1 Mah Subsidiary Anuual Report 05-06

Subsidiary Companies
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 Acres Consulting Engineers Limited ............................................................................................... Mahindra Holidays And Resorts India Limited ............................................................................................. 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 World City (Maharashtra) Limited ................................................................................................... Mahindra & Mahindra Financial Services Limited ........................................................................................ Mahindra Insurance Brokers Limited .............................................................................................................. Tech Mahindra Limited ................................................................................................................................... Tech Mahindra (Americas) Inc. ....................................................................................................................... Tech Mahindra GmbH.................................................................................................................................... Tech Mahindra (Singapore) Pte. Limited ........................................................................................................ Tech Mahindra (Thailand) Limited ................................................................................................................... Tech Mahindra (R & D Services) Limited ....................................................................................................... Tech Mahindra (R & D Services), Inc. ............................................................................................................ Tech Mahindra (R & D Services) Pte. Limited ................................................................................................ Tech Mahindra Foundation ............................................................................................................................. Bristlecone Limited ......................................................................................................................................... Bristlecone Inc. ............................................................................................................................................... Bristlecone India Limited ................................................................................................................................ Bristlecone (Singapore) Pte. Ltd. .................................................................................................................... Bristlecone GmbH ........................................................................................................................................... 1 20 40 51 66 83 97 114 120 132 168 184 216 228 241 253 262 305 321 361 369 376 391 396 413 421 430 436 446 458 474 492
Bristlecone UK Limited ................................................................................................................................... Mahindra Logisoft Business Solutions Limited .............................................................................................. Automartindia Limited ..................................................................................................................................... Mahindra USA, Inc. ......................................................................................................................................... Mahindra Gujarat Tractor Limited ................................................................................................................... Mahindra Shubhlabh Services Limited............................................................................................................ Mahindra And Mahindra South Africa (Proprietary) Limited ........................................................................... Mahindra Engineering Design & Development Company Limited ................................................................. Mahindra Overseas Investment Company (Mauritius) Limited ...................................................................... Mahindra (China) Tractor Company Limited ................................................................................................... Mahindra-BT Investment Company (Mauritius) Limited ................................................................................. Mahindra Europe s.r.l. ..................................................................................................................................... Mahindra SAR Transmission Private Limited.................................................................................................. Plexion Technologies (India) Private Limited .................................................................................................. Plexion Technologies (UK) Limited ................................................................................................................. Plexion Technologies GmbH ........................................................................................................................... Plexion Technologies Inc. ............................................................................................................................... Stokes Group Limited ..................................................................................................................................... Stokes Forgings Dudley Limited ..................................................................................................................... Jensand Limited .............................................................................................................................................. Stokes Forgings Limited ................................................................................................................................. Mahindra Renault Private Limited ................................................................................................................... Mahindra Automotive Steels Limited ............................................................................................................. Mahindra International Limited .......................................................................................................................
504 510 522 536 544 559 573 584 597 606 614 622 637 654 671 677 686 695 702 713 724 734 747 763
MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED
Directors Report to the Shareholders

Your Directors have pleasure in presenting their Fifty-second Annual Report along with the audited accounts of the Company for the year ended 31st March, 2006. FINANCIAL RESULTS (Rs. in lakhs) 2006 Sales & Income from Operations .............................................................................................. Other Income ............................................................................................................................ Increase in Stocks ..................................................................................................................... Total .......................................................................................................................................... Profit before Interest, Depreciation, Taxation and Extra-ordinary Items ................................... Less : Interest .......................................................................................................................... Depreciation .............................................................................................................................. Profit before Taxation ................................................................................................................ Provision for Taxation ................................................................................................................ - Current Tax .................................................................................................................. - Deferred Tax ................................................................................................................ - Fringe Benefit Tax ........................................................................................................ - Excess Provision for current taxation for earlier years ................................................ Profit after Taxation ................................................................................................................... Balance of Profit brought forward from last year ...................................................................... Profit & Loss Account Balance carried forward ........................................................................ (345.00) 15.00 (16.00) 3.62 614.55 1919.06 2533.61 (525.00) (1.00) 958.38 960.68 1919.06 5078.20 300.05 90.56 5468.81 1060.83 3.80 100.10 956.93 2005 5114.83 772.83 100.55 5988.21 1631.79 60.91 86.50 1484.38
DIVIDEND Your Directors do not recommend a dividend for the year under review as the Company needs to conserve resources for its future plans. OPERATIONS OPERATIONS The Engineering Division of the Company has shown a growth of 26% in sales volume. The M-Seal Division has shown a marginal decline as compared to the previous year and thus the overall operating results for the year showed a marginal decrease in the sales. The profit after tax for the year was Rs. 614.55 lakhs as against Rs. 958.38 lakhs achieved in the last year. The M-Seal Division maintained its leading position in the cable jointing kit business across the country. With the addition of the Heat Shrink range to Cable Jointing Kits, this Division has forayed into Gulf and East African markets where demand is on the increase for power cable jointing kits. The impetus to the Company's operations from the Engineering Division has also been steadily picking up with the two Service Centres opened in Delhi to cater to the major customers of your Company. Material Handling Systems suiting the needs of Cement Industries were supplied during the year.
CURRENT YEAR The outlook for the current year seems to be promising as your Company has procured several orders for both its Engineering and M-Seal Divisions which is expected to be completed within the next 4 to 6 months. Your Company expects an increase in demand for its existing products in Cable Jointing Kits due to addition of the Heat Shrink range which has provided an opportunity to the Company to market its products abroad. Your Company is geared up to meet quality specifications and delivery schedules and is confident of increasing its share in the global market. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES CORPORATE INITIA NITIATIVES As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since its inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the announcement made on the occasion of the th 60 Anniversary of Mahindra & Mahindra Limited, the holding company, that the Group would support a range of Corporate Social Responsibility (CSR) initiatives by committing 1% of Profit after Tax (PAT) on a continuing basis. The 1% PAT would
1
specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/or other Institutions, including K. C. Mahindra Education Trust and/or Mahindra Foundation, not related to the business of the Company or the welfare of the employees, towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Companys estimated PAT for the year on a continuing basis until further review by the Board. A beginning in this direction was made by your Company during the current year by making a contribution of Rs.9.54 lakhs to K. C. Mahindra Education Trust, after obtaining the approval of the Members at their Extraordinary General Meeting held on 12th January, 2006. STA DIRECTORS RESPONSIBILITY STATEMENT Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation received from the Operating Management, and after due enquiry, confirm that: (i) (ii) in the preparation of the annual accounts, the applicable accounting standards have been followed; 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, 2006 and of the profit of the Company for the year ended on that date; 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; the annual accounts have been prepared on a going concern basis.
Auditors of the Company and have given their consent for reappointment. The shareholders will be required to appoint auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. LOANS/ADVANCES DEPOSITS AND LOANS/ADVANCES The Company has not accepted deposits from the public or its employees during the year under review. The Company has not made loans/advances which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent company, Mahindra & Mahindra Limited. ENERGY, CONSERV CONSERVATION OF ENERGY, 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 given in the enclosed Annexure A to this Report. RELATIONS INDUSTRIAL RELATIONS Industrial Relations generally remained cordial throughout the year. SAFETY, HEALTH ENVIRONMENTAL SAFETY, HEALTH AND ENVIRONMENTAL PERFORMANCE Your Companys commitment towards safety, health and environment is being continuously enhanced by its various initiatives on safety awareness, health surveys of employees, recycling of wastes, etc. The health survey of employees is conducted once in every two years. Your Company maintains green surrounding at the factory and has started recycling wooden pallets and packing paper to save on fast depleting natural resources. The requirements relating to various environmental legislations and environment protection have been duly complied by your Company. ARTICULARS PARTICULARS OF EMPLOYEES AS REQUIRED UNDER COMPANIES ACT, SECTION 217(2A) OF THE COMPANIES ACT, 1956 AND RULES FRAMED THEREUNDER The Company had no employee who was in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2006 or not less than Rs.2,00,000 per month during any part thereof.
(iii)
(iv)
DIRECTORS Mr. C. S. Devale retires by rotation, and being eligible, offers himself for re-appointment. AUDIT COMMITTEE The Audit Committee presently comprises Mr. Hemant Luthra (Chairman of the Committee), Mr. Raghunath Murti and Mr. C. S. Devale. The Audit Committee met twice during the year under review. AUDITORS Messrs. A. F. Ferguson & Co., Chartered Accountants, retire as
For and on behalf of the Board Hemant Luthra Chairman
Mumbai, 27th April, 2006.
Annexure 'A' to the Directors Report

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, 2006. A. CONSERVATION OF ENERGY Besides maintaining and consolidating on the efforts made earlier, the Company has further taken the following steps to save energy : 1. Processcontrols have been established over all possible areas in ACH Department to reduce the indefinite energy requirement. Efficient temperature control systems have been installed on Injection Moulding Machine in Heat Shrink area to reduce the energy requirement. ii) iii) iv) v) vi) Tap Changer Cylinder for BHEL, Bhopal. 145 KV Operating Rod for Vijay Electricals. Pipeline Coating. Polymeric Insulators up to 36 KV. Thick-wall anti-tracking tubes for Heat Shrink 11 KV to 33 KV applications.
2.
vii) Dual-wall Tubes in medium thickness for Heat Shrink Kits. viii) 11 KV & 33 KV Stress Control Mastics for PILC application. ix) x) xi) 3. Black Sealing Mastic for Heat Shrink kits and terminations. Semi-Conducting & Insulating Tapes. Design for Kits upto 33 KV for export market.
B.
TECHNOLOGY ABSORPTION Research & Development : Specific areas in which Research & Development (R&D) was carried out by the Company : 1. New Product Development :i) Heat Shrink Stress Control Mastics for 11 to 33 KV, XLPE cables have been developed and successfully productionized. Heat Shrink Dual-wall Tubes have been successfully productionized. Heat Shrink Cable Terminations and Joints for 33 KV voltage have been developed and productionized. Prototype of 245 KV Operating Rod for ABB has been successfully developed and is currently under going validation tests in a circuit breaker at customers end. BHEL 420 KV - Operating Rod and Blast Cylinder have been developed by zero degree winding technique.
Expenditure on R & D : Rs. in lakhs 2006 (i) (ii) Capital Recurring 0.00 30.52 30.52 Percentage of Total R & D Expenditure to Total Turnover 0.66% 1.27% 2005 1.68 56.63 58.31
ii) iii)
iv)
C.
FOREIGN EXCHANGE EARNINGS & OUTGO Particulars with regard to Foreign Exchange Earnings and Outgo are given in the Notes on Accounts.
v)
2.
Future Action Plan:The Company has plans for new product development, improvement in quality and reduction in costs. Some of the major products under development are:i) Insulating Rod for Alstom for 245/420 KV application. For and on behalf of the Board Hemant Luthra Chairman
Auditors' Report to the Members of Mahindra Engineering and Chemical Products Limited
1.
We have audited the attached Balance Sheet of Mahindra Engineering and Chemical Products Limited as at 31st March, 2006 and also the Profit and Loss Account and 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 the 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 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: (a) 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 the books; the Balance Sheet, Profit and Loss Account and Cash
Flow Statement dealt with by this report are in agreement with the books of account; (d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement 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 written representations received from the directors, as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006, 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; (i) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; (ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
2.
(e)
(f)
3.
4.
(b)
For A.F. Ferguson & Co. Chartered Accountants G. Shankar Partner Membership No. 27023
(c)
Pune, 27th April, 2006
Annexure to the Auditors' Report
Annexure referred to in paragraph 3 of the Auditors Report of even date to the Members of Mahindra Engineering and Chemical Products Limited on the accounts for the year ended 31st March, 2006. (i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) As informed to us, the fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of physical verification of fixed assets is reasonable having regard to the size of the Company and the nature of the assets. (c) The fixed assets disposed off during the year are not substantial and hence it has not affected the going concern assumption. (ii) (a) Inventories have been physically verified during the year by the management (except for items lying with third parties for which confirmation have been received). In our opinion, the frequency of verification is reasonable. (b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company has maintained proper records of inventory. The discrepancies noticed on verification between physical stocks and book stocks were not material having regard to the size of operations of the Company and have been properly dealt with in the books of accounts. (iii) According to the information and explanations given to us, the Company has not granted or taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Sub-clauses (b), (c), (d), (f) and (g) are not applicable. (iv) In our opinion and according to the information and explanations given to us and having regard to the explanation that most of the items purchased are of a special nature and comparable alternative quotations are not available, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls. (v) (a) Based upon the audit procedures performed and according to the information and explanations given to us,
there are no contracts or arrangements that need to be entered into the register maintained in pursuance of Section 301 of the Companies Act, 1956. Sub-clause (b) is not applicable. (vi) The Company has not accepted any deposits from the public to which the provisions of Sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under apply. (vii) The Company has an internal audit system commensurate with its size and nature of its business. (viii) We have been informed that the Central Government has not prescribed the maintenance of cost records by the Company under Section 209(1)(d) of the Companies Act, 1956 for any of its products. (ix) (a) According to the records of the Company, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Investor Education and Protection Fund, Income tax, Sales tax, Wealth tax, Service tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. Based on our audit procedures and according to the information and explanations given to us, there are no arrears of statutory dues which has remained outstanding as at 31st March, 2006 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us and records of the Company, the details of the dues of sales tax/income tax/custom duty/wealth tax/service tax/excise duty/cess, which have not been deposited on account of any dispute, are given below: Nature of the Dues Sales Tax (F.Y. 200001) Income Tax (A.Y. 200001) Amount (Rs.) 520,756 Forum where dispute is pending Assistant Commissioner of Sales Tax, Pune Commissioner of Income Tax (Appeals), Mumbai
254,403
(x) The Company does not have any accumulated losses as at 31st March, 2006. The Company has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial year. (xi) Based on our audit procedures and on the information and explanations given by the management, the Company has not defaulted in repayment of dues to banks and financial institutions. There are no dues to debenture holders.
5
(xii) 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 Company is not a chit fund, nidhi/mutual benefit fund and therefore the requirements pertaining to such class of companies are not applicable. (xiv) The Company is not dealing or trading in shares, securities, debentures and other investments. (xv) The Company has not given any guarantee for loans taken by others from banks or financial institutions. (xvi) There were no term loans taken during the year. (xvii) The funds raised on short-term basis have not been used for long-term investment. (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.
(xix) The Company has not issued any debentures during the period and therefore the question of creating security or charge in respect thereof does not arise. (xx) The Company has not made any public issue and therefore the question of disclosing the end use of money does not arise. (xxi) Based upon the audit procedures performed and according to the information and explanations given and representations made by the management, we report that no fraud on or by the Company had been noticed or reported during the period.
For A.F. Ferguson & Co., Chartered Accountants G. Shankar Partner Membership No. 27023
Balance Sheet as at 31st March, 2006

2006 Rupees 2005 Rupees
Schedule SOURCES OF FUNDS: Shareholders Funds: Capital ......................................................................................... Reserves and Surplus ................................................................. Loan Funds: ............................................................................... Unsecured Loans ........................................................................ Deferred Tax Balance: Deferred Tax Liability .................................................................. Less: Deferred Tax Asset ...........................................................
Rupees
I II III
53,984,720 254,376,501 308,361,221 553,261 14,000,000 2,300,000 11,700,000
53,984,720 192,921,467 246,906,187 31,007,080 14,100,000 900,000 13,200,000 291,113,267
Total ............. APPLICATION OF FUNDS: Fixed Assets ............................................................................... Gross Block ................................................................................. Less: Depreciation/Amortisation ................................................. Net Block .................................................................................... Add: Capital Advance .................................................................. Investments ............................................................................... Current Assets, Loans and Advances: ..................................... Inventories .................................................................................. Sundry Debtors ........................................................................... Cash and Bank Balances ............................................................. Other Current Assets .................................................................. Loans and Advances ................................................................... V VI 66,246,203 129,240,854 18,294,975 179,353 11,994,246 225,955,631 IV 217,586,741 127,411,341 90,175,400 797,660
320,614,482
211,902,539 117,549,187 94,353,352 90,973,060 35,643,232 94,353,352 59,488,440 157,828,963 14,646,574 42,207 13,804,293 245,810,477
Less: Current Liabilities and Provisions: ........................................... Current Liabilities ........................................................................ Provisions ....................................................................................
VII 62,708,951 11,163,706 73,872,657 100,194,716 6,996,310 107,191,026 152,082,974 41,915,216 320,614,482 XV Hemant Luthra 138,619,451 58,140,464 291,113,267
Net Current Assets .................................................................... Miscellaneous Expenditure (to the extent not written off) ......... Total ............. NOTES TO THE ACCOUNTS .................................................... Per our report attached For A.F. Ferguson & Co., Chartered Accountants G. Shankar Partner
VIII
Chairman
C.S. Devale
Executive Director
Raghunath Murti
Director
Mumbai, 27th April, 2006

7
Profit and Loss Account for the Year ended 31st March, 2006
2006 Rupees 488,288,440 26,641,315 461,647,125 46,173,016 IX X 30,005,554 9,055,482 546,881,177 2005 Rupees 488,226,824 29,697,147 458,529,677 52,953,062 77,283,066 10,055,532 598,821,337
Schedule INCOME: Gross Sales .................................................................................
Rupees
Less: Excise Duty ......................................................................

Net Sales ..................................................................................... Service Charges .......................................................................... Other Income .............................................................................. Increase/(Decrease) in stocks of finished goods and work-inprocess .......................................................................................
EXPENDITURE: Consumption of Raw Materials, Stores, etc. .............................. Purchase of Finished Goods for Resale ...................................... Personnel .................................................................................... Interest ........................................................................................ Depreciation/Amortisation .......................................................... Other Expenses .......................................................................... XIV XII XIII XI 247,896,077 8,729,896 71,207,818 380,382 10,010,395 112,963,813 451,188,381 PROFIT BEFORE TAXATION ..................................................... 95,692,796 34,500,000 (1,500,000) 1,600,000 61,092,796 362,238 61,455,034 191,906,023 253,361,057 11.38 11.38 XV Hemant Luthra 220,849,924 32,043,281 64,238,573 6,091,448 8,650,257 118,510,023 450,383,506 148,437,831 52,500,000 100,000 95,837,831 95,837,831 96,068,192 191,906,023 17.75 17.75
Less: Provision for Taxation

Current Tax ...................................................................... Deferred Tax .................................................................... Fringe Benefit Tax ............................................................ PROFIT AFTER TAXATION .......................................................
Add:
Excess Provision for current taxation for earlier years ....
NET PROFIT ............................................................................... Balance of Profit brought forward from last year ........................ Profit and Loss Account Balance carried to the Balance Sheet .. Basic Earnings Per Share (Nominal Value per share Rs. 10) ....... Diluted Earnings Per Share (Nominal per share Rs. 10) .............. NOTES TO THE ACCOUNTS .................................................... Per our report attached to the Balance Sheet For A.F. Ferguson & Co., Chartered Accountants G. Shankar Partner
Chairman
C.S. Devale
Executive Director
Raghunath Murti
Director

8
Cash Flow Statement

2006 Rupees 95,692,796 10,010,395 380,382 16,225,248 (4,054,332) 132,422 22,694,115 Operating Profit before Working Capital Changes ....... Adjustments for Changes in Working Capital Trade and Other Receivables ....................................... Loans and Advances .................................................... Inventories .................................................................... Current Liabilities .......................................................... Provisions ..................................................................... 28,588,109 1,810,047 (6,757,763) (37,485,765) (283,926) (14,129,298) Cash generated from/(utilised in) Operations ............... Direct Taxes Paid .......................................................... NET CASH FROM OPERATING ACTIVITIES ............. B. CASH FLOW FROM INVESTING ACTIVITIES: Fixed Assets: Purchase ................................................ Sale ............................................................................... Investments: Purchase ................................................. Redemption/Sale of Investments ................................. Interest Received ......................................................... Dividend Received ........................................................ NET CASH FROM INVESTING ACTIVITIES .................. C. CASH FLOW FROM FINANCING ACTIVITIES: Repayment of term borrowings ................................... Interest Paid ................................................................. NET CASH UTILISED IN FINANCING ACTIVITIES ....... NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ............................................................. CASH AND CASH EQUIVALENTS: Opening Balance .......................................................... Closing Balance ............................................................ 14,646,574 18,294,975 3,648,401 41,460,341 14,646,574 (26,813,767)
9
Rupees A. CASH FLOW FROM OPERATING ACTIVITIES: Net Profit Before Tax .................................................... Adjustments for: Depreciation ................................................................. Interest Expense .......................................................... Amortisation of Expenses ............................................ Investment and Other Income ..................................... (Profit)()/Loss(+) on Redemption/Sale of Investments (Net) .............................................................................. (Profit)()/Loss(+) on Sale of Fixed Assets (Net) ..........
Rupees
2005 Rupees 148,437,831
8,650,257 6,091,448 16,225,248 (56,159,917) (24,085) 900,781 (24,316,268) 124,121,563 (60,963,437) (1,819,936) (31,168,728) 47,524,715 143,668 (46,283,718) 77,837,845 (29,119,848) 48,717,997
118,386,911
104,257,613 (31,286,440) 72,971,173
(6,830,117) 67,592 (85,738,111) 50,094,879 3,179,076 738,110 (38,488,571)
(37,706,651) 175,000 (107,343,973) 107,370,179 55,033,795 1,004,597 18,532,947
(30,453,819) (380,382) (30,834,201) 3,648,401
(87,973,263) (6,091,448) (94,064,711) (26,813,767)
Notes: 1. Figures in brackets represent outflows of cash and cash equivalents. 2. Cash and cash equivalents comprise of: 2006 Rupees Cash in Hand ................................................................ Remittance in Transit ................................................... Balance with Scheduled Banks: On Current Account ................................................ On Deposit Account [includes Rs. 5,822,734 (2005: Rs. 6,464,000; 2004: Rs. 6,180,000) under lien)] .... 12,380,739 5,822,734 18,294,975 8,129,548 6,464,000 14,646,574 35,029,539 6,180,000 41,460,341 91,502 2005 Rupees 53,026 2004 Rupees 18,802 232,000
Per our report attached to the Balance Sheet For A.F. Ferguson & Co., Chartered Accountants G. Shankar Partner
Hemant Luthra
Chairman
C.S. Devale
Executive Director
Raghunath Murti
Director

10
Schedules forming part of the Balance Sheet as at 31st March, 2006

SCHEDULE I CAPITAL: AUTHORISED: 5,500,000 Equity Shares of Rs. 10 each ............. 2,500,000 Redeemable Preference Shares of Rs. 100 each ...................................... 2006 Rupees 55,000,000 250,000,000 305,000,000 ISSUED, SUBSCRIBED AND PAID-UP: 5,398,472 Equity Shares of Rs. 10 each ............. Of the above: a) 111,006 shares have been allotted as fully paid-up pursuant to a contract for consideration other than cash. 108,872 shares have been allotted pursuant to a Scheme of Amalgamation without payment having been received in cash. 64,880 shares have been allotted to the shareholders of the erstwhile Mahindra Owen Limited (on receipt of necessary approvals) pursuant to a Scheme of Amalgamation sanctioned by Board for Industrial and Financial Reconstruction without payment having been received in cash. 53,984,720 53,984,720 Balance in Profit and Loss Account Total ......... SCHEDULE III LOAN FUNDS: Unsecured Loans: Short Term Loans and Advances from other than Banks .................................................................... Other Loans and Advances from other than Banks (in respect of assets taken on finance lease) [Repayable within a year Rs. 553,261 (2005: Rs. 453,819)] ..... Total ............ 30,000,000 2005 Rupees 55,000,000 250,000,000 305,000,000 SCHEDULE II RESERVES AND SURPLUS: Capital Reserve: As per last Balance Sheet ............ General Reserve: As per last Balance Sheet ............ Add: Transfer from Profit and Loss Account ........................................ 253,361,057 254,376,501 2006 Rupees 191,906,023 192,921,467 2005 Rupees 1,015,444 1,015,444 Rupees 2006 Rupees 2005 Rupees
b)
c)
553,261 553,261
1,007,080 31,007,080
d) 5,378,235 shares are held by Mahindra & Mahindra Limited, the Holding Company, either on its own or jointly with others. e) 20,237 shares are held by Mahindra Holdings & Finance Limited, subsidiary of Mahindra & Mahindra Limited Total ............ SCHEDULE IV FIXED ASSETS: COST Description As on 31st Additions Deductions As on 31st March, during the during the March, 2005 year year 2006 Rupees TANGIBLE ASSETS: Freehold Land ........................................................... Buildings ................................................................... Plant and Machinery .................................................. Furniture and Fixtures ............................................... Vehicles ..................................................................... Assets taken on Finance Lease: Vehicles ..................................................................... INTANGIBLE ASSET: (Other than internally generated) Technical Know-how ................................................. Software ................................................................... Total .......................................................................... Capital Advance ........................................................ 5,283,759 808,000 211,902,539 372,720 6,032,457 348,255 5,283,759 1,180,720 217,586,741 390,853 87,063 117,549,187 1,056,752 360,052 10,010,395 148,241 1,447,605 447,115 127,411,341 3,836,154 733,605 90,175,400 797,660 90,973,060 Previous year ............................................................ 181,426,843 37,706,651 7,230,955 211,902,539 115,054,108 8,650,257 6,155,178 117,549,187 94,353,352 4,892,906 720,937 94,353,352 94,353,352 8,826,776 41,261,463 141,864,768 8,608,893 3,350,008 1,898,872 5,659,737 348,255 8,826,776 41.261,463 147,176,250 8,608,893 3,350,008 1,898,872 16,044,310 91,367,309 6,428,616 2,795,128 435,908 1,168,918 6,710,930 285,790 247,560 180,393 148,241 17,213,228 97,929,998 6,714,406 3,042,688 616,301 8,826,776 24,048,235 49,246,252 1,894,487 307,320 1,282,571 8,826,776 25,217,153 50,497,459 2,180,277 554,880 1,462,964 Rupees Rupees Rupees DEPRECIATION/AMORTISATION Upto 31st March, 2005 Rupees For the Deductions year during the year Rupees Rupees NET BOOK VALUE 53,984,720 53,984,720
Upto 31st As on 31st As on 31st March, March, March, 2006 2006 2005 Rupees Rupees Rupees
11
Schedules forming part of the Balance Sheet as at 31st March, 2006 (Contd)
SCHEDULE V INVESTMENTS: CURRENT INVESTMENTS: Non-Trade, Unquoted Units of Mutual Funds 3,563,610 PFRCDD Prudential ICICI Floating Rate (2005: NIL) .... Plan C Daily Dividend Option ................................................ Total ............ The following investments (current investments, non-trade, unquoted) were purchased and sold during the year: No. of Units PFRPDD Prudential ICICI Floating Rate Plan Daily Dividend ................................................................ PFRCDD Prudential ICICI Floating Plan C Daily Dividend ................................................................ HDFC Cash Management Fund Saving Plan Dividend Reinvestment ......................................... The following investments (current investments, non-trade, unquoted) were purchased and sold during the previous year: No. of Units P 32 IND Prudential ICICI Institutional Liquid Plan Daily Dividend Option ....................................... PFRPD Prudential ICICI Floating Rate Plan Dividend ................................................................ P 32 D Prudential ICICI Liquid Plan Daily Dividend Option ................................................................... GFRD Grindlays Floating Rate Fund Daily Dividend ................................................................ Templeton Floating Rate Income Fund Short Term Plan .............................................................. HDFC Floating Rate Income Fund Short Term Plan Dividend Reinvestment ............................. SCHEDULE VI CURRENT ASSETS, LOANS AND ADVANCES: A. Inventories: Raw Materials and Components .................... Packing Materials ........................................... Work-in-Process ............................................. Finished Goods .............................................. Sundry Debtors (Unsecured): Outstanding over Six Months: Considered Good ........................................... Considered Doubtful ...................................... Other Debts: Considered Good ........................................... 2,806,077 1,172,783 682,617 1,108,658 2,257,259 2,042,897 2006 Rupees 32,481,054 781,541 30,177,471 2,806,137 66,246,203 B. Cost Rs. 33,252,585 B. 11,779,761 8,089,970 11,164,081 22,583,384 20,474,190 2005 Rupees 34,536,825 1,023,489 18,041,012 5,887,114 59,488,440 SCHEDULE VIII MISCELLANEOUS EXPENDITURE: (to the extent not written off or adjusted) Voluntary Retirement Scheme Compensation ...... Total ............ 2006 Rupees 41,915,216 41,915,216 2005 Rupees 58,140,464 58,140,464 Provisions: Leave Encashment ........................................ Fringe Benefit Tax .......................................... Tax Provision Less Payments (Current Tax) ... Total ............ 1,504,896 2,753,552 705,464 Cost Rs. 15,050,764 27,540,518 7,503,597 2006 Rupees 2005 Rupees SCHEDULE VI (Contd.) CURRENT ASSETS, LOANS AND ADVANCES: D. Other Current Assets: Interest Receivable ........................................ Loans and Advances: (Unsecured, considered good, unless otherwise stated): Advances Recoverable in Cash or in Kind or for value to be received ................................. Advance Payment of Income Tax [net of provisions] (current tax) .................................. Balance with Central Excise on Current Account .......................................................... Total ............ SCHEDULE VII CURRENT LIABILITIES AND PROVISIONS: A. Liabilities: Sundry Creditors: Due to Creditors other than Small Scale Industrial Undertakings .................................. Due to Small Scale Industrial Undertakings (See Note 5 Schedule XV) .............................. Advances from Customers ............................ 2006 Rupees 179,353 179,353 E. 35,643,232 35,643,232 2005 Rupees 42,207 42,207
10,110,906 1,883,340 11,994,246 225,955,631 2006 Rupees
12,087,973 1,716,320 13,804,293 245,810,477 2005 Rupees
53,969,938 3,584,736 57,554,674 5,154,277 62,708,951 2,949,108 118,181 8,096,417 11,163,706 73,872,657
78,497,019 8,347,047 86,844,066 13,350,650 100,194,716 3,233,034 3,763,276 6,996,310 107,191,026
Schedules forming part of the Profit and Loss Account for the Year ended 31st March, 2006
SCHEDULE IX OTHER INCOME: Dividend on Non-trade Current Investments ......... Interest on Non-trade, Long Term Investments [Includes interest pertaining to earlier years Rs. Nil (2005: 51,701,269)] ............................................... Interest on Refund of Income-tax ......................... Interest on Overdue Bills, Bank Deposits, Staff Loans, etc. [Tax deducted at source Rs. 41,475 (2005: Rs. 81,980)] ........................................................... Commission .......................................................... Packing and Freight Recoveries ............................ Profit on Sale of Long Term Investments .............. Net Profit on Sale of Current Investments ............ Profit on Sale of Fixed Assets ............................... Rent ...................................................................... Sundry Credits and Provisions no longer required written back .......................................................... Exchange Gain (Net) .............................................. Miscellaneous ....................................................... Total ............ 20052006 Rupees 738,110 20042005 Rupees 1,004,597
10,929,210 6,900,310 17,829,520 118,311,644 136,141,164 6,900,310 129,240,854
14,785,466 2,592,912 17,378,378 143,043,497 160,421,875 2,592,912 157,828,963 53,026 8,129,548 6,464,000 14,646,574
1,894,377
51,701,269 1,683,967
Less: Provision for Doubtful Debts ................

C. Cash and Bank Balances: Cash in Hand .................................................. With Scheduled Banks: On Current Account ....................................... On Deposit Account [includes Rs. 5,822,734 (2005: Rs. 6,464,000) under lien] ...................
91,502 12,380,739 5,822,734 18,294,975
1,421,845 1,989,146 2,524,477 32,000 16,050,000 1,299,379 4,056,220 30,005,554
1,770,084 71,910 8,500 15,585 13,657 17,171,864 547,883 3,293,750 77,283,066
12
Schedules forming part of the Profit & Loss Account for the Year ended 31st March, 2006 (Contd.)
SCHEDULE X INCREASE/(DECREASE) IN STOCKS OF FINISHED GOODS AND WORK-IN-PROCESS: Opening Stock: Finished Goods ..................................................... Work-in-Process .................................................... Closing Stock: Finished Goods ..................................................... Work-in-Progress ................................................... Total ............ SCHEDULE XI CONSUMPTION OF RAW MATERIALS, STORES, ETC.: Opening Stock of Raw Material/Packing Material .... 20052006 Rupees 20042005 Rupees SCHEDULE XIV (Contd.) OTHER EXPENSES: Legal and Professional Services ... 5,887,114 18,041,012 23,928,126 2,806,137 30,177,471 32,983,608 9,055,482 20052006 Rupees 35,560,314 242,208,097 33,262,595 244,505,816 3,390,261 247,896,077 20052006 Rupees 7,382,208 6,490,386 13,872,594 5,887,114 18,041,012 23,928,126 10,055,532 20042005 Rupees 14,447,118 239,061,908 35,560,314 217,948,712 2,901,212 220,849,924 20042005 Rupees Travelling ...................................... Excise Duty .................................. Commission on Sales ................... Sales Service Expenses ............... Transport and Delivery Charges ... Office and Establishment Expenses reimbursed to Mahindra & Mahindra Limited (Net) ................ Advertisement and Publicity ......... Research and Development ......... Sales Promotion ........................... Donation ....................................... Directors Fees ............................. Sub-Contract Charges .................. Loss on Sale/Disposal of Fixed Assets .......................................... Bad Debts Written Off ................. Provision for Doubtful Debts (Written back) ............................... Exchange Loss ............................. SCHEDULE XII PERSONNEL: Salaries, Wages, Bonus, etc. [including Rs. 16,225,248 (2005: Rs. 16,225,248) being amortisation of Voluntary Retirement Scheme Compensation] . Contribution to Provident and Other Funds [including gratuity settlement of Rs. 919,929 (2005: Rs. 1,522,926)] ...................................................... Welfare .................................................................. Total ............ Miscellaneous .............................. Total ......... Rupees 20052006 Rupees 4,752,011 7,845,307 6,323,016 3,090,715 24,728,618 6,964,165 20042005 Rupees 4,848,513 7,018,085 302,973 2,026,135 27,590,993 4,546,786
271,437 1,214,062 3,052,265 4,364,924 954,000 6,000 9,779,051 164,422 23,753 4,307,398 17,179,151 112,963,813
294,854 997,374 5,663,098 4,880,227 9,000 9,338,041 914,438 676,187 (345,459) 247,517 20,146,097 118,510,023
Add: Purchases [including processing charges Rs. 7,060,774 (2005: Rs. Nil] ................................. Less: Closing Stock ...............................................
Consumption of Raw Material/Packing Material ...
Add: Consumption of Stores, Tools for Production

Total ............
60,960,950
55,773,883
SCHEDULE XV NOTES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2006, AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006 1. Significant Accounting Policies: (i) Fixed Assets and Depreciation/Amortisation: (a) Fixed assets are stated at cost of acquisition or construction less depreciation/amortisation. Cost comprises of the purchase price and other attributable cost, including borrowing costs, of bringing the assets to its working condition for its intended use. (b) Depreciation on tangible fixed assets is provided on the straight line method at the rates and in the manner laid down in Schedule XIV to the Companies Act, 1956, except in respect of assets costing less than Rs. 5,000/- each which are fully depreciated in the year of purchase, Intangible Assets Technical know-how is amortised over a period of 5 years and software is amortised over a period of 3 years, on a straight line basis. (ii) Investments: Current investments are valued at lower of cost and fair value.
4,761,635 5,485,233 71,207,818
4,781,357 3,683,333 64,238,573
SCHEDULE XIII INTEREST: On other than fixed period loans ........................... Total ............ SCHEDULE XIV OTHER EXPENSES: Rent ............................................. Rates and Taxes [including disputed sales tax liability in respect of earlier years settled during this year Rs. Nil 2004-05: Rs. 12,190,000)] ............ Insurance ...................................... Repairs and Maintenance: Plant and Machinery ............. Buildings ............................... Others ................................... Power and Fuel ............................ Auditors Remuneration (includes service tax, where applicable): Audit Fees ............................. Fees for Other Services ........ Out of Pocket Expenses .......
20052006 Rupees 380,382 380,382 20052006 Rupees 426,358
20042005 Rupees 6,091,448 6,091,448 20042005 Rupees 437,906
Rupees
1,985,946 804,984 2,676,449 414,813 2,195,594 8,669,477
13,705,511 673,652 2,945,379 1,764,712 2,090,044 6,976,320
(iii) Inventories: Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials and components, stores and spares, and tools, the weighted average cost method is used. Costs of work-in-process, manufactured components and tools and manufactured finished goods include material costs, labour and appropriate factory overheads. (iv) Sundry Debtors and Advances:
673,440 84,180 12,277 769,897
661,200 82,650 17,790 761,640
Specific debts and advances identified as irrecoverable or doubtful are either written off or provided for, respectively. (v) Foreign Exchange Transactions (other than for Fixed Assets): Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Realised gains and losses and also
13
SCHEDULE XV (Contd.) NOTES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2006, AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006 exchange differences arising on translation at year end exchange rates of current assets and current liabilities outstanding at the end of the year are recognised in the Profit and Loss Account. (vi) Revenue Recognition: (a) sale of goods is recognised on shipment or despatch of goods to customers and are net of excise duty and sales tax. (b) Income from services rendered is accounted for when the services are rendered as per the contract terms. (c) Dividend income from investments is recognised when the right to receive payment is established. (d) Interest income from investments and deposits is recognised on time proportion basis. (vii) Employee Benefits (including on Retirement): (a) Retirement benefits under approved schemes are provided for in the following manner: (i) Provident Fund : by payment of contribution to Mahindra & Mahindra Limited Staff Provident Fund. (ii) Gratuity : gratuity liability is funded with Life Insurance Corporation of India, which is actuarially valued. Profit Before Tax as per Profit and Loss Account ............................... Add: Provision for Doubtful Debts, Advances, etc. ............................. Managerial Remuneration ............ 3. Contracts remaining to be executed on capital account and not provided for ......................... (a) Managerial Remuneration under Section 198 of the Act: Salary and Allowances ............................. Performance Linked Incentive .................. Perquisites ............................................... Directors Sitting Fees .............................. Total ............
20052006 Rupees 1,809,441
20042005 Rupees 2,231,558
4.
6,000 6,000
975,000 797,000 18,034 9,000 1,799,034
(b) Computation of Net Profit in Accordance with Section 309(5) of the Companies Act, 1956 Rupees 20052006 Rupees 95,692,796 4,307,398 6,000 4,313,398 100,006,194 20042005 Rupees 148,437,831 (345,459) 1,799,034 1,453,575 149,891,406 15,585 8,500 50,906,807 19,145 Net Profit as per Section 309(5) ... Commission Payable to Directors 5. 99,987,049 Nil 50,930,892 98,960,514 Nil
(iii) Superannuation : by payment of contribution to Life Insurance Corporation of India. (b) Leave Encashment : as per Companys policies determined in accordance with actuarial valuation.
Less: Profit on Sale of Investments

Profit on Sale of Long Term Investments ........................................ Capital Profit on Sale of Fixed Assets Excess of Income over expenditure of earlier year ........................
19,145
(viii) Tax expense for the year, comprising of current tax and deferred tax, is included in the determination of the net profit for the year. Deferred tax is recognised on all timing differences, subject to consideration of prudence in respect of deferred tax assets. (ix) Borrowing cost that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the year in which they are incurred. (x) Miscellaneous Expenditure (to the extent not written off or adjusted): Voluntary Retirement Scheme Compensation. Compensation paid to employees who have retired under the voluntary retirement scheme is amortised over a period of sixty months. 20052006 Rupees 2. Contingent Liabilities in respect of: (a) Excise Duty matters pending in appeal .... (b) Income tax matters .................................. (c) Sales tax matters ..................................... (d) Claims against the Company not acknowledged as debts ........................................ 590,915 3,101,460 1,190,265 25,274 590,915 2,019,107 669,509 8,984,982 20042005 Rupees
Dues to Small Scale Industrial Undertakings have been determined on the basis of verbal confirmations from the suppliers the status whereof has been relied upon by the Auditors. As at the year end, there were no Small Scale Industrial Undertakings to whom the Company owed a sum which is outstanding for more than 30 days. (i) Break-up of Deferred Tax Asset: Provision for Doubtful Debts .................... Others ...................................................... Total ............ (ii) Break-up of Deferred Tax Liability: Provision for Depreciation ........................ Others ...................................................... Total ............ 10,800,000 3,200,000 14,000,000 10,900,000 3,200,000 14,100,000 2006 Rupees 2,300,000 2,300,000 2005 Rupees 900,000 900,000
6.
14
SCHEDULE XV (Contd.) NOTES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2006, AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006 7. ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPHS 3 AND 4 OF PART II OF SCHEDULE VI TO THE ACT: (i) Information regarding Capacities, Production, Stock and Sales: Capacity Class of Goods (a) 1. Manufacturing: Cable Jointing Products and .................. Arc-Chamber Housing Conveyors and Bucket Elevators ........... (including parts thereof) [See Note (d)] Electronic Corrosion Protection Devices Nos. 74,554 (74,554) 100 (100) N.A. 262,400 (127,400) 100 (100) No separate Installed Capacity No separate Installed Capacity 5,818 4,926,933 (1,838) (5,493,257) () () () () 167,748 (147,921) 75,491 (50,437) (26,100) 11,789 (5,818) () () 2,475,710 (4,926,933) () () 160,614 (142,450) 75,491 (50,437) (26,100) 232,938,935 (240,434,429) 214,601,831 (150,915,355) (16,319,757) Quantitive Licensed Denomination (Note a) Installed (Note b) Opening Stock Quantity Value Rupees Production Quantity Closing Stock Quantity Value Rupees Turnover Quantity (Note c) Value Rupees
2.
Nos.
3.
Nos.
4.
Nozzle ....................................................
Nos.
N.A.
(210)
(254,940)
()
#()
#()
()
()
Total (a) ..........
4,926,933 (5,748,197)
2,475,710 (4,926,933)
447,540,766 (407,669,541)
Opening Stock Class of Goods (b) Trading: Cable Jointing Products and .................. Arc-Chamber Housing [See Note (f)] Total (b) .......... Total (a + b) ... Nos. () 960,181 (1,634,011) 960,181 (1,634,011) 5,887,114 (7,382,208) () Quantity Value Rupees Quantity
Purchases Value Rupees
Closing Stock Quantity Value Rupees
Turnover Quantity Value Rupees
8,729,896 (32,043,281) 8,729,896 (32,043,281)
()
330,427 (960,181) 330,427 (960,181) 2,806,137 (5,887,114)
()
14,106,359 (50,860,136) 14,106,359 (50,860,136) 461,647,125 (458,529,677)
# Scrapped during the previous year. Notes: (a) As per industrial licence/permission letters/acknowledged memoranda on hand, even though licensing has been abolished vide Notification No. S.O.477(E) dated 25th July, 1991 issued by Government of India, Ministry of Industry, Department of Industrial Development. (b) The installed capacity varies in accordance with the product-mix and is as certified by the management and accepted by the Auditors without verification as this is a technical matter. (c) The quantity of turnover is exclusive of samples and replacements. (d) The Engineering Division manufactures various components/assemblies of conveyors and bucket elevators. The manufactured as well as bought-out components/ assemblies are invoiced on delivery and are reflected in the turnover/income of the year in which they are delivered. Therefore, the Engineering Division has given quantitative details of both manufactured components/assembles under actual production. The bifurcation of sales into manufactured and bought-out components/assemblies is not practicable. Manufactured components/assemblies in stock are included under "work-in-process/manufactured components. The licensed and installed capacity disclosed is in respect of the complete system whereas the production and turnover quantities includes parts thereof. (e) Figures for licensed and installed capacities are on an annual basis. (f) The quantities in respect of traded goods for the year have not been furnished as traded goods comprises of a number of items dissimilar in size.
(g) Figures in brackets are in respect of the previous year.
15
SCHEDULE XV (Contd.) NOTES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2006, AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006
20052006 Rupees 8. (a) Consumption of Raw Materials, Stores, etc. Raw Materials and Components ................. Packing Materials ........................................ Stores and Spares ....................................... Tools ........................................................... Patterns ....................................................... Total ............ 234,603,524 9,902,292 2,593,059 781,523 15,679 247,896,077
20042005 Rupees 209,991,955 7,956,757 1,818,657 965,040 117,515 220,849,924 (d) Expenditure in Foreign Currency: Travel ............................................................. Technical Know-how Fees (Gross) ................. Royalty (Gross) ............................................... Others ............................................................ (e) Earnings in Foreign Exchange: Export of Goods on FOB Basis ...................... Commission ................................................... 9. Particulars of Assets taken on finance lease. (c) Import of goods on CIF basis: Raw Materials and Components .................... Stores, Spares and Tools ............................... Traded Goods ................................................. Capital Goods ................................................. Material for Research and Development .......
20052006 Rupees 49,146,902 127,286 1,368,000 463,873 51,106,061 1,373,443 1,623,522 7,662,379 10,659,344 59,440,233 1,989,146 61,429,379
20042005 Rupees 50,219,655 308,385 216,066 50,744,106 1,148,851 5,283,759 801,498 11,843,134 19,077,242 44,787,465 71,910 44,859,375
Particulars of Raw Materials and Components Consumed: 20052006 Value Rupees 16,900,132 31,255,514 98,211,678 88,236,200 234,603,524 (b) Value of imported and indigenous Raw Materials Consumed: % of Total Consumption Imported Material Indigenously Procured Notes: (i) Consumption of raw materials, components and spare parts have been ascertained on the basis of opening stock plus purchases less closing stock, which is after adjustment of excesses and shortages determined on physical count and excludes materials (imported) consumed for Research and Development Rs. 305,962 (2005: Rs. 175,647). Value figures include write-off of unserviceable and obsolete raw materials, components and spare parts. The term Spare Parts in Paragraph 4D(c) of Part II of Schedule VI of the Act, is interpreted to mean components used in manufactured of finished products or sold as such and not spares used for repairs and maintenance of machinery. 26 74 100 20052006 Value Rupees 60,728,397 173,875,127 234,603,524 % of Total Consumption 30 20042005 Value Rupees 63,369,723 20042005 Value Rupees 15,920,054 29,288,095 76,648,490 88,135,316 209,991,955
Quantity Cable Jointing Compounds Steel Components Others Kgs. MT. 347,135 1,041
Quantity 377,595 871
(i) Total minimum lease payment as at the Balance Sheet date is Rs. 565,390 (20042005: Rs. 1,086,166) and the present value of total minimum lease payments at the balance sheet date is Rs. 553,261 (20042005: Rs. 1,007,080). The difference represents the finance charge payable in the future. (ii) Payable Total Minimum Lease Payments at the Balance Sheet date 20052006 20042005 Rupees Rupees 565,390 520,776 565,390 565,390 1,086,166 Present Value of Minimum Lease Payments 20052006 20042005 Rupees Rupees 553,261 453,819 553,261 553,261 1,007,080
70 146,622,232 100 209,991,955
Not later than one year ................. Later than one year, but not later than five years ...................... Total .............................................
(iii) The aforesaid leasing arrangements are in respect of vehicles. The lease period is four years. 10. Earnings Per Share: (a) The amount used as the numerator in calculating both basic and diluted earnings per share is the Net Profit disclosed in the Profit and Loss Account. (b) The weighted average number of equity share used as the denominator in calculating both basic and diluted earnings per share is 5,398,472 shares (2005: 5,398,472 shares).
(ii)
11. Related Party Disclosures: (A) Name of the related party and nature of relationships where control exists. Name of the Related Party Nature of Relationship Mahindra & Mahindra Ltd. Holding Company (B) Related Party Transactions: NAME OF THE RELATED PARTY DESCRIPTION OF RELATIONSHIP NATURE OF TRANSACTION AMOUNT OF TRANSACTION AMOUNT OUTSTANDING AT THE END OF THE YEAR DEBIT/(CREDIT) (Rupees) 20052006 20042005 273,723 437,559
(Rupees) 20052006 20042005 Mahindra & Mahindra Ltd. Holding Company Office and Establishment Expenses 271,437 Lease Rental 5,462 Reimbursement of Expenses 330,841 Rent Paid 56,096 Recovery of Expenses 114,363 Rent Received 1,200,000 Reimbursement of Expenses 29,657 Sale of Goods 512,927 EDP Services Procured 1,200,000 Reimbursement of Expenses 18,734 Service Contracts 8,265 Interest Paid 313,425 Repayment of Unsecured Loan 30,000,000 Remuneration 294,854 5,462 218,221 71,968 93,190 971,864 38,864 1,200,000 58,711 16,365 5,972,024 1,790,034
Mahindra Ashtech Ltd.
Fellow Subsidiary
822,973
Tech Mahindra Ltd. Mahindra Intertrade Ltd. Mahindra Holding & Finance Ltd. D.G. Bokare
Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Key Management Personnel
(30,000,000)
16
SCHEDULE XV (Contd.) NOTES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2006, AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006 12. SEGMENT INFORMATION: (A) PRIMARY SEGMENTS BUSINESS SEGMENTS CHEMICAL DIVISION 20052006 Rupees (a) Segment Revenue Sales to External Customers (including other income) Inter-Segment Sales Total Segment Revenue (b) Segment Results Unallocated Corporate Expenses Interest Expense Interest Income Dividend Income Profit on Sale of Investments Profit Before Tax Fringe Benefit Tax Income Tax Profit After Tax (c) Segment Assets Unallocated Corporate Assets Total Assets (d) Segment Liabilities Unallocated Corporate Liabilities Total Liabilities (e) Cost Incurred during the period to acquire segment fixed assets 4,966,456 8,445,767 13,600,476 2,000,000 1,066,001 1,564,628 2,624,772 2,331,151 32,548,384 33,109,675 195,763,279 102,691,084 297,246,655 297,246,655 39,767,003 236,524,708 236,524,708 52,576,843 533,771,363 533,771,363 92,343,846 (325,000) (380,382) 3,316,222 738,110 95,692,796 1,600,000 33,000,000 61,092,796 298,454,363 54,117,560 352,571,923 65,658,059 20,467,859 86,125,918 6,032,457 10,010,395 16,225,248 4,331,151 36,551,002 6,993,453 13,600,476 676,187 1,155,649 1,656,804 2,624,772 42,254,942 61,172,808 235,433,525 148,181,987 341,677,914 341,677,914 54,585,844 190,903,889 190,903,889 44,029,691 532,581,803 532,581,803 98,615,535 (270,258) (6,091,448) 55,155,320 1,004,597 24,085 148,437,831 52,600,000 95,837,831 383,615,512 14,688,781 398,304,293 103,427,750 47,970,356 151,398,106 37,706,651 8,650,257 16,225,248 676,187 ENGINEERING DIVISION 20052006 Rupees TOTAL AMOUNT 20052006 Rupees CHEMICAL DIVISION 20042005 Rupees ENGINEERING DIVISION 20042005 Rupees TOTAL AMOUNT 20042005 Rupees
(f) Depreciation/Amortisation (g) Amortisation Miscellaneous Expenditure (h) Non-Cash expenses other than Depreciation/amortisation Note:
Business Segments of the Company are organised on the basis of two divisions Chemical Division and Engineering Division. Chemical Division comprises of manufacturing/trading/trading of Cable-Jointing Kts, Arc-Chamber Housing, Heat Shrink & Accessories and Services in respect thereof. Engineering Division comprises of manufacturing/trading of Parts of Bucket Elevators, Flow Conveyors, Screw Conveyors and Services in respect thereof. Domestic 20052006 Rupees Export 20052006 Rupees 61,429,379 Total 20052006 Rupees 533,771,363 Domestic 20042005 Rupees 487,722,428 Export 20042005 Rupees 44,859,375 Total 20042005 Rupees 532,581,803
(B) SECONDARY SEGMENTS-GEOGRAPHICAL SEGMENTS:
Segment revenue by geographical area based on geographical location of customers Note: The Companys operating facilities are located in India.
472,341,984
17
SCHEDULE XV (Contd.) NOTES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2006, AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006 13. Details of provisions and movements in each class of provisions as required by the Accounting Standard on Provisions. Contingent Liabilities and Contingent Assets (Accounting Standard-29). Particulars Leave Encashment 20052006 Amount (Rs.) Carrying Amount at the beginning of the year Additional Provision made during the year ..... Amount used during the year ......................... Unused amount reversed during the year ...... Carrying Amount at the end of the year ......... 3,233,034 550,449 834,375 2,949,108 20042005 Amount (Rs.) 3,089,366 744,716 601,048 3,233,034 Particulars Sundry Creditors (Liability) Amount in Foreign Currency 8,753 USD 57,040, CAD 25,293,500 YEN Sundry Debtors (Asset) 221,920 USD 640 EURO 591,700 YEN 14. Exchange gain adjusted in the carrying cost of Fixed Assets Rs. 8,678 (2005: Rs. Nil). 15. (A) Details of Derivative Instruments (for hedging): None. (B) Details of foreign currency exposures that are not hedged by a derivative instrument or otherwise: 20052006 Equivalent amount in Rs. 393,448 2,214,863 9,709,416 9,857,686 34,470 223,308
Brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits: Leave Encashment: Leave Encashment is a benefit to an employee in respect of encashment of accumulated leave to the credit of the employees either during employment or on separation as per the rules of the Company.
16. Previous years figures have been regrouped to confirm with the current year.
18
ANNEXURE Additional Information Pursuant to the Provisions of Part IV of Schedule VI to the Companies Act, 1956 of India for the year ended 31st March, 2006 (See Schedule XV, Note 10) Balance Sheet Abstract and Company's General Business Profile I. Registration Details: Registration No. 1 9 9 0 8 State Code 1 1 Balance Sheet Date 3 1 0 3 2 0 0 6 Capital Raised during the Year (Amount in Rs. Thousands): Public Issue Right Issue N I L N I L Bonus Issue Private Placement N I L N I L Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands): Total Liabilities Total Assets 8 6 1 2 6 3 5 8 0 4 6 Sources of Funds: Paid-up Capital Reserves and Surplus 5 3 9 8 5 2 5 4 3 7 7 Secured Loans Unsecured Loans N I L 5 5 3 Application of Funds Net Fixed Assets Investments 9 0 1 7 5 3 5 6 4 3 Net Current Assets Miscellaneous Expenditure 1 5 2 0 8 3 4 1 9 1 5 Accumulated Losses N I L Performance of Company (Amount in Rs. Thousands): Turnover# Total Expenditure 5 0 7 8 2 0 4 5 1 1 8 8 + Profit Before Tax + Profit After Tax 9 5 6 9 3 6 1 0 9 3 Earnings Per Share Dividend Rate% 1 1 . 3 8 N I L Generic Names of Three Principal Products/Services of Company (as per Monetary Terms): Item Code No. (ITC Code) 8 5 4 7 9 0 Product Description C A B L E J O I N T I N G K I T S A N D A C C E S S O R I E S Item Code No. (ITC Code) 8 4 2 8 1 0 Product Description Item Code No. (ITC Code) Product Description L I F T S / B U C K E T E L E V A T O R S 8 5 3 8 0 0 A R C C H A M B E R H O U S I N G
II.
III.
IV.
V.
# Excluding Other Income of Rs. 30,006 (000) Hemant Luthra
Chairman
C.S. Devale
Executive Director
Raghunath Murti
Director

19
MAHINDRA INTERTRADE LIMITED

Your Directors present the Twenty-eighth Annual Report together with the audited accounts of your Company for the year ended 31st March, 2006. Financial Results Rs. in lakhs 2006 Income ................................................................................................... Profit before depreciation, interest and taxation .................................... Less: Depreciation ................................................................................. Profit before interest and taxation ......................................................... Less : Interest ........................................................................................ Profit before tax ..................................................................................... Less : Provision for taxation ................................................................. Provision for deferred taxation .................................................. Provision for fringe benefit tax .................................................. Tax adjusted for previous years ................................................. Profit for the year after tax ..................................................................... Balance of Profit for earlier years ........................................................... Less: Interim Dividend on equity shares ............................................. Proposed Dividend on preference shares ................................. Proposed Dividend on equity shares ......................................... Less : Income-tax on Dividend .............................................................. Transfer to General Reserve ...................................................... Balance carried to Balance Sheet .......................................................... 72,062 4,558 89 4,470 593 3,877 1,330 (12) 25 24 2,510 1,796 382 136 209 104 251 3,224 2005 50,118 3,745 109 3,636 323 3,313 1,150 45 162 1,956 627 299 136 88 68 196 1,796
Your Companys gross income for the year has increased to Rs.73,742 lakhs as compared to Rs. 52,432 lakhs in the previous year registering a growth of 41%. Profit Before Tax for the year was higher at Rs. 3,877 lakhs than Rs. 3,313 lakhs in the previous year, representing an increase of 17%. Your Company could achieve an improved level of financial performance despite supply constraints particularly in the electrical steel segment and volatility in prices of other categories of steel, metals and ferro alloys. Your Companys ability to leverage its critical success factors and de-risk its operations from market fluctuations enabled it to grow despite the volatile nature of the market almost through the year. In addition, your Company continued its emphasis on initiatives aimed at sizeable savings through cost competitiveness and optimum utilization of available resources by linking with Steel Service Centers of its associate companies. After providing for taxes of Rs.1,367 lakhs (Rs.1,357 lakhs, in the previous year) including deferred tax credit of Rs.12 lakhs (Rs.45 lakhs debit, for the previous year), fringe benefit tax Rs.25 lakhs (previous year - Nil) and tax for the prior years Rs.24 lakhs (previous year Rs.162 lakhs), Profit After Tax (PAT) rose by 28% to Rs.2,510 lakhs, as compared to Rs.1,956 lakhs in the previous year. DIVIDEND During the year under review, your Directors paid an interim dividend of 23% on 1,21,00,007 fully paid up equity shares of Rs.10 each aggregating Rs.278.30 lakhs and on a pro rata basis on 1,50,00,000 partly paid up equity shares of the face value of Rs.10 each, Rs.3 per share paid-up aggregating Rs.103.50 lakhs. Your Directors recommend dividend of 7.25% on 18,75,000 cumulative redeemable preference shares of the face value of Rs.100 each aggregating Rs.135.94 lakhs. The dividend, if approved, will be paid to those preference shareholders whose names will appear on the Register of Members as on 1st July, 2006.
20
Your Directors also recommend a final dividend of 12.60% on 1,21,00,007 fully paid up equity shares of Rs.10 each and on a pro rata basis on 1,50,00,000 partly paid up equity shares of the face value of Rs.10 each, Rs.3 per share paid up, both aggregating Rs.209.16 lakhs. The dividend, if approved, will be paid to those equity shareholders whose names will appear on the Register of Members as on 1st July, 2006. The total preference and equity dividends for the year, together with the tax will absorb a total sum of Rs.828.85 lakhs. FOREIGN SUBSIDIARY Your Companys foreign subsidiary Mahindra MiddleEast
Electrical Steel Service Centre FZC (MMESSC) functions in the Sharjah Airport International Free Zone for supply of slit electrical Steel Coils to the transformer industry in the Middle East. During the year under review, MMESSC entered into a Joint Venture Agreement with Nippon Steel Corporation (NSC), the fourth largest producer of electrical steel in the world, under which NSC has subscribed to 10% of the paid up capital of MMESSC. Your Company will benefit from this joint venture in which it holds a majority stake. Consequently, the status of the subsidiary has been changed to FZC and it is since renamed as Mahindra MiddleEast Electrical Steel Service Center FZC. This facility is the first such unit for electrical steel in the Middle East. Your Company launched its international operations in the Middle East during the year by opening a branch office in the Middle East. The audited statement of accounts for the year ended 31st March, 2006 of the Companys subsidiary, together with reports of the Directors and Auditors, and a statement pursuant to section 212 of the Companies Act, 1956 is attached. INTERNAL CONTROLS Your Company has an adequate system of internal controls and continues to improve its internal business processes by tightening controls to meet the demands of growth and complexities of its businesses. Corporate Management Services department of the holding company Mahindra & Mahindra Limited (M&M) assesses the financial and operating controls of various businesses of the Company. Significant issues are brought to the attention of the Audit Committee of the Board. Statutory Auditors and the Head of Corporate Management Services of M&M are invited to attend the Audit Committee meetings. Risk Management Being in the trading business, your Company is exposed to a variety of risks. These risks are mitigated by using an integrated Risk Management approach which employs a number of techniques to cover the full range of risks in its operations. OPERATIONS The momentum of industrial growth remained buoyant during the year in all the major business segments your Company operated in and this operating environment is likely to be sustained during the current year. The Company concentrated its efforts in expanding its core business activities, namely, steel, ferro alloys, engineering exports, distribution of specialized equipment and retail, which led to significant growth over the previous year. Your Company is continually focusing on building robust business processes, and implementing risk management procedures, to enhance customer service and satisfaction. Steel business continues to contribute significantly to the profitability of the Company despite supply constraints primarily in electrical steel grades. Demand for steel softened globally resulting in decline in unit prices during the second half of the year.
HUMAN RESOURCES Your Company is focused on building a talent pool for the future. Your Company has a robust performance-linked reward scheme for its employees. Your Company continues to enhance the skills and abilities of its people and keen attention is given to both hands-on experience and training programmes. The Company also regularly deputes its personnel for programmes organised at the group corporate level. CURRENT YEAR Your Company expects that with continued emphasis by the Government on infrastructure, particularly in the power sector, demand for steel would remain strong in the current year which will enhance your Companys market share and the earnings. Your Company expects to maintain its growth momentum aided by further improvements in its productivity and processes. Your Company continues to explore other segments and line extensions that provide a sustainable growth model. It is implementing a high precision Blanking Line project to process steel coils for supply of automotive body profiles required for the automobile industry. This is in line with your Companys business philosophy of constantly innovating to serve the needs of its evolving customer needs. The proposed Blanking Line will be the first such independent facility for automotive skin panels in India. SHIFTING OF REGISTERED OFFICE During the year under review, your Company shifted its Registered Office from Gateway Building, Apollo Bunder, Mumbai - 400 001 to Mahindra Towers, P. K. Kurne Chowk, Worli, Mumbai - 400 018 for operational convenience. CORPORATE GOVERNANCE Constitution of the Board The Board presently has ten Directors. The Directors have wide experience in business related to trading, finance and general corporate management. Board Meetings The Board Meetings are conducted at least once every quarter to review the financial results of the Company, the Statutory Compliance Certificates and matters relating to the operations of the Company. Five Board Meetings were held during the year. These were well attended. Directors Dr. Pawan Kumar Goenka was appointed by the Board as an Additional Director on 28th October, 2005. Mr. Harsh Kumar was appointed by the Board as an Additional Director on 24th January, 2006. He was also appointed as Deputy Managing Director of the Company, for a period of five years, effective 24th January, 2006. Dr. Goenka and Mr. Harsh Kumar hold office only up to the date of the forthcoming Annual General Meeting of the Company.
21
The Company has received notices from a member signifying his intention to propose Dr. Goenka and Mr. Harsh Kumar as Directors of the Company at the forthcoming Annual General Meeting. Mr. Raghunath Murti, Mr. U. Y. Phadke and Mr. Rajeev Dubey retire by rotation and, being eligible, offer themselves for re-election at the forthcoming Annual General Meeting. Audit Committee The Audit Committee presently comprises Ms. Tarjani Vakil (Chairperson of the Committee), Mr. U. Y. Phadke and Mr. Zhooben Bhiwandiwala. The Audit Committee met twice during the year under review. Remuneration / Compensation Committee The Remuneration/ Compensation Committee presently comprises Mr. Bharat Doshi, Mr. U.Y. Phadke and Mr. Rajeev Dubey. This Committee met thrice during the year under review. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation received from the Operating Management, and after due enquiry, confirm that: (i) in the preparation of annual accounts, the applicable accounting standards have been followed;
Foundation, not related to the business of the Company or the welfare of the employees, towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Company's estimated PAT for the year on a continuing basis until further review by the Board. A beginning in this direction was made by your Company during the current year by making a contribution of Rs.5 lakhs to Rambhau Mhalgi Prathistan. AUDITORS Messrs A. F. Ferguson Associates, Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from Messrs A. F. Ferguson Associates, Chartered Accountants, to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. PUBLIC DEPOSITS AND LOANS/ADVANCES The Company has not accepted deposits from the public or its employees during the year under review. 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 with the parent company, Mahindra & Mahindra Limited, are furnished separately. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorption respectively are not applicable to the Company. The information on foreign exchange earnings and outgo is furnished in the Notes on Accounts. PARTICULARS OF EMPLOYEES AS REQUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 AND THE RULES MADE THEREUNDER As required under section 217(2A) of the Companies Act, 1956 and Rules thereunder, a statement containing particulars of the Companys employees who were in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2006 or not less than Rs.2,00,000 per month during any part of the said year is given in the Annexure to this Report. For and on behalf of the Board Anand G. Mahindra Chairman
(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, 2006 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. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since its inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the th announcement made on the occasion of the 60 Anniversary of Mahindra & Mahindra Limited, the holding company, that the Group would support a range of Corporate Social Responsibility (CSR) initiatives by committing 1% of Profit after Tax (PAT) on a continuing basis. The 1% PAT would specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/or other Institutions, including K.C. Mahindra Education Trust and/or Mahindra
22
Mumbai , 12th May, 2006.
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 with the parent company, Mahindra & Mahindra Limited Loans and advances in the nature of loans to firms / companies in which Directors are interested: Rs. in lakhs Name of the Company Mahindra Steel Service Centre Limited Balance as on 31st March, 2006 Nil Maximum outstanding during the year 160
The Company has not made any loans and advances in the nature of loans to subsidiaries, associates, and 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.
Annexure to the Directors Report

ADDITIONAL INFORMATION AS REQUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 AND FORMING PART OF THE DIRECTORS' REPORT FOR THE YEAR ENDED 31st MARCH, 2006
Name of the employee Designation/ Nature of duties Gross Remuneration (subject to Income tax) (Rs) 1,455,259 Qualifications Experience (years) Age (years) Date of commencement of employment Last Employment held, Organisation & Designation
Raghunath Murti *
Managing Director
Diploma in Mktg Mgmt - Jamnalal Bajaj, B.Com (Hons) - St Xaviers College, Calcutta B.Tech (Mech) IIT-Delhi, PGDBM (Mktg/Finance) - XLRI
34
57
April 1, 2005
Mahindra & Mahindra Ltd., Executive Vice President, Business Development
Harsh Kumar *
Deputy Managing Director
1,484,272
27
52
December 1, 2005
Tata Metaliks Ltd. Vice President Marketing & Sales
* Part of the year.
NOTES : 1. Nature of employment is contractual. 2. The above employees are not related to any other Director. 3. No employee holds by himself/herself or along with his/her spouse and dependent children 2% or more of the equity shares of the Company. 4. Terms and conditions of employment are as per Companys Rules/contract. 5. Gross remuneration received as shown in the statement includes Salary, Commision, Bonus, House Rent Allowance or value of perquisites for accommodation, car perquisites value/allowances as applicable, employer's contribution to Provident Fund and Superannuation Scheme including group insurance premium, leave encashment, leave travel facility, reimbursement of medical expenses and all allowances/perquisites and terminal benefits as applicable. For and on behalf of the Board
Mumbai, 12th May, 2006.
Anand G. Mahindra Chairman

23
Auditors Report to the Members of Mahindra Intertrade Limited

1. We have audited the attached balance sheet of Mahindra Intertrade Limited as at 31st March, 2006, 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. 2. 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. 3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government 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 Order. 4. 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; (ii) 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 and proper returns adequate for the purposes of our audit have been received from the branches not visited by us; (iii) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; For A. F. Ferguson Associates Chartered Accountants (iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; (v) On the basis of written representations received from the directors, as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; (vi) 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, 2006; (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.
Place: Mumbai Date: 25th April, 2006
Neeta S. Potnis Partner Membership Number: 42463
24

[Referred to in Paragraph (3) thereof] (i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. No physical verification of fixed assets was carried out by the management during the year. The Company has a system of verifying the fixed assets once in every three years. In our opinion, the frequency of verification of fixed assets is at reasonable intervals. During the year, in our opinion, a substantial part of fixed assets has not been disposed off by the Company. The inventory of the Company has been physically verified by the management during the year and at the year end. The stock lying with third parties have been confirmed by third parties as at the year end. In our opinion, the frequency of verification is reasonable. 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. On the basis of our examination of records of inventory, in our opinion, the Company has maintained proper records of inventory. 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. In our opinion and according to the information and explanations given to us, the Company has granted unsecured loans to two companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year in respect of loans granted was Rs. 1160 lakhs (including Rs.160 lakhs in respect of which no stipulations have been made for repayment, interest) and the year end balance of loan granted to such parties was Rs.nil. According to the information and explanations given to us, the Company has not given any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956, where the rate of interest and other terms and conditions are, in our opinion, prima facie prejudicial to the interest of the Company. In respect of loans granted where stipulations have been made, the parties have repaid the principal amount and interest as stipulated or as rescheduled. There is no overdue amount of loans, secured or unsecured, granted to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.
(e)
(b)
In our opinion and according to the information and explanations given to us, the Company has taken unsecured loans, from one company covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year in respect of such loans taken was Rs.1006 lakhs (in respect of which no stipulations have been made for repayment, interest) and the year end balance of loans taken from such party was Rs. 706 lakhs. According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956, where the rate of interest and other terms and conditions are, in our opinion, prima facie prejudicial to the interest of the Company. Since there are no stipulations for repayment, interest in respect of the loan stated in (e) above, the provisions of Clause 4(iii)(g) are not applicable to the Company.
(f)
(c)
(ii)
(a)
(g)
(b)
(iv)
(c)
(iii)
(a)
In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items are of a special nature for which alternative quotations are not available, 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, fixed assets and for the sale of goods and services. Further, on the basis of our examination and information and according to 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. (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; and In our opinion and according to the information and explanations given to us, having regard to comment in (iv) above, in respect of transactions exceeding the value of rupees five lakhs during the financial year, with each such party, made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.
(v)
(b)
(b)
(vi)
(c)
The Company has not accepted any deposits from public, to which the provisions of the directives issued by the Reserve Bank of India and the provisions of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956, and the rules framed there under are applicable. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.
(vii)
(d)
(viii) We have broadly reviewed the books of account maintained by the Company relating to the manufacture of Diesel
25
Generator Sets 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 of 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) 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 in respect of provident fund, employees state insurance, income-tax, salestax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it, have generally been regularly deposited by the Company during the year with the appropriate authorities. According to the information and explanations given to us, no undisputed amount payable in respect of aforesaid statutory dues were in arrears as at 31st March, 2006 for a period of more than six months from the date they became payable. Further, since the Central Government has till date not prescribed the amount of cess payable under section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same. (b) According to the information and explanations given to us, there are no disputed dues of income-tax, sales-tax, wealth tax, service tax, custom duty, excise duty and cess that have not been deposited on account of any dispute and therefore Clause 4(ix)(b) of the Order is not applicable to the Company.
(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 Clause 4(xiii) of the Order are not applicable to the Company. (xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Order are not applicable to the Company. (xv) 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 prima facie, prejudicial to the interest of the Company. (xvi) The Company has not obtained any term loans that were not applied for the purpose for which these were raised. (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 a short term basis which have been used for long term investment. (xviii) During the year, 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. (xix) As the Company has not issued any debentures, Clause 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) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.
(x)
The Company has neither accumulated losses as at 31st March, 2006 nor has it incurred any cash losses during the financial year ended on that date or in the immediately preceding financial year. In our opinion and based on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of its dues to any financial institution, bank or to debenture holders during the year.
For A. F. Ferguson Associates Chartered Accountants
(xi)
26

2006 Rs. in lakhs 2005 Rs. in lakhs
Schedule I. SOURCES OF FUNDS : SHAREHOLDERS FUNDS: Share Capital ............................................................................ Reserves and Surplus .............................................................. I II
Rs. in lakhs
3,535.00 3,823.29 7,358.29
3,535.00 2,144.26 5,679.266 1,867.40 7,546.66
LOAN FUNDS .......................................................................... Total ..........
III
1,670.54 9,028.83
II. APPLICATION OF FUNDS : FIXED ASSETS ......................................................................... Capital work-in-progress (refer note 15) .................................. IV 383.32 256.83 640.15 INVESTMENTS ........................................................................ DEFERRED TAX ASSET (NET) (refer note 7) ........................... NET CURRENT ASSETS : Current Assets, Loans and Advances ...................................... VI VII 23,466.86 15,661.70 7,805.16 Total ......... NOTES TO THE ACCOUNTS ................................................... XIII 9,028.83 21,217.81 14,347.31 6,870.50 7,546.66 V 475.02 108.50 355.64 355.64 224.30 96.22
Less : Current Liabilities and Provisions ..................................
Per our report attached
Anand G. Mahindra Bharat Doshi Raghunath Murti
Chairman Vice Chairman Managing Director
Neeta S. Potnis Partner
U. Y. Phadke Zhooben Bhiwandiwala Pawankumar Goenka Ms. Tarjani Vakil Rajeev Dubey A.K. Nanda Arnavaz M. Pardiwalla
Directors
Company Secretary

27
Profit and Loss Account for the year ended 31st March, 2006
2006 Rs. in lakhs 72,007.21 1,679.43 70,327.78 276.70 785.15 672.55 72,062.18 2005 Rs. in lakhs 50,569.01 2,314.30 48,254.71 519.01 693.98 649.90 50,117.60
Schedule SALES AND OTHER INCOME : Gross Sales ..................................................................................... Less : Excise duty ........................................................................... Net sales ......................................................................................... Income from services rendered ...................................................... Commission .................................................................................... Other income .................................................................................. TOTAL INCOME .............................................................................. EXPENDITURE : Raw Materials, Components and Finished products ...................... Personnel ........................................................................................ Interest ............................................................................................ Depreciation and Amrotisation ........................................................ Other Expenses .............................................................................. Profit before tax for the year ........................................................... Less : Provision for taxation for the year Current Tax .......................................................................... Deferred Tax ........................................................................ Fringe Benefit Tax ................................................................ Less: Tax adujstment for prior years ............................................... Profit after tax for the year .............................................................. Add : Balance of Profit/(loss) for earlier years ................................. Less : Interim Divided paid on Equity Shares ................................. Less : Proposed Divided on Preference Shares .............................. Less : Proposed Divided on Equity Shares ..................................... Less : Tax on Divided [includes Rs. 2.14 lakhs ............................... (2005 : Rs. Nill) pertaining to the previous year] Less : Transfer to General Reserve ................................................. Balance carried to Balance Sheet ................................................... Earning Per Share (Basic/Diluted) (note 8) (Rs.) .............................. NOTES TO THE ACCOUNTS ..........................................................
VIII
IX X XI XII
64,907.27 616.29 592.71 88.64 1,980.32 68,185.23 3,876.95 1,330.00 (12.28) 25.00 1,342.72 24.21 2,510.02 1,795.71 (381.80) (135.94) (209.16) (104.09) (251.00) 3,223.74 14.18
44,154.10 555.45 322.98 109.09 1,663.18 46,804.80 3,312.80 1,150.00 44.86 1,194.86 162.43 1,955.51 626.76 (298.80) (135.94) (87.98) (68.29) (195.55) 1,795.71 10.85
XIII
Directors
Company Secretary

28
Cash Flow Statement: Cash Flow Statement for the year ended 31st March, 2006
2006 Rs. in lakhs A. CASH FLOW FROM OPERATING ACTIVITIES Profit before tax for the year Adjustments for: Depreciation & Amortisation Foreign Exchange Interest income Interest expense Profit on sale of Fixed Assets (net) Operating Profit before Working Capital Changes Changes In: Trade & Other Receivables Inventories Trade & Other Payables Cash Generated from Operations Income Taxes Paid (net) [including FBT Rs. 21.34 lakhs (2005: Nil)] NET CASH FROM OPERATING ACTIVITIES B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Interest Received Purchase of Investments NET CASH USED IN INVESTING ACTIVITIES C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Bank Borrowings (net) Repayment of Borrowings (short term loan from Mahindra & Mahindra Ltd) Intercorporate Deposits Placed Intercorporate Deposits refunded Dividends Paid on Preference shares (includnig Income Tax on dividends) Dividends Paid on Equity shares (includnig Income Tax on dividends) Interest paid NET CASH USED IN FINANCING ACTIVITIES NET INCREASE IN CASH & CASH EQUIVALENTS CASH & CASH EQUIVALENTS: OPENING BALANCE [including unrealised exchangeloss of Rs. 0.45 lakh (2005: Rs. Nil)] CLOSING BALANCE [including unrealised exchange loss of Rs.0.24 lakh (2005: Rs. 0.45 lakh)] Rs. in lakhs 3,876.95 88.64 (0.21) (469.05) 592.71 (0.93) 211.16 4,088,11 (907.68) 95.68 930.43 118.43 4,206.54 (1,573.57) 2,632.97 (3,885.42) (1,588.98) 5,641.95 167.55 3,583.00 1,323.69 2,259.31 109.09 0.45 (329.15) 322.98 (0.72) 102.65 3,415.45 Rs. in lakhs 2005 Rs. in lakhs Rs. in lakhs 3,312.80
(377.08) 10.38 294.35 (250.72) (323.07) 103.14 (300.00) (1,500.00) 1,660.00 (155.00) (535.66) (559.88) (1,287.40) 1,022.50
(77.42) 2.17 235.92 (224.29) (63.62) (260.86) (300.00) (88.83) (618.72) (246.92) (1,515.33) 680.36
1,000.94 2,023.44 1,022.50
320.58 1,000.94 680.36
Directors
Company Secretary

29
Schedules forming part of the Balance Sheet and the Profit and Loss Account for the year ended 31st March, 2006
SCHEDULE I SHARE CAPITAL : Authorised : 28,000,000 (2005: 28,000,000) Equity Shares of Rs. 10/- each .............................. 1,875,000 (2005: 1,875,000) Cumulative Redeemable Preference Shares of Rs.100 each ............................... Issued and Subscribed : 12,100,007 (2005: 12,100,007) Equity shares of Rs. 10/- each fully paid up ......... 15,000,000 (2005: 15,000,000) Equity shares of Rs. 10/- partly paid at Rs.3/- per share 1,875,000 (2005: 1,875,000) 7.25% Cumulative Redeemable Preference Shares of Rs. 100/- each fully paid up [note 2]
(Of the above, 12,100,006 (2005: 12,100,006) Equity Shares of Rs.10/- each fully paid up, 15,000,000 Equity Shares of Rs. 10/- each, Rs.3/- Paid up and 1,875,000 7.25% Cumulative Redeemable Preference Shares of Rs. 100/- each fully paid up are held by Mahindra and Mahindra Ltd., the holding company and its nominees. )
2006 Rs. in lakhs
2005 Rs. in lakhs
SCHEDULE V
INVESTMENTS : Unquoted : Long Term (At Cost) : In Other Companies (trade): 500 Ordinary Shares of Rs.1000 each fully paid up in Seekar Fashions Private Ltd. ......... Less : Provision for Permament dimunition in the value ...................................
Rs. in Lakhs
2006 Rs. in Lakhs
Rs. in Lakhs
2005 Rs. in Lakhs
2,800.00
2,800.00
5.00 5.00
5.00 5.00 0.01
1,875.00 4,675.00
1,875.00 4,675.00
1,210.00 450.00
1,210.00 450.00
1,875.00
1,875.00
100 Ordinary Shares of Rs.10 each fully paid up in Mahindra Holdings & Finance Ltd. ................................. In subsidiary company (2005: wholly owned subsidiary) (Trade) : 900 (2005:12) Shares of USD 550 (2005: AED 150,082) each in Mahindra MiddleEast Electrical Steel Service Centre ....................... (FZC), Sharjah [formerly known as Mahindra MiddleEast Electrical Steel Service Centre (FZE), Sharjah, wholly owned subsidiary] Current (At the lower of cost and fair value) : 25,00,000(2005: Nil) units of Rs. 10 each in Kotak FMP Series 23 - Dividend of Kotak Mahindra Mutual Fund (Acquired (during the year) ........
0.01
225.01
224.29
250.00 475.02
224.30 Rs. in Lakhs 2005 Rs. in Lakhs
SCHEDULE VI 3,535.00 3,535.00 2005 Rs. in lakhs

CURRENT ASSETS & LOANS AND ADVANCES : (A) Current Assets: Stock-in-Trade (at cost or net realisable value whichever is lower): (i)Finished products purchased for sale (ii)Finished products produced for sale (iii)Raw Materials & Components Sundry Debtors: Unsecured: Outstanding over six months: Considered good Considered doubtful Other Debts, Considered good
Rs. in Lakhs
2006 Rs. in Lakhs
SCHEDULE II RESERVES AND SURPLUS : 1. General Reserve As per last balance sheet Add: Transfer from Profit and Loss Account ............................................. Total ................ 2. Profit and Loss Account Total ................ SCHEDULE III LOAN FUNDS : (A) Secured : From Banks : (i) Loans and Advances on cash credit Account (ii) Short Term Loan Total (A) (B) Unsecured : Short term loans from Mahindra & Mahindra Ltd., the Holding company Total (B) .......... Grand Total (A+B)
2006 Rs. in lakhs
465.47 136.92 5,514.13 6,116.52
380.91 123.72 5,707.57 6,212.20
348.55 251.00 599.55 3,223.74 3,823.29 2006 Rs. in lakhs
153.00 195.55 348.55 1,795.71 2,144.26 2005 Rs. in lakhs
1,552.77 176.84 1,729.61 12,811.29
994.73 207.22 1,201.95 11,813.56 13,015.51 (207.22) 14,364.06 12,808.29 0.08 3.96 4.04 244.37 27.50 724.58 2,023.20 996.45 1,000.49
Total Less: Provision for doubtful debts [refer note 12(i) & (ii)] Cash and Bank Balances : Cash in hand ................................................... Cheque in hand ............................................... Balances with Scheduled Banks: On Current Account ....................................... On Margin Money Account ............................ On Fixed Deposit Account .............................
14,540.90 (176.84)
138.47 138.47 252.73 27.50 1,604.50 1,884.73
264.54 700.00 964.54
161.40 700.00 861.40
706.00 706.00 1,670.54
1,006.00 1,006.00 1,867.40
(B) Loans and Advances: Unsecured, considered good unless otherwise stated Advance recoverable in cash or in kind or for value to be received (refer note 10) VAT Credit receivable Advance payment of Current Income tax (net of prov.)
SCHEDULE IV FIXED ASSETS :

Description of Assets Tangible Assets: FREEHOLD LAND Building* Office Equipment, Computers, Plant & Machinery Furniture and Fittings Vehicles Intangibles Assets: Intangibles [refer note 1(i)(c)] Website Original Cost As at 1st April, 2005 24.55 208.45 18.26 78.15 475.58 47.05 Additions during the year 73.44 12.50 1.00 38.83 Deductions during the year 16.05 0.70 29.09 Cost as at 31st March, 2006 73.44 24.55 204.90 18.56 87.89 475.58 47.05 Depreciation upto 1st April, 2005 0.20 124.34 7.76 31.70 285.35 47.05 Depreciation for the year 0.82 25.41 0.92 13.93 47.56 Depreciation Adjustments during the year 12.47 0.14 23.78 36.39 10.15 Depreciation upto 31st Mar, 2006 1.02 137.28 8.54 21.85 332.91 47.05 548.65 496.40
387.99 56.11 518.98 23,466.86
861.38 335.45 21,217.81 (Rs. in lakhs)
Net Balance As at 31st Mar, 2006 73.44 23.53 67.62 10.02 66.04 142.67 383.32 355.64
Net Balance As at 31st March,2005 24.35 84.11 10.50 46.45 190.23 355.64
Total 852.04 125.77 45.84 931.97 496.40 88.64 2005 786.22 77.42 11.60 852.04 397.46 109.09 * Includes Rs. 500 (2005 : Rs. 500) in respect of 10 shares of Rs. 50 each in Shah and Nahar Industrial Premises (A-1) Co. op. Society Limited.
30
Schedules forming part of the Balance Sheet and the Profit and Loss Account for the year ended 31st March, 2006
SCHEDULE VII CURRENT LIABILITIES AND PROVISIONS : (A) Current Liabilities : Acceptances .................................................. Sundry Creditors: Total outstanding dues of creditors other than small scale Industrial undertakings ................ (B) Provisions : Provision for Group gratuity liability Provision for leave encashable at retirement/ cessation ........................................................ Provision for current Income Tax (net of payments) ....................... Provision for Fringe Benefit Tax (net of advance tax thereon) ....................... Provision for dividend on preference shares ............................................................ Provision for dividend on equity shares .......... Provision for tax on dividend .......................... 2006 Rs. in lakhs 9,908.60 2005 Rs. in lakhs 10,062.44 SCHEDULE X PERSONNEL : Salaries, Wages, Bonus etc. .......................... Contribution to Provident and Other Funds .... Welfare .......................................................... Total .................... SCHEDULE XI INTEREST : Interest on fixed period loans ......................... Others ............................................................ Total* .................. 2006 Rs. in lakhs 531.93 58.27 26.09 616.29 2006 Rs. in lakhs 49.00 543.71 592.71 2005 Rs. in lakhs 509.59 33.26 12.60 555.45 2005 Rs. in lakhs 69.24 253.74 322.98
5,138.00 15,046.60 62.95 47.23 107.76 3.66 135.94 209.16 48.40 615.10
3,826.56 13,889.00 46.80 36.09 122.24 135.94 87.98 29.26 458.31 14,347.31 2005 Rs. in lakhs 329.15
*Net of interest capitalised Rs. 5.52 lakhs (2005 : Rs. Nil) SCHEDULE XII OTHER EXPENSES : Electricity Expenses ....................................... Rent ............................................................... Rates & Taxes ................................................ Insurance ....................................................... Repairs & Maintenance - others ..................... Bank Charges (including discounting charges) Clearing Forwarding and Freight Charges ...... Directors Fees ............................................... Commission to Non-wholetime Director (refer note 13) .......................................................... Commission to Selling Agents ....................... Processing charges ........................................ Bad Debts and Advances written off ............. Provision for doubtful debts (net) .................... Foreign Exchange Loss (Note 4) .................... General Miscellaneous expenses .................. Total .................... 2006 Rs. in lakhs 4.32 156.47 117.54 36.29 26.90 183.12 599.40 1.20 3.00 18.72 59.58 (30.38) 233.47 570.69 1,980.32 2005 Rs. in lakhs 4.25 159.04 38.13 23.66 29.83 167.76 425.60 1.25 3.00 138.06 45.25 253.62 (187.36) 9.92 551.17 1,663.18
Total (A) + (B)
15,661.70 2006 Rs. in lakhs 462.04
SCHEDULE VIII OTHER INCOME : Interest Others ...................................................

