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Directors Report of Fag Bearings India Ltd.

Dec 31, 2014

Dear Shareholders,

The Directors are pleased to present the 52nd Annual Report of the Company together with the audited financial statements of the Company for the year ended December 31, 2014.

(in million)

Financial Highlights

Year 2014 2013

TOTAL INCOME (Net) 16,731.0 14,482.8

Gross Operating Profit

(Earnings before depreciation, interest, tax and prior period adjustments) 2,826.9 2,294.5

Depreciation / Amortisation 493.5 432.5

Interest (Net) 9.7 7.6

Prior period adjustments - -

PROFIT BEFORE TAX 2,323.7 1,854.4

Provision for Tax 794.9 636.1

PROFIT AFTER TAX 1,528.8 1,218.3

Balance brought forward 6,490.3 5,739.3

Profit available for appropriation 8,019.1 6,957.6

APPROPRIATIONS

Proposed dividend 124.6 99.7 Income tax on dividend 21.2 17.6

Transfer to General Reserve 400.0 350.0

Balance carried to Balance Sheet 7,473.3 6,490.3

8,019.1 6,957.6

Financial and Operational Performance

Economy

After witnessing low GDP growth of 4.7 % in FY 2013-14, the year 2014 saw moderate improvement in the country''s economic climate. GDP growth in the first six months of financial year 2014-15 improved to 5.5%. Service sector continued its strong growth trend while Agriculture too, contributed through reasonable development. Development of Industrial Production though remained very erratic as reflected in the Index of Industrial Production (IIP) which grew very modestly at 1.5% during the year 2014.

Inflation remained in control as the Wholesale Price Index(WPI) continued the trend of deceleration. A sharp drop in crude oil prices, pushed WPI trend further south - from high of 6% in May 2014, WPI dropped to just 0.1% by December 2014.

After the historic general elections in May 2014, a new majority government at the Centre was formed in India. There are high expectations that a strong government not constrained by coalition politics will usher in significant reforms that can

accelerate growth in the medium term.

Despite positive sentiments, the year 2014 saw lacklustre momentum in investment cycle. RBI continued its conservative approach on interest rates and only marginally reduced the repo rate by 25 bps in January 2015.

On the Foreign Exchange Rate front, after a period of high volatility in year 2013, Indian Rupee seems to have stabilised with respect to USD while it improved considerably with respect to Euro.

y Industry Trend and Demand Development

Against the above backdrop, growth in demand of your Company''s products both for automotive and industrial sector remained moderate during the year 2014.

The two wheeler sector surprised by notching up 2-digit growth. On other hand, passenger cars and commercial vehicles did not grow as expected; while production of agricultural tractors declined in 2014 after registering growth in 2012 and 2013.

Due to overall cash crunch and slow progress in implementation of infrastructure and capacity increase in projects, demand from sectors such as Electric Motors, Industrial Gearbox, Railways and Heavy Industries was sluggish throughout the year 2014. Demand from Aftermarket was stable though the market saw intensified competitive actions thus limiting scope for smart recovery in volume and margins.

In the exports markets, demand of your Company''s products was strong.

) Performance

Your Company''s Income for the year 2014, was placed at M 16,731 million which is 15.5% higher than corresponding figures for the year 2013.

With increase in production at Maneja and Savli plants, exports grew by 33%. Other sectors of your Company''s business viz. Automotive, Industry and Aftermarket - each posted a good double digit growth. Profit from ordinary activities Before Tax increased to M 2,323.7 million (2013: M 1,854.4 million); while Profit After Tax increased to M 1,528.8 million (2013: M 1,218.3 million) Given modest economic environment, we consider your Company''s performance as encouraging.

Strategy

Your Company continues to pursue its long-term strategy to invest in profitable and sustainable growth. At our plant in Maneja - Vadodara, we enhanced production of Wheel bearings to meet growing demand of our Automotive customers. Increase in production of roller bearings supported growth in exports as well as domestic markets.

Production of low friction ball bearings at Savli, continues to improve following high global standards of quality and productivity. Though capacity utilisation of our Large Size Bearing production at Savli remained low, we initiated development of number of technologically advanced products there. New products for demanding applications in sector such as Wind, Power Generation, Industrial Transmission and Heavy Industries are gaining customer acceptance.

Your Company is confident that on the strength of Quality and Innovation, our production capacities at Savli and Maneja plants will be gainfully utilised.

The strength of your Company lies in its engineering capabilities. We continued our investment towards developing technical competence of our engineers. Beyond gaining expertise in bearing domain, our engineers are now well trained to develop subsystem and system understanding. This competence helps them immensely while partnering with our

customers at an early stage of development. Our engineers combine their application know-how with process and manufacturing expertise to deliver efficient solutions that delight our customers.

Our efforts to build local engineering competence were recognised this year by the Group when FAG India was certified and became a member of the Schaeffler Global Technical Network, after an extensive qualification audit by Schaeffler Germany.

With emphasis on innovation, R&D and sector approach, your Company was successful in developing large number of value added and energy efficient solutions for our customers in Automotive and Industrial sectors. In Aftermarket sector, we undertook service projects at customer locations and supported our customers'' initiatives towards reduction of Total Cost of Ownership (TCO).

At FAG, we believe that Quality and Productivity are moving targets. During the year, we intensified implementation of MOVE and Fit for Quality (FFQ) initiatives and progressed further towards our objective of realising operational excellence.

