TVS MOTORS PVT.LTD.

Heritage

TVS Group - 100 years young

The TVS group has always been inspired by a century long mission and vision of its own destiny. it is not just a business but a way of doing business, which sets TVS apart from others.  Back in 1911, to the founder of the company, the ordinary ambitions of a bus fleet operator or a vehicle servicing business would not suffice. Rather, he wanted to create an enduring business led by a family of likeminded workers and managers united by a set of shared high principles.

Driven by this inspiration, the TVS group has today emerged as India's leading supplier of automotive components. Today the TVS Group is the largest automotive component manufacturer in India, with annual turnover of more than USD 4 billion.The group has over 30 companies employing a work- force of 40,000 people.Underlying the success of the group is its philosophy of commitment to

1

TVS MOTORS PVT.LTD.

the cherished values of promoting trust, value and customer service. This was the personal philosophy of the Group's Founder Shri T V Sundaram lyengar, and it remains the overarching code by which the Group functions. Market leadership and rewards of business have followed naturally

The inspirational heritagealthough the letters TVS represent the initials of our founder, T V Sundaram lyengar, to us within TVS they have always stood for Trust, Value and Service. The founder of the company embodied these values and set an example for all employees to emulate.TVS believes that the success of any enterprise is built on the solid foundation of customer satisfaction.Continuous innovation and close customer interaction have enabled TVS companies to stay ahead of competition. Quality at TVS determines not only the end product but the systems, processes and operations at all levels. The first four companies in India, which have won the coveted Deming Prize, are from the TVS group.The business ranges across automobile component manufacturing, components distribution, manufacturing of powered two-wheelers, computer peripherals, financial services, contract manufacturing services and software development.

TVS Motors

What makes TVS stand out from all other two wheeler companies in the country is that it is without any foreign collaboration. The company was established by T.V Sundaram Iyengar in the year 1911 and was primarily into the production of mopeds. TVS Motor Company Limited, the flagship company of the USD 2.2 billion TVS Group, is the third largest two-wheeler manufacturer in India and among the top ten in the world, with an annual turnover of over USD 650 million. The company has many first to its credit like the introduction of the first indigenous moped and a 100 cc motorcycle in collaboration with Japanese auto giant Suzuki.When the collaboration ended in 2003, many thought that the company would die a natural death due to the exit of the foreign collaborator. However the company proved its detractors wrong by introducing the TVS Victor and rest as they say is history. The company roped in master blaster Sachin Tendulkar for the promotions and the sales went northwards after that. TVS Company is aiming to capture a quarter of the total two wheeler market in the country.

2

TVS MOTORS PVT.LTD.

Focus on Motorcycle

TVS group was a pioneer in mopeds but slowly they have shifted focus to the motorcycle segment since the entire market seems to be moving in that direction as consumer preferences and choices have changed with the changing times. The company has been able to outdo itself and spring a surprise, as many analysts felt that the company would be pushed to the periphery of the two wheeler market. With the exit of Suzuki, many felt TVS would have to limit itself to the moped market in the country. The company did not have a good track record of in-house product development as most of its' earlier ventures like the Shoaling, Shogun and the Surpass failed to take off.This further heightens the importance of the success of the TVS Victor, the company aims to become the number 2 two wheeler manufacturers in India and also want to crack the top five in Asia. The company has products across all categories from premium motorcycles to entry level mopeds and has recently launched Apache in the premium segment. Some of the models that the TVS Company produces are as follows

Mopeds

TVS Super XL

Scooterettes

TVS Scooty

Motorcycles

TVS Fiero TVS Victor TVS Centra TVS Star TVS Apache TVS Pep+

TVS Motor enters into three-wheeler business

10 March 2008

Chennai: TVS Motor Company (TVSM), the Chennai based firm, today launched its first first two-stroke 200cc auto rickshaw, TVS King, marking the

3

TVS MOTORS PVT.LTD.

