutions provider to farmers.

The year under review saw the planting of India's first biotech crop. Over 55,000 farmers planted Bollgard, the insect-protected Bt cotton, on 80,000 acres in six states. Based on a report from a team of officials and scientists, India's Minister for Environment and Forests told the Upper House of Parliament on December 15, 2002, that the performance of the Bt cotton was satisfactory in terms of the higher number of bolls, reduced number of sprays for control of bollworms and higher yields. This, despite the drought and the vagaries of the weather.

The key factor in our success has been the farmer, our customer. He trusts Monsanto's products to deliver, every time. The farmer vouches for our product each time he walks up to one of our dealers and asks for it. Our customer is therefore the focus of this year's Annual Report.

That brings me to our Pledge because it is the foundation of all that we do, internally and externally. Integrity is the core of our Pledge. We remain committed to it globally. Our pledge had five elements focused on external audiences -- Dialogue, Transparency, Respect, Sharing and Delivering Benefits. We have now added two more elements that are internally focused and that enhance the Pledge.

These additions commit us to 'Acting as Owners to Achieve Results' and 'Creating a Great Place to Work'. The first will involve better stewardship of our company's resources, making wise decisions and achieving the results agreed upon. The second commits us to greater diversity of people and thought, innovation, creativity and better performance-oriented rewards and recognition. This is now reflected in every aspect of our internal interaction, including the performance appraisals of our talented and dedicated group of people.

It is a matter of pride that an India team is among the recently announced winners of Monsanto's global Excellence Awards, a corporate programme that recognizes employees whose efforts best exemplify the spirit of the seven elements of the Monsanto Pledge. Monsanto India won the award for its community programme in Bellary, Karnataka, where it supports education for local children, apart from other community-oriented initiatives.

The Union Finance Minister, Shri Jaswant Singh, told Parliament in his Budget Speech on February 28, 2003: -Agriculture, the life-blood of our economy, after giving the country adequate food security, is now again at the crossroads, as it prepares to diversify and move up the value chain. It also needs to respond robustly to second generation issues such as land degradation and water logging. Diversification, resonance with market-forces and a swift adoption of sunrise technologies are the other needs.-

The readiness of the Indian farmer to opt for modern farming technologies has been amply proved during the Green Revolution. Monsanto, with its products and technologies based on biotechnology and genomics to improve the quantity and quality of food, feed and fibre, is uniquely positioned to help the farmer in this process.

Let me end by thanking our customers, business partners and employees for their wholehearted involvement and efforts in the past year. I also thank our Directors for their wise counsel. And finally, I thank you all for your continued support and appreciation.

AN OVERVIEW

We are pleased to present the results of yet another successful year for Monsanto India Ltd., this despite the country suffering its worst drought in three decades.

The month of July normally records 30% of the season's rainfall. However, July 2002 was the driest month of last year's monsoon, with rainfall being just half of what is normal. It was a record low for the past one hundred years, according to the Economic Survey 2002-03 of the Government of India. Rainfall did not increase in the subsequent months and the precipitation failed to make up for the deficit, making 2002 a disastrous year for Indian agriculture.

Despite the drought, and sales remaining flat, this has been a good year for your Company, with profits increasing more than 60% from Rs 3110 Lacs to Rs 5059 Lacs, and your Company recording the highest ever profit in its over half century history in India. One reason for higher profits is that our sales mix has changed. Our proportion of seed sales has increased. The herbicide business continues to be under great pressure because of the introduction of new molecules and increasing competition from generics. We continue to focus our efforts on exports of both seeds and chemistry through continued efforts to position ourselves as a credible source of high quality products.

Along with our knowledge-based innovative marketing strategies, which we fine-tuned even more, we geared up to face the challenge of the poor monsoon. We continued the cost management exercise we began last year. We also improved on our receivables, down to Rs 6260 Lacs from Rs 9081 Lacs last year, and brought loans and advances down to Rs 3358 Lacs from Rs 4616 Lacs last year. While we reduced receivables, we were strict on credit policies. Incentives for sales employees were linked with collections and we set targets for these. Our special credit cell continues to perform well.

All this helped us to exceed our best expectations and achieve a quantum jump in our financial performance for the year 2002-03.

Overall, our improved performance can be attributed to successful penetration of the Indian market for agro inputs (chemicals & seeds) despite the drought, sustained export volumes and a continuous focus on cost management.

EXPORTS

During the year, we commissioned the second part of our Rs 780 Lacs Wet Ear Gas Drying Seed Facility for hybrid seeds Eluru in Andhra Pradesh. Maize seed exports to South-East Asia Indonesia, the Philippines and Thailand) are now a major business for us and contribute significantly to our revenues and income.

Monsanto India Limited is now recognised throughout South- East Asia as a reliable source of high quality seed. Seeds are a big export growth area because our quality has improved dramatically and productivity from your Company's seeds is comparable to the best available seeds in that category. Our annual seeds production reached a record 19,000 tonnes last year.

“Agriculture, the life-blood of our economy, after giving the country adequate food security, is now again at the crossroads, as it prepares to diversify and move up the value chain. It also needs to respond robustly to second-generation issues such as land degradation and waterlogging. Diversification, resonance with market forces and a swift adoption of sunrise technologies are the other needs.

“India has the largest irrigated, arable land mass in the world, our gross arable land being second only to the United States of America. We must acknowledge the vital import of these facts: they are both an unrecognised, and an unused asset; it is our great reserve. We now need to give it full encouragement.”

Union Finance Minister Jaswant Singh in his Budget Speech, February 28, 2003

OUR FOCUS - CHEMISTRY, SEEDS, TRAITS

We integrated all our agricultural businesses in India into our listed company three years ago, making your Company a comprehensive agricultural inputs provider in India. We have completed the integration and made a smooth transition from a business based solely on herbicides to one that includes Seeds and Biotech Traits. We are committed to Indian agriculture, offering the Indian farmer unique solutions and products that will help enhance yields and improve the quality of the environment in a sustainable way, resulting in the growth of your Company's revenues and incomes.

Our results show that our integration strategy is bearing fruit. Our three core businesses today are Herbicides, Seeds and Biotech Traits and our focus is on four key crops -- rice, wheat, cotton and maize. Our thrust is on Innovative Marketing Strategies and bundling of products to provide Integrated Solutions to farmers, sourcing from third parties where necessary to grow the Seeds and Traits businesses, while reducing our operating costs in the competitive Herbicides segment.

HERBICIDES

Our Herbicides business is an important one. It is helping farmers replace manual weeding with cost-effective and efficient weed control, reduce production costs and improve quality and yield, thereby increasing their income.

We will continue to build on our existing diversified herbicides business as a strong platform for growth. This will help us leverage our distribution strengths and bring value to both our customers and our shareholders.

More and more farmers are now taking to Conservation Tillage (CT). First, it was the farmers in the wheat fields of Punjab and Haryana who found value in it in terms of time, energy and money saved. Now farmers in Bihar see great promise in it because of the agro-climatic conditions and farming practices in use there.

CT is useful where fields are waterlogged through September and, sometimes, even in October, delaying sowing for the winter crop. By using CT, farmers have found they can sow as early as mid-September, regardless of the water, and that unseasonable rain in October can actually help the crop if they use CT.

TRAITS

With joint distribution rights for Bollgard, the insect-protected Bt cotton from Mahyco Monsanto Biotech, your Company has a head start with the cotton farmers in some states. Last year, 55,000 farmers planted Bollgard on approximately 80,000 acres. This year we expect the acreage to improve as farmers have seen the benefits of the new technology in controlling the bollworm.

Zero-Till Cultivation Saves Costs:

Karnail Singh and Ajaib Singh of Mahi Nangal village, Talwandi Sabo Tehsil, Bathinda district, grow wheat, paddy and cotton on 32 acres of land. Two years ago, they switched to the zero-till method of sowing cotton and wheat, guided by Monsanto's field staff.

"We saw the benefits on a one-acre trial plot. The benefits of this method include a saving of Rs 1,200-1,500 per acre per annum in the cost of planting, an average yield increase of 15% in wheat, and savings in terms of labour and time," say the two farmers. Moreover, the soil in the zero-till method of cultivation is softer as compared to that in conventional tillage."

We have also taken the very first steps in the deregulation process for transgenic maize. Two kilograms of the seed have been imported through the authorised agency and the Review Committee for Genetic Manipulation has given permission for regulatory studies. The initial pollen flow studies are expected to be planted in the coming kharif season.

