LETTER OF OFFER Dated February 24, 2010 For Equity ... · FEMA Foreign Exchange Management Act,...

LETTER OF OFFER

Dated February 24, 2010

For Equity Shareholders of the Company only

(The Company was originally incorporated as Swaraj Vehicles Limited on July 26, 1983, as a public limited company under the Companies Act, 1956, as

amended (the ―Companies Act‖). The name of our Company was subsequently changed to its present name ‗Swaraj Mazda Limited‘ and a fresh

certificate of incorporation approving the change of name to ‗Swaraj Mazda Limited‘ was granted to our Company on November 27, 1984, by the

Registrar of Companies, Punjab.) For details of changes in the name of the Company, see ―History and Certain Corporate Matters - Incorporation‖ on

page 61.

Registered Office: Village Asron, District Nawanshahar – 144 533 (Punjab), India

Corporate Office: 204-205, Sector 34-A, Chandigarh – 160 022, India

Tel: (91 172) 2647 700 Fax: (91 172) 2615 111

Company Secretary and Compliance Officer: Mr. Gopal Bansal

Email: [email protected] Website: www.swarajmazda.net

FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF THE COMPANY ONLY

LETTER OF OFFER

ISSUE OF 3,984,946 EQUITY SHARES OF RS. 10 EACH AT A PREMIUM OF RS. 190 PER EQUITY SHARE AGGREGATING

Rs. 7,969.89 LACS TO THE EQUITY SHAREHOLDERS ON RIGHTS BASIS IN THE RATIO OF 19 EQUITY SHARES FOR

EVERY 50 EQUITY SHARES HELD ON THE RECORD DATE I.E. FEBRUARY 10,2010 (“ISSUE”). THE ISSUE PRICE FOR

THE EQUITY SHARES IS 20 TIMES OF THE FACE VALUE OF THE EQUITY SHARES.

GENERAL RISKS

Investments in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they

can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment

decision in the Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the

risks involved. The securities being offered in the Issue have not been recommended or approved by the Securities and Exchange Board of

India (the ―SEBI‖) nor does the SEBI guarantee the accuracy or adequacy of this document. Investors are advised to refer to the ―Risk

Factors‖ on page xi before making an investment in this Issue.

ISSUER‟S ABSOLUTE RESPONSIBILITY

The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and

correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held

and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any

such opinions or intentions misleading in any material respect.

LISTING

The existing Equity Shares of the Company are listed on the Bombay Stock Exchange Limited (the ―BSE‖) and the National Stock Exchange

of India Limited (the ―NSE‖). The Company has received ―in-principle‖ approvals from the BSE and the NSE for listing the Equity Shares

from this Issue by their letters dated September 30, 2009 and October 16, 2009, respectively. For the purposes of the Issue, the Designated

Stock Exchange shall be the BSE.

LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

JM Financial Consultants Private Limited

141, Maker Chambers III Nariman Point

Mumbai - 400 021

India Tel: (91 22) 6630 3030

Fax: (91 22) 2204 7185

Email: [email protected] Website: www.jmfinancial.in

Contact Person: Ms. Lakshmi Lakshmanan

SEBI Registration No: INM000010361

Link Intime India Private Limited

C-13, Pannalal Silk Mills Compound L.B.S Marg, Bhandup (West)

Mumbai - 400 078

India Tel: (91 22) 2596 0320

Fax: (91 22) 2596 0329

Email: [email protected] Website: www.linkintime.co.in

Contact Person: Mr. Praveen Kasare

SEBI Registration No: INR000004058

ISSUE PROGRAMME

ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT

APPLICATION FORMS ISSUE CLOSES ON

March 3, 2010 March 10, 2010 March 17, 2010

TABLE OF CONTENTS

SECTION I - GENERAL ............................................................................................................................. i

DEFINITIONS AND ABBREVIATIONS ............................................................................................. i

OVERSEAS SHAREHOLDERS .......................................................................................................... vi

PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA ........... viii

FORWARD LOOKING STATEMENTS ............................................................................................. x

SECTION II – RISK FACTORS ............................................................................................................... xi

SECTION III - INTRODUCTION ............................................................................................................. 1

SUMMARY OF THE ISSUE ................................................................................................................. 1

SUMMARY FINANCIAL INFORMATION ....................................................................................... 2

GENERAL INFORMATION ................................................................................................................ 8

CAPITAL STRUCTURE ......................................................................................................................13

OBJECTS OF THE ISSUE ...................................................................................................................17

STATEMENT OF TAX BENEFITS ....................................................................................................29

SECTION IV – ABOUT THE COMPANY ..............................................................................................35

INDUSTRY OVERVIEW .....................................................................................................................35

OUR BUSINESS ....................................................................................................................................42

HISTORY AND CERTAIN CORPORATE MATTERS ...................................................................61

OUR MANAGEMENT .........................................................................................................................64

SECTION V – FINANCIAL INFORMATION ....................................................................................... F1

AUDITORS’ REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR

ENDED MARCH 31, 2009 ................................................................................................................... F1

LIMITED REVIEW REPORT AND FINANCIAL STATEMENTS FOR THE SIX MONTHS

ENDED SEPTEMBER 30, 2009 ........................................................................................................ F32

ACCOUNTING RATIOS AND CAPITALISATION STATEMENT ..............................................71

STOCK MARKET DATA FOR EQUITY SHARES OF THE COMPANY ....................................73

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS .............................................................................................................75

FINANCIAL INDEBTEDNESS ...........................................................................................................81

SECTION VI – LEGAL AND OTHER INFORMATION ......................................................................84

OUTSTANDING LITIGATION AND DEFAULTS ..........................................................................84

MATERIAL DEVELOPMENTS .........................................................................................................94

GOVERNMENT AND OTHER APPROVALS ..................................................................................97

OTHER REGULATORY AND STATUTORY DISCLOSURES .....................................................98

SECTION VII - TERMS OF THE ISSUE ..............................................................................................105

SECTION VIII – STATUTORY AND OTHER INFORMATION ......................................................129

DECLARATION .................................................................................................................................131

i

SECTION I - GENERAL

DEFINITIONS AND ABBREVIATIONS

Unless the context otherwise indicates, the following terms have the meanings set forth in this section. All

references to acts, rules, regulations or other applicable laws and policies, shall be deemed to include all

amendments thereto:

DEFINITIONS

Term Description

―we‖, ―us‖, ―our‖, ―the Company‖

or ―our Company‖, ―the Issuer‖,

―Swaraj Mazda‖ or ―SML‖

Swaraj Mazda Limited

Company Related Terms

Term Description

Articles or Articles of Association The articles of association of the Company

Agreement Joint venture agreement dated October 5, 1984 between our Company, Punjab

Tractors Limited, Mazda Motor Corporation and Sumitomo Corporation

Auditors The statutory auditors of the Company, namely Price Waterhouse

Board or Board of Directors The Board of Directors of the Company

CDC-PTL CDC PTL Holdings Limited

CDC-FS CDC-Financial Services (Mauritius) Limited

Chairman The chairman of the Board of Directors, namely, Mr. S.K. Tuteja

Director(s) Director(s) of the Company, unless otherwise specified

Gunung Gunung Coach Sdn Bhd, Malaysia

Isuzu Isuzu Motors Limited

Mazda Mazda Motor Corporation

Memorandum or Memorandum of

Association

The memorandum of association of the Company

PSIDC Punjab State Industrial Development Corporation

Promoter Sumitomo Corporation

PTL Punjab Tractors Limited

SKS SKS Coachbuilders SDN Bhd

Registered Office The registered office of the Company, located at village Asron, Distt. Nawanshahar

– 144 533 (Punjab), India

Sumitomo Corporation Sumitomo Corporation, Japan

Issue Related Terms

Term Description

Business Day Any day, other than a Saturday or a Sunday, on which commercial banks in Mumbai

are open for business

Application Supported by

Blocked Amount or ASBA

The application (whether physical or electronic) used by an ASBA Investor to make

an application authorizing the SCSB to block the application amount in his/her

specified bank account maintained with the SCSB

ASBA Investor Equity Shareholders proposing to subscribe to the Issue through the ASBA Process

ii

Term Description

and who:

a) holds the Equity Shares of the Issuer in dematerialized form as on Record Date and

has applied for Right Entitlements and / or additional Equity Shares in dematerialized form;

b) has not renounced his / her Right Entitlements in full or in part;

c) is not a Renouncee; and

d) is applying through a bank account maintained with a SCSB

Bankers to the Issue Axis Bank Limited and Standard Chartered Bank Limited

Composite Application Form or

CAF

The form used by an Investor to make an application for allotment of Equity Shares in

the Issue

Controlling Branches of the

SCSBs

Such branches of the SCSBs which coordinate with the Lead Manager, the Registrar

to the Issue and the Stock Exchanges, a list of which is provided on

http://www.sebi.gov.in/pmd/scsb.html

Consolidated Certificate In case of holding of Equity Shares in physical form, our Company would issue one

certificate for the Equity Shares allotted to one folio

Compliance Officer Mr. Gopal Bansal, Company Secretary

Designated Stock Exchange The Bombay Stock Exchange Limited

Designated Branch(es) Such branch(es) of the SCSBs, which shall collect application forms used by ASBA

Investors and a list of which is available on http://www.sebi.gov.in/pmd/scsb.html

Draft Letter of Offer The draft letter of offer dated September 16, 2009 filed with the SEBI

Equity Shares

The Equity Shares of our Company having a face value of Rs. 10 unless otherwise

specified in the context thereof

Equity Shareholders A holder(s) of Equity Shares as on the Record Date

Investor(s) The Equity Shareholders of the Company on the Record Date, i.e. February 10, 2010

and the Renouncees

Issue Issue of 3,984,946 Equity Shares of Rs. 10 each at a premium of Rs. 190 per Equity

Share aggregating Rs. 7,969.89 lacs to the Equity Shareholders on a rights basis in the

ratio of 19 Equity Shares for every 50 Equity Shares held on the Record Date i.e.

February 10, 2010

Issue Closing Date March 17, 2010

Issue Opening Date March 3, 2010

Issue Price Rs. 200 per Equity Share

Issue Proceeds The proceeds of the Issue that are available to the Company

JM Financial JM Financial Consultants Private Limited

Lead Manager JM Financial

Letter of Offer This letter of offer dated February 24, 2010 filed with the Stock Exchanges after

incorporating comments received from the SEBI on the Draft Letter of Offer

Listing Agreement The Company‘s equity listing agreement entered into with the Stock Exchanges

Record Date February 10, 2010

Refund through electronic

transfer of funds

Refunds through ECS, Direct Credit, RTGS or NEFT, as applicable

Registrar to the Issue Link Intime India Private Limited

Renouncee(s) Any person(s) who has / have acquired Rights Entitlements from Equity Shareholders

Rights Entitlement The number of Equity Shares that an Equity Shareholder is entitled to in proportion to

the number of Equity Shares held by the Equity Shareholder on the Record Date

Self Certified Syndicate Bank

or SCSB

It is a Banker to an Issue registered under the Securities and Exchange Board of India

(Bankers to an Issue) Regulations, 1994, which offers the service of making an ASBA application and is recognised by the SEBI

iii

Term Description

SAF(s) Split Application Form(s)

Securities The Equity Shares offered in this Issue

Stock Exchange(s) The BSE and NSE where the Equity Shares of the Company are presently listed, and

where the Equity Shares to be issued pursuant to the Issue are proposed to be listed

Conventional / General Terms

Term Description

Act or Companies Act The Companies Act, 1956

CAGR Compound Annual Growth Rate

CDSL Central Depository Services (India) Limited

Cenvat The Central Value Added Tax

CESTAT The Customs, Excise, Service Tax Appellate Tribunal

CII Confederation of Indian Industry

CKD Completely Knocked Down

Criminal Procedure Code The Criminal Procedure Code, 1973

Depositories NSDL and CDSL

Depositories Act The Depositories Act, 1996

Distt. District

ECS Electronic clearing service

EPS Earnings per Share

ERP Enterprise Resource Planning

ESI Employees State Insurance

FEMA Foreign Exchange Management Act, 1999

FERA Foreign Exchange Regulation Act, 1973

Financial Year or Fiscal or FY Period of twelve months ended March 31 of that particular year

IFRS International Financial Reporting Standards

Indian GAAP The generally accepted accounting principles in India

Industrial Policy The industrial policy and guidelines issued thereunder by the Ministry of Industry,

Government of India

IPC The Indian Penal Code, 1860

I.T Act The Income Tax Act, 1961

ITAT Income Tax Appellate Tribunal

Modvat Modified Value Added Tax

NAV Net Asset Value

NEFT National Electronic Fund Transfer

NRE Account Non-Resident External Account

NRO Account Non-Resident Ordinary Account

PAT Profit after Tax

RTGS Real Time Gross Settlement

SEBI Securities and Exchange Board of India

SEBI Act The Securities and Exchange Board of India Act, 1992

SEBI Guidelines The Securities and Exchange Board of India (Disclosure and Investor Protection)

Guidelines, 2000, which have been rescinded on August 26, 2009

iv

Term Description

SEBI (ICDR) Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure

Requirements) Regulations, 2009

Securities Act United States Securities Act of 1933

Takeover Code Securities and Exchange Board of India (Substantial Acquisition of Shares and

Takeovers) Regulations, 1997

US GAAP The generally accepted accounting principles in United States

Wealth Tax Act The Wealth Tax Act, 1957

Industry Related Terms

Term Description

Bhp Brake horsepower

CNG Compressed Natural Gas

CO2 Carbon di-oxide

CV Commercial Vehicles

EMS Environment Management System

GVW Gross Vehicle Weight

LCV Light Commercial Vehicles

M&HCV Medium and Heavy Commercial Vehicles

OHS Occupational Health and Safety

UV Utility Vehicles

Abbreviations

Term Description

AGM Annual General Meeting

AS Accounting Standards, as issued by the Institute of Chartered Accountants of India

BSE The Bombay Stock Exchange Limited

CDSL Central Depository Services (India) Limited

DP Depository Participant

EGM Extraordinary General Meeting

ESI Employee State Insurance

FDI Foreign Direct Investment

FI Financial Institutions

FII(s) Foreign Institutional Investors registered with the SEBI under applicable laws

GDP Gross Domestic Product

GOI Government of India

HUF Hindu Undivided Family

IC Investment Company

ICAI Institute of Chartered Accountants of India

IRR Internal Rate of Return

KM Kilometre

Mn Million

MoU Memorandum of Understanding

v

Term Description

NR Non Resident

NRI(s) Non Resident Indian(s)

NSDL National Securities Depository Limited

NSE The National Stock Exchange of India Limited

OCB Overseas Corporate Body

OECD Organisation for Economic Co-operation and Development

RBI The Reserve Bank of India

ROC Registrar of Companies, Punjab, Himachal Pradesh and Chandigarh

STT Securities Transaction Tax

UTI Unit Trust of India

US$ United States Dollar

w.e.f. With effect from

vi

OVERSEAS SHAREHOLDERS

The distribution of this Letter of Offer and the issue of Equity Shares on a rights basis to persons in certain

jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons

into whose possession this Letter of Offer may come are required to inform themselves about and observe

such restrictions. The Company is making this Issue of Equity Shares on a rights basis to the Equity

Shareholders of the Company and will dispatch the Letter of Offer and Composite Application Form

(―CAF‖) to the shareholders who have an Indian address.

No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for

that purpose, except that this Letter of Offer has been filed with the SEBI for observations. Accordingly, the

Equity Shares may not be offered or sold, directly or indirectly, and this Letter of Offer may not be

distributed, in any jurisdiction, except in accordance with legal requirements applicable in such jurisdiction.

Receipt of this Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to

make such an offer and, in those circumstances, this Letter of Offer must be treated as sent for information

only and should not be copied or redistributed. Accordingly, persons receiving a copy of this Letter of Offer

should not, in connection with the issue of the Equity Shares or the Rights Entitlements, distribute or send

this Letter of Offer in or into the United States or any other jurisdiction where to do so would or might

contravene local securities laws or regulations. If this Letter of Offer is received by any person in any such

territory, or by their agent or nominee, they must not seek to subscribe to the Equity Shares or the Rights

Entitlements referred to in this Letter of Offer.

Neither the delivery of this Letter of Offer nor any sale hereunder, shall under any circumstances create any

implication that there has been no change in the Company‘s affairs from the date hereof or that the

information contained herein is correct as at any time subsequent to this date.

European Economic Area Restrictions

In relation to each Member State of the European Economic Area which has implemented the Prospectus

Directive (each, a ―Relevant Member State‖), an offer of the Equity Shares to the public may not be made in

that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares which has

been approved by the competent authority in that Relevant Member State or, where appropriate, approved in

another Relevant Member State and notified to the competent authority in that Relevant Member State, all in

accordance with the Prospectus Directive, except that an offer of Equity Shares to the public in that Relevant

Member State at any time may be made:

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so

authorized or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last

financial year; (2) a total balance sheet of more than Euro 43,000,000 and (3) an annual net turnover

of more than Euro 50,000,000, as shown in its last annual or consolidated accounts; or

(c) in any other circumstances which do not require the publication by us of a prospectus pursuant to

Article 3 of the Prospectus Directive.

Provided that no such offer of Equity Shares shall result in the requirement for the publication by the

Company or any JGC of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an ―offer of Equity Shares to the public‖ in relation to

any Equity Shares in any Relevant Member State means the communication in any form and by any means of

sufficient information on the terms of the offer and the Equity Shares to be offered so as to enable an investor

to decide to purchase or subscribe the Equity Shares, as the same may be varied in that Member State by any

measure implementing the Prospectus Directive in that Member State and the expression ―Prospectus

Directive‖ means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant

Member State.

vii

This European Economic Area selling restriction is in addition to any other selling restriction set out below.

United Kingdom Restrictions

This document is only being distributed to and is only directed at (i) persons who are outside the United

Kingdom, or (ii) to investment professionals falling within Article 19(5) of the Financial Services and

Markets Act 2000 (Financial Promotion) Order 2005 (the ―Order‖), or (iii) high net worth entities, and other

persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all

such persons together being referred to as ―relevant persons‖). The Equity Shares are only available to, and

any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Equity Shares will be

engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this

document or any of its contents.

NO OFFER IN THE UNITED STATES

The rights and the securities of the Company have not been and will not be registered under the United States

Securities Act of 1933 (the ―Securities Act‖), or any U.S. state securities laws and may not be offered, sold,

resold or otherwise transferred within the United States of America or the territories or possessions thereof

(the ―United States‖ or ―U.S.‖) or to, or for the account or benefit of, ―U.S. persons‖ (as defined in

Regulation S under the Securities Act (―Regulation S‖)), except in a transaction exempt from the registration

requirements of the Securities Act. The rights referred to in this Letter of Offer are being offered in India, but

not in the United States. The offering to which this Letter of Offer relates is not, and under no circumstances

is to be construed as, an offering of any Equity Shares or rights for sale in the United States or as a

solicitation therein of an offer to buy any of the said Equity Shares or rights. Accordingly, the Letter of Offer

and the enclosed CAF should not be forwarded to or transmitted in or into the United States at any time.

Neither the Company nor any person acting on behalf of the Company will accept subscriptions or

renunciation from any person, or the agent of any person, who appears to be, or who the Company or any

person acting on behalf of the Company has reason to believe is, either a ―U.S. person‖ (as defined in

Regulation S) or otherwise in the United States when the buy order is made. Envelopes containing a CAF

should not be postmarked in the United States or otherwise dispatched from the United States or any other

jurisdiction where it would be illegal to make an offer under the Letter of Offer, and all persons subscribing

for the Equity Shares and wishing to hold such Equity Shares in registered form must provide an address for

registration of the Equity Shares in India. The Company is making this issue of Equity Shares on a rights

basis to Equity Shareholders of the Company and the Letter of Offer and CAF will be dispatched to Equity

Shareholders who have an Indian address. Any person who acquires rights and the Equity Shares will be

deemed to have declared, represented, warranted and agreed, (i) that it is not and that at the time of

subscribing for the Equity Shares or the Rights Entitlements, it will not be, in the United States when the buy

order is made, (ii) it is not a ―U.S. person‖ (as defined in Regulation S), and does not have a registered

address (and is not otherwise located) in the United States, and (iii) is authorised to acquire the rights and the

Equity Shares in compliance with all applicable laws and regulations.

The Company reserves the right to treat as invalid any CAF which: (i) does not include the certification set

out in the CAF to the effect that the subscriber is not a ―U.S. person‖ (as defined in Regulation S), and does

not have a registered address (and is not otherwise located) in the United States and is authorized to acquire

the rights and the Equity Shares in compliance with all applicable laws and regulations; (ii) appears to the

Company or its agents to have been executed in or dispatched from the United States; (iii) where a registered

Indian address is not provided; or (iv) where the Company believes that CAF is incomplete or acceptance of

such CAF may infringe applicable legal or regulatory requirements; and the Company shall not be bound to

allot or issue any Equity Shares or Rights Entitlement in respect of any such CAF.

viii

PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA

Financial Data

Unless stated otherwise, the financial information and data in this Letter of Offer is derived from our

Company‘s financial statements which are included in this Letter of Offer and set out in the section

―Financial Information‖ on page F1. Our Company‘s fiscal year commences on April 1 and ends on March

31 of the following calendar year.

In this Letter of Offer, any discrepancies in any table between the total and the sums of the amounts listed are

due to rounding-off, and unless otherwise specified, all financial numbers in parenthesis represent negative

figures.

Our Company is an Indian listed company and prepares its financial statements in accordance with Indian

GAAP and the Companies Act. Neither the information set forth in our financial statements nor the format in

which it is presented should be viewed as comparable to information prepared in accordance with US GAAP,

IFRS or any accounting principles other than principles specified in the Indian GAAP. Indian GAAP differs

significantly in certain respects from IFRS and US GAAP. We urge you to consult your own advisors

regarding such differences and their impact on the financial data. The degree to which the financial

statements included in this Letter of Offer will provide meaningful financial information is entirely dependent

on the reader‘s familiarity with these accounting practices. Any reliance by persons not familiar with these

accounting practices on the financial disclosures presented in this Letter of Offer should accordingly be

limited.

All references to ―India‖ contained in this Letter of Offer are to the Republic of India, all references to the

―US‖ or the ―U.S.‖ or the ―USA‖, or the ―United States‖ are to the United States of America, its territories

and possessions, and all references to ―UK‖ or the ―U.K.‖ are to the United Kingdom of Great Britain and

Northern Ireland, together with its territories and possessions.

Currency and units of presentation

The Company prepares and publishes its financial statements in Indian Rupees. All references to ―Rupees‖,

―Indian Rupees‖, ―INR‖ or ―Rs.‖ are to Indian Rupees, the official currency of the Republic of India, all

references to ―US$‖ are to United States Dollars, the official currency of the United States of America, all

references to ―EURO‖ or ―€‖ are to the official currency of the European Union, and all references to ―JP¥‖

are to the official currency of Japan.

Please note:

One million is equal to 1,000,000 / 10 lacs

One billion is equal to 1,000 million / 100 crores

One lac is equal to 100 thousand

One crore is equal to 10 million / 100 lacs

Exchange Rates

Rupee and United States Dollar Exchange Rates

The following table sets forth, for the periods indicated, information with respect to the exchange rate

between the Rupee and the United States Dollar (in Rupees per United States Dollar). No representation is

made that the rupee amounts actually represent such United States Dollar amounts or could have been or

could be converted into United States Dollars at the rates indicated, any other rate or at all.

Year ended March 31 Year/ Month End Average High Low

2005 43.75 44.95 46.46 43.36

2006 44.61 44.28 46.33 43.30

2007 43.59 45.29 46.95 43.14

ix


2008 39.97 40.24 43.15 39.27

2009 50.95 45.91 52.06 39.89

Month

April, 2009 50.22 50.06 50.53 49.49

May, 2009 47.29 48.53 49.83 47.19

June, 2009 47.87 47.77 48.91 46.84

July, 2009 48.16 48.48 49.40 47.79

August, 2009 48.88 48.34 48.98 47.54

September, 2009 48.04 48.44 49.06 47.96

October, 2009 46.96 46.72 47.86 45.91

November, 2009 46.48 46.57 47.13 46.09

December, 2009 46.68 46.63 46.85 46.22

January, 2010 46.37 45.96 46.65 45.36 (Source: Reserve Bank of India – http:// www.rbi.org.in)

Rupee and Japanese Yen Exchange Rates

The following table sets forth, for the periods indicated, information with respect to the exchange rate

between the Rupee and the Japanese Yen (in Rupees per 100 Japanese Yen). No representation is made that

the rupee amounts actually represent such Japanese Yen amounts or could have been or could be converted

into Japanese Yen at the rates indicated, any other rate or at all.


2005 40.84 41.82 43.79 39.56

2006 38.01 39.13 41.60 36.91

2007 37.00 38.80 41.54 36.27

2008 40.08 35.29 41.90 32.69

2009 51.87 46.03 55.58 38.15

Month

April, 2009 51.85 50.82 52.63 49.58

May, 2009 48.89 50.23 52.09 48.89

June, 2009 50.01 49.48 51.46 48.12

July, 2009 50.57 51.33 53.56 49.47

August, 2009 52.70 50.96 52.70 49.16

September, 2009 53.35 52.88 53.75 52.30

October, 2009 51.63 51.76 53.16 50.57

November, 2009 53.89 52.28 54.38 51.46

December, 2009 50.51 52.05 53.20 50.51

January, 2010 51.59 50.31 51.83 49.07 (Source: Reserve Bank of India - http://www.rbi.org.in)

Industry and Market Data

Unless stated otherwise, industry, demographic and market data used throughout this Letter of Offer has been

obtained from industry publications, data on websites maintained by private and public entities, data

appearing in reports by market research firms and other publicly available information. These resources

generally state that the information contained therein has been obtained from sources believed to be reliable

but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Such data

involves risks, uncertainties and numerous assumptions and is subject to change based upon various factors,

including those discussed in the section titled ―Risk Factors‖ on page xi. Accordingly, investment decisions

should not be based upon such information.

x

FORWARD LOOKING STATEMENTS

All statements contained in this Letter of Offer that are not statements of historical fact constitute ‗forward

looking statements‘. Readers can identify forward-looking statements by terminology such as ―may‖ ―will‖,

―aim‖, ―is likely to result‖, ―believe‖, ―expect‖, ―will continue‖, ―anticipate‖, ―estimate‖, ―intend‖, ―plan‖,

―contemplate‖, ―seek to‖, ―future‖, ―objective‖, ―goal‖, ―project‖, ―should‖, ―will pursue‖ and similar

expressions or variations of such expressions. Similarly, statements that describe the Company‘s strategies,

objectives, plans or goals are also forward looking statements.

All forward looking statements (whether made by the Company or any third party) are subject to risks,

uncertainties and assumptions about the Company that could cause actual results to differ materially from

those contemplated by the relevant forward looking statement. Important factors that could cause actual

results to differ materially from the Company‘s expectations include but are not limited to:

general economic conditions;

currency and exchange rate fluctuations;

our ability to compete successfully;

our ability to satisfy changing customer demands;

our ability to successfully expand into new segments and geographies;

our ability to address risks relating to product liability, warrants and recall costs; and

our ability to reduce our cost of production and increase our operational efficiency.

For a further discussion of factors that could cause the Company‘s actual results to differ, see the sections

titled ―Risk Factors‖ and ―Our Business‖ on pages xi and 42, respectively. By their nature, certain market

risk disclosures are only estimates and could be materially different from what actually occurs in the future.

As a result, actual future gains or losses could materially differ from those that have been estimated. Neither

the Company nor the Lead Manager nor any of their respective affiliates or advisors have any obligation to

update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect

the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In

accordance with the SEBI / Stock Exchanges requirements, the Company and Lead Manager will ensure that

Investors in India are informed of material developments until the time of the grant of listing and trading

permission by the Stock Exchanges.

xi

SECTION II – RISK FACTORS

An investment in equity and equity related securities involves a high degree of risk and you should not invest

any funds in this Issue unless you can afford to take the risk of losing your investment. You should carefully

consider all of the information in this Letter of Offer, including the risks and uncertainties described below,

before making an investment. If any of the following risks, or other risks that are not currently known or are

now deemed immaterial, actually occur, our business, financial condition and results of operations could

suffer, the trading price of the Securities could decline and you may lose all or part of your investment. The

financial and other implications or material impact of risks concerned, wherever quantifiable, have been

disclosed in the risk factors mentioned below. However, there are some risk factors where the impact is not

quantifiable and hence has not been disclosed below. The ordering of the risk factors is intended to facilitate

ease of reading and reference and does not in any manner indicate the importance of one risk factor over

another.

This Letter of Offer contains forward-looking statements that involve risks and uncertainties. The Company’s

actual results could differ materially from those anticipated in these forward-looking statements as a result of

certain factors, including the considerations described below and elsewhere in this Letter of Offer.

You are advised to read the following risk factors carefully before making an investment in the Securities

offered in this Issue. You must rely on your own examination of the Company and this Issue, including the

risks and uncertainties involved. The Equity Shares have not been recommended or approved by the SEBI nor

does the SEBI guarantee the accuracy or adequacy of this Letter of Offer.

Internal Risk Factors

1. There are certain criminal proceedings against the Company, our Managing Director, one of our

Directors and certain employees of our Company and there can be no assurance that these matters

will be decided favourably and if determined adversely may impact our business and results of

operations.

The following table summarizes the criminal litigation against our Company, Managing Director,

Directors and employees:

S

No.

Parties

Involved

Nature of

criminal

litigation

Applicable sections

under which the

litigation is ongoing

Number of

Litigation

Aggregate

amount

involved

(Rs. in lacs )

1. Company, Managing

Director, Director and

employees

Violation of the

I.P.C

406 1 Not

ascertainable

2. Managing Director and

employees

Violation of the

I.P.C

383, 384, 403, 406,

409, 415, 418, 419,

420 and 506

1 Not

ascertainable

3. Our employee Violation of the

I.P.C

302 and 120-B 1 Not

ascertainable

Total Not

ascertainable

Details of the criminal litigation involving our Company, Managing Director and one of our Directors

are provided below:

Criminal proceeding against our Company, Managing Director, Director and employees

A criminal complaint has been filed by Sankalp Motors Private Limited against our Company, Mr. Yash

Mahajan, our Managing Director, Mr. Harkirat Singh, a Director of our Company and Mr, Gopal

Bansal, Mr. S.C. Ghosh and Mr. Sanjay Jha, our employees before the Judicial Magistrate, Alipore

xii

(―JMA‖), alleging criminal breach of trust, cheating, criminal conspiracy and non-settlement of claims

amounting to Rs. 11.76 lacs. The matter was instituted under Sections 406, 420 and 120-B of the Indian

Penal Code, 1860 (―I.P.C‖). The JMA by an order dated June 19, 2008, did not take cognizance of the

allegations under Sections 420 and 120-B of the I.P.C but issued process for criminal breach of trust

under Section 406 of the I.P.C. Further, our Company filed a quashing petition against the order of the

JMA, before the High Court at Kolkata (―Kolkata HC‖) and by an order dated September 18, 2008, the

Kolkata HC has stayed the proceedings before the JMA.

Criminal proceeding against our Managing Director and employees of the Company

A criminal complaint was filed by Mr. Vijay Pal Adhana against Mr. Yash Mahajan, our Managing

Director and Mr. K.B Prasad, Mr. Naval Sharma and Mr. Jasmeet Singh, our employees of the Company

before the Judicial Magistrate, Palwal (―JMP‖) alleging that our Company misused the cheques

amounting to Rs. 86.20 lacs, which were issued by him as security against certain vehicles sold to him.

The matter was instituted under Sections 383, 384, 403, 406, 409, 415, 418, 419, 420 and 506 of the

I.P.C. The Deputy Superintendent of Police (―DSP‖), Palwal conducted an inquiry and furnished a

report stating that the complainant owed our Company Rs. 269.00 lacs and had issued post-dated

cheques which were dishonoured due to unavailability of funds. Pursuant to the report, the JMP by an

order dated September 1, 2008, issued summoning order against certain of our officials. Our Company

had filed a quashing petition on behalf of our Managing Director and Mr. K.B Prasad before the Punjab

and Haryana High Court (―P&H HC‖). The P&H HC has, by an order dated February 12, 2009, stayed

further proceeding before the JMP. In addition, an anticipatory bail application was filed by our

Company on behalf of Mr. Jasmeet Singh and Naval Sharma, which was admitted and allowed by the

P&H HC by an order dated December 2, 2008.

Criminal proceeding against our employee

Under Sections 302 and 120-B of the I.P.C, Ms. Malti alleged that Mr. Pradeep Sharma, zonal manager

of our Company and others had murdered her son. The police registered a case against the accused and a

bail application was filed by our employee before the Sessions Judge, Barabanki, which was dismissed

by an order dated January 31, 2009. Aggrieved by the order of the Sessions Judge, Barabanki, our

employee filed another bail application before the High Court and was granted bail by an order dated

February 17, 2009. The matter is currently pending before the Session Judge, Barabanki.

Any adverse order in relation to the aforementioned criminal litigation could have could have an adverse

effect on our Company‘s business and results of operations. For further details of the criminal litigation,

please see the section titled ―Outstanding Litigation and Defaults – Litigation against our Company –

Criminal Cases‖ on page 84.

2. We have incurred negative cash flows in Fiscal 2009

In Fiscal 2009, we incurred negative cash flow from our operating activities of Rs. 2,614.02 lacs though

we generated a profit after tax of Rs. 478.76 lacs. The negative cash flows for Fiscal 2009 were on

account of increase in inventory and working capital requirements. For further details, please see the

section titled ―Financial Information – Auditors’ Report and Audited Financial Statements for the

year ended March 31, 2009‖ on page F30.

3. Our statutory auditors have qualified their audit report on our financial statements.

The financial statement of our Company includes the notes explaining that through issue of excise

notification no. 11/95 dated March 16, 1995, the Government sought to lapse Rs. 488.00 lacs out of

MODVAT Credit Receivable balance as on March 16, 1995. Petition by the Company and others with

the Delhi High Court challenging the said notification on grounds of law and equity was allowed by the

Supreme Court by an order dated January 28, 1999. The Finance Act, 1999 (the ―Finance Act‖), has,

however, brought in retrospective amendment w.e.f. March 16, 1995 in the Central Excise Act,

empowering the Central Government to lapse such MODVAT. On legal advice obtained by the Company

xiii

to seek redressal against the action of the Government, the Company has filed a writ petition before the

Delhi High Court on the ground that the Government action violates the doctrine of promissory estoppels

/ expectation principle besides other grounds. The Court has already admitted the petition. Accordingly,

pending Company‘s petition and decision thereupon, the amount of Rs. 488.00 lacs though adjusted in

excise records has not been provided in the books of account. For further details, please see the section

titled ―Financial Information – Auditor’s Report and Audited Financial Statements for the year ended

March 31, 2009‖ and ―Financial Information – Limited Review Report and Financial Statements for

the six months ended September 30, 2009‖ on pages F1 and F32, respectively.

4. Our Company is involved in certain litigation proceedings and we cannot assure you that we will

succeed in these actions.

There are outstanding litigation involving our Company, pending at different levels of adjudication

before different judicial fora, including high courts, district courts and tax tribunals. Should any new

developments arise, such as a change in Indian law or rulings against our Company by appellate courts

or tribunals, our Company may need to make provisions in its financial statements, which could

adversely affect its business results. Furthermore, if the verdict in such litigation is unfavorable to our

Company and if we are required to pay all or a portion of the disputed amounts, there could be a

material adverse effect on our Company‘s business and profitability. The details of the litigation

involving our Company, as on February 23, 2010, are detailed as under:

Cases against our Company

Category

Number of Litigation

Aggregate amount involved

(Rs. in lacs )

Income tax 5 245.31

Excise and service tax 17 135.70

Sales tax 7 266.85

Civil 10 11.84

Consumer 27 205.18

Labour 7 10.20

Total 73 875.08

For further details of the matters against the Company, please see the section titled ―Outstanding

Litigation and Defaults – Litigation against our Company‖ on page 84.

5. We are dependent on a limited number of vendors for the supply of critical components and raw

materials used in the manufacture of our products and any disruption in our supply chain may

adversely affect our sales and results of operations.

We depend on external vendors for the supply of components, assemblies, aggregates and certain raw

materials used in the manufacture of our products. As on December 31, 2009, we were procuring raw

materials and components from 382 vendors. Further, we are dependent on a limited number of 10

vendors, which include Merritor, HVS (India) Limited and Axles India Limited for certain types of

axles, GNA Udyog Limited for propeller shafts, ZF for power steering systems, Bosch for fuel injection

systems, Punjab Tractors Limited for transmission gears and Valeo Clutch Limited and Ceekay Daikan

Limited for clutches and on Swaraj Engines Limited for certain engine components. Furthermore, for

our non-air conditioned buses, the bus body, which is mounted on our chassis, is sourced from two (2)

third party vendors, JCBL Limited and Sita Singh & Sons, and the cargo boxes, used in our trucks, are

sourced from a single vendor, JCBL Limited. For details of our top three (3) vendors, please see the

section titled ―Our Business – Raw Materials and Components‖ on page 55.

We collaborate closely with many of our vendors in order to secure a reliable supply of raw materials

and components. However, failure by our vendors to adhere to the technical specifications, quality

requirements, and production and delivery schedules could disrupt our manufacturing process.

xiv

Furthermore, some components used in our vehicles are available only from a single vendors and cannot

be quickly or inexpensively re-sourced to another vendor due to long lead times and new contractual

commitments that may be required by another supplier in order to provide the components or materials.

For example, the front axle and fuel injector used in our CVs is supplied only by Bharat Forge and

Bosch, respectively. In November 2009, we experienced supply disruptions in procuring the fuel

injection system as a result of certain damage caused at the Bosch facilities at Jaipur due to a fire in the

nearby Indian Oil Corporation depot. Due to the work stoppages and resulting unavailability of fuel

injection pumps, we had to switch production from diesel vehicles to CNG vehicles as such vehicles do

not require fuel injection pumps and the dispatch of our Euro II and III diesel vehicles was delayed.

Similarly in October 2009, we experienced a delay in the supply of certain types of tyres from the plant

of J.K. Tyres in Kankroli resulting from work stoppages, which cased a delay in the dispatch of our

vehicles to our customers.

In addition, as compared to some of our competitors, our volumes are not large enough for the vendors

to set a dedicated manufacturing unit for us. This, as a result, can impact the regular supply of some of

the key components. Any significant problems with our supply chain in the future could affect our

results of operations in an adverse manner.

6. Our expansion project at the Nawanshahar plant may not be completed, in the timeframe or at cost

levels originally anticipated, and may not achieve the intended economic results.

In Fiscal 2007, we commenced our expansion project consisting of the establishment of a second vehicle

manufacturing facility and a new in-house bus body facility at our Nawanshahar plant. The expansion

project is being undertaken in two (2) phases. While we are in advanced stages of implementing the first

phase of the expansion project and both facilities have become operational in Fiscal 2009, the second

phase is likely to commence in Fiscal 2012. For details of the schedule of implementation, please see the

section titled ―Objects of the Issue – Expansion Project at our Company’s Nawanshahar plant –

Schedule of Implementation‖ on page 23.

This expansion project and any other future projects could be delayed by failure to receive regulatory

approvals, political unrest, technical difficulties, human, technological or other resource constraints, or

for other unforeseen reasons, events or circumstances. These projects may incur significant cost

overruns and may not be completed on time or at all. Any delays in land development and construction

or difficulties in obtaining timely supply of design, technology and know-how, and plant, machinery and

equipments may adversely affect the implementation of the expansion project. In addition, as a

consequence of project delays, cost overruns, changes or lack of demand for our products or for other

reasons, we may not achieve the economic benefits expected of the expansion project and our failure to

obtain expected economic benefits could adversely affect our business, financial condition and results of

operations.

7. We rely on technology transfers from Isuzu to continue to improve our products and our inability to

renew our technology transfer agreements with Isuzu or to enter into similar agreements with other

parties will adversely affect our business.

We have entered into technical assistance agreements with Isuzu for the manufacture of buses and trucks

in the M&HCV segment, thereby allowing us to widen our product portfolio. Currently, our luxury air-

conditioned buses in the M&HCV segment are being developed on the Isuzu chassis. Our technical

assistance agreements with Isuzu are valid until December 31, 2012, and these technical assistance

agreements may be automatically renewed for a further period of one year, however, there can be no

assurance that Isuzu will elect to renew these agreements and they might decide to terminate the

agreements. We can provide no assurance that we will continue to be able to enter into similar

agreements in the future with Isuzu or with other companies, or otherwise obtain transfers of technology

to continue to broaden our product portfolio, on terms favourable to us or at all, which may have an

adverse effect on our business, financial condition and results of operations.

xv

8. We import engines and transmission from Isuzu to manufacture products on the Isuzu chassis and

any disruption in supply or our inability to import such critical components from Isuzu at favorable

terms, or at all, will adversely affect our business.

Pursuant to our technology transfer agreements, we import engines and transmission from Isuzu to

manufacture products on the Isuzu chassis. Currently, our luxury air-conditioned buses in the M&HCV

segment are being developed on the Isuzu chassis. Any interruption in the import or supply of engines or

transmission from Isuzu, or any defects in such components, will have an adverse effect on production at

our manufacturing facility and thus adversely affect our business. Further, there can be no assurance that

Isuzu will elect to renew these agreements or that we will be able to import critical components from

Isuzu at favourable terms, or at all, in the future.

9. We may continue to be controlled by our Promoter, who by virtue of their aggregate shareholding

collectively own a substantial portion of our issued Equity Shares, as a result of which, the remaining

shareholders may not be able to affect the outcome of shareholder voting.

As on the date of this Letter of Offer, our Promoter shareholding stands at 53.52%. Our Promoter will

continue to own a substantial portion of our issued Equity Shares. Further, our Promoter has also

undertaken to subscribe to the unsubscribed portion, if any, of this Issue. Consequently, the collective

holding of our Promoter may increase above its current holding which may result in our Promoter and

group companies being in a position to influence the result of the shareholders voting and may enable

them to take actions that may conflict with the interests of some of our shareholders.

10. We have certain contingent liabilities not provided for which may adversely affect our financial

condition.

The following table sets forth our contingent liabilities as of the dates indicated:

(Rs. in lacs)

Particulars As on September 30,

2009

As on March 31, 2009 As on March 31, 2008

1. Claims against the

Company not

acknowledged as debts:

Sales Tax Cases 250.92 252.89 248.23

Excise Cases 203.76 178.18 171.40

Income Tax Cases 188.82 192.25 276.21

Civil Cases 10.25 18.86 12.70

Total 653.75 642.18 708.54 2. Bank Guarantee 1,270.48 1,006.38 331.94

3. Letter of Credit 1,005.94 1,358.31 2,681.07

4. Capital Commitment (Net

of Advances)

1,812.11 443.71 240.00

Total (1 + 2 + 3 + 4) 4,742.28 3,450.58 3,961.55

For further details see the sections titled ―Financial Information – Auditors’ Report and Audited

Financial Statements for the year ended March 31, 2009‖, ―Financial Information – Limited Review

Report and Financial Statements for the six months ended September 30, 2009‖ and ―Outstanding

Litigation and Defaults – Contingent liabilities not provided for as on March 31, 2008, March 31,

2009 and September 30, 2009‖ on pages F19, F45 and 84, respectively. To the extent that any of these

or future contingent liabilities become actual liabilities, it would adversely affect our results of

operations and financial condition.

11. We do not own intellectual property rights to certain of products and our brand name, and any failure

to enforce our rights could have an adverse effect on our business prospects

xvi

Our products are sold under the marks ―Swaraj Mazda‖ and ―Isuzu‖. We do not own intellectual

property rights relating to certain of our products. We have the right to use the name / trademark

―Swaraj‖ in our corporate name and branding of our commercial vehicles and spare parts until January

6, 2011. Subsequently, we have to completely discontinue using the name / trademark Swaraj in any

form or combination in our corporate name and branding the commercial vehicles and spare parts

manufactured by our Company. Further, under the joint venture agreement entered into between our

Company, Punjab Tractors Limited (―PTL‖), Mazda Corporation (―Mazda‖) and Sumitomo

Corporation (―Sumitomo‖), our Company has been given the right to use the Mazda name in the name

of our Company. The said joint venture agreement has been terminated pursuant to Mazda and PTL

ceasing to be shareholders in our Company. Our Company has been using the brand name ―Mazda‖ in

good faith. However, we cannot assure you that we will be able to continue to use the brand name

―Mazda‖ in the future and we may be refrained from using the brand name ―Mazda‖.

In such a situation, we cannot assure you that we will be able to enforce our rights if any person or

company uses our brand name to promote his / their products. If we are not ultimately successful in

enforcing our rights with respect to our brand name and our products for any reason, we may experience

a material adverse effect on our competitive position and our business.

12. We intend to utilize a part of the net proceeds of the Issue towards financing our ongoing Expansion

Project at our Nawanshahar plant and we may not be able to effectively utilize our increased

production capacity pursuant the Expansion Project, which may adversely effect our results of

operations.

We intend to utilize the Rs. 1,800.00 lacs of the net proceeds of the Issue towards financing Phase I of

our ongoing expansion project at our Nawanshahar plan (―Expansion Project‖) and Rs. 5,000.00 lacs of

the net proceeds of the Issue towards the repayment of loan taken from Allahabad Bank in relation to the

Expansion Project. For details of our Expansion Project, please see the section titled ―Objects of the

Issue – Expansion Project at our Company’s Nawanshahar plant‖ on page 18.

In Fiscal 2008 our installed capacity was 12,000 units per annum and our capacity utilization was

93.68%. Consequent to the establishment of a second vehicle manufacturing facility and a new in-house

bus body facility under Phase I of our Expansion Project during the end of Fiscal 2009, our installed

capacity increased to 18,000 units per annum and our capacity utilization for Fiscal 2009 declined to

45.36% compared to 93.68% in Fiscal 2008. The decline was primarily on account of an overall industry

decline in demand for commercial vehicles during Fiscal 2009 as well as expansion in capacity during

the end of Fiscal 2009 due to which the production from the newly established facilities was not

reflected for the entire year. For further details, please see the section titled ―Our Business – Our Plant

- Capacity and Capacity Utilisation‖ on page 54.

Pursuant to the Expansion Project, our production capacity is expected to increase to 24,000 units per

annum. Consequent to an increase in our production capacity due to our Expansion Project, our capacity

utilization may further decline on account of, among other things, a fall or stagnation in demand for our

commercial vehicles due to worsening general economic conditions and tightening in the availability of

finance, poor customer response to our vehicles and disruption in production. Such an impact on our

capacity utilization may adversely effect our results of operations.

13. General economic conditions including the availability of financing to customers have had and could

continue to have an adverse effect on our business, financial condition and results of operations.

Similar to the rest of the commercial vehicles (―CV‖) manufacturing industry, we are substantially

affected by general economic conditions in India, which is our principal market. The demand for CVs in

the Indian market is influenced by factors including the growth rate of the Indian economy, availability

of credit, interest rates, freight rates and fuel prices. Furthermore, spending on public transport and

economic activity in sectors such as healthcare, education and defence, impacts the demand for CVs,

specifically passenger carriers. Any adverse change in interest rates, inflation and / or fuel prices could

impact general economic conditions in India and could lead to a further decline in the demand for CVs

xvii

in the Indian market, which could affect our sales and future results of operations in an adverse manner.

In addition, tightening of credit markets may adversely impact our customer‘s ability to finance the

purchase of new CVs or our supplier‘s ability to provide us with raw materials and components. More

recently, adverse changes in economic factors, including slowdown in industrial production, increase in

fuel prices, higher inflation in the first half of Fiscal 2009, reduction in availability of vehicle financing,

and higher interest rates, have impacted the demand for CVs. As a result, our sales were significantly

impacted in Fiscal 2009, and there can be no assurance that the Indian economy will not experience a

downturn and a further weakening of economic activity.

Additionally, the global financial markets in the recent past have experienced a period of unprecedented

turmoil, including the bankruptcy, restructuring or sale of certain financial institutions. Indian markets

have also experienced the contagion effect of the global financial turmoil. As a result of the downturn in

the Indian and global economy, and the turmoil in the financial markets, financing for CVs had become

more difficult to obtain for our customers. Furthermore, interest rates in India had also risen thereby

increasing the cost of such financing. The Prime Lending Rate for the public sector banks in the last

week of September 2008 was between 13.75% to 14.00% (Source: Reserve Bank of India’s bulletin

dated November 12, 2008, available on http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx). We can

give no assurance as to when financing will be readily available for CV products from third party

sources or when the interest rates in India will be materially reduced. The absence of reasonable and

more readily available finance for our CVs could adversely affect our sales, financial condition and

results of operations.

Furthermore, any downgrade in the sovereign debt rating of India for domestic and international debt by

international rating agencies may adversely impact our ability to raise additional financing and the

interest rates and commercial terms on which such additional financing is available, which could have a

material adverse effect on our results of operations and financial condition.

14. We face significant competition which could adversely affect our sales and results of operations.

The Indian CV industry is highly competitive. We face strong competition from domestic manufacturers

as well as foreign CV manufacturers who are increasing their presence by establishing joint ventures

with local partners. These tie-ups and joint ventures are expected to change the dynamics of the CV

industry leading to increased competition and accelerated product development. International players

bring with them decades of international experience, global scale, advanced technology and significant

financial resources. Furthermore, new or existing competitors may exert pricing pressures on some or all

of our product segments and /or offer vehicles with improved features and services. Competition in the

CV market is likely to further intensify and there can be no assurance that we will be able to implement

our future strategies in a way that will mitigate the effects of increased competition. Our ability to

maintain our competitiveness will be fundamental to our future success in existing and new markets and

if we are unable to compete successfully, our market share may decline, materially adversely affecting

our results of operations and financial condition. For further details regarding our competitors, including

the market share of the Company, please see the section titled ―Our Business – Competition‖ on page

57.

15. Unavailability of and increase in the cost of raw materials and components may have a material

adverse effect on our results of operations and financial condition.

In Fiscal 2009, expenditures on raw materials and components represented 98.43% of our manufacturing

cost. The principal components required for the manufacture of CVs are made out of raw materials

including forging steel, cast iron, steel sheets and plates, non-ferrous material like aluminium and

copper, rubber and plastics. Our business is subject to the risk of price increases and periodic delays in

delivery of raw materials. Further, the costs at which we procure certain of our raw materials and inputs

may be impacted due to an increase in the prices of the relevant commodities. If the cost of raw

materials rise, or if we are unable to recover these costs through cost saving measures or are not able to

pass on all the cost increases to our customers through higher prices, our results of operations and

financial condition could be adversely affected. Furthermore, because of intense price competition and

xviii

fixed costs, we may not be able to adequately address changes in input prices even if they are

foreseeable.

16. Our future success depends on our ability to satisfy changing customer demands by offering

innovative, competitive and technologically advanced products.

The CV market in India is highly competitive and we face challenges in ensuring that our new and

existing models appeal to our customers. Our competitors may gain significant advantage if they are

able to offer products satisfying customer needs earlier or better than we are able to, which could

adversely affect our sales and results of operations. We are also subject to the risks generally associated

with new product introductions, including lack of market acceptance and delays in product

development. There can be no assurance that customers will be receptive to our products and related

technologies in the future or that the market acceptance of our products will meet our expectations, in

which case we will be unable to realize the intended economic benefit of our investments and our

financial condition and results of operations could be adversely affected.

17. We are subject to risks associated with expansion into new segments and markets.

We have adopted a number of growth strategies to expand our CV business, including the expansion of

our product offerings, and further enhancement of our distribution network and customer base. As a

consequence of our recent technical assistance agreement with Isuzu Motors Limited (―Isuzu‖), we have

forayed into manufacture of luxury air-conditioned buses in the Medium and Heavy Commercial

Vehicles (―M&HCV‖) segment. Similarly, increasing our presence across India by expanding our

dealer network in the relevant states and enhancing our customer base is one of the principal elements of

our growth strategy. Presently, our marketing operations are spread across India through a network of 89

dealers as on December 31, 2009 and for further details regarding our dealer network, please refer to the

section titled ―Our Business – Sale and Distribution of Vehicles‖ on page 48. These strategies involve

certain risks and uncertainties, and we can provide no assurance that we will be able to implement these

strategies successfully, on schedule or within budget, if at all. The costs involved in entering and

establishing ourselves in new segments and markets that we are not familiar with, and expanding our

operations into such segments and markets may be higher than expected. Our products may not be

accepted or we may not be successful in capturing market share in any of new product segment / market

that we enter into which could adversely impact our results of operations. Furthermore, if market

conditions further deteriorate or if operations do not generate sufficient funds, we may decide to delay or

cancel some aspects of our growth strategies which may materially and adversely affect our growth

prospects and future results of operations.

18. We rely on our distribution network for marketing, sale and distribution of our products and

underperformance of our distribution network may adversely affect our sales and results of

operations.

Our products are sold and serviced through a network of dealers and authorised service centres across

India and we rely on these networks of authorized dealers for marketing, sale and distribution of our

products and providing after sales service. We believe that we exercise due diligence in appointing our

authorised dealers and provide them with adequate support so that they perform to our expectations.

However, there can be no assurance that our expectations will be met and any failure on part of our

authorised dealers in performing their functions and providing high quality service to customers could

adversely affect our reputation, sales and results of operations. Furthermore, there can also be no

assurance that our current dealers will continue to do business with us or we will be able to attract

additional dealers to our network. We do not enter into long-term agreements with our dealers and our

dealers are under no obligation to continue their association with us. If we do not succeed in maintaining

the stability of our distribution network and attracting additional high-quality dealers to our distribution

network, our market share may decline, which may affect the results of our operations and financial

condition.

xix

19. The loss or shutdown of operations at any of our manufacturing facilities or any accidents or

damages to our manufacturing equipment, plant and machinery or information technology systems

may have a material adverse effect on our business, financial condition and results of operations.

Our plant is located at village Asron, Nawanshahar, Punjab and we have three (3) manufacturing

facilities at this plant. These manufacturing facilities are subject to operating risks, such as the

breakdown or accidents or failure of equipment, power supply or processes, performance below

expected levels of output or efficiency, obsolescence, labour disputes, strikes, lock-outs, natural

disasters and industrial accidents. Our manufacturing facilities are also subject to operating risk arising

from compliance with the directives of relevant government authorities. The occurrence of any of these

risks could significantly affect our operations by causing production to shut down or slow down.

Furthermore, we are dependent on our information technology systems for managing key business

processes such as product design and development, customer and dealer management, transaction

processing, accounting and production. Any failure in our information technology systems may

adversely impact our ability to manufacture our products, manage our dealers and provide service to our

customers, any of which may have a material adverse effect on our reputation, business, financial

condition and results of operations.

20. Our business is cyclical in nature and a substantial decrease in our sales during certain quarters

could have a material adverse impact on our financial performance.

Sale volumes of our passenger vehicle vehicles are cyclical in nature. Sales of our passenger carrier

vehicles used in schools are at peak during the period March to August of each year as during these

months, educational institutions mostly conclude their annual procurement of buses. Also our sales to

government departments, both Central and State, are seasonal in nature as most of the government

departments complete their procurements against budgetary allocation before March 31 each fiscal year.

As a result, our financial results for one quarter are not necessarily indicative of the results to be

expected for any other period.

21. We are subject to risks of assuming product liability, warranty and recall costs which may adversely

affect our results of operations and financial condition.

We are subject to risks and costs associated with product liability, warranty and recall should we supply

defective products, components, parts, or related after-sales services, which could generate adverse

publicity and adversely affect our business, results of operations and financial condition. If any of our

products are found to be defective, we may be required to undertake corrective actions or recall our

products. Further, any defect in our products or after-sales services provided by authorized dealers or

third parties could also result in customer claims for damages. Such actions and claims could require us

to expend considerable resources in correcting these problems and could adversely affect demand for

our products. Furthermore, defects in our products or spare parts may be covered under warranties

provided by us. Additionally, defective product complaints may also cause damage to our brand name

and may affect our reputation and brand image.

22. Our success is largely dependent on our ability to recruit, train and retain qualified employees.

We depend on our ability to attract, retain and motivate highly skilled and qualified employees. As on

December 31, 2009, we had a total of 950 full time employees (including trainees) consisting of 377

employees in the management cadre, 92 employees in the junior management cadre, 24 support staff and

457 workers. In addition to our full-time employees, we hire contract workers from time to time, to

assist us in various aspects of our business and as on December 31, 2009, we had a total of 295 contract

workers. For further details regarding our employees, please see the section titled ―Our Business –

Employees‖ on page 56. An increasing attrition level amongst such people and our inability to attract,

hire, train and retain employees could have a material adverse effect on our business and operation.

xx

23. Cost of compliance with safety or emission standards relating to our products or our manufacturing

facilities, or other environmental and governmental regulation, may adversely affect our business and


As a CV manufacturing company, we are subjected to extensive governmental regulations regarding

vehicle emission levels, noise, safety and levels of pollutants generated by our production facilities.

Also, there is significant potential that consumer demands will increasingly take into account fuel

efficiency and emissions. These regulations in India and elsewhere are likely to become more stringent

and the cost of complying with these regulations may be significant. While we are pursuing various

technologies in order to meet the required standards, the costs of compliance with these required

standards can be significant to our operations as we may have to incur substantial capital expenditure

and research and development costs to upgrade our products and our manufacturing facilities, as a result

of which our results of operations may be adversely affected.

24. Our future success depends on our ability to reduce our cost of production and thereby increase our

operational efficiency and we cannot assure you that our cost reduction measures will achieve the

planned operational efficiencies we seek.

Reducing our cost of production is essential to our business strategy in a highly competitive market

environment. Our cost reduction strategy focuses on, among other things, increasing the levels of

localization for our new product introductions, improving raw material and component sourcing, vendor

participation in cost reduction, continuing focus on sharing basic vehicle platforms among multiple

models in order to spread development costs, and reducing selling, general and administrative costs over

maximum models and variants. Our measures to increase our operational efficiency may not yield

results in the future, which may adversely affect our results of operations.

25. Our indebtedness, and the conditions and restrictions imposed on us by our financing agreements

could adversely affect our ability to conduct our business.

As on March 31, 2009, we had Rs. 22,028.69 lacs of secured and unsecured loans. We may incur

additional debt in the future, including as part of our expansion plans. However, we may be unable to

obtain sufficient financing on terms satisfactory to us, or at all. Rising interest rates may make credit

more difficult to obtain. Our level of indebtedness could have other important consequences, including

requiring us to dedicate a portion of our operating cash flow to making periodic principal and interest

payments on our debt thereby limiting our ability to pay dividends in the future, sell/ transfer assets or

fund future working capital, capital expenditures, research and development, and technology processes

and other general business requirements.

Furthermore, some of our loan agreements set limits on and / or require us to obtain lender consents

before, among other things, undertaking certain projects, issuing new securities, changing management,

merging, consolidating, selling significant assets, creating subsidiaries, changing shareholding structure,

amending any of our constitutional documents materially or making certain investments. While in the

past our lenders have not denied such consent, there can be no assurance that we will be able to comply

with these financial or other covenants or that we will be able to obtain the consents necessary for our

future growth plans. An event of default under any loan agreements, including our failure to service our

indebtedness, if not cured or waived, could have a material adverse effect on our financial condition and


26. There are certain restrictive covenants under the technical assistance agreements that may affect our

ability to conduct business.

Under the terms of the technical assistance agreements with Isuzu, the technical information and

information relating thereto, which is disclosed to the Company is considered to be of a confidential

nature and the Company is not permitted to disclose, transmit, dispose or part with any portion of the

confidential information to any third party without the prior written consent of Isuzu, except to the

extent such confidential information is required by permitted dealers for sale or repair or by permitted

xxi

suppliers for manufacturing subject to the execution of a non-disclosure agreement with such permitted

dealer or permitted supplier. Further, the confidential information can be used only for the assembly,

manufacture, sale, testing and repair of the licensed vehicles and licensed components. The technology

agreement provides that the confidentiality clause will remain in force for a period of 10 years after the

expiration or termination of the agreement.

The technical assistance agreement also does not grant any right, interest or title to the Company to any

trademark, tradename, design mark, logo or any other mark of Isuzu, except to the extent of the

Company using such trademarks on a royalty- free, non-exclusive and non-transferrable basis. Further,

the Company cannot make any changes in the licensed vehicles or licensed components without the

prior written consent of Isuzu. The Company and Isuzu have also expressly acknowledged that except as

specifically licensed to our Company, Isuzu owns or has licenses to, to the exclusion of our Company,

all rights, title and interest in the technical information, the model vehicle, model components and Isuzu

components, as they exist now and in the future, and in related information that may be provided by

Isuzu. Such restrictive covenants may affect our ability to conduct our business operations.

27. The financing agreement(s) executed by us in relation to the loan availed by us from Allahabad

Bank, which is intended to be repaid out of the Net Proceeds of the Issue, imposes certain conditions

and restrictions on us that may affect our ability to conduct our business.

Our Company entered into a term loan agreement dated March 27, 2009 with the Allahabad Bank for a

term loan of Rs. 6,000.00 lacs. The term loan carries an interest of 12% per annum and is repayable in

two (2) quarterly instalments of Rs. 500.00 lacs, beginning September 2009 and five (5) quarterly

instalments of Rs. 1,000.00 lacs, beginning March 2010. The loan is secured by a first equitable

mortgage / hypothecation charge over the entire fixed assets of our Company, ranking pari passu with

other lenders. Under the terms and conditions of the term loan agreement, our Company is prohibited

from paying our Directors, guarantors or any other person standing as guarantor, any commission,

brokerage, fees or any such payment in any other form for their having given such guarantee or

continuing such guarantee. Our Company must also ensure that the loan / advance funds are not utilized

for any other purpose than the purpose for which they have been obtained and that the funds are not

diverted / siphoned for any other purpose or to any other concern or sister concern. For further details of

the loan availed from the Allahabad Bank and other indebtedness of the Company, please see the section

titled ―Financial Indebtedness – Details of Secured Borrowings – Term Loans‖ on page 81.

28. Our funding requirements and deployment of the net proceeds of the Issue are based on management

estimates that may vary from actual fund requirements and may be subject to revision, cancellation or

addition which could adversely impact the objects of the Issue, including the implementation of the

expansion project at Nawanshahar plant.

The fund requirements and the intended use of the net proceeds of the Issue as described in the section

titled ―Objects of the Issue – Requirement of Funds and Use of Net Proceeds‖ on page 17 are based on

management estimates and our current business plan, and have not been appraised by any bank or

financial institution or other independent third party. In view of the competitive and dynamic nature of

the CV industry, we may have to revise our expenditure and fund requirements as a result of variations

in the cost structure, changes in estimates, exchange rate fluctuations and external factors, which may

not be within the control of our management may entail rescheduling, revising or cancelling the planned

expenditure and fund requirement, and increasing or decreasing the expenditure for a particular purpose

from our planned expenditure at the discretion of our management. In addition, the estimated fund

deployment schedule and schedule of implementation is based on management‘s current expectations

and is subject to change due to various factors, some of which may not be in our control.

Furthermore, the outlay in relation to our ongoing expansion project at the Nawanshahar plant in Punjab

has been estimated based on pro forma invoices / quotations received from various parties and

management estimates. Quotations received may undergo change as a result of, among other things,

variations in the cost of key inputs, their validity, changes in estimates, exchange rate fluctuations and

external factors, which may not be within the control of our management. Consequently, our actual

xxii

procurement cost may vary from the amounts indicated. Any revision, cancellation or addition of the

fund requirements on any of the objects of the Issue shall be effected only after obtaining necessary

approval(s) from the shareholders of the Company or any regulatory authority, if required.

29. Increasing risks to the CV industry due to a rise in diesel fuel prices could adversely affect our sales,

results of operations and financial condition.

In the CV segment, fuel costs represent a significant portion of the operating cost of such vehicles. Fuel

prices in India have historically been regulated by the government of India. However, due to a surge in

global prices of crude oil, the retail price of petroleum based products in India, including diesel,

increased substantially in the first half of Fiscal 2009. Though there has been stabilization in prices, any

substantial increase in the price of diesel in the future may adversely affect the competitiveness of diesel

fuel powered vehicles as compared to other vehicles or other modes of transportation, which could result

in a decrease in demand for diesel fuel powered vehicles in India, and thereby adversely affect our sales,

business and results of operations.

30. We may be adversely affected by labour unrest.

Our employees are represented by a labour union and are currently covered by a memorandum of

settlement relating inter alia to wages and emoluments valid up to March 31, 2010. While, we consider

our labour relations with our employees to be cordial, we may in future be subject to labour unrest

which may delay or disrupt our operations and sales and distribution of our CVs. In addition, we may

not be able to satisfactorily renegotiate the terms of the memorandum of settlement when it expires on

March 31, 2010. If there are work stoppages or lockouts at our facilities or at the facilities of our major

suppliers occur or continue for a long period of time, our business, financial condition or results of

operations may be adversely affected.

31. Any further issuance of Equity Shares by us may dilute your shareholding and adversely affect the

trading price of our Equity Shares.

Any further issuance of a substantial number of Equity Shares by us could dilute your shareholding.

Furthermore, Sumitomo Corporation, our Promoter, has a shareholding of 53.52%. Furthermore, our

Promoter has also undertaken to subscribe to the unsubscribed portion, if any, of this Issue.

Consequently, the collective holding of our Promoter may increase above its current holdings. The

market price of the Equity Shares could be affected by sales of a large number of the Equity Shares by

Sumitomo Corporation or another of our major shareholders or by a perception that such sales may

occur.

As a purchaser of the Equity Shares, you may experience dilution to your shareholding to the extent that

we conduct future equity or convertible equity offerings. Such dilutions can adversely affect the market

price of the Equity Shares.

32. Our insurance coverage may not be adequate to protect us against all potential losses to which we

may be subject and this may have a material adverse effect on our business.

While we believe that we maintain insurance coverage in amounts consistent with industry norms, there

can be no assurance that any claim under our insurance policies will be honoured fully or timely.