company's entry into the three-wheeler segment. The auto rickshaws will be available in LPG and petrol versions.The King, which has an electric start, is priced in the range of Rs90,000 to Rs1.30 lakh (ex-showroom), the company reported. The King will be manufactured at the TVSM Hosur factory, which has an installed capacity of one-lakh units per year. The company plans to introduce a diesel version by December. TVSM says the auto rickshaw is powered by a 200cc, low friction 7-port engine, which is fuel-efficient and would run about 30 km per litre. Other standard features of the King include, a water bottle compartment, a magazine shelf, mobile charger, FM radio, floor mats, large tail lamps and a rear bumper, the company reported K Stalin, minister for rural development and local administration in Tamil Nadu, launched the vehicle in the presence of the state transport minister, K N Nehru and TVS chairman and managing director Venu Srinivasan.''Styled on the lines of a car, TVS King will redefine all performance characteristics like initial pickup and power, comfort and convenience, fuel efficiency and safety,'' Venu Srinivasan said.  He stated that the three-wheeler business would add Rs400 crore to the top line of the company in 18 months. TVSM has invested about Rs 120 crore in the project and the target sales volume is expected to be 30,000 units for 2008-09, which will include a four-stroke CNG version (to be launched in July) for places such as Delhi, Venu Srinivasan added. He said that the company would acquire around 30 per cent of the market share of three-wheelers in India in 18 months. After Chennai, the company would launch the King in the southern region of India before making it available to other parts of the country by December this year, Srinivasan noted.TVSM would be make use of its existing distribution and service network in the country, besides exporting the King to more than 20 countries, he added The company has also tied up with insurance companies such as United India Insurance, New India Assurance and National Assurance Company to provide free medical cover of up to Rs30,000 per annum on a floater basis for TVS King drivers and their families.  The owner of the vehicle will additionally be covered by a personal accident policy for Rs.1 lakh.  TVS Motor will pay the first premium for the Rs.1 lakh cover and the beneficiaries will pay subsequent premiums of Rs240 per annum.The company also introduced a training programme for drivers in safety and preventive maintenance, Srinivasan said.

History and Early Years

TVS Motor Company is the third largest two-wheeler manufacturer in India and is among the world's top ten. It is the flagship company of the parent TVS

4

TVS MOTORS PVT.LTD.

Group employing over 40,000 people with an estimated 15 million customers.[ It manufactures motorcycles, scooters, mopeds and auto rickshaws. It is India's only two-wheeler company to have won the Deming Prize awarded for commitment to quality control, received in 2002.When TVS Motor was founded in 1978, its parent TVS Group, founded by T. V. Sundaram Iyengar had already been in existence for 67 years. Over the years TVS Motor has grown to be the largest in the group, both in terms of size and turnover, with four state of the art[4] manufacturing plants in Hosur, Mysore and Nalagarh in India and Karawang in Indonesia. TVS Motor is credited with many innovations in the Indian automobile industry, notable among them being the introduction of India's first two-seater moped, the TVS 50cc. The company became the leader in its category of sub 100 cc mopeds, having sold 7 million units. It also introduced the TVS Scooty, which is India's second largest brand in the scooterette segment.

International Range-Two Wheeler

5

TVS MOTORS PVT.LTD.

Three Wheeler

B

TVS makes its foray into the three-wheeler market with TVS KING

Chennai 09, March 2008: TVS Motor Company today scripted a new page in its history with the formal launch of the TVS King, thus announcing its foray into the three-wheeler market in India. The company's latest offering was launched at a glittering function in Chennai by Thiru M. K. Stalin, Minister for Rural Development and Local Administration, Government of Tamilnadu and Thiru K N Nehru, Minister for Transport, Government of Tamilnadu in the presence of TVS Motor Company's Chairman Thiru Venu Srinivasan and other dignitaries.  

6

TVS MOTORS PVT.LTD.

Launched in LPG and Petrol Versions, the TVS King would be India's first 200 cc two stroke

autorickshaw that will come with electric start and that is loaded with superior features. The TVS King promises good mileage and is fitted with a higher capacity engine with the peak torque at lower rpm to take care of gradability without frequent gearshifts. A modern low friction 7-port engine that is high in fuel efficiency drives the TVS King. The engine operates at lowe

TVS MOTOR COMPANY LIMITED

Board of Directors

VENU SRINIVASANChairman & Managing DirectorH. LAKSHMANANT. KANNANC. R. DUAK. S. BAJPAIR. RAMAKRISHNANPRINCE ASIRVATHAM

Audit Committee

T. KANNAN

7

TVS MOTORS PVT.LTD.

ChairmanC.R. DUAR. RAMAKRISHNANPRINCE ASIRVATHAM

Investors’ Grievance Committee

T. KANNANChairmanVENU SRINIVASANR. RAMAKRISHNAN

President & CEO

K.N. RADHAKRISHNAN

Executive Vice President – Finance

S.G. MURALI

Secretary

K.S. SRINIVASAN

Auditors

SUNDARAM & SRINIVASANChartered Accountants,23, Sir C.P. Ramaswamy Road,Alwarpet, Chennai - 600 018.

Listing of shares with

Madras Stock Exchange Ltd., Chennai.Bombay Stock Exchange Ltd., Mumbai.The National Stock Exchange of India Ltd., Mumbai.

Share Transfer Agent

Sundaram-Clayton LimitedNew No. 22, Old No. 31Railway Colony, 3rd Street,

8

TVS MOTORS PVT.LTD.

