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Directors Report of Hindustan Motors Ltd.

Mar 31, 2016

Directors'' Report to the Members

The Directors present their seventy-fourth Annual Report together with audited financial statements of the Company for the year ended March 31, 2016.

Financial Results/Performance

The figures for the year under review is not comparable with the previous financial year 2014-15 due to the fact that during the financial year 2014-15 the Uttarpara Plant was under suspension of work since 24th May, 2014 and the Plant was under operation only from 1st April, 2014 to 23rd May, 2014 and for the financial year 2015-16, the Uttarpara Plant was under suspension of work for the whole year.

During the year under review, the Company’s revenue was Rs. 0.87 Crores compared to Rs.16.95 Crores in the previous financial year. The following table gives a summary of the performance.

(Rs. in Crores)

Particulars

Standalone

Consolidated

2015-16

2014-15

2015-16

2014-15

Gross Revenue from Operations

0.87

16.95

0.87

16.95

Net Revenue from Operations

0.81

15.10

0.81

15.10

Profit/(Loss) before Exceptional items and Tax

(32.04)

(41.90)

(31.66)

(41.90)

Exceptional items (Income)

-

-

Profit / (Loss) before Tax

(32.04)

(41.90)

(31.66)

(41.90)

Tax Expenses

-

-

Profit / (Loss) For the Period

(32.04)

(41.90)

(31.66)

(41.90)

Standalone

The revenue account shows a loss of Rs.32.04 Crores after providing Rs.1.89 Crores for depreciation & amortization expense. There is a deficit of Rs.233.05 Crores as at the end of the current year as against Rs.201.00 Crores in the last year.

The losses during this year includes expenses incurred towards voluntary retirement scheme opted by 645 employees and provision for diminishing in the carrying value of inventories post declaration of suspension of work at Uttarpara Plant and layoff at Pithampur Plant.

Consolidated

The revenue account shows a loss of Rs.31.66 Crores after providing Rs.1.89 Crores for depreciation & amortization expense. There is a deficit of Rs.232.86 Crores as at the end of the current year as against ? 201.19 Crores in the last year.

The losses during this year includes expenses incurred towards voluntary retirement scheme opted by 645 employees and provision for diminishing in the carrying value of inventories post declaration of suspension of work at Uttarpara Plant and layoff at Pithampur Plant.

Review of Operations

As reported earlier that due to low productivity, growing indiscipline, shortage of funds and lack of demand for products, the Company was compelled to declare "Suspension of work" at its Uttarpara Plant with effect from 24th May, 2014 and the suspension of work is continuing due to no change in the situation. The lay off in Company’s Pithampur Plant with effect from 4th December, 2014 due to lack of orders is also continuing.

No material changes or commitments or any significant and material adverse orders or rulings passed by the regulators or Courts or Tribunals impacting the going concern status and Company’s operations in future have occurred between end of the financial year of the company and date of this report.

There has also been no change during the period under review in the nature of business of the Company or its subsidiary. Steps are being taken to close the business of Company’s subsidiary in USA subject to necessary compliances and approvals.

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

A detailed Management Discussion & Analysis Report forms part of this report is annexed as Annexure-1.

Outlook for 2016-17

The suspension of work at Company’s Uttarpara Plant and lay off at Company’s Pithampur Plant are continuing as it is unviable to operate the two plants under present business conditions.

In an effort to revive operations, the Company has been engaged in scouting for tie-ups with potential investors/strategic partners who can introduce newer product portfolios in the market and infuse capital into the Company.

The Company has started process of rationalizing the cost post suspension of work at Uttarpara plant and in the process, has provided Voluntary retirement to employees. It has reduced the fixed cost including employee cost considerably and continuously working on further reducing its fixed cost.

The Company is in the process of selling identified assets subject to necessary approvals to improve net worth as well as immediate cash generation to meet its financial obligations.

Board for Industrial and Financial Reconstruction

As the accumulated losses of the Company at the end of financial year ended on 30 September, 2013 exceeded its entire net worth, the Company has made reference to the Board for Industrial and Financial Reconstruction (BIFR) under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. The reference has been registered by BIFR and proceedings are going on.

Particulars of Loans, Guarantees or Investments

There are no Loans, Guarantees and Investments made under the provisions of Section 186 of the Companies Act, 2013 during the year under review. Details of Loans, Guarantees and Investments as at the year end are given in the notes to the Financial Statements.

Related Party Transactions

There are no contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013. The details of other transactions entered into with the Related Parties are given in the Note -37 to the Financial Statements.

Deposits

Your Company has not accepted any deposit within the meaning of Section 73 of the Companies Act, 2013 and the Rules made there under and therefore, no amount of principal or interest was outstanding as on the date of Balance Sheet.

Debentures

On 29th September, 2014, the Company allotted 20,53,00,000 - 10.25% Secured Non-Convertible Debentures of ? 1 each to Lenders (Banks/Financial Institutions). The said Debentures are redeemable in three equal annual installments along with interest starting from September 29, 2015. The Company is in the process of making such payment.

Corporate Social Responsibility Initiatives

In view of the continuing losses, the Company is not in a position to make any expenditure under Corporate Social Responsibility as per the provisions of Companies Act, 2013.

Risks and Concerns and its Management

The Company is exposed to have some internal risks to generate liquidity to meet the existing liability of the Company and day to day activities as the Uttarpara Plant of the Company is still under suspension of work and Pithampur Plant of the Company is still under layoff.

In order to identify and mitigate risks, the Company has constituted a Corporate Risk Management Committee. The details of Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Board’s Report. The Company has a Corporate Risk Management Charter to identify the nature and magnitude of risk associated with the Company and to take steps for mitigating the impact of such risks. The Corporate Risk Management Committee continuously identify and prioritize the risks associated with the functioning of the Company, lays down mitigation plan for identified risks with assigning responsibilities and adequately monitoring and managing the same. These are reviewed periodically and placed before the Board.

Industrial Relations

As reported earlier, the Company has declared "Suspension of Work" at its Uttarpara Plant in Hooghly District of West Bengal with effect from 24th May, 2014. During the year, 645 nos. of employees opted Voluntary Retirement Scheme (VRS) by giving a lump sum amount on such early retirement. At Pithampur Plant, the eight staff and technician grade employees have been laid off with effect from 4th December, 2014. The general industrial relation at both the plants is very sensitive but being managed. The number of employees as on 31st March, 2016 is 677.

Extract of Annual Return

The extract of the Annual Return in form MGT 9 is annexed herewith as Annexure-2.

Meetings of the Board and Audit Committee

During the year, four Board Meetings and four Audit Committee Meetings were convened and held. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. The Audit Committee comprises Independent Directors namely Smt. Mou Mukherjee (Chairperson), Shri Raj Kamal Johri and Shri Sanjay Basu (up to 16th September, 2015) and Shri A. Sankaranarayanan as other member. All the recommendations made by the Audit Committee were accepted by Board. Further details regarding Board Meetings and Audit Committee are given in the Corporate Governance Report which forms part of the Board’s Report.

Corporate Governance

The Company continues to remain committed to high standards of corporate governance. The report on corporate governance as per the requirement of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this report is annexed as Annexure-3. The Company has complied with all the requirements of corporate governance. The certificate from the Auditors of the Company confirming compliance to the conditions of the corporate governance requirements is also annexed.

Directors'' Responsibility Statement

In terms of the requirement of Section 134 of the Companies Act, 2013, Directors’ Responsibility Statement is annexed as Annexure-4 to this report.

Information on Remuneration

Information as per the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(1), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure-5 and Annexure-6 to this report.

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

Additional Information relating to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under Section 134(3)(m) of the Companies Act, 2013 is annexed as Annexure-7 to this report.

Internal Financial Controls Systems

The Company has comprehensive and adequate internal financial controls system for all major processes including financial statements to ensure reliability of reporting. The system also helps management to have timely data/feedback on various operational parameters for effective review. It also ensures proper safeguarding of assets across the Company and its economical use. The internal financial controls system of the Company is commensurate with the size, scale and complexity of its operations. The systems and controls are periodically reviewed and modified based on the requirement. The Company has an internal audit function which is empowered to examine the adequacy and compliance with policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of risk management, control and governance process. The scope of Internal Audit is well defined and documented and the audit committee reviews the observations of the Internal Audit critically. The composition and working of the audit committee forms part of the Corporate Governance Report.

Auditors

The Report by the Auditors is self-explanatory. Your Directors request you to ratify the appointment of auditors for another term beginning the conclusion of the ensuing Annual General Meeting till the conclusion of the subsequent Annual General Meeting and fix their remuneration as specified in the proposed resolution attached to the notice.

Further, with regard to preparation of accounts on going concern basis, the Auditors have made some observations under "Emphasis of Matter" appearing in the Auditors’ Report which the management has responded in Note-43 to the audited financial statements for the year ended 31st March, 2016.

Secretarial Audit

The Report of the Secretarial Auditor is annexed herewith as Annexure-8. There are no qualifications or observations or remarks made by Secretarial Auditor in his report.

