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Directors Report of Bajaj Auto Ltd.

Mar 31, 2015

Dear Members,

The directors present their Eighth Annual Report and audited financial statements for the year ended 31 March 2015.

Financial results

The financial results of the Company are elaborated in the Management Discussion and Analysis Report.

The highlights of the Financial Results are as under:

Sales in numbers FY 2015 FY 2014

Motorcycles 3,292,084 3,422,403

Three-wheelers 519,117 447,674

Total 3,811,201 3,870,077

Of which exports 1,806,078 1,583,935

(Rs. In Crore)

Particulars FY 2015 FY 2014

Total revenue 22,194.43 20,855.92

Total expenses 17,769.35 16,223.87

Profit before exceptional items and tax 4,425.08 4,632.05

Exceptional items 340.29 -

Profit before tax 4,084.79 4,632.05

Tax expense 1,271.05 1,390.10

Profit after tax 2,813.74 3,241.95

Profit for the year 2,813.74 3,243.32

Transfer to General reserve 282.00 325.00

Proposed dividend (inclusive of dividend tax) 1,734.57 1,692.73

Provision of dividend tax for previous year written back - (4.60)

Balance carried to Balance Sheet 797.17 1,230.19

Earnings per share (D) 97.2 112.1

Dividend

The directors recommend for consideration of the shareholders at the ensuing annual general meeting, payment of a dividend of B 50 per share, (500%) for the year ended 31 March 2015. The amount of dividend and the tax thereon aggregate to B 1,734.57 crore.

Dividend paid for the year ended 31 March 2014 was also B 50 per share (500%). The amount of dividend and the tax thereon aggregated to B 1,692.73 crore.

Share capital

The paid up equity share capital as on 31 March 2015 was B 289.37 crore.

There was no public issue, rights issue, bonus issue or preferential issue etc. during the year.

The Company has not issued shares with differential voting rights, sweat equity shares nor has it granted any stock options.

Operations

Detailed information on the operations of the Company are covered in the Management Discussion and Analysis Report.

Capacity expansion and new projects

The Company''s current installed capacity is 6.06 million units per annum. The Company plans to increase the installed capacity to around 6.12 million units per annum by March 2016.

As regards our quadricycle - RE 60, the product is ready for launch. Detailed information on the same is provided in the Management Discussion and Analysis Report.

Research and Development and technology absorption

A) Products

Many new products have been launched during the year under review. Detailed information on the new products is covered in the Management Discussion and Analysis Report.

B) Process

R&D has been working on improving its operations in a number of areas as listed below:

- Manpower: R&D has been expanding its team size in areas of design, analysis and validation in order to keep up with the rapidly expanding aspirations of the Company.

- Facilities: R&D continued to enhance its design, computing, proto-type manufacturing and validation facilities. Such enhancement efforts have enabled R&D to develop durable and refined products. A number of new test facilities and proto typing facilities were added.

C) Technology

- ABS on Pulsar RS 200 - As the best balance for cost and safety, the vehicle has front wheel ABS that offers safe braking with good vehicle stability. It also controls the rear wheel lift-up behavior, which is associated with emergency front wheel braking. This augments and supplements the race sports nature of the vehicle.

- EVAP systems for KTM offerings for USA and China markets - This system conforms to the evaporative emission norms of US EPA. The evaporative emission from fuel tank is controlled through use of charcoal canisters to absorb the fuel vapours from escaping into the atmosphere, and an electronically controlled purge valves to purge the absorbed vapour back into the intake system of the engine.

D) Outgo

The expenditure on research and development during 2014-15 and in the previous year was:-

(Rs. In Crore)

Particulars FY 2015 FY 2014

i. Capital (including technical know-how) 139.73 87.11

ii. Recurring 221.68 189.68

Total 361.41 276.79

iii. Total research and development expenditure as a % of sales, net of excise duty 1.71 % 1.40 %

Conservation of energy

Company continues its efforts to reduce and optimise the energy consumption at all manufacturing facilities, including corporate office at Pune. Significant reduction in energy consumption has been achieved as set out below:

A) Electrical Energy

- Installing and running variable speed NIRVAN screw air compressors at compressor houses at Waluj.

- Use of air pressure boosters for high pressure application in paint shops/robots at Waluj.

- Installation of chillers with scroll compressor in paint shop at Waluj.

- Arresting compressed air leakages through audits and countermeasures.

- Auto shut off-hydraulic, coolant, conveyor motors, fume extractors in machine shop.

- Installing air handling unit for plant 2 engine assembly in place of air conditioning system at Pantnagar.

- Use of transparent sheet in shops in place of shop lights at Chakan.

- Use of LED/CFLs for street lighting/shop lightings/office.

- Use of day light pipes in paint shop at Chakan and Pantnagar.

- Installation of energy efficient pumps/motors, equipments, air dryers, exhaust blowers, axial fans.

- Installation of breeze air unit in office/dyno room/PT sub assembly area at Chakan.

- Separate AHU ducts for both vehicle assembly conveyors at Pantnagar.

- Dynamometer cooling blower interlock with vehicle testing at Chakan.

B) Water

- Elimination of water cooling for compressed air at Waluj.

- Reuse of treated water for process, installation of RO plant at Waluj and Chakan.

- Replacement of water cooled dryers of compressor with air cooled dryers at Chakan.

- Replace underground hydrant and raw water pipe line with above ground level pipe line at Waluj and Chakan.

- Use of auto closed water taps for controlled consumption of water at wash basin.

- Use of ETP/STP treated water for chemical dosing and cleaning activity, gardening and toilet flushing at Pantnagar.

- Modification of water distribution line by gravity from main storage tank to different shops at Pantnagar.

- Rain water harvesting at Waluj.

C) LPG/PNG

- Thermal imaging/audit for ovens in paint shop and countermeasure at Waluj.

- Use of PNG instead of LPG at Chakan.

- Provision of air curtains at oven exit to reduce heat loss at Waluj.

- Installation of low temperature chemical in tank cell at Chakan.

- Weight reduction of job fixtures in heat treatment at Waluj and jigs at paint shop Pantnagar.

- Burner efficiency improvement through magnetic resonators at Waluj and Chakan.

- Recovery of heat from waste paint incineration and use it for chemical tank heating at Chakan.

- Use of natural gas started in canteen in place of LPG at Pantnagar.

D) Utilisation of renewable energy - key initiatives

- Installation of transparent roof sheets to maximise use of natural light.

- Installation of light pipes.

- Use of solar electrical energy.

- Use of wind driven ventilators.

Impact of measures taken

As a result of the initiatives taken for conservation of energy and natural resources, the Company has effected an overall reduction in consumption as given in the Table below:

% Reduction w.r.t. previous year

Description FY 2015 FY 2014

Electricity consumption 3.95 1.19

Water consumption 7.37 24.24

LPG/propane consumption 11.70 14.85

Investment/savings

Rs. In Crore

Description FY 2015 FY 2014

Investment for energy conservation activities 3.24 4.36

Recurring savings achieved through above activities 3.57 2.74

Awards and Accolades

- Waluj plant has been recognised with ''Excellent Energy efficient unit award'' for 2014 by CII.

