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Mahindra & Mahindra Limited Annual Report 2007-08

Directors Report Management Discussion and Analysis Corporate Governance Accounts Statement pursuant to Section 212 Consolidated Accounts

3 20 37 61 113 117

Contents

To the customer. For the customer. With the customer.

At Mahindra & Mahindra, we work with a simple philosophy

Customers drive us...

DR
YOU

At Mahindra our objective is not just to sell vehicles but to build relationships. For us the most important aspect of this relationship begins after the sale has occurred. We strive to continue being a part of your life. To ensure that you never regret having chosen us above others for taking care of your needs.

I VE
US

Being next to

YOU
dictates our reach Reach for it. Push yourself as far as you can.

 I lived in the US for about nine years and have always been
an automobile enthusiast, owning a lot of classic cars. And dont think I am exaggerating, if I say that the driving experience of the jeep Legend comes very close to that of Porsche Boxster. Moreover, the level of customer service that I receive is unheard of in the world. Mr. Mahendra Raj, Madurai

I find myself very secure and safe when I travel in my

Scorpio. It makes me feel comfortable and I don't feel worn out. I believe it to be a very sturdy and low maintenance vehicle. As a child, I used to envy M&M vehicles, but today others envy me and I feel proud to be the owner of my Mahindra Scorpio.

Anjali Pramod Jadhav, Mumbai

I was really pessimistic of Logan prior to its launch. But

after studying every feature of cars from this segment as against their price matrix, I eventually purchased Logan because of its cost effectiveness. I really loved the ceremonial delivery. The way they shoot and the way all the staff members start clapping with respect, one really feels special to be an owner of an M&M vehicle instead of a Skoda or a Hyundai. And finally it was very touching to receive a pooja kit to cap it off.

It was really fast. They worked day and night. It was like a
war field. I have never seen this kind of service in my life time. I was totally amazed to see the teamwork I am really proud of the Mahindra & Mahindra Brand. Through this service you have made me your customer for life. Elango Mani

Mr. Amandeep Singh, Ludhiana

Dedication is not what others expect of you, it is what you can give to others.

Servicing

with dedication defines our existence

YOU
our season. Shekhar Reddy, AP

Mahindra Tractors represent the best value and quality

for your dollar. The reliability and acceptance has been outstanding. We have dealt with several tractor makers in the past, but these tractors are clearly great performers at a reasonable price point.

I have been using a Mahindra tractor for close to 20 years,

even before it was turned into a DI tractor. It gives the best mileage compared to any other tractor. They even come to our doorstep to serve us and always help us during

Mr Anthony Mangold, Australia

I have been around equipment all my life. But for

$27,000, complete with a front loader, the 54-hp Mahindra (tractor) is by far the best for the money. It has more power and heavier steel. When you lock it into a four-wheel drive, you can move 3,000 pounds like nothing. That thing's an animal.

Mahindra Tractor is a powerful tractor and can be used

for multiple applications. I use it for ploughing the field and combine harvesting. When not required in agricultural fields, I use it for loader applications. Shriram Pal Raipur, Chattisgarh

Jamie Lucenberg, 35, during the cleanup in the wake of Hurricane Katrina as reported in an article in Business Week.

YOU
matter the most
At the beginning of Barack Obamas campaign for the US Presidential nomination, nobody expected him to stand a serious chance. Supporters were few and campaign funds were scarce. And yet the very first thing that Mr Obama did was to spend his scarce funds on creating a customer service centre, so that any one who called at any hour of the day or night would always have a human voice at the other end to listen to his or her concern. The rest is history. Against all odds, Mr Obama is today a Presidential candidate, and his people-centred, bottom-up strategy of engaging peoples hopes and emotions has played a large part in putting him there. It is interesting that TIME magazine reports that Mr Obama decided from the beginning to run his campaign like a business. Which meant that he followed the dictum of customer is king. Its a dictum that we in M&M try to live up to every day and in every way. A few years ago we publicly declared our ambition to become the most customer centric corporation in the world. And we consciously try to gear all our actions towards achieving this goal. In the course of this journey, we have realised that customer centricity springs from something much deeper than providing the cheapest product or flaunting celebrity endorsements or the most attractive freebies. Rather, it stems from seeing the customer as a person rather than a statistic in a market share. It comes from an ability to don the shoes of the customer and to see a problem from a customer perspective. It comes from offering customers something that nobody else does whether it is a service or an experience or just genuine attention and concern. It comes not from making sales but from building relationships. So when an M&M employee stops his car in the middle of his holiday to help a customer who is stranded by the side of the road we call that customer centricity. When the President of our Automotive Sector goes on TV to pledge publicly that we are striving to become the most customer caring auto company in India we call that customer centricity. When we offer a Mahindra On Call service one phone number for all our products and a friendly voice at any time of the day or night we call that customer centricity. We measure our levels of customer centricity with an internal score and our companies vie with each other for higher scores. Our customers respond to this customer centricity with great generosity. We have a Scorpio owner who jokingly calls himself a GM of M&M because he has sold so many Scorpios for us by recommending them to his friends. We have many farmers who have influenced their village communities to buy our tractors. And as our customer base grows beyond the shores of India we hope we will have European, Chinese, American, African, Australian and South American customers also doing the same thing. A happy customer is our best brand ambassador. And the day that every customer becomes a self-appointed brand ambassador for M&M will be the day when we become the most customer centric corporation in the world.

MAHINDRA & MAHINDRA LIMITED

COMMITTEES OF THE BOARD Audit Committee Deepak S. Parekh

Chairman

Nadir B. Godrej M. M. Murugappan R. K. Kulkarni Share T ransfer and Shareholders/ Transfer Investors Grievance Committee Keshub Mahindra
Chairman

Anand G. Mahindra Bharat Doshi A. K. Nanda R. K. Kulkarni Remuneration/Compensation Committee Narayanan Vaghul
Chairman

Keshub Mahindra Nadir B. Godrej M. M. Murugappan Loans & Investment Committee Keshub Mahindra
Chairman

BOARD OF DIRECTORS Keshub Mahindra

Chairman

Anand G. Mahindra Bharat Doshi A. K. Nanda R. K. Kulkarni Research & Development Committee A. S. Ganguly
Chairman

Anand G. Mahindra

Vice-Chairman & Managing Director

Anand G. Mahindra Nadir B. Godrej M. M. Murugappan Bharat Doshi GROUP MANAGEMENT BOARD Anand G. Mahindra
Vice-Chairman & Managing Director

Deepak S. Parekh Nadir B. Godrej M. M. Murugappan Narayanan Vaghul A. S. Ganguly R. K. Kulkarni Anupam Puri Thomas Mathew T. Bharat Doshi A. K. Nanda

Bharat Doshi A. K. Nanda

Nominee of Life Insurance Corporation of India Executive Director Executive Director

Group Chief Financial Officer President - Infrastructure Development Sector

Anjanikumar Choudhari Rajeev Dubey

President - Farm Equipment Sector President - HR, After - Market & Corporate Services

Pawan Goenka

Narayan Shankar

President - Automotive Sector

Company Secretary

Hemant Luthra

President - Systems & Technologies Sector

Raghunath Murti Uday Y. Phadke

President - Trade, Retail and Logistics Sector President - Finance, Legal and Financial Services Sector

Ulhas N. Yargop

President - Information Technology Sector

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Bankers Bank of America N.A. Bank of Baroda Bank of India Canara Bank Central Bank of India HDFC Bank Limited Standard Chartered Bank State Bank of India Union Bank of India

Auditors Deloitte Haskins & Sells 12, Dr. Annie Besant Road, Opp. Shiv Sagar Estate, Worli, Mumbai 400 018.

Advocates Khaitan & Co., Meher Chambers, R K Marg, Ballard Estate, Mumbai 400 038.

Registered Office Gateway Building, Apollo Bunder, Mumbai 400 001.

Branches 7, Dr. Ishaque Road (Old KYD Street), Kolkata 700 016. Mahindra Towers, 2-A Bhikaji Cama Place, New Delhi 110 066. Mahindra Towers, First Floor, 17/18, Pattulous Road, Chennai 600 002. Raheja Chambers, First Floor, 12, Museum Road, Bengaluru 560 001.

MAHINDRA & MAHINDRA LIMITED

Directors Report
Dear Shareholders
Your Directors present their Report together with the audited accounts of your Company for the year ended 31st March, 2008.

Performance Review
Automotive Sector: For the sixth consecutive year the Companys vehicle

Financial Highlights
(Rs. in crores) Gross Income Less: Excise Duty on Sales Net Income Profit before Depreciation, Interest, Exceptional items and Taxation Less: Depreciation / Amortisation Profit before Interest, Exceptional items and Taxation Less: Interest (Net) Profit before Exceptional items and Taxation Add: Exceptional items Profit before Taxation Less: Provision for tax Current tax (including Fringe Benefit Tax) Less: Provision for tax Deferred tax (Net) Profit for the year before prior period adjustments Prior Period Adjustment (Net of Tax) Profit for the year Balance of profit for earlier years Add: Transfer (to)/from Debenture Redemption Reserve Profit available for appropriation Less: General Reserve Interim Dividend paid Income-tax on Interim Dividend paid Proposed Dividend Income-tax on Proposed Dividend Balance carried forward 2008 13238 1566 11672 1505 239 1266 24 1242 165 1407 279 25 1103 1103 2125 (17) 3211 115 283 38 2775 2007 11558 1337 10221 1458 209 1249 (67) 1316 122 1438 366 (15) 1087 19 1068 1476 16 2560 110 184 26 98 17 2125

production and sales recorded outstanding performance levels despite the industry slowdown during the year. A total of 2,00,132 vehicles and 34,556 three-wheelers were produced as against 1,44,090 vehicles and 34,892 threewheelers in the last year. These include 11,079 light commercial vehicles (LCVs) and 26,653 cars (previous year 8,811 LCVs and 614 cars) manufactured and supplied to two of your subsidiaries, Mahindra International Limited (MIL) and Mahindra Renault Private Limited (MRPL). Your Company recorded sales of 1,61,001 vehicles and 34,076 three-wheelers as compared to 1,35,961 vehicles and 33,718 three-wheelers in the previous year registering a growth of 18.4% and 1.1% in vehicles sales and threewheeler sales respectively. The total domestic sales volume of 1,48,791 vehicles was higher by 16.3% than the previous years volume of 1,27,958 vehicles. Your Company reported a record sale of 1,48,761 multi utility vehicles (MUV or MUVs) in the domestic market in the year under review as against sale of 1,27,856 MUVs in the previous year. The Companys domestic MUV sales volume grew a very healthy 16.4%, against the industry MUV sales growth of 5.1%. Your Company strengthened its dominant position in the domestic MUV sub-segment by increasing its market share to 51.5% over the previous years market share of 46.6%.
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The small pick up model, Maxi Truck, was responsible for the Company pick up volumes registering a growth of 17% while the pick up sub-segment industry de-grew by 4%. As a result, your Companys market share jumped to 76.9% from the previous years market share of 63.2%. In the Overseas Markets, your Companys initiatives resulted in a strong growth of 54% in export volumes - from 8,021 vehicles [including 254 vehicles sourced from MIL] in the previous year to 12,359 vehicles [including 363 vehicles sourced from MIL] in the year under review. Spare parts sales for the year stood at Rs.388.30 crores (Exports Rs.39.89 crores) as compared to Rs.307.33 crores (Exports Rs.23.54 crores) in the previous year. Farm Equipment Sector: Your Company registered a production of 98,917 Tractors for the year under review as compared to 1,03,847 Tractors in the previous year. This was despite the material supply constraints faced by domestic tractor industry in the Financial Year 2008. In addition, 31,922 Engines were produced for the Mahindra Powerol brand. The strategy of increasing production at the Companys Rudrapur Plant, compared to earlier dependence on the Kandivali Plant, has significantly contributed to lowering the manufacturing cost. Your Company recorded sales of 99,042 Tractors, as compared to 1,02,531 Tractors sold in the previous year. Sale of domestic Tractors was 90,509 Tractors compared to 95,006 Tractors sold in the previous year (a de-growth of 4.7%). This was in a year that witnessed industry degrowth of 5.1%, following four consecutive years of Industry growth. The de-growth was mainly due to slow down in bank financing on account of higher NPAs, and tightening of lending norms. The situation was further aggravated by increased interest rates. In this challenging scenario, your Company has maintained its market leadership in the domestic market for the 25th consecutive year.
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Against the backdrop of strengthening of the Rupee against the US dollar, exports of the Companys Tractors have actually increased to 8,533 Tractors, a growth of 13.4%, compared to 7,525 Tractors exported last year. Your Companys Tractors are now being sold in 6 continents of the world. Apart from the US market and the African Countries, the neighbouring countries of Sri Lanka, Bangladesh and Nepal are the other large overseas markets. Forays have also been made into new markets, namely New Zealand and the Latin American Countries of Brazil and Chile. A number of new products were introduced, in both the domestic and international space, with many more in the pipeline. In the domestic market, the 30-40 HP Segment is the largest, comprising nearly 55% of the market. Your Company introduced the 295 DI Super Turbo, which was the first turbo charged Tractor in this Segment. Also, the 595 DI Super Turbo (greater than 40 HP Segment) was upgraded. The Arjun Ultra-1 has now been transformed into a versatile product which has demonstrated superlative performance both on and off the field. Mahindra Shaan a 25 HP multi-utility Tractor, which was launched by your Company in 2007, won the Outstanding Innovation Award from ASABE (American Society for Agricultural and Biological Engineers), USA. This Award has acknowledged the Companys ability to conceive and deliver innovative products. On the International front, Tier III and Tier IV compliant Tractors were introduced in the US market and to meet the demand of the higher HP Segment in Africa, the 8000 Tractor series was launched there. To leverage domain expertise in logistics and to enhance effectiveness of the supply chain in operation, the Company outsourced a significant part of its Logistics operations to Mahindra Logistics, a Division of the Company. Additional savings have been accrued as a result of this move.

MAHINDRA & MAHINDRA LIMITED

Under the Mahindra Powerol Brand, your Company sold 31,922 engines during the year, as against 24,141 engines last year, a growth of 32%. From having a single institutional customer in the Financial Year 2002, today the engine business has 22 corporate clients. Mahindra Powerol has retained its market leadership in gensets market, catering primarily to the telecom segment. Your Company expanded the Mahindra Powerol genset product range up to 62.5 KVA with the introduction of 40, 50 and 62.5 KVA engines. Mahindra Powerol was recognised with the Frost and Sullivan Voice of the Customer Award for being the Most Preferred Genset Brand in the Telecom Segment. Your Company has been awarded the Japan Quality Medal (JQM) in 2007, by the Union of Japanese Scientists and Engineers (JUSE), Tokyo, Japan. JQM is a rare honour given to a Company for excellence in Total Quality Management (TQM). The Company is the only Tractor Company in the world to win this Award. The Company had also won the Deming Application Prize in 2003. Both of these prizes are recognition of the Companys customer focus, commitment to TQM practices and demonstration of results by significantly improving product and process quality. Mahindra Defence Systems Division: Your Company provides world class armouring solutions for light combat vehicles and SUVs as well as high mobility vehicles for defence use. Your Company developed the AXE, a high mobility fast attack vehicle. This Vehicle was awarded the Indigenous Design of the Year by Overdrive. The Marksman is another modern light armoured vehicle developed during the year. Your Company continues to develop competencies in special vehicles and is in the advanced stages of construction of the Mahindra Special Military Vehicles facility at Faridabad. This is the first such dedicated defence vehicle facility in the private sector.

Your Company has established a manufacturing facility for underwater systems at Pune and is now well placed to deliver Sea Mines and Decoy Launchers to the Indian Navy. Your Company has obtained an export order from Ghana for up-armoured Scorpios during the year under review. Mahindra Logistics Division: The Logistics arm of your Company continues its impressive growth by recording revenues of Rs.607 crores as compared to Rs.383 crores in the previous year, registering a sustained increase of over 50% on a year on year basis for the past few years. The business has acquired its leadership position in the Automotive / BPO and ITES Industry Segments and is now building its presence in Retail and other Industry Segments. Profits: The Profit for the year before Depreciation, Interest, Exceptional items and Taxation was Rs.1,504.47 crores as against Rs.1,457.83 crores in the previous year registering an increase of 3.20%. Profit after tax was Rs.1,103.37 crores as against Rs.1,068.39 crores in the previous year recording an increase of 3.27%. Your Company continues with its rigorous cost restructuring exercises by efficiency improvements which have resulted in significant savings through value engineering, cost re-engineering and economising, optimum utilisation of available manufacturing locations, outsourcing of service activities, optimisation of plant capacity utilisation, cost competitiveness and right sizing in almost all areas.

Management Discussion and Analysis Report

A detailed analysis of the Companys performance is discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report.

Corporate Governance
Your Company is committed to transparency in all its dealings and places high emphasis on business ethics. For several years your Company has been following good Corporate Governance procedures long before they were
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mandated. A Report on Corporate Governance along with a Certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

In order to meet short-term mismatches, your Company utilised its fund based working capital limits from time to time, apart from making regular use of non-fund based limits. Your Company inter alia raised Rs.100 crores through issue of Commercial Paper at very competitive rates. The Paper was rated P1+ by CRISIL, the highest rating for a short term paper. The Consortium of Bankers continue to rate the Company as a prime customer and extend facilities/ services at prime rates. Your Company follows a prudent financial policy and aims to maintain optimum financial gearing at all times. The Companys total Debt to Equity Ratio was 0.60 as at 31st March, 2008. During the year, CRISIL has reaffirmed the AA+ with a Negative outlook rating assigned by it to the Companys outstanding Debentures in the previous financial year. CRISILs rating indicates high safety on timely payment of interest and principal. Subsequent to 31st March, 2008, the Board of Directors of your Company have considered and approved, subject to receipt of requisite approvals and consent of the Shareholders by means of a Postal Ballot, issuance of 93,95,974, 9.25% p.a. Unsecured Fully and Compulsorily Convertible Debentures (FCD or FCDs) of the Face Value of Rs.745 each aggregating Rs.700,00,00,630 to Golboot Holdings Limited, an entity controlled by Goldman Sachs, each FCD being convertible into one Equity Share of Rs.10 each in the Company at a price of Rs.745 per Share (including premium of Rs.735 per Share) in accordance with Chapter XIII of the Securities and Exchange Board of India (Disclosure & Investor Protection) Guidelines, 2000. The FCDs shall be convertible into Equity Shares at anytime within 18 months from the date of allotment of FCDs at the option of the Investor, and mandatorily convertible into Equity Shares on the date falling 18 months from the

Dividend
Keeping in mind the overall performance during the year, your Directors are pleased to recommend a dividend of 115% (Rs.11.50 per Equity Share), payable to those Shareholders whose names appear in the Register of Members as on the Book Closure Date. The equity dividend outgo for the financial year 2007-08, inclusive of tax on distributed profits (after reducing the tax on distributed profits of Rs.9.55 crores payable by the subsidiaries on the dividends receivable from them during the current financial year) would absorb a sum of Rs.321.09 crores (as against Rs.324.73 crores comprising an interim dividend of 75% and the final dividend of 40% [comprising the final dividend of 25% and a special dividend of 15%] paid for the previous year).

Finance
During the year, your Company raised resources from the capital markets to part finance its various ongoing modernisation and expansion programmes. Your Company successfully accessed both overseas and domestic markets with diverse instruments, maturities and interest rate fixings. The Company raised Unsecured External Commercial Borrowing (ECB) of US$ 50 million. The ECB was raised at an average maturity of six years at highly competitive rates. In the domestic market, your Company raised Rs.200 crores by way of Private Placement of Secured, Non-Convertible Redeemable Debentures with a bullet maturity of 3 years. ICRA has assigned a LAA+ rating to these Debentures indicating high credit quality. Your Company also raised Rs.100 crores through FCNR (B) Loan from a Consortium Bank at a highly competitive rate.
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MAHINDRA & MAHINDRA LIMITED

date of allotment. Your Company will utilise the amount raised through this preferential offer towards its Automobile and Farm Equipment businesses.

the Corporate Policy revised and released during the year. The Safety, Occupational Health and Environment of its employees are embedded in the core organisational values of the Company. The SH&E Policy inter alia ensures safety of public, employees, plant, equipment and business associates, ensuring compliance with all statutory rules and regulations on monthly basis, imparting training to its employees and business associates as per Training Calendar, carrying out Statutory safety audits of its facilities as per legal requirement, conducting regular medical check up of its employees and promoting eco-friendly activities. Various initiatives on Safety including Safety Promotions, Safety Patrol Rounds, Safety and Surveillance Audits, Safety Training, Safety Kaizens, reporting of near-miss incidents are encouraged to resolve the safety issues and various special initiatives such as emergency mock drills and upgradation of Fire Protection Systems were carried out thereby resulting in improved Safety Performance. Your Companys Plants continue to strive to achieve Accident Reduction in all its units ensuring a safety culture throughout all levels of the organisation. The Occupational Health and Safety (OHSAS) system aims to eliminate or minimise risk to employees and other interested parties who may be exposed to Occupational Health and Safety risks associated with its activities. During the year 200708, various product units of Haridwar and Nashik Plants have also been certified for OHSAS Management System (OHSAS 18001:2007) amended standard. All Plants of the Automotive Sector have been certified with the amended standard for Environmental Management System ISO 14001: 2004. Your Company has given the utmost importance for Environment Monitoring at all its Plants by implementing various environmental initiatives such as effluent treatment, increased green zones, water and waste water management, solid waste management, air pollution management thereby
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Stock Options
On the recommendation of the Remuneration/ Compensation Committee of your Company, the Trustees of the Mahindra & Mahindra Employees Stock Option Trust have granted 16,48,081 Stock Options to Eligible Employees during the year under review. Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure I to this Report.

Industrial Relations
Industrial Relations generally remained cordial and harmonious throughout the year. The Management Discussion and Analysis Report gives an overview of the developments in Human Resources/Industrial Relations during the year. In a restructuring exercise to rightsize the work force, the Company has, during the year under review accepted Voluntary Retirement from 28 employees of the Automotive Sector under the Scheme in existence since 1995 which has since been discontinued. These measures will enable the Company to obtain optimum utilisation of the existing work force and increase the level of productivity.

Safety , Health and Environmental P erformance Safety, Performance

Your Company has always demonstrated its strong commitment and responsibility towards Safety, Occupational Health and Environment which stems from its Vision and enjoins upon the Company to sustain business growth with deep commitment towards Safety, Occupational Health and Environment. Your Company has a well-established Safety, Occupational Health and Environmental (SH&E) Policy drilled down from

complying with all relevant Environment Legislations. The Environmental performance is well within the limits stipulated in statutory guidelines for all operations and fulfills the required statutory requirements of respective State Pollution Control Boards. Major environmental parameters required are being regularly monitored and reported to the concerned regulatory bodies. Your Companys Plants continued its commitment to improve the well being of the employees. Medical Checkups, both curative and preventive Check-ups have been organised at all its Plants including educating the employees on Industrial Hygiene at the work place.

aim to empower the youth from socially disadvantaged sections of society by extending livelihood training which will enable them to gain employment based on the skills learned at these Schools. Mid Day Meal Kitchen: The Company had entered into a tripartite public private partnership with the Government of Rajasthan and Naandi Foundation for setting up of a centralised Mid Day Meal Kitchen at Govindgarh Taluka, Jaipur District, in the state of Rajasthan. This kitchen will provide hygienic, nutritious and wholesome mid day meals to approximately 25,000 35,000 primary school children studying in 314 Government Schools in Govindgarh Taluka, Jaipur District. Supporting Nanhi Kali: Nanhi Kali, which supports the education of the disadvantaged girl child has been the flagship programme of the K. C. Mahindra Education Trust. The Mahindra Group has committed to independently support 6,000 girls in urban, rural and tribal parts of India by providing academic support as well as material support in the form of uniforms, clothes, school bags, shoes, etc. In addition, the Company has entered into a partnership with the Government of Rajasthan to jointly support the education of 10,000 disadvantaged girl children in the tribal area of Udaipur District. Gifting Cochlear Implants: By gifting the power of sound through the donation of cochlear implants, the Mahindra Group has changed the life and future of 41 profoundly hearing-impaired, underprivileged children till date. Operations are performed by Dr. Milind Kirtane, Indias leading ENT surgeon. All recipients are selected in consultation with Dr. Kirtane and his team of doctors, audiologists, teachers of the hearing impaired and social counselors. Supporting Government Schools: Continuing its commitment to make quality education accessible to all children, the Mahindra Group has continued

Corporate Social Responsibility

Corporate Social Responsibility (CSR) has always been an integral part of the vision of the Mahindra Group and has been the cornerstone of its core value of Good Corporate Citizenship. CSR for the Company is all encompassing, including making socially responsible products, engaging in responsible employee relations, and not only making a responsible commitment to the community but also encouraging employee engagement in community initiatives. The Mahindra Group has pledged amounts not exceeding 1% of its profit after tax (PAT) on a yearly basis for the Companys CSR initiatives, largely to benefit the socially and economically disadvantaged sections of society. While the Companys focus area for CSR has been in the field of education, as responsible citizens, the Company has also been actively supporting issues such as health and environment. Some of the major initiatives your Company has invested in are described below: Mahindra Pride School: As part of the 60th year celebrations, through the K. C. Mahindra Education Trust, the Company has committed to setting up two Mahindra Pride Schools. The Schools
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MAHINDRA & MAHINDRA LIMITED

support to 6 Government Schools in Mumbai (5 Schools at Kandivli and 1 in Worli). Naandi Foundation, the implementation partner for the School Adoption Programme, has through its Ensuring Children Learn strategy, been running Gyan Jyothi Centres or academic support classes to ensure that children coming to BMC Schools acquire grade specific learning competencies. Mahindra All India Talent Scholarships (MAITS): 498 students from 11 Centres all over India were awarded the MAITS in the last financial year to enable them to pursue a job oriented diploma course at a recognised Government Polytechnic in India. These students have been provided with this scholarship for a 3 year period. A majority of the scholarship awardees are girls, as the Trust is keen to empower girls through vocational education. Employee Social Options (ESOPS): Employee Social Options (ESOPS) the unique programme at the Mahindra Group where each employee can exercise his own social responsibility by volunteering in CSR initiatives received great support, with 14,535 employees volunteering for various initiatives with ESOPS expanding to 6 new States namely Uttar Pradesh, Assam, Madhya Pradesh, Rajasthan, Bihar and Tamil Nadu. Some of the Notable ESOPS initiatives this year were: The Lifeline Express; undertaken by the Tractor Plant in Rudrapur, where 647 surgeries were performed free of cost. Mahindra Hariyali; The Managements vision of planting One million trees has already reached the 2.8 lakhs mark across the country. AIDS Awareness Campaign; inaugurated in July, 2007, and conducted in partnership with an NGO AAS Centre for Human Hope aims to create Aids awareness among the Companys employees, school/college students, vendor/ suppliers and other citizens of Nashik City.

The Company has been recognised for its CSR work and feels privileged to have received the Businessworld FICCI SEDF CSR Award and the BSR Business for Social Responsibility Award.

Directors
Mr. Anand G. Mahindra, Mr. A. K. Nanda, Mr. Nadir B. Godrej and Mr. M. M. Murugappan retire by rotation and, being eligible, offer themselves for re-appointment.

Directors Responsibility Statement

Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representations received from the Operating Management, and after due enquiry, confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2008 and of the profit of the Company for the year ended on that date; (iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the annual accounts have been prepared on a going concern basis.

Subsidiary Companies
The subsidiary companies of your Company have reflected a significantly improved performance over the previous year and are moving from strength to strength, thereby contributing to the overall growth of the Company and
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appreciation in Shareholders value. The major subsidiaries such as Tech Mahindra Limited with a 399.5% growth in profits, Mahindra Holidays & Resorts India Limited with a 92.82% growth in profits and Mahindra & Mahindra Financial Services Limited with a 33.22% growth in profits, deserve special mention. The consolidated Group Profit for the year after exceptional items, prior period adjustments and tax and after deducting minority interests is Rs.1,571.12 crores as against Rs.1,497.15 crores earned last year - a growth of 4.94%. During the year under review, Mahindra Retail Private Limited, Mahindra Hotels and Residences India Limited, Mahindra Holdings Limited, Mahindra Rural Housing Finance Limited, Tech Mahindra (Malaysia) SDN.BHD, Tech Mahindra (Beijing) IT Services Limited, Bristlecone (Malaysia) SDN.BHD, Mahindra Residential Developers Limited, Mahindra Technology Park Limited, Mahindra Automotive Limited, Punjab Tractors Limited, Mahindra Logistics Limited, Mahindra Forgings Limited, Mahindra Castings Private Limited, Mahindra Navistar Engines Private Limited, Heritage Bird (M) Sdn Bhd, Mahindra First Choice Services Limited, Mahindra Graphic Research Design s.r.l., Mahindra Aerospace Private Limited and Ashtamudi Resorts Private Limited became subsidiaries of your Company. During the year under review, Mahindra Forgings Overseas Limited, Mahindra Forgings Mauritius Limited, Falkenroth Grundstucksgesellschaft GmbH, Tech Mahindra (R&D Services) Pte. Limited, Fried. Hunninghaus GmbH, Fried. Hunninghaus GmbH & Co. KG, Mahindra Stokes Holding Company Limited, Plexion Technologies (India) Private Limited, Mahindra Ashtech Limited and Ashtamudi Resorts Private Limited ceased to be subsidiaries of the Company. Subsequent to the year-end, iPolicy Networks Limited and Tech Mahindra (R&D Services) Limited ceased to be subsidiaries of the Company. The Statement pursuant to section 212 of the Companies Act, 1956 containing details of the Companys subsidiaries is attached.
10

The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Accounting Standard AS 21 form part of the Annual Report. The Company has made an application to the Ministry of Corporate Affairs seeking exemption from attaching the copy of the Balance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of the subsidiaries with the Balance Sheet of the Company. If in terms of the approval granted by the Ministry of Corporate Affairs under section 212(8) of the Companies Act, 1956, the copy of the Balance Sheet, etc. of the subsidiaries are not required to be attached to the Balance Sheet of the Company, the Company Secretary will make these documents available upon receipt of request from any Member of the Company interested in obtaining the same. These documents will also be available for inspection at the Head Office of the Company and the office of the respective subsidiary companies, during working hours upto the date of the Annual General Meeting.

Auditors
Messrs. Deloitte Haskins & Sells, Chartered Accountants, retire as Auditors of the Company and have given their consent for re-appointment. The Shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of section 224(1B) of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors proposed to be reappointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section.

Public Deposits and Loans/Advances

Out of the total 2,070 deposits of Rs.372.19 lakhs from the public and Shareholders as at 31st March, 2008, 141

MAHINDRA & MAHINDRA LIMITED

deposits amounting to Rs.22.14 lakhs, which had matured, had not been claimed as at the end of the financial year. Since then, 17 of these deposits of the value of Rs.2.90 lakhs have been claimed. The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement are furnished separately.

Current Y ear Year

During the period 1st April, 2008 to 27th May, 2008, 32,468 vehicles were produced as against 28,680 vehicles and 32,214 vehicles were despatched as against 27,247 vehicles during the corresponding period in the last year. During the same period 15,834 Tractors were produced and 15,639 Tractors despatched as against 16,010 Tractors produced and 16,099 Tractors despatched during the corresponding period in the previous year. The Indian economic performance has been impressive with a healthy GDP Growth Rate coupled with strong growth in the Industry as well as in the Services Sector. The expected normal monsoon and increase in the support prices announced by the Government should brighten the outlook for agriculture. While these macro economic factors remain strong, higher oil, commodity and food prices resulting in inflation, a sharply appreciating rupee, slowing world growth and fluid domestic and international financial conditions are likely to persist which will create pressure on pricing and margins. Consumer demand will remain below potential until interest rates soften. The Company expects to meet these challenges through innovative cost control, process efficiencies and designing products that exceed consumer expectations.

Tractor Industry, along with Mahindra Holdings & Finance Limited (MHFL), entered into a Share Purchase Agreement with Actis Group and the Burman Family to acquire 43.3% of the issued and fully paid-up equity capital of Punjab Tractors Limited (PTL). In addition to this, your Company along with MHFL had made an open offer to acquire an additional stake of upto 20% in PTL and also for acquiring upto 20% stake in Swaraj Engines Limted and Swaraj Automotives Limited, in accordance with Regulations 10 and 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended. Pursuant to these open offers, your Company acquired 20% additional stake in PTL, 20% in Swaraj Automotives Limited and 0.1% in Swaraj Engines Limited in the fiscal year 2007-08. PTL is a strategic fit to your Company. Its Swaraj Brand has a good reputation in the market for reliability and efficient working. PTL has also significant unutilised capacity which the Company would be utilising to ramp up not only sales of Swaraj Tractors but also exploit synergies with the Farm Equipment Sector of your Company. The Company will be in a unique position to leverage upon these opportunities coupled with other advantages such as economies of scale, sourcing benefits and some amount of vendor rationalisation. To add to these, PTL has certain products in the above 50 HP range which will add to the portfolio of the Company. Mahindra Graphic Research Design s.r.l.: With a view to further consolidating its presence in the Automotive Sector, your Company, through Mahindra Overseas Investment Company (Mauritius) Ltd. (MOICML), a wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement with G.R. Graphica Ricerca Design S.r.l. to purchase its assets and business. GR Design, started in 1996, has a rich experience in automotive body and trim design and a systematic and process oriented methodology. Since 1998, their quality system is ISO 9001 certified. Since July, 2005 they have adopted a qualityenvironmental integrated system and in 2006, they have
11

Acquisitions and other matters

Punjab Tractors Limited: As mentioned in the last Annual Report, your Company with a view to further consolidating its presence in the

obtained ISO 14001:2004 Certificates. Their capabilities cover the development of chassis, body, external and internal trim on automobiles, light and heavy trucks. The purpose of acquisition is to create an in-house design centre to meet the requirements of the Companys Automotive Sector. Merger of the Forgings Business: In order to build a robust, global scale business in forging and to reap the benefits of operational synergy and enhance stakeholder value, the forging entities of the group namely, Stokes Group Limited, Jeco Holding AG and Schneweiss & Co. GmbH were integrated by way of a Scheme of Arrangement between Mahindra Stokes Holding Company Limited, Mahindra Forgings Mauritius Limited and Mahindra Forgings Overseas Limited with Mahindra Forgings Limited. The Scheme which was approved by the Honourable Bombay High Court on 23rd November, 2007, was made effective on 27th December, 2007 and the Appointed Date for the same was 1st April, 2007. Mahindra Holdings & Finance Limited: In order to simplify and consolidate the group holding structure, your Company decided to merge its wholly owned subsidiary Mahindra Holdings & Finance Limited (MHFL) into your Company. This would help rationalise operations for both the companies. Besides, the restructuring would benefit the companies and its stakeholders on account of enhanced financial strength and capability. The amalgamation would integrate operations of both companies and would provide efficient management control and systems. In addition, the proposed Scheme would enhance your Companys financial strength, and result in higher Shareholder value creation and distribution. The proposed Scheme was approved by the Shareholders at a

Court Convened Meeting held on 12th April, 2008. This merger would be effective post the approval by the Honourable Bombay High Court and the Appointed Date for the same is 1st February, 2008. Divestment in Mahindra Ashtech Limited: Given the priority of your Company to invest only in its core businesses, your Company divested its holding in Mahindra Ashtech Limited, a wholly owned subsidiary of your Company, engaged in the business of Ash handling systems and Traveling Water Screen in favour of Fusion Fittings (India) Limited.

Energy Conservation, T echnology Absorption and Technology Foreign Exchange Earnings and Outgo
Particulars required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in Annexure II to this Report.

Particulars of Employees
The Company had 237 employees who were in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2008 or not less than Rs.2,00,000 per month during any part of the said year. However, as per the provisions of section 219(1)(b)(iv) of the Companies Act, 1956, the Directors Report and Accounts are being sent to all the Shareholders of the Company excluding the Statement of particulars of employees. Any Shareholder interested in obtaining a copy of the Statement may write to the Company Secretary of the Company. For and on behalf of the Board KESHUB MAHINDRA Chairman Mumbai, 28th May, 2008

12

MAHINDRA & MAHINDRA LIMITED

ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2008
Information to be disclosed under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999: (a) (b) Options granted The pricing formula 72,27,250 1st Tranche 2nd Tranche 3rd Tranche 4th Tranche Average price preceding the specified date - 27th September, 2001 Average price preceding the specified date - 30th May, 2003 Discount of 5.13% on the average price preceding the specified date - 31st May, 2004 Discount of 4.85% on the average price preceding the specified date - 30th May, 2005 5th Tranche Average price preceding the specified date - 14th September, 2005 6th Tranche Discount of 5.02% on the average price preceding the specified date - 29th May, 2006 7th Tranche Discount of 4.89% on the average price preceding the specified date - 13th September, 2006 8th Tranche Discount of 4.97% on the average price preceding the specified date - 30th July, 2007

Average price

- Average of the daily high and low of the prices for the Companys Equity Shares quoted on Bombay Stock Exchange Limited during the 15 days preceding the specified date.

The specified date

- Date on which the Remuneration/Compensation Committee decided to recommend to the Mahindra & Mahindra Employees Stock Option Trust (Trust), the grant of Options.

(c) (d) (e)

Options vested Options exercised The total number of shares arising as a result of exercise of option

47,56,553 Options stand vested on 31st March, 2008. 31,83,568 31,83,568 Equity Shares of Rs.10 each. These were transferred from the Trust to the Eligible Employees.

(f) (g)

Options lapsed Variation of terms of options

4,57,314 At the Sixty-first Annual General Meeting of the Company held on 30th July, 2007, the Mahindra & Mahindra Limited Employees Stock Option Scheme was amended to provide for recovery from Eligible Employees, the fringe benefit tax in respect of Options which are granted to or vested or exercised by the Eligible Employees on or after the 1st day of April, 2007.

(h)

Money realised by exercise of options

Rs.30,05,17,410. This amount was received by the Trust.

(i)

Total number of options in force

35,86,368

13

(j)

Employee-wise details of options granted to: (i) Senior managerial personnel (ii) Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year Mr. Raghunath Murti Mr. Hemant Luthra Mr. Ramesh Iyer 15,000 15,240 25,920 Mr. Pranab Datta Mr. Rajeev Dubey Mr. Allen Sequeira Mr. Prince M. Augustin * 15,240 15,000 10,160 5,080 Names Options granted during the year ended 31 March,
st

As per Statement attached

Names

Options granted during the year ended 31st March, 2005*

2004*

The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005.

(iii) Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant (k)

Nil

Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 Earnings per Share

Rs.41.52

(l)

Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed.

The Company has calculated the employee compensation cost using the intrinsic value of stock options. Had the fair value method been used, in respect of stock options granted on or after 30th June, 2003, the employee compensation cost would have been higher by Rs.23.01 crores, Profit after tax lower by Rs.23.01 crores and the basic and diluted earnings per share would have been lower by Re.0.96 and Re.0.90 respectively.

14

MAHINDRA & MAHINDRA LIMITED

(m) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock. (n) A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:

Options Grant Date

Exercise price (Rs.) 762.00

Fair value (Rs.) 252.98

31st July, 2007

The fair-value of the stock options granted on 31st July, 2007 have been calculated using Black-Scholes Options pricing Formula and the significant assumptions made in this regard are as follows: 7.34% 2.50 years 53.40% 3.04% Rs.728.80

(i)

risk-free interest rate,

(ii) expected life, (iii) expected volatility, (iv) expected dividends, and (v) the price of the underlying share in market at the time of option grant.

ST ATEMENT A T TACHED TO ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2008 STA AT
Name of Senior Managerial Persons to whom Stock Options have been granted Mr. Deepak S. Parekh Mr. Nadir B. Godrej Mr. M. M. Murugappan Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri Mr. Bharat Doshi Mr. A. K. Nanda * ** All the above Options have been exercised. The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005. 20,000 20,000 20,000 20,000 20,000 20,000 20,000 1,00,000 1,00,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 10,000 10,000 Nil Nil Nil Nil Nil Nil Nil 11,345 11,345 Nil Nil Nil Nil Nil Nil Nil 8,362 8,362 Options granted in Options granted in Options granted in Options granted in December , 2001* December, June, 2005** September , 2006 September, July , 2007 July,

15

ANNEXURE II TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2008
PARTICULARS AS PER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2008 l) To eliminate uneven fuel consumption in heat exchanger, fuel pump pressure adjusted to optimum level and heat exchanger replaced for better efficiency of Diesel consumption.

A ) Conservation of Energy
Energy Conservation Measures: 1. Engineering Initiatives a) Installation of energy efficient screw compressors at various locations. b) Installation of Heat pump for heating of synclean solution in Igatpuri, Kandivali. c) Supply duct modification in paint shop at Nashik. d) Unique development of super heat recovery from air conditioning units to eliminate use of conventional electrical heaters at washing machines in Transmission PU. e) f) Installation of Variable Frequency Drives for pumps, blowers. Natural draft Turbine air ventilators instead of electrical driven exhaust fans at Kandivali replacing powered exhaust blowers.

2. Through Process Improvement a) Waste heat recovery from Exhaust Flue gas at continuous Gas carburizing Furnace in Heat Treatment to eliminate use of electrical heaters at post wash. b) Ingenious ideas implemented at Kandivali/ Nashik/ Igatpuri/ Zaheerabad /Haridwar such as: i) ii) Energy alert system for air compressors. Temperature Controllers for window air conditioning units.

iii) Auto valves for water and compressed air application. iv) Timers for blowers, fans and lights. v) Occupancy sensor auto-switches for shop floor lighting.

vi) Higher H.P to lower H.P motors. vii) Use of compact fluorescent Lamps (CFL). viii) Continuous to intermittent operation of motors. ix) Electronic chokes and new reflector tube lights. c) Installation of heat pump at canteen which eliminates the 40 KW heater and 4.5KW water cooler in Canteen.

g) Automatic power factor controllers at various locations which has improved power factor from 0.92 to 0.993. h) Installation of fix capacitor bank for the motor above 50 KW rating. i) Controlling the temperature of split Air Conditioner installed in the office space by modifying the microcontroller and setting it to a 23deg.C instead of 16 deg. C. Installation of Beblec-make energy saver panel to lighting load at Tractor P. U. in Kandivali Plant. Reduction in power consumed by air compressor by plugging all the air leaks, replacing pneumatic tools by DC nut runners and by increasing unloading time of compressors.

j)

d) Eliminate low productivity by tackle modification so the NST hood & SFC grill can be loaded on single tackle. e) Reduction of air consumption by stopping air blowing & completely drying the chassis before taken to oven in paint shop.

k)

3. Awareness for Energy Conservation a) Celebrated Energy Conservation Week from 14th December, 2007 to 21st December, 2007

16

MAHINDRA & MAHINDRA LIMITED

to promote energy saving and conservation of resources. Energy Conservation Products displayed in the plant for awareness. b) Conducted slogan, poster and suggestion competition on Energy efficiency with overwhelming response by receiving 987 entries from all the product units. Winners of the competition are suitably rewarded. c) Distributed leaflets with Energy Saving tips to all employees.

The Automotive Sector, Nashik Plant won second excellence Award at National Energy Conservation Award from BEE. Both the above Awards were received from the Honourable President of India, Smt. Pratibha Patil. The Automotive Sector, Nashik and Kandivali Plants won the Maharashtra State Level Award - First and Second prize respectively. The Automotive Sector, Nashik Plant also won the water conservation excellence award from CII.

d) Energy Conservation awareness has been created amongst vendors, suppliers and external agencies like Indian Railway officials, FICCI, etc. by various interactions and seminars. e) Emails and posters used to create awareness among the Employees about the need for saving energy. Cross functional team for reducing the consumption of electricity during nonproduction time.

B ) Research & Development and T echnology Technology Absorption

During the year under review, pursuant to R & D efforts on development of new technologies, new models like Scorpio VLX with mHawk Engine and NGT530R improved transmission, Alfa Passenger, Bolero Camper DX, Scorpio Getaway Double Cab, 295 DI Super Turbo and Upgraded Sarpanch 595DI Super Turbo for the domestic market, 8000DI for Africa and Tier III and Tier IV upgrades for the US market, etc. were launched. Keeping in view the future requirements of technological upgradation, the Company has undertaken various programs like development of engines to meet future regulatory norms in India, USA and other countries to which the Companys products are exported. During the year, the Companys Tractor Division has filed 9 Patent applications and 8 Design registration applications (including 5 in USA). Seven Patents were granted to the Companys Tractor Division during the year, applications for which were filed in earlier years. Three Patents were granted to the Companys Automotive Division during the year. The Company spent Rs.245.33 crores (including Rs. 53.81 crores for Capital Expenditure) on Research and Development work during the year which was approximately 1.85% of the total turnover.

f)

g) Reward and Recognition for energy saving projects. h) Red tag system to reduce the air leakages. i) j) k) Training provided to cell members to think innovatively to reduce the energy consumption. Display of Energy generation and consumption process. Detailed Energy audit conducted by external Agency to quantify energy consumption and make people aware of potential areas of action.

The above initiatives and other efforts have resulted in reduction in energy consumption. These measures have also resulted in cost savings for the Company, aggregating approximately Rs.21 crores. In recognition of these efforts, the Company received following prestigious awards viz: The Automotive Sector, Zaheerabad Plant won the first prize in National Energy Conservation Award from BEE.

17

C ) Imported T echnology for the last 5 years Technology

Sr . No. Technology Imported Sr. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. Power shift transmission for higher HP Tractors NEF TCI NEF Performance improvements MDI Engine upgradation Anticlock Braking System on utility vehicle Common Rail Diesel on utility vehicle New CRDe Engine Development Development of a new MPV Euro IV Emission developments for exports Multi Link Suspension for utility vehicle Development of Air Bags on utility vehicle Development of cruise control on utility vehicle Fatigue Lab and track design for MRV, Chennai Sandwich material for noise absorption Development of Nano-Technology for IP etc. Climate control (Heated and Cooled) seats Bio-Diesel and Gas based engine Transmission Design of Compact Tractor Development of Integrated Cabin for Tractor Hydrophilic Nano coated Feature Automatic Transmission for SUV Transmisison for new SUV New Generation system for Brakes for SUV New Electricals & Electronics Features CNG engines for LCV Common Rail Diesel on Light commercial vehicle Next generation Common rail adaptation Hydrogen ICE Fuel Cell Vehicle Development 2nd Generation Biofuels (Biomass to Liquid / Gas to Liquid) Hybrid Vehicles Transmission Upgrade Electricals & Electronics Update Design for New Tractor Transmission Year of Import 2003 2004 2004 2004 2004 2004 2004 2004 2004 2004 2005 2005 2005 2005 2005 2005 2005 2006 2006 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 Status In the process of Absorption Technology Absorbed Technology Absorbed Technology Absorbed Technology Absorbed Technology Absorbed Technology Absorbed In the process of Absorption Technology Absorbed Technology Absorbed In the process of Absorption Technology Absorbed In the process of Absorption In the process of Absorption Technology Absorbed In the process of Absorption In the process of Absorption Technology Absorbed In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption Technology Absorbed Technology Absorbed Technology Absorbed In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption

Foreign Exchange Earnings and Outgo

The Company continues to strive to improve its export earnings. Further details in respect of exports are set out elsewhere in the Report. The information on foreign exchange earnings and outgo is furnished in the Notes on Accounts. For and on behalf of the Board KESHUB MAHINDRA Chairman

Mumbai, 28th May, 2008

18

MAHINDRA & MAHINDRA LIMITED

Particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the Annual Accounts of the Company pursuant to Clause 32 of the Listing Agreement.
Loans and advances in nature of loans to subsidiaries: (Rupees in crores) Name of the Company Mahindra & Mahindra Financial Services Limited Mahindra Intertrade Limited (including loans where there is no interest) Bristlecone India Limited Mahindra Gujarat Tractor Limited Mahindra Shubhlabh Services Limited NBS International Limited Mahindra Forgings Limited (Mahindra Forgings Overseas Limited, Mahindra Forgings Mauritus Limited and Stokes Forgings Holding Company Limited since merged with Mahindra Forgings Limited (Appointed Date - 01.04.2007) Bristlecone Limited Mahindra Ashtech Limited 40.67 40.67 6.50 Balances as on 31 March, 2008
st

Maximum outstanding during the year 4.00 3.13 (3.13) 8.03 1.00 8.25 2.00 233.98

0.15 (0.15) 8.03 1.00 8.25 2.00

Loans and advances in the nature of loans to firms/companies in which Directors are Interested: (Rupees in lakhs) Name of the Company Infrastructure Development Finance Company Limited Balances as on 31 March, 2008
st

Maximum outstanding during the year 15.00

15.00

Except as indicated above, the Company has not made any loans and advances in the nature of loans to associates or loans and advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no interest or interest below section 372A of the Companies Act, 1956. Investments by the Loanee in the shares of Subsidiary Company , when the Company has made loans or advances in the Company, nature of loan: Nil
19

Management Discussion & Analysis

Industry Structure
The Automotive Sector The automotive industry is one of the key contributors to the Indian manufacturing economy. The Indian automotive industry achieved a turnover in excess of Rs.1,65,000 crores in 2005-06. It accounted for over 13 mn direct and indirect jobs and 17% of the total indirect taxes as per the Automotive Mission Plan 2016, Government of India. The total production of Multi Utility Vehicles (MUVs), Light Commercial Vehicles (LCVs) and three wheelers in India during the year under review grew by 1% over the previous year and stood at 1,100,303 vehicles. (Source: SIAM). The Company produced 208,035 vehicles during the same period, a growth of 16% over the previous year. The Company accounted for 18.9% of the Indian production of MUVs, LCVs and three wheelers in the year under review. MUVs are a family of vehicles capable of versatile applications such as passenger transport, goods transport or a combination of the two. There are six manufacturers of multi utility vehicles in India. The Company is the largest manufacturer of MUVs in India, offering a range of over 20 models. 288,600 MUVs were sold in India in the year F-08, a growth of 5.1 % over F-07 (Source: Industry and internal). MUVs are further categorized into soft tops, hard tops and pick-ups. LCVs (carrying a payload of 2MT to 4 MT) are commercial vehicles used mostly for intra-state movement of goods. In F-08 44,957 LCVs of this category were sold a growth of 4.3% over F-07 (Source: Industry and internal).The company competes in this segment through its subsidiary Mahindra International Ltd (MIL). There are six manufacturers in India in this specific LCV segment.
20

India is the largest market in the world for three wheelers. In F-08 this segment decelerated by 9.7% over F-07, with 364,700 three wheelers being sold in India. (Source: SIAM). The Farm Equipment Sector The Indian Tractor market is the largest in the world, in terms of sales volume. In the current year all the tractor manufacturers together sold 3,02,241 tractors in the domestic market. Additionally, 44,260 tractors were exported. The domestic tractor market is segmented by horsepower into the low horsepower 25 HP segment, the mid segment of 35 HP and the high segment of above 45 HP. Most of the major players cater to all the three segments. However, their relative strengths and market positions differ from segment to segment. The domestic tractor industry is fragmented, with about 14 major players and some small local players. Many factors affect tractor sales including monsoons, means of irrigation, water levels, government declared support prices for crops, general commodity prices, crop production expenses (including seeds, fuel, fertilizer, pesticides and other costs) and the credit policy announced by RBI. The availability of finance is one of the most significant factors influencing tractor demand, as more than 90% of tractors are sold through bank finance. M&Ms Farm Equipment Sector (FES), which designs, develops, manufactures and markets tractors for Indian and overseas markets, is the largest manufacturer of tractors in India. FES has sustained its market leadership in the Indian tractor market for over 25 years.

