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Directors Report of Cummins India Ltd.

Mar 31, 2015

The Directors take pleasure in presenting the Fifty Fourth Annual Report together with the audited financial statements for the year ended March 31, 2015.

1. FINANCIAL RESULTS :

During the Financial Year 2014-15, net revenue from operations was Rs. 440,580 Lacs as compared to Rs. 397,667 Lacs during the previous year (11% higher). Exports and other foreign exchange earnings stood at Rs. 177,422 Lacs as compared to Rs. 125,831 Lacs during the previous year (41% higher). Profit after tax increased to Rs. 78,585 Lacs from Rs. 60,002 Lacs recorded for the previous year (31% higher).

2014-2015 2013-2014 (Rs. in Lacs) (Rs. in Lacs)

APPROPRIATION OF PROFIT :

Profit before taxation 93,739 81,751

Net Profit for the year after tax but before tax on proposed dividend 78,585 60,002

Tax on proposed dividend 7,434 6,124

Proposed Dividend 38,808 36,036

Transferred to General Reserve NIL 6,000

2. DIVIDEND :

Your Directors have recommended a final dividend of Rs. 9/- per equity share of Rs. 2/- each fully paid-up, in addition to the interim dividend of Rs. 5/- per equity share of Rs. 2/- each fully paid-up share declared on September 10, 2014, aggregating to Rs. 14/- (i.e. 700%) per equity share of Rs. 2/- each fully paid-up share for the year ended March 31, 2015 (last year Rs. 13/- per equity share i.e. 650%). The final dividend payout is subject to approval of the Members at the ensuing Annual General Meeting.

3. JOINT VENTURES AND ASSOCIATES :

While there is no company which has become / ceased to be joint venture or associate during the Financial Year 2014-15, the Company has following joint ventures and associate as on March 31, 2015 : -

a) Cummins Research and Technology India Private Limited (CRTI) :

The net revenue from the operations of Cummins Research and Technology India Private Limited (CRTI), a 50:50 joint venture between Cummins Inc., U.S.A. and your Company, for the year ended March 31, 2015 was Rs. 3,372 Lacs as compared to Rs. 6,329 Lacs during the previous year (47% lower). CRTI has a Research and Technology Center at Pune and is engaged in providing Information Technology enabled Mechanical Engineering development services primarily to Cummins Inc., U.S.A., its subsidiaries and joint ventures in all parts of the world. CRTI is converted from a Public Company limited by shares in to a Private Company limited by shares under the Companies Act, 2013 with effect from December 10, 2014.

b) Valvoline Cummins Private Limited (VCL) :

VCL, a 50:50 joint venture with Valvoline International Inc., U.S.A., a global leader in lubricants and engine oils, generated net revenue of Rs. 100,614 Lacs from its operations for the year ended March 31, 2015 as compared to Rs. 100,923 Lacs during the previous year. VCL is converted from a Public Company limited by shares in to a Private Company limited by shares under the Companies Act, 2013 with effect from October 14, 2014.

c) Cummins SVAM Sales & Service Private Limited (CSSSL) :

CSSSL is a 50:50 joint venture with SVAM Power Plants Private Limited, a dealer of your Company. CSSSL focuses on sales and service of Cummins engines and generator sets in parts of Northern India. CSSSL generated net revenue of Rs. 6,940 Lacs from its operations for the year ended March 31, 2015 as compared to Rs. 6,584 Lacs during the previous year (5% higher). CSSSL is converted from a Public Company limited by shares in to a Private Company limited by shares under the Companies Act, 2013 with effect from February 3, 2015.

d) Cummins Generator Technologies India Private Limited (CGT) :

Your Company owns approx. 48.5% shareholding in the Associate Company namely CGT which is in the business of manufacturing, marketing, sales and service of alternators and related spare parts. CGT generated net revenue of Rs. 51,565 Lacs from its operations for the year ended March 31, 2015 as compared to Rs. 49,722 Lacs during the previous year (4% higher). CGT is converted from a Public Company limited by shares in to a Private Company limited by shares under the Companies Act, 2013 with effect from December 10, 2014.

Further, a statement containing the salient features of the joint ventures and associate in the prescribed Form AOC-1 is appended as Annexure ''1'' which forms part of this Report.

4. INITIATIVES AT PHALTAN :

Currently various manufacturing plants are operational at Megasite at Phaltan, such as the HHP Rebuild Center, the India Parts Distribution Center, the Phaltan MidRange Upfit Center (PMUC) at the Domestic Tariff Area and the Low Horsepower Generator Set plant at the Special Economic Zone (SEZ).

While the common facilities like the Crèche, Administration Office and Health Center have commenced operations since August 2014, the facility for Area Business Office Training Center including an Auditorium having sitting capacity for 250 people has become functional since June 2015.

A Technical Training Center (at Phaltan), to support the Distribution Business, is expected to commence its operations by September 30, 2015. This Center has a capacity to train more than 550 engineers and 300 customers on special programs on controls, alternators etc.

In addition to manufacturing and related facilities, construction of a residential campus facility for employees of the Company near the Megasite, Phaltan, is expected to be completed by September 30, 2015 which comprises of four buildings with 500 rooms, a cafeteria and a club house.

5. INDIA OFFICE CAMPUS (IOC) :

Your Board of Directors are pleased to inform that the India Office Campus at Balewadi, Pune has become fully functional and currently houses all professional employees of the Company and its group companies located across various offices in Pune.

The Company proposes to shift its present Registered Office from Kothrud, Pune 411038 Maharashtra India to Cummins India Office Campus, Tower A, 5th Floor, Survey No. 21, Balewadi, Pune 411045 with effect from July 1, 2015.

Up to March 31, 2015, your Company has incurred total capital expenditure of Rs. 68,308 Lacs for the first and second towers of the IOC premises and an additional expenditure of Rs. 27,200 Lacs is proposed for the third tower.

6. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS :

Other than the unsecured loan given to Cummins Technologies India Private Limited (which is a subsidiary of Cummins Inc., U.S.A.) in 2011 in compliance with the Companies Act, 1956 and Rules thereunder, no other loan or guarantee is given or investment is made by your Company during the Financial Year 2014-15.

7. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES :

Particulars of contracts or arrangements with related parties referred to in Section 188 (1) of the Companies Act, 2013 in the prescribed Form AOC-2 is appended as Annexure ''2'' which forms part of this Report.

The Policy on materiality of related party transactions and dealings with related party transactions as approved by the Board may be accessed on the Company''s website at the link: ''http://www.cumminsindia.com/MAIN/corporate.html''.

8. CONSERVATION OF ENERGY :

Your Company continued to undertake various energy conservation initiatives during the year, some of which are given below:

Industrial Engine Business Unit Plants (Kothrud) :

- Reduction in 20% of power consumption in BU04 against standard machining hours;

- Reduction in Energy Consumption of new KV upfit from 179 kWh per engine to 143 kWh per engine by automation of blower line pumps;

- Implementation of energy saving project by replacing reciprocating type compressor by scroll type in Engineering AC plant; and

- Implementation of automated tools for energy review and balancing for identifying energy saving opportunities.

Power Generation Business Unit Plant, Pirangut and Phaltan Special Economic Zone (SEZ) :

- Use of LED fittings and natural sky lights on roofs to ensure minimal use of lights on the shop floor during day time;

- Maintaining a unity power factor and improving the power factor;

- Efficient load sharing between the distribution transformers leading to energy savings;

- Reduction in compressor energy consumption by 5% by way of efficient operation, leakage elimination, use of air guns, demand-based pressure control at Pirangut.

Distribution Business Unit Plants (Erandwane, Pune and HHP Rebuild Center, Phaltan) :

- Installation of HVLS Fan with VFD for shop floor to reduce use of wall mounting fans and improve air flow;

- Maintaining a unity power factor at the HHP Rebuild Center;

- Alternate switching off, of the street lights after duty hours;

- Use of VRV air conditioners for Administrative Building at Phaltan, thereby achieving energy savings;

- Maintaining AHU with additional screen filters and resulted in better efficiency with power saving;

- Use of sky lights on roofs to ensure minimal use of lights on the shop floor during day time; and

- Optimum utilization of dedicated air conditioning units instead of centralized AC system.

India Parts Distribution Center, Phaltan :

- Installation of Solar water heater for dish cleaning at cafeteria. Quarterly preventive maintenance plan is place to validate effectiveness;

- Use of motion activated sensors in the racking aisles and the office area and dock station. Quarterly preventive maintenance plan is to check working conditions of all sensors;

- Use of sky lights in the plant to reduce need for lighting during daytime;

- Use of motion sensors in rest rooms to reduce electricity consumption;

- Monitoring power off schedule and surprise audit by the Security Team and Safety Point Leaders which ensures optimum usage of available electrical equipment;

- Use of pull cords installation at offices and at packaging areas to reduce the lighting load consumption;

- Use of dual circuit motion sensors in meeting rooms;

- Use of VRV air conditioners for the administrative block;

- Use of energy efficient T-5 tubes at ware house to achieve energy savings;

- Use of solar LED street lights at certain locations namely, internal connecting roads, Admin Block, Hill top area etc. to reduce energy consumption; and

- Area Specific Energy dash board created, monthly release to entire plant team to ensure area specific focus remain intact.

Phaltan Midrange Upfit Center, Phaltan :

- Reduction of 10% Electrical Energy Consumption for all External Utility lights which saved 200 units per month; and

- Reduction of 5% Electrical Energy Consumption for Plant Lights and Fans.

Major initiatives undertaken during the previous year and continued during the year are as follows : -

- Efficient load sharing between the distribution transformers leading to energy savings;

- Maintaining unity power factor by reducing line energy losses;

- Use of natural sky lights on roofs to ensure minimal use of lights on the shop floor during day time;

- Use of energy efficient VRV air conditioners for the administrative building;

- Occupancy based control for AC and electricity and use of LED/ T-5 Lights;

- Use of 5-star rated air conditioners for ground floor and first floor at office area;

- Use energy efficient HVLS fan for shop floor ventilation;

- Use of dry type transformers to minimize energy loss; and

- Use of pull cords installation at offices and at packaging areas to reduce the lighting load consumption.

Your Company has made an overall capital investment of Rs. 755 Lacs on energy conservation equipment at various plants as on March 31, 2015.

IMPACT OF THE ABOVE MEASURES :

The above initiatives resulted in savings of about Rs. 107 Lacs in addition to Greenhouse Gas (GHG) emission reduction by 20% compared to FY 2013-14. The energy units saved during the year were about 12,60,450 kWh.

9. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION :

With a view to satisfy legislative, customer and market needs, your Company is committed to introducing new products and improving existing products to have better performance levels, lower life cycle costs, excellent safety and recyclability characteristics and meet stringent emission norms and, is geared towards meeting specific needs of the Indian customer.

The Technical Center of your Company continues in its endeavour to indigenize components and develop the next generation of components and systems in collaboration with the parent company - Cummins Inc., to reduce costs, improve fuel-efficiency, improve safety, enhance recyclability, and enhance performance and durability of its products. In order to improve technical productivity, new methodologies and technologies have been introduced and enhancements in capabilities are being continuously pursued to reduce the costs associated with new product development and customer support. Continued implementation of Six Sigma initiatives resulted in significant cost savings and improved operating efficiency.

To ensure the health and safety of employees, the Technical Center also pursued several initiatives to help drive towards the goal of zero-recordable incidents.

A. New Product Development :- The following new Products were developed as part of the above initiatives during the year:-

1. Emissions recipe to meet BSIII, BSIV and OBDII emission regulations for On Highway Commercial Vehicle ratings.

2. Advanced BSIII electronic products to enhance competitiveness in the Automotive segment and drive towards lower fuel consumption and higher power density product offerings for customers.

3. Multiple stationary engine families to meet the upcoming CPCB II Power Generation regulations up to 800 kW.

4. Key Industrial engine product families to support the growing Industrial Business.

5. Key Marine engine product families to support the increasing commercial Marine Business.

6. Fundamental electronics capability to help develop products that comply with OBD II (On Board Diagnostics) legislation.