Mehta Nagar, Chennai - 600 029.Tel : 044 - 2374 1889, 2374 2939Fax: 044 - 2374 1889

Bankers

STATE BANK OF INDIACorporate Accounts Group Branch,Greams Road, Chennai - 600 006.STATE BANK OF MYSOREIndustrial Finance Branch,Midford Garden Road, Bangalore - 560 001.

Registered office

Jayalakshmi Estates,29 (Old No.8), Haddows Road, Chennai - 600 006.Tel: 044 - 2827 2233Fax: 044 - 2825 7121

Factories

Post Box No. 4, Harita, Hosur - 635 109.Tel : 04344 - 276780Fax : 04344 - 276016Post Box No. 1, Byathahalli village,Kadakola Post, Mysore - 571 311.Tel: 0821 - 2596560Fax: 0821 - 2596530/2596533Bhatian Village, Nalagarh Post & TalukSolan District - 174 101.Himachal PradeshTel: 01795 - 220494Fax : 01795 – 220496

Subsidiary Companies

Sundaram Auto Components Limited, ChennaiTVS Motor Company (Europe) B.V., AmsterdamTVS Motor (Singapore) Pte. Limited, SingaporePT. TVS Motor Company Indonesia, Jakarta

9

TVS MOTORS PVT.LTD.

 

"TVS Motor Company has been awarded 'Star Performer -Silver Shield' in two/three wheelers category, by EEPC India,for excellent export performance for year 2007-08. Theaward was presented by the Hon'ble President of Republic ofMaldives, Mr. Mohamed Nasheed, at a glittering function atMaldives on 21st Feb'10"

10

TVS MOTORS PVT.LTD.

Exports

TVS Motor Company has been awarded 'Star Performer - Silver Shield' in two/three wheelers category, by EEPC India, for excellent export performance for year 2007-08.

Leadership

 

11

TVS MOTORS PVT.LTD.

 

Star of Asia Award to Mr. Venu Srinivasan, CMD TVS Motor Company by Business Week International.

He was also honoured with Doctorate in Science by University of Warwick, United Kingdom.

Mr Venu Srinivasan was conferred with the prestigious JRD Tata Corporate Leadership Award for the year 2004.

 

Engineering

The Deming Prize - TVS Motor Company is the only two-wheeler company in the world to be awarded the world's most prestigious and coveted recognition in Total Quality Management

Technology Award 2002 from Ministry of Science, Government of India for the successful commercialization of indigenous technology for TVS Victor

 

Asian Network for Quality Award 2004 - TVS Scooty Pep won the prestigious 'Outstanding Design Excellence Award' from Business World and National Institute of Design

Progressive Manufacturer 100 Award - TVS wins coveted 2009 Progressive Manufacturer 100 Award for end-to-end automation of the entire business process of its lubricant brand, TVS TRU4 TPM Excellence Award 2008 - First category by Japan Institute of Plant Maintenance (JiPm).

12

TVS MOTORS PVT.LTD.

Management

Emerging Corporate Giant in the Private Sector awarded by The Economic Times and the Harvard Business School Association of India.

Best Managed Company award from Business Today, one of India's leading business magazines.

 

Most Investor friendly company by Business Today, one of India's leading businessThe 'Good Advertising' award by Auto India Best Brand Awards 2009.SAP ACE AWARD 2007 - The company won the SAP ACE 2007 Award for Customer Excellence in the Most Innovative Netweaver Category.

TEAM TECH 2007 Award - TVS Motor Company bags TEAM TECH 2007 Award of Excellence for Integrated use of Computer Aided Engineering Technologies.

 

Many firsts to the Automotive Industry in IndiaTVS has been at the forefront in bringing a revolution in the way personal commutation was happening, way back in the 1980s. Beginning with launching a simple, easy-to-use moped for the middle class in India in the 1980s to launching 7 new bikes in a single day (first time in the history of the automotive industry in the world), TVS has often taken the unbeaten path to innovation.

 

13

TVS MOTORS PVT.LTD.

Ushering in the personal transportation revolution

1980Launched TVS 50, India's first 2 seater 50 cc moped

1984First Indian company to introduce 100 cc Indo - Japanese motorcycles

1994Launched India's First indigenous scooterette (sub - 100 cc variomatic) - TVS Scooty

1996Introduced India's first catalytic converter enabled motorcycle, the 110 cc Shogun

1997Introduced India's first 5 speed motorcycle, Shaolin

2000Launched India's first 150 cc, 4 stroke motorcycle - The Fiero

2001Launched India's first fully indigenously designed and manufactured motorcycle.