MAHINDRA & MAHINDRA LIMITED

Industry Developments
The Automotive Sector The Indian automotive industry had experienced a strong growth wave over the last five years. F-08 however, saw a drop in production (including two wheelers) by 2.3% and a drop in sales (including two wheelers) by 4.7% (Source: SIAM). The only segments that registered growth in sales were passenger vehicles (12.2%) and commercial vehicles (4.1%). The three wheeler and two wheeler segments witnessed a drop in growth of 9.7% and 7.9% respectively. A combination of factors contributed to this situation, the main ones being a rise in interest rates, continued increase in fuel prices, sharp commodity inflation leading to higher costs and a slight economic slowdown. The total number of MUVs sold in India increased by 5.1%, Within the MUV sub segments, the hard top sub segment, which is the largest sub segment in MUVs, saw a volume increase of 9% in the year under review as compared to 16% in the previous year. The soft tops sub segment, which has been declining significantly over the last few years, declined a further 6 % in the year under review. The pick-up market declined by 4% this year, after a 20% growth last year. The mid size car segment where the Logan competes, increased by 16%. In the LCV segment (2-4 MT of payload) the sales increased by 4.3%. The volumes in the small three-wheeler segment (0.5T load) declined by 18.6% and the large three-wheeler segment witnessed a decline in volumes of 37.3%. (Source: Industry and internal) The Farm Equipment Sector The first monsoon (between June and Sept) of FY 07-08 was 105% of the Long Period Average, resulting in a good Kharif crop. The second monsoon was lesser than normal

in more than half of the areas across India. Hence, Rabi sowing was lower than F-07 by 3%. However crop production during F-08 (Rabi and Kharif combined) is estimated to be 3% higher than the last year. The Government also announced significantly higher Minimum Support Prices for various crops for both Rabi and Kharif periods. Overall, it is estimated that the agricultural GDP of India will grow by 2.6% in F-08. Credit allocation to agriculture had been increased to Rs.2,25,000 Crores. Yet, due to higher NPAs, we witnessed a slow down in bank financing and a tightening of lending norms. This, coupled with increased interest rates, caused a drop of 5.1% in domestic sales in the tractor industry over F-07. The domestic industry closed at 3,02,241 tractors in F-08, compared to 3,18,328 tractors in F-07. Exports from India totalled 44,260 tractors in F-08, a growth of 31.5% over the last year. The industry had to bear the impact of hikes in the price of raw materials. Over the last four years, the prices of important input materials like steel, pig iron, and lead have continuously increased. The prices of crude oil increased significantly in the current year. Simultaneously, exports were impacted due to a significant appreciation of the rupee against the U.S. Dollar. Margins therefore continued to be under pressure. The industry is witnessing consolidation in the domestic market. In F-06, Tractor and Farm Equipment Ltd. (TAFE) bought Eicher Tractors Ltd. In F-08, M&M FES increased its dominance of the domestic market with the acquisition of Punjab Tractors Ltd. (PTL), With this acquisition, M&M FES now commands nearly 40% of the domestic market.

M&M P erformance Performance

The Automotive Sector The Automotive Sector (AS) of the Company is engaged in the Multi Utility Vehicle (MUV) and three wheeler segments
21

directly. It competes in the Light Commercial Vehicle (LCV) segment through its joint venture subsidiary MIL, and in the passenger car segment through another joint venture subsidiary Mahindra Renault Pvt. Ltd (MRPL). The Company manufactures LCVs for MIL and passenger cars for MRPL on contract basis. The Company also markets these LCVs and cars for the two companies respectively under distribution contract for a fee. For the sixth consecutive year, the Companys vehicle production and sales touched an all-time high during the year under review, despite the industry slowdown. A total of 234,688 vehicles (including 34,556 three wheelers, 11,079 LCVs for MIL and 26,653 cars for MRPL) were produced, which is a growth of 31.1 % over the previous year. On the domestic sales front, the company along with its subsidiaries MIL and MRPL sold a total of 218,998 vehicles (including 33,927 three wheelers, 10,373 LCVs through MIL and 25,907 cars through MRPL), recording a growth of 28.7% over the previous year. The Companys domestic MUV sales volumes grew a very healthy 16.4%, against the industry MUV sales growth of 5.1%. A record number of 148,761 MUVs were sold by M&M in the domestic market in the year under review as against the sale of 127,856 MUVs in the previous year. The company strengthened its domination of the domestic MUV sub segment by increasing its market share to 51.5% over the previous years market share of 46.6% In the hard top MUV sub segment, the success of the refreshed Scorpio and the Bolero models helped the Company grow its volumes by 19%. The refreshed version of the Bolero that was launched in March 2007 was a hit with customers and the Bolero brand sales volume increased by 33% over the previous year. In the process, Bolero brand sales crossed the milestone of 50,000 vehicles sold in a year and Bolero continued to be Indias largest selling MUV, for the third year in a row.
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November 2007 saw the launch of the VLX variant of the Scorpio. Powered by the m-Hawk - a new indigenously developed, state of the art, 2.2 liter common rail diesel engine - and bundled together with a host of electronic features. The Scorpio VLX has found great favour with the customer. In the soft top sub segment, the Companys soft-top sale volume declined by 7 % in line with the industry decline of 6%. The Company pick up volumes registered a growth of 17% in spite of an industry de-growth of 4% in this sub segment. As a result, the Companys market share jumped to 76.9% from the previous years share of 63.2%. The credit goes to the success of the small pick up model, the Maxi Truck. In LCVs, M&M, through its subsidiary MIL, has a presence only in the lower payload (< 4MT) segment of the market. The Companys sales in this sub segment improved by 20.3%, as against an industry sub segment growth of 4.4 % in the year under review. This was due to recent launches in the passenger segment as well as the repositioning of a load carrying model. One of the principal reasons for this very healthy growth was the increased focus on the business through MIL. This led to an increase in the Groups market share in the segment from 20.1% in the previous year to 23.1% in the year under review. The subsidiary company is currently also working on developing products for the higher end of the LCV segment as well as larger commercial vehicles. In November 2007, the company signed a joint venture agreement with International Trucks (a wholly owned affiliate of Navistar International Corporation) to produce diesel engines for medium and heavy commercial trucks and buses in India. The joint venture, named Mahindra Navistar Engines Pvt. Ltd. (MNEL), is 51% owned by Mahindra & Mahindra (M&M) and 49% owned by

MAHINDRA & MAHINDRA LIMITED

Warrenville based Navistar, North Americas largest combined commercial truck, school bus and mid-range diesel engine producer. F-08 also witnessed the launch of the Logan car by MRPL. The Logan boasts of best in class fuel efficiency, cabin space and driving comfort and has won multiple awards. Competing in the very competitive midsize segment of the domestic car market, the Logan has been amongst the top selling cars in the segment since launch and has captured a 11.2 % market share of this segment. 25,907 Logan cars were sold in F-08. In the 0.5 T load segment of the three wheeler market, the company has now acquired a sizeable market share of 19.3% with the Alfa three wheeler selling 21,564 units. This is a growth of 10.3% over the previous year, in a scenario where the industry volumes declined by 18.6%. In February 2008 the company also entered the 3-seat three wheeler passenger market with the launch of the Alfa passenger, in Chandigarh, Rajasthan, Bihar, Assam, West Bengal and Kerala. Customer acceptance has been positive and this model should contribute to the Companys growth in the current year, with the Pan India launch being completed by July 2008. In the declining large three wheeler segment, the Company sold 9,799 large three wheelers against 14,146 in the previous year. This is a decline of 30.7% in sales volumes compared to a 37.3% decline for industry as a whole. In the last MDA it was reported that two greenfield manufacturing sites, one at Chakan, near Pune and one at Oragadam near Chennai, were being planned. During the year under review, based on a re-alignment of its manufacturing strategy, the company has deferred its investment at the joint manufacturing site at Chennai in partnership with Renault s.a.s and Nissan Motor Company Ltd. The company will utilise the capacity available at their

new plant in Chakan and other existing plants to meet its medium term requirements, for both domestic and overseas production. Work on the greenfield plant at Chakan, near Pune has been initiated. Land acquisition is complete and construction work is in full swing. This plant near Pune will have the capabilities to manufacture the companys range of new generation MUVs as well as commercial application vehicles. It will also manufacture CVs for MIL. Additionally, MNEL will manufacture engines at this facility. The Company has intensified its efforts to identify niche markets for its automotive products throughout the world, especially in geographical areas that have similar sales, distribution and marketing conditions as India. Over the last three years the Company introduced its vehicles into many new countries including Europe, Middle East, South America and South-East Asia by adapting unique business models for each country. In F-08, vehicles were launched in Australia, Chile and Sudan. The year also witnessed the launch of the sectors first CKD operations abroad with the opening of CKD assembly plants in Egypt and Brazil. These initiatives resulted in continuing strong growth in export volumes, with a 54% export growth from 8,021 vehicles [including 254 vehicles sourced from MIL] in the previous year to 12,359 vehicles [including 363 vehicles sourced from MIL] in the year under review. The entry into all these new markets was under the MAHINDRA brand name, in keeping with the objective of promoting and establishing the Mahindra brand across the globe. In Operations, the Company focused on increasing capacity at existing plants, on rigorous cost reduction, and on a ramp up of its new Uttaranchal plant. Energy conservation was an area of particular focus. The impact of our efforts was recognised when, the Zaheerabad and Nasik Plants
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were awarded the National Energy Conservation Award (1 rank and 2

st nd

into a versatile product capable of being used in the fields, as well as for construction and mining applications. The Mahindra Shaan, launched in F-07, won the Outstanding Innovation Award from ASABE (American Society for Agricultural & Biological Engineers) This is a recognition of FES ability to conceive and develop innovative products that meet the customers latent needs. In its endeavor to offer unparalleled customer quality, durable and high performance products, FES tests its products in the most demanding environments. M&M FES was awarded the Indian Innovation Award 2006 for reducing time to market in New Product Development by bringing field to lab. This is an acknowledgement of FES technological advances and its ability to test its products with the same rigor within the confines of a test lab. This year, FES further increased its focus on Customer Centricity by leveraging technology to provide innovative new services. A 24x7 toll free number has been extended pan India to give customers a unique ownership experience. To meet the growing demand for automobiles running on alternate fuels, Bio-Diesel technology readiness for up to 5% bio-fuel has been achieved. FES has sold tractors with this capability. Bio-fuel hubs have been created in some areas to facilitate availability of this green fuel. FES is at the forefront of efforts in the development of green technologies, which will contribute to environmental sustainability. FES also sells engines and gensets under the Mahindra Powerol brand. Mahindra Powerol retained its market leadership in the telecom segment for gensets. In F-08, it increased its customer base, with engine and genset sales put together increasing by 32% in volume terms, and by an even more substantial 72% in value terms. Mahindra Powerol also expanded its genset product range upto 62.5 KVA. This was accompanied by the introduction of super

rank respectively), and the Nashik and

Kandivli plants won the state level prizes for energy conservation. The Automotive Sectors Nashik plant also won the National Award for excellence in water conservation. The Company has also been making significant efforts to take customer satisfaction to even higher levels in its pursuit of becoming one of the most customer caring automotive companies. The Company significantly improved its standing to 3rd rank on sales satisfaction in syndicated studies conducted by independent third party agencies like J.D. Power. Two of the companys products Scorpio and Logan were ranked No. 1 in the TNS Total Customer Satisfaction scores in their respective categories. In the TNS study on Dealer Satisfaction released in 2007, the Company ranked first. The Company was also rated second in a TNS study on the Most Trusted Indian car companies. The Farm Equipment Sector FES achieved a major milestone in F-08 when the cumulative sales of its tractors till date crossed the 13 lakh mark. It sustained its leadership position for the 25th consecutive year with a market share of 30% in the domestic tractor market, 90,509 tractors were sold in F-08 as against 95,006 tractors in F-07. Additionally, 8,533 tractors were exported in F-08 against 7,525 tractors in F-07. The year F-08 was marked by the introduction of new and upgraded products and technologies. The 295 DI Super Turbo and the upgraded Sarpanch 595DI Super Turbo were launched in the month of October 2007. The former is a 39HP Turbo charged tractor with a new technology. It is the first Turbo tractor in the mid segment and is one of the most powerful tractors in this category. The latter is an upgraded product, with significant improvement in the product performance and in the value offered to the customer. The Arjun Ultra-1 has now been transformed
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MAHINDRA & MAHINDRA LIMITED

silent gensets (less than 62 db) for usage in silent zones in accordance with the Central Pollution Control Board norms. Innovative brand promotion like FM radio campaigns & advertisements in public transport were undertaken - a first in this segment. Branded show rooms were set-up in 25 Indian cities to boost its presence in the retail segment. Mahindra Powerol won with the Frost & Sullivan Voice of the Customer Award for being the Most preferred Genset Brand in the Telecom Segment, which truly reflects the impact that Mahindra Powerol has created in the telecom space. This is another reflection of the FES spirit of customer centricity. On the global front FES strategic joint venture in China the Mahindra (China) Tractor Company Ltd. (MCTCL) increased its presence in the Chinese market by spreading its distribution to new regions in North West and Central China. This enabled a sales growth despite a sluggish domestic industry. On the exports front, MCTCL launched its 25HP - 4wd product in the USA market. This product has been well received by dealers in US. MCTCL has also made inroads in South Asia by penetrating markets like Bangladesh and Sri Lanka. MCTCL embarked on a product range expansion program by introducing products up to 55 HP. The enhanced market presence in domestic and exports markets and the product range expansion program will enable MCTCL to gain a significant presence in the China tractor industry. In the USA, the 0-70 HP tractor industry declined by 13% between April 2007 and March 2008. The major reasons were fuel price increases, softening of the credit market due to sub prime crisis and higher energy costs. Mahindra USA (MUSA) sales increased by 1%. Mahindra USA has been recognized as an important player in the American market, and has been invited to join the Board of the Association of Equipment Manufacturers (AEM), which is a leading international trade association

focused on meeting the global business needs of equipment manufacturers and service providers. The overall growth in exports for Rest of the World (ROW) tractor markets (excluding USA and China) in F-08 was 18%. Australia and Africa were major contributors to this growth. Satellite assembly plants were set up in the African states of Tchad and Mali in F-08. FES also entered new markets, including Iran in the Middle East, {where it had partnered with Iran Tractor Manufacturing Co. (ITMCo)} and Brazil in South America. FES won the All India Award for Export Excellence instituted by Engineering Export Promotion Council (EEPC), which recognized its outstanding contribution to Engineering Exports in the field of agricultural machinery. In addition, at the 74th International Fair of Agriculture, at Novi Sad, Serbia, M&M bagged the Best Tractor Introduction award. The Union of Japanese Scientists and Engineers (JUSE), Tokyo, Japan awarded the Japan Quality Medal to FES for 2007. The JQM is an internationally acclaimed Quality accolade, awarded to a company with outstanding Quality Management. FES is now the only tractor company in the world to attain this award, and with this win, it joins the league of global companies. FES also won the Deming Application Prize in 2003 for its Customer Focus, commitment to TQM practices and demonstration of results in improving product and process quality. For FES, after winning the Deming Prize, the JQM win signifies the culmination of a dream, the confirmation of our self-belief, and the embodiment of the We can spirit. FES continued its journey towards excellence in business process improvements in several ways. Its Lean Manufacturing initiative continued with strong momentum at all its plants. The Total Productivity Management (TPM) initiative that was launched at the Mumbai plant in November 2006 has been extended to Nagpur plant. Involving suppliers in the process strengthened the ongoing
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focus on continuous improvement. The ISO: 9000:2000, TS 16949 & ISO: 14001 re-certification & surveillance audits have continued at the various FES plants and all the stringent requirements have been met successfully. The Mumbai and Rudrapur plants were certified in F-07 for Occupational Health & Safety Assessment Series (OHSAS- 18001), making all the four FES plants OHSAS certified. This year, re-certification and surveillance audits for OHSAS were conducted. In recognition of its excellent health & safety practices, FES was awarded the Golden Peacock Occupational Health & Safety Award for the year 2007. Similarly, for the efforts in the area of Quality, FES was awarded the Golden Peacock National Quality Award -2007. FES continues to improve its supply chain efficiency by reducing dealer stocks and outstandings.

contribution to the Indian economy over 2006-2016. With the Companys enhanced presence in the Indian automotive industry thorough its joint ventures for CVs and cars as well with its entry into the smaller three wheeler category, the Company is well poised to garner an increasing share of this relatively high long term growth segment of the Indian economy. However the current year may witness sluggish growth due to global and local economic pressures as listed under the next section. In the Automotive Sector, the Company believes that its core MUV market is likely to increase its share in the light vehicles category due to the inherent versatility of MUVs for a fast growing developing country. The proportion of MUVs in India is relatively low compared to corresponding figures in Asian countries that share a similar or more developed profile. In the long term, we believe that the light vehicle market will expand at a fast clip in India and that MUVs will take an increasing share of this market. The AMP 2016 also states that fiscal benefits should be provided to MUVs, which could lead to further MUV growth. The Companys entry into the car market and the CV market through joint ventures and its strong presence in the MUV segment will enable the leveraging of the full range of opportunities. The WTO and Free Trade Area negotiations with Thailand, ASEAN, SAARC countries and the Mercosur countries are likely to lead to lowered tariffs across many target export markets. This could provide a significant opportunity to generate larger volumes from export sales and further the auto sectors strategic emphasis on the development of exports. Given the current state of road infrastructure in the interiors, as well as the extremely high cost required for improvement, MUVs will continue to be the most appropriate and economical vehicles for transporting people in the interiors. Rural public transportation is not as extensively developed

Opportunities
The Indian economy has been growing at an annual average growth rate of well above 8% for the last four years making it one of the fastest growing large economies in the world. This kind of secular long term growth combined with the Companys diligent expansion of its technological and product development capabilities, and its active search for overseas partners and markets, augurs well for the coming years for both sectors. The sectors also share synergies of resources, especially for sourcing, giving major opportunities for savings. Indias automotive sector is one of the fastest growing in the world. With the Indian economy on a high growth path on a secular long-term basis and with the consequently increased disposable incomes of the population at large, the Indian automotive industry is expected to have significant growth opportunities. The Indian Governments Automotive Mission Plan 2016 will enable such growth and targets a doubling of automotive industrys
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as in the urban areas, providing further opportunities for MUVs and LCVs. MUVs and CVs are preferred vehicles for projects and construction sites like the Golden Quadrilateral road project and the North, South, East and West Corridor project. A higher level of industrial development generally leads to a greater demand for MUVs and CVs. Hence if the planned rate of GDP growth is achieved over the next decade, the demand for MUVs and CVs should increase commensurately. The increased infrastructural investments required to maintain the high growth of the Indian economy - like the North South East West corridor which has a budget of tens of thousands of crores - and the increased goods movement from a fast growing economy, would maintain a high demand for commercial vehicles. To capture a share of the growing medium and heavy commercial vehicles segment, the Companys subsidiary, MIL, will launch a new range of medium and heavy commercial vehicles over the next few years and thus ensure the Companys participation in this important segment of the Indian automotive industry. The direct tax changes announced in the Government of Indias budget for F-09 would lead to an additional increase in the disposable incomes of taxpayers. In addition the release of higher salaries to government employees as a result of the sixth Pay Commission would also increase disposable incomes to a large group of people. Both these factors are likely to have a positive influence on vehicle demand, especially for personal use vehicles in the current year. The burgeoning Indian middle class population, with fast growing disposable incomes, with an increasing propensity to spend, along with the huge increase in the working age population expected over the next 10 years, will drive high growth for passenger vehicles like Bolero and Scorpio. Given that over half the Indian market is accounted for by

passenger cars, the Companys partnership with Renault to introduce Renault models through its subsidiary MRPL will continue to provide the Company growth from participating in the other fast growing segment of the Indian auto industry. Thus, through these strategic initiatives, the Auto Sector of M&M has put in place plans to increase its size of the addressable market of the Indian automotive industry from 17% in F-05 to 75% by F-10, providing a huge opportunity for growth. There are opportunities for the Farm Equipment Sector as well. The Govt. of India has increased its focus on agriculture in the budget for F-09. There are also certain states in India where penetration of tractors is low and these provide opportunities for growth. FES will leverage these opportunities by strong marketing initiatives like brand building, creating stronger franchisees, restructuring dealers and the introduction of new products. The USA and China are amongst the top three tractor markets in the world apart from India. To tap the potential in these markets, FES plans to continue its focus on these markets to become a global leader. M&M is well positioned to grow sales in the Chinese market. M&M is also exploring various global tractor markets in Africa, East Europe and the Middle East. Facilities at Nagpur and Rudrapur Plant will ensure low cost manufacturing for FES. China will also serve as a low cost sourcing base for FES products. These can be leveraged suitably.

Threats
A slowdown of the Indian economy is quite possible for the short term given current global developments. Due to the strong linkage of the automotive industry to the economy, such an event would adversely impact growth in the short term for the Company.
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For the Automotive Sector more stringent regulatory norms are being introduced. While these measures are welcome, they may result in an increase in manufacturing cost, which, in turn, may affect margins or demand in a price sensitive situation. Import tariffs have been progressively reduced and are expected to be reduced further in the future in line with Indias obligations under WTO and its bilateral free trade agreements with certain countries, with the possible eventual elimination of import tariffs on imports from these countries. This will increase competitive pressures on the Company. The Companys exports, a strong thrust area, can be adversely affected if the Rupee continues to appreciate. Tightening of credit disbursals for vehicles and increase in interest rates impacted demand in many segments in F-08. Maintenance of these factors or any increase in them would impact demand in the current year and this may affect sales volumes, leading to lower profitability. However having a subsidiary company, Mahindra Finance alleviates this concern to some extent. The entry of new players has made the passenger car and MUV markets much more competitive affecting the margins of all participants. The Company is countering this threat by a stronger focus on reducing costs and increasing efficiency of operations. High fuel prices increase the cost of ownership and could also adversely impact demand for both sectors. Any reduction in the price differential between petrol and diesel could increase demand for petrol MUVs at the expense of diesel MUVs. Almost all of the Companys MUV models are diesel powered and an increase in preference for petrol vehicles could be a disadvantage to the Company. However, even after five years of fuel price decontrol, a substantial differential has been maintained.
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For FES, high fuel prices increase the running costs, which may directly impact the tractor industry. The cost of diesel constitutes around 60% of the running cost of a tractor. Any further increase in the price of diesel may adversely impact input costs for farmers. If not compensated by a crop price increase, this can impact the availability of funds with farmers and, in turn, the tractor demand. Mandatory use of vehicles powered by alternative energy sources could affect both sectors. For the Auto Sector, it could lead to a demand for different types of vehicles. The Company has developed products powered by alternate energy like CNG and electricity to provide lower polluting products for a better environment, which minimizes this risk. The Company has also developed prototypes of a hybrid Scorpio and hydrogen powered three wheeler as well as a bio diesel powered Scorpio and Bolero. For FES, the mandatory use of vehicles powered by alternative energy sources could lead to a demand for different types of tractors. To minimize this risk, FES is customizing products powered by alternate energy like bio diesel. In F-08 FES has achieved technology readiness to introduce tractors powered by 5% bio diesel into the market. The company is therefore well placed to move with the trend towards alternative energy in both sectors, should it become a norm in future. A major threat to both sectors lies in the escalation in raw material prices. Such price hikes, especially for iron, steel and rubber are likely to put pressure on prices and could affect margins or demand. Commodity prices have seen significant price escalation in F-08 and the trend has continued into F-09. This has resulted in a significant rise in input costs, in turn causing price escalation. This may therefore impact demand with a consequent impact on the bottom-line if not passed on. The Companys Auto Sector continued to be amongst the most aggressive in

MAHINDRA & MAHINDRA LIMITED

passing on these costs to consumers, but may not be able to always do so in the future. Reduction of excise rates on small cars in February 2008 has increased the tax levy differential between small cars and larger vehicles significantly. With a resulting lower price tag for small cars, customers on the margin may opt to postpone large car purchases or buy a small car, which could impact MUV and the larger car segment growth adversely. With M&Ms strong focus on globalisation, any form of tariff/non-tariff barriers imposed by any country where M&M has a significant presence or has plans to grow will be a threat. As for all exporters, any political, economic uncertainty or natural calamity in the countries of export would be a potential threat. Apart from this, a steep increase in crude oil prices globally, has an inflationary impact on the overall economy.

taking appropriate steps to hedge currency exposure thus limiting the impact of risk. Both sectors will continue to focus on cost cutting measures through value engineering. In the domestic tractor market, growing NPAs of banks are a concern for FES, as this puts pressure on the credit availability to the farmers, 90% of whom buy tractors against loans. Interest rates for tractor loans tend to be higher than for housing and car loans. In recent times, banks have been increasing the interest rates, which could impact the loan repayment ability of the farmers, and thus impact tractor demand. The loan waiver may in the short term improve the credit availability to the farmer, but in the longer term this may lead to greater defaults in loan repayments and thus impact tractor demand.

Excise
In 1991, an excise dispute arose at the Nashik and Kandivli factories relating to the Commander range of ten-seater vehicles. The jurisdictional Central Excise authorities, after due inquiry, approved the classification of these vehicles as ten-seaters which attracted a lower rate of excise duty under Tariff Entry 8702. The Company successfully contested the subsequent challenge by the excise authorities, in two different fora. The Excise Department accepted these decisions and the classification of the vehicle as a ten-seater was consistently approved by the authorities. Inspite of the above, the Excise Department subsequently disputed the classification on the ground that classification of the Commander under Tariff Entry 8702 as ten-seater did not meet certain parameters of the Motor Vehicles Act, 1988 and the Maharashtra Motor Vehicles Rules, 1989, and demanded differential duty. The Departments stand was that the Commander should be classified under Tariff Entry 8703, attracting a higher rate of excise duty. The Company challenged these demands by writ petitions
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Risks and Concerns

Stringent legislation on pollution and emission requirements will increase the cost of the Companys products for the Automotive Sector. Holding the price line could have an impact on profitability. Price increases on the other hand could impact volumes. The Auto Sector is in the process of setting up a new greenfield plant at Chakan, near Pune. With the addition of the full capacity of this new plant, the dedicated final capacity will significantly increase as compared to its current capacity. If for some reason, demand does not allow a significant utilization of these new capacities, the increased fixed costs would impact profitability in the future. The Company has plans to bring in the incremental capacity from this new plant, phase wise to protect it from this risk. For the overseas operations rupee appreciation could be a risk for both sectors. However, M&M, as a practice, is

before the Bombay High Court, which stayed the further proceedings unconditionally. The High Court remanded these matters for adjudication before the Excise authorities. The Commissioner (Adjudication), Navi Mumbai passed an order dated 30th March 2005 confirming the demand of Rs.216.03 crores and imposed a penalty of Rs. 88.08 crores. The Company has filed an appeal and a stay application in the Tribunal challenging this order. The Tribunal has granted an unconditional stay against the demand and penalty in terms of its order dated 9th October 2007. In another concurrent proceeding, the Tribunal passed an order in July 2005 holding that the vehicles were appropriately classifiable under Tariff Entry 8702 as tenseaters. The Department has challenged this order by filing a Civil Appeal, before the Supreme Court, which has been admitted. The matter is yet to be finally heard. The Company does not expect any liability on this account as it has been advised that an extraneous legislation like the Motor Vehicles Act cannot be referred to for the purpose of excise classification. The Excise Commissioners, the Tribunal and various expert/statutory bodies holding the vehicle to be a ten-seater have accepted this stand. During the current year, the Commissioner of Central Excise, Nashik has also confirmed a demand of Rs. 24.55 crores and imposed a penalty of Rs.20 lacs in respect of Armada range of vehicles manufactured by its Nashik Unit during the period 1992 to 1996, on the same basis as adopted for Commander range of vehicles. The Tribunal was pleased to grant an unconditional stay against this order as well. The final hearing in both the above matters is awaited.

country. High growth of the industry leads to accelerated growth of the economy, which in turn leads to a higher growth for the automotive industry in a virtuous cycle. The last six years have seen both the Indian economy and the Indian automotive industry growing at a fast clip. The Indian auto industry is one of the fastest growing automotive industries in the world. Between 1997 and 2005, the global production of vehicles increased from 55.9 mn to 66.5 mn - an average growth of 2.2% p.a. (Source: OICA). Over the same period, vehicle production in India increased by an average 9.3% p.a. (Source: SIAM). In fact the growth of production across all categories of vehicles averaged 17% p.a. over F-02 to F-07 (Source: Automotive Mission Plan 2016, Government of India) The Indian economy is projected to grow at a brisk rate and demand conditions in the medium to long term are expected to remain strong. However, due to the high base in segments like cars and passenger MUVs, combined with globally challenging economic conditions, inflationary pressures, high fuel and commodity prices, relatively high interest rates and the market sentiment there is a stronger risk of lower growth in F-09 than that witnessed in F-08. Part of this risk would be possibly neutralized by the increase in disposable incomes of tax payers and government employees as explained earlier. However there are significant cost pressures facing the industry in the current year and if they were to be fully passed on, could impact demand for the year. The continuation of strong demand for the Bolero and the Scorpio VLX and the recently launched Alfa Passenger version could assist in generating higher growth than the industry as in F-08. The Company also plans to launch a new product being developed under the Project name Ingenio, during the later part of the current year. This will be the first ground up new MUV since 2002 and hence

Outlook
There is a strong linkage between the strength of the automotive industry and the strength of the economy of a
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should provide a boost to the Companys volumes relative to the industry for F-09. In the longer term, given the high correlation of the automotive industry to GDP growth and the fact that the industry itself accounts for about 4.5% of Indias GDP, the outlook for the auto industry on a GDP growth forecast of 7-8% p.a. is quite bright. The scenario for FES is also encouraging. For F-09, the Government of India has proposed to allocate Rs. 2.8 lakh crores for agricultural credit, which is expected to give a boost to the tractor industry. Moreover there is a strong focus on irrigation projects and investment for development of rainless areas with an outlay of Rs. 20,000 crores. The governments emphasis on rural economic development and support to the agriculture sector will create opportunities for growth in farm mechanization. Debt-waiver to the tune of Rs.50,000 cr. has been announced for small and marginal farmers, as also a onetime settlement of 25% of loan for remaining farmers. However, since the tractor penetration among the small and marginal farmers is low, this is expected to have a negligible impact on tractor demand. In view of all these factors, it is expected that the domestic tractor industry will maintain a growth trend in the long term In the international market, FES plans to expand aggressively into newer markets and strengthen its presence in markets where it is already present. Both sectors with their updated product portfolios and their exploration of global horizons, will strive to maintain their leadership position. Simultaneously, the Company will continue its focus on achieving cost leadership through focused cost optimization, value engineering, improved efficiency measures like supply chain management, countrywide connectivity of all its suppliers and dealers, and exploiting synergies between its Sectors.

Material developments in Human Resources / Industrial Relations

Industrial relations during the year for AS were cordial at all the plants and area offices. Senior management has spent time communicating the companys overall focus areas to the workmen. Further, there was focus on workmen training and their involvement in improving Quality, Productivity and cost effectiveness. FES too saw cordial Industrial relations during the year at all its plants and area offices. Manpower utilization is now at an effectiveness level of almost 100%. At FES, this year there was a major thrust to increase workmen participation in improvements under the Akraman (War on waste) movement. In this movement, the Continuous Improvement Teams work to solve business problems by using a systematic problem solving approach. This initiative has received 100 percent participation. All HR/IR activities were shaped by the imperative to create a culture of sustained business outperformance accompanied by extreme care for all stakeholders, starting with customers and employees, while sustaining and strengthening the core values of the Group. Productivity, Cost and Quality were important areas of focus during the year, while innovation continued to be a mantra that HR activities sought to promote. The single most important HR Metric that is being tracked is the Employee Engagement Index thrown up by the annual Gallup survey. This index has shown sharp improvement in the past three years, helped by the detailed action planning at each unit level based on the survey results. Talent management continues to be a major area of focus. Considerable progress has been made in succession planning for critical positions, and the use of development
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centres for management development. Creating a large number of coaches and mentors will be high on our priority list for the years to come, as will cross-Sector rotations. The Shadow Boards worked on major business issues facing the Company, and came up with innovative suggestions many of which were implemented. The network of Sector and Functional Talent Councils, under the overall guidance of the Apex Talent Council, has been busy through the year strategizing and shaping the Talent Management Process. The integration of acquired companies was an important activity requiring intense HR inputs. Global leadership and leadership lifecycle programmes are an important element of creating the Mahindra leader of tomorrow. In addition, technical and functional programmes are conducted by the businesses and e-learning is beginning to gather momentum. Bodhi Vriksha in Nasik has been humming with activity with both the Mahindra Management Development Centre (MMDC) and the Mahindra Institute of Quality (MIQ) together doing more than 15000 man days of training. Performance Management continues to be the backbone of all HR activities, and goal setting has received a lot of focus in the year under review. Two way communication telling and equally important, listening, - has used various physical and electronic platforms and has been branded in multiple ways across the Sectors. The Transformational IR movement continues to pick up momentum. There was a large increase in the number of self managed teams, worker training, and worker involvement in CSR activities. Two way continuous communication and dialogue is central to this movement.
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CSR and employee volunteering through the Employee Social Option activities continue to focus on three broad areas: 1. Education, with special emphasis on the girl child; 2. The Environment we have plated 250000 trees this season and will complete 1 million by Oct 08. 3. Public health which includes the AIDS initiative by the Auto Sector. The number of volunteers now exceeds 11,000 across the Group. We believe that participating in CSR activities not only helps create a Mahindra culture but also creates better leaders. Finally, creating leadership through customer centric innovation is vitally dependant on creating an atmosphere of trust and collaboration across the Company. More than anything else this is dependant on the everyday behaviour of leaders at all levels and therefore HR becomes the domain of all managers, with the fulltime HR personnel acting as strategic catalysts. The permanent employee strength of the company as on 31st March 2008 was 13,960.

Internal Control Systems

The Company maintains adequate internal control systems, which provide, among other things, reasonable assurance of recording the transactions of its operations in all material respects and of providing protection against significant misuse or loss of company assets. The Company uses an Enterprise Resource Planning (ERP) package, which enhances the internal control mechanism. The Company has a strong and independent internal audit function. The Chief Internal Auditor reports directly to the Chairman of the Board. Professionally qualified technical and financial personnel of the internal audit function conduct periodic audits to ensure that the Companys internal control systems are adequate and are complied with.

MAHINDRA & MAHINDRA LIMITED

Discussion on Financial P erformance with respect to Operational P erformance Performance Performance

Overview
The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, and Generally Accepted Accounting Principles (GAAP) in India. The Groups consolidated financial statements have been prepared in compliance with the standard AS 21 on Consolidation of Accounts and presented in a separate section. The company has provided segment reporting on a consolidated basis as per standard AS 17 on segment reporting. This information appears along with the consolidated accounts.

Financial Information Fixed Assets:

As at 31st March 2008 the Gross Block of Fixed Assets and Capital Work in Progress was Rs. 4202.58 crores as compared to Rs. 3510.29 crores as at 31st March, 2007. During the year, the Company incurred capital expenditure of Rs. 754.27 crores (previous year Rs. 544.59 crores). The major items of capital expenditure were on New Product Development, Capacity Enhancement, and Research & Development. This included purchase of Intangible assets aggregating to Rs. 71.42 crores (previous year Rs. 36.95 crores). March 31, 2008 March 31, 2007 4.64% 4.10%

Inventories:

Raw materials and bought out components as a % of consumption Finished goods as a % of gross sales

4.66% 4.68%

The inventory of Raw Material as on 31st March 2008 is on level with last year. The increase in Finished Goods inventory in % terms of sales is only apparent, as in terms of number of days sales there is no increase in Finished Goods inventory.

Sundry Debtors:
Sundry debtors amount to Rs. 1004.88 crores as at March 31, 2008, as compared with Rs. 700.89 crores as at March 31, 2007. Debtors as a percentage of gross sales and income from operations are 7.69% for the year ended March 31, 2008, as compared to 6.17 % for the previous year. The increase in debtors is mainly on account of increase in exports growth in Companys Genset engines and logistic business. RESUL TS OF OPERA TIONS RESULTS OPERATIONS Income : Particulars F 2008 Amount Gross Sales/Income from operations Less : Excise Duty on Sales Net Sales/Income from operations Other Income 13069.87 1566.39 11503.48 168.16 % 113.62 13.62 100.00 1.46 F 2007 Amount 11363.05 1336.78 10026.27 194.97 % 113.33 13.33 100.00 1.94 (Rupees crores) Inc./(Dec.) % 15.02 17.18 14.73 (13.75)

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Other Income:
Other income during F-2008 at Rs. 168.16 crores is lower than Rs 194.97 crores earned in the previous year. This is on account of lower dividend received from subsidiaries and lower income from surplus funds.

Expenditure:
(Rupees crores) Particulars F 2008 Amount Raw materials, Finished and Semi-finished Products Personnel expenses Interest, commitment and finance charges Depreciation Other expenses Provision for Contingencies Total Expenditure 7725.91 852.45 24.24 238.66 1580.65 8.16 10430.07 % 67.16 7.41 0.21 2.07 13.74 0.07 90.67 F 2007 Amount 6827.93 666.15 (67.45) 209.59 1269.33 8905.55 % 68.10 6.64 (0.67) 2.09 12.66 88.82 Inc./(Dec.) % 13.15 27.97 13.87 24.53 17.12

The total expenditure during the year as a percentage of Net sales / Income from Operations is 90.67% in the last year as compared to 88.82 % in the current year.

Other Expenses :
Other expenses as a percentage of net sales shows an increase over the previous year. This is mainly because of increase in variable expenses on Power & Fuel and higher spend on professional fees and traveling for new projects and developing new markets.

Material Cost :
For the year ended March 31, 2008, material cost as a percentage of net sales shows a decrease over the previous year mainly due to efficiencies arising out of strategic sourcing and reengineering initiatives undertaken by the company. Material cost is also impacted by product-mix changes.

Depreciation :
The depreciation for the year ended March 31, 2008 is at Rs. 238.66 crores as compared to Rs. 209.59 crores in the previous year due to higher capitalization and the increase in amortization of intangibles.

Personnel Cost :
Personnel cost as a percentage of sales has increased from 6.64 % to 7.48 %. This is mainly due to increase in officers strength, annual increments and refinements in actuarial assumptions affecting calculation of gratuity and leave pay provisions.
34

Interest (Net) :
The interest expense (net of interest income) for the year ended March 31, 2008 is a net expense of Rs. 24.24 crores as against a net interest income of Rs 67.45 crores

MAHINDRA & MAHINDRA LIMITED

in the previous year. Gross of interest income (CY: Rs.63.35 crores, PY Rs. 87.25 crores) the interest cost for the current period at Rs. 87.59 crores was higher than Rs.19.80 crores in the previous year due to increased borrowings to meet the companys growth plans.

Limited, 85 Subsidiaries, 4 Joint Ventures and 10 Associates engaged in various businesses. The Gross turnover for the year ended 31st March 2008 of Consolidated Mahindra Group is Rs. 26,600.11 crores as against Rs.19,417.45 crores for the previous year. The Groups net turnover grew by 36.80 % to Rs.24,445.29 crores in the current year from Rs. 17,868.93 crores in F2007. The profit before exceptional items and tax for the current year is Rs. 2,806.50 crores as compared to Rs. 2319.69 crores in the previous year a growth of 20.99%. This is due to the excellent performance of the parent company and group companies like Tech Mahindra Limited, Mahindra & Mahindra Financial Services Limited, Mahindra Holidays and Resorts India Limited, Mahindra Lifespace Developers Limited and others. During the year there was an exceptional charge of Rs. 302.51 crores arising mainly on account of an exlusivity payment of Rs. 440.12 crores made by Tech Mahindra to a customer, a profit of Rs. 178.00 crores on account of deemed divestiture of Mahindra & Mahindra Financial Services Ltd. The consolidated Group Profit for the year after exceptional items, prior period adjustments and tax and after deducting minority interests is Rs.1,571.12 crores as against Rs. 1497.15 crores earned last year a growth of 4.94 %. This growth in profits could be achieved due to the excellent performance by some Group companies, a few of which are mentioned here. The Groups major IT subsidiary, Tech Mahindra Limited (Consolidated), witnessed a Revenue growth of 31.87 % with total income increasing from Rs. 2935.02 crores last year to Rs.3870.50 crores in the current year. The profit after tax before exceptional items for the year was Rs. 769.50 crores as compared to Rs. 612.70 crores in the previous year an increase of 25.59 %. The Groups Finance company, Mahindra & Mahindra Financial Services Limited, despite of interest volatility and
35

Exceptional Items :
The profit from Exceptional items during the year ended 31st March 2008 is Rs. 165.20 crores as against Rs.121.99 crores last year. The profit in the current year is mainly from the valuation of certain shares received by the company under two court approved merger schemes at the fair value of the shares parted with in exchange for them. In the previous year the profit was mainly from the sale of shares of Tech Mahindra Limited offered as a part of that Companys Initial Public Offering.

Provision for taxation :

The provision for current tax, fringe benefit tax and deferred tax for the year ended March 31, 2008 as a percentage to profit before tax is lower than the previous year, on account of a zero incidence of tax on the exceptional items mentioned above and higher tax benefits during the year under section 80 IC due to increased profits in a new plant and under section 35 (2AB) on weighted deduction for R & D Expenditure.

Consolidated Financial P osition of the Position M&M Group

During the financial year 2008, the company acquired 63.33% stake in Punjab Tractors Ltd. Post the acquisition the Companys effective holdings in Swaraj Automotives Ltd and Swaraj Engines Ltd increased respectively to 35.64% and 21.49% there by bringing both the Companies into the Group as Associates. The company also increased its stake in Mahindra Forgings Ltd and converted it in to a subsidiary. As on 31st March 2008 the Group comprised of the flagship holding company, Mahindra & Mahindra

stiff competition, achieved a 45.73 % growth in its total income from Rs. 841.84 crores to Rs. 1226.80 crores. It is one of the leading NBFCs in financing of four wheelers and its profit after tax grew by 33.22 % from Rs. 132.88 crores in the previous year to Rs. 177.02 crores in the current year. Mahindra Holidays and Resorts India Ltd., during the year under review, continued to grow towards dominance in the Holiday Segment with membership growing to 73533 nos. The total income grew by 55.84% from Rs. 240.65 crores to Rs. 375.04 crores. The profit after tax for the year registered a growth of 92.82 % from Rs. 41.76 crores in F-2007 to Rs 80.52 crores in F-2008.

Mahindra Lifespace Developers Limited (formerly known as Mahindra Gesco Developers Limited), the Groups subsidiary in the business of real estate and infrastructure development showed impressive growth during the year under review. The demand for housing is buoyant and is expected to remain so at least for the near medium term. The Company through its subsidiary companies is engaged in setting up SEZs at Chennai, Jaipur & in Maharashtra. The Companys total income increased from Rs. 163.25 crores to Rs 219.96 crores a growth of 34.74%. The profit after tax during the year increased by 361.07% from Rs 14.18 crores to Rs 65.38 crores.

Segment Results
The results achieved by major business segments of the Group are given below: (Rupees Crores) Segments 1. 2. 3. 4. 5. 6. 7. 8. Automotive Farm Equipment Financial Services Steel Processing & Trading Infrastructure Hospitality IT Services Systech F-2008 741.55 603.91 279.14 89.02 75.31 110.87 362.13 204.81 F-2007 653.03 498.93 207.56 49.28 9.62 63.95 161.23 165.69

Certain statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.

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MAHINDRA & MAHINDRA LIMITED

Corporate Governance
Your Company has always practiced Corporate Governance of the highest standards. Your Company manages its affairs with diligence, transparency, responsibility and accountability and believes in maintaining superior standards of corporate conduct towards its employees, stakeholders and society. The Company is of the view that good governance goes beyond good working results and financial propriety and is a pre-requisite to attainment of excellent performance in terms of stakeholder value creation. Your Company practices a culture that is built on core values and ethics. During the year, CRISIL has reaffirmed the highest level rating (Level 1) for Governance and Value Creation. This rating indicates that the capability of the Company with respect to wealth creation for all its stakeholders while adopting strong Corporate Governance practices is the highest. A report on compliance with the Code of Corporate Governance as prescribed by the Securities and Exchange Board of India and incorporated in the Listing Agreement is given below. Apart from reimbursement of expenses incurred in the discharge of their duties, the remuneration that these Directors would be entitled to under the Companies Act, 1956 as Non-Executive Directors and the remuneration that a Director may receive for professional services rendered to the Company through a firm in which he is a partner, none of these Directors has any other material pecuniary relationships or transactions with the Company, its Promoters, its Directors, its Senior Management or its Subsidiaries and Associates which in their judgment would affect their independence. None of the Directors of the Company are inter-se related to each other. Khaitan & Co., Advocates & Solicitors, in which Mr. R. K. Kulkarni, Non-Executive Director is a partner, received professional fees of Rs.121.13 lakhs. The Senior Management have made disclosures to the Board confirming that there are no material, financial and/ or commercial transactions between them and the Company which could have potential conflict of interest with the Company at large.
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The Vice-Chairman & Managing Director and the two Executive Directors are Whole-time Directors. The Chairman who is a Non-Executive Chairman and the Vice-Chairman & Managing Director, though professional Directors in their individual capacities, belong to the Companys promoter group. The remaining Non-Executive Directors (including the Nominee Director) are Independent Directors, and have the requisite qualifications and experience in general corporate management, finance, banking, insurance and other allied fields which enable them to contribute effectively to the Company in their capacity as Independent Director.

I. Board of Directors
The composition of the Board is in total conformity with Clause 49 of the Listing Agreement, as amended from time to time. The Company has a Non Executive Chairman and the number of Non-Executive Independent Directors is more than one-half of the total number of Directors. The Board reviews and approves strategy and oversees the results of management to ensure that the long term objectives of enhancing stakeholders value are met.

A. Composition of the Board

Currently, the Board comprises of twelve Directors. The names and categories of Directors, the number of Directorships and Committee positions held by them in Directors Category

the companies are given below. None of the Directors on the Board is a Member on more than 10 Committees and Chairman of more than 5 Committees (as specified in Clause 49 of the Listing Agreement), across all the companies in which he is a Director: Total Number of Committee Memberships, Chairmanships and Directorships of public companies* as on 31st March, 2008 Committee Memberships+ Committee Chairmanships+ Directorships $

NON-EXECUTIVE: Mr. Keshub Mahindra (Chairman) Mr. Deepak S. Parekh Mr. N. B. Godrej Mr. M. M. Murugappan Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri Mr. Thomas Mathew T. EXECUTIVE: Mr. Anand G. Mahindra (Vice-Chairman & Managing Director) Mr. Bharat Doshi (Executive Director) Mr. A. K. Nanda (Executive Director) * Promoter 1 13 Promoter Independent Independent Independent Independent Independent Independent Independent Independent 1 7 4 6 3 1 7 1 1 5 2 4 1 2 1 7 12 13 9 11 5 7 4 5

Non-independent Non-independent

4 7

2 4

12 15

Excludes private limited companies, foreign companies, companies registered under section 25 of the Companies Act, 1956 and government bodies.

+ Committees considered are Audit Committee and Shareholders/Investors Grievance Committee, including that of Mahindra & Mahindra Limited. $ Excludes Alternate Directorships but includes Additional Directorships and Directorship in Mahindra & Mahindra Limited.

38

MAHINDRA & MAHINDRA LIMITED

B. Board Procedure
A detailed Agenda folder is sent to each Director in advance of Board and Committee Meetings. To enable the Board to discharge its responsibilities effectively, the Vice-Chairman & Managing Director apprises the Board at every Meeting of the overall performance of the Company, followed by presentations by the Sector Presidents. A detailed functional report is also placed at Board Meetings. The Board also inter alia reviews strategy and business plans, annual operating and capital expenditure budgets, investment and exposure limits, compliance reports of all laws applicable to the Company, as well as steps taken by the Company to rectify instances of non-compliances, review of major legal issues, minutes of the Board Meetings of your Companys unlisted subsidiary companies, significant transactions and arrangements entered into by the unlisted subsidiary companies, adoption of quarterly/half-yearly/ annual results, significant labour issues, transactions pertaining to purchase/ disposal of property(ies), major Directors Mr. Keshub Mahindra Mr. Anand G. Mahindra Mr. Deepak S. Parekh Mr. N. B. Godrej Mr. M. M. Murugappan Mr. Bharat Doshi Mr. A. K. Nanda Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri Mr. Thomas Mathew T.

accounting provisions and write-offs, corporate restructuring, Minutes of Meetings of the Audit and other Committees of the Board, and information on recruitment of Officers just below the Board level, including the Company Secretary and Compliance Officer.

C. Number of Board Meetings, Attendance of the Directors at Meetings of the Board and at the Annual General Meeting (AGM)
Six Board Meetings were held during the year 1st April, 2007 to 31st March, 2008 on the following dates 20th April, 2007, 28th May, 2007, 30th July, 2007, 29th October, 2007, 30th January, 2008 and 28th March, 2008. The gap between two Meetings did not exceed four months. These Meetings were well attended. The Sixty-first Annual General Meeting (AGM) of the Company was held on 30th July, 2007. The attendance of the Directors at these Meetings is as under: Attendance at the AGM Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No
39

Number of Board Meetings Attended 6 6 4 5 5 6 6 5 6 6 4 4

D. Directors seeking appointment/re-appointment

Mr. Anand G. Mahindra, Mr. A. K. Nanda, Mr. Nadir B. Godrej and Mr. M. M. Murugappan retire by rotation and, being eligible, have offered themselves for re-appointment. Mr . Anand G. Mahindra Mr. Mr. Anand G. Mahindra is Vice-Chairman & Managing Director of Mahindra & Mahindra Limited. After graduating from Harvard College and earning an MBA degree from the Harvard Business School, he returned to India and joined Mahindra Ugine Steel Company Limited (MUSCO), the countrys foremost producer of specialty steel, as Executive Assistant to the Finance Director. He rose to become President and Deputy Managing Director of MUSCO in 1989. During his stint at MUSCO, he initiated the Mahindra Groups diversification into the new business areas of real estate development and hospitality management. In 1991, he was appointed Deputy Managing Director of Mahindra & Mahindra Limited, the flagship Company of the Mahindra Group, and the countrys dominant producer of off-road vehicles and agricultural tractors. In April, 1997 he was appointed Managing Director of Mahindra & Mahindra Limited and in January, 2001 given the additional responsibility of Vice-Chairman. His focus in Mahindra & Mahindra Limited has been to drive a comprehensive change programme that has transformed the Company and the Group into an efficient and aggressive competitor in the new liberalised economic environment in India. Mr. Anand Mahindra is a Past President of the Confederation of Indian Industry, and of the Automotive Research Association of India (ARAI). He is also on the Board of the National Stock Exchange of India Limited.
40

Mr. Anand Mahindra is the Co-Chairman of the International Council of the Asia Society, New York, and a Member of the 2nd India Advisory Panel of International Enterprise Singapore. He is a Member of the Board of Deans Advisors of Harvard Business School, and also serves on the Advisory Committee of the Harvard University Asia Centre. Mr. Mahindra takes a keen interest in education in India and is on the Governing Board of several educational institutions. Mr. Anand Mahindra is the recipient of numerous national and international awards, including the Knight of the Order of Merit by the President of the French Republic, the Rajiv Gandhi Award for outstanding contribution in the business field, the 2005 Leadership Award from the American India Foundation, Person of the Year 2005 by Auto Monitor, CNBC Asia Business Leader Award for the year 2006, The Most Inspiring Corporate Leader of the Year 2007 by NDTV Profit, and Business Man of the Year 2007 from Business India. Mr. Anand Mahindra is Chairman of Bristlecone Limited; Cayman Islands, Mahindra Forgings Limited, Mahindra International Limited, Mahindra Lifespace Developers Limited, Mahindra Sona Limited, Mahindra (China) Tractor Company Limited, Tech Mahindra Limited, Tech Mahindra (Americas) Inc., Mahindra & Mahindra Financial Services Limited and Vice-Chairman of Mahindra Ugine Steel Company Limited. He is also Director of Angular Constructions Private Limited, Avion Aerosols Private Limited, FirstChoice Wheels Limited, Kotak Mahindra Bank Limited, Mahindra Holdings Limited, Mahindra Holdings & Finance Limited, MW.Com India Private Limited, M.A.R.K. Hotels Private Limited, Prana Holdings Inc. and Tech Mahindra Foundation.

