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Board of Directors

R J Shahaney, Chairman

D G Hinduja, Co-Chairman (Alternate : Y M Kale)

D J Balaji Rao

A K Das (Alternate : P Banerjee)

P N Ghatalia

S R Krishnaswamy

S Raha

F Sahami

S Shroff

A Spare

R Seshasayee, Managing Director

Vinod K Dasari, Whole-Time Director

Chief Financial Officer

K Sridharan

Executive Directors

J N Amrolia

Aravind S Bharadwaj

S Balasubramanian

A Bhat

A K Jain

R Malhan

N Mohanakrishnan

M Natraj

R Rajagopal Menon

Rajive Saharia

Shekhar Arora

B M Udayashankar

Executive Director and Company Secretary

A R Chandrasekharan

Auditors

M S Krishnaswami & Rajan

Deloitte Haskins & Sells

Cost Auditors

Geeyes & Co.

Bankers

Bank of America

Bank of Baroda

Canara Bank

Central Bank of India

Citibank N.A.

HDFC Bank Limited

ICICI Bank Limited

IDBI Bank Limited

Punjab National Bank

Standard Chartered Bank

State Bank of India

The Hongkong and Shanghai Banking Corporation Limited

Registered office

19, Rajaji Salai, Chennai 600 001

Plants

Ennore and Ambattur, Chennai; Hosur, Tamil Nadu;

Bhandara, Maharashtra; Alwar, Rajasthan.

Website

www.ashokleyland.com

ASHOKLeyland_082-895_AR2K7-8_Ord_2 col.indd 26 6/25/2008 7:27:17 PM

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Ashok Leyland Annual Report 08

Part I – Performance / Operations

The Directors are pleased to present the Annual Report of the Company, together with the audited Accounts, for the year ended

March 31, 2008.

Financial Results (Rs. Millions)

2007-2008 2006-2007

Profit before tax 6,381.50 6,045.06

Less: Provision for taxation 1,688.40 1,632.20

4,693.10 4,412.86

Add: Transfer from / (to):

Debenture redemption reserve 50.00 135.00

Balance profit from last year 3,616.86 2,303.70

General Reserve (1,000.00) (1,000.00)

7,359.96 5,851.56

Add: Excess provision written back

- Dividend (Including Corporate Dividend Tax) - 29.62

Profit available for appropriation 7,359.96 5,881.18

Appropriation:

Dividend 2006-07 - 1,985.81

Proposed Dividend 2007-08 1,997.71 -

Corporate Dividend Tax 339.51 278.51

Balance profit carried to Balance sheet 5,022.74 3,616.86

Earnings per Share (Face Value Re.1/-) - Basic 3.53 3.38

- Diluted 3.53 3.36

Directors’ Report


27

Dividend

The Directors recommend a dividend of 150% (Rs.1.50 per

equity share of Re.1/-) for the year ended March 31, 2008.

This Dividend will also be payable on the shares arising from

conversion of Foreign Currency Convertible Notes (FCCNs)

issued in April 2004, to the extent converted upto the Book

Closure Date(s).

Business operations

The domestic market for the Company’s products experienced

a slowdown in the year under review. Your Company was

however able to secure a higher share in the passenger

vehicles market. Total sales of vehicles, engines and spares

registered increases over the previous year.

The highlights are discussed in detail in the Management

Discussion and Analysis Report attached as Annexure-D to

this Report.

External Commercial Borrowings (ECBs)

During the financial year, despite a difficult situation in the

financial market, the Company contracted for ECBs for a sum

of US$ 270 mn. to part fund its capex requirements and

overseas investments. Out of the above, the Company has

drawn US$ 90 mn. during the year 2007-08 and the balance

would be drawn during 2008-09. The Company has fully

complied with the guidelines prescribed by RBI in this regard.

Research and development, technology absorption, energy

conservation etc.

The Company continues to lay emphasis on investing for the

future through Research and Development activities. The

facilities in the Company’s Technical Centre at Chennai have

been further upgraded, to ensure contemporary development

capabilities in order to offer competitive products to the

market place.

The particulars prescribed by the Companies (Disclosure of

Particulars in the Report of Board of Directors) Rules,1988

relating to Conservation of Energy, Technology Absorption,

Foreign Exchange are furnished in Annexure-A to this Report.

Other Ventures

Joint Venture with Nissan Motor Co. Ltd., Japan

The Company will be expanding its business and entering the

area of Light Commercial Vehicles with the promotion of Joint

Venture with Nissan Motor Co. Ltd., Japan. Discussions on

the Joint Venture Agreements are in an advanced stage. This

will be a major project and will cater not only to the domestic

market, but also to the export markets.

Ashley Alteams India Private Ltd.

A Joint Venture Agreement was signed on July 3, 2007

with Alteams O.Y. Finland, for the manufacture and sale

of High Pressure Die Casting components for the telecom

and automotive industries, including for the Company’s

own requirements. Ashley Alteams India Private Ltd., the

Joint Venture Company, is making steady progress in the

implementation of the project. Commencement of commercial

production is expected by end 2008.

Automotive Infotronics Private Ltd.

A Joint Venture Agreement was entered into with Siemens

VDO on July 16, 2007 (now known as VDO Automotive A.G.

a Company of Continental Corporation, Germany) for design,

development and adaptation of electrical and electronic

automotive components and customer-specific software

applications. Automotive Infotronics Private Ltd., the Joint

Venture Company is slated to commence commercial activities

during 2008-09.

Ashok Leyland (UAE) LLC, Ras Al Khaimah, UAE

Your Company has made an investment in Ashok Leyland

(UAE) LLC for setting up a manufacturing facility at Ras Al

Khaimah, UAE. The plant is expected to be commissioned in

a phased manner by June 2008. The plant will have capacity

to assemble and produce upto 2000 buses per year and will

cater to the growing market for the Company’s products in

UAE and other neighbouring countries.

Defiance Testing and Engineering Services, Inc.

The investment in Defiance Testing and Engineering Service,

Inc. Michigan, USA was made on July 17, 2007. The


28


company is implementing plans to turnaround, despite

recessionary conditions in the automobile industry in

the USA.

Avia Ashok Leyland Motors s.r.o. (AALM)

The commercial vehicles business of Avia acquired by the

Company in 2006, through a special purpose vehicle,

has made steady progress during the year 2007. During

this period, AALM focused on consolidating its business,

setting up processes, integrating its research and product

development activities with the Company, widening its market

reach, etc. AALM successfully developed and positioned

vehicles meeting Euro IV emission, safety and other standards

prevailing in Europe and achieved sales in excess of 700

units during the previous calendar year.

Albonair GmbH

Your Company has made an investment in Albonair GmbH

for development of vehicle emission treatment / control

systems and products. Albonair GmbH will focus on the

development, production and sales of exhaust after-treatment

systems for environment-friendly diesel engines. Over the

longer term, these cost effective systems are also expected

to find application in Europe and the USA. The venture has

already commenced operations and has been strengthened

with the recruitment of appropriate technical personnel.

Foreign Currency Convertible Notes (FCCNs)

The Foreign Currency Convertible Notes (FCCNs) for USD

100 mn. issued in April 2004 are convertible into shares of

the Company (Fixed Exchange Rate USD 1 = Rs.44.10). As

of March 31, 2008, 99,000 Notes (99%) have already been

converted into underlying shares, thereby increasing the

paid-up capital as of March 31, 2008.

All the procedures consequent to the conversion are being

completed on time and these shares, which rank pari passu

with the earlier shares in all respects, are tradeable on the

Indian Stock Exchanges. The enhanced share capital as on

March 31, 2008 and the corresponding revised shareholding

pattern are shown in the Corporate Governance Report

(Annexure-B) to this Report.

Subdivision of shares

The subdivision of your Company’s shares (from a face value of

Rs.10/- each to a face value of Re.1/- each) was effected in July

2004. The number of shareholders continues to increase and as

on March 31, 2008, the number of shareholders was 303,954

as against 200,091 shareholders as of March 31, 2007.

Part II – Corporate matters

Change in the Registered Office of the Company

Your Directors are happy to inform that your Company

has constructed a modern Corporate Office at a

prestigious location at No.1 Sardar Patel Road, Guindy,

Chennai 600 032. The registered office will be shifted to this

address shortly.

Corporate Governance

Your Company has consistently adopted high standards of

Corporate Governance. The Code of Conduct for the Board

and the Senior Management was adopted by the Company

in March 2005. Your Company is fully compliant with the

latest guidelines, and has even exceeded them in some

aspects. All the Directors (and also the members of the Senior

Management – of the rank of General Managers and above)

have confirmed in writing their compliance and adherence

with the Code of Conduct. The details are furnished in

Annexure-B to this Report.

The certification by the Managing Director regarding the Code

of Conduct, as required by SEBI guidelines, is also furnished

separately.

The Statutory Auditors of the Company have examined the

Company’s compliance, and have certified the same, as

required under SEBI guidelines. Such certificate is reproduced

as Annexure-C to this Report.

The Directors’ Responsibility Statement as required under

Section 217(2AA) of the Companies Act, 1956 is furnished in

Annexure-E to this Report.

The particulars of employees as prescribed by the Companies

(particulars of employees) Rules, 1975 are furnished in

Annexure-F to this Report.


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The CEO / CFO certification as required under the SEBI

guidelines is attached - as Annexure-G to this Report.

Directors

The present term of Mr R Seshasayee, Managing Director

is due to expire on May 31, 2009. Under his stewardship,

the Company has scaled great heights and has expanded

its operations significantly. The Company has embarked

on several new initiatives, not only in India, but globally.

Bearing in mind the above, the Remuneration Committee

and the Board consider it essential to continue to secure his

leadership of the Company and have decided to foreclose /

overlap the last year of his current term and has re-appointed

him as Managing Director for a period of three years from

1/4/2008 to 31/3/2011 with a suitable revision in the terms

of remuneration, subject to the approval of the shareholders at

the ensuing General Meeting. Necessary resolutions relating

to his re-appointment are being placed before the shareholders

for approval.

Mr Vinod K Dasari, the Chief Operating Officer of the

Company, who was co-opted to the Board as an Additional

Director vacates office at the ensuing Annual General Meeting.

Notice under Section 257 of the Companies Act, 1956 has

been received from a member proposing his appointment as

a Director. Necessary resolution relating to his appointment

as Wholetime Director is also being placed before the

shareholders for approval.

Mr D J Balaji Rao, Mr P N Ghatalia and Mr D G Hinduja,

Directors, retire by rotation at the forthcoming Annual General

Meeting and are eligible for re-appointment.

Necessary resolutions are being placed before the

shareholders for approval.

Mr D J Balaji Rao and Mr P N Ghatalia are Independent

Directors and Chairman of the Remuneration Committee and

Audit Committee of the Board respectively. Mr D G Hinduja is

a Promoter Director.

Cost Auditors

The Government has stipulated Cost Audit of the Company’s

records in respect of motor vehicles as well as engines.

M/s Geeyes & Co., Cost Auditors have carried out these

audits. Their findings have been satisfactory.

Secretarial Audit

As directed by Securities and Exchange Board of India

(SEBI), Secretarial Audit is being carried out at the specified

periodicity by a Practising Company Secretary. The findings of

the Secretarial Audit have been satisfactory.

Auditors

M/s M S Krishnaswami & Rajan, Chartered Accountants and

M/s Deloitte Haskins & Sells, Chartered Accountants, retire at

the close of this Annual General Meeting and are eligible for

re-appointment. The Company has received confirmation from

both the firms that their appointment will be within the limits

prescribed under Section 224(1B) of the Companies Act,

1956. The Audit Committee of the Board has recommended

their re-appointment. The necessary resolution is being placed

before the shareholders for approval.

Acknowledgement

The Directors wish to express their appreciation of the

continued co-operation of the Central and State Governments,

bankers, financial institutions, customers, dealers and

suppliers and also the valuable assistance and advice received

from major shareholders Hinduja Automotive Limited, the

Hinduja Group, and all the shareholders. The Directors also

wish to thank all the employees for their contribution, support

and continued co-operation through the year.

On behalf of the Board of Directors

Chennai R J SHAHANEY

May 8, 2008 Chairman


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(A) Conservation of Energy

All manufacturing plants have implemented various initiatives

for conservation of energy (around 1.2 mn. electrical units

have been saved leading to significant savings in costs) during

2007-2008.

A few such key initiatives are:

• Maintenance of power factor throughout the year, through

optimum use of capacitor banks.

• Use of wind power (Out of total electricity consumed, 36%

is the share of wind power).

• Optimisation of compressed air system.

(B) Technology absorption

Research and Development (R & D)

1. Specific areas in which R & D carried out by the Company

– ‘H’ series 6 cylinder engines rated at 152 KW (with

common rail) and 135 KW, both meeting Bharat Stage III

norms, now in commercial production.

– Fully built cabs introduced on tractor models with GVW

ratings of 49 and 40 tonnes.

– Pilot batch of 8X2 vehicles being launched in the market.

2. Benefits derived as a result of the above R & D

– Compliance with emission standards, present and proposed

from 2010.

– Wider range of vehicles with enhanced value to customer.

– Safer cabs.

3. Future Plan of Action

– Quantum improvement in processes and skill building to

meet the emerging competitive scenario in the market.

– Development of more environment friendly fuel efficient and

safe vehicles.

4. Expenditure on R & D

(Rs. million)

Capital 954.39

Revenue

(excluding depreciation) 1068.84

Total 2023.23

Total R & D Expenditure

as % of total turnover 2.3%

(C) Foreign Exchange Earnings and Outgo

Details of earnings and outgo of foreign exchange are given in

Schedules 1.5 to 1.8 of Notes to the Accounts. The Company

continues to strive to improve its export earnings.

Annexure A to Directors’ Report


31

1. Philosophy on Corporate Governance

The Board of Directors and the Management of Ashok Leyland

commit themselves to:

• strive towards enhancement of shareholder value through

– sound business decisions

– prudent financial management and

– high standards of ethics throughout the organisation

• ensure transparency and professionalism in all decisions

and transactions of the Company

• achieve excellence in Corporate Governance by

– conforming to, and exceeding wherever possible, the

prevalent mandatory guidelines on Corporate Governance

– regularly reviewing the Board processes and the

Management systems for further improvement

The Company has adopted a Code of Conduct for members of

the Board and senior management. All Directors have affirmed

in writing their adherence to the above Code. The full text of

the Code is furnished at the end of this Report, and is also

displayed at the Company’s website www.ashokleyland.com

2. Board of Directors

a) Composition : The Board of Directors of the Company,

headed by a Non-executive Chairman, consisted of the

following Directors, as on March 31, 2008, categorised as

indicated:

i) Non-executive Directors

a) Promoter Group

Mr A K Das (Alternate: Mr P Banerjee)

Mr D G Hinduja (Co-Chairman) (Alternate: Mr Y M Kale)

Mr S Raha

Mr F Sahami

Mr A Spare

Annexure – B to Directors’ Report Report on Corporate Governance

b) Connected with Associate Companies

Mr R J Shahaney (Chairman)

c) Independent

Mr D J Balaji Rao

Mr P N Ghatalia

Mr S R Krishnaswamy (representing LIC as shareholder)

Mr S Shroff

ii) Executive Director

Managing Director

Mr R Seshasayee

None of the Directors is related to each other.

Equity Shares held by Directors

Name of the Director No. of equity shares

Mr R J Shahaney 11,730

Mr R Seshasayee 11,236

There are no other shares or convertible instruments held by

any other Director(s)

b) Attendance at Board Meetings and last Annual General Meeting (AGM) and details of memberships of Directors in other Boards and Board Committees

Board Meetings held during the year 2007-08

Date of Meeting Board StrengthNo. of Directors

present

April 5, 2007 11 6

May 4, 2007 11 10

July 19, 2007 11 10

October 23, 2007 11 11

January 25, 2008 11 9

– The time gap between any two meetings did not exceed four

months.

– The last Annual General Meeting was held on July 20,

2007.


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Name of Director No. of Board meetings attended

Whether attended last A.G.M. held on July 20, 2007

Membership as on March 31, 2008

Other Boards (excluding Ashok Leyland)(Note 2)

Other Board Committees (excluding Ashok Leyland)(Note 3)

Mr R J Shahaney 5 Yes 2

(Both as Chairman)

2

(1 as Chairman)

Mr D G Hinduja (Note 1) 3 Yes 6 Nil

Mr D J Balaji Rao 5 Yes 8 8

(3 as Chairman)

Mr A K Das 4 Yes 10 1

Mr P N Ghatalia 5 Yes 8 8

(4 as Chairman)

Mr S R Krishnaswamy 5 Yes 1 Nil

Mr S Raha 4 Yes 3 1

Mr F Sahami 4 Yes 1 1

Mr S Shroff 1 No 6 4

Mr A Spare 4 Yes 2 Nil

Mr R Seshasayee 5 Yes 8

(5 as Chairman)

3

Alternate Directors:

Mr P Banerjee 1 No 2 Nil

Mr Y M Kale Nil No 3 1

(1 as Chairman)

Note 1 - Re-designated as Co-Chairman, effective July 19, 2007

Note 2 - The above excludes Foreign companies, Private Limited Companies and Alternate Directorships.