Subsidiary

The Company has only one subsidiary Hindustan Motors Limited, USA. Hindustan Motors Limited, USA was mainly engaged in the business of providing engineering services in automotive and other industrial sectors in USA. The subsidiary has not done any business since 2009-10. Steps are being taken to close the business of Company’s subsidiary in USA subject to necessary compliances and approvals.

As required salient features of financial statements of Hindustan Motors Limited, USA have been disclosed in Annexure-9 to this report.

Declaration by Independent Directors

Shri Raj Kamal Johri and Smt. Mou Mukherjee are Independent Directors on the Board of your Company. In the opinion of the Board and as confirmed by these Directors, they fulfill the conditions specified in Section 149 of the Companies Act, 2013 and the Rules made there under about their status as Independent Directors of the Company.

Directors

Shri Sanjay Basu resigned as Director of the Company with effect from 17th September, 2015. The Board places on record its high appreciation for the valuable services rendered by Shri Sanjay Basu during his tenure as Director of your Company.

At the ensuing Annual General Meeting, Shri Uttam Bose, Director of the Company, retires by rotation and being eligible offers himself for re-appointment.

Information about the Director proposed to be reappointed as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is provided in the Report on Corporate Governance forming part of this Report.

Key Managerial Personnel

Shri Moloy Chowdhury, Manager designated as Chief Executive Officer of the Company resigned from the services of the Company with effect from 16th June, 2015.

Shri Ajay Kumar Bansal has been appointed as Chief Executive Officer of the Company with effect from 2nd November, 2015 for a period of two years.

Shri Ajay Kumar Bansal has resigned from the services of the Company with effect from the close of business hours on 13th May, 2016.

Shri Tarun Kumar Kabra, Company Secretary resigned from the services of the Company with effect from the close of business hours on 31st December, 2015.

Ms. Sanu Agarwal has been appointed as Secretary of the Company with effect from 25th May, 2016.

Policy on Appointment of Director and Remuneration

The Nomination and Remuneration Committee identifies and ascertains the integrity, qualification, expertise, skills, knowledge and experience of the person for appointment as Director and Key Managerial Personnel. The appointment of a Director as recommended by the Nomination and Remuneration Committee requires approval of the Board.

The remuneration / compensation / commission etc. to the Directors and Key Managerial Personnel is proposed by the Nomination and Remuneration Committee in compliance with requirements of the Companies Act and recommended to the Board for it’s approval. Approval of Shareholders is obtained, if required.

The Directors receive remuneration by way of fees for attending meetings of the Board or committees thereof.

At the time of appointing an Independent Director, a formal letter of appointment is given to the candidate, which inter-alia, explains the role, functions, duties and responsibilities expected of the person as an Independent Director of the Company. The Independent Director is also explained in detail the compliance required from him under the Companies Act, 2013 and other relevant regulations. The independence of Director is decided as per provisions of the Companies Act, 2013.

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for remuneration of Directors, Key Managerial Personnel and Senior Management. The said Remuneration Policy is annexed as Annexure-10 to this report.

Board Evaluation

The Board of Directors evaluated the annual performance of the Board as a whole, its committees and the directors individually in accordance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in the following manner:-

i. Structured evaluation forms, as recommended by the Nomination and Remuneration Committee, after taking into consideration inputs received from the Directors, covering various aspects of the Board’s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance, for evaluation of the performance of the Board, its Committees and each director were provided to all the members of the Board.

ii. The members of the Board were requested to evaluate by filling the evaluation forms and the duly filled in evaluation forms were required to be sent to the Company Secretary in a sealed envelope or personally submitted to the Chairman at the concerned meeting.

iii. Based on the individual evaluation of the Directors, the Board initiated a detailed discussion at the concerned meeting on the performance of the Board/Committee/Individual Director, and formulated a final collective evaluation of the Board. The Board also provided an individual feedback to the concerned director on areas of improvement if any.

A separate meeting of Independent Directors was held on 15th December, 2015 to evaluate the performance evaluation of the Chairman of the meeting of Board of Directors (as there is no chairman of the Board), the Non-Independent Directors, the Board and flow of information from management.

Vigil Mechanism/Whistle Blower Policy

As per Section 177(9) of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Equity Listing Agreement, the Company has established an effective vigil mechanism named Whistle Blower Policy ("the Policy") which is also in conformity with the Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with a view to provide a mechanism for Directors and Employees of the Company inter alia to raise genuine concerns of any violations of legal or regulatory requirements, incorrect or misrepresentation of any financial statements and reports, etc. The Company encourages its employees to use the mechanism and has made provision for direct access to the Chairman of the Audit Committee in appropriate and exceptional cases. Adequate safeguards against victimization of the persons who use such mechanism are provided in the policy. The policy is posted on the website of the Company www.hindmotor.com.

Disclosure under The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has in place a policy for prevention of sexual harassment in accordance with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company did not receive any complaint during the year 2015-16.

Appreciation

Your Directors acknowledge and thank the Company’s customers, shareholders, state government authorities, business associates, banks and financial institutions for the support extended to the Company. Your Directors also record their appreciation for the commitment and dedication of the employees of your Company.

For and on behalf of the Board of Directors

Kolkata Uttam Bose A. Sankaranarayanan

25th May, 2016 Director Director


Mar 31, 2014

Dear members,

The Directors present their Seventy-second Annual Report together with annual accounts of the Company for the six-month period ended March 31, 2014.

Withdrawal of Scheme of Arrangement for Demerger and divestment of Chennai Car Plant

In order to bring long term viability in the operations of the Company, the Board had decided to demerge Company''s Chennai Car Plant in January, 2013. The objective of demerger of Company''s Chennai Car Plant was to induct a suitable investor/global leader in the respective businesses of the Company for viability in the long term. This is because the considerations, factors and financials applicable to the business comprised in the Chennai Car Plant and Uttarpara Plant including growth trajectories, maturity stage and requirement of funds are different and divergent in nature. However the Company had to withdraw the said Demerger Scheme due to procedural delays, delays in getting requisite approvals and also due to various developments and changes which have taken place without the Scheme having come into effect since its filing.

The Company entered into a Working Arrangement Agreement dated 5th January, 2014 with Hindustan Motor Finance Corporation Limited (HMFCL), to use and operate the Chennai Car Plant of the Company at Adigathur, Kadambathur 631 023 Tiruvallur in the State of Tamil Nadu and to use its infrastructural facilities thereat.

In the meantime, the Company also decided to divest the Chennai Car Plant and obtained approval of the shareholders through postal ballot. The Company made several efforts to find suitable buyers for its Chennai Car Plant. Since no other party was interested, the Company divested the Chennai Car Plant on a going concern basis to HMFCL at a value approved by registered valuers.

Thereafter the Company, in supersession of the Working Arrangement Agreement dated 5th January, 2014, handed over possession of the Chennai Car Plant to HMFCL on 30th March, 2014.

Financial Results

The financial year 2013-14 is for a period of six months ending 31st March, 2014.

The figures for the period under review being for six months are strictly not comparable with the previous financial year, which consisted of eighteen months. During the period under review, the Company''s revenue was Rs. 226 Crores compared to Rs. 881 Crores in the previous financial year. The following table gives a summary of the performance. (Rs. in Crores) 2013-14 2012-13 (6 months) (18 months)

Gross Revenue from Operations 225.81 880.78

Net Revenue from Operations 182.78 722.89

Profit/(Loss) before Exceptional items and Tax (103.45) (159.99)

Exceptional items (Income) 102.75 80.01

Profit / (Loss) before Tax (0.71) (79.98)

Tax Expenses 2.37 (8.78)

Profit / (Loss) For the Period (3.07) (71.20)

The revenue account shows a loss of Rs. 3.07 Crores after providing Rs. 8.44 Crores for depreciation & amortisation expense and Rs. 2.37 Crores for tax expenses. There was a deficit of Rs. 148.92 Crores in the Statement of Profit and Loss in the last year. After considering the results of the period under review, there is a deficit of Rs. 151.99 Crores in the Statement of Profit and Loss as at the end of the period.

During the period, the Company divested the Chennai Car Plant as well as sold its entire holding of 5,00,000 equity shares of Rs. 5/- each in HMFCL and balance 12,17,000 equity shares of Rs. 10/- in HM Export Limited and consequently an aggregate profit of Rs. 102.75 Crores thereon has been included in the Statement of Profit and Loss.

HMFCL ceased to be a subsidiary of the Company with effect from 12th December, 2013 when it issued further shares and became an associate of the Company with effect from that date. Further consequent to the aforesaid sale of shares in HMFCL by the Company its holding in HMFCL reduced to nil and it ceased to be an associate of the Company with effect from 25th March, 2014.

HM Export Limited ceased to be an associate of the Company with effect from 12th December, 2013.

As informed earlier, due to sale of property at Halol, Gujarat and consequent profit in the year 2011, lenders had made a claim of recompense of interest under Corporate Debt Restructuring Scheme (CDR) treating this profit as "windfall gain". The Company requested the lenders to waive a significant portion of the demand based on the facts and circumstances of its case as well as justifiable reasons and to be reasonable in their claim as the Company never made any profits from operations during CDR period. Further, since the Company has completed ten years under Corporate Debt Restructuring Scheme, it is required to exit CDR. At the time of exit, recompense of interest is to be paid to the lenders for the sacrifice made by them under CDR. As per the CDR Guidelines on recompense of interest, the total amount of recompense of interest as on 31st March, 2014 worked out to Rs. 90.21 Crores including the effect of compounding over 10 years for the difference in interest rates for respective years. The Corporate Debt Restructuring Empowered Group (CDR EG) at its meeting held on 28th June, 2014, approved the payment of recompense amount of Rs. 67.66 Crores by combination of cash, secured debentures and equity shares of the Company after waiving 25% of the total amount.

