harita seating systems limited · harita seating systems limited notice to the shareholders notice...

HARITA SEATING SYSTEMS LIMITED

Tenth Annual Report 2005-2006

1


Board of Directors

H Lakshmanan, Chairman

S I Jaffar Ali

C Narasimhan

Martin Grammer

President

S Thiagarajan

Secretary and Compliance Officer

A C Padmaja

Bankers

State Bank of India

Industrial Finance Branch

Anna Salai, Chennai 600 002

Shares listed with:

The Madras Stock Exchange Ltd.

The Bangalore Stock Exchange Ltd.

Auditors:

Sundaram & Srinivasan

Chartered Accountants,

23, Sir C.P. Ramaswamy Road,

Alwarpet, Chennai 600 018.

Registered Office:

“Jayalakshmi Estates”

No.29 (Old No.8)

Haddows Road

Chennai 600 006

Tel.: 044-28272233

Fax: 044-28257121

Works:

Hosur - Thally Road

Belagondapalli

Krishnagiri District

Tamilnadu

PIN 635 114

Tel.: 04347-233445

Fax: 04347-233460

Plot A2 MIDC Industrial area

Ranjangaon, Koregaon village,

Shirur taluk, Pune District

Maharashtra

PIN - 412210

Tel.: 02138-560742

Contents Page No.

Financial highlights 2

Notice to the shareholders 3

Directors’ report to the shareholders 5

Management Discussion and

Analysis Report 10

Report on Corporate Governance 14

Autitors’ report to the Shareholders 25

Balance Sheet 28

Profit and Loss Account 29

Schedules 30

Notes on accounts 36

Cash flow statement 47

General business profile 49

2


Financial Highlights(Rs.in lakhs)

Year 2000 2001 2002 2003 2004 2005 2006

Profit & Loss Account

Sales 5983.67 6937.37 6025.27 7873.25 9202.06 11798.82 13736.82

Other income 40.95 40.47 38.45 48.71 90.81 117.93 192.77

Total income 6024.62 6977.84 6063.72 7921.96 9292.87 11916.75 13929.59

Gross profit before

interest,depreciation & tax 751.32 778.99 490.58 730.09 894.03 987.92 1292.85

Depreciation 153.11 138.30 164.11 174.99 212.76 269.39 315.28

Profit before Interest & tax 598.21 640.69 326.47 555.10 681.27 718.53 977.57

Interest 102.87 76.55 39.97 10.11 0.35 0.28 31.78

Profit before taxation 495.34 564.14 286.50 544.99 680.92 718.25 945.79

Profit after taxation 292.34 357.14 182.06 341.80 437.69 451.78 638.79

Balance Sheet

Net fixed assets 1025.52 1226.41 1172.41 1329.35 1564.07 1878.80 2337.96

Investment 0.10 0.08 0.06 0.06 661.12 367.96 407.87

Net Current Assets 1202.43 1167.56 1066.82 924.23 305.29 598.89 1420.19

Miscellaneous expenses 2.78 - - - - - -

Total 2230.83 2394.05 2239.29 2253.64 2530.48 2845.65 4166.02

Share Capital 388.45 388.45 388.45 388.45 388.45 388.45 388.45

Reserves & Surplus 987.31 1236.89 1227.27 1464.20 1767.96 2082.72 2522.17

Net Worth 1375.76 1625.34 1615.72 1852.65 2156.41 2471.17 2910.62

Loan Funds 855.07 768.71 521.02 265.25 240.10 220.04 1091.96

Deferred tax liablity - - 102.55 135.74 133.97 154.44 163.44

Total 2230.83 2394.05 2239.29 2253.64 2530.48 2845.65 4166.02

Earnings per share (Rs.) 7.53 9.19 4.69 8.92 11.20 11.75 16.44

Dividend per share (Rs.) 2.50 2.50 2.50 2.50 3.00 3.20 4.50

Book value per share (Rs.) 35.35 41.84 41.59 47.69 55.51 63.62 74.93

Return on capital employed % *(ROCE) 28.0 28.2 15.2 27.8 30.4 28.4 25.8

Return on net worth % (RONW) ** 22.8 23.8 11.2 19.7 21.8 19.5 23.7

Fixed asset turnover (No. of times) # 6.05 6.16 5.02 6.29 6.36 6.85 6.52

Working capital turnover (No. of times) @ 5.45 5.85 5.39 7.91 14.97 26.10 13.61

Gross profit as % of total income 12.5 11.2 8.1 9.2 9.6 8.3 9.3

Profit before tax as % of total income 8.2 8.1 4.7 6.9 7.3 6.0 6.8

* ROCE is profit before interest and taxation divided by average networth plus loan funds.

** RONW is profit after tax divided by average networth.

# Fixed assets turnover is sales divided by average net fixed assets as at the end of the year.

@ Working capital turnover is sales divided by average net current assets as at the end of the year.

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Notice to the shareholders

NOTICE is hereby given that the Tenth Annual General

Meeting of the shareholders of the company will be held

at Kasturi Srinivasan Hall (Mini Hall),‘The Music Academy’,

New No.168 (Old No.306), TTK Road, Chennai 600 014

on Monday, the 18th September 2006 at 10.15 a.m. to

transact the following business:

ORDINARY BUSINESS

1. To consider and if thought fit to pass with or without

modification the following resolution as an ordinary

resolution:

RESOLVED THAT the audited balance sheet as at

31st March 2006 and the profit and loss account of

the company for the year ended on that date,

together with the directors’ report and the auditors’

report thereon as presented to the meeting be and

the same are hereby approved and adopted.



resolution:

RESOLVED THAT pursuant to the recommendation of

the board of directors of the company, a dividend

of Rs. 4.50 per share on 38,84,520 equity shares of

Rs. 10/- each fully paid up absorbing a sum of

Rs. 174.80 lakhs be and is hereby declared for the

year ended 31st March 2006 and the same be paid

to those shareholders whose name appear in the

register of members of the company as at the close

of 13th September 2006.



resolution:

RESOLVED THAT Mr S I Jaffar Ali, director, who retires

by rotation and being eligible for re-appointment,

be and is hereby re-appointed as a director of the

company.



resolution:

RESOLVED THAT the retiring auditors, Messrs. Sundaram

& Srinivasan, Chartered Accountants, Chennai be

and are hereby re-appointed as auditors of the

company to hold office from the conclusion of this

meeting till the conclusion of the next annual general

meeting of the company on such remuneration as

may be fixed in this behalf by the board of directors

of the company.

SPECIAL BUSINESS

5. To consider and if thought fit, to pass with or without

modification, the following resolution as an ordinary

resolution:

RESOLVED THAT, in supersession of the ordinary

resolution passed by the shareholders in the general

meeting of the company held on 15th January 1997,

the consent of the company be and is hereby

accorded to the board of directors under Section

293(1) (d) and all other applicable provisions of the

Companies Act, 1956 and the Articles of Association

of the Company, for borrowing, from time to time,

as it may consider fit, any sum or sums of moneys

from any person, whether or not the moneys so

borrowed together with the moneys already

borrowed by the company and remaining

outstanding at any one time (apart from temporary

loans obtained from the company’s bankers in the

ordinary course of business) exceed the aggregate

of the paid up capital of the Company and its free

reserves, that is to say, reserves that are not set apart

for any specific purpose, provided that the total

amount so borrowed and outstanding at any one

time, (apart from temporary loans obtained from the

company ’s bankers in the ordinary course of

business) shall not exceed Rs. 40 crores (Rupees forty

crores only) and that the board of directors be and is

hereby empowered and authorized to arrange and

fix the terms and conditions of all such moneys to

be borrowed, from time to time, as to interest,

repayment, security or otherwise as it may think fit.

By order of the Board

Chennai A C PADMAJA

28th July 2006 Secretary

Registered office:


29, Haddows Road

Chennai 600 006

Notes:

1. A member entitled to attend and vote at the

meeting is entitled to appoint one or more proxies

to attend and vote instead of himself and the proxy

or proxies so appointed need not be a member

or members as the case may be of the company.

The instrument appointing the proxy and the power

of attorney or other authority, if any, under which

it is signed or a notarially certified copy of that

power or authority shall be deposited at the

registered office of the company not later than 48

hours before the time fixed for holding the meeting.

2. The explanatory statement pursuant to Section 173(2)

of the Companies Act, 1956, in respect of the special

business as set out in the notice is annexed hereto.

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3. The register of members and the share transfer books

of the company will remain closed from 14 th

September 2006 to 18th September 2006 both days

inclusive.

4. The dividend on the equity shares as recommended

by the board of directors if approved by the

shareholders in the ensuing annual general meeting

will be paid on 20th September 2006 to those

shareholders (or their mandatees) whose names

appear in the register of members of the company

as at the close of 13th September 2006.

5. In terms of Section 205A read with Section 205C of

the Companies Act, 1956, the dividends declared

by the company which remain unclaimed for a

period of seven years will be transferred to the Investor

Education and Protection Fund (IEPF) established by

the Central Government on the due dates. The

particulars of due dates for transfer of such

unclaimed dividends to IEPF are furnished in the

report on corporate governance forming part of the

annual report.

Members who have not encashed their dividend

warrants are requested to make their claim by

surrendering the unencashed warrants immediately

to the company.

6. Members holding shares in physical form, in their own

interest, are requested to dematerialise the shares

to avail the benefits of electronic holding / trading.

7. Members are requested to notify to the company

immediately any change in their address. Members

holding shares in depository are requested to advice

change of address to their depository participants.

8. As a measure of economy, copies of the annual

report will not be distributed at the annual general

meeting. Members are therefore requested to bring

their copies of the annual report to the meeting.

9. Members are requested to affix their signature at the

space provided on the attendance sheet annexed

to the proxy form and hand over the slip at the

entrance of the meeting hall.

10. In terms of clause 49(IV)(G) of the listing agreement

with the stock exchanges, a brief resume of a director,

who is proposed to be re-appointed in this meeting,

nature of his expertise in specific functional areas

and other required particulars are given below:

Mr S I Jaffar Ali

Born on 30th November 1938, Mr S I Jaffar Ali is a post-

graduate in economics from Madras University and also

a law graduate from Madras Law College. He was co-

opted as a director by the board on 22nd January 1997.

He held senior positions in the Indian Police service and

retired in the year 1995 as Inspector General of Police.

He is member of the audit committee of the board of

directors of the company.

He does not hold any position as a director or a member

of any committee of directors of any other company.

He does not hold any share in the company.

The following explanatory statement sets out all the

material facts relating to the special business

mentioned in the accompanying notice dated 28th July

2006 and shall be taken as forming part of the notice.

Item no. 5

In terms of Section 293(1)(d) of the Companies Act, 1956

(the Act), the board of directors have the powers to borrow

moneys, where the moneys to be borrowed together with

moneys already borrowed (other than the temporary loans

obtained from the company’s bankers in the ordinary

course of business) exceeding the aggregate of the paid

up capital and free reserves of the company, with the

consent of the shareholders obtained in a general

meeting.

The shareholders of the company, at the general meeting

held on 15th January 1997 fixed the monetary ceiling for

borrowing in excess of the paid up capital and free

reserves of the Company at Rs.15 crores, taking into

account the then prevailing business volumes.

Considering the growth of the Company since 1997 and

the proposed expansion activities of the company, the

directors have considered it desirable to enhance the

borrowing powers from Rs.15 crores to Rs.40 crores.

Accordingly, the resolution is placed before the

shareholders for their approval.

None of the directors is in anyway concerned / interested

in the resolution.

The directors recommend the resolution to be adopted

as an ordinary resolution by the shareholders.

By order of the Board

Chennai A C PADMAJA

28th July 2006 Secretary

Registered office:


29, Haddows Road

Chennai 600 006

Explanatory statement pursuant to Section 173(2) of the Companies Act, 1956.

5


Directors’ report to the shareholdersThe directors herewith present the tenth annual

report of the company and the audited accounts

for the year ended 31st March 2006.

