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Directors Report of Timken India Ltd.

Mar 31, 2015

To the Members

The Board of Directors has pleasure in presenting the Twenty-eighth Annual Report of the Company together with the audited financial statements for the year ended 31st March, 2015.

Financial Results (Rs./Million)

Financial Financial Year ended Year ended 31 March, 2015 31 March,2014

Total Revenue 9349 7310

Total Expenditure 7953 6486

Earnings Before Interest, Tax, Depreciation, Amortization 1396 824

Less: Depreciation & Amortization 167 158

Less: Finance cost 6 9

Profit before tax (PBT) 1223 657

Less: Tax expenses 416 209

Profit after tax (PAT) 807 448

Add: Profit brought forward from previous year 2289 2403

Profit available for appropriation 3096 2851

Less: Appropriation

- Dividend including dividend distribution tax 245 517

- Transfer to General Reserve 81 45

Balance carried forward 2770 2289

During the financial year under review, total revenue grew by 28% due to increase in revenue from operation though other income fell by 45%. The increase in revenue from operation can be attributed to a 44% increase in exports and 22% increase in domestic sales. Expenditures on the other hand registered an increase of 23% due to volume increase and inflationary pressure. Increase in depreciation was due to capitalization of new Plant & Machinery and other assets for expansion projects despite a marginal reduction due to implementation of revised Schedule II as prescribed under the Companies Act, 2013. Profit before tax registered an increase of 86% to Rs. 1223 Million due to increase in volume and increased exports.

Finance

The Company continues to remain debt free and generated adequate cash flow to meet its working capital needs. Pending investment of such funds in growth opportunities it was temporarily parked in debt scheme offered by various mutual funds.

Expansion Projects

Industrial service - the Company has fully commenced its operation of Industrial Service plant in Raipur, Chhattisgarh during the year.

Roller line expansion - the Company completed its Roller expansion project during the year at a cost of Rs. 163 Million.

The business of the Company has not undergone any change in the financial year under review.

Post Balance Sheet event

A fire broke-out in the third party logistics provider's warehouse in Pune in the morning of Sunday 10 May, 2015. No one was injured in the incident but there had been substantial damage to the Company's inventory, held under trust with the third party logistic provider. The Company was in process of quantifying the losses suffered for necessary action and insurance claims. Regular operations were however restored at the location within a week, through the business continuity plan of the Company, without adversely impacting the customer delivery schedules.

Dividends

The Company paid an Interim Dividend on the Equity Shares of the Company @ Rs. 3.00 per share fully paid amounting to Rs. 203,999,952 on 28 November, 2014 as against total dividend of Rs. 6.50 per Equity Share of Rs. 10 each fully paid (65%) for the year ended 31 March, 2014. Payment of such interim dividend is to be considered as final dividend on the Equity Shares of the Company for the financial year ended 31 March, 2015. Your directors are not recommending any further dividend on the Equity Shares of the Company for the financial year 2014-15.

Board Meetings

Four Board meetings were held during the financial year 2014-15 on the following dates:

1. 9 May, 2014;

2. 13 August, 2014;

3. 10 November, 2014; and

4. 3 February, 2015.

In addition to the above, one meeting of the only Independent Directors was also held on 3 February, 2015 without participation of non- independent directors and Key Managerial Personnel.

Directors and Key Managerial Personnel

Mr. James R Menning resigned as the Chairman of the Board with effect from 19 August, 2014 and later resigned as a Director of the Company with effect from 30 September, 2014, in view of his pre-occupation in his new position as Senior Vice President Strategy & Development of the Timken Company in USA.

Mr. Sanjay Koul, Managing Director was elected as the Chairman of the Board with effect from 19 August, 2014 by the Board of Directors of the Company and has been re-designated as the Chairman & Managing Director.

Mr. Niroop Mahanty resigned as a Director of the Company with effect from 30 September, 2014, in view of his pre-occupation with certain critical activities and his inability to devote time to the affairs of the Company therefor.

Mr. Ajay K Das ('Mr. Das') has been appointed as an Additional Director with effect from 30 September, 2014.

Mrs. Rupa Mahanty ('Mrs. Mahanty') has been appointed as an Additional and Independent Director with effect from 30 September, 2014.

Except the above there has been no other change in the composition of the Board of Directors and Key Managerial Personnel.

In terms of relevant provisions of the Companies Act, 2013 ('the Act'), Mr. Das and Mrs. Mahanty hold office as such up to the date of forthcoming Annual General Meeting. The Company has received two separate notices from Members in terms of Section 160 of the Act, signifying its intention to propose the names of Mr. Das and Mrs. Mahanty for appointment as Directors of the Company at the next Annual general Meeting. These items have been included in the Notice convening the next Annual General Meeting of the Company. In this connection the Company is in receipt from each of Mr. Das and Mrs. Mahanty:

a. Consent in writing in Form DIR-2

b. Intimation in Form DIR - 8 and

In addition, the Company is in receipt of a declaration from Mrs. Mahanty to the effect that she meets the criteria of independence in terms of Section 149(6) of the Act.

Mr. R Ramesh, Director of the Company is liable to retire by rotation, and being eligible, offers himself for reappointment at the next Annual General Meeting.