Outlook

As we look ahead, effective implementation of economic agenda holds the key to nation''s progress. Industry indeed faces challenges of rigid labour laws, poor infrastructure, to name a few. Yet there is growing optimism that the government at the Centre is pushing reforms and will take actions to create a positive climate where dream of ''Make in India'' becomes a reality. In the short term, economic and industrial growth will largely depend on revival of investment cycle. The year 2015, may prove to be a year in transition before the economy moves to fast-track mid and long-term growth.

Your Company has strong fundamentals, follows robust customer and innovation focused strategy, emphasises on operational excellence and constantly empowers and motivates its people to pursue higher goals. This gives us confidence that your Company is capable of meeting growing customer expectations and is well prepared to benefit from medium and long-term growth of Indian economy.

Dividend

Your Directors recommend for your approval dividend for the year ended December 31, 2014 at the rate of M 7.5/- (2013: M 6.0) per equity share amounting to M 124.6 million. (2013: M 99.7 million).

The Company will pay the Income Tax on dividend as per the provisions of the Income Tax Act, 1961.

Transfer to General Reserve

A sum of M 400 million has been transferred to the General Reserves of the Company. This reflects well on the financial strength of the Company.

Transfer to Investor Education and Protection Fund

Pursuant to provisions of Section 205A of the Companies Act, 1956 the unpaid & unclaimed dividend pertaining to the year ended on December 31, 2006 amounting to M 365,016/- (including interest accrued thereon) which was lying in the Company''s separate unpaid dividend account and remaining unclaimed for a period of seven years, was transferred to the Investor Education and Protection Fund.

Subsidiary and Associate Companies

''FAG Roller Bearings Private Limited''

[U29130MH2001PTC134044] has became wholly owned subsidiary of ''FAG Bearings India Limited'' with effect from January 1, 2015.

Management''s Discussion and Analysis

A detailed review of operations, performance and future outlook of the Company is covered under a separate Annexure to this report as Management''s Discussion & Analysis. (ANNEXURE - I)

Directors

At the forthcoming Annual General Meeting, Mr. Sampath Kumar Raman and Mr. Frank Huber will retire by rotation and being eligible, will offer themselves for re-appointment in terms of the Articles of Association of the Company. A brief resume / particulars relating to them are given separately under the report on Corporate Governance. Your Directors recommend their re-appointment at the forthcoming Annual General Meeting.

Mrs. Renu Challu, Independent Director (Woman Director), has been appointed as an Additional Director with effect from November 6, 2014. Your Directors recommend her re- appointment subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

Dr. Sanak Mishra, Independent Director has been appointed as an Additional Director with effect from November 6, 2014. Your Directors recommend his re-appointment subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

Mr. Rakesh Jinsi has been appointed as an Additional Director (Independent) with effect from February 11, 2015. Your Directors recommend his re-appointment subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

Mr. Klaus Rosenfeld has been appointed as an Additional Director with effect from February 11, 2015. Your Directors recommend his re-appointment subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

Mr. Moreshwar Garde and Mr. Bernhard Steinruecke have resigned from the directorship with effect from November 6, 2014. Mr. Robert Schullan and Mr. Dharmesh Arora have resigned from the directorship with effect from February 7, 2015 and February 11, 2015 respectively. The Board wishes to place on record its appreciation of services rendered by them during their tenure as the Directors of the Company.

Key Managerial Personnel

Mr. Rajendra Anandpara, Managing Director & Chief Executive Officer, Mr. Satish Patel, Chief Financial Officer and Mr. Raj Sarraf, Company Secretary of the Company are Key Managerial Personnel of the Company as on December 31, 2014.

Particulars of Employees

The statement under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended and forming part of this report is given in Annexure - IV. However, pursuant to provisions of proviso (b) (iv) to Section 219 (1) of the Companies Act, 1956 all reports and accounts are being sent to all the shareholders of the Company except this Annexure - IV. Any shareholder interested in getting a copy of the said statement may write to the Company Secretary at Registered Office or at Head Office of the Company.

Corporate Governance

A separate Section on Corporate Governance is included in the Annual Report and the certificate from M/s. Samdani Kabra & Associates, Company Secretaries, Vadodara (Gujarat), the Company''s Secretarial Auditors confirming the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges is annexed thereto. (ANNEXURE - II)

Auditors

The Statutory Auditors, B S R & Co. LLP, Chartered Accountants, Mumbai, who will retire at the conclusion of 52nd Annual General Meeting to be held on April 24, 2015 and being eligible, will offer themselves for re-appointment for a period of five years subject to their eligibility and ratification of appointment in Annual General Meeting. A certificate from them has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 139 of the Companies Act, 2013.

Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Outgo

Information required as per Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 has been given in the Annexure forming part of this Report (ANNEXURE - III).

Environmental Protection and Occupational Health & Safety Policy

Commitment to Environmental protection, Occupational health and safety are important part of your Company''s Management principles. Details of actions taken by your Company towards protecting environment and safety are covered under Management''s Discussion & Analysis (Annexure I to the Directors'' report).

Directors'' Responsibility Statement

The Directors state that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) Accounting Policies as listed in notes to the financial statements have been selected and applied consistently. Reasonable and prudent judgements as

well as estimates have been made so as to give a true and fair view of the state of affairs of the Company as on December 31, 2014 and of the profit of the Company for that period;

c) Proper and sufficient care for maintenance of adequate accounting records has been taken in accordance with the provisions of the Companies Act, 1956 / 2013 so as to safeguard the assets of the Company and to detect and prevent fraud and other irregularities.

