Directors Report of VST Tillers Tractors Ltd.

Mar 31, 2018

Dear Shareholder,

The Directors have pleasure in presenting the 50th Annual Report of the Company and the Audited Statement of accounts for the year ended March 31, 2018.

FINANCIAL PERFORMANCE (Rupees in lakhs)

Period	Year 2017-18	Year 2016-17
OPERATING INCOME	76395	67766
NON-OPERATING INCOME	4521	2616
TOTAL INCOME	80916	70382
FINANCE COST	169	302
DEPRECIATION	1086	1181
TOTAL EXPENSES	65693	59124
EXCEPTIONAL ITEM	-	330
PROFIT BEFORE TAX	15223	11588
TAX	4025	3318
PROFIT AFTER TAX	11198	8271
OTHER COMPREHENSIVE INCOME	-3	-166
TOTAL COMPREHENSIVE INCOME	11195	8105
EARNING PER SHARE (Basic and Diluted)	129.61	95.73

COMPANY’S PERFORMANCE

The year under report was partially impacted in first half of the year with weak monsoon in June in States of Karnataka, Tamil Nadu and Kerala. In other parts of the country the monsoon was normal during the Kharif season. Structural changes in the subsidy schemes in few States, change over to DBT schemes in few states and price fixation delays impacted the sales of Power tillers during the year 2017-18.

The number of Power Tillers sold during the year was 30,143 units as against the previous year sale of 25,515 units registering growth in sales of 25%. The company market share moved to 60%.

Your company registered growth of 18% in Tractor numbers. 11,367 tractors were sold as against 9,635 tractors in 2016-17. The company market share is around 15.5% in the compact segment category.

Your company will be investing over 240 crores from the year 2016-17 until 2020-21 in infrastructure, up gradation and new product development. The company has launched new Tractor models, Tractor variants and Tiller models. During the year 2016-17 your company launched the 27 HP Viraat model to the market, and the upgraded version ‘VST SHAKTI VIRAAT PLUS’ in April 2017. Both these models are with 8 2 constant mesh gear box. The Viraat Plus has gained market share while the Samrat model is lagging

as we need to change the mind-set of the farmers to adapt engine with Electronic governor. The new model’s introduction, penetration in new areas, industry growth and our marketing communication has enabled growth in sales during the year 2017-18.

The Custom Hiring & Service Centers that are under the VST umbrella which was allocated under the scheme launched by the Government of Karnataka are running successfully.

The new plant for Power Tiller at Malur became operational in March 2018. This new plant is capable of higher productivity. The entire production of Power Tiller will be done in this plant effective August 2018. The existing plant at Bengaluru will be used for manufacture of higher HP range of Tractors and the Self-propelled Power reapers.

DIVIDEND:

The Board has recommended 500% Dividend (150% Normal dividend and 350% special dividend on account of Golden Jubilee year) i.e. Rs.50/- per equity share of Rs.10 each, for the financial year 2017-18 and the same will be disbursed on or after 13 th August 2018, if approved by the shareholder at the 50th AGM. The total outflow will be Rs.51,84,52,993 including

MANAGEMENT DISCUSSION AND ANALYSIS Industry - Opportunities & Challenges

Need to mechanize agriculture will continue to be a necessity due to limited availability of labour and high cost of labour. The trend in any segment is towards mechanization/automation to reduce the manual effort. Your company is in the business to ‘Create Sustainable Crop Solutions To Enhance Farm Productivity’. The company products mainly target the small and marginal farmers who account for more than 70% of the land holding. Shortage of rural labour force continues to be the key driver for business growth. The income of our farmers need to increase and this is possible with increase in productivity in the land size that they own. Your company is offering total crop solutions to the farmers at competitive pricing which will assist in their business. The company has developed packages for various crops like Paddy, Cotton, Sugarcane, Horticulture, Grapes etc. for Compact tractors and Power tillers.

Delays in announcing subsidy schemes by the State Governments, bureaucracy associated with the administration of schemes, weak Monsoon etc. will continue to be the challenge for your company. Entry of more and more competition tractors in the compact segment is demanding your company to come out with more and more variants to counter the competition. The commodity prices have increased over 20% in 2017-18. Many suppliers are seeking price increases. Due to price increase of components the contribution margin will get eroded and hence can have adverse impact on the company operating margins.

RISK & CONCERN

The inability of the Central Government to come out with strict guideline/policy to curb imports of poor quality Power Tillers without adequate service and spares is a cause for concern. State Governments are encouraging more and more Custom Hiring Centres to support the marginal and small farmers. This initiative may marginally impact the sales of Tillers to the farmers. More than 95% of Power Tillers are sold under government subsidy schemes. In case the subsidy allocations are reduced it can adversely affect the demand for these products. In some States even the compact tractors are given attractive subsidy. This will have an impact on Direct sales of Tractors. While the subsidy was most prevalent in Karnataka, Tamil Nadu and Andhra very recently Maharashtra government has announced a subsidy scheme for tractor. This is

not necessarily a good trend for the tractor industry. Most State Governments have switched over to DBT scheme for subsidy which will have a positive impact on working capital.

Your company is diversifying to manufacture and sell higher HP tractors to the domestic market. Having been in compact segment tractor manufacturing and sales it may take more than anticipated time for us to penetrate and establish the presence in higher HP segment.

CURRENT YEAR OUTLOOK

With prediction of normal monsoon, launch of new products models/ variants along with continued focus on farm mechanization to double the farmer income by the Central Government it is expected that the company growth will be on par with the overall industry growth.

DETAILS OF DIRECTORS APPOINTMENT/ REAPPOINTMENT:

In accordance with the provisions of the Companies Act, 2013 Mr. V T Ravindra (DIN-00396156) will retire at the ensuing AGM and is eligible for reappointment. Mr. Arun V Surendra (DIN-01617103) appointed as Additional Director of the Company effective from 11/05/2018. His appointment as Non-Executive Director forms part of Notice of 50th Annual General Meeting.

Mr. V.T. Ravindra appointed as whole-time Director of the Company effective from 11/05/2018. His appointment as whole-time Director forms part of Notice of 50th Annual General Meeting.

During the year, no non-executive director had any pecuniary relationship or transactions with the Company other than the sitting fees and reimbursement of expenses incurred by them for attending meetings of the Company.

KEY MANAGERIAL PERSONNEL (KMP)

The following persons are Key Managerial Personnel (KMP) of the Company under section 203 of the Companies Act, 2013. During the year 2017-18, Mr.R.Thiyagarajan resigned as CFO of the Company w.e.f. 01/06/2017 and Mr. P.M. Keshava appointed as CFO w.e.f. 01/06/2017.

1. Mr. V.P. Mahendra - Vice Chairman & Managing Director

2. Mr. P.M.Keshava - Chief Financial Officer

3. Mr. Chinmaya Khatua - Company Secretary

CORPORATE GOVERNANCE:

The Company strives to ensure good in Corporate Governance and levels of transparency with all the provisions of SEBI (Listing Obligation and Disclosure Requirement) Regulation, 2015. A certificate from the Auditors to this effect forms part of Corporate Governance Report.

Compliance reports in respect of all laws applicable to the Company have been reviewed by the Board of Directors.

DIRECTOR’S RESPONSIBILITY STATEMENT:

Pursuant to subsection 5 of Section 134 of the Companies Act 2013, the Directors confirm that:

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

(b) they have selected such accounting policies and applied them consistently and made judgements 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 and loss of the company for that period;

(c) they have 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;

(d) they have prepared the annual accounts on a going concern basis;

(e) they, have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

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

AUDITORS:

M/s. K.S. Rao & Co, Chartered Accountants (Firm Regn No. 003109S) were appointed as Auditors of the Company for five financial years w.e.f FY 2016-17, at the 48th Annual General Meeting of the Company.

COST AUDITORS:

Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed M/s. Rao, Murthy & Associates, Cost Accountants to audit the cost records of the Company for the financial year 2018-19 on a remuneration of Rs.2,50,000/- lakhs (Exclusive of applicable taxes) plus out of pocket expenses. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their approval. Accordingly, a Resolution seeking Member’s approval for the remuneration payable to M/s. Rao, Murthy & Associates., Cost Auditors is included in the Notice of the Annual General Meeting.

INTERNAL AUDITORS

M/s.Brahmayya & Co, Chartered Accountant were appointed as Internal Auditors under section 138 of the Companies Act, 2013 for the financial year 2017-18.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and read with Rules made thereunder, the Company had appointed Mr. Thirupal Gorige Company Secretaries in Practice to undertake the Secretarial Audit of the Company for the financial year 2017-18. The Secretarial Audit Report is enclosed herewith as Annexure-4.

PARTICULARS OF EMPLOYEES:

As required by provisions of section 197 of the Companies Act, 2013 read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The salary details of designated employees are given in Annexure-1.

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

Information under Section 134 Companies Act, 2013 read with rule 8 (3) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure-2.

DEPOSITS:

Your Company has not accepted any deposits within the meaning of Chapter- V of the Companies Act, 2013 and rules made thereunder.

Internal Control System and their Adequacy

The Company has put in place adequate internal financial controls over financial reporting Systems commensurate to the nature of its business and complexity of its operations. These are regularly tested for their effectiveness by Statutory as well as Internal Auditors.

The Company periodically conducts physical verification of inventory, fixed assets and cash on hand and matches them with the books of account. Explanations are sought for any variance noticed from the respective functional heads.

The Company is planning to implement new ERP system during the year 2019-20 to further strengthen the internal control system of the Company.

The Significant observations made by the Auditors and follow up actions there on reported to the Audit Committee. The Audit Committee reviews the adequacy and effectiveness of the Company’s Internal Control Environment and monitors the implementation of the Audit recommendations.

Industrial Relation

Industrial relations have been cordial at the Bengaluru, Mysore and Hosur plants during the year.

Your company has taken appropriate steps to build organizational capability which will enable the long term growth plans. There were 713 No. of permanent employees on roll as on 31st March 2018.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those either expressed or implied due to factors such as Raw material prices, Government policies, Competition, tax regime, market acceptance of new products and services, continued acceptance of existing products and services, changes in licensing programs, product price discounts, delays in product development and related product release schedules, sales and vendor channel disruption.

All information in this release is as of May 11, 2018, The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations. Information Technology

Your Company’s operations are supported by a full- fledged Data Centre. Your company has a well-planned Business Continuity Plan and Disaster Recovery Set-up for all critical applications with near real-time data replication.

The delivery centers meet the Information Security Management System and CIA (Confidentiality, Integrity and Availability) Standards. To cater to the ever-changing customer needs, the IT infrastructure is being constantly upgraded with new / enhanced features to facilitate smooth functioning of operations and deliver customer satisfaction. We are using industry best standard mailing solutions with compliance and availability of mails which controls various spam mails. The Company is planning to implement new ERP system during the year 2019-20 to further strengthen the internal control system of the Company along with 24*7 availability of critical applications and standard business analytical tools.

Board Meeting

Five meetings of the Board of Directors were held during the year. For further details, please refer report on Corporate Governance of this Annual Report. Declaration of Independent directors.

The Company has received declarations from Independent directors as mentioned in sub-section (6) of section 149 of the Companies Act, 2013. Committees

The Company has constituted Audit Committee, CSR Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee and Risk Management Committee. The details of the Committees are mentioned in Corporate Governance Report.

Vigil Mechanism

The purpose of this policy is to provide a framework to promote responsible and secure whistle blowing. It is to protect employees wishing to raise a concern about serious irregularities within the Company.

The Company has vigil mechanism to deal with instance of fraud and mismanagement, if any. The details of the vigil mechanism are explained in the Corporate Governance Report and also posted on the website(www.vsttillers.com) of the Company. Technology Transfer Agreement with M/s. Kukje Machinery Co. Ltd.

During the year 2017-18 the Company has entered into a Technology Transfer Agreement with

M/s. Kukje Machinery Co. Ltd., Korea to manufacture 47 HP tractors.

Auditors qualification, reservation or adverse remark or disclaimer.

Auditors Qualification on Internal financial control:

“The Company has designed and established internal financial controls over accounting of expenditure and payment processing. However, adequate “maker and checker controls” were not effective with respect to review of expenditure entries, generation of EDI (Electronic Data Interchange) file for payments, modifications to EDI file and uploading the EDI file onto the Bank’s website for payments, as detailed in note no. 45 to financial statements as at March 31, 2018 which resulted in creation of fictitious accounting entries in the system and payments to unauthorized parties.”

Management Response:

Looking into the unblemished track records, management believed that the internal control systems which includes design and financial controls were working effectively and in totality. However, it was realized that the operation of the internal controls and procedures were not effective and needed further improvement. The management has taken necessary steps to go into the depth of the fraud, the extent of possible damage done, legal proceeding, recovery of the amount embezzled and correcting the lapses in the internal financial controls. With this in mind, the management had already embarked on introducing a new ERP system (SAP) to overcome the shortfall in the present system.

There was no qualification, reservation or adverse remark or disclaimer from Secretarial Auditors.

There was no fraud reported by the auditors under section 143 (12) of the Companies Act, 2013 other than those which are reportable to the Central Government.

Loans, Guarantee & Investment

The Company has made investment during the year 2017-18. However, the investments and Loan formed part of the notes to the financial statements provided in this Annual Report. The company has not given any Loan or Guarantee during the year 2017-18.

Related Party Transactions

All related party transactions that are entered into during the financial year were on an arm’s length basis. There are no materially significant related party transactions made by the company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee and also before the Board for approval. Prior omnibus approval of the Audit Committee was obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their information and approval. The policy on dealing with Related Party Transactions as approved by the Board can be accessed at http://www.vsttillers.com/sites/default/ files/policies/policy_on_related_party_transc.pdf.

Material changes and commitments affecting the Financial Position

There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report;

Risk Management Policy

The Company is having a risk management policy. The risk pertaining to business of the Company is discussed at the Risk Management Committee, Audit Committee and at the Board Meetings on regular basis. There are no risks which in the opinion of the Board threaten the existence of the Company. However, some of the risks which may pose challenges are set out in the Management Discussion and Analysis which forms a part of this report.

