HARITA SEATING SYSTEMS LIMITED

HARITA SEATING SYSTEMS LIMITED

Twelfth Annual Report 2007-2008

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Board of Directors

H Lakshmanan, Chairman

S I Jaffar AliMartin GrammerC N Prasad

President

S Thiagarajan

Secretary & Compliance Officer

S Srinivasan

Audit Committee


S I Jaffar AliC N Prasad

Investors’ Grievance Committee


S I Jaffar AliC N Prasad

Bankers

State Bank of IndiaIndustrial Finance BranchAnna Salai, Chennai 600 002

Shares listed with

The Madras Stock Exchange Ltd.The Bangalore Stock Exchange Ltd.

Auditors

Sundaram & SrinivasanChartered Accountants,23, Sir C.P. Ramaswamy Road,Alwarpet, Chennai 600 018.

Registered Office

“Jayalakshmi Estates”No.29 (Old No.8)Haddows RoadChennai 600 006Tel.: 044-28272233Fax: 044-28257121

Works

Hosur - Thally RoadBelagondapalliKrishnagiri DistrictTamilnaduPIN 635 114Tel.: 04347-233445Fax: 04347-233460

Plot A2 MIDC Industrial areaRanjangaon, Koregaon village,Shirur taluk, Pune DistrictMaharashtraPIN - 412210Tel.: 02138-660742

Chaurasia Road, Pargana PlassiVillage Bhatian, Thesil NalagarhSolan District,Himachal PradeshPin: 174 101Tel.: 01795-220562

Contents Page No.

Financial highlights 2

Notice to the shareholders 3

Directors’ report to the shareholders 7

Report on Corporate Governance 16

Auditors’ report to the Shareholders 29

Balance Sheet 32

Profit and Loss Account 33

Schedules 34

Notes on accounts 41

Cash flow statement 53

General business profile 55

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Financial Highlights

Year ended 2002 2003 2004 2005 2006 2007 2008

Profit & Loss Account

Sales 6025.27 7873.25 9202.06 11798.82 13736.82 15547.33 19104.87

Other income 38.45 48.71 90.81 117.93 143.80 149.41 271.76

Total income 6063.72 7921.96 9292.87 11916.75 13880.62 15696.74 19376.63

Gross profit before

interest,depreciation & tax 490.58 730.09 894.03 987.92 1292.85 1363.01 1772.58

Depreciation 164.11 174.99 212.76 269.39 315.28 386.34 532.93

Profit before Interest & tax 326.47 555.10 681.27 718.53 977.57 976.67 1239.65

Interest 39.97 10.11 0.35 0.28 31.78 75.75 286.90

Profit before taxation 286.50 544.99 680.92 718.25 945.79 900.92 952.75

Profit after taxation 182.06 341.80 437.69 451.78 638.79 583.92 641.25

Balance Sheet

Net fixed assets 1172.41 1329.35 1564.07 1878.80 2337.96 4380.64 5546.86

Investment 0.06 0.06 661.12 367.96 407.87 350.00 437.38

Net Current Assets 1066.82 924.23 305.29 598.89 1420.19 1866.44 725.77

Total 2239.29 2253.64 2530.48 2845.65 4166.02 6597.08 6710.01

Share Capital 388.45 388.45 388.45 388.45 388.45 388.45 776.90

Reserves & Surplus 1227.27 1464.20 1767.96 2082.72 2522.17 2902.57 2930.94

Net Worth 1615.72 1852.65 2156.41 2471.17 2910.62 3291.02 3707.84

Loan Funds 521.02 265.25 240.10 220.04 1091.96 3125.62 2639.73

Deferred tax liability 102.55 135.74 133.97 154.44 163.44 180.44 362.44

Total 2239.29 2253.64 2530.48 2845.65 4166.02 6597.08 6710.01

Earnings per share (Rs.) 4.69 8.80 11.20 11.75 16.44 15.03 8.25

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

Book value per share (Rs.) 41.59 47.69 55.51 63.62 74.93 84.72 47.73

Return on capital employed % (ROCE)* 15.20 27.80 30.40 28.40 25.80 18.70 19.40

Return on net worth % (RONW) ** 11.20 19.70 21.80 19.50 23.70 18.80 18.30

Fixed asset turnover (No. of times) # 5.02 6.29 6.36 6.85 6.52 4.63 3.85

Working capital turnover (No. of times)@ 5.39 7.91 14.97 26.10 13.61 9.46 14.74

Gross profit as % of total income 8.10 9.20 9.60 8.30 9.30 8.70 9.10

Profit before tax as % of total income 4.70 6.90 7.30 6.00 6.80 5.70 4.90

* 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.

(Rupees in lakhs)

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Notice to the shareholdersNOTICE is hereby given that the Twelfth 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 Thursday, the 7th August 2008 at

10.30 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 2008 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.




RESOLVED THAT pursuant to the recommendation

of the board of directors of the Company, a

dividend of Rs. 2.50 per share on 77,69,040 equity

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

sum of Rs. 194.23 lakhs be and is hereby declared

for the year ended 31st March 2008 and the same

be paid to those shareholders whose names

appear in the register of members of the

Company as at the close of 1st August 2008.




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.




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




RESOLVED THAT Mr. C N Prasad be and is hereby

appointed as a Director of the Company in the

vacancy caused by the resignation of

Mr C Narasimhan, in terms of Articles of Association

of the Company and applicable provisions of the

Companies Act, 1956.




RESOLVED THAT subject to the provisions of section

269 read with 198, 309, 387 and Schedule XIII of

the Companies Act, 1956 (the Act) and such other

applicable provisions, if any, of the Act,

Mr. S Thiagarajan, President of the Company be

and is hereby appointed as Manager, for the

purpose of the Act for a period of 5 years

commencing from 1st December 2007, on such

terms and conditions of his appointment and

remuneration, as per the agreement entered into

between him and the Company, a copy of which

is placed before this meeting and initialled by the

Chairman for the purpose of identification thereof,

with the powers of the board of directors of the

Company to determine quantum of individual items

of his remuneration, payable at such intervals, within

the overall limits, for each financial year so as not

to exceed 5% of the net profits of the Company,

calculated in accordance with the provisions of

section 349 and 350 of the Companies Act, 1956.

RESOLVED FURTHER THAT the remuneration within

the aforesaid limits, as mentioned below, payable

to Mr. S Thiagarajan, as Manager under the Act,

for a period of five years from 1st December 2007,

subject to the condition that the board of directors,

from time to time, may determine the quantum

of individual items of his remuneration for each

financial year not exceeding the maximum limits

specified in each category as follows, be and is

hereby approved.

(1) Salary and commission on profits or

performance linked incentive or bonus:

Subject to a ceiling of Rs.50 lacs per annum

(2) Perquisites and allowances:

Perquisites like unfurnished accommodation /

house rent allowance, conveyance

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allowance, medical reimbursement, leave

travel assistance for self and family, club fees,medical / personal accident insurance premia

and other benefits or amenities, in aggregaterestricted to a sum not exceeding Rs.25 lakhsper annum; and

Provision of telephone at residence including

payment of local calls and long distance callsshall not be included in the computation ofperquisites for the purpose of calculation of

the said ceiling.

Personal long distance calls on telephone forprivate purposes shall be recovered by theCompany.

(3) Contribution to statutory funds:

Company’s contribution to provident fund and

superannuation fund not exceeding 27% ofthe salary or such other percentage of thesalary as may be fixed by the Central

Government from time to time; and Gratuityas per the rules of the Company.

Company ’s contribution to provident,superannuation and gratuity funds, shall not

be included for computation of limits ofperquisites and allowances as aforesaid.

(4) Pension benefits:

Entitled to pension, if any, payable afterretirement, as per the rules of the Company

RESOLVED FURTHER THAT the salary, commission on

profits or performance linked incentive, perquisitesand other allowances/benefits, contributionspayable at such quantum and such intervals, as

may be decided by the board of directors, fromtime to time, for each financial year, in aggregate,shall always be well within the limits prescribed under

section 198 read with 309 and 387 of the Act.

RESOLVED FURTHER THAT in the event of loss orinadequacy of profits in any financial year, theboard of directors of the Company, shall revise

the remuneration payable to Mr. S Thiagarajan asManager during such financial year in suchmanner as may be agreed to between the board

of directors of the Company and Mr. S Thiagarajanand within the limits prescribed in this behalf underSchedule XIII of the Companies Act, 1956.

RESOLVED FURTHER THAT Mr. S Thiagarajan, as

manager of the Company shall be subject to thesuperintendence, control and directions of theboard of directors of the Company and he shall

have all such powers, duties and responsibilities interms of the provisions of the Act and that may be

vested in him by the board of directors of theCompany, from time to time.

By order of the Board

Chennai S SRINIVASAN2nd July 2008 Secretary

Registered office:

“Jayalakshmi Estates”

29, Haddows Road

Chennai 600 006

Notes:

1. A member entitled to attend and vote at themeeting is entitled to appoint one or moreproxies to attend and vote instead of himselfand the proxy or proxies so appointed neednot be a member or members as the case maybe of the Company. The instrument appointingthe proxy and the power of attorney or otherauthority, if any, under which it is signed or anotarially certified copy of that power orauthority shall be deposited at the registeredoffice of the Company not later than 48 hoursbefore the time fixed for holding the meeting.

2. The explanatory statement, pursuant to section

173(2) of the Companies Act, 1956 in respect ofthe special business Nos.5 & 6 as set out aboveare annexed hereto.

3. The register of members and the share transfer

books of the Company will remain closed from1st August 2008 to 7th August 2008 (both daysinclusive).

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

of the Companies Act, 1956, the dividendsdeclared by the Company which remainunclaimed for a period of seven years will be

transferred to the Investor Education and ProtectionFund (IEPF) established by the Central Governmenton the due dates. The particulars of due dates for

transfer of such unclaimed dividends to IEPF arefurnished in the report on Corporate Governanceforming part of the annual report.

Members who have not encashed their dividendwarrants are requested to make their claim bysurrendering the unencashed warrants

immediately to the Company.

5. Members holding shares in physical form, in theirown interest, are requested to dematerialise theshares to avail the benefits of electronic holding /

trading.

6. Members are requested to notify to the Companyimmediately any change in their address.

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Members holding shares in depository are

requested to advise change of address to theirdepository participants.

7. As a measure of economy, copies of the annualreport will not be distributed at the annual general

meeting. Members are, therefore, requested tobring their copies of the annual report to themeeting.

8. Members are requested to affix their signature at

the space provided on the attendance sheetannexed to the proxy form and hand over the slipat the entrance of the meeting hall.

9. In terms of clause 49(IV)(G) of the Listing Agreementwith the stock exchanges, a brief resume ofdirectors, who are proposed to be re-appointed /

appointed in this meeting, nature of their expertisein specific functional areas, their other directorshipsand committee memberships and their

shareholdings and relationships with other directorsin the Company are given below:

I. Mr. S I Jaffar Ali

Born on 30th November 1938, Mr. S I Jaffar Ali is apost-graduate in economics from Madras

University and also a law graduate from MadrasLaw College. He was co-opted as a director ofthe Company by the board on 22nd January 1997.

He held senior positions in the Indian Police service

and retired in the year 1995 as Inspector Generalof Police. He is a member of the audit committeeand shareholders /investors’ grievance committee

of the board of directors of the Company.

He does not hold any position as a director or amember of any committee of directors of anyother Company.

He does not hold any share in the Company andhe is not related to any other directors of theCompany.

II. Mr. C N Prasad

Born on 1st July 1947, Mr. C N Prasad is a Graduate

in Mechanical Engineering and post graduate inManufacturing Technology from CranfieldUniversity, UK. He is also an MBA in Technology

Management from La Trobe University, Australia.

His experience includes 16 years in HindustanAeronautics Limited in various areas ofmanufacturing, production engineering and

project management, 3 years in Kinetic Honda,Indore as Works Manager and 15 years in Rane

Engine Valves Limited (REVL) as Director and CEO.

During his tenure as CEO of REVL a strong quality

orientation and customer centricity were brought

into that Company that resulted in several

accolades and achievements. REVL was one of

the earliest companies in India to secure ISO 9000

certification in 1993, won the best vendor awards

from Maruti and Deutz, Germany. The export

business and turnover grew several folds.

He joined Sundaram-Clayton Limited (SCL) in

February 2003 as President and elevated as Group

President effective June 2006 with overall

responsibilities for SCL.

During his tenure as President of SCL, the Company

has won several awards and recognitions from

customers and external agencies including the

following:

· ACMA Gold trophy for “Manufacturing

Excellence” in 2003

· Frost & Sull ivan, India Manufacturing

Excellence Award – Overall Gold in 2005.

· Frost & Sull ivan, India Manufacturing

Excellence Award – Super Platinum in 2007

· JIPM – TPM Category 1 Award.

He has been awarded by ITM Business School for

ITM Awards for Corporate Excellence in 2006 and

has also been awarded Best CEO by QCFI for the

year 2007.

