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Directors Report of Tube Investments of India Ltd.

Mar 31, 2015

Dear Members,

The Directors take pleasure in presenting the 66th Annual Report together with the audited Financial Statements for the year ended 31st March 2015.

1. Business Environment

The financial year 2014-15 was marked by falling oil prices, a reasonably stable US economy and signs of weaknesses in the Euro zone.

Major global economies barring the US have witnessed either no growth or declining growth in the previous year. While the US grew marginally in 2014, the European countries registered marginal or no growth. Euro zone continues to be under pressure. China has been experiencing another year of slow growth. After an initial period of growth, the Japanese economy too has seen lower growth rates with deflationary concerns. The Indian economy registered a growth rate of 7.4% for the year compared to 6.9% for the year 2013-14. The Indian Rupee remained range bound against the US dollar during the last financial year whereas other currencies showed a declining trend against the US dollar.

The Government of India has undertaken various policy initiatives such as reallocation of coal blocks, investments in railway infrastructure and enhancement of foreign direct investment limits for Insurance sector. Many broad based set of initiatives aimed at encouraging "Make in India" are expected to give an impetus to the manufacturing sector. Inflation rate has been subdued and interest rates have softened. It is expected that the benefits from various policy initiatives will have a positive impact on the manufacturing sector in the coming years.

The Automobile sector in India registered a growth of 9% during 2014-15. In the four wheeler segment, passenger vehicles and heavy commercial vehicles grew by 4% and 21% respectively, whereas light commercial vehicles declined by 10%. In the two wheeler segment, scooters grew by 28% and motor cycles grew by 4%.

2. Standalone Financial Highlights

Rs. in Crores

Particulars 2014-15 2013-14

Sale of Products - Gross 3916.16 3609.42

Less: Excise Duty on sales 270.38 257.73

Sale of Products - Net 3645.78 3351.69

Profit Before Exceptional Items and Tax 121.15 141.16

Add: Reversal of Provision for Diminution - 0.06 in value of Investments (net)

Less: Compensation under Voluntary Retirement 27.43 - Scheme

Add: Profit on sale of Non-Operating Assets 61.43 -

Profit Before Tax 155.15 141.22

Less: Tax Expense 34.29 47.15

Profit After Tax 120.86 94.07

Add: Surplus at the beginning of the year 176.98 160.04

Add: Earlier year''s provision for dividend 1.22 1.59 tax no longer required

Less: Depreciation on Tangible Fixed Assets on transition to Schedule II of the Companies 4.63 - Act,2013

Profit Available for Appropriation 294.43 255.70

Less: Transfer to General Reserve 30.00 20.00

Transfer to Debenture Redemption Reserve 42.18 19.28

Interim Dividend @ Rs. 1.50 (Previous year Rs. 1.50) per Equity Share of Rs. 2 each 28.06 28.02

Final Dividend Proposed @ Rs. 0.50 (Previous year Rs. 0.50 paise) per Equity 9.36 9.34 Share of Rs. 2 each

Dividend Distribution Tax - Current year 3.30 2.08

Balance carried to Balance Sheet 181.53 176.98

3. Performance Overview

For 2014-15, the Company achieved a net turnover of Rs. 3646 Cr., a growth of 9% over the previous year. The Profit before Depreciation, Interest, Exceptional Items and Tax for the year was Rs. 356 Cr. as against Rs. 349 Cr. in the previous year, a growth of 2%. However, the Profit before Exceptional items and Tax dropped to Rs. 121 Cr., a decline of 14% over the previous year, mainly attributed to high finance costs and depreciation. To strengthen the balance sheet, the Company sold non- operating assets, which generated a profit of Rs. 61 Cr. Further, the Company implemented Voluntary Retirement Schemes in certain locations at a cost of Rs. 27 Cr. to improve the productivity and competitiveness of its businesses.

The Cycles and Components segment recorded a revenue of Rs. 1314 Cr. as compared to Rs. 1185 Cr. during the previous year, a growth of 11%. This was driven by higher volume of specials and institutional sales. The operating profit before interest and tax stood at Rs. 58 Cr. as compared to Rs. 39 Cr. during the previous year, a growth of 50%.

The Engineering segment recorded a revenue of Rs. 1725 Cr. as compared to Rs. 1622 Cr. during the previous year, a growth of 6%. The operating profit before interest and tax stood at Rs. 103 Cr. as compared to Rs. 136 Cr. during the previous year. The drop in profits was due to additional costs associated with the new Large Diameter Tubing facility, the revenue from which is expected to flow in 2015-16.

The Metal Formed Products segment recorded a revenue of Rs. 929 Cr. as compared to Rs. 851 Cr. during the previous year, a growth of 9%. This was driven by higher volume of auto chains and fine blanking sales. The operating profit before interest and tax stood at Rs. 81 Cr. as compared to Rs. 67 Cr. during the previous year, a growth of 21%.

4. Business Review - Standalone

4.1. Cycles and Components

TI''s Presence

The Cycles and Components segment of the Company comprises bicycles of the Standard and Special variety including alloy bikes & specialty performance bikes, bicycle components sold as spares, fitness equipment such as motorised tread mills, elliptical, recumbent bikes etc.

Industry Scenario

Bicycles fall under two distinct categories - Standard and Special. The bicycle is today viewed as a product for fun, fitness and leisure activities in addition to being viewed as just a transportation medium. According to industry estimates, the bicycle industry volumes had a muted growth of approximately 2% in 2014-15. The industry volumes for standard bicycles registered a marginal decline despite higher institutional volumes. The Specials segment which includes Mountain Terrain Bikes, Sport Light Roadsters and Kids Bikes where your Company has inherent strengths grew approximately 6% in 2014-15.

Consumers today pay greater attention to design, features and retail experience in their purchase decisions. Increasing aspirations, higher purchasing power, international exposure to usage patterns and growing fitness consciousness have provided impetus to the high-end and Special bicycles. These segments continue to grow steadily year on year.

Between the four major players, close to 85% of the country''s requirements are met and smaller regional players and imports constitute the balance. The Company enjoys a share of over one-fourth of the total market with a much higher share of the Special and premium segment.

The domestic Fitness Industry continues to be attractive with significant growth in 2014-15. The fitness equipment business can be broadly classified under two segments - home and commercial. The fitness business of the Company is largely restricted to the home segment. Higher Income and a greater desire to be healthy and fit drive the growth of the fitness industry in India.

Review of Performance

Creating enhanced retail experience continues to be the focus for the Company especially with respect to Specials and premium segment. The Company has over 930 retail outlets including 663 exclusive stores in order to provide a superior purchasing experience to the consumers. These retail outlets also help the Company to better understand the market requirements by interacting directly with the consumers. The Company also continues to invest in strengthening its supply chain capabilities to address the market requirements.

In addition to the above, the Company has 13 premium stores under the "Track and Trail" banner in select locations. The Company has also introduced new retail concepts like a cafe-cum-store to promote sales of high end cycles and to strengthen its presence amongst cycling communities. The Company opened its first such store called "Ciclo Cafe" in Chennai during the year.Similar new concepts aimed at providing customers with an opportunity for an experiential purchase are also planned in the fitness business.

The Company will further improve its product portfolio by introducing new products and designs driven by consumer insight. The Company will continue to pursue initiatives aimed at widening the distribution reach, targeted advertising to drive demand and enhancing plant capacities. The Company is planning to set up a greenfield bicycle plant in Punjab to take advantage of an established vendor base and to cater to the higher demand in select segments and geographies. The Company will also continue the cost reduction initiatives in order to improve competitiveness and profitability.

The segment recorded revenue of Rs. 1314 Cr. as compared to Rs. 1185 Cr. during the previous year, a growth of 11%. The operating profit before interest and tax stood at Rs. 58 Cr. as compared to Rs. 39 Cr. during the previous year, a growth of 50%.

4.2. Engineering

TI''s Presence

The Engineering segment of the Company consists of cold rolled steel strips and precision steel tubes viz., Cold Drawn Welded tubes (CDW), Electric Resistance Welded tubes (ERW) and Stainless Steel tubes. These products primarily cater to the requirements of the automotive, boiler, bicycles, general engineering and process industries. With the establishment of a new plant for the manufacture of large diameter welded tubes, the Company has enhanced its product range for non-auto application, hitherto largely serviced by imports.

Industry Scenario

The automotive industry grew by 9% during 2014-15. Barring Light Commercial Vehicle Segment, all the other segments registered a growth compared to the previous year. Passenger vehicles and Two Wheelers grew by 4% and 10% respectively as compared to previous year. The Cold Rolled Steel Strips segment is dominated by integrated steel manufacturers. In this business, the Company continues to be a ''niche player'' focusing on the special grades catering to diverse applications in various sizes and grades.