7. Further enhancement of non-diesel product development capability.

8. Improved capability in intake air characteristic measurements to enhance understanding and control of the combustion process.

B. Benefits derived as a result of the above activities are:-

1. Enhanced development capabilities through use of electronic tools and simulation software to control the engine performance and combustion process.

2. Enhanced capability to tailor engine designs to improve the value proposition for customers through delivering superior power output, fuel economy, and transient response and reduced emission.

3. Product and component availability to meet the new emission norms ahead of implementation.

4. More safe, recyclable, reliable, durable and performance-efficient products and critical components were made available for the customers.

5. Component indigenization capability was improved through enhanced test capability, rig test and flow bench development and availability.

6. Significant enhancements in measurement capability were made to pursue business opportunities in non- diesel markets to serve both the rural and international communities.

C. Future plans include :- 1. Developing local ''fit for market'' solutions to meet upcoming emission regulations, local and rural market needs.

2. Technological innovation to add value to the products in the areas of alternate fuels, recycle / re-use and hybrid engines.

3. Continued expansion of the product range to serve the local and global market needs.

4. Providing energy-efficient solutions to reduce carbon footprint and improve recyclability.

5. Continued focus on indigenization and partnering with suppliers for waste elimination initiatives.

6. Alternate source development for various engine components.

7. Expanding the coverage of our engine development for the Power Generation market.

8. Advanced common rail electronic fuel systems to meet market needs for upcoming BS IV emission norms in Commercial Vehicle market aimed at delivering better performance through globally tested Cummins Fuel Systems technology.

D. Your Company continues to draw benefits from Cummins Inc.''s technical capabilities and advanced technology. With continued support from Cummins Inc., your Company is committed to develop advanced fuel-efficient and emission-compliant engines that work on a variety of fuel sources and comply with forthcoming domestic and global emission regulations, to help reduce Greenhouse Gas emission, whilst also enabling the products to deliver superior performance, reliability, durability and recyclability.

E. Expenditure on R & D :- The total expenditure on R & D was as follows :- 2014-2015 2013-2014 (Rs. in Lacs) (Rs. in Lacs)

Capital 1,138 790

Recurring 1,639 4,220

Total 2,777 5,010

Total R&D expenditure as a percentage of total sales turnover 0.63% 1.26%

11. MANAGEMENT DISCUSSION & ANALYSIS AND CORPORATE GOVERNANCE REPORT :

As per clause 49 of the Equity Listing Agreement with Stock Exchanges, the Management Discussion and Analysis Report and the Corporate Governance Report is appended as Annexure ''3'' and ''4'' respectively which form part of this Report.

The Company has obtained a Certificate from the Statutory Auditors confirming compliance with conditions of the Code of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges and the same is appended as Annexure ''5'' which forms part of this Report.

12. EXTRACT OF THE ANNUAL RETURN :

Extract of the annual return as prescribed under Section 92 (3) of the Companies Act, 2013 is appended as Annexure ''6'' which forms part of this Report.

13. RISK MANAGEMENT :

Business Risk Evaluation and Management is an ongoing process within the Organization. The Company has a robust risk management framework to identify, monitor and minimize risks as also identify business opportunities. As a process, the risks associated with the business are identified and prioritized based on Severity, Likelihood and Effectiveness of current detection. Such risks are reviewed by the senior management on a quarterly basis. Process owners are identified for each risk and metrics are developed for monitoring and reviewing the risk mitigation through Six Sigma Projects.

During the year, your Directors have re-constituted the Finance and Audit Committee of the Board of Directors of the Company as ''Audit and Risk Management Committee'' additionally entrusting the Committee with the responsibility to assist the Board in (a) Overseeing and approving the Company''s enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks.

14. INTERNAL FINANCIAL CONTROL :

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

15. VIGIL MECHANISM / WHISTLE BLOWER POLICY :

The Company has a ''Whistle Blower'' Policy which provides adequate safeguards against victimization of persons who may blow whistle. In addition, the Company also has constituted Internal Complaints Committee (under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013) and an Ethics Committee comprising of senior executives of the Company. Protected disclosures can be made by a whistle blower through an email or dedicated telephone line or letter to the Chairman & Managing Director of the Company or Letter to the Chairman of Audit and Risk Management Committee. Whistle Blower Policy may be accessed on the Company''s website at the link: ''http://www.cumminsindia.com/MAIN/corporate.html''. Details of number of complaints filed and resolved by the Internal Complaints Committee during the year are provided in the Business Responsibility Report of the Company.

16. CODE OF CONDUCT COMPLIANCE :

A declaration signed by the Chairman & Managing Director affirming compliance with the Company''s Code of Conduct by the Directors and Senior Management for the Financial Year 2014-15 as required under Clause 49 of the Equity Listing Agreement with Stock Exchanges is included in the Corporate Governance Report which is appended as Annexure ''4'' and forms part of this Report.

17. DIRECTORS'' RESPONSIBILITY STATEMENT :

In pursuance of the provisions of Section 134 (5) of the Companies Act, 2013, your Directors make the following statement:

(i) that in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards have been followed and there was no material departure from the same;

(ii) 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 as on March 31, 2015 and of the profit for the period April 1, 2014 to March 31, 2015;

(iii) 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, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis;

(v) that the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year; and

(vi) that 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.

18. DIRECTORS :

a) Changes in the composition of the Board of Directors :

During the year, Mr. Mark Smith (DIN 06852777) and Ms. Suzanne Wells (DIN 06954891) were appointed as Additional Directors of the Company w.e.f. May 23, 2014 and August 22, 2014 respectively. Mr. Pradeep Bhargava (DIN 00525234) has been appointed as an Alternate Director to Mr. Mark Smith w.e.f. May 23, 2014. Subsequently, Mr. Mark Smith is appointed as a Director, liable to retire by rotation, in the Annual General Meeting held on August 1, 2014.

The Board, at its Meeting held on August 1, 2014, noted the presence of Mr. Edward Pence (DIN 06577765) in India during July 30, 2014 to August 3, 2014 and consequent cessation of Mr. J. M. Barrowman (DIN 00668324) as an Alternate Director of Mr. Edward Pence effective July 30, 2014. The Board confirmed appointment of Mr. J. M. Barrowman as an Alternate Director to Mr. Edward Pence effective August 4, 2014 upon return of Original Director (Mr. Edward Pence) to the U.S.A.

In its Meeting held on September 10, 2014, the Board of Directors noted the presence of Mr. Mark Smith in India during September 9, 2014 to September 13, 2014 and consequent cessation of Mr. Pradeep Bhargava as an Alternate Director to Mr. Mark Smith effective September 9, 2014. The Board, at its Meeting dated September 10, 2014 confirmed appointment of Mr. Pradeep Bhargava, as an Alternate Director to Mr. Mark Smith effective September 14, 2014 upon return of Original Director (Mr. Mark Smith) to the U.S.A.

The Board, at its Meeting held on November 6, 2014, noted the presence of Mr. Edward Pence in India during November 4, 2014 to November 7, 2014 and consequent cessation of Mr. J. M. Barrowman as an Alternate Director of Mr. Edward Pence effective November 4, 2014. The Board confirmed appointment of Mr. J. M. Barrowman as an Alternate Director to Mr. Edward Pence effective November 8, 2014 upon return of Original Director (Mr. Edward Pence) to the U.S.A.

Mr. Patrick Ward (DIN 02871925) and Mr. Rajasekhar Menon (DIN 03074942) stepped down as Directors of the Company w.e.f. May 22, 2014 and August 2, 2014 respectively, due to their personal reasons. Mr. Pradeep Bhargava, Alternate Director to Mr. Ward also ceased to be a Director consequent to resignation of Mr. Ward. The Board of Directors placed on record their appreciation for the contribution made by Mr. Menon, Mr. Ward and Mr. Bhargava.

In accordance with the Companies Act, 2013 and Articles of Association of the Company, Mr. Casimiro Antonio Vieira Leitao and Mr. Edward Phillip Pence, Directors of the Company, retire by rotation and are eligible for re- appointment.

b) Committees of the Board :

The Board of Directors have constituted following committees in order to effectively cater its duties towards diversified role under the Companies Act, 2013 and Equity Listing Agreement with the Stock Exchanges:-

- Audit and Risk Management Committee;

- Stakeholders Relationship Committee;

- Nomination and Remuneration Committee; and

- Corporate Social Responsibility Committee.

Details of the constitution, terms of references of each Committee and number of meetings attended by individual director etc. are provided in the Corporate Governance Report which is appended as Annexure ''4'' and forms part of this Report.

c) Appointment of Key Managerial Personnel :

At their Meeting held on June 27, 2014 of the Board of Directors of the Company, Mr. Anant J. Talaulicar, Chairman & Managing Director and Mr. Rajiv Batra, Chief Financial Officer were formally designated as ''Key Managerial Personnel'' under Section 203 of the Companies Act, 2013.

Mr. K. Venkata Ramana, Group Vice President - Legal and Company Secretary was appointed as ''Key Managerial Personnel'' of the Company effective December 11, 2014.

d) Policy on Director''s Appointment and Remuneration :

The Policy of the Company on Director''s Appointment and Remuneration, including criteria for determining qualifications, positive attributes, independence of the directors and other matters provided under Section 178 (3) of the Act, adopted by the Board is appended as Annexure ''7'' which forms part of this Report. Details of the remuneration paid to the Board of Directors are provided in the Corporate Governance Report. We affirm that the remuneration paid to the Directors is as per the terms laid down in the Nomination and Remuneration Policy of the Company.

e) Board Performance Evaluation Mechanism :

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out the annual performance evaluation of its own performance and the Directors individually, as well as the evaluation of the working of its Committees. Details of the evaluation mechanism is provided in the Corporate Governance Report which is appended as Annexure ''4'' and forms part of this Report.

f) Familiarization Programme for Independent Directors :

The Independent Directors of the Company are associated with the Company for many years and are very familiar with the Company. During the year, the Management provided various documents, background notes etc. to have a better insight of the Company. The Chairman & Managing Director also has a one-to-one discussion with the newly appointed Directors. Details of initiatives for the Director to understand the Company, its business and the regulatory framework in which the Company operates and equips him/ her to effectively fulfil his/ her role as a Director of the Company are available at ''http://www.cumminsindia.com/MAIN/corporate.html''.

g) Declarations from the Independent Directors :

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and Clause 49 of the Equity Listing Agreement with the Stock Exchanges.

19. PARTICULARS OF EMPLOYEES :

The table containing the names and other particulars of employees in accordance with the provisions of Section 197 (12) of the Act, read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is appended as Annexure ''8'' which forms part of this Report.

A statement containing the names of every employee employed throughout the Financial Year and in receipt of remuneration of f 60 Lacs or more, or employed for part of the year and in receipt of f 5 Lacs or more per month under Rule 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report and is available on your Company''s website at http://www.cumminsindia.com/MAIN/annual reports.html. Any shareholder interested in obtaining a copy of the statement, may write to the Company Secretary at the Registered Office of the Company.

20. INDUSTRIAL RELATIONS :

Industrial relations at the Company''s plants continue to be cordial.

21. AUDITORS :

STATUTORY AUDITORS :

The Auditors, Price Waterhouse, Chartered Accountants, retire and hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment under the Companies Act, 2013. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for re-appointment. As required under Clause 49 of the Listing Agreement, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

SECRETARIAL AUDITOR :

Dr. K. R. Chandratre, Company Secretary in practice was appointed to conduct the secretarial audit of the Company for the Financial Year 2014-15, as required under Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report in Form MR-3 for Financial Year 2014-15 is appended as Annexure ''9'' which forms part of this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

COST AUDITORS :

Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its manufacturing activity is required to be audited. Your Directors had, on the recommendation of the Audit and Risk Management Committee, appointed Messrs Ajay Joshi and Associates, Pune to audit the cost accounts of the Company for the Financial Year 2015-16 on a remuneration of f 9 Lacs. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their determination. Accordingly, a Resolution seeking Member''s determination for the remuneration payable to Messrs Ajay Joshi and Associates, Cost Auditors is included at Item No. 7 of the Notice convening the Annual General Meeting.