The Committee composition :

Mr. M.K. Bannerjee, Chairman, Mr. V. K. Surendra, Member, Mr. K.M. Pai, Member, Mr. V.P. Mahendra, Member

The details of the policy are given below:

Risk Category	Risk Description	Mitigation
Iudustry Risk	Concentration on Agri Business Specific Risks are: - Industry Downturn in Agri Industry will adversely affect business - Strong competition and ability to market models faster. High focus on specific Segment Specific Risks are: - Business will be adversely affected when Agri segment experiences sluggish growth - Highly dependent on subsidy and Govt, policy on Agriculture development.	? Tapping of wider segments in products and geographies including its aftermarket foot print in the core business ? Explore to releasing new models ahead of competition in the future. 5 year strategic business plan to be formulated. ? Explore & grow businesses in the Engines, Attachments and other Agricultural Machinery, while remaining focused on core business ? Diversification in non-agri segment
Raw Material Risk a. Volatility in Raw material, commodity and fuel prices. b. Single source	a. Volatility in prices of raw materials and commodities may impact our profit. b. Single source purchasing increases the bargaining power of the supplier Specific risks are: — Business disruption — Continuous price escalation by the supplier	? Vendor rationalization & Commodity based approach in sourcing, leading to focused negotiation to manage prices of raw materials etc. ? Sourcing options to develop alternate sources for all critical single source purchases. 0 VA/VE efforts by Engineering resulting in material cost reduction through better designs
Quality & Integrity of the Product	Poor quality or integrity of our products may result in reputation and brand damage, resulting in lower volumes and financial claims Specific risks are: — Poor quality of the products — Increase in Cost of Quality leads to bottom-line erosion — Loss of customers & Lost opportunities in new programs	? Effective process control 0 Supplier cluster programs to improve quality of incoming parts 0 Warranty procedure & performance sign off with Suppliers.
Volatility in Currency Exchange Rate	Currency exchange gain or loss will impact the bottom line. Specific risks are: — Increase material cost in case of weakening rupee — Lower revenue realization in case of strengthening rupee against USD	[] PCFC to protect exports against currency fluctuation ? Restructuring of credit options for both imports & exports ? Hedging imports through forward contracts
Demand Risk	Inaccuracy in Sales forecasting leads to poor delivery performance thereby leading to loss of customers Specific Risks are — Excess Inventory — Lower vendor ratings (Mysore plant) — Premium freight — Customer Loss	? Implementation of IcSoft for big dealers. 0 Effective Implementation of demand management in by S&OP. ? Measurement of forecast accuracy to smoothen out demand variation D Enhance Vendor Managed Inventory
Information Security	Loss of business data, proprietary & confidential information and disruption of processes due to unavailability of robust IT systems, thereby causing financial damage. Specific risks are: — Failure of IT systems thereby business continuity — Susceptibility to Cyber crime	? Implementation of measures to secure confidentiality and integrity of data D Ensuring data redundancy by storage in data replication center 0 Far site data recovery center, (proposed) D Robust firewall mechanisms, thereby preventing cyber crimes
Technology Risk	Technological Obsolescence with the changes in technological trends in the Industry Specific risks are: — Loss of Business opportunity, and market share Risks arising through technology partnership — by disclosure of technology to competition & being a competitor themselves — Inability to provide effective technical solutions Specific risks are: — Threat of competition from technology partner & competitors — Ineffective utilization of Intellectual Infrastructure bandwidth	D Formulation of technology road map in line with the Industry trends aligning with the 5 year strategic plan. 0 Collaborate with leading technology partners to shorten the development cycle stay in sync with the market 0 Assessment of the capability of technical partner through a formal diligence process 0 Formal engagement model with exclusivity and no compete provisions in the agreement
People & Organization	Failure to attract with the right skills and talent to seize opportunities, achieve challenging returns and fulfil the strategy Specific Risks are: — Delay in Strategy & project execution & Growth plans	D Alignment of company performance and employee performance incentives through the effective compensation & benefit structure 0 Develop a talent pipeline through an annual talent review process and talent development 0 Values culture reinforced through induction, mandatory training, performance management, and employee interaction programs.
Product Liability	Specific risks are: Product Liability Product Guarantee Financial Loss Product recall	D Availing product liability with recall insurance policy .

Corporate Social Responsibility (CSR)

The Company has formed CSR policy and Committee details as required by the Act are available in Company website i.e. http://www.vsttillers.com/investors/policies. The Company has spent Rs.165 lakhs in CSR activities during the financial year 2017-18.

Evaluation of Board Performance.

The Board works with the nomination and remuneration committee to lay down the evaluation criteria for the performance of executive / non-executive / independent directors through a peer-evaluation excluding the director being evaluated. The evaluation of all the Directors and the Board as a whole was conducted based on the criteria and frame work adopted by the

Board. None of the Independent Directors are due for reappointment.

There is no change in nature of the business during the year.

Details of subsidiary, Associate or joint Venture Company.

During the year 2017-18 there is no change in Subsidiary Associate or Joint Venture Company.

Significant and material orders

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

The ratio of the remuneration of each Director and KMP to the median remuneration of the employees of the company for the financial year as follows:

Sl. No.	Name	Designation	Salary 2017-18 (in Rs)	Salary 2016-17 (in Rs)	Increase in salary	Ratio/Times per Median of employee remuneration
1	Mr.VP. Mahendra	Vice Chairman & Managing Director	77,10,739	77,49,081	-38,342 (-0.49%)	19.12
2	Mr. R. Thiyagarajan*	Chief Financial Officer	57,59,599	45,62,423	11,97,176 (26.24%)	14.28
3	Mr. P M Keshava**	Chief Financial Officer	35,38,136	26,33,631	9,04,505 (34.34%)	18.77
4	Mr. Chinmaya Khatua	Company Secretary	15,37,589	13,89,647	1,47,942 (10.64%)	3.81

* Mr.R.Thiyagarajan resigned from CFO w.e.f. 1st June 2017 and from Director w.e.f 31st March 2017.

** Mr.P.M.Keshava appointed as CFO w.e.f 1st June 2017.

There is a marginal increase in median remuneration of the employee during the year 2017-18.

The Company’s PAT has increased from Rs.8105 lakhs to Rs.11195 lakhs. The increase in KMP remuneration is line with the current market scenario and with Company policy. However, salary of Vice Chairman & Managing Director was approved by the shareholders.

The Company has given about 10.4% average increase in salaries to the employees keeping in view the overall industry standard and interest of the employees. The

unionized employees of the Company are getting salary increment as per the terms and conditions of their wage settlement. There is no exceptional circumstances of increase in the managerial remuneration.

The Company has 713 Nos permanent employees on roll as on 31st March 2018. The Company fixes salary of the employees on the basis of Remuneration Policy of the Company.

Payment of Commission to Managing Director.

The Managing Director is being paid commission on net profit of the Company as approved by the shareholders. The commission criteria is given below :

Name	Designation	Commission
VP. Mahendra	Vice Chairman & Managing Director	One percent on the net profit of the Company subject to a maximum of one and half times of annual basic salary drawn

Mr K.U.Subbaiah, CEO receives remuneration in excess of the highest paid director during the year the details are given in Page No.13

Date Paid up Capital Closing Market EPS PE Ratio Market (in Rs) Price per shares Capitalisation (Rs. in crore) 31.03.2017 86395280 1800 95.73 21.67 1555.12 31.03.2018 86395280 2511.75 129.61 19.38 2170 Increase/Decrease NIL % Increase/Decrease NIL No issue of shares during the year - - - - -

VARIATION IN MARKET CAPITALISATION :

Notes: Data based on share prices quoted on BSE.

Internal Complaint Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Company has formed Internal Complaint Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and no complaint was received during the year 2017-18.

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts / arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm’s length transactions under third proviso thereto:

1. Details of contracts or arrangements or transactions not at arm’s length basis: V.S.T. Tillers Tractors Ltd (the Company) has not entered into any contract/arrangement/transaction with its related parties which is not at arm’s length during FY 2017-18.

(a) Name(s) of the related party and nature of relationship: Not Applicable

(b) Nature of contracts/arrangements/transactions: Not Applicable

(c) Duration of the contracts / arrangements/ transactions: Not Applicable

(d) Salient terms of the contracts or arrangements or transactions including the value, if any: Not Applicable

(e) Justification for entering into such contracts or arrangements or transactions: Not Applicable

(f) Date(s) of approval by the Board: Not Applicable

(g) Amount paid as advances, if any: Not Applicable

(h) Date on which the special resolution was passed in general meeting as required under first proviso to section 188: Not Applicable

2. Details of material contracts or arrangement or transactions at arm’s length basis:

a. Name(s) of the related party and nature of relationship: Not Applicable

b. Nature of contracts / arrangements / transactions: Not Applicable

c. Duration of the contracts / arrangements / transactions: Not Applicable

d. Salient terms of the contracts or arrangements or transactions including the value, if any: Not Applicable

e. Date(s) of approval by the Board, if any: Not Applicable

f. Amount paid as advances, if any: None on behalf of Board of Directors

V. K. Surendra

Place: Bengaluru Chairman

Date: 11th May, 2018

Extract of Annual Return

Annual Return of the Company is available in Company website i.e. www.vsttillers.com, extract of Annual Return is annexed herewith as Annexure 5 to this report.

Secretarial Standards:

The Company Complies with all applicable secretarial standards.

Investor Education And Protection Fund

In accordance with the applicable provisions of the Companies Act, 2013 read with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (The Rules) any dividends unpaid or unclaimed for seven years from the date of transfer to Unpaid Dividend Account, shall be transferred to the Investor Education and Protection Fund established by the Central Government. Further according to that Rule the shares in respect of which dividend has remained unclaimed or unpaid for 7 (seven) consecutive years or more are required to be transferred to the Demat Account of the IEPF Authority. Accordingly the Company has transferred Rs.4,66,259/- unpaid and unclaimed dividend to Investor Education and Protection Fund and corresponding shares of 24,314 Nos to IEPF Authority as per IEPF Rules. The details of such Dividend and shares are available in Company website at www.vsttillers.com. Mr. Chinmaya Khatua has been appointed as nodal officer for IEPF Regulations.

ACKNOWLEDGEMENTS:

The Directors wish to convey their gratitude for the faith reposed in your Company by employees, dealers, vendors, Bankers and the customers at large.

for V.S.T. TILLERS TRACTORS LTD.

Place: Bengaluru V. K. Surendra

Date : May 11, 2018 Chairman

---

Mar 31, 2017

DIRECTORS’ REPORT

Dear Shareholder,

The Directors have pleasure in presenting the 49th Annual Report of the Company and the audited statement of accounts for the year ended March 31, 207

FINANCIAL PERFORMANCE (Rupees in lakhs)

Period	Year 2016-17	Year 2015-16
OPERATING INCOME	69512	64667
NON-OPERATING INCOME	1560	1227
TOTAL INCOME	71072	65894
PROFIT BEFORE DEPRECIATION, FINANCE COST & EXTRAORDINARY I TEM	11434	12513
FINANCE COST	298	256
DEPRECIATION	1181	1254
EXTRA ORDINARY ITEM	331	-
PROFIT BEFORE T AX	10285	BC3
INCOME TA X	3110	3590
PROFIT AFTER T AX	7175	7413
BALANCE B/ F	10823	5166
SURPLUS AVAILABLE FOR APPROPRIATION TO	17998	12579
FINAL / INTERIM DIVIDEND	-	1296
TAX ON DIVIDEN D	-	264
CSR EXPENDIT URE	222	196
BALANCE CARRIED FORWARD	17776	10823

Your company will be investing around Rs.80 crores ip new product development over next 4 years. The company will launch new Tiller variants and Tractor Variants. During the year 2016-17 your company synched the 27 HP Viraat Tractor model to the market Which made us represent in the 21-30 HP compact segment category which otherwise we were not present. We also launched the 7 HP single cylinder tractor VST SHAKTI SAMRAAT ’ and the upgraded version VS T SHAKTI VIRAAT PLUS ’ in April 207. Both these models are with 8 2 constant mesh gear box. The enhanced marketing campaign to reach out to end users and offering innovative & affordable farm mechanization solution enabled us to grow during the year.

COMPANY’S PERFORMANCE

The year under report was partially impacted wit¹! drought in States of Karnataka, Tamil Nadu and Ker In other parts of the country the monsoon was nor during the season. Structural changes in the subsidy schemes in few States, change over to DBT scheme! and price fixation delays impacted the sales of Power tillers during the year 2016-17

The number of Power Tillers sold in during the year was 25,55 units as against the previous year sale of 27,387; registering an adverse growth in sales of 6.8%, while the industry as a whole shrunk by 10.6%. However, your market share moved up to 59%.

Your company registered a recordable growth in Tractor numbers. We sold 9,635 tractors as against 7801 tractors in 2015-6 registering a growth of 23.5% in ^t the compact segment in comparison to 1% industry growth in the compact segment. Your company market share in the compact segment moved from B.2% in. 2015-15 to 6.5% in 2016-17. &

Your Company has been successfully running more than 75 Custom Hiring & Service Centers under the s cheme launched by the Government of Karnataka. Small farmers and marginal farmers are taking the farm equipment on lease through these Custom Hiring & Service Centers.

RISK & CONCERN

Your company has planned to invest around Rs.150 crores which includes new product development (Rs.80 crores), plant infrastructure and machinery over t next 4 years. 1

DIVIDEND:

The Board has recommended final dividend of Rs.15150%) per share for the financial year 2016- 17 and the same will be disbursed on or after 14th August 2017. The total outflow will be Rs.1560 lakhs , including the dividend distribution tax of Rs. 264 lakhs, if approved by the shareholder at the 49th AGM.

Transfer to reserves

There was no proposal for transfer to general reseal for the year 2016-17.

