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Directors Report of Pricol Ltd.

Mar 31, 2016

The Directors have pleasure in presenting the Forty Fourth Annual Report and audited accounts for the financial year ended 31st March, 2016.

FINANCIAL RESULTS

The summarized financial results are:

Rs.Million

2015-16

2014-15

Net Sales & Services

- Domestic

9,799.203

7,842.345

- Export

1,005.282

1,162.545

Total

10,804.485

9,004.890

Profit from Operations before

Finance Cost, Depreciation and

Amortisation Expense &

Exceptional Items

1,136.535

252.896

Less : Finance Costs

93.119

78.900

: Depreciation & Amortisation

Expense

341.737

352.545

Profit / (Loss) from Operations before

Exceptional Items and Tax

701.679

(178.549)

Less : Exceptional Items

100.162

46.768

Profit / (Loss) Before Tax

601.517

(225.317)

Less : Tax Expense

Current Tax

165.540

12.903

Deferred Tax

(24.000)

(48.378)

MAT Credit

(12.903)

For earlier years

28.003

3.033

Profit / (Loss) for the year

431.974

(179.972)

Add : Surplus - Opening

472.382

699.911

Less : Loss on Amalgamation

11.393

Adjustment relating to

Depreciation as per

Transitional Provision

36.164

Amount available for appropriation

904.356

472.382

DIVIDEND

Your Directors recommend a dividend of Rs.1/- per share of Rs.1/- face value for the year ended 31st March 2016 and the total dividend payout is Rs.114.095 Million including dividend distribution tax.

APPROPRIATION

(Rs. In Million)

2015-16

2014-15

Dividend (Rs.1/- per share of Rs.1/- face value) (Previous year- Nil)

94.797

_

Tax on Dividend

19.298

-

Surplus to be carried over

790.261

472.382

Total

904.356

472.382

AUTO INDUSTRY

During the year, the Auto Industry domestic market grew by 3.78% and exports by 1.91%. The overall growth was 3.49% as against 8.32% in the previous financial year.

The performance as per Society of Indian Automobile Manufacturers (SIAM) is:

Vehicles Sold

Growth

Category

2015-16 2014-15

In numbers

2015-16

%

Passenger Car / Utility Vehicle

3,262,917

3,048,978

7.02

Vans

180,650

173,599

4.06

Medium & Heavy Commercial Vehicle

337,565

263,407

28.15

Light Commercial Vehicle

449,828

438,480

2.59

Motor cycles / Scooters / Mopeds

18.937.104

18.433.027

2.73

Three Wheelers

942,533

940,226

0.25

Total

24,110,597

23,297,717

3.49

OPERATIONS

For the financial year 2015-16, our Company''s domestic sales increased to Rs.9,799.203 Million from Rs.7,842.345 Million, a growth of 25%, despite a growth of only 3.49% by the auto industry. The growth is on account of successful new launches during the festive season in two wheeler segment & growth in M&HCV segment, where Price is supplying the Speed Limiters. New legislation mandated all new Commercial Vehicles to be fitted with Speed Limiters effective 1st October, 2015. Price is the only approved source by ARAI for all OEM fitments.

Our export sales decreased by 13.53% to Rs.1,005.282 Million from Rs.1,162.545 Million. There was a steep production drop in two wheelers of our Overseas OEM

Customers Kawasaki Thailand / Indonesia and Piaggio Italy. In addition, there was a drop in the export sales to Europe since the economy there is yet to fully recover.

The overall sales of the Company increased by 20% to Rs.10,804.485 Million from Rs.9,004.890 Million.

The company was able to achieve profit before tax after exceptional items of Rs.601.517 Million against loss of Rs.225.317 Million incurred during the previous year. This was achieved by several operational improvements and cost reduction measures.

For the ensuing year 2016-17, the Company''s business is expected to grow higher than the market, mainly due to new business generated. The company has embarked upon further improving operational efficiency, efforts to control cost and expects to improve profits for the year 2016-17.

SUBSIDIARY COMPANIES

PT Pricol Surya Indonesia

The Company''s customers are 2 Wheeler manufacturers to whom Instrument Clusters are supplied.

In the financial year 2015-16 the company has achieved a sales of Indonesian Rupiah 172,406 Million (Rs.848.236 Million) as against the previous year sales of Indonesian Rupiah 190,739 Million (Rs.964.183 Million) a decrease of 9.61% in Indonesian Rupiah. The sales drop in INR terms was 12% mainly due depreciation of Indonesian Rupiah.

This fall in sales is mainly due to the drop in sales of two wheelers in Indonesia market. Even though there is steep fall in sales the company due to their cost control measures was able to contain its losses to Rs.28.571 Million as against the previous year loss of Rs.118.862 Million.

The outlook for the year 2016-17 is good as seen from the order inflow from customers. Efforts are being made to add new products in the current year and the company has received enquiries for new clusters and oil pumps. Coupled with various cost cutting measures the company is confident of making profits in 2016-17, if the market continues to grow and the economic condition of the country remains stable.

Pricol Asia Pte Limited, Singapore

This purchasing arm of our Company mainly assists in global procurement of raw materials and components to supply our Company and associate companies.

In the financial year 2015-16, the Company achieved sales of Rs.1,236.453 Million as against the previous year sales of Rs.1,043.079 Million. The company made a profit of Rs.21.808 Million during the year 2015 - 16 as against Rs.10.257 Million in 2014 - 15.

Pricol Espana Sociedad Limitada, Spain It is an investment arm of Pricol to acquire companies in Europe and America. During the financial year, the company has incurred a loss of Rs.2.964 Million mainly due to bank charges. It is a onetime charge. Its income mainly from interest from Pricol do Brasil stood at Rs.10.371 Million. Pricol do Brasil Componentes Automotives LtdA, Brazil

Pricol do Brasil Components Automotives LtdA (PdB) serves wide range of Domestic and International customers such as Volkswagen, Fiat, Fiat Powertrain, General Motors, Harley Davidson, Mack Trucks etc. PdB has a strong backward integrated facility with diverse manufacturing capabilities (Die Casting, Machining and Assembly) and extensive Testing and Validation facilities to provide end to end solution and add value to the Customer.

R&D capabilities are another strong area of PdB and several new programs are on the 1st stage of development, such as :- Electric Coolant Pump, Electric Vacuum Pump, Electric Coolant Valve, Variable Flow Oil Pump, Variable Flow Water Pump, Solenoid Valve and Electric Oil Pump.

During the financial year 2015-16, the country went through a political crisis and the economy ended up in de-growth of 5.9% and industrial production had a de-growth of 9.8%. Automotive industry had a dip of 25.6%, which had seriously affected PdB''s sales growth in Brazil. The sales went down from previous year BRL 79.454 Million (Rs.1,711 Million) to BRL 69.060 Million (Rs.1,303 Million) a drop of 13.08% (Pricol took over the Company in January 2015). In the current year PdB embarked upon severance of excess employees and reduced manpower by 68 employees. This has resulted in net increase of employee cost after considering the cost savings in employee cost due to reduction in manpower to the tune of BRL 2.616 Million (Rs.50 Million). During the year, the company has ended with a loss of BRL 24.361 Million (Rs.459.682 Million).

Outlook for the financial year 2016-17 is again a drop of around 15% in the automotive industry which will have an impact on Auto ancillaries.

PdB is working on various cost reduction initiatives such as materials and employee costs, together with sales improvement plans (Increasing the share of business with current major OEM''s - GM, Fiat & Volkswagen), price increase from customers, tapping the aftermarket business in Brazil, USA and Europe, to catch up the drop in OE market sales. New products sales for export and aftermarket sales will be the focus areas for PdB. As a result, business in more diversified markets and product variety should support for PdB''s growth in the future. Coimbatore Metal Works Limited (Formerly, Pricol Castings Limited)

On 22nd January, 2016 the company sold its 100% shareholding of its Wholly Owned Subsidiary Company, M/s. Coimbatore Metal Works Limited for a consideration of Rs.47.488 Million excluding bank liability of Rs.82.512 Million which has been taken over by the buyer.

Integral Investments Limited

A Wholly Owned Subsidiary made a profit of Rs.0.251 Million during the financial year 2015-16.

The parent company, Pricol Limited proposed to sell its 100% shareholding in the Company and identified a prospective buyer. The Company had obtained approval of Reserve Bank of India (RBI) for the proposed sale since it is a Non-Banking Financial Company (Non Deposit Taking). The sale is expected to be completed by July 2016.

Pricol Pune Limited (Formerly, Johnson Controls Pricol Private Limited)

Consequent to change in status (Private Limited to Public Limited) and name of the Company, presently it is known as Pricol Pune Limited. The face value of the equity shares of the company had been sub-divided from Rs.10/- each to Rs.1/- each.

The Wholly Owned Subsidiary Company supplies Instrument Clusters to 2 Wheelers by Bajaj Auto in the Western Region and Personal Passenger Car and Utility Vehicles manufactured by Renault Nissan, Tata Motors, Mahindra & Mahindra, General Motors India and FIAT India.

The sales increased from Rs.967.708 Million to Rs.1,216.415 Million due to better market conditions as well as sales to Kwid model of Renault. The company made an operational profit before exceptional item of Rs.68.394 Million as against the previous year loss of Rs.66.901 Million before amortisation of goodwill of Rs.60.169 Million.

Consequent to purchase of 50% shareholding held by Johnson Controls Enterprises Limited, UK by Pricol Limited, the company sold its Renault lines to Visteon Technical and Service Center Private Limited towards goodwill and transfer of technology in relation to products manufactured for Renault Nissan for a profit of Rs.82.500 Million.

The company made a net profit of Rs.89.425 Million during the financial year 2015-16 against the net loss of Rs.127.070 Million.

AMALGAMATION

On 27th January, 2016, the Board approved the amalgamation of Pricol Limited (Pricol) with its Wholly Owned Subsidiary Company, Pricol Pune Limited (Pricol Pune), an auto component Company, w.e.f. 1st April, 2015 ("Appointed Date") by way of Scheme of Amalgamation, subject to all relevant approvals.

By integrating the related auto component businesses of Pricol and Pricol Pune, the Company would be in a position to offer a wider portfolio of products and services to its customers. The amalgamation would provide a high level of synergistic integration of operations, better operational management and provide value addition to existing and future orders of both the companies by integrating the respective technical, financial and other expertise and resources.