He is the member of the audit committee and

investors’ grievance committee of the board of

directors of the Company. He does not hold any

share in the Company and he is not related to

any other directors of the Company. Details of

his other directorships and membership/

chairmanship of committees are given below:

Sl. Name of the Position CommitteeNo. Company held membership/

chairmanship

1. Auto (India) Director —EngineeringLimited

2. WABCO-TVS Whole Member-

(INDIA) time Shareholders/Limited Director Investors’

Grievance

Committee

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

The following explanatory statement sets out all thematerial facts relating to the special businessmentioned in the accompanying notice dated 2nd July

2008 and shall be taken as forming part of the notice.

Item no. 5

Mr. C N Prasad was appointed as a director, in termsof Section 262 of the Companies Act, 1956, in thecasual vacancy caused by the resignation of Mr. C

Narasimhan, Director effective 23rd April 2008. Mr C NPrasad will hold office upto this annual generalmeeting, when Mr C Narasimhan would have retired

in the normal course.

Notice has been received from a member of theCompany under section 257 of the Companies Act,

1956, along with a deposit of Rs.500/- signifying hisintention to propose the candidature of Mr C N Prasadfor the office of director and to move the resolution as

set out in item no.5 of this notice.

The directors recommend the resolution as set out initem no. 5 of the notice to be approved as an ordinary

resolution by the shareholders.

None of the directors except Mr. C N Prasad is deemedto be interested or concerned in the resolution.

Item no. 6

In terms of the provisions of section 269 of the

Companies Act, 1956, every public Company, or aprivate Company which is a subsidiary of a publicCompany, having a paid-up share capital of Rs. 5

crores or more, should have a managing or whole-time director or a manager.

The Company is required to appoint such managerial

person in terms of the provisions of section 269 of theCompanies Act, 1956 (“the Act”) since the paid upcapital of the Company increased from Rs.3,88,45,200

consisting of 38,84,520 equity shares of Rs.10/- each

to Rs.7,76,90,400 consisting of 77,69,040 equity sharesof Rs.10/- each following the allotment and issue ofbonus shares in the ratio of 1:1 to the shareholders of

the Company.

Such managerial person in place, on appointment,

will be subject to the superintendence, control anddirections of the board of directors of the Company,from time to time.

Accordingly, Mr S Thiagarajan, President of theCompany was appointed as “Manager” for thepurpose of the Act for a period of five years from 1st

December 2007 in terms of the agreement enteredinto with him by the Company, subject to the approvalof the shareholders in the ensuing annual general

meeting of the Company.

The directors therefore recommend the resolution asset out in item no. 6 of the notice to be approved as

an ordinary resolution by the shareholders.

None of the directors is deemed to be interested orconcerned in the resolution.

Inspection of documents:

Copies of the resolutions passed by the board of

directors of the Company on 6th December 2007 andthe agreement entered into between the Companyand Mr. S Thiagarajan are available for inspection at

the registered office of the Company as mentionedabove between 10.00 AM and 12.00 PM on all workingdays except Saturdays.

By order of the Board

Chennai S SRINIVASAN

2nd July 2008 Secretary

Registered office:

“Jayalakshmi Estates”

29, Haddows Road

Chennai 600 006

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Directors’ report to the shareholders

The directors herewith present the twelfth annual

report of the Company and the audited accounts

for the year ended 31st March 2008.

FINANCIAL HIGHLIGHTS

Rs. in lakhs

Year ended Year ended

31.3.2008 31.3.2007

Sales and other income 19,376.63 15,696.74

Gross profit before interestdepreciation and tax 1,772.58 1,363.01

Interest 286.90 75.75

Depreciation 532.93 386.34

Profit before tax 952.75 900.92

Provision for taxation (includingFBT and Deferred Tax) 311.50 317.00

Profit after tax 641.25 583.92

Add: Surplus brought forward 239.12 198.14

Transfer from investmentallowance reserve - 50.00

Profit available for appropriation 880.37 832.06

Appropriations:

Tax relating to earlier years (2.81) 4.20

Proposed dividend 194.23 -

Interim dividend paid - 174.80

Tax on dividend 33.01 24.52

Transfer to general reserves 425.00 389.42

Surplus in profit and loss

account 230.94 239.12

DIVIDEND

The board of directors of the Company have

recommended a dividend of Rs. 2.50 per share for

the year 2007-2008, absorbing a sum of Rs.194.23

lakhs subject to the approval of the shareholders in

the ensuing annual general meeting.

BONUS SHARES

During the year, the board of directors of the

Company, on 19th November 2007, allotted

38,84,520 equity shares of Rs. 10/- each as bonus

shares in the ratio of one equity share of Rs. 10/-

each aggregating Rs. 38,845,200/- to every equity

share of Rs. 10/- each held by the shareholders as

on the record date namely 16th November 2007

by capitalizing an equal amount of Rs. 38,845,200/-

standing to the credit of the general reserve

account of the Company. After the allotment, the

said bonus shares were listed in the Madras Stock

Exchange Ltd. (MSE) and Bangalore Stock Exchange

Ltd. (BgSE). MSE and BgSE also accorded their

trading permissions to deal / trade in Company’s

new shares with effect from 11th December and

13 th December 2007, respectively. Thus, the

Company ensured the compliance with the

provisions of Chapter XV of SEBI (Disclosure and

Investor Protection) Guidelines 2000 for

implementation of the proposal of bonus shares

recommended by the Board in their meeting held

on 28th July 2007 i.e. within six months.

APPROPRIATIONS

Out of the profits available for appropriation a sum

of Rs. 425 lakhs has been transferred to General

Reserves. The surplus of Rs. 230.94 lakhs has been

retained in the profit and loss account of the

Company.

PERFORMANCE

During the year under review, the sales and other

income increased from Rs.156.96 crores to

Rs.193.77 crores registering a growth of 23%. Profit

before interest, depreciation and tax has recorded

a growth of 30 % in 2007-08 over the previous year,

the net profit rose by 10% from Rs.5.84 crores to

Rs.6.41 crores.

The financial and operational performance of the

Company for the year under review along with other

material disclosures are furnished herein below in

the management discussion and analysis report as

a separate statement in terms of clause 49 of the

Listing Agreement.

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The Company provides seating solutions fortransport applications and has established aleading position in the country catering to allsegments of the automotive industry.

INDUSTRY STRUCTURE AND DEVELOPMENTS

India continued to be one of the fastest growingeconomies of the world. During the year 2007-08,the Indian economy grew at a robust pace for thefifth consecutive year. Real GDP growth wasestimated to be 8.7%. While agricultural and alliedactivities grew by 2.6%, Industrial sector's growth at8.6% was moderated against 10.6% achieved inthe previous year. Manufacturing and servicesectors continued to maintain the growthmomentum. Despite rupee appreciation, exportscontinued to show a healthy growth of 23% in dollarterms in 2007-08.

As far as automobile industry is concerned, the bussegment had an impressive 29% growth over theprevious year followed by LCVs at 13% and Cars &MUVs at 12% while two wheelers remained flat.Tractor was the only segment which failed to keeppace with other segments and was down by 2% in2007-08.

PRODUCT- WISE PERFORMANCE

During the year 2007-08, the Company's sales grewby 23% over the previous year. All segments ofseating business registered growth. Driven by driverseats, which posted an impressive growth of 91%in 2007-08 over the previous year, LCV seats grewby 20%, tractor seats by 20%, bus passenger seatsby 37%, Cars & MUV by 179% . The two wheelerseats registered a negative growth of 17% over theprevious year. Exports also contributed to theincrease in top line with a substantial growth of 42%over the previous year.

During the year 2007-08, the Company upgradedthe driver seats for heavy commercial vehicles andconstruction equipment to meet the AIS 023regulations of the Government and commencedsupplies to OE customers successfully. The effortstaken by the Company in speedily meeting the AIS023 regulation was well appreciated by the OEcustomers and resulted in higher sales in thissegment. Besides this, the Company alsodeveloped and productionised seat components

MANAGEMENT DISCUSSION AND ANALYSISREPORT

for export markets and introduced variants ofexisting bus passenger seat models to meetcustomer requirements.

Company's new technology products like microcellular urethane products and long fibre injectionmoulded components for automotive applicationshave been well received by customers and pilotsupplies were effected. Commercial productionof these products are expected to pick upmomentum this year. Being a new technology,we expect longer lead time for the markets toevaluate and accept these products in a big way.

OPPORTUNITIES AND THREATS

Year 2007-08 witnessed a number of MNCs joininghands with local players in forming JVs forcommercial vehicles. With this, we expect thecommercial vehicle market to grow in terms of highvalue high-end sophisticated vehicles withinternational standards to be launched in Indianmarket in the near future. Being an establishedleader in this segment, we expect the Company tocapitalize on these developments. Efforts havealready been made to develop high-end seats forthese applications.

Having established a leading position in tractor seatsegment in the domestic market, the company isnow focusing on export market and is committedto meet customer requirements in terms of quality,cost, delivery and service.

The year 2007-08 also witnessed anotherphenomenon of public sector transportundertakings launching low floor city buses,upgradation of existing fleet and induction of high-end buses for long distance travelling. Increasedconcern on public transportation shown by publicsector undertakings has also resulted in higher off-take of passenger carriers. The introduction of Volvobuses revolutionized the concept of safety andcomfort in long distance travelling. This has broughta new outlook among other leading busmanufacturers, who also started making Volvo likebuses. This has helped the company with greateropportunities in the high end bus passengersegment. The Company's plant in HimachalPradesh is ideally situated to cater to the needs ofthe customers in the northern India. Whileproduction of two wheeler and tractor seats have

9


already commenced there, production of buspassenger and commercial vehicle seats will startin the current year.

The government continued to focus onstrengthening of infrastructure in the country. As aresult, there was a heavy demand for earth movingequipment. The Company has already developedsuitable seats for this application and expect greateropportunities for business in this segment.

The new polyurethane technology productsdeveloped and productionised by the Companyoffers wide variety and choice to the customers forvarious applications.

As regards threats, a few multi-national seatmanufacturing companies in the segment of buspassenger and commercial vehicle seats haveestablished manufacturing facilities in India with thehelp of local partners. Competitors are expectedto launch products for high end vehicles.

Innovation is the key to success and the Companyis fully committed to focus on product innovationby developing newer cost effective productsprecisely targeted at customer needs in order tomeet the threats posed by competition and toleverage the opportunities offered by the market.The Company's well established products and in-house design capabilit ies with proximity tocustomers will enable the Company to retain &improve its market share through well definedstrategies.

RISKS AND CONCERNS

The alarming increase in the prices of crude oil andsteel in the recent months have affected theoperating margin of the industry as a whole andthe Company is no exception to this. Polyurethanechemical costs escalated due to increasing globalcrude oil prices. The steep increase in steel pricesalso has impacted input costs seriously, therebyaffecting operating margins. The tight monetarypolicy followed by Reserve Bank of India to controlinflation and money supply had a negative impacton the lending rate of banks, which has alsoaffected the margins.

Our business is directly linked to the performanceof the automotive industry, which to a greater extentdepends on credit availability. In view of the tightmonetary policy, we expect slow down in creditgrowth thereby affecting the off-take of vehicles.

BUSINESS OUTLOOK AND OVERVIEW

Having already established a leading position intractor seats in domestic market, the Company isfocusing on export markets and has developednew models for a leading OE manufacturer in theUnited States. Higher volume of business from thisopportunity is expected in the current year as wellas in the coming years.

Upgradation of urban bus fleet and introduction ofdeluxe/ultra deluxe buses by state transportcorporations as well as high-end long distance busesby the private operators offers yet another scope forincrease in volume of bus passenger and driver seats.

The locational advantage in having a manufacturingunit in Himachal Pradesh will facilitate speedysupplies with cost benefits and timely service to OEMs,STUs, bus body builders and tourist bus operators innorthern and eastern parts of the country and isexpected to improve market penetration in theseareas and additional business for the company. Thenew polyurethane technology products developedin Hosur plant coupled with upgradation of existingproducts to meet AIS 023 regulations are expectedto bring in additional business to the Company inthe current year.

As regards exports, there is a good scope forincreasing exports of driver seats for lawn andgarden tractors and seat components forcommercial vehicles. The Company is focusingon meeting customer expectations with regard toquality, cost and delivery.

OPERATIONS REVIEW

During the year under review, income fromoperations increased by 24% to Rs.194 crores fromRs.157 crores in the previous year 2006-07. Whileprofit before interest, depreciation and tax grew by30%, profit after tax improved by 10% to Rs.6.41crores from Rs. 5.84 crores due to higher interestcost and depreciation.

a) Quality

● ISO/TS 16949 Recertification - Feb ‘07

● ISO/TS 16949 Surveillance - Dec ‘07

● ISO 14001:2004 Recertification - Mar ‘08

b) Focus on Cost

In order to stay competitive, the Company has

undertaken measures like value engineering,

10


alternate materials and processes, elimination of non-value added activities, productivity improvement,

waste elimination, process and material optimization etc.

c) Financial performance

The financial and operational performance of the Company for the year 2007-08 as compared to the

previous year 2006-07 is furnished :

Particulars Year ended Year ended31st March 2008 31st March 2007

Rs.in lakhs % Rs. in lakhs %Income

Sales 19,104.87 99.00 15,547.33 99.00

Other income 271.76 1.00 149.41 1.00

Total Income 19,376.63 100.00 15,696.74 100.00

Raw materials and components consumed 13,693.65 71.00 11,302.83 72.00

Staff cost 1,613.90 8.00 1,247.31 7.90

Stores and tools consumed 228.56 1.00 166.42 1.10

Power and fuel 236.72 1.00 154.33 1.00

Repairs and maintenance 296.17 2.00 188.44 1.20

Other expenses 1,535.05 8.00 1,274.40 8.10

Interest 286.90 1.00 75.75 0.50

Depreciation 532.93 3.00 386.34 2.50

Total expenditure 18,423.88 95.00 14,795.82 94.30

Profit before tax 952.75 5.00 900.92 5.70

Provision for taxation - Current tax 109.00 1.00 279.00 1.80

- Deferred tax 182.00 1.00 17.00 0.10

- Fringe benefit tax 20.50 0.00 21.00 0.10

Profit after tax 641.25 3.00 583.92 3.70

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

UOM 2007-08 2006-07

EBITDA / turnover % 9.10 8.70

Profit before tax / turnover % 4.90 5.70

Return on capital employed % 19.40 18.70

Return on net worth % 18.30 18.80

Earnings per share Rs. 8.25 15.03

11


d) 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.

e) 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 new recruits 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 2008, the Company had 704

employees on its rolls.

f) Awards & Accolades

A team of employees in QCC won gold medal

in ICQCC, China during October 2007. The

same team also won country's best award in

ICQCC, China during October 2007.