Annual Declarations from Independent Directors

The Company has received necessary declaration from all Independent Directors of the Company under Section 149(7) of the Companies Act, 2013 confirming that each of them has met with the criteria of independence laid down in Section 149(6) of the Act.

Composition of Audit Committee

The composition of Audit Committee is given below:

Mr. P. S. Dasgupta, Non-Executive and Independent Director - Chairman

Mr. Sanjay Koul, Executive and non-independent Director - Member

Mr. Jai S. Pathak, Non-Executive and Independent Director - Member

Mrs. Rupa Mahanty, Non-executive and Independent Director - Member

Recommendations of the Audit Committee to the Board of Directors

During the year, the Board of Directors of the Company accepted all the recommendations put forward to it by the Audit Committee of the Board.

Vigil mechanism

The Company has adopted a Vigil Mechanism - a Whistle Blower Policy in terms of which the Directors and Associates of the Company have access to "The Timken Helpline", a toll free phone number that any Associate can call, if he has any concern or question, which he is not willing to discuss face to face with his Supervisor, Manager or a member of the Human Resource Team or Senior Management. This Helpline is available around the clock, every day. No call tracing or recording devices are ever used and if the Associate so wishes, he may remain completely anonymous. In terms of the said policy, Associates of the Company have also got direct access to the Chairman of the Audit Committee to report matters of exceptional nature.

The Company follows the open door policy and adequate safeguards have been provided against vicitimisation of the reporting Directors/Associates.

The Whistle Blower Policy of the Company is disclosed on the Company's website www.timken.com/india.

Composition of Nomination and Remuneration Committee

The Composition of the Nomination and Remuneration Committee is given below:

Mrs. Rupa Mahanty Non-Executive and Independent Director - Chairperson Mr. P. S. Dasgupta Non-Executive and Independent Director - Member

Mr. Jai S. Pathak Non-Executive and Independent Director - Member

Mr. Ajay K. Das Non-Executive and not- Independent Director - Member Nomination and Remuneration Policy

The Nomination and Remuneration Committee has laid down a policy for remuneration of directors, KMP and other employees and also the criteria for determining qualifications, positive attributes and independence of a director, the details of which can be seen in a document attached to this Report marked as Annexure - I.

Formal Annual Evaluation of the Board of Directors, its Committees and Directors

The Nomination and Remuneration Committee of the Board has laid down the criteria for evaluation of performance of the Independent Directors, Board of Directors and various committees of the Board and individual directors.

Accordingly, the Board of Directors at its meeting held on 3 February, 2015 carried out performance evaluation of all directors, Board of Directors and committees thereof. During such evaluation the evaluated director was not present at the discussion. The methodology of evaluation was discussed and each director was requested to record his evaluation of the other directors, Board and Committees of the Board of which he is a member and submit to the Chairperson of the Nomination and Remuneration Committee in terms of the criteria finalised earlier. The record of performance evaluation of the Chairperson of the Nomination and Remuneration Committee was sent to the Chairman & Managing Director of the Company.

Ratio of Remuneration

Pursuant to Section 197(12) of the Act read with Rules 5(1), (2) and (3) of Companies (Appointment and Remuneration) Rules, 2014 applicable details are given in the statement attached to this Report marked as Annexure - II. Information required under Rules 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in the Annexure - II itself.

Risk Management Policy

In terms of relevant provisions of law, the Board of Directors of the Company has adopted a Risk Management Policy of the Company. The policy has identified certain categories of risks that in the opinion of the Board, the Company may face as risks pertaining to the areas such as strategic, operational, financial, market, Compliance and information technology.

Descriptions for each of the risks identified in the Risk Matrix are documented and recorded in a structured format in each area where the risk is identified covering; nature of risk, severity of risk, chance of occurrence of risk, chance of detection and control mechanism available.

Each aspect of Severity, Occurrence and Detections are assigned with values on a scale of 1-5. These values are multiplied to determine the Risk Priority Number (RPN). The Risks are thereafter prioritized based on the RPN, analysed and strategy developed accordingly.

On completion of the above exercise the Company's Risk Matrix has been finalized and was reviewed at the year end by the India Leadership Team and Internal Risk Management Committee and reviewed at least once in a year by the Board of Directors of the Company.

Corporate Social Responsibility

Composition of Corporate Social Responsibility (CSR) Committee, annual report on CSR activities, details of the Policy development and implementation by the Company during the year are given in the statement attached to this Report marked as Annexure - III.

Statutory Audit

The Auditors, M/s S.R. Batliboi & Co., LLP, Chartered Accountants (Registration No. 301003E), have been appointed at the last Annual General Meeting for a period of three years from the conclusion of the said Annual General Meeting till the conclusion of the thirtieth Annual General Meeting subject to ratification of the appointment by the members at every subsequent Annual General Meeting.

Secretarial Audit

Mr. R Vijayakumar, Practising Company Secretary (FCS 6418 & COP 8667) Bangalore has been appointed by the Board of Directors to carry out Secretarial Audit in terms of Section 204 of the Companies Act, 2013 and Mr. Vijayakumar has since submitted his report, a copy of which is annexed to this Report marked as Annexure - IV.