22. CORPORATE SOCIAL RESPONSIBILITY POLICY AND ITS REPORT :

Your Company is an early adopter of the corporate social responsibility (''CSR'') initiatives. Corporate Responsibility is one of the six core values of your Company, which focuses on ''serving and improving the communities in which we live''. Your Company works with ''Cummins India Foundation'' towards three broad focus areas viz. Higher Education, Energy and Environment and Social Justice (including Local Community Infrastructure Development).

Details about the CSR Policy and initiatives taken by the Company during the year are available on our website ''http://www.cumminsindia.com/CIF/about us.html''. The Annual Report on our CSR Activities, is appended as Annexure ''10'' which forms part of this Report.

23. BUSINESS RESPONSIBILITY REPORT :

As stipulated under the Equity Listing Agreement with Stock Exchanges, the Business Responsibility Report describing the initiatives taken by the Company from environmental, social and governance perspective is attached as part of the Annual Report.

24. GENERAL :

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

a. Details relating to deposits covered under Chapter V of the Act;

b. Issue of equity shares with differential rights as to dividend, voting or otherwise;

c. Issue of shares (including sweat equity shares) to employees of the Company under any scheme;

d. Neither the Managing Director nor the Whole-time Directors of the Company received any remuneration or commission from any of its subsidiaries;

e. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations; and

f. No material changes and commitments occurred during April 1, 2015 till the date of this Report which would affect the financial position of your Company.

ACKNOWLEDGEMENT :

Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the financial institutions, banks, government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the Company''s executives, staff and workers.

On behalf of the Board of Directors,

Anant J. Talaulicar

Chairman & Managing Director

Mumbai: May 28, 2015

DIN: 00031051


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting the Fifty Third Annual Report and the Audited Accounts of the Company for the year ended March 31, 2014.

1. FINANCIAL RESULTS :

During the Financial Year 2013-14, net revenue from operations was f 397,667 Lacs as compared to f 458,938 Lacs during the previous year (13% lower). Exports and other foreign exchange earnings stood at f 125,831 Lacs as compared to f 131,597 Lacs during the previous year (4% lower). Profit after tax decreased to Rs. 60,002 Lacs from Rs. 76,411 Lacs recorded for the previous year (21% lower).

2013-2014 2012-2013 (Rs. in Lacs) (Rs. in Lacs)

APPROPRIATION OF PROFIT :

Profit before taxation 81,751 105,133

Net Profit for the year after tax but before tax on proposed dividend 60,002 76,411

Tax on dividend 6,124 6,017

Dividend 36,036 36,036

Transferred to General Reserve 6,000 7,641

Balance carried to Balance Sheet 136,699 124,857

2. DIVIDEND :

Your Directors have recommended a final dividend of Rs. 8/- per equity share of Rs. 2/- each fully paid-up, in addition to the interim dividend of Rs. 5/- per equity share of Rs. 2/- each fully paid declared on February 4, 2014, aggregating to Rs. 13/- per equity share of Rs. 2/- each fully paid-up share for the year ended March 31, 2014.

3. JOINT VENTURES :

a) Cummins Research and Technology India Limited (CRTI) :

The net revenue from the operations of Cummins Research and Technology India Limited (CRTI), a 50:50 joint venture between Cummins Inc., U.S.A. and your Company, for the year ended March 31, 2014 was Rs. 6,329 Lacs as compared to Rs. 8,512 Lacs during the previous year (26% lower). CRTI has a Research and Technology Center at Pune and is engaged in providing Information Technology enabled Mechanical Engineering development services primarily to Cummins Inc., its subsidiaries and joint ventures in all parts of the world.

b) Valvoline Cummins Limited (VCL) :

VCL, a 50:50 joint venture with Valvoline International Inc., U.S.A., a global leader in lubricants and engine oils, generated net revenue of Rs. 100,923 Lacs from its operations for the year ended March 31, 2014 as compared to Rs. 96,897 Lacs during the previous year (4% higher).

c) Cummins SVAM Sales & Service Limited (CSSSL) :

CSSSL is a 50:50 joint venture with SVAM Power Plants Private Limited, a dealer of your Company. CSSSL focuses on sales and service of Cummins engines and generator sets in parts of Northern India. CSSSL generated net revenue of Rs. 6,584 Lacs from its operations for the year ended March 31, 2014 as compared to Rs. 6,209 Lacs during the previous year (6% higher).

4. INITIATIVES AT PHALTAN :

Your Company continues with its expansion initiatives at the Megasite in Phaltan with the following projects :

- A facility for the Power Generation Business was inaugurated at MIDC Special Economic Zone at the Megasite, Phaltan in July, 2013. This is the sixth facility of the Cummins Group of Companies in Phaltan. This Plant is established to manufacture generator sets and generator drive engines in the low and medium kilowatt range for export markets (with a matured capacity of 51,000 units by 2016).

- A Technical Training Center facility at Phaltan is expected to commence its operations in March 2015 with a capacity to train 550 engineers, 300 customers and special programs on controls, alternators etc. for dealer engineers, customers and OEMs every year.

- Common facilities like the Area Business Organization Training Center and Auditorium, Crèche, Administration Office are expected to commence their operations in March 2015.

Your Company''s facility at Viman Nagar, Pune which catered to B-series engine based generators, closed down its operations w.e.f. March 31, 2013, due to synergizing business operations at the Megasite. The closure of the said facility did not have any material impact on the business of your Company as the demand for this product is being catered effectively from the facility located at Phaltan Megasite Upfit Center, Phaltan.

5. INDIA OFFICE CAMPUS (IOC) :

Your Company had entered into an Understanding for the purchase of a ten-acre Office Campus at Balewadi, Pune (India Office Campus). The IOC is to house all professional employees located at various offices in Pune with the exception of design/development engineers who will be based at the Kothrud campus Technical Center, and manufacturing support employees who will be located in the various plants. Your Company proposes to let out surplus office space to other Cummins Group companies, if any, after housing all of its professional employees. This initiative would offer the distinct advantage of co-locating most of the Cummins Group professional employees at one location and derive synergies of co-location. As on March 31, 2014, your Company incurred total capital expenditure of Rs. 32,250 Lacs and an additional expenditure of Rs. 38,700 Lacs is proposed till the second part of the facility is made fully functional.

6. MANAGEMENT DISCUSSION AND ANALYSIS / CORPORATE GOVERNANCE REPORT :

As per Clause 49 of the Listing Agreement with Stock Exchanges, the Management Discussion and Analysis Report and the Corporate Governance Report are annexed and form part of the Directors'' Report.

7. CODE OF CONDUCT COMPLIANCE :

A declaration signed by the Chairman and Managing Director affirming compliance for the Financial Year 2013-14, with the Company''s Code of Conduct by the Directors and Senior Management as required under Clause 49 of the Listing Agreement with Stock Exchanges, is annexed and forms part of the Directors'' Report.

8. DIRECTORS'' RESPONSIBILITY STATEMENT :

In pursuance of the provisions of Section 217 (2AA) of the Companies Act 1956, your Directors make the following statement :

(i) that in the preparation of the annual accounts, all applicable accounting standards have been followed and there was no material departure from the accounting standards;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on March 31, 2014 and of the profit for the period April 1, 2013 to March 31, 2014;

(iii) 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;

(iv) that the Directors have prepared the annual accounts on an ongoing concern basis; and

(v) that the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year.

9. CONSERVATION OF ENERGY :

Your Company continued to undertake various energy conservation initiatives during the year, some of which are given below :

Industrial Engine Business Unit Plant (Kothrud)

- Reduction in compressed air electrical energy consumption from 32 kWh per cylinder to 27 kWh per cylinder;

- Reduction in power consumption of machines in the Cylinder Block Line from 635 kWh to 571 kWh per equivalent KV cylinder blocks;

- 15% reduction in IEBU Refrigeration tonnage usage from 2167 Tons to 1798 Tons;

- Reduction in energy consumption of Main Power House Pumping system from 19,000 kWh to 12,000 kWh per month;

- Reduction in energy consumption of CNC machines from 1216 kWh to 1034 kWh per day in Cylinder Head section;

- 25% reduction in power consumption of hot well pump houses by demand-based pump rpm control automation using PLC and automation;

- Continued maintaining unity power factor by reducing line energy losses; and

- Energy saving by load balancing of Transformers - elimination of no load and load losses by switching off of Transformer A, B and D.

The Plant continued implementation of the following initiatives :

- Efficient load sharing between the distribution transformers leading to energy savings;

- Maintaining unity power factor by reducing line energy losses;

- Use of natural sky lights on roofs to ensure minimal use of lights on the shop floor during day time; and

- Use of VRV air conditioners for the administrative building.

Power Generation Business Unit Plant (Pirangut)

- Use of natural sky lights on roofs to ensure minimal use of lights on the shop floor during day time;

- Maintaining a unity power factor and improving the power factor;

- Efficient load sharing between the distribution transformers leading to energy savings; and

- Reduction in compressor energy consumption by 5% by way of efficient operation, leakage elimination, use of air guns, demand-based pressure control at Pirangut.

The Plant continued implementation of the following initiatives :

- Use of LED light fittings in office wash rooms;

- Use of motion sensors in rest rooms to reduce electricity consumption;

- Pull cords installation at offices to reduce the lighting load consumption;

- Use of 5-star rated air conditioners for ground floor and first floor at office area;

- Use of energy efficient T-5 tubes in the shop floor to achieve energy savings; and

- Use energy efficient HVLS fan for shop floor ventilation.

Distribution Business Unit Plants (Erandwane, Pune and HHP Rebuild Center, Phaltan)

- Use of APFC (Automatic Power Factor Correction) panel for power factor correction at the load end;

- Installation of solar water heater for canteen;

- Installation of temperature controller for cooling tower;

- Use of T5 tubes with electronic ballast for the shop floor, street and office area lighting;

- Maintaining a unity power factor at the HHP Rebuild Centre and improving the power factor at the Erandwane, Pune;

- Use of sky lights on roofs to ensure minimal use of lights on the shop floor during day time; and

- Energy saving rounds during the break between the shifts.

The Plants continued implementation of the following initiatives :

- Alternate switching off, of the street lights after duty hours;

- Installation of EM6 controller for controlling of air compressors (auto switching off the air compressors);

- Use of dry type transformers to minimize energy loss;

- Use of VRV air conditioners for Administrative Building at Phaltan thereby achieving energy savings;

- Load reduction in administration building at Erandwane, Pune by localized lighting at work stations and redesigning of general lighting as well as natural lighting;

- Pull cord switches for administration block lighting;

- Reduction of AHU water pump - Water supply to AHU given from the test cell pumps;

- Discontinued use of 30 HP Air compressor and instead use of portable air compressor of 5HP at Erandwane site; and

- Increased AHU preventative maintenance frequency has resulted in better efficiency with power saving.

India Parts Distribution Center (Phaltan)

- Installation of Solar street light at the Hill Top area;

- Installation of Solar water heater for dish cleaning at cafeteria;

- Use of motion activated sensors in the racking aisles and the office area and dock station;

- Use of sky lights in the plant to reduce need for lighting during daytime;

- Use of motion sensors in rest rooms to reduce electricity consumption;

- Monitoring power off schedule and surprise audit by the Security Team and Safety Point Leaders which ensures optimum usage of available electrical equipment;

- Use of pull cords installation at offices and at packaging areas to reduce the lighting load consumption;

- Use of dual circuit motion sensors in meeting rooms;

- Use of VRV air conditioners for the administrative block;

- Use of energy efficient T-5 tubes at ware house to achieve energy savings; and

- Use of solar LED street lights at certain locations namely, internal connecting roads, Admin Block, Hill Top area etc. to reduce energy consumption.

