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Directors Report of Falcon Tyres Ltd.

Mar 31, 2014

Dear members,

The Directors have pleasure in presenting the Annual Report and Audited Accounts of the Company for the eighteen months ended 31st March, 2014.

Your Company has achieved a net standalone turnover of Rs. 1198.66 crores during the period as against Rs. 905.96 crores in the previous year with Profit before Tax at Rs.3.99 crores excluding exceptional item and Profit after Tax at Rs. 3.97 crores. The loss of Rs. 0.02 crores is related to exceptional item on account of sale of shares of Chamundi Plasto Sacks Private Limited as the Company was not able to get the leverage of the consolidation.

Sl.No. Particulars For the Period For the year ended ended 31-Mar-14 30-Sep-12

i) Revenue from operations 119,866.37 90,595.66

ii) Other Income 947.64 951.39

iii) Total Revenue 120,814.01 91,547.05

iv) Profit before Interest, Depreciation and Taxation (EBIDTA) 7,661.37 7,378.97

v) Interest 4,793.80 4,055.09

vi) Depreciation 2,468.47 1,805.52

vii) Profit before Taxation and Exceptional Item 399.10 1,518.36

viii) Exceptional Items 1.61 6,697.28

ix) Profit before Taxation (PBT) 397.49 -5,178.92

x) Tax including Deferred Tax 0 719.57

xi) Profit After Taxation (PAT) 397.49 -5,898.49

xii) Profit brought forward from previous year -3,818.35 2,080.14

xiii) Amount available for Appropriation -3,420.86 -3,818.35

xiv) Appropriations

Transfer to General Reserve - -

Proposed Dividend - -

Corporate Dividend Tax - -

xv) Balance carried to Balance Sheet -3,420.86 -3,818.35

Some Key Performance ratios on standalone basis are furnished below

Description For the For the period year Last 10 UOM ended ended Years 31-Mar-14 30-Sep-12 Average

EBITDA/Revenue From Operations % 6.39 8.27 7.49

Profit Before Tax & Exceptional Item/Revenue From Operations % 0.33 1.68 3.35

Profit After Tax/Revenue From Operations % 0.33 -6.51 1.22

Return On Capital Employed % 4.85 -1.78 1.83

Earnings Per Share At A Face Value Of Rs. 5/- Per Share Rs. 0.51 -7.61 2.27

STANDALONE PERFORMANCE

Your Company has achieved a net turnover of Rs. 1198.66 crores for the eighteen month period compared to Rs. 905.96 crores for the year ended 30th Sep''2012. Profit before Interest, Depreciation, Taxes and exceptional item stood at Rs. 76.61 crores as against the previous year figure of Rs. 73.79 crores. The Profit after exceptional item but before Tax is Rs. 3.97 crores as against the previous year loss of Rs. 51.79 crores. Profit after Tax is Rs. 3.97 crores as against the previous year loss of Rs. 58.98 crores. During the period under review the operational profit increased due to softening Natural Rubber prices and ideal product mix. Production of Tyres and Tubes, during the period under review stood at 41722.43 MT as against 35440 MT in the previous year. The Company continued to partner with Original Equipment Manufacturers and has kept pace by developing Tyres for newer models. Production in MT is slightly down due to change in product mix, increase in value added products like Tubeless Tyres, PCR Tyres, etc.

Your Company continued to maintain its leadership position in Export market segment in the Current year. The pressure in replacement market demand is due to sluggish market conditions and cut-throat competition.

EXPANSION

Your Directors are happy to inform you that the expansion of the Company at Mysore has been completed and the production from the expansion plant has started in second Quarter of 2012 and the process of ramp up of production capacities are taken up by your Company.

CUSTOMERS FIRST

Your Company adopted policy of "Customers First" and we continued to be associated with major Automobile Companies (OEM''s) and enjoying the privileged position with all the OEM''s. The most conservative OEM''s also recognizes our Quality and Services and we are potential supplier for them.

