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Directors Report of Harita Seating Systems Ltd.

Mar 31, 2014

Dear Members,

The directors have pleasure in presenting the eighteenth annual report of the Company and the audited accounts for the year ended 31st March 2014.

1. FINANCIAL HIGHLIGHTS

(Rs. in lakhs) Year ended Year ended Particulars 31.3.2014 31.3.2013 Sales and other income 25,354.39 27,842.86 Gross profit before financial costs, depreciation and amortization expenses and tax 1,558.39 2,295.52 Finance costs 505.92 559.36 Depreciation and amortization expenses 463.24 422.14 Profit before tax 589.23 1,314.02 Provision for taxation 123.51 246.87 Profit after tax 465.72 1,067.15 Add: Surplus brought forward 950.04 213.17 Profit available for appropriation 1,415.76 1,280.32 Appropriations: Tax relating to earlier years – 13.74 Proposed Interim Dividend 116.54 194.23 Dividend tax payable – 15.59 Transfer to general reserve 23.30 106.72 Balance surplus in profit and loss statement carried forward 1,275.92 950.04 1,415.76 1,280.32

2. DIVIDEND

The board of directors (the board), at its meeting held on 22nd May 2014, declared an interim dividend of Rs.1.50 per share (15%) for the year 2013-14 absorbing a sum of Rs.116.54 lakhs on 77,69,040 equity shares of Rs.10/- each. The same will be paid to the shareholders on or after 31st May 2014.The Company has set-off its dividend distribution tax payable under Section

115-O(1A) of the Income Tax Act, 1961 against the dividend distribution tax paid by its subsidiary company on the dividend declared.

The board does not recommend any further dividend for the year under consideration.

3. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Company provides a complete seating solutions for driver and cabin seating for commercial vehicles, tractors and construction equipment, as well as passenger seats for buses across all segments and has established itself as a leader in these segments in the country for seating systems. This premier position in the country has helped the Company emerge as the seat provider of choice for new OEMs entering the country, such as Scania buses.

INDUSTRY STRUCTURE AND DEVELOPMENTS

In 2013-14, the economy grew only at 4.9% as against 5.5% previous year. In tandem, the industrial sector growth was low at 0.7% which was 1.0% last year. This slowdown can be attributed to all-round contraction in demand as well as drop in consumer confidence due to the global economic conditions.

During the fiscal year 2013-14, Rupee depreciated steeply to Rs. 60.10 / USD from Rs. 53 / USD levels in the previous year.

All the customer segments of the Company in the Indian domestic market except tractors registered a decline during 2013-14. The following table highlights the segment wise industry sales figures in vehicle units.

2013-14 2012-13 Growth / Category Nos. Nos. (decline) % Medium and Heavy Commercial Vehicles (M & HCV) 2,24,433 2,87,371 (21.9) Light Commercial Vehicles (LCV) 4,85,302 5,85,816 (17.2) Buses - M & HCV 45,813 53,691 (14.7) Tractors 6,34,151 5,27,329 20.3

[ Source: SIAM ]

The Company registered sales at Rs.25,012.53 lakhs in 2013-14. During the year, efficiency in supply chain was improved through inter-plant coordination; horizontal deployment of lean and other improvement initiatives was done across all plants. These initiatives, along with the implementation of various other cost reduction projects across functions have enabled the Company to post a profit before tax of Rs. 589.23 lakhs in 2013-14.

OPPORTUNITIES AND THREATS

The Company has initiated product development activities to maintain the leadership position in the tractor segment in the domestic market. The Company continues to supply products to export markets and is exploring opportunities to increase export sales.

As a leader in the bus passenger seats with a wide range of seats, the Company has further strengthened its position with new product variant launches, including the seats for deluxe, standard and school bus segments. The Company expects the added features to support further growth in this segment.

A significant competitive threat is the entry of overseas competition and the Indian bus body builders getting into seat manufacturing. During the past years, international seating companies have entered India with plans for local manufacturing facility either directly or through joint ventures. The Company continues to invest in the indigenous design capability to counter and address this threat.

The continued slow-down in the Indian economy is a threat to the Company owing to the large share of domestic sales. The Company is taking steps to expand the customer base and market spread to counter this threat.

PRODUCT-WISE PERFORMANCE

The Company posted a decline of 9.5% in the overall sales. The Company''s sales declined in the Commercial Vehicle segment and exports by 8% and 25% respectively.

BUSINESS OUTLOOK AND OVERVIEW

Continuing the depressed growth scenario in the previous year, the projected GDP growth for 2014-15 is 5.0-5.5%. The M&HCV and LCV segments are estimated to further decline. Bus segment is also expected to decline over last year levels. Tractor growth is expected to be marginal in year 2014-15.

RISKS AND CONCERNS

The domestic market for commercial vehicles, buses and off road equipment seat has declined last year. The continuing depressed economic projection for the country is expected to further impact the commercial vehicles and bus industry. The Company is working across the entire value chain to improve operational efficiency and maintain the cost base during the market decline. The Company plans to develop additional products to maintain its growth plans. The Company has also put in place initiatives to improve product quality to support the growth plans.

The Rupee depreciated in the last year as against the US dollar. There may not be a major recovery in 2014-15, and the Company is taking suitable forex cover to mitigate the risk in foreign exchange fluctuations.

OPERATIONS REVIEW

a. Manufacturing:

The Company has continued its focus on imparting training to key employees in an effort to reskill people and upgrade the manufacturing processes, apart from improvements in the facility by means of automation.

Further improvements of Lean Manufacturing initiatives will help the Company in containing manufacturing costs.

b. Quality:

The Company has earned recognition from customer in the form of best Supplier award

from Tata Motors Limited and TAFE Motors &Tractors Limited. The Company was selected for the honour in recognition of its dedication for providing products and service of outstanding quality as well as its commitment to continuous improvement. The quality system at the factories aims at achieving total customer satisfaction through its focus on improving product quality. Consistently, the Company has been achieving improved Quality levels at the customer-end, both in their line and warranty quality.

The Company plants are certified for TS 16949. In addition, the Quality laboratory at the Company is certified by National Accreditation Board for Testing and Calibration Laboratories (NABL) for conformance to ISO/IEC 17025.