MANAGEMENT DISCUSSION AND ANALYSIS

Industry - Opportunities & Challenges

Need of mechanization in agriculture has become | necessity due to limited availability of labor and high cost of labour. The aging population in the agriculture sector needs machines to reduce the manual effort. Yo company is in the business of manufacturing and solid machines and attachments for various crop cultivation The company products target largely the small an( marginal farmers who account for more than 70% o the land holding. Also, there is necessity to increase] the productivity in agriculture through mechanization and shortage of rural labour force continues to b the key driver for business growth. Moreover, to income of our farmers need to increase with increase productivity in the land size that they own. There lot of opportunity to support the farmers for customize crop solutions. Your company is offering total crore solutions to the farmers at competitive pricing which will assist in growing the business. The company has developed packages for various crops like Paddy, Cotton, Sugarcane, Horticulture, Grapes etc. for Compact tractors and Power tillers.

Delays in subsidy schemes announcement by the State Government, bureaucracy associated with the administration of schemes, weak Monsoon etc continues to be the challenge for your company.

Entry of more and more competition tractors in t compact segment is demanding your company to

The Central as well as State Governments are encouraging more and more Custom Hiring Centre’s to support the marginal and small farmers. This movement can impact the sales of Tillers and Tractors to the farmers as they may use the machines available in the Custom Hiring Centre’s on hire. Major portion ^, of Power Tillers are sold under government subsidy schemes. In case the subsidy allocations are reduced it can adversely affect the demand for these products. ;Mist State Governments are switching over to DBT scheme for subsidy which would mean without good retail finance support available for the farmers they will not be able to buy the tillers.

Your company fully endorses the call to Make in ^India.

CURRENT YEAR OUTLOOK

With prediction of normal monsoon and continued focus on farm mechanization by the Government. We expect our revenue growth will be on par with the overall industry growth.

(DETAILS OF DIRECTORS APPOINTMENT/ reappointment AND RESIGNATION:

% accordance with the provisions of the Companies Act, 2013 Mr. V V Pravindra (00239888) Nonexecutive Director of the Company will retire at the in ensuing AGM and is eligible for reappointment. V.T.Ravindra (DIN: 00396156) has been appointed ops Non-Executive Director of the Company with effect chrome 27/05/2016 Ms.Siva Kameswari Vissa (DIN: 02336249) has been appointed as Independent Director of the Company the effect from 29/07/2016.

Ms. K P Anuradha (DIN : 07214890) has resigned from Independent Director of the Company with effect If rom 0/08/206.

“Mr. R.Thiyagarajan (DIN: 06906198) has been appointed as Whole-time Director of the company w.e.f the 9/ 10/2016 and has resigned from the directorship of the Company with act from 31st March 2017.

During the year, no non-executive director had

e) they, have laid down internal financial controls to not be followed by the company and that such internal s financial controls are adequate and were operating effectively. any pecuniary relationship or transactions with the Company other than the sitting fees and reimbursement of expenses incurred by them for attending meeting of the Company.

KEY MANAGERIAL PERSONNEL (KMP)

The following persons are Key Managerial Person (KMP) of the Company under section 2013 of the Companies Act, 2013. There is no change in KMP during the year 2016-17.

1 Mr V.P. Mahendra - Vice Chairman & Managing Director

2. Mr. R. Thiyagarajan - Chief Financial Officer

3. Mr Chinmaya Khatua - Company Secretary

CORPORATE GOVERNANCE:

The Company strives to ensure good in Corporate Governance and levels of transparency with all the provisions of SEBI (Listing Obligation and Disclosure Requirement) Regulation, 2015. A certificate from the Auditors to this effect forms part of Corporate; Governance Report.

DIRECTOR’S RESPONSIBILITY STATEMENT:

Pursuant to subsection 5 of Section 134 of the Companies Act 2013, the Directors confirm that:

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

(b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so to give a true and fair view of the state of affair of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Ac for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) they have prepared the annual accounts on a going concern basis;

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

Based on the internal financial controls and compliance System establish and maintained by the Company, he Board is of the opinion that the Company’s internal financial controls were adequate during financial year 2016-17.

AUDITORS:

M/s. K.S. Rao & Co, Chartered Accountants (Firm Regn No. 003109S) were appointed as Auditors of the Company for five financial years w.e.f FY 2016-17, St the 48thAnnual General Meeting of the Company.

CO ST AUDITORS:

Pursuant to Section 148 of the Companies Act, 203 eat with The Companies (Cost Records and Audit) Amendment Rules, 204, the cost audit records maintained by the Company is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed M/s. Rao, Murthy & Associates, Cost Accountants to audit the cost records )f the Company for the financial year 2017-18 on a remuneration of Rs.2 lakhs (Exclusive of applicable taxes) plus out of pocket expenses. As required under the Companies Act, 203, the remuneration payable o the cost auditor is required to be placed before if Members in a general meeting for their approval. Accordingly, a Resolution seeking Members approval ''or the remuneration payable to M/s. Rao, Murthy & Associates., Cost Auditors is included in the Notice fry the Annual General Meeting.

NTERNAL AUDITORS

M/s.Brahmayya & Co, Chartered Accountant were appointed as Internal Auditors under section 138 of the Companies Act, 2013 for the financial year 2016-17.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the

Your company has taken appropriate steps to build organizational capability which will enable the long term growth plans.

Forward-Looking Statements

Companies Act, 2013 and read with Rules made hereunder, the Company had appointed M/s. K Narayana Swamy & Co., Company Secretaries in Practice to undertake the Secretarial Audit of 1 Company for the financial year 2016-17. The Secretarial Audit Report is enclose herewith as Annexure-4. PARTICULARS OF EMPLOYEES:

As required by provisions of section 197 of the Companies Act, 203 read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 204, except Mr. V.P. Mahendra, Vice Chairman & Managing Director and Mr. K.U. Subbaiah, Chief Executive Officer, the details of which are given Annexure- there are no employees who draw remuneration as set out the aforesaid provision of the Companies Act, 203. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

Information under Section 134 Companies Act, 203 read with rule 8 (3) of the Companies (Accounts Rules, 204 is enclosed as Annexure-2.

DEPOSITS:

Your Company has not accepted any deposits within the meaning of Chapter- V of the Companies Ac 203 and rules made there under.

Internal Control System and their Adequacy The Company has put in place adequate internal financial controls over financial reporting Systems commensurate to the nature of its business and complexity of its operations. These are regularly tested for their effectiveness by Statutory as well Internal Auditors with focused attention on validation of I T. Security.

The Company periodically conducts physical verification of inventory, fixed assets and cash on hand and matches’ hem with the books of account. , Explanations are sought for any variance noticed from the respective functional heads.

The Significant observations made by the Auditors and follow up actions there on reported to Audit Committee. The Audit Committee reviews the adequacy and effectiveness of the Company’s Internal Contract Environment and monitors the implementation of the Audit recommendations.

Industrial Relation

Industrial relations have been cordial at the Bangalore Mysore and Hosur plants during the year. Statements in this release that are forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those either expressed or implied due to factors such as Raw material prices, Government policies, Competition, tax regime, market acceptance of new products and services, continued acceptance of existing products and services, changes in licensing programs, product job ice discounts, delays in product development and related product release schedules, sales and vendor channel disruption.

All information in this release is as of May 25, 207, The Company undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in the company’s expectations.

Board Meeting

Six meetings of the Board of Directors were held during the year. For further details, please refer repot on Corporate Governance of this Annual Report. Declaration of Independent directors.

The Company has received declarations from Independent directors as mentioned in sub-section (6) section 149 of the Companies Act, 2013.

Committees

The Company has constitute Audit Committee, CSR Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee and Risk Management Committee. The details of the Committees are mentioned in Corporate Governance Report. Vigil Mechanism

The purpose of this policy is to provide a framework to promote responsible and secure whistle blowing. yt is to protect employees wishing to raise a concern flout serious irregularities within the Company.

T^e he Company has vigil mechanism to deal with instance of fraud and mismanagement, if any. The details of the vigil mechanism are explained in the Corporate Governance Report and also posted on the website (www.vsttillers.com) of the Company.

Committee was obtained for the transactions which are of a foreseen and repetitive nature. The transactions tinkered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the A_ud_it Committee and the Board of Directors for their information and approval. The policy on dealing with Related Party Transactions as approved by the Board can be accessed at http://www.vsttillers.com/sites/ default/files/policies/policy_on_related_party_transc.pdf Material changes and commitments affecting the Financial Position

here are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report;

Auditors qualification, reservation or adverse remark or disclaimer.

The Statutory Auditors have given a clean report without any qualification, reservation or adverse remark or disclaimer except as mentioned in Clause 2 (g)(iv) of the Auditors Report. The Secretarial Auditors ] made the following observation.

“There was an imbalance regarding constitution of the Board which was duly communicated to the Stock Exchanges and the same was restored during the year under review ”

No fraud has been reported by the Auditors un section 143 (12) of the Companies Act, 203.

Loans, Guarantee & Investment

The Company has given loan and made investment during the year 206-7. However, the investments and Loan formed part of the notes to the financial statements provided in this Annual Report. The company has no given any Guarantee during the year 206-7.

Related Party Transactions

All related party transactions that are entered into du the financial year were on an arm’s length basis. There are no materially significant related party transactions made by the company with Promoters, Directors, Managerial Personnel or other designated person which may have a potential conflict with the interest of the Company at lager.

All Related Party Transactions are placed be the Audit Committee and also before the Boa for approval. Prior omnibus approval of the Audit

Risk Management Policy

The Company is having a risk management policy.

The risk pertaining to business of the Company is discussed at the Audit Committee and at the Board Meetings on regular basis.

are no risks which in the opinion of the Board threaten the existence of the Company. However, some ^of the risks which may pose challenges are set out in nosier Management Discussion and Analysis which forms a part of this report.

The Committee composition :

Mr. M.K. Bannered, Chairman, Mr. V K. Surendra, Member ’K.M. Pai, Member, Mr. VP. Mahendra, Member

The details of the policy are given below:

Risk Category	Risk Description	Mitigation
Industry Risk	Concentration on Agri Business Specific Risks are: - Industry Downturn in Agri Industry will adversely affect business - Strong competition and ability to market models faster. High focus on specific Segment Svecific Risks are: - Business will be adversely affected when Agri segment experiences sluggish growth - Highly dependent on subsidy and Govt, policy on Agriculture development.	? Tapping of wider segments in products and geographies including its aftermarket foot print in the core business ? Explore to releasing new models ahead of competition in the future. 5 year strategic business plan to be formulated. ? Explore & grow businesses in the Engines, Attachments and other Agricultural Machinery, while remaining focused on core business ? Diversification in non-agri segment
Raw Material Risk a. Volatility in Raw material, commodity and fuel prices. b. Single source	a. Volatility in prices of raw materials and commodities may impact our profit. b. Single source purchasing increases the bargaining power of the supplier Specific risks are: - Business disruption - Continuous price escalation by the supplier	? Vendor rationalization & Commodity based approach in sourcing, leading to focused negotiation to manage prices of raw materials etc. ? Sourcing options to develop alternate sources for all critical single source purchases. ? VA/VE efforts by Engineering resulting in material cost reduction through better designs
Quality & Integrity of the Product	Poor quality or integrity of our products may result in reputation and brand damage, resulting in lower volumes and financial claims Specific risks are: - Poor quality of the products - Increase in Cost of Quality leads to bottom-line erosion - Loss of customers & Lost opportunities in new programs	? Effective process control ? Supplier cluster programs to improve quality of incoming parts ? Warranty procedure & performance sign off with Suppliers.

Volatility in Currency Exchange Rate	Currency exchange gain or loss will impact the bottom line. Specific risks are: - Increase material cost in case of weakening rupee - Lower revenue realization in case of strengthening rupee against USD	? Hedging imports through forward contracts ? PCFC1 to protect exports against currency fluctuation ? Restructuring of credit options for both imports & exports
Demand Risk	Inaccuracy in Sales forecasting leads to poor delivery performance thereby leading to loss of customers Specific Risks are — Excess Inventory — Lower vendor ratings (Mysore plant) — Premium freight — Customer Loss	? Implementation of IcSoft for big dealers. D Effective Implementation of demand management in by S&OP. ? Measurement of forecast accuracy to smoothen out demand variation ? Enhance Vendor Managed Inventory
Information Security	Loss of business data, proprietary & confidential information and disruption of processes due to unavailability of robust IT systems, thereby causing financial damage. Specific risks are: - Failure of IT systems thereby business continuity - Susceptibility to Cyber crime	? Implementation of measures to secure confidentiality and integrity of data ? Ensuring data redundancy by storage in data replication center ? Far site data recovery center, (proposed) ? Robust firewall mechanisms, thereby preventing cyber crimes
Technology Risk	Technological Obsolescence with the changes in technological trends in the Industry Specific risks are: - Loss of Business opportunity, and market share Risks arising through technology partnership - by disclosure of technology to competition & being a competitor themselves - Inability to provide effective technical solutions Specific risks are: - Threat of competition from technology partner & competitors - Ineffective utilization of Intellectual Infrastructure bandwidth	? Formulation of technology road map in line with the Industry trends aligning with the 5 year strategic plan. ? Collaborate with leading technology partners to shorten the development cycle stay in sync with the market ? Assessment of the capability of technical partner through a formal diligence process ? Formal engagement model with exclusivity and no compete provisions in the agreement
People & Organization	Failure to attract with the right skills and talent to seize opportunities, achieve challenging returns and fulfill the strategy Specific Risks are: - Delay in Strategy & project execution & Growth plans	? Alignment of company performance and employee performance incentives through the effective compensation & benefit structure D Develop a talent pipeline through an annual talent review process and talent development D Values culture reinforced through induction, mandatory training, performance management, and employee interaction programs.
Product Liability	Specific risks are: Product Liability Product Guarantee Financial Loss Product recall	D Availing product liability with recall insurance policy.

Directors and the Board as a whole was conducted based on the criteria and frame work adopted by the Board.

None of the Independent Directors are due for re-appointment.

There is no change in nature of the business during the year.