As part of the proposed Amalgamation, all assets (including intangible assets not recorded by Pricol) and liabilities of Pricol as on the Appointed Date shall stand transferred to and vested with Pricol Pune. By amalgamation of Pricol into Pricol Pune, the combined entity would be able to reflect the true net-worth in the financial statements (as all assets, tangible and intangible, including those not recorded in the books of Pricol would be recorded in the books of Pricol Pune at their respective fair values). This would enable greater realisation of potential of the businesses of both the companies and result in enhanced value creation for the Company, their shareholders, lenders and employees.

Upon amalgamation, Pricol will cease to exist and as consideration equity shareholders of Pricol shall receive equity shares of Pricol Pune in the ratio of 1:1. Pursuant to amalgamation, equity shares of Pricol Pune held by Pricol shall be cancelled. Pursuant to Amalgamation, the shareholding of Pricol Pune shall be the mirror image of Pricol''s shareholding pattern. The name of “Pricol Pune Limited” will be changed to “Pricol Limited.”

The Company had filed the Draft Scheme with BSE Limited (Designate Stock Exchange) and National Stock Exchange of India Limited as per SEBI circulars, for their ''No-objection'' to the Draft Scheme. The Stock Exchanges had given their ''No-objection'' to the draft scheme. Secured creditors of the company had given their no objection for the amalgamation.

The Company had filed necessary applications with Honourable High Court of Madras for getting their approval. As directed by the Honourable High Court, the company had already forwarded Notice to the shareholders to get their approval through postal ballot / e-voting by way of special resolution.

OUTLOOK, OPPORTUNITIES, CHALLENGES, RISKS & CONCERNS

The growth recorded in automotive industry was almost flat at 1.8% for the first half of 2015-16.This trend got reversed starting from 3rd quarter through the 4th quarter of the year on account of successful new launches.

The momentum picked up in two wheeler segment especially Scooters and M&HCVs during 3rd and 4th quarter to continue in 2016-17, according to SIAM reports. The overall industry growth in 2016-17 will be led by Scooter segment (17-19%) followed by M&HCV (12-15%). The advancement of sales due to implementation of BS-IV on Pan India basis effective 1st April, 2017 will also result in higher growth in Auto industry.

Key concerns for auto industry in 2016-17 will be increase in vehicle cost due to the new Infrastructure Cases announced in the recent budget and firming up of steel prices.

Pricol being market leader in Speed Limiting Devices hopes to benefit from the recent notifications in some of the States on retro-fitting of speed limiters in used commercial vehicles.

Pricol is expected to outgrow the auto industry on account of large basket of products that serve different segments within the industry.

RISK MANAGEMENT

The Company has adopted a Risk Management Policy, for identifying and managing risk, at the strategic, operational and tactical level. The Risk Management policy has been placed on the website of the Company and the web link there to be http://www.pricol.com/Risk-Management-Policy.pdf. Our risk management practices are designed to be responsive to the ever changing Industry dynamics.

At present the Company has not identified any element of risk which may threaten the existence of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company''s internal control systems have been strengthened taking into account the nature of business and size of operations to provide for:

- Reliability and integrity of financial and operational information;

- Effectiveness and efficiency of operations and assets;

- Compliance with applicable statutes, policies, listing requirements and management policies and procedures.

The Company, through its own Corporate Internal Audit Department, carries out periodic audits at all locations and all functions and brings out any deviation to internal control procedures. The observations arising from audit are periodically reviewed and compliance ensured. The summary of the Internal Audit observations is submitted to the Audit Committee. The Audit Committee at its meetings regularly reviews the financial, operating, internal audit & compliance reports to improve performance. The heads of various monitoring / operating cells are present for the Audit Committee meetings to answer queries from the Audit Committee.

FINANCE

During the year the Company has not accepted / renewed any fixed deposit from public. The total deposits remained unpaid or unclaimed as at 31st March, 2016 is Nil. There is no default in repayment of deposits or payment of interest thereon during the year.

The Company undertook several steps to keep a control over borrowings and cost of borrowings.

ICRA has reaffirmed the credit rating of “A-” for Long term fund based facilities and “A2 ” for short term fund based & non fund based facilities.

The particulars of Loans, Guarantees and Investments made by the Company under Section 186 of the Companies Act, 2013 are given in Note No. 2.50 to the Financial Statements.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were on arm''s length basis and were in the ordinary course of the business. During the year there were no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with the interest of the Company at large.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There are no significant and material orders passed by the Regulators / Courts / Tribunals which would impact the going concern status and the Company''s operations in future.

DIRECTORS

As per the provisions of Section 149 of the Companies Act, 2013, Regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Company''s Directors retirement policy at the age of 70, the Members of the Company had at the AGM held on 8th August 2014, re-appointed the independent directors as mentioned below:

Name of Independent Director

Period of Appointment

Mr. C.R.Swaminathan

Mr. K.Murali Mohan

Mr. Suresh Jagannathan

Mr. R.Vidhya Shankar

Mr. G.Soundararajan

Upto 28th February 2018

Upto 31st March 2018

Upto 31st July 2019

Upto 31st July 2019

Upto 31st July 2019

Mrs. Sriya Chari (DIN: 07383240) was appointed as an Additional (Independent) Director of the Company by the Board of Directors at its meeting held on 27th May 2016 and whose term of office expires at this Annual General Meeting (''AGM''). The Board recommends the appointment of Mrs. Sriya Chari as an Independent Director of the Company to hold office for a term of 5 (five) consecutive years commencing from 27th May 2016 to 26th May 2021.

All Independent Directors have given declarations that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013.

None of the Directors of the Company have resigned during the year.

Mr. Vijay Mohan and Mrs. Vanitha Mohan who are NonIndependent Director''s retire by rotation at the ensuing Annual General Meeting and are eligible for reappointment.

In line with the Company''s Directors retirement policy at the completion of age 70, Mr. D.Sarath Chandran retires from the Board, with effect from 27th May 2016. The Board places on record its warm appreciation for the contributions rendered by him from 1980 when he first came on to the Board of the Directors of our Company.

EVALUATION BY THE BOARD

The Board has made a formal annual evaluation of its own performance, Committees of the Board, Independent Directors and Individual Directors of the Company.

The Board''s performance was evaluated based on the criteria like Structure, Governance, Dynamics & Functioning, Approval & Review of Operations, Financials, Internal Controls etc.

The performance of the Independent Directors as well as Individual Directors including the Chairman of the Board were evaluated based on the evaluation criteria laid down under the Nomination and Remuneration Policy and the Code of Conduct as laid down by the Board.

The Committees of the Board were evaluated individually based on the terms of reference specified by the Board to the said Committee. The Board of Directors were satisfied with the evaluation process which ensured that the performance of the Board, its Committees, Independent Directors and Individual Directors adhered to their applicable criteria.

KEY MANAGERIAL PERSONNEL

The Key Managerial Personnel of the Company as stipulated under Companies Act, 2013 are Mr. Vikram Mohan, Managing Director, Mr. S. Shrinivasan, Chief Financial Officer & Mr. T.G.Thamizhanban, Company Secretary. Mr. J. Sridhar, Chief Financial Officer of the Company has retired from the services of the Company with effect from 31st August 2015 on attaining Superannuation. The Board placed its appreciation for the services rendered by Mr. J. Sridhar during his tenure as Chief Financial Officer of the Company.

STATUTORY AUDITORS

M/s. Haribhakti & Co. LLP the Statutory Auditors of the Company was re-appointed as Statutory Auditors of the Company, for the second term of 5 consecutive years, to hold office from the conclusion of the 43rd AGM held in the year 2015 to the conclusion of the fifth consecutive AGM to be held in the year 2020 (subject to ratification of the appointment by the members at every AGM held after the ensuing AGM).

M/s. Haribhakti & Co. LLP are eligible for ratification of appointment and have confirmed that their appointment, if approved, will be in compliance with Section 141 of the Companies Act, 2013.

Your Board recommends the ratification of appointment of M/s. Haribhakti & Co.LLP, as Statutory Auditors of the Company, to hold office from the conclusion of this AGM to the conclusion of the next AGM.

COST AUDITORS

The Board of Directors at its meeting held on 27th May 2016 appointed M/s. STR & Associates, Cost Accountants, as the Cost Auditors for conducting the Cost Audit for the financial year 2016-17. A resolution seeking members'' ratification of the remuneration payable to Cost Auditor is included in the AGM notice dated 27th May 2016. The Cost Audit Report will be filed within the stipulated period.

SECRETARIAL AUDIT

The Company had appointed M/s. P. Eswaramoorthy and Company, Company Secretary in Practice to undertake the Secretarial Audit of the Company for the financial year 2016-17. The Secretarial Audit Report is annexed herewith as “Annexure A”.

CSR INITIATIVES

Pricol''s Corporate Social Responsibility (CSR) activities reflect its philosophy of enhancing value to the society and the environment around us. The contribution in this regard has been made to the registered trust which is undertaking these schemes in addition to the CSR activities directly undertaken by the Company. The Annual Report on CSR activities is annexed herewith as “Annexure B”.

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

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 is annexed herewith as “Annexure C”.

EXTRACT OF THE ANNUAL RETURN

The extract of the Annual Return in Form No.MGT-9 is annexed herewith as “Annexure D”.

DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

Management and Union Representatives meeting is being conducted every month and the issues raised in the meetings are redressed immediately. Periodical review of the issues is being carried out to ensure its completeness. This has improved the overall peaceful Industrial Relations situation. The participation from the operators has improved considerably during the year. The number of people employed as on 31st March 2016 is 5,100.

Management is keen to implement the terms of the Long Term Productivity Linked Agreement with the Labour Unions entered into between the Management and the respective union representatives at the Plants I & III, Coimbatore and Plant II, Gurgaon without any deviation and delay.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

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

PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is annexed herewith as “Annexure E”.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013, the Directors would like to state that:

a) in the preparation of annual accounts for the financial year ended 31st March 2016, the applicable accounting standards have been followed;

b) they had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for the year under review;

c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) They had prepared the annual accounts for the financial year ended 31st March 2016, on a going concern basis;

e) They had laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and were operating effectively and

f) They had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively.

CORPORATE GOVERNANCE

Your company reaffirms its commitment to good corporate governance practices. The company complies with corporate governance requirements specified in regulation 17 to 27 and clauses (b) to (i) of sub-regulation (2) of regulation 46 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Pursuant to Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Report on Corporate Governance which forms a part of this Report, has been annexed herewith as “Annexure F”.

The Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as required under Regulation 17 (8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Practicing Company Secretary''s Certificate regarding compliance of conditions of Corporate Governance, is made a part of this Directors'' Report. All the board members and senior management personnel have affirmed compliance with the code of conduct for the year 2015-16.