- Waluj plant has won Gold Award (Apex level) in Indian Green Manufacturing Challenge award competition instituted by International Research Institute for Manufacturing, Chennai

International Business

Bajaj Auto continues to be India''s No.1 exporter of motorcycles and three-wheelers. It exports to 62 countries and enjoys the No.1 or No.2 position in 20 of them. During FY2015, exports accounted for 46.2% of the Company''s net sales. Detailed information on the International Business is given in the Management Discussion and Analysis Report.

Foreign exchange earnings and outgo

The Company continued to be a net foreign exchange earner during the year.

Total foreign exchange earned by the Company during the year under review was B 9,443.51 crore, compared to B 7,963.86 crore during the previous year.

Total foreign exchange outflow during the year under review was B 856.08 crore as against B 725.21 crore during the previous year.

Industrial relations

Industrial relations with staff and workmen across all the plants viz. Akurdi, Waluj, Chakan and Pantnagar continued to be cordial.

At Chakan, the wage review was due from 1 April 2013 as per the Wage Settlement dated 21 May 2010. Accordingly, a Memorandum of Understanding (MOU) was signed with the recognised union viz. Vishwa Kalyan Kamgar Sanghatana, on 14 August 2014 giving total wage rise of B 10,000 per month in CTC (Cost To Company) per workman in a phased manner for a period of three years from 1 April 2013 to 31 March 2016.

At Waluj, the Wage Settlement was due from 1 August 2014. Accordingly, a fresh settlement was signed with Bajaj Auto Ltd. Employees'' Union on 21 August 2014 for a period of 3.1/2 years from 1 August 2014 to 31 January 2018 giving wage rise of B 9,755 per month in CTC (Cost To Company) per workman. The new settlement is effective from the very next day of expiry of the earlier settlement, which expired on 31 July 2014.

Two workmen from motorcycles division, Waluj received Prime Minister''s ''Shramveer'' and ''Shramshree'' Awards respectively for the year 2013. One workman from spares operations department, Waluj received National ''Vishwakarma Rashtriya Puraskar'' from the Labour and Employment Ministry, Government of India, for the year 2012. Similarly, three workmen from Waluj received ''Gunwant Kamgar'' Awards for the year 2013 from Government of Maharashtra.

Subsidiaries and joint ventures

PT. Bajaj Auto Indonesia

In line with the corporate strategy of aligning with Kawasaki Heavy Industries for business in Indonesia, the routine business operations of PT. Bajaj Auto Indonesia were stopped. This year has seen consolidation of business with Kawasaki and also a complete and smooth closure of company operations in Indonesia.

Bajaj Auto International Holdings BV,

Netherlands (BAIH BV)

Bajaj Auto International Holdings BV is a 100% Netherlands based subsidiary of Bajaj Auto Ltd.

Over the years, through this subsidiary, Bajaj Auto has invested a total of € 198.1 million (B 1,219 crore), and holds approximately 48% stake in KTM AG of Austria (KTM), Europe''s second largest sport motorcycle manufacturer. Calendar year 2014 has been a record year for KTM, with highest sales in units and highest turnover in the history of the Company. Detailed information on the developments at the subsidiary and KTM AG is provided in the Management Discussion and Analysis Report.

Signing of anti-corruption initiative of World Economic Forum (WEF)

In support of the initiative taken by WEF, with a view to strengthening the efforts to counter bribery and corruption, your Company is a signatory to the ''Commitment to anti-corruption'' and is supporting the ''Partnering Against Corruption - Principles for Countering Bribery'' derived from Transparency International''s Business Principles. This calls for a commitment to two fundamental actions viz. a zero-tolerance policy towards bribery and development of practical and effective implementation programme.

Extract of annual return

The extract of annual return as provided under sub-section (3) of section 92 of the Companies Act, 2013, in the prescribed Form MGT-9 is annexed to this Report.

Number of meetings of the Board

There were 8 meetings of the Board held during the year. Detailed information is given in the Corporate Governance Report.

Directors'' responsibility statement

As required under clause (c) of sub-section (3) of section 134 of Companies Act, 2013, directors, to the best of their knowledge and belief, state that-

- in the preparation of the annual accounts, the applicable Accounting Standards had been followed alongwith proper explanation relating to material departures;

- the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

- the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- the directors had prepared the annual accounts on a going concern basis;

- the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

- the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Declaration by independent directors

The independent directors have submitted the declaration of independence, as required pursuant to section 149 (7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in sub-section (6).

Directors'' Remuneration Policy and criteria for matters under section 178

Information regarding Directors'' Remuneration Policy and criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178 are provided in the Corporate Governance Report.

Particulars of loans, guarantees or investments

Information regarding loans, guarantees and investments covered under the provisions of section 186 of the Companies Act, 2013 are detailed in the financial statements.

Related party transactions

There were no related party transactions (RPTs) entered into by the Company during the financial year, which attracted the provisions of section 188 of Companies Act, 2013. There being no ''material'' related party transactions as defined under clause 49 of the Listing Agreement, there are no details to be disclosed in Form AOC-2 in that regard.

During the year 2014-15, pursuant to section 177 of the Companies Act, 2013 and clause 49 of the Listing Agreement, all RPTs were placed before Audit Committee for its prior/omnibus approval.

The policy on RPTs as approved by Board is uploaded on the Company''s website www.bajajauto.com

Material changes and commitments

There have been no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this Report.

Risk Management Policy

Information on the development and implementation of a Risk Management Policy for the Company including identification therein of elements of risk which in the opinion of the Board may threaten the existence of the Company is given in the Corporate Governance Report.

Corporate Social Responsibility

Detailed information report on Corporate Social Responsibility Policy developed and implemented by the Company on CSR initiatives taken during the year pursuant to section 135 of the Companies Act, 2013 is given in the annexed Annual Report on CSR activities.

Formal annual evaluation of the performance of Board, its Committees and Directors

Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual directors is given in the Corporate Governance Report.

Presentation of financial results

The financial results of the Company for the year ended 31 March 2015 have been disclosed as per Schedule III to the Companies Act, 2013.

Consolidated financial statements

The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries and as prepared in compliance with the Accounting Standards and Listing Agreement as prescribed by SEBI.

A separate statement containing the salient features of its subsidiaries in the prescribed form (AOC-1) is annexed separately.

Statutory disclosures

The summary of the key financials of the Company''s subsidiaries (Form AOC-1) is included in this Annual Report. A copy of audited financial statements for each of the subsidiary companies will be made available to the members of the Company, seeking such information at any point of time.

The audited financial statements for each of the subsidiary companies will be kept for inspection by any member of the Company at its registered office during business hours. The same are placed on the Company''s website www.bajajauto.com

As required under the provisions of section 197 (12) of the Companies Act, 2013 read with rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the prescribed particulars are set out in an annexure to the Directors'' Report. As per provisions of section 136 (1) of the said Act, these particulars will be made available to any shareholder on request.

Certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

A cash flow statement for the year 2014-15 is attached to the Balance Sheet.

During the year under review, pursuant to the legislation ''Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace Act, 2013'' introduced by the Government of India, which came into effect from 9 December 2013, the Company has framed a Policy on Prevention of Sexual Harassment at Workplace. There was no case reported during the year under review under the said Policy.

Directors and Key Managerial Personnel-changes

Ms. Suman Kirloskar, an independent director of the Company, after her distinguished tenure on the Board since October 2002, tendered her resignation to take effect from close of office hours on 31 March 2015. In her place, pursuant to section 149 (1) and clause 49 of Listing Agreement,

Dr. Gita Piramal was appointed as an additional director in the category of non-executive, independent director of the Company, with effect from 1 April 2015 in the meeting of the Board held on 24 March 2015.

In light of the provisions of the Companies Act, 2013, Shekhar Bajaj as well as Niraj Bajaj retire from the Board by rotation this year and being eligible, offer themselves for re-appointment.

The information as required to be disclosed under clause 49 of the Listing Agreement in case of re-appointment of the directors is provided in the Notice of the ensuing annual general meeting.

There was no change in the Managing Director, CFO and Company Secretary, collectively the key managerial personnel, during the year under review.

Detailed information on the directors is provided in the Corporate Governance Report.

Significant and material orders passed by the regulators or courts

During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals, which may impact the going concern status of the Company and its operations in future.

Adequacy of internal financial controls

Internal financial controls with reference to the financial statements were adequate and operating effectively.

Corporate governance

Pursuant to clause 49 of the Listing Agreement with stock exchanges, a separate section titled ''Corporate Governance'' has been included in this Annual Report, alongwith the reports on Management Discussion and Analysis and General Shareholder Information.

All Board members and Senior Management personnel have affirmed compliance with the Code of Conduct for the year 2014-15. A declaration to this effect signed by the Managing Director/CEO of the Company is contained in this Annual Report.

The Managing Director and CFO have certified to the Board with regard to the financial statements and other matters as required in clause 49 of the Listing Agreement and the said certificate is contained in this Annual Report.

Certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Business responsibility report

Securities and Exchange Board of India (SEBI), vide its circular dated 13 August 2012, has mandated inclusion of business responsibility reports (BRR) as part of the annual reports for the top 100 listed entities by market capitalisation. Since Bajaj Auto Ltd. is one of the top 100 listed entities, the Company, as in the previous years, has presented its BR Report for the financial year 2014-15, which is part of this Annual Report. As a green initiative, the BR Report has been hosted on the Company''s website www.bajajauto.com

A physical copy of the BR Report will be made available to any shareholder on request.

Auditors

Statutory auditor

Pursuant to the provisions of section 139 of the Companies Act, 2013 and the Rules made thereunder, the current auditors of the Company, Dalal & Shah, Chartered Accountants (registration number: 102021W) were appointed by the shareholders at the 7th annual general meeting to hold office until the conclusion of the 10th annual general meeting, subject to ratification by shareholders at each annual general meeting.

The members are requested to ratify the appointment of Dalal & Shah, Chartered Accountants, (registration number: 102021W) as statutory auditors of the Company and to fix their remuneration for the year 2015-16.

The statutory audit report does not contain any qualification, reservation or adverse remark or disclaimer made by statutory auditor.

Secretarial auditor

Pursuant to the provisions of section 204 of the Companies Act, 2013 and Rules made thereunder, the Company has appointed, Shyamprasad D Limaye, (Membership No. 1587) Company Secretaries in Practice to undertake the secretarial audit of the Company. Secretarial Audit Report for the year 2014-15 given by Shyamprasad D Limaye in the prescribed form MR-3 is annexed to this Report. The Secretarial Audit Report for the year under review does not contain any qualification, reservation or adverse remark or disclaimer made by the secretarial auditor.

Cost audit/auditor

Pursuant to the provisions of section 148 of the Companies Act, 2013 and Companies (Cost Records and Audit) Rules, 2014, the products manufactured/services rendered by the Company were not covered for maintenance of cost records and therefore, the Company discontinued the cost audit and consequently, the Company has not appointed cost auditor for the financial year 2014-15.

On behalf of the Board of Directors,

Rahul Bajaj Chairman

Pune: 21 May 2015


Mar 31, 2014

The directors present their Seventh Annual Report and audited Statement of accounts for the year ended 31 March 2014. Since this Report pertains to financial year that commenced prior to 1 April 2014, the contents therein are governed by the relevant provisions/schedules/rules of the Companies Act, 1956, in compliance with general circular No. 08/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs.

The highlights are as under:

Units in Numbers FY2014 FY2013

Two-wheelers 3,422,403 3,757,105

Three-wheelers 447,674 480,057 Total 3,870,077 4,237,162

Of which Exports 1,583,935 1,547,157

Financials

(Rs.In Crore) Particulars FY2014 FY2013

Total revenue 20,855.92 20,792.74

Gross profit before finance costs, depreciation and amortisation 4,812.15 4,433.54

Finance costs 0.49 0.54

Depreciation and amortisation 179.61 166.77

Profit before tax 4,632.05 4,266.23

Tax expense 1,390.10 1,222.66

Profit after tax 3,241.95 3,043.57

Tax credits pertaining to earlier year 1.37 -

Profit for the year 3,243.32 3,043.57

Add: Balance brought forward from previous year 4,920.26 3,705.14

Profit available for appropriation 8,163.58 6,748.71

Transfer to General reserve 325.00 305.00

Proposed dividend (inclusive of dividend tax) 1,692.73 1,523.45

Provision of dividend tax for previous year written back - 4.60

Balance carried to Balance Sheet 6,150.45 4,920.26

Earnings per share (Rs.) 112.1 105.2

Dividend

The directors recommend for consideration of the shareholders at the ensuing annual general meeting, payment of a dividend of Rs. 50 per share, (500 per cent) for the year ended 31 March 2014. The amount of dividend and the tax thereon aggregate to Rs. 1,692.73 crore.

Dividend paid for the year ended 31 March 2013 was Rs.45 per share (450 per cent). The amount of dividend and the tax thereon aggregated to Rs. 1,523.45 crore.

Operations

The operations of the Company are elaborated in the annexed Management Discussion and Analysis Report.

Capacity expansion and new projects

The Company''s current installed capacity is 5.76 million units per annum. The Company plans to increase the installed capacity to around 6 million units per annum by March 2015.

The 4 Wheeler project is going on as per plan and is being implemented at Waluj. Commercial production of the four-wheeler RE 60 is slated for the second half of the current year.

Research and Development and technology absorption

A) Products Pulsar 200 NS

After the successful launch of Pulsar 200 NS in May 2012, this model has been well received in markets like Colombia. During the year under review, it was launched in Indonesia under the joint brand of Kawasaki Bajaj. The bike has been well received. New colour and graphics have been introduced on the 200 NS to make it even more exciting.