100% employee participation in the Company''s improvement programmes like suggestion schemes, Quality Control Circle projects, Supervisory Improvement Team projects, Cross Functional Team projects and

Task Force Team projects continued successfully for the 13th year in succession.

c. Focus on Vendor Development: In the previous year, the Company has launched a programme to improve capability and competitiveness of its vendors, in association with CII and Prof. Shoji Shiba, through the auspices of the Visionary Small and Medium Enterprises Programme. The pilot programme, run in one plant, had yielded positive results. This initiative was continued in 2013-14 also to cover other product segments and associated vendors. The Company will pursue this program in 2014-15 as well and will cover other vendors under this program.

d. Financial performance:

The financial and operational performance of the Company for the year 2013-14, as compared to the previous year 2012-13, is as follows:

Year ended Particulars 31st March 2014 Rs. in lakhs %

Income: Sales 25,012.53 98.65 Other Income 341.86 1.35 Total Income 25,354.39 100.00

Expenditure: Raw materials and components consumed 18,471.10 72.85 Changes in inventories of finished goods and work-in-process 30.42 0.12 Staff cost 2,793.23 11.02 Stores and tools consumed 56.59 0.22 Power and fuel 253.48 1.00 Repairs and maintenance 448.37 1.77 Carriage outward & Packing expenses 508.18 2.00 Other expenses 1,234.63 4.87 Finance costs 505.92 2.00 Depreciation and amortization expenses 463.24 1.83 Total expenditure 24,765.16 97.68



Year ended Particulars 31st March 2013 Rs. in lakhs % Income: Sales 27,616.68 99.19

Other Income 226.18 0.81

Total Income 27,842.86 100.00

Expenditure: Raw materials and components consumed 20,264.92 72.78 Changes in inventories of finished goods and work-in-process 2.99 0.01 Staff cost 2,564.76 9.21 Stores and tools consumed 102.85 0.37 Power and fue l263.49 0.95 Repairs and maintenance 393.41 1.41 Carriage outward & Packing expenses 760.82 2.73 Other expenses1, 194.10 4.29 Finance costs 559.36 2.01 Depreciation and amortization expenses 422.14 1.52 Total expenditure 26,528.84 95.28

Year ended Particulars 31st March 2014 Rs. in lakhs %

Profit/(Loss) before exceptional items and tax 589.23 2.32 Profit before tax 589.23 2.32 Provision for taxation - Current tax 116.00 0.46 - Deferred tax 7.51 0.03 Profit / (Loss) after tax 465.72 1.84 EBITDA/Turnover % 6.15 Profit/(Loss)before tax/turnover % 2.32 Return on capital employed % 11.51 Return on net worth % 11.08 Earnings per share in Rs. 5.99

Year ended Particulars 31st March 2013 Rs. in lakhs %

Profit/(Loss) before exceptional items and tax1, 314.02 4.72 Profit before tax1, 314.02 4.72 Provision for taxation - Current tax 277.36 1.00 - Deferred tax (30.49) (0.11) Profit / (Loss) after tax 1,067.15 3.83 EBITDA/Turn over % 8.24 Profit/(Loss)before tax/turnover % 4.72 Return on capital employed % 22.40 Return on net worth % 29.59 Earnings per share in Rs. 13.74

INTERNAL CONTROLS AND THEIR ADEQUACY

The Company has effective and adequate internal control systems covering all areas of operations. The internal control system provides for well documented policies / guidelines, authorisations and approval procedures. The internal control system stipulates a reasonable assurance with regard to maintaining of proper accounting controls, protecting assets from unapproved use and compliance of statutes.

The Internal Controls are supplemented by defined program of periodic internal audits at all locations and functions based on the plan approved by the Audit Committee. The observations, if any arising out of audit are periodically reviewed and compliance ensured. The summary of the Internal Audit observations and the status on implementation of corrective actions are reported to the Audit Committee of the Board of Directors for their review.

HUMAN RESOURCE DEVELOPMENT

The Company has been able to sustain its financial performance despite the industry slow- down, through the concerted and goal-aligned efforts by employees across the hierarchy. The Company places on record its deep appreciation

for the exemplary contribution of the employees at all levels.

The Company continued to induct fresh talent. The Company has upgraded the training needs identification based on the role requirements and gaps in this identification are closed by providing training to improve employee competencies. The Company''s industrial relations continue to be cordial.

As of 31st March 2014, the Company had 366 employees on its rolls.

COMMUNITY DEVELOPMENT AND SOCIAL RESPONSIBILITY

The Board at its meeting held on 5th November 2013, constituted a Corporate Social Responsibility Committee with

Mr H Lakshmanan as the Chairman of the Committee and Mr C N Prasad and Mr S I Jaffar Ali as members.

The Company has a vision to contribute to all round development of the rural areas around the Company. Some of the activities engaged by the Company are mentioned below:

a) Providing material support to a government school for improving the infrastructure in the area.

b) Assisting Self Help Groups in Belagondapalli village near Hosur Factory and at villages near Ranjangaon Factory on a continuous basis.

c) In order to encourage students in education and motivate them to do well in their studies, the Company offers scholarships to meritorious students of schools in nearby villages of the Factories.

CAUTIONARY STATEMENT

Statements in the management discussion and analysis report describing the Company''s objectives, projections, estimates, expectations may be forward looking statements within the meaning of applicable Securities Laws and Regulations. Actual results could differ materially from those expressed and implied. Important factors that could make a difference to the Company''s operations include, among other things, economic conditions affecting the demand, supply and price conditions in the markets in which the Company operates, changes in government regulations, tax laws and other statutes and incidental factors.

4. SUBSIDIARY COMPANY

As on the date of this report, Harita Fehrer Limited, Chennai (HFRL) is the only subsidiary of the Company.

HFRL is a material non-listed Indian subsidiary in terms of sub-clause III of Clause 49 of the Listing Agreement, as the total turnover of the subsidiary exceeds 20% of the consolidated turnover of the Company.

The Company is in fully compliant with the provisions as specified in sub-clause III of Clause 49 of the Listing Agreement. During the financial year 2013-14, HFRL achieved an income of Rs.28,501.94 lakhs and registered a profit after tax of Rs. 816.74 lakhs.