MAHINDRA & MAHINDRA LIMITED

Mr. Anand G. Mahindra is a Member of the following Board Committees: Sr . No. Sr. 1. 2. 3. 4. 5. 6. 7. 8. Name of the Company Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra Ugine Steel Company Limited Mahindra & Mahindra Financial Services Limited Kotak Mahindra Bank Limited Mahindra International Limited Mahindra Forgings Limited Name of Committee Share Transfer & Shareholders/Investors Grievance Committee Research & Development Committee Loans & Investment Committee Remuneration Committee Remuneration Committee Compensation Committee Remuneration Committee Remuneration Committee Position held Member Member Member Member Member Member Chairman Member

Mr. Anand Mahindra holds 4,000 Ordinary (Equity) Shares in the Company. Mr .A . K. Nanda Mr. A. Mr. Arun Nanda holds a Degree in Law from the University of Calcutta and is a fellow member of the Institute of Chartered Accountants of India (FCA) and the Institute of Company Secretaries of India (FCS). Mr. Nanda has also participated in a Senior Executive Programme at the London Business School. He joined the Group in 1973. He has held several important positions within the Group and was also the Company Secretary of the Company from 1987 to 2006. He joined the Board in August, 1992 and is currently the Executive Director and President, Infrastructure Development Sector which includes areas such as property development, construction, leisure and lifetime holidays, infrastructure privatization projects and engineering consultancy. He has played a pioneering role in building Mahindra World Cities. As a Board Member of Mahindra & Mahindra Limited (US $ 6 Billion Group), Mr. Nanda shoulders multiple responsibilities at corporate level including Compliances, Corporate Governance, Investments, Strategic Planning, identifying new business opportunities and Corporate Communications.

In addition, he is also the Chairman Emeritus of the IndoFrench Chamber of Commerce, a member of the governing Board of the council of EU Chambers of Commerce in India and a member of the governing board of Bombay First. He is the Chairman of CII National Committee on Water since 2006-07. Very recently he has been awarded with Chevalier de la Legion dHonneur (Knight of the Legion of Honour) by the President of the French Republic, Mr. Nicolas Sarkozy. Mr. A. K. Nanda is Chairman of Mahindra Construction Company Limited, Mahindra Consulting Engineers Limited, Mahindra Holidays & Resorts India Limited, Mahindra Infrastructure Developers Limited, Mahindra Technology Park Limited, Owens Corning (India) Limited and Vice-Chairman of Mahindra Lifespace Developers Limited and Mahindra World City Developers Limited. He is also Director of ABN AMRO Asset Management (India) Limited, Mahindra (China) Tractor Company Limited, Mahindra Holdings Limited, Mahindra Holdings & Finance Limited, Mahindra Holidays and Resorts (USA) Inc., MHR Hotel Management GmbH, Mahindra World City (Jaipur) Limited, Mahindra World City (Maharashtra) Limited and Mahindra Water Utilities Limited.
41

Mr. A. K. Nanda is a Member of the following Board Committees: Sr . No. Name of the Company Sr. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra Holdings & Finance Limited Mahindra Holidays & Resorts India Limited Mahindra Holidays & Resorts India Limited Owens Corning (India) Limited ABN AMRO Asset Management (India) Limited ABN AMRO Asset Management (India) Limited Mahindra Construction Company Limited Mahindra Lifespace Developers Limited Mahindra Lifespace Developers Limited Mahindra Lifespace Developers Limited Mahindra Lifespace Developers Limited Mahindra Lifespace Developers Limited Mahindra Infrastructure Developers Limited Mahindra World City (Jaipur) Limited Mahindra World City (Jaipur) Limited Mahindra World City (Jaipur) Limited Mahindra World City (Jaipur) Limited Mahindra World City (Jaipur) Limited Mahindra World City (Maharashtra) Limited Mahindra Consulting Engineers Limited Name of Committee Share Transfer & Shareholders/ Investors Grievance Committee Loans & Investment Committee Mahindra & Mahindra Employees Stock Option Trust M&M Superannuation Scheme Corporate Social Responsibility Committee Mahindra World School Education Trust, Chennai Audit Committee Remuneration Committee Employees Stock Option Trust Audit Committee Remuneration Committee Audit Committee Remuneration Committee Inverstors Grievance and Shareholders Committee Loans & Investment Committee Remuneration Committee Capital Issue Committee Employees Stock Option Trust Audit Committee Audit Committee Capital Issue Committee Land Lease Committee Loans & Investment Committee Remuneration Committee Capital Issue Committee Mahindra Consulting Engineers Employees Welfare Trust Position held Member Member Trustee Trustee Member Trustee Chairman Member Trustee Chairman Member Chairman Member Chairman Chairman Member Chairman Trustee Member Member Member Member Member Chairman Member Trustee

Mr. A. K. Nanda holds 1,91,198 Ordinary (Equity) Shares in the Company.

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MAHINDRA & MAHINDRA LIMITED

Mr . Nadir B. Godrej Mr. Mr. N. B. Godrej joined the Board in 1992. He holds a Master of Science degree in chemical engineering from Stanford University and an MBA from Harvard Business School. He has been a Director of several Godrej companies since 1977 and has developed the animal feed, agricultural inputs and chemicals businesses of Godrej Industries and other associated companies, and has been very active in research. Besides his professional assignments, Mr. Godrej was the former President of Oil Technologists Association of India, Indo-French Technical Association and the Compound Livestock Feed Manufacturers Association of India. He is currently the President of the Alliance Francaise de Bombay. Mr. Godrej is the Chairman of Godrej Agrovet Limited, Goldmohur Foods & Feeds Limited, Godrej

Global Solutions Limited, Poultry Processors Association of India and the Managing Director of Godrej Industries Limited. He is spearheading the Business Process Outsourcing initiative of the Godrej Group. Mr. Nadir B. Godrej is also Director of ACI Godrej Agrovet Private Limited; Bangladesh, Avestha Gengraine Technologies Limited, CBay Systems Holdings Limited, Compass BPO Limited, Godrej & Boyce Mfg. Co. Limited, Godrej Consumer Products Limited, Godrej Global Mid East FZE, Godrej Gold Coin Aquafeed Limited, Godrej International Limited, Godrej Properties Limited, Godrej Sara Lee Limited, KarROX Technologies Limited, Keyline Brands Limited, Rapidol (Pty) Limited, Tata Teleservices (Maharashtra) Limited and Boston Analytic LLC.

Mr. N. B. Godrej is a Member of the following Board Committees: Sr . No. Sr. 1. 2. 3. 4. 5. 6. Name of the Company Godrej Consumer Products Limited Godrej Global Solutions Limited Godrej Sara Lee Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Name of Committee Shareholders Committee Audit Committee Audit Committee Audit Committee Research & Development Committee Remuneration/Compensation Committee Position held Chairman Chairman Member Member Member Member

Mr. N. B. Godrej holds 1,16,782 Ordinary (Equity) Shares in the Company. Mr . M. M. Murugappan Mr. Mr. Murugappan has been a Director of the Company since August, 1992. He holds a Bachelor of Technology degree in Chemical Engineering from the University of Madras and has a Master of Science in Chemical Engineering from the University of Michigan. He is a

member of the Supervisory Board of the Murugappa Group of companies. He is the Chairman of Carborundum Universal Limited, CUMI America Inc.; USA, CUMI Canada Inc., CUMI Middle East FZE, Murugappa Morgan Thermal Ceramics Limited, MEL Systems & Services Limited, Net Access (India) Private Limited, Sterling Abrasives Limited, Tube Investments of India Limited and Wendt India Limited. Apart from his many interests in business, Mr. Murugappan takes a keen interest in the development of various citizenship initiatives, particularly
43

in education and health care. He serves on the Board of Governors of IIT Madras. Mr. M. M. Muruggapan is also Director of A M M Medical Foundation, BorgWarner Morse TEC Murugappa Private

Limited, iDea Lab (India) Private Limited, Infotech Enterprises Limited, Jingri-CUMI Super Hard Materials Company Limited; China, M M Muthiah Research Foundation, New Ambadi Estates Private Limited and Volzhsky Abrasive Works; Russia.

Mr. M. M. Murugappan is a Member of the following Board Committees: Sr . No. Sr. 1. 2. 3. 4. 5. 6. 7. 8. Name of the Company Carborundum Universal Limited Wendt India Limited Tube Investments of India Limited Tube Investments of India Limited Infotech Enterprises Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Mahindra & Mahindra Limited Name of Committee Share Transfer, Finance & Investors Grievance Committee Shareholders/Investors Grievance Committee Audit Committee Inverstors Grievance Committee Audit Committee Audit Committee Remuneration/Compensation Committee Research & Development Committee Position held Chairman Chairman Member Chairman Chairman Member Member Member

Mr. M. M. Murugappan holds 43,332 Ordinary (Equity) Shares in the Company.

II. Remuneration to Directors

A. Remuneration P olicy Policy
While deciding on the remuneration for Directors, the Board, Remuneration/Compensation Committee (Committee) considers the performance of the Company, the current trends in the industry, the qualification of the appointee(s), their experience, past performance and other relevant factors. The Board / Committee regularly keeps track of the market trends in terms of compensation levels and practices in relevant industries through participation in structured surveys. This information is used to review the Companys remuneration policies.

E . Codes of Conduct
The Board has laid down two separate Codes of Conduct (Codes), one for Board Members and other for Senior Management and Employees of the Company. These Codes have been posted on the Companys website http://www.mahindra.com .mahindra.com. All Board Members and Senior http://www .mahindra.com Management Personnel have affirmed compliance with these Codes. A declaration signed by the Vice-Chairman & Managing Director to this effect is enclosed at the end of this Report.

F.

CEO/CFO Certification

B. Remuneration to Non-Executive Directors for the year ended 31st March, 2008
The eligible Non-Executive Directors are paid commission upto a maximum of 1% of the net profits of the Company as specifically computed for this purpose. A commission of Rs. 1.20 crores has been provided as payable to the eligible Non-Executive Directors in the accounts of the year under review.

As required under Clause 49 V of the Listing Agreement with the Stock Exchanges, the Vice-Chairman & Managing Director and the Group Chief Financial Officer of the Company have certified to the Board regarding the Financial Statements for the year ended 31st March, 2008.

44

MAHINDRA & MAHINDRA LIMITED

During the year under review, the Non-Executive Directors were paid a commission of Rs.96 lakhs (provided in the Directors

accounts for the year ended 31st March, 2007), distributed amongst the Directors as under: (Rs. in Lakhs) Commission for the year ended 31st March, 2007, paid during the year under review 32.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00#

Mr. Keshub Mahindra Mr. Deepak S. Parekh Mr. N. B. Godrej Mr. M. M. Murugappan Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri Mr. Thomas Mathew T. (Nominee of LIC) # The Commission is paid to the Nominating Financial Institution.

Non-Executive Directors are also paid a sitting fee of Rs. 10,000 for every Meeting of the Board or Committee attended. The sitting fees paid to Non-Executive Directors for the year ended 31st March, 2008 alongwith their shareholdings are as under: Directors Sitting F ees for the Board Fees and Committee Meetings paid during the year ended 31st March, 2008 (Rs. in Lakhs) 1.10 1.10 1.70 1.40 0.80 0.90 1.80 0.40 0.40* No. of Ordinary (Equity) Shares held as on 31st March, 2008

Mr. Keshub Mahindra Mr. Deepak S. Parekh Mr. N. B. Godrej Mr. M. M. Murugappan Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri Mr. Thomas Mathew T. (Nominee of LIC) * Sitting Fees for Board Meetings were paid to LIC. 1,60,000 Stock Options granted to Non-Executive Directors under the Companys Stock Option Scheme on 6 December,
th

2,01,148 49,422 1,16,782 43,332 43,332 43,332 42,120 40,000 Nil

Original Exercise Price of Rs.454 per share. The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005. Details of the Options granted to each of the Directors are given in the Statement attached to Annexure I to the Directors Report.
45

2001 have been fully exercised by them. 35,000 Stock Options granted in June, 2005 to the Non-Executive Directors which have vested in June, 2006 can be exercised in three tranches over a period of five years from the date of vesting at an

C. Remuneration paid/payable to Managing/Executive Director(s) (Whole-time Directors) for the year ended 31st March, 2008
Remuneration to Whole-time Directors is fixed by the Remuneration / Compensation Committee which is subsequently approved by the Board of Directors and Shareholders at a General Meeting. Following is the remuneration paid/payable to the Whole-time Directors during the year ended 31st March, 2008: (Rs. In lakhs) Directors Salary Commission Companys Perquisites Total Contribu- and tion to allowances Funds* 16.40 44.13 228.45 Contract Period No. of Options granted in June, 2005 2005$ Nil No. of Options granted in September , September, 2006 $$ Nil No. of Options granted in July , July, 2007 2007$$$ Nil

Mr. Anand G. Mahindra (Vice-Chairman & Managing Director) Mr. Bharat Doshi (Executive Director)

60.73 107.19

4th April, 2007 to 3rd April, 2012

54.85

68.66

14.81

19.27

157.59

28th August, 10,000 2007 to 27th August, 2012 28th August, 10,000 2007 to 27th August, 2012

11,345

8,362

Mr. A. K. Nanda (Executive Director)

54.85

68.66

14.81

20.01

158.33

11,345

8,362

Aggregate of the Companys contributions to Superannuation Fund, Provident Fund, Gratuity and Privilege Leave Encashment. These Options which vested in June, 2006 in each of the Executive Directors can be exercised in three tranches over a period of five years from the date of vesting at an Original Exercise Price of Rs. 454 per share. The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005. $$ These Options would vest in four equal instalments in September, 2007, September, 2008, September, 2009 and September, 2010 respectively. These Options can be exercised within five years from the date of vesting of the Options at an Exercise Price of Rs. 616 per share. $$$ These Options would vest in four equal instalments in July, 2008, July, 2009, July, 2010 and July, 2011 respectively. These Options can be exercised within five years from the date of vesting of the Options at an Exercise Price of Rs. 762 per share. Details of the Options granted including discount are given in the Statement attached to Annexure I to the Directors Report. Notes: a) Notice period applicable to each of the Whole-time Directors six months. b) Employee Stock Option and Commission are the only components of remuneration that are performance-linked. All other components are fixed.

* $

III. Risk Management

Your Company has a well-defined risk management framework in place. The risk management framework adopted by the Company is discussed in detail in the Management Discussion and Analysis Chapter of
46

this Annual Report. Your Company has established procedures to periodically place before the Board, the risk assessment and minimisation procedures being followed by the Company and steps taken by it to mitigate these risks.

MAHINDRA & MAHINDRA LIMITED

IV . Committees of the Board IV.

A. Audit Committee
This Committee comprises solely of Independent Directors viz. Mr. Deepak S. Parekh (Chairman of the Committee), Mr. R. K. Kulkarni, Mr. N. B. Godrej and Mr. M. M. Murugappan. All the Members of the Committee possess strong accounting and financial management knowledge. The Company Secretary is the Secretary to the Committee. The terms of reference of this Committee are very wide. Besides having access to all the required information from within the Company, the Committee can obtain external professional advice whenever required. The Committee acts as a link between the Statutory and the Internal Auditors and the Board of Directors of the Company. It is authorised to select and establish accounting policies, review reports of the Statutory and the Internal Auditors and meet with them to discuss their findings, suggestions and other related matters. The Committee is empowered to inter alia review the remuneration payable to the Statutory Auditors and to recommend a change in Auditors, if felt necessary. It is also empowered to review Financial Statements and investments of unlisted subsidiary companies, Management Discussion & Analysis, Material individual transactions with related parties not in normal course of business or which are not on an arms length basis. Generally all items listed in Clause 49 II (D) of the Listing Agreement are covered in the terms of reference. The Audit Committee has been granted powers as prescribed under Clause 49 II (C). The Meetings of the Audit Committee are also attended by the Vice-Chairman & Managing Director, the Executive Directors of the Company, the President-Finance, Legal and Financial Services Sector, the Statutory Auditors, Chief Internal Auditor and the Company Secretary. The Chairman of the Audit Committee, Mr. Deepak S. Parekh was present at the 61st Annual General Meeting of the Company held on 30th July, 2007.

The Committee met six times during the year under review and the gap between two Meetings did not exceed four months. Members of the Committee attended all the Meetings. The attendance of the Meetings is as under: Members Mr. Deepak S. Parekh (Chairman) Mr. R. K. Kulkarni Mr. N. B. Godrej Mr. M. M. Murugappan Number of Meetings attended 6 6 6 6

B. Remuneration/Compensation Committee
The role of the Remuneration/Compensation Committee is to review market practices and to decide on remuneration packages applicable to the Vice-Chairman & Managing Director, the Executive Directors and Senior Executives of the Company. During the course of its review, the Committee also decides on the commission of the Directors and/or other incentives payable, taking into account the individuals performance as well as that of the Company. The Committee has formulated and administers the Mahindra & Mahindra Limited Employees Stock Option Scheme and also attends to such other matters as may be prescribed from time to time. Mr. N. Vaghul is the Chairman of the Committee. Mr. Keshub Mahindra, Mr. N. B. Godrej and Mr. M. M. Murugappan are the other Members of the Committee. The Committee met three times during the year under review. The attendance at the Meetings is as under: Members Mr. N. Vaghul (Chairman) Mr. Keshub Mahindra Mr. N. B. Godrej Mr. M. M. Murugappan Number of Meetings attended 3 3 3 3
47

C. Share T ransfer and Shareholders/Investors Transfer Grievance Committee

The Companys Share Transfer and Shareholders/Investors Grievance Committee functions under the Chairmanship of Mr. Keshub Mahindra, Chairman of the Board and a Non-Executive Director. Mr. Anand G. Mahindra, Mr. R. K. Kulkarni, Mr. Bharat Doshi and Mr. A. K. Nanda are also on the Committee. Mr. Narayan Shankar, Company Secretary, is the Compliance Officer of the Company. The Committee meets as and when required, to inter alia deal with matters relating to transfer of shares and monitor redressal of complaints from shareholders relating to transfers, non-receipt of balance-sheet, non-receipt of dividends declared, etc. With a view to expediting the process of share transfers, Mr. A. K. Nanda, Executive Director as well as Mr. Narayan Shankar, Company Secretary of the Company are severally authorised to approve transfers of not more than 5,000 Ordinary (Equity) Shares per transfer. The Committee met two times during the year. Both the Meetings were attended by all its Members. During the year, 31 complaints were received from the Shareholders, all of which have been attended to/resolved to date. As of date, there are no pending share transfers pertaining to the year under review.

Dr. A. S. Ganguly is the Chairman of the Committee. Mr. Anand G. Mahindra, Mr. N. B. Godrej, Mr. Bharat Doshi and Mr. M. M. Murugappan are the other Members of the Committee. The Committee held three Meetings during the year under review, which were well attended.

E. Loans & Investment Committee (a voluntary initiative of the Company)

The Committee approves of the making of loans and investment, disinvestment, borrowing moneys and related aspects of fund management in accordance with the Guidelines prescribed by the Board. Mr. Keshub Mahindra is the Chairman of the Committee. Mr. Anand G. Mahindra, Mr. R. K. Kulkarni, Mr. Bharat Doshi and Mr. A. K. Nanda, are the other Members of the Committee.

V. Subsidiary Companies
The Clause 49 defines a material non-listed Indian subsidiary as an unlisted subsidiary, incorporated in India, whose turnover or net worth (i.e. paid-up capital and free reserves) exceeds 20% of the consolidated turnover or net worth respectively, of the listed holding company and its subsidiaries in the immediately preceding accounting year. Under this definition, the Company did not have any material non-listed Indian subsidiary during the year under review.

D. Research & Development Committee (a voluntary initiative of the Company)

The Research & Development (R&D) Committee, which was constituted by the Board in 1998, provides direction on the R&D mission and strategy and key R&D and technology issues. The Committee also reviews and makes recommendations on skills and competencies required and the structure and the process needed to ensure that the R&D initiatives result in products that are in keeping with the business needs.
48

VI. Disclosures
A. Disclosure of transactions with Related P arties Parties
During the financial year 2007-08, there were no materially significant transactions entered into between the Company and its promoters, Directors or the management, subsidiaries or relatives, etc. that may have potential conflict with the interests of the Company at large. Further details of related party transactions are presented in note number 29 in Schedule XIV to Annual Accounts of the Annual Report.

MAHINDRA & MAHINDRA LIMITED

B. Disclosure of Accounting T reatment in Preparation Treatment of Financial Statements

The Company has followed the Accounting Standards laid down by The Companies (Accounting Standards) Rules, 2006 in preparation of its financial statements.

Financial Reporting for: Quarter ending 30th June, 2008 Half-year ending 30th September, 2008 Quarter ending 31st December, 2008 Year ending 31st March, 2009 - End July, 2008 - End October, 2008 - End January, 2009 - End May, 2009

C. Code for Prevention of Insider T rading Practices Trading

The Company has instituted a comprehensive Code of Conduct for prevention of Insider Trading for its designated employees, in compliance with Securities and Exchange Board of India (Prohibition of Insider Trading) Regulation, 1992. The Code lays down Guidelines, which advises them on procedures to be followed and disclosures to be made, while dealing with shares of the Company, and cautioning them of the consequences of violations.

Note Note: The above dates are indicative.

5. Registered Office
Mahindra & Mahindra Limited Gateway Building, Apollo Bunder, Mumbai - 400 001.

VII. Shareholder Information

1. 62nd Annual General Meeting
Date Time : : 30th July, 2008 3:30 p.m. Birla Matushri Sabhagar, 19, Sir Vithaldas Thackersey Marg (New Marine Lines), Mumbai - 400 020.

6. Listing of Ordinary (Equity) Shares and Debentures on Stock Exchanges

The Companys Shares are listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). The Global Depositary Receipts (GDRs) of the Company are listed on the Luxembourg Stock Exchange. The US $ 200 million Zero Coupon Foreign Currency Convertible Bonds (FCCBs) due for redemption in 2011 are listed at Singapore Exchange Securities Trading Limited. The requisite listing fees have been paid in full to all these Stock Exchanges. The Company has paid the requisite listing fees in full to NSE in respect of the Non-convertible Debentures of the Company which are listed.

Venue :

2. Dates of Book Closure/Record Date

Dates of Book Closure for Dividend will be from 5th July, 2008 to 30th July, 2008, both days inclusive.

3. Date of Dividend P ayment Payment

Date of payment of Dividend would be on or after 30th July, 2008.

7. Stock Code
1. Bombay Stock Exchange Limited (BSE) : 500520 2. National Stock Exchange of India Limited (NSE): M&M 3. Demat International Security Identification Number (ISIN) in NSDL and CDSL for Equity Shares INE101A01018
49

4. Financial Y ear of the Company Year

The financial year covers the period from 1st April to 31st March.

8. Stock P erformance Performance

The performance of the Companys shares relative to the BSE Sensitive Index is given in the chart below:

M&M on BSE BSE Index

1000 900 800

M&M on BSE

25000 20000 15000 10000 5000 0

Apr07 May07 Jun07 Jul07 Aug07 Sep07 Oct07 Nov07 Dec07 Jan08 Feb08 Mar08

700 600 500 400 300 200 100 0

BSE Index NSE Index

Closing Price on Last Trading day of the Month

The performance of the Companys shares relative to the NSE Sensitive Index (S&P CNX Nifty Index) is given in the chart below:
M&M on NSE NSE Index

1000 900 800 700 600 500 400 300 200 100 0
Apr07 May07 Jun07 Jul07 Aug07 Sep07 Oct07 Nov07 Dec07 Jan08 Feb08 Mar08

7000 6000 5000 4000 3000 2000 1000 0

M&M on NSE

Closing Price on Last Trading day of the Month

50

MAHINDRA & MAHINDRA LIMITED

9. Stock Price Data:

Equity Shares Bombay Stock Exchange Limited High Rs. April, 2007 May, 2007 June, 2007 July, 2007 August, 2007 September, 2007 October, 2007 November, 2007 December, 2007 January, 2008 February, 2008 March, 2008 * Based on closing prices. 781.00 802.00 784.00 838.00 725.05 807.95 857.00 785.00 867.80 872.00 703.10 721.00 Low Rs. 703.00 711.00 678.50 715.00 608.00 685.10 701.00 688.00 733.00 543.00 574.00 612.00 National Stock Exchange of India Limited High Rs. 780.00 803.00 782.70 838.70 730.20 809.70 857.00 821.00 869.50 873.90 706.00 724.00 Low Rs. 703.00 709.00 679.50 701.25 591.65 690.45 700.00 684.00 730.00 525.00 555.55 612.05 GDRs Luxembourg Stock Exchange* High US $ 18.71 19.31 18.97 20.50 17.43 19.74 21.32 22.00 21.92 21.97 17.58 17.31 Low US $ 16.56 17.46 16.72 18.01 15.22 17.05 18.22 17.89 19.30 15.37 14.62 15.31

10. Registrar and T ransfer Agents Transfer

Sharepro Services (India) Private Limited Unit: Mahindra & Mahindra Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai - 400 099. Telephone No.: +91-22-67720300 Fax: +91-22-28375646 email: sharepro@shareproservices.com The Registrar and Transfer Agents also have an office at: 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai - 400 021. Telephone No.: +91-22-66134700 Fax: +91-22-22825484
51

11. Share T ransfer System Transfer

Trading in Ordinary (Equity) Shares of the Company through recognized Stock Exchanges is permitted only in dematerialised form. Shares sent for transfer in physical form are registered and returned within a period of thirty days from the date of receipt of the documents, provided the documents are valid and complete in all respects. With a view to expediting

the process of share transfers, Mr. A. K. Nanda, Executive Director as well as Mr. Narayan Shankar, Company Secretary of the Company are severally authorised to approve the transfers of not more than 5,000 Equity Shares per transfer. The Share Transfer and Shareholders/Investors Grievance Committee meets as and when required to consider the other transfer proposals and attend to shareholder grievances.

12. Distribution of shareholding as on 31st March, 2008:

Number of Shares held 1 to 500 501 to 1000 1001 to 5000 5001 to 10000 10001 and above Total Shareholding P attern as on 31st March, 2008: Pattern Sr . No. Sr. 1. 2. 3. 4. 5. 6. 7. 8. Category of Shareholders Promoters and Promoter Group Mutual Funds Banks, Financial Institutions, Insurance Companies, State Government FIIs/FFIs/FCs/Foreign Bodies* Private Corporate Bodies Indian Public NRIs/OCBs Bank of New York (for GDR holders) Grand T otal Total * Total Holdings 5,55,90,917 1,27,06,111 5,23,15,085 6,27,01,359 1,59,25,273 2,53,07,730 19,22,946 1,92,72,392 24,57,41,813 Percentage 22.62 5.17 21.29 25.52 6.48 10.30 0.78 7.84 100.00 Number of Shareholders 1,29,946 4,966 4,091 429 610 1,40,042 Number of Shares held 85,75,677 36,64,589 83,63,547 29,66,703 22,21,71,297 24,57,41,813 % of Shareholding 3.49 1.49 3.40 1.21 90.41 100.00

FIIs/FFIs/FCs/Foreign Bodies does not include shareholding aggregating 117.50 lakhs Shares representing 4.78% of the paid-up share capital of the Company held by a FII as the same is included under the category of Promoters and Promoter Group.

52

MAHINDRA & MAHINDRA LIMITED

13. Dematerialisation of Shares

98.01% of the paid-up Equity Share Capital is held in dematerialised form with National Securities Depository Limited and Central Depository Services (India) Limited as on 31st March, 2008. The market lot of the share is one share, as the trading in the Equity Shares of the Company is permitted only in dematerialised form. Non-Promoters holding is 77.38% and the stock is highly liquid.

15. Plant Locations

The Companys manufacturing facilities are located at Kandivali, Nashik, Igatpuri, Nagpur, Zaheerabad, Jaipur, Rudrapur, Haridwar and Pune.

16. Address for correspondence

Shareholders may correspond with the Registrar and Transfer Agents at: Sharepro Services (India) Private Limited Unit: Mahindra & Mahindra Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai - 400 099. Telephone No.: +91-22-67720300 Fax: +91-22-28375646 email: sharepro@shareproservices.com on all matters relating to transfer/dematerialisation of shares, payment of dividend and any other query relating to Equity Shares or Debentures of the Company. The Company has also designated investors@mahindra.com as an exclusive email ID for Shareholders for the purpose of registering complaints and the same has been displayed on the Companys website. Shareholders would have to correspond with the respective Depositary Participants for Shares held in demateralised form. For all investor related matters, the Company Secretary & Compliance Officer can be contacted at: Mahindra Towers, 5th Floor, Dr. G. M. Bhosale Marg, Worli, Mumbai - 400 018. Telephone Nos.: +91-22-24905624, +91-22-24975074 Fax: +91-22-24900833 email: investors@mahindra.com OR narayan.shankar@mahindra.com The Company can also be visited at its website: : .mahindra.com http://www.mahindra.com http://www
53

14. Outstanding GDRs / ADRs / W arrants or any Warrants Convertible Instruments, Conversion date and likely impact on equity
1,92,72,392 GDRs were outstanding as at 31st March, 2008. Since the underlying Ordinary (Equity) Shares represented by GDRs have been allotted in full, the outstanding GDRs have no impact on the Equity of the Company. 1,00,000 Zero Coupon Convertible Bonds (due 2009) of US $ 1000 each (FCCBs) aggregating US$ 100 million issued in May, 2004, were at the option of the Bondholders convertible into around 68,61,911 Equity Shares/GDRs (each GDR representing one Equity Share of the Company) at an initial conversion price of Rs.647.05 per Share at any time between 7th June, 2004 and 8th April, 2009. Consequent to the issue of Bonus Equity Shares by the Company in the ratio of 1:1 in September, 2005, the initial conversion price of Rs.647.05 per Share was adjusted to Rs.323.52 per Share with effect from 3rd September, 2005 resulting into an increase in the number of Equity Shares underlying FCCBs to around 1,37,24,035. During the year, FCCBs aggregating US$ 27,00,000 were converted into 3,70,548 Equity Shares/GDRs. As at 31st March, 2008, all the FCCBs amounting to US$ 100 million (due 2009) have been fully converted into Equity Shares/ GDRs (each GDR representing one Equity Share of the Company). 2000 Zero Coupon Convertible Bonds (due 2011) of US$ 1,00,000 each aggregating US$ 200 million issued in April, 2006, may at the option of the Bondholder, be converted into around 96,35,156 Equity Shares/GDRs at an initial conversion price of Rs.922.04 at any time between 7th May, 2006 and 7th March, 2011. Till date, no conversion of any Bonds has taken place.

VIII. OTHER DISCL OSURES DISCLOSURES

1. Details of General Meetings and Special Resolutions passed
Annual General Meetings held during the past 3 years and the Special Resolutions passed therein: Year 2005 Date 28th July, 2005 Time 3.30 p.m. Special Resolutions passed 1. Payment of Commission to Non-Wholetime Directors including NonResident Directors. 2. Revision in the remuneration payable to Mr. Anand G. Mahindra, ViceChairman & Managing Director and the two Executive Directors of the Company viz. Mr. Bharat Doshi and Mr. A. K. Nanda. 3. Approval for commencement of new businesses of the Company. 4. Approval for increase in limit for holdings by FIIs from 35% to 49% of the paid-up Equity Share Capital of the Company. 5. Alteration of Article 3 in the Articles of Association of the Company. 2006 2007 26th July, 2006 30th July, 2007 3.30 p.m. 3.30 p.m. No Special Resolution was passed at the AGM. 1. Re-appointment of Mr. Anand G. Mahindra, Vice-Chairman & Managing Director for a period of 5 years w.e.f. 4th April, 2007. 2. Re-appointment of two Executive Directors of the Company viz. Mr. Bharat Doshi and Mr. A. K. Nanda for a period of 5 years w.e.f. 28th August, 2007 respectively. 3. Alteration of Article 3 of the Articles of Association of the Company. 4. Authority to the Board to recover from Eligible Employees, the fringe benefit tax in respect of Options which are granted to or vested or exercised by the Eligible Employees on or after the 1st day of April, 2007. Extraordinary General Meetings held during the past 3 years: Year 2007 Date Time Special Resolution passed Making investments, etc. in excess of the limits prescribed under section 372A of the Companies Act, 1956 upto an amount of Rs. 1500 crores.

20th April, 2007 11.00 a.m.

All the Meetings were held at Birla Matushri Sabhagar, 19, Sir Vithaldas Thackersey Marg (New Marine Lines), Mumbai 400 020. Subsequent to the year end, a Court Convened Meeting of the Equity Shareholders was held to pass the following Resolution: Year 2008 Date Time Resolution passed Approving the arrangement embodied in the Scheme of Amalgamation of Mahindra Holdings & Finance Limited with Mahindra and Mahindra Limited and their respective Shareholders.

12th April, 2008 3.30 p.m.

54

MAHINDRA & MAHINDRA LIMITED

The Meeting was held at Y. B. Chavan Centre, General Jagannathrao Bhosale Marg, Next to Sachivalaya Gymkhana, Mumbai - 400 021. Details of Special Resolutions passed through P ostal Ballots: Postal Date of Board Meeting Description % of V otes in Votes favour of the Special Resolution 20th April, 2007 1. Authorising the Board to offer, issue and allot Securities and/or QIP Securities as specified in the Postal Ballot Notice dated 27 April, 2007.
th

Scrutinizer for conducting the Postal Ballot Dr. S. D. Israni, Practising Company Secretary, Mumbai

93.41%

2. Authorising the Board to make loan(s), and/or give guarantee(s), and/or provide security(ies) in excess of the limits prescribed under section 372A of the Companies Act, 1956 upto an amount of Rs.1,500 crores as specified in the Postal Ballot Notice dated 27th April, 2007. 28th May, 2007 Authorising the Board to make loan(s) and/or give guarantee(s) and/or provide security(ies) and/or make investment(s) in excess of the limits prescribed under section 372A of the Companies Act, 1956 upto an amount of Rs.2,000 crores as specified in the Postal Ballot Notice dated 8th June, 2007.

93.25%

92.28%

Dr. S. D. Israni, Practising Company Secretary, Mumbai

Subsequent to the year end, the Board of Directors, have proposed the following Special Resolution to be passed through Postal Ballot. Date of Board Meeting 3rd May, 2008 Authorising the Board to create, offer, issue and allot 93,95,974, 9.25% Unsecured Fully & Compulsorily Convertible Debentures to Golboot Holdings Limited on terms as specified in the Postal Ballot Notice dated 3rd May, 2008. Description Last Date of Receiving Postal Ballot F orms Forms 7th June, 2008 Date of Declaration of Result 11th June, 2008

55

Dr. S. D. Israni, Practising Company Secretary, Mumbai has been appointed as a Scrutinizer for conducting the above Postal Ballot in a fair and transparent manner. The procedure for Postal Ballot is as per section 192A of the Companies Act, 1956 and Rules made thereunder namely Companies (Passing of the Resolution by Postal Ballot) Rules, 2001.

4. The Management Discussion and Analysis Report

The Management Discussion and Analysis Report (MDA) has been attached to the Directors Report and forms part of this Annual Report.

5. Compliance with Mandatory requirements

The Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement relating to Corporate Governance.

2. Details of non-compliance etc.

The Company has complied with all the requirements of regulatory authorities. During the last three years, there were no instances of non-compliance by the Company and no penalty or strictures were imposed on the Company by the Stock Exchanges or SEBI or any statutory authority, on any matter related to the capital markets.

6. Compliance with Non-mandatory requirements

a. Office of the Chairman The Company has provided the Chairman (NonExecutive) with a full-fledged office, the expenses of which are borne by the Company. The Chairman is reimbursed all expenses incurred in the performance of his duties. b. Remuneration Committee The Company has set up the Remuneration/ Compensation Committee long before the mandate of Clause 49 of Listing Agreement. c. Audit Qualifications During the period under review, there is no audit qualification in the Companys financial statements. The Company continues to adopt best practices to ensure regime of unqualified financial statements. The Company has not adopted the other nonmandatory requirements as specified in Annexure ID of the Clause 49. Mumbai, 28th May, 2008.

3. Means of Communication
The quarterly, half-yearly and yearly results are published in Business Standard and Sakal which are national and local dailies. These are not sent individually to the Shareholders. The Companys results and official news releases are displayed on the Companys website http://www .mahindra.com http://www.mahindra.com Presentations are also made to international and national institutional investors and analysts, which are regularly put up on the website of the Company. The Company was regularly posting information relating to its financial results and shareholding pattern on the SEBI EDIFAR website at www.sebiedifar.nic.in. Thereafter, it is being filed on Corporate Filing and Dissemination System (CDFS) viz. www.corpfiling.co.in, the common platform launched by BSE and NSE for electronic filing by listed companies.

56

MAHINDRA & MAHINDRA LIMITED

DECLARA TION B Y THE MANAGING DIRECTOR UNDER CLA USE 49 DECLARATION BY CLAUSE OF THE LISTING AGREEMENT
To The Members of Mahindra & Mahindra Limited I, Anand G. Mahindra, Vice-Chairman & Managing Director of Mahindra & Mahindra Limited declare that all the Members of the Board of Directors and Senior Management Personnel have affirmed compliance with the Codes of Conduct for the year ended 31st March, 2008. Anand G. Mahindra Vice-Chairman & Managing Director Mumbai, 28 May, 2008
th

CERTIFICA TE CERTIFICATE
To The Members of Mahindra & Mahindra Limited. We have examined the compliance of conditions of Corporate Governance by Mahindra & Mahindra Limited, for the year ended on 31st March, 2008, as stipulated in Clause 49 of the Listing Agreement of the said company with stock exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has complied with the conditions of the Corporate Governance as stipulated in the above mentioned Listing Agreement. We state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness with which the management has conducted the affairs of the company. For Deloitte Haskins & Sells Chartered Accountants B. P . Shroff P. (Partner) Membership Number: 34382 Mumbai, 28th May, 2008
57

Financial P osition at a Glance Position

(Rupees crores) 2008 Gross Fixed Assets Net Fixed Assets Investments Inventories Debtors Other Current Assets Misc. Expenditure not written off Long-term Borrowings Short-term Current Liabilities and Provisions Deferred Tax Liability (Net) Equity Capital Reserves Net Worth Book Value Per Share (Rupees) * 400 3251 57 239 4111 4350 78 2666 20 238 3315 3553 46 2052 147 233 2676 2909 111 1760 190 112 1875 1987 174.46 78 1329 203 116 1659 1775 150.89 68 1095 177 116 1454 1570 130.56 185 1051 138 116 1388 1504 128.26 344 927 111 1958 2069 165.50 109 900 110 1907 2017 166.90 132 870 103 1399 1502 134.14 4203 2361 4215 1084 1005 1566 14 2187 2007 3510 1871 2238 878 701 2169 18 1558 2006 3065 1555 1669 879 638 1232 18 837 2005 2810 1475 1190 760 512 1028 24 941 2004 2559 1391 1111 500 400 625 10 652 2003 2489 1466 862 457 517 640 40 1072 2002 2417 1537 800 469 648 616 1192 2001 2231 1483 710 553 632 529 224 791 2000 1859 1232 823 515 462 684 155 845 1999 1615 1099 810 437 592 804 97 1335

180.87 147.98 *123.29

Book value per share is shown after giving effect to a 1:1 bonus issue in September, 2005 Book value per share is calculated after reducing Miscellaneous Expenditure not written off and Revaluation Reserve from Net worth.

58

MAHINDRA & MAHINDRA LIMITED

Summary of Operations
2008 Income @ Materials Direct Indirect Excise Duty (Net) Personnel Interest (Net) @ Depreciation (Net) Other Expenses Exceptional items Extra-ordinary items Profit before tax for the year Tax for the year - Current Deferred Tax Liability/(Asset) Adj. pertaining to Prev. Years Balance profit Dividends Equity Dividend (%) Earnings per Share (Rupees) * Vehicles produced ** Vehicles sold ** Tractors produced Tractors sold (Units) (Units) (Units) (Units) 13238 7726 89 1584 861 24 239 1,473 (165) 1,407 279 25 1,103 #+321 #115.00 46.24 196956 195077 98917 99042 63 2007 11558 6828 79 1335 666 (67) 209 1,192 (122) 1,438 366 (15) 19 1,068 +115 115.00 45.15 169557 169679 103847 102531 87 2006 9451 5714 68 1136 553 (18) 200 909 (210) 1099 285 (43) 857 +278 100.00 38.07 2005 7804 4603 60 1055 465 (6) 184 743 (14) 714 215 (14) 513 +172 130.00 23.04 2004 6001 3353 43 955 421 52 165 603 (29) 438 63 26 349 +118 90.00 15.02 2003 4597 2500 39 785 385 87 165 496 (57) 197 12 39 146 + 72 55.00 6.28 87088 86890 45183 47028 29 2002 3997 2117 32 677 375 83 139 476 17 81 3 (25) 6 97 56 50.00 4.31 66256 65338 54524 58006 33 2001 4353 2359 49 755 401 62 140 443 15 129 8 121 +67 55.00 5.46 63146 62927 80261 79237 51

(Rupees crores) 2000 4409 2210 46 773 397 75 123 426 13 (4) 350 87 263 +67 55.00 11.93 76983 76437 73222 70571 67 1999 4167 2227 43 654 377 94 112 372 8 280 52 2 226 +63 55.00 10.93 70639 70548 66211 69362 58

148213 148025 117670 147591 145024 117399 87075 85029 45 67115 65390 36 50102 49576 25

@ Interest income netted off in interest expense # + **

Proposed Dividend. Including Income Tax on Proposed Dividend/Dividends. Including CKD packs.

59

Financial Highlights
PAT and Net Income (Rupees Crores)
1500
11672

Earnings P er Shares (Rs.) Per

50 45.15 46.24

12000

10221

1250
1068 8327 1103

10000
40 38.07

1000

8000

Net Income

PAT

6769

EPS (Rs.)

857

30 23.04 20

750
5057 513

6000

500
349

4000

15.02

250

2000

10

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

Net Income

Profit After Tax

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

Net Segmental Revenue F -2008 F-2008

0.7

Debt Equity Ratio

Farm Equipment 35%

Others 3%

0.60 0.6 0.53 0.5

Percentage

0.46 0.4 0.42

0.3

0.31

0.2

Automotive 62%

0.1

0.0

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

60

MAHINDRA & MAHINDRA LIMITED

ACCOUNTS

61

Auditors Report to the members of Mahindra & Mahindra Limited

1. We have audited the attached balance sheet of Mahindra & Mahindra Limited as at 31st March, 2008, the profit and loss account and also the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 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. As required by the Companies (Auditors Report) Order, 2003 (hereinafter referred to as the Order) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: i. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; 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; iii. the balance sheet and the profit and loss account dealt with by this report are in agreement with the books of account; in our opinion, the balance sheet and the profit and loss account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; in our opinion and to the best of our information according to the explanations given to us, the accounts give the information required by Companies Act, 1956, in the manner so required give a true and fair view in conformity with accounting principles generally accepted in India: and said the and the

iv.

2.

v.

(a) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2008; (b) in the case of the profit and loss account, of the profit for the year ended on that date; and (c) in the case of the cash flow statement, of the cash flows for the year ended on that date. 5. On the basis of the written representations received from the directors, as on 31st March, 2008, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2008 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

3.

4.

For Deloitte Haskins & Sells Chartered Accountants B.P . Shroff B.P. (Partner) Membership Number: 34382 Mumbai, 28th May, 2008

ii.

62

MAHINDRA & MAHINDRA LIMITED

Annexure to the Auditors Report

(Referred to in paragraph 3 of the Auditors Report of even date to the members of Mahindra & Mahindra Limited) (i) (a) The company is maintaining proper records showing full particulars, including quantitative details and unit wise situation of fixed assets. (b) The fixed assets have not been physically verified by the management during the year but the company has a system of verifying the fixed assets once in every three years. In our opinion the frequency of verification is at reasonable intervals. (c) During the year, in our opinion, a substantial part of fixed assets has not been disposed off by the company. (ii) (a) The inventory of the company has been physically verified by the management during the year and at or after the year end. In respect of stocks lying with third parties, a substantial portion was physically verified or has been confirmed by third parties during the year or at the year end. In our opinion the frequency of verification is reasonable. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management were found 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 records of inventory, in our opinion, the company has maintained proper records of inventory and the discrepancies noticed on physical verification between the physical stocks and the book records were not material in relation to the operations of the company. (iii) According to the information and explanations given to us, the company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 and accordingly paragraphs 4 (iii) (b), (c), (d), (f) and (g) of the Companies (Auditors Report) Order, 2003, are not applicable. (iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that many of the items are of a special nature and their prices cannot be compared with alternative 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 and fixed assets and for the sale of goods and services. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control system. (v) (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 Companies Act, 1956 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, having regard to the comments in (iv) above, 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. (vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975, as applicable, with regard to the deposits accepted from the public. According to the information and explanations given to us, no order under the aforesaid sections has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, on the company. (vii) In our opinion, the company has an internal audit system commensurate with its size and the nature of its business. (viii) We have broadly reviewed the books of account maintained by the company relating to the manufacture of motor vehicles and tractors pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been maintained and are being made up. We have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information given to us, the Central Government has not prescribed the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956, for any other products of the company. (ix) (a) According to the information and explanations given to us and according to the books and records as produced and examined by us, in our opinion, the undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues as applicable have generally been regularly deposited by the company during the year with the appropriate authorities. According to the information and explanations given to us, there are no arrears of statutory dues as mentioned above outstanding as at 31st March, 2008 for a period of
63

more than six months from the date they became payable. (b) As at 31st March, 2008 according to the records of the company and the information and explanations given Name of the statute Nature of the dues Amount Rs. in crores

to us, the following are the particulars of dues on account of income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty and cess matters that have not been deposited on account of any dispute:

Period to which the amount relates various years covering the period 1998-1999 1998-2007

Forum where pending

Income - Tax Laws

Income - Tax

0.81 48.05

Appellate Authority Tribunal level Appellate Authority Commissioner of Income-tax (Appeals) High Court Appellate Authority Tribunal level Appellate Authority upto Commissioner (Appeals) level Appellate Authority upto Commissioner level Appellate Authority Tribunal level Appellate Authority upto Commissioner (Appeals) level Appellate Authority Tribunal level Appellate Authority upto Commissioner (Appeals) level Appellate Authority upto Commissioner level Appellate Authority Tribunal level

Sales - Tax Laws

Sales - Tax

121.89 0.15 2.80

1985-2003 1986-2002 2007

10.76

1988-2005

Service Tax Laws

Service Tax

0.54 0.19

2001-2003 2001-2002

Excise Duty Laws

Excise Duty

365.84 0.93

1987-2007 1995-2006

8.12

2005-2007

Custom Duty Laws

Custom Duty

4.55

1996-2001

Out of the above amounts aggregating Rs. 564.63 crores, Rs. 449.44 crores have been stayed for recovery by the relevant authorities. (x) The company does not have accumulated losses as at 31st March, 2008 and has not incurred cash losses during the financial year ended on that date and in the immediately preceding financial year. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders during the year. In our opinion and according to the information and explanations given to us, the company has not granted

any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) The provisions of any special statute as specified under paragraph 4 (xiii) of the Order are not applicable to the company. (xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of paragraph 4 (xiv) of the Order are not applicable to the company. (xv) According to the information and explanations given to us, the company has not given any guarantees for loans taken by others from banks or financial institutions, the

(xi)

(xii)

64

MAHINDRA & MAHINDRA LIMITED

terms and conditions, whereof, in our opinion, are prejudicial to the interest of the company. (xvi) In our opinion and according to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained. (xvii) Based on the information and explanations given to us and on an overall examination of the balance sheet of the company, in our opinion, there are no funds raised on short term basis which have been used for long term investments. (xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956, during the year. (xix) According to the information and explanations given to us, the company has created security in respect of debentures issued during the year.

(xx)

The company has not raised any money by public issue during the year.

(xxi) 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 significant fraud on or by the company, noticed or reported during the year nor have we been informed of such case by the management.