Review of Performance

The Company witnessed a volume growth of 6% in steel tubes and 2% in cold rolled steel strips over the previous year.

Production in the new facility for large diameter tubing commenced during the year and is expected to stabilize in the coming year. This plant will cater to a wide set of customers in the off-highway, infrastructure and general engineering segments.

The segment recorded revenue of Rs. 1725 Cr. as compared to Rs. 1622 Cr. during the previous year, a growth of 6%. The operating profit before interest and tax stood at Rs. 103 Cr. as compared to Rs. 136 Cr. during the previous year. The drop in profits was due to additional costs associated with the new Large Diameter tubing facility at Tiruttani and the revenue from which is expected to flow in 2015-16.

The segment continued to maintain its focus on value added products, cost management, modernising its facility and improving the efficiencies, which helped improve the profitability.

4.3. Metal Formed Products

TI''s presence

Automotive and industrial chains, fine blanked products, stamped products, roll-formed car doorframes and cold rolled formed sections for railway wagons and passenger coaches constitute the Metal Formed Products of the Company.

Industry scenario

The two wheeler segment recorded a growth of 10% during the year. The growth is mainly due to higher growth of 28% in Scooter segment and 4% growth in motor cycle segment. Passenger car segment has registered only 4% growth.

Increased movement towards urbanization results in higher demand for scooters as well as high performance motor cycles. The Company is one of the three major players manufacturing roller chains and fine blanked parts for automotive industry in India. With the growth in two wheeler population, the replacement market for chains and sprockets continued to register healthy growth. The domestic demand for industrial chains has grown moderately.

There are currently three established roll-formed car doorframe manufacturers in India. Car manufacturers continue to invest in India and are increasingly using India as an export base. As a result, many component manufacturers have the opportunity to cater to the global needs of automobile manufacturers and their Tier 1 suppliers.

The railway segment is yet to show signs of a major revival. In the latest Union Budget, the Government has announced investments aimed at improving railway infrastructure.

Review of Performance

The sale of automotive chains to OEMs (Original Equipment Manufacturers) recorded a growth of 11% over the previous year. The Company continues to expand its presence in the aftermarket segment benefiting from the growing population of two- wheelers on the road. The sale of industrial chains in the domestic market recorded a growth of 3% during the year while the fine blanked components volume grew by 17%. Exports recorded a growth of 3% over the previous year. Exports continued to be a challenge in light of difficult demand conditions in Europe and with weak Euro affecting realisations.

The volume of car doorframes sold was lower by 15% due to a decline in the sale of select models of major car manufacturers. The Company has recently been awarded new doorframe programs from auto majors and is also expanding its presence in rolled components for car doors.

The Company is also looking at enhancing its product portfolio in value added stamped and pressed components with a focus on import substitution.

The Company is hopeful that with increased investment allocation towards improving the quality of railway infrastructure, the Company will benefit from higher demand for wagons.

The segment recorded revenue of Rs. 929 Cr. as compared to Rs. 851 Cr. during the previous year, a growth of 9%. The operating profit before interest and tax stood at Rs. 81 Cr. as compared to Rs. 67 Cr. during the previous year, a growth of 21%.

5. Dividend

The Board of Directors has recommended a final dividend of Rs. 0.50 per share, on Equity Share of face value of Rs. 2 each, for the financial year ended 31st March, 2015.

Together with the interim dividend of ''1.50 per share, paid on 23rd February, 2015, the total dividend for the year works out to Rs. 2 per share on Equity share of face value of Rs. 2 each. Final dividend, if approved by shareholders, will be paid on or after 14th August, 2015.

6. Share Capital

The paid up Equity Share Capital as on 31st March 2015 was Rs. 37.43 Cr. During the year under review, the Company has issued 2,38,898 Equity Shares to eligible employees under the Employee Stock Option Scheme.

7. Finance

Cash and Cash Equivalents as at 31st March 2015 were Rs. 25.73 Cr. The Company continues to focus on judicious management of its working capital. Receivables, inventories and other working capital parameters were kept under strict check through continuous monitoring.

7.1. Non-Convertible Debentures

During the year, the Non-Convertible Debentures aggregating Rs. 350 Cr. were issued and Rs. 230 Cr. were redeemed. As on 31st March 2015, Non-Convertible Debentures aggregating Rs. 1050 Cr. were outstanding.

7.2. Deposits

The Company has not accepted any fixed deposits under Chapter V of the Companies Act, 2013 and as such no amount of principal and interest were outstanding as on 31st March 2015.

7.3. Particulars of Loans, Guarantees and Investments

During the year, the Company has not given any loans or guarantees under the provisions of Section 186 of the Companies Act, 2013. The Company subscribed to 1,75,00,000 Equity Shares of Rs. 10 each of TI Tsubamex Private Ltd at Rs. 10 per share amounting to Rs. 17.50 Cr.

8. Consolidated Financial Highlights

Rs. in Cr.

Particulars 2014-15 2013-14

Revenue from Operations 9697.56 8834.49

Profit Before Tax 1003.28 789.37

Tax Expense (319.64) (271.84)

Profit for the year before Minority Interest 683.64 517.53

Minority Interest (259.28) (206.22)

Net Profit for the year 424.36 311.31

The Company''s consolidated Net Profit before Minority Interest for the year was at Rs. 684 Cr., as compared to Rs. 518 Cr., during the previous year, a growth of 32%. Net profit after minority interest for the year was at Rs. 424 Cr. as compared to Rs. 311 Cr. during the previous year, a growth of 36%.

9. Business Review - Subsidiaries and Joint Ventures

9.1. Cholamandalam Investment and Finance Co Ltd (CIFCL)

CIFCL had another year of good performance. Backed by the sustained performance of its vehicle finance and home equity verticals, CIFCL''s profit before tax grew 19%, at Rs. 657 Cr. (previous year: Rs. 550 Cr.) and profit after tax increased to Rs. 435 Cr. (previous year: Rs. 364 Cr.). Disbursements of CIFCL marginally declined to Rs. 12,808 Cr. in 2014-15 (previous year: Rs. 13,114 Cr.).

The Company holds 7,22,33,019 Equity Shares aggregating 50.28% of CIFCL''s Equity Capital. CIFCL has allotted, on 3rd September, 2014, 5,00,00,000 1% Compulsorily Convertible Preference Shares ("CCPS") of Rs. 100 each aggregating Rs. 500 Cr. on preferential basis to M/s. Dynasty Acquisition (FDI) Ltd., in accordance with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. As per the terms of the said issue, the CCPS are convertible into 1,22,85,012 Equity Ehares of Rs. 10 each in the share capital of CIFCL at a conversion price of Rs. 407 (including a premium of Rs. 397) per equity share not later than 12 months from the date of allotment.

9.2. Cholamandalam MS General Insurance Co. Ltd (CMSGICL)

CMSGICL, a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan, achieved a Gross Written Premium (including reinsurance acceptance) of Rs. 1,896 Cr. during 2014-15 (previous year: Rs. 1,872 Cr.), registering a growth of 1%. The profit before tax was Rs. 200 Cr. for the year (previous year: Rs. 102 Cr.), registering a growth of 96%.

The Company holds 22,11,15,659 Equity Shares aggregating 74% of CMSGICL''s equity capital. Recently, the Government of India has enhanced the FDI (Foreign Direct Investment) limit for the Insurance Industry from 26% to 49%.

9.3. Shanthi Gears Ltd (SGL)

SGL recorded a turnover of Rs. 152 Cr. in 2014-15 against Rs. 151 Cr. in the previous year. Profit before tax was Rs. 13 Cr. (previous year: Rs. 26 Cr.). During the year, SGL focused on re-establishing itself in the market. SGL grew its order booking by 20% due to the efforts taken in the previous year to enhance presence in the market especially in key user locations, enhancing its reach by strengthening its s ales and service teams, building references in high potential segments, entry into the defence segment and building its capability in certain high end applications.

9.4. Financiere C10 SAS (FC10)

FC10, a wholly-owned subsidiary in France, recorded a consolidated turnover of Euro 33 Mn in 2014 (previous year: Euro 32 Mn). The loss before tax for the year was Euro 0.38 Mn (previous year: profit before tax Euro 0.23 Mn). The consolidated results of FC10 include results of its subsidiaries viz., Sedis SAS & S2CI in France and Sedis Co Ltd in UK.