5. CONSOLIDATED FINANCIAL STATEMENTS

As required under the Listing Agreement with the Stock Exchanges, the consolidated financial

statements of the Company are attached.

The Ministry of Corporate Affairs (MCA) vide its circular No.2 in file No. 51/12/2007-CL-III dated 8th February 2011 has granted general exemption from attaching annual reports of subsidiaries along with the annual report of the holding companies without seeking any approval of the Central Government, subject to the conditions laid down therein.

The board of directors, at the meeting held on 22nd May 2014, passed necessary resolution confirming compliance with all the conditions enabling the circulation of annual report of the Company without attaching all the documents, referred to in Section 212(1) of the Companies Act, 1956 of the subsidiary company to the shareholders of the Company.

The annual accounts, reports and other documents of the subsidiary company will be made available to the stakeholders, on receipt of a request from them at the registered office of the Company during the business hours on any working day of the Company. If any member or investor wishes to inspect the same, it will be available during the business hours of any working day of the Company.

A statement giving the following information about HFRL consisting of (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (f) turnover (g) profit before taxation (h) provision for taxation (i) profit after taxation and (j) proposed dividend, has been attached with the consolidated balance sheet of the Company in compliance with the conditions as provided in the circular issued by MCA.

6. DIRECTORS

During the year, the Ministry of Corporate Affairs (MCA) has notified majority of the Sections of the Companies Act, 2013 (the Act, 2013) which include inter alia provisions relating to selection, manner of appointment, roles, functions, duties, reappointment of independent directors (IDs) and the relevant rules under the Act, 2013 and made them effective 1st April 2014.

The existing composition of the Company''s board is fully in conformity with the applicable provisions of the Act 2013 and Clause 49 of the Listing Agreement having the following directors as non-executive IDs, namely M/s H Lakshmanan, S I Jaffar Ali and C N Prasad.

In terms of the provisions of Section 149(10) read with Section 149(5) of the Act 2013, IDs are eligible to hold office for a term upto five consecutive years on the board and eligible for re-appointment for the second term on passing special resolutions by the Company. During the period, they will not be liable to ''retire by rotation'' as per the provisions of Sections 150(2) and 152(2) read with Schedule IV to the Act, 2013.

It is, therefore, proposed to appoint them as IDs for a consecutive period of five years at the ensuing annual general meeting. Necessary declarations have been obtained from them, as envisaged under the Act, 2013.

Both the Nomination and Remuneration Committee and the board also ensured that their appointments as IDs are in compliance with the requirements under the relevant statutes and that there were appropriate balance of skills, experience and knowledge in the board, so as to enable the board to discharge its functions and duties effectively.

Notices in writing signifying the intention to offer their candidatures as IDs of the Company along with the requisite deposit have been received from members of the Company in terms of Section 160 of the Act, 2013.

In terms of the provisions of sub-section (6) read with explanation to Section 152 of the Act 2013, two-third of the total number of directors i.e., excluding IDs, are liable to retire by rotation and out of which, one-third is liable to retire by rotation at every annual general meeting.

Mr Martin Grammer, director of the Company, is, therefore, liable to retire by rotation, at the ensuing annual general meeting, and being eligible, offers himself for re-appointment.

The brief resume of these directors proposed to be appointed and reappointed and other relevant information have been furnished in the Notice of AGM. Appropriate resolutions for their appointment / reappointment are being placed for approval of the shareholders at the annual general meeting.

The board, therefore, recommend their appointment / re-appointment as directors of the Company.

7. AUDITORS

Statutory Auditors

The Company, in terms of Section 139 (1) and (2) of the Act, 2013 (the Act) is required to appoint a statutory auditor for a term of five consecutive years i.e., till the conclusion of sixth annual general meeting and ratify their appointment, during the period, in every annual general meeting, till the sixth such meeting by way of passing of an ordinary resolution.

The period, for which any firm has held office as auditor prior to the commencement of the Act, 2013 will be taken into account for calculating the period of five consecutive years, as per the fourth proviso to Section 139(2) of the Act, 2013 read with Rule 6(3) of the Companies (Audit and Auditors) Rules, 2014.

M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai, who were earlier appointed as statutory auditors of the Company, were functioning as auditor for more than ten years. Hence, they are eligible to be appointed for the transitional period of three years in terms of the aforesaid provisions and rules under the Act, 2013.

It is proposed to appoint them as statutory auditors for the transitional period of three years, subject to the approval and ratification by the shareholders at the ensuing annual general meeting and at subsequent annual general meeting during the transitional period.

The Company has obtained necessary certificate under Section 141 of the Act, 2013 conveying their eligibility for the above appointment. The audit committee and board reviewed their eligibility criteria, as laid down under Section 141 of the Act, 2013 and recommended their appointment as auditors for the aforesaid period by the members.

Cost Auditor

As required under the Companies (Cost Accounting Records) Rules 2011, the Company filed the Cost Audit Report for the financial year 2012-13 in XBRL format.

The board of directors, subject to the approval of the Central Government, has re-appointed M/s. Raman & Associates, Cost Accountants, Chennai, with Firm Registration No. 000050, as Cost Auditors for conducting the Cost Audit for the financial year 2014-15. The audit committee of directors recommended their appointment and remuneration subject to the compliance of all the requirements as stipulated in circular no.15/ 2011 dated 11th April 2011 issued by the MCA.

The Company has also received necessary certificate under Section 141 of the Act, 2013 conveying their eligibility for re-appointment. The remuneration fixed by the board, based on the recommendation of the audit committee is required to be ratified by the members at the ensuing annual general meeting as per the requirement of Section 148(3) of the Act, 2013.

Secretarial Auditor

As required under Section 204 of the Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company is required to appoint a

Secretarial Auditor for auditing the secretarial and related records of the Company and to provide a report in this regard.

Accordingly, Ms B Chandra, Practising Company Secretary, has been appointed as Secretarial Auditor for carrying out the secretarial audit for the financial year 2014-2015 for attaching the report with the Board''s report to the shareholders.

8. CORPORATE GOVERNANCE

The Company has been practicing the principles of good corporate governance over the years and lays strong emphasis on transparency, accountability and integrity.