Discover 125 M

The Discover 125 M is the quintessential 125. Built on the compact M platform, it is a great blend of performance and affordability. This engine develops class leading performance of 11.5 Ps power and 1.12 Kg-m of torque, for a powerful drive, while maintaining the high fuel efficiency for which Discover brand is known for. The vehicle has a four-speed gear box suitably mated to the power characteristics of the engine. The agile handling chassis and suspension make this an ideal city bike.

Discover 100 M

The Discover 100 M is the new entry level Discover. It exemplifies the core values of high performance blended with great fuel economy. This product has been designed to complement the styling aspects of the ST and T series, which have created good appeal for the customers. The vehicle is powered by a high performance four-valve air cooled 100 cc DTSi engine, delivering 9.5 Ps and Torque of 0.92 Kg-m, with a four-speed gear box suitably mated to the power characteristics of the engine. It has the best in class fuel efficiency. The careful engineering of the product has resulted in very attractive price to the customer.

KTM Duke 390 with ABS

This joint venture between KTM and Bajaj saw yet another successful launch in the form of Duke 390. With the trademark Orange frame and alloy wheels typical to KTM, the bike lives upto the ''Ready to Race'' tag of KTM brand exceptionally well.

RE

All variants of our RE range of three-wheeler products comprising small, medium and large platforms and covering gasoline, gaseous and diesel engines have been put through a complete upgrade. These products have been updated with much better driver comfort through revised ergonomics, smart looks, improved engine performance and revised gear ratios leading to excellent drivability and upto 15% improvement in fuel economy.

DTSi technology has also been employed in the spark ignited engine versions, while five-speed gear box has been deployed in the diesel engine versions.

B) Process

R&D has been working on improving its operations in a number of areas as listed below.

Manpower: R&D has been expanding its team size in areas of design, analysis and validation in order to keep up with the rapidly expanding aspirations of the Company. In the year under review, we have expanded our manpower by about 6%.

Facilities: R&D continued to enhance its design, computing, prototype manufacturing and validation facilities. Such enhancement efforts have enabled R&D to develop durable and refined products. A number of new test facilities were put in to validate the durability and performance of the forthcoming two and four wheelers. The prototyping facilities were also augmented to enable building of the prototypes of these vehicles.

C) Technology

1) Anti Lock Braking system was introduced on KTM Duke 390. Through this model, the domestic and export markets got the chance to experience the confidence and safety of ABS, while applying the brakes on this high performance bike. Customers and media alike were impressed by this feature and its performance.

2) Technologies like Fuel Injection, five speed gear box, Multi valves, DTSi and light weighting have been employed on the RE60 to achieve excellent fuel economy, while at the same time provide great drivability and comfort to the driver and passengers. The product meets among other things the 400 kg weight limit prescribed in the European regulations for such category.

D) Outgo

The expenditure on research and development during 2013-14 and in the previous year was:

(Rs.In Crore) Particulars FY2014 FY2013

i. Capital (including technical know-how) 87.11 109.19

ii. Recurring 189.68 129.40

Total 276.79 238.59

iii. Total research and development expenditure as a percentage of sales, net of excise duty 1.40 % 1.22%

Conservation of energy

Company has always been a forerunner in conservation of energy and natural resources. Some of the important steps taken during the year under review are listed below:-

A) Electrical energy

- Installing and running variable speed NIRVAN screw air compressors at compressor houses.

- Use of air pressure boosters for high pressure application in paint shops/robots.

- Installation of energy efficient pumps/motors, equipments, air dryers, exhaust blowers, axial fans.

- Installation of chillers with scroll compressor in paint shop.

- Use of heat pump for water heating for washing machine.

- Arresting compressed air leakages through audits and countermeasures.

- Installation of soft start valve for machine to prevent air leakages.

- Reduction in frequency of ASU and exhaust blowers of paint shop during break hours.

- Use of transparent sheet in shops in place of shop lights (total 810 nos.).

- Separate AHU ducts for both V/A conveyors.

- Use of LED/CFLs for street lighting/shop lightings/office.

- Auto Shut Off - hydraulic, coolant, conveyor motors, fume extractors in motorcycle shop.

B) Water

- Elimination of water cooling for compressed air.

- Reuse of treated water for process, installation of RO plant. Replacement of water cooled dryers of compressor with air cooled dryers.

- Replace rusty underground hydrant and raw water pipe line with above ground level pipe line to arrest water leakage.

- Use of auto closed water taps for controlled consumption of water at wash basin.

- Usage of bio-cake for urinals and/or waterless urinals.

- Modification of water distribution line by gravity from main storage tank to different shops at Pantnagar.

- Rain water harvesting.

C) LPG/Propane

- Thermal imaging/audit for ovens in paint shop and countermeasure for heat loss areas identification.

- Installation and commissioning of PNG gas supply at Chakan and Pantnagar.

- Optimising start up time of top coat ovens.

- Provision of air curtains at oven exit to reduce heat loss.

- Installation of low temperature chemical in tank cell.

D) Utilisation of renewable energy - key initiatives

- Installation of natural light transparent roof sheets.

- Installation of light pipes.

- Use of solar electrical energy.

Impact of measures taken

As a result of the initiatives taken for conservation of energy and natural resources, the Company has effected an overall reduction in consumption as given in the Table below:

% Reduction w.r.to previous year

Description FY2014 FY2013

Electricity consumption 1.19 1.85

Water consumption 24.24 20.97

LPG/propane consumption 14.85 7.49

Investment/savings

Rs.In Crore

Description FY2014 FY2013

Investment for energy conservation activities 4.36 3.67

Recurring savings achieved through above activities 2.74 2.30

This chapter may be read with the Business Responsibility Report (BRR), which is part of the Annual Report.

International business

Bajaj Auto continues to outperform competition in terms of two and three-wheeler exports in spite of the grim world economic scenario. We have maintained our leadership position in exports and have dominated the Indian two and three-wheeler export scenario. Bajaj has exported a total of 1,583,935 two and three-wheelers, highlighting the stellar lead the Company has established against competition.

More details of International Business are set out in the annexed Management Discussion and Analysis Report.

Foreign exchange earnings and outgo

The Company continued to be a net foreign exchange earner during the year.

Total foreign exchange earned by the Company during the year under review was Rs. 7,963.86 crore, compared to Rs. 6,565.34 crore during the previous year.

Total foreign exchange outflow during the year under review was Rs.725.21 crore as against Rs. 1,083.16 crore during the previous year.

The above outflow excludes an investment of Rs. 67.75 crore (previous year: Rs. Nil) made in its subsidiary, PT. Bajaj Auto Indonesia (PT BAI) for increasing its stake from 98.94%.to 99.25%.

Industrial relations

Industrial relations with staff and workmen at the plants at Akurdi, Waluj and Pantnagar continued to be cordial. This includes the relations with staff at the plant at Chakan.