9.5. TI Tsubamex Private Ltd (TTPL)

TTPL was incorporated on 3rd January 2014, as a Joint Venture Company promoted by the Company jointly with Tsubamex Company Limited, Japan (TMX) with a Share Capital of Rs. 4 Cr., to engage in the business of design and engineering of sheet metal dies & fixtures and providing related services. The Company has further invested Rs. 17.50 Cr. in the Share Capital of TTPL during the year towards the setting up of a die design-cum-manufacturing facility for dies and TMX, the joint venture partner has invested Rs. 4.50 Cr. Post this infusion, TTPL has become the subsidiary of the Company, with the Company''s shareholding in TTPL at 75%.

TTPL''s loss before tax for the year was Rs. 1.94 Cr. (previous year: Rs. 2.06 Cr.).

9.6. TI Financial Holdings Ltd (TIFHL)

TI Financial Holdings Ltd is a wholly-owned subsidiary of the Company with an investment of Rs. 0.11 Cr. and is yet to commence its operations.

9.7. Cholamandalam MS Risk Services Ltd (CMSRSL)

CMSRSL, a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan, offers consulting services in the areas of risk assessment and mitigation across a range of industries. CMSRSL recorded a revenue of Rs. 35.33Cr. during the year 2014-15 (previous year: Rs. 24.58 Cr.). The profit before tax for the year was Rs. 2.04Cr. (previous year: Rs. 3.36 Cr.).

The Statement containing salient features of the Financial Statements of the Company''s subsidiaries and joint venture companies is attached as Annexure-A. The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with the Accounting Standard (AS) 21, form part of the Annual Report.

10. Financial Review

10.1. Profits & Profitability

While Operating Profit before Depreciation and Interest registered a marginal growth over the previous year through continued control on costs and better operating efficiencies, the Operating Profit before Tax excluding exceptional items were impacted by costs incurred on the Large Diameter plant which is yet to reach full production levels. On certain occasions, the Company was not able to fully recover the increase in cost from its customers.

All the business segments of the Company maintained their focus on servicing customers, improving efficiencies, controlling working capital and reducing resources employed in the business.

10.2. Capital Expenditure

The Company''s Large Diameter Tube manufacturing plant commenced production during the year under review and production is expected to stabilize in the coming year. The Company continues to invest in facilities with a view to servicing its customers in a more timely and efficient manner, modernising its assets and aims to be the best in class. The Company continues to assess the trends emerging in the industry and the changing requirements of its customers and invest appropriately for the long-term. To compete more effectively in the market and to address the growing bicycle segment in the northern and western parts of the country, the Company has started to work on a new facility in Punjab for manufacturing bicycles. The Company provides for accelerated depreciation with respect to some of its assets to reflect the remaining estimated useful life given the dynamic market conditions.

10.3. Interest Cost

The Company''s average cost of borrowing remained at 9.4% p.a. through a judicious mix of foreign currency and Indian Rupee borrowing in long and short-term funds. The interest cost for the year was higher due to the higher quantum of borrowings carried out to meet the expansion needs of the Company.

10.4. Internal Control Systems

Internal control systems in the organisation are looked at as the key to its effective functioning. The Internal Audit team periodically evaluates the adequacy and effectiveness of these internal controls, recommends improvements and also reviews adherence to policies based on which corrective action is taken to address gaps, if any.

The Company has a risk management policy and its internal control systems are an integral part of this policy. The Company has extensive internal control systems to mitigate risks inherent to day-to-day functioning and covers all areas of operations.

Revenue and capital expenditures are governed by approved budgets and the levels are defined by a delegation of authority mechanism. Review of capital expenditure is undertaken with reference to benefits expected in line with the policy for the same.

Investment decisions are subject to formal detailed evaluation and approved by the relevant authority as defined in the delegation of authority mechanism. The Audit Committee reviews the plan for internal audit, significant internal audit observations and functioning of the Company''s Internal Audit department on a periodic basis.

10.5. Internal Financial Control Systems with reference to the Financial Statements

The Company has a formal system of internal financial control to ensure the reliability of financial and operational information, and regulatory and statutory compliances. The Company''s business processes are enabled by an Enterprise-wide Resource Platform for monitoring and reporting processes resulting in financial discipline and accountability.

11. Enterprise Risk Analysis and Management

Risk management refers to the formal processes whereby risks associated with the "enterprise", as a whole, are managed. Risk management encompasses the following sequence:

* Identification of risks and risk owners

* Evaluation of the risks as to likelihood and consequences

* Assessment of options for mitigating the risks

* Prioritising the risk management efforts

* Development of risk management plans

* Authorisation for the implementation of the risk management plans

* Implementation and review of the risk management efforts

Risk management strengthens the robustness of the business. The Company has an established risk assessment and minimisation procedure. There are normal constraints of time, efficiency and cost.

Some of the risks associated with the business and the related mitigation plans are discussed hereunder. The risks given below are not exhaustive and the evaluation of risk is based on management''s perception.

The Risk Management Committee of the Board of Directors, constituted specifically to identify/monitor key risks of the Company and evaluate the management of such risks for effective mitigation, met on 3rd February 2015. The Committee reviewed the risks and related mitigation plans across the various SBUs of the Company.

11.1. Bicycles and Components

Risk Why considered as Risk

Product * Availability of alternatives Obsolescence * Increased affordability for motorised vehicles Risk * Shrinking road space for cycling

Price Risk * High competition leading to reduction in prices

Sourcing Risk * Dependence on vendor base * Consistent quality and supplies * 25% of vendors located in residential area

Competition Risk * Competition from domestic suppliers * Imports

Risk Mitigation Plan/Counter Measure

Product * Higher variety, especially of premium bikes Obsolescence * Products based on customer need Risk * "Cycling" as a concept - leisure,fitness, fun and recreation

Price Risk * Cost competitiveness * Development of lower cost models * Consumer insight based new product development and improving quality of aesthetic

Sourcing Risk * Continuous upgrading of vendor capability * Relationship building * Imports from quality sources * Relocate vendor base through vendor park at new location

Competition Risk * Enhancing the Brand Awareness * Introducing new models with a healthy innovation funnel * Consistent quality and timely delivery * Enhancing competitiveness

11.2. Engineering

Risk Why considered as Risk



User Industry * Significant exposure to auto sector Concentration * Lag in pass through of input cost changes Risk * Demand declining in global markets

Technology * Cheaper alternatives for auto applications Obsolescence affecting revenue streams Risk



Raw Material * Volatility in steel price Risk * Inconsistency in quality * High inventory holding

Competition * Competition from integrated steel mills Risk * New entrants with financial strength * Imports

Risk Mitigation Plan/Counter Measure

User Industry * New products/applications to existing new customers Concentration * Introduction of new products catering to non-auto Risk users * Leverage application engineering skills for tubular solutions * Drive operational efficiencies vigorously * Cost reduction through operational excellence initiatives

Technology * Strategic alliance with educational/research Obsolescence institutions Risk * Technology tie-up with global major * Imbibing new and relevant technologies

Raw Material * Alliance with steel producers Risk * Global sourcing * Strategic sourcing * Rationalisation and standardisation of grades * Move to products with higher value addition

Competition * Consistent quality and timely delivery Risk * Project range of offering leveraging all businesses of the Company * Innovate on products, process and applications * Leveraging metallurgy skills * Enhancing competitiveness * Lock-in with customers

11.3. Metal Formed Products

Risk Why considered as Risk

Product Risk * Revenues are model specific

User Industry * Dependence on auto sector Concentraion * Impact of slow down Risk

Customer * Availability of alternative source Retention Risk * Disruption in supplies

Entry of * Low technology barrier competition * Impact on profit

Entry of internationally * Better product range established players in * Tie-up with local player/end user domestic market * ''High quality'' image

Sourcing Risk * Dependence on few vendors for certain components

Risk Mitigation Plan/Counter Measure

Product Risk * Increase in customer base and models

* Indigenisation of equipment

* Pursue options for other business using the same facilities

* Model specific investments to be done by OEMs

User Industry * Diversification into non-auto business Concentraion * Focus on industrial applications Risk * Develop range of power transmission products

Customer * Cost competitiveness through Operational Retention Risk Excellence initiatives * Leverage design strength * Leverage proximity to customer * Build technology superiority * Product - plant rationalisation

Entry of * Leverage position with customer as technology competition leader * Continuous upgrading of technical specifications * Cost reduction * Concentration in focus markets

Entry of * Enhance product portiolio leveraging acquisition internationally * Leverage leadership and competitive position in established industry players in * Strengthen collaboration with R&D team of customer domestic * Pursue opportunities in systems/components market * Pursue options for collaborating with other multi-national player(s) of repute