The Company has provided an amount of Rs. 49.48 Crores in the accounts of the Company for the period under review towards additional liability after considering past payments.

The Company will issue up to 2,38,87,300 Equity Shares of Rs. 5/- each at a price of Rs. 9.44 (including premium of Rs. 4.44) aggregating to Rs. 22.55 Crores and up to 20,53,00,000 - 10.25% Secured Non-Convertible Debentures of Rs. 1/- aggregating to Rs. 20.53 Crores on private placement basis to the lenders (Bank and Financial Institutions) towards part payment of recompense of interest amount. The issue of shares and debentures to the lenders will be subject to approval of Shareholders and other approvals as may be required. The debentures will be secured by mortgage/ charge on the assets of Uttarpara Plant of the Company.

The Government of West Bengal (GoWB) has alleged that the Company has realized an excess sum of Rs. 194.47 Crores from the sale of 314 acres of land at Hindmotor, Uttarpara, West Bengal in earlier years and it should refund the said amount along with interest thereon. The Company has been legally advised that there is no liability on the Company to make any payment against the alleged demand. Accordingly, the Company has denied and disputed the allegations.

The losses during this period were due to lower volumes, high cost and a slowdown in the automobile industry.

A Cash Flow Statement for the period under review is also attached to the enclosed Annual Accounts.

Review of Operations

The Company has been focusing on the automobile and auto component business consisting of forgings, castings and stampings with plants at Uttarpara, Tiruvallur and Pithampur. In the automobile business, the main focus is on the Ambassador, the Sports Utility Vehicle Pajero Sport and the goods-carrying Mini Truck called Winner.

Sales of automobiles during the period under review are 1813 compared to 7982 during the previous financial year of eighteen month.

The continuing increase in fuel prices, higher interest rates, and higher taxes / duties slowed down the overall growth of automobile industry during the period under review. The period under review has continued to be challenging for the Company. The operations at Uttarpara plant were adversely affected due to lower volumes of Ambassador and Winner and shortage of working capital. The operations at the Chennai Car Plant were adversely affected due to lower volumes of Pajero Sport caused mainly by higher fuel prices and increased interest rates.

Your Company is taking steps, subject to necessary compliances and approvals, to close the Company''s subsidiary in the USA.

A detailed Management Discussion & Analysis Report forms part of this report as Annexure-1.

Outlook for 2014-15

The Indian Economy is likely to improve gradually during financial year 2014-15 compared to financial year 2013-14. The automobile industry is also showing sign of improvement with the recovery in economy in spite of high interest rates and fuel prices during the current financial year.

The Company has two units - one near Kolkata at Uttarpara where Ambassador and Winner vehicles along with auto components are produced and the other near Indore at Pithampur where job work is carried out on behalf of other automobile manufacturers. During the last several years, the Company''s Uttarpara Plant has been experiencing steady decline in volumes. The Ambassador car is predominantly sold in niche segments such as taxis, institutional and commercial segments and sales have been declining due to intensity of competition from mid-size car and utility vehicles.

The high cost of production has also made the vehicle uncompetitive in the market. The Uttarpara plant could not recover from the damage to its goodwill and business credibility faced by it during the major labour unrest that resulted in suspension of work during April/May, 2007. As a result the Company''s revenues for vehicle and auto component lines of business has been adversely affected. This is reflected in the declining trend in sales of vehicle. The situation further deteriorated from 2010-11 onwards due to non-availability of BS-IV compliant diesel engines and lower orders from government customers. The Company could start production of BS-IV emission compliant Ambassador Diesel only in September 2013. However, Company was unable to increase production due to lower demand, high costs and shortage of working capital. The delay in divestment of the business / interests of the Company in the Forge Shop and Foundry Shop at Uttarpara, West Bengal to reduce continuous operating losses has further worsened the financial conditions of the Company.

As a combined effect of above, the Company has been suffering from huge operating losses for the past several years. These losses have been funded year after year mainly from the sale of Company''s assets, through monetization of investments, capital infusion by the Promoters and other means.

As a result of continuous losses the Company has huge outstanding liabilities which are increasing with time. In March 2014, the Company divested its Chennai Car Plant in an effort to help in meeting the huge outstanding liabilities with the proceeds of the divestment.

Therefore, in view of the continuous cash losses as well as worsening conditions at its Uttarpara Plant as stated above, the Company was left with no other alternative but to declare "suspension of work" at its Uttarpara plant with effect from 24th May, 2014.

In an effort to revive operations, the Company has been actively engaged in scouting for tie-ups with potential investors/strategic partners who can introduce new models in the market and infuse capital into the Company.

Your directors are continuously making efforts to restructure the Company, and in this regard an external consultant has been hired to give an external perspective on the challenges and possible solutions at the Uttarpara Plant of the Company.

The Company has also approached the Government of West Bengal to provide all support to revive the Company. Delisting of shares The Company is taking necessary steps to delist its shares from Calcutta Stock Exchange Limited (CSE). There has been no trading in the shares of the Company on CSE for many years and the delisting will not affect the interest of the shareholders of the Company in any manner.

Board for Industrial and Financial Reconstruction

As the accumulated losses of the Company at the end of financial year ended on 30 September, 2013 exceeded its entire net worth, the Company has made reference to the Board for Industrial and Financial Reconstruction (BIFR) under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. The reference has been registered by BIFR.

Industrial Relations

In spite of all adverse conditions and financial hardships, your Company tried to maintain cordial relations across all plants during the period under review.

However, owing to delay in wages and salary payments, the industrial relations scenario started deteriorating with increased external influence but the situation was effectively and efficiently managed by proactive approaches at the unit level. But due to indiscipline, increasing costs and reasons stated above your Company was compelled to declare suspension of work at its Uttarpara Plant from 24th May, 2014 onwards.

Corporate Governance

The Company continues to remain committed to high standards of corporate governance. The report on corporate governance as per the requirement of the listing agreement with stock exchanges forms part of this report as Annexure-2. The Company has complied with all the requirements of corporate governance. The certificate from the Auditors of the Company confirming compliance to the conditions of the corporate governance requirements is also annexed.

Statutory Declaration

The Company has complied with all the applicable Accounting Standards prescribed by Companies (Accounting Standards) Rules, 2006. In terms of the requirement of Section 217 of the Companies Act, 1956, Directors'' Responsibility Statement is enclosed as Annexure-3 to this report. The particulars of employees to be disclosed as per the provisions of sub-section (2A) of the said Section are also given as Annexure-4.

Additional Information relating to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under sub-section (1)(e) of the said Section is also given as Annexure-5 to this report.

There has been no material change and commitments affecting the financial position of the Company which have occurred between the end of the six month period 2013-14 and the date of this report except that of suspension of work at Uttarpara Plant of the Company with effect from 24th May, 2014 and settlement of liability of recompense of interest as reported in this report.

There has also been no change during the period under review in the nature of business of the Company or its subsidiaries. Hindustan Motor Finance Corporation Limited ceased to be a subsidiary of the Company with effect from 12th December 2013. Steps are being taken to close the business of Company''s subsidiary in USA subject to necessary compliances and approvals.

Auditors

The report by the Auditors is self-explanatory.

S R Batliboi & Co. LLP, Chartered Accountants, the Statutory Auditors of the Company has given notice in writing of their unwillingness to continue as the Statutory Auditors of the Company from the conclusion of the next Annual General Meeting.

The Company has received a letter pursuant to Sections 139 and 141 of the Companies Act, 2013 from Ray & Ray, Chartered Accountants regarding their eligibility for appointment as Statutory Auditors of the Company Your Directors request you to appoint Ray & Ray, Chartered Accountants (FRN 301072E) as Statutory Auditors of the Company to hold office for a term of five years from the conclusion of ensuing Seventy-second Annual General Meeting of the Company till the conclusion of the Seventy-seventh Annual General Meeting (subject to ratification by shareholders at every Annual General Meeting) and to fix their remuneration.

Cost Auditors

M/s Shome & Banerjee, Cost Accountants are the Cost Auditors of the Company for the financial year 2013-14 (six month period). The Company has filed cost audit report for the financial year 2012-13 (eighteen month period) on 14th March, 2014 and the due date for filing cost audit report for the financial year 2013-14 is 27th September, 2014.

Subsidiaries

As per general exemption granted vide Government of India, Ministry of Corporate Affairs'' general circular no. 2/2011 dated 8th February, 2011, the Company has not attached the annual accounts of its subsidiary Hindustan Motors Limited, USA to this Annual Report. As required by the said circular, the relevant information for the subsidiary has been disclosed in the consolidated financial statements attached to this Annual Report.