SEEDS

The Seeds business will continue to be our growth platform during the next 3 to 5 years and we have reinforced our success in hybrid maize and sunflower seeds. Our seeds helped farmers improve productivity greatly even in last year's unfavourable weather conditions. Dekalb and Asgrow hybrid maize seeds are now so well established in the market that they contributed significantly to our revenues and income. We were able to exceed the targets by 12-15% in volume terms because we were able to present a greater value proposition to the Indian farmer.

Using clutter-breaking advertising and farmer communications, and imbuing our product with a powerful brand personality and creative brand imagery, we were able to make considerable headway with new maize hybrids based on a well-researched positioning effort that focused on our strengths. Similarly, we flourished with sunflower in a bullish market in Andhra Pradesh and significantly strengthened our already strong position and outperformed the market. With the strong pipeline we have laid, we expect to do even better in 2004 and beyond.

OUR INITIATIVES - MARKETDEVELOPMENT & BRAND BUILDING

LEADER SHOWS THE WAY

Our market development success story continues in Leader, our wheat herbicide. Despite new molecules and competitors entering the market, we have been able to hold on to our market position.

Three out of five wheat farmers in Punjab and Haryana now opt for Leader to control Phalaris minor (commonly known as gooli danda or mandoosi), wild oat and broad leaf weeds. We have been able to do this with creative, innovative marketing strategies that have used knowledge as a marketing tool and built a personality and imagery around the brand. Each new entrant has been contained with innovative use of media, farmer schemes and robust marketing campaigns.

Leader is today the most well recognised wheat herbicide brand in Northern India, and farmer satisfaction levels are very high. What has made the difference is that instead of merely selling a chemical, our marketing teams position Leader as meeting a farmer's need for cost-effective and efficient weed control in the first 25-45 days of sowing.

Failure to control weeds in this period leads to a yield loss of around two quintals (or Rs 1,300) per acre. Leader also controls successive flushes of weeds, giving farmers season-long weed control and saving them additional applications of herbicide. Leader farmers reported a yield gain of 18.7% or 4.5 quintals per acre, the highest yield increase among all brands.

These messages go out to farmers through a Leader brand personality, a Leader Pra ( Leader brother) who gives trustworthy advice differentiating Leader from other herbicides. We have found small interactive get-togethers of opinion leaders and farmers to be more effective than mass meetings to get our messages through.

We also have pack sizes that suit the farmers. We found that three out of five farmers have two-hectare farms. So we have two-hectare packs. Each pack also has a window so farmers can see the pouch of active ingredient inside along with thesurfactant. All this in tamper-proof packaging. So farmers always ask for the Khidkiwala Pack (the pack with the window)!

We also use a lot of farmer-relevant imagery and incentive schemes to promote the brand. Every opportunity is used to get our message across because our men are always on the move, close to the ground, close to the farmer. They are always at hand to offer any help and reinforce Leader as the farmer-friendly, tried-and-tested, three-in-one herbicide offering early weed control, wider range, residual effect, more value for money in every respect!

POSITIONING FOR FAST MIX

The Kum Paniwalla Fast Mix (Less Water Fast Mix) herbicide for rice fields that we introduced last year was in great demand given the drought-like situation in large parts of North India last year. This is another example of knowledge-based, innovative marketing that we employed last year and which reaped good dividends this year.

This brand is a new improved formulation of Butachlor (Machete), widely used in the rice fields of Punjab and Haryana, where a shortage of water and electricity indicated a need for a herbicide that could do with less water. Fast Mix spreads better in low water collection and reaches faster into the soil to right where the weeds are. Our promotion for Fast Mix focused on the action -- how this water-based herbicide spreads deeper in less water, another example of moving away from a chemical or molecule-based approach to associating a product with the farmer's need.

Crop Diversification for Sustainable Agriculture:

"The very first year we planted high yielding Hi-shell maize, the results were great," says Ram Jassal of Shekhe village, Jalandhar district. He planted Hi-shell hybrid maize on one acre in 2002 and got 23 quintals.This means a gross income of Rs 14,000, which is Rs.4,000 per acre more than what he gets for paddy.

"This year, I am going to plant Hi-shell on all my 10 acres of land. I have been searching for technology like this, which gives me higher returns with lower costs of cultivation. Its 'stay green' character also gives me fodder for the animals," says Jassal.

BUY A SEED, TAKE HOME A TRACTOR!

In a tough year, you rely on the good years. Last year, we tied up with Mahindra & Mahindra's tractor division, using a “lucky card” in maize packs that offered farmers the chance of winning a tractor. The 35% response rate gave us a good database of large farm holders that proved very useful in promoting our hybrids this year.

HUMSAFAR SMALL HOLDER INITIATIVE

We also continued to partner the small farmer with the three-way initiative that we launched last year in Rajasthan -- the Humsafar Small Holder Initiative. This year we found new partners for him in poultry companies in Tamil Nadu. Through this initiative we provide small farmers a one-stop Integrated Solutions package. We increase his crop value in terms of yield and, through another partner, we help him find a reliable buyer who will give him better prices for a better harvest. These are the farmers with holdings that are less than two hectares in size. To Monsanto, they are as important as big landholders. Often these small farmers have no access to new sustainable agricultural practices. We play the catalyst as the lead input partner, and continue the partnership right up to the marketplace.

Humsafar helps the small farmer with Dekalb, Hi-shell & Allrounder, the preferred maize hybrids. An agriculture graduate, who we hired and who lived in the village, became the farmer's companion, guiding him in new ways of maize production, from preparing the land to harvesting the crop. He co-ordinated visits by scientists from the local agricultural university who provided information and answered questions about seeds, fertiliser, pests and plant disease. He was a true humsafar.

Our parent company has developed a new logo that has the word “imagine” with the “ag” highlighted, incorporated into its standard logo. This is intended to help convey the message that Monsanto is an innovative agricultural company that creates relevant solutions for farmers, consumers and the environment. Our logo therefore has three distinctive elements: our name, the vine symbol and a new marketing tagline.

Our tagline, Monsanto Imagine, was chosen as a forwardthinking, open and positive way to communicate Monsanto's dedication to the agricultural business. The word 'imagine' is an open invitation for dialogue consistent with the Monsanto Pledge. Highlighting the 'ag' reinforces our position as an innovative agricultural company with unlimited possibilities. The direct simplicity of the concept is user-friendly and translates well across many languages.

All this brings about a qualitative change in the small farmer's subsistence approach to the low-yielding, traditional variety he has been sowing on his small farm for ages. It introduces him to new agronomic practices, opens new windows of opporunity for him, increases his profitability and changes his approach to life itself.

Monsanto won the first prize, the "Lakshya General & HR Management Award", for its presentation "Humsafar - A Friend in Need" at the "Lakshya On-the-Job Achievers Contest" conducted by the National Institute for Training in Industrial Engineering (NITIE) in Mumbai in August 2002. This is a forum where practising middle level managers present projects that they have conceptualised and implemented in their companies, before corporate leaders.

OUR PEOPLE - CREATING A GREAT PLACE TO WORK

Finding, training and retaining good people who enjoy their work is a challenge today. In your Company, Human Resources (HR) management is among Monsanto's global priorities and one of the four focus areas in the "Focussed Forward" strategy, which our Parent Company enunciated in August 2000.

We have been pursuing this strategy single-mindedly since 2000, moving forward simultaneously on all four priorities. We work towards "Creating a Winning Environment" through Organisational Development, HR processes and intensive training to create a culture in which people feel they are empowered to win. Our effort has been to create an autonomous, vibrant, goal-oriented work force where the thinking is dynamic and robust.

Our effort, based on objective findings conducted through an organisation wide Employee Satisfaction Survey, has been to

• Create capability, upgrade it by raising the bar, and retain the best
• Develop succession planning through a robust people review process
• Create motivation that goes beyond money, through value added to one's self in terms of career development and training

A winning environment is crucial to an organisation like ours, which is far flung and where people are on the move most of the time and linked only electronically. Our people are the single most important element of your Company's success and the basis of our confidence in our future. Hence, we pay a great deal of attention to motivation, training and development of every member of our staff. Constant growth for self-fulfilment, is an ongoing process with us.

One of the major developments during the year was the addition of two more elements to the Monsanto Pledge, the foundation of all that we do internally and externally. Till last year, the Pledge had five elements focused on external audiences -- Dialogue, Transparency, Respect, Sharing and Delivering Benefits. We have now added two more elements that are internally focused and that enhance the Pledge.