Details of subsidiary, Associate or joint Venture ^co^mpany.

During the year 206 -17 there is no change in Subsidiary Associate or Joint Venture Company.

Significant and material orders

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

The ratio of the remuneration of each Director and KMP to the median remuneration of the employees _r of the company for the financial year as follows:

S l. No.	Name	Designation	Salary 2016-07	Salary 2015-2016 (in Rs)	Increase in salary	Ratio/Times per median of employee remuneration
1	Mr.V.P. Mahendra	Vice Chairman & Managing Director (KMP)	77,49,081	77,49,901	(820)	15.20
2	Mr. B.C.S Iyengar #	Whole-time Director	4,52,760	54,23,602	(49,70,842)	(0.89)
3	Mr. R. Thiyagarajan2	Chief Financial Officer (KMP)	45,62,423	38,92,170	6,70,253 17.22%	8.95
4	Mr. Chinmaya Khatua	Company Secretary (KMP )	13,89,647	11,28,215	2,61,432 23.7%	2.72

# Mr.B C S Iyengar resigned on 30th April 2016.

* Mr.R.Thiyagarajan salary details as Whole-time Director and CFO.

The Company’s PAT has marginally decreased from R 7413 lakhs to Rs. 7175 lakhs. The increase in KMP remuneration is line with the current market scene and with Company policy. However salary of Vice Chairman & Managing Director and other Whole-time Directors was approved by the shareholders.

The Company has given about 8.73% average increase in salaries to the employees keeping in view the overact industry standard and interest of the employees. Tunionized employees of the Company are getting salary increment as per the terms and conditions of their settlement. There is no exceptional circumstances of increase in the managerial remuneration.

The Company has 633 permanent employees on roll. The Company fixes salary of the employees on the basis of Remuneration*p olicy of the Company.

Payment of Commission to Managing Director & Whole-time Director.

The Managing Director and Whole-time Directors are being paid commission on net profit of the Company as approved by the shareholders. The commission criteria are given below :

N ame	Designation	Commission
VP. Mahendra	Vice Chairman & Managing Director	One percent on the net profit of the Company subject to a maximum of one and half times of annual basic salary drawn
*B C S Iyengar	Whole-time Director	One percent on the net profit of the Company subject to a maximum of annual basic salary drawn

VARIATION IN MARKET CAPITALISATION :

Date	Paid up Capital (in Rs)	Closing Market Price per shares	EPS	PE Ratio	M arket Capitalization (Rs. in crore)
31.03.2016	86395280	1484.50	85.81	17.30	1074.32
31.03.2017	86395280	1800.00	83.05	21.67	1555.12
Increase/Decrease	NIL
% Increase/Decrea s	e NIL
No issue of shar es during the year	-	-	-	-	-

Notes : Data based on share prices quoted on BSE.

(d) Salient terms of the contracts or arrangements or rejections including the value, if any: Not Applicable

Internal Complaint Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Company has formed Internal Complaint Committee under Sexual Harassment of Women a Workplace (Prevention, Prohibition and Redressal) Act, 203 and no complaint was received during the year 206-7.

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014) ₂

Form for disclosure of particulars of contracts arrangements entered into by the company with relate parties referred to in sub-section (!) of section 88 of the Companies Act, 203 including certain arms length transactions under third proviso thereto:

1 Details of contracts or arrangements or transactions not at arm’s length basis: V.S.T. Tillers Tractors Ltd (the Company) has not entered into any contract/arrangement/transaction with its related parties which is not at arms length during FY 20B-7.

(a) Name(s) of the related party and nature of relationship: Not Applicable

(b) Nature of contracts/arrangements/transaction Not Applicable

(c) Duration of the contracts / arrangement? transactions: Not Applicable

(e) Justification for entering into such contracts or _at arrangements) transactions: Not Applicable ) (f) Date(s) of approval by the Board: Not Applicable

(g) Amount paid as advances, if any: Not Applicable

(h) Date on which the special resolution was passed in general meeting as required under first proviso to section 188: Not Applicable

2. Details of material contracts or arrangement or / transactions at arm’s length basis: Name(s) of the relate party and nature of ^f relationship: Not Applicable

b. Nature of contracts / arrangements / transactions: Not Applicable

c. Duration of the contracts / arrangements / transactions Not Applicable

d. Salient terms of the contracts or arrangements ^on rogations including the value, if any: Not ^the Applicable

e. Date(s) of approval by the Board, if any: Not f Applicable

f. Amount paid as advances, if any: None

ACKNOWLEDGEMENTS:

The Directors wish to convey their gratitude for faith reposed in your Company by employees, dealers,

on behalf of Board of Directors

V. K. Surendra

Ps/lace: Bengaluru Chairman

Date: 25th May, 2017

---

Mar 31, 2016

Dear Shareholder,

The Directors have pleasure in presenting the 48th Annual Report of the Company and the audited statement of accounts for the year ended March 31, 2016.

FINANCIAL PERFORMANCE

(Rupees in lacs)

Period	Year 2015-16	Year 2014-15
OPERATING INCOME	64667	55160
NON-OPERATING INCOME	1227	1186
TOTAL INCOME	65894	56346
PROFIT BEFORE DEPRECIATION & FINANCE COST	12513	11208
FINANCE COST	256	212
DEPRECIATION	1254	941
PROFIT BEFORE TAX	11003	10055
INCOME TAX	3590	3104
PROFIT AFTER TAX	7413	6952
BALANCE B/F	5166	5023
SURPLUS AVAILABLE FOR APPROPRIATION TO :	12579	11974
INTERIM/FINAL DIVIDEND	1296	1296
PROPOSED TAX ON DIVIDEND	264	264
TRANSFER TO GENERAL RESERVE	-	5000
DEPRECIATION ADJUSTMENT	-	71
CSR EXPENDITURE	196	177
BALANCE CARRIED FORWARD	10823	5166

COMPANY’S PERFORMANCE

The year under report was riddled with adverse factors with second consecutive year of scanty rain fall in many parts of Western India and Central India affecting crops in many areas. In addition, the returns to the sugar cane and cotton growers were also severely affected, added to this was the non-availability of subsidy for power tiller in some of the key States in the Eastern Region. However Southern states and Gujarat had a healthy growth thereby nullifying the negative effect of the adverse factors. We could grow in power tiller volumes by over 19% while the overall industry grew by less than 3%.

The number of Power Tillers sold during the year was 27387 units as against the previous year sales of 23,103 units with the market share growth to over 55 % an increase of 5 % over the previous year In the Tractor segment it was consecutive second year failure of monsoon which resulted in 10% de-growth of Industry in domestic market. Your company however gained 3.1% market share (Sub 30 HP segment) & registered 17% growth in volume from 6694 nos. in 2014-15 to 7801 nos in 2015-16. Expansion of product variants, release of new Tractor model, strengthening the marketing strategy by expanding to new markets, improved marketing campaign to reach out to end user and offering innovative & affordable farm mechanization solution enabled us to grow during the year.

DIVIDEND:

Your Directors had declared interim dividend of Rs.15/-(150%) per share for the financial year 2015-16 and the same was paid on 28/03/2016. The total outflow was Rs.1560 lacs including the dividend distribution tax. 264 lacs. The directors do not recommend any final dividend.

Transfer to reserves

An amount of Rs. 108.23 crore is proposed to be retained in the surplus without transferring to general reserve for the year 2015-16.

MANAGEMENT DISCUSSION AND ANALYSIS

Industry - Opportunities & Challenges

Your company is fortunate to be in the business of priority sector and uniquely placed with a range of machineries required for mechanized paddy and other crop cultivation. The products target largely the small farmers who account for more than 70% of the land holding. The ever growing need to increase the production and productivity in agriculture vis-a-vis the shortage of rural labour force continues to be the key driver for business growth. The comparative statistics of China and other rice growing countries of Asia instantly point to the tremendous opportunities for power tillers and mechanized translators in India. At the same time the liberal imports from China, uncertainties in subsidy and the problems associated with the administration of schemes, pose a constant challenge to the industry for short term as well as long term planning. The mechanized transplantation of paddy is a difficult concept to market but is sure to grow steadily.

The general decline in tractor industry is a matter of concern, however there are signs that the demand for small tractors will keep growing. Lower investment, running and maintenance cost and the advantages of compact size tractors are becoming more important factors for buying decisions, especially for agricultural usage. As pioneers in this segment we foresee a paradigm shift in the mind set of farmers from big machines to appropriate needs.

RISKS AND CONCERNS

It is well known that in as much as subsidy has greatly helped the power tiller industry to grow, the absence or delay in the subsidy schemes adversely affects the demand. While farm mechanization continues to be in focus, the share of funds from the Centre to the States is getting reduced. Special schemes to give thrust for custom hiring of agricultural machinery to benefit small farmers is yet to gain large scale acceptance. Your company is constantly trying to work with the Government to address many of the impediments that are coming in the way of greater success in small farm mechanization.

We have always conceded that we are not insulated from competition both in power tillers and tractors. We believe that it is helping the concept to grow and we have to create a space for ourselves by honing our skills and competitive edge. Your company fully endorses the call to “Make in India” and fervently hopes that domestic manufacturers interest will be accorded preference.

CURRENT YEAR OUTLOOK

With prediction of normal monsoon and continued focus on farm mechanisation by the Government. We expect our revenue growth will be par with the overall industry growth.

DETAILS OF DIRECTORS APPOINTMENT/ REAPPOINTMENT AND RESIGNATION:

In accordance with the provisions of the Companies Act, 2013 Mr. V.P. Mahendra, Vice Chairman & Managing Director of the Company will retire at the ensuing AGM and he is eligible for reappointment.

Mr. VT. Ravindra (DIN- 00396156) has been appointed by the Board as an additional director of the Company. His appointment as director of the Company has been included in the notice of 48th Annual General Meeting.

Mr. K.M. Pai has been appointed as an Independent Director with effect from 5th August, 2015, to fill the casual vacancy caused due to resignation of Mr. V. Ramachandran.

Mr. B.C.S. Iyengar has resigned from the directorship of the Company with effect from 30th April, 2016.

Mr.K.K. Rai and Mr.VRamachandran had resigned on 20/06/2015 and 25/06/2015 respectively.

During the year, no non-executive director had any pecuniary relationship or transactions with the Company other than the sitting fees and reimbursement of expenses incurred by them for attending meetings of the Company.

KEY MANAGERIAL PERSONNEL (KMP)

The following persons are Key Managerial Personnel (KMP) of the Company under section 203 of the Companies Act, 2013. There are no change in KMP during the year 2015-16.

1. Mr. VP. Mahendra - Vice Chairman & Managing Director

2. Mr. R. Thiyagarajan - Chief Financial Officer

3. Mr. Chinmaya Khatua - Company Secretary CORPORATE GOVERNANCE:

The Company strives to ensure good in Corporate Governance and levels of transparency with all the provisions of SEBI (Listing Obligation and Disclosure Requirement) Regulation, 2015. A certificate from the Auditors to this effect forms part of Corporate Governance Report.

DIRECTOR’S RESPONSIBILITY STATEMENT:

Pursuant to subsection 5 of Section 134 of the Companies Act 2013, the Directors confirm that:

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

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

(c) they have 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;

(d) they have prepared the annual accounts on a going concern basis;

(e) they, have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

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

Based on the internal financial controls and compliance system established and maintained by the Company, the Board is of the opinion that the Company’s internal financial controls were adequate during financial year 2015-16.

AUDITORS:

M/s. Brahmayya & Co, Chartered Accountants who were appointed as Auditors of the Company for three financial years w.e.f FY 2014-15 at the 46th Annual General Meeting, have given their resignation to be effective from conclusion of the 48th Annual General Meeting, to accommodate the Auditors rotation as per Companies Act, 2013.

The Audit Committee and Board have recommended M/s. K.S. Rao & Co, Chartered Accountants as Auditors of the Company. The appointment of new Auditors is included in the notice of the 48th Annual General Meeting for shareholder approval.

COST AUDITORS:

Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed M/s. Rao, Murthy & Associates, Cost Accountants to audit the cost records of the Company for the financial year 2016-17 on a remuneration of Rs.2 lakhs (Exclusive of service tax) plus out of pocket expenses. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member’s ratification for the remuneration payable to M/s. Rao, Murthy & Associates., Cost Auditors is included in the Notice of the Annual General Meeting.

INTERNAL AUDITORS

M/s. K.P.Rao & Co, Chartered Accountant were appointed as Internal Auditors under section 138 of the Companies Act, 2013 for the financial year 2015-16.

SECRETARIAL AUDITORS

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 M/s. K Narayana Swamy & Co, Company Secretaries in Practice to undertake the Secretarial Audit of the Company for the financial year 2015-16. The Secretarial Audit Report is enclosed herewith as Annexure-4.

PARTICULARS OF EMPLOYEES:

As required by provisions of section 197 of the Companies Act, 2013 read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, except Mr. V.P. Mahendra, Vice Chairman & Managing Director and Mr. K.U. Subbaiah, Chief Executive Officer, the details of which are given in Annexure-1, there are no employees who draw remuneration as set out in the aforesaid provision of the Companies Act, 2013.

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

Information under Section 134 Companies Act, 2013 read with rule 8 (3) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure-2.

DEPOSITS:

Your Company has not accepted any deposits within the meaning of Chapter- V of the Companies Act, 2013 and rules made there under.

Internal Control System and their Adequacy

The Company maintains adequate Internal Control Systems commensurate to the nature of its business and complexity of its operations. These are regularly tested for their effectiveness by Statutory as well as Internal Auditors with focused attention on validation of I T. Security.

The Significant observations made by the Auditors and follow up actions there on reported to the Audit Committee. The Audit Committee reviews the adequacy and effectiveness of the Company’s Internal Control

Environment and monitors the implementation of the Audit recommendations.

Industrial Relation

Industrial relations have been cordial at the Bengaluru, Mysore and Hosur plants during the year. Wage settlements were cordially concluded in our Mysore and Bangalore plants during the year.