Accordingly, to the extent we suffer loss or damage that is not covered by insurance or which exceeds

our insurance coverage, our business, financial condition and results of operations may be adversely

affected.

33. We have entered into lease agreements in relation to 24 properties which may not be renewed and we

may lose possession of the leased properties

We have entered into lease agreements in relation to 24 properties, including certain of our regional /

zonal offices and other premises. For details of properties leased by us, please see the section titled ―Our

xxiii

Business – Properties‖ on page 58. Our lease deed(s) with respect to (a) House No. 53, Sector 2,

Panchkula, a guest house of the Company has terminated on December 31, 2009, (b) Gadhvi Farm,

Survey No. 228/5, Pirana-Miroli Road, District Ahmedabad, Gujarat, a stockyard, has terminated on

November 30, 2009, (c) Sandoli More, Behind Pratibha Cold Storage, Faizabad Road, Barabanki,

Lucknow, Uttar Pradesh, a stockyard, terminated on August 30, 2008, and (d) Plot No. 633/1, Rangpuri,

New Delhi, a stockyard, terminated on October 31, 2008. We cannot assure you that the leases for our

properties will not expire without renewal or that the lessors of such properties will not terminate such

leases prior to the expiry of the lease period in the event of any breach of the terms of allotment. If any

of the leases is terminated or expires and is not renewed, we may be unable to continue operations at the

leased site.

Furthermore, if we enter into lease deeds or license agreements for our office premises and stock yards

that are not adequately registered with the concerned Sub-Registrar of Assurances. Such lease deeds or

license agreements will not be admissible as evidence in a court of law and our legal recourse based on

these unregistered lease deeds or license agreements will be limited.

34. Currency and exchange rate fluctuations could adversely affect our results of operations

We import a small part of capital equipment, raw materials and components, and also sell our vehicles in

various countries outside India. These transactions are denominated in foreign currencies, primarily the

US Dollar, Euro and the Japanese Yen. On account of fluctuations in foreign currencies we have

experienced gains and losses on transactions denominated in foreign currencies. Furthermore, continued

depreciation of the Indian Rupee could result in further foreign exchange losses. We have experienced

and expect to continue to experience foreign exchange losses and gains, and there can be no assurance

that risks arising out of fluctuations in the value of the Indian Rupee against the US Dollar, Euro and the

Japanese Yen can be mitigated.

35. Our Promoter has equity interests in affiliated companies that manufacture products that are related

to our business.

Our Promoter has equity interests or other investments in other companies that manufacture products

that are related to our business, such as Hino Motors Vietnam Limited, a company based in Vietnam

which manufactures CVs. There may be conflicts of interest in addressing business opportunities and

strategies in circumstances where our interests differ from other companies in which our Promoter has

an interest.

External Risk Factors

36. Changes in policies of the Government of India (“GoI”) could adversely impact our results of

operations and financial condition.

Our manufacturing facilities are located in India and a substantial portion of our revenue is derived from

sales of our products in the Indian market. Consequently, our Company itself, and the market price and

liquidity of its shares, may be affected by policy changes in India. For example, change in export

policies, imposition of foreign exchange controls, rising interest rates, increases in taxation or the

creation of new regulations could have a detrimental effect on the Indian economy generally and our

Company in particular.

Political instability or a change in economic liberalization and deregulation policies could seriously

harm business and economic conditions in India generally and our business in particular.

The GoI has in recent years sought to implement economic reforms, and the current Government has

implemented policies and undertaken initiatives that continue the economic liberalization policies

pursued by previous governments. For example, the GoI has announced its general intention to continue

India‘s current economic and financial sector deregulation policies and encourage infrastructure

projects. However, the roles of the GoI and the state governments in the Indian economy as producers,

xxiv

consumers and regulators have remained significant and there can be no assurance that liberalization

policies will continue in the future. Any significant change in such liberalization and deregulation

policies could adversely affect business and economic conditions in India generally and our results of

operations and financial condition in particular. Furthermore, we are also impacted by political

instability in the states where we operate.

Furthermore, India‘s obligation under its World Trade Organisation Agreement could lower the present

level of tariffs on imports of components and vehicles particularly with respect to cars in completely

built units and/or completely knocked down units, which could adversely affect our sales and results of

operations.

37. Delays in construction of improved roadways in India may adversely affect the demand for our

products.

Our business prospects are based on the assumption that new and large roadway projects in India being

undertaken by the Government of India and various state governments will proceed according to plan.

Improved roadways in India will not only reduce the time of travel but also costs. If these roadway

projects are not completed as per plan or at all, the demand for our current and new vehicles may not

achieve the level that we anticipate and, accordingly, may adversely affect our sales and results of

operations.

38. An increase in the competitiveness of alternative modes of transport in India could adversely affect

the demand for our products.

The railways in India have historically offered an alternative to transport of goods by road. In the recent

past, the railways have increasingly offered carriage of freight at competitive rates. Further, the new

initiatives from railways such as development of dedicated freights corridors could improve the

competitiveness of railways in the movement of freight. If the time taken by the railways to transport

goods and/or its competitiveness further improves, our potential customers may decide to use the

railways to transport goods from one place to the other, which may have an adverse effect on the

demand for CVs in India.

39. Any increase in taxes and other levies imposed by the GoI or state governments in India on the

acquisition or ownership of CVs, may have a material adverse effect on the demand for our products,

results of operations and financial condition.

Taxes and levies imposed by the GoI and state governments that affect our business include excise duty

on the manufacture of CVs, custom duty on the import of raw materials, sales tax, service tax, value

added tax, road and registration tax. These taxes and levies affect the cost of production and therefore

the demand for our products. Any increase in the rate of these taxes and levies or the imposition of new

taxes or levies in the future may have an adverse effect on the demand for our products and its results of

operations. Furthermore, any restrictions or levies imposed by the GoI on the use of CVs such as

congestion charges or other traffic control measures may adversely affect the demand for our products in

the future.

40. Terrorist attacks or war involving India or other countries could adversely affect business sentiment

and the financial markets and adversely affect our business.

Terrorist attacks may adversely affect global equity markets and economic growth as well as the Indian

economy, stock markets and our business. Such acts of violence or terrorism could have a direct

negative impact on us or an indirect impact on us by, for example, affecting our customers, the financial

markets or the economies in which we operate. This, in turn, could have a material adverse effect on the

market for securities of Indian companies, including the Equity Shares. The consequences of any

terrorist attacks are unpredictable, and we may not be able to foresee events that could have an adverse

effect on our business.

xxv

41. The extent and reliability of Indian infrastructure could adversely impact our results of operations

and financial condition.

India‘s physical infrastructure is less developed than that of many developed nations and problems with

its port, rail and road networks, electricity grid, communication systems or any other public facility

could disrupt our normal business activity. Any deterioration of India‘s physical infrastructure would

harm the national economy, disrupt the transportation of goods and supplies, and add costs to doing

business in India. These problems could interrupt our business operations, which could have a material

adverse effect on our results of operations and financial condition.

42. If natural disasters occur in India, our results of operations and financial condition could be

adversely affected.

India has experienced floods, earthquakes, tsunamis, cyclones and droughts in recent years. Such natural

catastrophes could disrupt our operations, production capabilities, distribution chains or damage our

facilities located in India. For example, in December 2004, Southeast Asia, including the eastern coast

of India, experienced a tsunami and in October 2005, the State of Jammu and Kashmir experienced an

earthquake, both of which caused significant loss of life and property damage.

Additionally, in the event of a drought, the state governments in which our facilities are located could

cut or limit the supply of water to our facilities, thus adversely affecting our production capabilities, and

reducing the volume of products we can manufacture and consequently reducing our revenues. We

cannot assure prospective investors that such events will not occur in the future, or that our results of

operations and financial condition will not be adversely affected.

43. Significant differences exist between Indian GAAP and other accounting principles, such as US

GAAP and IFRS, which may be material to investors’ assessments of our financial condition. If

applicable, our failure to successfully adopt IFRS required effective April 2011 could have a material

adverse effect on our stock price.

Our financial statements are prepared in accordance with Indian GAAP. We have not attempted to

quantify the impact of IFRS or US GAAP on the financial data included in this Letter of Offer, nor do

we provide a reconciliation of our financial statements to those of US GAAP or IFRS. US GAAP and

IFRS differ in significant respects from Indian GAAP. Accordingly, the degree to which the financial

statements included in this Letter of Offer will provide meaningful information is entirely dependent on

the reader‘s level of familiarity with Indian accounting practices. Any reliance by persons not familiar

with Indian accounting practices on the financial disclosures presented in this Letter of Offer should

accordingly be limited.

The Institute of Chartered Accountants of India, the accounting body that regulates the accounting firms

in India, has announced a road map for the adoption of, and convergence with IFRS, pursuant to which

all public companies in India, among other, such as our Company, will be required to prepare their

annual and interim financial statements under IFRS beginning with fiscal period commencing April 1,

2011. Because there is significant lack of clarity on the adoption of and convergence with IFRS and

there is not yet a significant body of established practice on which to draw in forming judgments

regarding its implementation and application, we have not determined with any degree of certainty the

impact that such adoption will have on our financial reporting. There can be no assurance that our

financial condition, results of operations, cash flows or changes in shareholders' equity will not appear

materially worse under IFRS than under Indian GAAP. As we transition to IFRS reporting, we may

encounter difficulties in the ongoing process of implementing and enhancing our management

information systems. Moreover, there is increasing competition for the small number of IFRS-

experienced accounting personnel available as more Indian companies begin to prepare IFRS financial

statements. There can be no assurance that our adoption of IFRS will not adversely affect our reported

results of operations or financial condition and if applicable, any failure to successfully adopt IFRS by

April 2011 could have a material adverse effect on our stock price.

xxvi

44. You may not receive the Securities that you subscribe for in this Issue until fifteen days after the date

on which this Issue closes, which will subject you to market risk.

The Securities you purchase in this Issue will not be credited to your demat account with depository

participants until approximately 15 days from the Issue Closing Date. You can start trading such

Securities only after receipt of listing and trading approvals in respect thereof. There can be no

assurance that the Securities allocated to you will be credited to your demat account, or that trading in

the Securities will commence within the specified time periods.

Notes to Risk Factors

Issue of 3,984,946 Equity Shares of Rs. 10 each at a premium of Rs. 190 per Equity Share

aggregating to an amount of Rs. 7,969.89 lacs to the equity shareholders on rights basis in the ratio

of 19 Equity Shares for every 50 Equity Shares held on the Record Date i.e. February 10, 2010. The

Issue Price for Equity Shares is 20 times of the face value of the Equity Share.

The net worth (shareholders‘ funds) of the Company was Rs. 10, 326.23 lacs as on September 30,

2009 according to the unaudited financial statements, which have been subjected to a limited review

by the auditors, included in this Letter of Offer on page F32. The net worth (shareholders‘ funds) of

the Company was Rs. 9,652.78 lacs as on March 31, 2009 according to the audited financial

statements included in this Letter of Offer on page F1.

The details of transactions by the Company with the Promoter or group companies during the period

beginning April 1, 2008 and ending on January 20, 2010, and the nature and amount of such

transactions is given below:

(Rs. in lacs)

S. No. Details

April 1, 2008 to

March 31, 2009

April 1, 2009 to

January 20, 2010

Cumulative

Value

1.

Purchase of components

/ spares 1,516.31 860.92

2,377.23

2. Purchase of fixed assets 252.36 20.44 272.80

3. Discounting charges 10.98 2.92 13.90

4. Dividend paid (Gross) 236.67 84.19 320.86

Total 2,016.32 968.47 2,984.79

Total

Our Company does not have any subsidiaries.

There are no financing arrangements whereby the Promoter, its directors, the promoter group, the

Directors of the Company and their relatives have financed the purchase by any other person of

securities of the Company during the period of six (6) months immediately preceding the date of

filing the Letter of Offer with the SEBI.

The Company has not made any loans or advances to any Directors or persons or companies in

which the Directors are interested.

1

SECTION III - INTRODUCTION

SUMMARY OF THE ISSUE

The following is a summary of the Issue. This summary should be read in conjunction with, and is qualified

in its entirety by, more detailed information in the section titled ―Terms of the Issue‖ on page 105.

Equity Shares offered by our Company 3,984,946 Equity Shares of Rs. 10 each

Rights Entitlement for Equity Shares 19 Equity Shares for every 50 Equity Shares held on the

Record Date, i.e. February 10, 2010

Record Date February 10, 2010

Issue Price per Equity Share Rs. 200

Equity Shares outstanding prior to the Issue 10,486,700 Equity Shares of Rs. 10 each

Equity Shares outstanding after the Issue 14,471,646 Equity Shares of Rs. 10 each

Use of Issue proceeds See the section titled ―Objects of the Issue- Requirement

of Funds and Use of Net Proceeds‖ on page 17.

Terms of the Issue See the section titled ―Terms of the Issue‖ on page 105.

2

SUMMARY FINANCIAL INFORMATION

The following tables set forth the Company‘s summary balance sheet and profit & loss account based on the

Company‘s financial statements as at and for the period ended September 30, 2009 on which the Auditor has

issued a limited review report and the Company‘s summary balance sheet, profit and loss account and cash

flow statement based on the Company‘s financial statements as at and for the period ended March 31, 2009

on which the Auditor has issued an audit report.

The Company‘s summary statements presented below should be read in conjunction with the financial

statements, notes and significant accounting policies thereto included in ―Financial Information – Auditors’

Report and Audited Financial Statements for the year ended March 31, 2009‖, ―Financial Information –

Limited Review Report and Financial Statements for the six months ended September 30, 2009‖ and

―Management’s Discussion and Analysis of Financial Condition and Results of Operations‖ on pages F1,

F32 and 75, respectively.

BALANCE SHEET AS AT 30TH SEPTEMBER, 2009

(Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

SOURCES OF FUNDS

Shareholders' Funds

Share Capital 1,049.38 1,049.38

Reserves & Surplus 9,276.85 8,603.40

10,326.23 9,652.78

Loan Funds

Secured Loans 8,818.71 15,128.69

Unsecured Loans 7,900.00 6,900.00

27,044.94 31,681.47

APPLICATION OF FUNDS

Fixed Assets

Gross Block 16,142.61 13,499.46

Less : Depreciation 3,969.57 3,553.92

Net Block 12,173.04 9,945.54

Capital Work-in-Progress 569.47 2,839.72

Deferred Tax Assets (Net) 9.96 279.96

Current Assets, Loans and

Advances

Inventories 16,181.89 14,929.19

Sundry Debtors 10,898.10 14,633.32

Cash and Bank Balances 1271.01 700.89

Other Current Assets 182.37 189.17

Loans and Advances 2,773.76 3,032.54

31,307.13 33,485.11

Less :

Current Liabilities and Provisions

Current Liabilities 15,262.41 13,349.00

Provisions 1,752.25 1,519.86

17,014.66 14,868.86

Net Current Assets 14,292.47 18,616.25

27,044.94 31,681.47

3

PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED 30TH

SEPTEMBER, 2009

(Rs. in lacs)

Period Ended Period Ended

30th Sept.2009 30th Sept.2008

INCOME

Sales 33,543.15 40,663.58

Less : Excise Duty 2,550.08 4,188.22

Net Sales Revenue 30,993.07 36,475.36

Other Operating Income 233.83 333.20

Total 31,226.90 36,808.56

EXPENDITURE

Manufacturing and Other Expenses 28,834.20 34,075.58

Finance Charges(Net) 1,033.59 638.57

Depreciation / Amortisation 415.65 224.83

Total 30,283.44 34,938.98

Profit for the period before Tax Expense 943.46 1,869.58

Tax expense/(Saving)

- Current Tax 169.00 435.00

- Current Tax Earlier Years 11.18 -

- Deferred Tax 270.00 190.00

- Fringe Benefits Tax - 25.00

- MAT Credit Entitlement (180.18) -

Profit for the period after Tax Expense 673.46 1,219.58

Balance brought forward from previous year

1,727.94 1,458.22

Profit available for Appropriation 2,401.40 2,677.80

APPROPRIATIONS

Balance Carried to Balance Sheet 2,401.40 2,677.80

2,401.40 2,677.80

Earning Per Share

- Basic/Diluted Earning Per Share (Rs.) 6.42 11.63

4

BALANCE SHEET AS AT 31ST MARCH, 2009 (Rs. in lacs)

As at As at

31st Mar.2009 31st Mar.2008

SOURCES OF FUNDS

Shareholders' Funds

Share Capital 1,049.38 1,049.38


9,652.78 9,358.05

Loan Funds

Secured Loans 15,128.69 1,356.87

Unsecured Loans 6,900.00 12,900.00

31,681.47 23,614.92


Fixed Assets

Gross Block 13,499.46 4,863.88


Net Block 9,945.54 1,872.76

Capital Work-in-Progress 2,839.72 8,090.59

Capital Spares - 3.21

Deferred Tax Assets (Net) 279.96 164.96


Advances

Inventories 14,929.19 12,349.80

Sundry Debtors 14,633.32 18,560.06




33,485.11 34,803.24

Less :

Current Liabilities and Provisions


Provisions 1,519.86 2,034.58

14,868.86 21,319.84


31,681.47 23,614.92

5

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2009

(Rs. in lacs)

Year Ended Year Ended

31st Mar.2009 31st Mar.2008

INCOME

Sales 59,983.81 75,882.81

Less : Excise Duty 5,898.58 9,339.36


Other Operating Income 610.01 598.75

Total 54,695.24 67,142.20

EXPENDITURE

Manufacturing and Other Expenses 51,888.94 61,768.44

Finance Charges(Net) 1,808.77 1,173.42

Depreciation / Amortisation 583.92 330.07

Total 54,281.63 63,271.93

Profit for the year before Tax Expense 413.61 3,870.27

Tax expense/(Saving)

- Current Tax 41.22 1,380.00

- Deferred Tax (115.00) (90.00)

- Fringe Benefits Tax 49.85 60.00

- MAT Credit Entitlement (41.22) -

Profit for the year after Tax Expense 478.76 2,520.27

Balance brought forward from the previous year

1,458.22 1,312.74


APPROPRIATIONS

Proposed Dividend 157.30 576.77

Dividend Tax and Surcharge 26.73 184.03 98.02 674.79

General Reserve 25.00 1,700.00


1,936.98 3,833.01

Earning Per Share


6

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2009

(Rs.in lacs)

Year ended Year ended

March

31,2009 March 31, 2008

A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit Before Tax expense 413.61 3,870.27

Adjustments For :

Depreciation 583.92 330.07

Foreign Exchange Fluctuation 12.24 63.74

Interest Expense 1,744.48 1,036.79

Interest Income (92.96) (22.61)

Provision for Doubtful Debts & Advances 128.06 395.38

Provision for Retirement Benefits 176.74 240.85

Provision for Warranty (160.34) 40.00

Provision for Wealth Tax 0.69 (0.40)

Liabilities/Provisions no longer required written back (115.51) (78.71)

2,277.32 2,005.11

Operating Profit Before Working Capital Changes 2,690.93 5,875.38

Adjustments for :

Decrease / (Increase) in Sundry Debtors 3,828.02 249.68

Decrease / (Increase) in Other Current Assets 268.78 258.69

Decrease / (Increase) in Loans & Advances (235.93) (48.38)

Decrease / (Increase) in Inventories (2,579.39) (3,616.77)

(Decrease) / Increase in Current Liabilities (6,222.04) (4,940.56) 1,285.59 (1,871.19)

CASH GENERATED FROM / (USED IN) OPERATIONS (2,249.63) 4,004.19

Less: Direct Tax Paid (net of refunds) 306.10 1,163.69

Less: Wealth Tax Paid 0.64 0.60

Less: Fringe Benefits Tax Paid 57.65 50.92

NET CASH GENERATED FROM / (USED IN)

OPERATING ACTIVITIES (2,614.02) 2,788.98

B.CASH FLOW FROM INVESTING ACTIVITIES :

Purchase of Fixed Assets (2,783.21) (5,393.57)

Interest Received 90.99 21.70

NET CASH USED IN INVESTING ACTIVITIES (2,692.22) (5,371.87)

C.CASH FLOW FROM FINANCING ACTIVITIES

Unsecured Loans taken during the year 7,131.13 13,331.42

Unsecured Loans repaid during the year 7,131.13 - 8,460.04 4,871.38

Secured Loans taken / (repaid) during the year 7,780.88 (1,602.33)

Dividend Paid (567.82) (563.28)

Dividend Tax (98.02) (98.02)

Interest Paid (2,013.38) (1,392.24)

NET CASH INFLOW FROM FINANCING

ACTIVITIES 5,101.66 1,215.51

Net Increase in Cash and Cash Equivalents (204.58) (1,367.38)

Cash and Cash Equivalents (#1) (A) 905.22 2,272.81

Cash and Cash Equivalents (#2) (B) 700.64 905.43

Notes:-

# 1 Cash and Bank Balances (C) 914.28 2,272.81

less. Cash Credit Accounts (being treated as financing activity) (9.06) -

7

905.22 2,272.81

# 2 Cash and Bank Balances (D) 700.89 * 914.28 *

less. Cash Credit Accounts (being treated as financing activity) - (9.06)

Cash and Cash Equivalents (E) 700.89 905.22

*Net of unrealised foreign exchange gain of Rs. 0.25 lacs (Previous year Rs.0.21 lacs unrealised foreign exchange loss)

A Cash and Cash Equivalents as at 01.04.2008 for the year ended March 31,2009 and as at 01.04.2007 for the year ended March 31, 2008;

B Cash and Cash Equivalents as at 31.03.2009 for the year ended March 31, 2009 and as at 31.03.2008 for the year ended March 31,

2008 C Cash and Bank Balances as at 01.04.2008 for the year ended March 31,2009 and as at 01.04.2007 for the year ended March 31,

2008;

D Cash and Bank Balances as at 31.03.2009 for the year ended March 31, 2009 and as at 31.03.2008 for the year ended March 31,

2008;

E Cash and Cash Equivalents as at 31.03.2009 for the year ended March 31, 2009 and as at 31.03.2008 for the year ended March 31,

2008.

Note:

1. The above "Cash Flow Statement" has been prepared under the Indirect method as set out in the Accounting

Standard -3 on Cash Flow Statements.

2. Figures in bracket indicates cash outflows.

3. Previous year figures have been regrouped and recasted wherever necessary to conform to the current year classification

8

GENERAL INFORMATION

Dear Shareholder(s),

Pursuant to the resolution passed by the Board of Directors of the Company at its meeting held on March 19,

2009, it has been decided to make the following offer to the Equity Shareholders of the Company, with a right

to renounce:

ISSUE OF 3,984,946 EQUITY SHARES OF RS. 10 EACH FOR CASH AT A PREMIUM OF RS. 190

PER EQUITY SHARE AGGREGATING Rs. 7,969.89 LACS TO THE EQUITY SHAREHOLDERS

ON RIGHTS BASIS IN THE RATIO OF 19 EQUITY SHARES FOR EVERY 50 EQUITY SHARES

HELD ON THE RECORD DATE i.e. FEBRUARY 10, 2010. THE ISSUE PRICE OF EACH EQUITY

SHARE IS 20 TIMES THE FACE VALUE OF THE EQUITY SHARE.

The Issue has also been approved by the shareholders of the Company at the extraordinary general meeting of

the Company held on July 2, 2009.

For details in payment methods, please see the section titled “Terms of the Issue – Principal Terms of the

Equity Shares – Terms of Payment” and “Terms of the Issue – Mode of Payment” on pages 105 and 114,

respectively.

Registered Office of the Company


Village Asron

District Nawanshahar – 144 533

Punjab, India

Registration No. 5516

Corporate Identification No.: L50101PB1983PLC005516

The Company is registered at the Registrar of Companies, Punjab, Chandigarh and Himachal Pradesh located

at:

Corporate Bhawan, Plot No.4 B

Sector 27 B, Madhya Marg

Chandigarh – 160 019, India

The existing Equity Shares of the Company are listed on the Stock Exchanges.

For details of the Board of directors of the Company, please see the section titled ―Our Management‖ on

page 64.

Company Secretary and Compliance Officer

Mr. Gopal Bansal


204 – 205, Sector 34-A

Chandigarh – 160 022

India

Tel: (91 172) 2647 700

Fax: (91 172) 2647 805

Email: [email protected]

9

Investors may contact the Compliance Officer or the Lead Manager for any pre-Issue / post-Issue related

matters.

Auditors

Price Waterhouse

Chartered Accountants

Building 8, Tower B

7th

and 8th

Floor

DLF Cyber City

Gurgaon – 122002

Haryana, India

Tel: (91 124) 4620 000

Fax: (91 124) 4620 620

Firm Registration Number (FRN No.): 301112E

Lead Manager to the Issue

JM Financial Consultants Private Limited

141, Maker Chambers III

Nariman Point

Mumbai - 400 021

Maharashtra, India

Tel: (91 22) 6630 3030

Fax: (91 22) 2204 7185


Investor Grievance ID: [email protected]

Contact Person: Ms. Lakshmi Lakshmanan

Website: www.jmfinancial.in

SEBI Registration No.: INM000010361

Statement of responsibilities as the Lead Manager to the Issue

JM Financial is the sole Lead Manager to the Issue and all the responsibilities relating to the co-ordination

and other activities in relation to the Issue shall be performed by them.

Legal Advisor to the Issue

Amarchand & Mangaldas & Suresh A. Shroff & Co.

Amarchand Towers

216, Okhla Industrial Estate, Phase III

New Delhi - 110 020, India

Tel: (91 11) 2692 0500

Fax: (91 11) 2692 4900

Bankers to the Issue

Axis Bank Limited SCF – 13 - 114, Phase – 7

Mohali – 160 062, India

Tel: (91 172) 4680 909 / 4680 900

Fax: (91 172) 4680 999

Email: [email protected] / [email protected]

Contact Person: Ms. Gargi Sood / Mr. Yogesh Gaba

10

Website: www.axisbank.com

SEBI Registration No.: INBI00000017

Standard Chartered Bank Limited No.270 DN Road

Cash Management Services

Ground Floor, Fort

Mumbai - 400 001

Tel: (91 22) 2268 3955

Fax: (91 22) 2209 6067

Email: [email protected] / [email protected]

Contact Person: Mr. Joseph George / Mr. Ramesh Joshi

Website: : www.standardchartered.com

SEBI Registration No.: INBI00000885

Self Certified Syndicate Banks

The list of banks that have been notified by the SEBI to act as SCSB for the ASBA Process are provided on

www.sebi.gov.in/pmd/scsb.html.

Credit Rating

This being an Issue of Equity Shares, no credit rating is required.

Monitoring Agency

No monitoring agency is required to be appointed by the Company for the Issue.

Appraisal Reports

None of the purposes for which the Net Proceeds are proposed to be utilized have been financially appraised

by any bank or financial institution.

Principal terms of loans and assets charged as security

Please see the section titled ―Financial Indebtedness‖ on page 81.

Listing of Securities

The Equity Shares of our Company were initially listed on the BSE in the year 1985 pursuant to an initial

public offering by our Company. Subsequently, in 2003, the Equity Shares of our Company were listed on the

NSE. We have received ―in-principle‖ approvals for listing of the Equity Shares to be issued pursuant to this

Issue from the BSE and the NSE by letters dated September 30, 2009 and October 16, 2009, respectively. We

will make applications to the Stock Exchanges for permission to deal in and for an official quotation in

respect of the Equity Shares being offered in terms of the Letter of Offer. If the permission to deal in and for

an official quotation is not granted for the Equity Shares by the Stock Exchanges, our Company shall

forthwith repay, without interest, all monies received from the Investors pursuant to the Letter of Offer. If

such money is not repaid within eight (8) days after our Company becomes liable to repay it (i.e. 15 days after

Issue Closing Date or the date of refusal by the Stock Exchanges, whichever is earlier) our Company and

every Director of the Company who is an officer in default shall, on and from expiry of eight (8) days, be

jointly and severally liable to repay the money, with interest as prescribed under Section 73 of the Companies

Act.

11

Issue Schedule

The subscription will open upon the commencement of the banking hours and will close upon the close of

banking hours on the dates mentioned below:

Issue Opening Date: March 3, 2010

Last date for receiving requests for SAFs: March 10, 2010

Issue Closing Date: March 17, 2010

The Board may however decide to extend the Issue period, as it may determine from time to time, but not

exceeding 30 days from the Issue Opening Date.

Impersonation

As a matter of abundant caution, attention of the Investors is specifically drawn to the provisions of sub-

section (1) of Section 68A of the Companies Act which is reproduced below:

―Any person who makes in a fictitious name an application to a company for acquiring, or subscribing for,

any shares therein, or otherwise induces a company to allot, or register any transfer of shares therein to him,

or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend

to five years‖.

Allotment Letters / Refund Orders

Our Company will issue and dispatch letters of allotment /share certificates /demat credit and /or letters of

regret along with refund order, as applicable, or credits the Equity Shares to the respective beneficiary

accounts, if any, within a period of 15 days from the Issue Closing Date. If the refund orders are not repaid

within eight (8) days from the date the Company becomes liable (i.e. 15 days from the Issue Closing Date or

the date of refusal by the Stock Exchange(s), whichever is earlier) the Company shall pay that money with

interest for the delayed period as prescribed under Section 73 of the Companies Act.

Investors residing at any of the centers where clearing houses are managed by the Reserve Bank of India

(―RBI‖) will get refunds through Electronic Clearing Service (―ECS‖) except where Investors are otherwise

disclosed as applicable / eligible to get refunds through direct credit and real time gross settlement (―RTGS‖).

In case of those Investors who have opted to receive Equity Shares in dematerialized form using electronic

credit under the depository system, advice regarding their credit of the securities shall be given separately.

Investors to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary

post intimating them about the mode of credit of refund within 15 days of the Issue Closing Date. The

Investors shall have an option either to receive the security certificates or to hold the securities in

dematerialized form with a depository.

In case of those Investors who have opted to receive Equity Shares in physical form and the Company issues

letter of allotment, the corresponding share certificates will be kept ready within three (3) months from the

date of allotment thereof or such extended time as may be approved by the Company Law Board under

Section 113 of the Companies Act or other applicable provisions, if any. Investors are requested to preserve

such letters of allotment, which would be exchanged later for the share certificates. For more information,

please see the section titled ―Terms of the Issue‖ on page 105.

The letter of allotment / refund order exceeding Rs. 1,500.00 would be sent by registered post / speed post to

the sole / first Investors registered address. Refund orders up to the value of Rs. 1,500.00 would be sent under

certificate of posting. Such refund orders would be payable at par at all places where the applications were

originally accepted. The same would be marked ‗Account Payee only‘ and would be drawn in favour of the

sole / first Investor. Adequate funds would be made available to the Registrar to the Issue for this purpose.

12

Declaration by Board on creation of separate account

The Board of Directors declares that funds received against this Issue will be transferred to a separate bank

account other than the bank account referred to sub-section (3) of Section 73 of the Companies Act.

Minimum Subscription

If our Company does not receive the minimum subscription of 90% of the Issue, our Company shall forthwith

refund the entire subscription amount received within 15 days from Issue Closing Date. If there is a delay in

the refund of subscription by more than eight (8) days after the date from which our Company becomes liable

to pay the subscription amount (i.e. 15 days after the Issue Closing Date or the date of refusal by the Stock

Exchanges, whichever is earlier) our Company shall pay interest for the delayed period at the rates prescribed

under Sections 73 (2) and (2A) of the Companies Act.

Compliance with the Listing Agreement

The Company has complied with the provisions of the listing agreement entered into with the Stock

Exchanges (―Listing Agreement‖) and no action has been initiated by the Stock Exchanges against the

Company, for non-compliance with any provision of the Listing Agreement.

13

CAPITAL STRUCTURE

Our share capital as on the date of filing of this Letter of Offer is set forth below.

(Rs.in lacs, except per share data)

Aggregate Value at

Face Value

Aggregate Value at

Issue Price

A. Authorized Share Capital*

40,000,000 Equity Shares of Rs.10 each 4,000.00

B. Issued, Subscribed and Paid-up Capital before the

Issue

10,486,700 Equity Shares of Rs. 10 each, fully paid-up 1,048.67**

C. Present Issue in terms of the Letter of Offer***

3,984,946 Equity Shares of Rs. 10 each 398.49 7,969.89

D. Paid-up Equity Capital after the Issue

14,471,646 Equity Shares of Rs. 10 each 1,447.16**

E. Securities Premium Account

Before the Issue Nil

After the Issue 7,571.40 * The authorized share capital of the Company was increased from Rs. 2,000.00 lacs (divided into 20,000,000 Equity Shares) to Rs.

4,000.00 lacs (divided into 40,000,000 Equity Shares) pursuant to an EGM dated July 2, 2009. ** It excludes the forfeited amount of Rs. 0.71 lac.

***The present Issue has been authorized by a resolution of the Board of Directors dated March 19, 2009.

Notes to the Capital Structure

1. The Promoter has confirmed that it intends to subscribe to the full extent of their Rights Entitlement

in the Issue. Subject to compliance with the Takeover Code, the Promoter and promoter group

reserve their right to subscribe for Equity Shares in this Issue by subscribing for renunciation, if any,

made by any other shareholder. The Promoter has provided an undertaking dated January 20, 2010

to our Company to apply for additional Equity Shares in the Issue, to the extent of the unsubscribed

portion of the Issue. As a result of this subscription and consequent allotment, the Promoter and

promoter group may acquire Equity Shares over and above their Rights Entitlement in the Issue,

which may result in an increase of the shareholding being above the current shareholding with the

Rights Entitlement of Equity Shares under the Issue. This subscription and acquisition of additional

Equity Shares by the Promoter and promoter group through this Issue, if any, will not result in

change of control of the management of the Company and shall be exempt in terms of proviso to

Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the requirements indicated

in ―Objects of the Issue – Requirement of Funds and Use of Net Proceeds‖ on page 17), there is no

other intention/purpose for this Issue, including any intention to delist our Company, even if, as a

result of allotments to the Promoter and promoter group, in this Issue, the Promoter‘s shareholding

in our Company exceeds their current shareholding. The Promoter and promoter group shall

subscribe to such unsubscribed portion as per the relevant provisions of the law. Allotment to the

Promoter and promoter group of any unsubscribed portion, over and above their Rights Entitlement

shall be done in compliance with the Listing Agreement and the Takeover Code, as amended, from

time to time.

The Promoter has provided the following undertaking vide its letter dated January 20, 2010.

―The subscription by the Promoters and / or members of the promoter group for the Equity Shares in

the Issue and the allotment of the Equity Shares will be in continuous compliance with the minimum

public shareholding requirement specified under Clause 40A of the Listing Agreement with the Stock

Exchanges (“Listing Agreement”) and the Company will take such steps as may be necessary to

14

ensure such compliance with Clause 40A of the Listing Agreement, including but not limited to

issuance of Equity Shares to the public through a prospectus, offer for sale of Equity Shares by the

Promoter to the public through a prospectus, sale of Equity Shares held by the Promoter through the

secondary market and any other step which does not adversely affect the interest of minority

shareholders.‖

The above will be done in compliance with the SEBI (ICDR) Regulations, the Takeover Code and

the Listing Agreement.

2. Shareholding Pattern of our Company

Shareholding pattern of our Company as on December 31, 2009:

Category

Code

Category of Shareholders Number of

Shareholders

Total

Number

of shares

Number of

Shares Held in

dematerialized

form

Total Shareholding as a

percentage of total

number of shares

Shares Pledged or otherwise

encumbered

As a

percentage of

A+B

As a

percentage

A+B+C

Number of

shares

As a percentage

(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX)=(VIII)/(IV)

*100

(A) Shareholding of Promoter and Promoter

Group

1 Indian

A Individuals/Hindu

Undivided Family

0 0 0 0 0

0 0.00

B Central Government/State Government

0 0 0 0 0 0 0.00

C Bodies Corporate 0 0 0 0 0 0 0.00

D Financial Institutions/Banks 0 0 0 0 0 0 0.00

E Any Other (specify) 0 0 0 0 0 0 0.00

Sub-Total (A) (1) 0 0 0 0 0 0 0.00

2 Foreign

A Individuals(Non-Resident

Individuals/ Foreign Individuals)

0 0 0 0 0 0 0.00

B Bodies Corporate 1 5,612,953 5,612,953

53.524

53.524

0 0.00

C Institutions 0 0 0 0 0 0 0.00

D Any Other (specify) 0 0 0 0 0 0 0.00

Sub-Total (A) (2) 1 5,612,953 5,612,953

53.524

53.524

0 0.00

Total Shareholding of

Promoter and Promoter

Group A = (A)(1)+(A)(2)

1 5,612,953 5,612,953

53.524

53.524

0 0.00

(B) Public Shareholding NA NA

1 Institutions NA NA

A Mutual Funds/UTI 9 920,546 918,996

8.778

8.778

- -

B Financial Institutions/Banks 1 6,450 6,450

0.062

0.062

- -

C Central Government/State

Government(s)

0 0 0 0

0

- -

D Venture Capital Fund 0 0 0 0 0 - -

E Insurance Companies 0 0 0 0 0 - -

F Foreign Institutional

Investors

3 976,417 975,567

9.311

9.311

- -

G Foreign Venture Capital Investors

0 0 0 0 0

- -

15

Category

Code

Category of Shareholders Number of

Shareholders

Total

Number

of shares

Number of

Shares Held in

dematerialized

form

Total Shareholding as a

percentage of total

number of shares

Shares Pledged or otherwise

encumbered

H Any Other (specify) 0 0 0 0

0

- -

Sub-Total (B) (1) 13 1,903,413 1,901,013

18.151

18.151

- -

2 Non-Institutions NA NA

A Bodies Corporate 224 282,545 276,894 2.694

2.694

- -

B Individuals

I Individual Shareholders

holding nominal Share

Capital value up to Rs. 1

lakh

9,433 1,216,110 719,841

11.597

11.597

- -

Ii Individual Shareholders

holding nominal Share

Capital value In excess of Rs. 1 lakh

8 207,571 207,571

1.979

1.979

- -

C Any Other (specify) 0 0 0

0.00

0.00

- -

I Foreign Body Corporate 3 1,063,464 1,063,464 10.141

10.141

- -

Ii Non Resident Individuals 1,041 200,642 67,642

1.913

1,913

- -

Iii Trust & Foundations 2 2 2

0.00

0.00

0 0

Sub-Total (B) (2) 10,711 2,970,334 2,335,414

28.325

28.325

- -

Total Public Shareholding

(B)= (B)(1)+(B)(2)

10,724 4,873,747 4,236,427

46.476

46.476

NA NA

Total (A)+(B) 10,725 10,486,700 9,849,380 100.00 100.00 - -

(C ) Share held by Custodian

and against which

Depository Receipts have

been issued

0 0 0 0 0 NA NA

Grand Total (A)+(B)+(C ) 10,725 10,486,700 9,849,380 100.00 100.00 - -

3. The details of the shareholding of the Promoter and the promoter group companies

Name Number of Equity

Shares

Percentage

Promoter

Sumitomo Corporation 5,612,953 53.52

Promoter group

Nil Nil Nil

Total 5,612,953 53.52

4. The details of shareholders holding over 1% as on December 31, 2009


Shares

Percentage

Promoter

Sumitomo Corporation 5,612,953 53.52

Total 5,612,953 53.52

Others

CDC Financial Services (Mauritius) Limited 972,983 9.27

Reliance Capital Trustee Company Limited- A/c Reliance

Tax saver 909,722 8.67

16


Shares

Percentage

Actis Agribusiness Limited 811,258 7.73

Isuzu Motors Limited 209,000 1.99

5. There have been no transactions in Equity Shares of our Company by the Promoter, in the last one

(1) year.

6. The Equity Shares held by our Promoter are not currently pledged.

7. The present Issue being a rights issue, as per Regulation 34(c) of the SEBI (ICDR) Regulations, the

requirement of promoters‘ contribution and lock-in are not applicable.

8. We have not issued any Equity Shares or granted any options under any employee stock option

scheme or employees stock purchase scheme.

9. There are no outstanding warrants, options or rights to convert debentures, loans or other instruments

convertible into Equity Shares.

10. We have not issued any Equity Shares for consideration other than cash or out of revaluation

reserves.

11. The Equity Shares of our Company are fully paid up and there are no partly paid up Equity Shares as

on the date of this Letter of Offer.

17

OBJECTS OF THE ISSUE

The net proceeds of the Issue, after deduction of Issue related expenses, are estimated to be approximately Rs.

7,847.14 lacs (―Net Proceeds‖).

The Net Proceeds will be utilized by our Company to fund its ongoing expansion project at the Nawanshahar

plant in Punjab (the ―Expansion Project‖) and general corporate purposes. The intended use of the Net

Proceeds is set forth below:

Financing the Expansion Project;

Repayment of loan taken from Allahabad Bank in relation to the Expansion Project; and

General corporate purposes.

The objects clause of the Memorandum of Association enables our Company to undertake its existing

activities and the activities for which the funds are being raised by our Company in this Issue.

Proceeds of the Issue

The details of the proceeds of the Issue are summarized in the following table: (Rs.in lacs)

S. No. Description Amount

1 Gross Proceeds of the Issue 7,969.89

2 Estimated Issue Expenses 122.75

3 Net Proceeds of the Issue 7,847.14

Requirement of Funds and Use of Net Proceeds

Our Company intends to use the Net Proceeds of the Issue towards financing Phase I of the Expansion

Project, repayment of loan taken from Allahabad Bank in relation to the Expansion Project and general

corporate purposes.

The intended use of the Net Proceeds is set forth below:

(Rs. in lacs)

Description

Estimated Cost

Amount

Deployed as on

December 31,

2009 (1)

Amount to be

Deployed

Amount to be Deployed

Amount to be

funded through

the Net Proceeds

Amount to be

funded through

Other Means of

Finance

(excluding the

Net Proceeds)

Financing the

Expansion

Project

26,000.00 11,438.41 14,561.59 1,800.00 12,761.59

Repayment of

loan taken from

Allahabad Bank

in relation to the

Expansion

Project(2)

5,000.00 - 5,000.00 5,000.00 -

General

corporate

purposes

- - - 1,047.14 -

Total 7,847.14 1) As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010.

2) As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, as on December 31, 2009, of a loan amount of Rs. 6,000.00 lacs, the Company has repaid Rs. 1,000.00 lacs. The remaining Rs. 5,000.00 lacs are proposed

to be funded through the Net Proceeds.

18

With regards to the financing requirements, excluding the Net Proceeds as above, our Company has made

firm arrangements of finance through verifiable means towards 75% of the financing requirements, excluding

the amount to be raised through the proposed Issue and existing identifiable internal accruals, in compliance

with Regulation (5) VII (D) (1) of Part E of Schedule VIII of the SEBI (ICDR) Regulations. Please refer to ―-

Expansion Project at our Company’s Nawanshahar plant – Funding Arrangement‖ below of this section

titled ―Objects of the Issue‖ on page 24 for further details.

The fund requirements and the intended use of the Net Proceeds as described herein are based on

management estimates, and have not been independently appraised by any bank or financial institution or

other independent third party. In view of the competitive and dynamic nature of the CV industry, our

Company may have to revise its expenditure and fund requirements as a result of variations in the cost

structure, changes in estimates, exchange rate fluctuations and external factors, which may not be within the

control of its management. This may entail rescheduling, revising or cancelling the planned expenditure and

fund requirement and increasing or decreasing the expenditure for a particular purpose from its planned

expenditure at the discretion of our Company‘s management. In addition, the fund deployment schedule and

schedule of implementation as described herein are based on the management‘s current expectations and are

subject to change due to various factors, some of which may not be in our Company‘s control. Any revision,

cancellation or addition of the fund requirements on any of the objects of the Issue shall be effected only after

obtaining necessary approval(s) from the shareholders of our Company or any regulatory authority, if

required.

There are no material existing or anticipated transactions in relation to the utilization of the Net Proceeds or

estimated cost as above with the Promoter, the Directors, our Company‘s key management personnel or

companies promoted by the Promoter. Furthermore, neither the Promoter nor the Directors have any interest

in the Expansion Project or the activities for which the funds are being raised by our Company in this Issue.

In case of variations in the actual utilization of funds earmarked for the purposes set forth above, surplus

funds, if any, available in respect of a particular purpose may be utilized to finance the fund requirements for

any of the other purposes for which funds are being raised in this Issue.

Expansion Project at our Company‟s Nawanshahar plant

In Fiscal 2007, our Company commenced its Expansion Project consisting of the establishment of a second

vehicle manufacturing facility (the ―Vehicle Manufacturing Facility II‖) and a new in-house bus body

facility (the ―Bus Body Facility‖) on 128 acres of Company owned land at its Nawanshahar plant. The

Expansion Project is being undertaken in two (2) phases and the total project cost is estimated at Rs.

26,000.00 lacs. Our Company has entered into technical assistance agreements in connection with the

Expansion Project. For details refer to the section titled ―History and Certain Corporate Matters - Technical

assistance agreements between Isuzu and our Company‖ on page 63.

Power is presently supplied to our Company‘s Nawanshahar plant by the Punjab State Electricity Board

(―PSEB‖). Our Company also has captive power generation by diesel generator sets of 5 MW to ensure un-

interrupted power supply in case of any power breakdown. The Company intends to source the additional

power requirements of the Expansion Project from the PSEB. Furthermore, our Company intends to continue

to use water supplied to the plant from three (3) submersible turbines and overhead tank to meet the needs of

its Expansion Project.

Project Cost

The break-down of the project cost of our Company‘s Expansion Project is set forth below in the following

table:

19

(Rs. in lacs)

Phase I Phase II

Amount

Deployed as on

December 31,

2009 (1)

Estimated

Amount to be

Deployed (2)

Total

Estimated

Outlay

Total

Estimated

Outlay (2)

Total

Project Cost

(A) (B) (C = A + B) (D) (E = C + D)

I. Vehicle Manufacturing

Facility II

– Land development

and construction

1,106.61 664.71 1,771.32 367.06 2,138.38

– Procurement of

design, technology

and know-how

24.17 - 24.17 - 24.17

– Plant, machinery and

utilities

1,053.64 564.41 1,618.05 3,935.86 5,553.91

– Others (3) 19.96 - 19.96 825.00 844.96

Total 2,204.38 1,229.12 3,433.50 5,127.92 8,561.42

II. Bus Body Facility

– Land development

and construction

4,131.19 125.32 4,256.51 97.37 4,353.88

– Procurement of

design, technology

and know-how

262.08 33.43 295.51 - 295.51

– Plant, machinery and

utilities

3,354.59 523.72 3,878.31 2,479.71 6,358.02

– Others (3) 136.17 - 136.17 295.00 431.17

Total 7,884.03 682.47 8,566.50 2,872.08 11,438.58

III. Working Capital Margin 1,350.00 1,650.00 3,000.00 3,000.00 6,000.00

Total (I+II+III) 11,438.41 3,561.59 15,000.00 11,000.00 26,000.00

1) As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010.

2) Based on pro-forma invoices / quotations received and management estimates. Includes charges relating to installation,

commissioning and erection, duties, taxes and other overheads, where applicable. 3) “Others” primarily includes costs relating to procurements of computers, furniture and vehicles. For the estimated outlay,

“Others” includes costs of development of components and contingency as estimated by the management.

Phase I of the Expansion Project

Phase I of the Expansion Project commenced in Fiscal 2007 and involved the setting-up of the Vehicle

Manufacturing Facility II and Bus Body Facility. The Company is in advanced stages of implementing this

phase of the Expansion Project and both facilities became operational in Fiscal 2009 with the Company‘s

installed capacity increasing from 12,000 vehicles in Fiscal 2008 to 18,000 vehicles in Fiscal 2009. The

remaining portion of Phase I of the Expansion Project will primarily involve the completion of construction

of civil infrastructure at both the facilities and purchase of additional equipments and tools for fabrication,

welding, assembly, material handling and metal forming.

Out of the total estimated outlay of Rs. 15,000.00 lacs in relation to Phase I of the Expansion Project, Rs.

3,433.50 lacs is the estimated outlay for the Vehicle Manufacturing Facility II, Rs. 8,566.50 lacs is the

estimated outlay for Bus Body Facility and Rs. 3,000.00 lacs is the estimated working capital margin. As per

the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, an amount of Rs.

11,438.41 lacs has already been deployed as on December 31, 2009 under Phase I of the Expansion Project.

The balance portion of Rs. 3,561.59 lacs relating to Phase I is expected to be deployed by Fiscal 2011 and is

proposed to be financed from the Net Proceeds and the Company‘s debt arrangements. Please see the section

titled ―– Expansion Project at our Company’s Nawanshahar plant – Funding Arrangement‖ of this section

titled ―Objects of the Issue‖ on page 24.

20

The balance amount to be deployed in relation to Phase I has been estimated based on pro-forma invoices /

quotations received from various parties, certain contracts and management estimates.

The remaining construction costs relating to building of civil facilities such as a spare parts department,

training centre and wash rooms, additions to the canteen building and installation of kitchen equipments, and

laying of a test track and RCC (Reinforced Cement Concrete) road system at the Vehicle Manufacturing

Facility II under Phase I of the Expansion Project has been estimated as Rs. 664.71 lacs based on estimates

dated June 24, 2009 by the Planners Group.

Detailed below are certain significant pro-forma invoices / quotations received from various parties for the

supply of plant, machinery and utilities under Phase I of the Expansion Project in relation to the Vehicle

Manufacturing Facility II:

S.No. Name of the Vendor Type of Machine Quantity

(Nos.) (1)

Estimated Cost

(Rs. in lacs) (2)

Date of

Quotation

1 Praja Mechanicals (P)

Ltd.

Chassis Turn Over

Device System

1 113.47 June 12, 2009

2 Mechlonic Engineers

Pvt. Ltd.

Fixture for assembly of

cabinet

4 104.72 June 3, 2009

3 Chicago Pneumatic Sales Electrical Multi Spindle

Fastening System

3 84.71 May 30, 2009

4 Mechlonic Engineers

Pvt. Ltd.

Spot Welding

Transformer (Model

"OS-100") and related

accessories

6 69.74 June 3, 2009

5 Planners Group Hanging structure for

lifting and handling of

vehicle cabins / assembly

of vehicles on the main

line

- 55.41 June 24, 2009

6 Protech Solutions Digital / Inverter Based

MIG Welding Machine

5 24.34 June 16, 2009

7 J.R. Enterprises X-Y Aluminium Rail

System

5 17.35 May 6, 2009

8 Inder Enterprises Safe track system 7 12.21 June 16, 2009

9 Punjab Tractors Ltd. Diesel Forklift 1 8.83 March 16, 2009

10 Fluidyne Control

Systems (P) Ltd.

Liquid Dispensing

System

2 7.18 June 18, 2009

1) Quantity is based on management estimates.

2) Includes charges relating to installation, commissioning and erection, duties, taxes and other overheads, where applicable.

The remaining costs for land development relating to the extension of the bus body assembly shed at the Bus

Body Facility under Phase I of the Expansion Project has been estimated as Rs. 34.92 lacs based on an

estimate dated June 24, 2009 from the Planners Group. Furthermore, the remaining construction costs relating

to the civil construction of the bus body assembly shed, partial construction of the FRP (Fiber Reinforced

Plastic) component production shed, and building of additional wash rooms at the Bus Body Facility under

Phase I of the Expansion Project has been estimated as Rs. 90.40 lacs based on estimates dated June 24, 2009

from the Planners Group.

Furthermore, with regards to the procurement of design, technology and know-how under the remaining

portion of Phase I of the expansion of the Bus Body Facility, the Company has entered into a license

production and parts supply agreement with Zhongtong Bus Holding Co. Limited, China for certain bus body

products. The estimated cost relating to fees for use of technical information, cost of fixtures and other

implement costs that are still to be incurred is estimated as Rs. 33.43 lacs.

21


supply of plant, machinery and utilities under Phase I of the Expansion Project in relation to the Bus Body

Facility:


(Nos.) (1)

Estimated Cost

(Rs. in lacs) (2)

Date of

Quotation

1 Divine Machines Pvt. Ltd. Sliding Base Type Roll

Forming Line

1 151.05 June 19, 2009

2 ISGEC HACO Metal

Forming Machinery Pvt.

Ltd.

CNC Press Brake (Model

ERMS-30135)

4 113.65 June 16, 2009

3 Advance Ventilation Pvt.

Ltd.

Exhaust Extraction with

Motorized return,

automatic disconnection

and balancer

2 30.85 June 16, 2009

4 Fairdeal Agencies 350 Amps capacity IGBT

Invertor Control

CO2/MAG Welding

Machine and accessories

11 27.76 June 9, 2009

5 ISGEC HACO Metal


Ltd.

Hydraulic Shear TS-3006 2 21.50 June 16, 2009

6 Asian Electronics Ltd. 4x54W Highbay 250 21.48 June 29, 2009

7 J.R. Enterprises Air supply equipments - 20.15 May 28, 2009

8 Hindustan Hydraulics

Private Ltd.

NC Hydraulic Shearing

Machine (Model GS-

3106)

1 19.92 June 1, 2009

9 Indian Oil Corporation

Ltd.

2x20 KL Tanks and

Pumps, and allied

facilities

1 15.11 May 29, 2009

10 Khusboo Scientific Pvt.

Ltd.

Salt Spray Tester (Model

.610 / 1000)

1 13.46 June 15, 2009

1) Quantity is based on management estimates. 2) Includes charges relating to installation, commissioning and erection, duties, taxes and other overheads, where applicable.

Phase II of the Expansion Project

On completion of Phase I, the Company expects to commence implementation of Phase II of the Expansion

Project with a view to further expand the Vehicle Manufacturing Facility II and Bus Body Facility. The

expansion will focus on upgrading the Vehicle Manufacturing Facility II to produce cabins and cargo boxes

for cargo applications for the M&HCV segment, and expanding the production capacity at the Bus Body

Plant by setting-up new machines, paint lines and manufacturing amenities. Phase II of the Expansion Project

is expected to be completed by Fiscal 2014. Upon completion of the Expansion Project, the production

capacity is expected to increase to 24,000 units per annum.

The estimated outlay for Phase II is expected to be Rs. 11,000.00 lacs, of which Rs. 5,127.92 lacs is the

estimated outlay for the Vehicle Manufacturing Facility II, Rs. 2,872.08 lacs is the estimated outlay for Bus

Body Facility and Rs. 3,000.00 lacs is the estimated working capital margin. As per the certificate of

Shamsher & Co., Chartered Accountants dated January 19, 2010 the Company has not incurred any

expenditure with respect to the Vehicle Manufacturing Facility II and the Bus Body Facility as on December

31, 2009 under Phase II of the Expansion Project.

The outlay in relation to Phase II has been estimated based on pro-forma invoices/ quotations received from

various parties and management estimates. The Company has not entered into any contracts in relation to the

estimated amount to be deployed.

The costs for land development in relating to the Vehicle Manufacturing Facility II under Phase II of the

Expansion Project has been estimated as Rs. 61.62 lacs based on an estimate dated June 24, 2009, from the

22

Planners Group. Furthermore, construction costs relating to the laying of floors for storage areas, construction

of additional wash rooms, further extending the test track and RCC (Reinforced Cement Concrete) road

system and reinforcing the seasonal nallah crossing between the Vehicle Manufacturing Facility II and Bus

Body Facility has been estimated as Rs. 305.45 lacs based on estimates dated June 24, 2009 from the Planners

Group.


supply of plant, machinery and utilities under Phase II of the Expansion Project in relation to the Vehicle

Manufacturing Facility II:


(Nos.) (1)

Estimated Cost

(Rs. in lacs) (2)

Date of

Quotation

1 Siemens Ltd. 132 KV Switchyard 1 471.38 May 25, 2009

2 Mechlonic Engineers Pvt.

Ltd

Spot Welding

Transformer (Model"OS-

100") and related

accessories

24 278.98 June 3, 2009

3 Sudhir Gensets Limited 1010 KVA Cumins Open

/ Silent DG Set with

Enclosure

3 276.17 May 29, 2009

4 Mechlonic Engineers Pvt.

Ltd.

Fixture for assembly of

cabinet

10 261.80 June 3, 2009

5 Planners Group Hanging structure for

lifting and handling of

vehicle cabins/ assembly

of vehicles on the main

line

- 167.03 June 24, 2009

6 Siemens Ltd. 132 KV transmission line

(1.7 Km)

1 139.36 July 3, 2009

7 Precision Testing

Machines Pvt. Ltd.

Spray and Bake Booth 2 121.89 June 16, 2009

8 Chicago Pneumatic Sales Electrical Multi Spindle

Fastening System

3 83.96 May 30, 2009

9 Asian Electronics Ltd. 4x54W Highbay 850 73.02 June 29, 2009

10 ETE Electrogears Pvt.

Ltd.

PCC Panel - Double Bus

Bar System

2 69.68 May 27, 2009



The costs for the construction of a road system, technical offices and completion of the FRP (Fiber

Reinforced Plastic) component production shed in relating to the Bus Body Facility under Phase II of the

Expansion Project has been estimated as Rs. 97.37 lacs based on estimates dated June 24, 2009 from the

Planners Group.


supply of plant, machinery and utilities under Phase II of the Expansion Project in relation to the Bus Body

Facility:


(Nos.) (1)

Estimated Cost

(Rs. in lacs) (2)

Date of

Quotation

1 Soham Surface Coatings

Pvt. Ltd.

Dip Pre-Treatment and

Painting Plant for Cargo

Box and Bus Body

Structural Components

1 625.93 June 16, 2009

2 ISGEC HACO Metal


Ltd.

500 T Hydraulic Press 3 514.07 June 20, 2009

3 Divine Machines Pvt. Ltd. Sliding Base Type Roll 2 302.09 June 19, 2009

23


(Nos.) (1)

Estimated Cost

(Rs. in lacs) (2)

Date of

Quotation

Forming Line

4 Praja Mechanicals Private

Limited

Paint Shop Conveyor 1 158.32 June 22, 2009

5 Fairdeal Agencies 350 Amps capacity IGBT

Invertor Control

CO2/MAG Welding

Machine and accessories

51 128.72 June 9, 2009

6 Precision Testing

Machines Pvt. Ltd.

Spray and Bake Booth 2 120.69 June 16, 2009

7 Electronica Hitech

Engineering Pvt Ltd

CNC Pipe Bending

Machine

1 98.31 June 15, 2009

8 ISGEC HACO Metal


Ltd.

CNC Press Brake

EERMS-30135

3 85.24 June 16, 2009

9 Nilkamal BITO Storage

System Pvt Ltd.

Pallet Storage System 2 65.67 June 25, 2009

10 Bir Associates Fire Hydrant System 1 61.38 June 16, 2009



The outlay in relation to Phase I and Phase II has been estimated based on pro-forma invoices / quotations

received from various parties and management estimates. Quotations received may undergo change as a result

of, among other things, variations in the cost of key inputs, validity, changes in estimates, exchange rate

fluctuations and external factors, which may not be within the control of the Company‘s management.

Consequently, the Company‘s actual procurement costs may vary from the ones indicated above. Please refer

to the risk factor titled ―Risk Factors – Internal Risk Factors - Our funding requirements and deployment

of the net proceeds of the Issue are based on management estimates that may vary from actual fund

requirements and may be subject to revision, cancellation or addition which could adversely impact the

objects of the Issue, including the implementation of the expansion project at Nawanshahar plant‖ on page

xxi.

Schedule of Implementation

The expected schedule of implementation for the remaining portion of Phase I of the Expansion Project and

Phase II, as estimated by the Company‘s management, is given below:

Particulars Expected Completion (On or Prior to)

Remaining portion of

Phase I

Phase II

I. Vehicle Manufacturing Facility II

– Land development and construction February 2011 March 2013

– Plant, machinery and utilities March 2011 March 2014

II. Bus Body Facility

– Land development and construction June 2010 January 2013

– Procurement of design, technology and know-how April 2010 December 2012

– Plant, machinery and utilities March 2011 May 2013

Means of Finance

The project cost of Rs. 26,000.00 lacs in relation to the Expansion Project is proposed to be financed through

equity of Rs. 8,000.00 lacs and debt of Rs. 18,000.00 lacs.

24

Funding Arrangement

The funding for the Expansion Project is proposed to be met as follows:

(Rs. in lacs)

Particulars

Amount

Project Cost A 26,000.00

Amount Deployed as on December 31, 2009 B 11,438.41 (1)

Amount to be Deployed C = A - B 14,561.59

Of which:

Amount to be funded through the Net Proceeds 1,800.00

Amount to be funded through Other Means of Finance (excluding the Net Proceeds) 12,761.59

Arrangements regarding the Other Means of Finance (excluding the Net Proceeds)

Sanction from Canara Bank vide sanction letter dated July 15, 2009 11,000.00

Sanction from Mizuho Corporate Bank vide sanction letter dated July 20, 2009 7,000.00


In case of any shortfall / cost overrun for the above project, the Company intends meeting the funding

requirements through its future internal accruals and additional debt arrangements.

Deployment of Funds

The break-up of the funds deployed as on December 31, 2009, as per the certificate of Shamsher & Co.,

Chartered Accountants dated January 19, 2010, and schedule of the balance fund deployment with regards to

the Expansion Project, as estimated by the Company‘s management, has been set forth below in the following

table:

(Rs. in lacs)

Particulars Phase I Phase II

Amount

Deployed as on

December 31,

2009 (1)

Estimated Amount to be

Deployed

Estimated Amount to be

Deployed

Remaining

Fiscal 2010

Fiscal 2011 Fiscal 2012 Beyond

Fiscal 2012

Vehicle Manufacturing

Facility II

2,204.38 301.83 927.29 250.00 4,877.92

Bus Body Facility 7,884.03 229.30 453.17 270.00 2,602.08

Working capital margin 1,350.00 - 1,650.00 800.00 2,200.00

Total 11,438.41 531.13 3,030.46 1,320.00 9,680.00 1) As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010.

As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, of the total amount

deployed as on December 31, 2009, Rs. 6,000.00 lacs was funded through a loan taken from Allahabad Bank

vide a term loan agreement dated March 27, 2009 and the balance Rs. 5,438.41 lacs was funded through a

loan taken from Mizuho Corporate Bank vide original loan agreement dated February 28, 2007. Please refer

to the section titled ―Financial Indebtedness‖ on page 81 for further details. The Company intends to use Rs.

5,000.00 lacs of the Net Proceeds to repay the loan taken from Allahabad Bank in relation to the

aforementioned Expansion Project.

Repayment of loans taken from Allahabad Bank in relation to the Expansion Project

The Company intends to use Rs. 5,000.00 lacs of the Net Proceeds to repay loan taken from Allahabad Bank

in relation to the Expansion Project.

The following are the details of the loan from Allahabad Bank in which repayment is proposed:

25

(Rs. in lacs)

Bank Date of

Sanction

Letter/

Loan

Agreeme

nt

Natur

e of

Loan

Interest Usage of

Loan

Amount

Sanction

ed /

drawn

down

Loan

Amount

Outstandi

ng as on

December

31, 2009

Repayme

nt Terms

Amoun

t to be

repaid

from

the Net

Procee

ds

Restrictive

Covenants

Allahab

ad Bank

Sanction

letter

dated March

16, 2009

and term loan

agreemen

t dated March

27, 2009 (1)

Term

loan

Allahaba

d Bank‘s

Prime Lending

Rate per

annum with

monthly

rests. As per the

term

loan agreeme

nt, the

prevalent Prime

Lending

Rate was 12.00%

per

annum.

Funding

the

expenditure in

connectio

n with the Expansio

n Project.

6,000.00

(2)

5,000.00 (2) Repayabl

e in two

instalments of Rs.

500.00

lacs quarterly,

beginning

September 2009

and five

quarterly instalment

s of Rs.

1,000.00 lacs,

beginning

March 2010.

5,000.0

0

The Company

is prohibited

from paying our directors,

guarantors or

any other persons

standing as

guarantors, any

commission,

brokerage, fees or any such

payment in

any other form for their

having given

such guarantee or continuing

such

guarantee. Further, the

Company must

also ensure that the

loan/advance

funds are not be utilized for

any other

purpose than the purpose for

which they are

obtained and that the funds

are not

diverted/siphoned for any

other purpose

or to any other

concern or

sister concern.

1) In terms of the sanction letter dated March 16, 2009, Allahabad Bank converted an unsecured short term loan granted to the Company into a term loan. The Company subsequently entered into a term loan agreement dated March 27, 2009 with

Allahabad Bank with respect to the aforementioned term loan.


The table below summarizes the break up of utilization of the above mentioned loan for Phase I of the

Expansion Project as per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010:

(Rs. in lacs)

Particulars Amount

(A) Land development and construction 2,488.22

(B) Procurement of design, technology and know-how 79.79

(C) Plant, machinery and utilities:

Electrical installations and generator sets 748.68

26

Particulars Amount

Paint shop equipments 558.72

Electric hoist and overhead cranes 472.05

Conveyor system 459.91

Jigs, fixtures & dies 119.24

Material handling equipments 311.03

Welding equipments 276.04

Tools and equipments 239.50

Inspection instruments and testing equipments 87.90

Mechanical installations 149.21

Total (C) 3,422.28

(D) Others 9.71

Total (A+B+C+D) 6,000.00

As confirmed by the certificate from Shamsher & Co., Chartered Accountants dated January 19, 2010, the

Company has utilized the aforementioned loan for the purposes for which it was sanctioned.

As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, as on December 31,

2009, the Company has repaid Rs. 1,000.00 lacs towards the aforementioned loan which was funded from the

Company‘s internal accruals. The next repayment instalment of Rs. 1,000.00 lacs is to be made at the

beginning of March 2010. In the interim period, until the Net Proceeds are received, the Company intends to

utilize its internal resources for such repayments.

The Company may repay the above mentioned borrowings on or prior to the scheduled due dates of the

respective loans.

For further details on the Company‘s indebtedness, please refer to the section titled ―Financial Indebtedness‖

on page 81.