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

e) Internal Financial Controls System is in place and the same has been followed by the Company. Further, such Internal Financial Controls are adequate and were operating effectively.

f) Proper systems to ensure compliance with the provisions of all applicable law and such systems were adequate and operating effectively.

Notes:

We refer to a General Circular No. 08/2014 No.1/19/2013-CL-V dated April 4, 2014, issued by the Ministry of Corporate Affairs, Government of India, that states "The financial statements (and documents required to be attached thereto), auditors report and Boards'' 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". Therefore, in adherence to this Circular, Financial Statements, Auditors'' Report and Board''s Report are prepared in accordance with the provisions of the Companies Act, 1956. However, in view of improved disclosure and corporate governance norms, additional information has been provided to the extent possible.

Acknowledgements

Your Directors place on record their sincere appreciation for the wholehearted and continued support extended by the Shareholders, Schaeffler Group, Suppliers, Customers, Stockists & Importers, Banks and all Employees of the Company during the year under report.

For and on behalf of the Board

Avinash Gandhi Chairman Mumbai:February 11.2015 DIN: 00161107


Dec 31, 2013

DIRECTORS'' REPORT

Dear Shareholders,

The Directors are pleased to present the 51st Annual Report of the Company together with the audited financial statements of the Company for the year ended December 31, 2013.

Financial Highlights (Rs. in million)

Year 2013 2012

TOTAL INCOME (Net) 14,758.7 14,912.8

Gross Operating Profit (Earning before depreciation, interest, tax and prior period adjustments) 2,294.5 2,650.4

Depreciation / Amortisation 432.5 302.7

Interest (Net) 7.6 13.0

Prior period adjustments - -

PROFIT BEFORE TAX 1,854.4 2,334.7

Provision for Tax 636.1 742.9

PROFIT FOR THE YEAR 1,218.3 1,591.8

Balance brought forward 5,739.2 4,594.0

Profit available for appropriation 6,957.5 6,185.8

APPROPRIATIONS

Proposed dividend 99.7 83.1

Income tax on dividend 17.6 13.5

Transfer to General Reserve 350.0 350.0

Balance carried to Balance Sheet 6,490.2 5,739.2

6,957.5 6,185.8

- Financial and Operational Performance

Against the backdrop of challenging macroeconomic situation and weak business sentiments, the year 2013 proved to be yet another difficult year. The economy which grew at 5% in FY 2012-13 - the slowest since a decade, continued its moderate growth trajectory in the first half of FY 2013-14 when economy expanded by 4.6% (5.3% in the corresponding period of FY 2012-13). It appears likely that GDP growth in year 2013-14 may even be lower than 5%.

The wholesale price index showed deceleration in the month of December 2013 at 6.16%. The Consumer Inflation continues to remain at around 10% reflecting persistently high food prices, currency depreciation, fuel price adjustments and other supply side constraints.

Indian Rupee depreciated considerably during the year 2013. Besides adverse economic climate, factors such as excessive import of gold and other external imbalances contributed to this unexpected development making the cost of imported goods dearer.

Demand growth of your Company''s products both from Automotive and Industrial sector slowed down in year 2013 thus limiting top-line development. This also led to relatively lower utilisation of our plants where we have invested significantly in recent years.

Your Company''s income was placed at Rs. 14,758.7 million in year 2013, slightly lower than that in year 2012. Increased cost of traded products and lower absorption of fixed costs impacted margins as profits from ordinary activities declined in year 2013 to Rs. 1,850 million (2012: Rs. 2,330 million). Against the backdrop of challenging environment, we consider your Company''s performance at par with the market.

Your Company continued its long-term strategy to invest in qualitative growth. At our plant in Maneja - Vadodara, production of advanced Generation 2 and Generation 3 Wheel Bearings gained momentum in the second half of year 2013. We successfully launched production of Low-friction Ball Bearings from our Savli plant. Our large-size bearing plant developed number of technologically advanced products for sectors such as wind, power plants, industrial gearboxes, railways, steel and cement plants etc. The Board is convinced that your Company will benefit from the investments made in plant and technology when the economy returns to growth track.

Your Company continued its emphasis on innovation, R&D and sector approach. Know-how of our customers'' business and our ability to design and provide effective value added solutions to our customers'' current and future needs provides us distinct competitive advantage in the market. Your Company was successful in developing large number of value added and energy-efficient solutions for our customers in Automotive and Industrial sectors.

At our plants in Maneja and Savli we intensified our actions to improve quality and reduce waste by implementing Schaeffler concepts such as MOVE, Fit for Quality and Line Challenger.

Your Company continued its pursuit towards people excellence by promoting harmonious work culture and by regularly undertaking various initiatives towards people development and employee engagement.

Challenges currently being faced by Indian economy will not disappear soon. The outcome of forthcoming General Election in 2014 will be crucial. Prospects of single party led stable alliance post General Elections can accelerate policy reforms and thus facilitate fast track growth in the coming years.

Your Company has strong fundamentals, follows robust customer and innovation focused strategy, emphasises on operational excellence and constantly empowers and motivates its people to pursue higher goals. This gives me confidence that your Company is not only prepared to face the current challenges but is also well placed to benefit from medium and long-term growth of Indian economy.

- Dividend

Your Directors recommend for your approval dividend for the year ended December 31, 2013 at the rate of Rs. 6 (2012: Rs. 5) per equity share amounting to Rs. 99.7 million (2012: Rs. 83.1 million).