FINANCIAL HIGHLIGHTS

Rs. in lakhs

Year ended Year ended

31.3.2006 31.3.2005

Sales and other income 13,929.59 11,916.75

Gross profit before

interest and depreciation 1,292.85 987.92

Interest 31.78 0.28

Depreciation 315.28 269.39

Profit before tax 945.79 718.25

Provision for taxation 307.00 266.47

Profit after tax 638.79 451.78

Add: Surplus brought forward 158.69 143.93

Tax relating to earlier years (0.02) 4.71

Profit available for appropriation 797.46 600.42

Appropriations:

Dividend 174.80 124.30

Tax on dividend 24.52 17.43

Transfer to general reserve 400.00 300.00

Surplus in profit and loss

account 198.14 158.69

DIVIDEND

The directors recommend a dividend of 45% for

the year ended 31st March 2006. The dividend, if

approved by the shareholders, would absorb a sum

of Rs.174.80 lakhs and wil l be paid to all

shareholders whose names stand on the register

of members as at the close of 13th September 2006.

APPROPRIATIONS

Out of the profits available for appropriation a sum

of Rs.400 lakhs has been transferred to General

Reserve. The surplus of Rs.198.14 lakhs has been

retained in the profit and loss account.

PERFORMANCE

During the year under review, sales increased by 16%

from Rs.117.99 crores to Rs.137.37 crores and net

profit by 41% from Rs.4.52 Crores to Rs.6.39 Crores.

During the year 2005-06, the Indian economy

continued its steady growth of over 7% achieved

in the last few years and the automotive industry

also followed suit with robust growth in all segments.

While tractors grew by 13% in 2005-06 over the

previous year, commercial vehicles registered a

growth of 11% and two wheelers by 15% during

the same period. Cars and multi-utility vehicles

recorded a growth of 7% in the year 2005-06 over

the previous year.

The financial and operational performance of the

company for the year under review along with other

material disclosures are furnished in the

management discussion and analysis report as a

separate statement in terms of clause 49 of the

listing agreement, forming part of the annual report.

DIRECTORS

During the year, Mr H Lakshmanan, director was

appointed as chairman by the Board of Directors

for a period of five years effective 24th April 2006 in

terms of the articles of association of the company.

Mr S I Jaffar Ali, director, retires at the ensuing annual

general meeting of the company and being

eligible offers himself for re-appointment.

AUDITORS

M/s Sundaram and Srinivasan, Chartered

Accountants, Chennai, retire at the ensuing annual

general meeting and are eligible for re-

appointment.

CORPORATE GOVERNANCE

As required by clause 49 of the listing agreement,

a management discussion and analysis report and

a report on corporate governance are enclosed.

The company, in terms of the revised clause 49 of

the Listing agreement, has adopted a ‘Code of

business conduct and ethics’ for the board and

senior management personnel of the company.

A certificate from the auditors of the company

regarding compliance of the conditions of

Corporate governance as stipulated by clause 49

of the listing agreement is attached to this report.

6


STATUTORY STATEMENTS

As per the requirements of section 217(1)(e) of the

Companies Act, 1956, read with the Companies

(Disclosure of Particulars in the Report of Board of

Directors) Rules, 1988, the information regarding

conservation of energy, technological absorption

and foreign exchange earnings and outgo are

furnished in Annexure I to this report.

The particulars required pursuant to section 217(2A)

of the Companies Act, 1956, read with the

Companies (Particulars of Employees) Rules, 1975,

are furnished in Annexure II to this report.

As required under section 217(2AA) of the

Companies Act, 1956, the directors’ responsibility

statement is given in Annexure III to this report.

Cash flow statement for the year 2005-06 is

attached to the Balance Sheet.

ACKNOWLEDGEMENT

The directors acknowledge the support and co-

operation received from the promoters, Harita

Group, Chennai.

The directors thank the customers, suppliers,

financial institutions and bankers for their valuable

support and assistance.

The directors wish to place on record their

appreciation of the sincere efforts of all the

employees of the company during the year under

review.

The directors also thank the shareholders for their

continued faith in the company.

For and on behalf of the Board

Chennai H Lakshmanan

28th July 2006 Chairman

7


A. CONSERVATION OF ENERGY

(1) Measures taken

� Changeover to liquefied petroleum gas

(LPG) from superior kerosene oil for powder

coating pretreatment process system.

� Introduction of high energy efficient

transformer for power and distribution

Systems.

� Introduction of energy saving devices for

compressed air system.

� Introduction of energy saving luminaries for

lighting system.

� Installation of LPG bulk storage facility.

� Introduction of FRP thermal insulation for

heating systems in foaming process.

The above measures have resulted in an annual

savings of Rs. 18 Lakhs.

(2) Proposed measures

� Introduction of high energy efficient motors

for pneumatic systems.

� Energy saving through modifying the heating

system of hydraulic mould fixtures

operations.

� Energy saving luminaries for street lighting.

� Auto switching on-off control systems for

lighting system.

� Energy saving through modifying the control

circuit of the exhaust systems and powder

coating equipment.

The above measures will result in an annual saving

of about Rs. 5.53 lakhs.

B. TECHNOLOGY ABSORPTION

Research & Development

(1) Specific areas in which R&D is carried out inthe Company

i) Developed new generation suspension

system adopted for driver seat to enhance

comfort and safety.

Annexure I to the Directors’ report for the year ended 31st March 2006Information pursuant to section 217(1) (e) of the Companies Act, 1956

ii) Developed driver seats for trucks, agricultural

and garden tractors for exports.

iii) Developed three new variants of bus

passenger seats for domestic market.

iv) Developed new seats for premium

motorcycles.

(2) Benefits derived as a result of above measures

i) Enhanced market share in bus passenger

seat segment.

ii) Established market presence for tractor and

driver seats in overseas market.

iii) Enhanced aesthetics and comfort levels to

passengers and drivers.

(3) Future plan of action

i) Development of new variants of driver seats

for tractors and commercial vehicles.

ii) Development of PU composites for

automobile application.

iii) Development of PU elastomer spring aids

for automobile application.

iv) Development of new generation of city bus

seats.

v) Development of new products for exports.

(4) Expenditure on R&D

Rs. in lakhs

(i) Capital 53.20

(ii) Recurring 129.37

(iii) Total 182.57

(iv) Total expenditure as a

percentage of turnover. 1.31%

(5) Technology absorption, adaptation andinnovation

(i) Efforts in brief:

a) Development of alternate materials and

processes to reduce the material cost.

8


b) Exploration of various technologies in

polyurethane foaming.

(ii) Benefits derived as a result of theabove are :

� Optimisation of raw material usage for

weight reduction and simplif ied

manufacturing/assembly process of

metro bus seats.

� Reduction in weight and elimination of

pre-treatment and painting by using

alternate material in bus passenger

seats.

� Natural resources used in 3-wheeler seats

in place of imported PU chemicals.

(iii) Details relating to imported technology:

(Technology imported during the last 5 years

reckoned from the beginning of the financial

year).

NIL

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Activities relating to export:

i) During the year 2005-06 new orders for

export of driver seats for garden tractors

and seat components for driver seats for

commercial vehicles were received and

executed.

ii) The company is continuing its efforts to

export driver seats to USA, Europe and

Middle East.

b) Total foreign exchange used and earned:

Foreign exchange earnings: Rs. 349.09 lakhs

Foreign exchange outgo:Rs.1222.33 lakhs


Chennai H LAKSHMANAN


9


Sl. Name Age Designation Date of Remuneration Qualification Experi- Previous

No. (yrs) employ- (Gross) ence Employment

ment Rs.

1 S Thiagarajan 58 President 27.11.1995 5085774.00 BE (Mech.) 33 Sr. Vice President

PDGBM Fisher Xomox (India) Ltd.

(IIM-A)

2 Y N Kale 48 Vice President 02.03.1988 3299339.00 BE (Mech) 22 Product Designer

(R&D) M.DES (Product Bharat Forge Ltd.

Design)

3 V Thiyagarajan * 45 General Manager 11.02.1998 1381344.00 B.Com, ACA, 20 Manager-Finance

(Finance) ACS, MBA Lakshmi Auto

Components Ltd.

Notes:

* Employed for part of the year only.

1) Years of experience include experience prior to joining the company also.

2) Remuneration comprises of salary, dearness allowance wherever applicable, lease rent paid, special allowance,

performance incentive, leave salary, car/driver perquisites, education allowance, contribution to provident fund and

superannuation fund, medical reimbursement, medical insurance premium, leave travel assistance and other benefits

evaluated under Income Tax Rules.

3) Besides, the employee is entitled to gratuity as per rules.

4) None of the employees is related to any of the directors of the company.

5) Terms of employment is contractual.

6) None of the employees, either individually or together with spouse or children, held more than 2% of the equity

shares of the company.




Annexure II to the Directors’ report for the year ended 31st March 2006Particulars of employees as per section 217(2A) of the Companies Act, 1956

Pursuant to the requirement of section 217(2AA) of

the Companies Act, 1956 with respect to Director’s

Responsibility Statement, it is hereby stated:

i. that in the preparation of the annual accounts

for the financial year ended 31st March 2006,

the applicable accounting standards had

been followed along with proper explanation

relating to material departures;

ii. that the directors had selected such

accounting policies and applied them

consistently and made judgements and

estimates that were reasonable and prudent

so as to give a true and fair view of the state

of affairs of the company at the end of the

financial year and of the profit of the company

for the year under review;

Annexure III to the Directors’ report for the year ended 31st March 2006Directors’ Responsibility Statement as required under section 217(2AA) of the Companies Act, 1956

iii. that the directors had taken proper and

sufficient care for the maintenance of

adequate accounting records in accordance

with the provisions of the Companies Act, 1956

for safeguarding the assets of the company

and for preventing and detecting fraud and

other irregularities; and

iv. that the directors had prepared the annual

accounts for the financial year ended 31st

March 2006 on a “going concern basis”.




10


The company provides seating solutions for

transport application and it has established

leadership position in the country catering to all

segments of the automotive industry.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Improved industrial production, significant growth

of service sector and growing exports have all

contributed to over 7% growth in the Indian

economy during the year 2005-06. The agricultural

production, though having a marginal growth at

2.6%, also contributed to the growth of the Indian

economy during the year 2005-06. Industrial

production grew by 8% and manufacturing sector

by 9% over the previous year. Foreign direct

investment inflow into India increased considerably

due to sustained growth in economic activity.

The Automotive industry continued to be buoyant

in 2005-06. The commercial vehicles, tractors and

two-wheelers grew by over 10%, while cars & MUVs

registered a growth of 7% over the previous year.

The company has benefited from the strong

economic growth in the country and the same is

reflected in the financial performance of the

company.

PRODUCT- WISE PERFORMANCE

During the year 2005-06, sale of tractor seats

increased by 39% Two-wheeler seats grew by 20%.

Seats for commercial vehicles also achieved 29%

increase in sales. Faced with stiff competition, the

growth of bus passenger seats in 2005-06 was

marginal over the previous year. Exports declined

by 35% during the year at Rs.353 lakhs due to loss

of contract manufacturing business to competition

from China.

OPPORTUNITIES AND THREATS

Company ’s tractor seats are well established

among the OE manufacturers and leading OEM

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

customers have increased purchases from the

company due to consistent quality and quicker

product development. In the last two years tractor

industry has been doing well and on account of

wide spread rains all over the country and average

to good monsoon predicted during this year, this

segment presents further opportunities for

consolidation and growth. Some of the OE

manufacturers, to whom the company has been

supplying seats for their domestic market, are well

established in American and European markets.

They have expressed their interest to source seats

from the company for their global requirements in

view of cost advantage in India. The company

has already commenced/in the process of

commencing supplies to these markets.

The company is putting up its third unit in Solan

District of Himachal Pradesh to cater to the

requirements of OEMs, State Transport Undertakings,

bus body fabricators and bus operators. For this

purpose, the company has acquired land at

Nalagarh and the commercial production is

expected to commence from the third quarter of

the current financial year. This will enable the

company to widen its customer base in northern

India and increase the sales in the coming years,

besides taking advantage of the tax concessions

offered by Himachal Pradesh Government.