Note 3 - Only Audit Committee, and Shareholders/Investors Grievance Committee are reckoned for this purpose.

The full details of Directors seeking re-appointment at the

ensuing Annual General Meeting have been furnished in the

Notice convening the meeting of the Shareholders.

Secretarial Standards

The Institute of Company Secretaries of India (ICSI) has laid

down Standards on Secretarial Practices relating to meetings

of the Board and Board Committees, General Meetings,

Dividends etc. The Secretarial and the operating practices of

the Company are in line with the above Secretarial Standards.

All the information required under Annexure-I to Clause-49 of

the Listing Agreements with Stock Exchanges are being placed

before the Board at every meeting, with the current status

duly updated.

3. Audit Committee

a) Constitution

The Audit Committee of the Company was constituted in

July 1987 with Terms of Reference, which covered most of

the aspects stipulated by SEBI in the year 2000. These were

comprehensively reviewed once again by the Company’s

Board in the year 2000, and the Audit Committee has been

mandated with the same Terms of Reference as specified in

Clause 49 of the Listing Agreements with Stock Exchanges.

The Terms of Reference also fully conform to the requirements

of Section 292A of the Companies Act, 1956.


33

b) Composition, names of members and Chairman

The composition of the Audit Committee:

Independent Directors

Mr P N Ghatalia (Chairman)

Mr D J Balaji Rao

Promoter Director

Mr F Sahami

All the members of the Audit Committee have expertise in Finance as well as in general management. Mr. P N Ghatalia and Mr

F Sahami had been senior partners in leading firms of Chartered Accountants. Mr D J Balaji Rao had been the Deputy Managing

Director of the then ICICI Ltd., (now ICICI Bank) and the Managing Director of Infrastructure Development Finance Company Ltd.

c) Meetings and Attendance

Audit Committee Meetings held during the year 2007-08 and Attendance Details

Attendance: Date of Meeting Committee Strength No. of Directors present

May 2, 2007 3 3

July 18, 2007 3 3

October 23, 2007 3 3

January 25, 2008 3 3

• Mr A R Chandrasekharan, Executive Director and Company Secretary is the Secretary to the Committee effective February 6, 2008.

• Mr N Sundararajan, Executive Director and Company Secretary was the Secretary to this Committee till February 5, 2008 and

has attended the Meetings of the Committee till February 5, 2008.

• Mr N Mohanakrishnan, Executive Director heading the Internal Audit function has attended all the meetings of the Committee.

• Mr K Sridharan, Chief Financial Officer, attended all the meetings of the Committee.

The Statutory Auditors of the Company and the Cost Auditors

are invited to join the Audit Committee Meetings. The Audit

Committee discusses with the Statutory Auditors on the

“Limited Review” of the quarterly/half-yearly accounts, the

Audit Plan for the year, matters relating to compliance with

Accounting Standards, the Auditors’ observations arising

from the annual audit of the Company’s accounts, and other

related matters. The Committee also reviews at every meeting

the significant observations arising from the Reports of the

Internal Audit Department and the adequacy of the follow-up

action taken by the Management. The Committee discusses

with the Cost Auditors about the Annual Cost Audit Reports,

and their observations.

4. Remuneration Committee

a) The Remuneration Committee consists of

Mr D J Balaji Rao, Independent Director, as the Chairman

of the Committee, with Mr R J Shahaney and Mr F Sahami

being the other members.

Mr A R Chandrasekharan, Executive Director and Company

Secretary is the Secretary to the Committee effective

February 6, 2008.

Mr N Sundararajan, Executive Director & Company Secretary

was the Secretary to this Committee till February 5, 2008.


34


The Committee is mandated with the following Terms of

Reference:

- Determination and approval of the quantum of commission,

perquisites and payment of special allowance to the Managing

Director; and

- Determination and approval of the annual increments to the

Managing Director .

The above determinations are based on the overall

performance of the Company and on the Committee’s

assessment of the personal contribution and achievements of

the Managing Director, but within the overall limits approved

by the shareholders.

b) The Committee met once during the year on May 4, 2007.

All the members were present at this meeting.

c) The Remuneration Policy of the Company is summarised as

follows:

(i) For Managing Director

The total remuneration, subject to shareholders’ approval,

consists of

• a fixed component – consisting of salary, allowances

(including Special Allowance) and perquisites; the perquisites

and benefits are in line with the Company’s Rules for senior

managerial personnel.

• a variable component – linked to the performance of the

Company as well as of the Managing Director – consisting

of Commission and allowances as determined by the

Remuneration Committee.

• No Sitting Fee is payable.

(ii) For Non-executive Directors

Sitting Fee is paid as per the Companies Act, 1956, and

the Articles of Association of the Company, for attending

any meeting of the Board or Committees of the Board.

Directors are also reimbursed actual travel costs and

incidental expenses incurred for attending such meetings or

in connection with the Company’s business. There are no

pecuniary relationship or transactions between any of the

Non-executive Directors and the Company. No other fee is

paid to Non-executive Directors other than the above.

d) The details of remuneration paid / payable to the Directors for the year 2007-08 are:

i) Non-executive Directors – Sitting Fees: (excluding reimbursement of travel and other expenses incurred for the Company’s business)

Rs. Rs.

Mr R J Shahaney 320,000 Mr S R Krishnaswamy 100,000

Mr D G Hinduja 120,000 Mr S Raha 80,000

Mr D J Balaji Rao 280,000 Mr F Sahami 180,000

Mr P Banerjee, Alt. Director 20,000 Mr S Shroff 20,000

Mr A K Das 80,000 Mr A Spare 160,000

Mr P N Ghatalia 180,000


35

ii) Managing Director

(Rs.)

a) Fixed Component

(i) Salary 2,890,000

(ii) Perquisites (**) 5,911,406

(iii) Special Allowance 5,780,000

b) Variable Component

Commission 5,780,000

Total 20,361,406

(**) Certain perquisites are valued as per the Income Tax

Rules. Does not include contribution to Provident Fund

@ 12% and Superannuation Fund @ 15% of the salary.

Mr. Seshasayee, Managing Director is under contract of

employment with the Company. There is also a contract

corresponding to his appointment as Managing Director,

stipulating 3 months’ notice period from either side. There is

no severance fees payable to him.

The Company does not have Employee Stock Options Scheme

in force.

5. Shareholders/Investors Grievance Committee

a) The Shareholders/Investors Grievance Committee has

been functioning since August 2000. Mr R J Shahaney is the

Chairman of the Committee; Mr D J Balaji Rao, Independent

Director and Mr R Seshasayee, Managing Director are the

other members. This Committee presently deals with and

approves all share transfers, transmissions and also all other

matters relating to investor relations and grievances. From

January 31, 2006, the Committee has also been empowered

to allot shares upon conversion of the Foreign Currency

Convertible Notes issued in April 2004.

Mr A R Chandrasekharan, Executive Director and Company

Secretary is the Secretary to Committee effective February 6,

2008 and is also the Compliance Officer nominated for this

purpose.

Mr N Sundararajan, Executive Director & Company Secretary

was the Secretary to this Committee and Compliance Officer

till February 5, 2008.

Meetings and Attendance

Shareholders / Investors Grievance Committee Meetings held

during the year 2007-2008 and attendance details

Date of Meeting Committee strength

No. of Directors Present

May 4, 2007 3 3

July 6, 2007 3 2

July 19, 2007 3 3

August 20, 2007 3 2

October 23, 2007 3 3

January 25, 2008 3 3

c) The Committee reviews the performance of the Company’s

Registrar & Transfer Agent (R & TA), and their system of

dealing with and responding to correspondence from all

categories of shareholders. The manner and timeliness of

dealing with complaint letters received from Stock Exchanges/

SEBI / Department of Company Affairs (DCA) etc. and the

responses thereto, are reviewed by this Committee.

During the year, 811 complaint letters were received from

investors; 2633 letters (including 19 letters from SEBI / Stock

Exchanges / DCA) were received on routine matters; all these

were dealt with satisfactorily. The very few letters, which

occasionally remained pending beyond the normal time limits

were cases of inadequate documentation or clarifications

being awaited.

For the seventh year in succession, the Company conducted

an Investor Satisfaction Survey through a questionnaire,

which was mailed along with the Notice of AGM 2007. 1567

investors had responded to the Survey. A vast majority of

them have expressed high degree of satisfaction about various

aspects of investor servicing. A few issues raised by some

investors were pursued and dealt with satisfactorily.

At the October 2007 meeting, the Committee also reviewed

the Special Report analysing the feedback from the Investor

Satisfaction Surveys, and approved the steps taken for further

improvements in investor servicing.

d) As on March 31, 2008, there was one share transfer

pending; this was completed within the due date.


36


6. General Body Meetings

a) Details of location and time of holding the last three AGMs.

Year Location Date & Time

56th AGM - 2005Narada Gana Sabha,

314 TTK Road, Chennai – 600 018

July 26, 2005

10.30 a.m.

57th AGM - 2006

Kamaraj Memorial Hall,

492 Anna Salai,

Teynampet, Chennai 600 006

August 1, 2006

10.00 a.m.

58th AGM - 2007Narada Gana Sabha,

314 TTK Road, Chennai – 600 018

July 20, 2007

10.25 a.m.

The Chairman of the Audit Committee was present at all the

above AGMs.

Details of EGMs held in the last three years: NIL

b) All the Special Resolutions placed before the shareholders

at the above meetings were approved. There were no

resolutions requiring approval through Postal Ballot.

7. Disclosures

There have been no materially significant related party

transactions with the Company’s Promoters, Directors, the

Management, their Subsidiaries or relatives which may have

potential conflict with the interests of the Company. The

necessary disclosures regarding the transactions with Related

Parties are given in the Notes to the Annual Accounts for the

year 2007-08.

There have been no instances of non-compliance by the

Company on any matters related to the capital markets, nor

have any penalty/strictures been imposed on the Company by

the Stock Exchanges or SEBI or any other statutory authority

on such matters during the last three years.

The Company had no subsidiary company as on

March 31, 2008.

8. Means of Communication

a) Half-yearly mailer communication is being sent since the

year 2001 with an enclosure of half-yearly results. This is also

displayed on the Company’s website www.ashokleyland.com

b) The quarterly results are being generally published in one

leading national (English) business newspaper and in one

vernacular (Tamil) newspaper. The quarterly results are also

displayed on the Company’s website www.ashokleyland.com

c) The Company’s website also displays milestones, official

press / news releases, Presentations made to institutional

investors and analysts, and several other details / information

of interest to various stakeholders.

d) A Management Discussion and Analysis Report is being

presented as a part of the Annual Report.


37

9. General Shareholder Information

a) 59th Annual General Meeting

– Day, Date and Time

– Venue

Wednesday, July 30 2008 – 10.30 a.m.

Kamaraj Memorial Hall,

492 Anna Salai, Teynampet, Chennai 600 006

b) Financial Calendar

Annual General Meeting

Unaudited results for the quarter ending June 30, 2008

Unaudited results for the quarter/half-year ending September 30, 2008

Unaudited results for the quarter ending December 31, 2008

Audited Results for the year ending March 31, 2009

July 30, 2008

July 29, 2008

Last week of October 2008

Last week of January 2009

Before end of May 2009

c) Book Closure Date From July 18, 2008 to July 30, 2008 (both days inclusive)

d) Dividend payment date Commencing July 30, 2008 – to be completed within the mandatory time limit.

e) Listing of Equity Shares

Listing of Global Depository Receipts

(GDRs)

Listing of Foreign Currency Convertible

Notes (FCCNs)

Madras Stock Exchange Ltd.

Bombay Stock Exchange Ltd.

National Stock Exchange of India Ltd.

London Stock Exchange

London Stock Exchange

The Listing Fees have been paid uptodate, to all the Stock Exchanges

f) Stock Code

Trading Symbol at

Demat ISIN Numbers in NSDL & CDSL

Madras Stock Exchange Ltd.

Bombay Stock Exchange Ltd.

(Physical)

(Demat)

National Stock Exchange of India Ltd.

Equity Shares

ALL

477

500477

ASHOKLEY

INE208A01029


38


39

}

i) Registrar and Transfer Agents:

The Company has appointed M/s Integrated Enterprises

(India) Ltd., 2nd Floor, Kences Towers, 1 Ramakrishna Street,

North Usman Road, T. Nagar, Chennai 600 017 as the

Registrar and Transfer Agent (R & TA) of the Company for all

aspects of investor servicing relating to shares in both physical

and demat form. The few residual matters relating to the fixed

deposits are dealt with directly by the Company

j) Share Transfer System

The authority relating to transfer of shares and allied work

relating to servicing of investors has been delegated by the

Board to the Shareholders / Investors Grievance Committee

which consists of Mr R J Shahaney (Chairman), Mr D J Balaji

Rao and Mr R Seshasayee.

In order to further improve and speed up investor servicing,

the Board has authorised the Managing Director individually

to approve all routine transfers, transmissions etc. of shares.

Such approval is being given by the Managing Director

at frequent/regular intervals (30 times during 2007-08).

Transfers, transmissions etc., were generally approved within

10 days; requests for dematerialisation were confirmed

within 9 days (as against the norm of 15 days). In addition,

the Committee met 6 times during the year 2007-08 for

approving specific transfers, transmissions, etc., reviewing

investor grievances and to allot shares upon conversion of

FCCNs.

g) Stock Market Data

Bombay Stock Exchange National Stock Exchange

Share Price Sensex Points Share Price S & P CNX Nifty Points

Month High(Rs.)

Low(Rs.)

High Low High(Rs.)

Low(Rs.)

High Low

April 2007 40.45 35.15 14,383.72 12,425.52 40.50 34.00 4,217.90 3,617.00

May 2007 40.50 36.60 14,576.37 13,554.34 40.50 35.45 4,306.75 3,981.15

June 2007 39.00 35.40 14,683.36 13,946.99 39.00 35.25 4,362.95 4,100.80

July 2007 40.80 36.65 15,868.85 14,638.88 40.90 36.75 4,647.95 4,304.00

Aug 2007 38.70 33.90 15,542.40 13,779.88 38.65 33.10 4,532.90 4,002.20

Sep 2007 46.30 36.70 17,361.47 15,323.05 46.40 36.50 5,055.80 4,445.55

Oct 2007 47.00 34.00 20,238.16 17,144.58 46.95 34.00 5,976.00 5,000.95

Nov 2007 48.85 36.80 20,204.21 18,182.83 49.80 36.40 6,011.95 5,394.35

Dec 2007 55.10 45.25 20,498.11 18,886.40 55.00 45.50 6,185.40 5,676.70

Jan 2008 57.90 25.80 21,206.77 15,332.42 57.50 26.15 6,357.10 4,448.50

Feb 2008 40.00 33.75 18,895.34 16,457.74 40.00 33.70 5,545.20 4,803.60

Mar 2008 38.35 30.60 17,227.56 14,677.24 38.40 30.60 4,947.00 4,468.55

h) Share Price performance in comparison to broad based indices – BSE Sensex and NSE Nifty

Share Price Movement (BSE) See Table above & Chart on page 44.

Share Price Movement (Nifty)

ASHOKLeyland_082-895-1_AR2K7-8_Ord_2 co_pg 26-94.indd 39 7/4/2008 3:54:29 PM

k) (i) Distribution of Shareholding as on March 31, 2008

No. of Shares Shareholders No. of Shares

Number % Number %

Upto 50 45590 15.00 1494673 0.11

51-100 68805 22.64 6665062 0.50

101-200 51230 16.85 9483846 0.71

201-500 69500 22.86 27732338 2.08

501-1000 35230 11.59 30284268 2.28

1001-2000 18778 6.18 29162214 2.19

2001-5000 11007 3.62 35641361 2.68

5001-10000 2327 0.77 17440041 1.31

10001 & above 1487 0.49 1172434514 88.14

Total 303954 100.00 1330338317 100.00

Sl. No.

Category No. of Holders No. of Shares %

1 Promoter – Hinduja Automotive Limited.

(Includes 164600070 shares in GDR Form)

1 678218782 50.98

2 Residents (Individuals / Clearing Members) 299157 191330930 14.38

3 Financial Institutions / Insurance Co. / State Govt. / Govt.

Companies / UTI

23 202097566 15.19

4 Foreign Institutional Investors 75 156390047 11.76

5 Non-Resident Indians/ OCB / Corporate Bodies – Foreign /

Bank – Foreign / Foreign Nationals

2244 23173515 1.74

6 Corporate Bodies 2351 33783599 2.54

7 Mutual Funds 28 29894970 2.25

8 Trusts 26 242730 0.02

9 Banks 47 1094678 0.08

10 Others – GDR 2 14111500 1.06

Total 303954 1330338317 100.00


40

(ii) Pattern of Shareholding as on March 31, 2008 (See Chart on page 44)


l) Dematerialisation of shares and Liquidity

Shares of the Company can be held and traded in electronic form. As stipulated by SEBI, the shares of the Company are accepted in

the Stock Exchanges for delivery only in dematerialisation form.