CAUTIONARY STATEMENT

Management Discussion and Analysis forming part of this Report is in compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and such statements may be “forward-looking” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company''s operations include economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors.

ACKNOWLEDGEMENTS

The Board takes this opportunity to place on record appreciation to Customers, Distributors, Dealers, Suppliers, Shareholders, Bankers and Government authorities for their continued support and co-operation during the year under review. The Directors also wish to place on record their appreciation to the employees at all levels for their continued co-operation and commitment.

For and on behalf of the Board

Vijay Mohan

Coimbatore Chairman

27th May, 2016 (DIN: 00001843)


Mar 31, 2015

Dear Members,

The Directors have pleasure in presenting the Forty Third Annual Report and audited accounts for the financial year ended 31st March, 2015.

FINANCIAL RESULTS

The summarised financial results are :

Rs. Million

2014-15 2013-14

Net Sales & Services

* Domestic 7,842.345 6,899.647

* Export 1,162.545 1,402.783

Total 9,004.890 8,302.430

Profit from Operations before Finance Cost, Depreciation and Amortisation Expense & Exceptional Items 252.896 694.353

Less : Finance Costs 78.900 65.196

: Depreciation & Amortisation Expense 352.545 306.646

Profit / (Loss) from Operations before Exceptional Items and Tax (178.549) 322.511

(2013-14 profit includes Profit of Rs. 114.206 Million from sale of land held as Stock-in-Trade)

Add : Exceptional Items (46.768) 516.334

Profit / (Loss) Before Tax (225.317) 838.845

Less : Tax Expense

Current Tax 12.903 173.882

Deferred Tax (48.378) 41.000

MAT Credit (12.903) (62.678)

For earlier years 3.033 16.648

Profit / (Loss) for the Year (179.972) 669.993

Add : Surplus - Opening 699.911 185.366

Less : Loss on Amalgamation from 1st Jan' 14 to 11.393 - 31st Mar' 14

Adjustment relating to Fixed Assets 36.164 - (Net of Deferred Tax)

Amount available for appropriation 472.382 855.359

DIVIDEND

To conserve the outflow of funds and use it for improving the operations of the Company, no dividend was recommended for the year 2014-15.

APPROPRIATION Rs. Million

2014-15 2013-14

Dividend - Nil - 75.600

(Previous year- Rs. 0.80 per share of Rs. 1.00 face value)

Tax on Dividend - 12.848

General Reserve - 67.000

Surplus to be carried over 472.382 699.911

Total 472.382 855.359

AUTO INDUSTRY

During the year, the Auto Industry domestic market grew by 7.22% and exports by 14.89%. The overall growth was 8.32% as against 4.04% in the previous financial year. The performance as per Society of Indian Automobile Manufacturers (SIAM) is :

Vehicles Sold Growth

Category 2014-15 2013-14 2014-15 In numbers %

Passenger Car / Utility Vehicle 3,048,822 2,907,316 4.87

Vans 174,759 192,335 (9.14)

Medium & Heavy

Commercial Vehicle 263,407 224,431 17.37

Light Commercial Vehicle 437,336 485,470 (9.91)

Motor cycles / Scooters /

Mopeds 18,462,178 16,890,778 9.30

Three Wheelers 939,884 833,477 12.77

Total 23,326,386 21,533,807 8.32

OPERATIONS

For the financial year 2014-15, our Company's domestic sales increased to Rs. 7,842.345 Million from Rs. 6,899.647 Million, a growth of 13.66%, despite a growth of only 8.32% by the auto industry.

Our export sales decreased by 17.13% to Rs. 1,162.545 Million from Rs. 1,402.783 Million. There was a steep production drop in two wheelers of our Overseas OEM Customers, Kawasaki Thailand / Indonesia and Piaggio Italy. In addition, there was a drop in the export sales to Europe since the economy there is yet to fully recover.

The overall sales of the Company increased by 8.46% to Rs. 9,004.890 Million from Rs. 8,302.430 Million, which is in line with the auto industry.

Reduction of sales in exports, after market and asset management systems, led to steep decline in profits. High increase in employee cost more than the normal levels was due to higher outflow in first year of long term wage settlement with Operators. These resulted in operational loss of Rs. 178.549 Million against the profit of Rs. 208.305 Million (excluding profit of Rs. 114.206 Million from sale of land held as Stock-in-Trade) in 2013-14.

For the ensuing year 2015-16, the Company's business is expected to grow higher than the market, mainly due to new businesses generated. The Company has embarked upon further improving operational efficiency, efforts to control cost and generate profits for the year 2015-16.

SUBSIDIARY COMPANIES

PT Pricol Surya, Indonesia

The Company's customers are 2 Wheeler manufacturers to whom Instrument Clusters are supplied.

In the financial year 2014-15 the Company has achieved a sales of Indonesian Rupiah 190,739 Million an increase of 12% over the previous financial year sales of Indonesian Rupiah 170,307 Million (In Indian Rupee the sales increased by 3.88% only to Indian Rupee 964.183 Million from Indian Rupee 928.174 Million due to depreciation of Indonesian Rupiah).

Due to steep increase in material cost, consequent to the Indonesian Rupiah depreciation against US Dollar and much higher than the normal increase in wages due to Government Policy, the Company has incurred a loss of Indian Rupee 118.862 Million. Increase could not be passed on to the Customers.

Efforts are being put to turn the Company profitable for the ensuing financial year. Towards this, the customers have already been approached to add more new products in the product range made by the parent Company, Pricol Limited in India. The techno- commercial discussions are in progress and the Company hopes to convert the same into business during the financial year 2015-16. As a beginning, the Company has received Purchase Order for the supply of Oil pumps to M/s. Suzuki, Indonesia.

Pricol Asia Pte Limited, Singapore

This purchasing arm of our Company mainly assists in global procurement of raw materials and components to supply our Company and associate companies.

In the financial year 2014-15, the Company achieved sales of Rs. 1,043.079 Million when compared with the previous year sales of Rs. 98.028 Million due to limited operations in the previous year. The Company was able to achieve a profit of Rs. 10.257 Million.

Pricol Espana Sociedad Limitada, Spain

During the year, Pricol Limited incorporated a Wholly Owned Subsidiary Company, Pricol Espana Sociedad Limitada, in Spain. It is an investment arm of Pricol to acquire companies in foreign countries. Pricol has infused capital of EURO 1.804 Million in the Company.

Pricol do Brasil Componentes Automotivos LtdA, Brazil

On 23rd January, 2015, through its Wholly Owned Subsidiary Company, Pricol Espana Sociedad Limitada, Spain, Pricol acquired 99.99% stake in Melling do Brasil Componentes Auomotivos LtdA, Brazil, an auto component manufacturing Company. The acquisition cost is One Brazilian Real (R$1). The name of the Company has been changed to Pricol do Brasil Componentes Automotivos LtdA.

The Company serves wide range of Domestic and International customers such as Volkswagen, FIAT, General Motors, Harley Davidson, Mack Trucks etc. The Company has a strong backward integrated facility with diverse manufacturing capabilities (Die Casting, Machining and Assembly) and extensive Testing and Validation facilities to provide end to end solution and add value to the Customer.

Pricol do Brasil is of strategic value to Pricol Limited as it gives Pricol access to a quality manufacturing footprint in Brazil and a good brand with strong technology and market leadership in the domestic market of Brazil. This acquisition will also give Pricol a reference to the customer programs which are launched elsewhere in the world and thereby could create a first mover advantage for Pricol.

During the period from 23rd January 2015 to 31st March 2015, the Company had a turnover of Rs. 284.416 Million and incurred a loss of Rs. 65.307 Million. To turnaround the Company adequate steps are taken to increase the turnover and control cost.

Pricol Castings Limited

During the year 2014-15, the Company made a sales turnover of Rs. 228.562 Million against Rs. 387.428 Million during the previous year. The Company incurred a loss of Rs. 184.552 Million.

During the year, the Company was not able to achieve the expected turnover and customers were not willing to pay any price increases to offset the increase in costs. This resulted in cash loss for the Company and Pricol has been infusing funds to keep the Company afloat. The management and board of Pricol after detailed deliberations decided to suspend the operations of the Company, since it was felt that further infusion of funds will not result in any improvement in operations of the Company. Taking into consideration the commitments to customers, operations were reduced slowly from July 2014 until the Customers developed alternate sources. The operations were suspended from December 2014. The settlement with Labour is yet to be completed.

Integral Investments Limited

A Wholly Owned Subsidiary made a profit of Rs. 2.893 Million during the financial year 2014-15.

Shanmuga Steel Industries Limited

A Wholly Owned Subsidiary of Integral Investments Limited filed for Striking Off its name from Ministry of Corporate Affairs (MCA) on 10th March 2014, under Exit Scheme. It has been Struck Off from the register of MCA on 13th June, 2014.

JOINT VENTURES

Johnson Controls Pricol Private Limited

The Joint Venture supplies Instrument Clusters to Personal Passenger Car and Utility Vehicles manufactured by Renault Nissan, Tata Motors, Mahindra & Mahindra, General Motors India, FIAT India and 2 Wheelers by Bajaj Auto in the Western Region.

The sales decreased from Rs. 1,029.610 Million to Rs. 979.960 Million due to the reduction in passenger vehicle sales of Tata Motors and Mahindra & Mahindra. Increase in input costs could not be passed on to the customers and product mix change-over resulted in a loss of Rs. 66.900 Million before amortisation of goodwill.

The Joint Venture partner, Johnson Controls Inc., USA exited their automotive electronics business worldwide. Consequently, as per the Termination Agreement dated 15th April, 2015, Johnson Controls Enterprises Limited, UK (JCEL) sold its 50% of shareholding in the JV to Pricol Limited on May 6, 2015 for a consideration of Rs. 200.237 Million. Subsequent to the acquisition, the JV, became the Wholly Owned Subsidiary Company of Pricol Limited.

Denso Pricol India Private Limited

The Joint Venture performance did not improve as envisaged and continued to incur losses. The projections for the future years were also not encouraging. Therefore it was decided to exit from the JV.

On 17th March, 2015 Pricol Limited sold its 49% of shareholding in Denso Pricol India Private Limited to Denso Corporation, Japan for a consideration of Rs. 200 Million. Subsequent to the sale the Company became the Wholly Owned Subsidiary Company of Denso Corporation, Japan.

AMALGAMATION

The Hon'ble High Court, Madras has sanctioned the Scheme of Amalgamation of Xenos Automotive Limited with Pricol Limited on 1st December, 2014 and a copy of the Order of the Hon'ble High Court in this regard was received by the Company on 16th December, 2014.