(Including tax deducted at source Rs.52.78 lakhs (2005: Rs.40.58 lakhs))
Interest on income tax refund ............................... Insurance claims received ..................................... Sundry credit balances/provisions no longer payable/required written back ............................... Provision for doubtful debts no longer required written back .......................................................... Profit on sale of fixed assets (net) ......................... Cash Discount ....................................................... Miscellaneuos Income .......................................... Total .......................
7.01 56.54 32.32 0.93 58.29 55.42 672.55
106.77 13.46 77.10 0.72 104.02 18.68 649,90
SCHEDULE IX RAW MATERIALS AND COMPONENTS AND FINISHED PRODUCTS : 2006 2005 Rs. in lakhs Rs. in lakhs (A) Decrease/(Increase) in Stock of Finished Goods: Opening Stock: Finished Products purchased for sale ............ 380.91 820.05 Less : VAT Credit Available (4.60) Finished Products produced for sale ....... Less : Closing Stock : Finished Products purchased for sale Finished Products produced for sale Decrease / (Increase) in Stock ....................... 376.31 123.72 500.03 (465.47) (136.92) (102.36) 820.05 64.00 884.05 (380.91) (123.72) 379,42 3,739.17 3,739.17 17,783.66 (5,707.57) 15,815.26 27,959.42 44,154.10
SCHEDULE XIII NOTES ON ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006 1. Significant Accounting Policies followed by the Company: (i) Fixed Assets: (a) All Fixed assets are carried at cost less depreciation. Financing costs that are attributable to the acquisition, construction or production of a qualifying asset are included in the cost of that asset upto the date the asset is ready for use. (b) Depreciation is calculated on the straight line method (SLM) at the rates and in the manner prescribed by schedule XIV to the Companies Act, 1956. except depreciation on vehicles which is provided at 20% p.a. on the SLM. (c) Goodwill arising on acquisition of business (included in intangibles, schedule IV) is being amortised equally over a period of ten years. (ii) Inventories: Inventories are stated at cost or net realisable value, whichever is lower after making provision for obsolescence. The Cost is arrived at on a moving weighted average method and includes where appropriate excise duty. Foreign currency Transactions: All foreign currency monetary items are translated at the relevent 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 acquisition of fixed asset from a country outside India) the exchange differences are recognised in the Profit Loss Account. In the case of monetary items incurred for the acquisition of fixed assets from a country outside India, the exchange differences are adjusted to the cost of such assets.
(B) Consumption of Raw Materials and Components : Opening Stock: .............................................. 5,707.57 Less: VAT Credit Available .............................. (39.15) 5,668.42
(iii)
Add: Purchases [including processing charges Add: Rs. 937.46 lakhs (2005: Rs. 619.88 lakhs)] Less: Closing Stock ........................................
34,724.71 (5,514.13) 34,879.00
(C) Purchases of Finished Products for Sale ........ Total ....................
30,130.63 64,907.27
31
(iv)
2.
3. 4. 5.
Revenue Recognition: Sales of products and services including commission are recognised when the products are shipped or services rendered. Income from insurance claims is recognised on acceptance of claim. (v) Investments: Long term investments are valued at cost less permanent diminution in value of investments, if any. Current investment are valued at the lower of cost and fair value (vi) Retirement Benefit: Contribution to Life Insurance Corporation of India in respect of Companys liability for retirement gratuity payable to employees is made on the basis of a letter from the Life Insurance Corporation of India stating the actuarial liability, the fund available and the contribution/funds required in respect of the liability. Retirement Benefits in respect of leave encashment are provided for based on a valuation as at the Balance Sheet date, made by an independent actuary. (vii) Taxes on Income: Current tax is accounted at the amount expected to be paid to/recovered from the taxation authorities using the applicable tax rates and tax laws. Deferred tax is recognised subject to the consideration of prudence, on timing differences, being the differences 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 are not recognised on unabsorbed depreciation and carry forward of losses unless there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. (viii) Segment Reporting: The accounting policies adopted for segment reporting are in line with the accounting policies of the company. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under Unallocated Corporate Expenses (refer note 21). Redemption of preference shares: 7.25% cumulative redeemable preference shares of the face value of Rs. 100 each are redeemable at the end of 5th year from the date of allotment being 2nd September, 2003. Loans from Banks are secured by a first charge on the Companys entire present and future inventories book debts, receivables, investments, machinery etc. in terms of the deeds of hypothecation executed by the Company. The net difference in foreign exchange debited to the Profit and Loss Account is Rs. 233.47 Lakhs (net) (2005: Rs. 9.92 Lakhs (net)). Managerial Remuneration: 2006 2005 Rs. in Lakhs Rs. i n Lakhs Salary ........................................................ 4.63 10.60 Commission ................................................... 5.89 27.14 Contribution to Provident and other funds ..... 0.55 2.86 Other perquisites and allowances .................. 10.82 33.17@ # 21.89* 73.77* *excludes the accural for leave encashment and gratuity as it is accrued for the Company as a whole. @ includes Rs. 3.22 lakhs pertaining to the earlier year. # include remuneration to the Managing Director from 1st April, 2005 to 30th June, 2005 and to the Deputy Managing Director from 24th January, 2006 being the date of appointment. Miscellaneous expenses include auditors remuneration (including services tax and education cess where applicable) as follows: 2006 2005 Rs. in lakhs Rs. in lakhs Audit fees ...................................................... 7.02 5.51 Fess for other services .................................. 3.47 Reimbursement of expenses ......................... 0.86 0.34 The components of Deferred tax liability and assets as at 31st March, 2006 are as under: 2006 2005 Rs. in lakhs Rs. in lakhs Deferred Tax Assets: On provision for doubtful debts and advances 59.52 75.83 Disallowance u/s 40a 19.30 On provision for Leave encashment 15.90 13.21 On provision for gratuity liability 21.20 17.13 115.92 106.17 Deferred Tax Liabilities: On depreciation 7.42 9.95 7.42 9.95 Deferred Tax Asset (net) 108.50 96.22 `````
8.
Earning per share:
2006 Rs. in lakhs
2005 Rs. in lakhs
Profit after tax and preference dividend including tax thereon ................... (A) 2,353.71 1,801.80 Weighted average number of shares ......... (B) 16,600,007 16,600,007 Earning per share (Basic/Diluted) (Rs.) ... (A/B) 14.18 10.85 Nominal value of equity share (Rs.) ................ 10 10 9. The identification of suppliers as small scale industrial undertakings (SSIs) has been done on the basis of the information provided by the suppliers to the company. At the year end there were no balance due to small scale industrial undertakings. 10. Advances recoverable in cash or in kind or for value to be received considered good (Schedule VI(B)) includes: (i) the Intercorporate Deposits Rs. Nil (2005 : Rs. 160.00 lakhs); (ii) Rs. 9.84 lakhs (2005: Rs. 25.43 lakhs) due from Mahindra MiddleEast Electrical Steel Service Centre, (FZC) a subsidiary company. 11. Contingent liabilities: 2006 2005 Rs. in lakhs Rs. in lakhs (i) Claims against the Company not acknowledged as debts: Taxation demand [including interest Rs. 90.66 lakhs (2005: Rs. 196.81 lakhs)] for the assessment year 2001-02 against which the Company has filed appeals before Income Tax Appellate Tribunal 225.41 222.91 (ii) Corporate Guarantee given by the Company against deferred credit facility sanctioned by Union Bank of India, Mumbai, to the subsidiary company Mahindra MiddleEast Electrical Steel Service Centre, FZC by opening letter of credit of the tenure of 35 months on supplier of equipment. In the event of default by the subsidiary company in retiring letter of credit on due date, the bank would have recourse to the Company. 550.00 550.00 (iii) Financial guarantee given by the Company against bank guarantee issued by State Bank of India in favour of a supplier of raw materials of Mahindra Gujarat Tractor Limited (MGTL). In the event of default by MGTL in discharging its obligations to the supplier on the due date, the bank would have recourse to the Company. 45.00 15.00 12. Sundry debtors outstanding include: (i) Rs. 620.30 Lakhs (2005 : Rs.526.37 lakhs) which in accordance with the terms of the contracts, arrangements are not due for payment within one year. (ii) Rs. 1,725.23 lakhs (2005: Rs. 313.92 lakhs) from Mahindra MiddleEast Electrical Steel Service Centre, (FZC) a subsidiary company. 13. Computation of Net profit in accordance with section 309(5) of the Companies Act, 1956 for the year ended 31st March, 2006. 2006 2005 Rs. Lakhs Rs. Lakhs Profit before Tax for the year 3,876.95 3,312.80 Add: Depreciation charged in accounts ....... 88.64 109.09 Directors Remuneration including directors fees ...................................... 17.20 47.88 Commission to Non-Wholetime director ................................................ 3.00 3.00 Commission to Managing Director and Deputy Managing Director .................. 5.89 27.14 (Profit) / Loss on sale of fixed assets (net) ......................................... (0.93) (0.72) Provisions for doubtful debts (net) (30.38) (264.46) 83.42 (78.07) Less: Depreciation under section 350 of the Companies Act, 1956 .......................... 92.00 109.71 Less: Bad debts and advances written off (net) ............................................... 59.58 253.62 Net profit under Section 349 ....................... 3,808.79 2,871.40 Commission payable to Non Wholetime director ................................................... 3.00 3.00 Commission payable to Managing Director and Deputy Managing Director ...................... 5.89 27.14
6.
7.
32
14. Contracts remaining to be executed on capital account and not provided for Rs. 3,051.90 lakhs (2005 : Rs. Nil) 15. Capital work-in-progress includes capital advances Rs. 233.36 Lakhs (2005: Rs. Nil) 16. Depreciation charge for the year ended 31st March, 2005 was higher by Rs. 15.36 lakhs consequent to a change in a rate of depreciation on vehicle to 20% p.a. on the SLM method with effect from 1st April, 2004. 17. Joint Venture Disclosure : i) Jointly Controlled Entity by the Company Name of the Entity Country of Incorporation % Holding
ii)
I. 1. 2.
Mahindra MiddleEast Electrical Steel Service Centre, FZC Sharjah 90% Interests in the Assets, Liabilities, Income and Expenses with respect to Jointly Controlled Entity Rs. In Lakhs 2006 ASSETS Fixed assets 522.02 Current Assets, Loans and Advances (a) Inentories 942.33 (b) Debtors and other receivables 728.29 (c) Cash and Bank 416.03
II. LIABILITIES 1. Loan Funds Foreign Currency loan from a bank 306.36 2. Current Liabilities and Provisions Creditors and other payables 2,022.48 III. INCOME 1. Sales and Service 2,423.99 2. Other income 9.31 IV. EXPENSES 1. Cost of sales 2,200.42 2. Administrative and General expenses 43.56 3. Distribution Costs 31.36 4. Interest expenses 38.64 5. Depreciation 28.42 Since it is the first year of the joint venture, the previous year's figures have not been given. 18. Additional information pursuant to the provisions of paragraphs 3(i)(a) and (ii), 4C & 4D, ofPart II of Schedule VI to the Companies Act, 1956 - See Schedule XIV. Previousyear's figures are indicated below the current year's figures. 19. Additional information pursuant to the provision of Part IV of Schedule VI to the Companies Act, 1956 - See Schedule XV. 20. Previous year's figures have been regrouped wherever necessary to conform with the groupings in the current year.
21. As per the Accounting Standard 17 Segment Reporting issued by the Institute of Chartered Accountants of India which is mandatory, the Company has disclosed Segment Reporting as follows: Rs. in lakhs STEEL & STEEL RAW MATERIALS 2006 2005 REVENUE Gross External Sales Less: Excise duty Total Revenue (Net External Sales) SEGMENT RESULT Unallocated Corporated Expenses (net of income) Operating Profit Interest Expenses Interest Income Income Taxes - Current tax - Deferred tax - Fringe Benefit Tax 63,611.20 1,679.43 61,931.77 3,905.62 3,905.62 3,905.62 Tax adjustment for prior years Profit After Tax OTHER INFORMATION Segment Assets Unallocated Corporate Assets Total Assets Segment Liabilities Unallocated Corporate Liabilities Total Liabilities Capital Expenditure (in India) Depreciation (including amortisation of Goodwill) Non Cash expenses other than depreciation 17,656.77 17,656.77 13,300.06 13,300.06 19,06 12.23 (18.64) 17,679.51 17,679.51 12,264.24 12,264.24 32.89 23.65 (91.17) 2,555.07 2,555.07 1,250.06 1,250.06 12.31 4.38 8.29 1,364.41 1,364.41 970.26 970.26 10.14 8.85 (35.51) 20,211.83 4,486.11 24,697.95 14,550.12 2,789.54 17,339.66 382.60 88.64 (8.51) 19,043.92 2,737.76 21,781.68 13,234.50 2,867.92 16,102.42 77.41 109.09 (316.93) 3,905.62 3,448.78 332.02 (131.55) 48,937.62 2,314.30 46,623.32 3,448.78 3,448.78 3,448.78 9,331.31 9,331.31 332.02 332.02 332.02 2,680.29 2,680.29 (131.55) (131.55) (131.55) 72,942.51 1,679.43 71,263.08 4,237.64 237.04 4,000.60 592.70 469.05 1,330.00 (12.28) 25.00 2,534.23 24.21 2,510.02 51,617.91 2,314.30 49,303.61 3,317.23 10.60 3,306.63 322.98 329.15 1,150.00 44.86 2,117.94 162.43 1,955.51 OTHERS 2006 2005 2006 TOTAL 2005
33
External Revenue by Geographical Market: 2006 Rs. in lakhs India Outside India TOTAL Segment Assets by Geographical Market India Outside India TOTAL Business Segments : The Company has considered business segments as the primary segment for disclosure. The segments have been identified taking into account the organisational structure and differing returns and risks of these segments. The Companys operation comprise mainly of steel and other operations. The steel segment relates to steel and raw materials for steel industry and involves imports, indenting, stock & sale and marketing of the items in domestic and international markets. Other operations include : (i) the Technical business which is engaged in imports, indenting and marketing machine tools, ultrasonic testing equipment, and providing technical services in connection with erection and commisioning projects, mainly for the equipment marketed. the Fast Moving Consumer Goods business which is engaged in distribution and marketing of play materials, gift, novelties, apparel and other branded products. the exports business which deals in export of products, mainly engineering items. Commodity trading Diesel Generator sets 70,208.65 2,733.86 72,942.51 2005 Rs. in lakhs 20,210.93 0.90 20,211.83 2005 Rs. in lakhs 49,864.42 1,753.49 51,617.91 2004 Rs. in lakhs 19,042.89 1.03 19,043.92
(A) Related parties where control exists: Holding Company Mahindra & Mahindra Ltd (M&M) Subsidiary Company Mahidra MiddleEast Electrical Steel Service Centre, (FZC) (MME) (B) a) Other related parties with whom the company has transactions, etc: Fellow Subsidiaries Mahindra Steel Service Centre Ltd (MSSCL) Mahindra Holdings Finance Ltd (MHFL) Mahindra & Mahindra Financial Services Ltd (MMFSL) Mahindra Gujarat Tractor Ltd (MGTL) Bristlecone India Ltd (MCL) Mahindra Holidays & Resorts India Ltd. (MHRIL) Mahindra USA Inc. (MUSA) Mahindra Shubhlabh Services Ltd (MSSLP) Mahindra Engg & Chem Products Ltd (MECP) Bristlecone UK Ltd (MILUK) Mahindra International Ltd (MINT) Automartindia Ltd. (AIL) Mahindra Ugine Steel Company Ltd (MUSCO) (wef 21st June, 2005) Key Managerial Personnel Mr. Raghunath Murti, Managing Director (2005 : Mr. R. R. Krishnan) Mr. Harsh Kumar, Deputy Managing Director (wef 24th January, 2006)
(C) (a)
Disclosure of transactions between the Company and related parties and the status of outstanding balance as on 31st March 2006:
Rs. in lakhs
(Receipt/income)/Expenditure/payment
Holding Company Subsidiary Subsidiar y Company Fellow Subsidiaries 2005 0.99 (0.98) 665.13 (708.23) (283.57) (24.57) 1.47 (0.30) 12.02 (0.07) 5.32 (77.46) (215.00)
(ii)
(iii) (iv) (V)
Geographical Segments : The geographical segments are considered for disclosure as secondary segments. The Companys geographical segments have been determined on the basis of location of customers. Segment Revenue and Expense : Some infrastructural items like office premises and other facilities are shared by different segments and are allocated on a reasonable basis. All other segment revenues and expenses are directly attributable to the segments. Inter Segment Sales : There are no inter segment sales, purchases or transfers during the year. External Revenue : 2006 Rs. in lakhs Sales and other income Less: Commission and service income netted against unallocated corporate costs Less: Interest income External Sales and other income 73,741.61 330.05 469.05 72,942.51 2005 Rs.in lakhs 52,431.90 484.84 329.15 51,617.91
c) b)
2006 2005 2006 2005 2006 Purchase of finished goods 2,788.10 163.41 4,564.36 Purchase of Fixed Asset 7.43 7.09 Sale of Assets (1.10) Processing charges paid 937.46 Sales of finished goods (excluding sales tax) (16,390.45) (7,239.37)(1,688.34) (327.85)(7,072.41) Income from services rendered (13.77) (23.40) (180.67) Deputation of Personnel to related parties (8.11) (5.89) (31.80) Deputation of Personnel from related parties 36.06 29.99 1.28 Other Income (1.56) (0.64) (0.90) Other Expenses 422.34 213.80 1.19 27.69 Reimbursement Received From Parties (456.69) (295.01) (4.01) (33.19) (0.08) Reimbursement Made to Parties 175.77 72.55 1.22 5.41 Interest Received (33.72) (0.82) (227.19) Interest Paid 7.00 Investments made 0.72 224.29 Inter Corporate Deposits Placed 1,500.00 Inter Corporate Deposits Refunded By Parties (1,660.00) Inter Corporate Deposits Refunded To Parties 300.00 300.00 Dividend on preference share for the previous year paid during the current year 135.94 78.74 Dividend on equity share for the previous year paid during the current year 87.98 249.00 Interim dividend on equity shares paid 381.80 298.80 Corporate guarantee given 550.00 Financial guarantee given 30.00 Transactions with Key Management Personnel 2006 Rs. in lakhs Managerial Remuneration Sales of assets Loss on sale of fixed assets Outstanding receivables as on 31.03.2006 From subsidiary Company (including Investment made) From fellow subsidiaries (including inter-corporate Deposits) Outstanding payables as on 31.03.2006 To Holding Company * To Fellow Subsidiaries To Key Managerial Personnel includes equity share cpaital, preference share capital 21.89 2006 Rs. in lakhs 1,960.08 2,899.07 2006 4,010.17 150.18 5.70
15.00
2005 Rs. in lakhs 73.77 0.09 0.50 2005 Rs. in lakhs 563.64 906.52 2005 4,391.81 5.75 27.14
22. As per Accounting Standard 18 Related Party issued by the Institute of Chartered Accountants of India which is mandatory, the Company has identified all the related parties having transactions during the period as per the details given below: 1. 2. In respect of the outstanding balances recoverable as at 31st March, 2006, no provision for doubtful debts has been made in respect of these parties. During the year there were no amounts written off and written back from such parties.
d)
34
Disclosure of transactions between the Company and fellow subsidiaries and the status of outstanding balance as on 31.03.2006 Rs. in lakhs
MSSCL Purchase of finished goods () () 937.46 (665.13) 240.99 (708.23) 116.82 (109.06) 31.80 (24.57) 1.28 (1.47) () 6.85 (5.09) 0.08 (0.07) 5.41 (2.67) 0.96 (34.59) () () 160.00 (215.10) () 389.70 147.53 () MUSCO 4,564.36 () () () 6,686.52 () 0.43 () () () () () () () 156.75 () 7.00 () () () () 2,215.59 () () MECP () () () () 0.25 () () () () () () () () () () () () () () MHFL () () () () 63.17 (174.51) () () () () () () 64.85 (42.87) () () () () 620.30 516.82 () MMFSL () () () () () () () () () () () 4.63 () () 1,500.00 () 1,500.00 () () () () MINT () () () 143.77 () () () () () () () () () () () () () 62.70 () () MGTL () () () () () () () 0.90 (0.30) () () () () () () () 30.00 (15.00) () () MCL () () () () () () () () 6.26 (4.70) () () () () () () () () 1.32 (1.24) MHRIL () () () 1.13 () () () () () 14.58 () () () () () () () () 0.48 () () MUSA (0.99) () () () () () () () () () () () () () () () () 0.99 (0.99) MSSLP () () () () () () () () (2.23) () (2.65) () () () () () () (3.18) AIL () (0.98) () () () () () () () () () () () () () () () () MILUK () () () () () () () () () () () () () () () () () 0.34 (0.34)
Sale of asset
Processing charges paid
Sales of finished goods (excluding sales tax)
Income from services rendered
Deputation of Personnel to related parties
Deputation of Personnel from related parties
Other Income
Other Expenses
Reimbursement Received from Parties
Reimbursement made to Parties
Interest Received
Interest Paid
Inter Corporate Deposits Placed
Inter Corporate Deposits Refunded by Parties
Financial guarantee given
Outstanding receivables
Outstanding payables
23. Derivative Instruments : The Company has entered into Forward Exchange Contracts (being a derivative Instrument), which are not intended for trading or speculative purposes, but for hedge purpose, to establish the amount of reporting currency required or available at the settlement date of certain payables. The following are the outstanding Forward Exchange Contracts entered into by the Company as on 31st March, 2006. Currency Amount Buy/sell Cross Currency USD 3,675,423.14 Buy Rupees The year end foreign currency exposures that have been hedged by a derivative instrument or otherwise are give below : a) Amounts receivable in foreign currency on account of the following : Export of goods and services USD 4,078,388.47 Rs. 1,812.84 Lakhs EURO 23,875.52 Rs. 12.87 Lakhs Commission and Services rendered AED 5,900.00 Rs. 0.70 Lakhs CAD 961.20 Rs. 0.37 Lakhs EURO 19,668.82 Rs. 10.60 Lakhs GBP 11,367.87 Rs. 8.80 Lakhs USD 118,883.09 Rs. 52.84 Lakhs b) Amount payable in foreign currency on account of the following : Import of goods and services AED 52,943.08 Rs. 6.61 Lakhs EURO 26,570.00 Rs. 14.54 Lakhs GBP 42,452.10 Rs. 33.28 Lakhs USD 18,347,582.92 Rs. 8,230.73 Lakhs The above disclosures have been made consequent to an annoucement by the Institute of Chartered Accountant of Indian in December, 2005, which is applicable to the financial periods ending on or after 31st March, 2006. Therefore, figures for the previous year have not been disclosed.
35
Schedule XIV
Additional Information pursuant to the provision of paragraphs 3(i)(a), 3(ii), 4C and 4D, of Part II of Schedule VI to the Companies Act, 1956. (A) Particulars in Respect of Goods Manufactured: Unit of Measure Steel Products Diesel Generator Sets MT Nos. Production* Quantity #62,420.69 #(45,982.52) 3,787.00 (369.00 66,207.69 (46,351.52) Opening Stock Quantity Value 249.03 (165.42) 33.00 () 282.03 (165.42) 100.21 (64.00) 23.51 () 123.72 (64.00) Closing Stock Quantity Value 280.65 (249.03) 2.00 (33.00) 282.65 (282.03) 134.85 (100.21) 2.07 (23.51) 136.92 (123.72) Quantity @62,389.07 @(45,898.91) 3,818.00 (305.00) 66,207.07 (46,203.91) (Rs. in lakhs) Sales Value @33,364.48 @(19,796.13) 6,652.14 (410.47) 40,016.62 (20,206.60)
* Produced at a third party # Including scrap 2133 MT (2005: 1402 MT) @ Including sales of scrap 2133 MT (2005: 1410 MT) Rs. 596.89 lakhs (Rs. 331.62 lakhs) Previous Years figures are in brackets (B) Particulars in Respect of Traded Goods: Sr. Class of Goods Unit of Measure Purchases # Quantity Value Rs. in lakhs 222.03 (312.87) 28,122.55 (26,535,46) 245.99 (237.33) 542.48 (485.07) 239.00 (81.31) 758.58 (307.38) 30,130.63 Less: VAT Credit Available (27,959.42) # Purchase quantities are net of adjustments for shortage/excess on physical verification @ Includes numerous items of diverse nature therefore it is neither practical nor meaningful to give the quantities Previous year's figures are in brackets. (C) Particulars in Respect of Raw Materials & Components Consumed : Rs. in lakhs 2006 2005 Quantity Steel Products Diesel Generator Sets $ 62,420.69 6,027.48 34,879.00 45,982.52 358.17 15,815.26 62,420.69 Value* 28,851.52 Quantity 45,982.52 Value* 15,457.09 (E) Earnings in Foreign Exchange : a) Export of goods on FOB basis . b) Commissions ........................... c) Others (freight, insurance, services rendered) ................... (F) Expenditure in Foreign Currency : a) b) c) d) e) Travelling .................................. Commission ............................. Interest .................................... Professional fees ..................... Others ...................................... 34.65 435.81 38.94 61.82 126.27 151.19 1.59 67.25 2006 Rs. in lakhs 2005 Rs. in lakhs Opening Stock Quantity Value Rs. in lakhs () 53.59 (349.90) 77.69 (61.84) 189.11 (245.29) 60.52 (135.98) (27.04) 380.91 (4.60) 376.31 (820.05) Closing Stock Quantity Value Rs. in lakhs () 90.52 (53.59) 66.67 (77.69) 248.50 (189.11) 59.78 (60.52) () 465.47 Sales Quantity Value Rs. in lakhs 344.07 (568.15) 29,565.96 (28,353.29) 378.08 (365.74) 725.27 (602.73) 222.17 (130.63) 755.04 (341.87) 31,990.59
1 2 3 4 5 6
Other Engineering Products@ Steel and Steel raw materials Spare Parts@ Play Material@ Apparel@ Others MT 71,981.59 (71,787.19)
134.55 (664.39)
280.69 (134.72)
71,867.49 (72,316.86)
(380.91)
(30,362.41)
2,072.08 580.11 81.67
1,242.42 454.95 56.12
Note: 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 shortage as ascertained on physical count. * Including processing charges (see Schedule IX) $ Includes numerous items of diverse nature therefore it is neither practical nor meaningful to give the quantities 2006 2005 Rs. in lakhs Rs. in lakhs (D) Value of imports on CIF basis : a) b) Raw materials .......................... Finished goods for resale ......... 16,246.01 13,801.81 10,006.93 14,154.55
(G) Value of imported and Indigenous Consumption : 2006 Rs. in lakhs Imported Steel ........... Local Steel ................. 13,949.84 20,929.16 34,879.00 % 40% 60% Rs. in lakhs 10,752.98 5,062.28 15,815.26 2005 % 68% 32%
36
Schedule XV
Additional information pursuant to the provisions of Part IV of Schedule VI to the Companies Act, 1956 Balance Sheet Abstract and Companys General Business Profile:
I. Registration Details : Registration No. Balance Sheet Date 3 1 Date II. 2 0 2 2 2 2 0 0 6 State Code 1 1
0 3 Month
Year
Capital raised during the year (Amount in Rs. Thousands) Public Issue N Bonus Issue N I L I L Right Issue N Private Placement N I L I L
III.
Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities including Shareholders Funds 2 4 6 9 0 5 3 2 Total Assets 4 6 9 0 5 3
Sources of Funds Paid-up Capital 3 5 3 5 0 0 Reserves and Surplus 3 8 2 3 2 9
Secured Loans 9 6 4 5 4
Unsecured Loans 7 0 6 0 0
Application of Funds Net Fixed Assets 6 4 0 1 5 Investment 4 7 5 0 2
Net Current Assets # 7 9 1 3 6 6
Miscellaneous Expenditure
Accumulated Losses IV. Performance of the Company (Amount in Rs. Thousands) Turnover @ 7 2 0 6 2 1 8 Total Expenditure 6 8 1 8 5 2 3
+ () Profit/(Loss) before Tax + 3 8 7 6 9 5
+ () Profit/(Loss) after Tax + 2 5 1 0 0 2
Earning per Share in Rupees 1 4 . 1 8
Dividend Rate % 3 5 . 6 0
@ includes sales and other income # includes Deferred Tax assets (net)
37
Schedule XV (Contd.)
V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) Item Code No. (ITC Code) Product Description F L A T 7 2 0 L 2 I 0 9 E D 5 C A L 4 S C R A P S T E E L S H E E T S P R O D U C T S ( C O L D R O L L E D )
R O L 7 2
Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description S T E L
E C T R 7 E E 2 L
Signatures to Schedule I to XV
Anand G. Mahindra Bharat Doshi Raghunath Murti U. Y. Phadke Zhooben Bhiwandiwala Pawankumar Goenka Ms. Tarjani Vakil Rajeev Dubey A.K. Nanda Arnavaz M. Pardiwalla
Directors
Company Secretary
38
Statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies Particulars Name of the Subsidiary Company The Financial year of the Subsidiary Company ended on Number of shares in the Subsidiary Company held by Mahindra Intertrade Limited at the above date: Equity Extent of holding The net aggregate of profits/(losses) of the Subsidiary Company for its financial year so far as they concern the members of Mahindra Intertade Limited a. b. Dealt with in the accounts of Mahindra Intertrade Limited for the year ended 31st March, 2006 Not dealt with in the accounts of Mahindra Intertrade Limited for the year ended 31st March 2006 AED Rs. Nil 831,162 100.98 Lakhs 500 90% Mahindra Middle East Steel Service Centre FZC 31st March, 2006
The net aggregate of profits/(losses) of the Subsidiary Company for its previous financial year so far as they concern the members of Mahindra Intertrade Limited a. b. Dealt with in the accounts of Mahindra Intertrade Limited for the year ended 31st March, 2005 Not dealt with in the accounts of Mahindra Intertrade Limited for the year ended 31st March 2005 AED Rs. Nil (279,788) (33.32) Lakhs
Anand G. Mahindra Bharat Doshi Raghunath Murti U. Y. Phadke Zhooben Bhiwandiwala Pawankumar Goenka Ms. Tarjani Vakil Rajeev Dubey A.K. Nanda Arnavaz M. Pardiwalla
Directors
Company Secretary

39
MAHINDRA MIDDLEEAST ELECTRICAL STEEL SERVICE CENTRE (FZC)
Directors Report to the Members for the year ended 31st March, 2006
The Directors are pleased to present their second report together with the audited Accounts of your Company for the year ended 31st March, 2006. 31st March, 2006 (in Rs.) Total Income Profit before depreciation & interest Depreciation Profit before interest Interest Profit/(Loss) for the year Balance of (Loss) for earlier years Less : Statutory Reserve Balance carried to Balance Sheet Dividend Your Directors recommend a maiden Dividend @ 8% on 1000 shares of the face value of USD 550 (Rs.24,458) each aggregating to USD 550,000 (Rs.24,392,583). The dividend will be paid to those shareholders whose names appear on the register of members as on July 12, 2006. Review of Operations The year ended on 31st March, 2006 was the first full year of operation of the Company. Your Companys gross turnover for the year under review has increased to USD 6,056,615 (Rs. 269,331,614) from USD 560,920 (Rs.24,943,549) in the previous year. Net earnings for the year is higher at USD 227,093 (Rs.10,098,618), up from a loss of USD 76,445 (Rs.3,399,424) during the previous year. The improved performance is attributed to the focused and customer centric approach followed by your Company in developing transformer market segment in the Middle East and neighbouring countries. Your Directors acknowledge the co-operation and assistance received from Nippon Steel Corporation, Japan, customers, suppliers, bankers and the officers of Sharjah Airport International Free Trade Zone, and other Government authorities. Outlook for the current year The demand for Electrical Steel in the Middle East and neighbouring countries is expected to grow significantly in coming years. In view of buoyant market conditions and encouraging trends, your Directors anticipate that the Company will achieve improvement both in revenue and profitability during the current year. Your Company has high order book position and is geared to exploit opportunities and meeting challenges by leveraging on support from Nippon Steel Corporation. Your Company has made significant investments over past two years in
40
31st March, 2006 (in USD) 6,079,872 394,672 71,021 323,651 96,557 227,093 (76,445) 22,709 127,939
8th August, 2004 to 31st March 2005 (in Rs.) 25,002,452 (2,289,570) 785,242 (3,074,813) 324,612 (3,399,424)
8th August, 2004 to 31st March, 2005 (in USD) 562,245 (51,487) 17,658 (69,145) 7,300 (76,445)
270,365,834 17,550,651 3,158,222 14,392,428 4,293,810 10,098,618 (3,399,424) 1,009,859 5,689,335
infrastructure, cultivating long term relationships with major transformer customers, built a competent peoples team, and has implemented robust businesses and risk management processes. Change in Status of the Company Pursuant to the Agreement on subscription for capital interest entered into between Mahindra Intertrade Limited (MIL), Nippon Steel Corporation (NSC) and the Company on 28th March, 2005, NSC have subscribed to the equity share capital of the Company and MIL and NSC hold the Equity Share Capital of the Company in the ratio of 90:10 respectively. On the induction of NSC as a shareholder, the status of the Company has changed from Free Zone Establishment (FZE) to Free Zone Company (FZC). Share Capital The existing capital of the Company consisting of Arab Emirates Dirhams (AED) 1,800,983 was converted to its equivalent in US Dollars i.e. US$ 493,420 represented by 12 shares. Consequent to the subscription of share capital by Nippon Steel Corporation of US$ 55,000 and further subscription by Mahindra Intertrade Limited of US$ 1,580, the paid-up share capital of the Company has increased from US$ 493,420 to US$ 550,000. The capital of US$ 550,000 has been restructured to be represented by 1,000 shares (each of value US$ 550). Currently, the Share Capital of the Company is as follows :Name of Shareholder Amount of share capital held (US$) 495,000 55,000 550,000 % of holding 90% 10% 100%
Mahindra Intertrade Ltd. Nippon Steel Corporation TOTAL
Directors Responsibility Statement The Directors state that : (i) (ii) in the preparation of the annual accounts, the applicable accounting standards have been followed; 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, 2006 and of the profit of the Company for the period ended on that date; proper and sufficient care has been taken for the maintenance of adequate accounting records and for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
Directors Nippon Steel Corporation, Japan, has named Mr. Mitsuru Tsukakoshi to be its Nominee Director on the Board of the Company. The nomination of Mr. Mitsuru Tsukakoshi is in terms of Article 12 of the Agreement on Subscription for Capital Interest dated 28th March, 2005 between Mahindra Intertrade Ltd., (Holding Company), Nippon Steel Corporation and the Company. Auditors M/s. A. F. Ferguson & Co., auditors of the Company have expressed their willingness to accept re-appointment. For and on behalf of the Board Raghunath Murti Chairman
(iii)
(iv) the annual accounts have been prepared on a going concern basis.
41
AUDITORS REPORT To the Members of Mahindra MiddleEast Electrical Steel Service Centre (FZC)
We have audited the accompanying balance sheet of Mahindra MiddleEast Electrical Steel Service Centre (FZC) [formerly known as Mahindra MiddleEast Electrical Steel Service Centre (FZE)] (a Limited Liability Company incorporated and licensed at Sharjah Airport International Free Zone) (hereinafter referred to as the Company) as at 31 March 2006, and the related statements of profit and loss and retained earnings and cash flows for the year then ended. 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 International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. According to the information and explanations given to us, in our opinion, the accompanying financial statements have been prepared in accordance with the Emiri Decree No. (2) of 1995 regarding the establishment of Sharjah Airport International FreeZone Authority and give a true and fair view, in all material respects: (a) in the case of the balance sheet, of the state of affairs of the company as at 31 March 2006; (b) in the case of the Profit and Loss Statement and retained earnings, of the profit of the company for the year ended on that date; and (c) in the case of the cash flow, of the cash flows for the year ended on that date, in accordance with the Statements of International Financial Reporting Standards issued by the International Accounting Standards Committee. In respect of the presentation of financial information in Indian Rupees and United States Dollars in the financial statements, we have verified the arithmetic accuracy of the presentation based upon an exchange rate provided by the Management (refer Note 2 to the Financial Statements). We did not audit and do not express an opinion on such information. B.P. Shroff Partner A.F. Ferguson & Co. Accountants Regn. No. 354
12th May, 2006
42
BALANCE SHEET 31 March 2006

Note 31 March 2006 Dhs. 4,773,855 31 March 2006 Rs. 58,002,339 31 March 2006 USD 1,304,331 31 March 2005 Dhs. 4,902,604 31 March 2005 Rs. 59,566,639 31 March 2005 USD 1,339,509
FIXED ASSETS at Net Book Value .............................. CURRENT ASSETS Inventories ......................... Debtors and Other Receivables .................... Cash and Bank ................... Total current assets .......... CURRENT LIABILITIES Creditors and Other Payables ......................... Due to Related Parties ....... Total current liabilities ..... NET CURRENT ASSETS ..
5 6 7
8,617,570 6,660,155 3,804,570 19,082,295
104,703,476 80,920,885 46,225,525 231,849,886
2,354,527 1,819,714 1,039,500 5,213,741
1,112,354 1,974,805 180,183 3,267,342
13,515,100 23,993,881 2,189,223 39,698,204
303,922 539,565 49,230 892,717
4,498,642 10 13,996,857 18,495,499 586,796 5,360,651
54,658,503 170,061,812 224,720,315 7,129,571 65,131,910
1,229,136 3,824,278 5,053,414 160,327 1,464,658
573,528 2,936,493 3,510,021 (242,679) 4,659,925
6,968,364 35,678,390 42,646,754 (2,948,550) 56,618,089
156,702 802,320 959,022 (66,305) 1,273,204
FINANCED BY Share Capital ...................... Reserve .............................. 8 9 2,007,620 551,374 2,558,994 SECURED LOAN Foreign Currency Loan from a Bank .................... UNSECURED LOAN From Standard Chartered Bank ............................... 5,360,651 65,131,910 1,464,658 4,919 4,659,925 59,766 56,618,089 1,344 1,273,204 13 2,801,657 34,040,133 765,480 3,133,811 38,075,804 856,233 24,392,583 6,699,194 31,091,777 548,530 150,648 699,178 1,800,983 (279,788) 1,521,195 21,881,943 (3,399,424) 18,482,519 492,072 (76,445) 415,627
The attached Notes 1 to 18 form part of these Financial Statements.
Raghunath Murti - Chairman Sumit Issar Mitsuru Tsukakoshi 12th May, 2006
43
Directors
STATEMENT OF PROFIT AND LOSS AND RETAINED EARNINGS For the Year Ended 31 March 2006
For the Year Ended 8 August 2004 to 31 March 2005 Dhs. For the Period 8 August 2004 to 31 March 2005 Rs. 8 August 2004 to 31 March 2005 USD
Note
31 March 2006 Dhs.
31 March 2006 Rs.
31 March 2006 USD
INCOME Sales and Service ............... Cost of Sales ...................... GROSS PROFIT ................. Other Income ..................... 22,167,211 20,122,689 2,044,522 85,121 2,129,643 EXPENDITURE Administrative and General Expenses ........................ Distribution Costs .............. Interest Expenses .............. Depreciation ....................... 4 12 398,354 286,791 353,400 259,936 1,298,481 INCOME/(LOSS) FOR THE YEAR .............................. Accumulated Loss at the beginning of the Year ..... Less: Statutory Reserve ..... Accumulated Profit/(Loss) at the end of the Year ..... 831,162 (279,788) 83,116 468,258 4,840,002 3,484,511 4,293,810 3,158,222 15,776,545 10,098,618 (3,399,424) 1,009,859 5,689,335 108,841 78,358 96,557 71,021 354,777 227,093 (76,445) 22,709 127,939 290,112 58,875 26,717 64,629 440,333 (279,788) (279,788) 3,524,862 715,329 324,612 785,242 5,350,045 (3,399,424) (3,399,424) 79,266 16,086 7,300 17,658 120,310 (76,445) (76,445) 269,331,614 244,490,671 24,840,943 1,034,220 25,875,163 6,056,615 5,498,002 558,613 23,257 581,870 2,052,967 1,897,270 155,697 4,848 160,545 24,943,549 23,051,831 1,891,718 58,903 1,950,621 560,920 518,380 42,540 1,325 43,865
Raghunath Murti - Chairman Sumit Issar Mitsuru Tsukakoshi 12th May, 2006
44
Directors
STATEMENT OF CHANGES IN EQUITY For the Year Ended 31 March 2006

Issued Capital Dhs. Balance as at 31 March 2005 ....... Issued of Shares during the Year . Income for the Year ................... Balance as at 31 March 2006 ...... 1,800,983 206,637 2,007,620 Rs. 21,881,943 2,510,640 24,392,583 USD 492,072 56,458 548,530 Dhs. (279,788) 831,162 551,374 Accumulated Profits Rs. (3,399,424) 10,098,618 6,699,194 USD (76,445) 227,093 150,648 Dhs. 1,521,195 206,637 831,162 2,558,994 Total Rs. 18,482,519 2,510,640 10,098,618 31,091,777 USD 415,627 56,458 227,093 699,178
45
CASH FLOW STATEMENT For the Year Ended 31 March 2006

For the Year Ended 31 March 2006 Dhs. Operating Activities: Profit/(Loss) for the year ................ Adjustments for Non-cash Item and items shown separately: Depreciation ................................... Interest Expenses .......................... Unrealised exchange differences ... Changes in Operating Assets and Liabilities: Increase in Inventories ................... Increase in Debtors and Other Receivables .................................... Increase in Creditors and Other Payables ......................................... Increase in Due to Related Parties . Cash Flow from Operations ........ Investing Activities: Acquisition of Fixed Assets ............ Net Cash used in Investing Activities ...................................... Financing Activities: Proceeds from Issue of Shares ...... Proceeds from Secured Loan ........ Interest Paid ................................... Net Cash from Financing Activities Increase in Cash and Cash Equivalents ................................... Cash and Cash Equivalents: Cash and Cash Equivalents at the beginning of the year* ................... Cash and Cash Equivalents at the end of the year* ............................. 175,264 3,804,570 3,629,306 *Cash and Bank ............................. Unsecured Loan from a Bank ........ 3,804,570 3,804,570 2,129,457 46,225,525 44,096,068 46,225,525 46,225,525 47,886 1,039,500 991,614 1,039,500 1,039,500 175,264 175,264 180,183 (4,919) 175,264 2,129,457 2,129,457 2,189,223 (59,766) 2,129,457 47,886 47,886 49,230 (1,344) 47,886 206,637 (348,142) (141,505) 3,629,306 2,510,640 (4,229,925) (1,719,285) 44,096,068 56,458 (95,121) (38,663) 991,614 1,800,983 3,116,452 (1,540) 4,915,895 175,264 21,881,943 37,864,892 (18,711) 59,728,124 2,129,457 492,072 851,490 (421) 1,343,141 47,886 (131,187) (131,187) (1,593,922) (1,593,922) (35,843) (35,843) (4,718,114) (4,718,114) (57,325,085) (57,325,085) (1,289,102) (1,289,102) (7,505,216) (4,685,350) 3,919,856 11,060,364 3,901,998 (91,188,374) (56,927,003) 47,626,250 134,383,423 47,409,275 (2,050,605) (1,280,150) 1,070,999 3,021,957 1,066,120 (1,112,354) (1,974,805) 469,445 2,766,280 (22,517) (13,515,101) (23,993,881) 5,703,756 33,610,302 (273,582) (303,922) (539,565) 128,264 755,814 (6,153) 259,936 353,400 (332,154) 3,158,222 4,293,810 (4,035,671) 71,021 96,557 (90,752) 64,629 26,717 17,359 785,242 324,612 210,912 17,658 7,300 4,743 831,162 10,098,618 227,093 (279,788) (3,399,424) (76,445) Rs. USD For the Period 8 August 2004 to 31 March 2005 Dhs. Rs. USD
The attached Notes 1 to 18 form part of these Financial Statements. Raghunath Murti - Chairman Sumit Issar Mitsuru Tsukakoshi 12th May, 2006
46
Directors
NOTES TO THE FINANCIAL STATEMENTS 31 March 2006

1. ACTIVITIES: Mahindra MiddleEast Electrical Steel Service Centre (FZE) was incorporated and licensed on 8 August 2004, at Sharjah Airport International Free Zone, Sharjah (FZ) with limited liability. Subsequently, the Company has entered into an agreement on subscription for capital interest with Nippon Steel Corporation (NSC), Japan, to reorganise the Company and manage as a FZC. Consequent upon the induction of NSC as a shareholder, the status has changed from Free Zone Establishment (FZE) to Free Zone Company (FZC) with limited liability with effect from 28 November 2005. The Company is engaged in processing of steel coils and supply of slit coils. 2. FINANCIAL PRESENTATION IN DHS, INR AND USD: Amounts reported in Indian Rupees and in United State Dollars for the years ended 31 March 2006, and 31 March 2005, have been given for convenience by translating the figures reported in Dhs. at the exchange rate of Rs. 12.15 = Dhs. 1 and USD 1 = Dhs. 3.66 which are the market rates as on 31 March 2006. 3. SIGNIFICANT ACCOUNTING POLICIES: (a) Accounting Convention: The financial statements have been prepared under the historical cost convention and comply with Statements of International Financial Reporting Standards issued by the International Accounting Standards Committee. (b) Depreciation: The cost of fixed assets is expensed in equal annual instalments (pro rata in the year of addition and disposal) over the estimated useful life of the assets. The estimated useful lives of the assets for the purpose of depreciation are as follows:
Plant and Machinery Vehicles Furniture and Fixtures Office Equipment Computers
20 5 10 5 5
years years years years years
Fixed assets having value less than or equal to 500 Dhs. (Rs. 6,075) (USD 137) each, are fully depreciated in the year of acquisition. (c) Inventories: Inventories are valued at lower of cost and net realisable value after making due allowance for any obsolete or slow moving items. Cost is determined on weighted average basis. (d) Debtors and Receivables: Provision is made towards accounts receivable considered doubtful. (e) Revenue Recognition: Income is recognised when goods are sold or services rendered. Sales are accounted net of trade discount and sales return. (f) Foreign Currency Transactions: Foreign currency transactions are recorded in U.A.E. Dirhams at the approximate rates of exchange prevailing at the time of transactions. At the year end, assets and liabilities are translated at the foreign exchange rates prevailing at the balance sheet date. All exchange differences thus arising or on settlement have been reported in the profit and loss statement for the year. (g) Provision for Gratuity: Provision is made for amount payable under the labour law in force in Sharjah Airport International Free Zone, Sharjah (FZ) authority, applicable to the employees accumulated periods of service at the balance sheet date.
47
NOTES TO THE FINANCIAL STATEMENTS 31 March 2006

4. FIXED ASSETS
Continued
Particulars Dhs. Cost: At 31 March 2006 .................................................. Additions ................................................................ At 31 March 2006 .................................................. Depreciation: At 31 March 2005 .................................................. Depreciation for the year ....................................... At 31 March 2006 .................................................. Net Book Value: At 31 March 2006 .................................................. At 31 March 2005 .................................................. 4,898,291 114,608 5,012,899 61,212 245,053 306,265 4,706,634 4,837,079
Plant and Machinery Rs. 59,514,236 1,392,487 60,906,723 743,726 2,977,394 3,721,120 57,185,603 58,770,510 USD 1,338,331 31,314 1,369,645 16,725 66,954 83,679 1,285,966 1,321,606 Dhs. 55,750 55,750 2,788 11,150 13,938 41,812 52,962
Vehicles Rs. 677,363 677,363 33,874 135,473 169,347 508,016 643,488 USD 15,232 15,232 762 3,046 3,808 11,424 14,470 Dhs. 4,250 9,700 13,950 182 1,201 1,383 12,567 4,068
Furniture and Fixtures Rs. 51,638 117,855 169,493 2,211 14,592 16,803 152,690 49,426 USD 1,161 2,650 3,811 50 328 378 3,433 1,111
4.
FIXED ASSETS (Contd.) Office Equipment Dhs. Rs. 33,741 33,741 1,689 6,743 8,432 25,309 32,052 USD 759 759 38 152 190 569 721 Dhs. 6,165 6,879 13,044 308 1,977 2,285 10,759 5,857 Computers Rs. 74,905 83,580 158,485 3,742 24,021 27,763 130,722 71,163 USD 1,684 1,880 3,564 84 540 624 2,940 1,600 As at 31 March 2006 Dhs. Rs. USD 1,357,167 35,843 1,393,010 17,658 71,021 88,679 1,304,331 1,339,509 As at 31 March 2005 Dhs. Rs. USD 1,357,167 1,357,167 17,658 17,658 1,339,509
Particulars Cost: At 31 March 2006 ................ Additions .............................. At 31 March 2006 ................ Depreciation: At 31 March 2005 ................ Depreciation for the year ..... At 31 March 2006 ................ Net Book Value: At 31 March 2006 ................ At 31 March 2005 ................
2,777 2,777 139 555 694 2,083 2,638
4,967,233 60,351,881 131,187 1,593,922 5,098,420 61,945,803 64,629 259,936 324,565 785,242 3,158,222 3,943,464
4,967,233 60,351,881 4,967,233 60,351,881 64,629 64,629 785,242 785,242
4,773,855 58,002,339 4,902,604 59,566,639
4,902,604 59,566,639
48
NOTES TO THE FINANCIAL STATEMENTS Continued 31 March 2006

5. INVENTORIES: Dhs. Raw Materials ................................................................ Work-in-Progress ........................................................... Finished Goods .............................................................. Goods in Transit ............................................................. 4,088,824 101,811 4,426,935 8,617,570 6. DEBTORS AND OTHER RECEIVABLES: Dhs. Trade Debtors ................................................................ Deposits ......................................................................... Prepayments .................................................................. Advance to Suppliers ..................................................... 6,485,305 20,250 3,250 151,350 6,660,155 7. CASH AND BANK BALANCES: Dhs. Cash on Hand ................................................................ Bank Balance in Current Account ................................... 147 3,804,423 3,804,570 31 March 2006 Rs. 49,679,212 1,237,004 53,787,260 104,703,476 31 March 2006 Rs. 78,796,456 246,038 39,488 1,838,903 80,920,885 31 March 2006 Rs. 1,786 46,223,739 46,225,525 USD 1,117,165 27,817 1,209,545 2,354,527 Dhs. 102,928 12,102 514,255 483,069 1,112,354 31 March 2005 Rs. 1,250,575 147,039 6,248,198 5,869,288 13,515,100 31 March 2005 Rs. 22,778,662 235,054 85,050 895,115 23,993,881 31 March 2005 Rs. 44,335 2,144,888 2,189,223 USD 28,122 3,307 140,507 131,986 303,922
USD 1,771,941 5,533 888 41,352 1,819,714
Dhs. 1,874,787 19,346 7,000 73,672 1,974,805
USD 512,237 5,286 1,913 20,129 539,565
USD 40 1,039,460 1,039,500
Dhs. 3,649 176,534 180,183
USD 997 48,233 49,230
8.
SHARE CAPITAL: Dhs. Authorised: 1,000 Shares of USD 550 (Dhs. 2,013) (Rs. 24,458) each (2005: 12 Shares of Dhs. 150,082 [(USD 41,006) (Rs. 1,823,496)] each ..................................................... Issued and Paid: (1000 Shares of USD 550 (Dhs. 2,013) (Rs. 24,458) each (2005: 12 Shares of Dhs. 150,082 [(USD 41,006) (Rs. 1,823,496)] each ..................................................... 900 Shares of USD 550 (Dhs 2,013) (Rs. 24,458) each [2005: 12 Shares of Dhs. 150,082 (USD 41,006) (Rs.1,823,496) each held by Mahindra Intertrade Limited, which is a subsdiary of Mahindra & Mahinda Limited]
31 March 2006 Rs.
USD
Dhs.
31 March 2005 Rs.
USD
2,007,620
24,392,583
548,530
1,800,983
21,881,943
492,072
2,007,620
24,392,583
548,530
1,800,983
21,881,943
492,072
9.
RESERVE: Dhs. Statutory Reserve (Refer Note 15) ................................. Retained Earnings .......................................................... 83,116 468,258 551,374
31 March 2006 Rs. 1,009,859 5,689,335 6,699,194 31 March 2006 Rs. 169,923,618 138,194 170,061,812 31 March 2006 Rs.
USD 22,709 127,939 150,648
Dhs. (279,788) (279,788)
31 March 2005 Rs. (3,399,424) (3,399,424) 31 March 2005 Rs. 35,635,075 43,315 35,678,390 31 March 2005 Rs.
USD (76,445) (76,445)
10 DUE TO RELATED PARTIES: Dhs. Mahindra Intertrade Limited ........................................... Mahindra Steel Service Centre Limited .......................... 13,985,483 11,374 13,996,857 11. TRANSACTIONS WITH RELATED PARTIES: Dhs. Managements policy is to conduct transactions with related parties on prices and terms substantially similar to those with unrelated parties. Purchase of Raw Materials ............................................ Purchase of Fixed Assets .............................................. Reimbursement Paid ..................................................... Reimbursement Received .............................................. Share Capital Subscribed ...............................................
USD 3,821,170 3,108 3,824,278
Dhs. 2,932,928 3,565 2,936,493
USD 801,346 974 802,320
USD
Dhs.
USD
13,973,329 81,540 28,275 10,236 5,722
169,775,947 990,711 343,541 124,367 69,522
3,817,849 22,279 7,725 2,797 1,563
2,753,810 257,606 1,800,983
33,458,792 3,129,913 21,881,943
752,407 70,384 492,072
49
NOTES TO THE FINANCIAL STATEMENTS Continued 31 March 2006

12. ADMINISTRATIVE AND GENERAL EXPENSES: Dhs. Travelling and Conveyance ............................................ Communication Expenses ............................................. Audit Fees [(including Dhs. 2,000 (Rs. 24,300) (USD 546) pertaining to the previous financial year] ........................ Repairs and Maintenance .............................................. Rent ............................................................................... Rates and Taxes ............................................................. Insurance ....................................................................... Bank Charges ................................................................. Exchange (Gain)/Loss (Net) ............................................ General Expenses .......................................................... 10,250 26,698 273,834 9,704 17,436 136,068 (266,054) 69,891 398,354 124,538 324,381 3,327,083 117,904 211,847 1,653,226 (3,232,556) 849,176 4,840,002 2,801 7,295 74,818 2,651 4,764 37,177 (72,692) 19,096 108,841 2,500 11,562 21,570 30,808 218 22,530 110,209 27,362 290,112 30,375 140,478 262,076 374,317 2,649 273,740 1,339,039 332,449 3,524,862 683 3,159 5,893 8,417 60 6,156 30,112 7,476 79,266 70,331 50,196 31 March 2006 Rs. 854,522 609,881 USD 19,216 13,715 Dhs. 51,895 11,458 31 March 2005 Rs. 630,524 139,215 USD 14,179 3,131
13. SECURED LOAN: Foreign currency loan from a Bank is secured by hypothecation of assets all raw materials, semi-finished goods and finished goods, products and moveable property of any kind. This charge in prescribed form is yet to be registered with the concerned authorities. 14. NUMBER OF EMPLOYEES: As of 31 March 2006, the Company had 5 (2005: 3) employees. 15. STATUTORY RESERVE: According to the articles of association of the Company, 10% of the annual net profit is allocated to a statutory reserve until such reserve equals 50% of the paid-up share capital. This reserve is not available for distribution. 16. LEASES: The Company has entered into operating lease arrangements for the custom built warehouse, the significant terms and conditions of which are as under: The tenure of the lease agreement is generally for a period of 7 to 25 years, renewable thereafter for another equal term.
The lease may be terminated at any time by giving a notice in writing. Lease rentals are charged to the statement of profit and loss and retained earnings Dhs. 273,834 [(Rs. 3,327,083) (USD 74,818)] [2005: Dhs. 21,570 (Rs. 262,076) (USD 5,893)]. 17. DIVIDEND: The Board of Directors has declared the dividend at the rate of USD 44.75 (Dhs. 163.79) (Rs. 1,989.99) per share aggregating USD 44,750 (Dhs. 163,785) (Rs. 1,989,988) at it's meeting held on 12th May, 2006 which has not been recognised as a distribution to it's shareholders during the year ended 31st March, 2006. 18. PREVIOUS YEARS FIGURES: The current years figures are not comparable with those of the previous financial year, since the previous financial year was for the period 8 August 2004 to 31 March 2005, and the previous financial years figures are all for FZE, which has been converted to FZC. The previous financial years figures have been regrouped/rearranged, wherever necessary.
50
MAHINDRA STEEL SERVICE CENTRE LIMITED
DIRECTORS REPORT TO THE SHAREHOLDERS

Your Directors have pleasure in presenting their Thirteenth Report together with the audited accounts of your Company for the year ended 31st March, 2006. Rs. in Lakhs Financial Results Year ended 31st March, 2006 Income .......................................................................................... Less: Excise duty .......................................................................... Income (Net) ................................................................................. Less: Expenses ............................................................................. Profit before interest, depreciation & taxation .............................. Less: Depreciation ........................................................................ Profit before interest & taxation .................................................... Less: Interest ................................................................................ Profit before taxation .................................................................... Less: Provision for taxation: Current (Including Fringe Benefit Tax) ........................... Deferred ......................................................................... Profit for the year after taxation .................................................... Add: Balance of profit for earlier years .......................................... Profit available for appropriation .................................................... Less: Transfer to General Reserve ............................................. Proposed dividend ............................................................ Dividend tax on proposed dividend [Including Rs. 0.76 lakhs (2005: Nil) pertaining to the previous year] ............................................................. Balance carried forward ................................................................ 15.80 665.54 10.37 427.18 212.00 (53.90) 399.47 427.18 826.65 40.00 105.31 149.13 13.55 259.07 277.84 536.91 20.00 79.36 1714.70 47.01 1667.69 893.13 774.56 198.67 575.89 18.32 557.57 Year ended 31st March, 2005 2120.67 127.80 1992.87 1356.73 636.14 177.60 458.54 36.79 421.75
Dividend Your Directors recommend a dividend of 17.25% on 61,04,706 equity shares of Rs. 10 each for the year ended 31st March, 2006, payable to those members whose names appear on the Register of Members of the Company as on 25th July, 2006, being the Record Date fixed for this purpose. The dividend, including tax on distributed profits, will absorb a sum of Rs.120.35 lakhs (previous year Rs. 89.73 lakhs). Operations Your Company continued its focus on improving operational efficiencies at its integrated steel service centre and as such could provide superior service at low operating costs to its customers. During the year under review, Lamination II line installed in the previous year became fully functional enabling the Company to make significant inroads in the transformer segment. Utilization of the CR slitting and shearing lines also increased over the previous year. Your Company could leverage
its strengths to capitalize on the opportunities provided by a significant pick up in demand across the industry segments in which it operates. As a result, the quantity of steel processed during the year increased significantly to 78,209 tonnes from 72,576 tonnes in the previous year representing an increase of 7.76%. Processing income was higher at Rs.1,283.49 lakhs as compared to Rs. 1,084.81 lakhs for the previous year registering an increase of 18.31%. This was achieved mainly on account of a sizeable increase in quantity processed and improved product mix. Higher revenue, improved margins and stringent cost containment measures have helped your Company achieve a higher profit before tax of Rs. 557.57 lakhs for the year against Rs. 421.75 lakhs in the previous year representing an increase of 32.20%. After providing for income tax of Rs. 212.00 lakhs (including Fringe Benefit Tax of Rs. 2.00 lakhs) and write back of provision for
51
deferred tax of Rs. 53.90 lakhs, profit after tax for the year has risen to Rs. 399.47 lakhs from Rs. 259.07 lakhs in the previous year registering a growth of 54%. Directors Responsibility Statement Pursuant to section 217 (2AA) of the Companies Act, 1956, your Directors, based on the representation 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;
The Board, on 28th October, 2005, appointed Mr. Prabal Banerji and Mr. Katsuhiko Shimada as Directors of the Company in place of Mr. Alan Durante and Mr. Tadashi Sawada, respectively. The Board, on the same day, also appointed Mr.Takanori Higashino as the Alternate Director to Mr. Shimada. Members will recall that the Joint Venture Agreement (JVA) and the Assignment Agreement (AA) subsisting between Mahindra & Mahindra Limited (M&M), Metal One Corporation (MOC), the existing JV partners, and the Company, were amended on 19th January, 2006, giving M&M and MOC both, a right to nominate one additional Director each on the Board of your Company. Pursuant to this and with a view to broad base the composition of the present Board, your Company, on a nomination from M&M, appointed Mr. Harsh Kumar as an additional Director of the Company with effect from 28 th March, 2006. Mr. Kumar holds office up to the date of the forthcoming Annual General Meeting of the Company. Your Company has received a notice from a member signifying his intention to propose the candidature of Mr. Kumar for the office of Director. Mr. Yoshiaki Kakehi retires by rotation and, being eligible, offers himself for re-appointment. Audit Committee The Audit Committee of the Board presently comprises of the following Directors of the Company: Mr. Raghunath Murti, Mr. Bharat Doshi, and Mr. Yoshiaki Kakehi or his Alternate Director, if any. Mr. Raghunath Murti is the Chairman of the Audit Committee. Two Meetings of the Audit Committee were held during the year. Public Deposits and Loans/Advances The Company has not accepted any deposits from the public or its employees during the year under review. The Company has not made any loans/advances, which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent company, Mahindra & Mahindra Limited. Corporate Social Responsibility Initiatives (CSR) As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since inception, the Mahindra Group has engaged in activities which add value to the communities around it. A step forward in this direction was taken by the announcement made on the occasion of the 60th anniversary of the holding company, Mahindra & Mahindra Limited, that the Group would support a range of CSR initiatives by committing up to 1% of Profit After Tax (PAT) every year, on a continuing basis to largely benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute towards Corporate Social Responsibility of the Company, up to 1% of the Companys estimated PAT for the year, on a continuing basis, until further reviewed by the Board.
ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgements 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, 2006 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. Corporate Governance
Constitution of the Board The Board presently has six Directors and all of them represent the joint venture partners. One of the Directors Mr. Katsuhiko Shimada has an Alternate Director to represent him on the Board. Board Meetings The Meetings of the Board of Directors are generally held at the Registered Office of the Company in Mumbai. Four Board Meetings were held during the year at which the financial results, matters relating to the operations of the Company and general industrial scenario were reviewed. Senior executives of the Company also attended the Board Meetings as invitees. Shareholding Your Company is a subsidiary of Mahindra & Mahindra Limited (M&M), which holds 61% of the paid up equity share capital of the Company. The balance 39% is held by Metal One Corporation, Japan.
Directors Mr. Alan Durante resigned as Director of the Company with effect from 25th September, 2005. Mr. Tadashi Sawada resigned as Director of the Company with effect from 13th October, 2005. Consequently, Mr. Takanori Higashino ceased to be the Alternate Director to Mr. Sawada with effect from the said date. Your Board has placed on record its sincere and deep appreciation of the valuable services rendered by Mr. Durante and Mr. Sawada during their tenure as the Directors of the Company.
52
Current Year Your Company expects that buoyancy in the Automobile, Home Appliance and Transformer segments will be sustained during the current year and will enable your Company to further optimize its resources by increasing its throughput and by enriching its product mix. Your Company is continuously evaluating opportunities to meet higher demand by further capacity addition at its existing location, and is also exploring the feasibility of expansion at certain other locations proximate to its customers. Auditors M/s. A. F. Ferguson Associates, Chartered Accountants, retire as auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The shareholders will be required to appoint auditors for the current year and to fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from the auditors to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. Safety, Health and Environmental Performance Your Companys commitment towards safety, health and environment is being continuously enhanced by its various initiatives on safety awareness, health surveys of employees, recycling of wastes, etc. The health survey of employees is conducted once in every two years. Your Company maintains green surrounding at the factory and has started recycling wooden pallets and packing paper to save on fast depleting natural resources. The requirements relating to various
environmental legislations and environment protection have been duly complied by your Company. Conservation of Energy Processing of materials at the factory at Kanhe is not power intensive. However, normal precautions are taken by the Company to minimize power consumption. Technology Absorption The Company has not entered into any technical collaboration with any party in the last five years. Foreign Exchange Earnings and Outgo The information on foreign exchange earnings and outgo is furnished in the Notes on Accounts. Particulars of Employees as required under section 217(2A) of the Companies Act, 1956 and rules made thereunder The Company had no employee who was in receipt of a remuneration of not less than Rs. 24,00,000 during the year ended 31st March, 2006 or not less than Rs. 2,00,000 per month during any part of the said year. For and on behalf of the Board of Directors of Mahindra Steel Service Centre Limited
Bharat Doshi Chairman Mumbai, 26th April, 2006.
53
AUDITORS REPORT To the Members of Mahindra Steel Service Centre Limited

1. We have audited the attached balance sheet of Mahindra Steel Service Centre Limited as at 31st March, 2006, the profit and loss account and 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, issued by the Central Government in terms of subsection (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 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, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; (iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; (v) On the basis of written representations received from the directors, as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;
2.
(vi) 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) (b) (c) in the case of balance sheet, of the state of affairs of the company as at 31st March, 2006; in the case of profit and loss account, of the profit for the year ended on that date; and in the case of cash flow statement, of the cash flows for the year ended on that date.
3.
4.
(ii)
For A. F. Ferguson Associates Chartered Accountants Neeta S. Potnis Partner Membership Number: 42463
(iii)
54
Annexure to the Auditors Report

[Referred to in Paragraph (3) thereof] (i) (a) The company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. No physical verification of fixed assets was carried out by the management during the year in accordance with its programme for physical verification of fixed assets once in every three years. In our opinion, the frequency of verification of fixed assets is at reasonable intervals. During the year, in our opinion, a substantial part of fixed assets has not been disposed off by the company. The inventory of the company has been physically verified by the management at the year end. In our opinion, the frequency of verification is reasonable. 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. In our opinion, the Company has maintained proper records of inventory. 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. In our opinion and according to the information and explanations given to us, the company has not granted any secured or unsecured loans to companies, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956, and therefore sub-paragraphs (iii)(b), (iii)(c) and (iii)(d) are not applicable. In our opinion and according to the information and explanations given to us, the company had taken an unsecured loan, from a company covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount outstanding during the year in respect of such loan taken was Rs.160 lakhs and the loan amount was repaid during the year. According to the information and explanations given to us, the company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956, where the rate of interest and other terms and conditions are, in our opinion, prima facie prejudicial to the interest of the Company. (v) (iv) (d) As explained to us, the company is regular in repaying the principal amounts as stipulated, where stipulations have been made, and has been regular in the payment of interest.
(b)
(c)
(ii)
(a)
In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items are of a special nature for which alternative quotations are not available, 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, fixed assets and for the sale of goods and services. Further, on the basis of our examination and according to information and explanations given to us, we have neither come across nor have we been informed of any instance of major weakness in the aforesaid internal control system. (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; and In our opinion and according to the information and explanations given to us, having regard to comment in (iv) above, the transactions exceeding Rs. five lakhs made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.
(b)
(c)
(b)
(iii)
(a)
(vi)
The Company has not accepted any deposits from public, to which the provisions of the directives issued by the Reserve Bank of India and the provisions of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956, and the rules framed thereunder are applicable. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.
(b)
(vii)
(viii) According to the information and explanations given to us and to the best of our knowledge, the Central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956. (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 in respect of provident fund, income-tax, fringe benefit tax, sales-tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it, have been regularly deposited by the Company during the year with the appropriate authorities. According to the information and explanations given to us, no
55
(c)
undisputed amount payable in respect of aforesaid statutory dues were in arrears as at 31st March, 2006 for a period of more than six months from the date they became payable. Further, since the Central Government has till date not prescribed the amount of cess payable under section 441A of the Companies Act, 1956, we are not in a position to comment upon the regulatory or otherwise of the Company in depositing the same. (b) As at 31st March, 2006 according to the records of the Company and the information and explanations given to us, there are no disputed dues of incometax, fringe benefit tax, sales-tax, wealth tax, service tax, custom duty, excise duty and cess matters that have not been deposited on account of any dispute and therefore Clause 4(ix) (b) of the Order is not applicable to the Company.
(xv) 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 prima facie, prejudicial to the interest of the company. (xvi) The Company has not obtained any term loans that were not applied for the purpose for which these were raised. (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) During the year, 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. (xix) As the Company has not issued any debentures, 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) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.
(x)
The Company has neither accumulated losses as at 31st March, 2006 nor has it incurred any cash losses during the financial year ended on that date or in the immediately preceding financial year. In our opinion and based on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of its dues to any financial institution, bank or to debenture holders during the year. 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.
(xi)
(xii)
(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 and according to the information and explanations given to us, 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.
56

31st March, 2006 Rupees Lakhs 31st March, 2005 Rupees Lakhs
Schedule I. SOURCES OF FUNDS SHAREHOLDERS FUNDS Capital .......................................................................... Reserves and Surplus .................................................. LOAN FUNDS ................................................................. DEFERRED TAX LIABILITY ............................................ [Refer Note 1(J) and Note 6 on Schedule XII] Total ................... II. APPLICATION OF FUNDS FIXED ASSETS Gross Block ............................................................... Less : Depreciation .................................................... Capital work in progress and advances ..................... Net Block ................................................................... CURRENT ASSETS, LOANS AND ADVANCES Inventories .................................................................. Sundry Debtors ........................................................... Cash and Bank Balances ............................................ Loans and Advances ................................................... V I II III
Rupees Lakhs
610.47 1181.59 1792.06 593.15 322.61 2707.82
610.47 903.23 1513.70 662.75 376.51 2552.96
IV 3557.02 1281.93 2275.09 2275.09 3556.08 1083.42 2472.66 3.82 2476.48
30.86 232.28 464.70 129.25 857.09 VI 272.91 151.45 424.36
49.41 564.67 48.40 132.07 794.55 558.21 159.86 718.07 432.73 76.48 2552.96
Less : CURRENT LIABILITIES AND PROVISIONS Liabilities ....................................................................

Provisions ..................................................................
NET CURRENT ASSETS Total ................... NOTES TO THE ACCOUNTS XII
2707.82
Per our report attached For A F Ferguson Associates Chartered Accountants Neeta S. Potnis Partner Bakul Sheth Company Secretary
Bharat Doshi Raghunath Murti Harsh Kumar Prabal Banerji Yoshiaki Kakehi Takanori Higashino
Chairman Managing Director
Directors
Mumbai, 26th April 2006

57
Schedule INCOME : Gross Sales ........................................................................... Less : Excise Duty Net Sales ................................................................................ Income from Services Rendered (Gross) ............................... [Tax Deducted at Source Rs.41.63 Lakhs (2005 : Rs.50.36 Lakhs)] Other Income ........................................................................ VII 95.10 1667.69 EXPENDITURE : Raw Material, Finished and Semi-Finished Products ............ Personnel .............................................................................. Interest .................................................................................. Depreciation .......................................................................... Other Expenses .................................................................... XI VIII IX X 238.97 108.96 18.32 198.67 545.20 1110.12 Profit before Tax ................................................................... 557.57 2.00 (53.90) 210.00 399.47 427.18 105.31 15.80 736.51 91.85 36.79 177.60 528.37 1571.12 421.75 13.55 149.13 259.07 277.84 79.36 10.37 85.26 1992.87 336.11 47.01 289.10 1283.49 950.60 127.80 822.80 1084.81 2006 Rupees Lakhs 2005 Rupees Lakhs
Less : Provision for Fringe Benefit Tax .................................. Provision for Deferred Tax ..........................................
Provision for Current Income Tax ............................... Profit for the year after Tax .................................................. Profit and Loss Account Balance brought forward from last year ............................................................
Less : Proposed Dividend ...................................................... Dividend Tax on Proposed Dividend ........................... [includes Rs.0.76 lakhs (2005: Rs. Nil) pertaining to the previous year] Less : Transfer to General Reserve .......................................
Balance carried to the Balance Sheet ...................................
40.00 665.54
20.00 427.18
Earning per Share Basic [(Rupees) Refer note 11 on Schedule XII] NOTES TO THE ACCOUNTS ...............................................
Per our report attached For A F Ferguson Associates Chartered Accountants Neeta S. Potnis Partner Bakul Sheth Company Secretary
6.54 XII
4.24
Directors
58
Cash Flow Statement for the Year Ended 31st March, 2006
31st March, 2006 Rupees lakhs Rupees lakhs A. CASH FLOW FROM OPERATING ACTIVITIES Profit before tax for the year Adjustments for: .................................................................... Depreciation .......................................................................... Amortisation of Preliminary Expenses .................................. Fixed Assets Written Off ....................................................... Foreign Exchange Gain .......................................................... Interest received ................................................................... Interest expense ................................................................... Operating Profit before Working Capital Changes Changes in: Trade and Other Receivables ................................................ Inventories ............................................................................. Trade and Other Payables ..................................................... Cash Generated from Operations ......................................... Income Taxes Paid (net of refund) ......................................... Net Cash from Operating Activities .................................. B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed Assets and capital advances .................... Interest Received .................................................................. Net Cash used Investing Activities .................................... C. CASH FLOW FROM FINANCING ACTIVITIES Dividends paid (including Income Tax on dividends) Interest free sales tax loan .................................................... Repayment of Inter Corporate Deposit ................................. Interest Paid .......................................................................... Net Cash used in Financing Activities ............................... Net Increase in Cash and Cash Equivalents ...................... CASH AND CASH EQUIVALENTS (Refer Schedule V) Opening Balance as at 1st April, 2005 .................................. Closing Balance as at 31st March, 2006 ............................... 557.57 198.67 (0.27) (11.80) 18.32 204.92 762.49 340.28 18.55 (285.14) 73.69 836.18 (254.26) 581.92 (26.39) 9.57 (16.82) (90.49) 114.75 (160.00) (13.06) (148.80) 416.30 (178.72) 15.51 96.84 (66.37) 567.67 (79.58) 488.09 (176.13) 3.67 (172.46) (61.98) 4.00 (215.00) (34.59) (307.57) 8.06 177.60 0.23 1.57 (3.90) 36.79 212.29 634.04 31st March, 2005 Rupees lakhs Rupees lakhs 421.75
48.40 464.70 416.30 31st March, 2006
40.34 48.40 8.06 31st March, 2005 44.94 3.46 48.40

Balance with Scheduled Bank in : Current Accounts ............................................................. Fixed Deposit Account * .................................................. * lien marked for SOD limit
Per our report attached For A F Ferguson Associates Chartered Accountants Neeta S. Potnis Partner Bakul Sheth Company Secretary Bharat Doshi Raghunath Murti Harsh Kumar Prabal Banerji Yoshiaki Kakehi Takanori Higashino
21.10 443.60 464.70
Directors

59
Schedules to the Balance Sheet

SCHEDULE I SHARE CAPITAL 31st March, 2006 Rupees Lakhs 1000.00 1000.00 31st March, 2005 Rupees Lakhs 1000.00 1000.00 SCHEDULE V CURRENT ASSETS, LOANS AND ADVANCES (A) CURRENT ASSETS Inventories Stores and Spares ........................... Raw Materials ................................. Work-in-Progress ............................ Rupees Lakhs 31st March, 2006 Rupees Lakhs 31st March, 2005 Rupees Lakhs
Authorised : 1,00,00,000 Equity Shares of Rs.10 each Total ..... Issued, Subscribed and Paid up : 61,04,706 Equity Shares of Rs.10 each Total ..... Of the above, 37,23,874 Equity Shares are held by Mahindra & Mahindra Limited, the holding company, [including 7 Equity Shares held jointly with its nominees]
30.86 30.86
31.90 1.55 15.96 49.41
610.47 610.47
610.47 610.47 Sundry Debtors (Unsecured, unless otherwise stated) Debts outstanding for a period exceeding six months : Considered good ...................... [including Rs.1.24 Lakhs due from the holding company (2005 : Rs.1.24 Lakhs)] & fellow subsidiary Rs.1.00 lakhs (2005: Rs.Nil)] Considered doubtful ................. Other debts, considered good [including Rs.Nil due from the holding company (2005 : Rs. 65.87 Lakhs) & fellow subsidiary Rs. 147.92 lakhs (2005: Rs. 0.44 Lakhs)] ................... Less : Provision for doubtful debts .
8.12
40.38
SCHEDULE II RESERVES AND SURPLUS
31st March, 2006 Rupees Lakhs 20.00 436.05 20.00 40.00 60.00 665.54 1181.59
31st March, 2005 Rupees Lakhs 20.00 436.05 20.00 20.00 427.18 903.23
19.73 27.85 224.16
18.70 59.08 524.29
Capital Reserve : Opening Balance ..................................... Share Premium : Opening Balance ..................................... General Reserve : Opening Balance : Transfer from Profit and Loss Account Closing Balance : Profit and Loss Account Balance ............. Total ......
252.01 19.73 232.28
583.37 18.70 564.67
Cash and Bank Balances Balances with Scheduled Banks in : Current Accounts ........................ Fixed Deposit Account* ............. * Rs.3.60 Lakhs - lien marked for Bank overdraft
21.10 443.60 464.70
44.94 3.46 48.40
SCHEDULE III LOAN FUNDS Secured Secur ed Foreign Currency Loan from Bank (secured by hypothecation of lamination line II) Unsecured Unsecur ed Interest free sales tax loan from SICOM [Repayable with, in one year Rs. Nil (2005: Rs.Nil)] Short Term Loan from a Limited Company [Repayable within one year Rs. Nil (2005 : Rs. 160 Lakhs)] Total ...... SCHEDULE IV FIXED ASSETS:
31st March, 2006 Rupees Lakhs 474.40
31st March, 2005 Rupees Lakhs 498.75
118.75
4.00 160.00
(B) LOANS AND ADVANCES (Unsecured, considered good) Advances recoverable in cash or in kind or for value to be received .... Payments towards Current Income Tax ................................................... Balances with Customs and Excise authorities ............................ Total .....
58.82 11.52 58.91 129.25 857.09
55.91 8.91 67.25 132.07 794.55
593.15
662.75
(Rupees Lakhs) Cost Description of Assets As at 1st April, 2005 10.86 603.67 2917.67 15.76 8.12 3556.08 2799.72 Additions during the year (3.44) # 4.54 1.10 742.41 Adjustments Deductions during during the the year year 17.40 0.16 0.16 3.45 As at 31st March, 2006 10.86 603.67 2914.07 15.76 12.66 3557.02 3556.08 As at 1st April, 2005 2.70 163.29 908.09 8.87 0.47 1083.42 907.70 Depreciation/Amortisation For the Year Adjustment/ Deductions Upto 31st March, 2006 2.95 183.15 1085.04 9.51 1.28 1281.93 1083.42 Net Block As at 31st March, 2006 7.91 420.52 1829.03 6.25 11.38 2275.09 2472.66 As at 31st March, 2005 8.16 440.38 2009.58 6.89 7.65 2472.66
Leasehold Land Buildings Plant and Machinery Furniture and Fittings Vehicles Total 2005
0.25 19.86 177.11 0.64 0.81 198.67 177.60
0.16 0.16 1.88
# Net of Exchange Gain (Net) of Rs.25.30 lakhs (2005:Rs.1.72 lakhs)
60
Schedules to the Balance Sheet

SCHEDULE VI CURRENT LIABILITIES AND PROVISIONS: 31st March, 2006 Rupees Lakhs 31st March, 2005 Rupees Lakhs SCHEDULE IX PERSONNEL: Salaries, Wages, Bonus, etc. .................... Staff Welfare Expenses ............................ Contribution to Provident and Other Funds Gratuity ...................................................... Total ......... SCHEDULE X INTEREST: Others* .................................................. * Net of Interest Capitalised Rs. Nil Lakhs (2005 : Rs.5.01 Lakhs) Total ..... SCHEDULE XI OTHER EXPENSES: Stores Consumed .................................. Packing Material Consumed ................... Power and Fuel ...................................... Rates and Taxes ..................................... Freight Outward ..................................... Insurance ................................................ Provision for doubtful debts .................... Repairs and Maintenance Buildings ......................................... Machinery ....................................... Others ............................................. Marketing and Support Service Charges Bank Charges ......................................... Amortisation of Preliminary Expenses [Refer Note 1(E) on Schedule XII] ........... Fixed Assets Written Off ........................ Miscellaneous Expenses (Refer Note 3 on Schedule XII) ..................................... Total ..... 2006 Rupees Lakhs 92.97 8.16 5.09 2.74 108.96 2006 Rupees Lakhs 18.32 2005 Rupees Lakhs 79.05 7.31 4.47 1.02 91.85 2005 Rupees Lakhs 36.79
(A) CURRENT LIABILITIES Sundry Creditors: - Total outstanding dues of Small Scale Industrial Undertakings (Note 7) ......... - Total outstanding due of creditors other than Small Scale Industrial Undertakings [including Rs.0.08 Lakhs due to the holding company (2005: Rs. 3.33 Lakhs)] Sales Tax Deferral ........................... [Refer Note 5 on Schedule XII] [Payable within one year Rs.Nil (2005 : Rs.Nil)] Interest Accrued but not due on loan (B) PROVISIONS: Gratuity ................................................... Leave Encashment ................................. Provision for Current Income Tax ............ Provision for fringe benefit tax ................ Proposed Dividend .................................. Dividend Tax on Proposed Dividend ........ Total .......
95.37 170.08
413.57 137.43
7.46 272.91 10.04 2.93 18.07 0.06 105.31 15.04 151.45 424.36
7.21 558.21 7.99 2.36 59.78 79.36 10.37 159.86 718.07
18.32 2006 Rupees Lakhs 29.05 158.63 45.34 6.23 68.20 11.11 6.93
36.79 2005 Rupees Lakhs 18.77 157.77 44.07 8.19 72.55 17.53 5.92 0.95 10.51 18.64
Rupees Lakhs
Schedules to the Profit and Loss Account

SCHEDULE VII OTHER INCOME: Interest from Banks (Gross) ................... [Tax Deducted at Source Rs.1.05 Lakhs (2005: Rs.0.01 Lakhs)] Interest from Others (Gross) .................. [(Tax Deducated at Source Rs. Nil (2005: Rs. Nil)] Steel Scrap Sales ................................... Sundry creditors balances no longer required Written Back ............................ Provision for doubtful debts no longer required written back ............................. Miscellaneous Income ........................... Total ...... 2006 Rupees Lakhs 7.14 2005 Rupees Lakhs 0.12
1.26 12.69 18.79 32.74 119.70 7.52 59.75 545.20
30.10 110.27 5.68 0.23 1.57 55.72 528.37
4.66
3.78
6.32 0.20 5.91 70.87 95.10
13.29 7.46 60.61 85.26
SCHEDULE VIII RAW MATERIALS, FINISHED AND SEMI-FINISHED PRODUCTS: (A) Consumption of Raw Materials : Opening Stock Add: Purchases [including outside processing charges Rs.0.42 Lakhs, (2005 : Rs. 1.07 Lakhs)] ............. Less : Closing Stock ......................
Rupees Lakhs 1.55 221.46 223.01
2006 Rupees Lakhs
2005 Rupees Lakhs 4.40 749.14 753.54 1.55
223.01 Decrease/(Incr ease/(Increase) (B) Decr ease/(Increase) in Stock of Finished Work-in-Progress ork-in-Progr Goods and Work-in-Pr ogr ess : Opening Stock (i) Finished Goods ...................... (ii) Work-in-Progress .................... 15.96 15.96
751.99
0.48 0.48 15.96 (15.48) 736.51
Less : Closing Stock : (i) Finished Goods ...................... (ii) Work-in-Progress ....................
Total .....
15.96 238.97
61
NOTES ANNEXED TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT

SCHEDULE XII Notes on Accounts 1. Significant Accounting Policies : (A) Basis of Accounting : The financial statements are prepared under the historical cost convention and on accrual basis. The financial statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (The Act) (B) Fixed Assets : (a) Fixed Assets are stated at cost less depreciation. Financing cost that are attributable to the acquisition, construction or production of a qualifying asset are included in the cost of asset upto the date the asset is ready for use. (b) (i) Leasehold land is amortised over the period of the lease. (ii) Depreciation on the other fixed assets is calculated on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Act. (C) Inventories : Inventories are stated at the lower of cost and net realisable value. Costs are ascertained on Moving Weighted Average Method and includes, wherever applicable, manufacturing overheads and excise duty. (D) Revenue Recognition : (i) Sale of product is recognised on despatch and is inclusive of excise duty recovered but net of sales tax. (ii) Processing Income is recognised when the processed products are despatched. (E) Miscellaneous Expenditure (to the extent not written off or adjusted) : This represents unamortised portion of expenses incurred on formation of the Company, and increase in the authorised capital, which is being amortised over a period of ten years. (F) Retirement Benefit : Gratuity & Leave Encashment : Gratuity Provision is determined considering the number of years of service of the employees in the Company in accordance with the policies of the Company. Leave Encashment is determined considering accumulated number of leave of the employee in the company in accordance with the policies of the company. (G) Excise Duty : Liability for Excise Duty is recognised on production of Finished Goods (H) Foreign Currency Transactions : All foreign currency monetary items are translated at the relevant rates of exchange preavailling at the year end. In respect of forward exchange contract the premium or discount arising at the inception of such a contract is amortilised as expense or income over the life of the contract. In case of monetary items (other that those for acquisition of fixed assets from a country outside India) the exchange difference are recognised in the Profit and Loss Account. In the case of monetary items incurred for the acquisition of fixed assets a country outside India, the exchange differences are adjusted to the cost of such assets. (I) Borrowing Costs : Borrowing Costs directly attributable to the acquisition of an asset are apportioned to the cost of Fixed Asset upto the date on which the asset is put to use/commissioned. (J) Tax on Income : Current tax is accounted at the amount expected to be paid to / recovered from the taxation authroites using the applicable tax rates and tax laws. Deferred Tax is recognised subject to the consideration of prudence, on timing difference, being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deffered tax assets are not recognised on unabsorbed depreciation and carry forward of losses unless there is virtual certainty that sufficient future taxable income will be available against which such defferred tax assets can be realised.
2.
Contingent liabilities at year end not provided for in respect of: 2006 Rupees Lakhs (i) Claims against the company not acknowledged as debts: Sales Tax (Demand raised by Sales tax authorities for Rs.4.76 lakhs contested by the company in the appeal at Sales Tax Tribunal) ...................................................... 4.26 Income Tax ................................................. 0.89
2005 Rupees Lakhs
4.26 2.17
3.
Miscellaneous Expenses include auditors remuneration as follows: 2006 2005 Rupees Rupees Lakhs Lakhs (i) As Auditors ................................................. (ii) Other Capacity - Other services ......................................... (iii) Reimbursement of expenses ...................... 0.12 0.27 1.82 0.01 2.20 1.70
4. 5.
Repairs and Maintenance includes machinery spares consumed Rs.6.07 Lakhs (2005 : Rs.3.79 Lakhs) The Company has received the Certificate of Entitlement from the Deputy Commissioner of Sales Tax, Maharashtra State, in terms of the Package Scheme of Incentives, 1993 of the Government of Maharashtra, consequent to which the company has deferred the sales tax liability with effect from 1st May, 2002. Accordingly, the sales tax liability so deferred amounting to Rs.170.08 Lakhs as at 31 st March, 2006 (2005 : Rs. 137.43 Lakhs) has been disclosed under the head Current Liabilities and Provisions. Deferred Taxation (A) The components of Deferred Tax liability and assets of the company are as under : Particulars 31st March, 2006 Rupees Lakhs 390.86 390.86 Less - Deferred Tax Assets : (i) On Retirement Benefits - Gratuity ................ (ii) On Retirement Benefits - Leave Encashment .. (iii) On Provision for Doubtful Debts .................. (iv) On Sales Tax Deferral ................................... Deferred Tax Liability (Net) ................................. 3.38 0.99 6.64 57.24 68.25 322.61 31st March, 2005 Rupees Lakhs 437.42 437.42 2.92 0.86 6.84 50.29 60.91 376.51
6.
Deferred Tax Liability : On Depreciation ................................................
7.
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 supplier to the company. There is no SSI to whom the company owes as on 31st March, 2006. Pursuant to Accounting Standard Interpretation (ASI - 2) issued by The Institute of Chartered Accountants of India, during the previous year the company capitalised insurance spares aggregating Rs. 17.40 lakhs from stores and spares inventory and charged depreciation at rates applicable to fixed assets to which the spares belong. Accordingly depreciation for previous year includes a charge pertaining to earlier years of Rs.7.84 lakhs. The Company is engaged exclusively in the business of manufacturing, processing, sale, etc of Flat Rolled Products. These, in context of Accounting Standard 17 - Segment Reporting, issued by The Institute of Chartered Accountants of India, are considered to constitute one single primary segment. Therefore, the disclosure requirements of the said Standard are not applicable.
8.
9.
10. As per Accounting Standard 18 - Related Party, issued by The Institute of Chartered Accountants of India which is mandatory, the company has identified all the related parties having transactions during the period as per details given below: 1. In respect of the outstanding balances recoverable as at 31st March, 2006 no provision for doubtful debts has been made in respect of these parties. 2. During the period there were no amounts written off and written back from such parties.
62
(A) Related parties where control exists : Holding Company : Mahindra & Mahindra Limited (M&M)
Other related parties with whom the company has transaction, etc: Fellow Subsidiary : Mahindra Intertrade Limited (MIL) : Mahindra Middle-East Electrical Steel Service Centre FZC (MMESS) Mahindera Ugine Steel Company Limited (MUSCO) A Company having Significant influence : Metal One Corporation (MO) Key Managerial Personnel : Mr. Raghunath Murti
(B) (a) Disclosure of transactions between the company and related parties during the year ended as at 31st March, 2006 : (Rupees Lakhs) (Receipts / income) / Expenditure / payment Holding Company M&M 31st March, 2006 (31st March, 2005) Purchase of Finished Goods Purchase of Machinery Purchase of Vehicle Processing Income Interest Paid Transport Charges paid Other Expenses Other Income Marketing and Support service charges Dividend on Equity Shares paid during the period Reimbursement received from Parties Reimbursement made to Parties Deputation of Personnel from related parties Deputation of Personnel to related parties Intercorporate Deposits refunded to parties (b) Outstanding receivable 31st March, 2006 Rupees Lakhs From Holding company From Fellow Subsidiary (c) Outstanding payable 31st March, 2006 Rupees Lakhs To Holding company # To Fellow Subsidiary [(including short term loan of Rs. Nil (2005:, Rs. 160 lakhs)] To Company having significant influence # excludes equity share capital Previous years figures are in Italics 31st March, 2005 Rupees Lakhs 3.33 389.70 83.74 1.24 148.92 31st March, 2005 Rupees Lakhs 67.11 0.44 Fellow Subsidiary MIL 31st March, 2006 (31st March, 2005) 250.63 Fellow Subsidiary MMESS 31st March, 2006 (31st March, 2005) Fellow Subsidiary MUSCO 31st March, 2006 (31st March, 2005) A Company having Significant influence MO 31st March, 2006 (31st March, 2005)
708.23

3.60
83.74
4.06
(36.09) (219.17) 13.29
(937.46)
(0.39)
(665.13)
0.96
34.59
58.92
0.67 0.68 (0.16) 48.41
(6.85)
(0.93)
30.95
(5.09)
116.82
109.06
(5.41)
33.51

21.43

(2.67)
0.08
(0.44)
0.07

0.07
1.28
1.47
31.80
24.57
160.00
215.00
63
11. Earning per Share : Year ended 31st March, 2006 399.47 6104706 6.54 Year ended 31st March, 2005 259.07 6104706 4.24
Profit for the period after tax (Rs. in lakhs) Weighted average number of shares Earning per Share Basic (Rupees) (A) Particulars in respect of goods manufactured: Class of Goods Unit of Measurement Year Installed Processing Capacity Per annum (on single shift basis) 54,400 54,400 Acutal Quantity Processed * 78209 * 72576
(A) (B) (A/B)
12. Additional information pursuant to the provision of paragraphs 3(i)(a) and (ii)(a), 4C and 4D of Part II of Schedule VI to the Act Opening Stock Qty. Value Rupees Lakhs Closing Stock Qty. Value Rupees Lakhs Sales Qty. Value Rupees Lakhs 336.11# 943.02#
Steel Blanks/Slit coils
MT MT
2006 2005
131 813
* Includes 131 Metric Tonnes (2005 : 813 Metric Tonnes) processed for own consumption # Includes sale of cuts and slits materials Rs. 76.75 Lakhs (2005 : Rs. 47.65 Lakhs) Notes : (1) Installed Processing Capacity and actual quantity processed are in respect of slitting, shearing and levelling of steel coils. (2) The Installed Processing Capacity varies in accordance with the product mix and is as certified by Managing Director. (B) Particulars in respect of Traded Goods (Rupees Lakhs) Class of Goods Steel Unit of Measurement Metric Tonnes Year 2006 2005 Purchase Qty Value 7 6.56 Sales Qty 7 Value 7.58
(C) Particulars of Raw Materials Consumed (entirely indigenous): Description Unit of Measurement 2006 Quantity Value Rupees Lakhs 223.01 Quantity 2005 Value Rupees Lakhs 751.99
Steel
Metric Tonnes
140
838
Notes : 1. The consumption in value has been ascertained on the basis of the opening stock plus purchases less closing stocks and includes the adjustment of excesses and shortages as ascertained on physical count and write-offs of obsolete and unserviceable raw materials. 2. In giving the above information the Company has taken the view that spares as referred to in paragraph 4(D)(c) of Part II of Schedule VI covers only such items as go directly into production and not spares used for repairs and maintenance of Machinery. (D) Expenditure in Foreign Currency 2006 Rupees Lakhs (i) CIF Value of Imported Spares (ii) CIF Value of Imported Machinery (iii) Interest Paid (E) Earnings in Foreign Exchange 2006 Rupees Lakhs Exchange gain/(loss) - net (including not gain capitalised Rs.25.30 lakhs (2005: 1.72 lakhs) (F) Remittance in Foreign Currency on account of Dividends to Non-Resident Shareholders Number of Year 2005-2006 2004-2005 13. Derivative Instruments : The Company has entered into Forward Exchnage Contracts (being a derivative instrument), which are not intended for trading or speculative purposes, but for hedge purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables or receivables. The following are the outstanding forward Exchange Contracts entered into by the Company as on 31st March, 2006: Currency EUR Amount 877,000 Buy / Sell Buy Cross Currency Rupees Shareholders 1 1 Shares Rupees Lakhs 23,80,832 23,80,832 30.95 21.43 2004-2005 2003-2004 Amount Remitted Dividend relating to 20.00 2005 Rupees Lakhs 1.68 9.85 8.21 17.17 2005 Rupees Lakhs 4.90 585.70 7.21
The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are nill, The above disclosure have been made consequent to an announcement by the Institute of Chartered Accountants of India in December, 2005, which is applicable to financial periods ending on or after 31st March, 2006. Therefore, figures for the previous year have not been disclosed. 14. Previous years figures have been regrouped/rearranged, wherever necessary.
64
15. Additional Information as required under Part IV of Schedule VI to the Act. Balance Sheet Abstract and Company's General Business Profile
I.
Registration Details : Registration No. Balance Sheet Date 3 1 1 1 0 7 3 0 4 0 1 6 6 State Code 1 1
II.
Capital Raised during the Year (Amount in Rs. Thousands) Public Issue N Bonus Issue N I L I L Rights Issue N Private Placement N I L I L
III.
Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Assets 3 1 3 2 1 8
Total Liabilities including Shareholders Funds 3 1 3 2 1 8
Sources of Funds Paid-up Capital 6 1 0 4 7
Application of Funds Net Fixed Assets 2 2 7 5 0 9
Reserve and Surplus 1 1 8 1 5 9 + 4 0
Investments N I L
Secured Loans 4 7 4
Net Current Assets 4 3 2 7 3
Unsecured Loans 1 3 1 2 8 2 7 6 5 1 Deferred Tax Liability (net)
(Please tick appropriate box + for Positive, for Negative) Miscellaneous Expenditure N Accumulated Losses N I L I L
IV.
Performance of Company (Amount in Rs. Thousands) Turnover (including other income) 1 6 6 7 6 9 Total Expenditure 1 1 1 0 1 2
+ Profit/Loss Before Tax 5 5 7 5 7 (Please tick appropriate box + for Profit, for Loss) + Earning per Share* in Rs. 6 . 5 4
+ Profit/Loss After Tax 3 9 9 4 7 (Please tick appropriate box + for Profit, for Loss) Dividend Rate % 1 7 . 2 5
(Please tick appropriate box + for Positive, for Negative) # Profit for the Year: Rs. 399.47 Lakhs, Weighted Average Number of Equity Shares: 6,104,706, Nominal Value of an Equity Share: Rs. 10 V. Generic Names of Three Principal Products/Services of the Company (as per monetary terms) Item Code No. (ITC Code) Product Description F 7 L A 2 T 0 9 . 2 0 L E D P R O D U C T C O L D
R O L
R O L Item Code No. (ITC Code) Product Description F 7 L A
L E D 2 T 0 8 . 2 9 L E D P R O D U C T H O T
R O L
R O L
L E D
Signatures to Schedules I to XII Per our report attached For A F Ferguson Associates Chartered Accountants Neeta S. Potnis Partner Bakul Sheth Company Secretary
Directors

65
MAHINDRA HOLDINGS & FINANCE LIMITED

Your Directors present the Twenty-first Annual Report together with the audited accounts of your Company for the year ended 31st March, 2006. Financial Results Rs. in lakhs 2006 Income ................................................................................................... Profit before interest and tax ................................................................. Less : Interest ........................................................................................ Profit before taxation ............................................................................. Less : Provision for taxation ................................................................... Current Tax .................................................................................. Deferred Tax ................................................................................ Profit after Tax ........................................................................................ Add : Balance brought forward from Earlier years ................................ Balance Profit available for appropriation ............................................... Less: Special Reserve ............................................................................ General Reserve .......................................................................... Interim Dividend : equity shares .................................................. Income-tax on interim dividend .................................................... Balance carried forward ......................................................................... 86.50 (1.30) 9,822.31 2,109.20 11,931.51 1,964.46 9,967.05 60.00 (6.71) 6,205.29 158.60 6,363.89 1,241.06 470.00 2,249.61 294.02 2,109.20 10,012.04 9,974.41 66.90 9,907.51 2005 7,382.18 6,348.34 89.76 6,258.58
................................................................................................... ...................................................................................................
Operations During the year under review, your Company divested part of its investment in Tube Investments of India Limited and made strategic investments in Mahindra Ugine Steel Company Ltd. and Siro Plast Ltd. During the year, 1,00,00,000 - 9% Cumulative Redeemable Preference Shares of Rs.10 each of Mahindra Holidays & Resorts India Limited (MHRIL), held by the Company were converted into 1,00,00,000 equity shares of the face value of Rs.10 each at par. Subsidiaries During the year, Mahindra Ugine Steel Company Limited (MUSCO) along with its subsidiary Console Estate and Investments Limited (Console) became a subsidiary of your Company. By order of the High Court of judicature at Bombay, dated 20th March, 2006, Console merged with MUSCO effective from 1st April, 2005 and ceased to be a subsidiary of MUSCO and consequently of the Company. The audited statement of accounts for the year ended 31st March, 2006 of the Companys subsidiaries together with reports of their Directors and Auditors, and statement pursuant to section 212 of the Companies Act, 1956 are attached.
Shifting of Registered Office During the year under review, your Company shifted its Registered Office from Gateway Building, Apollo Bunder, Mumbai - 400 001 to Mahindra Towers, P. K. Kurne Chowk, Worli, Mumbai - 400 018 for operational convenience. Directors Responsibility Statement Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation received from the Operating Management, and after due enquiry, confirm that :(i) (ii) in the preparation of the annual accounts, the applicable accounting standards have been followed; 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, 2006 and of the profit of the Company for the year ended on that date; 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
(iii)
66
for preventing and detecting fraud and other irregularities; (iv) the annual accounts have been prepared on a going concern basis.
Presently, the Audit Committee comprises Mr. A. K. Nanda (Chairman), Mr.U. Y. Phadke and Mr. M. A. Nazareth. The Audit Committee met twice during the year. Auditors Messrs. A. F. Ferguson & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from Messrs. A. F. Ferguson & Co., Chartered Accountants, to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. Public Deposits and Loans /Advances The Company has not accepted deposits from the public or its employees during the year under review. 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 with the parent company, Mahindra & Mahindra Ltd., are furnished separately. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption respectively are not applicable to the Company. There were no foreign exchange earnings or outgo during the year under review. Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and the Rules made thereunder The Company had no employee who was in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2006 or not less than Rs.2,00,000 per month during any part thereof. For and on behalf of the Board Keshub Mahindra
Corporate Social Responsibility Initiatives As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since its inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the announcement made on the occasion of the 60th Anniversary, of Mahindra & Mahindra Ltd., the holding company that the Group would support a range of Corporate Social Responsibility initiatives by committing 1% of Profit After Tax (PAT) on a continuing basis. The 1% PAT would specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/or other Institutions, including K. C. Mahindra Education Trust and/or Mahindra Foundation, not related to the business of the Company or the welfare of the employees, towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Companys estimated PAT for the year on a continuing basis until further review by the Board. A beginning in this direction was made by your Company during the current year by making a contribution of Rs. 25 lakhs to various charitable institutions. Directors Mr. Bharat Doshi and Mr. Anand G. Mahindra retire by rotation and, being eligible, offer themselves for re-election at the forthcoming Annual General Meeting. Mr. M. A. Nazareth was appointed by the Board as an Additional Director at its meeting held on 26th July, 2005. Mr. Nazareth holds office upto the date of the forthcoming Annual General Meeting of the Company. The Company has received a notice from a member signifying his intention to propose Mr. Nazareth as a Director of the Company at the forthcoming Annual General Meeting. Audit Committee Mr. M. A. Nazareth was also appointed as a Member of the Audit Committee in place of Late R. K. Pitamber effective 26th July, 2005. Mr. A. K. Nanda was elected Chairman of the Audit Committee at the Audit Committee Meeting held on 16th November, 2005.
Chairman Mumbai, 29 May, 2006

th
67
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 with the parent company, Mahindra & Mahindra Limited Balance as on 31st March, 2006 NIL NIL Rs. in lakhs Maximum outstanding during the year ended 31st March, 2006 NIL NIL
Name of the Company Loans and advances in the nature of loans to Subsidiary: ... Loans and advances in the nature of loans to Associates: ... Loans and advances in the nature of loans to firms/companies in which directors are interested:
Name of the Company Mahindra & Mahindra Financial Services Limited .................
Balance as on 31st March, 2006 NIL
Maximum outstanding during the year ended 31st March, 2006 89.00
The Company has not given any loans or advances in the nature of loans to any other related parties as defined in Accounting Standard 18- Related Party Disclosures where there is no repayment schedule or repayment beyond seven years or no interest or interest below section 372A of the Companies Act, 1956.
68
Auditors Report to the Members of Mahindra Holdings & Finance Limited

1. We have audited the attached balance sheet of Mahindra Holdings & Finance Limited as at 31st March, 2006, 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 amended by the Companies (Auditors Report) (Amendment) Order, 2004 (hereinafter referred to as the Order) issued by the Central Government of India in terms of subsection (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; For A.F. Ferguson & Co. Chartered Accountants A. S. Varma Partner Membership No. 15458 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, 2006, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006 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) (b) (c) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2006; in the case of the profit and loss account, of the profit for the year ended on that date; and in the case of the cash flow statement, of the cash flows for the year ended on that date.
v.
2.
vi.
3.
4.
ii.
iii.
69
Annexure to the Auditors Report of Mahindra Holdings & Finance Limited for the year ended 31st March, 2006 (Referred to in paragraph (3) thereof)
(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. All the fixed assets have been verified by the management at the year end in pursuance of a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its fixed assets. No material discrepancies were noticed on such verification. According to the information and explanations given to us and the records examined by us, during the year, the Company has not disposed off any fixed assets. (g) companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company. The Company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest.
(b)
(iv)
(c)
In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to fixed assets and sale of services. (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 have been so entered. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 have been made at prices, which are reasonable having regard to the prevailing market prices.
(v)
(ii)
As the Company does not have any inventory, paragraphs 4(ii)(a) to 4(ii)(c), 4(iv) to the extent relatable to purchase of inventory and sale of goods, and paragraph 4(viii) relating to maintenance of cost records, of the Order are not applicable. (a) According to the information and explanations given to us and on the basis of the entries made in the register of contracts maintained under section 301 of the Companies Act, 1956, the Company has granted loans to one party in respect of which the maximum amount involved is Rs. 89 lakhs and the balance outstanding as at 31st March, 2006 is Rs. NIL. In our opinion, the rate of interest and other terms and conditions on which loans have been granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company. The party has repaid the principal amounts as stipulated and has been regular in the payment of interest. There is no overdue amount of loan of more than Rs. One Lakh granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. According to the information and explanations given to us and on the basis of the entries made in the register of contracts maintained under section 301 of the Companies Act, 1956, the Company has taken loans from one party in respect of which the maximum amount involved is Rs. 210.00 lakhs and the balance outstanding as at 31st March, 2006 is Rs. NIL. In our opinion, the rate of interest and other terms and conditions on which loans have been taken from (vii) (ix)
(b)
(iii)
(vi)
(b)
(c)
The Company has not accepted any deposits from the public to which the directives issued by the Reserve Bank of the India and provisions of section 58A, 58AA or any other relevant provisions of the Act and the Companies (Acceptances of Deposits) Rules, 1975 are applicable and no order under the aforesaid sections have 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. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (a) According to the records of the Company, the Company is regular in depositing with appropriate authorities undisputed statutory dues including income tax, service tax, cess and other statutory dues applicable to it. Further, according to the information and explanations given to us, no undisputed amounts payable in respect of income tax, service tax, cess and other statutory dues, as applicable to it, were in arrears as at 31st March, 2006 for a period of more than six months from the date they became payable. According to the records of the Company, there are no dues of income tax, service tax, cess and other statutory dues which have not been deposited on account of any dispute.
(d)
(e)
(b)
(f)
70
(x)
The Company does not have accumulated losses as at 31st March, 2006 and has not incurred cash losses during the financial year ended on that date or in the immediately preceding financial year. The Company has not taken any loan from financial institutions or banks nor has defaulted in repayment of dues to debenture holders. Based on our examination of documents and records, the Company has not granted loans and advances on the basis of security by way pledge of shares, debentures and other securities and therefore the provisions of paragraph 4(xii) of the Order are not applicable. In our opinion, the Company is not a chit fund or a nidhi mutual benefit/society. Therefore, the provisions of paragraph 4(xiii) of the Order are not applicable to the Company. 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. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. Therefore, the provisions of paragraph 4(xv) of the Order are not applicable to the Company. As the Company has not taken any term loan, the provisions of paragraph 4(xvi) of the Order are not applicable.
(xvii) According to the information and explanations given to us, and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on shortterm basis have been used for long term investments. (xviii) The Company has not made any preferential allotment of shares to parties and companies covered maintained under Section 301 of the Companies Act, 1956 during the year. Therefore, the provisions of paragraph 4(xviii) of the Order are not applicable to the Company. (xix) (xx) (xxi) During the period covered by our audit, the Company has not issued any debentures. The Company has not made any public issue during the year. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.
(xi)
(xii)
(xiii)
(xiv)
(xv)
For A.F. Ferguson & Co. Chartered Accountants A. S. Varma Partner Membership No. 15458
(xvi)
71

2006 Rupees lakhs 2005 Rupees lakhs
Schedule I. SOURCES OF FUNDS : Shareholders Funds : Equity Share Capital .......................................................... Reserves and Surplus ....................................................... Loan Funds ............................................................................. Total .......... II. APPLICATION OF FUNDS : Fixed Assets : ......................................................................... Gross block ....................................................................... IV I II III
Rupees lakhs
121,60.16 174,71.73 25,00.00 321,31.89
121,60.16 76,49.42 27,10.00 225,19.58
4,54.91 25.05 4,29.86 V VI VII 99,02.08 30,29.79 69.58 130,01.45 210,96.72 21.14
4,54.91 20.25 4,34.66 193,16.18 19.84 7,43.37 41,27.47 5,07.27 53,78.11 8,92.58 17,39.11 26,31.69 105,84.17 321,31.89 27,46.42 2.48 225,19.58
Less : Depreciation ..........................................................