Your company has taken appropriate steps to build organizational capability which will enable the long term growth plans.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties.

Actual results could differ materially from those either expressed or implied due to factors such as Raw material prices, Government policies, Competition, tax regime, market acceptance of new products and services, continued acceptance of existing products and services, changes in licensing programs, product price discounts, delays in product development and related product release schedules, sales and vendor channel disruption.

All information in this release is as of May 27, 2016, The Company undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in the company’s expectations.

Board Meeting

Seven meetings of the Board of Directors were held during the year. For further details, please refer report on Corporate Governance of this Annual Report.

Declaration of Independent directors.

The Company has received declarations from Independent directors as mentioned in sub-section (6) of section 149 of the Companies Act, 2013.

Committees

The Company has constituted Audit Committee, CSR Committee, Nomination & Remuneration Committee,

Stakeholders Relationship Committee and Risk Management Committee. The details of the Committees are mentioned in Corporate Governance Report.

Vigil Mechanism

The purpose of this policy is to provide a framework to promote responsible and secure whistle blowing. It is to protect employees wishing to raise a concern about serious irregularities within the Company.

The Company has vigil mechanism to deal with instance of fraud and mismanagement, if any. The details of the vigil mechanism is explained in the Corporate Governance Report and also posted on the website (www.vsttillers.com) of the Company.

Auditors qualification, reservation or adverse remark or disclaimer.

The Statutory Auditors and Secretarial Auditors have given a “clean report” without any qualification, reservation or adverse remark or disclaimer. No fraud has been reported by the Auditors under section 143 (12) of the Companies Act, 2013.

Loans, Guarantee & Investment

The Company has not given any loan or guarantee under section 186 of the Companies Act, 2013 during the year 2015-16. However the investments formed part of the notes to the financial statements provided in this Annual Report.

Related Party Transactions

All related party transactions that are entered into during the financial year were on an arm’s length basis. There are no materially significant related party transactions made by the company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

Risk Category	Risk Description	Mitigation
Industry Risk	Concentration on Agri Business Specific Risks are: - Industry Downturn in Agri Industry will adversely affect business - Strong competition and ability to market models faster. High focus on specific Segment Specific Risks are: - Business will be adversely affected when Agri segment experiences sluggish growth - Highly dependent on subsidy and Govt, policy on Agriculture development.	? Tapping of wider segments in products and geographies including its aftermarket foot print in the core business D Explore to releasing new models ahead of competition in the future. 5 year strategic business plan to be formulated. D Explore & grow businesses in the Engines, Attachments and other Agricultural Machinery, while remaining focused on core business ? Diversification in non-agri segment

All Related Party Transactions are placed before the Audit Committee and also before the Board for approval. Prior omnibus approval of the Audit Committee was obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their information and approval. The policy on dealing with Related Party Transactions as approved by the Board can be accessed at http://www.vsttillers.com/sites/ default/files/policies/policy_on_related_party_transc.pdf

Material changes and commitments affecting the Financial Position

There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report;

Risk Management Policy

The Company is having a risk management policy. The risk pertaining to business of the Company is discussed at the Audit Committee and at the Board Meetings on regular basis. The details of the policy are given below :

Corporate Social Responsibility (CSR)

Raw Material Risk a. Volatility in Raw material, commodity and fuel prices. b. Single source	a. Volatility in prices of raw materials and commodities may impact our profit. b. Single source purchasing increases the bargaining power of the supplier Specific risks are: - Business disruption - Continuous price escalation by the supplier	? Vendor rationalization & Commodity based approach in sourcing, leading to focused negotiation to manage prices of raw materials etc. ? Sourcing options to develop alternate sources for all critical single source purchases. D VA/VE efforts by Engineering resulting in material cost reduction through better designs
Quality & Integrity of the Product	Poor quality or integrity of our products may result in reputation and brand damage, resulting in lower volumes and financial claims Specific risks are: - Poor quality of the products - Increase in Cost of Quality leads to bottom-line erosion - Loss of customers & Lost opportunities in new programs	? Effective process control ? Supplier cluster programs to improve quality of incoming parts ? Warranty procedure & performance sign off with Suppliers.
Volatility in Currency Exchange Rate	Currency exchange gain or loss will impact the bottom line. Specific risks are: - Increase material cost in case of weakening rupee - Lower revenue realization in case of strengthening rupee against USD	D Hedging imports through forward contracts ? PCFC1 to protect exports against currency fluctuation ? Restructuring of credit options for both imports & exports
Demand Risk	Inaccuracy in Sales forecasting leads to poor delivery performance thereby leading to loss of customers Specific Risks are - Excess Inventory - Lower vendor ratings (Mysore plant) - Premium freight - Customer Loss	D Implementation of IcSoft for big dealers. ? Effective Implementation of demand management in by S&OP. D Measurement of forecast accuracy to smoothen out demand variation D Enhance Vendor Managed Inventory
Information Security	Loss of business data, proprietary & confidential information and disruption of processes due to unavailability of robust IT systems, thereby causing financial damage. Specific risks are: — Failure of IT systems thereby business continuity - Susceptibility to Cyber crime	D Implementation of measures to secure confidentiality and integrity of data ? Ensuring data redundancy by storage in data replication center ? Far site data recovery center, (proposed) D Robust firewall mechanisms, thereby preventing cyber crimes
Technology Risk	Technological Obsolescence with the changes in technological trends in the Industry Specific risks are: - Loss of Business opportunity, and market share Risks arising through technology partnership - by disclosure of technology to competition & being a competitor themselves - Inability to provide effective technical solutions Specific risks are: - Threat of competition from technology partner & competitors - Ineffective utilization of Intellectual Infrastructure bandwidth	? Formulation of technology road map in line with the Industry trends aligning with the 5 year strategic plan. ? Collaborate with leading technology partners to shorten the development cycle stay in sync with the market D Assessment of the capability of technical partner through a formal diligence process ? Formal engagement model with exclusivity and noncompete provisions in the agreement
People & Organization	Failure to attract with the right skills and talent to seize opportunities, achieve challenging returns and fulfill the strategy Specific Risks are: - Delay in Strategy & project execution & Growth plans	? Alignment of company performance and employee performance incentives through the effective compensation & benefit structure ? Develop a talent pipeline through an annual talent review process and talent development ? Values culture reinforced through induction, mandatory training, performance management, and employee interaction programs.
Product Liability	Specific risks are: Product Liability Product Guarantee Financial Loss Product recall	? Availing product liability with recall insurance policy.

The Company has formed CSR policy and Committee during the year and details of CSR policy is available in Company website i.e. http://www.vsttillers.com/ policies. The Company has spent Rs.95 lakhs in CSR activities during the financial year 2015-16.

Evaluation of Board Performance.

The Board works with the nomination and remuneration committee to lay down the evaluation criteria for the performance of executive / non-executive / independent directors through a peer-evaluation excluding the director being evaluated. The evaluation of all the Directors and the Board as a whole was conducted based on the criteria and frame work adopted by the Board.

None of the Independent Directors are due for reappointment.

There is no change in nature of the business during the year.

Details of subsidiary, Associate or joint Venture Company.

During the year 2015-16 there is no change in Subsidiary Associate or Joint Venture Company.

Significant and material orders

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

The ratio of the remuneration of each Director and KMP to the median remuneration of the employees of the company for the financial year as follows:

Sl. No.	Name	Designation	Salary 2015-16 (in Rs)	Salary 2014-15 (in Rs)	Increase in salary	Ratio/Times per Median of employee remuneration
1	Mr.V.P. Mahendra	Vice Chairman & Managing Director (KMP)	77,49,901	76,26,104	1,23,797 (1.62%)	34.12
2	Mr. B C S Iyengar	Director Corporate Strategy	54,23,602	39,18,499	15,05,103 (38.41%)	23.88
4	Mr. R. Thiyagarajan	Chief Financial Officer (KMP)	38,92,170	31,22,978	7,69,192 (24.63%)	17.13
5	Mr. Chinmaya Khatua	Company Secretary (KMP)	11,28,215	9,00,570	2,27,648 (25.28%)	4.96

The Company’s PAT has increased from Rs. 6952 lakhs to Rs. 7413 lakhs, an increase of 6.63 % and this increase of KMP remuneration is line with the current market scenario and with Company policy. However salary of Vice Chairman & Managing Director and other whole time directors was approved by the shareholders.

The Company has given about 9% increase in salaries to the employees keeping in view the overall industry standard and interest of the employees. The unionized employees of the Company are getting salary increment as per the terms and conditions of their wage settlement. There is no exceptional circumstances of increase in the managerial remuneration.

The Company has 574 permanent employees on roll. The Company fixes salary of the employees on the basis of Remuneration Policy of the Company.

Payment of Commission to Managing Director & Whole time Director.

The Managing Director and Whole Time Directors are being paid commission on net profit of the Company as approved by the shareholders. The commission criteria is given below:

Internal Complaint Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Name	Designation	Commission
VP. Mahendra	Vice Chairman & Managing Director	One percent on the net profit of the Company subject to a maximum of one and half times of annual basic salary drawn
B C S Iyengar	Director Corporate strategy	One percent on the net profit of the Company subject to a maximum of the annual basic salary drawn

There are no employees who are not directors but receive remuneration in excess of the highest paid director during the year.

VARIATION IN MARKET CAPITALISATION :

Date	Paid up Capital (in Rs)	Closing Market Price per shares	EPS	PE Ratio	Market Capitalization (Rs. in crore)
31.03.2015	86395280	1243.50	80.46	15.45	1074.32
31.03.2016	86395280	1484.50	85.81	17.30	1282.54
Increase/Decrease	NIL	241.00	5.35	1.85	208.22
% Increase/Decrease	NIL	19.38	6.65	11.97	19.38
No issue of shares during the year	-	-	-	-	-

Notes : Data based on share prices quoted on BSE.

The Company has formed Internal Complaint Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and no complaint was received during the year 2015-16.

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts / arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm’s length transactions under third proviso thereto:

1. Details of contracts or arrangements or transactions not at arm’s length basis: V.S.T. Tillers Tractors Ltd (the Company) has not entered into any contract/arrangement/transaction with its related parties which is not at arm’s length during FY 2015-16.

(a) Name(s) of the related party and nature of relationship: Not Applicable

(b) Nature of contracts/arrangements/transactions: Not Applicable

(c) Duration of the contracts / arrangements/ transactions: Not Applicable

(d) Salient terms of the contracts or arrangements or transactions including the value, if any: Not Applicable

(e) Justification for entering into such contracts or arrangements or transactions: Not Applicable

(f) Date(s) of approval by the Board: Not Applicable

(g) Amount paid as advances, if any: Not Applicable

(h) Date on which the special resolution was passed in general meeting as required under first proviso to section 188: Not Applicable

2. Details of material contracts or arrangement or

transactions at arm’s length basis:

a. Name(s) of the related party and nature of relationship: Not Applicable

b. Nature of contracts / arrangements / transactions: Not Applicable

c. Duration of the contracts / arrangements / transactions: Not Applicable

d. Salient terms of the contracts or arrangements or transactions including the value, if any: Not Applicable

e. Date(s) of approval by the Board, if any: Not Applicable

f. Amount paid as advances, if any: None

on behalf of Board of Directors

V. K. Surendra

Place: Bengaluru Chairman

Date: 27th May, 2016

Extract of Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure-5 to this Report.

ACKNOWLEDGEMENTS:

The Directors wish to convey their gratitude for the faith reposed in your Company by Mitsubishi Heavy Industries Limited, employees, dealers, vendors, Bankers and the customers at large.

for V.S.T. TILLERS TRACTORS LTD.

Place: Bengaluru V. K. Surendra

Date : May 27, 2016 Chairman

---

Mar 31, 2015

Dear Shareholder,

The Directors have pleasure in presenting the 47th Annual Report of the Company and the audited statement of accounts for the year ended March 31, 2015.

FINANCIAL PERFORMANCE (Rupees in lacs) Period Year 2014-15 Year 2013-14

OPERATING INCOME 55160 62422

NON-OPERATING INCOME 1186 870

TOTAL INCOME 56346 63292

PROFIT BEFORE DEPRECIATION & FINANCE COST 11208 12764

FINANCE COST 212 177

DEPRECIATION 941 391

PROFIT BEFORE TAX 10055 12196

INCOME TAX 3104 3902

PROFIT AFTER TAX 6952 8294

BALANCE B/F 5023 5245

SURPLUS AVAILABLE FOR APPROPRIATION TO : 11974 13539

PROPOSED DIVIDEND 1296 1296

PROPOSED TAX ON DIVIDEND 264 220

TRANSFER TO GENERAL RESERVE 5000 7000

DEPRECIATION ADJUSTMENT 71 -

CSR EXPENDITURE 177 -

BALANCE CARRIED FORWARD 5166 5023

COMPANY'S PERFORMANCE

The year under report was riddled with adverse factors such as scanty rain fall in many parts of western India crop failure, plight of sugarcane and cotton growers, non-availability of subsidy for Power Tillers in key States, all of which have resulted in de-growth of tractor and power tiller volumes.

The number of Power Tillers sold during the year was 23103 units as against the previous year's 27252 while Tractor sales was down to 6694 units compared to 7452 during 2013-14.

However it is gratifying to note that while the Income from operation of the Company fell by 12%, better realisation on product price and stable raw material prices, control on overheads have enabled the company to minimize the dent on the bottom line.

DIVIDEND:

Your Directors have pleasure in recommending a dividend of Rs.15/- per equity share of Rs.10/- each for approval at the Annual General Meeting. The dividend if declared will result in an outflow of Rs.1560 lacs including the distribution tax.

Transfer to reserves

We propose to transfer Rs.50 crore to the general reserve. An amount of Rs.52 crore is proposed to be retained in the surplus.

