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Directors Report of Eicher Motors Ltd.

Dec 31, 2014

Dear Members,

The Board of Directors has pleasure in presenting the Thirty Third Annual Report along with the Audited Accounts for the year ended December 31, 2014.

FINANCIAL RESULTS

Your Company achieved an all-time high top-line growth during the financial year 2014 with totalrevenue from operations (net) at Rs. 3031.22 crores. The profit before depreciation and interest amounted to Rs. 733.56 crores, which is 24.2% of the total revenue. After accounting for interest and dividend income of Rs. 116.30 crores, interest expense of Rs. 1.67 crores and depreciation of Rs. 50.16 crores, profit before tax amounts to Rs. 798.03 crores. Profit after tax amounts to Rs. 558.92 crores after income tax provision of Rs. 239.11 crores.

The financial results are summarized below:

Particulars For the year ended For the year ended December 31, 2014 December 31, 2013

Gross sales 3303.72 1910.68

Less: Excise duty 289.01 215.29

net sales 3014.71 1695.39

Other operating revenue 16.51 7.08

Total revenue from operations (net) 3031.22 1702.47

Profit before depreciation and interest 733.56 313.73

Interest 1.67 0.27

Depreciation 50.16 30.41

Profit before other income and tax 681.73 283.05

Interest and dividend income 116.30 80.10

Profit before tax 798.03 363.15

Provision for tax (including Deferred tax) 239.11 84.53

Net profit after tax 558.92 278.62

Balance brought forward from previous year 618.54 455.76

Amount available for appropriation 1177.46 734.38

Proposed Dividend 135.52 81.12

Corporate Dividend Tax 18.94 6.86

Transfer to General Reserve Account 55.89 27.86

Balance carried to Balance Sheet 967.11 618.54

Earnings per share

- Basic (Rs.) 206.38 103.15

- Diluted (Rs.) 205.37 102.58

DIVIDEND

The Directors are pleased to recommend a dividend of 500% (Rs. 50/- per Equity Share of Rs. 10/- each) for the year ended December 31, 2014. Last year, your Company has paid dividend of 300% (Rs. 30/- per Equity Share of Rs. 10/- each) to the shareholders of the Company.

BUSINESS Performance

Your Company''s Royal Enfield unit continues to grow strongly. It sold 3,02,592 motorcycles in the year 2014, 69.9% growth over 2013 sales volume of 1,78,121 motorcycles. Of 3,02,592 motorcycles sold in 2014, 6,221 were exported, a growth of 46.2% over 2013 volume of 4,256 motorcycles.

Total revenue from operations (net) for the year was Rs. 3031.22 crores, 78.0% growth over previous year (Rs. 1702.47 crores). Net Sales of spare parts and services increased to Rs. 229.31 crores in 2014 from Rs. 147.62 crores in the previous year, registering a growth of 55.3%.

Maximising operating leverage is a key focus in your company. This enabled your company to grow profits faster than net sales from operations. Your Company''s profit before depreciation and interest was Rs. 733.56 crores, a growth of 133.8% over Rs 313.73 crores recorded in 2013.

MARKET AND FUTURE PROSPECTS

Your Company''s motorcycle business - Royal Enfield - enjoys high credibility and has seen phenomenal growth over the years. Your Company''s focused marketing efforts, improved product quality and expanded distribution network have enabled the brand to expand its reach to a much larger customer base.

Your Company has set its goal to be a leader in the global mid-size motorcycle market. In order to achieve this goal, your Company will invest in increasing manufacturing capacity, strengthening supply chain, developing product development infrastructure and expanding distribution network. Your Company will invest in all these areas to seize the significant opportunities for growth that it believes lie in India and international markets.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREiGN EXCHANGE EARNiNGS AND OUTGO UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WiTH THE COMPANiES (DiSCLOSURE OF PARTiCULARS iN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

CONSERVATION Of ENERGY

The following new initiatives were taken to conserve energy during the year 2014:

1. ConventionalDiode rectifiers in Plating Shop replaced by high

efficient IGBT (Integrated Gate Bi-polar Transistor) rectifiers resulted in savings of 25,660 KWH per annum.

2. Flush coolant pump & Chip conveyor motor of CNC machines in Machine Shop replaced by Chip Trays resulted in savings of 49,005 KWH per annum.

3. Drilling machine running time reduction by switching off the motor after completing each operation in Machine Shop Crank Case and Cover Cell resulted in savings of 9,450 KWH per annum.

4. Tube lights and lamps replaced by LED lights resulted in savings of 33,426 KWH per annum.

5. PTCED (Pre Treatment Cathodic Electro Deposition) chiller temperature in Paint Shop optimised using temperature controller resulted in savings of 10,800 KWH per annum.

6. Street light running time reduced by timer control and old Air- conditioners replaced by Star rated Split Air-conditioners resulted in savings of 13,872 KWH per annum.

7. Work area ASU (Air Supply Unit) mancoolers in Paint Shop running time reduced by temperature controller resulted in savings of 7,800 KWH per annum.

8. Fuel tank Line - Buffing & Exhaust Blower motor running time reduced by timer controlresulted in savings of 6,240 KWH per annum.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

In the following areas, we have designed and developed new systems:

1. Introduction of Maintenance free VRLA Battery for better performance and extended life.

2. Introduction of double heat treatment process in place of single heat treatment to achieve the consistency in heat treatment parameters for Cam Gears to increase wear resistance.

3. Robot welding introduced in the Frame welding process for better consistent welding.

4. Columbia Homologation approval - Optimisation of after treatment to suit both Euro II and BS III models to reduce variant.

5. Introduction of Double Side Coated (Electrolytic Zinc coating) sheet metal for Fuel Tank.

6. Introduction of SS guard in place of Chrome plated sheet metal to improve corrosion resistance and reduce chrome.

7. Introduction of spigot design in the exhaust system for improved life and consistent welding process.

8. Introduction of torque controlled clip for hose clamping.

RESEARCH AND DEVELOPMENT

The focus on Research and Development accelerated in 2014. The Company continues to invest in the development of new products and improvement in existing products and value engineering projects. Your Company continues to invest in infrastructure and talent for conducting research and development activities, as a result of which Rs. 14.75 crores (Previous year Rs. 10.89 crores) was incurred on capital account and Rs. 19.26 crores (Previous year Rs. 20.88 crores) were spent on revenue account of Research and Development.

FOREIGN EXCHANGE EARNINGS / EXPENDITURE

During the year, totalexports (FOB value) were Rs. 91.73 crores (Previous year Rs. 69.01 crores).

Foreign Exchange amounting to Rs. 93.23 crores (Previous year Rs. 66.42 crores) was used on account of import of components, spare parts, capital goods, business travel and consulting fees during the year under review.

Please also refer to Points Nos. 46 to 48 of notes to accounts forming part of AnnualAccounts for further details of Foreign Exchange earnings and expenditure.

EICHER EMPLOYEE STOCK OPTION PLAN 2006

27,900 stock options have been issued out of the forfeited stock options during the year ended December 31, 2014 (5,000 stock options net of forfeited in the previous year).

The Statement giving complete details as at December 31, 2014, pursuant to Clause 12 (Disclosure in the Directors'' Report) of the

Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, forms part of the Directors'' Report.

Further, details of options granted and exercised is included at Note 2(iv) in the notes to accounts forming part of Annual Accounts.

PUBLIC DEPOSITS

As on December 31, 2014, there are no public deposits. There are no deposits that remain unclaimed. The company has not renewed/ accepted fixed deposits after May 29, 2009.

BOARD OF DIRECTORS

In terms of section 152 of the Companies Act, 2013, the Board has revised the terms and conditions of appointment of Mr. Siddhartha Lal, Managing Director of the Company and made him liable to retire by rotation.

The Board, pursuant to the provisions of Section 149 and 152 of the Companies Act, 2013 and subject to the approval of shareholders in the ensuing Annual General Meeting, has appointed Ms. Manvi Sinha as an Independent Director of the Company for a period of five years, not liable to retire by rotation.

The Board, pursuant to the provisions of Section 149 and 152 of the Companies Act, 2013 and subject to the approval of shareholders in the ensuing Annual General Meeting, has appointed Mr. S. Sandilya, Mr. Priya Brat, Mr. M.J. Subbaiah and Mr. Prateek Jalan as Independent Directors of the Company for a period of five years. Mr. S. Sandilya, Mr. Priya Brat, Mr. M.J. Subbaiah and Mr. Prateek Jalan are existing directors and were liable to retire by rotation as per the provisions of the Companies Act, 1956. However in terms of the Companies Act, 2013, they shall not be liable to retire by rotation.

Brief resume of Directors proposed to be appointed along with additional information pursuant to Clause 49 of the listing agreement is provided in the notice of this meeting.

Consequent to the expiry of his term on December 31, 2014, Mr. R.L. Ravichandran had ceased to be a director.

CHANGE IN FINANCIAL YEAR

The financial year of the Company commences on January 1 and ends on December 31 every year. Pursuant to the provisions of Section 2(41) of the Companies Act, 2013, the Company is required to change its financial year, within a period of two years of commencement of the Act, such that it ends on March 31 every year.

In order to comply with the above statutory requirement, the Board of Directors at its Meeting held on February 13, 2015, has approved the change in financial year from ''January-December'' to ''April-March''. The current financial year of the Company (that commenced on January 1, 2015) will be extended up to March 31, 2016 (being a period of 15 months). Subsequently, the financial year of the Company shall commence on April 1 and end on March 31 every year.

DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM

The Company has formulated a Whistle Blower Policy to establish a vigil mechanism for Directors and employees of the Company to report concerns about unethical behavior, actual or suspected fraud or violation of the company''s code of conduct or ethics policy. The Whistle Blower Policy is available on the website of the Company.

SOCIAL CONTRIBUTION

The Company continues to support social causes and has, like in the previous years, made contributions for promotion of education in certain backward areas during the year. The Company has constituted a Corporate SocialResponsibility Committee and has framed a Corporate SocialResponsibility Policy and identified Healthcare, Children''s education, Road safety and Environmental sustainability as some of the key areas. The Company will continue to support social projects that are consistent with the policy.

UNLISTED SUBSIDIARIES OF EICHER MOTORS LIMITED - VE COMMERCIAL VEHICLES LIMITED (VECVL)

VE Commercial Vehicles Limited (VECVL), an unlisted subsidiary of your company, continued to perform exceedingly well despite adverse market conditions and posted good financial results in a difficult year. Total revenue from operations (net) at Rs. 5758.06 crores increased by 13.5% as against Rs. 5071.55 crores during the previous financial year ended December 31, 2013. The profit before depreciation and interest amounted to Rs. 383.05 crores at 6.7% of net sales as against profit before depreciation and interest of Rs. 338.95 crores during the previous year at 6.7% of net sales. After accounting for interest income of Rs. 35.59 crores (previous year Rs. 58.87 crores), interest expense of Rs. 8.09 crores (previous year Rs. 7.59 crores) and depreciation of Rs. 169.66 crores (previous year Rs. 99.63 crores), profit before tax amounts to Rs. 240.89 crores (previous year Rs. 290.60 crores). After providing for tax of Rs. 51.46 crores, profit after tax amounts to Rs. 189.43 crores (previous year Rs. 230.15 crores).

Please refer to the section on VECVL for details on financial and operational performance.

EiCHER POLARiS PRivATE LiMiTED (EPPL) is 50:50 joint venture with Polaris Industries Inc., US. During 2014, EPPL made satisfactory progress on all fronts of the project including product development and construction of manufacturing facility.

Operations & Financial Results of EPPL

EPPL was incorporated on October 10, 2012 and the commercial production/operationsoftheCompanyareyettobecommenced.During the year ended December 31, 2014, the company recorded loss before tax amount to Rs. 9.45 crores and pre-operative expenses amount to Rs. 33.24 crores.

Future outlook of EPPL

EPPL is expected to commence commercial production in 2015.

PARTICULARS UNDER SECTION 212 Of THE COMPANIES ACT, 1956

In terms of a General Circular No. 2/2011 dated February 8, 2011, issued by the Ministry of Corporate Affairs, the Board of Directors of the Company has accorded consent at its meeting held on February 13, 2015, for not attaching the copies of Balance Sheets, Statement of Profit and Loss, report of the Board of Directors and Auditors'' Report of the subsidiaries (including step down subsidiaries) as required under the provisions of Section 212 of the Companies Act, 1956 and to comply with the conditions laid down under the said circular.

The annualaccounts and related detailed information of the subsidiary companies (including step down subsidiaries) will be made available to the shareholders of the company and its subsidiary companies (including step down subsidiaries) upon request and will also be available for inspection during official working hours.

However, as directed by the Central Government the financial data of the subsidiaries have been furnished under the section on Financial Information of Subsidiary Companies forming part of the Annual Report. The statement pursuant to Section 212 of the Companies Act, 1956 forms part of the Annual Report (please refer to Note 40 of Consolidated Financial Statements).