Net block .......................................................................... Investments ............................................................................ Deferred Tax Assets ............................................................... Current Assets, Loans and Advances: .................................. Sundry Debtors ........................................................................ Cash and Bank balances .......................................................... Loans and Advances ................................................................
Less: Current Liabilities and Provisions : .............................

Liabilities ........................................................................... Provisions .........................................................................
VIII 7,04.70 17,12.58 24,17.28
Net Current Assets ................................................................. Miscellaneous Expenditure (to the extent not written off or adjusted) .................................................................................. Total ..........
Keshub Mahindra Anand G. Mahindra Bharat Doshi A. K. Nanda U. Y. Phadke M. A. Nazareth Angarika Achwal Baviskar
Chairman
For A. F. Ferguson & Co. Chartered Accountants A. S. Varma Partner
Directors
Company Secretary

72
2006 Rupees lakhs 100,12.04 100,12.04 2005 Rupees lakhs 73,82.18 73,82.18
Schedule
INCOME ......................................................................................... Total ..........
IX
EXPENDITURE : Interest (Note 5) ............................................................................. Depreciation .................................................................................... Other expenses .............................................................................. Total .......... Profit for the year before taxation ................................................... Provision for taxation : Current Tax .......................................................................... Deferred Tax ........................................................................ Profit for the year after tax .............................................................. 86.50 (1.30) 98,22.31 21,09.20 119,31.51 60.00 (6.71) 62,05.29 1,58.60 63,63.89 IV X 66.90 4.80 32.83 1,04.53 99,07.51 89.76 4.80 10,29.04 11,23.60 62,58.58
Add: Balance brought forward from earlier years ...........................

Profit available for appropriations ....................................................
APPROPRIATIONS : Special Reserve .............................................................................. General Reserve ............................................................................. Interim Dividend Paid ...................................................................... Income Tax on Interim Dividend ..................................................... Balance carried to Balance Sheet ................................................... Earning per share (Note 13): (Face Value Rs. 10/- per share) (Rupees) Basic ............................................................................................... Diluted ............................................................................................. NOTES ON ACCOUNTS ................................................................
19,64.46 99,67.05
12,41.06 4,70.00 22,49.61 2,94.02 21,09.20
8.08 6.70 XII

5.10 4.23
Chairman
Directors
Company Secretary

73
Cash Flow Statement for the year ended 31st March, 2006
Rupees lakhs A. Cash Flow from Operating Activities: Net Profit before exceptional item, taxation and adjustments pertaining to previous years ................................................................... Adjustments for : Depreciation ........................................................................................... Amortisation of expenses ...................................................................... Loss / (Profit) on sale of Investments (Net) ............................................ Provision for diminution in value of long term investment ..................... Operating Profit before Working capital changes .................................. Changes in : Trade and other receivables ................................................................... Trade and other payables ....................................................................... 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 ....................................... B. Cash Flow from Investing Activities : Purchase of investments ........................................................................ Sale of investments ................................................................................ Inter Corporate Deposits (Net) ............................................................... NET CASH (USED IN) / FROM INVESTING ACTIVITIES .................... C . Cash Flow from Financing Activities : Proceeds from borrowings ..................................................................... Repayments of borrowings .................................................................... Income Tax on Dividends paid ............................................................... NET CASH USED IN FINANCING ACTIVITIES .................................... NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS : Opening Balance .................................................................................... Closing Balance ...................................................................................... Cash and cash equivalents include: Balance With Scheduled Banks: On current account ................................................................................. On fixed deposit account ....................................................................... 2006 Rupees lakhs 2005 Rupees lakhs 62,58.58 4.80 14.25 (69,22.86) 10,00.00 (87,24.38) 11,83.13 (1,92.78) 1,06.14 (86.64) 10,96.49 (77.07) 10,19.42 (61,75.12) 40,82.54 4,79.50 (16,13.08) (2,10.00) (2,94.02) (5,04.02) (10,97.68) 41,27.47 30,29.79 (59,03.81) 3,54.77 (2,76.04) 1,27.24 (1,48.80) (0.01) 2,05.96 (46.74) 1,59.22 (24,04.28) 84,45.76 10,57.33 70,98.81 27,22.00 (36,12.50) (22,49.61) (31,40.11) 41,17.92 9.55 41,27.47
99,07.51 4.80 2.48 (87,32.39) 0.73
8.16 30,21.63 30,29.79
13.47 41,14.00 41,27.47
Chairman
Directors
Company Secretary

74
SCHEDULE I SHARE CAPITAL : Authorised : 14,00,00,000 Equity Shares of Rs. 10 each .............. Total ...... Issued : 12,16,00,693 Equity Shares of Rs. 10 each ............. Subscribed : 12,16,00,693 Equity Shares of Rs. 10 each .............
Of the above : (a) 12,16,00,593 shares are held by Mahindra & Mahindra Limited, the holding company. (b) 1,00,00,000 shares of Rs. 10 each fully paid-up were issued pursuant to a contract to discharge part of the consideration for acquisition of certain shares. (c) 5,53,29,710 shares of Rs. 10 each fully paid-up were issued with effect from 1st February, 2000 against the redemption of 55,32,971 4% Non-Cumulative Redeemable Preference Shares of Rs. 100 each fully paid-up.
2006 Rupees lakhs 140,00.00 140,00.00 121,60.07 121,60.07
2005 Rupees lakhs 140,00.00 140,00.00 121,60.07 121,60.07
SCHEDULE V INVESTMENTS (Non-trade, Fully paid-up) :

Face Value 2006 2005
Number
Per Unit Rupees (A) Long Term Investments (at cost, unless otherwise stated): Unquoted : a) In Subsidiary Companies : i) Equity Shares : Mahindra Acres Consulting Engineers Limited .............. (1,84,00,199) Mahindra Holidays & Resorts India Limited $ ............................ NBS International Limited ....
Rupees lakhs
Rupees lakhs
Rupees lakhs
5,10,000 2,84,00,199
10 10
64.02
64.02
50,500
10
31,27.16 5,07.30 36,98.48
21,22.16 5,07.30 26,93.48
5,46,000
100
Add: Forfeited shares ........................

Total ......
0.09 121,60.16
0.09 121,60.16
ii) Preference Shares : a) 7% Cumulative Redeemable Preference Shares Mahindra Ugine Steel Company Limited ..... 5,46.00 b) 9% Cumulative Redeemable Preference Shares (1,00,00,000) Mahindra Holidays & Resorts India Limited $ .............. 5,46.00 b) In Other Companies : i) Equity Shares : (12,00,000) Mahindra Construction Company Limited ............... 96.88 Mahindra Ashtech Limited* ............................. 5,50.00 Mahindra World City Developers Limited (formerly known as Mahindra Industrial Park Limited) ...................... 3,97.14 Mahindra Sona Limited * ............................ 1,63.83 New Tirupur Area Development Corporation Limited. * ....... 7,50.00 Owens Coming (India) Limited ............................... 28,12.48 Business Standard Limited 8.81 Gateway Housing Finance Corporation Limited ........... 2.50 (1,20,000) Integrated Property Management & Services Limited ............................... Mahindra Air Services Limited ............................... 2.90 (4,050) Mahindra Automotive Steels Private Limited (Rs.100) Mahindra Engineering & Chemical Products Limited 18.34 Mahindra Intertrade Limited (Rs. 10) .................. (4,80,000) Mahindra Logisoft Business Solutions Limited (2005: Re. 1) ...................... PSL Erickson Limited ......... 0.59 Triton Overwater Transport Agency Limited .................. 58.09 TC Enterprises LLC, Delaware, USA ................................... 15.23 48,76.79
10,05.00 10,05.00
SCHEDULE II RESERVES AND SURPLUS :
Rupees lakhs
2006 Rupees lakhs
2005 Rupees lakhs
9,00,000
10
Special Reserve (in terms of Section 45-IC of the Reserve Bank of India Act, 1934) : Balance as per last Balance Sheet ......... 38,66.20 Add: Transferred from Profit and Loss Account ......................................... 19,64.46 58,30.66 General Reserve : Balance as per last Balance Sheet ......... 16,74.02 Add: Transfer fr om Profit and Loss Account ......................................... Profit and Loss Account Balance .................. Total ...... 16,74.02 99,67.05 174,71.73
1,29.17 5,50.00
54,99,999
10 10
26,25.14 12,41.06 38,66.20 12,04.02 470.00 16,74.02 21,09.20 76,49.42
39,71,428
3,97.14 1,63.83 7,50.00 28,12.48 8.81 2.50 15.11 2.90 0.41 18.34
13,10,000 75,00,000 2,81,24,794 5,00,000 25,000 29,000
10 10 10 10 10 10 10 10 10
SCHEDULE III LOAN FUNDS : Unsecured : Other Loans and Advances Zero Coupon Optionally Convertible Debentures (2010) issued to the holding company (Note 7) ..... Short term loans and advances from Companies ........ Total ......
2006 Rupees lakhs
2005 Rupees lakhs
10 20,237 1
25,00.00 25,00.00
25,00.00 2,10.00 27,10.00

19,750 4,98,000 5 10
0.59 58.09 49,09.37
15.9% Ownership interest
SCHEDULE IV FIXED ASSETS :

COST Description ............................................ Cost as at 1st April, 2005 3,07.06 1,39.58 8.27 4,54.91 4,54.91 Additions during the year Deductions during the year Cost as at 31st March, 2006 3,07.06 1,39.58 8.27 4,54.91 4,54.91 Depreciation upto 31st March, 2005 19.18 1.07 20.25 15.45 DEPRECIATION Depreciation for the year 4.67 0.13 4.80 4.80 Adjustments Depreciation during upto 31st the year March, 2006 23.85 1.20 25.05 20.25
(Rupees lakhs)
NET BLOCK As at 31st March, 2006 3,07.06 1,15.73 7.07 4,29.86 4,34.66 As at 31st March, 2005 3,07.06 1,20.40 7.20 4,34.66
Freehold Land* ...................................... Factory Building* ................................... Residential Building ............................... Total ............................... As at 31st March, 2005 .........................
* Represent assets leased out for a period of nine years w.e.f. 7th November, 2003. (Note 12)
75
Face Value
2006
2005
2006
2005
Number
Per Unit Rupees
Rupees lakhs ii) Preference Shares : a) 10% Non-Cumulative Redeemable Participating Preference Shares Mahindra Construction Company Limited ......... 5,40.00 b) 10.5% Non-Cumulative Redeemable Preference Shares Mahindra Gesco Developers Limited ...... 10,00.00 c) 8.5% Cumulative Redeemable Preference Shares Mahindra Ashtech Limited ......................... 4,50.00 d) 7% Cumulative Redeemable Preference Shares (5,46,000) Mahindra Ugine Steel Company Limited e) 7% Non-Cumulative Redeemable Preference Shares Gateway Housing Finance Corporation Limited ...... 1,71.00
Rupees lakhs
Rupees lakhs Book Value of Unquoted Investments ................. Book Value of Quoted Investments ................. Market Value of Quoted Investments .................
Rupees lakhs
Rupees lakhs
146,13.89 64,82.83 464,68.29
135,25.61 57,90.57 274,26.57
5,40,000
100
5,40.00
10,00,000
100
10,00.00
Notes: $ During the year preference shares were converted into equity shares at par. Became a subsidiary w.e.f. 21st June, 2005. * The Compnay or the holding company or both, as the case may be, have agreed not to divest these holdings without the prior approval of certain financial institution/financial corporation/banks which have subscribed to the shares or granted financial assistance/credit facililties to the respective investee companies.
4,50,000
100
4,50.00
SCHEDULE VI DEFERRED TAXES : Deferred Tax Assets On Section 43B disallowances ............... Total ......
2006 Rupees lakhs 21.14 21.14 2006 Rupees lakhs
2005 Rupees lakhs 19.84 19.84 2005 Rupees lakhs
5,46.00
1,71,000
100
1,71.00 21,61.00 27,07.00 65.37
4.998 10,00,000
1,64,66,789
10
c) In Trust Securities (units) (6.537) India Auto Ancillary Trust ................................... d) Investment in the Capital of Partnership ChaseCom Limited Partnership, Delaware, USA-Limited Partner (Note 8) .............................. Quoted : a) In Subsidiary Companies : Equity Shares : Mahindra Ugines Steel Company Limited *
49.98
4,21.41
SCHEDULE VII CURRENT ASSETS, Rupees LOANS AND ADVANCES : lakhs (A) Current Assets: Sundry Debtors unsecured, considered good (Note 2) Outstanding over six months .............. 8,44.11 Other debts ......................................... 90,57.97 Cash and Bank Balances: Balance with Scheduled Banks: On current account .............................. 8.16 On fixed deposit account .................... 30,21.63
6,10.48 1,32.89 99,02.08 7,43.37
49,25.53 49,25.53
1,00,000 45,00,000 13,41,203 4,16,911 25 5,000 2,090
10 10 10 10 100 10 10
b) In Other Companies : Equity Shares : Hindustan Oil Exploration Company Limited ............... 19.70 Mahindra Gesco Developers Limited* ............................. 10,90.39 (1,52,41,885) Mahindra Ugine Steel Company Limited * . (12,83,480) Siro Plast Limited 2,90.13 (19,74,284) Tube Investments of India Limited .................. 1,47.80 Jardine Henderson Limited 0.14 Punjab Tractors Limited ..... 8.41 Trade Wings Limited .......... 0.59 15,57.16 (B) Current Investments (at cost or fair value whichever is lower) Unquoted: Units : (84,66,757) Prudential ICICI Mutual Fund-Liquid Institutional Plan Daily Dividend ....................... (64,01,090) Principal Mutual Fund-Liquid Institutional Plan Daily Dividend ....... (45,018) Tata Mutual Fund-Liquid Super Institutional Plan Daily Dividend ....................... (Nil) Tata Mutual FundFixed Horizon Fund ....... (Nil) Chola Mutual FundFixed Maturity Plan ...... Quoted: Equity Shares: (2,890) Gail (India) Limited (2,719) Oil & Natural Gas Corporation Limited ...... PTC India Limited (formerly known as Power Trading Corporation of India Limited) ........................
13.47 41,14.00 3,029.79 41,27.47
19.70 10,90.39 36,88.74 2,56.51 6,99.92 0.14 8.41 0.59 57,64.40
(B) Loans and Advances: (Unsecured, considered good unless otherwise stated) Advances recoverable in cash or in kind or for value to be received (Note 3): Considered good ................................. Considered doubtful ............................
57.56 5,36.26 5,93.82 5,36.26 57.56 12.02 69.58
4,90.85 5,36.26 10,27.11 5,36.26 4,90.85 16.42 5,07.27 53,78.11 2005 Rupees lakhs
Less: Provision for doubtful advances ....

Payment towards Income-tax ................
83,56,546
10
Total ......
9,90.38 5,17.01 10,03.44 6,40.23
130,01.45 2006 Rupees lakhs
51,68,961 57,679
10 1,000
SCHEDULE VIII CURRENT LIABILITIES AND PROVISIONS : (A) Liabilities : Sundry Creditors Total outstanding dues of creditors other than small scale industrial undertakings Interest accrued but not due .................. Interim Dividend Tax Payable .................
6,42.84 3,50.00 3,60.00 28,60.23
5,01.72 21,45.39 5.64 20.39
35,00,000 36,00,000
10 10
5,99.66 1,05.04 7,04.70
5,37.87 60.69 2,94.02 8,92.58
900
10
0.14 0.14
0.14 26.17
(B) Provisions : Provision for diminution in value of long term investments ................................... Provision for Taxation .............................
16,95.70 16.88 17,12.58
17,27.26 11.85 17,39.11 26,31.69
Total........
210,96.72 193,16.18
Total ......
24,17.28
76
SCHEDULE IX INCOME : Interest on bank and other accounts (gross) [Tax deducted at source Rs.65.50 lakhs (2005: Rs.35.44 lakhs)] ................................ Dividend on investments in subsidiaries (gross) non trade (Note 4) ............................ Dividend on other investments (gross) non trade (Note 4) .............................................. Profit on disposal of Long Term Investments (Note 6) ....................................................... Profit on disposal of Current Investments ... Income from services rendered .................. Less:Support Service Charges .................... Lease rent and Other Income ..................... Total ...
Rupees lakhs
2006 Rupees lakhs
2005 Rupees lakhs
Particulars Assets side:
(Rs. lakhs) 2006 Amount outstanding
(Rs. lakhs) 2005 Amount outstanding
2,94.41 5,78.48 3,64.87 87,22.68 9.71 84.23 63.17 21.06 20.83 100,12.04
1,69.84 12.53 1,99.83 69,22.86 0.01 2,32.68 1,74.51 58.17 18.94 73,82.18
(3) Break-up of Loans and Advances including bills receivables [other than those included in (4) below ]: (a) Secured ............................................... (b) Unsecured ........................................... (4) Break up of Leased Assets and stock on hire and hypothecation loans counting towards EL/HP activities: (i) Lease assets including lease rentals under sundry debtors : (a) Financial lease ............................... (b) Operating lease ............................. (ii) Stock on hire including hire charges under sundry debtors : (a) Assets on hire ................................ (b) Repossessed Assets ..................... (iii) Hypothecation loans counting towards EL/HP activities: (a) Loans where assets have been repossessed .................................. (b) Loans other than (a) above ............ (5) Break-up of Investments : Current Investments : 1. Quoted : (i) Shares: (a) Equity ......................... (b) Preference ................. (ii) Debentures and Bonds .................. (iii) Units of Mutual Funds ................... (iv) Government Securities .................. 2. Unquoted : (i) Shares: (a) Equity ......................... (b) Preference ................. (ii) Debentures and Bonds .................. (iii) Units of Mutual Funds ................... (iv) Government Securities .................. Long Term Investments : 1. Quoted : (i) Shares : (a) Equity ........................ (b) Preference ................ (ii) Debentures and Bonds .................. (iii) Units of Mutual Funds ................... (iv) Government Securities .................. 2. Unquoted : (i) Shares : (a) Equity ........................ (b) Preference ................ (ii) Debentures and Bonds .................. (iii) Units of Mutual Funds ................... (iv) Government Securities .................. (v) Units of Trust Securities ................ (vi) Other .............................................. 85,75.27 27,07.00 49.98 4,21.41 76,02.85 37,12.00 65.37 64,82.69 57,64.40 28,60.23 21,45.39 0.14 26.17 4,22.79 4,27.46 69.58 5,07.27
SCHEDULE X OTHER EXPENSES : Auditors Remuneration Audit Fees .............................................. Other Services ....................................... Reimbursement of expenses ................. Rates and taxes ............................................ Miscellaneous expenses .............................. Amortisation of share issue expenses ......... Donation ....................................................... Provision for diminution in value of long term investments ......................................... Loss on disposal of long term Investments Total ...
2006 Rupees lakhs 1.50 0.10 0.02 2.18 0.82 2.48 25.00 0.73 32.83
2005 Rupees lakhs 1.38 5.96 7.44 14.25 10,00.00 0.01 10,29.04
SCHEDULE XI Schedule to the Balance Sheet of a Non-Banking Financial Company [as required in terms of Paragraph 9BB of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998] (Rs. lakhs) Particulars 2005 Liabilities side: (1) Loans and advances availed by the NBFCs inclusive of interest accrued thereon but not paid (a) Debentures : Secured ......................... : Unsecured ..................... (other than falling within the meaning of public deposits) (b) Deferred Credits .................................. (c) Term Loans .......................................... (d) Inter-corporate loans and borrowing ... (e) Commercial Paper ............................... (f) Public Deposits .................................... (2) Break-up of (1)(f) above (Outstanding public deposits inclusive of interest accrued thereon but not paid): (a) In the form of Unsecured debentures . (b) In the form of partly secured debentures i.e. debentures where there is a shortfall in the value of security ................................................ (c) Other public deposits .......................... NA NA NA NA Amount outstanding 25,00.00 Amount overdue Amount Amount out- overdue standing 25,00.00 2006 (Rs. lakhs)
2,15.95
(6) Borrower group-wise classification of all leased assets, stock- on-hire and loans and advances : (Rs. lakhs) Category 2006 Amount net of provisions Secured Unsecured 1. Related Parties (a) Subsidiaries ................... (b) Companies in the same group ................... (c) Other related parties ..... 2. Other than related parties ... Total 4,22.79 69.58 4,92.37 4,22.79 69.58 4,92.37 3,92.82 4,27.51 1,14.40 9,34.73 3,92.82 4,27.51 1,14.40 9,34.73 2005 Amount net of provisions Total
Total Secured Unsecured
NA NA
NA NA
NA NA
NA NA
77
(7) Investor group-wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted ) : (Rs. lakhs) Category 2006 Market Value/ Book Value Break up (Net of or Fair Value Provision) or NAV 2005 Market Value/ Book Value Break up (Net of or Fair Value Provision) or NAV
4. Dividend on investments (gross) includes Rs. 1,07.02 lakhs (2005: Rs. 9.35 lakhs) and Rs. 8,36.33 lakhs (2005: Rs. 2,03.01 lakhs) on current and long term investments respectively. 5. Interest paid includes Rs. NIL (2005: Rs. 21.01 lakhs) on loans for fixed periods. 6. Profit or Loss on disposal of long term investments is net of expenditure of Rs. 21.76 lakhs (2005: Rs. 8.03 lakhs) related to the disposal of shares. 7. Zero coupon Optionally Convertible Debentures are redeemable at par after ten years from the date of allotment (allotment date being 24th October, 2000 for Rs.24 crores and 8th December, 2000 for Rs.1 crore debentures) with the option to the Company/debenture holder to redeem them at any time after twenty four months. The debentureholder has an option to have the debentures converted at par anytime after six months from the date of allotment. 8. During the year, the Company has invested Rs. 4,21.41 lakhs in ChaseCom Limited Partnership. Total Capital of ChaseCom Limited Partnership as on 31st December, 2005 is Rs. 71,41.67 lakhs which is converted at Rs. 45.13 for 1 US $ which represents the average of telegraphic transfer Buying and Selling rates as quoted by Mumbai Branch of State Bank of India on 30th December, 2005.
1. Related Parties (a) Subsidiaries .................................. (b) Companies in the same group ..... (c) Other related parties .................... 2. Other than related parties .................. Total (8) Other information: Particulars 1. Gross Non-Performing Assets (a) Related parties ......................... (b) Other than related parties ....... 2. Net Non-Performing Assets (a) Related parties ......................... (b) Other than related parties ....... 3. Assets acquired in satisfaction of debt 5,36.26 5,36.26 264,43.37 218,07.60 63,73.24 69,31.16 615,55.37 91,70.01 25,05.87 32,66.44 44,58.70 194,01.02 21,79.19 65,16.68 214,78.68 89,21.35 390,95.90 36,98.48 21,08.73 74,67.56 43,14.15 175,88.92
Following are the details of partners and sharing ratio of each partner as on 31st March, 2006. Name of Partners Sharing Ratio TC Enterprises LLC 1.00% Chase Interests, LP 62.00% Richard W.McDugald 26.60% SBC Operations Inc. 4.96% Mahindra Holdings & Finance Ltd. 5.44% 9. Segment Information: The Company has single reportable segment namely investing activity for the purpose of Accounting Standard 17 on segment reporting. Therefore, no disclosure is required. 10 Related PartyTransactions: (a) List of Related Parties: Holding Company : Mahindra & Mahindra Ltd. Subsidiary Company : Mahindra Acres Consulting Engineers Ltd. Mahindra Holidays & Resorts India Ltd. Mahindra Holidays & Resorts USA Inc. NBS International Ltd. Mahindra Ugine Steel Company Ltd. (w.e.f. 21st June, 2005) Fellow Subsidiary : Mahindra Ashtech Ltd.(MAL) Mahindra Engineering & Chemical Products Ltd. (MECPL) Mahindra Intertrade Ltd. (MIL) Mahindra Steel Service Centre Ltd. Mahindra & Mahindra Financial Services Ltd. (MMFSL) Tech Mahindra Ltd. Tech Mahindra (America) Inc. Tech Mahindra GmbH Tech Mahindra (Singapore) Pte Ltd. Bristlecone India Ltd. Bristlecone GmbH Bristlecone (Singapore) Pte. Ltd. Mahindra Logisoft Business Solutions Ltd. Automartindia Ltd. Mahindra USA Inc. Bristlecone (UK) Ltd. Mahindra Gujarat Tractor Ltd. Mahindra Shubhlabh Services Ltd. Mahindra Infrastructure Developers Ltd. Mahindra Gesco Developers Ltd. (GESCO) Bristlecone Ltd. Bristlecone Inc. Mahindra Engineering Design & Development Company Ltd. (MEDDCL) Mahindra Insurance Brokers Ltd. Mahindra World City Developers Ltd. Mahindra Middleeast Electrical Steel Service Centre (FZC) Mahindra & Mahindra South Africa (Pty) Ltd. Mahindra Overseas Investment Company (Mauritius) Ltd.
SCHEDULE XII NOTES ON ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006 1. Significant accounting policies: (a) Fixed Assets: (i) Fixed assets are valued at cost less depreciation. (ii) Depreciation on assets is calculated on straight line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956. (b) Investments: (i) All Long term investments are valued at cost or lower, if written down in case of permanent diminution in value. (ii) Current investments are valued at lower of cost and fair value, determined by category of investments. (c) Revenue Recognition: (i) Dividend from investments are recognised in the Profit and Loss Account when the right to receive payment is established. (ii) Interest income is accounted on accrual basis. (iii) Income from services rendered are recognised when the services are rendered. (iv) Income on assets considered to be non-performing assets are recognised when the amounts are realised. (d) Miscellaneous Expenditure (to the extent not written off or adjusted): Registration fee and stamp duty for increase in authorised capital and issue of shares are amortised equally over a period of three financial years, commencing from the year in which the expenditure is incurred. (e) Income Taxes: Current tax is determined as the amount of tax payable to the taxation authorities in respect of taxable income for the year. Deferred tax is recognised, subject to the consideration of prudence, on timing differences between taxable income and accounting income, that originate in one period and are capable of reversal in one or more subsequent periods. 2. The aggregate amount of sundry debtors outstanding for a period over six months and others include Rs. 8,44.11 lakhs (2005: Rs. 610.48 lakhs) and Rs.45.83 lakhs (2005: Rs. 132.89 lakhs) respectively, which, in accordance with the terms of a contract were not due for payment as at 31st March, 2006. 3. Advances recoverable in cash or kind or for value to be received include: Fixed/Call deposits with/loans to limited Companies [Rs.NIL (including accrued interest Rs.NIL)] [2005: Rs.390.17 lakhs (including accrued interest Rs. 1.17 lakhs)].
78
Fellow Subsidiary (Contd...)
Associates
Mahindra SAR Transmission Pvt. Ltd. Tech Mahindra (R & D Services) Ltd. (w.e.f. 28th November, 2005) Tech Mahindra (R & D Services) Inc. (w.e.f. 28th November, 2005) Tech Mahindra (R & D Services) Pte. Ltd. (w.e.f. 28th November, 2005) Jensand Ltd. (w.e.f. 3rd January, 2006) Mahindra (China) Tractor Company Ltd. (w.e.f. 13th May, 2005) Mahindra Automotive Steels Pvt. Ltd. (MASPL)(w.e.f. 27th May, 2005) Mahindra Europe s.r.l.(w.e.f. 30th May, 2005) Mahindra International Ltd. (w.e.f. 1st November, 2005) Mahindra Realty Ltd. (w.e.f. 21st September, 2005) Mahindra Renault Pvt. Ltd. (w.e.f. 5th August, 2005) Mahindra World City (Jaipur) Ltd. (w.e.f. 26th August, 2005) Mahindra-BT Investment Company (Mauritius) Ltd.(w.e.f. 9th May, 2005) Plexion Technologies (India) Pvt. Ltd. (w.e.f. 15th February, 2006) Plexion Technologies (UK) Ltd. (w.e.f. 15th February, 2006) Plexion Technologies GmbH (w.e.f. 15th February, 2006) Plexion Technologies Inc. (w.e.f. 15th February, 2006) Stokes Forgings Dudley Ltd. (w.e.f. 3rd January, 2006) Stokes Forgings Ltd. (w.e.f. 3rd January, 2006) Stokes Group Ltd. (w.e.f. 3rd January, 2006) Tech Mahindra (Thailand) Ltd. (w.e.f. 21st February, 2006) Tech Mahindra Foundation (w.e.f. 22nd March, 2006) : Mahindra Construction Company Ltd. Mahindra Sona Ltd. Owens Corning (India) Ltd.(OCIL) Mahindra Ugine Steel Company Ltd. (MUSCO)(Upto 20th June, 2005) Siro Plast Ltd. (Rs. in lakhs) Fellow Associates Subsidiaries () () () 6,00.00 (8,50.00) 6,00.00 () (5,18.00) (3,32.00) 9,89.00 (18,63.72) 3,00.00 (8,75.72) 89.00 (5,56.00) () # () # () () () () () () () ()
Sr. Nature of Transaction No. MASPL MEDDCL MAL c Interest Received MECPL MEDDCL MASPL OCIL d Interest Paid GESCO MIL e Dividend Received NBS International Ltd. MUSCO Mahindra Sona Ltd. Siro Plast Ltd. f Dividend Distributed g Inter Corporate Deposits Taken h Inter Corporate Deposits Refunded To Parties GESCO 3 OTHER TRANSACTIONS a Other Income, if any Siro Plast Ltd. OCIL b Other Expenses, if any MIL c Reimbursement Received From Parties d Reimbursement Made To Parties 4 OUTSTANDINGS ( as on Balance Sheet date) a Payable MIL b Receivable
Holding Subsidiaries () () () () () () () () 2.05 (31.07) () () () () () () () (22,49.61) (27,22.00) () () () () () () () () () () () 5,78.48 (12.53) 7.83 (12.53) 5,70.65 () () () () ()
Fellow Associates Subsidiaries 6,00.00 () (1,00.00) (3,32.00) 8.01 (76.02) 3.13 (59.72) (8.08) 4.14 () () 64.85 (58.69) (15.82) 64.85 (42.87) () () () () () () () () () () 86.47 (57.16) () () () 86.47 (57.16) () () () 1,10.95 (84.75) () () 91.70 (65.50) 19.25 (19.25) () ()
(b) Related Party Transaction are as under*: Sr. Nature of Transaction No. 1 INVESTMENTS a Sales b Purchase MUSCO 2 FINANCE a Inter Corporate Deposits Given MASPL MMFSL MAL b Inter Corporate Deposits Refunded By Parties MECPL MMFSL Holding Subsidiaries
2,10.00 (32,88.50) () () () () () () (2.65) 0.41 (0.25)
() () () () () () () () ()
(3,74.00) (3,74.00) () () () 63.17 (1,74.51) 63.17 (1,74.51) () ()
() () 1,05.06 (2,51.51) 20.83 (18.83) 84.23 (2,32.68) () () () ()
1.01 (2.50) () () () () () () () () ()
() () () () () () () () () ()
(5.95) () (2.65)
() () ()
6,20.30 (5,16.82) 6,20.30 (5,16.82) (1.17)
() () 8,89.94 (7,43.42)
79
Sr. Nature of Transaction No. MMFSL OCIL c Inter Corporate Deposits Given MECPL MMFSL d Inter Corporate Deposits Taken e Debentures issued
Holding Subsidiaries () () () () () (2,10.00) 25,00.00 (25,00.00) () () () () () () ()
Fellow Associates Subsidiaries (1.17) () (3,89.00) (3,00.00) (89.00) () () () 8,89.94 (7,43.37) () () () () ()
11. Contingent liability not provided for in respect of taxation matters is Rs.12.23 lakhs (2005: Rs. 18.08 lakhs) in respect of which the Company is in appeal before the appropriate authorities. 12. The future minimum lease payments receivable by the Company under operating lease for the period April, 2006 to October, 2006 is Rs.12.83 lakhs and for subsequent period the dues will be determined by supplementary agreements. 13. Earning per share: 2006 Net Profit After tax and prior year adjustment - Rs. In Lakhs (Amount used as numerator) Weighted Average number of equity shares for Basic Earning Per share Weighted Average number of equity shares for Diluted Earning Per share Nominal Value per Equity Share Basic Earning per Equity Shares Diluted Earning per Equity Shares 98,22.31 2005 62,05.29
12,16,00,693 14,66,00,693 Rs. 10.00 8.08 6.70
12,16,00,693 14,66,00,693 Rs. 10.00 5.10 4.23
# Rs. 100 * Significant transactions are given in italics. Previous Year figures are given brackets.
14. Previous years figures have been regrouped, wherever necessary, to confirm to the figures of the current year.
80
SCHEDULE XIII BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE
I. Registration Details : Registration No. Balance Sheet Date II. 3 1 1 1 0 3 3 6 0 0 6 6 0 State Code 1 1
Date
Month
Year
Capital Raised during the year (Amount in Rs. Thousands) : Public Issue N Bonus Issue N I L I L Rights Issue N Private Placement N I L I L
III.
Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) : Total Liabilities 3 4 5 4 9 1 7 3 Total Assets 4 5 4 9 1 7
Sources of Funds : Paid-up Capital 1 2 1 6 0 1 6 Reserves and Surplus 1 7 4 7 1 7 3
Secured Loans N Application of Funds : Net Fixed Assets 4 2 9 8 6 I L
Unsecured Loans 2 5 0 0 0 0
Investments 2 1 0 9 6 7 2
Net Current Assets 1 0 5 8 4 1 7
Miscellaneous Expenditure N Deferred Tax Asset L 2 1 1 4 I L
Accumulated Losses N IV. I
Performance of Company (Amount in Rs. Thousands) : Turnover (Total Income) 1 + 0 0 1 2 0 4 + Total Expenditure 1 0 4 5 3
- Profit/Loss Before Tax 9 9 0 7 5 1
- Profit/Loss After Tax 9 8 2 2 3 1
Earning per Share in Rs. Basic V. 8. 0 8 Diluted 6. 7 0
Dividend
Generic Names of Three Principal Products/Services of Company (as per monetary terms) : Item Code No. (ITC Code) Product Description N O T A P P L I C A B L E
Signature to Schedules I to XIII Keshub Mahindra Anand G. Mahindra R. K. Pitamber Bharat Doshi Anand G. Mahindra Bharat Doshi A. K. Nanda U. Y. Nanda A. K. Phadke M. A. Nazareth U. Y. Phadke
} }
Chairman
Directors Directors
Angarika Achwal Baviskar
Company Secretary Company Secretary
Mumbai, 28th April, 2006 26th 2005

81
Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary Companies Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary Companies
(Rs. in Lakhs)
Name of the Subsidiary Companies Mahindra Acres Consulting Engineers Limited Mahindra Holidays & Resorts India Limited NBS International Limited Mahindra Ugine Steel Company Limited Mahindra Holidays and Resorts USA Inc. (subsidiary of Mahindra Holidays & Resorts India Limited)
Particulars
The Financial Year of the Subsidiary Company ended on ........................................................ Number of Shares in the Subsidiary Company held by Mahindra Holdings & Finance Limited at the above date: Equity ................................................ [Nos.] Extent of holding .................................. [%] The net aggregate of profit/(loss) of the Subsidiary Company for its financial year so far as they concern the members of Mahindra Holdings & Finance Limited: (a) Dealt with in the accounts of Mahindra Holdings & Finance Limited for the year ended 31st March, 2006 ........................ (b) Not dealt with in the accounts of Mahindra Holdings & Finance Limited for the year ended 31st March, 2006 ................................ The net aggregate of profits/(loss) of the Subsidiary Company for its previous financial years so far as they concern the members of Mahindra Holdings & Finance Limited: (a) Dealt with in the accounts of Mahindra Holdings & Finance Limited for the year ended 31 st March, 2006 (b) Not dealt with in the accounts of Mahindra Holdings & Finance Limited for the year ended 31st March, 2006 ..................................
31st March, 2006
31st March, 2006
31st March, 2006
31st March, 2006
31st March, 2006
5,10,000 51%
2,84,00,199 99.99%
50,500 100%
1,64,66,789 50.69%
99.99%
0.59
20,83.32
11.92
42,37.13
(2.14)
7.83
4,94.00
3.93
12,71.09
70.89
20,45.36
Keshub Mahindra Anand G. Mahindra Bharat Doshi A. K. Nanda U. Y. Phadke M.A. Nazareth Angarika Achwal Baviskar
Chairman
Directors
Company Secretary
Mumbai, 29th May, 2006
82
MAHINDRA ACRES CONSULTING ENGINEERS LIMITED

Your Directors present the Thirteenth Annual Report along with the audited accounts of the Company for the year ended 31st March, 2006. FINANCIAL RESULTS (Rs. in lakhs) 2006 Gross Income ............................................................................................................ Total Expenditure ...................................................................................................... Profit before depreciation and taxation ..................................................................... Depreciation .............................................................................................................. Profit before taxation ................................................................................................ Provision for taxation Current tax ................................................................................................................ Deferred tax Asset/(Liability) (net) ............................................................................. Fringe benefit tax ...................................................................................................... Current tax for an earlier year ................................................................................... Profit after taxation ................................................................................................... Balance of profit brought forward ............................................................................. Profit and Loss Account balance carried forward ..................................................... 4.00 (0.14) 3.58 1.15 72.47 73.62 2.00 0.21 3.04 69.43 72.47 303.49 294.90 14.34 5.75 8.59 2005 250.32 245.07 11.38 6.13 5.25
Dividend With a view to conserve the cash resources of your Company, the Directors deem it prudent not to recommend a Dividend for the year. Operations During the year under review, your Company consolidated its operations through its Office at Chennai and stabilised its presence in high value growth areas of operation. The Profit Before Taxation for the year was Rs. 8.59 lakhs as compared to Rs.5.25 lakhs for the previous year. Your Company has successfully completed assignments received from the Ministry of Statistics and Programme Implementation, Government of India in various infrastructure fields viz. Railways, Highways and Power sectors as well as those from the Government of Pondicherry - Arts & Crafts Village, the World Bank aided Government of Maharashtra Hospital Project and various other projects. Your Company has secured new orders in thrust areas like the Intra-city bus terminus cum commercial developments at Bangalore and Dewas Water Supply Project, and has also bagged one such prestigious order for another World Bank aided water supply project in Kerala.
The Company has adopted the strategy of associating with mega projects in the initial stages like rendering pre-bid services to enable the Company secure detailed engineering and project management assignments. The Company has laid a strong foundation and created a favourable environment to secure major assignments in selected sectors in the years to come. Directors Dr. D. C. Kantawala and Mr. S. Venkatraman 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 representation 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, 2006
83
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. Corporate Social Responsibility Initiatives As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since its inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the announcement made on the occasion of the 60th Anniversary of Mahindra & Mahindra Limited, the ultimate holding company, that the Group would support a range of Corporate Social Responsibility (CSR) initiatives by committing 1% of Profit After Tax (PAT) on a continuing basis. The 1% PAT would specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/or other Institutions, including K. C. Mahindra Education Trust and/or Mahindra Foundation, not related to the business of the Company or the welfare of the employees, towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Company's estimated PAT for the year on a continuing basis until further review by the Board. Auditors Messrs. A. F. Ferguson Associates, Chartered Accountants, retire as Auditors of the Company and have given their consent for reappointment. The shareholders will be required to appoint auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section.
Deposits and Loans/Advances The Company has not accepted deposits from the public or its employees during the year under review. The Company has not made any loans/advances which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent company, Mahindra & Mahindra Limited. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorption respectively are not applicable to the Company. The information on foreign exchange earnings and outgo is furnished in the Notes to the Accounts. Particulars of Employees as required under section 217(2A) of the Companies Act, 1956 and Rules thereunder The Company had no employee who was in receipt of remuneration of not less than Rs. 24,00,000 during the year ended 31st March, 2006 or not less than Rs. 2,00,000 per month during any part thereof. Certificate under section 383A of the Companies Act, 1956 from a Company Secretary in Whole-time Practice. In accordance with the provisions of section 383A of the Companies Act, 1956, a certificate issued by Mr. J. P. Fernandes, Company Secretary in Whole-time Practice, certifying that the Company has complied with all the provisions of the Companies Act, 1956 is given in the Annexure and forms a part of this Report. For and on behalf of the Board
A. K. NANDA Chairman
84
Compliance Certificate
Reg. No. Paid up Capital : 11-74723 Authorised Capital : Rs. 1 crore : Rs. 1 crore
9.
The Company has wherever required duly complied with the provisions of section 297 of the Act in respect of contracts specified in that section. The Company has made necessary entries in the register maintained under section 301 of the Act. No Director or his relative or any firm or private company has been appointed to any office of profit in the Company attracting the provisions of section 314 of the Act wherever applicable. The Company has not issued any duplicate share certificates. The Company has: (i) delivered all the certificates on allotment of securities and on lodgment thereof for transfer/transmission or any other purpose in accordance with the provisions of the Act; not declared any dividend including interim dividend during the year under review. duly complied with the requirements of section 217 of the Act.
10. 11.
To, Members, Mahindra Acres Consulting Engineers Limited. I have examined the registers, records, books and papers of Mahindra Acres Consulting Engineers Limited (the Company) as required to be maintained under the Companies Act, 1956, (the Act) and the rules made thereunder and also the provisions contained in the Memorandum and Articles of Association of the st Company for the financial year ended on 31 March, 2006. In my opinion and to the best of my information and according to the examinations carried out by me and explanations furnished to me by the Company, its officers and agents, I certify that in respect of the aforesaid financial year: 1. the Company has kept and maintained all registers as stated in Annexure A to this certificate, as per the provisions of the Act and the rules made thereunder and all entries therein have been duly recorded.
12. 13.
(ii) (iii) 14.
2.
the Company has duly filed the forms and returns as stated in Annexure B to this Certificate, with the Registrar of Companies, Regional Director, Central Government, Company Law Board or other authorities within the time prescribed under the Act and the rules made thereunder, unless otherwise indicated in the said Annexure. the Company is a public company under section 3(i)(iv) of the Act. The paid-up share capital is Rs.1 crore. the Board of Directors duly met four times on 25 April, th nd 2005, 26 September, 2005, 22 December, 2005 and nd 22 March, 2006, in respect of which meetings proper notices were given and the proceedings were properly recorded and signed in the Minutes Book maintained for the purpose. the Company has not closed its Register of Members, and/ or Debenture-holders during the financial year ended st 31 March, 2006. The Annual General Meeting for the financial year ended on st th 31 March, 2005 was held on 26 September, 2005 after giving due notice to the members of the Company and the resolutions passed thereat were duly recorded in Minutes Book maintained for the purpose. No Extra-ordinary General Meeting was held during the st financial year ended 31 March, 2006. The Company has not advanced any loan to its Directors and/or persons or firms or Companies referred to in the section 295 of the Act.
th
The Board of Directors of the Company is duly constituted and the appointment of Directors, Additional Directors, Alternate Directors and Directors to fill casual vacancies have been duly made. The Company is managed by the Board and it has no Managing Director/ Whole-time Director/Manager. The Company has no sole selling agents requiring compliance of the provisions of the Act. The Company has wherever required, obtained all necessary approvals of the Central Government, Company Law Board, Regional Director, Registrar or such other authorities as may be prescribed under the various provisions of the Act. The Directors have disclosed their interest in other firms/ companies to the Board of Directors pursuant to the provisions of the Act and the Rules made thereunder. The Company has not issued any shares /debentures/ other securities during the financial year. The Company has not bought back any shares during the financial year under review. The Company has no preference shares/ debentures and hence no redemption of such shares/ debentures. The Company did not have to keep in abeyance rights to the dividend, right shares and bonus shares pending registration of transfer of shares in compliance with the provisions of the Act as the Company had declared no dividend nor did it issue any rights or bonus shares during the year under scrutiny.
85
15. 16. 17.
3. 4.
18.
5.
19. 20. 21. 22.
6.
7. 8.
23.
The Company has not accepted any deposits or unsecured loans requiring compliance with the provisions of sections 58A and 58AA of the Act read with the Companies (Acceptance of Deposits) Rules, 1975/ the applicable directions issued by the Reserve Bank of India/ any other authority in respect of such deposits or unsecured loans. No amount was borrowed by the Company from Directors, members, public, financial institutions, banks and others during the financial year under review. The Company has not made loans and investment, or given guarantees or provided securities to the other bodies corporate requiring compliance with the provisions of the Act. The Company has not altered the provisions of the Memorandum with respect to the situation of the Companys registered office from one State to another during the year under scrutiny. The Company has not altered the provisions of the Memorandum in respect of the Objects of the Company during the year under scrutiny. The Company has not altered the provisions of the Memorandum with respect to the name of the Company during the year under scrutiny.
29.
The Company has not altered the provisions of the Memorandum with respect to the share capital of the Company during the year under scrutiny. The Company has not altered its Articles of Association st during the Financial Year ended 31 March, 2006. No prosecution was initiated against or no show cause notice was received by the Company for alleged offences under the Act and also no fine and penalty or any other punishment was imposed on the Company. The Company did not receive any security / deposit from its employees during the year under certification and hence deposit of any security from them as per the provisions of section 417(1) of the Act did not arise. The Company has regularly deposited both Provident Fund and Employees State Insurance Dues with the prescribed authorities except in some cases where there were slight delays in depositing Provident Fund Dues.
30. 31.
24.
25.
32.
26.
33.
27.
28.
J. P. Fernandes Company Secretary FCS - 711 : C. P. No. : 2923
Annexure A 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Register of Members u/s.150. Minutes Book of Board Meetings u/s.193. Minutes Book of General Meetings u/s.193. Register of Charges u/s.143. Books of Accounts u/s.209. Register of particulars of contracts in which Directors are interested u/s.301. Register of Directors u/s.303. Register of Directors' shareholding u/s.307. Register of Transfers. Register of Directors attendance at Board Meetings (Regulation 71 of Table A). Register of Investments or loans made, guarantees given or securities provided u/s 372A.
86
Annexure B Forms and returns as filed by the Company with the Registrar of Companies, Regional Director, Central Government or other authorities st during the financial year ended on 31 March, 2006 :Sr. No. 1. Form No./ Return Audited Accounts Secretarial Compliance Certificate Annual Return Filed under Section Sec. 220 For Date of filing Whether filed If delay in filing within the whether requisite prescribed date additional fee paid Yes Not Applicable
Audited Accounts duly adopted by the members at their Annual General th Meeting held on 26 September, 2005. Secretarial Compliance Certificate adopted by Members at their Annual General Meeting held on th 26 September, 2005. Annual Return made as on th 26 September 2005, being the date of the last Annual General Meeting.
5 October, 2005
th
2.
Sec.383A
5 October,2005
th
Yes
Not Applicable
3.
Sec. 159
11 November, 2005
th
Yes
Not Applicable
87
Auditors' Report to the Members of Mahindra Acres Consulting Engineers Limited

We have audited the attached Balance Sheet of Mahindra Acres Consulting Engineers Limited as at 31st March, 2006, the Profit and Loss Account and also the Cash Flow Statement of the Company 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 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, amended by the Companies (Auditors Report) (Amendment) Order, 2004 (hereinafter referred to as the Order) issued by the Central Government of India in terms of Section 227(4A) 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 above, we report that: (a) 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, Profit and Loss Account, and Cash Flow Place: Bangalore Date: 24th May, 2006 Statement dealt with by this report are in agreement with the books of account; (d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement 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, 2006, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006, 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 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; (i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; (ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; (iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
(e)
(f)
For A.F. Ferguson Associates Chartered Accountants H.L. Shah Partner Membership No. 33590
(b)
(c)
88

Annexure referred to in paragraph (3) of the Auditors Report to the Members of Mahindra Acres Consulting Engineers Limited on the accounts for the year ended 31st March, 2006. (i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) According to the information and explanations given to us, all fixed assets of the Company have been physically verified during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable. (c) The Company has not disposed off a substantial part of fixed assets during the year and therefore paragraph 4(i)(c) of the Companies (Auditor's Report) Order, 2003 (hereinafter referred to as "the Order") is not applicable. (ii) As the Company is engaged in rendering services with respect to construction contracts, paragraphs 4(ii)(a), 4(ii)(b), 4(ii)(c) of the Order are not applicable. (iii) The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956, and therefore paragraph 4(iii) of the Order is not applicable. (iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and for the sale of services. We have neither come across nor have we been informed of any major weaknesses in internal control procedures. (v) According to the information and explanations given to us, there are no transactions with parties that need to be entered in the register maintained under Section 301 of the Companies Act, 1956, and therefore paragraph 4(v)(b) of the Order is not applicable. (vi) In our opinion and according to the information and explanations given to us, as the Company has not accepted deposits from the public, paragraph 4(vi) of the Order is not applicable. (vii) In our opinion, the Company has an internal audit system which is commensurate with its size and nature of business. (viii) As the Company is engaged in rendering services with respect to construction contracts, paragraph 4(viii) of the Order is not applicable. (ix) (a) According to the information and explanations given to us and according to the books and records examined by us, in our opinion, the undisputed statutory dues in respect of provident fund, employees state insurance, income tax, service tax and other material statutory dues as applicable have been generally 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, 2006, for a period of more than six months from the date they became payable. (b) As at 31st March, 2006, according to the records of the Company, the following dispute due on account of income tax has not been deposited with the appropriate authorities.
Nature of Dues Income Tax Amount (Rs. Lakhs) 27 Forum where dispute is pending Income Tax Appellate Tribunal
(x) The Company has neither accumulated losses nor has it incurred any cash losses during the financial year or in the immediately preceding financial year. (xi) As the Company has no borrowings provisions of paragraph 4(ix) of the Order are not applicable. (xii) The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities, and, therefore, provisions of paragraph 4(xii) of the Order are not applicable. (xiii) The provisions of any special statute applicable to chit fund and nidhi/mutual benefit fund/society are not applicable to the Company, and, therefore, paragraph 4(xiii) of the Order is not applicable. (xiv) The Company is not dealing or trading in shares, securities, debentures and other investments, and, therefore, paragraph 4(xiv) of the Order is not applicable. (xv) According to the information and explanations given to us, during the year the Company has not given any guarantee for loans taken by others from banks or financial institutions, and, therefore, paragraph 4(xv) of the Order is not applicable. (xvi) The Company has not taken any term loans during the year, and, therefore, the paragraph 4(xvi) of the Order is not applicable. (xvii) No funds has been raised on short term basis during the year, and, therefore, paragraph 4(xvii) of the Order is not applicable. (xviii) The Company has not made any preferential allotment of shares during the year, and, therefore, paragraph 4(xviii) of the Order is not applicable. (xix) The Company has not issued any debentures during the year, and, therefore, paragraph 4(xix) of the Order is not applicable. (xx) The Company has not raised any money by way of public issue during the year, and, therefore, provision of paragraph 4(xx) of the Order is not applicable. (xxi) To the best of our knowledge and belief and according to the information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed during the year. For A.F. Ferguson Associates Chartered Accountants Place: Bangalore Date: 24th May, 2006 H.L. Shah Membership No. 33590
89

As at 31-03-06 Rs. Lakhs Rs. Lakhs As at 31-03-05 Rs. Lakhs Rs. Lakhs
Schedule I. SOURCES OF FUNDS: SHAREHOLDERS FUNDS: (a) (b) Share Capital ............................................................... Reserves and Surplus ................................................. A B
100.00 89.90 189.90
100.00 88.75 188.75
II.
APPLICATION OF FUNDS: FIXED ASSETS: .................................................................. (a) (b) (c) Gross Block ................................................................. Less: Depreciation ...................................................... Net Block ..................................................................... C 120.65 95.56 25.09 0.14 116.29 90.75 25.54
Deferred Tax Assets (Net) .................................................. CURRENT ASSETS, LOANS AND ADVANCES (a) (b) (c) (d) Inventories .................................................................. Sundry Debtors ........................................................... Cash and Bank Balances ............................................. Loans and Advances ................................................... D E F G 260.23 12.86 62.11 335.20 Less: Current Liabilities and Provisions (a) (b) Current Liabilities ........................................................ Provisions .................................................................... H I 164.11 6.42 170.53 Net Current Assets .............................................................
3.92 285.16 4.37 48.23 341.68
173.58 4.89 178.47 164.67 189.90 163.21 188.75
NOTES TO THE ACCOUNTS .................................................... As per our report attached
N
For and on behalf of the Board
For A.F. Ferguson Associates Chartered Accountants
A. K. Nanda
Chairman
S. Venkatraman
Director Chief Operating Officer
H.L. Shah Partner
B. Suresh
Bangalore, Dated: 24th May, 2006

90
Mumbai, Dated: 23rd May, 2006
200506 Rs. Lakhs 305.43 J K (3.92) 1.98 303.49 200405 Rs. Lakhs 247.29 0.50 2.53 250.32
Schedule INCOME: Income from Consultancy Services ............................................ Increase/(Decrease) in contract Work-in-Progress ...................... Other Income ..............................................................................
EXPENDITURE: Personnel Expenses ................................................................... Other Expenses .......................................................................... Depreciation ................................................................................ L M 92.93 196.22 5.75 294.90 Profit for the year Before Taxation .......................................... Provision for Taxation Current Tax .......................................................................... Deferred Tax ....................................................................... Fringe Benefit Tax ............................................................... Prior Year ............................................................................. 4.00 (0.14) 3.58 1.15 72.47 73.62 0.12 N
81.35 157.59 6.13 245.07 5.25
8.59
2.00 0.21 3.04 69.43 72.47 0.30
Profit for the year After Taxation ............................................. Balance of Profit Brought Forward .............................................. Balance Carried to Balance Sheet ............................................... Earnings Per Share (Rs.) ............................................................. NOTES TO THE ACCOUNTS .................................................... As per our report attached
A. K. Nanda
Chairman
S. Venkatraman
H.L. Shah Partner
B. Suresh
91
200506 Rs. Lakhs A. Cash Flow from Operating Activities Net Profit Before Taxation .................................................................................... Adjustments for: Depreciation .................................................................................................. (Profit)/Loss on Fixed Assets (Net) ............................................................... Interest Income ............................................................................................. Unrealised Exchange Loss ............................................................................ Opening Profit before Working Capital Changes .................................................. Changes in: Trade and Other Receivables ........................................................................ Inventories .................................................................................................... Trade and Other Payables ............................................................................. Cash Generated from Operations ......................................................................... Income-tax Paid .................................................................................................... Net Cash From/(Used) in Operating Activities .................................................. B. Cash Flow from Investing Activities Purchase of Fixed Assets ..................................................................................... Sale of Fixed Assets ............................................................................................. Interest Received .................................................................................................. Net Cash used in Investing Activities ................................................................ C. Cash Flow from Financing Activities ................................................................. Net Cash Flows during the year (A+B+C) .......................................................... Cash and Cash Equivalents Opening Balance ................................................................................................... Closing Balance ..................................................................................................... 4.37 12.86 8.49 9.87 4.37 (5.50) (5.53) 0.26 0.12 (5.15) 8.49 (3.05) 0.70 0.03 (2.32) (5.50) 22.70 3.92 (10.28) 16.34 (19.11) 13.64 (28.61) (0.50) 22.43 (6.68) (10.90) (3.18) 5.75 (0.03) (0.18) 2.28 16.41 6.13 1.03 (0.17) 2.16 14.40 8.59 5.25 200405 Rs. Lakhs
As per our report attached
A. K. Nanda
Chairman
S. Venkatraman
H.L. Shah Partner
B. Suresh

92

SCHEDULE A SHARE CAPITAL: Authorised: 10,00,000 Equity Shares of Rs. 10 each . Issued, Subscribed and Paid-up: 10,00,000 Equity Shares of Rs. 10 each fully paid-up ............................ (Of the above, 5,10,000 Equity Shares are held by Mahindra Holdings & Finance Limited, the Holding Company, including 7 shares held jointly with its nominees.) 100.00 100.00 100.00 100.00 100.00 100.00 As at 31-03-06 Rs. Lakhs As at 31-03-05 Rs. Lakhs SCHEDULE F CASH AND BANK BALANCES: Cash and Cheques on Hand ...................... Balances with Scheduled Banks On Current Account .............................. On Deposit Account ............................. 5.35 1.78 12.86 0.84 2.91 4.37 As at 31-03-06 Rs. Lakhs 5.73 As at 31-03-05 Rs. Lakhs 0.62
SCHEDULE G LOANS AND ADVANCES : (Unsecured, Considered Good) Advances recoverable in Cash or in Kind or for Value to be received ............................ Taxation (Net) ............................................
As at 31-03-06 Rs. Lakhs 9.97 52.14 62.11
As at 31-03-05 Rs. Lakhs 7.62 40.61 48.23
SCHEDULE B RESERVES AND SURPLUS: Capital Reserve ......................................... Profit and Loss Account ............................
As at 31-03-06 Rs. Lakhs 16.28 73.62 89.90
As at 31-03-05 Rs. Lakhs 16.28 72.47 88.75
SCHEDULE H CURRENT LIABILITIES: Sundry Creditors Due to Small Scale Industrial Undertakings ......................................
As at 31-03-06 Rs. Lakhs
124.35 39.76 164.11
136.78 36.80 173.58
SCHEDULE D INVENTORIES: Contract Work-in-Progress (at lower of cost and net realizable value) ............................
As at 31-03-05 Rs. Lakhs 3.92 3.92
Others ................................................ Advances from Customers ........................
SCHEDULE I PROVISIONS: Leave Salary ..............................................
As at 31-03-06 Rs. Lakhs 6.42 6.42
As at 31-03-05 Rs. Lakhs 4.89 4.89
SCHEDULE E SUNDRY DEBTORS (Unsecured): Outstanding over six months Considered Good .................................. Considered Doubtful ............................. Less: Provision for Doubtful Debts ........... Other Debts .............................................. Unbilled Revenue ...................................... SCHEDULE C FIXED ASSETS:
As at 31-03-06 Rs. Lakhs 52.68 52.68 52.68 54.86 152.69 260.23
As at 31-03-05 Rs. Lakhs 48.89 10.14 59.03 10.14 48.89 53.83 182.44 285.16
Schedules forming part of the Profit and Loss Account for the year ended 31st March, 2006
SCHEDULE J INCREASE/(DECREASE) IN CONTRACT: WORK-IN-PROGRESS Closing Work-in-Progress .......................... Opening Work-in-Progress ........................ 200506 Rs. Lakhs 3.92 (3.92) 200405 Rs. Lakhs 3.92 3.42 0.50 Rs. Lakhs
GROSS BLOCK Description of Assets Cost as at 31-3-2005 Tangible Assets: Furniture and Fittings ............................... Vehicles .................................................... Office and Other Equipment .................... Computers ............................................... Intangible Asset: Technical know-how ................................ Total ......................................................... Previous Year ........................................... 8.77 16.12 21.20 29.51 75.60 40.69 40.69 116.29 124.78 Additions Deductions 0.01 0.57 0.59 1.17 1.17 11.54 Cost as at 31-3-2006 10.89 16.12 21.25 31.70 79.96 40.69 40.69 120.65 116.29 As at 31-3-2005 6.99 10.62 7.54 24.91 50.06 40.69 40.69 90.75 94.43
DEPRECIATION For the year 0.65 1.52 1.33 2.25 5.75 5.75 6.13 Deductions 0.01 0.34 0.59 0.94 0.94 9.81 As at 31-3-2006 7.63 12.14 8.53 26.57 54.87 40.69 40.69 95.56 90.75
NET BLOCK As at 31-3-2006 3.26 3.98 12.72 5.13 25.09 25.09 As at 31-3-2005 1.78 5.50 13.66 4.60 25.54 25.54
2.13 0.62 2.78 5.53 5.53 3.05
93
SCHEDULE K OTHER INCOME: Interest on Deposits (Tax deducted at source: Rs. 0.04 lakhs; previous year Rs. 0.01 lakhs) ......................................... Miscellaneous Income .............................. Profit on Sale of Fixed Assets (Net) .......... Bad Debts Recovered ...............................
200506 Rs. Lakhs
200405 Rs. Lakhs
ii) Intangible Asset: Technical know-how has been amortised over a period of five years. (c) Revenue Recognition:
0.18 0.13 0.03 1.64 1.98
0.17 1.32 1.04 2.53 200405 Rs. Lakhs 72.04 7.27 2.04 81.35 200405 Rs. Lakhs 21.68 0.16 4.30 3.07 32.53 7.72 0.97 6.90 7.67 21.13 6.17 4.74 1.03 2.
The Company recognises revenue on the percentage of completion method, which involves technical estimates with respect to costs to completion, of each contract/activity. Such estimates, made by the Company and certified to the auditors, have been relied upon by them, as these are of a technical nature. (d) Foreign Currency Transactions: Foreign currency transactions are recorded at the exchange rate prevailing on the date of transaction. Foreign currency assets and liabilities are translated at the contracted/ closing exchange rate prevailing on the last day of the accounting year and the resultant exchange differences are dealt with within the profit and loss account except in case of those pertaining to fixed assets acquired outside India, which are added to the carrying cost of such assets. (e) Retirement Benefits:
SCHEDULE L PERSONNEL EXPENSES: Salaries, Wages and Bonus ....................... Contribution to Provident and other Funds Staff Welfare Expenses .............................
200506 Rs. Lakhs 83.10 7.52 2.31 92.93
SCHEDULE M OTHER EXPENSES: Rent .......................................................... Rates and Taxes ........................................ Repairs and Maintenance Others ......... Power and Fuel ......................................... Professional Charges ................................ Postage, Telephone and Fax ..................... Insurance ................................................... Conveyance ............................................... Printing and Stationery .............................. Travelling Expenses .................................. Vehicle Expenses ...................................... Office Expenses ........................................ Loss on Fixed Assets Sold/Scrapped (Net) .. Unbilled Revenue accrued in earlier years written off ................................................. Bad Debts (net of provision for doubtful debts written back Rs. 10.14 lakhs, previous year Rs. Nil) ............................ Exchange Loss (Net) ................................. Miscellaneous Expenses ...........................
200506 Rs. Lakhs 9.97 0.06 1.64 2.10 50.60 5.93 1.29 8.60 7.44 26.15 7.28 6.77 39.79
Annual contributions are made to gratuity and superannuation schemes with Life Insurance Corporation of India. Provision is made for leave encashment on the basis of an actuarial valuation, as at the balance sheet date, by an independent actuary. (f) Taxes on Income: In accordance with the provisions of the Income Tax Act, 1961, current tax is determined as the amount of tax payable to the taxation authorities in respect of taxable income for the year. Deferred tax is accounted for under the liability method, subject to the consideration of prudence for deferred tax assets on timing differences, being the difference between taxable and accounting income that originate in one period and are capable of or reversal in one or more subsequent periods. (g) Segment Reporting: The Company has a single reportable segment, viz., income from consultancy fees for the purpose of Accounting Standard 17 on Segment Reporting. (a) In respect of contracts entered into by the Company, the Company has recognised revenue on the percentage of completion method, which is measured with reference to the proportion of personnel costs incurred to the total estimated personnel costs for each contract. (b) In respect of the contracts in progress as at the year end: Particulars i) The aggregate costs incurred and recognised profits (net) upto the year end ................... ii) Retentions .............................. 3. 20052006 Rs. Lakhs 20042005 Rs. Lakhs
16.65 2.28 9.67 196.22
26.90 2.16 10.46 157.59
816.89 7.75
853.30 6.63
SCHEDULE N NOTES ON ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006 1. Significant Accounting Policies: (a) Basis for Preparation of Accounts: The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Indian Companies Act, 1956. (b) Fixed Assets and Depreciation: i) Tangible Assets: Fixed assets are stated at cost less depreciation. Cost comprises of purchase price and any attributable cost (including financing cost) of bringing the assets to its working condition for its intended use. 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. Depreciation is provided on the straight line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956, except for certain items of Computers, Office Equipment and Furniture and Fixtures, costing more than Rs. 5,000, which are depreciated at the rate of 19.8% per annum to coincide with the expected useful life of such assets. 4.
The identification of a supplier as Small Scale Industrial Undertaking has been done on the basis of information available with the Company. On this basis there are no Small Scale Industrial Undertakings to whom the Company owes any amount as at the balance sheet date. Earnings Per Share: i) Net Profit After Tax ...................... ii) Weighted Average Number of Equity Shares (Nos.) ..................... iii) Basic and Diluted Earnings Per Share (Rs.) .................................... iv) Face Value of Equity Share (Rs.) .. 20052006 Rs. Lakhs 1.15 10,00,000 0.12 10.00 20042005 Rs. Lakhs 3.04 10,00,000 0.30 10.00
5.
Miscellaneous Expenses include: Auditors Remuneration: Audit Fees .................................... Other Services ............................. Reimbursement of Expenses/Levies Directors Sitting Fees ....................... 2.60 0.32 0.02 1.75 1.20 0.33 0.12
94
6.
Expenditure in Foreign Currency: Consultancy Fees ............................... Others ...............................................
20052006 Rs. Lakhs 19.16 0.95
20042005 Rs. Lakhs
7.
Earnings in Foreign Exchange: Consultancy Fees ............................... 10.66
8.
Related Party Transactions: (a) Names of related parties and nature of relationship where control exists: Name of Related Party Mahindra & Mahindra Limited Mahindra Holdings & Finance Limited Acres International Limited Fellow Subsidiaries: Tech Mahindra Limited (formerly known as Mahindra-British Telecom Limited) Mahindra Logisoft Business Solutions Limited Automartindia Limited Mahindra USA Inc. Bristlecone (UK) Limited Mahindra Gujarat Tractor Limited Mahindra Shubhlabh Services Limited Mahindra Insurance Brokers Limited Mahindra World City Developers Limited (formerly known as Mahindra Industrial Park Limited) Mahindra World City (Jaipur) Ltd., (w.e.f. 26th August 2005) Bristlecone Limited, Cayman Islands Bristlecone Inc. Mahindra MiddleEast Electrical Steel Service Centre (FZE) Mahindra & Mahindra South Africa (Pty.) Limited Mahindra International Limited (with effect from 1st November, 2005) Stokes Group Limited (with effect from 3rd January, 2006) Plexion Technology (India) Private Limited (with effect from 15th February, 2006) Jensand Limited (with effect from 3rd January, 2006) Stokes Forgings Limited (with effect from 3rd January, 2006) Stokes Forgings Dudley Limited (with effect from 3rd January, 2006) Plexion Technologies (UK) Ltd. (with effect from 15th February, 2006) Plexion Technologies GmbH, Germany (with effect from 15th February, 2006) Plexion Technologies Incorporated USA (with effect from 15th February, 2006) Mahindra Engineering Design & Development Company Limited Mahindra SAR Transmission Private Limited Mahindra Overseas Investment Company (Mauritius) Limited Mahindra Europe s.r.l. (with effect from 30th May, 2005) Mahindra (China) Tractor Company Limited (with effect from 13th May, 2005) Mahindra-BT Investment Company (Mauritius) Limited (with effect from 9th May, 2005) Mahindra Engineering & Chemical Products Limited Mahindra & Mahindra Financial Services Limited Mahindra Intertrade Limited Mahindra Steel Service Centre Limited Mahindra Gesco Developers Limited Mahindra Infrastructure Developers Limited Mahindra Ashtech Limited Mahindra Holidays & Resorts India Limited NBS International Limited Mahindra Realty Limited (with effect from 21st September, 2005) Mahindra Automotive Steels Private Limited (with effect from 2nd June, 2005) Mahindra Renault Private Limited (with effect from 5th August, 2005) Mahindra Holidays & Resorts U.S.A. Inc. Tech Mahindra (Americas) Inc. (formerly known as MBT International Inc.) Tech Mahindra GmbH (formerly known as MBT GmbH) Tech Mahindra Singapore (Pte.) Limited (formerly known as MBT Software Technologies Pte. Ltd.) Tech Mahindra (R&D Services) Limited (with effect from 28th November, 2005) Nature of Relationship Ultimate Controlling Company Holding Company with 51% Shareholding Controlling Interest Company with 49% Shareholding Substantial Interest
Tech Mahindra (R&D Services) Inc. (with effect from 28th November, 2005) Tech Mahindra (R&D Services) Pte. Limited (with effect from 28th November, 2005) Tech Mahindra (Thailand) Limited (with effect from 21st February, 2006) Tech Mahindra Foundation (with effect from 22nd March, 2006) Bristlecone India Limited Bristlecone (Singapore) Pte. Ltd. Bristlecone GmbH Mahindra Ugine Steel Company Ltd. (with effect from 21st June, 2005) Console Estate & Investment Limited (Ceased with effect from 20th March, 2006) (b) Related party transactions are as under: Rs. Lakhs Sl. Nature of Transactions No. 1. Income from Consultancy Services Reimbursements Received Advance Received Outstanding as at year end Payables Receivables 52.22 (58.90) 0.67 (9.77) 3.18 (0.11) (0.75) (33.80) () Rs. Lakhs Sl. Nature of No. Transactions Controlling Company Mahindra & Mahindra Ltd. 1. Income from Consultancy Fees Reimbursements Received Advances Mahindra World City Developers Ltd. Fellow Subsidiaries Mahindra Infrastructure Developers Ltd. Mahindra Gesco Developers Ltd. Controlling Company 1.86 (9.90) (0.58) () Fellow Subsidiaries 57.35 (34.36) 1.26 (0.12) 0.75 () Substantial Interest () () ()
2. 3. 4.
(c) Significant related party transactions are as under:
1.86 (9.90)
40.53 (18.11)
()
14.82 (14.40)
2.
(0.58) ()
1.14 () ()
() 0.75 ()
() ()
3.
Previous years figures are in brackets. 9. Deferred Tax Assets/(Liabilities) As at 31-03-2005 (2.50) 2.50 Tax Effect for the year (0.48) (2.16) 2.50 (0.14) Rs. Lakhs As at 31-03-06 (2.02) 2.16 0.14
Description Deferred Tax Liabilities Fixed Assets Deferred Tax Assets Provision from Leave Encashment Provision for Doubtful Debts Net Deferred Tax Asset/(Liability) 10. Contingent Liabilities:
Income Tax: Rs. 20.15 lakhs (200405: Rs. 20.15 lakhs) The above amount is based on a demand raised by the income tax authorities which the Company is contesting. Outflows, if any, arising out of this claim would depend on the outcome of the decision of the appellate authorities and the Companys right for future appeals. 11. Previous years figures have been regrouped, wherever necessary, to conform to this years classification.
95
12. The information relating to the Balance Sheet abstract and the Company's general business profile as per Part IV of Schedule VI to the Companies Act, 1956, is as under:
I. Registration Details: Registration No. Balance Sheet Date 1 1 3 1 7 4 7 2 3 0 3 - 2 0 0 6 State Code 1 1
II. Capital Raised During the Year (Amount in Rs. Thousands) Public Issue N I L Bonus Issue N I L III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities 3 6 0 4 3 Sources of Funds Paid-up Capital 1 0 0 0 0 Secured Loans N I L Application of Funds Net Fixed Assets 2 5 0 9 Net Current Assets 1 6 4 6 7 Accumulated Losses N I L IV. Performance of the Company (Amount in Rs. Thousands) Turnover (Represents Total Income) 3 0 3 4 9 Profit/Loss Before Tax + 8 5 9 + Earnings per Share in Rupees (Basic and Diluted) 0 . 1 2 V. Generic names of three Principal Products/Services of the Company (As per Monetary Terms) Item Code No. (ITC Code) Product Description Total Expenditure 2 9 4 9 0 Profit/Loss After Tax 1 1 5 Dividend Rate % N I L Investments N I N I Deferred Tax Asset 1 4 L L Miscellaneous Expenditure Reserves and Surplus 8 9 9 0 Unsecured Loans N I L Total Assets 3 6 0 4 3 Rights Issue N I Private Placement N I L L
Engineering Consultancy Project Consultancy For and on behalf of the Board
Signature to Schedule A to N
A. K. Nanda
Chairman
S. Venkatraman B. Suresh

96
MAHINDRA HOLIDAYS AND RESORTS INDIA LIMITED

Your Directors present their Tenth Report together with the audited accounts of your Company for the year ended 31st March, 2006. Financial Results Rs. in lakhs 2006 Income: Income from Operations ........................................................................ Expenditure Profit before Depreciation, Interest and Taxation .................................. Depreciation ........................................................................................... Interest & Financial Charges .................................................................. Profit for the year before tax .................................................................. Provision for Tax Current Tax ............................................................................ MAT credit Entitlement ......................................................... Deferred tax (net) ................................................................... Fringe Benefit tax .................................................................. Net Profit for the year after tax .............................................................. Balance brought forward from earlier years ........................................... Balance carried forward ......................................................................... (282) 282 (1,131) (137) 2,083 (308) 1,775 (130) (598) 922 (1,231) (308) 4,458 (775) (332) 3,351 2,729 (647) (431) 1,651 15,673 10,615 2005
Operations The aggressive pace of growth of the economy catalysed changes in lifestyle and holidaying habits. Our brand Club Mahindra has built up great salience in the holiday segment and enjoys a top of mind recall. Your Company was able to leverage the Brand Equity and the change in the lifestyle habits to add 10,200 Timeshare Members during the year as against 7,955 Timeshare Members added during the previous year. Your Company further strengthened its network and availability of roomnights for holidaying by its Members by creating additional accomodation in Goa, Coorg, Corbett and Poovar. Your Company has added a new Resort at Dharamshala thereby increasing its presence in the State of Himachal Pradesh. In addition, your Company has acquired lands for setting up of new resorts at Tungi Village (near Lonavala) at Undi and Chaferi Villages in Ratnagiri District of Maharashtra, and at Manapet Village, Pondicherry. Both Ratnagiri and Pondicherry are beach resorts. Your Companys income grew by 48% from Rs.10,615 lakhs to Rs.15,673 lakhs and Profit Before Tax increased by 103% from Rs.1651 lakhs to Rs.3351 lakhs during the year under review. Your Company continues to maintain and deliver exemplary levels of service to its Members. This is confirmed by the fact that four of the Companys Resorts at Goa, Munnar, Binsar and Coorg received the Gold Crown Certification from RCI based on independent member feedbacks, facilities and amenities. It is pertinent to note that Goa and Munnar Resorts have retained the
Gold Crown Certification since inception and Coorg received it within 6 months of starting operations. Your Company continues with its emphasis on Quality Standards. During the year, the Companys Resorts at Goa, Ooty and Kodaikanal received Food Hygiene Certification of International Standard from BHC of Netherlands. The Economy is poised for aggressive growth. With increasing disposable incomes, your Company expects changes in lifestyle to accelerate. Your Company is well poised to take advantage of these changes and continue its aggressive momentum both in terms of acquisition of members and increasing network of resorts. Deposits and Loans / advances The Company has not accepted any deposits from the public or its employees during the year under review. Your Company has not made any loans / advances which require to be disclosed in the Annual Accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent company, Mahindra & Mahindra Limited. Conservation of Energy and Technology Absorption In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption respectively are not applicable to the Company.
97
Foreign Exchange Earnings and Outgo The information on Foreign Exchange earnings and outgo is furnished in the Notes on Accounts. Particulars of Employees As required under section 217(2A) of the Companies Act, 1956, and Rules thereunder, a statement containing particulars of the Companys employee who was in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2006 or not less than Rs.2,00,000 per month during any part of the said year, is given in the Annexure to this Report. Directors Mr. Cyrus J. Guzder and Mr. Rohit Khattar retire by rotation and, being eligible, offer themselves for re-election at the forthcoming Annual General Meeting of the Company. Audit Committee The Audit Committee presently comprises of Mr. Cyrus J. Guzder (Chairman of the Committee), Mr. A. K. Nanda and Mr. U. Y. Phadke. Subsidiary Company The statement pursuant to section 212 of the Companies Act, 1956, containing details of your Companys subsidiary, Mahindra Holidays and Resorts (USA) Inc. is attached. Auditors Messrs A. F. Ferguson & Co., Chartered Accountants, retire as Auditors of the Company at the conclusion of the forthcoming Annual General Meeting, and have given their consent for reappointment. The shareholders will be required to appoint Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. 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 judgements 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, 2006 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. Corporate Social Responsibility Initiatives As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since its inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the announcement made th on the occasion of the 60 Anniversary of Mahindra & Mahindra Limited, the ultimate holding company, that the Group would support a range of Corporate Social responsibility (CSR) initiatives by committing 1% of Profit After Tax (PAT) on a continuing basis. The 1% PAT would specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/or other Institutions, including K. C. Mahindra Education Trust and/or Mahindra Foundation, not related to the business of the Company or the welfare of the employees towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Companys estimated PAT for the year on a continuing basis until further review by the Board. A beginning in this direction was made by your Company during the current year by making a contribution of Rs.9.20 lakhs to various charitable institutions.
For and on behalf of the Board A. K. Nanda
Chairman Goa: 22 April, 2006.

nd
98

Additional information as required under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors Report for the year ended 31st March, 2006. Name of the Employee Designation / Nature of duties Qualification Remuneration Age (subject to tax) (years) (Rs.) 84,46,953 51 Experience (years) Date of Last employment commencement held (Designation / of employment Organisation) 09/06/2004 President Food World Super Market Ltd. 26/08/2001 CEO (Entrepreneur) 01/03/2005 General Manager Ford India 05/02/2001 General Manager Arvind Brands 17/01/2006 Asst. Vice President Satyam Computers
1. Mr. Ramesh Ramanathan
Managing Director
B.A. PGDBM (IIM, Kolkata) ACA, ACS PDGDM (XLRI) B.A. B.E M.B.A. (IIML)
28
2. Mr. Amar Korde 3. Mr. Santosh Nair 4. Mr. R. Radhakrishna 5. Mr. Navarun Sen * * part of the year Notes: Notes
Chief Financial Officer Head Marketing Chief Sales Officer Business Head (Zest)
28,76,441 28,35,813 33,00,624 2,57,141
49 40 54 38
22 15 31 15
1. Nature of employment is contractual subject to termination on three months notice on either side. 2. The above employees are not related to any Director of the Company. 3. No employee holds by himself or alongwith his spouse and dependent children 2% or more of the equity shares of the Company. 4. Terms and Conditions of employment are as per Companys Rules / contract. 5. Gross remuneration received as shown in the statement includes Salary, Performance Pay, House Rent Allowance, perquisites value / allowances applicable, employers contribution to Provident Fund and Superannuation Scheme including reimbursement of medical expenses and all allowances / perquisites and terminal benefits as applicable.
A. K. Nanda
Chairman Goa: 22 April, 2006.

nd
99
Report of the Auditors to the Members of Mahindra Holidays and Resorts India Limited
We have audited the attached Balance Sheet of Mahindra Holidays and Resorts India Limited, as at 31st March, 2006 and also the profit and loss account and 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 examining, on a test basis, evidence supporting the amounts and the 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, 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 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; (ii) 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; (iii) the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; (iv) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; (v) on the basis of the written representations received from the directors, as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; (vi) 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, 2006; (b) in the case of 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.
For A.F. Ferguson & Co. Chartered Accountants
Place: Goa Date: 22nd April, 2006
H.L. Shah Partner Membership No.: 33590
100
Annexure referred to in paragraph 3 of the report of even date of the auditors to the members of Mahindra Holidays and Resorts India Limited on the accounts for the year ended 31st March, 2006
i.
a)
The company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. The management has a programme of physical verification of fixed assets over a period of three years which, in our opinion, is reasonable having regard to the size of the company and nature of its assets. In accordance with this programme, the management has conducted physical verification of certain fixed assets during the year and is in the process of reconciling the same with the fixed assets register. The company has not disposed off a substantial part of fixed assets during the year and therefore paragraph 4(i) (c) of the Companies (Auditor's Report) Order, 2003 (hereinafter referred to as the Order) is not applicable. Physical verification of inventory has been conducted by the management during the year and, in our opinion, the frequency of verification is reasonable. Procedures of physical verification of inventories followed by the management are reasonable, adequate and commensurate to the size of the company and the nature of it business. The company is maintaining proper records of inventories and no material discrepancies have been noticed on physical verification of inventories as compared to the book records.
vii.
In our opinion the company has an internal audit system that is commensurate with its size and nature of business. We are informed that maintenance of cost records has not been prescribed by the Central Government under section 209 (1)(d) of the Companies Act, 1956, in respect of the activities of the company and therefore paragraph 4 (viii) of the Order is not applicable. (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, sales tax, service tax, custom duty, excise duty and cess and other statutory dues, if any, with the appropriate authorities. There are no arrears of outstanding statutory dues as at 31st March 2006 for a period of more than six months from the date they became payable. As explained to us, there are no disputed dues of sales tax, income tax, customs duty, wealth tax, service tax, excise duty and cess that have not been deposited on account of any dispute and therefore paragraph 4 (ix) (b) of the Order is not applicable.
b)
viii.
ix.
c)
ii.
a)
(b)
b)
x.
c)
The company does not have accumulated losses at the end of the financial year and the company has not incurred cash losses in the financial year as well as in the immediately preceding financial year. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to banks and financial institutions. The company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities and therefore paragraph 4(xii) of the Order is not applicable. The provisions of any special statute applicable to chit fund and nidhi/mutual benefit fund/society are not applicable to the company and therefore paragraph 4(xiii) of the Order is not applicable.
xi. iii. The company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956, and therefore paragraph 4(iii) of the Order is not applicable. In our opinion and according to information and explanations given to us, there are adequate internal control procedures commensurate with size of the company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and there are no major internal control weakness in regard thereto. According to the information and explanations given to us, there are no transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956 and therefore paragraph 4(v) of the Order is not applicable. In our opinion and according to the information and explanations given to us, as the company has not accepted deposits from the public, paragraph 4(vi) of the Order is not applicable.
xii.
iv.
xiii.
v.
xiv. The company is not dealing or trading in shares, securities, debentures and other investments and therefore paragraph 4(xiv) of the Order is not applicable. xv. According to the information and explanations given to us, the company has given guarantee to a financial institution, in respect of finance availed by the time share members, the terms and conditions of which are not prejudicial to the interest of the company.
101
vi.
xvi.
The company has not availed any term loans during the year and therefore paragraph 4(xvi) of the Order is not applicable.
xxi.
xvii. Funds raised on short term basis have not been used for long term investments. xviii. The company has not made any preferential allotment of shares during the year and therefore paragraph 4(xviii) of the Order is not applicable. xix. The company has not issued any debentures during the year and therefore paragraph 4(xix) of the Order is not applicable. The company has not raised any money by way of public issues during the year and therefore paragraph 4(xx) of the Order is not applicable.
Based upon the audit procedures performed and as per the information and explanations given to us by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit.
For A.F. Ferguson & Co. Chartered Accountants
xx.
H.L. Shah Partner Membership No.: 33590
102
Balance Sheet as at March 31, 2006

As at March 31, 2006 Rs. As at March 31, 2005 Rs.
Schedule SOURCES OF FUNDS Shareholders Funds Share Capital .................................................................... Reserve and Surplus ........................................................ Deferred Income Advance towards members facilities (see Note 1(vii)(a)) .. Loan Funds Secured Loans ................................................................. Unsecured Loans ............................................................. Deferred tax liability (net) ................................................. Total ............. APPLICATION OF FUNDS Fixed Assets .................................................................... Gross Block ...................................................................... Less: Depreciation ........................................................... Net Block ......................................................................... Capital Work-in-Progress/Advances ................................. Expenditure during construction pending allocation ........ Investments .................................................................... Deferred Tax Asset (Net) ............................................... Current Assets, Loans and Advances ........................... Inventories ....................................................................... Sundry Debtors ................................................................ Cash and Bank Balances .................................................. Loans and Advances ........................................................ 5 3 4 1 2
284,002,000 177,622,936 2,222,432,500 268,060,588 102,914,447 3,055,032,471
284,002,000 113,841 1,604,561,254 220,262,532 12,500,000 2,121,439,627
1,907,375,373 297,047,089 1,610,328,284 13,827,881 8,230,020 1,632,386,185 7 8 8,722,986 1,428,154,970 77,434,156 260,855,333 1,775,167,445 9 350,302,262 2,514,410 352,816,672 1,422,350,773 10 3,055,032,471 17 295,513
1,482,995,474 224,750,604 1,258,244,870 14,391,391 3,168,717 1,275,804,978 45,295,513 10,138,595 6,195,163 774,898,993 39,146,695 186,961,478 1,007,202,329 243,476,895 4,368,664 247,845,559 759,356,770 30,843,771 2,121,439,627
Less: Current Liabilities and Provisions ....................... Current Liabilities ............................................................. Provisions .........................................................................
Net Current Assets ......................................................... Miscellaneous Expenditure (to the extent not written off or adjusted) ...................................................................... Profit and Loss Account ................................................. Total ............. NOTES ON ACCOUNTS ................................................. As per our report of even date attached For A.F. Ferguson & Co. Chartered Accountants H.L. Shah Partner A.K. Nanda Chairman
For and on behalf of the Board of Directors Ramesh Ramanathan Managing Director Amar Korde Chief Financial Officer Rajiv Balakrishnan Company Secretary

103
Profit and Loss Account for the year ended March 31, 2006
For the year ended March 31, 2006 Rs. For the year ended March 31, 2005 Rs.
Schedule Rs. INCOME Timeshare and Resort Income ............................. Other Income ....................................................... Total ............. 11 12
Rs.
1,527,225,509 44,078,664 1,567,304,173
1,017,088,383 44,408,782 1,061,497,165
EXPENDITURE Employee Cost ..................................................... Marketing Expenses ............................................ Depreciation ......................................................... Other Expenses ................................................... Interest and Financial Charges ............................. Total ............. Profit for the year before Tax ............................... Provision for Taxation: Current tax ................................................ Less: MAT credit entitlement ................... Deferred tax .............................................. Fringe benefit tax ...................................... Profit for the year after Tax .................................. Balance (loss) brought forward ............................ Balance carried forward ....................................... Basic and diluted Earnings Per Share .................. NOTES ON ACCOUNTS ...................................... Per our report attached to the Balance Sheet For A.F. Ferguson & Co. Chartered Accountants H.L. Shah Partner A.K. Nanda Chairman For and on behalf of the Board of Directors Ramesh Ramanathan Managing Director Amar Korde Chief Financial Officer Rajiv Balakrishnan Company Secretary 17 28,200,000 (28,200,000) 113,053,042 13,703,575 126,756,617 208,352,866 (30,843,771) 177,509,095 11.24 13,000,000 59,841,022 72,841,022 92,215,551 (123,059,322) (30,843,771) 4.46 15 16 13 14 199,207,274 465,692,054 77,475,161 456,584,201 33,236,000 1,232,194,690 335,109,483 146,815,345 280,942,362 64,753,465 360,807,867 43,121,553 896,440,592 165,056,573

104
Cash Flow Statement for the year ended March 31, 2006
Year ending 31-03-2006 Rs. A. CASH FLOW FROM OPERATING ACTIVITIES: Profit before taxation ....................................................................... Adjustments for: Depreciation ............................................................................. Interest and Financial Charges ................................................. Interest on Deposits ................................................................. Interest on Instalment Sales .................................................... Miscellaneous Expenditure written off .................................... Income from Securitisation ...................................................... Unrealised Exchange Gain/ Loss .............................................. Loss on Fixed Assets Sold/Scrapped ....................................... Operating Profit before Working Capital Changes .......................... Changes in: Deferred Income Advance towards members facilities ..... Trade and other receivables ..................................................... Inventories ................................................................................ Trade and other payables ......................................................... Income Taxes paid ................................................................... NET CASH FROM OPERATING ACTIVITIES ................................ B. CASH FLOW FROM INVESTING ACTIVITIES: Purchase of Fixed Assets ................................................................ Proceeds from Sale of Fixed Assets ............................................... Redemption of Investments ........................................................... Interest on Deposits ........................................................................ Interest on Instalment Sales ........................................................... Income from Securitisation ............................................................. NET CASH USED IN INVESTING ACTIVITIES ................................. C. CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from borrowings .............................................................. Repayments of borrowings ............................................................. Interest and Financial Charges paid [including interest capitalised Rs. Nil; Previous Year Rs. 441,056] ................................................. NET CASH (USED IN)/FROM FINANCING ACTIVITIES ............... NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS: Opening Balance ...................................................................... Closing Balance ........................................................................ As per our report of even date attached For A.F. Ferguson & Co. Chartered Accountants H.L. Shah Partner A.K. Nanda Chairman For and on behalf of the Board of Directors Ramesh Ramanathan Managing Director Amar Korde Chief Financial Officer Rajiv Balakrishnan Company Secretary 335,109,483 77,475,161 33,236,000 (128,230) (33,924,316) (4,462,981) (28,694) 3,279,295 75,446,235 410,555,718 617,871,246 (698,433,728) (2,527,823) 104,971,113 21,880,808 (42,419,679) 390,016,847 (439,004,676) 1,669,013 45,000,000 128,230 33,924,316 4,462,981 (353,820,136) 97,798,056 (62,500,000) (33,236,000) 2,062,056 38,258,767 39,146,695 77,405,462 Year ending 31-03-2005 Rs. 165,056,573 64,753,465 43,121,553 (24,602) (28,377,257) 2,472,232 (15,743,932) 444,296 66,645,755 231,702,328 392,035,432 (317,635,635) (1,948,027) 78,850,099 151,301,869 (13,679,289) 369,324,908 (220,204,382) 1,033,783 24,602 28,377,257 15,743,932 (175,024,808) (159,957,166) (43,121,553) (203,078,719) (8,778,619) 47,925,314 39,146,695
Cash and cash equivalents excludes unrealised exchange gain of Rs. 28694 (previous year Rs. nil).

105
SCHEDULE 1 SHARE CAPITAL:
As at March 31, 2006 Rs.
SCHEDULE 2 RESERVES AND SURPLUS
Authorised: 50,000,000 (previous year 25,000,000) equity shares of Rs. 10 each .. 10,000,000 Preference Shares of Rs. 10 each ........................................ Issued: 35,000,000 (previous year 25,000,000) Equity Shares of Rs. 10 each ... 10,000,000 Preference Shares of Rs. 10 each ........................................ Subscribed and Paid-up: 28,400,200 (previous year 18,400,200) Equity Shares of Rs. 10 each fully paid ................................. (of the above 28,400,199 (Previous Year 18,400,199) Equity Shares are held by the Holding Company, Mahindra Holdings and Finance Limited) 10,000,000 9% cumulative redeemable Preference Shares of Rs. 10 each fully paid .........................
500,000,000 100,000,000
250,000,000 100,000,000
Capital reserve ..................... Surplus in profit and loss account ......................................... ............................................. ......................................... SCHEDULE 3 SECURED LOANS (see Note 2):
As at March 31, 2006 Rs. 113,841 177,509,095 177,622,936
As at March 31, 2005 Rs. 113,841 113,841
350,000,000
250,000,000 100,000,000
284,002,000
184,002,000
Rs. Loans and Advances from a Bank 135,865,786 Cash Credit ....................... Other Loans and Advances Term loan (Repayable within one year Rs. 50,000,000; Previous 125,000,000 Year Rs. 50,000,000) ......... Deferred payment under hire 8,000,245 purchase ................................ Less: Future Interest ............. 805,443 268,060,588
Rs.
As at March 31, 2005 Rs. 43,954,577
170,000,000 6,982,684 674,729 6,307,955 220,262,532 As at March 31, 2005 Rs.
7,194,802
284,002,000
100,000,000 284,002,000
SCHEDULE 4 UNSECURED LOANS
Note: Preference Shares are redeemable at par at the expiry of seven years from the date of allotment, 13th July, 2000. The Company also has the option to redeem the Preference Shares at any time after the end of three years from the date of allotment and also vary or modify the terms and conditions governing the issue as per the conditions of issue. THe above preference shares were converted into 10,000,000 fully paid up equity shares of Rs. 10 each on 27th March, 2006. (Refer note 18)
Short term loans and advances from other than banks (Inter-Corporate Deposits)
12,500,000 12,500,000 Rupees
SCHEDULE 5 FIXED ASSETS:

Gross Block Description As at 31st March, 2005 Additions Transfers Deductions As at 31st March, 2006 As at 31st March, 2005 Depreciation / Amortisation For the Transfers year Deduction As at 31st March, 2006 Net Block As at 31st March, 2006
As at 31st March, 2005
(A) Tangible Assets (i) Assets on lease/ hire purchase Leasehold Land .......... Leasehold buildings ... Vehicles ...................... 864,000 28,745,205 11,401,954 41,011,159 (ii) Owned Assets Freehold Land ............ Buildings ..................... Plant & Machinery ..... Furniture and Fixtures Vehicles ...................... 92,868,511 817,734,081 280,569,079 228,880,298 10,581,605 1,430,633,574 (B) Intangible Assets Timeshare Weeks ............. Software ............................ 6,226,938 5,123,803 11,350,741 Total Previous Year 1,482,995,474 1,252,259,106 20,909,412 20,909,412 434,506,883 234,004,093 (10,126,984) (3,267,725) 6,226,938 26,033,215 32,260,153 1,907,375,373 1,482,995,474 1,868,082 3,036,343 4,904,425 224,750,604 161,786,785 622,694 4,257,954 4,880,648 77,475,161 64,753,465 (5,178,676) (1,789,646) 2,490,776 7,294,296 9,785,072 297,047,089 224,750,604 3,736,162 18,738,919 22,475,081 1,610,328,284 1,258,244,870 4,358,856 2,087,460 6,446,316 68,125,198 182,941,544 90,419,378 52,009,068 6,892,186 400,387,374 1,579,074 1,579,074 (1,515,168) (4,746,970) (1,199,572) (7,461,710) 160,993,709 1,000,675,625 369,473,289 276,142,396 17,853,293 1,825,138,312 51,652,520 69,847,233 87,072,646 4,519,913 213,092,312 14,846,035 22,286,877 29,942,912 2,664,242 69,740,066 1,040,484 1,040,484 (501,586) (2,216,377) (423,022) (3,140,985) 66,498,555 91,632,524 114,799,181 7,801,617 280,731,877 160,993,709 934,177,070 277,840,765 161,343,215 10,051,676 1,544,406,434 92,868,511 766,081,561 210,721,846 141,807,652 6,061,692 1,217,541,262 13,210,097 13,210,097 (1,579,074) (1,579,074) (2,665,274) (2,665,274) 864,000 41,955,302 7,157,606 49,976,908 43,633 2,121,588 4,588,646 6,753,867 8,726 1,355,681 (2,037,691) (2,037,691) 52,359 3,477,269 3,000,511 6,530,139 811,641 38,478,033 4,157,095 43,446,769 820,367 26,623,617 6,813,308 34,257,292
1,490,040 (1,040,484) 2,854,447 (1,040,484)
106
SCHEDULE 6 EXPENDITURE DURING CONSTRUCTION PENDING ALLOCATION As at April 01, 2005 Rs. Salaries, Wages and Bonus ... Staff Welfare Expenses ......... Power and Fuel ..................... Rent ...................................... Rates and Taxes .................... Repairs Others .................. Travelling ............................... Communication ..................... Printing and Stationery .......... Insurance ............................... Consultancy Charges ............ Freight ................................... Miscellaneous ....................... Total ...................................... 357,381 67,621 399,989 32,156 186,276 601,602 93,116 97,692 4,959 Additions Capitalised during the year Rs. Rs. 3,351,517 429,346 316,667 23,316 2,061,089 3,373,487 4,420,569 1,254,540 648,960 3,584,071 476,551 703,447 22,932 1,951,042 3,460,945 4,847,565 1,283,610 719,860 4,959 As at March 31, 2006 Rs. 124,827 20,416 13,209 384 142,203
SCHEDULE 8 CURRENT ASSETS, LOANS AND ADVANCES: A. Current Assets: Inventories Food, Beverages and Smokes .............. Operating Supplies ................................
As at March 31, 2006 Rs. 960,337 7,762,649 8,722,986
As at March 31, 2005 Rs. 1,331,274 4,863,889 6,195,163
Sundry Debtors (Unsecured) Outstanding over six months : Considered Good ......................... : Considered Doubtful .................... Other Debts, Considered Good .............
109,073,267 1,462,671 110,535,938 1,437,472,302 1,548,008,240 1,462,671 1,546,545,569 118,390,599 1,428,154,970
61,184,614 4,778,934 65,963,548 755,290,578 821,254,126 4,778,934 816,475,192 41,576,199 774,898,993 761,602 32,450,928 5,934,165 39,146,695
98,818 174,606 64,046
Less: Provision for Doubtful Debts ....... Less: Unmatured Finance Charges .......
26,792 7,505,666 22,226 36,827 77,434,156 8,230,020 (B) Loans and Advances: (Unsecured, Considered Good, unless otherwise stated) Advances recoverable in Cash or in Kind or for value to be received .................... Deposits ................................................ Payments towards Income-tax (Net of Provisions) ............................................ MAT Credit entitlement ........................ Cash and Bank Balances Cash on Hand ....................................... Balances with Scheduled Banks: in Current Accounts ....................... in Deposit Accounts ....................... 462,574 66,309,187 10,662,395
773,657 18,287,268 11,555,259 264,616 289,652 1,062,471 1,109,337 1,304,861 1,362,162
3,168,717 36,338,567 31,277,264
SCHEDULE 7 INVESTMENTS: Long Term Unquoted (at cost) Subsidiary Company: Trade Mahindra Holidays and Resorts USA Inc. ..... 100 Equity Shares of US $10 each fully paid-up Others: Non-Trade Guestline Hospitality Management and Development Services Limited 25,000 7% non-cumulative redeemable participating optionally Convertible Preference Shares of Rs. 10 each fully paid-up. ............. Mahindra Logisoft Business Solutions Limited 4,500,000 5% redeemable cumulative Preference Shares of Rs. 10 each fully paid-up (redeemed during the year) .............. Mahindra World City Developers Limited 1 Equity Share of Rs. 10 each fully paid-up. .
As at March 31, 2006 Rs. 45,503
As at March 31, 2005 Rs. 45,503
41,942,707 188,902,054 1,810,572 28,200,000 260,855,333
41,609,602 144,057,408 1,294,468 186,961,478 As at March 31, 2005 Rs.
SCHEDULE 9 CURRENT LIABILITIES AND PROVISIONS: (A) Current Liabilities: Sundry Creditors: Due to small scale industrial undertakings .......................... Others ...................................................
250,000
250,000
350,302,262 350,302,262
243,476,895 243,476,895 4,368,664 4,368,664 As at March 31, 2005 Rs.
10 295,513
45,000,000 10 45,295,513 SCHEDULE 10 MISCELLANEOUS EXPENDITURE: (To the extent not written off or adjusted) Specialised Software Expenditure Opening Balance ................... Additions during the year ...... (B) Provisions: Leave Salary ..........................................
2,514,410 2,514,410 As at March 31, 2006 Rs.
Notes: (a) The Preference Shares of Guestline Hospitality Management and Development Services Limited will be redeemed at par at the option of the investee at any time after five years but before twenty years from the date of allotment, viz., 14.01.2003. (b) The Preference Shares of Guestline Hospitality Management and Development Services Limited shall at the option of the holder be convertible into fully paid Equity Shares of the face value of Rs. 10 each anytime after thirtysix months from the date of allotments.
Rs.
Rs. 1,582,277 1,582,277 1,582,277
Less: Written off ...................