In order to add content and value to the vehicles,

the company is adding facilities in Hosur for

adjacencies like bus interiors, for which there is a

good scope in the country. Commercial production

of these is expected to commence by the fourth

quarter of the current financial year.

Further, in view of modernisation of airports and

construction of multiplexes and auditorium across

the country, the company is also actively pursuing

public seating for airports etc. and auditorium

seating business to take advantage of the

emerging opportunities in these segments.

11


As regards threats, in the recent past a few multi-

national seat manufacturing companies have

either established their own manufacturing facilities

in India or joined hands with local seat

manufacturers.

Innovation is the key to success and the company

is fully committed to focus on product innovation

by developing new cost effective products precisely

targeted at customer needs in order to meet the

threats posed by competition and to leverage the

opportunities offered by the market. The company’s

well established products and in-house design

capabilities will enable the company to retain its

market leadership through well defined strategies.

RISKS AND CONCERNS

Input materials used by the company’s products

are dependent on rubber, crude oil and steel. The

prices of these commodities are subjected to

international/national market forces of demand-

supply and other factors that influence price

volatility. Any significant upward price fluctuations

on these will increase the cost of raw materials

putting pressure on operating margins.

BUSINESS OUTLOOK AND OVERVIEW

The leadership position enjoyed by the company

in tractor seats, bus passenger seats and driver

seats will help further consolidation in these

segments and is expected to contribute further

growth in business during the current year 2006-07.

The logistical advantage accruing out of Himachal

Pradesh unit for ensuring speedy supplies with cost

benefits to OEMs, STUs, bus body builders and tourist

bus operators in northern and eastern parts of the

country is expected to add further impetus to

company’s efforts in consolidating business in these

markets. Similarly the new facilities being created

in Hosur plant are expected to widen company’s

product range and customer base, resulting in

increase in business.

The efforts put in by the company in export front,

have started yielding results. The company has

already started supplies of tractor seats and seat

components to overseas customers. Feedback

from these customers being satisfactory, there is

good scope for growth in exports.

OPERATIONS REVIEW

During the year under review, income from

operations increased by 17% to Rs.139.30 crores

from Rs.119.17 crores in the previous year 2004-05,

while profit after tax increased by 41% to Rs.6.39

crores from Rs.4.52 crores during the same period.

a) Quality

� Certification audit of OHSAS 18001:1999

was successfully completed in October.

2005.

� Surveillance audit of ISO/TS 16949 was

successfully completed in December.

2005.

� Surveillance audit of ISO 14001 was

successfully completed in February. 2006.

b) Focus on Cost

In order to stay competitive the company has

undertaken measures like value engineering,

alternate materials and processes, elimination

of non-value added activities, productivity

improvement, waste elimination, process and

material optimisation etc.

During the year under review, through in-house

machine building competency, two high

pressure PU foaming machines were

developed, which has resulted in considerable

savings in capital expenditure.

c) Information technology

Effective 1st April 2005, the company has

implemented SAP system in all areas of its

operation. SAP system integrates all processes

of manufacturing, materials, finance, sales,

quality and plant maintenance across the

company’s manufacturing plants.

12


d) Financial performance

The financial and operational performance of the company for the year 2005-06 as compared to the

previous year 2004-05 is furnished :

Particulars Year ended Year ended

31st March 2006 31st March 2005

Rs.in lakhs % Rs. in lakhs %

Income

Sales 13736.82 98.6 11798.82 99.0

Other income 192.77 1.4 117.93 1.0

Total Income 13929.59 100.0 11916.75 100.0

Raw materials and components consumed 10138.43 72.8 8562.75 71.9

Staff cost 1049.23 7.5 986.00 8.3

Stores and tools consumed 159.82 1.1 186.98 1.5

Power and fuel 159.04 1.1 139.54 1.2

Repairs and maintenance 171.64 1.2 169.14 1.4

Other expenses 958.58 6.9 884.42 7.4

Interest 31.78 0.2 0.28 0.0

Depreciation 315.28 2.3 269.39 2.3

Total expenditure 12983.80 93.1 11198.50 94.0

Profit before tax 945.79 6.9 718.25 6.0

Provision for taxation - current tax 273.00 2.0 246.00 2.1

- deferred tax 9.00 0.1 20.47 0.2

- fringe benefit tax 25.00 0.2 - -

Profit after tax 638.79 4.6 451.78 3.7

Some of the key ratios for the current year are furnished in the following table:

UOM 2005-06 2004-05

EBITDA / turnover % 9.3 8.3

Profit before tax / turnover % 6.8 6.0

Return on capital employed % 25.8 28.4

Return on net worth % 23.7 19.5

Earnings per share Rs. 16.44 11.75

13


e) Internal Control and their adequacy

The company has a proper and adequate

internal control system to ensure that all the

assets of the company are safeguarded and

protected against any loss and that all the

transactions are properly authorised, recorded

and reported.

f) Awards & Accolades

� Won silver trophy in Energy Conservation

Award in general category from the Ministry

of Power, Government of India, for the

second consecutive year.

� Best supplier award received from Tractors

and Farm Equipment Ltd.

� Awarded “Excellent water efficient unit”

certificate by Confederation of Indian

Industry.

HUMAN RESOURCE DEVELOPMENT

In keeping with company’s belief that employees

are the assets of a successful organisation, the

company has a well thought out in-house training

programmes on a continuous basis to improve the

skill of workmen, supervisors and executives.

Continuous productivity improvement efforts and

an employee satisfaction survey are the key HRD

activities carried out during the year. The company

has also recruited young graduates in various

disciplines to meet future needs of man-power

requirements. Through in-house training

programmes the freshers are provided training to

equip them with skill and knowledge in their

respective functional areas to take up responsibilities

for future growth of the company.

As of 31st March 2006, the company had 426

employees on its rolls.

CAUTIONARY STATEMENT

Statements in the management discussion and

analysis report describing the company ’s

objectives, projections, estimates, expectations

may be forward looking statements within the

meaning of applicable securit ies law and

regulations. Actual results could differ materially

from those expressed and implied. Important

factors that could make a difference to the

company’s operations include, among other things,

economic conditions affecting the demand, supply

and price conditions in the domestic and

international markets in which the company

operates, changes in Government regulations, tax

laws and other statutes and incidental factors.

14


1. Company’s philosophy on code ofGovernance

The company truly believes in transparency,

professionalism and accountability, which are

the basic principles of Corporate Governance

and would constantly endeavour to improve on

these aspects.

2. Board of Directors

a. Composition and category of directors

As of 31st March 2006, the board consists of

four directors. All are non-executive directors.

Out of the four directors, three directors are

independent directors.

Chairman is a non-executive director. The

number of independent directors is more

than one third of its total strength. Thus, the

company meets with the requirements of

composition of the board as per the listing

agreement.

During the year, the status of a director,

namely Mr Martin Grammer was changed

REPORT ON CORPORATE GOVERNANCE

from independent to non-independent

director effective 31st December 2005

consequent to the change in the definition

of “independent director” as per the revised

provision of clause 49 of the l ist ing

agreement.

b. Particulars of meetings of board ofdirectors held during the year:

During the financial year 2005-2006, the

Board met 6 times on 28th April 2005,

17th June 2005, 29th July 2005, 25th October

2005, 29th December 2005 and 28th January

2006.

c. Particulars of attendance of directors atthe board meetings held during thefinancial year 2005-2006 and at the lastannual general meeting, number ofdirectorships and committeememberships / chairmanships held by thedirectors in all companies as perdeclaration furnished by them are givenin the table below:

Name Cate Attendance Number of directorships and-gory Particulars committee memberships /

chairmanships

M/s Board Last Other Committee CommitteeMeeting Annual director- memberships** chairman-

General Ships* shipsMeeting

H Lakshmanan(Effective 24.4.2006,

appointed as a Chairman

of the board) NE-I 6 Yes 16 8 4

S I Jaffar Ali NE-I 5 Yes - 2 -

C Narasimhan NE-I 5 No 6 3 1

Martin Grammer NE-NI 1 Yes 1 - -

* includes private companies

** includes committees where the director is also a chairman.

NE-I : Non Executive - independent director

NE-NI : Non Executive - non independent director

None of the directors is a member of more than 10 board level committees or chairman of more than 5

such committees as required under clause 49 of the listing agreement.

15


d. Details of shareholdings of non-executivedirectors in the company as on 31st March2006

Name of the No. of shares Percentagedirector held (face value to the paid upM/s of Rs.10/- each) capital (%)

H Lakshmanan 1,010 0.03

C Narasimhan - -

S I Jaffar Ali - -

Martin Grammer 5,43,800 14.00

e. Access to information and updation to

directors:

The required information as enumerated in

Annexure 1A to Clause 49 of the Listing

Agreement is made available to the board of

directors for discussions and consideration at

board meetings. The board also reviews the

declaration made by the director and the

secretar y of the company regarding

compliance with all applicable laws on a

quarterly basis.

Functional heads are present whenever

necessary. They appraise all the directors about

the developments. Presentations are also made

to the members of board and the audit

committee at each meeting. Apart from this,

the observations of audit carried out by the

internal auditors and the details of payment of

statutory liabilities submitted by the statutory

auditors of the company are placed and

discussed with functional heads.

f. Code of Conduct for Board of Directors and

Senior Management Personnel:

The company has adopted a Code of Conduct

for Board of Directors and Senior Management

Personnel (The Code). The Code has been

communicated to directors and the members

of the senior management of the company.

The Code has also been displayed on the

company’s website www.haritaseating.com. All

the members of the board and senior

management have confirmed compliance

with the Code for the year ended 31st March

2006. The annual report contains a declaration

to this effect signed by the president and the

secretar y of the company who is the

compliance officer for the Code.

g. Subsidiaries

The company does not have any subsidiary and

hence, the appointment of an independent

director of the company and review of matters

specified under sub-clause III of clause 49 of

the Listing Agreement by the board do not arise.

h. Resume of directors

In terms of clause 49 (IV)(G) of the listing

agreement with the stock exchanges, a brief

resume of director, who is proposed to be re-

appointed in the ensuing annual general

meeting, is given in the notice convening the

ensuing annual general meeting of the

company.

3. Audit Committee

3.1Brief description of terms of reference

The terms of reference stipulated by the board of

directors to the audit committee are as contained

in clause 49 of the Listing Agreement. The role and

responsibilities of the Audit Committee include,

inter alia,

a. Oversight of the company ’s financial

reporting process and the disclosure of its

financial information to ensure that the

financial statements are correct, sufficient and

credible.

b. Recommending the appointment / re-

appointment / replacement or and removal of

external auditors, and fixation of audit fees and

payment for any other services rendered by

them.

c. Reviewing with the management the annual

and quarterly financial statements before

submission to the board for approval with

particular reference to the matters specified in

the Listing Agreement.

d. Reviewing of any related party transaction.

e. Review with the management on the

performance of statutory and internal auditors.

f. Reviewing with the management, external and

internal auditors, the adequacy of internal

control systems.

16


g. Reviewing of the adequacy of internal audit

function including the structure of the internal

audit department, appointment, staffing and

seniority of the official heading the department,

reporting structure, coverage and frequency of

internal audit and discussion with internal

auditors any significant findings including

internal investigation and follow-up thereon for

ensuring compliance of internal control system.

h. Discussion with external auditors regarding audit

plan, as well as post-audit discussion to ascertain

any area of concern.

i. Ascertainment of reasons for substantial defaults in

the payment to the shareholders (in case of non

payment of declared dividends) and creditors.

j. Review of management discussion and analysis

of financial conditions and results of operations

and other matters specified under clause 49 of

the Listing Agreement.

k. Other matters as set out in the listing agreement.

3.2 Composition, name of members and thechairman

Name of the Directors StatusM/s

H Lakshmanan, Chairman Independent director

C Narasimhan. Member Independent director

S I Jaffar Ali, Member Independent director

Mr H Lakshmanan, independent director, is the

chairman of the audit committee. The chairman

was present at the annual general meeting held

on 5th September 2005.