Sourcing Risk * Vendor relationship building * Enhancing vendor base, both locally as well as overseas * Leveraging strength of combined entity

11.4.General

Risk Why considered as Risk

HR Risk * Ability to attract talent, especially people with domain knowledge for new projects * Retention of talent

Internal Control * Multiple locations Risk

Currency Risk * Foreign currency exposure on exports, imports and borrowings

IT Related Risk * Confidentiality, integrity and availability

Project * Delay in implementation Management * Increase in cost Risk * Potential delay in stabilization of production

Risk Mitigation Plan/Counter Measure

HR Risk * Corporate Brand Building * Robust recruitment process * Structured induction and on the job training * Coaching and team building * Individual career and development plan * Effective communication exercises * Continuous engagement with identified talent pool * Deskill operations

Internal Control * Review of controls in a structured manner, Risk Risk at defined frequency * Risk based audit of controls

Currency Risk * Early identification and monitoring of imports and borrowings exposures * Hedging of exposures based on risk profile

IT Related Risk * Access controls * Secure Network Architecture * Infrastructure Redundancies & Disaster recovery mechanism * Audit of controls

Project * Effective project management Management * Pre implementation planning Risk * Deployment of adequate resources * Effective monitoring

12. Corporate Social Responsibility (CSR)

The Company, being part of the Murugappa Group, is known for its tradition of philanthropy and community service. The Company''s philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. With the enactment of the CSR provisions in the Companies Act, 2013, the Company has put in place a CSR policy incorporating the requirements therein which is also available on the Company''s website at the following link, http://www.tiindia.com/article/values/467.

As per the provisions of the Companies Act, 2013, the Company is required to spend Rs. 2.99 Cr., out of which the Company has spent Rs. 2.64 Cr. towards CSR activities during the year 2014-15. The Company had identified the projects as with the endeavour of making an impact in the areas of its operations by working closely with local communities. Details of the same are furnished in the Annual Report of CSR activities for the year 2014-15 annexed to and forming part of this Report as Annexure-B.

Being the first year, the Company took some time in ensuring that the programmes were carefully chosen but, could not spend the required amount fully, the reasons for which are explained in detail in the aforesaid Annual Report of CSR activities.

13. Corporate Governance

Your Company is committed to maintaining high standards of corporate governance.

In response to the changes brought into effect through the Companies Act, 2013 and the changes in the corporate governance norms (Clause 49 of the Listing Agreement) announced by the SEBI, the Board of Directors of your Company has reviewed the constitution and terms of reference of the Audit Sub-Committee, the Compensation & Nomination Committee (renamed, Nomination & Remuneration Committee) and the Shareholders''/Investors'' Grievance Committee (renamed, Stakeholders Relationship Committee). The required changes to the above Committees have been made to ensure compliance with the new requirements.

A report on corporate governance together with a certificate from the Auditors is annexed in accordance with the terms of the Listing Agreement with the Stock Exchanges and forms part of the Board''s Report. The Managing Director and the Chief Financial Officer have submitted a certificate to the Board regarding the Financial Statements and other matters as required under Clause 49(IX) of the Listing Agreement.

The Report further contains details as required to be provided in the Board''s Report on Independent Directors declaration, policy on Directors appointment and remuneration including criteria, annual evaluation by the Board and Directors, composition and other details required of Board committees, implementation of risk management policy, whistle-blower policy/vigil mechanism etc.

14. Human Resources

The Company leveraged its strength of human capital by focussing on building technical and leadership capabilities, driving operational excellence initiatives and enhancing the engagement of employees. The vision is to continue to build the capability of the human potential required to harness the business opportunities presented through various operational and strategic interventions.

The journey of investing on people potential continued during 2014-15. Comprehensive approach towards re-skilling of shop-floor manpower was completed through a manpower mix study across the Company. Actions are being taken to have the right mix of skilled workforce at the plants.

Learning and development processes have been tailor made to suit the business needs and aid the individual in meeting the competency gaps identified as part of their development process. A customised functional competency dictionary has been charted for all functions across the Company. The Company has also taken the initiative of value stream mapping, a critical process aimed at improving the process efficiencies and productivity improvements.

Employee engagement continued to be a focus area and a survey was carried out covering all levels across India with clear action plans crafted for implementation.

The Company launched an end-to-end Human Resource Management System. The e-portal is aimed at modernising the existing system and inclusion of new modules like learning management, talent management, e-recruitment, etc. A Central Recruitment Team was formed to standardise and optimize resource utilization across the Company.

Operational excellence continued to remain a critical area of focus during this financial year also. Operational excellence for support functions, horizontal deployment of projects across units and innovative approach to cost competitiveness were deployed. These projects are seen to have brought immense cost saving and process efficiency across various functions for the business. Industrial relations remained cordial at all the units and long-term settlements were successfully concluded with the unions at Mohali and Shirwal.

The number of permanent employees on the rolls of the Company as at 31st March, 2015 was 3434.

The information relating to employees and other particulars required under Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014 will be provided upon request. In terms of Section 136 of the Companies Act, 2013, the Report and Accounts are being sent to the Members excluding the information on employees, particulars of which are available for inspection by the Members at the Registered Office of the Company during business hours on all working days of the Company up to the date of the forthcoming Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in the said regard.

The disclosure with respect to remuneration as required under Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this Report as Annexure-C.

15. Prevention of sexual harassment at workplace

The Company has put framed a policy on prevention of sexual harassment at workplace in line with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An internal Complaints Committee (ICC) to redress complaints received regarding sexual harassment has been constituted. The policy extends to all employees (permanent, contractual, temporary and trainees). Employees at all levels are being sensitized about the new policy and the remedies available thereunder. No complaints were received and disposed off during the year under review.

16. Employee Stock Option Scheme

Details of the Employee Stock Option Scheme as required under the relevant SEBI Guidelines are annexed to this Report as Annexure-D.

17. Directors'' Responsibility Statement

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013:

a) that in the preparation of the annual Financial Statements for the year ended 31st March 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) that such accounting policies as mentioned in Note 1 of the Notes to the Financial Statements have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2015 and of the profit of the Company for the year ended on that date;

c) that proper and sufficient care has been taken 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) that the annual Financial Statements have been prepared on a going concern basis;

e) that proper internal financial controls to be followed by the Company have been laid down and that the financial controls are adequate and were operating effectively; &

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

18. Auditors

The Companies Act, 2013 has made it mandatory to rotate the statutory auditors once every 10 years in case of a firm of auditors. It stipulates compulsory rotation of auditors every 10 years in case of a firm of auditors and companies have been given a maximum of 3 years from 1st April, 2014 to comply with the requirement.

Consistent with the above requirement, M/s. Deloitte Haskins & Sells, Chartered Accountants, who have been the Statutory Auditors of the Company since the year 2005, have informed that they will not be seeking re-appointment at the ensuing 66th Annual General Meeting.

The Board of Directors take the opportunity to place on record its grateful appreciation of the contribution and services rendered by M/s Deloitte Haskins & Sells, Chartered Accountants, its partners and managers for their contribution and services rendered over the years.

In view of the above, it is proposed to appoint M/s. S.R. Batliboi & Associates LLP, Chartered Accountants, as the Statutory Auditors of the Company for a period of 5 years from the conclusion of the ensuing 66th Annual General Meeting till the conclusion of 71st Annual General Meeting.

The Board of Directors recommend the appointment of M/s. S.R. Batliboi & Associates LLP, Chartered Accountants as Statutory Auditors.

Consequent to the applicability of cost audit under the Companies (Cost Records and Audit) Amendment Rules, 2014 notified by the Ministry of Corporate Affairs (''MCA'') in December, 2014, Mr. V Kalyanaraman, Cost Accountant was appointed as the Cost Auditor for auditing the cost accounting records maintained by the Company relating to Steel Products and Metal Formed Products for the financial year ending 31st March, 2015. The Cost Audit Reports relating to the above products will be filed within the stipulated period of180 days from the close of financial year.

In respect of the previous year, 2013-14, the Cost Audit and Compliance Reports relating to Steel Products and Metal Formed Products, audited by Mr. V Kalyanaraman, Cost Auditor, were filed electronically in XBRL mode, on 24th September 2014 viz., well within the limit of within 180 days from the end of the financial year as stipulated by the MCA.

19. Related Party Transactions

All related party transactions that were entered into during the financial year under review were on an arm''s length basis and were in the ordinary course of business. There are no materially significant related party transactions during the year which may have a potential conflict with the interest of the Company at large. Necessary disclosures as required under the Accounting Standard (AS) 18 have been made in the notes to the Financial Statements.