General Corporate Purposes

The Company intends to deploy the balance Net Proceeds aggregating to Rs. 1,047.14 lacs, toward general

corporate purposes, including but not restricted to meeting working capital requirements, capital expenditure,

repayment of debts, or any other purposes as approved by the Board. The Company‘s management, in

accordance with the policies of the Board, will have flexibility in utilizing the proceeds earmarked for general

corporate purposes.

Utilization of Net Proceeds

The year-wise break down of the Net Proceeds to be utilized is set forth below in the following table:

(Rs. in lacs)

Description Fiscal 2010 Fiscal 2011

Financing the Expansion Project 450.00 1,350.00

Repayment of loan taken from Allahabad Bank in relation to the Expansion

Project

5,000.00 -

General corporate purposes 1,047.14

Issue Related Expenses

The Issue related expenses include, among others, fees of the Lead Managers, printing and distribution

expenses, legal fees, advertisement expenses, statutory fees, registrar and depository fees. The estimated Issue

related expenses are as follows:

27

S.No. Activity Expense Amount

(Rs. lacs)

Percentage of

Total

Estimated

Issue

Expenditure

Percentage

of Issue Size

1. Fees of the Lead Manager 37.00 30.14% 0.46% 2. Fees to Registrar to the Issue 2.50 2.04% 0.03% 3. Fees to the Legal Advisors 26.50 21.59% 0.33% 4. Fees to the Bankers to the Issue - - - 5. Other Expenses (Printing and stationary, distribution and

postage, advertisement and marketing expense etc.)

56.75 46.23% 0.71%

Total Estimated Issue Expenses 122.75 100.00% 1.54%

Working Capital Requirement, Industrial Regulations and Special Tax Benefits

The Net Proceeds will not be used to meet the Company‘s working capital requirements. There are no

industry regulations specific to the activities for which the funds are being raised by the Company in this

Issue, other than those currently applicable to the business of our Company.

For details on special tax benefits available to the Company and its shareholders, if any, please refer to the

section titled ―Statement Of Tax Benefits – Special Tax Benefits – Special Tax Benefits Available To The

Company‖ and ―Statement Of Tax Benefits – Special Tax Benefits – Special Tax Benefits Available To The

Shareholders Of The Company‖ on page 30.

Interim Use of the Net Proceeds

The management of the Company, in accordance with the policies formulated by the Board from time to time,

will have flexibility in deploying the Net Proceeds. Pending utilization of the Net Proceeds for the purposes

described above, the Company intends to temporarily invest the funds in high quality debt instruments

including deposits with banks and / or mutual funds. Such investments will be approved by the Board or its

committee from time to time, in accordance with its investment policies.

Monitoring of Utilization of Funds

In accordance with Regulation 16 of the SEBI (ICDR) Regulations, as the Issue size does not exceed Rs.

50,000.00 lacs, there is no requirement of appointing a monitoring agency for this Issue to monitor the

utilization of the Net Proceeds.

Our Board will monitor the utilization of the Net Proceeds. The Company will disclose the utilization of the

Net Proceeds, including interim use, under a separate head in its balance sheet till such time the Net Proceeds

have been utilized, clearly specifying the purpose for which such proceeds have been utilized. The Company

will also, in its balance sheet for the applicable fiscal periods, provide details, if any, in relation to all such

Net Proceeds that have not been utilized, thereby also indicating investments, if any, of such currently

unutilized Net Proceeds.

Pursuant to Clause 49 of the Listing Agreement, the Company shall on a quarterly basis disclose to the Audit

Committee the uses and applications of the Net Proceeds. On an annual basis, the Company shall prepare a

statement of funds utilized for purposes other than those stated in this Letter of Offer and place it before the

Audit Committee. Such disclosure shall be made only until such time that all the Net Proceeds have been

utilized in full. The statement shall be certified by the statutory auditors of the Company. In terms of Clause

43A of the Listing Agreement, the Company will furnish to the Stock Exchanges on a quarterly basis, a

statement indicating material deviations, if any, in the use of proceeds from the objects stated in this Letter of

Offer. Further, this information shall be furnished to the stock exchanges along with the interim or annual

28

financial results submitted under Clause 41 of the Listing Agreement and shall be published in the

newspapers simultaneously with the interim or annual financial results, after placing it before the Audit

Committee in terms of Clause 49 of the Listing Agreement.

29

STATEMENT OF TAX BENEFITS

The Board of Directors


204 - 205, Sector 34 –A,

Chandigarh – 160 022,

India

We hereby report that the enclosed statement, prepared by Swaraj Mazda Limited [hereinafter referred

to as the ―Issuer‖], states the possible tax benefits available to the Issuer and its members under the

provisions of the Income Tax Act, 1961 and the Wealth Tax Act, 1957, presently in force in India.

Several of these benefits are dependent on the Issuer or its members fulfilling the conditions prescribed under

the relevant provisions of the respective tax laws. Hence, the ability of the Issuer or its members to derive the

tax benefits is dependent upon fulfilling such conditions, which based on the business imperatives,

the Issuer may or may not choose to fulfill.

The benefits discussed in the Annexure are not exhaustive and the preparation of the contents stated

is the responsibility of the Issuer‘s management. We are informed that this statement is only intended

to provide general information to the investors and hence is neither designed nor intended to be a substitute

for professional tax advice. In view of the individual nature of the tax consequences and the changing tax

laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax

implications arising out of their participation in the issue.

We do not express any opinion or provide any assurance as to whether:-

i. the Issuer or its members will continue to obtain these benefits in future; or

ii. the conditions prescribed for availing the benefits, where applicable have been/ would be met

The contents of the enclosed statement are based on the information, explanations and representations

obtained from the Issuer and on the basis of the understanding of the business activities and operations of the

Issuer and the interpretation of the current tax laws in force in India. A shareholder is advised to consider in

his/her/its own case the tax implications of an investment in the Equity Shares.

For and on behalf of

PRICE WATERHOUSE


V. Nijhawan

Partner Membership No: F87228

Place: New Delhi

Date: September 4, 2009

30

Capitalised terms used in this section have the meaning set forth herein. The following key tax benefits are

available to the Company and the prospective shareholders under the current direct tax laws in India.

The tax benefits listed below are the possible benefits available under the current tax laws presently in force

in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions

prescribed under the relevant tax laws. Hence, the ability of the Company or its shareholders to derive the

tax benefits is dependent upon fulfilling such conditions, which based on business imperative it faces in the

future, it may or may not choose to fulfill. This statement is only intended to provide the tax benefits to the

company and its shareholders in a general and summary manner and does not purport to be a complete

analysis or listing of all the provisions or possible tax consequences of the subscription, purchase, ownership

or disposal etc. of shares. In view of the individual nature of tax consequence and the changing tax laws,

each investor is advised to consult his/her own tax adviser with respect to specific tax implications arising out

of their participation in the issue.

SPECIAL TAX BENEFITS

1. SPECIAL TAX BENEFITS AVAILABLE TO THE COMPANY

As per Section 35(2AB), weighted deduction @150% is available on Research & Development expenditure

(except on land and building). Section 35(2)(ia) provides for a 100% deduction for the capital expenditure on

scientific research, incurred in any previous year other than on land. These deductions/benefits are not

cumulative and are available only upon compliance of conditions and procedures prescribed in the aforesaid

sections read with rules.

2. SPECIAL TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY

There are no special tax benefits available to the Shareholders of the Company.

GENERAL TAX BENEFITS

1. Key benefits available to the Company under the Income Tax Act, 1961 (“the Act”)

BUSINESS INCOME:

a) Depreciation:

The Company is entitled to claim depreciation on specified tangible and intangible assets owned by it

and used for the purpose of its business under Section 32 of the Act. In case of new machinery or plant

that is acquired by the company (other than ships and aircrafts), the company is entitled to a further sum

equal to twenty per cent of the actual cost of such machinery or plant subject to conditions specified in

Section 32 of the Act.

b) MAT Credit:

As per Section 115JAA(1A) of the Act, the company is eligible to claim credit for Minimum Alternate

Tax (―MAT‖) paid for any assessment year (at 15% of book profit under section 115JB of the Act from

assessment year 2010-11 and 10% till assessment year 2009-10) against normal income-tax payable in

subsequent assessment years.

MAT credit shall be allowed for any assessment year to the extent of difference between the tax payable

as per the normal provisions of the Act and the tax paid under section 115JB for that assessment year.

Such MAT credit is available for set-off up to 10 years from assessment year 2010-11 and 7 years till

assessment year 2009-10, succeeding the assessment year in which the MAT credit arises.

31

2. Key benefits available to the Members of the Company

2.1 Resident Members

a) Dividend income:

Dividend (both interim and final), if any, received by the resident shareholders from a Domestic

Company shall be exempt from tax under Section 10(34) read with Section 115O of the Act.

b) Capital Gains:

a) i) Long Term Capital Gain (LTCG)

LTCG means capital gain arising from the transfer of a capital asset being Share held in a company or

any other security listed in a recognized stock exchange in India or unit of the Unit Trust of India or a

unit of a mutual fund specified under clause (23D) of section 10 or a Zero coupon bond held by an

assessee for more than 12 months.

In respect of any other capital assets, LTCG means capital gain arising from the transfer of an asset, held

by an assessee for more than 36 months.

ii) Short Term Capital Gain (STCG)

STCG means capital gain arising from the transfer of capital asset being Share held in a company or any

other security listed in a recognized stock exchange in India or unit of the Unit Trust of India or a unit of

a mutual fund specified under clause (23D) of section 10 or a Zero coupon bonds, held by an assessee for

12 months or less.

In respect of any other capital assets, STCG means capital gain arising from the transfer of an asset, held

by an assessee for 36 months or less.

b) LTCG arising on transfer of equity shares of a company or units of an equity oriented fund (as defined

which has been set up under a scheme of a mutual fund specified under Section 10(23D)) are exempt

from tax under Section 10(38) of the Act provided the transaction is chargeable to securities transaction

tax (STT) and subject to conditions specified in that section.

c) As per section 48 of the Act and subject to the conditions specified in that section, LTCG arising on

transfer of capital assets, other than bonds and debentures (excluding capital indexed bonds issued by the

Government) and depreciable assets, is to be computed by deducting the indexed cost of acquisition and

indexed cost of improvement from the full value of consideration.

As per section 112 of the Act, LTCG is taxed @ 20% plus applicable surcharge thereon and 3%

Education and Secondary & Higher education cess on tax plus Surcharge (if any) (hereinafter referred to

as applicable Surcharge and Education Cess and Secondary & Higher Education Cess). However, if such

tax payable on transfer of listed securities or units or Zero coupon bonds exceed 10% of the LTCG,

without indexation benefit, the excess tax shall be ignored for the purpose of computing the tax payable

by the assessee.

d) As per section 111A of the Act, STCG arising on sale of equity shares or units of equity oriented mutual

fund (as defined which has been set up under a scheme of a mutual fund specified under Section

10(23D)), are subject to tax at the rate of 15% (plus applicable Surcharge and Education Cess and

Secondary & Higher Education Cess) provided the transaction is chargeable to STT. No deduction under

chapter VIA shall be allowed from such income.

e) STCG arising on sale of equity shares or units of equity oriented mutual fund (as defined which has been

set up under a scheme of a mutual fund specified under Section 10(23D)), where such transaction is not

chargeable to STT, shall be taxable at the rate of 30% (plus applicable Surcharge and Education Cess and

Secondary & Higher Education Cess).

f) As per section 71 read with section 74 of the Act, short term capital loss arising during a year is allowed

to be set-off against short term as well as long term capital gains.

Balance loss, if any, shall be carried forward and set-off against any capital gains arising during

subsequent 8 years.

32

g) As per section 71 read with section 74 of the Act, long term capital loss arising during a year is all owed

to be set-off only against long term capital gains. Balance loss, if any, shall be carried forward and set-off

against long term capital gains arising during subsequent 8 years.

h) As per section 54EC of the Act, capital gains arising from the transfer of a long term capital asset (i.e.

shares being long term in nature which have not been subject to Security Transaction Tax) shall be

exempt from capital gains tax if such capital gains are invested within a period of 6 months after the date

of such transfer in specified bonds issued by the following and subject to the conditions special therein:

• National Highway Authority of India constituted under Section 3 of National Highway Authority of

India Act, 1988

• Rural Electrification Corporation Limited, a company formed and registered under the Companies

Act, 1956

If only part of the capital gains is reinvested, the exemption shall be proportionately available. However,

if the new bonds are transferred or converted into money within three years from the date of their

acquisition, the amount so exempted shall be taxable as Capital Gains in the year of transfer/conversion.

As per this section, the investment in the Long Term Specified Asset cannot exceed 50 lac rupees.

i) As per Section 54F of the Act, LTCG arising to an Individual/Hindu Undivided Family (HUF) from

transfer of shares (i.e. shares being long term in nature which have not been subject to Security

Transaction Tax) shall be exempt from tax if net consideration from such transfer is utilized within a

period of one year before, or two (2) years after the date of transfer, for purchase of a new residential

house, or for construction of residential house within three years from the date of transfer and subject to

conditions and to the extent specified therein.

j) Profit or gains arising from transfer of a capital asset is chargeable to tax as per section 45 of the Act

except where transfer of shares is covered under section 47(iii) i.e. transfer of shares by way of a gift or a

will or an irrevocable trust.

2.2 Non-Resident Members

a) Dividend Income:

Dividend (both interim and final), if any, received by the non-resident shareholders from a Domestic

Company shall be exempt from tax under Section 10(34) read with Section 115O of the Act.

b) Capital gains:

Benefits outlined in paragraph 2.1(b) above are also available to a non-resident shareholder except that as

per first proviso to Section 48 of the Act, the capital gains arising on transfer of shares of an Indian

Company need to be computed by converting the cost of acquisition, expenditure incurred in connection

with such transfer and full value of the consideration received or accruing as a result of the transfer, into

the same foreign currency in which the shares were originally purchased. The resultant gains thereafter

need to be reconverted into Indian currency. The conversion needs to be at the prescribed rates prevailing

on dates stipulated. Further, the benefit of indexation as provided in second proviso to section 48 is not

available to non-resident shareholders.

c) Tax Treaty Benefits:

As per Section 90 of the Act, the shareholder can claim relief in respect of double taxation, if any, as per

the provision of the applicable double taxation avoidance agreement entered into by the Government of

India with the country of residence of the non-resident investor.

2.3 Special provisions in case of non-resident Indians in respect of income / LTCG from specified

foreign exchange assets under Chapter XII-A of the Act.

i. Non-Resident Indian (NRI) means a citizen of India or a person of Indian origin who is not a resident.

Person is deemed to be of Indian origin if he, or either of his parents or any of his grand parents, were

born in undivided India.

33

ii. Specified foreign exchange assets include shares of an Indian company which is

acquired/purchased/subscribed by NRI in convertible foreign exchange.

iii. Income from investments [other than dividend exempt under section 10 (34)] and LTCG [other than gain

exempt under section 10 (38)] from assets other than foreign exchange assets shall be taxable @ 20%

(plus applicable Surcharge and Education Cess and Secondary & Higher Education Cess). No deduction

in respect of any expenditure or allowance or deductions under chapter VI-A shall be allowed from such

income.

iv. As per section 115E of the Act, LTCG arising from transfer of specified foreign exchange assets shall be

taxable @ 10% (plus applicable Surcharge and Education Cess and Secondary & Higher Education

Cess).

v. As per section 115F of the Act, LTCG arising on transfer of a foreign exchange asset shall be exempt in

case net consideration from such transfer is invested in the specified assets or savings certificates within

six months from the date of such transfer, subject to the extent and conditions specified in that section.

vi. As per section 115G of the Act, in case total income of a NRI consists only of investment income/LTCG

from such foreign exchange asset/specified asset and tax thereon has been deducted at source in

accordance with the Act, then, it shall not be necessary for a NRI to file return of income under Section

139(1) of the Act.

vii. As per section 115H of the Act, where a person who is a NRI in any previous year, becomes assessable

as a resident in India in respect of the total income of any subsequent year, he may furnish a declaration

in writing to the assessing officer, along with his return of income under section 139 of the Act for the

assessment year in which he is first assessable as a resident, to the effect that the provisions of the

chapter XII-A shall continue to apply to him in relation to investment income derived from the specified

assets i.e. any foreign exchange asset, for that year and subsequent years until such assets are transferred

or converted into money.

viii. As per section 115I of the Act, the NRI can opt not be governed by the provisions of chapter XII-A for

any assessment year by furnishing return of income for that assessment year under section 139 of the

Act, declaring therein that the provisions of this chapter shall not apply, in which case the other

provisions of the income tax act shall apply.

2.4 Foreign Institutional Investors (FIIs)

a) Dividend Income:

Dividend (both interim and final), if any, received by the shareholder from the domestic company shall

be exempt from tax under Section 10(34) read with Section 115O of the Act.

b) Capital Gains:

i) As per Section 115AD of the Act, income (other than income by way of dividends referred to in

Section 115O) received in respect of securities (other than units referred to in Section 115AB) shall

be taxable at the rate of 20% (plus applicable Surcharge and Education Cess and Secondary &

Higher Education Cess). No deduction in respect of any expenditure/allowance shall be allowed

from such income.

ii) As per Section 115AD of the Act, capital gains arising from transfer of securities shall be taxable as

follows:

STCG arising on transfer of securities where such transaction is chargeable to STT, shall be

taxable at the rate of 15% (plus applicable Surcharge and Education Cess and Secondary &

Higher Education Cess) as per section 111-A of the Act.

STCG arising on transfer of securities where such transaction is not chargeable to STT, shall be


Higher Education Cess).

LTCG arising on transfer of a long term capital asset, being an equity share in a company or a

unit of an equity oriented fund, where such transaction is chargeable to STT is exempt from tax

under Section 10(38) of the Act.

LTCG arising on transfer of securities where such transaction is not chargeable to STT, shall be


Higher Education Cess). The indexation benefit shall not be available while computing the

capital gains.

34

iii) Benefit of exemption under Section 54EC of the Act shall be available as outlined in Paragraph

2.1(B)(h) above.

c) Tax Treaty Benefits:

As per Section 90 of the Act, a shareholder can claim relief in respect of double taxation, if any, as per

the provision of the applicable double taxation avoidance agreements entered into by the Government of

India with the country of residence of the non-resident investor.

2.5 Mutual Funds

As per the provisions of Section 10(23D) of the Act, any income of mutual funds registered under the

Securities and Exchange Board of India, Act, 1992 or Regulations made there under, mutual funds set up

by public sector banks or public financial institutions and mutual funds authorized by the Reserve Bank

of India, would be exempt from income-tax, subject to the prescribed conditions.

3. Wealth Tax Act, 1957

Shares in a company, held by a shareholder are not treated as an asset within the meaning of Section

2(ea) of the Wealth Tax Act, 1957, hence, wealth tax is not applicable on shares held in a company.

Notes:

a) All the above benefits are as per the current tax law and will be available only to the sole/first names holder

in case the shares are held by joint holders.

b) In respect of non-resident investors, the tax rates and the consequent taxation mentioned above shall be

further subject to any benefits available under the relevant Double Tax Avoidance Agreement (DTAA), if

any, between India and the country of residence of the non-resident investor.

c) Impact of proposals in the Direct Taxes Code Bill, 2009 has not been considered as the same has not

become an Act as yet.

35

SECTION IV – ABOUT THE COMPANY

INDUSTRY OVERVIEW

The information in this section is obtained from industry publications, data on websites maintained by private

and public entities, data appearing in reports by market research firms and other publicly available

information. These resources generally state that the information contained therein has been obtained from

sources believed to be reliable but that their accuracy and completeness are not guaranteed and their

reliability cannot be assured.

In this section, bracketed numbers indicate losses / negative figures. For the convenience of readers, certain

amounts reported in US dollars have also been converted into Rupees at the exchange rate of US$1 = Rs.

45.68, which was the Reserve Bank of India reference rate for Rupee on January 13, 2010 as per the RBI.

The Indian Economy

According to the Handbook of Statistics on the Indian Economy (September 15, 2009) published by the RBI,

India had a population of approximately 1.1 billion in Fiscal 2009 with a GDP of approximately US$ 731.04

billion (estimates). The following table sets forth the key indicators of the Indian economy:

(Annual percentage change, except for foreign exchange reserves)

Key Indicators of the Indian Economy

Fiscal

2009

Fiscal

2008

Fiscal

2007

Fiscal

2006

Fiscal

2005

Fiscal

2004

GDP growth (1) 6.7% 9.0% 9.6% 9.4% 7.5% 8.5%

Index of Industrial Production

Growth(2)

2.8% 8.5% 11.6% 8.2% 8.4% 7.0%

Foreign Exchange Reserves (in

US$ billions)

252.0 309.7 199.2 151.6 141.5 113.0

________ 1) GDP at Factor Cost (Constant Prices). Data for: Fiscal 2007 is provisional/ for Fiscal 2008 is based on quick estimates/ for Fiscal 2009

is based on revised estimates; 2) Growth in Index of industrial production (General). Data for Fiscal 2008 is provisional;

(Source: Handbook of Statistics on the Indian Economy, RBI, September 15, 2009, available on http://www.rbi.org.in)

The recent global economic slowdown has impacted the Indian economy, especially during the second half of

Fiscal 2009. According to a recent article, India‘s GDP growth for the last quarter of Fiscal 2009 was 5.8%

compared to 8.6% for the same period in Fiscal 2008. Going forward, factors such as strong rural demand,

lagged impact of monetary and fiscal stimuli, softening of domestic input prices, investment demand from

brown-field projects and some restructuring initiatives are expected to have a positive impact on the

economy. (Source: RBI Bulletin (May 2009)). Moreover, the result of the general elections that were declared

in May 2009 has led to formation of a stable central government which is expected to augur well for the

Indian economy.

Recent developments in equity markets also indicate growing investor confidence in the Indian economy.

Investment flow through FII route in the first three months of the Fiscal 2010 has been US$ 6,269 million. FII

Investments for the first six months of 2009 was US$ 5,026 million, including a record single day net

purchase of US$ 1,062 million on May 20, 2009 as a positive reaction to the results of the general elections.

(Source: SEBI, http://www.sebi.gov.in)

The Indian Automotive Industry

Introduction

The automotive industry also provides direct and indirect employment to 13 million people and contributes to

nearly 17% of total indirect taxes (Source: Report of Working Group of Automotive Industry - Eleventh Five

Year Plan (2007- 2012) dated August, 2006, available on

http://planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_automaive.pdf). The Automotive

36

Mission Plan aims at doubling the contribution of automotive sector in GDP to 10% by taking the turnover to

US$ 145 billion in 2016. (Source: Automotive Mission Plan 2006-2016, Ministry of Heavy Industries &

Public Enterprises Government of India, December, 2006 available on

http://www.siamindia.com/upload/AMP.pdf)

The Indian automotive industry is highly competitive with a number of global and Indian companies present

in the market. Foreign companies are present in India either through joint ventures with local partners,

wholly/partially owned technology tie-ups or as subsidiaries of their parent companies. Most players are

present in more than one segment. The industry is also witnessing diversification by players into other

segments.

Classification of Vehicles in India

Vehicles with four or more wheels can be classified into passenger vehicles and commercial vehicles.

Passenger vehicles can be further segmented into Passenger Cars, having a seating capacity of up to six

persons excluding the driver, Utility Vehicles (or ―UVs‖), have a seating capacity of 7 to 12 persons

excluding the driver and Multi-Purpose Vehicles (or ―MPVs‖), which are van-type vehicles that have

maximum mass not exceeding 3.5 tonne.

From the end use perspective, CVs can be categorised into passenger carriers and goods carriers. The CV

market can be further segmented into Light Commercial Vehicles (or ―LCVs‖), which are generally classified

as those vehicles that have a maximum mass of below 7.5 tons, and M&HCVs which are generally classified

as those vehicles that have a maximum mass of above 7.5 tons.

[Note: Based upon Society of Indian Automobile Manufacturers (“SIAM”) (Flash) Report on Production and

Sales for March 2009]

Sales Trends

The following table sets forth the sales trends of the Indian Automotive Industry for the past five (5) fiscal

years:

Indian Automotive Industry – Sales Trends (Domestic + Exports)

(Number of Vehicles)

Category Fiscal 2010

(Apr –Dec)

Fiscal 2009

(Apr –Dec)

Fiscal

2009

Fiscal

2008

Fiscal

2007

Fiscal

2006

Fiscal

2005

Passenger

Vehicles 1,698,551 1,359,047 1,887,619 1,768,283 1,578,431 1,318,809 1,227,974

Commercial

Vehicles 383,315 324,222 426,795 549,488 517,302 391,264 348,370

Three

Wheelers 439,848 380,526 497,793 506,006 547,806 367,872 374,657

Two

Wheelers 7,628,337 6,363,634 8,441,844 8,068,991 8,491,978 7,569,573 6,576,172

Total 10,150,051 8,427,429 11,254,051 10,892,768 11,135,517 9,647,518 8,527,173

(Source: SIAM Report on Comparative Production, Domestic Sales for March 2009, March 2008, March 2006 and December 2009)

Sales (domestic as well as exports) of the Indian automotive industry grew from 8,527,173 vehicles in Fiscal

2005 to 11,254,051 vehicles in Fiscal 2009, at a compounded growth rate of 7.2%. This growth has been

driven by several factors including a growing economy, increasing purchasing power of the Indian middle

class, new product launches and vehicle finance schemes from automobile manufacturers and financial

institutions, and increased focus on exports. Of the total sales, exports contributed 13.6% in Fiscal 2009

compared to 7.4% in Fiscal 2005. Exports have grown at a compounded growth rate of 24.9%, while

domestic sales have grown at a compounded growth rate of 5.3% during the same period. In the four or more

37

wheels category, the passenger vehicle industry forms the largest constituent with total sales of 1,887,619

vehicles in Fiscal 2009, of which 82.2% were domestic sales.

The Indian CV Industry

Introduction

The Indian CV industry had a moderate beginning because of the controls imposed by the government

licensing regime that had dominated the Indian economic scene till the 1980‘s. Consequently, the

manufacturing capabilities of most of the CV players in India had remained constrained. Post liberalization

the industry has moved in line with the Indian economy.

The total sales of the CV market grew at a compounded growth rate of 16.4% to reach 549,488 vehicles in

Fiscal 2008 from 348,370 vehicles in Fiscal 2005. Sales growth during this period was supported by factors

including strong economic growth, commissioning of road constructions projects, falling interest rates and

availability of vehicle finance. In Fiscal 2009 sales declined by 22.3% to reach 426,795 vehicles due to a

variety of reasons including the global financial crisis leading to a slowdown in economic growth in India,

tightening in availability of credit for customers, hardening of interest rates and increase in fuel prices. Out of

total CV sales in Fiscal 2009, 42,673 vehicles or 10.0% were exports. Both domestic sales and exports

registered negative growth of 21.7% and 27.7% respectively in Fiscal 2009. (Note: Based upon the SIAM

(Flash) Report on Production and Sales for March 2009)

However Fiscal 2010 appears to be the year of recovery as sales of CV for the nine months ended December

31, 2009 grew by 18.23% to 383,315 units compared to 324,222 units for the same period ended on

December 31, 2008. (Note: Based upon the SIAM (Flash) Report on Production and Sales for December

2009)

Key Segments

From the end use perspective, the CV market can be categorised into passenger carriers and goods carriers.

The CV market can be further segmented into LCVs, having maximum mass below 7.5 tons, and M&HCV,

having maximum mass of above 7.5 tons.

Sales Trends

The following table sets forth the segmental sales trends of the Indian CV market for the past five (5) fiscal

years:

Indian CV Industry – Segmental Sales Trends (Domestic + Exports)


Category (based on

maximum mass)

Fiscal 2010

(Apr –Dec)

Fiscal 2009

(Apr –Dec)

Fiscal

2009

Fiscal

2008

Fiscal

2007

Fiscal

2006

Fiscal

2005

1) Passenger Carriers

1.1) LCV 26,606 24,120 32,271 34,139 28,871 24,786 21,465

Up to 5 tons 9,961 8,048 10,507 10,382 7,821 9,144 10,261

Exceeding 5 tons,

but less than 7.5 tons (1)

16,645 16,072 21,764 23,757 21,050 15,642 11,204

1.2) M&HCV 32,676 31,615 42,441 48,662 37,907 33,602 30,261

Exceeding 7.5 tons,

but less than 12 tons (1)

7,388 5,460 7,168 6,240 4,913 4,855 2,515

38

Indian CV Industry – Segmental Sales Trends (Domestic + Exports)


Category (based on

maximum mass)

Fiscal 2010

(Apr –Dec)

Fiscal 2009

(Apr –Dec)

Fiscal

2009

Fiscal

2008

Fiscal

2007

Fiscal

2006

Fiscal

2005

Exceeding 12 tons,

but less than 16.2

tons (1)

25,232 26,134 35,230 42,422 32,994 28,747 27,671

Exceeding 16.2 tons 56 21 43 - - - 75

Total Passenger Carrier

(1.1+1.2) 59,282 55,735 74,712 82,801 66,778 58,388 51,726

2) Goods Carrier

2.1) LCV 185,571 144,146 194,118 218,674 194,265 144,936 114,925

Upto 5 tons 157,940 120,581 163,578 182,852 154,022 99,156 66,131

Exceeding 5 tons,

but less than 7.5 tons (1)

27,631 23,565 30,540 35,822 40,243 45,780 48,794

2.2) M&HCV 138,462 124,341 157,965 248,013 256,259 187,940 181,719

Exceeding 7.5 tons,

but less than 12 tons (1)

30,577 21,914 29,486 43,088 37,596 33,629 29,446

Exceeding 12 tons,

but less than 16.2

tons

36,737 37,791 48,189 67,704 70,513 67,968 73,717

Exceeding 16.2

tons(2)

71,148 64,636 80,290 137,221 148,150 86,343 78,556

Total Goods Carrier

(2.1+2.2)

324,033 268,487 352,083 466,687 450,524 332,876 296,644

Total CV Sales (1 + 2) 383,315 324,222 426,795 549,488 517,302 391,264 348,370

1) Ranges where the Company currently has a presence.

2) Includes Goods Carriers - Haulage Tractors.

(Source: SIAM Report on Comparative Production, Domestic Sales for December 2009, March 2009, March 2008 and March 2006)

For the nine months ended December 31, 2009 the LCV sales grew by 26.10% to 212,177 units from 168,266

for the nine months ended December 31, 2008. Similarly, M&HCV sales grew by 9.73% from 155,956 for

the nine months ended December 31, 2008 to 171,138 units during the nine months ended December 31,

2009. (Note: Based upon SIAM (Flash) Report on Production and Sales for December 2009)

Between Fiscal 2005 and Fiscal 2009, while the LCV segment grew at a compounded growth rate of 13.5%,

the M&HCV segment declined by 1.4%. In the LCV segment, passenger carriers and goods carries developed

at a compounded growth rate of 10.7% and 14.0%, respectively. During the period, goods carriers with a

tonnage of up to 5 tons registered the highest growth (compounded growth rate of 25.4%) followed by

passenger carriers with a tonnage of between 5 and 7.5 tons (compounded growth rate of 18.1%). (Note:

Based upon the SIAM (Flash) Report on Production and Sales for March 2009)

In the M&HCV segment, while passenger carriers grew at a compounded growth rate of 8.8% and the goods

carrier market declined by 3.4% between Fiscal 2005 and Fiscal 2009. During the same period, the maximum

growth was registered by passenger carriers with a tonnage of between 7.5 to 12 tons (compounded growth

39

rate of 29.9%) followed by passenger carriers with a tonnage of between 12 and 16.2 tons (compounded

growth rate of 6.2%). Goods carriers with a tonnage of between 7.5 and 12 tons experienced marginal growth

compared to de- growth in the 12 to 16.2 tons range. (Note: Based upon the SIAM (Flash) Report on

Production and Sales for March 2009)

The overall passenger carrier market grew at a compounded growth rate of 9.6% between Fiscal 2005 and

Fiscal 2009, compared to a 4.4% growth registered by the goods carrier market for the same period. In the last

five (5) fiscal years, passenger carriers increased their market share in the ranges where our Company

operates. Furthermore, as discussed in the aforementioned paragraphs, the passenger carriers registered strong

growth in the ranges where our Company operates. The charts below set forth the segmental break-up of our

range of CVs and the compounded growth rates in our range of passenger carriers between Fiscal 2005 and

Fiscal 2009:

1) SML’s range includes (i) in passenger carriers – (a) Exceeding 5 tons, but less than 7.5 tons, (b) Exceeding 7.5 tons, but less than

12 tons and (c) Exceeding 12 tons, but less than 16.2 tons, and (ii) in goods carriers – (a) Exceeding 5 tons, but less than 7.5 tons,

and (b) Exceeding 7.5 tons, but less than 12 tons. (Source: SIAM Flash Report (Media) for March 2009, March 2008 and March 2006)

Competitive Landscape

Most of the players in the CV industry are present in both the passenger and goods carrier categories. The key

players in the CV industry include Ashok Leyland, Eicher Motors, Force Motors, Mahindra & Mahindra,

Tata Motors, Swaraj Mazda and Hindustan Motors. Some of the international players in the CV space include

Mercedes-Benz India, Tatra Vectra Motors and Volvo.

Key Factors affecting demand for CVs

Economic Growth and Increased Spending on Public Transport: Overall freight movement in the

country is a function of industrial and agricultural growth. High growth in GDP reflects higher economic

activity, which typically results in transportation of more freight and hence higher demand for CVs.

Indian‘s economic outlook is expected to remain positive with growth in key user segments such as

construction, infrastructure and engineering. Moreover, the result of the general elections that were

declared in May, 2009 has led to formation of stable central government which is expected to augur well

for the Indian economy. Furthermore, the growing tourism sectors along with the rising needs of India‘s

middle class, who increasingly seek comfortable road transport, is likely to positively impact the CV

industry, especially the demand for passenger carriers. In many major cities, another factor promoting the

demand for passenger carriers is the recent focus of public transport policy on improved bus transport,

including more and better buses. A recent development is the new high-capacity, express bus system

proposed for Bangalore and Delhi. The government has recently extended support to states for purchase

of buses, including low/semi-low floor buses, under the Jawaharlal Nehru National Urban Renewal

Mission (―JNNURM‖). In addition, several state governments and state organizations have begun/ are

planning to upgrade their vehicle fleets in the coming years, which is likely to further stimulate the

passenger carrier market.

40

Increased Procurement from Healthcare, Education and Defence Sectors: Increased economic

activity in sectors such as healthcare, education and defence impacts the demand for CVs, specifically

passenger carriers.

In the healthcare sector, the expected rise in demand for quality patient transportation facilities especially

from private hospitals is likely to lead to a corresponding increase in demand for customized ambulances.

Similarly, private schools and educational institutions are increasingly demanding comfortable buses

which meet specific safety norms. The expectant revamp of vehicle fleet by armed forces is also likely to

present a significant opportunity for CV manufacturers.

Interest Rates and Availability of Finance: Sale of CVs, as most other automobiles, is dependant on

prevailing interest rates and the availability of retail finance. Higher interest rates and stringent lending

norms can adversely affect demand. On the other hand, lower interest rates stimulate demand. Small

truck operators in the unorganised sector tend to be more vulnerable to interest rate fluctuations and

lending norms as compared with large-fleet operators.

The growth in CV sales prior to Fiscal 2009 was led by reduced interest rates and relatively easy

availability of finance. The hardening of interest rates and lending norms during Fiscal 2009 impacted

demand during the period. In a move to alleviate the pressure of India‘s credit market due to impact of

global liquidity constraints, the RBI undertook a series of reductions in the reserve ratios and the policy

rates during the latter part of Fiscal 2009. Furthermore, in order to boost demand in the CV industry, the

government announced an extension of the validity of accelerated depreciation benefit till September,

2009 and arrangements whereby public sector banks would provide a special line of credit to non-

banking finance companies for extension of CV loans. It remains to be seen how rapidly and effectively

these measures translate into lower interest rates and easier availability of credit.

Improvement in Road Infrastructure: Improvement in road infrastructure is expected to enable a more

effective distribution of goods and increase in passenger movement across the country and hence higher

demand for automobile vehicles. Increased government focus on roads and highway development

through, among other initiatives, the National Highways Development project (including the Golden

Quadrilateral project) to upgrade and strengthen national highways, spending by various state

governments to widen state roads and implementation of road construction programmes, augurs well for

the CV industry. Such a network may enable further market share gains for road transport over railways.

On the other hand, competition and new initiatives from railways, such as reducing unit cost to improve

efficiency and dedicated freight corridor, may keep a check on rising share of roads in freight movement.

Taxes and Duties: Reduction in excise duties and the introduction of VAT regime can act as catalyst for

higher demand of automobiles. A cut in excise duty reduces prices, which, if passed on, enhances the

affordability for buyers.

Restriction on Overloading: While legislation on overloading of goods exists, strict compliance and

enforcement of such legislation is generally lacking in India. Stricter enforcement of such legislation can

stimulate demand as transporter may need to buy more vehicles. In a judgement delivered on November

9, 2005, the Supreme Court passed an order banning the practice followed by some state governments, of

issuing gold cards/tokens that allow the holders to overload their trucks after payment of fixed charges.

The judgement impacted the demand for CVs, especially in Fiscal 2006 and 2007. Stricter enforcement

of such restrictions going forward could translate into a one-time additional demand of CV.

Profitability of Transport Operators: The demand for CVs is driven to a considerable extent by the

profitability of transport operators. The profitability of transport operators remains very sensitive to

freight rates and diesel prices. Freight rates are determined by two factors: the quantity of goods to be

moved and the number of trucks around to move the goods. Although diesel prices in India continue to

be artificially supported at lower levels by the government, any increase in fuel price results in higher

operating cost. This impacts the margins of the operators especially if freight rates remain stagnant.

41

Regulation of Safety and Emission Standards: Tightening of emission and safety standards not only

increases the costs of acquisition of automobiles, but also increases the demand for ‗compliant‘ vehicles

and accelerates the replacement cycles for older vehicles. Over the years there has been a trend towards

greater cognisance of vehicle emissions standards in India with consumer demand taking increasing

account of fuel efficiency and emissions. For instance the buses procured under the JNNURM are

required to be in line with the auto fuel policy approved by government of India in 2002, which lays

down roadmap of tighter emission norms up to 2010 i.e. introduction of Bharat Stage-III and Stage-IV

vehicles. More recently, there has been an increasing demand for CNG vehicles for passenger and goods

carriers in both the private and public sectors. A gas grid of approximately 8,000 kilometers (in addition

to existing 7,000 kilometers) is expected to be completed by 2010 which would lead to increased

availability of CNG thus leading to increased demand for CNG driven vehicles.

The recent global financial crisis, reduction in availability of vehicle financing and higher interest rate

has impacted the demand for CVs in India, particularly in the second half of Fiscal 2009. According to

the SIAM, sales (domestic and exports) for CVs fell from 309,095 vehicles during the second half of

Fiscal 2008 to 178,170 vehicles during the second half of Fiscal 2009. In line with overall decline in

demand of CVs during the second half of Fiscal 2009, our Company also experienced a fall in sale of

CVs which severally impacted net revenue and overall performance of operations during Fiscal 2009.

42

OUR BUSINESS

Overview

We are a commercial vehicle (―CV‖) manufacturer engaged in the design, development, manufacture,

assembly, marketing and distribution of passenger carriers and goods carriers for the transportation industry.

Our current product portfolio covers passenger carriers and goods carriers with a Gross Vehicle Weight

(―GVW‖) range of 5.7 tons to 12 tons. Furthermore, in the passenger carrier segment, we also offer buses

with up to 41-person seating capacity and a GVW of 16.2 tons.

We were incorporated in 1983 and in 1984 we signed a joint venture agreement for the manufacture of LCVs

with, Punjab Tractor Limited, India, (―PTL‖) Mazda Motor Corporation, Japan (―Mazda‖) and Sumitomo

Corporation, Japan (―Sumitomo‖). We commenced commercial operations in 1986 with the introduction of

our first cargo LCV truck with a GVW of 6 tons, followed by a 26 seater bus, both of which were based on

the design procured from Mazda (―Mazda design‖). Over the years, on the strength of our research and

development efforts, we have expanded our product portfolio both in respect of passenger carriers and goods

carriers. In the passenger carrier category, we currently offer non-air conditioned and air conditioned bus

models with a seating capacity ranging from 10 to 41 seats. In the goods carrier category we currently have

seven (7) core truck models with a GVW range of 6.1 tons to 7.5 tons in the LCV segment and 8.0 tons to

12.0 tons in the M&HCV segment with several variants. In addition, we manufacture special application

vehicles in the passenger and goods carrier categories which include a variety of ambulances, troop carriers,

dumper / garbage removal vehicles, water tankers, recovery vans and police vans.

Recently, we have forayed into manufacture of luxury air-conditioned buses. The production of luxury buses

in the M&HCV segment has been developed on the Isuzu chassis pursuant to technical assistance agreements

with Isuzu. For the manufacture of bus bodies we have obtained design and technical know-how from

Gunung Coach Sdn Bhd, Malaysia (―Gunung‖) for both the LCV and M&HCV segments. Gunung has also

supplied us with relevant designs, jigs, fixtures and tools along with technical personnel to assist us in the

absorption of technology and enhance our production capabilities. For the production of the body of our

luxury executive coaches in the LCV segment, we have procured design and technology from SKS

Coachbuilders SDN Bhd, Malaysia (―SKS‖).

We have three (3) manufacturing facilities located at our plant in village Asron, district Nawanshahar, Punjab,

near Ropar. With the installation of our second vehicle manufacturing facility and our new in-house bus body

facility at our Nawanshahar plant, our manufacturing capacity has increased to 18,000 vehicles by March 31,

2009. We also have a centre for research and development located at our plant which has been set-up to

study, develop and evolve new technologies for our products. Over the years we have leveraged our research

and development abilities to expand our range of offerings, indigenise technologies, localize imported

products and manufacture quality vehicles that meet evolving emission norms in India, such as Bharat Stage –

II and Bharat Stage - III.

We sell our vehicles to retail customers through our dealer network, and to government departments, both

central and state, and bulk customers through direct orders. We also export our vehicles to countries like

Bangladesh, Sri Lanka, Nepal and Ghana through distributors in these countries. In Fiscal 2009, 85%, 7% and

8% of our unit sales were made to retail customers, government departments and bulk customers, and the

export market, respectively. Our marketing operations are spread across India through a network of 89 dealers

as on December 31, 2009.

Sumitomo Corporation, one of the three (3) original promoters of our Company, the other two (2) being PTL

and Mazda, has increased its equity stake to 53.52 % after acquiring the shareholding of PTL and Mazda. As

on date of this Letter of Offer, neither PTL nor Mazda have any shareholding in our Company. Sumitomo is a

global conglomerate with eight (8) business units covering metal products, transportation and construction

systems, infrastructure, media, network and lifestyle, chemicals and electronics, mineral resources and

energy, general products and real estate, and finance and logistics. We believe that these relationships with

Sumitomo, our Promoter, and our technical alliance with Isuzu allow us to leverage and tap into their

respective resources, expertise and technical knowledge.

43

Our Strengths

We believe that our business has the following key strengths.

Strong in-house research and development capability

Since our inception we have placed strong emphasis on developing our in-house research and development

capabilities. Our centre for research and development is located at our Nawanshahar plant and currently we

have a team of 30 engineers who are engaged in developing new vehicle platforms and products across our

product segments. We commenced commercial operations with the introduction of a cargo LCV truck with a

GVW of 6 tons, followed by a 26 seater bus, both of which were based on the Mazda design. Since then our

in-house research and development initiatives have resulted in the expansion of our product portfolio, and

successful absorption and indigenization of technology. In the goods carrier category we have added three (3)

more wheel bases and currently have seven (7) core truck models with a GVW range of 6.1 tons to 7.5 tons in

the LCV segment and 8.0 tons to 12.0 tons in the M&HCV segment with several variants. In the passenger

carrier category we have designed five (5) models of buses in-house and currently offer bus models with a

seating capacity of 10 to 41 seats. We have also developed an offering of 20 special application vehicles

through our own research and development.

Since 1987, the Government of India has accorded us recognition as an in-house research and development

unit. Over the years, our research and development initiatives have not only enabled us to indigenise

technologies, localize parts and components used in the manufacture of our vehicles thereby reducing our

reliance on imports, but has also enabled us to develop new products and variants including three (3) models

of trucks and four (4) models of buses running on alternative fuels such as Compressed Natural Gas (―CNG‖)

and upgrade our engine platforms to comply with the Bharat Stage - II, Bharat Stage - III emissions standards.

We believe that our in-house research and development capabilities enable us to develop new products that

meet the needs of our customers and manufacture quality vehicles that meet evolving emission norms.

Ability to design, develop and manufacture customized products

Over the years, we have developed eight (8) customized vehicles to meet the needs of our customers

including soil testing vans, mobile blood banks, display vans, fire tenders, animal rescue vans, delivery vans,

low floor buses for the Delhi Metro and bomb disposal vans. Currently, we have a team of 20 designers who

are supported by engineers and technicians from our research and development center. We design and

develop our application vehicles keeping in mind our target customers as well as the market requirements and

compliance with various regulatory, safety and emission norms. We believe our ability to design, develop and

manufacture customized products enables us to meet the specific requirements of our bulk customers, and

position us quickly respond to market opportunities and changing trends in the segments we operate in.

Strong and experienced management

Our senior management team, including certain of our Directors, has substantial experience in the CV

industry and has been instrumental in the growth of our organization. For instance, our Managing Director,

Mr. Yash Mahajan, has more than 36 years of experience in the automobile industry. Furthermore, our senior

management team, includes Mr. B.S. Devgun (Special Advisor to Managing Director) who has 44 years of

experience in the automobile industry, Mr. R.P. Sehgal (Executive Director – Works) who has 40 years of

experience in the automobile industry, Mr. Lakhinder Singh (Associate Vice President – R&D) who has 33

years of experience in the automobile industry, Mr. Gopal Bansal (Senior Vice President – Finance &

Company Secretary) who has 29 years of experience in finance and secretarial matters including project

financing and Mr. K.B. Prasad (Vice President – Marketing), who has 35 yeas of experience in the

engineering and automobile industry.

We have witnessed low attrition of our key management personnel and believe that the continued association

of many members of our senior management team with the Company has contributed positively to the

development of our business. We believe that our executives working with our senior management are also

44

well equipped to face the challenges of growth within our Company and our industry. We believe that our

management team is well placed to provide result producing strategic leadership, direction and execution

skills to improve our current operations and take advantage of emerging opportunities in the industry.

Strong marketing teams


central and state, and bulk customers through direct orders. Our marketing operations are spread across India

through our zonal / regional offices which manage our network of 89 dealers as of December 31, 2009. Our

dealer network consists of 29 dealers in Northern India, 32 dealers in Southern India, 12 dealers in Western

India, 7 dealers in Central India and 9 dealers in Eastern India as of December 31, 2009. We directly deal

with government departments, both central and state, as well as bulk customers from our corporate office in

Chandigarh through a dedicated sales and marketing team who follow-up with existing customers for repeat

orders and tracks new customers for their requirements of vehicles which fit into our product portfolio. We

export our vehicles to countries like Bangladesh, Sri Lanka, Nepal and Ghana through distributors in these

countries and have set-up a dedicated export cell in our corporate office in Chandigarh for the purpose.

We believe that our marketing teams possess in-depth knowledge of our products and customer requirements,

and aspire to provide customers with the best services. With their knowledge of customer‘s needs and wide

industry experience, our marketing teams assist us in the development of our product offerings to ensure that

our final products meet the expectations of our customers and are accompanied by effective after sales

support services. Our marketing strategy focuses on promoting our products by educating the customer on the

beneficial features of our vehicles, leveraging our marketing arrangements such as our alliances with Canara

Bank and Federal Bank and providing effective after sales services. We believe that this has helped create a

loyal base of customers who associate our vehicles with reliability and value.

Business association with Sumitomo and technical alliance with Isuzu

Our technical assistance agreements with Isuzu, a Japanese manufacturer of CVs, has opened a gateway for

us to Isuzu‘s vehicle / engine range covering CNG, Liquefied Petroleum Gas (―LPG‖) and hybrid versions

for both passenger and goods carriers. We currently manufacture two models of luxury air conditioned buses

under the Isuzu platform, one in the 27 seater range and one in the 41 seater range. Additionally, we will also

benefit from Isuzu‘s expertise in research and development, technology, manufacturing and quality systems

for future product developments / launches. Furthermore, we have and continue to benefit from our close

business linkage with Sumitomo which is a global conglomerate with eight (8) business units covering metal

products, transportation and construction systems, infrastructure, media, network and lifestyle, chemicals and

electronics, mineral resources and energy, general products and real estate, and finance and logistics. For

instance, by purchasing certain automotive components for the production of our vehicles and spares from

Sumitomo we benefits from the logistical and purchase synergies from our association with Sumitomo. For

Fiscal 2009, such purchase of components and spares aggregated Rs. 1,516.31 lacs. We believe that these

relationships with Sumitomo, our Promoter, and our technical alliance with Isuzu allows us to leverage and

tap into their respective expertise and technical knowledge.

Our Strategy

We have the following strategies to develop our business and continue to grow further.

Expanding our product offerings

We offer a range of passenger and goods carriers in both the LCV and M&HCV segments. We believe that

our in-house research and development capabilities, ability to design, develop and manufacture customized

products and our technical alliance with renowned companies such as Isuzu will further enable us to expand

our product offerings in segments / ranges which, we believe, have potential for strong growth. We believe

that our understanding of customer preferences and well developed in-house research and development

capabilities has enabled us to anticipate emerging customer requirements and develop suitable products that

provide a strong value proposition to our customers.

45

In the passenger carrier category, we have recently forayed into the manufacture of luxury air-conditioned

coaches. We intend to launch models of air-conditioned luxury buses and coaches targeted at the tourism

industry and long distance inter-city travel. Furthermore, to meet the expected demand for comfortable public

road transport in cities, we intend to introduce low / semi-low floor city buses with optional air conditioning.

Similarly, in the goods carrier category we plan to introduce various upgrade and special trucks. We plan to

continue to customize and manufacture special purpose vehicles to meet the requirements of our customers

with a special focus on the growing health, education and retail sectors.

Expanding our manufacturing facilities

We commenced the establishment of our second vehicle manufacturing facility and a new in-house bus body

facility at our Nawanshahar plant beginning in Fiscal 2007. Both facilities became operational during Fiscal

2009 and our manufacturing capacity increased to 18,000 vehicles as on March 31, 2009. As part of our

growth strategy and with a view to take advantage of emerging business opportunities, we plan to further

expand these facilities with the objective of optimizing the utilization of the design infrastructure at these

facilities, introducing new manufacturing amenities required for enhancing our product portfolio and

expanding overall vehicle production capacities. For more information on the facilities and our future

expansions, please see the section titled ―– Our Plant‖ under this section titled ―Our Business‖ on page 53.

We believe that the expansion of these manufacturing facilities will help us manufacture our planned

portfolio of products and tap emerging business opportunities in the CV industry.

Further enhancing our distribution network and customer base

We have established a network of 29, 32 and 7 dealers in Northern, Southern and Central India as of

December 31, 2009, and are continually focusing on exploring opportunities to further penetrate in Western

and Eastern India by expanding our dealer network in the relevant states through new dealer appointments

that conform to our standards. For further details of our dealer network in India, please refer to the section

titled ―– Sale and Distribution of Vehicles‖ under this section titled ―Our Business‖ on page 48. We plan to

consolidate our presence across all regions in India and will continue to assist our existing dealers in

enhancing their performance and improving their sales and service networks. We seek to increase our

business with our existing customers and expand our customer base by developing suitable products that

provide a strong value proposition, leveraging our relationships and reference lists, and providing outstanding

after sales services to ensure durable satisfaction to the end users of our products.

Continuing focus on high quality standards and enhancing customer satisfaction

One of our principal goals has all along been and will continue to be to achieve high quality standards for our

products and services. We have been certified as an ISO 9001:2008 company for the design and manufacture

of LCVs, medium commercial vehicles and special purpose vehicles. Our bus body facility has been

recognized by the Automotive Research Authority of India, Pune for bus body building. We induct vendors

as regular sources only after the completion of an assessment process and have established procedures for

ensuring quality control of components sourced from such vendors. Our quality assurance programs include

random testing of production samples, frequent re-calibration of production equipment, analysis of post-

production vehicle performance and ongoing dialogue with workers to reduce production errors. We plan to

continue to focus on maintaining and upgrading the quality standards relating to our production processes and

procurements.

We believe that our sales and service network has enabled us to provide timely feed back on the performance

of our vehicles which has enabled us to continue improving the quality of our products and services, and we

plan to strengthen our dealer network and offices across India to further improve our responsiveness to

market and customer service needs.

46

Continuing focus on cost management

We believe that we have always been an extremely cost conscious enterprise and we believe in maintaining a

high degree of financial discipline in the conduct of our business affairs. We have put in place workmen

reward schemes to encourage their full involvement and active participation in our constant endeavours aimed

towards improvement of productivity, quality and cost reduction. We plan to continue to manage our costs

efficiently to offer competitively priced, high quality vehicles. Our cost reduction strategy will focus on,

among other things, increasing the levels of localization for our new product introductions, improving raw

material and component sourcing, vendor participation in cost reduction exercises, continuing focus on

sharing basic vehicle platforms among multiple models in order to monetise research and development costs

more effectively, and reducing selling, general and administrative costs over maximum models and variants.

Our Product Portfolio

Our current product portfolio covers passenger carriers and goods carriers in the GVW range of 5.7 tons to 12

tons. Furthermore, in the passenger carrier segment, we also offer buses with a 41-person seating capacity

with a GVW of 16.2 tons which have recently been introduced by us in the market. In addition, we

manufacture special application vehicles in the passenger and goods carrier categories which include a variety

of ambulances, troop carriers, dumper placers / garbage removal vehicles, water tankers, recovery vans and

police vans.

The following table sets forth the segmental unit sales of our vehicles for Fiscal 2009 and 2008:

Category Fiscal

2009

Fiscal

2008

Passenger Carriers 4,860 6,388

Goods Carriers 3,160 4,884

Total Sales 8,020 11,272

Passenger carriers

In the passenger carrier category, we currently offer non-air conditioned buses and air conditioned buses and

coach models with a seating capacity ranging from 10 to 41 seats. Our current offerings of passenger carriers

have a GVW range of 5.7 tons to 6.4 tons in the LCV segment and 8.0 tons to 16.2 tons in the M&HCV

segment.

Our non-air conditioned buses are supplied in standard, semi-deluxe and deluxe versions. We use our in-

house vehicle manufacturing facilities to manufacture the chassis of all our passenger carriers. While we have

the in-house capabilities of producing the bodies for our non-air conditioned buses, we currently procure the

bodies from two (2) different third party vendors who build such bodies as per the designs and specifications

prescribed by us.

We have recently forayed into the manufacture of luxury air conditioned buses and coaches, for which we

have set-up a second vehicle manufacturing facility and a new in-house bus body manufacturing facility at

our plant at village Asron, Nawanshahar, Punjab. The production of our luxury air-conditioned buses in the

M&HCV category has been developed on the Isuzu chassis pursuant to technical assistance agreements with

Isuzu. For the manufacture of bus bodies in the LCV and M&HCV category, we have already obtained design

and technical know-how, relevant designs, jigs, fixtures and tools. In addition, for the production of the body

of our luxury executive coaches in the LCV category, we have also procured the design and technology.

The following table sets forth brief details of our current product portfolio of non-air conditioned and air

conditioned buses in the passenger carrier category:

Current Product Portfolio in the Passenger Carrier Category

Category Number of Seats GVW Range (in tons)

Non-air Conditioned Buses

1. Standard buses (1) 18 to 41 ordinary seats 6.4 to 8.0 tons

2. Semi-deluxe buses (1) 14 to 32 high back seats 6.4 to 8.0 tons

47

Current Product Portfolio in the Passenger Carrier Category

Category Number of Seats GVW Range (in tons)

3. Deluxe buses (1) 10 to 24 reclining seats 6.4 to 8.0 tons

Air Conditioned Buses and Coaches

4. Luxury executive coaches (2) 13 reclining seats 5.7 tons

5. Luxury buses (2) 16 to 27 reclining seats 6.4 to 8.0 tons

6. Luxury buses (2) 41 reclining seats 16.2 tons Notes:

1) Available in Bharat Stage – II and Bharat Stage – III versions with diesel and CNG options.

2) Available in Bharat Stage – III version with diesel option only.

Goods carriers

In the goods carrier category, we currently offer seven (7) core truck models with a GVW range of 6.1 tons to

7.5 tons in the LCV segment and 8.0 tons to 12.0 tons in the M&HCV segment. Within this range, we offer

several vehicle variants including cabin chassis (without the cargo box), fixed side decks and high decks. We

manufacture our goods carriers in a ready to use condition at our vehicle manufacturing facilities in our

Nawanshahar plant.

The following table sets forth brief details of our current product portfolio in the goods carrier category:

Current Product Portfolio in the Goods Carrier Category

Models GVW Range (in tons)

LCV

1. Sartaj (1) 6.1 tons

2. Premium (1) 6.4 tons

3. Prestige (1) 7.5 tons

M&HCV

4. Supreme (1) 8.0 tons

5. Super (1) 8.8 tons

6. Samrat (1) 10.2 tons

7. Super 12 (2) 12.0 tons Notes:

1) Available in Bharat Stage – II and Bharat Stage – III versions with diesel and CNG options.

2) Available in Bharat Stage – II and Bharat Stage – III with diesel option only

Special application vehicles

We manufacture special application vehicles in both the passenger and goods carrier categories in accordance

with the specifications, designs and layouts requested by our customers.

The following table sets forth brief details of our range of special application vehicles and their usage:

Products Usage

Ambulances including cardiac ambulances and critical care

ambulances/ Dental vans/ Mobile clinics

Hospitals

Four-wheel drive For defence services both for cargo and passenger

Troop carriers/ Police and prisoner vans Army/ Law Enforcement

Dumpers/ Garbage removal vehicles Tipping materials in the construction industry/

sanitation

Water tankers Water transportation

Fire tenders Fire departments

Recovery vans Towing vehicles

Aluminium delivery boxes Food / perishable transport

Product Warranty

Our vehicles carry a 12 month warranty for any defects in material and workmanship from the date of

delivery of the vehicle to the end-user customer. Vehicles are serviced at our dealer locations for any

48

requirement and replacement covered under warranty. We regularly carry out inspections of facilities,

infrastructure and availability of genuine spare parts at our dealer / service outlets to ensure that the end-users

of our products receive efficient and prompt attention and service.

Our engines typically carry a two (2) year warranty from the date of delivery. The warranty covers defects in

manufacturing, material and workmanship by the Company.

Sale and Distribution of Vehicles


central and state, and bulk customers through direct orders. We also export our vehicles to countries like

Bangladesh, Sri Lanka, Nepal and Ghana through distributors in these countries. In Fiscal 2009, 85%, 7% and

8% of our unit sales were made to the retail customers, government departments and bulk customers, and

exports, respectively.

At present, our marketing operations are spread across India through a network of 89 dealers as on December

31, 2009. The following table indicates our current dealership network in India:

State S. No. Dealership Name City

Andhra Pradesh

1 A.V. Motors Hyderabad

2 Jayalakshmi Motors Rajahmundry

3 Kesar Motors Visakhapatnam

4 Jayalakshmi Motors Kadappa

5 Sri Venkateswara Motors Tirupati

6 Divya Engineering & Body Building Industries Mehboobnagar

7 Sri Pinakini Motors Nellore

8 Combined Motors Adilabad

Delhi

9 Inder Singh & Co. Delhi

10 Metaltech Motors Private Limited Delhi

Goa

11 Chowgule Industries Goa

Gujarat

12 Aastha Motors Ahmedabad

13 Shiv Shakti Motors Rajkot

14 Jay Jalaram Motors Anand

15 S.J.M. Motors Baroda

Haryana

16 Bhatia Auto Store Rohtak

17 Global Motors Jind

18 HKS Automobile Faridabad

19 Akash Automobiles Ambala

20 Bimla Motors Hissar

21 Dayal Motors Yamunanagar

Himachal Pradesh

22 Bee Gee Automobiles Solan

49


23 Suman Motors Shimla

24 Sai Motors Mandi

25 SK Dhiman & sons Kangra

26 Varsha Automobiles Hamirpur

J& K

27 Prince Motors Sri Nagar

28 Maya Motors Private Limited Jammu

29 Ney Shatok Motors Leh

Jharkhand

30 D.S. Industries Corporation Ranchi

Karnataka

31 K.H.T. Agencies Bangalore

32 S.K. International Motors Private Limited Bangalore

33 Auto House Mysore

34 Vinay Agencies Hospet

35 Span Enterprises Hubli

36 Century Automobiles Mangalore

Kerala

37 Maxim Trades Private Limited Cochin

38 Nirmala Automobiles Private Limited Trivandrum

39 Eric Motors Private Limited Kottayam

40 Premium Auto Services Calicut

41 Monal Motors Kannur

42 PSN Motors Private Limited Malapuram

43 Omega Auto House Waynad

Madhya Pradesh

44 Raipur Motor Engineering Works Raipur

45 My Car (India) Private Limited Bhopal

46 Dugar Distributors Private Limited Indore

47 Eros Motors Private Limited Jabalpur

48 Vikram Motors Gwalior

Maharashtra

49 Chowgule Industries Kolhapur

50 Mahavir Motors Nasik

51 Kamthe Auto Agencies (Pune) Pune

52 Patil Motors Ahmednagar

53 Shri Chakradhar Agricultural Corporation Amravati

54 Shree Vijeet Motors Private Limited Aurangabad

55 Eros General Agencies Nagpur

Punjab

56 Kissan Tractors Jalandhar

57 Northern Auto Amritsar

50


58 Agro Sales & Tractors Private Limited Ludhiana

Rajasthan

59 Hindustan Tractors Jaipur

60 Sarwangi Automobiles Sri Ganganagar

Sikkim

61 Khokhan Auto Gangtok

Tamil Nadu

62 AR.A.S. Autolines Private Limited Chennai

63 Chakraa Automobiles Chennai

64 Krystal Motors Salem

65 Vinayaka Auto Sales & Service Madurai

66 Shilpa Automech Trichy

67 Rehoboth Motors Tirnuvelli

68 Pondicherry General Motors & Accessories Private Limited Pondicherry

69 Abirami Motors Palladam

70 A.R. Automobiles Villupuram

71 Abirami Automobiles Tirpur

72 Bright Auto Service System Private Limited Erode

Tripura

73 J.K. Motors Agartala

Uttar Pradesh

74 Mittal Motors Ghaziabad

75 Prakash Motors Agra

76 Shivam Motors Dehradun

77 Nainital Auto Wheels Private Limited Haldwani

78 Shyam Automobiles Limited Noida

79 Singhal Sales Corporation Aligarh

80 Kirti Enterprises Gorakhpur

81 Ritu Motors Allahabad

82 NPK Motors Private Limited Mahura

83 S.G. Automotives Lucknow

West Bengal

84 Khokhan Auto Distributors Siliguri

85 Automobile House Kolkata

86 Durga Machinery Mart Malda

87 Nippon Motors Sales & Service Private Limited Asansol

88 Sri Krishna Automobile 24 Parganas

89 Subhendu Enterprise Burdwan

51

Retail customers

Our vehicles are sold to retail customers through a nation wide network of dealer outlets controlled by our

corporate office in Chandigarh, and zonal / regional offices located in Ahmedabad, Bangalore, Hyderabad,

Chennai, Pune, Kolkata, Lucknow, Bhopal and Cochin. Our retail customers include single truck operators,

small fleet owners, cargo transport companies, tourist operators and contract travel operators.

Our corporate office at Chandigarh and our zonal / regional offices manage our stock yards in various

locations, process dealer orders and ensure timely delivery of vehicles from stock yards to dealer locations.

Dealers generally raise their indents as per their requirement on a monthly basis. The indents are then

processed by our zonal / regional offices, consolidated at the corporate office and then forwarded to the plant

for production planning and execution. We generally extend selective credit facilities to our dealers as a part

of our strategy to increase market penetration based on relevant experience with the concerned dealer.

As on December 31, 2009, we had 89 dealers for sales and service of our vehicles. We choose our dealers

based on their local reputation, financial strength, experience in vehicle sales, capabilities in providing sale

and service infrastructure, and marketing and management capabilities. One of the key focus areas of our

marketing policy is to ensure that the personnel at dealer locations are fully trained to handle sale and service

of our vehicles and their skills are upgraded on a continuous basis.

Our retail marketing strategy focuses on identification of target customers, assessment of their needs and

financial ability to purchase our vehicles. After considering factors such as our competitor‘s strengths in a

matching product, pricing and after sale support practices, an in-depth assessment, involving active

participation of key corporate disciplines including research and development, technology, manufacturing and

material services, is undertaken to ascertain our capability to develop and thereafter undertake manufacture of

a new product / variant, capable of satisfying customers aspirations and also coping up with competitors.

Besides direct communication with certain of our retail customers through our zonal / regional offices, we

also rely on our dealers to provide us with feedback from our retail customers. The efforts and initiatives of

our dealers are further strengthened through the involvement and active participation of our marketing

personnel from the procurement of orders to their successful conclusion.

Government and bulk customers

We also sell our vehicles directly to central / state government departments and organizations including the

defense services, ministry of health, state police departments and state transport corporations. A majority of

our sales to our government departments, both central and state, are conducted in response to tenders floated

from time to time towards purchase of CVs depending upon their requirements. In addition to government

departments, we also sell our vehicles directly to bulk customers including transport logistic companies,

hospitals, educational institutions and corporates including retail chain companies. The vehicles we sell to

bulk customers are generally customized to suit their individual requirements.