Consequent to the merger, 296,721 equity shares of Rs. 1/- each of the Company was allotted to shareholders of Xenos, in ratio of 1 equity share of Rs. 1/- each of Pricol for every 122 equity shares of Rs. 10/- each of Xenos. Paid-up equity share capital of our Company increased to Rs. 94.797 Million from Rs. 94.500 Million.

OUTLOOK, OPPORTUNITIES, CHALLENGES, RISKS & CONCERNS

The automotive industry continued to show a sluggish trend during 2014-15 and this is expected to continue till the first half of 2015-16. Commercial vehicle is expected to revive from second half of 2015-16. The major concern is drop in sales in two wheeler and tractors from the last quarter of 2014-15 primarily due to slow down in demand in the rural segment. Overall the industry is expected to grow by 5% to 6% during 2015-16.

Pricol is expected to grow more than the auto industry due to opportunities in its new range of products.

There is a growing demand for Telematics, a high end electronics product, in the Construction equipment segment. Pricol has now a matured product to cater to this growing demand.

With International Purchasing Office opening up aggressively in India by global players, there is a good opportunity for Pricol to sell its range of products to the same customer in multiple geographies. Pricol has won a global contract for Oil and Water Pumps with Renault for their new A Entry vehicle which is common in India, Europe and Brazil.

RISK MANAGEMENT

The Company has constituted a Risk Management Committee and adopted a Risk Management Policy, for identifying and managing risk, at the strategic, operational and tactical level. The Risk Management policy has been placed on the website of the Company and the weblink there to is http://www.pricol.com/Risk- Management-Policy.pdf. Our risk management practices are designed to be responsive to the ever changing Industry dynamics.

At present the Company has not identified any element of risk which may threaten the existence of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company's internal control systems have been strengthened taking into account the nature of business and size of operations to provide for:

* Reliability and integrity of financial and operational information;

* Effectiveness and efficiency of operations and assets;

* Compliance with applicable statutes, policies, listing requirements and management policies and procedures.

The Company, through its own Corporate Internal Audit Department, carries out periodic audits at all locations and all functions and brings out any deviation to internal control procedures. The observations arising from audit are periodically reviewed and compliance ensured. The summary of the Internal Audit observations is submitted to the Audit committee. The Audit Committee at its meetings regularly reviews the financial, operating, internal audit & compliance reports to improve performance. The heads of various monitoring / operating cells are present for the Audit Committee meetings to answer queries from the Audit Committee.

FINANCE

During the year the Company has not accepted / renewed any fixed deposit from public. The total deposits remained unpaid or unclaimed as at 31st March, 2015 is Nil. There is no default in repayment of deposits or payment of interest thereon during the year.

The Company undertook several steps to keep a control over borrowings and cost of borrowings.

ICRA has reaffirmed the credit rating of "A-" for Long term fund based facilities and "A2 " for short term fund based & non fund based facilities.

The particulars of Loans, Guarantees and Investments made by the Company under Section 186 of the Companies Act, 2013 are given in Note No. 2.54 to the Financial Statements.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of the business. During the year there were no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with the interest of the Company at large.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There are no significant and material orders passed by the Regulators / Courts / Tribunals which would impact the going concern status and the Company's operations in future.

DIRECTORS

As per the provisions of Section 149 of the Companies Act, 2013, the amended Clause 49 of the Listing Agreement and the Company's Directors retirement policy at the age of 70, the Members of the Company had at the AGM held on 8th August 2014, re-appointed the independent directors as mentioned below:

Name of Independent Period of Director Appointment

Mr. C.R.Swaminathan Upto 28th February 2018

Mr. K.Murali Mohan Upto 31st March 2018

Mr. Suresh Jagannathan Upto 31st July 2019

Mr. R.Vidhya Shankar Upto 31st July 2019

Mr. G.Soundararajan Upto 31st July 2019

All Independent Directors have given declarations that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013.

None of the Directors of the Company have resigned during the year.

Mrs.Vanitha Mohan and Mr.Vikram Mohan who are Non-Independent Director's retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

EVALUATION BY THE BOARD

The Board has made a formal annual evaluation of its own performance, Committees of the Board, Independent Directors and Individual Directors of the Company.

The Board's performance was evaluated based on the criteria like Structure, Governance, Dynamics & Functioning, Approval & Review of Operations, Financials, Internal Controls etc.

The performance of the Independent Directors as well as Individual Directors including the Chairman of the Board were evaluated based on the evaluation criteria laid down under the Nomination and Remuneration Policy and the Code of Conduct as laid down by the Board.

The Committees of the Board were evaluated individually based on the terms of reference specified by the Board to the said Committee. The Board of Directors were satisfied with the evaluation process which ensured that the performance of the Board, its Committees, Independent Directors and Individual Directors adhered to their applicable criteria.

KEY MANAGERIAL PERSONNEL

The Key Managerial Personnel of the Company as stipulated under the Companies Act, 2013 are Mr.Vikram Mohan, Managing Director, Mr. K.U.Subbaiah, Chief Executive Officer, Mr. J.Sridhar, Chief Financial Officer & Mr.T.G.Thamizhanban, Company Secretary. Mr. K.U.Subbaiah has expressed his desire to retire as CEO of the Company effective end of May, 2015. The Board places on record its warm appreciation for the contributions rendered by Mr. K.U.Subbaiah over the past three years.

STATUTORY AUDITORS

M/s.Haribhakti & Co. (the name has been changed to M/s.Haribhakti & Co. LLP) the Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting. M/s.Haribhakti & Co. LLP are eligible for re-appointment and have confirmed that their re-appointment, if approved, will be in compliance with Section 141 of the Companies Act, 2013.

As per Section 139 of the Companies Act 2013, a Listed Company shall not appoint / re-appoint an Audit Firm as Statutory Auditors for more than 2 terms of 5 consecutive years. M/s.Haribhakti & Co. LLP, have already served as the Company's Statutory Auditor for a period of 5 years, from 2010-11. They are eligible for re-appointment as Statutory Auditors of the Company for a further period of 5 years.

Your Board recommends the re-appointment of M/s.Haribhakti & Co. LLP, as Statutory Auditors of the Company, to hold office from the conclusion of this AGM to the conclusion of the fifth consecutive AGM to be held in the year 2020 (subject to ratification of the appointment by the members at every AGM held after the ensuing AGM).

COST AUDITORS

The Board of Directors at its meeting held on 25th May, 2015 appointed M/s. STR & Associates, Cost Accountants, as the Cost Auditors for conducting the Cost Audit for the financial year 2015-16. A resolution seeking members' ratification of the remuneration payable to the Cost Auditor is included in the AGM Notice dated 25th May 2015. The Cost Audit Report will be filed within the stipulated period.

SECRETARIAL AUDIT

The Company had appointed Mr. K.Sriram, Partner, M/s.S.Krishnamurthy & Co., Chennai, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company for the year 2014-15. The Secretarial Audit Report is annexed herewith as "Annexure A".

CSR INITIATIVES

Pricol's Corporate Social Responsibility (CSR) activities reflect its philosophy of enhancing value to the society and the environment around us. The contribution in this regard has been made to the registered trust which is undertaking these schemes in addition to the CSR activities directly undertaken by the Company. The Annual Report on CSR activities is annexed herewith as "Annexure B".

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

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed herewith as "Annexure C".

EXTRACT OF THE ANNUAL RETURN

The extract of the Annual Return in Form No.MGT-9 is annexed herewith as "Annexure D".

DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

Overall Industrial relations situation remained peaceful during the year. The participation from the operators improved considerably during the year. The number of people employed during the year is 4,477.

Long Term Productivity Linked Agreement with the Labour Unions at the Plants I & III, Coimbatore and Plant II, Gurgaon was signed well before it was due in a proactive manner, which has improved the confidence of the customers pan India.

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

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy. The Company has not received any sexual harassment complaint during the year 2014-15.

PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is annexed herewith as "Annexure E".

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013, the Directors would like to state that:

a) in the preparation of annual accounts for the financial year ended 31st March 2015, the applicable accounting standards have been followed;

b) they had selected such accounting policies and applied them consistently and made judgements and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for the year under review;

c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) they had prepared the annual accounts for the financial year ended 31st March 2015, on a going concern basis;

e) they had laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and were operating effectively and

f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively.

CORPORATE GOVERNANCE

Your Company reaffirms its commitment to good corporate governance practices. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, the Report on Corporate Governance which forms a part of this Report, has been annexed herewith as "Annexure F".

The Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as required under Clause 49(IX) of the Listing Agreement.

Practicing Company Secretary's Certificate regarding compliance of conditions of Corporate Governance, is made a part of this Annual Report. All the board members and senior management personnel have affirmed compliance with the code of conduct for the year 2014-15.

CAUTIONARY STATEMENT

Management Discussion and Analysis forming part of this Report is in compliance with Corporate Governance Standards incorporated in the listing agreement with Stock Exchanges and such statements may be "forward- looking" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors.

ACKNOWLEDGEMENTS

The Board takes this opportunity to place on record appreciation to Customers, Distributors, Dealers, Suppliers, Shareholders, Bankers and Government authorities for their continued support and co-operation during the year under review. The Directors also wish to place on record their appreciation to the employees at all levels for their continued co-operation and commitment.

For and on behalf of the Board Coimbatore Vijay Mohan 25th 2015 Chairman


Mar 31, 2014

Dear Members,

The Directors are pleased to present the Company''s Twenty- Sixth Annual Report on the Business and Operations of HOV Services Limited (the "Company" or "HOVS") together with the Audited Statement of Accounts for the fifteen months period ended March 31, 2014.

The financial year was changed from calendar year to fiscal year i.e. April to March from April 1, 2014. Accordingly, the current financial statements are prepared for 15 (Fifteen) months period from January 1, 2013 up to March 31, 2014 and therefore, are not comparable to the financial statements of previous year which comprises of the 12 (Twelve) months year ended on December 31, 2012.