Cost Audit

Messrs Shome & Banerjee, Cost Accountants (F000001), Kolkata has been appointed to audit the cost accounts of the Company for the year 2014-15. The due date for submitting the Cost Audit Report for the year 2014-15 with prescribed authority is 30 September, 2015. The Cost Audit Report for the year ended 31 March, 2014 in XBRL format was submitted on 26 September, 2014. Based on the recommendation of the Audit Committee, the Board of Directors has reappointed Messrs Shome & Banerjee, Cost Accountants (F000001), Kolkata to audit the cost accounts for the year 2015-16 also and pursuant to Rule 14 of the Companies (Audit and Auditors Rules) 2014 the remuneration payable to them requires a ratification by the shareholders. The proposal for ratification of remuneration payable to the Cost Auditors is therefore, placed before the members for approval and has been included in the Notice convening the ensuing Annual General Meeting.

Qualifications in Audit Reports

The reports issued by the Statutory Auditors, the Secretarial Auditor and the Cost Auditors do not contain any qualification, reservation or adverse remark or disclaimer.

Utilization of issue proceeds

The Company raised Rs. 4,781.76 Lakhs (net of share issue expenses) under the Institutional Placement Programme to comply with the requirement to maintain a minimum public shareholding of 25% in listed companies, by issuing 4,265,134 equity shares in the year 2012-2013. The proceeds were used towards long term capital requirements, working capital requirements and for general corporate purposes as given in the prospectus dated 09 April, 2013. During the year ended 31 March, 2015 the Company has completely spent the money for the purpose for which the fund have been raised.

Related Party Transactions

All transactions with related parties were entered into in the ordinary course of business and were on arms length basis. However, in terms of provisions of sections 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, a summary of material related party transactions in the ordinary course of business and on arm's length basis is given in Form No. AOC-2, attached to this Report marked as Annexure V. The Policy can be seen at www.timken.com/india.

Listing with Stock Exchanges

The Company confirms that it has paid the Annual Listing Fees for the year 2015-2016 to National Stock Exchange and Bombay Stock Exchange where the Company's Shares are listed.

Extract of Annual Return

As required pursuant to section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in Form MGT 9 is attached as a part of this Report, marked as Annexure - VI

Corporate Governance and Shareholders Information

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis, Corporate Governance Report and Auditors' Certificate regarding compliance of conditions of Corporate Governance are made a part of this Report and are attached to this Report, marked as Annexure - VII.

Particulars

Conservation of energy:

1. Steps taken / impact on conservation of energy, with special reference to the following:

2. Steps taken by the company for utilizing alternate sources of energy including waste generated

3. Capital investment on energy conservation equipment

Remarks

In Jamshedpur, Plant power factor continued to be maintained at more than 0.96 levels:

I. Additional capacitor banks included near all high energy consuming equipment to increase power factor.

II. Rationalization of individual Split/window A.Cs through two way switch.

III. Interlocking of high HP motors to avoid idle running.

In Raipur, reduction in electrical load sanction (KVA) from 1500KVA to 1000KVA

Technology absorption:

1. Efforts, in brief, made towards technology absorption.

2. Benefits derived as a result of the above efforts, e.g., product improvement, cost reduction, product development, import substitution, etc.

3. In case of imported technology (imported during the last 3 years reckoned from the beginning of the financial year), following information may be furnished:

a. Details of technology imported.

b. Year of import.

c. Whether the technology been fully absorbed

d. If not fully absorbed, areas where absorption has not taken place, and the reasons therefore.

4. Expenditure incurred on Research and Development

Under the Collaboration Agreement, technology update is released from the Timken Company which is transferred to the Inter alia, shop floor instructions. Any improvement in the technology/progress is of this continuous update and this is being regularly monitored by the Timken Company personnel.

a. Manufacture of Tapered Roller Bearings

b. 1991-92 onwards

c. It is being gradually absorbed and is a continuous process.

Ongoing in the area of machining, heat treatment and finishing. To make further improvements in the manufacturing process, product quality and production output.

For and on behalf of the Board of Directors

Sanjay Koul New Delhi Chairman & Managing Director 22 May, 2015 DIN: 05159352


Mar 31, 2014

The Directors have pleasure in presenting the Twenty-seventh Annual Report on the business and operations of the Company together with the financial results for the period ended 31 March 2014.

Financial Results

(Rs./Million)

Financial Year ended Financial Year ended 31 March 2014 31 March 2013

a) Total Revenue 7310 6940

b) Total Expenditure 6486 6151

c) Earnings before Interest, Tax, Depreciation, Amortization 824 789

d) Less: Depreciation 156 139 e) Less: Amortization & Finance Costs 11 13 f) Profit before Tax (PBT) 657 637

g) Less: Tax Expenses 209 195

h) Profit after Tax (PAT) 448 442

i) Add: Profit brought forward from previous year 2403 2153

j) Profit available for appropriation 2851 2595

k) Less: Appropriations

- Dividend including dividend distribution tax 517 159

- Transferred to General Reserve 45 33

l) Balance carried forward 2289 2,403

During the financial year under review, total Revenue grew by 5% due to increase in both revenue from operations and other income. The increase in revenue from operations can be attributed to a 32% increase in export sales though domestic sales registered a decline by 4%. Expenditures on the other hand registered an increase of 5% due to volume increase and inflationary pressures. Increase in depreciation was due to capitalization of new plant and machinery for the expansion project. Profit before taxes registered an increase of 3% to Rs.657M.