The policy on Related Party Transactions as approved by the Board is uploaded and is available on the following link on the Company''s website, http://www.tiindia.com/article/values/476. None of the Directors had any pecuniary relationships or transactionsvis-a-vis the Company.

20. Directors

Ms. Madhu Dubhashi was appointed as Additional & Independent Director with effect from 3rd November, 2014. She holds office up to the date of the ensuing Annual General Meeting. The Board recommends her appointment as Independent Director under Section 149 of the Act for a term of five years viz., from the date of the 66th Annual General Meeting (2015) till the date of the 71st Annual General Meeting (2020).

Notice along with the deposit in terms of Section 160 of the Companies Act, 2013 has been received from a Member proposing the candidature of Ms. Madhu Dubhashi for appointment as Independent Director of the Company.

Mr. M M Murugappan will retire by rotation at the ensuing Annual General Meeting under Section 152 of the Companies Act, 2013 ("the Act") and being eligible, he offers himself for re-appointment.

The Board takes pleasure in recommending the appointment of Mr. M M Murugappan as Director and Ms. Madhu Dubhashi as Independent Director of the Company at the forthcoming Annual General Meeting.

21. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. R Sridharan of M/s. R. Sridharan & Associates, Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith and forms part of this Report as Annexure-E. No qualifications or observation or other remarks have been made by the Secretarial Auditor in his said Report.

22. Annual Return

Extract of the Annual Return is annexed and forms part of this Report as Annexure-F.

23. Key Managerial Personnel

Mr. L Ramkumar, Managing Director, Mr. Arjun Ananth, ChiefFinancial Officer and Mr. S Suresh, Company Secretary are the Key Managerial Personnel of the Company as per Section 203 of the Companies Act, 2013.

24. Energy Conservation, 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 of The Companies (Accounts) Rules, 2014 is annexed herewith and forms part of this Report as Annexure-G.

The Directors thank all Customers, Vendors, Financial Institutions, Banks, State Governments, Joint Venture Partners and Investors for their continued support to your Company''s performance and growth. The Directors also wish to place on record their appreciation of the contribution made by all the employees of the Company resulting in the good performance during the year under review.

On behalf of the Board

M M Murugappan Chairman

Chennai 5th May, 2015


Mar 31, 2014

Dear Members,

The Board of Directors is pleased to present the performance of your Company for the year ended 31st March, 2014.

Financial Highlights Rs.in Crores

2013-14 2012-13

Sale of Products - Gross 3609.42 3642.25

Less : Excise duty on sales 257.73 251.88

Sales of Products - Net 3351.69 3390.37

Earnings Before Finance Costs, Tax, Depreciation and Amortisation Expense 348.67 334.95

Less: Finance Costs 123.27 104.16

Depreciat on and Amort sat on Expense 84.24 79.77

Earnings Before Tax and Exceptional Items 141.16 151.02

Less: Provision for Diminution in value of Investments - 3.81

Add: Reversal of Provision for Diminution in value of Investments 0.06 -

profit Before Tax 141.22 147.21

Less: Tax Expense 47.15 43.25

profit After Tax 94.07 103.96

Add: Surplus at the beginning of the year 160.04 279.70

Add: Earlier year''s provision for dividend tax no longer required 1.59 1.17

profit Available for Appropriation 255.70 384.83

Less: Transfer to General Reserve 20.00 100.00

Transfer to Debenture Redempt on Reserve 19.28 84.27

Interim Dividend Rs. 1.50 (previous year" 1.50) per Equity Share of" 2 each 28.02 27.99

Final Dividend Proposed Rs.0.50 (previous year" 0.50 paise) per Equity Share of 9.34 9.33 2 each

Dividend Distribut on Tax - Current year 2.08 3.20

Balance carried to Balance Sheet 176.98 160.04

Review of Performance

Your Company achieved a revenue of Rs.3,609 Cr. during 2013-14 (previous year Rs.3,642 Cr.), a marginal decline over the previous year mainly at ributable to the slowdown in the automobile sector. Most of the segments within the automobile sector registered a decline in sales as compared to previous year.

Despite a challenging macro-economic environment, your Company''s Earnings before Finance Costs, Tax, Depreciat on and Amort sat on Expenses were at Rs.349 Cr. during the year as against Rs.335 Cr. in 2012-13, registering a growth of 4%. Finance costs were higher at Rs.123 Cr. as against Rs.104 Cr. in 2012-13 due to the increased borrowings resorted to meet the Company''s expansion programmes. profit before Tax and except onal items was at Rs.141 Cr. for the year 2013-14 as against Rs.151 Cr. in the previous year, a decline of 7%.

Cycles and Components

The Bicycle division recorded a revenue of Rs.1,185 Cr. in 2013-14 as against Rs.1,260 Cr. in the previous year. In volume terms, the Bicycle division recorded a marginal decline in sales in the current year. The prevailing low sent ment in the consumer goods industry impacted the demand for bicycles result ng in lower industry volume.

In order to meet the growth aspirat ons going forward, your Company has taken a slew of measures that is expected to provide the desired results in the coming years. Your Company has taken steps to strengthen its supply chain capabilit es. Based on extensive and cont nuous market research, your Company plans to launch new models that are expected to fi ll the current gaps in the product port olio. Your Company at aches greater importance to enhance the buying experience of the consumers. In this regard, the

940 retail outlets cont nue to provide a superior buying experience to the consumers. These retail outlets also enable direct interact on with the consumers to understand their requirements.

The division has reported a net operat ng profit before interest and tax of Rs.39 Cr. in 2013-14 as against Rs.49 Cr. in the previous year, registering a decline of 21%. Input cost increase could not be fully passed on to the customers due to compet t ve pressure in the industry, impact ng margins. Your Company continues to focus on improving the operat onal efficiencies and reducing the cost in order to enhance the profitability of the division going forward.

Engineering

The Engineering division recorded a revenue of Rs.1,622 Cr. as against Rs.1,582 Cr. in the previous year. This division is signifi cantly dependent on the automobile sector. In the automobile sector, the passenger vehicles volumes declined by 5%, while the commercial vehicles sales declined by 16%. The two wheeler segment alone recorded a growth of 7%, largely driven by the scooter segment which registered a growth of 21%.

The division has recorded a volume growth of 1% in steel tubes and 7% in cold rolled steel strips over the previous year. Export turnover recorded a growth of 15% during the year. Your Company''s Large Diameter Tubes project has progressed well and the same is expected to commence commercial product on in the second quarter of 2014-15. The project will de-risk your Company from over dependence on the automot ve sector and cater to the requirements of off -highway segments, infrastructure and general engineering. The division continues to expand its port olio of value added products while maintaining its focus on cost reduct on and operat onal efficiencies.

The division has reported a net operat ng profit before interest and tax of Rs.136 Cr. as against Rs.110 Cr. in the previous year, a growth of 24%.

Metal Formed Products

The Metal Formed Products segment of the Company registered a fl at growth in revenue at Rs.851 Cr. Despite a contract on in the manufacturing sector, your Company recorded a volume growth of 13% in the industrial chains segment. While, the two wheeler industry recorded a growth of 7% in volume terms, your Company recorded a growth of 19% in volume terms in the automot ve chains segment. This business cont nues to expand its presence in the aftermarket segment. Export segment was impacted due to the unfavourable economic condit ons in Europe.

The division is directly dependent on the growth of automot ve sector which faced one of its most challenging years. The passenger vehicles recorded a decline of 5% as compared to the previous year. The volume of car doorframes sold was lower by 14% due to a decline in demand for select models of major car manufacturers. Delay in finalisat on of tenders by the Ministry of Railways coupled with lower realisat on leading to capacity under- ut lisat on in the Railway business and lower off -take of doorframes impacted the operat ng profit of the segment.

Net operat ng profit before interest and tax for this segment was at Rs.67 Cr. as against Rs.80 Cr. in the previous year, a decline of 16%.

Management Discussion and Analysis

The Management Discussion and Analysis Report, which forms part of this Annual Report, sets out an analysis of the individual businesses including the industry scenario, performance, financial analysis, investments and risk mit gat on.

Dividend

The Board of Directors has recommended a final dividend of Rs.0.50 per share, on equity share of face value of Rs.2 each, for the financial year ended 31st March, 2014. Together with the interim dividend of Rs.1.50 per share, paid on 21st February, 2014, the total dividend for the year works out to Rs.2 per share on equity share of face value of Rs.2 each. Final dividend, if approved by shareholders, will be paid on or after 11th August, 2014.