SOCIAL RESPONSIBILITY

The Company has a vision to contribute to all round

development of the rural areas around the

Company. Some of the activities engaged by the

Company are mentioned below:

a) Providing material support to a government

school for improving the infrastructure in the

area.

b) Assisting Self Help Groups in Belagondapalli

village near our Factory in Hosur to supply

and sell food items. Buying these items for

Company's canteen on a continuous basis.

c) In order to encourage students in education

and motivate them to do well in their studies,

the Company offers scholarships to

meritorious students of schools in nearby

villages.

In addition to the above, the Company has been

regularly conducting blood donation camps.

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.

12


DIRECTORS

During the year under review, Mr. C Narasimhan,director resigned from the board, effective23rd April 2008 for personal reasons. The board ofdirectors wish to place on record their appreciationof the services rendered by Mr. C. Narasimhanduring his tenure as director of the Company.

In terms of the articles of association of the Company,Mr. C N Prasad was appointed as a director effective23rd April 2008 in the casual vacancy caused by theresignation of Mr. C Narasimhan. Mr C N Prasad willhold office upto this annual general meeting, whenMr. C Narasimhan would have retired in the normalcourse.

A notice in terms of Section 257 of the CompaniesAct, 1956 has been received from a member ofthe Company signifying his proposal for theappointment of Mr. C N Prasad as a director.

During the year, Mr. S I Jaffar Ali, director, retires atthe ensuing annual general meeting of thecompany and being eligible, offers himself for re-appointment.

The brief resume of the aforesaid Directors and otherinformation have been detailed in the noticeconvening annual general meeting of theCompany. Appropriate resolutions for theirappointment and re-appointment are beingplaced for approval of the share holders at theensuing annual general meeting. Your directorsrecommend their appointment/re-appointment asdirectors of your Company.

AUDITORS

M/s.Sundaram and Srinivasan, CharteredAccountants, Chennai, retire at the ensuing annualgeneral meeting and are eligible for re-appointment.

STATUTORY STATEMENTS

Appointment of Manager for the purpose of theCompanies Act 1956.

During the year, Mr. S. Thiagarajan president of theCompany was appointed as Manager under theCompanies Act 1956 effective 1

st December 2007

subject to the approval of the shareholders in theensuing annual general meeting of the Companyon such terms and conditions as explained in theexplanatory statement attached to the notice

convening the ensuing annual general meeting ofthe Company.

Conservation of energy, technology absorptionand foreign exchange earnings and outgo

As per the requirements of Section 217(1)(e) of theCompanies Act, 1956, read with the Companies(Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988, the information regardingconservation of energy, technology absorption andforeign exchange earnings and outgo are given inthe Annexure I to this report.

Particulars of employees

As required under the provisions of section 217(2A)of the Companies Act, 1956, read with theCompanies (Particulars of Employees) Rules, 1975as amended, the names and other particulars ofthe employees are set out in the Annexure II to thisreport.

However, as per the provisions of section 219(1)(b)(iv)of the Companies Act, 1956, the report andaccounts are being sent to all the shareholders ofthe Company excluding the aforesaid informationon employees. Any shareholder interested inobtaining such particulars may write to the CompanySecretary at the Registered office of the Company.

Directors’ Responsibility Statement

Pursuant to the requirement of Section 217(2AA)ofthe Companies Act, 1956 with respect to directors’responsibility statement, it is hereby confirmed:

(i) that in the preparation of annual accounts forthe financial year ended 31st March, 2008, theapplicable accounting standards had beenfollowed along with proper explanation relatingto material departures;

(ii) that the directors had selected such accountingpolicies and applied them consistently andmade judgements and estimates that werereasonable and prudent so as to give a trueand fair view of the state of affairs of theCompany at the end of the financial year andof the profit of the company for the year underreview;

(iii) that the directors had taken proper andsufficient care for the maintenance ofadequate accounting records in accordance

13


with the provisions of the Companies Act, 1956for safeguarding the assets of the Companyand for preventing and detecting fraud andother irregularities; and

(iv) that the directors had prepared the accountsfor the financial year ended 31st March 2008on a “going concern basis”.

CORPORATE GOVERNANCE

The Company has complied with the provisions ofListing Agreement concerning CorporateGovernance and a report to this effect is attachedto this report as required by Clause 49 of the ListingAgreement with the Stock Exchanges. A certificateissued by the statutory auditors of the Companyregarding compliance of conditions of CorporateGovernance, is also annexed to the said report.

The president and the general manager (finance)secretary of the Company have certified to theboard on financial statements and other mattersin accordance with clause 49(V) of the Listing

Agreement pertaining to CEO/CFO certification forthe financial year ended 31st March 2008.

ACKNOWLEDGEMENT

The directors acknowledge the support and co-operation received from the promoters, Harita Groupand Grammer Group.

The directors thank the customers, suppliers, financialinstitutions and bankers for their valuable support andassistance.

The directors wish to place on record their appreciationof the sincere efforts of all the employees of theCompany during the year under review.

The directors also thank the shareholders for theircontinued faith in the Company.

For and on behalf of the Board

Chennai H LAKSHMANAN2nd July 2008 Chairman

14


A. CONSERVATION OF ENERGY

(1) Measures taken

• Introduced energy saving luminaries for

street lighting

• Implemented the usage of LPG in identified

areas.

• Modified the control circuit of the vacuum

system of polyurethane foaming process

• Introduced auto switching on–off controls for

lighting system.

• Introduced automatic power factor

controller for power and distribution system.

• Implemented waste water heat recovery

system for boilers.

The above measures have resulted in an annual

savings of Rs. 13.15 Lakhs

(2) Proposed measures

• Energy saving in four wheeler mould heat

control system

• Logic control circuit for exhaust system

• Modification in pneumatic system

• Introduction of magnetic resonator for fuels

The above measures will result in an annual

saving of about Rs.5 lakhs.

B. TECHNOLOGY ABSORPTION

Research & Development

1. SPECIFIC AREAS IN WHICH R&D IS CARRIED OUT

IN THE COMPANY

i) Developed new variants of driver seats for

tractors and commercial vehicles to

enhance comfort and safety.

ii) Developed PU composites (long fibre

injection moulded parts) for automot ive

applications as an alternate to sheet metal

parts.

Annexure I to the Directors’ report for the year ended 31st March 2008Information pursuant to section 217(1) (e) of the Companies Act, 1956

iii) Developed PU elastomer spring aids for

automotive applications to increase

product performance and reliability.

iv) Developed driver and passenger seats for

export markets.

v) Developed low height mechanical

suspended seats for construction

equipment for improved comfort and

aesthetics.

vi) Developed 4 new variants in bus passenger

segment for domestic segment.

vii) Developed and productionised 3 wheeler

seats with simplified manufacturing process.

viii) 50 products for commercial vehicles and

bus passenger segment were made AIS023

compliant.

2. BENEFITS DERIVED AS A RESULT OF ABOVE

MEASURES:

i) Enhanced market presence in bus

passenger, commercial vehicle segments.

ii) New technology materials and processes

implemented for better product quality.

iii) Enhanced aesthetics, safety and comfort

levels to drivers in construction equipment.

iv) Penetration in export market for commercial

vehicle seating.

3. FUTURE PLAN OF ACTION:

i) Development polyurethane composites for

automotive application and bus interiors.

ii) Introduce technology products in bus

passenger, driver and tractor segments to

cater to high-end segment.

iii) Standardization of parts and sub-assemblies

for identified product segments for cost

competitiveness.

15


iv) Development of new products for exports -

commercial vehicles and hydraulic

excavators.

4. EXPENDITURE ON R&D

Rs. in lakhs

(i) Capital 28.80

(ii) Recurring 161.23

Total 190.03

(iii) Total expenditure as a

percentage of turnover 0.98%

5. TECHNOLOGY ABSORPTION, ADAPTATION AND

INNOVATION:

(i) Efforts in brief:

a) Development of alternate materials

and processes to reduce the material

cost.

b) Exploration of various technologies in

polyurethane foaming.

(ii) Benefits derived as a result of the above

are:

• Optimisation of raw material usage for

weight reduction and simplified

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.

(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 2007-08 new orders for

export of driver and passenger seat

components for commercial vehicles

were received and executed.

ii) The Company is continuing its efforts to

increase the current volume of export of

driver and passenger seats to USA and

Europe.

b) Total foreign exchange used and earned:

Foreign exchange

earnings: Rs. 1,157.14 lakhs

Foreign exchange

outgo: Rs. 985.51 lakhs

For and on behalf of the Board

Chennai H LAKSHMANAN

2nd July 2008 Chairman

16


1. Company’s philosophy on code ofGovernance

The Company believes in transparency,professionalism and accountability, which arethe basic principles of corporate governance.The Company would constantly endeavor toimprove on these aspects.

2. Board of Directors

i. Composition and category of directors

As of 31st March 2008, the board consists offour directors. All are non-executive directors.Out of the four directors, three directors areindependent directors.

Chairman is a non-executive andindependent director. The number ofindependent directors is more than onethird of its total strength. Thus, the Companymeets with the requirements of compositionof the board as per the listing agreement.

REPORT ON CORPORATE GOVERNANCE Subsequently, the board co-opted Mr. C NPrasad as an independent director of theCompany in the casual vacancy caused bythe resignation of Mr. C Narasimhan effective

23rd April 2008.

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

During the financial year 2007-2008, theBoard met 5 times on 26th April 2007, 28th

July 2007, 31st October 2007, 6th December2007 and 10th January 2008.

iii. Particulars of attendance of directors at

the board meetings held during the

financial year 2007-2008 and at the last

annual general meeting, number of

directorships and committee

chairmanships / memberships held by the

directors in all companies as per

declaration furnished by them are given

in the table below:

Name Cate- Attendance Number of directorships andgory Particulars committee memberships /

chairmanships

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

@

chairman-General Ships* shipsMeeting

H Lakshmanan NE-I 4 Yes 19 8 4

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

C Narasimhan ($) NE-I 2 Yes 9 3 1

Martin Grammer NE-NI 2 Yes - - -

C N Prasad (#) NE-I -NA- 2 1 -

* includes private companies@

includes committees where the director is also a chairman.# appointed as a Director w.e.f. 23rd April 2008$ resigned as a director w.e.f. 23

rd April 2008

NE : Non Executive director

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 5such committees as required under clause 49 of the listing agreement.

17


iv. Access to information and updation to

directors:

The required information as enumerated inAnnexure 1A to Clause 49 of the ListingAgreement is made available to the board ofdirectors of the Company for discussions andconsideration at board meetings. The boardalso reviews the declaration made by thedirector and the secretary of the Companyregarding compliance with all applicable lawson a quarterly basis.

Functional heads are present whenevernecessary. They apprise all the directors aboutthe developments and made presentations tothe members of board and the auditcommittee at meetings. Apart from this, theobservations of audit carried out by the internalauditors and the details of payment of statutoryliabilities submitted by the statutory auditors ofthe Company are placed and discussed withfunctional heads.

v. Code of Business Conduct and Ethics for

members of the Board of directors and Senior

Management:

The Company has in place a Code of Conductfor Business and Ethics (The Code) for membersof the board and senior management of theCompany. The Code has also been displayedon the Company ’s websitewww.haritaseating.com. All the members of theboard and senior management of theCompany have confirmed compliance with theCode for the year ended 31st March 2008. Theannual report contains a declaration to thiseffect signed by the president and the secretaryof the Company who is the compliance officerof the Code.

vi. Resume of directors

In terms of clause 49(IV)(G) of the ListingAgreement with the stock exchanges, a briefresume of directors, proposed to be re-appointed,nature of their expertise in specific functional areas,their other directorships and committeememberships and their shareholdings and theirrelationships with other directors of the Companyare provided in the notice convening twelfthannual general meeting of the Company.