The Company will make available the annual accounts of the subsidiary and related information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary will also be kept for inspection by any member of the Company at the registered office of the Company and that of the subsidiary. The Consolidated financial statements presented by the Company include the financial information of its subsidiary.

Hindustan Motor Finance Corporation Limited ceased to be a subsidiary of the Company with effect from 12th December, 2013.

Directors

Dr. Anand C. Burman, Shri Naresh Chandra, Shri Kranti Sinha and Shri Pradip Kumar Khaitan resigned as Directors of the Company with effect from 26th December, 2013, 6th February, 2014, 9th May, 2014 and 29th May, 2014 respectively. The Board places on record its high appreciation for the valuable services rendered by Dr. Anand C. Burman, Shri Naresh Chandra, Shri Kranti Sinha and Shri Pradip Kumar Khaitan during their tenure as Directors of your Company.

Shri C. K. Birla resigned as Chairman and Director of the Company with effect from 28th December, 2013. The Board places on record its high appreciation for the valuable services rendered by Shri C. K. Birla during his tenure as Director of your Company.

Shri Uttam Bose has resigned as Managing Director of the Company with effect from the close of business hours on 9th May, 2014. The Board places on record its high appreciation for the valuable services rendered by Shri Uttam Bose during his tenure as Managing Director of the Company. Shri Uttam Bose was appointed as an Additional Director with effect from 10th May, 2014. Shri Uttam Bose holds the office up to the date of the ensuing Annual General Meeting and is eligible for appointment as Director liable to retire by rotation.

Shri Sanjay Basu was appointed as an Additional Director with effect from 6th February, 2014. Shri Sanjay Basu holds the office up to the date of the ensuing Annual General Meeting and is eligible for appointment as Independent Director of the Company.

Shri Raj Kamal Johri was appointed as an Additional Director with effect from 6th February, 2014. Shri Raj Kamal Johri holds the office up to the date of the ensuing Annual General Meeting and is eligible for appointment as Independent Director of the Company.

At the ensuing Annual General Meeting, Shri A. Sankaranarayanan, Director of the Company, retires by rotation and being eligible offers himself for re-appointment.

Key Managerial Personnel

Shri Yogesh Goenka, the Chief Financial Officer and Company Secretary has resigned from the services of the Company with effect from the close of business hours on 9th May, 2014.

Shri Moloy Chowdhury has been appointed as Manager of the Company designated as Chief Executive Officer with effect from 10th May, 2014 for a period of two years. The appointment of Shri Moloy Chowdhury is subject to necessary approval(s).

Shri Tarun Kumar Kabra has been appointed as Company Secretary with effect from 10th May, 2014. Mr. Kabra is also Compliance Officer of the Company with effect from 10th May 2014.

Shri Aniruddha Sarkar has been appointed as Chief Financial Officer of the Company designated as Chief Financial Officer and Head of Legal with effect from 10th May 2014.

Appreciation

Your Directors acknowledge and thank the Company''s customers, shareholders, dealers, vendors, state government authorities, business associates, banks and financial institutions for the support extended to the Company. Your Directors also record their appreciation for the commitment and dedication of the employees of your Company.

For and on behalf of the Board of Directors

Kolkata Uttam Bose A. Sankaranarayanan 5th August, 2014 Director Director


Sep 30, 2013

To the Shareholders

The Directors present their Seventyfirst Annual Report together with annual accounts of the Company for the eighteen month period ended September 30, 2013.

Scheme of Arrangement for Demerger

The Board of Directors of the Company at its meetings held on 10th January 2013 and 9th February 2013 approved a scheme of arrangement for demerger of the "Chennai Car Plant" of the Company to its wholly owned subsidiary namely Hindustan Motor Finance Corporation Limited with effect from 1st April, 2012. The scheme is subject to requisite approvals, including sanction of the High Court. The shareholders of the Company present at the Court Convened Meeting held on 23rd September, 2013 and public shareholders through voting by postal ballot have approved the said scheme of arrangement with requisite majority. It is now awaiting sanction of the Court.

Financial Results

After taking into account the ongoing initiatives including the proposed demerger of the Chennai Car Plant of the Company, the financial year 2012-13 was extended by a period of six months ending 30th September, 2013 with the approval of Registrar of Companies, West Bengal. Accordingly, the financial results are presented for the eighteen month period ending 30th September, 2013. However since the requisite approvals relating to demerger have not yet been received, no accounting adjustment thereof has been made in the financial statements of the Company for the period under review.

The figures for the period under review being for eighteen months are strictly not comparable with the previous year, which consisted of twelve months. During the period under review, the Company''s revenue was Rs. 881 Crores compared to Rs. 590 Crores in the previous financial year. The following table gives a summary of the performance.

(Rs.in Crores)

2012-13 2011-12 (18 months) (12 months)

Gross Revenue from Operations 88078 590.49

Net Revenue from Operations 72789 494.26

Profit/(Loss) before Exceptional items and Tax (159.99) (133.96)

Exceptional items (Income) 100.56

Profit/(Loss) before Tax (79.98) (33.40)

Tax Expenses (8.8) (3.44)

Profit/(Loss) For the Period/Year (71.20) (29.96)

The revenue account shows a loss of Rs. 71.20 Crores after providing Rs. 21.97 Crores for depreciation & amortisation expense and taking credit of Rs. 8.78 Crores for deferred tax net of other taxes. There was a deficit of Rs. 77.72 Crores in the Statement of Profit and Loss in the last year. After considering the results of the period under review, there is a deficit of Rs. 148.92 Crores in the Statement of Profit and Loss as at the end of the period. As the accumulated losses of the Company at the end of the financial year ended 30th September, 2013 exceeded its entire net worth, the Company will take necessary steps to comply with the legal requirements.

During the period, the Company sold 29,55,000 equity shares of Rs. 10/- each of AVTEC Limited and 33,82,857 equity shares of Rs. 10/- each of HM Export Limited and aggregate profit of Rs. 80.01 Crores thereon has been included in the Statement of Profit and Loss.

Consequent to the aforesaid sale of shares, its holding in AVTEC Limited reduced from 11.82 % to 0.04 % and in HM Export Limited from 99.99% to 26.46%. AVTEC Limited ceased to be an associate of the Company with effect from 28th March, 2013. HM Export Limited ceased to be a subsidiary of the Company with effect from 26th September, 2013 and is an associate of the Company from 26th September, 2013.

After the end of the period under review, the Company has sold the balance 12,17,000 equity shares of HM Export Limited to its wholly owned subsidiary, Hindustan Motor Finance Corporation Limited.

As informed earlier, due to sale of property at Halol, Gujarat and consequent profit in the year 2011, the Lenders had made a claim of recompense of interest under Corporate Debt Restructuring Scheme. The Company requested the Lenders to waive a significant portion of the demand based on the facts and circumstances of the case as well as justifiable reasons and to be reasonable in their claim. Pending final decision on the same, provision has been made for Rs. 15 Crores on account of this in the year 2010-11 and the amount has been paid to Lenders in April, 2011.

The Government of West Bengal (GoWB) has alleged that the Company has realized an excess sum of Rs. 194.47 Crores from the sale of 314 acres of land at Hindmotor, West Bengal in earlier years and it should refund the said amount along with interest thereon. The Company has been legally advised that there is no liability on the Company to make any payment against the alleged demand. Accordingly, the Company has denied and disputed the allegations.

The Company is examining different options to improve liquidity, reduce losses and strengthening of net worth in view of past accumulated losses. The losses during the year were mainly on account of slow down in the automobile industry as well as adverse foreign exchange rates.

A Cash Flow Statement for the period under review is also attached to the enclosed Annual Accounts.

Preferential Allotment

As informed in the previous year that in order to meet the funding requirements for capital expenditure and working capital, the Company has on 12th March, 2012 allotted to promoter/promoter group companies on preferential basis 1,18,00,000 Warrants with each Warrant convertible into one Equity Share of the Company of nominal value of Rs. 5/- each at a premium of Rs. 7.25 per share at the option of the Warrant holder at any time within a period of eighteen months from the date of allotment of Warrants on payment of balance 75% consideration.

The Company has, on 19th June, 2012, allotted 1,18,00,000 Equity Shares of Rs. 5/- each at a premium of Rs. 7.25 per share to promoter/ promoter group companies who have exercised the option of conversion of 1,18,00,000 Warrants allotted to them on preferential basis.

The shareholding of the promoters has increased from 32.19 % to 36.52 % on conversion of Warrants into Equity Shares.

Review of Operations

The Company has been focusing on automobile business and auto component business consisting of forgings, castings and stampings with plants at Uttarpara, Tiruvallur and Pithampur. In the automobile business, the main focus is on Ambassador, Cedia, Sports Utility Vehicles namely, Pajero Sport, Montero and Outlander and the goods carrying Mini Truck called ''Winner''.

Sale of automobiles during the period under review is 7982 numbers compared to 5099 numbers during the previous financial year.