IMPACT OF THE ABOVE MEASURES :

The above initiatives resulted in savings of about Rs. 271 Lacs in addition to Greenhouse Gas (GHG) emission reduction by 3,131,153 tons during the year. The energy units saved during the year were about 14,643 kWh.

10. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION :

With a view to satisfy legislative, customer and market needs, your Company is committed to introducing new products and improving existing products to have better performance levels, lower life cycle costs, excellent safety and recyclability characteristics and meet stringent emission norms.

The Technical Center of your Company continues in its endeavour to indigenize components and develop the next generation of components and systems in collaboration with the parent company - Cummins Inc., to reduce costs, improve fuel-efficiency, improve safety, enhance recyclability, and enhance performance and durability of its products. In order to improve technical productivity, new methodologies and technologies have been introduced and enhancements in capabilities are being continuously pursued to reduce the costs associated with new product development and customer support. Continued implementation of Six Sigma initiatives resulted in significant cost savings and improved operating efficiency.

To ensure the health and safety of employees, the Technical Center also pursued several initiatives to help drive towards the goal of zero-recordable incidents.

A. New Product Development :

The following new Products were developed as part of the above initiatives during the year :

1. Emissions recipe to meet BSIII, BSIV and OBDII emission regulations for Automotive ratings.

2. Advanced BSIII electronic products to enhance competitiveness in the Automotive segment and drive towards lower fuel consumption and higher power density product offerings for customers.

3. Multiple stationary engine families to meet the upcoming CPCB II Power Generation regulations up to 800 kW.

4. Key Industrial engine product families to support the increasing Industrial Business.

5. Key Marine engine product families to support the increasing commercial Marine Business.

6. Fundamental electronics capability to help develop products that comply with OBD II (On Board Diagnostics) legislation.

7. Further enhancement of non-diesel product development capability.

8. Improved capability in intake air characteristic measurements to enhance understanding and control of the combustion process.

B. Benefits derived as a result of the above activities are :

1. Enhanced development capabilities through use of electronic tools and simulation software to control the engine performance and combustion process.

2. Enhanced capability to tailor engine designs to improve the value proposition for customers through delivering superior power output, fuel economy, and transient response and reduced emission.

3. Product and component availability to meet the new emission norms ahead of implementation.

4. More safe, recyclable, reliable, durable and performance-efficient products and critical components were made available for the customers.

5. Component indigenisation capability was improved through enhanced test capability, rig test and flow bench development and availability.

6. Significant enhancements in measurement capability were made to pursue business opportunities in non- diesel markets to serve both the rural and international communities.

C. Future plans include :

1. Developing local ''fit for market'' solutions to meet upcoming emission regulations, local and rural market needs.

2. Technological innovation to add value to the products in the areas of alternate fuels, recycle / re-use and hybrid engines.

3. Continued expansion of the product range to serve the local and global market needs.

4. Providing energy-efficient solutions to reduce carbon footprint and improve recyclability.

5. Continued focus on indigenization and partnering with suppliers for waste elimination initiatives.

6. Alternate source development for various engine components.

7. Expanding the coverage of our engine development for the Power Generation market.

D. Your Company continues to draw benefits from Cummins Inc.''s technical capabilities and advanced technology. With continued support from Cummins Inc., your Company is committed to develop advanced fuel-efficient and emission-compliant engines that work on a variety of fuel sources and comply with forthcoming domestic and global emission regulations, to help reduce Greenhouse Gas emission whilst also enabling the products to deliver superior performance, reliability, durability and recyclability.

E. Expenditure on R & D :

The total expenditure on R & D was as follows :

2013-2014 2012-2013 (f in Lacs) (f in Lacs)

Capital 790 812

Recurring 4,220 3,959

Total 5,010 4,771

Total R&D expenditure as a percentage of total sales turnover 1.26% 1.04%

12. PARTICULARS OF EMPLOYEES :

Information as per Section 217 (2A) of the Companies Act, 1956 (the "Act"), read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Act, the Directors'' Report and Accounts are being sent to the Shareholders, excluding the statement giving particulars of employees under Section 217(2A) of the Act.

Any Shareholder interested in obtaining a copy of the statement, may write to the Company Secretary at the Registered Office of the Company.

13. DIRECTORS :

Mr. Anant J. Talaulicar has been re-appointed as Managing Director for five (5) years from April 25, 2013.

During the year, Mr. Edward Pence and Mr. Rajasekhar Menon were appointed as Additional Directors of the Company w.e.f. May 10, 2013 and August 3, 2013 respectively. Mr. Edward Pence is appointed as a Director in the Annual General Meeting held on August 1, 2013. Mr. J. M. Barrowman has been appointed as an Alternate Director to Mr. Edward Pence w.e.f. May 10, 2013. In its Meeting held on May 10, 2013, the Board of Directors noted the presence of Mr. Patrick Ward in the State of Maharashtra, India during May 6, 2013 to May 10, 2013 and consequent cessation of Mr. Pradeep Bhargava as an Alternate Director to Mr. Patrick Ward effective May 6, 2013. The Board, at its Meeting held on May 10, 2013 confirmed appointment of Mr. Pradeep Bhargava, as an Alternate Director to Mr. Patrick Ward effective May 11, 2013 upon return of Original Director (Mr. Patrick Ward) to U.S.A. In its Meeting held on November 7, 2013, the Board of Directors noted the presence of Mr. Edward Pence in the State of Maharashtra, India during November 5, 2013 to November 9, 2013 and consequent cessation of Mr. J. M. Barrowman as an Alternate Director to Mr. Edward Pence effective November 5, 2013. The Board, at its Meeting held on November 7, 2013, confirmed appointment of Mr. J. M. Barrowman, as an Alternate Director to Mr. Edward Pence effective November 9, 2013 upon return of Original Director (Mr. Edward Pence) to the U.S.A.

Mr. Mark Levett and Mr. James Kelly stepped down as Directors of the Company w.e.f. May 9, 2013 and August 2, 2013, respectively. Mr. J.M. Barrowman, Alternate Director to Mr. Mark Levett, also ceased to be a Director consequent to resignation of Mr. Levett.

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Casimiro Antonio Vieira Leitao and Mr. Edward Phillip Pence, Directors of the Company, retire by rotation and are eligible for re-appointment.

14. INDUSTRIAL RELATIONS :

Industrial relations at the Company''s plants continue to be cordial.

15. AUDITORS :

The Auditors, Price Waterhouse, Chartered Accountants, retire and hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment under the Companies Act, 2013.

COST AUDITORS :

Your Company appointed M/s Parkhi Limaye & Co., Cost Auditors, Pune as its Cost Auditors for the year 2013-14. The Cost Audit report and the Compliance Report for the year 2012-13 in the revised format, which was due on September 30, 2013, was filed with the Ministry of Corporate Affairs on September 21, 2013 for the Company.

On behalf of the Board of Directors,

Anant J. Talaulicar Mumbai: May 22, 2014 Chairman & Managing Director


Mar 31, 2013

The Directors have pleasure in presenting the Fifty Second Annual Report and the Audited Accounts of the Company for the year ended March 31, 2013.

1. FINANCIAL RESULTS :

During the financial year 2012-13, net revenue from operations was Rs. 458,938 Lacs as compared to Rs. 411,722 Lacs during the previous year (11% higher). Exports and other foreign exchange earnings were at Rs. 131,597 Lacs as compared to Rs.123,616 Lacs during the previous year (6% higher). Profit after tax increased to Rs. 76,411 Lacs from Rs. 59,127 Lacs recorded for the previous year (29% higher).

2012 - 2013 2011 - 2012 (Rs. in Lacs) (Rs. in Lacs)

APPROPRIATION OF PROFIT :

Profit before taxation 105,133 82,463

Net Profit for the year after tax but before tax on proposed dividend 76,411 59,127

Tax on dividend 6,017 4,947

Dividend 36,036 30,492

Transferred to General Reserve 7,641 5,913

Balance carried to Balance Sheet 124,857 98,140

2. DIVIDEND :

Your Directors have recommended a final dividend of Rs. 8/- per equity share of Rs. 2/- each fully paid-up, in addition to the interim dividend of Rs. 5/- per equity share of Rs. 2/- each fully paid declared on January 31, 2013, aggregating to Rs. 13/- per equity share of Rs. 2/- each fully paid-up share for the year ended March 31, 2013.

3. JOINT VENTURES :

a) Cummins Research and Technology India Limited (CRTI) :

The net revenue from the operations of Cummins Research and Technology India Limited (CRTI), a 50:50 joint venture between Cummins Inc., U.S.A. and your Company, for the year ended March 31, 2013 was Rs. 8,512 Lacs as compared to Rs. 6,550 Lacs during the previous year (30% higher). CRTI has a Research and Technology Centre at Pune and is engaged in providing Information Technology enabled Mechanical Engineering development services primarily to Cummins Inc., its subsidiaries and joint ventures in all parts of the world.

b) Valvoline Cummins Limited (VCL) :

VCL,a 50:50 joint venture with Valvoline International Inc., U.S.A., a global leader in lubricants and engine oils generated net revenue of Rs. 96,897 Lacs from its operations for the year ended March 31, 2013 as compared to Rs. 83,900 Lacs during the previous year (15% higher).

c) Cummins SVAM Sales & Service Limited (CSSSL) :

CSSSL is a 50:50 joint venture incorporated on January 17, 2012 with SVAM Power Plants Private Limited, a Dealer of your Company. CSSSL focuses on sales and service of Cummins engines and generator sets in parts of Northern India. The net revenue for the year ended March 31, 2013 (being the first year of operations of CSSSL) was Rs. 6,209 Lacs and was profitable.

4. INITIATIVES AT PHALTAN :

Your Company continues with its expansion initiatives at the Megasite in Phaltan with the following projects:

- The Phaltan Midrange Engine Upfit Center (PMUC) was inaugurated at the Megasite, Phaltan in March, 2013. This is the fifth facility of the Cummins Group of Companies in Phaltan. The Upfit Center has been established to assemble, upfit, test and paint diesel and natural gas engines, both mechanical and electronic, of B and L series. In addition, the facility will also manufacture C series engines. This entire range will serve the power generation, industrial and on-highway applications. This facility will have an annual capacity of 24,000 engines and shall cater to the requirements of Construction, Marine, Compressor and Fire Pump sectors, as well on highway natural gas engines.

- A facility for Power Generation Business Unit to manufacture generator sets and generator drive engines in the low and medium kilowatt range for export markets (with a matured capacity of 51,000 units by 2016) is expected to commence operation during the second quarter of 2013 in the MIDC Special Economic Zone.

- The India Parts Distribution Center (IPDC) facility, which became operational in the third quarter of 2011-12, completed its ramp up in the year 2012-13 enabling Cummins to better fulfill the demand for aftermarket Parts in the domestic market. The first year of operations was marked by several achievements including becoming best-in-class for shipment quality across all Cummins PDCs, improvement in delivery, reduction in backorders and improved fulfillment for Engine Down Orders.

Your Company''s facility at Daman which catered to B series engine based generators, closed down its operations w.e.f. August 3, 2012, due to the lowering demand in market and reduction in the subsidies to be availed of, at the facility. The closure of the said facility did not have any material impact on the business of your Company as the demand for this product is being catered effectively from the facility located at Pirangut, Pune.

5. INDIA OFFICE CAMPUS (IOC) :

Your Company had entered into an Understanding for the purchase of a ten acre Office Campus at Balewadi, Pune (India Office Campus/IOC). The IOC shall house all professional employees located at various offices in Pune with the exception of design/development engineers who will be based at the Kothrud campus technical center, and manufacturing support employees who will be located in the plants. Your Company proposes to let out surplus office space, if any, after housing all of its exempt employees to other Cummins Group companies. This initiative would offer the distinct advantage of co-locating most of the Cummins Group professional employees at one location and derive synergies of co-location. The total capital expenditure for IOC is about Rs. 73,000 Lacs. The same is expected to be ready for occupation in phases commencing early 2014.