At Chakan, the workmen represented by the recognised union Vishwa Kalyan Kamgar Sanghatana, went on strike from 25 June 2013 to 13 August 2013 for the reason that Management refused to accede to their demand of allotment of 500 shares to each workman at a discounted rate of Rs. 1 per share. The union withdrew the strike unconditionally on realising Management''s firm decision and workers resumed work with effect from 14 August 2013.

At Chakan, wage review was due effective from 1 April 2013. Management offered Rs. 10,000 per month in a phased manner, depending upon the year of service etc., for three years. However, this issue is under litigation.

At Akurdi, as per the provisions of the wage settlement dated 20 August 2010, wage review was due and accordingly Memorandum of Understanding (MOU) was signed on 10 February 2014 giving wage rise of Rs. 10,000 per month per workman in a phased manner.

At Waluj, Bajaj Auto Ltd. Employees'' Union, representing majority of the workmen, has submitted a Charter of Demands for the forthcoming wage settlement, which is due from 1 August 2014.

Subsidiaries

PT. Bajaj Auto Indonesia (PT BAI)

The Company has a Memorandum of Understanding with Kawasaki Heavy Industries (KHI) for jointly distributing its products in many of the ASEAN countries. This was a result of a successful strategy followed by the Company in launching its products in Philippines. Enthused by the commendable success of this strategy, the Company has extended this strategy in Indonesia as well. Consequently, the operations at PT BAI have been scaled down significantly.

During the year under review, the Company through KHI sold 13,570 nos. of Pulsars during the seven-month period commencing from August 2013.

Bajaj Auto International Holdings BV, Netherlands (BAIH BV)

Bajaj Auto International Holdings BV is a 100% Netherlands based subsidiary of Bajaj Auto Ltd. Through this subsidiary, Bajaj Auto, over the years, has invested a total of €198.1 million and holds about 48% stake in KTM AG of Austria (KTM), Europe''s second largest sport motorcycle manufacturer.

Calendar year 2013 has been a record year for KTM, with highest sales in units and highest turnover in the history of the Company. KTM sold 123,859 motorcycles, a growth of 15.6% and achieved a turnover of €716.4 million, a growth of 17.1%. Profit after tax was at €36.5 million, a growth of 44.3%.

Proportionate profit of €17.5 million has been accounted in the consolidated results of Bajaj Auto Ltd.

During the year, Bajaj Auto manufactured 36,047 units of KTM Duke in its Chakan plant. 11,050 units were sold through the pro-biking network in India and 24,016 units were exported to various countries across the globe.

In the annual general meeting held on 24 April 2014, for the year 2013, KTM AG has declared a dividend of €1.00 per share (for the year 2012, dividend declared was €0.70 per share). BAIH BV is entitled to receive €5.2 million, being its share of dividend.

KTM is listed in the Second Regulated Market of the Vienna Stock Exchange and its market capitalisation as on 31 March 2014 was €818 million.

Signing of anti-corruption Initiative of World Economic Forum (WEF)

In support of the initiative taken by WEF, with a view to strengthening the efforts to counter bribery and corruption, your Company is a signatory to the "Commitment to anti-corruption" and is supporting the "Partnering Against Corruption - Principles for Countering Bribery" derived from Transparency International''s Business Principles. This calls for a commitment to two fundamental actions viz. a zero-tolerance policy towards bribery and development of practical and effective implementation program.

Corporate Social Responsibility

The Companies Act, 2013 notified section 135 of the Act concerning Corporate Social Responsibility alongwith the Rules thereunder and revised Schedule VII to the Act on 27 February 2014 to come into effect from 1 April 2014.

The Company being covered under the provisions of the said section, has taken necessary initial steps in this regard. A Committee of the directors, titled ''Corporate Social Responsibility Committee'', has been formed by the Board in its meeting held on 28 March 2014, consisting of the following Directors -

1. Rahul Bajaj, Chairman

2. Rajiv Bajaj

3. Nanoo Pamnani

The Committee has in place a CSR policy.

The said section being enacted with effect from 1 April 2014, necessary details as prescribed under the said section shall be presented to the members in the Annual Report for the year 2014-15.

Even when the said provisions were not mandated by the Ministry of Corporate Affairs, the Bajaj Group continued its Corporate Social Responsibility (CSR) initiatives in various fields, during the year 2013-14. Activities in this area are set out in detail in the annexed CSR Report.

Directors

In view of the provisions of the Companies Act, 2013, Madhur Bajaj and Sanjiv Bajaj have now become retiring directors. Thus they retire from the Board by rotation this year and being eligible, offer themselves for re-appointment. The information as required to be disclosed under clause 49 of the listing agreement in case of re-appointment of directors is provided in the Notice of the ensuing annual general meeting.

Pursuant to section 149(4) of the Companies Act, 2013, every listed company is required to appoint at least one third of its directors as independent directors. The Board already has one half of its directors in the category of independent directors in terms of the provisions of clause 49 of the listing agreement. The Board therefore, in its meeting held on 28 March 2014 appointed the existing independent directors under clause 49 as ''independent directors'' pursuant to Companies Act, 2013, subject to approval of shareholders.

As required under the said Act and the Rules made there under, the same is now put up for approval of members at the ensuing annual general meeting. Necessary details have been annexed to the Notice of the meeting in terms of section 102(1) of the Companies Act, 2013.

The independent directors have submitted the declaration of independence, as required pursuant to section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in sub-section(6).

With the appointment of independent directors, the conditions specified in the Act and the Rules made there under as also under new clause 49 of the listing agreement stand complied.

Directors'' responsibility statement

As required by sub-section (2AA) of section 217 of the Companies Act, 1956, directors state:

- that in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.

- that the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period.

- that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

- that the annual accounts have been prepared on a going concern basis.

Presentation of financial results

The financial results of the Company for the year ended 31 March 2014 as in the previous year have been disclosed as per the revised Schedule VI to the Companies Act, 1956, pursuant to notification dated 28 February 2011 and General Circular No. 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs.

Consolidated financial statements

The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries, viz. PT. Bajaj Auto Indonesia and Bajaj Auto International Holdings BV, Netherlands as prepared in compliance with the accounting standards and listing agreement as prescribed by SEBI.

Information in aggregate for each subsidiary company is disclosed separately in the consolidated Balance Sheet.

Statutory disclosures

Ministry of Corporate Affairs (MCA) vide circular No. 51/12/2007-CL-III dated 8 February 2011 has given general exemption with regard to attaching of the Balance Sheet, Profit and Loss Account and other documents of its subsidiary companies subject to fulfilment of conditions mentioned therein. The Company has fulfilled all the necessary conditions in this regard. Hence, the Company is not attaching the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies. The summary of the key financials of the Company''s subsidiaries is included in this Annual Report.

The annual accounts of the subsidiary companies and the related detailed information will be made available to the members of the Company and its subsidiary companies, seeking such information at any point of time. The annual accounts of the subsidiary companies will be kept for inspection by any member of the Company at its registered office and also at the registered office of the concerned subsidiary company.