Status of Dematerialisation of Shares – as on March 31, 2008

Physical Demat Total

Holders No. of Shares % to paid-up capital

No. of Shares(**)

% to paid-up capital

No. of Shares(**)

% to paid-up capital

Hinduja

Automotive

Limited * 441166680 33.16 237052102 17.82 678218782 50.98

Others 21478383*** 1.61 630641152 47.41 652119535 49.02

* held in one consolidated share certificate ** including in GDR Form

*** held by approx. 20850 holders

Shares of the Company are actively traded in the Bombay and

National Stock Exchanges, and hence have good liquidity.

m) Subdivision of Shares

Each equity share of face value of Rs.10/- was subdivided

into 10 equity shares of face value of Re.1/- each, effective

from July 7, 2004. Following the subdivision, there has been

a significant increase in the number of shareholders; as at

March 31, 2008, there were 303954 shareholders.

n) Outstanding GDR / Warrants and Convertible Notes, Conversion date and likely impact on the equity

No GDR is outstanding for conversion as on March 31, 2008

and hence there is no impact on equity.

After obtaining the approval of the shareholders at the

Extraordinary General Meeting held on February 28, 2004,

the Company issued Foreign Currency Convertible Notes

(FCCNs) for USD100 million in April 2004 to investors in the

overseas market. As per the terms of the Issue, these Bonds

are convertible into GDSs or convertible into the underlying

shares @ 1422.581 shares (of face value Re 1/- each) per

Note of USD1000, at a conversion price (reset in 2005) of

Rs 31/- per share at the option of the investors.

Consequent to the declaration of an interim dividend of 150%

(Rs 1.50 per share) for the year 2006-07, the conversion

price has once again been reset in April 2007 to Rs 30/- per

equity share.

From February 2006 the Company has been receiving

requests from the holders of FCCNs seeking to convert

the Notes held by them into underlying shares. Upto

31/03/2008, 99000 (99%) FCCNs have been converted

into 141044117 shares. All the statutory / contractual

obligations relating to such conversions have been fulfilled

in time, and such additional shares (upon conversion) have

admitted for trading at all the listed Stock Exchanges. As of

March 31, 2008 only 1000 FCCNs remained outstanding for

conversion.


41

o) Plant Locations

Ennore

Ennore

Chennai 600 057

Tamil Nadu

Hosur – Unit I

175 Hosur Indl. Complex

Hosur 635 126

Tamil Nadu

Hosur – Unit II

77 Electronic Complex

Perandapalli Village

Hosur 635 109

Tamil Nadu

Hosur – Unit IIA

Cab Panel Press Shop

SIPCOT Industrial Complex

Mornapalli village

Hosur 635 109

Tamil Nadu

Bhandara

Plot No.1 MIDC Industrial Area Village

Gadegaon,

Sakoli Taluk, Bhandara 441 904

Maharashtra

Alwar

Plot No. SPL 298

Matsya Indl. Area

Alwar 301 030

Rajasthan

Ambattur, Chennai

3A/A & 2 North Phase

SIDCO Industrial Estate

Ambattur

Chennai 600 098

Tamil Nadu

Technical Centre

Vellivayal Chavadi

Via Manali New Town

Chennai 600 103

Tamil Nadu

p) Address for Correspondence

To contact R & TA for all matters

relating to Shares, Dividends,

Annual Reports

M/s Integrated Enterprises

(India) Limited

2nd Floor, Kences Towers

1, Ramakrishna Street

North Usman Road

T. Nagar, Chennai 600 017

Tel: 91-44 – 2814 0801 / 03

Fax: 91-44 – 2814 2479

e-mail: [email protected]

For any other general matters or in

case of any difficulties/ grievances

Secretarial Department

Ashok Leyland Limited

Khivraj Complex II, 5th Floor

477-482 Anna Salai

Nandanam, Chennai 600 035

Tel: 91-44 – 2433 1120 / 2433 1128 /

2433 1129

Fax: 91-44 – 2433 5633


For Fixed Deposits Mr R Venugopalan

Dy General Manager – Finance


Ennore, Chennai 600 057

Tel: 91-44 – 2575 1001 / 2575 0233

Fax: 91-44 – 2575 1798


Website address www.ashokleyland.com

E-mail ID of Investor

Grievances Section

[email protected]

Name of the Compliance Officer A R Chandrasekharan

Executive Director &

Company Secretary


42


Non Mandatory Requirements

1. Non-executive Chairman

The Company maintains the office of the Non-executive

Chairman and reimburses expenses incurred in the

performance of his duties.

2. Remuneration Committee

The Company has constituted a Remuneration Committee; full

details are furnished under Item 4 of this Report.

3. Shareholder Rights

The statements of quarterly and half-yearly results are being

published in the Press. The Company has been mailing

half-yearly reports to shareholders from October 2001,

along with a letter from the Managing Director highlighting

significant events.

4. Postal Ballot

The Company has had no occasion so far to use the postal

ballot.

5. Whistle Blower Policy

The Company does not have a Whistle Blower Policy, but has

an independent Ombudsman, who is not an employee of the

Company.

Revised SEBI Guidelines on Corporate Governance

The Company is fully compliant with the revised SEBI

Guidelines.

Code of Conduct

Members of the Board and the Senior Management, shall

a) Always act in the best interests of the Company and its

stakeholders.

b) Adopt the highest standards of personal ethics, integrity,

confidentiality and discipline in dealing with all matters

relating to the Company.

c) Apply themselves diligently and objectively in discharging

their responsibilities and contribute to the conduct of the

business and the progress of the Company, and not be

associated simultaneously with competing organisations

either as a Director or in any managerial or advisory capacity,

without the prior approval of the Board.

d) Always adhere and conform to the various statutory and

mandatory regulations/guidelines applicable to the operations

of the Company avoiding violations or non-conformities.

e) Not derive personal benefit or undue advantages (financial

or otherwise) by virtue of their position or relationship with the

Company, and for this purpose

i) shall adopt total transparency in their dealings with

the Company

ii) shall disclose full details of any direct or indirect

personal interests in dealings/transactions with the

Company.

iii) shall not be party to transactions or decisions

involving conflict between their personal interest and

the Company’s interest.

f) Conduct themselves and their activities outside the

Company in such manner as not to adversely affect the image

or reputation of the Company.

g) Inform the Company immediately if there is any personal

development (relating to his / her business / professional

activities) which could be incompatible with the level and

stature of his position and responsibility with the Company.

h) Bring to the attention of the Board, Chairman or the

Managing Director as appropriate, any information or

development either within the Company (relating to its

employees or other stakeholders) or external, which could

impact the Company’s operations, and which in the normal

course may not have come to the knowledge of the Board/

Chairman or Managing Director.

i) Always abide by the above Code of Conduct, and shall

be accountable to the Board for their actions / violations /

defaults.


43

Share price movement

25

34

43

52

61

70

Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08

40.50 40.50 39.0040.90

38.65

46.40 46.9549.80

55.00 57.50

40.00 38.40

34.0035.45 35.25 36.75

33.10 36.50 34.0036.40

45.50

26.15

33.7030.60

4087.90 4295.80 4318.304528.85

4464.005021.35

5900.65

5762.75

6138.60

5137.45 5223.50

4734.50

Rs.S&P

CNX NiftyNSE - April 2007 to March 2008

25

34

43

52

61

70Rs. SensexBSE - April 2007 to March 2008

40.45 40.50 39.00 40.8038.70

46.30 47.00 48.85

55.1057.90

40.00 38.35

35.15 36.60 35.40 36.6533.90

36.7034.00

36.80

45.25

25.80

33.7530.60

13,872.37

14,544.46

14,650.51

15,550.99

15,318.60

17,291.10 19,837.99

19,363.19

20,286.99

17,648.71

15,644.44

17,578.72

Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08

0

1400

2800

4200

5600

7000

0

4200

8400

12600

16800

21000

Trusts (0.02%)

Mutual Funds (2.25%)

Promoter Hinduja Automotive Limited (50.98%)

Banks (0.08%)

Others (1.06%)

Financial Institutions / Insurance Co. / State Govt. / Govt. Companies / UTI (15.19%)

Residents (Individuals / Clearing Members) (14.38%)

Foreign Institutional Investors (11.76%)

Non-Resident Indians/ OCB / Corporate Bodies – Foreign / Bank – Foreign / Foreign Nationals (1.74%)

Corporate Bodies (2.54%)

Shareholding pattern as on March 31, 2008


44


Auditors’ Certificate on Compliance with the Conditions of Corporate Governance under Clause 49 of the Listing Agreements

To the Members of


1. We have examined the compliance with the conditions of Corporate Governance by Ashok Leyland Limited (the Company)

for the year ended March 31, 2008 as stipulated in Clause 49 of the listing agreement of the said company with the stock

exchanges in India, with the relevant records and documents maintained by the Company and furnished to us and the report

on Corporate Governance as approved by the Board of Directors.

2. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination has been

limited to procedures and implementation thereof, adopted by the Company for ensuring the said compliance. It is neither an

audit nor an expression of opinion on the financial statements of the Company.

3. Based on the aforesaid examination and according to the information and explanations given to us, we certify that the Company

has complied with the said conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

4. 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 M S Krishnaswami & Rajan

Chartered Accountants

M K Rajan

Partner

Membership No. 4059

For Deloitte Haskins & Sells

Chartered Accountants

R Laxminarayan

Partner

Membership No. 33023

May 8, 2008

Chennai

Annexure – C to Directors’ Report


45

A. Economy and Market trends

Global economy

Global economy grew strongly although the current turbulence

in financial markets has clouded prospects. The growth

was supported by generally sound fundamentals and strong

momentum in emerging market economies.

Looking ahead, contribution from developing countries to the

total GDP growth is expected to sustain at higher levels. This

is likely to result in huge capital inflows into the developing

countries. The share of the developing countries in world trade

will also continue to increase, resulting in significant export

opportunities. However, global inflation levels, fuelled by the

sharp increase in global commodity prices as well as by the

growth of developing countries such as China and India, are

expected to remain high.

Indian Economy

After robust growth over the past few years, Indian economy

witnessed a slowdown during 2007-08. GDP growth for

2007-08 as projected by the Government at 8.7% shows

a deceleration from the high growth of 9.4% and 9.6%,

respectively, in the previous two years. With the economy

modernizing, globalizing and growing rapidly, some degree of

cyclical fluctuation is to be expected.

Last year, inflation flared up driven primarily by increase in

the prices of coal and crude oil. This has, to some extent,

adversely impacted the pace of economic growth in the short

term, particularly the growth in the industrial sector, compared

to the previous year.

Accompanying the recent moderation in industrial growth, the

growth performance of some segments of the infrastructure

sector such as power generation and movement of railway

freight, as also the production of universal intermediates

such as steel, cement and petroleum, have shown subdued

performance.

Annexure D to Directors’ Report

Management Discussion and Analysis ReportIndia’s Eleventh five year plan paper projects a GDP growth

of 8.5% through a boost to growth in the agriculture sector,

improving infrastructure aggressively and encouraging

Public Private Partnerships for construction and operations

of infrastructure services such as highways, airports and

ports etc. The country is expected to continue the strong

momentum of the past and take the economy back on the

growth path of around 9%.

Commercial Vehicle (CV) Industry

The share of ‘Second hemisphere’ markets in the Global

Commercial Vehicle market is increasing. BRIC (Brazil,

Russia, India and China) countries are emerging as the key

markets among the ‘Second hemisphere’ countries. Other

‘Second hemisphere’ markets such as Eastern Europe, Latin

America, and ASEAN are also witnessing strong growth.

With India being the next large and lucrative market after

China, global players are entering the Indian market in

association with local partners. Besides, local players are

also diversifying their business to have a sizeable share in the

total commercial vehicle market. With global majors planning

to invest around Rs. 60 billion in the coming year to create

capacities, the Indian CV market is likely to get crowded.

Technology trends in the global commercial vehicle industry

are being increasingly driven by tighter emission standards

and demanding customer requirements. These are set to

dictate tougher tasks to new product development teams

worldwide in terms of providing products with high ‘value-cost’

equation.

The Indian commercial vehicle market continues to accelerate

towards the “hub and spoke” model present in the mature

markets worldwide. Of the total industry volume in the

Indian commercial vehicle industry over the last few years,

contribution from vehicles in the sub 7.5 T GVW and greater

than 16 T GVW segments has been continuously increasing.


46


Economic growth in agricultural and industrial sectors

coupled with the Government’s emphasis on infrastructure

development will continue to fuel the demand in India for

commercial vehicles. The Automotive Mission Plan 2016,

approved by the Government, is focusing on doubling the

contribution of automobile industry to the country’s GDP

by 2016. The Government has indicated that a balanced

approach would be pursued with regard to trade agreements

with countries / regions such as ASEAN, China, Sri Lanka,

Latin America and Middle East to provide growth opportunities

for the Indian automotive industry.

Product trends in the Indian commercial vehicle market point

towards an increase in the electronics content in vehicles

and a shift towards higher power to-weight ratios. These

trends will also be driven by legislations pertaining to vehicle

safety and comfort including the imminent “Bus Body Code”

and “Truck Code”. These measures to create an organized

and regulated commercial vehicle industry in the country

will enable commercial vehicle manufacturers to broaden

their presence across the value chain and offer

products with much higher levels of value addition

than those presently available.

The logistics industry in India is expected to undergo

large scale consolidation with the emergence

of more organized players who would use high

end commercial vehicles for long hauls and light

commercial vehicles for the last mile distribution.

Increasing awareness of all stakeholders in the

Indian transport and logistics sector will drive the

demand for fully built vehicle solutions that are

engineered for specific applications.

Increasing urbanization has highlighted the need for mass

rapid passenger transportation within the cities. Government

bodies are looking at a Bus Rapid Transport Systems (BRTS)

as a possible solution. Product trends for city buses will be

significantly driven by these developments. In addition to

this, the development of the road network between cities will

influence product trends for inter-city buses.

B. Ashok Leyland – The year in brief

Indian medium and heavy commercial vehicle industry

shrunk marginally during 2007-08 compared to 2006-07.

The Company sold 76,045 vehicles in the Indian market

during the fiscal 2007-08. The Company registered significant

market share improvement in the bus segment but lost

market share in the truck segment mainly due to production

constraints arising out of supply chain bottlenecks. These have

been addressed satisfactorily and the Company is on course to

recover lost ground. The “New Gen” cabin, expected to be bulk

produced in 2008-09, will further aid this exercise.

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02 8420 19103

23969

33518

37151

65069

42608

57847

27523

33894

44872

47928

77075

56776

76045

9925

11354

10777

14168

12006

18198

Domestic SalesBuses Trucks

0

10

20

30

40

50

60

70

80

90

100

2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Up to 7.5-ton > 7.5 - 16.2-ton > 16.2-ton

-


47

The Company sold 7,285 vehicles in the overseas markets

during 2007-08 – representing an increase of approximately

21% over the previous year.

Engines business has shown robust growth during 2007-08.

A total of 12,169 engines were sold, including engines sold

under the LEYPOWER brand of generator sets, a new line of

business being pursued by the Company.

Spare parts sales amounted to Rs. 7,236 million during

2007-08, registering a growth of 45%. This includes the sale

of knocked down kits to the Indian Defence establishment.

The Company fully utilized its production capacity of 84,000

vehicles across the five existing manufacturing units. The

development activities for the new facility at Uttarakhand

have been progressing as scheduled. This unit, designed for

an annual capacity of 50,000 vehicles, is expected to be

functional before June 2010.

The ‘Mission Summit’ initiative that was kick started last

year to promote innovation, was responsible for the concept

and development of the iBus, exhibited at the Auto Expo

in January 2008. The team has since been involved in

developing a strategy for the commercialization of the iBus.

Besides this, the ‘Mission Summit’ team is exploring many

other innovative concepts.

The Six Sigma initiative has been extended to all functional

areas and the second wave of training and associated projects

have successfully concluded. The third wave of training is

all set to roll out shortly. With this, the Six Sigma initiative is

expected to mature into a self sustaining process.

The Company’s initiative to nurture future leaders is showing

promising results. A number of initiatives put forward

by the cross functional team of Young Executives (YEs)

as part of their annual business plan are on their way to

implementation.

The Company has always endeavoured to offer its customers

the best value proposition in the market through product

innovations and refinement and is pursuing the same with

ever increasing vigour. Development programmes to bring out

the next generation of key aggregates are currently underway.

The Company is executing a transformational change

programme, with external assistance, to facilitate the

development and marketing of winning products to suit the

changing customer requirements. This would be facilitated by

enhancing competence in project management, lean product

development process, decision making and governance,

portfolio and pipeline management as well as technology

management.

JV with Nissan Motors

To become a full range player, the Company has entered into

a joint venture with Nissan Motors Co. Ltd., Japan to develop

and produce light commercial vehicles for both the domestic

and export markets. The two organizations have been working

closely over the past few months and the alliance is expected

to roll out its first product by 2010-11.

JV with Continental AG

Vehicle electronics is expected to play an increasingly

important role in the Indian automotive sector in the years to

come. The Company has entered into a joint venture with the

Europe based Continental Group (who acquired Siemens VDO

in September 2007) to develop and produce cutting edge

vehicle electronics products.