The continuing increase in fuel prices, higher interest rates, and higher taxes / duties slowed down the overall growth of automobile industry during the period under review. The period under review has continued to be challenging for the Company. In the absence of a BS-IV compliant vehicle the operations at Uttarpara Plant was adversely affected due to lower volumes of Ambassador and Winner and shortage of working capital. Pajero Sport launched by the Chennai Car Plant of the Company in March, 2012 was well accepted by the Customer and has been adjudged "Off-roader of the Year 2012" by auto magazine BBC Top Gear. However the operation at the Chennai Car Plant was adversely affected due to lower volumes of other vehicles caused mainly by higher petrol prices and increased interest rates. Further adverse exchange rates and shortage of power availability in Tamil Nadu severely affected the margins on the products of the Chennai Car Plant.

The Company has entered into an agreement with Isuzu Motors India Private Limited in June, 2013 for contract manufacturing of Isuzu SUVs and pickup trucks in India, at its Chennai Car Plant. The manufacturing is expected to start from December, 2013. The agreement will enable the Company to optimally utilize its spare capacity at the Chennai Car Plant.

In September, 2013 the Company has launched a BS-IV compliant 1.5 litre diesel powered vehicle named Ambassador Encore from its Uttarpara Plant. The new Ambassador Encore has been appreciated by the taxi unions in Kolkata and West Bengal.

The Agreement with Isuzu Motors and launch of Ambassador Encore is expected to improve the performance of the Company during the current financial year.

Your Directors are pleased to inform that the Ambassador has won the crown for "the world''s best taxi" at the Beaulieu''s World of Top Gear motorsport show conducted by BBC Top Gear.

Your Company is taking steps, subject to necessary compliances and approvals, to close the Company''s subsidiary inUSA.

A detailed Management Discussion & Analysis Report forms part of this report as Annexure-1.

Outlook for 2013-14

The financial year 2013-14 will be for a period of six months from 1st October, 2013 to 31st March, 2014.

The growth rate of the Indian Economy has further slowed down and is expected to be lower during fiscal 2013- 14 compared to fiscal 2012-13. With high interest rate, higher taxes and fuel prices automobile industry is headed for a biggest slow down in a decade during the current fiscal year.

The launch of BS-IV compliant Ambassador Encore has opened the market for the Company in 17 metropolitan cities where sale of BS-III cars had been banned since April, 2010. The Company is ramping up production at its Uttarpara Plant in West Bengal as well as resurrecting its distribution network in these cities to meet the surging demand for the Encore.

The contract manufacturing of vehicles for Isuzu Motors will enable the Company to utilize the spare capacity at its Chennai Car Plant and will also contribute positively to its profitability.

The Company is preparing to launch new variants of Ambassador and Winner during the current financial year. The launch of BS-IV compliant Ambassador Encore is expected to increase sales volumes in the current financial year. The Company continues to strengthen its distribution network by expanding its dealerships to reach new markets. The Company is also exploring opportunities to export Ambassador and Winner. The Company also continues to focus on cost reduction efforts and improvements in operational efficiencies as well as value engineering activities to improve the margins. With these initiatives, the Company expects improved performance in the current financial year.

As regards component business, in view of smaller size and continuous operating losses, your directors have decided in their meeting held on 30th October, 2013 to divest the whole or part of the business / interests of the Company in the Forge Shop and Foundry Shop at Uttarpara, West Bengal. This is subject to approvals of lenders and other approvals as may be required.

Industrial Relations

Industrial relations generally remained cordial and satisfactory.

Human resources initiatives such as skill level upgradation, training, appropriate reward & recognition systems and productivity improvement are the key focus areas for development of the employees of the Company.

Corporate Governance

The Company continues to remain committed for high standards of corporate governance. The report on corporate governance as per the requirement of the listing agreement with stock exchanges forms part of this report as Annexure-2. The Company has complied with all the requirements of corporate governance The certificate from the Auditors of the Company confirming compliance to the conditions of the corporate governance requirements is also annexed.

Statutory Declaration

The Company has complied with all the applicable Accounting Standards prescribed by Companies (Accounting Standards) Rules, 2006. In terms of the requirement of Section 217 of the Companies Act, 1956, Directors'' Responsibility Statement is enclosed as Annexure-3 to this report. The particulars of employees to be disclosed as per the provisions of sub-section (2A) of the said Section is also given as Annexure-4.

Additional Information relating to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under sub-section (l)(e) of the said Section is also given as Annexure-5 to this report.

There has been no material change and commitments affecting the financial position of the Company which have occurred between the end of the tighten month period 2012-13 and the date of this report.

There has also been no change during the period under review in the nature of business of the Company or its subsidiaries. HM Export Limited ceased to be a subsidiary of the Company with effect from 26th September, 2013. Steps are being taken to close the business of Company''s subsidiary in USA subject to necessary compliances and approvals.

Auditors

The report by the Auditors is self-explanatory. Your Directors request you to re-appoint auditors for another term beginning the conclusion of the ensuing Annual General Meeting till the conclusion of the subsequent Annual General Meeting and approve their remuneration as specified in the proposed resolution attached to the notice.

Cost Auditors

M/s Shome & Banerjee, Cost Accountants are the Cost Auditors of the Company for the financial year 2012-13 (18 month period). The Company has filed cost audit report for the financial year 2011-12 on 6th December, 2012 and the due date for filing cost audit report for the financial year 2012-13 is 29th March, 2014.

Subsidiaries

As per general exemption granted vide Government of India, Ministry of Corporate Affairs'' general circular no. 2/2011 dated 8th February, 2011, the Company has not attached the annual accounts of its two subsidiaries namely Hindustan Motor Finance Corporation Limited and Hindustan Motors Limited, USA to this Annual Report. As required by the said circular, the relevant information for each subsidiary has been disclosed in the consolidated financial statements attached to this Annual Report.

The Company will make available the annual accounts of subsidiaries and the related information to any member of the Company who may be interested in obtaining the same. The annual accounts of subsidiaries will also be kept for inspection by any member of the Company at the registered office of the Company and that of respective subsidiaries The Consolidated financial statements presented by the Company include the financial information of its subsidiaries.

HM Export Limited ceased to be a subsidiary of the Company with effect from 26th September, 2013.

Directors

During the period under review, Shri Gautam Dutta was nominated by IDBI Bank Limited as Director of the Company with effect from 9th May, 2012 to fill in the casual vacancy caused by withdrawal of nomination of Shri Subroto Gupta as its nominee on Company''s Board. The Board places on record its high appreciation for the valuable services rendered by Shri Subroto Gupta during his tenure as Director of your Company.

During the period under review, nomination of Shri Vijay Kumar Sharma as Director of the Company was withdrawn by Life Insurance Corporation of India with effect from 13th August, 2012. The Board places on record its high appreciation for the valuable services rendered by Shri Vijay Kumar Sharma during his tenure as Director of your Company.

At the ensuing Annual General Meeting, Shri Naresh Chandra and Shri Kranti Sinha, Directors of the Company, retire by rotation and being eligible offer themselves for re-appointment.

Appreciation

Your Directors acknowledge and thank the customers, shareholders, dealers, vendors, state government authorities, business associates, banks and financial institutions for the support extended to the Company. Your Directors also record their appreciation for the commitment and dedication of the employees of your Company.

For and on behalf of the Board of Directors

New Delhi C.K. Birla

18th November, 2013 Chairman


Mar 31, 2012

The Directors present their Seventieth Annual Report together with annual accounts of the Company for the year ended March 31, 2012.

Financial Results

During the year under review, the Company's revenue was Rs 592 Crores compared to Rs 803 Crores in the previous financial year. The following table gives a summary of the performance.

(Rs in Crores) 2011-12 2010-11 Gross Revenue from Operations 591.93 802.71

Net Revenue from Operations 495.48 654.79 Profit/(Loss) before

Exceptional items and Tax (133.96) (100.62)

Exceptional items 100.56 96.81

Profit/(Loss)before Tax (33.40) (3.81)

Tax Expenses (3.44) (4.56)

Profit/(Loss)for the Year (29.96) 0.75

The revenue account shows a loss of Rs 29.96 Crore after providing Rs 21.79 Crores for depreciation & amortisation expense and taking credit of Rs 3.44 Crores for deferred tax net of other taxes. There was a deficit of Rs 47.76 Crores in the Statement of Profit and Loss in the last year. After considering the results of the year under review, there is a deficit of Rs 77.72 Crores in the Statement of Profit and Loss as at the end of the year.

During the year, the Company sold 30,67,000 equity shares of Rs 10/- each of AVTEC Limited and its immovable properties at Kolkata and Halol, Gujarat and aggregate profit of Rs 100.56 Crores thereon has been included in the Statement of Profit and Loss. Consequent to the sale of shares held by the Company in AVTEC Limited, its holding in AVTEC Limited (including the shareholding in AVTEC Limited through its subsidiary) reduced from 43.33 % to 31.06 %.

As informed in the previous year, due to sale of property at Halol, Gujarat and consequent profit, the Lenders had made a claim of recompense of interest under Corporate Debt Restructuring Scheme. The Company requested the Lenders to waive a significant portion of the demand based on the facts and circumstances of the case as well as justifiable reasons and to be reasonable in their claim. Pending final decision on the same, provision has been made for Rs 15 Crores on account of this in the year 2010-11 and the amount has been paid to Lenders in April, 2011.

A Cash Flow statement for the year under review is also attached to the enclosed Annual Accounts.