6. MANAGEMENT DISCUSSION & ANALYSIS / CORPORATE GOVERNANCE REPORT :

As per clause 49 of the Listing Agreement with Stock Exchanges, the Management Discussion & Analysis Report and the Corporate Governance Report are annexed and form part of the Directors'' Report.

7. CODE OF CONDUCT COMPLIANCE :

A declaration signed by the Chairman and Managing Director affirming compliance for the Financial Year 2012-13 with the Company''s Code of Conduct by the Directors and Senior Management as required under Clause 49 of the Listing Agreement with Stock Exchanges, is annexed and forms part of the Directors'' Report.

8. DIRECTORS'' RESPONSIBILITY STATEMENT :

In pursuance of the provisions of section 217 (2AA) of the Companies Act 1956, your Directors make the following statement:

(i) that in the preparation of the annual accounts, all applicable accounting standards have been followed and there was no material departure from the accounting standards;

(ii) 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 as on March 31, 2013 and of the profit for the period April 1, 2012 to March 31, 2013;

(iii) 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; and

(iv) that the Directors have prepared the annual accounts on a going concern basis.

9. CONSERVATION OF ENERGY :

Your Company continued to undertake various energy conservation initiatives during the year, some of which are given below:

Engine Business Unit Plants (Kothrud and Pune - Nagar Road)

- Reduction in compressor energy consumption by efficient operation, leakage elimination, use of air guns, demand based pressure control, etc. by 33%;

- 34% reduction in power consumption of pump houses by demand based pump rpm control automation using PLC & automation;

- NH/NT engine assembly energy consumption was reduced by 22% by automation of ventilation blowers, lighting, syncool pump and AC plant;

- Efficient load sharing between the distribution transformers leading to energy savings;

- Six sigma project completed successfully for energy saving in the Cylinder Head machining section;

- Maintaining unity power factor by reducing line energy losses;

- Use of natural sky lights on roofs to ensure minimal use of lights on the shop floor during day time; and

- Use of VRV air conditioners for the administrative building.

Power Generation Business Unit Plants, Pirangut

- Use of LED light fittings in office wash rooms;

- Use of motion sensors in rest rooms to reduce electricity consumption;

- Pull cords installation at offices to reduce the lighting load consumption;

- Use of 5 star rated air conditioners for ground floor & first floor at office area;

- Use of energy efficient T-5 tubes in the shop floor to achieve energy savings; and

- Use energy efficient HVLS fan for shop floor ventilation.

Distribution Business Unit Plants (Erandwane and HHP Rebuild Center, Phaltan)

- Use of APFC (Automatic Power Factor Correction) panel for power factor correction at the load end;

- Alternate switching off, of the street lights after duty hours;

- Use of T5 tubes with electronic ballast for the shop floor, street and office area lighting;

- Maintaining a unity power factor at the HHP Rebuild Center and improving the power factor at the Erandwane, Pune plant;

- Use of sky lights on roofs to ensure minimal use of lights on the shop floor during day time;

- Installation of EM6 controller for controlling of air compressors (auto switching off the air compressors);

- Use of dry type transformers to minimize energy loss;

- Use of VRV air conditioners for Administrative Building at Phaltan thereby achieving energy savings;

- Load reduction in administration building at Erandwane, Pune by localized lighting at work stations and redesigning of general lighting as well as natural lighting;

- Pull cord switches for administration block lighting;

- Reduction of AHU water pump - Water supply to AHU given from the test cell pumps;

- Discontinued use of 30 HP Air compressor & instead use of portable air compressor of 5HP at Erandwane site; and

- Increased AHU preventative maintenance frequency resulted in to better efficient with power saving.

Parts Distribution Center, Phaltan, Maharashtra

- Use of motion activated sensors in the racking aisles and the office area;

- Use of sky lights in the plant to reduce need for lighting during daytime;

- Use of motion sensors in rest rooms to reduce electricity consumption;

- Power off schedule & surprise audit through security team & safety point leaders has ensured optimum usage of available electrical equipment;

- Pull cords installation at offices to reduce the lighting load consumption;

- Use of VRV air conditioners for the administrative block;

- Use of energy efficient T-5 tubes at ware house to achieve energy savings.

IMPACT OF THE ABOVE MEASURES :

The above initiatives resulted in savings of about Rs. 237 Lacs in addition to Greenhouse Gas (GHG) emission reduction by 2,552 tons during the year. The energy units saved during the year were about 2,721,251 kWh.

10. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION :

With a view to satisfy legislative, customer and market needs, your Company is committed to introducing new products and improving existing products to have better performance levels, lower life cycle costs, excellent safety and recyclability characteristics and meet stringent emission norms.

The Technical Center of your Company continues in its endeavour to indigenize components and develop the next generation of components and systems in collaboration with the parent company - Cummins Inc., to reduce costs, improve fuel efficiency, improve safety, enhance recyclability, enhance performance and durability of its products. In order to improve technical productivity, new methodologies and technologies have been introduced and enhancements in capabilities are being continuously pursued to reduce the costs associated with new product development and customer support. Continued implementation of Six Sigma initiatives resulted in significant cost savings and improved operating efficiency.

To ensure the health and safety of employees, the Technical Center also pursued several initiatives to help drive towards the goal of zero recordable incidents.

A. New Product Development:

The following new Products were developed as part of the above initiatives during the year:

1. Emissions recipe to meet BSIII, BSIV and OBDII emission regulations for Automotive ratings.

2. Advanced BSIII electronic products to enhance competitiveness in the Automotive segment and drive towards lower fuel consumption and higher power density product offerings for customers.

3. Multiple stationary engine families to meet the upcoming CPCB II Power Generation regulations up to 800 kW.

4. Key Industrial engine product families to support the increasing Industrial Business.

5. Key Marine engine product families to support the increasing Commercial Marine Business.

6. Fundamental electronics capability to help develop products that comply with OBD II (On Board Diagnostics) legislation.

7. Further enhancement of non-diesel product development capability.

8. Improved capability in intake air characteristic measurements to enhance understanding and control of the combustion process.

B. Benefits derived as a result of the above activities are:

1. Enhanced development capabilities through use of electronic tools and simulation software to control the engine performance and combustion process.

2. Enhanced capability to tailor engine designs to improve the value proposition for customers through delivering superior power output, fuel economy, transient response and reduced emission.

3. Product and component availability to meet the new emission norms ahead of implementation.

4. More safe, recyclable, reliable, durable and performance efficient products and critical components were made available for the customers.

5. Component indigenisation capability was improved through enhanced test capability, rig test and flow bench development and availability.

6. Significant enhancements in measurement capability were made to pursue business opportunities in non- diesel markets to serve both the rural and international communities.

C. Future plans include:

1. Developing local "fit for market" solutions to meet upcoming emission regulations, local and rural market needs.

2. Technological innovation to add value to the products in the areas of alternate fuels, recycle / re-use and hybrid engines.

3. Continued expansion of the product range to serve the local and global market needs.

4. Providing energy efficient solutions to reduce carbon foot print and improve recyclability.

5. Continued focus on indigenization and partnering with suppliers for waste elimination initiatives.

6. Alternate source development for various engine components.

7. Expanding the coverage of our engine development for the Power Generation market.

D. Your Company continues to draw benefits from Cummins Inc.''s technical capabilities and advanced technology. With continued support from Cummins Inc., your Company is committed to develop advanced fuel efficient and emission compliant engines that work on a variety of fuel sources and comply with forthcoming domestic and global emission regulations, to help reduce Greenhouse Gas emission whilst also enabling the products to deliver superior performance, reliability, durability and recyclability.

E. Expenditure on R & D:

The total expenditure on R & D was as follows:

2012-2013 2011-2012 (Rs. in Lacs) (Rs. in Lacs)

Capital 812 1,023

Recurring 3,959 3,834

Total 4,771 4,857

Total R&D expenditure as a percentage of total sales turnover 1.04% 1.18%

11. FOREIGN EXCHANGE EARNINGS AND OUTGO :

During the year under review, your Company exported 5,581 engines and 6,715 generator sets thereby achieving total export earnings of Rs. 127,035 Lacs.

Foreign Exchange earnings and gross outgo (including royalty, dividend etc.) during the year under review were as follows :

2012-2013 2011-2012 (Rs.in Lacs) (Rs. in Lacs)

(a) Earnings 131,597 123,616

(b) Outgo -

- Raw Materials/ components 51,308 45,193

- Capital Equipment 623 1,918

- Others 26,554 26,800

78,485 73,911

12. PARTICULARS OF EMPLOYEES :

Information as per Section 217 (2A) of the Companies Act, 1956 (the "Act"), read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Act, the Directors'' Report and Accounts are being sent to the Shareholders excluding the statement giving particulars of employees under Section 217(2A) of the Act.

Any Shareholder interested in obtaining a copy of the statement, may write to the Company Secretary at the Registered Office of the Company.

13. DIRECTORS :

Mr. Anant J. Talaulicar was initially appointed as the Managing Director of the Company for a period of 5 years from July 29, 2003 to April 24, 2008 and then subsequently re-appointed for a further period of 5 years from April 25, 2008 to April 24, 2013. At the Board Meeting held on January 31, 2013, Mr. Anant J. Talaulicar was re-appointed as Managing Director of the Company for a further period of five years effective April 25, 2013, subject to approval of the Central Government and the Shareholders.

During the year, Mr. Sean Milloy, Alternate Director to Mr. John Wall, ceased to be a Director of the Company effective July 28, 2012 upon arrival of Mr. John Wall, Original Director, to the State of Maharashtra. Mr. John Wall, Mr. B. H. Reporter and Mr. Mark A. Levett stepped down as Directors of the Company w.e.f. August 2, 2012, February 1, 2013 and May 9, 2013 respectively. On account of cessation of Mr. Mark A. Levett as Director of the Company, Mr. J.M. Barrowman, Alternate Director to Mr. Mark Levett also ceased to be a Director. Mr. Antonio Leitao, Mr. Prakash M. Telang and Mr. Edward Phillip Pence were appointed as Additional Directors of the Company w.e.f. August 3, 2012, January 31, 2013 and May 10, 2013, respectively. Mr. J. M. Barrowman has been appointed as Alternate Director to Mr. Edward Phillip Pence w.e.f. May 10, 2013.

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, M/s. James Kelly, Venu Srinivasan and Rajeev Bakshi, Directors of the Company, retire by rotation and are eligible for re-appointment.

14. INDUSTRIAL RELATIONS :

Industrial relations at the Company''s plants continue to be cordial.

15. AUDITORS :

The Auditors, Price Waterhouse, Chartered Accountants, retire and hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

COST AUDITORS :

Your Company appointed M/s Parkhi Limaye & Co., Cost Auditors, Pune as its Cost Auditors for the year 2012-13. The Cost Audit report and the Compliance Report for the year 2011-12 in the revised format, which was due on January 31, 2013, was filed with the Ministry of Corporate Affairs on December 25, 2012 for the Company.

On behalf of the Board of Directors,

Anant J. Talaulicar

Chairman & Managing Director

Pune: May 10, 2013


Mar 31, 2012

The Directors have pleasure in presenting the Fifty First Annual Report and the Audited Accounts of the Company for the year ended March 31, 2012.

1. FINANCIAL RESULTS :

During the financial year 2011-12, net revenue from operations was Rs. 411,722 Lacs as compared to Rs. 404,253 Lacs during the previous year (2% higher). Exports and other foreign exchange earnings were at Rs. 123,616 Lacs as compared to Rs. 108,975 Lacs during the previous year (13% higher). Profit after tax marginally increased to Rs. 59,127 Lacs from Rs. 59,099 Lacs recorded for the previous year.