Albonair GmbH

The Company has made an investment in Albonair GmbH

for development of cost effective vehicle emission treatment/

control systems and products, which, over the longer term,

are expected to find application in the first hemisphere

markets as well. The venture has already commenced

operations and has been strengthened with the recruitment of

appropriate technical personnel.

Ashley Alteams India Private Ltd.

The Company entered into a joint venture with Alteams O.Y.,

Finland, for the manufacture and sale of High Pressure Die

Casting components. Ashley Alteams India Private Ltd., the

joint venture Company, is making steady progress in the

implementation of the project and will cater to telecom

and automotive industry. Commencement of commercial

production is expected by end 2008.


48


Avia Ashok Leyland Motors s.r.o. (AALM)

The Commercial Vehicles business of Avia made steady

progress during the year 2007. AALM focused on initiatives

to consolidate its business, set up the processes, integrate

product development activities with the Company and widen

its market reach. The company achieved sales in excess of

700 units during the previous calendar year.

C. Risk Management

The Commercial Vehicles business has a specific set of

risk characteristics, which need to be carefully evaluated,

managed and mitigated. In order to effectively manage the

cyclical nature of demand, Management has adopted an

internal risk management protocol. Risk Management

covers the entire process of business, including, inter alia,

capital investment, technology development and customer

acquisition / retention.

Continuance of the reform process and emphasis on

infrastructure and agriculture augur well for the road transport

sector. However, given the cyclical nature of demand in the

Commercial Vehicles industry, capacity build up plans are

periodically reassessed, taking into account market conditions

and demand forecast.

The Company has plans to increase its annual capacity

to 184,000 vehicles (medium and heavy duty vehicles)

over next two / three years. Capacity addition through

de-bottlenecking engine / gear box manufacturing facilities

at Ennore unit is nearing completion. This would enable

the Company to overcome capacity constraints during the

coming years. In addition, the Company is moving ahead

with capacity addition of 50000 vehicles per year at the

Uttarakhand plant which needs to be completed before

March 2010 to avail the fiscal benefits. The Company is

pursuing plans to increase the share of non-cyclical business

including exports, non-auto engines and sale to Defence

sector to mitigate the impact of cyclicality.

Competition in the domestic Commercial Vehicles market

has increased significantly with many global OEMs setting up

manufacturing base. Consequent to the policy of progressive

opening up of the market, customs duty, as a trade barrier, is

likely to lose its influence. The Company is preparing to face

these challenges through focused R & D efforts in designing /

developing vehicles that offer appropriate transport solutions

and meet the changing preferences of customers.

Rising fuel prices in the international market, coupled with

competitive pressures to contain freight rates, could lead to

erosion in vehicle operators’ margins, thereby leading to lower

demand. However, increased use of heavy tonnage vehicles

for moving large freight loads has reduced the tonne / km

cost. This has helped improve the operational viability for the

vehicle operators.

There are continuing concerns on input cost increases

particularly steel and rubber, due to commodity price

movements. In a competitive market, the Company may

not be able to pass on the cost increases fully through

pricing action. Hence, margins may come under pressure.

The Company is taking steps to competitively procure

components through global sourcing, reduce cost through

Value Engineering and improve productivity through shop floor

initiatives.

The Company’s foreign exchange exposure has increased

manifold, through contracting External Commercial

Borrowings of US$ 315 mn. over the years. Exports are

likely to cross US$ 250 mn. in the next 3 to 4 years.

Strengthening of the Rupee, if it continues, can adversely

affect realization from exports. However, the Company has an

active, centralized treasury department, assisted by technical

experts to mitigate adverse effects of currency / interest rate

fluctuations. Considering the extent of capital expenditure

(over Rs. 30,000 mn.) in the next three years, the Company

may face uncertainty in fund availability at reasonable costs.

However, given the low gearing at present, the Company

believes it would be able to raise the required funds at

competitive rates. The Company manages liquidity risk

through tie-up of short term facilities from banks which could

be used in case of requirement.

D. Internal Control systems and their adequacy

Based on the nature of business and size of operations, the

Company’s internal control system has been designed to

provide for:


49

50

• Accurate recording of transactions with internal checks and

prompt reporting.

• Adherence to applicable Accounting Standards and Policies.

• Review of capital investments and long term business

plans.

• Periodic review meetings to guide optimum utilization of

resources.

• Compliance with applicable statutes, policies, listing

requirements and management policies and procedures.

• Effective use of resources and safeguarding of assets.

The internal control system provides for well documented

policies / guidelines, authorizations and approval procedures.

The Company, through its own Corporate Internal Audit

Department, carries out periodic audits at all locations

and all functions and brings out any deviation to internal

control procedures. The observations arising out of audit

are periodically reviewed and compliance ensured. The

summary of the Internal Audit observations is submitted

to Audit Committee of the Board of Directors. The status

of implementation of the recommendations is reviewed by

the Committee on a regular basis and concerns, if any, are

reported to the Board.

Information security and IPR protection initiatives

While the Company endeavours continuously to align

IT investments to business strategies, efforts have

simultaneously been made to safeguard the Company’s

invaluable information assets and intellectual property. As

a part of this initiative, the Company implemented, during

2005, BS7799 – 2:2002, the most widely accepted security

standard and got the coveted certification, the first among all

auto majors in India.

Continuing this journey further, the Company migrated

to ISO27001 during 2006, consequent to ISO adopting

BS7799, as part of the ISO standard for information security.

Subsequently, the scope of the certification was extended to

Advanced Engineering activities of the Company during 2007,

as a part of Company’s strategy to extend the scope to all

critical business units, where intellectual property and critical

information are either created, handled or stored.

During April 2008, STQC (MIT, Govt. of India) renewed

the ISO27001 certificate for a further period of three

years, subject to periodical surveillance audits, following

an assessment and detailed review of maintenance of

the implemented standard, best practices and further

improvements over the last three years.

E. Financial Review

During the year under review, growth in profits has been

commensurate with growth in revenues. The Company

achieved an overall growth in sale revenue by 7.8% over

the previous year. Drop in domestic vehicle sales by 1.4%

over previous year was adequately compensated by 21%

increase in export volumes. The Company improved its non-

auto Engine sales by 37%, supported by sale of “Leypower

Gensets”, a new line of revenue stream. Parts sales (including

supply of kits to Vehicle Factory, Jabalpur) registered 50%

growth. The share of non-cyclical revenues (covering revenues

from Buses / Chassis for buses, non-auto Engines, Defence,

Exports and Spare Parts) improved from 24% to 33% in

2007-08.



Summary of Profit and Loss Account

Rs millions

2007-08 2006-07 Inc / (Dec) %

Income

Sales (Net of Excise Duty)

Other Income

77,291

740

71,682

708

7.8

4.5

Total 78,031 72,390 7.8

Expenditure

Material Cost

Employee Expenses

Other Expenses

Depreciation

Financial Expenses

57,647

6,162

5,443

1,774

497

54,632

4,807

5,216

1,506

53

5.5

28.2

4.4

17.8

838.5

Total 71,523 66,214 8.0

Profit Before Extraordinary item 6,508 6,176 5.4

Extraordinary item – VRS Expenses Amortisation (127) (131) (2.6)

Profit Before Tax 6,381 6,045 5.5

Tax Provision – Current 1,014 1,351 (24.9)

– Deferred 604 230 162.7

– Fringe benefit tax 70 51 37.3

Profit After Tax 4,693 4,413 6.3

Basic Earnings Per Share (in Rs.) 3.53 3.38 4.4

Diluted Earnings Per Share (in Rs.) 3.53 3.36 5.1

Revenues:

The Company was able to earn revenue through the following streams of business activities:

i) Vehicles: Income from vehicles was Rs 68,819 mn. 4.1%

over the previous year level of Rs 66,092 mn.

ii) Engines: Income from Engines increased to Rs 1,921

mn., 59% growth over the previous year level of Rs 1,210

mn. During the year the Company offered factory built genset

engines, which accounted for 17% of total engine volume .

iii) Spare Parts and others: Income from Spare parts

including sale of kits to Vehicle Factory, Jabalpur increased to

Rs 6,551 mn., a jump of 50% over the previous year level of

Rs 4,380 mn.

Other income registered an increase by Rs. 32 mn. mainly

due to better realization on sale of investments during the

current year.

Costs:

Material Cost: Steel, the major input material, witnessed

a steep increase during the year (62% increase on point to

point basis compared to March 2007). The other major input,

rubber also witnessed an increase of 10% in commodity

prices. However, the Company mostly neutralized these

increases through continued efforts in value engineering


51

initiatives and better product mix. The Company also

managed to secure from global sources (including from

China where it has recently set up an office) components at

lower costs to offset the commodity price induced input cost

increases. The Company was also able to get the full year

benefit of VAT, introduced by Tamil Nadu Government in

January 2007. Average pricing action of about 4.5% effected

by the Company in a phased manner helped to protect the

margins.

Staff costs: The increase is mainly due to full year impact

of salary revision made in the previous year and incremental

manpower for ongoing activities at Uttarakhand and Product

Development initiatives.

Other expenses: These increased by 4.4% (excluding R &

D activities), mainly due to the activity levels and inflation.

Reduction in rates and taxes is due to full year impact of

abolition of Additional Sales tax in Tamil Nadu consequent to

introduction of VAT effective January 2007.

Depreciation for the year has increased to Rs 1,774 mn.

compared to Rs 1,506 mn. in the previous year due to

deployment of resources to augment capacity and incremental

provision for impairment of assets by Rs. 28 mn.

Financial expenses

Interest cost has gone up due to borrowings to meet the

capital expenditure and working capital requirements. The

Company is regulating its borrowing in line with capital

expenditure requirements. Centralised Treasury Department is

active in the money market to manage day-to-day investment

of surplus funds and raise short-term funds as required and

bring down cost by such borrowings.

Capital employed

Total capital employed by the Company increased by 21%

from Rs 27,075 mn. to Rs 32,680 mn., mainly due to

investments in facility creation.

Total Shareholders’ funds as at March 31, 2008 aggregated

Rs 21,267 mn. of which equity capital was Rs 1,330 mn.

comprising of 1,330 mn. shares of Re 1 each. Out of the

above, 6,468,000 shares were issued during the year by way

of conversion of Foreign Currency Convertible Notes.

BALANCE SHEET

Rs millions

2007-08 2006-07 Inc / (Dec) %

Sources of Funds

Shareholders’ Funds

Loan Funds

Deferred Tax Liability - Net

21,267

8,875

2,538

18,702

6,404

1,969

13.7

38.6

28.9

Total 32,680 27,075 20.7

Application of Funds

Fixed Assets

Investments

Net Current Assets

20,548

6,099

6,033

15,445

2,211

9,419

33.0

175.8

(35.9)

Total 32,680 27,075 20.7


52


Dividend

The Directors have recommended 150% dividend for the year

2008, i.e. Rs 1.50 per share.

Capital expenditure and Investments

During the year, the Company incurred Rs 6,959 mn. towards

capital expenditure. This expenditure covers investments

related to capacity expansion in the existing plants and in

the new plant at Uttarakhand and R & D programmes. The

Company also started making investments in Ashley Alteams

India Private Limited (Joint Venture Company with Alteams

O.Y. Finland) and Automotive Infotronics Private Limited (Joint

Venture with Continental AG). These two companies will focus

on supplies to meet specific component requirements for

fitment in Commercial Vehicles.

In addition the Company made investments in a vehicle

manufacturing / assembly plant at Ras Al Khaimah, Design

Engineering services business viz., Defiance Testing and

Engineering Services Inc. USA and Albonair GmbH, Germany

which is engaged in the development of fuel emission

treatment / control systems.

Net Current Assets (excluding cash / bank balances) as on

March 31, 2008 stood at Rs 1,519 mn. compared to the

previous year level of Rs 5,069 mn. mainly due to reduction

in trade debtor levels. Inventories have gone up to Rs 12,239

mn. as on March 31, 2008 compared to Rs 10,703 mn. as

at March 31, 2007. The increase is mainly due to increased

activity levels and higher level of finished vehicles and

engines. Focussed effort on collections reduced the sundry

debtors level to Rs 3,758 mn. from Rs 5,229 mn.

Liquidity

As at March 31, 2008, net debt (net of cash & bank

balances) to equity ratio was 0.2. During the year the

Company had tied up External Commercial Borrowings (ECB)

for USD 270 mn. Against these facilities, the Company

drew USD 90 mn. to fund imported capital expenditure/

investments. The balance of USD 180 mn. would be drawn

during the ensuing year. FCCNs issued during April 2004 has

been converted except for USD 1 mn., representing 1% of the

total issue size of USD 100 mn. Assuming conversion of this

balance portion, the equity of the Company will increase to

Rs 1331.8 mn. The Company manages its liquidity through

rigorous weekly monitoring of cash flows and surplus funds

are invested, mainly in units of mutual funds and in bank

deposits.

The Company’s principal sources of liquidity are:

a) Existing cash and cash equivalents

b) Cash generated by operations

c) Unutilised limits with banks

d) Unutilised limits out of term funding limits tied up with

financial institutions and Banks.

Fitch has awarded ratings at “AA (IND) / stable” for the

Company’s long term borrowings. ICRA has assigned the rating

LAA (L double A) for long-term loans and also assigned special

rating of A1+ (A one plus) for short-term loans. CRISIL has

given the ratings for long-term borrowings at “AA / negative”. On

Commercial Paper programme (short term borrowing), CRISIL

maintained the earlier rating of P1+. The Company believes that

it has sufficient liquidity to meet its working capital requirements

and other anticipated cash outflows.

Results of operation

The Company generated profit from operations after tax of

Rs 6,956 mn. After meeting working capital requirements

and extraordinary item of payments for Voluntary Retirement

Scheme of Rs 48 mn., the Company earned net cash inflow

of Rs 10,657 mn. from its operations.

Cash flow from financing activities significantly improved

mainly due to payment of dividend for 2006-07 in March-07

itself. This enabled the Company utilise internal generation

for meeting capital expenditure (including capital advance)

requirements and minimise the borrowings during 2007-08.

Profit before tax and extra-ordinary items improved by 4.5% to

Rs 6,508 mn. During the year, the Company charged Rs 127

mn. towards amortisation of VRS expenses. After providing

for taxes at Rs 1,688 mn. (including deferred tax and fringe

benefit tax), profit after tax for the current year improved by

6.3 % to Rs.4,693 mn.


53

F. The Years ahead

The Company has set itself the task of consolidating and

enhancing its position in the Indian commercial vehicle

market, both in terms of volumes as well as in customer

satisfaction, in the medium term. The Company is

executing various initiatives in terms of process and product

improvements to achieve this goal.

The Company aspires to widen its footprint in the global

commercial vehicle industry through organic and inorganic

growth and is examining opportunities towards this end.

Cash Flow Statement

Rs. millions

2007-08 2006-07

Profit from operations after tax 6,956 4,958

Dec. in Net Working Capital 3,749 372

Net Cash Flow from operating activities (before extraordinary item) 10,705 5,330

Payments under Voluntary Retirement Scheme (48) (330)

Net Cash flow from operating activities 10,657 5,000

Payment for Assets acquisition – net (6,095) (6,704)

Other cash flow from Investing activities – net (2,002) (519)

Cash flow from Financing activities 3,645 (2,908)

Net Cash Inflow / (Outflow) 6,205 (5,131)

Development programmes for the next generation products

and aggregates are currently underway. These include the

“Future Vehicle Development Programme”, the “New Engine

Platform” development programme among others. The

successful culmination of these programmes should give the

Company significant competitive advantages.

In order to compensate for the cyclic nature of the domestic

commercial vehicle industry, the Company has been focussing

on increasing its presence in allied businesses like

non-auto engine, Defence, Exports and Parts so as to achieve

a significant portion of its revenues from such non-cyclical

businesses.


54


Responsibility in relation to financial statements

The financial statements have been prepared in conformity, in

all material respects, with the generally accepted accounting

principles in India and the Accounting Standards prescribed by

the Institute of Chartered Accountants of India in a consistent

manner and supported by reasonable and prudent judgements

and estimates. The Directors believe that the financial

statements reflect true and fair view of the financial position

as on 31.3.2008 and of the results of operations for the year

ended 31.3.2008.

The financial statements have been audited by

M/s M S Krishnaswami & Rajan and M/s Deloitte Haskins &

Sells in accordance with generally accepted auditing standards,

which include an assessment of the systems of internal controls

and tests of transactions to the extent considered necessary by

them to support their opinion.

Going Concern

In the opinion of the Directors, the Company will be in a position

to carry on its existing commercial vehicles / engines business

and accordingly it is considered appropriate to prepare the

financial statements on the basis of going concern.

Maintenance of accounting records & Internal controls

The Company has taken proper and sufficient care for the

maintenance of adequate accounting records as required by

various Statutes.

Annexure E to Directors’ Report

Directors’ Responsibility statement as per Section 217(2AA) of the Companies Act, 1956

Directors have overall responsibility for the Company’s internal

control system, which is designed to provide a reasonable

assurance for safeguarding of assets, reliability of financial

records and for preventing and detecting fraud and other

irregularities.

The system of internal control is monitored by the internal audit

function, which encompasses the examination and evaluation

of the adequacy and effectiveness of the system of internal

control and quality of performance in carrying out assigned

responsibilities. Internal Audit Department interacts with all

levels of management and the Statutory Auditors, and reports

significant issues to the Audit Committee of the Board.