3. Audit Committee

3.1 Brief description of terms of reference

The terms of reference stipulated by the board ofdirectors of the Company to the audit committeeare as contained in clause 49 of the listingagreement and section 292A of the CompaniesAct, 1956. The role and responsibilities of the auditcommittee include, inter alia,

a. Overseeing of the Company ’s financialreporting process and the disclosure of itsfinancial information.

b. Reviewing with the management, quarterly andannual financial statements before submissionto the board for approval with particularreference to the matters specified in the ListingAgreement.

c. Reviewing the related party transactions.

d. Reviewing the reports of Internal Auditors andensuring that adequate follow up action istaken by the management on observationsand recommendations made by the internalauditors.

e. Recommending to the board the appointment/ re-appointment / replacement of the statutoryauditors and the audit fees payable and feespaid for other services rendered by the statutoryauditors.

f. Reviewing with the management, theperformance of statutory and internal auditors.

g. Reviewing with the management, external andinternal auditors, the adequacy of internalcontrol systems.

h. Reviewing the adequacy of internal auditfunctions and systems, structure, reportingprocess, audit coverage and frequency ofinternal audit.

i. Discussion with external auditors regarding theaudit plan as well as post-audit discussion toascertain any area of concern.

j. Ascertainment of reasons for substantialdefaults in the payment in case of non-payment of declared dividends and creditors.

k. Review of management discussion / analysisof financial conditions and results of operationsand other matters specified under clause 49of the Listing Agreement.

18


l. Review of financial statements, in particularthe investments made by the unlistedsubsidiaries.

m. In addition, review of such other functions asenvisaged under Section 292A of theCompanies Act, 1956 and Clause 49 of theListing Agreement with Stock Exchanges.

3.2 Composition, name of members and thechairman

As of 31st March 2008, the audit committeeconsists of the following independent directors:

Sl. Name of the Directors Status

No. M/s

1. H Lakshmanan, Chairman Independent director

2. C Narasimhan, Member (#) Independent director

3. S I Jaffar Ali, Member Independent director

(#) resigned as a Director w.e.f. 23rd April 2008

Subsequently the board appointed Mr. C N Prasad,independent director, as a member of the auditcommittee effective 23rd April 2008 in the place ofMr. C Narasimhan who ceased to be a member ofthe audit committee, consequent to his resignationas a director of the Company effective from that date.

Mr. H Lakshmanan, independent director, is thechairman of the audit committee. Mr. S Srinivasan,Secretary of the Company acts as the Secretary ofthe Audit Committee. Chairman of the AuditCommittee was present at the last annual generalmeeting held on 13th September 2007.

3.3 Meetings and attendance during the year

Date of the Members present

meeting M/s

26.04.2007 H Lakshmanan and S I Jaffar Ali

28.07.2007 H Lakshmanan and S I Jaffar Ali

31.10.2007 H Lakshmanan, C Narasimhanand S I Jaffar Ali

10.01.2008 C Narasimhan and S I Jaffar Ali

4. Disclosures

(i) Disclosures on materially significant related partytransactions that may have potential conflictwith the interests of the Company at large:

During the year the Company has not enteredinto any transaction of material nature with thedirectors, their relatives or management whichwere in conflict with the interest of the Company.

(ii) The transactions with the related parties, namelyits promoters, its subsidiaries and associatecompanies of routine nature have beenreported elsewhere in the annual report as perthe Accounting Standard (AS 18) issued by theInstitute of Chartered Accountants of India.

There are no transactions with the related parties,namely its promoters, associate companies etc.,

(iii) Details of non-compliance(s), if any by theCompany:

The Company has complied with all theirrequirements of the Stock Exchange(s) orSecurities Exchange Board of India on mattersrelated to Capital Markets, as applicable fromtime to time. There were no penalties imposedor strictures passed against the Company bythe statutory authorities in this regard.

(iv) The members of senior management havemade disclosures to the board relating to allmaterial, financial and other transactions statingthat they did not have personal interest thatcould result in a conflict with the interest of theCompany at large.

(v) The Company follows Accounting Standardsissued by the Institute of Chartered Accountantsof India / Company (Accounting Standards)Rules, 2006 and in the preparation of financialstatements, the Company has not adopted atreatment different from that prescribed in anyAccounting Standard.

(vi) The President (CEO) and Head of Finance (CFO)have certified to the Board on financialstatements and other matters in accordancewith clause 49(V) of the Listing Agreementpertaining to CEO/CFO certification for thefinancial year ended 31st March 2008.

(vii) The Company has complied with all applicablemandatory requirements in terms of clause 49of the Listing Agreement. The non-mandatoryrequirements have been adopted to the extentand in the manner as stated under theappropriate headings detailed elsewhere in thisreport.

19


5. Remuneration to directors

(i) Remuneration Committee:

The board has not set up a remunerationcommittee, as the need for the same hasnot arisen.

(ii) Non-executive directors’ compensationand disclosures:

The directors do not draw any remunerationfrom the Company other than sitting feesfor attending each meeting of the boardand committees thereof. The Companypays sitting fees of Rs.2,500/- each to all thenon-executive directors for attending eachmeeting of the board and/or committeethereof which is within the limits prescribedunder the Companies Act, 1956.

(iii) Particulars of sitting fees paid to directors

during the financial year 2007-2008.

Name of the Directors(*) Sitting fees paid

M/s (in Rs.)

H Lakshmanan 35,000

C Narasimhan 17,500

S I Jaffar Ali 42,500

Martin Grammer 5,000

Total 1,00,000

(*) - None of the Directors of the Company is relatedto each other.

Presently, the Company does not have a schemefor grant of any stock option either to the executivedirectors or employees.

(iV) Details of shareholdings of non-executivedirectors in the Company as on 31

st

March

2008.

Name of the No. of shares Percentagedirector held (face to the paidM/s value of up capital

Rs. 10/- each (%)

H Lakshmanan 2,020 0.03

C Narasimhan – –

S I Jaffar Ali – –

Martin Grammer 10,87,600 14.00

C N Prasad – –

There are no other particular pecuniaryrelationships or transactions of the non-executivedirectors vis-à-vis of the Company.

6. Subsidiaries:

The Company does not have any subsidiaryand hence, the appointment of anindependent director of the Company andreview of matters specified under sub-clause IIIof clause 49 of the Listing Agreement by theboard do not arise.

7. Investors’ Grievance Committee:

i) The investors’ grievance committee consists ofthree members viz., M/s. H Lakshmanan, non-executive chairman of the board,C Narasimhanand S I Jaffar Ali. Mr H Lakshmanan is thechairman of the committee. The Committeemet 5 times during the year.

Subsequently, the board appointedMr. C N Prasad, independent director, as amember of the Investors’ grievance committeeeffective 23 rd April, 2008 in the place ofMr. C Narasimhan who ceased to be a memberof the Investors’ grievance committee effective23rd April, 2008 consequent to his resignationas a director of the Company.

ii) As required by Securities Exchange Board of India(SEBI), Mr. S. Srinivasan, secretary of the Companyhas been appointed as the compliance officer.For any clarification / complaint, shareholdersmay contact Mr. S Srinivasan, secretary orMr. V N Venkatanathan, special officer of theCompany.

iii) The committee oversees and reviews all mattersconnected with share transfers, issue ofduplicate share certificates and other issuespertaining to shares. The committee also looksinto the redressal of investors’ grievancespertaining to transfer of shares, non-receipt ofbalance sheet, non-receipt of declareddividends, etc. The Company, as a matter ofpolicy, disposes investor complaints within aspan of seven days.

iv) Complaints received and redressed duringthe year 2007-2008:

S.No. Nature of Complaints No. ofComplaints

1. Non receipt of share certificates 1

2. Non receipt of dividend warrants 2

3. Other complaints –

Total 3

20


v) All the complaints were resolved and as on 31st

March 2008, there was no investor complaintpending.

All requests for dematerialization of shares werecarried out within the stipulated time period andno share certif icates was pending fordematerialization as on 31st March 2008.

vi) Secretarial auditA qualified practicing Company secretarycarried out a secretarial audit on a quarterly

basis to reconcile the total admitted capital withNational Securities Depository Limited (NSDL)and Central Depository Services (India) Limited(CDSL) and the total issued and listed capitaland placed the report for the perusal of theBoard. The secretarial audit report confirms thatthe total issued and listed capital is inagreement with the total number of shares inphysical form and the total number of

dematerialized shares held with NSDL and CDSL.

8. General Body Meeting:

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

Year Location Date Time

2004-05 Kasturi Srinivasan Hall (Mini Hall) 05.09.2005 2.00 P.M.The Music Academy, New No. 168,Old No. 306, T T K Road (Mowbrays Road),Chennai 600 014.

2005-06 Kasturi Srinivasan Hall (Mini Hall) 18.09.2006 10.15 A.MThe Music Academy, New No.168,Old No.306, T T K Road (Mowbrays Road),Chennai 600 014.

2006-07 Kasturi Srinivasan Hall (Mini Hall) 13.09.2007 10.15 A.MThe Music Academy, New No.168,Old No.306, T T K Road (Mowbrays Road),Chennai 600 014.

(ii) Special resolutions passed in the previous3 annual general meetings (AGM)

During the last three years, namely 2004-2005 to 2006-2007, approval of theshareholders obtained by passing specialresolutions in respect of the following:

Year Subject matter Date of AGMof specialresolutions

2004-2005 Nil 05.09.2005

2005-2006 Nil 18.09.2006

2006-2007 Nil 13.09.2007

(iii) Special resolutions passed last year

through postal ballot:

During the year 2006-2007, pursuant toSection 192A of the Companies Act, 1956,

the shareholders of the Company had

approved by means of postal ballot through

special resolutions for amending certain

clauses of the articles of association of the

Company, dealing with, inter alia,

reclassification in the composition of the

definition of promoter group, namely Harita

Group and Grammer Group, nomination of

directors on the board of directors of the

Company by each group.

At the extra-ordinary general meeting held

on 28th March 2007, Mr. H Lakshmanan,

Chairman declared that the special

resolution approving the amendments to

the articles of association, as circulated to

the shareholders, without any modification,

was passed with overwhelming majority

through postal ballot by the shareholders

as detailed below:

21


Particulars No. of Postal No. of Votes

Ballot Forms cast

received back by

the company

Postal Ballot Forms

Received/ 335 29,60,155

Votes Cast - Total

Less: Invalid 29 10,822

Valid 306 29,49,333

For the Resolution

(in figures) 303 29,48,753

For the Resolution

(in %) 99.02 99.98

Against the resolution

(in figures) 3 580

Against the resolution

(in %) 0.08 0.02

3. None of the subjects placed before the

shareholders of the Company in the ensuing

annual general meeting require approval of

shareholders by a postal ballot.

9. Means of communication:

(i) Quarterly Results

The unaudited quarterly financial results of theCompany were published in the English andvernacular newspapers. These are not sentindividually to the shareholders.

(ii) Newspapers wherein results normally published

The results are normally published in the Englishnewspaper viz. “The Economic Times” and theTamil version in a Tamil daily viz., “Makkal Kural”.

(iii) Website

The Company has created a web site addressas www.haritaseating.com. In terms of clause51 of the Listing Agreement pertaining toelectronic data information filing and retrieval(EDIFAR), the unaudited results and the quarterlydistribution schedules as filed with the stockexchanges are uploaded in SEBI-EDIFAR website.These details are also published in theCompany’s website. The Company makes use

of its website for publishing official news releaseand presentations, if any, made to institutionalinvestors / analysts.

(iv) Management discussion and Analysis report

As required by clause 49 of the ListingAgreement, the management discussion andanalysis report has been given as part of thedirectors’ report.

10. General Shareholder information:

i Annual General Meeting

Date and time : Thursday, the 7th August,2008 at 10.30 A.M

Venue : Kasturi Srinivasan Hall(Mini Hall)The Music AcademyNew No.168, OldNo.306, T T K Road(Mowbrays Road)Chennai 600 014

ii Financial year : 1st April to 31st March

Financial Calendar (2008-2009) (Tentative)

Annual General : August/ September 2009

Meeting (next year)

Financial reporting for : Financial Calendar

the quarter ending

30th June 2008 : 30th of July 2008

30th September 2008 : 15th to 31st of October 2008

31st December 2008 : 15th to 31st of January 2009

31st March 2009 : 15th to 30th of April 2009

iii Period of book closure

From 1st August 2008 to 7th August 2008(both days inclusive).

The board of directors have recommended adividend of Rs. 2.50/- per share for the year2007-2008, absorbing a sum of Rs. 194.23 lakhs,for approval of the shareholders in the ensuingannual general meeting.

v Listing on Stock Exchanges

Name of the stock exchange Stock code

Madras Stock Exchange (MSE) –

Bangalore Stock Exchange, (Bgst) HARITASEAT

22


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

Effective 7th January 2005, the equity shares of theCompany are regularly traded in BSE-INDONext

under scrip code 590043.