FINANCIAL RESULTS AND OPERATIONS: Rs. In Million

Consolidated Standalone

Fifteen Twelve Fifteen Twelve Particulars months period months year months months year ended on ended on period ended ended on March 31, 2014 December on March December 31, 2012 31, 2014 31, 2012

INCOME

Income from Operations 173.26 140.20 159.24 113.60

Other Income 10.14 15.58 12.74 14.73

183.40 155.78 171.98 128.33

EXPENDITURE

Purchase for resale - 21.20 - -

Staff Cost 128.50 96.59 122.17 87.61

General and Administrative Expenses 69.92 36.59 31.72 15.43

198.42 154.38 153.89 103.04

Profit / (Loss) before Interest, Depreciation and Tax (15.02) (1.40) 18.09 25.29

Less: Interest 1.60 - -

Less: Depreciation 9.74 4.99 4.03 3.42

Profit / (Loss) before Tax (26.36) (3.59) 14.06 21.87

Tax pertaining to earlier years 0.04 0.70 0.04 0.70

Less: Provisions for taxes

Current Tax 6.23 7.77 6.23 7.77

Deferred Tax (1.94) (0.83) (0.74) (0.83)

Profit / (Loss) after Tax (30.69) (11.23) 8.53 14.23

Less: Minority Interest (6.41) (8.80) - -

Profit/(Loss) after minority interest (24.28) (2.43) - -

Add: Share of Profit/(Loss) from an Associate (464.50) 51.23 -

Profit / (Loss) after Tax & Share of Profit/(Loss) from an Associate (488.78) 48.80 8.53 14.23

1. RESULTS OF OPERATIONS: Consolidated Financial Performance

- Consolidated total Income for the current fifteen months period was Rs. 183.40 million.

- EBIDT for the current fifteen months period was Rs. (15.02) million.

- Net Profit / (Loss) was Rs. (488.78) million.

- The basic and diluted Earnings per share (EPS) for the fifteen months period is Rs. (39.13).

Standalone Financial Performance

- Total Income for the current fifteen months period was Rs. 171.98 million.

- EBIDT for the current fifteen months period was Rs. 18.09 million.

- Net Profit was Rs. 8.53 million.

- The basic and diluted Earnings per share (EPS) is Rs. 0.68 for the period under reporting.

2. Appropriations

(i) Dividend:

Your Company intends to conserve available resources to invest in the growth of the business and pursue strategic growth opportunities. Accordingly your Directors do not recommend any dividend for the period.

For the fifteen months period ended March 31, 2014 the Company does not have any unpaid dividend meant to be transferred to the Investor Education Protection Fund under Section 205C of the Companies Act, 1956.

(ii) Transfer to Reserve:

No amount was transferred to Reserve during the financial period ended on March 31, 2014.

3. Subsidiary companies

The Company has the following subsidiary companies:

i) HOVS LLC incorporated in Delaware under the laws of Unites States of America;

ii) HOV Environment LLC incorporated in Nevada State under the laws of United States of America;

iii) HOVS Holdings Limited incorporated under the Companies Ordinance of Hong Kong; and

iv) HOV Environment Solutions Private Limited incorporated in Maharashtra under Indian Company Laws.

4. Significant developments

i) On March 19, 2013, Citi Venture Capital International ("CVCI Private Equity") invested in the SourceHOV as a new equity partner wherein CVCI Private Equity purchased all of the ownership interests of affiliates of Apollo Global Management, LLC ("Apollo") and certain minority holders'' in SourceHOV. This new partnership positioned SourceHOV for accelerated growth through industry leading advisory formed by a tenured investment team with specialized technology and service industry experience. The HOVS owns an equity interest in SourceHOV.

ii) On September 6, 2013 HOV Environment Solutions Private Limited ("HOV ESPL") was made subsidiary of HOV Environment LLC, a subsidiary company of HOVS LLC. HOV ESPL earlier was indirect subsidiary of HOV Services Limited through HOVS Holdings Limited a wholly owned subsidiary (WOS) of HOV Services Limited. The change was made in order to streamline & strengthen execution of operations and work related to environmental projects. Post the change HOV ESPL will continue to be an indirect subsidiary of the Company through HOVS LLC.

5. ADR/GDR

The shareholder''s in their Annual General meeting dated July 21, 2007 granted approval for proposed 15,000,000 of ADR/GDR issue. However, so far none of the underlying equity shares were issued by the Company.

6. Share Capital of the Company

During the quarter ended March 31, 2014 pursuant to the options exercised, 8,500 equity shares were allotted. Consequently after the allotment, the paid up share capital of the Company has gone up from 12,491,022 equity shares of Rs. 10/- each aggregating to Rs. 124,910,220/- to 12,499,522 equity shares of Rs. 10/- each aggregating to Rs.124,995,220/- Consequently the fully diluted outstanding share capital of the Company as at period ended March 31, 2014, on consolidated basis comprise of 12,499,522 equity shares of Rs. 10/- (Ten only) each.

8. Conservation of Energy, Technology Absorption, and Foreign Exchange:

Particulars furnished pursuant to Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1998:

Conservation of Energy: Your Company''s operations involve low energy consumption. The Company strives to conserve energy on continuous basis.

Research and Development: The Company has not undertaken any R&D activity in any specific area during the period under review, and hence no cost has been incurred towards the same.

Technology Absorption, Adaptation and Innovation: The Company is constantly developing and adopting modern technologies and standards to grow its competitive advantage, to better serve its clients, retain employees and improve productivity and performance, however during the period no such activities been carried out.

Foreign Exchange Earnings and Outgo: Almost the entire earnings of the Company are from the export of services since the Company has no domestic business. The foreign exchange earnings and outgo is contained in the Note number 20.10 of Notes to the Financial Statements of the Annual Report.

9. Particulars of Employees:

The Company has no employees drawing remuneration in excess of limits specified under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended.

10. Human Resources:

During the period the Company had maintained cordial relations with all its employees and has taken utmost care of its employees deployed. All employees are aligned under our value system which propagates and practices being open, transparent and honest, collaborative, honoring commitments and demanding excellence among them.

11. Directors Responsibility Statement:

Information as per Section 217(2AA) of the Companies Act, 1956 is annexed and forms part of the report.

12. Fixed Deposit

The Company has not accepted any deposits from the public within the meaning of Section 58A of the Companies Act, 1956, during the period under review.

13. Corporate Governance Report

The Company adheres to Corporate Governance guidelines to fulfill its responsibilities to all its stakeholders i.e. investors, customers, vendors, government, employees. Company believes that good corporate governance enhances accountability and increases shareholder value.

The Company complies with the corporate governance norms as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges and a report thereto is included in annexure to the Directors'' report.

14. Management Discussion and Analysis

Management Discussion and Analysis Report for the period under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is presented as a separate section forming a part of this report.

15. Statutory Auditors

The Statutory Auditors M/s Lodha & Co, Chartered Accountants, Mumbai, hold office till the conclusion of ensuing Annual General Meeting and have expressed their willingness and being eligible to continue, if re-appointed. Your directors recommend their re-appointment. A resolution proposing their appointment at remuneration to be fixed by the Board of Directors is submitted at the Annual General Meeting.

16. Directors

The Company had, pursuant to the provisions of clause 49 of the Listing Agreements entered into with Stock Exchanges, appointed Mr. B R Gupta, Mr. Harish Bhasin and Mr. Prakash Shukla as Independent Directors of the Company.

As per section 149(4) of the Companies Act, 2013 (Act), which came into effect from April 1, 2014, every listed public company is required to have at least one-third of the total number of directors as Independent Directors. In accordance with the provisions of section 149 of the Act, Mr. B R Gupta and Mr. Harish Bhasin, are being appointed as Independent Directors to hold office as per their tenure of appointment mentioned in the Notice of 26th Annual General Meeting (AGM) of the Company. Mr. Prakash Shukla intends not to seek for his appointment.

Mr. Surinder Rametra, Director, retires by rotation and being eligible has offered himself for re-appointment.

None of the Director was materially interested in any contracts or arrangements existing during or at the end of the financial period that was significant in relation to the business of the Company.

17. Subsidiary companies and consolidation of Accounts

As per Section 212 of the Companies Act, 1956, the Company is required to attach the directors'' report, auditors'' report, balance sheet, and statement of profit and loss, schedules to account and notes to the account of subsidiaries of your Company along with the balance sheet of your Company. However general exemption is granted in terms of General Circular No. 2/ 2011 and No. 5/12/2007-Cl-III dated February 8, 2011, issued by the Ministry of Corporate Affairs under section 212(8) of the Companies Act, 1956 granting general exemption. Your Company is in compliance of the section read with the provisions of the circular and will not be attaching the accounts of the subsidiaries.

The audited annual accounts and related information of subsidiary companies, where applicable, will be kept in the registered office and will be available for inspection, upon request by any of shareholders of the holding and subsidiary companies. A statement showing details on the subsidiary companies as prescribed vide general circular is attached in separate section of this Annual Report.

18. Acknowledgement

Your Directors'' place on record their appreciation for co-operation and support received from the Software Technology Parks of India, the Government of India, Government of Maharashtra, Reserve Bank of India, other governmental agencies and NASSCOM and the National Stock Exchange and the Bombay Stock Exchange and, bankers and shareholders during the year.

Your Directors express their sincere appreciation for the efforts made by employees at all levels for their hard work, co-operation and support extended to your Company during the year.

DIRECTORS'' RESPONSIBILITY STATEMENT

In compliance with Section 217(2AA) of the Companies Act, 1956, your Directors confirmed and state as follows:

a) That in preparation of Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; and

b) That the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial period and of the statement of profit and loss of the Company for that period; and

c) That the directors have taken proper and sufficient care of the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) That the directors have prepared the annual accounts on a going concern basis.

For and on behalf of the Board of Directors

Place: Mumbai Sunil Rajadhyaksha

Date: May 21, 2014 Chairman & Executive Director


Mar 31, 2013

The Directors have pleasure in presenting the Forty First Annual Report and audited accounts for the financial year ended 31st March, 2013.

FINANCIAL RESULTS

The summarised financial results are :

Rs. Million

2012-13 2011-12

Net Sales & Services

- Domestic 6,996.684 7,886.746

- Export 1,285.912 1,428.047

Total 8,282.596 9,314.793

Profit from Operations before Finance Cost, Depreciation and Amortisation Expense &

Exceptional Items 619.525 758.789

Less : Finance Costs 163.307 297.921

: Depreciation & Amortisation Expense 319.501 291.911

Profit from Operations before Exceptional Items 136.717 168.957

Add : Exceptional Items (Net) 494.203

Profit Before Tax 136.717 663.160

Less : Tax Expense

Current Tax 32.811 141.000

Deferred Tax (11.000) 44.000

MAT Credit (32.066) (86.000)

For earlier years (10.432)

Profit for the Year 157.404 564.160

Add : Surplus - Opening 145.080 114.600

Amount available for

appropriation 302.484 678.760



DIVIDEND

Your Directors recommend a dividend of 40% (Rs. 0.40 per share of Rs.1 face value) on the paid-up equity share capital of the Company for the year ended 31st March, 2013.