KEY MANAGERIAL PERSONNEL

The following employees were designated as whole-time key managerial personnel by the Board of Directors during the year under review:

(i) Mr. Siddhartha Lal, Managing Director

(ii) Mr. R.L. Ravichandran,* Whole Time Director

(iii) Mr. Lalit Malik, Chief Financial Officer; and

(iv) Mr. Manhar Kapoor, Company Secretary

*Mr. R.L. Ravichandran ceased to be a director with effect from December 31, 2014.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Clause 32 of the Listing Agreement, the Consolidated Audited Financial Statements and Consolidated

Cash Flow Statement for the year ended December 31, 2014 are provided in the Annual Report.

AUDITORS'' REPORT

The Auditors'' Report is annexed hereto and forms part of the Annual Report.

STATUTORY AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants, (Firm Registration Number: 015125N) are the Statutory Auditors of the Company, holding office as such till the conclusion of the ensuing AnnualGeneralMeeting (AGM) and being eligible have offered themselves for reappointment. Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Rules framed there under, the Board proposes reappointment of M/s Deloitte Haskins & Sells as Statutory Auditors of the Company for a period of three years subject to ratification of such appointment by shareholders at every AGM. M/s Deloitte Haskins & Sells have furnished a certificate to the effect that the proposed re-appointment, if made, will be in accordance with the provisions of Section 139 and 141 of the Companies Act, 2013.

COST AUDITORS

In conformity with the provisions of Section 148 of the Companies Act, 2013 and Companies (Cost Records and Audit) Rules, 2014, the Company has appointed Mr. V. Kalyanaraman, Cost Accountants, Chennai, as the Cost Auditors to carry out audit of the cost records of the Company pertaining to manufacture of engines and parts thereof and also pertaining to manufacture of motorcycles if required under the Act, applicable rules or otherwise considered desirable by the management of the Company.

CORPORATE GOVERNANCE AND MANAGEMENT DiSCUSSiON & ANALYSIS REPORT

As per Clause 49 of the Listing Agreement with Stock Exchanges, a Management Discussion and Analysis report is annexed to this report. A report on Corporate Governance together with the Auditors'' Certificate regarding the compliance of conditions of Corporate Governance forms part of the Annual Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of employees as per Sub-section (2A) of Section 217 of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975, for the year ended December 31, 2014, is annexed hereto and forms part of this Report.

STATEMENT OF RESPONSiBiLiTY

As required under section 217(2AA) of the Companies (Amendment) Act, 2000, the Board of Directors confirms that:

a. the applicable accounting standards have been followed in preparation of the annual accounts;

b. the accounting policies have been applied consistently, judgments and estimates have been reasonable and prudent thereby giving a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

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

APPLiCABiLiTY OF SECTiON 134 OF THE COMPANiES ACT 2013

The Ministry of Corporate Affairs, Government of India, has, vide its General Circular number 08/2014 issued on April 4, 2014, clarified that the financial statements (and documents required to be attached thereto), Auditors report and Board''s report in respect of financial years that commenced earlier than April 1, 2014 shall be governed by the relevant provisions/schedules/rules of the Companies Act, 1956 and that in respect of financial years commencing on or after April 1, 2014, the provisions of the new Act shall apply. This Directors'' Report is in relation with the financial year commencing on January 1, 2014 and has been prepared in accordance with the requirements of the Companies Act 1956.

ACKNOWLEDGEMENT

We thank our customers, business associates and bankers for their continued support during the last year.

We wish to convey our deep appreciation to the dealers of the Company for their achievements in the area of sales and service, and to suppliers/vendors for their valuable support.

We also place on record our sincere appreciation for the enthusiasm and commitment of Company''s employees for the growth of the Company and look forward to their continued involvement and support.

For and on behalf of the Board

Place: Gurgaon Siddhartha Lal S. Sandilya

Date: February 13, 2015 Managing Director Chairman

DIN 00037645 DIN 00037542


Dec 31, 2013

The Board of Directors has pleasure in presenting the Thirty Second Annual Report along with the Audited Accounts for the year ended December 31, 2013.

financial results

Your Company achieved an all time high top line growth during the financial year 2013 with total revenue from operations (net) at Rs. 1702.47 crores. The proft before depreciation and interest amounted to Rs. 313.73 crores, which is 18.4% of the total revenue. After accounting for interest and dividend income of Rs. 80.1 crores, interest expense of Rs. 0.27 crores and depreciation of Rs. 30.41 crores, profit before tax amounts to Rs. 363.15 crores. Profit after tax amounts to Rs. 278.62 crores after income tax provision of Rs. 84.53 crores.

dividend

The Directors are pleased to recommend a dividend of 300% (Rs. 30/- per Equity Share of Rs. 10/- each) for the year ended December 31, 2013. Last year, your Company has paid dividend of 200% (Rs. 20/- per Equity Share of Rs. 10/- each) to the shareholders of the Company.

Business Performance

Your Company''s Royal Enfield unit continues to grow significantly. It sold 1,78,121 motorcycles in the year 2013, 57.0% more when compared to 2012 sales of 1,13,432. Of 178,121 motorcycles sold in 2013, 4256 were exported, a growth of 20.5% over previous year.

The financial results are summarized below:

Rs. in crores

Particulars for the year ended for the year ended December 31, 2013 December 31, 2012

Gross sales 1910.68 1173.79

Less : Excise duty 215.29 130.04

net sales 1695.39 1043.75

Other operating revenue 7.08 5.51

Total revenue from operations (net) 1702.47 1049.26

Profit before depreciation and interest 313.73 145.43

Interest 0.27 0.26

Depreciation 30.41 17.15

Profit before other income and tax 283.05 128.02

Interest and dividend income 80.10 45.78*

Profit before tax 363.15 173.80

Provision for tax (including Deferred tax) 84.53 29.04

Net profit after tax 278.62 144.76

Balance brought forward from previous year 455.76 381.62

Amount available for appropriation 734.38 526.38

Proposed Dividend 81.12 54.00

Corporate Dividend Tax 6.86 2.14

Transfer to General Reserve Account 27.86 14.48

Balance carried to Balance Sheet 618.54 455.76

Earnings per share

- Basic (Rs.) 103.15 53.62

- Diluted (Rs.) 102.58 53.31

* Dividend @ Rs. 75/- per equity share which was declared by the Company''s subsidiary, VE Commercial Vehicles Limited (VECV) in its shareholders'' meeting held on January 31, 2013, was not included in the financial results for the year ended December 31, 2012. This is due to change in Schedule VI to Companies Act, 1956. Hitherto in terms of the earlier Schedule VI to the Companies Act, 1956, the Company was recognising income from dividend declared by its subsidiary company, i.e. VE Commercial Vehicles Limited (VECV) pertaining to the period on or before the Balance Sheet date. The requirement no longer exists in the revised Schedule VI. Accordingly, the Company as per AS–9 ''Revenue Recognition'' has recognised dividend from subsidiary companies as income only when the right to receive dividends is established as on the Balance Sheet date. Had the Company recognised dividend from VECV as income as per old Schedule VI, the profit for the year 2012 would have been higher by Rs. 40.80 crores.

Total revenue from operations (net) for the year was Rs. 1,702.47 crores, 62.2% growth over previous year (Rs. 1,049.26 crores). Net Sales of spare parts and services increased to Rs. 135.89 crores in 2013 from Rs. 100.14 crores in the previous year, registering a growth of 35.70%.

Royal Enfield has also substantially expanded and upgraded its network across the country. In 2013 it added 75 new dealerships taking the total dealership network to 307. The Company plans to continue to expand its distribution aggressively over the next few years, so that it is more convenient for Royal Enfield customers to purchase a bike and have it repaired and simultaneously to purchase accessories and apparel as well. The Company''s focus is on providing a very unique, friendly and technically sound experience at its dealerships so that the customer fully appreciates every contact with the Company.

market and future Prospects

Your Company continues to enlarge and enrich its product portfolio. On 11th September 2013, the much awaited Continental GT was launched in Brook lands, UK. Prominent media representatives and personalities from the automotive world were invited for the launch. Along with the motorcycle, a Continental GT range of apparel and accessories was also launched. The international media and distributor/dealer community were extremely impressed by the motorcycle – its ride and handling, ft and finish and how true the product is to its intent – café racing. This motorcycle has set the tempo for meaningful presence for Royal Enfield in the international markets. The Continental GT was launched in India in October 2013 along with accessories. Your Company is extremely satisfied with the customer response to the motorcycle. Prior to the Continental GT, the Bullet 500 was launched in India in early 2013 and received a heartening response.

Your Company has set its goals to be a significant player in the mid-size motorcycle market. It calls for investments in manufacturing capacity, supply chain, product platforms and distribution. Your Company will invest in all these areas to seize the significant opportunities for growth in that it believes lies in India and international markets.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION and foreign exchange earnings and outgo Under SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ With the companies (disclosure of Particulars In THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

conservation of energy

The following new initiatives were taken to conserve energy during the year 2013:

1. Replacement of Exhaust Blower Motor with Additional Ducting from existing Air Replacement Plant (ARP) exhaust system in Paint Shop that resulted in savings of 13824 KWH per annum.

2. Modification of Electric Circuit which resulted in reduced running time of Hydraulic Power Pack for Fixtures in Machine Shop (From 8hr/Shift to 1.2hr/Shift) resulting in savings of 35925 KWH per annum.

3. Automation of Motors in Spindle Drilling Machine in Machine Shop through Spindle Position Sensors resulted in savings of 18630 KWH per annum.

4. Replacement of Energy Efficient Air Conditioners resulted in savings of 3974 KWH per annum.

5. Efficient usage of Lightings in Machine Shop Line through automatic control resulted in savings of 7500 KWH per annum.

6. Reduction in Power consumption by using Sigma Air managers in Compressors resulted in savings of 31000 KWH per annum.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

In the following areas, we have designed and developed new systems:

1. Aluminum alloy wheel rim for better handling and weight reduction.

2. Clip on handle bar for better ergonomics.

3. Cradle type frame for better handling and manufacturing.

4. Spring damping system to reduce vibration in handle bar.

5. Needle bearing on swing arm for enhanced life.

6. Plastic seat pan for ease of manufacturing.

7. Introduction of Zinc Iron plating for fasteners – for improved corrosive resistance.

8. Introduction of improved Fuel Tank with pre coated (Electrolytic Zinc Coating) Sheet metal.

9. Introduction of double lip oil seal for Gear shift lever for better sealing.

10. Cam Clutch for starting arrangement to have better Cold Start ability and life.

11. Introduction of Polyamide gauge Bearing on Crank shaft for enhanced life.

12. Introduction of Aluminum Sealing Plug for the oil gallery for better sealing.

13. Introduction of graphite filled copper Exhaust Gasket for better exhaust sealing.

14. Silencer end cup by extrusion process to avoid multiple parts welding.

15. Introduction of U nut for Engine mounting for better torque retention.

16. Introduction of Metal Injection Molding (MIM) for exhaust cam lift pin.

research and development

The focus on Research and Development accelerated in 2013. The Company continues to invest in the development of new products and improvement in existing products and value engineering projects. Your Company continues to invest in infrastructure and talent for conducting research and development activities, as a result of which Rs. 10.89 crores (Previous year Rs. 3.95 crores) were incurred on capital account and Rs. 20.88 crores (Previous year Rs. 16.75 crores) were spent on revenue account of Research and Development.

Please also refer to Note No. 31 of Notes to Accounts forming part of the Annual Report for further details of Research and Development.

foreign exchange earnings/expenditure

During the current year, total exports (FOB value) were Rs. 69.01 crores (Previous year Rs. 54.89 crores).

Foreign Exchange amounting to Rs. 66.42 crores (Previous year Rs. 24.50 crores) was used on account of import of components, spare parts, capital goods, business travel and consulting fees during the year under review.

Please also refer to Note No. 46 to 48 of Notes to Accounts forming part of Annual Accounts for further details of Foreign Exchange earnings and expenditure.

eicher employee Stock option Plan 2006

5,000 stock options have been issued out of the forfeited stock options during the year ended December 31, 2013 (5,400 stock options net of forfeited in the previous year).

1,77,000 options (net of forfeited options) that were granted on September 30, 2006 under the Employee Stock Option Plan 2006 have vested with employees on October 1, 2009. Out of these, 1,77,000 options (1,70,600 options up to previous year and 6,400 options during the year under review) have been exercised by the employees.

2,08,900 options (net of forfeited options) that were granted on October 22, 2007 under the Employee Stock Option Plan 2006 have vested with employees on October 22, 2010. Out of these, 1,76,900 options (1,45,400 options up to previous year and 31,500 options during the year under review) have been exercised by the employees.

The Statement giving complete details as at December 31, 2013, pursuant to Clause 12 (Disclosure in the Directors'' Report) of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, forms part of the Directors'' Report.