MANAGEMENT DISCUSSION AND ANALYSIS

Industry - Opportunities & Challenges

Your company is fortunate to be in the business of priority sector and uniquely placed with a range of machineries required for mechanized paddy cultivation. The products target largely the small farmers who account for more than 70% of the land holding. The ever growing need to increase the production and productivity in agriculture vis-a-vis the shortage of rural labour force continues to be the key driver for business growth. The comparative statistics of China and other rice growing countries of Asia instantly point to the tremendous opportunities for power tillers and mechanized trans planters in India. At the same time the liberal imports from China , uncertainties in subsidy and the problems associated with the administration of schemes, pose a constant challenge to the industry for short term as well as long term planning. The mechanized transplantation of paddy is a difficult concept to market but is sure to grow steadily.

The general decline in tractor industry is a matter of concern, however there are signs that the demand for small tractors will keep growing. Lower investment, running and maintenance cost and advantages of compact size tractors are becoming more important factors for buying decisions, especially for agricultural usage. As pioneers in this segment we foresee a paradigm shift in the mind set of farmers from big machines to appropriate needs.

RISKS AND CONCERNS

It is well known that in as much as subsidy has greatly helped the power tiller industry to grow, the absence or delay in the subsidy schemes adversely affects the demand. While farm mechanization continues to be in focus, the share of funds from the Centre to the States is getting reduced. Special schemes to give thrust for custom hiring of agricultural machinery to benefit small farmers is yet to gain large scale acceptance. Your company is constantly trying to work with the Government to address many of the impediments that are coming in the way of greater success in small farm mechanization.

We have always conceded that we are not insulated from competition both in power tillers and tractors . We believe that it is helping the concept to grow and we have to create a space for ourselves by honing our skills and competitive edge. Your company fully endorses the call to "Make in India" and fervently hopes that domestic manufacturers interest will be accorded preference.

CURRENT YEAR OUTLOOK

Your Directors sincerely believe that the year 2014-15 was an aberration and the company should plan for returning to healthy growth for the current financial year. The products that your company manufac -tures requires a long lead time for production to match the seasonal fluctuation in demand and intimation to hundreds of vendors from whom the components are sourced. The opportunity loss during peak season is far greater than the carrying cost of inventory. This will be addressed with the new plant for Tractors in Hosur gearing up to increase the capacity utilization through the new variants that are added to the existing tractor model. The Bengaluru plant is also geared up to meet the anticipated increase in demand for power tillers.

DIRECTORS REAPPOINTMENT:

In accordance with the provisions of the Companies Act, 2013 Mr. V.V Pravindra, Director of the Company will retire at the ensuing AGM and he is eligible for reappointment.

APPOINTMENT OF KEY MANAGERIAL PERSONNEL (KMP)

During the year following persons were appointed as Key Managerial Personnel (KMP) of the Company under section 203 of the Companies Act, 2013.

1. Mr. V.P. Mahendra - Vice Chairman, Managing Director & CEO

2. Mr. R. Thiyagarajan - Executive Vice President & CFO

3. Mr. Chinmaya Khatua - Company Secretary

CORPORATE GOVERNANCE:

The Company strives to ensure good in Corporate Governance and levels of transparency with all the provisions of Clause-49 of the Listing Agreement. A certificate from the Auditors to this effect forms part of Corporate Governance Report.

DIRECTOR'S RESPONSIBILITY STATEMENT:

Pursuant to subsection 5 of Section 134 of the Companies Act 2013, the Directors confirm that:

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

(b) they had selected such accounting policies and applied them consistently and made judgements 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 and loss of the company for that period;

(c) they 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;

(d) they had prepared the annual accounts on a going concern basis; and

(e) they, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

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

AUDITORS:

M/s. Brahmayya & Co, Chartered Accountants were appointed as Auditors of the Company for three financial year w.e.f 2014-15 at the 46th Annual General Meeting. Their appointment will be ratified at the forth coming Annual General Meeting.

COST AUDITORS:

Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed M/s. Rao, Murthy & Associates, Cost Accountants to audit the cost records of the Company for the financial year 2015-16 on a remuneration of Rs.2 lakh (Exclusive of service tax) plus out of pocket expenses. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members

in a general meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to M/s. Rao, Murthy & Associates., Cost Auditors is included at Item No.6 of the Notice convening the Annual General Meeting.

INTERNAL AUDITORS

M/s. K.P.Rao & Co, Chartered Accountant were appointed as Internal Auditors under section 138 of the Companies Act, 2013 for the financial year 2014-15.

SECRETARIAL AUDITORS

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 had appointed M/s. K Narayana Swamy & Co, Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is enclosed herewith as Annexure-4.

PARTICULARS OF EMPLOYEES:

As required by provisions of section 197 of the Companies Act, 2013 read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, except Vice Chairman & Managing Director, the details of which are given in Annexure-1, there are no employees who draw remuneration as set out in the aforesaid provision of the Companies Act, 2013.

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

Information under Section 134 Companies Act, 2013 read with rule 8 (3) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure-2.

DEPOSITS:

Your Company has not accepted any deposits within the meaning of Chapter- V of the Companies Act, 2013 and rules made there under.

Internal Control System and their Adequacy

The Company maintains adequate Internal Control Systems commensurate to the nature of its business and complexity of its operations. These are regularly tested for their effectiveness by Statutory as well as Internal Auditors with focused attention on validation of I T.Security.

The Significant observations made by the Auditors and follow up actions there on reported to the Audit Committee. The Audit Committee reviews the adequacy and effectiveness of the Company's Internal Control Environment and monitors the implementation of the Audit recommendations.

Industrial Relation

Industrial relations have been cordial at the Bengaluru and Hosur plants during the year. At the Mysore plant the previous memorandum of settlement has expired and negotiations are under progress for an amicable settlement.

Your company has initiated steps to building organizational capabilities and strengthen human resources at all levels in line with the corporate growth plans.

Forward-Looking Statements

Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those either expressed or implied due to factors such as Raw material prices, Government policies, Competition, tax regime, market acceptance of new products and services, continued acceptance of existing products and services, changes in licensing programs, product price discounts, delays in product development and related product release schedules, sales and vendor channel disruption.

All information in this release is as of May 29, 2015, The Company undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in the company's expectations.

Board Meeting

Four meetings of the Board of Directors were held during the year. For further details, please refer report on Corporate Governance of this Annual Report.

Declaration of Independent directors.

The Company has received declarations from Independent directors as mentioned in sub-section (6) of section 149 of the Companies Act, 2013.

Committees

The Company has constituted Audit Committee, CSR Committee, Nomination & Remuneration Committee and Stakeholders Relationship Committee. The details of the Committees are mentioned in Corporate Governance Report.

Vigil Mechanism

The purpose of this policy is to provide a framework to promote responsible and secure whistle blowing. It is to protect employees wishing to raise a concern about serious irregularities within the Company.

The Company has vigil mechanism to deal with instance of fraud and mismanagement, if any. The details of the vigil mechanism is explained in the Corporate Governance Report and also posted on the website of the Company.

Auditors qualification, reservation or adverse remark or disclaimer.

The Auditors have given a "clean report" without any qualification, reservation or adverse remark or disclaime r. Except slight delay in payment of TDS. Management explained, the same has been addressed. The Secretarial Auditors have made the following observation.

"The Company is yet to appoint Woman Director on the Board of the Company in compliance with Clause 49 (H)(A)(1) of the Listing Agreement read with Section 149 of the Companies Act, 2013."

Explanation

We wish to inform that the Company has been making best efforts to find a suitable person for appointment as a woman director on the Board. We hasten to add that we are confident of complying with requirement at the earliest.

Loans, Guarantee & Investment

The Company has not given any loan or guarantee under section 186 of the Companies Act, 2013 during the year 2014-15. However the investments formed part of the notes to the financial statements provided in this Annual Report.

Related Party Transactions

All related party transactions that are entered into during the financial year were on an arm's length basis . There are no materially significant related party transactions made by the company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee and also before the Board for approval. Prior omnibus approval of the Audit Committee was obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their information and approval. The policy on dealing with Related Party Transactions as approved by the Board can be accessed at http://www.vsttillers.com/sites/ default/files/policies/policy_on_related_party_transc.pdf

Material changes and commitments affecting the Financial Position

There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report;

Risk Management Policy

With regard to risk management policy, the Company is in process of finalization of the risk management policy however risk pertaining to business of the Company is discussed at the Audit Committee and at the Board Meetings on regular basis.

Corporate Social Responsibility (CSR)

The Company has formed CSR policy and Committee during the year and details of CSR policy is available in Company website i.e. http://www.vsttillers.com/ policies. The Company has not spent any amount in CSR activities during the financial year 2014-15. However, as a matter of principle your Company has been supporting approved Trusts/NGOs in social, economic & educational fields.

Evaluation of Board Performance.

The Board works with the nomination and remuneration committee to lay down the evaluation criteria for the performance of executive / non-executive / independent directors through a peer-evaluation excluding the director being evaluated. The evaluation of all the Directors and the Board as a whole was conducted based on the criteria and frame work adopted by the Board.

None of the Independent Directors are due for re-appointment.

There is no change in nature of the business during the year. Details of subsidiary, Associate or joint Venture Company.

Under Companies Act, 2013, M/s. Mitsubishi Heavy Industries-VST Diesel Engines Pvt Ltd (CIN- U34107KA2007PTC043432) will be treated as Joint Venture Company.

Significant and material orders

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

The ratio of the remuneration of each Director and KMP to the median remuneration of the employees of the company for the financial year as follows:

Name Designation Salary Salary 2014-15 2013-14 (in Rs) (in Rs)

Mr.VP. Mahendra Vice Chairman & 76,26,104 46,15,503 Managing Director (KMP)

Mr. B C S Iyengar Director 39,18,499 39,32,338 Corporate Strategy

Mr. V.V. Pravindra Director 32,55,690 35,21,414

Mr. R. Thiyagarajan Executive Vice 31,22,978 27,90,878 President & CFO (KMP)

Mr. Chinmaya Khatua Company Secretary 9,00,570 7,13,383 (KMP)

Name Increase Ratio/Times in salary per Median of employee remuneration

Mr.VP. Mahendra 30,10,601 17.52 (65%)

Mr. B C S Iyengar (13,839) 9.00 (-.35%)

Mr. V.V. Pravindra (2,65,724) 7.48 (-7.5%)

Mr. R. Thiyagarajan 3,32,100 7.18 (11.90%)

Mr. Chinmaya Khatua 1,87,187 2.07 (26.24%)

The Company's PAT has decreased from Rs. 8294 lakhs to Rs. 6952 lakhs, a decrease of 16 % and this increase of KMP remuneration is line with the current market scenario and with Company policy. However salary of Vice Chairman & Managing Director and other whole time directors was approved by the shareholders.

In spite of reduction in profit, the Company has given marginal normal increase in salaries to the employees keeping in view the overall industry standard and interest of the employees. The unionized employees of the Company are getting salary increment as per the terms and conditions of their wage settlement. There is no exceptional circumstances of increase in the managerial remuneration. The salary of the Vice Chairman & Managing Director was increased due to terms and conditions of his re-appointment as approved by the members at the last AGM.

The Company has 536 permanent employees on roll. The Company fixes salary of the employees on the basis of Remuneration Policy of the Company. Payment of Commission to Managing Director & Whole time Director.

The Managing Director and Whole Time Directors are being paid commission on net profit of the Company as approved by the shareholders. The commission criteria is given below:

Name Designation Commission V.P. Mahendra Vice Chairman, One percent on the net profit of Managing Director the Company subject to a maximum & CEO of one and half times of annual basic salary drawn

B C S Iyengar Director Corporate One percent on the net profit of strategy the Company subject to a maximum of the annual basic salary drawn

V.V. Pravindra Director One percent on the net profit of the Company subject to a maximum of the annual basic salary drawn There are no employees who are not directors but receive remuneration in excess of the highest paid director during the year.

VARIATION IN MARKET CAPITALISATION :

Date Paid up Capital Closing Market (in Rs) Price per shares

31.03.2014 86395280 937.70

31.03.2015 86395280 1243.50

Increase/Decrease NIL 305.80

% Increase/Decrease NIL 32.60

No issue of shares during the year - -

Date EPS PE Ratio Market Capitalisation (Rs. in crore)

31.03.2014 96.00 9.77 810.12

31.03.2015 80.46 15.45 1074.32

Increase/Decrease -15.54 5.68 264.2

% Increase/Decrease -16.18 58.14 32.60

No issue of shares - - - during the year

Internal Complaint Committee under Sexual Harassment of Women at Workplace ( Prevention, Prohibition and Redressal ) Act, 2013.

The Company has formed Internal Complaint Committee under Sexual Harassment of Women at Workplace ( Prevention, Prohibition and Redressal ) Act, 2013 and no complaint was received during the year 2014-15.

Extract of Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure-5 to this Report.

ACKNOWLEDGEMENTS:

The Directors wish to convey their gratitude for the faith reposed in your Company by Mitsubishi Heavy Industries Limited, employees, dealers, vendors, Bankers and the customers at large.

For V.S.T. TILLERS TRACTORS LTD.

Place: Bengaluru V. K. Surendra Date : May 29, 2015 Chairman

---

Mar 31, 2013

Dear Shareholder,

The Directors have pleasure in presenting the 45th Annual Report of the Company and the audited statement of accounts for the year ended March 31, 2013.

FINANCIAL PERFORMANCE

(Rupees in lacs)

Period Year 2012-13 Year 2011-12

URNOVER 48166 53064

OtHER INCOME 210 463

tOtAL INCOME 48376 53527

PROFIt BEFORE DEPRECIAtION & FINANCE COSt 7425 7743

FINANCE COSt 128 86

DEPRECIAtION 335 321

PROFIt BEFORE tAX 6962 7336

INCOME tAX 2105 2343

PROFIt AFtER tAX 4857 4993

BALANCE B/F 4297 3008

SURPLUS AVAILABLE FOR APPROPRIAtION tO: 9155 8001

PROPOSED DIVIDEND 778 778

PROPOSED tAX ON DIVIDEND 132 126

tRANSFER tO GENERAL RESERVE 3000 2800

BALANCE CARRIED FORWARD 5245 4297

COMPANY''S PERFORMANCE

the year under report was challenging for your Company with growth slowing down in the agriculture sector impacting sales. the turnover for the year stood at, Rs.482 crores which is 10% lower than previous year fgure of Rs. 530 crores. However the operating proft at Rs. 69 crs. was almost on par with the previous year due to higher realisation. EBIDtA margin was constant at 14% and the proft after tax is Rs. 48 crs as against Rs.50 crs. Power tillers sold during the year was 21231 units as against the previous year''s 26154 units while tractor sales were lower at 6233 units compared to 7038 units during 2011-12. Your Company has also marketed 404 nos Rice transplanters in the rice growing regions in India which is slowly shifting in favour of these machines due to shortage of labour.