2004Launched the revolutionary VT-I engine for the best in class mileage in TVS Centra

2006Launched TVS Apache - first bike to win 6 awards in a row

2007Apache RTR - first two wheeler in India to have racing inspired engine and features.

2008TVS Flame, TVS Scooty Electric Vehicle and Three wheeler TVS King launched.

2009TVS Apache RTR 180 and TVS Streak launched.

 

Launch of 7 vehicles on the same day - Manufacturing Excellence makes this feasible

At the heart of the new product launches is the

14

TVS MOTORS PVT.LTD.

Production Team, setting to motion the dream put forward by the R&D.

Driven by the Five Pillars of TQM

The management philosophy is based on five pillars of TQM (Total Quality Management) which rests on the foundation of Total Employee Involvement, daily management and Kaizen (Continuous improvement).

The Total Employee Involvement

The Total Employee Involvement program ensures that responsibility for the company's performance is the shared responsibility of all levels of employees. It provides all employees with the opportunity to be involved in breakthrough activities and other improvements, over and above their daily routine.

Daily work managementDaily work management consists of defining and monitoring key processes, ensuring that they meet set targets, detecting abnormalities and preventing their recurrence. TVS Motor encourages continuous improvement in all aspects of work, using Cross Functional Teams (CFT), Supervisory Improvement Teams (SIT) Quality Control Circles (QCC) and suggestion schemes The five pillars start with policy management, which is used to arrive at the annual breakthrough objectives. There are generally not more than three company objectives, arrived at after a detailed exercise, which are deployed and reviewed periodically.

The company conducts an exhaustive range of training programs, utilising both in-house skills and consuftants from all over the world. The programs are conducted for all employees, at all levels. The Inspiration MomentWhen we won the Deming Prize in Quality in 2002, we were the only two wheeler manufacturer in the world to have won the award. However, our penchant for quality continues as we work in line with the principles

15

TVS MOTORS PVT.LTD.

of Kaizen (Japanese for Continuous improvement) and TQM (Total Quality Management). TVS Motor company Ltd (TVS Motor)- member of the TVS group is the largest company of the group in terms of size and turnover

TVS Motor Company – Vision & Mission

We are committed to being a highly profitable, socially responsible, and leading manufacturer of high value for money, environmentally friendly, lifetime personal transportation products under the TVS brand, for customers predominantly in Asian markets and to provide fulfilment and prosperity for employees, dealers and suppliers.

Vision Statement

TVS Motor - Driven by the customer

TVS Motor will be responsive to customer requirements consonant with its core competence and profitability. TVS Motor will provide total customer satisfaction by giving the customer the right product, at the right price, at the right time.

TVS Motor - The Industry Leader

TVS Motor will be one among the top two two-wheeler manufacturers in India and one among the top five two-wheeler manufacturers in Asia.

TVS Motor - Global overview

TVS Motor will have profitable operations overseas especially in Asian markets, capitalizing on the expertise developed in the areas of manufacturing, technology and marketing. The thrust will be to achieve a significant share for international business in the total turnover.

TVS Motor - At the cutting edge

16

TVS MOTORS PVT.LTD.

TVS Motor will hone and sustain its cutting edge of technology by constant benchmarking against international leaders.

TVS Motor - Committed to Total Quality

TVS Motor is committed to achieving a self-reviewing organization in perpetuity by adopting TQM as a way of life. TVS Motor believes in the importance of the process. People and projects will be evaluated both by their end results and the process adopted.

TVS Motor - The Human Factor

TVS Motor believes that people make an organization and that its well-being is dependent on the commitment and growth of its people. There will be a sustained effort through systematic training and planning career growth to develop employees talents and enhance job satisfaction. TVS Motor will create an enabling ambience where the maximum self-actualisation of every employee is achieved. TVS Motor will support and encourage the process of self-renewal in all its employees and nurture their sense of self worth.

TVS Motor - Responsible Corporate Citizen

TVS Motor firmly believes in the integration of Safety, Health and Environmental aspects with all business activities and ensure protection of employees and environment including development of surrounding communities. TVS Motor strives for long-term relationships of mutual trust and interdependence with its customers, employees, dealers and suppliers.

TVS Motor reports turnover of Rs. 3741.18 crore exports up 44% in FY '08-'09

Hosur, June 26, 2009: Despite the challenges brought on by the global economic meltdown, the TVS Motor Company (TVS) crossed several important milestones in the financial year 2008-09. Not only was the one millionth Scooty Pep+ rolled out from the company's Mysore plant, the Apache brand celebrated its first anniversary crossing the three-lakh mark. New models

17

TVS MOTORS PVT.LTD.

were introduced in the company's premium motorcycle and scooter segments. During the year, TVS also expanded its presence in the Indian three-wheeler market, adding CNG to the already-launched LPG and Petrol versions. The company also expanded ts global footprint to 55 countries and strengthened its dealership network in Indonesia .