Public deposits

As on December 31, 2013, there are no public deposits. There are no deposits that remain unclaimed. The Company has not renewed/ accepted fixed deposits after May 29, 2009.

Board of directors

Mr. S. Sandilya – Director retires by rotation and, being eligible, offers himself for reappointment.

The Board recommends his reappointment pursuant to applicable provisions of the Companies Act, 1956. Resolution seeking your approval on said item along with the terms and conditions are included in the Notice convening the Annual General Meeting together with brief resume of the Director being reappointed.

Subsidiaries of eicher motors Limited commercial vehicles Limited (vecvl)

VE Commercial Vehicles Limited (VECVL), a subsidiary of your Company, continued to perform well despite adverse market conditions. In 2013, the domestic sales volume of commercial vehicles industry (5 Tonne and above) decreased by 25.1% over 2012. This is the 2nd successive year of sales decline in the industry. However, VECVL posted better sales volume number in 2013 than the industry and arrested its sales volume decline to 15.5%, increasing its market share to 13.9% for the year 2013. 2013 was a landmark year for VECVL as it commercialised many strategic projects including medium duty engine project, bus body project etc. It unveiled a new range of trucks and buses that will replace its current fleet over time.

In 2013, VECVL posted total revenue from operations (net) at Rs. 5,069.6 crores as against Rs. 5,297.6 crores during the previous financial year ended December 31, 2012, a decline of 4.3%. The profit before depreciation and interest amounted to Rs. 401.9 crores at 8.1% of net sales as against proft before depreciation and interest of Rs. 410.4 crores during the previous year at 7.8% of net sales, a decline of 2.1%. The profit before tax amounts to Rs. 349.8 crores (previous year Rs. 431.5 crores). After providing for tax of Rs. 60.7 crores, profit after tax amounts to Rs. 289.1 crores (previous year Rs. 336.7 crores).

Please refer to the section on VECVL for details on financial and operational performance.

eicher Polaris Private Limited (EPPL)

Eicher Polaris Private Limited (EPPL) is a 50:50 joint venture with Polaris Inc., US. EPPL is in the project phase and will begin commercial production in 2015. During 2013, EPPL made satisfactory progress on all fronts of the project including product development and construction of manufacturing facility.

Operations & Financial Results of EPPL

EPPL was incorporated on October 10, 2012 and the commercial production/operations of the Company are yet to be commenced. During the year ended December 31, 2013, profit before tax amount to Rs. (0.18) crore and pre-operative expenses amount to Rs. 9.3 crores.

Future Outlook of EPPL

EPPL is working towards achieving start of production in 2015.

Particulars Under Section 212 of the companies ACT, 1956

In terms of a General Circular No. 2/2011 dated February 8, 2011, issued by the Ministry of Corporate Afairs, the Board of Directors of the Company has accorded consent at its meeting held on February 12, 2014, for non-attachment of the copies of Balance Sheets, Statement of Profit and Loss, reports of the Board of Directors and Auditors'' Report of the subsidiaries (including step down subsidiaries) as required under the provisions of Section 212 of the Companies Act, 1956 and to comply with the conditions laid down under the said circular.

The annual accounts and related detailed information of the subsidiary company (including step down subsidiaries) will be made available to the shareholders of the Company and its subsidiary company (including step down subsidiaries) at any point of time and will also be available for inspection during official working hours.

However, as directed by the Central Government the financial data of the subsidiaries have been furnished under Financial Information of Subsidiary Companies forming part of the Annual Report. Further, pursuant to Accounting Standard AS-21 specified in the Companies (Accounting Standards) Rules, 2006, the Consolidated Financial Statements presented by the Company include financial information of its subsidiaries. The statement pursuant to Section 212 of the Companies Act, 1956 forms part of the Annual Report (please refer to Note 40 of Consolidated Financial Statements).

consolidated financial Statements

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Clause 32 of the Listing Agreement, the Consolidated Audited Financial Statements and Consolidated Cash Flow Statement for the year ended December 31, 2013 are provided in the Annual Report.

auditors’ report

The Auditors'' Report is annexed hereto and forms part of the Annual Report.

Statutory auditors

M/s Deloitte Haskins & Sells, Chartered Accountants, have expressed their willingness to continue in ofce as Statutory Auditors, if re- appointed. A certificate has been obtained from them to the effect that the appointment, if made, will be in accordance with the limits specified in sub-section (1B) of section 224 of the Companies Act, 1956.

cost auditors

In conformity with the directives of the Central Government, the Company has appointed Mr. V Kalyanaraman, Cost Accountants, Chennai, as the Cost Auditors under Section 233B of the Companies Act, 1956, for the audit of cost accounts for Motor Vehicles (Two Wheelers) unit of the Company for the year ending December 31, 2014. The Cost Audit Report for the year ended December 31, 2012 was fled on June 21, 2013.

corporate Governance

As per Clause 49 of the Listing Agreement with Stock Exchanges, a Management Discussion and Analysis is annexed to this report. A report on Corporate Governance together with the Auditors'' Certificate regarding the compliance of conditions of Corporate Governance forms part of the Annual Report.

Particulars of employees

The statement of particulars of employees as per sub-section (2A) of section 217 of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975, for the year ended December 31, 2013 is annexed hereto and forms part of this Annual Report.

Statement of responsibility

As required under section 217(2AA) of the Companies (Amendment) Act, 2000, the Board of Directors confirms that:

a. the applicable accounting standards have been followed in preparation of the annual accounts;

b. the accounting policies have been applied consistently, judgments and estimates have been reasonable and prudent thereby giving a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

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

acknowledgement

Your Directors place on record their sincere gratitude to the continuing patronage and trust of our valued customers, bankers and financial institutions, business associates, shareholders and other statutory authorities who have extended their precious continued support and encouragement to your Company. Your Directors wish to convey their deep appreciation to the dealers of the Company for their achievements in the area of sales and service, and to suppliers / vendors and other business associates for their valuable support.

Your Directors also place on record, their sincere appreciation for the enthusiasm and commitment of its employees for the growth of the Company and look forward to their continued involvement and support.

For and on behalf of the Board

Place: Gurgaon Siddhartha Lal S. Sandilya

Date: February 12, 2014 Managing Director Chairman


Dec 31, 2012

The Board of directors has pleasure in presenting the Thirty First Annual Report along with the Audited Accounts for the year ended december 31, 2012.

FINANCIAL RESULTS

Your company achieved an impressive top line growth during the financial year 2012 with total revenue from operations (net) at Rs.1,049.26 crores. The profit before depreciation and interest amounted to Rs. 145.43 crores, which is 13.9% of the total revenue. After accounting for interest and dividend income of Rs. 45.78 crores, interest expense of Rs. 0.26 crore and depreciation of Rs. 17.15 crores, profit before tax amounts to Rs. 173.80 crores. Profit after tax amounted to Rs. 144.76 crores after income tax provision of Rs. 29.04 crores. The financial results are summarised below:

DIVIDEND

The directors are pleased to recommend a dividend of 200% (Rs. 20/- per Equity share of Rs.10/- each) for the year ended december 31, 2012.

BUSINESS PERFORMANCE

Your company''s Royal Enfield unit crossed a major milestone of producing and selling 1,00,000 motorcycles in the year 2012.

The Royal Enfield unit sold 52.0% more motorcycles in 2012 as compared to 2011. Total sales volume in 2012 was 1,13,432 motorcycles as compared to 74,626 in 2011. Total revenue from operations (net) for the year was Rs. 1,049.26 crores, 56.3% growth over the previous year (Rs. 671.45 crores).

EICHER MOTORS LIMITED (STANDALONE)

Rs. in crores

Particulars For the year ended For the year ended December 31, 2012 December 31, 2011

Gross 1,173.79 737.35

Less: Excise 130.04 71.38

Net 1,043.75 665.97

Oother operating revenue 5.51 5.48

Total revenue from operations (net) 1,049.26 671.45

Profit before depreciation and interest 145.43 80.09

Interest 0.26 2.02

Depreciation 17.15 13.02

Profit before other income and tax 128.02 65.05

Interest and dividend income* 45.78 76.78

Profit before 173.80 141.83

Provision for tax (including deferred tax) 29.04 17.28

Net profit after 144.76 124.55

Balance brought forward from previous year 381.62 313.11

Amount available for appropriation 526.38 437.66

Proposed dividend 54.00 43.19

Corporate dividend 2.14 0.39

Transfer to General Reserve Account 14.48 12.46

Balance carried to Balance sheet 455.76 381.62

Earnings per share

- Basic 53.62 46.18

- Diluted (Rs.) 53.31 46.00

* Dividend @ Rs. 75/- per equity share was declared by the company''s subsidiary, VE commercial Vehicles Limited (VEcV) in its shareholders'' meeting held on January 31, 2013, is not included in the financial results for the year ended december 31, 2012. This is due to change in schedule Vi of companies Act, 1956. Hitherto in terms of the earlier schedule Vi to the companies Act, 1956, the company was recognising income from dividend declared by its subsidiary company, i.e. VE commercial Vehicles Limited (VEcV) pertaining to the period on or before the Balance sheet date. This requirement no longer exists in the revised schedule Vi. Accordingly, the company as per As - 9 ''Revenue Recognition'' has recognised dividend from subsidiary companies as income only when the right to receive dividends is established as on the Balance sheet date. Had the company recognised dividend from VEOV as income as per old Schedule Vi, the profit for the year 2012 would have been higher by Rs. 40.80 crores.

Total exports in 2012 were 3,532 units, a growth of 10.4% over previous year.

Net sales of spare parts and services grew to Rs. 100.14 crores in 2012 from Rs. 74.50 crores in the previous year, registering a growth of 34.4%.

This year, your company launched the all new Thunderbird 500 and Thunderbird 350 motorcycle. These were received by customers with an overwhelming response. The Thunderbird range with its unique 360-degree design language and higher powered engine that has Royal Enfield''s signature flat torque curve, is poised to be the ultimate highway cruiser on the indian roads. Along with the Thunderbird range of motorcycles, Royal Enfield also launched a range of well-crafted, meticulously detailed, purpose-built riding apparel, marking the brand''s entry into the motorcycle accessories business.

Your company continued to expand its sales, distribution and after-market network in india and abroad. Royal Enfield products are now sold through 249 outlets (last year 190 outlets) in india and exported to 48 countries (last year 36 countries).

MARKET AND FUTURE PROSPECTS

The indian motorcycle industry slowed down in year 2012. However, your company''s Royal Enfield unit continued its growth trend in 2012. The exciting variants of classic models such as desert storm and chrome have expanded the consumer base that look for distinctive style and leisure riding. The New Thunderbird 500 and Thunderbird 350, positioned for long distance riding with value added features, are attracting a wider section of followers and very effective media launches have generated a healthy order book and brand recall. With the market evolving towards motorcycling and leisure riding activities, this growth trend is likely to continue.

PLEASE REFER TO MANAGEMENT DISCUSSION AND ANALYSIS FOR DETAILS.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO UNDER SECTION 217(1)(E) OF THE COMPANIES ACT, 1956, READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

CONSERVATION OF ENERGY

The following new initiatives were taken to conserve energy during the year 20I2:

1. Reducing the compressor capacity by I8.65 KWH using I25 HP compressors that resulted in savings of 64,454 KWH per annum.

2. Reduction in power consumption during idle time by using Variable Frequency Drive (VFD) in compressors resulted in savings of 5I,564 KWH per annum.

3. Reduction of running time of hydraulic power pack for fixture clamping from 8 hours per shift to I.2 hours per shift by modifying electrical circuit that resulted in a saving of 23,950 KWH per annum.

4. Reduction in motor running hours in Three spindle Drilling machine from 8 hours per shift to 2 hours per shift by introducing the sensor that resulted in a saving of I5,952 KWH per annum.

5. Reduction in fixed power consumption using star rate split A/c in place of window A/c that resulted in a saving of 6,359 KWH per annum.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION IN THE FOLLOWING AREAS, WE HAVE DESIGNED AND DEVELOPED NEW SYSTEMS:

1. Projection headlamp: Vertically stacked twin headlamp with projection system for better illumination on-road.

2. Led tail lamp: LED-based tail lamp for better life, light output and significant power savings. it also serves as an identity of the vehicle when seen from the rear.

3. improved handlebar mounting arrangements and mirror design help to reduce vibration level felt by the rider as a vibration reduction.

4. New thicker front suspension (41mm diameter) with friction reduction bushes for improved stability of the vehicle.

5. Anti-skip gear shift system to avoid false neutral experienced during gear shifting.

6. TPs (Throttle Position sensor) in carburettor: Precise control of ignition timing with air/fuel mixture delivery which enhances better drivability, performance and control in emission of the vehicle.

7. Digital instrument cluster with LED and added tell tales. Wheel speed deduction changed from mechanical to electronic sensor.