Our government and bulk customers are directly dealt by us from our corporate office in Chandigarh through

a dedicated sales team. This team regularly follows-up with our existing government and bulk customers for

repeat orders and, taking advantage of emerging opportunities, tracks new customers for their requirements of

vehicles which fit into our product portfolio. After assessment and ascertainment of their needs and

specifications, we maintain regular contact with the prospective buyers to win their confidence and trust in

our ability to supply quality products at reasonable costs within the time frame indicated by them. Our sales

team acts as a bridge between our bulk customers and our research and development / production teams by

not only tracking the new product requirements of our customers, but also in generating new product ideas.

Exports

We also export our vehicles to countries such as Bangladesh, Sri Lanka, Nepal and Ghana through

distributors in these countries. We have a dedicated export cell which maintains regular contact with our

export customers and liaises with distributors in foreign countries. Our service and research and development

personnel regularly visit these countries to take stock of the performance of our vehicles through direct

52

contacts with the end-users. These visits also help ensure that our overseas distributors maintain their

facilities as per our requirements and genuine spare parts are available so that efficient and prompt after sale

services are provided to our customers in these countries.

After Sales Services

Our after sales support services focuses on speedy redressal of customer grievances and queries, and making

spare parts readily available at reasonable prices with maximum convenience to the customer.

Our customer satisfaction cell, located at our corporate office in Chandigarh, maintains regular contact with

end-users regarding product performance, customer grievances and dealer conduct. Our service engineers and

mechanics, posted at our zonal / regional offices, visit customers to take care of any product related matters.

They also regularly inspect dealer infrastructure so as to ensure that our dealers are meeting our customer

service standards.

We require our dealers to be equipped with adequate infrastructure to address the needs of the customers and

we regularly take appropriate initiatives and steps to encourage our dealers to upgrade their workshops to

provide prompt and efficient after sales services and ensure easy availability of all requisite tooling and spare

parts for our vehicles. In addition to the services available with our dealers at their locations, we also

encourage them to set-up service centers to provide after sales services to customers not only in the cities /

towns where their offices are located but also at other strategic locations to enable customers to have access to

support services while in transit. We have established the Swaraj Mazda Training Centre at our Nawanshahar

plant to enhance product knowledge and improve productivity, maintenance and customer satisfaction

targeted for dealers and their service staff.

Our Spare Part Business

As a part of our after sales services, we sell spare parts including engine components, transmission

components, electric system components, brakes and steerings to our dealers who, in turn, provide the same

to our customers. In addition, spare parts are sold to distributors who in turn sell the same to retail stores. This

allows our customers with easy direct access to our spare parts through retail stores in addition to our dealer

outlets. We manufacture some of these parts indigenously and procure others from vendors.

Marketing Arrangements

We have entered into certain arrangements to expand our reach and promote sale of our products by

establishing alliances with Canara Bank and Federal Bank. The details of such marketing arrangements are

provided below:

Memorandum of Understanding with Canara Bank

For instance, we entered into a memorandum of understanding with Canara Bank on March 16, 2009 and

have nominated Canara Bank as one of our preferred financiers for financing certain eligible customers for

purchasing our vehicles. In terms of the agreement, Canara Bank co-ordinate with our dealers in their

endeavours to promote sale of company vehicles to eligible customers by offering appropriate financial

packages to them, including product structuring, down payment tenure of loan and effective rate of interest,

on best efforts basis. Our Company and Canara Bank have agreed to form a central coordination team which

would focus on areas like product structure, interest rates, resource allocation, central communication,

training, etc, so as to monitor the performance of the arrangement, in an effective manner. The arrangement

further provides for various sales and promotion activities to be undertaken at the location of our dealers or at

Canara Bank branches or at other locations under the arrangement. Furthermore, under the arrangement, our

Company has agreed to provide to each customer financed under the scheme by Canara Bank a discount in

the invoice of Rs. 3,000 per vehicle of four tyre models and Rs. 5,000 per vehicle of six (6) tyre models at

dealer points and two (2) additional free service per vehicle, post disbursal by Canara Bank. The purchasers

also get a special three (3) years warranty on engines. The memorandum of understanding is valid until

March 15, 2010.

53

Arrangement with Federal Bank

Our Company entered into an arrangement with the Federal Bank pursuant to a letter dated April 7, 2009,

with respect to the financing of vehicles manufactured by our Company. Under this arrangement, our

Company has agreed to provide 1% of the loan amount as subvention on the loans financed by Federal Bank

and Federal Bank has agreed to sanction loans at an interest rate that is 0.25% lower than its card rates, for the

entire period for which the loan is availed from the Federal Bank. This arrangement authorizes our Company

to use the name of Federal Bank in advertisement materials with its prior consent. The arrangement is valid

for a period of one (1) year.

Our Plant

Our plant is located at village Asron, Nawanshahar in Punjab, India and has three (3) manufacturing facilities.

Vehicle Manufacturing Facility I: Our first vehicle manufacturing facility was established in 1985. The

facility is primarily used for the production of the Sartaj, Premium, Prestige, Supreme, Super, Samrat and

Super-12 in the goods carrier category, and chassis for certain models of our standard, semi-deluxe and

deluxe buses, and special application passenger carriers.

Vehicle Manufacturing Facility II, Bus Body Facility and Phase I of the Expansion Project: With the

execution of technical assistance agreements with Isuzu for the production of chassis for cargo trucks and

luxury buses in the M&HCV segment, and technology procured from Gunung for the manufacture of bus

bodies in both the LCV and M&HCV segments, and SKS for the production of the body of luxury executive

coaches in the LCV segment, we commenced Phase I of our Expansion Project consisting of the

establishment of a second vehicle manufacturing facility (the ―Vehicle Manufacturing Facility II‖) and a

new in-house bus body manufacturing facility (the ―Bus Body Facility‖) at our Nawanshahar plant beginning

in Fiscal 2007. We are in advanced stages of implementing this phase of the Expansion Project with both

facilities having become operational in Fiscal 2009.

Our Company is implementing its Expansion Project in order to expand its product portfolio to capitalize on

the emerging business opportunities in the Indian CV sector. Accordingly, Phase I of our Expansion Project

has enabled us to foray into the manufacture of air-conditioned luxury buses and coaches, based on the Isuzu

platform, targeted at the tourism industry and long distance inter-city travel. An overview of the Vehicle

Manufacturing Facility II and Bus Body Facility established under Phase I of the Expansion Project is given

below:

Our Vehicle Manufacturing Facility II, which is adjacent to our vehicle manufacturing facility I,

became operational during Fiscal 2009. The facility is currently being used to assemble M&HCV

chassis for the passenger carrier category.

Our Bus Body Facility became operational during Fiscal 2009 and is designed to manufacture bus

bodies through in-house manufacturing chain from the production of Bus Body shell to painting,

docking on the vehicle chassis and fitment of seats interiors, panels and other fitments. This facility

can manufacture bus bodies of our entire range of luxury air-conditioned buses.

As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, a total of Rs.

11,438.41 lacs has already been deployed under Phase I of the Expansion Project as on December 31, 2009.

The balance portion of Rs 3,561.59 lacs relating to Phase I is expected to be deployed by Fiscal 2011 and is

proposed to be financed from the Net Proceeds and our debt arrangements. For further details, please see the

section titled ―Objects of the Issue – Project Cost‖ on page 18.

54

Capacity and Capacity Utilisation

The following table sets forth the installed capacity and production levels at our Nawanshahar plant as on

Fiscal 2009 and 2008:

Particulars Fiscal 2009 Fiscal 2008

Installed capacity (number of units per annum) (1) 18,000 12,000

Production (number of units) (2) 8,164 11,241

Capacity Utilization (%) (3) 45.36% 93.68% Notes:

1) On double shift basis. Includes production for internal use. 2) Includes 17 and 27 buses produced during test run in Fiscal 2009 and Fiscal 2008 respectively.

3) Capacity utilisation calculated as the production in a given year divided by the installed capacity in that year.

As indicated above, our Company‘s capacity utilization declined from 93.68% in Fiscal 2008 to 45.36% in

Fiscal 2009 primarily on account of an overall industry decline in demand for commercial vehicles during

Fiscal 2009. In order to facilitate its foray into the manufacture of luxury air-conditioned buses in the

M&HCV segment based on Isuzu platform, the Company commenced its Expansion Project consisting of the

establishment of a second vehicle manufacturing facility and a new in-house bus body manufacturing facility

at its Nawanshahar plant beginning in Fiscal 2007. Both facilities became operational in Fiscal 2009 under

Phase I of the Expansion Project due to which the installed capacity increased to 18,000 units in Fiscal 2009

from 12,000 units in Fiscal 2008. However, as the capacity expansion to 18,000 units was completed during

the end of Fiscal 2009, production from these facilities is not reflected for the entire year. Due to the above

reasons the capacity utilization was lower in Fiscal 2009 compared to Fiscal 2008.

Common Utilities

Power: Power is presently supplied to our plant by the Punjab State Electricity Board (―PSEB‖) at 11 KV.

We also have captive power generation by diesel generator sets of 5 MW to ensure un-interrupted power

supply in case of any power breakdown. As production in our plant increases to full capacity, we would

require additional power load for our operations which we plan to source from PSEB.

Water: Water is supplied to the plant from three (3) submersible turbines. Water is stored in over head tanks

before it is distributed to our facilities at the plant.

Phase II of the Expansion Project

On completion of Phase I, we expect to commence Phase II of the Expansion Project with a view to further

expand the Vehicle Manufacturing Facility II and Bus Body Facility. The expansion will focus on upgrading

the Vehicle Manufacturing Facility II to produce cabins and cargo boxes for cargo applications in the

M&HCV segment and expanding the production capacity at the Bus Body Plant by setting-up new machines,

paint lines and manufacturing amenities. Phase II will enable the Company to manufacture cargo applications

in the heavy cargo vehicle segment and meet the expected demand for comfortable public road transport in

cities, through the introduction of low / semi-low floor city buses with optional air conditioning. Phase II of

the Expansion Project is expected to be completed by Fiscal 2014. On completion of the Expansion Project,

the production capacity is expected to increase to 24,000 units per annum.

The estimated outlay for Phase II is expected to be Rs. 11,000.00 lacs. As per certificate dated January 19,

2010 from Shamsher & Co., Chartered Accountants, as on December 31, 2009, we have not incurred any

expenditure with respect to the Vehicle Manufacturing Facility II and the Bus Body Facility under Phase II of

the Expansion Project. The outlay in relation to Phase II has been estimated based on pro-forma invoices/

quotations received from various parties and management estimates. In view of the highly competitive and

dynamic nature of the industry in which we operate, we may have to revise our expansion plans including

changing the expected outlay and rescheduling our expenditure programmes. For further details, please see

the section titled ―Risk Factors - Internal Risk Factors - Our expansion project at the Nawanshahar plant

may not be completed, in the timeframe or at cost levels originally anticipated, and may not achieve the

intended economic results.‖ and ―Objects of the Issue‖ on pages xiv and 17, respectively.

55

Raw Materials and Components

Raw materials and components consumed constitute a major portion of our manufacturing costs. The

principal components required for the manufacture of CVs are made out of raw materials including forging

steel, cast iron, steel sheets & plates, non-ferrous material like aluminium and copper, rubber and plastics.

Our in-house manufacturing facilities produce sub-assemblies and assemblies for the production of LCVs.

Over the years, we have developed vendors who supply us components and parts as per our requirements.

These include components for in-house manufacture of engine and assemblies covering transmission, axle,

chassis and cargo box for our vehicle. For the in-house assembly of the vehicle cabin, except for a certain

parts such as panel doors, pan assembly floor, pillars and panel roof which we import, all other parts made out

of steel sheets are sourced from vendors developed by us in the vicinity of our plant. In respect of passenger

carriers and special application vehicles, we rely on two (2) vendors developed by us for supplying us with

relevant bodies. We outsource fuel injection system, brake system, steering assemblies and electrical system

as per our specifications as well as other items such as tyres, tubes, rims, batteries, paints and chemicals.

For the manufacture of chassis in the M&HCV range pursuant to our technical alliance with Isuzu, we

procure engines and transmission assemblies in a ready-to-fit condition. We also outsource major assemblies

covering axles, brake system, steering and chassis. For in-house manufacture of bus bodies, we procure steel

tubes, fibreglass reinforced plastic materials, aluminium sheets, glasses. For the interior of the body, we

outsource seats, interior panels, air-conditioners and other related fittings.

The following table sets forth a break-down of the raw materials and components consumed in Fiscal 2009

and Fiscal 2008: (Rs. in lacs)


CKD kits 1,447.94 1,759.18

Tyres, tubes and rims 3,045.13 3,820.58

Cargo boxes 775.16 840.01

Batteries 220.05 306.40

Others 38,565.46 47,160.32

Total 44,053.74 53,886.49

We imported 4.38% of our requirement of raw material and components in Fiscal 2009. Our imports

primarily consist of CKD kits. In Fiscal 2009, 95.62% of our requirements of raw material and components

were domestically sourced.

The following table sets forth the value of imported and indigenous raw material and components consumed

for Fiscal 2009 and Fiscal 2008:


% Rs. lacs % Rs. lacs

Imported 4.38 1,930.24 5.15 2,774.20

Indigenous 95.62 42,123.50 94.85 51,112.29

Total 100.00 44,053.74 100.00 53,886.49

We have a well established vendor base to provide necessary components in a timely manner and in adequate

quantities. Our vendors supply us necessary components on an order-by-order basis. Selected vendors are

evaluated for commercial and technical competence prior to commencement of supply. Samples are

thoroughly checked and tested as per our specifications and the performance of suppliers is monitored

through pilot production batches. We induct suppliers as regular sources only after such examination and

assessment is complete to our satisfaction.

Further, for certain of our components, we are dependent on a limited number of vendors which include

Merritor, HVS (India) Limited and Axles India Limited for certain types of axles, GNA Udyog Limited for

propeller shafts, ZF for power steering systems, Bosch for fuel injection systems, Punjab Tractors Limited for

56

transmission gears and Valeo Clutch Limited and Ceekay Daikan Limited for clutches and on Swaraj Engines

Limited for certain engine components.

JCBL Limited, Sita Singh & Sons Private Limited and Bosch Limited were the top three (3) vendors in terms

of purchases as a percentage of our Company‘s gross turnover in Fiscal 2009. The purchases as a percentage

of the Company‘s gross turnover accounted for by JCBL Limited, Sita Singh & Sons Private Limited and

Bosch Limited in Fiscal 2009 was 9.31%, 8.98% and 4.15%, respectively.

Please see the section titled ―Risk Factors - Internal Risk Factors - We are dependent on a limited number

of vendors for the supply of critical components and raw materials used in the manufacture of our

products and any disruption in our supply chain may adversely affect our sales and results of operations. ‖

on page xiii.

Certifications and Quality Assurance

We have been certified as an ISO 9001:2008 company from Perry Johnson Registrars, Inc. to design and

manufacture LCVs, medium commercial vehicles and special purpose vehicles such as buses, ambulances

and water tankers. Further, our bus body facility has been recognized by the Automotive Research Authority

of India, Pune for bus body building. Our quality assurance programs include random testing of production

samples, frequent re-calibration of production equipment, analysis of post-production vehicle performance

and ongoing dialogue with workers to reduce production errors.

Employees

As on December 31, 2009, we had a total of 950 full time employees (including trainees) consisting of 377

employees in the management cadre, 92 employees in the junior management cadre, 24 support staff and 457

workers. In addition to our full-time employees, we hire from time to time contract workers to assist us in

various aspects of our business. As of December 31, 2009, we had a total of 295 contract workers. The terms

of engagement for our contract workers are different than that of our full time employees.

Unions: Our regular workers at our factory are organized in the Swaraj Mazda Workers Union. Wage

agreements with this trade union are typically negotiated every four years. We concluded wage negotiations

in November 2006 and the wage settlement is effective from April 1, 2006 to March 31, 2010. We believe our

relations with our workforce are cordial and there have not yet been any incidence of a strike or lock- out

since inception.

Research and Development

Since inception, we have placed strong emphasis on developing our in-house research and development

capabilities, which we believe, has been instrumental in our growth. We commenced commercial operations

with the introduction of a LCV truck with a GVW of 6 tons in 2 wheel bases, followed by a 26 seater bus,

both of which were based on the Mazda design. Since then our in-house research and development initiatives

have resulted in the expansion of our product portfolio, and absorption and indigenization of the transfer of

technology. In the goods carrier category we have added three more wheel bases and currently have seven (7)

core truck models with a GVW range of 6.1 tons to 7.5 tons in the LCV segment and 8.0 tons to 12.0 tons in

the M&HCV segment with several variants. In the passenger carrier category we have developed a majority

of our buses in-house and currently offer different bus models with a seating capacity of 10 to 41 seats. We

have also developed a wide offering of special application vehicles through our own development initiatives

and efforts.

Since 1987, the Government of India has accorded us recognition as an in-house research and development

unit. Over the years, our research and development initiatives have not only enabled us to indigenise

technologies, localize parts and components used in the manufacture of our vehicles thereby reducing our

reliance on imports, but has also enabled us to develop new products and variants including vehicles running

on alternative fuels such as CNG and upgrade our engine platforms to comply with the Bharat Stage - II,

Bharat Stage - III emissions standards. More recently our significant achievements include the development

57

of trucks with GVWs of up to 12.0 tons, development of 4 wheel drive vehicles, manufacture of left hand

drive vehicles for export, launch of buses with higher seating capacities of up to 41 seats.

Our research and development activities emphasize designing and developing new products keeping in mind

market standards, customer requirements, cost of production and compliance with applicable regulations and

safety norms. Our research and development activities are currently focused on the design, development and

localization of trucks and buses based on the Isuzu platform and the development of engines which are Bharat

Stage IV compliant.

Our centre for research and development is located at our Nawanshahar plant. Currently, we have a team of

30 engineers who are engaged in developing new vehicle platforms and products across our product segments

supported by a team of 20 designers. In Fiscal 2009 and Fiscal 2008 we spent a total of Rs. 1,897.77 lacs, and

Rs. 543.73 lacs, respectively on research and development.

Competition

We face competition primarily from domestic CV manufacturers. We also face competition from foreign CV

manufacturers, which have increased, or are expected to increase, their participation in the Indian market

through technology transfers, joint ventures or wholly-owned subsidiaries. In the passenger carrier category

we primarily face competition from Ashok Leyland, Eicher Motors, Force Motors, Mahindra & Mahindra and

Tata Motors in our current range of LCVs and from Ashok Leyland, Eicher Motors, Tata Motors and Volvo

Buses India in our current range of M&HCVs. Similarly, in the goods carrier category we primarily face

competition from Ashok Leyland, Eicher Motors, Force Motors, Mahindra & Mahindra and Tata Motors in

our current range of LCVs and from Ashok Leyland, Eicher Motors and Tata Motors in our current range of

M&HCVs. The table below summarizes the market share of each of the competitor in the industry segment

that we operate in as on December 31, 2009.

Name of the Company

Goods Carrier Passenger Carrier

M&HCV

(7.5 to 12 tonnes)

LCV

(5 to 7.5 tonnes)

M&HCV

(7.5 to 16.2 tonnes)

LCV

(5 to 7.5 tonnes)

Tata Motors 47.13% 68.63% 45.68% 63.22%

Eicher Motors 39.35% 13.68% 4.46% 10.43%

Mahindra & Mahindra N/A 11.89% N/A 11.89%

Swaraj Mazda 9.45% 5.39% 4.92% 9.05%

Force Motors N/A 0.40% N/A 0.69%

Ashok Leyland 4.08% 0.00% 43.20% 4.72%

Volvo Buses India N/A N/A 1.27% N/A

Source: SIAM Report on Comparative Production, Domestic Sales for December 2009

We have designed our products to suit the specific requirements of the Indian market based on specific

customer needs such as safety, driving comfort, fuel efficiency and durability. We believe that our vehicles

are suited to the general conditions of Indian roads and local climate and meet the needs of our customers.

Intellectual Property

Our products are sold under the marks ―Swaraj Mazda‖ and ―Isuzu‖. We do not own intellectual property

rights relating to our products. We have the right to use the name / trademark ―Swaraj‖ in our corporate name

and branding of our commercial vehicles and spare parts until January 6, 2011. Subsequently, we have to

completely discontinue using the name / trademark Swaraj in any form or combination in our corporate name

and branding the commercial vehicles and spare parts manufactured by our Company. Further, under the joint

venture agreement entered into between our Company, PTL, Mazda and Sumitomo, our Company has been

given the right to use the Mazda name in the name of our Company. The said joint venture agreement has

been terminated pursuant to Mazda and PTL ceasing to be shareholders in our Company. Our Company has

been using the brand name ―Mazda‖ in good faith. For further details, please see the section titled ―Risk

58

Factors – Internal Risk Factors - Risks Associated with our Business - We do not own intellectual property

rights to our products and brand name and any failure to enforce our rights could have an adverse effect

on our business prospects‖ on page xv.

We have been granted registration of the design of our ―Prestige Bus‖ on October 17, 2007 under the Designs

Act, 2000.

Health, Safety and Environment

We are subject to environmental regulations applicable to our manufacturing facilities and are committed to

complying with applicable health, safety and environmental regulations and other requirements in our

operations.

We maintain and operate our pollution control facilities and conduct other environmental protection activities,

including the control and disposal of hazardous substances. We have installed effluent treatment plants at

each of our manufacturing facilities for treatment of industrial and domestic effluents. For handling all solid

wastes, we are in the process of commissioning an incinerator which shall convert all solid wastes to non-

polluting ash. In the future, we may incur increased costs and additional charges associated with

environmental compliance, the impact of new environmental laws and regulatory standards, or the availability

of new technologies.

We recognize the safety of our workforce with paramount importance and our plant has facilities and

qualified staff to handle basic medical facilities, should the need arise. We have also established joint

management worker health and safety committees that meet regularly throughout the year for purposes of

facilitating a two - way communication that aide in the reduction of injury rate, occupational diseases, lost

days and absenteeism and work related fatalities.

Insurance

We obtain specialized insurance for our manufacturing facilities and other risks covering our assets and

operations. Our insurance policies consist of coverage for risks relating to physical loss or damage. We obtain

insurance for outside processing materials, stock at our manufacturing facilities including imported and other

items, raw materials and semi-finished goods.

We also obtain an outgoing materials policy where our goods in transit from our plant such as spare parts are

insured against all risks. Furthermore, our stocks and goods held in trust at our zonal / regional offices,

stockyards and other places are also insured. We also obtain insurance for money and/ or cash stored or

collected by our zonal / regional offices or which is in transit from the office to banks.

Under our general product liability insurance policy, we are indemnified against any legal liability to pay

damages for third party claims arising out of bodily injury or property damage caused by any of our products

in transit. We also maintain a standard fire and special perils policy, which covers loss and damage due to fire

and similar perils to our buildings, plant and machineries, furniture, fixtures, fittings and stocks. However, we

do not maintain any third party liability insurance coverage for our chassis in transit.

Properties

Owned properties. Our registered office and plant is located at village Asron, Distt. Nawanshahar, Punjab,

India. We also own the premises occupied by our zonal office in Ahmedabad, having its address as 2nd Floor

Theltej Road, Near Drive-in-Cinema, Drive in Shopping Centre, Ahmedabad, Gujarat, and our spare parts

department in Ropar.

Leased properties. We lease certain properties that we utilize as offices, stockyards and workshop. The details

of these properties are as follows:

59

A. Offices

Office

Address Date of Agreement Date of expiry

Kolkata

Ground Floor, 215/B, Jodhpur

Park, Kolkata – 700 068, West

Bengal

March 17, 2008 October 31, 2010

Chandigarh 204-205, Sector 34-A,

Chandigarh

January 13, 1999 January 12, 2014

Pune

Survey No. 52/1/1, Plot No. 16,

1st Floor, Aggarwal Arcade,

Chandan Nagar, Pune – 411

014, Maharashtra

July 11, 2007 June 30, 2022

Hyderabad

Flat No. 301, Esteem House, D.

No. 6-3-456/20, Dwarkapuri

Colony, Punja Gutta,

Hyderabad - 500 004, Andhra

Pradesh

September 26, 2007 September 30, 2012

Lucknow

2/174-B, Vijay Khand, Gomti

Nagar, Lucknow – 226 010,

Uttar Pradesh

January 18, 2008 October 14, 2010

Delhi

C – 24, Malviya Nagar, New

Delhi – 110 017

May 10, 2008 April 30, 2011

Bhopal

227, Balbir Bhawan (Behind

Sargam Cinema), Zone II, MP

Nagar, Bhopal – 462 011,

Madhya Pradesh

November 3, 2006 November 5, 2010

Bengaluru

1st Floor, House No. 468, 39th C

Cross, 10th Main Road, 5th

Block, Jayanagar Bengaluru,

560 041, Karnataka

October 31, 2007 November 30, 2010

Cochin

Tharikkakara, North Village,

Re. Sy. No. 511/15,

Kalamassery Municipality ward

no. XXV, Door No. 185, Kerala

June 5, 2009 May 30, 2012

Chennai Adwave Rower, T. Nagar, 9,

South Boag Road, Chennai –

600 017, Tamil Nadu

Informal arrangement with Mahindra & Mahindra with

M&M raising quarterly bills of approximately Rs. 1.06 lacs

B. Workshop

Workshop


Panchkula

148 – 149, Industrial Area,

Phase I, Panchkula – 134

109, Haryana

May 30, 2001 May 31, 2016

60

C. Stockyards

Stockyard


Cochin

SY. No. 196/1.7 in block 37 of

Aluva, West Village, Aluva

Taluk, Ernakulam

June 30, 2009 May 31, 2012

Chennai

No. 40/2B and 40/2C,

Sriperumbdur Taluk,

Kancheepuram District, Tamil

Nadu

March 1, 2008 February 28, 2011

Lucknow Plot No. 30A, New Vasundhara

Society, Govindpuram, Village

Mohinuddinpur, Sitapur Road,

Lucknow

November 19, 2009 October 14, 2010

Siliguri

Shivnagar, Darjeeling More,

Siliguri, West Bengal

October 31, 2008 March 31, 2011

Vijayawada

Survey No. 365/1, Sri

Ramachandra Nagar,

Vijayawada – 520 008, Andhra

Pradesh

April 4, 2008 March 31, 2010

Pune

Gat No. 399, Pune Nagar Road,

Lonikand, Pune – 412 216,

Maharashtra

February 24, 2006 September 30, 2011

Hubli

Survey No. 237/4/B, Gokul

Village, Tarihal Industrial

Estate Road, Hubli, Karnataka

May 1, 2007 April 30, 2010

Mohali Plot No. D-157, Phase VIII,

Mohali, Punjab

June 10, 2009 June 9, 2010

Ranchi Plot No. 164, Ratu Road,

Kamre, Ranchi Jharkhand

July 11, 2009 June 30, 2012

D. Guest house

Guest house


New Delhi

C – 24, Malviya Nagar, New

Delhi – 110 017

July 31, 2007 July 31, 2010

Chandigarh

House No. 1131, Sector 33 C,

Chandigarh

January 15, 2009 December 31, 2014

Panchkula

House No. 165, Sector 6,

Panchkula

June 26, 2006 June 30, 2011

Panchkula H. No. 147, Sector 2, Panchkula,

Haryana

December 31, 2009 December 31, 2018

Ropar

House No. 283, Zail Singh Nagar,

Ropar, Punjab

April 15, 2009 April 14, 2010

61

HISTORY AND CERTAIN CORPORATE MATTERS

Incorporation

Our Company was initially incorporated as Swaraj Vehicles Limited on July 26, 1983 as a public limited

company under the Companies Act. The name of our Company was subsequently changed to its present name

‗Swaraj Mazda Limited‘ and a fresh certificate of incorporation consequent to the change of name was

granted to our Company on November 27, 1984 by the RoC.

Changes in Shareholding

Our Company was initially promoted and incorporated as Swaraj Vehicles Limited by Punjab State Industrial

Development Corporation Limited (―PSIDC‖) and PTL. PSIDC had held a letter of intent for the

manufacture of LCVs and our Company was incorporated to implement the said light commercial vehicles

project. PSIDC and PTL then held 60% and 40% of the issued and paid up equity capital of our Company,

respectively.

Our Company entered into a joint venture agreement dated October 5, 1984 with PTL, Mazda and Sumitomo

for setting up facilities for the manufacture and sale of certain models of the Mazda vehicles (―Agreement‖).

Pursuant to the Agreement, our Company entered into a technical transfer agreement of the same date with

Mazda. Upon the Agreement coming into effect, our Company was required to change its name to Swaraj

Mazda Limited. Under the terms of the Agreement, PTL was required to subscribe to 1,950,000 equity shares

of our Company amounting to 29% of the issued and paid-up capital of our Company, Mazda was required to

subscribe to 780,000 equity shares of our Company amounting to 15.6% of the issued and paid-up capital of

our Company and Sumitomo was required to subscribe to 520,000 equity shares of our Company amounting

to 10.4% of the issued and paid-up capital of our Company.

In 2003, PSIDC entered into a share purchase agreement with PTC, CDC-PTL Holdings Limited (―CDC-

PTL‖) and CDC Financial Services (Mauritius) Limited (―CDC-FS‖), pursuant to which CDC-PTL Holdings

Limited and CDC Financial Services (Mauritius) Limited acquired the entire shareholding of PSIDC in PTL,

constituting 23.49% of the total voting capital of PTL. As required under the Takeover code, CDC-PTL and

CDC-FS made an open offer to purchase up to 2,097,340 fully paid up Equity Shares of our Company

representing 20% of the total voting capital of our Company. Pursuant to the open offer, CDC-PTL acquired

43,206 Equity Shares of our Company.

Further, in 2004, pursuant to a voluntary open offer CDC-PTL and CDC-FS acquired 811,258 Equity Shares

of our Company.

In 2005, Sumitomo acquired 1,573,000 equity shares of PTL representing 15% of its shareholding in our

Company and further acquired from Mazda its entire equity shareholding of 1,638,000 shares in our

Company. Subsequently, in 2009, Sumitomo acquired the remaining shareholding of PTL in our Company

and increased its shareholding in our Company to 53.52%.

Changes in Registered Office

At the time of incorporation our registered office was situated at Phase IV, SAS Nagar, Mohali – 160 055. On

September 30, 1993, our Registered Office was shifted to village Asron, Distt. Nawanshahar – 144 533,

Punjab, where it is presently located.

Major Events

Year Event

1984 Our Company entered into a Joint Venture Agreement with PTL, Mazda & Sumitomo.

1986 Our Company commenced commercial operations.

1994 Our Company was declared a sick company under Sick Industrial Companies (Special

Provisions) Act, 1985 (―SICA‖).

62

Year Event

1995 The scheme for the revival / rehabilitation of our Company was approved by the BIFR.

1997 Our Company ceased to be a sick industrial company under SICA on the basis of positive

net worth.

1999 Bharat Stage I emission norms complied with.

2001 The cumulative sales of our vehicles crossed 50,000 vehicles.

2005 Sumitomo purchases 15% of the equity share capital of our Company from PTL.

Sumitomo purchases 15.6% of the equity share capital of our Company from

Mazda.

2006 Our Company obtained permission from the government for setting up new

manufacturing facilities at the existing site.

Our Company entered into technical assistance agreements with Isuzu.

Aggregate vehicles sale crossed 1, 00,000 in August.

2007 We commenced the trial production of our luxury buses.

2008 We launched our ultra luxury buses in July.

2009 Sumitomo raises its shareholding in our Company to 53.52% by purchasing the entire

equity holding of PTL in our Company.

Listing

The Equity Shares of the Company were initially listed on the BSE in the year 1985 pursuant to an initial

public offering by the Company. Subsequently, the Equity Shares of our Company were listed on the NSE in

the year 2003. The Equity Shares of our Company are presently listed on the Stock Exchanges.

The Equity Shares of our Company were also listed on the Ludhiana Stock Exchange and the Delhi Stock

Exchange but were subsequently delisted in 2004. The Company opted for voluntary delisting under Clause

5.2 of the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003 (the ―Delisting

Guidelines‖), which provides for companies that continue to have their securities listed on any stock

exchange(s) having nationwide trading terminals, to opt for voluntary delisting from any stock exchange in

India. The Company decided to opt for voluntary delisting from the Ludhiana Stock Exchange and the Delhi

Stock Exchange as it was of the view that (a) its securities were already listed on the BSE and the NSE, which

provided its members with an extensive nationwide network for trading of their securities, (b) the bulk of the

dealings by the Company took place on the BSE and the NSE, and (c) there was no trading in the Company‘s

securities on the Ludhiana Stock Exchange and the Delhi Stock Exchange. Therefore, as there was no

significant tangible benefit to the members of the Company from continued listing on the Ludhiana Stock

Exchange and the Delhi Stock Exchange, the Company decided to opt for voluntary delisting. Approval for

the delisting of the Company securities was received from the Ludhiana Stock Exchange and the Delhi Stock

Exchange pursuant to letters dated June 16, 2004 and March 31, 2004, respectively.

The objects of our Company are:

The main objects of our Company as contained in our Memorandum of Association are as follows:

1. To carry on all or any of our business of manufacturers, assemblers, producers, importers, exporters,

buyers, sellers, stockists, suppliers, distributors, wholesale/retail dealers, repairers and lessors, of

mobile vehicles for transport of men and material, self propelled or otherwise, including commercial

vehicles, buses, motor cars, jeeps, trailers and conveyances of all kinds and description suitable for use

on land and their motive power-units, transmissions, propulsion systems, chassis, bodies and all

assemblies, components, accessories, tools thereof.

2. To operate and deal in garages, warehouse and other facilities, spare-parts, fuels and lubricants for such

mobile vehicles, their energy-sources and the good carried therein.

3. To design, assemble, manufacture or otherwise deal in equipments and instruments concerning all types

of mobile vehicles.

63

Change in our Memorandum of Association

Date Particulars

July 2, 2009 The authorized share capital of the Company was increased from 2,000 lacs (divided

into 20,000,000 Equity Shares) to Rs. 4,000 lacs (divided into 40,000,000 Equity

Shares).

Board for Industrial and Financial Reconstruction (“BIFR”)

During 1991-93, the rupee underwent a sizeable devaluation and as a result there was a substantial increase in

the cost of imported raw materials used in the production our vehicles. Consequently, our Company‘s

operations were adversely affected and we were declared a sick company by the BIFR on April 5, 1994 under

Section 3 (1)(o) of the SICA. Our Company designed a scheme for rehabilitation which was sanctioned by

the BIFR on September 27, 1995. The scheme focussed on the means to reduce the cost of imported materials

through faster indigenization and reduction of other items of expenditure and improvement in productivity.

Pursuant to the said scheme, our Company ceased to be a sick company in 1997.

Subsidiaries

Our Company currently does not have any subsidiary.

Material Agreements

Detailed below are summaries of key agreements entered into by our Company:

Technical assistance agreements between Isuzu and our Company

Our Company has entered into two (2) technical assistance agreements dated June 30, 2006 and December

25, 2006 with Isuzu, pursuant to which Isuzu has granted our Company a license to use certain technical

information and to obtain certain assistance from them for the manufacture and assembly of specified

vehicles and components for certain models. Our Company is required to pay a lump sum royalty in three (3)

instalments to Isuzu for access to this technical information and assistance. Set forth below are the salient

features of both the technical assistance agreements:

Technical information: Isuzu is required to furnish to our Company, the current technical information to

enable our Company to manufacture or assemble the Licensed Vehicles and Licensed Component in the form

used by Isuzu in its own manufacture and assembly of the specified vehicles and components.

―Licensed Vehicle‖ means bus chassis assembled or manufactured by our Company utilizing all or any

portion of the technical information furnished by Isuzu to our Company.

―Licensed Component‖ means any components or parts that are installed on or used in the servicing and

maintenance of any licensed vehicle manufactured by our Company utilizing all or any portion of the

technical information.

Technical assistance: Under the technical assistance agreements, Isuzu is required to provide appropriate

technical assistance in relation to the assembly and manufacturing processes of the Licensed Vehicles and

Licensed Components.

Term: The technical and assistance agreements shall remain in effect until December 31, 2012. They shall be

automatically renewed for a period of one (1) year, unless the other party gives a written notice not to renew

the technical and assistance agreements.

64

OUR MANAGEMENT

Board of Directors

Under our Articles of Association we cannot have less than three (3) Directors or more than 12 Directors,

unless otherwise determined by a general meeting. We currently have 11 Directors and two (2) alternate

directors on our Board.

The following table sets forth details regarding our Board as on the date of filing of this Letter of Offer.

Name, Designation, Occupation, DIN

and Term

Address Nationality Age Other Directorships

Mr. S.K. Tuteja

Non-Executive, Independent Chairman

S/o Late Shri Lekh Raj Tuteja

Occupation: Retired Government

Employee

DIN: 00594076

Term: Liable to retire by rotation

S-307, Second

Floor,

Panchsheel

Park, New Delhi

Indian 64 Indian Companies

1. Small Industries

Development Bank of India;

2. HMT Limited;

3. National Bulk Handling

Corporation;

4. India Energy Exchange

Limited;

5. Axis Private Equity Limited;

6. Mundra Port and Special

Economic Zone Limited;

7. Adani Logistics Limited;

8. Adani Power Limited;

9. Abhishek Industries Limited;

10. Shree Renuka Infraprojects

Limited;

11. Shri Renuka Sugars Limited;

12. Sohrab Spinning Limited;

13. Precision Pipes and Profiles

Company Limited;

14. SVIL Mines Limited;

15. Tiger Cold Chain Private

Limited;

16. Pegasus Assets

Reconstruction (P) Limited;

17. A2Z Maintenance &

Engineering Services (P)

Limited;

18. A2Z Infrastructure Private

Limited; and

19. A2Z Powercom Private

Limited.

Foreign Companies

Nil

Mr. Yash Mahajan

Managing Director

S/o Late Shri Amar Nath Mahajan

Occupation: Service

DIN: 00066570

. # 3. Sector 7,

Panchkula,

Haryana


1. Pidilite Industries Limited;

and

2. Aptech Limited.

65


and Term


Term: For a period of five years from

June 1, 2006

Mr. Y. Watanabe

Whole-time Director

S/o Mr. Toyoji Watanabe

Occupation: Service

DIN: 00795194

Term: For a period of five (5) years

from July 1, 2009

165, sector 6,

Panchkula,

Haryana

Japanese 58 Nil

Mr. Harkirat Singh

Independent Director

S/o Mr. Tara Singh

Occupation: Retired

DIN: 00120756


No. 86, Phase II,

Mohali, Punjab

Indian 72 Nil

Mr. Steven Enderby

Non-Executive Director

S/o Mr. David John Enderby

Occupation: Service

DIN: 00171101


Actis Global

Services Private

Limited

The Mira

Corporate Suites

Block – D,

Ground Floor

1 & 2 Ishwar

Nagar,

New Delhi

British 47 Indian Companies

1. Halonix Limited;

2. AVTEC Limited;

3. Actis Advisers Private

Limited;

4. Tema India Limited; and

5. MFE India Limited.

Foreign Companies

1. Specialist Gases, Sri Lanka;

2. Ceylon Oxygen, Sri Lanka;

3. MFE Formwork

Technology, Malaysia; and

4. John Keells Holdings, Sri

Lanka.

Mr. A.K. Thakur


S/o Mr. Abhaya Pada Thakur

Occupation: Chartered Accountant

DIN: 00031778


Flat No. 402,

Nav Durga,

Govandi Station

Road, Deonar,

Chembur,

Mumbai


1. Rama Industries Limited;

2. Peerless Securities

Limited; and

3. SVIL Mines Limited.

Foreign Companies

Nil

66


and Term


Mr. P.K. Nanda


S/o Late Mr. Mohan Lal Nanda

Occupation: Business consultant

DIN: 00213613


4, Neville Court,

Grove End

Road, St. Johns

Wood, London,

U.K.

Indian

76 Indian Companies

1. JMG Corporation Limited;

2. GE Capital Investments

Private Limited; and

3. Vascular Concepts

Limited;

Foreign Companies

1. Omega Laser Systems

Limited; and

2. Vascular Concepts

Limited.

Mr. Pankaj Bajaj


S/o Mr. A.D. Bajaj

Occupation: Service

DIN: 00337925


AB 45,

Mianwali Nagar,

Rohtak Road,

Paschim Vihar,

New Delhi

Indian 37

Nil

Mr. M. Tabuchi


S/o Mr. Takeshi Tabuchi

Occupation: Service

DIN: 02620335


2-34-11,

Midorigaoka,

Yachiyo-shi

Chiba, Japan

Japanese 52 Indian companies

Nil

Foreign companies

1. Sumisho Motor Finance

Corporation;

2. SC-ABEAM Automotive

Consulting;

3. Sumitomo Mitsui Auto

Service Company, Limited;

and

4. Kiriu Corporation.

Mr. H. Yamaguchi


S/o Late Mr. Hiroko Yamaguchi

Occupation: Service

DIN: 02220950


# 74, Friends

Colony, New

Delhi

Japanese 54 Indian companies

1. Sumitomo Corporation

India Private Limited;

2. J.J. Impex (Delhi) Private

Limited; and

3. NKC Conveyor India

Private Limited.

Foreign companies

Nil

Mr. T. Hashimoto


S/o Mr. Kiichi Hashimoto

1-13-6,

Nishiogi-kita,

Suginami-ku,

Tokyo, Japan

Japanese 50

Nil

67


and Term


Occupation: Service

DIN: 00795276


Mr. Tatsuo Kato

Alternate Director to Mr. M. Tabuchi

S/o Mr. Takeshi Kato

Occupation: Service

DIN: 01785885


78, Jor Bagh,

New Delhi- 110

033

Japanese 48 Indian Companies

1. SumitomoCorporation

India Private Limited; and


Limited.

Foreign Companies

Nil

Mr. Taro Nanko

Alternate Director to Mr. T. Hashimoto

S/o Mr. Shinsuke Nanko

Occupation: Service

DIN: 01879475


C 2/8, Vasant

Vihar, New

Delhi-110048

Japanese 42 Indian Companies

1. Denso India Limited; and


Limited.

Foreign Companies

Nil

None of our Directors are related to each other.

Profiles of our Directors

Mr. S.K. Tuteja is our non-executive Chairman. He holds a master‘s degree in commerce from Delhi

University. Mr. Tuteja joined the Indian Administrative Services (IAS) in 1968 and retired from the IAS in

2005 as Secretary, Food and Public Distribution, Government of India. Mr. Tuteja‘s service career with the

Government in Punjab and at the Centre covered key assignments in various government departments. He

was the Chairman of the Punjab State Electricity Board from July 1997 to December 1998, the Chairman of

the Central Warehousing Corporation from July 2005 to January 2008 and the Chairman of the Pay

Commission of the Government of Punjab from November 2006 to April 2009. Mr. Tuteja has over 40 years

of experience in diverse fields which include district administration, education, industry, trade, commerce,

finance and company matters. He joined our Board on June 20, 1998 and was appointed as a non-executive

Independent Chairman of the Company on June 29, 2005.

Mr. Yash Mahajan is our Managing Director. He holds a bachelor‘s degree in commerce from Punjab

University. Mr. Mahajan is a UK trained and qualified Chartered Accountant and became a fellow member of

the Institute of Chartered Accountants (England and Wales) in 1963. He also became an associate member of

the Institute of Chartered Accountants of India in the year 1967. Mr. Mahajan started his professional career

with Balmer Lawrie and Company Limited in 1963 as a member of the executive staff, designated as the

Accounts Manager and joined Union Carbide India Limited in 1971 as Manager on Special Assignment. In

1973, he joined Punjab Tractors Limited as director finance and was appointed joint managing director in

1978. He was appointed managing director in 1981, elevated to the position of vice-chariman and managing

director and group chief executive in 1998, a position he held until May, 2006. He received the gold award of

68

the Institute of Marketing and Management (―IMM‖), for the 1979 IMM-Toshiba Marketing Man of the Year

for the organized sector. He was also selected in the year 2000 as one of the thirty outstanding entrepreneurs

for the Ernst and Young Entrepreneur of the Year Award. Mr. Mahajan joined our Company as one of the

first three directors on August 25, 1983 and was appointed Managing Director in November, 1983 and was

re-appointed as managing director on May 31, 2006. Mr. Mahajan has over 45 years of experience covering

all facets of corporate operations which include accounts, costing, finance, legal and secretarial, general

administration, industrial relations and human resource development, material services, marketing, joint

ventures, business and project management.

Mr. Y. Watanabe is our whole-time Director. He holds a bachelor‘s degree in foreign study from Sophia

University, Japan. Mr. Watanabe joined Sumitomo Corporation in 1975 and since then has held several

overseas assignments in Kenya, Spain and France. Mr. Watanabe, who joined our Board as non-executive

director in September, 2005 and was a key member of Sumitomo Corporation‘s core team for the Indian

project. He was appointed a whole-time Director of the Company with effect from July 1, 2009. Mr.

Watanabe has several years of experience in overseas marketing and management functions.

Mr. Harkirat Singh is an independent director on our Board. He holds a master‘s degree in economics from

Punjab University. Mr. Singh joined the Life Insurance Corporation of India (LIC) in April, 1961, held

various positions in LIC such as divisional manager, regional manager and the zonal manager and retired as

an executive director in 1995 after 34 years of service. He has attended advance courses in Finance and

Management in UK and Japan including a three month training course at the Royal Institute of Public

Administration in the year 1980. He has served on the boards of Mukund Steel, Shree Cements and the State

Financial Corporations of Uttar Pradesh, Jammu & Kashmir, Punjab and Himachal Pradesh. Mr. Singh has

over 48 years of experience in insurance, finance, business management and corporate affairs. He joined our

Board on January 10, 1990.

Mr. Steven Enderby is a non executive director on our Board. He holds a degree in economics from Queens

University, Belfast and is a qualified chartered accountant. Mr. Enderby joined Actis Advisers Private

Limited in 1990 and is currently a partner based in Delhi. He has over 18 years of experience. He joined our

Board on January 31, 2006.

Mr. A.K. Thakur is an independent director on our Board. He holds a degree in commerce from Calcutta

University and is a qualified chartered accountant. He joined Unit Trust of India in 1978 and retired as an

executive director after 23 years of service. Mr. Thakur has over 40 years of experience in areas such as

accounts, finance, investment and corporate affairs. He is currently a practicing chartered accountant and is

also an advisor to Ray and Ray Consultants Private Limited. He joined our Board on January 31, 2006.

Mr. P.K. Nanda is an independent director on our Board. He holds a degree in commerce from Kanpur

University and is a qualified chartered accountant. Mr. Nanda has held several key managerial positions with

multi national companies, both in India and abroad such as Remington Rand, Philips Electronics India and

Metal Box India. He was appointed as the chairman and managing director of Metal Box India in 1970. He

was also the founder president of the Confederation of Indian Industry (CII) and has also served as a member

of committees of Confederation of British Industry and United Kingdom South Africa Trade Association. He

has also been a guest lecturer at the International Management Institute, Geneva. He is also a business

consultant focusing on international business strategy. Mr. Nanda has over 50 years of experience in the areas

such as finance, corporate affairs, international trade and commerce, business strategy. He joined our Board

on July 29, 2006.

Mr. Pankaj Bajaj is a non-executive director on our Board. He holds a Bachelor‘s degree in law

from Hemvati Nandan Bahuguna Garhwal University, Uttarakhand (1996) and pursued an executive

management program from University of Maryland in the year 2000. Mr. Bajaj is a fellow member of the

Institute of Chartered Accountants of India (FCA), associate member of the Institute of Company Secretaries

of India (ACS) and associate member of the Institute of Cost and Works Accountants of India (AICWA). He

started his career in 1995 with Deloitte Haskins & Sells. He joined Sumitomo Corporation India Private

Limited in 1997 as company secretary. He currently holds the post of corporate officer and company

secretary and handles diversified corporate department responsibilities for the company which operates across

69

a spectrum of sectors including automobiles, chemicals and electronics. Mr. Bajaj has over 14 years of

experience in areas such as corporate planning, legal and secretarial matters, corporate finance, risk

management, taxation and internal controls. He joined our Board on July 29, 2006.

Mr. M. Tabuchi is a non-executive director on our Board. He holds a graduate degree in economics from

Kyoto University, Japan in 1980. He joined Sumitomo Corporation in 1980 and over the years, Mr. Tabuchi

has worked in many departments for Sumitomo Corporation such as railway products, forging and casting,

transportation equipment and ship, aerospace and transportation systems. He currently holds the post of

general manager, automotive division 1 of Sumitomo Corporation in Tokyo, Japan. Mr. Tabuchi has over 28

years of experience in the automobile and manufacturing industry. He joined our Board on May 28, 2009.

Mr. H. Yamaguchi is a non-executive director on our Board. He holds a graduate degree in economics from

Kobe University, Japan (1977). Mr. Yamaguchi joined Sumitomo Corporation in 1977. He has also worked

for Sumitomo Corporation in Myanmar, Singapore and Vietnam and was appointed the managing director of

Thang Long Industrial Park Company (Vietnam) in 1977. He is currently the chairman and managing director

of Sumitomo Corporation India Private Limited. Mr. Yamaguchi has over 30 years of experience in areas

such as motor vehicles, industrial parks, logistics and insurance. He joined our Board on May 28, 2009.

Mr. T. Hashimoto is a non-executive director on our Board. He holds a graduate degree in arts and science

from University of Tokyo in 1982. He has also pursued the management development programme from

Columbia University, New York and Harvard University, Boston in 1993. He joined Sumitomo Corporation

in 1982 and had worked in the motor vehicles department and automotive components and equipment

section. In 1997, he was appointed as the manager of the automotive components and equipment section of

Sumitomo Corporation of America. He currently holds the post of Assistant to General Manager, Automotive

Division 2 of Sumitomo Corporation in Tokyo. Mr. Hashimoto has over 26 years of experience in the

automobile industry. He joined our Board on May 28, 2009.

Mr. Tatsuo Kato is the alternate director to Mr. M. Tabuchi. He holds a graduate degree in economics from

Kobe University. He joined Sumitomo Corporation in 1985. He is currently on the board of directors of

Sumitomo Corporation India Private Limited. He has over 24 years of experience in the automobile industry.

He joined our Board on September 4, 2009.

Mr. Taro Nanko is the alternate director to Mr. T. Hashimoto. He holds a graduate degree in law from

Waseda University. He joined Sumitomo Corporation in 1990 and currently holds the position of senior

general manager, (automotive department), Sumitomo Corporation, India. He has over 19 years of experience

in the automobile industry. He joined our Board on September 4, 2009.

Shareholding of the Directors of the Company

The following table details the shareholding of the Directors in their personal capacity as on the date of this

Letter of Offer.

Name of Director(s) Number of

Equity Shares

(Pre-Issue)

Mr. Yash Mahajan

17, 307*

* Includes the Equity Shares held by the relatives.

Except as stated above, none of the other Directors hold any Equity Shares in the Company.

Interests of our Directors

All our Directors may be deemed to be interested to the extent of the fees payable to them for attending

meetings of the Board or a committee thereof, and to the extent of reimbursement of expenses payable to

them.

70

Our Directors have not entered into any arrangement or understanding with major shareholders, customers,

suppliers or other parties, pursuant to which they have been appointed as the Director of our Company.

Our Directors do not have any interest in any Objects of the Issue for which the Issue Proceeds are proposed

to be utilized.

All our Directors may be interested in the Equity Shares already held by them or that may be allotted to them

pursuant to the Issue and / or that may be allotted to companies, firms and trusts in which they are directors,

members, partners or trustees, as the case may be. Except as disclosed below, none of our Directors have any

interest in any property acquired or proposed to be acquired by our Company in the last two (2) years.

Our Company had entered into a 15 year lease agreement dated January 13, 1999, with Mr. R. L. Goyal, Mr.

Ashok Kumar and Mr. Ashish for our corporate office located at 204-205, Sector 34-A, Chandigarh. Mr.

Ashish, one of the co-owners of the premises, is the son of Mr. S.K. Tuteja.

The Director(s) may have further interest to the extent of any dividend payable to them and other distributions

in respect of the Equity Shares

Our Directors have not entered into any service contracts with our Company, pursuant to which they would

be entitled to any benefits upon the termination of their service.

F 1

SECTION V – FINANCIAL INFORMATION

AUDITORS’ REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR

ENDED MARCH 31, 2009

AUDITOR'S REPORT

TO THE MEMBERS OF SWARAJ MAZDA LIMITED

1. We have audited the attached Balance Sheet of Swaraj Mazda Limited, as at March 31, 2009, and the related Profit

and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed

under reference to this report. These financial statements are the responsibility of the company‘s management. Our

responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are

free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant

estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our

audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor‘s Report) Order, 2003, as amended by the Companies (Auditor‘s Report)

(Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of

‗The Companies Act, 1956‘ of India (the ‗Act‘) and on the basis of such checks of the books and records of the

company as we considered appropriate and according to the information and explanations given to us, we give in the

Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were

necessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from

our examination of those books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement

with the books of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report

comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors, and taken on record by the Board of Directors,

none of the directors is disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g)

of sub-section (1) of Section 274 of the Act;

(f) Attention is invited to non provision of Rs.488 lacs in respect of MODVAT credit receivable as explained in Note

2 on Schedule N. Had the said amount been provided, the net current assets and profit for the year would have

been lower by the corresponding amount.

(g) In our opinion and to the best of our information and according to the explanations given to us, the said financial

statements together with the notes thereon and attached thereto give in the prescribed manner the information

required by the Act and subject to our comments in para (f) above, give a true and fair view in conformity with

the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the company as at March 31, 2009;

ii. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

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

V. Nijhawan

Partner

Membership No: F87228


Place: New Delhi PRICE WATERHOUSE

Date: May 28, 2009 Chartered Accountants

F 2

ANNEXURE TO AUDITORS‟ REPORT

[Referred to in paragraph 3 of the Auditors‘ Report of even date to the members of Swaraj Mazda Limited on the financial

statements for the year ended March 31, 2009]

1. (a) The company is maintaining proper records showing full particulars including quantitative details and situation of

fixed assets.

(b) The fixed assets are physically verified by the management according to a phased programme designed to cover

all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the

company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically

verified by the management during the year and no material discrepancies between the book records and the

physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has

not been disposed off by the company during the year.

2. (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the

year. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our

opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable

and adequate in relation to the size of the company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper

records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records

were not material.

3. (a) The company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the

register maintained under Section 301 of the Act.

(b) The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the

register maintained under Section 301 of the Act.

4. In our opinion and according to the information and explanations given to us, having regard to the explanation

that certain items purchased are of special nature for which suitable alternative sources do not exist for obtaining

comparative quotations, there is an adequate internal control system commensurate with the size of the company

and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. Further, on the

basis of our examination of the books and records of the company, and according to the information and

explanations given to us, we have neither come across nor have been informed of any continuing failure to correct

major weaknesses in the aforesaid internal control system.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or

arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained

under that section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance

of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during

the year have been made at prices which are reasonable having regard to the prevailing market prices at the

relevant time.

6. The company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the

Act and the rules framed there under.

7. In our opinion, the company has an internal audit system commensurate with its size and nature of its business.

8. We have broadly reviewed the books of account maintained by the company in respect of products where,

pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been

prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the

F 3

prescribed accounts and records have been made and maintained. We have not, however, made a detailed

examination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the company examined by us, in our

opinion, the company is generally regular in depositing the undisputed statutory dues including provident fund,

investor education and protection fund, employees‘ state insurance, income-tax, sales-tax, value added tax, wealth

tax, service tax, customs duty, excise duty, cess and other material statutory dues as applicable with the

appropriate authorities.

(b) According to the information and explanations given to us and the records of the company examined by us, the

particulars of dues of income-tax, sales-tax, value added tax, wealth tax, service tax, customs duty, excise duty

and cess as at March 31, 2009 which have not been deposited on account of a dispute are stated in Note 1(a) on

Schedule N.

10. The company has no accumulated losses as at March 31, 2009 and it has not incurred any cash losses in the

financial year ended on that date or in the immediately preceding financial year.

11. According to the records of the company examined by us and the information and explanation given to us, the

company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the

balance sheet date.

12. The company has not granted any loans and advances on the basis of security by way of pledge of shares,

debentures and other securities.

13. The provisions of any special statute applicable to chit fund /nidhi /mutual benefit fund/ societies are not

applicable to the company.

14. In our opinion, the company is not a dealer or trader in shares, securities, debentures and other investments.

15. In our opinion, and according to the information and explanations given to us, the company has not given any

guarantee for loans taken by others from banks or financial institutions during the year.

16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans

have been applied for the purposes for which they were obtained.

17. On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the

information and explanations given to us, there are no funds raised on a short-term basis which have been used for

long-term investment.

18. The company has not made any preferential allotment of shares to parties and companies covered in the register

maintained under Section 301 of the Act during the year.

19. The company has not issued any debentures during the year and there are no debentures outstanding as at the year

end.

20. The company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the company, carried out in accordance with the

generally accepted auditing practices in India, and according to the information and explanations given to us, we

have neither come across any instance of fraud on or by the company, noticed or reported during the year, nor

have we been informed of such case by the management.

V. Nijhawan

Partner

Membership No.: F87228


Place: New Delhi Price Waterhouse

Date: May 28, 2009 Chartered Accountants

F 4

BALANCE SHEET AS AT 31ST MARCH, 2009 (Rs. in lacs)

As at As at

Schedule 31st Mar.2009 31st Mar.2008

SOURCES OF FUNDS

Shareholders' Funds

Share Capital A 1,049.38 1,049.38

Reserves & Surplus B 8,603.40 8,308.67

9,652.78 9,358.05

Loan Funds

Secured Loans C 15,128.69 1,356.87

Unsecured Loans D 6,900.00 12,900.00

31,681.47 23,614.92


Fixed Assets E

Gross Block 13,499.46 4,863.88


Net Block 9,945.54 1,872.76

Capital Work-in-Progress 2,839.72 8,090.59

Capital Spares - 3.21

Deferred Tax Assets (Net) F 279.96 164.96


Advances G

Inventories 14,929.19 12,349.80

Sundry Debtors 14,633.32 18,560.06




33,485.11 34,803.24

Less :

Current Liabilities and Provisions H


Provisions 1,519.86 2,034.58

14,868.86 21,319.84


31,681.47 23,614.92

Significant Accounting Policies M

Notes to Accounts N

This is the Balance Sheet referred

to in our report of even date. The Schedules referred to above form an integral part of the Balance Sheet.

For and on behalf of FOR AND ON BEHALF OF THE BOARD

PRICE WATERHOUSE


V.NIJHAWAN S.K.TUTEJA

Partner Chairman

M.No. F87228

GOPAL BANSAL YASH MAHAJAN

Sr. Vice President - Finance Managing Director

& Company Secretary

New Delhi, May 28, 2009 New Delhi, May 28, 2009

F 5

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2009

(Rs. in lacs)


Schedule 31st Mar.2009 31st Mar.2008

INCOME

Sales 59,983.81 75,882.81

(Refer Note 2 on Schedule M and 10(b) on Schedule N)

Less : Excise Duty 5,898.58 9,339.36


Other Operating Income I 610.01 598.75

Total 54,695.24 67,142.20

EXPENDITURE

Manufacturing and Other Expenses J 51,888.94 61,768.44

Finance Charges(Net) L 1,808.77 1,173.42

Depreciation / Amortisation E 583.92 330.07

Total 54,281.63 63,271.93

Profit for the year before Tax Expense 413.61 3,870.27

Tax expense/(Saving) (Refer Note 10 on Schedule M)

- Current Tax 41.22 1,380.00

- Deferred Tax (Refer Note 8 on Schedule N) (115.00) (90.00)

- Fringe Benefits Tax 49.85 60.00

- MAT Credit Entitlement (Refer Note 22 on Schedule N) (41.22) -

Profit for the year after Tax Expense 478.76 2,520.27

Balance brought forward from the

previous year 1,458.22 1,312.74


APPROPRIATIONS


Dividend Tax and Surcharge 26.73 184.03 98.02 674.79

General Reserve 25.00 1,700.00


1,936.98 3,833.01

Earning Per Share (Refer Note 7 on Schedule N )



Notes to Accounts N

This is the Profit & Loss Account

referred to in our report of even

date

The Schedules referred to above form an integral part of the Profit and Loss Account


PRICE WATERHOUSE


V.NIJHAWAN S.K.TUTEJA

Partner Chairman

M.No. F87228

GOPAL BANSAL YASH MAHAJAN

Sr. Vice President - Finance Managing Director

& Company Secretary


F 6

SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE A (Rs. in lacs)

As at As at

31stMar.2009 31st Mar.2008

SHARE CAPITAL

Authorised 2,00,00,000 Equity Shares ( Previous Year 2,00,00,000)

of Rs. 10/- each 2,000.00 2,000.00

Issued, Subscribed and Paid-up

1,04,86,700 * Equity Shares (Previous Year

1,04,86,700 of Rs. 10/- each fully paid up

1,048.67 1,048.67

Add: Forfeited Shares [Amount paid up on 13,300 0.71 0.71

Equity Shares (Previous Year 13,300) of Rs.10/- each ]

1,049.38 1,049.38

* Includes 100 Equity Shares (Previous Year 100) of Rs. 10/- each fully paid up and held by an NRI but not

allotted pending clearance from the Reserve Bank of India.

Of the above, 5,612,953 (Previous year 4,140,953) equity shares are held by Sumitomo Corporation, Japan the holding Company.

SCHEDULE B (Rs. in lacs)

As at As at

31stMar.2009 31st Mar.2008

RESERVES AND SURPLUS

Capital Reserve

15.00 15.00

(Refer Note 11 on Schedule M)

General Reserve

Balance brought forward

6,835.45 5,188.85

Less: Adjustment for change in Accounting Policies

- 53.40

(Refer Note 20 on Schedule N)

Add:Transferred from Profit & Loss Account

25.00 1,700.00

6,860.45 6,835.45

Profit and Loss Account

1,727.95 1,458.22

8,603.40 8,308.67

F 7


SCHEDULE C (Rs. in lacs)

As at As at

31st Mar.2009 31st Mar.2008

SECURED LOANS

From Banks

- Long Term Loan* 6,000.00 -

- Short Term Loan** 2,500.00 -

- Cash Credit** 6,628.69 1,356.87

15,128.69 1,356.87

Notes : * The loan is secured by subservient equitable mortgage / hypothecation charge over the entire fixed assets of

the Company. Repayable within one year Rs.2,000 lacs ( Previous year Rs. Nil).

** The limits sanctioned by the bankers are secured by a first charge by way of hypothecation of the Company's

Current Assets i.e Stocks, Bills Receivable, Book Debts and other movables of the Company and also by way of

a second mortgage and charge on the Company's immovable property. The said second charge is yet to be

created by the Company.

The Company had in an earlier year taken loans from Financial Institutions against first charge on its movable

and immovable property. The said loans have since been repaid. However, the charges in respect of these loans are in the process of being vacated.

SCHEDULE D (Rs. in lacs)

As at As at

31st Mar.2009 31st Mar.2008

UNSECURED LOANS

From Banks

- Long Term Loan* - 6,000.00

- Short Term Loan 6,900.00 6,900.00

6,900.00 12,900.00

* During the year, the Company has converted its unsecured long term loan into secured long term loan taken from bank.

Repayable within one year Rs. Nil (Previous year Rs. 6,000 lacs)

F 8

SCHEDULE FORMING PART OF THE ACCOUNTS

SCHEDULE E

FIXED ASSETS (Refer Notes 3, 4,12 and 14 on Schedule M )

(Rs. In lacs)

DESCRIPTION GROSS BLOCK DEPRECIATION / AMORTISATION NET BLOCK

As at Additions Adjustments As at As at For the Adjustments As at As at As at

01.04.2008 during 31.03.2009 01.04.2008 year 31.03.2009 31.03.2009 31.03.2008

the year

Tangible Assets

Freehold Land 48.74 - - 48.74 - - - -

48.74 48.74

Building 899.91 4,782.94 - 5,682.85 479.78 136.18 - 615.96

5,066.89 420.13

Plant & Machinery 2,499.10 2,951.31 - 5,450.41 1,648.74 242.48 - 1,891.22

3,559.19 850.36

Jigs and Fixtures 387.47 321.00 - 708.47 337.31 38.10 - 375.41

333.06 50.16

Furniture, Fixtures & 248.48 20.65 - 269.13 155.79 13.49 - 169.28

99.85 92.69

Office Equipments

Computers 234.04 84.84 10.28 308.60 166.49 51.45 10.28 207.66

100.94 67.55

Vehicles 546.14 222.83 10.84 758.13 203.01 83.62 10.84 275.79

482.34 343.13

Intangible Assets

Technical Know-How - 273.13 - 273.13 - 18.60 - 18.60

254.53 -

Total 4,863.88 8,656.70 21.12 13,499.46 2,991.12 583.92 21.12 3,553.92

9,945.54 1,872.76

Previous Year 4,590.58 274.55 1.25 4,863.88 2,662.30 330.07 1.25 2,991.12

1,872.76

F 9

CAPITAL WORK-IN-PROGRESS (CWIP)

Capital Advance - 88.97

Direct Capital Expenditure

2,289.62 6,024.72

Indirect expenditure pending allocation :

-Interest Cost 130.25 361.03

-Other expenditure 419.85 1,615.87

Total CWIP

2,839.72 8,090.59

Notes:

1. Indirect other expenditure pending allocation includes salary, power charges, travelling, foreign technician expenses, testing expenses,

& other administrative expenses and is net of amount recovered from sale [(net of excise duty Rs. 10.26 lacs (Previous year Rs. 13.23 lacs)] of

vehicle produced during test run Rs. 81.38 lacs (Previous year Rs. 81.57 lacs) .