FINANCIAL PERFORMANCE:

During the year ended March 2009, TVS registered a 5% growth in sales with overall sales registering 13.42 lakh units against 12.77 lakh units in the the previous financial year. Motorcycles accounted for 6.45 lakh units against 6.10 lakh units in the year 2007-2008, posting a growth of 6%. Scooters registered sales of 2.59 lakh units against 2.58 lakh units in the corresponding period of the previous year.

TVS recorded a total revenue of Rs. 3741.18 crores for the year ended March 2009, compared to previous year's 3310.35 crores . Profit after tax during the year ended March 2009 was marginally lower at Rs. 31.08 crores as against Rs. 31.77 crores recorded in the corresponding period last year.

18

TVS MOTORS PVT.LTD.

Project Report Consumers Attitude "After Sales Services"

About TVS Motors Pvt. Ltd.

19

Jan/10 Feb/10 Mar/10 Apr/10 May/10 Jun/100%

5%

10%

15%

20%

25%

30%

35%

40%

45% Chart Title

tvs motors time period

tvs m

oto

rs g

row

ra

te

TVS MOTORS PVT.LTD.

Preamble:

Consumer Attitudes After Sales Services :- In past six years of experience in the field of sales and services, TVS has build "Good Image" through advertisement, but through "Word of Mouth". TVS has created "Good Image" by continuously rendering high quality services by focusing on all the five determinants of quality of services - Reliability, Responsiveness, Assurance, Empathy and Tangibles. More investment has been done in Manufacturing, training and tangibles.

Keeping pace with changing technology, the group today has widely diversified operations, covering the entire gamut, of automobiles activities. Each of them highly focused and operating either as a separate company or as a separate profit centre.

This success is attributed to its satisfied customers and efficient, devoted 35 technical & support professionals.

Business attitudes towardscross-border sales and

consumer protection

This survey was requested by Directorate General Health and Consumer Protection

and coordinated by Directorate General Communication

Flash EB Series #186

Business attitudestowards cross-bordersales & consumerprotectionConducted byThe Gallup Organization Hungary& Gallup Europeupon the request of DG Health and ConsumerProtectionSurvey organised and managed by theEurobarometer Team of Directorate-General“Communication”This document does not reflect the views of the

20

TVS MOTORS PVT.LTD.

European Commission.The interpretations and opinions contained in itare solely those of the authors.

THE GALLUP ORGANIZATION

Main findings− A significant percentage of EU retailers are currently carrying out cross-border transactions(29%). E-Commerce also seems to be the key driver for opening up the retail InternalMarket. But on average, the retail Internal Market is far from being like a national retailmarket: for those retailers who do trade cross-border, most do only to a very few otherMember States (MS), only five percent of retailers with ten MS or more. 48% of retailersare prepared to trade cross-border, but 29% do at all. Finally, 46% of retailers are notprepared to trade cross-border.− Although most EU retailers (SMEs employing at least 10 persons represented 97% of thesample) sell to customers through shops, a very significant proportion is also engaged inInternet-based sales (57%).− Two-thirds (66%) of EU retailers only sell in their domestic market. Overall, three-in-tenretailers in the EU (29%) sell cross-border, using distance sales methods, to at least oneother EU country, but only one-in-five (19%) advertise cross-border. The businesses mostlikely to be involved in cross-border retailing are the medium or medium-large retailenterprises, with a limited number of outlets in other Member States and with significantexisting language capabilities.− Compared to actual sales activities, a surprisingly high number of retail enterprises are“prepared” to sell on a cross-border basis. Almost half of the EU retailers (48%) considerthey are prepared to sell to consumers in different Member States. Eighteen percent of all

21

TVS MOTORS PVT.LTD.

