COMMITTEES OF THE BOARD Audit Committee Deepak S.

Parekh
Chairman

Nadir B. Godrej M. M. Murugappan R. K. Kulkarni Share Transfer and Shareholders/ Investors Grievance Committee Keshub Mahindra
Chairman

Anand G. Mahindra Bharat Doshi A. K. Nanda R. K. Kulkarni Remuneration/Compensation Committee Narayanan Vaghul
Chairman

Keshub Mahindra Nadir B. Godrej M. M. Murugappan Loans & Investment Committee Keshub Mahindra
Chairman

BOARD OF DIRECTORS Keshub Mahindra

Chairman

Anand G. Mahindra Bharat Doshi A. K. Nanda R. K. Kulkarni Research & Development Committee A. S. Ganguly
Chairman

Anand G. Mahindra Deepak S. Parekh Nadir B. Godrej M. M. Murugappan Narayanan Vaghul A. S. Ganguly R. K. Kulkarni Anupam Puri Thomas Mathew T. Bharat Doshi A. K. Nanda

Vice-Chairman & Managing Director

Anand G. Mahindra Nadir B. Godrej M. M. Murugappan Bharat Doshi GROUP MANAGEMENT BOARD Anand G. Mahindra
Vice-Chairman & Managing Director

Bharat Doshi A. K. Nanda

Nominee of Life Insurance Corporation of India Executive Director Executive Director

President - Trade & Financial Services Sector President - Infrastructure Development Sector

Anjanikumar Choudhari Rajeev Dubey

President - Farm Equipment Sector President - Human Resources & Corporate Services

Pawan Goenka

Narayan Shankar

President - Automotive Sector

Hemant Luthra

Company Secretary

President - Systems & Technologies Sector

Raghunath Murti Uday Y. Phadke

Executive Vice Chairman - Mahindra Intertrade Limited President - Finance & Legal Affairs

Ulhas N. Yargop

President - Telecom & Software Sector

MAHINDRA & MAHINDRA LIMITED

Contents Directors Report ................................................................................................... 3 Management Discussion and Analysis ................................................................... 19 Corporate Governance ......................................................................................... 37 Accounts .............................................................................................................. 63 Statement pursuant to Section 212 ................................................................... 119 Consolidated Accounts ....................................................................................... 121 Bankers Bank of America N.A. Bank of Baroda Bank of India Canara Bank Central Bank of India HDFC Bank Limited Standard Chartered Bank State Bank of India Union Bank of India Auditors A. F. Ferguson & Co., Allahabad Bank Buildings, Bombay Samachar Marg, Mumbai 400 001. Advocates Khaitan & Co., Meher Chambers, R K Marg, Ballard Estate, Mumbai 400 038. Registered Office Gateway Building, Apollo Bunder, Mumbai 400 001. Branches 7, Dr. Ishaque Road (Old KYD Street), Kolkata 700 016. Mahindra Towers, 2-A Bhikaji Cama Place, New Delhi 110 066. Mahindra Towers, First Floor, 17/18, Pattulous Road, Chennai 600 002. Raheja Chambers, First Floor, 12, Museum Road, Bangalore 560 001.

DIRECTORS REPORT TO THE SHAREHOLDERS Your Directors present their Report together with the audited accounts of your Company for the year ended 31st March, 2007.

Financial Highlights
(Rs. in crores) 2007 Gross Income Less: Excise Duty on Sales Net Income Profit before Depreciation, Interest, Provision for Contingencies, Exceptional items and Taxation Less: Depreciation /Amortisation Profit before Interest, Provision for Contingencies, Exceptional items and Taxation Less: Interest (Net) Profit before Provision for Contingencies, Exceptional items and Taxation Less: Provision for Contingencies Profit before Exceptional items and Taxation Add: Exceptional items Profit before Taxation Less: Provision for tax Current tax (including Fringe Benefit Tax) Less: Provision for tax Deferred tax (Net) Profit for the year before prior period adjustments Prior Period Adjustment (Net of Tax) Profit for the year Balance of profit for earlier years Add: Transfer from Debenture Redemption Reserve Profit available for appropriation Less: General Reserve Interim Dividend paid Income-tax on Interim Dividend paid Proposed Dividends Income-tax on Proposed Dividends Balance carried forward
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2006 9451 1125 8326

11558 1313 10245

1458 209 1249 (67) 1316 1316 122 1438 366 (15) 1087 19 1068 1476 16 2560 110 184 26 98 17 2125

1072 200 872 (18) 890 1 889 210 1099 285 (43) 857 857 996 1 1854 100 244 34 1476

Performance Review

Your Companys subsidiary MIL, sold 8,550 LCVs during the year. The combined LCVs sales of the Company and MIL stood at 8,652 as compared to the last years sales of
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Automotive Sector:
The financial year ended 31 March, 2007 is the fifth

6,777 [including 1,833 sold by MIL] registering an increase of 28% against the industry (upto 4 MT payload LCVs segment) growth of 4%. The spare parts sales volume was Rs.307.33 crores (Exports Rs.23.54 crores) in the current year as compared to Rs.236.00 crores (Exports Rs.12.84 crores) in the previous year. The commencement of the manufacture of the Logan, a mid-sized sedan, in the last quarter of the year marked the entry of the Company into the passenger car segment through its subsidiary MRPL, a joint venture of the Company with Renault s.a.s. of France. Over the last three years, the Company introduced its vehicles in many new overseas markets including Europe, Middle East, South America and South-East Asia by adapting unique business models for each country. The Company launched a pick-up version of the Scorpio in South Africa during the year, becoming the first Indian automotive company to launch a product internationally. These initiatives resulted in your Company exporting 8,021 vehicles [including 254 LCVs sourced from MIL] during the year under review which is an increase of 45% over the previous years exports of 5,534 vehicles [including 175 LCVs sourced from MIL]. The Companys performance also reflected a significantly improved level of customer satisfaction as demonstrated by its 2006-07 scores in independent syndicated customer satisfaction and sales satisfaction studies. In the TNS study on Dealer Satisfaction released in 2007, your Company came first. The Company was also rated in a TNS study, one among the top two Most Trusted Indian car companies. The all new Scorpio launched at the end of the previous year received the Business World National Institute of Design Award in
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consecutive year of record growth in terms of vehicle production and sales. During the year under review, your Company produced 1,44,090 vehicles [i.e. multi utility vehicles (MUVs), cars and light commercial vehicles (LCVs) including 8,811 LCVs produced for Mahindra International Limited (MIL), a subsidiary of the Company and 614 cars produced for Mahindra Renault Private Limited (MRPL), another subsidiary of the Company] and 34,892 threewheelers as compared to 1,28,601 vehicles [including 2,705 LCVs produced for MIL] and 22,317 three-wheelers in the previous year. Your Company recorded sales of 1,35,961 vehicles and 33,718 three-wheelers as compared to 1,25,172 vehicles and 22,419 three-wheelers in the previous year registering a growth of 8.6% and 50% in vehicles sales and threewheelers sales respectively. The domestic total sales volume of 1,61,658 vehicles and three-wheelers was higher by 14% than the previous years volume of 1,42,057 vehicles and three-wheelers. Over all, a record number of 1,27,856 MUVs were sold by the Company in the domestic market during the year under review as against the sale of 1,14,694 MUVs in the previous year. The Companys domestic MUVs sales volumes grew by 11% as against the industry MUVs sales growth of 14%. In the large three-wheeler segment, the Companys sales volumes declined by 22% against a 28% decline for the industry as a whole. In the smaller three-wheeler segment, which the Company had entered in the previous year, your Company during the year under review sold 19,554 Champion Alfas against the sale of 4,307 Champion Alfas in the previous year.

the Best Automobile Design Four Wheeler category and was also awarded the coveted Golden Peacock Award for Innovative Products/Services in the Automobile segment. These awards augur well for the future. In the last quarter, your Company also unveiled the bio-diesel Scorpio and Bolero DI vehicles for 100% real world usage trials. The Scorpio with indigenously developed CRDe technology is the first Asian vehicle in its class to run on 100% bio-diesel. Given the high growth expectations from the Indian automotive industry and given the Companys participation in ever increasing areas of the industry, your Company is planning to set up two greenfield plants, one near Pune and another near Chennai, to meet future domestic and export requirements. The plant near Pune will specialize in commercial vehicles for the Company as well as for MIL. The plant near Chennai will be set up in partnership with Renault s.a.s. and Nissan Motor Company Ltd. to manufacture new generation personal segment Utility Vehicles and Sports Utility Vehicles for the Company as well as cars and other vehicles for Renault and Nissan. Both the plants should become operational over the next three years.

market leadership for the 24th consecutive year in the domestic tractor market. During the year under review, the Company launched the Mahindra Shaan, a Multi-Utility Tractor, another first of its kind in India. Shaan is a 25 HP innovative product designed to serve small and medium farmers in multiple ways, not only on the field but also on the road. Besides, being used as a regular tractor, the inbuilt trolley feature enables the customer to use Shaan for transportation of farm produce and other commercial loads. Your Company continued with its export focus with volumes growing by 8%. Some of the major export markets such as Sri Lanka and Bangladesh recorded highest ever sales growth with a market share of 22% and 27% respectively. Satellite Plants were set up in Chad, Mali in Africa and there were strategic tie-ups with Al-Frat in Syria and ITMCO in Iran. The turnover of your Companys Genset and Engine businesses also touched a new high of Rs.271 crores. The Company has started manufacturing Gensets at Delhi and Pune and has added several corporate clients in the current year for supplying Gensets and Engines. The Company sold 24,141 Engines and Gensets during the year under review as against 15,776 sold during the previous year, registering a phenomenal growth of 53%.

Farm Equipment Sector:

During the year under review, the tractor industry grew by 21.2%. It is the fourth consecutive year the industry saw growth which was due to a good monsoon, better availability of credit and focus on retail tractor financing by the Banking Sector. However, the growth has tapered in the last quarter on account of the retail squeeze. During the year, your Company sold 1,02,531 tractors as against 85,029 tractors sold in the previous year registering a significant growth of 21% and produced 1,03,847 tractors as against 87,075 produced in the previous year recording a notable growth of 19%. The Company maintained its
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Mahindra Defence Systems Division:

Your Company provides world-class armouring solutions for Light Combat Vehicles, Multi-Utility Vehicles and Sports Utility Vehicles besides design and development for prototyping special Military Vehicles and conversion of available vehicle platforms to special vehicles. The Company supplied 200 Rakshaks, a bullet proof vehicle to the Indian Army during the year under review. The Company is also considering venturing into supply of light armoured vehicles, high mobility vehicles and underwater naval systems.

Mahindra Logistics Division:

The Company offers differential and specialised end to end logistics solutions to select industries in the Automotive, Retail, BPO and ITES Segments by channelising internal and global capabilities and resources. This Division of your Company achieved revenues of Rs.382 crores with a client base of more than 165 customers including various corporates and multinationals, registering an impressive growth of 52% over the previous year.

Keeping in mind the overall performance during the year and the positive outlook of the Company, your Directors recommend a final dividend of 25% (Rs.2.50 per Equity Share) and a Special Dividend of 15% (Rs.1.50 per Equity Share) aggregating Rs.4 per Equity Share, payable to those Shareholders whose names appear in the Register of Members as on the Book Closure Date. The Special Dividend has been recommended in the light of the very successful listing of the Tech Mahindra Limited Equity Shares on the Stock Exchanges. The final dividend, inclusive of tax on distributed profits, would absorb a sum of Rs.114.89 crores. The total equity dividend outgo for the financial year 2006-07, inclusive of tax on distributed profits, would be Rs.324.73 crores (as against Rs.278.19 crores comprising a dividend of 75% and a special dividend of 25% paid for the previous year). Finance Your Company in May, 2004, had made a US$ 100 million Foreign Currency Convertible Bond (FCCB) offering to international investors. During the period upto 28th May, 2007, several Bondholders exercised their conversion option resulting into Bonds of value US$ 98.20 million getting converted into Equity Shares/Global Depositary Receipts. As already reported last year, in April, 2006, the Company made a FCCB issue of US$ 200 million to the international investors. The issue carried a zero coupon rate and the tenure of the issue was five years with a yield to maturity of 5%, the conversion price being Rs.922.04. The issue proceeds are earmarked for product development, modernisation and expansion of existing manufacturing facilities and expansion by internal growth as well as overseas acquisitions and in addition, for such purposes as may be permitted from time to time under applicable laws.
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Profits:
The Profit for the year before Depreciation, Interest, Provision for Contingencies, Exceptional items and Taxation was Rs.1,457.83 crores as against Rs.1,071.88 crores in the previous year registering an increase of 36.01%. Profit after tax was Rs.1,068.39 crores as against Rs.857.10 crores in the previous year recording an increase of 24.65%. Your Company continues with its rigorous cost restructuring exercises, which have resulted in significant savings by efficiency improvements through continued focus on optimisation of plant capacity utilisation, market performance and controlling operating and financing costs and right sizing in almost all areas. Management Discussion and Analysis Report A detailed analysis of the Companys performance is discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report. Dividend An interim dividend of 75% (Rs.7.50 per Ordinary (Equity) Share) has been paid to the Shareholders whose names appeared in the Register of Members as on 26th March, 2007, the record date fixed for this purpose. The amount so distributed, including tax on distributed profits amounted to Rs.209.84 crores.

During the year, the Company raised an External Commercial Borrowing of US$ 20 million for meeting part of funds required for modernization and expansion plans. Funds were raised for a three year period at highly competitive rates. The Consortium of Bankers continue to rate the Company as a prime customer and extend facilities/services at prime rates. Your Company follows a prudent financial policy and aims to maintain optimum financial gearing at all times. The Companys total Debt to Equity Ratio was 0.46 as at 31st March, 2007. During the year, Fitch Ratings India Private Limited (FITCH) reaffirmed the AA+(Ind) with a Positive Outlook rating assigned by it to the Companys outstanding Debentures in the previous financial year. The rating indicates strong capacity for timely payment of financial commitments and low expectation of credit risk. Similarly, CRISIL Limited (CRISIL) has reaffirmed the AA+ rating but has revised its rating outlook to Negative from Stable. The revision in outlook reflects CRISILs belief that the Company could leverage its Balance Sheet to finance its capital expenditure and inorganic growth plans, thereby increasing its financial risk profile. CRISILs rating indicates High Safety on timely payment of interest and principal. Stock Options On the recommendation of the Remuneration/Compensation Committee of your Company, the Trustees of the Mahindra & Mahindra Employees Stock Option Trust have granted 9,92,921 Stock Options to Eligible Employees during the year under review. Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure I to this Report.
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Industrial Relations Industrial Relations generally remained cordial and harmonious throughout the year. The Management Discussion and Analysis Report gives an overview of the developments in Human Resources/Industrial Relations during the year. Safety, Health and Environmental Performance Your Companys commitment and responsibility towards Safety, Occupational Health and Environment stems from its vision, which enjoins upon the Company to sustain business growth with deep commitment to the environment. The Company has a well-established Safety, Occupational & Environmental Policy which inter alia ensures safety of public, employees, plant and equipment, ensuring compliance with all statutory rules and regulations on regular basis, imparting training to its employees as per Training Calendar, carrying out statutory safety audits of its facilities as per legal requirement, conducting regular medical check-up of its employees and promoting eco-friendly activities. During the year under review, your Companys oldest Automotive Plant at Kandivli achieved a remarkable feat by receiving the National Energy Conservation Award for the 4th year in a row. In addition, the Automotive Sectors Zaheerabad Plant also received this award. The Automotive Sectors Nashik Plant won the National Award for Excellence in water conservation. The Kandivli, Nashik and Igatpuri Plants of the Automotive Sector have been certified with the amended standard for Environmental Management System ISO 14001:2004 and have also been certified for Occupational Health and Safety Management System (OHSAS 18001:1999). Similarly, in the year under review, the Tractor Division obtained certification for OHSAS 18001 for its Kandivli Plant and obtained OHSAS 18001 and ISO 14001 certification for its Rudrapur Plant. This makes all the Tractor Division Plants OHSAS certified. The Company strives to enrich the environment wherever possible by various

initiatives such as Greenbelt Development, Water and Waste Water Management, Solid Waste Management and Air Pollution Management. Your Company also strives for elimination of accidents in all its units by organizing Safety Patrol Rounds, Safety Kaizens, safety training, external audits of the Companys safety practices and systems, Occupational Health Examination, etc. Corporate Social Responsibility As a Corporate Citizen, your Company has always recognised that the business has to be sensitive enough to perceive the needs of the Society in which the corporates operate. The Company therefore believes that the weaker sections of our Society need help and support for them to be self-reliant. With this in view, the Mahindra Group (the Group) has redefined its Corporate Social Responsibility (CSR) in its 60 year and committed to pledge upto 1% of its Profit
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government schools in Mumbai. The majority of the children attending these schools belong to socially and economically disadvantaged sections of society. With the help of the Groups implementation partner, Naandi Foundation, a reputed NGO, the Group hopes to improve learning outcomes of children attending these schools with an aim that they achieve grade specific learning competencies in Science, Maths and language.

Supporting Nanhi Kalis

Nanhi Kali, which supports the education of the disadvantaged girl child has been the flagship programme of the K. C. Mahindra Education Trust (KCMET). The Group has made a commitment to support 6,000 girls in rural and tribal areas in various parts of India by providing academic support as well as material support in the form of uniforms, clothes, school bags, shoes, etc. Encouraged by the success of the programme, the Government of Rajasthan partnered with KCMET to support the education of 10,000 disadvantaged girl children in the tribal area of Udaipur District through the Nanhi Kali project.

after Tax (PAT) to benefit the socially and economically disadvantaged sections of society. Recognizing the potential that education holds to transform lives, the Mahindra Group has chosen education as its prime focus area, with special emphasis on the girl child. Some of the major social development programmes the Group has invested in are described below:

Mahindra All India Talent Scholarships

The Group has also doubled the number of Mahindra All India Talent Scholarships, as a result of which approximately 500 students belonging to the lower socioeconomic strata of society were provided with scholarships to pursue job oriented diploma courses at recognized polytechnic colleges. The scholarships are given for a three year period. Surveys conducted amongst Mahindra All India Talent Scholarship awardees have revealed that the beneficiaries of this scholarship programme have secured jobs with reasonable starting monthly salaries. Over the years, 3,252 students across the country have benefited from this scholarship.
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Mahindra Pride Schools

During its 60th year, the Company had announced plans for providing youth from socially weaker sections of society with livelihood training to enable them to gain employment based on the skills learned. The Group has set up the first training institute, Mahindra Pride School in Chinchwad, near Pune. The courses being offered are vocational in nature and are in line with market requirements in the region.

Support to Government Schools

Continuing its commitment to make quality education accessible to all children, the Group is supporting seven

Cochlear Implants
To give a new lease of life to the hearing impaired, the Group has agreed to donate 60 Cochlear Implants over a 3-year period to children below the age of 5 years, belonging to the socially and economically weaker sections of society. Each Cochlear Implant costs approximately Rs.5 lakhs. In the past two years, 25 children have benefited from the Cochlear Implants donated through the Mahindra Foundation.

Directors Mr. Keshub Mahindra, Mr. Anupam Puri, Dr. A. S. Ganguly and Mr. R. K. Kulkarni retire by rotation and, being eligible, offer themselves for re-appointment. Directors Responsibility Statement Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representations received from the Operating Management, and after due enquiry, confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2007 and of the profit of the Company for the year ended on that date; (iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the annual accounts have been prepared on a going concern basis.

Mid-Day Meal Kitchen

A Memorandum of Understanding has been signed between the Government of Rajasthan, your Company and Naandi Foundation to set up a centralized mid-day meal kitchen in a backward area in Jaipur District of Rajasthan which will feed over 25,000 children studying in government schools. Providing a nutritious mid-day meal helps in reduction of dropout rates besides adding to the general welfare of these children. The kitchen is expected to be set up in the coming year.

Location Specific Community Initiatives

Apart from the above activities, various business units of your Company carry out location specific community initiatives largely focused on health, education and environment including water management and sanitation projects.

Employee Social Options (ESOPs)

Employee participation is a vital ingredient of the Mahindra way of doing CSR. An unique initiative of your Company is its ESOPs Programme, through which the entire workforce of the Mahindra Group is provided with an array of options for volunteering their time and resources in the CSR activities. As a result of this, the Companys employees can be seen on any given day contributing directly to society in some part or other of the country.
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Subsidiary Companies The subsidiary companies of your Company are moving on from strength to strength and contributing to the overall growth of the Company. These subsidiaries have created a niche for themselves by venturing into newer businesses and with their excellent performance are blazing ahead at a fast pace thereby continuing to add shareholder value. The major

subsidiaries such as Tech Mahindra Limited, Mahindra & Mahindra Financial Services Limited, Mahindra Holidays & Resorts (India) Limited, Mahindra Gesco Developers Limited, etc. registered a significantly improved performance. The consolidated Group Profit for the year after exceptional items, prior period adjustments and tax and after deducting minority interests is Rs.1,497.15 crores as against Rs.1,269.72 crores earned last year - a growth of 17.91%. During the year under review, PT Tech Mahindra Indonesia, Mahindra Forgings Overseas Limited, Mahindra Forgings International Limited, CanvasM Technologies Limited, CanvasM Falkenroth (Americas) Inc., JECO GmbH, Holding AG, Gesenkschmiede Schneider GmbH, JECO-Jellinghaus GmbH, Umformtechnik Falkenroth Grundstucksgesellschaft GmbH, MHR Hotel Management GmbH, iPolicy Networks Limited, Mahindra Stokes Holding Company Limited, Mahindra Forgings Mauritius Limited, Mahindra Forgings Global Limited, Schneweiss & Co. GmbH, Fried. Hunninghaus GmbH, Fried. Hunninghaus GmbH & Co. KG and DGP Hinoday Industries Limited became subsidiaries of your Company. Mahindra Gesco Developers Limited and its subsidiaries, viz. Mahindra World City (Jaipur) Limited, Mahindra World City Developers Limited, Mahindra Infrastructure Developers Limited, Mahindra Integrated Township Limited and Mahindra World City (Maharashtra) Limited which had ceased to be subsidiaries of your Company during the year under review, again became subsidiaries of the Company. Mahindra Forgings Limited ceased to be a subsidiary of the Company. Your Directors are pleased to report that during the year under review, the Company divested 38,23,808 Equity Shares in Tech Mahindra Limited (TML) through an Offer for Sale as a part of the Initial Public Offering (IPO) of TML resulting in a gross cash realisation of Rs.139.57 crores. The IPO of TML was for a sum of Rs.465.22 crores comprising
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a fresh issue of 31,86,480 Equity Shares and an Offer for Sale of 95,59,520 Equity Shares by the Company and its joint venture partner in TML, viz. British Telecommunications plc. at a price of Rs.365 per Equity Share. Post IPO and post allotment of shares by TML under its ESOP Scheme(s), your Companys shareholding alongwith the shareholding of its subsidiary, Mahindra-BT Investment Company (Mauritius) Limited in TML as on 31 st March, 2007 stands at 52.56%. This divestment was made in line with the Companys policy of promoting investments in appropriate businesses and monetizing the same at an opportune moment for creating wealth for the Companys shareholders. TML got itself listed on 28th August, 2006 on National Stock Exchange of India Limited and Bombay Stock Exchange Limited. The IPO received an overwhelming response and was oversubscribed by 71.59 times. Subsequent to the year-end, Mahindra Rural Housing Finance Limited (MRHFL) became a subsidiary of Mahindra & Mahindra Financial Services Limited and Mahindra Hotels and Residences India Limited (MHRIL) and Ashtamudi Resorts Private Limited (Ashtamudi) became wholly owned subsidiaries of Mahindra Holidays & Resorts (India) Limited. MRHFL, MHRIL and Ashtamudi in turn have become subsidiaries of your Company. Mahindra Automotive Limited has also become a wholly owned subsidiary of the Company. Tech Mahindra (R&D Services) Pte. Limited, a subsidiary of Tech Mahindra Limited, has ceased to be a subsidiary of the Company. The Statement pursuant to section 212 of the Companies Act, 1956 containing details of the Companys subsidiaries is attached. The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Accounting Standard AS21 prescribed by The Institute of Chartered Accountants of India, form part of the Annual Report and Accounts.

In terms of approval granted by the Central Government under section 212(8) of the Companies Act, 1956, copy of the Balance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of the subsidiaries have not been attached to the Balance Sheet of the Company. The Company Secretary will make these documents available upon receipt of request from any Member of the Company interested in obtaining the same. However as directed by the Central Government, the financial data of the subsidiaries have been separately furnished forming part of the Annual Report. These documents will also be available for inspection at the Head Office of the Company and the office of the respective subsidiary companies, during working hours upto the date of the Annual General Meeting. Auditors Messrs. A. F. Ferguson & Co., the existing Statutory Auditors are now part of Messrs. Deloitte Haskins & Sells and it has been decided that Messrs. Deloitte Haskins & Sells, Chartered Accountants (DHS) would be appointed as the Statutory Auditors of the Company. Accordingly, Messrs. A. F. Ferguson & Co. have not offered themselves for re-appointment at the ensuing Annual General Meeting. The Company has received a Special Notice from a Member of the Company, in terms of the provisions of the Companies Act, 1956, signifying the intention to propose the appointment of DHS as the Statutory Auditors of the Company from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting. DHS have also expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of section 224(1B) of the Companies Act, 1956. Public Deposits and Loans/Advances Out of the total 2,378 deposits of Rs.398.94 lakhs from the public and Shareholders as at 31 March, 2007, 139 deposits
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amounting to Rs.21.31 lakhs, which had matured, had not been claimed as at the end of the financial year. Since then, 21 of these deposits of the value of Rs.3.85 lakhs have been claimed. The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement are furnished separately. Current Year During the period 1st April, 2007 to 27th May, 2007, 28,680 vehicles were produced as against 20,703 vehicles and 27,247 vehicles were despatched as against 19,225 vehicles during the corresponding period in the last year. During the same period 16,010 tractors were produced and 16,099 tractors despatched during the same period as against 16,381 tractors produced and 15,630 tractors despatched during the corresponding period in the previous year. The Indian economy continues to maintain a healthy momentum with high accelerating economic growth averaging an impressive 8% in the previous three years. The acceleration was powered largely by a robust double digit expansion in both manufacturing and service sector activities. The current year should augur well for the Company in the light of the prevailing economic scenario. Although volatility of exchange rates and input costs are a cause for concern, the Companys outlook for the rest of the year continues to remain positive. Acquisitions and other matters With a view to further consolidating its presence in the tractor industry, your Company along with Mahindra Holdings & Finance Limited (MHFL), a wholly owned subsidiary of the Company, entered into a Share Purchase Agreement with Actis Group and the Burman Family to
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acquire 43.3% of the issued and fully paid-up equity capital of Punjab Tractors Limited (PTL). In addition to this, your Company along with MHFL has made an open offer to acquire an additional stake of upto 20% in PTL and also for acquiring upto 20% stake in Swaraj Engines Limted and Swaraj Automotives Limited, in accordance with Regulations 10 and 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended. PTL is a strategic fit to your Company. Its Swaraj brand has a good reputation in the market for reliability and efficient working and PTL has significant unutilized capacity which the Company would be utilizing to ramp up not only sales of Swaraj tractors but also manufacture of Mahindra tractors. The Company will be in a unique position to leverage upon these opportunities coupled with other advantages such as economies of scale, sourcing benefits and some amount of vendor rationalization. To add to these, PTL has certain products in the above 50 HP range which will add to the portfolio strengths of the Company. During the year, the Systems & Technologies Sector of the Company strengthened its presence in the forgings business by acquiring a 67.90% stake in JECO Holding AG (Jeco) and a 100% stake (90.47% voting power) in Schneweiss & Co. GmbH (Schneweiss). Jeco with 120 years of experience is primarily focused on the trucks, bus and trailer market. Its major products include gear boxes, engine and axle parts, hubs, gears and piston heads. Its top customers include Daimler Chrysler Group, ZF Group, Volvo, Renault, AGCO and Kolbenschmidt. Schneweiss, a leading company in the forgings sector in Germany with 140 years of experience in the forgings industr y, is one of the top five axle beam manufacturers in the world and specializes in
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suspension, power train and engine parts. Its core competency lies in products with complex geometric shapes. During the year, the Systems & Technologies Sector also made its foray into the Castings business through the acquisition of a 66.10% equity stake in DGP Hinoday Industries Limited (DHIL), located at Pune in the State of Maharashtra. DHIL manufactures SG Iron castings for the Automotive Industry like Turbo Charger Housing, Gear carrier Housings, Differential Cases, Crank shafts, Exhaust manifold, etc. It also has facilities to manufacture Ceramic Magnets for Automotive Electricals and Industrial DC Motors and Ferrite Cores for electronics, telecommunications and specialized applications. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo Particulars required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in Annexure II to this Report. Particulars of Employees The Company had 173 employees who were in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2007 or not less than Rs.2,00,000 per month during any part of the said year. However, as per the provisions of section 219(1)(b)(iv) of the Companies Act, 1956, the Directors Report and Accounts are being sent to all the Shareholders of the Company excluding the Statement of particulars of employees. Any Shareholder interested in obtaining a copy of the Statement may write to the Company Secretary of the Company. For and on behalf of the Board KESHUB MAHINDRA Chairman Mumbai, 28th May, 2007

ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2007
Information to be disclosed under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999: (a) Options granted (b) The pricing formula 55,79,169 1st Tranche 2nd Tranche 3rd Tranche 4th Tranche 5th Tranche 6th Tranche 7th Tranche Average price preceding the specified date - 27th September, 2001 Discount of 4.89% on the average price preceding the specified date - 13th September, 2006 Average price - Average of the daily high and low of the prices for the Companys Equity Shares quoted on Bombay Stock Exchange Limited during the 15 days preceding the specified date The specified date - Date on which the Remuneration/Compensation Committee decided to recommend to the Mahindra & Mahindra Employees Stock Option Trust (Trust), the grant of Options 43,77,597 Options stand vested on 31st March, 2007. 25,13,441 25,13,441 Equity Shares of Rs.10 each. These were transferred from the Trust to the Eligible Employees. Average price preceding the specified date - 30th May, 2003 Discount of 5.13% on the average price preceding the specified date - 31st May, 2004 Discount of 4.85% on the average price preceding the specified date - 30th May, 2005 Average price preceding the specified date - 14th September, 2005 Discount of 5.02% on the average price preceding the specified date - 29th May, 2006

(c) Options vested (d) Options exercised (e) The total number of shares arising as a result of exercise of option (f) Options lapsed (g) Variation of terms of options (h) Money realised by exercise of options (i) Total number of options in force (j) Employee-wise details of options granted to: (i) Senior managerial personnel (ii) Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year

2,34,552 Nil Rs.12,30,63,360. This amount was received by the Trust. 28,31,176

As per Statement attached Names Options granted Names during the year st ended 31 March, 2004* Mr.Raghunath Murti Mr. Hemant Luthra Mr. Ramesh Iyer 15,000 15,240 25,920

Options granted during the year ended 31st March, 2005*

Mr. Pranab Datta 15,240 Mr. Rajeev Dubey 15,000 Mr. Allen Sequeira 10,160 Mr. Prince M. Augustin 5,080 * The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005.

(iii) Identified employees who Nil were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant
13

(k) Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 Earnings per Share (l) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed. (m) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock. (n) A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:

Rs.40.94

The Company has calculated the employee compensation cost using the intrinsic value of stock options. Had the fair value method been used, in respect of stock options granted on or after 30th June, 2003, the employee compensation cost would have been higher by Rs.8.44 crores, Profit after tax lower by Rs.8.44 crores and the basic and diluted earnings per share would have been lower by Re.0.36 & Re.0.33 respectively. Options Grant Date 31st July, 2006 29 September, 2006
th

Exercise price (Rs.) 620.00 616.00

Fair value (Rs.) 138.51 212.57

The fair-value of the stock options granted on 31st July, 2006 and 29th September, 2006 have been calculated using Black-Scholes Options pricing Formula and the significant assumptions made in this regard are as follows: 31st July, 2006 29th September, 2006 7.56% 3.00 years 35.41% 2.66% Rs.680.10

(i) risk-free interest rate, (ii) expected life, (iii) expected volatility, (iv) expected dividends, and (v) the price of the underlying share in market at the time of option grant.

7.55% 2.50 years 35.62% 2.66% Rs.590.10

STATEMENT ATTACHED TO ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2007 Name of Senior Managerial Persons to whom Options granted in Options granted in Options granted in Stock Options have been granted December, 2001* June, 2005** September, 2006 Mr. Deepak S. Parekh 20,000 5,000 Nil Mr. Nadir B. Godrej 20,000 5,000 Nil Mr. M. M. Murugappan 20,000 5,000 Nil Mr. Narayanan Vaghul 20,000 5,000 Nil Dr. A. S. Ganguly 20,000 5,000 Nil Mr. R. K. Kulkarni 20,000 5,000 Nil Mr. Anupam Puri 20,000 5,000 Nil Mr. Bharat Doshi 1,00,000 10,000 11,345 Mr. A. K. Nanda 1,00,000 10,000 11,345 * All the above Options have been exercised. ** The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005.
14

ANNEXURE II TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2007
PARTICULARS AS PER 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, 2007 A) Conservation of Energy During the year, the Company has taken the following initiatives for conservation of energy: g) Improvement of Power Factor from 0.98 to 1. Engineering Initiatives a) Installation of Sullair screw air compressors with latest spiral valve technology at Kandivli Plant. Similarly, centac type air compressors are installed at Nashik Plant and energy efficient Atlas Copco screw compressor installed at Igatpuri. b) Unique development of super heat recovery from air conditioning units to eliminate use of conventional electrical heaters at washing machines in Engine & Gear carrier assembly. c) Energy alert system for air compressors at Zaheerabad. d) Natural draft Turbine air ventilators instead of electrical driven exhaust fans at Kandivli, Igatpuri, Nashik and Zaheerabad. e) Air line separation of Paint Kitchen by installing new air line from Compressor Room (Utility) to Paint Kitchen (Plant) and stopped unnecessary air circulation in plant during the night shift and on Sundays/holidays.
15

f)

Energy saving low voltage transformer installed for lighting in Administration Building and IDAM.

0.99 by adding Capacitor bank. h) Solar water heating for eliminating use of electrical heaters in washing machine. i) Solar street lights, Changeover relays for street lights at Kandivli, Igatpuri and Haridwar. j) Solar water heating system for guest house and residential quarters at Zaheerabad. k) Revamping of Red primer oven with new fuel efficient burners, energy efficient blowers, air handling units and improved insulation. l) Use of Flat belt instead of V belt at shot blasting machine in Foundry PU. m) Automatic power factor controllers installed at all locations for improving the power factor to unity. n) Electricity generation through Engine testing alternator at Igatpuri. o) Installation of variable frequency drives for Paint Shop-primer booth and base coat booth at Zaheerabad.

2. Through Process Improvement a) Recovering waste heat from Exhaust Flue gas at continuous Gas carburising Furnace in Heat Treatment to eliminate use of electrical heaters at post wash and dryer section. b) Conversion of thermopacs with efficient burners using Piped Natural Gas (PNG), eliminating complete Light Diesel Oil (LDO) utilization. c) Optimization of air-fuel ratio for Furnaces and ovens at all locations.

3. Awareness for Energy Conservation a) Celebrated Energy Conservation Week from 14th December, 2006 to 21st December, 2006 to promote energy saving and conservation of resources. Conducted slogan, poster and suggestion Competition on Energy Efficiency which received an overwhelming response from all the product units at Kandivli Plant. b) Energy Conservation awareness has been created amongst vendors, suppliers by various interactions and seminars. c) Made a cross functional Team for reducing the consumption of electricity during non-production time. d) Reward and Recognition of power saving projects. e) Started red tag system to reduce the air leakages. The Automotive Sector, Kandivli Plant has received National Energy Conservation Award for the fourth time in succession from Ministry of Power, Government

d) Usage of recycler for taking out the Paint sludge thereby avoiding in-house burning of HSD resulting into major savings. e) More than 1,000 ingenious ideas were implemented at all locations such as: i) Continuous to intermittent operation of motors. ii) Timers for blowers, fans and lights. iii) Higher H.P to lower H.P motors. iv) Use of compact fluorescent Lamps (CFL). v) Use of air blow guns and pressure regulators. vi) Rain water Harvesting. vii) Energy efficient scroll compressor for Air conditioning.
16

of India. The Zaheerabad Plant of the Automotive Sector also received this Award for the year 2006. B) Technology Absorption The Company spent Rs.170 crores on Research and Development work during the year, including expenditure on capital assets purchased for Research and Development, which was approximately 1.46% of the total turnover.

C)

Imported Technology for the last 5 years Sr. No. Technology Imported 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. MDI Engine upgradation Design of 4 Wheel Drive Power shift transmission for higher HP tractors NEF TCI NEF performance improvements MDI Engine upgradation Antilock Braking System on utility vehicle Common Rail Diesel on utility vehicle New CRDe Engine development Development of a new MPV Euro IV Emission development for exports Multi Link Suspension for utility vehicle Development of Air Bags on utility vehicle Development of Cruise control on Utility vehicle Fatigue Lab and track design for MRV, Chennai Sandwich material for noise absorption Development of Nano-technology for IP etc. Climate control (Heated and Cooled) seats Bio-Diesel and Gas based engine Transmission Design of Compact Tractor Development of Integrated Cabin for Tractor Hydrophilic Nano coated Feature Automatic Transmission for SUV Transmission for new SUV New Generation system for Brakes for SUV New Electricals & Electronics Features CNG engines for LCV Common Rail Diesel on Light commercial vehicle Next generation Common rail adaptation Hydrogen ICE Fuel Cell Vehicle Development 2nd Generation Biofuels (Biomass to Liquid / Gas to Liquid) Year of Import 2002 2002 2003 2004 2004 2004 2004 2004 2004 2004 2004 2004 2005 2005 2005 2005 2005 2005 2005 2006 2006 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 Status Technology Absorbed Technology Absorbed In the process of Absorption Technology Absorbed Technology Absorbed Technology Absorbed Technology Absorbed Technology Absorbed Technology Absorbed In the process of Absorption Technology Absorbed Technology Absorbed In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption Technology Absorbed Technology Absorbed In the process of Absorption In the process of Absorption In the process of Absorption In the process of Absorption

Foreign Exchange Earnings and Outgo The information on foreign exchange earnings and outgo is furnished in the Notes on Accounts. For and on behalf of the Board KESHUB MAHINDRA Chairman Mumbai, 28th May, 2007
17

Particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the Annual Accounts of the Company pursuant to Clause 32 of the Listing Agreement. Loans and advances in nature of loans to subsidiaries: Rupees in crores Name of the Company Balances as on 31st March, 2007 4.00 0.00 Maximum outstanding during the year 4.00 25.00

Mahindra & Mahindra Financial Services Limited Mahindra Holdings & Finance Limited (including loans where the repayment schedule is more than seven years and no interest) Mahindra Intertrade Limited (including loans where there is no interest) Bristlecone India Limited Mahindra Gujarat Tractor Limited Mahindra Ashtech Limited Mahindra Shubhlabh Services Limited Plexion Technologies (India) Private Limited Mahindra Ugine Steel Company Limited (formerly Pranay Sheetmetal Stampings Limited, since merged with Mahindra Ugine Steel Company Limited) Mahindra Overseas Investment Company (Mauritius) Ltd. Mahindra Forgings Overseas Limited Mahindra Forgings Mauritius Limited

3.13 (3.13) 8.03 1.00 1.50 0.00 0.00

(25.00) 7.13 (7.13) 8.03 1.00 2.00 2.75 2.00

2.00 32.80 119.37 118.15

0.00 0.00 118.01 115.87

Loans and advances in the nature of loans to firms/companies in which Directors are Interested: Rupees in crores Name of the Company Balances as on 31st March, 2007 0.00 15.00 Maximum outstanding during the year 25.00 15.00

Housing Development Finance Corporation Limited Infrastructure Development Finance Company Limited

Except as indicated above, the Company has not made any loans and advances in the nature of loans to associates or loans and advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no interest or interest below section 372A of the Companies Act, 1956.
Investments by the Loanee in the shares of Subsidiary Company, when the Company has made loans or advances in the nature of loan: Investment in the shares of the Subsidiary Company Rupees in crores Name of the Company Balances as on 31st March, 2007 0.00
18

Mahindra Holdings & Finance Limited

Maximum outstanding during the year 12.00

MANAGEMENT DISCUSSION & ANALYSIS

Industry Structure The Automotive Sector The automotive industry is one of the key components of the Indian manufacturing economy. The Indian automotive industry achieved a turnover of Rs.1,65,000 crores in 2005-06 and accounted for over 13 million direct and indirect jobs and 17% of the total indirect taxes. (Source: Automotive Mission Plan 2016, Government of India). In the year under review, total vehicle production (including two wheelers) grew 14%. The total production of Multi Utility Vehicles (MUVs), Light Commercial Vehicles (LCVs) and three wheelers in India during the year under review was 1,088,676 vehicles. This is a growth of 25% over the previous year (Source: SIAM). The Companys production was 178,982 vehicles. Thus the Company accounted for 16.4% of the Indian production of MUVs, LCVs and three wheelers in the year under review. MUVs are a family of vehicles having versatile forms for various applications like passenger transport or goods transport or a combination of the two. MUVs are further categorized into soft tops, hard tops and pick-ups. There are six manufacturers of MUVs in India. The Company is the largest manufacturer of MUVs in India, offering a range of over 20 models. 274,520 MUVs were sold in India in the year F-07, a growth of 14% over F-06 (Source: Industry and internal). LCVs carrying 2MT to 4 MT of payload are commercial vehicles (CVs) used mostly for intraThe Indian Tractor market is the largest in the world, in terms of sales volumes. In the current year 3,18,317 tractors were sold in India and 34,415 tractors were exported. The tractor market is segmented by horsepower into the low 25 HP segment, the mid segment of 35 HP and the higher segment of above 45 HP Most of the major players cater to all the . three segments. However, their relative strengths and market positions differ from segment to state movement of goods. The Company competes in this category of LCVs through its subsidiary Mahindra International Ltd. (MIL). In F-07 43,113 LCVs (upto 4 MT payload) were sold a growth of 4% over F-06 (Source: Industr y and internal). There are six manufacturers in India in this specific LCV segment. India provides the largest market in the world for three wheelers. 403,909 three wheelers were sold in India in F-07 demonstrating a growth of 12% (Source: SIAM). The larger three wheeler segment, (i.e. three wheelers with a gross vehicle weight (GVW) of over 1 MT) accounts for roughly 13% of the three wheeler market in volume terms (Source: SIAM) The Company has established a very strong presence in this segment, since its entry in 2001. In F-06 the Company made an entry into the smaller three wheeler category with the launch of its small load carrying three wheeler Champion Alfa. The Farm Equipment Sector

19

segment. The domestic tractor industry is fragmented, with about 14 major players and a couple of small local players. Many factors affect tractor sales including the monsoon, means of irrigation and reach of water, government declared support prices for crops, commodity prices, crop production expenses (including seeds, fuel, fertilizer, pesticides and other costs) and the credit policy announced by RBI. This last factor is relevant since more than 90% of tractor sales are on credit. M&Ms Farm Equipment Sector (FES), which designs, develops, manufactures and markets tractors for Indian and overseas markets, is the largest manufacturer of tractors in India and has sustained its market leadership in the Indian tractor market for over 24 years. FES is going global at a rapid pace. Mahindra tractors are exported to U.S.A., China, and Australia, African countries, the SAARC countries like Nepal, Bangladesh and Sri Lanka and Eastern European nations, where they are sold under the parent Mahindra brand name. Industry Industry Developments The Automotive Sector The high growth of the Indian economy in the year under review fuelled the growth of the Indian automotive industry - vehicle production (including two wheelers) increased by 14% over the previous year (Source: SIAM). This growth needs to be seen in the context of several adverse developments during the year. High fuel prices and increase in commodity prices led to increased vehicle prices for all segments except small cars (as excise duty on small cars dropped

from 24% to 16% in the 2006 Union Budget). Interest rates went up significantly during the year. Clearly these adverse developments were overcome by the increased purchasing power of the Indian consumer as well as the economic boom in manufacturing and services sectors. The total number of MUVs sold in India increased by 14%. The LCV segment (2-4 MT of payload) increased by 4% in sales volumes. The large three wheeler segment witnessed a decline in volumes of 28% following the 20% decline last year. (Source: Industry and internal) Within MUVs, after a 7% decline last year, the pick-up market bounced back to grow 20%. The hard top sub segment, which is the largest sub segment in MUVs, saw volumes increase 16 % in the year under review. The soft tops sub segment has been declining significantly over the last few years and declined a further 24 % in the year under review. The Farm Equipment Sector The first monsoon (between June and September) of FY 06-07 was 99% of the Long Period Average. The second monsoon was also good and resulted in a 2.6% increase in Rabi sowing this year. Due to this and water availability during the year, crop production (Rabi and Kharif combined) is estimated to be 1.4% higher than last year. The Government also announced higher Minimum Support Prices for various crops for both Rabi and Kharif periods. It is estimated that the agricultural GDP of India will grow by 2.7%. Increased credit to agriculture, estimated at Rs.194,000 Crores, in this year, and a better

20

focus on retail tractor financing by the banking sector, helped the growth of the tractor industry. The industry witnessed a growth of 21.2% in domestic sales volumes over F-06. The domestic industry closed at 3,18,317 tractors in F-07, compared to 2,62,621 tractors in F-06. Exports from India amounted to 34,415 tractors in F07, a growth of 13.4% over last year. The industry had to bear the impact of hikes in the price of raw materials. Over the last three years, the prices of important input materials like steel, pig iron, and rubber have continuously increased. The prices of crude oil increased significantly in the current year. Margins therefore continued to be under pressure, despite the upturn in the industry. The industry is witnessing consolidation in the domestic market. In F-06 Tractor and Farm Equipment Ltd. (TAFE) bought Eicher Tractors Ltd. This year, M&M successfully bid for a 43.3% shareholding in Punjab Tractors Ltd. (PTL). Per erformance M&M Performance The Automotive Sector The Automotive Sector (AS) of the Company has been a full participant in the robust growth of the automobile industry. It is engaged in the MUV and three wheeler segments and in the LCV segment through its subsidiary MIL. The Company is now entering the passenger car segment through another subsidiary Mahindra Renault Pvt. Ltd (MRPL). Production of the Logan mid sized sedan commenced around the end of the fiscal year 2006-07. Sales commenced from April 2007. The Company manufactures LCVs for MIL and passenger cars

for MRPL on contract basis and also markets these under distribution contract for a fee. For the fifth consecutive year, the Companys vehicle production and sales touched an alltime high during the year under review. 144,090 vehicles [including 8,811 LCVs for MIL and 614 cars for MRPL] and 34,892 three wheelers were produced, a growth of 12% and 56% respectively. A total of 127,958 vehicles and 33,700 three wheelers were sold by the Company in the domestic market, a growth of 7% and 50% respectively. MIL sold 8,550 LCVs in the domestic market. Thus the Company and its subsidiary MIL together sold 170,208 vehicles and three wheelers in the domestic market demonstrating a growth of 18% over the previous year. Overall, a record number of 127,856 MUVs were sold by M&M in the domestic market in the year under review as against the sale of 114,694 MUVs in the previous year. The Companys domestic MUV sales volumes grew 11%, against the industry MUV sales growth of 14%. LCV sales volume of the Company and MIL taken together was 28% higher than last year against the industry growth of the 2-4 MT payload segment of 4%. In the large three wheeler segment, the Companys sales volumes declined by 22% against a 28% decline for industry as a whole, leading to an improvement in market share. The success of the refreshed Scorpio and the Bolero variants helped the Company grow by 11% in the hard top MUV sub segment. A refreshed version of the Bolero was launched in March 2007.

21

In the pick up sub segment, the Company launched a new low priced model, Maxi Truck, during the year, which did very well in the market leading to the Companys pick up volumes increasing 25% and hence also driving the industry sub segment growth of 20% which made this the fastest growing MUV sub segment once again. The soft tops MUV sub segment declined 24 %, while the Companys soft top sale volume declined 21 %. Due to these sub segment shifts and performances, the Companys MUV market share in India declined slightly from 47.6% in the previous year to 46.6% in the year under review. In LCVs, M&M, through its subsidiary MIL, has a presence only in the lower GVW (< 4MT) segment of the market. As mentioned earlier, this LCV sub segment witnessed a growth of 4% in the year under review, while the Companys and its subsidiarys LCV sales improved by 28% due to recent launches in the passenger segment as well as the repositioning of a load carrying model. One of the principal reasons for this very healthy growth was the increased focus on the business through its subsidiary. This led to an increase in market share in the segment from 16.3% in the previous year to 20.1% in the year under review. The subsidiary company is currently also working on developing products for the higher end of the LCV segment as well as larger CVs. In the declining large three wheeler segment, the Company sold 14,146 large three wheelers against 18,112 in the previous year and against 22,953 the year prior to that. The Companys small goods carrying three wheeler, Champion

Alfa that was launched in select markets last year was introduced in all the major markets in the year under review. The Company sold 19,554 Champion Alfas in the year under review against 4,307 sold in the previous year. Given the high growth expectations from the Indian automotive industry, and given the Companys participation in ever increasing areas of the industry, the Company is planning to set up two greenfield plants, one near Pune and another near Chennai, to meet future domestic and export capacity requirements. The plant near Pune will specialize in commercial types of vehicles for the Company as well as CVs for MIL. The plant near Chennai will be set up in partnership with Renault s.a.s and Nissan Motor Company Ltd. to manufacture new generation personal segment MUVs for the Company and cars and other vehicles for Renault and Nissan. The Company has intensified its efforts to identify niche markets for its automotive products throughout the world, especially geographical areas that have similar sales, distribution and marketing conditions as India. Over the last three years the Company introduced its vehicles into many new geographies including Europe, Middle East, South America and South-East Asia by adapting unique business models for each country. It established a beachhead for Europe with a JV in Italy that sells the Scorpio (called the Goa in Europe) and the Bolero. The Companys vehicles are now sold in Italy, France, Spain and Portugal as part of a plan to cover Europe gradually. The Company launched a pick up version of the Scorpio in South Africa during

22

the year, becoming the first Indian automotive company to launch a product internationally outside India for sale. These initiatives resulted in a continuation of the strong growth in the Companys export volumes. Volumes grew 45% from 5,534 [including 175 vehicles sourced from MIL] in the previous year to 8,021 vehicles [including 254 vehicles sourced from MIL] in the year under review. In line with the Companys objective of promoting and establishing the Mahindra brand across the globe, the entry into all these new markets was under the MAHINDRA brand name. In Operations, the Company focused on increasing capacity at existing plants, a ramp up of its new Uttaranchal plant and on rigorous cost reduction. In recognition of the Companys efforts at conserving energy, the Kandivli Plant and the Zaheerabad Plant were awarded the National Energy Conservation Award with the Kandivli Plant being given the Award for the 4th consecutive year, a unique feat. It also bagged a State level award for Energy Conservation. AS Nashik plant won the National Award for excellence in water conservation. During the year, the Company was granted a patent for an apparatus developed by AS for testing the decorative automotive components for combined effects of chemical and mechanical wiping. The Company has also been making significant efforts to take customer satisfaction to even higher levels. The Company significantly improved its ranking on customer and sales satisfaction in syndicated studies conducted by independent third party agencies like J.D. Power.