Operating Supplies Expenditure Opening Balance ................... Additions during the year ......
889,955 889,955 889,955
Less: Written off ...................
107
SCHEDULE 11 Timeshare and Resort Income
Timeshare Income ............................ Income from Resorts Room Rentals ..................... Food and Beverages ........... Wine and Liquor ................. Telex and Telephone .......... Others ........................................... Annual Subscription Fee ...................
For the year ended March 31, 2006 Rs. Rs. 1,134,936,692 63,722,957 93,223,398 2,127,591 1,751,411 32,030,169 192,855,526 199,433,291 1,527,225,509
Rs.
For the year ended March 31, 2005 Rs. 739,448,777
SCHEDULE 15 (Contd.) Other Expenses
50,635,686 73,063,024 1,774,190 1,774,188 23,082,940 150,330,028 127,309,578 1,017,088,383 For the year ended March 31, 2005 Rs. 28,377,257 24,602
SCHEDULE 12 Other Income
For the year ended March 31, 2006 Rs. 33,924,316 128,230
Rs. Others ............................................... Travelling ........................................... Communication ................................. Printing and Stationery ...................... Insurance .......................................... Security Charges ............................... Consultancy Charges ........................ Miscellaneous ................................... Service Charges ................................ Bad debts written off ........................ 3,316,263 Less: Provision for doubtful Debts Written back ........................... (3,316,263) Loss on Fixed Assets Sold/Scrapped (net) Miscellaneous Expenditure Written off
For the year ended March 31, 2006 Rs. 19,347,267 44,307,122 25,496,515 10,082,917 4,024,654 5,088,783 46,227,380 38,340,437 70,050,892
Rs.
For the year ended March 31, 2005 Rs. 15,120,469 36,354,787 23,152,999 8,618,993 4,110,767 3,815,080 49,292,621 30,329,126 49,593,507
3,279,295 456,584,201
444,296 2,472,232 360,807,867
Interest On Instalment Sales ................. Others Gross ....................... (Tax deducted at source Rs. 10,873; Previous Year Rs. 3,995) Income from Securitisation (refer Note 3) Miscellaneous Income ......................
SCHEDULE 16 Interest and Financial Charges
4,462,981 1,563,137 40,078,664
15,743,932 262,991 44,408,782 For the year
Interest Loans for fixed period .............. Others ...................................... Discounting Charges .................................... Bank Charges ...............................................
For the yer ended March 31, 2006 Rs. 18,727,144 537,033
13,971,823 33,236,000
For the year ended March 31, 2005 Rs. 23,816,988 8,043,248 187,843 11,073,474 43,121,553
SCHEDULE 13
Employee Cost
For the year
ended
March 31, 2006 Rs. 175,879,191 7,668,447 6,774,369 8,885,267 199,207,274
ended
March 31, 2005 Rs. 132,641,452 4,674,672 4,819,101 4,680,120 146,815,345 For the year ended March 31, 2005 Rs. 49,179,948 120,628,723 97,173,521 13,960,170 280,942,362 For the year ended March 31, 2005 Rs.
SCHEDULE 17 NOTES ON ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 1. Accounting Policies: (i) Basis for Preparation of Accounts: The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Indian Companies Act, 1956. (ii) Fixed Assets: Fixed Assets are stated at cost less depreciation. Cost comprises of purchase price and other directly attributable costs of bringing the asset to its working condition for its intended use and includes interest on moneys borrowed for construction/acquisition of fixed assets up to the period the assets are ready for use. Depreciation is calculated on straight line method at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956, except for the following: (a) Leasehold land and buildings are amortised over the period of lease. Furniture and fixtures in Club Mahindra Holiday World are amortised over a period of 36 months from the date of capitalisation. Motor vehicles provided to employees are depreciated over a period of 48 months. Other assets provided to employees are depreciated over a period of 60 months Intangible assets representing timeshare is amortised over a period of ten years. Expenditure incurred towards software is amortised over 36 months. (b) (c)
Salaries, Wages and Bonus ............... Contribution to Provident and Other Funds ....................................... Staff Welfare Expenses ..................... Training and Recruitment ..................
SCHEDULE 14 Marketing Expenses
Advertisement and Direct Mailers ..... Marketing Development Expenses ... Sales Commission ............................ Discount ...........................................
For the year ended March 31, 2006 Rs. 98,790,851 202,666,046 147,477,537 16,757,620 465,692,054
SCHEDULE 15 Other Expenses
Rs. Food, Beverages and Smokes consumed Opening Stock ......................... 1,331,274 Add: Purchases ........................ 28,585,203
For the year ended March 31, 2006 Rs.
Rs. 970,082 24,352,112 25,322,194 1,331,274
(d) (e) (iii)

23,990,920 12,471,913 36,873,464 39,370,679 5,867,776
Less: Closing Stock ..................

........................................... Operating Supplies ............................ Power and Fuel ................................. Rent (including lease rent) ................. Rates and Taxes ................................ Repairs and Maintenance Buildings .................................. Resort Renovations .................. Office Equipment .....................
29,916,477 960,337 28,956,140 17,387,675 49,899,922 57,019,991 6,656,602 2,394,979 26,981,928 1,041,702
Assets taken on Lease and Hire Purchase: Assets taken on Lease and Hire Purchase arrangements, wherein the Company has an option to acquire the assets are accounted for as fixed assets in accordance with Accounting Standard 19 on Leases. (refer Note No. 11)
(iv)
1,456,175 16,927,621 544,442
Inventories: Inventories are stated at cost or net realisable value, whichever is lower. The cost is arrived at on first in first out method.
108
(v)
Investments: Investments (long term) are stated at acquisition cost less provision for permanent diminution in value, if any. Revenue Recognition: (a) The Companys business is to sell Timeshare and provide 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 in non-refundable, is recognized as income on admission of a member . Entitlement fee, which entitles the timeshare member for the timeshare facilities over the membership usage period, is recognized as income equally over the usage period. (b) (c) (d) (e) Annual subscription fee dues from members is recognised as income on an accrual basis. Interest on instalment sales is recognised as income on an accrual basis. Income from resorts includes income from room rentals, food and beverages, etc., and is recognised when services are rendered. Securitised assets are de-recognised as the contractual rights therein are transferred to the third party. On de-recognition, the difference between book value of the securitised asset and consideration received is recognised as gain or loss arising on securitisation.
3.
(vi)
Securitisation: During the year the Company has securitised amounts receivables of Rs. 156,581,350 (Previous Year: Rs. 268,784,600) (including future interest receivable Rs. 18,492,752 (Previous Year Rs. 44,444,922) for a consideration of Rs. 145,000,000 (Previous Year Rs. 245,000,000). The excess of consideration received over the principal amount of receivable from members (net of reversals in respect of cancelled members Rs. 2,448,421 (Previous Year Rs. 4,916,390) is recognised as income from Securitisation. (refer Schedule 12) As at March 31, 2006 Rs. As at March 31, 2005 Rs.
4.
(vii)
Foreign Exchange Transactions: Foreign exchange transactions are recorded at exchange rates prevailing on the date of the transactions. Foreign currency receivables/payables are translated at exchange rates prevailing on the date of settlement or as at the year end, as applicable, and gain or loss arising out of such transaction is adjusted to the Profit and Loss Account. Foreign currency liabilities incurred for the acquisition of fixed assets from outside india are translated at exchange rates prevailing on the last day of the accounting year. The loss or gain arising out of the said translation is adjusted to the carrying cost of the asset.
(viii) Retirement Benefits: Contribution to provident fund is made monthly, at a predetermined rate, to the provident fund authorities and debited to the Profit and Loss Account on an accrual basis. The Company has an arrangement with Life Insurance Corporation of India (LIC) to administer its superannuation and gratuity schemes. The premium paid/payable is debited to the Profit and Loss Account on an accrual basis. Provision for leave encashment on retirement which was hitherto made on an arithmetical basis has been made on an actuarial valuation in the current year. This has resulted in write back of provision amounting to Rs. 1,849,254 (ix) Taxes on Income: Income taxes are accounted for in accordance with Accounting Standard 22 on Accounting for Taxes on Income (AS 22) issued by the Institute of Chartered Accountants of India. Tax expense comprises both current and deferred tax. Current tax is determined as the amount of tax payable in respect of taxable income for the period using the applicable tax rates and tax laws. Deferred tax assets and liabilities are 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 and are measured using tax rates enacted or substantively enacted as at the Balance Sheet date. The carrying amount of deferred tax assets and liabilities are reviewed at each Balance Sheet date. Segment Reporting: The Company has a single reportable segment namely sale of timeshare for the purpose of Accounting Standard 17 on Segment Reporting.
(x)
2.
Secured Loans Loans and advances from a bank and other loans and advances are secured by a first mortgage and charge on specified properties of the Company. Deferred payment under hire purchase is secured by hypothecation of assets financed.
Contingent Liabilities: (a) Receivables securitised, with recourse ......................................... Certain specified receivables have been securitised with a bank for availing finance. In case a member defaults in payment to the bank the bank would have recourse to the Company. In such cases the Company has recourse to the customer. (b) Arrears of dividend and dividend tax on 9% redeemable cumulative preference shares outstanding for the period from 13-07-2000 to 31-03-2005. (c) Guarantee given to financial institution for timeshare financing. The Company has given a guarantee to a Financial Institution for Time Share Financing to third parties. In case of default by the parties, the financial institution would have recourse to the company. In such cases, the company has recourse to the customer. (d) Claims against the Company not acknowledged as debts ................. Claims not acknowledged as debts represent luxury tax claimed on room revenue by the Government and disputed by the Company in the High court. The amount has been paid to the Government and possibility of reimbursement depends on the outcome of the case pending before the High Court. (e) Income tax matters under appeal The Income-tax Department has filed appeals against the orders of the CIT (A) for the assessment years 1998 99 to 200203 which were decided during the year in favour of the Company. Amount involved with respect to this matter (including demand for the assessment year 2003-04 for which assessment was completed during the year in respect of which the company intends to go in appeal and exclusive of consequential effect of similar matter in respect of the assessments remaining to be completed) is Rs. 200,618,279 (including interest of Rs. 58,051,475); previous year - Rs. 116,013,707 (including interest of Rs. 58,051,475). However, even if this liability crystallises, there would be future tax benefits available on account of timing differences, except for interest and income tax rate differences. Cash outflows would depend on the outcome of the appeals Estimated value of contracts remaining to be executed on capital account and not provided for (net of advances)
236,931,553
318,915,810
10,185,802
48,009,301 34,235,855
1,785,666
1,785,666
54,184,433
24,723,752
109
Year ended March 31, 2006 Rs. 6. Auditors Remuneration Audit Fees ............................................. Taxation Services .................................. Other Services ...................................... Reimbursement of Expenses ................ CIF Value of Imports Capital Goods ........................................ Expenditure in Foreign Currency Salary .................................................... Travel .................................................... Consultancy .......................................... Marketing Expenses ............................. Others ................................................... Earnings in Foreign Exchange Room Rentals and Restaurant Sales ..... Sales of Timeshare ............................... 1,700,000 163,360 14,036,662 9,805,938 2,582,081 11,075,947 40,595,151 44,614,018 52,914,591
Year ended March 31, 2005 Rs. 1,250,000 30,000 50,000 128,791 7,595,360
% of total Consumption 10. Particulars of Consumption Provisions, Beverages (excluding wine, liquor and smokes) ......... 93 Wine, liquor and smokes ......... 7 100 Indigenous ............................... Imported .................................. 100 100
Value % of total Rs. Consumption 26,846,053 2,110,087 28,956,140 28,956,140 28,956,140
Value Rs.
93 22,217,973 7 1,772,947 100 23,990,920 100 23,990,920 100 23,990,920
7. 8.
9,065,529 696,052 12,107,935 410,477 13,117,742 48,434,662 51,377,589
11. In respect of hire purchase transactions, the details of instalments payable in future are as follows: Not later than Later than 1 year 1 year not later than 5 years Rs. Rs. Minimum Instalment payable .. Present value of instalments payable ..................................... Previous year's figures are given in brackets 3,066,169 (2,779,894) 2,645,108 (3,184,325) 4,934,076 (3,528,061) 4,549,694 (3,798,359)
9.
12. Additional information pursuant to the provisions of paragraphs 3(i)(a) and (ii) of Part II of Schedule VI of the Companies Act, 1956. Sl. No. 1. 2. 3. Class of goods Beverages Wine and Liquor Smokes Unit of measurement Litres Litres Nos. Opening Stock Qty. Value (Rs.) 8,618 (4,375) 2,197 (1,343) 326 (86) 66,520 (45,427) 414,070 (243,211) 14,408 (4,747) Purchase Qty. Value (Rs.) 118,006 (87,140) 26,116 (20,456) 2,625 (1,568) 1,228,991 (876,235) 2,184,923 (1,865,846) 143,747 (84,500) Closing Stock Qty. Value (Rs.) 5,956 (8,618) 2,555 (2,197) 376 (326) 77,465 (66,520) 488,905 (414,070) 18,221 (14,408)
Figures in brackets are in respect of the previous year. The company has been exempted from certain disclosures of quantitive details required under para 3(i)(a) of Part II of Schedule VI to the Companies Act, 1956 as per order No. 46/26/2005-CL-III dated 23rd June, 2005 issued by the Ministry of Company Affairs. The said order requires the company to disclose certain information which have been disclosed under appropriate heads. 13. Segment reporting The Company has a single reportable segment namely sale of timeshare for the purpose of Accounting Standard 17 on Segment Reporting. Geographical segment information is given Reporting .......................... Within India Outside India .......................... Revenue ................... 1,461,686,250 65,539,259 .......................... (940,096,737) (76,991,646) Total assets .............. 3,387,975,725 19,873,417 .......................... (2,306,080,668) (22,222,153) Additions to .............. 421,296,786 13,210,097 fixed assets .............. (234,004,093) (Nil) Figures in bracket are in respect of the previous year. 14. Deferred Taxation: Particulars Deferred Tax Assets Provision for Doubtful Debts .. Provision for Leave Encashment ..................................... Preliminary Expenditure ........ Business Loss brought forward ................................. Unabsorbed Depreciation brought forward .................... As at 31st March, 2005 1,748,731 1,598,604 48,173 76,804,116 106,344,293 186,543,917 Deferred Tax Liability Difference between book and tax depreciation .............. 176,405,322 Net deferred tax (liability) / asset ..................... 10,138,595 Movement As at during the 31st March, year 2006 1,256,396 752,254 3,863 76,804,116 29,116,292 107,932,921 492,335 846,349 44,308 77,228,004 78,610,996 Rs. Total 1,527,225,509 (1,017,088,383) 3,407,849,142 (2,328,302,821) 434,506,883 (234,004,093) 15. Related Party Transactions: (i) Names of related parties and nature of relationship where control exists: Name of the Related Party Mahindra & Mahindra Limited Mahindra Holdings & Finance Ltd. Mahindra Holidays & Resorts (USA) Inc. Automartindia Ltd. Bristlecone Ltd. Bristlecone Inc. Mahindra Acres Consulting Engineers Ltd. Mahindra Astech Ltd. Mahindra Automotive Steels Pvt. Ltd. (w.e.f. 27th May, 2005) Tech Mahindra Ltd. Tech Mahindra GmbH Tech Mahindra (Americas) Inc. Mahindra BT Investment Company (Mauritius) Ltd. (w.e.f. 9th May, 2005) Tech Mahindra (Singapore) Pte. Ltd. Tech Mahindra (Thailand) Ltd. (w.e.f. 21st February, 2006) Bristlecone India Ltd. Bristlecone GmbH Bristlecone Singapore Pte Ltd. Mahindra (China) Tractor Company Ltd. (w.e.f. 13th May 2005) Mahindra Engg. & Chem Products Ltd. Mahindra Engineering Design & Development Company Ltd. Mahindra Europe s.r.l. (w.e.f. 30th May, 2005) Mahindra Gesco Developers Ltd. Name of the Relationship Controlling Company Holding Company Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary
(5,120,121) (113,053,042)
181,525,443 (102,914,447)
110
Mahindra Gujarat Tractor Ltd. Mahindra Insurance Brokers Ltd. Mahindra Infrastructure Developers Ltd. Mahindra Intertrade Ltd. Bristlecone UK Ltd. Mahindra International Ltd. (w.e.f. 1st November 2005) Mahindra WorldCity Developers Ltd. Mahindra Logisoft Business Solutions Ltd. Mahindra Middleeast Electrical Steel Service Centre (FZE) Mahindra & Mahindra Financial Services Ltd. Mahindra & Mahindra South Africa (Pty) Ltd. Mahindra Overses Investment Company (Mauritius) Ltd. Mahindra Realty Ltd. (w.e.f. 21st September 2005 Mahindra Renault Pvt. Ltd. (w.e.f. 5th August 2005) Mahindra Steel Service Centre Ltd. Mahindra Shublabh Services Ltd. Mahindra SAR Transmission Pvt. Ltd. Mahindra USA Inc. Mahindra Ugine Steel Company Ltd. (upto 21st June 2005) Mahindra WorldCity (Jaipur) Ltd. (w.e.f. 26th August, 2005) NBS International Ltd. Tech Mahindra (R&D Services) Ltd. (w.e.f. 28th November, 2005) Tech Mahindra (R&D Services) Inc. (w.e.f. 28th November, 2005) Tech Mahindra (R&D) Services) Pte. Ltd. (w.e.f. 28th November, 2005) Stokes Group Limited (w.e.f. 3rd January, 2006) Jensand Limited (w.e.f. 3rd January, 2006) Stockes Forgings Dudley Limited (w.e.f. 3rd Janury, 2006) Stokes Forgings Limited (w.e.f. 3rd January, 2006) Plexion Technologies (India) Private Limited (w.e.f. 15th February, 2006) Plexion Technologies (UK) Limited (w.e.f. 15th February, 2006) Plexion Technologies GmbH (w.e.f. 15th February, 2006) Plexion Technologies Incorporated (w.e.f. 15th February, 2006) Tech Mahindra Foundation (w.e.f. 22nd March 2006) Console Estate & Investments Limited (ceased w.e.f. 20th March, 2006) Ramesh Ramanathan
Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Key Managerial Personnel
(ii)
The related party transactions are as under:

Controlling Company Holding Company Fellow Subsidiary Key Managerial Personnel 2006 2005
Sl. No. Nature of Transactions
2006
2005
2006
2005
2006
2005
1. Finance: Conversion of preference share into fully paid equity shares 100,000,000 Interest paid on inter-corporate deposit Mahindra World City Developers Ltd. Inter-corporate deposit repaid Mahindra World City Developers Ltd. Inter-corporate deposit received Mahindra World City Developers Ltd. Redemption of preference shares Mahindra Logisoft Business Solution Ltd. 2. Purchases: Fixed Assets 448,000 Services Mahindra Logisoft Business Solution Ltd. 3. Other Transactions: Reimbursements received from parties Mahindra World City Developers Ltd. Reimbursements made 2,008,582 1,180,983 Lease Rent Mahindra Logisoft Business Solution Ltd. 4. Outstandings: Payable 1,562,942 34,730 Mahindra Engg. & Cham Products Ltd. Receivable Mahindra Gesco Devlopers Ltd. Mahindra World City Developers Ltd. 5. Managerial Remuneration 6. Payment to Relative of KMP Rent Deposit 7. Payment to Relative of KMP Rent 8. Receipts from Relative of KMP Rent Deposit
185,177
34,000,000
34,000,000
45,000,000
13,511,325
9,600,000
6,355,080 14,201
5,250,881
18,000
189,080
3,181 1,816,650
301,135 8,446,953 6,226,482 500,000 500,000 490,560
16. Managerial Remuneration to the Managing Director Year ended March 31, 2006 Rs. Salaries and Allowances Contributions to Provident and Superannuation Funds Perquisites 8,077,593 369,360 77,244 8,446,953 Rs. 3,646,953 is subject to Central Government approval. 17. Earnings Per Share: 2006 Rs. Profit after tax ( after preference dividend and tax theron for previous year) (A) Weighted Average Number of Share (Nos.) (B) Earnings Per Share (Basic/Diluted)(A/B) Nominal value of Equity Share 208,352,866 18,537,186 11.24 10
Year ended March 31, 2005 Rs. 5,839,828 309,410 77,244 6,226,482
2005 Rs. 82,039,362 18,400,200 4.46 10
18. As approved at the Extraordinary General Meeting held on 18th March, 2006, 10,000,000 9% Cumulative redemable Preference Shares of Rs. 10/- each were converted in to 10,000,000 fully paid equity shares of Rs. 10 each and issued to the holding Company on 27th March, 2006. Preference dividend upto the date of allotment of equity shares amounting to Rs. 51,336,986 has been waived by the holding company.
111
19. Additional Information pursuant to the provisions of Part IV of Schedule VI to the Companies Act, 1956. Balance Sheet Abstract and Companys General Business Profile: I. Registration Details: Registration No. Balance Sheet Date II. 3 1 0 3 3 6 5 2 9 0 5 0 6 State Code 1 8
Capital raised during the year (Amount in Rs. Thousands): Public Issue N Bonus Issue N I L I L Rights Issue N I L L
Private Placement N I
III.
Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities 3 4 0 7 8 Sources of Funds: Paid-up Capital 2 8 4 0 0 2 4 Reserves and Surplus 1 7 7 6 2 Secured Loans 2 6 8 0 6 3 1 4 9 3 Total Assets 4 0 7 8 4 9
Deferred Tax Liability 1 0 2 9 1 Application of Funds: Net Fixed Assets 1 6 3 2 3 8 ( Net Current Assets# ) 8 0 0 0 8
Investments 6 2 2 9 6 Deferred Tax Asset (Net) N I L
IV.
(# Includes Advance towards members facilites 2222432) Performance of Company (Amount in Rs. Thousands): Turnover (including other income) 1 5 6 7 3 0 4 + Total Expenditure 1 2 3 2 1 9 + 5
Profit/Loss Before Tax 3 3 5 1 0 9
(Please tick appropriate box + for Profit for Loss)
Profit/Loss After Tax 2 0 8 3 5 3
Earning Per Share in Rs. 1 1 . 2 4 Item Code No. (ITC Code) Product: Description: T N A
Dividend Rate % N I
I M E S H A R E H O T E L
A N D
20. Previous year's figures have been regrouped/recasted, wherever necessary, to conform to the current year's classification.
Signatures to Schedules 1 to 17 For and on behalf of the Board of Driectors A.K. Nanda Chairman Ramesh Ramanathan Managing Director Amar Korde Chief Financial Officer Rajiv Balakrishnan Company Secretary
Place: Goa, Date: 22nd April, 2006

112
STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956, RELATING TO SUBSIDIARY COMPANY Name of the Subsidiary Companies Mahindra Holidays and Resorts USA Inc. 31st March, 2006
Particulars The Financial Year of the Subsidiary Company ended on Number of shares in the subsidiary company held by Mahindra Holidays & Resorts India Limited at the above date: Equity (Nos.)
100
Extent of holding (%) The net aggregate of profits of the Subsidiary Company for its financial year so far as they concern the members of Mahindra Holidays and Resorts India Limited :
100%
(a) Dealt with in the accounts of Mahindra Holidays & Resorts India Limited for the year ended 31st March, 2006 (b) Not dealt with in the accounts of Mahindra Holidays & Resorts India Limited for the year ended 31st March, 2006 The net aggregate of profits of the Subsidiary Company for its previous financial years so far as they concern the members of Mahindra Holidays and Resorts India Limited :
NIL
(213564)
(a) Dealt with in the accounts of Mahindra Holidays & Resorts India Limited for the year ended 31st March, 2006
NIL
(b) Not dealt with in the accounts of Mahindra Holidays & Resorts India Limited for the year ended 31st March, 2006
NIL
NOTE: Mahindra Holidays and Resorts USA Inc. has been incorporated on 24-10-2003 and became a subsidiary of Mahindra Holidays and Resorts India Limited on 04-11-2003.
A.K. Nanda Chairman
Ramesh Ramanathan Managing Director
Amar Korde Chief Financial Officer
Rajiv Balakrishnan Company Secretary
Place : Goa Date : 22nd April, 2006
113
MAHINDRA HOLIDAYS & RESORTS USA INC.
Directors Report
The following will constitute a report of the Board of Directors relating to the activities of the Corporation for the financial year 2005-06. During the year, the Corporation undertook consultations with leading consultants in the areas of tax, legal issues governing timeshare operations, and financing issues. The corporation also consulted sales, marketing and servicing agents in the U.S.A. A detailed market research was also conducted in January, 2006 to test the product concept. It was earlier anticipated that final conclusions and arrangements will be completed by the end of September, 2005 but due to various legal, tax and other issues brought up by the consultations, the Corporation decided to take time to further fine-tune its strategy before launching operations. At a meeting of the Board of Directors of the holding company, Mahindra Holidays & Resorts (India) Limited held on 16th January, 2006, it was decided to make an investment of USD 100,000 by subscribing to equity shares of the corporation. It is expected that this subscription will happen in the month of June 2006. The Corporation will utilize these funds to purchase inventory in the USA to form underlying inventory for its club; along with Indian inventory that it will acquire from Mahindra Holidays & Resorts (India) Limited. The Directors anticipate that the first sales shall take place in the Financial Year 2006 2007 and expect a gradual expansion in the operations commencing in the following year. Mr. A.K. Nanda, Mr. Ramesh Ramanathan and Mr. Amar Korde continue to be the Directors of the corporation.
19th April, 2006
A.K. Nanda Director
Ramesh Ramanathan Director
114
Independent Auditors Report of Mahindra Holidays and Resorts USA Inc.

I have audited the accompanying balance sheet of Mahindra Holidays and Resorts USA Inc., a wholly owned subsidiary of Mahindra Holidays and Resorts India Limited, an India Corporation, as of March 31, 2006 and the related statements of operations and accumulated deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above presents fairly, in all material respects, the financial position of Mahindra Holidays and Resorts USA Inc., a wholly owned subsidiary of Mahindra Holidays and Resorts India Limited, an India Corporation, as of March 31, 2006, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
For Mel Crystal Certified Public Accountant
115
Balance Sheet as at March 31, 2006

2006 U.S. $ ASSETS Currents assets: Cash and cash equivalents (monies held in attorney escrow account - unrestricted) ................................... Total assets ...................................................................... LIABILITIES AND STOCKHOLDERS DEFICIENCY Current liabilities: Accrued expenses ...................................................... Corporation business and franchise taxes payable .... Total current liabilities ................................................. Stockholders deficiency : Common stock ($ 0.10 par value; 10,000 shares authorized 100 shares issued and outstanding .......... Paid-in capital .............................................................. Accumulated deficit .................................................... Total stockholders deficiency .......................................... Total liabilities and stockholders deficiency ..................... See accompanying notes to the financial statements. $ 10 990 (4,782) (3,782) 1,000 447 44,213 (213,564) (168,904) 44,660 10 990 1,000 1,000 447 44,213 44,660 44,660 $ 4,144 638 4,782 185,071 28,493 213,564 $ $ 1,000 1,000 44,660 44,660 $ $ 1,000 1,000 44,660 44,660 INR U.S. $ 2005 INR
116
Statements of Operations and Accumulated Deficit For the Year Ended March 31, 2006
2006 U.S. $ INR
Revenue ........................................................................... Expenses Corporation business and franchise taxes ................. Legal fees ................................................................... Accounting and auditing fees ..................................... Total expenses ...................................................... Net Loss ........................................................................... Accumulated deficit - April 1, 2005 .................................. Accumulated deficit - March 31, 2006 ............................. The accompanying notes to the financial statements.
638 644 3,500 4,782 (4,782) $ (4,782)
28,493 28,761 156,310 213,564 (213,564) (213,564)
117
Statements of Cash Flows for the years ended March 31, 2006
2006 U.S. $ Cash flows from operating activities: Net loss ...................................................................... Adjustments to reconcile net loss to cash provided by operating activities: Increase in operating assets and liabilities : Accrued expenses ......................................... Corporation business and franchise taxes payable ........................................................... Net cash provided by operating activities .................. Net change in cash and cash equivalents ........................ Cash and cash equivalents - April 1, 2005 ....................... Cash and cash equivalents - March 31, 2006 .................. $ 4,144 638 1,000 1,000 185,071 28,493 44,660 44,660 $ (4,782) (213,564) INR
The accompanying notes to the financial statements.
118
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2006 Nature of Organization : Mahindra Holidays and Resorts USA Inc. (MHRUSA) is a wholly owned subsidiary of Mahindra Holidays and Resorts India Limited (MHR), which is incorporated in the country of India. MHRUSA was incorporated in the State of Delaware in October 2003 and will build, rent, manage and promote holiday resorts and sell holiday timeshare memberships. Operations have not commenced as of the balance sheet date. Use of Estimates : The financial statements of MHRUSA have been prepared on the accrual basis of accounting. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Summary of Significant Accounting Policies: Cash and cash equivalents consist of an amount deposited in MHRUSA's attorney's escrow account. It is available for use by MHRUSA. Any unused funds will be transferred to a MHRUSA checking account as soon as it is opened. The account where the fund is on deposit may, at times, exceed federally insured limits. MHRUSA and MHRUSA's attorney have not experienced any losses on such accounts and believe they are not exposed to any significant credit risk on cash and cash equivalents. The attorney for MHRUSA was nominated and elected Secretary of the Corporation January 2, 2004. The financial statements are presented in US dollars. Amounts Reported in Indian Rupees have been given for convenience by translating the figures reported in US Dollars above, at the exchange rate of Rs. 44.66 = 1USD which is the average of telegraphic transfer buying and selling rates. Transactions with Related Parties: MHR contracted with various tax, legal and marketing consultants to ascertain financial and legal obligations regarding the operations they plan to commence in the United States. All of these activities were contracted and paid by MHR and expensed on the books of MHR accordingly, and not reflected on this Company's financial statements. MHRUSA incurred legal fees from its attorney who is also an officer of the Company in the amount of $644 for th fiscal year ended March 31, 2006. At a meeting of the Board of Directors held on January 16, 2006, the Board decided to make a capital investment of $100,000 in MHRUSA. The investment is scheduled to occur in June 2006. Commitments : There are no commitments as of the date of this report.
119
NBS INTERNATIONAL LIMITED
Directors Report to the Members

Your Directors present their Tenth Report together with the audited Accounts of your Company for the year ended 31st March, 2006. Financial Results: Rupees 2006 Income ............................................................................................................... Profit before Depreciation and Taxation ............................................................. Depreciation ....................................................................................................... Profit before Taxation ......................................................................................... Less: Provision for Taxation ............................................................................... - Current Tax ........................................................................................... - Deferred Tax ......................................................................................... - Fringe Benefit Tax ................................................................................. Profit for the year after Tax ................................................................................ Profit brought forward from earlier years ........................................................... Profit available for appropriation ......................................................................... Less: Transfer to General Reserve ..................................................................... Proposed Dividend ............................................................................................. Tax on Proposed Dividend .................................................................................. Balance carried forward ..................................................................................... (7,10,820) 65,864 (1,15,289) 11,91,538 57,01,083 68,92,621 (1,19,153) (3,78,750) (53,120) 63,41,598 (14,36,983) (20,800) 25,27,815 43,18,580 68,46,395 (2,52,781) (7,82,750) (1,09,781) 57,01,083 36,70,55,621 20,90,856 (1,39,073) 19,51,783
2005
47,22,02,532 41,05,961 (1,20,363) 39,85,598
Dividend Your Directors recommend a dividend of 75% (Rupees 7.50 per share) [previous year Rs.15.50 per share] payable to those shareholders whose names stand registered in the books of your Company as on the date of the Annual General Meeting. The dividend, inclusive of tax on distributed profits, will absorb a sum of Rs. 4.32 lakhs. Operations Your Company's sales during the year under review were 613 vehicles as compared to 791 vehicles in the previous year. A good demand for Scorpio Vehicles ensured good walk-ins at the show room throughout the year. Genuine accessories were in demand as usual. During the year under review your Company put in efforts to improve the Sales Satisfaction Process and achieved good results. Treating the Prospect and the Customer as RISHTEDAARS was the Guiding Mantra for the Show Room Operations. The vehicle delivery process was spearheaded by your Company and was a huge success. Your Company took lot of efforts in training its employees, to keep them abreast with the best practices, which helped, in
improving the overall Sales Satisfaction of customers. Systematic approach to prospect generation, conversion, test-drives helped in bringing the referrals to the Company. The promotional activities were in line with this approach as well. The Auditors in the Annexure to their Report [Sr. Nos. ii(c) and iv] have drawn the attention of the members of the Company as regards internal control procedures which require to be strengthened in the areas of invoicing for sale of accessories and maintenance of inventory records of accessories. Actions have been initiated towards strengthening the internal controls in these areas. With regard to the fraud reported by the Auditors in Sr. No. xxi of the Annexure to their Report, the Company has initiated proceeding for recovery of the amount of Rs.1.18 lakhs. Directors Mr. A. M. Choksey and Mr. Rajesh Jejurikar 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 representation received from the Operating Management, and after due enquiry, confirm that:
120
(i) (ii)
in the preparation of the annual accounts, the applicable accounting standards have been followed; 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, 2006 and of the profit of the Company for the year ended on that date; 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; the annual accounts have been prepared on a going concern basis.
Auditors Messrs B. K. Khare & Co., Chartered Accountants, retire as Auditors of the Company and have given their consent for re-appointment. The members will be required to appoint Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors proposed to be re-appointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. Deposits and Loans/Advances The Company has not accepted any deposits from the public or its employees during the year under review. The Company has not made any loans/advances which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent company, Mahindra & Mahindra Limited. Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outgo In view of the nature of activities that are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption respectively, are not applicable to the Company. There was no inflow or outflow of foreign exchange involved during the year under review. Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and Rules framed thereunder The Company had no employee who was in receipt of remuneration of not less than Rs. 24,00,000 during the year ended st 31 March, 2006 or not less than Rs.2,00,000 per month during any part thereof. For and on behalf of the Board
(iii)
(iv)
Corporate Social Responsibility Initiatives As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since its inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the announcement made on the occasion of the 60th Anniversary of Mahindra & Mahindra Limited (M&M), the ultimate holding company, that the Group would support a range of Corporate Social Responsibility (CSR) initiatives by committing 1% of Profit After Tax (PAT) on a continuing basis. The 1% PAT would specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/ or other Institutions, including K. C. Mahindra Education Trust and/or Mahindra Foundation, not related to the business of the Company or the welfare of the employees, towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Company's estimated PAT for the year on a continuing basis until further review by the Board. A beginning in this direction was made by your Company during the current year by making a contribution of Rs.13,000 to K.C. Mahindra Education Trust.
Rajeev Dubey Chairman
121
AUDITORS REPORT
To the members of NBS International Limited We have audited the attached Balance Sheet of NBS International Ltd. as at 31st March 2006 and also the Profit & Loss account and 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 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 test check 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. A. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India, in terms of Section 227 (4A) 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 in our comments in the Annexure referred to in paragraph A above, we report that: 1. 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 Profit & Loss Account dealt with by the Report are in agreement with the books of account. Place: Mumbai Date: 26th April, 2006 4. In our opinion, the Balance sheet and Profit and Loss Account comply with the accounting Standard referred to in section 211 (3C) of the Companies Act, 1956.. On the basis of written representation received from the Directors as on 31st March 2006 and taken on by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2006, from being appointed as a director in items of clause (g) of section 274(1) 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 read together with notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view: (i) (ii) In the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2006, and In the case of Profit and Loss Account, of the profit of the company for the year ended 31st March 2006.
5.
6.
B.
(iii) In the case of Cash flow Statement, of the cash flows for the year ended on that date.
2.
For B.K. Khare & Company Chartered Accountants
3.
(H.P. Mahajani) Partner Membership No. 30168
122
Annexure referred to in Paragraph A of the Auditors Report of Even date

i. (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. We have been informed that the fixed assets were not physically verified by the management during the year. During the year, the company has not disposed of any fixed assets. As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In our opinion and according to the information and explanations given to us and on the basis of our examination of the records of inventory, in our opinion the Company has maintained proper records of inventory (other than inventory of accessories, where improvement is needed). No material discrepancies were noticed on physical verification of inventory. According to the information and explanations given to us, the Company has not granted any secured/ unsecured loans from/to the parties listed in the register maintained under Section 301 of the Companies Act, 1956; According to the information and explanations given to us, the Company has not taken any secured/unsecured loans from/to the parties listed in the register maintained under Section 301 of the Companies Act, 1956. x. (b) According to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.
(b) (c) ii. (a)
vi.
In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public and therefore, the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and Rules there under are not applicable to the Company.
(b)
vii. In our opinion the company has an internal audit system that is commensurate with its size and nature of its business. viii. According to the information and explanations given to us, maintenance of Cost Records has not been prescribed by the Central Government under clause (d) of sub section (1) of section 209 of the Act. ix. According to the records of the Company and information and explanations given to us, expect for some delays in depositing service tax and ESIC contribution the Company has been regular in depositing all other undisputed statutory dues with the appropriate authorities. There were no arrears of outstanding statutory dues as at the last day of the financial year for a period of more than six months from the date they became payable. According to the records of the Company and information and explanations given to us, the company has no disputed dues of sales tax, custom tax, wealth tax, service tax, excise duty, and cess The Company does not have accumulated losses as at the end of the financial year and the Company has not incurred cash losses during current and in the immediately preceding financial year. According to the information and explanations given by the management, the Company has no dues to financial institutions, banks and debenture holders.
(c)
iii.
(a)
(b)
iv.
The internal control procedures need to be generally strengthened so as to make them commensurate with the size of the company and the nature of its business. In our opinion during the year there appears to be a continuing failure to correct major weaknesses in internal control in the areas of invoicing for sale of accessories and maintenance of inventory records of accessories. As explained to us, the company is in the process of initiating steps to generally strengthen the internal control procedures so as to also correct these weaknesses. In respect of transaction entered in the register maintained in pursuance of section 301 of the Companies Act 1956: (a) Based on audit procedures applied by us, to the best of our knowledge and belief and according to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangement that need to be entered into the register maintained under Section 301 have been so entered.
xi.
xii. According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of the security by way of pledge of shares, debentures and other securities. xiii. The provisions of any special statute applicable to Chit Fund, Nidhi or Mutual Benefit Fund/Societies are not applicable to the Company. xiv. Company is not dealing or trading in shares, securities, debentures and other investments. xv. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by other from banks and financial institutions.
v.
123
xvi. Company has not taken any term loan. xvii. According to the records of the Company and information and explanations given to us, the funds raised on short term basis have, prima facie, not been used during the year for long term investment. xviii. The Company has not made any preferential allotment to parties and companies covered under register maintained under Section 301 of the Companies Act, 1956. xix. The Company has not issued any debentures. xx. The Company has not raised money by any public issues. xxi. According to the information and explanations given to us, during the year under report fraud by an employee of the company by way of failure to record sale of a vehicle
( Rs. 3.20 lacs-since recorded and also proceeds recovered from the customer) and misappropriation of cash collected aggregating to an estimated amount of Rs. 1,18,000 were noticed (the money is yet to be recovered and accounted for). Subject to this is as explained to us, no other fraud on or by the company has been noticed or reported during the year.
For B.K. Khare & Company Chartered Accountants
(H.P. Mahajani) Partner Membership No. 30168
124

As at 31-03-2006 Rupees As at 31-03-2005 Rupees
Schedule Rupees SOURCES OF FUNDS SHAREHOLDERS FUNDS: Capital ......................................................................................... Reserves and Surplus ................................................................. Deferred Tax Liability (Net) (Ref. Note: 7) ............................... Total ............. I II
505,000 7,672,142 109,971 8,287,113
505,000 6,912,474 175,834 7,593,308
APPLICATION OF FUNDS FIXED ASSETS .......................................................................... Capital Work-in-Progress .......................................................... III 1,077,059 29,290 932,629
Net Current Assets: Current Assets, Loans and Advances ......................................... IV V 88,257,058 81,076,294 7,180,764 Total ............. 8,287,113 65,166,061 58,505,382 6,660,679 7,593,308
Less: Current Liabilities and Provisions ......................................
Notes to the Accounts ..............................................................
As per our report attached For B.K. KHARE & CO. Chartered Accountants H.P. MAHAJANI Partner
for and on behalf of the Board Rajeev Dubey Rajesh Jejurikar A.M. Choksey G. Seshadri
Directors

125
2006 Rupees 367,055,621 345,405,099 2,779,821 144,435 139,073 16,635,410 365,103,838 Profit before Taxation .................................................................. Less: Provision for: Income Tax ................................................................................. Deferred Tax ............................................................................... Fringe Benefit Tax ....................................................................... Profit/(Loss) After Taxation ......................................................... Add: Balance Brought forward from earlier years ....................... 1,951,783 710,820 (65,864) 115,289 1,191,538 5,701,083 6,892,621 2005 Rupees 472,202,532 449,729,609 3,360,591 120,363 15,006,371 468,216,933 3,985,598 1,436,983 20,800 2,527,815 4,318,580 6,846,395
Schedule SALES AND OTHER INCOME ................................................... EXPENDITURE Traded Goods .............................................................................. Personnel .................................................................................... Interest ........................................................................................ Depreciation ................................................................................ Other Expenses .......................................................................... VI VII VIII
Rupees
IX
APPROPRIATIONS: General Reserve ......................................................................... Proposed Dividend ...................................................................... Income Tax on Proposed Dividend ............................................. Balance carried to balance sheet ............................................. EARNINGS PER SHARE (Note 8) (Face Value Rs. 10/- per share) (Rupees) Basic ........................................................................................... Diluted ......................................................................................... Notes to the Accounts .............................................................. X
(119,153) (378,750) (53,120) 6,341,598
(252,781) (782,750) (109,781) 5,701,083
23.59 23.59
50.06 50.06
As per our report attached For B.K. KHARE & CO. Chartered Accountants H.P. MAHAJANI Partner
Directors

126
Cash Flow Statement for the Year ended 31st March, 2006
2006 Rupees Lakhs 2005 Rupees Lakhs
Rupees Lakhs A. CASH FLOW OPERATING ACTIVITIES: Net Profit before exceptional item, taxation and adjustments pertaining to previous years ........................................................... Adjustments for: Depreciation ........................................................................... Interest ................................................................................... Operating Profit before Working Capital Changes ......................... Changes in: Trade and Other Receivables ................................................. Inventories ............................................................................. Trade and Other Payables ...................................................... Cash generated from operations ................................................... Income-taxes paid (net of refunds) ................................................ Fringe Benefit Tax Paid .................................................................. NET CASH FROM OPERATING ACTIVITIES .................................. B. CASH FLOW FROM INVESTING ACTIVITIES: Purchase of fixed assets ................................................................ Interest Received ........................................................................... NET CASH USED IN INVESTING ACTIVITIES ................................ C. CASH FLOW FROM FINANCING ACTIVITIES ............................... NET CASH USED IN FINANCING ACTIVITIES ............................... NET INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C) ... CASH AND CASH EQUIVALENTS (Note 1): Opening Balance .................................................................... Closing Balance ...................................................................... Notes to the Cash Flow Statement for the Year ended 31st March, 2006
19.52 1.39 (1.22) 0.17 19.69 (61.63) (188.70) 230.32 (20.01) (0.32) (6.70) (1.15) (8.17) (3.13) 1.22 (1.91) (8.92) (8.92) (19.00) 112.59 93.59
39.86 1.20 (0.66) 0.54 40.40 12.82 23.02 (167.34) (131.50) (91.11) (17.50) (108.61) (2.13) 0.66 (1.47) (14.14) (14.14) (124.22) 236.80 112.58
2006 Rupees Lakhs 1. Cash and cash equivalents include: Cash, cheques and stamps on hand .............................................. Balances with Scheduled Banks: On current account ................................................................ On Fixed Deposit account ...................................................... 0.28 69.96 23.34 93.58
2005 Rupees Lakhs 59.30 30.92 22.37 112.59
As per our report attached to the Balance Sheet For B.K. KHARE & CO. Chartered Accountants H.P. MAHAJANI Partner
Directors

127

SCHEDULE I: SHARE CAPITAL: Authorised: 5,00,000 Equity Shares of Rs. 10 each ............. Issued, Subscribed and Paid-up: 50,500 Equity Shares (20042005: 50,500), of Rs. 10 each fully paid (The entire Share Capital is held by the Holding Company, Mahindra Holdings and Finance Ltd., including 100 shares held together with its nominees) ...................................... Total ............ SCHEDULE III FIXED ASSETS Description of Assets Plant and Machinery Furniture & Fixtures Total 31st March, 2005 Cost as at 31.03.2006 1,318,427 16,175 1,334,602 1,121,459 Additions during the year 90,589 192,913 283,502 213,143 Deductions during the year As at 31-03-2006 Rupees Cost as at 31.03.2006 1,409,016 209,088 1,618,104 1,334,602 As at 31-03-2005 Rupees Depreciation to 31.03.2005 385,798 16,175 401,973 281,610 Deductions of Depreciation Depreciation for 2005-06 128,123 10,949 139,073 120,363 Depreciation to 31.03.2006 513,921 27,124 541,046 401,973 As at 31-03-2006 Rupees 5,000,000 As at 31-032005 Rupees 5,000,000 SCHEDULE II: RESERVES AND SURPLUS: Rupees General Reserve: Balance as per last Balance Sheet Add: Transferred from Profit and Loss Account ............................... Profit and Loss Account: Balance as per account annexed .. 505,000 505,000 505,000 505,000 Total ..... 1,211,391 119,153 1,330,544 6,341,598 7,672,142 As at 31-03-2006 Rupees As at 31-032005 Rupees 958,610 252,781 1,211,391 5,701,083 6,912,474
(In Rupees) Net Balance Net Balance as on 31.3.2006 as at 31.03.2005 895,095 181,964 1,077,059 932,629 As at 31-03-2006 Rupees 932,629 932,629 839,849 As at 31-03-2005 Rupees
SCHEDULE IV: CURRENT ASSETS, LOANS AND ADVANCES:
Rupees
(A) Current Assets: Stock-in-Trade: (at cost or net realisable value whichever is lower Traded Goods ........................ Sundry Debtors: Unsecured unless otherwise stated: Outstanding over six months: Considered good ............. 877,921 Considered doubtful ........ 168,556 1,046,477 Other Debts: Considered good ............. Considered doubtful ........ 18,457,309 11,849 18,469,158 19,515,635
SCHEDULE V: CURRENT LIABILITIES AND PROVISIONS: (A) Current Liabilities: Sundry Creditors: (i) Total outstanding Dues of small scale industrial undertakings .................... (ii) Total outstanding Dues of creditors other than small scale industrial undertakings [including Rs. 2,923,069 (2005: Rs. 2,308,625) being advance payments for which value has still to be given] ........ Other Current Liabilities ........ (B) Provisions: For Income Tax (Net) ............ For Proposed Dividend (Gross) For tax on proposed dividend .. Total .....
Rupees
56,907,986
38,038,074
304,592 304,592 15,103,659 15,103,659 15,408,251 19,335,230 15,408,251 5,929,678 3,092,031 2,236,814 9,330,267 9,358,323 5,328,845 11,258,523
80,540,273
80,540,273 104,151 80,644,425
56,828,194 784,657 57,612,851 782,750 109,781
Less: Provision for Doubtful Debts ....................................
180,405
Cash and Bank Balances: Cash Cheques and Stamps on hand Balances with Scheduled Banks: (i) On Current Accounts ...... 6,996,032 (ii) On Fixed Deposit Accounts 2,334,235
378,750 53,120 431,870 81,076,294
28,056
892,531 58,505,382
(B) Loans and Advances: (Unsecured, considered good unless otherwise stated): Advance recoverable in cash or in kind for value to be received ................................ Balance with Government Authorities: Payments towards Income Tax (Net of Provisions) ................. Total .....
Schedules forming part of the Profit and Loss Account for the Year ended 31st March, 2006
SCHEDULE VI: SALES AND OTHER INCOME: Rupees 360,167,515 6,718,115 31-03-2006 Rupees 31-03-2005 Rupees 466,984,211 5,151,916 Sales Traded Goods ................. Other Operating Income (Ref. Note.: 5) .......................................
2,500,010
265,088
155,509 2,655,520 88,257,058
196,125 461,213 65,166,061
Interest Income (Gross) [includes tax deducted at source Rs. 22,857 (2005: Rs. 9,925)] ............. Prior Year Adjustments (Net) ........ Total .....
121,755 48,236 367,055,621 367,055,621
66,405 472,202,532 472,202,532
128
SCHEDULE VII: TRADED GOODS: (A) Decrease/(Increase) in Stock of Finished Goods: Opening Stock ......................
Rupees
31-03-2006 Rupees
31-032005 Rupees
(G) 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. (H) Segment Reporting: The Company has single reportable segment namely Automotive for the purpose of Accounting Standard 17 on Segment Reporting. 2. There are no dues payable to small scale industrial undertakings. Other operating income includes net margin earned for liaisoning of vehicle financing, registration, insurance, etc., for the customers. (a) Selling and Distribution expenses include Brokerage & discount on Sales Rs. 62,75,046 (2005: Rs. 35,49,509) (b) Prior Year Adjustments (credit) Rs. 48,236 (2005: Nil) is on account of sales, personnel expenses and other miscellaneous expenses. (c) Interest paid Rs. 1,44,435 (2005: Nil) is on completion of sales tax assessment and interest received is on fixed deposit with Bank. 5. Miscellaneous expenses include: 2006 Rupees 55,000 10,000 6,630 71,630 2005 Rupees 55,000 10,000 6,630 71,630 3. 4.
34,187,706 56,907,986 (22,720,280) 368,125,379 345,405,099
40,339,584 38,038,074 2,301,510 447,428,099 449,729,609
Less: Closing Stock ...............

Decrease/(Increase) in Stock (B) Purchase of Trade Goods ...... Total .....
Note: Opening Stock is after adjusting credit for VAT Rs./ 38.30 lakhs.
SCHEDULE VIII: PERSONNEL: Salaries, Wages and Bonus .......... Provident Fund ............................. Welfare ......................................... Total ..... SCHEDULE IX: OTHER EXPENSES: Rent ...................................................................... Rates and Taxes .................................................... Insurance ............................................................... Repairs and Maintenance ...................................... Advertisement ....................................................... Sales Incentives and Promotion Expenses ............ Selling and Distribution Expenses ......................... Power Charges Electricity ................................. Trvelling and Conveyance ...................................... Hire and Service Charges ...................................... Postage and Telephone ......................................... Printing and Stationery .......................................... Donation ................................................................ Provision for Doubtful Debts ................................. Miscellaneous Expenses (Ref. Note: 5) ................ Total .....
31-03-2006 Rupees 2,440,166 88,875 250,780 2,779,821 31-03-2006 Rupees 314,000 1,909,819 213,126 131,307 364,894 7,137,362 482,996 1,013,165 240,194 3,406,391 406,225 273,292 13,000 180,405 549,234 16,635,410
31-032005 Rupees 2,943,245 117,318 300,028 3,360,591 31-032005 Rupees 330,000 1,213,032 153,227 257,936 749,143 4,407,686 1,124,287 460,795 118,539 4,471,610 582,374 299,080 838,663 15,006,371
Statutory Audit Fees ...................................... Tax Audit Fees ............................................... Service Tax .................................................... Total ..... 6. Contingent Liability:
Claims against the Company not acknowledged as debts comprise of legal cases Rs. 282,064 (2005: Nil). 7. The components of Deferred tax liability and assets as at 31st March, 2006, are as under: 2006 2005 Rupees Rupees Deferred tax liability: On Depreciation ............................................. 170,695 175,834 Deferred tax assets: On Provision for Doubtful Debts .................... 60,724 Net Deferred tax liability ................................ 8. Earnings Per Share: 2006 Rupees Amount used as the numerator Balance of profit for 20052006 ....................................... Weighted Average number of equity shares used in computing basic earnings per share .. Basic Earnings per share ................................ Diluted Earnings per share ............................. 9. Related Party Transactions: (a) List of Related Parties: Holding Company 1,191,538 50,500 23.59 23.59 2005 Rupees 2,527,815 50,500 50.06 50.06 109,971 175,834
SCHEDULE X: NOTES ON ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006 1. Significant Accounting Policies: (A) Basis for Preparation of Accounts: The accounts have been prepared to comply in all material aspects with all applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Indian Companies Act, 1956. (B) Fixed Assets: Fixed Assets are stated at cost less depreciation. (C) Depreciation: Depreciation on Fixed Assets has been charged using Straight Line Method at rates specified in Schedule XIV to the Companies Act, 1956. Assets costing less than Rs. 5,000/- are depreciated at the rate of 100% per annum. (D) Inventories: Inventories are stated at cost (this year onwards net of VAT) or net realisable value whichever is lower. (E) Revenue Recognition: The Company follows the accrual method of accounting for its income and expenditure. Sales for products is recognised when products are delivered. Income from other services like insurance/registration of vehicles is recognised once the registration/insurance is completed in favour of the customer. (F) Retirement Benefits: Provident Fund contributions being the only retirement benefit to which the employees are presently eligible, are made to the Provident Fund Commissioner.
Mahindra & Mahindra Limited Mahindra Holdings & Finance Ltd.
Fellow Subsidiary Companies: 1. Tech Mahindra Limited (formerly known as Mahindra-British Telecom Limited) 2. Mahindra Engineering & Chemical Products Limited 3. Mahindra Infrastructure Developers Limited 4. Mahindra & Mahindra Financial Services Limited 5. Automartindia Limited 6. Mahindra Intertrade Limited 7. Mahindra USA Inc. 8. Mahindra Steel Service Centre Limited 9. Bristlecone (UK) Limited 10. Mahindra Gujarat Tractor Limited
129
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.
Mahindra Acres Consulting Engineers Limited Mahindra Holidays & Resorts India Limited Mahindra Logisoft Business Solutions Limited Mahindra Shubhlabh Services Limited Mahindra Ashtech Limited Mahindra Insurance Brokers Limited Mahindra Gesco Developers Limited Mahindra World City (Jaipur) Ltd. (with effect from 26th August, 2005) Bristlecone Limited, Cayman Islands Bristlecone Inc. Mahindra Engineering Design & Development Company Limited Mahindra Realty Limited (with effect from 21st September, 2005) Mahindra Automotive Steels Private Limited (with effect from 2nd June, 2005) Mahindra Renault Private Limited (with effect from 5th August, 2005) Mahindra Middleeast Electrical Steel Service Centre (FZE) Mahindra World City Developers Limited Mahindra & Mahindra South Africa (Pty.) Limited Tech Mahindra (Americas) Inc. (formerly known as MBT International Inc.) Mahindra International Limited (with effect from 1st November, 2005) Tech Mahindra GmbH (formerly known as MBT GmbH) Stokes Group Limited (with effect from 3rd January, 2006) Plexion Technology (India) Private Limited (with effect from 15th February, 2006) Jensand Limited (with effect from 3rd January, 2006) Stokes Forgings Limited (with effect from 3rd January, 2006) Stokes Forgings Dudley Limited (with effect from 3rd January, 2006) Plexion Technologies (UK) Ltd. (with effect from 15th February, 2006) Plexion Technologies GmbH, Germany (with effect from 15th February, 2006) Plexion Technologies Incorporated-USA (with effect from 15th February, 2006) Tech Mahindra Singapore (Pte.) Limited (formerly known as MBT Software Technologies Pte. Ltd.) Tech Mahindra (R&D Services) Limited (with effect from 28th November, 2005) Tech Mahindra (R&D Services) Inc. (with effect from 28th November, 2005) Tech Mahindra (R&D Services) Pte. Limited (with effect from 28th November, 2005) Tech Mahindra (Thailand) Limited (with effect from 21st February, 2006) Tech Mahindra Foundation (with effect from 22nd March, 2006) Bristlecone India Limited Bristlecone (Singapore) Pte. Ltd.
47. Bristlecone GmbH 48. Mahindra Ugine Steel Company Ltd. (with effect from 21st June, 2005) 49. Mahindra BT Investment Company (Mauritius) Limited (with effect from 9th May, 2005) 50. Mahindra Holidays & Resorts U.S.A. Inc. 51. Mahindra SAR Transmission Private Limited 52. Mahindra Overseas Investment Company (Mauritius) Limited 53. Mahindra Europe s.r.l. (with effect from 30th May, 2005) 54. Mahindra (China) Tractor Company Limited (with effect from 13th May, 2005) 55. Console Estate & Investment Limited (Ceased with effect from 20th March, 2006) 10. Related Party Transactions are as under: (Rs. Lacs) Nature of Transactions Holding Company Holding Company Fellow Subsidiary Companies
Purchases Goods ........................... 3,555.77 (3,889.29) 3.05 (3.12) 7.83 (12.53) 21.11 (46.23) 3.04 (2.28) 5.87 (17.39)
Sales Goods ........................... Finance Dividend Distributed ..... Other Transactions Other Income ............... Other Expenses Reimbursements received from parties ... Reimbursements made to parties ...................... Outstanding Payable ......................... Receivable ....................
1.92 (1.15) 756.02 (528.32) 0.07 (2.52)
2.11 (0.12)
11. For additional information pursuant to the provisions of Part IV of Schedule VI to the Companies Act, 1956 see Schedule XII. 12. Previous years figures have been regrouped wherever necessary.
SCHEDULE - XI Additional information persuant to the provisions of paragraphs 3(i) (a), of part II of Schedule VI to the Companies Act, 1956. Particulars in respect of Traded Goods: Sr. Class of Goods No. 1 2 Vehicles Accessories @ 2005 Units of Measure Nos. 2005 Purchases Quantity 648 789 Value 365,586,133 444,708,956 2,539,246 2,719,143 368,125,379 447,428,099 Opening Stock Quantity 66 68 Value 32,655,576 39,444,451 1,532,130 895,133 34,187,706 40,339,584 Closing Stock Quantity 101 66 Value 55,989,488 36,505,944 918,498 1,532,130 56,907,986 38,038,074 Quantity 613 791 Sales Value 356,506,776 462,049,286 3,660,739 4,934,925 360,167,515 466,984,211
@ Includes numerous items of diverse nature therefore it is neither practical nor meaningful to give the quantities
130
SCHEDULE XII : ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE: I. Registration Details: Registration No. 1 1 - 9 5 4 8 2 Balance Sheet Date 3 1 0 3 2 0 0 6
Date Month Year
State Code
1 1
II.
III.
IV.
V.
Capital Raised during the year (Amount in Rs. Thousands): Public Issue Rights Issue N I L N I L Bonus Issue Private Placement N I L N I L Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands): Total Liabilities Total Assets 8 9 1 8 8 8 9 1 8 8 Sources of Funds: Paid-up Capital Reserves and Surplus 5 0 5 7 6 7 2 Secured Loans Unsecured Loans N I L N I L Application of Funds: Net Fixed Assets Investments 1 1 0 6 N I L Net Current Assets Miscellaneous Expenditure 1 8 1 N I L Accumulated Losses Deferred Tax Liability (Net) N I L ( 1 1 0 ) Performance of the Company (Amount in Rs. Thousands): Turnover (Income) Total Expenditure 3 6 7 0 5 6 3 6 5 1 0 4 + Profit Before Tax + Profit After Tax 1 9 5 2 1 1 9 2 Earnings per Share in Rupees Dividend % 2 3 . 5 9 7 5 % Generic Names of Three Principal Products/Services of the Company (as per Monetary Terms): Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description N O T A P P L 8 7 0 2 Motor Vehicle for the transport of more than six persons, excluding the driver 8 7 0 3 Other motor vehicles principally designed for the transport of persons I C A B L E Accessories for and on behalf of the Board Rajeev Dubey Rajesh Jejurikar A.M. Choksey G. Seshadri
Directors

131
MAHINDRA UGINE STEEL COMPANY LIMITED
DIRECTORS REPORT
The Directors present their Forty-third Report together with the audited accounts of your Company for the year ended 31st March, 2006. RESULTS FINANCIAL RESULTS (Rupees in Lakhs)
2006 Gross Income ........................................................................................... Profit before Interest and Depreciation ................................................... Less: Interest ............................................................................................ Less: Depreciation .................................................................................... Profit before Tax and Exceptional item ................................................... Less: Provision for Taxation - Current Tax .................................................................................. - Deferred Tax (including Fringe Benefit Tax) ............................... Profit after tax and before exceptional items ......................................... Less: Exceptional items - Redemption premium on Preference Shares Profit after Tax .......................................................................................... Balance of profit/(loss) brought forward from earlier years .................. Balance of profit and loss account acquired on account of amalgamation ....................................................................................... Profit available for Appropriation .............................................................. Proposed Dividend on Equity Shares ...................................................... Proposed Dividend on Preference Shares .............................................. Interim Dividend paid on Preference Shares .................................................................................... Tax on Dividend ........................................................................................ Transfer to General Reserves .................................................................. Balance Carried Forward .......................................................................... 3240 (213) 6911 405 6506 1461 2047 10014 1462 16 85 219 4500 3732 513 1209 4816 4816 (779) 4037 928 191 157 1300 1461 62476 12361 1115 1308 9938 2005 52304 8638 1138 962 6538
PERFORMANCE REVIEW Your Companys operations continued to be profitable, with continued efforts to reduce costs and improve yield as also bettering the productivity levels. During the period under review, the gross income has grown by about 19% from Rs.52,304 lakhs to Rs.62,476 lakhs. The Profit after Tax for the year was Rs.6,506 lakhs as against Rs.4,816 lakhs in the previous year registering a growth of 35%. SCHEME OF AMALGAMATION In February, 2006, a Scheme of Amalgamation (Scheme) consisting of merger of Pranay Sheetmetal Stampings Limited (Pranay), Valueline Hotels & Resorts Limited (Valueline) and Console Estate & Investments Limited (Console) with your Company was approved by the Honble High Court of Bombay. Console was a wholly owned subsidiary of your Company. Pranay was an Associate of your Company and your Company held significant shareholding in Valueline. With this merger
132
and the consolidation of stampings operations with your Company, management control system are made more efficient and cost effective, enabling harnessing of synergies and in addition resulting in simplification of the group structure. The operations of Pranay include manufacture and sale of pressed metal components. Valueline had not commenced operations. The operations of Console include activities mainly related to investments and dealing in shares. The assets and liabilities of the erstwhile Pranay, Valueline and Console were transferred to and vested in the Company with retrospective effect from 1st April, 2005. The Scheme has, accordingly, been given effect to in these accounts. Pursuant to the Scheme, 150,000 fully paid up equity shares of Rs. 10 each have been allotted by the Company to the shareholders of Pranay in the ratio of 15 shares of the Company for every 2 equity shares of Re.1 each fully paid up held in Pranay and 1,400,840 fully paid up equity shares of Rs.10
each have been allotted by the Company to the shareholders of Valueline in the ratio of 14 shares of the Company for every 1 equity share of Rs. 10 each fully paid up held in Valueline. STEEL BUSINESS The total sales during the year increased from 106,012 tonnes for the year ended March, 2005 to 110,627 tonnes for the year ended March, 2006 registering a marginal growth of 4.35%. The industry continues to benefit from a high economic growth coupled with a robust demand. Recently, there has been some indication of softening of prices but demand continues to be buoyant and is expected to remain so for the near to mid term. The Companys capital expenditure scheme which it embarked on last year, has taken further shape this year and is expected to enhance production and sales volume of Steel to 240,000 tonnes by F-08. STAMPINGS BUSINESS As mentioned earlier in this report during the financial year, Pranay having a capacity of 13,000 tonnes of pressed metal sheets and components merged with the Company with effect from April 1, 2005. This has augmented the overall capacity of the stampings business of the Company to 31,000 tones. This stampings division mainly caters to the requirement of the Nashik unit of the holding company, Mahindra & Mahindra Limited. The expansion of stampings business at Rudrapur is also taking shape. The production and sales of the stampings business were as under: Tonnes In Tonnes Production 24,382 Sales 24,427 Rs. lacs Sales value 6,876.17
Dividend on Equity Shares Your directors have recommended a dividend of 45% (Rs. 4.50 per share) as against 30% (Rs.3 per share) for the previous year. The dividend, together with the tax on distributed profit, will absorb a sum of Rs.1,666.71 lakhs (previous year Rs.1,058.09 lakhs) and will be paid to those shareholders whose names stand registered in the books of the Company as on the book closure date. The total preference and equity dividend together with the tax on distributed profits (including interim dividend paid and tax thereon) will absorb Rs.1,781.44 lakhs. FINANCE During the year under review, the liquidity position of your Company improved significantly. Your Company has always been prompt in meeting the obligations towards banks and financial institutions. The Company successfully tied up its entire requirement of funding for the Capital Expenditure envisaged. INDUSTRIAL RELATIONS The relationship with the workers and their respective unions during the year has been by and large cordial. However, an illegal strike for eight days at the Khopoli plant disrupted production, sales and movement of materials. The dispute was amicably settled. The Labour agreement with the Labour union that is due for revision is expected to be signed in the next few months. In respect of the Kanhe unit, the labour settlement agreement was signed for a period of 3 years which provides for improved productivity by 33%. SAFETY, HEALTH AND ENVIRONMENTAL PERFORMANCE The Company has a policy on the general health, safety and environmental conservation through which every employee is responsible for the observance of the measures designed to prevent accidents, damage to health and to avoid environmental pollution. Safety committee members comprising representatives from workers and executives from various departments meet periodically to review the situation. DIRECTORS Mr. S. Ravi who was appointed as an Additional Director at the Board Meeting held on 29th July, 2005 holds office upto the date of the Annual General Meeting. The Company has received a notice from a member signifying his intention to propose Mr.S.Ravi as candidate for office of Director. Mr. Anand G. Mahindra, Dr. H.N. Sethna and Mr. C.S. Madhav Rao retire by rotation and, being eligible, offer themselves for reappointment 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:
133
A detailed analysis of the Companys performance is contained in the Management Discussion and Analysis Report, which forms part of this Annual Report. DIVIDEND Interim dividend on Preference Shares Your Directors have paid an interim dividend on Preference Shares as follows: a) 4.08% on 7% 546,000 Cumulative Redeemable Preference Shares of Rs.100/- each amounting to Rs.22.41 lakhs. 5.67% on 9.72% 1,100,000 Cumulative Redeemable Preference Shares of Rs.100/- each amounting to Rs.62.39 lakhs. The 9.72% Preference Shares were redeemed on 31st October, 2005 at a Premium of Rs.404.56 Lacs.
b)
Final dividend on Preference Shares Your Directors have recommended a final dividend of 2.92% on 7% 546,000 Cumulative Redeemable Preference Shares of Rs.100 each @ 2.92% amounting to Rs.15.81 lakhs.
(i)
In the preparation of the annual accounts, the applicable accounting standards have been followed;
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES (CSR) As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since inception, the Mahindra Group has engaged in activities which add value to the communities around it. A step forward in this direction was taken by the announcement made on the occasion of the 60th anniversary of the holding company, Mahindra & Mahindra Limited, that the Group would support a range of CSR initiatives by committing up to 1% of Profit after Tax (PAT) every year, on a continuing basis to largely benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has, subject to the approval of the shareholders, resolved to contribute towards Corporate Social Responsibility of the Company, upto 1% of the Companys estimated PAT for the year, on a continuing basis, until further review by the Board. PARTICULARS OF EMPLOYEES As required pursuant to Section 217(2A) of the Companies Act, 1956 and rules thereunder, a statement containing particulars of the companys employees who were in receipt of remuneration of not less than Rs. 24,00,000/- during the year ended 31st March, 2006 or of not less than Rs. 2,00,000/per month during any part of the said period is given in the Annexure to this Report. 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 the Annexure to this Report. ACKNOWLEDGEMENTS Your Directors record their gratitude to the Banks, Financial Institutions, Government Departments, Vendors and customers for their continued support and co-operation during the year. Your Directors also wish to place on record their appreciation of the services of the Employees of the Company.
(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, 2006 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 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. SUBSIDIARIES As mentioned elsewhere in this Report, M/s. Console Estate and Investments Limited got merged with the Company effective from 20th March, 2006. The appointed date of Merger was 1st April, 2005. M/s. Mahindra Automotive Steel Ltd. (MASL) (formerly Mahindra Automotive Steels Private Limited) ceased to be a subsidiary of your Company as your Companys shareholding in MASL was transferred to Mahindra Holdings & Finance Limited. The Company has no subsidiary as on 31st March, 2006. AUDITORS M/s. A.F.Ferguson & Co., Chartered Accountants, retire as auditors of the Company and have given their consent for reappointment. As required pursuant to the provisions of Section 224 (1B) of the Companies Act, 1956, the Company has obtained a written certificate from the above auditors proposed to be re-appointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. PUBLIC DEPOSITS AND LOANS/ADVANCES An aggregate amount of Rs. 7.71 lakhs representing 94 fixed deposits had matured but remained unpaid/unclaimed as at 31st March, 2006 pending instruction from the depositors concerned. Since then 11 fixed deposits aggregating Rs.1.19 lakhs have been repaid. The Company has discontinued acceptance of fresh deposits and renewal of existing deposits from public and shareholders with effect from 1st May, 2005. The particulars of loans/advances and investments in its own shares by listed companies, their subsidiaries, associates etc. required to be disclosed in the annual accounts of the companies pursuant to Clause 32 of the Listing Agreement are furnished separately.
For and on behalf of the Board KESHUB MAHINDRA Chairman
Mumbai: 24th April, 2006.
134
ANNEXURE FORMING PART OF THE DIRECTORS REPORT

ADDITIONAL INFORMATION PURSUANT TO SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED 31st MARCH, 2006. Name of Employees Mr. K. V. Ramarathnam Designation Qualification Date of Employment 5-5-2003 Age / (Experience) 58/(36) Gross Gross Remuneration 30,04,227* Last Employment (Organisation/ held (Organisation/ Designation) SBU Head (Steel Division) Perkasa Indobaja, Indonesia
Managing Director
B.E. (Mech)
Notes: 1. 2. 3. Nature of employment is contractual, subject to termination on 3 (three) months notice from either side. The above employee is not related to any Director of the Company. *Remuneration received as shown in the statement includes Salary, House Rent Allowance or value of perquisites for accommodation, car perquisite value, reimbursement of medical expenses, employers contribution to Provident Fund and Gratuity Fund, premium for Mediclaim and all other allowances/perquisites as applicable but does not include Commission of Rs. 25,00,000/- for the year 2004-05 approved by the Central Government. This will be paid by the Company after approval by the members in the ensuing Annual General Meeting. No employee holds by himself alongwith his spouse and dependent children 2% or more of the equity shares of the Company. Employment terms and conditions are as per the Companys rules.
4. 5.

KESHUB MAHINDRA Chairman
135
STATEMENT PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS' REPORT FOR THE YEAR ENDED 31ST MARCH, 2006 ELECTRICAL ENERGY: FORM A (Form for disclosure of particulars with respect to conservation of energy) Curr Year Curr ent Year 2005-2006 Steel A) Power & Fuel Consumption 1) Electricity a) Purchased Units (KWH) Total Amount (Rs.) Rate/Unit (Rs.) b) 2) 3) Own Generation (KWH) 137,918,679 507,566,918 3.68 56,296 N.A 4,463,142 19,655,154 4.40 263,688 N.A 142,381,821 527,222,072 3.70 319,984 N.A 129,863,542 462,260,891 3.56 37,248 N.A. 1,365,896 6,980,808 5.11 262,224 N.A. 131,229,438 469,241,699 3.58 299,472 N.A. Stampings Total Steel Previous Year 2004-2005 Stampings Total
Coal Furnace Furnace Oil (K.Litres) Total Amount (Rs.) Rate/Unit (Rs.)
18,781 268,713,037 14,308
N.A N.A N.A
18,781 268,713,037 14,308
17,932 194,097,305 10,824
N.A N.A N.A
17,932 194,097,305 10,824
4)
OTHER FUEL OIL (L.D.O.) Quantity (K.Litres) Total Amount (Rs.) Rate/Unit (Rs.) 5 85,065 16,679 N.A N.A N.A 5 85,065 16,679 4 61,714 16,679 N.A N.A N.A 4 61,714 16,679
Production B) Consumption Per Unit of Production 1) 2) 3) 4) 5) 6) Products *Unit - MT Electricity (KWH/MT) Total for the Plant Furnace Oil (K.Litres/MT) Total for the Plant Coal Other Fuel Oil (K.Litres/MT) Total for the Plant Total Fuel Oil (Furnace Oil+ L.D.O.) (K.Litres/MT) 111,188 1,240 0.169 N.A 0.00005 24,458 361 N.A N.A N.A 135,646 1,050 0.138 N.A 0.00004 106,009 1,225 0.169 N.A. 0.00003 8,449 162 N.A N.A. N.A 114,458 1,147 0.157 N.A. 0.00003
0.169
N.A
0.138
0.169
N.A
0.157
* Indicates in house production only.
136
FORM B (Form of disclosure of particulars with respect to Technology Absorption) RESEARCH & DEVELOPMENT Specific areas in which R & D activities have been successfully completed during 2005-06. Process Improvement 1. 2. 3. 4. 5. 16 new grades of steel have been developed. Heat Treatment cycles of nine grades of steel have been successfully developed and implemented. Cleanliness of bearing steel has been improved through special casting process. 4.8 MT ingot products have been successfully developed for TIMKEN application. Hardenability of three forging grade steels has been improved for customer satisfaction.
Benefits derived as a result of R & D activities. Continuous improvement in the process and products. There has been improvement in the quality of steel.
Future Plan of Action Propose to install a continuous rolling mill. Augment the infrastructure within the plant to achieve the enhanced capacity.
Expenditure on R&D (Rupees in lakhs) 2005-06 a] b] c] d] Capital Recurring Total Total R&D expenditure as percentage of total turnover 53.35 42.04 95.39 0.155 2004-05 1.60 35.35 36.95 0.07
137
TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION Efforts in brief made towards technology absorption 1. Installation of new walking beam furnace in place of an old furnace which had lost the accuracy. Benefits derived as a result of the above effort 2. Cost reduction Improvement in quality Increased productivity
In case of imported technology (imported during the last five years reckoned from the beginning of the year) the following information may be furnished. Technology imported - Nil Has the technology been fully absorbed - N.A. If not fully absorbed, areas where this has not taken place - N.A.
FOREIGN EXCHANGE EARNINGS AND OUTGO The information of foreign exchange earnings and outgo is furnished in the notes to the accounts.
For and on behalf of the Board KESHUB MAHINDRA Chairman
Mumbai : 24th April, 2006.
Particulars shares Particulars of loans / advances and investment in its own shares by listed companies, their subsidiaries, associates etc. equired Agreement. r equired to be disclosed in the Annual Accounts of the Company pursuant to Clause 32 of the Listing Agreement. Name of Company Outstanding Amount as on 31st March, 2006 Maximum amount Outstanding during the year 2005-06 Loan Amount Without Repayment Interest or Interest Schedule below Section 372A of the Companies Act,1956 Outstanding in respect of firms / companies in which Directors are interested Investment by Loanee in the shares of Parent and Subsidiary Company when the Company has made a Loan or Advance the nature of Loan (Rs.)
Mahindra Automotive Steels Pvt. Ltd. (A subsidiary of Console Estate & Investments Ltd.) till 20/04/2005*
(Rs.)
(Rs.)
(Rs.)
(Rs.)
(Rs.)
2,165,483*
2,165,483
2,165,483
2,165,483
2,165,483
Nil
Note : The Company ceased to be a subsidiary of Console Estate & Investments Ltd. w.e.f. April 20, 2005.
138
MANAGEMENT DISCUSSION AND ANALYSIS (MDA)