EU retailers also consider they are prepared to make cross-border sales to 10 or moreMember States, while only 5 percent report that they actually do so.− The most important obstacle to cross-border trade identified by the retailers is theperceived insecurity of transactions (61% of respondents that answered the questionconsider it is a fairly important or very important obstacle). Other obstacles are almostequally important: retailers are concerned about different national fiscal regulations (58%),

the difficulty to resolve complaints and conflicts cross-border (57%), the differences innational laws regulating consumer transactions (55%), the difficulties in ensuring anefficient after-sales service (55%) and, finally, the extra costs arising from cross-borderdelivery (51%). Only the costs arising from language differences clearly stand out as beingless important (43%).− Retailers who have no direct experience with cross-border trade are much more concernedwith possible obstacles to the development of such sales, than those familiar with crossborderactivities.− Retailers agree that if the provisions of the laws regulating transactions with consumerswere the same throughout the EU, their cross-border sales would increase: 43% of retailerssay that their cross-border sales would increase (28 % that they would increase a little, and15% that they would increase significantly). Retailers that use e-commerce, but are notcurrently involved in cross-border sales, are optimistic about the possible effects of suchharmonisation (47%), but those who have an experience of cross-border e-commerce areeven more optimistic (59%).− Regarding the costs of compliance with national consumer regulations, retailers who areprepared to trade cross-border (but not trading) tend to give more importance to these

22

TVS MOTORS PVT.LTD.

costs: 44% of them evaluate these costs as high (rather high or very high costs), and 33%as low or negligible.− The majority of EU retailers are not sure where to obtain information about consumerregulations in the different Member States (62%).IntroductionEU policies have a gone a long way towards establishing an Internal Market. However, while this hascreated a flourishing business-to-business (B2B) Internal Market, the same cannot be said for thebusiness to consumer (B2C, or retail) transactions, which remain largely fragmented along nationallines. So an area of economic activity which represents 58% of EU GDP is not yet truly integrated andnot fully subject to the competitive forces of the largest market in the world. A lack of consumerconfidence, but also companies’ reluctance to make cross–border offers to consumers, restricts theextent to which consumers could benefit from the Internal Market.In order to assess cross-border trade or cross-border sales (CBS) activity from a retail perspective, theDirectorate General Health and Consumer Protection sought to poll managers of retail enterprises,with at least 10 employees, on their experiences in cross-border transactions, as well as their views oncertain consumer protection measures. A total of 6,606 managers in the 25 countries of the EuropeanUnion (EU) and Norway were interviewed by telephone between the 6th and the 27th October 2006 in aFlash Eurobarometer survey. (Eurobarometer 252 analyses consumer attitudes towards cross-bordershopping and consumer protection in the Internal Market.)The sample was randomly selected according to two criteria - country and company size - withincertain activity sectors that are considered to be prone to have significant retail activity (see the Annexof the full report for the list of sectors included) and are also likely to be able to sell via distantmethods. Further technical notes explaining the manner in which Gallup and its partner institutesconducted the survey is also attached in the full report. 85% of the companies interviewed were small

23

TVS MOTORS PVT.LTD.

enterprises (10 – 49 employees), 12% were medium enterprises (50 – 249 employees). 90 % of themwere independent companies, while 3% were the mother of a multinational group and a further 7%were members of a multinational groupCross-border trade among EU retailersMost retailers use the traditional method of selling goods to consumers in shops (79%), but a verysignificant number of EU retail enterprises are also engaged in Internet-based sales (57%). Thispercentage gives an indication of the potential for growth in cross-border trade. On average, retailersuse at least two channels (2,05) to target their customers, and one third (33%) of EU retailers offertheir products and services via three or more channels.GALLUPSource:FLASH EB 186October 2006Sales channels used for retail

Direct sales

e cmmerce/internet

mail order

call center

sales through representetives visiting consumer in their homes

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Column1Column2Series 1

When analysing the average number of distant sales channels (that is: e-commerce, mail order,telesales, or home visits) used for retail purposes, it appears that an average retailer in the EU offers atleast one distant sales method to consumers (1,26). Slovenian (1,84), Czech (1,82) and Austrian (1,72)

24

TVS MOTORS PVT.LTD.

retailers put the most emphasis on utilising multiple distant sales channels, while those in Belgium(0,77), Finland (0,77) and France (0,82) seem to be the least interested. Retailers who are actuallyinvolved in distant cross-border sales are enthusiastic about the very positive effects of, and theopportunities provided by, e-commerce on their businesses; 50% say Internet make it much moreinteresting for them.Two-thirds (66%) of EU retailers only sell in their domestic market. One-in-ten retailers (9%)within the EU-25 claim to be selling goods to final consumers in at least three other EU MemberStates. This proportion rises to 20% of Maltese and 15% of Luxembourgish retailers, and drops to only3% in Finland.Current cross-border sales to final consumers