2. Interest capitalised during the year Rs. 532.08 lacs (Previous year Rs. Nil) as per AS-16 notified under Section 211(3C) of the Companies Act,1956

F 10


SCHEDULE F (Rs. in lacs)

As at 31st Mar.2009 As at 31st Mar.2008

DEFERRED TAX (LIABILITIES ) / ASSETS

(Refer Note 10 on Schedule M & Note 8 on Schedule N)

Deferred Tax (Liability) / Assets

- At the beginning of the year 164.96 47.46

Add: Adjustment for change in Accounting Policies - 27.50


- Adjustment during the year 115.00 279.96 90.00 164.96

279.96 164.96

SCHEDULE G (Rs. in lacs)

As at 31st Mar.2009 As at 31st Mar.2008

CURRENT ASSETS, LOANS & ADVANCES

CURRENT ASSETS

INVENTORIES


Raw Materials & Components 6,446.43 5,552.63

Raw Material - Goods in Transit 638.17 700.52

Stores and Spare Parts 90.74 78.74

Loose Tools 32.56 49.09

Work in Progress * 1,562.45 1,289.93

Finished Goods

- Vehicles ** 5,655.03 4,258.86

- Spares 503.81 6,158.84 420.03 4,678.89

14,929.19 12,349.80

* - Includes Work in Progress during test run production amounting to Rs. 83.03 lacs (Previous year Rs. 651.58 lacs).

** - Includes Finished goods of vehicles produced during test run production amounting to Rs. 1132.16 lacs (Previous year Rs. 896.15 lacs) valued at material cost.

F 11

SUNDRY DEBTORS

(Considered good unless otherwise stated)

Debts outstanding for more than six months:

- Secured 12.00 10.14

- Unsecured [ Including Rs.605.40 lacs considered

doubtful (Previous Year Rs.503.12 lacs)] 953.49 761.92

Less: Provision for doubtful debts 605.40 348.09 503.12 258.80

360.09 268.94

Other debts:

- Secured 495.49 328.28

- Unsecured [ Including Rs. 26.60 lacs considered

doubtful (Previous Year Rs. 30.16 lacs)] 13,804.34 17,993.00

Less: Provision for doubtful debts 26.60 13,777.74 30.16 17,962.84

14,633.32 18,560.06

F 12


SCHEDULE G (Continued) (Rs. in lacs)

As at 31st Mar.2009 As at 31st Mar 2008

CASH AND BANK BALANCES

Cash in hand 29.58 27.27

[Includes Stamps in Hand Rs. 1.35 lacs

(Previous Year Rs. 1.35 lacs)]

Balances with Scheduled Banks on :

- Current Accounts 421.35 661.65

- Cash Credit Accounts - 9.06

- Unpaid /Unclaimed Dividend Accounts 122.97 114.03

- Fixed Deposits 126.99 671.31 102.27 887.01

(Pledged as Margin money with banks against

issue of letters of credit and bank guarantees)

700.89 914.28

OTHER CURRENT ASSETS

(Unsecured considered good unless otherwise stated)

Prepaid Expenses 10.24 13.33

Export Incentives Receivables 178.93 444.62


189.17 457.95

LOANS AND ADVANCES


Advances recoverable in cash or in kind or

for value to be received 1,745.19 1,708.76

[Including Rs 10.45 lacs considered doubtful

(Previous Year Rs.10.45 lacs)]

Less: Provision for doubtful advances 10.45 1,734.74 10.45 1,698.31

Security Deposits 138.57 130.97

[Including Rs. 0.36 lacs considered doubtful


Less: Provision for doubtful deposits 0.36 138.21 0.36 130.61

Balances with Excise Authorities 884.13 692.23


MAT Credit Entitlement (Refer Note 22 on Schedule N) 41.22 -

Advance Tax 234.24 -

(Net of Provision Rs. 7,099.48 lacs)

3,032.54 2,521.15

SCHEDULE H (Rs. in lacs)

As at As at

31st Mar.2009 31st Mar.2008

CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES

Acceptances * 1,767.87 5,104.64

Sundry Creditors 9,620.83 12,200.61


Customer Advances 992.81 640.22

Unclaimed Dividends 122.97 114.03

Other Liabilities 812.12 1,225.76

Interest accrued but not due on short term loan 32.40 -

13,349.00 19,285.26

PROVISIONS

Provision for Taxation (Net of Advance Tax Rs.7025.65 lacs ) - 32.61

Fringe Benefits Tax 7.20 15.00

Wealth Tax 0.65 0.60


F 13

Tax on Proposed Dividend 26.73 98.02

Retirement benefits 1,025.32 848.58


Warranty 302.66 463.00

(Refer Note 8 on Schedule M & Note 4(b) on Schedule N)

1,519.86 2,034.58

14,868.86 21,319.84

* Secured to the extent of Rs.781.61 lacs(Previous Year Rs. 1,740.37 lacs) against hypothecation of Raw Material & Components.

F 14


SCHEDULE I (Rs. in lacs)


31st Mar.2009 31st Mar.2008

OTHER OPERATING INCOME

Sale of Scrap 224.11 208.29

Export Incentives (Refer Note 2 on Schedule M) 196.00 241.94

Liabilities/Provisions no longer required written back 115.51 78.71

Royalty 61.25 63.33

Miscellaneous Income 13.14 6.48

610.01 598.75

SCHEDULE J (Rs. in lacs)


31st Mar.2009 31st Mar.2008

MANUFACTURING AND OTHER

EEXPENSES

Materials consumed

Raw materials and components consumed* 44,053.74 53,886.49

(Refer Note 11 on schedule N)

Movement of Finished goods and Work in Progress

Opening Stock

-Finished goods 4,678.89 3,914.77

-Work-in-Progress 1,289.93 605.54

5,968.82 4,520.31

Add : Purchases of finished goods 2,510.63 2,566.11

8,479.45 7,086.42

Less : Closing Stock

-Finished goods 6,158.84 4,678.89

-Work-in-Progress 1,562.45 1,289.93

7,721.29 758.16 5,968.82 1,117.60

Total Consumption 44,811.90 55,004.09

Less : Vehicles Capitalised 89.19 17.17

Add : Increase in excise duty on finished goods 34.23 36.78

Net Consumption 44,756.94 55,023.70

Operating, Administrative and Other

Expenses (as per Schedule K) 7,132.00 6,744.74

51,888.94 61,768.44

* Includes Exchange loss on Foreign Currency transactions Rs. 381.46 lacs (Previous Year Rs.179.89 lacs)

F 15


SCHEDULE K (Rs. in lacs)


31st Mar.2009 31st Mar.2008

OPERATING, ADMINISTRATIVE & OTHER EXPENSES

Salaries,Wages and Bonus 2,867.02 2,369.36

(Refer Note 6 on Schedule M and 19 & 20 on Schedule N)

Contribution to Provident and Other Funds 464.70 348.79

(Refer Note 6 on Schedule M & 20 on Schedule N)

Workmen and Staff Welfare 214.47 195.96

Consumption of Stores, Spares and Tools 114.81 136.64

(Refer Note 12 (b) on Schedule N)

Repair and Maintenance:

- Machinery 15.58 22.67

- Building 21.76 30.62

- Others 20.49 11.94

Power and Fuel 333.62 354.66

Rent 156.38 122.84


Rates and Taxes 63.03 23.05

Legal and Professional 138.09 118.22


Insurance 40.79 65.72

Printing, Stationery, Postage and Telephone 112.16 105.72

Travelling and Conveyance 489.05 382.77

Provision for Doubtful Debts 128.06 395.38

Marketing,Sales and Promotion Expenses 1,575.06 1,858.09


Royalty 1.80 -

Research and Development 106.30 93.20


Directors' Sitting Fee 11.40 9.90

Exchange loss / (gain) on Foreign Currency

Transactions (Refer Note 9 on Schedule M) 85.97 (17.09)

Miscellaneous expenses 171.96 132.25

7,132.50 6,760.69

Less : Expenditure transferred to Fixed Assets 0.50 15.95


7,132.00 6,744.74

SCHEDULE L (Rs. in lacs)


31st Mar.2009 31st Mar.2008

FINANCE CHARGES/INCOME

(Refer Note 12 on Schedule M )

Interest on Loans * 1,744.48 1,036.79

Interest Others 55.56 63.33

Bank Charges 101.69 95.91

1901.73 1196.03

LESS :

Interest on Fixed Deposits(Gross) 10.33 4.49

[Tax deducted at source Rs. 1.97 lacs


Interest on Excise Duty Refund 79.74 -

Interest on Income Tax refund - 12.37

Interest Others 2.89 92.96 5.75 22.61

1,808.77 1,173.42

* Net of interest recovered from customers Rs. Nil (Previous year Rs.10.11 lacs)

F 16


SCHEDULE M

SIGNIFICANT ACCOUNTING POLICIES

1) ACCOUNTING CONVENTION

The Financial Statements are prepared to comply in all material aspects with the applicable accounting principles in

India, the applicable Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 and the

relevant provisions of the Companies Act, 1956.

2) REVENUE RECOGNITION

Sales are recognized on transfer of significant risks and rewards to the customer that usually takes place on dispatch of

goods to the customer from the factory/ stockyard/ storage area. In case of export sales, revenue is recognized as on

the date of bill of lading, being the effective date of transfer of significant risks and rewards to the customer. Export

benefits are accounted for on accrual basis.

3) FIXED ASSETS / INTANGIBLE ASSETS

Fixed assets are recorded at cost of acquisition. Cost includes freight, duties, taxes and expenses incidental to

acquisition and installation of fixed assets. In case of self-constructed fixed assets, appropriate overheads including

salaries & wages are allocated to the cost of the asset. The Cost of Capital Spares is capitalized along with the cost of

the related Asset.

Intangible assets comprising of Technical know how, product designs, prototypes etc. either acquired or internally

developed are stated at cost. In case of internally generated intangible assets, appropriate overheads including salary

and wages are allocated to the cost of the asset.

Capital work in Progress includes cost of assets at site, direct and indirect expenditure incidental to construction,

advances made for acquisition of capital assets and interest on the funds deployed for construction.

4) DEPRECIATION / AMORTISATION

Depreciation on tangible fixed assets is provided on a Straight-Line Method on a monthly pro-rata basis at the rates

and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except on following assets which are

being depreciated at the rates mentioned below:

Motor cars and air conditioners - 25.00%

Computers - 33.33%

All assets costing up to Rs. 5,000/- are being fully depreciated in the year of purchase.

Capital spares are amortized in a systematic manner over a period not exceeding the useful life of the asset to which

they relate.

Intangible assets are amortised on a Straight-Line Method on a monthly pro-rata basis over a period of three to ten

years based on the estimated useful life of the assets.

5) INVENTORIES

Inventories are valued at lower of cost or net realizable value. Cost for the purpose of valuation is calculated on a

quarterly weighted average method. In respect of Finished Goods & Work-in-Progress, applicable manufacturing

overheads and other costs incurred in bringing the items of inventory to their present location and condition are also

included. Excise duty is included in finished goods valuation.

6) EMPLOYEE BENEFITS

(a) Post-employment benefit plans

i. Defined Contribution Plans - The Company contributes to the appropriate authorities its share of the Employees‘

Provident & Pension Fund and Employee State Insurance, which is charged to Profit and Loss Account every year.

The Company has created trust which has taken Master policy with the Life Insurance Corporation of India to cover its

liability towards employees‘ Superannuation. Annual contribution of Superannuation is charged to Profit and Loss

Account every year

F 17

ii. Defined Benefit Plans - The estimated liability towards Gratuity and Leave Encashment is being provided for based

on the actuarial valuation carried out at the year-end using Projected Unit Credit Method. Actuarial gains and losses

are recognized in full in the Profit and Loss Account for the period in which they occur.


liability towards employees‘ Gratuity. The Gratuity obligation recognized in the Balance Sheet represents the present

value of the defined benefit obligation as adjusted for unrecognized past service cost and as reduced by the fair value

of Gratuity Fund.

(b) Short term employment benefits

The undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered by

employees is recognized during the period when the employee renders the services. These benefits include

compensated absences and performance incentives.

7) RESEARCH & DEVELOPMENT

Revenue expenditure on Research and Development is charged to the Profit and Loss Account in the year in which it

is incurred. Capital expenditure on Research and Development is shown as an addition to fixed assets and depreciated

at the rate as applicable to respective assets.

8) WARRANTY EXPENSES

Provision for warranty is made in the accounts on the basis of past experience and technical evaluation in respect of

vehicles sold.

9) FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are recorded at exchange rates prevailing at the date of transaction. Exchange

differences, if any, arising on settlement of transactions are recognized as income or expense in the year in which they

arise.

At the Balance Sheet date all monetary assets and monetary liabilities denominated in foreign currency are reported at

the exchange rates prevailing at the Balance Sheet date and the resultant exchange difference, if any, is recognized in

the Profit & Loss Account.

10) TAXATION

Tax Expense, comprising current tax, deferred tax & fringe benefit tax is included in determining the net profit for the

year. The current tax & fringe benefit tax has been computed in accordance with relevant tax rates and tax laws.

Minimum Alternate Tax (MAT) paid in excess of normal income tax is recognised as asset (MAT Credit entitlement)

only to the extent, there is reasonable certainty that company shall be liable to pay tax as per the normal provisions of

the Income Tax Act,1961 in future.

In accordance with Accounting Standard – 22 ‗Accounting for Taxes on Income‘, notified under Section 211(3C) of

the Companies Act, 1956, the deferred tax for timing differences between the book and the tax profits for the year is

accounted for using the tax rates and laws that have been enacted or substantially enacted as on the Balance Sheet

date. However, in the year of transition, the accumulated deferred tax (liabilities) / assets at the beginning of the year

has been recognized with a corresponding charge to the General Reserve.

Deferred tax assets arising from temporary timing differences are recognized to the extent there is a reasonable /

virtual certainty that the assets can be realised in the future and are reviewed for the appropriateness of their respective

carrying values at each Balance Sheet date.

11) GOVERNMENT GRANTS

Grants in the form of Capital/Investment subsidy are treated as Capital Reserve.

12) BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are

capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which

they are incurred.

13) LEASES

As lessee:

F 18

Lease rental in respect of assets taken on "Operating Lease" are charged to Profit & Loss account on straight-line basis

over the lease term.

14) IMPAIRMENT OF ASSETS

In accordance with Accounting Standard – 28 on ‗Impairment of Assets‘, notified under Section 211(3C) of the

Companies Act, 1956, recoverable amount of relevant assets is computed and compared with the carrying amount for

determining impairment loss, if any at the Balance Sheet date in case there is an indication that any asset may be

impaired.

15) PROVISIONS AND CONTINGENCIES Provisions are recognized when the Company has a present obligation as a result of past events, for which it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a

reliable estimate of the amount can be made. Provisions required to settle are reviewed regularly and are adjusted

where necessary to reflect the current best estimates of the obligation. Where the Company expects a provision to be

reimbursed, the reimbursement is recognized as a separate asset, only when such reimbursement is virtually certain.

Contingent liabilities are disclosed after an evaluation of the facts and legal aspects of the matters involved.

F 19


Schedule N

NOTES TO ACCOUNTS

1. There are Contingent Liabilities in respect of:

a) Claims against the Company not acknowledged as debts:

Name of the

statute

Nature of dues Amount (Rs.) Period to which

the amount

relates

Forum where the dispute

is pending

Central Sales

Tax Act,

1956

Demand raised for

difference in the rate

of tax.

Rs.218.23 lacs

(Rs.87.30 lacs

deposited by the

Company)

1st April 2000 to

30th

September

2000

Sales Tax Appellate

Tribunal, Chandigarh.

Central Sales

Tax Act,

1956

Vehicles impounded

& demand raised due

to discrepancy in /

inadequacy of

documents.

Rs.9.65 lacs (Surety

bond and Rs. 2.42 lacs

deposited by the

Company)

May, 2001 High Court of Punjab &

Haryana (Appeal filed by

the Company)

Punjab VAT

Act, 2005

Vehicles impounded

& demand raised due

to discrepancy in /

inadequacy of

documents.



deposited by the

Company)

March, 2008 Deputy Excise and Taxation

Commissioner cum Joint

Director Enforcement,

Patiala.

Punjab VAT

Act, 2005

Vehicles impounded

& demand raised due

to discrepancy in /

inadequacy of

documents.

Rs. 1.57 Lacs (Surety

bond and Rs. 0.39

lacs deposited by the

company)

August, 2007 Deputy Excise and Taxation



Patiala.

Karnataka

Value Added

Tax, 2003

Demand raised by

Sales tax Authorities

for late submission of

Return.

Rs. 1.97 lacs (Rs. 0.99


company)

December, 2007 Assistant Commissioner of

Commercial Taxes, Hubli

Gujarat Sales

Tax Act

Demand raised due to

discrepancy in

documents.

Rs. 11.78 lacs (Rs.

2.37 lacs deposited &

Rs. 9.25 lacs has been

given as bank

guarantee by the

company)

2001-02 Deputy Commissioner of

Sales Tax, Gujarat

Haryana

Value Added

Tax Act,

2003

Demand raised by

Sales Tax Authority,

Panchkula against non

submission of Form D

& D1.

Rs. 4.22 Lacs 2005-06 Excise & Taxation Officer

cum Assessing Authority,

Panchkula

Central Sales

Tax Act,

1956

Demand raised by


Panchkula against Non

submission of C forms



Panchkula

F 20

Central

Excise Act,

1944

Denial of benefit of

notification for fuel

efficiency to chassis

for Motor Vehicles.

Rs147.66 lacs (already

deposited by the

Company)

1995-96 to 1996-

97

The case has been referred

back by Supreme Court of

India to Customs Excise and

Service Tax Appellate

Tribunal (CESTAT)

Central

Excise Act,

1944

Demand raised to re-

determine the

assessable value of

components supplied

to spare parts division

under Rule 7 of

Valuation Rules.

Rs 4.25 lacs (Includes

penalty Rs. 2.12 lacs)

01 April, 2000 to

31 March, 2004


back by Customs Excise and


Tribunal (CESTAT) to

Commissioner (Appeals)

Central

Excise Act,

1944

Demand raised on

non-receipt of material

sent to job workers

within 180 days under

Rule 4(5a) of Cenvat

Credit rules.

Rs. 1.76 lacs (amount

of penalty)

01 April, 2003 to

31 October, 2003

Custom Excise and Service

Tax Appellate Tribunal

(CESTAT)

Central

Excise Act,

1944

Demand raised in

context with Service

tax on royalty received

on account of use of

brand name of SML.

Rs. 9.92 lacs(Rs. 1.30


Company, includes

penalty of Rs 6.62

lacs)

April‘ 2002 to

Mar‘ 2005.



(CESTAT)

Central

Excise Act,

1944

Demand raised for

non-inclusion of cost

of publicity items sold

to dealers on trading

basis as part of

Transaction Value.

Rs. 3.19 lacs (includes

penalty amounting to

Rs 0.30 lacs)

01 January, 2004 to

30 September,

2004



(CESTAT)

Central

Excise Act,

1944

Denial of utilization of

service tax credit for

the payment of service

tax liability on behalf

of foreign collaborator

Rs. 5.70 lacs

(inclusive of penalty

Rs. 2.85 lacs)

2005-06 Custom Excise and Service


(CESTAT)

Central

Excise Act,

1944

Inadmissible Service

tax credit utilized for

payment of service tax

liability resulting in

short payment of

service tax liability.

Rs. 5.70 lacs


Rs. 2.85 lacs)

2005-06 Appeal by the Company to be

filed before Custom Excise

and Service Tax Appellate

Tribunal (CESTAT)

Income Tax

Act, 1961

Disallowance of

provision for bad and

doubtful debts

Rs.36.74 lacs for the

assessment year 1992-

93 (representing the

amount of provision)

1991-92 High Court of Punjab &

Haryana (Appeal filed by the

Department)

Income Tax

Act, 1961

Demand raised under

section 234 B & C by

assessing authority



99 (Rs.22.02 lacs

deposited by the

Company)


Haryana (Appeal filed by

the Company).

Income Tax

Act, 1961

Demand raised for

excess deduction

claimed u/s 80HHC on

account of DEPB

Rs. 3.43 lacs for the


05.

2003-04 Appeal filed by the

Company before ITAT,

Chandigarh

Income Tax Demand raised for non Rs. 28.51 lacs for the 1986-87 Appeal filed by Department

F 21

Act, 1961

deduction of TDS on

payment of Fee for

Technical Services/

Royalty

Assessment Year

1987-88

before Punjab & Haryana

High Court

Income Tax

Act, 1961

Demand raised on

disallowance of

expenses, loading of

statutory dues on

Work-in-Progress u/s

145(A) and weighted

R&D deduction.

Rs. 101.55 lacs

Assessment year

2005-06 (Rs. 62.00


Company)

2004-05 Major relief granted by

CIT(A). Appeal against partial

disallowances filed before

ITAT both by the Company

and the Department

Civil

Recovery suit

Claim filed by finance

company for non

supply of vehicles by

the dealer even after

receiving money

Rs. 12.70 lacs claimed

by Luxmi General

Finance

1997 Appeal filed by the Company

before High Court at Chennai.

Civil

Recovery suit

Suit filed by the bank

for recovery of amount

sanctioned to one of

the customer for

purchase of a Swaraj

Mazda vehicle.

Rs. 4.16 lacs

2008

Civil Judge Senior Division,

Gurgaon

Distt.

Consumer

Forum

Award given by the

District Consumer

forum, Bilaspur,

against complaint filed

by the customer for

replacement of

defective engine.

Rs. 2.0 lacs

2008

Appeal filed by the

Company before State

Commission, Himachal

Pardesh against the order of

District Consumer forum,

Bilaspur

b) Bank Guarantees given by the Company and outstanding as on 31.03.2009 amounting to Rs. 1,006.38 lacs

(Previous Year Rs. 331.94 lacs).

c) Letters of Credit issued on behalf of the Company by its bankers and outstanding as on 31.03.2009 amounting

to Rs. 1,358.31 lacs (Previous Year Rs. 2,681.07 lacs).

2. Through issue of excise notification no 11/95 dated March 16, 1995 Government sought to lapse Rs. 488 lacs out

of Modvat Credit Receivable balance as on March 16, 1995. Petition by the Company and others with the Delhi

High Court challenging the said notification on grounds of law and equity was allowed by the Supreme Court vide

order dated January 28, 1999. The Finance Act, 1999 has, however, brought in retrospective amendment w.e.f.

March 16, 1995 in the Central Excise Act, empowering the Central Government to lapse such modvat. On legal

advice obtained by the Company to seek redressal against the action of the Government, the Company has filed

writ petition before the Delhi High Court on the ground that the Government action violates the doctrine of

promissory estoppel/expectation principle beside other grounds. The Court has already admitted the petition.

Accordingly, pending Company‘s petition and decision thereupon, the amount of Rs. 488 lacs though adjusted in

excise records has not been provided in the books of account.

3. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)

Rs. 443.71 lacs (Previous Year Rs. 240.00 lacs).

4. (a) Market promotion expenses (Schedule K) includes Commission on Sales amounting to Rs. 98.70 lacs

(Previous Year Rs. 84.15 lacs).

(b) Provision For Warranty* 2008-09 2007-08

Rs. In lacs Rs. In lacs

Opening Balance 463.00 423.00

Additions During the Year 226.00 303.00

F 22

Utilized during the year 386.34 263.00

Closing Balance 302.66 463.00

*As per warranty policy, the Company is required to provide free repair and replacement of parts required due to

manufacturing defects which appear during the warranty period.

5. As the Company‘s business activities fall within a single primary business segment, viz., ―Commercial Vehicles

and Spares‖, the disclosure requirement of Accounting Standard (AS) – 17 ―Segment Reporting‖ is not applicable.

6. In accordance with Accounting Standard on (AS 18) "Related Party Disclosures", the disclosure in respect of

transactions with the company's related parties are as follows:

i. Holding / Associate Company

(Holding w.e.f January 06, 2009) *

Sumitomo Corporation, Japan

ii. Key Management Personnel * Mr. Yash Mahajan – Managing Director

Mr. K Nakajima - Whole-time Director

*As identified and certified by the Management

iii. Transactions with Sumitomo Corporation:

2008-2009 2007-2008


a.

Purchase of components/spares 1,516.31 3,222.50

b. Purchase of fixed assets 252.36 29.66

c. Discounting charges 10.98 22.41

d. Dividend paid (Gross) 236.67 236.67

Balance outstanding at year end – Payable 736.70 1,712.55

iv. Payments to Key Management Personnel:

2008-2009 2007-2008

Rs. in lacs Rs. in lacs

a.

Remuneration (Refer Note 19 on Schedule N):

Mr. Yash Mahajan 184.88* 87.13

Mr. K. Nakajima 58.35 92.41

b. Other Payments

Rent paid to Mr. Yash Mahajan 9.69 Nil

Aggregate balances outstanding at year

end – Payables 11.95 82.21

* Includes arrears Rs. 88.27 lacs for the period 1st June, 2006 to 31

st March, 2008.

7. Earning Per Share (EPS):

31-03-2009 31-03-2008

Profit attributable to equity shareholders (Rs. in lacs)

478.76 2,520.27

Weighted average number of equity shares outstanding during

the year. [excluding 13,300 forfeited equity shares (Previous

Year 13,300)]

10,486,700 10,486,700

F 23

Basic/Diluted Earning Per Share (Rs.) 4.57 24.03

Face Value per share (Rs.) 10.00 10.00

8. In view of Accounting Standard (AS) -22 ―Accounting for Taxes on Income‖, the Company has accounted for

deferred tax as follows:

Amount (Rs. in lacs)

Particulars Balance as at

01.04.2008 Expense /(Saving)

during the year

Balance as at

31.03.2009

A) Deferred Tax Liabilities

(i) Tax impact of difference between carrying

amount of fixed assets in the financial

statements and income tax returns

275.39

871.93

1147.32

[196.70] [78.69] [275.39]

Sub Total 275.39 871.93 1147.32

[196.70] [78.69] [275.39]

(B) Deferred Tax Assets

(i) Tax impact of expenses charged in the

financial statements but allowable as

deductions in future years under income tax.

175.64 (42.85) 218.49

[114.81] [(60.83)] [175.64]

(ii) Tax impact of expenditure disallowed under

section 40(a)(ia) and 43B of the Income Tax

Act

264.71

(84.11)

348.82

[129.35] [(135.36)] [264.71]

(iii) Tax impact of loss as per normal

provisions of Income Tax Act,1961 - (859.97) 859.97

[-] [-] [-]

(iv) Adjustment on account of change in

accounting policy (Refer Note 20 on Schedule

N)

- - -

[27.50] [27.50] [-]

Sub Total 440.35 (986.93) 1427.28

[271.66] [(168.69)] [440.35]

Deferred Tax Assets (B-A) 164.96 (115.00) 279.96

[74.96] [(90.00)] [164.96]

The Deferred Tax saving (net) for the current year aggregating to Rs. 115 lacs (Previous Year Rs. 90 lacs) has

been credited to the Profit & Loss Account.

Note: Figures shown in parenthesis [ ] relate to previous year.

9. Auditors‟ Remuneration:

2008-2009 2007-2008

Rs. In lacs Rs. in lacs

Statutory Audit Fee 18.50 18.50

Tax Audit Fee 5.00 5.00

Other Audit Services / Certification 8.50 8.50

Reimbursement of Out of Pocket Expenses 1.04 1.28

33.04 33.28

F 24

Information with regard to Licensed Capacity, Installed Capacity*, Production, Sales and Stocks:

10.

a. Capacities Unit of Measurement Installed Capacity (Per Annum)

On-road automobiles

(having four or more

wheels such as light,

medium and heavy

commercial vehicles)

31.03.2009 31.3.2008

Nos. 18,000* 12,000*

* On double shift basis as certified by the management and relied upon by auditors being technical matter.

* Includes production for internal use.

Licensed Capacity: Not Applicable

b. Production, Sales and Stocks of Finished Goods:

2008-2009 2007-2008

Qty.(Nos.) Rs. In lacs Qty.(Nos.) Rs. In lacs

VEHICLES

Opening Stock 670 4,258.86 708 3,541.14

Production 8,164* - 11,241* -

Sales 8,022** 55,240.40 11,274** 71,328.46

Vehicles Capitalised 6 - 5 -

Vehicle Scrapped 5 - - -

Closing Stock 801*** 5,655.03 670*** 4,258.86

*Includes 17 buses (Previous Year 27) produced during test run.

**Includes 2 buses (Previous Year 2) sold during test run which is netted off from assets capitalised.

*** Includes 35 buses (Previous Year 25) produced during test run.

SPARES 2008-2009 2007-2008

(Rs. in lacs) (Rs. in lacs)

Opening Stock

420.04

373.63

Purchases

2,510.63

2,566.11

Sales

4,743.41

4,554.35

Closing Stock

503.81

420.04

Note: It is not possible to furnish quantitative information in respect of Spares in view of large number of items

of varied nature.

11. Raw Material & Components Consumed:

2008-2009 2007-2008

Qty. (Nos.) Rs. in lacs Qty. (Nos.) Rs. in lacs

CKD Kits 8,164 1,447.94 11,241 1,759.18

Tyres, Tube & Rims 164,882 3,045.13 228,075 3,820.58

Cargo Boxes 1,664 775.16 2,226 840.01

Batteries 8,335 220.05 11,528 306.40

Others 38,565.46 47,160.32

Total 44,053.74 53,886.49

i) In view of varied nature of large number of items, it is not possible to furnish quantitative information on

components.

F 25

ii) The figure of others is a balancing figure based on total consumption shown in Schedule J and includes

adjustments for excess/shortage found on physical verification.

iii) Quantities and values of all items except CKD kits (where actuals are taken) represent issues from stores

made during the period.

12. Value of imported and indigenous Raw Material & Components, Stores & Spares consumed and

percentage of each to total consumption:

a. Raw Material & Components:

2008-2009 2007-2008

% Rs. in lacs % Rs. in lacs

Imported 4.38 1,930.24 5.15 2,774.20

Indigenous 95.62 42,123.50 94.85 51,112.29

100.00 44,053.74 100.00 53,886.49

b. Stores & Spares:

2008-2009 2007-2008


Imported 6.61 7.59 7.22 9.87

Indigenous 93.39 107.22 92.78 126.77

100.00 114.81 100.00 136.64

13. C.I.F. Value of Imports:

2008-2009 2007-2008


Raw Material & Components 2,168.29 3906.87

Spares & Stores (Including Capital Spares) 76.22 8.84

Capital Goods 794.17 122.47

3,038.68 4,038.18

14. Earnings in Foreign Currency:

2008-2009 2007-2008

Nos Rs. in lacs Nos Rs. in lacs

Exports including Deemed Exports of

Vehicles at FOB Value 409 2,266.94 585 3,242.21

Export of Spare Parts 94.76 91.84

2,361.70 3,334.05

15. Expenditure in Foreign Currency (on payment basis - net of tax):

2008-2009 2007-2008


Traveling 21.49 21.79

Know-how 41.66 37.56

Discounting Charges 15.19 11.56

Technician Fees 65.29 76.56

143.63 147.47

16. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than

45 days as at 31st March, 2009 and 31st March, 2008. This information as required to be disclosed under the

F 26

Micro, Small and Medium Enterprises Development Act, 2006 has been determined on the basis of information

available with the Company.

17. The Company has a system for maintenance of information and documents as required by the transfer pricing

regulation under Sections 92-92F of the Income Tax Act, 1961, as applicable. Since the law requires existence of

such information and documentation to be contemporaneous in nature, the Company also updates its information

and documentation for international transactions entered into with the associated enterprises during the financial

year. The management is of the opinion that its international transactions are at arms length so that the aforesaid

legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that

of provision for taxation.

18. The Company has taken certain premises under operating lease arrangements. The lease period varies from 3 to

15 years with the option to extend the same with mutual consent. The total lease rental recognized as expense

aggregate to Rs. 156.38 lacs (Previous Year Rs.122.84 lacs).

Future minimum lease payments under non-cancellable operating leases:

2008-2009 2007-2008


Not later than one year 5.35 7.17

19. Managerial Remuneration * (Refer Note 6 on Schedule N) :

2008-2009

Rs. in lacs

2007-2008

Rs. in lacs

1. Remuneration:

i) Salaries and Allowances 120.00 85.80

ii) Commission 11.95 82.21

iii) Contribution to Provident & Other Funds 18.60 10.14

iv) Other Perquisites 4.41 1.39

154.96 179.54

2. Computation of net profit in accordance with Sec. 309(5) of the Companies Act, 1956

for the calculation of commission

Profit Before Tax 413.61 3,870.27

Add Depreciation charged in accounts 583.92 330.07

Provision for doubtful debts 128.06 395.38

Director‘s remuneration 243.23 179.54

Director‘s sitting fee 11.40 9.90

1,380.22 4,785.16

Less Depreciation as per section 350 of the Companies

Act,1956 555.68 293.85

Less Provision for doubtful debt written back 29.35 50.33

795.19 4,440.98

Maximum Commission to Managing Director @ 1%

(as approved by Members. Restricted to Rs. 4.00 lacs as

total remuneration approved by Ministry of Corporate

Affairs, Government of India is Rs. 96.72 lacs).

4.00 37.80

Maximum Commission to Whole time Director @ 1%

(Within the overall limit of Rs. 48.00 lacs being 100%

of annual salary as approved by Members)

7.95 44.21

*Notes:

i. Contribution to Provident and other funds does not include contribution towards gratuity & leave

encashment, as the separate figures for the directors are not available.

ii. Other Perquisites does not include premium in respect of personal accident insurance, as the

separate figures for the directors are not available.

F 27

iii. Remuneration of Whole time Director is subject to approval of Ministry of Corporate Affairs,

Government of India.

iv. Arrears of Remuneration paid to Managing Director during the year for the period 1st June, 2006

to 31st March, 2008 as approved by members is as below:

Particulars (Rs. in lacs)

Salaries and Allowances 64.20

Commission 6.61

Contribution to Provident & Other Funds 10.56

Other Perquisites 6.90

Total 88.27

20. The Company had adopted in the previous year Accounting Standard-15 ‗Employee Benefits‘ (Revised 2005)

notified under Section 211(3C) of the Companies Act, 1956. Consequent upon its adoption, in accordance with

the transitional provisions contained in the Accounting Standard, the net difference of Rs. 53.40 lacs (after

adjustment for deferred tax of Rs. 27.50 lacs) between the liability in respect of Gratuity and Leave Encashment

existing on the date of adoption and the liability that would have been recognized at the same date under the

previous Accounting Standard, was adjusted in the previous year against the opening balance of General Reserve.

Disclosures as per AS - 15 (Revised) ‗Employee Benefits‘ for year ended March 31, 2009:

I Defined Contribution Plans:

Provident Fund & Superannuation

During the year the company has recognised the following amounts in the Profit and Loss Account –

Rs. Lacs

2008-09 2007-08

Employers Contribution to Provident Fund & Pension Fund* 220.47 158.26

Superannuation* 53.01 45.60

II State Plans

Employees State Insurance Scheme

During the year the company has recognised the following amounts in the Profit and Loss Account-

Rs. Lacs

2008-09 2007-08

Employees State Insurance Scheme* 7.73 3.18

*Included in Contribution to Provident and Other Funds in Schedule K

III Defined Benefit Plans

a) Contribution to Gratuity Fund – Life Insurance Corporation of India

b) Leave Encashment

2008-09 2007-08

Actuarial Assumptions Leave

Encashment

Gratuity Leave

Encashment

Gratuity

(Unfunded) (Funded) (Unfunded) (Funded)

Mortality Table LIC 1994-

96 Ultimate

LIC 1994-

96 Ultimate

LIC 1994-96

Ultimate

LIC 1994-

96 Ultimate

Attrition Rate 5.00% p.a 5.00% p.a 5.00% p.a 5.00% p.a

Imputed Rate of Interest 7.50% p.a 7.50% p.a 8.00% p.a 8.00% p.a

Salary Rise 5.00% p.a 5.00% p.a 5.00% p.a 5.00% p.a

Return on Plan Assets N.A. 9.30% p.a N.A. 9.25% p.a

F 28

Remaining Working Life 20.69 Years 20.26 Years 21.31 Years 19.32 Years

Change in the present value of

obligation

Rs. Lacs

Defined benefit obligation as at April

1, 2008 254.20 560.65 203.57 442.43

Service cost 73.78 47.36 59.52 37.85

Interest cost 14.74 38.84 15.00 33.67

Actuarial loss/(gain) 53.96 116.12 8.33 89.81

Benefits paid (115.34) (85.61) (32.22) (43.11)

Defined benefit obligation as at March

31, 2009

281.34 677.36 254.20 560.65

Change in fair value of plan

Fair value of plan assets as at April 1,

2008 222.84 208.77

Expected return on plan assets 19.37 19.06

Contributions by employer 56.41 37.61

Actuarial (loss)/gain (0.55) 0.52

Benefits paid (85.61) (43.11)

Fair value of plan assets as at March

31, 2009 212.46 222.84

Reconciliation of present value of

defined benefit obligation and the

fair value of assets

Present value of obligation as at

March 31, 2009 677.36 560.65

Fair value of Plan Assets as at the end

of period funded status 212.46 222.84

Present value of unfunded obligation

as at March 31,2009 464.90 337.81

Expenses recognised in the Profit

and Loss Account *

Current Service Cost 73.78 47.36 59.52 37.85

Interest Cost 14.74 38.84 15.00 33.67

Expected return on plan assets - (19.37) - (19.06)

Net actuarial loss/ (gain) recognized 53.96 116.67 8.33 89.29

Total Expenses recognised in the

Profit & Loss Account 142.48 183.50 82.85 141.75

* Included in Salaries, Wages and Bonus & Contribution to Provident and Other Funds in Schedule K.

The major categories of plan assets as a percentage of total plan assets as at March 31, 2009 are as follows:

F 29

Government of India Securities Nil

Insurer Managed Funds 100%

Note: The estimates of future salary increase, considered in actuarial variation, take account of inflation,

seniority, promotion and other relevant factors such as supply and demand in the employment market.

Short term employment benefits

The undiscounted amount of short term employee benefits expected to be paid in exchange for services

rendered by employees is recognized during the period when the employee renders the services. These

benefits include compensated absences and performance incentives.

21. Research and Development Costs :

Rs. in Lacs

2008-09 2007-08

a. Revenue Expenditure

Salaries & Wages 132.12 98.94

Contribution to Provident and other funds 6.61 6.25

Materials 138.75 55.94

Testing & Analytical 100.01 81.19

Travelling 33.35 31.16

Membership & Subscription 14.59 12.34

Software - 5.61

Telephone, Insurance, AMC, Magazines & General

utilities 9.31 6.56

Total 434.74 297.99

b. Capital Expenditure

- Capitalised

- Work-in-Progress

109.09

1,353.94

64.13

181.61

22. Current tax expense comprise of Rs. 41.22 lacs (Previous year Rs. Nil), being charge for Minimum Alternate Tax

under section 115JB of the Income Tax Act, 1961. The Company has recognized MAT Credit Entitlement of Rs.

41.22 lacs (Previous year Nil) grouped under Loans and Advances (Schedule G), in accordance with Guidance

Note issued by the Institute of Chartered Accountants of India.

23. Detail in respect of dividend remitted during the year in foreign currency :

a) Number of Non-resident Shareholders: 1 (Previous Year Nil )

b) Number of Shares held: 209,000 (Previous Year Nil)

c) Amount remitted during the year: Rs. 1,149,500 (Previous Year Nil)

24. Previous year figures have been regrouped / reclassified wherever considered necessary to conform to current

year‘s classification.

F 30

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2009

(Rs.in Lacs)

Year ended Year ended

March

31,2009 March 31, 2008



Adjustments For :



Interest Expense 1,744.48 1,036.79




Provision for Warranty (160.34) 40.00

Provision for Wealth Tax 0.69 (0.40)


2,277.32 2,005.11


Adjustments for :

Decrease / (Increase) in Sundry Debtors 3,828.02 249.68


Decrease / (Increase) in Loans & Advances (235.93) (48.38)


(Decrease) / Increase in Current Liabilities (6,222.04) (4,940.56) 1,285.59 (1,871.19)

CASH GENERATED FROM / (USED IN) OPERATIONS (2,249.63) 4,004.19

Less: Direct Tax Paid (net of refunds) 306.10 1,163.69



NET CASH GENERATED FROM / (USED IN)

OPERATING ACTIVITIES (2,614.02) 2,788.98

B.CASH FLOW FROM INVESTING ACTIVITIES :

Purchase of Fixed Assets (2,783.21) (5,393.57)


NET CASH USED IN INVESTING ACTIVITIES (2,692.22) (5,371.87)

C.CASH FLOW FROM FINANCING ACTIVITIES

Unsecured Loans taken during the year 7,131.13 13,331.42

Unsecured Loans repaid during the year 7,131.13 - 8,460.04 4,871.38

Secured Loans taken / (repaid) during the year 7,780.88 (1,602.33)

Dividend Paid (567.82) (563.28)

Dividend Tax (98.02) (98.02)

Interest Paid (2,013.38) (1,392.24)

NET CASH INFLOW FROM FINANCING

ACTIVITIES 5,101.66 1,215.51

Net Increase in Cash and Cash Equivalents (204.58) (1,367.38)

Cash and Cash Equivalents as at 01.04.2008 (#1) 905.22 2,272.81

Cash and Cash Equivalents as at 31.03.2009 (#2) 700.64 905.43

Notes:-

# 1 Cash and Bank Balances as at 01.04.2008 914.28 2,272.81

less. Cash Credit Accounts (being treated as financing activity) (9.06) -

905.22 2,272.81

# 2 Cash and Bank Balances as at 31.03.2009 700.89 * 914.28 *


F 31

Cash and Cash Equivalents as at 31.03.2009 700.89 905.22

*Net of unrealised foreign exchange gain of Rs. 0.25 lacs (Previous year Rs.0.21 lacs unrealised foreign exchange loss)

Note:


Standard -3 on Cash Flow Statements .



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

even date


PRICE WATERHOUSE


V.NIJHAWAN GOPAL BANSAL S.K.TUTEJA

Partner Sr. Vice President -Finance Chairman

M.No. F87228 & Company Secretary

YASH MAHAJAN

Managing Director


F 32

LIMITED REVIEW REPORT AND FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED

SEPTEMBER 30, 2009

LIMITED REVIEW REPORT TO THE BOARD OF DIRECTORS OF SWARAJ MAZDA LIMITED

1. We have reviewed the accompanying balance sheet of Swaraj Mazda Limited as at September 30, 2009; and

the related statement of profit and loss and cash flows for the period ended September 30, 2009 and

September 30, 2008. These financial statements have been approved by the board of directors of the

company and are the responsibility of the company‘s management. Our responsibility is to issue a report on

these financial statements based on our review.

2. We conducted our review in accordance with the Standard on Review Engagements (SRE) 2400,

―Engagements to Review Financial Statements‖ issued by the Institute of Chartered Accountants of India.

This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the

financial statements are free of material misstatement.

3. A review is limited primarily to inquiries of company personnel and analytical procedures applied to

financial data and thus provide less assurance than an audit. We have not performed an audit and,

accordingly, we do not express an audit opinion.

4. Attention is invited to non provision of Rs.488 lacs in respect of Modvat Credit Receivable as explained in

Note 2 on Schedule N. Had the said amount been provided, the net current assets and profit for the period

would have been lower by the corresponding amount.

5. Based on our review conducted as above and subject to our comments in para 4 above, nothing has come to

our attention that causes us to believe that the accompanying financial statements do not give a true a nd fair

view (or ‗are not presented fairly, in all material respects‘) in accordance with the Accounting Standards

notified pursuant to the Companies (Accounting Standards) Rules, 2006 as per Section 211(3C) of the Companies

Act, 1956.

V. Nijhawan

Partner

Membership No. – F87228


Place: New Delhi Price Waterhouse

Date: January 22, 2010 Chartered Accountants

F 33

BALANCE SHEET AS AT 30TH SEPTEMBER, 2009 (Rs. in lacs)

As at As at

Schedule 30th Sept.2009 31st Mar.2009

SOURCES OF FUNDS

Shareholders' Funds

Share Capital A 1,049.38 1,049.38

Reserves & Surplus B 9,276.85 8,603.40

10,326.23 9,652.78

Loan Funds

Secured Loans C 8,818.71 15,128.69

Unsecured Loans D 7,900.00 6,900.00

27,044.94 31,681.47


Fixed Assets E

Gross Block 16,142.61 13,499.46


Net Block 12,173.04 9,945.54

Capital Work-in-Progress 569.47 2,839.72

Deferred Tax Assets (Net) F 9.96 279.96


Advances G

Inventories 16,181.89 14,929.19

Sundry Debtors 10,898.10 14,633.32

Cash and Bank Balances 1,271.01 700.89



31,307.13 33,485.11

Less :

Current Liabilities and Provisions H


Provisions 1,752.25 1,519.86

17,014.66 14,868.86


27,044.94 31,681.47


Notes to Accounts N

This is the Balance Sheet referred

to in our report of even date. The Schedules referred to above form an integral part of the Balance Sheet.


PRICE WATERHOUSE


V.NIJHAWAN GOPAL BANSAL YASH MAHAJAN

Partner Sr. Vice President – Finance Managing Director


New Delhi, 22nd January, 2010 Chandigarh, 22nd January, 2010

F 34

PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED 30TH

SEPTEMBER, 2009

(Rs. in lacs)


Schedule 30th Sept.2009 30th Sept.2008

INCOME

Sales 33,543.15 40,663.58

(Refer Note 2 on Schedule M and 10(b) on Schedule N)

Less : Excise Duty 2,550.08 4,188.22


Other Operating Income I 233.83 333.20

Total 31,226.90 36,808.56

EXPENDITURE

Manufacturing and Other Expenses J 28,834.20 34,075.58

Finance Charges(Net) L 1,033.59 638.57

Depreciation / Amortisation E 415.65 224.83

Total 30,283.44 34,938.98

Profit for the period before Tax Expense 943.46 1,869.58

Tax expense/(Saving) (Refer Note 10 on Schedule M)

- Current Tax 169.00 435.00

- Current Tax Earlier Years (Refer Note 22 on Schedule N) 11.18 -

- Deferred Tax (Refer Note 8 on Schedule N) 270.00 190.00

- Fringe Benefits Tax - 25.00

- MAT Credit Entitlement (Refer Note 22 on Schedule N) (180.18) -

Profit for the period after Tax Expense 673.46 1,219.58

Balance brought forward from

previous year 1,727.94 1,458.22


APPROPRIATIONS


2,401.40 2,677.80

Earning Per Share (Refer Note 7 on Schedule N )



Notes to Accounts N

This is the Profit & Loss Account

referred to in our report of even

date

The Schedules referred to above form an integral part of the Profit and Loss Account


PRICE WATERHOUSE



Partner Sr. Vice President – Finance Managing Director



F 35


SCHEDULE A (Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

SHARE CAPITAL

Authorised 4,00,00,000 Equity Shares ( Previous Year 2,00,00,000)

of Rs. 10/- each 4,000.00 2,000.00

Issued, Subscribed and Paid-up

1,04,86,700 * Equity Shares (Previous Year 1,04,86,700) of Rs. 10/- each fully paid up

1,048.67 1,048.67

Add: Forfeited Shares [Amount paid up on 13,300 0.71 0.71

Equity Shares (Previous Year 13,300) of Rs.10/- each ]

1,049.38 1,049.38

* Includes 100 Equity Shares (Previous Year 100) of Rs. 10/- each fully paid up and held by an NRI but not allotted pending clearance from the Reserve Bank of India.

Of the above, 5,612,953 (Previous year 5,612,953) equity shares are held by Sumitomo Corporation, Japan the holding Company.

SCHEDULE B (Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

RESERVES AND SURPLUS

Capital Reserve 15.00 15.00


General Reserve

Balance brought forward 6,860.45 6,835.45

Add: Transferred from Profit & Loss Account - 25.00

6,860.45 6,860.45

Profit and Loss Account 2,401.40 1,727.95

9,276.85 8,603.40

F 36


SCHEDULE C (Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

SECURED LOANS

From Banks

- Long Term Loan* 5,500.00 6,000.00

- Short Term Loan** - 2,500.00

- Cash Credit** 3,318.71 6,628.69

8,818.71 15,128.69

Notes : * The loan is secured by subservient equitable mortgage / hypothecation charge over the entire fixed assets of

the Company. Repayable within one year Rs. 3,500.00 lacs ( Previous year Rs. 2,000.00 lacs).

** The limits sanctioned by the bankers are secured by a first charge by way of hypothecation of the Company's

Current Assets i.e Stocks, Bills Receivable, Book Debts and other movables of the Company and also by way of

a second mortgage and charge on the Company's immovable property. The said second charge is yet to be

created by the Company.

The Company had in an earlier year taken loans from Financial Institutions against first charge on its movable

and immovable property. The said loans have since been repaid. However, the charges in respect of these loans are in the process of being vacated.

SCHEDULE D (Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

UNSECURED LOANS

From Banks

- Short Term Loan 7,900.00 6,900.00

7,900.00 6,900.00

F 37

SCHEDULE FORMING PART OF THE

ACCOUNTS

SCHEDULE E

FIXED ASSETS (Refer Notes 3, 4,12 and 14 on Schedule M )

(Rs. In lacs)

DESCRIPTION GROSS BLOCK DEPRECIATION / AMORTISATION NET BLOCK

As at Additions

Adjust

ments As at As at

For

the

Adjust

Ments As at As at As at

01.04.2009 During 30.09.2009 01.04.2009 period 30.09.2009 30.09.2009 31.03.2009

the

period

Tangible Assets

Freehold Land 48.74 -

-

48.74 -

-

- -

48.74 48.74

Building

5,682.85 361.35

-

6,044.20

615.96

99.58

- 715.54

5,328.66

5,066.89

Plant &

Machinery 5,450.41 2,170.31

-

7,620.72

1,891.22

191.35

-

2,082.57

5,538.15

3,559.19

Jigs and Fixtures 708.47 60.61

-

769.08

375.41

23.30

-

398.71

370.37

333.06

Furniture, Fixtures

& 269.13 9.83

-

278.96

169.28

7.87

-

177.15

101.81 99.85

Office Equipments

Computers 308.60 13.14

-

321.74

207.66

30.47 -

238.13 83.61

100.94

Vehicles 758.13 27.91

-

786.04

275.79

47.61 -

323.40

462.64 482.34

Intangible Assets Technical Know-

How

273.13 -

-

273.13

18.60

15.47

-

34.07

239.06

254.53

Total 13,499.46 2,643.15

-

16,142.61

3,553.92

415.65 -

3,969.57

12,173.04 9,945.54

Previous Year 4,863.88 8,656.70

21.12

13,499.46

2,991.12

583.92

21.12

3,553.92

9,945.54

CAPITAL WORK-IN-PROGRESS (CWIP)

Capital Advance

0.50 -

Direct Capital Expenditure

403.65

2,289.62

Indirect expenditure pending allocation :

-Interest Cost 33.82 130.25

-Other expenditure

131.50 419.85

Total CWIP

569.47

2,839.72

Notes:

1. Indirect other expenditure pending allocation includes salary, power charges, travelling, foreign technician expenses, testing expenses,

& other administrative expenses and is net of amount recovered from sale [(net of excise duty Rs. 1.92 lacs (Previous year Rs. 10.26 lacs)] of

vehicle produced during test run Rs. 22.97 lacs (Previous year Rs. 81.38 lacs) .

2. Interest capitalised during the year Rs. 65.79 lacs (Previous year Rs. 532.08) as per AS-16 notified under Section 211(3C) of the Companies

Act,1956

F 38


SCHEDULE F (Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

DEFERRED TAX (LIABILITIES ) / ASSETS


Deferred Tax (Liability) / Assets

- At the beginning of the period/ year 279.96 164.96

7- Adjustment during the period/ year (270.00) 9.96 115.00 279.96

9.96 279.96

SCHEDULE G (Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

CURRENT ASSETS, LOANS & ADVANCES

CURRENT ASSETS

INVENTORIES


Raw Materials & Components 6,346.03 6,446.43

Raw Material - Goods in Transit 464.15 638.17

Stores and Spare Parts 77.18 90.74

Loose Tools 43.26 32.56

Work in Progress * 1,524.65 1,562.45

Finished Goods

- Vehicles ** 7,153.03 5,655.03

- Spares

573.59 7,726.62 503.81 6,158.84

16,181.89 14,929.19

* - Includes Work in Progress during test run production amounting to Nil (Previous year Rs. 83.03 lacs).

** - Includes Finished goods of vehicles produced during test run production amounting to Rs. 909.01 lacs (Previous year Rs. 1,132.16 lacs) valued at material cost.

SUNDRY DEBTORS

(Considered good unless otherwise stated)

Debts outstanding for more than six months:

- Secured 1.00 12.00

- Unsecured [ Including Rs.644.41 lacs considered

doubtful (Previous Year Rs. 605.40 lacs)] 1,043.18 953.49

Less: Provision for doubtful debts 644.41 398.77 605.40 348.09

399.77 360.09

Other debts:

- Secured 562.16 495.49

- Unsecured [ Including Rs. 16.51 lacs considered

doubtful (Previous Year Rs. 26.60 lacs)] 9,952.68 13,804.34

Less: Provision for doubtful debts 16.51 9,936.17 26.60 13,777.74

10,898.10 14,633.32

F 39


SCHEDULE G (Continued) (Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

CASH AND BANK BALANCES

Cash in hand 14.93 29.58

[Includes Stamps in Hand Rs. 1.35 lacs


Balances with Scheduled Banks on :

- Current Accounts 961.53 421.35

- Unpaid /Unclaimed Dividend Accounts 122.79 122.97

- Fixed Deposits 171.76 1,256.08 126.99 671.31

[Includes Rs. 161.32 lacs (Previous Year Rs. 117.00 lacs)

Pledged as Margin money with banks against

issue of letters of credit and bank guarantees]

1,271.01 700.89

OTHER CURRENT ASSETS


Prepaid Expenses 12.71 10.24

Export Incentives Receivables 169.66 178.93


182.37 189.17

LOANS AND ADVANCES


Advances recoverable in cash or in kind or

for value to be received 1,637.34 1,745.19

[Including Rs 10.45 lacs considered doubtful

(Previous Year Rs.10.45 lacs)]

Less: Provision for doubtful advances 10.45 1,626.89 10.45 1,734.74

Security Deposits 118.82 138.57

[Including Rs. 0.36 lacs considered doubtful


Less: Provision for doubtful deposits 0.36 118.46 0.36 138.21

Balances with Excise Authorities 561.10 884.13


MAT Credit Entiltlement (Refer Note 22 on Schedule N) 221.40 41.22

Advance Tax 245.91 234.24

(Net of Provision Rs. 7,279.66 lacs)

(Previous Year Rs. 7,099.48 lacs)

2,773.76 3,032.54

SCHEDULE H (Rs. in lacs)

As at As at

30th Sept.2009 31st Mar.2009

CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES

Acceptances * 1,244.61 1,767.87

Sundry Creditors 12,486.51 9,620.83


Customer Advances 670.11 992.81

Unclaimed Dividends 122.79 122.97

Other Liabilities 738.39 812.12

Interest accrued but not due on short term loan - 32.40

15,262.41 13,349.00

PROVISIONS

Fringe Benefits Tax - 7.20

Wealth Tax - 0.65


F 40

Tax on Proposed Dividend 26.73 26.73

Retirement benefits 1,192.01 1,025.32


Warranty 376.21 302.66

(Refer Note 8 on Schedule M & Note 4(b) on Schedule N)

1,752.25 1,519.86

17,014.66 14,868.86

* Secured to the extent of Rs. 175.64 lacs(Previous Year Rs. 781.61 lacs) against hypothecation of Raw Material & Components.


SCHEDULE I (Rs. in lacs)



OTHER OPERATING INCOME

Sale of Scrap 109.71 148.96

Export Incentives (Refer Note 2 on Schedule M) 73.81 120.30

Liabilities/Provisions no longer required written back 11.65 28.52

Royalty 33.36 31.90

Miscellaneous Income 5.30 3.52

233.83 333.20

SCHEDULE J (Rs. in lacs)



MANUFACTURING AND OTHER EXPENSES

Materials consumed

Raw materials and components consumed* 24,889.54 29,477.70

(Refer Note 11 on schedule N)

Movement of Finished goods and Work in Progress

Opening Stock

-Finished goods 6,158.84 4,678.89


7,721.29 5,968.82

Add : Purchases of finished goods 1,253.45 1,515.20

8,974.74 7,484.02

Less : Closing Stock

-Finished goods 7,726.62 5,361.51


9,251.27 (276.53) 6,649.04 834.98

Total Consumption 24,613.01 30,312.68

Add : Increase in excise duty on finished goods 132.67 51.64

Net Consumption 24,745.68 30,364.32

Operating, Administrative and Other

Expenses (as per Schedule K) 4,088.52 3,711.26

28,834.20 34,075.58

* Includes Exchange loss on Foreign Currency transactions Rs. 23.03 lacs (Previous Year Rs. 223.07 lacs)

F 41


SCHEDULE K (Rs. in lacs)



OPERATING, ADMINISTRATIVE & OTHER EXPENSES

Salaries,Wages and Bonus 1,611.16 1,455.63

(Refer Note 6 on Schedule M and 19 & 20 on Schedule N)

Contribution to Provident and Other Funds 269.02 206.08


Workmen and Staff Welfare 126.12 101.42

Consumption of Stores, Spares and Tools 29.70 54.06

(Refer Note 12 (b) on Schedule N)

Repair and Maintenance:

- Machinery 7.54 8.88

- Building 11.07 7.13

- Others 16.24 5.68

Power and Fuel 201.16 191.67

Rent 73.74 85.17


Rates and Taxes 59.70 26.84

Legal and Professional 93.01 46.28


Insurance 19.01 20.17

Printing, Stationery, Postage and Telephone 54.78 63.48

Travelling and Conveyance 254.24 211.88

Provision for Doubtful Debts 40.57 110.85

Marketing,Sales and Promotion Expenses 1,061.80 967.43


Royalty 1.80 -

Research and Development 74.32 50.53


Directors' Sitting Fee 6.90 4.50

Exchange loss / (gain) on Foreign Currency

Transactions (Refer Note 9 on Schedule M) 1.83 14.15

Miscellaneous expenses 74.81 79.67

4,088.52 3,711.50

Less : Expenditure transferred to Fixed Assets - 0.24


4,088.52 3,711.26


SCHEDULE L (Rs. in lacs)



FINANCE CHARGES/INCOME

(Refer Note 12 on Schedule M )

Interest on Loans 900.87 587.92

Interest Others 33.61 27.00

Bank Charges 111.49 29.19

1,045.97 644.11

LESS :

Interest on Fixed Deposits(Gross) 1.91 3.02

[Tax deducted at source Rs. 0.18 lacs

(Previous Period Rs. 0.50 lacs)]

Interest on Excise Duty Refund 8.67 -

Interest Others 1.80 12.38 2.52 5.54

1,033.59 638.57

F 42


SCHEDULE M

SIGNIFICANT ACCOUNTING POLICIES

1) ACCOUNTING CONVENTION

The Financial Statements are prepared to comply in all material aspects with the applicable accounting principles in

India, the applicable Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 and the

relevant provisions of the Companies Act, 1956. The Company has followed the same accounting policies for

preparation of interim financial statements for six months period ended September 30, 2009 as those followed in

preparation of financial statements for the year ended March 31, 2009.

2) REVENUE RECOGNITION

Sales are recognized on transfer of significant risks and rewards to the customer that usually takes place on dispatch of

goods to the customer from the factory/ stockyard/ storage area. In case of export sales, revenue is recognized as on

the date of bill of lading, being the effective date of transfer of significant risks and rewards to the customer. Export

benefits are accounted for on accrual basis.

3) FIXED ASSETS / INTANGIBLE ASSETS

Fixed assets are recorded at cost of acquisition. Cost includes freight, duties, taxes and expenses incidental to

acquisition and installation of fixed assets. In case of self-constructed fixed assets, appropriate overheads including

salaries & wages are allocated to the cost of the asset. The Cost of Capital Spares is capitalized along with the cost of

the related Asset.

Intangible assets comprising of Technical know how, product designs, prototypes etc. either acquired or internally

developed are stated at cost. In case of internally generated intangible assets, appropriate overheads including salary

and wages are allocated to the cost of the asset.

Capital work in Progress includes cost of assets at site, direct and indirect expenditure incidental to construction,

advances made for acquisition of capital assets and interest on the funds deployed for construction.

4) DEPRECIATION / AMORTISATION

Depreciation on tangible fixed assets is provided on a Straight-Line Method on a monthly pro-rata basis at the rates

and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except on following assets which are

being depreciated at the rates mentioned below:

Motor cars and air conditioners - 25.00%

Computers - 33.33%

All assets costing up to Rs. 5,000/- are being fully depreciated in the year of purchase.

Capital spares are amortized in a systematic manner over a period not exceeding the useful life of the asset to which

they relate.

Intangible assets are amortised on a Straight-Line Method on a monthly pro-rata basis over a period of three to ten

years based on the estimated useful life of the assets.

5) INVENTORIES

Inventories are valued at lower of cost or net realizable value. Cost for the purpose of valuation is calculated on a

quarterly weighted average method. In respect of Finished Goods & Work-in-Progress, applicable manufacturing

overheads and other costs incurred in bringing the items of inventory to their present location and condition are also

included. Excise duty is included in finished goods valuation.

6) EMPLOYEE BENEFITS

(a) Post-employment benefit plans

F 43

i. Defined Contribution Plans - The Company contributes to the appropriate authorities its share of the Employees‘

Provident & Pension Fund and Employee State Insurance, which is charged to Profit and Loss Account every year.


liability towards employees‘ Superannuation. Annual contribution of Superannuation is charged to Profit and Loss

Account every year

ii. Defined Benefit Plans - The estimated liability towards Gratuity and Leave Encashment is being provided for based

on the actuarial valuation carried out at the year-end using Projected Unit Credit Method. Actuarial gains and losses

are recognized in full in the Profit and Loss Account for the period in which they occur.


liability towards employees‘ Gratuity. The Gratuity obligation recognized in the Balance Sheet represents the present

value of the defined benefit obligation as adjusted for unrecognized past service cost and as reduced by the fair value

of Gratuity Fund.

(b) Short term employment benefits

The undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered by

employees is recognized during the period when the employee renders the services. These benefits include

compensated absences and performance incentives.

7) RESEARCH & DEVELOPMENT

Revenue expenditure on Research and Development is charged to the Profit and Loss Account in the year in which it

is incurred. Capital expenditure on Research and Development is shown as an addition to fixed assets and depreciated

at the rate as applicable to respective assets.

8) WARRANTY EXPENSES

Provision for warranty is made in the accounts on the basis of past experience and technical evaluation in respect of

vehicles sold.

9) FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are recorded at exchange rates prevailing at the date of transaction. Exchange

differences, if any, arising on settlement of transactions are recognized as income or expense in the year in which they

arise.

At the Balance Sheet date all monetary assets and monetary liabilities denominated in foreign currency are reported at

the exchange rates prevailing at the Balance Sheet date and the resultant exchange difference, if any, is recognized in

the Profit & Loss Account.

10) TAXATION

Tax Expense, comprising current tax, deferred tax & fringe benefit tax is included in determining the net profit for the

year. The current tax & fringe benefit tax has been computed in accordance with relevant tax rates and tax laws.

Minimum Alternate Tax (MAT) paid in excess of normal income tax is recognised as asset (MAT Credit entitlement)

only to the extent, there is reasonable certainty that company shall be liable to pay tax as per the normal provisions of

the Income Tax Act,1961 in future.

In accordance with Accounting Standard – 22 ‗Accounting for Taxes on Income‘, notified under Section 211(3C) of

the Companies Act, 1956, the deferred tax for timing differences between the book and the tax profits for the year is

accounted for using the tax rates and laws that have been enacted or substantially enacted as on the Balance Sheet

date. However, in the year of transition, the accumulated deferred tax (liabilities) / assets at the beginning of the year

has been recognized with a corresponding charge to the General Reserve.

Deferred tax assets arising from temporary timing differences are recognized to the extent there is a reasonable /

virtual certainty that the assets can be realised in the future and are reviewed for the appropriateness of their respective

carrying values at each Balance Sheet date.

F 44

11) GOVERNMENT GRANTS

Grants in the form of Capital/Investment subsidy are treated as Capital Reserve.

12) BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are

capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which

they are incurred.

13) LEASES

As lessee:

Lease rental in respect of assets taken on "Operating Lease" are charged to Profit & Loss account on straight-line basis

over the lease term.

14) IMPAIRMENT OF ASSETS

In accordance with Accounting Standard – 28 on ‗Impairment of Assets‘, notified under Section 211(3C) of the

Companies Act, 1956, recoverable amount of relevant assets is computed and compared with the carrying amount for

determining impairment loss, if any at the Balance Sheet date in case there is an indication that any asset may be

impaired.

15) PROVISIONS AND CONTINGENCIES

Provisions are recognized when the Company has a present obligation as a result of past events, for which it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a

reliable estimate of the amount can be made. Provisions required to settle are reviewed regularly and are adjusted

where necessary to reflect the current best estimates of the obligation. Where the Company expects a provision to be

reimbursed, the reimbursement is recognized as a separate asset, only when such reimbursement is virtually certain.

Contingent liabilities are disclosed after an evaluation of the facts and legal aspects of the matters involved.

F 45


Schedule N

NOTES TO ACCOUNTS

1. There are Contingent Liabilities in respect of:

a) Claims against the Company not acknowledged as debts:

Name of the

statute

Nature of dues Amount (Rs.) Period to which

the amount

relates

Forum where the dispute is

pending

Central Sales

Tax Act,

1956

Demand raised for

difference in the rate

of tax.

Rs.218.23 lacs

(Rs.87.30 lacs

deposited by the

Company)

1st April 2000 to

30th

September

2000

Sales Tax Appellate Tribunal,

Chandigarh.

Central Sales

Tax Act,

1956

Vehicles impounded

& demand raised due

to discrepancy in /

inadequacy of

documents.



deposited by the

Company)

May, 2001 High Court of Punjab &


Company)

Punjab VAT

Act, 2005

Vehicles impounded

& demand raised due

to discrepancy in /

inadequacy of

documents.



deposited by the

Company)

March, 2008 Deputy Excise and Taxation



Patiala.

Punjab VAT

Act, 2005

Vehicles impounded

& demand raised due

to discrepancy in /

inadequacy of

documents.