The Company will pay the Income Tax on dividend as per the provisions of the Income-Tax Act.

- Transfer to General Reserves

A sum of Rs. 350 million has been transferred to the General Reserves of the Company. This reflects well on the financial strength of the Company.

- Transfer to Investor Education and Protection Fund

Pursuant to provisions of Section 205A read with Section 205C of the Companies Act, 1956 the unpaid / unclaimed dividend pertaining to the year ended on December 31, 2005 amounting to Rs. 260,994/- (including interest accrued thereon) which was lying in the Company''s separate unpaid dividend account and remaining unclaimed for a period of seven years, was transferred to the Investor Education and Protection Fund.

- Awards / Recognition

Your Company''s capabilities were recognised by our customers.

FAG India received the coveted Best Vendor Award from Bharat Heavy Electricals Limited (BHEL). FAG supplies bearings for Oil-Rigs, Coal Pulverisers and Electrical Machines to BHEL.

Honda Motorcycle and Scooters India Pvt. Ltd. (HMSI) recognised FAG India for ''Valuable Support and Contribution'' to their motorcycle project.

On the occasion of World Environment Day - June 5, 2013, Hero Motocorp Ltd. recognised FAG India for exceptional improvement in environmental performance as a part of their ''Green Supply Chain'' initiative.

Employees of FAG India received 13 Gold and Silver medals in Kaizen / Quality circles organised by QCFI and CII.

- Management''s Discussion and Analysis

A detailed review of operations, performance and future outlook of the Company is covered under a separate Annexure to this report as Management''s Discussion & Analysis (ANNEXURE - I).

- Directors

At the forthcoming Annual General Meeting, Mr. Avinash Gandhi and Mr. Moreshwar Garde will retire by rotation and being eligible, offer themselves for re-appointment in terms of the Articles of Association of the Company. A brief resume / particulars relating to them are given separately under the report on Corporate Governance. Your Directors recommend their re-appointment at the forthcoming Annual General Meeting.

Mr. Robert Schullan, who is presently President - Industrial Schaeffler Group, has been appointed as Additional Director with effect from October 31, 2013. Your Directors recommend his re-appointment subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

Mr. Wolfgang Dangel, Mr. Udo Bauer and Mr. Bruno Krauss have resigned from the directorship with effect from October 30, 2013, December 21, 2013 and January 31, 2014 respectively. The Board wishes to place on record its appreciation of services rendered by them during their tenure as the Directors of the Company.

Mr. Dietmar Heinrich, who is presently Chief Financial Officer of EMEA Region of the Schaeffler Group, has been appointed as Additional Director with effect from February 11, 2014. Your Directors recommend his re-appointment subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

Mr. Dharmesh Arora, who is presently President & CEO of Schaeffler India, has been appointed as Additional Director with effect from February 11, 2014. Your Directors recommend his re-appointment subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

The office of Alternate Directors was considered as vacated on arrival of their original directors and with the consent of original directors they were re-appointed as their Alternate Directors in the respective Board Meetings, the last of which was held on October 31, 2013.

As on date, Mr. Yezad Kapadia is an Alternate Director of Mr. Robert Schullan.

- Particulars of Employees

The statement under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended and forming part of this report is given in Annexure - IV. However, pursuant to provisions of proviso (b) (iv) to Section 219 (1) of the Companies Act, 1956 all reports and accounts are being sent to all the shareholders of the Company except this Annexure - IV. Any shareholder interested in getting a copy of the said statement may write to the Company Secretary at Registered Office or at Head Office of the Company.

- Corporate Governance

A separate section on Corporate Governance is included in the Annual Report and the certificate from M/s. Samdani Kabra & Associates, Company Secretaries, Vadodara (Guj.), the Company''s Secretarial Auditors confirming the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges is annexed thereto (ANNEXURE - II).

- Auditors

The Members are informed that while the registration number of the statutory auditors continues to remain the same, the name of the statutory auditors which was formerly known as B S R & Co., Chartered Accountants has been changed to B S R & Co. LLP, Chartered Accountants with effect from October 14, 2013 consequent to their conversion into a Limited Liability Partnership.

The Statutory Auditors, B S R & Co. LLP, Chartered Accountants, Mumbai, who will retire at the conclusion of 51st Annual General Meeting to be held on April 24, 2014 and being eligible, offer themselves for re-appointment. A certificate from them has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

- Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Outgo

Information required as per Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 has been given in the Annexure forming part of this Report (ANNEXURE - III).

- Environmental Protection and Occupational Health and Safety Policy Commitment to Environmental protection, Occupational Health and Safety are important part of your Company''s management''s principles. Details of actions taken by your Company towards protecting environment and safety are covered under ''Management''s Discussion & Analysis (Annexure - I to the Directors'' report)''.

- Directors'' Responsibility Statement

The Directors state that:

(i) In preparation of Annual Accounts all applicable accounting standards have been followed.

(ii) Accounting Policies as listed in notes to the financial statements have been selected and applied consistently. Reasonable and prudent judgements as well as estimates have been made so as to give a true and fair view of the state of affairs of the Company as on December 31, 2013 and of the profit of the Company for the accounting year ended on that day.

(iii) Proper and sufficient care for maintenance of adequate accounting records has been taken in accordance with the provisions of the Companies Act, 1956 so as to safeguard the assets of the Company and to detect and prevent fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

- Acknowledgements

Your Directors place on record their sincere appreciation for the wholehearted and continued support extended by the Shareholders, Schaeffler Group, Suppliers, Customers, Stockists & Importers, Banks and all Employees of the Company during the year under report.