Industry structur ucture A) Industry structure and developments Steel Business: Your Company is engaged in the manufacture of alloy and special steel through Electric Arc Furnace (EAF) route and caters to the automotive, engineering, bearings and other industries. All these segments are witnessing significant growth. The Company services an impressive list of customers including Bharat Forge, SKF, Cummins, Timken and TISCO which bears testimony to its leadership. Your Company is in the process of creating cost and quality leadership. The operating results will show that your Company has benefitted from focussing on a strategic framework. The steel that is produced is of world quality, import substitutive and the Company has been qualified by leading bearing manufacturers as an international source of supply. Quality has achieved consistency. The Companys operations continue to show consistent improvement. An experienced management team that has delivered the above results is being strengthened and knowledge management systems have been instituted so that the wealth of experience can be captured for future. While domestic demand has outstripped supplies, the Company has continued to evaluate options that create a hedge against possible reversal of the market dynamics and has been making progress in identifying export options for value added products. Stampings Business: As a result of the remarkable growth in the Automotive industry, the stampings division at Kanhe has increased its throughput significantly and is expected to further improve upon the capacity utilization. Like many other businesses, the stampings industry too has been a victim of over investment in small sub-optimal units which have traditionally been incapable of producing a quality product. The Kanhe stampings division has been able to move up the value chain and with group support, developed the capabilities to produce sub assemblies for Mahindra & Mahindra (M&M), Tata Motors and Ashok Leyland. The recent joint venture announced between M&M and Renault is expected to create greater opportunities for the stampings business. Further, business opportunities are also arising on account of M&Ms foray into a joint venture with International Trucks for the manufacture of Light and Heavy Commercial vehicles. These business activities together with the consolidation of stampings business consequent to merger of Pranay Sheetmetal Stampings Limited (Pranay) into the Company is expected to add value to the business. perfor formance: B) Segment-wise perfor mance: (i) Perfor formance Physical Per formance Sales (MT) 110,627 (106,012) Sales Value (Rs. in lakhs) 522,221 (47,915) (a) Steel Division: Class of Installed Actual goods capacity production (MT) (MT) Tool, alloy and Special steels 90,000 (90,000) 111,188 (106,009)
(Figures in brackets relate to the previous financial year). The Companys products continue to be received well in the market. An effort for keeping up the quality and customer satisfaction has been constantly appreciated by the customers. Continuous growth in market share is in progress. (b) Stampings Division : (Kanhe & Nashik Division) Class of goods (MT) Installed Actual capacity production (MT) 24,382 (8,782) Sales (MT) 24,427 (8,720) Sales Value (Rs. in lakhs) 6,876 (2,665)
Pressed sheet 31,000 metal components (18,000) & assemblies
(Figures in brackets relate to the previous financial year). As may be seen from the above, the operations of the stampings division have increased during the year ended March 31, 2006, mainly due to the merger of Pranay into the Company. c) Others: The Honble High Court, Bombay approved the Scheme of Amalgamation of Pranay, Console Estate and Investments Limited (Console) and Valueline Hotels and Resorts Limited (Valueline) with your Company vide its order dated February 24, 2006. The business of Pranay has already been discussed at the appropriate section. Console was a NonBanking Financial Company (NBFC) and was engaged in investment activities. As regards Valueline, the Company which was promoted with the object of setting up hotels and providing hotel management services, had not started any business. However, this Company was holding about 49% shares in Pranay. With the merger of Pranay, Console and Valueline, the respective companies have been dissolved without being wound up. Perfor formance: (ii) Financial Per for mance: (Rs. In Lakhs) Steel Sale of Products & Other Income Total Variable Cost Total Overheads 54,014 (48,777) 39,506 (35,643) 6,301 (5,228) Stampings 8,462 (3,528) 2,419 (1,513) 1,844 (790) Total 62,476 (52,305) 41,925 (37,156) 8,145 (6,418)
139
EBIDTA Depreciation and DRE EBIT Interest EBT Exceptional item of expenditure Tax - Current Tax - Deferred Tax Profit after Tax
8,206 (7,506) 497 (511) 7,709 (6,995) 1,002 (1,130) 6,707 (5,867)
4,200 (1,225) 856 (544) 3,344 (681) 113 (8) 3,231 (671)
12,406 (8,731) 1,353 (1,055) 11,053 (7,676) 1,115 (1,138) 9,938 (6,538) 405 () 3,240 (513) (213) (1,209) 6,506 (4,816)
The Company is also setting up a unit to manufacture 4,800 Metric Tonnes of painted pressed sheetmetal at Rudrapur, Uttaranchal at a cost of Rs. 50 crores to cater to the requirement of the tractors division of M&M at the same location. D) Risk Management: Steel Business: The year F-06 has seen further growth for the industry. In order to maintain and increase the share in the market, the Company has been looking for opportunities in diverse affiliated segments and more value added products. Your Company continues its efforts in setting up ring rolling facilities for manufacturing bearing races. Exports, as a possible avenue, are being pursued. The major risks of the Company can be classified in the following three categories: Raw materials availability: The year F-06 continued to be volatile both in prices and availability of raw materials including restrictions on imports of heavy melting scrap. The Company is gearing to ensure continuous availability of raw materials and have built adequate expertise to procure them at the most competitive prices. The Company has been constantly on the look-out for long term contracts towards this. Imports: Imports: Import of high quality steel products particularly from China can pose a threat. The reduction of import duty on alloy steel in the last Finance Act is a deterrent. However, the Company is taking various steps to improve the processes and manufacturing costs so as to remain competitive. product Prices of finished pr oduct : During the year F-06, the market and the prices have been favourable although the indications towards softening of prices have been surfacing from time to time. With focussed attention to the process improvements, the Company expects to increase the market share and also be preferred suppliers of steel to some of the key customers. Stampings Business: The business is distributed among large and small press shops and captive press shops of the vehicle manufacturers. Traditionally business was done in-house. Growth in business and increasing demand for quality stampings is making it necessary to out source this facility. Capabilities of the units in the stampings business will ensure continuous business. The Company is in the process of refining the cost control measures to sustain itself in the market.
Figures in brackets represent for previous year.
Growth C) Growth Potential: Steel Business: The engineering industry and the auto component business in particular are expected to grow at a CAGR in excess of 15% per annum for the next five years. In order to service demand, your Company is in the process of enhancing its capacity and production to 240,000 tonnes. The first phase of expansion has already been completed with the installation of the oxygen lancing facilities, the second ladle furnace and the walking beam furnace. The Scheme also takes into account technology up-gradation and setting up certain infrastructure facilities, improvement of lay-out that optimizes process flow for achieving greater efficiencies. The scheme is on schedule and will be ready in the second quarter of F-08. The Company is also in the process of exploring various forward and backward integration projects, which will take shape as we go forward. Stampings B usiness: The Company continues to remain optimistic about the growth of the stampings business which is closely linked to the fortunes of the automotive industry. In order to capitalize on and de-risk itself from the cyclicality of any one segment of the automotive industry, the stampings business has been broad basing its customer base, which now ranges from tractors and two wheelers to cars and trucks. The improvement in the financial performance of the Company has encouraged large customers to treat your companys stampings operations as partners in the development process-a confidence that will encourage further capital investments.
140
E)
Control: Cost Contr ol: Steel Division: The Steel division has been making continuous efforts to reduce costs on various operational inputs besides improving yield and reduction in cycle time. Stampings Division: Your Company has an on-going project of multi-skilling. In addition, your Company is also considering the introduction of robotic hands for a part of the operations in order to increase the productivity. This way it will be possible to rationalise labour. Any attrition due to retirement, resignation etc. will not be replaced. That position is eliminated from the organisation chart and the job is distributed amongst existing people. We review each cost every quarter and take corrective actions. Employees are encouraged to cut cost through innovation and application of mind. All these actions mentioned above have helped us to survive in this acute competitive environment.
material movement. The labour wage settlement at Khopoli which is due will be entered into in the next few months. At Kanhe unit the labour agreement was signed with the labour union for a period of 3 years, with an improvement in productivity by 33%. At the Pranay stampings division at Nashik, the concept of factory within factory which was existing is being progressively replaced by the workers directly being taken on the company rolls instead of through the contractors. Opportunities Threats: H) Opportunities & Thr eats: Opportunities: (a) Opportunities: Steel Business: Your Company has potential opportunities for making stainless steel and spring steel, wire rods. Opportunities in respect of forward integration are being explored by your Company. Stampings B usiness: The growing opportunities in Auto Sector will in turn provide more business opportunities. Threats: (b) Threats: Steel Business: The capacity buildup by competitors may pose a threat. However, your Company is geared up to meet the competition. Stampings B usiness: Low cost stampings by the un-organised sector may result in competition for your Companys product. However, the quality standards of your Company will take care of these threats.
F)
internal control Adequacy of inter nal control system: The Company at all the divisions has established internal control systems commensurate with the size of its operations with a view to ensure that all the assets are safeguarded and protected against losses and that all the transactions are appropriately authorised, correctly recorded and disclosed in the financial statements. Based on these duly authorised documentations, the financial statements are prepared. The steel division and the Nashik stampings division are on SAP which incorporates the necessary controls, checks and balances. The stampings division at Kanhe is being brought under SAP shortly.
G) Personnel: Total number of permanent employees of Steel business and Stampings business as on 31 st March, 2006 were 868 and 359 respectively. Regular Training Programmes in various areas of Corporate Interest are being held at different levels in the organization which are considered essential The relations between the Management and the workers have been generally cordial during the year excepting for an eight days illegal strike by the workers at the Khopoli plant which affected production, dispatches and the
Certain statements in the Management Discussion & 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 express 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.
141
CORPORATE GOVERNANCE
Good corporate governance has always been an integral part of the Companys business philosophy. The Company attaches significant importance to issues of Corporate Governance. In line with the Mahindra Group philosophy, your Company believes in attainment of highest levels of transparency in all facets of its operations and has always focussed on Good Corporate Governance. Your Company has consistently made efforts in ensuring transparency, accountability and responsibility in dealing with its employees, stakeholders, customers and the community at large. Your Company fundamentally believes that good corporate governance should be an internally driven need and is not to be looked upon as an issue of compliance dictated by statutory requirements. Your Company has systems and procedures in place to ensure that it remains fully compliant with all mandated regulations. The stipulations mandated by Clause 49 of the Listing Agreement have been fully complied. This chapter, along with the chapters on Management Discussion and Analysis reports your Companys compliance with the revised Clause 49. I. BOARD OF DIRECTORS: The Company has a Non-Executive Chairman and the number of Independent Directors is more than 1/3rd of the total number of Directors. 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 management of the Company is entrusted in the hands of the Key Management Personnel of the Company and is headed by the Managing Director who operates under the supervision and control of the Board. The Board reviews and approves strategy and oversees the actions and results of management to ensure that the long term objectives of enhancing stakeholder value are met. The Chairman and the Vice-Chairman of the Company, though professional Directors in their own individual capacity, belong to the Companys promoter group. Mr. Hemant Luthra, a NonExecutive Director of the Company, is in the whole time employment of the Holding Company, Mahindra & Mahindra Limited (M&M) and draws remuneration from it. Besides Mr. R.R. Krishnan, a NonExecutive Director of your Company, is a consultant with M&M and draws remuneration from it. Apart from the above and apart from the reimbursement of expenses incurred in the discharge of their duties, the sitting fees 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 as an advisor or an employee of its Holding Company, 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, its Holding Company which in their judgement would affect their independence. 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.
142
A. Composition of Board The Company presently has ten Directors and out of which one is the Managing Director. There are four Non-Independent NonExecutive Directors. Life Insurance Corporation of India, as an equity investor, has nominated one Non-Executive Director on the Board. The remaining five Non-Executive Directors (including the Nominee Director) are Independent Directors and professionals with expertise and experience in general corporate management, finance, banking and other allied fields. 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. The Constitution of the Board as on 31st March, 2006 is as under: Category Total number of Total number of Total number Directors Committee Chairmanships of Directorships* Memberships+ of Committees of Public of Public of Public Companies Companies as Companies as as on 31st on 31st March, on 31st March, March, 2006. 2006. 2006. Non-Executive Mr. Keshub Mahindra Chairman Mr.Anand G. Mahindra Vice-Chairman Mr.N.V.Khote Dr.H.N.Sethna Mr.Hemant Luthra Mr.M.R. Ramachandran Mr.R.R. Krishnan Mr.C.S.Madhav Rao (Nominee of LIC) Mr.S. Ravi@ Executive Mr. K.V. Ramarathnam Managing Director
Promoter
Promoter Independent Independent Non Independent Independent Non Independent Independent Independent Non Independent
1 1 5 5 2 1 1 7
None 1 2 1 None None None 4
12 2 5 9 1 2 1 10
None
* Excludes Directorships in Private Companies, Foreign Companies, Section 25 Companies and Government Bodies but includes Directorships in Mahindra Ugine Steel Company Limited. + Committees considered are Audit Committee and Investors Grievance Committee, including in Mahindra Ugine Steel Company Limited. @ Appointed w.e.f 29th July, 2005.
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 Managing Director briefs the Board at every meeting on the overall performance of the Company, followed by presentations by the other Senior Executives of the Company. A detailed functional report is also placed at Board meetings. The Board also 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, adoption of quarterly/half-yearly/annual results, significant labour issues, transactions pertaining to purchase/ disposal of property, major accounting provisions and write-offs, corporate restructuring, minutes of meetings of the Audit and other Committees of the Board, information on recruitment of Officers just below the Board level, including the Compliance Officer. C. Number of Board Meetings, attendance record of the Directors at Meetings of the Board and at the last Annual General Meeting. Six board meetings were held during the period from 1st April, 2005 to 31st March, 2006 on the following dates: 21st April, 2005 29th July, 2005 5th September, 2005 28th October, 2005 27th January, 2006 29th March, 2006
Mr.S.Ravi, who has been appointed as an Additional Director of the Company on 29th July, 2005, holds office upto the date of the Annual General Meeting. A notice has been duly received from a member proposing the candidature of Mr.S. Ravi for the office of the Director at the said meeting. Mr. Anand G. Mahindra Mr. Anand Mahindra is the Vice Chairman of the Company. He is the Vice Chairman and Managaing Director of Mahindra & Mahindra Limited (M&M). He was member of the Harvard College Cambridge, class of 1977, from where he graduated with a Magna cum Laude. In 1981, he obtained an MBA from the Harvard Business School. He later joined your Company, where he was appointed President and Deputy Managing Director in 1989. He was appointed Deputy Managing Director of M&M in 1991. Mr.Anand Mahindra became Managing Director of Mahindra & Mahindra Limited in 1997. In Janaury 2001, he was appointed Vice-Chairman of M&M. He is Past President 2003-04 of the Confederation of Indian Industry and has also been President of the prestigious Automotive Research Association of India (ARAI). He is a member of the Advisory Council of the Initiative on Corporate Governance of Harvard Business School, the Asia Pacific Advisory Board of the Harvard Business School, the Executive Committee of the Nehru Centre and the Governing Body of the National Institute of Bank Management and is the Co-Chairman of the international Council of the Asia Society in New York. He is also a Trustee of the K.C.Mahindra Education Trust and on the Board of Governors of the Mahindra United World College of India . Mr.Mahindra is on the Boards of Mahindra Gesco Developers Limited, Mahindra & Mahindra Limited, National Stock Exchange of India Limited, Mahindra Ugine Steel Co. Limited, Mahindra Intertrade Limited, Mahindra & Mahindra Financial Services Limited, Kotak Mahindra Bank Limited, Automartindia Limited, Tech Mahindra Limited, Avion Aerosols Private Limited, MW.Com India Limited, M.A.R.K. Hotels Private Limited, Angular Constructions Limited, Bristlecone Limited, Cayman Islands, Mahindra International Limited, Mahindra (China) Tractor Co. Limited, Tech Mahindra (Americas) Inc. Mr.Anand Mahindra is on the Committees of the Board mentioned hereunder: Name of the Company Mahindra & Mahindra Ltd. Name of the Committee Share Transfer & Shareholders/ Investors Grievance Committee Research & Development Loan & Investment Remuneration Committee Remuneration/ Compensaton Remuneration/ Compensaton Remuneration Position held Member Member Member Member Member Member Chairman
The Forty Second Annual General Meeting was held on 29th July, 2005. The attendance of the Directors at these meetings is as under: Director No. of Board Meeting(s) Attended 6 4 6 3 4 4 4 4 5 1 Attendance at the AGM Yes Yes Yes No No No Yes No Yes N.A.
Mr. Keshub Mahindra Mr. Anand G. Mahindra Mr.K.V.Ramarathnam Mr. N.V.Khote Dr.H.N.Sethna Mr. M.R.Ramachandran Mr.Hemant Luthra Mr.C.S.Madhav Rao Mr.R.R.Krishnan Mr.S.Ravi*
* Appointed as an Additional Director of the Company with effect from 29th July, 2005. D. Directors seeking appointment / re-appointment Mr. Anand G. Mahindra, Dr.H.N.Sethna and Mr.C.S. Madhav Rao retire by rotation and being eligible have offered themselves for re-appointment.
Mahindra Ugine Steel Co. Ltd. Mahindra & Mahindra Financial Services Ltd. Kotak Mahindra Bank Limited Mahindra International Limited
Mr. Anand Mahindra does not hold any shares in the Company.
143
Dr. H.N. Sethna Dr. H. N. Sethna is B.Sc. (Tech), M.S.E (Michigan); F.A.Sc., F.N.A., F.I.E., M.I.E. and has been conferred Honorary Doctorate by various esteemed Universities from all over India. Dr. H.N. Sethna began his career in the year 1947 as a trainee with I.C.I., Manchester under the Tata ICI Scheme. In 1949 he joined Indian Rare Earths Limited, where he was given the full technical responsibility for setting the Rare Earths Plant at Alwaye in Kerala which marked the beginning of exploitation of nuclear material in India. In 1959 he joined the Atomic Energy Establishment at Trombay (now Bhabha Atomic Research Centre) as Chief Scientific Officer and later became the Director of the Engineering Group with the responsibility for designing and construction of the Plutonium Plant at Trombay in 1964 and Uranium Mill at Jaduguda in Bihar in 1967. Dr. H.N. Sethna was the Director of the Bhabha Atomic Research Centre for the period 1966 to 1972. He was appointed as Secretary/Principal Secretary to the Government of India and Chairman of the Atomic Energy Commission for the period 197283. In the year 1974 he led a team responsible for Indias first peaceful Nuclear Experiment. During the period 1998-2001 Dr. Sethna was appointed as the member of the research Advisory Committee of the Planning Commission, Member of the Court of the Indian Institute of Science, Bangalore, Member of Court of University of Hyderabad and Member of Board of Trade, Directorate General of Foreign Trade, Government of India. Dr. H.N.Sethna has been bestowed with various Honors and Awards at various junctures of his career. Dr. H.N. Sethna, during the span of his career, has chaired various eminent organisations and corporate bodies namely Fertilizer Corpn. of India, Board of Governors of IIT Bombay and Delhi, Tata Memorial Centre, Indian Rare Earths Limited, Tata Electric Companies. Dr. H.N. Sethna has been conferred with memberships of various learned societies viz. Royal Swedish Academy of Engineering Sciences, Indian Academy of Sciences, The Institution of Engineers (India), Indian National Science Academy, Indian Institute of Chemical Engineers, Aeronautical Society of India etc. Dr. H.N.Sethna is also a Trustee for various charitable trust viz. Sir Ratan Tata Trust, Bai Hirabai J.N. Tata Navsari Charitable Institution, Sarvajanik Seva Trust, Ness Wadia Foundation, Member of the Board of Management of Bai Jerbai Wadia Hospital for Children, Institute of Child Health Research Society, Council of Nowrosjee Wadia Maternity Hospital, Ness Wadia Research Society. Dr. H.N. Sethna is the Chairman of Cabot India Limited, WIMCO Limited and also holds Directorships of The Bombay Dyeing & Manufacturing Co. Limited, Josts Engineering Co. Limited, Protos Engineering Company Private Limited and The Mahindra United World College of India. Dr. H.N. Sethna holds 1,200 shares in the Company.
144
Dr. H.N. Sethna is a member of the following Board Committees : Sr. Name of the No. Company 1. Mahindra Ugine Steel Co. Ltd. 2. Mahindra Ugine Steel Co. Ltd. 3. The Bombay Dyeing & Mfg. Co. Ltd. Name of the Committee Audit Committee Remuneration Committee Audit Committee Share Transfer Committee Shareholders Grievance Committee ShareTransfer Committee Audit Committee ShareTransfer Committee Audit Committee Position held Member Chairman Member Member Member Member Chairman Chairman Chairman
4. 5. 6.
Josts Engg. Co. Ltd. Cabot India Ltd. Wimco Ltd.
Mr. C.S. Madhav Rao Mr. C. S.Madhav Rao is a Chartered Accountant and has worked with Life Insurance Corporation of India (L.I.C.) in various capacities. Mr.Madhav Rao retired as Executive Director (Audit) from L.I.C. Presently he is a partner of Prema Gopal & Co. Chartered Accountants, Hyderabad. Mr. C.S.Madhav Rao is a member of the following Board Committee : Sr. Name of the No. Company 1. Mahindra Ugine Steel Company Ltd. Name of the Committee Audit Committee Position held Member
Mr. Madhav Rao does not hold any shares in the Company. Mr.S.Ravi Mr. S. Ravi is a Post Graduate in Commerce and F.C.A. He is a practicing Chartered Accountant and the Senior Partner of Ravi Rajan & Co. During the course of practice, he has handled assignments in the field of Restructuring & Rehabilitation of companies, Takeover, Mergers & Acquisitions and Business and Brand valuation. He is also a member on the Board of Voluntary Health Association of India (VHAI). His experience in the banking sector includes tenure as Government Nominated Director of UCO Bank, wherein as a member of the Strategic Revival Group, was instrumental in the formulation of the revival plan and its subsequent implementation. He was also a member of the strategic Revival Committee of Dena Bank apart from Asset Liability Management Committee, Risk Management Committee and Committee for Monitoring NPAs and Chairman of Audit Committee during his tenure as shareholder director of the Bank. He is a Trustee of PNB Mutual Fund . Mr. S. Ravi holds the Directorships of the following body corporates viz. IFCI Limited, Corporation Bank, IDBI Capital
Market Services Limited, Batliboi Limited, Spectrum Power Generation Limited, Principal Trustee Company Private Limited, Gujarat Pipavav Port Limited, LIC Housing Finance Limited, IDBI Home Finance Limited, Garware Chemicals Limited, Mr. Ravi is a member of the following Board Committees: Sr. Name of the No. Company/Bank 1 Mahindra Ugine Steel Co. Ltd. 2 Corporation Bank 3 4 5 6 IDBI Capital Market Services Ltd. Garware Chemicals Ltd. LIC Housing Finance Ltd. IFCI Ltd. Name of the Committee Investors Grievance Committee Audit Committee Audit Committee Audit Committee Audit Committee Position held Chairman Chairman Chairman Member Chairman
Sitting fees paid during the year Director Mr. Keshub Mahindra Mr. Anand G. Mahindra Dr. Homi N. Sethna Mr. N.V. Khote Mr. M.R. Ramachandran Mr. Hemant Luthra Mr. R.R.Krishnan Mr. C.S. Madhav Rao Mr. S. Ravi Board 37,000 22,000 30,000 18,500 30,000 22,000 33,500 30,000 7,500 Committee 3,750 33,750 26,000 62,500 26,000 22,500
(Rupees) Total 37,000 25,750 63,750 44,500 92,500 22,000 59,500 52,500 7,500
C. Remuneration to the Managing Director for the year ended 31st March, 2006. Remuneration payable to the Managing Director is fixed by the Remuneration Committee and thereafter approved by the shareholders at a General meeting. Following is the Remuneration paid/payable to the Managing Director during the year ended 31st March, 2006.
Director Salary Companys Perquisites (Rs.) contribution and to funds* allowances (Rs.) (Rs.) 13,20,000 3,56,400 13,27,827 Total (Rs.) Contract Period
Audit Committee Member Remuneration Committee Member Investors Grievances Committee Member
Mr. S. Ravi does not hold any shares in the Company. E. Codes of Conduct The Board has laid down two separate Codes of Conduct-one for Board members and other for senior management and employees of the Company. These Codes have been posted on the Companys website www.muscoindia.com. All Board Members and Senior Management Personnel have affirmed compliance with the Codes of Conduct. A declaration signed by the Managing Director to this effect is enclosed at the end of this report. II REMUNERATION TO DIRECTORS A. Remuneration Policy While deciding on the remuneration for Directors, the Board, Remuneration 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 information is used to review the Companys remuneration policies. B. Remuneration to Non-Executive Directors for the year ended 31st March, 2006. Non-Executive Directors are paid sitting fee of Rs.7,500/- for every meeting of the Board or Audit Committee attended. Sitting fees have been revised from Rs.3,500/- to Rs.7,500/- per meeting, effective from Board/Committee meeting held on 5th September, 2005 and a revised sitting fees of Rs.3,750/- is paid per meeting in case of Investors Grievance/Remuneration Committee meetings with effect from 5th September, 2005. The fees paid to Non-Executive Directors for the year ended 31st March, 2006 is as under:
Mr. K.V. Ramarathnam Managing Director
30,04,227* 5th May, 2003 to 4th May, 2008.
Note: * The above does not include Commission of Rs.25,00,000/payable to Mr.Ramarathnam, Managing Director of the Company for the year 2004-05 for which the Central Governments approval has already been obtained and payable after approval by members at the ensuing Annual General Meeting. The Remuneration Committee and the Board of Directors at their meeting held on 29th March, 2006 and on 24th April, 2006 respectively, have approved the payment of Commission of Rs.30,00,000/- for the year 2005-2006, subject to the approval by members of the Company. (The above Remuneration paid to the Managing Director does not include the accrual for Gratuity and Leave encashment as it is funded / provided on the basis of actuarial valuation for the Company as a whole). $ Notice period applicable to Managing Director is three months. 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.
145
IV. COMMITTEES OF BOARD A. Audit Committee The Audit Committee was constituted by the Board of Directors at its meeting held on 14th February, 2001 and presently it comprises of Mr. N.V. Khote, Dr. Homi N. Sethna, Mr. M.R. Ramachandran and Mr. C.S. Madhav Rao all being independent Non-Executive Directors and Mr. R.R. Krishnan, a Non-Executive Director, who has been appointed as member of the Committee effective from 25th July, 2005. Mr. N.V.Khote is the Chairman of the Committee. The terms of reference of this Committee are very wide. Besides having access to all the required information 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 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, Management Discussion & Analysis, material individual transactions with related parties not in normal course of business or which are not on an arms length basis. Generally all items listed in Clause 49 II D of the Listing Agreement are covered in the terms of reference. The Audit Committee has been granted powers as prescribed under Clause 49 II C. The meetings of the Audit Committee were also attended by the Managing Director, Executive Vice-President (Finance) & MIS, Company Secretary, the Statutory Auditors and the Internal Auditors. The Committee held 5 meetings during the year 2005-06. The attendance at the meetings was as under: Sr. Members No. 1 2 3 4 Mr. N.V. Khote (Chairman) Mr. M.R. Ramachandran Mr. C.S.Madhav Rao Dr.H.N.Sethna Meetings Attended 3 5 3 3 Remarks (appointed as a member of Audit Committee w.e. f. 21st April, 2005 ) (appointed as a member of Audit Committee w. e. f. 25th July, 2005)
The Committee meets as and when required, to deal with matters relating to transfer/transmission of shares and monitors redressal of complaints from shareholders relating to transfers, non-receipt of balance-sheet, non-receipt of dividends declared, etc. The Committee held 6 meetings during the year 2005-06. The attendance at these meetings was as under: Sr. Members No. 1 2 3 Mr. S. Ravi Mr. M.R. Ramachandran Mr. K. V. Ramarathnam Meetings Attended 6 6 Remarks (appointed as member on 28th October, 2005) -
The Company also has Share Transfer Sub-Committee consisting of the following members: Mr. K.V. Ramarathnam Mr. R. Sundaresan . . Managing Director . . Executive Vice President (Finance) & MIS
Normally Share Transfer Committee meetings are held twice in a month to approve share transfers and other related matters and are attended by the Managing Director, Executive Vice President (Finance) & MIS and Company Secretary of the Company. Share Transfer Committee meetings are chaired by the Managing Director of the Company. During the year, 38 letters/complaints were received from the shareholders, all of which were attended to / resolved to date. As on 31st March, 2006, there were no pending share transfers pertaining to the year under review. C. Remuneration Committee. The role of the Remuneration Committee is to review market practices and to decide on remuneration packages applicable to the Managing Director . During the course of its review, the Committee also decides on the Commission and/or other incentives payable, taking into account the individuals performance as well as that of the Company. The Remuneration Committee was constituted by the Board of Directors at its meeting held on 30th July, 2002 and presently it comprises of Dr. H. N. Sethna, Mr. Anand G. Mahindra, Mr. N. V. Khote and Mr. M. R. Ramachandran. Dr. H. N. Sethna is the Chairman of the Committee. The Committee held 3 meetings during 2005-06. The attendance at the meetings was as under: Sr. No. 1. 2. 3. 4. Members Dr.H.N.Sethna Mr.Anand G. Mahindra Mr.N.V.Khote Mr.M.R.Ramachandran Meeting Attended 3 1 2 3
Mr.R.R.Krishnan
B. Investors Grievance Committee The Investors Grievance Committee was constituted by the Board of Directors at its meeting held on 27th July, 2001 and presently it comprises of Mr. K.V. Ramarathnam, Managing Director, Mr. M.R. Ramachandran and Mr.S. Ravi who was appointed as member of the Committee w.e.f. 29th July, 2005.
146
V. MANAGEMENT A. Disclosures During the financial year 2005-06, there were no materially significant transactions entered into between the Company and its promoters, Directors or the management, 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 no. 25 in Schedule L to Annual Accounts of the Annual Report. B. Disclosure of Accounting Treatment in Preparation of Financial Statements The Company has followed the Guidelines of 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 regulation 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 Company, and cautioning them of the consequences of violations. VI. SHAREHOLDER INFORMATION (i) Annual General Meeting The Forty Third Annual General Meeting of the Company will be held on Monday, 24th July, 2006 at 3.45 p.m. at Amar Gian Grover Auditorium, Lala Lajpat Rai Memorial Trust, Lala Lajpat Rai Marg, Haji Ali, Mumbai 400 034 to transact such business as stated in the Notice of the Meeting. (ii) Financial Year of the Company The financial year covers the period 1st April to 31st March. Reporting of Unaudited Financial Results with Limited Review for quarter ended: 30.06.2006 - by end of July, 2006. 30.09.2006 - by end of October, 2006. 31.12.2006 - by end of January, 2007. Audited financial results for the year ended 31.03.2007 - by end of April, 2007.
(v) Listing of Equity Shares on Stock Exchanges 1. 2. 3. Bombay Stock Exchange Limited. National Stock Exchange of India Limited Calcutta Stock Exchange Association Limited*
(*Applied for delisting on 14th September, 2004 and approval is still awaited). The Company has paid the Listing Fees to Bombay Stock Exchange Limited and National Stock Exchange of India Limited in full. (vi) Stock Codes: (a) (b) (c) Bombay Stock Exchange Limited (BSE) 504823 National Stock Exchange of India Limited (NSE) MAHINDUGIN EQ Demat International Securities Identification Number (ISIN) in NSDL and CDSL for E q u i t y Shares INE 850A01010
(vii) Stock Market price data: High/low prices during each month in last financial year on Bombay Stock Exchange Limited / National Stock Exchange of India Limited. Month Bombay Stock Exchange High (Rs.) Low (Rs.) April 2005 May 2005 June 2005 July 2005 August 2005 September 2005 October 2005 November 2005 December 2005 January 2006 February 2006 March 2006 116.80 107.30 118.50 112.00 117.90 139.50 129.90 121.00 141.00 160.95 137.00 139.25 94.10 94.50 96.25 98.30 102.00 106.05 85.00 90.50 111.00 130.75 112.60 119.00 National Stock Exchange High (Rs.) Low (Rs.) 116.90 113.80 118.45 111.25 117.50 139.45 129.95 122.00 141.25 161.40 138.90 138.80 96.00 95.00 96.00 97.65 86.25 106.05 84.25 91.05 112.00 130.00 112.00 118.45
(viii) Stock Performance in comparison to BSE Sensitive Index
Note : The above dates are indicative. (iii) Date of Book Closure 14th July, 2006 to 24th July, 2006 (both days inclusive). (iv) Dividend Payment date
Ma
un
ul
Se
Oct
ec
an
Mar
On or after 24th July, 2006.
Mont s MUSCO Price BSE Sensex Points ast tra in ate o t e ont
BSE Sensex Points
MUSCO Price Value in Rs.
AGM for the year ended 31.03.2007 - by end of July, 2007.
147
(ix) Registrar and Transfer AgentsM/s. Sharepro Services (India) Private Limited Unit: Mahindra Ugine Steel Co. Limited Satam Estate, 3rd floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai - 400 099. Tel. No.: 022-28215168/28329828 Fax No.: 022-28375646 E-mail : [email protected] (x) Share Transfer System All the Transfers received are processed and approved by the Share Transfer Sub-Committee, which normally meets twice in a month or more depending on the volume of Transfers and reports to the Investors Grievance Committee. (xi) Pattern of shareholding as on 31st March, 2006 Sr. No. 1 2 3 4 5 6 7 8 9 Description Promoters Public Financial Institutions Banks Mutual Funds Foreign Institutional Investors Non Resident Indian / Foreigner Bodies Corporate Persons Acting in Concert Public TOTAL Number of Shares 16,483,792 2,783,006 1,330 332,401 3,978,908 181,079 1,560,744 1,606,016 5,555,253 32,482,529 % to capital 50.74 8.57 0.01 1.02 12.25 0.55 4.81 4.94 17.11 100.00
(xiii) Dematerialization of Shares and Liquidity as on 31st March, 2006. Physical Form : 7.65% 92.35% Dematerialized Form :
Trading in equity shares of the Company is permitted in dematerialized form only as per the notification issued by Securities and Exchange Board of India (SEBI). (xiv) Outstanding ADRs / GDRs / Warrants or any convertible instruments, conversion date and likely impact on Equity. The Company has not issued any ADRs /GDRs / Warrants or any convertible instruments. (xv) Plant Locations : 1. Steel Division Jagdish Nagar, Khopoli- 410 216, District-Raigad, Maharashtra. Stampings Divisions a) 371, Takwe Road, At & Post-Kanhe, Tal. Maval, Dist. Pune- 412 106. b) D-2, MIDC, Ambad, Nashik- 422 010.
2.
(xvi) Address for correspondence Registered Office:74, Ganesh Apartment, Opp. Sitaladevi Temple, L. J. Road, Mahim(W), Mumbai - 400 016. Tel.: 022-24444287 Telefax: 022-24458196 E-mail: [email protected] VII. OTHER DISCLOSURES Annual General Meetings held during the past three years: Year 2002-03 2003-04 2004-05 Date 31.07.2003 29.07.2004 29.07.2005 Time 3.45 p.m. 3.45 p.m. 11.30 a.m.
(xii) Distribution of shareholding as on 31st March, 2006 Shares Held Up to-500 501-1000 1001-2000 2001-3000 3001-4000 4001-5000 5001-10000 10001-and above TOTAL No. of Share holders 19,326 1,038 430 159 75 69 91 75 21,263 % to Share holders 90.89 4.88 2.02 0.75 0.35 0.33 0.43 0.35 100.00 No. of Shares 2,141,433 851,872 668,463 410,675 273,685 327,765 699,552 27,109,084 32,482,529 % to Capital 6.59 2.62 2.06 1.27 0.84 1.01 2.15 83.46 100.00
All the meetings were held at Amar Gian Grover Auditorium, Lala Lajpatrai Memorial Trust, Lala Lajpatrai Marg, Haji Ali, Mumbai-400 034. No postal ballots were used/invited for voting at these meetings. In addition to the Annual General Meeting, the Company had also held a Court Convened Extra Ordinary General Meeting on 11th January, 2006 for approval of Scheme of Amalgamation of Pranay Sheetmetal Stampings Limited, Console Estate & Investments Limited and Valueline Hotels & Resorts Limited with the Company.
148
The following Special Resolutions were passed in the previous 3 Annual General Meetings: Financial Year 2002-2003 Date of Meeting 31.07.2003 Special Resolutions passed 1. Approval for increase in the remuneration of Mr. P.G. Chitale as Managing Director of the Company for the period from 1st November, 2002 to 31st March, 2004 and 2. Approval for appointment and terms of remuneration of Mr. K.V. Ramarathnam as Executive Director of the Company for five years with effect from 5th May, 2003. 2003-2004 29.07.2004 1. Consent accorded to the Board to delist the Companys Equity Shares from stock exchanges at Ahmedabad, Kolkata, New Delhi and Chennai and 2. Approval for new Registrar and Share Transfer Agents, M/s. Sharepro Services, to be appointed with effect from 1st August, 2004. 2004-2005 29.07.2005 Approval for revision in remuneration payable to Mr.K.V.Ramarathnam as the Managing Director of the Company with effect from 1st April, 2004 for the remainder of his term of office.
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 & yearly results are published in The Economic Times, The Free Press Journal, Maharashtra Times and Navashakti which are national and local dailies. These are not sent individually to the Shareholders. The Company results and official news releases are displayed on the Companys website http://www.muscoindia.com
4.
The Management Discussion and Analysis Report (MDA) has been attached to the Directors Report and forms part of this Annual Report. Compliance with mandatory & non-mandatory requirements The Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement relating to Corporate Governance. Further, the Company has adopted the following non-mandatory requirements of the Clause: The Company has set up the Remuneration Committee. The financial statements of the Company are unqualified. The Company has not adopted the other nonmandatory requirements as specified in Annexure ID of Clause 49.
5.
The Company has not proposed any special resolution to be conducted through postal ballot for this Annual General Meeting.
149
DECLARATION BY THE MANAGING DIRECTOR PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT

To The members of Mahindra Ugine Steel Company Limited I, K. V. Ramarathnam, Managing Director of Mahindra Ugine Steel Company Limited, declare that all the members of the Board of Directors and Senior Management Personnel have affirmed compliance with the Codes of Conduct. K. V. Ramarathnam Managing Director Place : Mumbai Date : 24th April, 2006.
CERTIFICATE
To the members of Mahindra Ugine Steel Company Limited. We have examined the compliance of conditions of Corporate Governance by Mahindra Ugine Steel Company Limited, for the year ended 31st March, 2006, 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 Corporate Governance. It is neither an audit nor an expression of opinion of 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
Place : Mumbai Date : 24th April, 2006.
150
AUDITORS REPORT TO THE MEMBERS OF MAHINDRA UGINE STEEL COMPANY LIMITED

1. We have audited the attached balance sheet of Mahindra Ugine Steel Company Limited as at 31st March 2006 and also the profit and loss account and 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, 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: (a) 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, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; (d) In our opinion, the balance sheet, profit and loss account and cash flow statement 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 written representations received from the directors, as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006 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: (i) (ii) in the case of balance sheet, of the state of affairs of the company as at 31st March, 2006; in the case of profit and loss account, of the profit for the year ended on that date; and
2.
(e)
(f)
3.
4.
(iii) in the case of cash flow statement, of the cash flows for the year ended on that date.
(b)
For A. F. Ferguson & Co. Chartered Accountants R. A. Banga Partner Membership Number: 37915 Mumbai, 24th April, 2006
(c)
151
Annexure to the Auditors Report to the Members of Mahindra Ugine Steel Company Limited
[Referred to in Paragraph 3 thereof] (i) (a) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. In respect of furniture, fixtures and office equipment, location is broadly indicated unit-wise. As explained to us, the company has a phased programme designed to verify all fixed assets over a period of three years. Accordingly, certain class of assets at Khopoli, Kanhe and Nashik were verified by the management during the year. No material discrepancies between the book records and the physical inventory were noticed in respect of the assets physically verified. During the year, in our opinion, a substantial part of fixed assets has not been disposed off by the company. The inventory of the company has been physically verified by the management during the year and at the year end or after the year end. The stock of scrap, having regard to its nature and manner of storage, was verified at the year end by the management by visual estimation (relied upon by us). In respect of materials lying with third parties, these have been confirmed by them. In our opinion, the frequency of verification is reasonable. In our opinion and according to the information and explanations given to us, having regard to the comment in respect of scrap in (ii) (a) above, the procedure of physical verification of stocks are reasonable and adequate in relation to the size of the company and the nature of its business. On the basis of our examination of records of inventory, in our opinion, the company has maintained proper records of inventory. As stock of scrap is verified by visual estimation (relied upon by us), no adjustments have been made for the difference between the stocks so determined and the book records as it has been explained to us by the management that such an adjustment would not be proper having regard to the method of verification and the quantum of discrepancy noticed. The discrepancies noticed on physical verification between the physical stocks and book records were not material in relation to the operations of the company. The Company has not granted any loans secured or unsecured to companies, firm or other parties covered in the register maintained under Section 301 of the Companies Act, 1956, and accordingly paragraphs (iii)(b), (c) and (d) of the Order are not applicable. In our opinion and according to the information and explanations given to us, the company has taken over under a scheme of amalgamation an unsecured loan (v) (iv) (c) from a company covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount of the loan involved during the year was Rs. 900.00 lakhs and the year end balance of loan taken was Rs. 200.00 lakhs. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions on which such loan has been taken are not, prima facie prejudicial to the interests of the Company. As explained to us, in respect of the loan taken there was no stipulation as to repayment.
(b)
(g)
(c) (ii) (a)
In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items are of a special nature or are at negotiated prices and therefore alternative quotations are not available. there are adequate internal control procedures commensurate with the size of the company and the nature of its business for the purchase of inventory, 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. (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; In our opinion and according to the information and explanations given to us, having regard to comments in (iv) above, where there have been transactions with other parties, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 during the year have been made at prices, which are reasonable having regard to the prevailing market prices for such goods, materials or services at the relevant time.
(b)
(b)
(c)
(vi)
(iii)
(a)
(b)
In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of Sections 58A, 58AA and 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 nature of its business.
152
(viii) We have broadly reviewed the books of account maintained by the company relating to the manufacture of steel and automotive parts and accessories 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 of determining whether they are accurate or complete. (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 arrears of outstanding statutory dues as mentioned above as at 31st March, 2006 for a period of more than six months from the date they became payable. As at 31st March, 2006 according to the records of the Company and the information and explanation given to us, the following are the particulars of disputed dues on account of income-tax, sales-tax, wealth tax, service tax, custom duty, excise duty and cess matters that have not been deposited on account of any dispute:
Nature of dues Amount disputed Rs. 4,285,246 861,316 Period to which the amount relates 1995-96 F.Y. 1989-90 F.Y. 2000-01 F.Y. 2002-03 Forum where pending [some of these can be clubbed] Tribunal Income Tax Appellate Tribunal Dy. Commissioner (Appeals) Commissioner of Income-Tax (Appeals) Custom, Excise & Service Tax Appellate Tribunal
March, 2006 and has not incurred cash losses during the financial year ended on that date or in the immediately preceeding financial year. (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of its dues to a financial institution, bank or to debenture holders during the year. 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.
(xii)
(xiii) The provisions of any special statute as specified under clause (xiii) of the Order are not applicable to the Company. (xiv) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of transactions and contracts in respect of trading in shares and timely entries have been made therein. The shares are held by the company in its own name. (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. (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 a short term basis which have been used for long term investment. (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) As the Company has no debentures outstanding at any time during the year, clause 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) According to the information and explanations given to us, during the year, no fraud on or by the Company has been noticed or reported.
(b)
Name of the statute Sales Tax Laws Income Tax Laws
Sales tax Income Tax
Income Tax Income Tax
2,638,286 862,135
Customs Duty
Customs duty 41,519,887 Feb-1994 @
Excise Duty Laws
Excise Excise
20,667,042 July 2001 Dy. Commissioner to May 2005 3,206,434 Sept 1998 Commissioner to Mar 2003 (Appeals)
For A. F. Ferguson & Co. Chartered Accountants R.A. Banga Partner Membership Number: 37915 Mumbai, 24th April, 2006
@ The amount has been stayed for recovery by the relevant authority. (x) The Company does not have accumulated losses as at 31
st
153

31st March, 2006 Rupees 31st March, 2005 Rupees
Schedule SOURCES OF FUNDS SHAREHOLDERS FUNDS SHARE CAPITAL .............................................................. RESERVES AND SURPLUS ............................................. ................................................................................ LOAN FUNDS SECURED LOANS ........................................................... UNSECURED LOANS ...................................................... Deferred Tax Liability [Net] (see note 23) .........................
Rupees
A B
379,425,290 1,107,716,103 1,487,141,393
473,916,890 439,244,035 913,160,925 374,098,322 270,051,000 995,520,030 150,410,940 2,633,072,363 644,149,322 120,900,000 1,678,210,247
C D
443,839,812 551,680,218
APPLICATION OF FUNDS FIXED ASSETS ............................................................... Gross Block ...................................................................... Less : Depreciation .......................................................... Net Block ......................................................................... Capital Work-in-progress .................................................. INVESTMENTS ................................................................ CURRENT ASSETS, LOANS AND ADVANCES ............ Inventories ....................................................................... Sundry Debtors ................................................................ Cash and Bank Balances .................................................. Loans and Advances ........................................................ LESS : CURRENT LIABILITIES AND PROVISIONS ....... Current Liabilities ............................................................. Provisions ......................................................................... Net Current Assets .......................................................... MISCELLANEOUS EXPENDITURE (See note 25) ......... (to the extent not written off or adjusted) Building renovation and repairs expenses ....................... Special payments under Voluntary Retirement Scheme ..
E 2,696,250,154 1,674,967,328 1,021,282,826 136,890,690 F G 1,005,340,499 1,452,348,945 153,591,786 256,352,601 2,867,633,831 H 1,172,106,810 235,171,830 1,407,278,640 1,460,355,191 1,101,065,742 151,505,780 1,252,571,522 950,802,273 1,158,173,516 8,686,393 2,000,962,048 1,384,848,672 616,113,376 70,031,870 686,145,246 30,860,870 972,765,293 1,029,642,900 90,965,081 110,000,521 2,203,373,795
2,474 5,854,789 5,857,263 2,633,072,363
66,772 10,335,086 10,401,858 1,678,210,247
Notes to the Accounts ................................................... Significant Accounting Policies ........................................

The Schedules referred to herein form an integral part of the Balance Sheet As per our report of even date attached For A. F. Ferguson & Co. Chartered Accountants R. A. BANGA R. Sundaresan Partner Executive Vice President Finance & MIS Mumbai : 24th April, 2006 154
L M
Keshub Mahindra Anand G. Mahindra K. V. Ramarathnam Hemant Luthra R. R. Krishnan N. V. Khote M. R. Ramachandran C. S. Madhav Rao
V.K. Gupte Company Secretary
Directors
Mumbai : 24th April, 2006
31st March, 2006 Rupees 6,331,805,949 875,681,182 5,456,124,767 Income from processing (Gross) (see note 12) ........................ Less : Excise Duty ................................................................... ........................................................................................ Arising and other sales(Gross) ................................................. Less : Excise Duty ................................................................... Miscellaneous Receipts(see note 13) ...................................... Other Income ........................................................................... Increase / (decrease) in stocks ................................................ EXPENDITURE Manufacturing and other expenses ......................................... Depreciation ............................................................................. Interest (see note 8) ................................................................. ........................................................................................ PROFIT BEFORE TAX AND EXCEPTIONAL ITEM ................ Provision for tax (see note 23) Current Tax (including Fringe Benefit Tax) .......................... Deferred Tax ....................................................................... PROFIT AFTER TAX AND BEFORE EXCEPTIONAL ITEM .... Less : Exceptional items Premium On Redemption Of Preference Shares(Net of tax) (Refer note 14 ) ........................................................................ PROFIT AFTER TAX ................................................................ Balance of profit / (loss )for earlier year ................................... Balance of profit and loss account acquired on account of amalgamation (Refer Note 2 to the notes to accounts) ........... PROFIT AVAILABLE FOR APPROPRIATION .......................... Proposed Dividend on Equity Shares ....................................... Proposed Dividend on Preference Shares ............................... Interim Dividend Paid on Preference Shares ........................... Tax on Dividend ........................................................................ Transfer to General Reserve Account ...................................... BALANCE IN PROFIT AND LOSS CARRIED FORWARD ...... Earning per share (basic and diluted) before exceptional item (face value Rs.10) ..................................................................... Earning per share (basic and diluted) after exceptional item (face value Rs.10) (see note 24 ) .............................................. Notes to the Accounts ........................................................... Significant Accounting Policies ................................................
The Schedules referred to herein form an integral part of the Balance Sheet As per our report of even date attached to the Balance Sheet For A. F. Ferguson & Co. Chartered Accountants R. A. BANGA R. Sundaresan Partner Executive Vice President Finance & MIS Mumbai : 24th April, 2006
Schedule INCOME SALE OF PRODUCTS/OTHER INCOME FROM OPERATIONS Sale of products (Gross) (see note 12) ..................................... Less : Excise Duty ...................................................................
31st March, 2005 Rupees 5,565,392,581 574,100,259 4,991,292,322 154,038,533 62,958,822 91,079,711 115,321,736 12,919,943 102,401,793 35,227,393 5,220,001,219 10,491,049 67,851,955 5,298,344,223 4,434,556,774 96,215,732 113,759,216 4,644,531,722 653,812,501 51,300,000 120,900,000 172,200,000 481,612,501 481,612,501 (77,891,270) 403,721,231 92,795,067 19,112,655 15,695,058 130,000,000 146,118,451 15.03 15.03
764,674,031 309,590,027 455,084,004 245,575,263 52,981,625 192,593,638 46,566,280 6,150,368,689 97,279,006 249,209,546 6,496,857,241 5,260,729,483 130,849,059 111,478,716 5,503,057,258 993,799,983 324,000,000 (21,300,000) 302,700,000 691,099,983 40,456,673 650,643,310 146,118,451 204,660,780 1,001,422,541 146,171,381 1,581,156 8,480,285 21,911,653 450,000,000 373,278,066 20.92 19.68 L M
Keshub Mahindra Anand G. Mahindra K. V. Ramarathnam Hemant Luthra R. R. Krishnan N. V. Khote M. R. Ramachandran C. S. Madhav Rao
I J
K E
V.K. Gupte Company Secretary
Directors
Mumbai : 24th April, 2006 155
Cash Flow Statement for the Year Ended 31st March, 2006
Rupees A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and exceptional items ..................................... Adjustment for Depreciation ...................................................................................... Dividend Income ............................................................................... Interest and commitment charges .................................................... Amortisation of expenses ................................................................. Foreign Exchange Difference (Gain) ................................................. Profit on sale of investment .............................................................. Profit on sale of fixed assets (net) .................................................... Interest income ................................................................................. Provision for premium payable on redemption of cumulative preference shares ........................................................... Income towards use of fixed assets ................................................. Provision for Diminution in value of investment (written back) ........ Operating Profit before Working Capital changes ............................. Changes in Trade and other receivables .............................................................. Inventories ........................................................................................ Trade and other Payables .................................................................. 993,799,983 130,849,059 (361,786) 111,478,716 4,544,595 (82,289,148) (259,199) (5,450,283) 3,500,000 (1,010,000) 161,001,954 1,154,801,937 (435,378,072) (21,131,635) (1,835,161) (458,344,868) Miscellaneous expenditure(to the extent not written off) incurred during the year .................................................................... Cash generated from operations ................................................... Income-tax paid ................................................................................. NET CASH FROM OPERATING ACTIVITIES .................................. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets ................................................................... Sale of fixed assets ........................................................................... Sale of investments .......................................................................... Dividends received ............................................................................ Interest received ............................................................................... NET CASH (USED IN)/FROM INVESTING ACTIVITIES ................ CASH FLOW FROM FINANCING ACTIVITIES Redemption of Preference Shares .................................................... Premium on redemption of Preference Shares ................................ Proceeds from borrowings ............................................................... Repayment of borrowings ................................................................ Dividends paid ................................................................................... Interest and commitment charges paid ............................................ NET CASH (USED IN) / FROM FINANCING ACTIVITIES .............. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS : Opening Balance ............................................................................... Opening Balance on amalgamation (see note 2 below) ................... Closing Balance ................................................................................. See notes attached NOTES TO CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006 Cash and cash equivalents include: Cash and cheques on hand Balance with scheduled banks: In Current Accounts In Deposit Accounts Total cash and cash equivalents 696,457,069 (302,917,669) 393,539,400 (279,105,403) 909,045 93,693,447 361,786 3,828,299 (180,312,826) (110,000,000) (40,456,673) 930,702,981 (703,999,899) (136,571,388) (98,888,155) (159,213,134) 54,013,440 90,965,081 8,613,265 153,591,786 31st March, 2006 Rupees 1 7,398,375 136,931,639 9,261,772 153,591,786 31st March, 2006 Rupees 31st March, 2005 Rupees 653,812,501 96,215,732 (494,524) 113,759,216 9,361,401 (127,207) (56,982) (1,426,139) (4,812,456) 899,268 (3,172,000) 210,146,309 863,958,810 (225,531,324) (249,911,305) 81,884,582 (393,558,047) (1,532,228) 468,868,535 (53,397,614) 415,470,921 (84,762,264) 9,928,136 246,922 494,524 5,809,825 (68,282,857) 169,193,974 (446,888,738) (235,692) (113,361,903) (391,292,359) (44,104,295) 135,069,376 90,965,081 31st March, 2005 Rupees 3,787,863 70,377,868 16,799,350 90,965,081
B.
C.
2 3 4
Cash and cash equivalents as on 1st April, 2005 of erstwhile Pranay, Valueline and Console taken over on amalgamation (See note 3 below). The amalgmation of erstwhile Pranay, Valueline and Console with the Company is a non-cash transaction (Refer Note 2 of notes to accounts). Previous years figures have been regrouped wherever necessary to conform to this years classifications. Keshub Mahindra Anand G. Mahindra K. V. Ramarathnam V.K. Gupte Company Secretary N. V. Khote M. R. Ramachandran Hemant Luthra R. R. Krishnan C. S. Madhav Rao Mumbai : 24th April, 2006
As per our report of even date attached For A. F. Ferguson & Co. Chartered Accountants R. A. BANGA R. Sundaresan Partner Executive Vice President Finance & MIS Mumbai : 24th April, 2006 156
Directors
Schedules Annexed to and forming part of the Balance Sheet

SCHEDULE A SHARE CAPITAL Rupees Authorised: 34,000,000 Equity Shares of Rs.10 each 100,000 11% Redeemable Cumulative Preference Shares of Rs. 100 each ..................... 3,000,000 Redeemable Cumulative Preference Shares of Rs. 100 each ..................... Total ..... Issued, Subscribed and paid-up (see note 1) 32,482,529 Equity Shares of Rs.10 each, fully paid-up ....................... (2004-05: 30,931,689) Nil (2004-05: 9.72% Redeemable Cumulative 1,100,000) Preference Shares of Rs. 100 each .................................. 546,000 7% Redeemable Cumulative Preference Shares of Rs. 100 each ..................... Total ..... 31st March, 2006 Rupees 340,000,000 31st March, 2005 Rupees 340,000,000 As per last Balance Sheet ...................... 293,125,209 Add : Transfer from Profit and Loss Account ..................................... 450,000,000 Less : Transferred to Capital Redemption Reserve Account .................................... 110,000,000 On amalgamation * ................................ 10,395,242 Balance as per profit and loss account ... Total 300,000,000 650,000,000 300,000,000 650,000,000 * Reserves (net of adjustments) taken over consequent to the Scheme of Amalgamation of Pranay, ValueLine and Console with the Company (Refer note 2 to the notes to accounts) ..... 163,125,209 130,000,000 622,729,967 293,125,209 373,278,066 146,118,451 1,107,716,103 439,244,035
10,000,000
10,000,000
324,825,290
309,316,890
110,000,000
SCHEDULE C SECURED LOANS (see note 9) Term loan from Banks (repayable within one year Rs.137,729,660 2004-05 : Rs.81,199,159) ................ Advances from banks ...................... Interest accrued and due on above ..........................................
Rupees
31st March, 2006 Rupees
54,600,000 379,425,290
54,600,000 473,916,890
316,020,552 127,819,260 127,819,260 443,839,812
{16,466,789 (2004-05 : 15,241,885) equity shares and 546000 7% Redeemable Cumulative Preference shares are held by Mahindra Holdings & Finance Ltd, the holding company; 2004-05: not the holding company } SCHEDULE B RESERVES AND SURPLUS Capital Reserve (on redemption of preference shares, being the amount originally paid-up on shares forfeited) : - As per last Balance Sheet .................... 375 375 Capital Redemption Reserve Account As per last Balance Sheet ...................... Add: Transferred from General Reserve Account .................................... 110,000,000 2,000 On amalgamation * ................................ 110,002,000 Share Premium Account - As per last Bala nce Sheet .................. Less : Provision for premium payable on redemption of Redeemable Cumulative Preference Shares .......... Special Reserve (in terms of Section 45IC of the Reserve Bank of India Act, 1934) (on amalgamation) * ..................... General Reserve SCHEDULE E FIXED ASSETS
COST Additions and adjustments Rupees 500,000 433,030 141,045,879 13,441,201 6,659,641 2,797,102 164,876,853 11,607,041
174,526,306 199,095,550 476,466 199,572,016 374,098,322
2,600,732
SCHEDULE D UNSECURED LOANS Fixed Deposits (repayable within a year Rs.15,982,000 2004-05 - Rs. 15,146,000) ............... Short Term Advances - from Banks .................................... - from Others ................................... ........................................................ Other Loans - from Banks .................................... - from Others ...................................
49,496,000 326,184,218 20,000,000 346,184,218 100,000,000 56,000,000 156,000,000 551,680,218
58,051,000 100,000,000 112,000,000 212,000,000 270,051,000
2,600,732
1,705,695
ASSETS
As On 1-4-2005
#As on 1.4.2005 taken over consequent to amalgamation Rupees Rupees 632,671 6,164,084 106,998,646 408,433,953 10,271,051 4,455,932 536,956,337
Deductions and adjustments Rupees 4,851,313 1,693,771 6,545,084 19,191,764
As On 31.3.2006
Up To 31-3-2005
Rupees 11,140,888 6,164,084 367,463,997 2,218,199,068 65,194,446 25,290,569 2,797,102 2,696,250,154 2,000,962,048
DEPRECIATION #As on 1.4.2005 taken over consequent to amalgamation Rupees Rupees 451,032 18,100,569 142,927,115 3,089,199 596,920 165,164,835
For the year
Adjustments
Upto 31-3-2006
WRITTEN DOWN VALUE As on As on 31-3-2006 31-3-2005
Rupees
Rupees 4,415,005 1,480,233 5,895,238 17,013,911
Rupees 526,204 139,327,142 1,482,548,444 39,511,708 12,748,670 305,160 1,674,967,328 1,384,848,672
Rupees 11,140,888 5,637,880 228,136,855 735,650,624 25,682,738 12,541,899 2,491,942 1,021,282,826 136,890,690 1,158,173,516
Rupees 10,008,217 150,063,342 440,844,548 10,479,963 4,717,306 616,113,376 70,031,870 686,145,246
Freehold land Leasehold land Buildings Plant and Machinery Furniture,fixtures and office equipments Vehicles Software Expenditure Previous year Capital work-in-progress
10,008,217 260,032,321 1,668,719,236 46,333,507 15,868,767 2,000,962,048 2,008,546,771
109,968,979 1,227,874,688 35,853,544 11,151,461 1,384,848,672 1,305,646,851
75,172 11,257,594 111,746,641 4,983,970 2,480,522 305,160 130,849,059 96,215,732
Notes : # Taken over on amalgamation consequent to Scheme of Amalgamation of Pranay, Valueline and Console with the Company (refer note 2 to the notes to accounts)
157
SCHEDULE F 31st March, INVESTMENTS 2006 (at cost- Long term) Rupees (Unquoted, unless otherwise stated) Trade : Shares (fully paid up) Orissa Sponge Iron Ltd. 21,739 equity shares of Rs. 10 each, (quoted) ...................... 296,445 Dena Bank 34,500 equity shares of Rs. 10 each, (quoted) ...................... 1,035,000 Pranay Sheetmetal Stampings Ltd. . NIL (2004-05 ; 260) equity shares of Rs. 100 each (720 shares of Rs. 100 each acquired on amalgamation; 980 shares of Rs. 100 each subdivided into 98,000 shares of Re. 1 each; 882,000 bonus shares received during the year; 980,000 shares extinguished on amalgamation) Pranay Sheetmetal Stampings Ltd. . NIL (2004-05 ; Nil) (4,000 8% Cumulative Redeemable Preference shares of Rs.100 each acquired on amalgamation; extinguished on amalgamation) Debentures : (fully paid-up) Pranay Sheetmetal Stampings Ltd. NIL (2004-05: 125,000 ) non convertible debentures of Rs. 100 each (extinguished on amalgamation) ..... Non-Trade : Shares : (fully paid-up) In Subsidiary Companies : Console Estate and Investments Ltd. NIL (2004-05: 98,000) equity shares of Rs. 10 each (extinguished on amalgamation) ................................ Mahindra Automotive Steels Pvt.Ltd. ........................................... NIL (2004-05: 10) equity shares of Rs. 10 each (6000 shares acquired on amalgamation and 6010 shares sold during the year) In other companies : Mahindra Hotels and Resorts Ltd. 49,990 equity shares of Rs. 10 each 499,900 Valueline Hotels and Resorts Pvt. Ltd. NIL (2004-05: 10,001) equity shares of Rs. 100 each ............................... (10001 shares of Rs. 100 each subdivided into 100010 shares of Rs. 10 each; 100,010 shares extinguished on amalgamation) Mahindra & Mahindra Contech Ltd. 35,000 equity shares of Rs. 10 each 350,000 Window of the World Motels Pvt. Ltd. 2 equity shares of Rs. 100 each ...... 200 Mahindra Construction Co. Ltd. 300,000 equity shares of Rs. 10 each 3,000,000 Kotak Mahindra Bank 3,000 (2004-05: Nil ) equity shares of Rs. 10 each (quoted) ....................... 31,723 (1200 shares of Rs.10 each acquired on amalgmation and 1800 bonus shares received during the year) Mahindra & Mahindra Ltd. NIL (2004-05: 25,000) equity shares of Rs. 10 each, (quoted) .................. (111,034 shares acquired on amalgamation and 136,034 shares sold during the year) The Indian and Eastern Engineer Co. Ltd. 3 ordinary shares of Rs. 10 each ..... 45 10,000 equity shares of Rs.10 each 150,000 Other Investments : Unit Trust of India 33,230 6.75% Tax free Bonds of Rs.100 each (quoted) ...................... 3,323,080 National Saving Certificate (Rs. 9,779 acquired on amalgamation and redeemed during the year) 8,686,393 Notes : (1) Aggregate of quoted investments : Cost ................................................ Market Value ................................... (2) Aggregate of unquoted investments : Cost ................................................
296,445 1,035,000 26,000
SCHEDULE G CURRENT ASSETS, LOANS AND ADVANCES Inventories: Stores and spare parts .............. Loose tools ................................ Raw materials ........................... Semi-finished goods .................. Finished goods .......................... Equity Shares (Refer Note 2 ) .... Sundry Debtors : (unsecured) Over six months considered good ................... considered doubtful .............. Others Considered good ..................
31st March, 2006 Rupees 232,677,383 1,323,904 266,777,738 468,401,955 36,159,519
Rupees
31st March, 2005 Rupees 185,593,933 1,307,897 536,093,776 243,031,162 6,738,525 972,765,293
1,005,340,499
104,310,058 38,250,453 1,348,038,887 1,490,599,398
48,393,910 79,539,234 981,248,990 1,109,182,134 79,539,234 1,452,348,945 1,029,642,900 701,101 3,086,762 70,377,868 2,852,955 13,946,395 87,177,218 153,591,786 90,965,081
Less : Provision for doubtful debts ................................

Cash and Bank Balances : Cash on hand ............................ Cheques on hand ...................... Balances with Scheduled Banks in Current accounts .............. in Fixed Deposit accounts .... in Deposit accounts as margin money ......................
38,250,453
869,518 6,528,857 136,931,639 2,975,972 6,285,800 146,193,411
12,500,000
980,000 100
Loans and Advances : .......... (unsecured) Advances and loans to subsidiaries considered good ................... considered doubtful ..............
108,000 2,113,483 2,221,483 2,113,483 108,000
499,900 1,000,100
Less : Provision for doubtful advances ........................................

Advances recoverable in cash or in kind or for value to be received considered good ................... considered doubtful .............. Less : Provision for doubtful advances ........................................ Taxation advance payments less provision ................................. Balances Excise, Port Trust, etc .................................
253,229,779 32,453,064 * 285,682,843
86,526,163 31,749,066 118,275,229 31,749,066 86,526,163 22,358,031 1,008,327 256,352,601 2,867,633,831 110,000,521 2,203,373,795 7,063,991
350,000 200 3,000,000
32,453,064 253,229,779 1,441,657 1,681,165
* including capital advance of ........ 7,700,000 SCHEDULE H CURRENT LIABILITIES AND PROVISIONS CURRENT LIABILITIES : * Acceptances ....................... 386,337,181 Sundry Creditors (see note 20) Total outstanding dues of : small scale industrial ..... 7,894,165 undertakings (see note 21) creditors other than small scale industrial undertakings .................. 773,502,678 781,396,843 Dividend warrants posted but not encashed ................ 701,037 Interest warrants posted but not encashed ...................... 2,614,751 Interest accrued but not due on loans ........................ 1,056,998
80,668,771
265,471,974 20,074,036
45 150,000
3,323,080 30,860,870
812,706,131 832,780,167 2,639,564 174,037 1,172,106,810 1,101,065,742
4,686,248 6,078,738 4,000,145
12,354,525 18,108,283 18,506,345
158
SCHEDULE H CURRENT LIABILITIES AND PROVISIONS (Contd...) 31st March, 2006 Rupees PROVISIONS : Provision for diminution in value of investments 3,500,000 Provision for leave encashable at retirement/cessation 18,209,000 Provision for contingencies (Refer note 22 ) 36,530,000 Provision for premium payable on redemption of Cumulative Preference Shares ** 8,458,000 Provision for dividend on equity shares 146,171,381 Provision for dividend on preference shares 1,581,156 Provision for tax on dividend 20,722,293
Rupees
31st March, 2005 Rupees 4,510,000 14,435,000 4,958,000 92,795,067 19,112,655 15,695,058 151,505,780 1,252,571,522
31st March, 2006 Rupees SCHEDULE K MANUFACTURING AND OTHER EXPENSES 1. Raw materials and bought out components consumed [including outside processing costs Rs. 60,567,802 2004-05 - Rs.35,956,946 (see note 10(a))] 2. Goods purchased for resale [ see note 12(B)] 3. Payment to and provision for employees : (a) salaries,wages,bonus,etc. (b) companys contribution to provident and other funds (c) staff welfare expenses (d) gratuity (including provision for contingencies of Rs.36,530,000 : 2004-05: Rs.Nil) 4. Operating and other expenses: (a) stores consumed (b) repairs and maintenance to buildings (including stores consumed Rs.13,745,131; 2004-05 - Rs.10,081,182) (c) repairs and maintenance to machinery (including stores and spare parts consumed Rs.77,317,424; 2004-05: **Rs.50,486,911) (d) repairs and maintenance to others (e) power and fuel *(f) rent including lease rentals (net) (g) rates and taxes (net) (h) insurance charges (i) bad debts/advances written off 9,373,842 Less : provision written back 6,960,561 (j) provision for doubtful debts/advances (net) (k) provision for diminution in value of long term investments (net) (l) other expenses (see note 5) (m)amortisation of deferred revenue expenditure : Building renovation and repairs expenses Special payments under Voluntary Retirement Scheme Computer software implementation expenses 5. Excise duty 6. Provision for premium payable on redemption of cumulative preference shares
Rupees
3,297,057,453 1,454,550 258,759,638 18,146,890 39,034,599 594,875 316,536,002
2,842,742,645 18,265,916 190,210,438 14,996,252 29,713,937 1,797,701 236,718,328
235,171,830 1,407,278,640 * **
There is no amount due and outstanding to be credited to the Investor Education and Protection Fund. Includes provision created during the year Rs. 3,500,000 (2004 05 Rs. 3,500,000) 31st March, 2006 Rupees 3,031,644 1,513,347 36,786 325,000 361,786 31st March, 2005 Rupees 24,524 245,000 225,000 494,524 1,875,000 224,383 336,454 2,099,383 2,713,073 314,169 1,426,139 56,982 3,386,779 10,491,049
439,918,142
379,220,812
SCHEDULE I OTHER INCOME Rupees OTHER INCOME Profit/(Loss) on sale, etc. of stock in trade - net * Dividends on shares held in stock in trade Dividends from long term investments: Trade Non Trade From subsidiary company Others Interest : On long term investments Trade Non Trade Others [including tax deducted/ deductible at source Rs.576,941 (2004-05:Rs.647,093)] Rent Profit on sale of assets (net) Profit on sale of long term Non trade investment Miscellaneous Income *Profit/(Loss) on sale, etc.of stock in trade - net Sales Less: Purchase Inc/(dec) stock in trade Profit on stock in trade SCHEDULE J INCREASE / (DECREASE) IN STOCKS Increase / (Decrease) in stock of Finished goods and Semi-finished goods Opening stock: Semi-finished goods Finished goods Total Add :Stock taken over on amalgamation (Refer Note 2 ) Semi-finished goods Finished goods Total Less: Closing stock : Semi-finished goods Finished goods (Decrease)/Increase in Stock
47,223,332
21,696,752
115,280,351 22,549,818 800,113,814 981,704 5,515,677 6,070,705
71,401,815 17,559,726 667,608,537 1,253,139 3,472,251 5,241,682 28,584,350 19,892,883
336,454
5,113,829 304,770 259,199 82,289,148 4,068,829 97,279,006 3,855,352 3,855,352 (823,708) 3,031,644
2,413,281 (35,737,705) (1,010,000) 220,183,808
8,691,467 9,391,733 138,507,851
64,298 4,480,297 1,628,047,522 14,133,956 3,500,000 5,260,729,483
498,175 6,784,830 2,078,396 1,333,407,166 2,523,451 899,268 4,434,556,774 130,200 3,763,329
243,031,162 6,738,525 249,769,687 1,889,240 3,693,001 5,582,241 468,401,955 36,159,519 504,561,474 249,209,546 255,351,928
173,704,084 8,213,648 181,917,732 181,917,732 243,031,162 6,738,525 249,769,687 67,851,955
* Includes payments in respect of finance leases ** Includes stores and spare parts written off
159
SCHEDULE L NOTES TO ACCOUNTS 1. The Subscribed Capital includes: a) 30,000 Equity shares allotted as fully paid-up pursuant to contracts without payment having been received in cash; b) 600,000 Equity shares allotted consequent to the Scheme of Amalgamation with Bank of Baroda Ltd.; c) 821,319 Equity shares allotted on conversion of 10% Convertible Series G Debentures of the face value of Rs. 20,532,975 at a premium of Rs.15 per share. These debentures were originally issued consequent to the Scheme of Amalgamation with Bank of Baroda Ltd.; d) 11,000,000 Equity shares allotted as fully paid-up (at a premium of Rs. 35 per share) pursuant to a contract to discharge part of the consideration for acquisition of the Companys Stampings Unit at Kanhe; e) 3,650,866 Equity shares allotted as fully paid-up Bonus shares by way of capitalisation of share premium account and accumulated profits; f) 546,000 7% Cumulative Redeemable Preference Shares are redeemable on October 30, 2006 at a redemption premium of Rs. 105 lacs; g) 1,550,840 Equity shares allotted consequent to the Scheme of Amalgamation with Pranay, Valueline and Console (Refer Note 2 below). 2. Scheme of Amalgamation of Pranay Sheetmetal Stampings Limited (Pranay), Valueline Hotels and Resorts Limited (Valueline) and Console Estate and Investments Limited (Console) with the Company : a) Pursuant to the Scheme of Amalgamation of the erstwhile Pranay, Valueline and Console with the Company as approved by the shareholders in the court convened meeting held on 11th January 2006 and subsequently sanctioned by the Honble High Court of Bombay on 24th February 2006, the assets and liabilities of erstwhile Pranay, Valueline and Console were transferred to and vested in the Company with retrospective effect from 1st April 2005. The Scheme has, accordingly, been given effect to in these accounts. b) The operations of Pranay include manufacture and sale of pressed metal components. Valueline has not yet commenced operations. The operations of Console include activities related to investments and dealing in shares. c) The Amalgamation has been accounted for under the pooling of interests method as prescribed by Accounting Standard 14 (AS-14) issued by The Institute of Chartered Accountants of India. Accordingly, the assets, liabilities and other reserves of erstwhile Pranay, Valueline and Console, as at 1st April 2005 have been taken over at their book values subject to adjustments as specified in the Scheme of Amalgamation. Accordingly, Rs. 10,395,242 has been debited to the general reserves taken over. d) Pursuant to the Scheme of Amalgamation refer to in (a) above, and after considering the extinguishment of shares held by the Company in Pranay, Valueline and Console and Consoles and Valuelines holding in Pranay, 150,000 fully paid up equity shares of Rs. 10 each have been allotted by the Company to the shareholders of Pranay in the ratio of 15 shares of the Company for every 2 equity shares of Rs. 1 each fully paid up in Pranay and 1,400,840 fully paid up equity shares of Rs. 10 each have been allotted by the Company to the shareholders of Valueline in the ratio of 14 shares of the Company for every 1 equity share of Rs. 10 each fully paid up in Valueline. e) The figures for the current year include figures for erstwhile Pranay, Valueline and Console for the period 1st April 2005 to 31st March 2006 and accordingly, not comparable to those of the previous year. 3. Estimated amount of contracts remaining to be executed on capital account and not provided for as on 31st March, 2006 Rs. 656,956,354 (2004-2005 Rs. 31,468,086). 4. Invoices raised during the period for price differences/interest on delayed payments, which are under negotiation, are accounted for if and when realised. 5. Other expenses in Schedule K include : March 31st March 2006 31st March,2005 Rupees Rupees (a) Remuneration of auditors Audit fees 1,212,200 1,571,360 121,220 Company Law Matters 10,800 Other services 432,559 631,100 Reimbursement of out of pocket expenses 30,365 42,540 (b) (i) Cash discount on sales 4,056,143 6,423,165 (ii) Commission to other selling agents 1,732,611 1,878,253 (c) Donation to NCP National Relief Fund 1,000,000 (d) Pre-operative expenditure taken over on amalgamation 763,861 6. Managerial remuneration for directors included in the Profit and Loss Account is Rs. 8,913,227 (2004-2005 Rs. 3,161,306) including contribution to provident fund and other funds Rs.356,400 (2004-2005 Rs. 356,400), perquisites Rs. 1,327,827 (2004-2005 Rs. 1,229,407), and commission Rs. 5,500,000 (including in respect of earlier year Rs. 2,500,000 being commission payable to the Managing Director approved by the Central Government and pending approval of shareholders; 2004-2005 Rs. Nil) and sitting fees payable to non-whole-time directors Rs. 409,000 (2004-05 Rs. 255,500).
accordance Profit Computation of Net Pr ofit in accor dance with Section 309(5) of the March, Companies Act, 1956 for the year ended 31st March, 2006 2005-06 Rupees Profit before taxation and after exceptional item as per Profit & Loss Account 953,343,310 Add : Directors Remuneration including Directors Fees 8,913,227* 962,256,537 Less : Excess of expenditure over income carried forward from previous year Profit on sale of Investments (net) Provision for diminution in value of long term investment written back Profit for the purpose of Directors commission : Commission payable to wholetime directors 66,179,165 82,289,148 1,010,000 149,478,313 812,778,224 3,000,000
* (including Rs. 2,500,000 in respect of the previous year, in respect of which the approval of the Central Government has been obtained, however, pending shareholders approval.) 7. Contingent Liabilities not provided for in respect of : a) Bills discounted but not matured Rs. 121,923,706 (2004-2005 Rs. 2,080,432 ). Represents customers bills discounted. b) Excise duty: i) Claims against the Company not acknowledged as debts Rs. 3,206,434 (2004-2005 Rs. 223,947). ii) Other Excise matters for which the company is contingently liable Rs. 63,999,857 (20042005 Rs. 58,536,326). These are in respect of matters which have been successfully defended by the company and where the Department has further gone in appeal. This includes: a) Rs. 6,223,476 (2004-2005 Rs. 6,223,476) relating to the method of valuation of customer processed finished goods for the purpose of discharge of excise duty, where the customer supplies raw material. This matter has been settled by CESTAT in favour of the company. In the above case the Department has gone in further appeal in the Supreme Court. b) Rs. 36,508,710 (2004-2005 Rs. 36,508,710) relating to inclusion of scrap credit in the assessable value for the purpose of payment of Excise Duty. This matter has been settled by CESTAT in favour of the company. The Supreme Court has remanded the case back to the authorities. c) Rs. 600,629 (2004-2005 Rs. 1,303,110) being other matters. Further in respect of (b)(ii)(a) above, the Department has continued to issue show cause cum demand notices for subsequent periods aggregating to Rs. 20,667,042 (2004-2005 Rs. 14,501,030). c) Taxation demands against which the Company is in appeal Rs. 19,738,817 (2004-2005 Rs. 16,238,396) and, decisions in favour of the Company against which the Department is in appeal Rs. 15,041,926 (2004-2005 Rs. 15,041,926). d) Other claims against the Company not acknowledged as debts Rs. 43,472,887 (2004-2005 Rs. 43,472,887). These include: i) Rs. 41,519,887 pertaining to show cause notice for payment of custom duty in respect of the Value Based Advance Licenses (VBAL) purchased by the company and used for import of goods. As the export obligation against the above VBAL was already fulfilled by the seller of the license, the company appealed against the said notice with CESTAT who has granted a stay. ii) Rs. 1,953,000 (2004-2005 Rs. 1,953,000) being other matters. e) Other matter for which the company is contingently liable is Rs. 146,346,951 (2004-2005 Rs. 117,687,428). This represents the dispute in the rate of water charges demanded by the Irrigation Department based on an unilateral increase in rates and the amount which the company has been paying. The above amount includes an initial demand raised by the Irrigation Department of Rs. 5,673,638 up to 31st March 1995 which was decided in favour of the company in the court of the Civil Judge, Senior Division Panvel. The balance of Rs. 140,673,313 (2004-2005 Rs. 112,013,790) represents differential demands raised by the Irrigation Department for subsequent periods. 8. Interest: March,2006 31st Mar ch,2006 31st March,2005 Rupees Rupees On debentures and fixed loans 47,959,914 40,761,660 On others 65,799,302 70,717,056 111,478,716 113,759,216 9. (a) Term loans from Banks are secured by a first equitable mortgage on all immovable property and plant and machinery attached to the earth, both present and future, ranking pari-passu.
160
(b) Advances for working capital from banks are secured by hypothecation of raw materials, finished goods, goods in process, stores, book debts, specified movable assets, etc. These advances are also secured by a joint equitable mortgage on the immovable properties of the Company situated at Khopoli and Kanhe, the mortgage to rank second and subservient to the mortgage created in respect of (a) above. 10. Raw materials and bought out components consumed. March, 31st March, 2005 31 st March, 2006 Qty Value Qty Value M/T Rupees M/T Rupees a) 1) Ferrous scrap 131,892 1,911,830,366 121,790 1,811,098,420 2) Ferro alloys 5,178 797,023,080 5,685 1,052,054,613 3) Other metals 1,520 52,170,909 1,643 63,737,307 4) Slag making materials 11,385 39,706,601 11,477 43,471,836 5) Metal Sheets 2,907 81,267,676 3,484 110,269,690 6) Components 25,519,014 55,125,839 7) Processing charges 35,956,945 60,567,802 3,297,057,453 12. Information for class of goods manufactured, traded in : A. Particulars in respect of goods manufactured : Class of Goods Unit Of Measurement Licensed Capacity Per Annum [see note (ii)] Installed Capacity Per Annum [see note (iii)] Actual production [see note (iv)] 2,842,742,645
b) Imported at landed cost Indigenously obtained 11. Stores and spares consumed : Imported at landed cost Indigenously obtained
March, 31st March, 2006 Rupees % 1,451,943,995 44 1,845,113,458 56 3,297,057,453 Rupees 48,822,828 482,157,869 530,980,697 100 % 9 91 100
31st March, 2005 Rupees % 1,128,854,535 40 1,713,888,110 60 2,842,742,645 Rupees 45,876,119 393,912,786 439,788,905 100 % 10 90 100
Consumption in value is after adjusting excesses and shortages ascertained on physical verification and write off for deterioration, unserviceable items etc. During the current financial year stores consumed includes write off of Rs. Nil (2004-05 : Rs. 3,763,329).
Opening Stock Qty Value Rupees
Closing Stock Qty Value Rupees
Sales (see note iv) Qty Value Rupees
Tool,alloy and M/T 150,000 90,000 111,188 561 26,040,519 110,627 5,222,111,644 Special steel M/T (150,000) (90,000) (106,009) (2) (200,628) () () (106,012) (4,791,516,397) Pressed Sheet metal components and M/T 31,000 31,000 24,382 452* 10,431,526* 407 10,119,000 24,427 687,617,387 assemblies M/T (18,000) (18,000) (8,782) (122) (4,244,828) (184) (6,738,525) (8,720) (266,530,094) st * Includes stocks as on 1 April 2005 of Pranay Sheetmetal Stampings Limited taken over consequent to Scheme of Amalgamation; Pressed sheet metal components and assemblies 268 MT; Rs. 3,693,001. Notes : (i) In respect of Tool, alloy and Special Steel, the industrial licence permits manufacture of castings and forgings up to 2000 M/T within the above overall licensed capacity. (ii) In respect of Pressed Sheet metal components and assemblies, the licensed capacity is as per the Memorandum filed with, and duly acknowledged by the Secretariat for Industrial Assistance. (iii) Installed capacity on an integrated basis is certified by the Managing Director and not verified by the auditors since this is a technical matter. (iv) Production and sales in respect of Pressed Sheet metal components and assemblies includes customers materials processed. B. Particulars in respect of goods traded in : Class of Goods Unit of Measurment M/T M/T M/T M/T M/T MT M/T M/T Mix Mix Opening Stock Qty. Value Rupees () () () () (196) (3,768,192) () () (3,768,192) Purchase Qty. (358) (104) () (224) Value Rupees (4,534,636) (4,343,617) () (7,225,188) 1,454,550 (2,162,475) 1,454,550 (18,265,916) Closing Stock Qty. Value Rupees () () () () () () () () () Sales Qty. (358) (104) (196) (224) Value Rupees (4,739,062) (6,182,995) (3,989,673) (7,385,173) 1,479,740 (2,028,739) 1,479,740 (24,325,642)
(i) Heavy Melting Scrap (ii) Stainless Steel Scrap (iii) Non-Alloy Steel Billets (iv) Steel Sheet (v) Others Total
Previous years figures have been enclosed in parenthesis. C. Details of stock in trade shares Name of the Company Qty. 4,800 22 330 100 70 50 20 Acquired on Amalgamation Value Rupees 513,268 12,011 100,965 36,749 104,456 50,775 5,484 823,708 Purchases Value Rupees Closing Stock Value Rupees Sales Value Rupees 3,377,579 19,559 107,286 55,195 207,006 83,840 4,887 3,855,352
Mahindra & Mahindra Ltd. Reliance Industries Ltd. Hindustan Petroleum Corp. Ltd. Indian Oil Corp. Ltd. Infosys Technologies Ltd. TCS Ltd. Orchid Pharma and Chemicals Ltd. Total * Bonus shares received.
Qty. 10 *
Qty. 10
Qty. 4,800 22 330 100 70 50 20
161
13. Miscellaneous receipts include : March, 31st Mar ch, 2006 Rupees Income from services rendered 38,302,851 31st March, 2005 Rupees 27,655,173
12 Joglekar Refra. & Ceramics P. Ltd. 13 Refra Industries 14 Shiv Casting & Fabricators 15 Ameya Engineering 16 Arkay Industries 17 Bhagyoday Engg. 18 Carline Pressings
30 Techno Ventures 31 TMC Measuring Instruments Pvt. Ltd. 32 Vaibhav Screen Plast P. Ltd. 33 Vardhini Udyog 34 Vijay Trading Corporation 35 Toe Industries 36 Zodiac Powder Coaters
14. The Company has redeemed 1,100,000 9.72% Redeemable Cumulative Preference Shares of Rs. 100/- each issued in December 2003, on the redemption date i.e. 31st October, 2005. In order to incorporate the understanding always existing between the Company and its preference shareholders, a premium of Rs. 40,456,673 payable on redemption has been provided for and paid. 15. C.I.F. Value of Imports March, 31st Mar ch, 2006 Rupees 1,169,946,836 50,842,545 29,635,485 31st March, 2005 Rupees 1,351,573,601 43,561,295 2,582,211 Capital 11,426,024 () () () 11,426,024 ()
22. (a) Provision for contingencies Rs. 36,530,000 is in respect of employees. Labour demands are under negotiations at certain locations of the Company. The ultimate settlement is contingent on the conclusion of negotiations. (b) The movement in above provision is as follows: Provisions Pr ovisions Balance as at 1 April 2005 Add : Provision made during the year Less : Utilisation during the year Balance as at 31st March 2006
st
(a) Raw materials (b) Stores and spares (c) Capital goods These include imports on : i) C & F Basis
Rupees 36,530,000 36,530,000
ii) FOB Basis iii) High Seas
Raw Materials Stores & Spares 78,320,303 176,713 (35,264,970) (6,714,693) 410,014 () (429,552) 1,041,936,053 (358,427,482) () 1,120,256,356 (393,692,452) 586,727 (7,144,245)
23. The components of Deferred tax liability and assets as at 31st March, 2006 are as under: March, 31st March, 2006 Deferred tax liability: On fiscal allowances on fixed assets On other timing differences Rupees 176,370,648 21,643 176,392,291 31st March, 2005 Rupees 139,447,829 24,434 139,472,263
Total
Previous years figures have been enclosed in parenthesis. 16. Expenditure in foreign currency (on payment basis) March, 31st Mar ch, 2006 Rupees 2,275,542 1,971,931 31st March, 2005 Rupees 405,485 771,631
Less: Deferred tax assets * (See note (a) below) On employee separation and retirement On provision for doubtful debts 2,836,192 10,345,938 12,295,998 503,223 25,981,351 Net Note: In 2004-2005, the company has recognised deferred tax asset arising from unabsorbed depreciation under tax laws, etc. up to 31st March, 2004 aggregating Rs. 77,800,000 in view of favourable operating performance. 24. Earnings per share have been computed as under: March, 31st March, 2006 Rupees a) Net Profit for the year after tax and before exceptional item Less: Preference Dividend for the year 2005-06 (2004-05) including tax there on Adjusted profit before exceptional item (A) Less: Exceptional item Adjusted profit after exceptional item (B) b) Weighted average equity shares (Nos.) c) i) Earnings per share before exceptional item (Rs.) (A)/(b) 691,099,983 31st March, 2005 Rupees 481,612,501 150,410,940 1,702,283 16,869,980 18,572,263 120,900,000
Interest Others 17. Earnings in foreign exchange
(a) F.O.B. Value of exports (b) Freight and insurance
March, 31st Mar ch, 2006 Rupees Nil Nil
31st March, 2005 Rupees 4,713,973 456,352
On provision for Contingencies On other timing differences
18. Research and Development expenditure debited to Profit and Loss Account aggregates Rs.4,203,653 (2004-2005 Rs. 3,535,308) consisting of salaries and power, based on allocations made by the Company, and materials. 19. The net difference in foreign exchange (i.e. the differences between the spot rates on the date of the transactions and the actual rates at which the transactions are settled/appropriate rates applicable at the year end) debited to the Profit and Loss Account is Rs. 3,791,718 (2004-2005 Credit of Rs. 645,436). 20. Sundry creditors include credit balances in current accounts with directors Rs. 2,403 (2004-2005 Rs. 2,403). 21. The identification of suppliers as Small Scale Industrial undertakings (SSIs) has been done on the basis of the information provided by the suppliers to the Company. On this basis, the total outstanding dues of SSIs have been disclosed in Schedule H and the names of SSIs, to whom the Company owes any sum and which are outstanding for more than 30 days are given below : 1 2 3 4 5 6 7 8 9 Maruti Bahu-Udheshiya A.G.V Sanstha Metaflux Co.Pvt. Ltd. Shinde Engineering Works Vidarbha Ceramics Pvt. Ltd. Paramount Abrasives Pvt. Ltd. Premier Alloys & Chemicals Ranchi Refractories Precision Engineering Products Shrishanti Engineers 19 Emdet Engineering 20 Kanda Motors 21 Mak Glit Chem 22 Precision Forgings 23 Press Tech Engg. 24 R.R. Metal Pressing Co. 25 Rane Enterprises 26 Sanghi Gases 27 Share Pressings 28 Suraj Auto Parts 29 Swapnil Auto Engg. Pvt. Ltd.
11,472,558 679,627,425 40,456,673 639,170,752 32,482,529 20.92 19.68
16,605,347 465,007,154 465,007,154 30,931,689 15.03 15.03
10 Shetty Chem. & Engg. Works Pvt. Ltd. 11 Swastik Lime Industries
ii) Earnings per share after exceptional item (Rs.) (B)/(b)
162
25. Related parties disclosures: a) Related parties where Control exists: Holding Company Mahindra Holdings & Finance Limited Ultimate Holding Company Mahindra & Mahindra Limited Subsidiary Companies Mahindra Automotive Steels Pvt. Limited Console Estate and Investments Limited w.e.f. 21/06/2005 w.e.f. 21/06/2005 upto 20/04/2005 ceased to be a subsidiary w.e.f. 01/04/05 2) Associate Companies upto 20/06/2005 upto 20/06/2005 ceased to be an associate w.e.f. 01/04/05 3) Key Management Personnel Mr. K. V. Ramarathnam, Managing Director Mahindra International Limited Mahindra Steel Service Centre Limited Mahindra & Mahindra Financial Services Limited Bristlecone India Limited Mahindra Holdings & Finance Limited Mahindra & Mahindra Limited Pranay Sheetmetal Stampings Limited
b) Names of other related parties with whom transactions have taken place during the year Mahindra Automotive Steels Pvt. Limited Mahindra Intertrade Limited
1) Fellow subsidiaries w.e.f. 21/06/2005
c) Transactions carried out with the related parties referred to in (a) and (b) above in the ordinary course of business: Sr. Ultimate No. Particulars Associate Company Holding Co Holding Co Subsidiary Companies Fellow Subsidiaries Bristlecone India Ltd. Mahindra Holdings & Finance Ltd. Mahindra & Mahindra Ltd.
Key Management Personnel
Purchases of Goods or Services
Receiving of Services
Sale of Goods
Rendering of Services
Reimbursement of expenses
Sale of Fixed Assets
Recovery of charges
Deputation of Personnel charge
(-) (-) (-) (-) (-) (-) (-) (-) (-)
Pranay Sheetmetal Stampings Ltd. (-) (5,554,737) 80,714 (2,014,642) (4,423,263) 1,805,453 (7,471,972) (7,385,173) 158,311,078 (145,974,561) (-) (293,721) (-) (-) (-) (-) (3,172,000) 321,275 (1,965,104) (-) (-) (-) (-) 3,232,444 (-) (-) (-) (-) (-) (-) (-) (-)
Mahindra Mahindra Console Holdings & & Estate & Finance Mahindra Investments Ltd. Ltd. Ltd. 622,657 (-) (-) (-) 1,987,710 (-) (-) (-) 5,767,713 (-) (-) (-) 601,695,133 (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 3,792,090 (-) (-) (-) (-) (-) (-)
Mahindra Automotive Steels Pvt Ltd. (-) (-) (-) (-) (-) (-) (-) (-) (-)
Mahindra Mahindra Automotive Intertrade Steels Ltd. Pvt Ltd. 674,994,911 (-) (-) (-) (-) 451,825,049 (-) (-) 2,250,000 (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
M&M Mahindra Financial International Services Ltd. Ltd. (-) (-) (-) (-) 5,018,043 (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
Mahindra Steel Service Centre Ltd. (-) (-) (-) (-) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) (-) (-) (-) 8,504,227 (2,905,806)
10
Remuneration to key managerial personnel Finance: Inter Corporate Deposits taken
Inter Corporate Deposits repaid
Equity Dividend Paid
Equity Dividend Received
Preference Dividend Paid
Interest expenses
Interest income
Preference Shares issued
Redemption of Preference Shares (Including Premium) Equity Shares sold
11
Guarantees & Collaterals Received
(-) (-) (-) (-) (-) (-) (-) (-) (-) (246,922) (-)
(-) 20,000,000 (50,000,000) (-) (225,000) (-) 3,163,014 (4,819,829) (-) 110,000,000 (-) (-) (-) (-)
(-) (-) (-) (-) (-) (631,207) (1,875,000) (-) (-) (-) (-)
(-) (-) 50,000,000 (-) (-) 49,400,367 (-) (-) 1,768,442 (-) (-) 7,664,943 19,927,997 (-) (-) 6,183,561 (-) (-) (-) (-) (-) (-) 150,456,673 (-) (-) (-) (-) (-) (-)
(-) (2,400,000) (-) (245,000) (-) (130,784) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) 18,701,149 (-) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
163
164
Fellow Subsidiaries Mahindra Intertrade Ltd Bristlecone India Ltd M&M Mahindra Financial International Services Ltd Ltd (-) (-) (-) (-) Mahindra Steel Service Centre Ltd Key Management Personnel Mahindra Holding & Finance Ltd Mahindra & Pranay Mahindra Sheetmetal Ltd Stampings Ltd (-) (-) (-) 150,000,000 (-) (-) (-) (-) (-) (-) Mahindra Holding & Finance Ltd Mahindra Console & Estate & Mahindra Investments Ltd Ltd Mahindra Mahindra Automotive Automotive Steels Steels Pvt Ltd Pvt Ltd (-) (-) (-) (-) (24,695,821) (-) (1,955,448) (-) (-) 20,000,000 (-) 103,764,798 (-) (-) (-) (-) (-) (-) (-) (-) 183,936,174 (-) (-) 1,143,663 (-) (-) 9,000 (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (12,500,000) (29,715,871) (5,440,197) (-) (-) (590,000,000) (-) (-) (250,000,000) (-) (-) (-) (-) (-) (-) 164,737,721 (-) (-) 440,000,000 (-) (-) (-) (108,319) (-) (-) (-) (-) (2,115,483) (2,113,483) (-) (-) (-) 2,165,483 (-) 2,113,483 (-) (-) (-) (-) 6,049 (-) (-) (-) (-) (-) 331 (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 636,183 (-) (-) (-) (-) (-) 58,915 (-) (-) (-) (-) (-) (-) (-) (-) (-)
c) Transactions carried out with the related parties referred to in (a) and (b) above in the ordinary course of business: (Cont...) Sr. Ultimate No. Particulars Associate Company Holding Co Holding Co Subsidiary Companies
12
Guarantees & Collaterals lapsed
13
Outstandings
Payables
i) Inter Corporate Deposits taken (including interest) ii) Other payables
Receivables i) Investments in fully Convertible Debentures (including interest) ii) Other receivables
iii) Provision for doubtful debts and advances Guarantees & Collaterals Received
Guarantees & Collaterals given
26. Miscellaneous Expenditure (to the extent not written off or adjusted) Sr. Particulars No. 1 2 3 Opening Balance Incurred During the year (1,532,228) (1,532,228) Amortisation Closing Balance 2,474 (66,772) 5,854,789 (10,335,086) 5,857,263 (10,401,858)
instrument), which are not intended for trading or speculative purposes, but for hedge purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables,. The following are the outstanding Forward Exchange Contracts entered into by the company as on 31st March, 2006 Currency US Dollar Amount 31,728.10 Buy/Sell Buy Cross Currency Rupees
Building Renovation and 66,772 repair expenses (564,947) Special payments under 10,335,086 Voluntary Retirement Scheme (15,587,688) Computer Software implementation expenses (2,078,396) Total 10,401,858 (18,231,031)
64,298 (498,175) 4,480,297 (6,784,830) (2,078,396) 4,544,595 (9,361,401)
The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: a. Amounts payable in foreign currency on account of the following: Rs. 33,798,685 US$757,464.14 Rs. 1,639,044 Euro 30,200 Capital Imports (including intangibles) Rs. 2,930,850 Euro 54,000 The above disclosures have been made consequent to an announcement by the Institute of Chartered Accountant of India in December, 2005, which is applicable to the financial periods ending on or after 31st March, 2006. Therefore, figures for the previous year have not been disclosed Import of goods & services
Previous years figures have been enclosed in parenthesis. 27. Derivative Instruments : The company has entered into Forward Exchange Contracts (being a derivative 28. SEGMENT REPORTING a) PRIMARY SEGMENT INFORMATION (BUSINESS SEGMENT) F-2006 External Sales 1 Segment Revenue (Net) Steel 5,310,667,882 Stamping 839,700,807 Others 4,544,991 Segment Total 6,154,913,680 Elimination Total 6,154,913,680 Segment Result Steel Stamping Others Segment Total Unallocated corporate expenses net of unallocated income Profit before interest & taxation Interest expenditure Interest income Provision for Taxation Profit / (loss) After Taxation and before exceptional item Other Information 1 Segment Assets Steel Stamping Others Segment Total Unallocated corporate assets Total Assets 2 Segment Liabilities Steel Stamping Others Segment Total Unallocated corporate liabilities Total Liabilities 3 Capital Expenditure Steel Stamping Others Segment Total 4 Depreciation Steel Stamping Others Segment Total 5 Non cash expenditure other than depreciation Steel Stamping Others Segment Total 4,868,326,273 351,674,946 5,220,001,219 5,220,001,219 F-2005
F-2005 F-2006 Inter-segment Sales
F-2006
F-2005 Total 4,868,326,273 351,674,946 5,220,001,219 5,220,001,219 721,941,822 68,215,336 790,157,158 (27,397,897) 762,759,261 (113,759,216) 4,812,456 (172,200,000) 481,612,501
5,310,667,882 839,700,807 4,544,991 6,154,913,680 6,154,913,680 702,246,796 334,425,217 4,160,597 1,040,832,610 (58,995,806) 1,099,828,416 (111,478,716) 5,450,283 (302,700,000) 691,099,983
3,021,179,408 980,227,982 31,723 4,001,439,113 59,035,978 4,060,475,091 1,104,099,137 105,078,305 26,707 1,209,204,149 1,369,986,812 2,579,190,961 203,904,019 27,831,657 231,735,676 46,287,617 84,472,028 130,759,645 15,785,755 15,785,755
2,411,872,665 429,924,403 2,841,797,068 97,155,106 2,938,952,174 1,042,175,512 45,273,519 1,087,449,031 948,744,076 2,036,193,107 80,626,482 544,929 81,171,411 42,935,283 53,182,419 96,117,702 47,337,434 47,337,434
165
b) SECONDARY SEGMENT INFORMATION (GEOGRAPHICAL SEGMENT) F-2006 1 Segment Revenue 2 3 Within India Outside India Total Revenue Within India Outside India Within India Outside India 6,154,913,680 6,154,913,680 4,001,439,113 231,735,676 5,214,830,894 5,170,325 5,220,001,219 2,841,797,068 81,171,411 F-2005
Segment Assets
Capital Expenditure
NOTES: 1. The Company has considered business segment as primary segment for disclosure. The segments have been identified taking into account the organisational structure as well as the deferring risk and returns of the segments. Steel segment comprises of sale of alloy steel. Stamping segment comprises of sale of pressed metal components. Other segment comprises of activities related to dealing in shares. Inter segment revenue is market led. 2. The geographical segments considered for disclosure are Sales within India Sales outside India 3. Segment Revenue comprises of : 2005-06 Sales including income from processing, arising and other sales and Miscellaneous receipts Rs. 6,150,368,689 Profit/(Loss) on sale, etc. of stock in trade net Rs. 3,031,644 Dividend on shares held in stock in trade Rs. 1,513,347 4. Additional information pursuant to the provisions of Part IV of Schedule VI to the Companies Act , 1956 (See Schedule N) 5. Previous years figures have been regrouped wherever necessary to conform to this years classification. 5. Foreign Exchange Transactions : All assets and liabilities in foreign currencies are translated at the relevant rates of exchange prevailing at the year end. In respect of forward 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 assets and monetary liabilities (other than those for acquisition of fixed assets acquired from a country out side India), the exchange differences are recognised in the Profit and Loss Account. In case of liabilities incurred for acquisition of fixed assets acquired from a country out side India, the exchange differences are adjusted to the cost of such assets. 6. Miscellaneous Expenditure (to the extent not written off or adjusted) i. Special payments under Voluntary Retirement Scheme are amortised over a period of five years from the accounting year in which the liability is incurred. ii. Expenditure incurred on major renovation and repairs of buildings is being written off over a period of five years from the year in which the expenditure is incurred. iii. computer software implementation expenses are amortised over a period of 36 months from the date of commissioning. These expenses incurred up to 31st March, 2003 are shown under Miscellaneous Expenditure and expenses incurred from 1st April, 2003 are capitalised under intangible assets. 7. Revenue Recognition : Sales of products and services are recognised when the products are shipped or the services rendered. 8. Retirement Benefits : Retirement Benefits in respect of gratuity and leave encashable at the time of retirement/ cessation of service are provided for based on valuations, as at the Balance Sheet date, made by independent actuaries. 9. Taxes on income : Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax assets and liabilities are 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 losses under tax laws are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets on account of other timing differences are recognised to the extent that there is a reasonable certainty of its realisation. 10. Segment Reporting : The accounting policies adopted for segment reporting are in line with the accounting policies of the Company and are identified having regard to the dominant 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. Expenses relating to the enterprise as a whole and not allocable on a reasonable basis to the business segments are reflected as unallocated corporate expenses.
SCHEDULE M SIGNIFICANT ACCOUNTING POLICIES 1. Basis for preparation of accounts : The accounts have been prepared to comply in all material respects with applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act,1956. Fixed Assets : Fixed assets are recorded at historical cost of purchase and do not reflect current values. Cost includes interest and other financial charges attributable to the acquisition of fixed assets. Foreign exchange differences relating to the acquisition of fixed assets are adjusted to the cost of the asset. Fixed assets acquired under finance leases are recognised at the lower of fair value of the leased assets at inception and the present value of minimum lease payment. Lease payment are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability. Depreciation is provided for as follows: a) In respect of the assets of the Companys Stampings Units at Kanhe and Nasik, depreciation is provided on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except as stated in note b(ii) below. In respect of all other units / divisions : i) The Company provides depreciation on Straight Line Method in respect of buildings, railway sidings and plant and machinery, heavy vehicles, other vehicles and data processing equipment, and on reducing balance method in respect of furniture, fixtures and office equipment at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956, except as stated in note b(ii). ii) iii) The Company provides depreciation on straight line method on heavy vehicles, other vehicles and data processing equipment at 25%, 20% and 33% of cost respectively. In respect of extra shift, depreciation is provided on the basis of the actual utilisation of assets. In determining actual utilisation, it has been assumed that the individual items of plant in each shop have worked for the same number of hours as the main plant in that shop, except where separate records are maintained for any item. When an asset is disposed off, the cost and related depreciation are removed from the books of account and the resultant profit (including capital profit) or loss is reflected in the profit and loss account. 3. Investments : All long term investments are valued at cost. Provision for diminution is made to recognise a decline, other than temporary, in the value of long term investments. Dividend income is recognised when the right to receive payment is established. Inventories : Inventories are stated at cost or net realisable value, whichever is lower. Cost of inventories is arrived at on a weighted average basis and is inclusive of overheads and duties, where appropriate.
2.
b)
4.
166
SCHEDULE N BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE

I. Registration Details : Registration No. Balance Sheet Date II. 3 1 0
Date
1 3
Month
5 0
4 6
State Code
Year
Capital Raised during the year (Amount in Rs. Thousands) : Public Issue N Bonus Issue N I L I L Rights Issue 1 5 5 0 8 * Private Placement
III.
N I L * Issued pursuant to Scheme of Amalgamation. Refer Note 2. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) : Total Assets (including Miscellaneous Expenditure not written-off and adverse balance of profit and loss account 4 0 6 6 3 3 2
Total Liabilities (including Shareholders Funds) 4 0 6 6 3 3 2
Sources of Funds : Paid-up Capital 3 7 9 4 2 5 Reserves and Surplus 1 1 0 7 7 1 6
Secured Loans 4 4 3 8 4 0
Unsecured Loans 5 5 1 6 8 0
Application of Funds : Net Fixed Assets 1 1 1 4 5 6 8 0 1 3 N IV. 7 5 I 4 5 L Net Current Assets Accumulated Losses Investments 8 5 6 8 8 5 6 7 Miscellaneous Expenditure
Performance of Company (Amount in Rs. Thousands) : Turnover (Sales and Other Income) 6 2 4 7 6 4 7 + 0 Total Expenditure [Including decrease/(increase) in Stocks] 5 2 5 3 8 4 7
+ / - Profit/Loss Before Tax 9 9 3 8 0
- Profit/Loss After Tax (after exceptional item) 6 5 0 6 4 3
Earning per Share in Rupees (after exceptional item) 1 V. 9 . 6 8
Dividend Rate % 45
Generic Names of Three Principal Products/Services of Company (as per monetary terms) : Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description 7 7 8 2 2 7 2 1 0 8 4 8 Other bars and rods of other alloy steel Other bars and rods of iron or non-alloy steel Parts and accessories of motor vehicles
Signature to Schedules A to N
Keshub Mahindra Anand G. Mahindra K. V. Ramarathnam V.K. Gupte Company Secretary N. V. Khote M. R. Ramachandran Hemant Luthra R. R. Krishnan C. S. Madhav Rao
R. Sundaresan Executive Vice President Finance & MIS
Directors
167
MAHINDRA ASHTECH LIMITED

Your Directors present their Eleventh Report together with the audited accounts of your Company for the year ended 31st March, 2006. Financial Results (Rs. in lakhs) 2006 Income ................................................................................................................................ Profit/ (Loss) before Interest, Depreciation & Taxation ....................................................... Interest ................................................................................................................................ Depreciation ........................................................................................................................ Profit / (Loss) before Taxation ............................................................................................. Provision for Taxation Fringe Benefit Tax ......................................................................................................... Deferred Tax .................................................................................................................. Profit / (Loss) after Taxation for the year ............................................................................. Balance of Loss for earlier years ......................................................................................... Balance carried to Balance Sheet ....................................................................................... 9.29 44.80 (2,733.08) (2,688.28) (43.28) (794.53) (1,938.55) (2,733.08) 6,172.43 203.68 (96.99) (52.60) 54.09 2005 2,734.39 (688.64) (110.93) (38.24) (837.81)
Review of Operations During the year, your Company went through a major Business Process Re-engineering by shifting the Design & Engineering Department from Kolkata to Pune. This has made your Company more responsive at the market place. Right sizing of manpower has made your Company more cost competitive. Orders on hand are at Rs. 140 crores as against Rs. 28 crores for the previous year. Your Company has also achieved an all time high income of Rs. 62.96 crores (Gross) (an increase of 123.82% over the last year) and has posted a marginal profit for the year. The scenario of Power Sector has taken dramatic steps towards Power for All by 2012 as stated by the Central Government in its manifesto and this augurs very well for the Companys future plans. Potential Sick Company As mentioned in the previous years report, the Company continues to be a Potential Sick Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985. Finance During the year, your Company issued and allotted 1,00,000 8.50% Cumulative Redeemable Preference Shares of the face value of Rs. 100 each aggregating Rs. 1 crore on a rights basis to Mahindra & Mahindra Limited, the holding company. Directors Mr. David Hataria, Executive Director resigned with effect from 15th September, 2005. The Board has placed on record its appreciation of the services rendered by Mr. Hataria during his tenure of office.
168
Mr. Amar Banerjee was appointed as an Additional Director by the Board from 15th September, 2005. Mr. Banerjee was also appointed as Managing Director of the Company with effect from 15th September, 2005. Mr. Banerjee holds office upto the date of the forthcoming Annual General Meeting. The Company has received a notice from a member signifying his intention to propose Mr. Banerjee as candidate for the office of Director of the Company. Mr. S. Venkatraman retires by rotation and, being eligible, offers himself for re-appointment. Directors Responsibility Statement Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation 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 judgements 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, 2006 and of the loss 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.
Audit Committee The Audit Committee presently comprises Mr. Hemant Luthra (Chairman of the Committee), Mr. Raghunath Murti and Mr. S. Venkatraman. The Committee met once during the year. Remuneration Committee The Remuneration Committee presently comprises Mr. S. Venkatraman (Chairman of the Committee), Mr. Hemant Luthra and Mr. Raghunath Murti. The Committee met once during the year. Auditors Messrs A. F. Ferguson & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The members will be required to appoint Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors proposed to be re-appointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. Public Deposits and Loans/Advances The Company has not accepted any deposits from the public or its employees during the year under review. The Company has not made any loans/advances which require to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent company, Mahindra & Mahindra Limited. Industrial Relations Industrial Relations remained satisfactory during the year under review.
Conservation of Energy The expenditure on power and fuel is not significant in relation to the total expenses of the Company. However, the Company is conscious about the consumption of electricity and rationalization thereof. Technology Absorption The Company has not entered into any technical collaboration with any party in the last five years. Foreign Exchange Earnings & Outgo The Company has not incurred any foreign exchange expenditure during the year. The particulars of foreign exchange earnings are given in the Notes to Accounts. Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and Rules framed thereunder The Company had no employee who was in receipt of remuneration of not less than Rs. 24,00,000 during the year ended 31st March, 2006 or not less than Rs. 2,00,000 per month during any part of the said year.
For and on behalf of the Board Raghunath Murti
Chairman Mumbai, 27 April, 2006.

th
169
Report of Auditors to the Members of Mahindra AshTech Limited

1. We have audited the attached Balance Sheet of Mahindra AshTech Limited, as at 31st March, 2006 together with the Profit and Loss Account and 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. These 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 the 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, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we give 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 above, we report that: a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose 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 the books; The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of account; In our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this Report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; e) On the basis of the written representations received from the directors as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006 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 subject to our reliance, because they are technical matters, on certificate by a Director in respect of percentage of completion and cost to completion, in respect of construction contracts [Schedule O-Note 1F] on the basis of which the profits have been accounted, give a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. For A.F. Ferguson & Co. Chartered Accountants
2.
f)
3.
4.
b)
c)
d)
Pune: 27th April, 2006
G. Shankar Partner Membership No: 27023
170
Annexure to the Auditors Report

Annexure referred to in paragraph (3) of the Auditors Report of even date on the accounts of Mahindra AshTech Limited for the year ended 31st March, 2006. (i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) The Company has a system of verifying the fixed assets once every three years. The fixed assets were physically verified by the Management during the previous year, and, accordingly, no physical verification of the fixed assets was carried out by the Management during the year. In our opinion, the frequency of verification is at reasonable intervals. No material discrepancies were noticed on such verification. (c) During the year, in our opinion, the Company has not disposed off a substantial part of fixed assets. (ii) (a) The inventory of the Company has been physically verified by the Management at the year end. In respect of stocks lying with third parties, some of these have been confirmed by them. 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 inventories followed by the Management were found to be reasonable and adequate in relation to the size of the Company and the nature of its business. (c) In our opinion, the Company is maintaining proper records of inventory. 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) According to the information and explanations given to us, the Company has not taken/granted any loans, secured or unsecured, from/to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Therefore, provisions of Clause 4(iii)(a), (b), (c), (d), (f) and (g) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company. (iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to sale of goods and services. There is no continuing failure to correct major weakness, if any, in internal control system. (v) Based on the audit procedures applied by us and according to the information and explanations give to us, the contracts or arrangements that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements have been made at prices, which are reasonable having regard to the prevailing market prices at the relevant time. (vi) The Company has not accepted any deposits from the public to which the provision of Sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed thereunder apply. (vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. (viii) To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956. (ix) (a) According to the records of the Company, apart from certain instances of delays in depositing undisputed sales tax, custom duty, labour welfare fund dues and income tax deduction/collected at source, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Investor Education and Protection Fund, Income tax, Sales tax, Wealth tax, Service tax, Custom duty, Excise duty, Cess and other statutory dues with the appropriate authorities. Based on our audit procedures and according to the information and explanations given to us, there are no statutory dues which has remained outstanding as at 31st March, 2006 for a period of more than six months from the date they became payable. (b) According to the records of the Company and the information and explanations given to us, the dues of income tax/sales tax/excise duty/custom duty/wealth tax/service tax/cess, which have not been deposited on account of any dispute, are given below: Nature of Dues Amounts involved (Dues to the extent not deposited) (Rs. Lacs) 3.75 Forum where dispute is pending Assistant Commissioner of Sales Tax
Sales tax (19992000)
(x) In our opinion, the accumulated losses of the Company are more than fifty per cent of its net worth. The Company has not incurred any cash losses during the financial year covered by our audit but has incurred cash losses in the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution, debenture holder or bank during the year.
171
(xii) 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) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/society and therefore the requirements pertaining to such class of companies are not applicable. (xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. (xv) The Company has not given any guarantee for loans taken by others from banks or financial institutions. (xvi) The Company has not obtained any term loans during the year. (xvii) According to the information and explanations given to us and in our opinion, funds raised on short term basis have not been used for long term investment. (xviii) During the year, 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. (xix) The Company has not issued any debentures during the period and therefore the question of creating security or charge in respect thereof does not arise. (xx) The Company has not raised any money by public issue and therefore the question of disclosing the end use of money does not arise. (xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year. For A.F. Ferguson & Co. Chartered Accountants
G. Shankar Partner Membership No: 27023
172