On the fnancial front, your Company continues to remain debt free with cash fows adequately covering working capital requirements. However, on account of unprecedented fall in the demand during the year the Company was constrained to carry higher inventory.the performance of the Precision Components Division continues to depend largely on captive consumption and consequently reported a subdued performance.

DIVIDEND:

Your Directors have pleasure in recommending a dividend of Re.9/- per equity share of Rs.10/- each for approval at the Annual General Meeting. the dividend if declared will result in an outfow of Re.909.70 lacs including the distribution tax.

NSE LISTING:

the shares of the Company were listed and admitted to dealings on the National Stock Exchange of India Limited w.e.f. June 20, 2011.

DIRECTORS:

In accordance with the provisions of the Companies Act, 1956 and Articles of Association, Mr. V.K Surendra and Mr.M.K Bannerjee Directors of the Company retire by rotation and are eligible for re-appointment.

CORPORATE GOVERNANCE:

the Company strives to ensure good in Corporate Governance and levels of transparency with all the provisions of Clause-49 of the Listing Agreement. A certifcate from the Auditors to this effect forms part of Corporate Governance Report.

DIRECTOR''S RESPONSIBILITY STATEMENT:

Pursuant to sec 217(2AA) of the Companies Act 1956, amended as per Companies (Amendment) Act 2000, the Directors confrm that:

In preparation of the Annual Accounts of your Company the Accounting Standards laid down by the Institute of Chartered accountants of India from time to time have been followed.

Appropriate Accounting policies have been selected and applied consistently, reasonable and prudent judgment and estimates have been made so as to ensure that the accounts give a true and fair view of affairs of your company as at March 31, 2013 and the profts of your company for the year ended March 31, 2013.

Proper and suffcient care has been taken for the maintenance of appropriate accounting records in accordance with the provisions of the act for safeguarding the assets of your company and for preventing and detecting frauds and other irregularities. the annual accounts have been prepared on a going concern basis.

the observations of Auditors in their report to Members have been adequately dealt with in the relevant notes to accounts. Hence no additional explanation is considered necessary.

AUDITORS:

M/s. Brahmayya & Company, Chartered Accountants, retire as Auditors of the Company at the conclusion of 45th Annual General Meeting and are eligible for re-appointment.

COST AUDITORS:

M/s. Rao, Murthy & Associates, Cost Accountants were re-appointed by the Board of Directors in its meeting held on May 30, 2013. the Cost Audit Report for the fnancial year 2011-12 was fled on January 15, 2013 and the due date for fling the report was February 28, 2013.

PARTICULARS OF EMPLOYEES:

As required by provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (particular of employees) Rules 1975, as amended, there are no employees who draw remuneration as set out in the aforesaid provision of the Companies Act.

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

Information under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors'' Report for the year ended 31st March 2013 is enclosed as Annexure.

FIXED DEPOSITS:

Your Company has not accepted any fxed deposits within the meaning of Section 58A of the Companies Act, 1956 and rules made there under.

Internal Control Systems

Your Company maintains adequate internal control system, which provides reasonable assurance that transactions in signifcant areas are monitored to prevent any misuse. to strengthen this area your Company is looking at improved responsiveness from a fully integrated ERP. this will enable vendors to get information on material requirement and ensure streamlined supply of materials. the new system will improve its capability and speed of information to add more value. the Internal auditors carry out audits on a regular basis and submit their report once in a quarter to the Audit Committee. the Audit Committee reviews the report and recommendations of the Internal Auditors and advises the Management to strengthen and streamline the system wherever required.

Industrial Relation

Industrial relations have been cordial across all the plants during the year. the tri-annual agreement for wage settlement has recently been concluded with mutual satisfaction. Your Company is continuously taking initiatives for building organizational capabilities and enhancing people productivity. Various training and development programs were offered to the managerial cadre to upgrade their skills and develop the human resource base. Steps are also being implemented to strengthen specifc areas that are considered key to the Company in achieving its business goals.

Forward-Looking Statements

Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those either expressed or implied due to factors such as Raw material prices, Government policies, Competition, tax regime, market acceptance of new products and services, continued acceptance of existing products and services, changes in licensing programs, product price discounts, delays in product development and related product release schedules, sales and vendor channel disruption.

All information in this release is as of May 30, 2013, the Company undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in the company''s expectations.

ACKNOWLEDGEMENTS:

the Directors wish to convey their gratitude for the faith reposed in your Company by Mitsubishi Heavy Industries Limited, the fnancial institutions, employees, dealers, vendors and the customers at large.

for VSt tILLERS tRACtORS LtD.

Place: Bangalore V. K. Surendra

Date : May 30, 2013 Chairman

---

Mar 31, 2012

The Directors have pleasure in presenting the 44th Annual Report of the Company and the audited statement of accounts for the year ended March 31, 2012.

FINANCIAL PERFORMANCE (Rupees in lacs)

Period Year 2011-12 Year 2010-11

TURNOVER 53064 42531

OTHER INCOME 463 597

TOTAL INCOME 53527 43128

PROFIT BEFORE DEPRECIATION & INTEREST 7739 7403

INTEREST 82 72

DEPRECIATION 321 227

PROFIT BEFORE TAX 7336 7104

INCOME TAX 2343 2485

PROFIT AFTER TAX 4993 4619

BALANCE B/F 3008 2493

SURPLUS AVAILABLE FOR APPROPRIATION TO: 8001 7112

PROPOSED DIVIDEND 778 778

PROPOSED TAX ON DIVIDEND 126 126

TRANSFER TO GENERAL RESERVE 2800 3200

BALANCE CARRIED FORWARD 4297 3008

COMPANY'S PERFORMANCE

The financial year 2011-12 is of great significance to the Company as it records surpassing a turnover of Rs. 500 crores. During the year under review your Company has been on a consistent upward path with the turnover increasing by 24% from Rs. 425 crores in 2010-2011 to Rs. 530 crores. Your Company has clocked a modest growth by selling over 26000 Tillers and maintained its leadership position in the power tiller industry while significantly improving tractor sales which crossed 7000 units.

Though the farm sector was well placed to attain a moderate growth, challenges remained high for the Company during the year. The operating profit increased marginally by 3% to Rs. 68 crores. This marginal increase on a 24% higher turnover is due to steep escalation in cost of raw materials and margins continued to be under pressure. The profit after tax amounted to Rs. 50 crores, an increase of 9% over the previous year and earnings per share during the year increased from Rs. 53.46 to Rs. 57.79 On the financial front, your Company has adopted a disciplined approach towards managing liquidity though delays in realization of government subsidies have significantly pushed up the receivables and working capital.

The sale of power tillers during the year increased by 12% and Chinese made "Dragon" tiller sale improved significantly over the previous year though on a lower base. The Tractor sales have grown by a robust 50% in line with the growing demand. Your Company's plan to market Rice Transplanters has been encouraging primarily driven by non availability of farm labour during transplanting season. During the year, 370 units were sold in the rice growing belts in India.

The Precision Components Division's performance has been steady despite the continuous increase in cost of inputs and overheads. Export margins have contracted due to spiralling raw material costs with very little scope for passing on the higher cost. Several cost cutting measures and low cost automation was introduced. Due to the volatility of overseas orders, export revenue slowed down resulting in lower capacity utilization in some areas. This division is primarily contributing to the overall performance of your Company on a lower cost base and is now focusing on producing components for captive use.

DIVIDEND:

Your Directors have pleasure in recommending a dividend of Rs.9/- per equity share of Rs.10/- each for approval at the Annual General Meeting. The dividend if declared will result in an outflow of Rs. 904 lacs including the distribution tax.

NSE LISTING:

The shares of the Company were listed and admitted to dealings on the National Stock Exchange of India Limited w.e.f. June 20, 2011.

DIRECTORS:

In accordance with the provisions of the Companies Act, 1956 and Articles of Association, Mr. R Subramanian and Mr. V. Ramachandran Directors of the Company retire by rotation and are eligible for re-appointment.

CORPORATE GOVERNANCE:

The Company strives to ensure highest standards in Corporate Governance and levels of transparency with all the provisions of Clause-49 of the Listing Agreement. A certificate from the Auditors to this effect forms part of Corporate Governance Report.

DIRECTOR'S RESPONSIBILITY STATEMENT:

Pursuant to sec 217(2AA) of the Companies Act 1956, amended as per Companies (Amendment) Act 2000, the Directors confirm that:

In preparation of the Annual Accounts of your Company the Accounting Standards laid down by the Institute of Chartered accountants of India from time to time have been followed.

Appropriate Accounting policies have been selected and applied consistently, reasonable and prudent judgment and estimates have been made so as to ensure that the accounts give a true and fair view of affairs of your company as at March 31, 2012 and the profits of your company for the year ended March 31, 2012.

Proper and sufficient care has been taken for the maintenance of appropriate accounting records in accordance with the provisions of the act for safeguarding the assets of your company and for preventing and detecting frauds and other irregularities.

The annual accounts have been prepared on a going concern basis. The observations of Auditors in their report to Members have been adequately dealt with in the relevant notes to accounts. Hence no additional explanation is considered necessary.

AUDITORS:

M/s. Brahmayya & Company, Chartered Accountants, retires as Auditors of the Company at the conclusion of 44th Annual General Meeting and are eligible for re-appointment.

COST AUDITORS:

M/s. Rao, Murthy & Associates, Cost Accountants were re-appointed by the Board of Directors in its meeting held on May 29, 2012. The Cost Audit Report for the financial year 2010-11 was filed on August 19, 2011 and the due date for filing the report was September 30, 2011.

PARTICULARS OF EMPLOYEES:

As required by provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules 1975, as amended, there are no employees who draw remuneration as set out in the aforesaid provision of the Companies Act.

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

Information under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended 31st March 2012 is enclosed as Annexure.

FIXED DEPOSITS:

Your Company has not accepted any fixed deposits within the meaning of Section 58A of the Companies Act, 1956 and rules made there under.

MANAGEMENT's DISCUSSION AND ANALYSIS

Industry structure and developments:

The GDP growth of the Indian economy declined to 6.5% during 2011-12 against 8.4% recorded in 2010- 11 due to high inflation and lower rate of growth in manufacturing. With the various measures adopted by the government and a normal monsoon the agriculture sector is expected to grow by 3% compared to 5% growth during 2010-2011. The relatively weak responses to price hikes in agricultural commodities brings back into focus on the need for sustained levels of growth in agriculture and allied sectors.

The Power Tiller industry which is growing at around 20% per annum largely relies on Government subsidies and agricultural lending by banks. On the demand side, Power Tillers being imported from China by various players has seen robust growth during the year and is posing a challenge to your company in its endeavor to increase its market share. It is encouraging for the industry that due to shortage of labor, potential for power tillers, rice transplanters and other farm equipment is well positioned to attain a high growth trajectory.

The Indian tractor market which is the largest in the world is expected to increase at a CAGR of 6-7% by 2014-15. The biggest markets for the tractor industry include States like Uttar Pradesh (UP), Andhra Pradesh (AP), Madhya Pradesh (MP), Rajasthan, and Maharashtra, which together accounted for around 50% of the total tractor sales in India during 2011-12. In the domestic tractor market, the industry as a whole grew to 607658 units during 2011-12 from 545109 units in the previous year. Your company commands a significant market share in Maharashtra and Gujarat in the smaller HP tractors and sales in this segment are expected to grow in the coming year. New players are entering the below 20-25hp segment to tap the potential in these markets. To cater to market demand, the manufacturing capacities will be established by the year end. A new model with better aesthetics are being planned that will lead to higher revenue streams during the year.

OPPORTUNITIES

The growth of the Power tiller and Tractor industry could be directly linked to the GDP growth of the Indian economy. Agriculture which is slated to register a positive growth of 3% which will benefit farm mechanization and provide opportunities for higher sales and optimum utilization of capacities. Government schemes such as Rashtriya Krishi Vikas Yojana (RKVY), Macro Management Scheme and National Food Security Mission will also support a strong demand and help the Company to increase volumes in absolute terms. With infrastructure projects and rural employment schemes increasing employment opportunities, availability of labour for agricultural activities continued to decline, compelling farmers with small and medium-sized land holdings to mechanize. Being an organized player in the power tiller industry along with a strong after sales service, your Company is constantly evolving by taking initiatives like brand building and upgrading dealers to face competition.

RISKS AND CONCERNS

Agriculture is the backbone of India's economy. Though various irrigation schemes have been conceived to enhance the cultivable area, the agricultural sector continues to be monsoon dependent. On another front, higher interest rate of bank finance for your Company's products and increasing delay in releasing timely subsidy by various states for power tillers is an area of concern. During the year, sale of Chinese made power tillers under various subsidy schemes has intensified competition for your Company. Appropriate marketing strategies are being adopted to gain market share and strengthen our competitive edge in the current scenario. The government's fiscal policy of controlling inflation by hardening of interest rates could have an adverse impact on the demand for power tillers and tractors. As for margins, the Company would remain vulnerable to adverse changes in input costs during the year.