Audit Committee supervises the financial reporting process

through review of accounting and reporting practices,

financial and accounting controls and financial statements.

Audit Committee also periodically interacts with internal and

statutory auditors to ensure quality and veracity of Company’s

accounts.

Internal Auditors, Audit Committee and Statutory Auditors

have full and free access to all the information and records

as considered necessary to carry out their responsibilities. All

the issues raised by them have been suitably acted upon and

followed up.


55

We, R Seshasayee, Managing Director and K Sridharan, Chief Financial Officer of Ashok Leyland Limited, certify that:

1. We have reviewed the financial statements for the year and that to the best of our knowledge and belief:

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

be misleading;

b) these statements present a true and fair view of the state of affairs of the Company and of the results of operations and

cash flows. The financial statements have been prepared in conformity, in all material respects, with the existing generally

accepted accounting principles including Accounting Standards, applicable laws and regulations.

2. There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are

fraudulent, illegal or violative of the company’s code of conduct.

3. We accept overall responsibility for establishing and monitoring the company’s internal control system for financial reporting and

evaluating its effectiveness. Internal audit function monitors the internal control system for financial reporting, which encompasses

the examination and evaluation of the adequacy and effectiveness. Internal audit works with all levels of management and

statutory auditors, and reports significant issues to the Audit Committee of the Board. The auditors and Audit Committee are

appraised of any corrective action taken with regard to significant deficiencies and material weaknesses.

4. We indicate to the auditors and to the Audit Committee:

a) significant changes in internal control over financial reporting during the year;

b) significant changes in accounting policies during the year;

c) instances of significant fraud of which we have become aware of and which involve management or other employees who

have significant role in the Company’s internal control system over financial reporting.

However, during the year there were no such changes or instances.

R Seshasayee K Sridharan

Managing Director Chief Financial Officer

May 8, 2008

Chennai

Code of Conduct for the Senior ManagementThis is to confirm that for the financial year March 31, 2008 all members of the Senior Management have affirmed in writing their

adherence to the Code of Conduct adopted by the Company.

R Seshasayee

Managing Director

May 8, 2008

Chennai

Annexure – G to Directors’ Report

Certification by Managing Director and Chief Financial Officer to the Board


56


Auditors’ Report

To the Members of

ASHOK LEYLAND LIMITED

1. We have audited the attached Balance Sheet of ASHOK

LEYLAND LIMITED as at March 31, 2008, the Profit and

Loss Account and the Cash Flow Statement (financial

statements) for the year ended on that date, annexed

thereto, signed by us under reference to this report. 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 and

assurance 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. We report that:

3.1 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.

3.2 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 those books.

3.3 the financial statements dealt with by this report are in

agreement with the books of account.

3.4 in our opinion, the aforesaid financial statements comply

in all material respects with the applicable Accounting

Standards referred to in Section 211(3C) of the Companies

Act, 1956 (the Act).

3.5 on the basis of written representations received from the

Directors as on March 31, 2008, and taken on record by

the Board of Directors, we report that none of the directors

is prima facie disqualified as on March 31, 2008 from

being appointed as a director in terms of Section 274 (1)

(g) of the Act.

3.6 in our opinion and to the best of our information and

according to the explanations given to us, the aforesaid

financial statements read with the Statement on Significant

Accounting Policies and Notes to the Accounts, give the

information required by the Act, in the manner so required

and also 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 March 31, 2008;

(ii) in the case of the Profit and Loss Account, of the

profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash

flows for the year ended on that date.

4. As required by the Companies (Auditor’s Report) Order,

2003 issued by the Government of India in terms of

Section 227(4A) of the Companies Act, 1956, and on the

basis of such checks as we considered appropriate and

according to the information and explanations given to us,

we further report that:

4.1 (i) the Company is maintaining proper records showing

full particulars including quantitative details and

situation of fixed assets.

(ii) the fixed assets are being physically verified under

a phased programme of verification, which, in our

opinion, is reasonable having regard to the nature

and value of its assets, and no material discrepancies

have been noticed on such verification.

(iii) the Company has not disposed off substantial part

of its fixed assets during the year.

4.2 (i) inventories have been physically verified during the

year by the management at reasonable intervals.

(ii) the procedures of physical verification of the inventory

followed by the management are reasonable and


57

adequate in relation to the size of the Company and

the nature of its business.

(iii) the company is maintaining proper records of its

inventories and no material discrepancies were

noticed on physical verification.

4.3 the Company has neither granted nor taken any loans,

secured or unsecured, to / from companies, firms or other

parties covered in the register maintained under Section

301 of the Act.

4.4 there is an adequate internal control system commensurate

with the size of the Company and the nature of its business

with regard to purchase of inventory and fixed assets and

for sale of goods and services. Further, on the basis of our

examination of the books and records of the Company,

we have neither come across nor have been informed of

any continuing failure to correct major weaknesses in the

aforesaid internal control system.

4.5 to the best of our knowledge there are no contracts or

arrangements referred to in Section 301 of the Act which

need to be entered in the register maintained under the

said section.

4.6 the company has complied with the provisions of section

58A and 58AA or any other relevant provisions of the Act

and the Companies (Acceptance of Deposit) Rules, 1975

with regard to deposits accepted from public.

4.7 the Company has an internal audit system commensurate

with its size and nature of its business.

4.8 we have broadly reviewed the books of account and records

maintained by the Company relating to the manufacture

of commercial vehicles, diesel engines, gensets and auto

components pursuant to the order 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.

4.9 (i) the Company is regular in depositing undisputed

statutory dues including provident fund, investor

education and protection fund, employees’ state

insurance, income tax, sales tax, wealth tax,

service tax, customs duty, excise duty, cess and

other material statutory dues as applicable with the

appropriate authorities during the year.

(ii) there are no dues of income tax/wealth tax, service

tax, customs duty, which have not been deposited

on account of any dispute. Details of dues towards

sales tax, excise duty and cess that have not been

deposited on account of dispute are as stated

below:

Rs. Millions

Nature of

dues

Dues Forum where

the dispute is

pending

Amount stayed

not included in

dues

Sales Tax 19.28 Appellate Deputy/

Additional

Commissioner

197.40

0.88 Tribunal 25.77

Excise Duty

and cess.

2.10 Commissioner

of Central Excise

(Appeals)

–

4.10 the Company does not have any accumulated losses as at

March 31, 2008 and has not incurred any cash losses in

the financial year ended on that date or in the immediately

preceding financial year.

4.11 the Company has not defaulted in repayment of dues to

any financial institution, bank or debenture holders during

the year.

4.12 the Company has maintained adequate documents and

records where it has granted loans and advances on the

basis of security by way of pledge of shares, debentures

and other securities.

4.13 the provisions of any special statute applicable to a

chit fund, nidhi, mutual benefit fund / societies are not

applicable to the Company.

4.14 the Company is not dealing or trading in shares, securities,

debentures and other investments. Accordingly the


58


provisions of clause 4 (xiv) of the Companies’ (Auditor’s

report) Order 2003 are not applicable to the Company.

4.15 the terms and conditions of guarantees given during the

year by the Company, for loans taken by others from banks

or financial institutions, are not prima facie prejudicial to

the interest of the Company.

4.16 the term loans availed by the Company were prima facie,

applied for the purpose for which they were obtained. The

loan funds pending application was temporarily deployed

as deposits with banks.

4.17 on an overall examination of the financial statements

of the Company, funds raised on short-term basis have,

prima facie, not been used during the year for long-term

investment.

4.18 the Company has not made any preferential allotment of

shares during the year to any party.

4.19 the Company has created securities / charges in respect of

debentures issued and outstanding.

4.20 the Company has not raised any money by public issues

during the year.

4.21 considering the size and nature of the Company’s

operations, no fraud of material significance on or by the

Company has been noticed or reported during the year.

For M.S. Krishnaswami & Rajan For Deloitte Haskins & Sells

Chartered Accountants Chartered Accountants

M.K. Rajan R. Laxminarayan

Partner Partner

Membership No. 4059 Membership No. 33023

May 08, 2008

Chennai


59

(Rs. Millions)Schedule 2008 2007

SOURCES OF FUNDSShareholders’ funds Capital 1.1 1,330.34 1,323.87 Reserves and surplus 1.2 20,159.48 17,621.81

21,489.82 18,945.68Loan funds Secured loans 1.3 1,902.40 3,602.16 Unsecured loans 1.4 6,972.61 2,801.82

8,875.01 6,403.98Deferred tax liability – net 2,538.20 1,969.29Total 32,903.03 27,318.95APPLICATION OF FuNDSFixed assets 1.5 Gross block 29,424.38 26,201.97

Less Depreciation 14,168.88 13,131.64

Net block 15,255.50 13,070.33

Capital work-in-progress 5,292.45 2,374.9120,547.95 15,445.24

Investments 1.6 6,099.00 2,210.94Current assets, loans and advances Inventories 1.7 12,239.14 10,703.21 Sundry debtors 1.8 3,758.35 5,228.75 Cash and bank balances 1.9 4,513.70 4,349.39 Loans and advances 1.10 8,241.37 6,695.79

28,752.56 26,977.14Less Current liabilities and provisions 1.11 Liabilities 19,267.09 16,516.25 Provisions 3,452.31 1,042.30

22,719.40 17,558.55Net current assets 6,033.16 9,418.59Miscellaneous expenditure(to the extent not written off or adjusted)

1.12 222.92 244.18

Total 32,903.03 27,318.95

Statement on significant accounting policies, Schedules 1.1 to 1.12 andNotes to the Accounts form part of this Balance Sheet.

For and on behalf of the Board

K. SRIDHARAN A.R. CHANDRASEKHARAN R. SESHASAYEE R. J. SHAHANEYChiefFinancialOfficer ExecutiveDirector& ManagingDirector Chairman Company Secretary

This is the Balance Sheet referred to in our report of even date.

For M.S. KRISHNASWAMI & RAJAN For DELOITTE HASKINS & SELLSChartered Accountants Chartered Accountants

M.K. RAJAN R. LAXMINARAYANPartner Partner

May 08, 2008Chennai

Balance Sheet as at March 31, 2008


60


(Rs. Millions)

Schedule 2008 2007INCOME Sales 2.1 89,336.90 83,047.17

Less Excise duty 12,045.67 11,365.41

77,291.23 71,681.76

Other income 2.2 739.99 708.03

78,031.22 72,389.79 ExPENDITuRE Manufacturing and other expenses 2.3 69,251.34 64,654.91

Depreciation, amortisation and impairment 2.4 1,773.61 1,505.74

Financial expenses 2.5 497.40 53.32

71,522.35 66,213.97

Profit before extraordinary items 6,508.87 6,175.82 Extraordinary items Voluntary retirement scheme compensation amortised 127.37 130.76

Profit before tax 6,381.50 6,045.06 Provision for taxation – Current tax 1,014.00 1,350.50

– Deferred tax 604.40 230.20

– Fringe benefit tax 70.00 51.50

Profit after tax 4,693.10 4,412.86 Excess provision written back – Dividend – 25.98

– Corporate dividend tax thereon – 3.64

Balance profit from last year 3,616.86 2,303.70

Transfer from / (to) – Debenture redemption reserve 50.00 135.00

– General reserve (1,000.00) (1,000.00)

7,359.96 5,881.18 Dividend – Interim – 1,985.81

– Proposed final 1,997.71 –

Corporate dividend tax thereon 339.51 278.51

Balance profit carried to Balance Sheet 5,022.74 3,616.86 Earnings per share (Face value Re.1) – Basic (in Rs.) 3.53 3.38

– Diluted (in Rs.) 3.53 3.36

Profit and Loss account for the year ended March 31, 2008

Statement on significant accounting policies, Schedules 2.1 to 2.5 andNotes to the Accounts form part of this Profit and Loss Account.



This is the Profit and Loss Account referred to in our report of even date.



May 08, 2008Chennai


61

(Rs. Millions)

2008 2007

Cash flow from operating activities

Profit before tax 6,381.50 6,045.06

Adjustments for:

Depreciation, amortisation and impairment 1,773.61 1,505.74

Other amortisations 143.49 164.76

Foreign exchange (gains)/losses (63.60) (65.30)

Interest expense net of interest capitalisation 615.01 196.46

Interest income (214.67) (160.94)

Income from investments (22.85) (98.85)

(Profit)/Loss on disposal of fixed assets/long term investments (375.86) (323.15)

Diminution in value of investments written back – net – (168.13)

Transfer from General Reserve – Employee benefits – (781.54)

Operating profit before working capital changes 8,236.63 6,314.11

Adjustments for changes in :

Inventories (1,535.93) (1,677.60)

Debtors 1,426.87 (1,005.76)

Advances 261.52 (1,047.41)

Current liabilites and provisions 3,596.82 4,102.54

Cash generated from operations 11,985.91 6,685.88

Income tax including Fringe benefit tax paid (1,280.65) (1,356.00)

Net cash flow from operating activities before extraordinary expenditure 10,705.26 5,329.88

Compensation under Voluntary retirement scheme (48.41) (330.37)

Net cash flow from operating activities after extraordinary expenditure 10,656.85 4,999.51

Cash flow from investing activities

Payments for assets acquisition (6,209.04) (6,812.87)

Proceeds on sale of fixed assets 113.65 108.49

Purchase of Investments (373.82) (50.64)

Sale/redemption of investments 474.95 817.93

Income from investments – Interest 106.61 59.43

– Dividend 22.85 129.39

Changes in advances (2,231.98) (1,473.70)

Net cash flow used in investing activities (8,096.78) (7,221.97)

Cash Flow Statement for the year ended March 31, 2008


62


Cash Flow Statement for the year ended March 31, 2008 (Contd.)



This is the Cash Flow Statement referred to in our report of even date.



May 08, 2008Chennai

(Rs. Millions)

2008 2007

Cash flow from financing activities

Long term borrowings – Raised 3,672.10 2,162.35

– Repaid (404.71) (829.95)

Changes in short term borrowings 993.32 –

Debenture/Loan raising expenses paid (68.94) (2.47)

Interest paid – net (546.59) (181.67)

Dividend paid and tax thereon – (1,792.34)

Interim dividend and tax thereon – (2,264.32)

Net cash flow from financing activities 3,645.18 (2,908.40)

Net cash inflow/(outflow) 6,205.25 (5,130.86)

Opening cash and cash equivalents 1,952.02 7,082.88

Closing cash and cash equivalents 8,157.27 1,952.02

Net increase/(decrease) in cash and cash equivalents 6,205.25 (5,130.86)

Notes to the cash flow statement

1 Components of cash and cash equivalents:

Cash and bank balances, cash credit excluding those relating to unclaimed dividend 4,491.75 1,953.31

Investments in money market instruments 3,650.73 –

Unrealised foreign exchange gains – net 14.79 (1.29)

8,157.27 1,952.02

2 The conversion of Foreign Currency Convertible Notes into equity shares has not been considered in the above statement. Refer Note 8 to the Accounts.

3 Cash flows from Investing activities includes acquisition of 100% shares in Albonair GmbH (cost Rs. 1.59 million) and Defiance Testing & Engineering Services (cost Rs. 141.05 million) and disposal of 60% (Rs. 0.95 million) and 51% (Rs. 71.94 million) shares respectively therein.


63

1. Accounting convention

1.1 Financial statements are prepared in accordance with the generally accepted accounting principles including accounting standards in India under historical cost convention except so far as they relate to revaluation of certain land and buildings.

1.2 Use of estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such differences are dealt with in the period in which the results are known/ materialise.

2. Fixed assets and depreciation/amortisation

2.1 Cost of all civil works (including electrification and fittings) is capitalised with the exception of alterations and modifications of a capital nature to existing structures where the cost of such alteration or modification is Rs 100,000 and below. Other fixed assets, including intangible assets and assets given on lease, where the cost exceeds Rs. 10,000 and the estimated useful life is two years or more, is capitalised. Cost of initial spares and tools is capitalised along with the respective assets. Cost of fixed assets is net of credits under Cenvat / Vat Scheme. Expenditure directly related and incidental to construction are capitalised upto the date of attainment of commercial production. Interest and other related costs, including amortised cost of borrowings attributable only to major projects are capitalised as part of the cost of the respective assets.

2.2 Assets are depreciated / amortised, as below, on straight line basis:

(a) Leasehold land, over 40 years or the period of the lease, whichever is less, from its commencement;

(b) Leasehold land and buildings subject to revaluation, is calculated on the respective revalued amounts, over the balance useful life as determined by the valuers in the case of buildings and as per (a) above in the case of land;

(c) Buildings, plant and machinery (except assets subject matter of impairment) and other assets, including intangible assets and assets given on lease, over their estimated useful lives or lives derived from the rates specified in Schedule XIV to the Companies Act, 1956, whichever is lower;

(d) Assets subject to impairment, on the asset’s revised carrying amount, over its remaining useful life.

2.3 Depreciation/amortisation is charged for the full year on the additions made during the first half of the year and for six months on the additions made during the second half of the year. No depreciation is provided for in respect of assets disposed off during the year.