2006 Rupees Lacs 2005 Rupees Lacs
Schedule I. SOURCES OF FUNDS: SHAREHOLDERS FUNDS: (a) Share Capital ................................................................. (b) Reserves and Surplus .................................................... LOAN FUNDS ..................................................................... DEFERRED TAX LIABILITY (Net) ....................................... Total ....... II. APPLICATION OF FUNDS: FIXED ASSETS .................................................................... (a) Gross Block ................................................................... (b) Less: Depreciation ......................................................... (c) Net Block ....................................................................... INVESTMENTS ................................................................... CURRENT ASSETS, LOANS AND ADVANCES: ............... (a) Inventories ..................................................................... (b) Sundry Debtors ............................................................. (c) Cash and Bank Balances ............................................... (d) Loans and Advances ..................................................... F G E A B C D
Rupees Lacs
3,100.00 388.56 178.27 3,666.83
3,000.00 388.56 681.34 4,069.90
427.81 211.26 216.55 0.20 190.20 4,273.81 207.65 645.40 5,317.06
434.36 182.69 251.67 0.20 124.82 2,023.07 108.00 572.74 2,828.63 1,812.98 116.30 1,929.28 648.97 899.35 185.60 2,733.08 4,069.90
Less: CURRENT LIABILITIES AND PROVISIONS: (a) Current Liabilities ........................................................... (b) Provisions ......................................................................
H 4,597.54 70.55 4,668.09
NET CURRENT ASSETS ..................................................... MISCELLANEOUS EXPENDITURE (To the extent not written off) .......................................................................... Profit and Loss Account Adverse Balance ...................... Total ....... NOTES ON ACCOUNTS ..................................................... O I
112.83 2,688.28 3,666.83
As per our report attached to the Balance Sheet For A.F. Ferguson & Co. Chartered Accountants G. Shankar Partner R. S. Kotian Company Secretary
Amar Banerjee Raghunath Murti Hemant Luthra S. Venkatraman
Managing Director
Directors

173
Schedule SALES AND OTHER INCOME: Gross Sales ................................................................................. Less: Excise Duty ...................................................................... Income from Long Term Contracts (Note 4) ............................... Less: Excise Duty ...................................................................... Income from Services Rendered ................................................ Other Income .............................................................................. J 730.14 70.35 659.79 5,440.38 53.43 5,386.95 36.71 88.98 6,172.43 EXPENDITURE: Raw Materials, Finished and Semi-Finished Products ................ Excise Duty ................................................................................. Personnel Expenses ................................................................... Interest ........................................................................................ Depreciation/Amortisation .......................................................... Estimated Losses on Incomplete Contracts ............................... Other Expenses .......................................................................... Total ....... Profit/(Loss) Before Taxation ....................................................... Less: Provision for Taxation Current Tax ................................................................................. Deferred Tax ............................................................................... Fringe Benefit Tax ....................................................................... Profit/(Loss) for the year ............................................................. Balance of (Loss)/Profit for earlier years ..................................... Balance of Loss carried to Balance Sheet .................................. Earning Per Share ....................................................................... NOTES ON ACCOUNTS ...................................................... O 9.29 44.80 (2,733.08) (2,688.28) 0.29 (43.28) (794.53) (1,938.55) (2,733.08) (8.13) N L M K 4,540.56 12.83 467.25 96.99 52.60 (53.26) 1,001.37 6,118.34 54.09 2,046.98 13.84 523.73 110.93 38.24 (18.76) 857.24 3,572.20 (837.81) 632.85 58.23 574.62 2,038.80 20.37 2,018.43 61.76 79.58 2,734.39 Rupees Lacs 2006 Rupees Lacs 2005 Rupees Lacs
As per our report attached to the Balance Sheet For A.F. Ferguson & Co. Chartered Accountants G. Shankar Partner R. S. Kotian Company Secretary
Managing Director
Directors

174
2006 Rupees Lacs 54.09 52.60 96.99 75.17 1.37 226.13 Operating Profit before Working Capital Changes ....................................... Miscellaneous Expenditure (to the extent not written off or adjusted) incurred during the year ............................................................................... Adjustments for Changes in Working Capital Trade and Other Receivables ....................................................................... Loans and Advances .................................................................................... Inventories ................................................................................................... Current Liabilities ......................................................................................... Provisions ..................................................................................................... Cash Generated from/(Utilised in) Operations ............................................. Direct Taxes Paid ......................................................................................... NET CASH FLOW FROM OPERATING ACTIVITIES ................................. B. CASH FLOW FROM INVESTING ACTIVITIES Fixed Assets: Purchase ...................................................................................................... Sale .......................................................................................................... NET CASH USED IN INVESTING ACTIVITIES .......................................... C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Borrowings .......................................................................... Repayment of Borrowings ........................................................................... Interest Paid ................................................................................................. Issue of Share Capital .................................................................................. NET CASH USED IN FINANCING ACTIVITIES ......................................... NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ...... CASH AND CASH EQUIVALENTS Opening Balance .......................................................................................... Closing Balance Notes: 1. Figures in brackets represent outflows of cash and cash equivalents. 2. Cash and Cash equivalents comprise of: 2006 Rupees Lacs 150.96 56.32 0.37 207.65 As per our report attached to the Balance Sheet For A.F. Ferguson & Co. Chartered Accountants G. Shankar Partner R. S. Kotian Company Secretary 2005 Rupees Lacs 45.54 62.36 0.10 108.00 2004 Rupees Lacs 19.08 5.02 0.10 24.20 280.22 (2.40) (2,250.74) (65.49) (65.38) 2,783.58 (45.75) 356.22 634.04 (4.42) 629.62 (297.51) 44.52 210.50 30.32 (40.81) (52.98) (914.34) (914.34) 38.24 110.93 37.80 12.88 199.85 (637.96) (223.40) 2005 Rupees Lacs (837.81)
Rupees Lacs A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit (loss) Before Tax .......................................................................... Adjustments for: Depreciation ................................................................................................. Interest Expenses ........................................................................................ Amortisation of Expenses ............................................................................ (Profit) () (Loss) (+) on Sale of Fixed Assets/Scrapped/written off (Net) ....
Rupees Lacs
(70.48) 51.62 (18.86) 102.13 (605.20) (108.04) 100.00 (511.11) 99.65 108.00 207.65
(32.33) 1.12 (31.21) 140.08 (110.73) 1,000.00 1,029.35 83.80 24.20 108.00
Cash in Hand and Cheques on Hand ........................................................... Balance with Scheduled Banks: On Current Account ..................................................................................... On Deposit Account (includes Rs. 0.37 lacs (2005: Rs. 0.10 lacs) under lien)
Managing Director
Directors

175
SCHEDULE: A SHARE CAPITAL Authorised: 1,55,00,000 (2005: 1,55,00,000) Equity Shares of Rs. 10 each .......................... 15,50,000 (2005: 14,50,000) Preference Shares of Rs. 100 each ............ Total ............ Issued and Subscribed: 1,55,00,000 (2005: 1,55,00,000) Equity Shares of Rs. 10 each, fully paid-up ..... 15,50,000 8.50% (2005: 14,50,000) Cumulative Redeemable Preference Shares of Rs. 100 each, fully paid-up ..................... Total ............ Of the above: 1. 2. 1,00,00,000 Equity Shares are held by the Holding Company, Mahindra & Mahindra Limited. 54,99,999 Equity Shares are held by Mahindra Holding & Finance Limited, a Subsidiary of Mahindra & Mahindra Limited, including 5 shares held jointly with its nominees. 1 Equity Share is held by Mahindra Gesco Developers Limited, a Subsidiary of Mahindra & Mahindra Limited. (a) 4,50,000 8.50% Cumulative Redeemable Preference Shares of Rs. 100 each are held by the Mahindra Holdings & Finance Limited, a Subsidiary of Mahindra & Mahindra Limited. The aforesaid Preference Shares were issued on 9th June, 2000. The terms of the Preference Issue was amended with effect from 1st March, 2004, to reduce cumulative dividend rate from 10.50% to 8.50% p.a. The Preference Shares are now redeemable at the expiry of four years from 1st March, 2004. (b) 10,00,000 8.50% Cumulative Redeemable Preference Shares of Rs. 100 each are held by Mahindra & Mahindra Limited, the holding company. These Preference Shares are redeemable at par as under: 5,00,000 Preference Shares at the end of the 5th year from the date of allotment of the shares. Balance 5,00,000 Preference Shares at the end of the 6th year from the date of allotment of the shares. The Company has the option to redeem the shares any time after the expiry of one year from the date of allotment, i.e., 30th March, 2004.
2006 Rupees Lacs
2005 Rupees Lacs
1,550.00 1,550.00 3,100.00
1,550.00 1,450.00 3,000.00
1,550.00
1,550.00
(c) 1,00,000 8.50% Cumulative Redeemable Preference Shares of Rs. 100 each issued to Mahindra & Mahindra Limited, the holding company, on 31st March, 2006, and are redeemable at par at the end of one year from the date of allotment of shares, i.e., 31st March, 2006. (d) If dividend on the 8.5% Cumulative Redeemable Preference Shares is not paid for any year or years a premium will be payable on redemption of the shares at such rates so that the shareholder earns a post tax yield of 8.50% per annum for the total period of holding the shares. (e) Arrears of fixed cumulative dividend Rs. 340.72 lacs. SCHEDULE: B RESERVES AND SURPLUS: Capital Reserve .............................................. Total ............ SCHEDULE: C LOAN FUNDS (A) Secured Loans: Loans and Advances from banks (secured by a pari passu charge on the Companys present and future goods, book debts, all other moveable assets, outstanding monies, claims, investments, etc., in terms of the deed of hypothecation) ................. Loans and Advances from others (secured by hypothecation of vehicle purchased out of said loan) ....................................... (B) Unsecured Loans: Short-term Loans and Advances: From other than Banks [repayable within one year Rs. 95 lacs (2005: Rs. 62 lacs)] Total ............ SCHEDULE: D DEFERRED TAX: (A) Deferred Tax Assets: Timing Difference on Account of: Carried Forward Tax Losses .................... Other Items ............................................ (B) Deferred Tax Liabilities: Timing Difference on Account of: Depreciation ............................................ Net Deferred Tax Liabilities: .................... 2006 Rupees Lacs 388.56 388.56 2006 Rupees Lacs 2005 Rupees Lacs 388.56 388.56 2005 Rupees Lacs
1,550.00 3,100.00
1,450.00 3,000.00
3. 4.
76.95
619.34
6.32
95.00 178.27 2006 Rupees Lacs
62.00 681.34 2005 Rupees Lacs
30.12
42.35
30.12
42.35
SCHEDULE: E FIXED ASSETS: Description of Assets Cost as at 31-3-2005 Tangible Assets: Buildings ................................................... Plant and Machinery ................................. Furniture and Fittings ............................... Vehicles (Note 1 below) ........................... Improvement to Leased Premises ........... Intangible Assets: (Other than internally generated): Software ................................................... Total ......................................................... Previous Year ........................................... 62.38 310.32 21.67 17.33 22.66 GROSS BLOCK Additions Deductions during during the year the year 9.24 28.73 17.08 10.18 3.64 52.69 22.73 0.13 1.48 Cost as at 31-3-2006 18.93 316.32 38.62 26.03 26.30 DEPRECIATION/AMORTISATION Deductions/ Upto For AdjustAs at 31-3-2005 the year ments 31-3-2006 27.40 133.01 8.95 9.77 3.56 3.37 30.79 10.86 2.71 4.74 18.03 5.69 0.04 0.27 12.74 158.11 19.77 12.21 8.30
(Rupees in Lacs) NET BLOCK As at 31-3-2006 6.19 158.21 18.85 13.82 18.00 As at 31-3-2005 34.98 177.31 12.72 7.56 19.10
434.36 431.83
1.61 70.48 32.33
77.03 29.80
1.61 427.81 434.36
182.69 160.25
0.13 52.60 38.24
24.03 15.80
0.13 211.26 182.69
1.48 216.55 251.67
251.67
Note: 1. Vehicles includes Rs. 8.62 lacs at cost (2005: Rs. 12.95 lacs) yet to be registered in the Companys name pending completion of transfer formalities. 2. Fixed Assets held for disposal Rs. 9.17 lacs (2005: 54.42 lacs) (Net Book Value) - Plant & Machinery.
176
SCHEDULE: F INVESTMENTS: Long Term, Non-Trade, At Cost Government Securities (Unquoted) Face Value Per Unit Number (Rupees) 2 10,000 National Savings Certificate@ Total ...............
2006 Rupees Lacs
2005 Rupees Lacs
SCHEDULE: H CURRENT LIABILITIES AND PROVISIONS: (A) Current Liabilities: Acceptances ........................................... Sundry Creditors (i) Total Outstanding Dues of Small Scale Industrial Undertakings (Note 9 and Schedule Q) ................................ (ii) Total Outstanding Dues of Creditors other than Small Scale Industrial Undertakings (Note 3) ....................... (iii) Billing/Claims in excess of amounts considered as income on incomplete long term contracts ........................... (iv) Advances from Customers ............... (v) Interest Accrued but not Due on Loans (B) Provisions: Provision for Leave Encashable .............. Provision for Estimated Losses on Incomplete Contracts ..............................
2006 Rupees Lacs 1,360.68
2005 Rupees Lacs 561.56
0.20 0.20
0.20 0.20
50.98
45.38
@ Lodged as Security Deposit, with the Sales Tax authorities.
1,977.96
1,085.50
SCHEDULE: G CURRENT ASSETS, LOANS AND ADVANCES: (A) Current Assets: Stores and Spares .................... Tools and Patterns ................... Stock-in-Trade and Work-inProgress: (i) Work-in-Progress ................ (ii) Manufactured Components (iii) Raw Materials and Boughtout-Components ................ 59.84 0.23 116.73 3.50 9.90
2006 Rupees Lacs
2005 Rupees Lacs 3.60 9.45
241.13 965.60 1.19 4,597.54 40.86 29.69 70.55 4,668.09 2006 Rupees Lacs
119.63 0.91 1,812.98 33.35 82.95 116.30 1,929.28 2005 Rupees Lacs
30.35 1.72 79.70 190.20 124.82 Total ............ SCHEDULE: I MISCELLANEOUS EXPENDITURE: Miscellaneous Expenditure (To the extent not written off or adjusted) Voluntary Retirement Scheme Compensation Total ............ 1,199.94 12.12 1,212.06 634.07 1,846.13 12.12 1,834.01 Interest - Others - Gross ................................ Sundry Creditors Balances written back ......... Scrap Sales ..................................................... Miscellaneous Income ................................... Total ............ SCHEDULE: J OTHER INCOME:
Sundry Debtors (Note 2) Unsecured: Outstanding for a period exceeding six months: Considered Good ..................... Considered Doubtful ................ Others Considered Good ..... Less: Provision for Doubtful Debts Short Billing/Claims considered as income on incomplete long term contracts .......................... Cash and Bank Balances: Cash on Hand .......................... Cheques on Hand .................... Balances with Scheduled Banks: (i) On Current Account ........... (ii) On Fixed Deposit Account . (B) Loans and Advances: (Unsecured, considered good unless otherwise stated): Advances recoverable in cash or in kind or for value to be received (net of provision for doubtful advances Rs. 52.67 lacs, previous year Rs. 29.68 lacs) .................. Payments towards Income-tax Current (net provisions) ....... Balances with Customs, Port Trust, Excise, etc. .................... Total ............ 10.30 37.09 645.40 5,317.06 15.17 8.23 572.74 2,828.63 56.32 0.37 207.65 62.36 0.10 108.00 1.58 149.38 1.29 44.25 1,532.90 43.21 1,576.11 2,478.59 4,054.70 43.21 4,011.49
112.83 112.83 2006 Rupees Lacs 1.55 57.66 6.53 23.24 88.98 2006 Rupees Lacs
185.60 185.60 2005 Rupees Lacs 0.33 0.85 59.30 19.10 79.58 2005 Rupees Lacs
262.32 4,273.81
189.06 2,023.07
SCHEDULE: K RAW MATERIALS, FINISHED AND SEMI-FINISHED PRODUCTS (A) (Increase)/Decrease in Stock of Finished Goods, Work-inProgress and Manufactured Components: Opening Stock: (i) Work-in-Progress ............. (ii) Manufactured Components Less: Closing Stock: (i) Work-in-Progress ............. (ii) Manufactured Components (Increase)/Decrease in Stock (B) Consumption of Raw Materials and Bought-outComponents: Opening Stock ...................... Add: Purchases [including outside processing charges Rs. 90.29 lacs (2005: Rs. 35.87 lacs)] ... Less: Closing Stock ............... Total ............
Rupees Lacs
30.35 1.72 32.07 59.84 0.23 60.07 (28.00)
108.65 4.15 112.80 30.35 1.72 32.07 80.73
598.01
549.34
79.70
205.62
4,605.59 116.73 4,568.56 4,540.56
1,840.33 79.70 1,966.25 2,046.98
177
SCHEDULE: L PERSONNEL: Salaries, Wages, Bonus, etc. .......................... Contribution to Provident and Other Funds .... Gratuity .......................................................... Welfare ........................................................... Total ............ SCHEDULE: M INTEREST: Interest on Fixed Period Loans ....................... Others ............................................................ Total ............ SCHEDULE: N OTHER EXPENSES: Lacs Stores Consumed ........................ Tools and Patterns Consumed ..... Power and Fuel ............................ Rent (including Lease Rent) ......... Bank Charges ............................... Carriage and Delivery ................... Rates and Taxes ........................... Insurance ...................................... Repairs and Maintenance: Buildings ......................... Machinery ....................... Others ............................. Advertisement .............................. Commission on Sales/Contracts .. Professional Charges ................... Travelling Expenses ..................... Net Difference in Foreign Exchange .. Provision for Doubtful Debts and Advances ..................................... Liquidated Damages .................... Miscellaneous Expenses (Note 8) Erection and Commissioning Subcontract Expenses ........................ Miscellaneous Expenditure Written Off - Voluntary Retirement Scheme Compensation .............................. Loss on Fixed Assets Sold/Scrapped/ Written Off (Net) .......................... Total ............ SCHEDULE: O
2006 Rupees Lacs 376.59 33.21 11.35 46.10 467.25 2006 Rupees Lacs 0.19 96.80 96.99 2006 Rupees Lacs 22.53 3.07 12.80 22.82 128.75 99.25 10.64 17.76
2005 Rupees Lacs 344.01 36.49 100.16 43.07 523.73 2005 Rupees Lacs 110.93 110.93 2005 Rupees 13.79 7.74 14.91 30.12 83.01 23.98 3.96 11.78 13.44 5.99 3.57
C. 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 and Customs duties. D. Foreign Exchange Transactions (Other than for Fixed Assets): Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Current Assets and Current Liabilities outstanding at the year end are translated at year end and exchange rates and the profit/loss so determined and also the realised exchange gains/losses are recognised in the Profit and Loss Account. E. Revenue Recognition: Sales of products and services are recognised when the products are shipped or services rendered. In respect of construction contracts, the Company accounts for the income on the percentage of completion basis. (Refer Paragraph (F) below). F. Construction Contracts: In respect of construction contracts, contract revenue and contract costs are recognised as revenue and expense respectively in the Profit and Loss Account in the year in which the work is performed. Provision for foreseeable losses is recognised when the total contract costs exceeds the total estimated contract revenue. 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 each contract, 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. G. Retirement Benefits: Retirement Benefits in respect of Gratuity and Leave Encashment benefits are provided for based on actuarial valuations, as at Balance Sheet date. H. Miscellaneous Expenditure (to the extent not written off or adjusted): Voluntary Retirement Scheme Compensation paid to employees who have retired under the voluntary retirement scheme is amortised over the payback period (36 months). I. Income Tax: Tax expense for the year, comprising of current tax and deferred tax, is included in the determination of net profit for the year. Deferred tax is recognised on all timing differences, subject to consideration of prudence in respect of deferred tax assets. 2. Sundry Debtors outstanding includes Rs. 1,073.34 lacs (2005: Rs. 844.09 lacs), which in accordance with the terms of the contracts were not due for payment as at 31st March, 2006. Sundry Creditors includes accrued interest of Rs. 63.54 lacs (2005: Rs. 63.54 lacs) payable to Mahindra & Mahindra Limited for acquisition of its MSL Division. Income from long-term contracts includes Export Benefits Rs. 0.38 lacs (2005: Rs. 13.72 lacs). Contingent Liabilities not provided for: (a) In respect of contracts for design, manufacture, supply, erection and commissioning of plant and equipment placed with the Company by various customers, the committed dates of completion had expired, and, hence, strictly in terms with the relative contracts, the Company could be liable for liquidated damages/penalties the amount of which is estimated at a ceiling of Rs. 946.71 lacs (2005: Rs. 769.53 lacs). However, the Company expects to have the liquidated damages/penalties waived. (b) Claims against the Company not acknowledged as debts: 31-03-2006 Rupees Lacs Gross Gross Gross 3.75 73.77 10.00 31-03-2005 Rupees Lacs 3.75 73.77
15.24 3.54 4.53 23.31 1.40 76.25 55.57 33.74 54.08 3.15 141.32 218.39
23.00 0.48 29.76 66.77 29.18 0.08 41.80 5.75 152.63 267.82
75.17 1.37 1,001.37
37.80 12.88 857.24
3. NOTES ON ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006 1. Significant Accounting Policies: A. Basis of Preparation of Accounts: The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Indian Companies Act, 1956. B. Fixed Assets: (a) Fixed Assets are stated at cost less depreciation/amortisation. (b) 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: (i) Buildings at project sites over 1 to 4 years, to coincide with the project period; and (ii) Vehicles over 2 to 10 years to coincide with the useful life. (c) Improvement to leasehold premises are amortised over the lease period (5 years). (d) Intangible assets (Software) is amortised on the straight line method over a period of three years. 5.
4.
Particulars Sales Tax: Income Tax: Labour Matters:
178
6. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 0.50 lacs (2005: Rs. Nil). 7. The Company had in an earlier year executed a contract in respect of which the customer had withheld its dues against claims for rectification aggregating Rs. 210 lacs. In addition, the Company has given bank guarantees aggregating Rs. 477 lacs as security towards liquidated damages. Whilst, the Company does not acknowledge these claims as debts, the Company in turn has counter claims aggregating Rs. 130 lacs for extra works done by the Company outside the purview of the original contract. The matters are under negotiation and the Company is confident that no liability would devolve on it on this account. 8. Miscellaneous Expenses include: (a) Amounts payable to the Auditors in respect of Audit Fees (including Service Tax) Rs. 4.41 lacs (2005: Rs. 4.41 lacs) and out-of-pocket expenses of Rs. 0.07 lacs (2005: Rs. 0.01 lacs). (b) Amounts payable as Professional Fees and out-of-pocket expenses to auditor/associate firm of the statutory auditors Rs. Nil (2005: Rs. 0.77 lacs). 9. The identification of suppliers as Small Scale Industrial Undertakings (SSIs) has been done on the basis of the information provided by the suppliers to the Company. On this basis, the disclosure of total outstanding dues of SSIs has been made in Schedules H and Q.
11. 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 P. 12. As required by the Sick Industrial Companies Act, 1985, the Company has filed an application (Form C) with the Board for Industrial and Financial Reconstruction on 8th September, 2004, since the accumulated losses of the Company are more than fifty per cent of its net worth and also the Company has incurred cash losses during the two immediately preceding financial years. 13. Having regard to the support from the Holding Company, Mahindra & Mahindra Ltd., towards achieving its business plan, including providing necessary support towards procurement of financial resources, the accounts have been prepared on a going concern basis. 14. Earning Per Share: 2005-06 Profit After Tax (Rs. in lacs) ..................... Weighted Average Number of Shares .... Earning Per Share (Basic/Diluted) (Rs.) ... Nominal Value Per Equity Share .............. 15. Related Party Disclosure: (A) Name of the related party and nature of relationship where control exists: Name of the Related Party Mahindra & Mahindra Ltd. Nature of Relationship Holding Company 44.80 15,500,000 0.29 10.00 2004-05 (794.53) 9,767,671 (8.13) 10.00
10. Managerial remuneration included in the Profit and Loss Account is Rs. 6.43 lacs (2005: Rs. 19.35 lacs) including perquisites Rs. 0.73 lacs (2005: Rs. 1.40 lacs). The said remuneration of Rs. 6.43 lacs is subject to the approval of the shareholders, by way of a special resolution, in the general meeting. (B) Related Party Transactions: Name of the Related Party Description of Relationship Nature of Transactions
Amount of Transactions
Rs. Lacs 200506 Mahindra & Mahindra Ltd. Holding Company Expenses incurred by M&M for Office Establishment Expenses incurred by company on behalf of Mahindra & Mahindra Ltd. Cumulative Redeemable Preference Shares Subscribed Equity Share Subscribed Rent Paid Sale of Office Building at Sewree Sale of Plant and Machinery at Sewree Interest on ICD Paid ICD Received ICD Repaid Mahindra Engineering & Chemical Products Limited Fellow Subsidiary Rent Paid Reimbursement of Expenses Payment made towards Purchase of Goods Loan Availed Repayment of Loan Interest Paid Purchase of Car Professional Charges 19.50 22.42 100.00 1.81 34.67 18.14 12.00 0.85 5.13 7.13 0.81 0.19 200405 17.54 7.22 1000.00 0.68 130.00 130.00 9.72 0.93 1.48 0.61
Amount Outstanding at the end of year Debit/(Credit) Rs. Lacs 200506 (12.24) 200405 (67.95)
(8.23)
Mahindra & Mahindra Financial Services Ltd.
Fellow Subsidiary
(6.32)
Mahindra Acres Consulting Engineering Ltd. Mahindra Holding & Finance Ltd.
Fellow Subsidiary
(0.16)
Fellow Subsidiary
Interest on ICD Paid ICD Received ICD Repaid Remuneration
6.43
2.74 332.00 332.00 19.35
Mr. Amar Banerjee
Key Management Personnel
179
16. Details of provisions and movements in each class of provisions as required by the Accounting Standard on Provisions, Contingent Liabilities and Contingent Assets (Accounting Standard-29) Rs. in Lacs Nature of Provision Leave Encashment 31st March, 31 March, 2006 2005 33.35 19.75 12.24 40.86 55.40 1.64 23.69 33.35
(b) For method used to determine the contract revenue during the year refer the significant accounting policy (Note 1F). (c) Method used to determine the stage of completion of contracts in progress is by comparing actual costs incurred as percentage of total estimated costs for the contract. (d) Aggregate amount of costs incurred upto reporting date is Rs. 15,497.48 lacs (2005: Rs. 11,175.73 lacs) in respect of contract in progress. (e) Recognised losses upto reporting date is Rs. 29.69 lacs (2005: Rs. 82.95 lacs). (f) Advances received are Rs. 956.28 lacs (2005: Rs. 123.30 lacs). (g) Retention money is Rs. 1,060.03 lacs (2005: Rs. 831.26 lacs). (h) Gross amount due from customer for contract work is Rs. 262.32 lacs (2005: Rs. 189.06 lacs). (i) Gross amount due to customers for contract work as a liability is Rs. 241.13 lacs (2005: Rs. 119.63 lacs). (j) Aggregate amount of cost incurred and recognised profits (less recognised losses) upto reporting date Rs. 16,096.95 lacs (2005: Rs. 11,111.43 lacs). 19. (A) Details of Derivative Instruments (for hedging) None (B) Details of foreign currency exposures that are not hedged by a derivative instrument or otherwise: Particulars Amount in Foreign Currency CHF 116,380 USD 56,000 Equivalent Amount in Rupees 40,31,403 25,07,680
Carrying Amount at the beginning of the year .................................................... Additional Provision made during the year Amount Used during the year ................. Carrying Amount at the end of the year ..
Brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits. Leave Encashment: Leave Encashment is a benefit to an employee in respect of encashment of accumulated leave to the credit of the employees either during employment or on separation as per the rules of the Company. 17. The Company is engaged in manufacturing/erection of Capital Goods (including parts thereof) and services in respect thereof, which constitutes one Business Segment. During the year, the Company has not made any material direct Export Sales. Accordingly, there is only one Geographical Segment. Hence, the requirement of disclosures of segment information is not applicable. 18. The disclosures as required by AS-7 (Revised) on Construction Contracts are as follows: (a) Contract revenue recognised as revenue during the year Rs. 5,386.95 lacs (Net) (2005: Rs. 2,018.43 lacs).
Sundry Creditors (Liability) ................
20. Previous years figures have been regrouped wherever necessary to conform to classification of the current year.
SCHEDULE: P (I) 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. (I) PARTICULARS IN RESPECT OF GOODS MANUFACTURED: Sl. Class of Goods No. Unit of Licensed MeasureCapacity ment per Annum [Note (A)] Nos. Nos. Nos. Nos. Nos. Nos. Sets Nos. 120 87 100 10 Installed Capacity per Annum [Note (A)] 120 87 100 10 Actual Production [Note (B) and (D)] 2,558 (2,074) 462 (462) Opening Stock Quantity Value Rs. Lacs Closing Stock Quantity Value Rs. Lacs Quantity Sales Value Rs. Lacs 453.74 } (293.78) 276.40 } (339.07)
1. 2.
Vibroscreens Separation Equipment: (a) Centrifuges (b) Mineral Oil Purifiers (c) Continuous Vegetable Oil Refining Plants (d) Spares
3.
Spares: (a) Ash Handling Plant [See Note (C) below] (b) Travelling Water Screens, Trash Cleaning Machines (Mechanical Cleaning Rakes) allied equipment and accessories
Sets
4.
Income from Long Term Contracts: (a) Ash Handling Plants [See Note (D) below] Nos. Sets Mtrs. Carried forward: 2 to 7* 7 3,982 (1,481) 89 (322) 18 (22) $1.72 (4.15) 15 (18) $0.23 $(1.72) 67,086 (56,946) 7,780 (382) 198,761 (73,065)
180
Sl. Class of Goods No.
Unit of Licensed Measure- Capacity ment per Annum [Note (A)] Kgs. Ft. Sq.Ft.
Installed Capacity per Annum [Note (A)]
Actual Production [Note (B) and (D)]
Opening Stock Quantity Value Rs. Lacs
Closing Stock Quantity Value Rs. Lacs Quantity
Sales Value Rs. Lacs
Brought forward: 543,361 (559,662) 155 (314) 1,124 (0)
(b) Travelling Water Screens, Trash Cleaning Machines (Mechanical Cleaning Rakes) allied equipment and accessories [See Note (E) below]
5,279.92 (1,966.09)
Nos.
20
20**
160.46 (72.71) 6,170.52 (2,671.65)
* Depending on the size of the plant according to Customer's Specification. $ These amounts are included under the head Manufactured Components in Schedules G and K. ** Depending on the size as per Customer's specification and application. NOTES TO SCHEDULE P (I): A. (a) The installed capacity has been certified by the Management, which the Auditors have relied on without verification, as this is a technical matter. (b) The licensed and installed capacity indicated above relate to the products for which the Company has been granted industrial licenses and does not include capacity available for undertaking jobs according to customers specific requirements, as it is not possible to quantify the same. B. Actual production includes production for captive consumption. C. Sales of manufactured component are out of production and opening stock from item 4(a). D. The manufacture, supply, erection and commissioning of a complete Ash Handling Plant as per customers specification is spread over several years. The Company simultaneously manufactures individual component parts and equipment for several plants. The manufactured as well as bought-out components and equipment are invoiced on delivery and are reflected in the turnover/income of the year in which they are delivered. Hence, it is not possible to state in which accounting year a complete plant is manufactured. Therefore, the Company has given quantitative details of manufactured components and equipment only under actual production, opening stock and closing stock and similar details of both manufactured and bought out components and equipment in respect of turnover/income. The Company did not have in stock as on 31st March, 2006 components and equipment for a complete Ash Handling Plant. The sale/income of Ash Handling Plants represents the quantity and value of manufactured and bought-out components equipment supplied against Six Orders (2005: Six) for the aforesaid plants. E. In respect of Travelling Water Screen, as per item 4(b), whilst the components are invoiced on delivery and the value is reflected in the turnover of the year of delivery, for the purpose of quantitative information, a travelling water screen is treated as having been produced/sold during the year in which all the critical components required for such assembly are produced/sold respectively. SCHEDULE: P(II) PARTICULARS OF RAW MATERIALS AND COMPONENTS CONSUMED: Sl. Description No. 1. Steel Items (Sheets, Tubes, etc.) Unit of Quantity Measurement Nos. Kgs. Mtrs. Sq. Feets Set 4,767 (25,902) 456,839 (402,213) 5,505 (7,142) (102) 43 (169) Value Rs. Lacs Notes: 1. The consumption in value has been ascertained on the basis of opening stock plus purchases less closing stock and includes adjustment of excesses and shortages as ascertained on physical count and write off of obsolete and unserviceable raw materials and components. 2. The consumption in value shown agaisnt item 3 is a balancing figure based on the total consumption shown in the Profit and Loss Account. P (III) Value of imports on C.I.F. Basis accounted for during the year: 2006 Rupees Lacs 92.34 2005 Rupees Lacs 345.65
}
}
Particulars 650.02 (264.39) P Components, Spare Parts, etc. (imports on cost and insurance basis) ...........
(IV) Expenditure in Foreign Currencies (subject to deduction of tax where applicable): 2006 Rupees Lacs 2005 Rupees Lacs 10.36 0.49 10.85
2.
Other Metals (Steel Shots, Lead, Tins, etc.)
Particulars Nos. Mtrs. Kgs. 1,189 (459) 1,001 (8) 856 (1) 42 () Technical Fees .................................. 5.98 (4.57) P Others ............................................... Total ............ (V) Earnings in Foreign Exchange: Particulars
` Sq. Feets 3. Other Components (including processing charges) Total
2006 Rupees Lacs 2,327.48
2005 Rupees Lacs 43.53
Export of Goods on F.O.B. Basis ...... 3,912.56 (1,697.29) 4,568.56 (1,966.25) Note:
F.O.B. value of exports includes local sales and income from long term contracts, 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.
181
P.
(VI) Value of Imported and Indigenous Consumption: Raw Material and Components* 2006 Particulars Imported ......................... Indigenously Obtained .... Total ................................ Rupees Lacs 105.79 4,462.77 4,568.56 % 2.32 97.68 100.00 Rupees Lacs 5.96 1,960.29 1,966.25 2005 % 0.30 99.70 100.00
SCHEDULE: Q Following are the names of Small Scale Industrial Undertakings (SSIs) to whom the Company owes sums which are outstanding for more than 30 days as on 31st March, 2006, 1. Aparna Enterprises 2. Accurate Springs 3. Alfa Heat Tech 4. The Allied Founders (P) Ltd. 5. Alloy Steels 6. Chandimata Iron Industries 7. Exponential Engineering Pvt. Ltd. 8. Indian Pneumatic & Hydraulic Co. 9. Jenco Industrial Corporation 10. Jwala Industries 11. Mayura Steel Pvt. Ltd. 12. Menon Metalliks Pvt. Ltd. 13. Neven Textile Engineers 14. Quality Patterns 15. Switzer Instruments Ltd. 16. Shah Industries & Commercial Corpn. 17. Salins Engineering works 18. Vidyut Green Bank (India) P. Ltd.
*Includes items used otherwise than for production, amount not ascertained. Notes: 1. See Note (i) on Schedule P (ii). 2. In giving the above information the Company has taken the view that spares and components as referred to Paragraph 4(D)(c) of Part II of Schedule VI covers only such items as go directly into production. P (VII) Previous years figures have been regrouped to conform with the current year.
182
SCHEDULE: R Additional information pursuant to the Provisions of Part IV of Schedule VI to the Companies Act, 1956:
Balance Sheet Abstract and Company's General Business Profile: I. Registration Details: Registration No. 1 1 Date - 9 3 4 4 7 Month Year State Code 1 1
Balance Sheet Date 3 1 - 0 3 - 2 0 0 6 II. Capital Raised During the Year (Amount in Rs. Thousands) Public Issue N I L Bonus Issue N I L III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities including Shareholders' Funds 5 6 4 6 6 4 Sources of Funds Paid-up Capital 3 1 0 0 0 0 Secured Loans 8 3 2 7 Application of Funds Net Fixed Assets 2 1 6 5 5 Net Current Assets 6 4 8 9 7 Miscellaneous Expenditure 1 1 2 8 3 IV. Performance of the Company (Amount in Rs. Thousands) Turnover (Sales and Other Income) 6 1 7 2 4 3 Profit/(Loss) Before Tax 5 4 0 9 Earnings per Share in Rupees 0 . 2 9 Total Expenditure 6 1 1 8 3 4 Profit/(Loss) after Tax 4 4 8 0 Dividend Rate % N I L Investments 2 0 Deferred Tax Liability (Net) N I L Accumulated Losses 2 6 8 8 2 3 Reserves and Surplus 3 8 8 5 6 Unsecured Loans 9 5 0 0 Total Assets 5 6 4 6 6 4 Rights Issue N I L Private Placement 1 0 0 0 0
V. Generic names of three Principal Products/Services of the Company (As per Monetary Terms) *Item Code No. (ITC Code) Product Description *Item Code No. (ITC Code) Product Description 8 4 2 8 9 0 2 0 A S H H A N D L I N G S Y S T E M
8 4 2 8 9 0 9 0 T R A V E L L I N G W A T E R S C R E E N
Signatures to Schedules A to R R. S. Kotian Company Secretary
Managing Director
Directors
Mumbai: 27th April, 2006

183
MAHINDRA GESCO DEVELOPERS LIMITED

Your Directors present their Seventh Report together with the audited accounts of your Company for the year ended 31st March, 2006. FINANCIAL HIGHLIGHTS (Rs. in lacs) 2006 Operating Income ........................................................................................................ Other Income ............................................................................................................... Total Income ................................................................................................................ Profit Before Depreciation, Interest and Taxation ...................................................... Less : Depreciation ..................................................................................................... Profit Before Interest and Taxation ............................................................................. Less : Interest ............................................................................................................ Profit Before Taxation .................................................................................................. Less : Provision for Taxation ...................................................................................... Current Tax ...................................................................................................... Deferred Tax (including MAT Credit) ............................................................... Profit for the year after Taxation ................................................................................. Add : Balance of Profit for earlier years .................................................................... Profit available for appropriation .................................................................................. Less : Proposed Dividend (including tax on distributed profits) ................................ Less : Transfer to General Reserve ........................................................................... Balance carried forward ............................................................................................... 167 482 1,100 2,190 3,290 1,295 27 1,968 105 444 785 1,405 2,190 2,190 12,113 300 12,413 2,413 228 2,185 436 1,749 2005 9,146 349 9,495 2,189 241 1,948 614 1,334
Operations The overall economic environment in the country continues to remain buoyant and business confidence is high. This is equally true for the infrastructure and real estate sectors. The realisation that impetus to the infrastructure sector, including of course real estate, an important component of this vital sector, can catalyse economic development in the country in an all pervasive manner could not have come at a better time. The buoyancy in real estate can be seen across the length and breadth of the country. The promulgation of the SEZ Act has induced developers and industrial houses to establish SEZs across industries and regions. Your Company is a pioneer in the field and has promoted Mahindra World City Developers Limited, which has established the first private sector SEZ at Chennai. It has three sector specific SEZs - IT, Auto Ancillary and Apparel. The Industrial Park of the SEZ is almost sold out. The Company is now planning to expand this into a fully integrated SEZ. Based on the success of Mahindra World City, Chennai, the Company has entered into an understanding with the State Governments of Rajasthan and Maharashtra to set up two multi-product SEZs at Jaipur and Karla, near Pune. During the year, your Company expanded its project activities.
184
While the residential project at Wakad (approximately 5.3 lacs sq.ft. of saleable area) near Pune called the Woods is heading towards completion having earlier been sold off in record time, two new projects aggregating approximately 8.0 lacs sq.ft. of saleable area were launched during the third quarter of the year under review. Sylvan County, spread over a sprawling campus of approximately 22 acres became your Companys first housing project in Chennai located in the Mahindra World City complex, now renowned for being the first private sector SEZ. This project has been virtually sold out even before start of construction. Mahindra Eminente, a premium residential complex, was launched in Goregaon, Mumbai. This is a high-rise develop ment covering approximately 2.7 lacs sq.ft. of saleable area, comprising premium flats intended for consumers who value space and better quality living. Your Company has acquired land in Faridabad for a residential project, which is expected to be launched in the current financial year, as soon as it receives the approvals. Your Company is expected to commence operations at Nasik during the later part of the current financial year. Efforts are continuing to expand the land bank and as indicated in the previous years report, moves are afoot to increase our footprint to some newer locations.
Various organization development initiatives were undertaken during the year. These are expected to help create a robust organization based on strong values, uniform and systematic business processes and people empowerment. Your Company will shortly be undertaking major marketing initiatives to create a differentiated brand identity which will provide customers the requisite value and comfort that they seek and which they have come to very profoundly associate with the Mahindra brand. Project revenues were significantly higher than the previous year having grown by over 36%. Current occupancy at the commercial complex and at business centres is near 100%. During the year, revenues have increased by around 32% and Profit Before Tax has increased from Rs.1334 lacs to Rs.1749 lacs registering a growth of 31%. Profit after Tax has increased from Rs.785 lacs to Rs.1100 lacs, showing a growth of 40%. The sharp increase in the capital employed represents the additions to the land bank. To achieve the aspirational growth targets set by the management, your Company will have to continuously add to its inventory, specially, since the land buying process is tedious and takes a long time. The resources required for acheiving this growth will be mobilised at an appropriate time. The Management Discussion and Analysis Report deals with the operations of your Company in detail and forms part of this Annual Report. Dividend Your directors have recommended dividend for the year on 55,00,000 13.10% Non-Cumulative Redeemable Preference shares of Rs.100 each and on 10,00,000 10.50% Non-Cumulative Redeemable Preference shares of Rs.100 each and a dividend of 10% on the paid-up equity capital of the Company. The total dividend payment including tax on distributed profits amounts to Rs.1295 lacs. The dividend, if approved, shall be subject to tax and shall be paid out of profits of the current and previous years. Corporate Governance A report on the Corporate Governance along with a Certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement are annexed to this Report. Directors Mr. Anand Mahindra, Mr. Uday Phadke and Mr. Sanjiv Kapoor retire by rotation and being eligible offer themselves for re-appointment. The Board at the Meeting held on 18th January, 2006, appointed Mr. Pranab Kumar Datta as an Additional Director. At the same meeting, the Board appointed Mr. Pranab Kumar Datta as the Managing Director, designating him as Managing Director & Chief Executive Officer for a period of five years with effect from 18th January, 2006, subject to the approvals of the Members of the Company and the Central Government.
Mr. Pranab Kumar Datta holds office upto the date of the forthcoming Annual General Meeting. The Company has received notice from a member signifying his intention to propose Mr.Pranab Kumar Datta as candidate for the office of Director. Your directors recommend his appointment as director of the Company. 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) ii) in the preparation of the annual accounts, the applicable accounting standards have been followed; 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, 2006 and of the profit of the Company for the year ended on that date; 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;
iii)
iv) the annual accounts have been prepared on a going concern basis. Corporate Social Responsibility Initiatives (CSR) As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since its inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the announcement made on the occasion of the 60th Anniversary of Mahindra & Mahindra Limited, that the Group would support a range of CSR initiatives by committing 1% of Profit after Tax (PAT) on a continuing basis. The 1% PAT would specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/or other Institutions, including K. C. Mahindra Education Trust and/or Mahindra Foundation, not related to the business of the Company or the welfare of the employees towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Companys estimated PAT for the year on a continuing basis until further review by the Board. A beginning in this direction was made by your Company during the current year by making a contribution of Rs. 5 lacs to a registered public charitable trust engaged in educational, training and research activities and socially pertinent issues for backward classes and rural communities.
185
Subsidiaries During the year, Mahindra World City (Maharashtra) Limited (formerly Mahindra Realty Limited) and Mahindra World City (Jaipur) Limited became subsidiaries of your Company. Both these companies will be developing Special Economic Zones (SEZs) near Pune and Jaipur, respectively. The other subsidiary company, Mahindra World City Developers Limited (formerly known as Mahindra Industrial Park Limited) has successfully implemented Indias first private sector SEZ near Chennai. Your Company, as a Co-Developer is doing a part of the residential development in that SEZ spread over approximately 22 acres. The Tirupur Water Supply & Sewerage project is being implemented by a consortium led by your Company. A subsidiary company, Mahindra Infrastructure Developers Limited is an equity participant in the project company. The project has successfully completed commissioning and has now entered the operations phase. The Statement pursuant to Section 212 of the Companies Act, 1956, containing details of the Companys subsidiaries, Mahindra Infrastructure Developers Limited, Mahindra World City Developers Limited, Mahindra World City (Maharashtra) Limited and Mahindra World City (Jaipur) Limited, is attached. The Consolidated Financial Statements of the Company and its subsidiary companies, prepared in accordance with Accounting Standard 21 prescribed by The Institute of Chartered Accountants of India, form part of the Annual Report and Accounts. Your Company has made an application to the Central Government seeking exemption from attaching the accounts, etc., of its subsidiaries, Mahindra Infrastructure Developers Limited, Mahindra World City Developers Limited, Mahindra World City (Maharashtra) Limited and Mahindra World City (Jaipur) Limited with the Balance Sheet of the Company. If 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, Report of the Board of Directors and Auditors of the subsidiaries are not required to be attached with 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. 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 Registered Office of the Company during working hours upto the date of the Annual General Meeting. Further, pursuant to Accounting Standard AS 21 issued by The Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include financial information of its subsidiaries. Auditors M/s. Kalyaniwalla & Mistry, Chartered Accountants and M/s. B. K. Khare & Co., Chartered Accountants, retire as Joint Auditors at the forthcoming Annual General Meeting and have given their consent for re-appointment. The members will be
186
required to appoint Auditors for the current year and fix their remuneration. As required under the provisions of Section 224 of the Companies Act, 1956, the Company has obtained written certificates from the above Auditors proposed to be re-appointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. Deposits and Loans/Advances Your Company has not accepted any deposits from the public or its employees during the year under review. The Company has not made any loans/advances which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the Company. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption respectively, are not applicable to the Company. Details of foreign exchange earnings and outgo during the year under review are furnished in the Notes to Accounts. Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956 and Rules made there under: The Company had three employees who were in receipt of remuneration of not less than Rs. 24,00,000 during the year 31st March, 2006 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 being sent to the shareholders does not include this Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Company. Acknowledgments The Directors would like to thank all clients and suppliers/ associates of your Company for the unstinted support received from them during the year. The Directors would also like to place on record their appreciation for the dedicated efforts and services put in by the employees of the Company. For and on behalf of the Board
Anand G. Mahindra Chairman Mumbai, April 25, 2006
Management Discussion & Analysis Report

The Management of the Company is pleased to present this report covering the activities of the Company during the year 2005-2006. I. The Overall Review The Companys focus on the residential segment continued as demand for housing remains buoyant and is expected to remain so at least for the near medium term. To expand the Companys operations it is inevitable that concerted efforts be made to increase land bank, all the more so since land buying is a tedious and tortuous process and therefore certain minimum pipeline inventory has to be maintained, to ensure continuity in operations. Consequently, the Company made further purchases of land parcels at Pimpri near Pune, Mumbai, Faridabad and Nasik. Land acquisition is an ongoing exercise and as already spelt out in the previous years report, the Company is planning to augment its presence in the industry by venturing into newer locations, which offer potential for the kind of development the Company is reputed for. New projects were launched at Chennai and Mumbai. The Chennai project located at Mahindra World City, reputed as the first private sector SEZ, marks the Companys foray into the residential market in Chennai. It may be noted that in the previous year the Company began its operation in Chennai through a commercial project undertaken for a very reputed private sector bank. The housing project is spread over approximately 22 acres involving construction of over approximately 5 lacs sq. ft of saleable area. This is a unique development comprising of premium semi-detached houses, luxurious fully detached bungalows and three bedroom apartments set in very pleasant and sylvan surroundings adjacent to the famous Chengelpet Lake. To reflect its eye-catching ambience and surroundings, the complex has been aptly christened as Sylvan County. The project was marketed uniquely through the use of direct marketing techniques, private presentations and effective use of the web as a communication medium. However, the attractiveness of the project can be gauged by the fact that it was verbally sold out upon its launch with minimal marketing efforts. Construction began towards the third quarter of the financial year and the project is expected to be completed within 2 years. The Company also launched a prestigious exclusive multistoreyed residential project at Goregaon, Mumbai. The housing units have been designed to meet the needs of the upwardly mobile consumers who value good living and luxuriant space. This project called Mahindra Eminente involving a saleable area of approximately 2.7 lacs sq ft was also launched in December and is expected to be ready in around two years. Architectural plans have been kept ready for the proposed new projects at Faridabad, Pimpri and Mumbai. II.
These will be launched as soon as the approvals are received. The commercial complexes at Delhi, Pune and Mumbai are all fully occupied. Business Centre activity continues to operate at an optimum level. The Company closed the year with a total income of Rs.12413 lacs, Profit before Tax of Rs.1749 lacs and Profit after Tax of Rs.1100 lacs. Since the Company is the flagship of the Infrastructure Sector, and carries its business directly and through its various subsidiary companies, it is only natural to expand its presence in the Sector not only directly but also through its various operating units. With the extremely fruitful and successful experience of the first SEZ project at Chennai, the Company responded to the invitations from the Governments of Rajasthan and Maharashtra to partner them in SEZ projects in their respective states. Towards this objective, Memorandum of Understandings have been signed by the Company with these two State Governments for establishing SEZs of approximately 3000 acres each at Jaipur and near Pune through its subsidiary companies. These SEZs are expected to further augment the Companys presence in the everexpanding infrastructure and real estate industry in the country. Mahindra World City, the brand name for SEZ business, has already established itself and the brand equity is only expected to enhance with the commencement of the newer SEZs. Business Environment The industry continued to experience buoyant conditions throughout the year. This was backed by a very healthy growth in the economy. The rising disposable incomes, changing mindsets and availability of easy finance are the significant contributors for consumers wanting to buy their housing units at an early age. With tightening liquidity conditions, interest rates have shown a rising trend. Land prices also continued to rise throughout the country, but notwithstanding this sustained rise, there has been no let up in demand as evidenced by the auctions of lands at Mumbai and some other places that received record response. IT and IT Enabled Services, which are the major drivers of growth for the real estate industry continue to experience buoyancy and as such the demand for commercial and housing space is unlikely to abate in the near future. Recently, the Government also announced a relaxation of FDI norms in retail, allowing single brand companies to commence operations. Perhaps it is a matter of time when the retail sector would be opened up fully for FDI. This would result in a further escalation in demand thereby allowing real estate developers the opportunity to exploit the resulting buoyant conditions. However, rising land prices is a cause of concern and together with the increase in interest and inputs costs such as cement and steel, it is inevitable that the increasing end product prices may begin to have an impact on demand.
187
III. Operations Review The new residential project covering over 5.3 lacs sq.ft of saleable area launched at Wakad near Pune in the previous year is satisfactorily heading towards completion. This project was sold out in record time. The multi-storeyed building projects at Goregaon (Mahindra Gardens) and Kanjur Marg (GE Gardens) have also been completed having earlier been sold through very innovative marketing strategies. As stated elsewhere in the report, a new housing project has been launched at Mahindra World City, Chennai. This project encompasses approximately 22 acres and is almost sold out. The project envisages development of 3 bedroom apartments, semi-detached houses, and fully detached bungalows in a sprawling campus, which provides contemporary and enviable amenities. This project too was marketed through use of innovative tools, the efficacy of which was demonstrated by the fact that with minimal marketing, it has been virtually sold out. Construction began in December and is expected to be completed in two years. The Company launched a premium residential complex covering a saleable area of 2.7 lacs sq. ft. at Goregaon, Mumbai, comprising of dwelling units in 3 BHK and 3BHK+ study configuration in two multi-storey towers. Space is at premium in this project and is targeted at the upwardly mobile businessmen and professionals who value space and are eager to provide corresponding comforts to their family that can induce healthy living and emotional well-being. The Company has further procured land at Faridabad, Pimpri and Mumbai aggregating to over 15 lacs sq.ft of saleable area. These projects are expected to be launched, as soon as the building approval plans are approved by the concerned authorities. The Company is also considering a new commercial development at Pimpri, near Pune. The land is already in possession of the Company and the development will be spread over 3 lacs sq. ft of saleable area. To increase its spread of operations, the Company has acquired land at Nasik and hopes to begin operations during the current year. It is exploring a few more locations in various parts of the country for expanding its portfolio of locations. The organization building initiatives continue relentlessly. The overhauling of the business processes for which a renowned consulting firm was engaged, was completed and new processes are under implementation. The Company has also engaged the Mahindra Institute of Quality for improving quality culture and initiating 6-Sigma programme. In order to further enhance its brand equity and closely align with its customers, major development initiatives have been undertaken in improving customer-centricity and escalating this vital value across all functions. IV. Other Activities During the year Mahindra Industrial Park Limited which
188
developed the countrys first Special Economic Zone (SEZ) in the private sector as a joint venture with the Government of Tamil Nadu was rechristened as Mahindra World City Developers Limited. The new name more aptly describes the nature of the operations of the company. Since SEZs are expected to be the harbinger for catalyzing economic growth at a much faster pace, as demonstrated by the Chinese example, and buoyed with the experience of the first SEZ at Chennai, the Company has promoted 2 new subsidiaries viz., Mahindra World City (Jaipur) Limited and Mahindra World City (Maharashtra) Limited which will be developing the SEZs at Jaipur and at Karla (near Pune) in partnerships with the Government of Rajasthan and Maharashtra respectively. These SEZs will be spread over approximately 3000 acres each. Memorandums of Understanding have been reached with the respective State Governments and the usual formalities are being complied with before the respective companies commence business operations. V. Financial Review During the year the Company reported a Profit before Tax of Rs.1749 lacs, an increase of 31% compared to the previous year, on top of the 73% growth recorded in the earlier year. Profit after Tax increased by 40% from Rs.785 lacs to Rs.1100 lacs. The capital employed by the Company has increased to Rs. 32008 lacs reflecting the investments in land acquisition. The increase in capital employed has largely been funded from debt and the Companys debt equity ratio, while having moved up from 0.27:1 to 0.66:1 is still very healthy. VI. Internal Controls The Company has an adequate system of internal controls commensurate with its nature of business and scale of operations. However, to contemporise the business processes, services of a renowned international management consultancy firm were engaged to re-craft business processes. Implementation of these processes are expected to further enhance the internal control systems. The internal audit activity is carried out by a firm which specialises in internal audit. They undertake the audit programme in accordance with the guidance of the Audit Committee of the Board. These reports are discussed with the management and are placed before the audit committee periodically. VII. Human Resources Organizational development is a continuing exercise and in this respect major initiatives in the area of Human Resources development have been taken including : a. b. Crafting of a Values Document by a multi functional task force Constitution of a Shadow Board of bright young managers to constantly critique the Companys strategy
so as to bring about greater ownership, and alignment and mid course correction if things are deviating from the intended plans. c. Comprehensive review of the Quality Journey so as to make it an integral part of the Companys values and culture. The Company in partnership with the Mahindra Institute of Quality has embarked on the 6-Sigma journey. Various development projects have been undertaken as a part of this journey. The world renowned Prof. Kume from Japan (a Freelance Consultant & Principal Advisor of Mahindra Institute of Quality) was invited to share his thoughts with the management team on his interpretation of quality and the recommended way forward for the Company, contextual to its nature of business and the status of the industry. Increasing employee engagement through various impactful initiatives on special occasions such as annual festivals, etc. Implementation of the Corporate Social Responsibility (CSR) in sync with the Mahindra Group philosophy. Organization members as a part of the Employee Social Option Programme (Esops), have spontaneously and willingly participated in various social causes such as cleaning & painting of a municipal school at Kandivali (East), contributing to Home for the Destitutes, Shanti Bhagini, Don Boscos, etc. Deputation of managers to various competency development programmes to broaden their perspective.
Land prices during the year spiralled upwards. The hectic speculative activity is resulting in land grabbing at any cost and this is an area of concern. To mitigate any adverse fall out, the Company is consciously employing a hedging strategy in a manner that will mitigate risk. Venturing into newer cities and expanding the footprint in the SEZ domain are an outcome of this approach. IX. Risks and Concerns Apart from the increase in land prices, inputs costs have also been constantly increasing. This is likely to squeeze margins if end product prices do not go up correspondingly. Increase in end product prices coupled with tight liquidity may impact demand. The Company is combating these risks by way of qualitative market research, quicker decision making, reducing its time to market for projects and by taking a fresh look at its entire set of processes, apart from undertaking a proactive approach towards problem resolution. The Company has a Risk Management Policy, which is being periodically reviewed. Project delays are likely because of a new regulation that requires environment clearance for residential projects involving capital outlay of more than Rs.50 crores. X. Business Outlook In our view, the real estate markets would continue to be buoyant in the coming year with growth coming from innovative products both in commercial and residential segments. During 2006-2007, your Companys focus would remain in the residential segment. It would endeavour a series of new launches to expand its presence and footprint.
d.
e.
f.
As of 31st March, 2006 the Company had 154 employees. VIII. Opportunities and Threats The Real Estate market is humungous in its size. The industry has only recently started receiving focus and it has swiftly responded to the stimulus. Both housing and commercial developments have escalated sharply, particularly during the last two years. The buoyancy in the economy and rising income levels can only propel the growth of the industry. This provides a tremendous opportunity to a Company whose values and reputation stand out prominently in the industry. The effort that the Company is making towards a holistically professional approach and all round development based on competency and people empowerment will enable it to exploit the growing opportunity in the industry and increase its share in the market place. Towards this end, the Company is planning forays into medium and smaller cities.
Certain statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forwardlooking 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 material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in government regulations, tax regimes, economic developments within India and other incidental factors.
189
Corporate Governance Report

1. Corporate Governance Philosophy Your Company is committed to good Corporate Governance and endeavours to implement the Code of Corporate Governance in its true spirit. The philosophy of your Company in relation to Corporate Governance is to ensure transparency in all its operations, make disclosures and enhance shareholder value without compromising in any way compliance with laws and regulations. Your Company believes that good governance brings about sustained corporate growth and long-term benefits for stakeholders. Your Company continues to follow procedures and practices in conformity with the Code of Corporate Governance as enunciated in the Listing Agreement. Details of the implementation of the Code follow in the paragraphs below. 2. Board of Directors The Company has a non-executive Chairman and more than one-third of the total number of Directors is independent. 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 Management of the Company is entrusted in the hands of the Key Management Personnel of the Company and is headed by the Managing Director & Chief Executive Officer who operates under the supervision and control of the Board. The Board reviews and approves strategy and oversees the actions and results of management to ensure that the long term objectives of enhancing stakeholder value are met. Mr. Anand G. Mahindra, Mr. Arun Nanda, Mr. Uday Y. Phadke and Mr. Hemant Luthra, non-executive Directors of your Company are in the whole-time employment of the holding Company, Mahindra & Mahindra Limited and draw remuneration from it. Apart from the above and apart from the reimbursement of expenses incurred in discharge of their duties and the remuneration that some of the nonexecutive Directors would be entitled to under the Companies Act, 1956, none of the Directors has any other material pecuniary relationships or transactions with the Company, its Promoters, its Directors, its Management, subsidiaries and Associates which in their judgement would affect their independence. The Senior Management has 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.
a)
Number of Board Meetings Five Board Meetings were held during the period 1st April, 2005 to 31st March, 2006 on the following dates:25th April, 2005, 27th July, 2005, 10th August, 2005, 25th October, 2005 and 18th January, 2006.
b)
Composition, Status, Attendance at the Board Meetings and at the last AGM: As on 31st March, 2006, Mahindra Gescos Board comprised of eight members. The Chairman of the Board and three other members are non-independent non-executive Directors. The Managing Director is an executive of the Company while remaining three members are independent Directors. The names and categories of Directors, their attendance at the Board Meetings held during the year and at the last Annual General Meeting are given below:
Name of the Director
Status
No of Board Meetings Held Attended
Attendance at the last AGM @
Mr. Anand G Mahindra Chairman Mr. Arun Nanda Vice-Chairman Mr. Uday Y Phadke Mr. Hemant Luthra Mr. Sanjiv Kapoor
Non-Independant Non-executive Non-Independant Non-executive Non-Independant Non-executive Non-Independant Non-executive Independant Non-executive
5 5 5 5
5 5 4 3
Yes Yes No Yes
5 5 5 5
4 3 5 1
Yes No Yes N.A.
Mr. Shailesh Haribhakti Independant Non-executive Mr. Anil Harish Mr. Pranab Kumar Datta Managing Director & Chief Executive Officer* Independant Non-executive Executive
* Appointed as Additional Director on 18th January, 2006 and attended the Board Meeting of 18th January, 2006 as a director. @ The Sixth Annual General Meeting was held on 10th August, 2005 c) Details of Directorships / Committee Memberships: As mandated by Clause 49, none of the Directors is a member of more than ten Board level Committees nor is any of them a Chairman of more than five committees in which they are members. The number of Directorships and Committee positions held by them in companies are given below :
190
Name of the Director Mr. Anand G. Mahindra (Chairman) Mr. Arun Nanda (Vice-Chairman) Mr. Uday Y. Phadke Mr. Hemant Luthra Mr. Sanjiv Kapoor (Independent Director) Mr. Shailesh Haribhakti (Independent Director) Mr. Anil Harish (Independent Director) Mr. Pranab Kumar Datta** (Managing Director & Chief Executive Officer
Director of Membership Chairmanship Public in in Companies* Committee Committee 12 1
3.
Notes on Directors seeking Appointment / Re-Appointment Mr. Anand G. Mahindra, Mr. Uday Y. Phadke and Mr. Sanjiv Kapoor retire by rotation and, being eligible offer themselves for re-appointment. Mr. Pranab Kumar Datta was appointed as an additional Director and subsequently as Managing Director & Chief Executive Officer. Mr. Datta holds office upto the date of this Annual General Meeting and is seeking re-appointment. The Company has received notice from a Member signifying his intention to propose Mr. Pranab Kumar Datta as candidate for the office of Director. Mr. Anand G. Mahindra
13 7 10
7 7 4
4 1 1
15
15
Mr. Anand Mahindra is the Chairman of the Company. He is the Vice-Chairman and Managing Director of Mahindra & Mahindra Limited (M & M). He was member of the Harvard College Cambridge, class of 1977, from where he graduated with a Magna cum Laude. In 1981 he obtained an MBA from the Harvard Business School. He later joined MUSCO, where he was appointed President and Deputy Managing Director in 1989. He was appointed Deputy Managing Director of M & M in April 1991. Mr. Anand Mahindra became Managing Director of M & M in April 1997. In January 2001, he was appointed Vice-Chairman of M & M. He is past President 2003-2004 of the Confederation of Indian Industry and has also been President of the prestigious Automotive Research Association of India (ARAI). He is a member of the Advisory Council of the Initiative on Corporate Governance of Harvard Business School, the Asia Pacific Advisory Board of the Harvard Business School, the Executive Committee of the Nehru Centre and the Governing Body of the National Institute of Bank Management and is the Co-Chairman of the International Council of the Asia Society in New York. He is also a Trustee of the K. C. Mahindra Education Trust and on the Board of Governors of the Mahindra United World College of India. Mr. Mahindra is on the Boards of Mahindra Gesco Developers Ltd, Mahindra & Mahindra Ltd, National Stock Exchange of India Ltd., Mahindra Ugine Steel Co. Ltd., Mahindra Intertrade Ltd., Mahindra & Mahindra Financial Services Ltd., Mahindra Sona Ltd., Mahindra Holdings & Finance Ltd., Kotak Mahindra Bank Ltd., Automartindia Ltd., Tech Mahindra Ltd., Avion Aerosols Pvt. Ltd., MW.Com India Pvt. Ltd., M.A.R.K. Hotels Pvt. Ltd., Angular Constructions Pvt. Ltd., Bristlecone Ltd., Cayman Islands, Mahindra International Ltd., Mahindra (China) Tractor Co. Ltd., Tech Mahindra (Americas) Inc.
including Directorship/Committee Memberships in Mahindra Gesco Developers Limited as of 31st March, 2006.
** appointed with effect from 18th January, 2006 d) 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 responsibility effectively, the Managing Director & Chief Executive Officer of the Company briefs the Board at every Meeting on the overall performance of the Company. A detailed functional report is also placed at every Board Meeting. Amongst other things, the Board also reviews strategy and business plans, annual operating and capital expenditure budgets, compliance with statutory/ regulatory requirements and review of major legal issues, adoption of quarterly/half-yearly/annual results, risk management policies, investors grievances, minutes and significant transactions of subsidiary companies, investment and exposure limits, major accounting provisions and writeoffs, corporate restructuring, minutes of meetings of the Audit Committee and Committee of Directors of the Board, etc.
191
Mr. Mahindra is on the Committees of the Board mentioned hereunder:

Name of Company Name of Committee Position Held Member
Mr. Phadke is on the Committees of the Board mentioned hereunder :

Name of Company Mahindra Gesco Developers Ltd. Mahindra Intertrade Ltd. Name of Committee Audit Audit Audit Audit Remuneration/ Compensation Audit Audit Audit Audit Position Held Member Member Member Member Member
Mahindra & Mahindra Ltd. Share Transfer and Shareholders/Investor Grievance Committee Research & Development Loans & Investment Mahindra Ugine Steel Co. Ltd. Mahindra & Mahindra Financial Services Ltd. Kotak Mahindra Bank Ltd.
Member Member
Mahindra Holdings & Finance Ltd. Mahindra & Mahindra Financial Services Ltd. Mahindra Holidays & Resorts (India) Ltd.
Remuneration Remuneration / Compensation Remuneration / Compensation Remuneration
Member
Member Chairman Member Member
Member Member
Mahindra Gujarat Tractor Ltd. Mahindra Shubhlabh Services Ltd.
Mahindra International Limited
Chairman
Mahindra Renault Private Ltd.
Mr. Mahindra does not hold any shares in the Company. Mr. Uday Y. Phadke Mr. Phadke joined the Mahindra group in 1973. He is the President of Finance & Legal affairs of Mahindra & Mahindra Ltd. and a member of the Group Management Board. Mr. Phadke is a member of the Institute of Chartered Accountants of India and Institute of Company Secretaries of India, besides having a Bachelors Degree in Commerce & Law. Mr. Phadke has been the Chairman of the Direct Tax Committee of Bombay Chambers of Commerce and Industry. Currently, he is on the Accounting Standards Board of the Institute of Chartered Accountants of India and is also a member on the National Committee on Professional Services of CII. Mr. Phadke is a Member and Convener of the Corporate Governance Cell (CGC) and a Trustee of the Employees Benefit Fund of Mahindra & Mahindra Limited. Mr. Phadke is on the Board of various Mahindra Group companies, such as Mahindra Gesco Developers Ltd, Mahindra Intertrade Ltd., Mahindra Holdings & Finance Ltd., Mahindra & Mahindra Financial Services Ltd., Mahindra Holidays & Resorts (India) Ltd., Mahindra Gujarat Tractor Ltd., Mahindra Shubhlabh Services Ltd., Mahindra Renault Pvt. Ltd., Mahindra & Mahindra South Africa (Pty) Ltd.
Mr. Phadke does not hold any shares in the Company. Mr. Sanjiv Kapoor A commerce graduate and F.C.A., Mr Sanjiv Kapoor is a partner of M/s. S K Kapoor & Co., one of the leading chartered accountancy firms and has been involved in the audits of many large Public Sector Organisations and Public Companies like RBI, PSU Banks, LIC, UTI and NTPC. In the year 1988-89, he was elected as the President of Kanpur Chartered Accountants Society. He is a member of the Kanpur Telephone Advisory Committee, Northern Railway Users Consultative Committee, and Vice-President of Upper India Chamber of Commerce. Mr. Kapoor is on the Boards of Mahindra Gesco Developers Ltd., UPSE Securities Ltd., Mahindra Word City Developers Ltd., Sahara Asset & Management Company Pvt. Ltd. Mr. Kapoor is on the Committees of the Board mentioned hereunder :
Name of Company Mahindra Gesco Developers Ltd. Name of Committee Audit Remuneration Position Held Chairman Chairman
Mr. Kapoor does not hold any shares in the Company. Mr. Pranab Kumar Datta Mr. Datta joined Mahindra Gesco in the latter half of 2003, as President & Chief Executive Officer. He is responsible for the day-to-day management of the Company, subject to the overall supervision and guidance of the Board of Directors. Mr. Datta is a Chartered Accountant by training
192
and has had an illustrious career in Finance, Marketing and General Management of over 34 years in leading Indian Companies like Rallis, Voltas, NELCO and Marico. Prior to joining Mahindra Gesco, he was CEO (Health Care)-Marico Industries Limited. Mr. Datta is on the Boards of Mahindra Gesco Developers Ltd., Mahindra Infrastructure Developers Ltd., Mahindra World City (Maharashtra) Limited (formerly known as Mahindra Realty Limited) and Knight Frank (I) Pvt. Ltd. Mr. Datta is the Chairman of the Audit Committee of Mahindra Infrastructure Developers Limited. He is also a member of Governing Council of National Real Estate Development Council (NAREDCO) and a member of Infrastructure Sub-Committee and of Construction and Real Estate Task Force, Western Region of Confederation of Indian Industry (CII). 4. Remuneration Policy While deciding on the remuneration to directors, the Board/ Remuneration Committee considers the performance of the Company, the current trends in the industry, the qualification of the appointee, his experience, past performance and other relevant factors. Remuneration paid to Directors Detailed information of Directors remuneration for the year 2005-06 is set forth below :
Name of the Director Category Sitting Fees Salary and Perquisites Superannuation and Provident Fund Total (Note 3) (Amount in Rupees) Mr. Anand G. Mahindra Chairman Mr. Arun Nanda Vice-Chairman Mr. Uday Y. Phadke Mr. Hemant Luthra Mr. Sanjiv Kapoor NonExecutive NonExecutive NonExecutive NonExecutive NonExecutive Independent NonExecutive Independent NonExecutive Independent Executive (Note 1) N.A. N.A. NIL
3. 4. 5. 6.
approval of the members at the ensuing Annual General Meeting and the approval of the Central Government. The notice period for Managing Director is one month. Aggregate of the Companys contributions to Superannuation Fund and Provident Fund The Company has not advanced any loans or granted any stock options to any of its Directors. No commission was paid to any of the Directors. Includes : a. b. c. Salary and Allowances of Rs. 638,633. Perquisites of Rs. 130,942. Performance pay and other benefits of Rs. 360,044.
Shares and Convertible Instruments held by Directors Mr. Pranab Dattas spouse holds nine shares in the Company jointly with Mr. Pranab Datta. No other director holds any shares and / or convertible instruments in the Company. 5. Committees of the Board Audit Committee The Audit Committee of your Company presently comprises of three independent Non-Executive Directors, namely Mr. Sanjiv Kapoor, Mr. Shailesh Haribhakti, Mr Anil Harish and one Non-Executive Director, Mr. Uday Y. Phadke. The terms of reference of the Committee are in accordance with the requirements of Clause 49 of the Listing Agreement and Section 292A of the Companies Act, 1956 and inter-alia includes : Overview of the Companys financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. Recommending to the Board, the appointment, reappointment and, if required, the replacement or removal of the statutory auditor and the fixation of their fees. Review of the internal control systems with the management, internal auditors and statutory auditors. Review with the management, the annual financial statements before submission to the Board for approval, with special emphasis on accounting policies and practices, compliance and other legal requirements concerning financial statements. Review the adequacy of internal audit function, significant internal audit findings and follow-ups thereon Review Management Discussion and Analysis. Review Material Individual Transactions with related parties not in normal course of business or which are not on an arms length basis. Review financial statements and investment of unlisted subsidairy companies.
(Note 1) (Note 1) (Note 1) 90,000 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. NIL NIL NIL 90,000
Mr. Shailesh Haribhakti
70,000
N.A.
N.A.
70,000
Mr. Anil Harish
1,20,000
N.A.
N.A.
1,20,000
Mr. Pranab Kumar Datta Managing Director & Chief Executive Officer (Note 2)
N.A.
11,29,619 (Note 6)
1,16,598
12,46,217
Notes : 1. Non-Executive Directors have voluntarily waived receipt of sitting fees for attending meetings of the Board / Committees of the Board of Directors of the Company. Appointed with effect from 18th January, 2006. Remuneration paid is approved by the Remuneration Committee and the Board of Directors and is subject to the
2.
Mr. Sanjiv Kapoor is the Chairman of the Committee. During the year under review six meetings were held : 25th April, 2005, 27th July, 2005, 10th August, 2005, 25th October, 2005, 19th December, 2005 and 18th January, 2006. Mr. Uday Phadke attended five meetings. Mr. Shailesh
193
Haribhakti and Mr. Sanjiv Kapoor attended four meetings. Mr. Anil Harish attended all meetings. The Vice-Chairman, the Managing Director & Chief Executive Officer, the Chief Financial Officer, the Internal and Statutory Auditors are regularly invited to attend the Audit Committee Meetings. The Company Secretary is the Secretary to the Committee. All the members of the Audit Committee possess strong accounting/financial management knowledge. Shareholders & Investors Grievance Committee The Shareholders and Investors Grievance Committee of your Company comprises of two non-executive directors, viz; Mr. Arun Nanda, Chairman and Mr. Hemant Luthra. The Committees objective is attending to investors complaints pertaining to transfers / transmission of shares, non-receipt of dividend / interest, and any other related matter. The Committee met once during the year and all the members attended the meeting. Remuneration Committee The Company has constituted a Remuneration Committee with effect from 18th January, 2006 consisting of three independent non-executive directors, viz. Mr. Sanjiv Kapoor, Mr. Shailesh Haribhakti and Mr. Anil Harish and one nonexecutive director, Mr. Arun Nanda. The terms of reference of the Remuneration Committee, inter-alia consists of the determination of the remuneration payable to the Managing Director. Mr. Sanjiv Kapoor is the Chairman of the Committee. The Committee met once during the year. All the members except Mr. Shailesh Haribhakti attended the meeting. Loans & Investment Committee The Loans & Investment Committee of your Company comprises of three non-executive directors, viz; Mr. Arun Nanda, Mr. Uday Phadke and Mr. Hemant Luthra. The Committees objective is to finalize within the parameters set by the Board, the terms on which the borrowings / investments would be made by the Company from time to time. Mr. Arun Nanda is the Chairman of the Committee. The Committee met eight times during the year and Mr. Nanda and Mr. Phadke attended all the meetings. Mr. Luthra did not attend any meeting. 6. GENERAL SHAREHOLDER INFORMATION Seventh Annual General Meeting Day / Date Time Venue : Friday, July 21, 2006 : 3.00 p.m. : Y.B. Chavan Centre, Gen. Jagannathrao Bhosale Marg, Next to Sachivalaya Gymkhana, Mumbai 400 021.
Details of Annual/Extraordinary General Meetings held during past three years

Year 2003 2004 2005 Date 31st July, 2003 30th July, 2004 10th August, 2005 Time 3.00 p.m 3.00 p.m 3.00 p.m Venue Y B Chavan Centre, Mumbai MVIRDC World Trade Center, Mumbai Y B Chavan Centre, Mumbai
Details of special resolutions passed in Annual/ Extraordinary General Meetings held during past three years 6th AGM Special resolution passed for increasing the limit of investment by FIIs including their subaccounts into equity shares of the company upto 30% of the paid-up equity share capital of the company 5th AGM Nil 4th AGM Nil
No special resolution was passed last year through postal ballot. No special resolution is proposed to be conducted through postal ballot. Dates of Book Closure Saturday, July 8, 2006 to Friday, July 21, 2006 (both days inclusive). Dividend Payment Date On or after July 21, 2006 Financial Calendar of the Company The financial year covers the period from 1st April to 31st March. Financial reporting for 2006 07 (Tentative): The First Quarter Results 30.6.2006 The Half Yearly Results 30.9.2006 Third Quarter Results 31.12.2006 Approval of Annual Accounts 31.3.2007 Listing on Stock Exchanges The equity shares of the Company are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited. Listing fees have been paid to the Stock Exchanges for the period upto 31st March, 2007. By end of July, 2006 By end of October, 2006 By end of January, 2007 By end of April, 2007
194
MGDLs stock exchange codes BSE NSE Demat ISIN in NSDL and CDSL for Equity Shares Year 2005 2005 2005 2005 2005 2005 2005 2005 2005 2006 2006 2006 Month April May June July August September October November December January February March High(Rs.) 138.00 148.55 157.25 224.00 239.90 294.00 337.70 389.90 463.00 448.00 416.00 535.00 532313 GESCOCORP EQ ISIN INE813A01018
Registrar and Share Transfer Agents Sharepro Services (India) Pvt Ltd. Registered Office Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai 400 099. Tel : 28215168, 28329828, 28215991 Fax : 28375646 E-mail:[email protected] Investor Relation Centre 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai - 400021. Tel : 22825163, 22881569
BSE Monthly Highs / Lows and Volumes Low(Rs.) 115.00 124.00 112.50 135.15 174.15 191.50 256.50 256.00 363.05 383.05 350.00 356.00 Monthly Volume 4,44,108 4,33,928 7,71,511 10,80,997 6,85,498 23,88,657 12,44,265 7,78,459 5,69,434 4,13,977 1,47,514 13,92,825
Share Transfer System 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. Pranab Kumar Datta, Managing Director & Chief Executive Officer, Mr. Anuj Mehra, Vice President Marketing and Mr. Suhas Kulkarni, Company Secretary have been severally authorised by the Board to approve the transfer of shares in physical form, not exceeding 5000 equity shares per transfer provided that the transferee does not hold 1,00,000 or more equity shares. As of date, there are no pending share transfers pertaining to the year under review. Distribution of Shareholding as on 31st March, 2006
No. of Equity shares No. of shareholders 72,592 3,136 1,090 499 410 597 254 82 32 25 46 44 78,807 % of shareholders 92.114 3.979 1.383 0.633 0.520 0.758 0.322 0.104 0.041 0.032 0.058 0.056 100.00 No. of shares held % of shareholding 4.682 1.483 0.885 0.572 0.622 1.420 1.193 0.641 0.367 0.377 1.124 86.635 100.00
Performance in comparison to BSE 500 Index

Year 2005 2005 2005 2005 2005 2005 2005 2005 2005 2006 2006 2006 Month April May June July August September October November December January February March MGDL Share Price Close (Rs.) 126.25 127.05 140.10 185.25 207.10 274.30 275.75 383.15 395.90 393.75 358.95 462.20 BSE 500 Index Close
2610.50 2829.20 2928.31 3124.78 3273.00 3521.83 3198.69 3568.37 3795.96 4004.96 4130.07 4516.73
1 100 101 200 201 300 301 400 401 500 501 1000 1001 2000 2001 3000 3001 4000 4001 5000 5001 10000 10001 & above Total
14,52,645 4,60,230 2,74,687 1,77,448 1,92,930 4,40,508 3,70,268 1,98,788 1,13,720 1,17,012 3,48,604 2,68,81,510 3,10,28,350
500 450
MGDL Close on BSE
6000 5000 4000 3000 2000 1000 0
400 350 300 250 200 150 100 50 0 AprMay- Jun- JulAug-Sep- Oct-Nov-Dec- Jan-Feb-Mar05 05 05 05 05 05 05 05 05 06 06 06 MGDL Close on BSE (Rs)
195
Shareholding Pattern as on 31st March, 2006 Category No. of Equity shares held Promoters Insurance Companies & Banks UTI and Mutual Funds FIIs NRIs/OBC/GDR Domestic Companies Resident Individuals Total 1,70,66,126 2,60,501 8,94,975 81,42,548 2,85,754 5,17,135 38,61,311 3,10,28,350
% of 1.
Status of Investors Complaints / Share transfers received during the period 1st April, 2005 to 31st March, 2006 Number of complaints received from the investors comprising of Non-receipt of Dividend, Non-receipt of Shares lodged for transfer, Non-Receipt of Annual Report, etc. Number of complaints resolved Complaints Pending as at 31st March, 2006 Number of Share transfers pending for approval as at 31st March, 2006 Disclosure of Accounting Treatment The financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, the Accounting Standards issued by The Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. 22
shareholding 55.00 0.84 2.88 26.24 0.93 1.67 12.44 100.00
2. 3. 4.
22 Nil Nil
Dematerialisation of Shares As of 31st March, 2006, 2,99,06,305 shares (96.38%) of total equity capital were held in Electronic form with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The Companys equity shares are traded in the electronic form. Requests for dematerialisation of shares are generally processed and confirmed within 7 days. Outstanding GDRs/ ADRs /Warrants or any convertible instruments, conversion date and likely impact on equity. As of 31st March, 2006, outstanding GDRs represent 1,52,140 equity shares. Since the underlying Equity Shares represented by GDRs have been allotted in full, the outstanding GDRs have no impact on the Equity Share Capital of the Company. Offices of the Company Registered Office 5th floor, Mahindra Towers, Worli, Mumbai 400 018. Tel: 022-24929353/54 Branch Offices Mahindra Towers, 2A, Bhikaji Cama Place, New Delhi 110 066. Tel: 011-26173787/26194977 City Point, 2nd Floor, Office No. 215-A, B & C, Boat Club Road, Pune 411 001. Tel: 95-20-56010142 / 43 Ground floor, Mahindra Towers, 17/18 Patullos Road, Chennai 600 006. Tel : 044-43510000 Shareholders may correspond with the Company at its registered office and / or with the Registrars and Share Transfer Agents, Sharepro Services (I) Pvt. Ltd. Compliance Officer Mr. Suhas Kulkarni Company Secretary Mahindra Gesco Developers Limited 5th floor, Mahindra Towers, Worli, Mumbai - 400 018. Tel : 022-24929353 Fax : 022-24975084 E-mail : [email protected]
7.
8.
Materially Significant Related Party Transactions During the financial year 2005-06, 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 No. 18 in Schedule 21 to Annual Accounts of the Annual Report.
9.
Compliance with clause 49 Mandatory Requirements The Company is fully compliant with all applicable mandatory requirements of the revised Clause 49. Non-Mandatory Requirements
The Company has set up the Remuneration Committee of the Board of Directors, the details of which have been provided under the section Committees of the Board. The financial statments of the Company are unqualified. The Company has not non- mandatory requirements. adopted other
10. Other Disclosures Details of Non-compliance Relating to Capital Markets The Company has complied with all the requirements of regulatory authorities. No penalties/strictures were imposed on the Company by Stock Exchanges or SEBI or any statutory authority on any matter related to capital market since the listing of the Companys equity shares.
196
Code of Conduct The Board of Directors of the Company has laid down two separate Codes of Conduct one for Directors and other for Senior Management and employees. These codes are posted on the Companys website, www.mahindragesco.com. All Board Members and Senior Management Personnel have affirmed compliance with the Code of Conduct for the year under review. Declaration to this effect signed by the Managing Director & Chief Executive Officer is annexed to this report.
Material Non-listed Indian Subsidiary Company Mahindra World City Developers Limited, is a material non-listed Indian subsidiary under the revised Clause 49. Mr. Sanjiv Kapoor, Independent Director of the Company, is on the Board of above referred material non-listed Indian subsidiary. The Audit Committee of the Company has periodically reviewed financial statements of subsidiary companies.
Means of Communication The quarterly, half-yearly and yearly results are published in national and local dailies. The quarterly and halfyearly results are not sent individually to the shareholders. The Company also informs stock exchanges in a prompt manner, all price sensitive information or such other matters which in its opinion, are material and relevant for the shareholders and subsequently issues a press release on the said matters. Further, Company has also been complying with the listing requirement for filing of its financial results under the EDIFAR system of SEBI. The Companys official news and releases are displayed on the Companys website www.mahindragesco.com . Mumbai, April 25, 2006
Code for Prevention of Insider-Trading Practices In compliance with the SEBI regulation 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.
Risk Assessment and Minimisation procedures are in existence and are reviewed periodically.
Managing Director & CEOs Declaration on Code of Conduct

As required by Clause 49 of the Listing Agreement the Managing Director & CEOs Declaration for Code of Conduct is given below : To The Members of Mahindra Gesco Developers Limited I, Pranab Kumar Datta, Managing Director & Chief Executive Officer of the Company declare that all Board Members and Senior Management of the Company have affirmed compliance with the Code of Conduct. For Mahindra Gesco Developers Limited Pranab Kumar Datta Mananging Director & Chief Executive Officer
Mumbai, April 25, 2006
197
Auditors Certificate on Corporate Governance

To The Members of Mahindra Gesco Developers Limited, Mumbai We have examined the compliance of the conditions of Corporate Governance by Mahindra Gesco Developers Limited (the Company) for the year ended on March 31, 2006 as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchange. The compliance of the 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 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 Clause 49 of the above mentioned Listing Agreement. We further 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 and on behalf of Kalyaniwalla & Mistry Chartered Accountants Viraf R. Mehta Partner M. No. 32083 Mumbai Dated: April 25, 2006
For and on behalf of B. K. Khare & Co. Chartered Accountants Padmini Khare Kaicker Partner M. No. 44784 Mumbai Dated: April 25, 2006
198
AUDITORS REPORT To the Members of Mahindra Gesco Developers Limited

1. We have audited the attached Balance Sheet of Mahindra Gesco Developers Limited as at 31st March 2006 and the Profit and Loss Account and the Cash Flow Statement of the Company 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, issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, we give 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: a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of the books. The Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account. In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. Without qualifying our opinion, we draw attention to: i) Note No. 7 (c) of schedule 21 of the accounts regarding construction work-in-progress, project advances and interest accrued thereon which include Rs. 86,58,50,770 on account of certain projects, the commencement of which has been delayed pending resolution of certain matters including receipt of appropriate approvals and outcome of court cases. 5. ii) Note No. 12 of Schedule 21 of the accounts regarding managerial remuneration, which is subject to approval of Central Government and approval of members at the ensuing annual general meeting.
f)
2.
In respect of projects under long term contracts undertaken and/or financed by the Company [Note no. 1(e), 7(a) & 7(b)], we have relied upon the managements estimates of the percentage of completion, costs to completion and the projection of revenues expected from projects owing to the technical nature of such estimates, on the basis of which profits/losses have been accounted, interest income accrued and realisibility of the construction work in progress and project advances determined. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the notes thereon give the information required by the Companies Act, 1956, in the manner so required and subject to the matter referred to in paragraph (f) above, give a true and fair view in conformity with the accounting principles generally accepted in India: i) ii) iii) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006, in the case of the Profit and Loss Account, of the profit for the year ended on that date, and in the case of Cash Flow Statement, of the cash flows for the year ended on that date.
g)
3.
4.
b)
c)
On the basis of the written representations received from the Directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2006 from being appointed as a Director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
d)
For and on behalf of Kalyaniwalla and Mistry Chartered Accountants B.K.Khare and Co. Chartered Accountants
e)
Viraf R. Mehta Partner M. No. 32083 Mumbai, April 25, 2006
Padmini Khare Kaicker Partner M. No. 44784 Mumbai, April 25, 2006
199
ANNEXURE TO THE AUDITORS REPORT

Referred to in Paragraph (3) of our report even on the accounts of Mahindra Gesco Developers Limited for the year ended 31st March, 2006. 1) (i) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. The Company has a program for physical verification of fixed assets at periodic intervals. In our opinion, the period of verification is reasonable having regard to the size of the /company and the nature of its assets. No material discrepancies have been reported on such verification. 8) As informed to us, the maintenance of cost records has been prescribed by the Central Government under Section 209(1) (d) of the Companies Act, 1956, in respect of the activities carried on by the Company. (i) According to the records of the Company, the Company is generally regular in depositing 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 statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of Income tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty and Excise Duty were outstanding, at the year for a period of more than six month from the date they became payable. According to the information and explanation given to us, there are no dues of Sales Tax, Customs Duty, Wealth Tax, Excise Duty or Cess outstanding on account of any dispute, other than four cases of disputed Income Tax demands as under: Amount Forum where case is (Rupees) pending 14,57,974 Income tax Appellate Tribunal 3,94,22,983 Income tax Appellate Tribunal (Appeal being filed) 68,74,543 Commissioner of Income Tax (Appeals) 8,29,88,101 Commissioner of Income Tax (Appeals)
(ii)
9)
(iii) In our opinion, the disposal of fixed assets during the year does not affect the going concern assumption. 2) The Management has conducted physical verification of inventory at reasonable intervals. The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. The Company has not granted /taken any loans, secured or unsecured to / from parties listed in the register maintained under Section 301 of the Companies Act, 1956. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchase of inventory, fixed assets and for the sale of goods and services. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in the internal control system. (i) 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. 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, the transactions made in pursuance of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.
(ii)
3)
4)
Sr. Assessment year No. 1 2 3 4 Block period (1995-2001) 2001-02 2002-03 2003-04
5)
(ii)
10) The Company does not have accumulated losses at the end of the financial year and it has not incurred any cash losses in the current year and in the immediately preceding financial year. 11) According to the information and explanations given to us, and based on the documents and records produced before us, the Company has not defaulted in repayment of dues to banks. 12) According to the information and explanations given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares and other securities. 13) In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statute applicable to chit fund and nidhi /mutual benefit fund/societies.
6)
In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Companies Act, 1956, and the rules framed thereunder. The Company has an internal audit system, which in our opinion is commensurate with the size of the Company and the nature of its business.
7)
200
14) The Company does not deal or trade in shares, securities, debentures and other investment. 15) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions, the terms and conditions whereof are prejudicial to the interest of the Company. 16) As informed to us, the term loans were applied for the purpose for which the loans were obtained. 17) According to the information and explanations given to us, on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on short-term basis for long term investment. 18) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956. 19) The Company did not issue any debentures during the year.
20) The Company has not raised any money through a public issue during the year. 21) Bases on the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year.
For and on behalf of Kalyaniwalla and Mistry Chartered Accountants B.K.Khare and Co. Chartered Accountants
Viraf R. Mehta Partner M. No. 32083 Mumbai, April 25, 2006
Padmini Khare Kaicker Partner M. No. 44784 Mumbai, April 25, 2006
201

Current Year Rupees Previous Year Rupees
Schedule SOURCES OF FUNDS Shareholders Funds: Share Capital .............................................................. Reserves and Surplus ................................................ Loan Funds: Secured Loans ........................................................... Unsecured Loans ....................................................... Deferred Tax Liability/(Asset) (Net) ........................ TOTAL .... APPLICATION OF FUNDS Fixed Assets .............................................................. Gross Block ................................................................ Less: Depreciation ..................................................... Net Block ................................................................... Investments .............................................................. Current Assets, Loans and Advances: Inventories ................................................................. Sundry Debtors .......................................................... Cash and Bank Balances ............................................ Other Current Assets ................................................. Loans and Advances .................................................. 8 9 10 11 12 7 6 3 4 5 1 2
960,283,500 967,584,705 1,927,868,205 183,221,486 1,089,700,000 1,272,921,486 14,510 3,200,804,201
960,280,800 987,086,572 1,947,367,372 24,319,903 506,000,000 530,319,903 (62,869,159) 2,414,818,116
567,885,080 225,239,386 342,645,694 957,748,690 1,661,436,766 189,195,919 161,121,356 256,239,735 933,188,231 3,201,182,007
589,528,833 213,725,606 375,803,227 936,378,690 665,070,602 124,817,794 238,683,289 256,636,292 1,079,420,940 2,364,628,917 1,091,698,734 170,293,984 1,261,992,718 1,102,636,199 2,414,818,116
Less: Current Liabilities and Provisions: Current Liabilities ....................................................... Provisions ................................................................... 13 14 985,830,577 314,941,613 1,300,772,190 Net Current Assets .................................................... TOTAL .... Notes to Accounts ..................................................... 21 1,900,409,817 3,200,804,201
The Schedules referred to above form an integral part of the Balance Sheet As per our Report attached hereto Signatures to the Balance Sheet and Schedules 1 to 14 and 21 For and on behalf of Kalyaniwalla & Mistry Chartered Accountants Viraf R. Mehta Partner For and on behalf of B.K. Khare & Co. Chartered Accountants Padmini Khare Kaicker Partner For and on behalf of the Board Anand G. Mahindra Chairman Suhas Kulkarni Company Secretary Arun Nanda Vice-Chairman
Pranab Datta Managing Director & C.E.O. S. Krishnan Chief Financial Officer

202
Current Year Rupees 1,211,260,486 30,037,321 1,241,297,807 EXPENDITURE Operating Expenses ................................................... Employee Remuneration and Benefits ...................... Administration and Other Expenses .......................... Interest and Finance Charges .................................... Depreciation ............................................................... 17 18 19 20 865,979,535 63,907,893 70,094,897 43,673,239 22,782,727 1,066,438,291 Profit Before Taxation .............................................. Less: Provision for Current Taxation .......................... Add: MAT Credit eligible for set off ........................... Less: Provision for Deferred Taxation ........................ Profit for the Year After Tax .................................... Add: Balance brought forward from previous year .... Amount Available for Appropriation ........................... APPROPRIATIONS Proposed Dividend On Equity Shares ................................................ On Preference Shares ......................................... 31,028,350 82,550,000 15,929,364 2,750,146 196,772,376 329,030,236 Basic and Diluted Earnings Per Share (Refer Note 20, Schedule 21) .............................................................. Notes to Accounts ..................................................... 21 3.55 2.53 219,024,389 219,024,389 174,859,516 16,684,428 (14,714,428) 62,883,669 110,005,847 219,024,389 329,030,236 621,155,730 43,860,190 65,551,113 61,365,339 24,139,477 816,071,849 133,403,490 10,510,000 44,344,350 78,549,140 140,475,249 219,024,389 Previous Year Rupees 914,594,454 34,880,885 949,475,339
Schedule INCOME Operating Income ...................................................... Other Income ............................................................. 15 16
Tax on Distributed Profit ............................................ Transfer to General Reserve ...................................... Balance Carried to Balance Sheet ..............................
The Schedules referred to above form an integral part of the Profit and Loss Account As per our Report attached hereto Signatures to the Profit and Loss Account and Schedules 15 to 21 For and on behalf of Kalyaniwalla & Mistry Chartered Accountants Viraf R. Mehta Partner For and on behalf of B.K. Khare & Co. Chartered Accountants Padmini Khare Kaicker Partner For and on behalf of the Board Anand G. Mahindra Chairman Suhas Kulkarni Company Secretary Arun Nanda Vice-Chairman

203
Current Year Rupees A. Cash flow from Operating Activities Net Profit Before Tax ....................................................................................... Adjustments for: Depreciation ............................................................................................... Provision for Diminution in value of investments written back .................. Loss on Sale of Investments ...................................................................... Considered Separately: Interest Income .......................................................................................... Interest Expenses ...................................................................................... Dividend Income ........................................................................................ Profit on Sale of Fixed Assets .................................................................... Operating Profit Before Working Capital Changes ............................... Adjustments for: Trade and Other Receivables ..................................................................... Inventories .................................................................................................. Trade Payables and Other Liabilities .......................................................... Cash Generated from Operations .............................................................. Income Taxes (Paid)/Received ................................................................... Net Cash (used in)/from Operating Activities ............................................. B. Cash Flow from Investing Activities Purchase of Fixed Assets .................................................................................. Proceeds from Sale of Fixed Assets ................................................................. Proceeds from Sale of Investments .................................................................. Investment in Subsidiary ................................................................................... Interest Received .............................................................................................. Dividend Received ............................................................................................. Income Taxes Paid ............................................................................................ Deposits/Advances with Companies ................................................................. Net Cash from Investing Activities .................................................................... C. Cash Flow from Financing Activities Increase in Borrowings ...................................................................................... Repayment of Borrowings ................................................................................ Interest Paid ...................................................................................................... Redemption of Preference Shares .................................................................... Issue of Share Capital ........................................................................................ Net Cash used in Financing Activities ............................................................... Net Increase/(Decrease) in Cash and Cash Equivalents .................................... 174,859,516 22,782,727 (11,590,702) 43,673,239 (1,200,000) (7,108,498) 221,416,282 148,396,134 (991,366,164) (111,329,788) (732,883,536) (55,353,428) (788,236,964) (7,047,107) 24,530,410 (21,370,000) 11,987,259 1,200,000 (1,473,692) 7,826,870 1,236,101,583 (493,500,000) (39,756,122) 2,700 702,848,161 (77,561,933) Previous Year Rupees 133,403,490 24,139,477 (4,593,750) 4,954,030 (17,855,319) 61,365,339 (800,000) (4,993,085) 195,260,182 (17,593,200) 44,617,976 156,556,966 378,841,924 (20,175,582) 358,666,342 (9,065,731) 40,005,622 4,155,970 (24,381,430) 22,573,660 800,000 (365,626) 37,400,000 71,122,465 645,518,771 (811,100,000) (63,889,787) (256,075,080) 14,400 (485,531,696) (55,742,889)
Cash and Cash Equivalents (Opening) ............................................................... 238,683,289 294,426,178 Cash and Cash Equivalents (Closing) ................................................................ 161,121,356 238,683,289 Notes: 1. Sale of fixed assets excludes profit/loss on sale of properties, which is considered as operating income/expense. 2. To finance working capital requirements, the Companys bankers have sanctioned a total fund based limit of Rs. 400,000,000 (Previous Year Rs. 400,000,000). Of these, limits utilised as on March 31, 2006 is Rs. 183,221,486 (Previous Year Rs. 24,319,903). 3. The figures for the previous year have been regrouped wherever necessary to conform to current years classification.
As per our Report attached hereto For and on behalf of Kalyaniwalla & Mistry Chartered Accountants Viraf R. Mehta Partner For and on behalf of B.K. Khare & Co. Chartered Accountants Padmini Khare Kaicker Partner For and on behalf of the Board Anand G. Mahindra Chairman Suhas Kulkarni Company Secretary Arun Nanda Vice-Chairman