A separate section on corporate governance and a certificate from the statutory auditors of the Company regarding compliance of conditions of Corporate Governance, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges form part of this Annual Report.

The President cum Manager (CEO) and the General Manager - finance (CFO) of the Company have certified to the board on financial statements and other matters in accordance with Clause 49(V) of the Listing Agreement pertaining to CEO/CFO certification for the financial year ended 31st March 2014.

9. STATUTORY STATEMENTS

a. Conservation of energy, technology absorption and foreign exchange earnings and outgo:

As per the requirements of 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, the information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure I to this report.

b. Particulars of employees:

The particulars required pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, are given in Annexure II to this report. However, in terms of the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Directors'' Report (excluding Annexure II) is being sent to all the shareholders of the Company. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the registered office of the Company.

c. Public Deposits:

The Company has not accepted any deposit from the public within the meaning of Section 58A of the Companies Act, 1956, for the year ended 31st March 2014.

d. Directors'' Responsibility Statement

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956 with respect to Directors'' Responsibility Statement, it is hereby stated:

i) that in the preparation of annual accounts for the financial year ended 31st March, 2014, the applicable accounting standards had been followed and that there were no material departures;

ii) that the directors had selected such accounting policies and applied them consistently and made judgements 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 year and of the profit of the Company for the year under review;

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

iv) that the directors had prepared the accounts for the financial year ended 31st March 2014 on a "going concern basis".

10.ACKNOWLEDGEMENT

The directors acknowledge the support and co-operation received from the promoters, Harita Group and Mr Martin Grammer.

The directors thank the customers, suppliers, financial institutions and bankers for their valuable support and assistance.

The directors wish to place on record their appreciation of the sincere efforts of all the employees of the Company during the year under review.

The directors also thank the shareholders for their continued faith in the Company.

For and on behalf of the Board

Chennai H LAKSHMANAN 22nd May 2014 Chairman


Mar 31, 2013

To The Shareholders

The directors have pleasure in presenting the seventeenth annual report of the Company and the audited accounts for the year ended 31st March 2013.

1. FINANCIAL HIGHLIGHTS (Rs. in lakhs) Year ended Year ended Particulars 31.3.2013 31.3.2012

Sales and other income 27,842.86 30,890.03

Gross profit before financial costs, depreciation and amortization expenses and tax 2,295.52 2,364.22

Finance costs 559.36 663.70

Depreciation and amortization expenses 422.14 434.38

Profit / (Loss) before exceptional items and tax 1,314.02 1,266.14

Exceptional items (income) 151.82

Profit before tax 1,314.02 1,417.96

Provision for taxation 246.87 295.95

Profit / (Loss) after tax 1,067.15 1,122.01

Add: Surplus brought forward 213.17 (493.99)

Profit / (Loss) available for appropriation 1,280.32 628.02

Appropriations: Tax relating to earlier years 13.74 3.25

Proposed Interim Dividend 194.23 271.92

Dividend tax payable 15.59 27.48

Transfer to general reserve 106.72 112.20

Balance surplus in profit and loss statement carried forward 950.04 213.17

2. DIVIDEND

The board, at its meeting held on 22nd May 2013, declared an interim dividend of Rs. 2.50/- per share (25%) for the year 2012-13 absorbing a sum of Rs.209.82 lakhs including dividend distribution tax on 77,69,040 equity shares of Rs.10/- each. The same will be paid to the shareholders on 5th June 2013.

The directors of the Company do not recommend any further dividend for the year under consideration.

3. SUBSIDIARY COMPANY

As on the date of this report, Harita Fehrer Limited, Chennai (HFRL) is the only subsidiary of the Company.

HFRL is a material non-listed Indian subsidiary in terms of sub-clause III of Clause 49 of the Listing Agreement, as the total turnover of the subsidiary exceeds 20% of the consolidated turnover of the Company.

The Company is fully compliant with the provisions as specified in sub-clause III of clause 49 of the Listing Agreement. During the financial year 2012-13, HFRL achieved an income of Rs. 277.03 crores and registered a profit after tax of Rs. 1.84 crores.

5. CONSOLIDATED FINANCIAL STATEMENTS

The annual accounts of the subsidiary for the year ended 31st March 2013 is consolidated with the accounts of the Company in accordance with Accounting Standards as prescribed under Section 211(3C) of the Companies Act, 1956 and as required under the Listing Agreement. These financial statements disclose the assets, liabilities, income, expenses and other details of the Company and its subsidiary.

The Ministry of Corporate Affairs (MCA) vide its circular No.2 in file No. 51/12/2007-CL-III dated 8th February 2011 has granted general exemption under Section 212(8) of the Companies Act, 1956 for holding companies from attaching annual reports of subsidiaries along with its annual report without seeking any approval of the Central Government. However, this is subject to fulfilment of conditions as stipulated in the said circular granting general exemption to the holding company and passing of a resolution by the board of the holding company in this regard.

The board of directors at the meeting held on 22nd May 2013 passed necessary resolution for complying with all the conditions enabling the circulation of annual report to the shareholders of the Company without attaching all the documents of the subsidiary company, referred to in Section 212(1) of the Companies Act, 1956.

The annual accounts, reports and other documents of the subsidiary company will be made available to the members, on receipt of a request from them. The annual accounts of the subsidiary company will be available at the registered office of the Company and at the registered office of the subsidiary company. If any member or investor wishes to inspect the same, it will be available during the business hours of any working day at the registered office of the Company.

A statement giving the following information about HFRL consisting of (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (f) turnover (g) profit before taxation (h) provision for taxation (i) profit after taxation and (j) proposed dividend, has been attached with the consolidated balance sheet of the Company in compliance with the conditions as provided in the circular issued by MCA.

6. DIRECTORS

Mr C N Prasad, director, retires at the ensuing annual general meeting of the Company and being eligible, offers himself for reappointment.

The brief resume of Mr C N Prasad, director has been detailed in the notice convening the annual general meeting of the Company. Appropriate resolution for his re-appointment is being placed for approval of the shareholders at the ensuing annual general meeting. The directors recommend his re-appointment as director of the Company.

7. AUDITORS

M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai, retire at the ensuing annual general meeting and are eligible for re-appointment.