SUBSIDIARY

During the previous year, the Company has disposed off the entire share holding of Chamundi Plasto Sacks Private Limited (CPSPL). Hence, CPSPL no longer remain subsidiary of your Company. Falcon Tyres Rubber Pvt. Ltd. has become subsidiary of the Company w.e.f. 23.01.2013. The Financial position and performance of the subsidiary during the year as follow:

Particulars For the year ended 31/03/2014 Falcon Tyres Rubber Private Limited

Capital 1.00

Reserves (0.21)

Total Assets 325.79

Total Liabilities 325.79

Investments Nil

Turnover Nil

EBIDTA (0.02)

EBDT (0.02)

Profit Before Taxation (0.02)

Provision for taxation including Deferred Tax Nil

Profit after Taxation (0.02)

Proposed Dividend including corporate div tax Nil

Pursuant to Accounting Standard -21 (AS -21) prescribed by the Institute of Chartered Accountants of India / Companies (Accounting Standards) Rule 2006, the accounts of the subsidiary company are consolidated with the accounts of the Company and Consolidated Accounts forms part of this report

As per general circulation No. 2/2011 and Notification No. 51/12/2007-CL-III dated 08/02/2011, the account of the subsidiary Company has not been attached to the accounts of your Company

The copy of the Annual Report of the Subsidiary Company will be made available to shareholders on request and will also be kept for inspection by any shareholder at the registered office of your company and it''s subsidiary company.

APPROPRIATIONS

DIVIDEND

To conserve the resources for future expansion needs, your Directors do not propose any dividend for the year under review.

QUALITY MANAGEMENT SYSTEM

Your Company continued to be accredited with certifications by MIs TUV, 5UDD, South Asia Pvt. Ltd., with respect to the following'':

* IS0 9001:2008 & ISO I T516949: 2009 for Quality Management System, valid till May, 2016,

* ISO 14001:2004 & OHSAS 18001:2007 for Environment, Occupational Health & Safety Assessment Series Management Systems and are valid till September 2014 and September 2015 respectively.

* Your Company has started the process of TPM and the implementation of the same is under progress.

DIRECTORS

In accordance with the provisions of the Companies Act, 2013 and the Company''s Articles of Association, Mr. Pawan Kumar Ruia & Mr. Ashok Kumar Agarwal, the Directors of the Company will retire by rotation on the conclusion of this meeting and being eligible & offer themselves for re-appointment.

Mr. S.Badrinarayan, Mr. Ashok Gupta, Kamal Jiwrajka and Mr. Sunil Bhansali have resigned w.e.f. 19-Feb-2014, 23-Dec-2013, 13-Nov-2013 and 16-Nov-2012 respectively as Director. The Board place on record it''s appreciation for the contribution made by them during their tenure.

Mr. A.K.Jain, Mr. K.N.Prithviraj & Mr. Prakash P. Mallya who were appointed as Independent Directors on the board have resigned w.e.f. 14-May-2014, 31-Mar-2014 and 31-Mar-2014 respectively. The Board place on record it''s appreciation for the contribution made by them during their tenure.

Mr. Dipak Das, Mrs. Baishali Roy and Mr. Rupendra Nath Kumar have been appointed as Independent Director w.e.f. 14-05-2014. None of the Director is disqualified under section 274(1)(g)

AUDITORS

M/s. K.N. Gutgutia & Co., Chartered Accountants, auditors of the Company, resigned as auditors of the company during the year. M/s Gora & Company, Chartered Accountants, Registration No. 327183E has been appointed as auditors of the company in the Extraordinary General meeting of the company held on 16th August, 2014. They confirmed that the said appointment would be in conformity with the provisions of Section 139 of the Companies Act, 2013 and rules framed there under.

COST AUDIT

Complying with the Provision of Section 233(B) of the Companies Act, 1956, the Board of Directors have appointed Mr. T.L. Sangameswaran, Cost Accountant, Mysore, to carry out Audit of the Cost Accounts of the Company relating to the manufacture of Tyres & Tubes for the period ended 31st March, 2014 in compliance with the Central Government Order in this regard and the cost audit report will be submitted to the Ministry of Corporate Affairs, Government of India.

FIXED DEPOSITS

During the year under review, your Company has neither invited nor accepted any deposits from the public.

PARTICULARS OF EMPLOYMENT

As required under the provisions of Sec. 217(2A) of the Companies Act, 1956, read with the Rules framed there-under, a statement of particulars of the employees has been annexed to this report and included as Annexure-I.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Information pursuant to Sec. 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988, is furnished in Annexure-II.