Dividends

The Company paid an interim dividend on the equity shares of the Company @ Rs.6.50 per share of Rs.10 each fully paid amounting to Rs. 441,921,571 on 29 November 2013 as against a total dividend of Rs. 2/- per equity share of Rs. 10/- each fully-paid (20%) for the year ended 31 March 2013. Payment of such interim dividend is to be considered as final dividend on the equity shares of the Company for the financial year ended 31 March 2014. Your Directors are not recommending any further dividend on the equity shares of the Company for the financial year 2013-14.

Expansion Projects

Industrial services - The Company has partially commenced operations of the Industrial Service plant in Raipur, Chattisgarh during the last quarter of 2013-14. Established at a cost of Rs.13.50 Crores, this facility aims to cater to combined Gear and Bearings services. Work on enhancing the capabilities to make this facility fully operational is currently underway and is expected to be completed during the current year.

The Raipur Service plant is the first such Timken plant outside the United States that expands the Service capabilities to new growing markets offering gear service capabilities.

Roller line expansion- Work is progressing satisfactorily and the first line is expected to be commissioned in the second quarter of the year.

Finance

Your Company continues to remain debt free and generated adequate cash flow to meet its working capital needs. Pending investment of such fund in growth opportunities it was temporarily parked in debt based schemes offered by various mutual funds.

Listing of Equity Shares on Stock Exchanges

Listing of the Company''s Equity Shares on BSE Limited and National Stock Exchange of India Limited continued during 2013-14 and the listing fees for the year 2014-15 have already been paid to the Stock Exchanges.

Directors

Mr. Christopher J Holding resigned as a Director of the Company with effect from 5 February 2014. The Board placed on record its deep appreciation for the valuable contribution made by Mr. Holding as a Director.

Mr. James R. Mining, Director of the Company, is liable to retire by rotation at the forth coming Annual General Meeting and being eligible, offers himself for re-appointment at the said Annual General Meeting.

Mr. Jai S Pathak and Mr. Niroop Mahanty being non-executive (independent) Directors of the Company retire by rotation at the ensuing Annual General Meeting under the provisions of the erstwhile Companies Act, 1956. In terms of Section 149 and any other applicable provisions of the Companies Act, 2013 (''the Act''), both Mr. Pathak and Mr. Mahanty being eligible and seeking re-appointment are proposed to be appointed as Independent Directors for a term of 5 years.

The Company has received two separate notices from members under the provisions of Section 160 of the Act proposing Mr. Pathak and Mr. Mahanty as candidates for the office of Director.

The Company has received from each of Mr. Jai S Pathak and Mr. Niroop Mahanty:

(a) Consent in writing in Form DIR-2

(b) Intimation in Form DIR-8

(c) A declaration to the effect that he meets the criteria of independence in terms of Section 149(6) of the Act.

The proposals for the appointment of Mr. Pathak and Mr. Mahanty as Independent Directors on the Board, have been included in the Notice convening the next Annual General Meeting of the Company.

Mr. P. S. Dasgupta is a non-executive (independent) Director of the Company. In terms of Section 149 and any other applicable provisions of the Act Mr. Dasgupta, being eligible, is proposed to be appointed as an Independent Director for a term of 5 years.

The Company has received a notice from a member under the provisions of Section 160 of the Act proposing Mr. Dasgupta as a candidate for the office of Director.

The Company has received from Mr. Dasgupta:

(a) Consent in writing in Form DIR-2

(b) Intimation in Form DIR-8

(c) A declaration to the effect that he meets the criteria of independence in terms of Section 149(6) of the Act.

The proposal for the appointment of Mr. Dasgupta as Independent Director on the Board, has been included in the Notice convening the next Annual General Meeting of the Company.

Mr. R Ramesh has been appointed as an additional director and also as a Whole-time Director by the Board of Directors with effect from 9 May 2014. In terms of relevant provisions of the Act, Mr. Ramesh holds office up to the date of the forthcoming Annual General Meeting. The Company has received a notice from a member in terms of Section 160 of the Act signifying his intention to propose the name of Mr. Ramesh for appointment as director of the Company at the next Annual General Meeting. This item has been included in the Notice convening the next Annual General Meeting of the Company.

Statutory Audit

Messrs. S R B C & CO LLP, Chartered Accountants, Statutory Auditors of the Company retires at the conclusion of the Twenty-seventh Annual General Meeting. The Company has received a letter dated 22 April 2014 from Messrs. S R B C & CO LLP Statutory Auditors expressing their unwillingness to be reappointed as Auditors due to certain factors entirely internal to them. It is proposed to appoint Messrs. S. R. Batliboi & Co LLP as the Statutory Auditors of the Company subject to the approval of the shareholders at the Annual Genera Meeting to hold office for a period of three years commencing from the conclusion of Twenty - seventh Annual General Meeting to the conclusion of the Thirtieth Annual General Meeting at such fees as may be mutually determined between the Board of Directors of the Company and the Statutory Auditors. Messrs. S. R. Batliboi & Co LLP have furnished to the Company a Certificate, regarding their eligibility for appointment as Auditors. Accordingly, the appointment of Messrs. S. R. Batliboi & Co. LLP, Chartered Accountants is being proposed as an ordinary resolution at the Twenty-seventh Annual General Meeting of the Company in terms of applicable provisions of the Companies Act, 2013 and has been included in the Notice convening the next Annual General Meeting.