Preferential Allotment

In order to meet the funding requirements for capital expenditure and working capital, the Company has on 12th March, 2012 allotted to promoter/promoter group companies on preferential basis 1,18,00,000 Equity Shares of nominal value of Rs 5/- each at a premium of Rs 7.25 per share and 1,18,00,000 Warrants with each Warrant convertible into one Equity Share of the Company of nominal value of Rs 5/- each at a premium of Rs 7.25 per share at the option of the Warrant holder at any time within a period of eighteen months from the date of allotment of Warrants on payment of balance consideration. The Company has received 25% of consideration for such Warrants during the year.

The shareholding of the promoters has increased from 27.22% to 32.19% on allotment of Equity Shares and will further increase to 36.52% on conversion of Warrants into Equity Shares.

Review of Operations

The Company has been focusing on automobile business and auto component business consisting of forgings, castings and stampings with plants at Uttarpara, Tiruvallur and Pithampur. In the automobile business, the main focus is on Ambassador, Cedia, Sports Utility Vehicles namely, Pajero, Montero and Outlander and the goods carrying Mini Truck called 'Winner'.

Sale of automobiles during the year under review is 5139 numbers compared to 10097 numbers during the previous financial year.

The continuing higher interest rates and increased petrol prices slowed down the overall growth of automobile industry during the year under review. The year under review has been a challenging one for the Company. The operations at Uttarpara plant was adversely affected due to lower volumes of Ambassador and Winner and shortage of working capital. The operations at Chennai Car Plant was also adversely affected due to lower volumes caused mainly by higher petrol prices and increased interest rates. Further adverse exchange rates severely affected the margins on the products of Chennai Car Plant. The Company persuaded its collaborator Mitsubishi Motors Corporation, Japan to reduce kit prices in view of the higher foreign exchange rates as well as increased competition in the operating segment, the benefit of which started in the second half of the year.

In March, 2012, your Company launched a state-of-the- art sports utility vehicle (SUV), called Pajero Sport and a seven-seater upgraded version of the Mitsubishi Outlander both from its Chennai Car Plant under license from Mitsubishi Motors Corporation, Japan. A diesel- driven newer version of SUV, Pajero Sport will not only serve as an excellent successor to the existing Pajero but will also become a major product in the Company's portfolio to take on the stiff competition in the fast growing SUV segment. The Company started production of CNG driven Winner from its Pithampur Plant and a passenger carrier version is also being developed. These new products are expected to generate favorable response in the market place and increase the sales of your Company in the current financial year.

Your Company is taking steps, subject to necessary compliances and approvals, to close the Company's subsidiary in USA, also engaged in engineering design related software.

A detailed Management Discussion & Analysis Report (MDAR) forms part of this report as Annexure-1.

Outlook for 2012-13

With the growth rate of the Indian Economy expected to be higher during 2012-13 compared to 2011-12 and the indication of reduction in interest rate, the growth in automobile industry is expected to be higher during the current financial year. However, continuing higher fuel prices are cause for concern. The Company is preparing to launch new variants of Ambassador and Winner in the fast growing commercial vehicles segment during the current financial year. The Company is also upgrading its diesel engine to meet BS-IV emission norms. The launch of Pajero Sport and a seven-seater Outlander in March, 2012 is expected to increase sales volumes in the current financial year. The Company continues to strengthen its distribution network by expanding its dealerships as well as opening new warehouses to ensure timely deliveries. The Company also continues to focus on cost reduction efforts and improvements in operational efficiencies as well as value

engineering activities to improve the margins. With these initiatives, the Company expects improved performance in the current financial year.

As regards component business, those customers and products that were acquired during the year under review will come in the regular production stream in the current financial year and will add to the business of the Company.

Registered Office

Effective 10th March, 2012, the Registered Office of your Company is at Birla Building, 14th Floor, 9/1 R.N. Mukherjee Road, Kolkata-700001.

Industrial Relations

Industrial relations generally remained cordial and satisfactory.

Human resources initiatives such as skill level up gradation, training, appropriate reward & recognition systems and productivity improvement are the key focus areas for development of the employees of the Company.

Corporate Governance

The Company continues to remain committed for high standards of corporate governance. The report on corporate governance as per the requirement of the listing agreement with stock exchanges forms part of this report as Annexure-2. The Company has complied with all the requirements of corporate governance. The certificate from the Auditors of the Company confirming compliance to the conditions of the corporate governance requirements is also annexed.

Statutory Declaration

The Company has prepared and presented the financial statements for the year ended 31st March, 2012 in accordance with the revised Schedule VI notified under the Companies Act, 1956.

The Company has complied with all the applicable Accounting Standards prescribed by Companies (Accounting Standards) Rules, 2006. In terms of the requirement of Section 217 of the Companies Act, 1956, Directors' Responsibility Statement is enclosed as Annexure-3 to this report. The particulars of employees to be disclosed as per the provisions of sub-section (2A) of the said Section are also given as Annexure-4.

Additional Information relating to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under sub-section (1)(e) of the said Section is also given as Annexure-5 to this report.

There has been no material change and commitments affecting the financial position of the Company which have occurred between the end of the financial year 2011-12 and the date of this report.

There has also been no change during the financial year under review in the nature of Company's business or in the Company's subsidiaries. Steps are being taken to close the business of Company's subsidiary in USA subject to necessary compliances and approvals.

Auditors

The report by the Auditors is self-explanatory. Your Directors request you to re-appoint auditors for another term beginning the conclusion of the ensuing Annual General Meeting till the conclusion of the subsequent Annual General Meeting and approve their remuneration as specified in the proposed resolution attached to the notice.

Cost Auditors

M/s Shome & Banerjee, Cost Accountants are the Cost Auditors of the Company for the financial year 2011-

12. The Company has filed cost audit report for the financial year 2010-11 on 17th August, 2011 and the due date for filing cost audit report for the financial year 2011-12 is 27th September, 2012.

Subsidiaries

As per general exemption granted vide Government of India, Ministry of Corporate Affairs' general circular no. 2/2011 dated 8th February, 2011, the Company has not attached the annual accounts of its all the three subsidiaries namely Hindustan Motor Finance Corporation Limited, HM Export Limited and Hindustan Motors Limited, USA to this Annual Report. As required by the said circular, the relevant information for each subsidiary has been disclosed in the consolidated financial statements attached to this Annual Report.

The Company will make available the annual accounts of subsidiaries and the related information to any member of the Company who may be interested in obtaining the same. The annual accounts of subsidiaries will also be kept for inspection by any member of the Company at the registered office of the Company and that of respective subsidiaries. The Consolidated financial statements presented by the Company include the financial information of its subsidiaries.

The Company is in the process of creating pledge of 45,50,000 equity shares of Rs 10/- each held in its subsidiary, HM Export Limited in favour of its Lenders, as additional security under the Corporate Debt Restructuring package.

Directors

During the year under review, nomination of Shri Yogesh Kumar Rastogi as Director of the Company was withdrawn by ICICI Bank Limited with effect from 1st March, 2012. The Board places on record its high appreciation for the valuable services rendered by Shri Yogesh Kumar Rastogi during his tenure as Director of your Company.

At the ensuing Annual General Meeting, Shri P. K. Khaitan, Dr. Anand C. Burman and Shri V. K. Sharma, Directors of the Company, retire by rotation and being eligible offer themselves for re-appointment.

Shri Manoj Jha submitted his resignation as Managing Director of the Company with effect from the close of business hours on 31st January, 2012. The Board places on record its high appreciation for the valuable services rendered by Shri Manoj Jha during his tenure as Managing Director of the Company.

Shri Uttam Bose has been appointed as Managing Director of the Company with effect from 2nd April, 2012 for a period of three years.

Appreciation

Your Directors acknowledge and thank the customers, shareholders, dealers, vendors, state government authorities, business associates, banks and financial institutions for the support extended to the Company. Your Directors also record their appreciation for the commitment and dedication of the employees of your Company.

For and on behalf of the Board of Directors

New Delhi C.K. Birla

30th April, 2012 Chairman


Mar 31, 2011

The Directors present their Sixty-ninth Annual Report together with annual accounts of the Company for the year ended March 31, 2011.

Financial Results

During the year under review, the Companys revenue was Rs. 850 Crores compared to Rs. 737 Crores in the previous financial year. The following table gives a summary of the performance.

(Rs. in Crores)

2010-11 2009-10

Gross sales and services 850.04 736.88

Profit/(Loss) before Interest, Depreciation and Taxes 40.14 (4.59)

Interest Payment 27.16 11.04

Depreciation 16.74 17.63

Profit/(Loss) before Tax (3.76) (33.26)

Provision for Tax (4.51) 17.84

Profit/(Loss) After Taxation 0.75 (51.10)

The revenue account shows a profit of Rs. 0.75 Crore after providing Rs. 16.74 Crores for depreciation and taking credit of Rs. 4.51 Crores for deferred tax net of other taxes. There was a debit balance of Rs. 132.28 Crores in the Profit and Loss Account, which was brought forward from last year. After setting off the sums available from reduction of equity share capital by half and writing off securities premium account and considering the results of the year under review, there is a closing debit balance of Rs. 47.76 Crores in the Profit and Loss Account.