2011-2012 2010-2011 (Rs. in Lacs) (Rs. in Lacs)

APPROPRIATION OF PROFIT :

Profit before taxation 82,463 80,237

Net Profit for the year after tax but before tax on proposed dividend 59,127 59,099

Tax on dividend 4,947 4,872

Dividend 30,492 29,700

Transferred to General Reserve 5,913 5,910

Balance carried to Balance Sheet 98,140 80,365

2. DIVIDEND :

Your Directors have recommended a final dividend of Rs. 6/- per equity share of Rs. 2/- each fully paid-up, in addition to the interim dividend of Rs. 5/- per share declared on February 9, 2012, aggregating to Rs. 11/- per share for the year ended March 31, 2012 on the enhanced paid-up share capital post issuance of Bonus shares in the ratio of 2:5.

3. INCREASE IN AUTHORISED SHARE CAPITAL AND ISSUANCE OF BONUS EQUITY SHARES :

Pursuant to the approval of the shareholders at the Extra-Ordinary General Meeting held on September 9, 2011, the Authorized Share Capital of your Company was increased from Rs. 4,000 Lacs to Rs. 8,000 Lacs which facilitated issuance of 792 Lac Bonus Shares of Rs. 2/- each in the ratio of 2:5 (two equity bonus shares for every five equity shares held) to the shareholders of the Company. Consequently, the paid-up capital of your Company stands increased from Rs. 3,960 Lacs to Rs. 5,544 Lacs.

4. JOINT VENTURES :

a) Cummins Research and Technology India Limited (CRTI) :

The net revenue from operations of Cummins Research and Technology India Limited (CRTI), a 50:50 joint venture between Cummins Inc., U.S.A. and your Company, for the year ended March 31, 2012, was Rs. 6,550 Lacs as compared to Rs. 4,676 Lacs during the previous year (40% higher). CRTI has a Research and Technology Center at Pune and is engaged in providing Information Technology Enabled Mechanical Engineering Development Services to Cummins Inc., its subsidiaries and joint ventures across the world.

b) Valvoline Cummins Limited (VCL) :

VCL is a 50:50 joint venture with Valvoline International Inc., U.S.A., a global leader in lubricants and engine oils. The net revenue from operations of VCL for the year ended March 31, 2012 was Rs. 83,900 Lacs as compared to Rs. 70,364 Lacs during the previous year (19% higher).

c) Cummins SVAM Sales & Service Limited (CSSSL) :

On January 17, 2012, a 50:50 Joint Venture company, namely Cummins SVAM Sales & Service Limited was formed with a paid-up capital of Rs. 1,200 Lacs with SVAM Power Plants Private Limited (one of the existing Dealers of your Company). The registered office of CSSSL is located at Delhi. CSSSL will concentrate its efforts on sales and service of Cummins engines and generator sets in Northern India.

5. INITIATIVES AT PHALTAN :

Your Company continues with its expansion initiatives at the Megasite in Phaltan with the following projects :

- The India Parts Distribution Center (IPDC) has been established with an aim to enhance supply chain efficiency in aftermarket parts distribution. Equipped with state-of-the-art infrastructure, this Center will serve as a logistics hub to facilitate improve inbound receiving and inventory management capabilities and enhance Cummins' ability to serve its customers significantly. The IPDC has been in operation since the third quarter of 2011-12.

- A facility for Power Generation Business Unit to manufacture generator sets and generator drive engines in the low and medium horse power range for export markets (with a matured capacity of 51,000 units by 2016) is now expected to commence operation during Q2 of 2013. This facility is being set up in the MIDC Special Economic Zone.

- The B, C and L series engine upfit facility is now expected to commence operations by end of 2012. This facility will have an annual capacity of 20,000 engines and shall cater to the requirements of construction, compressor, marine and fire pump sectors.

6. INDIA OFFICE CAMPUS (IOC) :

Your Company has entered into an Understanding for the purchase of an Office Campus at Balewadi, Pune (India Office Campus / IOC). The IOC shall house all its exempt employees located at various offices in Pune. Your Company proposes to let out surplus office space, if any, after housing all of its exempt employees to other Cummins group companies for their exempt employees. This initiative would offer the distinct advantage of co-locating all Cummins group professional employees at one location to derive synergies of co-location. The total capital expenditure for IOC shall be about Rs. 73,000 Lacs for the total space. The same is expected to be ready for occupation in phases from April 2014.

7. MANAGEMENT DISCUSSION & ANALYSIS/ CORPORATE GOVERNANCE REPORT :

As per Clause 49 of the Listing Agreement with Stock Exchanges, the Management Discussion & Analysis Report and the Corporate Governance Report are annexed and form part of the Directors' Report.

8. CODE OF CONDUCT COMPLIANCE :

A declaration signed by the Chairman and Managing Director affirming compliance with the Company's Code of Conduct by Directors and Senior Management, for the Financial Year 2011-12, as required under Clause 49 of the Listing Agreement with Stock Exchanges is annexed and forms part of the Directors' Report.

9. DIRECTORS' RESPONSIBILITY STATEMENT :

In pursuance of the provisions of section 217 (2AA) of the Companies Act, 1956, your Directors make the following statement :

(i) that in the preparation of the annual accounts, all applicable accounting standards have been followed and there was no material departure from the accounting standards;

(ii) 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 as on March 31, 2012 and of the profit for the period April 1, 2011 to March 31, 2012;

(iii) 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; and

(iv) that the Directors have prepared the annual accounts on a going concern basis.

10. CONSERVATION OF ENERGY :

Your Company continued to undertake various energy conservation initiatives during the year, some of which are given below :

Engine Business Unit Plants (Kothrud and Pune - Nagar Road)

- Improved furnace load utilization through effective operation of furnaces in the heat treatment area.

- Reduction in power consumption of hot well pumps by installation of variable frequency drives.

- Energy saving by replacement of metal halide lamps by T5 light fittings in QSK60 assembly.

- Cycle modification of gear grinding machine enabling automatic switching off the spindle motor of the same machine.

- Reduction in energy consumption at NHNT Assembly & Testing Unit by switching off idle pumps, AC chillers, Lighting, etc.

- Reduction in energy consumption of Nagar Road plant by using daylight for lighting, switching off AC chillers and providing Variable Frequency Drive (VFD) for Compressors.

Power Generation Business Unit Plants (Kasar Amboli and Daman)

- Installation of energy efficient lights.

- Enhancement in power factor to unity reducing line energy losses.

Distribution Business Unit Plants (Erandwane and HHP Rebulid Center, Phaltan)

- Use of APFC (Automatic Power Factor Correction) panel for power factor correction at load side.

- Alternate switching off of the street lights after duty hours.

- Use of T5 tubes with electronic ballast for shop floor, street and office area lighting.

- Maintaining a unity power factor at the HHP Rebuild Center and improving the power factor at Erandwane, Pune plant.

- Use of sky lights on roofs to ensure minimal use of lights on the shop floor during day time.

- Installation of EM6 controller for controlling of air compressors (automatic switching off of the air compressors).

- Use of dry type transformers to minimize energy loss.

- Use of VRV air conditioners for Administrative Building at Phaltan thereby achieving energy savings.

- Load reduction in administration building at Erandwane, Pune by localized lighting at work stations and redesigning of general lighting as well as natural lighting.

India Parts Distribution Center, Phaltan

- Use of motion activated sensors in the racking aisles and the office area.

- Use of sky lights in the plant to reduce need for lighting during daytime.

IMPACT OF THE ABOVE MEASURES :

The above initiatives resulted in savings of about Rs. 57 Lacs in addition to Greenhouse Gas (GHG) emission reduction by 685 tons during the year. The energy units saved during the year were about 711,446 kWh.

11. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION :

With a view to satisfy customer and market needs, your Company is committed to introducing new products and improve existing products which will have better performance levels, lower life cycle costs and meet stringent emission norms.

The Technical Center of your Company, in collaboration with the parent company - Cummins Inc., U.S.A., continues in its endeavour to indigenize components and develop the next generation of components and systems to reduce costs, improve fuel efficiency, enhance performance and durability of its products. In addition, to improve technical productivity, new methodologies and technologies have been introduced and enhancements in capabilities are being continuously pursued to reduce the costs associated with new product development and customer support. Continued implementation of six sigma initiatives resulted in significant cost savings and improved operating efficiency.

To ensure the health and safety of employees, the Technical Center also pursued several initiatives to help drive towards the goal of zero recordable incidents.

A. New Product Development :

The following new products were developed as part of the above initiatives during the year :

1. Emission recipe to meet BS IV emission regulations for Automotive ratings.

2. BS III products to enhance competitiveness in the Automotive segment and drive towards lower fuel consumption and higher power density product offerings for customers.

3. Multiple engine families to meet the upcoming CPCB II Power Generation regulations.

4. Key Industrial engine product families to support the increasing Industrial Business.

5. Fundamental electronics capability to help achieve upcoming OBD II (On Board Diagnostics) legislation.

6. Enhancement of non-diesel product development capability.

7. Improved capability in intake air characteristic measurements to enhance understanding and control of the combustion process.

B. Benefits derived as a result of the above activities are :

1. Enhanced development capabilities through use of electronic tools and software to control the engine performance and combustion process.

2. Enhanced capability to tailor the products to improve the value proposition for customers through delivering superior fuel economy, transient response and reduced emission.

3. Product and component availability to meet the new emission norms ahead of implementation.

4. More reliable, durable and performance efficient products and critical components were made available for the customers.

5. Component indigenisation capability was improved through enhanced rig test and flow bench development and availability.

6. Significant enhancement to pursue business opportunities in non-diesel markets.

C. Future plans include :

1. Developing local solutions to meet upcoming emission regulations and market needs.

2. Technological innovation to add value to the products in the areas of alternate fuels and hybrid engines.

3. Continued expansion of the product range to serve the local and global market needs.

4. Providing energy efficient solutions to reduce carbon foot print.

5. Continued focus on indigenization and partnering with suppliers for waste elimination initiatives.

6. Alternate source development for various engine components.

7. Low range engine development for Power Generation Market.

D. Your Company continues to draw benefits from Cummins Inc.'s technical capabilities and advanced technology. With continued support from Cummins Inc., your Company is committed to develop advanced fuel efficient and emission compliant engines to comply with forthcoming domestic and global emission regulations and help reduce Greenhouse Gas emissions and also enabling the products to deliver superior performance.

E. Expenditure on R & D :

The total expenditure on R & D was as follows :

2011-2012 2010-2011 (Rs. in Lacs) (Rs. in Lacs)

a) Capital 1,023 500

b) Recurring 3,834 3,269

c) Total 4,857 3,769

d) Total R&D expenditure as a percentage of total sales turnover 1.18% 0.93%

13. PARTICULARS OF EMPLOYEES :

Information as per Section 217 (2A) of the Companies Act, 1956 (the "Act"), read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Act, the Directors' Report and Accounts are being sent to the Shareholders excluding the statement giving particulars of employees under Section 217(2A) of the Act.

Any Shareholder interested in obtaining a copy of the statement, may write to the Company Secretary at the Registered Office of the Company.

14. DIRECTORS :

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, M/s. P. S. Dasgupta, Nasser Munjee and Patrick Ward, Directors of the Company, retire by rotation and are eligible for re-appointment.

15. INDUSTRIAL RELATIONS :

Industrial relations at the Company's plants continue to be cordial.

16. AUDITORS :

The Auditors, Price Waterhouse, Chartered Accountants, retire and hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

COST AUDITORS :

Your Company appointed M/s. Parkhi Limaye & Co., Pune as its Cost Auditors for the year 2011-12. The Cost Audit report for the year 2010-11 was due on September 27, 2011 and was filed with the Ministry of Corporate Affairs on September 23, 2011 for Kothrud and Daman plants and on September 27, 2011 for Kasar Amboli, Pune plant.

On behalf of the Board of Directors,

Anant J. Talaulicar

Pune : May 15, 2012 Chairman & Managing Director


Mar 31, 2011

The Directors of Cummins India Limited have pleasure in presenting the Fiftieth Annual Report and Audited Accounts of the Company for the year ended March 31, 2011.