8. introduction of stainless steel exhaust guards instead of chrome plating as an eco friendly measure.

RESEARCH AND DEVELOPMENT

The focus on Research and development accelerated in 2012. The company continues to invest in the development of new products and improvement in existing products and value engineering projects. Your company continues to invest in infrastructure and talent for conducting research and development activities, as a result of which Rs. 3.95 crores (Previous year Rs. 5.55 crores) were incurred on capital account and Rs. 16.75 crores (Previous year Rs. 10.45 crores) were spent on revenue account of Research and development.

Please also refer Note No. 31 of Notes to Accounts forming part of the Annual Report for further details of Research and development.

FOREIGN EXCHANGE EARNINGS/EXPENDITURE

During the current year, total exports (FOB value) were Rs. 54.89 crores (Previous year Rs. 45.3 crores).

Foreign Exchange amounting to Rs. 24.50 crores (Previous year Rs. 14.69 crores) was used on account of import of components, spare parts, capital goods, business travel and consulting fees during the year under review.

Please also refer Points Nos. 46 to 48 of Notes to Accounts forming part of the Annual Report for further details of Foreign Exchange earnings and expenditure.

EICHER EMPLOYEE STOCK OPTION PLAN 2006

12,600 stock options have been issued out of the forfeited stock options during the year ended december 31, 2012 (1,32,200 stock options in previous year).

1,77,000 options (net of forfeited options) that were granted on september 30, 2006 under the Employee stock Option Plan 2006 have vested with employees on October 1, 2009. Out of these, 1,70,600 options (1,70,600 options up to previous year and no options during the year under review) have been exercised by the employees.

2,08,900 options (net of forfeited options) that were granted on October 22, 2007 under the Employee stock Option Plan 2006 have vested with employees on October 22, 2010. Out of these, 1,45,400 options (1,37,000 options up to previous year and 8,400 options during the year under review) have been exercised by the employees.

The statement giving complete details as at december 31, 2012, pursuant to clause 12 (disclosure in the directors'' Report) of the securities and Exchange Board of india (Employee stock Option scheme and Employee stock Purchase scheme) Guidelines 1999, forms part of the directors'' Report.

PUBLIC DEPOSITS

As on december 31, 2012, there are no deposits. during the year under review, 17 deposits aggregating Rs. 0.10 crore matured and were repaid. There are no deposits that remain unclaimed. The company has not renewed/accepted fixed deposits after May 29, 2009.

BOARD OF DIRECTORS

Mr. M.J. subbaiah - director retires by rotation and, being eligible, offers himself for reappointment.

Mr. R.L. Ravichandran was appointed as Whole Time director of the company for a period of two years with effect from January 1, 2011. His tenure has expired on december 31, 2012. The Board of directors in its meeting held on February 12, 2013 has recommended him for reappointment as the Whole Time director of the company for a further period of two years with effect from January 1, 2013.

The Board recommends the above reappointments pursuant to applicable provisions of the companies Act, 1956. Resolutions seeking your approval on said items along with the terms and conditions are included in the Notice convening the Annual General Meeting together with brief resume of the directors being reappointed.

JOINT VENTURE

Ybur company has entered i nto a strategic joint venture agreement with Us-based Polaris industries inc. on July 23, 2012, a recognised leader in the powersports industry, to set up a greenfield project in the automotive sector with a 50-50 partnership.

Pursuant to the said Joint Venture Agreement, a Joint Venture company i.e. Eicher Polaris Private Limited has been incorporated on October I0, 20I2 to design, develop, manufacture and market a full new range of personal vehicles. The operations of this joint venture will commence in 20I5. The overall investment in the Joint Venture company over a three-year period will be approximately Rs. 250 crores.

VE COMMERCIAL VEHICLES LIMITED (VECV) - A SUBSIDARY COMPANY OF EICHER MOTORS LIMITED

VECV posted a growth of 6.7% in the year 20I2 with total revenue from operations (net) at Rs. 5,297.63 crores as against Rs. 4,964.21 crores during the previous financial year ended December 3I, 20II. The profit before depreciation and interest amounted to Rs. 4I0.43 crores at 7.8% of net sales as against operating profit before depreciation and interest of Rs. 5II.74 crores during the previous year at 10.4% of net sales, a decline of I9.8%. After accounting for interest income of Rs. 88.02 crores (Previous year Rs. I03.22 crores), interest expense of Rs. 2.72 crores (Previous year Rs. 5.22 crores) and depreciation of Rs. 64.25 crores (Previous year Rs. 50.I5 crores), profit before tax amounts to Rs. 43 1.48 crores (Previous year Rs. 559.59 crores). After providing for tax of Rs. 94.82 crores, profit after tax amounts to Rs. 336.66 crores (Previous year Rs. 414.11 crores).

The financial results are summarised below:

Rs. in crores

Particulars For the For the year ended year ended December December 31, 2012 31, 2011

Gross sales 5,718.30 5,295.05

Less: Excise duty 475.11 374.49

Net Sales 5,243.19 4,920.56

Other operating revenue 54.44 43.65

Total revenue from 5,297.63 4,964.21 operations (net)

Profit before 410.43 511.74 depreciation and interest

Interest 2.72 5.22

Depreciation 64.25 50.15

Profit before other income and tax 343.46 456.37

Interest income 88.02 103.22

Profit before 431.48 559.59

Provision for taxation (94.82) (145.48) (including Deferred tax)

Net profit after tax 336.66 414.11

VECV posted a creditable 6.7% growth in net revenue. This is a result of VEcV''s success in gaining market share in tough market conditions that saw a sharp drop in the industry''s sales volume. segment wise industry and VEcV''s performance is explained below. Apart from gaining market share and improving the topline, VEcV posted a strong financial performance in tough market conditions. it did so by sharp focus on managing costs and working capital.

AN OVERVIEW OF SUBSIDIARY COMPANY''S BUSINESSES

Eicher Trucks and Buses (ETB):

After a good 20II, wherein the commercial Vehicle industry (5 Tonne and above) grew by I0.I% over the previous year, the industry declined by II.7% during 20I2. slowdown in new investments and overall industrial production marked the year 20I2. As a result, the domestic industry sales volume ended at 3,60,813 units as against 4,07,338 units in 20II, a decline of II.4%. The total cV industry (including exports) recorded sales of 3,95,I80 units as against 20II sales of 4,47,472 units, a decline of II.7%.

ETB recorded total sales of 48,262 units against 48,337 units in 20II, a decline of only 0.2% while gaining market share (including exports) from I0.8% in 20II to I2.2% in 20I2.

Within the domestic cV industry, the Light and Medium duty truck segment of 5 to I4 Tonne (L&MD), where ETB is a strong player, ended the year 20I2 with sales of 94,I87 units during 20I2, a drop of 8.4% over 20II. ETB sold 29,54I units in L&MD segment as against 3I,38I units during 20II thus recording a drop of 6.2%. This however was better than industry''s performance and ETB''s market share in this segment grew from 30.5% in 2011 to 31.2% in 20I2.

The industry''s heavy duty truck segment of I6 Tonne and above (HD) sale also dropped from 237,239 units in 20IIto I95,I40 units in 20I2 , a drop of I7.8% in 20I2 as against I2% growth in the previous year. However, ETB continued to grow in the HD truck segment, riding on the success of the VE series fuel efficient trucks and ended the year with a growth of 4.7% in the domestic market over 20II. ETB sold 7,699 trucks in 20I2 as against 7,352 trucks in 20II in the domestic market. ETB continues to follow sharply focussed strategy of targeting specific geography and segments with the right fit products in order to ensure superior value delivery to its customers.

ETB continued to build on its strong performance in the Bus segment. it recorded its all time high sale of 852I units, a growth of 3I.2% over previous year. This is a result of its efforts to widen its customer base and maintain superior product quality.

ETB exported 2,50I units in 20I2 registering a drop of I9.5 % over 20II. This is against the industry drop of I3.2 % in exports.

Volvo Trucks india (VTi)

Volvo Trucks are marketed in niche segments dominated mainly by mining tippers and over dimensional cargo carrying prime movers. over the years, Volvo Trucks has established a dominant position in this segment. Despite intense competition and pricing pressure in a weakening market due to mining issues, Volvo Trucks has maintained its supremacy through differentiated products and after market offerings driving high customer satisfaction.

Volvo Trucks recorded total sales of 569 units against 706 units in 2011, a decline of 19.3%.

Eicher Engineering components (EEc)

The domestic components industry witnessed a tough period with slowdown in the automobile industry. specifically, all the segments to which EEc is supplying components i.e. Tractors, commercial Vehicles, Three Wheelers, etc. witnessed lower demand.

The construction of a new plant at dewas was completed in December 2012 This plant has a capacity of 1,20,000 gears per month and will become fully operational by early 2013.

Eicher Engineering Solutions (EES)

This business is operated through an Engineering Design centre at Gurgaon (EEsG) along with Eicher Engineering solution inc., (UsA) and its two subsidiaries viz. Hoff Auto Design (shanghai) co. Ltd. and Hoff Auto Design (Beijing) co. Ltd.

The overall business revenue grew 6.5% over last year. EEs successfully generated business from strategic customers and group companies.

MARKET AND FUTURE PROSPECTS OF SUBSIDIARY COMPANY''S BUSINESSES

VE commercial Vehicles Limited, Eicher Motors 50:50 Joint Venture with AB Volvo, will complete five years in 2013. The journey has been very eventful and the symbiosis has been very clearly experienced by all stakeholders: dealers, suppliers, employees and shareholders. since its inception in 2008, VEcV has made capital investments of more than Rs. 1,300.00 crores in developing new manufacturing facilities, progressively upgrading of industrial capacity, developing new products and setting up world class systems and processes in all areas of the business.

VE Powertrain (VEPT) is the world class engine manufacturing facility with modern design and frugal engineering approach. VEPT is the first plant in india capable of producing Euro 6 engines, with variants of Euro 3/4 and 5. it has state-of-the-art technology with the highest level of automation in india. it has immense strategic importance as it will meet the requirements of Volvo Group''s automotive medium duty engine and Eicher branded HD commercial vehicles. The terminal capacity of the plant would be 1,00,000 engines, to be achieved gradually. The production will commence in the second half of 2013.

The recently installed cED Paintshop is a giant leap in quality. it will ensure best cabin painting finish in the contemporary trucks in india. The corrosion resistance is significantly enhanced. The plant will have a capacity of 72,000 units/year production in the first phase expandable to 1,00,000 units/year in the second phase. ETB''s new state-of-the-art Parts Distribution centre has become operational. This will significantly enhance ETB''s ability to provide a distinctly superior customer service. The new bus body plant will be completed in the first half of 2013. increasing ETB''s ability to provide superior product and better value to its customers. ETB continues to make excellent progress on developing new LMD and HD product platforms.

EEc created additional capacities for Transmission Gears by setting up its fourth manufacturing plant at Dewas. This new plant will cater to the requirements needed for increased volumes of ETB, VEPT, Royal Enfield and increased share of business from existing customers.

Eicher Trucks and Buses (ETB)

The year 2012 has been quite an eventful year for ETB. Apart from the excellent progress in various projects, ETB further consolidated its position with gain in market shares in all the segments.

overall, cV growth in 5 Tonne and above category declined in 2012 as compared to last year. All categories in the heavy duty truck segment witnessed decline as the HD segment contracted by 17.8% in 2012. The high sale of vehicles in 2010 and 2011 in anticipation of high continuing growth has resulted in excess capacity coupled with the postponement of replacement demand owing to the current economic situation. Buses saw a moderate growth of 6.3% in 2012.

ETB recorded an excellent overall performance in 2012 with substantial increase in market share across all product segments. in 2013, the L&MD vehicles are expected to continue their strong contribution. it is also expected that the increasing acceptability and positive customer response to the ''VE'' series of Heavy Duty trucks and increasing penetration of Heavy Duty buses would provide incremental volumes in 2013 and lead to improved growth prospects in the future. The new product platforms of both L&MD and HD commercial vehicles will provide a significant opportunity to ETB to enhance its customer value proposition.

There is emerging competition but ETB is in a strong position with the large number of products in its portfolio, the population base it has for its vehicles and also a strong, committed and expanding dealer network.

Volvo Trucks india (VTI)

2012 witnessed tough competition with pressure on price realisation. VT FM 480 10x4, the innovative Dump Truck launched from the Volvo stable in october 2012 has evinced strong customer interest. VTi has launched extensive country- wide customer engagement activities focussing on the Value enhancers with the complete new range in Volvo Trucks.

Eicher Engineering Components (EEC)

Growth in business with domestic Original Equipment Manufacturers (OEMs) will be in line with the manufacturing plans of the domestic OEMs. However, owing to a higher share of business with OEMs, development of new products, upgradation of technology and meeting the increasing requirements of new strategic customers would be key for the long term success of EEc.