During the year, in respect of a sale tax demand on the Company aggregating to Rs. 85.83 Crores, the Honble Supreme Court of India decided the matter in favour of the Company.

During the year, the Company sold 62,18,000 equity shares of Rs. 10/- each (including 48,00,000 to its subsidiary) of AVTEC Limited and its immovable properties at Chennai and Halol, Gujarat and aggregate profit of Rs. 96.80 Crores thereon has been included in the Profit and Loss Account. Consequent to the sale of shares held by the Company in

AVTEC Limited, its holding in AVTEC Limited reduced from 49% to 24.13%.

The Company subscribed to additional 45,50,000 equity shares of Rs. 10/ each at a premium of Rs. 140/- per share of its subsidiary, HM Export Limited during the year aggregating to Rs. 68.25 Crores after obtaining approval of shareholders through postal ballot.

As you are aware that the accumulated losses of the Company at the end of financial year 31st March, 2010 had resulted in erosion of more than fifty percent of its peak net worth during the immediately preceding four financial years and therefore the Company had to report to the Board for Industrial and Financial Reconstruction (BIFR) about such erosion of net worth under Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985. Your directors are pleased to inform that the accumulated losses of the Company at the end of financial year 31st March, 2011 reduced to less than the fifty percent of its peak net worth during the immediately preceding four financial years and therefore the Company has ceased to be "potentially sick company" under the provisions of Section 23 of Sick Industrial Companies (Special Provisions) Act, 1985. An intimation in this regard shall be made to BIFR.

Due to sale of property at Halol, Gujarat and consequent profit, the Lenders have made a claim of recompense of interest under Corporate Debt Restructuring Scheme. The Company has requested the Lenders to be reasonable in their claim. Pending final decision, provision has been made for Rs. 15 Crores on account of this which has since been paid to Lenders in April, 2011.

A Cash Flow statement for the year under review is also attached to the enclosed Annual Accounts.

Reduction of Share Capital and writing off Securities Premium Account

As a part of capital restructuring exercise, shareholders of the Company approved capital reduction on 16th November, 2010 through postal ballot which was duly confirmed by the Honble High Court at Calcutta vide its Order dated 15th

December, 2010 and Certificate of Registration of the said Order was issued by the Registrar of Companies, West Bengal on 11th January, 2011. Pursuant to this, the Company reduced the paid up value of equity shares from Rs. 10/- each to Rs. 5/- each with effect from 11th January, 2011 resulting in reduction of the Share Capital and has set off the sums available from reduction in Share Capital of Rs. 80.59 Crores and writing off the Securities Premium Account to the extent of Rs. 3.71 Crores against the debit balance of Profit & Loss Account as on 31st March, 2010. The nominal value of equity shares was also simultaneously reduced from Rs. 10/- each to Rs. 5/- each by amending the Memorandum of Association of the Company.

The trading in equity shares of the Company was suspended from 27th January, 2011 to give effect to reduction in equity share capital of the Company which recommenced from 21st February, 2011.

Review of Operations

The Company has been focusing on automobile business and auto component business consisting of forgings, castings and stampings with plants at Uttarpara, Tiruvallur and Pithampur. In the automobile business, the main focus is on Ambassador, Lancer, Cedia, Sports Utility Vehicles namely, Pajero, Montero and Outlander and the goods carrying Mini Truck calledWinner.

Sale of automobiles during the year under review consisting of Ambassador, Winner, Lancer, Cedia, Sports Utility Vehicle and other Utility Vehicles is 10097 compared to 11003 nos. during the previous financial year. Though the overall growth of automobile industry was better than expected, the sale of Ambassador was affected due to slow down in orders from Kolkata taxi replacement market, implementation of BSIV emission norms in 13 major cities while the Company did not have any BSIV diesel engine and lower orders from government customers. The Sports Utility Vehicle - Outlander was well received in the market and the Company was able to sell 1243 nos. as against 411 nos. in the previous year. The support provided by the foreign collaborator by reducing the kit prices as well as the benefit from increased volume of Outlander were more than offset by adverse movement in foreign exchange rates affecting the profitability of vehicles sold from the Companys Chennai Car Plant. In addition,

the Company minimized pressure on margins by way of increase in sale price of vehicles, aggressive cost reduction and value engineering measures.

During the year, your Company launched a new model Lancer EVO X, a luxury sedan with next generation technology, Pajero meeting BSIV emission norms and an improved version of Montero from the Chennai Car Plant. From the Uttarpara Plant, an improved version of Ambassador, called Ambassador Discovery with improved interiors and upgraded variants of Mini Truck, Winner were introduced. These new products are expected to generate favourable response in the market place and increase the sales of your Company in the current financial year.

On the component business front, several new customers and orders were acquired and these products are under development for both castings and forgings business which are expected to add to the Companys component business in the current financial year.

The Companys branch in Japan, engaged in engineering design related software work was closed during the year. Your Company is taking steps, subject to necessary compliances and approvals, to close the Companys subsidiary in USA, also engaged in engineering design related software.

A detailed Management Discussion & Analysis Report (MDAR) forms part of this report as Annexure-1.

Outlook for 2011-12

The Indian economy is expected to grow at a higher rate during 2011-12. However, due to higher borrowing cost and surge in commodity prices, the growth in automobile industry is expected to be moderate during the current financial year. The Company is preparing to launch new variants of Ambassador in the fast growing Commercial vehicles segment, during the current financial year.

The Company also plans to launch a complete new generation of its popular Sports Utility Vehicle, Pajero called Pajero Sports, 7-seater Outlander, upgraded Montero, two new variants of Ambassador - one as a pickup and another as a commercial passenger carrier for more than 7 passengers as well as facelift of the Winner and introduce a passenger carrier of Winner during the current financial year. The new variants of Ambassador along with recently launched new

variants of Winner from Uttarpara plant; utilisation of Pithampur plant for manufacturing of Winner and Winner variants; and Outlander 7-seater, Pajero Sports BU and Pajero BSIV from Chennai Car Plant are likely to augur well for the Company. The Company is also strengthening its distribution network by expanding its dealerships as well as opening new warehouses to ensure timely deliveries. The Company continues to focus on cost reduction efforts and improvements in operational efficiencies as well as value engineering activities to improve the margins. With these initiatives, the Company expects improved performance in the current financial year.

As regards component business, those customers and products that were acquired during the year under review will come in the regular production stream in the current financial year and will add to the business of the Company.

Industrial Relations

Industrial relations generally remained cordial and satisfactory.

Human resources initiatives such as skill level upgradation, training, appropriate reward & recognition systems and productivity improvement are the key factors continuously being focused for development of the employees of the Company.

The Company is taking steps to start an Industrial Training Centre in Hindmotor, West Bengal to help in improving the employability of the local youths as well as have a steady source of trained personnel to it, its dealer and the industry generally.

Corporate Governance

The Company continues to remain committed for high standards of corporate governance. The report on corporate governance as per the requirement of the listing agreement with stock exchanges forms part of this report as Annexure- 2. The Company has complied with all the requirements of corporate governance. The certificate from the Auditors of the Company confirming compliance to the conditions of the corporate governance requirements is also annexed.

Statutory Declaration

The Company has complied with all the applicable Accounting Standards prescribed by Companies (Accounting

Standards) Rules, 2006. In terms of the requirement of Section 217 of the Companies Act, 1956, Directors Responsibility Statement is enclosed as Annexure-3 to this report. The particulars of employees to be disclosed as per the provisions of sub-section (2A) of the said Section are also given as Annexure-4.

Additional Information relating to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under sub-section (l)(e) of the said Section is also given as Annexure-5 to this report.

There has been no material change and commitments affecting the financial position of the Company which have occurred between the end of the financial year 2010-11 and the date of this report.

There has also been no change during the financial year under review in the nature of Companys business or in the Companys subsidiaries. Steps are being taken to close the business of Companys subsidiary in USA subject to necessary compliances and approvals.

Auditors

The report by the Auditors is self-explanatory. Your Directors request you to re-appoint auditors for another term beginning the conclusion of the ensuing Annual General Meeting till the conclusion of the subsequent Annual General Meeting and approve their remuneration as specified in the proposed resolution attached to the notice.

Subsidiaries

The Company has sold 143 shares of Rs. 10/- each of its subsidiary HM Export Limited during the year under review which has changed the status of subsidiary from wholly owned subsidiary to subsidiary only.

As per general exemption granted vide Government of India, Ministry of Corporate Affairs general circular no. 2/2011 dated 8th February, 2011, the Company has not attached the annual accounts of its all the three subsidiaries namely Hindustan Motor Finance Corporation Limited, HM Export Limited and Hindustan Motors Limited, USA to this Annual Report. As required by the said circular, the relevant information for each subsidiary has been disclosed in the Consolidated financial statements attached to this Annual Report.

The Company will make available the annual accounts of subsidiaries and the related information to any member of the Company who may be interested in obtaining the same. The annual accounts of subsidiaries will also be kept for inspection by any member of the Company at the registered office of the Company and that of respective subsidiaries. The Consolidated financial statements presented by the Company include the financial information of its subsidiaries.