Joint venture with Tsubamex, Japan

The Company had entered into an agreement with Tsubamex Co. Limited, Japan ("Tsubamex") on 12th July, 2013, to form a 50:50 joint venture company in India by name, TI Tsubamex Private Limited, to engage in the business of design and engineering of sheet metal dies & fi xtures and providing related services. Tsubamex is a reputed die and tool maker for components to the automot ve industry and has several decades of experience in this fi eld. Tsubamex has a good client base comprising of renowned global auto companies and t er - I suppliers to such auto makers. The Company and Tsubamex invested Rs.2 Cr. each towards their respect ve init al subscript on in the joint venture company, which was incorporated on 3rd January, 2014.

Subsidiary Companies

Cholamandalam Investment and Finance Co Ltd (CIFCL)

It was another year of good performance for CIFCL. Riding on the back of sustained performance by its vehicle finance and home equity vert cals, aggregate disbursements of CIFCL improved to Rs.13,114 Cr. in 2013-14 (previous year Rs.12,118 Cr.), profit before tax grew 22%, at Rs.550 Cr. (previous year Rs.451 Cr.) and profit after tax increased by 19% to Rs.364 Cr. (previous year Rs.307 Cr.).

Cholamandalam MS General Insurance Co Ltd (CMSGICL)

CMSGICL, a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan, achieved a Gross writen Premium (including reinsurance acceptance) of Rs.1,872 Cr. during 2013-14 (previous year Rs.1,652 Cr.), registering a growth of 13%. The profit before tax was Rs.102 Cr. for the year (previous year Rs.88 Cr.), registering a growth of 16%. During 2013-14, to augment its solvency posit on and support the business plan, CMSGICL came out with a rights issue of shares of Rs.75 Cr. Your Company''s subscript on was Rs.55.50 Cr.

Shanthi Gears Ltd (SGL)

SGL recorded a turnover of Rs.152 Cr. in 2013-14 against Rs.146 Cr. in the previous year. profit before tax was Rs.26 Cr. (previous year Rs.22 Cr.). SGL grew its top line in both the nat onal market and through exports, mainly due to the focus on winning back customers lost during the diffi cult years of the past, improving operat onal efficiencies leading to higher service levels and focus on the service segment. SGL enhanced its presence in the market, key user locat ons and reach to customers by strengthening its teams involved in sales & service. The company also built on its distribut on network during the year and established its presence in many key markets.

Financière C10 SAS (FC10)

FC10, a wholly-owned subsidiary in France, recorded a consolidated turnover of Euro 32 Mn in 2013 (previous year Euro 33 Mn). Its profit before tax was Euro 0.23 Mn (Euro 0.31 Mn).

The Statement pursuant to Sect on 212 of the Companies Act, 1956 containing details of the Company''s subsidiaries is at ached.

The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with the Account ng Standard (AS) 21, form part of the Annual Report.

Directors

Mr. S B Mathur, Director, resigned from the Board with eff ect from 8th August, 2013 due to his other commitments. The Board places on record its appreciat on of the service rendered by Mr. S B Mathur during his tenure as Director of the Company.

Mr. S Sandilya and Mr. Pradeep V Bhide, non-execut ve Independent Directors in terms of the List ng Agreement, will ret re by rotat on at the ensuing Annual General Meet ng ("AGM") under Sect on 152 of the Companies Act, 2013 ("the Act"). Being eligible, they off er themselves for appointment as Independent Directors pursuant to Sect on 149 of the Act. The Board recommends the appointment of Mr. S Sandilya as Independent Director for a term of four years viz., from the date of the 65th AGM (2014) t ll the date of the 69th AGM (2018). As regards Mr. Pradeep V Bhide, the Board recommends his appointment as Independent Director for a term of fi ve years viz., from the date of the 65th AGM (2014) t ll the date of the 70th AGM (2019).

Mr. C K Sharma, non-execut ve Independent Director in terms of the List ng Agreement, who is not liable to ret re at the ensuing AGM, is also seeking appointment as Independent Director in terms of Sect on 149 of the Act. The Board recommends his appointment as Independent Director for a term of three years viz., from the date of the 65th AGM (2014) t ll the date of the 68th AGM (2017).

Mr. Hemant M Nerurkar was appointed as Addit onal Director with eff ect from 5th May, 2014. He holds Office up to the date of the ensuing AGM. The Board recommends his appointment as Independent Director under Sect on 149 of the Act for a term of four years viz., from the date of the 65th AGM (2014) t ll the date of the 69th AGM (2018).

Individual Not ce in terms of Sect on 160 of the Act has been received from members proposing the candidature of Messrs. S Sandilya, Pradeep V Bhide, C K Sharma and Hemant M Nerurkar for appointment as Independent Directors of the Company.

The Board takes pleasure in recommending the appointment of Messrs. S Sandilya, Pradeep V Bhide, C K Sharma and Hemant M Nerurkar as Independent Directors as their associat on will immensely benefit the Company.

Corporate Governance

Your Company is commit ed to maintaining high standards of corporate governance. A report on corporate governance, along with a cert fi cate from the Statutory Auditors on compliance with the corporate governance norms forms part of this Annual Report.

In response to the changes brought into eff ect through the Companies Act, 2013 and in the corporate governance norms (Clause 49 of the List ng Agreement) [to be eff ect ve from 1st October, 2014] announced by the Securit es and Exchange Board of India, the Board of Directors of your Company has reviewed the const tut on and terms of reference of the exist ng Audit Commit ee, the Compensat on & Nominat on Commit ee and the Shareholders''/Investors'' Grievance Commit ee. Requisite changes have been made thereto to ensure compliance with the new requirements.

Human Resources

During the year, among the many init at ves taken on the HR front, the focus was inter alia on improving employee product vity, building organisat onal & people capabilit es and ensuring greater compliance under various statutes. Customised programmes were conducted round the year addressing all levels of employees in order to create a robust talent pipeline and assist them in chartering their career plans. The quest for operat onal excellence was further strengthened through the unique House of Excellence framework supported by the ''Train the Trainer'' programme, named as ''Shiksha''. The Company had cordial industrial relat ons across businesses and this enabled the Management to conclude the long-term set lement in two of the business locat ons, when it became due.

The Company had 3,486 permanent employees on its rolls, as on 31st March, 2014.

Employees'' Stock Option Scheme

''Details of the Employees'' Stock Opt on Scheme as required under the relevant SEBI Guidelines are annexed to this Report.

Social Commitment

As a corporate cit zen, your Company is commit ed to the conduct of its business with a strong sense of social responsibility. Every year, the Company has been contribut ng a small port on of its profits for the promot on of worthy causes like educat on, healthcare, scient fi c research etc. This year too, a sum of "0.73 Cr. was contributed to various organisat ons engaged in the aforesaid fi elds and to others.

Your Company has further const tuted a Corporate Social Responsibility (CSR) Commit ee of the Board towards the end of the financial year, 2013-14 in line with the requirement of the new Companies Act, 2013 and the Rules thereunder. This Commit ee will implement the CSR activities of the Company from the current year onwards.

Financial Statements

Though a number of provisions of the new Companies Act,

2013 have come into force eff ect ve 1st April, 2014, the Ministry of Corporate Affairs, Government of India vide its General Circular 08/2014 no.1/19/2013-V dated 4th April,

2014 has clarifi ed that for the financial year, 2013-14, preparat on of the Financial Statements and documents to be at ached thereto, auditors'' report and Board''s report shall be governed by the provisions and schedules of the Companies Act, 1956. Accordingly, the Financial Statements and other documents for the financial year, 2013-14 have been prepared in accordance with the relevant provisions/ Schedules/Rules of the Companies Act, 1956.

Auditors

The new Companies Act, 2013 has made it mandatory to rotate the statutory auditors once every ten years in case of a fi rm of auditors. The Act provides companies a maximum of three years, namely, up to 31st March, 2017 to eff ect rotat on, wherever necessary. M/s. Deloit e Haskins & Sells, Chartered Accountants, who have been the Statutory Auditors of the Company since the year 2005, being eligible, have off ered themselves for appointment at the ensuing 65th Annual General Meet ng. The Board of Directors recommend their appointment as the Statutory Auditors for the period from the conclusion of the ensuing 65th Annual General Meet ng t ll the conclusion of the next (66th) Annual General Meet ng.

Mr. V Kalyanaraman was appointed as the Cost Auditor for audit ng the cost account ng records maintained by the Company of E-Scooters, Pedelec (bat ery powered bicycles), Steel Products and Metal Formed Products for the financial year ended 31st March, 2014. The Cost Audit Reports relating to the above products will be fi led with the Government within the st pulated period of 180 days from the close of financial year.