Rs. 1.57 Lacs (Surety

bond and Rs. 0.39


company)

August, 2007 Deputy Excise and Taxation



Patiala.

Gujarat Sales

Tax Act

Demand raised due to

discrepancy in

documents.

Rs. 11.78 lacs (Rs.

2.37 lacs deposited &

Rs. 9.25 lacs has been

given as bank

guarantee by the

company)

2001-02 Gujarat Value Added Tax

Tribunal, Ahmedabad.

Haryana

Value Added

Tax Act,

2003

Demand raised by


Panchkula against non

submission of Form D

& D1.



Panchkula

Central Sales

Tax Act,

1956

Demand raised by


Panchkula against Non

submission of C forms



Panchkula

Central

Excise Act,

1944

Denial of benefit of

notification for fuel

efficiency to chassis

for Motor Vehicles.

Rs147.66 lacs (already

deposited by the

Company)

1995-96 to 1996-

97


back by Supreme Court of

India to Customs Excise and


Tribunal (CESTAT)

Central

Excise Act,

1944

Demand raised to re-

determine the

assessable value of

Rs 4.25 lacs (Includes

penalty Rs. 2.12 lacs)

01 April, 2000 to

31 March, 2004


back by Customs Excise and


F 46

components supplied

to spare parts division

under Rule 7 of

Valuation Rules.

Tribunal (CESTAT) to

Commissioner (Appeals)

Central

Excise Act,

1944

Demand raised in

context with Service

tax on royalty received

on account of use of

brand name of SML.

Rs. 9.92 lacs(Rs. 1.30


Company, includes

penalty of Rs 6.62

lacs)

April‘ 2002 to

March‘ 2005.

Custom Excise and Service Tax

Appellate Tribunal (CESTAT)

Central

Excise Act,

1944

Demand raised for




basis as part of

Transaction Value.

Rs. 3.19 lacs (includes

penalty amounting to

Rs 0.30 lacs)

01 January, 2004 to

30 September,

2004



Central

Excise Act,

1944

Denial of utilization of

service tax credit for

the payment of service

tax liability on behalf

of foreign collaborator

Rs. 5.70 lacs


Rs. 2.85 lacs)

2005-06 Custom Excise and Service Tax


Central

Excise Act,

1944

Inadmissible Service

tax credit utilized for

payment of service tax

liability resulting in

short payment of

service tax liability.

Rs. 5.70 lacs


Rs. 2.85 lacs)

2005-06 Appeal by the Company to be

filed before Custom Excise and

Service Tax Appellate Tribunal

(CESTAT)

Central

Excise Act,

1944

Wrong utilization of

CENVAT credit on

service tax on royalty.

Rs. 19.61 lacs


Rs. 9.81 lacs)

2007-08 Commissioner (Appeals)

Central

Excise Act,

1944

Demand raised for




basis as part of

Transaction Value.

Rs. 1.94 lacs October-2004 to

March-2005

The Supreme Court

Central

Excise Act,

1944

Demand raised for




basis as part of

Transaction Value.

Rs. 5.79 (includes

penalty of Rs 2.90

lacs)

April-2005 to Jan-

2006



Income Tax

Act, 1961

Disallowance of

provision for bad and

doubtful debts



93 (representing the

amount of provision)



Department)

Income Tax

Act, 1961

Demand raised under

section 234 B & C by

assessing authority



99 (Rs.22.02 lacs

deposited by the

Company)



Company).

Income Tax

Act, 1961

Demand raised for non

deduction of TDS on

payment of Fee for

Technical Services/

Royalty

Rs. 28.51 lacs for the

Assessment Year

1987-88

1986-87 Appeal filed by Department

before Punjab & Haryana

High Court

F 47

Income Tax

Act, 1961

Demand raised on

disallowance of

expenses, loading of

statutory dues on

Work-in-Progress u/s

145(A) and weighted

R&D deduction.

Rs. 101.55 lacs

Assessment year

2005-06 (Rs. 62.00


Company)

2004-05 Major relief granted by CIT(A).

Appeal against partial

disallowances filed before

ITAT both by the Company and

the Department

Civil

Recovery suit

Claim filed by finance

company for non

supply of vehicles by

the dealer even after

receiving money

Rs. 4.09 lacs 1997 Appeal filed by the Company

before High Court (Double

Bench) at Chennai.

Civil

Recovery suit

Suit filed by the bank

for recovery of amount

sanctioned to one of

the customer for

purchase of a Swaraj

Mazda vehicle.

Rs. 4.16 lacs

2008

Civil Judge Senior Division,

Gurgaon

Distt.

Consumer

Forum

Award given by the

District Consumer

forum, Bilaspur,

against complaint filed

by the customer for

replacement of

defective engine.

Rs. 2.00 lacs

2008

Appeal filed by the Company

before State Commission,

Himachal Pardesh against the

order of District Consumer

forum, Bilaspur

b) Bank Guarantees given by the Company and outstanding as on 30.09.2009 amounting to Rs. 1,270.48 lacs

(Amount as at March 31, 2009 Rs. 1,006.38 lacs).

c) Letters of Credit issued on behalf of the Company by its bankers and outstanding as on 30.09.2009 amounting

to Rs. 1,005.94 lacs (Amount as at March 31, 2009 Rs. 1,358.31 lacs).

2. Through issue of excise notification no 11/95 dated March 16, 1995 Government sought to lapse Rs. 488 lacs out

of Modvat Credit Receivable balance as on March 16, 1995. Petition by the Company and others with the Delhi

High Court challenging the said notification on grounds of law and equity was allowed by the Supreme Court vide

order dated January 28, 1999. The Finance Act, 1999 has, however, brought in retrospective amendment w.e.f.

March 16, 1995 in the Central Excise Act, empowering the Central Government to lapse such modvat. On legal

advice obtained by the Company to seek redressal against the action of the Government, the Company has filed

writ petition before the Delhi High Court on the ground that the Government action violates the doctrine of

promissory estoppel/expectation principle beside other grounds. The Court has already admitted the petition.

Accordingly, pending Company‘s petition and decision thereupon, the amount of Rs. 488 lacs though adjusted in

excise records has not been provided in the books of account.

3. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)

Rs. 1,812.11 lacs (Amount as at March 31, 2009 Rs. 443.71 lacs).

4. (a) Market promotion expenses (Schedule K) includes Commission on Sales amounting to Rs. 53.68 lacs

(Previous period Rs. 65.13 lacs).

(b) Provision For Warranty* Period Ended

30.09.2009

Year ended

31.03.2009


Balance at the beginning of the period/ year 302.66 463.00

Additions During the period/ year 172.62 226.00

Utilized during the period/ year 99.07 386.34

Balance at the end of the period/ year 376.21 302.66

F 48

*As per warranty policy, the Company is required to provide free repair and replacement of parts required due to

manufacturing defects which appear during the warranty period.

5. As the Company‘s business activities fall within a single primary business segment, viz., ―Commercial Vehicles

and Spares‖, the disclosure requirement of Accounting Standard (AS) – 17 ―Segment Reporting‖ is not applicable.

6. In accordance with Accounting Standard on "Related Party Disclosures" (AS 18), the disclosure in respect of

transactions with the company's related parties are as follows:

i. Holding / Associate Company

(Holding w.e.f January 06, 2009) *

Sumitomo Corporation, Japan

ii. Key Management Personnel * Mr. Yash Mahajan – Managing Director

Mr. Y Watanabe - Whole-time Director

Mr. K Nakajima - Whole-time Director

*As identified and certified by the Management

iii. Transactions with Sumitomo Corporation:


Period Ended

30.09.09

Period Ended

30.09.08

a.

Purchase of components/spares 564.30 945.61

b. Purchase of fixed assets 20.44 -

c. Discounting charges 0.90 5.86

d. Dividend paid (Gross) - 236.67

As at 30.09.2009 As at 31.03.2009

Balance outstanding – Payable 173.32 736.70 iv. Payments to Key Management Personnel:


Period Ended

30.09.09

Period Ended

30.09.08

a.

Remuneration (Refer Note 19 on Schedule N):

Mr. Yash Mahajan 57.53 151.02*

Mr. Y. Watanabe (w.e.f 1

st July, 2009) 17.94 -

Mr. K. Nakajima(up to 30

th June, 2009) 17.94 42.00

b. Other Payments

Rent paid to Mr. Yash Mahajan - 9.69

As at 30.09.2009 As at 31.03.2009

Aggregate balances outstanding 18.00 11.95

* Includes arrears Rs. 88.27 lacs for the period 1st June, 2006 to 31

st March, 2008.

7. Earning Per Share (EPS):

Period Ended

30.09.09

Period Ended

30.09.08

Profit attributable to equity shareholders (Rs. in lacs)

673.46 1,219.58

F 49

Weighted average number of equity shares outstanding during

the period. [excluding 13,300 forfeited equity shares (Previous

period 13,300)]

10,486,700 10,486,700

Basic/Diluted Earning Per Share (Rs.) 6.42 11.63

Face Value per share (Rs.) 10.00 10.00

8. In view of Accounting Standard –22 ―Accounting for Taxes on Income‖ , the Company has accounted for

deferred tax as follows:

Amount (Rs. in lacs)

Particulars Balance as at

01.04.2009 Expense (Saving)

during the period

Balance as at

30.09.2009

A) Deferred Tax Liabilities

(i) Tax impact of difference between carrying

amount of fixed assets in the financial

statements and income tax returns

1147.32

143.78

1291.10

[275.39] [871.93] [1147.32]

Sub Total 1147.32 143.78 1291.10

[275.39] [871.93] [1147.32]

(B) Deferred Tax Assets

(i) Tax impact of expenses charged in the

financial statements but allowable as

deductions in future years under income tax.

218.49 (9.00) 227.49

[175.64] [(42.85)] [218.49]

(ii) Tax impact of expenditure disallowed under

section 40(a)(ia) and 43B of the Income Tax

Act

348.82

(55.13)

403.95

[264.71] [(84.11)] [348.82]

(iii) Tax impact of loss as per normal

provisions of Income Tax Act,1961 859.97 190.35 669.62

[-] [(859.97)] [859.97]

Sub Total 1427.28 126.22 1301.06

[440.35] [(986.93)] [1427.28]

Deferred Tax Assets (B-A) 279.96 270.00 9.96

[164.96] [(115.00)] [279.96]

The Deferred Tax Expense (net) for the current period aggregating to Rs. 270 lacs has been debited to the Profit &

Loss Account.

Note: Figures shown in parenthesis [ ] relate to the year ended March 31, 2009.

F 50

9. Auditors‟ Remuneration:

Period Ended

30.09.09

Period Ended

30.09.08

Rs. In lacs Rs. in lacs

Statutory Audit Fee 11.75 9.25

Tax Audit Fee 3.00 2.50

Other Audit Services / Certification 16.75 5.50

Reimbursement of Out of Pocket Expenses 0.70 0.77

32.20 18.02

10. Information with regard to Licensed Capacity, Installed Capacity*, Production, Sales and Stocks:

a. Capacities Unit of

Measurement

Installed Capacity (Per Annum)

On-road automobiles (having

four or more wheels such as

light, medium and heavy

commercial vehicles)

30.09.2009 31.03.2009

Nos. 18,000* 18,000*

* On double shift basis as certified by the management and relied upon by auditors being technical matter.

* Includes production for internal use.

Licensed Capacity: Not Applicable

b. Production, Sales and Stocks of Finished Goods:

Period ended Year ended

30.09.09 31.03.09

Qty.(Nos.) Rs. In lacs Qty.(Nos.) Rs. In lacs

VEHICLES

Opening Stock 801 5,655.03 670 4,258.86

Production 4,802* - 8,164* -

Sales 4,548** 31,200.81 8,022** 55,240.40

Vehicles Capitalised - - 6 -

Vehicle Scrapped - - 5 -

Closing Stock 1,055*** 7,153.03 801*** 5,655.03

*Includes 2 buses (Previous Year 17) produced during test run.

**Includes 9 buses (Previous Year 5) produced during test run out of which 1 bus (Previous Year 2) has been netted off

from assets capitalised.

*** Includes 28 buses (Previous Year 35) produced during test run.

F 51

SPARES Period Ended Year Ended

30.09.09 31.03.2009

(Rs. in lacs) (Rs. in lacs)

Opening Stock

503.81

420.04

Purchases

1,253.46

2,510.63

Sales

2,342.34

4,743.41

Closing Stock

573.59

503.81

Note: It is not possible to furnish quantitative information in respect of

Spares in view of large number of items of varied nature.

11. Raw Material & Components Consumed:


30.09.09 30.09.08

Qty. (Nos.) Rs. in lacs Qty. (Nos.) Rs. in lacs

CKD Kits 4,802 985.19 5,400 961.53

Tyres, Tube & Rims 89,763 1,634.74 108,556 1,983.22

Cargo Boxes 945 409.23 1,177 569.25

Batteries 5,068 109.54 5,509 154.38

Others 21,750.84 25,809.32

Total 24,889.54 29,477.70

i) In view of varied nature of large number of items, it is not possible to furnish quantitative information on

components.

ii) The figure of others is a balancing figure based on total consumption shown in Schedule J and includes

adjustments for excess/shortage found on physical verification.

iii) Quantities and values of all items except CKD kits (where actuals are taken) represent issues from stores

made during the period.

12. Value of imported and indigenous Raw Material & Components, Stores & Spares consumed and

percentage of each to total consumption:

a. Raw Material & Components:


30.09.09 30.09.08


Imported 5.18 1,289.40 4.72 1,390.70

Indigenous 94.82 23,600.14 95.28 28,087.00

100.00 24,889.54 100.00 29,477.70

F 52

b. Stores & Spares:


30.09.09 30.09.08


Imported - - 10.18 5.50

Indigenous 100.00 29.70 89.82 48.56

100.00 29.70 100.00 54.06

13. C.I.F. Value of Imports:


30.09.09 30.09.08


Raw Material & Components 707.48 1,189.26

Spares & Stores (Including Capital Spares) 3.05 46.04

Capital Goods 33.65 60.82

744.18 1,296.12

14. Earnings in Foreign Currency:


30.09.09 30.09.08

Nos. Rs. in lacs Nos. Rs. in lacs

Exports including Deemed Exports of

Vehicles at FOB Value

213 1,042.43 267 1,316.69

Export of Spare Parts 48.19 48.40

1,090.62 1,365.09

15. Expenditure in Foreign Currency (on payment basis - net of tax):


30.09.09 30.09.08


Traveling 1.38 15.61

Know-how - 41.66

Discounting Charges 5.11 13.21

Technician Fees 25.46 49.51

31.95 119.99

16. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than

45 days as at 30th

September, 2009 and 31st March, 2009. This information as required to be disclosed under the

Micro, Small and Medium Enterprises Development Act, 2006 has been determined on the basis of information

available with the Company.

F 53

17. The Company has a system for maintenance of information and documents as required by the transfer pricing

regulation under Sections 92-92F of the Income Tax Act, 1961, as applicable. Since the law requires existence of

such information and documentation to be contemporaneous in nature, the Company also updates its information

and documentation for international transactions entered into with the associated enterprises during the financial

year. The management is of the opinion that its international transactions are at arms length so that the aforesaid

legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that

of provision for taxation.

18. The Company has taken certain premises under operating lease arrangements. The lease period varies from 3 to

15 years with the option to extend the same with mutual consent. The total lease rental recognized as expense

aggregate to Rs. 73.74 lacs (Previous Period Rs. 85.17 lacs).

Future minimum lease payments under non-cancellable operating leases:

As at As at

30.09.2009 31.03.2009


Not later than one year 7.23 5.35

19. Managerial Remuneration * (Refer Note 6 on Schedule N) :

Period

Ended

30.09.09

Rs. in lacs

Period

Ended

30.09.08

Rs. in lacs

1. Remuneration:

i) Salaries and Allowances 60.00 60.00

ii) Commission 18.00 36.00

iii) Contribution to Provident & Other Funds 10.98 8.10

iv) Other Perquisites 4.43 0.65

93.41 104.75

2. Computation of net profit in accordance with Sec. 309(5) of the Companies Act, 1956

for the calculation of commission

Profit Before Tax 943.46 1,869.58

Add Depreciation charged in accounts 415.65 224.83

Provision for doubtful debts 40.57 110.85

Director‘s remuneration 93.41 193.02

Director‘s sitting fee 6.90 4.50

1,499.99 2,402.78

Less Depreciation as per section 350 of the Companies

Act,1956 399.19 212.04

Less Provision for doubtful debt written back 11.66 28.52

1,089.14 2,162.22

Maximum Commission to Managing Director @ 1%

(as approved by Members) amounts to Rs. 10.89 lacs

(Previous period Rs. 21.62 lacs). However, commission

actually provided in books of accounts on estimation

basis is Rs. 9.00 lacs (Previous period Rs. 18.00 lacs).

9.00 18.00

F 54

Maximum Commission to Whole time Directors @ 1%

as approved by Members) amounts to Rs. 10.89 lacs

(Previous period Rs. 21.62 lacs). However, commission

actually provided in books of accounts on estimation

basis is Rs. 9.00 lacs (Previous period Rs. 18.00 lacs).

9.00 18.00

*Notes:

i. Contribution to Provident and other funds does not include contribution towards gratuity & leave

encashment, as the separate figures for the directors are not available.

ii. Other Perquisites does not include premium in respect of personal accident insurance, as the

separate figures for the directors are not available.

iii. Arrears of Remuneration paid to Managing Director during the period ended September 30, 2008

for the period 1st June, 2006 to 31

st March, 2008 as approved by members is as below:

Particulars (Rs. in lacs)

Salaries and Allowances 64.20

Commission 6.61

Contribution to Provident & Other Funds 10.56

Other Perquisites 6.90

Total 88.27

20. Disclosures as per AS - 15 (Revised) ‗Employee Benefits‘ for half year ended September 30, 2009:

I Defined Contribution Plans:

Provident Fund & Superannuation

During the year the company has recognised the following amounts in the Profit and Loss Account

Rs. Lacs

Period Ended

30.09.09

Period Ended

30.09.08

Employers Contribution to Provident Fund & Pension Fund* 120.62 97.23

Superannuation* 23.40 25.64

II State Plans

Employees State Insurance Scheme

During the half year, the company has recognised the following amounts in the Profit and Loss Account-

Rs. Lacs

Period Ended

30.09.09

Period Ended

30.09.08

Employees State Insurance Scheme* 4.89 3.22

*Included in Contribution to Provident and Other Funds in Schedule K

F 55

III Defined Benefit Plans

a) Contribution to Gratuity Fund – Life Insurance Corporation of India

b) Leave Encashment

Period Ended 30.09.09

Year Ended 31.03.09

Actuarial Assumptions Leave

Encashment

Gratuity Leave

Encashment

Gratuity

(Unfunded) (Funded) (Unfunded) (Funded)

Mortality Table LIC 1994-

96 Ultimate

LIC 1994-

96 Ultimate

LIC 1994-96

Ultimate

LIC 1994-

96 Ultimate

Attrition Rate 5.00% p.a 5.00% p.a 5.00% p.a 5.00% p.a

Imputed Rate of Interest 7.75% p.a 7.75% p.a 7.50% p.a 7.50% p.a

Salary Rise 6.00% p.a 6.00% p.a 5.00% p.a 5.00% p.a

Return on Plan Assets N.A. 9.25% p.a N.A. 9.30% p.a

Remaining Working Life 20.96 Years 20.01 Years 20.69 Years 20.26 Years

Change in the present value of

obligation

Rs. Lacs

Defined benefit obligation at

beginning of period/ year 281.34 677.36 254.20 560.65

Service cost 44.60 28.87 73.78 47.36

Interest cost 10.24 25.98 14.74 38.84

Actuarial loss/(gain) 32.71 74.45 53.96 116.12

Benefits paid (34.08) (13.90) (115.34) (85.61)

Defined benefit obligation at the end

of period/ year

334.81 792.76 281.34 677.36

Change in fair value of plan

Fair value of plan assets as at

beginning of period/ year 212.46 222.84

Expected return on plan assets 9.50 19.37

Contributions by employer - 56.41

Actuarial (loss)/gain (0.32) (0.55)

Benefits paid (13.90) (85.61)

Fair value of plan assets at the end of

period/ year

207.74 212.46

Reconciliation of present value of

defined benefit obligation and the

fair value of assets

F 56

Present value of obligation at the end

of period/ year

792.76 677.36

Fair value of Plan Assets as at the end

of period funded status 207.74 212.46

Present value of unfunded obligation

at the end of period/ year

585.02 464.90

Expenses recognised in the Profit

and Loss Account *

Current Service Cost 44.60 28.87 73.78 47.36

Interest Cost 10.24 25.98 14.74 38.84

Expected return on plan assets - (9.50) - (19.37)

Net actuarial loss/ (gain) recognized 32.71 74.76 53.96 116.67

Total Expenses recognised in the

Profit & Loss Account 87.55 120.11 142.48 183.50

* Included in Salaries, Wages and Bonus & Contribution to Provident and Other Funds in Schedule K.

The major categories of plan assets as a percentage of total plan assets as at September 30, 2009 are as

follows:

Government of India Securities Nil

Insurer Managed Funds 100%

Note: The estimates of future salary increase, considered in actuarial variation, take account of inflation,

seniority, promotion and other relevant factors such as supply and demand in the employment market.

Short term employment benefits

The undiscounted amount of short term employee benefits expected to be paid in exchange for services

rendered by employees is recognized during the period when the employee renders the services. These

benefits include compensated absences and performance incentives.

21.Research and Development Costs :

Period Ended

30.09.09

Rs. in Lacs

Period Ended

30.09.08

Rs. in Lacs

a. Revenue Expenditure

Salaries & Wages 82.66 70.11

Contribution to Provident and other funds 4.51 4.12

Materials 54.46 46.06

Testing & Analytical 65.50 41.10

Travelling 7.54 16.96

Membership & Subscription 2.08 4.59

Telephone, Insurance, AMC, Magazines & General

utilities

8.54 4.16

Total 225.29 187.10

F 57

b. Capital Expenditure

- Capitalised

- Work-in-Progress

50.34

56.53

-

124.40

22. Current tax expense comprise of Rs. 180.18 lacs (Previous period- Nil), being charge for Minimum Alternate Tax

(MAT) under section 115JB of the Income Tax Act, 1961. The Company has recognized MAT Credit Entitlement

of Rs. 180.18 lacs (Previous period- Nil) grouped under Loans and Advances (Schedule G), in accordance with

the Guidance Note issued by the Institute of Chartered Accountants of India.

‗Current Tax for earlier year‘ represents adjustment of MAT provision for the Assessment Year 2009-10 on

account of revision in MAT provisions of the Income Tax Act, 1961 retrospectively as per the Finance Act, 2009.

23. Detail in respect of dividend remitted during the period in foreign currency :

a) Amount remitted during the period: Nil (Previous Year Rs. 1,149,500)

b) Number of Non-resident Shareholders: Nil (Previous Year 1 )

c) Number of Shares held: 209,000 (Previous Year 209,000)

24. Previous period figures have been regrouped / reclassified wherever considered necessary to conform to current

period‘s classification.

F 58

CASH FLOW STATEMENT FOR THE PERIOD ENDED 30TH SEPTEMBER, 2009

(Rs. in Lacs)

Period ended Period ended

September 30, 2009 September 30, 2008



Adjustments For :



Interest Expense 900.87 587.92




Provision for Warranty 73.55 (4.00)

Provision for Fringe Benefit Tax written back (0.20) -

Provision for Wealth Tax (0.03) -


1,584.58 1,135.04


Adjustments for :

Decrease / (Increase) in Sundry Debtors 3,706.30 (2,509.44)


Decrease / (Increase) in Loans & Advances 450.64 (546.94)


(Decrease) / Increase in Current Liabilities 2,108.75 5,019.79 3,308.98 (788.48)

CASH GENERATED FROM OPERATIONS 7,547.83 2216.14

Less: Direct Tax Paid (net of refunds) 191.67 302.96



NET CASH GENERATED FROM OPERATING

ACTIVITIES 7,348.54 1,867.28

B. CASH FLOW FROM INVESTING ACTIVITIES :

Purchase of Fixed Assets (481.40) (971.64)


NET CASH USED IN INVESTING ACTIVITIES (469.20) (966.60)

C. CASH FLOW FROM FINANCING ACTIVITIES

Unsecured Loans taken during the period 3,000.00 1,508.80

Unsecured Loans repaid during the period 2,000.00 1,000.00 3,000.00 (1,491.20)

Secured Loans taken / (repaid) during the period (6,309.97) 3,936.38

Dividend Paid (0.18) (559.55)

Dividend Tax - (98.02)

Interest Paid (999.07) (824.26)

NET CASH INFLOW FROM /(USED IN) FINANCING

ACTIVITIES (6,309.22) 963.35

Net Increase in Cash and Cash Equivalents 570.12 1,864.03 Cash and Cash Equivalents as at beginning of the period

(#1) 700.89 905.22

Cash and Cash Equivalents as at end of the period (#2) 1,271.01 2,769.25

Notes:-

# 1 Cash and Bank Balances 700.89 914.28

F 59


Cash and Cash Equivalents – Opening Balance 700.89 905.22

# 2 Cash and Bank Balances 1,271.01 2,769.25

less. Cash Credit Accounts (being treated as financing activity) - -

Cash and Cash Equivalents – Closing Balance 1,271.01 2,769.25

Note:


Standard -3 on Cash Flow Statements .



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

even date


PRICE WATERHOUSE



Partner Sr. Vice President -Finance Managing Director



71

ACCOUNTING RATIOS AND CAPITALISATION STATEMENT

Accounting Ratios

The following tables set forth certain accounting and other ratios based on our Company‘s financial statements

as at and for the period ended September 30, 2009 on which the Auditor has issued a limited review report, and

the Company‘s financial statements as at and for the period ended March 31, 2009 on which the Auditor has

issued an audit report. The aforementioned financial statements are included in the sections titled ―Financial

Information – Auditor’s Report and Audited Financial Statements for the year ended March 31, 2009‖ and

―Financial Information – Limited Review Report and Financial Statements for the six months ended

September 30, 2009‖ on pages F1 and F32, respectively.

Particulars As on September 30, 2009 As on March 31, 2009

Weighted average number of equity shares

outstanding during the period (excluding 13,300

forfeited equity shares)

10,486,700 10,486,700

Basic / Diluted Earning Per Share (Rs.) 6.42 4.57

Return on Net Worth (%) 6.52% 4.96%

Net Asset Value Per Share (Rs.) 98.47 92.05

The Ratios have been computed as below:

Earning Per

Share (Basic)

(Rs.)

Net profit attributable to Equity Shareholders (excluding extraordinary items, if any)

Weighted Average number of Equity Shares outstanding during the year

Earning Per Share

(Diluted) (Rs.)


Weighted Average number of Diluted Equity Shares outstanding during the year

Return On Net

worth (%):


Net Worth at the end of the year (excluding revaluation reserves)

Net Asset Value

per Share (Rs.)

Net Worth at the end of the year (excluding revaluation reserves)

Weighted Average number of Equity shares outstanding during the year

Capitalization Statement (Rs. in lacs)

Particulars Pre-Issue as on

September 30, 2009

Adjusted for the Issue

Borrowing

- Short – Term Debt 11,218.71 11,218.71

- Long – Term Debt 5,500.00 5,500.00

Total Debt 16,718.71 16,718.71

Shareholders' funds

Equity Share Capital 1,049.38 1,447.87


Total Shareholders Funds 10,326.23 18,296.12

72

Particulars Pre-Issue as on

September 30, 2009

Adjusted for the Issue

Total Debt / Equity Ratio 1.62 0.91

Long-term Debt / Equity ratio 0.53 0.30

The Ratios have been computed as below:

Total Debt /

Equity Ratio

Short Term Debt + Long Term Debt

Equity (i.e., Equity Share Capital + Reserves & Surplus)

Long Term Debt /

Equity Ratio

Long Term Debt

Equity (i.e., Equity Share Capital + Reserves & Surplus)

73

STOCK MARKET DATA FOR EQUITY SHARES OF THE COMPANY

Our Company‘s Equity Shares are currently listed on the Stock Exchanges. Stock market data for our Equity

Shares has been given separately for the BSE and NSE. Our Equity Shares were voluntarily delisted from the

Ludhiana Stock Exchange, pursuant to a letter dated June 16, 2004 received from the Ludhiana Stock Exchange.

Similarly, our Equity Shares were voluntarily delisted from the Delhi Stock Exchange, pursuant to a letter dated

March 31, 2004 received from the Delhi Stock Exchange. For details of listing and delisting of our Equity

Shares, refer to the section titled ―History and Certain Corporate Matters - Listing‖ on page 62. As our

Company‘s Equity Shares are actively traded on the Stock Exchanges, stock market data has been given

separately for each of these Stock Exchanges.

The high and low closing prices recorded on the Stock Exchanges for the preceding three (3) Fiscals and the

number of Equity Shares traded on the days the high and low prices were recorded are stated below.

BSE

Year ending

March 31 High (Rs.) Date of High

Volume

on date of

high (no.

of Equity

Shares)

Low

(Rs.) Date of Low

Volume on

date of low

(no. of

shares)

Average

price for

the year

(Rs.)

2009 335.00 April 25,

2008 269 105.00

March 3,

2009 10 242.08

2008 362.50 May 11,

2007 2,917 257.00

January 21,

2008 470 313.66

2007 367.80 April 10,

2006 919 206.00

August 7,

2006 50 282.21

(Source: www.bseindia.com)

NSE

Year ending

March 31 High (Rs.) Date of High

Volume

on date of

high (no.

of shares)

Low

(Rs.) Date of Low

Volume on

date of low

(no. of

shares)

Average

price for

the year

(Rs.)

2009 335.00 April 28,

2008 118 105.00

March 16,

2009 775 243.06

2008 360.10 April 24,

2007 3,637 250.00

January 22,

2008 225 313.91

2007 372.95 April 10,

2006 833 211.05

June 15,

2006 2,633 281.73

(Source: www.nseindia.com)

The high and low prices and volume of Equity Shares traded on the respective dates during the last six (6)

months is as follows:

BSE

Month,

Year

High

(Rs.)

Date of High Volume on

date of high

(no. of

shares)

Low

(Rs.)

Date of low Volume on

date of low

(no. of

shares)

Average

price for the

month (Rs.)

January

2010

331.00 January 4,

2010

131 274.65 January 29,

2010

746 300.36

December

2009

334.80 December 31,

2009

10,019 268.00 December 8,

2009

1,641 295.21

November

2009

281.45 November 19,

2009

10,485 200.20 November 3,

2009

237 244.57

October

2009

236.30 October 21,

2009

5,958 209.00 October 30,

2009

119 219.83

September

2009

221.90 September 8,

2009

5 205.75 September 10,

2009

219 213.84

August

2009

229.95 August 31,

2009

350 206.25 August 3,

2009

100 217.07

(Source: www.bseindia.com)

74

NSE

(Source: www.nseindia.com)

Shares are the same on more than one (1) day, the day on which there has been higher volume of trading has

been considered for the purposes of this section.

In the event the high and low price of the Equity Shares are the same on more than one (1) day, the day on

which there has been higher volume of trading has been considered for the purposes of this section.

Month,

Year

High

(Rs.)

Date of High Volume on

date of high

(no. of

shares)

Low

(Rs.)

Date of low Volume on

date of low

(no. of

shares)

Average

price for

the month

(Rs.)

January

2010

339.00 January 4,

2010

830 276.95 January 28,

2010

1,688 301.48

December

2009 334.50

December 31,

2009

10,427 266.05 December 7,

2009

230 295.84

November

2009 282.35

November 19,

2009

25,272 195.30 November 4,

2009

41 243.90

October

2009 231.20

October 23,

2009

150 202.40 October 30,

2009

1,095 218.85

September

2009 222.70

September 10,

2009

315 209.10 September 15,

2009

966 215.50

August

2009 230.00

August 31, 2009 909 207.50 August 21,

2009

520

216.82

75

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

The following discussion of the Company’s financial condition and results of operations should be read in

conjunction with the sections titled “Financial Information – Auditor’s Report and Audited Financial

Statements for the year ended March 31, 2009” and “Financial Information – Limited Review Report and

Financial Statements for the six months ended September 30, 2009” on pages F1 and F32, respectively.

For the purpose of this section, unless the context requires otherwise, references to “Fiscal 2009” and “Fiscal

2008” are to the financial year ended March 31 of the relevant year and references to “year” are to the

financial year of the Company.

This section contains forward-looking statements that involve risks and uncertainties. The Company’s actual

results may differ materially from those discussed in such forward-looking statements as a result of various

factors, including those described under the sections titled “Risk Factors” and “Forward-Looking

Statements” on pages xi and x, respectively.

Overview of the Results of our Operations for the Six Months Ended September 30, 2009

The following tables set forth selected financial information of the Company, including as a percentage of total

income, for the six months ended September 30, 2009 and September 30, 2008 based on the Company‘s

unaudited financial statements as at and for the six month period ended September 30, 2009 and for the six

month period ended September 30, 2008 on which the Auditor has issued a limited review report. This

discussion should be read in conjunction with the section titled ―Financial Information - Limited Review

Report and Financial Statements for the six months ended September 30, 2009‖ on page F32.

Particulars September 30, 2009 September 30, 2008

(Rs. in lacs) % of Total

Income

(Rs. in lacs) % of

Total

Income

Sale Volumes (No. of vehicles) 4,547 5,454

Net Sales Revenues 30,993.07 99.25% 36,475.36 99.09%

Other Operating Income (1) 233.83 0.75% 333.20 0.91%

Total Income 31,226.90 100.00% 36,808.56 100.00%

Manufacturing and Other Expenses

Materials Consumed (2) 24,745.68 79.25% 30,364.32 82.50%

Employee Costs 2,006.30 6.42% 1,763.13 4.79%

Other Expenditure (3) 2,082.22 6.67% 1,948.13 5.29%

Finance Charges (net) 1,033.59 3.31% 638.57 1.73%

Depreciation/ Amortization 415.65 1.33% 224.83 0.61%

Total Expenditure 30,283.44 96.98% 34,938.98 94.92%

Profit Before Tax 943.46 3.02% 1,869.58 5.08%

Provision for Taxation

Current Tax 169.00 0.54% 435.00 1.18%

Current Tax Earlier Years 11.18 0.04% - -

Deferred Tax Charge / (Credit) 270.00 0.86% 190.00 0.52%

Fringe Benefit Tax - - 25.00 0.07%

MAT Credit Entitlement (180.18) -0.58% - -

Total Tax Expense / (Credit) 270.00 0.86% 650.00 1.77%

Net Profit After Tax 673.46 2.16% 1,219.58 3.31%

Notes:

1. Other operating income includes sale of scrap, export incentives, liabilities / provisions no longer required to be written back, royalty and miscellaneous income.

2. Materials consumed include, raw materials and components consumed, movement of finished goods and work in progress.

3. Other expenditure includes consumption of stores, spares and tools, marketing sales and promotion expenses etc.

Six months ended September 30, 2009 compared to the six months ended September 30, 2008

76

Total Income

Our total income consists of net sales revenues and other operating income. Our total income declined by

15.16% for the six months ended September 30, 2009 compared to the six months ended September 30, 2008,

primarily on account of a 15.03% decrease in our net sales revenue.

Net Sales Revenue

Our net sales revenue decreased by Rs. 5,482.29 lacs, or 15.03%, to Rs. 30,993.07 lacs for the six months ended

September 30, 2009 from Rs. 36,475.36 lacs for the six months ended September 30, 2008. The decline in net

sales revenue was primarily on account of a decline in CV sales from 5,454 units for the six months ended

September 30, 2008 to 4,547 units for the six months ended September 30, 2009, mainly arising because of a

continued overall fall in the demand for CVs which began during the second half of Fiscal 2009 resulting from a

variety of macro economic factors including higher interest rates, a reduction in the availability of vehicle

finance, and decrease in disbursement of loans for financing of CVs.

Other Operating Income

Other operating income decreased to Rs. 233.83 lacs for the six months ended September 30, 2009 from Rs.

333.20 lacs for the six months ended September 30, 2008 primarily on account of a decline in the income from

the sale of scrap and export incentives.

Total Expenditure

Our total expenditure decreased by 13.32% to Rs. 30,283.44 lacs for the six months ended September 30, 2009

from Rs. 34,938.98 lacs for the six months ended September 30, 2008. As a percentage of total income, the total

expenditure increased from 94.92% for the six months ended September 30, 2008 to 96.98% for the six months

ended September 30, 2009.

The following table presents our total expenditure for the six months ended September 30, 2009 and the six

months ended September 30, 2008.

Particulars Total Expenditure

September

30, 2009

September

30, 2008

(Rs. in lacs)

Manufacturing and Other Expenses (A)

Materials Consumed 24,745.68 30,364.32

Employee Costs 2,006.30 1,763.13

Other Expenditure 2,082.22 1,948.13

Finance Charges (net) (B) 1,033.59 638.57

Depreciation/ Amortization (C) 415.65 224.83

Total Expenditure (A + B + C) 30,283.44 34,938.98


Manufacturing and other expenses consist of materials consumed, employee costs and other expenditure.

Manufacturing and other expenses decreased by 15.38% from Rs. 34,075.58 lacs for the six months ended

September 30, 2008 to Rs. 28,834.20 lacs for the six months ended September 30, 2009. As a percentage of total

income of the Company, our total expenditure increased from 94.92% for the six months ended September 30,

2008 to 96.98% for the six months ended September 30, 2009 primarily on account of a 13.79% increase in

employee costs due to an addition of employees for the expansion project at our Company‘s Nawanshahar plant

and a rise in the compensation package of our employees.

Materials Consumed

Materials consumed as a percentage of total income declined to 79.25% for the six months ended September 30,

2009 from 82.50% for the six months ended September 30, 2008. In absolute terms, manufacturing cost

decreased by 18.50% to Rs. 24,745.68 lacs for the six months ended September 30, 2009 compared to Rs.

30,364.32 lacs for the six months ended September 30, 2008. Our manufacturing cost primarily consists of raw

materials and components consumed, which declined by 15.56% from Rs. 29,477.70 lacs for the six months

77

ended September 30, 2008 to Rs. 24,889.54 lacs for the six months ended September 30, 2009. The decline was

mainly due to decline in production volumes in line with the decline in net sales.

Employee Cost

Our employees cost consist of salaries, wages and bonus, contribution to provident and other funds, and

payments towards workmen and staff welfare. For the six months ended September 30, 2009, salaries, wages

and bonus, contribution to provident and other funds, and payments towards workmen and staff welfare

increased by 10.68%, 30.54% and 24.35% respectively, compared to the six months ended September 30, 2008.

The increase was mainly due to addition of employees for the expansion project at our Company‘s Nawanshahar

plant and rise in the compensation package of our employees. Consequently, our employee cost increased by

13.79%, from Rs. 1,763.13 lacs for the six months ended September 30, 2008 to Rs. 2,006.30 lacs for the six

months ended September 30, 2009, and represented 4.79% and 6.42% of total income for the six months ended

September 30, 2008 and the six months ended September 30, 2009, respectively.

Other Expenditure

Other expenditure includes operating, administrative and other expenses other than employee cost. Some of the

key expenditures covered under this head are marketing expenses, fuel expenses and travelling expenses. For the

six months ended September 30, 2009, the marketing expenses increased by 9.75% from Rs. 967.43 lacs for the

six months ended September 30, 2008 to Rs. 1,061.80 lacs for the six months ended September 30, 2009. For

the six months ended September 30, 2009, the travelling expenses increased by 19.99%, from Rs. 211.88 lacs

for the six months ended September 30, 2008 to Rs. 254.24 lacs for the six months ended September 30, 2009.

Legal and professional expenses, and rates and taxes also increased by 108.85% to reach Rs. 152.71 lacs for the

six months ended September 30, 2009 compared to six months ended September 30, 2008. The increase in our

marketing expenses was on account of extra marketing costs incurred by the Company in response to the severe

market conditions including incentivisation. Likewise the increase in our travelling expenses was on account of

extra traveling undertaken by marketing personnel. Our overall, other expenditure increased by 6.88% from Rs.

1,948.13 lacs in for the six months ended September 30, 2008 to Rs. 2,082.22 lacs for the six months ended

September 30, 2009.

Finance Charges (Net)

Finance charges increased by 61.86% for the six months ended September 30, 2009, from Rs. 638.57 lacs for

the six months ended September 30, 2008 to Rs. 1,033.59 lacs for the six months ended September 30, 2009,

and represented 1.73% and 3.31% of the total income for the six months ended September 30, 2008 and for the

six months ended September 30, 2009, respectively. The rise in finance charges was on account of charge of

interest in relation to the expansion project at our Company‘s Nawanshahar plant to our Company‘s profit and

loss account, which in the corresponding period was capitalized as the project was under set-up stage.

Depreciation / Amortization

Depreciation/amortization increased by 84.87% for the six months ended September 30, 2009, from Rs. 224.83

lacs for the six months ended September 30, 2008 to Rs. 415.65 lacs and represented 0.61% and 1.33% of total

income for the six months ended September 30, 2008 and for the six months ended September 30, 2009,

respectively. This increase was primarily due to charge of additional depreciation in respect of new fixed assets

in relation to the expansion project at our Company‘s Nawanshahar plant

Tax Expense / (Credit)

For the six months ended September 30, 2009, we had a lower tax expense of Rs. 270.00 lacs as compared to a

tax expense of Rs. 650.00 lacs for the six months ended September 30, 2008 on account of decrease in taxable

income.

Net Profit After Tax

As a result of the foregoing, our net profit after tax decreased by 44.78% for the six months ended September

30, 2009 from Rs. 1,219.58 lacs for the six months ended September 30, 2008 to Rs. 673.46 lacs. As a

percentage of total income, the net profit after tax decreased to 2.16% for the six months ended September 30,

2009 from 3.31% for the six months ended September 30, 2008.

78

Overview of the Results of our Operations for Fiscal 2009 and Fiscal 2008

The following tables set forth selected financial information of the Company, including as a percentage of total

income, for Fiscal 2009 and Fiscal 2008, based on the Company‘s financial statements on which the Auditor has

issued an audit report. This discussion should be read in conjunction with the section titled ―Financial

Information – Auditor’s Report and Audited Financial Statements for the year ended March 31, 2009‖ on

page F1 of this Letter of Offer.


(Rs. in

lacs)

% of Total

Income (Rs. in lacs) % of Total Income

Sale Volumes (No. of

vehicles) 8,020 11,272

Net Sales Revenues 54,085.23 98.88 66,543.45 99.11

Other Operating Income (1)

610.01 1.12 598.75 0.89

Total Income 54,695.24 100 67,142.20 100


Materials Consumed (2)

44,756.94

81.83 55,023.70 81.95

Employees Cost 3,546.19 6.48 2,914.11 4.34

Other Expenditure (3) 3,585.81 6.55 3,830.63 5.70

Finance Charges (net) 1,808.77 3.31 1,173.42 1.75

Depreciation/

Amortization

583.92 1.07 330.07 0.49

Total Expenditure 54,281.63 99.24 63,271.93 94.24

Profit Before Tax 413.61 0.76 3,870.27 5.76

Provision for Taxation

-Current Tax 41.22 0.08 1,380.00 2.05

-Deferred Tax Charge /

(Credit)

(115.00) -0.21 (90.00) -0.13

-Fringe Benefit Tax 49.85 0.09 60.00 0.09

-MAT Credit

Entitlement

(41.22) -0.08 0.00 0.00

Total Tax Expense /

(Credit)

(65.15) -0.12 1,350.00 2.01

Net Profit After Tax 478.76 0.88 2,520.27 3.75

Notes:

i. Other operating income includes sale of scrap, export incentives, liabilities/provisions no longer required to be written back, royalty and miscellaneous income.

ii. Materials consumed include, raw materials and components consumed, movement of finished goods and work in progress.

iii. Other expenditure includes consumption of stores, spares and tools, marketing sales and promotion expenses etc.

Fiscal 2009 Compared to Fiscal 2008

The recent global financial crisis, reduction in availability of vehicle financing and higher interest rate has

impacted the demand for CVs in India, particularly in the second half of Fiscal 2009. According to the SIAM,

sales (domestic and exports) for CVs fell from 309,095 vehicles during the second half of Fiscal 2008 to

178,170 vehicle during the second half of Fiscal 2009. In line with overall decline in demand of CVs during the

second half of Fiscal 2009, our Company also experienced a fall in sale of CVs which severally impacted net

revenue and overall performance of operations during Fiscal 2009.

Total Income

Our total income consists of net sales revenues and other operating income. Our total income declined by

18.54% in Fiscal 2009 compared to Fiscal 2008, primarily on account of an 18.72% decrease in our net sales.

Net Sales Revenue

79

Our net sales revenue decreased by Rs. 12,458.22 lacs, or 18.72%, to Rs. 54,085.23 lacs in Fiscal 2009 from Rs.

66,543.45 lacs in Fiscal 2008. The decline in net sales was primarily on account of a decline in CV sales from

11,272 units in Fiscal 2008 to 8,020 units in Fiscal 2009, mainly during the second half of Fiscal 2009, arising

largely because of an overall fall in the demand for CVs. The fall in demand for CVs was primarily on account

of a variety of macro economic factors including a slowdown in domestic growth, higher interest rates, a

reduction in the availability of vehicle finance, and decrease in disbursement of loans for financing of CVs.

Other Operating Income

Other operating income includes income from sale of scrap, export incentives relating to DEPB, liabilities no

longer required written back, royalties received by us in respect of use of corporate name for sale of lubricants

by companies engaged in the business of manufacture and marketing of these lubricants and sundry items. Other

operating income increased to Rs. 610.01 lacs in Fiscal 2009 from Rs. 598.75 lacs in Fiscal 2008. The decline in

income from export incentives and royalty payments in Fiscal 2009 was offset by an increase in the income

from sale of scrap, liabilities / provisions no longer required written back.

Total Expenditure

Our total expenditure decreased by 14.21% to Rs. 54,281.63 lacs in Fiscal 2009 from Rs. 63,271.93 lacs in

Fiscal 2008. As a percentage of total income, the total costs increased from 94.24% in Fiscal 2008 to 99.24% in

Fiscal 2009.

The following table presents our total expenditure for Fiscal 2009 and 2008.

Particulars Total Expenditure

Fiscal 2009 Fiscal 2008

(Rs. in lacs)

Manufacturing and Other Expenses (A)

-Materials Consumed 44,756.94 55,023.70

-Employees Cost 3,546.19 2,914.11

-Other Expenditure 3,585.81 3,830.63

Finance Charges (Net) (B) 1,808.77 1,173.42

Depreciation/ Amortization (C) 583.92 330.07

Total Expenditure (A+B+C) 54,281.63 63,271.93


Manufacturing and other expenses consist of materials consumed, employee costs and other expenditure.

Manufacturing and other expenses decreased by 15.99% from Rs. 61,768.44 lacs in Fiscal 2008 to Rs. 51,888.94

lacs in Fiscal 2009. As a percentage of total income of the Company, it increased from 92.00% in Fiscal 2008 to

94.87% in Fiscal 2009 primarily on account of a 21.69% increase in employee costs due to an increased

requirement of employees for the expansion project at our Company‘s Nawanshahar plant and a rise in the

compensation levels of the Company‘s permanent employees and senior management in Fiscal 2009 as

compared to Fiscal 2008.

Materials Consumed

Materials consumed as a percentage of total income declined to 81.83% in Fiscal 2009 from 81.95% in Fiscal

2008. In absolute terms, manufacturing cost decreased by 18.66% to Rs. 44,756.94 lacs in Fiscal 2009 compared

to Rs. 55,023.70 lacs in Fiscal 2008. Our manufacturing cost primarily consists of raw materials and

components consumed, which declined by 18.25% from Rs. 53,886.49 lacs in Fiscal 2008 to Rs. 44,053.74 lacs

in Fiscal 2009 due to decline in production volumes in line with the decline in net sales

Employee Cost

Our employees cost consist of salaries, wages and bonus, contribution to provident and other funds, and

payments towards workmen and staff welfare. In Fiscal 2009, salaries, wages and bonus, contribution to

provident and other funds, and payments towards workmen and staff welfare increased by 21.00%, 33.23% and

9.44% respectively, compared to Fiscal 2008. The increase was mainly due to increased requirement of

employees primarily for our expansion project at the Nawanshahar Plan and a rise in the compensation levels of

80

our permanent employees and senior management. Consequently, our employee cost increased by 21.69%, from

Rs. 2,914.11 lacs in Fiscal 2008 to Rs. 3,546.19 lacs in Fiscal 2009, and represented 4.34% and 6.48% of total

income for the years ended March 31, 2008 and 2009, respectively.

Other Expenditure

Other expenditure includes operating, administrative and other expenses other than employee cost. Some of the

key expenditures covered under this head are Marketing Expenses, Stores, Fuel Expenses and Travelling

Expenses. In Fiscal 2009, the Marketing Expenses declined by 15.23% from Rs. 1,858.09 lacs in Fiscal 2008 to

Rs. 1,575.06 lacs in Fiscal 2009. Similarly, in Fiscal 2009, the Fuel Expenses declined by 5.93%, from Rs.

354.66 lacs in Fiscal 2008 to Rs. 333.62 lacs in Fiscal 2009. The decline in our Marketing Expenses was on

account of reduction in sale volumes and cost reduction measures on our part. The decline in Fuel Expenses,

despite an increase in fuel costs during Fiscal 2009, was mainly due to reduced requirements from our

manufacturing facilities due to a decrease in production volume compared to Fiscal 2008. Our overall ‗other

expenditure‘ declined by 6.39% from Rs. 3,830.63 lacs in Fiscal 2008 to Rs. 3,585.81 lacs in Fiscal 2009.

Finance Charges (Net)

Finance charges increased by 54.15% in Fiscal 2009, from Rs. 1,173.42 lacs in Fiscal 2008 to Rs. 1,808.77 lacs

in Fiscal 2009, and represented 1.75% and 3.31% of the total income for Fiscal 2008 and Fiscal 2009

respectively. The rise in finance charges was due to higher levels of borrowings including a short term loan of

Rs. 2,500 lacs and a cash credit of Rs. 6,628.69 lacs, on account of decline in cash generation caused by sharp

drop in sales post September, 2008 and hike in interest rates.

Depreciation / Amortization

Depreciation/amortization increased by 76.9% in Fiscal 2009, from Rs. 330.07 lacs in Fiscal 2008 to Rs. 583.92

lacs and represented 1.07% and 0.49% of total income for Fiscal 2009 and Fiscal 2008, respectively. This

increase was primarily due to purchase of new fixed assets relating to the expansion of our manufacturing

facilities and setting up of our new in-house bus body plant. Our gross block increased to Rs. 13,499.46 lacs as

on March 31, 2009 from Rs. 4,863.88 lacs as on March 31, 2008.

Tax Expense / (Credit)

In Fiscal 2009 we had a tax credit of Rs. 65.15 lacs as compared to a tax expense of Rs. 1,350.00 lacs in Fiscal

2008. The tax credit in the Fiscal 2009 was primarily due to deferred tax asset calculated as per Accounting

Standard 22, arising because of a negative taxable income due to higher tax depreciation allowance on capital

expenditure and R&D expenditure.

Net Profit after Tax

As a result of the foregoing, our net profit after tax decreased by 81.00% in Fiscal 2009 from Rs. 2,520.27 lacs

in Fiscal 2008 to Rs. 478.76 lacs. As a percentage of total income, the net profit after tax decreased to 0.88% in

Fiscal 2009 from 3.75% in Fiscal 2008.

81

FINANCIAL INDEBTEDNESS

1. Details of Secured Borrowings

The facilities with respect to our Company‘s secured borrowings on December 31, 2009 are as follows:

A. Term Loans

Sl.

No.

Name of

lender

Facility Interest

rate (%)

Repayment schedule Security Amount

Outstanding as

on December 31,

2009

1. Allahabad

Bank

Term loan

of Rs.

6,000.00

lacs

12.00 Two (2) instalments of

Rs. 500.00 lacs

quarterly, beginning

September 2009 and

five (5) instalments of

Rs. 1,000.00 lacs

quarterly, beginning

March 2010

First Equitable

mortgage /

hypothecation charge

over the entire fixed

assets of our Company,

ranking pari passu

with other lenders

Rs. 5,000.00 lacs

2. Canara

Bank*

Term loan

of Rs.

11,000.00

lacs

12.25 Rs. 4,000.00 lacs to be

repaid within 20

quarterly instalments,

beginning June 2010

and Rs. 7,000.00 lacs

to be repaid within 20

quarterly instalments,

beginning June 2014

First pari-passu charge

on entire fixed assets

of the Company with

other lenders

-

3. Mizuho

Corporate

Bank*

Term loan

of Rs.

7,000.00

lacs

MIBOR

+500 basis

points

One (1) year

moratorium and 10

equal half yearly

instalments, beginning

from the end of 18

months from

drawdown

First pari-passu charge

on plant and machinery

of the Company,

equitable mortgage on

land and building,

which would be shared

on pari passu basis

ranking with other

lenders

-

*The facilities have not yet been availed.

B. Working Capital Facilities

Sl.

No.

Name of lender Facility Interest rate

(%)

Security Amount

Outstanding as on

December 31, 2009

1. Consortium

agreement with

Canara Bank and

Indian Overseas

Bank dated January

23, 1993, as

amended by the

supplemental

working capital

consortium

agreement dated

January 28, 2009

12,700.00 lacs,

including fund

based and non-fund

based limits of Rs.

7,000 lacs and Rs.

5,700 lacs,

respectively

Canara Bank -

11.75; and

Indian Overseas

Bank -10.00

First charge by way

of hypothecation of

current assets and

other movables,

both present and

future and also by

way of collateral a

first charge on our

Company‘s

immovable and

movable property

Rs. 6,773.77 lacs

82

2. Details of Unsecured Borrowings

The facilities with respect to our Company‘s unsecured borrowings as on December 31, 2009 are as follows:

Sl.

No.

Name of

lender

Facility Interest rate

(%)

Repayment

schedule

Amount

Outstanding as on

December 31, 2009

1. Mizuho

Corporate

Bank

Short term loan of Rs.

7,000.00 lacs

7.00 Repayable on demand Rs. 6,900.00 lacs

2. Deutsche

Bank*

Credit facilities including

overdraft (―OD‖), short

term loan (―STL‖), bills

discounting (―BD‖),

letters of credit,

guarantees, pre export

advance (―PEA‖), export

bills purchase (―EBP‖)

and invoice financing

aggregating to Rs.

3,000.00 lacs

-

STL – maximum 6

months

BD – maximum 90 days

LC – validity / usage

maximum 180 / 180 days

Guarantees maximum of

12 months

Invoice financing –

maximum 90 days

PEA / EBP – maximum

90 days

-

3. Standard

Chartered

Bank

Facilities including

working capital demand

loan (―WCDL‖),

overdraft(―OD‖),

receivables service,

payment undertaking, pre

and post shipment credit

aggregating to Rs.

2,000.00 lacs

6.70 - 7.30 WCDL – maximum 12

months

OD – maximum up to 1

day

Receivables service –

maximum up to 120 days

Payment undertaking -


Pre shipment credit –


Post shipment credit –


Rs. 2,000.00 lacs

*The facility has not yet been availed.

The Company has not defaulted in relation to the aforementioned secured and unsecured borrowings.

Additionally, under the terms of certain arrangements, our Company has undertaken not to do any of the

following without the prior written consent of the lenders, including:

to enter into any scheme of expansion, merger, amalgamation, compromise or reconstruction;

to sell, lease or transfer all or substantial portion of its fixed assets;

to change / modify the existing shareholding pattern;

to change our ownership or constitution or entities controlling us;

to change our shareholding, management or majority of directors;

to vary the shareholding of our directors and principal shareholders;

to change the general nature of our business;

to make any material amendments to our constitutional documents;

to offer any corporate guarantee to any company;

to allow to be withdrawn any monies brought in by the promoter and directors or relatives and friends

of the promoters and directors;

to invest any funds by way of deposits and loans, or in the share capital of any other concern;

to borrow or obtain credit facilities of any description from other banks or money lenders; and

to enter into any hire purchase arrangement.

83

3. Details of Bank Guarantees

In addition to the details of the financial indebtedness, the details of bank guarantees given by the Company as

on September 30, 2009 is provide below:

S.

No. Beneficiary Name

Date of the bank

guarantee

Amount outstanding as on

September 30, 2009

(Rs. in lacs)

1

Deputy Sales Tax Commissioner-Government of

Jammu & Kashmir February 10, 2004 4.00

2

Deputy Sales Tax Commissioner- Government of

Jammu & Kashmir February 10, 2004 2.00

3 Director Supplies & Disposal, Haryana February 19, 2004 10.00

4 Ministry of Defence, Govt of India- New Delhi September 26, 2007 2.94

5 Commissioner Commercial Tax-Ahmedabad December 31, 2007 9.26

6 DTE General of Ordinance Services-New Delhi March 12, 2008 54.45

7 Director Mech. Transport Air HQ New Delhi April 8, 2008 14.66

8

Commandant (Coord) Adm, Dte,HQ,DG, BSF-

New Delhi May 28, 2008 1.20

9 President of India GoI, DGBSF September 5, 2008 4.19

10

Gujarat State Disaster Management Authority-

Gandhinagar October 16, 2008 272.94

11


Gandhinagar November 6, 2008 71.48

12



13



14



15

Dte General of Ordance, Hq. of MOD(Army)- New

Delhi January 13, 2009 27.07

16

P&AO, Department of Road Transport &

Highways, New Delhi January 13, 2009 67.03

17 DDO, FHQ BSF-New Delhi January 13, 2009 0.49

18 Uttarakhand Transport Corporation March 18, 2009 20.00

19

Housing & Urban Development Department-

Bhubaneshwar March 21, 2009 20.00

20 Urban Development Department -Jharkhand March 21, 2009 30.00

21

MD U.P State Road Transport Corporation-

Lucknow March 23, 2009 45.30

22

MD UP State Road Transport Corporation-

Lucknow March 23, 2009 34.70

23 Commissioner Raipur Municipal Corporation March 26, 2009 46.37

24 Deputy Transport Commissioner-Agartala May 15, 2009 25.00

25 Delhi Metro Rail Corporation-Delhi May 15, 2009 60.00

26 Patna Municipal Corporation- Patna May 22, 2009 11.00

27 State Urban Development Authority- Chandigarh June 26, 2009 25.00

28 Ranchi Municipal Corporation-Ranchi July 13, 2009 64.33

29 Dhanbad Municipal Corporation- Dhanbad July 13, 2009 65.25

30 Jamshedpur Notified Area Committee- Jamshedpur July 13, 2009 46.61

31 Himachal Road Transport Corporation- Shimla September 23, 2009 15.75

32 Himachal Road Transport Corporation- Shimla September 23, 2009 18.00

Total 1,270.48

84

SECTION VI – LEGAL AND OTHER INFORMATION

OUTSTANDING LITIGATION AND DEFAULTS

Except as described below, there are no outstanding litigations including, suits, criminal or civil prosecutions

and taxation related proceedings against our Company and our Directors that would have a material adverse

effect on our business. Further, there are no defaults, non-payment of statutory dues including, institutional/

bank dues and dues payable to holders of any debentures, bonds and fixed deposits that would have a material

adverse effect on our business other than unclaimed liabilities against our Company and our Directors as of the

date of this Letter of Offer.

Our Company is not involved in any fresh or pending litigation against in the last 10 years where the aggregate

amount involved is more than either 1% of the net worth of our Company or 1% of the total revenue of our

Company as per the last audited financial year.

Further, except as disclosed below our Company is not involved in any criminal litigation or litigation involving

moral turpitude.

Set forth below are details of the outstanding or pending litigation against our Company and details of

proceedings filed by our Company.

Contingent liabilities not provided for as on September 30, 2009, March 31, 2009 and March 31, 2008

(Rs. in lacs)

Particulars As on September 30,

2009

As on March 31, 2009 As on March 31, 2008

1. Claims against the

Company not

acknowledged as debts:

Sales Tax Cases 250.92 252.89 248.23

Excise Cases 203.76 178.18 171.40

Income Tax Cases 188.82 192.25 276.21

Civil Cases 10.25 18.86 12.70

Total 653.75 642.18 708.54 2. Bank Guarantee 1,270.48 1,006.38 331.94

3. Letter of Credit 1,005.94 1,358.31 2,681.07

4. Capital Commitment (Net of

Advances)

1,812.11 443.71 240.00

Total (1 + 2 + 3 + 4) 4,742.28 3,450.58 3,961.55

Litigation against our Company

1. Criminal Cases

There are three (3) criminal proceedings against our Company. The aggregate financial implication in these

proceedings is not quantifiable. These criminal litigation are as follows:

1. Mr. Vijay Pal Adhana filed a criminal complaint (No.306 of 2008) dated April 21, 2008 against our

Managing Director Mr. Yash Mahajan, Mr. K.B Prasad, Mr. Naval Sharma and Mr. Jasmeet Singh

(employees of our Company) before the JMP alleging that our Company misused the cheques

amounting to Rs. 86.20 lacs issued by him as a security against the vehicles sold to him. The matter

was instituted under Sections 383, 384, 403, 406, 409, 415, 418, 419, 420 and 506 of the I.P.C. The

JMP ordered an inquiry to be conducted by DSP, Palwal. The DSP furnished a report stating that it had

been found that the complainant owed our Company Rs. 269.00 lacs and had issued post dated cheques

which were dishonoured due to unavailability of funds. Pursuant to the report, the JMP issued

summoning order dated September 1, 2008 against the officials of our Company. Our Company had

filed a quashing petition (No. 30984 of 2008) on behalf of Mr. Yash Mahajan and Mr. K.B Prasad

dated November 25, 2008 before the P&H HC. The High Court by its order dated February 12, 2009

stayed further proceeding before the trial court. Further, an anticipatory bail application (No. 31643 of

2008) dated December 1, 2008 was filed by our Company on behalf of Mr. Jasmeet Singh and Naval

85

Sharma which was admitted and allowed by the High Court by an order dated December 2, 2008. The

matter is currently pending and the next date of hearing is April 9, 2010.

2. Sankalp Motors Private Limited had filed a criminal complaint (C-3913/08) against our Company, our

Managing Director, Mr. Yash Mahajan, Mr. Harkirat Singh, a Director of our Company, Mr, Gopal

Bansal, Mr. S.C. Ghosh and Mr. Sanjay Jha (employees of our Company) before the JMA alleging

criminal breach of trust, cheating, criminal conspiracy and non settlement of claims amounting to Rs.

11.76 lacs. The matter was instituted under Section 406, 420 and 120-B of the I.P.C. The JMA by an

order dated June 19, 2008, did not take any cognizance of cheating and criminal conspiracy but issued

process against our Directors and officials for criminal breach of trust. Our Company has filed a

quashing petition (No. 3282 of 2008) dated September 8, 2008 against the said order before the Kolkata

HC. The Kolkata HC by its order dated September 18, 2008 stayed the proceedings of the trial court.

The matter is currently pending.

3. Ms. Malti, had filed first information report dated July 24, 2008 against Mr. Pradeep Sharma, zonal

manager of our Company and others alleging that her son had been murdered by the accused. The

police registered a case (No. 350 of 2008) against the accused. Mr. Pradeep Sharma filed a bail

application (No. 01 of 2009) before the Session Judge, Barabanki who by an order dated January 31,

2009 dismissed the application. Aggrieved by the order, Mr. Pradeep Sharma filed another bail

application on January 9, 2009, before the Lucknow High Court and by an order dated February 17,

2009 was granted the bail. The matter is currently pending before the Sessions Judge, Barabanki.

2. Income Tax cases

There are five (5) income tax proceedings pending against our Company for certain assessment years. The

aggregate financial implication in these proceedings is Rs. 245.31 lacs. These income tax matters are as follows.

Assessment year 1987-88

1. The Assessing Authority, Chandigarh (―AA‖) had passed an order against our Company and issued a

demand notice for the payment of Rs. 28.51 lacs on account of non deduction of tax at source (―TDS‖)

on dearness allowances (―DA‖) paid to foreign engineers deputed by Mazda Motor Corporation, Japan

in terms of the technical assistance and joint venture agreement with our Company. Our Company filed

an appeal against the order before the Commissioner of Income Tax (Appeals) (―CIT (A)‖). The CIT

(A) by an order dated April 3, 1989 held that no TDS is deductible on reimbursement of expenses.

Aggrieved by the order, the Income Tax Officer, (―ITO‖) had filed an appeal (No.1098/CHANDI/89)

before the Income Tax Appellate Tribunal, Chandigarh who by an order dated February 21, 1995

dismissed the appeal. Aggrieved by the order dated February 21, 1995, the ITO has filed an appeal (No.

162 of 1996) before the High Court. The case is currently pending.

Assessment year 1992-93:

1. The Assessing Authority (―AA‖) had issued an order dated February 28, 1995 against our Company

disallowing the provision amounting to Rs. 36.74 lacs for bad and doubtful debts treated as an expense.

Our Company filed an appeal (No. 693/94-95) before the Commissioner, Income Tax (Appeals) (―CIT

(A)‖) dated March 28, 1995 against the order. The CIT (A) by its order dated September 4, 1995

rejected our appeal. Aggrieved by the order, our Company filed an appeal (No. 1321/CHANDI/1995)

dated October 10, 1995 before the Income Tax Appellant Tribunal, Chandigarh (―ITAT‖). The ITAT

by its order dated February 28, 2003 held that the provision for bad and doubtful debts should be

treated as an expense. Aggrieved by the order dated February 28, 2003 the Commissioner of Income

Tax, Chandigarh has filed an appeal (No. 324 of 2004) dated February 24, 2004 before the High Court.

The case is currently pending.