INDUSTRIAL RELATIONS

The Company maintained harmonious and cordial Industrial Relations during the period under review. A regular system of holding bi-parte discussion with the recognized Union regarding the issue of common interest of all employees was adopted.

SAFETY

Your Company has a well-defined Safety Management System. Continuous endeavour is made to create safety awareness among the employees. As part of this, forums like Works Committee, Plant Safety Committee are functioning for taking up necessary preventive and corrective actions wherever required and to create awareness among the employees on Safety and Health. Your Company has also appointed a team consisting of Senior Executive & Employees of the Company to monitor the safety aspect of the plant and all employees were advised to participate actively on the safety related issues. Safety Day has been observed in the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company is pro-active to its Corporate Social Responsibility. The following are few of the activities organized by your Company during the period under review:

i) Ganesh Festival: Like every year this year also the Company has joined hands with the employees to celebrate the Ganesh Festival, which is one of the biggest festival in Karnataka and observed rituals and festivity with equal fervor.

ii) May Day Celebration: 1st May of the year is being observed as workers day. Your Company also joins hands with Employees and their family in observing the day where the Company sponsored various sports and cultural activities. Winner of the sports event were rewarded with the prizes and sweets distributed.

iii) Green Revolution: The Company has developed a green belt in and around the Company premises for better environment. During the year the Company has planted more than 1000 plants.

iv) Training to School, College Students: Your Company is regularly providing training to engineering students and management trainees of various institutes and colleges.

v) Sports Prize Sponsorship: During the year the Company has sponsored prizes of sports in local community.

vi) Merit Award: The Meritorious and excellence In sports cash award to the children of the Employees has been distributed during the period.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Sec. 217 (2AA) of the Companies Act, 1956, with respect to Director''s Responsibility Statement, it is hereby confirmed:

i) That in the preparation of the accounts for the period ended 31st March, 2014 the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2014 and of the profit or loss of the Company for the period ended on the date;

iii) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) That the Directors have prepared the accounts for the period ended 31st March, 2014 on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management''s Discussion and Analysis is given separately and forms part of this Annual Report

CORPORATE GOVERNANCE

The report of Board of Directors of the Company on Corporate Governance is given as a separate section titled "Corporate Governance Report" which forms part of this Annual Report.

Certificate of the Statutory Auditors of the Company regarding compliance with the Corporate Governance requirement as stipulated in clause 49 of the Listing Agreement with the stock exchange is annexed with the Corporate Governance Report.

APPRECIATION & ACKNOWLEDGMENT

Your Directors acknowledge the continued support and co-operation from the Financial Institutions, Banks, Customers, Vendors, Dealers and Government Authorities during the period under review.

Further your Directors thank the Shareholders for their continued confidence reposed on the Management / Board of the Company. The Board also places on record its appreciation for the devoted and dedicated contribution made by the employees at all levels in achieving these results.

On behalf of the Board of Directors

Place: Kolkata Ashok Kr. Agarwal Dipak Das Date: 29-Aug-2014 Director Director


Sep 30, 2010

The Company has achieved significant improvement in the period under review on account of better operating efficiencies, higher productivity, all round cost reduction measures and richer product mix.

FINANCIAL RESULT - STANDALONE (Rs. in Lacs)

Sl Particulars 2009-10 2008-09 No. (12 Months) (18 Months)

i) Gross Turnover 84434.77 85146.30

ii) Net Turnover 78810.41 78386.17

iii) Other Income 566.33 341.49

iv) Total Revenue 79376.74 78727.66

v) Profit before Interest, Depreciation & Taxation (EBIDTA) 9008.23 6744.39

vi) Interest 1652.11 2004.57

vii) Depreciation 777.66 844.45

viii) Profit before Taxation & Exceptional Item 6578.46 3895.37

ix) Exceptional Items -- --

x) Profit before Taxation (PBT) 6578.46 3895.37

xi) Tax including Deferred Tax and Fringe Benefit Tax 1415.00 896.13

xii) Excess Provision of Earlier Year Written Back (Net) – Income Tax +FBT -- -2.58

xiii) Profit after Taxation (PAT) 5163.46 3001.82

xiv) Profit brought forward from previous year 205.90 169.33

xv) Amount available for Appropriation 5369.36 3171.15

xvi) Appropriations

Transfer to General Reserve 3500.00 2500.00

Interim Dividend -- 142.02

Proposed Final Dividend 852.14 255.64

Corporate Dividend Tax 144.82 67.59

Total

xvii) Balance carried to Balance Sheet 872.40 205.90

Some of the Key Performance ratios on standalone basis are furnished below:

Description UOM 2009-10 2008-09 (12 Months) (18 Months)

EBITDA/ Gross Turnover % 10.7 7.90

Profit Before Tax / Gross Turnover % 7.8 4.6

Profit After Tax / Gross Turnover % 6.1 3.5

Return On Capital Employed % 15.7 8.5

Earnings Per Share at a Face Value of Rs. 5/- Per Share Rs. 15.15 8.81

STANDALONE PERFORMANCE

Your Companys turnover for the year under review at Rs. 844.35 Crores represents an annualized increase of 49% over the previous period (18 months) turnover at Rs. 851.46 Crores. Profit before Interest, Depreciation and Taxes at Rs. 90.08 Crores represented an annualized increase of 100% over the previous period (18 Months) figure of Rs. 67.44 Crores. The Profit before Tax at Rs. 65.78 Crores represented an annualized increase of 153% over the previous period (18 Months) figure of Rs. 38.95 Crores. Profit after Ta x at Rs. 51.64 Crores represented an annualized increase of 158% over the previous period (18 months) figure of Rs. 30.02 Crores.

Production of Tyres and Tubes, during the year under review stood at 37660 M.T. with an annualized increase of 28% over pervious period. The Company has partnered with Original Equipment Manufacturers and has kept pace by developing Tyres for newer models in a short span of time.

Your Company has made its presence felt in a big way in OE, Replacement and Export Segments in the Current year. Concerted efforts towards an ambitious plan bore fruitful results in these segments.

CO-GEN PLANT / EXPANSION

Your Directors are happy to inform you that the benefit of Co-Gen Power Plant has started flowing to the Company. The power produced by Co-Gen has not only helped in improving the productivity but also its by-product Steam was available free of cost to the plant. The uninterrupted power supply through Co-Gen plant has helped in reducing the scrap and improving the quality of the product.

Your Company has already started work on 5 Lacs Tyres expansion plant at Mysore. Your Company is further planning to put additional 5 Lacs Tyres expansion at Haridwar & actively considering foraying into 4-wheeler segment

CUSTOMERS FIRST

Your Company is having a policy of “Customers First” and due to this we have been able to continue to be associated with major Automobile Companies (OEs) and enjoying the privileged position with all the OEs. The most conservative OEs also recognize our Services and Quality and we are becoming, a significant suppliers for them.

SUBSIDIARY

During the year under review, Monotona Tyres Limited (MTL) become subsidiary of the Company. w.e.f. 21st of May 2010 where your Company holds 54 Lacs shares out of 72 Lacs shares i.e. 75% of the paid up and subscribed capital of the Company. The synergy between the two Companies having similar kind of products will bore fruitful results in the year to come.

Pursuant to Accounting Standard (AS – 21) issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company in this Annual Report include financial information of its subsidiary.

APPROPRIATIONS

DIVIDEND

Your Directors recommend a Dividend of Rs. 2.50 per equity share (i.e. 50%) for the financial year ended 30th September, 2010. The proposed dividend together with Corporate Dividend Ta x will absorb Rs. 9.97 Crores. The dividend if approved, shall be payable to shareholders registered in the books of the Company and to the beneficial owners furnished by the depositories as determined with reference to the book closure from 25th December, 2010 to 30th December, 2010 (both days inclusive).

The total outflow on account of Equity Dividend together with Corporate Dividend Ta x will be Rs. 9.97 Crores, vis a vis Rs. 4.65 Crores paid for fiscal 2008-09 (18 Months).

TRANSFER TO GENERAL RESERVE

The Board has recommended a transfer of Rs. 35 Crores to the General Reserve.

QUALITY MANAGEMENT SYSTEM

Your Company has been conforming with certifications by M/s TUV, SUDD, South Asia Pvt. Ltd., with respect to ISO 9001:2008 & ISO / TS16949: 2009 for Quality Management System were re-certified in Feb 2010 and ISO 14001:2004 & OHSAS 18001:2007 for Environment, Occupational Health & Safety Assessment Series Management Systems, which already certified. Up-gradation of ISO 9001:2000 was upgraded to ISO 9001:2008 and ISO/TS16949:2002 to ISO/TS16949:2009 during the year.