3.3 Meetings and attendance during the year

Date of the Members present

meeting M/s

28.04.2005 H Lakshmanan, C Narasimhan

and S I Jaffar Ali


and S I Jaffar Ali

29.07.2005 H Lakshmanan and S I Jaffar Ali


and S I Jaffar Ali


and S I Jaffar Ali

28.01.2006 H Lakshmanan

and C Narasimhan

4. Remuneration to directorsThe board has not set up a remuneration

committee, as the need for the same has not

arisen.

The directors do not draw any remuneration from

the company other than sitting fees for attending

each meeting of the board and committees

thereof.

The company pays sitting fees of Rs.2,500/- each

to all the non-executive directors for attending each

meeting of the board and/or committee thereof

which is within the limits prescribed under the

Companies Act, 1956.

Particulars of sitting fees paid to directors duringthe financial year 2005-2006.

Name of the Directors Sitting fees paidM/S (in Rs.)

H Lakshmanan 45,000

C Narasimhan 37,500

S I Jaffar Ali 35,000

Martin Grammer 2,500

Total 1,20,000

Presently, the company does not have a scheme

for grant of any stock option either to the executive

directors or employees.

5. Investors’ Grievance Committee:

The investors’ grievance committee consists of three

members viz., M/s. H Lakshmanan, C Narasimhan

and S I Jaffar Ali. Mr H Lakshmanan is the chairman

of the committee. The Committee met 4 times

during the year.

The committee oversees and reviews all matters

connected with share transfers, issue of duplicate

share certificates, etc. The committee also looks

into redressal of investors’ grievances pertaining to

transfer of shares, non-receipt of balance sheet,

non-receipt of declared dividends, etc., The

company, as a matter of policy disposes of investor

complaints within a span of seven days.

As required by Securities Exchange Board of India

(SEBI), Ms A C Padmaja, secretary of the company

has been appointed as the compliance officer.

For any clarification / complaint, shareholders

may contact Ms A C Padmaja, secretary or

Mr S Muralidharan, special officer of the company.

17


Complaints received and redressed during thefinancial year 2005-2006:

Nature of Complaints No. ofComplaints

Non receipt of dividend warrants 2

Other complaints 1

Total 3

All the complaints were resolved and as on 31st

March 2006 there was no investor complaint

pending.

All requests for dematerialisation of shares were

carried out within the stipulated time period and

no share certif icates were pending for

dematerialisation as on 31st March 2006.

6. Secretarial audit report regardingreconciliation of capital:

Pursuant to clause 47(c) of the Listing Agreement

with Stock Exchanges, certificates, on half-yearly

basis, have been issued by a Company Secretary-

in-practice for due compliance of share transfer

formalities by the Company. Pursuant to SEBI

(Depositories and Participants) Regulations, 1996,

certificates have also been received from a

Company Secretar y-in-practice for timely

dematerialization of the shares of the Company

and for conducting a secretarial audit on a quarterly

basis for reconciliation of the share capital of the

company.

As on 31st March 2006, there was no difference

between the issued and listed capital and the

aggregate of shares held by investors in both

physical form and in electronic mode with the

depositories.

7. General Body Meeting:

(a) Location and time where the annual general meetings were held during the last three years:

Year Location Date Time

2002-03 The Music Academy, 306, T T K Road 04.08.2003 10.15 A.M.

(Mowbrays Road), Chennai 600 014.

2003-04 Kasturi Srinivasan Hall (Mini Hall) 19.08.2004 10.15 A.M.

The Music Academy, 306, T T K Road


2004-05 Kasturi Srinivasan Hall (Mini Hall) 05.09.2005 2.00 P.M.

The Music Academy, 306, T T K Road


(b) Special resolutions passed in the previous 3 annual general meetings (AGM)

During the last three years, namely 2002-2003 to 2004-2005, approval of the shareholders obtained

by passing special resolutions as follows:

Year Subject matter of special resolutions Date of AGM

2002-2003 Nil 04.08.2003

2003- 2004 Shareholders of the company approved by way of a special resolution 19.08.2004

for keeping the register of members and index of members and other

documents at a place other than the registered office of the company,

namely at the Share Transfer Department at No.31 Railway Colony,

III Street, Mehta Nagar, Chennai 600 029

2004-2005 Nil 05.09.2005

18


(c) Special resolutions through postal ballot:

1) None of the subjects placed before the

shareholders in the last annual general

meeting required approval of the equity

shareholders by a postal ballot in terms

of section 192A of the Companies Act,

1956 and the Companies (Passing of

Resolution by Postal Ballot) Rules 2001.

2) None of the subjects placed before the

shareholders of the company in the

ensuing annual general meeting require

approval of the shareholders by a postal

ballot.

8. Disclosures :

(a) Disclosures on materially significant related

party transactions that may have potential

conflict with the interest of company at large:

During the year the company has not entered

into any transaction of material nature with the

directors, their relatives or management which

were in conflict with the interest of the

company.

(b) There are no transactions with the related

parties, namely its promoters, associate

companies etc.

(c) The members of the senior management

have made disclosures to the board relating

to all material, financial and other transactions

stating that they did not have any personal

interest, that could result in a conflict with the

interest of the Company at large.

(d) Details of non compliance by the company,

penalties, strictures imposed on the company

by Stock Exchanges or SEBI, or any statutory

authority, on any matter related to capital

markets, during the last three years:

During the year, there was no penalty or

stricture imposed on the company by stock

exchanges or SEBI or any statutory authority

on any matter related to capital markets.

However, Securities and Exchange Board of

India (SEBI) vide its letter No.CFD / DCR / RC/ TO/

23040/04 dated 16th November 2004 has

alleged that the company violated the

provisions of Regulations 6 & 8 of SEBI

(Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 (the said Regulations). It was

alleged in the said notice that the company

has not made the disclosure under Regulation

8(3) of the said Regulations furnishing

particulars of changes, if any in respect of the

holdings of promoters or persons having

control over the company and persons acting

in concert and by persons holding shares in

excess of 15% of the paid up capital of the

company as on the record date fixed for

declaration of dividend on 16th May 2000.

In the said letter, SEBI also has given an option

that it may consider the company’s request

for a consent order, upon payment of an

amount of Rs.25,000/- as penalty for the

aforesaid violation.

The company contended that it has not

violated the provisions of regulation 8(3) of the

said Regulation on the ground that:

1. the payment of interim dividend

approved by the board of directors and

the fixation of record date as 16th May

2000 for this purpose does not fall within

the scope of the said regulation as it did

not amount to declaration of dividend in

terms of Companies Act, 1956, as the

law stood on that date.

2. there were no changes in the

shareholding of the persons referred to

in the said communication and the

regulation requires a declaration to be

filed only when there is change in

shareholding.

However, the company without prejudice to

its stand taken has also given its consent to

pay Rs.25,000 as penalty under Section 15A

of the Securities and Exchange Board of India

Act, 1992 vide its letter No.01/ 04/C/07 dated

24th December 2004.

19


(e) The company follows Accounting Standards

issued by the Institute of Chartered

Accountants of India and in the preparation

of financial statements, the Company has not

adopted a treatment different from that

prescribed in any Accounting Standard.

(f) The President (CEO) and General Manager-

Finance (CFO) have certified to the Board in

accordance with clause 49 (V) of the Listing

Agreement pertaining to CEO/CFO

certification for the financial year ended 31st

March 2006.

(g) The company has complied with all

applicable mandatory requirements in terms

of clause 49 of the Listing Agreement. The non-

mandatory requirements have been adopted

to the extent and in the manner as stated

under the appropriate headings detailed

elsewhere in this report.

9. Means of communication:

(a) Quarterly Results

The unaudited quarterly financial results of the

company were published in the English and

vernacular newspapers. These are not sent

individually to the shareholders.

(b) Newspapers wherein results normally

published

The results are normally being published in the

English newspaper viz The Economic Times

and the Tamil version in a Tamil daily viz.,

Makkal Kural.

(c) Website

The company has created a web site address

as www.haritaseating.com. The unaudited

results and the quarterly distribution schedules

as filed with the stock exchanges are published

in the company’s web site. The company

makes use of its web-site for publishing official

news release and presentations, if any, made

to institutional investors / analysts.

(d) Management Discussion and Analysis report

As required by clause 49 of the listing

agreement, the management discussion and

analysis report is annexed to the annual report.

10. General Shareholder information:

10.1 Annual General Meeting

Date and time : 18th September 2006

at 10.15 A.M

Venue : Kasturi Srinivasan Hall

(Mini Hall)

The Music Academy

306, T T K Road

(Mowbrays Road)

Chennai 600 014

10.2 Financial Calendar (2006-2007) (Tentative)

Annual General : August/ September 2007

Meeting (next year)

Financial reporting for : Date of Board meeting

the quarter ending

Any day between:

30th June 2006 : 28th of July 2006

30th September 2006 : 15th to 31st of October 2006

31st December 2006 : 15th to 31st of January 2007

31st March 2007 : 15th to 30th of April 2007

10.3 Particulars of dividend payment

Rate of Dividend : 45%

To be paid on : 20th September 2006

10.4 Period of book closure

From 14th September 2006 to 18th September

2006 (both days inclusive).

10.5 Listing on Stock Exchanges

Name of the stock exchange Stock code

Madras Stock Exchange (MSE) HARITASEAT

Bangalore Stock Exchange, (BgSE) HARITASEAT

ISIN alloted by Depositories : INE 939D01015(Company ID Number)

Effective 7th January 2005, the equity shares of the

company are regularly traded in BSE-INDONext

under scrip code 590043.

(Note : Annual listing fees for the year 2006-2007

have been duly paid to all the above stock

exchanges)

20


10.6 Market Price Data : High, Low, during eachmonth in the last financial year

The shares of the company were not traded

during the period 1st April 2005 to 31st March

2006 in Madras Stock Exchange and

Bangalore Stock Exchange.

However the shares of the company are

being regularly traded in BSE-INDONext and

the data relating to the trading in BSE –

INDONext is given below:

BSE-INDONext (in Rs.)

Month Month’s Month’shigh price low price

April 2005 139.00 106.30

May 2005 163.00 110.00

June 2005 164.90 116.00

July 2005 136.60 107.00

August 2005 217.00 96.25

September 2005 221.50 157.55

October 2005 209.90 140.25

November 2005 165.00 140.05

December 2005 178.00 144.00

January 2006 252.80 167.05

February 2006 289.00 205.00

March 2006 252.25 170.00

10.7 Changes in Demat scenario

Shareholders are requested to note that as

per circular no. SEBI/MRD/cir-10/2004 dated

10th February 2004 issued by Securities and

Exchange Board of India (SEBI) to the

depositories, the facility of transfer-cum-

demat has since been withdrawn.

Effective from February 1, 2005, SEBI has

issued a circular dated 28th January 2005

rationalising the fee structure for

dematerialisation of securities as follows:

a. No investor shall be required to pay any

charge towards opening of a Beneficiary

Owner (BO) Account except for statutory

charges as may be applicable;

b. No investor shall be required to pay any

charge for credit of securities into his/her

BO account; and

c. No custody charge shall be levied on any

investor who would be opening a BO

account on or after February 1, 2005.

With effect from April 1, 2005 the issuer

companies will bear the custody charges.

The shareholders are requested to make

use of this opportunity and dematerialize

their physical share certificates, through a

depository participant. Shareholders

requiring any further clarif ication /

assistance on the subject may contact the

company’s share transfer agent.

10.8 Share transfer system and RTA:

M/s Sundaram-Clayton Limited (SCL),

Chennai, a registered Share Transfer Agent in

category II with SEBI, is the Share Transfer Agent

(STA) of the company.

Shares lodged for transfer are normally

processed within 10 days from the date of

lodgement, if the documents are clear in all

respects. All requests for dematerialization of

securities are processed and the confirmation

is given to the depositories within 7 days.

Grievances received from investors and other

miscellaneous correspondence on change

of address, mandates etc are processed by

the share transfer department within 7 days.

Shareholders are therefore requested to

correspond with the STA for transfer /

transmission of shares, change of address

and queries pertaining to their shareholding,

dividend etc., at their address given in this

report.