CURRENT YEAR OUTLOOK

Agriculture is the mainstay of more than two-thirds of the country's population and with the expansion of non-farm economic activities there is a tendency to exit this field. The Government is targeting over 4% growth for agriculture which is necessary to support a 9% GDP growth which is the theme of the 12th Five Year Plan. Expenditure on rural development and investments are expected to grow, besides improving infrastructure according to the Economic Survey. A favourable monsoon coupled with ease of credit availability to farmers will have a positive influence on the power tiller and tractor industry. During the current year, with various marketing and development initiatives undertaken, your Company is confident of maintaining its growth momentum. On the export front, the outlook is positive for tractors and your Company is presently taking steps for obtaining export certification for marketing in European countries.

The steps taken to introduce Rice Transplanters in various states are proving to be sustainable in the long term with government support. Extensive work to train self-help groups who have been effective agents of change on various aspects of adapting to mechanized transplantation have been undertaken. Your Company driven by these initiatives is expecting to reap rewards in the future with more models.

Currently, the pressing need is efficiency in procuring raw material. Due to the growth experienced in industry coupled with shortage of power in certain areas, availability of key raw materials have had adverse repercussions on the Company's production leading to opportunity losses. The year ahead could be challenging if inflationary conditions are not contained which may lead to lower than expected contribution. Recognizing that for enhancing production, scale is essential, your Company is developing new vendors and focusing on improved efficiency from supply chain management.

During the year, your Company has commenced work on establishing a new Tractor manufacturing plant located in Hosur, Tamil Nadu with an installed capacity of 36000 units p.a. The financial outlay for this project is budgeted at Rs. 66 crores and funded with a mixture of internal accruals and debt. The plant is expected to go on stream during the end of the first quarter of 2013. This project will also give the Company the prospect of introducing more tractor models and de-risk its current portfolio and seize growth opportunities in the future

At Precision Component Division, investment in critical machinery has been made only in required areas to cater to higher captive consumption. We believe the export demand would remain flat due to the economic downturn in overseas market and the static customer base. Realizing the current scenario, your Company's plan is to continue its focus on in-house supply.

Internal Control Systems

Your Company maintains adequate internal control system, which provides reasonable assurance that transactions in significant areas are monitored to prevent any misuse. To strengthen this area your Company is looking at improved responsiveness from a fully integrated ERP. This will enable vendors to get information on material requirement and ensure streamlined supply of materials. The new system will improve its capability and speed of information to add more value. The Internal auditors carry out audits on a regular basis and submit their report once in a quarter to the Audit Committee. The Audit Committee reviews the report and recommendations of the Internal Auditors and advises the Management to strengthen and streamline the system wherever required.

Industrial Relation

Industrial relations have been cordial across all the plants during the year. Your Company is continuously taking initiatives for building organizational capabilities and enhancing people productivity. Various training and development programs were offered to the managerial cadre to upgrade their skills and develop the human resource base. Your company has been increasing the strength of apprentices and trainees across various departments to cultivate new talent. Steps are also being implemented to strengthen specific areas that are considered key to the Company in achieving its business goals.

Forward-Looking Statements

Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those either expressed or implied due to factors such as Raw material prices, Government policies, Competition, tax regime, market acceptance of new products and services, continued acceptance of existing products and services, changes in licensing programs, product price discounts, delays in product development and related product release schedules, sales channel disruption.

All information in this release is as of May 29, 2012, The Company undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in the company's expectations.

ACKNOWLEDGEMENTS:

The Directors wish to convey their gratitude for the faith reposed in your Company by Mitsubishi Heavy Industries Limited, the financial institutions, employees and the customers at large.

for VST TILLERS TRACTORS LTD.

V. K. Surendra

Chairman

Place: Bangalore

Date : May 29, 2012

---

Mar 31, 2011

The Directors have pleasure in presenting the 43rd Annual Report of the Company and the audited statement of accounts for the year ended March 31, 2011.

FINANCIAL PERFORMANCE (Rupees in lacs)

Period Year 2010-11 Year 2009-10

TURNOVER 42531 34454

OTHER INCOME 597 277

TOTAL INCOME 43128 34731

PROFIT BEFORE DEPRECIATION & INTEREST 7403 6506

INTEREST 72 67

DEPRECIATION 227 259

PROFIT BEFORE TAX 7104 6180

INCOME TAX 2485 1947

PROFIT AFTER TAX 4619 4233

BALANCE B/F 2493 1016

SURPLUS AVAILABLE FOR APPROPRIATION TO: 7112 5249

DIVIDEND 778 648

TAX ON DIVIDEND 126 108

TRANSFER TO GENERAL RESERVE 3200 2000

BALANCE CARRIED FORWARD 3008 2493

COMPANYS PERFORMANCE

We are pleased to report another successful period for your Companys business. Your Company has clocked a modest growth by selling over 23000 Tillers and 4700 Tractors and continues to maintain its leadership position in the power tiller industry.

The turnover for the year registered an increase by 23% from Rs.344 crores in 2009-10 to Rs. 425 crores while the operating profit increased to Rs. 65 crores compared to Rs.59 crores. However, the operating margin declined by 1.83% due to increase in raw material costs. Profit after tax was Rs. 46 crores, an increase of 9% over the previous year and earnings per share during the year increased from Rs.48.99 to Rs.53.46.

The sale of power tillers during the year increased by 23%. While the Tractor sales have grown by 26% during the year. Your Companys aggressive plan to market Rice Transplanters has been encouraging primarily driven by expensive farm labor and government subsidy.

The performance of Precision Component Division improved with exports registering a growth of 45% from Rs. 5.5 crores to Rs. 8 crores . However export margins have been impacted due to spiraling raw material costs with very little scope for passing on the increase to our overseas customers. During the year, this division has capitalized on growth opportunity in production of components for captive consumption which has indirectly contributed to the overall performance of your Company.

DIVIDEND:

Your Directors have pleasure in recommending a dividend of Rs. 9/- per equity share of Rs.10/- each for approval at the Annual General Meeting. The dividend if declared will result in an outflow of Rs. 904 lacs including the distribution tax.

NSE LISTING

The shares of the Company were listed and admitted to dealings on the National Stock Exchange of India Limited w.e.f. June 20, 2011.

DIRECTORS:

In accordance with the provisions of the Companies Act, 1956 and Articles of Association, Mr. K K Rai, Mr. M K Bannerjee and Mr. A Hishikawa, Directors of the Company retire by rotation and are eligible for re-appointment.

CORPORATE GOVERNANCE:

The Company strives to ensure highest standards in Corporate Governance and levels of transparency in accordance with the provisions of Clause-49 of the Listing Agreement. A certificate from the Auditors to this effect forms part of Corporate Governance Report.

DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to sec 217(2AA) of the Companies Act 1956, amended as per Companies (Amendment) Act 2000, the Directors confirm that:

In preparation of the Annual Accounts of your Company the Accounting Standards laid down by the Institute of Chartered accountants of India from time to time have been followed.

Appropriate Accounting policies have been selected and applied consistently, and reasonable and prudent judgment and estimates have been made so as to ensure that the accounts give a true and fair view of affairs of your company as at March 31, 2011 and the profits of your company for the year ended March 31, 2011.

Proper and sufficient care has been taken for the maintenance of appropriate accounting records in accordance with the provisions of the act for safeguarding the assets of your company and for preventing and detecting frauds and other irregularities.

The annual accounts have been prepared on a going concern basis.

The observations of Auditors in their report to Members have been adequately dealt with in the relevant notes to accounts. Hence no additional explanation is considered necessary.

AUDITORS:

M/s. Brahmayya & Company, Chartered Accountants, retire as Auditors of the Company at the conclusion of 43rd Annual General Meeting and are eligible for re-appointment.

COST AUDITORS:

M/s. Rao, Murthy & Associates, Cost Accountants were re-appointed by the Board of Directors in its meeting held on May 30, 2011. The Cost Audit Report for the financial year 2009-10 was filed on September 8, 2010 and the due date for filing the report was September 30, 2010.

PARTICULARS OF EMPLOYEES:

As required by provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules 1975, as amended, there are no employees who draw remuneration as set out in the aforesaid provision of the Companies Act.

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

Information under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended 31st March 2011 is enclosed as Annexure.

FIXED DEPOSITS:

Your Company has not accepted any fixed deposits within the meaning of Section 58A of the Companies Act, 1956 and rules made there under.

ACKNOWLEDGEMENTS:

The Directors wish to convey their gratitude for the faith reposed in your Company by Mitsubishi Heavy Industries Limited, the financial institutions, employees and the customers at large.

for VST TILLERS TRACTORS LTD.

Sd/-

Place: Bangalore V. K. Surendra

Date : May 30, 2011 Chairman

---

Mar 31, 2010

The Directors record with deep sadness, the demise of founder Managing Director, Shri VT.Krishnamoorthy. His guidance to your Company in the above capacity and subsequently as Chairman during the formative and difficult years was invaluable. We pay our respect and homage to the departed soul.

Your Directors are pleased to present the 42nd Annual Report and the audited statement of accounts for the year ended March 31, 2010.

FINANCIAL PERFORMANCE (Rupees in lacs)

Period Year 2009-10 Year 2008-09

TURNOVER 34454 27414

OTHER INCOME 277 482

TOTAL INCOME 34731 27896

PROFIT BEFORE DEPRECIATION & INTEREST 6506 4748

INTEREST 67 53

DEPRECIATION 259 281

PROFIT BEFORE TAX 6180 4414

INCOME TAX 1947 1523

PROFIT AFTER TAX 4233 2891

BALANCE B/F 1016 880

SURPLUS AVAILABLE FOR APPROPRIATION TO: 5249 3771

DIVIDEND 648 432

TAX ON DIVIDEND 108 73

TRANSFER TO GENERAL RESERVE 2000 2250

BALANCE CARRIED FORWARD 2493 1016

COMPANYS PERFORMANCE

During the year under review your company continued to improve upon the progress made during the previous year by selling over 19000 Tillers which helped the Company to consolidate its position as market leader in the power tiller industry. The sale of tractors also increased significantly by over 3700 nos. Both these figures are a milestone.

The turnover for the year registered an increase by 26% from Rs 274 crores in 2008-09 to Rs.344 crores while the operating profit increased to Rs. 59 crores compared to Rs.39 crores. This was mainly due to higher growth and operating efficiency. Profit after tax amounted to Rs. 42 crores, an increase of 46% over the previous year. Consequently, earnings per share increased from Rs. 50.20 to Rs. 68.69 and

your company continues to remain debt free while short term borrowings were limited to only need based working capital requirements. Power Tillers and Tractors contributed 62% and 24% of the sales during the year. Export revenue from Precision Component Division declined by 58% due to the global recession in the component business.

The sale of power tillers during the year increased to 19068 units as against the previous years sales of 16691 units, an increase of 14%. The companys tractor sales also accelerated to 3758 units as against 2327 units in the previous year. As a result of an aggressive plan to market Rice Transplanters, 858 units were sold mainly in the paddy growing belts of Punjab, Tamil Nadu and Kerala. This steadily shift towards mechanization has been due to acute shortage of labour and cost effectiveness of these machines.

DIRECTORS REPORT

The performance of the Component Division went through a difficult time due to the global economic slowdown and profits from exports declined on a standalone basis. During the second half of the year, export margins were impacted due to higher raw material prices. This apart, the strengthening of the Rupee against the Sterling and Euro compounded the problems as realizations declined. Despite these conditions, increase in production of components for captive consumption enabled this division to record a moderate increase in top line and sustain its operations.

DIVIDEND:

Your Directors have pleasure in recommending a dividend of Rs.7.507- per equity share of Rs. 10/- each for approval at the Annual General Meeting. The dividend if declared will result in an outflow of Rs.756 lacs including the distribution tax.

DIRECTORS:

In accordance with the provisions of the Companies Act, 1956 and Articles of Association, Mr. V K Surendra and Mr. V Ramachandran Directors of the Company retire by rotation and being eligible, offer themselves for re-appointment.

CORPORATE GOVERNANCE:

The Company strives to ensure highest standards in Corporate Governance and levels of transparency and has been compliant with all the provisions of Clause-49 of the Listing Agreement. A certificate from the Auditors to this effect forms part of Corporate Governance Report.

DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to sec 217(2AA) of the Companies Act 1956, amended as per Companies (Amendment) Act 2000, the Directors confirm that:

In preparation of the Annual Accounts of your Company the Accounting Standards laid down by the Institute of Chartered accountants of India from time to time have been followed.

Appropriate Accounting policies have been selected and applied consistently, and reasonable and prudent judgment and estimates have been made so as to ensure that the accounts give a true and fair view of affairs of your company as at March 31, 2010 and the profits of your company for the year ended March 31, 2010.

Proper and sufficient care has been taken for the maintenance of appropriate accounting records in accordance with the provisions of the act for safeguarding the assets of your company and for preventing and detecting frauds and other irregularities.

The annual accounts have been prepared on a going concern basis.

The observations of Auditors in their report to Members have been adequately dealt with in the relevant notes to accounts. Hence no additional explanation is considered necessary.

AUDITORS:

M/s. Brahmayya & Company, Chartered Accountants, retire as Auditors of the Company at the conclusion of 42nd Annual General Meeting and are eligible for re-appointment.

PARTICULARS OF EMPLOYEES:

Information as per Section 21 7(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules 1975, as amended, details of employee who was employed throughout the financial year and was in receipt of remuneration aggregating to not less than 24 lacs p.a. is as follows :

Mr. V P Manendra - Managing Director

Aged - 68 years

Gross Remuneration recieved - Rs. 35,39,518/-

Qualification - B.E. - Electrical

Experience - 30 Years

Date of Employment - 01/10/1980

Last position held - as Deputy Managing Director

of the Company

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

Information under Section 217( I )(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended 31 st March 2010 is enclosed as Annexure.

FIXED DEPOSITS:

Your Company has not accepted any fixed deposits within the meaning of Section 58A of the Companies Act, 1956 and rules made there under.

ACKNOWLEDGEMENTS:

The Directors wish to convey their gratitude for the faith reposed in your Company by Mitsubishi Heavy Industries Limited, the financial institutions, employees and the customers at large.

For VST TILLERS TRACTORS LTD.

Sd/- Place: Bangalore V. K. Surendra

Date : May 28, 2010 Chairman