(Note : Annual listing fees for the year 2008-2009

have been paid to the above Stock Exchanges)

(vi) 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 2007 to 31st March

2008 in Madras Stock Exchange Limited and

Bangalore Stock Exchange Limited. 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 2007 219.90 178.00

May 2007 198.00 165.20

June 2007 187.45 151.10

July 2007 186.85 158.10

August 2007 222.75 163.00

September 2007 235.20 190.50

October 2007 202.00 170.00

November 2007 287.50 102.80

December 2007 123.95 103.00

January 2008 134.80 85.50

February 2008 95.00 80.15

March 2008 90.00 55.05

(vii) Share transfer system and RTA:

a. With a view to rendering prompt and efficientservice to the investors, M/s Sundaram-ClaytonLimited (SCL), a registered share transfer agentin category II, has been appointed as the ShareTransfer Agent of the Company (STA). Theshareholders have also been advised about thisappointment of STA to handle share registry workpertaining to both physical and electronic

segment of the Company effective 1st October2004.

b. All matters connected with the share transferboth physical and electronic, dividends andother matters are handled by the STA locatedat the address mentioned elsewhere in thisreport.

c. Shares lodged for transfer are normallyprocessed within 10 days from the date oflodgement, if the documents are clear in allrespects. All requests for dematerialization ofsecurities are processed and the confirmationis given to the depositories within 7 days.Grievances received from investors and othermiscellaneous correspondence on change ofaddress, mandates etc. are processed by theSTA within 7 days.

d. Pursuant to Clause 47(c) of the ListingAgreement with Stock Exchanges, certificates,on half-yearly basis, have been issued by aCompany Secretary-in-practice for duecompliance of share transfer formalities by theCompany.

e. Pursuant to SEBI (Depositories and Participants)Regulations, 1996, certificates have also beenreceived from a Company Secretary-in-practice for timely dematerialization of theshares of the Company and for conducting asecretarial audit on a quarterly basis forreconciliation of the share capital of theCompany.

f. The Company, as required under clause 47(f)of the Listing Agreement, has designated thefollowing e-mail IDs, [email protected] / (STA)[email protected] (complianceofficer) for the purpose of registering complaints,if any, by the investors and expeditious redressalof their grievances.

g. The shareholders are, therefore, requested tocorrespond with the STA for transfer / transmissionof shares, change of address and queriespertaining to their shareholding, dividend etc.at their address given in this report, any changeof names and queries pertaining to the

shareholding and dividends etc.

23


ix. Distribution of Shareholding as on 31st March 2008

Shareholding No. of % to total No. of % to total(Range) shares shares members members

Upto 500 6,14,405 7.91 3,047 81.43

501-1000 3,38,852 4.36 421 11.25

1001-2000 2,80,343 3.61 190 5.08

2001-5000 1,62,095 2.09 53 1.42

5001-10000 1,02,061 1.31 14 0.37

10001 & above 62,71,284 80.72 17 0.45

Total 77,69,040 100.00 3,742 100.00

(viii) Shareholding pattern as on 31st March 2008

Particulars No. of %shares held to total

(A) Shareholding of Promoter andPromoter Group1. Indian - Bodies Corporate 40,72,400 52.422. Foreign - Individuals 10,87,600 14.00

Total Shareholding of Promoterand Promoter GroupTotal (A) 51,60,000 66.42

(B) Public Shareholding

1. Institutions

a) Mutual Funds 5,11,072 6.58

b) Banks, Financial Institutions,Insurance companies,(Central, State GovernmentInstitutions, Non-Govt. Institutions) 200 -

Subtotal Institutions 5,11,272 6.58

(2) Non-Institutions

(a) Bodies Corporate 6,54,075 8.42

(b) Individuals <1 lakh 14,15,779 18.22

(c) Individuals > 1 lakh 10,600 0.15

(d) NRI - Repatriable 5,150 0.06

(e) NRI - Non-Repatriable 12,164 0.15

Subtotal Non-Institutions 20,97,768 27.00

Total (B) 26,09,040 33.58

Grand Total (A) + (B) 77,69,040 100.00

24


x. Dematerialisation of shares:

Out of 26,09,040 equity shares of Rs.10/- each held by persons other than Promoters, 15,67,046

shares have been dematerialised as on 31st March 2008 accounting for 60.06%

xi Issue of GDRs/ADRs

The 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.

xii Plant Locations

a) Hosur : Belagondapalli, Thally Road

Hosur 635 114.

Tel : 04347 233445

Fax: 04347 233460

Email: [email protected]

b) Ranjangoan : Plot No.A2, MIDC Industrial area

Ranjangaon, Koregaon Village

Shirur taluk, Pune District

Maharashtra

Tel: 02138 660742

c) Himachal Pradesh : Chaurasia Road, Pargana Plassi

Village Bhatian, Thesil Nalagarh

Solan District,

Himachal Pradesh

Pin: 174 101

Tel : 01795-220562

xiii 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 Limited

Company and any query on annual New No.22, Old No.31

report Railway Colony, 3rd Street

Mehta Nagar, Chennai 600 029.

Tel : 044 - 2374 1889, 2374 2939

Fax : 044 - 2374 1889

Email : [email protected]

: [email protected]

(ii) For inivestor grievance and general : [email protected]

correspondence : [email protected]

25


11.Non-Mandatory Disclosure:

The non-mandatory requirements have beenadopted to the extent and in the manner asstated under the appropriate headings detailedbelow:

(i) The Board:

No policy has been fixed on tenure ofindependent directors.

The non-executive directors of the Companyare liable to retire by rotation and if eligible,offer themselves for re-appointment. Nospecific tenure has been fixed for theindependent directors.

(ii) Remuneration committee:

The board has not set up a remunerationcommittee as the need for the same hasnot arisen.

(iii) Shareholder rights:

The half-yearly results of the Company arepublished in English and Vernacularnewspapers and are also displayed on theCompany ’s website namelywww.haritaseating.com and in the officialwebsite of SEBI, namelywww.sebiedifar.nic.in. The results are not sentto the shareholders individually.

(iv) Audit Qualifications:

The statutory financial statements of theCompany are unqualified.

(v) Training of board members / Mechanism forevaluating non-executive directors:

The present board of directors consists ofwell-experienced and responsible membersof society. All the directors are well aware ofbusiness model as well as the risk profile ofthe business parameters of the Companyand their responsibilities as directors. Hence,in the opinion of the board, they do notrequire any further training.

(vi) Mechanism for evaluating non-executiveBoard members:

All the non-executive directors haveexpertise in their respective functional areas

and in the opinion of the board, theirperformance do not require any furtherevaluation.

(vii) Whistle blower policy

The Company has not adopted whistleblower policy. However, the Company haspermitted free access to any personnel toapproach the management on any issue.

12. Request to investors:

● Investors holding shares in physicalmode are requested to kindly note thefollowing procedure:

o Investors are requested tocommunicate bank details, thechange of address, if any, directly tothe STA of the Company located atthe address mentioned above.

o In case of loss / misplacement ofshare certificates, investors shouldimmediately lodge a FIR / Complaintwith the police and inform theCompany with original or certifiedcopy of FIR / acknowledged copy ofcomplaint for marking stop transferof shares.

o For expeditious transfer of shares,investors should fill in complete andcorrect particulars in the transferdeed. Wherever applicable,registration number of Power ofAttorney should also be quoted in thetransfer deed at the appropriateplace.

o Investors, whose signature hasundergone any change over aperiod of time, are requested tolodge their new specimen signatureduly attested by a bank manager tothe STA of the Company.

o Investors of the Company who havemultiple folios in identical names arerequested to apply for consolidationof such folios and send the relevantshare certificates to the Company.

● Nomination in respect of shares – Section109A of the Companies Act, 1956

26


provides facility for making nominationsby shareholders in respect of theirholding of shares. Such nominationgreatly facilitates transmission of sharesfrom the deceased shareholder to his /her nominee without having to gothrough the process of obtainingsuccession certificate / probate of thewill etc. It would, therefore, be in the bestinterests of the shareholders holdingshares in physical form registered as asole holder to make such nominations.Investors, who have not availednomination facility, are requested to availthe same by submitting the nominationform. This form will be made availableon request. Investors holding shares indemat form are advised to contact theirDP’s for making nominations.

● As required by SEBI, investors may furnishdetails of their bank account numberand name and address of the bank forincorporating the same in the warrants.This would avoid wrong credits beingobtained by unauthorized persons.

● Investors holding shares in electronic formare requested to deal only with theirdepository participants in respect of anychange of address, nomination facilityand furnishing bank account number etc.

● Investors are requested to note thatNational Securities Depository Limited

(NSDL) and Central Depository Services

(India) Limited (CDSL) have announced

the launch of SMS alert facility for demataccount holders whereby investors willreceive alerts for debits/credits (transfers)

to their demat accounts a day after thedebit. These alerts will be sent to thoseaccount holders who have provided their

mobile numbers to their DepositoryParticipants (DPs). No charge will belevied by NSDL/CDSL on DPs for providing

this facility to investors. This facility will beavailable to investors who request for thesame and provide their mobile numbers

to the DPs. Further information is availableon the website of NSDL and CDSL,namely www.nsdl.co.in and

www.cdslindia.com respectively.

● Investors, who have not encashed their

dividend warrants in respect of dividenddeclared from the financial year ended31st March 2001, are requested to

contact the STA of the Company andsurrender their warrants for payment.

● Investors are requested to note that thedividend, not claimed for a period ofseven 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 isgiven below:

27


DECLARATION PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT REGARDING

ADHERENCE TO THE CODE OF BUSINESS CONDUCT AND ETHICS.

To

The Shareholders of the Company

Harita Seating Systems Limited

29, Haddows Road

Chennai - 600 006

On the basis of the written representations received from members of the board and senior managementpersonnel in terms of the relevant provision of clause 49 of the Listing Agreement, we hereby certify that boththe members of the board and the senior management personnel of the Company have affirmedcompliance with the respective provisions of the Code of Business Conduct and Ethics of the Company aslaid down by the board of directors for the year ended 31st March 2008.

Chennai S THIAGARAJAN S SRINIVASAN

2nd

July, 2008 Manager cum President Secretary

PARTICULARS OF UNCLAIMED DIVIDEND

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

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

2005-2006 18.09.2006 24.10.2006 24.10.2013

2006-2007 22.03.2007 27.04.2007 27.04.2014

(Interim)

Reminders are sent to Investors periodically advising them to encash the unclaimed dividends beforetransferring the unclaimed dividends to IEPF. Investors will be advised well in advance before transferring theunclaimed dividends to IEPF. Investors are requested to note that, as per the Companies Act, 1956, unclaimeddividends once transferred to IEPF cannot be claimed.

28


AUDITORS CERTIFICATE ON COMPLIANCE OF THE PROVISIONS OF THE CODE OF

CORPORATE GOVERNANCE IN THE LISTING AGREEMENT.

To

The Shareholders of Harita Seating Systems

Limited, Chennai - 600 006

We have examined the compliance of conditionsof corporate governance by Harita Seating SystemsLimited, Chennai 600 006 for the year ended 31st

March 2008, as stipulated in Clause 49 of the ListingAgreement of the said Company with StockExchanges.

The compliance of conditions of CorporateGovernance is the responsibility of Company’smanagement. Our examination was limited toprocedures and implementation thereof, adoptedby the Company for ensuring the compliance ofthe conditions of the Corporate Governance. It isneither an audit nor an expression of opinion onthe financial statements of the Company.

In our opinion and to the best of our informationand according to the explanations given to us, we

certify that the Company has complied with theconditions of Corporate Governance as stipulatedin the abovementioned Listing Agreement.

We state that no investor grievances are pendingfor a period exceeding one month against theCompany as per the records maintained by theInvestors’ Grievances Committee.

We further state that such compliance is neither anassurance as to the future viability of the Companynor the efficiency or effectiveness with which themanagement has conducted the affairs of theCompany.

For SUNDARAM & SRINIVASANChartered Accountants

M BALASUBRAMANIYAMChennai Partner2nd July, 2008 Membership No.F7945

29


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

the year ended 31st March 2008

We have audited the attached balance sheet ofHarita Seating Systems Limited, Chennai 600 006as at 31st March 2008, the profit and loss accountfor the year ended on that date annexed theretoand the cash flow statement for the year endedon that date. These financial statements are theresponsibility of the company’s management. Ourresponsibility is to express an opinion on thesefinancial statements based on our audit.

1. We conducted our audit in accordance withauditing standards generally accepted in India.Those standards require that we plan andper form the audit to obtain reasonableassurance about whether the financialstatements are free of material misstatement.An audit includes examining, on a test basis,evidence supporting the amounts anddisclosures in the financial statements. An auditalso includes assessing the accountingprinciples used and significant estimates madeby management, as well as evaluating theoverall presentation of the financial statements.We believe that our audit provides a reasonablebasis for our opinion.

2. As required by the Companies (Auditor’s Report)Order, 2003 and amended by the Companies(Auditor ’s report) (Amendment) Order, 2004issued by the Central Government in terms ofsub-section (4A) of section 227 of theCompanies Act, 1956, we enclose in theAnnexure a statement on the matters specifiedin 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 andexplanations, which to the best of ourknowledge and belief were necessary forthe purposes of our audit.

(ii) In our opinion, proper books of account, asrequired by law, have been kept by thecompany so far as appears from ourexamination of those books.

(iii) The balance sheet, profit and loss accountand cash flow statement referred to in this

report are in agreement with the books ofaccount.

(iv) In our opinion, the balance sheet, profit andloss account and cash flow statement dealtwith by this report comply with theaccounting standards, referred to in sub-section (3C) of section 211 of theCompanies Act, 1956.