10.9 Shareholding pattern as on 31st March 2006

Particulars No. of %shares held to total

Indian promoters 20,36,200 52.42

Foreign nationals 5,43,800 14.00

Banks, Financial Institutions,

Insurance companies,

(Central, State Government

Institutions, Non-Govt.

Institutions) 100 -

Mutual Funds and UTI 148007 3.81

Private Corporate Bodies 3,31,626 8.54

NRI 3,004 0.08

Indian Public 8,21,783 21.15

Total 38,84,520 100.00

21


10.10 Distribution of Shareholding as on 31st March 2006

Shareholding No. of % to total No. of % to total

(Range) shares shares members members

Upto 500 5,31,510 13.68 3,458 92.14

501-1000 1,49,452 3.85 202 5.38

1001-2000 70,005 1.80 50 1.33

2001-5000 69,019 1.78 22 .59

5001-10000 38,737 1.00 7 .19

10001 & above 30,25,797 77.89 14 .37

Total 38,84,520 100.00 3,753 100.00

10.11 Dematerialisation of shares:Out of 18,48,320 equity shares of Rs.10/- each held by persons other than Promoters, 6,81,669

shares have been dematerialised as on 31st March 2006 accounting for 36.88%.

10.12 Issue of GDRs/ADRsThe company has not issued any Global Depository Receipt / American Depository Receipt / Warrant

or any convertible instrument, which is likely to have impact on the company’s equity.

10.13 Plant LocationsHosur : Belagondapalli, Thally Road

Hosur 635 114.

Tel : 04347 233445

Fax: 04347 233460

Email: [email protected]

Ranjangoan : Plot No.A2, MIDC Industrial area

Ranjangaon, Koregaon Village

Shirur taluk, Pune District

Maharashtra

Tel: 02138 560742

10.14 Address for Investor Correspondence

(i) For transfer / dematerialisation of shares, Sundaram-Clayton Limited

payment of dividend on shares and any Share transfer agent

other query relating to the shares of the Unit: Harita Seating Systems LimitedCompany; New No.22, Old No.31

(ii) For any query on annual report. Railway Colony, 3rd Street

Mehta Nagar, Chennai 600 029.

Note: Applicable to all the shareholders Tel : 044 - 2374 1889, 2374 2939

irrespective of their mode of holding. Fax : 044 - 2374 1889

(physical or demat) Email : [email protected]

[email protected]

22


11. Non-Mandatory Disclosure:

The non-mandatory requirements have been adopted to the extent and in the manner as stated

under the appropriate headings detailed below:

The Board

No policy has been fixed on tenure of independent directors.

Remuneration committee

The board has not set up a remuneration committee as the need for the same has not arisen.

Shareholder rights

The half-yearly results of the company are published in English and Vernacular newspapers and are

also displayed on the company’s website namely www.haritaseating.com. The results are not sent to

the shareholders individually.

Audit Qualifications

The statutory financial statements of the company are unqualified.

Training of board members

The present board of directors is already comprised of well-experienced and responsible members of

society. All the directors are well aware of business model as well as the risk profile of the business

parameters of the company and their responsibilities as directors. Hence, in the opinion of the board,

they do not require any further training.

Mechanism for evaluating non-executive board members.

There is no specific mechanism for the reasons mentioned in the clause 5 above.

12. Request to investors:

� Investors holding shares in physical mode are requested to kindly note the following procedure:

o Investors are requested to communicate bank details, the change of address, if any, directly

to the share transfer department of the company located at the address mentioned above.

o In case of loss / misplacement of share certificates, investors should immediately lodge a FIR /

Compliant with the police and inform the company with original or certified copy of FIR /

acknowledged copy of complaint for marking stop transfer of shares.

o For expeditious transfer of shares, investors should fill in complete and correct particulars in

the transfer deed. Wherever applicable, registration number of Power of Attorney should also

be quoted in the transfer deed at the appropriate place.

o Investors, whose signature has undergone any change over a period of time, are requested

to lodge their new specimen signature duly attested by a bank manager to the shares

department of the company.

o Investors of the company who have multiple folios in identical names are requested to apply

for consolidation of such folios and send the relevant share certificates to the company.

� Nomination in respect of shares – Section 109A of the Companies Act,1956 provides facility for

making nominations by shareholders in respect of their holding of shares. Such nomination greatly

facilitates transmission of shares from the deceased shareholder to his / her nominee without

having to go through the process of obtaining succession certificate/ probate of the will etc. It

would therefore be in the best interests of the shareholders holding shares in physical form registered

as a sole holder to make such nominations. Investors, who have not availed nomination facility,

are requested to avail the same by submitting the nomination form. This form will be made available

on request. Investors holding shares in demat form are advised to contact their DP’s for making

nominations.

23


� As required by SEBI, investors may furnish details of their bank account number and name and

address of the bank for incorporating the same in the warrants. This would avoid wrong credits

being obtained by unauthorized persons.

� Investors holding shares in electronic form are requested to deal only with their depository

participants in respect of any change of address, nomination facility and furnishing bank account

number etc.

� Investors, who have not encashed their dividend warrants in respect of dividend declared from

the financial year ended 31st March 1999, are requested to contact the share transfer department

of the company and surrender their warrants for payment.

� Investors are requested to note that the dividend, not claimed for a period of seven years from the

date they become due for payment, shall be transferred to “Investor Education and Protection

Fund” (IEPF) in terms of Section 205C of the Companies Act, 1956.

� Information in respect of the unclaimed dividends due for remittance into IEPF is given below:

PARTICULARS OF UNCLAIMED DIVIDEND

Financial Date of Date of transfer Date ofYear declaration to special account transfer to IEPF

1998-1999 06.09.1999 24.10.1999 24.10.2006

1999-2000 23.05.2000 10.07.2000 10.07.2007

2000-2001 17.09.2001 23.10.2001 23.10.2008

2001-2002 20.09.2002 26.10.2002 26.10.2009

2002-2003 20.06.2003 26.07.2003 26.07.2010

2003-2004 19.08.2004 24.09.2004 24.09.2011

2004-2005 05.09.2005 11.10.2005 11.10.2012

Reminders are sent to Investors periodically advising them to encash the unclaimed dividends before

transferring the unclaimed dividends to IEPF. Investors will be advised well in advance before transferring the

unclaimed dividends to IEPF. Investors are requested to note that, as per the Companies Act, 1956, unclaimed

dividends once transferred to IEPF will not be refunded.

24


To,

The Shareholders of the Company

We hereby declare that all members of the board and the senior management personnel have affirmed

compliance with the respective provisions of the Code of Business Conduct and Ethics of the company

formulated by the board of directors for the financial year ended 31st March 2006.

S THIAGARAJAN A C PADMAJA

President Secretary

Chennai

28th

July, 2006

DECLARATION PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT REGARDING

ADHERENCE TO THE CODE OF CONDUCT

AUDITORS CERTIFICATE ON COMPLIANCE OF THE PROVISIONS OF THE CODE OF

CORPORATE GOVERNANCE IN THE LISTING AGREEMENT.

To

The Shareholders of Harita Seating SystemsLimited, Chennai.

We have examined the compliance of conditions

of corporate governance by Harita Seating Systems

Limited, Chennai for the year ended 31st March

2006, as stipulated in Clause 49 of the Listing

Agreement of the said company with Stock

Exchanges.

The compliance of conditions of Corporate

Governance is the responsibility of the company’s

management. Our examination was limited to

procedures and implementation thereof, adopted

by the company for ensuring the compliance of

the conditions of the Corporate Governance. It is

neither an audit nor an expression of opinion on

the financial statements of the company.

In our opinion and to the best of our information

and according to the explanations given to us, we

certify that the company has complied with the

conditions of Corporate Governance as stipulated

in the abovementioned Listing Agreement.

We state that no investor grievances are pending

for a period exceeding one month against the

company as per the records maintained by the

Investors’ Grievances Committee.

We further state that such compliance is neither an

assurance as to the future viability of the company

nor the efficiency or effectiveness with which the

management has conducted the affairs of the

company.

For SUNDARAM & SRINIVASAN

Chartered Accountant

M BALASUBRAMANIYAM

Madurai Partner

28th July, 2006 Membership No.F7945

25


Auditors’ Report to the shareholders of Harita Seating Systems Limited for the year

ended 31st March 2006

We have audited the attached balance sheet of

Harita Seating Systems Limited, Chennai 600 006

as at 31st March 2006, the profit and loss account

for the year ended on that date annexed thereto

and the cash flow statement for the year ended

on that date. 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.

1. We conducted our audit in accordance with

auditing standards generally accepted in

India. These standards require that we plan and

per form the audit to obtain reasonable

assurance about whether the f inancial

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 presentation of the financial statements.

We believe that our audit provides a

reasonable basis for our opinion.

2. As required by the Companies (Auditor ’s

Report) Order, 2003 and amended by the

Companies (Auditor ’s report) (Amendment)

Order, 2004 issued by the Central Government

in terms of sub-section (4A) of section 227 of

the Companies Act, 1956, we enclose in the

Annexure a statement on the matters specified

in paragraphs 4 and 5 of the said Order.

3. Further to our comments in the Annexure,

referred to above, we state that

(i) 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.

(ii) 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. The

company’s branch accounts were also

audited by us.

(iii) The balance sheet, profit and loss account

and cash flow statement referred to in this

report are in agreement with the books of

account including its branch.

(iv) In our opinion, the balance sheet, profit and

loss account and cash flow statement dealt

with by this report comply with the

accounting standards, referred to in sub-

section (3C) of section 211 of the

Companies Act, 1956.

(v) On the basis of written representations

received from the directors, as on 31st

March 2006 and taken on record by the

board of directors, we report that no director

is disqualified from being appointed as a

director of the company in terms of clause

(g) of sub-section (1) of section 274 of the

Companies Act, 1956 on the said date.

(vi) In our opinion and to the best of our

information and according to the

explanations given to us, the said accounts

read together with the Signif icant

Accounting Policies and other notes thereon

give the information required by the

Companies Act, 1956, in the manner so

required and give a true and fair view in

conformity with the accounting principles

generally accepted in India.

a. In so far as it relates to the balance

sheet, of the state of affairs of the

company as at 31st March 2006,

b. In so far as it relates to the profit and

loss account, of the profit for the year

ended on that date, and

c. In so far as it relates to the cash flow

statement, of the cash flows for the year

ended on that date.


Chartered Accountants

M BALASUBRAMANIYAM

Madurai Partner

28th July 2006 Membership No.F7945

26


(i) (a) The company has maintained proper

records showing full particulars including

quantitative details and situation of fixed

assets.

(b) All the assets have not been physically

verified by the management during the

year but there is a regular programme

of verification at reasonable intervals,

which, in our opinion, is reasonable

having regard to the size of the company

and the nature of its assets. No material

discrepancies were noticed on such

verification.

(c) The assets disposed off during the year are

not substantial and therefore do not affect

the going concern status of the company.

(ii) (a) The inventory other than in-transit have

been physically verified at reasonable

intervals during the year by the

management. In our opinion, the

frequency of such verif ication is

adequate. In respect of inventory with

third parties which have not been

physically verified, there is a process of

obtaining confirmation from such parties.

(b) In our opinion and according to the

information and explanations given to us,

the procedures for physical verification

of inventory followed by the

management were reasonable and

adequate in relation to the size of the

company and the nature of its business.

(c) In our opinion, the company has

maintained proper records of inventory.

The discrepancies between the physical

stocks and the book stocks were not

material and have been properly dealt

with in the books of account.

(iii) (a) During the year, the company has not

granted any loan, secured or unsecured

to companies, firms or other parties

covered in the register maintained under

Section 301 of the Companies Act, 1956.

(b) During the year the company has not

taken any loan, secured or unsecured

from companies, firms or other parties

covered in the register maintained under

Section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the

information and explanations given to us, there

are adequate internal control procedures

commensurate with the size of the company

and the nature of its business with regard to

purchase of inventory, fixed assets and for the

sale of goods and services. During the course

of our audit, no major weakness has been

noticed in the internal control system.