1. FINANCIAL RESULTS:

During the year under review, net sales turnover was Rs. 39,454,427 (000) (Rs. 39,454 million) as compared to Rs. 28,448,704 (000) (Rs. 28,449 million) during the previous year (39% higher). Exports and other foreign exchange earnings were Rs. 10,962,713 (000) (Rs. 10,963 million) as compared to Rs. 5,076,277 (000) (Rs. 5,076 million) during the previous year (116% higher). Profit after tax was Rs. 5,909,903 (000) (Rs. 5,910 million) as compared to Rs. 4,438,672 (000) (Rs. 4,439 million) for the previous year (33% higher).

2010-2011 2009-2010 (Rs. 000) (Rs.OOO)

APPROPRIATION OF PROFIT:

Profit before taxation 8,023,667 6,109,147

Net Profit for the year after tax but before tax on proposed dividend 5,909,903 4,438,672

Tax on dividend 487,161 399,213

Dividend 2,970,000 2,376,000

Transferred to General Reserve 590,991 443,867

Balance carried to Balance Sheet 8,036,470 6,174,719

2. DIVIDEND:

Your Directors have recommended a final dividend of Rs. 8/- per equity share of Rs. 2/- each fully paid-up, for the year ended March 31, 2011, in addition to the interim dividend of Rs. II- per share declared on February 3,2011, aggregating to Rs. 15/- per share for the year.

3. JOINT VENTURES:

a) Cummins Exhaust India Limited (CEIL):

Your Company divested its entire shareholding of 2 million equity shares in Cummins Exhaust India Limited (a joint venture engaged in the business of manufacture and sale of exhaust silencers and mufflers for Internal Combustion Engines), as it was no longer considered core or strategic to the Company. The shares were sold to MVG Acquisition Corp., USA on April 29, 2011 for a consideration of Rs. 534.40 million.

b) Cummins Research and Technology India Limited (CRTI):

The sales and other income of Cummins Research and Technology India Limited (CRTI), a 50:50 joint venture between Cummins Inc., U.S.A. and your Company, for the year ended March 31, 2011, was Rs. 467,843 (000) (Rs. 468 million) as compared to Rs. 409,910 (000) (Rs. 410 million) during the previous year (14% higher). CRTI has a Research and Technology Centre at Pune and is engaged in providing Information Technology Enabled Mechanical Engineering Development Services to Cummins Inc., its subsidiaries and joint ventures across the world.

c) Valvoline Cummins Limited (VCL):

VCL is a 50:50 joint venture with Valvoline International Inc., U.S.A., a global leader in lubricants and engine oils. The net sales and other income of VCL for the year ended March 31, 2011 was Rs. 7,083,285 (000) (Rs. 7,083 million) as compared to Rs. 5,821,835 (000) (Rs. 5,822 million) during the previous year (22% higher). VCL has declared a dividend of Rs. 10/- per equity share of Rs. 10/- each on equity paid-up share capital of Rs. 190 million during the Financial Year 2010-11.

4. INITIATIVES AT THE CUMMINS MEGASITE :

Owing to continued strong demand, your Company stepped up its expansion initiatives at the Cummins Megasite at Phaltan with the following projects :

- A High Horse Power Engine Rebuild centre - which has a state of the art facility to rebuild HHP engines, started its operations in March 2011.

- A Parts Distribution Centre (PDC) - which will undertake kitting of parts and components and distribution of the same from a centralized location to cater to the requirements of other Cummins plants as well as after market, is under construction. The PDC is expected to commence operations in the third quarter of this year.

- A unit for the manufacture/assembly and upfit of B, C and L series engines is also being set up at the Megasite. This facility is expected to commence operations by the first half of 2012, with an annual capacity of approx. 20,000 engines. The plant would cater to the requirements of engines for the construction, compressor, marine and fire pump markets.

- A facility for the manufacture of Power Generator Sets and G-Drives in the low and medium horse power range is also being set up on the MIDC SEZ at Phaltan. This facility is expected to commence production by the middle of 2012 and would have a matured annual capacity of 51,000 units by 2015, mainly for export markets.

Your Company also identified opportunities to provide support to Project Affected People (land owners) by way of providing employment to qualified and eligible members and extending education assistance to others.

5. MANAGEMENT DISCUSSION & ANALYSIS / CORPORATE GOVERNANCE REPORT :

As per clause 49 of the Listing Agreement with Stock Exchanges, the Management Discussion & Analysis Report and Corporate Governance Report are annexed and form part of the Directors Report.

6. CODE OF CONDUCT COMPLIANCE :

A declaration signed by the Chairman and Managing Director affirming compliance with the Companys Code of Conduct by Directors and Senior Management, for the Financial Year 2010-2011, as required under Clause 49 of the Listing Agreement with Stock Exchanges is annexed and forms part of the Directors Report.

7. DIRECTORS RESPONSIBILITY STATEMENT:

In pursuance of the provisions of section 217 (2AA) of the Companies Act, 1956, your Directors make the following statement: -

(i) that in the preparation of the annual accounts, all applicable accounting standards have been followed and there was no material departure from the accounting standards;

(ii) 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 as on March 31, 2011 and of the profit for the period April 1, 2010 to March 31, 2011;

(iii) 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; and

(iv) that the Directors have prepared the annual accounts on a going concern basis.

8. CONSERVATION OF ENERGY:

Your Company continued to undertake various energy conservation initiatives during the year, some of which are given below :-

Engine Business Unit Plants (Kothrud and Pune - Nagar Road) :-

- Reduction in power consumption of KV ATPU area for lighting, cooling towers, and other applications.

- Waste Heat Recovery from powerhouse generator set by generation of hot water for use in canteen.

- Reduction in energy consumption of hydraulic press by machine cycle modification.

Power Generation Business Unit Plants (Kasar Amboli and Daman) :-

- Compressor AC Drive control installation.

- Installation of energy efficient lights.

- Compressor health check up and air leakage preventive maintenance.

- Installation of LED based street lights.

Distribution Business Unit, Erandawana, Pune :-

- Load reduction in administration building by localized lighting at work stations and redesigned general lighting as well as natural lighting.

- Use of energy efficient chokes, light fittings, lamps, push pull switches etc.

- Improved power factor.

IMPACT OF THE ABOVE MEASURES :

The above initiatives resulted in savings of about Rs. 3,743 (000) in addition to Green House Gas (GHG) emission reduction by 490 tons during the year. The energy units saved during the year were about 470,492 kWh.

Cummins Megasite, Phaltan :-

Your Company initiated following energy conservation initiatives at the Megasite :

- Use of composite wall and high performance double glazing for fagade, thereby achieving reduction in load on the air conditioning system.

- Use of sky lights on roofs to ensure minimal use of lights on the shop floor during day time.

- Use of APFC (Automatic Power Factor Correction) panel for power factor correction at load side.

- Use of dry type transformers to minimize loss of electricity.

- Motion sensors with dimmable ballast for the IT building.

- Use of motion sensors to ensure effective utilization of power.

- Use of timers for alternate switching of street lights after duty hours.

- Use of TS tubes with electronic ballast for shop floor, street and office area lighting.

- Use of glass wool to reduce the working temperature on the shop floor.

- Use of VRV air conditioners for the administrative buildings thereby achieving energy savings.

9. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION :

Your Company remains committed to introducing new products and improving existing products which meet stringent emission norms, have higher levels of performance and lower life cycle costs, to satisfy market needs.

The Technical Centre of your Company continues in its endeavour to indigenize components and develop the next generation of components and systems in collaboration with Cummins Inc., to reduce costs, improve fuel efficiency, performance and durability of its products. In addition, technical productivity enhancements are continuously pursued to reduce the costs associated with new product development.

A. New Product Development:

The following new products were developed as part of the above initiatives during the year:

1. Emission recipe development to meet BS-IV emission regulations for Automotive ratings. Multiple Power ratings from 99 HP to 380 HP were developed for various applications.

2. Development of BS-III new ratings. Multiple Power ratings from 99 HP were developed for various applications.

3. Established FTIR Ammonia slip measurement facility to meet BS-IV requirements.

4. Integration of Continental fuel system on GTA855 emissionised recipe for gas compression market.

5. Reduction in cost of ownership by integration of Champion spark plugs on GTA855 engines.

6. Indigenous C8.3 engine certified by IRS for marine application used on 120KW and 80KW Gensets.

B. Benefits derived as a result of the above activities are:

a. Significantly lower development cost ensured value addition to the customers.

b. On time availability of emissions compliant and fuel efficient products to customers.

c. More reliable, durable and performance efficient products and critical components were made available.

d. Component indigenisation and six sigma initiatives resulted in significant cost savings.

e. The above initiatives helped in securing new customers.

C. Future plans include :

- Developing local solutions to meet upcoming emissions regulations and market needs,

- Technological innovation to add value to products in the areas of alternative fuels and hybrid engines,

- Emphasis to reduce carbon foot prints and energy efficient solutions,

- Continued focus on indigenization and supplier partnership based waste elimination initiatives,

- Alternate source development for various engine components,

- Low range engine development for the Power Generation Market.

D. Your Company continues to draw benefits from Cummins Inc.s technical capabilities and advanced technology. With continued support from Cummins Inc., U.S.A., your Company is committed to develop advanced fuel efficient and emissions compliant engines to comply with forthcoming domestic and global emissions regulations.

E. Expenditure on R & D :

The total expenditure on R & D was as follows :-

2010-2011 2009-2010

(Rs. 000) (Rs. 000)

a) Capital 50,018 314,195

b) Recurring 326,936 317,559

c) Total 376,954 631,754

d) Total R&D expenditure as a percentage of total sales turnover 0.96% 2.22%

10. FOREIGN EXCHANGE EARNINGS AND OUTGO :

During the year under review, your Company exported 9,310 engines and 4,908 generator sets thereby achieving export earnings of Rs. 10,604,257 (000) (Rs. 10,604 million).

Foreign Exchange earnings and gross outgo (including royalty, dividend etc.) during the year under review were as follows :-

2010-2011 2009-2010

(Rs.000) (Rs.OOO)

(a) Earnings 10,962,713 5,076,277

(b) Outgo -

- Raw Materials/components 5,576,732 3,134,867

- Capital equipment 478,759 305,254

- Others 2,455,656 1,354,102

8,511,147 4,794,223

11. PARTICULARS OF EMPLOYEES :

Information as per Section 217(2A) of the Companies Act, 1956 (the Act), read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. As per the provisions of Section 219(1 )(b)(iv) of the Act, the Directors Report and Accounts are being sent to the Shareholders excluding the statement giving particulars of employees under Section 217(2A) of the Act.

Any Shareholder interested in obtaining a copy of the statement, may write to the Assistant Company Secretary at the Registered Office of the Company.

12. DIRECTORS:

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, M/s. Mark Levett, Venu Srinivasan and Rajeev Bakshi, Directors of the Company, retire by rotation and are eligible for re-appointment.

13. INDUSTRIAL RELATIONS :

Industrial relations at the Companys plants continue to be cordial.

14. AUDITORS:

The Auditors, Price Waterhouse, Chartered Accountants, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

COST AUDITORS:

Your Company appointed M/s. Parkhi Limaye & Co., Cost Auditors, Pune as its Cost Auditors for the year 2010-11. The Cost Audit report for the year 2009-10 was filed with the Ministry of Corporate Affairs on September 26, 2010, due date being September 27, 2010.

On behalf of the Board of Directors,

Anant J. Talaulicar

Mumbai: May 30, 2011 Chairman & Managing Director


Mar 31, 2010

The Directors of Cummins India Limited have pleasure in presenting the Forty-Ninth Annual Report and the Audited Accounts of the Company for the year ended March 31, 2010.