1. The AA had issued an order dated May 31, 1999 against our Company for the payment of Rs. 18.82

lacs as interest on delay in depositing advance tax. Our Company filed an appeal dated July 5, 1999

before the CIT (A) bearing no. 138/P/99-2000. The CIT (A) by its order dated July 5, 2000 allowed our

appeal. Aggrieved by the order of the CIT(A) the Joint Commissioner of Income Tax filed an appeal

(No. 805/CHANDI/2000) dated October 20, 2000 before the ITAT, Chandigarh. The ITAT by its order

86

dated December 17, 2004 allowed the appeal of the Joint Commissioner of Income Tax. Our Company

has deposited Rs. 22.02 lacs along with interest. Aggrieved by the order of the ITAT our Company has

filed an appeal (No. 406 of 2005) dated August 17, 2005 before the High Court. The matter is currently

pending.


1. The Additional Commissioner of Income Tax, Chandigarh issued an order dated December 28, 2007

raising a demand of Rs. 185.51 lacs against our Company Aggrieved by the order of the Additional

Commissioner of Income Tax, our Company filed an appeal (No.239/P/07-08]) before the CIT (A)

contesting all the additions and disallowances made. The CIT (A) by its order dated November 28,

2008, allowed all the major additions except the weighted deduction of 150% of the expenditure

incurred on in-house research and development unit on the ground that though our Company is

recognized as in-house research and development unit, but the approval for claiming such deduction in

a procedural form is pending. Aggrieved by this order, our Company had filed an appeal stating that we

are entitled to claim weighted deduction as we are duly recognized as in-house R&D unit and the said

recognition is valid up to March 31, 2010. Further, the income tax department has also challenged the

order of the CIT (A) before the ITAT, Chandigarh. The quantum of tax involved is Rs. 101.55 lacs.


Assessment year 2006 - 2007:

1. The Additional Commissioner of Income Tax, Chandigarh, issued an order dated December 23, 2009,

raising a demand of Rs. 94.79 lacs against our Company on account of additions and disallowance of

weighted deduction of 150 % of expenditure incurred on an in-house research and development unit.

Our Company had filed an appeal before CIT(A) on January 11, 2010. The matter is currently pending.

3. Excise and Service Tax cases

There are 17 excise and service tax proceedings pending against our Company. The aggregate financial

implication in these proceedings is Rs. 135.70 lacs. These proceedings are as follows.

1. The Excise Department had issued a show cause notice (No. 490/phg/ST/07/7153) dated January 4,

2008 to our Company demanding Rs. 3.30 lacs on the ground that the royalty received by our Company

from M/s. Tide Water for using the name of ―Swaraj Mazda Limited‖ should be assessed under the

category ―Management Consultancy‖. Our company filed a reply on February 21, 2008 before the

Commissioner, Central Excise - Jalandhar. The Commissioner Central Excise by an order (No.

8/CE/Jal/08) dated February 22, 2008 dismissed the appeal. Aggrieved by the order our Company filed

an appeal (No. 1120 of 2008) dated June 2, 2008 before CESTAT-New Delhi who on July 17, 2008

granted a stay to our Company. The matter is currently pending.

2. The Excise Department had issued a show cause notice (No. V-15(87) CE/SML/82/2004/329-330)

dated January 24, 2005 to our Company demanding an amount of Rs. 3.18 lacs. The show cause notice

sought to levy excise duty on sale of complimentary items by our Company to the dealer. Our

Company filed its reply on April 15, 2005 before the Assistant Commissioner, Central Excise,

Phagwara. (―Assistant Commissioner‖) The Assistant Commissioner by an order (No. 76/CE/AC/05)

dated August 29, 2005 vacated the demand. Aggrieved by the order, the Excise Department filed an

appeal (No. 166 of 2005) dated December 15, 2005 before Commissioner (Appeals), Jalandhar. Our

Company had filed cross objection application dated August 26, 2006 against this appeal. The

Commissioner-Appeals vide order (No. 43 of 2007) dated February 14, 2007 allowed the appeal filed

by the Excise Department and confirmed the demand. Aggrieved by the order our Company filed an

appeal (No. 1417 of 2007) dated May 17, 2007 before the CESTAT-New Delhi. CESTAT by an order

dated December 14, 2008 has granted stay to our Company until disposal of the appeal. The matter is

currently pending.

3. The Excise Department had issued a show cause notice (No. V-15(87)CE/SML/88/2005/8325) dated

October 24, 2005 to our Company seeking to levy Rs. 1.94 lacs as excise duty on the sale of

complimentary items by our Company to the dealer. Our Company filed its reply on January 27, 2006

to the Assistant Commissioner. The Assistant Commissioner by an order dated April 27, 2006 vacated

the demand and the Excise Department filed an appeal (No. 164 of 2007) dated May 25, 2007 before

87

Commissioner (Appeals), Jalandhar. Our Company had filed cross objection application dated August

13, 2007 against this appeal. The Commissioner (Appeals) by an order (No. 29 of 2008) dated January

30, 2008 rejected the appeal filed by the Excise Department. Aggrieved by the order the Excise

Department filed an appeal (No. 875 of 2008) before CESTAT, New Delhi. The CESTAT vide order

(No. 606-609/2008) dated August 12, 2008 dismissed the appeal and the Excise Department has filed

civil appeal (No. 1522 of 2009) before the Supreme Court. The matter is currently pending.

4. The Excise Department had issued a show cause notice (No. V-15(87)CE/SML/59/2006/1747-48)

dated May 2, 2006 to our Company. The show cause notice sought to levy excise duty on sale of

complimentary items by our company to dealer and imposed a demand of Rs. 2.90 lacs. Our Company

filed its reply on January 7, 2007 to the Assistant Commissioner. The Assistant Commissioner by an

order (No. 3/CE/AC/08) dated January 15, 2008 denied any relief and confirmed the demand.

Aggrieved by the order, our Company filed an appeal (No. 212 of 2008) dated March 20, 2008 before

Commissioner (Appeals), Jalandhar. The Commissioner (Appeals) by order (No. 703 of 2008) dated

November 4, 2008 allowed our appeal. Aggrieved by the order the Excise Department filed an appeal

(No. 106 of 2009) dated January 9, 2009 before the CESTAT, New Delhi. The matter is currently

pending.

5. The Excise Department had issued three show cause notices (No. V-15 (87)CE/SML/497/2006-

07/4520) dated October 25, 2007, (No.15(87)CE/SML/48/2007/1436) dated March 3, 2008 and

(No.15(87)CE/SML/83/08/5878) dated September 26, 2008 seeking to levy excise duty amounting to

Rs. 1.90 lacs on sale of complimentary items by our Company to dealers. Our Company filed two

replies dated January 29, 2008 and March 9, 2009 before the Assistant Commissioner. The Assistant

Commissioner by an order dated March 31, 2009 vacated the demand. The matter is currently pending.

6. The Excise Department had issued a show cause notice (No. V- 15(87)CE/SML /29/2004/533) dated

February 1, 2005 to our Company seeking to levy excise duty of Rs. 2.12 lacs seeking to levy excise

duty on the amount recovered by our Company as transport charges. Our Company filed its reply on

August 29, 2005 before the Assistant Commissioner. The Assistant Commissioner by an order dated

August 31, 2005 denied any relief and confirmed the demand. Aggrieved by the order, our Company

filed an appeal (No. 355 of 2005) dated December 14, 2005 before the Commissioner (Appeals),

Jalandhar. The Commissioner-Appeals by an order dated January 30, 2007 partly allowed the demand.

Aggrieved by the order of Commissioner (Appeals) our Company filed an appeal (No. 1181 of 2007)

dated May 3, 2007 before CESTAT. CESTAT by an order (No. 944 of 2008) dated December 8, 2008

forwarded the issue to Commissioner (Appeals). The Commissioner (Appeals) by an order dated April

24, 2009 confirmed the demand. The Excise Department has also filed an application dated February 2,

2009 for rectification of mistake before CESTAT. Our Company has filed an appeal (No. 2140 of

2009) before the CESTAT, New Delhi, against the order dated April 24, 2009, for vacation of demand.

Our Company has deposited an amount of Rs. 2.12 lacs as the CESTAT has disposed off our

Company‘s stay application by an order (No. 1065/09) dated October 23, 2009. The matter is currently

pending.

7. The Excise Department had issued a show cause notice (No. V-15(87)CE/Swaraj/114/06/45) dated

April 3, 2007 to our Company demanding an amount of Rs. 2.84 lacs. Our Company filed reply dated

March 19, 2008 before the Assistant Commissioner who by an order dated May 30, 2008 denied any

relief and confirmed the demand. Aggrieved by the order, our Company filed an appeal (No. 851 of

2008) dated August 6, 2008 before the Commissioner (Appeals), Jalandhar. The Commissioner

(Appeals) by an order (No. 23/2009) dated January 30, 2009 confirmed the demand and we filed an

appeal dated April 29, 2009 before the CESTAT. The matter is currently pending before the CESTAT.

8. The Excise Department had issued a show cause notice (No. ST-

13/PHG/STC/SwarajMazda/4/04/9063) dated December 8, 2004 to our Company seeking to levy

service tax amounting to Rs. 11.25 lacs on account of the royalty paid to Mazda from August 16, 2002

until March 31, 2003. Our Company filed reply dated February 21, 2005 to the Assistant

Commissioner. The Assistant Commissioner had called our Company for a personal hearing in relation

to this issue and the matter is pending.

9. The Excise Department had issued a show cause notice (No. V-15 (87) CE/AC/SML/134/04/9517)

dated December 31, 2004 seeking to re-determine the value of the components supplied to Swaraj

Engine Limited by our Company and demanding an amount of Rs. 4.40 lacs. Our Company filed reply

88

dated April 15, 2005 before the Assistant Commissioner, Phagwara who by an order dated August 31,

2005 denied any relief and confirmed the demand. Aggrieved by the order, our Company filed an

appeal (No. 854 of 2005) dated October 21, 2005 before the Commissioner (Appeals), Jalandhar. The

Commissioner (Appeals) vide order (No. 121 of 2006) dated March 29, 2006 allowed our appeal. The

Excise Department filed an appeal (No. 2378 of 2006) dated July 14, 2006 before CESTAT who by an

order (No. 635 of 2006) dated August 11, 2006 rejected the appeal filed by the Excise Department.

10. The Excise Department had issued a show cause notice (No. 87/CE/JC/ADJ/7/5131) dated September

13, 2007 to our Company seeking an amount of Rs. 8.21 lacs on account of delay in payment of excise

duty on clearance of input as such. Our Company filed reply dated January 29, 2008 before the Joint

Commissioner, Central Excise Jalandhar. The matter is currently pending with the Joint Commissioner

Excise, Jalandhar.

11. The Excise Department had issued a show cause notice (No. 87/CE/SML/PHG/110/08/8332) dated

December 23, 2008 to our Company demanding an amount of Rs. 4.38 lacs on the grounds that our

Company was not entitled to the claim setting of the service tax against the canteen services provided

to our employees. By an order dated January 29, 2010, the Deputy Commissioner, Central Excise,

disallowed a portion of our claim amounting to Rs. 2.13 lacs and also confirmed the demand raised. In

addition, the interest on the disallowed amount was confirmed and a penalty amounting to Rs. 2.13 lacs

was imposed. Our Company is in the process of filing an appeal against the order dated January 29,

2010.


December 12, 2008 to our Company demanding an amount of Rs. 1.85 lacs on the grounds that our

Company was not entitled to the claim setting of the service tax against the premium paid on insurance

of our employees. Our Company is under process of filing the reply to the Assistant Commissioner,

Central Excise, Ropar.


January 14, 2009 to our Company levying an amount of Rs. 0.98 lacs as education cess (secondary and

higher) on automobile cess. Our Company is under process of filing the reply to the Assistant

Commissioner, Central Excise, Ropar. The matter is currently pending.

14. The Excise Department had issued two (2) show cause notices (No. ST-13/PHG/SCN/SML/IPR/2590)

dated April 17, 2008 and (No.V(ST)15/JC/Adj/35/2008/5301) dated October 17, 2008 to our Company

demanding an aggregate amount of Rs.12.60 lacs. The show cause notices allege wrong utilization of

CENVAT credit on Intellectual Property Rights. Our Company has filed a reply dated January 12, 2009

to the Joint Commissioner, Central Excise, Jalandhar. The Additional Commissioner has confirmed the

demand by an order dated August 12, 2009. Our Company filed an appeal (No. 89/2009) before the

Commissioner (Appeals) who has, by an order dated December 11, 2009, granted the stay in favour of

our Company. The matter is currently pending.

15. The Excise Department has issued a show cause notice (No. IV-

30(22)D/SwarajMazda/Tech/RPR/09/25) dated April 9, 2009 to our Company demanding an amount of

Rs. 2.15 lacs on the ground of recovering the Automobile Cess on clearance of buses for road testing.

Our Company is in the process of filing the reply to the Assistant Commissioner, Central Excise,

Ropar. The matter is currently pending.

16. The Excise Department had issued seven (7) show cause notices against our Company raising an

aggregate demand of Rs. 71.08 lacs. The Central Excise Department has sought seeking to re-

determine the value of the components supplied to Swaraj Engine Limited by our Company. A hearing

was held before the Joint Commissioner on July 23, 2009 and the decision is awaited.

17. The Excise Department had issued show cause notice dated November 11, 2008 against our Company

raising a demand of Rs. 0.74 lacs alleging under payment of service tax.

4. Sales Tax cases

There are seven (7) sales tax proceedings pending against our Company. The aggregate financial

implication in these proceedings is Rs. 266.85 lacs. These sales tax cases are as follows.

89

1. The Excise and Taxation officer cum Assessing Authority (―Assessing Authority‖), Panchkula had

issued a notice (D No.746/05-06) dated March 31, 2009 for the assessment year 2005-06 against our

Company for an amount of Rs. 7.59 lacs alleging non submission of concessional rate forms (―C/D

forms‖) under the Haryana Value Added Tax and Central Sales Tax. Our Company vide letter dated

April 30, 2009 requested the Assessing Authority for the extension of time to submit the required

forms. Our Company is currently in the process of submitting the C/D forms.

2. The Excise and Taxation Officer, Balongi, District Mohali had impounded the vehicle of our Company

on account of the wrong tax payers identification number 03191039643 mentioned on the documents

of the vehicle. Our Company submitted surety bond dated August 21, 2007 and subsequently the

vehicle was released. The Excise and Taxation Officer raised a demand vide order dated October 9,

2007 for an amount of Rs. 1.58 lacs by imposing a penalty due to mentioning of wrong TIN number.

Our Company deposited 25% of the penalty imposed amounting to Rs. 0.39 lacs for filing the appeal.

Aggrieved by the order, our Company filed an appeal (No. 4131/2007) dated November 6, 2007 before

the Deputy Excise and Taxation Commissioner. The matter is currently pending.

3. The Excise and Taxation Officer, Balongi, District Mohali impounded the spare parts imported by our

Company. Our Company submitted a surety bond dated November 16, 2007 and subsequently the

department released the impounded spare parts. The Excise and Taxation Officer issued a demand

notice vide its order dated February 16, 2008 for an amount of Rs. 2.10 lacs on account of penalty

imposed. Our Company deposited 25% of the penalty imposed amounting to Rs. 0.52 lacs for filing the

appeal. Aggrieved by the order, our Company filed an appeal (No. 4327 of 2008) dated March 18, 2008

before the Deputy Excise and Taxation Commissioner. The matter is currently pending.

4. The Assistant Commercial Revenue Commissioner Ahmedabad, Gujarat raised a demand vide its order

(No. 11579) dated March 22, 2007 imposing a penalty of Rs. 11.78 lacs against our Company. Our

Company filed a reply dated April 20, 2007 before the commissioner who rejected our reply and issued

an order (No. 816) dated May 4, 2007. Aggrieved by the order our Company filed an appeal dated June

20, 2007 before the Deputy Commissioner (Appeals), Ahmedabad who by an order dated August 10,

2008 rejected our appeal. Aggrieved by the order our Company filed another appeal (No. 673/8 of

2008) dated November 19, 2008 before the Gujarat Value Added Tax Tribunal, Ahmedabad, Gujarat.

Our Company has also deposited an amount of Rs. 2.37 lacs on the account of the penalty imposed.


5. The Excise and Taxation Officer Chandigarh issued an assessment order dated December 14, 2000

raising a demand of Rs. 15.59 lacs on account of local sales tax and an amount of Rs. 202.63 lacs on

account of central sales tax against our Company for the assessment period April 1, 2000 to September

30, 2000. The total demand amounts to Rs. 218.22 lacs. Aggrieved by the order, our Company filed an

appeal dated January 11, 2001 before the Deputy Excise and Taxation Commissioner Chandigarh.

Deputy Excise and Taxation Commissioner cum Appellate Authority by its order dated June 20, 2002

rejected our appeal. Aggrieved by the order dated June 20, 2002 our Company filed another appeal

dated August 16, 2002 before the Sales Tax Appellate Tribunal, Chandigarh. The matter is currently

pending.

6. The Excise and Taxation Officer ICC Jharmari, Lalru, District Patiala issued a notice (No. 73) dated

May 7, 2001 against our Company impounding six vehicles on account of verification of the

transaction of the vehicles. Our Company filed a reply dated June 5, 2001 along with the surety bonds

for the release of the vehicles. The officer issued an order dated July 11, 2001 imposing a penalty of

Rs. 9.65 lacs. Aggrieved by the notice, our Company filed an appeal dated September 7, 2001 with the

Joint Director (Enforcement) cum Deputy Excise and Taxation Commissioner, Patiala and deposited an

amount of Rs. 2.42 lacs. The Joint Director (Enforcement) cum Deputy Excise and Taxation

Commissioner dismissed our appeal by an order dated April 21, 2005. Aggrieved by the order our

Company filed an appeal dated September 22, 2005 before the Sales Tax Tribunal, Punjab, Chandigarh.

The Sales Tax Tribunal by its order dated April 5, 2006 rejected our appeal. Aggrieved by the order our

Company filed an appeal dated August 29, 2007 before the High Court. We received a notice from the

Excise and Taxation Officer, Mohali, on August 31, 2009 directing us to pay Rs. 9.65 lacs and we have

deposited Rs. 7.23 lacs, as we had previously deposited Rs. 2.42 lacs, with the Excise and Taxation

Officer, Mohali on the same date. The appeal has been admitted and the matter is currently pending.

90

7. The Sales Tax Officer, Lucknow, issued an order dated July 22, 2008, raising a demand of Rs. 15.93

lacs on account of re-assesment for the year 1993-94. Our Company deposited Rs. 4.00 lacs on

December 14, 2009 for filing the appeal with Deputy Commissioner Sales Tax, Lucknow. The matter

is currently pending.

Further, there are 10 civil cases, seven (7) labour related proceedings and 27 consumer cases pending against

our Company before different judicial fora and tribunals that are not material. A majority of these proceedings

relate to workmen‘s compensation, illegal termination of services and delivery of defective vehicles. The

aggregate value of the claims filed against us is approximately Rs. 227.22 lacs.

Litigation filed by our Company

There are 17 criminal proceedings filed by our Company under Section 138 of the Negotiable Instruments Act

pertaining to dishonour of cheques. The aggregate amount involved in these proceedings is Rs. 524.44 lacs.

a. Criminal complaints filed by our Company under the Negotiable Instruments Act

1. Our Company has filed a criminal complaint (No. 13685 of 2007) dated November 2, 2007 against Mr.

Har Prasad Dogra before the Chief Judicial Magistrate (―CJM‖), Chandigarh for dishonour of cheque

amounting to Rs. 78 lacs. The CJM had issued non bailable arrest warrant against Mr. Har Prasad

Dogra, who appeared before the CJM and was granted bail. The matter is currently pending before the

CJM and the next date of hearing is April 15, 2010.

2. Our Company has filed a criminal complaint (No. 597 of 2006) dated June 10, 2006 against M/s Verma

Motors, Hamirpur and Mr. Sanjay Verma before the CJM, Chandigarh for dishonour of cheque

amounting to Rs. 5.00 lacs. The CJM had issued bailable arrest warrant against Mr. Sanjay Verma. The

matter is currently pending before the CJM and the next date of hearing is April 28, 2010.

3. Our Company has filed a criminal complaint (No. 12869 of 2007) dated November 1, 2007 against Mr.

Harjeet Singh Bala before the CJM, Chandigarh for dishonour of three (3) cheques amounting to an

aggregate of Rs. 60.00 lacs. The CJM had issued bailable arrest warrant against Mr. Harjeet Singh Bala

who appeared before the CJM and was granted bail. The matter is currently pending before the CJM

and the next date of hearing is May 27, 2010.

4. Our Company has filed a criminal complaint (No. 14125 of 2007) dated November 27, 2007 against

Mr. Rakesh Kukar before the CJM, Chandigarh for dishonour of cheque amounting to Rs. 4.54 lacs.

The CJM had issued a summoning order against Mr. Rakesh Kukar. In addition, Mr. Rakesh Kukar has

filed a quashing petition (Criminal Misc. No. M33170 of 2009) against the complaint filed by our

Company before the P&H HC. The matter is currently pending and the next date of hearing before the

CJM is March 3, 2010 and before the P&H HC is March 11, 2010.

5. Our Company has filed a criminal complaint (No. 596 of 2006) dated June 10, 2006 against M/s

Ahmad Automobiles, Sri Nagar and Mr. Irfan Ahmad before the CJM, Chandigarh for dishonour of

cheque amounting to Rs. 6.10 lacs. The CJM had issued non bailable arrest warrant against Mr. Irfan

Ahmad. The matter is currently pending before the CJM and the next date of hearing is April 28, 2010.

6. Our Company has filed a criminal complaint (No. 12890 of 2008) dated July 5, 2008 against M/s Sai

Automobiles, Mr. Ashok Thakor and Ms. Savitri Thakor before the CJM Chandigarh for dishonour of

two (2) cheques amounting to an aggregate of Rs. 32.40 lacs. The CJM had issued bailable arrest

warrants against Mr. Ashok Thakor and Ms. Savitri Thakor. Mr. Ashok Thakor appeared before the

CJM and was granted bail. Mr. Ashok Thakor and Ms. Savitri Thakore, M/s Sai Automobiles have

filed a petition (Criminal Misc. No. 24566 of 2009) in the High Court for quashing the complaint filed

by our Company. The matter is currently pending and the next date of hearing before the CJM is April

7, 2010 and before the P&H HC is February 25, 2010.

7. Our Company has filed a criminal complaint (No. 23738 of 2008) dated December 18, 2008 against

M/s Patil Motors and Mr. Bhagwan Vinayak Patil before the CJM, Chandigarh for dishonour of cheque

amounting to Rs. 9.45 lacs. The CJM had issued a summoning order to Mr. Bhagwan Vinayak Patil.

The matter is currently pending before the CJM and the next date of hearing is May 21, 2010.

91

8. Our Company has filed a criminal complaint (No. 22554 of 2008) dated November 6, 2008 against M/s

Mahajan Brothers, Mr. Anil Mahajan and Mr. Sain Das Mahajan before the CJM, Chandigarh for

dishonour of two (2) cheques amounting to an aggregate of Rs. 42.00 lacs. The CJM had issued

summoning order against M/s Mahajan Brothers, Mr. Anil Mahajan and Mr. Sain Das Mahajan. The

matter is currently pending before the CJM and the next date of hearing is May 5, 2010.

9. Our Company has filed a criminal complaint (No. 948 of 2009) dated January 30, 2009 against M/s

National Tractor Traders, Mr. Mehul Kirtibhai Patel, Ms. Sandhya Ben M Patel, Mr. Anuj Bhai Patel

and Ms. Toral Ben Patel before the CJM, Chandigarh for dishonour of two (2) cheques amounting to an

aggregate amount of Rs. 14.44 lacs. All the accused were granted bail. Mr. Anuj Bhai Patel and Ms.

Toral Ben Patel have filed a petition (Criminal Misc. No. 35169 of 2009) before the P&H HC for

quashing the complaint filed by our Company in relation to them. The matter is currently pending and

the next date of hearing before the CJM is April 13, 2010 and the next date of hearing before the P&H

HC is May 5, 2010.

10. Our Company has filed a criminal complaint dated March 27, 2009 against M/s Sohal Motors, and Mr.

Amarjeet Singh Sohal before the CJM Chandigarh for dishonour of three (3) cheques amounting to Rs.

90.00 lacs. The CJM had issued summoning order against Mr. Amarjeet Singh Sohal. The matter is

currently pending before the CJM and the next date of hearing is February 24, 2010.

11. Our Company has filed a criminal complaint dated April 4, 2009 against M/s Dugar Distributors and

Mr. Anil Dugar before the CJM Chandigarh for dishonour of a cheque amounting to Rs. 6.66 lacs. The

CJM had issued bailable arrest warrants against Mr. Anil Dugar. The matter is currently pending before

the CJM and the next date of hearing is May 2, 2010.

12. Our Company has filed three (3) criminal complaints dated November 30, 2007 against Mr. Vijay Pal

Adhana before the CJM Chandigarh for dishonour of 12 cheques amounting to Rs. 86.20 lacs. Mr.

Vijay Pal Adhana appeared before the CJM and was granted bail. The matter is currently pending

before the CJM and the next date of hearing is May 18, 2010.

13. Our Company has filed two (2) criminal complaints dated September 27, 2007 against Mr. Vijay Pal

Adhana before the CJM Chandigarh for dishonour of eight (8) cheques amounting to an aggregate of

Rs. 60.00 lacs. Mr. Vijay Pal Adhana appeared before the CJM and was granted bail. The matter is

currently pending before the CJM and the next date of hearing is May 13, 2010.

14. Our Company has filed a criminal complaint (No. 3643 of 2009) dated May 2, 2009 against M/s Shree

Bhagwati Motors and Mr. Om Prakash Agarwal before the CJM Chandigarh for dishonour of a cheque

amounting to Rs. 8.42 lacs. The CJM has issued a summoning order against Mr. Om Prakash Agarwal.

The matter is currently pending before the CJM and the next date of hearing is August 16, 2010.

15. Our Company has filed a criminal complaint (No. 9156 of 2009) dated September 18, 2009, against

Mr. Mehul Kirtibhai Patel, Ms. Sandhya Ben M Patel and M/s National Tractor Traders before the

CJM, Chandigarh for dishonour of cheque amounting to Rs. 10.00 lacs. The CJM had issued a

summoning order against all the accused. The matter is currently pending before the CJM and the next

date of hearing is June 4, 2010.

16. Our Company has filed a criminal complaint (No. 722 of 2009) dated October 16, 2009, against M/s

National Tractor Traders, Mr. Mehul Kirtibhai Patel and Ms. Sandhya Ben M Patel before the CJM,

Chandigarh for dishonour of cheque amounting to Rs. 6.23 lacs. The CJM had issued a summoning

order against all the accused. The matter is currently pending before the CJM and the next date of

hearing is February 26, 2010.

17. Our Company has filed a criminal complaint (No. 484 of 2010) dated November 24, 2009, against M/s

National Tractor Traders, Mr. Mehul Kirtibhai Patel and Ms. Sandhya Ben M Patel before the CJM,

Chandigarh for dishonour of cheque amounting to Rs. 5.00 lacs. The CJM had issued a summoning

order against all the accused. The matter is currently pending before the CJM and the next date of

hearing is March 12, 2010.

b. Excise cases

92

The Central Excise Department, Government of India (―Excise Department‖) had by its notification (No. 11 of

95) dated March 16, 1995 stated that that unutilized CENVAT balance of Rs. 488.00 lacs would be forfeited.

Our Company had filed a writ petition (No. 4754 of 95) dated September 18, 1995 before the High Court, New

Delhi. The writ petition was forwarded to the Supreme Court on November 22, 1997 and the Supreme Court

vide its order dated January 28, 1999, held that Central Excise Department had no power to forfeit the unutilized

balance. Subsequently, the government amended the Finance Act was empowering the Government to forefeit

the unutilized CENVAT balance with retrospective effect. Our Company filed a writ petition (No. 1824 of

2000) dated March 28, 2000 before the High Court, New Delhi against challenging the Finance Act. The matter

is currently pending with High Court.

Litigation against Our Directors

Litigation involving Mr. S.K. Tuteja

There is no litigation involving Mr. S.K. Tuteja.

Litigation involving Mr. Yash Mahajan

For litigation involving Mr. Yash Mahajan, our Managing Director, please see ―– Litigation involving our

Company – Criminal Cases‖ above under this section titled ―Outstanding Litigation and Defaults‖ on pages 84

and 85, respectively.

Litigation involving Mr. Y. Watanabe

There is no litigation involving Mr. Y. Watanabe.

Litigation involving Mr. Harkirat Singh

For litigation involving Mr. Harkirat Singh, an Independent Director, please see ―– Litigation involving our

Company – Criminal Cases‖ above under this section titled ―Outstanding Litigation and Defaults‖ on page 85.

Litigation involving Mr. Steven Enderby

There is no litigation involving Mr. Steven Enderby.

Litigation involving Mr. A.K. Thakur

There is no litigation involving Mr. A.K. Thakur.

Litigation involving Mr. P.K. Nanda

There is no litigation involving Mr. P.K. Nanda.

Litigation involving Mr. Pankaj Bajaj

There is no litigation involving Mr. Pankaj Bajaj.

Litigation involving Mr. M. Tabuchi

There is no litigation involving Mr. M. Tabuchi.

Litigation involving Mr. H.Yamaguchi

There is no litigation involving H. Yamaguchi.

Litigation involving Mr. T. Hashimoto

There is no litigation involving Mr. T. Hashimoto.

93

Litigation involving Mr. Tatsuo Kato

There is no litigation involving Mr. Tatsuo Kato.

Litigation involving Mr. Taro Nanko

There is no litigation involving Mr. Taro Nanko.

Litigation involving Subsidiaries

Our Company has no subsidiaries.

Details of violations of securities laws or willful defaults by our Company, Directors and Promoter

Our Company, Directors and Promoter have further confirmed that they have not been declared as willful

defaulters by the RBI or any other governmental authority. As disclosed above in this section in relation to

lawsuits, there are no violations of securities laws committed by them in the past or are pending against them.

Past notices / investigations / proceedings / penalties / orders by the SEBI involving the Company

Our Company received a notice dated October 21, 2003, from the SEBI calling upon our Company to show

cause in relation to an alleged violation of Sub-Regulation (3) of Regulation 8 of the Takeover Code regarding a

delay of 78 days on the part of the Company in complying with the said sub-regulation of the Takeover Code,

and imposition of penalty as prescribed in clause (b) of Section 15A of the Securities and Exchange Board of

India Act, 1992 for the aforementioned violation. Our Company was subsequently discharged from the

adjudication proceedings without imposition of any penalty pursuant to an order dated April 30, 2004 passed by

the adjudicating officer under Rule 5(1) of the Securities and Exchange Board of India (Procedure of Holding

Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995.

94

MATERIAL DEVELOPMENTS

I.

1. Information as required by the Government of India, Ministry of Finance circular No. F2/5/SE/76 dated

February 5, 1977, as amended by their circular of even number dated March 8, 1977 and in accordance

with sub-item (B) of item X of Regulation (5) of Part E of the SEBI (ICDR) Regulations.

Working Results of the Company

Financial Results for the period between April 1, 2009 and December 31, 2009 Rs. in lacs

Net Sales / Income from Operations 49,724.01

Other Operating Income 352.31

Total Income 50,076.32

Profit before Depreciation, Interest and tax 3,909.84

Interest 1,480.65

Depreciation / Amortization 648.13

Profit before tax 1,781.06

Tax expense / Saving 520.00

Net profit after tax for the period 1,261.06

There are no material changes and commitments, which are likely to affect the financial position of the

Company since December 31, 2009 (i.e. last date up to which updated financial information is incorporated

in the Letter of Offer).

2. a) Week end prices of Equity Shares of the Company for the last four (4) weeks on the BSE and NSE

are as provided below:

Week Ended on Closing Rate BSE

(Rs.)

Closing Rate NSE

(Rs.)

February 16, 2010 234.35 235.00

February 9, 2010 256.35 256.30

February 2, 2010 302.75 299.25

January 25, 2010 286.10 286.00

b) Highest and lowest price of the Equity Shares of the Company for the last four (4) weeks on the

BSE and NSE are as provided below:

Highest

(Rs.)

Date Lowest

(Rs.)

Date

BSE 313.90 February 3, 2010 234.35 February 16, 2010

NSE 312.45 February 3, 2010 235.00 February 16, 2010

(c) The market price of the Equity Shares of the Company on February 23, 2010 was Rs. 227.95 and

Rs. 226.00 on the BSE and the NSE, respectively. II. Our Company has filed its unaudited financial results for the quarter ended December 31, 2009

with the Stock Exchanges in accordance with the requirements under the Listing Agreement.

95

(Rs. in lacs)

3rd Quarter Ended Nine Months Ended

Year

Ended

31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.03.2009

Unaudited Audited

a) Net Sales / Income from Operations 18,730.94 4,191.26 49,724.01 40666.62 54,085.23

b) Other Operating Income 118.48 98.62 352.31 431.82 610.01

Total Income from Operations 18,849.42 4,289.88 50,076.32 41098.44 54,695.24

EXPENDITURE

a) (Increase) / decrease in stock in trade and

work-in-progress 762.14 (5,560.78) (635.17) (6,189.36) (1,718.24)

b) Consumption of raw materials 13,503.28 8,198.37 38,395.82 37,676.07 43,964.55

c) Purchase of traded goods 656.22 691.32 1,906.67 2,206.52 2,510.63

d) Employees cost 1,113.76 886.34 3,124.06 2,649.47 3,546.19

e) Depreciation / amortization 232.48 188.74 648.13 409.57 583.92

f) Other expenditure 1,296.88 854.44 3,375.10 2,805.57 3,585.81

Total Expenditure 17,564.76 5,258.43 46,814.61 39,557.84 52,472.86

Profit/ (Loss) before interest and tax 1,284.66 (968.55) 3,261.71 1,540.60 2,222.38

Interest 447.06 584.62 1,480.65 1,224.19 1,808.77

Profit/ (Loss) before tax 837.60 (1,553.17) 1,781.06 316.41 413.61

Tax expense / (saving) 250.00 (503.38) 520.00 146.62 (65.15)

Net Profit / (Loss) after tax for the period 587.60 (1,049.79) 1,261.06 169.79 478.76

Paid-up equity share capital (Face value Rs. 10/-) 1,049.38 1,049.38 1,049.38 1,049.38 1,049.38

Reserves (excluding Revaluation Reserves) as per

balance sheet of previous accounting year - - - - 8,603.40

BASIC / DILUTED EARNING/ (LOSS) PER

SHARE (Rs.) 5.6 (10.0) 12.0 1.6 4.6

(Not Annualised)

PUBLIC SHAREHOLDING

- Number of shares 48,73,747 48,73,747 48,73,747 48,73,747 48,73,747

- Percentage of shareholding 46.5% 46.5% 46.5% 46.5% 46.5%

PROMOTERS AND PROMOTER GROUP

SHAREHOLDING

a) Pledged / encumbered

- Number of shares NA NA NA

- Percentage of shares (as a % of the total

shareholding of the Promoter & promoter group) NA NA NA


share capital of the Company) NA NA NA

b) Non-Encumbered

- Number of Shares 56,12,953 56,12,953 56,12,953


shareholding of Promoter & promoter group) 100% 100% 100%

96

3rd Quarter Ended Nine Months Ended

Year

Ended

31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.03.2009

Unaudited Audited


share capital of the Company) 53.5% 53.5% 53.5%

The above results were taken on record by the Board of Directors in their meeting held at New Delhi on 29th January, 2010

and have been subjected to a ‗Limited Review‘ by the Auditors of the Company.

The Company is primarily engaged in the business of Commercial Vehicles and its parts. As the basic nature of these

activities is governed by the same set of risk and returns, these constitute and have been grouped as single segment in the

above disclosure as per Accounting Standard 17 dealing with ―Segment Reporting‖.

Through issue of Excise Notification No. 11/95 dated March 16, 1995, Government sought to lapse Rs. 4.88 crores out of

Modvat Credit receivable balance as on March 16, 1995. Petition by the Company and others with the Delhi High Court

challenging the said Notification on grounds of law and equity was allowed by the Supreme Court vide order dated January

28, 1999. The Finance Act, 1999 has, however, brought in retrospective amendments w.e.f. March 16, 1995 in the Central

Excise Act, empowering the Central Government to lapse such Modvat. On legal advise obtained by the Company to seek

redressal against the action of the Government, the Company has filed writ petition before the Delhi High Court on the

ground that the Government action violates the doctrine of promissory estoppel / expectation principle besides other

grounds. The court has already admitted the petition. Accordingly, pending Company‘s petition and decision thereupon, the

amount of Rs. 4.88 crores though adjusted in Excise Records has not been provided in the books of account.

During the quarter, the Company received two (2) complaints from the shareholders which were duly resolved. There are no

complaints remaining unresolved as at the beginning and end of the quarter.

Previous period figures have been regrouped / recast, wherever necessary to confirm to current period classification.

for and on behalf of

the Board of Directors

(Yash Mahajan)

Managing Director

97

GOVERNMENT AND OTHER APPROVALS

The following regulations primarily govern the operations of our Company:

1. Central Motors Vehicles Rules, 1989;

2. Auto Fuel Policy, 2003; and

3. Essential Commodities Act, 1955.

In addition to the above, our Company is required to ensure compliance with various environmental laws such

as the Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and Control of Pollution) Act,

1981, the Environment Protection Act, 1986 and the Hazardous Wastes (Management, Handling and

Transboundary Movement) Rules, 2008.

Our Company has received the necessary consents, licenses, permissions and approvals from the government

and various governmental agencies required for its present business and except as mentioned below, no further

material approvals are required for carrying on its present business.

The objects clause of the Memorandum of Association enables our Company to undertake its existing activities.

Pending Approvals: Neither has the Company made any application for obtaining any approval nor are there any approvals that are

pending before any governmental or regulatory authority, as on the date of filing this Letter of Offer.

98

OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

Pursuant to the resolution passed by the Board of Directors of our Company at its meeting held on March 19,

2009, it has been decided to make the rights offer to the Equity Shareholders of our Company with a right to

renounce.

The Issue has also been approved by the shareholders of the Company at the extraordinary general meeting of

the Company held on July 2, 2009.

Prohibition by the SEBI

Neither the Company, nor the Directors nor the Promoter nor the person(s) in control of the Promoter nor the

promoter group companies, have been prohibited from accessing or operating in the capital markets under any

order or direction passed by the SEBI. Further, neither the Promoter nor the Company nor our group companies

have been declared as willful defaulters by RBI / Government authorities.

Except Mr. A.K. Thakur, who serves on the board of trustees of Sahara Mutual Fund (SEBI Registration No.

MF/030/96/0), none of the Directors of the Company are associated with the capital markets in any manner.

Eligibility for the Issue

The Company is an existing company registered under the Companies Act whose Equity Shares are listed on the

BSE and the NSE. The Company is eligible to make this Issue in terms of Chapter IV of the SEBI (ICDR)

Regulations.

Compliance with Part E of Schedule VIII of the SEBI (ICDR) Regulations

The Company is in compliance with the provisions specified in Part E of Schedule VIII of the SEBI (ICDR)

Regulations.

Disclaimer Clause of SEBI

AS REQUIRED, A COPY OF THE DRAFT LETTER OF OFFER WASSUBMITTED TO SEBI. IT IS

TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THE DRAFT LETTER OF

OFFER TO SEBI SHOULD NOT, IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME

HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY

EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH

THE ISSUE IS PROPOSED TO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS

MADE OR OPINIONS EXPRESSED IN THE DRAFT LETTER OF OFFER. THE LEAD MANAGER,

JM FINANCIAL CONSULTANTS PRIVATE LIMITED HAS CERTIFIED THAT THE

DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE GENERALLY ADEQUATE AND

ARE IN CONFORMITY WITH SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)

REGULATIONS, 2009 FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCE FOR THE

TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED

DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY

RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT

INFORMATION IN THE DRAFT LETTER OF OFFER, THE LEAD MANAGER IS EXPECTED TO

EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS

RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD

MANAGER HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED SEPTEMBER

16, 2009, WHICH WILL READ AS FOLLOWS:

1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO

LITIGATION SUCH AS COMMERCIAL DISPUTES, DISPUTES WITH COLLABORATORS,

ETC. AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE

99

ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE DRAFT

LETTER OF OFFER PERTAINING TO THE SAID ISSUE;

2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY,

ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT

VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE,

PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE

DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE

COMPANY, WE CONFIRM THAT:

A. THE DRAFT LETTER OF OFFER FILED WITH SEBI IS IN CONFORMITY WITH THE

DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;

B. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE ISSUE AS ALSO THE

REGULATIONS, GUIDELINES, INSTRUCTIONS ETC., ISSUED BY SEBI, THE

GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE

BEEN DULY COMPLIED WITH; AND

C. THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE TRUE, FAIR AND

ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION

AS TO INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN

ACCORDANCE WITH THE REQUIREMENTS OF THE SEBI (ISSUE OF CAPITAL AND

DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE

LEGAL REQUIREMENTS.

3. WE CONFIRM THAT ALL THE INTERMEDIARIES NAMED IN THE DRAFT LETTER OF

OFFER ARE REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID;

4. WE HAVE SATISFIED OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO

FULFIL THEIR UNDERWRITING COMMITMENTS - NOT APPLICABLE;

5. WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR

INCLUSION OF THEIR SECURITIES AS PART OF THE PROMOTERS‟ CONTRIBUTION

SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE

PROMOTERS‟ CONTRIBUTION SUBJECT TO LOCK-IN, WILL NOT BE DISPOSED / SOLD/

TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE

OF FILING THE DRAFT LETTER OF OFFER WITH SEBI TILL THE DATE OF

COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT LETTER OF OFFER-

NOT APPLICABLE;

6. WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF

INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009,

WHICH RELATES TO SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS

CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES

AS TO COMPLIANCE WITH THE CLAUSE HAVE BEEN MADE IN THE DRAFT LETTER OF

OFFER - NOT APPLICABLE;

7. WE UNDERTAKE SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C) AND (D) OF

SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD

OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009

SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE

TO ENSURE THAT PROMOTERS‟ CONTRIBUTION AND SUBSCRIPTION FROM ALL FIRM

ALLOTTEES WOULD BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE

ISSUE. WE UNDERTAKE THAT AUDITORS‟ CERTIFICATE TO THIS EFFECT SHALL BE

DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS

HAVE BEEN MADE TO ENSURE THAT PROMOTERS‟ CONTRIBUTION SHALL BE KEPT IN

AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE

RELEASED TO THE COMPANY ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE -

NOT APPLICABLE;

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8. WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE

FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE „MAIN OBJECTS‟

LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER

CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED

OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS

MEMORANDUM OF ASSOCIATION;

9. WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE

THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE

BANK ACCOUNT AS PER THE PROVISIONS OF SECTION 73(3) OF THE COMPANIES ACT,

1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER

PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE

LETTER OF OFFER. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO

BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS

THIS CONDITION – NOTED FOR COMPLIANCE;

10. WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT LETTER OF OFFER

THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT

OR PHYSICAL MODE;

11. WE CERTIFY THAT ALL APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES

AND EXCHANGE BAORD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE

REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO

DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE

INVESTOR TO MAKE A WELL INFORMED DECISION;

12. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT

LETTER OF OFFER:

a. AN UNDERTAKING FROM THE COMPANY THAT AT ANY GIVEN TIME THERE SHALL

BE ONLY ONE DENOMINATION FOR THE SHARES OF THE COMPANY; AND

b. AN UNDERTAKING FROM THE COMPANY THAT IT SHALL COMPLY WITH SUCH

DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY SEBI FROM TIME TO TIME.

13. WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO

ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA

(ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE

MAKING THE ISSUE;

14. WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN

EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OR

THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISK

FACTORS, PROMOTERS EXPERIENCE, ETC.; AND

15. WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH

THE APPLICABLE PROVISIONS OF THE SEBI (ISSUE OF CAPITAL AND DISCLOSURE

REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE

REGULATION NUMBER, ITS TEXT, THE STATUS OF COMPLIANCE, PAGE NUMBER OF

THE DRAFT LETTER OF OFFER WHERE THE REGULATION HAS BEEN COMPLIED WITH

AND OUR COMMENTS, IF ANY.

The filing of this Letter of Offer does not, however, absolve the Company from any liabilities under Section 63

or Section 68 of the Companies Act or from the requirement of obtaining such statutory or other clearance as

may be required for the purpose of the proposed Issue. The SEBI further reserves the right to take up, at any

point of time, with the Lead Manager any irregularities or lapses in this Letter of Offer.

Caution

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The Company and the Lead Manager accept no responsibility for statements made otherwise than in this Letter

of Offer or in any advertisement or other material issued by the Company or at the instance of the Company and

that anyone placing reliance on any other source of information would be doing so at his own risk.

Investors who invest in the Issue will be deemed to have been represented by the issuer company and Lead

Manager and their respective directors, officers, agents, affiliates and representatives that they are eligible under

all applicable laws, rules, regulations, guidelines and approvals to acquire equity shares of our company, and are

relying on independent advice / evaluation as to their ability and quantum of investment in this issue

The Lead Manager and the Company shall make all information available to the Equity Shareholders and no

selective or additional information would be available for a section of the Equity Shareholders in any manner

whatsoever including at presentations, in research or sales reports etc. after filing of this Letter of Offer with the

SEBI.

Disclaimer with respect to jurisdiction

This Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and

regulations thereunder. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate

court(s) in New Delhi / Chandigarh, India only.

Selling Restrictions

The distribution of this Letter of Offer and the issue of Equity Shares on a rights basis to persons in certain

jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons into

whose possession this Letter of Offer may come are required to inform themselves about and observe such

restrictions. The Company is making this Issue of Equity Shares on a rights basis to the shareholders of the

Company and will dispatch the Letter of Offer and CAFs to shareholders who have provided an Indian address.

No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for

that purpose, except that the Letter of Offer has been filed with the SEBI. Accordingly, the Equity Shares may

not be offered or sold, directly or indirectly, and this Letter of Offer may not be distributed in any jurisdiction,

except in accordance with legal requirements applicable in such jurisdiction. Receipt of this Letter of Offer will

not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and, those

circumstances, this Letter of Offer must be treated as sent for information only and should not be copied or

redistributed. Accordingly, persons receiving a copy of this Letter of Offer should not, in connection with the

issue of the Equity Shares or the rights entitlements, distribute or send the same in or into the United States or

any other jurisdiction where to do so would or might contravene local securities laws or regulations. If this

Letter of Offer is received by any person in any such territory, or by their agent or nominee, they must not seek

to subscribe to the Equity Shares or the rights entitlements referred to in this Letter of Offer.

Neither the delivery of this Letter of Offer nor any sale hereunder, shall under any circumstances create any

implication that there has been no change in the Company‘s affairs from the date hereof or that the information

contained herein is correct as of any time subsequent to this date.

United States Restrictions

NEITHER THE RIGHTS ENTITLEMENTS NOR THE SECURITIES THAT MAY BE PURCHASED

PURSUANT HERETO HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS

AMENDED (THE ―SECURITIES ACT‖), OR ANY U.S. STATE SECURITIES LAWS, AND MAY NOT BE

OFFERED, SOLD, RESOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OF

AMERICA OR THE TERRITORIES OR POSSESSIONS THEREOF (THE ―UNITED STATES‖ OR THE

―U.S.‖) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ―US PERSONS‖ (AS DEFINED IN

REGULATION S UNDER THE SECURITIES ACT (―REGULATION S‖)), EXCEPT IN A TRANSACTION

EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE RIGHTS

REFERRED TO IN THIS LETTER OF OFFER ARE BEING OFFERED IN INDIA, BUT NOT IN THE

UNITED STATES. THE OFFERING TO WHICH THIS LETTER OF OFFER RELATES IS NOT, AND

UNDER NO CIRCUMSTANCES IS TO BE CONSTRUED AS, AN OFFERING OF ANY SHARES OR

RIGHTS FOR SALE IN THE UNITED STATES OR AS A SOLICITATION THEREIN OF AN OFFER TO

BUY ANY OF THE SAID SHARES OR RIGHTS. ACCORDINGLY, THIS LETTER OF OFFER SHOULD

NOT BE FORWARDED TO OR TRANSMITTED IN OR INTO THE UNITED STATES AT ANY TIME.

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NEITHER THE COMPANY NOR ANY PERSON ACTING ON BEHALF OF THE COMPANY WILL

ACCEPT SUBSCRIPTIONS OR RENUNCIATIONS FROM ANY PERSON, OR THE AGENT OF ANY

PERSON, WHO APPEARS TO BE, OR WHO THE COMPANY OR ANY PERSON ACTING ON BEHALF

OF THE COMPANY HAS REASON TO BELIEVE IS, EITHER A ―U.S. PERSON‖ (AS DEFINED IN

REGULATION S) OR OTHERWISE IN THE UNITED STATES. ANY PERSON SUBSCRIBING TO THE

EQUITY SHARES OFFERED HEREBY WILL BE DEEMED TO REPRESENT THAT SUCH PERSON IS

NOT A U.S. PERSON (AS DEFINED IN REGULATION S) OR OTHERWISE IN THE UNITED STATES

AND HAS NOT VIOLATED ANY U.S. SECURITIES LAWS IN CONNECTION WITH THE EXERCISE.

European Economic Area Restrictions

In relation to a Relevant Member State of the European Economic Area which has implemented the Prospectus

Directive at any relevant time, the Company has not made and will not make an offer of the Equity Shares to the

public in that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares

which has been approved by the competent authority in that Relevant Member State or, where appropriate,

approved in another Relevant Member State and notified to the competent authority in that Relevant Member

State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the

Relevant Implementation Date, make an offer of Equity Shares to the public in that Relevant Member State at

any time:

(a) to legal entities which are authorised or regulated to operate in the financial markets, or if not so

authorised or regulated, whose corporate purpose is solely to invest in securities; or

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last

financial year; (2) a total balance sheet of more than €4,30,00,000 and (3) an annual net turnover of

more than €5,00,00,000, as shown in its last annual or consolidated accounts; or

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus

Directive), subject to obtaining the prior consent of the lead manager; or

(d) in any other circumstances which do not require the publication by the Company of a prospectus

pursuant to Article 3 of the Prospectus Directive.

For the purpose of this provision, the expression an ―offer of Equity Shares to the public‖ in relation to any

Equity Shares in any Relevant Member State means the communication in any form and by any means of

sufficient information on the terms of the offer and the Equity Shares to be offered so as to enable an Investor to

decide to purchase or subscribe for the Equity Shares, as the same may be varied in that Member State by any

measure implementing the Prospectus Directive in that Member State and the expression ―Prospectus Directive‖

means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

This European Economic Area selling restriction is in addition to any other selling restriction set out below.

United Kingdom Restrictions

This Letter of Offer is only being distributed to and is only directed at (i) persons who are outside the United

Kingdom, or (ii) to investment professionals falling within Article 19(5) of the Order, or (iii) high net worth

entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of

the Order (all such persons together being referred to as ―relevant persons‖). The Equity Shares are only

available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Equity

Shares will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or

rely on this document or any of its contents.

Designated Stock Exchange

The Designated Stock Exchange for the purposes of this Issue will be the BSE.

Disclaimer Clause of the BSE

The BSE has given pursuant to its letter number DCS/PREF/JA/IP-RT/1016/9-10 dated September 30, 2009,

permission to our Company to use BSE‘s name in this Letter of Offer as one of the Stock Exchanges on which

103

this Company‘s securities are proposed to be listed. The BSE has scrutinized this Letter of Offer for its limited

internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The BSE does

not in any manner: (i) warrant, certify or endorse the correctness or completeness of any of the contents of this

Letter of Offer; or (ii) warrant that this Company‘s securities will be listed or will continue to be listed on the

Exchange; or (iii) take any responsibility for the financial or other soundness of this Company, its Promoters, its

management or any scheme or project of this Company; and it should not for any reason be deemed or construed

that this Letter of Offer has been cleared or approved by the BSE. Every person who desires to apply for or

otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and

analysis and shall not have any claim against the BSE whatsoever by reason of any loss which may be suffered

by such person consequent to or in connection with such subscription / acquisition whether by reason of

anything stated or omitted to be stated herein or for any other reason whatsoever.

Disclaimer Clause of the NSE

As required, a copy of this Letter of Offer has been submitted to the National Stock Exchange of India Limited

(the ―NSE‖). NSE has, pursuant to its letter number NSE/LIST/120773-7 dated October 16, 2009 given

permission to the Issuer to use the NSE‘s name in this Letter of Offer as one of the Stock Exchanges on which

the Issuer‘s securities are proposed to be listed. The NSE has scrutinized this Letter of Offer for its limited

internal purpose of deciding on the matter of granting the aforesaid permission to the Issuer. It is to be distinctly

understood that the aforesaid permission given by NSE should not in any way be deemed or construed to mean

that the Letter of Offer has been cleared or approved by NSE; nor does it in any manner warrant, certify or

endorse the correctness or completeness of any of the contents of this Letter of Offer; nor does it warrant that

the Issuer‗s securities will be listed or will continue to be listed on the NSE; nor does it take any responsibility

for the financial or other soundness of the Issuer, its Promoter, its management or any scheme or project of the

Issuer.

Every person who desires to apply for or otherwise acquire any securities of the Issuer may do so pursuant to

independent inquiry, investigation and analysis and shall not have any claim against NSE whatsoever by reason

of any loss which may be suffered by such person consequent to or in connection with such subscription/

acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.

Filing

The Draft Letter of Offer was filed with the SEBI, Plot No. C 4-A, ‗G‘ Block, Bandra Kurla Complex, Bandra

(East), Mumbai 400 051, India for its observations and the SEBI has given its observations by a letter dated

December 16, 2009, which have been duly incorporated in the Letter of Offer. The Letter of Offer has been filed

with the Designated Stock Exchange as per the provisions of the Companies Act.

Issue Related Expenses

The expenses of the Issue payable by the Company include brokerage, fees and reimbursement to the Lead

Manager, Auditors, Legal Advisor, Registrar to the Issue, printing and distribution expenses, publicity, listing

fees, stamp duty and other expenses and will be met out of the Issue Proceeds.

S.No. Activity Expense Amount

(Rs. in lacs)

Percentage of

Total

Estimated

Issue

Expenditure

Percentage of

Issue Size

1. Fees of the Lead Manager 37.00 30.14% 0.46% 2. Fees to Registrar to the Issue 2.50 2.04% 0.03% 3. Fees to the Legal Advisors 26.50 21.59% 0.33% 4. Fees to the Bankers to the Issue - - - 5. Other Expenses (Printing and stationary, distribution and

postage, advertisement and marketing expense etc.)

56.75 46.23% 0.71%

Total Estimated Issue Expenses 122.75 100.00% 1.54%

Investor Grievances and Redressal System

The Company has adequate arrangements for redressal of investor complaints. Well-arranged correspondence

system developed for letters of routine nature. The share transfer and dematerialization for the Company is

104

being handled by the in-house registrar and share transfer agent. Letters are filed category wise after having

attended to. Redressal norm for response time for all correspondence including shareholders complaints is

within 10-12 days.

The contact details of the share registrars are:

MCS Limited

Sri Venkatesh Bhawan

F-65, 1st Floor

Okhla Industrial Area, Phase- I

New Delhi - 110 020

India

Tel : (91 11 4140 4149)

Fax : (91 11 4170 9881)

Status of Complaints

(a) Total number of complaints received during Fiscal 2009: 30

(b) No. of shareholders complaints as on December 31, 2009: There were no pending complaints as on

December 31, 2009.

(d) Status of the complaints: There were no pending complaints.

(e) Time normally taken by it for disposal of various types of Investor grievances: 10 to 12 days.

Investor Grievances arising out of this Issue

The Company‘s investor grievances arising out of the Issue will be handled by Link Intime India Private

Limited who are the Registrar to the Issue. The Registrar will have a separate team of personnel handling only

post-Issue correspondence.

The agreement between the Company and the Registrar provides for retention of records with the Registrar for a

period of one (1) year from the last date of dispatch of Allotment Advice / share certificate / refund orders to

enable the investors to approach the Registrar for redressal of their grievances.

All grievances relating to the Issue may be addressed to the Registrar to the Issue giving full details such as folio

number, name and address, contact telephone / cell numbers, email id of the first Investor, number and type of

shares applied for, CAF serial number, amount paid on application and the name of the bank and the branch

where the application was deposited, along with a photocopy of the acknowledgement slip. In case of

renunciation, the same details of the Renouncee should be furnished.

The average time taken by the Registrar for attending to routine grievances will be seven (7) days from the date

of receipt. In case of non-routine grievances where verification at other agencies is involved, it would be the

endeavour of the Registrar to attend to them as expeditiously as possible. The Company undertakes to resolve

the Investor grievances in a time bound manner.

Investors may contact the Compliance Officer / Company Secretary in case of any pre-Issue / post -Issue

related problems such as non-receipt of allotment advice / share certificates / demat credit / refund orders

etc. His address is as follows:

Mr. Gopal Bansal


204 – 205, Sector 34-A

Chandigarh – 160 022

India

Tel: (91 172 264 7700)

Fax: (91 172 261 5111)


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SECTION VII - TERMS OF THE ISSUE

The Equity Shares proposed to be issued on rights basis, are subject to the terms and conditions contained in the

Letter of Offer, the enclosed CAF, the Memorandum of Association and Articles of Association of the

Company, the provisions of the Companies Act, the terms and conditions as may be incorporated in the Foreign

Exchange Management Act, 1999 (―FEMA‖), guidelines issued by the SEBI, guidelines, notifications and

regulations for issue of capital and for listing of securities issued by GoI and/or other statutory authorities and

bodies from time to time, terms and conditions as stipulated in the allotment advice or security certificate and

rules as may be applicable and introduced from time to time.

Authority for the Issue

This Issue is being made pursuant to a resolution passed by the Board of Directors of the Company under

section 81(1) of the Companies Act at its meeting held on March 19, 2009. The Issue has also been approved by

the shareholders of the Company at the extraordinary general meeting of the Company held on July 2, 2009.

Basis for the Issue

The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose

names appear as beneficial owners as per the list to be furnished by the Depositories in respect of the Equity

Shares held in the Electronic Form and on the Register of Members of the Company in respect of the Equity

Shares held in physical form at the close of business hours on the Record Date i.e. February 10, 2010, fixed in

consultation with the Stock Exchanges.

Rights Entitlement

As your name appears as beneficial owner in respect of Equity Shares held in the electronic form or appears in

the register of members as an Equity Shareholder of the Company as on the Record Date, i.e., February 10,

2010, you are entitled to the number of Equity Shares as set out in Part A of the enclosed CAFs.

PRINCIPAL TERMS OF THE EQUITY SHARES

Face Value

Each Equity Share will have a face value of Rs. 10.

Issue Price

Each Equity Share shall be offered at an Issue Price of Rs. 200 for cash at a premium of Rs. 190 per Equity

Share. The Issue Price has been arrived at in consultation between the Company and the Lead Manager.

Entitlement Ratio

The Equity Shares are being offered on rights basis to the Equity Shareholders in the ratio of 19 Equity Shares

for every 50 Equity Share held on the Record Date.

Terms of Payment

Full amount of Rs. 200 per Equity Share is payable on application.

Fractional Entitlements

For Equity Shares being offered on a rights basis under the Issue, if the shareholding of any of the Equity

Shareholders is less than three (3) Equity Shares or is not in multiples of 50, the fractional entitlement of such

Equity Shareholders shall be ignored. Equity Shareholders whose fractional entitlements are being ignored will

be given preference in the allotment of one (1) additional Equity Share each, if such Equity Shareholders have

applied for additional Equity Shares.

106

For example, if an Equity Shareholder holds between eight (8) and 10 Equity Shares, he will be entitled to three

(3) Equity Shares on a rights basis. He will also be given a preference for allotment of one (1) additional Equity

Shares if he has applied for the same.

Those Equity Shareholders holding less than three (3) Equity Shares will therefore be entitled to zero Equity

Share under this Issue and shall be despatched a CAF with zero entitlement. Such Equity Shareholders are

entitled to apply for additional Equity Shares. However, such Equity Shareholders cannot renounce their

entitlement to apply for additional Equity Shares in favour of any other person. A CAF with zero entitlement

will be non-negotiable / non-renunciable.

For example, if an Equity Shareholder holds between one (1) and two (2) Equity Shares, he will be entitled to

nil Equity Shares on a rights basis. He will be given a preference for allotment of one (1) additional Equity

Share, if he has applied for the same.

Ranking

The Equity Shares being issued shall be subject to the provisions of our Memorandum of Association and

Articles of Association. The Equity Shares shall rank pari passu, in all respects including dividend, with our

existing Equity Shares.

Listing and trading of Equity Shares proposed to be issued

The Company‘s existing Equity Shares are currently traded on the Stock Exchanges under the ISIN

INE294B01019. The fully paid up Equity Shares proposed to be issued on a rights basis shall be listed and

admitted for trading on the Stock Exchanges under the existing ISIN for fully paid Equity Shares of the

Company.

The listing and trading of the Equity Shares shall be based on the current regulatory framework applicable

thereto. Accordingly, any change in the regulatory regime would accordingly affect the schedule.

All steps for the completion of the necessary formalities for listing and commencement of trading of the Equity

Shares allotted pursuant to the Issue shall be taken within seven (7) working days from the finalization of the

basis of allotment. The Company made an application for ―in-principle‖ approval for listing of the Equity Shares

in accordance with Clause 24(a) of the Listing Agreement to the BSE and the NSE through letters dated

September 16, 2009 and has received such approval from the BSE pursuant to the letter (bearing no.

DCS/PREF/JA/IP-RT/1016/9-10) dated September 30, 2009 and from the NSE pursuant to letter (bearing no.

NSE/LIST/120773-7) dated October 16, 2009.

Rights of the Equity Shareholder

Subject to applicable laws, the Equity Shareholders of our Company shall have the following rights:

Right to receive dividend, if declared;

Right to attend general meetings and exercise voting powers, unless prohibited by law;

Right to vote in person or by proxy;

Right to receive offers for rights shares and be allotted bonus shares, if announced;

Right to receive surplus on liquidation;

Right to free transferability of Equity Shares; and

Such other rights as may be available to a shareholder of a listed public company under the Companies

Act and Memorandum of Association and Articles of Association.

General Terms of the Issue

Market Lot

The Equity Shares of the Company are tradable only in dematerialized form. The market lot for Equity Shares in

dematerialized mode is one. In case of holding of Equity Shares in physical form, the Company would issue to

the allottees one (1) certificate for the Equity Shares allotted to each folio (―Consolidated Certificate‖).

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Joint Holders

Where two (2) or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold

the same as joint tenants with the benefit of survivorship subject to the provisions contained in the Articles of

Association.

Nomination

In terms of Section 109A of the Companies Act, nomination facility is available in case of Equity Shares. The

Investor can nominate any person by filling the relevant details in the CAF in the space provided for this

purpose.

In case of Equity Shareholders who are individuals, a sole Equity Shareholder or the first named Equity

Shareholder, along with other joint Equity Shareholders, if any, may nominate any person(s) who, in the event

of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Equity

Shares. A person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original

Equity Shareholder(s), shall be entitled to the same advantages to which he would be entitled if he were the

registered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make

a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the

event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon

the sale of the Equity Shares by the person nominating. A transferee will be entitled to make a fresh nomination

in the manner prescribed. Fresh nominations can be made only in the prescribed form available on request at the

registered office of the Company or such other person at such addresses as may be notified by the Company.

The Investor can make the nomination by filling in the relevant portion of the CAF.

Only one (1) nomination would be applicable for one (1) folio. Hence, in case the Equity Shareholder(s) has

already registered the nomination with the Company, no further nomination needs to be made for Equity Shares

that may be allotted in this Issue under the same folio.

In case the allotment of Equity Shares is in dematerialized form, there is no need to make a separate

nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective

Depositary Participant (“DP”) of the Investor would prevail. Any Investor desirous of changing the

existing nomination is requested to inform its respective DP.

Notices

All notices to the Equity Shareholder(s) required to be given by the Company shall be published in one (1)

English national daily with wide circulation, one (1) Hindi national daily with wide circulation and/or, will be

sent by ordinary post/registered post/speed post to the registered holders of the Equity Shares from time to time.

Additional Subscription by the Promoter

The Promoter has confirmed that it intends to subscribe to the full extent of their Rights Entitlement in the Issue.

Subject to compliance with the Takeover Code, the Promoter and promoter group reserve their right to subscribe

for Equity Shares in this Issue by subscribing for renunciation, if any, made by any other shareholder. The

Promoter has provided an undertaking dated January 20, 2010, to our Company to apply for additional Equity

Shares in the Issue, to the extent of the unsubscribed portion of the Issue. As a result of this subscription and

consequent allotment, the Promoter and promoter group may acquire Equity Shares over and above their Rights

Entitlement in the Issue, which may result in an increase of the shareholding being above the current

shareholding with the Rights Entitlement of Equity Shares under the Issue. This subscription and acquisition of

additional Equity Shares by the Promoter and promoter group through this Issue, if any, will not result in change

of control of the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii)

of the Takeover Code. As such, other than meeting the requirements indicated in ―Objects of the Issue –

Requirement of Funds and Use of Net Proceeds‖ on page 17), there is no other intention / purpose for this

Issue, including any intention to delist our Company, even if, as a result of allotments to the Promoter and

promoter group, in this Issue, the Promoter‘s shareholding in our Company exceeds their current shareholding.

The Promoter and promoter group shall subscribe to such unsubscribed portion as per the relevant provisions of

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the law. Allotment to the Promoter and promoter group of any unsubscribed portion, over and above their Rights

Entitlement shall be done in compliance with the Listing Agreement and the Takeover Code from time to time.

For details, please see the section titled ―– Basis of Allotment‖ under this section titled ―Terms of the Issue‖ on

page 112.

Procedure for Application

The CAF for Equity Shares would be printed in black ink for all Equity Shareholders. In case the original CAFs

are not received by the Investor or is misplaced by the Investor, the Investor may request the Registrars to the

Issue, for issue of a duplicate CAF, by furnishing the registered folio number, DP ID Number, Client ID

Number and their full name and address.