As required under the provisions of sub-section (2A) of section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, particulars of the employees are set out in an annexure to the Directors'' Report. As per provisions of section 219 (1) (b) (iv) of the said Act, these particulars will be made available to any shareholder on request.

Particulars regarding technology absorption, conservation of energy and foreign exchange earnings and outgo required under section 217(1)(e) of the Companies Act, 1956 and Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 have been given in preceding paragraphs.

Directors'' responsibility statement as required by section 217(2AA) of the Companies Act, 1956 appears in a preceding paragraph.

Certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report as Annexure 1.

A cash flow statement for the year 2013-14 is attached to the Balance Sheet.

During the year under review, pursuant to the new legislation "Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace Act, 2013" introduced by the Government of India, which came into effect from 9 December 2013, the Company has framed a Policy on Prevention of Sexual Harassment at Workplace. There were no cases reported during the year under review under the said Policy.

Corporate governance

Pursuant to clause 49 of the listing agreement with stock exchanges, a separate section titled ''Corporate Governance'' has been included in this Annual Report, along with the reports on Management Discussion and Analysis and General Shareholder Information.

SEBI vide its circular No. CIR/CFD/POLICY CELL/2/2014 dated 17 April 2014 has notified the revised clause 49 of the listing agreement to be applicable with effect from 1 October 2014. This Report therefore stands complied against the previous clause 49 of the listing agreement.

All board members and senior management personnel have affirmed compliance with the code of conduct for the year 2013-14. A declaration to this effect signed by the Chief Executive Officer (CEO) of the Company is contained in this Annual Report.

The CEO and Chief Financial Officer (CFO) have certified to the Board with regard to the financial statements and other matters as specified in clause 49 of the listing agreement and the said certificate is contained in this Annual Report.

Business Responsibility Report

Securities and Exchange Board of India (SEBI), vide its circular dated 13 August 2012, has mandated inclusion of Business Responsibility Report (BRR) as part of the annual reports for listed entities. To begin with, SEBI has made it mandatory for top 100 listed entities based on market capitalisation at BSE and NSE as on 31 March 2012 to include BR Reports as part of their annual reports from the financial year ending on or after 31 December 2012. Since Bajaj Auto Ltd. is one of the top 100 listed entities, the Company, as in the previous year, has presented its BR Report for the financial year 2013-14, which is part of this Annual Report. As a green initiative, the BR Report has been hosted on the Company website www.bajajauto.com A physical copy of the BR Report will be made available to any shareholder on request.

Secretarial Standards of ICSI

During the year under review, Secretarial Standards specified by the Institute of Company Secretaries of India (ICSI) from time to time were recommendatory in nature. Your Company, however, complied with the same.

Auditors'' report

The observations made in the Auditors'' Report, read together with the relevant notes thereon are self-explanatory and hence, do not call for any comments under section 217 of the Companies Act, 1956.

Auditors

Pursuant to the provisions of section 139 of the Companies Act, 2013 and the Rules made there under, the current auditors of the Company, Dalal & Shah, Chartered Accountants are eligible to hold the office for a period of three years, upto 2017.

The members are requested to appoint Dalal & Shah, Chartered Accountants, as auditors for three years from the conclusion of the ensuing annual general meeting till the conclusion of the 10th annual general meeting in 2017 and to fix their remuneration for the year 2014-15.

Cost Auditors

A P Raman was appointed as Cost Auditor to conduct audit of cost accounts maintained by the Company for the financial year 2013-14. The full particulars of the Cost Auditor and cost audit conducted by him for the financial year 2012-13 are furnished below:- ICWA Membership No. 837

Registration No. of Firm 110141

Address Golok, Plot No.13, Sector No.28

Pradhikaran, Nigdi, Pune - 411 044

Details of Cost Audit Report for the financial year 2012-13:

(a) Due date of filing 30 September 2013

(b) Actual date of filing 27 September 2013

On behalf of the Board of Directors,

Rahul Bajaj

Chairman

15 May 2014


Mar 31, 2013

The directors present their sixth annual report and the audited statements of accounts for the year ended 31 March 2013.

The highlights are as under:

Units in Numbers 2013 2012

Two-wheelers 3,757,105 3,834,405

Three-wheelers 480,057 515,155

Total 4,237,162 4,349,560

Of which Exports 1,547,157 1,579,824

Financials

(Rs. In Crore)

Particulars 2013 2012

Net sales and other income 20,792.74 20,137.02

Cross profit before exceptional item, interest and depreciation 4,430.74 4,328.03

Interest 0.54 22.24

Depreciation 163.97 145.62

Gross profit before exceptional item 4,266.23 4,160.17

Exceptional item

- Valuation losses on derivative hedging instruments - (134.00)

Profit before tax 4,266.23 4,026.17

Tax expense 1,222.66 1,022.12

Profit after tax 3,043.57 3,004.05

Add: Balance brought forward from previous year 3,705.14 2,515.48

Profit available for appropriation 6,748.71 5,519.53

Transfer to General reserve 305.00 301.00

Proposed dividend (inclusive of dividend tax) 1,523.45 1,513.39

Balance carried to Balance Sheet 4,920.26 3,705.14

Earnings per share (Rs.) 105.2 103.8

Dividend

The directors recommend for consideration of the shareholders at the ensuing annual general meeting, payment of a dividend of Rs.45 per share, (450 per cent) for the year ended 31 March 2013. The amount of dividend and the tax thereon aggregate to Rs. 1,523.45 crore.

Dividend paid for the year ended 31 March 2012 was also Rs. 45 per share (450 per cent).

The amount of dividend and the tax thereon aggregated to Rs. 1,513.39 crore.

Operations

The operations of the Company are elaborated in the annexed Management Discussion and Analysis Report.

Capacity expansion and new projects

The Company''s current installed capacity is 5.4 million units per annum. The Company plans to increase the installed capacity to 6.06 million units per annum by March 2014.

The 4 Wheeler project is going on as per plan and is being implemented at Waluj.

Commercial production of the four-wheeler RE 60 is slated for second half of 2013-14.

Research and Development and technology absorption

A) Products Pulsar 200 NS

Pulsar 200 NS was launched in May 2012. It has gone on to redefine the sports motorcycle segment in India. It has set a new benchmark in terms of performance, style, technology and affordability. It has brought additional set of customers to the Pulsar portfolio. It has won an astounding number of 12 awards for product and technology including the award for the best product design in all automobiles.

Discover 125 ST

This completely new platform of vehicle was designed to take the legacy of the successful Discover brand, into the future. The vehicle has been designed to further enhance the sporty commuter image of the Discover brand. The vehicle is equipped with a high performance 4 valve air cooled engine powered by twin spark ignition, delivering 13 Ps, and a 5 speed gear box suitably mated to the power characteristics of the engine. This provides the commuter the joy of a powerful drive, while maintaining high fuel efficiency for which Discover brand is known for. The vehicle is also equipped with the state-of-the-art features like Nitrox mono shock absorber for riding pleasure, which is a first for a commuter 125 cc bike.