For Deloitte Haskins & Sells Chartered Accountants B.P . Shroff B.P. (Partner) Membership Number: 34382 Mumbai, 28th May, 2008

65

Balance Sheet as at 31st March, 2008

Schedule I. SOURCES OF FUNDS : SHAREHOLDERS FUNDS : Capital ................................................................................. Employee Stock Options Outstanding ................................. Reserves and Surplus ........................................................... LOAN FUNDS : ..................................................................... (a) Secured Loans .............................................................. (b) Unsecured Loans .......................................................... DEFERRED TAX LIABILITY (Net) ............................................ Total .......... II. APPLICA TION OF FUNDS : APPLICATION FIXED ASSETS : Gross Block .......................................................................... Less : Depreciation .............................................................. Net Block ............................................................................. CAPITAL WORK-IN-PROGRESS .............................................. INVESTMENTS ...................................................................... CURRENT ASSETS, LOANS AND ADVANCES : (a) Inventories .................................................................... (b) Sundry Debtors ............................................................ (c) Cash and Bank Balances ............................................... (d) Other Current Assets .................................................... (e) Loans and Advances ..................................................... CURRENT LIABILITIES AND PROVISIONS : (a) Current Liabilities .......................................................... (b) Provisions ..................................................................... NET CURRENT ASSETS ......................................................... MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED) .............................................. Total .......... NOTES ON ACCOUNTS ............................................................... Per our report attached For Deloitte Haskins & Sells Chartered Accountants B. P . Shroff P. Partner Deepak S. P arekh Parekh aghul N. V Vaghul R. K. K ulkarni Kulkarni A. S. Ganguly A. P . Puri P. N. B. Godrej XIV IV 2008

Rupees crores 2007

I II

239.07 4.00 4,107.00 4,350.07

238.03 3.18 3,311.70 3,552.91 106.65 1,529.35 2,587.06 56.72 6,993.85 1,636.00 19.79 5,208.70

III A III B

617.26 1,969.80

3,656.13 1,841.68 1,814.45 546.45 2,360.90 4,215.06 1,084.11 1,004.88 861.23 13.27 691.88 3,655.37 VII A VII B 2,307.55 943.46 3,251.01 404.36 VIII 13.53 6,993.85

3,229.69 1,639.12 1,590.57 280.60 1,871.17 2,237.46 878.48 700.89 1,326.07 3.31 839.42 3,748.17 1,950.22 715.43 2,665.65 1,082.52 17.55 5,208.70

V VI A VI B VI C VI D VI E

Keshub Mahindra Directors Anand G. Mahindra Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2008

Narayan Shankar Mumbai, 28th May, 2008

66

MAHINDRA & MAHINDRA LIMITED

Profit and Loss Account

for the year ended 31st March, 2008

Rupees crores Schedule 2008 12,371.03 1,566.39 IX X XI XII XIII 10,804.64 867.00 11,671.64 7,725.91 18.18 852.45 24.24 238.66 1,608.96 10,468.40 46.49 10,421.91 1,249.73 8.16 1,241.57 165.20 1,406.77 278.75 24.65 1,103.37 1,103.37 2,125.08 (16.88) 2,108.20 3,211.57 115.00 282.61 38.48 2,775.48 2007 10,940.50 1,336.78 9,603.72 617.52 10,221.24 6,827.93 (2.14) 666.15 (67.45) 209.59 1,318.57 8,952.65 47.10 8,905.55 1,315.69 1,315.69 121.99 1,437.68 365.73 (15.63) 1,087.58 19.19 1,068.39 1,475.75 15.67 1,491.42 2,559.81 110.00 184.03 25.81 98.20 16.69 2,125.08

SALES - Traded and Manufactured Goods [Note 11(a)] .......................................... Less : Excise Duty on Sales (Net) ............................................................................. Net Sales ................................................................................................................. Income from Operations and Other Income ........................................................... Net Income .............................................................................................................. EXPENDITURE : Raw Materials, Finished and Semi-finished Products ....................................... Excise Duty ....................................................................................................... Personnel .......................................................................................................... Interest, Commitment and Finance Charges (Net) ........................................... Depreciation/Amortisation [Note 5(d)(i)] .......................................................... Other Expenses ................................................................................................. Less : Cost of Manufactured Products Capitalised .................................................. Profit before provision for contingencies, exceptional items and taxation .............. Less : Provision for contingencies [Note 10 (b) & (c)] ............................................. Profit before exceptional items and taxation ........................................................... Add : Exceptional Items [Note 23] .......................................................................... Profit before taxation .............................................................................................. - Current Tax (including Fringe Benefit Tax) .................. Less : Provision for Tax - Deferred Tax (Net) [Note 24] ...................................... Profit for the year before prior period adjustments ................................................ Prior Period Adjustment (Net of Tax) : [Note 16] .................................................... Profit for the year .................................................................................................... Balance of Profit for earlier years ............................................................................ (Less)/Add : Transfer (to)/from Debenture Redemption Reserve (Net) ..................... Total of Profit and Loss Account balances shown above ........................................ Deduct : : : : : General Reserve ...................................................................................... Interim Dividend Paid .............................................................................. Income Tax on Interim Dividend Paid ..................................................... Proposed Dividend .................................................................................. Income Tax on Proposed Dividend ....................................

Balance for 2007-2008 and earlier years carried to Balance Sheet ......................... EARNINGS PER SHARE [Note 25] : (Face value Rs. 10/- per share) (Rupees) Basic ................................................................................................................. Diluted ................................................................................................... NOTES ON ACCOUNTS ............................................................................................ Per our report attached For Deloitte Haskins & Sells Chartered Accountants B. P . Shroff P. Partner Deepak S. P arekh Parekh aghul N. V Vaghul R. K. K ulkarni Kulkarni A. S. Ganguly A. P . Puri P. N. B. Godrej

XIV

46.24 41.52

45.15 40.94

Keshub Mahindra Directors Anand G. Mahindra Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2008
67

Narayan Shankar Mumbai, 28th May, 2008

Cash Flow Statement for the year ended 31st March, 2008
2008 A. CASH FL OW FROM OPERA TING ACTIVITIES : FLOW OPERATING Net Profit before exceptional items and taxation ................................... Adjustments for : Depreciation/Amortisation ............................................................... (Profit)/Loss on Exchange (Net) ....................................................... Investment and Interest Income ...................................................... Interest Commitment and Finance charges ..................................... Amortisation of Expenses ................................................................ (Profit)/Loss on sale of investments (Net) ........................................ (Profit)/Loss on fixed assets sold/scrapped/written off (Net) ........... Excess of cost over fair value of current investments (Net) ............ Provision for diminution in the value of long term investments .... Operating Profit before Working Capital changes .................................. Changes in : Trade and other receivables ............................................................. Inventories ....................................................................................... Trade and other payables ................................................................ (450.40) (205.63) 408.87 (247.16) Miscellaneous Expenditure (to the extent not written off or adjusted) incurred during the year .................................................... Cash generated from operations ............................................................ Income Taxes paid (Net of refunds) ........................................................ NET CASH FROM OPERATING ACTIVITIES ............................................... 238.66 (39.90) (143.60) 87.59 2.75 (28.94) 2.82 (1.74) (5.40) 112.24 1,353.81 1,241.57

Rupees crores 2007

1,315.69

209.59 6.36 (234.65) 19.80 2.06 (5.62) 1.73 2.36 1.63 1,317.32

(168.17) 0.26 365.67 197.76

(3.12) 1,103.53 (277.70) 825.83

(2.73) 1,512.35 (343.40) 1168.95

68

MAHINDRA & MAHINDRA LIMITED

Cash Flow Statement

B.

(Contd.)

Rupees crores 2008 2007

CASH FL OW FROM INVESTING ACTIVITIES : FLOW Purchase of fixed assets ......................................................................... Sale of fixed assets ................................................................................. Purchase of investments ......................................................................... Sale of investments ................................................................................ Interest received ..................................................................................... Dividends received .................................................................................. Inter corporate deposits (Net) ................................................................ Exceptional Items : Sales Proceeds (Net) on sale of Long Term Investments ......................... NET CASH USED IN INVESTING ACTIVITIES ............................................ (2,075.08) 142.75 (950.40) (729.09) 12.00 (16,091.67) 14,487.81 68.95 65.61 111.31 (504.45) 22.55 (9,267.62) 8,652.08 80.09 120.39 (196.19)

C.

CASH FL OW FROM FINANCING ACTIVITIES : FLOW Proceeds from borrowings ..................................................................... Repayments of borrowings (including premium on prepayments) ......... Dividends paid [including income tax on dividends Rs. 16.69 crores (2007 : Rs. 60.03 crores)] ...................................................................... Interest Commitment and Finance charges paid .................................... NET CASH FROM FINANCING ACTIVITIES ............................................... NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ............ CASH AND CASH EQUIV ALENTS [Note 1] : EQUIVALENTS Opening Balance .................................................................................... Closing Balance ...................................................................................... See Notes attached. 1,361.79 923.88 725.16 1,361.79 2,303.55 (1,294.08) (118.01) (80.12) 811.34 (437.91) 1,078.57 (149.22) (483.46) (27.81) 418.08 636.63

Per our report attached For Deloitte Haskins & Sells Chartered Accountants B. P . Shroff P. Partner Deepak S. P arekh Parekh aghul N. V Vaghul R. K. K ulkarni Kulkarni A. S. Ganguly A. P . Puri P. N. B. Godrej

Keshub Mahindra Directors Anand G. Mahindra Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2008
69

Narayan Shankar Mumbai, 28th May, 2008

Notes to the Cash Flow Statement

1

for the year ended 31st March, 2008

Rupees crores 2008 Cash and Bank Balances ......................................................................... Unrealised (Gain)/Loss on foreign currency cash and cash equivalents . Total cash and cash equivalents ............................................................. 2 During the year the Company has acquired/formed the following subsidiaries :a) b) c) d) e) f) g) 3 4 Punjab Tractors Limited Rs. 1287.21 crores Mahindra Logistics Limited Rs. 0.05 crores Mahindra Castings Private Limited Rs. 0.05 crores Mahindra Automotive Limited Rs. 0.05 crores Mahindra Aerospace Private Limited Rs. 0.05 crores Mahindra FirstChoice Services Limited Rs. 0.05 crores Mahindra Navistar Engines Private Limited Rs. 0.01 crores 861.23 62.65 923.88 2007 1,326.07 35.72 1361.79

During the year the Company received on disposal the following subsidiary :Mahindra Ashtech Limited Rs. 0.33 crores During the year the Company has consolidated its business interest in Mahindra Hinoday Industries Limited by swapping the shares held by the Company in Mahindra Hinoday Industries Limited for shares of Mahindra Castings Private Limited. This being a non cash transaction does not form part of cash flow. a) Arising out of the scheme of arrangement for the merger between Companys subsidiaries Mahindra Stokes Holding Company Limited, Mahindra Forgings Overseas Limited, Mahindra Forgings Mauritius Limited with Mahindra Forgings Limited, the Company received shares of Mahindra Forgings Limited. The Company is required to value the shares received by referencing it to the fair value of the shares given up. As a result the gain of Rs. 157.10 crores has been accounted for as an exceptional item. This being a non cash transaction does not form part of cash flow. Arising out of the scheme of arrangement for the merger between Companys subsidiaries Plexion Technologies (India) Private Limited with Mahindra Engineering Design & Development Company Limited the Company received shares of Mahindra Engineering Design & Development Company Limited. The Company is required to value the shares received by referencing it to the fair value of the shares given up. As a result the gain of Rs. 15.63 crores has been accounted for as an exceptional item. This being a non cash transaction does not form part of cash flow.

b)

Previous years figures have been regrouped/restated wherever necessary.

70

MAHINDRA & MAHINDRA LIMITED

SCHEDULE I
2008 Share Capital [Note 2] : Authorised : 37,50,00,000 (2007 - 27,50,00,000) Ordinary (Equity) Shares of Rs. 10 each ................. 25,00,000 Unclassified shares of Rs.100 each ............................................................. Total .......... Issued and Subscribed : 24,57,41,813 (2007 - 24,53,71,265) Ordinary (Equity) Shares of Rs.10 each fully paid up ............................................................................. Less : 66,68,431 (2007 - 73,38,558) Ordinary (Equity) Shares of Rs. 10 each fully paid up issued to ESOP Trust but not allotted to employees ..................... Adjusted : Issued and Subscribed Share Capital .........................................

Rupees crores 2007

375.00 25.00 400.00

275.00 25.00 300.00

245.74 245.74 6.67 239.07

245.37 245.37 7.34 238.03

SCHEDULE II
Rupees crores 2007 Reserves and Surplus : 1 2 Capital Reserve ............................................................... Securities Premium Account [Note 3(a)(i)] ..................... Less : Premium on shares issued to ESOP Trust but not allotted to employees [Note 3(b)] ..................... 11.50 11.50 502.10 516.20 17.98 18.38 484.12 497.82 12.86 13.33 633.92 604.82 3.67 3.75 637.59 608.57 1.12 16.79 39.43 50.12 1,186.62 1,198.13 27.04 149.01 27.04 149.01 115.00 110.00 115.00 110.00 16.88 158.92 259.01 2.01 163.11 1.64 0.40 0.37 162.71 0.39 0.47 80.90 0.34 0.08 0.34 80.98 15.67 10.69 12.92 14.02 270.52 11.50 11.50 527.13 502.10 16.34 17.98 510.79 484.12 12.47 12.86 748.92 633.92 3.33 3.67 752.25 637.59 18.00 1.12 39.43 39.43 (12.92) 1,331.52 1,186.62 2,775.48 2,125.08 4,107.00 3,311.70 Additions Deductions 2008

3 4

Revaluation Reserve [Note 3(a)(ii)] .................................. General Reserve .............................................................. Add : Bonus shares issued to ESOP Trust ....................... but not alloted to employees [Note 3(b)] ......................

5 6 7

Debenture Redemption Reserve ...................................... Investment Fluctuation Reserve [Note 27] ...................... Hedging Reserve Account [Note 3(c)] ............................

Balance for 2007-2008 and earlier years as per Profit and Loss Account ................................................. Total ..........

Transfer from Profit and Loss Account Rs. 115.00 crores (2007 : Rs. 110.00 crores) Adjustment on adoption of Accounting Standard 15 (revised 2005) Employee Benefits (Net of Tax of Rs. 41.05 crores). Refer Note 16. Transfer from Profit and Loss Account Rs. 16.88 crores (2007 : Rs. Nil) Transfer to Profit and Loss Account net of charge created Rs. 0.22 crores
71

SCHEDULE III
2008 Loan F unds [Note 4] : Funds (A) Secured : (1) Debentures/Bonds .............................................................................. (2) Foreign Currency Loans from Banks ................................................... (3) Loans and Advances on cash credit account from Banks .................. (4) Short-term Foreign Currency Loans from Banks ................................. (B) Unsecured : (1) Fixed Deposits .................................................................................... (2) Short-term Loans from Banks ............................................................ (3) Other Loans : (a) From Financial Institutions .......................................................... (b) Foreign Currency Loan from Banks ............................................. (c) Zero Coupon Convertible Bonds .............................................. (d) From Others [including interest accrued and due Rs. 0.02 crores (2007 : Rs. 0.02 crores)] .................................... 521.13 491.02 802.60 45.19 1,859.94 1,969.80 Total ............. 2,587.06 3.72 106.14 205.51 121.80 9.04 280.91 617.26

Rupees crores 2007

5.51 35.25 65.89 106.65 3.99 8.03 326.67 262.63 879.41 48.62 1,517.33 1,529.35 1,636.00 Rupees crores

SCHEDULE IV
Fixed Assets [Note 5] :
Description of Assets Cost/ Professional valuation as at 31st March, 2007 Additions and adjustments during the year Deductions and adjustments during the year Cost/Professional valuation as at 31st March, 2008 Depreciation/Amortisation to 31st March, 2007 Deprecia- Deductions tion/ and Amor adjustAmortisation ments for 2007of Depre2008 ciation/ Amortisation 0.72 14.14 185.14 6.32 13.53 8.18 11.19 239.22 210.05 0.20 31.18 0.56 4.72 36.66 81.20 Depreciation/ Amortisation to 31st March, 2008 Net Balance as at 31st March, 2008 Net Balance as at 31st March, 2007

Land - Freehold ......................... Land - Leasehold ....................... Buildings .................................... Plant and Machinery ................. Furniture and Fittings ................ Vehicles, Cycles, etc. .................. Development Expenditure ......... Software Expenditure ................

43.73 66.20 465.21 2,418.28 80.67 87.06 49.12 19.42

10.00 0.20 53.74 286.71 17.44 31.39 54.37 16.94 470.79 443.18

0.74 35.03 1.19 7.39 44.35 99.02

53.73 66.40 518.21 2,669.96 96.92 111.06 103.49 36.36 3,656.13 3,229.69

1.72 105.85 1,436.25 35.62 34.08 16.12 9.48

2.44 119.79 1,590.21 41.38 42.89 24.30 20.67 1,841.68 1,639.12

53.73 63.96 398.42 1,079.75 55.54 68.17 79.19 15.69 1,814.45 1,590.57

43.73 64.48 359.36 982.03 45.05 52.98 33.00 9.94

Total ..........

3,229.69 2,885.53

1,639.12 1,510.27

1,590.57

72

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V
Investments (At Cost, unless otherwise specified) :
Note Face V alue Value Per Unit Rupees Shares (Non-trade and fully paid-up unless otherwise specified) : Unquoted : (a) In Subsidiary Companies : (i) Equity Shares : Mahindra Engineering and Chemical Products Limited ....................... Mahindra Intertrade Limited [including 1,50,00,000 shares partly paid-up Rs. 3 per share] ............................................................. Mahindra Steel Service Centre Limited ................................................. Mahindra Holdings & Finance Limited ................................................. Mahindra USA Incorporated ................................................................. Mahindra Gujarat Tractor Limited ........................................................ Mahindra Shubhlabh Services Limited .................................................. FirstChoice Wheels Limited (formerly known as Automartindia Limited) Mahindra Logisoft Business Solutions Limited ..................................... Mahindra Ashtech Limited ................................................................... Bristlecone Limited ................................................................................ Mahindra & Mahindra South Africa (Proprietary) Limited ............ Mahindra Engineering Design & Development Company Limited ....... Mahindra Overseas Investment Company (Mauritius) Limited ............. Mahindra SAR Transmission Private Limited ......................................... Mahindra Renault Private Limited ........................................................ Mahindra International Limited ............................................................ Plexion Technologies (India) Private Limited ......................................... Mahindra Forgings Overseas Limited ................................................... Mahindra Forgings Mauritius Limited .................................................. Mahindra Hinoday Industries Limited (formerly known as DGP Hinoday Industries Limited) .......................... Mahindra Stokes Holding Company Limited ........................................ Mahindra Automotive Limited .............................................................. Mahindra Castings Private Limited ....................................................... Mahindra Logistics Limited ................................................................... Mahindra Navistar Engines Private Limited (formerly known as MIM Engines India Private Limited) ..................... Mahindra Aerospace Private Limited .................................................... Mahindra First Choice Services Limited ................................................ (ii) 7.25% Cumulative Redeemable Preference Shares : Mahindra Intertrade Limited ................................................................ (iii) 8.50% Cumulative Redeemable Preference Shares : Mahindra Ashtech Limited ................................................................... (iv) SeriesA Preference Shares : Bristlecone Limited .................................. (v) SeriesB Preference Shares : Bristlecone Limited .................................. (vi) 8.00% Non Cumulative Redeemable Preference Shares : Mahindra Hinoday Industries Limited (formerly known as DGP Hinoday Industries Limited) .......................... (b) 312 8,55,646 1,00,000 35,000 75,000 7,49,997 50,000 20,000 2,85,000 2,296 1,78,000 100 10 10 10 10 10 10 10 10 10 10 100 100 In Other Companies : (i) Equity Shares : Montreal Engineering International Limited ......................................... Machinery Manufacturers Corporation Limited .................................... Judricks (India) Private Limited ............................................................. Mahindra & Mahindra Contech Limited ............................................... NTTF Industries Limited ........................................................................ Jayem Automotives Limited .................................................................. Officemartindia.com Limited ................................................................ Indian NGOs.com Private Limited ......................................................... Sixth Sense Studios Private Limited ...................................................... Utility Engineers (India) Limited ............................................................ Mahindra Renault Nissan Automotive Private Limited (formerly known as Mahindra Renault Automotive Private Limited) ... Others ................................................................................................... (ii) 4.00% Tax-free Cumulative Preference Shares : Machinery Manufacturers Corporation Limited .................................... (iii) 11.00% Redeemable Preference Shares : Sixth Sense Studios Private Limited ...................................................... 2008 Long T erm Term Current Rupees crores 2007 Long Term Current

Number

53,78,235 2,71,00,006 37,23,874 14,66,00,593 4,50,00,000 16,83,218 1,48,33,793 2,26,25,348 63,49,500 42,22,250 35,70,000 81,26,218 2,23,40,000 45,53,739 10,16,24,232 5,03,75,600 12,48,00,000 1,64,87,602 50,000 5,10,000 50,000 50,000 18,75,000 70,00,000 69,20,000

10 10 10 10 US $ 0.10 10 10 10 10 10 US $ 0.001 ZAR 1 10 US $ 1 10 10 10 10 EURO 1 EURO 1 10 10 10 10 10 10 10 10 100 100 US $ 0.001 US $ 0.001 10

5.64 16.60 6.38 146.60 19.38 3.55 15.87 29.21 5.78 19.26 2.49 59.96 94.85 21.77 154.38 52.34 124.81 105.25 0.05 0.51 0.05 0.05 18.75 (c)(1) 31.72 15.12 950.37

5.64 16.60 6.38 146.60 19.38 3.55 15.87 29.21 5.78 7.91 19.26 2.49 7.05 38.46 14.63 129.48 52.34 37.28 286.50 78.16 95.84 40.91 18.75 11.00 31.72 15.12 8.42 1,144.33

(b) (b) (c)(1) (b) (b)(c)(2) (b)(c)(3) (c)(4) (b)(c)(5) (c)(6) (c)(7) (c)(8) (c)(9) (c)(10) (c)(11) (c)(12)&(13) (c)(14) (c)(15) (c)(16) (c)(17)

(c)(9)

(b)

(c)(20)

* 0.94 0.10 0.04 0.15 0.22 0.06 0.02 0.29 * 0.02 1.78 3.62

* 0.94 0.10 0.04 0.15 * 0.22 0.06 0.02 0.29 0.01 * 0.02 1.78 3.63

(c)(21) (a) (b)

*denotes amounts less than Rs.50,000

73

SCHEDULE V

(Contd.)
Rupees crores Note 2008 Long T erm Term Quoted : (a) In Subsidiary Companies : (i) Equity Shares : Mahindra Lifespace Developers Limited (formely known as Mahindra Gesco Developers Limited) .................... Mahindra & Mahindra Financial Services Limited ................................ Tech Mahindra Limited ......................................................................... Punjab Tractors Limited ........................................................................ Mahindra Forgings Limited (transferred from Quoted Non Subsidiary) Current 2007 Long Term Current

Investments (At Cost, unless otherwise specified) :

Face V alue Value P er Unit Rupees

Number

1,54,01,126 5,82,41,532 5,37,76,252 3,84,76,510 4,15,26,329

10 10 10 10 10

(b) (b) (b) (c)(18) (b)(c)(19)

216.34 150.91 191.81 1,388.75 754.14 2,701.95

216.34 150.91 191.81 559.06

(b) 7,417 4,79,543 10 10 10 10

In Non-Subsidiary Companies : (i) Equity Shares : + Fairfield Atlas Limited ........................................................................... Mahindra Forgings Limited (transferred to Quoted Subsidiary) ........... Swaraj Engines Limited ......................................................................... Swaraj Automotives Limited .................................................................

(c)(22) (c)(23) (c)(24)

0.95 12.39 13.34

1.39 128.51 129.90

13

Debentures/Bonds : (Non-trade & fully paid-up) : Unquoted : (a) In Subsidiary Companies : 1,00,00,000 11.19% Mahindra & Mahindra Financial Services Limited ............................. (b) In Other Companies : 100 0.50% The East India Clinic Limited ............................................................... 100 9.00% Jayem Automotives Limited .................................................................

(d)(2)

* *

4.00 * 13.22 17.22

(d)(1)

200 100 7,75,000 18 150

10,00,000 10,00,000 100 10,00,000 10,00,000

Quoted : (a) In Subsidiary Companies : 7.50% Mahindra & Mahindra Financial Services Limited ............................... 8.60% Mahindra & Mahindra Financial Services Limited ............................... (b) In Other Companies : 6.75% Tax Free US 64 Bonds .......................................................................... 7.00% Power Finance Corporation Limited (2011) Series XXII ...................... 7.99% Infrastructure Development Finance Company Limited ......................

20.22 10.02 8.09 1.80 15.00 55.13 55.13 (1.44) 53.69

17.22 17.22

20.22 10.02 8.09 1.80 15.00 55.13 55.13 (3.49) 51.64

Less : Excess of cost over fair value of current investments of Debentures/Bonds ..

Other Investments : Government Securities : Unquoted : 36,000 ^ 6 Years National Savings Certificates ..............................................................

(e)(1)

* *

17.40 17.40 17.40 (0.48) 16.92

* * * *

2.02 2.02 2.02 (0.17) 1.85

Quoted : 16,92,70,000 ^ Government of India Securities ......................................................................

(e)(2)

Less : Excess of cost over fair value of current investments of Government Securities ................................................................................

+ ^ *

Trade Investment Total Face Value denotes amounts less than Rs. 50,000

74

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V

(Contd.)
Rupees crores Note 2008 Long T erm Term Units : Unquoted : Current 2007 Long Term Current

Investments (At Cost, unless otherwise specified) :

Face V alue Value Per Unit Rupees

Number

50,00,000 1,16,34,531 4,99,66,023 1,06,78,643 1,00,12,609 99,990 2,59,71,950 1,41,02,516 1,22,66,828 91,07,385 99,98,300 2,19,18,952 50,00,000 1,49,99,250 1,00,00,000 1,00,00,000 95,50,985 1,47,139 1,00,00,000 2,50,00,000

10 ABN AMRO Mutual Fund - Dual Advantage Fund Plan A Series 1 Institutional Growth .................................................................................................. 10 Birla Mutual Fund - Cash Plus Institutional Premium Daily Dividend ....................... 10 Birla Mutual Fund - Sun Life Liquid Plus Institutional Daily Dividend ...................... 10 Deutsche Mutual Fund - Fixed Term Fund Series 9 Growth Option ......................... 10 Deutsche Mutual Fund - Insta Cash Plus Fund Super Institutional Daily Dividend Plan .................................................................................................... 10 Deutsche Mutual Fund - Money Plus Advantage Fund Institutional Plan Dividend .... 1,000 DSP Merrill Lynch Mutual Fund - Liquid Plus Institutional Plan Daily Dividend ........ 1,000 DSP Merrill Lynch Mutual Fund - Cash Plus Institutional Daily Dividend .................. 10 Franklin Templeton Mutual Fund - Fixed Tenure Fund Series V 13 Months Plan Growth 10 Franklin Templeton Mutual Fund - Floating Rate Income Fund Long Term Plan Super Institutional Option Daily Dividend ................................................................. 10 HDFC Mutual Fund - Multiple Yield Fund Plan 2005 Growth .................................. 10 HDFC Mutual Fund - Multiple Yield Fund Growth ................................................... 10 HDFC Mutual Fund - Cash Management Fund Call Plan Daily Dividend Reinvestment Option ......................................................................... 10 HDFC Mutual Fund - Cash Manangement Fund Savings Plan Daily Dividend Reinvestment Option ......................................................................... 10 HDFC Mutual Fund - FMP 13M March 2006 ( I ) Institutional Plan Growth ........... 10 HSBC Mutual Fund - Liquid Plus Institutional Plus Daily Dividend ........................... 10 JM Financial Mutual Fund - High Liquidity Fund Growth Plan Bonus Option Bonus Units ........................................................................................ 10 Kotak Mahindra Mutual Fund - Liquid Institutional Premium Daily Dividend .......... 10 LIC Mutual Fund - Liquid Fund Dividend Plan .......................................................... 10 Lotus India Mutual Fund - Liquid Fund Super Institutional Daily Dividend .............. 10 Principal Mutual Fund - Income Fund Growth Plan ................................................. 10 Principal Mutual Fund - Floating Rate Fund FMP Institutional Option Daily Dividend ........................................................................................................... 10 Principal Mutual Fund - Fixed Maturity Plan (FMP-43) 91 Days Series XIII Regular Dividend Payout Feb. 08 ............................................... 10 Prudential ICICI Mutual Fund - Sweep Cash Option Daily Dividend ........................ 10 Prudential ICICI Mutual Fund - Institutional Liquid Plan Super Institutional Daily Dividend ........................................................................................................... 10 Standard Chartered Mutual Fund - Fixed Maturity 2nd Plan Dividend .................... 1,000 Standard Chartered Mutual Fund - Liquidity Manager Plus Daily Dividend ............. 10 Standard Chartered Mutual Fund - Grindlays Fixed Maturity Plus Plan III B Growth .. 10 Standard Chartered Mutual Fund - Fixed Maturity Plan Quarterly Series 26 Dividend .. 10 Sundaram Mutual Fund - BNP Paribas FTP 90 Days Series 3 Institutional Dividend ... 1,000 Tata Mutual Fund - Liquid Super High Investment Fund Daily Dividend .................. 10 Tata Mutual Fund - Dynamic Bond Fund Option A Dividend ................................... 1,000 UTI Mutual Fund - Liquid Cash Plan Institutional Daily Income Option ................... 10 UTI Mutual Fund - Fixed Income Interval Fund Monthly Interval Plan II Institutional Dividend Plan ........................................................................................ 10 UTI Mutual Fund - Fixed Maturity Plan HFMP 03/08 I Institutional Dividend Plan Payout ............................................................................................................. 10 UTI Mutual Fund - Fixed Maturity Plan (YFMP/09/06) Growth Plan ......................... (f)(6) (f)(7) (f)(14) (f)(15) (f)(18) (f)(19) (f)(20) (f)(22) (f)(23) (f)(27) (f)(28) (f)(29) (f)(30) (f)(31) (f)(36) (f)(39) (f)(42) (f)(45) (f)(47) (f)(48) (f)(49) (f)(52) (f)(55) (f)(56) (f)(60) (f)(61) (f)(62) (f)(63) (f)(68) (f)(74) (f)(75) (f)(76) (f)(77) (f)(78) (f)(81)

5.00 11.66 50.00 10.70 10.12 10.00 26.00 15.00 15.00 10.00 10.00 21.95 5.00 15.00 10.00 10.00 10.03 15.00 10.00 25.00 295.46

5.00 4.00 21.22 5.00 5.00 5.00 19.71 10.00 22.57 2.40 20.03 10.00 5.00 9.90 5.00 5.00 10.00 164.83

75

SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
Note Face V alue Value P er Unit Rupees Others : Certificate of Deposit Unquoted : 25,00,00,000 25,00,00,000 45,00,00,000 25,00,00,000 25,00,00,000 20,00,00,000 25,00,00,000 ^ State Bank of Travancore ........................................................................................... ^ ABN AMRO Bank ....................................................................................................... ^ State Bank of Mysore ................................................................................................ ^ Allahabad Bank .......................................................................................................... ^ Kotak Mahindra Bank Limited ................................................................................... ^ HDFC Bank ............................................................................................................. (g)(1) (g)(2) (g)(3) (g)(4) (g)(5) (g)(6) (g)(7) (g)(8) (g)(9) (g)(10) (g)(11) 3,669.28 Total .......... 23.15 23.12 42.71 23.80 24.55 19.16 23.22 179.71 545.78 4,215.06 1,854.14 23.60 9.30 23.83 13.89 33.02 28.33 9.49 9.52 14.02 165.00 383.32 2,237.46 2008 Long T erm Term Current Rupees crores 2007 Long Term Current

Number

^ State Bank of Bikaner & Jaipur .................................................................................. ^ State Bank of Hyderabad ........................................................................................... ^ State Bank of Patiala ................................................................................................. ^ Union Bank of India .................................................................................................. ^ Punjab National Bank ................................................................................................

Cost (Net of amounts written off) of Unquoted investments .................................. Cost of Quoted Investments .....................................................................................

1,429.16 2,787.82 4,216.98

1,495.01 746.11 2,241.12 (3.66) 2,237.46 10,303.89

Less : Excess of cost over fair value of Current Investments (Net) ...........................

(1.92) 4,215.06

Market Value of Quoted Investments ........................................................................ ^ Total Face Value

7,669.90

Notes : Face V alue Value Per Unit Rupees (a) 21 74 100 16,667 (Rials) Total .........
#

Number

Long T erm Term Rupees Shares (unquoted) in other companies comprise :

#

Long Term Rupees

The United Spices Importers Limited (Equity B Shares) ............................ Engineering & Metal Works, Tehran ............................................................

1 1

1 1

Written off to Re.1

(b)

Equity investments in these companies carry certain restrictions on transfer of shares in terms of funds raised by these companies from financial institutions/banks.

76

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V
(c)

(Contd.)

Investments (At Cost, unless otherwise specified) :

The following are the movements in Shares during the year : Equity Shares Acquired Nos. 70,00,000 10,76,218 1,35,30,000 14,28,000 1,46,45,007 1,15,00,000 12,48,00,000 50,000 1,64,37,602 50,000 5,10,000 50,000 50,000 3,84,76,510 2,83,25,959 30,00,000 7,417 4,79,543 @ Conversion of Loan into Equity Sold Nos. 1,49,05,000 45,03,011 4,88,88,001 2,47,30,001 1,49,38,258 82,21,107 1 30,05,000 13,91,860 Preference Shares Acquired/ (Redeemed/Sold) Nos. (11,00,000) (80,00,000)

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) (21) (22) (23) (24) $ (d)

Mahindra Ashtech Limited Mahindra Engineering Design & Development Company Limited Mahindra Overseas Investment Company (Mauritius) Limited Mahindra SAR Transmission Private Limited Mahindra Renault Private Limited Plexion Technologies (India) Private Limited Mahindra Forgings Overseas Limited Mahindra Forgings Mauritius Limited Mahindra Hinoday Industries Limited Mahindra Stokes Holding Company Limited Mahindra Automotive Limited Mahindra Castings Private Limited Mahindra Castings Private Limited Mahindra Logistics Limited Mahindra Navistar Engines Private Limited Mahindra Aerospace Private Limited Mahindra First Choice Services Limited Punjab Tractors Limited Mahindra Forgings Limited Jayem Automotives Limited Mahindra Renault Nissan Automotive Private Limited Fairfield Atlas Limited Swaraj Engines Limited Swaraj Automotive Limited Subscribed to on a rights basis # Consideration other than Cash

$ #

# # # # #

The following are the movements in Debentures/Bonds during the year : Acquired Nos. Rs. crores Sold Nos. 13,21,500 4 Matured

(1) (2) (e)

Jayem Automotives Limited

.............................................................................................................

9.00% 11.19%

Mahindra & Mahindra Financial Services Limited ........................................................................................

Government Securities : (1) (2) Face value of Rs. * crores (2007 : Rs. * crores) were lodged as security deposit. Government of India Securities of the face value Rs. 20.00 crores (2007 : Rs. Nil) were purchased and of the face value of Rs. 5.00 crores (2007 : Rs. Nil) sold during the year.

(f)

The following are the movements in Units during the year : Acquired Nos. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) ABN AMRO Mutual Fund - Money Plus Institutional Weekly Dividend ................................................................................. ABN AMRO Mutual Fund - Money Plus Institutional Plan Daily Dividend ............................................................................. ABN AMRO Mutual Fund - Cash Fund Institutional Plus Daily Dividend ............................................................................... ABN AMRO Interval Fund Monthly Plan A Dividend ............................................................................................................. Birla Mutual Fund - Interval Income Institutional Monthly Series 2 Dividend ....................................................................... Birla Mutual Fund - Cash Plus Institutional Premium Daily Dividend .................................................................................... Birla Mutual Fund - Sun Life Liquid Plus Institutional Daily Dividend .................................................................................... Birla Mutual Fund - Floating Rate Fund Long Term Weekly Dividend ................................................................................... Birla Mutual Fund - Interval Income Institutional Monthly Series 1 Dividend ....................................................................... Chola Mutual Fund - Liquid Institutional Daily Dividend Reinvestment Plan ......................................................................... Chola Mutual Fund - Freedom Income STP Institutional Daily Dividend Reinvestment Plan ................................................. Chola Mutual Fund - Liquid Super Institutional Plan Cumulative .......................................................................................... Chola Mutual Fund - Short Term Floating Rate Fund Daily Dividend Reinvestment Plan ...................................................... 99,97,606 6,51,79,681 1,50,01,965 1,50,91,012 1,00,58,000 1,02,47,80,089 16,54,33,206 1,22,67,257 1,01,19,414 12,46,05,311 12,31,20,307 1,43,13,660 25,12,14,925 Rs. crores Sold Nos.

10.02 99,97,606 65.18 6,51,79,681 15.00 1,50,01,965 15.09 1,50,91,012 10.06 1,00,58,000 1,026.78 1,01,31,45,558 165.55 11,54,67,182 12.28 1,22,67,257 10.12 1,01,19,414 125.00 12,46,05,311 123.13 12,31,20,307 15.00 1,43,13,660 251.63 25,12,14,925

*denotes amounts less than Rs.50,000

77

SCHEDULE V

(Contd.)

Investments (At Cost, unless otherwise specified) :

Acquired Nos. (14) (15) (16) (17) (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31) (32) (33) (34) (35) (36) (37) (38) (39) (40) (41) (42) (43) (44) (45) (46) (47) (48) (49) (50) (51) (52) (53) (54) (55) (56) (57) (58) (59) (60) (61) Deutsche Mutual Fund - Fixed Term Fund Series 9 Growth Option ...................................................................................... Deutsche Mutual Fund - Insta Cash Plus Fund Super Institutional Daily Dividend Plan ........................................................ Deutsche Mutual Fund - Insta Cash Plus Fund Institutional Plan Daily Dividend Option ...................................................... Deutsche Mutual Fund - Money Plus Fund Institutional Plan Daily Dividend Option ............................................................ Deutsche Mutual Fund - Money Plus Advantage Fund Institutional Plan Dividend ............................................................... DSP Merrill Lynch Mutual Fund - Liquid Plus Institutional Plan Daily Dividend ..................................................................... DSP Merrill Lynch Mutual Fund - Cash Plus Institutional Daily Dividend ............................................................................... DSP Merrill Lynch Mutual Fund Liquidity Fund Institutional Daily Dividend ....................................................................... Franklin Templeton Mutual Fund - Fixed Tenure Fund Series V 13 Months Plan Growth ..................................................... Franklin Templeton Mutual Fund - Floating Rate Income Fund Long Term Plan Super Institutional Option Daily Dividend ....................................................................................................................................... Franklin Templeton Mutual Fund - Floating Rate Income Fund Long Term Plan Dividend .................................................... Franklin Templeton Mutual Fund - India Treasury Management Account Super Institutional Plan Daily Dividend ................................................................................................................................................................ HDFC Mutual Fund - Cash Manangement Fund - Savings Plus Plan Retail Weekly Dividend Option ..................................................................................................................................................................... HDFC Mutual Fund - Multiple Yield Fund Plan 2005 Growth ............................................................................................... HDFC Mutual Fund - Multiple Yield Fund Growth ................................................................................................................ HDFC Mutual Fund - Cash Management Fund Call Plan Daily Dividend Reinvestment Option ............................................. HDFC Mutual Fund - Cash Manangement Fund Savings Plan Daily Dividend Reinvestment Option ............................................................................................................................................................. HDFC Mutual Fund - FMP 13M March 2006 ( I ) Institutional Plan Growth ........................................................................ HDFC Mutual Fund - Floating Rate Income Fund - Short Term Plan Daily Dividend Reinvestment Option ............................................................................................................................................................. HDFC Mutual Fund - Floating Rate Income Fund Short Term Plan Wholesale Daily Dividend Reinvestment Option ............................................................................................................................................................. HDFC Mutual Fund - Cash Manangement Fund - Savings Plus Plan Wholesale Daily Dividend Option ..................................................................................................................................................................... HSBC Mutual Fund - Cash Fund - Institutional Plus Daily Dividend ...................................................................................... HSBC Mutual Fund - Liquid Plus Institutional Plus Daily Dividend ........................................................................................ JM Financial Mutual Fund - High Liquidity Fund Daily Dividend Plan ................................................................................... JM Financial Mutual Fund - High Liquidity Fund Super Institutional Plan Daily Dividend ..................................................... JM Financial Mutual Fund - High Liquidity Fund Growth Plan Bonus Option Bonus Units ................................................... JM Financial Mutual Fund - Money Manager Fund Super Plus Plan Daily Dividend ............................................................. Kotak Mahindra Mutual Fund - Flexi Debt Scheme Daily Dividend ....................................................................................... Kotak Mahindra Mutual Fund - Liquid Institutional Premium Daily Dividend ....................................................................... Kotak Mahindra Mutual Fund - Floater Short Term Daily Dividend ....................................................................................... Kotak Mahindra Mutual Fund - Floater Short Term Weekly Dividend ................................................................................... LIC Mutual Fund - Liquid Fund Dividend Plan ....................................................................................................................... LIC Mutual Fund - Liquid Plus Fund Daily Dividend Plan ....................................................................................................... Lotus India Mutual Fund - Liquid Fund Super Institutional Daily Dividend ........................................................................... Principal Mutual Fund - Income Fund Growth Plan .............................................................................................................. Principal Mutual Fund - Floating Rate Fund FMP Institutional Option Daily Dividend .......................................................... Principal Mutual Fund - Floating Rate Fund FMP Institutional Option Dividend Reinvestment Weekly ............................................................................................................................................................. Principal Mutual Fund - Cash Management Fund Liquid Option Institutional Premium Plan Daily Dividend ........................................................................................................................................................................ Principal Mutual Fund - Fixed Maturity Plan (FMP - 43) 91 Days Series XIII Regular Dividend Payout Feb. 08 ....................................................................................................................................................................... Principal Mutual Fund - Floating Rate Fund SMP Institutional Option Daily Dividend .......................................................... Prudential ICICI Mutual Fund - Flexible Income Plan Daily Dividend ..................................................................................... Prudential ICICI Mutual Fund - Sweep Cash Option Daily Dividend ...................................................................................... Prudential ICICI Mutual Fund - Institutional Liquid Plan Super Institutional Daily Dividend .................................................. Reliance Mutual Fund - Liquidity Fund Daily Dividend Reinvestment Option ........................................................................ SBI Mutual Fund - Magnum Insta Cash Fund Daily Dividend Option ................................................................................... SBI Mutual Fund - Premier Liquid Fund Super Institutional Daily Dividend ........................................................................... Standard Chartered Mutual Fund - Fixed Maturity 2nd Plan Dividend .................................................................................. Standard Chartered Mutual Fund - Liquidity Manager Plus Daily Dividend ........................................................................... 6,53,46,836 11,73,46,337 9,06,02,534 1,50,02,006 2,20,785 46,07,513 1,19,009 46,16,87,347 2,87,02,780 98,96,368 1,62,60,799 3,48,53,823 69,78,79,548 12,97,05,405 22,62,77,217 6,44,29,044 68,18,46,753 27,24,92,650 1,43,83,417 20,17,10,221 7,74,77,074 29,04,43,254 53,07,78,533 11,77,99,378 1,50,84,637 10,03,00,099 2,50,84,615 2,00,04,098 29,65,24,863 2,00,25,943 35,01,02,688 50,00,000 37,01,81,204 8,39,68,264 21,885 1,41,75,18,699 3,01,00,024 1,76,80,219 10,56,79,385 91,59,867 Rs. crores 65.46 117.58 90.68 15.14 22.09 460.80 11.90 462.35 30.01 989.88 16.30 36.34 742.29 130.75 228.11 64.63 682.23 272.84 15.00 202.04 77.50 291.35 649.04 118.20 15.11 110.13 25.08 20.01 296.89 20.07 350.13 Sold Nos. 40,00,000 5,46,68,193 11,73,46,337 9,06,02,534 49,89,397 4,32,934 45,07,523 1,19,009 50,00,000 43,57,15,397 2,87,02,780 98,96,368 1,62,60,799 50,00,000 41,89,254 5,37,57,410 68,37,77,032 1,00,00,000 12,97,05,405 22,62,77,217 6,44,29,044 68,18,46,753 29,50,42,039 1,43,83,417 20,17,10,221 23,34,038 7,74,77,074 29,04,43,254 51,85,11,705 11,77,99,378 1,50,84,637 9,11,92,714 2,50,84,615 1,00,05,797 1,92,44,216 27,46,05,911 2,00,25,943 35,01,02,688

5.00 370.21 37,01,81,204 88.78 8,39,68,264 0.02 1,00,24,741 1,417.57 1,40,25,19,449 30.11 3,01,00,024 29.61 1,76,80,219 106.02 10,56,79,385 50,00,000 916.17 92,58,875

78

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
Acquired Nos. (62) Standard Chartered Mutual Fund - Grindlays Fixed Maturity Plus Plan III - B Growth ............................................................ (63) Standard Chartered Mutual Fund - Fixed Maturity Plan Quarterly Series 26 Dividend ............................................................. (64) Standard Chartered Mutual Fund - Grindlays Floating Rate Fund LT Institutional Plan B Daily Dividend ........................................................................................................................................................................... (65) Sundaram Mutual Fund - BNP Paribas Floater ST Institutional Daily Dividend ......................................................................... (66) Sundaram Mutual Fund - BNP Paribas Liquid Plus Super Institutional Daily Dividend ............................................................. (67) Sundaram Mutual Fund - BNP Paribas Money Fund Super Institutional Daily Dividend ........................................................... (68) Sundaram Mutual Fund - BNP Paribas FTP 90 Days Series 3 Institutional Dividend ................................................................ (69) Tata Mutual Fund - Fixed Income Portfolio Fund Scheme A1 Institutional .............................................................................. (70) Tata Mutual Fund - Fixed Income Portfolio Fund Scheme A2 Institutional .............................................................................. (71) Tata Mutual Fund - Floater Fund Daily Dividend ...................................................................................................................... (72) Tata Mutual Fund - Floating Rate Short Term Institutional Plan Daily Dividend ....................................................................... (73) Tata Mutual Fund - Liquidity Management Fund Daily Dividend .............................................................................................. (74) Tata Mutual Fund - Liquid Super High Investment Fund Daily Dividend .................................................................................. (75) Tata Mutual Fund - Dynamic Bond Fund Option A Dividend ................................................................................................... (76) UTI Mutual Fund - Liquid Cash Plan Institutional Daily Income Option ................................................................................... (77) UTI Mutual Fund - Fixed Income Interval Fund Monthly Interval Plan II Institutional Dividend Plan ............................................. (78) UTI Mutual Fund - Fixed Maturity Plan HFMP 03/08 I Institutional Dividend Plan Payout ....................................................... (79) UTI Mutual Fund - Liquid Plus Fund Institutional Plan Daily Dividend Option ......................................................................... (80) UTI Mutual Fund - Money Market Fund Daily Dividend Reinvestment Option ......................................................................... (81) UTI Mutual Fund - Fixed Maturity Plan (YFMP/09/06) Growth Plan ......................................................................................... 1,00,00,000 26,01,63,475 10,97,01,781 17,05,22,857 10,89,83,242 1,00,00,000 1,50,80,483 50,25,694 30,76,89,840 15,69,83,863 2,04,610 37,28,237 95,50,985 90,89,261 2,01,58,262 2,50,00,000 6,24,010 11,20,57,931 Rs. crores 10.00 260.22 110.27 170.71 110.02 10.00 15.09 5.03 308.79 157.07 20.51 415.52 10.03 926.60 20.16 25.00 62.41 197.94 Sold Nos. 50,00,000 26,01,63,475 10,97,01,781 17,05,22,857 10,89,83,242 1,50,80,483 50,25,694 30,76,89,840 15,69,83,863 2,04,610 37,73,112 89,42,122 1,01,58,262 6,24,010 11,20,57,931 1,00,00,000

(g)

The following are the movements in Certificate of Deposits during the year : Acquired Face V alue Value Rs. crores (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) State Bank of Travancore ......................................................................................... ABN AMRO Bank ..................................................................................................... State Bank of Mysore .............................................................................................. Allahabad Bank ........................................................................................................ Kotak Mahindra Bank Limited .................................................................................. HDFC Bank ............................................................................................................ State Bank of Bikaner & Jaipur ................................................................................ State Bank of Hyderabad ......................................................................................... State Bank of Patiala ................................................................................................ Union Bank of India ................................................................................................. Punjab National Bank .............................................................................................. State Bank of India .................................................................................................. 25.00 25.00 95.00 25.00 25.00 20.00 50.00 50.00 Total V alue Value Rs. crores 23.15 23.12 89.80 23.80 24.55 19.16 48.03 49.10 Sold Face V alue Value Rs. crores 25.00 10.00 25.00 15.00 35.00 30.00 60.00 10.00 15.00 25.00 Matured Face V alue Value Rs. crores 50.00

79

SCHEDULE VI
2008 Current Assets, Loans and Advances : (A) Inventories (at cost or net realisable value whichever is lower) : (i) Finished Products produced and purchased for sale ...................... (ii) Contracts and Work-in-Progress ...................................................... (iii) Manufactured Components ............................................................ (iv) Raw Materials and Bought-out Components .................................. (v) Property Development Activity - Work-in-Progress [including completed flats and premises Rs. 6.32 crores (2007 : Rs. 6.32 crores)] [Note 11(b)] ............................................. (vi) Stores and Spares ............................................................................ (vii) Tools ................................................................................................ (B) Sundry Debtors (Unsecured) [Note 6] : Outstanding over six months : Considered good ................................... : Considered doubtful ............................. Other Debts : Considered good ................................... : Considered doubtful ............................. 579.43 53.15 48.10 351.95 6.32 24.76 20.40 1,084.11 111.29 31.61 142.90 893.59 1.20 894.79 Less : Provision for Doubtful Debts ........................................................ (C) Cash and Bank Balances : Cash, cheques and stamps on hand ...................................................... Balances with Scheduled Banks : (i) On Current Account ........................................................................ (ii) On Fixed Deposit Account ............................................................... (iii) On Margin Account ........................................................................ Balances with Non-Scheduled Banks [Note 7] : On Current Account ............................................................................... (D) Other Current Assets : Interest accrued on investments ............................................................. Others ..................................................................................................... (E) Loans and Advances [Note 8] : (Unsecured, considered good unless otherwise stated) : Advances and Loans to subsidiaries :Considered good .................................................................................... Considered doubtful ............................................................................... Less : Provision for doubtful Advances and Loans ................................. Bills of exchange, considered doubtful .................................................. Less : Provision for doubtful bills ........................................................... Advances recoverable in cash or in kind or for value to be received : Considered good .................................................................................... Considered doubtful ............................................................................... Less : Provision for Doubtful Advances .................................................. Payments towards Income Tax and Surtax [Note 20(d)] ......................... Balances - Customs, Port Trust, Excise, etc. ............................................ Total..... 1,037.69 32.81 1,004.88 194.27 109.72 550.59 0.06 660.37 6.59 861.23 2.13 11.14 13.27

Rupees crores 2007

448.34 38.24 44.99 305.52 6.32 17.19 17.88 878.48 85.86 45.95 131.81 615.03 6.44 621.47 753.28 52.39 700.89 329.96 81.62 910.12 0.05 991.79 4.32 1,326.07 3.17 0.14 3.31

100.73 5.99 106.72 5.99 1.02 1.02 470.53 47.80 518.33 47.80 470.53 119.92 0.70 691.88 3,655.37 100.73

290.22 7.24 297.46 7.24 290.22 1.55 1.55 448.44 50.03 498.47 50.03 448.44 100.42 0.34 839.42 3,748.17

80

MAHINDRA & MAHINDRA LIMITED

SCHEDULE VII
2008 Current Liabilities and Provisions : (A) Current Liabilities* : Acceptances ............................................................................................ Sundry Creditors : (i) Total outstanding dues of micro and small enterprises [Note 9] ........................................................................................... 4.16 125.79

Rupees crores 2007

121.85

3.58

(ii) Total outstanding dues of creditors other than micro and small enterprises [including Rs. 112.05 crores (2007 : Rs. 77.70 crores) being advance payments for which value has still to be given] ..... (iii) Dues to Subsidiaries ........................................................................ Dividend payable .................................................................................... Balances on Directors Current Accounts ............................................... Interest accrued but not due on loans ................................................... * There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund. (B) Provisions : Proposed Dividend ................................................................................. Provision for Tax on Proposed Dividend ................................................. Provision for diminution in value of long term investments .................. Provision for premium payable on redemption of convertible bonds .... Provision for contingencies [Note 10 (b) & (c)] ...................................... Provision for compensated absences ...................................................... Provision for taxation ............................................................................. Provision Others [Note 10 (a) & (c)] ....................................................... Total........