The Company will pledge 45,50,000 equity shares of Rs. 10/- each held in its subsidiary, HM Export Limited in favour of Lenders, as additional security to the Lenders under the Corporate Debt Restructuring package.

Directors

At the ensuing Annual General Meeting, Shri C. K. Birla and Shri A. Sankaranarayanan, Directors of the Company, retire by rotation and being eligible offer themselves for re- appointment.

Appreciation

Your Directors acknowledge and thank the customers, shareholders, dealers, vendors, state government authorities, business associates, banks and financial institutions for the support extended to the Company. Your Directors also record their appreciation for the commitment and dedication of the employees of your Company.

For and on behalf of the Board of Directors

C.K. Birla Chairman

New Delhi 16th May, 2011


Mar 31, 2010

The Directors present their Sixty-eighth Annual Report together with amual accounts of the Company for the year ended March 31, 2010.

With profound sorrow and grief, the Directors report the sad demise of Shri G. P. Birla on 5th March, 2010. As Chairman of the Company during the period from 13th January, 1982 to 26th November, 1997, Shri G. P. Birla, a pioneering industrialist and a dedicated humanist, guided The affairs of the Company from strength to strength. He was a doyen in the industrial world and established a large number of industries in various sectors in India and abroad like automobile, paper, cement, electrical, building products and precision engineering products. He was a noble hearted soul and a great philanthropist and established several large foundations, hospitals and institutions for charitable and educational purposes. He was awarded "Padma Bhushan" in the year 2006 by the Government of India for his outstanding services to the nation. In his death, the country has lost a great industrialist and a philanthropist.

Financial Results

During the year under review, the Companys revenue was Rs.736 Crores compared to Rs.771 Crores in the previous financial year. The following table gives a summary of the performance.

(Rupees in Crores) 2009-10 2008-09

Gross sales and services 735.99 770.70 Profitless) before Interest,

Depreciation and Taxes (4.59) (9.52)

Interest Payment 11.04 12.35

Depreciation 17.63 20.66

Profit / (Loss) before Tax (33.26) (42.53)

Provision for Tax 17.84 (3.67)

Profit/(Loss) After Taxation (51.10) (38.86)

The revenue account shows a loss of Rs. 51.10 Crores after providing Rs. 17.63 Crores for depreciation and Rs. 17.84 Crores for deferred tax and other taxes. There was a debit balance of Rs. 81.17 Crores in the Profit and Loss Account, which was brought forward from last year. After considering the results of the year under review, there is a closing debM balance of Rs 132 28 Crores in the Profit and Loss Account.

In accordance with the Order of the Government of West Bengal in September 2006 wherein the Company was allowed to develop 314 acres of land at Hindmotor as Integrated IT Township & Auto Ancillary Park, the Company has transferred the balance part of its land admeasuring 62.791 acres by handing over physical possession thereof against payment to the Developer and profit of Rs. 51.37 Crores Thereon has been included in the Profit and Loss Account during the year. The Company had entered into a full and final out of Court settlement regarding disagreement/disputes with the Developer and the said settlement was duly recorded by the Honble High Court at Calcutta. The amount of Rs. 5 Crores paid in pursuance of this settlement has been netted off from the profit on sale of the land. With this, the Company has completed the transfer of 314 acres of land to the Developer.

The accumulated losses of the Company at the end of financial year 31st March, 2010 have resulted in erosion of more than fifty percent of its peak net worth during the immediately preceding four financial years. While the Company is taking necessary steps to protect further erosion, the Company will report to the Board for Industrial and Financial Reconstruction about such erosion of networth as envisaged under Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 forthwith upon finalisation of me duly audited accounts of the Company for the financial year ended 31st March, 2010. Shareholders are also requested to take note of this erosion and consider the same at the Extraordinary General Meeting of the members being convened for the purpose.

A Cash Flow statement for the year under review is also attached to the enclosed Annual Accounts.

Review of Operations

The Company has been focusing on automobile business and auto component business namely f orgings, castings and stampings with plants at Uttarpara Tiruvallur and Pithampur. In the automobile business, the main focus is on Ambassador, Lancer, Cedia, Sports Utility Vehicles namely, Pajero, Montero and Outlander and the recently launched goods carrying mini truck called Winner.

Sale of automobiles during the year under review consisting of Ambassador, Winner, Lancer; Cedia, Sports Utility Vehicle and other Utility Vehicles is 11003 compared to 9211 nos. during the previous financial year registering a growth of 19%. However the benefit of enhanced volumes was offset by adverse movement in foreign exchange rates affecting the profitability of vehicles sold from the Companys Chennai Car Plant. Your Company was able to persuade its foreign collaborator to reduce kit prices in order to stay competitive in the market. The gains of such reduction, due to inherent lead time in shipments, became available to the Company only in the later part of the final quarter of the year under review. In addition, the Company minimized pressure on margins by way of aggressive cost reduction and value engineering measures

During the year, your Company introduced a new model of Outlander from the Chennai Car Plant as well as the CNG version of Winner from the Uttarpara Plant both of which have generated lot of enthusiasm in the market place and are expected to increase the sales of your Company in the current financial year.

Your Company is taking steps, subject to necessary compliances and approvals to close the Companys branch

in Japan and the subsidiary in USA engaged in engineering software services due to lack of remunerative business opportunities in the export markets.

A detailed Management Discussion & Analysis Report (MDAR) forms pa?t of this report as Annexure-1.

Outlook for 2010-11

In view of the revival in the economy as well as in the automobile industry, the Company is taking various initiatives to improve the sales of its products and expects to improve the performance in the current financial year. The sale of Ambassador cars will continue to improve initially due to demand from Kolkata taxi replacement market and subsequently with the launch of Bharat Stage-IV versions of the Ambassador. Most of your Companys vehicles either meet the Bharat Stage-IV emission norms or are under final stages of development and testing. These norms were made mandatory by the Government in 13 cities in India with effect from 1st April 2010. The Company continues to focus on cost reduction efforts and improvements in operational efficiencies as well as value engineering activities to improve the margins. With these initiatives, the Company expects improved performance in the current financial year.

Industrial Relations

Industrial relations generally remained cordial and satisfactory.

Human resources initiatives such as skill level upgradation, training, appropriate reward & recognition systems and productivity improvement are the key factors continuously being focused for development of the employees of the Company.

Corporate Governance

The Company continues to remain committed for high standards of corporate governance. The report on corporate governance as per the requirement of the listing agreement with stock exchanges forms part of this report as Annexure-2. The Company has complied with all the requirements of corporate governance. The certificate from the Auditors of the Company confirming compliance to the conditions of the corporate governance requirements is also annexed.

Statutory Declaration

The Company has complied with all the Accounting Standards prescribed by The Institute of Chartered Accountants of India. In terms of the requirement of Section 217 of the Companies Act, 1956, Directors Responsibility Statement is enclosed as Annexure-3 to this report. The particulars of employees to be disclosed as per the provisions of sub-section (2A) of the said Section are also given as Annexure-4.

Additional Information relating to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under sub-sectai (l)(e) of the said Section is also given as Annexure-5 to this report.

There has been no material change and commitments affecting the financial position of the Company which have occurred between the end of the financial year 2009-10 and the date of this report.

There has also been no change during the financial year under review in the nature of Companys business or in the Companys subsidiaries. Steps are being taken to close the business of Companys susidiary in USA subject to necessary compliances and approvals.

Auditors

The report by the Auditors is self-explanatory. Your Directors request you to re-appoint auditors for another term beginning the conclusion of the ensuing Annual General Meeting till the conclusion of the subsequent Annual General Meeting and approve their remuneration as specified in the proposed resolution attached to the notice.

Subsidiary Companies

The statement pursuant to Section 212 of the Companies Act, 1956 in respect of the three wholly owned subsidiary companies, namely Hindustan Motor Finance Corporation Limited, HM Export Limited and Hindustan Motors Limited, USA and their latest Annual accounts are attached to this Annual Report.

Directors

During the year under review, Shri Vijay Kumar Sharma was nominated by LIC as Director of the Company with effect from 26th October, 2009 to fill in the casual vacancy caused by resignation of Shri S.C.Jain as its nominee on Companys Board. The Board places on record its high appreciation of the valuable services rendered by Shri S.C.Jain during his tenure as Director of the Company

At the ensuing Annual General Meeting, Shri Naresh Chandra and Shri Kranti Sinha, Directors of the Company, retire by rotation and being eligible offer themselves for re- appointment.

Shri R. Santhanam, Managing Director of the Company, has submitted his resignation with effect from the close of business hours on 18th May, 2010. The Board places on record its high appreciation of the valuable services rendered by Shri R. Santhanam during his tenure as Managing Director of the Company.

Shri Manoj Jha has been appointed as Managing Director of the Company with effect from 19th May, 2010 for a period of five years.

Appreciation

Your Directors acknowledge and thank the customers, shareholders, dealers, vendors, state government authorities, business associates, banks and financial institutions for the support extended to the Company. Your Directors also record their appreciation for the commitment and dedication of the employees of your Company.

For and on behalf of the Board of Directors

New Delhi C.K. Birla

1st May, 2010 Chairman