204
Schedules annexed to and forming part of the Balance Sheet as at 31st March, 2006
SCHEDULE 1 SHARE CAPITAL Authorised: 41,000,000 Equity Shares of Rs. 10 each 6,500,000 Preference Shares of Rs. 100 each 9,000,000 Preference Shares of Rs. 10 each 6,000,000 Unclassified Shares of Rs. 10 each Issued: 31,074,501 Equity Shares of Rs. 10 each 5,500,000 13.10% Non-Cumulative Redeemable Preference Shares of Rs. 100 each (Refer Note 3a) 1,000,000 10.50% Non-Cumulative Redeemable Preference Shares of Rs. 100 each (Refer Note 3b) Subscribed and Paid-up: 31,028,350 Equity Shares of Rs. 10 each fully paid-up 5,500,000 13.10% Non-Cumulative Redeemable Preference Shares of Rs. 100 each fully paid-up (Refer Note 3a) 1,000,000 10.50% Non-Cumulative Redeemable Preference Shares of Rs. 100 each fully paid-up (Refer Note 3b) Current Year Previous Year Rupees Rupees 410,000,000 650,000,000 90,000,000 60,000,000 1,210,000,000 310,745,010 410,000,000 650,000,000 90,000,000 60,000,000 1,210,000,000 310,745,010 SCHEDULE 2 RESERVES AND SURPLUS Capital Redemption Reserve: Balance as per last Balance Sheet Add: Transfer from General Reserve Share Premium Account: Balance as per last Balance Sheet General Reserve: Balance as per last Balance Sheet Add: Transfer from Profit and Loss Account 550,000,000 550,000,000 Less: Transfer to Capital Redemption Reserve Less: Premium on Redemption of Preference Shares 100,000,000 960,745,010 100,000,000 960,745,010 Profit and Loss Account 507,367,700 2,750,146 763,442,780 (85,358,360) 175,336,123 175,336,123 85,358,360 85,358,360 85,358,360 85,358,360 Current Year Previous Year Rupees Rupees
(170,716,720) 510,117,846 196,722,376 967,584,705 507,367,700 219,024,389 987,086,572
310,283,500
310,280,800
SCHEDULE 3 SECURED LOANS (Refer Note 4) Overdrafts from Banks 183,221,486 183,221,486 SCHEDULE 4 UNSECURED LOANS (Refer Note 5) 24,319,903 24,319,903
550,000,000
550,000,000
100,000,000 960,283,500
100,000,000 960,280,800
Short Term Loans From Banks From Companies Other Loans 700,000,000 3,700,000 386,000,000 1,089,700,000 SCHEDULE 5 DEFERRED TAX LIABILITY (NET): Deferred Tax Liability Relating to: Difference between book and Tax Depreciation Deferred Tax Asset Relating to: Business loss carried forward Demerger Expenses Expenses allowable on Actual Payment 48,978,245 2,259,608 51,237,853 14,510 110,468,919 2,680,557 2,472,679 115,622,155 (62,869,159) 51,252,363 52,752,996 400,000,000 106,000,000 506,000,000
Of the above: a) 31,074,501 Equity Shares of Rs. 10 each 5,500,000 13.10% Non-Cumulative Redeemable Preference Shares of Rs. 100 each 1,000,000 10.50% Non-Cumulative Redeemable Preference Shares of Rs. 100 each have been issued for consideration other than cash, pursuant to the two Schemes of Arrangements b) 12,566,126 Equity Shares are held by Mahindra & Mahindra Ltd. the ultimate Holding Company 4,500,000 Equity Shares are held by Mahindra Holdings and Finance Limited a subsidiary of Mahindra & Mahindra Ltd., the ultimate Holding Company 5,500,000 13.10% Non-Cumulative Redeemable Preference Shares are held by Mahindra & Mahindra Ltd., the ultimate Holding Company 1,000,000 10.50% Non-Cumulative Redeemable Preference Shares are held by Mahindra Holdings and Finance Limited, a subsidiary of Mahindra & Mahindra Ltd., the ultimate Holding Company Mahindra & Mahindra Limited and Mahindra Holdings & Finance Limited are constituents of the Mahindra & Mahindra group as defined in Section 2(ef) of the Monopolies and Restrictive Traded Practices Act, 1969, in relation to the Company. SCHEDULE 6 FIXED ASSETS Particulars April 1, 2005 Rupees Land Building Furniture and Fixtures Plant and Machinery Computers Vehicles Total Previous Year Total 18,473,758 510,105,372 13,776,368 23,183,159 12,888,581 11,101,595 589,528,833 626,101,983 COST Additions Deductions
(In Rupees) As at March 31, 2006 Rupees 18,473,758 488,182,780 13,907,523 23,451,296 16,671,848 7,197,875 567,885,080 589,528,833 Upto March 31, 2005 Rupees 176,580,101 7,338,078 12,026,152 11,171,747 6,609,528 213,725,606 200,212,481 DEPRECIATION Deductions For the during year the year Rupees Rupees 6,259,723 179,840 134,056 564,754 4,130,574 11,268,947 10,626,352 15,893,120 1,385,777 1,631,364 2,650,736 1,221,730 22,782,727 24,139,477 Upto March 31, 2006 Rupees 186,213,498 8,544,015 13,523,460 13,257,729 3,700,684 225,239,386 213,725,606 NET BLOCK As at As at March 31, March 31, 2006 2005 Rupees Rupees 18,473,758 301,969,282 5,363,508 9,927,836 3,414,119 3,497,191 342,645,694 375,803,227 18,473,758 333,525,271 6,438,290 11,157,007 1,716,834 4,492,067 375,803,227
Rupees 413,797 508,000 4,412,445 1,712,865 7,047,107 9,065,739
Rupees 21,922,592 282,642 239,863 629,178 5,616,585 28,690,860 45,638,889
205
SCHEDULE 7 INVESTMENTS (Refer Note 6) Long Term Investments (At Cost) Unquoted, Trade Equity Shares: In Subsidiary Companies: Mahindra Infrastructure Developers Limited (16,00,000 Shares acquired during the year) Mahindra World City Developers Ltd. (formerly Mahindra Industrial Park Ltd.) Mahindra World City (Jaipur) Ltd. (50,000 Shares acquired during the year (Refer Note 6(b)) Mahindra World City (Maharashtra) Ltd. (Formerly Mahindra Realty Ltd. (37,000 Shares acquired during the year) (Refer Note 6(b)) In Others: Deepmangal Developers Private Ltd. Knight Frank (I) Pvt. Ltd. Mahindra Ashtech Limited Mahindra Knowledge Park (Mohali) Limited Preference Shares: In Subsidiary Company: Mahindra World City Developers Ltd. (formerly Mahindra Industrial Park Ltd.) (6% Cumulative Redeemable Preference Shares) In Others: Mahindra Knowledge Park (Mohali) Limited (7% Non-Cumulative Redeemable Participating Optionally Convertible Preference Shares) Less: Provision for Diminution in Value of Investment
Face Number of Value Shares/ Rupees Units
Current Year Rupees
Previous Year Rupees
SCHEDULE 11 OTHER CURRENT ASSETS Interest accrued on Project Advances (Refer Note 7b) Less: Provision for Impairment in Asset Value Interest Accrued on Deposits
Current Year Previous Year Rupees Rupees 407,225,551 (155,015,000) 252,210,551 4,029,184 256,239,735 407,547,177 (155,015,000) 252,532,177 4,104,115 256,636,292
10 10 10
14,400,000 12,553,565 500,000
144,000,000 125,917,080 5,000,000
128,000,000 125,917,080 SCHEDULE 12 LOANS AND ADVANCES (Unsecured, Considered Good, unless otherwise stated) Advances recoverable in Cash or in Kind or for value to be received Project Advances (Refer Notes 7b and 7c) Considered Good Considered Doubtful
51,902,256 667,502,710 12,124,652 679,627,362 (12,124,652) 667,502,710 17,404,000 171,708,306 6,338,831 18,332,128 933,188,231
49,844,716 867,157,938 12,124,652 879,282,590 (12,124,652) 867,157,938 22,404,000 114,881,186 7,247,827 17,885,273 1,079,420,940
10
37,000
370,000
100 10 10 10
177 400,000 1 6
28,461,600 4,000,000 10 60
28,461,600 4,000,000 10 60
Less: Provision for Doubtful Advances Inter-corporate Deposits Advance Payment of Income Tax Staff Loans/Advances Deposits
100
6,500,000
650,000,000
650,000,000
SCHEDULE 13 CURRENT LIABILITIES Sundry Creditors (Refer Note 8a) Due to Subsidiary Co. Advances and Deposits Unclaimed Dividends (Refer Note 8b) Other Liabilities Interest Accrued on Loans but not Due 362,715,195 3,400,000 411,615,545 1,458,611 200,982,518 5,658,708 985,830,577 SCHEDULE 14 PROVISIONS 383,666,083 28,688,795 490,454,951 1,514,766 185,632,548 1,741,591 1,091,698,734
10
50,000
500,000 958,248,750 (500,060) 957,748,690
500,000 936,878,750 (500,060) 936,378,690
SCHEDULE 8 INVENTORIES (At lower of cost and net realisable value) Stock-in-Trade: Construction Work-in-Progress (Refer Notes 7a and 7c)
Current Year Previous Year Rupees Rupees
Provision for Taxation Proposed Dividend Provision for Losses to project completion (Refer Note 8c) Provision for Retirement Leave Encashment Benefits Provision for Gratuity
58,218,440 129,507,714 124,103,371 2,458,124 653,964 314,941,613
41,760,010 124,103,371 2,642,783 1,787,820 170,293,984
38,751,089 1,622,685,677 1,661,436,766
63,632,487 601,438,115 665,070,602
SCHEDULE 9 SUNDRY DEBTORS (Unsecured, Considered Good) Outstanding over six months Other Debts 29,704,894 159,491,025 189,195,919 37,279,800 87,537,994 124,817,794
Schedules annexed to and forming part of the Profit and Loss Account for the year ended 31st March, 2006
SCHEDULE 15 OPERATING INCOME Income from Operation of Commercial Complexes* (gross) Income from Projects Current year Previous year Rupees Rupees 114,272,278 1,006,408,212 48,192,094 42,387,902 1,211,260,486 88,045,062 718,817,056 54,930,637 40,146,193 12,655,506 914,594,454
SCHEDULE 10 CASH AND BANK BALANCES Cash on Hand Balances with Scheduled Banks: On Current Accounts On Deposit Accounts 40,639,938 120,262,689 161,121,356 19,738,682 218,731,901 238,683,289 218,729 212,706
Project Management Fees* (gross) Business Centre Revenues* (gross) Profit on Sale of Properties
* (Income Tax deducted at source Rs. 18,921,615; Previous Year Rs. 12,821,638)
206
SCHEDULE 16 OTHER INCOME Interest Income (Gross)* On Inter Corporate Deposits On Bank Deposits Others
SCHEDULE 18 EMPLOYMENT REMUNERATION AND BENEFITS Salaries, Allowance and Bonus Contribution to Provident and Other Funds Staff Welfare Expenses
Current Year Previous Year Rupees Rupees 72,357,741 4,867,419 5,692,624 82,917,784 49,372,070 4,456,294 4,475,766 58,304,130 (14,443,940) 43,860,190
2,485,075 6,088,807 3,016,820 1,200,000 7,108,498 10,138,121 30,037,321
1,581,559 7,392,130 8,881,630 800,000 4,993,085 4,593,750 6,638,731 34,880,885
Dividend on Long Term Trade Investments Profit on Sale of Fixed Assets (Net) Provision for Loss on Sale of Investment written back Miscellaneous Income
Less: Allocated to Projects
(19,009,891) 63,907,893
*(Income Tax deducted at source Rs. 1,473,692; Previous Year Rs. 365,626)
SCHEDULE 19 ADMINISTRATION AND OTHER EXPENSES Rent, Rates and Taxes 16,157,580 405,278 16,888,818 378,363
SCHEDULE 17 OPERATING EXPENSES Cost of Projects: Opening Stock: Stock-in-Trade Work-in-Progress
Insurance Repairs and Maintenance: Building
3,035,531 3,344,305 520,620 11,116,425 16,902,134 3,609,458 4,110,896 2,816,876 2,416,250 5,659,544 70,094,897
3,896,292 3,391,500 685,235 7,538,355 11,274,916 3,584,797 3,388,054 830,617 1,655,560 4,594,030 7,444,576 65,551,113
63,632,487 601,438,115 665,070,602
74,696,592 634,991,986 709,688,578
Others Electricity Charges Travelling and Conveyance Legal and Professional Fees Printing and Stationery
Add: Expenses incurred during the year: Land Cost/Premium for Development Rights Architect Fees Preliminaries and Site Expenses Civil, Electrical Contracting, etc. Interest (Net) Overheads Allocated Payment to Local Agencies Insurance Legal and Professional Fees 1,081,167,695 25,554,570 4,809,745 550,166,996 40,585,126 19,009,891 3,089,887 1,860,305 272,180 1,726,516,395 2,391,586,997 Less: Closing Stock: Stock-in-Trade Work-in-Progress (38,751,089) (1,622,685,677) (1,661,436,766) 730,150,231 Project Management Fees Rent Ground Rent Property Tax Insurance Repairs and Maintenance Commercial Properties Communication Professional Fees Brokerage Advertisement, Marketing and Business Development Electricity Other Operating Expenses 1,356,916 17,341,450 2,218,081 2,224,693 164,166 22,052,541 2,097,742 2,753,527 29,269,310 35,938,964 20,411,914 865,979,535 (63,632,487) (601,438,115) (665,070,602) 497,286,336 1,440,000 17,648,208 2,218,083 2,607,390 64,960 18,018,185 2,033,959 319,270 5,157,302 35,654,466 28,189,744 10,517,827 621,155,730 88,000,000 16,180,343 13,229,972 302,314,840 3,292,035 14,443,940 12,414,881 827,009 1,965,340 452,668,360 1,162,356,938
Telephone, Postage and Courier Sales Promotion and Entertainment Auditors Remuneration Loss on Sale of Investment Miscellaneous Expenses
SCHEDULE 20 INTEREST On Fixed Loans On Other Deposits/Loans 25,269,339 58,989,026 84,258,365 Less: Allocated to Projects (40,585,126) 43,673,239 36,061,001 28,596,373 64,657,374 (3,292,035) 61,365,339
207
Schedules annexed to and forming part of the Balance Sheet as at 31st March, 2006, and the Profit and Loss Account for the year ended 31st March, 2006
SCHEDULE 21 NOTES TO ACCOUNTS 1. SIGNIFICANT ACCOUNTING POLICIES: a) Accounting Convention: The financial statements are prepared under the historical cost convention in accordance with the Generally Accepted Accounting Principles in India, the Accounting Standards issued by The Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. b) Fixed Assets: Fixed assets are stated at cost of acquisition or construction less accumulated depreciation. Cost includes all incidental expenses related to acquisition and installation, other pre-operation expenses and interest in case of construction. The carrying amount of cash generating units/assets is reviewed at the balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognised whenever carrying amount exceeds the recoverable amount. Depreciation on fixed assets is provided on the written down value method at the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on assets acquired during the year is provided for the full year and no depreciation is provided in the year of disposal. c) Investments: Investments are classified into long term and current investments. Long-term investments are carried at cost, provision for diminution, if any, in the value of each long-term investment is made to recognise a decline, other than of a temporary nature. Current investments are carried individually at lower of cost and fair value and the resultant decline, if any, is charged to revenue. d) Inventories: Inventories are valued at lower of cost and net realisable value. Construction Work-in-Progress includes cost of land, premium for development rights, construction costs and allocated interest and expenses incidental to the projects undertaken by the Company. e) Revenue Recognition: Income from real estate sales is recognised on the transfer of all significant risks and rewards of ownership to the buyers and it is not unreasonable to expect ultimate collection and no significant uncertainty exists regarding the amount of consideration. However if, at the time of transfer substantial acts are yet to the performed under the contract, revenue is recognised on proportionate basis as the acts are performed, i.e., on the percentage of completion basis. Income from long term contracting assignments is also recognised on the percentage on completion basis. As the long-term contracts necessarily extend beyond one year, revision in costs and revenues estimated during the course of the contract are reflected in the accounting period in which the facts requiring the revision become known. Unbilled costs are carried as construction work-in-progress. Determination of revenues under the percentage of completion method necessarily involves making estimates by the Company, some of which are of a technical nature, concerning, where relevant, the percentages of completion, costs to completion, the expected revenues from the project/ activity and the foreseeable losses to completion. Such estimates have been relied upon by the auditors. 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 claims submitted. Where the management fee is linked to the revenue generation from the project, revenue is recognised on the percentage of completion basis. Income from operation of commercial complexes is recognised over the tenure of the lease/service agreement. i)
Income from services rendered in respect of project is inclusive of service tax recoverable from the clients. Interest income is accounted on an accrual basis at contracted rates except where there is uncertainty of ultimate collection. Dividend income is recognised when the right to receive the same is established. f) Retirement Benefits: Retirement benefits to the employees comprising of payments under defined contribution plans like provident fund, family pension and superannuation are charged to profit and loss account. The liability in respect of defined benefit schemes like gratuity and leave encashment benefits on retirement is provided on the basis of actuarial valuation as at the year end. The liabilities for gratuity and superannuation are funded through schemes of the Life Insurance Corporation of India. g) Borrowing Costs: Borrowing costs that are directly attributable to long-term project management and development activities are capitalised as part of project cost. Other borrowing costs are recognised as expense in the period in which they are incurred. Borrowing costs are capitalised as part of project cost when the activities that are necessary to prepare the asset for its intended use or sale are in progress. Borrowing costs are suspended from capitalisation on the project when development work on the project is interrupted for extended periods. h) Provision for Taxation: The expense comprises both current and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities using the applicable tax rates and tax laws. Deferred tax assets and liabilities are recognised for future tax consequences attributable to the timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent periods and are measured using tax rates enacted or substantively enacted as at the Balance Sheet date. Deferred Tax assets are not recognised unless, in the management judgement, there is virtual certainty that sufficient future taxable income will be available against which deferred tax assets can be realised. The carrying amount of deferred tax is reviewed at each balance sheet date. Segment Information: The Company operates in two main segments; namely, Operating of commercial complexes and Projects, Project Management and Development activities. The segments have been identified and reported taking into account the differing risks and returns and the internal business reporting systems. 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. Provisions and Contingent Liabilities: Provisions are recognised in the accounts in respect of present probable obligations, the amount of which can be reliably estimated. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. 2. Equity Share Capital: The allotment of 46,151 (Previous Year 46,421) equity shares of the Company has been kept in abeyance in accordance with Section 206A of the Companies Act, 1956, till such time as the title of the bonafide owner of the shares is certified by the concerned Stock Exchange or the Special Court (Trial of Offences relating to Transactions in Securities). 270 (Previous Year 1,440) equity shares of Rs. 10 each have been allotted during the year out of the shares kept in abeyance. Preference Share Capital: a) The 13.10% Non-Cumulative Redeemable Preference Shares are redeemable at par on 30th September, 2006. b) The 10.50% Non-Cumulative Redeemable Preference Shares are redeemable at par at the option of the Company at any time between 23rd March 2004 and 22nd March, 2011.
j)
3.
208
4.
Secured Loans: Overdrafts from banks are secured by hypothecation of the entire current assets of the Company and mortgage of immovable properties of the Company and that of a third party.
Current Year Previous Year Rupees Rupees Future minimum lease payments under non-cancellable operating leases Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years 10. Contingent Liabilities: Matter
5.
Unsecured Loans: Unsecured loans of Rs. 703,700,000 (Previous Year Rs. 403,000,000) are repayable on call or by 31st March, 2007.
33,609,228 As at 31st March, 2006 Rupees
31,087,832 As at 31st March, 2005 Rupees
6.
Investments: a) In the opinion of the Management, no loss is expected to arise in respect of Investments for which an additional provision is required to be made in the accounts. b) During the year, the Company has invested in 37,000 Equity Shares (74% stake) of Mahindra World City (Maharashtra) Ltd. (MWCML) (formerly Mahindra Realty Ltd.) and 500,000 Equity Shares (100% stake) of Mahindra World City (Jaipur) Ltd. (MWCJL). Thus, MRL and MWCJL have become subsidiaries of the Company w.e.f. 21st September, 2005 and 26th August, 2005, respectively. a) Claims against the Company not acknowledged as debts represent A suit filed by a party in the Delhi High Court, and disputed by the Company, for recovery of brokerage in respect of a transaction relating to operating of commercial complexes. In the opinion of the management the above claim is not sustainable.
4,266,771
4,266,771
7.
Inventories, Current Assets, Loans and Advances: a) Construction Work-in-Progress represents materials at site and unbilled costs on the projects. Based on projections and estimates by the Company of the expected revenues and costs to completion, provision for losses to completion and/or write off of costs carried to inventory have been made on projects where the expected revenues are lower than the estimated costs to completion. In the opinion of the management, the net realisable value of the construction work in progress will not be lower than the costs so included therein. b) Project advances and interest accrued thereon represent the amounts recoverable from the proceeds of projects undertaken/financed by the Company as per the contracted terms. The advances as well as the interest thereon are considered good and fully recoverable based on inter-alia the estimates and projections by the Company of the project costs and revenues. c) Construction Work-in-Progress, Project Advances and Interest accrued thereon referred to in 7(a) and 7(b) above, include Rs. 865,850,770 (Previous year Rs. 865,850,770) 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.
b) Guarantees Guarantees issued by a bank are on behalf of third parties and counter guaranteed by the Company, against which the Company has received counter guarantees from the respective parties c) Income tax matters under appeal The Income tax Department has sought to re-classify certain business income as income from house property, in respect of which the Company has partially succeeded in appeal and would pursue the matter further
32,062,500
145,157,597
105,989,749
11. The Company has filed its detailed refuting a claim by a land-owner against the Company amounting to Rs. 304,052,300 in respect of a project management agreement pending arbitration. The Company has been legally advised that the claim invoked by the land-owner is unsustainable. 12. Managerial Remuneration: Current Year Previous Year Rupees Rupees Salaries and Allowances Contribution to Provident and Superannuation Funds Perquisites (estimated monetary value) Total 998,677 116,598 130,942 1,246,217
8.
Sundry Creditors and Provisions: a) The Company did not owe any amounts to Small Scale Industrial Undertakings as on the Balance Sheet date. b) There are no amounts due and outstanding to be credited to Investor Education and Protection Fund. c) The Company has, in case of certain projects, provided for Rs. 124,103,371 (Previous year 124,103,371) as provision for losses to project completion. The amount has been determined using best estimates with regard to percentage of completion, foreseeable costs to completion and revenues from the project activity. However, considering future business scenario, inflation in construction costs and market movement causing changes in realisation, which cannot be presently quantified, the final outcome may differ from that presently estimated.
Remuneration to the Managing Director and Chief Executive Office is for the period 18th January, 2006 to March 31st March, 2006, and is subject to the approval of the members at the ensuing Annual General Meeting and the approval of the Central Government. There was no managerial person employed in the previous year. 13. Computation of Net Profit in accordance with Section 349 of the Companies Act, 1956: Current Year Previous Year Rupees Rupees Rupees Profit before Tax Add: Depreciation as per Accounts Managerial Remuneration Directors Fees Profit on disposal of fixed assets allowable as per proviso to Section 349 Less: Depreciation under Section 350 Profit on disposal of fixed assets not allowable as per proviso to Section 349 Net Profit as per Section 349 of the Companies Act, 1956 5% of Net Profit as computed above 22,782,727 1,246,217 280,000 174,859,516 133,403,490 24,139,477 60,000
9.
Leases: The Companys significant leasing arrangements are in respect of operating leases for Commercial and Residential premises. a) Lease income from operating leases is recognised on a straight-line basis over the period of lease. The particulars of the premises given under operating leases are as under: Current Year Previous Year Rupees Rupees Gross Carrying Amount of Premises 359,523,790 321,334,826 Accumulated Depreciation 140,402,285 106,918,735 Depreciation for the year 11,532,711 11,285,057 Future minimum lease payments under non-cancellable operating leases 25,845,814 23,634,886 Not later than 1 year Later than 1 year and not later than 5 years 8,378,440 Later than 5 years b) Lease expenditure for operating leases is recognised on a straight-line basis over the period of lease. The particulars of the premises taken on operating leases are as under:
5,440,887
29,749,831 2,046,09,347
4,454,139 162,057,106 24,139,477
22,782,727
7,108,498
29,891,225 174,718,122 8,735,906
17,648.592 120,269,037 6,013,452
209
14. Auditors' Remuneration (including service tax): Audit Fees Tax Audit Fees Tax Matters Certification and Other Services 15. Earnings in Foreign Currency: Consideration received on Sale of Residential Units Total 16. Expenditure in Foreign Currency: On Foreign Travel For Other Matters: Professional Fees Others Total 17. Segmental Reporting: Operating of Commercial Complexes
Current Year Previous Year Rupees Rupees 1,033,125 137,750 515,300 730,075 2,416,250 826,500 84,900 55,100 689,060 1,655,560
18. Related Parties: List of Related Parties: Enterprises Controlling the Company Mahindra & Mahindra Limited Mahindra Holdings & Finance Limited Holding Company Enterprises under the control of the Company
Ultimate Holding Company a subsidiary of the Ultimate Mahindra Infrastructure Developers Limited Mahindra World City Developers Limited (formerly known as Mahindra Industrial Park Limited) Mahindra World City (Jaipur) Limited (with effect from 26th August, 2005) Mahindra World City Maharashtra Ltd. (Formerly Mahindra Realty Limited with effect from 21st September, 2005)
2,180,878 2,180,878 81,034 3,741,638 3,822,672 Projects, Project Management and Development Others
182,785 264,336 447,121 Consolidated
Fellow Subsidiaries: Tech Mahindra Limited (formerly known as Mahindra-British Telecom Limited) Mahindra MiddleEast Electrical Steel Service Centre (FZC) Mahindra & Mahindra Financial Services Limited Mahindra Intertrade Limited Mahindra Steel Service Centre Limited NBS International Limited Mahindra Acres Consulting Engineers Limited Mahindra Ashtech Limited Mahindra Holidays & Resorts India Limited Mahindra Automotive Steels Private Limited (with effect from 2nd June, 2005) Mahindra Engineering & Chemical Products Limited Mahindra Holidays & Resorts (USA) Inc. Bristlecone India Limited Tech Mahindra GmbH (formerly known as MBT GmbH) Tech Mahindra Singapore (Pte.) Limited (formerly known as MBT Software Technologies Pte. Ltd.) Tech Mahindra (R&D Services) Limited (with effect from 28th November, 2005) Tech Mahindra (R&D Services) Inc. (with effect from 28th November, 2005)
REVENUE External Revenue Previous Year Inter-segment Revenues Previous Year TOTAL REVENUE Previous Year SEGMENT RESULT Previous Year Unallocated Corporate Expenses Net of Unallocated Income Previous Year Operating Profit Previous Year Interest Expense Previous Year Interest Income Previous Year Income Taxes Previous Year NET PROFIT Previous Year OTHER INFORMATION Segment Assets Previous Year Unallocated Corporate Assets Previous Year TOTAL ASSETS Previous Year Segment Liabilities Previous Year Unallocated Corporate Liabilities Previous Year TOTAL LIABILITIES Previous Year Capital Expenditure Previous Year Depreciation Previous Year Non-Cash Expenses other than Depreciation Previous Year
115,194,920 1,055,489,988 103,853,017 778,528,577 115,194,920 1,055,488,988 103,853,017 778,528,577 47,200,213 275,544,921 45,296,395 228,309,310
42,410,203 40,146,193 42,410,203 40,146,193 6,987,770 5,454,154
1,213,094,111 922,527,788 1,213,094,111 922,527,788 329,732,904 279,059,860 (122,790,850) (102,146,350) 206,942,054 176,913,510 (43,673,239) (61,365,339) 11,590,702 17,855,319 (64,853,669) (54,854,350) 110,005,847 78,549,140 3,970,072,346 3,173,881,126 531,518,555 565,798,867 4,501,590,901 3,739,679,993 1,665,316,510 1,029,374,771 778,869,453 762,937,850 2,444,185,963 1,792,312,621 7,047,107 9,065,739 22,782,727 24,139,477
Mahindra Logisoft Business Solutions Limited Automartindia Limited Mahindra (USA) Inc. Bristlecone (UK) Limited Mahindra Gujarat Tractor Limited Mahindra Shubhlabh Service Limited Mahindra Insurance Brokers Limited Mahindra (China) Tractor Company Limited (with effect from 13th May, 2005) Mahindra Europe s.r.l. (with effect from 30th May, 2005) Bristlecone Limited, Cayman Islands Bristlecone Inc. Mahindra & Mahindra South Africa (Pty.) Limited Tech Mahindra (Thailand) Limited (with effect from 21st February, 2006) Mahindra International Limited (with effect from 1st November, 2005) Stokes Group Limited (with effect from 3rd January, 2006)
287,342,914 315,554,751
3,657,202,883 2,843,454,893
25,526,549 14,871,482
287,342,914 315,554,751 72,043,673 65,188,482
3,657,202,883 2,843,454,893 1,583,286,573 950,521,189
25,526,549 14,871,482 9,986,264 13,665,100
72,043,673 65,188,482 13,351,146 14,174,645
1,583,286,573 950,521,189 1,020,037 803,057 652,067 375,041
9,986,264 13,665,100 361,720 518,276 1,637,290 671,363
Note: The segment result for Projects, Project Management and Development activity is arrived at after considering an interest of Rs. 1,065,006 (Previous Year Rs. 3,292,035), as it formed part of the cost of projects according to the method of accounting followed by the Company.
Plexion Technology (India) Private Limited Tech Mahindra (R&D Services) (with effect from 15th February, 2006) Pte. Limited (with effect from 28th November, 2005) Jensand Limited (with effect from 3rd January, 2006) Stokes Forgings Limited (with effect from 3rd January, 2006) Mahindra SAR Transmission Private Limited Tech Mahindra Foundation (with effect from 22nd March, 2006)
210
Bristlecone GmbH Plexion Technologies (UK) Ltd. (with effect from 15th February, 2006) Plexion Technologies GmbH, Germany (with effect from 15th February, 2006) Mahindra Engineering Design & Development Company Limited Plexion Technologies Incorporated USA (with effect from 15th February, 2006)
Bristlecone (Singapore) Pte. Ltd. Stokes Forgings Dudley Limited (with effect from 3rd January, 2006) Mahindra Ugine Steel Company Ltd. (with effect from 21st June, 2005) Console Estate & Investment Limited (Ceased with effect from 20th March, 2006) Tech Mahindra (Americas) Inc. (formerly known as MBT International Inc.)
Transactions with related parties during the year and balance as on 31st March, 2006 (Rupees) Nature of Transactions Enterprise Enterprise Companies controlling under the under common the control of the control Company Company including Fellow Subsidiaries 3,678061 1,634486 88,000,000 1,458,069 21,370,000 24,000,000 3,706,218 51,548 3,459,197 28,688,795 1,356,916 1,440,000 890,600 279,653 6,937,500 2,46,000 279,859 293,577 Joint Ventures/ Associates Key Management Personnel
Mahindra Overseas Investment Company Mahindra BT Investment Company (Mauritius) Limited (Mauritius) Limited (with effect from 9th May, 2005) Key Management Personnel Mr. Pranab Datta Managing Director & Chief Executive Officer
Enterprises over which key management personnel are able to exercise significant influence Nil
Rendering of Services 36,223,264 Previous Year 23,954,662 Purchase of Goods 130,000,000 Previous Year Receiving of Services 13,425,641 Previous Year 13,195,440 Purchase of Fixed Assets 891,241 Previous Year Remuneration Previous Year Expense Reimbursement 1,550,479 Previous Year 1,188,064 Finance Given Previous Year ICD Refunded by them Previous Year 37,400,000 Interest Paid 1,574,795 Previous Year 8,360,000 Interest Received Previous Year 1,581,559 Corporate Guarantees Previous Year Receivables 5,457,981 Previous Year 2,499,159 Payables 191,937,000 Previous Year 354,690,139
5,967,726 3,276,139
The significant related party transactions are as under: Nature of Transactions Enterprises controlling the Company Amount Rupees Enterprises under the control of the Company Amount Rupees Companies under common control including Fellow Subsidiaries Amount (Rupees)
Rendering of services Receiving of services Purchase of Goods Purchase of Fixed Assets Expense Reimbursement Finance given during the year
Mahindra & Mahindra Ltd. Mahindra & Mahindra Ltd. Mahindra & Mahindra Ltd. Mahindra & Mahindra Ltd. Mahindra & Mahindra Ltd.
36,223,264 13,425,641 130,000,000 891,241 1,550,479 5,457,981 191,937,000
Mahindra World City (Jaipur) Ltd. Mahindra World City (Jaipur) Ltd. Mahindra Infrastructure Developers Ltd. Mahindra Infrastructure Developers Ltd. Mahindra World City (Jaipur) Ltd.
1,196,436 5,000,000 16,000,000 2,509,782 1,196,436 Mahindra Acres Consulting Engineers Ltd. Mahindra Acres Consulting Engineers Ltd. Mahindra Holidays & Resorts India Ltd. 1,356,916 246,000 279,859
Receivables
Mahindra & Mahindra Ltd.
Payables
Mahindra & Mahindra Ltd.
211
19. Information in respect of Jointly Controlled Operations: i) Development of the following residential projects: Mahindra Park, Mumbai G.E. Links, Mumbai G.E. Gardens, Mumbai Project at Byculla, Mumbai Central Park, Gurgaon ii) Project for providing potable drinking water and sewerage facilities at Tirupur, Tamil Nadu.
20. Earnings per Share: Calculation of Net Profit available for Equity Shareholders. Current Year Previous Year Rupees Rupees A. Profit available for Equity Shareholders B. Weighted average number of Equity Shares of Rs. 10/- each C. Basic and Diluted Earnings per Share 110,005,847 31,028,350 3.55 78,549,140 31,027,840 2.53
21. Additional information pursuant to the provisions of Part IV of Schedule VI to the Companies Act, 1956, is annexed to the Notes to Accounts. 22. The figures for the previous year have been regrouped wherever necessary to conform to current years classification.
212
23. ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE: I. Registration Details: Registration No. State Code Balance Sheet Date II. Capital Raised during the year: Public Issue Rights Issue Bonus Issue Private Placement III. Position of Mobilisation and Deployment of Funds: Total Liabilities Total Assets Sources of Funds: Paid-up Capital Reserves and Surplus Secured Loans Unsecured Loans Deferred Tax Liability (Net) Application of Funds: Net Fixed Assets Investments Net Current Assets Miscellaneous Expenditure Accumulated Losses IV. Performance of Company: Turnover Total Expenditure Profit/(Loss) Before Tax Profit/(Loss) After Tax Earning Per Share (Rs.) Dividend Rate V. Generic Names of Three Principal Products/ Services of Company (as per monetary terms): Description i. Commercial Complexes ii. Projects, Project Management/Development iii. Business Centre Item Code No. N . A . N . A . N . A . + + 3 4 2 6 4 6 9 5 7 7 4 9 1 9 0 0 4 1 0 N I N I Amount (Rs. in Thousands) 1 2 4 1 2 9 7 1 0 6 6 4 3 8 1 7 4 8 6 0 1 1 0 0 0 6 3 . 5 5 1 0 % L L 9 6 0 2 8 4 9 6 7 5 8 5 1 8 3 2 2 1 1 0 8 9 7 0 0 1 5 N I N I N I N I Amount (Rs. in Thousands) 4 5 0 1 5 7 6 4 5 0 1 5 7 6 L L L L 3 1 - 0 3 1 1 8 9 4 9 o f 1 9 9 9 1 1 2 0 0 6
213
Statement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies:
Name of the Subsidiary Company Mahindra Infrastructure Developers Limited Particulars The Financial Year of the Subsidiary Company ended on ......................... Number of Shares in the Subsidiary Company held by Mahindra Gesco Developers Limited at the above date: Equity .............................................. Extent of Holding ............................ The net aggregate of profits/(losses) of the Subsidiary Company for its financial year so far as they concern the members of Mahindra Gesco Developers Limited: 1. Dealt with in the Accounts of Mahindra Gesco Developers Limited for the year ended 31st March, 2006 ............................. 2. Not dealt with in the Accounts of Mahindra Gesco Developers Limited for the year ended 31st March, 2006 ............................. The net aggregate of profits/(losses) of the Subsidiary Company for its previous financial year so far as they concern the members of Mahindra Gesco Developers Limited: 1. Dealt with in the Accounts of Mahindra Gesco Developers Limited for the year ended 31st March, 2005 ............................. 2. Not dealt with in the Accounts of Mahindra Gesco Developers Limited for the year ended 31st March, 2005 ............................. 14,400,000 80% 12,553,565 62.77% 500,000 100% 37,000 74% Name of the Subsidiary Company Mahindra World City Developers Limited (formerly Mahindra Industrial Park Limited) 31st March, 2006 Name of the Subsidiary Company Mahindra World City (Jaipur) Limited Name of the Subsidiary Company Mahindra World City (Maharashtra) Limited (Formerly Mahindra Realty Ltd.) 31st March, 2006
31st March, 2006
31st March, 2006
Nil
Nil
Nil
Nil
3,451,756
13,432,146
(23,465)
(28,856)
Not Applicable
Not Applicable
Not Applicable
Not Applicable
(1,624,927)
(4,708,346)
Not Applicable
Not Applicable
Suhas Kulkarni Company Secretary
S. Krishnan Chief Financial Officer
Pranab Datta Managing Director & C.E.O.
Arun Nanda Vice-Chairman
Anand G. Mahindra Chairman
214
Summary of Financial Performance of the Subsidiaries for the year April 2005March 2006 Information in Compliance with Letter No. 47/62/2006-CL-III issued by Ministry of Company Affairs, Government of India u/s 212(8) of the Companies Act, 1956
Subsidiary Mahindra World City (Jaipur) Ltd. Mahindra World City (Maharashtra) Ltd. (formerly Mahindra Realty Ltd.) MWCML Rupees 500,000 (38,994) 505,510 505,510 7,915 (38,994) (38,994) Mahindra World City Developers Ltd. (formerly Mahindra Industrial Park Ltd. MWCDL Rupees 850,000,000 (333,509,294) 1,550,890,201 1,550,890,201 2,600,000 882,464,178 21,839,025 (439,293) 21,399,732 Mahindra Infrastructure Developers Ltd.
MWCJL Particulars Capital Reserves/(Debit balance as per Profit and Loss Account) Total Assets Total Liabilities Investments (except in case of investment in subsidiaries)* Turnover Profit Before Taxation Provision for Taxation Profit after Taxation Proposed Dividend Rupees 5,000,000 (23,465) 4,932,894 4,932,894 6,055 (10,465) (13,000) (23,465)
MIDL Rupees 180,000,000 2,848,447 188,879,282 188,879,282 153,139,990 9,771,697 6,326,735 (1,967,040) 4,359,695
* Investments of MWCDL of Rs. 2,600,000 shown above do not include investment in MWCML of Rs. 130,000 as MWCML is a subsidiary of Mahindra Gesco Developers Ltd.
215
MAHINDRA INFRASTRUCTURE DEVELOPERS LIMITED

Your Directors present their Fifth Report together with the audited Accounts of your Company for the year ended 31st March, 2006. Financial Results Rupees 2006 Income ................................................................................................... Profit before Depreciation and Taxation ................................................. Depreciation ........................................................................................... Profit before Taxation ............................................................................. Less: Provision for Taxation ................................................................... Current Tax ................................................................................ Fringe Benefit Tax ...................................................................... Deferred Tax .............................................................................. Profit after Taxation ................................................................................ Loss brought forward from previous year .............................................. Balance carried forward ......................................................................... 19,25,000 25,440 16,600 43,59,695 (15,10,248) 28,49,447 34,000 25,972 3,57,199 (18,67,447) (15,10,248) 97,71,697 63,34,840 8,105 63,26,735 2005 39,27,559 4,25,489 8,318 4,17,171
Operations and Outlook for the current year During the year under the review your Companys Income has increased from Rs. 39.27 lakhs to Rs.97.72 lakhs mainly due to increase in the management support services to its joint venture. Consequently, the Profit before tax has also risen significantly from Rs. 4.17 lakhs to Rs. 63.27 lakhs. During the year, Mahindra Water Utilities Ltd., the Companys joint venture has successfully commenced the Operations and Maintenance services for the Tirupur Water and Sewerage Project. Your Companys solid waste management project at Tirumala is nearing completion and the focus would be to operationalise the project during the current year. Considering the experience gained in implementing projects in the Water and Sanitation Sector and also the thrust given by the Local Authorities in this Sector, your Company anticipates lot of opportunities in the sector. Capital During the year under review, the capital of your Company was increased from Rs. 1600 lakhs to Rs. 1800 lakhs by issue of 20,00,000 equity shares of Rs. 10 each for cash at par, on a rights basis to the existing members of the Company. Directors Ms. Anita George retires by rotation and, being eligible, offers herself for re-appointment. Mr. D. K. Tandon who retires by rotation, does not wish to seek re-appointment at the forthcoming Annual General Meeting of the Company. The Board has placed on record its sincere appreciation of the services rendered by Mr. D. K. Tandon during his tenure as Director of the Company.
216
Directors Responsibility Statement Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation received from the Operating Management, and after due enquiry, confirm that: (i) (ii) in the preparation of the annual accounts, the applicable accounting standards have been followed; 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, 2006 and of the profit of the Company for the year ended on that date; 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; the annual accounts have been prepared on a going concern basis.
(iii)
(iv)
Corporate Social Responsibility Initiatives As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since its inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the announcement made on the occasion of the 60th Anniversary of Mahindra & Mahindra Limited, the holding company, that the
Group would support a range of Corporate Social Responsibility initiatives by committing 1% of Profit After Tax (PAT) on a continuing basis. The 1% PAT would specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/or other Institutions, including K. C. Mahindra Education Trust and/or Mahindra Foundation, not related to the business of the Company or the welfare of the employees towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Companys estimated PAT for the year on a continuing basis until further review by the Board. Audit Committee The Audit Committee presently comprises Mr. Pranab Datta (Chairman of the Committee), Mr. D. K. Tandon and Mr. S. Venkatraman. The Audit Committee met twice during the year under review. Remuneration Committee The Remuneration Committee presently comprises Mr. Pranab Datta (Chairman of the Committee), Ms. Anita George and Mr. S. Venkatraman. Auditors Messrs. A. F. Ferguson & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The members will be required to appoint Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors proposed to be re-appointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section.
Public Deposits and Loans/Advances The Company has not accepted any deposits from the public or employees during the year under review. The Company has not made any loans/advances which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent companies Mahindra Gesco Developers Limited and Mahindra & Mahindra Limited. Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outgo In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorption respectively are not applicable to the Company. There were no foreign exchange earnings or outgo during the year under review. Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and Rules framed thereunder The Company had no employee who was in receipt of remuneration of not less than Rs. 24,00,000 during the year ended 31st March, 2006 or not less than Rs.2,00,000 per month during any part thereof.
A. K. Nanda Chairman
217
Report of Auditors to the Shareholders

1. We have audited the attached Balance Sheet of Mahindra Infrastructure Developers Limited as at 31st March, 2006, the Profit and Loss Account and the Cash Flow Statement of the Company 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 auditing standards generally accepted in India. Those standards require that we plan and perform the audit to 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, amended by the Companies (Auditors Report) (Amendment) Order, 2004 (herein after 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 give in the Annexure, a statement on the matters specified in paragraphs 4 of the said Order. Further to our comments in the Annexure referred to 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, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; Mumbai, dated: 14 April 2006 iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement 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 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2006 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 2006; and in the case of the Profit and Loss Account, of the profit for the year ended on that date; and in the case of the Cash Flow Statement, of the cash flows for the year ended as on that date.
v)
2.
vi)
3.
b) c)
4.
ii)
For A. F. Ferguson & Co. Chartered Accountants
iii)
A.S.Varma Partner Membership No. 15458
218
Annexure to the Auditor's Report

[Annexure referred in paragraph (3) of the Auditor's Report of even date on the Accounts of Mahindra Infrastructure st Developers Limited for the year ended 31 March, 2006] i. a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. b) All the Fixed assets have been verfied by the management at the year end in pursuance of a regular program of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its fixed assets. No material discrepancies were noticed on such verification. c) In our opinion and according to the information and explanations given to us, the company has not disposed of a substantial part of the fixed assets during the year. ii. As the company does not have any inventory clause 4 (ii)(a) to (ii)(c), (iv) to the extent relatable to purchase of inventory and sale of goods, and clause 4(viii) relating to maintenance of cost records are not applicable to the company. iii. a) In our opinion and according to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. As the Company has not granted any loans, secured or unsecured to the Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956, paragraph 4 (iii)(b), 4(iii)(c), 4(iii)(d) of the Order are not applicable. (b) In our opinion and according to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. As the Company has not taken any loans, secured or unsecured to the companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956, paragraphs 4(iii)(f) and 4(iii)(g) of the Order are not applicable. iv. In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and the nature of its business for the purchase of fixed assets and for the sale of 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 weakness in the aforesaid internal control system. v. a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangement referred to in section 301 of the Companies Act, 1956, have been entered in the register required to be maintained under that section; and
b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of five lakhs rupees in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices where applicable, at the relevant time. vi. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from public to which the provision of sections 58A, 58AA, or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. vii. According to the information and explanations given to us, the company has an internal audit system, which is in our opinion, commensurate with the size of the company and the nature of its business. viii. a) According to the records of the company, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including income-tax, servicetax, and other statutory dues applicable to it. Further according to the information and explanations given to us, no undisputed amount payable in respect of aforesaid statutory dues were in arrears, as at 31st March, 2006 for a period of more than six months from the date they become payable. b) According to the records of the Company, there are no dues of income-tax, sales tax, wealth-tax, service-tax, / custom duty / excise duty, and cess which have not been deposited on account of any dispute. ix. According to the information and explanations given to us, in our opinion, as the Company has been registered for a period less than five years, the requirements of clause 4(x) concerning whether the accumulated losses at the end of the financial year are not less than of its net worth or the company has incurred cash losses in the previous financial year are not applicable. x. The Company has neither taken any loan from financial institution or bank nor has it issued any debentures, thereof, the requirement of clause 4(xi) of the Order concerning default in repayments of dues are not applicable. xi. Based on our examination of documents and records, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities and therefore, the requirements of clause 4 (xii) of the Order are not applicable. xii. In our opinion, the company is not a chit fund or a nidhi mutual benefit/society. Therefore the requirements of clause 4 (xiii) of the Order are not applicable to the company. xiii. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, requirements of clause 4 (xiv) of the Order are not applicable to the company.
219
xiv. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions. Therefore the requirements of clause 4 (xv) of the Order are not applicable to the company. xv. As the company has not taken any term loan, the requirements whether the term loan were applied for the purpose of which loans were obtained, of clause 4 (xvi) of the Order are not applicable. xvi. Based on our 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 investment. xvii. 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. Therefore, the requirement of clause 4(xviii) of the Order whether at the price at which shares have been issued is prejudicial to the interest of the company, is not applicable to the company.
xviii. During the period covered by our audit report, the company has not issued any debentures. Consequently, the question of creating any security or charge in respect of debentures does not arise. xiv. The company has not made any public issue and therefore the requirements to disclose the end use of money raised by public issue in the financial statements does not arise. xv. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit. For A.F.Ferguson & Co Chartered Accountants A.S. Varma Partner Membership No. 15458
Place: Mumbai Dated: 14th April 2006
220
BALANCE SHEET AS AT 31ST MARCH, 2006

Schedule I SOURCES OF FUNDS : SHAREHOLDERS FUNDS Capital ....................................................................... Reserves and Surplus Profit & Loss Account Balance ................................. Deferred Tax Liability ................................................. TOTAL............. II APPLICATION OF FUNDS : Fixed Capital Expenditure ................................................. Gross Block ............................................................... Less: Depreciation .................................................... .................................................................................. Net Block .................................................................. Incidental Expenditure during construction Pending allocation ..................................................... Construction Work-in-progress ................................. .................................................................................. Net Block .......................................................................... INVESTMENTS ............................................................... Deferred Tax Asset ........................................................... CURRENT ASSETS, LOANS AND ADVANCES ............. Sundry Debtors ......................................................... Cash and Bank Balances ........................................... Loans and Advances ................................................. .................................................................................. .................................................................................. .................................................................................. Less: CURRENT LIABILITIES AND PROVISIONS .......... Current Liabilities ...................................................... Provisions .................................................................. .................................................................................. .................................................................................. .................................................................................. NET CURRENT ASSETS ................................................. Profit and Loss Account ................................................... Debit Balance per account annexed ......................... TOTAL............. NOTES ON ACCOUNTS
As per our attached report of even date For A.F.FERGUSON & Co. Chartered Accountants A. S. Varma Partner
Rupees
As at 31st March, 2006 Rupees
180,000,000 2,849,447 22,755 182,872,202
160,000,000 19,465 160,019,465
II 173,959 63,867 110,092 173,959 46,642 127,317
III
2,340,998 6,912,157 9,363,247
1,619,392 1,154,389 2,901,098 153,139,990 13,310
IV
153,139,990
V 6,116,245 19,811,381 448,419 26,376,045 VI (4,795,870) (1,211,210) (6,007,080) 20,368,965 (675,944) (675,944) 2,454,819 708,561 2,174,430 247,772 3,130,763
182,872,202 X
A. K. Nanda Pranab Datta S. Venkatraman
1,510,248 160,019,465
Chairman
Directors
Mumbai, dated: 14th April, 2006

221
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006
2006 Rupees 9,771,697 2005 Rupees 3,927,559
Schedule INCOME .................................................................................... EXPENDITURE Personnel expenses .............................................................. Other expenses ..................................................................... Depreciation [net of Rs. 9120 (2005: Rs. 24,045) transferred to incidental expenditure during construction pending allocation] TOTAL............. PROFIT FOR THE YEAR BEFORE TAXATION ......................... Less: Provision for taxation : Current Tax ............................................................................ Fringe Benefit tax .................................................................. Deferred tax [Note 7 (a)] ........................................................ VIII IX VII
1,141,413 2,295,444 8,105 3,444,962 6,326,735
2,244,025 1,258,045 8,318 3,510,388 417,171
1,925,000 25,440 16,600 1,967,040
34,000 25,972 59,972 357,199 (1,867,447) (1,510,248)
PROFIT AFTER TAXATION ...................................................... Loss brought forward from previous year ............................. BALANCE CARRIED TO BALANCE SHEET Earnings Per Share Basic ...................................................................................... Diluted ...................................................................................
4,359,695 (1,510,248) 2,849,447
0.26 0.26
0.02 0.02
NOTES ON ACCOUNTS ...........................................................
As per our attached report of even date attached to the Balance Sheet For A.F.FERGUSON & Co. Chartered Accountants A. S. Varma Partner
A. K. Nanda Pranab Datta S. Venkatraman
Chairman
Directors

222
SCHEDULES FORMING PART OF THE ACCOUNT AS AT 31ST MARCH, 2006.

SCHEDULE I SHARE CAPITAL:
Authorised 20,000,000 Equity shares of Rs.10/- each ............ Issued 18,000,000 Equity Shares of Rs. 10/- each ........ Subscribed and Paid-up 18,000,000 (2005: 16,000,000) Equity shares of Rs.10/- each fully paid-up. ..................................... [Of the above, 14,400,000 (2005:12,800,000) shares are held by Mahindra Gesco Developers Limited, the holding company, including 6 shares jointly held . with its nominees] ..............................................................

200,000,000 180,000,000

200,000,000 180,000,000
SCHEDULE V CURRENT ASSETS, LOANS AND ADVANCES: Rupees

Sundry Debtors - Unseccured, considered good : Other debts upto six months ............ 6,116,245
Ast at 31st March, 2005 Rupees

708,561
6,116,245 Cash and Bank Balance : Cash on hand ..................................... Balance with Scheduled Bank : on Current Account ..................... on Fixed Deposit Account ........... on Margin Account ...................... TOTAL .....
180,000,000 160,000,000
708,561 12,160 397,579 1,572,691 192,000
1,662,193 18,149,188 19,811,381
180,000,000
160,000,000
2,174,430
Loan and Advances - Unsecured, considered good : Advances recoverable in cash or in kind or for value to be received ............................................. Advance tax-tax deducted at source
242,033 206,386 448,419 26,376,045
41,895 205,877 3,130,763

SCHEDULE III As at 31st March, 2006 Rupees

Incidental Expenditure During Construction Pending Allocation : Salaries and Allowances. ................. Travelling expenses. ......................... Vehicle expenses. ............................ Telephone expenses. ....................... Project development. ....................... Depreciation. .................................... Rent expenses. ................................ Miscellaneous expenses. .................
SCHEDULE VI
CURRENT LIABILITIES AND PROVISIONS:
1,221,954 63,859 258,189 16,283 465,000 38,437 147,314 129,962 2,340,998
777,451 22,285 142,653 7,955 465,000 29,317 84,914 89,817 1,619,392
Curr Curr ent Liabilities Sundry Creditors - other tha due to small scale industrial undertakings Other Liabilities Provisions Pr ovisions : Provision for tax Provision for Fringe Benefit tax
4,259,323 536,547 4,795,870 1,210,570 640 1,211,210 6,007,080
610,997 64,947 675,944 675,944
SCHEDULE IV
INVESTMENTS : (Unquoted) Face Value per unit Long term, Trade, At cost : Rupees Equity Shares :. 10 Rathna Boomi Enterprises Pvt. Ltd. 10 Mahindra Water Utilities Ltd. 10 New Tirupur Area Development Corporation Ltd. 10 Mahindra Inframan Water Utilities Pvt. Ltd.
SCHEDULE VII
As at 31st March, 2006 Rupees 9,030,000 741,697 9,771,697
As at 31st March, 2005 Rupees 3,708,000 181,678 37,881 3,927,559
Number 500 50,000 15,000,000 24,999
5,000 500,000 150,000,000 249,990 150,754,990
5,000 500,000 150,000,000 249,990 150,754,990 2,385,000
Income Management fees Interest on Bank deposits [Tax dedcuted at at source: Rs 1.66.123 (2005: Rs. 38,020) Interest-other [Tax deducted at Source : Rs. Nil (2005: Rs. 5,293)]
Preference Shares : 238500 10 Rathna Bhoomi Enterprises Pvt. Ltd. 10% Non-cumulative redeemable participating optionally covertible preference shares
SCHEDULE VIII
Personnel Salaries and Allowances [Note 9] Welfare 1,109,112 32,301 1,141,413 2,207,723 36,302 2,244,025
2,385,000
153,139,990
153,139,990
SCHEDULE II Fixed Capital Expenditure : Description of Completed Assets

Furniture and Fixtures Computers Vehicles Plant & Machinery and Office Equipments Total Previous year
(In Rupees)
As at 01/04/2005
16,034 52,425 96,000 9,500 173,959 159,034
GROSS BLOCK Additions Deductions

23,925 9,000
As at As at 31/03/2006 31/03/2005
16,034 52,425 96,000 9,500 173,959 173,959 16,034 11,216 9,892 9,500 46,642 14,492
DEPRECIATION For the Deductions Upto year 31/03/2006

8,105 9,120 17,225 32,363 213 16,034 19,321 19,012 9,500 63,867 46,642
NET BLOCK As at As at 31/03/2005 31/03/2006 31/03/2005

33,104 76,988 110,092 127,317 41,209 86,108 127,317
223

SCHEDULE IX As at 31st March, 2006 Rupees Rupees
82,619 15,088 59,608 668 16,063 24,000 60,000 902 60,902 1,961,920 74,576 2,295,444
Ast at 31st March, 2005 Rupees

32,700 135,578 120,979 80,363 400,000 13,278 41,654 315,500 40,000 263 40,263 24,000 5,287 48,443 1,258,045
h)
Segment reporting : The Company has a single reportable segment namely development of infrastructure projects for the purpose of Accounting Standard 17 on Segment Reporting.
Other Expenses : Bidding expenses Travelling expenses Vehicle expenses Telephone expenses Rent expenses Rates & Taxes Publicity and Business promotion expenses Printing and Stationery Stamp and Filing fees Auditors' remuneration for Statutory audit for Out of pocket expenses Professional Charges Loss on sale of fixed assets General and miscellaneous expenses
2.
The estimated amount of the contracts entered into and remaining to be executed on Capital account and not provided for (net of advances) as at 31st March, 2006 is Rs. 1,791,638 (2005: Rs. 7,473,078) Managerial remuneration:
2006 Salary ............................................................................. Perquisites ..................................................................... Rupees 2005 600,000 446,500 1,046,500
3.
4.
Contingent liability not provided for: (a) Guarantee/Counter Guarantee given by the company: Amount of Guarantee 2006 For Joint Venture Companies 1,800 2005 1,802 Amount outstanding 2006 1,800 2005 1,802 Rs. in lakhs Maximum liability of the Company 2006 900 2005 901
SCHEDULE X PAR ART NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31st MARCH 2006
1. a) Significant accounting policies : Basis of preparation of accounts : The accounts have been prepared to comply, in all material aspects, with the applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act 1956. b) Fixed Assets: i) All Fixed Assets are carried at cost less depreciation. Cost includes financing cost relating to borrowed funds attributable to the construction or acquisition of fixed assets upto the date the asset is ready for use. 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. 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.
5.
Information pertaining to Joint Ventures: 2006 Name of Joint Venture Equity Interest Incorporated Share in Assets & Liabilities Share in Income Share in Expenditure 2005 2006 Rupees 2005
Mahindra Water Utilities Limited 50% India 50% India
Mahindra InfraMan Water Utilities Pvt Ltd. 50% India 50% India
28,509,757 8,226,532 75,288,865 23,293,985 44,290,782 14,114,426
379,629 383,555 36,767 2,250,884 36,943 1,937,104
ii) c) d)
6.
Investments : All long-term investments are valued at cost or lower, if written down. Miscellaneous Expenditure - to the extent not written off or adjusted : Preliminary expenses comprise registration fees, Stamp duty and expenditure on formation of the Company which are amortised equally over a period of three financial years commencing from the period ended 31st March 2002. Revenue Recognition Management fees arising from projects developed by the Company, is accounted in the year in which such income is established as receivable and is disclosed net of service tax charged to the Client which in turn is paid/payable to the Government. Dividend income will be recognised in the Profit and Loss Account when the right to receive payment is established.
Earnings Per Share: : The computation of the Earnings per share in line with Accounting Standard 20 issued by the Institute of Chartered Accountants of India is as under: Rupees 2006 A. B. C. D. E. F. Net Profit after tax available for equity shareholders (Rs.) Nominal value per Share Weighted Average number of Equity Shares(No.) Basic Earnings per share (Rs.) Total Weighted Average number of Equity Shares Diluted Earnings per share (Rs.) 4,359,695 10 2005 357,199 10
e)
17,084,932 15,383,562 0.26 0.02 17,084,932 15,383,562 0.26 0.02
f)
Interest Income is accounted for on time proportion basis. Income Taxes: 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 are recognised only to the extent that there is virtual certainty or reasonable certainty, as the case may be, supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realised.
7.
a) The components of Deferred Tax Liabilities (DTL)/Deferred Tax Assets(DTA) as at 31 st March, 2006 are as follows: Rupees Particulars Difference between Tax and Book depreciation DTL Difference on account of allowance of preliminary expenses as per book and tax DTA Net Deferred Tax Asset/(Liability) 2006 2005 (22,755) (19,465) NIL (22,755) 13,310 (6,155)
g)
Expenditure during construction period : i) Expenditure of a capital nature incurred during construction period in repect of a project being executed by the Company is grouped under Construction workin-progress. Such expenditure would be capitalised upon the commencement of commercial operations of the project. Incidental expenditure during construction pending allocation represents expenditure incurred in connection with the project which is intended to be capitalised to the project.
ii)
b) In line with Accounting Standard 22 Accounting for taxes on income, the Company on principles of prudence has not recognised in the accounts, a Deferred Tax Asset of Rs.NIL as at 31st March, 2006 (Rs.533,431 as at 31st March, 2005).
224
8.
The following disclosures are made as required in pursuance of the Accounting Standard 18 Related Party Disclosures issued by the Institute of Chartered Accountants of India and which became effective from 1st April, 2004: List of related parties: Enterprises controlling the Company : Mahindra & Mahindra Limited (Controlling Company) Mahindra Gesco Developers Limited (Holding Company) Fellow Subsidiaries: Tech Mahindra Limited (formerly Mahindra Engineering & Chemical known as Mahindra-British Products Limited Telecom Limited) Mahindra Logisoft Business Mahindra & Mahindra Financial Solutions Limited Services Limited Automartindia Limited Mahindra Intertrade Limited Mahindra USA Inc. Mahindra Steel Service Centre Limited Bristlecone (UK) Limited Mahindra Holdings & Finance Limited Mahindra Gujarat Tractor Limited Mahindra Acres Consulting Engineers Limited Mahindra Shubhlabh Services Mahindra Ashtech Limited Limited Mahindra Insurance Brokers Limited Mahindra Holidays & Resorts India Limited Mahindra World City Developer Ltd. NBS International Limited (formerly known as Mahindra Industrial Park Limited Mahindra World City (Jaipur) Ltd Mahindra Realty Limited (w.e.f. 26th August, 2005) (w.e.f. 21st Sep. 2005) Brislecone Limited, Cayman Islands Mahindra Automotive Steels Pvt. Ltd. (w.e.f. 2nd June, 2005) Bristlecone Inc., Mahindra Renault Pvt. Ltd. (w.e.f. 5th August, 2005) Mahindra Middleeast Electrical Mahindra Holidays & Resorts U.S.A. Inc. Steel Service Centre (FZE) Mahindra & Mahindra South Africa Tech Mahindra (Americas) Inc. [formerly (Pty.) Limited known as MBT International Inc.] Mahindra International Limited Tech Mahindra GmbH (formerly known (w.e.f. 1st Nov. 2005) as MBT GmbH) Stokes Group Limited Tech Mahindra Singapore (Pte.) Ltd. (w.e.f. 3rd Jan. 2006) (formerly known as MBT Software Technologies Pte. Ltd) Plexion Technology (India) Private Tech Mahindra (R&D Services) Limited Limited (w.e.f. 15th Feb. 2006) (w.e.f. 28th Nov. 2005) Jensand Limited Tech Mahindra (R&D Services) Inc. (w.e.f. 3rd Jan. 2006) (w.e.f. 28th Nov. 2005) Stokes Forgings Dudley Limited Tech Mahindra (R&D Services) Pte. Ltd. (w.e.f. 3rd Jan. 2006) (w.e.f. 28th Nov. 2005) Stokes Forgings Dudley Limited Tech Mahindra (Thailand) Limited (w.e.f. 3rd Jan. 2006) (w.e.f. 21st Feb. 2006) Plexion Technologies (UK) Ltd Tech Mahindra Foundation (w.e.f. 15th Feb. 2006) (w.e.f. 22nd March 2006) Plexion Technologies GmbH, Bristlecone India Limited Germany (w.e.f. 15th Feb. 2006) Plexion Technology Incorporated Bristlecone (Singapore) Pte. Ltd. USA (w.e.f. 15th Feb. 2006) Mahindra Engineering Design & Bristlecone GmbH Development Company Ltd. Mahindra SAR Transmission Mahindra Ugine Steel Company Ltd. Private Limited (w.e.f. 21st June. 2005) Mahindra Overseas Investment Console Estate & Investment Ltd. Company (Mauritius) Limited (Ceased with effect from 20th Mar. 06) Mahindra Europe s.r.l. Mahindra (China) Tractor Company Ltd. (w.e.f. 30th May. 2005) (w.e.f. 13th May. 2005) Mahindra BT Investment Company (Mauritius) Limited (w.e.f. 9th May. 2005) Joint Ventures of the Company : Mahindra Water Utilities Limited Mahindra Inframan Water Utilities Private Limited : Rathna Bhoomi Enterprises Private Limited : Nil : Nil
Transactions with related parties during the year and balance as on 31st March 2006
Nature of transactions Enterprise Fellow controlling Subsidiaries the Company Joint Ventures/ Associates Key Enterprises Manageover ment which key personnel management personnel are able to exercise significant influence (1,046,500)
Rendering of services Purchase of Fixed Assets CWIP/Capital advances Remuneration Expenses Reimbursement received Loan / advance given Loan refunded Interest received Guarantees outstanding Receivables Payables
3,411,971 (1,468,135) 281,137 (51,404) 2,756,055 (61,739)
175,000
9,030,000 (3,708,000)
(14,925) 279,600 (2,871) (280,100) 15,330 17,841 (11,567) (18,010) (300,000) (500,000) (4,890) (20,521) 90,000,000 (90,192,000) 72,129 6,116,245 (708,561) (55,357) (62,953)
Previous year's figures are in brackets and italics
The Significant related party transactions are as under:

Nature of transactions Rendering of services Enterprise controlling the Company Amount Joint Ventures/ Associates Mahindra Water Utilities Ltd (Joint Venture) Mahindra Inframan Water Utilities Pvt. Ltd. (Joint Venture) Rathna Bhoomi Enterprises Pvt. Ltd. (Associates) Rathna Bhoomi Enterprises Pvt. Ltd. (Associates) Amount
9,030,000 (3,058,000) 650,000 (14,925) 279,600 (279,600)
Purchase of Fixed Assets Expenses
Loan given
Mahindra & Mahindra Ltd. (Controlling Company) Mahindra Gesco Developers Ltd. (Holding Company)
@@ 871,259) 3,097,189 (596,876)
Loan refunded by party Guarantees given
Mahindra Inframan Water Utilities Pvt. Ltd. (Joint Venture) (300,000) Mahindra Inframan Water Utilities Pvt. Ltd. (Joint Venture) (500,000) Mahindra Water Utilities Ltd. (Joint Venture) (90,000,000) Mahindra Inframan Water Utilities Pvt. Ltd. (Joint Venture) 192,000
@@ Previous year's figures are in brackets and italics Current year not significant
9.
Salary and Allowances includes expenditure incurred in respect of employees of other companies seconded to the Company.
Associates of the Company Key Management Personnel Enterprises over which key management personnel are able to exercise significant influence
10. Previous years figures have been regrouped whereever necessary to conform to this year's classification. 11. Additional information pursuant to the provisions of Part IV of Schedule VI to the Companies Act 1956 - see Schedule XI.
225
SCHEDULE XI 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 1 1 1 3 1 9 4 2 State Code 1 1
3 1 0 3 2 0 0 6 Date Month Year Rights Issue 2 0 0 0 0 Private Placement N I L
II. Capital Raised During the Year (Amount in Rs. Thousands) Public Issue N I L
Bonus Issue N I L
III. Position of Mobilisation & Deployment of Funds (Amount in Rs. Thousands) Total Liabilities (including Shareholders Funds) 1 8 8 8 7 9 Sources of Funds : Paid-up Capital 1 8 0 0 0 0 Secured Loans N I L 2 3 Application of Funds : Net Fixed Assets 9 3 6 3 Net Current Assets 2 0 3 6 9 Accumulated Losses N I L
Total Assets 1 8 8 8 7 9 Reserves & Surplus 2 8 4 9 Unsecured Loans N I L
Deferred Tax Liability
Investments 1 5 3 1 4 0 Miscellaneous Expenditure N I L
Deferred Tax Asset N I L
IV. Performance of Company (Amount in Rs. Thousands) : Turnover (Total Income) 9 7 7 2 +/() + Basic - Rs. 0.26 Profit/Loss before Tax 6 3 2 7 Earning per Share Rupees Diluted - Rs. 0.26 +
Total Expenditure 3 4 4 5 +/() Profit/Loss after Tax 4 3 6 0 Dividend Rate % N I L
V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) : Item Code No. (ITC Code) Product Description Signatures to Schedules I to XI A. K. Nanda Pranab Datta S. Venkatraman N O T A P P L I C A B L E
Chairman
Directors

226
Cash Flow for the year ended March 31, 2006

Current Year Rupees A. Cash Flow from Operating Activities Profit before taxation .......................................................................................... Adjustments for : Depreciation ....................................................................................................... Interest Income .................................................................................................. Amortisation of Expenses .................................................................................. Loss on sale of fixed asset ................................................................................. 6,326,735 8,105 (741,697) (733,592) 5,593,143 Previous Year Rupees 417,171 8,318 (207,089) 5,287 (193,484) 223,687
Operating Profit before Working capital changes .............................................. Changes in: ......................................................................................................... Trade and other receivables ............................................................................... Trade and other payables ...................................................................................
(5,465,185) 4,119,926 (1,345,259)
239,875 (44,155) 195,720 419,407 36,749 456,156 (1,824,375) 3,500 (37,700,010) (6,000,000) 6,000,000 281,913 (39,238,972)
Cash Generated from operations ....................................................................... Income taxes refund/(paid) ................................................................................. NET CASH FROM OPERATING ACTIVITIES ................................................... B. Cash Flow from Investing Activities Capital expenditure ............................................................................................. Sale of fixed assets ............................................................................................ Purchase of investments ................................................................................... Intercorporate Deposits given ............................................................................ Intercorporate Deposits refunded ...................................................................... Interest received ................................................................................................ Net Cash Used in investing activities ............................................................. C. Cash Flow from Financing Activities Proceeds from Share Capital .............................................................................. ............................................................................................................................ Net cash used in Financing Activities ............................................................. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ................ Cash and cash equivalents (see Note below) Opening Balance ................................................................................................ Closing Balance .................................................................................................. Note: Cash and cash equivalents includes : Cash on hand ...................................................................................................... Balances with Scheduled Bank : i) on Current Account ......................................................................................... ii) on Fixed Deposit Account ............................................................................... iii) on Margin Account ......................................................................................... ............................................................................................................................ ............................................................................................................................ ............................................................................................................................ A. K. Nanda Pranab Datta S. Venkatraman
4,247,884 (739,739) 3,508,145 (6,470,254) 599,060 (5,871,194)
20,000,000 20,000,000 17,636,951
30,000,000 30,000,000 (8,782,816)
2,174,430 19,811,381
10,957,246 2,174,430
1,662,193 18,149,188 19,811,381
12,160 397,579 1,572,691 192,000 2,174,430
As per our attached report of even date attached to the Balance Sheet For A.F.FERGUSON & Co. Chartered Accountants A. S. Varma Partner
Chairman
Directors

227
MAHINDRA WORLD CITY DEVELOPERS LIMITED

(Formerly Mahindra Industrial Park Limited)
DIRECTORS REPORT TO THE SHARE HOLDERS

Your Directors present their Ninth Annual Report together with the audited accounts of the Company for the financial year ended March 31st, 2006. FINANCIAL RESULTS: (Rs. in lakhs) 2006 Profit / (Loss) before Depreciation, Interest and Taxation ......................................................... Depreciation .............................................................................................................................. Interest ...................................................................................................................................... Taxation ..................................................................................................................................... Profit / (Loss) for the year ......................................................................................................... Balance brought forward from earlier years .............................................................................. Balance carried forward ............................................................................................................ OPERATIONS Your Company has turned around and has made a profit during the year. Your Companys offer of space in all the three sector-specific SEZs and the Domestic Tariff Area has received a good response. The processing area of the SEZ has been fully committed. In the non-processing area, the first residential development has commenced. Well known international brands have chosen Mahindra World City for setting up their manufacturing facilities. FINANCE During the year under review, your Company generated substantial cash flows enabling early repayment of Rs 30 crore secured loan availed from M/s. Infrastructure Leasing & Financial Services Limited. INVESTMENTS During the year the Company made investments out of its surplus funds in the equity of Mahindra World City (Maharashtra) Limited (formerly known as Mahindra Realty Limited) and Ascendas Mahindra IT Park Ltd. CHANGE OF NAME Your Companys name has been changed to Mahindra World City Developers Limited with effect from 30th August, 2005 to reflect the current nature of activities. DIRECTORS Mr. N. Vaghul and Mr. S. Durgashankar, Directors, retire by rotation and being eligible, offer themselves for re-election at the forthcoming Annual General Meeting. Mr.Rameshram Mishra, IAS resigned from the Board with effect from 22.12.2005 Your Directors place on record their sincere appreciation of the valuable services rendered by Mr.Rameshram Mishra, IAS during his tenure as Director of the Company. 1,186.58 (16.81) (951.38) (4.39) 214.00 (3,549.09) (3,335.09) 2005 (408.84) (15.81) (1,006.46) (1,431.11) (2,117.98) (3,549.09)
Mr. D. Rajendran, IAS was appointed as Director of the Company with effect from 22.12.2005 in the Casual vacancy caused by the resignation of Mr.Rameshram Mishra, IAS. Mr. Sanjiv Kapoor was appointed by the Board as Additional Director of the Company with effect from 22.12.2005. He holds office upto the date of the forthcoming Annual General Meeting. The Company has received a Notice from a member proposing the appointment of Mr. Sanjiv Kapoor as a Director. AUDIT COMMITTEE The Audit Committee comprises of the following Non- Executive Directors: 1 2 3 Mr. Sanjiv Kapoor Chairman Mr. D. Rajendran, IAS and Mr.V. Balaraman
DIRECTORS RESPONSIBILITY STATEMENT Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation 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, 2006 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.
228

AUDITORS Messrs. A.F. Ferguson & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from Messrs. A.F.Ferguson & Co., Chartered Accountants, to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. DEPOSITS AND LOANS/ADVANCES The Company has not accepted deposits from the public or its employees during the year under review. The Company has not made any loans/advances which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent companies Mahindra Gesco Developers Limited and Mahindra & Mahindra Limited. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorption respectively are not applicable to the Company.
There were no foreign exchange earnings during the year under review. The information on foreign exchange outgo is furnished in the Notes on Accounts. PARTICULARS OF EMPLOYEES AS REQUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 AND THE RULES MADE THERE UNDER The Company has one employee who was in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2006 or not less than Rs.2,00,000 per month during any part of the said year. The particulars are given in the annexure to the Report. ACKNOWLEDGEMENT Your Directors wish to place on record their sincere thanks to the Tamil Nadu Government, Housing Development Finance Corporation Limited and Employees for their support and co-operation extended during the period under review.
For and On Behalf of the Board
N. Vaghul Chairman

Additional information as required under section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors Report for the year ended 31st March, 2006 Name of the Employee Mr.B. G.Menon Designation / Nature of Duties Chief Operating Officer & Manager Qualification(s) Remuneration Age (Subject to tax) (yrs) (Rs.) 4,358,145 48 Experience (yrs) 24 Date of Commencement of employment 1st July, 2003 Last employment held (Designation / Organisation) Chief Executive Officer/ SSI Education.
B.Tech., PGDM
Notes: 1. Mr.B. G. Menon was appointed as Chief Operating Officer with effect from 1st July, 2003 and as Manager with effect from 18th March, 2004. 2. Nature of employment is contractual, subject to termination at three months notice from either side. 3. The above employee is not related to any other Director of the Company. 4. The employee does not hold by himself or along with his spouse and dependent children 2% or more of the equity shares of the Company. 5. Terms and Conditions of employment are as per Companys rules/contract. 6. Gross remuneration received as shown in the statement includes Salary, Bonus, House Rent Allowance or value of perquisites for accommodation, car perquisites value/allowances applicable, employers contribution to Provident fund and Superannuation scheme including group insurance premium, leave travel facility, reimbursement of medical expenses and all allowances/ perquisites and terminal benefits as applicable. For and on behalf of the Board N.Vaghul Chairman
229

Auditors Report to the Members of Mahindra World City Developers Limited (Formerly Mahindra Industrial Park Limited)
We have audited the attached Balance Sheet of Mahindra World City Developers Limited (formerly Mahindra Industrial Park Limited) as at 31st March, 2006, the Profit and Loss Account, and also the Cash Flow Statement of the Company 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 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, issued by the Central Government of India in terms of Section 227(4A) 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 above, we report that: (a) (b) (c) (d) (e) 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 the books; the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement 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, 2006, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006, 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 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: (i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; (ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. For A.F. Ferguson & Co. Chartered Accountants H.L. Shah Partner Membership No. 33590
(f)
Bangalore, 25th April, 2006
230

Annexure referred to in paragraph (4) of the Auditors Report to the members of Mahindra World City Developers Limited on the accounts for the year ended 31st March, 2006.
1. (a) (b) (c) The Company has maintained proper records to show full particulars including quantitative details and situation of Fixed Assets. The management has physically verified the assets during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable. The Company has not disposed off a substantial part of fixed assets during the year, and, therefore, paragraph 4(i)(c) of the Companies (Auditors Report) Order, 2003 (hereinafter referred to as the Order) is not applicable. The Company has carried out physical verification of saleable inventory during the year and no material discrepancies were noticed on such verification. The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. The Company is maintaining proper records of inventory and no material discrepancies have been noticed on physical verification of inventories as compared to the book records.
2. (a) (b) (c)
3. The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956, and, therefore, paragraph 4(iii) of the Order is not applicable. 4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of inventory. We have neither come across nor have we been informed of any major weaknesses in internal control system. 5. According to the information and explanations given to us, there are no transactions with parties that need to be entered in the register maintained under Section 301 of the Companies Act, 1956, and, therefore, paragraph 4(v) of the Order is not applicable. 6. In our opinion and according to the information and explanations given to us, as the Company has not accepted deposits from the public, paragraph 4(vi) of the Order is not applicable. 7. The Company has an internal audit system which is commensurate with its size and nature of business. 8. We are informed that maintenance of cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956, in respect of the activities of the Company, and, therefore, paragraph 4(viii) of the Order is not applicable. 9 (a) In our opinion and according to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues including income tax and any other statutory dues with the appropriate authorities. There are no arrears of outstanding statutory dues as at 31st March, 2006, for a period of more than six months from the date they became payable. According to the information and explanations given to us, there are no dues of sales tax, income tax, customs duty, wealth tax, service tax, excise duty and cess, which have not been deposited on account of any dispute.
(b)
10. The accumulated losses at the end of the financial year are less than fifty per cent of its net worth and the Company has not incurred cash losses in the financial year but incurred cash losses in the immediately preceding financial year. 11. The Company has not defaulted in repayment of dues to banks/financial institutions. 12. The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities, and, therefore, paragraph 4(xii) of the Order is not applicable.
231

13. The provisions of any special statute applicable to chit fund & nidhi/mutual benefit fund/society are not applicable to the Company, and, therefore, paragraph 4(xiii) of the Order is not applicable. 14. The Company is not dealing or trading in shares, securities, debentures and other investments, and, therefore, paragraph 4(xiv) of the Order is not applicable. 15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions, and, therefore, paragraph 4(xv) of the Order is not applicable. 16. The Company has applied term loans for the purpose for which the loans were obtained. 17. The Company has not raised funds on short-term basis, and, therefore, paragraph 4(xvii) of the Order is not applicable. 18. The Company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956, and, therefore, paragraph 4(xviii) of the Order is not applicable. 19. The Company has not issued any debentures during the year, and, therefore, paragraph 4(xix) of the Order is not applicable. 20. The Company has not raised any money by way of public issue during the year, and, therefore, paragraph 4(xx) of the Order is not applicable. 21. Based upon the audit procedures performed and as per the information and explanations given to us by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit. For A.F. Ferguson & Co. Chartered Accountants H.L. Shah Partner Membership No. 33590
232


As at 31st March, 2006 Rupees As at 31st March, 2005 Rupees
Schedule
SOURCES OF FUNDS: Shareholders Funds: Share Capital ............................................................................... Loan Funds: Secured Loans ............................................................................ Total ............. APPLICATION OF FUNDS: Fixed Assets ............................................................................... Gross Block ................................................................................. Less: Depreciation ..................................................................... Net Block .................................................................................... Capital Work-in-Progress/Advances ............................................ Investments ................................................................................ Current Assets, Loans and Advances: Inventories .................................................................................. Sundry Debtors ........................................................................... Cash and Bank Balances ............................................................. Loans and Advances ................................................................... 5 6 7 8 1,037,983,335 3,903,560 1,399,454 69,754,441 1,113,040,790 1,488,027,931 70,342,634 30,888,301 67,353,320 1,656,612,186 115,551,413 363,446 115,914,859 1,540,697,327 354,909,026 1,982,500,000 4 3 55,516,128 6,071,088 49,445,040 52,165,077 101,610,117 2,730,000 48,926,155 4,994,823 43,931,332 42,962,315 86,893,647 2 535,000,000 1,385,000,000 1,132,500,000 1,982,500,000 1 850,000,000 850,000,000
Less: Current Liabilities and Provisions ................................

Current Liabilities ............................................................. Provisions ........................................................................
9 165,434,695 455,506 165,890,201
Net Current Assets .................................................................... Profit and Loss Account ............................................................ Total ............. Notes to the Accounts .............................................................. As per our Report of even date attached For A.F. Ferguson & Co. Chartered Accountants H.L. Shah Partner 13
947,150,589 333,509,294 1,385,000,000
For and on behalf of the Board of Directors N. Vaghul A. K. Nanda Sanjiv Kapoor T. Rajendran (IAS) S. Durgashankar B. G. Menon S. Chandru
Chairman Vice-Chairman
Directors Chief Operating Officer & Manager Chief Financial Officer

233

Year ended 31st March, 2006 Rupees 868,932,950 13,403,305 10 127,923 882,464,178 Year ended 31st March, 2005 Rupees 366,969,000 867,450 251,677 368,088,127
Schedule INCOME: Land Lease Premium ........................................... Operation and Maintenance Income .................... Other Income .......................................................
EXPENDITURE: Project Development Costs ................................. Interest and Finance Charges .............................. Legal and Professional Charges ........................... Depreciation ......................................................... Other Expenses ................................................... Decrease/(Increase) in Work-in-Progress ............. 11 12 252,648,293 95,138,150 13,258,694 1,681,460 47,853,960 450,044,596 860,625,153 Profit before Taxation ........................................ Provision for Taxes Income Tax ........................................... Fringe benefit Tax ................................ 439,293 21,399,732 (354,909,026) (333,509,294) (1.13) 13 For and on behalf of the Board of Directors N. Vaghul For A.F. Ferguson & Co. Chartered Accountants H.L. Shah Partner A. K. Nanda Sanjiv Kapoor T. Rajendran (IAS) S. Durgashankar B. G. Menon S. Chandru (143,110,636) (211,798,390) (354,909,026) (9.36) 21,839,025 120,289,348 100,646,209 6,417,020 1,581,280 101,003,039 181,261,867 511,198,763 (143,110,636)
Profit after Taxation ........................................... (Loss) brought forward ......................................... (Loss) carried to Balance Sheet ........................... Basic and Diluted Earnings Per Share .................. Notes to the Accounts .......................................
As per our Report of even date attached to the Balance Sheet

234

Schedules forming part of Accounts for the year ended 31st March, 2006
SCHEDULE 1 Share Capital: As at 31st March, 2006 Rupees 250,000,000 650,000,000 50,000,000 950,000,000 Issued, Subscribed and Paid-up: 20,000,000 Equity Shares of Rs. 10/- each fully paid-up ............................................. (of the above 12,553,565 Equity Shares of Rs. 10/- each fully paid-up are held by Mahindra Gesco Developers Limited, the Holding Company) 6,500,000 6% Cumulative Redeemable Preference Shares of Rs. 100/- each fully paid-up ..................................... i. The Cumulative Redeemable Preference Shares are redeemable at par after the principal amount and interest has been fully paid on the Term Loan from others. ii. The Preference Dividend shall be paid after repayment of at least 75% of the Term Loan from others under a line of credit of Rs. 128 crores. 850,000,000 850,000,000 SCHEDULE 8 Loans and Advances: (Unsecured, Considered Good) Advances recoverable in Cash or in Kind or for value to be received .............................................. Deposits ................................................................ Tax deducted at Source ......................................... 200,000,000 200,000,000 As at 31st March, 2005 Rupees 250,000,000 650,000,000 50,000,000 950,000,000 SCHEDULE 4 Investments: As at 31st March, 2006 Rupees As at 31st March, 2005 Rupees
Authorised: 25,000,000 Equity Shares of Rs. 10/- each ......... 6,500,000 Redeemable Cumulative Preference Shares of Rs. 100/- each ................. 5,000,000 Unclassified Shares of Rs. 10/- each ..
Long Term, Unquoted (at cost) Others Non-trade Mahindra Realty Limited (13,000 Equity Shares of Rs. 10/- each fully paid-up) (acquired during the year) ...................................................................... Ascendas Mahindra IT Park Private Limited (260,000 Equity Shares of Rs. 10/- each fully paid-up) (acquired during the year) ......................................
130,000
2,600,000 2,730,000
SCHEDULE 5 Inventories (refer Note 1(e) and Note 8): Work-in-Progress (representing cost of land and related development expenditure) ........... 1,037,983,335 1,488,027,931 1,037,983,335 1,488,027,931 SCHEDULE 6 Sundry Debtors: (Unsecured, Considered Good) Outstanding for more than six months .................. Outstanding for less than six months ...................
650,000,000
650,000,000
3,428,020 475,540 3,903,560
70,342,634 70,342,634
SCHEDULE 7 Cash and Bank Balances: Cash on Hand ........................................................ Cheques on Hand .................................................. Balances with Scheduled Banks on Current Account ........................................ on Fixed Deposit Account ..............................
16,997 348,251 1,034,206 1,399,454
89,134 28,644,718 2,154,449 30,888,301
SCHEDULE 2 Secured Loans: Term Loan from others ......................................... (Secured/to be secured by equitable mortgage on land, disclosed as inventories, near Maraimalai Nagar, Chennai)
535,000,000 1,132,500,000
67,093,808 1,326,111 1,334,522 69,754,441
64,837,440 1,396,491 1,119,389 67,353,320
535,000,000 1,132,500,000
SCHEDULE 3 Fixed Assets: Particulars As at 31-03-2005 Land ............................ Building ....................... Plant and Machinery .... Office Equipment ........ Furniture and Fixtures . Computers .................. Vehicles ....................... Total ............................ Previous Year .............. 10,779,777 30,468,484 1,546,452 1,744,488 2,476,460 1,910,494 48,926,155 47,219,254 Gross Block Additions 5,293,621 853,767 130,828 19,940 482,200 798,842 7,579,198 1,706,901 Deletions 261,766 727,459 989,225 As at 31-03-2006 10,779,777 35,762,105 853,767 1,677,280 1,502,662 2,958,660 1,981,877 55,516,128 48,926,155 As at 31-03-2005 1,836,053 408,291 659,226 1,622,945 468,308 4,994,823 3,413,543 Depreciation For the year 1,008,854 10,111 78,750 94,683 304,255 184,807 1,681,460 1,581,280 Deletions 87,549 517,646 605,195 As at 31-03-2006 2,844,907 10,111 487,041 666,360 1,927,200 135,469 6,071,088 4,994,823 As at 31-03-2006 10,779,777 32,917,198 843,656 1,190,239 836,302 1,031,460 1,846,408 49,445,040
Rupees Net Block As at 31-03-2005 10,779,777 28,632,431 1,138,161 1,085,262 853,515 1,442,186 43,931,332
235

SCHEDULE 9 Current Liabilities and Provisions:
SCHEDULE 13 Notes to the Accounts for the year ended 31st March, 2006 1. Significant Accounting Policies: (a) Basis of Accounting:
Current Liabilities: Sundry Creditors Due to Small Scale Industrial Undertakings ... Others ............................................................ 135,561,335 25,216,785 4,656,575 165,434,695 Provisions: Leave Salary .......................................................... Gratuity ................................................................. 227,280 228,226 455,506 165,890,201 197,321 166,125 363,446 115,914,859 92,207,428 14,348,300 8,995,685 115,551,413
Advance received from Customers ....................... Interest accrued but not due on Loans ..................
The accounts have been prepared to comply in all material aspects in accordance with applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Indian Companies Act, 1956. (b) Revenue Recognition: i) Land lease premium is recognised as income upon creation of leasehold rights in favour of the lessee or upon an agreement to create leasehold rights with handing over possession. ii) Income from operation and maintenance charges and water charges are recognised on an accrual basis as per terms of the agreement with the lessees. (c) Fixed Assets: Fixed Assets are stated at cost less accumulated depreciation. Cost of acquisition is inclusive of purchase price, levies and any directly attributable cost of bringing the assets to its working condition for the intended use. When an asset is scrapped, or otherwise disposed of, the cost and related depreciation are removed from the books of accounts and resultant profit (including capital profit) or loss, if any, is reflected in the Profit and Loss Account. (d) Depreciation: Depreciation is provided on straight line method basis from the date assets are put to use in accordance with Schedule XIV to the Companies Act, 1956. (e) Inventories:
SCHEDULE 10 Other Income: Interest on Deposits (Tax deducted at source Rs. 9,897, previous year Rs. 38,721) ..................... Miscellaneous Income ..........................................
Year ended 31-03-2006 Rupees 44,323 83,600 127,923
Year ended 31-03-2005 Rupees 185,177 66,500 251,677
SCHEDULE 11 Other Expenses: Salaries, Wages and Bonus ................................... Staff Welfare ......................................................... Electricity ............................................................... Rent ...................................................................... Rates and Taxes .................................................... Insurance ............................................................... Repairs and Maintenance others ...................... Advertisement and Business Promotion ............... Travelling ............................................................... Printing and Stationery .......................................... Communication ..................................................... Directors Sitting Fees ........................................... Preliminary Expenses Written Off ......................... Deferred Revenue Expenses ................................ Exchange Fluctuation ............................................ Bank Charges ........................................................ Security Charges ................................................... Miscellaneous ....................................................... Loss on Sale of Fixed Assets ................................ Site Maintenance .................................................. Filing Fees ............................................................. 12,748,437 697,616 1,730,599 1,232,747 66,029 210,499 1,171,859 11,420,881 3,265,472 556,182 909,774 38,000 21,161 116,442 906,848 1,189,516 52,348 11,512,850 6,700 47,853,960 12,379,034 528,574 1,421,472 911,157 128,636 130,884 700,482 17,540,731 2,933,098 416,417 776,046 44,000 234,066 59,424,245 14,910 36,721 820,884 855,741 1,699,652 6,289 101,003,039 3. SCHEDULE 12 Decrease/(Increase) in Work-in-Progress: Opening Work-in-Progress .................................... 1,488,027,931 1,669,289,798 Closing Work-in-Progress ...................................... 1,037,983,335 1,488,027,931 450,044,596 181,261,867 2.
Inventories are valued at lower of cost and net realisable value. Cost represents cost of land and all expenditure incurred in connection with, or attributable to the project, and, being a long-term project, includes interest. (f) Retirement Benefits: The provisions of the Employees Provident Fund Act and Employees State Insurance Act are not applicable to the Company. Provisions for leave salary and gratuity are made on an arithmetical basis. (g) Taxes on Income: Income taxes are accounted for in accordance with Accounting Standard 22 on Accounting for Taxes on Income (AS 22) issued by the Institute of Chartered Accountants of India. Tax expense comprises both current and deferred tax. Current tax is determined as the amount of tax payable in respect of taxable income for the period using the applicable tax rates and tax laws. Deferred tax assets and liabilities are 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 and are measured using tax rates enacted or substantively enacted as at the Balance Sheet date. The carrying amount of deferred tax assets and liabilities are reviewed at each Balance Sheet date. (h) Segment Reporting: The Company has a single reportable segment, namely, lease of land. Year ended 31st March, 2006 Rupees Estimated Value of contracts remaining to be executed on capital account and not provided for (net of advances) ...................................... Managerial Remuneration: Manager * Salaries, Allowances and Perquisites . * Contribution to Provident, Gratuity and Superannuation Fund ......................... 4,001,492 356,653 4,358,145 Remuneration Rs. 621,791 is subject to shareholders approval. 30,81,000 259,200 3,340,200 Year ended 31st March, 2005 Rupees
60,050,746
12,227,984
236

4. Auditors' Remuneration:
Year ended 31st March, 2006 Rupees 400,000 86,359
Year ended 31st March, 2005 Rupees 200,000 100,000 26,119
Name of the Related Party Bristlecone GmbH Bristlecone Singapore Pte. Ltd. Mahindra (China) Tractor Company Ltd. (w.e.f. 13th May, 2005) Mahindra Engg. & Chem. Products Ltd. Mahindra Engineering Design & Development Company Ltd. Mahindra Europe s.r.l. (w.e.f. 30th May, 2005) Mahindra Gujarat Tractor Ltd. Mahindra Holdings & Finance Ltd. Mahindra Holidays & Resorts India Ltd. Mahindra Holidays & Resorts (USA) Inc. Mahindra Insurance Brokers Ltd. Mahindra Infrastructure Developers Ltd. Mahindra Intertrade Ltd. Bristlecone UK Ltd. Mahindra International Ltd. (w.e.f. 1st November, 2005) Mahindra Logisoft Business Solutions Ltd. Mahindra Middleeast Electrical Steel Service Centre (FZE) Mahindra & Mahindra Financial Services Ltd. Mahindra & Mahindra South Africa (Pty) Ltd. Mahindra Overseas Investment Company (Mauritius) Ltd.
Name of the Relationships Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary
Audit Fees ...................................................... Other Services ............................................... Reimbursement Expenses/Levies ................. 5. Expenditure in Foreign Currency: Travel ........................................................... Other Expenses .............................................
175,842 1,531,420
265,062 777,832
6. Loans and Advances include an amount of Rs. 63,570,058 (previous year Rs. 63,570,058), outstanding for more than five years, paid to the land procuring agent towards procurement of land. As there are certain matters that require resolution, the parties have referred the same to a mutually agreed mediator. The management is of the opinion that the matter is expected to be resolved satisfactorily and also considering that the Company has recourse against the agent, it is expected that the amount would be recovered and therefore no provision for loss, if any, is required to be made. 7. Arrears of dividend and dividend tax on 6% Cumulative Redeemable Preference Shares outstanding for the period from 01-10-2003 to 31-03-2006 is Rs. 110,242,031 (previous year Rs. 66,145,219). 8. The cost of land and related development expenditure is disclosed as work-inprogress as the Company expects to incur further costs on land and infrastructure development. 9. The Company is in the business of land development for industrial, commercial and residential use. The Company acquires land and incurs expenditure on its development and related infrastructure facilities for lease/sale. During the year, the Company has leased 290 (previous year 161) acres of land on long-term basis. 10. Earnings Per Share: 2006 Rupees Profit/(Loss) after preference dividend including tax thereon ...................................... Equity Shares (Nos.) ....................................... Earnings Per Share (Basic/Diluted) ................. Nominal Value of Equity Share ....................... 11. Related Party Transactions: (a) Names of related parties and nature of relationship where control exists: Name of the Related Party Mahindra & Mahindra Limited Mahindra Gesco Developers Ltd. Automartindia Ltd. Bristlecone Ltd. Bristlecone Inc. Mahindra Acres Consulting Engineers Ltd. Mahindra Ashtech Ltd. Mahindra Automotive Steels Pvt. Ltd. (w.e.f. 27th May, 2005) Tech Mahindra Ltd. Tech Mahindra GmbH Tech Mahindra (Americas) Inc. Name of the Relationships Controlling Company Holding Company Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary 2005 Rupees
Mahindra Realty Ltd. (w.e.f. 21st September, 2005) Fellow Subsidiary Mahindra Renault Pvt. Ltd. (w.e.f. 5th August, 2005) Fellow Subsidiary Mahindra Steel Service Centre Ltd. Mahindra Shubhlabh Services Ltd. Mahindra SAR Transmission Pvt. Ltd. Mahindra USA Inc. Mahindra Ugine Steel Company Ltd. (w.e.f. 21st June, 2005) Mahindra World City (Jaipur) Ltd. (w.e.f. 26th August, 2005) NBS International Ltd. Tech Mahindra (R & D Services) Ltd. (w.e.f. 28th November, 2005) Tech Mahindra (R & D Services) Inc. (w.e.f. 28th November, 2005) Tech Mahindra (R & D Services) Pte. Ltd. (w.e.f. 28th November, 2005) Stokes Group Limited (w.e.f. 3rd January, 2006) Jensand Limited (w.e.f. 3rd January, 2006) Stokes Forgings Dudley Limited (w.e.f. 3rd January, 2006) Plexion Technologies (India) Private Limited (w.e.f. 15th February, 2006) Plexion Technologies (UK) Limited (w.e.f. 15th February, 2006) Plexion Technologies GmbH (w.e.f. 15th February, 2006) Plexion Technologies Incorporated (w.e.f. 15th February, 2006) Console Estate & Investment Limited (upto 20th March, 2006) Ascendas Mahindra IT Park Private Limited B.G. Menon Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary
(22,697,080) (187,207,449) 20,000,000 (1.13) 10 20,000,000 (9.36) 10
Stokes Forgings Limited (w.e.f. 3rd January, 2006) Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary Joint Venture Key Managerial Personnel
Mahindra-BT Investment Company (Mauritius) Ltd. (w.e.f. 9th May, 2005) Fellow Subsidiary Tech Mahindra (Singapore) Pte. Ltd. Tech Mahindra (Thailand) Ltd. (w.e.f. 21st February, 2006) Bristlecone India Ltd. Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary
237

(b) The related party transactions are as under: Nature of Transactions 1. Income: Land Lease Premium Water Charges 2. Deposit Received 3. Investment: Mahindra Realty Limited Ascendas Mahindra IT Park Private Limited 4. Other Transactions: Professional Charges paid Mahindra Acres Consulting Engineers Limited 5. Other Expenses Mahindra Holidays & Resorts (India) Limited Mahindra Acres Consulting Engineers Limited Mahindra Logisoft Business Solutions Limited Reimbursement Received Mahindra Logisoft Business Solution Limited 6. Outstandings: Receivables Payables Mahindra Holidays & Resorts ((India) Limited 7. Managerial Remuneration 25,165 (3,485) 3,418,187 (28,688,795) 1,816,650 () 4,358,145 (3,340,200) 70,885 (45,400) 1,497,958 () 43,243 (184,601) 49,205 (51,655) 15,107 (181,688) 6,355,080 (5,250,881) 676,817 (316,324) 76,143 (109,397) 1,464,664 (1,634,486) 3,796,544 (1,665,034) 130,000 () 2,600,000 () 3,057,570 () 405,622,000 () (88,000,000) 111,280 () Controlling Company Holding Company Fellow Subsidiary Joint Venture Key Managerial Personnel
12. Joint Venture Disclosure: i) Interest in Joint Venture: Name of the Company Ascendas Mahindra IT Park Private Limited ii) Country of Incorporation India Proportion of Ownership Interest 26%
Interest in the assets, liabilities, income and expenses with respect to the Joint Venture. Year ended 31-03-2006 Rupees 3,632,143 127,891 3,105,076 30,420 4,436,860 141,330
Particulars I. a. Net Fixed Assets ................................................................................................................................................... b. Pre-operative Expenditure ..................................................................................................................................... c. Cash and Bank Balances ....................................................................................................................................... d. Loans and Advances .............................................................................................................................................. II. Current Liabilities and Provisions ................................................................................................................................. III. Expenses ..................................................................................................................................................................... 13. The name of the Company was changed to Mahindra World City Developers Limited from Mahindra Industrial Park Limited on 30th August, 2005.
238

14. INFORMATION PURSUANT TO PART IV, SCHEDULE VI OF THE COMPANIES ACT, 1956. BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE I. Registration Details: Registration No. Balance Sheet Date II. 3 1 1 8 0 3 3 7 5 2 5 0 1 0 6 State Code 1 8
Date
Month
Year
Capital Raised during the year (Amount in Rs. Thousands): Public Issue N Bonus Issue N I L I L Rights Issue N I L L Private Placement N I
III.
Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities 1 5 5 0 8 Sources of Funds: Paid-up Capital 8 5 0 0 Secured Loans 5 3 5 0 0 0 0 0 Reserves and Surplus N I Unsecured Loans N I L L 9 0 1 Total Assets 5 5 0 8 9 0
Application of Funds: Net Fixed Assets 1 0 1 6 1 Net Current Assets 9 4 7 1 5 Accumulated Losses 3 3 3 5 0 IV. 0 1 9 Investments 2 7 3 0
Miscellaneous Expenditure N I L
Performance of the Company (Amount in Rs. Thousands): Turnover (including other Income) 8 8 2 4 6 4 Profit/(Loss) before Tax 2 1 8 3 9 Earnings Per Share in Rupees ( 1 . 1 3 ) Total Expenditure 8 6 0 6 2 Profit/Loss after Tax 2 1 4 0 Dividend Rate % N I 5 0 L
V.
Generic Name of Principal Product/Services of the Company (as per Monetary Terms): Product Description ITC Code D E V E L O P M E N T N I L O F I N D U S T R I A L P A R K S
15.
Previous year's figures have been regrouped/recast, wherever necessary to conform to this year's classification.