3. Investments

Long term investments are stated at cost less provision for diminution other than temporary, if any. Current investments are valued at lower of cost and fair value.

4. Inventories

4.1 Inventories are valued at lower of cost and net realisable value; cost being ascertained on the following basis:

– Stores, spares, consumable tools, raw materials and components: on monthly moving weighted average basis. In respect of works-made components, cost includes applicable production overheads.

– Work-in-progress, finished / trading goods: under absorption costing method.

4.2 Cost includes taxes and duties and is net of credits under Cenvat / Vat Scheme.

4.3 Cost of patterns and dies is amortised equally over five years.

4.4 Surplus / obsolete / slow moving inventories are adequately provided for.

5. Foreign currency transactions

Foreign currency transactions (including booking / cancellation of forward contracts) are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities (including forward contracts) in foreign currency are translated at year

Statement on significant accounting policies


64


Statement on significant accounting policies

end rates. Exchange differences arising on settlement of transactions and translation of monetary items and financial derivatives (including forward contracts) are recognised as income or expense.

5.2 The premium or discount arising on forward contracts is amortised over the life of the contract.

5.3 Investments in equity capital of companies registered outside India are carried in the Balance Sheet at the rates prevailing on the date of the transaction.

5.4 Income/expenditure of overseas branches is recognised at the average rate prevailing during the month in which transaction occurred.

6. Amortisation of deferred expenditure

Expenditure incurred on issue of debentures / raising loans is amortised over the period of such borrowings. Premium paid on prepayment of any borrowing is amortised over the unexpired period thereof or sixty months, whichever is less.

7. Revenue recognition

Revenue from sale of products is recognised on despatch or appropriation of goods in accordance with the terms of sale and is inclusive of excise duty and export incentives, but net of incentive on sales including commission, rebates and discounts. Revenue arising due to price escalation claim is recognised in the period when such claim is made in accordance with terms of sale.

8. Government grants

Grants in the form of capital / investment subsidy are treated as Capital Reserve. Export incentives and incentives in the nature of subsidies given by the Government are reckoned in revenue in the year of eligibility.

9. Research and development costs

Expenditure on the design and production of prototypes is charged to revenue as incurred. Product development costs, including knowhow developed / acquired, incurred on new vehicle / engine platforms, variants on existing platforms and aggregates are recognised as Intangible assets and amortised.

10. Employee benefits

10.1 Short term employee benefit obligations are estimated and provided for.

10.2 Post employment benefits and other long term employee benefits

Defined contribution plans:

Company’s contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and / or statute and charged to revenue.

Defined benefit plans and compensated absences:

Company’s liability towards gratuity, other retirement benefits and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in revenue.

10.3 Termination benefits

Compensation under voluntary retirement scheme is amortised over lesser of thirty six months and the period from incurrence of expenditure to March 31, 2010.

11. Product warranties

Provision for product warranties is made for contractual obligations in accordance with the policy in force and is estimated for the unexpired period.

12. Deferred tax

Deferred tax is recognised on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversing in one or more subsequent periods.

Deferred tax assets on unabsorbed depreciation and carry forward of losses are recognised only to the extent there is a virtual certainty of its realisation.


65

(Rs. Millions)

2008 2007

Schedule – 1.1 CAPITAL

Authorised

1,500,000,000 (2007 : 1,500,000,000) Equity shares of Re.1 (2007 :Re.1) each 1,500.00 1,500.00

Issued

a) 524,598,695 (2007: 524,598,695) Equity shares of Re 1 (2007: Re.1) each 524.60 524.60

b) 341,742,940 (2007: 341,742,940) Equity shares of Re.1 (2007: Re.1) each issued by way of conversion of debentures 341.74 341.74

c) 323,157,240 (2007: 323,157,240) Equity shares of Re.1 (2007: Re.1) each issued through Global Depository Receipts 323.16 323.16

d) 141,044,117 (2007: 134,576,117) Equity shares of Re.1(2007: Re.1) each issued by way of conversion of Foreign Currency Convertible Notes (FCCN) 141.04 134.57

1,330.54 1,324.07

Subscribed

a) 524,394,020 (2007: 524,394,020) Equity shares of Re 1 (2007: Re.1) each 524.40 524.40

b) 341,742,940 (2007: 341,742,940) Equity shares of Re.1 (2007: Re.1) each issued by way of conversion of debentures

341.74 341.74

c) 323,157,240 (2007: 323,157,240) Equity shares of Re.1 (2007: Re.1) each issued through Global Depository Receipts

323.16 323.16

d) 141,044,117 (2007: 134,576,117) Equity shares of Re.1(2007: Re.1) each issued by way of conversion of Foreign Currency Convertible Notes (FCCN)

141.04 134.57

1,330.34 1,323.87

Add Forfeited shares (Rs.3,800) (2007: Rs.3,800)

1,330.34 1,323.87

Schedules annexed to and forming part of the Balance Sheet as at March 31, 2008

Of the above,

1. 14,788,880 (2007: 14,788,880) Equity shares were allotted under an agreement without payment being received in cash.

2. 62,308,110 (2007: 62,308,110) Equity shares were allotted as fully paid up by way of bonus shares by capitalisation out of

General Reserve and from Securities Premium Account.

3. Hinduja Automotive Limited ( formerly LRLIH Limited ), the holding company, holds 513,618,712 (2007: 513,618,712) Equity

Shares of Re.1 (2007: Re.1) each and 5,486,669 (2007: 5,486,669) Global Depository Receipts equivalent to 164,600,070

(2007: 164,600,070) Equity shares of Re. 1 (2007: Re.1) each.

4. Refer Note 8 to the Accounts for option on unissued shares.


66



(Rs. Millions)2008 2007

Schedule – 1.2 RESERVES AND SURPLUSCapital reserveAs per last Balance Sheet 8.95 8.95 Revaluation reserveAs per last Balance Sheet 229.55 239.45 Less Reduction on reconstruction of building – 4.12 Less Transfer to Profit and Loss Account(Refer Note 3.7 (b) to the Accounts) 5.78 223.77 5.78 229.55 Securities premium As per last Balance Sheet 8,715.80 5,647.29 Add Premium on issue of shares upon conversion of FCCN (Refer Note 8 to the Accounts) 187.57 8,903.37 3,068.51 8,715.80Debenture redemption reserveAs per last Balance Sheet 212.50 347.50 Less Transfer to Profit and Loss Account 50.00 162.50 135.00 212.50General reserveAs per last Balance Sheet 4,838.15 4,356.05 Add Transfer from Profit and Loss Account 1,000.00 1,000.00 Less Adjustment towards provision for liability for employee benefits – net of tax(Refer Note 12(a) to the Accounts) – 5,838.15 517.90 4,838.15 Surplus-balance in Profit and Loss Account 5,022.74 3,616.86

20,159.48 17,621.81

2008 2007Schedule – 1.3 SECURED LOANSDebentures 650.00 850.00 Loans from banks – Term loans 1,252.40 1,319.40 – Cash credit – 1,432.76

1,902.40 3,602.16

1 a) Debentures and term loans from banks aggregating Rs.1,902.40 million (2007: Rs. 2,169.40 million) are secured by a first charge created on certain immovable properties and movable assets of the Company

b) Cash credit facility is secured by a first charge on certain movable assets and goods-in-transit and book debts (excluding deferred receivables ) and also by a charge on the immovable properties subordinate to the existing charge created in favour of the lenders till 12th October, 2007.

2. a) The Company has powers to reissue debentures aggregating Rs. Nil (2007: Rs.200.00 million)

b) Debentures are to be redeemed at par in single/equal instalments, as stated below:

Debenture Series 2008 2007 Dates of RedemptionRs. Millions Rs. Millions

AL 4 133.33 266.67 10 January, 2008 and 2009AL 6 16.67 33.33 15 February, 2008 and 2009AL 9(A) – 50.00 15 October, 2007AL 11 500.00 500.00 17 September, 2008, 2009 and 2010

650.00 850.00 3. Loans include Rs. 517.27 million (2007: Rs. 1,632.76 million) due within 12 months.


67


(Rs. Millions)

2008 2007

Schedule – 1.4 UNSECURED LOANS

Loans and advances – From banks 5,607.12 1,086.75

– Deferred sales tax 1,325.37 1,480.33

Foreign Currency Convertible Notes (refer Note 8 to the Accounts) 40.12 234.74

6,972.61 2,801.82

Of the above, amount due within 12 months

Loans and advances – From banks 993.32 –

– Deferred sales tax 301.18 155.96

Schedule – 1.5 FIxED ASSETS

DescriptionGross Block (Cost/Valuation) Depreciation / Impairment Net Block

01.04.2007 Additions Deductions 31.03.2008 Upto31.03.2008

Upto31.03.2007

31.03.2008 31.03.2007

Land – Freehold 318.59 11.91 0.46 330.04 – – 330.04 318.59

– Leasehold 141.23 1,056.38 – 1,197.61 56.24 52.64 1,141.37 88.59

Buildings 3,123.58 382.91 31.21 3,475.28 1,081.28 980.87 2,394.00 2,142.71

Plant and machinery 18,546.00 1,962.27 718.37 19,789.90 10,991.30 10,440.68 8,798.60 8,105.32

Furniture,fittings and equipment 1,211.18 214.90 11.26 1,414.82 934.73 810.27 480.09 400.91

Vehicles and aircraft 1,394.10 18.88 54.02 1,358.96 325.30 276.77 1,033.66 1,117.33

Assets given on lease

Leasehold land 4.84 7.80 – 12.64 3.00 1.03 9.64 3.81

Buildings – 80.48 – 80.48 1.16 – 79.32 –

Plant and machinery – windmills 562.21 0.98 – 563.19 107.25 60.74 455.94 501.47

Furniture, fittings and equipment – 7.87 – 7.87 0.77 – 7.10 –

Intangible assets

Computer software

– Developed 248.14 – 3.46 244.68 226.40 204.19 18.28 43.95

– Acquired 250.42 154.77 – 405.19 213.49 165.01 191.70 85.41

Technical knowhow-acquired 401.68 142.04 – 543.72 227.96 139.44 315.76 262.24

26,201.97 4,041.19 818.78 29,424.38 14,168.88 13,131.64 15,255.50 13,070.33

Previous year 21,384.99 5,174.45 357.47 26,201.97 13,131.64 –

Capital work-in-progress 5,292.45 2,374.91

20,547.95 15,445.24

1. Certain Freehold and Leasehold land and buildings were revalued as at December 31, 1984.

2. Execution of lease deed and registration is in progress for ‘leasehold land’ at Uttrakhand. Amounts pertaining to a portion of leasehold land at Hosur, sublet during the year, have been reclassified.

3. A portion of buildings in Bhandara {estimated gross value Rs. 7.20 million (2007: Rs.7.20 million)} is on a land, title for which is yet to be transferred to the Company.

4. Cost / Valuation of Buildings as at March 31, 2008 includes:

a) Rs.0.34 million (2007: Rs.0.34 million) being cost of shares in Housing Co–operative Society representing ownership rights in residential flats and furniture and fittings there at.

b) Rs.13.24 million (2007: Rs.13.24 million) representing cost of residential flats including undivided interest in land.

5. Depreciation / amortisation / impairment for the year is disclosed in Schedules 2.3(C) and 2.4 to the Profit and Loss Account.

6. Cost of additions and capital work-in-progress includes borrowing cost Rs. 73.18 million (2007: Rs. 29.83 million) and other expenses in the course of construction Rs. 2.25 million (2007: Rs. Nil).


68



2008 2007Schedule 1.6 INVESTMENTS Nos. Rs. Millions Nos. Rs. MillionsI. Current investments – other than trade 1) Mutual Fund Units of Rs.10 each Birla cash plus institutional premium dividend 59,894,733 600.12 – – Birla sunlife cash manager IP dividend 29,996,127 300.05 – – HDFC cash management fund savings plan dividend 28,210,335 300.06 – – ICICI prudential liquid super IP dividend 80,013,259 800.17 – – Kotak liquid institutional premium dividend 16,359,194 200.04 – – LIC MF liquid fund dividend 18,218,261 200.04 – – Reliance liquidity fund dividend 34,996,240 350.07 – – 2) Mutual Fund Units of Rs. 1,000 each UTI Liquid Fund Cash Plan IP dividend 883,005 900.18 – – 3) Non convertible redeemable bonds of Rs. 1 million each IndusInd Bank Limited 1,140 1,140.00 1,140 1,140.00 ICICI Bank Limited 20 20.05 20 20.05 II. Long term investments A) Trade 1) Equity Shares of Rs. 10 each Arkay Energy (Rameswarm) Limited 600,000 6.00 600,000 6.00 Ashley Alteams India Private Limited 5,000 0.05 – – Automotive Coaches and Components Limited 1,410,664 11.23 1,410,664 11.23 Automotive Infotronics Private Limited 25,000 0.25 – – Hinduja Foundries Limited (formerly Ennore Foundries Limited) 3,424,449 143.06 3,424,449 143.06 Irizar – TVS Limited 1,400,000 14.00 1,400,000 14.00 2) Equity Shares of Rs.100 each Ashley Transport Services Limited 420,000 42.00 300,000 30.00 Gulf Ashley Motor Limited 354,000 35.40 354,000 35.40 3) Equity shares of Srilankan Rs. 10 each Lanka Ashok Leyland Limited 1,008,332 5.75 1,008,332 5.75 4) 6 % Cumulative Non–Convertible Redeemable Preference shares of Rs. 100 each Hinduja Foundries Limited 2,500,000 250.00 2,500,000 250.00 5) Ownership interest in share capital in Czech Koruna Avia Ashok Leyland Motors s.r.o. – ownership interest 40% 0.15 40% 0.15 6) Equity shares of UAE Dhirams of 1,000 each Ashok Leyland (UAE) LLC 2,450 30.26 2,450 30.26 7) Equity Shares of US Dollars 0.01 each Defiance Testing and Engineering Services, Inc. USA 49 69.11 – – 8) Equity shares of Euro 1 each Albonair GmbH 10,000 0.64 – – B) Other than trade 1) Equity shares of Rs. 10 each Ashley Airways Limited 1,470,000 14.70 – – Ashley Holdings Limited 1,250,000 12.50 750,000 7.50 Ashley Investments Limited 1,250,000 12.50 750,000 7.50 Ashok Leyland Project Services Limited 3,442,400 34.42 3,442,400 34.42 Chennai Willingdon Corporate Foundation (Cost Rs. 900) 100 100 Hinduja TMT Global Solutions Limited 2,029 0.40 – – Hinduja Ventures Limited (formerly Hinduja TMT Limited) 2,029 0.41 4,058 0.81 ICICI Bank Limited 24,231 1.05 24,231 1.05 IndusInd Bank Limited 28,581,764 577.25 29,031,764 511.67 2) Equity shares of Rs. 100 each, partly paid–up Adyar Property Holding Co. Limited (Rs. 65 paid up) 400 0.03 400 0.03 3) 2% Non–Cumulative Non–Convertible Redeemable Preference shares of Rs. 10 each Ashley Holdings Limited 3,250,000 32.50 – – Ashley Investments Limited 3,250,000 32.50 – –

6,136.94 2,248.88 Less Provision for diminution in value 37.94 37.94

6,099.00 2,210.94


69

4. Purchase and sales / redemption of investments during the year are as under :

Acquisition Disposals Description Nos. Cost

Rs. Millions Nos. Cost

Rs. Millions a) Units in schemes of mutual funds Birla Mutual Fund 1,784,568,335 17,876.18 1,694,677,475 16,976.01 Chola Mutual Fund 212,595,702 2,130.55 212,595,702 2,130.55 Deutsche Mutual Fund 171,215,044 1,715.49 171,215,044 1,715.49 DSP Merrill Lynch Mutual Fund 149,993 150.02 149,993 150.02 Franklin Templeton Mutual Fund 349,981 350.07 349,981 350.07 HDFC Mutual Fund 487,064,626 5,248.81 458,854,290 4,948.75 HSBC Mutual Fund 296,203,847 2,963.94 296,203,847 2,963.94 ING VYSYA Mutual Fund 118,077,419 1,181.34 118,077,419 1,181.34 JM Financial Mutual Fund 34,952,070 350.10 34,952,070 350.10 Kotak Mahindra Mutual Fund 337,023,005 4,121.15 320,663,811 3,921.11 LIC Mutual Fund 327,047,883 3,591.02 308,829,622 3,390.98 Principal Mutual Fund 95,013,923 950.21 95,013,923 950.21 Prudential ICICI Mutual Fund 974,446,678 9,744.84 894,433,419 8,944.67 Reliance Mutual Fund 265,769,457 3,465.81 230,773,216 3,115.74 SBI Mutual Fund 157,039,537 1,575.50 157,039,537 1,575.50 Standard Chartered Mutual Fund 300,062 300.12 300,062 300.12 Sundaram Mutual Fund 57,270,074 578.16 57,270,074 578.16 Tata Mutual Fund 26,369,961 3,433.80 26,369,961 3,433.80 UTI Mutual Fund 24,858,246 13,236.81 23,975,241 12,336.63 b) Equity Shares Associate companies Albonair GmbH 25,000 1.59 15,000 0.95 Ashley Airways Limited 1,470,000 14.70 – – Ashley Alteams India Private Limited 5,000 0.05 – – Ashley Holdings Limited 500,000 5.00 – – Ashley Investments Limited 500,000 5.00 – – Ashley Transport Services Limited 120,000 12.00 – – Automotive Infotronics Private Limited 25,000 0.25 – – Defiance Testing and Engineering Services, Inc. USA 100 141.05 51 71.94 Others IndusInd Bank Limited 2,700,000 129.17 3,150,000 63.60 c) Preference Shares in Associate companies Ashley Holdings Limited 3,250,000 32.50 – – Ashley Investments Limited 3,250,000 32.50 – – 5. During the year, the Company has been alloted 2,029 shares in HTMT Global Solutions Limited pursuant to demerger and transfer of IT / ITES

undertaking belonging to Hinduja TMT Limited. After demerger, there has been a reduction of face value of equity shares in Hinduja TMT Limited and simultaneous consolidation of face value with the result the Company holds 2,029 equity shares of Rs. 10 each. Hinduja TMT Limited has changed its name to Hinduja Ventures Limited.