APPROPRIATION

Rs. Million

2012-13 2011-12

Dividend Rs. 0.40 per share of Rs. 1.00 face value. (Previous year - Rs. 0.40 regular dividend plus Rs. 0.40 special dividend from profit on sale of unit, totaling Rs. 0.80 per share of Rs. 1.00 face value) 36.000 72.000

Tax on Dividend 6.118 11.680

General Reserve 75.000 450.000

Surplus to be carried over 185.366 145.080

Total 302.484 678.760

AUTO INDUSTRY

As against a growth of 14% in the previous financial year, in the year 2012-13, the domestic auto industry grew by 2% only.

The performance as per Society of Indian Automobile Manufacturers (SIAM) is :

Vehicles Sold Growth Category 2012-13 2011-12 2012-13 In numbers %

Passenger Car 2,440,127 2,532,852 -3.66

Utility Vehicle 561,921 368,993 52.29

Vans 239,314 236,777 1.07

Medium & Heavy

Commercial Vehicle 287,282 377,711 -23.94

Light Commercial Vehicle 585,812 524,046 11.79

Scooters / Scooterettee 3,014,485 2,653,421 13.61

Motor cycles 11,952,135 11,944,898 0.06

Mopeds 792,069 785,942 0.78

Three Wheelers 841,379 875,034 -3.85

Total 20,714,524 20,299,674 2.04

OPERATIONS

Our domestic sales in 2011-12 was Rs. 6,747 Million (excluding sales of Rs. 1,140 Million transferred in March, 2012 to wholly owned subsidiary Pricol Pune Limited. This wholly owned subsidiary subsequently became JV with Johnson Controls).

During 2012-13, our domestic sales increased to Rs. 6,997 Million, an increase of 3.70% despite a negative growth in passenger car, commercial vehicles, 3 Wheelers and only negligible growth in 2 Wheeler Segment.

Our export sales decreased to Rs. 1,286 Million from Rs. 1,428 Million, a decline of nearly 10%, due to adverse economic conditions prevailing in Europe and slow economic recovery in USA, the two major areas of our exports.

The overall sales increased from Rs. 8,175 Million in 2011-12 (excluding sales transferred to Pricol Pune Limited) to Rs. 8,283 Million, a growth of 1.32%.

The company was able to achieve profit from operation of Rs. 137 Million (Rs. 169 Million in 2011-12), in spite of negligible growth in domestic market, negative growth in exports coupled with increase in power cost due to heavy power shutdowns in State of Tamilnadu and increase in all input costs. This was achieved mainly due to several cost reduction initiatives implemented by the company.

For the ensuing year 2013-14, the Company''s balance business (excluding the business sold to wholly owned

subsidiary, Pricol Components Limited) is expected to grow by 10%, mainly due to new business generated. The company has embarked upon further improving operational efficiency, efforts to control cost and expects to improve profits for the year 2013-14.

SUBSIDIARY COMPANIES

PT Pricol Surya, Indonesia

The new regulation introduced by the Central Bank of Indonesia (Bank Indonesia) to increase the down payment for purchase of new vehicles from 10% to 30%, affected the purchasing power of the consumer and consequent to that the company''s sales decreased to Rs. 1,006 Million for the financial year 2012-13, from Rs. 1,110 Million, in the previous financial year. From January 2013, employing outsourced labour has been restricted to non-production activity and coupled with increase in Minimum Wages by 58 % as mandated by Indonesian authorities, the operating cost increased. The decrease in sales and increase in employee cost affected the profits. The company achieved Profit Before Tax of Rs. 60 Million against Rs. 72 Million for 2011-12.

The outlook for the Company is promising for the financial year 2013-14 in terms of sales growth and profits.

Pricol Limited, the parent company infused further USD 1 Million to enhance the equity capital of the company.

Pricol Castings Limited

During the year 2012-13, the company''s turnover was Rs. 268 Million against Rs. 239 Million achieved during the previous year, an increase of 12 % over previous year.

Despite overall increase of power, fuel and other costs, the company earned a marginal profit of Rs. 1.02 Million during the year 2012-13 against loss of Rs. 5.89 Million in the year 2011-12.

The outlook for the Company is promising for the financial year 2013-14 with good order book. In order to manage the continuously rising costs of power and fuel, the company is installing a Biogasifier Plant, for generating gas. This gas will be used for melting

aluminium, rather than costly electric power. This will result in reduction of Power and Fuel Cost from the second half of this financial year.

Due to increase in sales and reduction in power cost for the second half of the financial year, the profits will be better.

Pricol Limited, the parent company infused further Rs. 29.145 Million to enhance the equity capital of the company.

Pricol Asia Pte Limited, Singapore

A wholly owned subsidiary company incorporated on 27th August, 2012, mainly to assist in global procurement of raw materials and components for Pricol Limited and its associates.

During the year, the company earned a profit of Rs. 5.16 Million.

Integral Investments Limited

A wholly owned subsidiary during the financial year 2012-13 incurred a loss of Rs. 0.21 Million.

Shanmuga Steel Industries Limited

A wholly owned subsidiary of Integral Investments Limited during the year 2012-13 incurred a loss of Rs. 0.23 Million.

Pricol Components Limited

On 22nd April, 2013 the company transferred its Denso Technology Instrument Cluster Business pertaining to Toyota Kirloskar Motors Limited and Maruti Suzuki India Limited, at Coimbatore and Gurgaon Plants respectively, to Pricol Components Limited (erstwhile Wholly Owned Subsidiary) for a value of Rs. 583 Million. The net cash inflow out of slump sale, net of assets transferred, capital gains tax and share capital infused into Pricol Components Limited is Rs. 417 Million, for the financial year 2013-14.

JOINT VENTURES

Johnson Controls Pricol Private Limited

The 50:50 Joint Venture Company between Pricol Limited and M/s. Johnson Controls Enterprise Limited, UK (a Wholly Owned Subsidiary of Johnson Controls, Inc. USA), manufactures instrument clusters for Personal Passenger Vehicles (Scooter, Motor Cycle, Car & Multi Purpose Vehicle). During the financial year 2012-13, the company made a turnover of Rs. 1,234.06 Million. The operational profit before tax prior to amortisation of goodwill was Rs. 24.64 Million. Post amortisation of goodwill Rs. 60.16 Million, there was a loss of Rs. 35.52 Million.

Denso Pricol India Limited

The Wholly Owned Subsidiary, Pricol Components Limited became a 51:49 Joint Venture between M/s. DENSO Corporation, Japan and Pricol Limited. Subsequent to the formation of JV, the name of the company changed from Pricol Components Limited to Denso Pricol India Limited.

OUTLOOK, OPPORTUNITIES, CHALLENGES, RISKS & CONCERNS

The slowdown in economic activity coupled with high interest rates and rising fuel and vehicle prices have dampened consumer sentiments. With inflation expected to reduce and interest rates softening, the Overall Indian Auto Industry in 2013-14 is expected to grow at a moderate rate of 5 - 6% only over the previous year. The Global Economy recovery is still weak. This would mean weak exports forecasts for India in 2013-14. Global OEMs continue to look to India as a preferred manufacturing location, for both the domestic and export markets.

While the long term prospects for the industry remain strong in line with the outlook for the OEM segment, the industry faces strong challenges in the form of threat of low cost imports, currency volatility and ability to invest on product development to be able to move up the value chain.

Amidst these uncertain market conditions, we can still aim for opportunities in the domestic market especially in the two wheeler segment. It is driven by the increasing spending power and disposable income, especially with the younger population. Passenger Vehicles, Small & Light CVs and Tractor segments are experiencing steady growth rates which should be viewed as opportunities for achieving higher growth during the fiscal year.

Hence focusing on increasing the Company''s share of business with the Major Customers with our wide variety of products would allow us to grow in times of uncertain market conditions.

During the fiscal year, the pressure on selling prices will have an impact on the profitability. Further weakening of the Rupee could impact Auto Component Supplier''s profitability, as cost increases for imported components would only be partially compensated by OEMs. The liquidity stress faced by OEMs could be passed down the value chain leading to longer credit periods and higher working capital needs.

We are planning to reduce the above risks through optimisation of material costs through consolidation of supplier base, strategic sourcing initiatives, product innovation resulting into creating product differentiators, focused cost reduction drives across the company thereby leading to reducing costs and improvement in profitability. A Company Management Committee comprising all heads of various functions has been formed to achieve the above stated plans.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company''s internal control systems has been

strengthened taking into account the nature of business and size of operations to provide for:

· Reliability and integrity of financial and operational information ;

· Effectiveness and efficiency of operations and assets ;

· Compliance with applicable statutes, policies, listing requirements and management policies and procedures.

The company, through its own Corporate Internal Audit Department, carries out periodic audits at all locations and all functions and brings out any deviation to internal control procedures. The observations arising from audit are periodically reviewed and compliance ensured. The summary of the Internal Audit observations is submitted to the Audit Committee. The Audit Committee at their meetings regularly review the financial, operating, internal audit and compliance reports to improve performance. The heads of various monitoring / operating cells are present for the Audit Committee meetings to answer queries from the Audit Committee.

RISK MANAGEMENT

Risk is an integral part of the business process.

To enhance the risk management process, the company has mapped the risks. Risk arising are identified and prioritised. Risk mitigation activities plans are established and executed as and when need arises. Periodical reviews are carried out to assess the risk levels.

FINANCE

During the year the company has not accepted / renewed any fixed deposit from public. The total deposits from public outstanding as on 31st March, 2013 is Nil.

The company undertook several steps to reduce its borrowings to keep a control over the cost of borrowings.

ICRA has upgraded the credit rating to ''BBB'' for Working Capital fund based facilities & Term Loan facilities and ''A3 '' for working capital non fund based facilities like Letters of Credit and Buyers Credit for imports.

DIRECTORS

The Board reappointed Mrs.Vanitha Mohan as Vice Chairman and Mr.Vikram Mohan as Managing Director of the Company with effect from 1st April, 2013.

The company''s stated policy is that all Whole Time Directors should step down on completion of 65 years and Non Whole Time Directors should step down on completion of 70 years. Since Mr.Vijay Mohan has completed 65 years, he has stepped down from the

position of Executive Chairman of the company. The Board has appointed him as an additional director (Non- Executive Chairman) under Section 260 of the Companies Act, 1956. He vacates office on the date of the forthcoming 41st Annual General Meeting and is eligible for appointment.

Mr.C.R.Swaminathan and Mr.Suresh Jagannathan Directors retire by rotation at the ensuing Annual General Meeting and are eligible for reappointment.

Mr.V.Ramakrishnan has resigned effective 31st March, 2013 due to his personal commitments.