In the TNS study on Dealer Satisfaction released in 2007, the Company ranked first. The Company was also rated second in a TNS study on Most Trusted Indian car companies. The allnew Scorpio launched at the end of the previous year received the Business World National Institute of Design Award in the Best Automobile Design Four Wheeler category and was also awarded the coveted Golden Peacock Award for Innovative Products / Services in the Automobile segment. These awards augur well for the future. In the last quarter, the Company also unveiled the bio-diesel Scorpio and Bolero DI vehicles for 100% real world usage trials. The Scorpio is the first Asian vehicle in its class to run on 100% bio-diesel. The Farm Equipment Sector M&M became the first tractor company in India to sell more than one lakh tractors in a year. The Company sold 1,02,531 tractors in F-07 as against 85,029 tractors sold during F-06. This includes export of 7,525 tractors as against 6,981 tractors exported last year. The Company crossed another milestone in F-07; the cumulative sale of tractors till date crossed the 12,00,000 tractors mark. It sustained its leadership position for the 24th consecutive year with a market share of 29.8% in the domestic tractor market. The Company has been a pioneer in the Indian tractor industry in many ways. It had introduced the first Turbo tractor in India. It was the first tractor company in the world to win the prestigious Deming Award. In the current year,

23

F-07, it launched the Mahindra Shaan, a Multi Utility Tractor, another first of its kind in India. Shaan is a 25 HP innovative product designed to serve small and medium farmers in multiple ways, not only on the field but also on the road. Besides being used as a regular tractor, the inbuilt trolley feature enables the customer to use Shaan for transportation of farm produce and other commercial goods like sand, bricks and flowers. The Arjun Ultra-1, which was launched in F-06 for the domestic market, was well received and has significantly contributed to growth in the higher HP segment in F-07. Apart from this, the Company continued to evolve new products and upgrade the aesthetics, styling and ergonomics of existing products. It also rolled out two new product variants each for the 55 and 60 HP categories for the US markets. This year, the Company has trained a special focus on Customer Centricity and rural technology development. A 24x7 toll free number has been introduced to address customer queries and complaints - another first in India from M&M. In line with the growing demand for automobiles running on alternate fuels, a Bio-Diesel programme for tractors was initiated. On 7th February 2007, a tractor that can run on 5% bio-diesel was displayed in New Delhi in the presence of the Union Minister for Petroleum and Natural Gas. The Company also sells engines and gensets to various industries. The gensets are sold under the Mahindra Powerol brand. In F-07, engine and genset sales put together increased by 53% in volume terms while the sales more than

doubled in value terms. In F-06, the Company had made an entry into the retail and nongenset segments. This year it developed noise resistant canopies for gensets in accordance with the Central Pollution Control Board norms. It became the market leader in the telecom sector for Powerol gensets. On the global front the Companys strategic joint venture in China - Mahindra China Tractor Company Ltd. (MCTCL) - was able to reach planned capacity by the end of its first year. A few products of MCTCL are being tested in target markets. It is also using suppliers in China as an alternative source for some commodities. MCTCL aids this process. Strategically, this JV offers M&M a faster entry into China and a complementary product range for China as well as for export markets. In the USA, the 0-70 HP tractor industry declined by 12% between April 2006 and March 2007. The major reasons were fuel price increases, softening of the housing market and higher energy costs. Mahindra USA slowed down at the lesser rate of 7%. The overall growth in exports for Rest of the World (ROW) tractor markets (excluding USA and China) in F-07 was an impressive 132%. Australia and Africa were major contributors to this growth. The Australia operations, which began in F-06 with the setting up of an assembly plant at Brisbane, are doing well. The Company also entered new markets in F-07 including the Middle East and South America. The Company continued its journey towards excellence in business process improvements in

24

several ways. A Lean Manufacturing initiative was started at all its plants. TPM was launched at the Mumbai plant in November 2006. Involving suppliers in the process strengthened the ongoing focus on continuous improvement. The Mumbai and Rudrapur plants were certified in F-07 for Occupational Health & Safety Assessment Series (OHSAS- 18001). This makes all the four of the Companys plants OHSAS certified. The Company was also granted a patent for a Self Air-bleeding fuel supply system with gravity-primed fuel feed pump developed by it for diesel engines. The Company continues to improve its supply chain by reducing dealer stocks and outstandings. It believes that its dealer stocks and outstandings, in terms of number of days, are much lower than other industry players. Opportunities The Indian economy has been growing at an annual average growth rate of well above 8% for the last three years making it one of the fastest growing large economies in the world. This kind of growth focus combined with the Companys diligent expansion of its technological and product development capabilities, and its active search for overseas partners and markets, augurs well for the coming years. Indias automotive sector is one of the fastest growing in the world. With the Indian economy on a high growth path and with the consequently increased disposable incomes of the population at large, the Indian automotive industry is expected to have significant growth opportunities. The Indian Government is also

working on a plan to significantly increase the growth prospects of the Indian automobile industry. It has announced a new automotive policy, viz. Automotive Mission Plan 2016 (AMP 2016), in partnership with the industry with the objective of doubling its contribution to the Indian economy over the next ten years. With the Companys enhanced presence in the Indian automotive industry through its joint ventures for CVs and cars as well with its entry into the smaller three wheeler category, the Company is well poised to garner an increasing share of this fast growing segment of the Indian economy. In the Automotive Sector, the Company believes that its core MUV market is likely to increase its share in the light vehicles category due to the inherent versatility of MUVs for a fast growing developing country. The proportion of MUVs in India is relatively low compared to corresponding figures in Asian countries that share a similar or more developed profile. In the long term, we believe that the light vehicle market will expand at a fast clip in India and that MUVs will take an increasing share of this market. The AMP 2016 also states that fiscal benefits should be provided to MUVs, which could lead to further MUV growth. The Companys entry into the car market through a joint venture and its strong presence in the MUV segment will enable the leveraging of the full range of opportunities. The ongoing WTO and Free Trade Area negotiations with Thailand, ASEAN, SAARC countries and the Mercosur countries are likely to lead to lowered tariffs across many target

25

export markets. This could provide a significant opportunity to generate larger volumes from export sales and further the sectors strategic emphasis on the development of exports. Given the current state of road infrastructure in the interiors, as well as the extremely high cost required for improvement, MUVs will continue to be the most appropriate and economical vehicles for transporting people in the interiors. Rural public transportation is not as extensively developed as in the urban areas, providing further opportunities for MUVs and LCVs. MUVs and CVs are preferred vehicles for projects and construction sites like the Golden Quadrilateral road project and the North, South, East and West Corridor project. A higher level of industrial development generally leads to a greater demand for MUVs and CVs. Hence if the planned rate of GDP growth is achieved over the next decade, the demand for MUVs and CVs should increase commensurately. The increased infrastructural investments required to maintain the high growth of the Indian economy - like the North South East West corridor which has a budget of tens of thousands of crores - and the increased goods movement from a fast growing economy, would maintain a high demand for CVs. To capture a share of the growing medium and heavy CV segment, the Companys subsidiary, MIL, will launch a new range of medium and heavy CVs over the next few years and thus ensure the Companys participation in this important segment of the Indian automotive industry.

The burgeoning Indian middle class population, with fast growing disposable incomes, with an increasing propensity to spend, along with the huge increase in the working age population expected over the next 10 years, will drive high growth for passenger vehicles. Given that over half the Indian market is accounted for by passenger cars, the Companys partnership with Renault to introduce Renault models suitable for India through its subsidiary MRPL will provide the Company incremental growth from participating in the other fast growing segment of the Indian auto industry. Thus, through these strategic initiatives, the Company has put in place plans to increase its size of the addressable market of the Indian automotive industry from the current 17% to 75%, providing a huge opportunity for growth. Regulatory measures on compulsory scrapping of vehicles beyond a particular vintage have been mooted in some States. The adoption of these norms could lead to higher demand due to a surge in the replacement demand of the scrapped vehicles. There are opportunities for the Farm Equipment Sector as well. The Government of India has given increased focus to agriculture in the budget for F-08. The crop and water situation also appears satisfactor y, which is an encouraging sign for the tractor industry. The Rabi crop sowing increased by 2.6% this year, compared to F-06. This crop will be harvested in the first quarter of next year. In India, 76 water reservoirs are identified as major reservoirs since they contribute to 63% of the

26

total water capacity in the country. The water level in these major reservoirs across India was higher than last year by 12%. There are also certain states in India where penetration is low and these provide opportunities for growth. The Company will leverage these opportunities by strong marketing initiatives like brand building, creating stronger franchises, restructuring dealers and the introduction of new products. The USA and China are among the top three tractor markets in the world apart from India. The Company plans to continue its focus on these markets to become a global leader. Mahindra USA plans to introduce a new series of models in US markets that will open up new customer segments. In China, MCTCL has started selling tractors in the domestic Chinese market. M&M is well positioned to grow sales in the Chinese market. M&M is also exploring various global tractor markets in Africa, East Europe and the Middle East. Facilities at the Nagpur and Rudrapur Plants will ensure low cost manufacturing bases for the Company. China will also serve as a low cost sourcing base for its products. The pressing need of overseas automotive players to cut costs has created an outsourcing opportunity for India in the area of automotive systems/aggregate production. India has a competitive edge due to its strong base of highly skilled (and relatively low cost) engineers. M&M already has domain expertise in many of the required areas and can offer global O.Es and Tier 1 suppliers, products and services across

the chain, right from the sourcing of steel to the design of systems. These capabilities have been strategically integrated into a single sector, Mahindra Systech. This move is expected to result in further business growth and to establish the Mahindra brand in the global automotive arena. It will also partially de-risk the cyclicality inherent in the Automotive and Farm Equipment businesses. Apart from this, the sectors will share synergies of resources, especially for sourcing, giving major opportunities for savings. Threats For the Automotive Sector more stringent regulatory norms are being introduced. While these measures are welcome, they may result in an increase in manufacturing costs, which, in turn, may affect margins or demand in a price sensitive situation. Import tariffs have been progressively reduced and are expected to be reduced further in the future in line with Indias obligations under WTO and its bilateral free trade agreements with certain countries, with the possible eventual elimination of import tariffs on imports from these countries. This will increase competitive pressures on the Company. The Companys exports, a strong thrust area, can be adversely affected if the Rupee continues to appreciate. Current trends indicate that interest rates for vehicle and tractor loans given by NBFCs and Banks in India are likely to increase over the years and this may affect the Companys sales volume leading to lower profitability.

27

The entry of new players has made the passenger car and MUV markets much more competitive affecting the margins of all participants. The Company is countering this threat by a stronger focus on reducing costs and increasing efficiency of operations. It also hopes to garner greater economies of scale from its entry into the car market with its joint venture with Renault. Any reduction in the price differential between petrol and diesel could increase demand for petrol MUVs at the expense of diesel MUVs. Almost all of the Companys MUV models are diesel powered and an increase in preference for petrol vehicles could be a disadvantage to the Company. However even after four years of fuel price decontrol, a substantial differential has been maintained. Mandator y use of vehicles powered by alternative energy sources could lead to a demand for different types of vehicles. The Company has developed products powered by alternate energy like CNG and electricity to provide lower polluting products for a better environment, which minimizes this risk. The Company has also developed prototypes of a hybrid Scorpio and hydrogen powered three wheeler, thus demonstrating its capabilities. As mentioned earlier, it also developed bio diesel powered Scorpio and Bolero in the year. Hence the Company is well placed to move with the trend towards alternative energy vehicles, should it take place. Consistently high fuel prices increase the running cost of vehicles, and may therefore

impact demand for automobiles. The impact could be felt on the auto sector bottom-line if not passed on to the customer. The Company continued to be amongst the most aggressive in passing on these costs to consumers, but may not be able to always do so in the future. High fuel prices increase the running costs, and may directly impact the tractor industry. Diesel constitutes over 60% of the running cost of a tractor. Any further increase in the price of diesel may adversely impact input costs for farmers. If not compensated by a crop price increase, this can impact the availability of funds with farmers and, in turn, the tractor demand. For the Company, the mandatory use of vehicles powered by alternative energy sources could lead to a demand for different types of tractors. To minimise this risk, it is customising products powered by alternate energy like bio diesel. In F-07 it successfully tested a tractor powered by 5% bio diesel and will introduce it soon. The Company is well placed to move with the trend towards alternative energy tractors, should it become a norm in future. With M&Ms strong focus on globalisation, any form of tariff/non-tariff barriers imposed by any country where M&M has a significant presence or has plans to grow will be a threat. As for all exporters, any political, economic uncertainty or natural calamity in the countries of export would be a potential threat. A major threat to both sectors lies in the escalation in raw material prices. Such price hikes, especially for iron, steel and rubber are likely to put pressure on prices and could affect

28

margins or demand. Apart from this, a steep increase in crude oil prices globally, has an inflationary impact on the overall economy. Risks and Concerns Stringent legislation on pollution and emission requirements will increase the cost of the Companys products for the Automotive Sector. Holding the price line could have an impact on profitability. Price increases on the other hand could impact volumes. The Company has established two joint ventures during F-06. If these do not develop as per their business plan, the returns from them may be lower than expected and this could have an impact on the Companys margins and cash flows. The Company is planning to set up two new greenfield plants in association with global partners. With the addition of the full capacity of these new plants, the Companys dedicated final capacity will significantly increase as compared to its current capacity. If for some reason, the demand for the Companys products does not allow a significant utilization of these new capacities, the increased fixed costs would impact the Companys profitability in the future. The Company has plans to bring in the incremental capacity from these new plants, phase wise to protect it from this risk. Additionally, the Company has tied up with other OEMs to jointly share the costs and bring in economies of scale for the full plant, even if individually the Companys volumes would account for only a part of the total. For the Farm Equipment Sector a fluctuation in forex rates could be a risk. However, M&M,

as a practice, is taking appropriate steps to hedge currency exposure thus limiting the impact of risk. It will continue to focus on cost cutting measures through value engineering. Domestically, growing NPAs of banks are a concern for the Company, as this puts pressure on the credit availability to the farmers, 90% of whom buy tractors against loans. Interest rates for tractor loans tend to be higher than for housing and car loans. Banks have been increasing the interest rates, which could impact the loan repayment ability of the farmers, and thus impact tractor demand. However, the Finance Minister, in his budget speech, has talked about 2% subvention to support farmers for short-term crop loans. Excise In 1991, an excise dispute arose at the Nashik and Kandivili factories relating to the Commander range of ten-seater vehicles. The jurisdictional Central Excise authorities, after due inquiry, approved the classification of these vehicles as ten-seaters which attracted a lower rate of excise duty under Tariff Entry 8702. The Company successfully contested the subsequent challenge by the excise authorities, in two different fora. The Excise Department accepted these decisions and the classification of the vehicle as a ten-seater was consistently approved by the authorities. Inspite of the above, the Excise Department subsequently disputed the classification on the ground that classification of the Commander under Tariff Entry 8702 as ten-seater did not meet certain parameters of the Motor Vehicles

29

Act, 1988 and the Maharashtra Motor Vehicles Rules, 1989, and demanded differential duty. The Departments stand was that the Commander should be classified under Tariff Entry 8703, attracting a higher rate of excise duty. The Company challenged these demands by writ petitions before the Bombay High Court, which stayed the further proceedings unconditionally. The High Court remanded these matters for adjudication before the Excise authorities. The Commissioner (Adjudication), Navi Mumbai passed an order dated 30
th

this account as it has been advised that an extraneous legislation like the Motor Vehicles Act cannot be referred to for the purpose of excise classification. The Excise Commissioners, the Tribunal and various expert/statutory bodies holding the vehicle to be a ten-seater have accepted this stand. During the current year, the Commissioner of Central Excise, Nashik has also confirmed a demand of Rs. 24.55 crores and imposed a penalty of Rs. 20 lacs in respect of Armada range of vehicles manufactured by its Nashik Unit during the period 1992 to 1996, on the same basis as adopted for Commander range of vehicles. The Tribunal was pleased to grant an unconditional stay against this order as well. The final hearing in the matter is awaited. Outlook There is a strong linkage between the strength of the automotive industry and the strength of the economy of a country. High growth of the industry leads to accelerated growth of the economy, which in turn leads to a higher growth for the automotive industry in a virtuous cycle. The last five years have seen both the Indian economy and the Indian automotive industry growing at a fast clip. The Indian auto industry is one of the fastest growing automotive industries in the world. Between 1997 and 2005, the global production of vehicles increased from 55.9 mn to 66.5 mn - an average growth of 2.2% p.a. (Source: OICA). Over the same period, vehicle production in India increased by an average 9.3% p.a. (Source: SIAM). In fact the growth of production across

March 2005

confirming the demand of Rs.216.03 crores and imposed a penalty of Rs. 88.08 crores. The Company has filed an appeal and a stay application in the Tribunal challenging this order. Initially, a bench of the Tribunal passed an order (stay order) directing the Company to pay Rs. 54 crores and furnish bank guarantee of Rs. 54 crores as pre-deposit. The Company challenged this before the Bombay High Court, which was pleased to set aside this stay order and remand the matter back to the Tribunal for hearing on the stay application afresh. The matter is yet to be heard. In another concurrent proceeding, the Tribunal passed an order in July 2005 holding that the vehicles were appropriately classifiable under Tariff Entr y 8702 as ten-seaters. The Department has challenged this order by filing a Civil Appeal, before the Supreme Court, which has been admitted. The matter is yet to be finally heard. The Company does not expect any liability on

30

all categories of vehicles averaged 17% p.a. over the last five years (Source: Automotive Mission Plan 2016, Government of India). If the Indian economy continues to grow at a high rate, demand conditions for the short to medium term are expected to remain strong. However, due to the high base and the upward bias on interest rates there is a also a possibility that the growth in F-08 may be relatively lower than F-07. In the longer term, given the high correlation of the automotive industry to GDP growth and the fact that the industry itself accounts for about 4.5% of Indias GDP the outlook for the , auto industry on a GDP growth forecast of 78% p.a. is quite bright. Over the longer term AS will be increasing its participation in the growth of the Indian auto industry by entering into other segments like cars and medium and heavy commercial vehicles due to its JVs. For F-08, the Government of India has proposed to allocate Rs. 2.37 lakh crores for agricultural credit, which is an important factor for the tractor industry. Moreover there is a strong focus on irrigation projects and investment for development of rainless areas. The governments emphasis on rural economic development and supporting the agriculture sector provides longer-term opportunities for faster farm mechanisation. There is a focus on seeds production. Moreover, Rs.12,400 crores has been announced for water related schemes. Rainwater Harvesting, as a means of improving the water table is also on the governments agenda. This opens several possibilities for the FES and it is working on the development of a

number of new products, particularly value for money solutions, for small farmers. The tractor industry saw a steep growth in F07 and has now reached a high base. It is therefore estimated that the industry will witness a moderate growth path in F-08 depending on the monsoon. Both sectors with their updated product portfolios and their exploration of global horizons, will strive to maintain their leadership position. Simultaneously, the Company will continue its focus on achieving cost leadership through focused cost optimization, value engineering, improved efficiency measures like supply chain management, countr ywide connectivity of all its suppliers and dealers, and exploiting synergies between its Sectors. Material developments in human resources/ industrial relations Industrial relations during the year for AS were cordial at all the plants and area offices of M&M. A new agreement was signed at the Zaheerabad Plant that provides for increased productivity linked to increased wages. Industrial relations during the year for FES were cordial at all the plants and area offices of M&M. A major wage settlement was signed at the Nagpur Plant on 30th April 2006 aiming for 30% higher productivity. Manpower utilization is now at an effectiveness level of almost 100%. This year there was a major thrust to increase workman participation in improvements. Continuous Improvement Teams have been

31

formed amongst workmen to get inputs for process improvements with a focus on total quality and cost effectiveness. The permanent employee strength of the Company as on 31st March 2007 was 13089. Internal Control Systems The Company maintains adequate internal control systems, which provide, among other things, reasonable assurance of recording the transactions of its operations in all material respects and of providing protection against significant misuse or loss of company assets. The Company uses an Enterprise Resource Planning (ERP) package, which enhances the internal control mechanism. The Company has a strong and independent internal audit function. The Chief Internal Auditor reports directly to the Chairman of the Board. Professionally qualified technical and financial personnel of the internal audit function conduct periodic audits to ensure that the Companys internal control systems are adequate and are complied with Discussion on Financial Performance with respect to Operational Performance Overview Over view The financial statements have been prepared in compliance with the requirements of the 2. Inventories:

Companies Act, 1956, and Generally Accepted Accounting Principles (GAAP) in India. The Groups consolidated financial statements have been prepared in compliance with the standard AS 21 on Consolidation of Accounts and presented in a separate section. The company has provided segment reporting on a consolidated basis as per standard AS 17 on segment reporting. This information appears along with the consolidated accounts. Financial Information Fixed 1. Fixed Assets: As at 31st March 2007 the Gross Block of Fixed Assets and Capital Work in Progress increased to Rs. 3510.28 crores from Rs. 3064.71 crores as at 31st March 2006. During the year, the Company incurred capital expenditure of Rs. 544.59 crores (previous year Rs. 294.57 crores). The major items of capital expenditure are for Capacity Enhancement, New Product Development and Research & Development. This includes purchase of Intangible assets aggregating to Rs. 36.95 crores (previous year Rs. 10.62 crores)

March 31, 2007 Raw materials and bought out components as a % of consumption Finished goods as a % of gross sales better planning and control. 4.62% 4.10%

March 31, 2006

5.52% 4.70%

There was an appreciable reduction in inventories due to focus on supply chain management and

32

Sundry Sundry Debtors: Sundry debtors amount to Rs.700.89 crores as at March 31, 2007, as compared with Rs. 637.97 crores as at March 31, 2006. Debtors as a percentage of gross sales and income from RESULTS OPERATIONS RESULTS OF OPERATIONS 1. Income :

operations are 6.17 % for the year ended March 31, 2007, as compared to 6.82 % for the previous year. This decrease in sundry debtors is due to judicious credit management and control.

(Rs. crores) Particulars F 2007 Amount Gross Sales/Income from operations Less : Excise Duty on Sales Net Sales/Income from operations Other Income Other Income: Other income during F-2007 at Rs. 194.97 crores was significantly higher than Rs 103.86 crores earned in the previous year. It comprises mainly of dividends from subsidiaries/ other companies, income from surplus fund investments and other miscellaneous income. Expenditure: Particulars F 2007 Amount % to Net Income 6851.92 666.15 (Rs. crores) F 2006 Inc./(Dec.) Amount % to Net % Income 69.49 6.71 19.92 20.73 11363.05 1312.79 10050.26 194.97 % 113.06 13.06 100.00 1.94 F 2006 Amount 9347.57 1124.89 8222.68 103.86 % 113.68 13.68 100.00 1.26 Inc./(Dec.) % 21.56 16.70 22.23 87.72

Raw materials, Finished and Semi-finished Products Personnel expenses Interest, commitment and finance charges Depreciation Other expenses Provision for contingencies Total Expenditure (67.45) 209.58 1269.34 8929.54 (0.67) 2.08 12.63 (18.40) 200.01 989.11 0.78 (0.22) 2.43 12.03 0.01 90.45 266.58 4.79 28.33 20.07 68.18 5713.77 6.63 551.78

88.85 7437.05

Though the total expenditure has increased in absolute amount, it has declined as a percentage of Net sales / Income from Operations from 90.45 % last year to 88.85 % in the current year.

33

Material Cost : For the year ended March 31, 2007, material cost as a percentage of net sales shows a decrease over the previous year mainly due to efficiencies arising out of strategic sourcing and reengineering initiatives undertaken by the company. Material cost is also impacted by product-mix changes. Personnel Cost : Personnel cost as a percentage of sales has decreased from 6.71 % to 6.63 %. Increase in personnel cost in absolute value is mainly due to increase in officers strength, annual increments and the impact of wage settlements. Other Expenses : Other expenses as a percentage of net sales shows an increase over the previous year is mainly because of increase in variable expenses on account of higher volumes and increase in Advertising and Brand Building. Depreciation : The depreciation for the year ended March 31, 2007 is at Rs. 209.58 crores as compared to Rs. 200.01 crores in the previous year. Interest (Net) : The interest expense (net of interest income) for the year ended March 31, 2007 is a net income of Rs. 67.45 crores as against a net interest income of Rs 18.40 crores in the previous year. Gross of interest income (CY: Rs. 87.25 crores, PY Rs. 45.36 crores) the interest cost for the current period at Rs. 19.80

crores was lower than Rs. 26.96 crores in the previous year due to more efficient funds management. Exceptional Items : The profit from Exceptional items during the year ended 31st March 2007 is Rs.121.98 crores as against Rs.210.01 crores last year. The profit in the current year is mainly from profit on sale of shares of Tech Mahindra Limited offered as a part of that Companys Initial Public Offering while in the previous year profit from Exceptional items included profit on sale of shares of MMFSL and profit arising out of the transfer of the right to carry on LCV business along with congeries of rights therein and intellectual property rights to the subsidiary Mahindra International Limited. Provision for taxation : The provision for current tax, fringe benefit tax and deferred tax for the year ended March 31, 2007 as a percentage to profit before tax is higher than the previous year, on account of the incremental profit of Rs.191.80 crores during the current year being subjected to tax at the maximum marginal rate of 33.66%. Period Prior Period Adjustments: Prior period adjustments (net of tax) Rs. 1918.84 lakhs (previous year nil) are on account of Provision for Gratuity Rs. 2584.59 lakhs Gross arising from certain refinements in the actuarial assumptions, accrual of Post Retirement Medical Benefits on an actuarial basis Rs. 307.85 lakhs Gross and the resultant tax credit on both the items of Rs. 973.60 lakhs.

34

Position Consolidated Financial Position of the M&M Group As required by the Accounting Standards, the company has published the consolidated Profit and Loss Account and Balance Sheet for the M&M Group as a whole. The Group comprises of the flagship holding company, Mahindra & Mahindra Limited, 75 Subsidiaries, 4 Joint Ventures and 10 Associates engaged in various businesses. The Gross turnover for the year ended 31st March 2007 of Consolidated Mahindra Group is Rs. 19436.81 crores as against Rs. 13908.37 crores for the previous year. The Groups net turnover grew by 41.62% to Rs.17912.28 crores in the current year from Rs. 12648.41 crores in F-2006. The profit before exceptional items and tax for the current year is Rs. 2319.69 crores as compared to Rs. 1539.11 crores in the previous year a growth of 50.72%. This is due to the excellent performance of the parent company and group companies like Tech Mahindra Limited, Mahindra & Mahindra Financial Services Limited, Mahindra Holidays and Resorts India Limited, Mahindra Gesco Developers Limited and others. During the year there was an exceptional charge of Rs 117.29 crores arising mainly on account of an upfront payment of Rs. 524.94 crores by Tech Mahindra to a customer, a profit of Rs. 209.61 crores on account of deemed divestiture of Mahindra Gesco Developers Ltd. at the time of its successful Qualified Institutional Placement of shares and a profit of Rs 152.53 crores arising from the Initial Public Offering of Tech

Mahindra Ltd. During the year there was also a Prior period profit of Rs 15.18 crores mainly due to, reversal of certain excess provisions for income tax of previous years. The consolidated group profit for the year after exceptional items, prior period adjustments and tax and after deducting minority interests is Rs.1497.15 crores as against Rs.1269.72 crores earned last year a growth of 17.91%. This growth in profits could be achieved due to the excellent performance by some Group companies, a few of which are mentioned here. The Groups Finance company, Mahindra & Mahindra Financial Ser vices Limited (MMFSL), despite very stiff competition, achieved a 41.62 % growth in its total income from Rs. 596.41 crores to Rs. 844.61 crores. It is one of the leading NBFCs in financing of four wheelers and its profit after tax grew by 22.73 % from Rs. 108.27 crores in the previous year to Rs. 132.88 crores in the current year. The Groups major IT subsidiary, Tech Mahindra Limited (Consolidated), witnessed a Revenue growth of 130.03 % with total income increasing from Rs. 1276.68 crores last year to Rs.2936.73 crores in the current year. The profit after tax before exceptional items for the year was Rs. 612.62 crores as compared to Rs 235.38 crores in the previous year an increase of 160.27 %. Mahindra Holidays and Resorts India Ltd., during the year under review, continued to grow towards dominance in the Holiday Segment with membership growing to 53113 nos. The total income grew by 53.54% from Rs. 156.73 crores

35

to Rs. 240.65 crores. The profit after tax for the year registered a growth of 100.38 % from Rs. 20.84 crores in F-2006 to Rs.41.76 crores in F-2007. Mahindra Gesco Developers Limited (MGDL), the Groups subsidiary in the business of real estate and infrastructure development showed impressive growth during the year under review. The demand for housing is buoyant and is expected to remain so at least for the near medium term. The Company (through its Results Segment Results

subsidiary, Mahindra World City Developers Limited) has successfully operationalised the SEZ at Chennai and has formed a SPV Mahindra World City Jaipur Ltd along with the Government of Rajasthan for building a new SEZ at Jaipur. The Companys total income increased from Rs. 124.13 crores to Rs 163.25 crores a growth of 31.52%. The profit after tax during the year increased by 28.82% from Rs 11.00 crores to Rs 14.17 crores.

The results achieved by major business segments of the Group are given below: (Rs. crores) Segments 1. 2. 3. 4. 5. 6. 7. 8. Automotive Farm Equipment Financial Services Steel Processing & Trading Infrastructure Hospitality IT Services Systech F-2007 653.04 499.67 207.56 49.28 9.62 63.95 161.23 165.69 F-2006 538.46 310.54 164.19 48.03 18.68 32.03 261.66 98.76

Certain statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.

36

CORPORATE GOVERNANCE
Your Company is fully committed towards transparency in all its dealings, adhering to the corporate values and leveraging the corporate resources in alignment with the benefits to the stakeholders. Your Company promotes and practices a culture that is built on core values and ethics. It is committed to all its stakeholders including fulfilling its societal obligations. CRISIL Limited, which was engaged to conduct a Governance and Value Creation rating has assigned a CRISIL GVC Level 1 rating to your Company. The rating indicates that M&Ms capability with regard to Corporate Governance and Value Creation for all its stakeholders is the highest. Your Company has been practising the principles of good Corporate Governance and ethical business practices over the decades. A report on compliance with the Code of Corporate Governance as prescribed by the Securities and Exchange Board of India and incorporated in the Listing Agreement is given below. term objectives of enhancing stakeholders value are met. The Vice-Chairman & Managing Director and the two Executive Directors are Whole-time Directors. The Chairman, who is a NonExecutive Chairman and the Vice-Chairman & Managing Director, though professional Directors in their individual capacities, belong to the Companys promoter group. Life Insurance Corporation of India (LIC) had with effect from 29 th May, 2006, nominated Mr. Thomas Mathew T., its current Managing Director as its representative on the Board. The remaining eight Non-Executive Directors (including the Nominee Director) are Independent Directors, and professionals, with expertise and experience in general corporate management, finance, banking, insurance and other allied fields. Apart from reimbursements of expenses incurred in the discharge of their duties, the remuneration that these Directors would be entitled to under the Companies Act, 1956 as Non-Executive Directors and the remuneration that some of the Directors may receive for professional services rendered to the Company either in individual capacity or through a firm in which one of them is a partner, none of these Directors has any other material pecuniary relationships or transactions with the Company, its Promoters, its Directors, its Senior Management or its Subsidiaries and Associates which in their judgement would affect their independence.

I. Board of Directors
The Company has a Non-Executive Chairman and the number of Independent Directors is more than 1/3 of the total number of Directors.
rd

The number of Non-Executive Directors is more than 50% of the total number of Directors. The composition of the Board is in conformity with Clause 49 of the Listing Agreement. The Board reviews and approves strategy and oversees the results of management to ensure that the long

37

Khaitan & Co., Advocates & Solicitors, in which Mr. R. K. Kulkarni, Non-Executive Director is a partner, received professional fees of Rs.86.28 lakhs. The Senior Management have made disclosures to the Board confirming that there are no material, financial and/or commercial transactions between them and the Company which could have potential conflict of interest with the Company at large.
Directors Category

A. Composition of the Board The Company presently has twelve Directors. The names and categories of Directors, the number of Directorships and Committee positions held by them in the companies are given below. None of the Directors on the Board is a Member on more than 10 Committees and Chairman of more than 5 Committees (as specified in Clause 49 of the Listing Agreement), across all the companies in which he is a Director.
Total Number of Committee Memberships, Chairmanships and Directorships of public companies* as on 31st March, 2007

Committee Memberships+ NON-EXECUTIVE Mr. Keshub Mahindra (Chairman) Mr. Deepak S. Parekh Mr. N. B. Godrej Mr. M. M. Murugappan Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri Mr. Thomas Mathew T.** EXECUTIVE Mr. Anand G. Mahindra (Vice-Chairman & Managing Director) Mr. Bharat Doshi (Executive Director) Mr. A. K. Nanda (Executive Director) * + Promoter 1 Promoter Independent Independent Independent Independent Independent Independent Independent Independent 1 6 6 5 4 1 7 2 -

Committee Chairmanships+ 1 4 3 1 1 2 1 -

Directorships $

6 12 14 9 11 4 7 4 5 12

Non-independent Non-independent

4 9

2 4

9 14

Excludes private limited companies, foreign companies, companies registered under section 25 of the Companies Act, 1956 and government bodies Committees considered are Audit Committee and Shareholders/Investors Grievance Committee, including that of Mahindra & Mahindra Limited Excludes Alternate Directorships but includes Additional Directorships and Directorship in Mahindra & Mahindra Limited

** Appointed as Nominee Director of LIC with effect from 29th May, 2006 $

38

B. Board Procedure A detailed Agenda folder is sent to each Director in advance of Board and Committee Meetings. To enable the Board to discharge its responsibilities effectively, the Vice-Chairman & Managing Director apprises the Board at every Meeting of the overall performance of the Company, followed by presentations by the Sector Presidents. A detailed functional report is also placed at Board Meetings. The Board also inter alia reviews strategy and business plans, annual operating and capital expenditure budgets, investment and exposure limits, compliance reports of all laws applicable to the Company, as well as steps taken by the Company to rectify instances of non-compliances, review of major legal issues, Minutes of the Board Meetings of your Companys unlisted subsidiary companies, significant transactions and arrangements entered into by the unlisted subsidiary companies, adoption of quarterly/half-yearly/annual results, significant labour issues, transactions pertaining to purchase/disposal of property(ies), major Directors Mr. Keshub Mahindra Mr. Anand G. Mahindra Mr. Deepak S. Parekh Mr. N. B. Godrej Mr. M. M. Murugappan Mr. Bharat Doshi Mr. A. K. Nanda Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri Mr. Thomas Mathew T. * Mr. T. S. Vijayan @ *

accounting provisions and write-offs, corporate restructuring, Minutes of Meetings of the Audit and other Committees of the Board, and information on recruitment of Officers just below the Board level, including the Company Secretary and Compliance Officer. C. Number of Board Meetings, Attendance of the Directors at Meetings of the Board and at the Annual General Meeting (AGM) Eight Board Meetings were held during the period 1st April, 2006 to 31st March, 2007 on the following dates 29th May, 2006, 26th July, 2006, 26th October, 2006, 21st November, 2006, 31st January, 2007, 5 th March, 2007, 21st March, 2007 and 26th March, 2007. The gap between two Meetings did not exceed four months. These were well attended. The Sixtieth Annual General Meeting (AGM) was held on 26th July, 2006. The attendance of the Directors at these Meetings is as under: Number of Board Meetings Attended 8 7 6 6 5 8 8 6 6 8 5 6 Attendance at the AGM Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes -

Appointed as Nominee Director of Life Insurance Corporation of India (LIC) with effect from 29th May, 2006 @ Mr. T. S. Vijayan resigned as Nominee Director of LIC with effect from 29th May, 2006

39

D. Directors

seeking

appointment/

Management, Ahmedabad, and was appointed by the Government to serve on a number of high level Committees including the Sachar Commission on Company Law & MRTP and the Central Advisory Council of Industries. Mr. Mahindra has received several national and international awards for his contribution to public life and industry, including the Chevalier De La Legion Dhonneur, the Businessman of the Year 1989 of Business India Award, The Sir Jehangir Ghandy Medal for Industrial Peace 1994 of XLRI, Jamshedpur, the IMC Diamond Jubilee Endowment Trust Award in 1998, Dadabhai Naoroji International Award for Excellence & Lifetime Achievement, All India Management Association Lifetime Achievement Award for Management in 2003 and the Lakshya Business Visionary Award 2006 instituted by NITIE and Indian Business School (IBS) Kolkata Lifetime Achievement Award presented by The Institute of Chartered Financial Analysts of India (ICFAI) in 2007. He is Chairman of Mahindra Holdings & Finance Limited, Mahindra Ugine Steel Company Limited, Tech Mahindra Foundation and Kema Services (International) Private Limited. He is a Director in Bombay Burmah Trading Corporation Limited, The Bombay Dyeing & Manufacturing Company Limited, Rodal Investments Private Limited and Pratham-India Education Initiative. Mr. Keshub Mahindra holds 2,01,148 Ordinary (Equity) Shares in the Company.

re-appointment Mr. Keshub Mahindra, Mr. Anupam Puri, Dr. A. S. Ganguly and Mr. R. K. Kulkarni retire by rotation and, being eligible, have offered themselves for re-appointment. Mr. Keshub Mahindra Mr. Keshub Mahindra has been the Chairman of the Board since 1963. A graduate from Wharton, University of Pennsylvania, he joined the Company as a Director in 1948. Mr. Mahindra is Chairman of the Board of Governors of Mahindra United World College of India, Vice-Chair man of Housing Development Finance Corporation Limited and Director of United World Colleges International Limited, U.K. amongst other companies. Mr. Mahindra is associated with several committees. He is a Member of the Prime Ministers Council on Trade & Industry, New Delhi, Member of the Apex Advisory Council of ASSOCHAM, a Member of the Governing Board of Bombay First and President of the Governing Council of the University of Pennsylvania Institute for the Advanced Study of India, among others. Mr. Mahindra was the President of the Bombay Chamber of Commerce and Industr y, ASSOCHAM, the Indo-American Society and the Employers Federation of India. He was also the Chairman of Indian Institute of

40

Mr. Keshub Mahindra is a Member of the following Board Committees: Sr. No. 1. Name of the Company Mahindra & Mahindra Limited Name of the Committee Share Transfer and Shareholders/Investors Grievance Committee Loans & Investment Committee Remuneration/ Compensation Committee Compensation Committee Remuneration Committee Position held Chairman

2. 3.

Mahindra & Mahindra Limited Mahindra & Mahindra Limited

Chairman Member

4. 5.

Housing Development Finance Corporation Limited The Bombay Dyeing & Manufacturing Company Limited

Chairman Chairman

Mr. Anupam Puri Mr. Anupam Puri was appointed to the Board of the Company in 2001. From 1970 to 2000, he was with McKinsey & Company (McKinsey). He worked globally with corporate clients in several industries on strategy and organisational issues, and served several governments and multilateral institutions on public policy. Mr. Puri spearheaded the development of McKinseys India practice, oversaw the Asian and Latin American offices, and was an elected member of the Board. He is currently a Special Adviser for General Atlantic Partners. Sr. No. Name of the Companies/Bank 1. 2. 3. 4. 5. 6. Dr. Reddys Laboratories Limited Dr. Reddys Laboratories Limited Dr. Reddys Laboratories Limited Dr. Reddys Laboratories Limited ICICI Bank Limited Tech Mahindra Limited Mr. Puri did an M. Phil in Economics from Nuffield College, Oxford University in 1969, a MA in Economics from Balliol College, Oxford University in 1967 and a BA in Economics from Delhi University, India in 1965. Mr. Puri also ser ves on the Boards of Dr. Reddys Laboratories Limited, ICICI Bank Limited and Tech Mahindra Limited. Mr. Anupam Puri holds 40,000 Ordinary (Equity) Shares in the Company. Mr. Anupam Puri is a Member of the following Board Committees: Name of the Committee Audit Committee Compensation Committee Nomination Committee Strategy Committee Board Governance and Remuneration Committee Audit Sub-Committee Position held Member Member Chairman Member Member Chairman

41

Dr. A. S. Ganguly Dr. A. S. Ganguly was appointed to the Board of the Company in 1997. Dr. Ganguly is currently the Chairman of Firstsource Solutions Limited and a Director on the Central Board of the Reserve Bank of India, since November, 2000. Dr. Gangulys principal professional career spanned 35 years with Unilever Plc/N.V. Dr. Ganguly graduated with distinction from the Bombay University and has obtained the M.S. and Ph.D. degrees from the University of Illinois, USA. Over the years, Dr. Ganguly has been a member of several government committees, including the Science Advisory Committee to the Prime Minister of India. He is presently a member of the Prime Ministers Council on Trade and Industry as well as the Investment Commission. More recently, he has Sr. No. 1. 2. 3. 4. 5. 6. 7. Name of the Companies/ Bank Mahindra & Mahindra Limited Firstsource Solutions Limited Tata AIG Life Insurance Company Limited Tata AIG Life Insurance Company Limited Wipro Limited Reserve Bank of India Reserve Bank of India

been appointed a member of the National Knowledge Commission to the Prime Minister. Dr. Ganguly is also the recipient of the International Alumni Award for Exceptional Achievement for the academic year 2003-04, from the University of Illinois. In 2006, Dr. Ganguly was awarded the CBE (Hon) by the United Kingdom. Dr. Ganguly is Director of ICICI Knowledge Park Limited, ABP Private Limited, Wipro Limited, Hemogenomics Private Limited and Tata AIG Life Insurance Company Limited. Dr. Ganguly is a Member of the Advisory Board of Microsoft Corporation (India) Private Limited and Advisory Director on Blackstones India Advisory Board. Dr. A. S. Ganguly holds 40,000 Ordinary (Equity) Shares in the Company. Dr. A. S. Ganguly is a Member of the following Board Committees: Position held Chairman Chairman Member Chairman Chairman Member

Name of the Committee Research & Development Committee Compensation and Board Governance Committee Audit Committee Remuneration Committee Corporate Governance Committee Audit Committee of BFS

Board of Financial Supervision (BFS) Member

Mr. R. K. Kulkarni Mr. R. K. Kulkarni has been a Director of the Company since 1997. An L.L.M. (Master of

Laws) from the University of Bombay, he is an Advocate and a Solicitor, and is all India Partner in Khaitan & Co., Advocates &

42

Solicitors since 2005. Mr. Kulkarni has been in legal practice for about 37 years and prior to joining Khaitan & Co. was a partner of another leading firm for 26 years. Mr. Kulkarni has vast and hands on experience in the legal field, with particular emphasis on Corporate and Commercial Laws. Apart from his indepth knowledge of Companies and related legislation, Mr. Kulkarni has considerable experience in the fields of mergers and acquisitions, joint ventures, capital markets and project finance for infrastructure projects. Mr. Kulkarni has participated in National & International conferences and seminars at which he has read papers on foreign direct investment Sr. No. 1. 2. Name of the Companies Mahindra & Mahindra Limited Mahindra & Mahindra Limited

in India, Infrastructure privatisation and reforms. He is also on the Advisory Board as also on the Faculty of the Post Graduate Diploma Course in Securities Law at the Government Law College, Mumbai. Mr. Kulkarni is Director of Mahindra & Mahindra Contech Limited, Beck India Limited, Caprihans India Limited, Associated Polymers Limited, Revertex India Private Limited, Shamrao Vithal Co-operative Bank Limited and Entertainment Network (India) Limited. Mr. R. K. Kulkarni holds 38,788 Ordinary (Equity) Shares in the Company. Mr. R. K. Kulkarni is a Member of the following Board Committees: Name of the Committee Audit Committee Position held Member Member

Share Transfer and Shareholders/Investors Grievance Committee Loans & Investment Committee Audit Committee Shareholders / Investors Grievance Committee Audit Committee Shareholders / Investors Grievance Committee Remuneration Committee Audit Committee

3. 4. 5. 6. 7. 8. 9.

Mahindra & Mahindra Limited Beck India Limited Beck India Limited Caprihans India Limited Caprihans India Limited Caprihans India Limited Entertainment Network (India) Limited

Member Chairman Member Chairman Member Member Member

E. Codes of Conduct The Board has laid down two separate Codes of Conduct (Codes), one for Board Members

and other for Senior Management and Employees of the Company. These Codes have been posted on the Companys website

43

www.mahindra.com. All Board Members and Senior Management Personnel have affirmed compliance with these Codes. A declaration signed by the Vice-Chairman & Managing Director to this effect is enclosed at the end of this Report.

information is used to review the Companys remuneration policies. B. Remuneration to Non-Executive Directors for the year ended 31st March, 2007 The eligible Non-Executive Directors are paid commission upto a maximum of 1% of the net profits of the Company as specifically computed for this purpose. A commission of Rs.96 lakhs has been provided as payable to the eligible Non-Executive Directors in the accounts of the year under review. The Directors are yet to determine the distribution of this amount between themselves on the basis of individual Directors contribution, guidance, etc. During the year under review, the Non-Executive Directors were paid a commission of Rs.101.22 lakhs (provided in the accounts for the year ended 31st March, 2006), distributed amongst the Directors as under: (Rs. in lakhs)

II. Remuneration to Directors

A. Remuneration Policy While deciding on the remuneration for Directors, the Board, Remuneration/ Compensation Committee (Committee) considers the performance of the Company, the current trends in the industry, the qualification of the appointee(s), their experience, past performance and other relevant factors. The Board/ Committee regularly keeps track of the market trends in terms of compensation levels and practices in relevant industries through participation in structured surveys. This

Directors

Mr. Keshub Mahindra Mr. Deepak S. Parekh Mr. N. B. Godrej Mr. M. M. Murugappan Mr. V. K. Chanana (Nominee of UTI)* Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri Mr. T. S. Vijayan (Nominee of LIC)**

Commission for the year ended 31st March, 2006, paid during the year under review 32.00 8.00 8.00 8.00 7.80# 8.00 8.00 8.00 8.00 5.42#

* Resigned with effect from 22nd March, 2006 ** Appointed with effect from 28th July, 2005 as Nominee Director of Life Insurance Corporation of India and resigned with effect from 29th May, 2006 # The Commission is payable to the Nominating Financial Institutions

44

Non-Executive Directors are also paid a sitting fee of Rs.10,000 for every Meeting of the Board or Committee attended. The fees paid to Non-Executive Directors for the year ended 31st March, 2007 alongwith their shareholdings are as under: Directors Sitting Fees for Board and Committee Meetings paid during the year ended 31st March, 2007 (Rs. in lakhs) 1.30 1.10 1.20 1.30 0.60 0.90 0.80 2.00 0.50 No. of Ordinary (Equity) Shares held as on 31st March, 2007

Mr. Keshub Mahindra Mr. Deepak S. Parekh Mr. N. B. Godrej Mr. M. M. Murugappan Mr. Thomas Mathew T. (Nominee of LIC)* Mr. Narayanan Vaghul Dr. A. S. Ganguly Mr. R. K. Kulkarni Mr. Anupam Puri *

2,01,148 46,090 80,000 40,000 Nil 40,000 40,000 38,788 40,000

Appointed as Nominee Director of Life Insurance Corporation of India (LIC) with effect from 29th May, 2006. Sitting Fees for Board Meetings were paid to LIC. Bonus Issue made in September, 2005. Details of the Options granted to each of the Directors are given in the Statement attached to Annexure I to the Directors Report. C. Remuneration paid/payable to Managing/ Executive Director(s) (Whole-time Directors) for the year ended 31st March, 2007 Remuneration to Whole-time Directors is fixed by the Remuneration/ Compensation Committee and thereafter approved by Shareholders at a General Meeting.

1,60,000 Stock Options granted to NonExecutive Directors under the Companys Stock Option Scheme on 6th December, 2001 have been fully exercised by them. 35,000 Stock Options granted in June, 2005 to the NonExecutive Directors which have vested in June, 2006 can be exercised in three tranches over a period of five years from the date of vesting at an Original Exercise Price of Rs.454 per share. The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1

45

Following is the remuneration paid/payable to the Whole-time Directors during the year ended 31st March, 2007.
(Rs.in lakhs)

Directors

Salary ComCompanys Perquisites mission Contribu- and tion to allowances Funds* 53.60 107.19 14.47 39.13

Total

Contract Period

No. of Options granted in June, 2005 $ Nil

No. of Options granted in September, 2006 $$ Nil

Mr. Anand G. Mahindra (Vice-Chairman & Managing Director)

214.39 4th April, 2002 to 3rd April, 2007 @ 144.06 28th August, 2002 to 27th August, 2007 @@ 144.77 28th August, 2002 to 27th August, 2007 @@

Mr. Bharat Doshi 45.77 (Executive Director)

68.66

12.36

17.27

10,000

11,345

Mr. A. K. Nanda 45.77 (Executive Director)

68.66

12.36

17.98

10,000

11,345

Aggregate of the Companys contributions to Superannuation Fund, Provident Fund, Gratuity Paid and Privilege Leave Encashment $ The Options vested in June, 2006 in each of the Executive Directors can be exercised in three tranches over a period of five years from the date of vesting at an Original Exercise Price of Rs.454 per share. The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005 $$ These Options would vest in four equal instalments in September, 2007, September, 2008, September, 2009 and September, 2010 respectively. These Options can be exercised within five years from the date of vesting of the Options at an Exercise Price of Rs.616 per share @ The Contract with the Vice-Chairman & Managing Director expired on 3rd April, 2007 and has been renewed for a further period of five years with effect from 4th April, 2007 to 3rd April, 2012. The approval from the Shareholders is being sought for the same as mentioned in the Notice @@ The Contracts with the Executive Directors expire on 27th August, 2007 and are being renewed for a further period of five years with effect from 28th August, 2007 to 27th August, 2012. The approval from the Shareholders is being sought for the same as mentioned in the Notice Notes: a) Notice period applicable to each of the Whole-time Directors six months. b) Commission is the only component of remuneration that is performance-linked. All other components are fixed. c) The remuneration payable to the Vice-Chairman & Managing Director and the Executive Directors is fixed by the Remuneration/Compensation Committee which is subsequently approved by the Board of Directors and Shareholders.

III. Risk Management

Your Company has a well-defined risk management framework in place. The risk management framework adopted by the Company is discussed in detail in the Management Discussion and Analysis Chapter

of this Annual Report. Your Company has established procedures to periodically place before the Board the risk assessment and minimisation procedures being followed by the Company and steps taken by it to mitigate these risks.

46

IV. Committees of the Board

A. Remuneration/Compensation Committee The role of the Remuneration/Compensation Committee is to review market practices and to decide on remuneration packages applicable to the Vice-Chairman & Managing Director, the Executive Directors and Senior Executives of the Company. During the course of its review, the Committee also decides on the commission of the Directors and/or other incentives payable, taking into account the individuals performance as well as that of the Company. The Committee has formulated and administers the Mahindra & Mahindra Limited Employees Stock Option Scheme and also attends to such other matters as may be prescribed from time to time. Mr. N. Vaghul is the Chairman of the Committee. Mr. Keshub Mahindra, Mr. N. B. Godrej and Mr. M. M. Murugappan are the other Members of the Committee. Three Meetings were held during the year. The attendance at the Meetings is as follows: Members Number of Meetings attended 3 3 2 3

Mr. Deepak S. Parekh (Chairman of the Committee), Mr. R. K. Kulkarni, Mr. N. B. Godrej and Mr. M. M. Murugappan (appointed with effect from 29th May, 2006). All the Members of the Committee possess strong accounting and financial management knowledge. The Company Secretary is the Secretary to the Committee. The terms of reference of this Committee are very wide. Besides having access to all the required infor mation from within the Company, the Committee can obtain external professional advice whenever required. The Committee acts as a link between the Statutory and the Internal Auditors and the Board of Directors of the Company. It is authorised to select and establish accounting policies, review reports of the Statutory and the Internal Auditors and meet with them to discuss their findings, suggestions and other related matters. The Committee is empowered to inter alia review the remuneration payable to the Statutory Auditors and to recommend a change in Auditors, if felt necessary. It is also empowered to review Financial Statements and investments of unlisted subsidiary companies, Management Discussion & Analysis, material individual transactions with related parties not in normal course of business or which are not on an arms length

Mr. N. Vaghul (Chairman) Mr. Keshub Mahindra Mr. N. B. Godrej Mr. M. M. Murugappan B. Audit Committee

basis. Generally all items listed in Clause 49 II D of the Listing Agreement are covered in the terms of reference. The Audit Committee

This Committee comprises solely of Independent Directors. The Committee comprises of

47

has been granted powers as prescribed under Clause 49 II C. The Meetings of the Audit Committee are also attended by the Vice-Chairman & Managing Director, the Executive Directors of the Company, the President-Finance & Legal Affairs, the Statutory Auditors, Chief Internal Auditor and the Company Secretary. The Chairman of the Audit Committee, Mr. Deepak S. Parekh was present at the Annual General Meeting of the Company held on 26th July, 2006. The Committee met five times during the year under review and the gap between two Meetings did not exceed four months. The attendance at the Meetings is as under: Members Mr. Deepak S. Parekh (Chairman) Mr. R. K. Kulkarni Mr. N. B. Godrej Mr. M. M. Murugappan 5 3 4 Number of Meetings attended 5

Mr. A. K. Nanda are also on the Committee. Mr. Narayan Shankar, Compliance Officer has been appointed as Company Secretary with effect from 26th October, 2006. The Committee meets as and when required, to deal with matters relating to transfers/ transmissions of shares and monitors redressal of complaints from shareholders relating to transfers, non-receipt of balance-sheet, nonreceipt of dividends declared, etc. With a view to expediting the process of share transfers, Mr. A. K. Nanda, Executive Director as well as Mr. Narayan Shankar, Company Secretary of the Company are severally authorised to approve the transfers of not more than 5,000 Ordinary (Equity) Shares per transfer. The Committee held two Meetings during the year under review. Both the Meetings were attended by all its Members. During the year, 53 letters/complaints were received from the Shareholders, all of which have been attended to/resolved to date. As of date, there are no pending share transfers pertaining to the year under review. D. Research & Development Committee

C. Share Transfer and Shareholders/ Investors Grievance Committee The Companys Share Transfer and

(a voluntary initiative of the Company) The Research & Development (R&D) Committee, which was constituted by the Board in 1998, provides direction on the R&D mission and strategy and key R&D and technology issues. The Committee also reviews and makes recommendations on skills and competencies required and the structure and the process

Shareholders/Investors Grievance Committee functions under the Chairmanship of Mr. Keshub Mahindra, Chairman of the Board and a NonExecutive Director. Mr. Anand G. Mahindra, Mr. R. K. Kulkarni, Mr. Bharat Doshi and

48

needed to ensure that the R&D initiatives result in products that are in keeping with the business needs. Dr. A. S. Ganguly is the Chairman of the Committee. Mr. Anand G. Mahindra, Mr. N. B. Godrej, Mr. Bharat Doshi and Mr. M. M. Murugappan are the other Members of the Committee. The Committee held two Meetings during the year under review, which were well attended. E. Loans & Investment Committee

Under this definition, the Company does not have any material non-listed Indian subsidiary during the year under review.