These additions commit us to 'Acting as Owners to Achieve Results' and 'Creating a Great Place to Work'. The first involves better stewardship of your Company's resources, making wise decisions and achieving the results agreed upon. We will create clarity of direction, roles and accountability, build strong relationships with our customers and external partners, make wise decisions and take responsibility for achieving agreed upon results.

Herbicides of Prosperity:

Dogoh village, near Ratia tehsil, 40 km from Fatehabad, grew cotton mostly till 1975. Paddy was a secondary preference crop because weeding was done by hand. That year, Sardar Laxman Singh used Machete to tackle weeds for the first time and cut the cost of weeding. Says Laxman Singh, now 75: "The results with Machete are so consistent that despite the introduction of other products for weed control in paddy, farmers still prefer Machete."

His son, Hajura Singh, has had similar experiences with Leader, the wheat herbicide. He attributes the high yields of wheat to Leader and says that without it farmers would have been forced to drop wheat from their cropping cycle. Hajura Singh proudly points to his 100 acres of land, two tractors, a jeep, a car and the latest motorised farm equipment and says, "None of this would have been possible without Monsanto."

Higher Yields, Higher Income:

Aavula Chandrasekhar (30) of Thakkalapadu village, of Guntur district in Andhra Pradesh, sowed Hi-shell maize on 1.5 acres last year. He got an average yield of 38 quintals per acre - 8 quintals more per acre than what he usually gets from other hybrids. That translates into an increased income of Rs 6,000 for his holding.

"I was able to pay off my debts and get back my house which I had mortgaged. Seeing this, other farmers in the village have decided to shift to Hi-shell," says Chandrasekhar.

The second commits us to greater diversity of people and thought, faster innovation, creativity and better learning, inclusive teamwork and performance-oriented rewards and recognition

But at the heart of it all is Integrity, the core of our Pledge. This is key and is reflected in every aspect of our internal and external interactions.

On the training front, we continue to build, based on feedback from our people through the Employee Satisfaction Survey. Training programmes are now more employee need-based. Among the several new programmes we launched to develop People Managers during the year was People Management 101. Two such programmes, which were conducted region wide, were customised and rolled out specifically for our India team leaders.

We would like to see all our employees across all functions and disciplines based on identified patterns of behaviour in accordance with which they will be appraised. This will help review the performance of people using the same language and parameters. In addition, we have specific competencies for specific functions, as in the case of accountants, for instance.

The creation of the Rapid Recognition Award (RRA), to immediately commend outstanding performance outside of that recognised by institutionalised awards, was a major development last year. Unlike the functional Monsanto Excellence Awards, the RRA could be from peer to peer, subordinate to peer or subordinate to supervisor. The award consists of a handwritten "I appreciate" note and a memento.

Development Performance Rewards (DPR) is another area we are building on. Since retaining good people is an ongoing challenge, we have now developed a People Review tool, which we have modified to bring greater objectivity to the review process and reduce the element of subjectivity. While some amount of bias is inherent in any review process, this new tool brings in an element of objectivity and enables us to have meaningful review conversations around developmental feedback and helps in succession planning. The new People Review process was launched and actioned vigorausly.

Feedback is key to your Company's performance and a major result of the culture that we have created in the organisation through our HR processes. We have managers who get a 360- degree feedback against seven leadership parameters, which have been customised for our needs. This includes a peer review, and also a review by one's juniors who have the option to remain anonymous during the review process.

Peer review is also a succession planning tool. It highlights areas where employees are strong/weak, helps develop an action plan to build on the strengths, and close the gaps where a weakness is perceived. A review shared in a peer group also brings greater fairness and balance and opens up new paths in terms of the opportunities open to an individual. Most importantly, it brings in transparency that goes back to the individual and increases confidence in the system.

Simultaneously, we have also tried to customise our management incentive programme. We have a programme, which is aggressive and drives certain behaviour for business success, be it global, regional, country or individual goals.

However, creating new initiatives is not enough. We have to create, sustain, nurture and be authentic to our processes in order to achieve success. One of the ways we are challenging employees to create growth is through cross-functional moves, besides those which are intra-functional and intra-regional. Two of our people have accepted international assignments while two others have completed such projects. This has a cross-cultural advantage and provides valuable learning for us in India, apart from contributing to the success of other teams in the region.

DIVERSITY

We have made a strong business case for diversity. Your Company, which is a microcosm of the world, must reflect that world be it in terms of age, sex, race, geography or community. Even our stakeholders are a diverse lot. We therefore believe in a diverse work force that reflects the world and creates a more enriched decision-making process. This also makes our ability to respond to the marketplace more effective.

India has been chosen for a pilot project on diversity this year. We have a team with representatives across the company, dedicated to champion and research and drive this project.

ENVIRONMENT, SAFETY AND HEALTH

In a company where people are constantly on the move in every kind of weather and terrain, the importance of good safety practices cannot be over emphasised. Safety is another aspect of nurturing, protecting and retaining valuable human resources.

Monsanto places prime importance on safety, health and environmental sustainability at the work place, at home and wherever Monsanto employees are on the move. We are committed to creating injury-free workplaces throughout our organisation.

For Monsanto employees, driving is an integral part of the job. A company or personal vehicle is a workplace and safe driving therefore becomes a primary job responsibility. Vehicle Safety is our way of protecting our employees, families and customers from injury on the road. Your Company took several steps during the year under review to champion vehicle safety as a strong company value and culture, which is part of the job from Day 1 and the shared responsibility of everyone, because it is beneficial to employees and their families.

As part of this effort, we have a global Champion, a sponsorship Team and a global Project Team. We are proud that your Managing Director Sekhar Natarajan represents Asia- Pacific on the Project Team.

As a first step, we examined where we stand on safety issues, benchmarked ourselves against the best in the industry and established Key Deliverables for 2002 and 2003.

All this has demonstrated strong senior management commitment and created ownership of the process down the line with strong recognition and incentive programmes to create positive reinforcement and emphasise the value to the individual. Vehicle Safety is emphasised at every meeting to drive behavioural changes.

We have introduced Defensive Driving training and Vehicle Audits (seat belts are a 'must' without exception) and constantly reminded people about cell-phone usage and other distractions during driving. Our global vehicle policy prohibits the driver's use of any hand-held electronic device, including cell phones, while driving.

Every new driver goes through his first training within 14 days of hire. Refresher training is conducted every 3 years and anyone who is ever classified as "at-risk" undergoes special training.

Monsanto First, Always:

"Monsanto has always given Punjab farmers new technologies. Machete was the first herbicide to be launched for the paddy crop and is still the most preferred herbicide across the state," says Sardar Manjeet Singh of Punjab Khad Store, Jalandhar, one of the oldest and most respected input suppliers in the area.

" Leader was launched when farmers lost hope in tackling the menace of Phalaris minor. Now it is a necessity for wheat farmers. Then came 'Fastmix' - a new herbicide, just when our farmers were suffering a water crisis. Monsanto's field staff works closely with farmers, understands their problems and develops products which the farmers need. They are always the first to bring new ideas and new technology. I am proud to be associated with Monsanto."

CONTRIBUTING THROUGH GOOD CORPORATE CITIZENSHIP

COMMUNITY DEVELOPMENT PROGRAMMES

Your Company is proud that the Monsanto India team is among Monsanto's recently announced winners of the company's global Excellence Awards, a corporate programme that recognises employees whose efforts best exemplify the spirit of the seven elements of the Monsanto Pledge.

The Monsanto Pledge encompasses the elements of Dialogue, Transparency, Respect, Sharing, Delivering Benefits, while promising to foster a spirit of Ownership and Pride in the Workplace among employees. Monsanto India's award winning initiative is a community programme in Bellary, Karnataka. In 1996 Monsanto India launched a programme to provide educational tools for the local children, beginning on a small scale by donating books, school bags and scholarships to students. Since its inception, the programme has donated 200,000 schoolbooks, 50,000 school bags and 2,500 student scholarships to local children.

In addition to the student programme, Monsanto India conducted both human and animal heath camps, benefiting more than 4,000 people and 3,000 animals, and developed publicvaccination programmes, providing polio vaccination to hundreds of children.

Through Monsanto's efforts, hundreds of trees have been planted. Your Company also contributed Rs 2.5 Lacs to "Swaccha Grama Scheme" (Clean Village Programme), which has led to the construction of a road and better hygiene and sanitation.