In respect of the previous year, 2012-13, the Cost Audit and Compliance Reports relating to E-Scooters, Pedelec (bat ery powered bicycles), Steel Products and Metal Formed Products, audited by Mr. V Kalyanaraman, Cost Auditor, were fi led electronically in XBRL mode, on 25th September 2013 viz., well within the limit of within 180 days from the end of the financial year st pulated by the Cost Audit Branch, Ministry of Corporate Affairs, Government of India.

The other informat on required to be furnished in the Directors'' Report under the provisions of Sect on 217 of the Companies Act, 1956 relating to conservat on of energy,

technology absorpt on, foreign exchange earnings and outgo and Directors'' Responsibility Statement are annexed and form part of this Report.

In accordance with the provisions of Sect on 217(2A) of the Companies Act, 1956 read with Companies (Part culars of Employees) Rules, 1975 and the Companies (Part culars of Employees) Amendment Rules, 2011, the name and other part culars of employees are to be set out in the annexure to the Directors'' Report. However, having regard to the provisions of Sect on 219(1)(b)(iv) of the Companies Act, 1956, the Annual Report is being sent to all members of the Company excluding the aforesaid informat on. Any

member interested in obtaining such part culars may write to the Company Secretary at the Registered Office of the Company.

The Directors thank all Customers, Vendors, Financial Inst tut ons, Banks, State Governments and Investors for their cont nued support to your Company''s performance and growth. The Directors also wish to place on record their appreciat on of the contribut on made by all the employees of the Company result ng in the good performance during the year under review.

Directors'' Responsibility Statement

(Pursuant to Sect on 217(2AA) of the Companies Act, 1956)

Pursuant to Sect on 217(2AA) of the Companies Act, 1956, the Directors to the best of their knowledge and belief confi rm that:

- in the preparat on of the Statement of profit and Loss for the fi nancial year ended 31st March, 2014 and the Balance Sheet as at that date ("financial statements"), applicable Account ng Standards have been followed.

- appropriate account ng policies have been selected and applied consistently and such judgments and est mates that are reasonable and prudent have been made so as to give a true and fair view of the state of Affairs of the Company as at the end of the financial year and of the profit of the Company for that period.

- proper and suffi cient care has been taken for the maintenance of adequate account ng records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for prevent ng and detect ng fraud and other irregularit es. To ensure this, the Company has established internal control systems, consistent with its size and nature of operat ons. In weighing the assurance provided by any such system of internal controls its inherent limitat ons should be recognised. These systems are reviewed and updated on an ongoing basis. Periodic internal audits are conducted to provide reasonable assurance of compliance with these systems. The Audit Commit ee meets at regular intervals to review the internal audit funct on.

- the financial statements have been prepared on a going concern basis.

- the financial statements have been audited by Messrs. Deloit e Haskins & Sells, Statutory Auditors and their report is appended thereto.

On behalf of the Board

M M Murugappan

Chairman

Chennai

5th May, 2014


Mar 31, 2013

Dear Shareholders,

The Board of Directors is pleased to present the performance of your Company for the year ended 31st March, 2013.

Financial Highlights Rs. in Crores

2012-13 2011-12

Sale of Products - Gross 3642.25 3664.77

Less: Excise duty on sales 251.88 200.35

Sales of Products - Net 3390.37 3464.42

Earnings Before Finance Costs, Tax, 334.95 397.74 Depreciation and Amortisation Expense

Less: Finance Costs 104.16 76.56

Depreciation and Amortisation Expense 79.77 76.08

Earnings Before Tax and Exceptional Item 151.02 245.10

Less: Provision for Diminution in value of Investments 3.81 -

Profit Before Tax 147.21 245.10

Less: Tax Expense 43.25 65.01

Profit After Tax 103.96 180.09

Add: Surplus at the beginning of the year 279.70 392.70

Less: Final dividend including tax on dividend 0.00 0.02

Add: Earlier year''s provision for dividend tax no longer required 1.17 1.76

Profit Available for Appropriation 384.83 574.53

Less: Transfer to General Reserve 100.00 200.00

Transfer to Debenture Redemption Reserve 84.27 31.66

Interim Dividend @ Rs. 1.50 (previous year Rs. 2) per Equity Share of Rs. 2 each 27.99 37.24

Final Dividend Proposed @ Rs. 0.50 (previous year Rs. 1) per Equity Share of Rs. 2 each 9.33 18.63

Dividend Distribution Tax - Current year 3.20 7.30

Balance carried to Balance Sheet 160.04 279.70

Review of Performance

Your Company achieved a turnover of Rs.3,642 Cr. during 2012-13 (previous year Rs.3,665 Cr.). This performance has to be viewed in the context of the current economic environment. Your Company is largely dependent on the auto industry, with the exception of the Bicycle segment. In view of the economic slowdown, the auto industry as well as the bicycles industry did not fare well during the year, which impacted your Company''s performance. Earnings before Finance Costs, Tax, Depreciation and Amortisation Expenses were at Rs. 335 Cr. during the year as against Rs. 398 Cr. in 2011-12, a decline of 16%. Finance costs was high at Rs.104 Cr. as against Rs.77 Cr. in 2011-12 due to the increased borrowings resorted to meet the Company''s expansion programmes. Profit Before Tax was Rs. 147 Cr. for the year 2012-13 as against Rs. 245 Cr. in the previous year.

The Bicycle division recorded a turnover of Rs. 1,255 Cr. in 2012-13 as against Rs. 1,285 Cr. in the previous year. This segment witnessed steep increase in the customs and excise levies. Lower disposable income in the rural areas affected the demand for Standard bicycles. Higher input costs, together with the increase in the statutory levies, resulted in the higher price of bicycles for the end consumer, affecting the demand in Specials segment as well. As part of its growth strategy, your Company continues to invest in the expansion of retail outlets to improve its reach and the buying experience. The business has established a manufacturing and assembly line for high-end bicycles, to cater to the export market. The division continues to focus on promoting cycling. Your Company has reduced its dependence on imports in select product lines and has plans to introduce many new models in the coming years to meet customer aspirations.

As regards electric scooters, lack of infrastructure support and the withdrawal of subsidies by the Government have affected the consumer''s preference for this product. In this scenario, prospects for the growth of this product are not expected to improve in the near term.

The division has reported a profit before interest and tax of Rs.49 Cr. in 2012-13 as against Rs.76 Cr. in the previous year, registering a decline of 36%.

The Engineering division recorded a turnover of Rs. 1,467 Cr. in 2012-13 as against Rs. 1,449 Cr. in the previous year. With the bulk of its revenue coming from the auto sector, the performance of this business was impacted during the year due to decline in demand for motor cycles and commercial vehicles. Margin was affected due to the increase in power & fuel cost and the inability to pass on the same in entirety. The tubular component business continued to enjoy good patronage from its user segments and grew by 6%. Your Company commissioned a stainless steel tube manufacturing facility in the previous year and is working with user industries for product acceptance. Export turnover of the division was at previous year''s levels despite the market slowdown witnessed in Europe and the United States of America. Efforts are underway to enhance the product portfolio of the division through the manufacture of large diameter Cold Drawn Welded tubes (CDW), which finds application in non-auto industries. Towards this, a green fi eld facility is under establishment and it is expected to start commercial production in the first quarter of 2014-15.

The division has reported a net operating profit before interest and tax of Rs. 110 Cr. as against Rs. 131 Cr. in the previous year. Improving internal effi ciencies and aggressive cost management helped to limit the impact of the drop in volume and steep increase in costs.

The Metal Formed Products segment of the Company registered a turnover of Rs.795 Cr. in 2012-13, as against Rs.860 Cr. in the previous year. Stagnati on in demand from the motorcycle segment affected the sale of drive chains to OEMs. To counter this, your Company focussed on the replacement market, which facilitated good growth in volumes for the division. Consistent with the decline in the key industry user segments like cement, material handling and infrastructure, off-take of industrial chains was not encouraging. Uncertain conditions and low economic activity in the European markets further impacted the export of industrial chains. Your Company continues to invest in equipment to manufacture fine blanked products as there is a good opportunity for growth in the domestic and export markets. Sale of fine blanked products grew by 33% in 2012-13 over the previous year. Passenger cars designed with roll-formed doorframes did not grow during the year, resulting in a drop in the volume of doorframes sold. The existence of a large underutilised capacity in cold rolled sections for railway wagons affected the top line and margin. Net operating profit before interest and tax for this segment was at Rs. 80 Cr., representing a decline of 29%.

Management Discussion and Analysis

The Management Discussion and Analysis Report, which forms part of this Annual Report, sets out an analysis of the individual businesses including the industry scenario, performance, financial analysis, investments and risk mitigation.