(v) On the basis of written representationsreceived from the directors, as on 31st March2008 and taken on record by the board ofdirectors, we report that no director isdisqualified from being appointed as adirector of the company in terms of clause(g) of sub-section (1) of section 274 of theCompanies Act, 1956 on the said date.

(vi) In our opinion and to the best of ourinformation and according to theexplanations given to us, the said accountsread together with the notes thereon givethe information required by the CompaniesAct, 1956, in the manner so required andgive a true and fair view in conformity withthe accounting principles generallyaccepted in India,

a. in so far as it relates to the balance sheet,of the state of affairs of the company asat 31st March 2008,

b. in so far as it relates to the profit and lossaccount, of the profit for the year endedon that date, and

c. in so far as it relates to the cash flowstatement, of the cash flows for the year

ended on that date.

For SUNDARAM & SRINIVASAN Chartered Accountants

M BALASUBRAMANIYAMChennai Partner2nd July 2008 Membership No.F7945

30


(i) (a) The company has maintained properrecords showing full particulars includingquantitative details and situation of fixedassets.

(b) All the assets have not been physicallyverified by the management during theyear but there is a regular programmeof verification at reasonable intervals,which, in our opinion, is reasonablehaving regard to the size of thecompany and the nature of its assets.No material discrepancies were noticedon such verification.

(c) The assets disposed off during the yearare not substantial and therefore do notaffect the going concern status of thecompany.

(ii) (a) The inventory other than in-transit havebeen physically verified at reasonableintervals during the year by themanagement. In our opinion, thefrequency of such verif ication isadequate. In respect of inventory withthird parties which have not beenphysically verified, there is a process ofobtaining confirmation from suchparties.

(b) In our opinion and according to theinformation and explanations given tous, the procedures for physicalverification of inventory followed by themanagement were reasonable andadequate in relation to the size of thecompany and the nature of its business.

(c) In our opinion, the company hasmaintained proper records of inventory.The discrepancies between the physicalstocks and the book stocks were notmaterial and have been properly dealtwith in the books of account.

(iii) (a) During the year, the company has notgranted any loan, secured or unsecured

to companies, firms or other partiescovered in the register maintained underSection 301 of the Companies Act,1956.

(b) During the year the company has nottaken any loan, secured or unsecuredfrom companies, firms or other partiescovered in the register maintained underSection 301 of the Companies Act, 1956.

(iv) In our opinion and according to theinformation and explanations given to us, thereare adequate internal control procedurescommensurate with the size of the companyand the nature of its business with regard topurchase of inventory, fixed assets and for thesale of goods and services. During the courseof our audit, no major weakness has beennoticed in the internal control system.

(v) (a) Based on the audit procedures appliedby us and according to the informationand explanations provided by themanagement, we are of the opinion thatthe contracts or arrangements that needto be entered in the register maintainedin pursuance of Section 301 of theCompanies Act, 1956 have beenproperly entered in the said register;

(b) In our opinion and according to theinformation and explanations given tous, the transactions entered in the registermaintained under Section 301 duringthe financial year, exceeding rupees fivelakhs in respect of each party have beenmade at prices which are reasonablehaving regard to prevailing market pricesat the relevant time;

(vi) The company has not accepted any depositfrom the public.

(vii) The company has an internal audit systemwhich, in our opinion, is commensurate withthe size of the company and nature of itsbusiness;

Auditors’ report to the shareholders

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

31st March 2008

31


(viii) We have broadly reviewed the books of accountmaintained by the company pursuant to therules made by the Central Government underSection 209 (1)(d) of the Companies Act, 1956for maintenance of cost records and are of theopinion that, prima facie, the prescribedaccounts and records have been made andmaintained;

(ix) (a) According to the records provided to us,the company is regular in depositingundisputed statutory dues includingProvident Fund, Employees StateInsurance, Investor Education andProtection Fund, Income Tax, Sales Tax,Wealth Tax, Service Tax, Customs Duty,Excise Duty, Cess and other materialstatutory dues with the appropriateauthorities. The provisions of EmployeesState Insurance Act are not applicable tothe company’s units at Belagondapallinear Hosur and Ranjangaon near Pune.

(b) According to the information andexplanations given to us, no undisputedamounts payable in respect of IncomeTax, Wealth Tax, Sales Tax, Service Tax,Customs Duty, Excise Duty and Cess werein arrears, as at 31st March 2008 for aperiod of more than six months from thedate they became payable.

(c) According to information andexplanations given to us, the followingare the details of the disputed dues, thatwere not deposited with the concernedauthorities:

Name of the Nature of Amount Forum wherestatute dues (Rs. in Lakhs) dispute is pending

Income Income tax 0.98 Commissioner of

Tax Act, 1961 Income-tax

(Appeals), Chennai

Central Excise Excise duty 2.18 Assistant

Commissioner of

Central Excise, Hosur

II Division, Hosur

Service tax Service tax 6.48 Commissioner of

Central Excise,

Chennai III

(x) The company neither has accumulated lossesas at the end of the financial year nor has

incurred cash losses during the financial yearand in the immediately preceding year.

(xi) Based on our verification and according to theinformation and explanations given by themanagement, the company has not defaultedin repayment of dues to its bank.

(xii) Based on our examination and according tothe information and explanations given to us,the company has not granted loans andadvances on the basis of security by way ofpledge of shares, debentures and othersecurities;

(xiii) The company is not a chit / nidhi / mutual benefitfund / society and as such clause (xiii) of theOrder is not applicable;

(xiv) The company is not dealing or trading in shares,securities, debentures and other investments;

(xv) Based on our examination and according tothe information and explanation given by themanagement, the company has not given anyguarantee for loans taken by others from anybanks or financial institutions.

(xvi) The term loan availed by the company wasutilized for the purpose for which the loan wasobtained.

(xvii) On the basis of our examination, the companyhas not used funds raised on short term basisfor long term investment.

(xviii) During the year the company has not allottedany shares on preferential basis to parties andcompanies covered in the register maintainedunder section 301 of the Companies Act, 1956.

(xix) During the year, the company has not issuedany secured debentures;

(xx) During the year, the company has not raisedany money by public issue;

(xxi) Based on the audit procedures adopted andinformation and explanations given to us by themanagement, no fraud on or by the companyhas been noticed or reported during the courseof our audit.

For SUNDARAM & SRINIVASANChartered Accountants

M BALASUBRAMANIYAMChennai Partner2nd July 2008 Membership No.F7945

32


Balance Sheet as at 31st March, 2008Rupees in Lakhs

Schedule As at As at

Number 31.03.2008 31.03.2007

I SOURCES OF FUNDS

1. Shareholders’ funds

a) Capital I 776.90 388.45

b) Reserves and surplus II 2,930.94 2,902.573,707.84 3,291.02

2. Loans

a) Secured loans III 1,950.86 2,021.01

b) Unsecured loans IV 688.87 1,104.612,639.73 3,125.62

3. Deferred tax liability 362.44 180.44

(net of deferred tax asset)

TOTAL 6,710.01 6,597.08

II APPLICATION OF FUNDS

1. Fixed assets V

a) Gross block 8,114.09 4,781.78

b) Less: depreciation 2,814.18 2,283.41

c) Net block 5,299.91 2,498.37

d) Capital work - in - progress VI 246.95 1,882.27

2. Investments VII 437.38 350.00

3. Current assets, loans and advancesa) Interest accrued on deposits 0.35 2.83

b) Inventories VIII 985.86 727.69

c) Sundry debtors IX 3,012.94 2,862.46

d) Cash and bank balances X 252.74 457.53

e) Other current assets XI 46.32 33.04

f) Loans and advances XII 1,401.07 1,426.64

TOTAL (A) 5,699.28 5,510.19

Less: Current liabilities and provisions

a) Current liabilities XIII 3,639.77 2,481.48

b) Provisions XIV 1,333.74 1,162.27

TOTAL (B) 4,973.51 3,643.75

Net current assets (A)-(B) 725.77 1,866.44

TOTAL 6,710.01 6,597.08

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

Chairman Director Manager cum President For SUNDARAM & SRINIVASAN

Chartered Accountants

Chennai S SRINIVASAN M. BALASUBRAMANIYAM

2nd July, 2008 General Manager - Finance & Secretary Partner

33


Profit and Loss Account for the year ended 31st March, 2008Rupees in Lakhs

Schedule Year ended Year ended

Number 31.03.2008 31.03.2007

Sales - Gross 21,841.90 17,999.57

Less: Excise duty 2,737.03 2,452.24

Net Sales 19,104.87 15,547.33

Other income XV 271.76 149.41

(A) 19,376.63 15,696.74

Raw materials and components consumed XVI 13,693.65 11,302.83

Salaries, wages, stores consumedand other expenses XVII 3,910.40 3,030.90

(B) 17,604.05 14,333.73Profit before interest, depreciationand tax (A)-(B) (C) 1,772.58 1,363.01

Interest XVIII 286.90 75.75


(D) 819.83 462.09

Profit before tax (C)-(D) (E) 952.75 900.92

Provision for taxation - income-tax 109.00 279.00- fringe benefit tax 20.50 21.00- deferred tax 182.00 17.00

(F) 311.50 317.00

Profit for the year (after tax) (E)-(F) (G) 641.25 583.92

Balance Profit brought forward 239.12 198.14

Transfer from investment allowance reserve - 50.00

Profit for the year 641.25 583.92

880.37 832.06

Tax relating to earlier years (2.81) 4.20

Proposed dividend @ 25% (Last year - Nil-) 194.23 -

Interim dividend paid - 174.80

Provision for dividend tax 33.01 24.52

Transfer to general reserves 425.00 389.42

Balance surplus carried forward to balance sheet 230.94239.12

880.37 832.06

No. of equity shares 77,69,040 38,84,520

Nominal value of equity shares Rs. 10/- 10/-

Basic and diluted earnings per share Rs. 8.25 15.03

Notes on accounts XIXH LAKSHMANAN S I JAFFAR ALI S THIAGARAJAN As per our report annexed





34


SchedulesRupees in Lakhs

As at As at

31.03.2008 31.03.2007

I CAPITAL

Authorised

1,00,00,000 Equity shares of Rs.10/- each 1,000.00 500.00

(Last year 50,00,000 Equity shares of Rs. 10/- each)

Issued, subscribed and paid up

77,69,040 Equity shares of Rs.10/- each fully paid up

(Previous year: 38,84,520 equity shares of Rs. 10/-

each fully paid up) 776.90 388.45

776.90 388.45

Out of the above 77,69,040 Equity shares, 38,84,520

Equity shares were alloted by capitalisation of General

Reserve to the extent of Rs. 388.45 lakhs (Last Year -Nil-)

II RESERVES AND SURPLUS

a) State Subsidy 15.00 15.00

b) General reserve

As per last balance sheet 2,638.45 2,249.03

Less: Amount capitalised by issue of

Bonus Shares 388.45 -

2,250.00 2,249.03

Add: Transfer from Profit and Loss account 425.00 2,675.00 389.42 2,638.45

c) Capital redemption reserve 10.00 10.00

d) Surplus i.e

Balance in profit and loss account 230.94 239.12

2,930.94 2,902.57

III SECURED LOANS

From bank

a. Secured by a first charge on fixed assets of the company 1,359.99 1,595.78

b. Secured by hypothecation of raw materials,

work - in - process, finished goods and book debts 590.87 425.23

1,950.86 2,021.01

IV UNSECURED LOANS

a) From bank -short term 521.97 929.57

b) From others -long term 166.90 175.04

688.87 1,104.61

35


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ea

r-

43.7

7376.7

34.3

042.8

832.9

822.4

66.9

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25

32

.93

386.3

4

-

253.0

61,9

51.8

016.9

8361.1

560.5

0128.4

931.8

412.5

22

,81

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8

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ts s

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/de

lete

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--

-2.0

70.0

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--

-2

.16

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l-

253.0

61951.8

014.9

1361.0

660.5

0128.4

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172.2

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516.4

6185.3

427.5

1275.6

328.3

319.4

5-

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7

Sc

he

du

les

- (Continued)

V F

IXED

ASSETS

Ru

pe

es

in L

akh

s

Tota

l

36


VII INVESTMENTS (AT COST)

a Non-trade-quoted (short-term fully paid)As at Additons Sales/ As at

1st April, during the Sub- realisation 31st March2007 year total during 2008

the year

(i) Principal Mutual Fund, Chennai

1. 3,78,229.132 units in Global Opportunities 50.00 - 50.00 50.00 -

fund - Dividend payout annually

2. 4,08,204.940 units in Global Opportunitiesfund - Dividend payout annually - 61.18 61.18 61.18 -

50.00 61.18 111.18 111.18 -(ii) HSBC Mutual Fund, Mumbai

1. 5,00,000.000 units in Unique OpportunityFund-Growth plan 50.00 - 50.00 50.00 -

2. 4,49,662.876 units in Cash fund Growth - 57.93 57.93 57.93 -

50.00 57.93 107.93 107.93 -(iii) DSP Merrill Lynch Fund Managers

Limited, Mumbai

1. 4,88,997.555 units in Small and Midcap-Regular growth 50.00 - 50.00 50.00 -

2. 3,08,639.814 units in in Liquidity fund -Regular growth - 57.49 57.49 57.49 -

50.00 57.49 107.49 107.49 -(iv) Reliance Capital Asset Management

Limited, Mumbai

1. 6,35,897.282 units in Liquid fund - TreasuryPlan Institutional Option - Growth - 116.71 116.71 116.71 -