Discover 100 T

This product complements Discover 125 ST and extends the all new design of Discover 125 ST to smaller engine capacity. It sharply focuses on the customers who prefer greater fuel efficiency, but desire all the enhancements. The vehicle is powered by a high performance 4 valve air cooled 100 cc DTSi engine, delivering 10.2 Ps, with a 5 speed gear box suitably mated to the power characteristics of the engine. This is the world''s first 100 cc single cylinder 4 valve DTSi engine and delivers class leading power and fuel efficiency.

KTM Duke 125 - Duke 200

Model Year 2013 saw Duke 125 and Duke 200 substantially upgraded. Vehicle safety is taken to the next level with the introduction of "Anti-lock braking system (ABS)". The vehicle is equipped with twin channel ABS offering independent control for both the wheels and increases driver safety by not allowing the vehicle to skid even in case of panic braking on low friction surfaces.

The Duke 200 won 8 awards this year. Between Pulsar and KTM, the Company swept practically all the major awards announced during the year under review.

B) Process

R&D has been working on improving its operations in a number of areas as listed below.

- Manpower: R&D has been expanding its team size in areas of design, analysis and validation in order to keep up with the rapidly expanding aspirations of the Company.

- Facilities: R&D continued to enhance its design, computing, proto-typing and validation facilities. Such enhancement efforts have enabled R&D to develop durable and refined products. A number of new test facilities were put in to validate the durability and performance of the forthcoming 4 wheelers. The prototyping facilities were also upgraded to enable building of the prototypes of these vehicles.

- Technology: This year, R&D launched the Triple Spark technology for the Pulsar family.

This technology takes the DTS-I performance to the next higher level. It gives best in class fuel efficiency and performance on a sports bike. This technology went on to win the "Automotive technology of the year" award competing in the category of not just 2 wheelers, but in all categories of automobiles.

- Total Productive Maintenance (TPM): R&D continues to vigorously pursue the TPM way of thinking and working. This has yielded excellent results in quality management of design and validation process. The TPM approach has also been effective in the lead time reduction on the various critical processes in R&D by elimination of waste.

C) Outgo

The expenditure on research and development during 2012-13 and in the previous year was:

(Rs. In Crore)

Particulars 2013 2012

i. Capital

(including technical know-how) 109.19 42.22

ii. Recurring 129.40 113.70

Total 238.59 155.92

iii. Total research and development expenditure as a percentage of sales, net of excise duty 1.22% 0.83%

Conservation of energy

Company has always been a forerunner in conservation of energy and natural resources.

All manufacturing processes and products are designed for minimising the carbon footprints and are being continuously upgraded to consistently achieve this goal. Company has a distinction of having all its plants certified for ISO 14000 and 18000. Company not only follows Standard Operating Procedures for environment protection and conservation of resources in all its plants, but also propagates these initiatives throughout its vendor partners under the initiative of ''Green Supply Chain''.

The energy conservation drive is guided by the principle of 5 Rs (Reuse, Reduce, Recycle, Remove, Recover). Given below are some of the key initiatives taken during 2012-13 towards energy and natural resource conservation.

- Electrical energy saving was achieved by replacing reciprocating compressor with screw air compressors at Waluj; use of air pressure booster for high pressure application, use of energy efficient pumps and motors, use of LED/induction lamps for lighting system in plant and offices.

- Water saving was achieved by various measures, such as installation of RO plant, use of air cooled compressors in place of water cooled compressors; use of breeze air coolers instead of ARP, use of treated water for horticulture activities.

- Liquified Petroleum Gas (LPG)/propane saving was achieved by optimum usage of oven/furnaces at paint shop and HT, by reduction in weight of paint line jigs and heat treatment fixtures, by replacing pre-treatment chemicals requiring less temperature, at Chakan and by increasing conveyor speed in paint shop.

- Initiatives in utilisation of renewable energy were taken during the year. Installation of solar power plant 20 Kwp at Waluj and installation of light pipes at Waluj and Pantnagar are the key initiatives to note.

Impact of measures taken

As a result of the initiatives taken for conservation of energy and natural resources, the Company has effected an overall reduction in consumption as given in the table below :

% Reduction w.r.to previous year Description 2013 2012

Electricity consumption 1.85 7.86

Water consumption 20.97 Nil

LPG/propane consumption 7.49 13.44

Investment/savings

(Rs. In Crore)

Description 2013 2012

Investment for energy conservation activities 3.67 2.07

Recurring savings achieved through above activities 2.30 2.14

This chapter may be read with the Business Responsibility Report (BRR), which is part of the annual report.

International business

Bajaj Auto continues to outperform competition in terms of two and three wheeler exports, in spite of the grim world economic scenario. We have maintained our leadership position in exports and have dominated the Indian two and three wheeler export scenario.

Bajaj has exported a total of 1,547,157 two and three wheelers, highlighting the stellar lead the Company has established against competition.

More details of International Business are set out in the annexed Management Discussion and Analysis Report.

Foreign exchange earning and outgo

The Company continued to be a net foreign exchange earner during the year.

Total foreign exchange earned by the Company during the year under review was Rs. 6,565.34 crore, compared to Rs. 6,625.96 crore during the previous year.

Total foreign exchange outflow during the year under review was Rs. 1,083.16 crore as against Rs. 776.98 crore during the previous year.

The above outflow excludes an investment of Rs. 231.86 crore (previous year: Rs. 68.14 crore) made in its 100% subsidiary, Bajaj Auto International Holdings BV, Netherlands for increasing its stake in KTM AG from 40.87% to 47.96%.

Industrial relations

Industrial relations with staff and workmen across the plants at Akurdi, Waluj, Chakan and Pantnagar continued to be cordial.

At Pantnagar, wage settlement dated 7 December 2012 was amicably signed in conciliation between the management and representatives of workmen. The workmen have formed a trade union on 21 August 2012 under the name and style "Bajaj Auto Ltd. Employees Sangh", which has a majority following.

At Chakan, Vishwa Kalyan Kamgar Sanghatana, the recognised union has given notice of termination of the existing settlement dated 21 May 2010 as per provisions of The Industrial Disputes Act, 1947.

Five workmen of BAL-Waluj and two workmen of BAL-Chakan have received Best Worker (Cunwant Kamgar) Welfare Awards for the year 2012 declared by the Maharashtra Labour Welfare Board, Mumbai, Government of Maharashtra.

Subsidiaries

PT. Bajaj Auto Indonesia (PT BAI)

In line with the general slow-down in the global economy, Indonesia has posted a GDP growth rate of 6.3% as against 6.5% recorded in 2011-12.

Two wheeler sales, a true barometer of national economy, had declined to 7.1 million units from the levels of 8 million units in the previous year, a decline of 11.5%. Restrictions in financing norms imposed by the central bank relating to two wheeler financing has contributed significantly to the decline in sale of two wheelers in Indonesia.