Overall, three-in-ten enterprises interviewed in the EU (29%) claimed to be selling cross-border to atleast one other EU country. As previously stated, 9% indicated that they sell to three or morecountries, the same proportion told Eurobarometer that they are trading cross-border with consumersin two EU countries, and another 12% sell to one other EU country). Such activity is less widespreadin the new Member States (24%) than in the EU-15 (30%).Turning to the average proportion of cross-border sales per sales channel, answers were not weightedto reflect the market shares of the respondents, and only respondents who were using the givenchannel were polled. Therefore, they indicate the average proportion of retailers’ cross-border salesper sales channel, and not the overall percentage of cross-border sales compared to total sales.The highest proportion of cross-border trade in shops is to be found in Malta and Cyprus. In Malta,29% of income in stores is spent by visitors, and in Cyprus, the figure is 24%. Belgian retailers alsorely significantly on incomes from tourists or other EU-foreign nationals (22%), while the figure forLuxembourg is 20%. Spanish retailers estimate that about 17 cents of every euro spent, come from

25

TVS MOTORS PVT.LTD.

people visiting from another EU Member State. Managers do not see noteworthy income from EUvisitors in Slovenia (2% of retail store income is attributed to such a source), Finland (3%), Sweden(3%), Denmark (4%), Norway (4%) and Germany (5%).Managers of EU retail enterprises that do use distance sales methods estimate that about 17% of therevenue generated via distant sales channels comes from customers living in other EU countries. Theproportion of such revenue among total distant sales revenue is the highest in Malta (48%) and Cyprus (37%), and it is around 30% in Greece, the Czech Republic, Austria and Lithuania. At the same time,this percentage is perceived as small by some managers, especially in Finland (4%).Retailers do not limit their distant sales to EU countries. However, they are most likely to use theadvantages offered by the EU Internal Market. Adding the revenue of non-EU cross-border sales tothat achieved within the Union shows that moe than a quarter (29%) of all distant retail revenue iscoming from cross-border transactions. In other words, only 71% of all sales via e-commerce, callcentres, mail and in-home visits in the EU are performed domestically.Small companies usually have a somewhat higher proportion of domestic sales as compared tomedium and large enterprises (29% of cross-border transactions of all kinds for small enterprises, and33% for medium and large retailers). Cross-border sales are especially important for those enterprises

(55%), and finally the extra costs arising from cross-border delivery (51%). Only costs arising fromlanguage differences clearly stand out as being less important (43%).The analysis of the intensity of the responses, confirms that the primary barrier to cross-borderretailing is the perceived fear that cross-border sales could involve a higher risk of fraud and nonpayment:40% of retailers told Eurobarometer that this is a very important obstacle to cross-bordertrade.Practical obstacles to B2C cross-border tradeL

26

TVS MOTORS PVT.LTD.

Higher risk of fraud and non-payments in cross-border

Higher risk of fraud and non-payments in cross-border

Extra costs of compliance with different national fiscal

Greater difficulty in resolving complaints and conflicts

cross-border

Extra costs of compliance with different national laws

Greater difficulty in ensuring an efficient after-sales service

0%20%

40%60%

80%100%

Not importantFairlyVeryDK/NA

salesExtra costs of compliance with different national fiscalregulations (VAT rules, etc.)Greater difficulty in resolving complaints and conflictscross-borderExtra costs of compliance with different national lawsregulating consumer transactionsGreater difficulty in ensuring an efficient after-sales serviceExtra costs arising from cross-border deliveryCosts arising from language differences

Contents

 • Company profile

• Marketing Department

    • Functions

    • Objectives

    • Future of Company

• Research Methodology

27

TVS MOTORS PVT.LTD.

    • Objectives of Study

    • Limitations

• Introduction to the topic

• Option about the topic

• Conclusion & Suggestions

• Questionnaire

• Bibliography

 

28

TVS MOTORS PVT.LTD.

HODOLOGY

Objective

Primary:

1) To understand about derivative market

2) To study how does a derivative has the risk or position

3) To know why the derivatives is considered safer then the cash market

Secondary:

1. To understand scope of derivatives in capital market

Research Approach:

Data collection:

1) Primary Data: - Formal and Informal Discussion with the company

guide and clients of the company.

29

TVS MOTORS PVT.LTD.

2) Secondary Data: - Internet, Books, Newspapers, TV channels,

News Channels.

Research Problem:

There are very few ways for hedging price risk or price volatility in equity

markets and derivatives is one of them. My study is to see how derivatives are

used for hedging price risk in equity market.

Limitation:

1) As research required detail information of portfolios of clients, which is very

confidential for the company, a huge difficulty was faced in getting the data.

2) As the company guide was very busy in his exhausting work schedule very

less guidance was available.

Scope of study:

30

TVS MOTORS PVT.LTD.

1) As derivatives are very vast subject the scope of research is limited to the

financial derivatives viz. future & options.

2) Forwards has been kept out of the scope of this research.

3) Since options are widely used for hedging, only the options cases have been

taken into the consideration in my research.