VI. Disclosures
A. Disclosure of transactions with Related Parties During the financial year 2006-07, there were no materially significant transactions entered into between the Company and its promoters, Directors or the management, subsidiaries or relatives, etc. that may have potential conflict with the interests of the Company at large. Further details of related party transactions are presented in Note Number 30 in Schedule XIV to Annual Accounts of the Annual Report. B. Disclosure of Accounting Treatment in Preparation of Financial Statements The Company has followed the Accounting Standards laid down by The Institute of Chartered Accountants of India (ICAI) in preparation of its financial statements. C. Code for Prevention of Insider Trading Practices In compliance with SEBIs Regulations on prevention of insider trading, the Company has instituted a comprehensive Code of Conduct for prevention of Insider Trading for its designated employees. The Code lays down Guidelines, which advises them on procedures to be followed and disclosures to be made, while dealing with shares of the Company, and cautioning them of the consequences of violations.

(a voluntary initiative of the Company) The Committee approves of the making of loans and investment, disinvestment, borrowing moneys and related aspects of fund management in accordance with the Guidelines prescribed by the Board. Mr. Keshub Mahindra is the Chairman of the Committee. Mr. Anand G. Mahindra, Mr. R. K. Kulkarni, Mr. Bharat Doshi and Mr. A. K. Nanda are the other Members of the Committee.

V. Subsidiary Companies
The revised Clause 49 defines a material non-listed Indian subsidiary as an unlisted subsidiary, incorporated in India, whose turnover or net worth (i.e. paid up capital and free reser ves) exceeds 20% of the consolidated tur nover or net worth respectively, of the listed holding company and its subsidiaries in the immediately preceding accounting year.

49

VII. Shareholder Information

1. 61st Annual General Meeting Date Time Venue : 30th July, 2007 : 3.30 p.m. : Birla Matushri Sabhagar, 19, Sir Vithaldas Thackersey Marg (New Marine Lines), Mumbai - 400 020. 2. Dates of Book Closure/Record Date Record Date for Interim Dividend was 26 March, 2007, and Dates of Book Closure for Final Dividend will be from 7th July, 2007 to 30th July, 2007, both days inclusive. 3. Date of Dividend Payment Date of payment of Interim Dividend was 29th March, 2007, and Date of payment of Final Dividend would be on or after 30th July, 2007. 4. Financial Year of the Company The financial year covers the period from 1st April to 31st March. Financial Reporting for: Quarter ending 30th June, 2007 Half-year ending 30 September, 2007- End October, 2007
th th

Quarter ending 31st December, 2007 - End January, 2008 Year ending 31st March, 2008 - End May, 2008

Note: The above schedules are indicative. 5. Registered Office Gateway Building, Apollo Bunder, Mumbai - 400 001. 6. Listing of Ordinary (Equity) Shares and Debentures on Stock Exchanges The Companys Shares are listed on the Stock Exchanges at Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). The Company has applied for approval for delisting its shares with The Calcutta Stock Exchange Association Limited and the approval for delisting of the Shares is awaited. The Global Depositary Receipts (GDRs) of the Company are listed on the Luxembourg Stock Exchange. The US$ 100 million Zero Coupon Foreign Currency Convertible Bonds (FCCBs) due for redemption in 2009 and US$ 200 million Zero Coupon FCCBs due for redemption in 2011 are both listed at Singapore Exchange Securities Trading Limited. The requisite listing fees have been paid in full to all these Stock Exchanges.

- End July, 2007

The Non-convertible Debentures of the Company are listed with NSE and the Company has paid the requisite listing fees in full.

50

7. Stock Code 1. Bombay Stock Exchange Limited (BSE): 500520 2. National Stock Exchange of India Limited (NSE): M&M 3. Demat International Security Identification Number in NSDL and CDSL for Equity Shares ISIN - INE101A01018 8. Stock Performance The performance of the Companys shares relative to the BSE Sensitive Index is given in the chart below:
M&M on BSE BSE Index

1000 900 800

M&M on BSE

16000 14000 12000

BSE Index NSE Index

700 600 500 400 300 200 100 0 Apr- May- Jun06 06 06 Jul06 Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar06 06 06 06 06 07 07 07 Last Trading day of the month

10000 8000 6000 4000 2000 0

The performance of the Companys shares relative to the NSE Sensitive Index (S&P CNX Nifty Index) is given in the chart below:
M&M on NSE NSE Index

1000 900 800

M&M on NSE

4500 4000 3500 3000 2500 2000 1500 1000 500 Apr- May- Jun06 06 06 Jul06 Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar06 06 06 06 06 07 07 07 Last Trading day of the month 0

700 600 500 400 300 200 100 0

51

9. Stock Price Data Equity Shares Bombay Stock Exchange Limited High Rs. April, 2006 May, 2006 June, 2006 July, 2006 August, 2006 September, 2006 October, 2006 November, 2006 December, 2006 January, 2007 February, 2007 March, 2007 * Based on closing prices 10. Registrar and Transfer Agents Sharepro Services (India) Private Limited Unit: Mahindra & Mahindra Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai - 400 099. Telephone No.: +91-22-28215168 Fax: +91-22-28375646 email: sharepro@vsnl.com The Registrar and Transfer Agents also have an office at: 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai - 400 021. Telephone No.: +91-22-22881569 Fax: +91-22-22825484 665.00 719.00 630.00 635.00 674.90 688.00 806.70 853.00 909.95 1002.00 950.75 817.00 Low Rs. 559.90 530.00 488.00 495.10 573.10 610.00 672.10 757.60 744.00 872.00 795.00 694.00 National Stock Exchange of India Limited High Rs. 665.00 723.85 631.00 638.40 672.00 682.75 806.40 852.35 915.00 1001.00 954.75 817.00 Low Rs. 537.50 523.65 456.65 494.60 556.00 609.05 643.00 750.15 745.10 873.35 758.60 693.30 GDRs Luxembourg Stock Exchange* High US $* 14.72 15.78 12.57 13.50 14.30 14.54 16.89 18.80 19.48 22.46 21.35 19.28 Low US $* 13.98 12.80 11.19 11.07 12.25 13.66 14.77 16.50 16.85 17.11 19.26 15.90

52

11. Share Transfer System Trading in Ordinary (Equity) Shares of the Company through recognized Stock Exchanges is permitted only in dematerialised form. Shares sent for transfer in physical form are registered and returned within a period of thirty days from the date of receipt of the documents, provided the documents are valid and complete in all respects. With a

view to expediting the process of share transfers, Mr. A. K. Nanda, Executive Director as well as Mr. Narayan Shankar, Company Secretary of the Company are severally authorised to approve the transfers of not more than 5,000 Equity Shares per transfer. The Share Transfer and Shareholders/Investors Grievance Committee meets as and when required to consider the other transfer proposals and attend to shareholder grievances.

12. Distribution of shareholding as on 31st March, 2007 Number of Shares held 1 to 500 501 to 1000 1001 to 5000 5001 to 10000 10001 and above Total Shareholding Pattern as on 31st March, 2007 Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. Category of Shareholders Promoters and Promoter Group Mutual Funds Banks, Financial Institutions, Insurance Companies, State Government FIIs/FFIs/FCs* Private Corporate Bodies Indian Public NRIs/OCBs Bank of New York (for GDR holders) Grand Total Total Holdings 5,61,78,406 1,32,26,717 3,87,51,783 7,93,68,533 1,32,57,527 2,51,71,278 22,26,425 1,71,90,596 24,53,71,265 Percentage 22.90 5.39 15.79 32.35 5.40 10.25 0.91 7.01 100.00 Number of Shareholders 1,27,969 391 326 85 205 1,28,976 Number of Shares held 2,05,93,902 27,06,796 74,73,368 61,21,793 20,84,75,406 24,53,71,265 % of Shareholding 8.39 1.10 3.05 2.50 84.96 100.00

* FIIs/FFIs/FCs does not include shareholding aggregating 117.50 lakhs Shares representing 4.79% of the paid-up share capital of the Company held by a FII as the same is included under the category of Promoters and Promoter Group

53

13. Dematerialisation of Shares 97.81% of the paid-up Equity Share Capital is held in a dematerialised form with National Securities Depository Limited and Central Depository Services (India) Limited as on 31 st March, 2007. The market lot of the share is one share, as the trading in the Equity Shares of the Company is permitted only in dematerialized form. Non-Promoters holding is 77.10% and the stock is highly liquid. 14. Outstanding GDRs/ADRs/Warrants or any Convertible Instruments, Conversion date and likely impact on equity 1,71,90,596 GDRs were outstanding as at 31 March, 2007. Since the underlying
st

initial conversion price of Rs.647.05 per Share was adjusted to Rs.323.52 per Share with effect from 3 rd September, 2005 resulting into an increase in the number of Equity Shares underlying FCCBs to around 1,37,24,035. During the year, FCCBs aggregating US$ 3,25,70,000 were converted into 44,69,913 Equity Shares/GDRs. As at 31st March, 2007, FCCBs amounting to US$ 27,00,000 convertible into around 3,70,548 Equity Shares/GDRs were outstanding. Subsequent to 31st March, 2007, FCCBs aggregating US$ 9,00,000 have been converted into 1,23,516 Equity Shares/GDRs and as of date FCCBs amounting to US$ 18,00,000 convertible into around 2,47,032 Equity Shares/GDRs are outstanding. 2000 Zero Coupon Convertible Bonds (due 2011) of US$ 1,00,000 each aggregating US$ 200 million issued in April, 2006, may at the option of the Bondholder, be converted into around 96,35,156 Equity Shares/GDRs at an initial conversion price of Rs.922.04 at any time between 7 th May, 2006 and 7th March, 2011. Till date, no conversion of any Bonds have taken place. 15. Plant Locations The Companys manufacturing facilities are located at Kandivli, Nashik, Igatpuri, Nagpur, Zaheerabad, Jaipur, Rudrapur, Haridwar and Pune.

Ordinary (Equity) Shares represented by GDRs have been allotted in full, the outstanding GDRs have no impact on the Equity of the Company. 1,00,000 Zero Coupon Convertible Bonds (due 2009) of US$ 1000 each (FCCBs) aggregating US$ 100 million issued in May, 2004, were at the option of the Bondholders convertible into around 68,61,911 Equity Shares/GDRs (each GDR representing one Equity Share of the Company) at an initial conversion price of Rs.647.05 per Share at any time between 7th June, 2004 and 8th April, 2009. Consequent to the issue of Bonus Equity Shares by the Company in the ratio of 1:1 in September, 2005, the

54

16. Address for correspondence Shareholders may correspond with the Registrar and Transfer Agents at: Sharepro Services (India) Private Limited Unit : Mahindra & Mahindra Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai - 400 099. Telephone No.: +91-22-28215168 Fax: +91-22-28375646 email: sharepro@vsnl.com on all matters relating to transfer/ dematerialisation of shares, payment of dividend and any other query relating to shares in or debentures of the Company. The Company has also designated investors@mahindra.com as an email ID

for the purpose of registering complaints and the same has been displayed on the Companys website. Shareholders would have to correspond with the respective Depositary Participants for Shares held in demateralised form. For all investor related matters, the Compliance Officer & Company Secretary can be contacted at : Mahindra Towers, 5th Floor, Dr. G. M. Bhosale Marg, Worli, Mumbai - 400 018. Telephone No.: +91-22-24905624, +91-22-24975074 Fax: +91-22-24900833 email: investors@mahindra.com OR narayan.shankar@mahindra.com The Company can also be visited at its website: http://www.mahindra.com

VIII. OTHER DISCLOSURES

1. Details of General Meetings and Special Resolutions passed Annual General Meetings held during the past 3 years and the Special Resolutions passed therein: Year 2004 2005 Date 28th July, 2004 28th July, 2005 Time 3.30 p.m. 3.30 p.m. Special Resolutions passed Allotment of further shares to Mahindra & Mahindra Employees Stock Option Trust. 1. Payment of Commission to Non-wholetime Directors including Non-Resident Directors. 2. Revision in the remuneration payable to Mr. Anand G. Mahindra, Vice-Chairman & Managing Director and the two Executive Directors of the Company viz. Mr. Bharat Doshi and Mr. A. K. Nanda.

55

Year

Date

Time

Special Resolutions passed 3. Approval for commencement of new businesses of the Company. 4. Approval for increase in limit for holdings by FIIs from 35% to 49% of the paid-up Equity Share Capital of the Company. 5. Alteration of Article 3 in the Articles of Association of the Company.

2006

26th July, 2006

3.30 p.m.

No Special Resolution was passed at the AGM.

Extraordinary General Meeting held during the past 3 years: Year 2004 Date 29th April, 2004 Time 11.00 a.m. Special Resolutions passed 1. Issue of Securities in International/ Domestic markets for an amount not exceeding US$ 100 million with a right to retain 15% for additional allotment. 2. Approval for increase in limit for holdings by FIIs from 24% to 35% of the paid-up Equity Share Capital of the Company. Extraordinary General Meeting held subsequent to the year end: Year 2007 Date 20th April, 2007 Time 11.00 a.m. Special Resolution passed Making investments, etc. in excess of the limits prescribed under section 372A of the Companies Act, 1956 upto an amount of Rs.1500 crores.

All the Meetings were held at Birla Matushri Sabhagar, 19, Sir Vithaldas Thackersey Marg (New Marine Lines), Mumbai - 400 020. Details of Special Resolutions passed through Postal Ballot: Date of passing the Special Resolution 5th April, 2006 Issue of Securities in International / Domestic markets for an amount not exceeding US$ 200 Million. Mr. B. H. Wani, Advocate & Solicitor, Mumbai acted as a Scrutinizer for conducting the Postal Ballot in a fair and transparent manner. Description % of Votes in favour of the Special Resolution 93.51

56

Subsequent to the year end, the Board of Directors, have proposed the following Special Resolutions to be passed through Postal Ballot. Date of Board Meeting Description Last Date of receiving Postal Ballot Forms 20th April, 2007 1. Authorising the Board to offer, issue and allot Securities and/ or QIP Securities as specified in the Postal Ballot Notice dated 27th April, 2007. 2. Authorising the Board to make loan(s), and/or give guarantee(s), and/or provide security(ies) in excess of the limits prescribed under section 372A of the Companies Act, 1956 upto an amount of Rs.1500 crores as specified in the Postal Ballot Notice dated 27th April, 2007. 28th May, 2007 Authorising the Board to make loan(s) and/or give guarantee(s) and/or provide security(ies) and/or make investment(s) in excess of the limits prescribed under section 372A of the Companies Act, 1956 upto an amount of Postal Ballot Notice. Dr. S. D. Israni, Practising Company Secretary, Mumbai has been appointed as a Scrutinizer for conducting the above Postal Ballots in a fair and transparent manner. The procedure for Postal Ballot is as per section 192A of the Companies Act, 1956 and Rules made thereunder namely Companies (Passing of the Resolution by Postal Ballot) Rules, 2001. Rs.2000 crores as may be specified in the 12th July, 2007 20th July, 2007 (proposed) 31st May, 2007 4th June, 2007 Date of Declaration of Result(s)

57

2. Details of non-compliance etc. The Company has complied with all the requirements of regulatory authorities. During the last three years, there were no instances of non-compliance by the Company and no penalty or strictures were imposed on the Company by the Stock Exchanges or SEBI or any statutory authority, on any matter related to the capital markets. 3. Means of Communication The quarterly, half-yearly and yearly results are published in Business Standard and Sakal which are national and local dailies. These are not sent individually to the Shareholders. The Companys results and official news releases are displayed on the Companys website http://www.mahindra.com Presentations are also made to international and national institutional investors and analysts which are also put up on the website of the Company. The Company also regularly posts information relating to its financial results and shareholding pattern on the SEBI EDIFAR Website at www.sebiedifar.nic.in 4. The Management Discussion and Analysis Report The Management Discussion and Analysis Report (MDA) has been attached to the Directors Report and forms part of this Annual Report.

5. Compliance requirements

with

Mandatory

The Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement relating to Corporate Governance. 6. Compliance requirements a. Office of the Chairman The Company has provided the Chairman (Non-Executive) with a fullfledged office, the expenses of which are borne by the Company. The Chairman is reimbursed all expenses incurred in the performance of his duties. b. Remuneration Committee The Company has set up the Re m u n e r a t i o n / C o m p e n s a t i o n Committee long before application of Clause 49. c. Audit Qualifications During the period under review, there is no audit qualification in the Companys financial statements. The Company continues to adopt best practices to ensure regime of unqualified financial statements. The Company has not adopted the other nonmandatory requirements as specified in Annexure I D of the Clause 49. Mumbai, 28th May, 2007 with Non-mandatory

58

DECLARATION BY THE MANAGING DIRECTOR UNDER CLAUSE 49 OF THE LISTING AGREEMENT To The Members of Mahindra & Mahindra Limited I, Anand G. Mahindra, Vice-Chairman & Managing Director of Mahindra & Mahindra Limited declare that all the Members of the Board of Directors and Senior Management Personnel have affirmed compliance with the Codes of Conduct for the year ended 31st March, 2007. Anand G. Mahindra Vice-Chairman & Managing Director Mumbai, 28th May, 2007 CERTIFICATE To The Members of Mahindra & Mahindra Limited We have examined the compliance of conditions of Corporate Governance by Mahindra & Mahindra Limited, for the year ended on 31st March, 2007, as stipulated in Clause 49 of the Listing Agreement of the said company with stock exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness with which the management has conducted the affairs of the company. For A. F. Ferguson & Co. Chartered Accountants R. A. Banga (Partner) Membership Number: 37915 Mumbai, 28th May, 2007

59

Financial Position at a Glance

(Rupees in lakhs) 2007 Gross Fixed Assets Net Fixed Assets Investments Inventories Debtors Other Current Assets Misc. Expenditure not written off Long-term Borrowings Short-term 7791 4621 205164 14675 23340 267547 290887 *123.29 11122 175971 18975 11165 187488 198653 174.46 7778 132924 20325 11601 165902 177503 150.89 6794 109478 17710 11601 145382 156983 130.56 18526 105074 13790 11601 138801 150402 128.26 34304 92704 11049 195833 206882 165.50 10886 90021 11049 190662 201711 166.90 13162 87027 10337 139877 150214 134.14 18363 81623 10337 123995 134332 122.29 351028 187117 223746 87848 70089 216880 1755 155810 2006 306471 155445 166909 87874 63797 123235 1805 83718 2005 281044 147488 118979 75983 51153 102820 2438 94140 2004 255927 139160 111115 49970 40048 62476 964 65203 2003 248913 146609 86227 45675 51708 63964 3972 107190 2002 241677 153723 80013 46904 64778 61554 119180 2001 223148 148252 71000 55253 63201 52911 22361 79088 2000 185892 123199 82299 51554 46158 68373 15516 84481 1999 161464 109861 81030 43697 59207 80381 9684 133457 1998 142653 101741 65596 51485 51657 72998 5988 115147

Current Liabilities and Provisions 266564 Deferred Tax Liability (Net) Equity Capital Reserves Net Worth 1979 23803 331488 355291

Book Value Per Share (Rupees) *147.98 *

Book value per share is shown after giving effect to a 1:1 bonus issue in September, 2005 Book value per share is calculated after reducing Miscellaneous Expenditure not written off and Revaluation Reserve from Net worth.

60

Summary of Operations
(Rupees in lakhs) 2007 Income @ Materials Direct Indirect Excise Duty (Net) Personnel Interest (Net) @ Depreciation (Net) Other Expenses Exceptional items Extra-ordinary items Profit before tax for the year Tax for the year - Current Deferred Tax Liability / (Asset) Adj. pertaining to Prev. Years Balance profit Dividends Equity Dividend (%) Earnings per Share (Rupees) Vehicles produced ** (Units) Vehicles sold ** (Units) Tractors produced (Units) Tractors sold (Units) @ Interest income netted off in interest expense # + ** 1155802 685192 7884 131065 66615 (6745) 20959 119263 (12198) 143767 36573 (1564) 1919 106839 #+32473 #115.00 45.15 169557 169679 103847 102531 8725 2006 945143 571377 6824 113650 55257 (1840) 20001 90925 (21001) 109950 28540 (4300) 85710 +27819 100.00 38.07 148213 147591 87075 85029 4536 2005 780409 460264 5987 105482 46459 (558) 18405 74308 (1355) 71417 21500 (1350) 51267 +17196 130.00 23.04 148025 145024 67115 65390 3582 2004 600123 335287 4323 95543 42087 5159 16520 60333 (2948) 43819 6350 2615 34854 +11779 90.00 15.02 117670 117399 50102 49576 2535 2003 459679 250022 3939 78501 38516 8690 16544 49529 (5765) 19703 1230 3920 14553 + 7198 55.00 6.28 87088 86890 45183 47028 2900 2002 399675 211723 3173 67644 37471 8267 13938 47621 1729 8109 360 (2520) 578 9691 5621 50.00 4.31 66256 65338 54524 58006 3297 2001 435290 235858 4893 75537 40063 6216 14009 44337 1522 12855 800 12055 +6697 55.00 5.46 63146 62927 80261 79237 5057 2000 440918 221023 4550 77324 39683 7463 12327 42606 1252 (358) 35048 8700 26348 +6745 55.00 11.93 76983 76437 73222 70571 6682 1999 416697 222739 4307 65364 37729 9384 11198 37163 805 28008 5150 267 22591 +6311 55.00 10.93 70639 70548 66211 69362 5802 1998 405265 215135 4906 63983 38344 4758 9929 34858 405 32947 7800 25147 +6254 55.00 12.17 77510 76954 71468 67780 7530

Including Proposed Dividend @40% : Rs. 9820 lakhs Including Income tax on Proposed Dividend/Dividends. Including CKD packs.

61

Financial Highlights
PAT and Net Income (Rupees Crores)
1500

Earnings Per Share (Rs.)

60

12000

10245

1250
1068

10000

50 45.15

8327

1000

8000

40

38.07

Net Income

PAT

6769

857

EPS (Rs.)

750
5057 513

6000

30 23.04 20 15.02

500

3811 349

4000

250
146

2000

10

6.28

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

Net Income

Profit After Tax

Net Segment Revenue F-2007

0.8 0.75

Debt Equity Ratio

0.7

Farm Equipment 37.0%

Others 2.4%

0.6 0.53

Percentage

0.5

0.46

0.4

0.42

0.3

0.31

0.2

Automotive 60.6%

0.1

0.0

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

62

MAHINDRA & MAHINDRA LIMITED

ACCOUNTS

63

MAHINDRA & MAHINDRA LIMITED

Auditors Report to the members of Mahindra & Mahindra Limited

1. We have audited the attached balance sheet of Mahindra & Mahindra Limited as at 31st March, 2007, the profit and loss account and also the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order, 2003 (hereinafter referred to as the Order) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: i. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; in our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; the balance sheet and the profit and loss account dealt with by this report are in agreement with the books of account; iv. in our opinion, the balance sheet and the profit and loss account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; on the basis of the written representations received from the directors, as on 31st March, 2007, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2007; (b) in the case of the profit and loss account, of the profit for the year ended on that date; and (c) in the case of the cash flow statement, of the cash flows for the year ended on that date.

v.

2.

vi.

3.

4.

For A. F. Ferguson & Co. Chartered Accountants

ii.

iii.

R. A. Banga (Partner) Membership Number: 37915 Mumbai, 28th May, 2007

64

MAHINDRA & MAHINDRA LIMITED

Annexure to the Auditors Report (Referred to in paragraph 3 of the Auditors Report of even date to the members of Mahindra & Mahindra Limited) (i) (a) The company is maintaining proper records showing full particulars, including quantitative details and unit wise situation of fixed assets. (b) Physical verification of fixed assets was carried out during the year in accordance with the companys policy of verifying the assets once in three years. In our opinion, the frequency of verification is at reasonable intervals. No material discrepancies between book records and the physical inventory were noticed. (c) During the year, in our opinion, a substantial part of fixed assets has not been disposed off by the company. (ii) (a) The inventory of the company has been physically verified by the management during the year and at or after the year end. In respect of stocks lying with third parties, a substantial portion was physically verified or has been confirmed by third parties during the year or at the year end. In our opinion the frequency of verification is reasonable. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management were found reasonable and adequate in relation to the size of the company and the nature of its business. (c) On the basis of our examination of records of inventory, in our opinion, the company has maintained proper records of inventory and the discrepancies noticed on physical verification between the physical stocks and the book records were not material in relation to the operations of the company. (iii) (a) In our opinion and according to the information and explanations given to us, the company has granted unsecured loans to five companies/parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount of loans during the year was Rs. 4,712.77 lakhs (including loans aggregating Rs. 2,212.77 lakhs which were at call) and the year end balance of loans granted to such companies/parties was Rs. 772.92 lakhs, which, were at call. (b) In our opinion and according to the information and explanations given to us, the rates of interest and other terms and conditions on which loans have been granted to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company. (c) In respect of loans granted where stipulations have been made, the parties are repaying the principal amount and paying the interest as stipulated or as rescheduled except in respect of a loan of Rs. 459.42 lakhs which is at call and has been fully provided for in
65

an earlier year. As a matter of prudence, interest on the same is not recognised during the year. (d) In our opinion and according to the information and explanations given to us, other than the item referred to in (c) above, there is no overdue amount of more than rupees one lakh. (e) In our opinion and according to the information and explanations given to us, the company has not taken any loan secured or unsecured from companies/parties covered in the register maintained under section 301 of the Companies Act, 1956 and accordingly paragraph 4 (iii) (f) and (g) of the said Order are not applicable. (iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that many of the items are of a special nature and their prices cannot be compared with alternative quotations, there is an adequate internal control system commensurate with the size of the company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control system. (v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section. (b) In our opinion and according to the information and explanations given to us, having regard to the comments in (iv) above, the transactions made in pursuance of such contracts or arrangements and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices, which are reasonable having regard to the prevailing market prices at the relevant time. (vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975, as applicable, with regard to the deposits accepted from the public. According to the information and explanations given to us, no order under the aforesaid sections has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, on the company. (vii) In our opinion, the company has an internal audit system commensurate with its size and the nature of its business.

MAHINDRA & MAHINDRA LIMITED

(viii) We have broadly reviewed the books of account maintained by the company relating to the manufacture of motor vehicles and tractors pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been maintained and are being made up. We have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information given to us, the Central Government has not prescribed the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956, for any other products of the company. (ix) (a) According to the information and explanations given to us and according to the books and records as produced and examined by us, in our opinion, the undisputed

statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues as applicable have generally been regularly deposited by the company during the year with the appropriate authorities. According to the information and explanations given to us, there are no arrears of outstanding statutory dues as mentioned above as at 31st March, 2007 for a period of more than six months from the date they became payable. (b) As at 31st March, 2007 according to the records of the company and the information and explanations given to us, the following are the particulars of dues on account of income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty and cess matters that have not been deposited on account of any dispute:

Name of the statute

Nature Nature of the dues

Amount Rs. in lakhs

Period to which relates the amount relates Various years covering the period 1997-1999 2003-2004

where Forum where pending

Income - Tax Laws

Income - Tax

80.78 3620.45

Appellate Authority - Tribunal level Appellate Authority - upto Commissioner of Income-tax (Appeals) Appellate Authority - upto Commissioner level High Court Appellate Authority - Tribunal level Appellate Authority - upto Commissioner (Appeals) level Appellate Authority - upto Commissioner level Appellate Authority upto Commissioner of Income-tax (Appeals) level Appellate Authority - Tribunal level Appellate Authority - upto Commissioner (Appeals) level Appellate Authority - Tribunal level Appellate Authority - upto Commissioner (Appeals) level

3.00

1998-1999

Sales - Tax Laws

Sales - Tax

234.82 37.47 80.48

1985-2003 1986-2002 2007

707.51

1988-2005

Wealth Tax Laws

Wealth Tax

30.77

1998-2000

Service Tax Laws

Service Tax

34.19 18.46

2001-2003 2001-2002

Excise Duty Laws

Excise Duty

36863.38 266.57

1987-2007 1995-2006

66

MAHINDRA & MAHINDRA LIMITED

Out of the above amounts aggregating Rs. 41,977.88 lakhs, Rs. 5,200.09 lakhs have been stayed for recovery by the relevant authorities. (x) The company does not have accumulated losses as at 31st March, 2007 and has not incurred cash losses during the financial year ended on that date and in the immediately preceding financial year.

(xvii) Based on the information and explanations given to us and on an overall examination of the balance sheet of the company, in our opinion, there are no funds raised on short term basis which have been used for long term investments. (xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956, during the year. (xix) In our opinion and according to the information and explanations given to us, as the company has not issued any debentures during the year, paragraph 4 (xix) of the Order is not applicable to the company. (xx) The company has not raised any money by public issue during the year. (xxi) During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of significant fraud on or by the company, noticed or reported during the year nor have we been informed of such case by the management.

(xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders during the year. (xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) The provisions of any special statute as specified under paragraph 4 (xiii) of the Order are not applicable to the company. (xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of paragraph 4 (xiv) of the Order are not applicable to the company. (xv) According to the information and explanations given to us, the company has not given any guarantees for loans taken by others from banks or financial institutions, the terms and conditions, whereof, in our opinion, are prejudicial to the interest of the company. (xvi) In our opinion and according to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained.

For A. F. Ferguson & Co. Chartered Accountants

R. A. Banga (Partner) Membership Number: 37915 Mumbai, 28th May, 2007

67

MAHINDRA & MAHINDRA LIMITED

Balance Sheet as at 31st March, 2007

Schedule I. SOURCES OF FUNDS : SHAREHOLDERS FUNDS : Capital ................................................................................. Employee Stock Options Outstanding ................................ Reserves and Surplus ......................................................... LOAN FUNDS : (a) Secured Loans. ............................................................ (b) Unsecured Loans. ........................................................ DEFERRED TAX LIABILITY (Net) ......................................... Total........ I II 238,03.27 3,18.12 3,311,69.56 3,552,90.95 III A III B 106,65.34 1,529,35.32 1,636,00.66 19,78.62 5,208,70.23 233,39.96 1,58.73 2,673,88.40 2,908,87.09 216,67.60 666,70.62 883,38.22 146,75.00 3,939,00.31 Rupees lakhs 2007 Rupees lakhs 2006 Rupees lakhs

II.

APPLICATION OF FUNDS : FIXED ASSETS : Gross Block ........................................................................ Less : Depreciation ............................................................. Net Block ............................................................................ CAPITAL WORK-IN-PROGRESS ........................................ INVESTMENTS .................................................................... CURRENT ASSETS, LOANS AND ADVANCES : (a) Inventories .................................................................... (b) Sundry Debtors ............................................................ (c) Cash and Bank Balances ............................................ (d) Other Current Assets ................................................... (e) Loans and Advances ................................................... CURRENT LIABILITIES AND PROVISIONS : (a) Current Liabilities .......................................................... (b) Provisions ..................................................................... NET CURRENT ASSETS ..................................................... MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED) .......................................... Total........ VIII IV 3,229,68.47 1,639,11.62 1,590,56.85 280,59.91 1,871,16.76 2,237,45.70 878,48.37 700,88.67 1,326,07.19 3,31.24 839,41.48 3,748,16.95 VII A VII B 1,950,21.91 715,42.52 2,665,64.43 1,082,52.52 17,55.25 5,208,70.23 XIV 2,885,52.54 1,510,26.61 1,375,25.93 179,18.60 1,554,44.53 1,669,08.84 878,74.37 637,96.89 730,30.60 3,14.12 498,89.83 2,749,05.81 1,520,84.12 530,80.21 2,051,64.33 697,41.48 18,05.46 3,939,00.31

V VI VI VI VI VI A B C D E

NOTES ON ACCOUNTS ........................................................... Per our report attached For A. F. Ferguson & Co. Chartered Accountants M. M. Murugappan N. Vaghul R. K. Kulkarni A. S. Ganguly A. P. Puri Thomas Mathew T. N. B. Godrej

R. A. Banga Partner

Keshub Mahindra Anand G. Mahindra Directors Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2007

Narayan Shankar

Mumbai, 28th May, 2007

68

MAHINDRA & MAHINDRA LIMITED

Profit and Loss Account for the year ended 31st March, 2007
Schedule SALES - Traded and Manufactured Goods [Note 11(a)] ....................................... Less : Excise Duty on Sales (Net) ........................................................................... Net Sales .............................................................................................................. Income from Operations and Other Income ........................................................... Net Income ........................................................................................................... EXPENDITURE : Raw Materials, Finished and Semi-finished Products ...................................... Excise Duty ...................................................................................................... Personnel ......................................................................................................... Interest, Commitment and Finance Charges (Net) ........................................... Depreciation/Amortisation [Note 5(e)(i)] ............................................................ Other Expenses ................................................................................................ Less : Cost of Manufactured Products capitalised ................................................ Profit before provision for contingencies, exceptional items and taxation .............. Less : Provision for contingencies [Note 10 (b) & (c)] ............................................ Profit before exceptional items and taxation ........................................................... Add : Exceptional Items [Note 24] .......................................................................... Profit before taxation ............................................................................................... Less : Provision for Tax Current tax (including Fringe Benefit Tax) .................. Deferred tax (Net) [Note 25] ...................................... Profit for the year before prior period adjustments ................................................. Prior Period Adjustment (Net of Tax) : [Note 17] .................................................... Profit for the year .................................................................................................... Balance of Profit for earlier years ............................................................................ Add : Transferred from Debenture redemption reserve (Net) ................................. Total of Profit and Loss Account balances shown above ....................................... Deduct : General Reserve ..................................................................................... : Interim Dividend Paid ............................................................................. : Income tax on Interim Dividend Paid ..................................................... : Proposed Dividends - see Directors Report ......................................... : Income tax on Proposed Dividends ....................................................... Balance for 2006-2007 and earlier years carried to Balance Sheet ...................... EARNINGS PER SHARE [Note 26] : (Face value Rs. 10/- per share) (Rupees) Basic ................................................................................................................ Diluted .............................................................................................................. NOTES ON ACCOUNTS ........................................................................................ Per our report attached For A. F. Ferguson & Co. Chartered Accountants M. M. Murugappan N. Vaghul R. K. Kulkarni A. S. Ganguly A. P. Puri Thomas Mathew T. N. B. Godrej X XI XII XIII IX 2007 Rupees lakhs 10,940,50.23 1,312,79.14 9,627,71.09 617,51.31 10,245,22.40 6,851,91.69 (2,13.80) 666,15.33 (67,45.43) 209,58.65 1,318,57.27 8,976,63.71 47,09.94 8,929,53.77 1,315,68.63 1,315,68.63 121,98.47 1,437,67.10 365,72.87 (15,63.26) 1,087,57.49 19,18.84 1,068,38.65 1,475,74.47 15,67.20 1,491,41.67 2,559,80.32 110,00.00 184,03.05 25,81.03 98,19.90 16,68.89 2,125,07.45 2006 Rupees lakhs 9,113,66.15 1,124,89.36 7,988,76.79 337,77.15 8,326,53.94 5,713,76.57 11,61.05 551,78.39 (18,40.16) 200,00.53 1,004,03.20 7,462,79.58 26,53.40 7,436,26.18 890,27.76 78.45 889,49.31 210,01.18 1,099,50.49 285,40.00 (43,00.00) 857,10.49 857,10.49 996,39.74 43.39 996,83.13 1,853,93.62 100,00.00 243,97.41 34,21.74 1,475,74.47

45.15 40.94 XIV

38.07 34.93

R. A. Banga Partner

Keshub Mahindra Anand G. Mahindra Directors Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2007

Narayan Shankar Mumbai, 28th May, 2007

69

MAHINDRA & MAHINDRA LIMITED

Cash Flow Statement for the year ended 31st March, 2007
Rupees lakhs A. CASH FLOW FROM OPERATING ACTIVITIES : Net Profit before exceptional items and taxation ................................... Adjustments for : Depreciation/Amortisation ............................................................... Unrealised Profit on Exchange (Net) ............................................... Investment and Interest Income ..................................................... Interest, Commitment and Finance charges ................................... Amortisation of Expenses ............................................................... Profit on sale of Investments (Net) .................................................. (Profit)/Loss on fixed assets sold/scrapped/written off (Net) .......... Excess of cost over fair value of current investments (Net) ........... Provision for diminution in the value of long term investments (Net) 209,58.65 6,36.34 (234,64.52) 19,79.63 2,06.09 (5,62.00) 1,72.60 2,36.09 1,62.88 Operating Profit before Working Capital changes .................................. Changes in : Trade and other receivables ........................................................... Inventories ....................................................................................... Trade and other payables ............................................................... (168,16.91) 26.00 365,67.56 197,76.65 Miscellaneous Expenditure (to the extent not written off or adjusted) incurred during the year ..................................................... Cash generated from operations ........................................................... Income taxes paid (Net of refunds) ........................................................ NET CASH FROM OPERATING ACTIVITIES ......................................... (164,27.02) (118,91.41) 27,817.25 (5,01.18) 1,317,31.51 200,00.53 (4,02.81) (94,46.56) 26,95.61 7,57.61 (8,27.00) (17,89.78) 68.55 (22,17.50) 88,38.65 977,87.96 1,315,68.63 889,49.31 2007 Rupees lakhs 2006 Rupees lakhs

(2,73.10) 1,512,35.06 (343,40.49) 1,168,94.57

(75.81) 972,10.97 (285,20.71) 686,90.26

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MAHINDRA & MAHINDRA LIMITED

Cash Flow Statement (Contd.)

2007 Rupees lakhs B. CASH FLOW FROM INVESTING ACTIVITIES : Purchase of fixed assets ........................................................................ Sale of fixed assets ................................................................................ Purchase of investments ........................................................................ Sale of investments ................................................................................ Interest received ..................................................................................... Dividends received ................................................................................. Inter corporate deposits (Net) ................................................................ Exceptional Items : Sales Proceeds (Net) on sale of Long Term Investments ...................... NET CASH USED IN INVESTING ACTIVITIES ....................................... C. CASH FLOW FROM FINANCING ACTIVITIES : Proceeds from borrowings ..................................................................... Repayments of borrowings (including premium on prepayments) ......... Dividends paid [including income tax on dividends Rs. 6002.77 lakhs (2006 : Rs. 2115.18 lakhs)] ................................................................... Interest, Commitment and Finance charges paid .................................. NET CASH FROM/(USED IN) FINANCING ACTIVITIES ......................... NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS .... CASH AND CASH EQUIVALENTS [Note 1] : Opening Balance .................................................................................... Closing Balance ..................................................................................... See Notes attached. Per our report attached For A. F. Ferguson & Co. Chartered Accountants M. M. Murugappan N. Vaghul R. K. Kulkarni A. S. Ganguly A. P. Puri Thomas Mathew T. N. B. Godrej 725,15.25 1,361,78.89 630,68.57 725,15.25 1,078,56.74 (149,22.15) 249,35.86 (140,47.10) 142,75.32 (950,38.78) 187,62.82 (502,65.80) (504,44.51) 22,55.38 (9,267,62.13) 8,652,07.80 80,09.24 120,39.32 (196,19.20) (294,26.21) 19,59.46 (4,790,29.20) 4,309,87.03 55,25.01 37,48.99 (27,93.70) 2006 Rupees lakhs

(483,46.07) (27,80.67) 418,07.85 636,63.64

(171,49.73) (27,16.81) (89,77.78) 94,46.68

R. A. Banga Partner

Keshub Mahindra Anand G. Mahindra Directors Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2007

Narayan Shankar

Mumbai, 28th May, 2007

71

MAHINDRA & MAHINDRA LIMITED

Notes to the Cash Flow Statement for the year ended 31st March, 2007
2007 Rupees lakhs 1 Cash and bank balances ....................................................................... Unrealised (Gain)/Loss on foreign currency cash and cash equivalents Total cash and cash equivalents ............................................................ 1,326,07.19 35,71.70 1,361,78.89 2006 Rupees lakhs 730,30.60 (5,15.35) 725,15.25

During the year, the Company, has acquired the following subsidiaries a) b) c) d) DGP Hinoday Industries Limited Rs. 9584.32 lakhs. Mahindra Stokes Holding Company Rs. 5.00 lakhs. Mahindra Forging Overseas Limited Rs. * lakh. Mahindra Forging Mauritius Limited Rs. * lakh.

* denotes amounts less than Rs. 500.00 3 During the year, the Company has consolidated its business interest in Stokes Group Limited by swapping the shares held by the Company in Stokes Group Limited for shares of Mahindra Stokes Holding Company Limited. This being a non cash transaction does not form part of Cash Flow. Previous years figures have been regrouped/restated wherever necessary.

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MAHINDRA & MAHINDRA LIMITED

SCHEDULE I
Share Capital [Note 2] : Authorised : 27,50,00,000 Ordinary (Equity) Shares of Rs. 10 each .................................................... 25,00,000 Unclassified Shares of Rs.100 each ........................................................... Total........ Issued and Subscribed : 24,53,71,265 (2006 - 24,09,01,352) Ordinary (Equity) Shares of Rs.10 each fully paid up ............................................................................. Less : 73,38,558 (2006 - 75,01,768) Ordinary (Equity) Shares of Rs. 10 each fully paid up issued to ESOP Trust but not allotted to employees .................... Adjusted : Issued and Subscribed Share Capital ....................................... 2007 Rupees lakhs 275,00.00 25,00.00 300,00.00 2006 Rupees lakhs 275,00.00 25,00.00 300,00.00

245,37.13 245,37.13

240,90.14 240,90.14

7,33.86 238,03.27 Deductions Rupees lakhs 163,04.57 2,47.82 39.98 2,98.80 162,64.59 (50.98) 47.06 98.06 80,90.35 116,00.89+ 8.16 80,98.51 116,00.89 15,67.20* * 43.39* * 10,68.98 12,30.00 270,46.34 129,21.36

7,50.18 233,39.96 2007 Rupees lakhs 11,50.08 11,50.08 502,10.19 516,20.24 17,97.95 18,37.93 484,12.24 497,82.31 12,86.40 13,33.46 633,91.74 604,82.09 3,66.93 3,75.09 637,58.67 608,57.18 1,11.67 16,78.87 39,43.05 50,12.03 1,186,62.11 1,198,13.93 2,125,07.45 1,475,74.47 3,311,69.56 2,673,88.40

SCHEDULE II
Reserves and Surplus : 1 2 Capital Reserve .............................................................. Securities Premium Account [Note 3(a)(i)] ...................... Less : Premium on shares issued to ESOP Trust but not allotted to employees [Note 3(b)] ...................... 2006 Rupees lakhs 11,50.08 11,50.08 516,20.24 171,45.21 18,37.93 21,36.73 497,82.31 150,08.48 13,33.46 14,31.52 604,82.09 620,82.98 3,75.09 608,57.18 620,82.98 16,78.87 17,22.26 50,12.03 62,42.03 1,198,13.93 876,37.35 7 Balance for 2006-2007 and earlier years as per Profit and Loss Account ................................................ Total........ ! + * Additions Rupees lakhs 148,94.52 347,22.85 148,94.52 347,22.85 110,00.00! 100,00.00! 3,75.09 110,00.00 103,75.09 258,94.52 450,97.94

3 4

Revaluation Reserve [Note 3(a)(ii)] .................................. General Reserve ............................................................. Add : Bonus shares issued to ESOP Trust but not alloted to employees [Note 3(b)] .......................

5 6

Debenture Redemption Reserve .................................... Investment Fluctuation Reserve [Note 28] .....................

Transfer from Profit and Loss Account Rs. 11000.00 lakhs (2006 : Rs. 10000.00 lakhs) Adjustment on adoption of Accounting Standard 15 (revised 2005) Employee Benefits (Net of Tax of Rs. 4104.93 lakhs). Refer Note 17. Utilised for issue of Bonus Shares Transfer to Profit and Loss Account net of charge created during the year Rs. 22.08 lakhs (2006 : Rs. 331.61 lakhs)
73

MAHINDRA & MAHINDRA LIMITED

SCHEDULE III
Rupees lakhs Loan Funds [Note 4] : (A) Secured : (1) Debentures/Bonds ............................................................................. (2) Foreign Currency Loans from Banks ................................................. (3) Loans and Advances on cash credit account from Banks ............... 5,50.67 35,25.36 65,89.31 106,65.34 90,50.67 92,40.48 33,76.45 216,67.60 2007 Rupees lakhs 2006 Rupees lakhs

(B) Unsecured : (1) Fixed Deposits ................................................................................... (2) Short-term Loans : From Banks ....................................................................................... From Companies ............................................................................... 8,02.87 8,02.87 (3) Other Loans : (a) From Financial Institutions .......................................................... (b) Foreign Currency Loan from Banks ............................................ (c) Zero Coupon Convertible Bonds ................................................ (d) From Others [including interest accrued and due Rs. 2.03 lakhs (2006 : Rs. 2.03 lakhs)] .............................................................. 326,66.85 262,62.91 879,41.40 270,32.99 175,85.91 157,41.00 3,96.15 5.00 4,01.15 3,98.94 8,43.06

48,62.35 1,517,33.51 1,529,35.32

50,66.51 654,26.41 666,70.62 883,38.22

Total........

1,636,00.66

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MAHINDRA & MAHINDRA LIMITED

SCHEDULE IV
Fixed Assets [Note 5] :
Description of Assets Cost/ Professional valuation as at 31st March, 2006 Additions and adjustments during the year Deductions and adjustments during the year Cost/Professional valuation as at 31st March, 2007 Depreciation/Amortisation to 31st March, 2006 Deprecia- Deductions tion/ and Amoradjusttisation ments for 2006- of Depre2007 ciation/ Amortisation Rupees lakhs Rupees lakhs Depreciation/ Amortisation to 31st March, 2007 Net Balance as at 31st March, 2007 Net Balance as at 31st March, 2006

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Land - Freehold ........................

40,61.28

3,16.37

5.08

43,72.57

43,72.57

40,61.28

Land - Leasehold ......................

55,36.30

10,83.92

66,20.22

1,04.13

68.08

1,72.21

64,48.01

54,32.17

Buildings ....................................

375,41.23

94,04.85

4,25.36

465,20.72

96,13.10

11,03.83

1,32.31

105,84.62

359,36.10

279,28.13

Plant and Machinery .................

2,236,41.51

262,60.61

80,73.76 2,418,28.36 1,336,52.41

170,10.90

70,38.32

1,436,24.99

982,03.37

899,89.10

Furniture and Fittings ................

71,52.25

12,37.43

3,23.06

80,66.62

32,79.26

5,02.38

2,20.10

35,61.54

45,05.08

38,72.99

Vehicles, Cycles, etc. ................

74,60.46

23,19.81

10,74.48

87,05.79

30,46.55

10,90.72

7,28.84

34,08.43

52,97.36

44,13.91

Development Expenditure .........

26,27.63

22,84.21

49,11.84

9,95.89

6,16.07

16,11.96

32,99.88

16,31.74

Software Expenditure ................

5,31.88

14,10.47

19,42.35

3,35.27

6,12.60

9,47.87

9,94.48

1,96.61

Total........ 2,885,52.54 2,699,71.62

443,17.67 226,10.07

99,01.74 3,229,68.47 1,510,26.61 40,29.15 2,885,52.54 1,335,56.39

210,04.58 200,46.91

81,19.57 25,76.69

1,639,11.62 1,590,56.85 1,375,25.93 1,510,26.61 1,375,25.93

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MAHINDRA & MAHINDRA LIMITED

SCHEDULE V
Investments (At Cost, unless otherwise specified) :
Note Face Value Per Unit Rupees Shares (Non-trade and fully paid-up unless otherwise specified) : Unquoted : (a) In Subsidiary Companies : (i) Equity Shares : Mahindra Engineering & Chemical Products Limited .......................... Mahindra Intertrade Limited [including 1,50,00,000 shares partly paid-up Rs. 3 per share] ........................................................... Mahindra Steel Service Centre Limited ............................................... Mahindra Holdings & Finance Limited ................................................. Mahindra USA Incorporated ................................................................ Mahindra Gujarat Tractor Limited ........................................................ Mahindra Shubhlabh Services Limited ................................................ Tech Mahindra Limited (transferred to Quoted during the year) ........ Automartindia Limited .......................................................................... Mahindra Logisoft Business Solutions Limited ................................... Mahindra Ashtech Limited ................................................................... Bristlecone Limited ............................................................................... Mahindra & Mahindra South Africa (Proprietary) Limited ................... Mahindra Engineering Design & Development Company Limited .......... Mahindra Overseas Investment Company (Mauritius) Limited ............ Mahindra SAR Transmission Private Limited ...................................... Mahindra Forgings Limited (formerly known as Mahindra Automotive Steels Limited) (transferred to Quoted Others during the year) ........................................................... Mahindra Renault Private Limited ........................................................ Mahindra International Limited ............................................................ Stokes Group Limited .......................................................................... Plexion Technologies (India) Private Limited ....................................... Mahindra Forgings Overseas Limited .................................................. Mahindra Forgings Mauritius Limited .................................................. DGP Hinoday Industries Limited ......................................................... Mahindra Stokes Holding Company Limited ...................................... (ii) 7.25% Cumulative Redeemable Preference Shares : Mahindra Intertrade Limited ................................................................. (iii) 8.50% Cumulative Redeemable Preference Shares : Mahindra Ashtech Limited ................................................................... (iv) 13.10% Non-Cumulative Redeemable Preference Shares : Mahindra Gesco Developers Limited .................................................. (v) SeriesA Preference Shares: Bristlecone Limited ............................... (vi) SeriesB Preference Shares: Bristlecone Limited .............................. (vii) 8.00% Non-Cumulative Redeemable Preference Shares : DGP Hinoday Industries Limited ......................................................... 2007 Long Term Rupees lakhs Current Rupees lakhs 2006 Long Term Rupees lakhs Current Rupees lakhs

Number

53,78,235 2,71,00,006 37,23,874 14,66,00,593 4,50,00,000 16,83,218 1,48,33,793 2,26,25,348 63,49,500 79,05,000 42,22,250 35,70,000 70,50,000 88,10,000 31,25,739

10 10 10 10 US $ 0.10 10 10 2 10 10 10 US $ 0.001 ZAR 1 10 US $ 1 10 10

5,63.88 16,60.00 6,38.38 146,60.06 19,37.89 3,55.00 15,87.31 29,21.33 5,77.83 7,90.50 19,26.19 2,49.20 7,05.01 38,45.98 14,62.85

5,63.88 16,60.00 6,38.38 121,60.06 19,37.89 19,36.39 19,21.52 205,45.15 14,03.46 11,33.00 10,00.00 19,26.19 2,49.20 7,05.01 2,26.32 14,62.85

(c) (1) (c) (2) (b)(c)(3) (c)(17)(18) (b)(c)(4) (c) (5) (c) (6) (b) (c) (7)

8,69,79,225 5,03,75,600 45,03,011 4,88,88,001 1,32,30,001 1,49,38,258 82,21,107 18,75,000 11,00,000 70,00,000 69,20,000 80,00,000

10 10 GBP 0.10 10 EURO 1 EURO 1 10 10 100 100 100 US $ 0.001 US $ 0.001 10

(b)(c)(8) (c) (9) (b) (c) (10) (c) (11) (c) (12) (c)(13)(14)

129,47.92 52,34.11 37,27.85 286,50.11 78,15.97 95,84.32 40,90.55 18,75.00 11,00.00

80,01.01 26,26.50 52,34.11 29,09.77 37,27.85 18,75.00 11,00.00 55,00.00 31,71.84 15,12.40 851,27.78

(c) (15)

31,71.84 15,12.40 8,41.73 1,144,33.21

(c) (12)

(b) 312 8,55,646 1,00,000 35,000 75,000 1 7,49,997 50,000 20,000 2,85,000 5,000 2,296 1,78,000 100 10 10 10 10 10 10 10 10 10 10 100 100

In Other Companies : (i) Equity Shares : Montreal Engineering International Limited ......................................... Machinery Manufacturers Corporation Limited ................................... Judricks (India) Private Limited ............................................................ Mahindra & Mahindra Contech Limited ............................................... NTTF Industries Limited ....................................................................... Jayem Automotives Limited ................................................................. Officemartindia.com Limited ................................................................ Indian NGOs.com Private Limited ....................................................... Sixth Sense Studios Private Limited ................................................... Utility Engineers (India) Limited ............................................................ Mahindra Renault Automotive Private Limited .................................... Others ................................................................................................... (ii) 4.00% Tax-free Cumulative Preference Shares : Machinery Manufacturers Corporation Limited ................................... (iii) 11.00% Redeemable Preference Shares : Sixth Sense Studios Private Limited ...................................................