2,086.43 70.70 2,161.29 4.21 2.46 13.80 2,307.55

1,781.48 28.57 1,813.63 7.33 2.46 4.95 1,950.22

282.61 38.48 25.17 224.97 8.16 200.76 37.09 126.22 943.46 3,251.01

98.20 16.69 52.25 244.58 169.95 29.94 103.82 715.43 2,665.65

SCHEDULE VIII
2008 Miscellaneous Expenditure (to the extent not written off or adjusted) : (a) Finance Charges ..................................................................................... (b) Separation and Other Costs ................................................................... Total........ 5.73 7.80 13.53

Rupees crores 2007

5.33 12.22 17.55

81

SCHEDULE IX
2008 Income from Operations and Other Income : Income from services rendered ...................................................................... Property Development Activity-Property ......................................................... Dividends on Investments in subsidiaries-Gross ............................................. Dividends on other Investments-Gross [Note 12(a)] ...................................... Rent received ................................................................................................. Miscellaneous Income .................................................................................... Profit on sale of Investments (Net) [Note 12(d)] ........................................... Total........ 523.91 65.24 15.01 8.43 225.47 28.94 867.00

Rupees crores 2007

285.56 5.93 114.10 33.30 6.50 166.51 5.62 617.52

SCHEDULE X
2008 Raw Materials, Finished and Semi-Finished Products : (A) Decrease/(Increase) in Stock of Finished Goods, Work-in-Progress and Manufactured Components : Opening Stock : (i) Finished Products produced and purchased for sale ...................... 448.34 38.24 44.99 531.57 Less : Closing Stock : (i) Finished Products produced and purchased for sale ...................... 579.43 53.15 48.10 680.68 Decrease/(Increase) in Stock ................................................................... (B) Consumption of Raw Materials and Bought-out Components : Opening Stock ........................................................................................ Add : Purchases [including outside processing charges Rs. 251.68 crores (2007 : Rs. 232.05 crores)] ............................. Less : Closing Stock : .............................................................................. (C) Purchases of Finished Products for sale ................................................. Total........ 305.52 7,602.26 7,907.78 351.95 7,555.83 319.19 7,725.91 (149.11)

Rupees crores 2007

427.95 47.32 49.89 525.16

(ii) Contracts and Work-in-Progress ...................................................... (iii) Manufactured Components ............................................................

448.34 38.24 44.99 531.57 (6.41)

(ii) Contracts and Work-in-Progress ...................................................... (iii) Manufactured Components ............................................................

308.27 6,581.78 6,890.05 305.52 6,584.53 249.81 6,827.93

82

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XI
2008 Personnel : Salaries, Wages, Bonus, etc. .......................................................................... Contribution to Provident and other funds ................................................... Gratuity .......................................................................................................... Welfare .......................................................................................................... Total........ 709.71 47.48 14.97 80.29 852.45

Rupees crores 2007

554.95 38.06 7.85 65.29 666.15

SCHEDULE XII
2008 Interest, Commitment and Finance Charges : On Term Loans and Debentures .................................................................... On Others (Net) ............................................................................................. Less : Interest Income : (i) Interest on Government Securities, Debentures and Bonds - Gross [Note 12(b)] ............................................................................................ 80.80 6.79 87.59

Rupees crores 2007

17.50 2.30 19.80

4.87 58.48 63.35 24.24

4.82 82.43 87.25 (67.45)

(ii) Interest - Others - Gross [Note 12(c)] ..................................................... Total........

83

SCHEDULE XIII
2008 Other Expenses : Stores consumed ........................................................................................... Tools consumed ............................................................................................. Power and Fuel .............................................................................................. Rent including lease rentals ........................................................................... Rates and Taxes ............................................................................................. Insurance ....................................................................................................... Repairs and Maintenance [Note 13] : Buildings ................................................................................................. Machinery ............................................................................................... Others ..................................................................................................... 17.65 73.35 28.81 119.81 Advertisement ................................................................................................ Commission on sales/contracts (Net) ............................................................. Discount allowed ........................................................................................... Freight outward ............................................................................................. Sales Promotion Expenses .............................................................................. Miscellaneous Expenses [Note 14] ................................................................. Amortisation of expenses [Note 1(E)(a)] ........................................................ Directors fees ................................................................................................ Donations and contributions ......................................................................... Loss on Fixed Assets sold/scrapped/written off (Net) ..................................... Excess of cost over fair value of Current Investments (Net) .......................... Provision for doubtful debts/advances (Net) [Note 26] ................................. Provision for diminution in value of Long term investments (Net) [Note 27] Total........ 77.22 70.74 5.20 508.95 142.40 452.17 0.59 0.10 7.37 2.82 (1.74) (23.59) (5.40) 1,608.96 73.01 15.79 91.33 36.40 22.69 13.10

Rupees crores 2007

64.53 14.30 65.19 21.08 22.12 12.67

18.22 68.80 21.01 108.03 82.27 52.85 2.60 366.70 130.69 357.05 0.33 0.10 6.26 1.73 2.36 7.71 1,318.57

84

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XlV
Notes on Accounts for the year ended 31st March, 2008
1. Significant Accounting Policies : (A) Fixed Assets : (a) (i) Fixed Assets are carried at cost less depreciation except as stated in (ii) below. Cost includes financing cost relating to borrowed funds attributable to the construction or acquisition of qualifying fixed assets upto the date the asset is ready for use. When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of account and resultant profit (including capital profit) or loss, if any, is reflected in the Profit and Loss Account. (ii) (b) (i) (ii) Land and Buildings, had been revalued as at 31st October, 1984 at depreciated replacement values on the basis of a valuation made by a firm of Chartered Surveyors & Valuers. The indices, if any, used are not stated in the valuation. Leasehold land is amortised over the period of the lease. Depreciation on assets is calculated on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except for : (1) (2) Certain items of Plant & Machinery individually costing more than Rs. 5,000 - over their useful lives (2 years, 3 years, 5 years or 7 years, as the case may be) as determined by the Company. Cars and Vehicles for commercial use - at 16.21% of cost and others - at 15% of cost.

(iii) Depreciation charge for each year is after deducting the amount representing the depreciation on the increase due to revaluation of Land and Buildings, transferred from the Revaluation Reserve. (B) Intangible Assets : Intangible Assets are initially measured at cost and amortised so as to reflect the pattern in which the assets economic benefits are consumed. (a) Technical Knowhow : The expenditure incurred is amortised over the estimated period of benefit, not exceeding six years commencing with the year of purchase of the technology. (b) Development Expenditure : The expenditure incurred on technical services and other project/product related expenses are amortised over the estimated period of benefit, not exceeding five years. (c) Software Expenditure : The expenditure incurred is amortised over three financial years equally commencing from the year in which the expenditure is incurred. (C) Investments : Long term investments are valued at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of investments. Current investments are valued at the lower of cost and fair value, determined by category of investment. (D) Inventories : Inventories are stated at cost or net realisable value, whichever is lower. Cost is arrived at on a weighted average method and includes, where appropriate, manufacturing overheads and excise duty. Long term contracts in progress are valued at cost. (E) Miscellaneous Expenditure (to the extent not written off or adjusted) : Expenditure carried forward under this head is being amortised as follows : (a) Finance Charges : The expenditure incurred in raising long term borrowings is amortised over the period of the borrowings. On early buyback, conversion or repayment of borrowings, any unamortised expenditure is fully written off in that year. (b) Separation and Other Costs : Special Payments/Pensions under Voluntary Retirement Schemes. The liability is amortised by the year ended March, 2010 from the month in which the liability is incurred.

85

(F)

Foreign Exchange Transactions : Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary items are translated at the year-end rates. The exchange difference between the rate prevailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the year is recognised as income or expense, as the case may be. Any premium or discount arising at the inception of a forward exchange contract is recognised as income or expense over the life of the contract, except in the case where the contract is designated as a cash flow hedge.

(G) Derivative Instruments and Hedge Accounting : The Company uses foreign currency forward contracts and currency options to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions. The Company does not hold derivative financial instruments for speculative purposes. The Company has applied to all such contracts outstanding as on 31st March, 2008 the hedge accounting principles set out in Accounting Standard 30 Financial Instruments : Recognition and Measurement (AS 30) by marking them to market. Changes in the fair value of the contracts that are designated and effective as hedges of future cash flows are recognised directly in Hedging Reserve Account and the ineffective portion is recognised immediately in the profit and loss account. (H) Revenue Recognition : Sales of products and services are recognised when the products are shipped or services rendered. In respect of sale of property (concerning property development activity), the Company accounts for the income on the percentage of completion basis. [Refer paragraph (I) below]. Dividend from investments are recognised in the Profit and Loss Account when the right to receive payment is established. (I) Property Development Activity : The Company accounts for income on the percentage of completion basis which necessarily involves technical estimates of the percentage of completion, and costs to completion of the activity, on the basis of which profits/losses are accounted. Such estimates, made by the Company and certified to the auditors, have been relied upon by them, as these are of a technical nature. (J) Government Grants : The Company is entitled to various incentives from a State Government, such as grants by way of refund of octroi duty paid by the Company for its manufacturing unit located in a developing region. In view of the uncertainty in respect of the collection of these grants, such grants are accounted for as and when the disbursements are received. (K) Employee Benefits : Defined Contribution Plan/Defined Benefit Plan/Long Term Compensated Absences Companys contributions paid/payable during the year to Superannuation Fund, ESIC and Labour Welfare Fund are recognised in the Profit and Loss Account. Contributions to Provident Fund are made to a Trust administered by the Company and are charged to Profit and Loss account as incurred. The Company is liable for the contribution and any shortfall in interest between the amount of interest realised by the investment and the interest payable to members at the rate declared by the Government of India. Companys liability towards gratuity, long term compensated absences and post retirement medical benefit schemes are determined by independent actuaries, using the projected unit credit method. Past services are recognised on a straight line basis over the average period until the benefits become vested. Actuarial gains and losses are recognised immediately in the statement of Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to the market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government Bonds are consistent with the currency and estimated terms of the defined benefit obligation. (L) Redemption Premium : Premium payable on redemption of Bonds/Debentures is fully provided and charged to Securities Premium Account (Net of Tax) in the year of issue. (M) Product Warranty : In respect of warranties given by the Company on sale of certain products, the estimated costs of these warranties are accrued at the time of sale. The estimates for accounting of warranties are reviewed and revisions are made as required. (N) Leases : The Companys significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns, computer hardware etc.). The leasing arrangements, which are not non-cancellable, range between eleven months and three years generally, and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as rent including lease rentals.

86

MAHINDRA & MAHINDRA LIMITED

(O) Taxes on Income : Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising on account of unabsorbed depreciation or carry forward of tax losses are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realised. (P) 2. Excise duty recovered on sales is included in Sales Traded and Manufactured Goods. Excise duty in respect of Finished Goods manufactured is shown separately as an item of expense and included in valuation of finished goods produced.

Share Capital : Issued and Subscribed Capital include : (i) (ii) 1,66,809 Ordinary Shares allotted as fully paid-up pursuant to a contract without payment having been received in cash. 17,06,07,504 Ordinary Shares allotted as fully paid-up by way of Bonus Shares by capitalisation of Securities Premium Account and Reserves.

(iii) 12,56,562 Ordinary Shares issued consequent to the Scheme of Amalgamation with the Union Bank of India Limited. Of these, 13,737 Ordinary Shares were issued on conversion of 41,211 8% Bonds. (iv) 12,98,202 Ordinary Shares issued consequent to the Scheme of Amalgamation with International Tractor Company of India Limited without payment having been received in cash. (v) 1,88,166 Ordinary Shares issued consequent to the Scheme of Amalgamation with Mahindra Spicer Limited without payment having been received in cash.

(vi) 9,73,200 Ordinary Shares issued consequent to the Scheme of Amalgamation with Mahindra Nissan Allwyn Limited without payment having been received in cash. 3. Reserves and Surplus : Rupees crores 2008 (a) Movements during the year : (i) Securities Premium Account : Additions, arising out of exercise of options ............................................ Premium on conversion of Debentures and Bonds ................................... Reduction of provision for premium on redemption of Zero Coupon Convertible Bonds (Net of Tax of Rs. 5.54 crores (2007 : Rs. Nil)) Applied, in accordance with Section 78 of the Companies Act, 1956, towards : Writing-off of share and bonds/debenture issue expenses (Net of Tax of Rs. 0.49 crores (2007 : Rs. 0.48 crores)) ........................... Premium on redemption/buyback of debentures and Zero Coupon Convertible Bonds (Net of Tax of Rs. Nil (2007 : Rs. 81.87 crores)) ............................ 2.01 2.01 (ii) Revaluation Reserve : Adjusted against depreciation for the year [Note 1 (A)(b)(iii)] .................. Adjusted in respect of revalued Land and Buildings sold/demolished ....... 0.39 0.39 (b) 0.43 0.04 0.47 1.74 161.37 163.11 1.34 11.62 14.08 27.04 0.14 140.14 8.73 149.01 2007

The Guidance Note on Accounting for Employee Share-based Payments issued by The Institute of Chartered Accountants of India requires that shares allotted to a trust but not transferred to employees be reduced from Share Capital and Reserves. Accordingly, the Company has reduced the Share Capital by Rs. 3.34 crores (2007 : Rs. 3.67 crores), Securities Premium by Rs. 16.34 crores (2007 : Rs. 17.98 crores) for the 33,34,216 shares (2007 : 36,69,279 shares) held by the trust pending transfer to the eligible employees. The Share Capital of the Company has also been reduced and the General Reserve increased by Rs. 3.33 crores (2007 : Rs. 3.67 crores) for the bonus shares issued by the Company in September 2005 to the trust but not yet transferred by the trust to the employees. The above monies which are treated as advance received from it, is included under Current Liabilities. 87

(c)

Consequent to the announcement issued by The Institute of Chartered Accountants of India dated 29th March, 2008 in respect of forward exchange contracts and currency and interest rate swaps, the Company has applied the Hedge Accounting principles set out in the Accounting Standard (AS) 30 Financial Instruments : Recognition and Measurement with effect from 31st March, 2008. Accordingly, all such contracts outstanding as on 31st March, 2008 are marked to market and the loss aggregating Rs. 12.92 crores (Net of Tax of Rs. 6.66 crores) arising consequently on contracts that were designated and effective as hedges of future cash flows has been recognised directly in the Hedging Reserve Account. Consequent to this change in accounting for such contracts, the Reserves and Surplus is lower by Rs. 12.92 crores (Net of Tax of Rs. 6.66 crores).

4.

Loans : (a) Debentures are redeemable/have been redeemed at par as follows (i) (ii) Rs. 5.00 crores on 16th July, 2008 Rs. 0.50 crores on 22nd May, 2008 (pursuant to exercise of call option)

(iii) Rs. 200.00 crores on 9th January, 2011 (iv) Also refer Note 4 (c) below (b) (i) Debentures of Rs. 205.51 crores and Foreign Currency Loans from Banks of Rs. 121.80 crores are secured by a pari-passu charge on immovable properties of the Company both present and future, subject to certain exclusions and are also secured by pari-passu charge on the movable properties of the Company including movable machinery, machinery spares, tools and accessories, both present and future. Short term Foreign Currency Loan of Rs. 280.91 crores from Banks and Loans and Advances on cash credit accounts from the Companys Bankers are secured by a first charge on a pari-passu basis on the whole of the current assets of the Company namely inventories, book debts, outstanding monies, receivables, claims etc. both present and future.

(ii)

(c)

Debentures of the face value of Rs. 110 each and Zero Interest Bonds of the face value of Rs. 90 each were both compulsorily and automatically fully converted into two equity shares of Rs.10 each at a premium of Rs. 45 per share and Rs. 35 per share respectively on 1st April, 1991, 1st October, 1991 and 18th July, 1992. The balance amount of Rs. 0.01 crores will be converted, into appropriate number of equity shares, on receipt of the balance amount due on allotment. The following amounts are repayable by 31st March, 2009 : (i) (ii) Debenture holders ......................................................................... Foreign currency loans from Banks (secured) ................................. : : : Rs. 5.50 crores (2007 : Rs. Nil) Rs. 304.41 crores (2007 : Rs. 11.75 crores) Rs. 2.15 crores (2007 : Rs. 1.59 crores)

(d)

(iii) Fixed Deposit holders ..................................................................... (iv) Rupee Loans :(a) (b) from banks ............................................................................ from others ............................................................................

: :

Rs. 106.14 crores (2007 : Rs. 8.03 crores) Rs. 6.14 crores (2007 : Rs. 3.43 crores)

The Company had issued during the year ended 31st March, 2005, Zero Coupon Foreign Currency Convertible Bonds (Bonds 2009) aggregating US $ 100 million, at par. Upto 31st March, 2008, those Bonds have been fully converted into equity shares/GDRs. Premium payable on redemption of Bonds 2009 had been fully provided in the previous year by debiting the same to Securities Premium Account (SPA). Consequent to the conversion premium aggregating Rs. 1.37 crores no longer payable on bonds converted into equity shares/ GDRs has been credited back to SPA during the year. The Company had issued during the year ended 31st March, 2007, Zero Coupon Foreign Currency Convertible Bonds (Bonds 2011) aggregating US $ 200 million, at par. The bond holders have an option to convert these bonds into Equity Shares with full voting rights or Global Depository Receipts (GDRs) determined at an initial conversion price of Rs. 922.04 per share with fixed exchange rate of conversion of Rs. 44.42 = US $ 1, at any time on or after 7th May, 2006 upto 7th March, 2011. The Bonds 2011 may be redeemed, in whole but not in part, at the option of the Company at any time on or after 13th April, 2008 subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the bonds fall due for redemption on 14th April, 2011 at 128.03 per cent of their principal amount. Upto 31st March, 2008, none of the Bonds 2011 have been converted into equity shares/GDRs. The net proceeds of Rs. 274.03 crores, unutilised as at 31st March, 2008, is disclosed under Cash and Bank Balances. 88

MAHINDRA & MAHINDRA LIMITED

5.

(a) (b) (c) (d)

Land includes a sum of Rs. Nil (2007 : Rs. 1.30 crores) for which the conveyance is pending receipt of approval from the appropriate authorities. Buildings include Rs. * crores (2007 : Rs. * crores) being the value of shares in co-operative housing societies. Additions to Plant and Machinery include Rs. Nil [2007 : Rs. 0.22 crores (debit) (Net)] on account of foreign exchange fluctuation. (i) The depreciation charge for the year excludes : (a) (b) (ii) An amount of Rs. 0.39 crores (2007 : Rs. 0.43 crores), representing depreciation on the increase due to revaluation of Land and Buildings transferred from the Revaluation Reserve. An amount of Rs. 0.17 crores (2007 : Rs. 0.03 crores), representing depreciation on assets used for development work. This expenditure is transferred to Development Expenditure and is appropriately amortised.

The Revaluation Reserve is also adjusted for an amount of Rs. Nil (2007 : Rs. 0.04 crores) in respect of revalued Land and Buildings sold/demolished during the year.

(iii) The net credit to the Profit and Loss Account consequent to the above adjustments to the Revaluation Reserve is Rs. 0.39 crores (2007 : Rs. 0.47 crores). 6. 7. Sundry Debtors others include Rs. 0.22 crores (2007 : Rs.7.38 crores), which, in accordance with the terms of the contracts, were not due for payment as at 31st March, 2008. Cash and Bank Balances include balances lying with non-scheduled banks : (a) In Current Account Rupees crores Bank Tejarat, Tehran Balance as at 31st March, 2008 ........................................ Balance as at 31st March, 2007 ........................................ Maximum balance during the year ................................... Maximum balance during the previous year ..................... (b) In Deposit Account Rupees crores Bank of Australia Balance as at 31st March, 2008 ........................................ Balance as at 31st March, 2007 ........................................ Maximum balance during the year ................................... Maximum balance during the previous year ..................... 8. Loans and Advances include : (i) (ii) Fixed/Call deposits with/loans to limited companies Rs. 71.44 crores (2007 : Rs. 259.06 crores) including Rs. 64.95 crores (2007 : Rs. 252.39 crores) with/to subsidiaries. Amounts paid towards joint development of property Rs. 1.54 crores (2007 : Rs. 1.54 crores). 0.16 * * * * Bank of Australia 4.38 1.37 5.62 6.43 Bank of China 0.06 0.63 1.41 0.78 The Municipal Co-op. Bank Ltd. 2.15 2.32 3.61 3.81

(iii) Share Application money pending allotment Rs. 9.33 crores (2007 : Rs. 15.72 crores) to subsidiaries. (iv) Amount held in escrow account towards acquisition of shares in companies Rs. Nil (2007 : Rs. 99.72 crores). * denotes amounts less than Rs. 50,000

89

9.

Micro, Small and Medium enterprises have been identified by the Company on the basis of the information available. Total outstanding dues of Micro and Small enterprises, which are outstanding for more than the stipulated period are given below : Rupees crores 2008 (a) Dues remaining unpaid as at 31st March Principal Interest (b) (c) Interest paid in terms of Section 16 of the Act Amount of interest due and payable for the period of delay on payments made beyond the appointed day during the year (d) (e) Amount of interest accrued and remaining unpaid as at 31st March Further interest due and payable even in the succeeding years, until such date when the interest due as above are actually paid to the small enterprises 0.01 0.10 0.15 0.01 0.01 3.09 0.04 1.50 * 2007

10. (a)

Provision - Others Rs. 126.22 crores (2007 : Rs. 103.82 crores) includes provision for warranty Rs. 106.42 crores (2007 : Rs. 85.32 crores). This relates to warranty provision made in respect of sale of certain products, the estimated cost of which is accrued at the time of sale. The products are generally covered under a free warranty period ranging from 6 months to 3 years. Provision for Contingencies Rs. 8.16 crores (2007 : Rs. Nil) is in respect of labour demands under negotiations at certain locations of the Company. The movement in above provisions is as follows : Rupees crores Warranty 2008 Provisions Balance as at 1st April Add : Provision made during the year Less : Utilisation during the year Balance as at 31st March 85.32 90.78 69.68 106.42 63.21 81.55 59.44 85.32 8.16 8.16 0.78 0.78 2007 Contingency 2008 2007

(b) (c)

11. (a)

Sales include : (i) (ii) Export benefits Rs. 28.64 crores (2007 : Rs. 48.49 crores). Cost of items given for sales promotion/as donations Rs. 0.32 crores (2007 : Rs. 0.34 crores).

(b) 12. (a) (b)

Stock-in-Trade, Property Development Activity, includes completed premises Rs. 3.13 crores (2007 : Rs. 3.13 crores), which, pending sale, have been given out on leave and licence basis for which fresh agreement is under negotiation. Dividends on other investments Rs. 15.01 crores (2007 : Rs. 33.30 crores) are in respect of current investments. Interest on Government Securities, Debentures and Bonds includes tax deducted at source Rs. 0.90 crores (2007 : Rs. 0.94 crores) and comprise Rs. 0.28 crores (2007 : Rs. 1.33 crores) and Rs. 4.59 crores (2007 : Rs. 3.49 crores) in respect of long term and current investments respectively. Interest received - others includes tax deducted at source Rs. 3.91 crores (2007 : Rs. 5.44 crores). Profit on sale of investments (Net) includes profit on disposal of current investments (Net) Rs. 14.72 crores (2007 : Rs. 5.62 crores), and profit on disposal of long term investments (Net) Rs. 14.22 crores (2007 : Rs. Nil).

(c) (d)

13. Repairs and Maintenance includes machinery spares consumed Rs. 22.19 crores (2007 : Rs. 21.10 crores) but does not include items included under Consumption of Raw Materials and Bought-out Components and amounts charged to salaries and wages (amounts not ascertained). * denotes amounts less than Rs. 50,000

90

MAHINDRA & MAHINDRA LIMITED

14. Miscellaneous Expenses include : (a) Amounts paid/payable to Auditors (net of service tax where applicable) : Rupees crores Statutory Auditors (i) (ii) Audit Fees ...................................................................................................................... Company Law matters ................................................................................................... 0.91 0.76 * * 0.74 0.47 Cost Auditors 0.02 0.02 0.01

(iii) Other Services ................................................................................................................ (iv) Reimbursement of expenses : As auditor ......................................................................................................................

0.06 0.01 1.71 1.24

* * 0.02 0.03

The above amounts exclude Rs. Nil (2007 : Rs. 0.35 crores) paid to the Statutory Auditors which is being adjusted against Securities Premium Account being FCCB issue expenses. (b) (c) An amount of Rs. 1.20 crores (2007 : Rs. 0.96 crores) payable as commission to non-wholetime Directors Note 15 and Schedule XV. The cost of property sold including movement in work-in-progress in respect of property development activity are as under : Rupees crores 2008 Opening balance as on 1st April Add : Construction Cost * * Less : Flats Capitalised Less : Cost of Property Development ActivityWorkinProgress as at 31st March * * 2007 1.69 0.11 1.80 1.68 * 1.68 0.12

15. Managerial remuneration for Directors included in the Profit and Loss Account is Rs. 6.78 crores (2007 : Rs. 6.15 crores) including Directors fees of Rs. 0.10 crores (2007 : Rs. 0.10 crores), perquisites Rs. 1.25 crores (2007 : Rs. 1.20 crores) and commission Rs. 3.65 crores (2007 : Rs. 3.41 crores) (See Schedule XV) and excluding charge for gratuity, provision for leave encashment and post retirement medical benefit as separate actuarial valuation figures are not available. The above perquisites include amortisation of Employees Stock Options amounting to Rs. 0.09 crores (2007 : Rs. 0.11 crores). * denotes amounts less than Rs. 50,000

91

16. Employee Defined Benefits : Defined benefit plans as per Actuarial valuation on 31st March, 2008. Gratuity (F unded) (Funded) 2008 I. Expense recognised in the Statement of Profit and Loss Account for the year ended 31st March 1. 2. 3. 4. 5. II. 1. 2. 3. 4. III. Current Service Cost Interest Expected Return on Plan Assets Actuarial (Gain)/Loss Total expense Present value of Defined Benefit Obligation as at 31st March Fair value of plan assets as at 31 March
st

Rupees crores 2007

13.20 14.84 (12.45) (0.62) 14.97 201.76 163.58 (38.18) (38.18) 184.43 13.20 14.84 (0.62) (10.09) 201.76 127.04 12.45 31.45 (7.36) 163.58 12.45 100% 8.05% 9.45% Indian Assured Lives Mortality (1994-96) Modified Ultimate Age 21 to 30 Age 31 to 40 Age 41 to 50 Age 51 & above 10% 5% 3% 2% 201.76 (38.18) 4.67 Age 21 to 44 Age 45 to 60

13.39 13.24 (10.81) (7.97) 7.85 184.43 127.04 (57.39) (57.39) 173.08 13.39 13.24 (8.64) (6.64) 184.43 109.66 10.81 13.21 (6.64) 127.04 10.81 100% 8.20% 9.20%

Net Asset/(Liability) recognised in the Balance Sheet as at 31st March

Funded status [Surplus/(Deficit)] Net Asset/(Liability) as at 31st March

Change in the obligation during the year ended 31st March 1. Present value of Defined Benefit Obligation at the beginning of the year 2. Current Service Cost 3. Interest Cost 4. Actuarial (Gain)/Loss 5. Benefit payments ** 6. Present value of Defined Benefit Obligation at the end of the year

IV . IV.

Change in F air V alue of Assets during the year ended 31st March Fair Value 1. 2. 3. 4. 5. 6. Fair value of plan assets at the beginning of the year Expected return on plan asset Contributions by employer Actual benefits paid Fair value of plan assets at the end of the year Actual return on plan assets

V. VI

The major categories of plan assets as a percentage of total plan Funded with LIC Actuarial assumptions 1. 2. 3. 4. Discount Rate Expected rate of return on plan assets In-Service Mortality Turnover Rate

2% 1%

VII. Experience Adjustments 1. 2. 3. Defined Benefit Obligation Surplus/(Deficit) Experience Adjustment on Plan Liabilities 184.43 (57.39) -

* *Includes benefit payment recoverable Rs. 2.73 crores.

92

MAHINDRA & MAHINDRA LIMITED

Post Retirement Medical Benefits (Unfunded) 2008 I. Expense recognised in the Statement of Profit and Loss Account for the year ended 31st March 1. 2. 3. 4. II. Current Service Cost Interest Actuarial (Gain)/Loss Total expense 0.21 0.28 (0.77) (0.28)

Rupees crores 2007

0.20 0.23 (0.13) 0.30

Net Asset/(Liability) recognised in the Balance Sheet as at 31st March 1. 2. 3. Present value of Defined Benefit Obligation as at 31st March Funded status [Surplus/(Deficit)] Net Asset/(Liability) as at 31st March 2.79 (2.79) (2.79) 3.22 (3.22) (3.22)

III.

Change in the obligation during the year ended 31st March 1. 2. 3. 4. 5. 6. Present value of Defined Benefit Obligation at the beginning of the year Current Service Cost Interest Cost Actuarial (Gain)/Loss Benefit payments Present value of Defined Benefit Obligation at the end of the year 3.22 0.21 0.28 (0.77) (0.15) 2.79 3.08 0.20 0.23 (0.13) (0.16) 3.22

IV . IV.

Change in F air V alue of Assets during the year ended 31st March Fair Value 1. 2. Contributions by employer Actual benefits paid 0.15 (0.15) 0.16 (0.16)

V.

Actuarial assumptions 1. 2. 3. Discount Rate In-Service Mortality Turnover Rate Age Age Age Age 21 31 41 51 8.05% Indian Assured Lives Mortality (1994-96) Modified Ultimate to 30 10% to 40 5% to 50 3% & above 2% Age 21 to 44 Age 45 to 60 2% 1% 8.20%

4. VI.

Medical premium inflation

3.00% One percentage point increase in medical inflation rates 2008 2007 0.09 0.42 One percentage point decrease in medical inflation rates 2008 (0.08) (0.32) 2007 (0.06) (0.40)

Effect of one percentage point change in the assumed medical inflation rate

1. 2.

Effect on the aggregate service and interest cost of Post Employment Medical Benefits Effect on the accumulated Post Employment Medical Benefits Obligations

0.05 0.38

VII. Experience Adjustments 1. 2. 3. Defined Benefit Obligation Surplus/(Deficit) Experience Adjustment on Plan Liabilities 2.79 (2.79) (0.55) 3.22 (3.22) 0.07

93

Basis used to determine expected rate of return on assets : Based on expectation of the average long term rate of return expected on investment of the fund, during the estimated term of obligation. The estimate of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. During the previous year the Company had adopted Accounting Standard (AS) 15 (revised 2005) Employee Benefits. Read with the Accounting Standard Board Guidance on implementing AS 15, Employee Benefits (revised 2005) issued by The Institute of Chartered Accountants of India in May 2007, the Company had (i) (ii) accounted for Rs. 80.90 crores (Net of Tax of Rs. 41.05 crores) as a reduction from Revenue Reserves. accounted as prior period adjustment (Net of Tax) Rs. 19.19 crores being on account of Provision for Gratuity Rs. 25.85 crores Gross arising from certain refinements in the actuarial assumptions and accrual of Post Retirement Medical Benefits on an actuarial basis Rs. 3.08 crores Gross and the resultant tax credit thereon was Rs. 9.74 crores.

17. The Company had allotted 55,24,219 ordinary (equity) shares in the year ended 31st March, 2002, to the Mahindra & Mahindra Employees Stock Option Trust set up by the Company. The trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the Compensation Committee. In respect of options granted prior to 29th September, 2006, the equity settled options vest one year from the date of the grant and are exercisable on specified dates in 3 tranches within a period of 5 years from the date of vesting. The number of options exercisable in each tranche is between the minimum of 100 and a maximum of 1/3rd of the options vested, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised till that date. Options granted on or after 29th September, 2006 vest in 4 equal instalments on the expiry of 12 Months, 24 Months, 36 Months and 48 Months from the date of grant. The options may be exercised on the date of vesting and on specified dates within 5 years from the date of vesting. Number of vested options exercisable on each specified date is subject to a minimum of 50 or number of options vested whichever is lower, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised till that date. The compensation costs of stock options granted to employees are accounted by the Company using the intrinsic value method. Summary of Stock Options No. of stock options Options outstanding on 1st April, 2007 Options granted during the year Options forfeited/lapsed during the year Options exercised during the year Options outstanding on 31st March, 2008 Options vested but not exercised on 31st March, 2008 Average share price on the date of exercise of the options are as under Date of exercise 16 August, 2007
th th th

Weighted average exercise price (Rs.) 345.33 762.00 257.15 264.81 557.33 303.00

28,31,176 16,48,081 2,22,762 6,70,127 35,86,368 14,22,559

Average share price (Rs.) 645.00 748.05 802.50 780.50

st

29 September, 2007 25 October, 2007 5 December, 2007

th

Information in respect of options outstanding as at 31 March, 2008. Range of exercise price Rs. 29.50 - Rs. 61.50 Rs. 215.00 - Rs. 227.00 Rs. 361.00 Rs. 616.00 Rs. 620.00 Rs. 762.00 The fair value of options granted during the year on 31st July, 2007 is Rs. 252.98 per share. 94 Number of options 26,368 10,88,552 27,742 8,35,132 16,08,574 Weighted average remaining life 1.17 yrs 3.14 yrs 3.57 yrs 5.79 yrs 6.83 yrs

MAHINDRA & MAHINDRA LIMITED

The fair value has been calculated using the Black Scholes Options Pricing Model and the significant assumptions made in this regard are as follows : Grant dated , 2007 July, 31 st July Risk free interest rate Expected life Expected volatility Expected dividend yield Exercise price Stock price 7.34% 2.50 Years 53.40% 3.04% 762.00 728.80

In respect of Options granted under the Employee Stock Option plan, in accordance with guidelines issued by SEBI, the accounting value of the options is accounted as deferred employee compensation, which is amortised on a straight line basis over the period between the date of grant of options and eligible dates for conversion into equity shares. Consequently, salaries, wages, bonus, etc. includes Rs. 2.16 crores (2007 : Rs. 1.73 crores) being the amortisation of deferred employee compensation, after adjusting for reversals on account of options lapsed. Had the Company adopted fair value method in respect of options granted on or after 1st April, 2005, the employee compensation cost would have been higher by Rs. 22.93 crores crores, Profit after tax lower by Rs. 22.93 crores and the basic and diluted earning per share would have been lower by Re. 0.96 and Re. 0.90 respectively. 18. The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2008 is Rs. 522.77 crores (2007 : Rs. 363.92 crores). 19. The Commissioner of Central Excise (Adjudication), Navi Mumbai, passed an order on 30th March, 2005, confirming the demand made on the Company for payment of differential excise duty (including penalty) of Rs. 304.11 crores in connection with the classification of Companys Commander range of vehicles, during the years 1991-1996. Whilst the Company had classified the Commander range of vehicles as 10-seater attracting a lower rate of excise duty, the Commissioner of Central Excise (Adjudication), Navi Mumbai, has held that these vehicles could not be classified as 10-seaters and as such attracted a higher rate of excise duty. In earlier proceedings, the Collector of Central Excise, Mumbai as also the Collector Central Excise (Appeals), Mumbai had upheld the classification of these vehicles as 10-seaters. Similarly, certain statutory/expert bodies have also confirmed the concerned vehicles to be 10-seater vehicles. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has also by its order dated 19th July, 2005 upheld this classification. The departments Statutory Appeal against this order has been admitted by the Supreme Court. The Commissioner of Central Excise, Nasik passed another order dated 20th March, 2006 confirming a demand of Rs. 24.75 crores in respect of Companys Armada range of vehicles manufactured during the years 1992 1996, on the same grounds as adopted for Commander range of vehicles. The Company has been legally advised that the aforesaid orders dated 30th March, 2005 and 20th March, 2006 passed by the Commissioners are unsustainable in law. The Tribunal has also given an unconditional stay against both the aforesaid orders. The final hearing in the above matters is awaited. The Company is confident that it would succeed in the case and the Companys stand that the Commander and Armada vehicles are 10-seater vehicles would be upheld. As such, the Company does not expect any liability on this account. 20. Contingent Liability : (a) Guarantees given by the Company : Rupees crores Amount of guarantees Outstanding amounts against the guarantees 2007 1.05 50.95 2008 * 34.37 2007 * 46.94

2008 For employees For other companies *denotes amounts less than Rs. 50,000 1.05 38.10

95

(b)

Claims against the Company not acknowledged as debts comprise of : (i) (ii) Excise Duty, Sales Tax and Service Tax claims disputed by the Company relating to issues of applicability and classification aggregating ax : Rs. 127.24 crores) [2007 : Rs. 52.37 crores (Net of Tax : Rs. 40.12 crores)]. Tax Rs. 184.03 crores (Net of T ax : Rs. 7.61 crores) Other Matters (excluding claims where amounts are not ascertainable) : Rs. 10.73 crores (Net of T Tax [2007 : Rs. 10.27 crores (Net of Tax : Rs. 7.33 crores)]

(iii) Claims on capital account : Rs. 1.18 crores (2007 : Rs. 1.18 crores) (c) (d) Uncalled liability on equity shares partly paid Rs. 10.50 crores (2007 : Rs. 10.50 crores). Taxation matters : (i) Demands against the Company not acknowledged as debts and not provided for, relating to issues of deductibility and taxability in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed : - Income Tax (ii) : Rs. 134.14 crores (2007 : Rs. 140.53 crores). Items in respect of which the Company has succeeded in appeal, but the Income Tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed : - Income Tax matters - Surtax matters (e) : : Rs. 37.96 crores (2007 : Rs. 37.96 crores) Rs. 0.13 crores (2007 : Rs. 0.13 crores)

Bills discounted not matured Rs. 61.22 crores (2007 : Rs. 62.66 crores).

21. Research and Development expenditure debited to the Profit and Loss Account, including certain expenditure based on allocations made by the Company, aggregate Rs. 191.52 crores (2007 : Rs. 145.88 crores) [excluding depreciation Rs. 25.83 crores (2007 : Rs. 20.97 crores)]. 22. The net difference in foreign exchange gain credited to the Profit and Loss Account is Rs. 13.45 crores (2007 : Rs. 2.78 crores). 23. Exceptional items of Rs. 165.20 crores (2007 : Rs. 121.99 crores) comprise of : (a) (b) Profit on sale of certain long term investments Rs. Nil (2007 : Rs. 128.36 crores) after considering a write back of provision for diminution in value of investments and other assets Rs. Nil (2007 : Rs. 29.36 crores). Gain of Rs. 172.73 crores arising from the schemes of arrangement (merger) between the Companys subsidiaries Mahindra Stokes Holding Company Limited (MSHCL), Mahindra Forgings Overseas Limited (MFOL) and Mahindra Forgings Mauritius Limited (MFML) with Mahindra Forgings Limited (MFL); and between Plexion (India) Private Limited with Mahindra Engineering Design and Development Company Limited (MEDDCL) approved by the High Court of Bombay. The schemes are operative from the appointed date of 1st April, 2007. Consequently MFL became a subsidiary of the Company and MSHCL, MFOL, MFML and Plexion (India) Private Limited, ceased to be subsidiaries of the Company. In compliance with Accounting Standard 13 - Accounting for investments, the Company is required to value the additional shares received of MFL and MEDDCL, by referencing them to the fair value of the shares of MSHCL, MFOL, MFML, and Plexion (India) Private Limited respectively, resulting in the gain mentioned above. Amortisation of liability and other retirement benefits made under Voluntary Retirement Schemes aggregating Rs. 7.53 crores (2007 : Rs. 6.37 crores). Rupees crores 2008 Deferred Tax Liability : (i) (ii) On fiscal allowances on Fixed Assets Others 196.65 21.11 217.76 Deferred tax assets : (i) (ii) On Provision for Compensated Absences On Provision for Doubtful Debts/Advances 67.36 13.68 48.67 11.01 20.32 161.04 Net Deferred Tax Liability 56.72 56.34 21.19 67.61 14.61 9.02 168.77 19.79 182.90 5.66 188.56 2007

(c)

24. The components of Deferred T ax Liability and assets as at 31st March, 2008 are as under : Tax

(iii) On Premium on redemption of Zero Coupon Convertible Bonds (iv) On Provision for Employee Benefits (v) Others

96

MAHINDRA & MAHINDRA LIMITED

25. Earnings per Share : 2008 Amount used as the numerator Balance of profit for 2007-2008 (Rupees crores) ..................... (Gain)/Loss on difference in exchange on bonds (Rupees crores) .................................................. Amount used as the numerator for diluted earnings per share (Rupees crores) ............................ Weighted average number of equity shares used in computing basic earnings per share ............. Effect of potential ordinary (equity) shares on conversion of bonds/debentures ........................... Weighted average number of equity shares used in computing diluted earnings per share .......... Basic Earnings per share (Rs.) (Face value of Rs. 10 per share) ...................................................... Diluted Earnings per share (Rs.) ..................................................................................................... 26. Provision for doubtful debts and advances for the year comprises : Rupees crores 2008 Provision for doubtful debts and advances made during the year (Net) (including Rs. Nil (2007 : Rs. Nil) pursuant to the scheme of Arrangement approved by the Honble High Court of Bombay on 12th December, 2003). ............................................................ Less : Transfer from Investment Fluctuation Reserve pursuant to the above scheme of arrangement .................................................................................................................................. Total .............................................................................................................................................. 2007 1,103.37 (42.97) 1,060.40 23,86,22,366 1,67,57,276 25,53,79,642 46.24 41.52 2007 1,068.39 (24.08) 1,044.31 23,66,06,170 1,84,52,109 25,50,58,279 45.15 40.94

(23.59) (23.59)

7.71 7.71

27. Provision for diminution in the value of long term investments for the year comprises : Rupees crores 2008 Provision for diminution in value of investments, made during the year (Net) (including provision of Rs. Nil (2007 : Rs. 10.69 crores) pursuant to the scheme of Arrangement approved by the Honble High Court of Bombay on 12th December, 2003) ............ Less : Transfer from Investment Fluctuation Reserve pursuant to the above scheme of arrangement .................................................................................................................................. Total .............................................................................................................................................. 2007

(5.40) (5.40)

10.69 10.69 -

28. The outstanding derivative instruments as on 31st March, 2008 : The Company has taken forward contracts to hedge exposures arising out of trade payables in foreign currency. Such outstanding forward contracts have been booked for fixing exchange rates between cross currencies like JPY/US$. The amount of hedges is JPY 50.00 crores (2007 : JPY 35.00 crores and EUR 0.20 crores). The export receivables of the Company have been hedged in part by forward contracts AUD 0.35 crores, EUR 1.00 crore and US$ 19.40 crores (2007 : US$ 2.73 crores) and partly US$ 33.75 crores and EUR 1.20 crores (2007 : Nil) by a derivative structure in the form of strips. The foreign currency exposures not hedged by derivative instrument or otherwise as on 31st March, 2008 are Receivables of JPY 4.25 crores, RMB * crores and P ayables of A UD 0.04 crores, CHF * crores, EUR 0.61 crores, GBP 0.05 crores, SEK 0.06 crores, SGD 0.02 crores, US$ 7.84 Payables AUD crores, ZAR 0.12 crores (2007 : Receivables of EUR 4.02 crores, GBP 0.09 crores, AUD 0.15 crores, JPY 2.20 crores, US$ 13.81 crores, RMB 0.01 crores and Payables of CHF * crores, SAR 0.01 crores, SEK 0.03 crores, SGD * crores, ZAR 0.57 crores). The Company has outstanding borrowings of JPY 1,091.74 crores and US$ 11.45 crores (2007 : JPY 539.04 crores and US$ 2.00 crores) as Foreign Currency Loans. The borrowing of JPY 509.44 crores (2007 : JPY 539.04 crores) has been completely hedged using cross currency swap structure fixing the liability into a full fledged rupee liability. The borrowing of JPY 582.30 crores has been fixed to a US$ liability using a cross currency swap structure. The borrowing of US$ 2.00 crores has been hedged using a forward cover. The Company had made an issue of US$ 20.00 crores in the form of Foreign Currency Convertible Bonds in April, 2006. Out of these issues, Bonds of value US$ 20.00 crores (2007 : US$ 20.27 crores) are outstanding and have not been hedged. *denotes amounts less than 50,000 of respective currency. 97

29. Related P arty T ransactions : Party Transactions (a) (i) Related parties where control exist : Subsidiaries : Sl. No. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. Name of the Company Stokes Forgings Limited Stokes Forgings Dudley Limited Plexion Technologies (UK) Limited Plexion Technologies GmbH Plexion Technologies Incorporated Mahindra Lifespace Developers Limited (formerly known as Mahindra Gesco Developers Limited) Mahindra World City (Jaipur) Limited Mahindra World City Developers Limited Mahindra Infrastructure Developers Limited Mahindra Integrated Township Limited Mahindra World City (Maharashtra) Limited PT Tech Mahindra Indonesia Mahindra Forgings International Limited CanvasM Technologies Limited CanvasM (Americas) Incorporated Mahindra Forgings Europe AG (formerly known as JECO Holdings AG) Gesenkschmiede Schneider GmbH JECO-Jellinghaus GmbH Falkenroth Umformtechnik GmbH Mahindra Forgings Global Limited Schneweiss & Co. GmbH Mahindra Hinoday Industries Limited (formerly known as DGP Hinoday Industries Limited) iPolicy Networks Limited MHR Hotel Management GmbH Mahindra Forgings Limited (appointed date 1st April, 2007) Mahindra Rural Housing Finance Limited (w.e.f. 9th April, 2007) Mahindra Hotels and Residences India Limited (w.e.f 26th April, 2007) Ashtamudi Resorts Private Limited (from 9th May, 2007 to 30th June, 2007) Mahindra Automotive Limited (w.e.f. 25th May, 2007) Bristlecone (Malaysia) SDN.BHD (w.e.f. 30th May, 2007) Tech Mahindra (Malaysia) SDN.BHD (w.e.f. 11th June, 2007) Punjab Tractors Limited (w.e.f. 6th July, 2007) Mahindra Castings Private Limited (w.e.f. 30th August, 2007) Mahindra Retail Private Limited (w.e.f. 3rd September, 2007) Mahindra Technology Park Limited (w.e.f. 28th September, 2007) Mahindra Holdings Limited (w.e.f. 2nd November, 2007) Mahindra Logistics Limited (w.e.f. 12th December, 2007) Tech Mahindra (Beijing) IT Services Limited (w.e.f. 21st December, 2007) Mahindra Navistar Engines Private Limited (formerly known as MIM Engines India Private Limited) (w.e.f. 31 st January, 2008) Mahindra Residential Developers Limited (w.e.f. 1st February, 2008) Mahindra Graphic Research Design s.r.l. (w.e.f. 20th February, 2008) Mahindra Aerospace Private Limited (w.e.f. 28th February, 2008) Heritage Bird (M) SDN.BHD (w.e.f. 3rd March, 2008) Mahindra First Choice Services Limited (w.e.f. 24th March, 2008)

Sl. No. Name of the Company 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. Mahindra Engineering and Chemical Products Limited Mahindra Ashtech Limited (up to 3rd January, 2008) Mahindra Logisoft Business Solutions Limited FirstChoice Wheels Limited (formerly known as Automartindia Limited) Mahindra USA Incorporated Mahindra Gujarat Tractor Limited Mahindra (China) Tractor Company Limited Mahindra Shubhlabh Services Limited Mahindra & Mahindra South Africa (Proprietary) Limited Mahindra Europe s.r.l. Mahindra Engineering Design & Development Company Limited Mahindra SAR Transmission Private Limited Mahindra Overseas Investment Company (Mauritius) Limited Mahindra-BT Investment Company (Mauritius) Limited Mahindra Intertrade Limited Mahindra Steel Service Centre Limited Mahindra Middleeast Electrical Steel Service Centre (FZC) Mahindra Holdings & Finance Limited Mahindra Consulting Engineers Limited Mahindra Holidays and Resorts India Limited Mahindra Holidays and Resorts USA Incorporated NBS International Limited Mahindra Ugine Steel Company Limited Mahindra & Mahindra Financial Services Limited Mahindra Insurance Brokers Limited Tech Mahindra Limited Tech Mahindra (Americas) Incorporated Tech Mahindra GmbH Tech Mahindra (Singapore) Pte. Limited Tech Mahindra (Thailand) Limited Tech Mahindra Foundation Tech Mahindra (R & D Services) Limited Tech Mahindra (R & D Services) Incorporated Tech Mahindra (R & D Services) Pte. Limited (upto 7th April, 2007) Bristlecone Limited Bristlecone Incorporated Bristlecone UK Limited Bristlecone India Limited Bristlecone (Singapore) Pte. Limited Bristlecone GmbH Mahindra Renault Private Limited Mahindra International Limited Stokes Group Limited Jensand Limited

98

MAHINDRA & MAHINDRA LIMITED

(b) (i)

Other parties with whom transactions have taken place during the year. Associates : Sl. No. 5. 6. 7. Name of the Company Swaraj Automotive Limited (w.e.f. 3rd July, 2007) Swaraj Engines Limited (w.e.f. 6th July, 2007) Mahindra Renault Nissan Automotive Private Limited (upto 9th March, 2008)

Sl. No. Name of the Company 1. 2. 3. 4. (ii) Mahindra Composites Limited Mahindra Construction Company Limited Owens Cornings (India) Limited Mahindra Water Utilities Limited

Joint Venture : Name of the Company Mahindra Sona Limited

Sl. No. 1.

(iii) Key Management Personnel : Vice Chairman and Managing Director Executive Directors (c) The related party transactions are as under : Rupees crores Sl. No. Nature of T ransactions Transactions 1. Purchases : Goods ....................................................................... Fixed Assets .............................................................. Services ..................................................................... 2. Sales : Goods ....................................................................... Fixed Assets .............................................................. Services ..................................................................... 3. Investments : Purchase ................................................................... Sales/Redemption ..................................................... 4. 5. Share Application Money (Net) ................................. Deputation of Personnel : From Related Parties ................................................. To Related Parties ...................................................... 1.19 (0.29) 11.21 (2.11) * denotes amounts less than Rs. 50,000 99 (-) 0.39 (-) (-) (-) (-) (-) 1,067.46 (609.25) 615.02 (125.82) 9.33 (15.72) 3.00 (182.71) (-) (-) (-) (-) (-) (-) (-) (-) 567.07 (602.46) 0.77 (0.61) 186.25 (30.85) (-) (-) 0.02 (5.83) (-) (-) 0.04 (0.02) (-) (-) (-) 441.75 (226.87) 9.73 (2.50) 85.67 (61.12) 1.59 (55.14) 0.33 (-) (-) 50.51 (39.27) (*) (-) (-) (-) (-) Subsidiaries Associate Companies Joint V entures Ventures Key Management Personnel Mr. Anand Mahindra Mr. B.N. Doshi Mr. A.K. Nanda

Rupees crores Sl. No. Nature of T ransactions Transactions Subsidiaries Associate Companies Joint V entures Ventures Key Management Personnel

6.