Please note that the request for a duplicate CAF should reach the Registrar to the Issue, within 12 days of the

Issue Opening Date. Investors should note that those who are making the application in the duplicate form

should not utilize the original CAF for any purpose, including renunciation, even if the original CAF is received

or found subsequently. If any Investor violates any of these requirements, they will face the risk of rejection of

both the applications. Neither the Company nor the Registrar to the Issue will be responsible for postal delays or

loss, if any, of a duplicate CAF in transit.

Acceptance of the Issue

You may accept the Issue and apply for the Equity Shares offered, either in full or in part, by filling Part A of

the enclosed CAFs and submit the same along with the application money payable to the Bankers to the Issue or

any of the collection branches as mentioned on the reverse of the CAFs before the close of the banking hours on

or before the Issue Closing Date or such extended time as may be specified by the Board of Directors of the

Company in this regard. Investors at centres not covered by the branches of collecting banks can send their

CAFs together with the cheque drawn at par on a local bank at Mumbai / demand draft payable at Mumbai to

the Registrar to the Issue by registered post / speed post. Such applications sent to anyone other than the

Registrar to the Issue are liable to be rejected. For further details on the mode of payment, please see the

sections titled ―- Mode of Payment for Resident Equity Shareholders / Investors‖ and ―- Mode of Payment for

Non-Resident Equity Shareholders / Investors‖ under this section titled ―Terms of the Issue‖ on page 125.

Option available to the Equity Shareholders

The CAFs will clearly indicate the number of Equity Shares that the Equity Shareholder is entitled to.

If the Equity Shareholder applies for an investment in Equity Shares, then he can:

Apply for his Rights Entitlement of Equity Shares in part;

Apply for his Rights Entitlement of Equity Shares in part and renounce the other part of the Equity

Shares;

Apply for his Rights Entitlement of Equity Shares in full;

Apply for his Rights Entitlement in full and apply for additional Equity Shares; and

Renounce his Rights Entitlement in full.

Additional Equity Shares

You are eligible to apply for additional Equity Shares over and above your Rights Entitlement, provided that

you have applied for all the Equity Shares offered without renouncing them in whole or in part in favour of any

other person(s). Applications for additional Equity Shares shall be considered and allotment shall be made at the

sole discretion of the Board, subject to sectoral caps and in consultation if necessary with the Designated Stock

Exchange and in the manner prescribed under the section titled ―– Basis of Allotment‖ under this section titled

―Terms of the Issue‖ on page 112.

If you desire to apply for additional Equity Shares, please indicate your requirement in the place provided for

additional Equity Shares in Part A of the CAF. The Renouncee applying for all the Equity Shares renounced in

their favour may also apply for additional Equity Shares.

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Where the number of additional Equity Shares applied for exceeds the number available for allotment, the

allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange.

Renunciation

This Issue includes a right exercisable by you to renounce the Equity Shares offered to you either in full or in

part in favour of any other person or persons. Your attention is drawn to the fact that the Company shall not allot

and/or register and Equity Shares in favour of more than three persons (including joint holders), partnership

firm(s) or their nominee(s), minors, HUF, any trust or society (unless the same is registered under the Societies

Registration Act, 1860 or the Indian Trust Act, 1882 or any other applicable law relating to societies or trusts

and is authorized under its constitution or bye-laws to hold Equity Shares, as the case may be).

Any renunciation from Non-resident Indian Shareholder(s) to Resident Indian(s) is subject to the renouncer(s) /

renouncee(s) obtaining the approval of the FIPB and/or necessary permission of the RBI under the FEMA and

such permissions should be attached to the CAF. Applications not accompanied by the aforesaid approvals are

liable to be rejected. Additionally, any renunciation by any Equity Shareholder resident in/outside India to any

non-resident is prohibited.

By virtue of the Circular No. 14 dated September 16, 2003 issued by the RBI, Overseas Corporate Bodies

(―OCBs‖) have been derecognized as an eligible class of investors and the RBI has subsequently issued the

Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs))

Regulations, 2003. Accordingly, the existing Equity Shareholders of the Company who do not wish to subscribe

to the Equity Shares being offered but wish to renounce the same in favour of Renouncee shall not renounce the

same (whether for consideration or otherwise) in favour of OCB(s).

Part ‗A‘ of the CAF must not be used by any person(s) other than those in whose favour this offer has been

made. If used, this will render the application invalid. Submission of the enclosed CAF to the Banker to the

Issue at its collecting branches specified on the reverse of the CAF with the form of renunciation (Part ‗B‘ of the

CAF) duly filled in shall be conclusive evidence for the Company of the person(s) applying for Equity Shares in

Part ‗C‘ of the CAF to receive allotment of such Equity Shares. The Renouncees applying for all the Equity

Shares renounced in their favour may also apply for additional Equity Shares. Part ‗A‘ of the CAF must not be

used by the Renouncee(s) as this will render the application invalid. Renouncee(s) will have no further right to

renounce any Equity Shares in favour of any other person.

Procedure for renunciation

To renounce all the Equity Shares offered to a shareholder in favour of one Renouncee

If you wish to renounce the offer indicated in Part ‗A‘, in whole, please complete Part ‗B‘ of the CAF. In case of

joint holding, all joint holders must sign Part ‗B‘ of the CAF. The person in whose favour renunciation has been

made should complete and sign Part ‗C‘ of the CAF. In case of joint Renouncees, all joint Renouncees must sign

this part of the CAF.

To renounce in part/or renounce the whole to more than one person(s)

If you wish to either accept this offer in part and renounce the balance or renounce the entire offer under this

Issue in favour of two (2) or more Renouncees, the CAF must be first split into requisite number of forms.

Please indicate your requirement of SAFs in the space provided for this purpose in Part ‗D‘ of the CAF and

return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the

last date of receiving requests for SAFs. On receipt of the required number of SAFs from the Registrar, the

procedure as mentioned in paragraph above shall have to be followed.

In case the signature of the Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the

specimen registered with the Company, the application is liable to be rejected.

Renouncee(s)

The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part ‗C‘ of the CAF and

submit the entire CAF to the Bankers to the Issue on or before the Issue Closing Date along with the application

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money in full.

Change and / or introduction of additional holders

If you wish to apply for Equity Shares jointly with any other person(s), not more than three (3), who is/are not

already a joint holder with you, it shall amount to renunciation and the procedure as stated above for

renunciation shall have to be followed. Even a change in the sequence of the name of joint holders shall amount

to renunciation and the procedure, as stated above shall have to be followed.

However, this right of renunciation is subject to the express condition that the Board of Directors of the

Company shall be entitled in its absolute discretion to reject the request for allotment from the Renouncee(s)

without assigning any reason thereof.

Instructions for Options

The summary of options available to the Equity Shareholder is presented below. You may exercise any of the

following options with regard to the Equity Shares offered, using the enclosed CAF:

Option Available Action Required

1. Accept whole or part of your Rights

Entitlement without renouncing the balance.

Fill in and sign Part A (All joint holders must sign)

2. Accept your Rights Entitlement in full and

apply for additional Equity Shares

Fill in and sign Part A including Block III relating to the

acceptance of entitlement and Block IV relating to additional

Equity Shares (All joint holders must sign)

3. Renounce your Rights Entitlement in full to

one person (Joint Renouncees are considered

as one).

Fill in and sign Part B (all joint holders must sign) indicating the

number of Equity Shares renounced and hand it over to the

Renouncee. The Renouncee must fill in and sign Part C (All joint

Renouncees must sign)

4. Accept a part of your Rights Entitlement and

renounce the balance to one or more

Renouncee(s)

OR

Renounce your Rights Entitlement to all

the Equity Shares offered to you to more

than one Renouncee

Fill in and sign Part D (all joint holders must sign) requesting for

SAFs. Send the CAF to the Registrar to the Issue so as to reach

them on or before the last date for receiving requests for SAFs.

Splitting will be permitted only once.

On receipt of the SAF take action as indicated below.

For the Equity Shares you wish to accept, if any, fill in and sign

Part A.

For the Equity Shares you wish to renounce, fill in and sign Part

B indicating the number of Equity Shares renounced and hand it

over to the Renouncee. Each of the Renouncee should fill in and

sign Part C for the Equity Shares accepted by them.

5. Introduce a joint holder or change the

sequence of joint holders

This will be treated as a renunciation. Fill in and sign Part B and

the Renouncee must fill in and sign Part C.

Please note that:

Part ‗A‘ of the CAF must not be used by any person(s) other than the Equity Shareholder to whom this

Letter of Offer has been addressed. If used, this will render the application invalid.

Request for SAF should be made for a minimum of one (1) Equity Share or, in either case, in multiples

thereof and one (1) SAF for the balance Equity Shares, if any.

Request by the Investor for the SAFs should reach the Company on or before March 10, 2010.

Only the Equity Shareholder to whom this Letter of Offer has been addressed shall be entitled to

renounce and to apply for SAFs. Forms once split cannot be split further.

SAFs will be sent to the Investor (s) by post at the applicant‘s risk.

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Availability of duplicate CAF

In case the original CAF is not received, or is misplaced by the Investor, the Registrar to the Issue will issue a

duplicate CAF on the request of the Investor who should furnish the registered folio number/ DP and Client ID

number and his / her full name and address to the Registrar to the Issue. Please note that the request for

duplicate CAF should reach the Registrar to the Issue within 12 days from the Issue Opening Date. Please note

that those who are making the application in the duplicate form should not utilize the original CAF for any

purpose including renunciation, even if it is received/ found subsequently. If the Investor violates such

requirements, he / she shall face the risk of rejection of both the applications.

Application on Plain Paper

An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate

CAF may make an application to subscribe to the Issue on plain paper, along with Demand Draft, net of bank

and postal charges payable at Mumbai, which should be drawn in favour of the ―Swaraj Mazda – Rights Issue‖

and the Equity Shareholders should send the same by registered post / speed post directly to the Registrar to the

Issue.

The envelope should be superscribed ―Swaraj Mazda – Rights Issue‖ and should be postmarked in India. The

application on plain paper, duly signed by the Investors including joint holders, in the same order as per

specimen recorded with the Company, must reach the office of the Registrar to the Issue before the Issue

Closing Date and should contain the following particulars:

Name of Issuer, being Swaraj Mazda Limited;

Name and address of the Equity Shareholder including joint holders;

Registered Folio Number/ DP and Client ID no.;

Number of Equity Shares held as on Record Date;

Number of Equity Shares entitled to;

Number of Equity Shares applied for;

Number of additional Equity Shares applied for, if any;

Total number of Equity Shares applied for;

Total amount paid at the rate of Rs. 200 per Equity Share;

Particulars of cheque / draft;

Savings / Current Account Number and name and address of the bank where the Equity Shareholder

will be depositing the refund order; and

Except for applications on behalf of the Central or State Government and the officials appointed by the

courts, PAN number of the Investor and for each Investor in case of joint names, irrespective of the

total value of the Equity Shares applied for pursuant to the Issue;

A representation that the Equity Shareholder is not a ―U.S. Person‖ (as defined in Regulation S under

the Securities Act);

Signature of the Equity Shareholders to appear in the same sequence and order as they appear in the

records of the Company; and

Additionally, Non Resident applicants shall include the following:

―I / We understand that neither the Rights Entitlement nor the Equity Shares have been, and will not be,

registered under the US Securities Act or any United States state securities laws, and may not be offered,

sold, resold or otherwise transferred within the United States or to the territories or possessions thereof or

to, or for the account or benefit of, ―U.S. Persons‖ (as defined in Regulation S under the US Securities Act),

except in a transaction exempt from, or in a transaction not subject to, the registration requirements of the

US Securities Act. The Equity Shares referred to in this application are being offered in India but not in the

United States of America. The offering to which this application relates is not, and under no circumstances

is to be construed as, an offering of any shares or warrants or rights for sale in the United States, or the

territories or possessions thereof, or as a solicitation therein of an offer to buy any of the said shares or

warrants or rights. Accordingly, this application should not be forwarded to or transmitted in or to the

United States at any time, except in a transaction exempt from, or in a transaction not subject to, the

registration requirements of the US Securities Act. None of the Company, the Registrar, the Lead Manager

or any other person acting on behalf of the Company will accept subscriptions from any person, or the agent

of any person, who appears to be, or who the Company, the Registrar, the Lead Manager or any other

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person acting on behalf of the Company has reason to believe is, a resident of the United States and to

whom an offer, if made, would result in requiring registration of this application with the United States

Securities and Exchange Commission.

I / We will not offer, sell or otherwise transfer any of the Equity Shares, which may be acquired by us in

any jurisdiction or under any circumstances in which such offer or sale is not authorized or to any person to

whom it is unlawful to make such offer, sale or invitation except under circumstances that will result in

compliance with any applicable laws or regulations. We satisfy, and each account for which we are acting

satisfies, all suitability standards for investors in investments of the type subscribed for herein imposed by

the jurisdiction of our residence.

I / We understand and agree that the Equity Shares may not be reoffered, resold, pledged or otherwise

transferred except in an offshore transaction in compliance with Regulation S, or otherwise pursuant to an

exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.‖

Please note that those who are making the application otherwise than on original CAF shall not be entitled to

renounce their rights and should not utilize the original CAF for any purpose including renunciation even if it is

received subsequently. If the Investor violates such requirements, he/she shall face the risk of rejection of both

the applications. The Company shall refund such application amount to the Investor without any interest

thereon.

Last date of Application

The last date for submission of the duly filled in CAF is March 17, 2010.

If the CAF together with the amount payable is not received by the Banker to the Issue/ Registrar to the Issue on

or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board/

Committee of Directors, the invitation to offer contained in the Letter of Offer shall be deemed to have been

declined and the Board/ Committee of Directors shall be at liberty to dispose off the Equity Shares hereby

offered, as provided under the section titled ―– Basis of Allotment‖ under this section titled ―Terms of the

Issue‖ on page 112.

Basis of Allotment

Subject to the provisions contained in the Letter of Offer, the Articles of Association of the Company and the

approval of the Designated Stock Exchange, the Board will proceed to allot the Equity Shares in the following

order of priority:

(a) Full allotment to those Equity Shareholders who have applied for their Rights Entitlement either in full

or in part and also to the Renouncee(s) who has / have applied for Equity Shares renounced in their

favour, in full or in part.

(b) If the shareholding of any of the Equity Shareholders is less than three (3) Equity Shares or not in

multiples of 50, the fractional entitlement of such Equity Shareholders shall be ignored. Equity

Shareholders whose fractional entitlements are being ignored will be given preference in the allotment

of one (1) additional Equity Share each, if such Equity Shareholders have applied for additional Equity

Shares. Allotment under this head shall be considered if there are any un-subscribed Equity Shares after

allotment under (a) above. If the number of Equity Shares required for allotment under this head are

more than the number of Equity Shares available after allotment under (a) above, the allotment would

be made on a fair and equitable basis in consultation with the Designated Stock Exchange.

(c) Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as

part of the Issue and have also applied for additional Equity Shares. The allotment of such additional

Equity Shares will be made as far as possible on an equitable basis having due regard to the number of

Equity Shares held by them on the Record Date, provided there is an under-subscribed portion after

making full allotment in (a) and (b) above. The allotment of such Equity Shares will be at the sole

discretion of the Board / Committee of Directors in consultation with the Designated Stock Exchange,

as a part of the Issue and will not be a preferential allotment.

(d) Allotment to Renouncees who having applied for all the Equity Shares renounced in their favour, have

applied for additional Equity Shares provided there is surplus available after making full allotment

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under (a), (b) and (c ) above. The allotment of such Equity Shares will be at the sole discretion of the

Board/Committee of Directors in consultation with the Designated Stock Exchange, as a part of the

Issue and not preferential allotment.

After taking into account allotment to be made under (a) above, if there is any unsubscribed portion,

the same shall be deemed to be ‗unsubscribed‘ for the purpose of regulation 3(1)(b) of the Takeover

Code which would be available for allocation under (b), (c) and (d) above. The Promoter has confirmed

that it intends to subscribe to the full extent of their Rights Entitlement in the Issue. Subject to

compliance with the Takeover Code, the Promoter and promoter group reserve their right to subscribe

for Equity Shares in this Issue by subscribing for renunciation, if any, made by any other shareholder.

The Promoter has provided an undertaking dated January 20, 2010 to our Company to apply for

additional Equity Shares in the Issue, to the extent of the unsubscribed portion of the Issue. As a result

of this subscription and consequent allotment, the Promoter and promoter group may acquire Equity

Shares over and above their Rights Entitlement in the Issue, which may result in an increase of the

shareholding being above the current shareholding with the Rights Entitlement of Equity Shares under

the Issue. This subscription and acquisition of additional Equity Shares by the Promoter and promoter

group through this Issue, if any, will not result in change of control of the management of the Company

and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other

than meeting the requirements indicated in the section titled ―Objects of the Issue – Requirement of

Funds and Use of Net Proceeds‖ on page 17), there is no other intention/purpose for this Issue,

including any intention to delist our Company, even if, as a result of allotments to the Promoter and

promoter group, in this Issue, the Promoter‘s shareholding in our Company exceeds their current

shareholding. The Promoter and promoter group shall subscribe to such unsubscribed portion as per the

relevant provisions of the law. Allotment to the Promoter and promoter group of any unsubscribed

portion, over and above their Rights Entitlement shall be done in compliance with the Listing

Agreement and the Takeover Code from time to time.

Procedure for Application through the Applications Supported by Blocked Amount (“ASBA”) Process

This section is for the information of the ASBA Investors proposing to subscribe to the Issue through the

ASBA Process. The Company and the Lead Manager are not liable for any amendments or modifications

or changes in applicable laws or regulations, which may occur after the date of this Letter of Offer.

Equity Shareholders who are eligible to apply under the ASBA Process are advised to make their

independent investigations and to ensure that the CAF is correctly filled up.

The list of banks who have been notified by the SEBI to act as SCSB for the ASBA Process are provided on

http://www.sebi.gov.in/pmd/scsb.html. For details on designated branches of SCSB collecting the CAF, please

refer the above mentioned SEBI link.

Equity Shareholders who are eligible to apply under the ASBA Process

The option of applying for Equity Shares in the Issue through the ASBA Process is only available to Equity

Shareholders of the Company on the Record Date and who:

Are holding the Equity Shares in dematerialised form and have applied towards his/her Rights Entitlements

or additional Equity Shares in the Issue in dematerialised form;

Have not renounced his/her Rights Entitlements in full or in part;

Are not a Renouncee;

Are applying through a bank account maintained with one of the SCSBs.

CAF

The Registrar will despatch the CAF to all Equity Shareholders as per their Rights Entitlement on the Record

Date for the Issue. Those Equity Shareholders who wish to apply through the ASBA payment mechanism will

have to select for this mechanism in Part A of the CAF and provide necessary details.

Equity Shareholders desiring to use the ASBA Process are required to submit their applications by selecting the

ASBA Option in Part A of the CAF only or in plain paper application and indicate that they wish to apply

through the ASBA payment mechanism. On submission of the CAF after selecting the ASBA Option in Part A

or plain paper applications indicating application through the ASBA payment mechanism, the Equity

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Shareholders are deemed to have authorized (i) the SCSB to do all acts as are necessary to make the CAF in the

Issue, including blocking or unblocking of funds in the bank account maintained with the SCSB specified in the

CAF or the plain paper, transfer of funds to the separate bank account maintained by the Company as per the

provisions of section 73(3) of the Companies Act, on receipt of instruction from the Registrar to the Issue after

finalization of the basis of Allotment; and (ii) the Registrar to the Issue to issue instructions to the SCSB to

remove the block on the funds in the bank account specified in the CAF or plain paper, upon finalization of the

basis of Allotment and to transfer the requisite funds to the separate bank account maintained by the Company

as per the provisions of Section 73(3) of the Companies Act.

Application in electronic mode will only be available with such SCSB who provides such facility. The Equity

Shareholder shall submit the CAF / plain paper application to the SCSB for authorizing such SCSB to block an

amount equivalent to the amount payable on the application in the said bank account maintained with the same

SCSB. However, no more than five (5) applications (including CAF and plain paper application) can be

submitted per bank account in the Issue. In case of withdrawal / failure of the Issue, the Lead Manager, through

the Registrar to the Issue, shall notify the SCSBs to unblock the blocked amount of the Equity Shareholder

applying through ASBA within one (1) day from the day of receipt of such notification.

Acceptance of the Issue

You may accept the Issue and apply for the Equity Shares either in full or in part, without renouncing the

balance, by filling Part A of the respective CAFs sent by the Registrar, selecting the ASBA process option in

Part A of the CAF and submit the same to the SCSB before the close of the banking hours on or before the Issue

Closing Date or such extended time as may be specified by the Board of Directors of the Company in this

regard.

Mode of payment

The Equity Shareholder applying under the ASBA Process agrees to block the entire amount payable on

application with the submission of the CAF, by authorizing the SCSB to block an amount, equivalent to the

amount payable on application, in a bank account maintained with the SCSB.

After verifying that sufficient funds are available in the bank account provided in the CAF, the SCSB shall

block an amount equivalent to the amount payable on application mentioned in the CAF until it receives

instructions from the Registrars. Upon receipt of intimation from the Registrar, the SCSBs shall transfer such

amount as per Registrar‘s instruction allocable to the Equity Shareholders applying under the ASBA Process

from bank account with the SCSB mentioned by the Equity Shareholder in the CAF. This amount will be

transferred in terms of the SEBI (ICDR) Regulations, into the separate bank account maintained by the

Company as per the provisions of Section 73(3) of the Companies Act. The balance amount remaining after the

finalization of the basis of allotment shall be either unblocked by the SCSBs or refunded to the Investors by the

Registrar on the basis of the instructions issued in this regard by the Registrar to the Issue and the Lead

Managers to the respective SCSB.

The Equity Shareholders applying under the ASBA Process would be required to block the entire amount

payable on their application at the time of the submission of the CAF.

The SCSB may reject the application at the time of acceptance of CAF if (i) the bank account with the SCSB

details of which have been provided by the Equity Shareholder in the CAF does not have sufficient funds

equivalent to the amount payable on application mentioned in the CAF or (ii) more than five (5) applications

(including CAF and plain paper application) are submitted per account held with the SCSB in the Issue.

Subsequent to the acceptance of the application by the SCSB, the Company would have a right to reject the

application only on technical grounds.

Options available to the Equity Shareholders applying under the ASBA Process

The summary of options available to the Equity Shareholders is presented below. You may exercise any of the

following options with regard to the Equity Shares, using the respective CAFs received from Registrar:

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Option Available

Action Required

1. Accept whole or part of your Rights Entitlement

without renouncing the balance.

Fill in and sign Part A of the CAF (All joint holders

must sign)

2. Accept your Rights Entitlement in full and apply for

additional Equity Shares

Fill in and sign Part A of the CAF including Block III

relating to the acceptance of entitlement and Block

IV relating to additional Equity Shares (All joint

holders must sign)

The Equity Shareholder applying under the ASBA Process will need to select the ASBA option process in

the CAF and provide required necessary details. However, in cases where this option is not selected, but

the CAF is tendered to the SCSB with the relevant details required under the ASBA process option and

SCSB blocks the requisite amount, then that CAF would be treated as if the Equity Shareholder has

selected to apply through the ASBA process option.

Additional Equity Shares

You are eligible to apply for additional Equity Shares over and above the number of Equity Shares that you are

entitled too, provided that you have applied for all the Equity Shares (as the case may be) offered without

renouncing them in whole or in part in favour of any other person(s). Applications for additional Equity Shares

shall be considered and allotment shall be made at the sole discretion of the Board, in consultation with the

Designated Stock Exchange and in the manner prescribed under the section titled ―—Basis of Allotment‖ under

this section titled ―Terms of the Issue‖ on page 112.

If you desire to apply for additional Equity Shares please indicate your requirement in the place provided for

additional Securities in Part A of the CAF.

Renunciation under the ASBA Process

Renouncees cannot participate in the ASBA Process.

Application on Plain Paper

An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate

CAF and who is applying under the ASBA Process may make an application to subscribe to the Issue on plain

paper. Equity Shareholders applying on the basis of a plain paper application are required to indicate their

choice of applying under the ASBA Process.

The envelope should be superscribed ―Swaraj Mazda – Rights Issue‖ and should be postmarked in India. The

application on plain paper, duly signed by the Investors including joint holders, in the same order as per

specimen recorded with the Company, must reach the Designated Branch / corporate branch of the SCSBs

before the Issue Closing Date and should contain the following particulars:

Name of Issuer, being Swaraj Mazda Limited;

Name and address of the Equity Shareholder including joint holders;

Registered Folio Number / DP and Client ID no.;

Number of Equity Shares held as on Record Date;

Number of Equity Shares entitled;

Number of Equity Shares applied for;

Number of additional Equity Shares applied for, if any;

Total number of Equity Shares applied for;

Total amount paid at the rate of Rs. 200 per Equity Share;

Particulars of cheque / draft;


courts, PAN number of the Investor and for each Investor in case of joint names, irrespective of the

total value of the Equity Shares applied for pursuant to the Issue;

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Authorizing such SCSB to block an amount equivalent to the amount payable on the application in

such bank account maintained with the same SCSB;

A representation that the Equity Shareholder is not a ―U.S. Person‖ (as defined in Regulation S under

the Securities Act);

Signature of the Equity Shareholders to appear in the same sequence and order as they appear in the

records of the Company; and

Additionally, Non Resident applicants shall include the following:

―I / We understand that neither the Rights Entitlement nor the Equity Shares have been, and will not be,

registered under the US Securities Act or any United States state securities laws, and may not be offered,

sold, resold or otherwise transferred within the United States or to the territories or possessions thereof or

to, or for the account or benefit of, ―U.S. Persons‖ (as defined in Regulation S under the US Securities Act),

except in a transaction exempt from, or in a transaction not subject to, the registration requirements of the

US Securities Act. The Equity Shares referred to in this application are being offered in India but not in the

United States of America. The offering to which this application relates is not, and under no circumstances

is to be construed as, an offering of any shares or warrants or rights for sale in the United States, or the

territories or possessions thereof, or as a solicitation therein of an offer to buy any of the said shares or

warrants or rights. Accordingly, this application should not be forwarded to or transmitted in or to the

United States at any time, except in a transaction exempt from, or in a transaction not subject to, the

registration requirements of the US Securities Act. None of the Company, the Registrar, the Lead Manager

or any other person acting on behalf of the Company will accept subscriptions from any person, or the agent

of any person, who appears to be, or who the Company, the Registrar, the Lead Manager or any other

person acting on behalf of the Company has reason to believe is, a resident of the United States and to

whom an offer, if made, would result in requiring registration of this application with the United States

Securities and Exchange Commission.

I / We will not offer, sell or otherwise transfer any of the Equity Shares, which may be acquired by us in

any jurisdiction or under any circumstances in which such offer or sale is not authorized or to any person to

whom it is unlawful to make such offer, sale or invitation except under circumstances that will result in

compliance with any applicable laws or regulations. We satisfy, and each account for which we are acting

satisfies, all suitability standards for investors in investments of the type subscribed for herein imposed by

the jurisdiction of our residence.

I / We understand and agree that the Equity Shares may not be reoffered, resold, pledged or otherwise

transferred except in an offshore transaction in compliance with Regulation S, or otherwise pursuant to an

exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.‖

Option to receive Securities in Dematerialized Form

EQUITY SHAREHOLDERS UNDER THE ASBA PROCESS MAY PLEASE NOTE THAT THE

EQUITY SHARES OF THE COMPANY UNDER THE ASBA PROCESS CAN ONLY BE ALLOTTED

IN DEMATERIALIZED FORM AND TO THE SAME DEPOSITORY ACCOUNT IN WHICH THE

EQUITY SHARES ARE BEING HELD ON RECORD DATE.

General instructions for Equity Shareholders applying under the ASBA Process

(a) Please read the instructions printed on the respective CAF carefully.

(b) Application should be made on the printed CAF only and should be completed in all respects. The CAF

found incomplete with regard to any of the particulars required to be given therein, and/or which are

not completed in conformity with the terms of this Letter of Offer are liable to be rejected. The CAF /

plain paper application must be filled in English.

(c) The CAF / plain paper application in the ASBA Process should be submitted at a Designated Branch of

the SCSB and whose bank account details are provided in the CAF and not to the Bankers to the Issue /

collecting banks (assuming that such collecting bank is not a SCSB), to the Company or Registrar or

Lead Manager to the Issue.

(d) All applicants, and in the case of application in joint names, each of the joint applicants, should

mention his/her PAN number allotted under the I.T Act, irrespective of the amount of the application.

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courts, CAFs / plain paper applications without PAN will be considered incomplete and are liable

to be rejected.

(e) All payments will be made by blocking the amount in the bank account maintained with the SCSB.

Cash payment is not acceptable. In case payment is affected in contravention of this, the application

may be deemed invalid and the application money will be refunded and no interest will be paid thereon.

(f) Signatures should be either in English or Hindi or in any other language specified in the Eighth

Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression

must be attested by a Notary Public or a Special Executive Magistrate under his / her official seal. The

Equity Shareholders must sign the CAF / plain paper application as per the specimen signature

recorded with the Company or Depositories.

(g) In case of joint holders, all joint holders must sign the relevant part of the CAF / plain paper application

in the same order and as per the specimen signature(s) recorded with the Company. In case of joint

applicants, reference, if any, will be made in the first applicant‘s name and all communication will be

addressed to the first applicant.

(h) All communication in connection with application for the Equity Shares, including any change in

address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of

allotment in this Issue quoting the name of the first / sole applicant Equity Shareholder, folio numbers

and CAF number.

(i) Only the person or persons to whom the Equity Shares have been offered and not renouncee(s) shall be

eligible to participate under the ASBA process.

Do’s:

a. Ensure that the ASBA Process option is selected in part A of the CAF and necessary details are filled

in. In case of non-receipt of the CAF, the application can be made on plain paper indicating application

through the ASBA payment mechanism with all necessary details as indicated under the heading

―Application on Plain Paper‖ under this section titled ―Terms of the Issue‖on page 115.

b. Ensure that you submit your application in physical mode only. Electronic mode is only available with

certain SCSBs and not all SCSBs and you should ensure that your SCSB offers such facility to you.

c. Ensure that the details about your Depository Participant and beneficiary account are correct and the

beneficiary account is activated as Equity Shares will be allotted in the dematerialized form only.

d. Ensure that the CAFs / plain paper application are submitted at the SCSBs and details of the correct

bank account have been provided in the CAF.

e. Ensure that there are sufficient funds (equal to {number of Equity Shares as the case may be applied

for} X {Issue Price of Equity Shares, as the case may be}) available in the bank account maintained

with the SCSB mentioned in the CAF before submitting the CAF to the respective Designated Branch

of the SCSB.

f. Ensure that you have authorised the SCSB for blocking funds equivalent to the total amount payable

on application mentioned in the CAF / plain paper application, in the bank account maintained with the

respective SCSB, of which details are provided in the CAF / plain paper application and have signed

the same.

g. Ensure that you receive an acknowledgement from the SCSB for your submission of the CAF / plain

paper application in physical form or electronic mode.

h. Except for applications on behalf of the Central or State Government and the officials appointed by the

courts, each applicant should mention their PAN allotted under the I.T Act.

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i. Ensure that the name(s) given in the CAF / plain paper application is exactly the same as the name(s)

in which the beneficiary account is held with the Depository Participant. In case the CAF / plain paper

applicationis submitted in joint names, ensure that the beneficiary account is also held in same joint

names and such names are in the same sequence in which they appear in the CAF / plain paper

application.

j. Ensure that the Demographic Details are updated, true and correct, in all respects.

Don’ts:

1) Do not apply on duplicate CAF after you have submitted a CAF to a Designated Branch of the SCSB.

2) Do not pay the amount payable on application in cash, by money order or by postal order.

3) Do not send your physical CAFs / plain paper applications to the Lead Manager to the Issue / Registrar

/ collecting banks (assuming that such collecting bank is not a SCSB) / to a branch of the SCSB which

is not a Designated Branch of the SCSB / Company; instead submit the same to a Designated Branch

of the SCSB only.

4) Do not submit the GIR number instead of the PAN as the application is liable to be rejected on this

ground.

5) Do not instruct your respective banks to release the funds blocked under the ASBA Process.

6) Do not submit more than five (5) applications (including CAF and plain paper application) per bank

account maintained with the SCSB for the Issue.

Grounds for Technical Rejection under the ASBA Process

In addition to the grounds listed under ―- Grounds for Technical Rejection‖ under this section titled ―Terms of

the Issue‖ on page 124, applications under the ABSA Process are liable to be rejected on the following grounds:

a) Application for Rights Entitlements or additional shares in physical form.

b) DP ID and Client ID mentioned in CAF / plain paper application not matching with the DP ID and Client

ID records available with the Registrar.

c) Sending CAF / plain paper application to the Lead Manager / Registrar / collecting bank (assuming that

such collecting bank is not a SCSB) / to a branch of a SCSB which is not a Designated Branch of the

SCSB / Company.

d) Renouncee applying under the ASBA Process.

e) Insufficient funds are available with the SCSB for blocking the amount.

f) Funds in the bank account with the SCSB whose details are mentioned in the CAF / plain paper

application having been frozen pursuant to regulatory orders.

g) Account holder not signing the CAF / plain paper application or declaration mentioned therein.

h) Submitting the GIR number instead of the PAN.

i) Application on split form.

j) Do not submit more than five (5) applications (including CAF and plain paper application) per bank

account maintained with the SCSB for the Issue.

Depository account and bank details for Equity Shareholders applying under the ASBA Process

IT IS MANDATORY FOR ALL THE EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA

PROCESS TO RECEIVE THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL EQUITY

SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS SHOULD MENTION THEIR

DEPOSITORY PARTICIPANT‟S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION

NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE CAF / PLAIN PAPER APPLICATION.

EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS MUST ENSURE THAT THE

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NAME GIVEN IN THE CAF / PLAIN PAPER APPLICATION IS EXACTLY THE SAME AS THE

NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE CAF / PLAIN PAPER

APPLICATION IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE

DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME

SEQUENCE IN WHICH THEY APPEAR IN THE CAF / PLAIN PAPER APPLICATION.

Equity Shareholders applying under the ASBA Process should note that on the basis of name of these

Equity Shareholders, Depository Participant‟s name and identification number and beneficiary account

number provided by them in the CAF / plain paper application, the Registrar to the Issue will obtain

from the Depository demographic details of these Equity Shareholders such as address, bank account

details for printing on refund orders and occupation (“Demographic Details”). Hence, Equity

Shareholders applying under the ASBA Process should carefully fill in their Depository Account details

in the CAF / plain paper application.

These Demographic Details would be used for all correspondence with such Equity Shareholders including

mailing of the letters intimating unblock of bank account of the respective Equity Shareholder. The

Demographic Details given by Equity Shareholders in the CAF / plain paper application would not be used for

any other purposes by the Registrar. Hence, Equity Shareholders are advised to update their Demographic

Details as provided to their Depository Participants.

By signing the CAFs / plain paper applications, the Equity Shareholders applying under the ASBA Process

would be deemed to have authorized the Depositories to provide, upon request, to the Registrar to the Issue, the

required Demographic Details as available on its records.

Letters intimating allotment and unblocking or refund (if any) would be mailed at the address of the

Equity Shareholder applying under the ASBA Process as per the Demographic Details received from the

Depositories. Refunds, if any, will be made directly to the bank account in the SCSB and which details are

provided in the CAF/plain paper application and not the bank account linked to the DP ID. Equity

Shareholders applying under the ASBA Process may note that delivery of letters intimating unblocking of

bank account may get delayed if the same once sent to the address obtained from the Depositories are

returned undelivered. In such an event, the address and other details given by the Equity Shareholder in

the CAF / plain paper application would be used only to ensure dispatch of letters intimating unblocking

of bank account.

Note that any such delay shall be at the sole risk of the Equity Shareholders applying under the ASBA

Process and none of the Company, the SCSBs or the Lead Managers shall be liable to compensate the

Equity Shareholder applying under the ASBA Process for any losses caused due to any such delay or

liable to pay any interest for such delay.

In case no corresponding record is available with the Depositories that matches three (3) parameters, namely,

names of the Equity Shareholders (including the order of names of joint holders), the DP ID and the beneficiary

account number, then such applications are liable to be rejected.

Transfer of Funds

The Registrar to the Issue shall instruct the relevant SCSB to unblock the funds in the relevant ASBA bank

accounts for (i) transfer of requisite funds to the separate bank account maintained by the Company as per the

provisions of section 73(3) of the Companies Act, (ii) rejected / unsuccessful ASBAs.

In case of failure or withdrawal of the Issue, on receipt of appropriate instructions from the Lead Manager

through the Registrar to the Issue, the SCSBs shall unblock the bank accounts latest by the next day of receipt of

such information.

Underwriting

The present Issue is not underwritten.

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Issue Schedule

Issue Opening Date: March 3, 2010

Last date for receiving requests for SAFs: March 10, 2010

Issue Closing Date: March 17, 2010

The Board may however decide to extend the Issue period as it may determine from time to time but not

exceeding 30 days from the Issue Opening Date.

Allotment Advices / Refund Orders

The Company will issue and dispatch allotment advice / share certificates / demat credit and /or letters of regret

along with refund order or credit the allotted Equity Shares to the respective beneficiary accounts, if any, within

a period of 15 days from the Issue Closing Date. If such money is not repaid within eight (8) days from the day

the Company becomes liable to repay it, (i.e. 15 days after the Issue Closing Date or the date of the refusal by

the Stock Exchange(s), whichever is earlier) the Company and every Director of the Company who is an officer

in default shall, on and from expiry of eight (8) days, be jointly and severally liable to pay the money with

interest as prescribed under Section 73 of the Companies Act.

Investors residing at any of the centers where clearing houses are managed by the RBI will get refunds through

Electronic Clearing Service (―ECS‖) except where Investors are otherwise disclosed as applicable/eligible to get

refunds through direct credit and real time gross settlement (―RTGS‖).

In case of those Investors who have opted to receive Equity Shares in dematerialized form using electronic

credit under the depository system, advice regarding their credit of the securities shall be given separately.

Investors to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary

post intimating them about the mode of credit of refund within 15 days of the Issue Closing Date.

In case of those Investors who have opted to receive Equity Shares in physical form and the Company issues

letter of allotment, the corresponding share certificates will be kept ready within three (3) months from the date

of allotment thereof or such extended time as may be approved by the Company Law Board under Section 113

of the Companies Act or other applicable provisions, if any. Investors are requested to preserve such letters of

allotment, which would be exchanged later for the share certificates. For more information, see ―Terms of the

Issue‖ on page 105. The letter of allotment / refund order exceeding Rs. 1,500.00 would be sent by registered post/speed post to the

sole / first Investors registered address. Refund orders up to the value of Rs. 1,500.00 would be sent under

certificate of posting. Such refund orders would be payable at par at all places where the applications were

originally accepted. The same would be marked ‗Account Payee only‘ and would be drawn in favour of the

sole/first Investor. Adequate funds would be made available to the Registrar to the Issue for this purpose.

Payment of Refund

Mode of making refunds

The payment of refund, if any, would be done through any of the following modes:

1. ECS / NECS – Payment of refund would be done through ECS / NECS for Investors having an account at

any of the centers specified by the RBI. This mode of payment of refunds would be subject to availability of

complete bank account details including the MICR code as appearing on a cheque leaf, from the

Depositories. The payment of refunds is mandatory for Investors having a bank account at any centre where

ECS / NECS facility has been made available by the RBI (subject to availability of all information for

crediting the refund through ECS / NECS), except where the Investor, being eligible, opts to receive refund

through National Electronic Fund Transfer (―NEFT‖), direct credit or RTGS.

2. NEFT – Payment of refund shall be undertaken through NEFT wherever the Investors‘ bank has been

assigned the Indian Financial System Code (IFSC), which can be linked to a MICR, if any, available to that

particular bank branch. IFSC Code will be obtained from the website of RBI as on a date immediately prior

to the date of payment of refund, duly mapped with MICR numbers. Wherever the Investors have registered

their nine digit MICR number and their bank account number while opening and operating the demat

account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment

of refund will be made to the Investors through this method.

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3. Direct Credit – Investors having bank accounts with the Bankers to the Issue shall be eligible to receive

refunds through direct credit. Charges, if any, levied by the relevant bank(s) for the same would be borne by

the Company.

4. RTGS – Investors having a bank account at any of the centres specified by the RBI where such facility has

been made available and whose refund amount exceeds Rs. 10.00 lacs, have the option to receive refund

through RTGS. Such eligible Investors who indicate their preference to receive refund through RTGS are

required to provide the IFSC code in the CAF. In the event the same is not provided, refund shall be made

through ECS. Charges, if any, levied by the refund bank(s) for the same would be borne by the Company.

Charges, if any, levied by the Investor‘s bank receiving the credit would be borne by the Investor.

5. For all other Investors, including those who have not updated their bank particulars with the MICR code,

the refund orders will be despatched under certificate of posting for value up to Rs. 1,500.00 and through

Speed Post/ Registered Post for refund orders of Rs. 1,500.00 and above. Such refunds will be made by

cheques, pay orders or demand drafts drawn in favour of the sole/first Investor and payable at par.

6. Credit of refunds to Investors in any other electronic manner permissible under the banking laws, which are

in force, and is permitted by the SEBI from time to time.

Printing of Bank Particulars on Refund Orders

As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement,

the particulars of the Investor‘s bank account are mandatorily required to be given for printing on the refund

orders. Bank account particulars will be printed on the refund orders/refund warrants which can then be

deposited only in the account specified. The Company will in no way be responsible if any loss occurs through

these instruments falling into improper hands either through forgery or fraud.

Allotment advice / Share Certificates / Demat Credit

Allotment advice/ share certificates/ demat credit or letters of regret will be dispatched to the registered address

of the first named Investor or respective beneficiary accounts will be credited within 15 days, from the Issue

Closing Date. In case the Company issues allotment advice, the relative shared certificates will be dispatched

within one (1) month from the date of the allotment. Allottees are requested to preserve such allotment advice (if

any) to be exchanged later for share certificates.

Option to receive Equity Shares in Dematerialized Form

Investors to the Equity Shares of the Company issued through this Issue shall be allotted the securities in

dematerialized (electronic) form at the option of the Investor. The Company signed a tripartite agreement with

NSDL on June 12, 2000, which enables the Investors to hold and trade in securities in a dematerialized form,

instead of holding the securities in the form of physical certificates. The Company has also signed a tripartite

agreement with CDSL on June 21, 2000, which enables the Investors to hold and trade in securities in a

dematerialized form, instead of holding the securities in the form of physical certificates.

In this Issue, the allottees who have opted for Equity Shares in dematerialized form will receive their Equity

Shares in the form of an electronic credit to their beneficiary account as given in the CAF, after verification with

a depository participant. Investor will have to give the relevant particulars for this purpose in the appropriate

place in the CAF. Allotment advice, refund order (if any) would be sent directly to the Investor by the Registrar

to the Issue but the Investor‘s depository participant will provide to him the confirmation of the credit of such

Equity Shares to the Investor‘s depository account. CAFs, which do not accurately contain this information, will

be given the Equity Shares in physical form. No separate CAFs for Equity Shares in physical and/or

dematerialized form should be made. If such CAFs are made, the CAFs for physical Equity Shares will be

treated as multiple CAFs and is liable to be rejected. In case of partial allotment, allotment will be done in demat

option for the Equity Shares sought in demat and balance, if any, will be allotted in physical Equity Shares.

INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY CAN BE

TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM.

Procedure for availing the facility for allotment of Equity Shares in this Issue in the electronic form is as under:

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Open a beneficiary account with any depository participant (care should be taken that the beneficiary

account should carry the name of the holder in the same manner as is exhibited in the records of the

Company. In the case of joint holding, the beneficiary account should be opened carrying the names of the

holders in the same order as with the Company). In case of Investors having various folios in the Company

with different joint holders, the Investors will have to open separate accounts for such holdings. Those

Equity Shareholders who have already opened such beneficiary account(s) need not adhere to this step.

For Equity Shareholders already holding Equity Shares of the Company in dematerialized form as on the

Record Date, the beneficial account number shall be printed on the CAF. For those who open accounts later

or those who change their accounts and wish to receive their Equity Shares pursuant to this Issue by way of

credit to such account, the necessary details of their beneficiary account should be filled in the space

provided in the CAF. It may be noted that the allotment of Equity Shares arising out of this Issue may be

made in dematerialized form even if the original Equity Shares of the Company are not dematerialized.

Nonetheless, it should be ensured that the depository account is in the name(s) of the Equity Shareholders

and the names are in the same order as in the records of the Company.

Responsibility for correctness of information (including Investor‘s age and other details) filled in the CAF

vis-à-vis such information with the Investor‘s depository participant, would rest with the Investor. Investors

should ensure that the names of the Investors and the order in which they appear in CAF should be the same

as registered with the Investor‘s depository participant.

If incomplete / incorrect beneficiary account details are given in the CAF the Investor will get Equity

Shares in physical form.

The Equity Shares allotted to applicants opting for issue in dematerialized form, would be directly credited

to the beneficiary account as given in the CAF after verification. Allotment advice, refund order (if any)

would be sent directly to the applicant by the Registrar to the Issue but the applicant‘s depository

participant will provide to him the confirmation of the credit of such Equity Shares to the applicant‘s

depository account.

Renouncees will also have to provide the necessary details about their beneficiary account for allotment of

Equity Shares in this Issue. In case these details are incomplete or incorrect, the application is liable to be

rejected.

General instructions for Investors

(a) Please read the instructions printed on the enclosed CAF carefully.

(b) Application should be made on the printed CAF, provided by the Company except as mentioned under

the head ―- Application on Plain Paper‖ under this section titled ―Terms of the Issue‖ on page 111

and should be completed in all respects. The CAF found incomplete with regard to any of the

particulars required to be given therein, and/ or which are not completed in conformity with the terms

of the Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof will be

refunded without interest and after deduction of bank commission and other charges, if any. The CAF

must be filled in English and the names of all the Investors, details of occupation, address, father‘s /

husband‘s name must be filled in block letters.

The CAF together with cheque / demand draft should be sent to the Bankers to the Issue / collecting

bank or to the Registrar to the Issue and not to the Company or Lead Manager to the Issue. Investors

residing at places other than cities where the branches of the Bankers to the Issue have been authorized

by the Company for collecting applications, will have to make payment by Demand Draft payable at

Mumbai of an amount net of bank and postal charges and send their CAFs to the Registrar to the Issue

by registered post / speed post. If any portion of the CAF is / are detached or separated, such

application is liable to be rejected.

Applications where separate cheques / demand drafts are not attached for amounts to be paid for

Equity Shares are liable to be rejected.

(c) Except for applications on behalf of the Central and State Government and the officials appointed by

the courts, all Investors, and in the case of application in joint names, each of the joint Investors, should

123

mention his / her PAN number allotted under the I.T Act, irrespective of the amount of the application.

CAFs without PAN will be considered incomplete and are liable to be rejected.

(d) Investors are advised that it is mandatory to provide information as to their savings / current account

number and the name of the bank with whom such account is held in the CAF to enable the Registrar to

the Issue to print the said details in the refund orders, if any, after the names of the payees. Application

not containing such details is liable to be rejected.

(e) All payment should be made by cheque / demand draft only. Application through the ASBA process as

mentioned above is acceptable. Cash payment is not acceptable.In case payment is effected in

contravention of this, the application may be deemed invalid and the application money will be

refunded and no interest will be paid thereon.

(f) Signatures should be either in English or Hindi or in any other language specified in the Eighth

Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression

must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The

Equity Shareholders must sign the CAF as per the specimen signature recorded with the Company.

(g) In case of an application under power of attorney or by a body corporate or by a society, a certified true

copy of the relevant power of attorney or relevant resolution or authority to the signatory to make the

relevant investment under this Issue and to sign the application and a copy of the Memorandum and

Articles of Association and / or bye laws of such body corporate or society must be lodged with the

Registrar to the Issue giving reference of the serial number of the CAF. In case the above referred

documents are already registered with the Company, the same need not be a furnished again. In case

these papers are sent to any other entity besides the Registrar to the Issue or are sent after the Issue

Closing Date, then the application is liable to be rejected. In no case should these papers be attached to

the application submitted to the Bankers to the Issue.

(h) In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as

per the specimen signature(s) recorded with the Company. Further, in case of joint Investors who are

Renouncees, the number of Investors should not exceed three. In case of joint Investors, reference, if

any, will be made in the first Investor‘s name and all communication will be addressed to the first

Investor.

(i) Application(s) received from NRs / NRIs, or persons of Indian origin residing abroad for allotment of

Equity Shares shall, inter alia, be subject to conditions, as may be imposed from time to time by the

RBI under FEMA in the matter of refund of application money, allotment of Equity Shares, subsequent

issue and allotment of Equity Shares, interest, export of share certificates, etc. In case a NR or NRI

Equity Shareholder has specific approval from the RBI, in connection with his shareholding, he should

enclose a copy of such approval with the CAF.

(j) All communication in connection with application for the Equity Shares, including any change in

address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of

allotment in this Issue quoting the name of the first/sole Investor, folio numbers and CAF number.

Please note that any intimation for change of address of Equity Shareholders, after the date of

allotment, should be sent to the Registrar and Transfer Agents of the Company, in the case of Equity

Shares held in physical form and to the respective depository participant, in case of Equity Shares held

in dematerialized form.

(k) SAFs cannot be re-split.

(l) Only the person or persons to whom Equity Shares have been offered and not Renouncee(s) shall be

entitled to obtain SAFs.

(m) Investors must write their CAF number at the back of the cheque /demand draft.

(n) Only one mode of payment per application should be used. The payment must be by cheque / demand

draft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or

a sub member of the Bankers Clearing House located at the centre indicated on the reverse of the CAF

where the application is to be submitted.

124

(o) A separate cheque / draft must accompany each CAF. Outstation cheques / demand drafts or post-dated

cheques and postal / money orders will not be accepted and applications accompanied by such cheques

/ demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment

against application if made in cash. (For payment against application in cash please refer point (e)

above).

(p) No receipt will be issued for application money received. The Bankers to the Issue / collecting bank/

Registrar will acknowledge receipt of the same by stamping and returning the acknowledgment slip at

the bottom of the CAF.

Grounds for Technical Rejections

Investors are advised to note that applications are liable to be rejected on technical grounds, including the

following:

Amount paid does not tally with the amount payable for;

Bank account details (for refund) are not given;

Age of first Investor not given;

Except for CAFs on behalf of the Central or State Government and the officials appointed by the courts,

PAN number not given for application of any value;

In case of CAF under power of attorney or by limited companies, corporate, trust, relevant documents are

not submitted;

If the signature of the Equity Shareholder does not match with the one given on the CAF and for

renouncee(s) if the signature does not match with the records available with their depositories;

If the Investors desires to have Equity Shares in electronic form, but the CAF does not have the Investor‘s

depository account details;

CAFs are not submitted by the Investors within the time prescribed as per the CAF and the Letter of Offer;

CAFs not duly signed by the sole/joint Investors;

CAFs by OCBs;

CAFs accompanied by Stockinvest;

In case no corresponding record is available with the depositories that matches three parameters, namely,

names of the Investors (including the order of names of joint holders), the Depositary Participant‘s identity

(DP ID) and the beneficiary‘s identity;

CAFs that do not include the certification set out in the CAF to the effect that the subscriber is not a ―U.S.

person‖ (as defined in Regulation S), and does not have a registered address (and is not otherwise located)

in the United States and is authorized to acquire the rights and the securities in compliance with all

applicable laws and regulations;

CAFs which have evidence of being executed in / dispatched from the US;

CAFs by ineligible non-residents (including on account of restriction or prohibition under applicable local

laws) and where a registered address in India has not been provided;

CAFs where the Company believes that CAF is incomplete or acceptance of such CAF may infringe

applicable legal or regulatory requirements;

In case the GIR number is submitted instead of the PAN;

Applications by renouncees who are persons not competent to contract under the Indian Contract Act, 1872,

including minors;

Multiple CAFs, including cases where an Investor submits CAFs along with a plain paper application;

125

Applications where separate cheques/ demand drafts are not attached for amounts to be paid for Equity

Shares.

Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before filling in

the CAF. The instructions contained in the CAF are each an integral part of the Letter of Offer and must be

carefully followed. CAF is liable to be rejected for any non-compliance of the provisions contained in the Letter

of Offer or the CAF.

Mode of payment for Resident Equity Shareholders / Investors

All cheques / drafts accompanying the CAF should be drawn in favour of the collecting bank (specified on

the reverse of the CAF), crossed ‗A/c Payee only‘ and marked ‗Swaraj Mazda - Rights Issue‘; and

Investors residing at places other than places where the bank collection centres have been opened by the

Company for collecting applications, are requested to send their CAFs together with Demand Draft for the

full application amount, net of bank and postal charges favouring the Bankers to the Issue, crossed ‗A/c

Payee only‘ and marked ‗Swaraj Mazda - Rights Issue‘ payable at Mumbai directly to the Registrar to the

Issue by registered post so as to reach them on or before the Issue Closing Date. The Company or the

Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any.

Investment by FIIs

In accordance with the current regulations, the following restrictions are applicable for investment by FIIs:

The Issue of Equity Shares under this Issue to a single FII should not exceed 10% of the post-issue paid up

capital of the Company. In respect of an FII investing in the Equity Shares on behalf of its sub-accounts the

investment on behalf of each sub-account shall not exceed 5% of the total paid up capital of the Company. In

accordance with foreign investment limits applicable to the Company, the total FII investment cannot exceed

24% of the total paid up capital of the Company. The limit may be increased further if the shareholders so

consent by way of a special resolution. The shareholders of the Company pursuant to an EGM dated August 28,

2004 increased the limit of FII shareholding in the Company to 49%.

Investment by NRIs

Investments by NRIs are governed by the Portfolio Investment Scheme under Regulation 5(3)(i) of the Foreign

Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000.

Procedure for Applications by Mutual Funds

A separate application can be made in respect of each scheme of an Indian mutual fund registered with the SEBI

and such applications shall not be treated as multiple applications. The applications made by asset management

companies or custodians of a mutual fund should clearly indicate the name of the concerned scheme for which

the application is being made.

Mode of payment for Non-Resident Equity Shareholders / Investors

As regards the application by non-resident Equity Shareholders, the following conditions shall apply:

Individual non-resident Indian applicants can obtain application form at the following address:


C-13, Pannalal Silk Mills Compound

L.B.S Marg, Bhandup (West)

Mumbai - 400 078

India

Tel: (91 22) 2596 0320

Fax: (91 22) 2596 0329


Website: www.linkintime.co.in


mailto:[email protected]

126

Payment by non-residents must be made by demand draft payable at Mumbai / cheque payable drawn

on a bank account maintained at Mumbai or funds remitted from abroad in any of the following ways:

Application with repatriation benefits

By Indian Rupee drafts purchased from abroad and payable at Mumbai or funds remitted from

abroad (submitted along with Foreign Inward Remittance Certificate); or

By cheque / draft on a Non-Resident External Account (NRE) or FCNR Account maintained

in Mumbai; or

By Rupee draft purchased by debit to NRE/FCNR Account maintained elsewhere in India and

payable in Mumbai; or FIIs registered with the SEBI must remit funds from special non-

resident rupee deposit account; or

Non-resident investors applying with repatriation benefits should draw cheques/drafts in

favour of ‗Swaraj Mazda Limited – Rights Issue – NR‘ and must be crossed ‗account payee

only‘ for the full application amount, net of bank and postal charges.

Application without repatriation benefits

As far as non-residents holding Equity Shares on non-repatriation basis are concerned, in

addition to the modes specified above, payment may also be made by way of cheque drawn on

Non-Resident (Ordinary) Account maintained in Mumbai or Rupee Draft purchased out of

NRO Account maintained elsewhere in India but payable at Mumbai. In such cases, the

allotment of Equity Shares will be on non-repatriation basis.

All cheques/drafts submitted by non-residents applying on a non-repatriation basis should be

drawn in favour of ‗Swaraj Mazda Limited – Rights Issue – NR‘ and must be crossed ‗account

payee only‘ for the full application amount, net of bank and postal charges. The CAFs duly

completed together with the amount payable on application must be deposited with the

collecting bank indicated on the reverse of the CAFs before the close of banking hours on or

before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

Investors may note that where payment is made by drafts purchased from NRE / FCNR / NRO

accounts as the case may be, an Account Debit Certificate from the bank issuing the draft

confirming that the draft has been issued by debiting the NRE / FCNR / NRO account should

be enclosed with the CAF. Otherwise the application shall be considered incomplete and is

liable to be rejected.

New demat account shall be opened for holders who have had a change in status from resident

Indian to NRI.

Notes:

In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the

investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to I.T

Act.

In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the

Equity Shares cannot be remitted outside India.

The CAF duly completed together with the amount payable on application must be deposited with the

collecting bank indicated on the reverse of the CAFs before the close of banking hours on or before the

Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

In case of an application received from non-residents, allotment, refunds and other distribution, if any,

will be made in accordance with the guidelines / rules prescribed by RBI as applicable at the time of

making such allotment, remittance and subject to necessary approvals.

127

Impersonation

As a matter of abundant caution, attention of the Investors is specifically drawn to the provisions of sub-

section (1) of Section 68A of the Companies Act which is reproduced below:

“Any person who makes in a fictitious name an application to a Company for acquiring, or subscribing for,

any shares therein, or otherwise induces a Company to allot, or register any transfer of shares therein to

him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may

extend to five years”.

Dematerialized dealing

Our Company has entered into agreements dated June 12, 2000 and June 21, 2000 with NSDL and CDSL,

respectively, and its Equity Shares bear the ISIN INE294B01019.

Payment by Stockinvest

In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003- 04 dated November 5, 2003, the Stockinvest

Scheme has been withdrawn. Hence, payment through Stockinvest would not be accepted in this Issue.

Disposal of application and application money

No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers

to the Issue / Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning

the acknowledgment slip at the bottom of each CAF.

The Board reserves its full, unqualified and absolute right to accept or reject any application, in whole or in part,

and in either case without assigning any reason thereto.

In case an application is rejected in full, the whole of the application money received will be refunded.

Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money

due on Equity Shares allotted, will be refunded to the Investor within a period of 15 days from the Issue Closing

Date. If such money is not repaid within eight (8) days from the day the Company becomes liable to repay it, the

Company and every Director of the Company who is an officer in default shall, on and from expiry of eight (8)

days, be jointly and severally liable to repay the money with interest as prescribed under Section 73 of the

Companies Act.

For further instruction, please read the CAF carefully.

Utilization of Issue Proceeds

The Board of Directors declares that:

(i) All monies received out of this Issue shall be transferred to a separate bank account other than the bank

account referred to sub-section (3) of Section 73 of the Companies Act;

(ii) Details of all monies utilized out of the Issue shall be disclosed under an appropriate separate head in

the balance sheet of our Company indicating the purpose for which such monies have been utilized;

and

(iii) Details of all unutilized monies out of the Issue, if any, shall be disclosed under an appropriate separate

head in the balance sheet of our Company indicating the form in which such unutilized monies have

been invested.

(iv) The Company may utilize the funds collected in the Issue only after the basis of allotment is finalized.

Undertakings by the Company

1. The complaints received in respect of the Issue shall be attended to by the Company expeditiously and

satisfactorily.

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2. All steps for completion of the necessary formalities for listing and commencement of trading at all

Stock exchanges where the securities are to be listed will be taken within seven (7) working days of

finalization of basis of allotment.

3. The funds required for making refunds to unsuccessful applicants as per the modes disclosed shall be made

available to the Registrar to the Issue by the Company.

4. The Company undertakes that where refunds are made through electronic transfer of funds, a suitable

communication shall be sent to the Investor within 15 days of the Issue Closing Date, giving details of

the banks where refunds shall be credited along with amount and expected date of electronic credit of

refund.

5. Adequate arrangements shall be made to collect all ASBA applications and to consider then similar to

non-ASBA applications while finalising the Basis of Allotment.

6. At any given time there shall be only one denomination for the shares of the Company.

7. We shall comply with such disclosure and accounting norms specified by the SEBI from time to time.

Minimum Subscription

If the Company does not receive the minimum subscription of 90% of the Issue, the Company shall forthwith

refund the entire subscription amount received within 15 days from the Issue Closing Date. If such money is not

repaid within eight (8) days from the day the Company becomes liable to repay it, (i.e. 15 days after the Issue

Closing Date or the date of the refusal by the Stock Exchange(s), whichever is earlier) the Company and every

Director of the Company who is an officer in default shall, on and from expiry of eight (8) days, be jointly and

severally liable to repay the money with interest as prescribed under sub-section (2) and (2A) of Section 73 of

the Companies Act.

Important

Please read this Letter of Offer carefully before taking any action. The instructions contained in the

accompanying CAF are an integral part of the conditions of this Letter of Offer and must be carefully

followed; otherwise the application is liable to be rejected.

All enquiries in connection with this Letter of Offer or accompanying CAF and requests for SAFs must be

addressed (quoting the Registered Folio Number / DP and Client ID number, the CAF number and the name

of the first Equity Shareholder as mentioned on the CAF and superscribed ‗Swaraj Mazda Limited – Rights

Issue‘ on the envelope and postmarked in India) to the Registrar to the Issue at the following address:


C-13, Pannalal Silk Mills Compound

L.B.S Marg, Bhandup (West)

Mumbai - 400 078

India

Tel: (91 22) 2596 0320

Fax: (91 22) 2596 0329


Website: www.linkintime.co.in


It is to be specifically noted that this Issue of Equity Shares is subject to the risks and uncertainities

mentioned in the section titled ―Risk Factors‖ on page xi.

The Issue will remain open for a minimum 15 days. However, the Board will have the right to extend the Issue

period, as it may determine from time to time, but not exceeding 30 days from the Issue Opening Date.

mailto:[email protected]

129

SECTION VIII – STATUTORY AND OTHER INFORMATION

Option to subscribe

Other than the present Issue, and except as disclosed in the section titled ―Terms of the Issue‖ on page 105, the

Company has not given any person any option to subscribe to the Equity Shares of the Company.

The Investors shall have an option either to receive the security certificates or to hold the securities in

dematerialized form with a depository.

Material Contracts and documents for inspection

The following contracts (not being contracts entered in to in the ordinary course of business carried on by the

Company or entered into more than two (2) years before the date of this Letter of Offer) which are or may be

deemed material have been entered or are to be entered in to by the Company. These contracts and also the

documents for inspection referred to hereunder, may be inspected at the Registered Office of the Company

situated at village Asron, Distt. Nawanshahar – 144 533 (Punjab), from 10.00 a.m. to 1.00 p.m., on working

days, from the date of this Letter of Offer until the date of closure of the Issue.

1. Memorandum and Articles of Association of the Company.

2. Certificate of Incorporation of the Company dated July 26, 1983.

3. Consents of the Directors, Auditors, Company Secretary, Lead Manager to the Issue, Bankers to the

Issue, Legal Advisor to the Issue and Registrar to the Issue to include their names in the Letter of Offer

to act in their respective capacities.

4. Copy of the resolution of the Board of Directors dated March 19, 2009 approving this Issue.

5. Copy of the shareholder resolution dated July 2, 2009 approving this Issue.

6. Engagement letter dated May 8, 2009 received from the Company appointing JM Financial Consultants

Private Limited to act as Lead Manager to the Issue.

7. Agreement dated September 14, 2009 entered into by the Company with the Lead Manager to the

Issue.

8. Memorandum of Understanding dated August 29, 2009 entered into with the Registrar to the Issue.

9. Annual Reports of Fiscal 2005, 2006, 2007, 2008 and 2009.

10. Limited review report dated January 22, 2010 issued by the auditor of the Company.

11. Prospectus dated April 10, 1985 issued by our Company.

12. In-principle listing approval dated September 30, 2009 and October 16, 2009 from the BSE and NSE

respectively.

13. Due diligence certificate dated September 16, 2009 to SEBI from the Lead Manager to the Issue.

14. SEBI interim observation letter (Ref. No. CFD/DIL/SP/EB/180088/2009) dated October 16, 2009 and

our reply dated October 29, 2009.

15. SEBI observation letter (Ref. No. CFD/DIL/ISSUES/SP/EB/187502/2009) dated December 16, 2009,

and our in-seriatim reply dated January 25, 2010.

16. Tripartite Agreement dated June 12, 2000 between the Company, NSDL & MCS Limited for offering

depository option to the Investors.

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17. Tripartite Agreement dated June 21, 2000 between the Company, CDSL & MCS Limited for offering

depository option to the Investors.

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DECLARATION

No statement made in this Letter of Offer contravenes any of the provisions of the Companies Act, 1956, as

amended and the rules made thereunder. All the legal requirements connected with the issue as also the

guidelines, instructions, etc., issued by the SEBI, Government and any other competent authority in this behalf,

have been duly complied with. Furthermore, we certify that all the disclosures made in this Letter of Offer are

true and correct.

SIGNED BY ALL THE DIRECTORS OF THE COMPANY

Mr. S.K. Tuteja

Non-Executive, Independent Chairman

__________________

Mr. Yash Mahajan

Managing Director

__________________

Mr. Y. Watanabe

Whole time Director

__________________

Mr. Harkirat Singh


__________________

Mr. Steven Enderby


__________________

Mr. A.K. Thakur


__________________

Mr. P.K. Nanda


__________________

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Mr. Pankaj Bajaj


__________________

Mr. M. Tabuchi


__________________

Mr. H.Yamaguchi


__________________

Mr. T. Hashimoto


__________________

Mr. Taro Nanko

Alternate Director to Mr. T. Hashimoto

__________________

Mr. Tatsuo Kato

Alternate Director to Mr. M. Tabuchi

__________________

_____________________

Mr. Gopal Bansal

Senior Vice President – Finance & Company Secretary

Place: New Delhi

Date: February 24, 2010

LETTER OF OFFER Dated February 24, 2010 For Equity ... · FEMA Foreign Exchange Management Act,...

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