Monsanto India has donated its Rs 7.5 Lacs prize money to the Mahatma Gandhi Sikshana Samithi in Bellary, Karnataka, and Zilla Praja Parishat Unnatha Patashala in Eluru, Andhra Pradesh, to upgrade the education infrastructure and help local schools meet the children’s needs.

Monsanto has also contributed to development activities in and around the community in Rakholi in Silvassa where our plant is situated. Through the local Rotary Club, of which our employees are members, an English medium school has been started in Khanvel, about 8 km. from our plant. Our employees are closely involved in the management and development of the school. Your Company also helped the local Rakholi School by providing books to needy students. A medical check-up for the students was also organised.

Your Company's employees have also participated in health camps hosted by the Adivasi Vikas Sanghatana, an organisation working for the tribals of Silvassa. Polio camps, eye camps and skin check-up camps were some of the other initiatives taken up. Your Company's employees were also involved in blood donation camps organised by the Red Cross Society, Silvassa, distribution of old clothes in villages, tree plantation and Pulse Polio vaccination drives.

In Andhra Pradesh, we continued our partnership with 100 DWCRA (Development of Women and Children in Rural Areas) groups in two districts (Vizianagaram and Ranga Reddy) to empower women. Monsanto Meekosam (Monsanto For You) came in as a technology partner, offering farmer education and skills training in the latest agricultural technologies, including integrated crop management in hybrid rice, cotton and maize through the DWCRA self-help groups.

NEW CERTIFICATIONS

New certifications your Company received during the year were ISO 9001 Quality Management Systems for the Bellary plant and Occupational Health, Safety and Assessment Systems (OHSAS 18001) by SGS International Certification Services, Singapore, for the Corn Breeding Station, Bangalore.

Earlier last year, the Mumbai corporate office was the first corporate office in India to be awarded the OHSAS 18001 certification.

The OHSAS and ISO are voluntary standards used by industries to quantitatively measure their safety performance. These certifications demonstrate your Company's commitment to providing a healthy and safe workplace for our employees, contractors and visitors, and to having a neutral or positive environmental impact from our operations.

We are now working towards OHSAS for the Monsanto Research Centre in Bangalore in 2003. We will also rework the certification for Silvassa and Bellary in 2003 for OHSAS 18001.

FINANCIAL SUMMARY FOR 10 YEARS

NOTICE

NOTICE is hereby given that the FIFTY THIRD Annual General Meeting of Monsanto India Limited will be held on Friday, 25th July, 2003 at 10.30 a.m. at M.C.GHIA HALL, BHOGILAL HARGOVINDAS BUILDING, 2nd Floor, 18/20, Kaikhushru Dubash Marg, Mumbai - 400 001 to transact the following business:

ORDINARY BUSINESS:

1. To receive, consider and adopt the Balance Sheet as at 31st March, 2003 and the Profit and Loss Account for the year ended on that date, together with the reports of the Directors and Auditors thereon.

2. To declare a dividend.

3. To appoint a Director in place of Mr.Brett D. Begemann, who retires by rotation and being eligible, offers himself for re-appointment.

4. To appoint a Director in place of Dr. S.P. Adarkar, who retires by rotation and being eligible, offers himself for re-appointment.

5. To re-appoint Messers Deloitte Haskins & Sells, Chartered Accountants, Mumbai, as Auditors to hold office from the conclusion of this meeting until conclusion of the next Annual General Meeting and to authorise the Board of Directors to fix their remuneration.

SPECIAL BUSINESS:

6. To consider and if thought fit, to pass, with or without modification(s), the following Resolution as a Special Resolution:

"RESOLVED that pursuant to the provisions of Section 61 and other applicable provisions of the Companies Act, 1956, and Clause 6.1 and other applicable provisions of the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003 (hereinafter referred to as 'Delisting Guidelines') and subject to such other approvals, permissions and sanctions, as may be necessary and subject to such conditions and modifications, as may be prescribed or imposed by any authority while granting such approvals, permissions and sanctions, as may be agreed to by the Board of Directors of the Company ('the Board' which term shall be deemed to include any Committee thereof), consent of the Company be and is hereby accorded to the Board to delist the Equity Shares of the Company from the Stock Exchange at Delhi;

RESOLVED further that the Board be and is hereby authorised to settle all questions, difficulties or doubts that may arise in regard to the aforesaid voluntary delisting of shares, as it may, in its absolute discretion deem fit without being required to seek any further approval of the members or otherwise and intent that the members shall be deemed to have given their approval expressly by the authority of this resolution;

RESOLVED further that the Board be and is hereby authorised to take all necessary steps in this regard in order to comply with all the legal and procedural formalities and further to authorise any of its Committees/Directors or any of the Officers of the Company to do all such acts, deeds or things as may be necessary from time to time to give effect to the aforesaid resolutions and matters connected or incidental thereto."

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956:

Item No.6:

In order to provide liquidity to the shareholders and investors, the Company's Equity Shares are listed on the Stock Exchanges at Mumbai (BSE), Delhi (DSE) and National Stock Exchange (NSE). The bulk of the trading in the Company's Equity Shares takes place on BSE and NSE.

It has been confirmed by DSE that there is no transaction reported in the last three years at their Stock Exchange. This is due to expansion of BSE and emergence of NSE and their extensive networking and extension of terminals to other cities, where investors have access to online dealings in the Company's Equity Shares on such terminals across the country. No particular benefit is available to the shareholders of the Company by continuing the listing of the Equity Shares on DSE. The proposed delisting of the Company's Equity Shares on DSE will not be prejudicial to, or affect the interest of the investors.

The Company's Equity Shares are one of the scrips which the Securities and Exchange Board of India (SEBI) has specified for settlement only in dematerialised form by all investors. Accordingly, there is no physical movement of share certificates in transactions taking place on the Stock Exchanges.

Hence, it is considered desirable to delist the Equity Shares of the Company from DSE subject to the Company complying with the various provisions of the SEBI (Delisting of Securities) Guidelines, 2003 ('the Delisting Guidelines') and obtaining requisite approvals, permissions and sanctions in this regard.

The Company's Equity Shares will continue to be listed on BSE and NSE.

In terms of the Delisting Guidelines, a public announcement regarding the proposed delisting will be published. The delisting will take effect only after all approvals, permissions and sanctions have been received. The exact date on which delisting will take place will be suitably notified.

The Directors recommend the Special Resolution for the approval of the members.

No Director of the Company is concerned or interested in the said resolution.

NOTES:

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND A PROXY NEED NOT BE A MEMBER. A PROXY IN ORDER TO BE EFFECTIVE, MUST BE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE MEETING.

2. The Register of Members and Share Transfer books of the Company will be closed from Wednesday, 16th July, 2003 to Friday, 18th July, 2003 (both days inclusive).

3. The payment of dividend, upon declaration by the shareholders at the forthcoming Annual General Meeting, will be made on or after 25th July, 2003 as under:

• To all those beneficial owners holding shares in electronic form as per the beneficial ownership data as may be available to the company by the National Securities Depository Ltd. (NSDL) and the Central Depository Services (India) Ltd. (CDSL) as at the end of the day on Tuesday, 15th July, 2003.
• To all those members holding shares in physical form after giving effect to all the valid share transfers lodged with the Company before the closing hours on Tuesday, 15th July, 2003.

4. Shareholders, holding shares in physical form are requested to notify change of address, if any, immediately to the Company/ Registrar & Share Transfer Agents (RTA), preferably alongwith their banks/Electronic Clearing Service (ECS) details, unless already notified, so as to reach the Company/RTA on or before 15th July, 2003.

Beneficial owners holding shares in electronic form are requested to notify any change of address, bank particulars, ECS particulars etc. to their respective depository participants and make sure that such changes are recorded by them correctly on or before 15th July, 2003. The particulars recorded with the depository participants will be considered for making the payment of dividend either by issuing physical instruments or through ECS as recently intimated by the Company. Shareholders are requested to take appropriate action in the matter, in their own interest, to avoid delay in receiving the payment of dividend.

Where dividend payments are made through ECS, intimation regarding such remittances would be sent separately to the shareholders.

5. Shareholders desiring any information as regards the accounts are requested to write to the Company atleast 7 days in advance, so as to enable the Company to keep the information ready.

6. In accordance with the provisions of Section 205A of the Companies Act, 1956, the Company has transferred unclaimed dividend for the year ended 31st March, 1995 to the "Investor Education and Protection Fund".