Provision for diminution in value of other assets written back .............................................................

(0.03)

(-)

(-)

(-)

7.

Finance : Inter Corporate Deposits given ................................. 56.17 (38.80) Inter Corporate Deposits refunded by parties ........... 8.16 (40.05) Inter Corporate Deposits taken ................................. 25.00 (-) Inter Corporate Deposits refunded to parties ........... 25.00 (-) Interest received ....................................................... 9.59 (9.03) Interest Paid .............................................................. 1.32 (-) Dividend received ..................................................... 65.24 (114.10) Security Deposits Accepted ....................................... 0.57 (-) Security Deposits Paid ............................................... 3.00 (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)

8.

Guarantees & Collaterals given .................................

(32.25)

9.

Other Transactions : Other Income ........................................................... 6.80 (5.61) Other Expenses ......................................................... 8.21 (11.89) Reimbursements received from parties ..................... 315.68 (24.67) Reimbursements made to parties ............................. 174.37 (19.17) Advance given .......................................................... 4.84 (237.53) Advance refunded .................................................... 236.55 (9.00) (6.17) (1.73) 0.02 (0.34) (0.19) (-) (-) 0.02 (0.05) (*) 0.06 (0.03) (-) (-) (-) (-) (-) (-) (-) (-) (-)

* denotes amounts less than Rs. 50,000

100

MAHINDRA & MAHINDRA LIMITED

Rupees crores Sl. No. Nature of T ransactions Transactions Subsidiaries Associate Companies Joint V entures Ventures Key Management Personnel

10.

Outstandings : Payable ..................................................................... 70.70 (28.57) Receivable ................................................................. 180.37 (321.24) Debenture issued by parties ..................................... 30.00 (30.00) Inter Corporate Deposits given ................................. 64.95 (17.09) Guarantees & Collaterals given ................................. 34.37 (46.94) Security Deposit Paid ................................................ 3.00 (0.05) 0.65 (3.95) 3.09 (2.97) (-) 4.59 (4.59) (-) (-) (-) 6.69 (6.69) (-) (-) (-) 8.97 (9.23) 0.02 (0.02) (-) (-) (-) (-) (-) (-) (-) (-) (-) 2.46 (2.46) (-) (-) (-) (-) 5.39 (4.98) 0.17 (0.77) (-) (-) (-) 0.05 (0.05)

11.

Managerial Remuneration .........................................

(-)

12.

Dividends ..................................................................

(-)

13.

Provision for diminution in value of other assets .....

4.37 (5.62)

14.

Provision for doubtful debts/advances ......................

1.62 (1.62)

15.

Share Application Money .........................................

9.33 (15.72)

16.

Stock Options ...........................................................

(-)

Previous years figures are given in brackets. The previous year figures are suitably regrouped.

101

The significant related party transactions are as under Rupees crores Nature of T ransactions Subsidiaries Transactions 1. Purchase Goods Mahindra Intertrade Limited Mahindra SAR Transmission Pvt. Limited Mahindra Hinoday Industries Limited Mahindra Forgings Limited 2. Sale Goods Mahindra USA Incorporated Mahindra International Limited Amount 232.20 (159.05) (29.19) 46.98 (-) 60.36 (-) 178.05 (175.69) 98.30 (114.92) Associate Companies Mahindra Composites Limited Mahindra Forgings Limited Amount 1.58 (-) (53.62) Joint V entures Ventures Mahindra Sona Limited Amount 50.51 (39.27)

Mahindra & Mahindra 100.99 South Africa (Proprietary) Limited (196.19) Mahindra Europe s.r.l. 3. Sale Services Mahindra International Limited Mahindra Renault Private Limited 4. Investment Purchase Mahindra Forgings Limited Mahindra Renault Private Limited Mahindra Automotive Limited Mahindra Forgings Overseas Limited Mahindra Forgings Mauritius Limited Mahindra Holdings & Finance Limited 5. Investments Sales Mahindra Holdings & Finance Limited Mahindra Stokes Holding Company Limited Mahindra Forgings Limited Mahindra Castings Private Limited 6. Investments Redemption Mahindra & Mahindra Financial Services Limited Mahindra Lifespace Developers Limited Mahindra Holdings & Finance Limited *denotes amounts less than Rs. 50,000 102 115.65 (-) 47.76 (7.08) 114.37 (11.37) 688.61 (-) (103.21) 124.75 (-) (286.50) (78.16) (25.00) (4.97) (40.86) 468.54 (-) 105.20 (-) 4.00 (-) (55.00) (25.00) Swaraj Automotive Limited Swaraj Engines Limited Mahindra Forgings Limited Mahindra Lifespace Developers Limited Mahindra Renault Nissan Automotive Private Limited * (-) 0.01 (-) (48.50) (134.21) 3.00 (-) Mahindra Sona Limited 0.04 (0.02)

MAHINDRA & MAHINDRA LIMITED

Rupees crores Nature of T ransactions Transactions 7. Share Application Money (Net) Subsidiaries Mahindra Overseas Investment Company (Mauritius) Limited Mahindra Automotive Limited Mahindra Navistar Engines Private Limited 8. Advances Given Mahindra Forgings Overseas Limited Mahindra Forgings Mauritius Limited Mahindra Renault Private Limited Mahindra Ugine Steel Company Limited 9. Inter Corporate Deposits given Mahindra Overseas Investment Company (Mauritius) Limited Bristlecone Limited Mahindra Shubhlabh Services Limited 10. Inter Corporate Deposits refunded by parties Mahindra Intertrade Limited Mahindra Overseas Investment Company (Mauritius) Limited Mahindra Ashtech Limited 11. Guarantees given Mahindra Overseas Investment Company (Mauritius) Limited Amount (15.72) 5.50 (-) 3.83 (-) (119.38) (118.16) 0.75 (-) 4.09 (-) (32.80) 40.82 (-) 8.25 (-) 1.56 (-) (32.80) 6.50 (-) (32.25) Associate Companies Amount Joint V entures Ventures Amount

30. Joint V enture Disclosure Venture i) Jointly Controlled Entities by the Company : Name of the Entity Country of Incorporation India India

% Holding 29.77 % 18.06 %

a) b)

Mahindra Sona Limited* ................................................................ PSL Erickson Limited* .....................................................................

* Shareholding is through a subsidiary, Mahindra Holdings & Finance Limited.

103

ii)

Interests in the Assets, Liabilities, Income and Expenses with respect to Jointly Controlled Entities. Rupees crores 2008 I. AS SETS ASSETS 1. 2. 3. Fixed Assets ............................................................................................ Investment ............................................................................................. Current Assets, Loans and Advances a) b) c) d) 4. II. Inventories ..................................................................................... Sundry Debtors .............................................................................. Cash and Bank Balances ................................................................ Loans and Advances ...................................................................... 5.97 11.21 2.06 1.30 0.32 4.06 11.91 2.42 1.15 0.41 6.54 0.05 4.87 0.03 2007

Deferred Tax Net .................................................................................

LIABILITIES 1. Loan Funds a) b) 2. Secured Loans ................................................................................ Unsecured Loans ............................................................................ 1.88 2.23 0.50

Current Liabilities and Provisions a) b) Liabilities ........................................................................................ Provisions ....................................................................................... 8.07 1.96 6.09 2.68

III.

INCOME 1. 2. Sales ...................................................................................................... Other Income ......................................................................................... 46.95 1.60 49.92 1.14

IV . IV.

EXPENSES 1. 2. 3. 4. 5. Raw Materials, Finished and Semi Finished Products ............................. Excise Duties .......................................................................................... Manufacturing, Selling Expenses, etc. .................................................... Depreciation/Amortisation ...................................................................... Provision for Taxation ............................................................................. 27.30 5.00 10.51 0.60 1.88 28.55 4.11 10.51 0.57 2.40

V.

OTHER MA T TERS MAT 1. 2. Contingent Liabilities .............................................................................. Capital Commitments ............................................................................ 3.53 0.60 3.39 0.12

31. Additional information pursuant to the provisions of paragraphs 3(i)(a) and (ii), 4C and 4D of Part II of Schedule VI to the Companies Act, 1956 - See Schedule XVI. Previous years figures are indicated below the current years figures. 32. Additional information pursuant to the provisions of Part IV of Schedule VI to the Companies Act, 1956 - See Schedule XVII. 33. Previous years figures have been regrouped/restated wherever necessary.

104

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XV
Computation of Net Profit in accordance with Section 309(5) of the Companies Act, 1956 for the year ended 31st March, 2008
Rupees crores 2008 Profit before Taxation as per Profit and Loss Account ...................................................... Add : Depreciation charged in the Accounts ................................................................. : Directors Remuneration including Directors fees ............................................... : Provision for doubtful debts and advances (Net) ................................................. : Profit on sale of Fixed Assets as per Section 349 (3)(d) of the Companies Act, 1956 (Net) ................................................................................. : Loss on sale, etc. of Fixed Assets (Net) ................................................................ : Net reduction in the fair value of current investments ........................................ : Voluntary Retirement Schemes amortisation included in Exceptional Item .......... : Provision for diminution in value of long term investments (Net) ....................... 238.66 6.78 (23.59) 2.82 (1.74) 7.53 (5.40) 225.06 1,631.83 Less : Depreciation under Section 350 of the Companies Act, 1956 ............................ : Amortisation of Intangibles ................................................................................. : Profit on sale of Investments (Net) ...................................................................... : Prior Period Adjustments Gross of Tax (Refer Note 16) ........................................ : Profit arising on merger between Companys Subsidiaries (Refer Note 23 (b)) ... : Loss on sale of Fixed Assets as per Section 349 (3)(d) of the Companies Act, 1956 (Net) ................................................................................. 192.01 19.37 28.94 172.73 1.71 414.76 Total...... ................................................................................................................. Commission payable to the wholetime Directors restricted to ............................... Commission payable to the non-wholetime Directors restricted to ........................ 1,217.07 2.45 1.20 1,406.77 2007 1,437.68 209.59 6.15 7.71 0.04 1.73 2.36 6.37 233.95 1,671.63 175.90 12.29 133.98 28.93 351.10 1,320.53 2.45 0.96

105

SCHEDULE XVI
Additional Information pursuant to the Provisions of P aragraphs 3 (i)(a) and (ii), 4C and 4D, of P art II of Schedule VI to the Companies Act, 1956. Paragraphs Part (A) PARTICULARS IN RESPECT OF GOODS MANUF ACTURED : MANUFACTURED Sl. Class of Goods No. Unit of Measurement Licensed Capacity per annum [Note (i)] Installed Capacity per annum [Note (i)] Actual Production [Notes (ii) & (iii)(a)]

1.

a.

On Road Automobiles having four or more wheels such as light, medium and heavy commercial vehicles, jeep type vehicles and passenger cars covered under sub heading (5) of Heading (7) of First Schedule Three Wheelers Agricultural Tractors [Note (v) below] Tractor Skids

Nos. Nos. Nos.

b. 2. a. b.

2,76,000 2,76,000 1,11,000 80,000 1,89,000 1,69,000

2,29,000 1,92,000 54,000 54,000 1,73,000 1,58,000 These are manufactured against spare capacity under 2(a) These are manufactured against spare capacity under 1 and 2 above

1,62,400 1,34,665 34,556 34,892 95,301 1,01,202

3.

Manufactured and Purchased Parts and Accessories for sale [Notes (iii)(a) and (b) below]

Nos.

3,616 2,645

4. 5. 6. 7. 8.

Internal Combustion Piston Engines Parts and accessories of motor vehicles Internal Combustion Engine D.G. Sets Engines

Nos. Nos. Nos. Nos. Nos.

1,75,000 1,10,000 5,00,000 5,00,000 60,000 50,000 24,000 24,000

1,36,000 1,10,000 1,25,000 1,25,000 54,000 39,000 Assembly at 3rd Party Locations These are manufactured against spare capacity under 2(a)

2,42,709 1,64,225 1,29,236 1,00,076 80,967 104,971 47,597 36,973 16,943 8,877

15,129 15,180

9.

Export benefits

Notes : (i) (a) (b) (c) (d) (e) The installed capacity has been certified by Presidents, which the auditors have relied on without verification as this is a technical matter. The licensed capacities include/represent, as the case may be, registrations granted and Industrial Entrepreneur Memorandum filed with, and duly acknowledged by, the Government pursuant to the schemes of de-licensing. [Also see note (v) below]. Within the overall licensed capacity in item 1 above, the Company is permitted to manufacture for outside sale 10,000 petrol/diesel engines and 4,000 tonnes grey iron castings. Bullet proof work and fabrication on base vehicles has been carried out at third party facilities. 38 (2007 : 190) vehicles were produced and sold using such third party facilities and are included in item (A) 1(a). The installed capacity mentioned against item no. (A) 1(a) above includes 48,000 (2007 : 42,000) for production of vehicles for third parties.

106

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVI

(Contd.)

Opening Stock Quantity Value Rupees crores Quantity

Closing Stock Value Rupees crores Quantity

Sales Value Rupees crores

4,473 5,869 2,312 1,157 7,163 5,846

179.74 204.49 26.63 15.60 164.73 132.67

5,826 4,473 2,753 2,312 7,053 7,163

256.52 179.74 29.28 26.63 187.26 164.73

1,60,636 1,35,707 34,076 33,718 95,370 99,797

7,409.92 6,373.48 398.98 405.72 3,133.96 3,093.00

119 120

4.22 5.80

168 119

6.61 4.22

3,546 2,637

133.55 120.16

917 379 70 6 90 66 97 1

62.97 61.12 2.92 3.74 0.03 0.01 1.23 0.01

1,162 917 12 70 107 90 115 97

82.01 62.97 8.15 2.92 0.02 0.03 2.04 1.23

13,836 11,411 1,519 2,532 16,925 8,781

576.86 451.95 125.85 106.80 2.02 3.53 367.08 175.19

226 310

1.24 1.69

439 226

2.79 1.24

14,916 15,264

140.35 123.38 28.64 48.49 Total..... 12,317.21 10,901.70

(ii)

Actual Production includes production for captive consumption. The actual production disclosed against manufactured components/sub-assemblies/steel blanks is the number of such components transferred during the year to the Marketing Unit/Spare Parts Stores for sale or sold otherwise. The Opening and Closing Stocks and Sales of goods shown under item 3 above consist of manufactured and purchased parts. The bifurcation of stocks/sales into manufactured and bought-out parts is not practicable.

(iii) (a) (b)

(iv) With regard to clause 3(ii) of Part II of Schedule VI to the Companies Act,1956, the Company is of the view that, in respect of the property development activity, the Company is not a manufacturing, a trading or a service company falling under sub-clause (a), (b) and (c) thereof, but it is an other company falling under sub-clause (e) thereof. (v) Licensed capacity in respect of Agricultural Tractor includes a Letter of Intent from the Government of India for expansion of the manufacturing capacity from 25,000 to 60,000 tractors at Mumbai subject to fulfillment of conditions mentioned therein; an Industrial License will be issued on fulfillment of the conditions mentioned in the Letter of Intent. 107

SCHEDULE XVI
(B)

(Contd.)

PARTICULARS IN RESPECT OF GOODS TRADED : Purchases Opening Stock Closing Stock Sales

Sl. No. Class of Goods

Unit of Measurement

Quantity

Value Rupees crores

Quantity

Value Quantity Rupees crores

Value Quantity Rupees crores

Value Rupees crores

1. 2. 3 4.

Tractors ............................................... Agricultural Implements ...................... Light Commercial Vehicles .................. Bought-out Spares for Resale [Note (iii)(b) to item A] ...................... Others ................................................. Total .... Note (v) to item (A).

Nos. Nos. Nos.

113 109 9,585 6,588 365 254

2.99 3.88 24.79 17.67 13.63 9.61 275.88 217.94 1.90 0.70 319.19 249.80

33 41 1,645 1,006 -

1.13 1.26 3.50 1.56 4.63 2.82

36 33 2,230 1,645 -

1.13 1.13 3.62 3.50 4.75 4.63

110 97 9,000 5,860 365 254

4.64 4.61 30.53 22.24 16.07 10.94 2.58 1.01 53.82 38.80

5.

(C)

PARTICULARS OF RAW MA TERIALS AND COMPONENTS CONSUMED : MATERIALS Unit of Measurement Nos. Sq.F eet Sq.Feet Metric T onnes Tonnes Value Rupees crores

Sl. No. Description 1. Steel Items (Sheets, Tubes, etc.) .............................................................................

Quantity 73,444 77,909 62 76 53,355 56,693

}
}

206.56 213.87

2.

Aluminium Sections and Other Aluminium Items ..................................................

Metric T onnes Tonnes Kgs.

0.03 13 93,757 88,533

1.27 1.34

3.

Other Metals (Steel Shots, Lead, Tin, etc.) .............................................................

Metric T Tonnes onnes

95.38 66.63

0.31

4.

Paints .....................................................................................................................

Nos. Kgs. Litres

5,26,015 34,936 2,071,338 1,624,099 2,687,054 2,672,994

0.27

62.27 58.39

5.

Steel Scrap .............................................................................................................

Metric T onnes Tonnes

6,026 4,398

11.87 7.17

108

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVI
(C) Sl. No. Description 6.

(Contd.)

PARTICULARS OF RAW MA TERIALS AND COMPONENTS CONSUMED (Contd.) : MATERIALS Unit of Measurement Metric T onnes Tonnes Quantity 2,787 1,839 Value Rupees crores 5.18 2.74

Pig Iron ..................................................................................................................

7.

Miscellaneous Foundry Materials ............................................................................

Nos. Metric T onnes Tonnes Litres

1,545,042 1,205,714 9,400 6,678 3,07,209 1,90,194

7.89 4.87

8.

Other Materials (Direct Stores, Patterns, Oils, etc.) ................................................

Not practicable to give quantitative details

*61.67 *57.18

9.

Tyres and Tubes ......................................................................................................

Nos.

*2,469,329 *2,240,763

*393.28 *357.55

10. Components other than Tyres and Tubes (including processing charges) .............. 11. Material handling and transportation charges, etc. incurred on the above items not separately allocable .......................................................... Total ... * Includes items used for other than production, amounts not ascertained. Notes : (i) (ii)

*6,488.63 *5,598.04 316.90 283.11 7,555.83 6,584.53

The consumption in value has been ascertained on the basis of opening stock plus purchases less closing stock and includes the adjustment of excesses and shortages as ascertained on physical count and write-off of obsolete and unserviceable raw materials and components. The consumption in value shown against item 10 is a balancing figure based on the total consumption shown in the Profit and Loss Account.

(D) VAL UE OF IMPORTS ON C.I.F . BASIS ACCOUNTED FOR DURING THE YEAR : ALUE C.I.F. Rupees crores 2008 1. 2. 3. 4. Raw Materials ................................................................................................ Components, Spare Parts, etc. ....................................................................... Capital Goods ................................................................................................ Items imported for Resale .............................................................................. Total.. Notes : (i) Credits, if any, recoverable in respect of short landings, etc. are not considered. (ii) The value of imports shown above includes : (a) Imports on C&F basis as per suppliers invoices Rs. 2.91 crores (2007 : Rs. 16.01 crores) (b) Imports on cost basis Rs. 184.17 crores (2007 : Rs. 130.58 crores) 4.63 121.11 144.70 8.57 279.01 2007 17.96 107.46 82.72 8.00 216.14

109

SCHEDULE XVI
(E)

(Contd.) Rupees crores 2008 2007 18.59 15.54 0.07 15.98 46.93 97.11

EXPENDITURE IN FOREIGN CURRENCIES (SUBJECT TO DEDUCTION OF T AX WHERE APPLICABLE) : TAX

1. 2. 3. 4. 5.

Professional and Consultancy Fees [including Rs. 2.30 crores (2007 : Rs.0.40 crores) capitalised] ...................... Commission on Exports ................................................................................. Royalty ........................................................................................................... Interest ........................................................................................................... Others ............................................................................................................ Total ...

26.24 22.76 0.06 46.65 57.71 153.42

Notes : (1) Fee for use of technology, development expenditure and software expenditure [refer to in Note 1 (B)] : (a) written off during the year Rs. 9.05 crores (2007 : Rs. 2.65 crores); and (b) amount remitted during the year Rs. 31.23 crores (2007 : Rs. 18.45 crores) net of tax deducted at source Rs. 1.33 crores (2007 : Rs. 1.82 crores) are not included in the above figures. (F) REMIT TANCE IN FOREIGN CURRENCY ON ACCOUNT OF DIVIDENDS TO NON-RESIDENT SHAREHOLDERS : REMITT Number of Shareholders Equity shares Rupees crores 2008 : 4 2007 : 5 1,318 4,87,984 * 0.49 Year ended 31st March, 2007 Year ended 31st March, 2006 Amount remitted Dividend relating to

(G) EARNINGS IN FOREIGN EX CHANGE : EXCHANGE Rupees crores 2008 1. 2. 3. Export of goods on F.O.B. basis ..................................................................... Interest ........................................................................................................... Others (freight, etc.) ...................................................................................... Total ... Notes : F.O.B. value of exports includes local sales which qualify for export benefits and for which payment is receivable in foreign currency and local/ export sales under rupee credit which qualify for export benefits. (H) VAL UE OF IMPORTED AND INDIGENOUS CONSUMPTION : ALUE ^Raw Materials and Components Rupees crores 1. 2. Imported ..................................... Indigenously obtained ................ Total .... ^ Includes items used for other than production, amount not ascertained. Notes : (1) Items purchased through canalising agencies have been considered as imported. (2) See Note (i) to item (C). (3) In giving the above information the Company has taken the view that spares and components as referred to in paragraph 4 (D)(c) of Part II of Schedule VI covers only such items as go directly into production. * denotes amounts less than Rs. 50,000 110 120.88 134.56 7,434.95 6,449.97 7,555.83 6,584.53 % 1.60 2.04 98.40 97.96 100.00 100.00 795.38 38.90 49.28 883.56 2007 614.96 51.86 46.05 712.87

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVII
ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956. Balance Sheet Abstract & Companys General Business Profile : I. Registration Details : Registration No. Balance Sheet Date 4 5 5 8 3 1 Date 0 3 Month 2 0 0 8 Year State Code 1 1

II.

Capital raised during the Y ear (Amount in Rs. Thousands) : Year Public Issue Rights Issue

N I L
Bonus Issue Private Placement

N I L

N I L
III. Position of Mobilisation and Deployment of F unds (Amount in Rs. Thousands) : Funds Total Liabilities including Shareholders Funds Total Assets

N I L

0 4 0 5 9 0 1 7

1 0 4 0 5 9 0 1 7
Reserves & Surplus

Sources of F unds : Funds Paid-up Capital

2 3 9 0 7 3 4
Secured Loans

4 1 1 0 9 9 8 1
Unsecured Loans

6 1 7 2 5 3 3
Deferred Tax Liability (Net)

1 9 6 9 8 0 1 4

5 6 7 2 6 7
Application of F unds : Funds Net Fixed Assets

2 3 6 0 8 9 8 6
Investments Net Current Assets

4 2 1 5 0 6 1 5
Miscellaneous Expenditure

4 0 4 3 6 3 8
Accumulated Losses

1 3 5 2 9 0
IV . IV. Performance of Company (Amount in Rs. Thousands) : Turnover (Sales & Other Income) Total Expenditure

N I L

1 3 4 7 4 1 0 8 5
+ - Profit/Loss Before Tax

1 2 0 6 7 3 3 4 8
+ Profit/Loss After Tax

1 4 0 6 7 7 3 7

1 1 0 3 3 7 3 7

Earnings per Share in Rupees Basic Diluted

Rs. 46.24 Rs. 41.52

Dividend Rate %

1 1 5

(Refer Note 25)

111

SCHEDULE XVII (Contd.)

V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) : Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description

8 7 0 1 Tractors 8 7 0 2 Motor Vehicles for the transport of more than six persons, excluding the driver 8 7 0 3 Other motor vehicles principally designed for the transport of persons

after considering exceptional item after considering the provision for contingencies and exceptional item. computed on the basis of, the weighted average number of shares outstanding during the year. Signatures to Schedules I to XVII Deepak S. P arekh Parekh N. V aghul Vaghul R. K. K ulkarni Kulkarni A. S. Ganguly A. P . Puri P. N. B. Godrej

Keshub Mahindra Directors Anand G. Mahindra Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2008

Narayan Shankar

112

MAHINDRA & MAHINDRA LIMITED

Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies
The net aggregate of profits/(losses) of the Number of Subsidiary Companies so far as they concern the members of Shares in the Mahindra & Mahindra Limited Subsidiary Company held For Current Financial Year For Previous Financial Years by Mahindra & Mahindra Limited at the Dealt with in Not dealt Dealt with in Not dealt financial year the accounts with in the the accounts with in the ending date of Mahindra & accounts of of Mahindra & accounts of Mahindra Mahindra & Mahindra Mahindra & Limited for Mahindra Limited for Mahindra the year Limited for the year Limited for Equity Extent ended 31st the year ended 31st the year of March, 2008 ended 31st March, 2008 ended 31st holding March, 2008 March, 2008 Nos. 53,78,235 2,71,00,006 37,23,874 14,66,00,593 % 100.00% 100.00% 100.00% 90.00% 61.00% 100.00% 51.00% #93.64% #70.23% #93.64% #93.64% #93.64% 100.00% 50.69% 100.00% Rupees crores 21.99 Rupees crores 10.12 (10.58) 45.09 4.42 2.54 106.98 0.36 75.40 (0.02) 3.20 (0.01) (0.09) 14.94 0.01 Rupees crores 24.04 0.83 0.67 Rupees crores 57.64 53.61 1.26 6.38 198.89 0.46 70.52 0.44 1.05 86.78 -

Name of the Subsidiary Companies

Mahindra Engineering and Chemical Products Limited _ Mahindra Retail Private Limited .......................... Mahindra Intertrade Limited .................................. @ Mahindra Middleeast Electrical Steel Service Centre (FZC) ....................................................... Mahindra Steel Service Centre Limited ................... Mahindra Holdings & Finance Limited ................... Mahindra Consulting Engineers Limited ............. Mahindra Holidays and Resorts India Limited .... + MHR Hotel Management GmbH ........................ + Mahindra Holidays and Resorts USA Incorporated + Mahindra Hotels and Residences India Limited .. + Heritage Bird (M) SDN.BHD ............................... NBS International Limited .................................. Mahindra Ugine Steel Company Limited ............ Mahindra Holdings Limited ................................ Mahindra Lifespace Developers Limited (formerly known as Mahindra Gesco Developers Limited) ............................................... Mahindra Infrastructure Developers Limited ...... Mahindra World City Developers Limited ........... Mahindra World City (Jaipur) Limited ................ Mahindra Integrated Township Limited ............. Mahindra Residential Developers Limited ........... Mahindra World City (Maharashtra) Limited ...... Mahindra Technology Park Limited .................... Mahindra & Mahindra Financial Services Limited ... Mahindra Insurance Brokers Limited .................. Mahindra Rural Housing Finance Limited ........... * denotes amount less than Rs. 50,000

1,54,01,126 5,82,41,532 -

51.08% 40.87% 42.21% 37.80% 48.78% 48.77% 51.08% 51.08% #60.10% #60.10% #60.10%

33.40 (0.10) 4.82 (0.30) (0.09) (0.01) * (0.10) 106.39 2.98 (0.36)

2.31 11.65 -

12.14 0.22 6.64 (0.83) (0.21) (0.03) 196.11 5.10 -

113

Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies (Contd.)
The net aggregate of profits/(losses) of the Number of Subsidiary Companies so far as they concern the members of Shares in the Mahindra & Mahindra Limited Subsidiary Company held For Current Financial Year For Previous Financial Years by Mahindra & Mahindra Limited at the Dealt with in Not dealt Dealt with in Not dealt financial year the accounts with in the the accounts with in the ending date of Mahindra & accounts of of Mahindra & accounts of Mahindra Mahindra & Mahindra Mahindra & Limited for Mahindra Limited for Mahindra the year Limited for the year Limited for Equity Extent ended 31st the year ended 31st the year of March, 2008 ended 31st March, 2008 ended 31st holding March, 2008 March, 2008 Nos. Tech Mahindra Limited .......................................... Tech Mahindra (Americas) Incorporated ............ Tech Mahindra GmbH ........................................ Tech Mahindra Singapore Pte. Limited ............... Tech Mahindra (Thailand) Limited ...................... PT Tech Mahindra Indonesia .............................. Tech Mahindra (R&D Services) Limited ............... o Tech Mahindra (R&D Services) Incorporated ...... CanvasM Technologies Limited ........................... CanvasM (Americas) Incorporated ...................... iPolicy Network Limited ...................................... Tech Mahindra Foundation ................................ Tech Mahindra (Malaysia) SDN.BHD ................... Tech Mahindra (Beijing) IT Services Limited ........ Bristlecone Limited.. ~ Bristlecone Incorporated .................................... ~ Bristlecone India Limited .................................... Bristlecone (Singapore) Pte. Limited ................... Bristlecone GmbH .............................................. ~ Bristlecone UK Limited ....................................... ~ Bristlecone (Malaysia) SDN.BHD ......................... Mahindra Logisoft Business Solutions Limited ....... FirstChoice Wheels Limited (formerly known as Automartindia Limited) .......... Mahindra USA Incorporated .................................. Mahindra Gujarat T ractor Limited .......................... Tractor Mahindra Shubhlabh Services Limited ................... Mahindra & Mahindra South Africa (Proprietary) Limited .................................................................. 5,37,76,252 42,22,250 63,49,500 2,26,25,348 4,50,00,000 16,83,218 1,48,33,793 35,70,000 % 48.97% 48.97% 48.97% 48.97% 48.97% 48.97% 48.97% 48.97% 39.23% 39.23% 48.97% 48.97% 48.97% 48.97% 82.08% 82.08% 82.08% 82.08% 82.08% 82.08% 82.08% 100.00% #72.28% 100.00% 60.00% 77.31% 51.00% Rupees crores 1.04 Rupees crores 167.55 5.14 0.99 0.66 0.26 0.53 (2.95) 0.49 (0.95) 0.06 (1.99) (0.41) 0.02 (0.12) (2.49) (20.89) 0.11 (0.94) (1.13) (5.15) 0.48 1.48 (15.75) 1.70 0.74 (1.44) (3.73) Rupees crores Rupees crores 304.41 (3.34) (15.04) 1.70 0.04 9.50 1.10 0.17 (2.09) 0.41 (3.38) (7.67) 4.40 (0.24) 0.84 (0.69) (5.08) (15.40) 22.23 (16.78) (19.98) 11.02

Name of the Subsidiary Companies

114

MAHINDRA & MAHINDRA LIMITED

Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies (Contd.)
Number of Shares in the Subsidiary Company held by Mahindra & Mahindra Limited at the financial year ending date The net aggregate of profits/(losses) of the Subsidiary Companies so far as they concern the members of Mahindra & Mahindra Limited For Current Financial Year Dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2008 Rupees crores Not dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2008 Rupees crores (1.29) (12.89) 0.02 1.66 (0.44) 0.46 23.13 1.92 0.02 (0.49) (8.58) 0.93 (0.05) (5.11) (1.07) 13.85 (10.50) 9.02 0.98 5.52 6.97 (21.75) (2.22) 0.77 (5.40) For Previous Financial Years Dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2008 Rupees crores 0.75 Not dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2008 Rupees crores (1.31) (24.92) 1.94 0.18 0.13 21.13 0.30 (0.09) (0.58) 0.01 (0.19) (0.27) (4.25) (1.10) 0.82 (2.21) 0.14 8.13 2.03 1.22 (24.36) (1.86) 0.04

Name of the Subsidiary Companies

Equity

Extent of holding % 100.00% 83.74% 57.00% 80.00% 100.00% 60.26% 100.00% 100.00% 100.00% 100.00% 60.56% 60.43% 60.43% 60.43% 60.43% 60.56% 60.56% 60.56% 60.56% 60.56% 60.56% 60.56% 51.00% 51.00% 65.00% #42.96%

Nos. Mahindra Overseas Investment Company (Mauritius) Limited .................................................................. Mahindra (China) Tractor Company Limited ....... Mahindra-BT Investment Company (Mauritius) Limited ............................................................... Mahindra Europe s.r.l. ....................................... Mahindra Graphic Research Design s.r.l. ............ Mahindra SAR T ransmission Private Limited ........... Transmission Mahindra Engineering Design & Development Company Limited ................................................... @ Plexion Technologies (UK) Limited ...................... @ Plexion Technologies GmbH ............................... @ Plexion Technologies Incorporated ..................... Mahindra F orgings Limited .................................... Forgings Stokes Group Limited.. .. Stokes Forgings Dudley Limited ......................... Jensand Limited ................................................. a Stokes Forgings Limited ..................................... Mahindra Forgings Global Limited. 2,23,40,000 45,53,739 81,26,218 4,15,26,329 10,16,24,232 5,03,75,600 1,64,87,602 -

Schneweiss & Co. GmbH .................................

Mahindra Forgings International Limited ........... P Mahindra Forgings Europe AG (formerly known as JECO Holdings AG) ............. Gesenkschmiede Schneider GmbH ..................... JECO-Jellinghaus GmbH ..................................... Falkenroth Umformtechnik GmbH ..................... Mahindra Renault Private Limited .......................... Mahindra International Limited ............................. Mahindra Castings Private Limited ......................... ~ Mahindra Hinoday Industries Limited (formerly known as DGP Hinoday Industries Limited)

115

Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies (Contd.)
Number of Shares in the Subsidiary Company held by Mahindra & Mahindra Limited at the financial year ending date The net aggregate of profits/(losses) of the Subsidiary Companies so far as they concern the members of Mahindra & Mahindra Limited For Current Financial Year Dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2008 Rupees crores Not dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2008 Rupees crores (2.32) 39.97 (0.01) (0.08) (0.12) For Previous Financial Years Dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2008 Rupees crores Not dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2008 Rupees crores -

Name of the Subsidiary Companies

Equity

Extent of holding % 100.00% 64.64% 100.00% 51.00% 100.00% 100.00%

Nos. Mahindra Automotive Limited ............................... Punjab T ractor Limited ........................................... Tractor Mahindra Logistics Limited .................................... Mahindra Navistar Engines Private Limited (formerly known as MIM Engines India Private Limited) Mahindra Aerospace Private Limited ...................... Mahindra First Choice Services Limited .................. 12,48,00,000 3,84,76,510 50,000 5,10,000 50,000 50,000

# after considering shares issued to its ESOP Trust but not allotted to its employees. _ a subsidiary of Mahindra Engineering and Chemical Products Limited @ a subsidiary of Mahindra Intertrade Limited a subsidiary of Mahindra Holdings & Finance Limited + a subsidiary of Mahindra Holidays and Resorts India Limited a subsidiary of Mahindra Lifespace Developers Limited a subsidiary of Mahindra Integrated Township Limited a subsidiary of Mahindra & Mahindra Financial Services Limited a subsidiary of Tech Mahindra Limited o a subsidiary of Tech Mahindra (R&D Services) Limited a subsidiary of CanvasM Technologies Limited ~ a subsidiary of Bristlecone Limited a subsidiary of Bristlecone India Limited a subsidiary of Mahindra Overseas Investment Company (Mauritius) Limited @ a subsidiary of Mahindra Engineering Design & Development Company Limited a subsidiary of Mahindra Forgings Limited a subsidiary of Stokes Group Limited a a subsidiary of Jensand Limited a subsidiary of Mahindra Forgings Global Limited P a subsidiary of Mahindra Forgings International Limited a subsidiary of Mahindra Forgings Europe AG (formerly known as JECO Holdings AG) ~ a subsidiary of Mahindra Castings Private Limited Note : The financial year of all subsidiaries ended on 31st March, 2008, except for Heritage Bird (M) SDN.BHD whose first financial year would be from 7th July, 2007 to 30th June, 2008 and Mahindra First Choice Services Limited whose first financial year would be from 24th March, 2008 to 31st March, 2009.

Deepak S. P arekh Parekh N. V aghul Vaghul R. K. K ulkarni Kulkarni A. S. Ganguly A. P . Puri P. N. B. Godrej

Keshub Mahindra Directors Anand G. Mahindra Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2008

Narayan Shankar Mumbai, 28th May, 2008

116

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Report of the Auditors to the Board of Directors of Mahindra & Mahindra Limited
1. We have audited the attached consolidated balance sheet of Mahindra & Mahindra Limited and its subsidiaries (the Group) as at 31st March, 2008, and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date, annexed thereto. These consolidated financial statements are the responsibility of Mahindra & Mahindra Limiteds management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 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. We did not audit the financial statements of certain subsidiaries and joint ventures, whose financial statements reflect Groups share of total assets of Rs. 16,569.67 crores as at 31st March, 2008 and Groups share of total revenues of Rs. 8,663.18 crores for the year ended on that date and Groups share of net cash inflow of Rs. 66.17 crores for the year ended on that date and associates whose financial statements reflect the Groups share of profit (net) upto 31st March, 2008 of Rs. 24.08 crores and the Groups share of profit (net) of Rs. 10.00 crores for the year ended on that date as considered in the consolidated financial statements. These financial statements and other financial information have been audited by other auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts included in respect of these subsidiaries, joint ventures and associates, is based solely on the report of the other auditors. 4. We report that the consolidated financial statements have been prepared by Mahindra & Mahindra Limiteds management in accordance with the requirements of Accounting Standard 21, Consolidated Financial Statements, Accounting Standard 23, Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard 27, Financial Reporting of Interests in Joint Ventures, notified by the Companies (Accounting Standards) Rules, 2006. Based on our audit and on consideration of the reports of other auditors on separate financial statements and on the other financial information of the components, in our opinion and to the best of our information and according to the explanations given to us, the attached consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: a) in the case of the consolidated balance sheet, of the state of affairs of Mahindra & Mahindra Limited Group as at 31st March, 2008; in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.

2.

5.

3.

b)

c)

For Deloitte Haskins & Sells Chartered Accountants B.P . Shroff B.P. (Partner) Membership Number: 34382 Mumbai, 28th May, 2008

117

Consolidated Balance Sheet as at 31st March, 2008

Schedule I. SOURCES OF FUNDS : SHAREHOLDERS FUNDS : Capital ........................................................................................ Employee Stock Options Outstanding ........................................ Reserves and Surplus .................................................................. MINORITY INTEREST ................................................................... LOAN FUNDS : (a) Secured Loans ....................................................................... (b) Unsecured Loans ................................................................... DEFERRED INCOME : Advance towards Club Mahindra members facilities ................ Total ............ II. APPLICA TION OF FUNDS : APPLICATION FIXED ASSETS : Gross Block ................................................................................. Less : Depreciation ..................................................................... Net Block .................................................................................... CAPITAL WORK-IN-PROGRESS ..................................................... INVESTMENTS ............................................................................. DEFERRED TAX ASSETS (Net) ...................................................... CURRENT ASSETS, LOANS AND ADVANCES : (a) Inventories ............................................................................. (b) Sundry Debtors ..................................................................... (c) Cash and Bank Balances ........................................................ (d) Other Current Assets ............................................................. (e) Loans and Advances .............................................................. LESS : CURRENT LIABILITIES AND PROVISIONS : (a) Current Liabilities .................................................................. (b) Provisions .............................................................................. NET CURRENT ASSETS ................................................................ MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED) ..................................................... Total ............ NOTES ON ACCOUNTS ............................................................... Per our report attached For Deloitte Haskins & Sells Chartered Accountants B. P . Shroff P. Partner Deepak S. P arekh Parekh N. V aghul Vaghul R. K. K ulkarni Kulkarni A. S. Ganguly A. P . Puri P. N. B. Godrej XIV V VI A VI B VI C VI D VI E IV 2008

Rupees crores 2007

I II

239.07 4.00 5,921.70 6,164.77 2,734.52

238.03 3.18 4,613.54 4,854.75 1,659.48 5,619.35 2,209.68 7,829.03 319.51 14,662.77

III A III B

6,981.88 2,899.13 9,881.01 477.95 19,258.25

10,690.36 4,219.02 6,471.34 1,154.17 7,625.51 1,354.72 17.57 3,275.42 3,767.83 1,727.99 15.65 8,141.64 16,928.53

7,818.72 3,591.27 4,227.45 559.30 4,786.75 1,003.30 14.71 2,428.61 2,702.69 2,045.12 2.97 6,860.31 14,039.70 4,270.08 930.61 5,200.69 8,839.01 19.00 14,662.77

VII A VII B

5,291.24 1,391.02 6,682.26 10,246.27

VIII

14.18 19,258.25

Keshub Mahindra Directors Anand G. Mahindra Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2008

Narayan Shankar Mumbai, 28th May, 2008

118

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Consolidated Profit and Loss Account

for the year ended 31st March, 2008

Rupees crores Schedule 2008 19,774.37 2,154.82 IX X XI XII XIII 17,619.55 6,825.74 24,445.29 11,629.15 3,613.73 589.52 582.24 5,373.63 21,788.27 157.64 21,630.63 2,814.66 8.16 2,806.50 (302.51) 2,503.99 691.84 (34.64) 1,846.79 2.22 1,844.57 10.00 1,854.57 283.45 1,571.12 2,945.13 (16.88) 2,928.25 4,499.37 49.04 242.33 13.71 282.61 38.48 3,873.20 65.84 59.84 2007 14,439.52 1,548.52 12,891.00 4,977.93 17,868.93 8,961.24 2,388.40 299.20 379.86 3,597.59 15,626.29 78.79 15,547.50 2,321.43 1.74 2,319.69 (117.29) 2,202.40 624.34 (28.63) 1,606.69 (15.18) 1,621.87 16.38 1,638.25 141.10 1,497.15 1,940.96 0.69 16.00 1,956.27 3,453.42 24.74 140.04 184.03 44.59 98.20 16.69 2,945.13 63.28 57.75

SALES [Note 25] ......................................................................................................... Less : Excise Duty on Sales [Note 25] ......................................................................... Net Sales ..................................................................................................................... Income from Operations & Other Income .................................................................. EXPENDITURE : Raw Materials, Finished and Semi-finished Products .................................................. Personnel .................................................................................................................... Interest, Commitment and Finance Charges (Net) ...................................................... Depreciation/Amortisation [Notes 8 and 25] .............................................................. Other Expenses ........................................................................................................... Less : Cost of Manufactured/Purchased Products capitalised ..................................... Profit before provision for contingencies, exceptional item and taxation .................. Less : Provision for contingencies ............................................................................... Profit before exceptional item and taxation ............................................................... Add : Exceptional Items [Note 18] ............................................................................. Profit before taxation ................................................................................................. Less : Provision for Tax - Current Tax including Fringe Benefit Tax [Note 25] ......... - Deferred Tax (Net) [Notes 17 and 25] . ........................... Profit for the year before prior year adjustments ....................................................... Less : Adjustments pertaining to previous years [Note 19] ........................................ Balance of profit for 2007-2008 before share of Profit/Loss of Associates and Minority Interests ........................................................................................................ Add : Share of Profit of Associates for the year ........................................................ Profit before Minority Interests ................................................................................... Minority Share in Profits for 2007-2008 .................................................................... Net Profit .................................................................................................................... Balance of profit for earlier years ............................................................................... Less : Charge on adoption of Accounting Standard -15 (revised) ............................. (Less)/Add : Transfer (to)/from Debenture Redemption Reserve (Net) ........................ Total of Profit and Loss Account balances shown above ........................................... Deduct : Statutory Reserve .......................................................................................... : General Reserve (Net) ................................................................................... : Interim Dividends Paid ................................................................................. : Income Tax on Dividends ............................................................................. : Proposed Dividend on Equity Shares ............................................................ : Income Tax on Proposed Dividend ............................................................... Balance for 2007-2008 and earlier years carried to Balance Sheet ............................ EARNINGS PER SHARE : [Note 23] (Face value Rs.10/- per share) (Rupees) Basic. .......................................................................................................................... Diluted ........................................................................................................................ NOTES ON ACCOUNTS ............................................................................................... Per our report attached For Deloitte Haskins & Sells Chartered Accountants B. P . Shroff P. Partner Deepak S. P arekh Parekh aghul N. V Vaghul R. K. K ulkarni Kulkarni A. S. Ganguly A. P . Puri P. N. B. Godrej

XIV

Keshub Mahindra Directors Anand G. Mahindra Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2008
119

Narayan Shankar Mumbai, 28th May, 2008

Consolidated Cash Flow Statement

A.

for the year ended 31st March, 2008

Rupees crores 2008 CASH FL OW FROM OPERA TING ACTIVITIES : FLOW OPERATING Net Profit before exceptional item, taxation and adjustments pertaining to previous years .............................................................................................. Adjustments for : Depreciation/Amortisation ........................................................................... Profit on Exchange (Net) ............................................................................. Investment and Interest Income (Excluding Rs. 5.93 crores (2007 : Rs. 7.85 crores) in respect of financial enterprises consolidated) ... Interest, Commitment and Finance charges (Excluding Rs. 453.06 crores (2007 : Rs. 314.38 crores) in respect of financial enterprises consolidated) Amortisation of Expenses ............................................................................ Profit on sale of Investments (Net) .............................................................. (Profit)/Loss on fixed assets sold/scrapped/written off (Net) ........................ Provision for diminution in value of long term investments (Net) .............. (Increase)/Decrease of cost over fair value of current investments (Net) ..... Operating Profit before Working Capital changes ....................................... Changes in : Stock on hire ........................................................................ Deferred income advances towards membership fees ...... Trade and other receivables .................................................. Loans against Assets * .......................................................... Inventories ............................................................................ Trade and other payables ..................................................... Exceptional Items : Upfront payment to a customer ................................................................. Miscellaneous Expenditure (to the extent not written off or adjusted) incurred during the year ............................................................................. Cash generated/(used) from operations ...................................................... Income Taxes paid (Net of refunds including for prior years) ..................... NET CASH FROM/(USED IN) OPERATING ACTIVITIES ................................... * In respect of financial enterprises consolidated. B. CASH FL OW FROM INVESTING ACTIVITIES : FLOW Purchase of fixed assets .............................................................................. Sale of fixed assets ...................................................................................... Purchase of investments .............................................................................. Sale of investments ..................................................................................... Interest received .......................................................................................... Dividends received ....................................................................................... Inter corporate deposits (Net) ..................................................................... Purchase consideration paid on acquisition of interest in subsidiaries ....... Sales Proceeds (Net) received on divesture of interest in subsidiaries ......... Exceptional Item : Sale of a Business undertaking .................................................................... NET CASH USED IN INVESTING ACTIVITIES ................................................. 158.44 (1,091.40) (808.55) (703.34) 1,094.40 (1,350.45) (440.12) (5.18) 1,461.19 (762.32) 698.87 2007

2,806.50 582.24 (30.61) (170.85) 262.51 4.39 (180.00) (19.83) 4.33 (1.74) 450.44 3,256.94

2,319.69 379.86 (3.40) (154.03) 95.39 9.29 (12.80) 3.72 2.14 2.37 322.54 2,642.23 0.52 97.42 (997.81) (1,501.07) (446.16) 1,135.78 (1,711.32) (524.94) (15.43) 390.54 (552.97) (162.43)

(1,972.30) 45.40 (16,307.27) 15,937.00 124.81 30.16 8.41 (1,311.48) 675.68 (2,769.59)

(1,374.59) 58.57 (9,752.50) 9,929.66 109.89 16.45 67.06 (936.18) 727.74 32.41 (1,121.49)

120

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Consolidated Cash Flow Statement

C. CASH FL OW FROM FINANCING ACTIVITIES : FLOW

(Contd.)

Rupees crores 2008 2007 16,633.98 (13,944.80) (502.24) (67.07) 2,119.87 835.97 1,180.03 69.17 2,085.16

Proceeds from borrowings .......................................................................... Repayments of borrowings (including premium on repayment) ................. Dividends paid ............................................................................................. Interest, Commitment and Finance charges paid ........................................ NET CASH FROM FINANCING ACTIVITIES .................................................... NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (A + B + C) CASH AND EQUIV ALENTS [Note (a)] EQUIVALENTS Opening Balance ......................................................................................... Cash & Bank Balance Acquired on Acquisition of Subsidiaries ................... Closing Balance ...........................................................................................

32,458.76 (30,376.23) (131.72) (260.65) 1,690.16 (380.56) 2,085.16 81.07 1,785.67

Per our report attached For Deloitte Haskins & Sells Chartered Accountants B. P . Shroff P. Partner Deepak S. P arekh Parekh N. V aghul Vaghul R. K. K ulkarni Kulkarni A. S. Ganguly A. P . Puri P. N. B. Godrej

Keshub Mahindra Directors Anand G. Mahindra Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2008

Narayan Shankar Mumbai, 28th May, 2008

Notes to the Consolidated Cash Flow Statement for the year ended 31st March, 2008
Rupees crores 2008 (a) Cash and Bank Balances .............................................................................. Unrealised (Net) translation loss on foreign currency cash and cash equivalents .................................................................................................. Total cash and cash equivalent .................................................................... 1,727.99 57.68 1,785.67 2007 2,045.12 40.04 2,085.16

(b) The following non-cash transactions do not form part of Cash Flow : (i) During the year the Company has consolidated its business interest in Mahindra Hinoday Industries Limited by swapping the shares held by the Company in Mahindra Hinoday Industries Limited for shares of Mahindra Casting Private Limited. (ii) Arising out of the scheme of arrangement for the merger between companys subsidiaries Mahindra Stokes Holding Company Limited, Mahindra Forgings Overseas Limited, Mahindra Forgings Mauritius Limited with Mahindra Forgings Limited, the Company received shares of Mahindra Forgings Limited. (iii) Arising out of the scheme of arrangement for the merger between companys subsidiaries Plexion Technologies (India) Private Limited with Mahindra Engineering Design & Development Company Limited the Company received shares of Mahindra Engineering Design & Development Company Limited. (c) Previous years figures have been regrouped/restated wherever necessary.
121

SCHEDULE I
2008 Share Capital : Authorised : 37,50,00,000 (2007 - 27,50,00,000) Ordinary (Equity) Shares of Rs. 10 each 25,00,000 Unclassified shares of Rs.100 each ............................................. Total .............. Issued and Subscribed : 24,57,41,813 (2007 - 24,53,71,265) Ordinary (Equity) Shares of Rs.10 each fully paid up ............................................................................... Less : 66,68,431 (2007 - 73,38,558) Ordinary (Equity) Shares of Rs.10 each fully paid up issued to ESOP Trust but not allotted to employees 375.00 25.00 400.00 245.74 245.74 6.67 239.07

Rupees crores 2007 275.00 25.00 300.00 245.37 245.37 7.34 238.03 Rupees crores 2008 23.48 23.43 138.55 138.55 579.03 554.03 16.34 17.98 562.69 536.05 12.47 12.86 971.84 742.98 3.33 3.67 975.17 746.65 18.24 1.36 30.61 30.61 50.00 50.00 194.51 145.47 28.78 14.00 (16.57) 2,048.50* 1,668.41* 3,851.12 2,928.47 22.08 16.66 5,921.70 4,613.54

Adjusted : Issued and Subscribed Share Capital ......................................................