(b)

(c) (16) (a) (b)

0.11 94.25 10.00 3.50 15.00 22.52 6.19 2.00 28.50 0.50 2.25 1,78.00 3,62.82

0.11 94.25 10.00 3.50 15.00 22.52 6.19 2.00 28.50 2.25 1,78.00 3,62.32

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MAHINDRA & MAHINDRA LIMITED

SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
Note Face Value Per Unit Rupees Quoted : (a) In Subsidiary Companies : (i) Equity Shares : 10 Mahindra Gesco Developers Limited .................................................. (b)(c)(15) 10 Mahindra & Mahindra Financial Services Limited ............................... (b) 10 Tech Mahindra Limited (transferred from Unquoted during the year) ...................................... (b)(c)(17)(18) 2007 Long Term Rupees lakhs Current Rupees lakhs 2006 Long Term Rupees lakhs Current Rupees lakhs

Number

1,54,01,126 5,82,41,532 5,37,76,252

216,33.39 150,90.95 191,81.25 559,05.59

67,21.29 150,90.95 218,12.24

(b) 13,91,860 1,32,00,370 10 10

In Non-Subsidiary Companies : (i) Equity Shares : + Fairfield Atlas Limited ........................................................................... Mahindra Forgings Limited (formerly known as Mahindra Automotive Steels Limited transferred from Unquoted Subsidiary during the year) .................................................

1,39.18

1,39.18

(c) (19)

128,51.01 129,90.19

1,39.18

4 200 13 13,21,500

100 1,00,00,000 10,00,000 100 100

Debentures/Bonds (Non-trade & fully paid-up) : Unquoted : (a) In Subsidiary Companies : 0% Mahindra Holdings & Finance Limited .................................................... 11.19% Mahindra & Mahindra Financial Services Limited ............................ 7.50% Mahindra & Mahindra Financial Services Limited .............................. (b) In Other Companies : 0.50% The East India Clinic Limited ............................................................. 9.00% Jayem Automotives Limited ...............................................................

(d) (1)

4,00.00 0.01 13,21.50 17,21.51

20,22.28 20,22.28

25,00.00 4,00.00 0.01 13,21.50 42,21.51

20,22.28 20,22.28

100 7,75,000 18 150

1,00,00,000 10,00,000 100 10,00,000 10,00,000

Quoted : (a) In Subsidiary Companies : 6.90% Mahindra & Mahindra Financial Services Limited .............................. 8.60% Mahindra & Mahindra Financial Services Limited .............................. (b) In Other Companies : 6.75% Tax Free US-64 Bonds ....................................................................... 7.00% Power Finance Corporation Limited (2011) Series XXII .................... 7.99% Infrastructure Development Finance Company Limited ....................

(d) (2) (d) (3)

17,21.51

10,01.67 8,09.36 1,80.00 15,00.00 34,91.03 55,13.31 (3,49.52) 51,63.79

42,21.51 42,21.51

19,95.08 8,09.36 1,80.00 29,84.44 50,06.72 (1,20.01) 48,86.71

(d) (4)

Less : Excess of cost over fair value of current investments of Debentures/Bonds .....................................................................................

17,21.51

Other Investments : Government Securities : Unquoted : 36,000 6 Years National Savings Certificates ......................................................................

(e) (1)

0.36 0.36

2,01.56 2,01.56 2,01.56 (16.31) 1,85.25

0.29 0.29 0.29 0.29

2,01.56 2,01.56 2,01.56 (9.73) 1,91.83

Quoted : 1,92,70,000 Government of India Securities ................................................................................

0.36

Less : Excess of cost over fair value of current investments of Government Securities ...............................................................................

0.36

Trade Investment Total face value

77

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
Note Face Value Per Unit Rupees Units : Unquoted : ABN AMRO Mutual Fund - Cash Fund Institutional Plus Daily Dividend ............... ABN AMRO Mutual Fund - Flexi Debt Regular Daily Dividend ............................... ABN AMRO Mutual Fund - Fixed Term Plan Series 2 Quarterly Plan A Dividend . ABN AMRO Mutual Fund - Dual Advantage Fund Plan A Series 1 Institutional Growth ................................................................................................... Birla Mutual Fund - Cash Fund Institutional Premium Daily Dividend .................... Birla Mutual Fund - Fixed Maturity Plan Quarterly Series 2 Dividend Payout .............. Chola Mutual Fund - Fixed Maturity Plan Series 2 (Qtrly Plan -I) Dividend ........... Chola Mutual Fund - Fixed Maturity Plan Series 3 (Qtrly Plan -I) Dividend ........... Deutsche Mutual Fund - Insta Cash Plus Institutional Plan Daily Dividend ........... Deutsche Mutual Fund - Fixed Term Series 9 Growth Option ................................ Deutsche Mutual Fund - Money Plus Dividend Option ........................................... DSP Merrill Lynch Mutual Fund - Fixed Term Plan Series IB Dividend .................. DSP Merrill Lynch Mutual Fund - Fixed Term Plan Series IC Dividend .................. DSP Merrill Lynch Mutual Fund - Liquid Plus Institutional Plan Daily Dividend ..... Franklin Templeton Fixed Tenure Fund Series V 13 Months Plan Growth ............. HDFC Mutual Fund - Cash Management Fund Savings Plan Daily Dividend ........ HDFC Mutual Fund - Multiple Yield Fund - Plan 2005 Growth .............................. HDFC Mutual Fund - Multiple Yield Fund - Growth ................................................ HDFC Mutual Fund - Cash Management Fund Call Plan Daily Dividend .............. HDFC Mutual Fund - FMP 3M March 2006(1) Institutional Plan Dividend ............. HDFC Mutual Fund - FMP 13M March 2006(1) Institutional Plan Growth ............. HSBC Mutual Fund - Cash Fund Institutional Plus Daily Dividend ........................ HSBC Mutual Fund - Fixed Term Series -7-Dividend ............................................. HSBC Mutual Fund - Fixed Term Series -8-Dividend ............................................. HSBC Mutual Fund - Liquid Plus Institutional Plan Daily Dividend ........................ JM Financial Mutual Fund - Fixed Maturity Fund - Series II Qtrly Plan QSA Dividend ........................................................................................................... JM Financial Mutual Fund - Liquid Fund Growth Plan ............................................ Kotak Mahindra Mutual Fund - Liquid Institutional Premium Plan Daily Dividend . Kotak Mahindra Mutual Fund - Fixed Maturity Plan Series XVIII Dividend ........... Kotak Mahindra Mutual Fund - Fixed Maturity Plan Series 19 Dividend ................ Kotak Mahindra Mutual Fund - Fixed Maturity Plan Series 23 Dividend ................ Principal Mutual Fund - Cash Management Fund Liquid Option Institutional Premium Plan Daily Dividend ................................................................................... Principal Mutual Fund - Fixed Maturity Plan 91 Days Dividend Payout ................. Principal Mutual Fund - Fixed Maturity Plan 91 Days Series I ............................... Principal Mutual Fund - Fixed Maturity Plan 91 Days Series III .............................. Principal Mutual Fund - Income Fund Growth Plan ................................................ Prudential ICICI Mutual Fund - Super Institutional Daily Dividend .......................... Prudential ICICI Mutual Fund - Blended Plan B Institutional Dividend ................... Prudential ICICI Mutual Fund - FMP Yearly Series XXV Dividend ........................... Prudential ICICI Mutual Fund - FMP Monthly Plan Dividend XXVII ......................... Prudential ICICI Mutual Fund - Sweep Cash Option Daily Dividend ...................... Reliance Fixed Maturity Fund Quarterly Plan III - Series II Dividend Option .......... SBI Mutual Fund - Magnum Institutional Income Savings Dividend. ...................... SBI Mutual Fund - Magnum Debt Fund Series 13 Months Growth Option ........... Standard Chartered Mutual Fund - Grindlays Fixed Maturity 19th Plan Dividend . Standard Chartered Mutual Fund - Grindlays Fixed Maturity 21st Plan Dividend . Standard Chartered Mutual Fund - Liquidity Manager Daily Dividend ................... Standard Chartered Mutual Fund - Fixed Maturity 3rd Plan Dividend ................... Standard Chartered Mutual Fund - Fixed Maturity 2nd Plan Dividend .................. Standard Chartered Mutual Fund - Liquidity Manager Plus Daily Dividend ........... Standard Chartered Mutual Fund - Fixed Maturity Plus Plan III B Growth ............ Sundaram Mutual Fund - Money Fund Super Institutional Daily Dividend ............. 2007 Long Term Rupees lakhs Current Rupees lakhs 2006 Long Term Rupees lakhs Current Rupees lakhs

Number

50,00,000 40,00,000 2,12,149 50,00,000 50,00,000 41,89,254 1,89,03,587 1,00,00,000 2,25,49,389 23,34,038 1,92,44,216 1,00,02,856 50,00,000 99,007 50,00,000

10 10 10 10 10 10 10 10 10 10 10 1,000 1,000 1,000 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 1,000 10 10

(f) (1) (f) (2) (f) (3) (f) (4) (f) (14) (f) (16) (f) (21) (f) (22) (f) (23) (f) (f) (f) (f) (25) (29) (30) (33)

5,00.00 4,00.00 21,21.91 5,00.00 5,00.00 5,00.00 19,71.00 10,00.00 22,57.07 2,39.50 20,02.76 10,00.29 5,00.00 9,90.16 5,00.00

15,02.99 5,04.19 5,02.47 15,83.57 5,00.00 10,00.00 10,00.00 10,76.09 4,00.00 5,00.00 5,02.04 7,07.05 5,00.00 9,89.55 5,00.00 1,03.86 24,50.57 10,00.00 10,00.00 13,81.66 5,02.95 5,00.00 5,00.00 23,48.57 5,00.00 5,00.00 10,00.00 8,04.00 10,06.39 5,04.92 5,00.00 14,26.77 5,11.50 10,13.48 5,00.00 5,00.00 13,64.04 10,00.00 5,00.00 5,00.00 1,30.03 5,00.00 5,00.00 8,00.48 8,22.43

(f) (38) (f) (f) (f) (f) (f) (f) (f) (f) (f) (f) (f) (f) (f) (f) (40) (45) (46) (47) (48) (49) (50) (52) (54) (56) (60) (66) (67) (68)

(f) (69) (f) (70) (f) (72) (f) (73) (f) (75) (f) (76) (f) (79) (f) (81) (f) (82) (f) (86) (f) (105) (f) (111) (f) (112) (f) (116) (f) (117) (f) (118) (f) (119) (f) (120) (f) (121) (f) (126)

78

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
Note Face Value Per Unit Rupees 10 Sundaram Mutual Fund - Fixed Term Plan Series 1Feb 06 (100 Days) Dividend Plan ............................................................................................................ 10 Tata Mutual Fund - Fixed Horizon Fund Series 3 Scheme A Dividend ............... 1,000 Tata Mutual Fund - Liquidity Management Fund Daily Dividend ............................ 10 Tata Mutual Fund - Fixed Horizon Fund Series 5 Scheme A Dividend ............... 1,000 Tata Mutual Fund - Liquid Super High Investment Fund Daily Dividend ................ 10 UTI Mutual Fund - Fixed Maturity Plan QFMP 106/11 Dividend Plan .................... 10 UTI Mutual Fund - Fixed Maturity Plan QFMP Growth Plan ................................... 10 UTI Mutual Fund - Money Market Fund Daily Dividend Option .............................. 10 UTI Mutual Fund - Fixed Maturity Plan YFMP Growth Plan ................................... (f) (f) (f) (f) (f) (f) (f) (f) (f) (127) (128) (134) (135) (136) (139) (142) (143) (144) 2007 Long Term Rupees lakhs Others : Commercial Paper Unquoted : Export Import Bank of India ..................................................................................... Current Rupees lakhs 5,00.14 10,00.00 164,82.83 2006 Long Term Rupees lakhs Current Rupees lakhs 5,00.00 5,12.32 15,77.07 5,00.00 5,00.00 5,00.53 18,20.49 423,50.01

Number 44,875 1,00,00,000

(g) (1)

19,47.00 19,47.00

25,00,00,000 10,00,00,000 25,00,00,000 15,00,00,000 35,00,00,000 30,00,00,000 10,00,00,000 10,00,00,000 15,00,00,000

Certificate of Deposit Unquoted : State Bank of Travancore ......................................................................................... ICICI Bank Limited .................................................................................................... ABN AMRO Bank ..................................................................................................... State Bank of Mysore ............................................................................................... Allahabad Bank ......................................................................................................... Kotak Mahindra Bank Limited .................................................................................. HDFC Bank ............................................................................................................. State Bank of Bikanner & Jaipur ............................................................................. State Bank of Hyderabad ......................................................................................... State Bank of Patialia ...............................................................................................

(h) (1) (h) (2) (h) (3) (h) (4) (h) (5) (h) (6) (h) (10) (h) (11) (h) (12) (h) (13)

1,854,13.68

23,60.20 9,30.27 23,83.15 13,89.18 33,02.03 28,33.31 9,48.84 9,51.47 14,01.70 165,00.15

4,94.37 9,83.87 4,89.91 14,70.27 14,70.09 9,61.46 58,69.97 552,45.52 1,669,08.84 1,419,01.16 251,37.42 1,670,38.58 (1,29.74) 1,669,08.84 2,030,84.89

383,32.02 1,116,63.32 2,237,45.70 1,515,23.16 725,88.37 2,241,11.53 (3,65.83) 2,237,45.70 10,285,25.22

Total Cost (Net of amounts written off) of Unquoted Investments .................................. Cost of Quoted Investments ....................................................................................

Less : Excess of cost over fair value of Current Investments (Net) .......................

Market Value of Quoted Investments ....................................................................... Total Face Value Notes : Face Value Per Unit Rupees (a) 21 74 100 16,667 (Rials) Shares (unquoted) in other companies comprise : * The United Spices Importers Limited (Equity B Shares) ......................... * Engineering & Metal Works, Tehran ............................................................

2007 Long Term Rupees 1 1

2006 Long Term Rupees 1 1

Number

Total........ * Written off to Re.1 Equity investments in these companies carry certain restrictions on transfer of shares in terms of funds raised by these companies from financial institutions/banks.

(b)

79

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
(c) The following are the movements in Shares during the year : Equity Shares Acquired Sold Preference Shares Acquired/ (Redeemed/Sold) Nos. 80,00,000 (55,00,000)

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) * # $ (d)

Mahindra Holdings & Finance Limited Mahindra Gujarat Tractor Limited Mahindra Shubhlabh Services Limited Automartindia Limited Mahindra Logisoft Business Solutions Limited Mahindra Ashtech Limited Mahindra Overseas Investment Company (Mauritius) Limited Mahindra Renault Private Limited Stokes Group Limited Mahindra Forgings Overseas Limited Mahindra Forgings Mauritius Limited DGP Hinoday Industries Limited Mahindra Stokes Holding Company Limited Mahindra Stokes Holding Company Limited Mahindra Gesco Developers Limited Mahindra Renault Automotive Private Limited Tech Mahindra Limited Tech Mahindra Limited Mahindra Forgings Limited Subscribed to on a rights basis Consideration other than Cash Conversion of Debentures into Equity Due to Consolidation from Rs. 2 per share to Rs. 10 per share Bonus Shares The following are the movements in Debentures/Bonds during the year :

Nos. Nos. 2,50,00,000$ 74,97,970 48,47,645* 76,53,517 1,51,78,690* 61,00,500 20,95,000 82,90,000 6,07,14,225* 10,00,000 24,65,310# 4,88,88,001 1,32,30,001 1,49,38,258 50,000 81,71,107# 28,35,000 5,000 4,60,80,048 4,60,80,048 38,23,808 49,78,444

Acquired Nos. (1) (2) (3) (4) $ (e) Mahindra Holdings & Finance Limited ........................................................... Mahindra & Mahindra Financial Services Limited .......................................... Mahindra & Mahindra Financial Services Limited .......................................... Infrastructure Development Finance Company Limited ................................ Conversion of Debentures into Equity 0.00% 6.90% 8.60% 7.99% 100 150 Rs. lakhs

Sold Nos.

Matured Nos.

25,00,000$ 20 10,01.67 15,00.00

Government Securities : (1) Of face value Rs. 0.08 lakhs (2006 : Rs. 0.02 lakhs) were purchased and of face value Rs. 0.01 lakhs (2006 : Rs. 3.00 lakhs) matured during the year. Face value of Rs. 0.36 lakhs (2006 : Rs. 0.29 lakhs) were lodged as security deposit. (2) Government of India Securities of the face value Rs. Nil (2006 : Rs. 193 lakhs) were purchased during the year. The following are the movements in Units during the year : Acquired Nos. Rs. lakhs 14,41.21 20,18.05 5.44 5,00.00 5,09.81 10,00.00 15,50.06 5,09.81 10,00.00 10,00.00 5,09.81 15,00.00 20,04.37 565,19.41 10,00.00 5,00.00 Sold Nos. 2,94,41,905 2,52,22,144 50,79,052 50,98,116 1,00,00,000 1,54,84,439 50,98,116 1,00,00,000 1,00,00,000 50,98,116 1,50,00,000 2,00,39,708 57,98,99,018 96,17,049 50,00,000 50,00,000

(f)

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17)

ABN AMRO Mutual Fund - Cash Fund Institutional Plus Daily Dividend .................................. ABN AMRO Mutual Fund - Flexi Debt Regular Daily Dividend ................................................. ABN AMRO Mutual Fund - Fixed Term Plan Series 2 Quarterly Plan A Dividend .................... ABN AMRO Mutual Fund - Dual Advantage Fund Plan A Series 1 Institutional Growth ......... ABN AMRO Mutual Fund - Fixed Term Plan Series 2 Quarterly Plan D Dividend Payout ....... ABN AMRO Mutual Fund - Fixed Term Plan Series 3 Quarterly Plan G Dividend ................... ABN AMRO Mutual Fund - Long Term Floating Rate Fund Weekly Dividend .......................... ABN AMRO Mutual Fund - Cash Fund - Institutional Plus Daily Dividend ............................... ABN AMRO Mutual Fund - Fixed Term Plan Series 2 Quarterly Plan B Dividend .................... ABN AMRO Mutual Fund - Fixed Term Plan Series 3 Quarterly Plan A Dividend Pay Out ..... ABN AMRO Mutual Fund - Fixed Term Plan Series 3 Quarterly Plan D Dividend Pay Out ..... ABN AMRO Mutual Fund - Fixed Term Plan Series 3 Quarterly Plan E Dividend Pay Out ..... Birla Mutual Fund - Cash Manager IP Daily Dividend Reinvestment ........................................ Birla Mutual Fund - Cash Fund Institutional Premium Daily Dividend. ...................................... Birla Mutual Fund - Short Term Fund - Dividend Reinvestment ................................................ Birla Mutual Fund - Fixed Maturity Plan Quarterly Series 2 Dividend Payout .......................... Chola Mutual Fund - FMP Series 4, (Quarterly Plan III) Dividend Payout .................................

1,44,12,112 2,01,80,276 54,358 50,00,000 50,98,116 1,00,00,000 1,54,84,439 50,98,116 1,00,00,000 1,00,00,000 50,98,116 1,50,00,000 2,00,39,708 56,40,94,151 96,17,049 50,00,000

80

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
Acquired Nos. (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31) (32) (33) (34) (35) (36) (37) (38) (39) (40) (41) (42) (43) (44) (45) (46) (47) (48) (49) (50) (51) (52) (53) (54) (55) (56) (57) (58) (59) (60) (61) (62) (63) (64) (65) (66) (67) (68) (69) (70) (71) (72) (73) Chola Mutual Fund - FMP Series 4 (Quarterly Plan -I ) Dividend ............................................. Chola Mutual Fund - Liquid Institutional Dividend Reinvestment Plan ...................................... Chola Mutual Fund - Short Term Floating Rate Fund Daily Dividend Reinvestment Plan ........ Chola Mutual Fund - Fixed Maturity Plan Series 2 (Quarterly Plan -I) Dividend ....................... Chola Mutual Fund - Fixed Maturity Plan Series 3 (Quarterly Plan -I) Dividend ....................... Deutsche Mutual Fund - Insta Cash Plus Institutional Daily Dividend Plan .............................. Deutsche Mutual Fund - Fixed Term Fund Series 12 Dividend Payout .................................... Deutsche Mutual Fund - Money Plus Dividend Option .............................................................. Deutsche Mutual Fund - Fixed Term Fund - Series 13 - Dividend Plan ................................... Deutsche Mutual Fund - Insta Cash Plus Fund -Institutional Plan Daily Dividend Plan ........... Deutsche Mutual Fund - Money Plus Fund Institutional Plan Dividend Option ........................ DSP Merrill Lynch Mutual Fund - Fixed Term Plan Series IB Dividend ..................................... DSP Merrill Lynch Mutual Fund - Fixed Term Plan Series IC Dividend ..................................... DSP Merrill Lynch Mutual Fund - Fixed Term Plan Series ID Dividend ..................................... DSP Merrill Lynch Mutual Fund - Liquidity Fund Institutional Daily Dividend ........................... DSP Merrill Lynch Mutual Fund - Liquid Plus Institutional Plan Daily Dividend ........................ Franklin Templeton Short Term Income Plan Weekly Dividend Reinvestment .......................... Franklin Templeton Floating Rate Income Fund Long Term Institutional Option ....................... Franklin Templeton Short Term Income Institutional Plan Weekly Dividend Reinvestment ....... Franklin Templeton Treasury Management Account Super Institutional Plan Daily Dividend Reinvestment ............................................................................................................................... HDFC Mutual Fund - Cash Management Fund Savings Plan Daily Dividend ........................... HDFC Mutual Fund - Cash Management Fund Savings Plus Plan Dividend ........................... HDFC Mutual Fund - Multiple Yield Fund- Growth .................................................................... HDFC Mutual Fund - FMP 3M June 2006 (I) Institutional Plan Dividend Pay Out ................... HDFC Mutual Fund - FMP 3M September 2006 (I) Institutional Plan Dividend Payout ........... HDFC Mutual Fund - Liquid Fund Premium Plan Dividend Daily Reinvestment ....................... HDFC Mutual Fund - FMP 3M August 2006 (I) Institutional Plan Dividend .............................. HDFC Mutual Fund - Cash Management Fund Call Plan Daily Dividend ................................. HDFC Mutual Fund - FMP 3M March 2006(1) Institutional Plan Dividend ................................ HDFC Mutual Fund - FMP 13M March 2006(1) Institutional Plan Growth ................................ HSBC Mutual Fund - Cash Fund Institutional Plus Daily Dividend ........................................... HSBC Mutual Fund - Fixed Term Series -7-Dividend ................................................................ HSBC Mutual Fund - Fixed Term Series -8-Dividend ................................................................ HSBC Mutual Fund - Income Fund Short Term Institutional Dividend ...................................... HSBC Mutual Fund - Liquid Plus Institutional Plan Daily Dividend ........................................... JM Financial Mutual Fund - Fixed Maturity Series III Quarterly Plan FMP Q2 Dividend Plan .. JM Financial Mutual Fund - Fixed Maturity Series II Quarterly Plan QSA Dividend ................. JM Financial Mutual Fund - High Liquidity Super Institutional Plan Daily Dividend .................. JM Financial Mutual Fund - Liquid Fund Growth Plan .............................................................. JM Financial Mutual Fund - Manager Fund Super Plan Daily Dividend .................................... JM Financial Mutual Fund - Manager Fund Super Plus Plan Daily Dividend ........................... Kotak Mahindra Mutual Fund - Flexi Debt Scheme - Daily Dividend ........................................ Kotak Mahindra Mutual Fund - Liquid Institutional Premium Plan Daily Dividend .................... Kotak Mahindra Mutual Fund - Bond (Short Term) - Monthly Dividend .................................... Kotak Mahindra Mutual Fund - Floater Long Term Weekly Dividend ........................................ Kotak Mahindra Mutual Fund - FMP 3M Series 2 Dividend Payout ......................................... Kotak Mahindra Mutual Fund - FMP 3M Series 3 Dividend Payout ......................................... Kotak Mahindra Mutual Fund - FMP 3M Series 5 Dividend Payout ......................................... Kotak Mahindra Mutual Fund - Fixed Maturity Plan Series XVIII Dividend ............................... Kotak Mahindra Mutual Fund - Fixed Maturity Plan Series 19 Dividend .................................. Kotak Mahindra Mutual Fund - Fixed Maturity Plan Series 23 Dividend .................................. Principal Mutual Fund - Cash Management Fund Liquid Option Institutional Premium Plan Daily Dividend. ............................................................................................................................. Principal Mutual Fund - Fixed Maturity Plan 91 Days Dividend Payout .................................... Principal Mutual Fund - Deposit Fund (FMP30) 91 Days September 06 Plan Dividend Payout Principal Mutual Fund - Fixed Maturity Plan 91 Days Series I .................................................. Principal Mutual Fund - Fixed Maturity Plan 91 Days Series III ................................................ 1,00,00,000 5,23,91,103 7,51,28,197 13,05,71,885 50,00,000 1,03,78,078 1,00,00,000 12,75,60,652 4,07,97,407 584 1,305 70,968 11,72,012 6,26,272 46,098 1,47,78,678 1,50,601 66,64,680 35,73,44,342 1,52,14,830 41,89,254 1,00,01,700 1,00,03,600 8,17,23,419 1,00,01,700 16,71,47,829 1,00,00,000 45,50,31,871 45,695 86,129 1,01,65,392 6,76,47,595 51,24,848 80,511 4,01,40,529 1,46,18,446 1,00,22,420 2,29,79,041 1,00,52,109 52,14,44,269 1,00,43,935 1,03,33,596 1,00,00,000 1,00,00,000 1,00,00,000 36,85,22,490 50,00,000 69,156 70,238 Rs. lakhs 10,00.00 52,55.56 75,25.04 130,82.65 5,00.00 10,45.68 10,00.00 127,80.94 40,81.81 5.84 13.05 7,09.68 117,22.46 62,63.77 5,03.05 15,27.25 15,14.36 666,63.46 380,08.57 15,24.78 5,00.00 10,00.17 10,00.36 100,19.13 10,00.17 174,27.84 10,00.00 455,28.67 4.57 8.61 10,20.84 67,69.49 5,12.48 8.06 40,20.68 15,00.00 10,02.24 22,97.91 10,05.39 637,62.72 10,15.73 10,37.30 10,00.00 10,00.00 10,00.00 368,54.83 5,00.00 6.92 7.02 Sold Nos. 1,00,00,000 5,23,91,103 7,51,28,197 1,00,00,000 1,00,00,000 14,13,11,850 50,00,000 1,53,78,078 1,00,00,000 12,75,60,652 4,07,97,407 50,788 72,010 70,968 11,72,012 4,14,123 46,098 1,47,78,678 1,50,601 66,64,680 36,66,47,789 1,52,14,830 9,39,022 1,00,01,700 1,00,03,600 8,17,23,419 1,00,01,700 17,17,47,263 1,00,00,000 1,00,00,000 46,88,40,696 50,75,205 50,86,129 1,01,65,392 4,50,98,206 51,24,848 50,80,511 4,01,40,529 1,22,84,408 1,00,22,420 2,29,79,041 1,00,52,109 54,06,50,645 1,00,43,935 1,03,33,596 1,00,00,000 1,00,00,000 1,00,00,000 50,00,000 50,00,000 1,00,00,000 37,65,61,934 1,00,63,874 50,00,000 51,18,338 50,70,238

81

MAHINDRA & MAHINDRA LIMITED

SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
Acquired Nos. (74) (75) (76) (77) (78) (79) (80) (81) (82) (83) (84) (85) (86) (87) (88) (89) (90) (91) (92) (93) (94) (95) (96) (97) (98) (99) (100) (101) (102) (103) (104) (105) (106) (107) (108) (109) (110) (111) (112) (113) (114) (115) (116) (117) (118) (119) (120) (121) (122) (123) (124) (125) (126) (127) (128) (129) (130) (131) Principal Mutual Fund - Income Fund Short Term Plan Institutional Plan Dividend Weekly .... Principal Mutual Fund - Income Fund Growth Plan ................................................................... Prudential ICICI Mutual Fund - Super Institutional Daily Dividend ............................................ Prudential ICICI Mutual Fund - Flexible Income Plan Dividend Fortnightly ............................... Prudential ICICI Mutual Fund - FMP Series 32 One Month Plan A Retail Dividend ................. Prudential ICICI Mutual Fund - Blended Plan B Institutional Dividend ...................................... Prudential ICICI Mutual Fund - FMP Series 32 Three Months Plan A Retail Dividend ............ Prudential ICICI Mutual Fund - FMP Yearly Series XXV Dividend ............................................. Prudential ICICI Mutual Fund - FMP Monthly Plan Dividend XXVII ........................................... Prudential ICICI Mutual Fund - FMP Monthly Plan Dividend Monthly ....................................... Prudential ICICI Mutual Fund - Institutional Short Term Plan DR Fortnightly ............................ Prudential ICICI Mutual Fund - FMP Series 32 Three Months Plan D Retail Dividend ............ Prudential ICICI Mutual Fund - Sweep Cash Option Daily Dividend ......................................... Reliance Mutual Fund - Fixed Horizon Fund Dividend Option .................................................. Reliance Mutual Fund - Fixed Horizon 11 Monthly Plan Series 1 Institutional Dividend Plan . Reliance Mutual Fund - Fixed Horizon Monthly Plan Series I Dividend Plan ............................ Reliance Mutual Fund - Fixed Horizon Monthly Plan Series II Dividend Plan ........................... Reliance Mutual Fund - Fixed Horizon Monthly Plan A Series II Dividend Option ................... Reliance Mutual Fund - Fixed Horizon Monthly Plan A Series III Dividend Option .................. Reliance Mutual Fund - Fixed Horizon Fund Monthly Plan A Series IV Dividend Option ......... Reliance Mutual Fund - Fixed Horizon Monthly Plan A Series VI Dividend Option .................. Reliance Mutual Fund - Fixed Horizon Quarterly Plan B Series I Dividend Option .................. Reliance Mutual Fund - Fixed Horizon Monthly Plan A Series V Dividend Option ................... Reliance Mutual Fund - Fixed Horizon Quarterly Plan B Series IV Dividend Option ................ Reliance Mutual Fund - Fixed Horizon Quarterly Plan B Series II Dividend Option ................. Reliance Mutual Fund - Fixed Horizon Quarterly Plan B Series V Dividend Option ................. Reliance Mutual Fund - Fixed Horizon Quarterly Plan I Series I Dividend Option .................... Reliance Mutual Fund - Fixed Horizon Quarterly Plan B Series III Dividend Option ................ Reliance Mutual Fund - Floating Rate Daily Dividend ................................................................ Reliance Mutual Fund - Liquid Cash Plan Daily Dividend Option ............................................. Reliance Mutual Fund - Liquidity Daily Dividend Reinvestment ................................................. Reliance Mutual Fund - Fixed Maturity Quarterly Plan III Series II Dividend Option ................. SBI Mutual Fund - Magnum Debt Series 180 Days (August 06) Dividend Option ................... SBI Mutual Fund - Magnum Debt Series 90 Days (June 06) Dividend Option ........................ SBI Mutual Fund - Magnum Debt Series 60 Days (September 06) Dividend Option .............. SBI Mutual Fund - Magnum Debt Series 90 Days (August 06) Dividend Option ..................... SBI Mutual Fund - Magnum Debt Series 90 Days (October 06) Dividend Option ................... SBI Mutual Fund - Magnum Institutional Income Savings Dividend ......................................... SBI Mutual Fund - Magnum Debt Fund Series 13 Months Growth Option .............................. SBI Mutual Fund - Magnum Debt Series 90 Days (May 06) Dividend Option .......................... Standard Chartered Mutual Fund - Medium Term Monthly Dividend Option ............................ Standard Chartered Mutual Fund - ST Plan C Fortnightly Dividend ......................................... Standard Chartered Mutual Fund - Grindlays Fixed Maturity 19th Plan Dividend .................... Standard Chartered Mutual Fund - Grindlays Fixed Maturity 21st Plan Dividend .................... Standard Chartered Mutual Fund - Liquidity Manager Daily Dividend ...................................... Standard Chartered Mutual Fund - Fixed Maturity 3rd Plan Dividend ...................................... Standard Chartered Mutual Fund - Liquidity Manager Plus Daily Dividend .............................. Standard Chartered Mutual Fund - Fixed Maturity Plus Plan III B Growth ............................... Sundaram Mutual Fund - Fixed Term Plan Series IX (90 Days) Dividend Plan ........................ Sundaram Mutual Fund - BNP FTP Series VI June 06 (100 Days) Dividend Payout ............... Sundaram Mutual Fund - Fixed Term Plan Series VIII (30 Days) Dividend Plan ....................... Sundaram Mutual Fund - Fixed Term Plan Series X (30 Days) Dividend Plan ......................... Sundaram Mutual Fund - Money Fund Super Institutional Daily Dividend ................................ Sundaram Mutual Fund - Fixed Term Plan Series 1Feb 06(100 days) Dividend Plan .............. Tata Mutual Fund - Fixed Horizon Fund Series 3 Scheme A Dividend ..................................... Tata Mutual Fund - Fixed Horizon Series 5 Scheme C Dividend .............................................. Tata Mutual Fund - Fixed Horizon Series 5 Scheme D Dividend .............................................. Tata Mutual Fund - Fixed Horizon Series 6 Scheme G Dividend .............................................. 92,38,136 4,81,10,541 60,25,59,529 96,36,597 1,00,53,100 1,65,551 53,78,833 1,63,384 85,250 20,00,658 91,81,419 1,01,61,400 5,50,18,279 50,00,000 2,00,00,000 50,24,298 1,00,24,298 50,00,000 1,50,00,000 1,50,00,000 1,50,00,000 50,54,490 1,50,00,000 1,00,00,000 1,00,00,000 50,54,490 1,00,00,000 1,00,00,000 99,67,337 15,60,05,771 9,67,46,281 1,02,88,572 1,00,00,000 1,00,00,000 50,00,000 1,00,00,000 18,88,61,914 50,00,000 1,00,98,438 1,51,39,607 68,832 47,100 5,989 27,500 97,13,492 50,00,000 1,00,46,044 1,00,00,000 1,00,05,400 1,00,05,400 6,99,11,686 37,761 1,01,40,173 1,01,42,920 1,03,01,119 Rs. lakhs 10,10.46 50,06.91 602,56.03 10,17.18 10,05.31 16.66 5,37.89 16.34 8.53 2,32.92 10,14.26 10,16.14 55,01.83 5,00.00 20,00.00 5,02.43 10,02.43 5,00.00 15,00.00 15,00.00 15,00.00 5,05.45 15,00.00 10,00.00 10,00.00 5,05.45 10,00.00 10,00.00 10,02.89 173,80.76 96,77.63 10,28.90 10,00.00 10,00.00 5,00.00 10,00.00 189,47.57 5,00.00 10,09.84 15,15.26 6.88 4.71 0.60 2.75 971,44.63 5,00.00 10,04.60 10,00.00 10,00.54 10,00.54 70,57.79 3.78 10,14.02 10,14.29 10,30.12 Sold Nos. 92,38,136 2,88,66,325 61,68,27,244 96,36,597 1,00,53,100 52,63,935 53,78,833 1,02,98,184 50,85,250 20,00,658 91,81,419 1,01,61,400 4,50,15,423 50,00,000 2,00,00,000 50,24,298 1,00,24,298 50,00,000 1,50,00,000 1,50,00,000 1,50,00,000 50,54,490 1,50,00,000 1,00,00,000 1,00,00,000 50,54,490 1,00,00,000 1,00,00,000 99,67,337 15,60,05,771 9,67,46,281 50,00,000 1,02,88,572 1,00,00,000 1,00,00,000 50,00,000 1,00,00,000 20,24,58,121 1,00,00,000 50,00,000 1,00,98,438 1,51,39,607 50,68,832 50,47,100 13,06,195 50,27,500 96,94,533 1,00,46,044 1,00,00,000 1,00,05,400 1,00,05,400 7,80,58,304 50,00,000 51,60,912 1,01,40,173 1,01,42,920 1,03,01,119

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SCHEDULE V (Contd.)
Investments (At Cost, unless otherwise specified) :
Acquired Nos. (132) (133) (134) (135) (136) (137) (138) (139) (140) (141) (142) (143) (144) (g) Tata Mutual Fund - Fixed Horizon Series 8 Scheme B Dividend Institutional Plan .................. Tata Mutual Fund - Fixed Horizon Series 8 Scheme C Dividend Institutional Plan .................. Tata Mutual Fund - Liquidity Management Fund Daily Dividend ............................................... Tata Mutual Fund - Fixed Horizon Fund Series 5 Scheme A Dividend ..................................... Tata Mutual Fund - Liquid Super High Investment Fund Daily Dividend .................................. UTI Mutual Fund - Fixed Maturity Plan Quarterly Series QFMP/0806/11 Dividend Plan Payout UTI Mutual Fund - Liquid Cash Plan Institutional Daily Income Option .................................... UTI Mutual Fund - Fixed Maturity Plan QFMP 106/11 Dividend Plan ....................................... UTI Mutual Fund - Fixed Maturity Plan QFMP/0506/1 Dividend Option ................................... UTI Mutual Fund - Fixed Maturity Plan QFMP/1006/11 Dividend Plan Payout ........................ UTI Mutual Fund - Fixed Maturity Plan QFMP Growth Plan ...................................................... UTI Mutual Fund - Money Market Fund Daily Dividend Option ................................................. UTI Mutual Fund - Fixed Maturity Plan YFMP Growth Plan ...................................................... The following are the movements in Commercial Paper during the year : Acquired Face Value Rs. lakhs (1) (2) (h) Export Import Bank of India ....................................... Housing Development Finance Corporation Limited . 10,00.00 Total Value Rs. lakhs 9,80.50 Sold Face Value Rs. lakhs 10,00.00 Matured Face Value Rs. lakhs 10,00.00 10,00.00 1,50,00,000 1,54,95,648 2,00,922 40,92,041 1,00,00,000 35,24,111 50,00,000 1,00,00,000 7,71,78,679 1,00,00,000 Rs. lakhs 15,00.00 15,49.56 20,13.76 456,06.61 10,00.00 359,24.17 5,00.00 10,00.00 134,90.18 10,00.00 Sold Nos. 1,50,00,000 1,54,95,648 3,58,302 50,00,000 40,47,166 1,00,00,000 35,24,111 50,00,000 50,00,000 1,00,00,000 50,05,250 8,76,25,060

The following are the movements in Certificate of Deposits during the year : Acquired Face Value Rs. lakhs Total Value Rs. lakhs 48,21.97 38,61.84 23,83.15 13,89.18 57,63.84 9,81.53 24,81.92 9,71.82 28,33.31 9,48.84 9,51.47 14,01.70 Sold Face Value Rs. lakhs 30,00.00 5,00.00 20,00.00 15,00.00 Matured Face Value Rs. lakhs 5,00.00 15,00.00 15,00.00 35,00.00 10,00.00 25,00.00 10,00.00

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

State Bank of Travancore .......................................... ICICI Bank Limited ..................................................... ABN AMRO Bank ....................................................... State Bank of Mysore ................................................ Allahabad Bank .......................................................... Kotak Mahindra Bank Limited ................................... State Bank of Indore .................................................. Punjab National Bank ................................................. HSBC Bank ................................................................ HDFC Bank ................................................................ State Bank of Bikaner & Jaipur ................................. State Bank of Hyderabad .......................................... State Bank of Patiala .................................................

50,00.00 40,00.00 25,00.00 15,00.00 60,00.00 10,00.00 25,00.00 10,00.00 30,00.00 10,00.00 10,00.00 15,00.00

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SCHEDULE VI
Current Assets, Loans and Advances : (A) Inventories (at cost or net realisable value whichever is lower) : (i) Finished Products produced and purchased for sale ..................... (ii) Contracts and Work-in-Progress .................................................... (iii) Manufactured Components ............................................................ (iv) Raw Materials and Bought-out Components ................................. (v) Property Development Activity - Work-in-Progress [including completed flats and premises Rs. 632.22 lakhs (2006 : Rs.726.14 lakhs)] [Note 11(b)] ............................................ (vi) Stores and Spares .......................................................................... (vii) Tools ................................................................................................ (B) Sundry Debtors [Note 6] : Unsecured unless otherwise stated : Outstanding over six months : Considered good ............................... : Considered doubtful .......................... Other Debts : : Considered good ............................... Considered doubtful .......................... Rupees lakhs

2007 Rupees lakhs 448,33.53 38,24.28 44,99.13 305,52.15 6,32.32 17,18.84 17,88.12 878,48.37 85,85.41 45,94.77 131,80.18 615,03.26 6,44.12 621,47.38 753,27.56 52,38.89 700,88.67 329,95.79

2006 Rupees lakhs 427,95.22 47,31.69 49,89.18 308,27.38 8,42.85 18,78.79 18,09.26 878,74.37 61,38.45 35,67.16 97,05.61 576,58.44 5,95.73 582,54.17 679,59.78 41,62.89 637,96.89 182,59.56 72,00.32 471,71.02 5.42 543,76.76

Less : Provision for Doubtful Debts ....................................................... (C) Cash and Bank Balances : Cash, cheques and stamps on hand .................................................... Balances with Scheduled Banks : (i) On Current Account ........................................................................ (ii) On Fixed Deposit Account * ........................................................... (iii) On Margin Account ......................................................................... * (includes balance of unutilised monies raised by issue : Rs. 85836.01 lakhs (2006 : Rs. Nil)) Balances with Non-Scheduled Banks [Note 7] : (i) On Current Account ........................................................................ (ii) On Fixed Deposit Account ..............................................................

81,61.95 910,12.33 5.42 991,79.70

4,31.70 4,31.70 1,326,07.19

3,78.70 15.58 3,94.28 730,30.60 3,00.02 14.10 3,14.12

(D) Other Current Assets : Interest accrued on investments ............................................................ Plant and Machinery and other assets held for sale(at cost or net realisable value whichever is lower) ....................................................... (E) Loans and Advances [Note 8] : (Unsecured, considered good unless otherwise stated) : Advances and Loans to subsidiaries : Considered good ............................................................................ Considered doubtful ........................................................................ Less : Provision for doubtful Advances and Loans ........................ Bills of exchange, considered doubtful .................................................. Less : Provision for doubtful bills ........................................................... Advances recoverable in cash or in kind or for value to be received : Considered good ............................................................................ Considered doubtful ........................................................................ Less : Provision for Doubtful Advances .......................................... Payments towards Income tax and Surtax [Note 21(d)] ........................ Balances - Customs, Port Trust, Excise, etc. ........................................ Total........

3,17.14 14.10 3,31.24

290,21.20 7,23.72 297,44.92 7,23.72 1,55.04 1,55.04 448,44.12 50,02.72 498,46.84 50,02.72 448,44.12 100,42.28 33.88 839,41.48 3,748,16.95 290,21.20

124,14.75 7,27.01 131,41.76 7,27.01 124,14.75 1,55.04 1,55.04 274,02.18 53,03.99 327,06.17 53,03.99 274,02.18 100,10.15 62.75 498,89.83 2,749,05.81

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SCHEDULE VII
Rupees lakhs Current Liabilities and Provisions : (A) Current Liabilities * : Acceptances .......................................................................................... Sundry Creditors : (i) (ii) Total outstanding dues of small scale industrial undertakings [Note 9 (a)] ...................................................................................... Total outstanding dues of creditors other than small scale industrial undertakings [including Rs. 7770.40 lakhs (2006 : Rs. 4630.45 lakhs) being advance payments for which value has still to be given] ..... 89,85.52

2007 Rupees lakhs

2006 Rupees lakhs

121,85.22

132,57.00

57,81.15

1,695,21.12 28,56.63 1,813,63.27

1,288,88.31 23,98.58 1,370,68.04 2,75.99 2,15.86 12,67.23 1,520,84.12

(iii) Dues to Subsidiaries .......................................................................

Dividend payable .................................................................................... Balances on Directors Current Accounts .............................................. Interest accrued but not due on loans ..................................................

7,33.15 2,45.77 4,94.50 1,950,21.91

* There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund. (B) Provisions : Proposed Dividends - see Directors Report ......................................... Provision for tax on Proposed Dividend ................................................ Provision for diminution in value of long term investments .................... Provision for premium payable on redemption of convertible bonds .... Provision for contingencies [Note 10 (b) & (c)] ....................................... Provision for compensated absences .................................................... Provision for taxation .............................................................................. Provision : Others [Note 10 (a) & (c)] ..................................................... 98,19.90 16,68.89 52,24.91 244,58.29 169,95.15 29,93.80 103,81.58 715,42.52 Total........ 2,665,64.43 243,97.41 34,21.74 70,91.99 10,07.52 78.45 56,72.44 31,08.17 83,02.49 530,80.21 2,051,64.33

SCHEDULE VIII
Miscellaneous Expenditure (to the extent not written off or adjusted) : (a) Finance Charges .................................................................................... (b) Separation and Other Costs .................................................................. Total........

2007 Rupees lakhs

2006 Rupees lakhs

5,33.50 12,21.75 17,55.25

2,19.38 15,86.08 18,05.46

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SCHEDULE IX
Income from Operations and Other Income : Income from services rendered ..................................................................... Property Development Activity-Property ....................................................... Dividends on Investments in subsidiaries-Gross. .......................................... Dividends on other Investments-Gross [Note 12(a)] ..................................... Rent received ................................................................................................ Miscellaneous Income ................................................................................... Profit on sale of Fixed Assets sold/scrapped/written off (Net) [Note 15] ...... Profit on sale of Investments (Net) [Note 12(d)] ............................................ Total........

2007 Rupees lakhs 285,55.83 5,93.39 114,09.69 33,29.77 6,50.00 166,50.63 5,62.00 617,51.31

2006 Rupees lakhs 152,39.32 7,03.58 36,44.41 12,66.38 3,39.68 99,67.00 17,89.78 8,27.00 337,77.15

SCHEDULE X
Rupees lakhs Raw Materials, Finished and Semi-Finished Products : (A) Decrease/(Increase) in Stock of Finished Goods, Work-in-Progress and Manufactured Components : Opening Stock : (i) (ii) Finished Products produced and purchased for sale ..................... Contracts and Work-in-Progress .................................................... 427,95.22 47,31.69 49,89.18

2007 Rupees lakhs

2006 Rupees lakhs

333,46.82 47,29.92 41,19.17 525,16.09 421,95.91 427,95.22 47,31.69 49,89.18 531,56.94 525,16.09 (103,20.18)

(iii) Manufactured Components ............................................................ Less : Closing Stock : (i) (ii) Finished Products produced and purchased for sale ..................... Contracts and Work-in-Progress ....................................................

448,33.53 38,24.28 44,99.13

(iii) Manufactured Components ............................................................

Decrease/(Increase) in Stock ................................................................. (B) Consumption of Raw Materials and Bought-out Components : Opening Stock ....................................................................................... Add : Purchases [including outside processing charges Rs. 23205.20 lakhs (2006 : Rs. 24147.45 lakhs)] ...................... 308,27.38 6,605,76.83 6,914,04.21 Less : Closing Stock .............................................................................. 305,52.15

(6,40.85)

295,37.39 5,601,39.57 5,896,76.96 308,27.38 6,608,52.06 5,588,49.58 228,47.17 5,713,76.57

(C) Purchases of Finished Products for sale .......................................... Total........

249,80.48 6,851,91.69

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SCHEDULE XI
Personnel : Salaries, Wages, Bonus, etc. ........................................................................ Contribution to Provident and other funds .................................................... Gratuity .......................................................................................................... Welfare .......................................................................................................... Total........

2007 Rupees lakhs

2006 Rupees lakhs

554,95.62 38,05.73 7,85.26 65,28.72 666,15.33

446,85.32 31,95.12 16,38.34 56,59.61 551,78.39

SCHEDULE XII
Interest, Commitment and Finance Charges : On Term Loans and Debentures ................................................................... On Others (Net) ............................................................................................. Less : Interest Income : (i) (ii) Interest on Government Securities, Debentures and Bonds - Gross [Note 12(b)] ............................................................................................ Interest - Others - Gross [Note 12(c)] ....................................................

2007 Rupees lakhs

2006 Rupees lakhs

17,49.90 2,29.73 19,79.63

24,95.65 1,99.96 26,95.61

4,81.85 82,43.21 87,25.06

4,37.69 40,98.08 45,35.77 (18,40.16)

Total........

(67,45.43)

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SCHEDULE XIII
Rupees lakhs Other Expenses : Stores consumed .......................................................................................... Tools consumed ............................................................................................ Power and Fuel ............................................................................................. Rent including lease rentals .......................................................................... Rates and Taxes ............................................................................................ Insurance ....................................................................................................... Repairs and Maintenance [Note 13] : Buildings ................................................................................................. Machinery ............................................................................................... Others .................................................................................................... 18,22.08 68,80.32 21,00.36

2007 Rupees lakhs

2006 Rupees lakhs

64,53.42 14,30.49 65,19.22 21,07.90 22,12.42 12,66.84

54,09.31 14,14.63 57,46.36 18,26.69 24,67.71 9,41.21

17,86.07 54,43.72 16,10.86 108,02.76 88,40.65 54,86.82 57,04.36 1,87.05 260,64.43 83,89.06 294,06.41 27.99 9.80 5,48.56 68.55 81.11 (22,17.50) 1,004,03.20

Advertisement ................................................................................................ Commission on sales/contracts (Net) ........................................................... Discount allowed ........................................................................................... Freight outward ............................................................................................. Sales Promotion Expenses ........................................................................... Miscellaneous Expenses [Note 14] ............................................................... Amortisation of Expenses [Note 1(E)(a)] ........................................................ Directors fees ............................................................................................... Donations and contributions ......................................................................... Loss on Fixed Assets sold/scrapped/written off (Net) [Note 15] .................. Excess of cost over fair value of Current Investments (Net) ......................... Provision for doubtful debts/advances (Net) [Note 27] ................................. Provision for diminution in value of Long term investments (Net) [Note 28] . Total........