Dividend

The Board of Directors has recommended a final dividend of Rs.0.50 per share, on Equity Share of face value of Rs.2 each, for the fi nancial year ended 31st March, 2013. Together with the interim dividend of Rs. 1.50 per share, paid on 22nd February, 2013, the total dividend for the year works out to Rs.2 per share on Equity Share of face value of Rs.2 each. Final dividend, if approved by shareholders, will be paid on or after 6th August, 2013.

Subsidiary Companies Cholamandalam Investment and Finance Co Ltd (CIFCL)

It was another year of good performance for CIFCL. Riding on the back of sustained performance by its vehicle finance and home equity verticals, aggregate disbursements of CIFCL improved to Rs.12,118 Cr. in 2012-13 (previous year: Rs. 8,889 Cr.), profit before tax grew 56%, at Rs.451 Cr. (Rs. 290 Cr.) and profit after tax increased by 77% to Rs. 307 Cr., (Rs. 173 Cr.). In order to meet the projected growth in its loan disbursements and to augment the capital adequacy ratio, CIFCL came out with a Qualified Institutional Placement of Equity Shares to Qualified Institutional Buyers (QIBs). CIFCL issued 1.05 Cr. Equity Shares of face value of Rs. 10 each, on private placement, at a premium of Rs. 275 per share, aggregating Rs. 300 Cr. to QIBs. The Company''s present shareholding in CIFCL is 50.47%.

Cholamandalam MS General Insurance Co Ltd (CMSGICL)

CMSGICL, a joint venture with Mitsui Sumitomo Insurance Company Ltd, Japan, achieved a Gross Written Premium (including reinsurance acceptance) of Rs.1,652 Cr. during 2012-13 (previous year Rs. 1,506 Cr.), registering a growth of 10%.

Completing its first decade of business operations, CMSGICL registered a profit before tax of Rs.88 Cr. in 2012-13 (previous year Rs. 16 Cr.).

During 2012-13, to augment its solvency position and support the business plan, CMSGICL came out with a rights issue of shares of Rs. 50 Cr. Your Company''s subscription was Rs. 37 Cr.

Shanthi Gears Ltd (SGL)

Pursuant to the Share Purchase Agreement dated 13th July, 2012 with the erstwhile promoters of SGL and the consequent mandatory Open Offer made to the public shareholders of SGL under the SEBI Takeover Regulations, your Company acquired 5,72,96,413 Equity Shares (70.12%) of SGL, during 2012-13, for an aggregate consideration of about Rs.464 Cr. SGL became a subsidiary of the Company effective 19th November, 2012.

SGL designs, manufactures and supplies various kinds of industrial gears and gearboxes catering to a wide variety of applications across industries. Over the last four decades, SGL has built a very strong brand through the supply of high quality products, efficient service and meeting customer expectati ons, both in India and overseas. Your Company considers the acquisition of SGL as a strategic fit, which will yield immense benefits in the years to come.

SGL recorded a turnover of Rs.161 Cr. in 2012-13 against Rs. 187 Cr. in the previous year. Profi t before tax was Rs. 22 Cr. (previous year Rs. 42 Cr.)

Financiere C10 SAS (FC10)

FC10, in which the Company earlier held 77.13% of the share capital, became a wholly-owned subsidiary effective 17th December, 2012, consequent to the Company acquiring the balance 22.87% of the share capital from the remaining shareholders, at an investment of Rs. 16.55 Cr.

FC10, the holding company of Sedis SAS, France, Societe De Commercialisation De Composants Industriels, France and Sedis Company Ltd., UK recorded a consolidated turnover of «33.3 M in 2012 (previous year «33.3 M). Its profit before tax was «0.31 M («1.05 M).

TICI Motors (Wuxi) Co Ltd (TICI Motors)

Considering the accumulated losses and the prevailing business conditions, your Company has decided to voluntarily liquidate TICI Motors, the wholly-owned Chinese subsidiary, established for manufacturing electric scooter CKD kits for sale in the Indian market. A sum of Rs. 3.81 Cr. has been provided in the books of account for the year towards diminution in value of the investment.

The Statement pursuant to Section 212 of the Companies Act, 1956 containing details of the Company''s subsidiaries is attached.

The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with the Accounting Standard (AS) 21, form part of the Annual Report.

Directors

Mr. N Srinivasan will retire by rotation at the ensuing Annual General Meeting and is eligible for re-appointment.

Mr. S B Mathur was appointed as an Additional Director with effect from 2nd May, 2013 and a resolution under Section 257 of the Companies Act, 1956 for his appointment is being placed before the shareholders at the ensuing Annual General Meeting for approval.

Mr. L Ramkumar was re-appointed by the Board of Directors, at the meeti ng held on 31st January, 2013, as Managing Director of the Company, for a fresh term, from 1st February, 2013 to 8th April, 2016 (both days inclusive). Necessary resolution for the re-appointment of Mr. L Ramkumar, payment of remunerati on and other terms thereof form part of the Notice of the ensuing Annual General Meeting for shareholders'' approval.

Corporate Governance

Your Company is committed to maintaining high standards of corporate governance. A report on corporate governance, along with a certificate from the Statutory Auditors on compliance with corporate governance norms forms part of this Annual Report.

Human Resources

The HR strategy of your Company is to support and drive business deliverables by leveraging the people resources in the organisation. To this end, HR programs of the Company focus on both strategic and operational prioriti es of the business.

A comprehensive study of shop floor operations was taken up at some of the units to facilitate productivity improvements through a desirable manpower mix, elimination of non-value added activities, layout changes etc. Also, a pilot study on organisation design & structure was conducted at one of the businesses to identify and recommend optimal manning and levels required for various functions. With the objective of building the capabilities of sales workforce across all its businesses, a new program was initiated in association with an international firm. This initiative is expected to help in improving the sales force productivity and also in retaining customers. Special efforts are being taken to improve the technical capabilities of shop floor operators through customised training programs by reputed institutions and technical experts. Focus is also being laid on a Career Development Program wherein competency gaps of individual employees are being identified and based on these gaps, Individual Development Plans (IDPs) are being drawn up and development inputs provided based on the IDPs. Long-term settlements were concluded with the labour unions at four manufacturing units during 2012-13. Your Company also took various initiatives to strengthen the safety, statutory compliance and security related areas. The Company had 3,443 permanent employees on its rolls, as on 31st March, 2013.

Employees'' Stock Option Scheme

Details of the Employees'' Stock Option Scheme as required under the relevant SEBI Guidelines are annexed to this Report.

The introduction of a new ESOP Scheme (ESOP 2012), which was approved by the Members at the last Annual General Meeting held on 6th August, 2012, stands withdrawn, without implementation, as the market regulator pronounced its view that such schemes providing for acquisition of securities from secondary market are outside the purview of the relevant regulations.

Social Commitment

As a corporate citizen, your Company is committed to the conduct of its business with a strong sense of social responsibility. Every year, the Company has been contributing a small porti on of its profi ts for the promoti on of worthy causes like education, healthcare, scientific research etc. This year too, a sum of Rs. 1.26 Cr. was contributed to various organisations engaged in the aforesaid fields and to others.

Auditors

Messrs. Deloitte Haskins & Sells, Chartered Accountants and Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Mr. V Kalyanaraman has been appointed as the Cost Auditor for auditing the cost accounting records maintained by the Company of E-Scooters, Pedelec (battery powered bicycles), Steel Products and Metal Formed Products for the financial year ending 31st March, 2013. The Cost Audit Reports relating to the above products will be filed within the stipulated period of 180 days from the close of the financial year.

In respect of the previous year, 2011-12, the Cost Audit and Compilance Reports relati ng to Cycles, Steel Products and Metal Formed Products, audited by Mr. V. Kalyanaraman, Cost Auditor, were filed electronically in XBRL mode, on 7th January, 2013 viz., well within the limit of 28th February, 2013 stipulated by the Cost Audit Branch, Ministry of Corporate Affairs, Government of India.

The other information required to be furnished in the Directors'' Report under the provisions of Section 217 of the Companies Act, 1956 relati ng to conservation of energy, technology absorption, foreign exchange earnings and outgo, particulars of employees and Directors'' Responsibility Statement are annexed and form part of this Report.

The Directors thank all Customers, Vendors, Financial Instituti ons, Banks, State Governments and Investors for their conti nued support to your Company''s performance and growth. The Directors also wish to place on record their appreciation of the contribution made by all the employees of the Company resulting in the good performance during the year under review.

On behalf of the Board

M M Murugappan Chennai Chairman

2nd May, 2013

 
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