7. In terms of Sections 205A and 205C of the Companies Act, 1956, any dividend remaining unpaid for a period of seven years from the due date of payment is required to be transferred to the Investor Education and Protection Fund. Members who have not encashed their dividend warrants for the year 1995-96 or thereafter, are requested to write to the Company/RTA.

By Order of the Board of Directors
AJAI JAIN
Counsel (Legal & Taxation) & Company Secretary

Mumbai: May 27, 2003
Registered Office:
Ahura Centre, 5th Floor,
96, Mahakali Caves Road,
Andheri (East), Mumbai - 400 093.

DIRECTORS' REPORT

TO THE SHAREHOLDERS,

2. OPERATIONS:

The Net Sales during the year under consideration were lower by approximately 0.73% as compared to the previous year due to unfavourable weather for agriculture and severe competition in the agrochemicals business. Our seed business continues to grow on the strength of our special genetics and market development work.

3. DIVIDEND:

Your Directors are pleased to recommend a dividend of Rs.12.50 per share on the share capital as against Rs. 8/- per share in the previous year. In addition, the Company will have to pay Tax @ 12.81% (including surcharge) on the dividend amount.

4. BUYBACK OF EQUITY SHARES:

The Company's proposal to buyback 3,28,478 fully paid-up equity shares of Rs. 10/- each from existing shareholders at a maximum price of Rs. 575/- per share from the open market has been approved by the Board. The Company will commence the buyback after receiving approval from the Foreign Investment Promotion Board and such other approvals as may be required.

5. MANUFACTURING:

During the year, the Company expanded the corn drying facility at Eluru in Andhra Pradesh to meet the increased demand of gas dried seeds in local as well as international markets.

6. ENVIRONMENT, SAFETY & HEALTH (ESH):

The Company is continuously following the policy on environment, safety and health in accordance with Monsanto's Corporate Guidelines. All the plants of the Company achieved performance of zero reportable accidents for the year.

Your Company remains committed to social responsibility and continues to support community development projects.

7. HUMAN RESOURCES:

The Company continues to maintain cordial and harmonious relationship with its employees. To meet the changing business challenges, the Company provides training to its employees to upgrade their knowledge based skills.

The information required under Section 217(2A) of the Companies Act, 1956 ('the Act') and the rules made thereunder is given in the Annexure hereto and forms part of this report. In terms of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Act. Any shareholder interested in obtaining a copy of the said statement, may write to the Company at its Registered Office.

8. DIRECTORS:

During the year, Mr. Wan Wah Chung resigned from the Board in view of his retirement from Monsanto. Your Directors would like to place on record their sincere gratitude towards the guidance and contribution made by Mr. Wan Wah Chung in the growth of the business in India.

Pursuant to the provisions of Article 111 of the Articles of Association, Mr. Andrew J. Kuchan was appointed as a Non- Retiring Director on 22nd January, 2003 in the casual vacancy caused by the resignation of Mr.Wan Wah Chung.

Mr.Andrew J. Kuchan, Chief Financial Officer - Asia Pacific, aged 40 years, has been associated with Monsanto Company, USA for the past 18 years and has been entrusted with various challenging assignments during this period. Mr.Andrew J. Kuchan is responsible for region wide financial operations and strategies including accounting, treasury, credit and tax.

Mr. Brett D. Begemann and Dr. S. P. Adarkar retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

9. DIRECTORS' RESPONSIBILITY STATEMENT:

In compliance of Section 217(2AA) of the Act, your directors, on the basis of information made available to them, confirm the following:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed;

(b) they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2003 and of the profit or loss of the Company for that year;

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the annual accounts are prepared on a going concern basis.

10. CORPORATE GOVERNANCE:

A Report on Corporate Governance along with a certificate from the Auditors of the Company regarding compliance of the requirements of Corporate Governance, as also the Management Discussion and Analysis Report pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges are annexed hereto.

11. AUDITORS:

Messers Deloitte Haskins & Sells, Chartered Accountants, auditors of the Company retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Members are requested to appoint auditors for the current year and authorise the Board to fix their remuneration.

12. FOREIGN EXCHANGE EARNINGS AND OUTGO:

The details of expenditure and earnings in foreign currency are given under Notes to Accounts in Schedule 16.

13. CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION:

The information required to be furnished pursuant to Section 217(1)(e) of the Act, read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is appended hereto and forms part of this Report.

14. ACKNOWLEDGEMENT: The Board places on records its sincere appreciation for the continued support from Monsanto Company, USA - the parent Company, shareholders, distributors/dealers, farmers and other business associates, which contributed to our good results.

For and on behalf of the Board of Directors

Mumbai: May 27, 2003

ANNEXURE TO THE BOARD OF DIRECTORS' REPORT

I. CONSERVATION OF ENERGY:

FORM A

Form for disclosure of particulars with respect to conservation of energy.

A. POWER AND FUEL CONSUMPTION:

B. CONSUMPTION PER UNIT OF PRODUCTION:

The Company manufactures a wide range of products which pass through various operations before reaching the finishingstage. It is therefore not feasible to furnish the information in respect of consumption per unit of production.

II. TECHNOLOGY ABSORPTION:

FORM B

Form for disclosure of particulars with respect to Technology Absorption.

A. Research and Development:

B. Technology Absorption, Adaptation and Innovation:

For and on behalf of the Board of Directors

Mumbai: May 27, 2003

CORPORATE GOVERNANCE REPORT

1. COMPANY’S PHILOSOPHY ON CORPORATE GOVERNANCE:

Monsanto India Limited is a subsidiary of Monsanto Company, USA and is committed in adapting the best global practices of Corporate Governance. Corporate Governance envisages commitment of the Company towards the attainment of high levels of transparency, accountability and business propriety with the ultimate objective of increasing long term shareholders value, keeping in view the needs and interests of all other stakeholders.

2. BOARD OF DIRECTORS:

The Board comprises of Executive and Non-Executive Directors. The present strength of the Board is seven Directors comprising of one Executive Director, three Independent Non–Executive Directors and three Non-Executive Directors including the Chairman of the Company. The Executive and Non-Executive Directors are accomplished professionals and experts in their respective corporate fields.

Monsanto Company, USA has certain rights enshrined in the Articles of Association pertaining to the appointment of Directors.

Mr. Andrew J. Kuchan was appointed as a non-retiring director w.e.f. 22nd January, 2003.

The Company has not entered into any materially significant transaction with its promoters, directors, the management or any relatives thereof, that may have potential conflict with the interests of the Company at large.

The details of the Directors on the Board of your Company are given below:

Six Board Meetings were held during the year on the following dates:

The time gap between any two consecutive meetings is not more than four months.

3. AUDIT COMMITTEE:

The role and terms of reference of the Audit Committee are that it shall, without in any manner limiting its power to extend the scope of its work, generally carry out such duties as are contemplated under Clause 49 of the Listing Agreement and Section 292A of the Companies Act, 1956.

Composition and Attendance at the Audit Committee Meeting:

This Committee comprises of the following independent nonexecutive directors:

The Managing Director, Chief Financial Officer, Internal Auditor and Statutory Auditors are invitees to the meeting. Mr.Ajai Jain, Counsel (Legal & Taxation) & Company Secretary acts as Secretary of the Committee.

The Audit Committee met three times during the year on 21st May, 2002, 24th October, 2002 and 31st March, 2003.

4. REMUNERATION COMMITTEE:

The Remuneration Committee comprises of Dr.S. P. Adarkar, Chairman, besides Mr.R. C. Khanna and Mr.H. C. Asher, all being Non-Executive and Independent Directors. The terms of reference of the Committee are:

1. To recommend to the Board, the salary (including annual increments), perquisites and commission (if any) to be paid to the Company’s Managing Director/Whole-Time Directors (MD/WTDs);

2. To finalise the perquisites package within the overall ceiling fixed by the Board;

3. To recommend to the Board retirement benefits to be paid to the MD and WTDs;

4. To function as the Compensation Committee as per SEBI Guidelines on Employees’ Stock Option Scheme, if any such scheme is declared in future;

5. To define and implement the performance linked incentive scheme;

6. To periodically review and suggest revision of the total remuneration package of the MD/WTDs keeping in view the performance of the Company, standards prevailing in the industry, statutory guidelines etc.

During the year, one meeting of the Remuneration Committee was held on 17th June, 2002 and was attended by all the Directors.

Details of remuneration to the Directors during the year are as follows:

The Company does not have any Stock Option Scheme. However, the Managing Director and every employee of the Companyparticipate in the Global Stock Option Plan/Stock Appreciation Rights Plan of Monsanto Company, USA.