Eicher Engineering Solutions (EES)

The Engineering services market continues to be an area of high opportunity and potential for growth. in 2012, EEs improved its business from strategic customers and group companies and also deployed global resources for project execution.

PARTICULARS UNDER SECTION 2I2 OF THE COMPANIES ACT, 1956

In terms of a General circular No. 2/2011 dated February 8, 2011, issued by the Ministry of corporate Affairs, the Board of directors of the company has accorded consent at its meeting held on February 12, 2013, for non-attachment of the copies of Balance sheets, statement of Profit and Loss, reports of the Board of directors and Auditors'' Report of the subsidiaries (including step down subsidiaries) as required under the provisions of section 212 of the companies Act, 1956 and to comply with the conditions laid down under the said circular.

The annual accounts and related detailed information of the subsidiary company (including step down subsidiaries) will be made available to the shareholders of the company and its subsidiary company (including step down subsidiaries) at any point of time and will also be available for inspection.

However, as directed by the central Government the financial data of the subsidiaries have been furnished under Financial information of subsidiary companies forming part of the Annual Report. Further, pursuant to Accounting standard As- 21 specified in the companies (Accounting standards) Rules, 2006, the consolidated Financial statements presented by the company include financial information of its subsidiaries. The statement pursuant to section 212 of the companies Act, 1956 forms part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

in accordance with the Accounting standard As-21 on consolidated Financial statements read with clause 32 of the Listing Agreement, the consolidated Audited Financial statements and consolidated cash Flow statement for the year ended December 3I, 20I2 are provided in the Annual Report.

auditors'' report

With reference to para 5 of the Auditors'' Report on the consolidated Financial statements for the year ended December 3I, 20I2, please refer Note No. 35 in the Notes to Accounts of the consolidated Financial statements for the year ended December 3I, 20I2, which is self-explanatory.

STATUTORY AUDITORS

M/s Deloitte Haskins & sells, chartered Accountants, have expressed their willingness to continue in office as statutory Auditors, if re-appointed. A certificate has been obtained from them to the effect that the appointment, if made, will be in accordance with the limits specified in sub-section (IB) of section 224 of the companies Act, 1956.

COST AUDITORS

in conformity with the directives of the central Government, the company has appointed Mr. V. Kalyanaraman, cost Accountants, chennai, as the cost Auditors under section 233B of the companies Act, I956, for the audit of cost accounts for the Motor Vehicles (Two Wheelers) unit of the company for the year ending December 3I, 20I3.

Pursuant to the General circular No. 43/2012 dated December 26, 20I2 read with General circular Nos.I8/20I2 dated July 26, 2012 and 8/2012 dated May I0, 20I2 (as amended on June 29, 20I2), the Ministry of corporate Affairs has allowed the companies concerned to file their cost Audit Reports for the year 20I I-I2 [including the reports relating to any previous year(s)] with the central Government in the XBRL mode, within I80 days from the close of the company''s financial year to which the report relates or by January 3I, 20I3, whichever is later. Accordingly, the cost Audit Report for the year ended December 3I, 20II was filed on December 3I, 20I2.

CORPORATE GOVERNANCE

As per clause 49 of the Listing Agreement with stock Exchanges, a Management Discussion and Analysis is annexed to this report. A report on corporate Governance together with the Auditors'' certificate regarding the compliance of conditions of corporate Governance forms part of the Annual Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of employees as per sub-section (2A) of section 217 of the companies Act, 1956, read with companies (Particular of Employees) Rules, 1975, for the year ended december 31, 2012 is annexed hereto and forms part of this Annual Report.

STATEMENT OF RESPONSIBILITY

As required under section 217(2AA) of the companies (Amendment) Act, 2000, the Board of directors confirms that:

a. the applicable accounting standards have been followed in preparation of the annual accounts;

b. the accounting policies have been applied consistently, judgments and estimates have been reasonable and prudent thereby giving a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities;

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

ACKNOWLEDGEMENT

Your directors place on record their sincere gratitude to the continuing patronage and trust of our valued customers, bankers and financial institutions, business associates, shareholders and other statutory authorities who have extended their precious continued support and encouragement to your company. Your directors wish to convey their deep appreciation to the dealers of the company for their achievements in the area of sales and service, and to suppliers/vendors and other business associates for their valuable support.

Your directors also place on record, their sincere appreciation for the enthusiasm and commitment of its employees for the growth of the company and look forward to their continued involvement and support.

For and on behalf of the Board

Place: Gurgaon Siddhartha Lal S. Sandilya

Date: February 12, 2013 Managing Director Chairman


Dec 31, 2010

The Board of Directors has pleasure in presenting the Twenty Ninth Annual Report along with the Audited Accounts for the year ended December 31, 2010.

BUSINESS ENVIRONMENT

India maintained its growth buoyancy achieved after the 2008 downturn in all sectors of economy. The fundamentals of Indian Economy continue to be strong. In 2009 -10 GDP grew by 7.4% and 2010-11 growth is forecasted above 8.5%.

The two wheeler industry has recorded a handsome growth in the year 2010. Your Company is a niche player in 350cc and above segment of the two wheeler industry and secured an all time high growth in terms of volume and Profitability.

The commercial vehicle industry in which your company operates through the subsidiary company, namely, VE Commercial Vehicles Limited (VECV), achieved new peak in sales volumes. VECV capitalised the growth momentum by recording its highest ever sales volumes. This has resulted in signifi cantly improved performance over 2009 as refl ected in very strong Profitability and cash fl ows.

FINANCIAL RESULTS

Your Company achieved impressive top line growth during the financial year 2010 with total Income at 4426.7 MINR. The operating Profit before depreciation and interest amounted to 457.9 MINR which is 10.3% of the total income. After accounting for interest and dividend income of 541.8 MINR, interest expense of 25.7 MINR and depreciation of 107.9 MINR, Profit before tax amounts to 866.1 MINR. Profit after tax amounts to 754.4 MINR after income tax provision of 111.7 MINR.

The financial results are summarized below: -

(Rs. in millions)

Particulars For the year For the year ended Dec. ended Dec. 31, 2010 31, 2009

Gross sales 4843.8 4079.9

Less : Excise duty 459.1 329.0

Net sales 4384.7 3750.9

Other income 42.0 29.2

Total income 4426.7 3780.1

Operating Profit before depreciation and interest (EBIDTA) 457.9 279.3

Interest 25.7 4.2

Depreciation 107.9 101.0

Profit before other income and tax 324.3 174.1

Interest and dividend income* 541.8 292.2

Profit before tax 866.1 466.3

Provision for tax (including Deferred tax)(111.7) (91.0)

Net Profit after tax 754.4 375.3

Balance brought forward from previous period/year 2752.4 3565.0

Dividend on bought back and extinguished equity shares no longer payable - 7.0

Corporate dividend tax on above dividend - 1.2

Premium paid on buy back of equity shares - (960.5)

Amount available for appropriation 3506.8 2988.0

Proposed Dividend 296.3 186.9

Corporate Dividend Tax 4.0 8.7

Transfer to General Reserve Account 75.4 40.0

Balance carried to Balance Sheet 3131.1 2752.4

Earnings per share

- Basic (Rs.) 28.17 13.85

- Diluted (Rs.) 28.06 13.81

* Dividend @ Rs 50/- per equity share was declared by VECV in its shareholders meeting held on 01.02 2011. An amount of 272 MINR being dividend income on investments in VECV has been accounted for in the above financial results.

DIVIDEND

The Directors are pleased to recommend a dividend of 110% (Rs. 11/- per Equity Share of Rs.10/- each) for the year ended December 31, 2010.

TWO WHEELERS BUSINESS

The year 2010 was an excellent year for the entire automobile industry. The two wheeler industry grew by 31% during the calendar year 2010 as against 18% growth achieved in the calendar year 2009. Royal Enfi eld achieved a great win in successfully transitioning its engine platform from Cast Iron Engine to Unit Construction Engine in October 2010. This transition and production constraints in certain areas, however, hampered growth of the production from much beyond 2009 levels.

Total sales volume of Royal Enfi eld in 2010 was 52576 motorcycles. It was marginally better than previous years volumes of 51955 motorcycles. Your company is carrying a very healthy order book for execution in 2011 as well.

Royal Enfi eld performed better on the export front. Total exports in 2010 were 2630 motorcycles as against 1953 motorcycles in the previous year.

Spare parts sales recorded 511.9 MINR in 2010 as against 397.8 MINR in the previous year, registering a growth of 29%.

MARKET AND FUTURE PROSPECTS

We expect two wheelers demand to remain robust, given strong off take in both rural and urban areas, continuing rise in rural household incomes owing to a good monsoon season and various government schemes.

The Economy Segment (100 cc) has posted a growth of 25% and the Executive Segment ( 125 cc to 250 cc ) has grown by 32%. Both these trends give a very clear direction on the expected future growth in the higher cc segments which provide further impetus to your Companys future prospects.

Further, with the entry of Harley Davidson and other life style bikes, it is expected that motorcycling culture will grow faster. This will have a favorable impact for Royal Enfi eld, being a highly treasured brand in this segment.

EXPORTS:

Your Company unveiled chrome version of Classic and Bullet 500 at the New York show. These will be marketed this year. Your Company has entered the state of California USA after meeting the stringent evaporative emission standards. In 2011, there are plans to expand to new markets in South Africa, Taiwan, Paraguay and Peru.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

CONSERVATION OF ENERGY

The following new initiatives were taken to conserve energy:

1. Modifi ed the blowers in the Air Replacement Plant (ARP) in the Paint Shop and thereby reduced the motor power from 28 Amps to 22 Amps which resulted in reduction of power consumption by almost 100 units per day.

2. Installation of additional timers on Hydraulic power pack (Boring Machines) for reduction of power consumption during machine idle time.

3. Installation of poly-carbonate sheet in the northern glass area of Vehicle Assembly roof thereby eliminating need for lighting during day time.

4. Installation of 10 Nos of additional Turbo Vent in various areas in the shop fl oor which will enhance the ventilation at work place without consuming power.

5. Introduction of auto air cut off system in the air gauges inspection stations resulting in saving of compressed air which in turn will reduce the power consumption.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

All domestic models have been suitably adapted to meet BS III emission norms effective from October 2010.

Evaporative emission technology has been adapted for 500cc Electronic Fuel Injection (EFI) models of the motorcycles sold in California, USA in 2010.

RESEARCH AND DEVELOPMENT

The focus on Research and Development activity continued with development of new products and variants thereof apart from improving the existing products and value engineering projects. An amount of 12.9 MINR was incurred on capital account and 92.4 MINR on revenue account in Research and Development.

Please also refer Note No. 5 of Schedule 12 of Notes to Accounts forming part of Annual Report for further details of Research and Development.

FOREIGN EXCHANGE EARNINGS / EXPENDITURE

During the current year exports of two wheelers were 329.6 MINR (FOB value) (Previous year 285.4 MINR).

Foreign Exchange amounting to 109 MINR (Previous year 100 MINR) was used on account of import of components, spare parts, capital goods, business travel and consulting fees during the year under review.

The Royal Enfi eld brand has great recognition in foreign markets. It exports to more than 30 countries.

In order to assess potential and stimulate demand in existing and new potential markets, your company regularly executes many marketing initiatives abroad.

Please also refer Point No(s). 6 to 8 of Statement of Additional Information forming part of Annual Accounts for further details of Foreign Exchange earnings and expenditure.

EICHER EMPLOYEE STOCK OPTION PLAN 2006

55400 stock options have been issued out of the forfeited stock options during the year ended December 31, 2010.

177000 options (net of forfeited options) that were granted on September 30, 2006 under the Employee Stock Option Plan 2006 have vested with employees on October 1, 2009. Out of these, 154700 options have been exercised by the employees during the year under review.

208900 options (net of forfeited options) that were granted on October 22, 2007 under the Employee Stock Option Plan 2006 have vested with employees on October 22, 2010. Out of these, 90200 options have been exercised by the employees during the year under review.

The Statement giving complete details as at December 31, 2010, pursuant to Clause 12 (Disclosure in the Directors Report) of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, forms part of the Directors Report.

PUBLIC DEPOSITS

As at December 31, 2010, there are 70 deposits aggregating to 5.8 MINR. During the year under review, 111 deposits aggregating to 8.9 MINR matured and were repaid. There are no deposits that remain unclaimed. The Company has not renewed/accepted fixed deposits after May 29, 2009.

BOARD OF DIRECTORS

Mr. Siddhartha Lal was appointed as the Managing Director of the Company with effect from May 1, 2006 for a period of fi ve years. His tenure will terminate on April 30, 2011. Mr. Siddhartha Lal has been recommended for reappointment as the Managing Director of the Company for a further period of fi ve years with effect from May 1, 2011.