Cost Audit

The Board of Directors have appointed Messrs. Shome & Banerjee as the Cost Auditors to audit the Cost Accounts of the Company for the year ending 31 March 2015. The due date for submitting the Cost Audit Report for the current year with the prescribed authority is 30 September 2014. The Cost Audit Report for the year ended 31 March 2013 in XBRL format was submitted on 27 September 2013. Pursuant to Rule 14 of the Companies (Audit and Auditors Rules) 2014 the remuneration payable to the cost auditors requires a ratification by the shareholders. The proposal for ratification of remuneration payable to the Cost Auditors is therefore, placed before the members for approval and has been included in the Notice convening the next Annual General Meeting.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis, Corporate Governance Report and Auditors'' Certificate regarding compliance of conditions of corporate governance are made a part of the Annual Report.

Industrial Relations

The performance of the Company during the year ended 31 March 2014 could be made possible only with the collective contribution and excellent performance of the Associates both in terms of operational parameters and also at the market place. The Directors express their appreciation for the wholehearted support received from all sections of the Associates of the Company.

Social Responsibility

The Company and its associates have been actively participating in the promotion of social welfare activities of the communities where Timken facilities are located in India.

Particulars of Employees

Information required under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (corresponding to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975) is given in the Annexure forming part of the Report. However as per the provisions of said Rules, the Report and Accounts are being sent to all Shareholders of the Company excluding the Statement of Particulars of Employees. Such particulars shall be made available to any shareholder on a specific request made by him in writing before the date of the Annual General Meeting.

Conservation of Energy, Technology Absorption & Foreign Exchange

All the new machineries installed during the year are energy efficient. Significant cost saving on cutting fluids and consumption of electricity have been achieved by machine modifications, energy audit and efficient coolant management. Regarding absorption of foreign technology, the process is ongoing in the areas of machining, heat treatment and finishing. The Company has now achieved full indigenisation of all components for Standard Bearings and substantial indigenization for AP Bearings. It is the intention of the Company to proceed with the process of indigenisation further.

Other details are given in the Annexure, which also forms part of this report.

Directors'' Responsibility Statement

As per Section 134(5) of the Companies Act, 2013, the Board of Directors report that:

- in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

- the Directors had selected such accounting policies and applied 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 year and of the profit of the Company for that period;

- the Directors had taken proper and sufficient care for 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;

- the Directors had prepared the annual accounts on a going concern basis;

- the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

- the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

For and on behalf of the Board of Directors

Bangalore James R Menning

10 July 2014 Chairman


Mar 31, 2013

To the Members

The Directors have pleasure in presenting the Twenty-sixth Annual Report on the business and operations of the Company together with the financial results for the period ended 31 March 2013.

Financial Results

(Rs./Million)

12-months ended 15-months ended 31 March 2013 31 March 2012

a) Total Revenue 6,940 8,511

b) Total Expenditure 6,151 7,244

c) Earnings before Interest, Tax, Depreciation, Amortization 789 1,267

d) Less: Depreciation 139 149

e) Less : Amortization & Finance Costs 13 12

f) Profit before Tax (PBT) 637 1,106

g) Less: Tax Expenses 195 299

h) Profit after Tax (PAT) 442 807

i) Add: Profit brought forward from previous year 2,153 2.908

j) Profit available for appropriation 2,595 3,715

k) Less: Appropriations

- Dividend including dividend distribution tax 159 1,481

- Transferred to General Reserve 33 81

l) Balance carried forward 2,403 2,153

The current financial year comprised a period of 12 months ended 31 March 2013 whereas the previous financial year comprised a period of 15 months ended 31 March 2012. Therefore, the two sets of numbers appearing above are not comparable.

During the financial year under review, total Revenue grew annually (April, 2012 - March, 2013 vs. April, 2011 - March, 2012) by 2% primarily due to increase in revenue from operations though other income registered a decline of 66%. This is primarily on account of sale in long term investments and current investments. The increase in revenue from operations can be attributed to 4% annual increase in sales out of which export sales grew by 8% and domestic sales grew by 2% annually. Expenditures on the other hand registered an increase of 5% due to increase in costs of materials and also due to increased volume of products purchased for resale. Increase in depreciation was due to capitalization of new plant and machinery for the expansion project.

Consequently Profit before tax declined by 18% to Rs. 637 million primarily on account of reduction in investment income.