For and on behalf of the Board

Avinash Gandhi

Mumbai: February 11, 2014 Chairman


Dec 31, 2012

To the members of the Company,

The Directors are pleased to present the 50th Annual Report of the Company together with the audited financial statements of the Company for the year ended December 31, 2012.

Financial Highlights

(Rs.in million)

Year 2012 2011

TOTAL INCOME (Net) 14,912.8 13,394.0

Gross Operating Profit

(Earnings before depreciation, interest, tax and prior period adjustments) 2,650.4 2,848.1

Depreciation / Amortization 302.7 225.9

Interest (Net) 13.0 12.6

Prior period adjustments - -

PROFIT BEFORE TAX 2,334.7 2,609.6

Provision for Tax 742.9 849.9

PROFIT FOR THE YEAR 1,591.8 1,759.7

Balance brought forward 4,594.0 3,377.5

Profit available for appropriation 6,185.8 5,137.2

APPROPRIATIONS

Proposed dividend 83.1 166.2

Income tax on dividend 13.5 27.0

Transfer to General Reserve 350.0 350.0

Balance carried to Balance Sheet 5,739.2 4,594.0

6,185.8 5,137.2

Financial and Operational Performance

2012 was a difficult year. Indian economy slowed down with GDP estimated to grow only at 5% in 2012-13, slowest since a decade. Besides slowing down of economy, factors such as tight liquidity and generally weak sentiments led to reduced consumption and investments.

Demand growth of your Company''s products slowed down in 2012 thus limiting top line development. Increased costs of traded goods due to weakening of Indian Rupee, intense market competition and lower absorption of fixed costs on account of slower volume growth put added pressure on margins.

Amid the sluggish environment, your Company performed reasonably well. Income rose to M 1,491 crores representing growth of 11% (2011: 25%). Profit from ordinary activities in 2012 was placed at Rs.233 crores (2011: Rs.261 crores).

Consistent with its long-term strategy to invest in qualitative growth, your Company commissioned a new plant at Savli (near Vadodara) where we commenced production of Low-friction Ball Bearings. Production of Large Size Bearings and a new heat treatment plant will go on stream soon. At the existing plant in Maneja - Vadodara, we ramped up production of advanced Generation 3 Wheel Bearings, besides investing in various capacity and quality improvement projects.

Your Company intensified the implementation of MOVE and Fit for Quality programmes as a part of continuous improvement process to realise the goal of operational excellence.

Continuing its emphasis on innovation, R&D and sector approach, your Company was successful in developing large number of value added and efficient solutions for its customers in automotive and industrial sectors.

By focusing on Schaeffer Group''s core competencies of innovation, quality, and productivity, your Company will continue to sharpen its future competitiveness.

Your Company will stay on course with its long-term strategy of investing in development of local production and R&D capabilities. Leveraging strengths of our robust processes, and empowered employees, your Company will continue to strive to become preferred partner to customers in India and thus benefit from India''s growth in medium and long-term.

- Dividend

Your Directors recommend for your approval dividend for the year ended December 31, 2012 at the rate of Rs.5/- (2011: Rs.10/- inclusive of a dividend of Rs.5/- per share in celebration of Company''s 50th year of incorporation) per equity share amounting to Rs.83.1 million (2011: Rs. 166.2 million).

The Company will pay the income tax on dividend as per the provisions of the Income-Tax Act.

- Transfer to General Reserves

A sum of Rs.350 million has been transferred to the General Reserves of the Company. This reflects well on the financial strength of the Company.

- Transfer to Investor Education and Protection Fund

Pursuant to provisions of Section 205A read with Section 205C of the Companies Act, 1956, the unpaid / unclaimed dividend pertaining to the year ended on December 31, 2004, amounting to Rs. 290,804/- (including interest accrued thereon) was lying in the Company''s separate unpaid dividend account and, remaining unclaimed for a period of seven years, was transferred to the Investor Education and Protection Fund.

- Management Discussion and Analysis

A detailed review of operations, performance and future outlook of the Company is covered under a separate Annexure to this report as Management Discussion and Analysis. (ANNEXURE - I)

- Directors

At the forthcoming Annual General Meeting, Mr. Bruno Krauss and Mr. Bernhard Steinruecke will retire by rotation and being eligible, offer themselves for re-appointment in terms of the Articles of Association of the Company. A brief resume / particulars relating to them are given separately under the report on Corporate Governance. Your Directors recommend their re-appointment at the forthcoming Annual General Meeting.

Mr. Udo Bauer, who is President & CEO of Schaeffer Asia Pacific, has been appointed as Additional Director with effect from May 25, 2012. Pursuant to provisions of Section 260 of the Companies Act, 1956, read with the Articles of Association of the Company, he can hold office only up to the date of the forthcoming Annual General Meeting of the Company. We have received a notice under Section 257 of the Companies Act, 1956, from a member proposing his candidature for directorship and being eligible, your Directors recommend his re-appointment, subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

During the year, the office of Alternate Directors was considered as vacated on arrival of their original directors. With the consent of original directors they were re-appointed as their Alternate Directors in the respective Board Meetings, the last of which was held on October 26, 2012.

As on December 31, 2012, Mr. Kamlesh Tapadar and Mr. Yezad Kapadia are the Alternate Directors of Mr. Bruno Krauss and Mr. Wolfgang Dangel respectively.