2. 5,86,797.066 units in Equity Advantagefund - Retail Plan Growth - 60.00 60.00 60.00 -

3. 4,86,526.461 units in Liquid Fund - TreasuryPlan Institutional Option - Growth - 75.00 75.00 75.00 -

- 251.71 251.71 251.71 -(v) JM Financial Mutual Fund, Mumbai

1. 4,88,997.555 units in Contra Fund -Growth Plan - 50.00 50.00 50.00 -

2. 2,61,657.481 units in JM High LiquidityFund Growth Plan - 55.77 55.77 55.77 -

- 105.77 105.77 105.77 -

Rupees in Lakhs

Schedules - (Continued) As at As at31.03.2008 31.03.2007

VI CAPITAL WORK-IN-PROGRESS

a) Building under construction 139.97 288.49

b) Machinery under installation 106.98 1,366.24

c) Expenditure pending allocation - 227.54

246.95 1,882.27

37


Schedules - (Continued) Rupees in lakhs

As at Additons Sales/ As at1st April, during the Sub- realisation 31st March

2007 year total during 2008the year

(vi) SBI Mutual Fund, Chennai

1. 10,00,000.000 units in One India Fund

Dividend 100.00 - 100.00 100.00 -

2. 7,04,737.800 units in Magnum Insta Cashfund Cash option - 123.49 123.49 123.49 -

3. 4,25,426.916 units in Magnum Insta Cashfund Cash option - 74.56 74.56 - 74.56

4. 1,29,634.431 units in Magnum equityfund - Growth - 50.00 50.00 - 50.00

100.00 248.05 348.05 223.49 124.56

(vii) DBS Cholamandalam AssetManagement, Chennai

1. 2,44,316.537 units in Freedom Income

STP Regular - 30.54 30.54 30.54 -

2. 3,00,000 units in FMP Series 8 -Quarterly Plan - 2 Dividend - 30.00 30.00 30.00 -

3. 3,75,838.926 units in Hedged Equity

Fund Cumulative - 56.00 56.00 56.00 -

4. 4,75,970.053 units in Freedom IncomeSTP inst-cum Org - 60.55 60.55 60.55 -

5. 4,13,746.147 units in Hedged Equityfund Cumulative - 61.15 61.15 - 61.15

6. 30,65,903.780 units in Small Cap - Cumulative - 30.67 30.67 - 30.67

- 268.91 268.91 177.09 91.82

(viii) Birla Sun life Insurance, Mumbai

6,34,146.341 units in BSL InternationalEquity Plan B - Growth - 65.00 65.00 - 65.00

- 65.00 65.00 - 65.00

(ix) HDFC Standard of Life Insurance, Mumbai

3,99,861.586 units in Balanced Managed Fund - 156.00 156.00 - 156.00

- 156.00 156.00 - 156.00

b Non - trade - quoted (long-term fully paid)

Reliance Mutual Fund, Mumbai

10,00,000.000 units in Equity FundRetail plan Growth 100.00 - 100.00 - 100.00

100.00 - 100.00 - 100.00

Total 350.00 1,272.04 1,622.04 1,184.66 437.38

(Aggregate market value of all investments: Rs. 404.48 lakhs - Last year Rs. 369.53 lakhs)

38


Schedules - (Continued)Rupees in lakhs

As at As at31.03.2008 31.03.2007

VIII INVENTORIES (at cost)

* Raw materials and components 652.15 475.66* Work-in-process 137.10 78.08* Stores 46.29 32.79* Finished Goods 106.69 55.94 Goods in bond 43.63 85.22

985.86 727.69* As certified by a director

IX SUNDRY DEBTORS

a) Debts outstanding for a periodexceeding six months

- Unsecured considered good 128.13 162.81

- Unsecured considered doubtful 49.56 19.88

177.69 182.69

Less: Provision for doubtful debts 49.56 128.13 19.88 162.81b) Other debts

- Unsecured considered good 2,884.81 2,699.65

3,012.94 2,862.46

X CASH AND BANK BALANCES

a) Cash on hand 144.07 64.65

b) With scheduled bank1) Current account 105.88 335.372) Deposit account 2.79 57.51

252.74 457.53

XI OTHER CURRENT ASSETS

a) Prepaid expenses 44.61 31.20

b) Income-tax deducted at source 1.71 1.84

46.32 33.04

XII LOANS AND ADVANCES-unsecured considered good

a) Advances recoverable in cash or in kind or for

value to be received 1,354.30 1,390.83

b) Deposits 46.77 35.81

1,401.07 1,426.64

XIII CURRENT LIABILITIES

a) Sundry creditors 3,629.45 2,411.14

b) Investor Education and Protection Fund

- Unpaid dividend 10.32 70.34

3,639.77 2,481.48

39



As at/year ended As at/year ended

31.03.2008 31.03.2007

XIV PROVISIONS

a) Dividend proposed 194.23 -

b) Dividend tax 33.01 -

c) Taxation - income-tax and wealth tax 661.00 798.00

- Fringe benefit tax 66.50 46.00

d) Warranty 59.96 70.00

e) Leave pay 37.55 33.20

f) Pension 202.34 155.98

g) Others 79.15 59.09

1,333.74 1,162.27

XV OTHER INCOME

a) Scrap sales 59.67 40.43

b) Labour charges received (gross) - 2.58

(TDS-Rs. - Nil) (Last year Rs.0.06 lakhs)

c) Interest on deposits and investments (gross) 6.04 6.46

(TDS-Rs.0.27 lakhs) (Last year Rs.0.96 lakhs)

d) Profit on sale of assets 0.01 2.21

e) Profit on sale of investments 91.65 24.49

f) Miscellaneous income (see note no.7) 114.39 73.24

271.76 149.41

XVI RAW MATERIALS AND COMPONENTS CONSUMED

OPENING STOCK

Raw materials 475.66 366.48

Work-in-process 78.08 58.72

Finished goods 55.94 42.49

609.68 467.69

Purchase of raw materials and components 13,979.91 11,444.82

Total (A) 14,589.59 11,912.51

CLOSING STOCK

Raw materials 652.15 475.66

Work-in-process 137.10 78.08

Finished goods 106.69 55.94

Total (B) 895.94 609.68

Consumption (A) - (B) 13,693.65 11,302.83

40




31.03.2008 31.03.2007

XVII SALARIES, WAGES, STORES CONSUMED AND OTHER EXPENSES

a) Salaries and wages* 1,272.22 985.43

b) Contribution to provident and other funds* 118.36 83.94

c) Staff welfare expenses* 223.32 177.94

d) Stores and tools consumed 228.56 166.42

e) Power and fuel* 236.72 154.33

f ) Rent* 16.41 17.43

g) Rates and taxes* 21.63 141.50

h) Repairs and maintenance*

- Building 66.84 28.63

- Machinery 163.54 111.15

- Other assets 65.79 48.66

i) Audit fees - as auditors 6.00 4.50

- tax audit 1.00 1.00

- certification 0.65 0.65

j) Directors’ sitting fees 1.00 1.18

k) Insurance 33.26 21.25

l) Other expenses* (see note no.6) 1,454.69 1,078.54

m) Excise duty paid on samples 0.02 0.50

n) Loss on sale of assets 0.39 7.51

o) Loss on sale of investments - 0.34

3,910.40 3,030.90

[* Net of recoveries]

XVIII INTEREST

a) On fixed loan 130.13 -

b) On other loans 156.77 75.75

286.90 75.75

41


Schedules - (Continued)

Rupees in lakhs


31.03.2008 31.03.2007

XIX NOTES ON ACCOUNTS

1 Notes on Accounting Standards prescribed by The Institute

of Chartered Accountants of India

ACCOUNTING STANDARD (1) - Accounting policy

The accounts are maintained on accrual basis as a going

concern.

ACCOUNTING STANDARD (2) - Inventories

Inventories 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 flow

The cash flow statement is prepared under “indirect method”

and the same is annexed.

ACCOUNTING STANDARD (4) -Contingencies & events

occurring after balance sheet date

Details regarding contested liabilities are furnished in

Note No. 3.

ACCOUNTING STANDARD (5) - Prior period items

Freight charges - 0.06

ACCOUNTING STANDARD (6) - Depreciation

Depreciation 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%.

42


Depreciation in respect of assets acquired during the year whoseactual cost does not exceed Rs.5,000/- has been provided at100%.

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 andsale of seating systems for automotive and non automativeapplications including railway and other parts and accessoriesfor automotive and non automotive applications. Indigenoussales are recognised based on raising of invoices and deliverythereof. Export sales are recognised on the basis of date of letexport certificate. The revenue and expenditure are accountedon a going concern basis. Interest income/expenses isrecognised using the time proportion method based on ratesimplicit in the transaction.

ACCOUNTING STANDARD (10) - Fixed assets

Fixed assets including technical knowhow fees are stated atcost less accumulated depreciation.

ACCOUNTING STANDARD (11) - Effects of changes inforeign exchange rates

Purchase of imported raw materials, components, spares andcapital goods are accounted based on retirement memos frombanks. In respect of liabilities on import of raw materials,components, spare parts and capital goods which are in transitand where invoices/bills are yet to be received, the liability isaccounted based on the advance copies of documents at themarket exchange rate prevailing on the date of Balance Sheet.

Net exchange difference debited to Profit and loss account 20.21 5.22

Foreign currency loan or deposit made outside India - Nil -

The company has not entered into any transaction in derivativeinstruments and hence reporting on currency swapping/interestrate structure does 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 diminution in thecarrying cost of investments is made if such diminution is otherthan temperory in nature in the opinion of the management.

ACCOUNTING STANDARD (14) - Amalgamation Not applicable Not applicable


Rupees in lakhs


31.03.2008 31.03.2007

XIX NOTES ON ACCOUNTS-contd.,

43


ACCOUNTING STANDARD (15) - Retirement benefits

A Defined contribution plans

(a) Contributions to provident fund is in the nature of

defined contribution plan and are made to Provident

Fund maintained by Government and in the case of

senior staff, to recognised Trust maintained by the

company.

(b) Contribution to superannnuation fund is in the nature

of defined contribution plan and is remitted to Life

Insurance Corporation of India in accordance with the

scheme framed by the Corporation.

B Defined benefit plan

(a) The company extends defined benefit plans in the form

of leave salary to employees. In addition the company

also extends pension to senior managers of the

company. Provision for leave salary and pension is

made on actuarial valuation basis.

(b) The company also extends defined benefit plan in the

form of gratuity to employees. Contribution to gratuity

is made to Life Insurance Corporation of India in

accordance with the scheme framed by the

Corporation.



44



As at/year ended31.03.2008


C. Disclosure as required by Accounting Standard 15Leave Salary Pension Gratuity

(a) Expenses recognised in the Profit & Loss Account

(i) Current service cost 7.07 - 13.02

(ii) Interest cost 2.44 14.82 9.69

(iii) Expected return on plan assets - - (11.30)

(iv) Net actuarial loss /(gain) recognised in the year 0.27 31.54 21.29

Total 9.78 46.36 32.70

(b) Change in defined benefit obligation during theyear ended 31st March 2008

(i) Present value of obligation as at beginning ofthe year (01-04-2007) 33.20 155.98 137.86

(ii) Interest cost 2.44 14.82 9.69

(iii) Current service cost 7.07 - 13.02

(iv) Benefits paid (5.44) - (17.24)

(v) Actuarial loss on obligation 0.27 31.54 22.78

(vi) Present value of obligation as at the end ofthe year (31-03-2008) 37.54 202.34 166.11

(c) Change in fair value of plan assets during theyear ended 31st March 2008

(i) Fair value of plan assets at the beginning ofthe year (01-04-2007) - - 147.99

(ii) Expected return on plan assets - - 11.30

(iii) Contributions made during the year - - 22.57

(iv) Benefits paid - - (17.24)

(v) Actuarial gain on plan assets - - 1.50

(vi) Fair value of plan assets as at the end ofthe year (31-03-2008) - - 166.12

(d) Balance Sheet movements(i) Value of benefit obligations / (net assets) at the

beginning of the year (01-04-2007) 33.20 155.98 (10.13)(ii) Contributions made during the year - - (22.57)(iii) Expenses 9.78 46.36 32.70(iv) Benefits paid (5.44) - -(iv) Value of benefit 37.54 202.34 -

Note: The net asset in respect of gratuity plan isnot recognised as it is lying in irrevocable trustfund approved by Income tax authorities.

(e) Actuarial assumptions(i) Discount rate used 8.00% 9.50% 8.00%(ii) Expected return on plan assets Not Not 8.00%

applicable applicable

Estimates of future salary increases consideredin actuarial valuation takes into account theinflation, seniority and other relevant factors.

45



Rupees in lakhs


31.03.2008 31.03.2007


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.

ACCOUNTING STANDARD (17) - Segment reporting

The operations of the entity relate to manufacture of seating

system for automotive & non automotive applications including

railway, and other parts and accessories for automotive and

non automotive applications. The income from sale of other

parts and accessories being individually less than ten percent

of total revenue, no separate disclosure is made.

ACCOUNTING STANDARD (18) - Related party disclosure

Key management personnel: Mr S Thiagarajan, Manager

within the meaning of provisions of the Companies Act, 1956.