The Company has received a letter from them, stating that the appointment, if made, will be within the limit prescribed under Section 224(1B) of the Companies Act, 1956.

8. COST AUDITOR

In terms of the Companies (Cost Accounting) Records Rules, 2011, the Company had filed the Cost Compliance Report for the financial year 2011-12 with the Ministry of Company Affairs (MCA) in XBRL format.

Consequent to the MCA''s industry specific Cost Audit Order No. 52/26/CAB-2010 dated 24th January 2012, the Company appointed M/s Raman & Associates, Cost Accountants, Chennai for auditing the cost accounting information for the financial year 2012 - 13 and a report in this regard will be filed with the Central Government within the stipulated time. The Central Government has also approved the appointment of M/s Raman & Associates, Cost Accountants, Chennai as Cost Auditors for the said financial year.

The board, at its meeting held on 22nd May 2013, re-appointed M/s Raman & Associates, Cost Accountants, Chennai as Cost Auditors of the Company for the financial year 2013-14, subject to approval of the Central Government. The Company has received a letter from them, stating that the appointment, if made, will be within the prescribed limit under Section 224(1B) of the Companies Act, 1956.

9. CORPORATE GOVERNANCE

The Company has been practicing the principles of good corporate governance over the years and lays strong emphasis on transparency, accountability and integrity.

A separate section on Corporate Governance and a certificate from the statutory auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges form part of the Annual Report.

The president and the general manager - finance of the Company have certified the financial statements and other connected matters in accordance with Clause 49(V) of the Listing Agreement pertaining to CEO/CFO certification for the financial year ended 31st March 2013.

10.STATUTORY STATEMENTS

a. Conservation of energy, technology absorption and foreign exchange earnings and outgo:

As per the requirements of 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, information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure I to this report.

b. Particulars of employees:

There is no employee receiving remuneration in excess of the limits prescribed under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules 1975 as amended.

c. Public Deposits:

The Company has not accepted any deposit from the public within the meaning of Section 58A of the Companies Act, 1956, for the year ended 31st March 2013.

d. Directors'' Responsibility Statement: Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 with respect to directors'' responsibility statement, it is hereby confirmed:

(i) that in the preparation of annual accounts for the financial year ended 31st March, 2013, the applicable accounting standards had been followed and there were no material departures;

(ii) that the directors had selected such accounting policies and applied them consistently and made judgements 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 year and of the profit of the Company for the year under review;

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

(iv) that the directors had prepared the accounts for the financial year ended 31st March 2013 on a "going concern basis".

11.ACKNOWLEDGEMENT

The directors acknowledge the support and co- operation received from the promoters, Harita Group and Mr Martin Grammer.

The directors thank the customers, suppliers, financial institutions and bankers for their valuable support and assistance.

The directors wish to place on record their appreciation of the sincere efforts of all the employees of the Company during the year under review.

The directors also thank the shareholders for their continued faith in the Company.

For and on behalf of the Board

Chennai H LAKSHMANAN

22nd May 2013 Chairman


Mar 31, 2012

The directors have pleasure in presenting the sixteenth annual report of the Company and the audited accounts for the year ended 31st March 2012.

1. FINANCIAL HIGHLIGHTS

(Rs. in lakhs)

Year ended Year ended 31.3.2012 31.3.2011

Sales and other income 30890.03 24231.80

Gross profit before financial costs, depreciation and amortization expenses and tax 2,364.22 594.85

Financial costs 663.70 747.29 Depreciation and

amortization expenses 434.38 431.66 Profit / (Loss) before

exceptional items and tax 1,266.14 (584.10)

Exceptional items (income) 151.82 -

Profit before tax 1,417.96 (584.10)

Provision for taxation 295.95 (74.11)

Profit / (Loss) after tax 1,122.01 (509.99)

Add: Surplus brought forward (493.99) 17.20

Profit / (Loss) available for

appropriation 628.02 (492.79) Appropriations:

Tax relating to earlier years (3.25) (1 20)

Proposed Interim Dividend 271.92 -

Dividend tax payable 27.48 -

Transfer to general reserve 112.20 -

Surplus in profit and loss statement carried forward 213.17 (493.99)

2. DIVIDEND

The board of directors of the Company at their meeting held on 30th May 2012, declared an interim dividend of Rs.3.50 per share for the year ended 31st March 2012, absorbing a sum of Rs.299.40 lakhs (including dividend distribution tax) on 77,69,040 equity shares of Rs.10/- each fully paid up. The same will be paid on or after 11th June 2012.

The directors of the Company do not recommend any further dividend for the year under consideration.

4. SUBSIDIARY COMPANY

As on the date of this report, Harita Fehrer Limited, Chennai (HFRL) is the only subsidiary of the Company. HFRL is a material non-listed Indian subsidiary in terms of sub-clause III of Clause 49 of the Listing Agreement, as the total turnover of the subsidiary exceeds 20% of the consolidated turnover of the Company.

The Company is fully compliant with the provisions as specified in sub-clause III of Clause 49 of the Listing Agreement. During the financial year 2011-12, HFRL achieved an income of Rs. 294.76 Cr and registered a profit after tax of Rs. 11.04 Cr. It had declared a maiden dividend of 10% for the year 2011 -2012.

5. CONSOLIDATED FINANCIAL STATEMENTS

The annual accounts of the subsidiary for the year ended 31st March 2012 is consolidated with the accounts of the Company in accordance with Accounting Standards as prescribed under Section 211(3C) of the Companies Act, 1956 and as required under the Listing Agreement. These financial statements disclose the assets, liabilities, income, expenses and other details of the Company and its subsidiary.

The Ministry of Corporate Affairs (MCA) vide its circular No. 2 in file No. 51/12/2007-CL-III dated 8th February 2011 has granted general exemption under Section 212(8) of the Companies Act, 1956 for holding companies from attaching annual reports of subsidiaries along with its annual report without seeking any approval of the Central Government. However, this is subject to fulfillment of conditions as stipulated in the said circular granting general exemption to the holding company and passing of a resolution by the board of the holding company in this regard.