- Particulars of Employees

The statement under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended and forming part of this report is given in Annexure - IV. However, pursuant to provisions of proviso (b) (iv) to Section 219 (1) of the Companies Act, 1956, all reports and accounts are being sent to all the shareholders of the Company except this Annexure - IV. Any shareholder interested in getting a copy of the said statement may write to the Company Secretary at Registered Office or at Head Office of the Company.

- Corporate Governance

A separate section on Corporate Governance is included in the Annual Report and the certificate from M/s Samdani Kabra & Associates, Company Secretaries, Vadodara (Guj.), the Company''s Secretarial Auditors confirming the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges is annexed thereto. (ANNEXURE - II)

- Auditors

The Statutory Auditors, B S R & Co., Chartered Accountants, Mumbai, who will retire at the conclusion of 50th Annual General Meeting to be held on April 25, 2013 and being eligible, offer themselves for re-appointment. A certificate from them has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

- Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Outgo

Information required as per Section 217(1) (e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 has been given in the Annexure forming part of this Report. (ANNEXURE - III)

- Environmental Protection and Occupational Health and Safety Policy

Commitment to Environmental Protection and Occupational Health and Safety is an important part of your Company''s management''s principles. Details of actions taken by your Company towards protecting environment and safety are covered under ''Management Discussion and Analysis (Annexure I to the Directors'' Report)''.

- Directors'' Responsibility Statement

The Directors state that:

(i) In preparation of Annual Accounts, all applicable accounting standards have been followed.

(ii) Accounting Policies as listed in notes to the financial statements have been selected and applied consistently. Reasonable and prudent judgments as well as estimates have been made so as to give a true and fair view of the state of affairs of the Company as on December 31, 2012 and of the profit of the Company for the accounting year ended on that day.

(iii) Proper and sufficient care for maintenance of adequate accounting records has been taken in accordance with the provisions of the Companies Act, 1956 so as to safeguard the assets of the Company and to detect and prevent fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

- Acknowledgements

Your Directors place on record their sincere appreciation for the wholehearted and continued support extended by the Shareholders, Schaeffler Group, Suppliers, Customers, Stockiest & Importers, Banks and all Employees of the Company during the year under report.

For and on behalf of the Board

Avinash Gandhi

Mumbai: February 14, 2013 Chairman


Dec 31, 2011

The Directors are pleased to present the 49th Annual Report of the Company together with the audited financial statements of the Company for the year ended December31,2011.

Financial Highlights

(Rs. in million)

Year 2011 2010

TOTAL INCOME (Net) 13,393.9 10,653.5

Gross Operating Profit

(Earning before depreciation, interest, tax and prior period adjustments) 2,848.0 2,054.4

Depreciation / Amortisation - : 225.8 201.1

Interest (Net) 12.6 8.9

Prior period adjustments - 25.6

PROFIT BEFORE TAX 2,609.6 1,818.8

Provision for Tax 849.9 603.8

PROFIT AFTER TAX 1,759.7 1,215.0

Balance brought forward 3,377.5 2,609.7

Profit available for appropriation 5,137.2 3,824.7

APPROPRIATIONS

Proposed dividend : 166.2 83.1

Income tax on dividend 27.0 14.1

Transfer to General Reserve 350.0 350.0

Balance carried to Balance Sheet 4,594.0 3,377.5

5,137.2 3,824.7

Financial and Operational Performance

Your Company's sales have been consistently growing at a rate better than the growth of the bearing industry in India. The Company has realised sales growth of 25% (2010: 30%) amidst growth in Automotive and Industrial Segments as well as exports.

Dividend

Your Directors recommend for your approval dividend for the year ended December 31, 2011 at the rate of Rs. 10.0 (inclusive of a dividend of Rs. 5 per share in celebration of the Company's 50th year of incorporation) (2010: Rs. 5.0) per equity share amounting to Rs. 166.2 million (2010: Rs. 83.1 million).

The Company will pay the Income Tax on dividend as per the provisions Of the Income Tax Act.

Transfer to General Reserves

A sum of Rs. 350 million has been transferred to the General Reserves Of the Company. This reflects well on the financial strength of the Company.

Transfer to Investor Education and Protection Fund

Pursuant to provisions of Section 205A read with Section 205C of the Companies Act, 1956 the unpaid and unclaimed dividend pertaining to the year ended on December 31, 2003 amounting to Rs. 314,389/- (including interest accrued thereon) was lying in the Company's separate unpaid dividend account and, remaining unclaimed for a period of seven years, was transferred to the Investor Education and Protection Fund.

Management's Discussion and Analysis

A detailed review of operations, performance and future outlook of the Company is covered under a separate Annexure to this report as Management's Discussion & Analysis. (Annexure -1)

Directors

At the forthcoming Annual General Meeting, Mr. Wolfgang Dangel and Mr. Frank Huber will retire by rotation and being eligible, offer themselves for re-appointment in terms ofthe Articles of Association of the Company. A brief resume / particulars relating to them are given separately under the report on Corporate Governance. Your Directors recommend their re-appointment at the forthcoming Annual General Meeting.

Mr. R. Sampath Kumar has been rendering his services to the Company as an Alternate Director since over a decade. Considering his experience, expertise in the areas of corporate and general commercial laws & intellectual commercial property law and being qualified for appointment as Director, the Board in its meeting held on April 21, 2011, appointed him as an Additional Director. Pursuant to provisions of Section 260 of the Companies Act, 1956 read with the Articles of Association of the Company, he can hold office only up to the date of the forthcoming Annual General Meeting of the Company. We have received a notice under Section 257 of the Companies Act, 1956 from a member proposing his candidature for directorship and being eligible, your Directors recommend his re-appointment subject to approval of shareholders at the forthcoming Annual General Meeting of the Company.