82,27.04 52,84.60 2,60.01 366,70.17 130,68.54 357,04.87 33.19 9.70 6,25.97 1,72.60 2,36.09 7,71.44 1,318,57.27

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SCHEDULE XIV
Notes on Accounts for the year ended 31st March, 2007
1. Significant Accounting Policies : (A) Fixed Assets : (a) (i) All Fixed Assets are carried at cost less depreciation except as stated in (ii) below. Cost includes financing cost relating to borrowed funds attributable to the construction or acquisition of qualifying fixed assets upto the date the asset is ready for use. In case of borrowed funds and liabilities in foreign currencies for the acquisition of fixed assets from a country outside India, the exchange differences are adjusted to the cost of such asset. When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of account and resultant profit (including capital profit) or loss, if any, is reflected in the Profit and Loss Account. (ii) Land and Buildings, had been revalued as at 31st October, 1984 at depreciated replacement values on the basis of a valuation made by a firm of Chartered Surveyors & Valuers. The indices, if any, used are not stated in the valuation. Leasehold land is amortised over the period of the lease. Depreciation on assets is calculated on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except for : (1) certain items of Plant & Machinery individually costing more than Rs. 5,000 - over their useful lives (2 years, 3 years, 5 years or 7 years, as the case may be) as determined by the Company. Cars and Vehicles - at 15% of cost.

(b) (i) (ii)

(2)

(iii) Depreciation charge for each year is after deducting the amount representing the depreciation on the increase due to revaluation of Land and Buildings, transferred from the Revaluation Reserve. (B) Intangible Assets : All Intangible Assets are initially measured at cost and amortised so as to reflect the pattern in which the assets economic benefits are consumed. (a) Technical Knowhow : The expenditure incurred is amortised over the estimated period of benefit, not exceeding six years commencing with the year of purchase of the technology. (b) Development Expenditure : The expenditure incurred on technical services and other project/product related expenses are amortised over the estimated period of benefit, not exceeding five years. (c) Software Expenditure : The expenditure incurred is amortised over three financial years equally commencing from the year in which the expenditure is incurred. (C) Investments : All long term investments are valued at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of investments. Current investments are valued at the lower of cost and fair value, determined by category of investment. (D) Inventories : Inventories are stated at cost or net realisable value, whichever is lower. Cost is arrived at on a weighted average method and includes, where appropriate, manufacturing overheads and excise duty. Long term contracts in progress are valued at cost. (E) Miscellaneous Expenditure (to the extent not written off or adjusted) : Expenditure carried forward under this head is being amortised as follows : (a) Finance Charges : The expenditure incurred in raising long term borrowings is amortised over the period of the borrowings. On early buyback, conversion or repayment of borrowings, any unamortised expenditure is fully written off in that year. 89

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(b)

Separation and Other Costs : Special Payments/Pensions under Voluntary Retirement Schemes. The liability is amortised over a period of five years from the month in which the liability is incurred.

(F)

Foreign Exchange Transactions : All foreign currency monetary items are translated at the relevant rates of exchange prevailing at the year end. In respect of forward exchange contracts the premium or discount arising at the inception of such a contract is amortised as expense or income over the life of the contract. In case of monetary items (other than those for acquisition of fixed assets from a country outside India) the exchange differences are recognised in the Profit and Loss Account. In the case of monetary items incurred for the acquisition of fixed assets and technical know-how from a country outside India, the exchange differences are adjusted to the cost of such assets.

(G)

Revenue Recognition : Sales of products and services are recognised when the products are shipped or services rendered. In respect of sale of property (concerning property development activity), the Company accounts for the income on the percentage of completion basis. [Refer paragraph (H) below]. Dividend from investments are recognised in the Profit and Loss Account when the right to receive payment is established.

(H)

Property Development Activity : The Company accounts for income on the percentage of completion basis which necessarily involves technical estimates of the percentage of completion, and costs to completion of the activity, on the basis of which profits/losses are accounted. Such estimates, made by the Company and certified to the auditors, have been relied upon by them, as these are of a technical nature.

(I)

Government Grants : The Company is entitled to various incentives from a State Government, such as grants by way of refund of octroi duty paid by the Company for its manufacturing unit located in a developing region. In view of the uncertainty in respect of the collection of these grants, such grants are accounted for as and when the disbursements are received.

(J)

Employee Benefits : i) Defined Contribution Plan Companys contributions paid/payable during the year to Provident Fund, Superannuation Fund, ESIC, and Labour Welfare Fund are recognised in the Profit and Loss Account. ii) Defined Benefit Plan/Long term compensated absences Companys liability towards gratuity, compensated absences and post retirement medical benefit schemes are determined by independent actuaries, using the projected unit credit method. Past services are recognised on a straight line basis over the average period until the benefits become vested. Actuarial gains and losses are recognised immediately in the statement of Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to the market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government Bonds are consistent with the currency and estimated terms of the defined benefit obligation.

(K)

Redemption Premium : Premium payable on redemption of Bonds/Debentures is fully provided and charged to Securities Premium Account (net of tax) in the year of issue.

(L)

Product Warranty : In respect of warranties given by the Company on sale of certain products, the estimated costs of these warranties are accrued at the time of sale. The estimates for accounting of warranties are reviewed and revisions are made as required.

(M) Leases : The Companys significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns, computer hardware etc.). The leasing arrangements, which are not non-cancellable, range between eleven months and three years generally, and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as rent including lease rentals. 90

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(N)

Taxes on Income : Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising on account of unabsorbed depreciation or carry forward of tax losses are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realised.

(O)

Excise duty recovered on sales is included in Sales Traded and Manufactured Goods. Excise duty in respect of Finished Goods manufactured is shown separately as an item of expense and included in valuation of finished goods produced.

2.

Share Capital : Issued and Subscribed Capital include : (i) (ii) 1,66,809 Ordinary Shares allotted as fully paid-up pursuant to a contract without payment having been received in cash. 17,06,07,504 Ordinary Shares allotted as fully paid-up by way of Bonus Shares by capitalisation of Securities Premium Account and Reserves. 12,56,562 Ordinary Shares issued consequent to the Scheme of Amalgamation with the Union Bank of India Limited. Of these, 13,737 Ordinary Shares were issued on conversion of 41,211 8% Bonds. 12,98,202 Ordinary Shares issued consequent to the Scheme of Amalgamation with International Tractor Company of India Limited without payment having been received in cash. 1,88,166 Ordinary Shares issued consequent to the Scheme of Amalgamation with Mahindra Spicer Limited without payment having been received in cash. 9,73,200 Ordinary Shares issued consequent to the Scheme of Amalgamation with Mahindra Nissan Allwyn Limited without payment having been received in cash.

(iii)

(iv)

(v)

(vi)

3.

Reserves and Surplus : 2007 Rupees lakhs (a) Movements during the year : (i) Securities Premium Account : Additions, arising out of exercise of options ............................................. Premium on conversion of Debentures and Bonds .................................. Reversal of premium on redemption of Zero Coupon Convertible Bonds pursuant to conversion .............................................................................. 8,66.94 148,94.52 Applied, in accordance with Section 78 of the Companies Act, 1956, towards : Writing-off of share and bonds/debenture issue expenses (net of tax of Rs. 47.68 lakhs (2006 : Rs. Nil)) ................................................................ Premium on redemption/buyback of debentures and Zero Coupon Convertible Bonds (net of tax of Rs. 8186.66 lakhs (2006 : Rs. Nil)) ....... 161,31.05 163,04.57 (ii) Revaluation Reserve : Adjusted against depreciation for the year [Note 1 (A)(b) (iii)] Adjusted in respect of revalued Land and Buildings sold/demolished 42.87 4.19 47.06 43.28 54.78 98.06 20.09 2,47.82 1,73.52 2,27.73 66,67.07 347,22.85 13.51 140,14.07 2,03.95 278,51.83 2006 Rupees lakhs

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MAHINDRA & MAHINDRA LIMITED

(b) The Guidance Note on Accounting for Employee Share-based Payments issued by The Institute of Chartered Accountants of India requires that shares allotted to a trust but not transferred to employees be reduced from Share Capital and Reserves. Accordingly, the Company has reduced the Share Capital by Rs. 366.93 lakhs (2006 : Rs. 375.09 lakhs), Securities Premium by Rs. 1797.95 lakhs (2006 : Rs. 1837.93 lakhs) for the 36,69,279 shares (2006 : 37,50,884 shares) held by the trust pending transfer to the eligible employees. The Share Capital of the Company has also been reduced and the General Reserve increased by Rs. 366.93 lakhs (2006 : Rs. 375.09 lakhs) for the bonus shares issued by the Company in September 2005 to the trust but not yet transferred by the trust to the employees. The above monies which is treated as advance received from it, is included under current liabilities. 4. Loans : (a) Debentures are redeemable at par as follows (i) (ii) (iii) (b) (i) Rs. 500 lakhs on 16th July, 2008. Rs. 50 lakhs on 22nd May, 2011. Also refer Note 4 (c) below. All Debentures of Rs. 550.67 lakhs and certain Foreign Currency Loans from Banks of Rs. 3525.36 lakhs are secured by a paripassu charge on immovable properties of the Company both present and future, subject to certain exclusions and are also secured by pari-passu charge on the movable properties of the Company including movable machinery, machinery spares, tools and accessories, both present and future. Loans and Advances from the Companys Bankers are secured by a first charge on a pari-passu basis on the whole of the current assets of the Company namely inventories, certain book debts, outstanding monies, receivables, claims etc. both present and future.

(ii)

(c)

Debentures of the face value of Rs. 110 each and Zero Interest Bonds of the face value of Rs. 90 each were both compulsorily and automatically fully converted into two equity shares of Rs.10 each at a premium of Rs. 45 per share and Rs. 35 per share respectively on 1st April, 1991, 1st October, 1991 and 18th July, 1992. The balance amount of Rs. 0.67 lakhs will be converted, into appropriate number of equity shares, on receipt of the balance amount due on allotment. The following amounts are repayable by 31st March, 2008 : (i) (ii) (iii) (iv) Debentures/Bonds.............................. ........................................... : Foreign currency loans from Banks ................................................ : Fixed deposit holders ...................................................................... : Rupee Loans - from others ............................................................. : Rs. Nil Rs. 1175.12 lakhs Rs. 158.58 lakhs Rs. 342.67 lakhs (2006 : Rs. 8500.00 lakhs) (2006 : Rs. 5715.12 lakhs) (2006 : Rs. 516.10 lakhs) (2006 : Rs. 204.16 lakhs)

(d)

The Company had issued during the year ended 31st March, 2005, Zero Coupon Foreign Currency Convertible Bonds (Bonds 2009) aggregating US $ 100 million, at par. Out of these upto 31st March, 2007, Bonds aggregating US $ 97.30 million have been converted into equity shares/GDRs. Subsequent to the year end, Bonds aggregating US $ 0.90 million have been converted into equity shares/ GDRs. Premium payable on redemption of Bonds 2009 had been fully provided in the previous year by debiting the same to Securities Premium Account (SPA). Consequent to the conversion premium aggregating Rs. 866.94 lakhs no longer payable on bonds converted into equity shares/GDRs has been credited back to SPA during the year. During the year, the Company issued Zero Coupon Foreign Currency Convertible Bonds (Bonds 2011) aggregating US $ 200 million, at par. The bond holders have an option to convert these bonds into Equity Shares with full voting rights or Global Depository Receipts (GDRs) determined at an initial conversion price of Rs. 922.04 per share with fixed exchange rate of conversion of Rs. 44.42 = US $ 1, at any time on or after 7th May, 2006 upto 7th March, 2011. The Bonds 2011 may be redeemed, in whole but not in part, at the option of the Company at any time on or after 13th April, 2008 subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the bonds fall due for redemption on 14th April, 2011 at 128.03 per cent of their principal amount. Upto 31st March, 2007, none of the Bonds 2011 have been converted into equity shares/GDRs.

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MAHINDRA & MAHINDRA LIMITED

The net proceeds of Rs. 85836.01 lakhs, unutilised as at 31st March, 2007, is disclosed under Cash and Bank balances. The Company has during the year debited the provision for premium payable on redemption of convertible bonds to the Securities Premium Account net of tax, in accordance with the Announcement Tax effect of expenses/income adjusted directly against the reserves and/or Securities Premium Account issued by The Institute of Chartered Accountants of India, which was hitherto being debited gross of tax. As a result the Securities Premium Account as at 31st March, 2007 is higher by Rs. 8186.66 lakhs, Deferred Tax Asset is higher by Rs. 6761.45 lakhs, tax expense for the year is higher by Rs. 1425.21 lakhs and consequently the profit for the year is lower by Rs. 1425.21 lakhs. 5. (a) Land includes a sum of Rs. 129.98 lakhs (2006 : Rs. 129.98 lakhs) for which the conveyance is pending receipt of approval from the appropriate authorities. The Company has filed the necessary return under Section 6 of the Urban Land (Ceiling and Regulation) Act, 1976, in respect of vacant land held by it and has also applied to the Government of Maharashtra under Section 20 of the said Act requesting for exemption of the said vacant land from the ceiling restrictions of the Act. Buildings include Rs. 0.05 lakhs (2006 : Rs. 0.04 lakhs) being the value of shares in co-operative housing societies. Additions to Plant and Machinery include Rs. 21.94 lakhs debit (Net) [2006 : Rs. 16.86 lakhs (credit) (Net)] on account of foreign exchange fluctuation. (i) The depreciation charge for the year excludes : (a) An amount of Rs. 42.87 lakhs (2006 : Rs. 43.28 lakhs), representing depreciation on the increase due to revaluation of Land and Buildings transferred from the Revaluation Reserve. An amount of Rs. 3.06 lakhs (2006 : Rs. 3.10 lakhs), representing depreciation on assets used for development work. This expenditure is transferred to Development Expenditure and is appropriately amortised.

(b)

(c) (d)

(e)

(b)

(ii)

The Revaluation Reserve is also adjusted for an amount of Rs. 4.19 lakhs (2006 : Rs. 54.78 lakhs) in respect of revalued Land and Buildings sold/demolished during the year. The net credit to the Profit and Loss Account consequent to the above adjustments to the Revaluation Reserve is Rs. 47.06 lakhs (2006 : Rs. 98.06 lakhs).

(iii)

6.

Sundry Debtors others include Rs. 737.94 lakhs (2006 : Rs. 1561.46 lakhs), which, in accordance with the terms of the contracts, were not due for payment as at 31st March, 2007. Cash and Bank Balances include balances lying with non-scheduled banks : (a) In Current Account Rupees lakhs Bank Tejarat, Tehran Balance as at 31st March, 2007 Balance as at 31st March, 2006 Maximum balance during the year Maximum balance during the previous year (b) In Deposit Account Rupees lakhs Bank of Australia Balance as at 31st March, 2007 Balance as at 31st March, 2006 Maximum balance during the year Maximum balance during the previous year 15.58 15.58 15.58 0.06 0.06 0.06 0.06 Bank of Australia Bank of China The Municipal Co-op. Bank Ltd 2,32.29 1,16.54 3,81.32 2,35.94

7.

1,37.07 2,54.26 6,43.25 5,24.51

62.28 7.84 77.52 19.41

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MAHINDRA & MAHINDRA LIMITED

8.

Loans and Advances include : (i) (ii) (iii) (iv) Fixed/Call deposits with/loans to limited companies Rs. 25906.05 lakhs (2006 : Rs. 7551.96 lakhs) including Rs. 25239.21 lakhs (2006 : Rs. 2876.26 lakhs) with/to subsidiaries. Amounts paid towards joint development of property Rs. 154.05 lakhs (2006 : Rs. 154.05 lakhs). Share Application money pending allotment Rs. 1571.94 lakhs (2006 : Rs. 8469.66 lakhs) to subsidiaries. Amount held in escrow account towards acquisition of shares in companies Rs. 9972.13 lakhs (2006 : Rs. Nil). The identification of suppliers as Small Scale Industrial undertaking (SSIs) has been done on the basis of the information to the extent provided by the suppliers to the Company. On this basis, the disclosure of total outstanding dues of SSIs and the names of SSIs shown in Schedule XVII has been made. Micro, Small and Medium enterprises have been identified by the Company on the basis of the information available. Total outstanding dues of Micro and Small enterprises, which are outstanding for more than the stipulated period are given below : Rupees lakhs (i) Dues remaining unpaid as at 31st March, 2007 Principal ............................................................................................................................................................ Interest .............................................................................................................................................................. (ii) (iii) (iv) Interest paid in terms of Section 18 of the Act ............................................................................................... Amount of interest due and payable for the period of delay on payments made beyond the appointed day during the year ........................................................................................... Amount of interest accrued and remaining unpaid as at 31 March, 2007 ...................................................
st

9.

(a)

(b)

1,49.93 0.22 0.76 0.98

10. (a)

Provision Others Rs. 10381.58 lakhs (2006 : Rs. 8302.49 lakhs) includes provision for warranty Rs. 8532.18 lakhs (2006 : Rs. 6321.48 lakhs). This, relates to warranty provision made in respect of sale of certain products, the estimated costs of which is accrued at the time of sale. The products are generally covered under a free warranty period ranging from 6 months to 3 years. Provision for Contingencies Rs. Nil (2006 : Rs. 78.45 lakhs) is in respect of labour demands under negotiations at certain locations of the Company. The movement in above provisions is as follows : Warranty Rupees lakhs Provisions Balance as at 1st April, ........................................... Add : Provision made during the year ................... Less : Utilisation during the year ............................ Balance as at 31st March, ................................... 2007 63,21.48 81,54.59 59,43.89 85,32.18 2006 47,02.40 44,20.09 28,01.01 63,21.48 Contingency Rupees lakhs 2007 78.45 78.45 2006 33.99 78.45 33.99 78.45

(b) (c)

11. (a)

Sales include : (i) (ii) Export benefits Rs. 4848.98 lakhs (2006 : Rs. 3135.78 lakhs). Cost of items given for sales promotion/as donations Rs. 34.39 lakhs (2006 : Rs. 18.35 lakhs).

(b) 12. (a) (b)

Stock-in-Trade, Property Development Activity, includes completed premises Rs. 313.10 lakhs (2006 : Rs. 407.03 lakhs), which, pending sale, have been given out on leave and licence basis for which fresh agreement is under negotiation. Dividends on other investments Rs. 3329.77 lakhs (2006 : Rs. 1266.38 lakhs) is in respect of current investments. Interest on Government Securities, Debentures and Bonds includes tax deducted at source Rs. 93.52 lakhs (2006 : Rs. 88.59 lakhs) and comprise Rs. 133.24 lakhs (2006 : Rs. 158.53 lakhs) and Rs. 348.61 lakhs (2006 : Rs. 279.16 lakhs) in respect of long term and current investments respectively. Interest received - others includes tax deducted at source Rs. 544.17 lakhs (2006 : Rs. 474.80 lakhs). Profit on sale of investments (net) includes profit on disposal of current investments (net) Rs. 562.00 lakhs (2006 : Rs. 569.96 lakhs), and profit on disposal of long term investments (net) Rs. Nil (2006 : Rs. 257.04 lakhs). 94

(c) (d)

MAHINDRA & MAHINDRA LIMITED

13. Repairs and Maintenance includes machinery spares consumed Rs. 2110.08 lakhs (2006 : Rs. 1905.59 lakhs) but does not include items included under Consumption of Raw Materials and Bought-out Components and amounts charged to salaries and wages (amounts not ascertained). 14. Miscellaneous Expenses include : (a) Amounts paid/payable to Auditors (net of service tax where applicable) : Statutory Auditors Rupees lakhs (i) Audit Fees .................................................................................................. 76.00 65.00 (ii) Company Law matters ............................................................................... 0.20 0.20 (iii) Other Services ............................................................................................ 47.05 22.56* (iv) Reimbursement of expenses : As auditor ................................................................................................... 1.13 1.34 1,24.38 89.10 * Net of service tax of Rs. 8.41 lakhs pertaining to an earlier year. The above amounts exclude Rs. 35.00 lakhs (2006 : Rs. Nil) paid to the Statutory Auditors which is being adjusted against Securities Premium Account being FCCB issue expenses. (b) (c) An amount of Rs. 96.00 lakhs (2006 : Rs. 101.22 lakhs) payable as commission to non-wholetime Directors Note 16 and Schedule XV. The cost of property sold including movement in work-in-progress in respect of property development activity are as under : Rupees lakhs 2007 Opening balance as on 1st April, ....................................................................................... Add : Construction Cost .................................................................................................... 1,68.66 11.34 1,80.00 Less : Flats Capitalised ...................................................................................................... Less : Cost of Property Development Activity Work-in-Progress as at 31st March, ..... 1,68.15 0.10 1,68.25 11.75 2006 5,76.55 57.95 6,34.50 1,68.66 1,68.66 4,65.84 0.07 0.22 3.53 2.02 Cost Auditors Rupees lakhs 1.99 1.80 1.47

15. Profit/Loss on fixed assets sold/scrapped/written off (net) includes an aggregate capital profit of Rs. 799.18 lakhs (2006 : Rs. 2356.64 lakhs). 16. Managerial remuneration for Directors included in the Profit and Loss Account is Rs. 615.14 lakhs (2006 : Rs. 688.79 lakhs) including Directors fees of Rs. 9.70 lakhs (2006 : Rs. 9.80 lakhs), perquisites Rs. 119.79 lakhs (2006 : Rs. 193.03 lakhs) and commission Rs. 340.51 lakhs (2006 : Rs. 341.97 lakhs) (See Schedule XV) and excluding charge for gratuity, provision for leave encashment and post retirement medical benefits as separate actuarial valuation figures are not available. The above perquisites include amortisation of Employees Stock Options amounting to Rs. 10.96 lakhs (2006 : Rs. 16.30 lakhs). 95

MAHINDRA & MAHINDRA LIMITED

17. Employee Defined Benefits : Defined benefit plans as per Actuarial valuation on 31st March, 2007 Rupees lakhs Gratuity (Funded) I. Expense recognised in the Statement of Profit and Loss Account for the year ended 31st March, 2007 1. 2. 3. 4. 5. 6. II. Current Service Cost Interest Expected Return on plan assets Actuarial (Gain)/Loss Payments on account of employees transferred Total expense 13,38.60 13,24.04 (10,80.70) (8,63.66) 66.98 7,85.26 19.66 23.03 (12.69) 30.00 Post Retirement Medical Benefits (Unfunded)

Net Asset/(Liability) recognised in the Balance Sheet as at 31st March, 2007 1. 2. 3. 4. 1. 2. 3. 4. 5. 6. 1. 2. 3. 4. 5. 6. Present Value of Defined Benefit Obligation as at 31st March, 2007 Fair Value of plan assets as at 31st March, 2007 Funded status [Surplus/(Deficit)] Net Asset/(Liability) as at 31st March, 2007 Present Value of Defined Benefit Obligation at the beginning of the year Current Service Cost Interest Cost Actuarial (Gain)/Loss Benefit payments Present Value of Defined Benefit Obligation at the end of the year Fair Value of plan assets at the beginning of the year Expected return on plan assets Contributions by employer Actual benefits paid Fair Value of plan assets at the end of the year Actual return on plan assets Funded with LIC 184,42.82 127,03.59 (57,39.23) (57,39.23) 173,07.75 13,38.60 13,24.04 (8,63.66) (6,63.91) 184,42.82 109,65.85 10,80.70 13,20.95 (6,63.91) 127,03.59 10,80.70 100% As at 31 March, 2007 8.20% 9.20% Indian Assured Lives Mortality (1994-96) Modified ultimate Age 21 to 44 - 2.00% Age 45 to 60 - 1.00% 3.00% One percentage point increase in medical inflation rates 9.05 41.55 One percentage point in decrease medical inflation rates (5.80) (39.52)
st

3,21.71 (3,21.71) (3,21.71) 3,07.85 19.66 23.03 (12.69) (16.14) 3,21.71 16.14 (16.14)

III. Change in the obligation during the year ended 31st March, 2007

IV. Change in Fair Value of Assets during the year ended 31st March, 2007

V.

The major categories of plan assets as a percentage of total plan

VI. Actuarial assumptions 1. 2. 3. 4. 5. Discount Rate Expected rate of return on plan assets In-service Mortality Turnover Rate Medical premium inflation

VII. Effect of one percentage point change in the assumed medical inflation rate 1. 2. Effect on the aggregate service and interest cost of Post Employment Medical Benefits Effect on the accumulated Post Employment Medical Benefits obligations

96

MAHINDRA & MAHINDRA LIMITED

Basis used to determine expected rate of return on assets : Based on expectation of the average long term rate of return expected on investment of the fund, during the estimated term of obligation. The estimate of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. During the year the Company has adopted Accounting Standard (AS) 15 (revised 2005) Employee Benefits. Read with the Accounting Standard Board Guidance on implementing AS 15, Employee Benefits (revised 2005) issued by The Institute of Chartered Accountants of India in May 2007, the Company has (i) (ii) Accounted for Rs. 8090.35 lakhs (Net of Tax of Rs. 4104.93 lakhs) as a reduction from Revenue Reserves. Accounted as prior period adjustment (net of tax) Rs. 1918.84 lakhs being on account of Provision for Gratuity Rs. 2584.59 lakhs Gross (2006 : Rs. Nil) arising from certain refinements in the actuarial assumptions and accrual of Post Retirement Medical Benefits on an actuarial basis Rs. 307.85 lakhs Gross (2006 : Rs. Nil) and the resultant tax credit thereon is Rs. 973.60 lakhs.

18. The Company had allotted 55,24,219 ordinary (equity) shares in the year ended 31st March, 2002, to the Mahindra & Mahindra Employees Stock Option Trust set up by the Company. The trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the Compensation Committee. In respect of options granted prior to 29th September, 2006, the equity settled options vest one year from the date of the grant and are exercisable on specified dates in 3 tranches within a period of 5 years from the date of vesting. The number of options exercisable in each tranche is between the minimum of 100 and a maximum of 1/3rd of the options vested, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised till that date. Options granted on or after 29th September, 2006 vest in 4 equal instalments on the expiry of 12 Months, 24 Months, 36 Months and 48 Months from the date of grant. The options may be exercised on the date of vesting and on specified dates within 5 years from the date of vesting. Number of vested options exercisable on each specified date is subject to a minimum of 50 or number of options vested whichever is lower, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised till that date. The compensation costs of stock options granted to employees are accounted by the Company using the intrinsic value method. Summary of Stock Options No. of stock options Weighted average exercise price (Rs.) 196.16 616.78 421.65 100.06 345.33 304.52

Options outstanding on 1st April, 2006 Options granted during the year Options forfeited/lapsed during the year Options exercised during the year Options outstanding on 31st March, 2007 Options vested but not exercised on 31st March, 2007 Average share price on the date of exercise of the options are as under Date of exercise 30th May, 2006 10th June, 2006 5th December, 2006 97

20,50,200 9,92,921 48,735 1,63,210 28,31,176 18,64,156

Average share price (Rs.) 616.88 544.00 850.03

MAHINDRA & MAHINDRA LIMITED

Information in respect of options outstanding as at 31st March, 2007. Range of exercise price Number of options Weighted average remaining life 1.16 yrs 4.12 yrs 4.57 yrs 6.67 yrs

Rs. 29.50 - Rs. 61.50 Rs. 215.00 - Rs. 227.00 Rs. 361.00 Rs. 616.00 - Rs. 620.00

2,40,296 15,89,748 34,112 9,67,020

The fair value of options granted during the year on 31st July, 2006 & 29th September, 2006 is Rs. 138.51 and Rs. 212.57 per share respectively. The fair value has been calculated using the Black Scholes Options Pricing Model and the significant assumptions made in this regard are as follows : Grant dated 31-Jul-06 Risk free interest rate Expected life Expected volatility Expected dividend yield Exercise price Stock Price 7.55% 2.50 Years 35.62% 2.66% 620.00 590.10 Grant dated 29-Sep-06 7.56% 3.00 Years 35.41% 2.66% 616.00 680.10

In respect of Options granted under the Employee Stock Option plan, in accordance with guidelines issued by SEBI, the accounting value of the options is accounted as deferred employee compensation, which is amortised on a straight line basis over the period between the date of grant of options and eligible dates for conversion into equity shares. Consequently, salaries, wages, bonus, etc. includes Rs. 172.90 lakhs (2006 : Rs 151.62 lakhs) being the amortisation of deferred employee compensation, after adjusting for reversals on account of options lapsed. Had the Company adopted fair value method in respect of options granted on or after 1st April, 2005, the employee compensation cost would have been higher by Rs. 824.87 lakhs, Profit after tax lower by Rs. 824.87 lakhs and the basic and diluted earning per share would have been lower by Rs. 0.35 & Rs. 0.32 respectively. 19. The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2007 is Rs. 36391.50 lakhs (2006 : Rs. 22616.53 lakhs). 20. The Commissioner of Central Excise (Adjudication), Navi Mumbai, passed an order on 30th March, 2005, which was received by the Company on 4th April, 2005, confirming the demand made on the Company for payment of differential excise duty (including penalty) of Rs. 30411.00 lakhs in connection with the classification of Companys Commander range of vehicles, during the years 1991-1996. Whilst the Company had classified the Commander range of vehicles as 10-seater attracting a lower rate of excise duty, the Commissioner of Central Excise (Adjudication), Navi Mumbai, has held that these vehicles could not be classified as 10-seaters and as such attracted a higher rate of excise duty. In earlier proceedings, the Collector of Central Excise, Mumbai as also the Collector Central Excise (Appeals), Mumbai had upheld the classification of these vehicles as 10-seaters. Similarly, certain statutory/expert bodies have also confirmed the concerned vehicles to be 10-seater vehicles. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has also by its order dated 19th July, 2005 upheld this classification. The departments Statutory Appeal against this order has been admitted by the Supreme Court. The Company has been legally advised that the order dated 30th March, 2005 passed by the Commissioner is unsustainable in law and has filed an appeal against this order, along with stay application, before the CESTAT. The Company is confident that it would succeed in the case and the Companys stand that the Commander and Armada Vehicles are 10-seater vehicles would be upheld. As such, the Company does not expect any liability on this account. 98

MAHINDRA & MAHINDRA LIMITED

During the current year, the Commissioner of Central Excise, Nasik confirmed a demand of Rs. 24.55 crores and imposed a penalty of Rs. 20.00 lakhs in respect of Companys Armada range of vehicles manufactured during the years 1992 1996, on the same grounds as adopted for Commander range of vehicles. The Tribunal has in this case too granted an unconditional stay against the order. The final hearing in the matter is awaited. 21. Contingent Liability : (a) Guarantees given by the Company : Amount of guarantees Outstanding amounts against the guarantees 2006 Rupees lakhs 1,05.00 52,70.00 2007 Rupees lakhs 0.35 46,94.00 2006 Rupees lakhs 0.35 27,17.00

2007 Rupees lakhs For employees .................................. For other companies ........................ (b) 1,05.00 50,95.00

Claims against the Company not acknowledged as debts comprise of : (i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 5237.49 lakhs (Net of Tax : Rs. 4012.11 lakhs) [2006 : Rs. 13387.18 lakhs (Net of Tax : Rs. 9942.51 lakhs)]. Other Matters (excluding claims where amounts are not ascertainable) : Rs. 1026.62 lakhs (Net of Tax : Rs. 733.23 lakhs) [2006 : Rs. 514.38 lakhs (Net of Tax : Rs. 341.24 lakhs)]. Claims on capital account : Rs. 118.20 lakhs (2006 : Rs. 118.20 lakhs).

(ii)

(iii) (c) (d)

Uncalled liability on equity shares partly paid Rs. 1050.00 lakhs (2006 : Rs. 1050.00 lakhs). Taxation matters : (i) Demands against the Company not acknowledged as debts and not provided for, relating to issues of deductibility and taxability in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed : Income tax (ii) : Rs. 14053.00 lakhs (2006 : Rs. 11317.07 lakhs).

Items in respect of which the Company has succeeded in appeal, but the Income tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed : Income tax matters : Surtax matters : Rs. 3796.45 lakhs (2006 : Rs. 4962.35 lakhs). Rs. 12.80 lakhs (2006 : Rs. 12.80 lakhs).

(e)

Bills discounted not matured Rs. 6266.43 lakhs (2006 : Rs. 8696.91 lakhs).

22. Research and Development expenditure debited to the Profit and Loss Account, including certain expenditure based on allocations made by the Company, aggregate Rs. 14587.63 lakhs (2006 : Rs. 11535.83 lakhs) [excluding depreciation Rs. 2097.23 lakhs (2006 : Rs. 2427.53 lakhs)]. 23. The net difference in foreign exchange credited to the Profit and Loss Account is Rs. 277.95 lakhs (2006 : Rs. 171.23 lakhs). The credit on account of exchange differences in respect of forward exchange contracts, to be recognised in the Profit and Loss Account or capitalised in subsequent accounting periods is Rs. 52.26 lakhs (2006 : Rs. 40.90 lakhs debit). 99

MAHINDRA & MAHINDRA LIMITED

24. Exceptional items of Rs. 12198.47 lakhs (2006 : Rs. 21001.18 lakhs) comprise of : (a) Profit on sale of certain long term investments Rs. 12835.90 lakhs (2006 : Rs. 16757.83 lakhs) after considering a write back of provision for diminution in value of investment and other assets Rs. 2936.06 lakhs (2006 : Rs. Nil). A profit of Rs Nil (2006 : Rs. 4840.00 lakhs) arising out of the transfer of the right to carry on LCV business along with the congeries of rights therein and intellectual property rights to its subsidiary Mahindra International Limited for a consideration of Rs. Nil (2006 : Rs. 4840.00 lakhs). Amortisation of liability and other retirement benefits made under Voluntary Retirement Schemes aggregating to Rs. 637.43 lakhs (2006 : Rs. 596.65 lakhs).

(b)

(c)

25. The components of Deferred tax liability and assets as at 31st March, 2007 are as under : 2007 Rupees lakhs Deferred tax liability : (i) (ii) On fiscal allowances on fixed assets ................................................................. Others ................................................................................................................. 182,90.20 5,65.32 188,55.52 Deferred tax assets : (i) (ii) (iii) (iv) (v) (vi) Provision for Compensated absences ............................................................... Provision for Doubtful debts/Advances .............................................................. Premium on redemption of Zero Coupon Convertible Bonds ........................... Provision for Gratuity .......................................................................................... Provision for Post Retirement Medical Benefits ................................................. Others ................................................................................................................. 56,33.84 21,18.68 67,61.45 13,52.86 1,08.29 9,01.78 168,76.90 18,16.00 17,96.00 7,52.00 43,64.00 187,44.00 2,95.00 190,39.00 2006 Rupees lakhs

Net Deferred tax liability .............................................................................................

19,78.62

146,75.00

26. Earnings per Share : 2007 Amount used as the numerator Balance of profit for 2006-2007 (Rupees lakhs) ....................... (Gain)/Loss on difference in exchange on bonds (Rupees lakhs) ................................................... Amount used as the numerator for diluted earnings per share (Rupees lakhs) ............................. Weighted average number of equity shares used in computing basic earnings per share ............ Effect of potential ordinary (equity) shares on conversion of bonds/debentures ............................ Weighted average number of equity shares used in computing diluted earnings per share .......... Basic Earnings per share (Rs.) (Face value of Rs. 10 per share) .................................................... Diluted Earnings per share (Rs.) ....................................................................................................... 1,068,38.65 (24,08.15) 1,044,30.50 23,66,07,123 1,84,51,156 25,50,58,279 45.15 40.94 2006 857,10.49 1,18.93 858,29.42 22,51,11,765 206,32,529 24,57,44,294 38.07 34.93

100

MAHINDRA & MAHINDRA LIMITED

27. Provision for doubtful debts and advances for the year comprises : 2007 Rupees lakhs Provision for doubtful debts and advances made during the year (Net) (including Rs. Nil (2006 : Rs. Nil) pursuant to the Scheme of Arrangement approved by the Honble High Court of Bombay on 12th December, 2003). ..................................................................................... Less: Transfer from Investment Fluctuation Reserve pursuant to the above Scheme of Arrangement ................................................................................. Total ................................................................................................................. 7,71.44 81.11 2006 Rupees lakhs

7,71.44

81.11

28. Provision for diminution in the value of long term investments for the year comprises : 2007 Rupees lakhs Provision for diminution in value of investments, made during the year (Net) (including provision of Rs. 1068.98 lakhs (2006 : Rs. 1230.00 lakhs) pursuant to the Scheme of Arrangement approved by the Honble High Court of Bombay on 12th December, 2003). ................................................................. Less : Transfer from Investment Fluctuation Reserve pursuant to the above Scheme of Arrangement ................................................................................. Total ................................................................................................................. 10,68.98 12,30.00 (22,17.50) 2006 Rupees lakhs

10,68.98

(9,87.50)

29. The outstanding derivative instruments as on 31st March, 2007 : The Company has taken forward contracts to hedge exposures arising out of trade payables in foreign currency. Such outstanding forward contracts have been booked for fixing of exchange rates between cross currencies like Euro/JPY and the USD. The amounts hedged are JPY 3500 lakhs and Euro 20 lakhs (2006 : JPY 2500 lakhs and Euro 35 lakhs) The Exports receivables of the Company have been hedged in part by forward contracts US$ 272.73 lakhs (2006 : US$ 305 lakhs) and partly US$ Nil (2006 : US$ 120 lakhs) by a derivative structure in the form of Range Forward. The Company has outstanding borrowings of JPY 53904 lakhs and US$ 200 lakhs (2006 : JPY 56864 lakhs and US$ 100 lakhs) under the External Commercial Borrowing facility. The borrowing of JPY 53904 lakhs (2006 : JPY 56864 lakhs and US$ 100 lakhs) has been completely hedged using a currency swap structure converting the liability into a full fledged Rupee liability. The borrowing of US$ 200 lakhs (2006 : US$ Nil) has not been hedged. The Company has made an issue of US$ 1000 lakhs in the form of Foreign Currency Convertible Bonds in May, 2004 & US$ 2000 lakhs in the form of Foreign Currency Convertible Bonds in April, 2006. Out of these issues, Bonds of value US$ 2027.00 lakhs (2006 : US$ 352.70 lakhs) are outstanding and have not been hedged. The Foreign Currency Exposures not hedged by a derivative instrument or otherwise as on 31st March, 2007 are Receivables of EURO 402.44 lakhs, GBP 8.56 lakhs, AUD 14.52 lakhs, JPY 220.23 lakhs, USD 1381.42 lakhs, RMB 1.01 lakhs and Payables of CHF 0.14 lakhs, SAR 1.09 lakhs, SEK 3.26 lakhs, SGD 0.40 lakhs, ZAR 57.16 lakhs. (2006 : Receivables of EURO 4.94 lakhs, GBP 1.87 lakhs, AUD 12.87 lakhs, CHF 0.14 lakhs, SEK 1.42 lakhs and Payables of USD 135.80 lakhs, AUD 0.14 lakhs, DKK 0.43 lakhs and SGD 0.15 lakhs).

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MAHINDRA & MAHINDRA LIMITED

30. Related Party Transactions : (a) (i) Related parties where control exist : Subsidiaries : Sl. No. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. Name of the Company Stokes Group Limited Jensand Limited Stokes Forgings Limited Stokes Forgings Dudley Limited Plexion Technologies (India) Private Limited Plexion Technologies (UK) Limited Plexion Technologies GmbH Plexion Technologies Incorporated Mahindra Gesco Developers Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) Mahindra World City (Jaipur) Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) Mahindra World City Developers Limited (upto 10 th October, 2006 & w.e.f. 30th March, 2007) Mahindra Infrastructure Developers Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) Mahindra Integrated Township Limited ( from 4th May, 2006 to 10th October, 2006 & w.e.f. 30th March, 2007) Mahindra World City (Maharashtra) Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) PT Tech Mahindra Indonesia (w.e.f. 28th April, 2006) Mahindra Forgings Overseas Limited (w.e.f. 11th August, 2006) Mahindra Forgings International Limited (w.e.f. 27th September, 2006) CanvasM Technologies Limited (w.e.f. 5th October, 2006) CanvasM (Americas) Inc. (w.e.f. 5th October, 2006) JECO Holdings AG (w.e.f. 29th November, 2006) Gesenkschmiede Schneider GmbH (w.e.f. 29th November, 2006) JECO-Jellinghaus GmbH (w.e.f. 29th November, 2006) Falkenroth Umformtechnik GmbH (w.e.f. 29th November, 2006) Falkenroth Grundstucksgesellschaft GmbH (w.e.f. 29th November, 2006) Mahindra Forgings Mauritius Limited (w.e.f. 5th December, 2006) Mahindra Forgings Global Limited (w.e.f. 7th December, 2006) Schneweiss & Co. GmbH (w.e.f. 1st January, 2007) Fried. Hunninghaus GmbH (w.e.f. 1 st January, 2007) Fried. Hunninghaus GmbH & Co. KG (w.e.f. 1st January, 2007) DGP Hinoday Industries Limited (w.e.f. 6th January, 2007) iPolicy Networks Limited (w.e.f. 22nd January, 2007) MHR Hotel Management GmbH (w.e.f. 12th March, 2007) Mahindra Stokes Holding Company Limited (w.e.f. 21st March, 2007) Mahindra Forgings Limited (upto 21st May, 2006) (formerly known as Mahindra Automotive Steels Limited)

Sl. No. Name of the Company 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. Mahindra Engineering & Chemical Products Limited Mahindra Ashtech Limited Mahindra Logisoft Business Solutions Limited Automartindia Limited Mahindra USA Incorporated Mahindra Gujarat Tractor Limited Mahindra (China) Tractor Company Limited Mahindra Shubhlabh Services Limited Mahindra & Mahindra South Africa (Pty) Limited Mahindra Europe s.r.l. Mahindra Engineering Design & Development Company Limited Mahindra SAR Transmission Private Limited Mahindra Overseas Investment Company (Mauritius) Ltd. Mahindra-BT Investment Company (Mauritius) Limited Mahindra Intertrade Limited Mahindra Steel Service Centre Limited Mahindra Middleeast Electrical Steel Service Centre (FZC) Mahindra Holdings & Finance Limited Mahindra Consulting Engineers Limited (formerly known as Mahindra Acres Consulting Engineers Limited) Mahindra Holidays & Resorts India Limited Mahindra Holidays and Resorts USA Incorporated NBS International Limited Mahindra Ugine Steel Company Limited Mahindra & Mahindra Financial Services Limited Mahindra Insurance Brokers Limited Tech Mahindra Limited Tech Mahindra (Americas) Incorporated Tech Mahindra GmbH Tech Mahindra (Singapore) Pte. Limited Tech Mahindra (Thailand) Limited Tech Mahindra Foundation Tech Mahindra (R & D Services) Limited Tech Mahindra (R & D Services) Incorporated Tech Mahindra (R & D Services) Pte. Limited Bristlecone Limited Bristlecone Incorporated Bristlecone UK Limited Bristlecone India Limited Bristlecone (Singapore) Pte. Limited Bristlecone GmbH Mahindra Renault Private Limited Mahindra International Limited

102

MAHINDRA & MAHINDRA LIMITED

(b) (i)

Other parties with whom transactions have taken place during the year. Associates : Sl. No. 5. 6. Name of the Company Mahindra Forgings Limited (w.e.f. 22nd May, 2006) (formerly known as Mahindra Automotive Steels Limited) Mahindra Gesco Developers Limited (from 11th October, 2006 to 29th March, 2007)

Sl. No. Name of the Company 1. 2. 3. 4. Mahindra Composite Limited (formerly known as Siroplast Limited) Mahindra Construction Company Limited Owens Cornings (India) Limited Mahindra Water Utilities Limited

(ii)

Joint Ventures :

Sl. No. Name of the Company 1. (iii) Mahindra Sona Limited Key Management Personnel : Vice Chairman and Managing Director .................. Executive Directors ................................................. Mr. Anand Mahindra Mr. B.N. Doshi Mr. A.K. Nanda

(c)

The related party transactions are as under : Rupees lakhs Nature of Transactions Subsidiaries Associate Companies Joint Ventures Key Management Personnel

Sl. No.

1.

Purchases : Goods ................................................................... 226,86.50 (253,28.62) Fixed Assets ......................................................... 2,49.64 (41,36.55) Services ................................................................ 47,71.89 (68,08.12) 55,13.69 (5,65.70) (25.69) (-) 39,27.28 (45,86.66) 0.02 (-) (-) (-) (-) (-)

2.

Sales : Goods ................................................................... 602,46.01 (439,55.89) Fixed Assets ......................................................... 61.40 (29,28.89) Services ................................................................ 30,84.64 (13,13.24) (-) (-) 5,83.04 (-) (0.39) (-) 2.40 (0.15) (-) (-) (-)

3.

Investments : Purchase ............................................................... 609,25.00 (244,52.14) Sales/Redemption ................................................ 125,82.20 (16,61.76) 182,70.89 (-) (-) (-) (-) (-) (-)

103

MAHINDRA & MAHINDRA LIMITED

(c)

The related party transactions are as under : (Contd.) Rupees lakhs Nature of Transactions Subsidiaries Associate Companies (-) Joint Ventures Key Management Personnel (-)

Sl. No.

4.

Share Application Money (Net) .............................

15,71.94 (42,83.60)

(-)

5.

Deputation of Personnel : From Related Parties ............................................ 29.10 (68.70) To Related Parties ................................................ 2,11.02 (3,86.27) (-) (2.66) (-) (-) (-) (-)

6.

Provision for diminution in value of other assets written back ..............................................

3.35 (3,00.29)

(45.00)

(-)

(-)

7.

Finance : Inter Corporate Deposits given ............................ 38,79.60 (6,90.00) Inter Corporate Deposits refunded by parties ..... 40,04.60 (9,75.00) Interest received ................................................... 9,02.79 (5,35.39) Dividend received ................................................. 114,09.69 (36,44.41) Dividend distributed ...................................... (3.25) Security Deposits Accepted ................................. (1,81.43) (-) (45.00) (31.63) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (1.17) (-) (-) (-) (-)

8.

Guarantees & Collaterals given ............................

32,25.00 (8,70.00)

9.

Other Transactions : Other Income ........................................................ 5,61.46 (2,47.11) Other Expenses .................................................... 25,29.28 (5,01.51) 6,16.85 (1.20) 1,73.22 (-) 4.67 (4.32) 0.10 (-) (-) (-)

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MAHINDRA & MAHINDRA LIMITED

(c)

The related party transactions are as under : (Contd.) Rupees lakhs Nature of Transactions Subsidiaries Associate Companies 34.17 (1,32.31) 18.73 (0.43) (-) (2,00.00) Joint Ventures Key Management Personnel (-) (-) (-) (-)

Sl. No.

Reimbursements received from parties ...............

24,67.20 (47,20.41)

2.59 (2.68) (-) (-) (-)

Reimbursements made to parties ........................

19,16.85 (11,63.74)

Advance given ......................................................

237,53.07 (2,35.00)

Advance refunded ................................................

9,00.00 (6,50.00)

10.

Outstandings : Payable ................................................................. 28,56.63 (23,98.58) Receivable ............................................................ 351,28.96 (187,16.45) Inter Corporate Deposits given ............................ 17,08.76 (18,33.76) Guarantees & Collaterals given ............................ 46,94.00 (27,17.00) 3,94.80 (-) 2,96.79 (2,39.61) 4,59.42 (4,59.42) (-) (-) (-) 6,68.71 (6,68.71) (8.32) (-) (-) (-) 9,22.89 (8,37.20) 1.75 (3.25) (-) (-) (-) (-) (-) (-) (-) (-) (-) 2,45.46 (2,15.86) (-) (-) (-) 4,98.47 (5,61.47) 76.82 (33.08) (-) (-) (-) 4.74 (8.38) (80.00)

11.

Managerial Remuneration .....................................

(-)

12.

Dividends ..............................................................

(-)

13.

Provision for diminution in value of other assets .

5,62.06 (5,65.43)

14.

Provision for doubtful debts/advances ................

1,61.66 (1,61.66)

15.

Share Application Money. .....................................

15,71.94 (84,69.66)

16.

Stock Options ......................................................

(-)

17.

Loan Refunded by Key Management Personnel .

(-)

Previous years figures are given in brackets. The previous year figures are suitably regrouped. 105

MAHINDRA & MAHINDRA LIMITED

The significant related party transactions are as under Rupees lakhs S.No. Nature of Transactions 1. Purchase Goods Subsidiaries Mahindra Intertrade Ltd. Mahindra SAR Transmission Pvt. Ltd. Amount 159,05.22 (167,26.85) 29,19.07 (31,65,52) Associate Companies Mahindra Ugine Steel Company Ltd. Mahindra Composite Ltd. Amount (4,16.07) (1,49.63) Joint Ventures Mahindra Sona Ltd. Amount 39,27.28 (45,86.66)

Mahindra Forgings 53,61.81 Ltd. (36,57.22)

2.

Sale Goods

Mahindra USA Inc. Mahindra International Ltd. Mahindra & Mahindra South Africa (Pty) Ltd.

175,68.74 (194,00.72) 114,92.36 (44,62.63) 196,18.64 (119,56.10)

Mahindra Sona Ltd.

(0.39)

3.

Investment Purchase

Mahindra International Limited Mahindra Renault Private Limited Stokes Group Limited

(52,33.12) 103,21.42 (26,25.50) (28,96.55) (32,61.61) 286,50.11 (-) 78,15.97 (-) 25,00.00 (-)

Mahindra Forgings 48,50.00 Limited (80,00.00) Mahindra Gesco 134,20.89 Developers Ltd. (-)

Plexion Technologies (India) Private Limited Mahindra Forgings Overseas Ltd. Mahindra Forgings Mauritus Ltd. Mahindra Holdings & Finance Ltd.

4.

Investments Sales

Mahindra Holdings & Finance Ltd. Mahindra Stokes Holding Company Limited

4,96.65 (-) 40,85.55 (-)

5.

Investments Redemption

Mahindra Ugine Steel Company Limited Mahindra Gesco Developers Limited Mahindra Holdings & Finance Ltd.

(16,61.76) 55,00.00 (-) 25,00.00 (-)

6.

Share Application Money(Net)

Mahindra Overseas Investment Company (Mauritius) Limited

15,71.94 (1,32.82)

Mahindra Forgings Limited (48,50.00)

106

MAHINDRA & MAHINDRA LIMITED

The significant related party transactions are as under (Contd.) Rupees lakhs S.No. Nature of Transactions 7. Advances Given Subsidiaries Mahindra Forgings Overseas Limited Mahindra Forgings Mauritius Limited 8. Inter Corporate Deposits given Mahindra Shubhlabh Services Limited Mahindra International Limited Mahindra Engineering Design& Development Company Limited Plexion Technologies (India) Private Limited Mahindra Overseas Investment Company (Mauritius) Ltd. 9. Inter Corporate Deposits refunded by parties Mahindra Intertrade Limited Mahindra Holdings & Finance Limited Mahindra Shubhlabh Services Limited Mahindra International Limited Mahindra Engineering Design & Development Company Limited Mahindra Overseas Investment Company (Mauritius) Ltd. 10. Guarantees given Mahindra Overseas Investment Company (Mauritius) Limited Amount 119,37.55 (-) 118,15.52 (-) (2,50.00) (1,25.00) (2,40.00) Associate Companies Amount Joint Ventures Amount

(75.00) 32,79.60 (-)

(1,50.00) (2,10.00) (2,50.00) (1,25.00) (2,40.00)

Mahindra Construction Company Limited

(45.00)

32,79.60 (-)

32,25.00 (8,70.00)

Previous years figures are given in brackets. 31. Joint Venture Disclosure i) Jointly Controlled Entities by the Company : Name of the Entity a) b) Mahindra Sona Limited * ............................................................................ PSL Erickson Limited* ................................................................................ Country of Incorporation India India % Holding 29.77 % 18.06 %

* Shareholding is through a subsidiary, Mahindra Holdings & Finance Limited.