Dividends

Your Directors are pleased to recommend a dividend of Rs. 2/- per equity share of Rs. 10/- each fully-paid (20%) for the year ended 31 March 2013 out of the profits of the Company for the year 2012-13 as against a total dividend of Rs. 20/- per equity share of Rs. 10/- each fully-paid (200%) for the previous financial period comprising 15 months, disbursed as an interim dividend on 28 November 2011 which was confirmed as a final dividend at the 25th Annual General Meeting of the Company held on 19 July 2012. The dividend being recommended by your Directors is subject to approval of the shareholders at the forthcoming Annual General Meeting and if approved will be paid to those shareholders or beneficial owners for dematerialized shares whose names will appear on the Register of Members of the Company as at the close of business on 24 July 2013.

Proposed Issue of New Shares

Pursuant to the approval of the members conveyed at the Extraordinary General Meeting in terms of Section 81 (1A) of the Companies Act, 1956, the Company has since issued 42,65,134 equity shares of Rs. 10/- each at an issue price of Rs. 120/- per equity share through an Institutional Placement Programme in accordance with Chapter VIII-A of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, to comply with the requirement to maintain a minimum public shareholding of 25% in listed companies.

Expansion Project

Industrial Services plant

The Company is in the process of establishing an Industrial Service plant in Raipur, Chattisgarh with an estimated cost of Rs. 27.50 Crores including plant and machinery. This facility shall be a combined Gear and Bearings service facility - located in the hub of the Metal, Cement, Coal fired power generation, Mining Industry and will support growing our aftermarket penetration in these target industries.

This proposed Raipur Service plant, will be the first such Timken plant outside the United States that expands the service capabilities to new growing markets offering gear service capabilities. This project is expected to be commissioned by mid 2013.

Roller line capacity

Your Company is a manufacturer of tapered roller bearings. Considering the increased demand for rollers in the Asia Region, your Company has embarked upon an expansion plan for manufacture of rollers beyond the capacity currently available. The additional capacity will not only help the Company to meet the domestic demand but also will help to increase its export turnover. This will also reduce the Company''s dependency on imported rollers resulting in reduction of lead time and shipping and duty costs.

This project is being established at a cost of Rs. 16.50 Crores and is expected to be commissioned by end of third quarter of the current financial year.

Finance

Your Company continues to remain debt free and generated adequate cash flow to meet its working capital needs. Pending investment of such fund in growth opportunities it was temporarily parked in debt based schemes offered by various mutual funds.

Listing of Equity Shares on Stock Exchanges

Listing of the Company''s Equity Shares on BSE Limited and National Stock Exchange of India Limited continued during 2012-13 and the listing fees for the year 2013-14 have already been paid to the Stock Exchanges.

Directors

Mr. Ajay K. Das (''Mr. Das'') resigned as the Managing Director of the Company with effect from 26 October 2012. The Board placed on record its deep appreciation for the valuable contribution made by Mr. Das as the Managing Director.

Mr. Sanjay Koul (''Mr. Koul'') has been appointed as an additional director and also as the Managing Director by the Board of Directors with effect from 26 October 2012. In terms of relevant provisions of the Companies Act, 1956 (''the Act''), Mr. Koul holds office up to the date of the forthcoming Annual General Meeting. The Company has received a notice from a member in terms of Section 257 of the Act signifying his intention to propose the name of Mr. Koul for appointment as director of the Company at the next Annual General Meeting. This item has been included in the Notice convening the next Annual General Meeting of the Company.

Mr. Deepak Rastogi (''Mr. Rastogi'') resigned as a Director of the Company with effect from 7 June 2013. The Board placed on record its deep appreciation for the valuable contribution made by Mr. Rastogi as a Director of the Company.

Mr. Christopher J Holding (''Mr. Holding'') has been appointed as an additional director by the Board of Directors with effect from 7 June 2013. In terms of relevant provisions of the Act, Mr. Holding holds office up to the date of the forthcoming Annual General Meeting. The Company has received a notice from a member in terms of Section 257 of the Act signifying his intention to propose the name of Mr. Holding for appointment as director of the Company at the next Annual General Meeting. This item has been included in the Notice convening the next Annual General Meeting of the Company.

Mr. P. S. Dasgupta and Mr. James R. Menning, Directors of the Company, are liable to retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment at the said Annual General Meeting.

Statutory Audit

The Statutory Auditors of the Company who were appointed at the Twenty-fifth Annual General Meeting have since informed the Company about change in their name from S R B C & Co to S R B C & CO LLP effective 1 April 2013, pursuant to the Limited Liability Partnership Act, 2008.

Messrs. S R B C & CO LLP, Chartered Accountants, Statutory Auditors of the Company retires at the conclusion of the Twenty-sixth Annual General Meeting and offers themselves for reappointment. They have furnished to the Company a Certificate, regarding their eligibility for reappointment. Accordingly, the reappointment of Messrs. S R B C & CO LLP, Chartered Accountants is being proposed as an ordinary resolution at the Twenty-sixth Annual General Meeting of the Company in terms of applicable provisions of the Companies Act, 1956 and has been included in the Notice convening the next Annual General Meeting.