(v) (a) Based on the audit procedures applied

by us and according to the information

and explanations provided by the

management, we are of the opinion that

the contracts or arrangements that need

to be entered in the register maintained

in pursuance of Section 301 of the

Companies Act, 1956 have been

properly entered in the said register;

(b) In our opinion and according to the

information and explanations given to us,

the transactions entered in the register

maintained under Section 301 and

exceeding during the financial year by

Rupees five lakhs in respect of each party

have been made at prices which are

reasonable having regard to prevailing

market prices at the relevant time;

(vi) The company has not accepted any deposit

from the public.

(vii) The company has an internal audit system

which, in our opinion, is commensurate with

the size and nature of its business;

Auditors’ report to the shareholders

Annexure referred to in our report of even date on the accounts for the year ended

31st March 2006

27


(viii) We have broadly reviewed the books of

account maintained by the company

pursuant to the rules made by the Central

Government under Section 209 (1)(d) of the

Companies Act, 1956 for maintenance of cost

records and are of the opinion that, prima

facie, the prescribed accounts and records

have been made and maintained;

(ix) (a) According to the records provided to us,

the company is regular in depositing

undisputed statutory dues including

Provident Fund, Investor Education and

Protection Fund, Income Tax, Sales Tax,

Wealth Tax, Service Tax, Customs Duty,

Excise Duty, Cess and other material

statutory dues with the appropriate

authorities. The provisions of Employees

State Insurance Act are not applicable

to the company.

(b) According to the information and

explanations given to us, no undisputed

amounts payable in respect of Income

Tax, Wealth Tax, Sales Tax, Service Tax,

Customs Duty, Excise Duty and Cess were

in arrears, as at 31st March 2006 for a

period of more than six months from the

date they became payable.

(c) According to information and

explanations given to us, the following is

the detail of the disputed due, that was

not deposited with the concerned

authorities:

Name of the Nature of Amount Forum where

statute dues (Rs. in Lakhs) dispute is pending

Income Income tax 12.55 (net of Commissioner of

Tax Act, 1961 refund due Income-tax

Rs.11.53 lakhs) (Appeals), Chennai

(x) The company neither has accumulated losses

as at the end of the financial year nor has

incurred cash losses during the financial year

and in the immediately preceding year.

(xi) Based on our verification and according to the

information and explanations given by the

management, the company has not

defaulted in repayment of dues to any bank.

(xii) Based on our examination and according to

the information and explanations given to us,

the company has not granted loans and

advances on the basis of security by way of

pledge of shares, debentures and other

securities;

(xiii) The company is not a chit / nidhi / mutual

benefit fund / society and as such clause (xiii)

of the Order is not applicable;

(xiv) The company is not dealing or trading in

shares, securities, debentures and other

investments;

(xv) The company has given guarantee to Housing

Development Finance Corporation Limited,

Mumbai in respect of housing loans availed

by its employees. The terms of such guarantee

are not prejudicial to the interests of the

company.

(xvi) The company has not availed any term loan;

(xvii) On the basis of our examination, the company

has not used funds raised on short term basis

for long term investment.

(xviii) During the year the company has not allotted

any shares on preferential basis to parties and

companies covered in the register maintained

under section 301 of the Companies Act,

1956.

(xix) During the year, the company has not issued

any secured debentures;

(xx) During the year, the company has not raised

any money by public issue;

(xxi) Based on the audit procedures adopted and

information and explanations given to us by the

management, no fraud on or by the company

has been noticed or reported during the course

of our audit.



M BALASUBRAMANIYAM

Madurai Partner

28th July 2006 Membership No.F7945

28


Balance Sheet as at 31st March, 2006(Rupees in Lakhs)

Schedule As at As at

Number 31.03.2006 31.03.2005

I SOURCES OF FUNDS

1. Shareholders’ funds

a) Capital I 388.45 388.45

b) Reserves and surplus II 2,522.17 2,082.722,910.62 2,471.17

2. Loans

a) Secured loans III 219.46 –

b) Unsecured loans IV 872.50 220.041,091.96 220.04

3. Deferred tax liability 163.44 154.44

(net of deferred tax asset)

4,166.02 2,845.65

II APPLICATION OF FUNDS:

1. Fixed assets V

a) Gross block 4,386.70 3,618.64

b) Less: depreciation 2,048.74 1,739.84

Net block 2,337.96 1,878.80

2. Investments VI 407.87 367.96

3. Current assets, loans and advancesa) Interest accrued 0.10 0.08

b) Inventories VII 549.39 330.84

c) Sundry debtors VIII 3,075.22 2,455.64

d) Cash and bank balances IX 162.55 152.95

e) Loans and advances X 1,118.85 741.62

f) Other current assets XI 32.91 28.69

(A) 4,939.02 3,709.82

Less: Current liabilities and provisions

Current liabilities XII 2,257.86 2,224.94

Provisions XIII 1,260.97 885.99

(B) 3,518.83 3,110.93

Net current assets (A)-(B) 1,420.19 598.89

4,166.02 2,845.65

H LAKSHMANAN S I JAFFAR ALI S THIAGARAJAN As per our report annexed

Chairman Director President For SUNDARAM & SRINIVASAN


M. BALASUBRAMANIYAM

Partner

Chennai A C PADMAJA K GOPALA DESIKAN Madurai

28th July, 2006 Secretary General Manager-Finance 28th July, 2006

29


Profit and Loss Account for the year ended 31st March, 2006(Rupees in Lakhs)

Schedule Year ended Year ended

Number 31.03.2006 31.03.2005

Sales - Gross 15,916.95 13,634.37

Less: Excise duty 2,180.13 1,835.55

Net Sales 13,736.82 11,798.82

Other income XIV 192.77 117.93

(A) 13,929.59 11,916.75

Raw materials and components consumed XV 10,138.43 8,562.75

Salaries, wages, stores consumed

and other expenses XVI 2,498.31 2,366.08

(B) 12,636.74 10,928.83

Profit before interest, depreciation

and tax (A)-(B) (C) 1,292.85 987.92

Interest XVII 31.78 0.28


(D) 347.06 269.67

Profit before tax (C)-(D) (E) 945.79 718.25

Provision for taxation - Income-tax 273.00 246.00

- Fringe benefit tax 25.00 –

- Deferred tax 9.00 20.47

(F) 307.00 266.47

Profit for the year (after tax) (E)-(F) (G) 638.79 451.78

Balance profit brought forward 158.69 143.93

Profit for the year 638.79 451.78

Tax relating to earlier year (0.02) 4.71

Total 797.46 600.42

Proposed dividend @ 45% (Last year 32%) 174.80 124.30

Provision for dividend tax 24.52 17.43

Transfer to general reserve 400.00 300.00

Balance surplus carried forward to balance sheet 198.14 158.69

Total 797.46 600.42

No. of equity shares 38,84,520 38,84,520

Nominal value of equity shares Rs. 10.00 10.00

Basic and diluted earnings per share Rs. 16.44 11.75

Notes on accounts XVIII




M. BALASUBRAMANIYAM

Partner



30


Schedules(Rupees in Lakhs)

As at As at

31.03.2006 31.03.2005

I CAPITAL

Authorised

50,00,000 equity shares of Rs.10/- each 500.00 500.00

Issued, subscribed and paid up

38,84,520 equity shares of Rs.10/- each fully paid up 388.45 388.45

388.45 388.45

II RESERVES AND SURPLUS

a) State Subsidy 15.00 15.00

b) General reserve

As per last balance sheet 1,849.03 1,549.03

Add: transfer from profit and loss account 400.00 300.00

2,249.03 1,849.03

c) Investment allowance reserve 50.00 50.00

d) Capital redemption reserve 10.00 10.00

e) Surplus i.e

Balance in profit and loss account 198.14 158.69

2,522.17 2,082.72

III SECURED LOANS

From banks

Secured by hypothecation of raw materials,

work-in- process, finished goods and book debts 219.46 –

219.46 –

IV UNSECURED LOANS

a) From banks -short term 652.46 –

b) From others -long term 220.04 220.04

872.50 220.04

31

HA

RITA

SEATIN

G S

YSTE

MS LIM

ITED

V FIXED ASSETS(Rupees in Lakhs)

Gross block Depreciation Net block

As at Additions Sales/ As at Upto For the Sales/ Upto As at As at

S.No Particulars 1st April during transfers 31st March 31st March year transfers 31st March 31st March 31st March

2005 the during the 2006 2005 2006 2006 2005

year year

1 Land 48.91 123.37 – 172.28 – – – – 172.28 48.91

2 Building 644.73 15.29 13.94 646.08 169.50 21.36 3.86 187.00 459.08 475.23

3 Plant & machinery 2,125.73 510.43 – 2,636.16 1,117.76 227.93 – 1,345.69 1,290.47 1,007.97

4 Vehicles 30.80 4.90 4.97 30.73 14.34 4.71 2.52 16.53 14.20 16.46

5 Office Equipments 457.51 14.65 – 472.16 297.58 35.86 – 333.44 138.72 159.93

6 Moulds 243.61 114.23 – 357.84 111.84 20.99 – 132.83 225.01 131.77

7 Furniture & fittings 35.32 6.62 – 41.94 20.88 2.72 – 23.60 18.34 14.44

8 Canteen equipments 21.97 5.58 – 27.55 7.94 1.71 – 9.65 17.90 14.03

3,608.58 795.07 18.91 4,384.74 1,739.84 315.28 6.38 2,048.74 2,336.00 1,868.74

9 Capital work-in-progress

- Plant and machinery – 1.96 – 1.96 – – – – 1.96 –

- Electrical installation 10.06 – 10.06 – – – – – – 10.06

Total 3,618.64 797.03 28.97 4,386.70 1,739.84 315.28 6.38 2,048.74 2,337.96 1,878.80

32


Schedules - (Continued)

VI INVESTMENTS (AT COST) (Rupees in lakhs)

1 Non-trade-quoted (short-term)As at Additons Sales/realisa As at

1st April, during the tion during 31st March2005 year the year 2006

A HDFC Mutual Fund, Chennai2000118.885 units in Multiple Yield 211.84 – 211.84 –Fund Growth

2000118.885 units in Multiple Yield

Fund Dividend – 215.84 215.84 –

2000000 units in Multiple yield fund

Growth – 200.00 200.00 –

1434508.390 units in Cash management

Fund savings plan growth – 207.66 99.79 107.87

B ABN AMRO Asset Management, Mumbai

996088.644 units in Floating Rate

Fund-Institutional Growth 56.12 – 56.12 –

C Franklin Templeton Investments, Mumbai

1000000 units in flexi cap fund growth 100.00 – 100.00 –996003.87 units in flexi cap fund growth – 127.39 127.39 –

996003.87 units in flexi cap fund growth – 111.18 111.18 –

D ICICI Prudential Mutual Fund, Chennai977995.110 units PIFG Prudential

infrastructure fund-Growth – 100.00 100.00 –

E SBI Mutual fund, Chennai741003.254 units L031 Magnum

Insta cash fund – 115.00 115.00 –

F UTI Mutual Fund, Chennai

2000000 units of Leadership fund growth – 200.00 – 200.00

G Reliance Mutual Fund, Mumbai

Equity fund growth – 100.00 – 100.00

Total 367.96 1,377.07 1,337.16 407.87

[Market value of investments: Rs.422.71 lakhs]

33


Schedules - (Continued)(Rupees in lakhs)

As at As at

31.03.2006 31.03.2005

VII INVENTORIES (at cost)