107

MAHINDRA & MAHINDRA LIMITED

ii)

Interests in the Assets, Liabilities, Income and Expenses with respect to Jointly Controlled Entities. 2007 Rupees lakhs I ASSETS 1 2 3 Fixed Assets ............................................................................................................. Investment ................................................................................................................ Current Assets, Loans and Advances a b c d 4 II Inventories ........................................................................................................ Sundry Debtors ................................................................................................ Cash and Bank Balances ................................................................................ Loans and Advances ....................................................................................... 4,05.76 11,91.10 2,41.53 1,15.21 40.74 3,86.71 10,58.97 1,67.32 1,25.73 23.84 4,86.98 3.38 4,78.32 3.38 2006 Rupees lakhs

Deferred Tax Net ...................................................................................................

LIABILITIES 1 Loan Funds a b 2 Secured Loans ................................................................................................. Unsecured Loans ............................................................................................. 2,23.34 50.48 3,19.63 50.48

Current Liabilities and Provisions a b Liabilities ........................................................................................................... Provisions ......................................................................................................... 6,08.68 2,68.20 6,14.99 2,51.47

III

INCOME 1 2 Sales ......................................................................................................................... Other Income ........................................................................................................... 49,92.15 1,13.89 41,39.19 1,20.68

IV

EXPENSES 1 2 3 4 5 Raw Materials, Finished and Semi Finished Products ............................................ Excise Duties ............................................................................................................ Manufacturing, Selling Expenses, etc. ..................................................................... Depreciation/Amortisation ........................................................................................ Provision for Taxation ............................................................................................... 28,55.01 4,11.43 10,50.58 56.71 2,39.80 24,57.74 3,38.88 8,39.14 52.23 1,94.83

OTHER MATTERS 1 2 Contingent Liabilities ................................................................................................ Capital Commitments ............................................................................................... 3,01.79 11.60 2,82.09 1.56

32. Additional information pursuant to the provisions of paragraphs 3(i)(a) and (ii), 4C and 4D of Part II of Schedule VI to the Companies Act, 1956 - See Schedule XVI. Previous years figures are indicated below the current years figures. 33. Additional information pursuant to the provisions of Part IV of Schedule VI to the Companies Act, 1956 - See Schedule XVIII. 34. Previous years figures have been regrouped/restated wherever necessary.

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MAHINDRA & MAHINDRA LIMITED

SCHEDULE XV
Computation of Net Profit in accordance with Section 309(5) of the Companies Act, 1956 for the year ended 31st March, 2007
Rupees lakhs Profit before Taxation as per Profit and Loss Account .................................................................. Add : : : : : : : : Depreciation/Amortisation charged in the Accounts ..................................................... Directors Remuneration including Directors fees ......................................................... Provision for doubtful debts and advances (Net) .......................................................... Profit on sale of Fixed Assets as per Sec 349 (3)(d) of the Companies Act, 1956 (Net) Loss on sale, etc. of Fixed Assets (Net) ........................................................................ Net reduction in the fair value of current investments ................................................... Voluntary Retirement Schemes amortisation included in Exceptional Item ................... Provision for diminution in value of long term investments (Net) ................................... 209,58.65 6,15.14 7,71.44 4.07 1,72.60 2,36.09 6,37.43 233,95.42 1,671,62.52 Less : : : : : : Depreciation under Section 350 of the Companies Act, 1956 ..................................... Profit on sale of Investments (Net) ................................................................................. Prior Period Adjustments Gross of Tax [Refer Note 17] ................................................ Profit on sale, etc. of Fixed Assets (Net) ....................................................................... Loss on sale of Fixed Assets as per Section 349 (3)(d) of the Companies Act, 1956 (Net) Profit on sale of LCV business together with congeries of rights ................................. 175,90.05 133,97.90 28,92.44 338,80.39 Total..... Commission payable to the wholetime Directors restricted to ...................................... Commission payable to the non-wholetime Directors restricted to .............................. 1,332,82.13 2,44.51 96.00 2007 Rupees lakhs 1,437,67.10 2006 Rupees lakhs 1,099,50.49 200,00.53 6,88.79 81.11 68.55 5,96.65 (22,17.50) 192,18.13 1,291,68.62 171,68.98 175,84.83 17,89.78 1,34.40 48,40.00 415,17.99 876,50.63 2,40.75 1,01.22

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MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVI
Additional Information pursuant to the Provisions of Paragraphs 3 (i)(a) and (ii), 4C and 4D, of Part II of Schedule VI to the Companies Act, 1956. (A) PARTICULARS IN RESPECT OF GOODS MANUFACTURED : Unit of Measurement Licensed Capacity per annum [Note (i)] Installed Capacity per annum [Note (i)] Actual Production [Notes (ii) & (iii)(a)]

Sl. Class of Goods No.

1.

a.

On Road Automobiles having four or more wheels such as light, medium and heavy commercial vehicles, jeep type vehicles and passenger cars covered under sub heading (5) of Heading (7) of First Schedule [Note (iv) below] .................................................... Three Wheelers ..................................................... Agricultural Tractors [Note (vi) below] ...................... Tractor Skids .........................................................

Nos. Nos. Nos.

b. 2. a. b.

2,76,000 2,21,000 80,000 80,000 1,69,000 1,69,000

1,92,000 1,56,000 54,000 36,000 1,58,000 1,35,500 These are manufactured against spare capacity under 2(a) These are manufactured against spare capacity under 1 and 2 above

1,34,665 1,25,896 34,892 22,317 1,01,202 83,708

2,645 3,367

3.

Manufactured and Purchased Parts and Accessories . for sale [Notes (iii)(a) and (b) below] ...........................

Nos.

4. 5. 6. 7. 8. 9. 10

Internal Combustion Piston Engines .............................. Petrol/Diesel Engines 15 HP to 80 HP [Note (i)(c) below] Industrial Petrol Engines ................................................. Agricultural Implements ................................................... Parts and accessories of motor vehicles ....................... Internal Combustion Engine ........................................... D. G. Sets .......................................................................

Nos. Nos. Nos. Nos. Nos. Nos. Nos.

11 12

D. G. Sets ....................................................................... Export benefits ................................................................

Nos.

1,10,000 1,10,000 500 500 2,38,000 2,38,000 5,00,000 5,00,000 50,000 50,000 Assembly at 3rd Party Locations 24,000 -

1,10,000 1,02,000 500 500 1,25,000 1,25,000 39,000 33,600

1,87,449 2,10,141 1,00,076 92,265 438 1,04,971 1,05,378 36,973 27,278 8,877 1,085 -

* Used for Captive Consumption Notes : (i) (a) (b) (c) The installed capacity has been certified by Presidents, which the auditors have relied on without verification as this is a technical matter. The licensed capacities include/represent, as the case may be, registrations granted and Industrial Entrepreneur Memorandum filed with, and duly acknowledged by, the Government pursuant to the schemes of de-licensing. [Also see note (vi) below]. Within the overall licensed capacity in item 1 above, the Company is permitted to manufacture for outside sale 10,000 petrol/diesel engines and 4000 tonnes grey iron castings. The information given against item 5 is in respect of such petrol/diesel engines transferred to the Marketing Unit for sale. Bullet proof work and fabrication on base vehicles has been carried out at third party facilities. 190 (2006 : 172) vehicles were produced and sold using such third party facilities and are included in item (A) 1(a). The installed capacity mentioned against item no. (A) 1(a) above includes 42000 (2006 : 18000) for production of vehicles for third parties.

(d) (e) (ii)

Actual Production includes production for captive consumption. 110

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVI (Contd.)

Opening Stock Quantity Value Rupees lakhs Quantity

Closing Stock Value Rupees lakhs Quantity

Sales Value Rupees lakhs

5,869 5,186 1,157 1,302 5,846 3,720

204,48.53 178,39.25 15,59.94 16,17.66 132,67.43 85,54.95

4,473 5,869 2,312 1,157 7,163 5,846

179,73.89 20,448.53 26,63.11 15,59.94 164,72.98 132,67.43

1,35,707 1,24,997 33,718 22,419 99,797 81,556

6,373,48.39 5,646,23.42 405,72.03 318,57.48 3,093,00.24 2,415,02.00

120 63

5,80.12 2,79.97

119 120

4,22.18 5,80.12

2,637 3,306

120,16.10 137,58.44

379 335 28 6 290 66 179 1 -

62,81.18 45,38.94 3,74.11 2,93.60 9.47 0.52 9.81 -* 1.29 -

917 379 70 6 90 66 97 1 -

64,21.21 62,81.18 2,91.65 3,74.11 3.34 0.52 -* 1,22.64 1.29 -

11,411 281 2,532 2,354 8,781 1,084 -

575,32.00 522,19.39 106,79.93 2,48.86 3,53.44 3,38.21 175,19.01 16,75.31 48,48.98 31,35.76 Total..... 10,901,70.12 9,093,58.87

(iii)

(a) (b)

The actual production disclosed against manufactured components/sub-assemblies/steel blanks is the number of such components transferred during the year to the Marketing Unit/Spare Parts Stores for sale or sold otherwise. The Opening and Closing Stocks and Sales of goods shown under item 3 above consist of manufactured and purchased parts. The bifurcation of stocks/sales into manufactured and bought-out parts is not practicable.

(iv) (v)

Production figures include jeep type vehicles at a stage without body, and light commercial vehicles at cowl & chassis stage. Closing stocks include 1 (2006 : 14) vehicles valued at Rs. 3.16 lakhs (2006 : Rs. 31.27 lakhs) on which body-building work was in progress as at the year end. With regard to clause 3(ii) of Part II of Schedule VI to the Companies Act,1956, the Company is of the view that, in respect of the property development activity, the Company is not a manufacturing, a trading or a service company falling under sub-clause (a), (b) and (c) thereof, but it is an other company falling under sub-clause (e) thereof. Licensed capacity in respect of Agricultural Tractor includes a Letter of Intent from the Government of India for expansion of the manufacturing capacity from 25,000 to 60,000 tractors at Mumbai subject to fulfillment of conditions mentioned therein; an Industrial License will be issued on fulfillment of the conditions mentioned in the Letter of Intent. 111

(vi)

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVI (Contd.)

(B) PARTICULARS IN RESPECT OF GOODS TRADED : Purchases Sl. No. Class of Goods Unit of Measurement Opening Stock Closing Stock Sales

Quantity

Value Rupees lakhs

Quantity

Value Quantity Rupees lakhs

Value Quantity Rupees lakhs

Value Rupees lakhs

1. 2. 3 4.

Tractors ................................................. Agricultural Implements ........................ Light Commercial Vehicles .................... Bought-out Spares for Resale [Note (iii)(b) to item A] ........................ Others ................................................... Total.....

Nos. Nos. Nos.

109 194 6,588 3,847 254 175

3,87.70 5,38.13 17,67.22 6,44.39 9,61.10 5,86.75 217,93.90 210,74.92 70.56 2.98 249,80.48 228,47.17

41 15 1,006 1,003 -

1,25.54 48.67 1,56.56 1,54.51 2,82.10 2,03.18

33 41 1,645 1,006 -

1,12.13 1,25.54 3,50.40 1,56.56 4,62.53 2,82.10

97 4,60.55 167 6,83.73 5,860 22,23.80 3,759 6,99.97 254 10,94.16 175 6,20.60 1,01.60 2.98 38,80.11 20,07.28

5.

Note (v) to item (A).

(C) PARTICULARS OF RAW MATERIALS AND COMPONENTS CONSUMED : Sl. No. Description Unit of Measurement Value Rupees lakhs

Quantity

1.

Steel Items (Sheets, Tubes, etc.) ............................................................................

Nos. Sq.Feet Metric Tonnes

77,909 1,83,050 76 56,944 52,825 13 512 88,533 66.63 69.00 34,936 86,212 16,24,099 17,25,723 26,72,994 25,32,947 4,398 5,413

}
}

213,87.35 204,74.88

2.

Aluminium Sections and Other Aluminium Items ....................................................

Metric Tonnes Kgs.

1,34.42 5,47.03

3.

Other Metals (Steel Shots, Lead, Tin, etc.) .............................................................

Metric Tonnes

26.63 22.16

4.

Paints .......................................................................................................................

Nos. Kgs. Litres

58,39.45 54,44.75

5.

Steel Scrap ..............................................................................................................

Metric Tonnes

7,16.61 8,18.56

112

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVI (Contd.)

(C) PARTICULARS OF RAW MATERIALS AND COMPONENTS CONSUMED (Contd.): Sl. No. Description Unit of Measurement Value Rupees lakhs

Quantity

6.

Pig Iron .....................................................................................................................

Metric Tonnes

1,839 2,094 12,05,714 13,37,921 6,678 7,733 1,90,194 2,20,965

2,73.67 3,17.21

7.

Miscellaneous Foundry Materials .............................................................................

Nos. Metric Tonnes Litres

4,87.07 5,27.16

8.

Other Materials (Direct Stores, Patterns, Oils, etc.) ................................................

Not practicable to give quantitative details

*57,17.72 *43,42.66 *22,40,763 *20,82,052 1,909 *357,55.28 *264,99.71 3,73.94 *5,622,03.16 *4,750,56.96

9.

Tyres and Tubes .......................................................................................................

Nos.

10. CKD Components for Light Commercial Vehicles ..................................................

Nos.

11. Components other than Tyres and Tubes (including processing charges) .............

12. Material handling and transportation charges, etc. incurred on the above items not separately allocable ........................................................................................... Total.....

283,10.70 244,24.56 6,608,52.06 5,588,49.58

* Includes items used for other than production, amounts not ascertained. Notes : (i) (ii) The consumption in value has been ascertained on the basis of opening stock plus purchases less closing stock and includes the adjustment of excesses and shortages as ascertained on physical count and write-off of obsolete and unserviceable raw materials and components. The consumption in value shown against item 11 is a balancing figure based on the total consumption shown in the Profit and Loss Account.

(D) VALUE OF IMPORTS ON C.I.F. BASIS ACCOUNTED FOR DURING THE YEAR : 2007 Rupees lakhs 17,96.23 107,45.59 82,72.37 8,00.14 216,14.33 2006 Rupees lakhs 36,85.66 97,86.94 29,07.16 9,21.39 173,01.15

1. 2. 3. 4.

Raw Materials (including CKD Components for Light Commercial Vehicles) ......... Components, Spare Parts, etc. ............................................................................... Capital Goods .......................................................................................................... Items imported for Resale ....................................................................................... Total..

Notes : (i) Credits, if any, recoverable in respect of short landings, etc. are not considered. (ii) The value of imports shown above includes : (a) (b) Imports on C&F basis as per suppliers invoices Rs. 1601.34 lakhs (2006: Rs. 2269.74 lakhs) Imports on cost basis Rs. 13058.47 lakhs (2006 : Rs. 12197.97 lakhs)

113

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVI (Contd.)

(E) EXPENDITURE IN FOREIGN CURRENCIES (SUBJECT TO DEDUCTION OF TAX WHERE APPLICABLE) : 2007 Rupees lakhs 1. 2. 3. 4. 5. Professional and Consultancy Fees [including Rs. 40.25 lakhs (2006 : Rs.19.42 lakhs) capitalised] ........................................................................ Commission on Exports .......................................................................................... Royalty ..................................................................................................................... Interest ..................................................................................................................... Others ...................................................................................................................... Total..... 18,59.23 15,53.85 6.70 15,98.29 39,63.44 89,81.51 2006 Rupees lakhs 5,65.41 14,49.00 1.14 13,52.21 25,78.97 59,46.73

Notes : (1) Fee for use of technology, development expenditure and software expenditure [refer to in Note 1 (B)] : (a) written off during the year Rs. 265.31 lakhs (2006 : Rs. 15.36 lakhs); and (b) amount remitted during the year Rs. 1845.41 lakhs (2006 : Rs. 428.43 lakhs) net of tax deducted at source Rs. 182.24 lakhs (2006 : Rs. 11.12 lakhs) are not included in the above figures. (F) REMITTANCE IN FOREIGN CURRENCY ON ACCOUNT OF DIVIDENDS TO NON-RESIDENT SHAREHOLDERS : Number of Shareholders Equity shares Rupees lakhs 2007 : 5 2006 : 2 (G) EARNINGS IN FOREIGN EXCHANGE : 2007 Rupees lakhs 614,96.08 51,86.41 46,04.17 712,86.66 2006 Rupees lakhs 465,10.26 11,15.75 31,81.71 508,07.72 4,87,984 2,43,393 48.80 31.64 Year ended 31st March, 2006 Year ended 31st March, 2005 Amount remitted Dividend relating to

1. 2. 3.

Export of goods on F.O.B. basis ............................................................................. Interest ..................................................................................................................... Others (freight, etc.) ................................................................................................. Total.....

Notes : F.O.B. value of exports includes local sales which qualify for export benefits and for which payment is receivable in foreign currency and local/ export sales under rupee credit which qualify for export benefits. (H) VALUE OF IMPORTED AND INDIGENOUS CONSUMPTION :

*Raw Materials and Components 1. 2. Imported Indigenously obtained Total..... Rupees lakhs 130,82.09 103,98.47 6,477,69.97 5,484,51.11 6,608,52.06 5,588,49.58 % 1.98 1.86 98.02 98.14 100.00 100.00

* Includes items used for other than production, amount not ascertained. Notes : (1) (2) (3) Items purchased through canalising agencies have been considered as imported. See Note (i) to item (C). In giving the above information the Company has taken the view that spares and components as referred to in paragraph 4 (D)(c) of Part II of Schedule VI covers only such items as go directly into production. 114

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVII
Following are the names of Small Scale Industrial Undertakings (SSIs) to whom the Company owes and which are outstanding for more than 30 days as on 31st March, 2007. Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 Name of the SSIs AMETEEP MACHINE TOOLS PRIVATE LTD. ASIA AUTOMOTIVE LTD AUTOLEC INDUSTRIES LTD VIREN SALES CORPORATION ARMATECH ASSOCIATES ANTHIA MACHINE TOOLS APT PNEUMATICS PVT LTD. AAKASH ENGINEERS ASHRA CONSULTANTS (P) LTD AUTOMOTIVE ENGG WORKS AYTIDA TOOLS PVT. LTD. BALA INDUSTRIES BHARAT KUMAR & CO BUI PRIVATE LIMITED A.R.INDUS HIND AUTO CENTURY ALLOY INDUSTRIES CONSOLIDATED HOISTS PRIVATE LIMITED HEMANT TOOLS PVT LTD KRAMPE HYDRAULIC PVT LTD TRISTAR ENGINEERS D M CORPORATION A.J.AUTO PVT.LTD. A.R.CORPORATION A-1 PRODUCTS ABS RUBBER PRODUCTS ACCURATE SPRINGS ACME ENGINEERS (P) LTD ADITYA AUTO PARTS PVT LTD AERONA INDUSTRIAL SPRINGS AJANTA AGENCIES. ALF ENGINEERING PVT LTD ALLIED SPARES AND AUTO ALMATS PRINT PACK PVT LTD ALPUMP PVT LTD AMAR AUTO AGENCY AMARDEEP ENGINEERS AMTEK AMUL INDUSTRIES LTD ANIL WELDMESH FAB STEEL & WIRE ANITHA ENTERPRISES ATIT ENGINEERING COMPANY ATOP PRODUCTS PRIVATE LIMITED AUTOSILENCERS INDIA AUTO TURN INDUSTRIES AUTO WINDOW AUTOFORMS AUTO MECH AUTOMOTIVE INDUSTRIES AUXI AUTO AVANTI COMPONENTS AVDEL INDIA LTD. AVESTA ENTERPRISES PVT LTD. A J INDUSTRIES AMBUJA INDUSTRIES ATAI FILTERS PVT LTD AUTO SHELL FOUNDRY AEROCOM AUTOMOTIVES PVT.LTD. BABA ENTERPRISES BEHZAD ENGINEERING PVT LTD BEMCO INDIA BENARA UDYOG PRIVATE LTD BERU DIESEL START SYSTEMS PVT LTD BHAGYASHRI HOME APPL P LTD BILL INDUSTRIES BLOW RUBBER INDUSTRIES BOBSON ENGINEERS AND CONTRACTORS BOMBAY COMMERCIAL SYNDICATE BOMBAY TRPT ELECT COMPONENT PVT LTD BRYTAX AUTO INDUSTRIES LTD. Sr. No. 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 Name of the SSIs CAMATA ENTERPRISES CARLINE PRESSINGS PVT. LTD. CASPRO METAL INDUSTRIES PVT LTD CAST METAL INDUSTRIES P.LTD CASTALL INDUSTRIES CASTWEL AUTOPARTS PVT. LTD CHAMP ENGINEERING WORKS CHANDAN ENTERPRISE. CHEMETALL - RAI INDIA LTD. CIRCLIPS INDIA (P) LTD. D G CORPORATION DELITE PLASTICS DELTA ENTERPRISE DELUX ENGINEERING DESHPANDE AUTOMECH PVT LTD DEVI ENTERPRISES DHAM FASTENERS DIN ENGG CORPORATION DURANO PROCESS (HYDERABAD) DEEPJYOTE PAINT INDUSTRIES DEEPNSHO INDUSTRIES DWARAKA INDUSTRIES EASTMAN CAST & FORGE LIMITED EHARA ENGINEERING PVT LTD EHARA INDUSTRIES ELECTROMAGS AUTOMOTIVE PRODUCTS EXCEL AUTO INDUSTRIES EXCEL PACKAGING EATA PLAST FABRICS EKVIRA COATS EAGLE ENTERPRISES FIBRE FOAM (BOMBAY) PVT LTD SR FIBREGLASS AUTO PVT. LTD FORMATIC ENGINEERING WORKS FORTUNA ENG (NASIK) P LTD FREE FIELD ENGINEER FRIENDS AUTO INDUSTRIES FRIENDS INDUSTRIAL WORKS F TOOL TECH FABOMECH ENGINEERS FIBREGLASS FABRICATIONS GANESH ENGINEERING. GAUTAM CASTING INDS. PVT LTD GAUTAM TECHNOCAST GEAR MASTER ENGINEERING CORPORATION GENEVA ENGINEERING WORKS GUJARAT STEEL INDUSTRIES GAINMAX FERRO CAST PVT LTD H N ENTERPRISES HIMSONS STEEL PVT. LTD. HIND AUTO CRANKS PVT. LTD. HINDUSTAN ENGINEERS. HINDUSTAN FASTENERS PVT LTD HODEK VIBRATION TECHNOLOGIES P LTD HEM ENGG WORKS HERALD ENGINEERS IMPRESSIVE IMPRESSIONS INDIAN ENGINEERING CO INDU ENGINEERS INDUSTRIAL ENGG SYNDICATE INDUSTRIAL RUBBER PRODUCTS INTERFACE MICROSYSTEMS INNOVA RUBBERS PVT. LTD. J B INDUSTRIES J M INDUSTRIES J.P.TOOLS & COMPONENTS JAI INDUSTRIES JAY INDUSTRIES JAY USHIN LTD JITESH ENTERPRISES 115 Sr. No. 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 Name of the SSIs JYOTI PRODUCTS PRIVATE LIMITED K V ENTERPRISES KAY KAY FLUID SEALS LTD KAYGEE FOAM PVT LTD KISHORE ENGINEERING WORKS KLIPCO PRIVATE LTD KYM ASSEMBLERS & MANUFACTURERS K P TOOLS PVT LTD KELVIN ENGINEERS KIRAN MECHANICAL INDUSTRIES. KSHITIJ ENTERPRISES LALIT METAL INDUSTRIES LAXMI NARASIMHA RUBBER INDUSTRIES LUMAX INDUSTRIES LTD M B AUTO INDUSTRIES M.D. INDUSTRIES M G AUTOMOTIVES PVT LTD M G INDUSTRIES MAC STEEL PRIVATE LIMITED MUNGI BROTHERS MACK SPRINGS PVT LTD MAGNA INDUSTRIES MAHABAL METALS PVT. LTD. MAHARASHTRA UDYOG MALATI FOUNDERS PRIVATE LIMITED MALHAR AUTO INDUSTRIES MANABAR INDUSTRIES MANGIRISH PLASTIC WORKS MANGLA UDYOG PVT LTD MANJUL LAMINATES (P) LTD. MAS ALUMINIUM PVT. LTD. MAYURESH ENGINEERING WORKS MEENA ELASTOMERS MEENAKSHI POLYMERS MICRO TURNERS MITTER FASTENERS MODEL FASTENERS P LTD MONARCH ENGG WORKS MOONLIGHT AUTO PVT LTD. MOREX INDUSTRIAL CORPORATION MADANLAL AND BROS MEHNAT PRODUCT ENGINEERS NARASIPUR PRECISON PVT LTD NATESAN PRECISION COMPONENTS(P) LTD NATIONAL INDUSTRIES. NEEMA FORGE PRESS P. LTD. NEOLITE INDUSTRIES NETALKAR ENGG WORKS NETALKAR POWER TRANSMISSION. NEW KRISHNA METAL ARTS NIPA RUBBER PRODUCTS NIPPON AUDIOTRONIX LTD OMEGA LINING INDUSTRIES OSWAL POLY RUBBERS P. M. ELECTRO-AUTO PVT LTD PADMINI ENGG PVT LTD PANCHAL ROLL FORMING PANETRICAL ENGINEERS PVT. LTD PANORAMA AUTOMOTIVE PVT LTD PARTH ENGINEERS. PAUL COMPONENTS P LTD PAULSON INDUSTRIES PEARL PLASTIC PRODUCTS PERFECT ALLOY COMP P LTD PHIROZE SETHNA P LTD PIONEER AUTOMOTIVE & TOOLS INDUSTRIES PLASTMOULD AUTO ANCILLARIES P LTD POLAR AUTO & ENGG.IND.PVT.LTD. PRABHA ENGINEERING PVT. LTD.

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVII (Contd.)

Following are the names of Small Scale Industrial Undertakings (SSIs) to whom the Company owes and which are outstanding for more than 30 days as on 31st March, 2007. Sr. No. 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 Name of the SSIs PRAMOD PLASTIC INDUSTRIES PRATAP ENTERPRISE PRAVIN ANCILLARY PRODUCTS PVT LTD PRAVIN AUTO ENGG PVT. LTD. PRAVIN WIPERS & ANCILLARIES PVT.LTD PRECISE INDUSTRIES. PRECISION AUTO INDUSTRIES PRECISION AUTOWARES (P) LTD PRECISION FORGING & STAMPING PRECISION INDUSTRIAL CORPN PREMIER SEALS INDIA PVT. LTD PRESS COMPONENTS PRESSTO FORMS (P) LTD. PRINCE METAL WORKS PROGRESSIVE ENGINEERING WORKS PUSHKAR ALLOY CASTINGS PVT.LTD. P.G.ENGINEERS PVT LTD POLYMECH COMPONENTS PVT LTD R ENGINEERING R S FASTENERS RADHEYA MACHINING LIMITED RAGHUVAMSHI ASSOCIATE ENG RAINA ENGINEERING RAMKRISHNA IRON WORKS PVT LTD RATHOD INDUSTRIES RAVI & CO RAVI INDUSTRIES PVT.LTD. RELIABLE AUTOTECH PVT LTD. RELIABLE TECHNOCRATS P LTD RIGHT-TIGHT FASTENERS PVT LTD RITVIJ PLASTICS PVT LTD RUKMINI ENTERPRISES R K ENGINEERING WORKS RAINBOW INDUSTRIES RELIANCE MOTORS R I POLYMERS S & M INDUCTION S B INDUSTRIES S K METAL WORKS S.S.ENGINEERING WORKS. SAKI AUTO PRODUCTS PVT.LTD. SAMEER AUTO PVT LTD SAMEER LINKAGES PRIVATE LIMITED SANDEEP PLASTIC INDUSTRIES SANE STEEL WORKS SANJYOT METAL INDUSTRIES SARNA AUTOTEX PVT LTD SATISH INDUSTRIAL PLASTICS SATPUDA ENGG PVT LTD SATYAY INDUSTRY (INDIA) SAVERA PLASTICS SAVITA AUTO INDUSTRIES SEACO ENGINEERING WORKS SHAH AUTO INDUSTRIES SHAH CONCABS PVT. LTD SHAREEN AUTO PVT LTD SHEAR BEND MECHANICAL WORKS SHILP ENTERPRISES SHILPA INDUSTRIES SHIVSHAKTI INDUSTRIES SHIVAM PAINTS PVT LTD SHRADDHA INDUSTRIES SHREE ENGG WORKS SHREE SAINATH INDUSTRIES SHRI GAJANAN AUTO ENGG PVT LTD SIDDHIVINAYAK FOUNDERS & ENGINEERING WORKS SHROFF TEXTILES LIMITED SIDDHI FORGE PVT. LTD. SIKANDS LIMITED SOUND CASTINGS PVT LTD Sr. No. 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 Name of the SSIs SOUTHERN AUTO CASTINGS PVT LTD SPRING FASTNERS SPRING INDIA SRI GURUKRUPA ENTERPRISES STANDARD ENGG.PRODUCTS STANDARD ENGINEERING INDUSTRIES STANDARD SPRINGS & METAL PRESS WORK STAR AUTO INDUSTRIES PVT. LTD. STAR INDUSTRIES STAR SPRINGS STEERWELS STERLING INDUSTRIES SUJAN INDUSTRIES SUJATA STEEL WORKS PVT LTD. SUMO AUTO-TECH PVT LTD SUSHMI ENGINEERING SUSIRA INDUSTRIES LTD SUVIDH ENGINEERING INDUSTRIES SUYOG RUBBER (INDIA) PVT LTD SWASTIK METAL WORKS PVT.LTD. S N INDUSTRIES SHARADA TIMBER DEPOT & SAW MILL SHREE ENGINEERING WORKS SHREE PLASTIC INDUSTRIES SLIDEWELL SPARLEX ENGINEERING PVT. LTD. SUNAX AUTOMOTIVE PLASTIC P LTD TAJ AUTO ACCESSORIES TAYSONS INDUSTRIES TECHNOCRATS INDIA THAKKARSONS AUTO TOSHIRA AUTO INDUSTRIES PVT LTD. TOYO METALLURGICAL LTD TRIMWELL ENTERPRISES TUSHAR INDUSTRY TUSHAR AUTO PARTS PVT. LTD UCAL PRODUCTS P LTD UKAY METAL INDUSTRIES PVT LTD UNI AUTO PARTS UNITED ENGG WORKS UNITED RUBBER INDUSTRIES UNITY INDUSTRIES UNIQUE RUBBER WORKS VELTECH FORGING PVT. LTD. VERSATILE EQUIPMENTS PVT LTD VICO FORGE PRIVATE LIMITED VICTORY LUMINAIRES VIDARBHA GAS VESSELS PVT. LTD. VIDHARBHA AGRO INDUSTRIES PVT.LTD. VIJAY ENTERPRISES VIJAY ROLLING MILLS VIKAS AUTOMATIC FASTENERS PVT LTD. VIKMAN STEEL BALL INDUSTRIES VIKRANT AUTO INDUSTRIES VIKRANT AUTO SUSPENSIONS VINAYA ENTERPRISES VIRAJ ENGINEERING CO. VIRAL ENGINEERS VI-SON CABLES PVT. LTD. VIBRANT AUTO COMPONENTS PVT LTD VIJAY ENGINEERING WORKS WESTERN AUTO SPARES WIMSON ELECTRONICS PRIVATE LIMITED ZODIAC POWDER COATERS ZOROASTRIAN AUTOMOBILES PVT LTD. ESOOFALI ESMAILJI KARACHIWALLA & CO EDWARD ENGG CORPORATION ENSONS INDUSTRIES 116 Sr. No. 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 Name of the SSIs EL-DIGI SYSTEMS PVT LTD ELECTRO TECH ELECTRICALS ELFAB INDUSTRIES FUJI AIR TOOLS (INDIA) PVT LTD. FINE ENGINEERING TOOLS P LTD FOURESS ENTERPRISES GAURAV ELECTRONICS GOLE PRECISION TOOLS PVT LTD GRAMOS CHEMICALS INDIA PVT LTD GANESH PATTERNS GAMMA INDUSTRIES H J CORPORATION HARKO METAL PVT LTD. HYDERABAD GENERAL ENGG.WORKS HYDERABAD INDUSTRIAL PRODUCT HYDERABAD PRESS PRODUCTS INSULATION & ELECTRICAL PROD PVT LTD INDMECH INDUSTRIAL CORPN INDUSTRIAL ENTERPRENEURS INNOVATIVE INDUSTRIES HIPRO TOOLS PVT LTD KISHOR ENGINEERING COMPANY KARISHMA ENGG WORKS LUNAR ELECTRICAL INDUSTRIES MAGNUM ENGINEERS MAHESH ENTERPRISES MAYURI ENTERPRISES MEERA ENGINEERING WORKS MEHTA FASTNERS NASIK SUPER TOOLS PVT LTD NASH ROBOTICS & AUTOMATION PVT LTD NIRMAL ENGINEERING WORKS NATIONAL RUBBER PRODUCTS PREMIER FREIGHT SYSTEM PROGRESSIVE STEEL PROCESSORS PRECISION PRESS-O-FAB INDUSTRIES PRANAV INDUSTRIES PRAMOD INDUSTRIES QUICK TOOLS CORPORATION RADIX SENSORS PVT LTD RAJA TOOLS R M INDUSTRIES STEEL SMITH SHAH AGENCIES SRIATO SUSHIL TRADERS SIZE CONTROL GAUGES & TOOLS SHRIPAD AGENCIES SHREE SERVICES SEAM ENGINEERS SEVEN SEAS FORGINGS PVT LTD SHEEL METAL INDUSTRIES SWAN REFRIGERATION S S INDUSTRIES SOUBHAGYA PACKER SYLEA AUTOMOTIVE INDIA LTD. D D ENTERPRISES PEST CONTROL (INDIA) LIMITED TIDKE PRINTING PRESS TOOL CONCEPT TOOLS CRAFT TRIJAMA FILTERALL PVT. LTD. VIJAY ENGINEERING VASU CHEMICALS VORA INDUSTRIES WELLPACK ENTERPRISES PERFECT DIES WORKS UNIVERSAL AUTO & DAIRY PRODUCTS

MAHINDRA & MAHINDRA LIMITED

SCHEDULE XVIII
ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956.

Balance Sheet Abstract & Companys General Business Profile :

I. Registration Details : Registration No. Balance Sheet Date 4 5 5 8 3 1 Date 0 3 Month 2 0 0 7 Year State Code 1 1

II.

Capital Raised during the Year (Amount in Rs. Thousands) : Public Issue Rights Issue

N I L
Bonus Issue Private Placement

N I L

N I L
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) : Total Liabilities including Shareholders Funds Total Assets

N I L

8 0 4 3 1 1 5 6
Sources of Funds : Paid-up Capital

8 0 4 3 1 1 5 6
Reserves & Surplus

2 3 8 0 3 2 7
Secured Loans

3 3 1 4 8 7 6 8
Unsecured Loans

1 0 6 6 5 3 4
Deferred Tax Liability (Net)

1 5 2 9 3 5 3 2

1 9 7 8 6 2
Application of Funds : Net Fixed Assets

1 8 7 1 1 6 7 6
Investments Net Current Assets
1 0 8 2 5 2 5 2

2 2 3 7 4 5 7 0
Miscellaneous Expenditure

Accumulated Losses

1 7 5 5 2 5
IV. Performance of Company (Amount in Rs. Thousands) : Turnover (Sales & Other Income) Total Expenditure

N I L

1 1 7 7 3 6 2 5 0
+ - Profit/Loss Before Tax

1 0 3 3 5 9 5 4 0
+ Profit/Loss After Tax

1 4 3 7 6 7 1 0
(Please tick appropriate box + for Profit - for Loss)

1 0 6 8 3 8 6 5

Earnings per Share in Rupees Basic

Rs. 45.15

Diluted
Rs. 40.94

Dividend Rate % 1 1 5

(Refer Note 26)

117

MAHINDRA & MAHINDRA LIMITED

V.

Generic Names of Three Principal Products/Services of Company (as per monetary terms) : Item Code No. (ITC Code) Product Description Tractors 8 7 0 1

Item Code No. (ITC Code) Product Description

8 7 0 2 Motor Vehicles for the transport of more than six persons, excluding the driver

Item Code No. (ITC Code) Product Description

8 7 0 3 Other motor vehicles principally designed for the transport of persons

after considering the provision for contingencies and exceptional items. after considering exceptional items. computed on the basis of the weighted average number of shares outstanding during the year. Signatures to Schedules I to XVIII

M. M. Murugappan N. Vaghul R. K. Kulkarni A. S. Ganguly A. P. Puri Thomas Mathew T. N. B. Godrej

Keshub Mahindra Anand G. Mahindra Directors Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2007

Narayan Shankar

118

MAHINDRA & MAHINDRA LIMITED

Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies
Number of Shares in the Subsidiary Company held by Mahindra & Mahindra Limited at the financial year ending date The net aggregate of profits/(losses) of the Subsidiary Companies so far as they concern the members of Mahindra & Mahindra Limited For Current Financial Year For Previous Financial Years Not dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2007

Name of the Subsidiary Companies

Equity

Dealt with in the accounts of Mahindra & Mahindra Limited for the year Extent ended 31st of March, 2007 holding %

Not dealt Dealt with in with in the the accounts accounts of of Mahindra & Mahindra & Mahindra Mahindra Limited for Limited for the year the year ended 31st ended 31st March, 2007 March, 2007

Nos. Mahindra Engineering & Chemical Products Limited ..................................................................... Mahindra Intertrade Limited ................................. @ Mahindra Middleeast Electrical Steel Service Centre (FZC) ....................................................... Mahindra Steel Service Centre Limited ............... Mahindra Holdings & Finance Limited ................ " Mahindra Consulting Engineers Limited (formerly known as Mahindra Acres Consulting Engineers Limited) ............................................................... " Mahindra Holidays & Resorts India Limited ....... + MHR Hotel Management GmbH ........................ + Mahindra Holidays & Resorts USA Inc. ............. " NBS International Limited ................................... " Mahindra Ugine Steel Company Limited ............ Mahindra Ashtech Limited .................................... Mahindra Gesco Developers Limited .................. ! Mahindra Infrastructure Developers Limited ....... ! Mahindra World City Developers Limited ........... ! Mahindra World City (Jaipur) Limited ................. ! Mahindra Integrated Township Limited .............. ! Mahindra World City (Maharashtra) Limited ....... Mahindra & Mahindra Financial Services Limited " Mahindra Insurance Brokers Limited .................. Tech Mahindra Limited .......................................... # Tech Mahindra (Americas) Incorporated ............. # Tech Mahindra GmbH ........................................ # Tech Mahindra Singapore Pte. Limited .............. # Tech Mahindra (Thailand) Limited ....................... # PT Tech Mahindra Indonesia .............................. # Tech Mahindra (R&D Services) Limited .............. o Tech Mahindra (R&D Services) Incorporated ..... o Tech Mahindra (R&D Services) Pte. Limited ...... # CanvasM Technologies India Limited ................. CanvasM (Americas) Incorporated ..................... # Tech Mahindra Foundation .................................. # iPolicy Network Limited ...................................... Bristlecone Limited ................................................ $ Bristlecone Inc .................................................... $ Bristlecone India Limited .................................... # Bristlecone (Singapore) Pte. Limited .................. # Bristlecone GmbH .............................................. $ Bristlecone UK Limited ....................................... Mahindra Logisoft Business Solutions Limited .. Automartindia Limited ........................................... Mahindra USA Inc. ................................................. Mahindra Gujarat Tractor Limited ........................ Mahindra Shubhlabh Services Limited ................ Mahindra & Mahindra South Africa (Proprietary) Ltd. .................................................... Mahindra Engineering Design & Development Company Limited ................................................... Mahindra Overseas Investment Company (Mauritius) Limited ................................................. 53,78,235 2,71,00,006 37,23,874 14,66,00,593 79,05,000 1,54,01,126 5,82,41,532 5,37,76,252 42,22,250 63,49,500 2,26,25,348 4,50,00,000 16,83,218 1,48,33,793 35,70,000 70,50,000 88,10,000

Rupees lakhs Rupees lakhs 2,68.91 4,31.60 6,08.00 11,64.83 12,67.44 1,79.76 20,93.51 19,40.42 76.17 2,76.21 24,17.96 14.15 40,49.99 47.32 21.78 22,76.36 (1,85.60) 7,08.14 10.61 13,78.13 (82.85) (20.87) (2.84) 76,07.53 2,59.83 34,17.61 3,36.37 99.65 1,36.23 23.11 4,56.35 49.91 0.14 17.01 41.47 (2,08.90) (1,55.84) (24.82) 5,22.30 (46.52) 18.39 0.07 2,42.83 (5,74.35) 3,80.70 10.55 (1,01.85) 2,14.12 17,11.35 (1,99.08)

Rupees lakhs Rupees lakhs 2,09.16 64.24 1,25.66 11,64.83 50,68.81 64,82.76 35,17.33 49.77 4,40.42 174,70.92 31.72 32,53.87 (2.08) 82.81 64,01.72 (26,88.28) 8,21.02 12.54 (9,41.75) (0.09) (0.19) 158,52.90 3,14.69 317,62.21 (7,69.85) (18,42.79) 38.81 (21.98) 5,67.12 68.70 (0.16) (0.20) (1,92.16) (7,82.17) 4.05 24.20 65.81 (92.83) (7,51.03) (10,42.19) 18,42.41 (16,88.25) (18,96.42) 8,88.23 4,01.71 67.64

100.00% 100.00% 90.00% 61.00% 100.00% 51.00% #96.99% #72.74% #96.99% 100.00% 50.69% 100.00% 50.03% 40.02% 41.33% 37.02% 47.77% 50.03% #67.72% #67.72% 49.03% 49.03% 49.03% 49.03% 49.03% 49.03% 49.03% 49.03% 49.03% 39.27% 39.27% 49.03% 49.03% 82.20% 82.20% 82.20% 82.20% 82.20% 82.20% 100.00% 75.89% 100.00% 60.00% 77.31% 51.00% 100.00% 100.00% 119

MAHINDRA & MAHINDRA LIMITED

Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies
Number of Shares in the Subsidiary Company held by Mahindra & Mahindra Limited at the financial year ending date The net aggregate of profits/(losses) of the Subsidiary Companies so far as they concern the members of Mahindra & Mahindra Limited For Current Financial Year For Previous Financial Years Not dealt with in the accounts of Mahindra & Mahindra Limited for the year ended 31st March, 2007

Name of the Subsidiary Companies

Equity

Dealt with in the accounts of Mahindra & Mahindra Limited for the year Extent ended 31st of March, 2007 holding %

Not dealt Dealt with in with in the the accounts accounts of of Mahindra & Mahindra & Mahindra Mahindra Limited for Limited for the year the year ended 31st ended 31st March, 2007 March, 2007

Nos.

Rupees lakhs Rupees lakhs of of of of of of of of of of (15,57.14) 1,89.91 63.39 (36.50) (2,48.80) 26.45 (9.67) (32.43) (8.95) 0.85 (47.39) (44.98) (5,41.60) (18,38.35) (1,68.86) (2.99) (2,47.38) 16.17 9,11.22 2,27.11 1,37.21 11.04 (3.23) (1,81.02) 1,34.72 (1.16) 1,97.64 93.09

Rupees lakhs Rupees lakhs (9,34.54) 4.37 (45.57) 49.13 (15.77) 3.38 1.14 (25.86) 16.71 1.13 (1,58.21) (5,97.63) (16.82) -

Mahindra (China) Tractor Company Limited ....... Mahindra-BT Investment Company (Mauritius) Limited ................................................................ Mahindra Europe s.r.l .......................................... Mahindra SAR Transmission Private Limited ...... 31,25,739 Plexion Technologies (India) Pvt. Limited ........... 45,03,011 Plexion Technologies (UK) Limited ...................... Plexion Technologies GmbH ............................... Plexion Technologies Incorporated ..................... 82,21,107 Mahindra Stokes Holding Company Limited ...... Stokes Group Limited ......................................... $ Stokes Forgings Dudley Limited ......................... $ Jensand Limited ................................................. % Stokes Forgings Limited ..................................... Mahindra Renault Pvt Limited .............................. 8,69,79,225 Mahindra International Limited ............................. 5,03,75,600 Mahindra Forgings Overseas Limited .................. 4,88,88,001 Mahindra Forgings International Limited...... . !JECO Holdings AG ................................................ Gesenkschmiede Schneider GmbH ..................... JECO-Jellinghaus GmbH ...................................... Falkenroth Umformtechnik GmbH ........................ Falkenroth Grundstucksgesellschaft GmbH ......... Mahindra Forgings Mauritius Limited .................. 1,32,30,001 " Mahindra Forgings Global Limited ........................ $ Schneweiss & Co. GmbH ................................... # Fried. Hunninghaus GmbH .................................. # Fried. Hunninghaus GmbH & Co. KG .................. DGP Hinoday Industries Limited .......................... 1,49,38,258 # after considering shares issued to its ESOP Trust but not allotted

80.00% 57.00% 80.00% 51.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.52% 99.52% 99.52% 99.52% 51.00% 51.00% 67.90% 67.90% 67.90% 67.90% 67.90% 67.90% 67.90% 100.00% 100.00% 100.00% 100.00% 100.00% #66.10% to its employees.

@ a subsidiary of Mahindra Intertrade Limited " a subsidiary of Mahindra Holdings & Finance Limited + a subsidiary of Mahindra Holidays & Resorts India Limited ! a subsidiary of Mahindra Gesco Developers Limited " a subsidiary of Mahindra & Mahindra Financial Services Limited # a subsidiary of Tech Mahindra Limited o a subsidiary of Tech Mahindra (R&D Services ) Limited a subsidiary of CanvasM Technologies India Limited $ a subsidiary of Bristlecone Limited # a subsidiary of Bristlecone India Limited a subsidiary of Mahindra Overseas Investment Company (Mauritius) Limited

a subsidiary a subsidiary $ a subsidiary % a subsidiary a subsidiary ! a subsidiary a subsidiary " a subsidiary $ a subsidiary # a subsidiary

Plexion Technologies (India ) Pvt Limited Mahindra Stokes Holding Company Limited Stokes Group Limited Jensand Limited Mahindra Forgings Overseas Limited Mahindra Forgings International Limited JECO Holdings AG Mahindra Forgings Mauritius Limited Mahindra Forgings Global Limited Schneweiss & Co. GmbH

Note : The financial year of all subsidiaries ended on 31st March, 2007 except for MHR Hotel Management GmbH whose first financial year would be from 16th February, 2007 to 31st March, 2008. M. M. Murugappan Keshub Mahindra Chairman N. Vaghul R. K. Kulkarni Anand G. Mahindra Vice Chairman & Managing Director A. S. Ganguly Directors A. P. Puri Bharat Doshi Executive Directors Thomas Mathew T. A. K. Nanda N. B. Godrej Narayan Shankar Company Secretary

Mumbai, 28th May, 2007 120

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Report of the Auditors to the Board of Directors of Mahindra & Mahindra Limited
1. We have audited the attached consolidated balance sheet of Mahindra & Mahindra Limited and its subsidiaries (the Group) as at 31st March, 2007, and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date, annexed thereto. These consolidated financial statements are the responsibility of Mahindra & Mahindra Limiteds management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We did not audit the financial statements of certain subsidiaries and joint ventures, whose financial statements reflect Groups share of total assets of Rs. 1242955.00 lakhs as at 31st March, 2007 and Groups share of total revenues of Rs. 684215.68 lakhs for the year ended on that date and Groups share of net cash inflow of Rs. 27799.83 lakhs for the year ended on that date and associates whose financial statements reflect the Groups share of profit (net) upto 31st March, 2007 of Rs. 206.41 lakhs and the Groups share of profit (net) of Rs. 1631.39 lakhs for the year ended on that date as considered in the consolidated financial statements. These financial statements and other financial information have been audited by other auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts included in respect of these subsidiaries, joint ventures and associates, is based solely on the report of the other auditors. 4. We report that the consolidated financial statements have been prepared by Mahindra & Mahindra Limiteds management in accordance with the requirements of Accounting Standard 21, Consolidated Financial Statements, Accounting Standard 23, Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard 27, Financial Reporting of Interests in Joint Ventures, issued by the Institute of Chartered Accountants of India. Based on our audit and on consideration of the reports of other auditors on separate financial statements and on the other financial information of the components, in our opinion and to the best of our information and according to the explanations given to us, the attached consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: a) in the case of the consolidated balance sheet, of the state of affairs of Mahindra & Mahindra Limited Group as at 31st March, 2007; in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.

2.

5.