Cost Audit

Mr. Prakash Kumar Varma was reappointed as the Cost Auditor to audit the Cost Accounts of the Company for the year ended 31 March 2013. Due to health reasons, Mr. Varma could not take up this assignment and has since requested the Company to relieve him of his responsibilities and appoint a new Cost Auditor in his stead. Accordingly, the Board of Directors have appointed

Messrs. Shome & Banerjee as the new Cost Auditors to audit the Cost Accounts of the Company for the year ended 31 March 2013. The due date for submitting the Cost Audit Report for that year with the prescribed authority is 30 September 2013. The Cost Audit Report for the year ended 31 March 2012 in XBRL format was submitted on 27 February 2013.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis, Corporate Governance Report and Auditors'' Certificate regarding compliance of conditions of corporate governance are made a part of the Annual Report.

Industrial Relations

The performance of the Company during the year ended 31 March 2013 could be made possible only with the collective contribution and excellent performance of the Associates both in terms of operational parameters and also at the market place. The Directors express their appreciation for the wholehearted support received from all sections of the Associates of the Company.

Social Responsibility

The Company and its associates have been actively participating in the promotion of social welfare activities of the communities where Timken facilities are located in India.

Particulars of Employees

Information required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is given in the Annexure forming part of the Report. However, as per the provisions of Section 219(1)(b)(iv), the Report and Accounts are being sent to all Shareholders of the Company excluding the Statement of Particulars of Employees. Any shareholder interested in obtaining such particulars may inspect the same at the Registered Office of the Company or write to the Company for a copy.

Conservation of Energy, Technology Absorption and Foreign Exchange

All the new machineries installed during the year are energy efficient. Significant cost saving on cutting fluids and consumption of electricity have been achieved by machine modifications, energy audit and efficient coolant management. Regarding absorption of foreign technology, the process is ongoing in the areas of machining, heat treatment and finishing. The Company has now achieved full indigenization of all components for standard bearings and substantial indigenization for AP Bearings. It is the intention of the Company to proceed with the process of indigenization further.

Other details are given in the Annexure, which also forms part of this report.

Directors'' Responsibility Statement

Pursuant to the provision of Section 217(2AA) of the Companies Act, 1956, the Directors give hereunder the Directors'' Responsibility Statement relating to the Accounts of the Company:

(1) The applicable Accounting Standards have been followed in the preparation of the accompanying Accounts;

(2) 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 year ended 31 March 2013 and of the profit of the Company for the said period;

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

(4) The Directors have prepared the accompanying Accounts on a going concern basis.

For and on behalf of the Board of Directors

Bangalore James R. Menning

21 June, 2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting the Twenty-fifth Annual Report on the business and operations of the Company together with the financial results for the 15 months period ended 31 March 2012.

FINANCIAL RESULTS

(Rs./Millions)

15-months 12-months ended ended 31 March 31 December

2012 2010

a) Total Income 8,511 4,820

b) Total Expenditure 7,244 3,969

c) Gross Profit 1,267 851

d) Less: Depreciation 149 113

e) Earnings before Interest, 1,118 738

Tax & Prior period item

f) Less: Interest 12 9

g) Add: Income/(Expense) - (16)

relating to prior period

h) Profit before Tax (PBT) 1,106 713

i) Less: Taxes 299 203

j) Profit after Tax (PAT) 807 510

k) Add: Profit brought forward 2,908 2,398

from previous year

l) Profit available for appropriation 3,715 2,908

m) Less: Appropriations

- Interim dividend including

dividend distribution tax 1,481 -

- Transferred to General

Reserve 81 -

n) Balance carried forward to

Balance Sheet 2,153 2,908

During the 15 months period ended on 31 March 2012, Total Income grew by 76% primarily due to increase in net sale of products by 77% and a 73% increase in sale of services compared to 12-months year ended on 31 December 2010. Expenditures on the other hand registered an increase of 82% due to increase in costs of materials and also due to increased volume of products purchased for resale.

Increase in depreciation was due to capitalization of new plant and machinery for the expansion project.

Increase in interest was on account of short term loan taken during the year.

Profit before tax went up by 55% to Rs. 1,106 million primarily due to increased sales volume in rail, heavy truck, industrial aftermarket and exports.

The Company's Plant at Jamshedpur operated at capacity.

DIVIDENDS

The Company paid an interim dividend on the equity shares of the Company @ Rs. 20/- per equity share of Rs. 10/- each fully-paid, amounting to Rs. 1,274.44 million on 28 November 2011. Such payment of interim dividend is to be considered as final dividend on the equity shares of the Company for the 15 months period ended 31 March 2012. Your Directors are not recommending any further dividend on equity shares of the Company for 2011-12.

EXPANSION PROJECT

The Expansion Project has been successfully implemented and commercial production started from third quarter of 2011. So far, 0.1 million races of 'up to 8 inch' tapered roller bearings were manufactured from this facility for the period up to March 2012. The total actual investment on this project is Rs. 300 million.

FINANCE

Working capital was managed well in the 15 months period ended 31 March 2012 resulting in generation of adequate cash flows. Pending investment of such funds in suitable growth opportunities in India, it was temporarily parked in debt based schemes offered by various Mutual Funds. During the 15 months period under review, the Company had to borrow short term funds amounting to Rs. 300 million from HDFC Bank Ltd. to cover temporary financial needs. Except this the Company had not taken any other loan, whether short term or long term. Receivables continued to be managed well, as a result of which the number of days outstanding for domestic receivable at the end of 2011 -12 had come down to 51 days compared to 56 days at the end of last year. Inventory management continued to remain under focus of the management team. At the end of the year the overall inventory rose to Rs. 1,476 million due to increased level of operations though the average number of days outstanding was maintained at 121 days as of 31 March 2012.