The board of directors at the meeting held on 30th May 2012 passed necessary resolution for complying with all the conditions enabling the circulation of annual report to the shareholders of the Company without attaching all the documents of the subsidiary company, referred to in Section 212(1) of the Companies Act, 1956. The annual accounts, reports and other documents of the subsidiary company will be made available to the members, on receipt of a request from them. The annual accounts of the subsidiary company will be available at the registered office of the Company and at the registered office of the subsidiary company. If any member or investor wishes to inspect the same, it will be available during the business hours of any working day at the registered office of the Company.

A statement giving the following information about HFRL consisting of (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (f) turnover (g) profit before taxation (h) provision for taxation (i) profit after taxation and (j) proposed dividend, has been attached with the consolidated balance sheet of the Company in compliance with the conditions as provided in the circular issued by MCA.

6. DIRECTORS

Mr Martin Grammer, director, retires at the ensuing annual general meeting of the Company and being eligible, offers himself for re-appointment.

Mr Ram Natarajan was appointed as an additional, non executive and independent director of the Company effective 10th November 2011. Mr Ram Natarajan will hold office upto this annual general meeting.

A notice in terms of Section 257 of the Companies Act, 1956 has been received from a member of the Company signifying his proposal for the appointment of Mr Ram Natarajan as a director of the Company.

The brief resume of Mr Martin Grammer and Mr Ram Natarajan, directors, have been detailed in the notice convening the annual general meeting of the Company. Appropriate resolutions for their re-appointment and appointment are being placed for approval of the shareholders at the ensuing annual general meeting. The directors recommend their re-appointment / appointment as directors of the Company.

7. AUDITORS

M/s.Sundaram & Srinivasan, Chartered Accountants, Chennai, retire at the ensuing annual general meeting and are eligible for re-appointment.

The Company has received a letter from them, stating that the appointment, if made, will be within the limit prescribed under Section 224(1 B) of the Companies Act, 1956.

8. COST AUDITOR

MCA issued an industry specific Cost Audit Order vide No. 52/26/CAB-2010 dated 24th January 2012, thereby requiring all such companies, which are in the manufacturing activities of automotive components (covered under Central Excise Tariff Chapter Nos. 84, 87) to appoint a Cost Auditor for auditing the cost accounting information effective 1st April 2012 for the financial year 2012-13 and file a report with the Central Government, on or before 30th September of every year.

The board of directors, in view of this industry specific order, at their meeting held on 30th May 2012 appointed M/s. Raman & Associates, Cost Accountants, Chennai, as Cost Auditor for carrying out the cost audit of the Company for the financial year 2012-2013, subject to the compliance of all the requirements, as stipulated in circular no.15/2011 dated 11th April 2011 issued by MCA and subject to the approval of the Central Government.

The Company has received a letter from the said Cost Audit firm, stating that the appointment, if made, will be within the prescribed limit under Section 224(1 B) of the Act.

For the financial year under review, a Cost Compliance report will be obtained and filed with MCA on or before 30th September 2012 in terms of Companies (Cost Accounting) Records Rules, 2011.

9. CORPORATE GOVERNANCE

The Company has been practicing the principles of good corporate governance over the years and lays strong emphasis on transparency, accountability and integrity.

A separate section on Corporate Governance and a certificate from the statutory auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges form part of the Annual Report.

The president and the general manager - finance of the Company have certified the financial statements and other connected matters in accordance with Clause 49(V) of the Listing Agreement pertaining to CEO/CFO certification for the financial year ended 31st March 2012.

10. STATUTORY STATEMENTS

a. Conservation of energy, technology absorption and foreign exchange earnings and outgo:

As per the requirements of 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, information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure I to this report.

b. Particulars of employees:

There is no employee receiving remuneration in excess of the limits prescribed under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules 1975 as amended.

c. Public Deposits:

The Company has not accepted any deposit from the public within the meaning of Section 58A of the Companies Act, 1956, for the year ended 31st March 2012.

d. Directors' Responsibility Statement: Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 with respect to directors' responsibility statement, it is hereby confirmed:

(i) that in the preparation of annual accounts for the financial year ended 31st March 2012, the applicable accounting standards had been followed and there were no material departures;

(ii) that the directors had 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 year and of the profit of the Company for the year under review;

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

(iv)that the directors had prepared the accounts for the financial year ended 31st March 2012 on a "going concern basis".

11. ACKNOWLEDGEMENT

The directors acknowledge the support and co- operation received from the promoters, Harita Group and Mr Martin Grammer.

The directors thank the customers, suppliers, financial institutions and bankers for their valuable support and assistance.

The directors wish to place on record their appreciation of the sincere efforts of all the employees of the Company during the year under review.

The directors also thank the shareholders for their continued faith in the Company.

For and on behalf of the Board

Chennai H LAKSHMANAN

30th May 2012 Chairman


Mar 31, 2011

Dear Members,

The directors have pleasure in presenting the fifteenth annual report of the Company and the audited accounts for the year ended 31st March 2011.

I. FINANCIAL HIGHLIGHTS

(Rs. in lakhs)

Year ended Year ended 31.3.2011 31.3.2010

Sales and other income 23,195.17 23,249.86

Gross profit before interest, depreciation and tax 580.04 1,487.56

Interest 732.48 704.44

Depreciation 431.66 883.52

Profit / (Loss) before tax (584.10) (100.40)

Provision for taxation (including deferred tax) (74.11) (109.21)

Profit / (Loss) after tax (509.99) 8.81

Add: Surplus brought forward 17.20 -

Profit / (Loss) available for appropriation (492.79) 8.81

Appropriations:

Tax relating to earlier years 1.20 (8.39)

Surplus / (Deficit) in

profit and loss account (493.99) 17.20

2. DIVIDEND

The board of directors of the Company has not recommended any dividend for the year ended 31st March 2011.

4. SUBSIDIARY COMPANY

As on the date of this report, Harita Fehrer Limited, Chennai (HFRL) is the only subsidiary of the Company.

During the year, the subsidiary company allotted 30,14,676 additional equity shares of Rs.10/- each for cash at a premium of Rs.41.78 per share to M/s F.S. Fehrer Automotive GmbH, Germany (Fehrer), on 14th February 2011 on a preferential basis, in pursuance of the Joint Venture arrangement between the Company and Fehrer.