Mr.Hiroyuki Wakabayashi has resigned effective 26th April, 2013 due to his other commitments. Consequently, Mr.Nobuhiro Takahashi vacated his office as Alternate Director to Mr.Hiroyuki Wakabayashi with effect from 26th April, 2013.

The Board of Directors places on record their warm appreciation of the valuable contribution made by Mr.V.Ramakrishnan, Mr.Hiroyuki Wakabayashi and Mr.Nobuhiro Takahashi during their association with the company.

AUDITORS

The Auditors of the Company, M/s.Haribhakti & Co., retire at the ensuing Annual General Meeting and are eligible for reappointment. Your Board recommends their appointment as the Statutory Auditors of the Company.

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

COST AUDITORS

M/s.STR & Associates., Cost Accountants, has been appointed as the Cost Auditors for conducting Cost Audit for the financial year 2012-13. The Cost Audit Report will be filed within the stipulated period of 180 days of the close of the financial year.

The Board of Directors at its meeting held on 29th May, 2013 reappointed M/s.STR & Associates., Cost Accountants, as the Cost Auditors for conducting the Cost Audit for the financial year 2013-14.

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

DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

Further to the Memorandum of Understanding reached between the Management and the Labour Union during

February 2012, productivity linked wage agreement under Section 12(3) of The Industrial Disputes Act was signed on 8th June, 2012 before the Additional Commissioner of Labour, Chennai, covering various issues. Operators have reached the agreed work norms effective 1st June, 2012 and have also increased 8% additional productivity effective 15th July, 2012.

Through this settlement, it was agreed by both the parties to withdraw all the cases pending before various Labour Forums. Accordingly, cases before the Labour Court and the Writ Petitions before the Madras High Court were withdrawn by both parties. A four member committee, as per the terms of settlement, is working towards settling the issues of dismissed and suspended workmen.

CORPORATE SOCIAL OBJECTIVES

With Pricol''s longstanding commitment on service to the society, we are determined to create a better environment and society. As good corporate citizens, we feel responsible to actively contribute our best efforts to enhance the society and the environment.

Pricol group has initiated "We Care", a program to enhance the CSR activities of Pricol Limited.

"We Care" has clear objective towards the following CSR activities:

· Providing medical aid for the unreached rural areas ;

· Conducting awareness campaigns ;

· Supporting the needy educational & charity institutions ;

· Creating a greener environment.

As part of "We Care", we continuously hold a variety of events that are in alignment with the above mentioned purpose.

CONSERVATION OF ENERGY

Though your company is not a power intensive industry, the company continues its efforts to reduce energy usage by adopting various methods of energy saving and conservation.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year the Company''s foreign exchange earnings were Rs. 1,233.704 Million (Rs. 1,325.521 Million in 2011-12). The revenue expenditure in foreign currency was Rs. 1,533.703 Million (Rs. 1,781.206 Million in 2011-12) and the capital expenditure was Rs. 8.984 Million (Rs. 55.950 Million in 2011-12).

The Company will continue its efforts to enhance the export sales.

STATUTORY STATEMENTS

As required by Section 212 of the Companies Act, 1956, a statement showing the Company''s interest in the subsidiaries is enclosed to the Balance Sheet of the Company.

The Government of India vide its Circular No. 2/2011 dated 8th February, 2011 granted general exemption under Section 212(8) of the Companies Act, 1956 from attaching the Balance Sheet and Statement of Profit & Loss and other documents of its subsidiaries and hence the same have not been attached.

As directed by the Central Government, the accounts of the subsidiaries are consolidated with the accounts of the company in accordance with Accounting Standard 21 (AS 21) prescribed by The Institute of Chartered Accountants of India and Listing Agreement prescribed by Securities Exchange Board of India. The consolidated accounts duly audited by the statutory auditors and the consolidated balance sheet information form part of the annual report.

The annual accounts, reports and other documents of the subsidiary companies will be made available to the members and investors upon receipt of a request from them.

The annual accounts of the subsidiary companies will be available at the registered office of the company and at the respective subsidiary companies concerned. Any member or investor can inspect the same during the business hours of any working day.

The statement showing the particulars of technology absorption pursuant to Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is given in the annexure forming part of this report.

As required by the provisions of Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 Companies (Particulars of Employees) Amendment Rules, 2011, the names and other particulars of employees are set out in the annexure forming part of this report.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm that:

a) in the preparation of annual accounts for the financial year ended 31st March, 2013 the applicable accounting standards have been followed ;

b) they had selected such accounting policies and applied them consistently and made judgements and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for the year under review;

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

d) they had prepared the annual accounts for the financial year ended 31st March, 2013 on a going concern basis.

CORPORATE GOVERNANCE

Your company reaffirms its commitment to the good corporate governance practices. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance Report is annexed to this Directors'' Report.

The Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as required under Clause 49(V) of the Listing Agreement.

Auditors'' Certificate regarding compliance of the Corporate Governance is made a part of this Annual Report. All the board members and senior managerial personnel have affirmed compliance with the code of conduct for the year 2012-13.

CAUTIONARY STATEMENT

Management Discussion and Analysis forming part of this Report is in compliance with Corporate Governance Standards incorporated in the listing agreement with Stock Exchanges and such statements may be "forward-looking" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company''s operations include economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors.

ACKNOWLEDGEMENTS

The Board wishes to place on record appreciation to Denso Corporation, Japan, Johnson Controls, USA, Customers, Distributors, Dealers, Suppliers, Shareholders, Bankers, Government Authorities and Other Technology Partners for their continued support and cooperation during the year under review. The Directors also wish to place on record their appreciation to the employees at all levels for their continued cooperation and commitment.

For and on behalf of the Board

Coimbatore Vijay Mohan

29th May, 2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting the Fortieth Annual Report and audited accounts for the financial year ended 31st March 2012.

FINANCIAL RESULTS

The summarised financial results are :

Rs Million 2011-12 2010-11

Net Sales & Services

- Domestic 7,886.746 7,100.154

- Export 1,428.047 1,062.933

Total 9,314.793 8,163.087

Profit from Operations before Finance Cost, Depreciation and Amortisation Expense & Exceptional Items 758.789 825.879

Less : Finance Costs 297.921 273.116

: Depreciation & Amortisation

Expense 291.911 337.040

Profit from Operations before

Exceptional Items 168.957 215.723

Add : Exceptional Items (Net) 494.203 -

Profit Before Tax 663.160 215.723

Less : Tax Expense

Current Tax 141.000 43.490

Deferred Tax 44.000 63.810

MAT Credit (86.000) (43.490)

For earlier years - (79.235)

Profit for the Year 564.160 231.148

Add : Surplus - Opening 114.600 71.212

Amount available for appropriation 678.760 302.360

DIVIDEND

Your Directors recommend a dividend of 40% plus a special dividend of 40% from profit on sale of unit, aggregating to 80% (Rs 0.80 per share of Rs1 face value) on the paid-up equity share capital of the Company for the year ended 31st March 2012.

APPROPRIATION Rs Million

2011-12 2010-11

Dividend Rs 0.80 per share of Rs 1.00 face value. (Previous year - Rs 0.60 per share of Rs 1.00 face value) 72.000 54.000

Tax on Dividend 11.680 8.760

General Reserve 450.000 125.000

Surplus to be carried over 145.080 114.600

Total 678.760 302.360

AUTO INDUSTRY

As against a growth of 27% in the previous financial year, in the year 2011-12, the domestic auto industry grew by 14% only.

The performance as per Society of Indian Automobile Manufacturers (SIAM) is :

Vehicles Sold Growth Category 2010-11 2011-12 2011-12 In numbers %

Passenger Car 2,411,059 2,516,037 4.35

Utility Vehicle 318,869 372,201 16.73

Multi Purpose Vehicle 215,940 237,152 9.82 Medium & Heavy

Commercial Vehicle 351,408 376,618 7.17

Light Commercial Vehicle 407,540 525,577 28.96

Scooters / Scooterettee 2,108,250 2,653,446 25.86

Motor Cycles 10,488,566 11,943,579 13.87

Mopeds 703,713 785,942 11.69

Three Wheelers 795,992 876,127 10.07

Total 17,801,337 20,286,679 13.96

OPERATIONS

During 2011-12, our domestic sales increased from Rs 7,100 million to Rs 7,887 million, a growth of 11% only, since we are yet to regain the full market share lost.

Our export sales increased from Rs 1,063 million to Rs 1,428 million, a growth of 34%, partially due to recovery of automotive markets in countries where we export and addition of new customers.

The overall sales increased from Rs 8,163 million to Rs 9,315 million, a growth of 14%.

The increase in cost of all inputs, especially imported raw materials and electronic components, coupled with higher finance costs resulted in the Profit from Operations decreasing from Rs 216 million to Rs 169 million.

The Company had an exceptional expense of Rs 98.500 million towards compensation for retrenched labour. As informed last year about formation of wholly owned subsidiary, on 18th March 2012, our company sold business, assets & liabilities related to Personal Passenger Vehicles (Scooter, Motor Cycle, Car & MPV) instrument cluster business out of our Plant V, Pune by way of slump sale to Pricol Pune Limited, the erstwhile wholly owned subsidiary, for a value of Rs 734 million. The profit out of slump sale is Rs 593 million. Consequently, the Profit Before Tax increased from Rs 216 million to Rs 663 million.

For the ensuing year 2012-13, the Company's balance business (excluding the business sold) is expected to grow by 11 to 13 %, barring unforeseen circumstances arising out of the economic uncertainty faced by India.

Our Company will continue its efforts to control the operational costs and improve the bottom line.

SUBSIDIARY COMPANIES

PT Pricol Surya, Indonesia

As informed last year Honda Motor Cycles became a new customer from January 2011. With supplies to Honda Motor Cycles for the whole year in 2011-12, the company's sales increased steeply to Rs 1,110 million (Rs 317 million for 2010-11). The Company generated a Profit Before Tax of Rs 83 million (Loss of Rs 11 million for 2010-11).

Effective January 2012, Yamaha Motor Indonesia has increased the order for Electronic Instrument Cluster. Yamaha Motor is also showing interest in procuring Mechanical Instrument Cluster. Suzuki Motor Cycles have awarded new Instrument Cluster Business for their forthcoming model.

The outlook for the year 2012-13 is a growth of 18 to 20 % with increase in profits.

Pricol Castings Limited (formerly English Tools and Castings Limited)

During 2011-12, the Company made a sales turnover of Rs 239 million against Rs 264 million last year, a decrease of 10%.