Nature of transaction: Remuneration: Rs. 19.41 lakhs

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 perthe 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 inrespect of taxable income for the period. Deferred tax liabilityand asset are recognised based on timing difference.

1 Deferred tax liability consists of:

- tax on Depreciation 623.96 427.80

- tax on expenses claimed on payment basisunder Income-tax Act, 1961 114.98 110.69

(A) 738.94 538.49

2 Deferred tax asset consists of:

- tax on provision in respect of expenditurewhich will be allowed under the Income-taxAct, 1961 only on payment basis 376.50 358.05

(B) 376.50 358.05

Deferred tax liability (net of deferred tax asset) (A)-(B) 362.44 180.44(refer Balance Sheet)

46



As at/year ended As at/year ended31.03.2008 31.03.2007


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

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

ACCOUNTING STANDARD (25) - Interim financial reporting

The company has elected to publish quarterly financial resultswhich were subject to limited review by the statutory auditors.

ACCOUNTING STANDARD (26) - Intangible assets

During the year the company acquired the following asset fallingunder the definition of intangible assets as per the AccountingStandard and the following disclosure is made in respect of thoseasset.

(1) Software

- Useful life of the asset 2 years 2 years

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

as depreciation as depreciation

- Gross carrying amount at the beginning and atthe end of the period

Opening balance 55.03 –

Addition during the year 10.93 55.03

Total 65.96 55.03

Amortised as depreciation 60.50 27.52

Closing balance 5.46 27.51

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 assetsnet of accumulated depreciation is not less than therecoverable amount of those assets. Hence there is noimpairment loss on the assets of the company.

ACCOUNTING STANDARD (29) - Provisions, contingent liabilityand contingent asset

1. Provisions

In respect of warranty obligations provision is made inaccordance with terms of sale of seat assemblies.

2. Contingent liabilities

The amount for which the company is contingently liableare disclosed in Note No. 2

3. Contingent assets which are likely to give rise to thepossibility of inflow of economic benefits -Nil- -Nil-

4. Contested liabilities are detailed in Note No.3

47


2. Contingent liabilities not provided for

a. On counter guarantee furnished to banks 310.23 180.37

b. On letters of credit opened with banks - 32.39

3. Liability contested and not provided for

a) Income tax 0.98 0.19

b) Service tax 6.48 6.48

c) Central Excise 2.18 –

4. Deposit includes deposit with Central Excise 0.73 1.03

5. Sundry creditors include:

a) Dues to small scale industrial undertakings 627.37 239.71

b) Dues of creditors other than small scale industrial

undertakings 3,002.08 2,171.43

Names of small scale industrial undertakings to whom the

company owes an amount which is outstanding for more

than 30 days.

Autocomps, Bangalore, Essaar Tools, Hosur, India

Engineering Works, Kolahpur, Indo German Tools, Hosur,

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

Kamadhenu Enterprises, Bangalore, L R Industries, Hosur,

Numann Industries, Hosur, Paragon Fasteners, Bangalore,

Supram Industries, Bangalore, Sai Kunal Industries,

Bangalore, STS Engineering Services, Hosur, Suriya Plastics,

Hosur, Sri Ram- Karthik Polymers, Coimbatore, Scintillating

Engineering CNC India Pvt Ltd, Hosur, Young Polymers Pvt

Ltd, Hosur, Mistry Industries, Pune, Gold Seal Engineering

Products, Mumbai.

Payment terms for the above suppliers is 45 days from

the date of invoice. The dues are less than 45 days old

and therefore do not bear any interest.

c) Information required under the Micro, Small and Medium

Enterprises Development Act, 2006:

The company has written to all suppliers to ascertain if

they are covered by the said Act. No information has

been received in reply.

However, the suppliers’ credit terms are generally 45 days

within which all payments are made. Hence, the question

of payment of interest or provision there of belated

payments does not arise.


Rupees in lakhs


31.03.2008 31.03.2007


48



Rupees in lakhs


31.03.2008 31.03.2007

XVIII NOTES ON ACCOUNTS-contd.,

6. Other expenses include:

a) reimbursement of expenses to auditors 3.51 2.67

b) legal & retainer fees 192.00 156.51

c) carriage outwards 637.77 422.21

d) warranty claims 14.08 7.67

e) commission 102.53 62.54

f) cash discount 0.21 -

7. Miscellaneous income under other income includes:

a) packing cost recoveries 0.40 0.29

b) sale of moulds manufactured - 7.95

c) dividend income 0.52 3.36

8. Building (cost Rs. 288.94 lakhs) (last year Rs. 144.21 lakhs)

is situated on leasehold land alloted by Maharashtra

Industrial Development Corporation Limited, Mumbai. The

lease deed is yet to be executed while agreement to lease

has been concluded.

9. Cash & bank balances include:

a) Cheques on hand 141.06 58.88

b) Unpaid dividend 10.32 70.34

10.Expenses, wherever applicable are inclusive of service

tax at appropriate rates and net off service tax set off

permissible.

11.R & D revenue expenses

i) Salary 104.86 96.68

ii) Testing charges 20.24 28.52

iii) Design development charges 29.96 -

iv) Field trial expenses - 4.63

v ) Travel expenses 6.17 8.80

12.R & D capital expenditure

i ) Plant and machinery 2.95 9.41

i i ) Office equipment (computers) 25.85 53.35

49


Rupees in lakhs

As at/year ended As at/year ended31.03.2008 31.03.2007

Schedules - (Continued)XVIII NOTES ON ACCOUNTS-contd.,






13.Managerial remuneration, subject to approval by the

shareholders in the ensuing annual general meeting,

consists of :

a) Salary 14.33 -

b) Contribution to provident and other funds 0.58 -

c) Performance linked incentive 4.50 -

14.Previous year’s figures have been regrouped wherever

necessary to conform to the current year’s classification.

50


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 31.03.2008 Year ended 31.03.2007

A. Basic raw materials Unit Quantity Value Quantity Value

a) Polyol Kgs 11,11,168 1,341.94 10,90,982 1,337.55

b) Isocyanate Kgs 6,56,980 743.59 5,97,975 753.21

c) Others (which include sheets,

tubes,upholstery materials

etc., which individually

do not account for 10% or

more of the total value of

consumption) 11,717.89 9,244.88

13,803.42 11,335.64

B. Consumption of raw materials and components

% of total % of total

consumption Value consumption Value

a) Imported 6.14 847.55 10.87 1,232.53

b) Indigenous 93.86 12,955.87 89.13 10,103.11

100.00 13,803.42 100.00 11,335.64

C. Consumption of machinery spares

% of total % of total

consumption Value consumption Value

a) Imported 15.32 16.79 7.90 7.76

b) Indigenous 84.68 92.78 92.10 90.51

100.00 109.57 100.00 98.27

II IMPORTS - CIF VALUE

a) Raw materials & components 796.19 1,251.85

b) Capital goods 29.61 661.35

c) Spares 10.91 7.12


51


III OTHER EXPENDITURE IN FOREIGN CURRENCY

a) Travel 13.63 25.23

b) Consultancy fee 123.12 85.75

c) Others 12.05 8.01

IV EARNINGS IN FOREIGN EXCHANGE

Exports - F.O.B 1,157.14 842.23

V PAYMENT TO NON-RESIDENT SHAREHOLDERS

a) No. of non-resident shareholders - 1

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

c) Dividend* - 48.94

(relating to the

year 2005 - 06 and

year 2006-07)

* Consists of 2005-06 final dividend and 2006-07 interim dividend

VI SALE BY CLASS OF GOODS

Quantity Value Quantity Value

(Nos.) (Nos.)

Seat for automotive application 24,58,286 18,944.18 22,01,597 15,163.26

Other (Spares) 160.69 384.07

19,104.87 15,547.33

VII LICENSED AND INSTALLED CAPACITY

Information is not furnished in view of abolition of industrial licencing

requirements for the products manufactured by the company.


Rupees in lakhs


31.03.2008 31.03.2007

52







a. Seats for automotive application

Opening stock 4,666 54.15 3,756 42.08

Add: Production 24,65,481 22,02,507

Available for sale 24,70,147 22,06,263

Less: Closing stock 11,861 106.50 4,666 54.15

Sales 24,58,286 22,01,597

b. Spares

Quantitative details are not furnished as

the income from sales is individually

less than ten percent of total income


VIII OPENING AND CLOSING STOCK OF GOODS PRODUCED

Rupees in lakhs

Year ended 31.03.2008 Year ended 31.03.2007

Quantity Value Quantity Value

(Nos.) (Nos.)

53


Cash flow statement for the year ended 31st March, 2008 Rupees in lakhs


31.03.2008 31.03.2007

A CASH FLOW FROM OPERATING ACTIVITIES

Profit before tax and extra ordinary items 952.75 900.92

Add:


Depreciation on assets sold (2.16) (151.67)

Income-tax relating to earlier years 2.81 (4.20)

Dividend income (0.52) (3.36)

Interest income (6.04) (6.46)

Interest expenditure 286.90 813.92 75.75 296.40

Operating profit before working capital changes 1,766.67 1,197.32

Adjustments for:

Interest accrued 2.48 (2.73)

Inventory (258.17) (178.30)

Trade receivables (150.48) 212.76

Loans and advances 208.03 (101.62)

Other current assets (13.28) (0.13)

Trade payables and provisions 973.02 24.24

761.60 (45.78)

Cash generated from operations 2,528.27 1,151.54

Direct tax paid (182.46) (206.17)

(182.46) (206.17)

Net cash from operating activities -(A) 2,345.81 945.37

B CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (1,702.93) (2,454.22)

Sale of fixed assets 5.94 176.87

Purchase of investments (1,272.04) (1,074.63)

Sale of investments 1,184.66 1,132.50

Interest received 6.04 6.46

Dividend received 0.52 (1,777.81) 3.36 (2,209.66)

Net cash used in investing activities -(B) (1,777.81) (2,209.66)

C CASH FLOW FROM FINANCING ACTIVITIES

Secured loans (70.15) 1,801.55

Unsecured loans (415.74) 232.11

Interest paid (286.90) (75.75)

Dividend and dividend tax paid - (772.79) (398.64) 1,559.27

Net cash from financing activities -(C) (772.79) 1,559.27

54


D NET INCREASE IN CASH AND CASH EQUIVALENTS (A)+(B)+(C) (204.79) 294.98

Cash and cash equivalents at the beginning of the year 457.53 162.55

Cash and cash equivalents at the end of the year 252.74 457.53

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

direct tax 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, 2008 Rupees in lakhs


31.03.2008 31.03.2007






55


BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE VIDE NOTIFICATION DATED 15thMAY 1995 ISSUED BY MINISTRY OF CORPORATE 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 8 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: 3 8 8 4 5 Private Placement: N I L

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

Total liabilities: 6 7 1 0 0 1 Total assets: 6 7 1 0 0 1

Source of Funds

Paid up capital 7 7 6 9 0 Reserves & surplus 2 9 3 0 9 4

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

Deferred tax 3 6 2 4 4

Application of funds

Net fixed assets 5 5 4 6 8 6 Investments 4 3 7 3 8

Net current assets 7 2 5 7 7 Misc.expenses N I L

Accumulated loss N I L

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

Turnover 1 9 3 7 6 6 3 Total expenditure 1 8 4 2 3 8 8

(includes other income)

Profit before tax 9 5 2 7 5 Profit after tax 6 4 1 2 5

Earnings per share Rs Rs 8 . 2 5 Dividend rate 2 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

Harita Seating Systems LimitedRegd. Office: "Jayalakshmi Estates", No.29, Haddows Road, Chennai 600 006

ADMISSION SLIPPlease hand over this admission slip at the entrance of meeting hall

NAME AND ADDRESS OF THE SHAREHOLDER NO. OF SHARES HELD

NAME OF THE PROXY (IN CAPITAL LETTERS)

12th ANNUAL GENERAL MEETING Member Proxy

7th August, 2008 at 10.30 A.M. I hereby record my presence at the meeting.

Kasturi Srinivasan Hall (Mini Hall)The Music AcademyNew No.168 (Old No. 306), T.T.K. RoadChennai – 600 014 Signature of Member / Proxy

Harita Seating Systems LimitedRegd. Office: "Jayalakshmi Estates", No.29, Haddows Road, Chennai 600 006

PROXY FORM

I/We .......................................................................................................................................................of

.................................................................................................................................................. in the district

of ....................................................................................... being a Member/Members of Harita Seating

Systems Limited hereby appoint ...............................of ................................ in the district of

....................................................................................................................................... or failing him

................................................................................. of ................................................ in the district of

................................................................................................................................ as my / our Proxy to

vote for me / us and on my / our behalf at the 10th Annual General Meeting of the Company to be held on

Thursday, the 7th August, 2008 at 10.30 A.M. and at any adjournment thereof.

Signed this ...................................................................................... day of .................................... 2008.

Proxy form must reach Company's registered office not laterthan 48 hours before the commencement of the meeting.

FOR OFFICE USE ONLYProxy No. Date of Receipt

RevenueStamp

Signature

Client ID Folio No.

(Strike off whichever is not applicable)

Client ID Folio No.

(Strike off whichever is not applicable)

HARITA SEATING SYSTEMS LIMITED

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