Mr. R.L.Ravichandran, has been appointed as the Additional Director and Whole Time Director of the Company w.e.f January 1, 2011. Notice pursuant to Section 257 of the Companies Act, 1956 has been received from a member proposing Mr. R.L.Ravichandran for the appointment as Director of your Company.

Mr Prateek Jalan-Director retires by rotation and, being eligible, offers himself for reappointment.

The Board recommends the above appointments/reappointments pursuant to applicable provisions of the Companies Act, 1956. Resolutions seeking your approval on these items along with the terms and conditions are included in the Notice convening the Annual General Meeting together with a brief resume of the Directors being appointed/re-appointed.

VE COMMERCIAL VEHICLES LIMITED (VECV) - A SUBSIDARY COMPANY OF EICHER MOTORS LIMITED

VECV has posted impressive all time high top line during the financial year 2010 with total operating income at 39398.5 MINR as against 25384.8 MINR during the previous financial year ended December 31, 2009, a phenomenal growth of 55.2%. The operating Profit before depreciation and interest amounted to 3348.1 MINR at 8.5% of Net Sales as against operating Profit before depreciation and interest of 1353.8 MINR during the previous year at 5.4%, a growth of 147%. After accounting for interest income of 764.1 MINR (previous year 735.5 MINR), interest expense of 63.0 MINR (previous year 71.2 MINR) and depreciation of 457.3 MINR (previous year 377.0 MINR), Profit before tax and exceptional items amounts to 3591.9 MINR (previous year 1641.1 MINR). After providing for tax of 996.5 MINR, Profit after tax amounts to 2595.4 MINR (previous year 949.3 MINR).

The financial results are summarized below:

(Rs. in Millions)

For the year For the year ended 31st ended 31st Dec 2010 Dec 2009

Gross sales 41760.6 26638.6

Less : Excise duty 2586.4 1406.9

Net sales 39174.2 25231.7

Other operating income 224.3 153.1

Total operating income 39398.5 25384.8

Operating Profit before depreciation 3348.1 1353.8 and interest (EBIDTA)

Interest 63.0 71.2

Depreciation 457.3 377.0

Profit before other income, 2827.8 905.6 exceptional item and tax

Interest income 764.1 735.5

Profit before exceptional item and tax 3591.9 1641.1

Exceptional item - (234.4)

Profit before tax 3591.9 1406.7

Provision for tax (including Deferred tax) (996.5) (457.4)

Net Profit after tax 2595.4 949.3

The major improvement in financial results of VECV is on account of higher volumes across all product segments and focused cost reductions in all areas. Further there is an extraction of working capital of 305 MINR inspite of higher volumes and signifi cant increase in fi nished goods inventory to support higher sales forecast.

AN OVERVIEW OF SUBSIDIARY COMPANYS BUSINESSES

Eicher Trucks and Buses (ETB):

The Commercial Vehicle Industry (5T and above) touched new peak level at 412454 units registering a growth of 51.4% in 2010 over the previous year fi gure of 272434 units.

Year 2010 was a year of record breaking performance for ETB. ETB recorded its highest ever total Commercial Vehicles sales of 38181 against 24264 units in 2009, a growth of 57.4% with growth in numbers and market share across all product segments.

The 5-12 To n Light & Medium Duty (L&MD) domestic cargo Commercial Vehicles Industry ended the year 2010 with sales of 93732 as against 65875 in 2009 thus recording a growth of 42.3%. ETB outperformed the industry in this segment and recorded a sale of 26426 units in 2010 as against 16889 units in 2009, a growth of 56.5%. Due to higher sales, ETB gained market share in this segment and ended at a market share of 28.2% vis a vis 25.6% in previous year.

In its strong 7 to 12 T domestic cargo segment, VECV improved its strong position with a sale of 22787 units in 2010 with a higher market share of 38.5% as against a sale of 14734 units and a market share of 35.8% with very good acceptability of its fuel effi cient E2 plus series of Trucks in this segment.

The domestic Heavy Duty truck segment of 16 To n and above (HD) recorded a growth of around 70%.

In the year 2010 beginning, VECV launched the new "VE" series of fuel effi cient HD trucks at the Auto Expo. The Value Enhanced "VE" series offer customers high reliability, superior performance, enhanced service coverage along with high fuel effi ciency. VECV sold 4219 trucks in domestic cargo HD segment as against 1424 in the previous year. VECV has followed a focused strategy of targeting specifi c geography and segments with the right fit product in order to ensure higher value delivery to the customer and this has started refl ecting in the increased volumes during the current year.

Domestic Bus industry recorded a sale of 71536 units as against sale of 57296 units in 2009, a growth of 24.9%. VECV sold 4819 buses in 2010 as against 3286 units in 2009, a growth of 46.7%, thereby gaining market share from 5.7% in 2009 to 6.7% in 2010.

The exports in L&MD segment for VECV grew by 25.3% with exports of 2080 Trucks and Buses as against industry growth of 23.6%. Overall exports of the Company in 2010 were 2717 units, a marginal growth as compared to 2665 units in 2009 mainly because of constrained supply. However, the pipeline continues to be very healthy.

With continuous focus on productivity, VECV crossed the peak capacity production of 4000 units per month with production of 4152 units in December, 2010. This will help in meeting the increased production requirements in 2011 based on expected growth in industry.

Volvo Trucks India (VTI)

Volvo trucks market witnessed a positive trend in the fi rst quarter of 2010. VECV continued its strong hold in the premium high end of the market represented by European players. VECV continued to control around 71.1% market share of this premium segment. The after sales network was further strengthened with addition of new dealerships and also upgradation of existing dealerships.

All over the world, Volvo Trucks stand for quality, safety and environmental care. In India, it has completed its journey of 12 years and established itself as a premium brand, known for driving progress in the industry with its modern technology, values and high standards. Volvo has achieved and maintained its leadership position in select segments of mining and Over Dimensional Cargo (ODC).

Eicher Engineering Components (EEC)

During the year 2010, Eicher Engineering Components (EEC) achieved the highest ever turnover of MINR 2038.2 (including inter segment sales) registering a growth of 55.8%.

The replacement market sales registered a marginal growth over 2009, as it was constrained due to capacities. However, EEC has been successful in launching new products and expanding the reach in 2010.

During the year 2010, capacity augmentation at Dewas plant was successfully completed in transmission gears and Crown-Wheel Pinion and the plant started meeting 100% captive requirements of Eicher Trucks and Buses and OEM customer requirements as well.

The commissioning of the new Crown Wheel Pinion (CWP) Plant and upgradation of machines and robotized furnace at Dewas facility have provided a much needed stimulus to the EEC business in meeting customers demand, on time in full.

Eicher Engineering Solutions (EES)

This business is operated through an Engineering Design Centre at Gurgaon along with Eicher Engineering Solution Inc., (USA) and its two subsidiaries in China namely M/s Hoff Automotive Design Company (HADC) and M/s Hoff Technology Service Company, (HTSC).

There was a marginal improvement in the business situation at EES Inc., USA as income went up as compared to the previous year. The strategy to diversify away from the Detroit based auto industry paid off as a signifi cant portion of the revenue was generated from industries like Heavy Truck and specialty vehicles.

Various cost reduction measures and streamlining of operations led to an increase in effi ciency thereby improving the overall Profitability of VECV and reducing the break-even point.

MARKET AND FUTURE PROSPECTS OF SUBSIDIARY COMPANYS BUSINESSES

Eicher Trucks and Buses (ETB):

With increased focus on infrastructure by Government of India and the latest estimates of economic growth, the CV industry is expected to do well in coming years.

Inflation is a concern and will be a big challenge leading to likely hardening of interest rates in short to medium term in addition to hardening of commodity prices and thereby have an impact on margins.

VECV has recorded an excellent overall performance in 2010. While L&MD segment will continue its strong contribution, VECV will continue to steadily improve the market shares in HD and Bus Segments.

Export has shown steady growth during last few years with a signifi cant growth potential in future. In order to achieve the ambition from export and emerging competition in the overseas markets, VECV has put in place a new collaboration structure to leverage the distribution network of Volvo and UD Truck Corporation in various developing countries in Asia as well as outside Asia.

Volvo Trucks India (VTI)

Volvo Trucks India has undertaken different initiatives to grow business in India. This includes the introduction of Volvo Trucks new as well as present product range into different emerging application segments like Port Intercarting, Road, fi re trucks, aerial ladder trucks, tunneling operations and airport runway sweepers. The go-ahead to produce the prototype for the new higher capacity mining and coal tipper with the possibility of opening up of the new segment and customer-base, will also help in its growth.

With a focus on high performance select segments, VECV is confi dent to further consolidate its presence in the high growth mining segment and over dimensional cargo segment.

Eicher Engineering Components (EEC)

EECs captive business from ETB is expected to grow on account of further growth in Vehicle sales volumes with 100% gears and Crown wheel requirement being met by EEC.

On domestic front, the business is expected to be in line with manufacturing plans of the domestic Original Equipment Manufacturers (OEMs). However, due to higher share of business with OEMs, development of new products, upgradation of technology and acquisition of new strategic customers would be the main contributing factors taking the Companys growth to signifi cant levels. VECV is making the required investment to increase capacity to meet enhanced demand both internal and external.

With US market picking up, there is better infl ow of orders both repeat and fresh. This will result in upward trend in export business of VECV. In the long term, based on new customer acquisition, VECV expects to grow signifi cantly in all segments especially in aggregate assembly business and outsourcing business. VECVs ability to offer design and build services will add to its ability to attract business.

On inputs front, Steel, Forgings and other raw materials prices are showing an upward trend, hence recovery of higher input cost specifi cally in export and replacement market will be a big challenge.

Eicher Engineering Solutions (EES)

The outlook for this business continues to improve over the past 6 months as the Auto companies in the US and their Tier 1/2/3 suppliers come out of bankruptcy and the recession with a restructured operation and with the need to revamp their product design and introduce new models in order to grow. In addition, EES Inc. is well poised to consolidate on the inroads and gains already made in the heavy truck and aerospace industries in the previous year. Overall EES Inc. is expected to do well in the current year.

New Project

Medium Duty Engine Project (MDEP)

VECV has announced an investment of 2880 MINR in its Pithampur Plant for the production and fi nal assembly of the Volvo groups new global medium-duty engine platform. Due to this investment, it will be possible for the Volvo Group to locate most of its production of medium-duty engines at VECVs plant in Pithampur. VECV has an established and extensive supplier base in India with effi cient purchasing channels and is already producing 40,000 engines per year in its existing Pithampur plant. The new investment in Pithampur will result in an annual production capacity of an additional 85,000 engines. In addition to production of the base engine itself, the facility in Pithampur will also conduct fi nal assembly of engines for India and all of Volvo Groups global markets with Euro 3 and Euro 4 emission requirements.

PARTICULARS UNDER SECTION 212 OF THE COMPANIES ACT, 1956

In terms of approval granted by the Central Government under Section 212 (8) of the Companies Act , 1956, copy of Balance Sheets, Profit and Loss accounts, reports of the Board of Directors and Auditors Report of the subsidiaries (including step down subsidiaries) have not been attached with the Balance Sheet of the Company. These documents will be made available upon request by any investor of the Company or subsidiary companies and shall be kept for inspection by any investor at the Registered office of the Company.

However, as directed by the Central Government the financial data of the subsidiaries have been furnished under Financial Information of Subsidiary Companies forming part of the Annual Report. Further, pursuant to Accounting Standard AS-21 specified in the Companies (Accounting Standards) Rules, 2006, the Consolidated Financial Statements presented by the Company include financial information of its Subsidiaries.

The statement pursuant to Section 212 of the Companies Act, 1956 forms part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Clause 32 of the Listing Agreement, the Consolidated Audited Financial Statements and Consolidated Cash Flow Statement are provided in the Annual Report.

STATUTORY AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, have expressed their willingness to continue in office as Statutory Auditors, if re- appointed. A certifi cate has been obtained from them to the effect that the appointment, if made, will be in accordance with the limits specified in sub-section (1B) of section 224 of the Companies Act, 1956.

COST AUDITORS

In conformity with the directives of the Central Government, the Company has appointed Mr V. Kalyanaraman, Cost Accountants, Chennai, as the Cost Auditors under Section 233B of the Companies Act, 1956 for the audit of cost accounts for the motorcycles business for the year ending on December 31, 2011.

CORPORATE GOVERNANCE

As per Clause 49 of the Listing Agreement with Stock Exchanges, a Management Discussion and Analysis is annexed to this report.

A report on Corporate Governance together with the Auditors Certifi cate regarding the compliance of conditions of Corporate Governance forms part of the Annual Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of employees as per sub-section (2A) of section 217 of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975, for the year ended December 31, 2010 is annexed hereto and forms part of this Annual Report.