The Company took efforts to streamline the business by pulling out of non profitable business. Further, sale to one of the existing customer changed to supply of casting with aluminium raw material supplied by them. This has resulted in drop in sale value of Rs 11 million, but helped the company to improve operating margins.

Even though the company had a loss of Rs 6 million for the whole year 2011-12, various cost control measures implemented during the financial year 2011-12, resulted in nominal profits for each of the last 3 quarters of 2011-12.

For the ensuing year, the company has won new orders from domestic and overseas customers. All the new business is with higher value addition like machining, painting etc. Gravity Die Casting Process is also given more focus to take the company to next level of growth. The Company is having an order book of Rs 320 million. With some more new customers expected, turnover of Rs 400 million is expected for financial year 2012-13. This increase in sales will lead to profits.

The existing erratic power situation and raising LPG cost is a cause of concern. Various new initiatives are planned to manage cost and generate the projected profitability.

In order to create a brand image for the Company, the name of the Company has been changed from "English Tools and Castings Limited" to "Pricol Castings Limited" from 24th November 2011.

Integral Investments Limited

A wholly owned subsidiary during the financial year 2011-12 received a dividend of Rs 0.777 million and earned a Profit Before Tax of Rs 0.105 million.

Shanmuga Steel Industries Limited

A wholly owned subsidiary of Integral Investments Limited during the year 2011-12 earned a Profit Before Tax of Rs 10.535 million, through sale of its Land & Building.

JOINT VENTURE Pricol Pune Private Limited

The Wholly Owned Subsidiary Pricol Pune Limited became a 50:50 joint venture between M/s.Johnson Controls Enterprise Limited, UK (a Wholly Owned Subsidiary of Johnson Controls, Inc. USA) and Pricol Limited on 26th March, 2012. During the period 18th May 2011 to 31st March, 2012 the company made a sales turnover of Rs 47.279 million and earned a Profit Before Tax of Rs 1.061 million.

The status of the company has been changed from Public to Private Limited from 30th April, 2012.

SHARE WARRANTS

With the approval of shareholders given in the Extra Ordinary General Meeting held on 9th December 2011, the company issued 4,500,000 convertible share warrants of Rs 1/- each, on a preferential basis to M/s.PHI Capital Solutions LLP, (PHI) with each warrant convertible into one equity share of Rs 1/- each of the Company for a price of Rs 18/- per warrant (including a premium of Rs17/-). PHI has paid Rs 4.50 per warrant (25% of the Issue price) as application money. PHI have to exercise their warrant rights within eighteen months.

OUTLOOK, OPPORTUNITIES, CHALLENGES, RISKS & CONCERNS

Due to economic uncertainty and continuing high inflation, the sales forecast by the auto industry is conservative with moderate growth projections of 8 to 10% only for the current financial year.

Global OEMs continue to look to India as a preferred manufacturing location, for both the domestic and export markets. Increasing spending power and disposable income, especially with the younger population, is spurring sales of Two Wheelers and entry-level cars.

While the long term prospects for the industry remain strong in line with the outlook for the OEM segment, the industry faces strong challenges in the form of threat of low cost imports, currency volatility and ability to invest on product development to be able to move up the value chain.

With India's GDP slowing down to less than 7% and S&P's outlook downgrade, the Indian Automotive Industry's growth is also expected to slow down. The Auto component industry is also under continuous pressure to bring down cost of products by adapting new manufacturing processes, better R&D and reduced manpower. The increase in excise duty and weakening of the rupee has put additional strain on the bottom line.

Mitigation of this risk has been planned by increasing the Company's Share of Business with the Major Customers and focusing only on the major product groups to grow.

A Company Management Committee comprising of all heads of various functions has been formed with the role of achieving the Company's sales targets, reducing costs and to improve profit.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company's internal control system has been designed & implemented, taking into account the nature of business and size of operations, to provide for:

- Reliability and integrity of financial and operational information.

- Effectiveness and efficiency of operations and assets.

- Compliance with applicable statutes, policies, listing requirements, management policies and procedures.

The Company, through its own Internal Audit Department, carries out periodic audits at all locations and all functions and brings out any deviation to internal control procedures. The observations arising out of audit are periodically reviewed and compliance ensured. The summary of the Internal audit observations is submitted to the Audit Committee. The Audit Committee at their meetings regularly review the financial, operating, internal audit & compliance reports to improve performance. The heads of various monitoring / operating cells are present for the Audit Committee meetings to answer queries from the Audit Committee.

RISK MANAGEMENT

Risk is an integral part of the business process.

To enhance the risk management process, the company has mapped the risks. Risk arises for achieving business objectives are identified and prioritized. Risk mitigation activity plans are established and executed as and when need arises. Periodical reviews are carried out to assess the risk levels.

FINANCE

During the year the company has not accepted / renewed any fixed deposit from public. The total deposits from public outstanding as on 31st March, 2012 is NIL.

ICRA has maintained the credit rating of 'LBBB-' for Working Capital fund based facilities & Term Loan facilities and 'A3' for working capital non fund based facilities like Letters of Credit and Buyers Credit for imports.

DIRECTORS

Mr.V.Ramakrishnan, Mr.R.Vidhya Shankar and Mr.G.Soundararajan, Directors, retire by rotation at the ensuing Annual General Meeting and are eligible for reappointment.

Mr. Hiroyuki Wakabayashi of Denso Corporation was inducted into the Board on 29th July 2011 to fill up the vacancy due to the resignation of Mr. Mitsuhiko Masegi of Denso Corporation. Mr. Hiroyuki Wakabayashi will hold office upto the ensuing Annual General Meeting 2012. He is eligible for appointment. The Board places on record it's warm appreciation of the valuable contribution made by Mr. Mitsuhiko Masegi during his association with the company.

AUDITORS

The Auditors of the Company, M/s.Haribhakti & Co. retire at the ensuing Annual General Meeting and are eligible for reappointment. The Board recommends their appointment as the Statutory Auditors of the Company.

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

DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

With a view to bring in a complete transformational approach in respect of all the employee relations issues, a series of meetings were held between the representatives of the management and the Union. A Memorandum of Understanding has been signed between the parties in February 2012 covering various areas of production and productivity improvements, wage increase, settlement of pending disputes including dropping of several cases pending before various forums raised by both the parties in the past.

In the mutual interest of maintaining industrial peace and harmony, a significant improvement path has been chosen by both the parties by adopting and establishing a productivity linked wage settlement process to achieve the enhanced productivity levels and also certain important principles have been laid for employees participation and earn more by enhancing the productivity levels on an ongoing basis in future. A formal settlement is expected to be signed in due course.

As a part of organisational restructuring several new senior level professionals have been inducted to the company in line with the company's growth path.

CORPORATE SOCIAL OBJECTIVES

Corporate Social Responsibility continues to assume an important role in the activities of the Company. Afforestation, Water Management, Literacy and Health continue to be the chosen areas of work by the Company and its employees.

Large scale tree planting has been carried out on World Environment day by our employees inside the plant as well as in the nearby villages and schools. A tree park has been developed inhouse to grow saplings for distribution to the public.

Under Pricol Rural Development Programme (PRDP), Nithyananda - the gasifier crematorium maintained by our company received good accolades among the public.

CONSERVATION OF ENERGY

Though your company is not a power intensive industry, the company continues its efforts to reduce energy usage by adopting various methods of energy saving and conservation.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year the Company's foreign exchange earnings were Rs 1,325.521 Million (Rs 1,002.222 Million in 2010-11). The revenue expenditure in foreign currency was Rs 1,781.206 Million (Rs 1,659.987 Million in 2010-11) and the capital expenditure was Rs 55.950 Million (Rs 63.544 Million in 2010-11).

The Company will continue its efforts to enhance the export sales.

CHANGE OF REGISTERED OFFICE

The Registered Office of the Company has been shifted from 702/7, Avanashi Road, Coimbatore - 641 037 to CPM Towers, 109, Race Course, Coimbatore - 641 018 with effect from 25th May 2012.

STATUTORY STATEMENTS

As required by Section 212 of the Companies Act, 1956, a statement showing the Company's interest in the subsidiaries is enclosed to the Balance Sheet of the Company.

The Government of India vide its Circular No. 2/2011 dated 8th February 2011 granted general exemption under Section 212(8) of the Companies Act, 1956 from attaching the Balance Sheet and Statement of Profit & Loss and other documents of its subsidiaries and hence the same have not been attached.

As directed by the Central Government, the accounts of the subsidiaries are consolidated with the accounts of the company in accordance with Accounting Standard 21 (AS 21) prescribed by The Institute of Chartered Accountants of India and Listing Agreement prescribed by Securities Exchange Board of India. The consolidated accounts duly audited by the Statutory Auditors and the consolidated balance sheet information form part of the annual report.

The annual accounts, reports and other documents of the subsidiary companies will be made available to the members and investors upon receipt of a request from them.

The annual accounts of the subsidiary companies will be available at the registered office of the company and at the respective subsidiary companies concerned. Any member or investor can inspect the same during the business hours of any working day.

The statement showing the particulars of technology absorption pursuant to Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is given in the annexure forming part of this report.

As required by the provisions of Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 and Companies (Particulars of Employees) Amendment Rules, 2011 the names and other particulars of employees are set out in the annexure forming part of this report.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm that:

a) in the preparation of annual accounts for the financial year ended 31st March 2012, the applicable accounting standards have been followed;

b) they had selected such accounting policies and applied them consistently and made judgements and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for the year under review;

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

d) they had prepared the annual accounts for the financial year ended 31st March 2012, on a going concern basis.

CORPORATE GOVERNANCE

Your Company reaffirms its commitment to the good corporate governance practices. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance Report is annexed to this Directors' Report.

The Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as required under clause 49(V) of the Listing Agreement.

Auditors' Certificate regarding compliance of the Corporate Governance is made a part of this Annual Report. All the board members and senior managerial personnel have affirmed compliance with the code of conduct for the year 2011-12.

CAUTIONARY STATEMENT

Management Discussion and Analysis forming part of this Report is in compliance with Corporate Governance Standards incorporated in the listing agreement with Stock Exchanges and such statements may be "forward- looking" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors.

ACKNOWLEDGEMENTS

The Directors take this opportunity to place on record their appreciation to Denso Corporation, Japan, Customers, Distributors, Dealers, Suppliers, Shareholders, Bankers, Government authorities and Other Collaborators for their continued support and co-operation during the year under review. The Directors wish to place on record their appreciation to the employees at all levels for their continued co-operation and commitment.

For and on behalf of the Board

Coimbatore Vijay Mohan

29th May 2012 Chairman

 
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