SCHEDULE II
Reserves and Surplus : 1 Capital Reserve .................................................................... 2 3 Capital Reserve on consolidation ......................................... Securities Premium Account [Note 5] .................................. Less : Premium on shares issued to ESOP Trust but not allotted to employees [Note 5] ............................................ 2007 23.43 23.43 138.55 41.40 554.03 579.60 17.98 18.38 536.05 561.22 12.86 13.33 742.98 726.45 3.67 3.75 746.65 730.20 1.36 17.36 30.61 41.30 50.00 145.47 120.73 (16.57) (3.85) 1,668.41 1,545.12 Additions 0.05 161.98 27.15 148.95 27.15 148.95 242.33@ 150.73@ 242.33 150.73 16.88$ -*** 50.00*** 49.04 24.74 41.70 30.57 407.72 536.40 Deductions 64.83 2.15 174.52 1.64 0.40 0.51 174.12 0.39 0.47 13.47** 134.20** 0.34 0.08 13.81 134.28 16.00 -# 10.69# 12.92 12.72 27.63 413.11

4 5

Revaluation Reserve ............................................................. General Reserve [Note 5] ..................................................... ................................................................................... Add : Bonus shares issued to ESOP Trust but not allotted to employees [Note 5] ............................................

6 7 8 9

Debenture Redemption Reserve ........................................... Investment Fluctuation Reserve ........................................... ................................................................................... Capital Redemption Reserve ................................................ ................................................................................... Special Reserve (As per Section 45 IC of the RBI Act) .........

10 Hedging Reserve Account [Note 6] ..................................... 11 Foreign Exchange Fluctuation Reserve .................................

*{including Group Share in Joint Ventures Rs. 3.30 crores (2007 : Rs. 2.88 crores)} 12 Balance for 2007-2008 and earlier years as per Profit and Loss Account Group Share in Joint Ventures Total ...............

@ includes transfer of Rs. Nil (2007 : Rs. 10.69 crores) from Investment Fluctuation Reserve per contra pursuant to the Scheme of Arrangement approved by the Honble High Court of Bombay on 12th December, 2003. ** includes transfer of Rs. Nil (2007 : Rs. 50.00 crores) to Capital Redemption Reserve and Adjustment on adoption of Accounting Standard -15 (revised 2005) Employee benefits [Refer Note 11]. # transfer of Rs. Nil (2007 : Rs. 10.69 crores) to General Reserve per contra pursuant to the above Scheme of Arrangement [Note 4] *** transfer of Rs. Nil (2007 : Rs. 50.00 crores) from General Reserve. $ transfer from Profit & Loss Account Rs. 16.88 crores ( 2007 : Rs. Nil). 122

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE III
2008 Loan F unds : Funds (A) Secured : [Note 7] (1) Debentures/Bonds ........................................................ (2) Foreign Currency Loans from Banks ............................. (3) Rupee Loans : (a) From Financial Institutions ...................................... (b) From Banks ............................................................. (c) From Others ............................................................ (4) Loans and Advances on cash credit account from Banks.. (5) Short-term Foreign Currency Loans from Banks ........... Group Share in Joint Ventures ............................................ Total .......... (B) Unsecured : (1) Fixed Deposits .............................................................. (2) Short-term Loans : (a) From Banks ............................................................. (b) From Others ............................................................ 476.02 476.02 (3) Other Loans : (a) From Financial Institutions ...................................... (b) Foreign Currency Loans from Banks ....................... (c) Zero Coupon Convertible Bonds ............................. (d) Debentures/Bonds ................................................... (e) From Government of Gujarat .................................. (f) From Banks .............................................................. (g) From Others ............................................................ 573.98 491.02 802.60 331.20 9.40 161.28 45.19 2,414.67 2,899.13 Group Share in Joint Ventures ............................................ Total .......... Total .......... 2,899.13 9,881.01 8.44 6.05 1,638.59 62.40 1,707.04 655.29 284.06 6,980.00 1.88 6,981.88 3,585.51 748.10

Rupees crores 2007

3,067.51 264.03 1,281.14 35.30 1,316.44 963.43 5.71 5,617.12 2.23 5,619.35 11.04 86.42 58.89 145.31 388.29 262.63 879.41 291.40 9.26 96.71 125.12 2,052.82 2,209.17 0.51 2,209.68 7,829.03

123

SCHEDULE IV
Fixed Assets : Rupees crores
Description of Assets Cost/ Professional valuation as at 31st March, 2007 Additions and adjustments during the year # Deductions and adjustments during the year Cost/Professional valuation as at 31st March, 2008 Depreciation/Amortisation to 31st March, 2007 Deprecia- Deductions tion/ and adjustAmor Amorments tisation of Deprefor 2007ciation/ 2008 # Amortisation Depreciation/ Amortisation to 31st March, 2008 Net Balance as at 31st March, 2008 Net Balance as at 31st March, 2007

A : Assets on Lease Plant and Machinery ....................... Vehicles ........................................... Sub Total A ..................................... B : Owned Assets Land - Freehold ............................... Land - Leasehold ............................. Buildings - Freehold ........................ Buildings - Leasehold ...................... Plant and Machinery ....................... Furniture and Fittings ...................... Vehicles, Cycles, etc. ....................... Technical Knowhow ........................ Development Expenditure ............... Software Expenditure ...................... Websites .......................................... Non-Compete Fees .......................... Timeshare weeks ............................. Trademarks ...................................... Other Intangible .............................. Goodwill + ..................................... Sub Total B ...................................... C : Group Share in Joint V entures Ventures TOTAL (A+B+C) .............................. 114.17 98.60 1,120.88 15.86 4,662.15 464.27 142.11 99.08 64.94 58.72 3.74 0.23 0.62 16.21 930.61 7,792.19 10.26 7,818.72 4,335.08 28.25 216.74 198.71 26.27 1,134.54 111.14 49.61 98.13 42.77 2.00 0.49 0.58 1,187.84 3,097.07 0.86 3,098.29 3,655.33 0.20 24.36 0.02 109.29 71.50 11.84 0.45 0.92 (0.06) 5.95 224.47 0.36 226.65 171.69 137.99 319.57 1,295.23 42.11 5,687.40 503.91 179.88 99.08 162.62 100.57 3.74 2.23 0.62 16.76 0.58 2,112.50 10,664.79 10.76 10,690.36 7,818.72 2.25 348.33 2.91 2,815.51 282.42 62.54 3.79 16.57 35.00 3.74 0.31 6.95 3,580.32 6.69 3,591.27 2,040.25 1.99 57.47 6.71 615.81 61.41 26.62 19.68 9.05 25.35 0.50 0.06 1.43 0.01 826.09 0.69 828.14 1,656.47 5.41 109.53 77.05 6.51 0.24 198.74 0.36 200.39 105.45 4.24 400.39 9.62 3,321.79 266.78 82.65 23.47 25.62 60.11 3.74 0.50 0.37 8.38 0.01 4,207.67 7.02 4,219.02 3,591.27 137.99 315.33 894.84 32.49 2,365.61 237.13 97.23 75.61 137.00 40.46 1.73 0.25 8.38 0.57 2,112.50 6,457.12 3.74 6,471.34 4,227.45 114.17 96.35 772.55 12.95 1,846.64 181.85 79.57 95.29 48.37 23.72 0.23 0.31 9.26 930.61 4,211.87 3.57 4,227.45 7.64 8.63 16.27 0.36 0.36 1.82 1.82 7.64 7.17 14.81 0.19 4.07 4.26 1.36 1.36 1.29 1.29 0.19 4.14 4.33 7.45 3.03 10.48 7.45 4.56 12.01

+ Goodwill arising on consolidation. # Refer Note 8 (b)

124

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE V
2008 Long T erm Term Investments (At Cost unless otherwise specified) : Shares (Non-trade and fully paid-up unless otherwise specified) : Unquoted : (a) Equity Shares ................................................................. (b) Equity Shares - Associates [Note 1(c) & Note 24] ......... (c) Preference Shares .......................................................... (d) Preference Shares - Associates ...................................... Quoted : (a) Equity Shares ................................................................. (b) Equity Shares - Associates [Note 1(c) & Note 24] ......... 2008 Current 2007 Long Term

Rupees crores 2007 Current

30.93 47.89 26.22 5.64 110.68 18.99 22.66 41.65 152.33

24.89 24.89

35.47 42.47 17.76 5.64 101.34 23.17 122.41 145.58 246.92 13.22 0.33 13.55

24.89 24.89

Debentures/Bonds (Non T rade & fully paid-up) : Trade (a) Unquoted ...................................................................... (b) Quoted .......................................................................... Other Investments : Government Securities (including Treasury Bills) : (a) Unquoted ...................................................................... (b) Quoted .......................................................................... Units : (a) Unquoted ...................................................................... Investment in the Capital of P artnership Partnership (a) Unquoted ...................................................................... Others : (a) Unquoted ......................................................................

0.33 0.33

0.01 0.01 34.22 34.22 0.05 0.05 186.94

17.93 17.93 946.23 946.23 179.76 179.76 1,168.81 1,355.75 0.94 1,356.69 1,271.89 84.80 1,356.69 1.97 1,354.72

0.01 0.01 0.35 0.35 4.21 4.21 0.23 0.23 265.27

3.36 3.36 548.46 548.46 165.00 165.00 741.71 1,006.98 0.03 1,007.01 832.85 174.16 1,007.01 3.71 1,003.30 409.23

Total ......... Group Share in Investments of Joint Ventures ..................... Total ......... Cost (Net of amounts written off ) of Unquoted Investments. Cost/Carrying Value of Quoted Investments ......................... Less : Excess of cost over fair value of Current Investments (Net)

Market value of Quoted Investments ...................................

206.64

125

SCHEDULE VI
2008 Current Assets, Loans and Advances : (A) Inventories (at cost or net realisable value whichever is lower) : (i) Finished Products produced and purchased for sale ................. (ii) Contracts and Work-in-Progress ................................................. (iii) Manufactured Components ....................................................... (iv) Raw Materials and Bought-out Components ............................. (v) Work-in-Progress Property Development Activity and Long Term Contracts ........................................................................... (vi) Food, Beverages, Smokes and Operating Supplies ..................... (vii) Stores and Spares ....................................................................... (viii) Tools ........................................................................................... Group Share in Inventories of Joint Ventures .................................... Total .......... (B) Sundry Debtors : Unsecured unless otherwise stated : Outstanding over six months : Considered good ........................... : Considered doubtful ...................... 393.37 78.03 471.40 Other Debts : Considered good ...................................................... : Considered doubtful ................................................ 3,424.74 1.93 3,426.67 3,898.07 Less : Unmatured finance charges .................................................... Less : Provision for doubtful debts .................................................... Group Share in Debtors of Joint Ventures ........................................ Total .......... (C) Cash and Bank Balances : Cash, cheques and stamps on hand ................................................. Balances with Banks : (i) On Current Account ............................................................ (ii) On Fixed Deposit Account .................................................. (iii) On Margin Account ............................................................ 531.22 946.65 2.44 1,480.31 1,721.82 Group Share in Cash and Bank Balances of Joint Ventures .............. Total .......... 6.17 1,727.99 241.51 66.66 78.52 3,752.89 14.94 3,767.83 335.42 3.45 70.20 39.68 3,269.45 5.97 3,275.42 1,013.20 725.26 48.10 1,034.14

Rupees crores 2007

786.54 279.94 45.00 794.57 428.86 1.79 54.70 33.15 2,424.55 4.06 2,428.61

210.69 82.38 293.07 2,499.41 8.10 2,507.51 2,800.58 25.45 86.84 2,688.29 14.40 2,702.69 384.72 339.87 1,313.45 0.60 1,653.92 2,038.64 6.48 2,045.12

126

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE VI

(Contd.)

Rupees crores 2008 2007

(D) Other Current Assets : Interest accrued on Investments ........................................................ Others ................................................................................................ Group Share in Other Current Assets of Joint Ventures .................... Total .......... 4.29 11.14 15.43 0.22 15.65 2.83 0.14 2.97 2.97

(E) Loans and Advances : (Unsecured, considered good unless otherwise stated) : Bills of exchange, considered good ................................................... Bills of exchange, considered doubtful ............................................. 13.60 1.02 14.62 Less : Provision for doubtful debts .................................................... Advances recoverable in cash or in kind or for value to be received : Considered good ............................................................................... Considered doubtful .......................................................................... 1,548.86 78.15 1,627.01 Less : Provision for doubtful advances .............................................. Loans against assets/Retained Interest in Securitised Assets (Secured) : Considered good ............................................................................... Considered doubtful .......................................................................... 6,157.63 545.15 6,702.78 Less : Provision for doubtful advances .............................................. Payments towards Income Tax and Surtax (Net of provisions) .......... Balances - Customs, Port Trust, Excise, etc. ....................................... 269.68 6,433.10 98.64 39.73 8,140.31 Group Share in Loans and Advances of Joint Ventures .................... Total .......... Total .......... 1.33 8,141.64 16,928.53 5,428.26 345.42 5,773.68 149.13 5,624.55 15.13 16.77 6,859.08 1.23 6,860.31 14,039.70 71.77 1,555.24 1,197.72 83.32 1,281.04 83.32 1,197.72 1.02 13.60 4.91 2.05 6.96 2.05 4.91

127

SCHEDULE VII
2008 Current Liabilities and Provisions : (A) Current Liabilities : Acceptances ....................................................................................... Sundry Creditors : (i) Total outstanding dues of micro and small enterprises ............. and small enterprises ................................................................. Dividend payable ............................................................................... Balances on Directors Current Accounts .......................................... Interest accrued but not due on loans .............................................. Deposits/Advances received against hire purchase/lease agreements Other current liabilities ...................................................................... Group Share in Current Liabilities of Joint Ventures ......................... Total .......... (B) Provisions : Proposed Dividends ........................................................................... Provision for Tax on Proposed Dividend ............................................ Provision for diminution in value of long term investments ............. Provision for premium payable on redemption of convertible bonds Provision for Contingencies [Note 14 (b)] ......................................... Provision for compensated absences ................................................. Provision for Estimated Loss/Expenses on Securitisation ................... Provision : Others [Note 14 (a)] ........................................................ Group Share in Provisions of Joint Ventures ..................................... Total .......... Total .......... 282.61 38.48 28.11 224.97 9.55 388.93 93.19 324.55 1,390.39 0.63 1,391.02 6,682.26 4.97 3,700.27 3,705.24 4.21 2.46 185.93 56.11 972.99 5,281.23 10.01 5,291.24 354.29

Rupees crores 2007

340.84 3.60 3,328.86 3,332.46 7.33 2.46 123.26 34.41 421.27 4,262.03 8.05 4,270.08 98.20 16.69 23.23 244.58 3.46 278.82 67.43 196.98 929.39 1.22 930.61 5,200.69

(ii) Total outstanding dues of creditors other than micro

SCHEDULE VIII
2008 Miscellaneous Expenditure (to the extent not written off or adjusted) : (a) Finance Charges ......................................................................... (b) Separation and other costs ........................................................ (c) Others ........................................................................................ Total .......... 5.73 7.99 0.46 14.18

Rupees crores 2007

5.34 13.20 0.46 19.00

128

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE IX
2008 Income from Operations and Other Income : Income from services rendered ......................................................... Income from long term contracts ..................................................... Income from Project Management, etc. ............................................ Hire Purchase income, Lease income and other rentals .................... Income from Loan, Retained Interest in securitised assets & securitisation ..................................................................................... Commission ....................................................................................... Dividends on other Investments [Note 20 (a)] .................................. Rent received ..................................................................................... Miscellaneous Income ....................................................................... Profit on sale of Investments (Net) [Note 20 (c)] .............................. Profit on sale of Fixed assets (Net) .................................................... Group Share in Joint Ventures .......................................................... Total ....... 4,759.09 158.58 0.38 38.39 1,198.81 14.91 50.73 5.51 389.65 180.00 19.83 6,815.88 9.86 6,825.74

Rupees crores 2007 3,685.19 135.81 2.03 54.23 821.06 7.41 51.30 4.62 198.10 12.80 4,972.55 5.38 4,977.93 Rupees crores 2008 2007

SCHEDULE X
Raw Materials, Finished and Semi-Finished Products : (A) (Increase)/Decrease in Stock of Finished Goods, Work-in-Progress and Manufactured Components : Opening Stock : (i) Finished Products produced and purchased for sale ................. (ii) Contracts and Work-in-Progress ................................................. (iii) Manufactured Components ....................................................... Add : Stock taken over on acquisition ....................................... (i) Finished Products produced and purchased for sale ................. (ii) Contracts and Work-in-Progress ................................................. Less : Closing Stock : (i) Finished Products produced and purchased for sale ................. (ii) Contracts and Work-in-Progress ................................................. (iii) Manufactured Components ....................................................... (Increase)/Decrease in Stock .............................................................. (B) Consumption of Raw Materials and Bought-out Components : Opening Stock. .................................................................................. Add : Purchases ................................................................................. Add : Stock taken over on acquisition .............................................. Less : Closing Stock ........................................................................... (C) Purchases of Finished Products for sale ............................................ Group Share in Joint Ventures .......................................................... Total ....... 786.54 279.94 45.00 1,111.48 38.70 18.02 56.72 1,013.20 725.26 48.10 1,786.56 (618.36) 794.57 11,242.45 12,037.02 72.11 1,034.14 11,074.99 22 1,145. 1,145.22 11,601.85 27.30 11,629.15

670.32 115.59 49.92 835.83 64.40 157.00 221.40 786.54 279.94 45.00 1,111.48 (54.25) 487.98 8,134.63 8,622.61 75.66 794.57 7,903.70 1,083.24 8,932.69 28.55 8,961.24

129

SCHEDULE XI
2008 Personnel : Salaries, Wages, Bonus, etc. .............................................................. Contribution to Provident and other funds ....................................... Welfare .............................................................................................. 3,164.03 210.93 232.26 3,607.22 Group Share in Joint Ventures .......................................................... Total ....... 6.51 3,613.73

Rupees crores 2007

2,129.89 127.58 125.56 2,383.03 5.37 2,388.40

SCHEDULE XII
2008 Interest, Commitment and Finance Charges : On Term Loans and Debentures ........................................................ On Others (Net) ................................................................................. Finance charges ................................................................................. 571.33 125.26 18.84 715.43 Group Share in Joint Ventures .......................................................... Total ....... Less : Interest Income : Interest on Government Securities, Debentures and Bonds Gross [Note 20 (b)] ............................................................... Interest - Others - Gross ........................................................ Group Share in Joint Ventures .......................................................... Total ....... 2.38 123.16 125.54 0.51 126.05 589.52 0.14 715.57

Rupees crores 2007

340.54 60.11 16.19 416.84 0.27 417.11

2.52 115.29 117.81 0.10 117.91 299.20

130

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE XIII
2008 Other Expenses : Stores consumed ............................................................................... Tools consumed ................................................................................. Power and Fuel .................................................................................. Rent including lease rentals ............................................................... Rates and Taxes ................................................................................. Insurance ........................................................................................... Repairs & Maintenance : Buildings ..................................................................................... Machinery ................................................................................... Others ........................................................................................ 29.36 190.91 61.52 281.79 Postage, Telephone & Communication .............................................. Software Charges .............................................................................. Legal & Professional Charges ............................................................. Advertisement .................................................................................... Commission on sales/contracts (Net) ................................................. Discount allowed ............................................................................... Freight outward ................................................................................. Sales Promotion Expenses ................................................................. Travelling Expenses ............................................................................ Cost of Projects, Property etc. ........................................................... Subcontracting Charges .................................................................... Miscellaneous Expenses ..................................................................... Amortisation of expenses .................................................................. Directors fees .................................................................................... Donations and contributions ............................................................. Loss on Fixed Assets sold/scrapped/written off (Net) ........................ Provision for diminution in value of Long Term investments (Net) ... Net (Increase)/Decrease of cost over fair value of current investments Provision for doubtful debts/advances (Net) ..................................... Group Share in Joint Ventures Total ....... 133.73 97.80 160.85 207.44 165.92 24.76 568.57 268.21 662.67 466.06 547.50 545.01 0.78 0.10 16.46 4.33 (1.74) 261.09 5,365.26 8.37 5,373.63 172.78 38.46 437.95 184.46 74.15 46.13

Rupees crores 2007

120.62 25.04 252.91 117.51 50.23 36.84

28.35 125.04 41.22 194.61 94.27 126.12 136.67 148.43 119.08 13.07 402.72 190.64 473.39 48.04 390.51 481.13 1.44 0.10 14.27 3.72 2.14 2.37 144.83 3,590.70 6.89 3,597.59

131

SCHEDULE XlV
Notes on the Consolidated Accounts for the year ended 31st March, 2008
1. The Consolidated Financial Statements relate to Mahindra & Mahindra Limited (M&M, the Company) and its subsidiaries, joint ventures and associates. The Consolidated Financial Statements have been prepared in accordance with Accounting Standard 21 (AS 21) Consolidated Financial Statements, Accounting Standard 23 (AS 23) Accounting for Investment in Associates in Consolidated Financial Statements and Accounting Standard 27 (AS 27) Financial Reporting of Interests in Joint Ventures notified by the Companies (Accounting Standard) Rules, 2006. The Consolidated Financial Statements have been prepared on the following basis : (a) Investments in Subsidiaries : i) The Financial Statements of the Company and its subsidiary companies have been combined on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses. Intra group balances, intra group transactions and unrealised profits or losses have been fully eliminated. The difference between the costs of investment in the subsidiaries over the Companys portion of equity of the subsidiary is recognised in the financial statements as Goodwill or Capital Reserve. The difference between the proceeds from disposal of investment in a subsidiary and the carrying amount of its assets less liabilities as of date of disposal is recognised in the Profit and Loss Account as profit or loss on disposal of investment in subsidiary. Minority Interest in the net assets of consolidated subsidiaries consists of : a) b) v) the amount of equity attributable to minorities at the date on which investment in a subsidiary is made; and the minorities share of movements in equity since the date the parent subsidiary relationship comes into existence.

ii) iii) iv)

The Financial Statements of the subsidiaries are drawn upto 31st March, 2008.

The subsidiaries (which along with Mahindra & Mahindra Limited, the parent, constitute the group) considered in the presentation of these consolidated financial statements are : Proportion of ownership interest as at 31-03-2008 as at 31-03-2007 Proportion of V Voting oting Power where different as at 31-03-2008 as at 31-03-2007

Name of the Subsidiary Company

Country of Incorporation

Indian Subsidiaries FirstChoice Wheels Limited (formely known as Automartindia Limited)* Mahindra Life Space Developers Limited (formerly known as Mahindra Gesco Developers Limited) Mahindra Consulting Engineers Limited Mahindra Ashtech Limited (up to 3rd January, 2008) Tech Mahindra Limited Bristlecone India Limited Mahindra Engineering and Chemical Products Limited Mahindra Gujarat Tractor Limited Mahindra Holdings & Finance Limited Mahindra Holidays and Resorts India Limited * Mahindra Infrastructure Developers Limited Mahindra Intertrade Limited India India India India India India India India India India India 51.08% 51.00% 48.97% 82.08% 100.00% 60.00% 100.00% 95.99% 40.87% 100.00% 50.03% 51.00% 100.00% 49.03% 82.20% 100.00% 60.00% 100.00% 99.99% 40.02% 100.00% 52.49% 100.00% 80.00% 52.56% 100.00% 80.00% India 75.89% 75.89% -

132

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Name of the Subsidiary Company

Country of Incorporation

Proportion of ownership interest as at 31-03-2008 100.00% 61.12% 61.00% 77.31% 100.00% 61.12% 100.00% 42.21% 60.26% 51.00% 51.08% 51.00% 50.69% 37.80% 48.97% 39.23% 48.97% as at 31-03-2007 100.00% 69.32% 61.00% 77.31% 100.00% 69.32% 100.00% 41.33% 51.00% 51.00% 50.03% 51.00% 50.69% 37.02% 49.03% 100.00% 39.27% 49.03%

Proportion of V Voting oting Power where different as at 31-03-2008 100.00% 82.62% 100.00% 74.00% 100.00% 80.10% 100.00% as at 31-03-2007 100.00% 82.62% 100.00% 74.00% 99.99% 80.10% 100.00%

Mahindra Logisoft Business Solutions Limited Mahindra & Mahindra Financial Services Limited * Mahindra Steel Service Centre Limited Mahindra Shubhlabh Services Limited NBS International Limited Mahindra Insurance Brokers Limited Mahindra Engineering Design & Development Company Limited Mahindra World City Developers Limited Mahindra SAR Transmission Private Limited Mahindra International Limited Mahindra World City (Maharashtra) Limited Mahindra Renault Private Limited Mahindra Ugine Steel Company Limited Mahindra World City (Jaipur) Limited Tech Mahindra (R & D Services) Limited Plexion Technologies (India) Private Limited [Note 3(ii)] CanvasM Technologies Limited iPolicy Networks Limited Mahindra Hinoday Industries Limited (formerly known as DGP Hinoday Industries Limited)* Mahindra Stokes Holding Company Limited [Note 3(i)] Mahindra Integrated Township Limited Ashtamudi Resorts Private Limited (w.e.f. 9th May, 2007 upto 30th June, 2007) [Note 3 (iii)] Mahindra Automotive Limited (w.e.f. 25th May, 2007) Mahindra Castings Private Limited (w.e.f. 30th August, 2007) Mahindra Forgings Limited (appointed date 1st April, 2007) Mahindra Hotels and Residences India Limited (w.e.f. 26th April, 2007) Mahindra Retail Private Limited (w.e.f. 3rd September, 2007) Mahindra Technology Park Limited (w.e.f. 28th September, 2007) Mahindra Holdings Limited (w.e.f. 2nd November, 2007)

India India India India India India India India India India India India India India India India India India

India India India

43.08% 48.78%

66.36% 100.00% 47.77%

66.28% 100.00%

100.00%

India India India India

100.00% 65.00% 60.56%

India India India India

95.98% 100.00% 51.08% 100.00%

99.99% 100.00% -

133

Name of the Subsidiary Company

Country of Incorporation

Proportion of ownership interest as at 31-03-2008 100.00% 61.12% 64.64% as at 31-03-2007 -

Proportion of V Voting oting Power where different as at 31-03-2008 100.00% as at 31-03-2007 -

Mahindra Logistics Limited (w.e.f. 12th December, 2007) Mahindra Rural Housing Finance Limited (w.e.f. 9th April, 2007) Punjab Tractors Limited (w.e.f. 6th July, 2007) Mahindra Residential Developers Limited (w.e.f. 1st February, 2008) Mahindra Aerospace Private Limited (w.e.f. 28th February, 2008) Mahindra First Choice Services Limited (w.e.f. 24th March, 2008) Mahindra Navistar Engines Private Limited (w.e.f. 31st January, 2008) (formerly known as MIM Engines India Private Limited) Foreign Subsidiaries Bristlecone Limited Mahindra (China) Tractor Company Limited Tech Mahindra GmbH Bristlecone GmbH Plexion Technologies GmbH Mahindra Forgings Europe AG (formerly known as JECO Holdings AG) Gesenkschmiede Schneider GmbH JECO-Jellinghaus GmbH Falkenroth Umformtechnik GmbH Falkenroth Grundstucksgesellschaft GmbH [Note 3(v)] Schneweiss & Co. GmbH ** Fried. Hunninghaus GmbH [Note 3(iv)] Fried. Hunninghaus GmbH & Co. KG [Note 3(iv)] MHR Hotel Management GmbH PT Tech Mahindra Indonesia Mahindra Europe s.r.l. Mahindra Overseas Investment Company (Mauritius) Limited Mahindra-BT Investment Company (Mauritius) Limited Mahindra Forgings Overseas Limited [Note 3(i)] Mahindra Forgings International Limited Mahindra Forgings Mauritius Limited [Note 3(i)]

India India India

India India India

48.77% 100.00% 100.00%

100.00% -

India

51.00%

Cayman Islands China Germany Germany Germany

82.08% 83.74% 48.97% 82.08% 100.00%

82.20% 80.00% 49.03% 82.20% 100.00%

100.00% 100.00% -

100.00% 100.00% -

Germany Germany Germany Germany Germany Germany Germany Germany Germany Indonesia Italy Mauritius Mauritius Mauritius Mauritius Mauritius

60.56% 60.56% 60.56% 60.56% 60.56% 71.99% 48.97% 80.00% 100.00% 57.00% 60.56% -

67.90% 67.90% 67.90% 67.90% 67.90% 100.00% 100.00% 100.00% 74.99% 49.03% 80.00% 100.00% 57.00% 67.90% 67.90% 100.00%

100.00% 100.00% 100.00% 100.00% 90.47% 75.00% 100.00% 100.00% -

100.00% 100.00% 100.00% 100.00% 100.00% 90.47% 75.00% 100.00% 100.00% -

134

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Name of the Subsidiary Company

Country of Incorporation

Proportion of ownership interest as at 31-03-2008 60.56% 90.00% 48.97% 82.08% 51.00% 48.97% 82.08% 60.43% 60.43% 60.43% 60.43% 100.00% 48.97% 100.00% 82.08% 95.99% 48.97% 100.00% 39.23% as at 31-03-2007 100.00% 90.00% 49.03% 82.20% 49.03% 51.00% 49.03% 82.20% 99.52% 99.52% 99.52% 99.52% 100.00% 49.03% 100.00% 82.20% 99.99% 49.03% 100.00% 39.27%

Proportion of V Voting oting Power where different as at 31-03-2008 100.00% 100.00% 100.00% 100.00% 100.00% 99.78% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% as at 31-03-2007 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Mahindra Forgings Global Limited Mahindra Middleeast Electrical Steel Service Centre (FZC) Tech Mahindra (Singapore) Pte. Limited Bristlecone (Singapore) Pte. Limited Tech Mahindra (R & D Services) Pte. Limited (upto 7th April, 2007) Mahindra & Mahindra South Africa (Proprietary) Limited Tech Mahindra (Thailand) Limited Bristlecone UK Limited Stokes Group Limited Stokes Forgings Dudley Limited Jensand Limited Stokes Forgings Limited Plexion Technologies (UK) Limited Tech Mahindra (Americas) Incorporated Mahindra USA Incorporated Bristlecone Incorporated Mahindra Holidays and Resorts USA Incorporated Tech Mahindra (R & D Services) Incorporated Plexion Technologies Incorporated CanvasM (Americas) Incorporated Tech Mahindra (Beijing) IT Services Limited (w.e.f. 21st December, 2007) Mahindra Graphic Research Design s.r.l. (w.e.f. 20th February, 2008) Bristlecone (Malaysia) SDN.BHD (w.e.f. 30th May, 2007) Tech Mahindra (Malaysia) SDN.BHD. (w.e.f. 11th June, 2007) Heritage Bird (M) SDN.BHD. (w.e.f. 3rd March, 2008) * **

Mauritius Sharjah Singapore Singapore Singapore South Africa Thailand U.K. U.K. U.K. U.K. U.K. U.K. U.S.A. U.S.A. U.S.A. U.S.A. U.S.A. U.S.A. U.S.A.

China

48.97%

100.00%

Italy Malaysia Malaysia Malaysia

100.00% 82.08% 48.97% 95.99%

100.00% 100.00% 100.00%

excluding shares issued to ESOP Trust but not allotted to employees as per the Guidance Note on Accounting for Employee Share-based Payments issued by The Institute of Chartered Accountants of India. includes fundamental economic rights and administrative rights (including but not limited to voting rights, information rights and right to participate in shareholders meetings) in respect of 2.72% shares.

Note : Tech Mahindra Foundation is not consolidated as a subsidiary as it can apply its income for charitable objects only and cannot pay dividend or transfer funds to its parent. 135

(b)

Interests in Joint V entures Ventures The Groups interests in jointly controlled entities of the Group are : Name of the Entity Country of Incorporation Percentage of ownership interest as at 31-03-2008 29.77% 18.06% 50.00% 50.00% Percentage of ownership interest as at 31-03-2007 29.77% 18.06% 50.00% 50.00%

a) c)

Mahindra Sona Limited * Mahindra Water Utilities Limited $

India India India India

b) PSL Erickson Limited * d) Mahindra Inframan Water Utilities Private Limited $

Interest in Joint Ventures are accounted for using Proportionate Consolidation Method. * Shareholding is through a subsidiary, Mahindra Holdings & Finance Limited $ Shareholding is through a subsidiary, Mahindra Infrastructure Developers Limited The Financial Statements of all the Joint Ventures are drawn upto 31st March, 2008. (c) Investment in Associates The Groups Associates are : Name of the Entity Country of Incorporation Percentage of ownership interest as at 31-03-2008 21.50% 43.83% 50.00% 20.43% 34.79% 34.79% 34.79% 30.56% Percentage of ownership interest as at 31-03-2007 21.50% 43.83% 50.00% 20.01% 34.79% 34.79% 34.79% 47.11% 30.56%

Owens Corning (India) Limited Mahindra Construction Company Limited Officemartindia.com Limited Rathna Bhoomi Enterprises Private Limited Kota Farm Services Limited Mriyalguda Farm Solution Limited Mega One Stop Farm Services Limited Mahindra Forgings Limited (is a subsidiary of the Company w.e.f 1st April, 2007) Mahindra Composites Limited Mahindra Lifespace Developers Limited (formerly known as Mahindra Gesco Developers Limited) (upto 24th March, 2007) Mahindra Renault Nissan Automotive Private Limited (formerly known as Mahindra Renault Automotive Limited) (upto 9th March, 2008) Swaraj Automotives Limited (w.e.f 3rd July, 2007) Swaraj Engines Limited (w.e.f 6 July, 2007)
th

India India India India India India India India India

India

46.09%

India India India

st

35.64% 21.49%

50.00% -

The Financial Statements of all the Associates are drawn up to 31 March, 2008. 2. Accounting P olicies : Policies (A) Fixed Assets : (a) (i) (ii) Fixed Assets are carried at cost less depreciation except as stated in (iii) below. Cost includes financing cost relating to borrowed funds attributable to the construction or acquisition of qualifying fixed assets upto the date the asset is ready for use. When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of account and resultant profit (including capital profit) or loss, if any, is reflected in the Profit and Loss Account.

(iii) Land and Buildings, of the parent company had been revalued as at 31st October, 1984 at depreciated replacement values on the basis of a valuation made by a firm of Chartered Surveyors & Valuers. The indices, if any, used are not stated in the valuation.

136

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

(b)

(i) (ii)

Leasehold land is amortised over the period of the lease. Depreciation on assets is calculated on Straight Line Method (SLM) at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except : For the following class of assets where depreciation is calculated at rates, based on useful life of the assets/local laws, which are in no case lower than the rates specified in Schedule XIV to the Companies Act, 1956 : Building (at sites) Building (others) Plant & Machinery Furniture & Fixture Vehicles : : : : : at 25.00 % to 100.00 % at 2.56 % to 6.67 % at 14.29 % to 33.33 % at 7.69 % to 33.33 % at 10.00 % to 50.00 %

(iii) Depreciation charge for each year is after deducting the amount representing the depreciation on the increase due to revaluation of Land and Buildings, transferred from the Revaluation Reserve. (B) Intangible Assets : All Intangible Assets are initially measured at cost and amortised so as to reflect the pattern in which the assets economic benefits are consumed : (a) Technical Knowhow : The expenditure incurred is amortised over the estimated period of benefit, not exceeding six years commencing with the year of purchase of the technology. (b) Development Expenditure : The expenditure incurred on technical services and other project related expenses are amortised on the completion of the development work over the estimated period of benefit not exceeding five years. (c) Software Expenditure : The expenditure incurred is amortised over three financial years equally commencing from the year in which the expenditure is incurred. (d) Websites : The expenditure incurred is amortised over the estimated period of benefit, not exceeding five years. (e) Timeshare Weeks : Intangible assets representing timeshare weeks are amortised over a period of ten years. (f) Trademarks : The expenditure incurred is amortised over the estimated period of benefit, not exceeding ten years. (g) Non-Compete Fees : Non-compete payments are amortised equally over the estimated period of benefit, not exceeding ten years. (C) Investments : All long term investments, other than in Associates, are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary, in the value of investments. Current investments are valued at the lower of cost and fair value, determined by category of investment. Investments in Associates are accounted using the equity method. (D) Inventories : Inventories are stated at cost or net realisable value, whichever is lower. Cost is arrived at on a weighted average method and includes, where appropriate, manufacturing overheads and excise duty. Cost of the inventory, includes interest, where appropriate, for long term projects. (E) Miscellaneous Expenditure (to the extent not written off or adjusted) : Expenditure carried forward under this head is amortised as follows : (a) Finance Charges : The expenditure incurred in raising long term borrowings is amortised over the period of the borrowings. On early buyback, conversion or repayment of borrowings, any unamortised expenditure is fully written off in that year. 137

(b)

Separation and Other Costs : Special Payments/Pensions under Voluntary Retirement Schemes. The liability is amortised by the year ended March, 2010 from the month in which the liability is incurred.

(F)

Foreign Exchange Transactions : Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary items are translated at the year-end rates. The exchange difference between the rate prevailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the year is recognised as income or expense, as the case may be. Any premium or discount arising at the inception of a forward exchange contract is recognised as income or expense over the life of the contract, except in the case where the contract is designated as a cash flow hedge.

(G) Derivative instruments and hedge accounting : The Company uses foreign currency forward contracts and currency options to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions. The Company does not hold derivative financial instruments for speculative purposes. The Company has applied to all such contracts outstanding as on 31st March, 2008 the hedge accounting principles set out in Accounting Standard 30 Financial Instruments : Recognition and Measurement (AS 30) by marking them to market. Changes in the fair value of the contracts that are designated and effective as hedges of future cash flow are recognised directly in the Hedging Reserve Account and the ineffective portion is recognised immediately in the Profit and Loss Account. (H) Revenue Recognition : (a) Sales of products and services are recognised when the products are shipped or services rendered. Income from long term contracts and sale of property (concerning property development activity) is, accounted for on percentage of completion basis. [Refer paragraph (I) below]. Dividends from investments are recognised in the Profit and Loss Account when the right to receive payment is established.

(b) (I)

Long term contracts and Property Development Activity : Income on long term contracts and property development activity is accounted on the percentage of completion basis which necessarily involves technical estimates of the percentage of completion of each contract/activity, and costs to completion of the contract/activity, on the basis of which profits/losses are accounted. Such estimates, made by the management and certified to the auditors, have been relied upon by them, as these are of a technical nature. Project management fees receivable on fixed period contracts is accounted over the tenure of the contract/agreement. Where the management fee is linked to the input costs, revenue is recognised as a proportion of the work completed based on progress claim submitted. Where the management fees are linked to the revenue generation from the project, revenue is recognised on the percentage of completion basis.

(J)

Income from Lease/Hire Purchase : Finance earnings on lease transactions are calculated by applying the interest rate implicit in the lease, to the investment in the leased assets, as reduced by the net present value of the lease instalments falling due. Income from hire purchase contracts entered prior to 1st April, 2001 is accounted for on equated basis in accordance with the terms of the contract (except in some cases in which it is accounted for by applying the interest rate implicit in such contracts). For hire purchase transactions entered on or after 1st April, 2001 the income is accounted for by applying the interest rate implicit in such contracts.

(K)

Government Grants : The Company is entitled to various incentives from a State Government, such as grants by way of refund of octroi duty paid by the Company for its manufacturing unit located in a developing region. In view of the uncertainty in respect to the collection of these grants, such grants are accounted for as and when the disbursements are received.

(L)

Timeshare Business : The activity of selling Timeshare and providing holiday facilities to members for a specified period each year, over a number of years, for which membership fee is collected either in full up front, or on a deferred payment basis. Upto 30th September, 2005 out of the total membership fee, relevant portion reasonably attributable towards cost required to market Timeshare, which is assessed and revised periodically, is recognised as Timeshare income in the year in which the purchaser of Timeshare becomes a member and the balance representing Advance towards members facilities is being recognised as Timeshare income equally over a period for which holiday facilities are provided commencing from the year in which the member is entitled to benefits of membership under the scheme. With effect from 1st October, 2005 in accordance with the new membership rules, admission fee, which is non-refundable, is recognised as income on admission of a member. Entitlement fee, which entitles the timeshare member for the timeshare facilities over the membership usage period, is recognised as income equally over the usage period.

138

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

(M) Employee Benefits : Defined Contribution Plan/Defined Benefit Plan/Long term compensated absences. Groups contributions paid/payable during the year to Superannuation Fund, ESIC and Labour Welfare Fund are recognised in the Profit and Loss Account. Contributions to Provident Fund are made to a Trust administered by the Group and are charged to Profit and Loss Account as incurred. The Company is liable for the contribution and any shortfall in interest between the amount of interest realised by the investment and the interest payable to members at the rate declared by the Government of India. Groups liability towards gratuity, long term compensated absences and post retirement medical benefit schemes are determined by independent actuaries, using the projected unit credit method. Past services are recognised on a straight line basis over the average period until the benefits become vested. Actuarial gains and losses are recognised immediately in the statement of Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to the market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government Bonds are consistent with the currency and estimated terms of the defined benefit obligation. (N) Product Warranty : In respect of warranties on sale of certain products, the estimated costs of these warranties are accrued at the time of sale. The estimates for accounting of warranties are reviewed and revisions are made as required. (O) Leases : The Groups significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns, etc.). The leasing arrangements which are not non-cancellable range between 11 months and three years generally, and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as Rent including lease rentals. (P) Segment Reporting : The accounting policies adopted for segment reporting are in line with the accounting policies of the Group. Segments are identified having regard to the dominant source and nature of risks and returns and internal organisation and management structure. Revenues and expenses have been identified to the segments based on their relationship to the business activity of the segment. Income/Expenses relating to the enterprise as a whole and not allocable on a reasonable basis to business segments are reflected as unallocated corporate income/expenses. Inter-segment transfers are at prices which are generally market led. (Q) Taxes on Income : Current Tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising on account of unabsorbed depreciation or carry forward of tax losses are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realised. (R) Income from Securitisation and Assignment : Securitised assets are derecognised as the contractual rights therein are transferred to the special purpose vehicle or buyers as the case may be. On derecognition, the difference between book value of the securitised asset and consideration received as reduced by the estimated provision for loss/expense and incidental expenses related to the transaction is recognised as gain or loss arising on securitisation. In case of assignment of receivables the assets are derecognised as all the rights, titles, future receivables and interest thereof are assigned to the purchaser. On derecognising, the difference between book value of the receivables assigned and consideration received as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction is recognised as gain or loss arising on assignment. 3. Changes in Group Structure : During the year ended 31st March, 2008, the following changes in Group structure have taken place and the same have been appropriately dealt with in the Consolidated Financial Statements. i. Mahindra F orgings Ltd : In accordance with a scheme of amalgamation sanctioned by the Honble High Court of Judicature, Bombay vide Forgings its order dated 23rd November, 2007, the Companys subsidiaries Mahindra Stokes Holding Company Ltd; Mahindra Forgings Overseas Ltd; and Mahindra Forgings Mauritius Ltd., have merged with Mahindra Forgings Ltd. Consequent to the merger, Mahindra Forgings Ltd, an associate company as at 31st March, 2007 has with effect from 1st April, 2007,the appointed date of the merger, become a subsidiary of the Company. The Company, as a part of its strategy to establish itself in the Forging business, had earlier acquired stakes in Mahindra Forgings Ltd (MFL), Stokes Forgings, U.K., Jeco, Germany, and in Schoneweiss, Germany. The acquisitions in the overseas companies were routed through investment companies. In line with its strategy, the investment companies had issued fresh shares to external investors and through a scheme of arrangement sanctioned by the High Court of Bombay in November 2007 the investment companies were merged with MFL with effect from the appointed date 1st April, 2007. Since the swap ratios determined by the court order were after considering the above 139

equity infusion, both the equity infusion and the merger were accounted for as on the appointed day 1st April, 2007. Upon giving effect to the Scheme, the resulting loss on dilution of the Groups interest in the forging business of Rs. 31.00 crores has been disclosed as an exceptional item under note 18.2. ii. Mahindra Engineering Design & Development Company Ltd : In accordance with a scheme of amalgamation sanctioned by the Honble High Court of Judicature, Bombay vide its order dated 14th March, 2008, the Companys wholly owned subsidiary Plexion Technologies (India) Pvt. Ltd., has merged with effect from 1st April, 2007, the appointed date, with Mahindra Engineering Design & Development Company Ltd., an existing wholly owned subsidiary of the Company. Mahindra Holidays & Resorts India Ltd : In accordance with a scheme of amalgamation sanctioned by the Honble High Court of Judicature, Madras vide its order dated 27th February, 2008, the Companys wholly owned subsidiary Ashtamudi Resorts Pvt. Ltd., acquired in May 2007, has merged with effect from 1st July, 2007, the appointed date. Schoneweiss & Co.GmbH : In accordance with a scheme of amalgamation sanctioned by the Local Authority of Germany, vide its order dated 8th November, 2007, the Companys wholly owned subsidiaries Fried Hunninghaus GmbH and Fried Hunninghaus GmbH & Co. KG, both incorporated in Germany, have merged with effect from 1st April, 2007 with Schoneweiss & Co.GmbH., an existing wholly owned subsidiary of the Company. Falkenroth Umformtechnik GmbH : In accordance with a scheme of amalgamation sanctioned by the Local Authority of Germany, vide its order dated 21st August, 2007, the Companys wholly owned subsidiary Falkenroth Grundstucksgesellschaft GmbH incorporated in Germany, has merged with effect from 1st April, 2007 with Falkenroth Umformtechnik GmbH., an existing wholly owned subsidiary of the Company. Mahindra Holdings & Finance Ltd (MHFL) : In terms of the proposed Scheme of Amalgamation of MHFL, an existing wholly owned subsidiary, with the Company, the merger would be operative, pending statutory approvals, w.e.f 1st February, 2008. Pending the approvals, MHFL, an existing subsidiary has been considered to be a subsidiary as on the Balance Sheet date and the results of MHFL for the period ended 31st March, 2008 have been considered in the Consolidated Financial Statements.

iii.

iv . iv.

v.

vi.

4.

In the Consolidated Accounts, the Investment Fluctuation Reserve account is reflected with a corresponding adjustment to General Reserve. In accordance with the Scheme of Arrangement approved by the Honble High Court of Bombay on 12th December, 2003, the Investment Fluctuation Reserve has been utilised against diminution in value of certain investments in the accounts of the Company. Accordingly, an amount of Rs. Nil (2007 : Rs. 10.69 crores) utilised for provision for investment in subsidiaries in the standalone accounts of the Company, and not set up in the consolidated accounts, has been transferred from Investment Fluctuation Reserve to General Reserve. The Guidance Note on Accounting for Employee Share-based Payments issued by The Institute of Chartered Accountants of India requires that shares allotted to a trust but not transferred to employees be reduced from Share Capital and Reserves. Accordingly, the Company has reduced the Share Capital by Rs. 3.34 crores (2007 : Rs. 3.67 crores), Securities Premium by Rs. 16.34 crores (2007 : Rs. 17.98 crores) for the 33,34,216 shares (2007 : 36,69,279 shares) held by the trust pending transfer to the eligible employees. The Share Capital of the Company has also been reduced and the General Reserve increased by Rs. 3.33 crores (2007 : Rs. 3.67 crores) for the bonus shares issued by the Company in September 2005 to the trust but not yet transferred by the trust to the employees. The above monies which is treated as advance received from it, is included under Current Liabilities.

5.

6.

Consequent to the announcement issued by The Institute of Chartered Accountants of India dated 29th March, 2008 in respect of forward exchange contracts and currency and interest rate swaps, the Company has applied the Hedge Accounting principles set out in the Accounting Standard (AS) 30 Financial Instruments : Recognition and Measurement with effect from 31st March, 2008. Accordingly, all such contracts outstanding as on 31st March, 2008 are marked to market and the net gain aggregating Rs. 28.78 crores arising consequently on contracts that were designated and effective as hedges of future cash flows has been recognised directly in the Hedging Reserve account. Consequent to this change in accounting for such contracts, the profit for the year is lower and the Reserves and Surplus is higher by Rs. 28.78 crores.

7.

Loans : (a) Secured borrowings are secured by a pari-passu charge on immovable properties of the entities both present and future, subject to certain exclusions and are also secured by pari-passu charge on the movable properties of the entities including movable Machinery, Machinery Spares, Tools and Accessories, both present and future, subject to certain exclusions. Loans and Advances from Banks are secured by a first charge on whole of the current assets namely inventories, certain book debts, outstanding monies, receivables, claims, etc. both present and future. The depreciation charge for the year excludes : (i) (ii) . 0.43 crores), representing depreciation on the increase due to revaluation of Land and An amount of Rs. 0.42 crores (2007 : Rs. Buildings transferred from the Revaluation Reserve. An amount of Rs. 1.70 crores (2007 : Rs. 0.03 crores), representing depreciation on assets used for development work. This expenditure is transferred to Development Expenditure and is appropriately amortised.

(b) 8. (a)

140

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

(b)

Additions to assets include assets taken over due to acquisition of subsidiaries : Rupees crores Description of Assets Land ....................................................................................................................................... Building .................................................................................................................................. Plant & Machinery .................................................................................................................. Furniture & Fittings ................................................................................................................ Vehicles, Cycles, etc ................................................................................................................ Software Expenditure ............................................................................................................. Non-Compete Fees ................................................................................................................. Total ....................................................................................................................................... Cost/Professional Valuation 4.39 54.73 335.25 9.46 7.39 1.55 2.00 414.77 Depreciation/ Amortisation 18.21 215.19 6.26 4.40 0.25 244.31

9.

During the year, Mahindra & Mahindra Financial Services Limited has without recourse assigned loan receivables of Rs. 244.25 crores (2007 : Rs. 218.37 crores) contracts amounting to Rs.809.86 crores (2007 : Rs. 609.96 crores) (including future interest receivable) for a consideration of Rs. 730.31 crores (2007 : Rs. 554.32 crores) and de-recognised the assets from the books. The income booked in respect of assignment of receivables includes certain amount towards cost of future servicing of the assigned pool and an appropriate amount has been provided towards expenditure for future services. On assignment of receivables income is booked at Rs.133.45 crores (2007 : Rs.74.09 crores) and provision for estimated loss/expenses of Rs.32.60 crores (2007 : Rs.27.35 crores). During the year provision in respect of securitisation of Rs. 6.84 crores (2007 : Rs.7.10 crores) considered no longer necessary has been written back.