3.

b) c)

For A. F. Ferguson & Co. Chartered Accountants R. A. Banga (Partner) Membership Number: 37915

Mumbai, 28th May, 2007

121

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Consolidated Balance Sheet as at 31st March, 2007

Schedule I. SOURCES OF FUNDS : SHAREHOLDERS FUNDS : Capital ........................................................................................ Employee Stock Options Outstanding ....................................... Reserves and Surplus ................................................................ MINORITY INTEREST ................................................................ LOAN FUNDS : (a) Secured Loans ...................................................................... (b) Unsecured Loans .................................................................. DEFERRED TAX LIABILITY (Net) ................................................ DEFERRED INCOME : Advance towards Club Mahindra members facilities ................ Total ............................................................................................ II. APPLICATION OF FUNDS : FIXED ASSETS : Gross Block ............................................................................... Less : Depreciation .................................................................... Net Block ................................................................................... CAPITAL WORK-IN-PROGRESS ............................................... INVESTMENTS ........................................................................... DEFERRED TAX ASSETS (Net) .................................................. CURRENT ASSETS, LOANS AND ADVANCES : (a) Inventories ............................................................................. (b) Sundry Debtors ..................................................................... (c) Cash and Bank Balances ..................................................... (d) Other Current Assets ............................................................ (e) Loans and Advances ............................................................ LESS : CURRENT LIABILITIES AND PROVISIONS : (a) Current Liabilities ................................................................... (b) Provisions .............................................................................. NET CURRENT ASSETS ............................................................ MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED) ................................................. Total ............................................................................................ NOTES ON ACCOUNTS .......................................................... Per our report attached For A. F. Ferguson & Co. Chartered Accountants M. M. Murugappan N. Vaghul R. K. Kulkarni A. S. Ganguly A. P. Puri Thomas Mathew T. N. B. Godrej IV 2007 Rupees lakhs 2006 Rupees lakhs

I II

238,03.27 4,52.42 4,613,53.96 4,856,09.65 1,659,48.17

233,39.96 2,13.84 3,486,08.79 3,721,62.59 852,50.68 4,042,20.62 1,229,13.78 5,271,34.40 115,65.70 222,09.64 10,183,23.01

III A III B

5,619,34.62 2,209,68.05 7,829,02.67 319,51.20 14,664,11.69

7,818,71.58 3,591,27.16 4,227,44.42 559,30.18 4,786,74.60 1,003,30.00 14,70.88 2,428,60.56 2,702,56.78 2,045,11.83 2,96.94 6,860,34.29 14,039,60.40 4,275,61.79 923,62.44 5,199,24.23 8,840,36.17 VIII XIV 19,00.04 14,664,11.69

4,335,07.83 2,040,25.41 2,294,82.42 310,71.67 2,605,54.09 1,180,32.71 1,663,16.54 1,851,63.74 1,187,18.54 2,84.89 5,020,45.21 9,725,28.92 2,792,92.49 559,44.12 3,352,36.61 6,372,92.31 24,43.90 10,183,23.01

VI VI VI VI VI

A B C D E

VII A VII B

R. A. Banga Partner

Keshub Mahindra Anand G. Mahindra Directors Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2007

Narayan Shankar Mumbai, 28th May, 2007

122

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Consolidated Profit and Loss Account for the year ended 31st March, 2007
Schedule SALES [Note 23] ....................................................................................................... Less: Excise Duty on Sales [Note 23] ....................................................................... Net Sales .................................................................................................................. Income from Operations & Other Income ................................................................. EXPENDITURE : Raw Materials, Finished and Semi-finished Products ............................................... Personnel .................................................................................................................. Interest, Commitment and Finance Charges (Net) .................................................... Depreciation/Amortisation [Notes 6 and 23] ............................................................. Other Expenses ......................................................................................................... Less : Cost of Manufactured/Purchased Products capitalised ................................ Profit before provision for contingencies, exceptional item and taxation .................. Less : Provision for contingencies ............................................................................ Profit before exceptional item and taxation ............................................................... Add : Exceptional Item [Note 16] ............................................................................. Profit before taxation ................................................................................................. Less : Provision for Tax - Current tax including Fringe Benefit Tax [Note 23] ........ - Deferred tax (Net) [Notes 15 and 23] ............................ Profit for the year before prior year adjustments ...................................................... Less : Adjustments pertaining to previous years [Note 17] ...................................... Balance of profit for 2006-2007 before share of profit/loss of Associates and Minority Interests ....................................................................................................... Add : Share of Profit of Associates for the year ...................................................... Profit before Minority Interests .................................................................................. Minority Share in Profits for 2006-2007 .................................................................... Net Profit ................................................................................................................... Balance of profit for earlier years .............................................................................. Less : Charge on adoption of Accounting Standard - 15 (revised) ......................... Add : Transfer from Debenture Redemption Reserve (Net) ..................................... Total of Profit and Loss Account balances shown above ......................................... Deduct : Statutory Reserve ...................................................................................... : General Reserve (Net) ................................................................................ : Interim Dividends Paid ............................................................................... : Income tax on Dividends ........................................................................... : Proposed Dividends on Equity Shares ...................................................... : Income tax on Proposed Dividends .......................................................... Balance for 2006-2007 and earlier years carried to Balance Sheet ........................ EARNINGS PER SHARE : [Note 21] (Face value Rs.10/- per share) (Rupees) Basic ......................................................................................................................... Diluted ....................................................................................................................... NOTES ON ACCOUNTS .......................................................................................... Per our report attached For A. F. Ferguson & Co. Chartered Accountants R. A. Banga Partner M. M. Murugappan N. Vaghul R. K. Kulkarni A. S. Ganguly A. P. Puri Thomas Mathew T. N. B. Godrej 2007 Rupees lakhs 14,439,51.95 1,524,52.74 12,914,99.21 4,997,28.77 17,912,27.98 8,985,23.12 2,388,40.22 299,20.24 379,86.41 3,616,94.12 15,669,64.11 78,78.71 15,590,85.40 2,321,42.58 1,73.52 2,319,69.06 (117,29.03) 2,202,40.03 624,34.48 (28,62.98) 1,606,68.53 (15,18.17) 1,621,86.70 16,38.05 1,638,24.75 141,10.16 1,497,14.59 1,940,95.86 69.08 16,00.24 1,956,27.02 3,453,41.61 24,73.75 140,03.95 184,03.05 44,59.24 98,19.90 16,68.89 2,945,12.83 2006 Rupees lakhs 11,067,29.75 1,259,95.96 9,807,33.79 2,841,07.17 12,648,40.96 6,912,15.69 1,399,38.47 219,37.48 283,30.69 2,352,39.34 11,166,61.67 61,75.10 11,104,86.57 1,543,54.39 4,43.75 1,539,10.64 263,40.42 1,802,51.06 439,08.86 (36,15.04) 1,399,57.24 23.11 1,399,34.13 4,66.69 1,404,00.82 134,29.16 1,269,71.66 1,137,29.67 55.25 1,137,84.92 2,407,56.58 34,86.77 146,96.72 6,58.08 243,97.41 34,21.74 1,940,95.86

IX

X XI XII XIII

63.28 57.75 XIV

56.40 51.72

Keshub Mahindra Anand G. Mahindra Directors Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2007

Narayan Shankar

Mumbai, 28th May, 2007

123

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Consolidated Cash Flow Statement for the year ended 31st March, 2007
Rupees lakhs A. CASH FLOW FROM OPERATING ACTIVITIES : Net Profit before exceptional item, taxation and adjustments pertaining to previous years ............................................................................................. Adjustments for: Depreciation/Amortisation ........................................................................... Unrealised Profit on Exchange (Net) ........................................................... Investment and Interest Income (Excluding Rs. 784.74 lakhs (2006 : Rs. 365.05 lakhs) in respect of financial enterprises consolidated). Interest, Commitment and Finance charges (Excluding Rs. 31438.36 lakhs (2006 : Rs. 21082.59 lakhs) in respect of financial enterprises consolidated) Amortisation of Expenses ........................................................................... (Profit)/Loss on sale of Investments (Net) ................................................... (Profit)/Loss on fixed assets sold/scrapped/written off (Net) ...................... Provision for diminution in value of long term investments (Net) ................ Excess of cost over fair value of current investments (Net) ....................... 2007 Rupees lakhs 2006 Rupees lakhs

2,319,69.06 379,86.41 (3,39.73) (154,02.61) 95,39.09 9,28.60 (12,80.05) 3,71.62 2,14.19 2,36.69 322,54.21

1,539,10.64 283,30.69 (6,13.94) (87,84.73) 73,53.06 9,51.00 (105,60.48) (4,03.91) (25.12) 71.23 163,17.80 1,702,28.44 1,24.86 61,78.72 (570,26.11) (1,376,57.77) (290,41.17) 433,02.22 (1,741,19.25) (86.38) (39,77.19) (419,10.18) (458,87.37)

Operating Profit before Working Capital changes ....................................... Changes in : Stock on hire ......................................................................... Deferred income advances towards membership fees ...... Trade and other receivables .................................................. Loans against Assets * .......................................................... Inventories ............................................................................. Trade and other payables ...................................................... Exceptional Items : Upfront payment to a customer .................................................................. Miscellaneous Expenditure (to the extent not written off or adjusted) incurred during the year .............................................................................. Cash generated/(used) from operations ..................................................... Income taxes paid (net of refunds including for prior years) ...................... NET CASH (USED IN)/FROM OPERATING ACTIVITIES ............................. * In respect of financial enterprises consolidated. B. CASH FLOW FROM INVESTING ACTIVITIES : Purchase of fixed assets ............................................................................. Sale of fixed assets ..................................................................................... Purchase of investments ............................................................................. Sale of investments ..................................................................................... Interest received .......................................................................................... Dividends received ...................................................................................... Inter corporate deposits (Net) ..................................................................... Purchase consideration paid on acquisition of interest in subsidiary ......... Sales Proceeds (Net) received on divesture of interest in subsidiaries ....... Exceptional Item: Sale of a Business undertaking .................................................................. NET CASH (USED IN)/FROM INVESTING ACTIVITIES ...............................

2,642,23.27 52.39 97,41.56 (997,81.08) (1,501,07.30) (446,16.48) 1,135,78.50 (1,711,32.41) (524,93.80) (15,42.62) 390,54.44 (552,97.14) (162,42.70)

(1,374,58.21) 58,56.63 (9,752,50.13) 9,929,65.66 109,88.72 16,45.26 67,05.98 (936,17.39) 727,74.33 32,40.63 (1,121,48.52)

(525,29.14) 17,39.62 (5,396,42.80) 4,771,53.68 64,40.11 11,24.94 (119,12.57) (248,75.07) 543,19.57 (881,81.66)

124

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Consolidated Cash Flow Statement (Contd.)

2007 Rupees lakhs C. CASH FLOW FROM FINANCING ACTIVITIES : Proceeds from borrowings .......................................................................... Repayments of borrowings [including premium on repayment] .................. Dividends paid ............................................................................................ Interest, Commitment and Finance charges paid ....................................... NET CASH (USED IN)/FROM FINANCING ACTIVITIES .............................. NET INCREASE IN CASH AND CASH EQUIVALENTS (A + B + C) ........... CASH AND CASH EQUIVALENTS [Note (a)] Opening Balance ......................................................................................... Cash & Bank Balance Acquired on Acquisition of Subsidiaries ................. Closing Balance .......................................................................................... See Notes attached. Per our report attached For A. F. Ferguson & Co. Chartered Accountants M. M. Murugappan N. Vaghul R. K. Kulkarni A. S. Ganguly A. P. Puri Thomas Mathew T. N. B. Godrej 16,633,98.18 (13,944,79.69) (502,24.28) (67,07.28) 2,119,86.93 835,95.71 7,319,53.17 (5,621,82.80) (178,07.81) (51,41.93) 1,468,20.63 127,51.60 2006 Rupees lakhs

1,180,03.25 69,16.48 2,085,15.44

1,013,72.53 38,79.12 1,180,03.25

R. A. Banga Partner

Keshub Mahindra Anand G. Mahindra Directors Bharat Doshi A. K. Nanda

Chairman Vice Chairman & Managing Director Executive Directors Company Secretary Mumbai, 28th May, 2007

Narayan Shankar Mumbai, 28th May, 2007

Notes to the Consolidated Cash Flow Statement for the year ended 31st March, 2007
2007 Rupees lakhs (a) Cash and Bank Balances ........................................................................... Unrealised (Net) translation (Gain)/Loss on foreign currency cash and cash equivalents .................................................................................................. Total cash and cash equivalent ................................................................... 2,045,11.83 40,03.61 2,085,15.44 2006 Rupees lakhs 1,187,18.54 (7,15.29) 1,180,03.25

(b) During the year, the Company has consolidated its business interest in Stokes Group Limited by swapping the shares held by the Company in Stokes Group Limited for shares of Mahindra Stokes Holding Company Limited. This being a non cash transaction does not form part of Cash Flow. (c) Previous years figures have been regrouped/restated wherever necessary.

125

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE I
Share Capital : Authorised : 27,50,00,000 Ordinary (Equity) Shares of Rs.10 each ............................................................. 25,00,000 Unclassified Shares of Rs.100 each .................................................................. Total ........................... Issued and Subscribed : 24,53,71,265 (2006 - 24,09,01,352) Ordinary (Equity) Shares of Rs.10 each fully paid up .... Less: 73,38,558 (2006 - 75,01,768) Ordinary (Equity) Shares of Rs.10 each fully paid up issued to ESOP Trust but not allotted to employees ........................................ Adjusted : Issued and Subscribed Share Capital ....................................................................... 2007 Rupees lakhs 275,00.00 25,00.00 300,00.00 245,37.13 245,37.13 7,33.86 238,03.27 Deductions Rupees lakhs 64,82.78 174,52.47 2,55.42 39.98 2,98.80 174,12.49 (43.38) 47.06 98.06 **134,19.74 **116,00.89 8.16 134,27.90 116,00.89 16,00.24 55.25 #10,68.98 #12,30.00 12,71.63 5,47.48 413,11.08 134,88.30 2006 Rupees lakhs 275,00.00 25,00.00 300,00.00 240,90.14 240,90.14 7,50.18 233,39.96 2007 Rupees lakhs 23,42.87 23,42.87 138,55.62 41,40.32 554,02.41 579,60.36 17,97.95 18,37.93 536,04.46 561,22.43 12,86.40 13,33.46 742,98.34 726,45.15 3,66.93 3,75.09 746,65.27 730,20.24 1,35.97 17,36.21 30,60.66 41,29.64 50,00.00 145,46.63 120,72.88 (16,56.75) (3,85.12) *1,668,41.13 1,545,12.93

SCHEDULE II
Reserves and Surplus : 1 2 3 Capital Reserve ................................................................... Capital Reserve on consolidation ........................................ Securities Premium Account [Note 4] ................................. Less : Premium on shares issued to ESOP Trust but not allotted to employees [Note 4] ............................................ 2006 Rupees lakhs 23,42.87 23,08.56 41,40.32 40,92.16 579,60.36 234,77.92 18,37.93 21,36.73 561,22.43 213,41.19 13,33.46 14,31.52 726,45.15 683,19.32 3,75.09 730,20.24 683,19.32 17,36.21 17,91.46 41,29.64 53,59.64 120,72.88 85,86.11 (3,85.12) 1,62.36 1,545,12.93 1,133,92.32 *(including Group Share in Joint Ventures Rs. 287.98 lakhs (2006 : Rs.250.37 lakhs)) 11 Balance for 2006-2007 and earlier years as per Profit and Loss Account ...................................................................... Group Share in Joint Ventures ............................................ Total @ Additions Rupees lakhs 34.31 161,98.08 48.16 148,94.52 347,37.86 148,94.52 347,37.86 @150,72.93 @159,26.72 3,75.09 150,72.93 163,01.81 ***50,00.00 24,73.75 34,86.77 536,39.28 546,08.91

4 5

Revaluation Reserve ............................................................ General Reserve [Note 4] .................................................... Add : Bonus shares issued to ESOP Trust but not allotted to employees [Note 4] .........................................................

6 7 8 9

Debenture Redemption Reserve ......................................... Investment Fluctuation Reserve .......................................... Capital Redemption Reserve .............................................. Special Reserve (As per Section 45 IC of the RBI Act) ......

10 Foreign Exchange Fluctuation Reserve ...............................

2,928,46.56 1,928,53.76 16,66.27 12,42.10 4,613,53.96 3,486,08.79

includes transfer of Rs. 1068.98 lakhs (2006 : Rs.1230.00 lakhs) from Investment Fluctuation Reserve per contra pursuant to the Scheme of Arrangement approved by the Honble High Court of Bombay on 12th December, 2003. ** includes transfer of Rs. 5000.00 lakhs (2006 : Rs. Nil) to Capital Redemption Reserve and Adjustment on adoption of Accounting Standard -15 (revised 2005) Employee benefits [Refer Note 9]. # transfer of Rs.1068.98 lakhs (2006 : Rs.1230.00 lakhs) to General Reserve per contra pursuant to the above Scheme of Arrangement [Note 3]. *** transfer of Rs. 5000.00 lakhs (2006 : Rs. Nil) from General Reserve.

126

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE III
Rupees lakhs Loan Funds : (A) Secured : [Note 5] (1) Debentures/Bonds .......................................................................... (2) Foreign Currency Loans from Banks .............................................. (3) Rupee Loans : (a) From Financial Institutions . ..................................................... (b) From Banks ............................................................................. (c) From Others ............................................................................. 1,287,09.43 35,30.00 1,322,39.43 (4) Loans and Advances on cash credit account from Banks ............ 957,48.04 5,617,11.28 Group Share in Joint Ventures ............................................................... Total ......................................................................................... 2,23.34 5,619,34.62 53.83 675,44.81 105,91.95 781,90.59 416,60.26 4,039,00.95 3,19.67 4,042,20.62 3,067,50.67 269,73.14 2,690,50.67 149,99.43 2007 Rupees lakhs 2006 Rupees lakhs

(B) Unsecured : (1) Fixed Deposits ................................................................................ (2) Short-term Loans : (a) From Banks ............................................................................. (b) From Others ............................................................................. 107,43.90 58,89.04 166,32.94 (3) Other Loans: (a) From Financial Institutions ....................................................... (b) Zero Coupon Convertible Bonds ............................................. (c) Debentures/Bonds ................................................................... (d) From Government of Gujarat ................................................... (e) From Banks ............................................................................. (f) From Others ............................................................................. 367,26.85 879,41.40 291,40.00 9,25.66 359,34.28 125,12.42 2,031,80.61 2,209,17.57 Group Share in Joint Ventures ........................................................ Total ......................................................................................... Total ......................................................................................... 50.48 2,209,68.05 7,829,02.67 322,61.32 157,41.00 261,08.30 8,87.63 185,85.91 50,72.04 986,56.20 1,228,63.29 50.49 1,229,13.78 5,271,34.40 213,41.10 2,17.00 215,58.10 11,04.02 26,48.99

127

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE IV
Fixed Assets :
Description of Assets Cost/ Professional valuation as at 31st March, 2006 Additions and adjustments during the year Deductions and adjustments during the year Cost/Professional valuation as at 31st March, 2007 Deprecia- Depreciation/Amortion/ tisation Amorto 31st tisation March, for 20062006 2007 Deductions and adjustments of Depreciation/ Amortisation Depreciation/ Amortisation to 31st March, 2007 Net Balance as at 31st March, 2007 Net Balance as at 31st March, 2006

Rupees lakhs A : Assets on Lease Plant and Machinery ....................... Vehicles ........................................... Computers ...................................... Sub Total A ..................................... B : Owned Assets Land - Freehold .............................. Land - Leasehold ........................... Buildings - Freehold ....................... Buildings - Leasehold ..................... Plant and Machinery ....................... Furniture and Fittings ...................... Vehicles, Cycles, etc. ..................... Technical Knowhow ........................ Development Expenditure .............. Software Expenditure ..................... Websites ......................................... Non-Compete Fees ........................ Time share weeks .......................... Trademarks ..................................... Goodwill + ...................................... Sub Total B ..................................... C : Group Share in Joint Ventures TOTAL (A+B+C) .............................. + Goodwill arising on consolidation. Refer Note 6 (b) 125,19.48 6,23.57 780,39.57 5,96.32 2,846,00.48 172,49.48 101,72.01 93.53 27,45.51 20,54.67 3,73.74 23.25 62.28 32.53 217,41.50 4,309,27.92 9,74.49 4,335,07.83 3,446,37.40 7,63.62 8,40.03 1.77 16,05.42

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

Rupees lakhs

12.91 12.91

1,20.10 1.77 1,21.87

7,63.62 7,32.84 14,96.46

18.70 3,11.08 1.29 3,31.07

1,61.47 0.08 1,61.55

65.78 1.37 67.15

18.70 4,06.77 4,25.47

7,44.92 3,26.07 10,70.99

7,44.92 5,28.95 0.48 12,74.35

54,63.67 26,16.34 346,63.85 9,90.08 1,912,81.65 305,25.05 57,72.67 98,67.58 38,94.93 39,31.44 15,88.93 748,58.70 3,654,54.89 65.16 3,655,32.96 940,06.00

5.81 5,54.96 101,35.43 8,80.10 16,03.91 52.84 1,46.70 1,14.56 35,39.06 170,33.37 13.86 171,69.10 51,35.57

179,77.34 32,39.91 1,121,48.46 15,86.40 4,657,46.70 468,94.43 143,40.77 99,08.27 64,93.74 58,71.55 3,73.74 23.25 62.28 16,21.46 930,61.14 7,793,49.44 10,25.68 7,818,71.58 4,335,07.83

1,00.56 16.31 169,88.01 1,97.19

77.49 31.40 180,61.06 93.93

0.02 2,15.65 86,98.90 3,98.48 9,87.36 21.54 37.84 1,09.40 104,69.19 9.04 105,45.38 31,67.22

1,78.03 47.71 348,33.42 2,91.12 2,812,20.10 285,73.22 62,54.72 3,78.80 16,56.86 34,99.04 3,73.74 31.15 6,94.72 3,580,32.63 6,69.06 3,591,27.16 2,040,25.41

177,99.31 31,92.20 773,15.04 12,95.28 1,845,26.60 183,21.21 80,86.05 95,29.47 48,36.88 23,72.51 23.25 31.13 9,26.74 930,61.14 4,213,16.81 3,56.62 4,227,44.42 2,294,82.42

124,18.92 6,07.26 610,51.56 3,99.13 1,146,23.68 81,31.57 61,56.28 38.35 17,25.19 8,63.83 23.25 37.36 29.80 217,41.50 2,278,47.68 3,60.39 2,294,82.42

1,699,76.80 1,199,42.20 91,17.91 40,15.73 55.18 10,20.32 11,90.84 3,73.74 24.92 2.73 198,53.79 32,26.35 3,45.16 6,74.38 24,17.60 6.23 6,91.99 -

2,030,80.24 1,654,21.58 6,14.10 64.00

2,040,25.41 1,656,47.13 1,550,79.03 521,13.60

128

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE V
2007 Long Term Rupees lakhs Investments (At Cost unless otherwise specified) : Shares (Non-trade and fully paid-up unless otherwise specified): Unquoted : (a) Equity Shares ................................................................ (b) Equity Shares - Associates [Note 1(c) & Note 22] ........ (c) Preference Shares ......................................................... (d) Preference Shares - Associates .................................... 2007 Current Rupees lakhs 2006 Long Term Rupees lakhs 2006 Current Rupees lakhs

35,47.08 42,46.97 17,75.68 5,63.85 101,33.58

0.14 0.14 0.14 24,89.36 24,89.36

30,78.42 116,70.83 3,53.75 5,63.85 156,66.85 3,30.05 3,94.58 7,24.63 163,91.48 13,21.51 33.23 13,54.74

0.14 0.14 0.14 9,89.36 9,89.36

Quoted : (a) Equity Shares ................................................................ (b) Equity Shares - Associates [Note 1(c) & Note 22] ........

23,16.76 122,40.66 145,57.42 246,91.00

Debentures/Bonds (Non-trade & fully paid-up) : (a) Unquoted ...................................................................... (b) Quoted ..........................................................................

13,21.51 33.23 13,54.74

Other Investments : Government Securities (including Treasury Bills) : (a) Unquoted ...................................................................... (b) Quoted ..........................................................................

1.22 1.22

3,35.83 3,35.83 365,99.86 365,99.86 322,33.70 322,33.70 716,58.89 1,006,97.28 3.38 1,007,00.66 832,84.68 174,15.98 1,007,00.66 3,70.66 1,003,30.00

1.13 1.13 2,49.98 2,49.98 4,21.41 4,21.41 0.03 0.03 184,18.77

4,57.42 4,57.42 904,76.03 904,76.03 78,21.58 78,21.58 997,44.53 1,181,63.30 3.38 1,181,66.68 1,159,61.90 22,04.78 1,181,66.68 1,33.97 1,180,32.71 62,38.26

Units : (a) Unquoted ......................................................................

25,46.78 25,46.78

Investment in the Capital of Partnership (a) Unquoted ......................................................................

4,21.41 4,21.41

Others : (a) Unquoted ......................................................................

23.24 23.24 290,38.39

Total ................................................................ Group Share in Investments of Joint Ventures ..................... Total ................................................................ Cost (net of amounts written off ) of Unquoted Investments Cost/Carrying Value of Quoted Investments ........................ Less : Excess of cost over fair value of Current Investments (Net)

Market value of Quoted Investments ...................................

409,22.69

129

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE VI
2007 Rupees lakhs Current Assets, Loans and Advances : (A) Inventories (at cost or net realisable value whichever is lower) : (i) Finished Products produced and purchased for sale ................ (ii) Contracts and Work-in-Progress ............................................... (iii) Manufactured Components ....................................................... (iv) Raw Materials and Bought-out Components ............................ (v) Work-in-Progress Property Development Activity and Long Term Contracts .......................................................................... (vi) Food, Beverages, Smokes and Operating Supplies .................. (vii) Stores and Spares ..................................................................... (viii) Tools ........................................................................................... Group Share in Inventories of Joint Ventures ................................... Total .................................................................................... (B) Sundry Debtors : Unsecured unless otherwise stated : Outstanding over six months : Considered good ............................ : Considered doubtful ....................... Other Debts : Considered good ..................................................... : Considered doubtful ................................................. 787,57.13 279,94.00 45,05.96 793,47.97 428,86.08 1,78.46 54,70.46 33,14.74 2,424,54.80 4,05.76 2,428,60.56 670,32.38 115,59.44 49,91.53 487,98.32 261,59.15 87.23 44,92.71 28,09.04 1,659,29.80 3,86.74 1,663,16.54 2006 Rupees lakhs

392,36.65 82,37.58 474,74.23 2,317,64.45 8,07.90 2,325,72.35 2,800,46.58 25,45.24 86,84.26 2,688,17.08 14,39.70 2,702,56.78

128,93.80 64,50.92 193,44.72 1,721,35.00 6,64.18 1,727,99.18 1,921,43.90 11,83.91 71,15.10 1,838,44.89 13,18.85 1,851,63.74

Less : Unmatured Finance Charges ................................................. Less : Provision for Doubtful Debts .................................................. Group Share in Debtors of Joint Ventures ........................................ Total .................................................................................... (C) Cash and Bank Balances : Cash, cheques and stamps on hand ............................................... Balances with Scheduled Banks : (i) On Current Account ................................................................... (ii) On Fixed Deposit Account ......................................................... (iii) On Margin Account .................................................................... Balances with Non-Scheduled Banks : On Current Account & Fixed Deposit Account ................................. Group Share in Cash and Bank Balances of Joint Ventures ............ Total ....................................................................................

384,71.91 297,25.55 1,313,19.78 60.64 1,611,05.97 42,86.45 2,038,64.33 6,47.50 2,045,11.83

226,05.75 255,42.34 675,17.39 6,65.06 937,24.79 21,30.43 1,184,60.97 2,57.57 1,187,18.54

130

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE VI (Contd.)
Rupees lakhs (D) Other Current Assets : Interest accrued on investments ....................................................... Plant & Machinery and other assets held for sale ............................ (at cost or estimated net realisable value, whichever is lower) Stock on Hire .................................................................................... Less : Unmatured Finance Charges ................................................. Less : Provision for Non Performing Assets & Doubtful Debts ........ Total .................................................................................... (E) Loans and Advances : (Unsecured, considered good unless otherwise stated) : Bills of exchange, considered good .................................................. Bills of exchange, considered doubtful ............................................. 4,91.05 2,05.04 6,96.09 Less: Provision for doubtful debts .................................................... 2,05.04 4,91.05 Advances recoverable in cash or in kind or for value to be received : Considered good .............................................................................. Considered doubtful .......................................................................... 1,197,72.01 83,31.78 1,281,03.79 Less : Provision for Doubtful Advances ............................................ 83,31.78 1,197,72.01 Loans against assets/Retained Interest in Securitised Assets (Secured) : Considered good .............................................................................. Considered doubtful .......................................................................... 5,428,26.87 345,41.87 5,773,68.74 Less : Provision for Doubtful Advances ............................................ 149,10.61 5,624,58.13 Payments towards Income tax and Surtax (net of provisions) ......... Balances - Customs, Port Trust, Excise, etc. ................................... 15,12.65 16,77.77 6,859,11.61 Group Share in Loans and Advances of Joint Ventures ................... Total .................................................................................... Total .................................................................................... 1,22.68 6,860,34.29 14,039,60.40 3,984,22.61 225,73.26 4,209,95.87 86,45.04 4,123,50.83 28,46.52 3,93.04 5,019,62.67 82.54 5,020,45.21 9,725,28.92 859,09.35 90,68.03 949,77.38 90,68.03 859,09.35 4,62.93 2,13.09 6,76.02 2,13.09 4,62.93 2,82.84 14.10 2,96.94 2,14.35 18.15 84.34 17.55 66.79 14.40 52.39 2,84.89 2007 Rupees lakhs 2006 Rupees lakhs

131

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE VII
Rupees lakhs Current Liabilities and Provisions : (A) Current Liabilities : Acceptances .................................................................................... Sundry Creditors : (i) (ii) Total outstanding dues of small scale industrial undertakings ... Total outstanding dues of creditors other than small scale industrial undertakings ............................................................... 118,42.43 3,257,66.08

2007 Rupees lakhs

2006 Rupees lakhs

340,83.88

304,45.81 60,36.82 2,079,48.58

3,376,08.51 Dividend payable ............................................................................... Balances on Directors Current Accounts ......................................... Interest accrued but not due on loans ............................................. Deposits/Advances received against hire purchase/lease agreements ....................................................................................... Other current liabilities ....................................................................... 7,33.15 2,45.77 123,26.16 34,40.81 383,18.56 4,267,56.84 Group Share in Current Liabilities of Joint Ventures ......................... Total ........................................................................................... (B) Provisions : Proposed Dividends .......................................................................... Provision for Tax on Proposed Dividend ........................................... Provision for diminution in value of long term investments ............... Provision for premium payable on redemption of convertible bonds Provision for Contingencies [Note 12 (b)] ......................................... Provision for compensated absences ............................................... Provision for Estimated Loss/Expenses on Securitisation ................ Provision : Others [Note 12 (a)] ......................................................... Group Share in Provisions of Joint Ventures .................................... Total ........................................................................................... Total ........................................................................................... 98,19.90 16,68.89 23,22.57 244,58.29 3,46.20 271,82.81 67,43.13 196,98.36 922,40.15 1,22.29 923,62.44 5,199,24.23 8,04.95 4,275,61.79

2,139,85.40 2,75.99 2,15.86 94,66.04 49,05.53 192,56.32 2,785,50.95 7,41.54 2,792,92.49 243,97.41 34,21.74 19,64.00 10,07.53 4,43.75 91,41.40 47,17.93 107,84.97 558,78.73 65.39 559,44.12 3,352,36.61

SCHEDULE VIII

2007 Rupees lakhs

2006 Rupees lakhs

Miscellaneous Expenditure (to the extent not written off or adjusted) : (a) Finance Charges ........................................................................ (b) Separation and other costs ....................................................... (c) Others ........................................................................................ Total ........................................................................................... 5,33.50 13,20.47 46.07 19,00.04 2,19.38 21,76.60 47.92 24,43.90

132

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE IX
Income from Operations and Other Income : Income from services rendered ........................................................ Income from long term contracts ..................................................... Income from Project Management, etc. ........................................... Hire Purchase income, Lease income and other rentals .................. Income from Loan, Retained Interest in securitised assets & securitisation ..................................................................................... Commission ...................................................................................... Dividends on other Investments [Note 18 (a)] ................................... Rent received .................................................................................... Miscellaneous Income . ..................................................................... Profit on sale of Investments [Note 18 (c)] ....................................... Profit on sale of Fixed Assets ...........................................................

2007 Rupees lakhs 3,685,19.05 135,81.17 2,02.45 54,22.71 821,05.96 7,41.45 51,30.14 4,61.92 217,46.32 12,80.05 4,991,91.22 5,37.55 4,997,28.77 2007 Rupees lakhs 2007 Rupees lakhs

2006 Rupees lakhs 1,715,24.31 164,64.00 13,50.40 58,67.60 568,40.93 8,62.16 26,51.61 3,52.19 163,60.60 105,60.48 4,03.91 2,832,38.19 8,68.98 2,841,07.17 2006 Rupees lakhs

Group Share in Joint Ventures .......................................................... Total........

SCHEDULE X
Raw Materials, Finished and Semi-Finished Products : (A) (Increase)/Decrease in Stock of Finished Goods, Work-in-Progress and Manufactured Components : Opening Stock : (i) Finished Products produced and purchased for sale ................ (ii) Contracts and Work-in-Progress ............................................... (iii) Manufactured Components ....................................................... Add : Stock taken over on acquisition : Finished Products produced and purchased for sale ................ Contracts and Work-in-Progress ...............................................

670,32.38 115,59.44 49,91.53 835,83.35

503,30.39 58,19.59 41,20.89 602,70.87 1,15.00 40,62.84 221,40.29 41,77.84 670,32.38 115,59.44 49,91.53 1,112,57.09 835,83.35 (191,34.64) 397,09.19 6,164,35.80 6,561,44.99 43,35.03 487,98.32 6,116,81.70 962,10.63 6,887,57.69 24,58.00 6,912,15.69 (55,33.45) 487,98.32 8,158,61.58 8,646,59.90 75,65.83 793,47.97 7,928,77.76 1,083,23.80 8,956,68.11 28,55.01 8,985,23.12

(i) (ii)

64,40.72 156,99.57

Less : Closing Stock : (i) Finished Products produced and purchased for sale ................ (ii) Contracts and Work-in-Progress ............................................... (iii) Manufactured Components ....................................................... (Increase)/Decrease in Stock ............................................................ (B) Consumption of Raw Materials and Bought-out Components : Opening Stock .................................................................................. Add : Purchases ............................................................................... Add: Stock taken over on acquisition ............................................... Less : Closing Stock ......................................................................... (C) Purchases of Finished Products for sale ..................................... Group Share in Joint Ventures .......................................................... Total........

787,57.13 279,94.00 45,05.96

133

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE XI
Personnel : Salaries, Wages, Bonus, etc. ............................................................ Contribution to Provident and other funds ....................................... Welfare ..............................................................................................

2007 Rupees lakhs 2,129,88.62 127,58.15 125,56.54 2,383,03.31

2006 Rupees lakhs 1,218,76.33 77,53.21 98,31.31 1,394,60.85 4,77.62 1,399,38.47

Group Share in Joint Ventures .......................................................... Total........

5,36.91 2,388,40.22

SCHEDULE XII

2007 Rupees lakhs

2006 Rupees lakhs

Interest, Commitment and Finance Charges : On Term Loans and Debentures ....................................................... On Others (Net) ................................................................................. Finance charges ................................................................................ 340,53.71 52,77.43 16,19.30 409,50.44 Group Share in Joint Ventures .......................................................... Total........ Less : Interest Income : Interest on Government Securities, Debentures and Bonds Gross [Note 18(b)] ................................................................... Interest - Others - Gross ......................................................... 2,51.69 107,95.55 110,47.24 Group Share in Joint Ventures ................................................ Total........ 9.97 110,57.21 299,20.24 1,99.77 62,93.27 64,93.04 5.13 64,98.17 219,37.48 27.01 409,77.45 236,75.40 39,72.84 7,53.43 284,01.67 33.98 284,35.65

134

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE XIII
Rupees lakhs Other Expenses : Stores consumed .............................................................................. Tools consumed ................................................................................ Power and Fuel ................................................................................. Rent including lease rentals .............................................................. Rates and Taxes ............................................................................... Insurance ........................................................................................... Repairs & Maintenance : Buildings .................................................................................... Machinery .................................................................................. Others ........................................................................................ 28,34.68 125,04.41 41,22.00 194,61.09 Advertisement ................................................................................... Commission on sales/contracts (Net) ............................................... Discount allowed ............................................................................... Freight outward ................................................................................. Sales Promotion Expenses ............................................................... Travelling Expenses ........................................................................... Cost of Projects, Property, etc. ......................................................... Subcontracting Charges ................................................................... Miscellaneous Expenses ................................................................... Amortisation of expenses .................................................................. Directors fees ................................................................................... Donations and contributions ............................................................. Loss on Fixed Assets sold/scrapped/written off ............................... Provision for diminution in value of Long term investments ............. Excess of cost over fair value of Current investments(Net) .............. Provision for doubtful debts/advances (Net) ..................................... 148,42.87 119,07.89 13,07.31 402,72.08 190,64.30 473,39.27 48,04.33 362,82.88 957,10.12 1,43.91 9.70 14,26.63 3,71.62 2,14.19 2,36.69 72,94.63 3,610,05.34 Group Share in Joint Ventures .......................................................... Total........ 6,88.78 3,616,94.12 28,02.69 69,37.48 30,00.84 127,41.01 97,65.95 108,07.12 7,17.46 300,08.61 109,88.82 266,19.14 145,27.12 86,34.74 655,09.04 1,42.58 9.80 21,78.33 (25.12) 71.23 32,24.91 2,344,77.51 7,61.83 2,352,39.34 120,62.06 25,04.43 252,91.18 117,51.18 50,22.50 36,84.48 92,81.70 18,48.23 145,67.37 57,05.57 50,83.27 20,70.63 2007 Rupees lakhs 2006 Rupees lakhs

135

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

SCHEDULE XlV
Notes on the Consolidated Accounts for the year ended 31st March, 2007
1. The Consolidated Financial Statements relate to Mahindra & Mahindra Limited (M&M, the Company) and its subsidiary companies. The Consolidated Financial Statements have been prepared in accordance with Accounting Standard 21 (AS 21) Consolidated Financial Statements, Accounting Standard 23 (AS 23) Accounting for Investment in Associates in Consolidated Financial Statements and Accounting Standard 27 (AS 27) Financial Reporting of Interests in Joint Ventures issued by The Institute of Chartered Accountants of India. The Consolidated Financial Statements have been prepared on the following basis : (a) Investments in Subsidiaries : i) The Financial Statements of the Company and its subsidiary companies have been combined on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses. Intra group balances, intra group transactions and unrealised profits or losses have been fully eliminated. The difference between the costs of investment in the subsidiaries over the Companys portion of equity of the subsidiary is recognised in the financial statements as Goodwill or Capital Reserve. The difference between the proceeds from disposal of investment in a subsidiary and the carrying amount of its assets less liabilities as of date of disposal is recognised in the Profit and Loss Account as profit or loss on disposal of investment in subsidiary. Minority Interest in the net assets of consolidated subsidiaries consist of : a) b) v) the amount of equity attributable to minorities at the date on which investment in a subsidiary is made and the minorities share of movements in equity since the date the parent subsidiary relationship comes into existence.

ii)

iii)

iv)

The Financial Statements of the subsidiaries are drawn upto 31st March, 2007.

The subsidiaries (which along with Mahindra & Mahindra Limited, the parent, constitute the group) considered in the presentation of these consolidated financial statements are : Proportion of ownership interest as at 31-03-2007 75.89% as at 31-03-2006 75.89% Proportion of Voting Power where different as at 31-03-2007 as at 31-03-2006 -

Name of the Subsidiary Company

Country of Incorporation

Automartindia Limited Mahindra Gesco Developers Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) Mahindra Consulting Engineers Limited (formerly known as Mahindra Acres Consulting Engineers Limited) Mahindra Ashtech Limited Tech Mahindra Limited Tech Mahindra GmbH Tech Mahindra (Americas) Incorporated Tech Mahindra (Singapore) Pte. Limited Bristlecone India Limited Bristlecone (Singapore) Pte. Limited Bristlecone GmbH Mahindra Engineering & Chemical Products Limited Mahindra Gujarat Tractor Limited Mahindra Holdings & Finance Limited Mahindra Holidays & Resorts India Limited *

India

India

50.03%

55.00%

India India India Germany U.S.A. Singapore India Singapore Germany India India India India

51.00% 100.00% 49.03% 49.03% 49.03% 49.03% 82.20% 82.20% 82.20% 100.00% 60.00% 100.00% 99.99%

51.00% 100.00% 56.26% 56.26% 56.26% 56.26% 86.54% 86.54% 86.54% 100.00% 60.00% 100.00% 99.99%

52.56% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% -

60.06% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% -

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Name of the Subsidiary Company

Country of Incorporation

Proportion of ownership interest as at 31-03-2007 as at 31-03-2006

Proportion of Voting Power where different as at 31-03-2007 as at 31-03-2006

Mahindra Infrastructure Developers Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) Mahindra Intertrade Limited Bristlecone UK Limited Mahindra Logisoft Business Solutions Limited Mahindra & Mahindra Financial Services Limited * Mahindra Steel Service Centre Limited Mahindra Shubhlabh Services Limited Mahindra USA Incorporated NBS International Limited Bristlecone Limited Bristlecone Incorporated Mahindra Insurance Brokers Limited * Mahindra & Mahindra South Africa (Pty) Limited Mahindra Engineering Design & Development Company Limited Mahindra Middleeast Electrical Steel Service Centre (FZC) Mahindra Overseas Investment Company (Mauritius) Limited Mahindra Holidays & Resorts USA Incorporated * Mahindra World City Developers Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) Mahindra SAR Transmission Private Limited Mahindra-BT Investment Company (Mauritius) Limited Tech Mahindra (Thailand) Limited Mahindra (China) Tractor Company Limited Mahindra Europe s.r.l. Mahindra International Limited Mahindra World City (Maharashtra) Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) Mahindra Renault Private Limited Mahindra Ugine Steel Company Limited Mahindra World City (Jaipur) Limited (upto 10th October, 2006 & w.e.f. 30th March, 2007) Tech Mahindra (R & D Services) Limited Tech Mahindra (R & D Services) Incorporated Tech Mahindra (R & D Services) Pte. Limited Stokes Group Limited India India U.S.A. Singapore U.K. 37.02% 49.03% 49.03% 49.03% 99.52% 55.00% 56.24% 56.24% 56.24% 99.20% 74.00% 99.99% 100.00% 100.00% 100.00% 99.99% 100.00% 100.00% India India India 50.03% 51.00% 50.69% 54.84% 51.00% 50.69% 100.00% 100.00% India India Mauritius Thailand China Italy India 41.33% 51.00% 57.00% 49.03% 80.00% 80.00% 51.00% 54.38% 51.00% 57.00% 56.25% 80.00% 80.00% 51.00% 82.62% 100.00% 82.62% 100.00% India India U.K. India India India India U.S.A. India Cayman Islands U.S.A. India South Africa India Sharjah Mauritius U.S.A. 40.02% 100.00% 82.20% 100.00% 69.32% 61.00% 77.31% 100.00% 100.00% 82.20% 82.20% 69.32% 51.00% 100.00% 90.00% 100.00% 99.99% 44.00% 100.00% 86.54% 100.00% 69.91% 61.00% 72.77% 100.00% 100.00% 86.54% 86.54% 69.91% 51.00% 100.00% 90.00% 100.00% 99.99% 80.00% 100.00% 100.00% 100.00% 100.00% 80.00% 100.00% 100.00% 100.00% 100.00%

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MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Name of the Subsidiary Company

Country of Incorporation

Proportion of ownership interest as at 31-03-2007 99.52% 99.52% 99.52% 100.00% 100.00% 100.00% 100.00% 67.90% 67.90% 67.90% 67.90% 67.90% 67.90% as at 31-03-2006 99.20% 99.20% 99.20% 100.00% 100.00% 100.00% 100.00% -

Proportion of Voting Power where different as at 31-03-2007 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% as at 31-03-2006 100.00% 100.00% 100.00% -

Stokes Forgings Dudley Limited Jensand Limited Stokes Forgings Limited Plexion Technologies (India) Private Limited Plexion Technologies (UK) Limited Plexion Technologies GmbH Plexion Technologies Incorporated Mahindra Forgings Overseas Limited (w.e.f. 11 August,2006) Mahindra Forgings International Limited (w.e.f. 27 September, 2006) JECO Holdings AG (w.e.f. 29 November, 2006) Gesenkschmiede Schneider GmbH (w.e.f. 29 November, 2006) JECO-Jellinghaus GmbH (w.e.f. 29 November, 2006) Falkenroth Umformtechnik GmbH (w.e.f. 29 November, 2006) Falkenroth Grundstucksgesellschaft GmbH (w.e.f. 29th November, 2006) PT Tech Mahindra Indonesia (w.e.f. 28 April, 2006) CanvasM Technologies Limited (w.e.f. 5 October, 2006) CanvasM (Americas) Inc. (w.e.f. 5 October, 2006) iPolicy Networks Limited (w.e.f. 22
nd th th th th th th th th th

U.K. U.K. U.K. India U.K. Germany U.S.A. Mauritius Mauritius Germany Germany Germany Germany

Germany Indonesia India U.S.A. India Mauritius Mauritius Germany Germany Germany India

67.90% 49.03% 39.27% 39.27% 49.03% 100.00% 100.00% 100.00% 100.00% 100.00% 66.36%

100.00% 100.00% 80.10% 100.00% 100.00% 90.47% -

January, 2007)
th

Mahindra Forgings Mauritius Limited (w.e.f. 5 December, 2006) Mahindra Forgings Global Limited (w.e.f. 7 December, 2006) Schneweiss & Co. GmbH (w.e.f. 1 January, 2007)** Fried. Hunninghaus GmbH (w.e.f. 1 January, 2007) Fried. Hunninghaus GmbH & Co. KG (w.e.f. 1 January, 2007) DGP Hinoday Industries Limited (w.e.f. 6 January, 2007) * Mahindra Stokes Holding Company Limited (w.e.f. 21st March, 2007) Mahindra Integrated Township Limited (from 4 May, 2006 to 10th October, 2006 & w.e.f. 30th March, 2007) MHR Hotel Management GmbH (w.e.f. 12 March, 2007) * *
th th th st st st th

India

100.00%

India Germany

47.77% 74.99%

100.00% 75.00%

excluding shares issued to ESOP Trust but not allotted to employees as per the Guidance Note on Accounting for Employee Share-based Payments issued by The Institute of Chartered Accountants of India. includes fundamental economic rights and administrative rights (including but not limited to voting rights, information rights and right to participate in shareholders meetings) in respect of 9.53% shares.

**

Note : Tech Mahindra Foundation is not consolidated as a subsidiary as it can apply its income for charitable objects only and cannot pay dividend or transfer funds to its parent.

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MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

(b)

Interests in Joint Ventures The Groups interests in jointly controlled entities of the Group are : Name of the Entity Country of Incorporation Percentage of ownership interest as at 31-03-2007 29.77% 18.06% 50.00% 50.00% Percentage of ownership interest as at 31-03-2006 29.77% 18.06 % 50.00% 50.00%

(a) Mahindra Sona Limited * (b) PSL Erickson Limited * (c) Mahindra Water Utilities Limited $ (d) Mahindra Inframan Water Utilities Private Limited $

India India India India

Interest in Joint Ventures are accounted for using Proportionate Consolidation Method. * Shareholding is through a subsidiary, Mahindra Holdings & Finance Limited. $ Shareholding is through a subsidiary, Mahindra Infrastructure Developers Limited. The financial statements of all the Joint Ventures are drawn upto 31st March, 2007. (c) Investment in Associates The Groups Associates are : Name of the Entity Country of Incorporation Percentage of ownership interest as at 31-03-2007 21.63% 37.49% 50.00% 20.01% 34.79% 34.79% 34.79% Percentage of ownership interest as at 31-03-2006 21.50% 37.49% 50.00% 22.00% 32.74% 32.74% 32.74%

Owens Corning (India) Limited Mahindra Construction Company Limited Officemartindia.com Limited Rathna Bhoomi Enterprises Private Limited Kota Farm Services Limited Mriyalguda Farm Solution Limited Mega One Stop Farm Services Limited Mahindra Forgings Limited (formerly known as Mahindra Automotive Steels Limited ) Mahindra Composites Limited (formerly known as Siroplast Limited) Mahindra Gesco Developers Limited (from 11th October, 2006 to 29th March, 2007) Mahindra Renault Automotive Private Limited (w.e.f. 23 February, 2007) The financial statements of all the Associates are drawn up to 31st March, 2007. 2. Accounting Policies : (A) Fixed Assets : (a) (i)
rd

India India India India India India India

India India India India

47.11% 30.56% 46.09% 50.00%

47.11% 30.56% -

All Fixed Assets are carried at cost less depreciation except as stated in (ii) below. Cost includes financing cost relating to borrowed funds attributable to the construction or acquisition of qualifying fixed assets upto the date the asset is ready for use. In case of borrowed funds and liabilities in foreign currencies for the acquisition of fixed assets from a country outside India, the exchange differences are adjusted to the cost of such asset. When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of account and resultant profit (including capital profit) or loss, if any, is reflected in the Profit and Loss Account.

(ii)

Land and Buildings, of the parent company had been re-valued as at 31st October, 1984 at depreciated replacement values on the basis of a valuation made by a firm of Chartered Surveyors & Valuers. The indices, if any, used are not stated in the valuation. 139

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

(b)

(i) (ii)

Leasehold land is amortised over the period of the lease. Depreciation on assets is calculated on Straight Line Method (SLM) at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except : For the following class of assets where depreciation is calculated at rates, based on useful life of the assets, which are in no case lower than the rates specified in Schedule XIV to the Companies Act, 1956 : Building (at sites) Building (others) Plant & Machinery Furniture & Fixture Vehicles : at 25.00 % to 100.00 % : at 2.56 % to 6.67 % : at 14.29 % to 33.33 % : at 7.69 % to 33.33 % : at 10.00 % to 50.00 %

(iii)

Depreciation charge for each year is after deducting the amount representing the depreciation on the increase due to revaluation of Land and Buildings, transferred from the Revaluation Reserve.

(B)

Intangible Assets : All Intangible Assets are initially measured at cost and amortised so as to reflect the pattern in which the assets economic benefits are consumed : (a) Technical Knowhow : The expenditure incurred is amortised over the estimated period of benefit, not exceeding six years commencing with the year of purchase of the technology. (b) Development Expenditure : The expenditure incurred on technical services and other project related expenses are amortised on the completion of the development work over the estimated period of benefit not exceeding five years. (c) Software Expenditure : The expenditure incurred is amortised over three financial years equally commencing from the year in which the expenditure is incurred. (d) Websites : The expenditure incurred is amortised over the estimated period of benefit, not exceeding five years. (e) Time Share Weeks : Intangible assets representing time share weeks are amortised over a period of ten years. (f) Trademarks : The expenditure incurred is amortised over the estimated period of benefit, not exceeding ten years. (g) Non Compete Fees : Non compete payments are amortised equally over the estimated period of benefit, not exceeding ten years.

(C)

Investments : All long term investments, other than in Associates, are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary, in the value of investments. Current investments are valued at the lower of cost and fair value, determined by category of investment. Investments in Associates are accounted using the equity method.

(D)

Inventories : Inventories are stated at cost or net realisable value, whichever is lower. Cost is arrived at on a weighted average method and includes, where appropriate, manufacturing overheads and excise duty. Cost of the inventory, includes interest, where appropriate, for long term projects.

(E)

Miscellaneous Expenditure (to the extent not written off or adjusted) : Expenditure carried forward under this head is amortised as follows : (a) Finance Charges : The expenditure incurred in raising long term borrowings is amortised over the period of the borrowings. On early buyback, conversion or repayment of borrowings, any unamortised expenditure is fully written off in that year.

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MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

(b)

Separation and Other Costs : Special Payments/Pensions under Voluntary Retirement Schemes. The liability is amortised over a period of five years from the month in which the liability is incurred.

(c) (F)

Preliminary expenses are written off over a period of five years from the date of incurring such expenditure.

Foreign Exchange Transactions : All foreign currency monetary items are translated at the relevant rates of exchange prevailing at the year end. In respect of forward exchange contracts the premium or discount arising at the inception of such a contract is amortised as expense or income over the life of the contract. In the case of monetary items (other than those for acquisition of fixed assets from a country outside India), the exchange differences are recognised in the Profit and Loss Account. In the case of monetary items incurred for the acquisition of fixed assets and technical know-how from a country outside India, the exchange differences are adjusted to the cost of such assets. In respect of non-integral foreign operations, the assets and liabilities, both monetary and non-monetary are translated at the closing rates and income and expenses are translated at exchange rates at the dates of transaction and all the resulting exchange differences are accumulated in foreign exchange fluctuation reserve until the disposal of the net investment.

(G)

Revenue Recognition : (a) Sales of products and services are recognised when the products are shipped or services rendered. Income from long term contracts and sale of property (concerning property development activity) is, accounted for on percentage of completion basis. [Refer paragraph (H) below]. Dividends from investments are recognised in the Profit and Loss Account when the right to receive payment is established.

(b) (H)

Long term contracts and Property Development Activity : Income on long term contracts and property development activity is accounted on the percentage of completion basis which necessarily involves technical estimates of the percentage of completion of each contract/activity, and costs to completion of the contract/activity, on the basis of which profits/losses are accounted. Such estimates, made by the management and certified to the auditors, have been relied upon by them, as these are of a technical nature. Project management fees receivable on fixed period contracts is accounted over the tenure of the contract/agreement. Where the management fee is linked to the input costs, revenue is recognised as a proportion of the work completed based on progress claim submitted. Where the management fees are linked to the revenue generation from the project, revenue is recognised on the percentage of completion basis.

(I)

Income from Lease/Hire Purchase : Finance earnings on lease transactions are calculated by applying the interest rate implicit in the lease, to the investment in the leased assets, as reduced by the net present value of the lease instalments falling due. Income from hire purchase contracts entered prior to 1st April, 2001 is accounted for on equated basis in accordance with the terms of the contract (except in some cases in which it is accounted for by applying the interest rate implicit in such contracts). For hire purchase transactions entered on or after 1st April, 2001 the income is accounted for by applying the interest rate implicit in such contracts.

(J)

Government Grants : The Company is entitled to various incentives from a State Government, such as grants by way of refund of octroi duty paid by the Company for its manufacturing unit located in a developing region. In view of the uncertainty in respect to the collection of these grants, such grants are accounted for as and when the disbursements are received.

(K)

Time Share Business : The activity of selling Timeshare and providing holiday facilities to members for a specified period each year, over a number of years, for which membership fee is collected either in full up front, or on a deferred payment basis. Upto 30th September, 2005 out of the total membership fee, relevant portion reasonably attributable towards cost required to market Timeshare, which is assessed and revised periodically, is recognised as Timeshare income in the year in which the purchaser of Timeshare becomes a member and the balance representing Advance towards members facilities is being recognised as Timeshare income equally over a period for which holiday facilities are provided commencing from the year in which the member is entitled to benefits of membership under the scheme. With effect from 1st October, 2005 in accordance with the new membership rules, admission fee, which is non-refundable, is recognised as income on admission of a member. Entitlement fee, which entitles the Timeshare member for the Timeshare facilities over the membership usage period, is recognised as income equally over the usage period. 141

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

(L)

Employee Benefits : i) Defined Contribution Plan Groups contributions paid/payable during the year to Provident Fund, Superannuation Fund, ESIC and Labour Welfare Fund are recognised in the Profit and Loss Account. ii) Defined Benefit Plan/Long term compensated absences Groups liability towards gratuity, compensated absences and post retirement medical benefit schemes are determined by independent actuaries, using the projected unit credit method. Past services are recognised on a straight line basis over the average period until the benefits become vested. Actuarial gains and losses are recognised immediately in the statement of Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to the market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government Bonds are consistent with the currency and estimated terms of the defined benefit obligation.