Schedule 1.6 INVESTMENTS (CONTINuED)1. Investments are fully paid–up unless otherwise stated.2. Quoted Investments – Cost 1,882.23 1,816.65 – Market value 3,918.38 2,813.85 Unquoted Investments – Units in Mutual funds – cost/fair value 3,650.73 – – others – cost 603.98 432.23 3. The shares in the following companies can be disposed off / encumbered only with the consent of Banks / Financial Institutions

who have given loans to / subscribed to the Debentures of those companies: a) Automotive Coaches and Components Limited b) Hinduja Foundries Limited



70



(Rs.Millions)2008 2007

Schedule 1.7 INVENTORIESStores and spares 418.33 279.17 Consumable tools 196.00 149.88 Raw materials and components (including patterns and dies) 4,229.29 3,853.39 Work-in-progress 1,140.47 1,095.07 Finished/Trading goods 6,255.05 5,325.70

12,239.14 10,703.21

Schedule 1.8 SuNDRY DEBTORSTrade 3,742.11 5,194.43 Others 22.54 85.22

3,764.65 5,279.65 Less Provision 6.30 50.90

3,758.35 5,228.75 Of the above,1 Unsecured – Considered good 3,758.35 5,228.75 – Considered doubtful 6.30 50.90 2 Age analysis of debts – Outstanding for more than six months

(includes deferred receivables Rs. Nil (2007:Rs.1.16 million))

585.75 696.04

– Other debts 3,178.90 4,583.61 3 Debtors include Bills receivable 3,635.22 1,414.49


71

(Rs. Millions)

2008 2007

Schedule 1.9 CASH AND BANK BALANCES

Cash and stamps on hand 2.82 4.05

Cheques on hand and remittances in transit 0.98 1.37

Balances with scheduled banks

– Current account 381.11 867.18

– Deposit account 4,031.96 3,450.74

Balances with other banks

– Current account 60.57 12.86

– Deposit account 36.26 13.19

4,513.70 4,349.39

Balances with other banks

– Current account

ABSA Bank – South Africa – Denominated in South African Rand 49.17 4.16

Bank of America – Hong Kong – Denominated in US$ 0.01 –

Citi Bank – New York – Denominated in US$ 0.02 0.03

HSBC – Egypt – Denominated in US$ 0.03 0.06

Indian Oceanic International Bank – Mauritius – Denominated in Mauritius Rupees 5.20 4.65

National Bank of Sharjah – Sharjah – Denominated in Dirham 0.79 0.23

National Bank of Sharjah – Sharjah – Denominated in US$ 5.10 2.60

Standard Chartered Bank – Ghana – Denominated in Ghana Cedis 0.06 0.39

Standard Chartered Bank – Ghana – Denominated in US$ 0.04 –

State Bank of Bangladesh – Bangladesh – Denominated in Taka 0.15 0.74

– Deposit account

Bank of America – Hong Kong – Denominated in US $ 24.19 –


Maximum balance at any time during the year

– Current account

ABSA Bank – South Africa – Denominated in South African Rand 54.99 7.60


Citi Bank – New York – Denominated in US$ 0.03 0.04

HSBC – Egypt – Denominated in US$ 0.42 0.48

Indian Oceanic International Bank – Mauritius – Denominated in Mauritius rupees 8.24 4.65

National Bank of Sharjah – Sharjah – Denominated in Dirham 14.10 7.85

National Bank of Sharjah – Sharjah – Denominated in US$ 35.57 6.97


Standard Chartered Bank – Ghana – Denominated in US$ 0.50 0.11

State Bank of Bangladesh – Bangladesh – Denominated in Taka 0.74 2.68

– Deposit account





72




Schedule 1.10 LOANS AND ADVANCES7,443.54 5,718.07 Advances recoverable in cash or in kind or for value to be received

Balances with customs, port trust, central excise, etc. 486.49 617.37 Other receivables 454.15 507.61

8,384.18 6,843.05 Less Provision 142.81 147.26

8,241.37 6,695.79 Of the above,1. Unsecured – Considered good 8,241.37 6,695.79 – Considered doubtful 142.81 147.26 2. Due from a Director/Officers – At the end of the year 1.20 0.94 – Maximum amount due at any time during the year 1.54 1.30 3. Advances for capital items and investments 1,318.38 1,702.13 4. Interest accrued on investments 53.40 53.48

Schedule 1.11 CuRRENT LIABILITIES AND PROVISIONSLiabilitiesAcceptances 4,425.50 4,199.76 Creditors for materials and expenses – Micro and Small enterprises 663.55 347.79 – Others 12,262.03 9,789.33 Other liabilities 1,834.77 2,127.30 Interest accrued but not due on loans 81.24 52.07

19,267.09 16,516.25 Provisions Current income tax-net – 124.56Fringe benefit tax-net 1.30 1.30 Proposed dividend 1,997.71 – Corporate dividend tax on proposed dividend 339.51 – Product warranties 502.65 357.29Employee benefits 611.14 559.15

3,452.31 1,042.30 22,719.40 17,558.55

Of the above,1. Provision made during the year – Product warranties 145.36 83.38 – Employee benefits 51.99 324.502. Other liabilities include – Unclaimed matured fixed deposit and interest accrued thereon 0.08 0.47 – Unclaimed dividends 21.95 963.32 – Unclaimed debenture interest – 1.533. Creditors for materials and expenses include – Gratuity 98.42 212.034. Provision for employee benefits relates to – Compensated absences 539.61 482.26 – Other defined benefit plans 71.53 76.89

Schedule 1.12 MISCELLANEOuS ExPENDITuRE (to the extent not written off or adjusted)Debenture issue/loan raising expenses 69.17 2.57Premium on prepayment of borrowings 2.95 11.85Compensation under voluntary retirement scheme 150.80 229.76

222.92 244.18


73

Schedules annexed to and forming part of the Profit and Loss Account for the year ended March 31, 2008

Unit ofMeasurement

2008 2007

Volume Rs. Millions Volume Rs. Millions

Schedule 2.1 SALES

Commercial vehicles Nos 83,307 81,016.63 83,094 77,760.03

Engines and gensets Nos 11,757 2,354.17 8,202 1,525.77

Spare parts and others 7,912.43 5,468.41

91,283.23 84,754.21

Less Commission, rebate and discounts 1,946.33 1,707.04

89,336.90 83,047.17

(Rs.Millions)

2008 2007

Schedule 2.2 OTHER INCOME

Income from current investments

Dividend 19.84 65.53

Interest 104.93 110.34

124.77 175.87

Income from long term investments

Dividend – Trade 3.54 96.82

– Others 19.31 2.03

22.85 98.85

Lease Rent 77.50 36.60

Profit on disposal of fixed assets - net 41.90 90.33

Profit/(loss) on disposal of investments - net

– Current 0.03 255.05

– Long term 333.93 (4.41)

333.96 250.64

Miscellaneous income 139.01 55.74

739.99 708.03

Of the above,

Tax deducted at source from income on:

– Trade investments 0.35 0.45

– Other investments 23.70 25.70


74




Schedule 2.3 MANuFACTuRING AND OTHER ExPENSESA Materials

Consumption of raw materials and components - net 57,480.59 54,081.14 Less Scrap sales 504.95 385.10

56,975.64 53,696.04 Purchase of trading goods 1,635.27 1,241.79

B Employees’ remuneration and benefits Salaries, wages and bonus 4,984.56 4,442.28 Contribution to provident, gratuity and other funds 506.40 534.74 Welfare expenses 670.76 611.47

6,161.72 5,588.49 Less Transfer from General Reserve – 781.54

6,161.72 4,806.95 C Other expenses

Power and fuel 452.78 454.35 Consumption of stores and tools 412.75 378.88 Repairs and maintenance – Buildings 169.28 131.50 – Machinery 574.84 416.97 Rent 130.47 112.56 Rates and taxes 11.63 275.95 Insurance 39.81 60.56 Selling and administration expenses – net 3,315.36 3,250.43 Research and development 305.66 294.85 Provision for diminution in value of investments written back - net – (168.13) Bad and doubtful debts/advances provided/written–off – Net of recovery/write back 30.25 8.16

5,442.83 5,216.08 D Movement in value of stock of finished/

trading goods and work-in-progress Opening stock 6,420.77 5,930.97 Closing stock 7,395.52 6,420.77 (Increase)/Decrease (974.75) (489.80)

E Excise duty in value of finished/trading goodsIncrease/(Decrease) 17.30 185.10

69,258.01 64,656.16 F Less Expenses capitalised 6.67 1.25

69,251.34 64,654.91

1. Rent includes amortisation of cost/value of leasehold assets as reduced by transfer from Revaluation reserve (Refer Note 3.7(b) to the Accounts) 4.88 3.03 2. Selling and administration expenses include Directors’ sitting fees 1.54 2.08


75


(Rs. Millions)

2008 2007

Schedule 2.4 DEPRECIATION, AMORTISATION AND IMPAIRMENT

Buildings 117.75 85.28

Plant and machinery 1,220.37 1,064.83

Furniture, fittings and equipment 135.12 112.32

Vehicles and aircraft 97.81 76.97

Assets given on lease

Buildings 1.16 –

Plant and machinery – windmills 46.51 38.63

Furniture, fittings and equipment 0.77 –

Intangible assets

Computer software

– Developed 22.21 32.29

– Acquired 48.48 38.68

Technical know-how – Acquired 88.52 61.83

1,778.70 1,510.83

Less Transfer from Revaluation reserve

(Refer Note 3.7(b) to the Accounts)

5.09 5.09

1,773.61 1,505.74

Of the above,

Impairment of Plant and machinery 29.69 16.97

Impairment of Buildings 15.20 –

2008 2007

Schedule 2.5 FINANCIAL EXPENSES

Interest 688.19 226.29

Others 148.11 91.91

836.30 318.20

Less Interest earned on bills receivable, deposits and other accounts 214.67 160.94

Cash discounts earned 51.05 74.11

265.72 235.05

Borrowing cost capitalised 73.18 29.83

497.40 53.32

Of the above,

1. Debenture issue/loan raising expenses amortised 2.34 0.27

2. Premium on prepayment of borrowings amortised 8.90 30.70

3. Tax deducted at source from interest earned 13.67 18.32

(Rs. Millions)


76


Notes to the Accounts for the year ended March 31, 2008

Unit of Measurement

2008 2007

1. Information regarding goods manufactured, importsand foreign currency transactions

1.1 Installed capacities – Two shifts(as certified by the Managing director)Commercial vehicles Nos. 84,000 84,000

1.2 Production Commercial vehicles Nos. 84,006 83,549 Engines@ and gensets Nos. 12,652 8,294 @ Engines manufactured against spare capacity of commercial vehicles

1.3 Finished / trading goods and work-in-progress Rs. Millions Rs. MillionsOpening stockCommercial vehicles Nos. 6,076 4,415.96 5,652 3,752.77 Engines and gensets Nos. 303 46.31 222 35.31 Parts for sale – Bought out finished 609.75 508.46 – Works made 253.68 197.13 Work-in-progress 1,095.07 1,437.30 Closing stock Commercial vehicles Nos. 6,748 4,851.40 6,076 4,415.96 Engines and gensets Nos. 1,168 69.83 303 46.31 Parts for sale – Bought out finished 996.23 609.75 – Works made 337.59 253.68 Work-in-progress 1,140.47 1,095.07 Capitalised/transferred for internal use and others – Commercial vehicles Nos. 27 31 – Engines and gensets Nos. 30 11

1.4 Consumption of raw materials and components Plates, sheets and angles Tonnes 54,063 1,704.27 66,981 1,930.93 Bars Tonnes 531 48.35 386 18.51 Steel tubes Metres 30,468 1.62 2,807 0.65 Tyres, tubes and flaps Sets 726,909 5,004.22 755,713 5,247.29 Forgings and castings 5,411.06 5,397.40 Finished and other items 45,311.07 41,486.36

57,480.59 54,081.14 Of the above – Imported items 2,129.76 1,815.29

3.71% 3.36% – Indigenous items 55,350.83 52,265.85

96.29% 96.64%1.5 Imports (c.i.f.)

Raw materials 1,637.24 1,370.07 Trading goods and others 65.57 14.03 Spares and tools 65.66 61.56 Capital goods 1,361.72 2,435.24

3,130.19 3,880.90


77

2008 20071.6 Expenditure remitted in foreign currency

Royalty 1.74 16.12 Technical knowhow 409.70 257.57 Interest and commitment charges 260.79 9.14 Commission paid on sales 470.84 605.03 Research and development 136.48 107.91 Travel 33.59 51.03 Consultancy 243.13 57.87 Other expenses 460.96 191.40

2,017.23 1,296.06 1.7 Earnings in foreign currency

Export – FOB value 7,560.48 6,292.15 Interest 141.91 63.77 Others (Freight, insurance, dividend and commission earned) 425.32 226.62

8,127.71 6,582.54 1.8 Dividend remitted in foreign currency

Number of non-resident shareholders 1 1Number of shares on which dividend was remitted 441,166,680 441,166,680 Dividend remitted during the year relating to previous year 661.75 529.40

2. Information regarding managerial remuneration2.1 Remuneration to Managing Director

Salary 8.67 7.80 Contribution to provident and superannuation fund 1.65 1.48 Commission 5.78 5.20 Perquisites 5.91 5.73

22.01 20.21 Perquisites include amounts evaluated as per Income tax Rules in respect of certain items.

2.2 Computation of net profits under Section 198/349of the Companies Act, 1956 Profit before tax 6,381.50 6,045.06 Add – Depreciation/impairment as per books 1,773.61 1,505.74 – Directors’ remuneration 23.55 22.29 – Amortisation of expenses relating to raising /

repayment of loans

11.24

30.97 8,189.90 7,604.06

Deduct – Depreciation as per Section 350 of the Act 1,759.86 1,490.62 – Capital profit on sale of fixed assets and

investments

346.06

269.65 – Expenses relating to raising/repayment of loans 67.84 2.47 – Reversal of provision for dimunition in value of

investments –

168.13

Net Profit 6,016.14 5,673.18 The total remuneration as stated in 2.1 above is within the maximum permissible limit under the Act.


(Rs. Millions)


78


2008 20073. Other financial information3.1 Capital commitments (net of advances) not

provided for (including Rs. 729.48 million (2007 : Rs. 582.13 Million) in respect of Intangible assets)

6,885.63

3,281.57 3.2 Contingent liabilities

a) Guarantees 663.94 66.65 b) Partly paid shares 0.01 0.01 c) Claims (net) against the company not

acknowledged as debt – Sales tax

52.81

15.18 – Others 207.83 125.44 d) Bills discounted 10,029.52 7,806.01

3.3 Interest charge ona) Debentures 61.87 88.81 b) Fixed loans 358.75 52.41

3.4 Auditors’ remuneration Included under Selling and administration expenses For financial audit 3.00 2.40 For cost audit 0.15 0.24 For taxation matters 0.55 0.44 For company law matters 0.03 0.03 For other matters 2.77 3.04 Expenses reimbursed 0.48 1.04

3.5 Total Research and development costs charged to the Profit and Loss account (including amount shown under Schedule 2.3)

1,085.21

791.30

3.6 a) Net exchange difference debited / (credited) to Profit and Loss account

(476.33)

(70.26)

b) Of the above, unrealised gains / loss debited / (credited) to Profit and Loss account

(112.70)

(29.97)

3.7 a) In respect of the following fixed assets useful lives lower than those derived from the rates specified in Schedule XIV to the Companies Act, 1956 have been reckoned in computing depreciation / amortisation for the year.

Useful lives Buildings Revalued buildings are depreciated over the balance useful life as determined by the valuers Plant and machinery Assets subjected to impairment – revised carrying amount over its remaining useful life Windwills 12 Furniture and fittings and equipment Furniture and fittings 8 Office equipment 8 Data processing system 5 Vehicles Cars and motorcycles 3 Trucks and buses 5 Intangible assets Computer software – Developed 5 – Acquired 5 Technical knowhow – acquired 5 / 6b) Depreciation for the year computed on revalued assets over the balance useful life on straight line method includes a net charge of

Rs.5.78 million (2007:Rs. 5.78 million) [Rs. 0.69 million (2007: Rs. 0.69 million) in Schedule 2.3 and Rs. 5.09 million (2007: Rs.5.09 million) in Schedule 2.4] being the excess over the depreciation computed by the method followed by the Company prior to revaluation and the same has been transferred from Revaluation Reserve to the Profit and Loss Account.