Remuneration Policy:

Payment of remuneration to the Managing Director is governed by the Agreement executed with the Managing Director by the Company, the terms and conditions of which were approved by the Board and the Shareholders. The remuneration structure comprises of salary, bonus, incentives, perquisites and other allowances. The Non-Executive Directors do not draw any remuneration from the Company other than sitting fees and such commission as may be determined by the Board from time to time.

5. SHAREHOLDERS’/ INVESTORS’ GRIEVANCES COMMITTEE:

The Shareholders’/Investors’ Grievances Committee comprises of Dr. S. P. Adarkar, Chairman, besides Mr. R. C. Khanna, Mr. H. C. Asher and Mr. Sekhar Natarajan. Mr. Ajai Jain is the Compliance Officer of the Committee. During the year, the Committee held 2 meetings on 22nd January, 2003 and 31st March, 2003. The Committee looks into the redressal of shareholder and investor complaints/ grievances. The Committee also looks into the complaints concerning issue of duplicate share certificates, transfer of shares, non-receipt of dividends and Balance Sheet, demat queries, etc. The Committee also oversees the performance of the Registrar and Transfer Agents and recommends measures for overall improvement in the quality of investor services.

A comparative statement of the various complaints received and redressed by the Company during the year are given below:

The Company received 156 correspondences/complaints during the year, most of which have been attended to within a period of fifteen days from the date of receipt of the same except some pending cases relating to disputes over title to shares.

Share Transfer System: The Company’s shares are in compulsory Dematerialisation Segment.

Share Transfers in physical form are presently registered and option letter for simultaneous dematerialisation of shares are being sent within a period of 20 days from the date of receipt, provided the documents are complete and the shares under transfer are not in dispute. The share certificates duly endorsed are being immediately dispatched after expiry of 30 days from the date of option letter to those who have not opted for simultaneous transfer cum dematerialisation. The total number of equity shares in physical form transferred during the year was 6981.

Share Transfer Committee: The Company also has a Share Transfer Committee comprising of Mr. Sekhar Natarajan, Mr. Sandeep Kulkarni and Mr. Ajai Jain. The Committee meets once in a fortnight and approves all matters related to shares vis-a-vis transfers, transmission, dematerialisation and rematerialisation of shares etc. The Company had no transfer of physical shares pending at the close of the financial year.

6. MEANS OF COMMUNICATION:

During the year under reference, quarterly results were published in widely circulating national and local daily newspapers such as The Economic Times and Maharashtra Times. These were not sent individually to the shareholders.

As per requirement of Clause 51 of the Listing Agreement, all the data related to quarterly financial results, shareholding pattern etc. is provided on the SEBI’s EDIFAR (Electronic Data Information Filing and Retrieval) website www.sebiedifar.nic.in within the timeframe prescribed in this regard.

The Management Discussion and Analysis Report forms a part of this Annual Report.

7. GENERAL BODY MEETINGS:

Particulars of Annual General Meetings (AGM) held during last three years:

No postal ballots were used/invited for voting at these meetings.

8. DISCLOSURES:

The details of transaction with the Company, which are either under direct control or indirect control of holding company i.e. Monsanto Company, USA are given in Note no. 19 of the Notes to Accounts. Besides these, the Company has no material transaction with its promoters, directors or the management, their subsidiaries or relatives, etc. that may have a potential conflict with the interest of the Company.

The Company has complied with all regulatory requirements on capital market and has not been imposed any penalty/strictures by the Stock Exchanges or SEBI or any other statutory authorities.

The Non-Executive Directors have no material pecuniary relationship or transaction with the Company in their personal capacity.

9. GENERAL SHAREHOLDER INFORMATION:

8. Monthly Highs & Lows of market price of the Company’s shares on Bombay Stock Exchange (BSE) & stock performance during the year 2002-03:

9. Distribution Schedule & Shareholding Pattern as on 31st March, 2003:

BRIEF RESUME & OTHER INFORMATION IN RESPECT OF MR. BRETT D. BEGEMANN, CHAIRMAN AND DR. S.P. ADARKAR, DIRECTOR SEEKING RE-APPOINTMENT AT THE ENSUING ANNUAL GENERAL MEETING:

1. Mr. Brett D. Begemann, aged 42 years, joined Monsanto in 1983 and is currently the Vice President, Asia Pacific for Monsanto Company, USA. He is responsible for Monsanto's agriculture business including seeds, biotech traits and crop protection products across all of Asia. He is also a member of Monsanto's Executive Leadership team.

Mr. Brett D. Begemann is a graduate of the University of Missouri with a B.S. degree in agricultural economics. He is not a director/ member of any other Company/Committee.

2. Dr. S. P. Adarkar, aged 82 years, is associated with Monsanto since 1947 in various capacities in India and abroad. He worked as Chairman of Mindia Chemicals Limited and Managing Director of this Company for several years and later on was associated as nominee director of Monsanto Company, USA. He is currently an independent non-executive director. He holds a Doctorate degree in Chemistry.

His other directorships include: The Saraswat Co-op. Bank Ltd., Uni Abex Alloy Products Ltd., Classic Stripes Pvt. Ltd., Maharashtra Hybrid Seeds Co. Ltd., Gujarat Petrosynthese Ltd., Pearl Organics Ltd., Mahyco Vegetable Seeds Ltd., Control Print (India) Ltd., Uni-Deritend Ltd., Amar Remedies Ltd., Mahyco Seeds Ltd., Dai-ichi Karkaria Ltd. and Xcel Vision Technologies Ltd.

AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE

TO THE SHAREHOLDERS OF MONSANTO INDIA LIMITED

We have examined the compliance of conditions of corporate governance by Monsanto India Limited for the year ended on 31st March, 2003 as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchanges.

The compliance of conditions of corporate governance is the responsibility of the Management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring 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 in all material respects with the conditions of corporate governance as stipulated in the above mentioned Listing Agreement.

As required by the Guidance Note issued by the Institute of Chartered Accountants of India, we have to state that according to the information and explanations given to us, no investor grievance is pending for period exceeding one month against the Company as per the records maintained by the Shareholders' and Investors' Grievances Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company.

For Deloitte Haskins & Sells
Chartered Accountants
P. B. Pardiwalla
Partner

Mumbai: May 27, 2003

MANAGEMENT DISCUSSION AND ANALYSIS REPORT- 2003

Industry Structure & Development: Agriculture is the backbone of the Indian economy and contributes 33 percent of its GNP. Two thirds of the country's work force derives its livelihood from agriculture. For continued growth, the agriculture sector needs better quality inputs such as seeds, fertilisers and pesticides as well as regular upgradation in farming and irrigation techniques, farmer education and credit facilities,] etc.

The growth of unwanted weeds and herbs is detrimental to crop yields and the agrochemical industry provides pesticides to control pests, herbs and weeds to maintain the fertility of the soil and to enable farmers to enjoy better yields. Farmers also need high quality seeds which are suitable for planting in diverse climatic conditions and will deliver high yields.

Higher productivity in food grains will ensure higher income for farmers, resulting in a greater demand for industrial goods and services. Higher crop productivity can be achieved through high grade plant protection and the greatest challenge before us is to prevent pest related crop losses, which are presently estimated at 20-30 percent of crops sown i.e. approximately Rs. 30,000 Crores per annum.

The Pesticide and Seed industries are regulated by two separate statutes i.e. Insecticides Act, 1968 and Seeds Act, 1966.

The pesticide industry is comprised of large manufacturers including Indian and multinational companies (MNCs) as well as a host of small manufacturers across India. The quality systems and ESH (Environment, Safety and Health) systems followed by Indian companies and MNC's have generally kept pace with the latest international norms, with ISO 9000, ISO 14001 and OHSAS 18001 certification and the "Responsibility Care" concept being followed.

Overall capacity for the manufacture of agrochemicals in the country exceeds utilisation. 2002 was a bad monsoon year in India and resulted in the reduction of farm area under cultivation. This, coupled with severe competition from spurious materials, brought about a reduction in prices of agrochemicals, higher inventories and delayed receivables. These factors affected not only the turnover of the agrochemical industry, but the bottom line too came under severe pressure.

Herbicides constitute just 14 percent of the Indian agrochemical market (the other 86 percent being comprised of insecticides and fungicides) because cheap labour is easily available for weeding operations. The industry is currently going through a dip on account of low pest pressure, unfavourable climatic conditions and a decrease in acreages.