10. The Company had issued during the year ended 31st March, 2005, Zero Coupon Foreign Currency Convertible Bonds (Bonds 2009) aggregating US $ 100 million, at par. Upto 31st March, 2008, those Bonds have been fully converted into equity shares/GDRs. Premium payable on redemption of Bonds 2009 had been fully provided in the previous year by debiting the same to Securities Premium Account (SPA). Consequent to the conversion premium aggregating Rs. 1.37 crores no longer payable on bonds converted into equity shares/GDRs has been credited back to SPA during the year. The Company had issued during the year ended 31st March, 2007, Zero Coupon Foreign Currency Convertible Bonds (Bonds 2011) aggregating US $ 200 million, at par. The bond holders have an option to convert these bonds into Equity Shares with full voting rights or Global Depository Receipts (GDRs) determined at an initial conversion price of Rs. 922.04 per share with fixed exchange rate of conversion of Rs. 44.42 = US $ 1, at any time on or after 7th May, 2006 upto 7th March, 2011. The Bonds 2011 may be redeemed, in whole but not in part, at the option of the Company at any time on or after 13th April, 2008 subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the bonds fall due for redemption on 14th April, 2011 at 128.03 per cent of their principal amount. Upto 31st March, 2008, none of the Bonds 2011 have been converted into equity shares/GDRs. The net proceeds of Rs. 274.03 crores, unutilised as at 31st March, 2008, is disclosed under Cash and Bank balances. 11. Employee Defined Benefits : Defined benefit plans as per Actuarial valuation on 31st March, 2008 Gratuity unded) (Funded) (F 2008 A . Expense recognised in the Statement of Profit & Loss Account for the year ended 31st March 1. 2. 3. 4. 5. 6. 7. 8. 9. Current service cost Interest cost Expected return on plan assets Actuarial (Gains)/Losses Past Service cost Settlement cost Payments on account of employee transferred Effect of the limit in Para 59(b) of the revised AS 15 Total expense 20.65 19.99 (16.54) 2.39 0.42 (1.73) 0.01 25.19 16.18 14.52 (12.03) (7.95) 0.67 11.39 16.39 3.22 2.74 0.02 22.37 10.88 1.94 (1.62) 11.20 0.21 0.29 (0.70) (0.20) 0.20 0.24 (0.15) 0.29 2007 Gratuity (Unfunded) 2008 2007 Rupees crores Post Retirement Medical Benefits (Unfunded) 2008 2007

141

Rupees crores Gratuity unded) (Funded) (F 2008 B. Net Asset/(Liability) recognised in the Balance Sheet as at 31st March 1. 2. 3. 4. 5. Present Value of Defined Benefit obligation as at 31st March Fair value of plan assets as at 31st March Amount not recognised as an asset Funded status [Surplus/(Deficit)] Net Asset/(Liability) as at 31 March
st

Gratuity (Unfunded) 2008 2007

Post Retirement Medical Benefits (Unfunded) 2008 2007

2007

278.71 217.95 0.01 (60.77) (60.77)

204.46 144.67 (59.79) (59.79)

52.75 (52.75) (52.75)

32.05 (32.05) (32.05)

2.95 (2.95) (2.95)

3.30 (3.30) (3.30)

C. Change in the obligations during the year ended 31st March 1. 2. 3. 4. 5. 6. 7. 8. 9. Present Value of Defined Benefit obligation at the beginning of the year Obligations arising on account of acquisitions during the year Current service cost Interest cost Actuarial (Gains)/Losses Liabilities settled on sale of business Benefits paid Past Service Cost Present Value of Defined Benefit obligation at the end of the year 204.46 45.67 20.65 19.99 2.92 (15.40) 0.42 278.71 190.07 16.18 14.52 (8.29) (8.02) 204.46 32.04 0.68 16.39 3.22 2.74 (2.35) 0.03 52.75 22.96 10.88 1.94 (1.62) (2.11) 32.05 3.30 0.21 0.29 (0.70) (0.15) 2.95 3.17 0.20 0.24 (0.15) (0.16) 3.30

D. Change in the fair value of plan assets during the year ended 31st March 1. 2. 3. 4. 5. 6. 7. 8. 9. E. Fair value of plan assets at the beginning of the year Fair value of plan assets arising on account of acquisitions during the year Expected return on plan assets Actuarial Gains/(Losses) Contributions by employer Asset distributed on sale of business Actual Benefits paid Fair value of plan assets at the end of the year Actual return on plan assets 144.67 29.37 16.54 0.63 39.41 (12.67) 217.95 12.50 125.53 12.06 (0.34) 15.44 (8.02) 144.67 12.03 2.35 (2.35) 0.15 (0.15) 0.16 (0.16) -

Major category of plan assets as a percentage of total plan Government of India securities Corporate Bonds Special Deposit Scheme Funded with LIC Others 0.36% 0.61% 0.00% 98.37% 0.66% 100%

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MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Rupees crores Gratuity unded) (Funded) (F 2008 F. Actuarial Assumptions 1. 2. 3. 4. Discount Rate (Basis - prevailing market yields of govt securities.) Expected Rate of return on plan assets In-service Mortality Turnover rate 7.50 % 8.50 % 7.50 % 9.45 % 7.50 % 8.35 % 6.00 % 9.20 % 7.50 % 8.50 % 7.50 % 8.35 % 8.20 % 8.25 % 8.20 % 2007 Gratuity (Unfunded) 2008 2007 Post Retirement Medical Benefits (Unfunded) 2008 2007

Indian Assured Lives Mortality (1994-96) Modified ultimate Age 21 to 30 - 10% Age 31 to 40 - 5% Age 41 to 50 - 3% Age 51 & above - 2% Age 21 to 44 2% Age 21 to 30 - 10% Age 31 to 40 - 5% Age 41 to 50 - 3% Age 21 to 44 2% Age 45 to 60 1% Age 21 to 30 - 10% Age 31 to 40 - 5% Age 41 to 50 - 3% Age 51 & above - 2% 3.00 % 6.00 % One percentage point increase in medical inflation rate Age 21 to 44 2% Age 45 to 60 1% 3.00%

Age 45 to Age 51 & 60 1% above - 2%

5.

Medical Premium inflation

One percentage point decrease in medical inflation rate

G. Effect of one percentage point change in the assumed medical inflation rate Current Y ear Year Effect on the aggregate service and interest cost of Post Employment Medical benefits Effect on the accumulated Post Employment Medical benefit obligations Previous Y ear Year Effect on the aggregate service and interest cost of Post Employment Medical benefits Effect on the accumulated Post Employment Medical benefit obligations 0.09 0.43 (0.06) (0.40) Rupees crores Gratuity (F unded) (Funded) 2008 H. Experience Adjustments Defined Benefit obligation (Deficit)/Surplus Experience adjustments on plan liabilities 278.71 (60.77) 4.67 204.46 (59.79) 52.75 (52.75) 32.05 (32.05) 2.95 (2.95) (0.49) 3.30 (3.30) 0.07 2007 Gratuity (Unfunded) 2008 2007 Post Retirement Medical Benefits (Unfunded) 2008 2007 0.05 0.40 (0.08) (0.34)

Basis used to determine expected rate of return on assets : Based on expectation of the average long term rate of return expected on investment of the fund, during the estimated term of obligation. The estimate of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Further, as at 31st March, 2008, Current Liabilities and Provisions include Pension liability of Rs. 119.72 crores (2007 : 95.26 crores) in respect of foreign subsidiaries. 143

In the previous year the Company had adopted Accounting Standard (AS) 15 (revised 2005) Employee Benefits, read with the Accounting Standard Board Guidance on implementing AS 15, Employee Benefits (revised 2005) issued by The Institute of Chartered Accountants of India in May 2007, the Company had (i) (ii) Accounted for (Net of Tax) Rs. 84.20 crores as a reduction from General Reserve and Rs 0.69 crores as a reduction from Profit and Loss account. Accounted as prior period adjustment (Net of Tax) Rs. 19.19 crores being on account of Provision for Gratuity Rs. 25.85 crores Gross arising from certain refinements in the actuarial assumptions and accrual of Post Retirement Medical Benefits on an actuarial basis Rs. 3.08 crores Gross and the resultant tax credit thereon was Rs. 9.74 crores.

12. The Commissioner of Central Excise (Adjudication), Navi Mumbai, passed an order on 30th March, 2005, confirming the demand made on the Company for payment of differential excise duty (including penalty) of Rs. 304.11 crores in connection with the classification of Companys Commander range of vehicles, during the years 1991-1996. Whilst the Company had classified the Commander range of vehicles as 10-seater attracting a lower rate of excise duty, the Commissioner of Central Excise (Adjudication), Navi Mumbai, has held that these vehicles could not be classified as 10-seaters and as such attracted a higher rate of excise duty. In earlier proceedings, the Collector of Central Excise, Mumbai as also the Collector Central Excise (Appeals), Mumbai had upheld the classification of these vehicles as 10-seaters. Similarly, certain statutory/expert bodies have also confirmed the concerned vehicles to be 10-seater vehicles. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has also by its order dated 19th July, 2005 upheld this classification. The departments Statutory Appeal against this order has been admitted by the Supreme Court. The Commissioner of Central Excise, Nasik passed another order dated 20th March, 2006 confirming a demand of Rs. 24.75 crores in respect of Companys Armada range of vehicles manufactured during the years 1992 1996, on the same grounds as adopted for Commander range of vehicles. The Company has been legally advised that the aforesaid orders dated 30th March, 2005 and 20th March, 2006 passed by the Commissioners are unsustainable in law. The Tribunal has also given an unconditional stay against both the aforesaid orders. The final hearing in the above matters is awaited. The Company is confident that it would succeed in the case and the Companys stand that the Commander and Armada Vehicles are 10-seater vehicles would be upheld. As such, the Company does not expect any liability on this account. 13. Contingent Liability : (a) Guarantees given : Rupees crores Outstanding amounts against the guarantees 2008 For employees ............................................................................................................. For other companies ................................................................................................... Others ......................................................................................................................... Group Share in Joint Ventures Rs. 0.35 crores (2007 : Rs. Nil) (b) Claims against the Companies not acknowledged as debts comprise of : (i) (ii) Excise Duty, Sales tax and Service tax claims disputed by the Company relating to issues of applicability and classification aggregating ax : Rs. 138.20 crores) {2007 : Rs. 62.85 crores (Net of Tax : Rs. 47.07 crores)}. to Rs. 206.41 crores (Net of T Tax ax : Rs. 37.15 crores) {2007 : Other Matters (excluding claims where amounts are not ascertainable) : Rs. 146.23 crores (Net of T Tax Rs. 95.75 crores (Net of Tax : Rs. 23.42 crores)}. 0.03 5.41 337.52 2007 0.05 28.43

(iii) On Capital account : Rs. 1.18 crores (2007 : Rs. 1.18 crores). ax : Rs. 0.38 crores) (2007 : Rs. 0.01 crores). (iv) Group Share in Joint Ventures Rs. 0.51 crores (Net of T Tax (c) Taxation matters : (i) Demands not acknowledged as debts and not provided for, relating to issues of deductibility and taxability in respect of which the matters are in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed : Income Tax Group Share in Joint Ventures : Rs. 229.23 crores (2007 : Rs. 205.28 crores) : Rs. 3.15 crores (2007 : Rs. 0.07 crores )

144

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

(ii)

Items which have succeeded in appeal, but the Income Tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed : Income Tax matters Surtax matters : Rs. 60.49 crores (2007 : Rs. 51.23 crores) : Rs. 0.13 crores (2007 : Rs. 0.13 crores)

(d) (e)

Bills discounted not matured Rs. 44.21 crores (2007 : Rs. 7.84 crores). In respect of contracts for design, manufacture, supply, erection and commissioning of plant and equipment placed by various customers, the committed dates of completion had expired and, hence, strictly in terms of the relative contracts, the liability for liquidated damages/penalties, Net of T ax Rs. Nil) (2007 : Rs. 6.69 crores). the amount of which is estimated at a ceiling of Rs. Nil (2007 : Rs. 10.08 crores) (Net Tax The Companys subsidiary, Tech Mahindra Limited, had acquired Tech Mahindra (R&D Services) Limited (TMRDL), vide Share Purchase Agreement dated 15th November, 2005, for a initial consideration of Rs. 175.51 crores (including stamp duty). As a result, TMRDL and its two wholly owned subsidiaries have become subsidiaries/step subsidiaries of the Company with effect from the date of acquisition i.e. 28th November, 2005. The terms of purchase also provide for payment of contingent consideration to all the selling shareholders, payable over three years and calculated based on achievement of specific targets. The contingent consideration is payable in cash and cannot exceed Rs. 64.08 crores The consideration so payable would be accounted in the books of account in the year of achieving the milestones under the Agreement. Accordingly, Rs. 2.06 crores (2007 : Rs. 10.12 crores) has been accounted for as at the year end, as additional cost of acquisition.

(f)

(g)

Corporate undertaking on Securitisation/Assignment by Mahindra & Mahindra Financial Services Limited Rs Rs. 308.22 crores. Provision - Others Rs. 324.55 crores (2007 : Rs. 196.98 crores) includes provision for warranty Rs. 139.11 crores (2007 : Rs. 103.43 crores). This relates to warranty provision made in respect of sale of certain products, the estimated costs of which is accrued at the time of sale. The products are generally covered under a free warranty period ranging from 6 months to 3 years. Provision for Contingencies Rs. 9.55 crores (2007 : Rs. 3.46 crores) is in respect of labour demands under negotiations at certain locations of the Company. The ultimate settlement is contingent on the conclusion of negotiations. The movement in above provisions is as follows : Rupees crores Warranty Provisions Balance as at 1st April ..................................................................................... Add : Other entities ....................................................................................... Add : Provision made during the year ........................................................... Less : Utilisation/Reversal during the year ....................................................... Balance as at 31st March .............................................................................. Group Share in Joint Venture : Rs. 15.93 crores (2007 : Rs.12.84 crores) 2008 103.43 123.69 88.01 139.11 2007 63.21 11.21 98.98 69.97 103.43 Contingency 2008 3.46 1.39 8.16 3.46 9.55 2007 4.44 2.93 3.91 3.46

14. (a)

(b)

15. The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2008 is Rs. 1259.60 crores (2007 : Rs. . 648.19 crores). Group Share in Joint Ventures : Rs. 0.60 crores (2007 : Rs. 0.12 crores). 16. Research and Development expenditure debited to the Profit and Loss Account, including certain expenditure based on allocations made aggregate Rs. 205.13 crores (2007 : Rs. 149.37 crores). Group Share in Joint Ventures : Rs. 0.02 crores (2007 : Rs. 0.03 crores).

145

17. The components of Deferred Tax Liability and Assets as at 31st March, 2008 are as under : Rupees crores 2008 Deferred Tax Liability : (i) (ii) On fiscal allowances on Fixed Assets ..................................................................................... Others .................................................................................................................................... Group Share in Joint Ventures ............................................................................................... Deferred Tax Assets : (i) (ii) Provision for Compensated absences ..................................................................................... Provision for Doubtful Debts/Advances .................................................................................. 79.31 141.64 64.75 48.67 16.23 1.37 47.47 0.97 400.41 Net Deferred Tax Liability/(Assets) ................................................................................................... (17.57) 60.88 96.06 30.68 67.61 13.53 1.08 36.02 0.95 306.81 (14.71) 340.95 41.43 0.46 382.84 260.67 31.02 0.43 292.12 2007

(iii) Unabsorbed depreciation carried forward # ......................................................................... (iv) Premium on Redemption of Zero Coupon Convertible Bonds ................................................ (v) Provision for Gratuity ............................................................................................................. (vi) Provision for Post Retirement Medical Expenses ..................................................................... (vii) Others .................................................................................................................................... Group Share in Joint Ventures ...............................................................................................

# (considered, as there are compensatory timing differences the reversal of which, will result in sufficient future taxable income against which this can be realised). 18 18. Exceptional items of Rs. 302.51 crores (Debit) {2007 : Rs.117.29 crores (Debit)}, comprise of the following : Rupees crores 2008 1. 2. 3. 4. 5. 6. Profit on divesture of Long Term Investments (Net) ............................................................... Loss on dilution of Groups interest in Forging Business ....................................................... Profit on sale of Discontinued Operation of a subsidiary ....................................................... Exclusivity Payment ................................................................................................................ Amortisation of liability and other retirement benefits made under Voluntary Retirement Schemes ................................................................................................................................. Others .................................................................................................................................... Total ............ Figures in brackets signify charge to Profit and Loss Account. During January 2008, the Company has disposed of its entire holding in Mahindra Ashtech Limited (MAL), an erstwhile subsidiary. The financial position of MAL for the period April 07 to January 08 is summarised hereunder : Rupees crores 2008 Income ................................................................................................................................... Expenses ................................................................................................................................ Profit before Tax ..................................................................................................................... Profit after Tax ....................................................................................................................... ** 37.50 42.27 (4.77) (4.83) 2007 67.74 68.73 (1.74) (1.86) (8.23) (1.53) (302.51) (8.08) 0.36 (117.29) 116.37 31.00 (440.12)** 2007 395.35 20.02 (524.94)*

As per the terms of agreement entered into by a Group Subsidiary, it has made an exclusivity payment of Rs. 440.12 crores (2007 : Rs. 524.94 crores) to a customer which is unconditional, irrevocable and non-refundable. Accordingly, this payment has been disclosed as an exceptional item in the Profit and Loss Account. During the previous year, a Group Subsidiary has entered into Global Sourcing Agreement relating to the development of a global sourcing model for strategic outsourcing services, with a customer for a term of five years.

146

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

19 19. Adjustments pertaining to previous years, net of current and deferred tax, comprise of the following : 2008 1. 2. 3. 4. (Excess)/Short provision of Income Tax in respect of previous years ....................................... Short provision of warranties ................................................................................................. Gratuity and post retirement medical benefit ........................................................................ Other adjustments ................................................................................................................. Total ................. 20. (a) (b) (c) 0.37 1.13 0.72 2.22

Rupees crores 2007 (34.40) 19.19 0.03 (15.18)

Dividends on other investments Rs. 50.73 crores (2007 : Rs. 51.30 crores) is in respect of current investments. Interest on Government Securities, Debentures and Bonds comprise Rs. Nil (2007 : Rs. 1.00 crores) and Rs. 2.38 crores (2007 : Rs.1.52 crores) in respect of long term and current investments respectively. Profit on sale of investments (Net) includes profit on disposal of current investments (Net) Rs. 26.60 crores (2007 : Rs. 7.84 crores), and profit on disposal of long term investments (Net) Rs. 153.40 crores (2007 : Rs. 4.96 crores).

21 21. Work-in-progress Property Development Activity and Long Term Contracts and Advances recoverable in cash or kind or for value to be received includes Rs. 68.73 crores (2007 : Rs. 76.13 crores) on account of certain projects, the commencement of which has been delayed pending resolution of certain matters including receipt of approvals and outcome of court cases. 22. Related P arty T ransactions : Party Transactions (a) Names of related parties where transactions have taken place during the year :

Where Control exists : Sl. No. 1. Associates : Sl. No. 1. 2. 3. 4. 5. 6. Name of the Company Owens Corning (India) Limited Mahindra Construction Company Limited Officemartindia.com Limited Rathna Bhoomi Enterprises Private Limited Mahindra Composites Limited Mahindra Renault Nissan Automotive Private Limited (upto 9th March, 2008) Sl. No. 7. 8. 9. 10. 11. Name of the Company Mega One Stop Farm Services Limited Kota Farm Services Limited Mriyalguda Farm Solution Limited Swaraj Automotives Limited (from 3rd July, 2007) Swaraj Engines Limited (from 6th July, 2007) Name of the Company Tech Mahindra Foundation

Joint V entures : Ventures Sl. No. 1. 2. Name of the Company Mahindra Sona Limited Mahindra Water Utilities Limited Sl. No. 3. 4. Name of the Company Mahindra Inframan Water Utilities Private Limited PSL Erickson Limited

Key Management P ersonnel : Personnel Vice Chairman and Managing Director .......................... Mr. Anand Mahindra Executive Directors ......................................................... Mr. B.N. Doshi Mr. A.K. Nanda

147

(b)

The related party transactions are as under : Rupees crores Nature of T ransactions Transactions Subsidiary Companies Associate Companies Joint V entures Ventures Key Management Personnel

Sl. No. 1.

Purchases : Goods ........................................................................................ (-) Fixed Assets ................................................................................ (-) Services ...................................................................................... (-) 127.33 (71.17) 0.38 @ 0.32 (-) 54.64 (42.92) @ (-) (-) (-) (-)

2.

Sales : Goods. ............................................ (-) Fixed Assets ................................................................................ (-) Services ...................................................................................... (-) 5.27 (39.04) 0.08 (0.64) 1.95 (6.91) 1.24 (-) (-) 0.04 (0.50) (-) (-) (-)

3.

Investments : Purchase .................................................................................... (-) 3.00 (182.71) (-) (-)

4.

Deputation of Personnel : From Related Parties .................................................................. (-) To Related Parties ....................................................................... (-) (0.03) 0.39 (0.07) (-) (-) (-) (-)

5.

Provisions for : Doubtful Advances during the year ........................................... (-) Diminution in value of other assets written back ...................... (-) (0.38) (0.06) (-) (-) (-) (-)

6.

Finance : Interest received ......................................................................... (-) Dividend Distributed ......................................... (-) Cash discount received .............................................................. (-) 3.18 (1.10) (0.13) (0.29) (-) 1.31 (1.11) (-) (-) (-) (-)

@ denotes amounts less than Rs. 50,000 148

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Sl. No.

Nature of T ransactions Transactions

Subsidiary Companies

Associate Companies

Joint V entures Ventures

Rupees crores Key Management Personnel

7.

Other Transactions : Other Income ............................................................................. (-) Donation given .......................................................................... 7.57* (-) Other Expenses ..................................................................... . (5.57)* Reimbursements received from parties .................................. . (-) Reimbursements made to parties ............................................... (-) Advance given by group company ............................................. (-) 9.51 (7.06) (-) (1.74) 0.02 (0.35) (0.19) (0.13) 0.02 (0.05) (-) 0.05 @ 0.06 (0.03) (-) (-) (-) (-) (-) (-) (-) (-)

8.

Outstandings : Payable ....................................................................................... (-) Receivable .................................................................................. (-) Inter Corporate Deposits given .................................................. (-) 15.16 (5.52) 28.68 (30.41) 5.73 (5.73) 7.65 (7.65) 5.33 (5.74) (-) (-) (-) 10.19 (9.73) 1.50 (0.74) (-) (-) (-) (-) (-) (-) (2.46) (2.46) (-) (-) (-) (-) 5.39 (4.98) 0.17 (0.79) 0.05 (0.05)

9.

Provision for Diminution in value of other related assets ...........

(-)

10.

Provision for Doubtful debts/advances .......................................

(-)

11.

Managerial Remuneration ..........................................................

(-)

12.

Dividends ...................................................................................

(-)

13.

Stock Options ............................................................................

(-)

Previous years figures are in brackets. * Amount pertains to Tech Mahindra Foundation. @ denotes amounts less than Rs. 50,000

149

Significant related party transactions are as under : Rupees crores Nature of T ransactions Transactions 1. Purchase - Goods ........................ Associate Companies Mahindra Composites Limited Amount 1.58 (-) Swaraj Engines Limited 125.75 (-) Mahindra Forgings Limited (69.47) 2. Purchase Fixed Assets. Mahindra Composites Limited 0.33 (-) Swaraj Engines Limited Kota Farm Services Limited 0.01 (-) @ 3. Purchase Services ..................... Swaraj Engines Limited 0.32 (-) 4. Sale Goods ............................... Swaraj Engines Limited 5.27 (-) Mahindra Forgings Limited (39.04) 5. Sale Fixed Assets ...................... Mahindra Forgings Limited (0.64) Swaraj Engines Limited 0.08 (-) 6. Sale Services ............................. Swaraj Engines Limited 1.95 (-) Mahindra Water Utilities Limited Mahindra Sona Limited (0.47) 0.04 (-) 7. Investment Purchase ................ Mahindra Forgings Limited (48.50) Mahindra Gesco Developers Limited (134.21) 8. Deputation of Personnel .............. Mahindra Composites Limited 0.39 (-) 9. Interest Received ......................... Owens Corning (India) Limited 3.18 (-) @ denotes amounts less than Rs. 50,000 Mahindra Sona Limited 1.24 (-) Mahindra Inframan Utlities Private Limited Mahindra Sona Limited @ @ Joint V entures Ventures Mahindra Sona Limited Amount 54.64 (42.92)

150

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Rupees crores Nature of T ransactions Transactions 10.Dividend Received ....................... Associate Companies Amount (-) 11.Other Income .............................. Owens Corning (India) Limited 9.25 (-) Mahindra Composites Limited 0.25 (-) 12.Reimbursement received .............. from parties Mahindra Composites Limited 0.01 (-) Mahindra Sona Limited Mahindra Water Utilities Limited 13.Payable ........................................ Mahindra Construction Company Limited Mahindra Composites Limited 0.11 (-) 0.55 (-) Swaraj Engines Limited 14.50 (-) 14.Receivables .................................. Owens Corning (India) Limited 20.85 (-) Mahindra Construction Company Limited Kota Farm Services Limited 6.07 (-) 0.25 (-) Mriyalguda Farm Solution Limited 0.05 (-) Mega One Stop Farm Services Limited Mahindra Composites Limited 0.54 (-) 0.37 (-) Swaraj Engines Limited 0.54 (-) Previous years figures are in brackets. Mahindra Sona Limited 1.50 (-) Mahindra Sona Limited 0.04 (-) 0.01 (-) 10.19 (-) Mahindra Sona Limited Joint V entures Ventures Mahindra Sona Limited Amount 1.31 (-) 0.02 (-)

151

23. Earnings per Share : 2008 Amount used as the numerator Net Profit (Rupees crores) ..................................................................... (Gain)/Loss on difference in exchange on bonds (Rupees crores) ............................................................... Amount used as the numerator for diluted earnings per share (Rupees crores) ......................................... Weighted average number of equity shares used in computing basic earnings per share .......................... Effect of potential ordinary (equity) shares on conversion of bonds/debentures ........................................ Weighted average number of equity shares used in computing diluted earnings per share ....................... Basic Earnings per share (Rs.) (Face value of Rs. 10 per share) ................................................................... Diluted Earnings per share (Rs.) .................................................................................................................. 24. Investment in Associates : No. of Equity shares held % of Holding Cost of Investments (Equity Shares) Goodwill/ (Capital reserve) Share in accumulated Profit/(Loss)/ Reserves Carrying Cost 1571.12 (42.97) 1528.15 23,86,22,366 1,67,57,276 25,53,79,642 65.84 59.84 2007 1,497.15 (24.08) 1,473.07 23,66,06,170 1,84,52,109 25,50,58,279 63.28 57.75

(Nos.) Unquoted : Owens Corning (India) Limited. ........................ 2,81,24,794 2,81,24,794 Mahindra Construction Company Limited ......... 9,00,000 9,00,000 Officemartindia.com Limited. ............................ 7,499,97 7,499,97 Rathna Bhoomi Enterprises Private Limited ....... 500 500 Kota Farm Services Limited ................................ 2,73,420 2,73,420 Mriyalguda Farm Solution Limited .................... 3,37,500 3,37,500 Mega One Stop Farm Services Limited .............. 3,51,000 3,51,000 Mahindra Renault Automotive Private Limited. (upto 9th March, 2008) ..................................... 5,000 50.00% 0.01 Total ............ 21.50% 21.50% 43.83% 43.83% 50.00% 50.00% 20.43% 20.01% 34.79% 34.79% 34.79% 34.79% 34.79% 34.79% 28.12 28.12 0.97 0.97 0.22 0.22 @ @ 0.27 0.27 0.34 0.34 0.35 0.35 (7.64) (7.64) 0.03 0.03 19.77 14.34 (0.97) (0.97) (0.22) (0.22) @ @ (0.27) (0.27) (0.34) (0.34) (0.35) (0.35)

(Rupees crores)

47.89 42.46 -

0.01 47.89 42.47

@ denotes amounts less than Rs. 50,000 152

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

No. of Equity shares held

% of Holding

Cost of Investments (Equity Shares)

Goodwill/ (Capital reserve)

Share in accumulated Profit/(Loss)/ Reserves

Carrying Cost

Quoted : Mahindra Composites Limited ..........................

(Nos.) 13,41,203 13,41,203 30.56% 30.56% 47.11% 21.49% 35.64% 2.90 2.90 128.52 1.63 12.45 0.55 0.55 43.72 8.34 Total ............ Total ............ 1.45 1.11 (10.12) 2.70 1.53 -

(Rupees crores) 4.35 4.01 118.39 4.33 13.98 22.66 122.40 70.55 164.87

Mahindra Forgings Limited (became subsidiary w.e.f. 1st April, 2007) .........

13,200,370

Swaraj Engines Limited (w.e.f. 3rd July, 2007) ...

41,19,000 -

Swaraj Automotives Limited (w.e.f. 6 July, 2007)

th

10,59,543 -

25. Joint V entures Disclosure : Ventures Groups Share in Joint Ventures with respect to other items : Rupees crores 2008 a) b) c) d) e) Sales ....................................................................................................................................... Excise Duty ............................................................................................................................. Depreciation/Amortisation ...................................................................................................... Provision for Current Tax including FBT .................................................................................. Provision for Deferred Tax (Net) ............................................................................................. 46.95 (5.00) (0.69) (3.37) 0.03 2007 49.92 (4.11) (0.60) (3.27) 0.13

Figures in brackets signify charge to Profit and Loss Account.

153

154
Rupees crores IT Services Infrastructure Others Eliminations Hospitality Systech Financial Services Trading Consolidated Total Farm Equipment 5,469.88 4,401.72 747.27 571.86 14.67 15.29 732.60 556.57 331.48 198.60 1,064.08 755.17 (1,031.10) (677.93) (1,031.10) (677.93) 118.75 67.16 212.52 131.52 7.93 2.26 220.45 133.78 357.76 234.72 3,654.95 1,739.97 0.09 2.22 326.35 153.80 357.67 232.50 3,328.60 1,586.17 205.49 122.54 5,351.13 4,334.56 24.35 29.35 5,375.48 4,363.91 3,944.06 3,143.39 1,232.30 846.73 919.39 787.74 30.59 26.17 7.02 7.27 298.79 247.99 3,913.47 3,117.22 1,225.28 839.46 620.60 539.75 32.80 24.92 3,913.47 3,117.22 1,225.28 839.46 653.40 564.67 212.52 131.52 357.67 232.50 3,534.09 1,708.71 26,422.44 19,366.38 2,154.82 1,548.52 24,267.62 17,817.86 24,267.62 17,817.86 4.50 10.27 745.56 655.99 (4.01) (2.96) 603.91 498.93 362.13 161.23 279.14 207.56 89.02 49.28 75.31 9.62 110.87 63.95 (3.45) (3.43) (440.12) (524.94) (2.23) (0.96) 204.81 165.69 607.36 502.36 802.25 686.17 279.14+ 207.56+ 89.02 49.28 75.31 9.62 110.87 63.95 207.04 166.65 119.73 31.39 19.27 119.73 50.66 3,036.28 2,372.97 (449.81) (513.02) 2,586.47 1,859.95 82.39 72.42 2,504.08 1,787.53 283.72 85.61 136.32 104.77 147.31 395.71 2,503.99 2,202.40 691.84 624.34 (34.64) (28.63) 1,846.79 1,606.69 2.22 (15.18) 1,844.57 1,621.87 10.00 16.38 1,854.57 1,638.25

26.

Segment Information :

Segment Report for the year ended 31st March, 2008.

Primary Segment Disclosure - Business Segment

Automotive

REVENUE Gross External Revenue

10,308.86 7,798.72

Less : Excise Duty on Sales

1,783.11 1,318.61

Net External Revenue

8,525.75 6,480.11

Inter Segment Revenue

Total Revenue

8,530.25 6,490.38

RESUL T RESULT Segment result before exceptional items

Exceptional item allocated to Segments

741.55 Segment result after exceptional items 653.03 Unallocable Corporate expenses (Net of Income) Operating Profit

Less : Interest expense not allocable to segments

Add : Interest Income not allocable to segments

Add : Exceptional Item Unallocable to segment

Profit before T ax Tax

Less : Income Taxes

Current Tax including Fringe Benefit Tax

Deferred Tax

Profit for the year before prior year adjustments

Less : Adjustments pertaining to previous years

Balance of Profit for the year before Share of Profit of Associates

Share of Profit of Associates

Profit for the year before Minority Interests

+ In line with Accounting Standard 17 on Segment Reporting, results of Financial Services Segment are computed after charge of interest cost as segment expense. Note : Segment Revenue and Segment Result for F 2007 in respect of Infrastructure Segment is for a period of 1st April, 2006 to 10th October, 2006.

Segment Information (Contd.) : Rupees crores Farm Equipment Financial Services Eliminations Consolidated Total Trading Infrastructure Hospitality Systech Others IT Services

Automotive

OTHER INFORMA TION INFORMATION 2,794.26 1,768.66 2,078.55 1,415.00 6,870.11 6,177.66 396.22 385.50 975.38 723.85 745.25 471.66 2,703.19 1,984.41 548.60 433.86 21,710.53 16,763.33 4,598.64 3,373.25 26,309.17 20,136.58 1,204.25 828.61 806.10 574.42 5,624.16* 5,438.40* 222.60 230.55 91.47 52.98 539.56 359.62 800.04 659.80 149.09 120.16 11,537.93 9,927.48 5,886.13 3,712.43 17,424.06 13,639.91

Segment Assets

4,598.97 3,402.73

Unallocable Corporate Assets

Total Assets

Segment Liabilities

2,100.66 1,662.94

Unallocable Corporate Liabilities

Total Liabilities

Capital Expenditure 215.38 150.87 3.58 2.95 4.07 3.43 0.46 80.41 61.49 81.68 53.14 8.81 7.45 5.73 2.86 3.46 21.82 11.31 8.87

907.31 864.61

168.85 146.59

238.16 201.39

13.74 12.18

26.74 44.64

58.37 8.68

78.08 47.29

615.74 854.53 160.41 60.00 0.03 -

50.60 9.85 4.04 2.86 0.15 0.75

Depreciation/Amortisation

Non cash expenditure other than depreciation

* In line with Accounting Standard 17 on Segment Reporting, segment liabilities of Financial Services Segment include the related interest bearing liabilities.

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

155

Secondary Segment Disclosure - Geographical Segment Rupees crores Domestic Revenue From External Customers .............................. Segment Assets ........................................................... Capital Expenditure ..................................................... 18,761.03 14,047.72 19,649.70 14,967.54 1,921.02 2,143.29 Overseas 7,661.41 5,318.66 2,060.83 1,795.79 236.57 46.47 Total 26,422.44 19,366.38 21,710.53 16,763.33 2,157.59 2,189.76

Notes : 1. Business Segments The Group has considered business segments as the primary segment for disclosure. The segments have been identified taking into account the organisational structure as well as the differing risks and returns of these segments. Automotive Segment comprises of sales of automobiles, spare parts and related services. Farm Equipment Segment comprises of sales of Tractors, spare parts and related services. IT Services comprises of services rendered for IT and Telecom. Financial Services comprise of services relating to financing, leasing and hire purchase of automobiles and tractors. Infrastructure comprise of operating of Commercial complexes, Project management and development. Hospitality comprises of sale of Timeshare. Systech comprises of Automotive components and other related products and services. Others comprise of Investment, Transport solutions group etc. 2. Secondary Segments The geographical segments are considered for disclosure as secondary segment. Domestic segment includes sales to customers located in India and service income accrued in India. Overseas segment includes sales and services rendered to customers located outside India. Segment Revenue comprises of : Rupees crores 2008 Sales .................................................................................................................................. Income from Services rendered ......................................................................................... Income from long term contracts ..................................................................................... Income from project management ................................................................................... Hire purchase and lease income ....................................................................................... Income from Loan, Retained Interest in securitised Asset & Securitisation ....................... Other allocable income * .................................................................................................. Total otal........ 19,774.37 4,759.47 166.69 0.38 38.39 1,198.81 484.33 26,422.44 2007 14,439.52 3,689.34 135.81 2.02 54.23 821.06 224.40 19,366.38

156

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Rupees crores 2008 *Other allocable income includes : Interest Income ................................................................................................................. Scrap Sales ........................................................................................................................ Commission ...................................................................................................................... Dividend ............................................................................................................................ Profit on Sale of Long Term Investments .......................................................................... Others ............................................................................................................................... Total otal........ 27. Previous years figures have been regrouped/restated wherever necessary. 13.25 110.76 14.91 6.22 132.77 206.42 484.33 5.22 82.67 7.42 6.73 7.27 115.09 224.40 2007

157

Details of Subsidiary Companies

Rupees crores

158
Capital (including Preference Capital) Reserves & Surplus 0.61 1.06 (71.45) 4.86 6.81 (1.47) (7.23) (2.00) 0.14 8.33 (36.52) 39.72 (14.58) 7.81 19.09 1218.98 9.94 (47.46) 1.87 (2.32) 142.81 28.06 44.09 2.37 49.33 (4.14) (22.92) 734.49 (0.48) (41.28) 29.72 0.01 305.87 65.14 3.77 (0.01) 0.30 8.53 (0.66) 42.22 88.55 812.94 (6.32) (0.01) 5.90 (0.16) 2.72 13.40 27.94 60.89 100.57 3.78 1.90 59.68 12.10 84.48 39.69 454.69 53.83 117.16 29.41 7021.81 83.60 63.42 4.42 0.05 289.55 169.90 46.39 74.99 84.41 370.97 208.89 634.03 1028.92 36.16 25.28 309.97 47.68 484.98 741.96 23.10 0.05 19.49 11.45 94.61 278.26 389.81 965.84 6.76 0.05 38.07 10.74 2.72 13.40 27.94 60.89 100.57 3.78 1.90 59.68 12.10 84.48 39.69 454.69 53.83 117.16 29.41 7021.81 83.60 63.42 4.42 0.05 289.55 169.90 46.39 74.99 84.41 370.97 208.89 634.03 1028.92 36.16 25.28 309.97 47.68 484.98 741.96 23.10 0.05 19.49 11.45 94.61 278.26 389.81 965.84 6.76 0.05 38.07 10.74 0.01 50.01 0.01 0.22 5.52 0.04 0.53 11.67 9.72 4.25 18.65 1.69 0.05 @ 42.87 135.88 0.03 15.24 0.05 11.08 253.77 2.91 32.16 75.07 94.69 8.44 16.65 31.90 257.18 171.89 964.64 16.92 332.44 1226.80 172.41 55.57 5.69 1.99 60.47 107.03 145.08 58.06 0.10 0.04 252.03 2.54 80.11 284.53 0.29 162.88 375.04 3.49 1.08 18.01 0.01 541.06 894.97 219.96 5.24 61.59 0.80 (1.51) (25.02) 0.82 (2.99) (1.21) (6.16) (2.12) 0.18 0.09 (21.65) 0.25 (4.03) 0.14 (0.23) 271.99 (4.51) (16.24) 1.13 (2.32) 1.64 14.86 22.57 4.38 31.55 (2.17) (18.97) (18.51) (0.44) 1.31 (16.62) 0.01 147.11 125.99 3.41 (0.01) 0.05 7.69 (0.18) (4.11) 70.07 83.78 1.50 (0.01) 4.87 (0.16) 0.19 @ 0.06 0.68 0.06 0.04 0.09 0.14 0.25 0.04 0.14 (0.14) 94.96 (1.02) 0.42 0.45 4.73 (0.55) 2.11 11.95 (4.99) 0.04 0.08 (4.06) 14.41 45.47 0.30 2.73 @ 0.24 24.99 18.40 0.02 0.61 (1.51) (25.08) 0.14 (2.99) (1.21) (6.16) (2.18) 0.14 (21.79) (4.07) (0.09) 177.02 (3.49) (16.24) 0.71 (2.32) 1.18 10.13 23.13 2.27 19.60 (2.17) (18.97) (13.52) (0.48) 1.23 (12.56) 0.01 132.70 80.52 3.41 (0.01) (0.25) 4.96 (0.18) (4.35) 45.09 65.39 1.48 (0.01) 4.87 (0.16) 51.02 16.35 11.30 13.16 Total Assets Total Liabilities Gross Turnover Profit before Tax Provision for Tax Profit after Tax Proposed Dividend & Tax thereon 0.13 0.31 73.91 19.05 65.17 3.67 7.94 57.67 @ 6.45 31.30 77.20 19.54 32.27 0.48 95.29 3.47 76.62 1.00 0.05 124.80 25.37 5.40 7.05 0.63 31.46 212.95 452.95 68.57 8.56 20.30 30.60 22.55 146.60 76.42 @ 0.05 18.00 0.50 50.00 98.78 35.35 50.81 12.45 0.05 2.19 1.00 Details of Investments (excluding Investments in subsidiaries)

Name of Subsidiary Company

Bristlecone (Malaysia) SDN.BHD # Bristlecone GmbH # Bristlecone Incoporated # Bristlecone India Limited Bristlecone Limited # Bristlecone Singapore Pte. Limited # Bristlecone UK Limited # CanvasM Technologies Limited CanvasM (Americas) Incorporated # Falkenroth Umformtechnik GmbH # FirstChoice Wheels Limited Gesenkschmiede Schneider GmbH # iPolicy Networks Private Limited Jeco-Jellinghaus GmbH # Jensand Limited # Mahindra & Mahindra Financial Services Limited Mahindra & Mahindra South Africa (Proprietary) Limited # Mahindra (China) Tractor Company Limited # Mahindra Acres Consulting Engineers Limited Mahindra Aerospace Private Limited Mahindra Automotive Limited Mahindra Castings Private Limited Mahindra Engineering and Chemical Products Limited Mahindra Engineering Design & Development Company Limited Mahindra Europe s.r.l. # Mahindra Forgings Europe AG # Mahindra Forgings Global Limited # Mahindra Forgings International Limited # Mahindra Forgings Limited Mahindra Graphic Research Design s.r.l. # Mahindra Gujarat Tractor Limited Mahindra Hinoday Industries Limited Mahindra Holdings Limited Mahindra Holdings & Finance Limited Mahindra Holidays and Resorts India Limited Mahindra Holidays and Resorts USA Incoporated # Mahindra Hotels and Residences India Limited Mahindra Infrastructure Developers Limited Mahindra Insurance Brokers Limited Mahindra Integrated Township Private Limited Mahindra International Limited Mahindra Intertrade Limited Mahindra Lifespace Developers Limited Mahindra Logisoft Business Solutions Limited Mahindra Logistics Limited Mahindra Middleeast Electrical Steel Service Centre (FZC) # Mahindra Navistar Engines Private Limited

@ denotes amounts less than Rs. 50,000. # The financial statements of the Foreign Subsidiaries have been converted into Indian Rupees at the 31st March,2008 exchange rate.

Details of Subsidiary Companies (contd.)

Rupees crores

Name of Subsidiary Company 88.96 199.26 0.05 0.05 2.00 7.56 29.09 6.10 10.00 32.48 17.92 135.00 0.35 85.00 55.55 0.22 0.05 0.52 0.37 2.35 1.99 60.76 31.46 0.48 4.35 121.36 1.49 0.27 0.39 0.02 4.60 0.14 0.64 3.62 0.05 (2.47) 12.08 (0.02) (10.58) (0.60) 18.10 (24.18) 17.96 (0.20) 156.55 21.83 (3.22) (0.07) (4.51) 3.16 (0.10) 0.85 2.48 (0.05) (2.34) 4.43 604.08 148.65 0.95 (7.96) 22.09 1106.96 4.74 (0.03) 0.05 5.31 97.59 4.99 0.33 33.13 30.39 122.68 854.02 0.04 7.49 12.18 80.04 43.83 39.98 9.81 709.54 308.13 413.17 0.88 148.13 58.73 0.17 16.78 8.40 0.68 1.35 29.90 868.28 393.21 23.08 112.47 26.44 2215.90 38.51 0.18 1.05 6.39 122.64 7.93 1.89 19.85 30.44 122.68 854.02 0.04 7.49 12.18 80.04 43.83 39.98 9.81 709.54 308.13 413.17 0.88 148.13 58.73 0.17 16.78 8.40 0.68 1.35 29.90 868.28 393.21 23.08 112.47 26.44 2215.90 38.51 0.18 1.05 6.39 122.64 7.93 1.89 19.85 30.44 8.88 9.00 0.56 11.08 0.38 0.42 60.20 0.26 154.48 19.82 298.60 7.76 0.25 1252.48 0.31 71.11 39.00 15.56 0.01 1101.52 571.37 7.17 28.58 0.01 0.49 74.63 20.40 1.05 6.88 63.18 990.43 592.67 70.22 167.39 3702.30 283.93 2.13 25.22 87.56 29.89 10.81 63.92 2.15 (1.25) (42.37) (0.02) (10.57) (0.61) 1.48 (1.75) 7.12 (0.20) 44.19 3.61 (0.75) (0.01) 14.32 (0.06) (0.03) (0.07) 2.72 0.02 (0.57) 1.68 97.10 52.51 0.97 (12.14) 411.13 15.46 (0.25) 0.05 1.53 (7.05) 1.66 0.54 2.21 @ 0.27 0.01 (0.01) 0.71 0.11 2.95 14.70 1.93 0.04 2.89 0.09 0.01 0.02 0.83 (0.09) 0.62 31.94 20.64 (0.53) (3.78) 68.94 5.11 0.55 (1.03) 0.24 (1.25) (42.64) (0.02) (10.58) (0.60) 0.77 (1.86) 4.17 (0.20) 29.49 1.68 (0.79) (0.01) 11.42 0.03 (0.03) (0.09) 1.89 0.02 (0.48) 1.06 65.17 31.87 1.51 (8.36) 342.19 10.35 (0.25) 0.05 0.98 (6.02) 1.42 0.54 2.21 @ 1.29 11.40 5.90 35.54 78.10 -

Capital (including Preference Capital) Reserves & Surplus Total Assets Total Liabilities Gross Turnover Profit before Tax Provision for Tax Profit after Tax Proposed Dividend & Tax thereon

Details of Investments (excluding Investments in subsidiaries)

Mahindra Overseas Investment Company (Mauritius) Limited # Mahindra Renault Private Limited Mahindra Residential Developers Limited Mahindra Retail Private Limited Mahindra Rural Housing Finance Limited Mahindra SAR Transmission Private Limited Mahindra Shubhlabh Services Limited Mahindra Steel Service Centre Limited Mahindra Technology Park Limited Mahindra Ugine Steel Company Limited Mahindra USA Incoporated # Mahindra World City (Jaipur) Limited Mahindra World City (Maharashtra) Limited Mahindra World City Developers Limited Mahindra-BT Investment Company (Mauritius) Limited # MHR Hotel Management GmbH # NBS International Limited Plexion Technologies (UK) Limited # Plexion Technologies GmbH # Plexion Technologies Incoporated # PT Tech Mahindra Indonesia # Punjab Tractors Limited Schneweiss & Co. GmbH # Stokes Forgings Dudley Limited # Stokes Forgings Limited # Stokes Group Limited # Tech Mahindra Limited Tech Mahindra (Americas) Incoporated # Tech Mahindra (Beijing) IT Services Limited # Tech Mahindra (Malaysia) SDN.BHD # Tech Mahindra (R & D Services) Incoporated # Tech Mahindra (R & D Services) Limited Tech Mahindra (Singapore) Pte. Limited # Tech Mahindra (Thailand) Limited # Tech Mahindra GmbH # Tech Mahindra Foundation

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

@ denotes amounts less than Rs. 50,000. # The financial statements of the Foreign Subsidiaries have been converted into Indian Rupees at the 31st March,2008 exchange rate.

159

Notes

160

Corporate

Awards 2007-08
Mahindra was ranked among the top 10 Indian companies by the US based Reputation Institute in its Global 200: The Worlds Best Corporate Reputations list Mr. Keshub Mahindra, Chairman received the Ernst & Young Entrepreneur of the Year Lifetime Achievement award Mr. Anand Mahindra, Vice-Chairman & Managing Director received the Business India Businessman of the Year award Mr. Arun Nanda, Executive Director & President received the Chevalier de la Legion dHonneur from the President of the French Republic Mr. Bharat Doshi, Executive Director & Group CFO, received the CFO of the Year award and the Best Performing CFO award in the Auto, Aviation and Auto Ancillaries Sector at the HSBC CNBC CFO Awards Mr. Rajeev Dubey, President, HR & Corporate Services and Member of the Group Management Board, Mahindra & Mahindra received The Outstanding HR Professional of the Year award at the Asia Pacific HRM Congress The company was awarded the Excellence in Innovation award at the Indira International Innovation Summit (3is Summit) The company was awarded the Bombay Chamber Good Corporate Citizen Award The company was awarded the SAP ACE (Awards for Customer Excellence) by SAP India in the category Best Automotive Sector Implementation Large Enterprises for SAP Business Warehouse (BW) Implementation along with Management Cockpit Employer Brand of the Year Award for Best HR Strategy in line with Business Award for Talent Management Award for Continuous Innovation in HR Strategy at Work Award for Excellence in Training Award for Managing Health at Work Award for Global HR Strategy Award for Excellence in HR through Technology Award for Innovative Retention Strategy Businessworld-FICCI-SEDF Corporate Social Responsibility Award Pegasus Corporate Social Responsibility Gold Award for the Mahindra Lifeline Express and the Nanhi Kali programme BSE Business for Social Responsibility Award for Best Corporate Social Responsibility Practice Auto Monitor CSR Award for Mahindra Lifeline Express Zaheerabad and Nashik plants won the first and second prize respectively in the Automobile Industry category at the National Energy Conservation Awards

Corporate Governance ACL Impact Award Mahindras Corporate Management Services (winners from Asia Pacific Region) Golden Peacock Award to the All New Mahindra Scorpio for Innovative Product / Services in the Automobile segment Golden Peacock Eco-Innovation Award for the Bijlee, an all electric zero emissions vehicle Car of the Year from HT Cars & Bikes (supplement of Hindustan Times) to Mahindra Renault Logan Business Standard Motoring Jury Award to Mahindra Renault Logan Best Entry Midsize Car in Initial Quality to Mahindra Renault Logan - J.D. Power Asia Pacific India Initial Quality Study J.D. Power Asia Pacific Indian Automotive Performance, Execution and Layout Study (APEAL) to Mahindra Renault Logan Midsize Car of the Year Award to Mahindra Renault Logan - NDTV Profit Car India & Bike India Awards Value for Money Car to Mahindra Renault Logan - Top Gear TNS Voice of the Customer Award for Mahindra Scorpio and Mahindra Renault Logan Indigenous Design of the Year Award to Mahindra AXE Annual Overdrive Awards Engineering Export Promotion Council All India Export Award in the category Star Performer Award: Motor Vehicles: Large Enterprises

Automotive Sector

HR Awards presented at the Asia P acific HRM Congress Pacific

Infomedia India Limited

Farm Equipment Sector Japan Quality Medal Golden Peacock National Quality Award for Excellence in Quality Golden Peacock Occupational Health & Safety Award for Excellence in Health and Safety Practices Indian Innovation Award for outstanding innovation in Reducing Time To Market In New Product Development By Bringing Field To Lab Frost & Sullivan Voice of Customer award to Mahindra Powerol for the most preferred Genset Brand in the telecom segment Amity Corporate Excellence Award to Punjab Tractors Limited (PTL) at Inbush, an international business summit organized by Amity International Business School Greentech Safety Silver Award to Punjab Tractors Limited (PTL) for outstanding achievement in safety management, awarded by the Greentech Foundation All India Award for Export Excellence from the Engineering Export Promotion Council (EEPC) for outstanding contribution to engineering exports in the field of agricultural machinery

Corporate Social Responsibility

Sustainability

Registered Office:

Mahindra & Mahindra Ltd. Gateway Building, Apollo Bunder, Mumbai 400 001 www.mahindra.com

PRODUCT info@trisyscom.com