During the year, the office of Alternate Directors was considered as vacated on arrival of their original directors and with the consent of original directors they were re-appointed as their alternate directors in the respective Board Meetings, the last of which was held on 0ctober20,2011.

As on December 31, 2011, Mr. Kamlesh Tapadarand Mr. Yezad Kapadia are the Alternate Directors of Mr. Bruno Krauss and Mr. Wolfgang Dangel respectively.

Particulars of Employees

The statement under Section 217 (2A) oft he Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended and forming part of this report is given in Annexure - IV. However, pursuant to provisions of proviso

(b) (iv) to Section 219 (1) of the Companies Act, 1956 all reports and accounts are being sent to all the shareholders of the Company except this Annexure - IV. Any shareholder interested in getting a copy of the said statement may write to the Company Secretary at Registered or Head Office of the Company.

Corporate Governance

A separate Section on Corporate Governance is included in the Annual Report and the certificate from M/s Samdani Kabra & Associates, Company Secretaries, Vadodara (Guj.), the Company's Secretarial Auditors confirming the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges is annexed thereto. (Annexure - II)

Auditors

The Statutory Auditors, B S R & Co., Chartered Accountants, who retire At the conclusion of 49th Annual General Meeting to be held on 20th day of April 2012 and being eligible, offer themselves for re-appointment. A certificate from them has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act,1956.

Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Outgo

Information required as per Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars

in the Report of Board of Directors) Rules, 1988 has been given in the Annexure forming part of this Report. (Annexure- III)

Environmental Protection and Occupational Health and Safety Policy

- We aim to ensure the continued existence and success of our Company by establishing and maintaining a safe working environment that promotes the health and performance of our employees as well as taking active measures to protect the environment

- We actively use global work safety management systems for continuous improvement

- We place special emphasis on ergonomic design

- We are committed to observing all legislation and specifications regarding work safety

- We take comprehensive measures to protect our employees against health hazards

- Comprehensive and effective emergency measures are in place at all locations to ensure that our employees and visitors receive the property treatment in the event of injury

Directors' Responsibility Statement

The Directors state that:

i) In preparation of Annual Accounts all applicable accounting standards have been followed.

ii) Accounting Policies as listed in the Schedule 15 to the financial statements have been selected and applied consistently. Reasonable and prudent judgments as well as estimates have been made so as to give a true and fair view of the state of affairs of the Company as on December 31,2011 and of the profit of the Company for the accounting year ended on that day.

iii) Proper and sufficient care for maintenance of adequate accounting records has been taken in accordance with the provisions of the Companies Act, 1956 so as to safeguard the assets of the Company and to detect and prevent fraud and other irregularities.

iv) The annual accounts have been prepared on a going concern basis.

Acknowledgements

Your Directors place on record their sincere appreciation for the wholehearted and continued support extended by the Shareholders, Schaeffler Group, Suppliers, Customers, Stockiest & Importers, Banks and all Employees of the Company during the year under report.

For and on behalf of the Board

Avinash Gandhi Mumbai: February 9,2012 . Chairman


Dec 31, 2009

The Directors are pleased to present the 47th Annual Report of the Company together with the audited financial statements of the Company for the year ended December31,2009.

FINANCIAL HIGHLIGHTS Rs.in million

YEAR 2009 2008

TOTAL INCOME (Net) 8,264.2 7,660.5

Gross operating profit 1,318.8 1,728.0 (Earning before depreciation, interest, tax and prior period adjustments)

Depreciation / Amortization 200.8 205.9

Interest (Net) 7.0 4.8

Prior period adjustments 115.2 43.8

PROFIT BEFORE TAX 995.8 1,473.5

Provision for tax 340.4 516.3

PROFIT AFTER TAX 655.4 957.2

Balance brought forward 2,291.8 1,722.1

Profit available for appropriation 2,947.2 2,679.3

APPROPRIATIONS

Proposed dividend 74.8 74.8

Income tax on dividend 12.7 12.7

Transfer to general reserve 250.0 300.0

Balance carried to balance sheet 2,609.7 2,291.8

2,947.2 2,679.3

FINANCIAL AND OPERATIONAL PERFORMANCE

The year 2009 started against the backdrop of a major economic recession that hit the world during the second half of 2008. Though the Indian economy, driven by domestic consumption and well supported by stimulus measures of Government, gradually came out of this global turmoil, the overall business situation remained very challenging during the year 2009.

Your Companys total net sales grew by a moderate 7% during the year. Our exports sales declined by 51%, as the markets in Europe and US slumped under recessionary pressure. At the same time our intensified focus on Indian customers led to a smart increase of 17% in domestic sales (over 2008).

The general business scenario in 2009 was also characterized by severe liquidity crisis - triggered by global financial crisis. Your Company successfully implemented a number of measures to improve working capital management. As at the year ending December 31, 2009, our inventories reduced by 37% and sundry debtors witnessed a decrease of 5% compared to the previous year.

At FAG India, we also undertook a number of projects to improve productivity, quality and customer responsiveness. Under active guidance and support from Schaeffler Group, we successfully launched MOVE project at the Vadodara factory. MOVE provides a platform to empowered employees to come together and avoid waste through error-free processes while working in synchronization with our customers.