During the year, the shareholding of the Company in HFRL, in view of the above allotment of shares by HFRL to Fehrer, got reduced from 60% to 51%. However HFRL continues to be a subsidiary of the Company in terms of Section 4(1)(b) of the Companies Act, 1956.

HFRL is a material non-listed Indian subsidiary in terms of sub-clause III of clause 49 of the Listing Agreement, as the total turnover of the subsidiary exceeds 20% of the consolidated turnover of the Company.

The Company is fully compliant with the provisions as specified in sub-clause III of clause 49 of the Listing Agreement.

During the financial year 2010-11, HFRL achieved an income of Rs.246.67 Cr and registered a profit after tax of Rs.2.12 Cr.

5. CONSOLIDATED FINANCIAL STATEMENTS

The annual accounts of the subsidiary for the year ended 31st March 2011 is consolidated with the accounts of the Company in accordance with Accounting Standards as prescribed under Section 211(3C) of the Companies Act, 1956 and as required under the Listing Agreement. These financial statements disclose the assets, liabilities, income, expenses and other details of the Company, its subsidiaries and associates.

The Ministry of Corporate Affairs (MCA) vide its circular No. 2 in file No. 51/12/2007-CL-III dated 8th February 2011 has granted general exemption under Section 212(8) of the Companies Act, 1956 for holding companies from attaching annual reports of subsidiaries along with the annual report of the holding companies without seeking any approval of the Central Government. However, this is subject to fulfilment of conditions as stipulated in the said circular granting general exemption to the holding company and passing of a resolution by the board of the holding company in this regard.

The board of directors at their meeting held on 2nd May 2011 passed necessary resolution for complying with all the conditions enabling the circulation of annual report to the shareholders of the Company without attaching all the documents referred to in Section 212(1) of the Companies Act, 1956 of the subsidiary company.

The annual accounts, reports and other documents of the subsidiary company will be made available to the members, on receipt of a request from them. The annual accounts of the subsidiary company will be available at the registered office of the Company and at the registered office of the subsidiary company. If any member or investor wishes to inspect the same, it will be available during the business hours of any working day at the registered office of the Company.

A statement giving the following information about HFRL consisting of (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (f) turnover (g) profit before taxation (h) provision for taxation (i) profit after taxation has been attached with the consolidated balance sheet of the Company in compliance with the conditions as provided in the circular issued by MCA.

6. DIRECTORS

During the year, Mr H Lakshmanan, director was re-appointed as chairman of the Board of Directors, for a further period of five years effective 24th April 2011 in terms of the Articles of Association of the Company.

Mr S I Jaffar Ali, director, retires at the ensuing annual general meeting of the Company and being eligible, offers himself for re-appointment.

His brief resume and other information have been detailed in the notice convening the annual general meeting of the Company. Appropriate resolution for his re-appointment is being placed for approval of the shareholders at the ensuing annual general meeting. The directors recommend his re-appointment as a director of the Company.

7. AUDITORS

M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai, the statutory Auditors of the Company retire at the ensuing annual general meeting and are eligible for re-appointment.

The Company has received a letter from them, stating that the appointment, if made, will be within the limit prescribed under Section 224(1B) of the Companies Act, 1956.

8. CORPORATE GOVERNANCE

The Company has been practicing the principles of good corporate governance over the years and lays strong emphasis on transparency, accountability and integrity.

A separate section on corporate governance and a certificate from the statutory auditors of the Company regarding compliance of conditions of corporate governance as stipulated in clause 49 of the Listing Agreement with the Stock Exchanges form part of the annual report.

The president and the general manager - finance of the Company have certified to the board on financial statements and other matters in accordance with clause 49(V) of the Listing Agreement pertaining to CEO/CFO certification for the financial year ended 31st March 2011.

9. STATUTORY STATEMENTS

a. Conservation of energy, technology absorption and foreign exchange earnings and outgo:

As per the requirements of 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, information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure I to this report.

b. Particulars of employees:

There is no employee receiving remuneration excess of the limits prescribed under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules 1975 as amended.

c. Public Deposits:

The Company has not accepted any deposit from the public within the meaning of Section 58A of the Companies Act, 1956, for the year ended 31st March 2011.

d. Directors' Responsibility Statement:

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, with respect to directors' responsibility statement, it is hereby confirmed:

(i) that in the preparation of annual accounts for the financial year ended 31st March 2011, the applicable Accounting Standards had been followed and that there are no material departures;

(ii) that the directors had selected such accounting policies and applied them consistently and made judgements 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 year and of the loss of the Company for the year under review;

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

(iv) that the directors had prepared the accounts for the financial year ended 31st March 2011 on a "going concern basis".

10.ACKNOWLEDGEMENT

The directors gratefully acknowledge the continued support and co-operation received from the promoters, Harita Group and Mr Martin Grammer.

The directors thank the customers, suppliers, financial institutions and bankers for their valuable support and assistance.

The directors wish to place on record their appreciation for the sincere efforts of all the employees of the Company during the year under review.

The directors also thank the investors for their continued faith in the Company.

For and on behalf of the Board

H LAKSHMANAN Chairman

Chennai 3rd August 2011


Mar 31, 2010

The directors have pleasure In presenting the fourteenth annual report of the Company and the audited accounts for the year ended 31st March 2010.

1. FINANCIAL HIGHLIGHTS

Rs. in lakhs

Year ended Year ended

31.3.2010 31.3.2009

Sales and other Income 23,249.86 19,822.16

Gross profit before interest,

depreciation and tax 1,487.56 330.76

Interest 704.44 424.77

Depreciation 883.52 696.92

Profit / (Loss) before tax (100.40) (790.93)

Provision for taxation

(Including FBT and

Deferred Tax) (109.21) 101.16

Profit / (Loss) after tax 3.81 (892.09)

Add: Surplus brought forward - 230.94

Profit / (Loss) available

for appropriation 3.81 (661.15)

Appropriations;

Tax relating to earlier years (8.39) (16.63)

Depreciation relating to

earlier years - (0.30)

Surplus / (deficit) in

profit and loss account 17.20 (644.22)



2. DIVIDEND

The board of directors of the Company has not recommended cny dividend for the year ended 31 * March 2010 in view of the inadequacy of profits of the Company.