The Indian seed industry can be broadly divided into two categories - field crop seeds and vegetable seeds. This industry has a few large producers operating at the national level and a number of small and regional producers and marketers.

Opportunities & Threats: The availability of indigenous raw material, cheap labour for industrial activities, consistency in production quality and the steady increase in pesticides usage spell a continued increase in the demand for herbicides and lend an impetus to the agrochemical industry.

The growing population in the country will need sufficient food at affordable prices and this calls for a higher production of food grains from limited arable land - as the pressures of industrialisation and housing continue to reduce agriculture activities. Higher yields can best be assured by reducing crop losses caused by weeds, pests and insects and by providing high quality seeds to farmers.

With the opening of the world market under WTO, India has the opportunity to increase its trade of agriculture based products and this is making farmers more conscious about using branded herbicides and seeds rather than relying upon traditional methods.

Hybrid seeds are gaining in popularity, though some farmers still prefer to use their residual crop as seed for the next season. However, awareness is increasing about high quality hybrid seeds, which give high yields and high income, enticing farmers to switch over to new varieties of hybrid seeds and technologically enhanced seeds.

Farmers’ acceptance of modern technologies in farming and the easy availability of hybrid seeds are good indicators of the growth of the seeds industry.

Product Performance: During the year 2002-03, the year's moonsoon season rainfall for the country as a whole was 19 percent below normal causing 29 percent of the country's agricultural area to face drought conditions. This reduced the agrochemical market by around 20 percent and there was a substantial reduction in the sales of herbicides as well.

However, our 'Machete' - rice herbicide and 'Leader' - wheat herbicide performed relatively well. The seed business also performed very well and the high quality gas dried corn seed under the brand name of 900 M and Hishell are well established in the farming community.

Monsanto is well positioned in the agriculture industry with its portfolio of niche products, the strong backing of its parent company and an energetic team of dedicated employees.

Financial Performance: The margins in the agrochemical business continue to be under severe pressure from competing molecules and due to a bad monsoon. However, the company was able to maintain its margin in the seed business, thanks to extensive market expansion activities and the superior quality of seeds.

Our cost management efforts have also yielded good results during the year.

Outlook: It is hoped that the monsoon in 2003 will be better than it was in 2002. An export thrust on agriculture commodities and processed agriculture produce, combined with an increased awareness of better crop protection due to Government and private sector extension, education and demonstration efforts - should boost the morale of the industry and 2003-2004 is expected to be a good year. However, the first forecast received from the Indian Meteorological Department has not been very encouraging and is cause for worry for our farmers and industry.

The company is hopeful of maintaining its performance in future, on account of its strong and well-established brands, aggressive marketing strategies and the development of new products.

Risks & Concerns: The Company depends on imports for most of its technical material and hence the business is susceptible to the volatility of the exchange rates and import duties. The overall economic slowdown has affected most segments of the economy including the agriculture markets. Competition in the market place continues to have an impact on our realisations and also exerts pressure on our margins.

Inspite of growth in irrigation facilities and availability of high quality inputs, still agriculture is substantially dependent on adequate, evenly distributed and timely monsoon rain.

Apart from the challenges presented by poor rainfall, higher taxes and duties and large investments on effluent treatment plants, the other major concerns of the agrochemical and seeds industry are the presence of spurious pesticides and counterfeit seeds.

Internal Control System: Your Company adheres to its written corporate policies with respect to all transactions, financial reporting and budgeting. The Company has an adequate system of internal control commensurate to its size. The internal audit department regularly conducts audit/review of the various functions and departments to assess financial and operating controls. All significant issues are regularly brought to the notice of the Audit Committee of the Directors. The statutory auditors and internal auditor are invited to attend the Audit Committee meetings.

Human Resources: The focus on performance evaluation, performance linked remuneration, training and succession planning are the core areas of motivation for the employees.

Maintaining control over the headcount and enhancing the linkage of remuneration to performance are some of the key factors underlying the excellent performance of the Company during the year.

The Company continues to support its employees by providing them opportunities for postings and overseas assignments, as part of their development and training.

Cautionary Statement: The statement made in this section describes the Company's objectives, projections, expectations and estimations which may be 'forward looking statements' within the meaning of applicable securities, laws and regulations. The annual results can differ materially from those expressed or implied, depending on the economic and climatic conditions, Government policies and other incidental factors which are beyond the control of the Company.

For and on behalf of the Board of Directors

Mumbai: May 27, 2003

AUDITORS’ REPORT

TO THE SHAREHOLDERS OF MONSANTO INDIA LIMITED

1. We have audited the attached Balance Sheet of MONSANTO INDIA LIMITED as at 31st March, 2003 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Manufacturing and Other Companies (Auditors’ Report) Order, 1988, issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, we give in the Annexure a statement on 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 for the 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 our examination of the books;

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

d) In our opinion the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) On the basis of the written representations received from the directors of the Company, and taken on record by the Board of Directors as on 31st March 2003, we report that none of the directors are disqualified as at 31st March, 2003 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting policies and notes thereon give the information required by the Companies Act, 1956, in the manner so required 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 31st March, 2003,

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 Cash Flow Statement, of the cash flows for the year ended on that date.

For Deloitte Haskins & Sells
Chartered Accountants
P. B. Pardiwalla
Partner

Mumbai: May 27, 2003

ANNEXURE TO THE AUDITORS’ REPORT OF MONSANTO INDIA LIMITED.

[referred to in paragraph 3 of our report of even date]

1) The company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets. All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its business. Accordingly, the physical verification of fixed assets has been carried out by the management during the year and we were informed that no material discrepancies were noticed on such verification as compared with the records of fixed assets.

2) None of the fixed assets have been revalued during the year.

3) The stocks of finished goods, raw materials, stores and spare parts have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

4) The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

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

6) On the basis of our examination of the stock records, in our opinion, the valuation of stocks is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the preceding year.

7) The Company has taken an unsecured interest free loan from a company under the same management as defined under Section 370 (1B) of the Companies Act 1956, (the ‘Act’) the terms and conditions of which are prima facie not prejudicial to the interests of the Company. The Company has not taken any loans from companies, firms or other parties listed in the register maintained under Section 301 of the Act, or from any other company under the same management as defined under Section 370(1B) of the Act.

8) The Company has granted an unsecured loan to a company under the same management as defined under Section 370 (1B) of the Act on terms and conditions that are prima facie not prejudicial to the interests of the Company. The Company has not granted any other loans to companies, firms, or other parties listed in the register maintained under Section 301 of the Act or to any other company under the same management as defined in Section 370(1B) of the Act.

9) The employees to whom the loans have been given by the Company are repaying principal amounts as stipulated and are also regular in payment of interest, where stipulated.

10) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business, for the purchase of stores, raw materials, including components, plant and machinery, equipment and other assets and for sale of goods.

11) According to the information and explanations given to us, in respect of the transctions of purchase and sale of goods, made in pursuance of the contracts or arrangements entered in the register maintained under Section 301 of the Act, and aggregating to Rs.50,000/- or more in respect of each party, we were informed that there are no alternate acceptable sources since similar transactions with other parties have not been made and therefore, no comparison of prices was possible. There were no transactions of sale of services entered in the said register.

12) As explained to us, the company has a procedure for determination of unserviceable or damaged stores, raw materials and finished goods and adequate provision has been made in the accounts for the loss arising on such account.

13) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from public. 14) In our opinion, reasonable records have been maintained by the Company for the sale and disposal of realisable scrap and by-products.

15) In our opinion and according to the information and explanations given to us, the Company has an adequate internal audit system commensurate with its size and nature of its business.

16) We have broadly reviewed the accounts maintained by the Company for its Chemistry business pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (1)(d) of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records.

17) According to the records of the company, contributions to the Provident Fund have been regularly deposited during the year with the appropriate authorities. According to the Company, the provisions of the Employees’ State Insurance Act are not applicable to the Company during the year.

18) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty or excise duty were outstanding as at 31st March, 2003, for a period of more than six months from the date they become payable.

19) According to the information and explanations given to us, no personal expenses of employees or directors have been charged to revenue account, other than those payable under contractual obligations or in accordance with generally accepted business practice.

20) The company is not a sick industrial company within the meaning of clause (o) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985.

21) In relation to trading activity of the company, we are informed that there were no damaged goods.

22) In respect of service activities of the company:

i. These activities do not involve consumption of materials and stores.

ii. Allocation of man-hours to jobs is not maintained, as it is not relevant in view of the nature of services rendered.

iii. In view of the above, the question of reasonableness of system of authorisation and internal control on allocation of stores and labour to jobs does not arise.