During the year, profitability of the Company remained under pressure due to a sharp decline in the exports business, substantial impact of steel price increase and an adverse product mix resulting from market conditions.

Due to the above reasons, operating profit of your Company (Profit before tax) during the year 2009 reduced to 13%, compared to 19% in 2008.

DIVIDEND

Your Directors recommend for your approval dividend for the year ended December 31, 2009 at the rate of Rs. 4.5 (2008: Rs. 4.5) per equity share amounting to Rs. 74.8 million (2008: Rs. 74.8 million).

The Company will pay the IncomeTax on dividend as per the provisions of the lncome Tax Act.

TRANSFER TO GENERAL RESERVES

A sum of Rs. 250 million has been transferred to the general reserves of the Company. This reflects well on the financial strength of the Company.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to provisions of Section 205A read with Section 205C of the Companies Act, 1956, the unpaid / unclaimed dividend pertaining to the year ended on December 31, 2001 amounting to Rs. 297,148/- (including interest accrued thereon) that was lying in the Companys separate unpaid dividend account and remaining unclaimed for a period of seven years, was transferred to the Investor Education and Protection Fund.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed review of operations, performance and future outlook of the Company is covered under a separate Annexure to this report as Management Discussions Analysis (Annexure-1).

DIRECTORS

Mr. Rajendra Anandpara was appointed as an Additional Director from July 23, 2009 and as the Managing Director effective from August 1, 2009 by the Board of Directors of the Company at the meeting heldonJuly23,2009 to fill the vacancy caused due to the resignation of Mr. Biswarup Dhar.

The Board placed on record its appreciation of Mr. Dhars contribution to the Company.

At the forthcoming Annual General Meeting, Mr. Frank Huber and Mr. BernhardSteinruecke will retire by rotation and being eligible, offer themselves for re-appointment as per the terms of the Articles of Association of the Company. A brief resume / particulars relating to them are given separately under the report on Corporate Governance. Your Directors recommend their re-appointment at the forthcoming Annual General Meeting.

Mr. Dietmar Heinrich resigned from the Companys Directorship with effect from October 31, 2009. The Board appreciated his contribution as Director of the Company. The office of his Alternate Director Mr. Kamlesh Tapadar was considered as vacated automatically with effect from October31,2009.

In place of Mr. Heinrich, Mr. Bruno Krauss, Executive Vice President- Finance, Schaeffler Group Asia Pacific Region and member of the Regional Asia Pacific Executive Management Board, was appointed as Additional Director w.e.f. February 11,2010 by the Board of Directors of the Company. The Company has received notice under Section 257 of the Companies Act, 1956 proposing candidature of Mr. Bruno Krauss forthe office of the Director.

During the year, the office of Alternate Directors was considered as vacant on arrival of their original Directors and with the consent of original Directors they were re-appointed as their Alternate Directors in the respective board meetings, the last of which was held on October 22,2009.

As on December 31, 2009 Mr. R. Sampath Kumar and Mr. Yezad Kapadia are the Alternate Directors of Mr. Frank Huber and Mr. Wolfgang Dangel respectively. On the request of Mr. Bruno Krauss, the Board of Directors in its meeting held on February 11, 2010 has appointed Mr. Kamlesh Tapadar as his Alternate Director.

PARTICULARS OF EMPLOYEES

The statement under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended and forming part of this report is given in Annexure - IV. However, pursuant to the provisions of Proviso (b)(iv) to Section 219 (1) of the Companies Act, 1956 all reports and accounts are being sent to all the shareholders of the Company except this Annexure - IV. Any shareholder interested in getting a copy of the said statement may write to the Company Secretary at Registered or at Head Office of the Company.

CORPORATE GOVERNANCE

A separate section on Corporate Governance is included in the Annual Report and the certificate from M/s Samdani Kabra & Associates, Company Secretaries, Vadodara (Gujarat), the Companys Secretarial Auditors confirming the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreementwith StockExchanges, is annexed thereto (Annexure - II).

AUDITORS

The Statutory Auditors, M/s Mohinder Puri & Company, Chartered Accountants, who retire at the conclusion of the 47th Annual General Meeting to be held on April 22, 2010 and being eligible, offer themselves for reappointment. A certificate from them has been received to the effect that their reappointment, if made, would be within the limits prescribed under Section 224 (IB) of the CompaniesAct, 1956.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information required as per Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988 has been given in the Annexure forming part of this report (Annexure - III).

DIRECTORSRESPONSIBILITY STATEMENT

The Directors state that:

i) In the preparation of annual accounts, all applicable accounting standards have been followed,

ii) Accounting policies as listed in the Schedule 15 to the financial statements have been selected and applied consistently. Reasonable and prudent judgments as well as estimates have been made, so as to give a true and fair view of the state of affairs of the Company as on December 31, 2009 and of the profit of the Company for the accounting year ended on that day,

iii) Proper and sufficient care for maintenance of adequate accounting records has been taken in accordance with the provisions of the Companies Act, 1956 so as to safeguard the assets of the Company and to detect and prevent fraud and other irregularities,

iv) The annual accounts have been prepared on a going concern basis.

ACKNOWLEDGEMENTS

Your Directors place on record their sincere appreciation for the wholehearted and continued support extended by the shareholders, Schaeffler Group, suppliers, customers, stockists & importers, banks and all employees of the Company during the year under review.

For and on behalf of the Board

Avinash Gandhi

Mumbai: February 11, 2010 Chairman

 
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