(Rs. Millions)


79

2008 2007 4. Earnings per sharea) Basic earnings per share

Profit after taxation as per Profit and Loss account (in Rs. million) (A) 4,693.10 4412.86Weighted average number of equity shares outstanding (B) 1,328,598,817 1,303,890,649Basic earnings per share (Face value Re. 1) (in Rs.) (A/B) 3.53 3.38Profit before extraordinary items net of tax (in Rs. million) (C) 4,777.18 4,499.61Basic earnings per share (Face value Re. 1) excluding extraordinary item net of tax (in Rs.) (C/B) 3.60 3.45

b) Diluted earnings per shareProfit after taxation as per Profit and Loss account (in Rs. million) 4,693.10 4,412.86 Add Interest and other costs net of tax (3.20) (5.28)Adjusted profits (in Rs. million) (D) 4,689.90 4,407.58 Weighted average number of potential equity shares on conversion of FCCN (E) 1,470,000 7,938,000 Weighted average number of equity shares (F= B+E) 1,330,068,817 1,311,828,649 Diluted earnings per share (Face value Re.1)(in Rs.) (D/F) 3.53 3.36 Diluted earnings per share (Face value Re. 1) excluding extraordinary items net of tax (in Rs.)

3.59

3.43

5. Composition of net deferred tax liability Rs. MillionsDeferred tax liabilities – Depreciation/Research and development expenditure 2,673.59 2,138.48 – Other timing differences 24.22 4.98 Deferred tax assets – Voluntary retirement scheme compensation (32.87) (35.13) – Other timing differences (126.74) (139.03)

2,538.20 1,969.29 6. Segment information

The Company is principally engaged in a single business segment viz., Commercial vehicles and related components and operates in one geographical segment as per Accounting Standard 17 on ‘Segment Reporting’.

7. Related party disclosure a) List of parties where control exists Holding company Hinduja Automotive Limited (formerly LRLIH Limited ), United Kingdom Machen Holdings SA (Holding Company of Hinduja Automotive Limited) Machen Development Corporation, (Holding Company of Machen Holdings SA) Amas Holdings SA (Holding Company of Machen Development Corporation)b) Other related parties with whom transactions have taken place during the year Fellow subsidiary Hinduja Foundries Limited, a company under same management Associates Albonair GmbH, Germany Ashley Airways Limited Ashley Alteams India Private Limited Ashley Holdings Limited Ashley Investments Limited Ashley Transport Services Limited Ashok Leyland Project Services Limited Ashok Leyland (UAE) LLC, Ras Al Khaimah, UAE Automotive Coaches and Components Limited Automotive Infotronics Private Limited Avia Ashok Leyland Motors s.r.o, Czech Republic



80


Defiance Testing and Engineering Services, Inc. USA Gulf Ashley Motor Limited Irizar TVS Limited Lanka Ashok Leyland Limited, Sri Lanka Key management personnel Mr. R. Seshasayee, Managing Director


(c) Material Transactions with related parties (i) Purchase of raw materials and components Hinduja Foundries Limited 2,184.52 2,743.15 Automotive Coaches and Components Limited 911.04 992.02 Irizar TVS Limited 634.16 477.68 Other associate companies – 5.41 (ii) Sales Lanka Ashok Leyland Limited 1,090.63 1,228.49 Gulf Ashley Motor Limited 515.98 549.03 (iii) Other expenditure Lanka Ashok Leyland Limited 61.15 50.78 Avia Ashok Leyland Motors s.r.o. 10.76 – Ashok Leyland Project Services Limited 3.35 22.50 (iv) Expenses recoverable to/(from) Defiance Testing & Engineering Services Inc. (62.23) – Lanka Ashok Leyland Limited (50.04) – Other associate companies (11.70) – Gulf Ashley Motors Limited (1.99) (2.01) Hinduja Automotive Limited 1.58 0.92 (v) Interest and other income Avia Ashok Leyland Motors s.r.o. 111.10 39.78 Defiance Testing & Engineering Services Inc. 35.66 – Other associate companies 10.01 14.77 (vi) Dividend income Hinduja Foundries Limited – 92.31 Lanka Ashok Leyland Limited 3.54 4.51 Other associate companies – 1.71 (vii) Dividend Hinduja Automotive Limited 1,017.33 1,191.15 Managing Director 0.02 0.03 (viii) Remuneration to key management personnel Refer 2.1 of Notes to the Accounts (ix) Guarantees given Avia Ashok Leyland Motors s.r.o. 281.75 – Ashok Leyland (UAE) LLC 273.13 – (x) Sale of fixed assets Hinduja Foundries Limited – 7.79 (xi) Acquisition/disposal of investments Associate companies 171.75 (130.59) (Refer Note 4 in Schedule 1.6) (xii) Advance given for share capital Ashley Alteams India Private Limited 27.58 – Automotive Infotronics Private Limited 0.92 –



81


(xiii) Loans given Avia Ashok Leyland Motors s.r.o. 1,185.90 – Defiance Testing and Engineering Services, Inc. 544.05 – Ashok Leyland (UAE) LLC 176.33 – Albonair GmbH 46.73 – (xiv) Outstanding balances – Debtors Lanka Ashok Leyland Limited 125.24 – Gulf Ashley Motors Limited 24.07 55.70 Other associate companies 15.28 0.88 – Loans and advances (including interest accrued) Avia Ashok Leyland Motors s.r.o 2,616.02 1,582.96 Defiance Testing and Engineering Services Inc. 623.02 – Other associate companies 296.13 89.50 Machen Development Corporation 206.56 206.56 Key management personnel 0.24 0.31 – Creditors for materials and expenses Hinduja Foundries Limited 122.69 204.39 Automotive Coaches and Components Limited – 43.15 Other associate companies 46.50 9.18 Key management personnel 6.08 5.20 – Financial guarantees Avia Ashok Leyland Motors s.r.o 281.75 – Ashok Leyland (UAE) LLC 273.13 – Automotive Coaches and Components Limited 66.50 66.50 (xv) Advances to associate companies in the nature of loan (excluding interest accrued) included in (xiv) above Avia Ashok Leyland Motors s.r.o 2,611.81 1,582.96 Defiance Testing and Engineering Services Inc. 541.62 – Ashok Leyland (UAE) LLC 183.89 6.43 Albonair GmbH 48.97 – – Maximum loan (excluding interest accrued) outstanding during the year from associate companies Avia Ashok Leyland Motors s.r.o 2,611.81 1,582.96 Defiance Testing and Engineering Services Inc. 551.88 – Ashok Leyland (UAE) LLC 183.89 6.43 Albonair GmbH 48.97 – Ashley Holdings Limited – 16.20 Ashley Investments Limited – 17.80 Ashok Leyland Project Services Limited – 10.00



82


8. The Company raised US$ 100 million (notes of US $ 1000 each) during April 2004 by way of Foreign currency convertible notes (FCCN) bearing interest rate of 0.5% per annum. Note holders have an option to convert each note of US$ 1000 into 1,470 shares of Re. 1 each at the prevailing conversion price of Rs.30. During the year, 6,468,000 (2007: 102,283,541) equity shares were allotted consequent to conversion of 4,400 (2007: 71,900) FCCN aggregating to US$ 4.40 million (2007: US$ 71.90 million). Cumulatively upto March 31, 2008, holders of FCCN aggregating to US$ 99.00 million have exercised their option and were allotted 141,044,117 equity shares. The balance notes unless previously converted, redeemed or repurchased and cancelled, will be redeemed on April 30, 2009 at 100% of their principal value.

9. The Company has entered into operating lease arrangements with various parties for leasing out windmills. Ashok Leyland Project Services Limited, an associate company, through its wind energy division, maintains these assets and has guaranteed the following minimum lease rentals:


(a) Receivable within one year from the end of the year 77.00 55.00(b) Receivable between one year and five years 365.00 255.00(c) Receivable after five years 293.00 285.00(d) Amount recognized during the year 77.50 36.60

10. In terms of the FCCN issue and on the basis of the legal opinion obtained in this regard, the note holders, who have exercised their option to convert the notes upto the record date for the dividend that may be declared for the year ended March 31, 2008, will be entitled to the said dividend. Accordingly, the Company has provided for the proposed dividend (including corporate dividend tax thereon) on the basis that all the FCCNs remaining outstanding as of March 31, 2008 would get converted into equity shares before the record date.

11. Derivatives

The Company uses derivative financial instruments such as forward contracts, currency swap to hedge certain currency exposures, present and anticipated, denominated mostly in US dollars, EURO, Japanese YEN and Great Britain Pounds. Generally such contracts are taken for exposures materialising in the next six months. The Company actively manages its currency/interest rate exposures through a centralised treasury division and uses derivatives to mitigate the risk from such exposures. The use of derivative instruments is subject to limits and regular monitoring by appropriate levels of management. The limits and monitoring systems are periodically reviewed by management and the Board. The market risk on derivatives is mitigated by changes in the valuation of underlying assets, liabilities or transactions, as derivatives are used only for risk management.



83

The information on derivative instrument is as follows:A] Dervative instruments outstandings: (Millions)Details Buy/ Sell Amount in foreign currency

2008 2007Foreign Exchange Contracts – USD/INR Sold $62.50 $31.89 – USD/INR Bought $8.63 $10.07 – EUR/USD Bought €6.28 €2.62 – GBP/USD Bought £1.35 £0.50 – USD/JPY Sold $15.17 $2.91 – USD/CHF Sold $0.83 – Currency Swaps – USD/JPY Bought $85.00 $20.00 Refer Note 5 in Significant Accounting Policies for accounting treatment of such derivatives

B] Foreign currency exposure not hedged by derivative instrument: (Millions)

Details Amount (Foreign currency) Amount Rs.2008 2007 2008 2007

Amount receivable on account of sale of goods, loans, deposits, etc.

$97.98

$68.03

3,930.92

2,957.26

Others Others 49.42 37.93 Amount payable on account of purchase of goods, loans, interest etc. $169.90 $97.55 6,816.27 4,240.50

€46.51 €39.70 2,950.48 2,297.44 ¥800.20 ¥839.70 322.98 309.41

£1.41 £2.61 112.35 222.13 CHF 5.55 CHF 0.20 224.22 7.01



84


12. Employee Benefits

a) In the previous year, the Company had determined the liability for Employee benefits as at March 31, 2007 in accordance

with the revised Accounting Standard 15 – and adjusted Rs. 517.90 million (net of tax of Rs. 263.64 million) relating to

the period upto March 31, 2006 from the opening General Reserve, in terms of the said Standard.

b) Defined benefit plans – As per Acturial valuation on March 31, 2008 (Rs. Millions)

Gratuity Compensated absences

Other defined benefit plans

2008 2007 2008 2007 2008 2007

A Expense recogonised in the statement of Profit & Loss

Account for the year ended March 31, 2008

1 Current service cost 84.82 77.02 57.54 57.23 10.57 14.25

2 Interest cost 93.52 77.84 36.58 32.80 5.55 4.55

3 Expected return on plan assets (85.60) (69.54) – – – –

4 Net actuarial (gain) / loss recognised during the year 6.39 126.71 14.03 0.60 (6.42) 7.03

5 Total expense 99.13 212.03 108.15 90.63 9.70 25.83

B Actual return on plan assets

1 Expected return on plan assets 85.60 69.54 – – – –

2 Actuarial gain/ (loss) on plan assets 27.53 20.49 – – – –

3 Actual return on plan assets 113.13 90.03 – – – –

C Net Asset/ (Liability) recognised in the Balance Sheet

1 Present value of the obligation 1,423.77 1,282.38 539.61 482.26 71.53 76.89

2 Fair value of plan assets 1,325.34 1,070.35 – – – –

3 Funded status [surplus/ (deficit)] (98.42) (212.03) (539.61) (482.26) (71.53) (76.89)

4 Unrecognised past service cost – – – – – –

5 Net Asset/(Liability) recognised in the Balance Sheet (98.42) (212.03) (539.61) (482.26) (71.53) (76.89)

D Change in Present value of the Obligation during the year

1 Present value of obligation as at beginning of the year 1,282.38 1,074.15 482.26 428.49 76.89 62.62

2 Current service cost 84.82 77.02 57.54 57.23 10.58 14.25

3 Interest cost 93.52 77.84 36.58 32.80 5.55 4.55

4 Benefits paid 70.87 93.83 50.80 36.86 15.07 11.56

5 Actuarial (gain) / loss on obligation 33.92 147.20 14.03 0.60 (6.42) 7.03

6 Present value of obligation as at end of the year 1,423.77 1,282.38 539.61 482.26 71.53 76.89

E Change in Assets during the year

1 Fair value of plan assets as at beginning of the year 1,070.35 874.16 – – – –

2 Expected return on plan assets 85.60 69.54 – – – –

3 Contributions 212.74 199.99 – – – –

4 Benefits paid 70.87 93.83 – – – –

5 Actuarial gain / (loss) on plan assets 27.53 20.49 – – – –

6 Fair value of plan assets as at end of the year 1,325.35 1,070.35 – – – –

F Experience adjustments in

1 Plan liabilities – loss/(gain) 33.92 147.20 26.85 1.01 (6.42) 7.03

2 Plan assets – loss/(gain) (27.53) (20.49) – – – –



85

G Major categories of plan assets as a percentage of total

plan

100% Unfunded Unfunded

Qualifying

insurance policy

H Actuarial Assumptions

1 Discount rate

2 Salary escalation

3 Expected rate of return on plan assets

2008

8.0%

6.3%

8.0%

2007

7.5%

5.0%

7.5%

c) Gratuity is administered through Group gratuity scheme with Life Insurance Corporation of India. The expected return on

plan assets is based on market expectation at the beginning of the year, for the returns over the entire life of the related

obligation.

d) During the year the Company has recognised the following amounts in the Profit and Loss Account in Schedule 2.3 B

– Salaries and wages include compensated absences Rs. 108.15 million (2007: Rs. 90.63 million) and other defined

employee benefits Rs. 0.43 million ( 2007: Rs. 0.40 million)

– Contribution to provident, gratutiy and other funds include Provident fund and family pension Rs. 264.67 million

(2007: Rs. 226.65 million), super annuation Rs.71.13 million (2007: Rs. 54.05 million), gratuity fund Rs.99.13

million (2007: Rs. 212.03 million) and other funds Rs.69.03 million (2007 Rs. 42.01 million)

– Welfare expenses include contribution to employee state insurance plan Rs. 2.64 million (2007: Rs. 2.17 million) and

other defined employee benefits Rs. 9.27 million (2007: Rs. 25.43 million).

e) In the previous year, the Company had adopted the Revised Accounting Standard 15 on Employee benefits. Accordingly,

the comparitives for four prior years have not been disclosed.

13. The information required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been

determined to the extent such parties have been identified on the basis of information available with the Company. There are

no over dues to parties on account of principal amount and / or interest and accordingly no additional disclosures have been

made.

14. Figures for the previous year have been regrouped / amended wherever necessary.

Signatures to Statement of Significant Accounting Policies, Schedules and Notes to the Accounts.




May 08, 2008Chennai

Gratuity Compensated absences

Other defined benefit plans


86


87

Balance Sheet Absract and Company’s General Business Profile

I. Registration Details

Registration No. State Code

Balance Sheet Date

Date Month Year

II. Capital Raised during the year (Amount in Rs. Thousands) (See note below)

Public Issue Rights Issue

Bonus Issue Private Placement

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

Total Liabilities Total Assets

Sources of Funds

Paid-up Capital Reserves & Surplus

Secured Loans Unsecured Loans

Deferred Tax Liability

Application of Funds

Net Fixed Assets Investments

Net Current Assets Misc. Expenditure

Accumulated Losses

IV. Performance of Company (Amount in Rs. Thousands)

Turnover Total Expenditure

Profit/LossbeforeTax Profit/LossafterTax

Earnings Per Share in Rs. DIvidend Rate %

V. Generic Names of Three Principal Products of Company

Item Code No. (ITC Code) Product Description

Note:

SharecapitaloftheCompanyhasincreasedduringtheyearbyRs.6,468,000/- due to allotment of 6,468,000 equity shares on conversion of FCCNs (Refer Note 8 in Notes to the Accounts).

3 1 0 3 2 0 0 8

+ +

0 0 0 1 0 5

N I L

N I L

5 5 6 2 2 4 2 8

1 3 3 0 3 3 8

1 9 0 2 4 0 0

2 5 3 8 1 9 5

2 0 5 4 7 9 5 0

6 0 3 3 1 6 4

N I L

7 8 0 3 1 2 2 4

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4 6 9 3 1 0 4

1 5 0

+ – + –


K. SRIDHARAN A.R. CHANDRASEKHARAN R. SESHASAYEE R. J. SHAHANEYChiefFinancialOfficer ExecutiveDirector& ManagingDirector Chairman CompanySecretary

May 08, 2008Chennai


Sl.

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Nam

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88


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94

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