STATEMENT OF RESPONSIBILITY

As required under section 217 (2AA) of the Companies (Amendment) Act, 2000, the Board of Directors confi rms that:

a. the applicable accounting standards have been followed in preparation of the annual accounts;

b. the accounting policies have been applied consistently, judgements and estimates have been reasonable and prudent thereby giving a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit of the Company for the year;

c. proper and suffi cient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

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

ACKNOWLEDGEMENT

Your Directors place on record their sincere gratitude to the continuing patronage and trust of our valued customers, bankers and financial institutions, business associates, shareholders and other statutory authorities who have extended their precious continued support and encouragement to your Company. Your Directors wish to convey their deep appreciation to the dealers of the Company for their achievements in the area of sales and service, and to suppliers / vendors and other business associates for their valuable support.

Your Directors also place on record, their sincere appreciation for the enthusiasm and commitment of its employees for the growth of the Company and look forward to their continued involvement and support.

For and on behalf of the Board

Place : New Delhi Siddhartha Lal S. Sandilya

Date : February 5, 2011 Managing Director Chairman


Dec 31, 2009

The Board of Directors has pleasure in presenting the Twenty Eighth Annual Report along with the Audited Accounts for the year ended December 31, 2009.

BUSINESS ENVIRONMENT

Indian economic growth is steadily picking momentum. After experiencing recessionary situation in last quarter of 2008 and the fi rst quarter of 2009, the economy has bounced back from the second quarter of 2009 with an expected GDP growth of 7% plus for the year 2009. Automobile Industry also recorded a smart recovery in second half of year 2009. Your Company is a niche player in 350cc and above segment of two wheeler industry and in line with improvement in business environment; two wheeler industry registered a growth of 16% during the year 2009.

The Commercial vehicle industry in which your company operates through the Subsidiary Company namely VE Commercial Vehicles Limited (VECV), also recovered in the second half of 2009 with handsome gains in last quarter of 2009 in all the vehicle segments.

FINANCIAL RESULTS

Your Company achieved impressive top line growth during the fi nancial year 2009 with total Income at 3780.1 MINR. The previous period fi gures are not comparable as those are for nine months and also include revenue from Commercial Vehicle and related components/ Engineering Services business for the quarter April to June 2008, that was transferred to VECV w.e.f July 1, 2008. The operating profi t before depreciation and interest amounted to 279.3 MINR @ 7.4% of the total income. After accounting for interest and dividend income of 292.2 MINR, interest expense of 4.2 MINR and depreciation of 101.0 MINR, profi t before tax amounts to 466.3 MINR. Profi t after tax amounts to 375.3 MINR after income tax provision of 91.0 MINR.

The fi nancial results are summarized below:

(Rs. in millions)

As at As at December December 31, 2009 31, 2008 (April to December)

Gross sales 4079.9 7717.8

Less : Excise duty 329.0 843.2

Net sales 3750.9 6874.6

Other income 29.2 51.2

Total income 3780.1 6925.8

Operating profit before depreciation and interest (EBIDTA) 279.3 120.8

Interest 4.2 35.9

Depreciation 101.0 152.0

Profi t before other income, 174.1 (67.1) exceptional item & tax

Interest and dividend income* 292.2 212.5

Profi t before exceptional item and tax 466.3 145.4

Exceptional item - 204.2

Profi t before tax 466.3 349.6

Provision for tax (including Deferred tax) (91.0) 40.4

Net profit after tax 375.3 390.0

Balance brought forward from revious period/year 3565.0 3378.4

Dividend on bought back and extinguished equity shares no longer payable 7.0 -

Corporate Dividend Tax on above dividend 1.2 -

Premium paid on buy back of equity shares (960.5) -

Amount available for appropriation 2988.0 3768.4

Proposed Dividend 186.9 140.5

Corporate Dividend Tax 8.7 23.9

Transfer to General Reserve Account 40.0 39.0

Balance carried to Balance Sheet 2752.4 3565.0

Earnings per share

- Basic (Rs.) 13.85 13.88

- Diluted (Rs.) 13.81 13.88

* Dividend @ Rs. 25 per equity share was declared by VECV in its shareholders’ meeting held on February 8, 2010. An amount of 136 MINR being dividend income on investments in VECV has been accounted for in the above fi nancial results.

DIVIDEND

The Directors are pleased to recommend a dividend of 70% (Rs.7/- per Equity Share of Rs.10/- each) for the year ended December 31, 2009.

BUY BACK OF EQUITY SHARES OF THE COMPANY

During the year, your Company successfully completed the buy back of 1408969 equity shares of Rs. 10 each at a price of Rs. 691.68 per share. An amount of 974.6 MINR including premium of 960.5 MINR was used for this purpose. The promoters’ group and AB Volvo, Sweden did not participate in that.

TWO WHEELERS BUSINESS

The year 2009 has been an extremely good year for your Company with an all time high sales of 51955 motorcycles against 43298 motorcycles during 2008, thus registering a growth of 20%. Performance was good in both domestic as well as export markets with sale of 50002 motor cycles (previous year 41542) and 1953 motorcycles (previous year 1756) respectively.

Spare parts sales also recorded a good growth with sales at 397.8 MINR in 2009 (Previous period 250.9 MINR)

Your Company experienced a very good demand throughout the year and production lagged the demand month after month. Based on productivity improvements, investments made in balancing equipment and also outsourcing of some operations, your Company was able to increase the production capacity of motorcycles during the year to 5000 motorcycles per month as against the previous year capacity of 3750 motorcycles per month. Necessary steps are being taken to jack up the capacity further during the current year 2010.

Your company operates in the “Leisure Cruiser” segment with engine capacity of 350 cc and above and it continues to be the only domestic player in this segment in Indian market.

Another major highlight of the year 2009 was introduction of “Classic” bike in the two categories of 350cc and 500cc. The “Classic” bikes are powered by a single cylinder 500 cc Unit Construction Engine (UCE) supported by Electronic Fuel Injection (EFI). The UCE has an integrated assembly for the engine, gear box and clutch and this reduces the friction between the movable parts, resulting in lower transmission losses. These bikes received tremendous response from the market and also got an excellent media coverage.

MARKET AND FUTURE PROSPECTS

The two wheeler industry outlook has been positive in 2009 with 18% growth in domestic volumes as compared with 2008. The economy segment (100 cc) that had stagnated last year has also seen a revival, posting a growth of 16%. In future, a fraction of this huge segment is likely to upgrade to higher capacity products which may ensure long term prospects for the premium and executive segments.

The Power Style and Technology Segment (PST), represented by motorcycles over 125cc is continuing to show a healthy growth. This segment has grown by 9% during the year under review. One indicative example of the good reception in the domestic market for PST segment is the staggering growth registered by the Completely Built Units (CBU) imports by International brands.

Further the advent of the biking culture and lifestyle orientation in the bigger cities in Indian market will trigger growth in this segment. The Internationally popular players are also focusing now in India which will help the Leisure Cruiser segments to register stable growth levels.

Your Company will achieve 100% change over to Unit Construction Engine (UCE) architecture with effect from April 2010. The new UCE engine meets the mandatory emission norms that are becoming applicable from April 1, 2010.

EXPORTS:

A number of new introductions are planned in overseas markets in the current year. These include:

1. A chrome version of Classic and Battle Green version of Classic in the world market. These products were unveiled in the January, 2010 Auto Expo at Delhi.

2. Classic 350 version in Japan which will increase the off-take for Japan.

3. Classic models in the State of California USA after meeting the evaporative emission standards. This initiative will yield signifi cant sales potential for your Company in the California State for the fi rst time.

4. Introduction in new markets namely Canada, Mexico, Brazil and Belgium.

With all the above initiatives, the potential for further sales growth is very high during the year 2010 for your Company.

MERGER OF EICHER GOODEARTH INVESTMENTS LIMITED (EGIL)

Pursuant to the Composite Scheme of Arrangement (“the Scheme”) between EGIL, Eicher Goodearth Private Limited (EGPL) and Eicher Motors Limited (the Company) under section 391 to section 394 of the Companies Act, 1956, approved by the Hon’ble High Court of Delhi vide its order dated October 27, 2009,the “Residual EGIL”, subsequent to demerger of Investment Business of EGIL into EGPL was transferred to and vested in the Company in accordance with section 2 (1B) of the Income tax Act, 1961.

EGIL’s main assets were the investments in the equity shares of your Company and on merger, these investments of EGIL got cancelled and in lieu thereof, your Company has issued and allotted on January 5, 2010, 14032764 shares of Rs. 10 each aggregating Rs.140.3 millions to the members of residual EGIL in the proportion in which they held equity shares in Residual EGIL. The details are given in Note 3 of Schedule 12- Notes to the Accounts forming part of the “Annual Report” .

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

CONSERVATION OF ENERGY

The following new initiatives were taken to conserve energy :

- Installation of timer on Hydraulic power pack (Boring Machines) for reduction of power consumption during machine idle time

- Interlocking of machine accessories (Drilling Machines) units for reduction of power consumption during machine idle time.

- Reduction in power consumption in Machine shop due to introduction of transparent roof system thereby using natural light

- Installation of 47 Nos of Turbo Vents in various areas in the shop fl oor which will enhance the ventilation at work place without consuming power

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Electronic Fuel Injection (EFI) technology that was hitherto introduced in overseas market only, was introduced in the domestic market as well in the new Classic 500cc bikes segment that was launched during the year 2009.

UCE with Twin Spark ignition has been used in the domestic model Classic 350cc as well as Classic 500cc launched in November, 2009.

This UCE Engine will replace the present ‘Cast Iron’ engines in Electra and Standard bikes as well to meet the Indian emission norms of BS II (Euro III) effective from April 2010.

RESEARCH AND DEVELOPMENT

The focus on research and development activities continued with development of new products and variants thereof apart from improving the existing products and value engineering projects. An amount of 6.4 MINR was incurred on capital account and 77.7 MINR on revenue account in Research and Development.

Please also refer Note No.5 of Schedule 12 of Notes to Accounts forming part of Annual Report for further details of Research and Development.

FOREIGN EXCHANGE EARNINGS / EXPENDITURE

During the current year export of two wheelers were 285.4 MINR (FOB value) (Previous period 157.5 MINR)

Foreign Exchange amounting to 100 MINR (Previous period 70 MINR) was used on account of import of components, spare parts, capital goods, business travel and consulting fees during the accounting year under review.

Currently Royal Enfi eld motorcycles are primarily exported to western countries which include UK, USA, Germany, France, Spain and Italy. New export markets planned for expansion are the Latin America, California and Canada.

In order to assess potential in these markets, marketing initiatives like product displays, participation in new exhibitions and market research are planned during the current year.

Please also refer point No. 7 and 8 of Statement of Additional Information forming part of Annual Accounts for further details of Foreign Exchange earnings and expenditure.

EMPLOYEES STOCK OPTION SCHEME 2006

There has been no further issue of stock options during the year ended December 31, 2009. 181000 options (net of lapsed options) that were granted on September 30, 2006 under the Employee Stock Option Plan 2006 have vested with employees’ on October 1, 2009. Out of these, 7900 options have been exercised by the employees during the year under review.

The Statement giving complete details as at December 31, 2009, pursuant to Clause 12 (Disclosure in the Directors’ Report) of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, forms part of the Directors’ Report.

PUBLIC DEPOSITS

As at December 31, 2009, there are 181 deposits aggregating to 14.7 MINR. During the year under review, 203 deposits aggregating to 16.3 MINR matured and also have been repaid or renewed. There are no deposits that remain unclaimed. Considering the surplus funds available with the Company, the Board decided not to renew/accept the fi xed deposits after May 29, 2009.

BOARD OF DIRECTORS

Mr S.Sandilya - Director, retires by rotation and, being eligible, offers himself for reappointment.

VE COMMERCIAL VEHICLES LIMITED (VECV) – A SUBSIDARY COMPANY OF EICHER MOTORS LIMITED

VECV achieved impressive top line growth during the fi nancial year 2009 with total operating income at 25385 MINR as against 9914 MINR during the previous fi nancial period of six months ended December 2008. The operating profi t amounted to 1354 MINR @ 5.3% of the operating income as against operating loss of 5.8 MINR during the previous period. After accounting for interest income of 735.5 MINR (previous period 342.9 MINR), interest expense of 71.2 MINR (previous period 53.7 MINR) and depreciation of 377 MINR (previous period 175.4 MINR), profi t before tax and exceptional items amounts to 1641.1 MINR (previous period 108 MINR). Due to carry forward loss situation and erosion of net worth in the subsidiary company EES Inc USA, the entire investments made in the equity capital of EES Inc amounting to 234.4 MINR has been treated as impaired and carrying cost of investment has been reduced to NIL and fully provided for. After providing for tax of 457.4 MINR, profi t after tax amounts to 949.3 MINR (previous period 165.5 MINR).