* Raw materials and components 366.48 174.04

* Work-in-process 58.72 94.66

* Stores 25.23 11.96

* Finished Goods 42.49 45.33

* Goods in bond 56.47 4.85

549.39 330.84

* as certified by a director

VIII SUNDRY DEBTORS- unsecured considered good

a) Debts outstanding for a period

exceeding six months 60.95 62.06

Less: Provision for doubtful debts 12.34 48.61 62.06 –

b) Other debts 3,026.61 2,455.64

3,075.22 2,455.64

IX CASH AND BANK BALANCES

a) Cash on hand 90.73 44.08

b) With scheduled bank

1) Current account 71.03 107.83

2) Deposit account 0.79 1.04

162.55 152.95

X LOANS AND ADVANCES-unsecured considered good

a) Advance recoverable in cash or in kind or for

value to be received 1,091.15 719.99

b) Deposits 27.70 21.63

1,118.85 741.62

XI OTHER CURRENT ASSETS

a) Prepaid expenses 31.24 27.43

b) Income-tax deducted at source on

labour charges and on interest income 1.67 1.26

32.91 28.69

XII CURRENT LIABILITIES

a) Sundry creditors 2,250.22 2,218.29

b) Investor Education and Protection Fund

- Unpaid dividend 7.64 6.65

2,257.86 2,224.94

34



As at/year ended As at/year ended

31.03.2006 31.03.2005

XIII PROVISIONS

Dividend proposed 174.80 124.30

Provision for taxation-dividend tax 24.52 17.43

Taxation - income-tax and wealth tax 764.00 491.00

- Fringe benefit tax 25.00 –

Warranty 74.00 69.00

Leave pay 31.05 29.37

Pension 167.60 154.89

1,260.97 885.99

XIV OTHER INCOME

a) Scrap sales 30.08 29.12

b) Labour charges received (gross) 1.67 15.02

(TDS-Rs.0.05 lakh) (Last year Rs.0.09 lakh)

c) Interest on deposits and investments (gross) 4.72 2.53

(TDS-Rs.0.36 lakh) (Last year Rs.0.30 lakh)

d) Miscellaneous income (see note no.8) 156.30 71.26

192.77 117.93

XV RAW MATERIAL AND COMPONENTS CONSUMED

OPENING STOCK

Raw materials 174.04 133.84

Work-in-process 94.66 81.52

Finished goods 45.33 43.22

314.03 258.58

Purchase of raw materials and components 10,292.09 8,618.20

Total (A) 10,606.12 8,876.78

CLOSING STOCK

Raw materials 366.48 174.04

Work-in-process 58.72 94.66

Finished goods 42.49 45.33

Total (B) 467.69 314.03

Consumption (A) - (B) 10,138.43 8,562.75

35




31.03.2006 31.03.2005

XVI SALARIES, WAGES, STORES CONSUMED AND OTHER EXPENSES

a) Salaries and wages* 834.64 772.87

b) Contribution to provident and other funds* 87.78 115.19

c) Staff welfare expenses* 126.81 97.94

d) Stores and tools consumed 159.82 186.98

e) Power and fuel 159.04 139.54

f) Rent* 11.19 13.32

g) Rates and taxes* 165.45 106.83

h) Repairs and maintenance*

- Building 27.07 28.02

- Machinery 122.77 91.90

- Other assets 21.80 49.22

i) Audit fees - as auditors 4.09 3.86

- tax audit 1.00 1.02

- certification 0.60 0.55

j) Directors’ sitting fee 1.20 0.98

k) Insurance 13.89 14.01

l) Other expenses (see note no.7)* 757.74 740.54

m) Excise duty paid on samples 3.42 1.56

n) Loss on sale of assets – 0.88

o) Loss on sale of investments – 0.87

2,498.31 2,366.08

[* Net of recoveries]

XVII INTEREST

On other loans 31.78 0.28

31.78 0.28

36



(Rupees in lakhs)


31.03.2006 31.03.2005

XVIII NOTES ON ACCOUNTS1 Notes on Accounting Standards prescribed by The Institute

of Chartered Accountants of India

ACCOUNTING STANDARD (1) - Accounting policyThe accounts are maintained on accrual basis as a going

concern.

ACCOUNTING STANDARD (2) - InventoriesInventories are valued in accordance with the method of

valuation prescribed by the Institute of Chartered Accountants

of India at weighted average rates and in applicable cases

at lower of cost or realisable value.

ACCOUNTING STANDARD (3) - Cash flowThe cash flow statement is prepared under “indirect method”

and the same is annexed.

ACCOUNTING STANDARD (4) -Contingencies & eventsoccuring after balance sheet date

Details regarding contested liabilities are furnished in

Note No.2.

ACCOUNTING STANDARD (5) - Prior period itemShort provision of employee cost — (0.06)

Excess provision of employee cost 3.06 1.70

Raw materials and components consumed — 4.61

Retrospective selling price revision 44.46 (1.60)

ACCOUNTING STANDARD (6) - DepreciationDepreciation has been provided under straight line method

in respect of all assets at the rates prescribed under schedule

XIV of the Companies Act, 1956 and on prorata basis on

assets acquired/sold during the year.Depreciation in respect

of computers and vehicles has been provided at 30% and

18% respectively which is higher than the rate prescribed in

schedule XIV of the Companies Act.

Until the year ended 31st March, 2002, moulds were

depreciated applying rates fixed under schedule XIV of the

Companies Act.This method is continued for moulds acquired

before 31st March, 2002 and put to use. In respect of moulds

acquired on and after 1st April, 2002 and put to use, depreciation

is charged based on quantity of seat cushions produced.

Until the year ended 31st March, 2002, tools and fixtures were

depreciated applying rates fixed under schedule XIV of the

Companies Act.This method is continued for tools and fixtures

acquired before 31st March, 2002 and put to use. In respect

of tools and fixtures acquired on and after 1st April, 2002

and put to use, depreciation is charged at 25%.

37


Depreciation in respect of assets acquired during the year whose

actual cost does not exceed Rs.5,000/- has been provided at

100%.

ACCOUNTING STANDARD (7) - Construction contracts Not applicable Not applicable

ACCOUNTING STANDARD (8) - R & D

This standard is deleted from 1st April, 2003.

ACCOUNTING STANDARD (9) - Revenue recognition

The income of the company is derived from manufacture and

sale of seating systems for automotive applications, railways and

fitness equipment and parts thereof. Indigenous sales are

recognised based on raising invoices. Export sales are

recognised on the basis of date of bill of lading. The revenue

and expenditure are accounted on a going concern basis.

Interest income/expenses is recognised using the time proportion

method based on rates implicit in the transaction.

ACCOUNTING STANDARD (10) - Fixed assets

Fixed assets including technical knowhow fees are stated at

cost less accumulated depreciation.

ACCOUNTING STANDARD (11) - Effects of changes in foreign exchange rates

Purchase of imported raw materials, components,spares and

capital goods are accounted based on retirement memos from

banks. Sales include realised exchange fluctuation on exports.

Net exchange difference credited to Profit and loss account (5.23) 0.30

Foreign currency loan or deposit made outside India - Nil -

The company did not have any transaction in derivative

instruments and hence reporting on currency swaping/interest

rate structure do not arise.

ACCOUNTING STANDARD (12) - Government grants

No grant has been received during the year.

ACCOUNTING STANDARD (13) - Investments

Investments are valued at cost. Provision for dimunition in the

carrying cost of long term investments is made if such dimunition

is other than temperory in nature in the opinion of the

management.

ACCOUNTING STANDARD (14) - Amalgamation Not applicable Not applicable


(Rupees in lakhs)


31.03.2006 31.03.2005

XVIII NOTES ON ACCOUNTS-contd.,

38


ACCOUNTING STANDARD (15) - Retirement benefits

a) Contributions to provident fund are made to a

recognised Trust in respect of excluded employees.In

respect of other employees the contribution is made

to Government.

b) Leave salary is provided on actuarial basis

c) The company has evolved a pension policy for the

senior managers. Provision in this regard is made on

actuarial valuation basis for current and past services.

d) Contributions to gratuity and superannuation fund are

made to Life Insurance Corporation of India in

accordance with the scheme framed by the

Corporation.

ACCOUNTING STANDARD (16) - Borrowing cost

The borrowing cost has been treated in accordance with

Accounting Standard on borrowing cost (AS 16) issued by the

Institute of Chartered Accountants of India. During the year, there

were no borrowings attributable to qualifying assets and hence

no borrowing costs were capitalised.

ACCOUNTING STANDARD (17) - Segment reporting

The entire operations of the company relate to only one segment

viz., seating systems.

ACCOUNTING STANDARD (18) - Related party disclosure

I Reporting enterprise Harita Seating Systems Limited

ii Name of the transacting related party Harita Limited, Chennai

iii Description of the relationship The reporting enterprise is an

associate of the related party.

iv Description and nature of transaction Payment of service charges to

related party

v Volume of the transactions either as an amount or as

an appropriate proportion -Nil- (last year Rs. 82.73 lakhs)

vi Any other elements of the related party transactions Service charges for availing

necessary for an understanding of the financial management services from related

statements party.

vii The amounts or appropriate proportion of outstanding Amount payable -Nil-

items pertaining to related parties as at the balance (last year Rs. 78.81 lakhs)

sheet date and provisions for doubtful debts due from Provision for doubtful debts -Nil-

such parties as at that date

viii Amounts written off or written back in the period in

respect of debts due from or to related parties -Nil-


(Rupees in lakhs)


31.03.2006 31.03.2005


39



(Rupees in lakhs)


31.03.2006 31.03.2005


ACCOUNTING STANDARD (19) - Accounting of leases Not applicable Not applicable

ACCOUNTING STANDARD (20) - Earnings per share

Disclosure is made in the Profit & Loss Account as per

the requirement of the standard

ACCOUNTING STANDARD (21) - Consolidatedfinancial statement Not applicable Not applicable

ACCOUNTING STANDARD (22) - Accounting for tax on income

Current tax is determined as the amount of tax payable in

respect of taxable income for the period Deferred tax

liability and asset are recognised based on timing

difference

1 Deferred tax liability consists of:

- tax on Depreciation 146.78 146.20

- tax on R & D expenditure 133.02 118.99

- tax on expenses claimed on payment basis

under Income-tax Act, 1961 89.69 63.01

(A) 369.49 328.20

2 Deferred tax asset consists of:

- tax on provision in respect of expenditure

which will be allowed under the Income-tax

Act, 1961 only on payment basis 206.05 173.76

(B) 206.05 173.76

Deferred tax liability (net of deferred tax asset) (A)-(B) 163.44 154.44

(refer Balance Sheet)

ACCOUNTING STANDARD (23) - Investment in associates -Nil- -Nil-

ACCOUNTING STANDARD (24) - Discontinued operations -Nil- -Nil-

ACCOUNTING STANDARD (25) - Interim financial reporting

As per clause 41 of listing agreement the company is required

to publish the financial results on a quarterly basis. Condensed

form of Profit & Loss is being published for every quarter.

40



(Rupees in lakhs)


31.03.2006 31.03.2005


ACCOUNTING STANDARD (26) - Intangible assets

During the year the company acquired the following asset

falling under the definition of intangible assets as per the

Accounting Standard and the following disclosure is made in

respect of this asset

(1) Software

- Useful life of the asset 2 years 2 years

- Amortisation rates used 50% each year 50% each year

- Gross carrying amount at the beginning and at

the end of the period

Opening balance 18.48 –

Addition during the year – 37.48

Total 18.48 37.48

Amortised as depreciation 18.48 19.00

Closing balance – 18.48

ACCOUNTING STANDARD (27) - Reporting on financials of joint venture Not applicable Not applicable

ACCOUNTING STANDARD (28) - Impairment of assets

As on the Balance Sheet date the carrying amounts of the

assets net of accumulated depreciation is not less than the

recoverable amount of those assets. Hence there is no

impairment loss on the assets of the company.

ACCOUNTING STANDARD (29) - Provisions, contingent liability

and contingent asset

1. Provisions

In respect of warranty obligations provision is made in

accordance with terms of sale of seat assemblies.