4. SUBSIDIARY COMPANY

During the year under review, the name of the Companys subsidiary "Harita Polymer Limited" was changed to "Harita Fehrer Limited" (HFRL) effective 21st August 2009.

During the year, the board of directors, as approved by the shareholders in terms of Section 293(1 )(a) of the Companies Act, 1956 through the process of Postal Ballot, transferred the following businesses namely:

(a) business owned by the Company viz., foaming business, two wheeler and three wheeler seats, seat cushions. Long Fibre Injection (LFI) and Micro Cellular Urethane (MCU) products; and

(b) all foaming and fabrication business as acquired by the Company from M/s. Polyflex India Private Limited and Polyflex Engineering Private Limited to and In favour of HFRL effective 22nd January 2010, 1oge1hei wilh aii assels, which include property, rights and powers and liabilities, which include duties of every description relating to the aforesaid businesses.

The shareholders also authorized the board of directors to determine the consideration for the said transfer of business. Accordingly, the board of directors fixed the sale consideration at Rs. 46.50 Cr which was settled partly by way of allotment of 1,02,00,000 equity shares of Rs. 10/- each at a premium of Rs. 17/- per share amounting to Rs.27.54 Cr in the equity capital of HFRL and the balance consideration of Rs. 18.96 Cr by way of cash, both aggregating to Rs.46.50 Cr.

During the year, the Company and M/S.F.S Fehrer Automotive GmbH, Germany (Fehrer) entered into a Joint Venture agreement on 28th May 2009 to control and manage the business activities of HFRL. In terms of the said Joint Venture agreement, HFRL allotted 68,33,364 equity shares of Rs. 10/- each for cash at a price of Rs. 101.54 per share (including a premium of Rs.91.54 per share) aggregating to Rs.69.39 Cr to its foreign collaborators, namely Fehrer on 8th February 2010.

The shareholding of the Company in HFRL, in view of the above allotment of shares by HFRL to Fehrer, got reduced from 100% to 60%. Hence, the status of HFRL changed from that of the wholly owned subsidiary to that of a subsidiary of the Company effective 8th February 2010.

It may be noted from the annual accounts of HFRL, that it has become a material non-listed Indian subsidiary in terms of sub-clause III of clause 49 of the Listing Agreement, as the total turnover of the subsidiary exceeds 20% of the consolidated turnover of the Company. Shareholders ate requested to note that the Company is fully compliant with the provisions of the aforesaid clause 49 of the Listing Agreement.

As on the date of this report, HFRL is the only subsidiary of the Company.

The annual accounts of the subsidiary for the period ended 31st March 2010 is consolidated with the accounts of the Company in accordance with Accounting Standard 21 (AS 21) prescribed by The Institute of Chartered Accountants of India pursuant to clause 32 of the Listing Agreement. The consolidated accounts duly audited by the statutory auditors of the Company and the consolidated financial information of the subsidiary form part of the annual report.

As required by Section 212 of the Companies Act, 1956, a statement and a copy of the audited annual accounts of HFRL, for the period ended 31st March 2010 together with reports of the directors and the statutory auditors are attached to the balance sheet of the Company.

5. DIRECTORS

During the year, Mr C N Prasad, director, retires at the ensuing annual general meeting of the Company and being eligible, offers himself for re- appointment.

His brief resume and other information have been detailed in the notice convening annual general meeting of the Company. Appropriate resolution for his re-appointment is being placed for approval of the shareholders at the ensuing annual general meeting. Your directors recommend his re-appointment as a director of the Company.

6. AUDITORS

M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai, retire at the ensuing annual general meeting and are eligible for le-appoinlrnent.

The Company has received a letter from them, stating that the appointment, if made, will be within the limit prescribed under Section 224(1 B) of the Companies Act, 1956.

7. CORPORATE GOVERNANCE

The Company has been practicing the principles of good corporate governance over the years and lays strong emphasis on transparency, accountability and integrity.

A separate section on Corporate Governance and a certificate from the statutory auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges form part of the Annual Report.

The president and the senior manager (finance) of the Company have certified the financial statements and other connected matters in accordance with clause 49(V) of the Listing Agreement pertaining to CEO/CFO certification for the financial year ended 31 * March 2010.

The Ministry of Corporate Affairs issued Corporate Governance Voluntary Guidelines 2009 in the second half of December 2009. The guidelines broadly outline conditions for appointment of directors, their remuneration / responsibilities, risk management by the board, the enhanced role of audit committee, rotation of audit partners, firms and conduct of secretarial audit, The Company while generally meeting the various requirements has already commenced taking steps for appropriate action for compliance of the relevant items of the guidelines.

8. STATUTORY STATEMENTS

Conservation of energy, technology absorption and foreign exchange earnings and outgo

As per the requirements of 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, the information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are given in the Annexure I to this report.

Particulars of employees

As required under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the Annexure II to this report.

However, as per the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, the report and accounts are being sent to all the shareholders of the Company excluding the aforesaid information on employees. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company.

Public Deposits

The Company has not accepted any deposit from the public within the meaning of Section 58A of the Companies Act, 1956 for the year ended 31 st March 2010.

Directors Responsibility Statement

Pursuant to the requirement of Section 217(2M) of the Companies Act, 1956 with respect to directors responsibility statement, it is hereby confirmed:

(i) that in the preparation of annual accounts for the financial year ended 31 * March, 2010, the applicable accounting standards had been followed along wfth proper explanation relating to material departures;

(ii) that the directors had selected such accounting policies and applied them consistently and made judgements 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 year and of the profit of the Company for the year under review;

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

(iv) that the directors had prepared the accounts for the financial year ended 31 * March 2010 on a "going concern basis".

9. ACKNOWLEDGEMENT

The directors acknowledge the support and co-operation received from the promoters, Harita Group and Mr Martin Grammer.

The directors thank the customers, suppliers, financial institutions and bankers for their valuable support and assistance.

The directors wish to place on record their appreciation of the sincere efforts of all the employees of the Company during the year under review.

The directors also thank the shareholders for their continued faith in the Company.

For and on behalf of the Board

Chennai H LAKSHMANAN

30th July 2010 Chairman