DIRECTORS

In accordance with the Companies Act, 1956 read with the Articles of Association of the Company, Mr. Ambuj K Jain & Mr. K.N. Prithiviraj, Directors of the Company will retire by rotation at this meeting and being eligible offers themselves for re-appointment.

During the year under review Mr. Vijay Vaid was appointed w.e.f. 14th August, 2010

Your Board recommends the above re-appointment / appointment.

AUDITORS

M/s. K.N. Gutgutia & Co., Chartered Accountants auditors of the Company, retire at the conclusion of the ensuing Annual General Meeting and have expressed their willingness to act as auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 224(1B) of the Companies Act. The observations of the Auditors in their Report on Accounts read with the relevant notes are self-explanatory.

COST AUDIT

The Board of Directors have appointed Mr. T.L.Sangameswaran, Cost Accountant, Mysore to carry out Audit of the Cost Accounts of the Company relating to the manufacture of Tyres & Tubes for the period ended 30th September 2010 in compliance with the Central Government Order in this regard.

FIXED DEPOSITS

During the year under review, your Company has neither invited nor accepted any deposits from the public.

PARTICULARS OF EMPLOYMENT

As required under the provisions of Sec. 217(2A) of the Companies Act, 1956, read with the Rules framed thereunder, a statement of particulars of the employees has been annexed to this report and included as Annexure-I.

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

Information pursuant to Sec. 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988, is furnished in Annexure-II.

INDUSTRIAL RELATIONS

During the year your Company has finalized 3.3 years long term wage agreement with union. The Company maintained harmonious and cordial Industrial Relations during the period under review. A regular system of holding bi-partite discussion with the recognized Union regarding the issue of common interest of all employees was adopted.

SAFETY

Your Company has a well-defined Safety Management System. Continuous endeavor is made to create safety awareness among the employees. As part of this forums like Works Committee, Plant Safety Committee are functioning for taking up necessary preventive/ corrective actions wherever required and to create awareness among the employees on Safety and Health. Your Company has also appointed a team headed by AGM Safety for the purpose. Safety Day has been observed in the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR) Your Company is pro-active to its Corporate Social Responsibility. The following are few of the activities organized by your Company during the period under review:

i) Ganesh Festival: The Company has joined hand with the employees to celebrate the Ganesh Festival, which is one of the biggest festival in Karnataka and observed ritual and festivity with equal fervor.

ii) May Day Celebration: 1st May of the year is being observed as workers day in the whole world. Your Company also joins hands with Employees and their family in observing the day where Company sponsored various sports and cultural activities are performed. Winner of the sports event are rewarded with the prizes and sweets were distributed.

iii) Green Revolution: The Company has developed a green belt in and around the Company premises for better environment. During the year the Company has planted more than 3000 plants.

iv) Training to School/ College Students: Your Company is regularly providing training to engineering students and management trainees of various institutes and colleges.

In addition to this your Company had sponsored the Factory visit of College students.

DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirement under Sec. 217 (2AA) of the Companies Act, 1956, with respect to Directors Responsibility Statement, it is hereby confirmed:

(i) That in the preparation of the accounts for the financial year ended 30th September, 2010 the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial period and of the profit or loss of the Company for the year under review;

(iii) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) That the Directors have prepared the accounts for the financial period ended 30th September, 2010 on a going concern basis.

CORPORATE GOVERNANCE

Pursuant to the provisions contained in the Listing agreement, a Management Discussion and Analysis Report, a report on Corporate Governance together with the Auditors Certificate on the compliance of conditions of Corporate Governance is furnished as Annexure forming part of this Directors Report.

APPRECIATION & ACKNOWLEDGMENT Your Directors acknowledge the continued support and co- operation from the Financial Institutions, Banks, Customers, Vendors, Dealers and Government Authorities during the year under review. Further your Directors thank the Shareholders for their continued confidence in the Company. The Board also places on record its appreciation for the devoted and dedicated contribution made by the employees at all levels in achieving these results.

On behalf of the Board of Directors

Place: Kolkata Sunil Bhansali S. Ravi

Date: 12th November, 2010 Executive Director Director