2. Contingent liabilities

The amount for which the company is contingently liable

are disclosed in Note No. 2

3. Contingent assets which are likely to give rise to the

possibility of inflow of economic benefits -Nil- -Nil-

4. Contested liabilities are detailed in Note No.3

41


2. Contingent liabilities not provided for

a. On counter guarantee furnished to banks 160.35 250.74

b. On letters of credit opened with banks 29.03 4.06

c. On guarantee furnished to Housing

Development Finance Corporation Ltd,

Mumbai, on loans granted to employees

of the company. 2.55 3.96

3. Liability contested and not provided for

a) On Income tax matters 24.08 16.07

b) On Sales tax matters 5.72 5.72

4. Deposit includes deposit with Central Excise 1.63 0.37

5. Sundry creditors include:

a) Amount liable to be transferred to Investor Education and

Protection fund as and when falls due

- Unpaid dividend 7.64 6.65

b) Dues to small scale industrial undertakings 142.16 111.30

c) Dues of creditors other than small scale industrial

undertaking 2,108.06 2,106.99

Name of small scale industrial undertakings to whom the company

owes an amount which is outstanding for more than 30 days

Autocomps, Bangalore, Aravind Enterprises, Hosur, Asian Packagings,

Hosur, Essaar Tools, Hosur, Ever Bright Products, Hosur, Hari Industries,

Bangalore, India Engineering Works, Kolahpur, Indo German Tools,

Hosur, Jai Guru Fabricators, Hosur, Jit Auto Comp, Hosur, Kamadhenu

Enterprises, Bangalore, Kavia Engineering Pvt Ltd, Bangalore,

L R Industries, Hosur, Magod Laser Machining Pvt Ltd, Bangalore,

Metlok Company, Bangalore, Mecolam Engineering Pvt Ltd,

Bangalore, Micron Precision Plastics, Bangalore, MKV Engineering

Pvt Ltd, Hosur, Numann Industries, Hosur, Paragon Fasteners,

Bangalore, Presscom Products Pvt Ltd, Hosur, Rubber Extrusion and

Moulding Co, Bangalore, Siddhi Foams, Bangalore, Supram

Industries, Bangalore, Sai Kunal Industries, Bangalore, STS Engineering

Services, Hosur, Suriya Plastics, Hosur, Sri Ram Kartthic Polymers,

Coimbatore, Shri Vaari Engineering Enterprises, Hosur, Scintillating

Engineering CNC India Pvt Ltd, Hosur, Vijay Precision Components,

Bangalore, Young Polymers Pvt Ltd, Hosur, Zigma Pressings, Hosur,

Mistry Industries, Pune, Golden Jubilee Corporation, Pune, Gold Seal

Engineering Products, Mumbai.

Payment terms for the above suppliers is 60 days from the date of

invoice. The dues are less than 60 days old and therefore do not

bear any interest


(Rupees in lakhs)


31.03.2006 31.03.2005


42


6. a) Due from an officer of the company – 6.08

b) Maximum balance due at any time during the year – 6.31

7. Other expenses include:

a) reimbursement of expenses to auditors 1.34 1.26

b) legal & retainer fees 141.08 208.90

c) carriage outwards 243.98 165.18

d) warranty claims 6.32 2.82

e) commission 36.32 27.39

f) cash discount 1.13 6.95

8. Miscellaneous income under other income includes:

a) packing cost recoveries 0.45 0.36

b) sale of moulds manufactured – 4.72

c) sale of raw materials 48.97 15.26

d) profit on sale of assets 22.50 0.79

e) dividend income – 1.17

f) profit on sale of investments 60.47 48.58

9. Building (cost Rs.140.29 lakhs) (last year Rs.134.10 lakhs) is

situated on leasehold land alloted by Maharashtra Indus-

trial Development Corporation Limited, Mumbai.The lease

deed is yet to be executed while agreement to lease has

been concluded.

10.Cash & bank balances include:

a) Cheques on hand 89.01 41.49

b) Unpaid dividend 7.56 6.65

11.Expenses, wherever applicable are inclusive of service

tax at appropriate rates and net off service tax set off

permissible

12.R & D revenue expenses for the financial year 2005-06

i) Salary 94.98 Lakhs

ii) Testing charges 23.16 Lakhs

iii) Design development charges 6.87 Lakhs

iv) Field trial expenses 4.36 Lakhs


(Rupees in lakhs)


31.03.2006 31.03.2005


43


13.R & D capital expenditure for the financial year 2005-06

i) Buildings 1.52 lakhs included in total cost of addition of Rs. 15.29 lakhs

ii) Plant and machinery 49.96 lakhs included in total cost of addition of Rs.510.43 lakhs

iii) Office equipment (computers) 1.72 lakhs included in total cost of addition of Rs. 14.65 lakhs

14. Previous year’s figures have been regrouped wherever necessary to conform to the current

year’s classification.






M. BALASUBRAMANIYAM

Partner



44


15. Information pursuant to the provisions of Part II of Schedule VI of the Companies Act, 1956 (Vide

Notification dated 30th October 1973 of the Department of Company Affairs, Government of India).

(Rupees in lakhs)

I RAW MATERIALS CONSUMEDYear ended 31.03.2006 Year ended 31.03.2005

A. Basic raw materials Unit Quantity Value Quantity Value

a) Polyol Kgs 8,86,827 1,077.04 8,08,210 936.70

b) Isocyanate Kgs 5,71,832 666.69 5,16,066 656.11

c) Others (which include sheets,

tubes,upholstery materials

etc., which individually

do not account for 10% or

more of the total value of

consumption) 8,355.92 6,985.19

10,099.65 8,578.00

B. Consumption of raw materials and components

% of total % of total

consumption Value consumption Value

a) Imported 12.94 1,306.79 5.20 445.71

b) Indigenous 87.06 8,792.86 94.80 8,132.29

100.00 10,099.65 100.00 8,578.00

C. Consumption of machinery spares

% of total % of total

consumption Value consumption Value

a) Imported 5.21 5.31 12.37 11.37

b) Indigenous 94.79 96.55 87.63 80.53

100.00 101.86 100.00 91.90

II IMPORTS - CIF VALUE

a) Raw materials & components 1,038.43 362.81

b) Capital goods 74.14 81.38

c) Spares 2.54 9.10


45


III OTHER EXPENDITURE IN FOREIGN EXCHANGE

a) Travel 12.52 20.06

b) Consultancy fee 70.03 87.86

c) Others 7.27 8.61

IV EARNINGS IN FOREIGN EXCHANGEExports - F.O.B 349.09 551.55

V PAYMENT TO NON-RESIDENT SHAREHOLDERS

a) No. of non-resident shareholders 1 2

b) No. of shares held by non-residents 5,43,800 5,43,800

c) Dividend 17.40 16.31

(relating to the (relating to the

year 2004-05) year 2003-04)

VI SALE BY CLASS OF GOODSQuantity Value Quantity Value

(Nos) (Nos)

a) Seats for tractors 1,11,020 1,810.11 83,265 1,265.18

b) Seats for cars 5,442 103.82 83,423 1,605.10

c) Deluxe seating system for 4 wheelers 2,67,914 7,281.59 1,85,078 4,811.78

d) Deluxe seating system for 2 wheelers 17,32,963 4,194.69 17,10,993 3,455.12

e) Deluxe seating system for railways 386 32.96 1,445 74.08

f) Fitness equipment 31,411 224.55 58,589 523.03

g) Others 89.10 64.53

13,736.82 11,798.82

VII LICENSED AND INSTALLED CAPACITY

Information not furnished in view of abolition of industrial licencing

requirements for the products manufactured by the company


(Rupees in lakhs)

year ended year ended

31.03.2006 31.03.2005

46


VIII OPENING AND CLOSING STOCK OF GOODS PRODUCED(Rupees in lakhs)

Description Year ended 31st March 2006 Year ended 31st March 2005

Opening Production Closing Opening Production Closing

stock stock stock stock

a) Seats for tractors

Qty (in Nos) 162 1,11,097 239 90 83,337 162

Value 2.29 2.84 1.12 2.29

b) Seats for cars

Qty (in Nos) 201 5,312 71 60 83,564 201

Value 3.50 1.94 1.59 3.50

c) Deluxe seating

system for 4 wheelers

Qty (in Nos) 1,366 2,67,191 643 699 1,85,745 1,366

Value 25.77 29.08 17.56 25.77

d) Deluxe seating system

for 2 wheelers

Qty (in Nos) 450 17,35,316 2,803 237 17,11,206 450

Value 1.08 8.22 0.52 1.08

e) Deluxe seating system

for railways

Qty (in Nos) – 386 – – 1,445 –

Value – – – – –

f) Fitness equipment

Qty (in Nos) 1,725 29,786 100 2,612 57,702 1,725

Value 10.15 0.41 21.74 10.15





M. BALASUBRAMANIYAM

Partner



47


Cash flow statement for the year ended 31st March, 2006 (Rupees in lakhs)


31.03.2006 31.03.2005

A CASH FLOW FROM OPERATING ACTIVITIES

Profit before tax and extra ordinary items 945.79 718.25


Depreciation on assets sold (6.38) (22.49)

Income-tax relating to earlier years (0.02) 4.71

Dividend income – (1.17)

Interest income (4.72) (2.53)

Interest expenditure 31.78 0.28

335.94 248.19

Operating profit before working capital changes 1281.73 966.44

Adjustments for:

Interest accrued (0.02) (0.05)

Inventory (218.55) (49.90)

Trade receivables (619.58) (697.69)

Loans and advances (55.46) 184.33

Other current assets (4.22) (5.48)

Trade payables and provisions 52.31 185.16

(845.52) (383.63)

Cash generated from operations 436.21 582.81

Direct tax paid (321.77) (238.00)

Net cash from operating activities -(A) 114.44 344.81

B CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (797.03) (630.93)

Sale of fixed assets 28.97 69.30

Purchase of investments (1,377.07) (3,782.04)

Sale of investments 1,337.16 4,075.20

Interest received 4.72 2.53

Dividend received – 1.17

Net cash used in investing activities -(B) (803.25) (264.77)

C CASH FLOW FROM FINANCING ACTIVITIES

Secured loans 219.46 (0.21)

Unsecured loans 652.46 –

Sales tax deferral loan repaid – (19.85)

Interest paid (31.78) (0.28)

Dividend and dividend tax paid (141.73) (131.47)

Net cash from financing activities -(C) 698.41 (151.81)

48


D NET INCREASE IN CASH AND CASH EQUIVALENTS (A)+(B)+(C) 9.60 (71.77)

Cash and cash equivalents at the beginning of the year 152.95 224.72

Cash and cash equivalents at the end of the year 162.55 152.95

Note: 1) The above statement has been prepared in indirect method except in case of interest,

diividend and purchase and sale of investments, which have been considered on the basis of

actual movement of cash

2) Cash and cash equivalent represents cash and bank balances

Cash flow statement for the year ended 31st March, 2006 (Rupees in lakhs)


31.03.2006 31.03.2005




M. BALASUBRAMANIYAM

Partner



49


BALANCE SHEET ABSTRACT AND COMPANY’S BUSINESS PROFILE VIDE NOTIFICATION DATED 15th MAY 1995ISSUED BY MINISTRY OF COMPANY AFFAIRS

I REGISTRATION DETAILS

Registration no. 1 8 - 3 5 2 9 3 Date: 2 4 . 4 . 9 6

Balance sheet date: 3 1 0 3 2 0 0 6 State code: 1 8

Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount Rs.in thousand)

Public issue: N I L Rights issue: N I L

Bonus issue: N I L Private Placement: N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount Rs.in thousand)

Total liabilities: 4 1 6 6 0 2 Total assets: 4 1 6 6 0 2

Source of Funds

Paid up capital 3 8 8 4 5 Reserves & surplus 2 5 2 2 1 7

Secured loans 2 1 9 4 6 Unsecured loans 8 7 2 5 0

Deferred tax 1 6 3 4 4

Application of funds

Net fixed assets 2 3 3 7 9 6 Investments 4 0 7 8 7

Net current assets 1 4 2 0 1 9 Misc.expenses N I L

Accumulated loss N I L

IV PERFORMANCE OF THE COMPANY (Amount Rs. in thousand)

Turnover 1 3 9 2 9 5 9 Total expenditure 1 2 9 8 3 8 0

(includes other income)

Profit before tax 9 4 5 7 9 Profit after tax 6 3 8 7 9

Earnings per share Rs 1 6 . 4 4 Dividend rate 4 5 %

V GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANY (as per monetary terms)

Item code no. 8 7 0 8

Product description

1 D E L U X E S E A T I N G S Y S T E M F O R

T R A N S P O R T V E H I C L E S

2 S E A T S F O R T R A C T O R S

3 S E A T S F O R C A R S

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