Definition: Option is a legal contract in which the writer of the option grants to

the buyer, the right to purchase from or sell to the writer a designated

instrument or a scrip at a specified price within a specified period of time.

Parties involved:

1) Buyer of the asset

2) Exchange

3) Seller of the asset

31

TVS MOTORS PVT.LTD.

Options are fundamentally different from forwards and futures contracts. An

option gives the holder of the option the right to do something. The holder

does not have to exercise this right. In contrast, in a forward or futures

contract, the two parties have committed themselves to doing something.

There are two types of options:

1) call option

2) put option

A call option gives the holder the right but nit the obligation to buy an

asset by a certain price. E.g.: X purchases a call option from Y of REL it

means Y gives the right to purchase REL at a fix strike price within a certain

period.

Where as a put option gives the holder the right but not the obligation

to sell an asset by a certain date for a certain price.

Options terminology;

32

TVS MOTORS PVT.LTD.

Index option : These options have the index as the underlying. Some

options are European, American. E.g. – index futures contracts, index

options contracts are also settled.

Stock option : Stock options are options on individual stock. Options

currently trade on over 500 stocks in the US.

Buyer of an option : The buyer of an option is the one who by paying the

option premium buys the right but not the obligation to exercise his

option on the seller\writer.

Writer of an option : The writer of a call\put is the one who receives the

option premium and is thereby obliged to sell \buy the asset if the buyer

wishes to exercise his option.

Option price : It is the price which the option buyer pays to the option

seller. It is also referred as the option premium.

Expiration date : The date specified in the options contract is known as

expiration date, the exercise date, the striker date or the maturity.

Strike price : The price specified in the options contract.

In the money option : A call option on the index is said to be in the

money when the current value of index at a level higher than the strike

price(i.e. spot price>strike price )

33

TVS MOTORS PVT.LTD.

At-the-money option : An at-the-money (ATM) option is an option that

would lead to zero cash flow if it were exercised immediately. An option

on the index is at-the-money when the value of current index equals the

strike price (i.e. spot price = strike price)

Out-of-the-money option : An out-of-money (OTM) option is an option

that would lead to a negative cash flow it was exercised immediately. A

call option on the index is said to be out-of-the-money when the value of

current index stands at a level which is less than the strike price (i.e. spot

price < strike price)

Since hedging is mostly done by means of option nowadays. There are certain

strategies which are considered before hedging the positions or risks by the

investors:

Options strategies

1. Long Call : A long call can be an ideal tool for investors who wish to

participate from an upward price movement in the underlying stock.

2. Long Put : A long put can be an ideal tool for an investor who wishes to

participate profitably from a downward price move in the underlying stock.

34

TVS MOTORS PVT.LTD.

3. Married Put : An investor purchasing a put while at the same time

purchasing an equivalent number of shares of the underlying stock is

establishing a “married put” position- a hedging strategy with a name from

an old IRS ruling.

4. Protective Put : An investor who purchases a put option while holding

shares of the underlying stock from a previous purchase is employing a

“protective put”.

5. Covered Call : The covered call is a strategy in which an investor writes a call

option contract while at the same time owning an equivalent number of

shares of the underlying stock. If this stock is purchased simultaneously

with writing the call contract the strategy is commonly referred to as a buy-

write. If the shares are already held from a previous purchase it is

commonly referred to an overwrite.

6. Cash Secured Put : According to the terms of a put contract, a put writer is

obligated to purchase an equivalent number of underlying shares at the

put’s strike price if assigned an exercise notice on the written contract.

Many investors write puts because they are willing to be assigned and

acquire shares of the underlying stock in exchange for the premium

received from the put’s sales. For this discussion, a put writer’s position will

be considered as “cash-secured” if he has on deposit with his brokerage

firm a cash amount sufficient to cover such a purchase of all option

contracts.

35

TVS MOTORS PVT.LTD.

7. Bull Call Spread : Establishing a bull call spread involves the purchase of a

call option on a particular underlying stock, while simultaneously writing a

call option on the same underlying stock with the same expiration month,

at a higher strike price. Both the buy and the sell sides of this spread are

opening transactions, and are always the same number of contracts.

8. Bear Put Spread : Establishing a bear put spread involves the purchase of a

put option on a particular underlying stock, while simultaneously writing a

put option on the same underlying stock with the same expiration month,

but with a lower strike price. Both the buy and the sell sides of this spread

are opening transactions, and are always the same number of contracts.

9. Caller : A caller can be established by holding shares of an underlying stock,

purchasing a protective put and writing a covered call on that stock. The

option portions of this strategy are referred to as a combination. Generally,

the put and the call are both out-of- the-money when this combination is

established, and have the same expiration month.

36

TVS MOTORS PVT.LTD.

37