PT BAI has also witnessed a declining sales volume trend with billing of 11,198 units in 2012-13 as against 23,337 units done in 2011-12.

The distribution arrangement announced by Bajaj Auto Ltd. in September 2012 with Kawasaki Motors to market and distribute Pulsar NS motor cycles in Indonesia is expected to give a new fillip to the growth of exports to Indonesia, from the second half of financial year 2013-14.

Bajaj Auto International Holdings BV, Netherlands (BAIH BV)

During the year under review, BAIH BV invested further € 33.90 million (approx. Rs. 236 crore) to increase its stake in KTM AG (KTM) to 47.96%.

In the calendar year 2012, KTM posted robust growth to 107,142 units (up by 32%);

€ 612 million turnover and € 25.3 million net profit (up by 22.2%). Proportionate net profit of € 11.96 million has been accounted in the consolidated results of Bajaj Auto Ltd.

KTM returned to dividend list with a dividend declaration of € 0.70 per share for 2012.

BAIH BV is entitled to receive € 3.64 million, being its share of dividends.

During the year, Bajaj Auto produced 26,805 units of KTM Duke Motorcycles. 7,388 Dukes were sold in India through the 70 strong pro-biking network in India and 18,546 units were exported to various countries, including Europe, Japan, etc.

Various joint development projects are proceeding well. The next jointly developed product Duke 390, sporting a high performance engine is scheduled to be launched in first half of 2013-14. Bajaj Auto will produce this model in its Chakan plant.

Signing of anti-corruption initiative of World Economic Forum (WEF)

In support of the initiative taken by WEF, with a view to strengthening the efforts to counter bribery and corruption, your Company is a signatory to the "Commitment to anti-corruption" and is supporting the "Partnering Against Corruption - Principles for Countering Bribery" derived from Transparency International''s Business Principles. This calls for a commitment to two fundamental actions viz. a zero-tolerance policy towards bribery and development of practical and effective implementation program.

Corporate Social Responsibility

During the year 2012-13, Bajaj Auto continued its Affirmative Action Plan and Corporate Social Responsibility initiatives in various fields. Activities in this area are set out in greater detail in the annexed CSR Report.

Directors

J N Godrej, S H Khan, Ms Suman Kirloskar and Naresh Chandra retire from the Board by rotation this year and being eligible, offer themselves for re-appointment.

Directors'' responsibility statement

As required by sub-section (2AA) of section 217 of the Companies Act, 1956, directors state:

- that in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.

- that the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period.

- that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

- that the annual accounts have been prepared on a going concern basis.

Presentation of financial results

The financial results of the Company for the year ended 31 March 2013 as in the previous year have been disclosed as per the revised Schedule VI to the Companies Act, 1956, pursuant to notification dated 28 February 2011 issued by the Ministry of Corporate Affairs.

Consolidated financial statements

The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries, viz. PT. Bajaj Auto Indonesia and Bajaj Auto International Holdings BV, Netherlands as prepared in compliance with the accounting standards and listing agreement as prescribed by SEBI.

Information in aggregate for each subsidiary company is disclosed separately in the consolidated Balance Sheet.

Statutory disclosures

Ministry of Corporate Affairs (MCA) vide circular No.51/12/2007-CL-l 11 dated 8 February 2011 has given general exemption with regard to attaching of the Balance Sheet, Profit and Loss Account and other documents of its subsidiary companies subject to fulfillment of conditions mentioned therein. The Company has fulfilled all the necessary conditions in this regard.

Hence, the Company is not attaching the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies. The summary of the key financials of the Company''s subsidiaries is included in this annual report.

The annual accounts of the subsidiary companies and the related detailed information will be made available to the members of the Company and its subsidiary companies, seeking such information at any point of time. The annual accounts of the subsidiary companies will be kept for inspection by any member of the Company at its registered office and also at the registered office of the concerned subsidiary company.

As required under the provisions of sub-section (2A) of section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, particulars of the employees are set out in an annexure to the directors'' report.

As per provisions of section 219 (1) (b) (iv) of the said Act, these particulars will be made available to any shareholder on request.

Particulars regarding technology absorption, conservation of energy and foreign exchange earnings and outgo required under section 217(l)(e) of the Companies Act, 1956 and Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 have been given in preceding paragraphs.

Directors'' responsibility statement as required by section 217(2AA) of the Companies Act, 1956 appears in a preceding paragraph.

Certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this report as Annexure 1.

A cash flow statement for the year 2012-13 is attached to the Balance Sheet.

Corporate governance

Pursuant to clause 49 of the listing agreement with stock exchanges, a separate section titled ''Corporate Governance'' has been included in this annual report, along with the reports on Management Discussion and Analysis and General Shareholder Information.

All Board members and senior management personnel have affirmed compliance with the code of conduct for the year 2012-13. A declaration to this effect signed by the Chief Executive Officer (CEO) of the Company is contained in this annual report.

The CEO and Chief Financial Officer (CFO) have certified to the Board with regard to the financial statements and other matters as specified in clause 49 of the listing agreement and the said certificate is contained in this annual report.

Business Responsibility Report

Securities and Exchange Board of India (SEBI), vide its circular dated 13 August 2012, has decided to mandate inclusion of Business Responsibility Reports (BRR) as part of the annual reports for listed entities. To begin with, SEBI has made it mandatory for top 100 listed entities based on market capitalisation at BSE and NSE as on 31 March 2012 to include BR Reports as part of their annual reports from the financial year ending on or after 31 December 2012. Since Bajaj Auto Ltd. is one of the top 100 listed entities, the Company has presented its first BR Report for the financial year 2012-13, which is part of this annual report. As a green initiative, the BR Report has been hosted on the Company website www.bajajauto.com A physical copy of the BR Report will be made available to any shareholder on request.

Secretarial standards of ICSI

Secretarial standards issued by the Institute of Company Secretaries of India (ICSI) from time to time are currently recommendatory in nature. Your Company is, however, Complying with the same.

Auditors'' report

The observations made in the Auditors'' Report, read together with the relevant notes thereon are self-explanatory and hence, do not call for any comments under section 217 of the Companies Act, 1956.

Auditors

The members are requested to appoint Messers Dalai & Shah, Chartered Accountants, as auditors for the period from the conclusion of the ensuing annual general meeting till the conclusion of the next annual general meeting and to fix their remuneration.

In conformity with the directives of the Central Government, the Company has appointed Mr. A P Raman, cost accountant, ICWA Membership No. 837, with address at Golok, Plot No.13, Sector No.28, Pradhikaran, Nigdi, Pune - 411 044, as the cost auditor under section 233B of the Companies Act, 1956 to conduct the cost audit of Bajaj Auto Ltd. for the year 2012-13.

For the year ended 31 March 2012, the due date of filing the cost audit report was 30 September 2012, which was subsequently extended upto 28 February 2013 and the actual date of filing the cost audit report was 27 February 2013.

On behalf of the Board of Directors,

Rahul Bajaj

Chairman

16 May 2013

 
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