For Deloitte Haskins & Sells
Chartered Accountants
P. B. Pardiwalla

Partner

Mumbai: May 27, 2003

BALANCE SHEET AS AT 31ST MARCH, 2003

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2003

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SCHEDULE 5 - FIXED ASSETS

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SCHEDULE 16: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS

1. Company Background:

Monsanto India Limited ('the Company') was incorporated on 8th December, 1949. The Company is presently engaged in the business of production and sale of agricultural inputs, namely, chemicals and hybrid seeds. The Company's corporate office is located in Mumbai. It has a chemical production unit at Silvassa, hybrid seed production units at Bellary and Eluru and a chemical packing unit at Guwahati.

On 25th April, 2003, the Company has announced a proposal to buyback its fully paid-up equity shares upto a maximum of 3,28,478 shares at a price not exceeding Rs. 575/- per share payable in cash from the open stock markets through the trading facilities of The Bombay Stock Exchange and The National Stock Exchange.

The company has applied to the Foreign Investment Promotion Board for the approval of increase in the shareholding of the promoter group, consequent upon buyback of the said shares. Subsequent formalities for buyback will be commenced after receipt of the approval.

2. Significant Accounting Policies:

(A) Basis of preparation of financial statements:

The accompanying financial statements have been prepared under the historical cost convention, in accordance with Indian Generally Accepted Accounting Principles and as per the provisions of the Companies Act, 1956.

(B) Use of estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and differences between actual results and estimates are recognised in the periods in which the results are known/materialise.

(C) Fixed Assets:

Fixed Assets are stated at their historical cost of acquisition or construction, less accumulated depreciation. Cost includes all costs incurred to bring the assets to their present location and condition. The Company capitalises software and related implementation costs, where it is reasonably estimated that the software has an enduring useful life.

(D) Depreciation:

Depreciation on fixed assets [except as stated in (iii) and (iv) below] is provided for in accordance with Section 205(2) of the Companies Act, 1956 at the rates specified in Schedule XIV to the Act, as follows: (i) On fixed assets acquired prior to 1st April, 2000 (other than Silvassa) on Written Down Value basis. (ii) On all other fixed assets (other than field vehicles and leasehold improvements) on Straight Line basis. (iii) Field vehicles are depreciated at the rate of 20% on Straight Line basis. (iv) Leasehold improvements are amortised over the unexpired period of lease.

(E) Borrowing Costs:

Borrowing costs attributable to the acquisition of a qualifying asset, as defined in Accounting Standard 16 on Borrowing Costs, are capitalised as part of the cost of acquisition. Other borrowing costs are expensed as incurred. (F) Inventories: Inventories are measured at the lower of cost and net realisable value. Costs of inventories comprise all costs of purchase - net of CENVAT, costs of inputs for standing crops, cost of conversion and other costs incurred in bringing the inventory to their present location and condition. Inventories are adjusted for expected losses, if any.

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G) Revenue Recognition:

i) Revenue is recognised when it is earned and no significant uncertainty exists as to its realisation or collection. Revenue on sale of products is recognised on delivery of the products, when all significant contractual obligations have been satisfied, when the property in the goods is transferred for a price, when significant risks and rewards of ownership have been transferred and no effective control is retained.

Sales are stated inclusive of excise duty and net of returns, trade discounts and sales tax recovered. Excise duty is in accordance with general classification 3/2002 issued by the ICAI presented as a reduction from gross sales.

ii) Revenue in respect of royalty, interest, commission etc. is recognised in accordance with contractual obligations.

(H) Foreign Currency Transactions:

(i) Transactions in foreign currency are recorded at the average monthly exchange rates, during the months in which the transactions are effected.

(ii) Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets are adjusted in the carrying amount of the respective fixed assets. The carrying amount of fixed assets is also adjusted at the end of each financial year for any change in the liability arising out of expressing the related outstanding foreign currency liabilities at the closing rates of exchange prevailing at the date of the balance sheet or at the rates specified in the related forward contract.

(iii)Monetary items (other than those related to the acquisition of fixed assets) denominated in foreign currency are restated using the exchange rates prevailing at the date of balance sheet or rates specified in the related forward contract. Gains/losses arising on restatement and on settlement of such liabilities are recognised in the profit and loss account.

(I) Retirement Benefits:

Retirement benefits are expensed to revenue as incurred. The Company has schemes for Provident, Gratuity and Superannuation benefits, payable to employees on their retirement/superannuation. Gratuity and Leave encashment liabilities are determined at each year-end on the basis of third party actuarial valuations. Contributions to the funds created under these schemes are made according to the rules of the respective schemes.

(J) Earnings Per Share:

The Company reports basic and diluted earnings per share in accordance with Accounting Standard 20 on Earnings Per Share. Basic Earnings Per Share is computed by dividing the net profit for the year by the weighted average number of Equity shares outstanding during the year. Diluted Earnings Per Share is computed by dividing the net profit for the year by the weighted average number of Equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares, except where the results are anti-dilutive.

(K) Taxes on Income:

Income taxes are accounted for in accordance with Accounting Standard 22 on Accounting for Taxes on Income. Taxes comprise both current and deferred tax.

Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the applicable tax rates and tax laws.

The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the substantively enacted tax rates and tax regulations. The carrying amount of deferred tax assets at each balance sheet date is reduced to the extent that it is no longer reasonably certain that sufficient future taxable income will be available against which the deferred tax asset can be realised.

(L) Contingent Liabilities:

These are disclosed by way of notes to the accounts. Provision is made in the books for those liabilities which are likely to materialise after the year end, till the finalisation of accounts and those contractual claims/liabilities which may crystallise after negotiations with the concerned parties and which have material effect on the position stated in the balance sheet.

(M) Cash Flow Statement:

The cash flow statement is prepared by the indirect method set out in Accounting Standard 3 on Cash Flow Statement and presents cash flow by operating, investing and financing activities of the Company

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.

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18. Segment Reporting:

The dominant source and nature of the risks and returns of the agricultural chemistry and seeds activities of the Company not being significantly different, the Company has a single primary business segment 'Agriculture Inputs'.

Secondary segment information, reported by geographical areas is as follows:

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19. Related Party Disclosure:

Names of related parties and description of relationship

Holding Company:

Monsanto Company, USA

Fellow Subsidiaries:

P.T Branita Sandhini, Monsanto Phillipines INC, Monsanto Seeds (Thailand) Ltd., Monsanto Thailand Ltd., Parry Monsanto Seeds Pvt. Ltd., Monsanto Singapore Co. (Pte) Ltd., Monsanto Europe S.A., Monsanto (Bangladesh) Ltd., Monsanto Pakistan Agri Tech (Pvt) Ltd., Monsanto (Malaysia) Sdn. Bhd., Monsanto Holdings Private Limited, Mahyco Monsanto Biotech (India) Limited.

Associates:
Mahyco Seeds Limited
Key Managerial Personnel:
Mr. Sekhar Natarajan,
Managing Director

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21. The total outstanding dues to Small Scale Industrial undertakings is Rs. 184.74 Lacs. The names of such undertakings to which the Company owes a sum outstanding for more than 30 days as on 31st March, 2003 are:

22. The income generated from seed production activities is essentially agricultural income and hence is not considered taxable. The same stand has been accepted by the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 1990-91 to 1997-98. However, Income Tax department has appealed against CIT(A) orders for the assessment year 1993-94 to 1997-98 before Income Tax Appellate Tribunal. Based on the consistent favourable orders of CIT (A) and legal opinion obtained by the company, the management is confident of ultimately obtaining a favourable judgement. Accordingly, no provision for Income Tax is made in the accounts for Agricultural Income.

23. Balance due from companies under the same management - included in:

a) Inter Corporate Loans - Monsanto Holdings Private Limited Rs.413 Lacs (Previous Year - Rs. 1475 Lacs). Maximum amount outstanding during the year Rs.1655 Lacs (Previous Year - Rs. 2505 Lacs) (Schedule 11).

b) Other Receivables - Monsanto Holdings Private Limited Rs. 0.03 Lacs (Previous Year - Rs. 88.56 Lacs) (Schedule 10).

24. Deferred Tax Liability:

25. Earnings Per Share (EPS):

Note: There is no diluted EPS as there are no outstanding dilutive potential equity shares.

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26. Revenue expenses on Research and Development debited to Profit and Loss Account is Rs. 197.26 Lacs (Previous Year Rs. 155.23 Lacs).