CHANGE OF ACCOUNTING YEAR

In order to align the accounting year of the Company with the practices followed in India, it was decided that the accounting year of the Company be changed from calendar year - January to December to fiscal year - April to March. Accordingly, the current accounting period of the Company covered 15 months starting from 1 January 2011 to 31 March 2012.

LISTING OF EQUITY SHARES ON STOCK EXCHANGES

Listing of the Company's Equity Shares on BSE Limited and National Stock Exchange of India Limited continued during 2011- 12 and the listing fees for the year 2012-13 have al ready been paid to the Stock Exchanges.

DIRECTORS

Mr. Sridharan Rangarajan resigned as a Director of the Company with effect from 1 June 2011. The Board placed on record its deep appreciation for the valuable contribution made by Mr. Rangarajan as a Director.

Mr. Deepak Rastogi has been appointed as an Additional Director on the Board with effect from 1 June 2011. In terms of relevant provisions of the Companies Act, 1956 ('the Act'), Mr. Rastogi holds office up to the date of the forthcoming Annual General Meeting. The Company has received a notice from a member in terms of Section 257 of the Act signifying his intention to propose the name of Mr. Rastogi for appointment as Director of the Company at the next Annual General Meeting. This item has been included in the Notice convening the next Annual General Meeting of the Company.

Mr. Jai S Pathak and Mr. Niroop Mahanty, Directors of the Company, are liable to retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment at the said Annual General Meeting.

AUDITORS

Messrs. S. R. Batliboi & Co., Statutory Auditors hold office until the conclusion of the next Annual General Meeting. The Company has received a letter dated 29 March 2012 from Messrs. S. R. Batliboi & Co., Statutory Auditors expressing their unwillingness to be reappointed as Auditors due to certain factors entirely internal to them.

It is proposed to appoint Messrs. S R B C & Co, as the Statutory Auditors of the Company subject to the approval of the shareholders at the Annual General Meeting to hold office from the conclusion of Twenty-fifth Annual General Meeting until the conclusion of the next Annual General Meeting.

The Company has also received a letter from Messrs. S R B C & Co, Chartered Accountants to the effect that their appointment, if made, would be within the prescribed limits of Section 224(2-B) of the Companies Act, 1956 and they are not disqualified for such appointment within the meaning of Section 226 of the Companies Act, 1956.

Accordingly, the appointment of Messrs. S R B C & Co, Chartered Accountants is being proposed as an ordinary resolution at the Twenty-fifth Annual General Meeting of the Company in terms of applicable provisions of the Companies Act, 1956 and has been included in the Notice convening the next Annual General Meeting.

The Directors placed on record their appreciation for the valuable support and guidance received from Messrs. S. R. Batliboi & Co., as the Statutory Auditors since July 1999.

Pursuant to the directions received from the Central Government, Mr. Prakash Kumar Varma has been reappointed as the Cost Auditor to audit the Cost Accounts of the Company for the 15 months period ended 31 March 2012.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis, Corporate Governance Report and Auditors' Certificate regarding compliance of conditions of corporate governance are made a part of the Annual Report.

INDUSTRIAL RELATIONS

The performance of the Company during the 15 months period ended 31 March 2012 could be made possible only with the collective contribution and excellent performance of the Associates both in terms of operational parameters and also at the market place. The Directors express their appreciation for the wholehearted support received from all sections of the Associates of the Company.

SOCIAL RESPONSIBILITY

The Company and its associates have been actively participating in the promotion of social welfare activities of the communities where Timken facilities are located in India.

PARTICULARS OF EMPLOYEES

Information required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is given in the Annexure forming part of the Report. However, as per the provisions of Section 219(1 )(b)(iv), the Report and Accounts are being sent to all Shareholders of the Company excluding the Statement of Particulars of Employees. Any shareholder interested in obtaining such particulars may inspect the same at the Registered Office of the Company or write to the Company for a copy.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE

All the new machineries installed during the year are energy efficient. Significant cost saving on cutting fluids and consumption of electricity have been achieved by machine modifications, energy audit and efficient coolant management. Regarding absorption of foreign technology, the process is ongoing in the areas of machining, heat treatment and finishing. The Company has now achieved full indigenization of all components for Standard Bearings and substantial indigenization for AP Bearings. It is the intention of the Company to proceed with the process of indigenization further.

Other details are given in the Annexure, which also forms part of this report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provision of Section 217(2AA) of the Companies Act, 1956, the Directors give hereunder the Directors' Responsibility Statement relating to the Accounts of the Company:

(1) The applicable Accounting Standards have been followed, in the preparation of the accompanying Accounts;

(2) 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 15 months period ended 31 March 2012 and of the profit of the Company for the said period;

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

(4) The Directors have prepared the accompanying Accounts on a going concern basis.

For and on behalf of the Board of Directors

Bangalore James R. Menning

2 May 2012 Chairman

 
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