The financial results are summarized below: -

(Rs. in millions)

As at Dec As at Dec 31, 2009 31, 2008 (Mar 7 to Dec 31, 2008)

Gross sales 26638.6 10651.8

Less : Excise duty 1406.9 802.0

Net sales 25231.7 9849.8

Other operating income 153.1 63.8

Total operating income 25384.8 9913.6

Operating profi t before 1353.8 (5.8) depreciation and interest

(EBIDTA)

Interest 71.2 53.7

Depreciation 377.0 175.4

Profi t before other income,905.6 (234.9) exceptional item and tax

Interest income 735.5 342.9

Profi t before exceptional 1641.1 108.0 item and tax

Exceptional item (234.4) -

Profi t before tax 1406.7 108.0

Provision for tax (including (457.4) 57.5 Deferred tax)

Net profi t after tax 949.3 165.5

Another signifi cant improvement in the last fi nancial year has been the extraction of a huge amount of 2285 MINR from the working capital with major reduction in inventories and other items of working capital.

AN OVERVIEW OF SUBSIDIARY COMPANY’S BUSINESSES

Eicher Trucks and Buses (ETB):

The Commercial vehicle industry (5T and above) has slowly and steadily recovered during the year 2009. The fi rst quarter of January to March 2009 was the worst affected with industry dropping by 48.1% as compared to the corresponding previous year’s quarter. However the situation kept on improving quarter after quarter with growth of 106.8% in October to December 2009 quarter. Overall the industry ended at 272486 units for the year 2009 as against 306573 during 2008 with a drop of 11.1%.

As against this, ETB had a marginal growth in 2009 over 2008 with sales of 24264 against 23775 with a growth of 2.1%.

Within the CV Industry, Light and Medium duty segment of 5 to 12 Ton (L&MD) in which VECV continues to be a strong player, ended the year 2009 with sales of 104162 as against 97633 in 2008 thus recording a growth of 6.7%. The domestic cargo segment of L&MD industry ended with a handsome growth of 13.8% with sales of 65877 during 2009. The Buses segment of L&MD recorded a growth of 20.4% with sales at 27944 and exports dropped to 10341 from 16508 during 2008 with drop of 37.4%.

VECV had sales of 21682 Trucks and Buses in L&MD segment as against 20430 during 2008 thus recording a growth of 6.1% almost in line with industry growth of 6.7%. VECV had a growth of 6.9% in the domestic Cargo segment with sales of 16893 trucks. In domestic Buses segment of L&MD industry, the growth for VECV was 17.7% with sales of 3128 Buses. The exports in L&MD segment for VECV dropped by 15.6% with exports of 1661 Trucks and Buses as against industry drop of 37.4%.

Within the 5 to 12 Ton, VECV sales dropped by 6.2% in 5 To n segment even though the industry grew by 22% in 2009. This was due to the fi nancing constraint faced specifi cally in this segment as this segment is mostly represented by small operators and the fi nancing was a bit diffi cult for small operators and companies with captive fi nancing operations made handsome gains. In 7 to 12 T domestic cargo segment, VECV maintained its strong position with market share of close to 36% during 2009 with introduction of a new improved E2 plus series of Trucks in this segment.

The Heavy Duty segment of 16 Ton and above (HD) was the worst affected in the fi rst two quarters of the year 2009 with drop of 55.7% in January to March Quarter and 41.2% drop in April to June Quarter over corresponding previous year quarters. However the situation improved from July to September Quarter with drop of just 4.3% and last quarter of October to December recorded a whopping growth of 110.9%.

Overall for the year, HD segment dropped by 19.4% with sales of 168324 against 208940 in 2008. Within this, the drop in domestic Cargo segment was 23.4% with sales at 124231 Trucks. Sales of Buses grew marginally to 29273 Buses against 29174 during 2008 based on procurement of buses under “Jawaharlal Nehru National Urban Renewal Mission” (JNNURM) scheme of Government of India.

Exports in HD industry dropped by 16.2% to 14820 trucks and buses over previous year.

VECV sold 2582 trucks and buses in HD segment as against 3345 in the previous year with a decline of 22.8% as against decline of 19.4% in the industry. The decline in domestic cargo segment was high at 42.9% with sales of 1424 trucks. Exports for VECV recorded a handsome growth of 77.7% in HD segment with sale of 1004 trucks and buses in overseas market.

During the year 2009, VECV worked extensively on its HD products to improve the performance and reliability of these products. A number of steps were also initiated to tone up the after sales network. After various improvements and value enhancements, a new series named “VE” series of HD trucks has been introduced in the Auto Expo in January 2010.

Volvo Trucks India (VTI)

Volvo Trucks India operates in select premium heavy duty truck segments. Volvo Truck’s main offerings are customized to mining, heavy construction, over-dimensional-cargo and other special applications e.g. fi re trucks, aviation refueling, sky lift, boom pump.

Volvo trucks market was affected in the fi rst half of the year due to the liquidity crunch and the delay in projects maturity due to general

elections in April and May 2009. The demand picked up in the second half of 2009. VECV continued its strong hold in the premium high end of the market represented by European players including Mercedes and Scania apart from Volvo. VECV continued to control around 70% market share of this premium segment. The after sales network was further strengthened with addition of new dealerships at Bilaspur and Goa and also upgradations of existing dealerships.

Eicher Engineering Components (EEC)

During the year 2009, Eicher Engineering Components achieved a turnover of 1308.7 MINR (including inter segment sales) registering a growth of 6%.

The automobile industry in India has been on steady recovery path led by strong growth in passenger cars segment and an impressive recovery in CV segment during the year 2009. The fortunes of domestic Components Industry improved signifi cantly with recovery in Automobile Industry. However due to heavy downturn in US, the component exports suffered very badly in the year 2009.

VECV has also been successful in registering itself as approved supplier to large corporations like John Deere, CNH and Caterpillar. This would offer a very large potential of business in future.

The replacement market sales observed growth with the expansion of both product range and distribution network.

During the year 2009, expansion at Dewas plant was successfully completed in transmission gears and Crown-Wheel Pinion and the plant started meeting 100% captive requirements of Eicher Trucks and Buses.

The Gear Box Assembly facility at Special Economic Zone (SEZ), Pithampur was also made operational during 2009.

Eicher Engineering Solutions (EES)

This business is operated through an Engineering Design centre at Gurgaon along with Eicher Engineering Solution Inc., (USA) and its two subsidiaries in China namely M/s Hoff Automotive Design Company (HADC) and M/s Hoff Technology Service Company (HTSC).

Overall this business remained depressed during 2009 as auto business in USA is yet to recover from sluggish demand. Both assignments of projects as well proto development jobs were affected adversely in Detroit, the hub of auto industry in USA, as a result of which not much off shoring of the design jobs could be done to the Gurgaon Design centre.

Income at EES Inc USA dropped to USD 8.6 Million resulting in a loss of USD 1.7 Million for the year 2009. The situation is likely to improve from 2010.

MARKET AND FUTURE PROSPECTS OF SUBSIDIARY COMPANY’S BUSINESSES

Eicher Trucks and Buses (ETB):

The Commercial vehicle industry saw a smart recovery in the second half of 2009 and the industry is continuing the growth path in 2010 as well with January 2010 recording all time high sales of more than 10000 vehicles in L&MD segment (5 to 12 ton) and more than 20000 in HD segment.

The government has shown a renewed commitment to road infrastructure with potential investments of more than Rs. 1000

billion in next 3 years. This is expected to boost Commercial Vehicles Industry sales, and in particular HD truck volumes driven by construction sector demand as well as enhanced goods movement.

HD bus sales are expected to grow signifi cantly backed by orders under “JNNURM” scheme of Government of India.

On the whole, a robust domestic economy and recovery of global fi nancial markets is expected to launch a strong business cycle for the industry. However continued availability of credit will be critical to sustain the revival in the industry amidst rising infl ation and concerns of higher interest rates.

Volvo Trucks India (VTI)

Volvo trucks has undertaken different initiatives to grow business in India. This includes the introduction of Volvo Truck’s new as well as present product range into different emerging application segments like concrete boom pumps, fi re trucks, aerial ladder trucks, tunneling operations and airport runway sweepers.

The recent launch of the ‘most powerful truck on Indian road’, the Volvo FH 520 puller will further strengthen Volvo’s position in the premium trucks segment.

With a focus on high performance select segments, VECV is confi dent to further consolidate its presence in the high growth mining segment and over-dimensional-cargo segment.

Eicher Engineering Components (EEC)

EEC’s captive business from ETB is expected to grow on account of higher share of business and also the aggressive plans to capture higher Market share in HD range. There is also signifi cant opportunity to get business from Volvo Group worldwide.

On domestic front, the business is expected to be in line with manufacturing plans of the domestic OEMs. However, due to higher share of business with OEMs, development of new products, upgradation of technology and acquisition of new strategic customers would be main contributing factors taking company’s growth to signifi cant levels.

VECV’s exports to US in the short term are expected to be impacted by the present conditions in US. However, in the long term, based on new customer acquisitions, company expects to grow signifi cantly in all segments especially in aggregate assembly business and outsourcing business. VECV’s ability to offer design and build services will add to its ability to attract business. In the export market other than US, company’s volume is likely to grow signifi cantly with some new customer acquisitions.

On supplier’s front, Steel, Forgings and other raw materials prices are showing the upward trend. Recovery of higher input cost specifi cally in export and replacement market will be big challenge.

Eicher Engineering Solutions (EES)

The outlook for this business at this time looks very challenging as the Automobile market in USA is going through recession and recovery is on very slow path and the business is heavily dependent on Auto sector in US. However, Company’s strategy of shifting from auto sector to other sectors would help in growth of business.

VECV is also exploring further business opportunities in the fi eld of Engineering Design Services along with Vinn Group AB of Sweden by aligning the existing business with Vinn Group AB through an effi cient structure. A non binding Memorandum of understanding was signed with Vinn Group AB during the year.

PARTICULARS UNDER SECTION 212 OF THE COMPANIES ACT, 1956

In terms of approval granted by the Central Government under Section 212 (8) of the Companies Act , 1956, copy of Balance Sheets, Profi t and Loss accounts, reports of the Board of Directors and Auditors’ Report of the subsidiaries (including step down subsidiaries) have not been attached with the Balance Sheet of the Company. These documents will be made available upon request by any investor of the Company or subsidiary companies and shall be kept for inspection by any investor at the Registered Offi ce of the Company.

However, as directed by the Central Government the fi nancial data of the subsidiaries have been furnished under Financial Information of Subsidiary Companies forming part of the Annual Report. Further, pursuant to Accounting Standard AS-21 specifi ed in the Companies (Accounting Standards) Rules, 2006, the Consolidated Financial Statements presented by the Company includes fi nancial information of its Subsidiaries.

The statement pursuant to Section 212 of the Companies Act, 1956 forms part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Clause 32 of the Listing Agreement, the Consolidated Audited Financial Statements and Cash Flow Statement are provided in the Annual Report.

STATUTORY AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, have expressed their willingness to continue in offi ce as Statutory Auditors, if re- appointed. A certifi cate has been obtained from them to the effect that the appointment, if made, will be in accordance with the limits specifi ed in sub-section (1B) of section 224 of the Companies Act, 1956.

COST AUDITORS

In conformity with the directives of the Central Government, the Company has appointed Mr V. Kalyanaraman, Cost Accountants, Chennai, as the Cost Auditors under Section 233B of the Companies Act, 1956 for the audit of cost accounts for the motorcycles business for the year ending on December 31, 2009.

CORPORATE GOVERNANCE

As per Clause 49 of the Listing Agreement with Stock Exchanges, a Management Discussion and Analysis is annexed to this report. A report on Corporate Governance together with the Auditors’ Certifi cate regarding the compliance of conditions of Corporate Governance forms part of the Annual Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of employees as per sub-section (2A) of section 217 of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975, for the year ended December 31, 2009 is annexed hereto and forms part of this Annual Report.

STATEMENT OF RESPONSIBILITY

As required under section 217 (2AA) of the Companies (Amendment) Act, 2000, the Board of Directors confi rms that:

a. the applicable accounting standards have been followed in preparation of the annual accounts;

b. the accounting policies have been applied consistently, judgements and estimates have been reasonable and prudent thereby giving a true and fair view of the state of affairs of the Company at the end of the fi nancial year and of the profi t of the Company for the year;

c. proper and suffi cient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

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

ACKNOWLEDGEMENT

Your Directors place on record their sincere gratitude to the continuing patronage and trust of our valued customers, bankers and fi nancial institutions, business associates, shareholders and other statutory authorities who have extended their precious continued support and encouragement to your Company. Your Directors wish to convey their deep appreciation to the dealers of the Company for their achievements in the area of sales and service, and to suppliers / vendors and other business associates for their valuable support.

Your Directors also place on record, their sincere appreciation to the enthusiasm and commitment of its employees for the growth of the Company and look forward to their continued involvement and support.

For and on behalf of the Board

Place : New Delhi Siddhartha Lal S. Sandilya

Date : February 13, 2010 Managing Director Chairman

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