(M) Product Warranty : In respect of warranties on sale of certain products, the estimated costs of these warranties are accrued at the time of sale. The estimates for accounting of warranties are reviewed and revisions are made as required. (N) Leases : The Groups significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns, etc.). The leasing arrangements which are not non-cancellable range between 11 months and three years generally, and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as Rent including lease rentals. (O) Segment Reporting : The accounting policies adopted for segment reporting are in line with the accounting policies of the Group. Segments are identified having regard to the dominant source and nature of risks and returns and internal organisation and management structure. Revenues and expenses have been identified to the segments based on their relationship to the business activity of the segment. Income/Expenses relating to the enterprise as a whole and not allocable on a reasonable basis to business segments are reflected as unallocated corporate income/expenses. Inter-segment transfers are at prices which are generally market led. (P) Taxes on Income : Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising on account of unabsorbed depreciation or carry forward of tax losses are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realised. (Q) Income from Securitisation and Assignment : Securitised assets are derecognised as the contractual rights therein are transferred to the special purpose vehicle or buyers as the case may be. On derecognition, the difference between book value of the securitised asset and consideration received as reduced by the estimated provision for loss/expense and incidental expenses related to the transaction is recognised as gain or loss arising on securitisation. In case of assignment of receivables the assets are derecognised as all the rights, titles, future receivables & interest thereof are assigned to the purchaser. On derecognising, the difference between book value of the receivables assigned and consideration received as reduced by the estimated provision for loss/expenses & incidental expenses related to the transaction is recognised as gain or loss arising on assignment. 3. In the Consolidated Accounts, the Investment Fluctuation Reserve account is reflected with a corresponding adjustment to General Reserve. In accordance with the Scheme of Arrangement approved by the Honble High Court of Bombay on 12th December, 2003, the Investment Fluctuation Reserve has been utilised against diminution in value of certain investments in the accounts of the Company. Accordingly, an amount of Rs. 1068.98 lakhs (2006 : Rs. 1230.00 lakhs) utilised for provision for investment in subsidiaries in the standalone accounts of the Company, and not set up in the consolidated accounts, has been transferred from Investment Fluctuation Reserve to General Reserve. The Guidance Note on Accounting for Employee Share-based Payments issued by The Institute of Chartered Accountants of India requires that shares allotted to a trust but not transferred to employees be reduced from Share Capital and Reserves. Accordingly the Company has reduced the Share Capital by Rs. 366.93 lakhs (2006 : Rs. 375.09 lakhs), Securities Premium by Rs. 1797.95 lakhs (2006 : Rs. 1837.93 lakhs) for the 36,69,279 shares (2006 : 37,50,884 shares) held by the trust pending transfer to the eligible employees. The Share Capital of the company has also been reduced and the General Reserve increased by Rs. 366.93 lakhs (2006 : Rs. 375.09 lakhs) for the bonus shares issued by the company in September, 2005 to the trust but not yet transferred by the trust to the employees. The above monies which is treated as advance received from it, is included under current liabilities. 142

4.

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

5.

Loans : (a) Secured borrowings are secured by a pari-passu charge on immovable properties of the entities both present and future, subject to certain exclusions and are also secured by pari-passu charge on the movable properties of the entities including movable Machinery, Machinery Spares, Tools and Accessories, both present and future, subject to certain exclusions. Loans and Advances from Banks are secured by a first charge on whole of the current assets namely inventories, certain book debts, outstanding monies, receivables, claims, etc. both present and future. The depreciation charge for the year excludes : (i) (ii) (b) An amount of Rs. 42.87 lakhs (2006 : Rs. 43.28 lakhs), representing depreciation on the increase due to revaluation of Land and Buildings transferred from the Revaluation Reserve. An amount of Rs. 3.06 lakhs (2006 : Rs. 3.10 lakhs), representing depreciation on assets used for development work. This expenditure is transferred to Development Expenditure and is appropriately amortised. Rupees lakhs Description of Assets * Cost/Professional Valuation 21,59.81 47.79 225,36.41 1,190,17.63 247,51.34 35.92 20,05.43 60.30 19.15 7,17.25 1,713,51.03 Depreciation/ Amortisation 17.63 130,86.36 951,38.68 171,68.15 24.57 15,06.33 11.19 5.57 6,56.31 1,276,14.79

(b) 6. (a)

Additions to assets include assets taken over due to acquisition of subsidiaries :

Land ......................................................................................................................................... Land - Leasehold ..................................................................................................................... Building .................................................................................................................................... Plant & Machinery .................................................................................................................... Furniture & Fittings ................................................................................................................... Property Leasehold ............................................................................................................... Vehicles, Cycles, etc. ............................................................................................................... Technical Know-how ................................................................................................................ Development Expenditure ........................................................................................................ Trademarks .............................................................................................................................. Total .........................................................................................................................................

*The depreciation charge for the year includes an amount of Rs. Nil (2006 : Rs. 0.50 lakhs) representing lease terminal adjustment for the year. Excludes transactions where a company ceased to be a subsidiary and again became a subsidiary. 7. (a) During the year ended 31st March, 2007, Mahindra & Mahindra Financial Services Limited has without recourse securitised/assigned loan receivables of Rs. 21837.00 lakhs (2006 : Rs. 22644.00 lakhs) contracts amounting to Rs. 60996.22 lakhs (2006 : Rs. 55630.58 lakhs) (including future interest receivable) for a consideration of Rs. 55431.62 lakhs (2006 : Rs. 51468.22 lakhs). As the income booked in respect of securitisation/assignment of receivables include certain amount towards cost of future servicing of the securitised/assigned pool, a matching amount has been provided for. The income booked on securitisation/assignment of receivables during the year is Rs. 7409.45 lakhs (2006 : Rs. 5718.00 lakhs) and provision for estimated loss/expenses is Rs. 2735.28 lakhs (2006 : Rs. 2082.66 lakhs). During the year ended 31st March, 2007, Mahindra Holidays & Resorts India Limited has with recourse securitised receivables of Rs. 6136.13 lakhs (2006 : Rs. 2622.28 lakhs).

(b)

8.

The Company had issued during the year ended 31st March, 2005, Zero Coupon Foreign Currency Convertible Bonds (Bonds 2009) aggregating US $ 100 million, at par. Out of these upto 31st March, 2007, Bonds aggregating US $ 97.30 million have been converted into equity shares/ GDRs. Subsequent to the year end, Bonds aggregating US $ 0.90 million have been converted into equity shares/GDRs. Premium payable on redemption of Bonds 2009 had been fully provided in the previous year by debiting the same to Securities Premium Account (SPA). Consequent to the conversion premium aggregating Rs. 866.94 lakhs no longer payable on bonds converted into equity shares/ GDRs has been credited back to SPA during the year. During the year, the company issued Zero Coupon Foreign Currency Convertible Bonds (Bonds 2011) aggregating US $ 200 million, at par. The bond holders have an option to convert these bonds into Equity Shares with full voting rights or Global Depository Receipts (GDRs) determined at an initial conversion price of Rs. 922.04 per share with fixed exchange rate of conversion of Rs. 44.42 = US $ 1, at any time on or after 7th May, 2006 upto 7th March, 2011. 143

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

The Bonds 2011 may be redeemed, in whole but not in part, at the option of the Company at any time on or after 13th April, 2008 subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the bonds fall due for redemption on 14th April, 2011 at 128.03 per cent of their principal amount. Upto 31st March, 2007, none of the Bonds 2011 have been converted into equity shares/GDRs. The net proceeds of Rs. 85836.01 lakhs, unutilised as at 31st March, 2007, is disclosed under Cash and Bank balances. In accordance with the announcement Tax effect of expenses/income adjusted directly against the reserves and/or Securities Premium Account issued by The Institute of Chartered Accountants of India, the company has during the year debited the provision for premium payable on redemption of convertible bonds to the Securities Premium Account net of tax, which was hitherto being debited gross of tax, as a result the Securities Premium Account as at 31st March, 2007 is higher by Rs. 8186.66 lakhs, Deferred Tax Asset is higher by Rs. 6761.45 lakhs, the tax expense for the year is higher by Rs. 1425.21 lakhs and consequently the profit for the year after tax is lower by Rs. 1425.21 lakhs. 9. Employee Defined Benefits : Defined benefit plans as per Actuarial valuation on 31st March, 2007 Rupees lakhs Gratuity (Funded) I. Expense recognised in the Statement of Profit and Loss account for the year ended 31st March, 2007 1. 2. 3. 4. 5. 6. II. Current Service Cost Interest Expected Return on plan assets Actuarial (Gain)/Loss Payments on account of employees transferred Total expense 16,17.83 14,52.64 (12,03.23) (7,95.16) 66.98 11,39.06 10,87.98 1,94.08 (1,61.53) 11,20.53 20.14 23.77 (15.20) 28.71 Gratuity (Unfunded) Post Retirement Medical Benefits (Unfunded)

Net Asset/(Liability) recognised in the Balance Sheet as at 31st March, 2007 1. 2. 3. 4. Present Value of Defined Benefit Obligation as at 31st March, 2007 Fair Value of plan assets as at 31st March, 2007 Funded status [Surplus/(Deficit)] Net Asset/(Liability) as at 31st March, 2007 204,46.33 144,67.11 (59,79.22) (59,79.22) 32,05.16 (32,05.16) (32,05.16) 3,30.06 (3,30.06) (3,30.06)

III. Change in the obligation during the year ended 31st March, 2007 1. 2. 3. 4. 5. 6. Present Value of Defined Benefit Obligation at the beginning of the year Current Service Cost Interest Cost Actuarial (Gain)/Loss Benefit payments Present Value of Defined Benefit Obligation at the end of the year 190,07.30 16,17.83 14,52.64 (8,29.13) (8,02.31) 204,46.33 22,96.39 10,87.98 1,94.08 (1,61.53) (2,11.76) 32,05.16 3,17.76 20.14 23.77 (15.20) (16.41) 3,30.06

IV. Change in Fair Value of Assets during the year ended 31st March, 2007 1. 2. 3. 4. 5. 6. 7. V. Fair Value of plan assets at the beginning of the year Expected return on plan assets Contributions by employer Actuarial Gain/(Loss) Actual benefits paid Fair Value of plan assets at the end of the year Actual return on plan assets 125,53.60 12,05.62 15,44.17 (33.97) (8,02.31) 144,67.11 12,03.23 100% 16.41 (16.41) -

The major categories of plan assets as a percentage of total plan Funded with LIC

144

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Rupees lakhs Gratuity (Funded) Gratuity (Unfunded) Post Retirement Medical Benefits (Unfunded)

VI. Actuarial assumptions 1. 2. 3. 4. 5. Discount Rate Expected rate of return on plan assets In-service Mortality Turnover Rate Medical premium inflation 7.50% - 8.35% 6.00% - 9.20%

As at 31st March, 2007 7.50% - 8.35% 8.20% -

Indian Assured Lives Mortality (1994-96) Modified ultimate Age 21 to 44 - 2.00% Age 45 to 60 - 1.00% 3.00%

VII. Effect of one percentage point change in the assumed medical inflation rate

One percentage point increase in medical inflation rates

One percentage point decrease in medical inflation rates

Effect on the aggregate service and interest cost of Post Employment Medical Benefits Effect on the accumulated Post Employment Medical Benefits obligations Basis used to determine expected rate of return on assets:

9.20 42.57

(5.93) (40.39)

Based on expectation of the average long term rate of return expected on investment of the fund, during the estimated term of obligation. The estimate of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Further, as at 31st March, 2007, Current Liabilities and Provisions include Pension liability of Rs. 9525.66 lakhs in respect of foreign subsidiaries acquied during the later part of the year. During the year the Company has adopted Accounting Standard (AS) 15 (revised 2005) Employee Benefits. Read with the Accounting Standard Board Guidance on implementing AS 15, Employee Benefits (revised 2005) issued by the Institute of Chartered Accountants of India in May 2007, the Company has (i) (ii) Accounted for (net of tax) Rs. 8419.74 lakhs as a reduction from General Reserve and Rs 69.08 lakhs as a reduction from Profit and Loss account. Accounted as prior period adjustment (net of tax) Rs. 1918.84 lakhs being on account of Provision for Gratuity Rs. 2584.59 lakhs Gross (2006 : Rs. Nil) arising from certain refinements in the actuarial assumptions and accrual of Post Retirement Medical Benefits on an actuarial basis Rs. 307.85 lakhs Gross (2006 : Rs. Nil) and the resultant tax credit thereon is Rs. 973.60 lakhs.

10. The Commissioner of Central Excise (Adjudication), Navi Mumbai, passed an order on 30th March, 2005, which was received by the Parent Company on 4th April, 2005, confirming the demand made on the Company for payment of differential excise duty (including penalty) of Rs. 30411.00 lakhs in connection with the classification of Companys Commander range of vehicles, during the years 1991-1996. Whilst the Company had classified the Commander range of vehicles as 10-seater attracting a lower rate of excise duty, the Commissioner of Central Excise (Adjudication), Navi Mumbai, has held that these vehicles could not be classified as 10-seaters and as such attracted a higher rate of excise duty. In earlier proceedings, the Collector of Central Excise, Mumbai as also the Collector Central Excise (Appeals), Mumbai had upheld the classification of these vehicles as 10-seaters. Similarly, certain statutory/expert bodies have also confirmed the concerned vehicles to be 10-seater vehicles. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has also by its order dated 19th July, 2005 upheld this classification. The departments Statutory Appeal against this order has been admitted by the Supreme Court. The Company has been legally advised that the order dated 30th March, 2005 passed by the Commissioner is unsustainable in law and has filed an appeal against this order, along with stay application, before the CESTAT. The Company is confident that it would succeed in the case and the Companys stand that the Commander and Armada Vehicles are 10-seater vehicles would be upheld. As such, the Company does not expect any liability on this account. During the current year, the Commissioner of Central Excise, Nasik confirmed a demand of Rs. 24.55 crores and imposed a penalty of Rs. 20.00 lakhs in respect of Companys Armada range of vehicles manufactured during the years 1992 1996, on the same grounds as adopted for Commander range of vehicles. The Tribunal has in this case too granted an unconditional stay against the order. The final hearing in the matter is awaited. 145

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

11. Contingent Liability : (a) Guarantees given : Outstanding amounts against the guarantees 2007 Rupees lakhs For employees ............................................................................................................... For other companies ..................................................................................................... Others ............................................................................................................................ (b) Claims against the Companies not acknowledged as debts comprise of : (i) Excise Duty, Sales tax and Service tax claims disputed by the Company relating to issues of applicability and classification aggregating to Rs. 6285.11 lakhs (Net of Tax : Rs. 4706.86 lakhs) (2006 : Rs. 14242.00 lakhs (Net of Tax : Rs. 10503.60 lakhs)). Other Matters (excluding claims where amounts are not ascertainable) : Rs. 3439.24 lakhs (Net of Tax : Rs. 2342.19 lakhs) (2006 : Rs. 12686.77 lakhs (Net of Tax : Rs. 8422.40 lakhs)). On Capital account : Rs. 118.20 lakhs (2006 : Rs. 118.20 lakhs). Group Share in Joint Ventures Rs. 0.88 lakhs (2006 : Rs. 0.88 lakhs). 5.06 28,43.05 2006 Rupees lakhs 10.40 2,00.00 14,98.68

(ii)

(iii) (iv) (c)

Taxation matters : (i) Demands not acknowledged as debts and not provided for, relating to issues of deductibility and taxability in respect of which the matters are in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed : (ii) Income tax : Rs. 20527.56 lakhs (2006 : Rs. 15126.09 lakhs) Group Share in Joint Ventures : Rs. 6.69 lakhs (2006 : Rs. 0.88 lakhs)

Items which have succeeded in appeal, but the Income tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed : Income tax matters : Rs. 5123.13 lakhs (2006 : Rs. 5186.54 lakhs) Surtax matters : Rs. 12.80 lakhs (2006 : Rs. 12.80 lakhs)

(d) (e)

Bills discounted not matured Rs. 784.32 lakhs (2006 : Rs. 1491.64 lakhs). In respect of contracts for design, manufacture, supply, erection and commissioning of plant and equipment placed by various customers, the committed dates of completion had expired and, hence, strictly in terms of the relative contracts, the liability for liquidated damages/ penalties, the amount of which is estimated at a ceiling of Rs. 1008.25 lakhs (2006 : Rs. 946.71 lakhs) - Net of Tax Rs. 668.87 lakhs (2006 : Rs. 628.05 lakhs). However, it is expected to have the liquidated damages/penalties waived, as in the past. The Company had acquired Tech Mahindra (R&D services) Limited vide Share Purchase Agreement dated 15th November, 2005, for a initial consideration of Rs. 17550.60 lakhs (including stamp duty). As a result, TMRDL and its two wholly owned subsidiaries have become subsidiary/step subsidiaries of the Company with effect from the date of acquisition i.e. 28th November, 2005. During the year the Company has acquired additional 1600 shares at total consideration of Rs. 3.10 lakhs and the same has been accounted as additional cost of acquisition. The terms of purchase also provide for payment of contingent consideration to all the selling shareholders, payable over three years and calculated based on achievement of specific targets. The contingent consideration is payable in cash and cannot exceed Rs. 6407.80 lakhs. The consideration so payable would be accounted in the books of account in the year of achieving the milestones under the Agreement. Accordingly Rs. 1011.50 lakhs (2006 : Rs. 328.29 lakhs) has been accounted for as at the year end, as additional cost of acquisition.

(f)

12. (a)

Provision - Others Rs. 19698.36 lakhs (2006 : Rs. 10784.97 lakhs) includes provision for warranty Rs. 10342.77 lakhs (2006 : Rs. 6321.48 lakhs). This relates to warranty provision made in respect of sale of certain products, the estimated costs of which is accrued at the time of sale. The products are generally covered under a free warranty period ranging from 6 months to 3 years. Provision for Contingencies Rs. 346.20 lakhs (2006 : Rs. 443.75 lakhs) is in respect of labour demands under negotiations at certain locations of the Company. The ultimate settlement is contingent on the conclusion of negotiations. 146

(b)

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

The movement in above provisions is as follows : Rupees lakhs Warranty Provisions Balance as at 1 April, .................................................................................... Add : Other entities ......................................................................................... Add : Provision made during the year ............................................................ Less : Utilisation/Reversal during the year ...................................................... Balance as at 31st March, ............................................................................ * includes utilisation during the year Rs. 271.07 lakhs (2006 : Rs. 33.99 lakhs) 13. The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2007 is Rs. 64818.75 lakhs (2006 : Rs. 60977.14 lakhs). Group Share in Joint Ventures: Rs. 11.60 lakhs (2006 : Rs. 1.56 lakhs). 14. Research and Development expenditure debited to the Profit and Loss Account, including certain expenditure based on allocations made aggregate Rs. 14936.88 lakhs (2006 : Rs. 11584.72 lakhs). Group Share in Joint Ventures: Rs. 3.11 lakhs (2006 : Rs. 4.52 lakhs) 15. The components of Deferred tax liability and assets as at 31st March, 2007 are as under : Rupees lakhs 2007 Deferred tax liability : (i) On fiscal allowances on fixed assets ....................................................................................... (ii) Others ....................................................................................................................................... Group Share in Joint Ventures ................................................................................................. 260,67.58 31,02.03 42.78 292,12.39 Deferred tax assets : (i) Provision for Compensated absences ..................................................................................... (ii) (iii) (iv) (v) (vi) Provision for Doubtful debts/Advances .................................................................................... Unabsorbed depreciation carried forward # ............................................................................ Premium on Redemption of Zero Coupon Convertible Bonds ................................................ Provision for Gratuity ................................................................................................................ Provision for Post Retirement Medical Expenses .................................................................... 60,88.10 96,06.16 30,68.29 67,61.45 13,52.86 1,08.29 36,02.15 95.97 306,83.27 Net Deferred tax liability/(assets) (14,70.88) 2006 212,05.76 21,29.52 53.81 233,89.09 20,21.81 66,90.27 2,75.27 27,57.59 78.45 118,23.39 115,65.70
st

Contingency 2006 2007 4,43.75 2,93.45 3,91.00 * 3,46.20 2006 33.99 4,43.75 33.99 * 4,43.75

2007 63,21.48 11,20.85 98,97.73 69,97.29 103,42.77

47,02.40 44,20.09 28,01.01 63,21.48

(vii) Others Group Share in Joint Ventures.

# (considered, as there are compensatory timing differences the reversal of which, will result in sufficient future taxable income against which this can be realised).

147

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

16. Exceptional items of Rs. 11729.03 lakhs (Debit) [2006 : Rs. 26340.42 lakhs (credit)], comprise of the following : 2007 Rupees lakhs 1. 2. 3. 4. 5. 6. Profit on divesture of Long Term Investments ......................................................................... Profit on Discontinuation of Operation in a subsidiary ............................................................ Upfront Payment to a customer* ............................................................................................. Amortisation of liability and other retirement benefits made under Voluntary Retirement Schemes ................................................................................................ Premium on redemption of preference shares ........................................................................ Others ....................................................................................................................................... Total .......................................................................................................................................... 395,35.11 20,02.06 (524,93.80) (8,08.41) 36.01 (117,29.03)

2006 Rupees lakhs 275,79.06 (8,34.07) (4,04.57) 263,40.42

* During the year, a group subsidiary has entered into Global Sourcing Agreement relating to the development of a global sourcing model for strategic outsourcing services, with a customer for a term of five years. As per the terms of agreement, a group subsidiary has made an upfront payment of Rs. 52493.80 lakhs to the customer which is unconditional, irrevocable and non-refundable. Accordingly, this payment has been disclosed as an exceptional item in the Profit and Loss Account. Figures in brackets signify charge to Profit and Loss Account. 17. Adjustments pertaining to previous years, net of current and deferred tax, comprise of the following : 2007 Rupees lakhs 1. 2. 3. (Excess)/Short provision of Income Tax in respect of previous years. .................................... Gratuity and post retirement medical benefit (net of tax of Rs. 973.60 lakhs) ....................... Other Adjustments .................................................................................................................... Total .......................................................................................................................................... 18. (a) (b) (34,40.32) 19,18.84 3.31 (15,18.17) 2006 Rupees lakhs 20.59 2.52 23.11

Dividends on other investments Rs. 5130.14 lakhs (2006 : Rs. 2651.61 lakhs) is in respect of current investments. Interest on Government Securities, Debentures and Bonds comprise Rs. 99.73 lakhs (2006 : Rs. 109.15 lakhs) and Rs. 151.96 lakhs (2006 : Rs. 90.62 lakhs) in respect of long term and current investments respectively. Profit on sale of investments (net) includes profit on disposal of current investments (net) Rs. 784.32 lakhs (2006 : Rs. 706.09 lakhs), and profit on disposal of long term investments (net) Rs. 495.73 lakhs (2006 : Rs. 9854.39 lakhs).

(c)

19. Work-in-progress Property Development Activity and Long Term Contracts and Advances recoverable in cash or kind or for value to be received includes Groups share of Rs. 4331.85 lakhs (2006 : Rs. 4762.18 lakhs) on account of certain projects, the commencement of which has been delayed pending resolution of certain matters including receipt of approvals and outcome of court cases. 20. Related Party Transactions : (a) Names of related parties where transactions have taken place during the year :

Subsidiaries : Sl. No. 1. Associates : Sl. No. 1. 2. 3. 4. 5. Name of the Company Mahindra Forgings Limited (formerly known as Mahindra Automotive Steels Limited) Owens Corning (India) Limited Rathna Bhoomi Enterprises Private Limited Mahindra Composites Limited (formerly known as Siroplast Limited) Kota Farm Services Limited Sl. No. 6. 7. 8. 9. Name of the Company Mriyalguda Farm Solution Limited Mega One Stop Farm Services Limited Mahindra Construction Company Limited Mahindra Gesco Developers Limited (from 11th October, 2006 to 29th March, 2007) Name of the Company Tech Mahindra Foundation

148

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Joint Ventures : Sl. No. 1. 2. Name of the Company Mahindra Sona Limited Mahindra Water Utilities Limited Sl. No. 3. Name of the Company Mahindra Inframan Water Utilities Private Limited

Key Management Personnel : Vice Chairman and Managing Director .......................... Executive Directors .........................................................

Mr. Anand Mahindra Mr. B.N. Doshi Mr. A.K. Nanda

(b)

The related party transactions are as under : Rupees lakhs

Sl. No.

Nature of Transactions

Subsidiary Companies

Associate Companies

Joint Ventures

Key Management Personnel

1.

Purchases Goods .......................................................................................... Fixed Assets ................................................................................

(36,57.22) (-) (-) (16,28.89) (39.80)

71,16.64 (29,18.14) 0.11 (25.69) 39,04.16 (42,92.30) 64.11 (-) 6,90.81 (3.56) 182,70.89 (-) (-) 3.45 (2.80) 7.00 (2.66) 37.80 (20.03) 6.39 (45.00) (-) (1,25.19) 1,10.42 (1,18.10) 13.41 (19.25) 28.55 (-)

42,92.40 (46,51.49) 0.12 (-) (0.39) (-) 49.80 (90.45) (-) (-) (-) (-) (-) (-) (-) (-) (-) 1,11.35 (91.70) (-)

(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (1.17) (-) (-)

2.

Sales Goods .......................................................................................... Fixed Assets ................................................................................ Services .......................................................................................

3.

Investments Purchase ...................................................................................... Share Application Money paid .................................................... Deputation of Personnel From Related Parties ................................................................... To Related Parties .......................................................................

(80,00.00) (48,50.00) (-) (40.05) (-) (-) (6,00.00) (6,00.00) (21.28) (-) (-)

4. 5.

6.

Provisions for : Doubtful Advances during the year ............................................. Diminution in value of other assets written back ........................

7.

Finance Inter Corporate Deposits given ................................................... Inter Corporate Deposits refunded by parties ............................ Interest received .......................................................................... Dividend received ........................................................................ Cash discount received ...............................................................

149

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Rupees lakhs Sl. No. 8. Nature of Transactions Subsidiary Companies Associate Companies Joint Ventures Key Management Personnel

Other Transactions Other Income ............................................................................... (-) Other Expenses ........................................................................... 5,56.60 $ (15,00.00) $ Reimbursements received from parties ....................................... (1,23.64) Reimbursements made to parties ............................................... (-) Advance given by group company ............................................. (-) Advance refunded by group company ........................................ (-) 7,06.34 (3,29.15) 1,74.12 (-) 34.95 (1,84.05) 18.73 (59.21) 12.70 (20.03) (2,00.00) 4.67 (4.32) 0.10 (-) 2.59 (3.22) (-) (-) (-) (-) (-) (-) (-) (-) (-)

9.

Outstandings Payable ........................................................................................ (2,87.54) Receivable ................................................................................... (1,51.82) Inter Corporate Deposits given ................................................... (-) Guarantees and Collaterals given ............................................... (-) 5,51.73 (-) 30,40.89 (19,34.48) 5,72.80 (5,72.80) (-) 7,64.90 (6,68.71) 5,74.14 (5,04.71) (-) (-) (-) (-) (-) 9,72.60 (8,49.18) 74.05 (64.41) (-) (9,00.00) (-) (-) (-) (-) (-) (-) (-) 2,45.46 (2,15.86) (-) (-) (-) (-) (-) (-) 4,98.47 (5,61.47) 78.77 (33.08) 4.74 (8.38) (80.00)

10.

Provision for Diminution in value of other related assets ............

(-)

Provision for Doubtful debts /advances ......................................

(-)

11.

Share Application Money. ............................................................

(48,50.00)

12.

Managerial Remuneration ............................................................

(-)

13.

Dividends .....................................................................................

(-)

14.

Stock Options ..............................................................................

(-)

15.

Loan Refunded by Key Management Personnel ........................

(-)

Previous years figures are in brackets. $ Amount pertains to Tech Mahindra Foundation. 150

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Significant related party transactions are as under : Rupees lakhs Nature of Transactions Associate Companies Amount (27,10.95) Mahindra Forgings Limited 2. Purchase Fixed Assets ............. Kota Farm Services Limited 69,47.20 (-) 0.11 (-) Mahindra Inframan Water Utilities Private Limited 3. Sale Goods ............................... Mahindra Ugine Steel Company Limited Mahindra Forgings Limited 4. Sale Fixed Assets ..................... Mahindra Forgings Limited (42,71.90) 39,03.80 (-) 64.11 (-) Sale Services 5. Investment Purchase ................ Mahindra Forgings Limited Mahindra Forgings Limited 6,14.43 (-) 48,50.00 (-) Mahindra Gesco Developers Limited 6. Provision for Doubtful Advance ... Mega One Stop Farm Services Limited Mriyalguda Farm Solution Limited Kota Farm Services Limited 134,20.89 (-) 12.70 (19.86) (0.17) 25.10 (-) 7. Inter Corporate Deposit refunded by parties ..................................... Mahindra Ugine Steel Company Limited Mahindra Construction Company Limited Previous years figures are in brackets. 21. Earnings per Share : 2007 Amount used as the numerator Net Profit (Rupees lakhs) ........................................................................ (Gain)/Loss on difference in exchange on bonds ......................................................................................... Amount used as the numerator for diluted earnings per share (Rupees lakhs) .......................................... Weighted average number of equity shares used in computing basic earnings per share ......................... Effect of potential ordinary (equity) shares on conversion of bonds/debentures ......................................... Weighted average number of equity shares used in computing diluted earnings per share ....................... Basic Earnings per share (Rs.) (Face value of Rs. 10 per share) ................................................................. Diluted Earnings per share (Rs.) .................................................................................................................... 1,497,14.59 (24,08.15) 1,473,06.44 23,66,07,123 1,84,51,156 25,50,58,279 63.28 57.75 2006 1,269,71.66 1,18.93 1,270,90.59 22,51,11,765 2,06,32,529 24,57,44,294 56.40 51.72 (80.19) (45.00) Mahindra Water Utilities Limited 47.40 (-) Mahindra Sona Limited Mahindra Sona Limited 0.02 (-) 0.10 (-) (0.39) Joint Ventures Mahindra Sona Limited Amount 42,92.40 (46,51.49)

1. Purchase Goods . Mahindra Ugine Steel Company Limited

151

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

22. Investment in Associates No. of Equity shares held % of Holding Cost of Investments (Equity Shares) Goodwill/ Capital reserve Share in accumulated Profit/(Loss)/ Reserves Carrying Cost

(Nos.) Unquoted : Owens Corning (India) Limited ......................... 2,81,24,794 2,81,24,794 Mahindra Construction Company Limited ........ 9,00,000 9,00,000 Officemartindia.com Limited. ............................ 7,499,97 7,499,97 Rathna Bhoomi Enterprises Private Limited ..... 500 500 Kota Farm Services Limited .............................. 2,73,420 2,73,420 Mriyalguda Farm Solution Limited .................... 3,37,500 3,37,500 Mega One Stop Farm Services Limited ........... 3,51,000 3,51,000 Mahindra Renault Automotive Private Limited . 5,000 Total .................................................................. 21.63% 21.50% 37.49% 37.49% 50.00% 50.00% 20.01% 22.00% 34.79% 32.74% 34.79% 32.74% 34.79% 32.74% 50.00% 28,12.48 28,12.48 96.88 96.88 22.00 22.00 0.05 0.05 27.34 27.34 33.75 33.75 35.10 35.10 0.50 (7,63.78) (7,63.78) 2.52 2.52 -

(Rupees lakhs) 14,33.99 12,79.46 (96.88) (96.88) (22.00) (22.00) (0.05) (0.05) (27.34) (27.34) (33.75) (33.75) (35.10) (35.10) 42,46.47 40,91.95 0.50 42,46.97 40,91.95

Quoted : Mahindra Composites Limited (formerly known as Siroplast Limited) ......................................... Mahindra Forgings Limited (formerly known as Mahindra Automotive Steels Limited) (transferred from unquoted to quoted during the year) ............................................................

13,41,203 13,41,203

30.56% 30.56%

290.13 290.13

54.92 54.92

1,11.10 1,04.45

4,01.23 3,94.58

1,32,00,370 82,21,936

47.11% 47.11%

128,51.89 80,01.00

43,72.44 43,72.44

(10,12.46) (4,22.12)

118,39.43 75,78.88 122,40.66 79,73.46

Total ..................................................................

23. Joint Ventures Disclosure : Groups Share in Joint Ventures with respect to other items : 2007 Rupees Lakhs a) b) c) d) e) Sales ............................................................................................................................................................... Excise Duty ..................................................................................................................................................... Depreciation/Amortisation .............................................................................................................................. Provision for Current Tax including FBT ......................................................................................................... Provision for Deferred Tax (Net) ..................................................................................................................... 49,92.15 (4,11.43) (60.34) (3,26.62) 12.68 2006 Rupees Lakhs 41,39.62 (3,38.92) (61.55) (3,22.52) 20.99

Figures in brackets signify charge to Profit and Loss Account. 152

24. Segment Information :

Segment Report for the year ended 31st March, 2007. Rupees lakhs

Primary Segment Disclosure - Business Segment

Automotive

Farm Equipment

IT Services

Financial Services

Steel Processing & Trading

Infrastructure

Hospitality

SYSTECH

Others

Eliminations

Consolidated Total

REVENUE Gross External Revenue 4,373,98.41 3,446,87.14 43,16.60 20,25.38 24,92.29 17,26.44 122,53.69 98,69.41 15,29.46 11,91.68 3,117,22.36 1,388,51.53 839,45.69 587,23.96 564,66.99 518,92.59 131,51.50 176,17.34 232,50.04 152,72.26 1,708,70.70 576,56.02 599,60.19 550,79.25 -

7,798,71.69 6,450,23.55

19,366,37.57 13,848,03.64 1,524,52.74 1,259,95.96

Less : Excise Duty on Sales

1,318,60.70 1,111,83.05

Net External Revenue

Inter Segment Revenue 4,360,16.62 3,471,13.91 3,142,64.63 1,406,65.46 846,72.94 588,96.38 787,73.88 726,52.77 133,77.43 179,75.34 234,72.45 152,72.26 1,699,11.22 612,59.57 599,65.20 675,28.47

6,480,10.99 5,338,40.50 10,26.68 5,73.79

4,330,81.81 3,426,61.76 29,34.81 44,52.15

3,117,22.36 1,388,51.53 25,42.27 18,13.93

839,45.69 587,23.96 7,27.25 1,72.42

539,74.70 501,66.15 247,99.18 224,86.62

131,51.50 176,17.34 2,25.93 3,58.00

232,50.04 152,72.26 2,22.41 -

1,586,17.01 477,86.61 112,94.21 134,72.96

584,30.73 538,87.57 15,34.47 136,40.90

(453,07.21) (569,70.77) (453,07.21) (569,70.77)

1,784,184.83 1,258,807.68 1,784,184.83 1,258,807.68

Total Revenue

6,490,37.67 5,344,14.29

RESULT Segment result before exceptional items Exceptional item allocated to Segments 503,09.70 313,96.34 (3,42.65) (3,41.89) 499,67.05 310,54.45 161,23.04 261,66.14 207,55.71 164,18.61 49,27.59 48,03.26 9,61.59 18,68.19 63,94.62 32,03.21 165,69.50 98,75.63 686,16.84 261,66.14 (524,93.80) 207,55.71+ 164,18.61+ 49,27.59 48,03.26 9,61.59 18,68.19 63,94.62 32,03.21 166,65.24 98,75.63 (95.74) -

655,99.16 541,01.05 (2,94.78) (2,54.76)

30,64.97 116,09.46 19,26.82 (2,37.42) 49,91.79 113,72.04

2,372,95.42 1,594,41.89 (513,00.15) (8,34.07) 1,859,95.27 1,586,07.82 72,42.04 50,82.08 1,787,53.23 1,535,25.74

Segment result after exceptional items Unallocable Corporate expenses (net of income)

653,04.38 538,46.29

153

Operating Profit

Less : Interest expense not allocable to segments

Add : Interest Income not allocable to segments

85,61.17 67,67.44 104,76.85 63,18.27

Add: Exceptional Item Unallocable to segments

Profit before Tax

395,71.12 271,74.49 2,202,40.03 1,802,51.06

Less : Income Taxes Current Tax including Fringe benefit tax

Deferred Tax

624,34.48 439,08.86 (28,62.98) (36,15.04)

Profit for the year before prior year adjustments

Less : Adjustments pertaining to previous years

1,606,68.53 1,399,57.24 (15,18.17) 23.11 1,621,86.70 1,399,34.13 16,38.05 4,66.69 1,638,24.75 1,404,00.82

Balance of Profit for the year before Share of Profit of Associates

Share of Profit of Associates

Profit for the year before Minority Interests

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

+ In line with Accounting Standard 17 on Segment Reporting, results of Financial Services segment are computed after charge of interest cost as segment expense. Note: Segment Revenue and Segment Result in respect of Infrastructure Segment is for a period of 1st April, 2006 to 10th October, 2006.

Information (Contd.): Rupees lakhs

Automotive

Farm Equipment

IT Services

Financial Services

Steel Processing & Trading

Infrastructure

Hospitality

SYSTECH

Others

Eliminations

Consolidated Total

OTHER INFORMATION 1,741,41.42 1,424,43.69 818,88.79 4,605,50.59 243,02.80 449,83.47 337,54.39 548,74.51 483,44.17 1,415,00.03 6,177,65.78 385,50.11 723,85.33 471,66.43 1,984,40.51 461,11.19 16,763,33.50 11,418,11.26 3,373,14.77 2,217,96.55 20,136,48.27 13,636,07.81 814,44.99 694,94.63 256,76.08 4,145,73.13 * 152,39.58 110,23.00 257,22.18 155,68.43 114,94.63 574,42.27 5,438,40.26 * 230,54.64 52,97.39 359,62.39 659,80.30 134,31.79 9,927,47.66 7,040,98.65 3,712,42.83 2,045,39.79 13,639,90.49 9,086,38.44 146,27.03 91,43.91 61,38.48 60,44.62 3,42.65 3,41.89 41,37.82 5,17.77 2,71.34 2,59.79 7,74.75 53,13.93 7,44.78 2,85.88 21,82.47 8,87.34 40,70.84 12,72.20 3,99.62 3,53.26 44,05.83 201,38.69 12,17.88 44,64.19 8,68.47 47,28.89 854,52.98 62,09.45 60,00.57 16,42.17 10,16.31 3,85.29 2,96.25 2,97.43 75.24 75.17

Segment Assets

3,402,72.70

2,506,68.85

Unallocable Corporate

Assets

Total Assets

Segment Liabilities

1,662,93.63

1,153,06.99

Unallocable Corporate

Liabilities

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Total Liabilities

Capital Expenditure

864,61.35

346,14.28

Depreciation/Amortisation

150,87.31

154
2,94.78 2,54.76

134,35.36

Non cash expenditure

other than depreciation

* In line with Accounting Standard 17 on Segment Reporting, segment liabilities of Financial Services segment include the related interest bearing liabilities.

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Secondary Segment Disclosure - Geographical Segment Rupees lakhs Domestic Revenue from External Customers .............................. 14,047,72.30 11,248,15.25 Segment Assets ........................................................... 14,967,54.08 10,506,22.08 Capital Expenditure ...................................................... 2,143,29.13 559,94.01 Notes : 1. Business Segments The Group has considered business segments as the primary segment for disclosure. The segments have been identified taking into account the organisational structure as well as the differing risks and returns of these segments. Automotive Segment comprises of sales of automobiles, spare parts and related services. Farm Equipment Segment comprises of sales of Tractors, spare parts and related services. IT Services comprises of services rendered for IT and Telecom. Financial Services comprise of services relating to financing, leasing and hire purchase of automobiles and tractors. Infrastructure comprise of operating of Commercial complexes, Project management and Development. Hospitality comprises of sale of Time share. SYSTECH comprises of Automotive components and other related products and services. Others comprise of Investment, Transport solutions group etc. 2. Secondary Segments The geographical segments are considered for disclosure as secondary segment. Domestic segment includes sales to customers located in India and service income accrued in India. Overseas segment includes sales and services rendered to customers located outside India. Overseas 5,318,65.27 2,599,88.39 1,795,79.42 729,75.44 46,46.66 48,60.67 Total 19,366,37.57 13,848,03.64 16,763,33.50 11,235,97.52 2,189,75.79 608,54.68

Segment Revenue comprises of : 2007 Rupees lakhs Sales ........................................................................................... Income from Services rendered .................................................. Income from long term contracts ............................................... Income from project management ............................................. Hire purchase and lease income ................................................ Income from Loan, Retained Interest in securitised Asset & Securitisation Other allocable income * .................................................................................................... Total .......................... 14,439,51.95 3,689,33.76 135,81.17 2,02.45 54,22.71 821,05.96 224,39.57 19,366,37.57 2006 Rupees lakhs 11,067,29.75 1,713,19.73 172,12.46 13,50.40 58,67.60 568,40.93 254,82.77 13,848,03.64

155

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

2007 Rupees lakhs *Other allocable income includes : Interest Income ................................................................................................................... Scrap Sales ......................................................................................................................... Commission ........................................................................................................................ Dividend .............................................................................................................................. Profit on Sale of Long Term Investments ........................................................................... Others ................................................................................................................................. Total .......................... 5,21.62 82,67.10 7,41.45 6,73.39 7,26.62 115,09.39 224,39.57

2006 Rupees lakhs

5,13.69 55,02.91 6,11.79 2,73.17 87,22.68 98,58.53 254,82.77

25. Previous years figures have been regrouped/restated wherever necessary.

156

Details of Subsidiary Companies

(Rupees Lakhs)

Name of Subsidiary Company 2981.20 7102.65 29.02 1104.94 5716.81 106.01 213.43 0.04 1151.70 3060.00 14.51 14.84 445.05 580.30 5447.63 7120.86 1713.69 2901.50 51.22 2976.94 100.00 3100.00 6216.21 6109.49 539.85 705.00 509.74 7677.37 40621.00 7677.37 41781.60 2030.20 14660.16 2840.02 0.43 50.00 1800.00 3535.00 9877.56 5000.00 1245.00 237.10 4935.84 44.83 385.02 55.06 5476.36 4657.56 (47.50) (780.31) 130.26 19889.70 (4250.77) (4.40) (3.23) (364.33) 58352.07 19465.20 59546.99 2472.17 37306.46 47736.68 2140.52 562.52 1981.59 37796.75 25975.71 9413.57 494.96 2623.70 (181.02) 19532.25 98.46 3586.85 2077.20 3437.98 4617.49 6057.03 6057.03 3437.98 3586.85 19532.25 58352.07 19465.20 59546.99 2472.17 37306.46 47736.68 2140.52 562.52 1981.59 37796.75 25975.71 9413.57 494.96 2623.70 (3062.49) 5499.83 5499.83 9058.91 15289.60 15289.60 (2485.32) 5997.44 5997.44 115.66 368.30 368.30 720.15 12705.67 12705.67 3.48 0.20 3748.36 938.98 10.82 4.61 18445.41 590.18 1531.40 622.10 0.03 2061.07 3277.24 3277.24 2743.08 16338.92 16338.92 (1050.65) 1336.08 1336.08 3664.59 43714.58 43714.58 19.73 23436.58 1417.98 276.22 7825.35 418.57 6889.18 349.98 3659.83 7781.92 5478.72 7556.22 5.15 181.83 8093.03 3636.62 24064.99 79.44 1194.69 104.20 78192.72 41722.20 0.81 457.47 5271.21 71628.92 87041.45 87041.45 16063.16 16324.92 670.24 6130.86 6130.86 5557.53 212.48 2302.88 2302.88 1895.51 4.76 21.45 21.45 (1.16) 239.90 359.78 2105.01 2006.10 (1209.32) 42.94 (45.20) 459.02 47.48 (174.19) 343.45 (1946.62) 2775.67 1659.00 136.46 (181.02) (364.33) (3.23) (4.40) 17.32 3256.68 6647.90 46.91 601.11 63.42 3623.30 (337.55) (47.50) 243.83 84.63 98.07 169.45 169.45 17.41 17.41 4231.19 28364.40 28364.40 0.25 7251.41 322.44 43.33 1465.43 1465.43 313.92 43.33 0.04 0.04 181.61 5.80 42.26 142.75 688.03 774.12 (5.29) 21.47 185.70 19.73 11.41 10.28 375.53 (52.35) 57.22 (0.26) 145.44 2472.23 217.43 36.86 1190.75 (6.45) 1.01 (115.66) 135.54 135.54 98.19 0.11 0.03 (25.38) 376.05 376.05 448.59 (56.51) 0.08 (5062.13) 2648.57 2648.57 11001.53 (19.29) 10.90 472.07 4632.77 4632.77 1.00 8631.52 647.24 46.07 601.17 (30.19) (56.59) 0.08 43.33 140.83 11.61 (1.16) 197.64 217.03 1416.98 1231.98 (1204.03) 21.47 (45.20) 273.32 27.75 (185.60) 333.17 (1946.62) 2400.14 1711.35 79.24 (181.02) (364.33) (3.23) (4.40) 17.58 3111.24 4175.67 46.91 383.68 26.56 2432.55 (331.10) (47.50) 242.82 84.63 62.70 1154.95 1154.95 2753.15 22.40 0.03 22.37 (416.27) 6864.23 6864.23 0.14 (189.59) (189.59) (1472.89) 3593.60 3593.60 1.00 15395.73 (742.00) 14.82 (756.82)

Capital (including Preference Capital) Reserves & Surplus Total Assets Total Liabilities Gross Turnover Profit before Tax Provision for Tax Profit after Tax Proposed Dividend & Tax thereon 202.41 823.89 1016.07 256.15 -

Details of Investments (excluding Investments in subsidiaries)

Automartindia Limited

Bristlecone Limited#

Bristlecone GmbH#

Bristlecone India Limited

Bristlecone Incorporated#

Bristlecone (Singapore) Pte. Limited#

Bristlecone UK Limited#

CanvasM (Americas) Inc. #

CanvasM Technologies Limited

DGP Hinoday Industries Limited

Falkenroth Grundstucksgesellschaft GmbH#

Fried. Hunninghaus GmbH#

Fried. Hunninghaus GmbH & Co. KG#

Falkenroth Umformtechnik GmbH#

Mahindra Gesco Developers Limited

Gesenkschmiede Schneider GmbH#

iPolicy Networks Limited

JECO Holdings AG#

Jensand Limited#

157

JECO-Jellinghaus GmbH#

Mahindra Consulting Engineers Limited

Mahindra Ashtech Limited

Mahindra-BT Investment Company (Mauritius) Limited#

Mahindra (China) Tractor Company Limited#

Mahindra Engineering & Chemical Products Limited

Mahindra Engineering Design & Development Company Limited

Mahindra Europe s.r.l.#

Mahindra Forgings Global Limited#

Mahindra Forgings International Limited#

Mahindra Forgings Mauritius Limited#

Mahindra Forgings Overseas Limited#

Mahindra Gujarat Tractor Limited

Mahindra Holdings & Finance Limited

Mahindra Holidays & Resorts India Limited

Mahindra Holidays & Resorts USA Incorporated#

Mahindra Insurance Brokers Limited

Mahindra Infrastructure Developers Limited

Mahindra Intertrade Limited

Mahindra International Limited

Mahindra Integrated Township Limited

Mahindra Logisoft Business Solutions Limited

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Mahindra Middleeast Electrical Steel Service Centre (FZC)#

Details of Subsidiary Companies (contd.)

(Rupees Lakhs)

Name of Subsidiary Company 8401.88 419.30 5307.69 17054.75 822.11 610.47 2908.59 612.89 1956.15 3248.25 8500.00 3500.00 35.00 5.05 34.24 450.30 55.49 256.47 2901.50 51.22 211.49 163.01 333.67 217.35 12135.90 460.34 114.58 2.18 14.33 67.50 5.00 2278.43 (21.54) 353.70 472.08 (114.58) 684.81 1075.46 768.21 2283.76 10361.42 12688.08 75676.20 156889.10 367.31 2673.74 584.91 2526.68 2526.68 2673.74 156889.10 12688.08 684.81 1075.46 768.21 2283.76 (612.67) 3568.39 3568.39 2156.88 2965.95 2965.95 43.39 9720.44 9720.44 (60.02) 2301.88 2301.88 7273.50 2512.15 10772.04 31620.23 31620.23 (202.30) 280.83 280.83 64.04 368.34 368.34 (323.72) 1302.65 1302.65 1218.42 1108.20 682.61 14175.22 6338.29 16937.36 22062.71 6649.33 6645.37 275968.70 12557.65 13.60 2606.65 4981.85 1052.43 117.09 (5.95) 50.75 50.75 122.63 94.07 578.80 578.80 3950.29 (6.15) 29.85 29.85 0.13 (243.26) 7389.42 7389.42 (1002.96) 10620.48 10620.48 26.00 14360.69 3941.22 (241.82) (5.75) 37.74 (9.76) (228.93) 40.55 (32.43) 765.41 (29.09) (686.96) 1168.97 203.20 539.04 12674.40 1412.08 0.40 156.64 321.71 47.13 84.58 13788.21 58685.05 58685.05 86.86 86286.09 6817.75 2199.95 29553.74 29553.74 61762.05 667.38 1162.21 6189.34 6189.34 5295.54 (84.04) (2232.30) 2733.71 2733.71 0.56 2791.85 (121.59) 10.15 (12.47) 286.68 2327.00 40.41 1.20 0.01 15.96 19.87 14.10 268.00 18.53 (142.75) 482.93 171.73 2756.30 481.33 54.82 43.86 1508.49 3928.10 3928.10 1804.80 730.38 277.57 3259.49 4090.55 4090.55 (8.95) 3466.67 59499.24 59499.24 195.89 (3585.83) 18.75 (3604.58) (8.95) 452.81 (131.74) (71.57) 380.70 4490.75 3900.81 (243.02) (5.76) 21.78 (9.76) (248.80) 26.45 (32.43) 497.41 (47.62) (544.21) 686.04 203.20 367.31 9918.10 930.75 0.40 101.82 277.85 47.13 84.58 3242.55 12327.75 12327.75 19.54 (199.08) (199.08) 1953.78 13449.47 13449.47 30577.38 1213.35 391.60 821.75 69421.56 628088.60 628088.60 2636.45 84461.15 20274.01 6985.67 13288.34

Capital (including Preference Capital) Reserves & Surplus Total Assets Total Liabilities Gross Turnover Profit before Tax Provision for Tax Profit after Tax Proposed Dividend & Tax thereon 2012.33 128.55 950.07 1565.00 4.43 -

Details of Investments (excluding Investments in subsidiaries)

Mahindra & Mahindra Financial Services Limited

Mahindra & Mahindra South Africa (Pty) Limited#

Mahindra Overseas Investment Company (Mauritius) Limited#

Mahindra Renault Private Limited

Mahindra Stokes Holding Company Limited

Mahindra Steel Service Centre Limited

Mahindra Shubhlabh Services Limited

Mahindra SAR Transmission Private Limited

Mahindra USA Incorporated#

Mahindra Ugine Steel Company Limited

Mahindra World City Developers Limited

Mahindra World City (Jaipur) Limited

MAHINDRA & MAHINDRA LIMITED (CONSOLIDATED)

Mahindra World City (Maharashtra) Limited

NBS International Limited

Plexion Technologies GmbH#

Plexion Technologies (India) Private Limited

Plexion Technologies (UK) Limited#

Plexion Technologies Incorporated#

158

Schneweiss & Co. GmbH#

Stokes Forgings Dudley Limited#

Stokes Forgings Limited#

Stokes Group Limited#

Tech Mahindra (Americas) Incorporated#

Tech Mahindra GmbH#

PT Tech Mahindra Indonesia#

Tech Mahindra Limited

Tech Mahindra (R & D Services) Limited

Tech Mahindra (R & D Services) Pte. Limited#

Tech Mahindra (R & D Services) Incorporated#

Tech Mahindra (Singapore) Pte. Limited#

Tech Mahindra (Thailand) Limited#

Tech Mahindra Foundation

# The financial statements of the Foreign Subsidiaries have been converted into Indian Rupees at the 31st March, 2007 exchange rate.