1. FINANCIAL RESULTS :

During the year under review, net sales turnover was Rs. 28,448,704 (’000) (Rs. 28,449 million) as compared to Rs. 33,042,837 (’000) (Rs. 33, 043 million) during the previous year (14% lower). Exports and other foreign exchange earnings were Rs. 5,076,277 (’000) (Rs. 5,076 million) as compared to Rs. 13,424,852 (’000) (Rs. 13,425 million) during the previous year (62% lower). Profit after tax was Rs. 4,438,672 (’000) (Rs. 4,439 million) as compared to Rs. 4,336,611 (’000) (Rs. 4,337 million) for the previous year (2% higher). 2009-2010 2008-2009 (Rs. ’000) (Rs.’000)

APPROPRIATION OF PROFIT :

Profit before taxation 6,109,147 5,990,216

Net Profit for the year after tax but before tax on proposed dividend 4,438,672 4,336,611

Tax on dividend 399,213 319,846

Dividend 2,376,000 1,782,000

Transferred to General Reserve 443,867 433,661

Balance carried to Balance Sheet 6,174,719 4,955,127

2. DIVIDEND :

Your Directors have recommended a final dividend of Rs. 6/- per equity share of Rs. 2/- each fully paid-up, for the year ended March 31, 2010, in addition to the interim dividend of Rs. 6/- per share declared on December 3, 2009, aggregating to Rs.12/- per share for the year.

3. CONSOLIDATED FINANCIAL STATEMENTS :

Consolidated Financial Statements are not being published, as consequent to the amalgamation of its subsidiaries, Cummins Sales and Service India Limited (CSS) and Cummins Auto Services Limited (CASL) with your Company, your Company no longer has any subsidiaries.

4. JOINT VENTURES :

a. Cummins Exhaust India Limited (CEIL) :

Sales and other income of CEIL, a 50:50 Joint Venture between Cummins Filtration Inc., U.S.A. and your Company, for the year ended March 31, 2010, was Rs. 447,572 (’000) (Rs. 448 million) as compared to Rs. 429,565 (’000) (Rs. 430 million) during the previous year (4 % higher). CEIL declared a dividend aggregating to Rs.14.5 per equity share of Rs. 10/- each during the year ended March 31, 2010, on the paid-up share capital of Rs. 40,000 (’000). CEIL is engaged in the business of manufacture and sale of exhaust silencers and mufflers for Internal Combustion Engines.

b. Cummins Research and Technology India Limited (CRTI) :

Sales and other income of Cummins Research and Technology India Limited (CRTI), a 50:50 Joint Venture between Cummins Inc., U.S.A. and your Company, for the year ended March 31, 2010, was Rs. 409, 910 (’000) (Rs. 410 million ) as compared to Rs. 482,717 (’000) (Rs. 483 million) during the previous year (15 % lower).

CRTI has a Research and Technology Centre at Pune and is engaged in providing Information Technology Enabled Mechanical Engineering Development Services to Cummins Inc., its subsidiaries and joint ventures across the world.

c. Valvoline Cummins Limited (VCL) :

VCL is a 50:50 joint venture with Valvoline International Inc., U.S.A., a global leader in lubricants and engine oils. Sales and other income of VCL for the year ended March 31, 2010 was Rs. 5,823,353 (’000) (Rs. 5,823 million) as compared to Rs. 4,470,661 (’000) (Rs. 4,471 million) during the previous year (30% higher). VCL has declared a dividend of Rs. 12.60 per equity share of Rs. 10/- each on equity paid-up share capital of Rs. 190,000 (’000) during the financial year 2009-10.

5. INITIATIVES AT PHALTAN :

With the recovery in the economy, your Company has once again stepped up activity and investment at its Phaltan Project. Two projects are underway and are expected to commence operations during the third quarter of 2010.

- A High Horse Power Rebuild centre which will have a state of the art facility to Rebuild upto 900 High Horse Power engines per annum.

- A Parts Distribution Centre (PDC) which will undertake kitting, assembly of products, parts, components etc. and distribution of the same from a centralized location to cater to the requirements of other plants of Cummins as well as after market.

Total investment in these projects and in building common infrastructure facilities for the plants at Phaltan is expected to be around Rs. 1,200,000 (’000) during the year 2010-11.

6. OTHER INITIATIVES :

Your Company reacted with agility to brace the economic slowdown at the beginning of the year. Some initiatives in this direction included :

- Effective redeployment of manpower among Business Units / Group Companies to ensure optimum utilization of resources.

- Judicious capital investments and deferment of capital expenditure where possible, without affecting growth. However, investment in people, customer relationships, new products & technologies and critical projects / capacity expansion continued as planned to strengthen your Company’s position for long term profitable growth in India.

- CBS operations, which commenced during the FY 2004-05 for transactional services, like financial transactions, payroll processing, IT infrastructure management etc., were discontinued effective September 1, 2009, to enable the Company to focus on its core business activities. However, in order to ensure continuity of services as per quality and security standards of Cummins, these services have been outsourced to a group company, Cummins Technologies India Limited (CTIL).

- Intensified use of Accelerated Cost Efficiency and Six Sigma tools to drive down costs.

- Effective vendor management and consolidation to leverage better costs.

7. MANAGEMENT DISCUSSION & ANALYSIS / CORPORATE GOVERNANCE REPORT :

As per clause 49 of the Listing Agreement with Stock Exchanges, the Management Discussion & Analysis Report and Corporate Governance Report are annexed and form part of the Directors’ Report.

8. CODE OF CONDUCT COMPLIANCE :

A declaration signed by the Chairman and Managing Director affirming compliance with the Company’s Code of Conduct by Directors and Senior Management, for the Financial Year 2009-2010, as required under Clause 49 of the

Listing Agreement with Stock Exchanges is annexed and forms part of the Directors’ Report.

9. DIRECTORS’ RESPONSIBILITY STATEMENT :

In pursuance of the provisions of section 217 (2AA) of the Companies Act, 1956, your Directors make the following statement :-

(i) that in the preparation of the annual accounts, all applicable accounting standards have been followed and there was no material departure from the accounting standards;

(ii) 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 as on March 31, 2010 and of the profit for the period April 1, 2009 to March 31, 2010;

(iii) 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; and

(iv) that the Directors have prepared the annual accounts on a going concern basis.

10. CONSERVATION OF ENERGY :

Your Company continued to undertake various energy conservation initiatives during the year, some of which are given below :-

Engine Business Unit Plants (Kothrud and Pune - Nagar Road) :-

- Reduction of electrical energy transmission losses from 7.5% to 6%.

- Reduction of R & D old pump house energy consumption by 40% through redesigning of the pumping system.

- Increase in power efficiency of non-CNC machines by reducing auxiliary power consumption.

- Reduction of power consumption of selected CNC machines from 229 kWh per equivalent KV engine to 206 kWh per equivalent KV engine by modifying machine cycle and consequently avoiding wastages in energy consumption.

- Reduction in power consumption of cooling tower from 3735 kWh/Day to 2900 kWh/Day by operating cooling towers without the use of fans.

- Reduction in power consumption of New KV Engine Assembly Utilities by reducing wastages in pumping and air conditioning system.

- Waste Heat Recovery from Powerhouse genset cooling water to reduce electrical energy consumption at canteen area.

Power Generation Business Unit Plants (Kasar Amboli and Daman) :-

- Re-arrangement of office and canteen lighting.

- Reduction in compressor air leakages and centralisation of compressed air system.

- Energy saving un-plug initiative which involves power switch off on holidays.

- Air conditioning control and usage.

- Effective utilisation of natural light on the shop floor.

Distribution Business Unit (CS&S), Erandawana, Pune :-

- Load reduction in administration building by localized lighting at work stations and redesigned general lighting as well as natural lighting.

- Improved power factor.

IMPACT OF THE ABOVE MEASURES :

The above initiatives resulted in savings of about Rs. 12,943 (’000) in addition to Green House Gas (GHG) emission reduction by 3,410 tons during the year. The energy units saved during the year was approximately 1,815,804 kWh.

11. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION :

Your Company remains committed to introducing new products and improving the existing products which meet stringent emission norms, have higher levels of performance and lower life cycle costs, in order to meet market needs.

The Technical Centre of your Company continues in its endeavour to indigenize components and develop the next generation of components and systems in collaboration with Cummins Inc., to reduce costs, and improve fuel efficiency, performance and durability of its products. In addition, technical productivity enhancements are continuously pursued to reduce the costs associated with new product development.

A. New Product Development :

The following new Products were developed as part of the above initiatives during the year :

1. KTA-50-L CNG Dual-fuel DEMU for locomotive application.

2. Development of emissionized G-855-P and GTA-855-P engines for Gas Compression application.

3. Development of B Gas Plus CNG engine calibration for integration with Hybrid transmission system.

4. Industrial rating development for 143 HP Engines.

5. Certification for 140 HP Engines.

6. Rating assessment of stage II Emission Norms for 200 kVA Engines.

7. Tier I rating development for a Dozer application for QST30 Engine.

8. EU stage II emission rating development for KTA19 engine for the Power Generation market.

9. Commissioning of Euro-IV level state-of-the-art emissions measurement facility at the Technical Centre.

B. Benefits derived as a result of the above activities are :-

a. Significantly lower development cost, ensured value addition to the customers.

b. On time availability of emission compliant and fuel efficient products to customers.

c. More reliable, durable and performance efficient products and critical components were made available.

d. Component indigenization and Six Sigma initiatives resulted in significant cost savings.

e. The above initiatives helped in winning new customers.

C Future plans include :

- Continued cost reduction initiatives using proven methods like Six Sigma.

- Continued focus on indigenization and supplier partnership based waste elimination initiatives.

- Alternate source development for various engine components.

- Introduction of full authority electronic diesel as well as natural gas engines compliant with future emissions requirements for all markets.

- Low range engine development for Power Generation Market.

D. Your Company continues to draw benefits from Cummins Inc.’s technical capabilities and advanced technology. With continued support from Cummins Inc., U.S.A., your Company is committed to developing advanced fuel efficient and emissions compliant engines that comply with forthcoming domestic and international emissions regulations.

E. Expenditure on R & D :

The total expenditure on R & D was as follows :-

2009-2010 2008-2009 (Rs.’000) (Rs.’000)

a) Capital 314,195 100,132

b) Recurring 317,559 307,990

c) Total 631,754 408,122

d)Total R&D expenditure as a percentage of total sales turnover 2.22% 1.23%

13. PARTICULARS OF EMPLOYEES :

Information as per Section 217(2A) of the Companies Act, 1956 (the Act), read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Act, the Directors’ Report and Accounts are being sent to the Shareholders excluding the statement giving particulars of employees under Section 217(2A) of the Act.

Any Shareholder interested in obtaining a copy of the statement, may write to the Assistant Company Secretary at the Registered Office of the Company.

14. DIRECTORS :

During the year under review, M/s. S.M. Chapman and Glyn Price stepped down as Directors of the Company w.e.f. December 3, 2009, and January 25, 2010 respectively. The Board of Directors place on record their appreciation for the contributions made by M/s. S.M. Chapman and Glyn Price.

M/s. Patrick Ward and James Kelly were appointed as Additional Directors of the Company w.e.f. from December 3, 2009 and January 25, 2010 respectively. Mr. Pradeep Bhargava (erstwhile Alternate Director to Mr. S. M. Chapman) has been appointed as an Alternate Director to Mr. Patrick Ward w.e.f. December 3, 2009. The resolutions confirming the appointment of Mr. Partick Ward and Mr. James Kelly as Directors, are being placed at the ensuing Annual General Meeting.

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, M/s. Nasser Munjee, B. H. Reporter and John Wall, Directors of the Company, retire by rotation and are eligible for re- appointment.

15. INDUSTRIAL RELATIONS :

Your Company’s operations at the facility at Kothrud in Pune were partially disrupted effective September 15, 2009 due to a strike by its Production Associates demanding re-opening of the wage agreement signed in conciliation. The strike was called off effective November 20, 2009. The business was not significantly affected during the strike, as your Company sustained manufacturing operations with the help of Diploma Mechanical Engineers and Managers. Post the strike, industrial relations have become very cordial and have been further strengthened by frequent communication between Associates and Management, co-operation and participation by Associates in management programs, etc.

16. AUDITORS :

The Auditors, Price Waterhouse, Chartered Accountants, retire and hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

On behalf of the Board of Directors,

Anant J. Talaulicar

Mumbai: May 29, 2010 Chairman & Managing Director

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