239

Year ended 31-03-2006 A. CASH FLOW FROM OPERATING ACTIVITIES: Profit/(Loss) for the year ....................................................................................... Adjustments for: Depreciation .......................................................................................................... Interest and Finance Charges ............................................................................... Profit/(Loss) on Sale of Fixed Assets .................................................................... Deferred Revenue Expenditure ............................................................................. Miscellaneous Expenses Written Off ................................................................... Interest Income ..................................................................................................... Operating Profit before Working Capital Changes ................................................ Changes in: Sundry Debtors ..................................................................................................... Loans and Advances ............................................................................................. Inventories ............................................................................................................ Current Liabilities .................................................................................................. Cash Generated from Operations ......................................................................... Taxes Paid ............................................................................................................. Net Cash from Operating Activities ...................................................................... B. CASH FLOW FROM INVESTING ACTIVITIES: Purchase of Fixed Assets ..................................................................................... Sale of Fixed Assets ............................................................................................. Purchase of Investments ...................................................................................... Interest Received .................................................................................................. Net Cash used in Investing Activities ................................................................... C. CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from Borrowings ................................................................................... Repayment of Borrowings .................................................................................... Interest and Finance Charges Paid ....................................................................... NET CASH USED IN FINANCE ACTIVITIES ....................................................... NET INCREASE IN CASH AND CASH EQUIVALENTS (A + B +C) .................... Opening Balance ................................................................................................... Closing Balance ..................................................................................................... As per our Report of even date attached to the Balance Sheet For A.F. Ferguson & Co. Chartered Accountants H.L. Shah Partner 21,839,025 1,681,460 95,138,150 52,348 (44,323) 118,666,660 66,439,074 (2,185,988) 450,044,596 54,314,452 568,612,134 687,278,794 (654,426) 686,624,368 Year ended 31-03-2005 (143,110,636) 1,581,280 100,646,209 59,424,245 234,066 (185,177) 18,589,987 (70,342,634) 504,470 181,261,867 (1,831,191) 109,592,512 128,182,499 (1,110,101) 127,072,398
(16,781,960) 331,682 (2,730,000) 44,323 (19,135,955)
(9,256,555) 185,177 (9,071,378)
150,000,000 (747,500,000) (99,477,260) (696,977,260) (29,488,847) 30,888,301 1,399,454
322,500,000 (299,310,960) (110,680,835) (87,491,795) 30,509,225 379,076 30,888,301

240
MAHINDRA WORLD CITY (JAIPUR) LIMITED
DIRECTORS' REPORT TO THE MEMBERS

Your Directors present their first Report together with the audited Accounts of the Company for the year ended 31st March, 2006. Operations During the year under review, your Company has taken preliminary steps for setting up a Special Economic Zone (SEZ) at Jaipur. The Government of Rajasthan through Rajasthan Industrial Development and Investment Corporation Limited (RIICO) shall participate in the equity of the Company. The Company has received approval from Ministry of Commerce, Govt. of India, for the development of SEZ for IT and ITES sector and an in-principle approval for expansion of the same to a multiproduct SEZ. The Company is currently in talks with the Government of Rajasthan for finalizing various agreements in this regard. As the activities of the Company including acquisition of land in SEZ are expected to be step-up in near future, the Company proposes to increase its capital in tranches at appropriate times, to fund the activities. 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; Auditors M/s. S. C. Kabra & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from M/s. S. C. Kabra & Co., Chartered Accountants, to the effect that their re-appointment if made, would be in conformity with the limits specified in the said section. Certificate under Section 383 A of the Companies Act, 1956 from a Company Secretary in Whole-time Practice In accordance with the provisions of Section 383A of the Companies Act, 1956, a certificate issued by M/s. Deepak Arora & Associates, Company Secretary in Whole-time Practice, certifying that the Company has complied with all the provisions of the Companies Act, 1956 is given in the Annexure and forms a part of this Report. Public Deposits and Loans/ Advances The Company has not accepted any deposits from the public or employees during the year under review. The Company has not made any loans/advances, which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent companies Mahindra Gesco Developers Limited and Mahindra & Mahindra Limited. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption respectively, are not applicable to the Company. There was no inflow or outflow of foreign exchange involved during the year under review. Particulars of Employees as required under section 217(2A) of the Companies Act, 1956 and rules made there under The Company had no employee who was in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2006 or not less than Rs. 2,00,000 per month during any part of the said year. For and on behalf of the Board Arun Nanda Chairman Mumbai, 12th April, 2006.
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, 2006 and of the loss 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. Directors Mr. Arun Nanda, Mr. Sanjiv Tyagi and Mr. Basant Kumar Jain being the first Directors of the Company hold office upto the date of the forthcoming Annual General Meeting of the Company. The Company has received notices from a member signifying his intention to propose Mr. Arun Nanda, Mr. Sanjiv Tyagi and Mr. Basant Kumar Jain as candidates for the office of Director.
241
COMPLIANCE CERTIFICATE
FORM (SEE RULE 3) COMPANIES (COMPLIANCE CERTIFICATE) RULE, 2001 Registration No. of the Company : 17-021207 Nominal Capital : Rs. 2.00 CRORE To, The Members MAHINDRA WORLD CITY (JAIPUR) LIMITED, Jaipur. We have examined the registers, records, books and papers of MAHINDRA WORLD CITY (JAIPUR) LIMITED (the company), as required to be maintained under the Companies Act, 1956 (the Act), and the rules made thereunder and also the provisions contained in the Memorandum and Articles of Association of the Company for the financial year ended on 31st March, 2006 (financial year). In our opinion and to the best of our information and according to the examinations carried out by us and explanations furnished to us by the company, its officers and agents, we certify that in respect of the aforesaid financial year : 1. The company has kept and maintained all registers as stated in ANNEXURE A to this certificate, as per the provisions of the Act and the rules made there under and all entries therein have been duly recorded. The company has duly filed the forms and returns as stated in ANNEXURE B to this certificate, with the Registrar of Companies. The Company being a public limited company comments are not required. The Board of Directors duly met 4 times respectively on 02.09.2005, 19.12.2005, 06.01.2006, and 07.03.2006 in respect of which meeting proper notices were given and the proceeding were properly recorded and signed in the Minutes Books maintained for the purpose. The company has not closed its Register of Members during the financial year. The company was incorporated on 26th August 2005 and in the financial year 2005-2006 no Annual General Meeting was held. No extra ordinary general meeting was held during the financial year. The company has not given any loans and advances to any directors or persons or firms or companies referred to under section 295 of the Act. The company has not entered into any contracts falling within the purview of section 297 of the Act.
13. The company has: i. Not allotted /transmits any security during the financial year and delivered all the certificate on transfer of shares during the financial year. Not deposited any amount in a separate Bank Account as no dividend was declared during the financial year. Not required to post warrants to any member of the company as no dividend was declared during the financial year. Not required to transfer any amounts to Investor Education and Protection Fund during the financial year. During the financial year company was not required to comply with the requirements of section 217 of the Act.
ii. iii.
iv. v.
14. The Board of directors of the company is duly constituted. And there was no change in Board of Director during the financial year. 15. The company has not appointed any Managing Director/ Manager/Whole Time Director during the financial year. 16. The company has not appointed any sole selling agents during the financial year. 17. The company was not required to obtain any approvals of the Central Government, Company Law Board, Regional Director, Registrar or such authorities prescribed under the various provisions of the Act during the financial year. 18. The directors have disclosed their interest in other firms/ companies to the Board of Directors pursuant to the provisions of the Act and rules made thereunder. 19. The company has not issued any security during the financial year. 20. The company has not bought back any shares during the financial year. 21. Since Incorporation Company has not issued any preference share/debenture, hence para is not applicable. 22. There were no transactions necessitating the company to keep in abeyance rights to dividend, rights shares and bonus shares pending registration of transfer of shares. 23. The company has not invited/accepted any deposits including any unsecured loans falling within the purview of section 58A during the financial year. 24. The company has not made any borrowings during the financial year. 25. The company has not made any investment/loan/guarantee as per Section 372A of the act during the financial year. 26. The company has not altered the provisions of the Memorandum with respect to situation of the companys registered office from one state to another during the year under scrutiny. 27. The company has not altered the provisions of the Memorandum with respect to the object of the company during the year under scrutiny.
2.
3. 4.
5. 6.
7. 8.
9.
10. The company has made necessary entries in the register maintained under section 301 of The Act. 11. The Company has not obtained the necessary approval under section 314 of the companies act, 1956 as no instances were falling during the financial year under this section. 12. The company has not issued any duplicate share certificates during the financial year.
242
28. The company has not altered the provisions of the Memorandum with respect to name of the company during the year under scrutiny. 29. The company has not altered the provisions of the Memorandum with respect to share capital of the company during the year under scrutiny. 30. The company has not altered its Articles of Association during the financial year. 31. There was no prosecution initiated against or show cause notices received by the company and no fines or penalties or any other punishment was imposed on the company during the financial year, for offences under the Act.
32. The company has not received any money as security from its employees during the financial year. 33. The provision of section 418 of the act is not applicable on company. For DEEPAK ARORA & ASSOCIATES Practicing Company Secretaries Date : 12th April, 2006 Place : JAIPUR DEEPAK ARORA PROPRIETOR C.P.No. 3641
ANNEXURE A Registers as maintained by the Company: Statutory Registers 1. 2. 3. 4. 5. 6. Register of Members u/s 150 Minutes Book of Board and General Meetings u/s 193 Register of Contracts in which Directors are interested u/s 301 Register of Directors/Managing Director/Whole time director/Secretaries u/s 303 Register of Directors Shareholding u/s 307 Register of Share Transfer
ANNEXURE B Forms and Returns as filed by the Company with Registrar of Companies during the financial year ending 31st March 2006 S.No. Form No. Returns Memorandum of Association Articles of Association Form No 1 Form No 32 Form No 18 Form No 29 Form No 29 Form No 29 Form No 20 Schedule III Form No 22 Filed under section For Date of Filling Whether filed If delay in filing whether within prescribed requisite additional time fee paid Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes NA NA NA NA NA NA NA NA NA NA NA
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
33 33 33 303 146 264 264 264 149 149 165
25.08.2005 25.08.2005 25.08.2005 25.08.2005 25.08.2005 25.08.2005 25.08.2005 25.08.2005 14.11.2005 14.11.2005 06.01.2006
25.08.2005 25.08.2005 25.08.2005 25.08.2005 25.08.2005 25.08.2005 25.08.2005 25.08.2005 14.11.2005 14.11.2005 06.01.2006
243
AUDITORS REPORT
To THE MEMBERS OF M/S. MAHINDRA WORLD CITY (JAIPUR) LIMITED 1. We have audited the attached Balance Sheet of M/s Mahindra World City (Jaipur) Limited., as at 31st March, 2006 and also the Profit & Loss Account for the year ended on that date annexed thereto. These financial statements are the resposibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on out audit. We conducted our audit in accordance with 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 statement. An audit also includes assessing the accounting priciples 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 (Auditor's Report Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, 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 above, we report that : i ii. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit; In our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purpose of our audit, have been received from the branches/depots not visited by us. The report on the account of brach audited by other auditor has been forwarded to us and has been appropriately dealt by us in preparing our report.
iii.
The Balance Sheet and Profit and Loss account dealt with by this report are in agreement with the books of account and with the returns from the branches/depots. In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956. On the basis of written representations received from the directors as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2006, from being appointed as directors 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 read together with notes thereon 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) b) c) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006. In the case of the Profit and Loss account, of the loss of the Company for the period ended on that date; and In the case of Cash Flow Statement, of the cash flows of the Company for the period ended on that date.
iv.
v.
2.
vi.
3.
For S.C. KABRA & CO. Chartered Accountants NILESH CHOUDHARY Partner Membership No. - 116144
Place: Mumbai Dated: 12th April, 2006
244
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE OF THE SHAREHOLDERS i a. b. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.. We are informed that the Company has formulated a regular program of physical verification of all fixed assets, which in our opinion is reasonable having regard to the size of the Company and nature of its assets. Accordingly, the physical verification of the fixed assets has been carried out by management during the year and no material discrepancies were noticed on such verification. There was no substantial disposal of fixed assets during the year. As explained to us inventories (except stock lying with third parties, confirmation for which has been obtained and in transit were physically verified during the year by the management at reasonable intervals. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. The company has not granted any loan, secured or unsecured to companies firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 Accordingly, sub-clause (b), (c) and (d) are not applicable. The company has not taken any loan, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, sub-clause (f) and (g) are not applicable.
tax wealth tax, custom duty, excise duty, cess and other statutory dues applicable to it with appropriate authorities. There is no undisputed outstanding statutory dues as at the year end for a period of more than six months from the date they become payable. x. xi. The Company has accumulated losses at the end of the financial year and it has incurred cash losses in the current financial year. Based on our audit procedures and on the information and explanations given by the management we are of the opinion that the company has not defaulted in repayment of dues to financial institutions and banks. We have been informed that the Company has not issued any debenture during the year.
c. ii. a.
xii. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. xiii. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/ society, therefore, the provisions of clause 4 (xiii) of the Companies (Auditor's Report) order, 2003 (as amended), are not applicable to the Company. xiv. The Company does not deal or trade in shares, securities, debentures and other securities except that it has investments of long term nature in shares/bonds and these are held in the name of the Company. xv. According to the information and explanations given to us, the Company has not given corporate guarantees for loans taken by others from banks of financial institutions. Accordingly, clause 4 (xv) of the order is not applicable. xvi. To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which loans were obtained. xvii. According to the information and explanation given to us, on an overall basis, funds raised on short term basis have, prima facie, not been used during the year for long term investments. xviii The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956. xix. The Company did not have any outstanding debentures during the year. Hence, question of creation of security or charge does not arise. xx. The Company has not raised any money through a public issue during the year. xxi. Based on 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, no fraud on or by the Company, noticed or reported during the year. For S.C. KABRA & CO. Chartered Accountants
b.
c.
iii.
a.
b.
iv.
In our opinion and according to the information and explanation given to us, there is 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. During the course of our audit, no major weakness has been noticed in internal control system. In our opinion and according to the information and explanations provided by the management, we are of the opinion that the particulars of contract or arrangements that need to be entered into the register maintained under section 301 of the Companies Act' 1956 have been so entered. In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and provisions of section 58A and 58AA of the Companies Act, 1956 and rules framed there under with regard to the deposits accepted from the public.
v.
vi.
vii. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. viii. We have broadly reviewed the books of accounts maintained by the Company 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 are of the opinion that prime facie the prescribed accounts and records have been made and maintained. ix. According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, service
NILESH CHOUDHARY Partner Membership No. - 116144
Place: Mumbai Dated: 12th April, 2006
245

Schedule I SOURCES OF FUNDS : Shareholders Funds Capital ............................................................................... TOTAL............. 1 5,000,000 5,000,0000 Rupees Rupees
II
APPLICATION OF FUNDS : Fixed Assets ..................................................................... Gross Block ...................................................................... Less: Depreciation ............................................................ 2 54,000 473 53,527
Deferred Tax Asset (note 5) ........................................... Current Assets, Loans And Advances ........................... Inventories ........................................................................ Cash and Bank Balances .................................................. Loans and Advances ........................................................ 3 4 5 7,495,208 1,716,180 1,359 9,212,747
Less: Current Liabilities And Provisions

Liabilities ........................................................................... Provisions ......................................................................... Net Current Assets ......................................................... Miscellaneous Expenditure .............................................. (to the extent not written off or adjusted) ........................ Profit and Loss Account ................................................. TOTAL............. Notes on Accounts 9 23,465 5,000,000 8 6 7 4,419,894 13,000 4,432,894 4,779,853 143,155
As per our report attached For S. C. Kabra & Co. Chartered Accountants Nilesh Choudhary Partner
For and on behalf of the board
Basant Jain Director
Arun Nanda Chairman

246
PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 26TH AUGUST 2005 TO 31ST MARCH 2006
Schedule INCOME Interest - gross (includes tax deducted at source: Rs. 1359) ..... .............................................................................................. EXPENDITURE Salaries and Allowances ........................................................ Travelling Expenses ............................................................... Professional Fees .................................................................. Advertisement ....................................................................... Telephone Expenses ............................................................. Miscellaneous Expenses ....................................................... Depreciation .......................................................................... Preliminary Expenses written off during the period .............. .............................................................................................. .............................................................................................. Less: Transferred tp Work in Progress (note 1 (e) .......................... Auditor's Remuneration .......................................................... Audit Fees (inclusive of Service Tax) ..................................... other services ........................................................................ ...................................................................................... Total 163,050 154,498 6,960,494 150,000 8,600 17,192 473 40,901 7,495,208 7,495,208 11,020 5,500 16,520 Rupees Rupees 6,055 6,055
(Loss) before taxation ............................................................ Less: Provision for taxation Current Tax ............................................................................ Deferred Tax (note 5) ............................................................. Fringe Benefit Tax ................................................................. Balance carried to Balance Sheet ........................................... (13,000)
(10,465)
(13,000) (23,465)
Earnings per share - Basic and Diluted .................................. Notes to Accounts ..................................................................... 9
(0.05)
Arun Nanda Chairman

247
CASH FLOW FOR THE PERIOD ENDED MARCH 31, 2006

Rupees A. Cash Flow from Operating Activities Net Profit / (Loss) before Tax .............................................................................. Adjustments for : Depreciation ....................................................................................................... Interest Income .................................................................................................. Preliminary Expenditure ..................................................................................... 473 (6,055) (143,155) (10,465)
Operating Loss before working capital changes ................................................ Adjustments for : Trade and other Receivables .............................................................................. Inventories .......................................................................................................... Trade Payables and Other Liabilities ................................................................... Net Cash from operating activities ................................................................. B. Cash Flow from investing activities Purchase of Fixed Assets ................................................................................... Interest recieved ................................................................................................ Net Cash (Used in) / from investing activities ............................................... C. Cash Flow from financing activities Issue of share capital ......................................................................................... Net cash used in Financing activities ............................................................. Net Increase / (Decrease) in cash and cash equivalents ............................... Cash and Cash equivalents (Opening) .......................................................... Cash and Cash equivalents (Closing) .............................................................
(159,202)
(1,359) (7,495,208) 4,419,894 (3,235,875)
(54,000) 6,055 (47,945)
5,000,000 5,000,000 1,716,180 1,716,180
Arun Nanda Chairman

248
SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH 2006 AND PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 26TH AUGUST 2005 TO 31ST MARCH, 2006.
SCHEDULE 1 SHARE CAPITAL: Rupees
Authorised 500,000 Equity shares of Rs.10/- each ................. Issued, Subscribed and Paid-up 500,000 equity shares of Rs. 10 each fully paid up. (The entire share capital is held by Mahindra Gesco Developers Ltd., the holding company) TOTAL ..... 5,000,000 5,000,0000
SCHEDULE 3: INVENTORIES
Work in Progress Project-related Expenditure inventorised during the period TOTAL .....
Rupees
7,495,208 7,495,208
SCHEDULE 4: CASH & BANK BALANCES

5,000,000 Balance with a scheduled bank on current account TOTAL ..... 1,716,180 1,716,180 (In Rupees)
SCHEDULE 2 Fixed Assets : Description of Assets As at 01/04/2005

GROSS BLOCK Addition Deductions during during the year the year
54,000 54,000
As at 31/03/2006
54,000 54,000
Upto 01/04/2005

DEPRECIATION For the Adjustments Period for deductions

473 473
NET BLOCK Upto As at As at 31/03/2006 31/03/2006 31/03/2005 31/03/2005

473 473 53,527 53,527
Computers Total
SCHEDULE 5: LOANS AND ADVANCES

(Unsecured, considered good) Tax Deducted at Source ........................................ TOTAL .....
Rupees
1,359 1,359
SCHEDULE 7: PROVISIONS
Provision for Fringe Benefit Tax TOTAL .....
Rupees
13,000 13,000
SCHEDULE 6: CURRENT LIABILITIES

Sundry Creditors Other Liabilities TOTAL ..... 4,138,688 281,206 4,419,894
SCHEDULE 8: MISCELLANOUS EXPENDITURE

(to the extent not written off or adjusted) Preliminary expenses Less : Written off during the period TOTAL ..... 184,056 40,901 143,155
NOTES TO ACCOUNTS FOR THE PERIOD ENDED 31ST MARCH, 2006.

SCHEDULE 9
1.
Significant accounting policies a. Basis for Accountings: The accounts have been prepared to comply in all material aspects relating to the applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956. b. Fixed Assets: Fixed Assets are stated at cost less depreciation. Cost of acquisition is inclusive of purchase price, levies any incidental expenditure and any directly attributable costs of bringing the asset to its working condition for its intended use and interest in case of construction. c. Depreciation Depreciation is provided on the manner and at rates prescribed in Schedule XIV of the Companies Act, 1956 on straight-line method. d. Investments : The Company is in the bussiness of land development for industrial, commercial and residential use ("the project"). Work in progress is valued at cost or net realisable value (whichever is lower) and includes the cost of land and all expenditure incurred in connection with, or attributable to the Project, and being a long-term project includes interest. e. Miscellaneous Expenditure (to the extent not written off or adjusted) Preliminary expenses i.e. formation expenses, registration fess, etc. incurred for formation of enterprise are carried forward to be appropriately written off over a period of thirty six months starting from the month in which the company was incorporated. 3. 2.
f.
Income Taxes : 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 are recognised only to the extent that there is virtual certainty or reasonable certainty, as the case may be supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realised.
g.
Segment Report : The Company has a single reportable segment, namely, lease of land.
The identification of suppliers as small-scale industrial undertakings has been done on the basis of information provided by the suppliers to the Company. On this basis, there are no small-scale industrial undertakings to whom the Company owes any amount. The following disclosures are made as required in pursuance of the Accounting Standard 18 "Related Party Disclosures" issued by the Institute of Chartered Accountants of India and which became effective from 1st April, 2004
(a) List of Related Parties & Relationships
Enterprises Controlling the Company

Mahindra & Mahindra Limited Mahindra Gesco Developers Limited Ultimate Controlling Company Holding Company with 100% share holding Controlling Interest
249
Fellow Subsidiaries
Tech Mahindra Limited (formerly known as Mahindra-British Telecom Ltd.) Mahindra Logisoft Business Solutions Limited Automartindia Limited Mahindra USA Inc. Bristlecone (UK) Limited Mahindra (Gujarat Tractor Limited Mahindra Shublabh Services Limited Mahindra Insurance Brokers Limited Mahindra World City Developers Ltd. (formerly known as Mahindra Industrial Park Limited ) Mahindra Infrastructure Developers Limited Mahindra Europe s.r.l. (with effect from 30th May, 2005) Bristlecone Limited, Cayman Islands Bristlecone Inc. Mahindra Middleeast Electrical Steel Service Centre (FZC) Mahindra & Mahindra South Africa (Pty) Limited Mahindra International Ltd. (with effect from 1st November 2005) Stokes Group Limited (with effect from 3rd January 2006) Plexion Technologies (India) Pvt. Ltd (with effect from 15th February 2006) Jensand Limited (with effect from 3rd January 2006) Stokes Forgings Limited (with effect from 3rd January 2006) Stokes Forgings Dudley Limited (with effect from 3rd January 2006) Plexion Technologies (UK) Limited (with effect from 15th February 2006) Plexion Technologies GmbH, Germany (with effect from 15th February 2006) Plexion Technologies Incorporated USA (with effect from 15th February 2006) Mahindra Engineering & Chemical Products Limited Mahindra and Mahindra Financial Services Limited Mahindra Intertrade Limited Mahindra Steel Service Centre Limited Mahindra Holdings & Finance Limited Mahindra Acress Consulting Engineers Limited Mahindra Ashtech Limited Mahindra Holidays & Resorts Inida Limited NBS International Limited Mahindra World City Maharashtra Limited (with effect from 21st September 2005) (formerly Mahindra Realty Limited) Mahindra Automotives Steels Pvt. Ltd. (with effect from 2nd June 2005) Mahindra Renault Pvt. Ltd. (with effect from 5th August 2005) Mahindra Holidays & Resorts U.S.A. Inc. Bristlecone India Limited Tech Mahindra GmbH (formerly known as MBT GmbH) Mahindra Singapore (Pte.) Limited (formerly known as MBT Software Technologies Pte. Ltd.) Tech Mahindra (R&D Services) Ltd. (with effect from 28th November 2005) Tech Mahindra (R&D Services) Inc. (with effect from 28th November 2005) Tech Mahindra (R&D Services) Pte. Ltd. (with effect from 28th November 2005) Tech Mahindra (Thailand) Limited (with effect from 21st February 2006)
Tech Mahindra Foundation (with effect from 22nd March 2006) Bristlecone (Singapore) Pte. Ltd. Bristlecone GmbH Mahindra Ugine Steel Company Ltd. (with effect from 21st June 2005) Console Estate & Investment Limited (Ceased with effect from 20th March 06) Tech Mahindra (Americas) Inc. (formerly known as MBT International Inc.) Mahindra Engineering Design & Development Company Ltd. Mahindra Overseas Investment Company (Mauritius) Limited Mahindra (China) Tractor Company Limited (with effect from 13th May 2005) Mahindra SAR Transmission Pvt. Limited Mahindra BT Investment Company (Mauritius) Limited (with effect from 9th May 2005) The Significant related party transactions are as under : Nature of Transaction Finance Received - Share Capital Payables 4. Enterprises Controlling the Company Mahindra Gesco Developers Limited 5,000,000 1,196,436
The Company was incorporated on 28th August 2005 and this being the first accounting period of the company, the requirement for the previous period is not applicable. The Company recognises deferred tax assets only to the extent of timing differences relating to the diffference between the book and tax depreciation. However, In line with the AS 22, the Company has not recognized the deferred tax asset net of deferred tax liability of Rs 3,522 on principles of prudence. The component of Deferred Tax Assets (DTA) / Deferred Tax Liabilities (DTL) as at 31st March 2006 are as follows :
Deferred Tax Assets Relating to unabsorbed losses Relating to unabsorbed depreciation DTA Deferred Tax Liability Relating to the differences between the taxes on book and tax depreciation Deferred Tax Asset (Net) 6. (a)
Rupees 3,363 5,453 8,816
DTL
(b) (a-b)
5,294 3,522
The computation of "Earnings Per Share" in line with the Accounting Standard 20 issued by the Institute of Chartered Accountants of India is as under : Net Profit / (Loss) after tax (Rs.) (availbale for equity shareholders) Weighted Average number of Equiry Shares (nos) Basic and Diluted Earning per Share (Rs) (23,465) 500,000 (0.05)
250
SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2006 AND PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 26TH AUGUST 2005 TO 31ST MARCH, 2006.
7 The additional information pursuant to the provisions of Part IV of Schedule VI of the Companies Act, 1956 is as under Balance Sheet Abstract and Companys General Business Profile. I. Registration Details Registration No.
1 3
7 1
0 0
2 3
0 0
7 6
State Code :
Balance Sheet Date
Date
II.
Month
Year
Capital raised during the year at Face Value (Amount in Rs. Thousand) Public Issue Right Issue
N
Bonus Issue
I I
L
Private Placement
N 5 0
I 0
L 0
N
III.
Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousand) Total Liabilities including Shareholders Funds Total Assets
5
Sources of Funds : Paid-up Capital
Reserves & Surplus
5
Secured Loans
0
Unsecured Loans
Application of Funds : Net Fixed Assets Investments
5
Net Current Assets
4
Miscellaneous Expenditure
4
Accumulated Losses
2
IV.
Performance of Company (Amount in Rs. Thousand) Turnover (Sales and Other Income) Total Expenditure
6
+ Loss Before Tax + Loss After Tax
Earning per Share in Rupees
Dividend Rate %
251
V.
Generic Names of Three Principal / Services of the Company (as per monetary items): (ITC Code) Product Description
N. A. D E V E L O P M E N T O F S E Z S
Signatories to Schedules 1 to 9 For and on behalf of the board
Arun Nanda Chairman
252
MAHINDRA WORLDCITY (MAHARASHTRA) LIMITED (Formerly Mahindra Realty Limited)
DIRECTORS REPORT TO THE MEMBERS

Your Directors present their first Report together with the audited Accounts of the Company for the year ended 31st March, 2006. Operations During the year under review, your Company has initiated the preliminary steps for setting up Special Economic Zone (SEZ) at Karla, near Pune. The Government of Maharashtra through Maharashtra Industrial Development Corporation Limited (MIDC) shall participate in the equity of the Company. The Company has received in principle approval from Ministry of Commerce, Govt. of India, for the multi-product SEZ. The Company is currently in talks with the Government of Maharashtra for finalizing various agreements in this regard. Change of Name In line with your Companys business and activities, the name of your Company was changed from Mahindra Realty Limited to Mahindra World City (Maharashtra) Limited. 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; The Company has received notices from a member signifying his intention to propose Mr. Pranab Kumar Datta, Mr. S. Krishnan, Mr. B. G. Menon and Mr. Basant Kumar Jain as candidates for the office of Director. Auditors M/s. R. Jaitlia & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from M/s. R. Jaitlia & Co., Chartered Accountants, to the effect that their re-appointment if made, would be in conformity with the limits specified in the said section. Public Deposits and Loans/ Advances The Company has not accepted any deposits from the public or employees during the year under review. The Company has not made any loans/advances, which are required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the parent companies Mahindra Gesco Developers Limited and Mahindra & Mahindra Limited. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption respectively, are not applicable to the Company. There was no inflow or outflow of foreign exchange involved during the year under review. Particulars of Employees as required under section 217(2A) of the Companies Act, 1956 and rules made there under The Company had no employee who was in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2006 or not less than Rs. 2,00,000 per month during any part of the said year.
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 31 st March, 2006 and of the loss 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. Directors Mr. Pranab Kumar Datta, Mr. S. Krishnan and Mr. B. G. Menon being the first Directors of the Company hold office upto the date of the forthcoming Annual General Meeting of the Company. Mr. Basant Kumar Jain was appointed as an Additional Director at the meeting of the Board of Directors of the Company held on 14th February, 2006. Mr. Basant Kumar Jain holds office only upto the date of the forthcoming Annual General Meeting of the Company.
For and on behalf of the Board Pranab Kumar Datta Chairman
Mumbai, 21st April, 2006.
253
AUDITORS REPORT To The Members of Mahindra World City Maharashtra Limited (Formerly Mahindra Realty Limited)
1. We have audited the attached Balance Sheet of Mahindra Realty Limited as at March 31, 2006, and the related the Profit and Loss Account for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date, which we have signed under reference to this report. 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 the audit in accordance with 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 (a) examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. (b) assessing the accounting principles used and significant estimates made by management in the preparation of the financial statements and (c) 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, as amended by the Companies(Auditors Report) (Amendment) Order, 2004 (together the 'Order'), issued by the Central Government of India in terms of section 227(4A) of the Companies Act, 1956 and on the basis of such checks as we considered appropriate and according to the information and explanation given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order to the extent applicable to the company. Further to our comments in the Annexure referred to in the paragraph (3) above, we report that: a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of the audit. In our opinion, proper books of account as required by the law have been maintained by the Company, so far as it appears from the examination of the books of Company. c. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in the agreement with the books of account of the Company. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in section 211(3c) of the Companies Act, 1956; On the basis of the written representations received from the Directors, and taken on record by the Board of Directors, we report that none of the director is disqualified as on 31 st March 2006 from being appointed as a directors u/s 274(1)(g) 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 financial statements, together with the notes thereon and attached thereto, give the information as 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 :i) ii) in the case of the Balance sheet, of the state of affairs of the Company as at March 31, 2006; in the case of the Profit and Loss Account, of the Loss the Company for the year ended on that date; and in the case of the Cash Flow Statement, of the cash flows for the year ended as on that date. For R. Jaitlia & Co. Chartered Accountants Mukesh Maheshwari Partner Membership No. 49818 Mumbai, 21st April, 2006
d.
e)
2.
f.
3.
iii)
4.
b.
254
Annexure to the Auditor's Report

Annexure referred to the Auditor's Report of even date on the Accounts of Mahidra Realty Limited for the year ended st 31 March, 2006 1. The Company has does not have any fixed assets. 2. As the company does not have any inventory clause 4 (ii)(a) to (ii)(c) (iv) to the extent relatable to inventory and sale of goods, and clause 4(viii) are not applicable to the company. 3. The Company has not granted nor taken any loans, secured or unsecured from companies, firms or other parties listed in the Register maintained under section 301 of the Companies Act, 1956. As the company has not grnated/taken any loans, secured or unsecured to/form parties listed in the register maintained under section 301 of the Companies Act, 1956, paragraph 4(iii)(b), 4(iii)(c), 4(iii)(d) of the Order are not applicable. 4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchases of fixed assets held for disposal. 5. According to the information and explanations provided by the management, we are of the opinion that there are no transactions entered into during the year that need to be entered into the register maintained under that section 301of the Companies Act, 1956. 6. In our opinion and according to the information and explanations given to us, there are no transactions made during the year in pursuance of contracts or arrangements entered in the Register maintained under section 301 and exceeding the value of five lakhs rupees in respect of any party during the year. Accordingly, the requirement of this caluse whether transactions have been made at a price which are reasonable having regard to prevailing market prices at the relevant time, is not applicable. 7. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public to which the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 are applicable and no order under the aforesaid section has been passed by the Company Law Board on the company. 8. According to the information and explanations given to us, in our opinion neither the paid-up capital and reserves of the company exceeded Rs. 50 lakhs as at the commencement of the financial year nor its average annual turnover exceeded Rs. 5 Crores for a period of three consecutive financial years immediately preceding the financial year concerned, therefore, the requirements of clause 4(vii) of the Order relating to internal audit system are not applicable to the Company.
9. According to the information and explanation given to us and the records of the Company, there are no transactions made by the company during the year which required it to deposit undisputed statutory dues including provident fund, investor education and Protection Fund , ESIC, income-tax, sales tax, wealth-tax, custom duty, excise duty, cess and any other statutory dues with the appropriate authorities and therefore, the requirements of this clause are not applicable to the Company. 10. According to the information and expanation given to us and the records of the company, there are no dues of sales tax, income-tax, custom tax, wealth-tax, excise duty / cess which have not been deposited on account of any dispute. 11. The accumulated losses of the Company at the end of the financial year are less than fifty percent of its net worth. The company has incurred cash losses in the current financial year. 12. As the Company has neither taken any loan from financial institution or bank nor has it issued debentures, thereof, the requirement of clause 4(xi) of the Order concerning default in repayments of dues does not applicable. 13. Based on our examination of documents and records, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities and therefore, the requirements of clause 4 (xii) of the Order are not applicable. 14. In our opinion, the company is not a chit fund or a nidhi mutual benefit/society. Therefore, the provisions of clause 4 (xiii) of the Order, 2003 are not applicable to the company. 15. In our opinion, the company is not a dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Order, 2003 are not applicable to the company. 16. According to the information and explanations given to us and the company has not given any gurantee for loans taken by others company from banks or financial institutions. Therefore the provisions of clause 4 (xv) of the Order 2003 are not applicable to the company. 17. As the company has not taken any term loan, the requirements whether the term loan were applied for the purpose for which the loans were obtained, of clause 4 (xvi) of the Order are not applicable. 18. 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 a short term basis which have been used for long term investment. and vice versa. 19. The Company has not made any preferential allotment of shares to parties and companies covered in the Register
255
maintained under section 301 of the Companies Act, 1956 during the year. Therefore, the provision of clause 4(xviii) of the Order, 2003 relating to the price at which shares have been issued is prejudicial to the interest of the company, is not applicable to the company. 20. During the period covered by our audit report, the company has not issued any debentures. Consequently, the question of creating any security in respect of debentures does not arise. 21. The company has not made any public issue and therefore the requirements as to disclose the end use of money raised by public issue in the financial statements does not arise.
22. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit. For R. Jaitlia & Co Chartered Accountants Mukesh Maheshwari Partner Membership No. 49818
Mumbai, 21st April 2006
256

Schedule I SOURCES OF FUNDS : SHAREHOLDERS FUNDS Capital ....................................................................... TOTAL.TOTAL............. II APPLICATION OF FUNDS : Deferred Tax Asset (note 5) CURRENT ASSETS, LOANS AND ADVANCES ............. Cash and Bank Balances ........................................... Loans and Advances ................................................. .................................................................................. .................................................................................. .................................................................................. 1 500,000 500,000 Rupees Rupees
2 3
381,686 44,898 426,584
Less: CURRENT LIABILITIES AND PROVISIONS .......... Liabilities ...................................................................

.................................................................................. .................................................................................. NET CURRENT ASSETS ................................................. Miscellaneous Expenditure ........................................... (to the extent not written off or adjusted Profit and Loss Account ................................................... Debit Balance per account annexed ......................... TOTAL............. NOTES ON ACCOUNTS
5,510 5,510
421,074 39,932
38,994 500,000 6
As per our report attached R. Jaitlia & Co. Chartered Accountants Mukesh Maheshwari Partner M. No. 49818
For and behalf of the Board S. Krishnan Basant Jain
Directors
Mumbai, 21st April, 2006

257
PROFIT AND LOSS ACCOUNT FOR THE PERIOD 21ST SEPTEMBER 2005 TO 31ST MARCH, 2006
Schedule INCOME Interest Gross (includes tax deducted at source. Rs.1388) .... TOTAL............. EXPENDITURE Professional Fees .................................................................. Printing & Stationery ............................................................. Rates and Taxes .................................................................... Preliminary Expenses written off during the period .............. Auditor's Remuneration for Audit Fees ........................................................................ for other services .................................................................. Other expenses ..................................................................... TOTAL............. LOSS BEFORE TAXATION ....................................................... Less: Provision for taxation : Current Tax ............................................................................ Deferred Tax (note 5) ............................................................. Fringe Benefit tax ..................................................................
Rupees
Rupees
7,915 7,915
13,700 4,836 5,350 9,639
5,510 5,510 11,020 2,365 46,910 (38,994)
BALANCE CARRIED TO BALANCE SHEET Earning Per Share-Basic and diluted
(38,994) (0.78)
NOTES ON ACCOUNTS ...........................................................
As per our report attached R. Jaitlia & Co. Chartered Accountants Mukesh Maheshwari Partner M. No. 49818
For and behalf of the Board S. Krishnan Basant Jain
Directors

258

SCHEDULE 1 SHARE CAPITAL:
Authorised 50,000 Equity shares of Rs.10/- each .................................. Issued,Subscribed and Paid-up 50,000 Equity Shares of Rs. 10/- each fully paid up. .......... [out of the above 37000 shares are held by MGDL, the holding company] ................................................. Total .................. 500,000
Fellow Subsidiaries: Rupees

500,000 500,000
SCHEDULE 2
CASH & BANK BALANCES Balance with a scheduled bank on current account. ........... Total .............. 381,686 381,686
SCHEDULE 3
LOANS AND ADVANCES (Unsecured, Considered Good) Loans and Advances .................................................................. Tax deducted at source .............................................................. Total .............. 43,510 1,388 44,898
SCHEDULE 4
LIABILITIES Sundry Creditors ........................................................................ Total .............. 5,510 5,510
SCHEDULE 5
MISCELLANOUS EXPENDITURE (to the extent not written off or adjusted) Preliminary expenses ................................................................. Less: Written off during the period ............................................ Total ..............
49,571 9,639 39,932
SCHEDULE 6 NOTES TO ACCOUNTS FOR THE PERIOD ENDED 31st MARCH 2006
1. a) Significant accounting policies : Basis of Accounting : The accounts have been prepared to comply with all material aspects relating to the applicable accounting principles in India, the accounting standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act 1956. Miscellaneous Expenditure (to the extent not written off or adjusted) : Preliminary expenses i.e. formation expenses, registration fees, etc. incurred for formation of enterprise are carried forward to be appropriately written off over a period of thirty six months starting from the month in which the company was incorporated. c) Income Taxes: 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 are recognised only to the extent that there is virtual certainty or reasonable certainty, as the case may be, supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realised: d) 2. Segment reporting : The Company has a single reportable segment namely, lease of land. The identification of suppliers as small-scale industrial undertakings has been done on the basis of information provided by the suppliers to the Company. On this basis, there are no small-scale industrial undertakings to whom the Company owes any amount. The folloing disclosures are made as required in pursuance of the Accounting Standard 18 "Related Party Disclosures" issued by the Institute of Chartered Accountants of India and which became effective from 1st April, 2004: List of related parties: Enterprises Controlling the Company Mahindra & Mahindra Limited Mahindra Gesco Developers Limited Ultimate Controlling Company Holding Company with 74% shareholding - Controlling Interest
b)
Tech Mahindra Limited (formerly known as Mahindra-British Telecom Limited) Mahindra Logisoft Business Solutions Limited Automartindia Limited Mahindra USA Inc. Bristlecone (UK) Limited Mahindra Shubhlabh Services Limited Mahindra World City Developer Ltd. (formerly known as Mahindra Industrial Park Limited Mahindra Infrastructure Developers Limited Mahindra Europe s.r.l (with effect from 30th May, 2005) Brislecone Limited, Cayman Islands Bristlecone Inc., Mahindra Middleeast Electrical Steel Service Centre (FZC) Mahindra & Mahindra South Africa (Pty.) Limited Mahindra International Limited (with effect from 1st Nov. 2005) Stokes Group Limited (with effect from 3rd Jan. 2006) Plexion Technology (India) Private Limited (with effect from 15th Feb. 2006) Jensand Limited (with effect from 3rd Jan. 2006) Stokes Forgings Limited (with effect from 3rd Jan. 2006) Stokes Forgings Dudley Limited (with effect from 3rd Jan. 2006) Plexion Technologies (UK) Ltd (with effect from 15th Feb. 2006) Plexion Technologies GmbH, Germany (with effect from 15th Feb. 2006) Plexion Technology Incorporated USA (with effect from 15th Feb. 2006) Mahindra Engineering Design & Development Company Ltd. Mahindra Overseas Investment Company (Mauritius) Limited Mahindra (Chine) Tractor Company Ltd. (with effect from 13th May. 2005) Mahindra Insurance Brokers Limited
Mahindra Engineering & Chemical Products Limited Mahindra Gujarat Tractor Limited Mahindra & Mahindra Financial Services Limited Mahindra Intertrade Limited Mahindra Steel Service Centre Limited Mahindra Holdings & Finance Limited Mahindra Ashtech Limited NBS International Limited Mahindra World City (Jaipur) Ltd (with effect from 26th August, 2005) Mahindra Automotive Steels Private Limited (with effect from 2nd June, 2005) Mahindra Renault Private Limited (with effect from 5th August, 2005) Mahindra Holidays & Resorts U.S.A Inc. Bristlecone India Limited Tech Mahindra GmbH (formerly known as MBT GmbH) Tech Mahindra Singapore (Pte.) Ltd. (formerly known as MBT Software Technologies Pte. Ltd) Tech Mahindra (R&D Services) Limited (with effect from 28th Nov. 2005) Tech Mahindra (R&D Services) Inc. (with effect from 28th Nov. 2005) Tech Mahindra (Thailand) Limited (with effect from 21st Feb. 2006) Tech Mahindra Foundation (with effect from 22nd March 2006) Bristlecone (Singapore) Pte. Ltd. Bristlecone GmbH Mahindra Ugine Steel Company Ltd. (with effect from 21st June. 2005) Console Estate & Investment Ltd. (Ceased with effect from 20th Mar. 06) Tech Mahindra (Americas) Inc.[Formerly known as MBT International Inc.] Mahindra SAR Transmission Private Limited Mahindra BT Investment Company (Mauritius) Limited [with effect from from 9th May, 2005] Mahindra Hoildays & Resorts India Limited. Mahindra Acres Consulting Engineers Limited.
4.
5.
Transactions with related parties during the year and balance as on 31st March 2006. An amount of Rs. 41,010 is receivable from Mahindra Gesco Developers Ltd, the Holding company towards expenditure incurred on its behalf. The Company was incorporated on 21st September 2005 and this being the first accounting period of the company, the requirement for the previous period is not applicable. The Company recognises deferred tax assets only to the extent of timing differences relating to the difference between the book and tax depreciation. However, in line with the AS22, the Company has not recognized the net deferred tax asset of Rs. 13,126 on principles of prudence. The Component of Deferred Tax Assets (DTA) as at 31st march 2006 is as follows: Rupees Deferred Tax Assets Relating to unabsorbed losses 13,126 DTA 13,126
3.
6.
The comutation of "Earnings Per Share" in line with the Accounting Standard 20 issued by the Institute of Chartered Accountants of India is as under: Net Profit /(Loss) after tax (Rs) (38,994) (Available for equity Shareholders) Weighted Average numebr of equity Shares (nos) 50,000 Basic and Diluted Earnings Per Share (Rs) (0.78)
259
7. THE ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956 IS AS UNDER Balance Sheet Abstract & Companys General Business Profile :
I. Registration Details : Registration No. Balance Sheet Date 1 1 1 5 6 2 2 5 State Code 1 1
3 1 0 3 2 0 0 6 Date Month Year Rights Issue N I L
II. Capital Raised During the Year (Amount in Rs. Thousands) Public Issue N I L
Bonus Issue N I L
Private Placement 5 0 0
III. Position of Mobilisation & Deployment of Funds (Amount in Rs. Thousands) Total Liabilities (including Shareholders Funds) 5 0 0 Sources of Funds : Paid-up Capital 5 0 0 Secured Loans N I N I L L
Total Assets 5 0 0 Reserves & Surplus N I L
Unsecured Loans N I L
Deferred Tax Liability
Application of Funds : Net Fixed Assets N I L
Investments N I L
Net Current Assets 4 2 1 Accumulated Losses 3 9 IV. Performance of Company (Amount in Rs. Thousands) : Refer Notes 1(d) and (e) Turnover (including other Income)** 8 +/() Profit/Loss before Tax 3 9 (0.78) ITC Code Product Description N O T A P P L
Miscellaneous Expenditure 4 0
Total Expenditure** 4 7 +/() Profit/Loss after Tax N 3 9 Dividend Rate % I L
Earning per Share Rupees
V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) : I C A B L E O F S E Zs
D E V E L O P M E N T
Signatures to Schedules 1 to 6 For and behalf of the Board S. Krishnan Basant Jain
Directors
260
Cash Flow for the period ended March 31, 2006

Rupees A. Cash Flow from Operating Activities Net profit before tax ........................................................................................... Adjustments for : Interest Income .................................................................................................. Preliminary Expenditure ..................................................................................... Operating Profit before Working capital changes .............................................. (7,915) (39,932) (86,842) (38,994)
Adjustment for : Trade and other receivables ............................................................................... Trade payables and other Liabilities .................................................................... NET CASH FROM OPERATING ACTIVITIES B. Cash Flow from investing activities interest received ................................................................................................. Net Cash (Used in)/ from investing activities ................................................ C. Cash Flow from financing activities Issue of Share Capital ......................................................................................... ............................................................................................................................ Net cash used in Financing activities ............................................................. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ................ 500,000 500,000 381,686 7,915 7,915 (44,898) 5,510 (126,230)
Cash and cash equivalents (Opeing) .................................................................. Cash and cash equivalents (Closing) ..................................................................
381,686
As per our report attached R. Jaitlia & Co. Chartered Accountants
Signatures to Schedules 1 to 6 For and behalf of the Board S. Krishnan
Mukesh Maheshwari Partner M. No. 49818
Basant Jain
Directors
261
MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED

Your Directors are pleased to present the Sixteenth Annual Report together with the audited accounts of your Company for the year ended 31st March, 2006. The summarized financial results of the Company are given hereunder: FINANCIAL RESULTS (Rs. Crores) 2004-05 404.76 133.20 134.90 3.85 271.95 132.81 55.84 5.30 82.27 0.01 82.28 70.22 152.50
2005-06 Total income ................................................................................................. Less : Finance costs .................................................................................... Expenditure ....................................................................................... Depreciation / amortisation ............................................................... 596.41 219.44 209.65 5.17 434.26 Profit Before Tax .......................................................................................... Less : Provision for tax current tax (Including fringe benefit tax and wealth tax) Add : Provision for tax deferred tax asset (net) .......................................... Profit after tax for the year ........................................................................... Add : Excess provision for tax earlier years (net) .................................... Add : Amount brought forward from previous years ................................. Amount available for appropriation .............................................................. Appropriations : General reserve ............................................................................................ Statutory reserve ......................................................................................... Dividend on preference shares (interim) ...................................................... Income tax on preference dividend (interim) ............................................. Dividend on equity shares (interim) ............................................................. Income-tax on dividend (interim) .................................................................. Proposed dividend on equity shares (final) .................................................. Income-tax on proposed dividend (final) ...................................................... Surplus carried to balance sheet 162.15 64.27 10.39 108.27 0.00 108.27 101.64 209.91
10.90 21.66 3.45 0.48 10.52 1.48 16.35 2.29 142.78 209.91
8.30 16.46 1.77 0.23 10.30 1.35 10.92 1.53 101.64 152.50
DIVIDEND Equity Shares An interim dividend @ 15% (Rs. 1.50 per Equity Share) has been paid to the shareholders whose names appeared in the Register of Members as on 27th October, 2005, the record date fixed for this purpose. The amount so distributed, including tax on distributed profits amounted to Rs.12.00 crores. Keeping in mind the overall performance during the year and positive outlook of your Company, the Directors recommend a final dividend of 20% (Rs.2.00 per Equity Share), payable to those members whose names appear in the Register of Members as on the Book Closure Date. The final dividend, inclusive of tax on distributed profits, will absorb a sum of Rs.18.64 crores. The total equity dividend outgo for the financial year 2005-06, inclusive of tax on distributed profits, would be Rs.30.64 crores, as against Rs.24.10 crores paid for the previous year.
262
Preference Shares A dividend of 6.90% (Rs.6.90 per Preference Share) on 50,00,000 Cumulative Redeemable Non-Convertible Preference Shares of Rs.100 each was declared and paid to the shareholders whose names appeared in the Register of Members as on 27th October, 2005, the record date fixed for this purpose. The preference dividend entailed an outgo of Rs. 3.93 crores including tax on distributed profits. OPERATIONS The Indian automobile industry continued to grow at a healthy rate of 13% in 2005-06. Most of the segments of the industry, like Light Commercial Vehicles (LCVs), Utility Vehicles (UVs), Passenger Cars and Tractors to whom your Company extends finance, registered strong growth. Buoyed by good market conditions, your Company grew its loan assets by 50.3% from Rs.2,753.76 crores in 2004-05 to
Rs.4,138.98 crores in 2005-06. The Companys pro-active approach in floating tailor made finance schemes and deeper coverage of rural areas continued to yield results in the form of growth in disbursement and profitability. During 2005-06, the Company expanded its product portfolio and created separate Heads to monitor financing of each product like auto, farm equipment, used vehicles and light commercial vehicles. In addition, an Asset Re-construction Division (ARD) was constituted to look after bad debts recovery, sale of repossessed vehicles, etc. The Company continues to be a dominant player in financing four wheelers in the Non Banking Finance Company (NBFC) Sector and continued to improve its market share for disbursement of Tractors as compared to 2004-05. Your Company reported an income of Rs.596.41 crores for 200506 as against Rs.404.76 crores in the previous year registering a growth of 47.3%. Profit Before Tax (PBT) for 2005-06 was Rs. 162.15 crores an increase of 22.1% over 2004-05 of Rs. 132.81 crores. Profit After Tax (PAT) increased by 31.6% from Rs.82.28 crores in 2004-05 to Rs.108.27 crores in 2005-06. A detailed discussion on the Companys operations is presented in the chapter on Management Discussion and Analysis in this Annual Report. SUBSIDIARY COMPANY Mahindra Insurance Brokers Limited The year under review represents the second year of insurance broking operations of your Companys subsidiary, Mahindra Insurance Brokers Ltd. (MIBL). The primary focus of MIBL was on consolidating the life and non-life business portfolios developed during its first year of operation. The customized life insurance product Mahindra Loan Suraksha (MLS) introduced by MIBL in the previous year, continued to receive a good response and grew by 27.9% from 26,724 lives to 34,171 lives covered with a Sum Assured of Rs.743.45 crores as against a Sum Assured of Rs.601.90 crores in the previous year. A significant proportion of MIBLs business comes from the rural markets. In the non-life retail (Motor) segment, also primarily in the rural market, MIBL achieved a growth of 125.7% from 12,438 cases in 2004-05 to 28,075 cases in 2005-06. During the year, MIBL achieved a growth of 94.7% in premium generated, increasing from Rs.21.73 crores in 2004-05 to Rs.42.30 crores in 2005-06. The Profit Before Tax (PBT) of MIBL increased by 61.2% from Rs.2.76 crores to Rs.4.45 crores. Profit After Tax (PAT) increased by 66.0% from Rs.1.73 crores to Rs.2.88 crores. MIBL received the prestigious ISO 9001:2000 certification for Quality Management Systems in September, 2005 for services related to broking of life and non-life insurance products to corporate customers. This will go a long-way in establishing MIBL as a Customer-Centric Corporation. MIBL declared an Interim Dividend of 400% (Rs.40 per equity share). The dividend entailing an outgo of Rs.2.28 crores, including tax on distributed profits, was paid to the shareholders whose names appeared in the Register of Members of MIBL as on 23rd March, 2006. In view of the Interim Dividend declared of 400%, no further dividend is recommended for the financial year ended 31st March, 2006. The total equity dividend outgo of MIBL for
the financial year 2005-06, inclusive of tax on distributed profits, is Rs.2.28 crores, as against Rs.0.03 crores paid for the previous year. The Statement pursuant to section 212 of the Companies Act, 1956 containing details of your Companys subsidiary, MIBL is attached. The Consolidated Financial Statements of the Company and its subsidiary, MIBL is prepared in accordance with Accounting Standard 21 prescribed by The Institute of Chartered Accountants of India and form part of the Annual Report and Accounts. EMPLOYEES STOCK OPTION SCHEME (ESOS) Pursuant to the authority of the Members granted at the Extraordinary General Meeting of your Company held on 24th October, 2005, the Remuneration/Compensation Committee of the Board of Directors of the Company (the Committee) has formulated the Mahindra & Mahindra Financial Services Limited Employees Stock Option Scheme (the Scheme). The Company has for the administration and implementation of the Scheme constituted a Trust known as Mahindra & Mahindra Financial Services Limited Employees Stock Option Trust (the Trust). The Company allotted 26,86,550 Equity Shares of the face value of Rs.10 each at a premium of Rs.41 per share, making in the aggregate, a total price of Rs.51 per share to the Trust on 6th December, 2005. In furtherance of the Scheme, the Trust , on the recommendation of the Committee, grants to the Eligible Employees of the Company and/or its holding company and/or its subsidiary company(ies) Options to acquire the Equity Shares of the Company. The Trust has granted 26,86,550 Stock Options at an Exercise Price of Rs.51 per share on 7th December, 2005. 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. PRIVATE PLACEMENT During the year, the Company issued 31,57,895 Equity Shares to a Foreign Institutional Investor (FII) at a price of Rs.190 per Equity Share aggregating around Rs.60 crores amounting to 4.16% of the pre-IPO equity capital of the Company on a private placement basis. INITIAL PUBLIC OFFER (IPO) To further augment the capital base for future growth plans, your Company made an Initial Public Offer (IPO) of 20 million equity shares of Rs.10 each comprising fresh issue of 10 million equity shares of Rs.10 each and offer for sale of 10 million equity shares of Rs.10 each by the parent company, Mahindra & Mahindra Ltd. and certain other shareholders of the Company. The issue constituted 23.3% of the fully diluted post issue paid up share capital of the Company. Your Directors wish to place on record the fact that the issue received an overwhelming response and was subscribed by 26.88 times. The issue price was finalized at Rs. 200 per Equity Share, being the upper end of the price band. The shares were allotted on 9th March, 2006 and were listed on National Stock Exchange of India Limited and Bombay Stock Exchange Limited on 17th March, 2006.
263
CAPITAL ADEQUACY Consequent upon the issuance of shares to the Trust, private placement and the IPO, the paid up share capital of the Company has increased to Rs.136.00 crores as on 31st March, 2006 from Rs.120.16 crores as on 31st March, 2005. The securities premium account has also increased to Rs.354.08 crores from Rs.103.50 crores. As a result of the increased net worth, your Company was able to enhance the Capital to Risk Assets Ratio (CRAR) to 18.20% as on 31st March, 2006 well above 12% CRAR prescribed by the Reserve Bank of India. RBI Guidelines The Company has complied with all the applicable regulations of the Reserve Bank of India (RBI). As a prudent practice your Company makes additional provisioning for Non Performing Assets at a faster rate than that prescribed by the RBI. CREDIT RATING During the year, CRISIL Ltd. re-affirmed the rating of AA+/ Stable to your Companys long-term Non-Convertible Debentures. The rating of AA+/Stable indicates high degree of safety with regard to timely payment of interest and principal on the instrument. Your Company continued to enjoy the highest rating of P1+ for its short-term borrowing programme in the form of Commercial Paper and Short-term Debentures. During the year, CRISIL Ltd. also reaffirmed the rating of AA+/ Stable assigned to your Companys Tier-II Sub-ordinated Debt Programme. It also re-affirmed the rating pfAA+/Stable for the Companys Redeemable Preference Shares. This rating indicates high degree of safety with regard to timely payment of interest and principal on the instrument. FINANCE Your Company continued to adopt pro-active methods in sourcing of funds and maintained asset/liability match throughout the year. The Company resorted to borrowings through innovative instruments like standalone Commercial Paper, MIBOR linked Debentures and FCNR (B) loans. Your Company sourced medium term loans from consortium banks at attractive rates to the extent of Rs.198 crores against tractor portfolio. Your Company also issued sub-ordinated debt amounting to Rs.50 crores at a very attractive rate. Your Company pro-actively structured various innovative deals like Inverse Floater, Step-up Inverse Floater and also floated instruments linked to 1 year Government of India Securities and reduced interest rate risk and considerably reduced borrowing cost. As a risk management measure, the Company entered into various derivative transactions to convert floating rate loan to fixed rate loan and vice versa. The Cash Management Services (CMS) was extended to cover 37 more branches taking the total coverage of branches under CMS to 147 thereby saving substantial transfer and interest cost. During the review period, the consortium limit of your Company has been enhanced to Rs. 700 crores from Rs. 625 crores by State Bank of India (SBI), which is the lead bank. Encouraged by the response received for its first offsite investor meet held last year, the Company organized a second annual offsite investor meet which was well attended by the investors
264
from Mutual Funds and Banks. CRISIL Ltd. made an exhaustive presentation to the investors on the ratings assigned to different borrowing instruments of the Company. DISTRIBUTION OF MUTUAL FUND PRODUCTS The Company has received approval of the Reserve Bank of India (RBI) to undertake distribution of Mutual Fund products. The Company will leverage the large branch network, especially in semi urban / rural areas, to cross sell mutual fund products to its existing customers. To begin with, your Company proposes to distribute mutual fund products in 6 centers on a pilot basis. SECURITISATION / ASSIGNMENT OF RECEIVABLES During the year, your Company successfully securitized / assigned receivables to the extent of Rs.556.31 crores. The pass through certificates were rated AAA(so) by CRISIL Ltd. indicating the highest degree of certainty regarding timely payment of financial obligations on the instrument. ACCOUNTS AND ACCOUNTING STANDARDS The Company adheres to the prudential guidelines prescribed by the Reserve Bank of India and to the Accounting Standards issued by the Institute of Chartered Accountants of India in preparation of its financial statements. The particulars on related party exposures, non-performing assets and business levels in lease and hire purchase and other activities, required to be disclosed in the format prescribed by the Reserve Bank of India are contained in the schedules forming part of the accounts. As a measure of good practice, your Company gets its accounts audited on a quarterly basis by the Statutory Auditors. FIXED DEPOSITS AND LOANS/ADVANCES As reported last year, your Company had, in line with the Reserve Bank of Indias suggestion to phase out public deposits, discontinued accepting fresh / renewal of deposits with effect from 1st April, 2005. Fixed Deposits of Rs. 13.04 crores were outstanding as at 31st March, 2006. In total, 381 deposits amounting to Rs.0.64 crores had matured but were unclaimed as at the end of the year. Of these, 68 deposits of the aggregate value of Rs.0.16 crores have been claimed after 31st March, 2006. The holders of unclaimed deposits are periodically reminded by the Company to send their claim for the amount of the matured deposits. 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 with the Company, are furnished separately. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES (CSR) As a socially responsible citizen, the Mahindra Group has contributed not only to the economic well being of the communities it interacts with, but has also enhanced their social well being. Since the inception, the Mahindra Group has always been engaged in activities which add value to the community around us. A step forward was taken in this direction by the announcement made on the occasion of the 60th Anniversary of the holding company, Mahindra & Mahindra Limited, that the
Group would support a range of CSR initiatives by committing 1% of Profit After Tax (PAT) on a continuing basis. The 1% PAT would specifically benefit the economically disadvantaged and socially weaker sections of the society. Accordingly, the Board of your Company has resolved to contribute to recognised charitable and/or other Institutions, including K. C. Mahindra Education Trust, not related to the business of the Company or the welfare of the employees towards Corporate Social Responsibilities of the Company, such amounts which in the aggregate in any financial year will not exceed 1% of the Companys estimated PAT for the year on a continuing basis until further review by the Board. A beginning in this direction was made by your Company during the current year by making a contribution of Rs.18.00 lacs to various charitable institutions. DIRECTORS Mr. Alan E. Durante resigned as a Director of the Company with effect from 25th September, 2005. The Board has placed on record its sincere appreciation of the valuable services rendered by Mr. Alan E. Durante during his tenure as Director. Dr. Pawan Goenka who was appointed as a Director of the Company with effect from 27th October, 2005 in the vacancy caused by the resignation of Mr. Alan E. Durante will hold office upto the date of the next Annual General Meeting. A Notice has been duly received from a Member proposing the candidature of Dr. Goenka for the office of Director at the said Meeting. Your Directors recommend his appointment as Director of the Company. Mr. Ramesh Iyer was re-appointed by the Board as the Managing Director of the Company for a further period of 5 years with effect from 30th April, 2006 subject to the approval of the Members of the Company. Mr. Bharat Doshi, Mr. Nasser Munjee and Mr. M. G. Bhide retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. CORPORATE GOVERNANCE A report on the Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement are annexed to this Report. ASSET LIABILITY COMMITTEE (ALCO) An Asset Liability Committee, constituted by the Board, reviews the working of the Asset Liability Operating Committee, in accordance with the guidelines of the Reserve Bank of India. The details of the Asset Liability Committee and its Meetings are presented in the Chapter on Corporate Governance in this Annual Report. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation 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, 2006 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. AUDITORS Messrs. B. K. Khare & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from Messrs. B. K. Khare & Co., Chartered Accountants, to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption respectively, are not applicable to the Company. The information on foreign exchange outgo is furnished in the Notes to the Accounts. There were no foreign exchange earnings during the year. PARTICULARS OF EMPLOYEES AS REQUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 AND THE RULES MADE THEREUNDER The Company had 2 employees who were in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2006 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 being sent to the shareholders does not include this Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Company. For and on behalf of the Board ANAND G. MAHINDRA Chairman
265
Annexure I to the Directors Report for the year ended 31st March, 2006
Information to be disclosed under the Securities and Exchange Board of Inda (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999: (a) (b) Options granted The pricing formula 26,86,550 The first tranche of Stock Options granted during the year under review were priced at a discount of Rs. 15 on the fair value of Rs. 66 (rounded off) based on the valuation obtained from an independent valuer based on Net Asset Value/Asset Based Method. Nil Not applicable 26,86,550 equity shares of Rs. 10 each. These will be transferred from the Trust to the Eligible Employees. Nil Nil Nil 26,86,550 As per statement attached Nil
(c) (d) (e) (f) (g) (h) (i) (j)
Options vested Options exercised The total number of shares arising as a result of exercise of option Options lapsed Variation of terms of options Money realised by exercise of options Total number of options in force Employee-wise details of options granted to: (i) (ii) Senior managerial personnel Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year Identified employees who 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
(iii)
Nil
(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 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. Weighted-average exercise prices and weightedaverage 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. 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: (i) (ii) (iii) (iv) (v) risk-free interest rate, expected life, expected volatility, expected dividends, and the price of the underlying share in market at the time of option grant.
Rs. 14.41*
(l)
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, the employee compensation cost would have been higher by Rs. 46.05 lakhs, Profit After Tax lower by Rs. 46.05 lakhs and the basic and diluted earnings per share would have been lower by Re. 0.07 and Re. 0.07 respectively. Not Applicable
(m)
(n)
Ranging from 5.8% to 6.6% 2.5 years to 5 years 0.5 5% The Company was unlisted as on the date of grant of option. However, as per the valuation received from an independent valuer, the fair value of the underlying share was Rs. 65.53 at the time of Grant of option.
* Refer Note no. 4 in Schedule XX to Annual Accounts of the Annual Report.

266
STATEMENT ATTACHED TO ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2006 Name of Senior Managerial Persons to whom Stock Options have been granted Mr. Bharat N. Doshi Mr. Uday Y. Phadke Mr. Anjanikumar Choudhari Dr. Pawan Goenka Mr. Manohar G. Bhide Mr. Dhananjay Mungale Mr. Naseer Munjee Mr. Piyush Mankad Mr. Ramesh Iyer Mr. V. Ravi Mr. Apurv Verma Mr. Nitin Shah Mr. Rajesh Vasudevan Mr. Dinesh Prajapati Mr. Sankha Bhowmick Mr. Rajesh Joshi Mr. Suresh Shanmugam Mr. Gurdev Mehta Mr. Binoj Mathai Mr. Richard Clement Mr. H. S. Kamath Mr. Rajnish Agarwal Number of Options granted 200,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 100,000 60,000 40,000 12,000 10,000 12,000 3,250 12,000 7,500 14,000 7,500 7,500 7,500 7,000
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 with the Company. Loans and advances in the nature of loans to subsidiaries, associates, and where there is no repayment schedule or repayment beyond seven years or no interest or interest below section 327A of the Companies Act, 1956 Nil. Loans and advances in the nature of loans to firms/companies in which Directors are interested: Rs. in Lacs Name of the Company Mahindra Shubhlabh Services Limited Mahindra Construction Company Limited Mahindra Ashtech Limited Balance as on 31st March, 2006 0.44 113.38 6.45 Maximum outstanding during the year 1.65 113.38 7.13
267
MANAGEMENT DISCUSSION & ANALYSIS

Industry Structure & Developments Mahindra & Mahindra Financial Services Limited (MMFSL, Mahindra Finance or the company) is a leading non-banking finance company (NBFC) that provides finance for utility vehicles, tractors and cars for rural and semi-urban Indian markets. The steady rise in incomes and demand in these markets over the last few years have contributed to MMFSLs growth in customers, assets, revenue and profitability. Indian Economy has witnessed strong growth in the last 3 financial years. In 2003-04, the country achieved a real GDP growth of 8.5%. The next year, despite relatively poor monsoons, India grew at 7.5%. And for 2005-06, estimates suggest that GDP grew by 8.4%. This strong overall growth performance has contributed to a sharp increase in demand for the automobile sector, which has grown by 13.0%. Assisted by a turnaround growth in agriculture of 2.3% in 2005-06, and a rapid increase in non-agricultural incomes, rural and semi-urban India also witnessed healthy growth, coupled with higher levels of spending. MMFSL leveraged these opportunities to deliver excellent results in 2005-06, the highlights of which are given below. MMFSLs Financial Highlights, 2005-06 Total assets grew by 59% from Rs.3,115 crore on 31 March, 2005 to Rs.4,951 crore on 31 March, 2006. Cumulative number of customer contracts increased by 39% from 336,819 in 2004-05 to 467,977 in 2005-06. Total income grew by 47% from Rs.405 crore in 2004-05 to Rs.596 crore in 2005-06. Profit after tax (PAT) grew 32% from Rs.82 crore in 2004-05 to Rs.108 crore in 2005-06. Capital Adequacy Ratio increased from 17.8% to 18.2 %. The Companys healthy growth in 2005-06 was another step towards accomplishing its long term goal of becoming a preferred provider of retail financial services in rural and semi-urban India. In the initial phase by financing Mahindra & Mahindra (M&M) Limiteds vehicles, MMFSL gained experience and immense understanding of the prevailing market conditions in semi urban and rural India. This knowledge, coupled with the personalised customer base that the company has built over the last decade, is the platform on which MMFSL plans to build its long term strategy. During 2005-06, in order to raise capital to fund long term growth and to broaden the ownership base, MMFSL made an Initial Public Offer (IPO) of 20 million equity shares of a face value of Rs.10. This was made up of a fresh issue of 10 million equity shares and a divestment of another 10 million by M&M as well as some other existing shareholders. The shares were offered at a price band of Rs.170-Rs.200 per share. The issue was subscribed by 26.88 times. The issue price was finalized at Rs. 200 per Equity Share, being the upper end of the price band. Consequently, over 23.3% of the fully diluted post-issue paid-up capital of the company was allotted through this IPO.
268
From being a company solely financing Mahindra products, MMFSL has diversified into financing other automobile products in the same market space. Today, around 30% of its business emanates from financing of non M&M vehicles. While the company builds on the Mahindra brand value and corporate ethos, all transactions with the promoter company are on arms length and based on commercial considerations. Going forward, MMFSL will continue to leverage its relationship with Mahindra, while pursuing its own distinct business model. The landscape of rural and semi-urban India is witnessing fundamental and structural changes. According to the National Sample Survey, per capita rural expenditure has increased from Rs.3,428 in 1993-94 to Rs.6,742 in 2003-04. In addition, the percentage of rural households having permanent (or pucca) houses has risen from 30.6% in 1991 to 41% in 2001 (Census of India 1991 and 2001). Moreover, income growth in rural India is not limited to agriculture. Data from the Annual Survey of Industries shows that, in 2000-01, rural India could speak of 36% of organised manufacturing establishments; 38% of its employees; 43% of its output; and 41% of net value added. Indeed, all the evidence suggests that real income in rural and semi-urban India has been growing at over 6% per year since 1993-94, which has opened up huge prospects for MMFSLs business. MMFSL, therefore, believes that there is a large and growing opportunity for providing financial services in this market space, and intends to provide a unique business propositions by addressing niche segments within this market. Credit in rural and semi-urban India is generally provided either by banks from the organised sector or by local money lenders. There is a large segment of potential borrowers whose credit requirements are not met because they cannot satisfy the lending covenants of the banks or service the high borrowing costs from money lenders. Mahindra Finance intends to bridge this gap and position itself between banks and money lenders in terms of competitive rates and ease of loan sanctions. This goal will not be restricted to financing automobiles but shall extend to leveraging the large client base by providing a wide range of financial products and services through the companys nationwide distribution network. For instance, MMFSL has already started distributing insurance products in rural and semiurban India through its subsidiary Mahindra Insurance Brokers Limited. It has also recently commenced its mutual fund distribution business and is exploring opportunities of entering housing loans and personal loans in rural and semi-urban markets. Mahindra Finance believes that this is an interactive, peopledriven business model, the growth of which depends upon building long term personal relationships. This coupled with superior knowledge of rural markets, and the ability to tailor products, positions the company well to meet rural and semiurban credit needs and provide competitive, flexible and speedy lending services. Opportunities As on 31st March, 2006, the Companys total assets was Rs.4,951.27 crore up by 59.0% from a year earlier. The cumulative number of customer contracts at the end of 2005-06 was
4,67,977 a growth of 38.9% over the previous year. This growth was on the basis of two primary drivers: First, the country witnessed healthy growth in the three major sectors of the automobile industry in 2005-06. Passenger car sales increased by 7.5% to 8,82,094; utility vehicle sales increased by 10.3% to 1,94,577; and tractor sales were in excess of 2,80,000 units. Second, MMFSL aggressively expanded its sales force across India. Today, the Company has one of the largest networks of branches among those Non-Banking Financial Companies (NBFCs) covering rural and semi-urban areas. In 2004-05, there were 256 offices. In 2005-06, these had increased by 19.1% to 305. These offices play a critical role in that they are provided full authority to approve loans within prescribed guidelines. Chart A plots the growth of MMFSLs offices since 2000-01.
Third, there has been a drop in the average holding period of a new car to 4-5 years. This has resulted in increased demand for new cars and UVs with faster replacements which, in turn, has been expedited due to the rapid growth of the used car market. This has also opened up opportunities for aspiring car owners to own a cheaper second hand car. Thus, there are now greater financing opportunities for buyers of both new and used cars. Fourth, the Government of Indias focus on developing rural India continues to add impetus to the rural economy. Chart B shows that government outlays on agriculture and rural development as a proportion of total outlay has increased in 2005-06 over 200405. Long term programmes such as Bharat Nirman, which aims to develop irrigation, roads, housing, drinking water, electricity and telephone connectivity, have helped in the development of rural Indian infrastructure. These have increased rural incomes, and are expected to do so even more significantly in the future. As rural households generate higher incomes, there will be a rise in their aspirations and propensity to demand credit for different things. Thus, opening up more opportunities for MMFSL in rural financing.
Mahindra Finances distribution network is spread across 25 states and 2 Union Territories, and is categorised into five zones and 16 regions, with branches reporting into their respective regional offices. Strong economic conditions and aggressive market penetration through increased branch networks contributed to a 28.4% increase in new contracts from 1,02,142 new contracts in 2004-05 to 1,31,158 in 2005-06. Several developments are helping MMFSL grow its retail finance business in rural and semi-urban India. The first has to do with changes in behavioural patterns. Previously, Indians were averse to the concept of using credit to fund their purchases and preferred to save and then spend. Today, with a variety of consumer credit products being widely available, rural and semiurban Indian households are willing to acquire assets through borrowing. Second, growth in the availability of finance has itself helped increase the demand for cars and utility vehicles (UVs). Car manufacturers have tied up with public sector banks to provide finance to target rural and semi-urban areas. Further, the average loan to value (or LTV) for cars has also grown over the last five years, thus increasing the amount of credit required for the same number of vehicles.
Finally, some specific developments are aiding the growth of tractors sale, which accounts for a sizeable portion of MMFSLs portfolio. Apart from farming activities, tractors are being increasingly used for transporting material to construction and infrastructure development sites. Increase of road construction activity and other infrastructure development have resulted in higher demand for tractors. Moreover, many Indian farms now use equipment such as tillers, harvesters, threshers and borewell pumps. These are energy intensive. Given the poor availability of power in many parts of rural India, tractor motors and alternators are often used as the power source leading to further demand. In addition with a reduction in farm labour due to growing rural-urban migration, many farmers are looking to increase the use of farm equipment, including tractors. MMFSL continues to build the Mahindra Finance brand in these markets and develop its retail finance business. During the year, MMFSL started branding operations in Karnataka through mediums like hoardings and advertisement in television channels, which generated a growth in response and awareness. During 2006-07, the Company will take up branding exercise in other states.
269
Some major marketing initiatives undertaken during 2005-06 were: Extending MMFSLs association with other vehicle manufacturers including Maruti, Hyundai, Toyota, Tata Motors, General Motors, and Ford and their dealers. Participation in regional fairs like the Gwalior Mela and the Pushkar Mela, where the company provided special financing products for the period of the fair. Local governments also provided sales tax concessions and manufacturers often offered incentives such as price discounts, vehicle exchange programmes and free servicing. A marketing arrangement with HPCL, which currently owns or franchises over 6,000 petrol stations across India, for MMFSL to distribute products to rural customers through its proposed outlets at these petrol pumps. Threats The financing industry is becoming increasingly competitive and our growth will depend on our ability to compete effectively. Our main competitors are banks and NBFCs. Over the last several years, a number of banks have increased their focus on retail loans in rural and semi-urban areas in India. While they may not have our knowledge base and operational flexibilities, these competitors may have greater resources than we do and access to cheaper funds. The growth prospects of our business, including the quality of our assets and our ability to grow our asset portfolio and implement our strategy, are influenced by the growth rate of the agricultural sector and the development of rural infrastructure. The level of loans made, recovery of our loans and demand for vehicles and tractors are all affected by these factors. Any slow down in the Indian economy, the growth of vehicle and tractor sales and in the agricultural sector (particularly due to abnormal monsoons), coupled with inflationary pressures or any change in Government policy could adversely impact our future financial performance. The agriculture sector is highly seasonal and largely cash-based. Delays in the supply of utility vehicles and tractors at peak times may have an adverse effect on our financial performance. Mahindra Insurance Brokers Limited The business of distributing life and non-life insurance products is done through MMFSLs subsidiary, Mahindra Insurance Brokers Limited (MIBL). 2005-06 is the second year of operations for this subsidiary. A significant proportion of the MIBLs business comes from the rural markets. A customised life insurance product, Mahindra Loan Suraksha, was introduced by MIBL in 2004-05 and has continued to receive a good response. As on 31st March, 2006, 34,171 lives were covered with a sum assured of Rs.743.45 crore. In the non-life retail (motor) segment, MIBL achieved a growth of 125.7% to 28,075 cases in 2005-06. During 2005-06, MIBL achieved 94.7% growth in premium generated, which increased from Rs.21.73 crore in 2004-05 to Rs.42.30 crore in 2005-06. The Profit Before Tax increased by 61.2% from Rs.2.76 crores in 2004-05 to Rs.4.45 crores in 200506, and the Profit After Tax increased by 66% from Rs.1.73 crores
270
to Rs.2.88 crores during the same period. MIBL also received the ISO 9001:2000 certification for Quality Management Systems for services related to broking of life and non-life insurance products to corporate customers in September 2005. This will go a long-way in firmly establishing MIBL as a Customer-Centric Corporation. Operations MMFSLs operations have two critical elements. 1. Build on a financing infrastructure that can best customise risk adjusted products and have simple documentation and prompt loan approval procedures. 2. A strong structure in place that can most efficiently source funds and manage resources. Customised Products with Simple Documentation and Quick Loan Approvals This includes a clearly defined set of procedures for evaluating the creditworthiness of customers that extends from initial evaluation to loan approval. The funds are advanced after due process of evaluation and upon providing the necessary documentation. However, the quantum of documentation is much less than what is required in banks and lot of emphasis is placed on tailoring finance to customer needs. MMFSLs objective is to ensure appraisal and disbursement within the shortest possible time, without compromising on asset quality. On an average, loans are approved within two to three days of an application being received. Once a loan is made, there is a structured loan monitoring process, which also includes direct visits by loan officers to customers houses. The entire monitoring process is backed by a strong MIS department, which is centralised and monitors compliance with the terms and conditions of credit facilities. This involves monitoring of aspects like completeness of documentation and creation of security through regular visits to the branches by the companys executives and internal auditors. Given the nature of the business, an efficient structure for optimal risk adjusted loan evaluation and a strong loan recovery cell are in place. Efficient Fund Raising and Management of Financial Resources The distribution of Mahindra Finances source of borrowing in terms of investors and instruments are given in Charts C and D.
turned these strategies into action. Going forward, we not only plan to maintain this key source of competitive advantage but also build on it through well-structured initiatives. We have empowered our employees by gradually decentralising the decision making process within the company. This has been backed by running extensive training programmes at various levels. In addition, employees have also been offered financial assistance to pursue higher studies. The Company has a well structured performance based appraisal and remuneration system for its employees. Under this programme, regular feedback is given to employees based on a half yearly appraisal process. Mahindra Finance also sourced Rs.198 crore worth of three-year term loans from consortium of banks against its tractor portfolio at attractive rates. It also issued subordinated debt amounting to Rs.50 crore for a six year tenure at a very competitive rate. The Company also proactively structured various innovative deals like the inverse Floater, Step-up Inverse Floater and also floated instruments linked to 1 year Government of India Securities, and reduced interest rate risk and borrowing costs. As a risk management measure, the Company entered into various derivative transactions to convert floating rate loan to fixed rate loan and vice versa. During 2005-06, the consortium limit of MMFSL was enhanced to Rs.700 crore from Rs.625 crore by the lead bank, namely the State Bank of India. In addition, Cash Management Services (CMS) were extended to cover 37 more branches during the year, which increased the total coverage of branches under CMS to 147. This has substantially saved on transfer and interest cost. In 2005-06, MMFSL continued to enjoy excellent credit ratings for its borrowing programs. CRISILs ratings are: AA+/Stable for the companys long term Non-convertible debentures which indicates high degree of safety with regard to timely payment of interest and principal on the instrument. AA+/Stable for MMFSLs Tier-II subordinated debt. pfAA+/Stable for the companys redeemable preference shares which also indicates high degree of safety with regard to timely payment of interest and principal on the instrument. P1+, the highest rating, for its short-term borrowing programme in the form of Commercial Paper and Short-term Debentures. The Companys second off-site investors meet was well attended by mutual funds and banks. CRISIL made an exhaustive presentation to the investors on the ratings assigned to different borrowing instruments of the company. Human Resources As a financial services company which takes pride in serving and knowing its customers better than most, our people remain our most valuable asset. We believe our past successes have come as much because of the soundness of our strategies as due to the quality and determination of all our employees who During 2005-06, the Company also designed an Employee Stock Option Scheme (ESOS). Under the ESOS, stock options have been granted to all eligible employees of MMFSL as well as certain designated employees of the holding company M&M, and the subsidiary MIBL. The ESOS is regulated by a Trust. The Company believes that the ESOS will act as an important tool towards employee retention and motivation. The company also participates in the M&M Groups Talent Management And Retention programme which aims to identify, assess and acquire talent. Under this programme, senior management employees of the M&M Group are divided across sectors and functions to head functional councils. These councils in turn serve to identify key talent in the group and provide them avenues for future growth. As of 31st March, 2006, there were 2,296 employees on the rolls of the company. Information Technology Leveraging Information Technology (IT) tools to improve overall productivity and efficiency of the organisation has been a key focus area of the company. Its IT initiatives are aimed at enhancing service levels, increasing customer convenience and improving loan administration and recovery, while minimising costs. Over 150 of the companys 305 offices are connected to the servers at the MMFSL head office in Mumbai. Though the challenge is enormous, given the problems associated with achieving connectivity in rural areas, we remain steadfast in our focus on achieving IT connectivity with all our offices. While our existing IT system enables us to manage our nationwide operations efficiently and effectively monitor and control risks, going forward, the Company also plans to deploy a customer relationship management system. We believe this will go a long way in assisting the company to cross-sell other products and services as well as in improving credit and market risk management. Financial & Operational Performance The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, and Generally Accepted Accounting Principles (GAAP) in India. The abridged financials of MMFSL for 2005-06 including revenue, expenditure and profits, are presented in Table 1.
271
Table 1: Abridged profit and loss account (Rs. crore unless indicated otherwise) 2005-06 2004-05 Growth % Revenue: Income from operations Other income Total Expenditure: Financial Expenses Employee cost Provisions & Write Offs Depreciation & Amortisation Other Expenses Total PBT Current tax Deferred tax Tax - Earlier years PAT Earnings Per Share - Basic (Rs.) Earnings Per Share - Diluted (Rs.) 219.44 40.55 81.61 5.17 87.49 434.26 162.15 64.27 (10.39) 0.00 108.27 14.59 14.41 133.20 27.14 56.00 3.85 51.76 271.95 132.81 55.84 (5.30) (0.01) 82.28 13.23 13.23 64.7 49.4 45.7 34.3 69.0 59.6 22.1 15.1 96.0 0.0 31.6 10.3 8.9 582.32 14.09 596.41 396.93 7.83 404.76 46.7 79.9 47.3
terms this looks high as a percentage of revenues, there was a marginal increase from 6.8% in 2004-05 to 7.0% in 2005-06. The Company recorded a 22.1% growth in Profit before tax (PBT), which grew from Rs.132.8 crore in 2004-05 to Rs.162.2 crore in 2005-06. Profit after tax (PAT) grew by 31.6 %, from Rs.82.3 crore in 2004-05 to Rs.108.3 crore in 2005-06. Consequently, basic earnings per share issue increased from Rs.13.2 during 2004-05 to Rs.14.6 during 2005-06. Table 2 sets forth information on the key ratios of the company. Table 2: Key Ratios 2005-06 PBT/Net income PAT/Net income PBT/Total Assets RONW* Debt/Equity** Capital Adequacy Tier 1 capital Tier 2 capital Book Value** (Rs.) * Based on Average Net Worth **After factoring ESOP issue The decline in the PBT and PAT ratios have much to do with the planned increase in the number of branches and people as well as a rise in borrowing costs. The fall in RONW is a result of both the decline in profitability ratios and the increase in net worth as a result of the IPO. However, subsequent to the IPO, the debt to equity ratio of the company has improved significantly from 7.04 as on 31st March, 2005 to 5.65 as on 31st March, 2006. In real terms and relative to other financing companies this is a low level of financial gearing and there is significant scope of increasing the borrowings to grow the business in the future. The Company has also significantly improved its capital adequacy ratios. These continue to remain higher than those mandated by the RBI. MMFSLs capital adequacy ratio as on 31st March 2006 was 18.2% comprising Tier 1 capital adequacy of 13.2% and Tier 2 capital adequacy of 5.0%. The book value of the company has also increased from Rs. 50.68 as on 31st March, 2005 to Rs. 80.89 as on 31st March, 2006. The ratio of income to average total assets declined from 15.7% for the year ended 31st March, 2005 to 14.8% for the year ended 31st March, 2006. This can be attributed to marginal decline in lending rates due to competitive pressures, change in the product mix. Overheads of the company as a percentage of average assets were maintained at 3.3 % during 2005-06. In absolute terms, write-offs and NPA provisions increased by 45.7% from Rs.56.00 crore for the year ended 31st March, 2005 to Rs.81.61 crore for the year ended 31st March, 2006. This was due to the rise in the volume of loans as well as a general decrease in the re-sale value of repossessed vehicles. As a ratio of write-offs and NPA provisions to Average assets, however, declined from 2.2% in 27.2% 18.2% 3.3% 20.1% 5.65 18.2% 13.2% 5.0% 80.89 2004-05 32.8% 20.3% 4.3% 26.4% 7.04 17.8% 10.5% 7.3% 50.68
The financial position of MMFSL continues to remain strong. Its proactive approach towards designing tailor-made finance schemes and extending its reach across rural India has resulted in MMFSL recording a 47.3% growth in total revenues from Rs. 404.77 crore in 2004-05 to Rs. 596.41 crore in 2005-06. During the year, the Company expanded its product portfolio and created separate heads to monitor financing of each of its products such as auto, farm equipment, used vehicles, light commercial vehicles etc. This translated into even faster growth in income from our core business area of financing activities which increased by 46.7% from Rs.396.94 crore in 2004-05 to Rs.582.32 crore in 2005-06. The rise in income was partly offset by an increase in expenditure, primarily due to a 64.7% growth in financial expenses to Rs.219.44 crore in 2005-06. There has been an increase of 58.2% in total borrowings outstanding to finance higher levels of business from Rs.2,454.15 crore as on 31st March 2005 to Rs.3,882.94 crore as on 31st March 2006. Despite the raising interest rate scenario, the ratio of interest costs (financial expenses net of bank charges) to average borrowings has increased marginally from 6.4% as on 31st March 2005 to 6.7% as on 31st March 2006. Commission and brokerage expenses increased by 27.2% to Rs.23.26 crore in 2005-06 principally due to increase in the volume of lending. Employee costs increased from Rs. 27.14 crore in 2004-05 to Rs. 40.5 crore in 2005-06 on account of a 29.5% rise in the number of employees to 2,296 as of 31st March 2006, as well as general increases in salaries and benefits. While in absolute
272
2004-05 to 2.0% in 2005-06. Table 3 sets forth detailed information on NPA of the company. Table 3: Non-Performing Asset (NPA) Analysis (Rs. crore unless indicated otherwise) 2005-06 Gross Non-Performing Assets Less: NPA provisions Net Non-Performing Assets Total Assets Net NPA to Total Assets (%) 247.21 125.87 121.34 4,951.27 2.5% 2004-05 199.16 98.39 100.77 3,114.65 3.2%
Even prior to becoming a listed entity, the Company believed that high degree of accountability and robust internal controls were critical to its business success. Even though over 96% of the Companys share holding was held by Mahindra & Mahindra Limited (parent company), as a good governance, the Company had Independent Directors on Board. Also, the Company had constituted Audit Committee comprising of these independent directors well before it was made mandatory. In addition, the Company gets its accounts audited on a quarterly basis by its statutory auditors. The recent focus on corporate governance initiatives, as mandated in Clause 49 of the Listing Agreement of the Stock Exchanges, has helped us quantify and formalise this belief, which in turn makes our commitment to them even stronger. The corporate governance practices instituted by the company are discussed in detail in the chapter on corporate governance which forms part of this Annual Report. Outlook Rural India offers a great opportunity, and we believe that the growth in the rural and semi-urban automobile markets will continue. Given the change in consumer pattern and government initiatives for rural infrastructure, there is massive scope for retail finance in up-country India. MMFSL focuses on creating its niche within this large opportunity. On the costs front, interest rates are expected to rise further. In an environment of rising crude oil prices, domestic petroleum and diesel prices, too, are expected to increase in India. These two factors could partially reduce automobile demand growth rates in the future. Going forward, our biggest challenge will be to build teams that can successfully implement the key elements of the companys strategy which involve continuously introducing innovative products, risk adjusted pricing, customer focus and convenience, wide distribution, strong processes and prudent risk management. Overall, we are extremely optimistic about the growth prospects of rural and semi-urban India. We believe that these markets will continue to grow and develop at very rapid pace and that we shall be able to successfully leverage this to grow our business and profits, and remain a dominant NBFC in financing four wheelers. The outlook for 2006-07, therefore, is optimistic. Cautionary Statement
Note: The above figures are excluding securitised assets.

In absolute terms gross NPA and net NPA increased from 199.16 crore and 100.77 crore as on 31st March, 2005 to 247.21 crore and 121.34 crore respectively as on 31st March, 2006. However, net NPA as a percentage of total assets has declined from 3.2% as of 31st March, 2005 to 2.5% as of 31st March, 2006. It may be noted that the write-offs due to non-recovery have remained around 2% of average total assets. Risks & Concerns Our goal in risk management is to ensure that we understand, measure and monitor the various risks that arise and we follow policies and procedures defined to address these risks. We are primarily exposed to credit risk, interest rate risk, liquidity risk and operational risks. Internally, we have constituted an eight member risk management team, comprising functional heads, to manage these risks. This team identifies, assesses and monitors all of our principal risks in accordance with defined policies and procedures. Our Chief Financial Officer heads this team. Our Board level Audit Committee oversees risk management policies and procedures. It reviews credit and operational risks while the Asset Liability Management Committee review policies in relation to investment strategy and other risks like interest rate risk and liquidity risk. Internal Control Systems In the opinion of the management, the internal control systems are adequate and provide, among other things, reasonable assurance of recording transactions of operations in all material respects and of providing protection against significant misuse or loss of company assets. A team of auditors conduct internal audits to assess the adequacy of the internal controls procedures and processes of the Company. It has appointed a number of audit firms across the country to review and audit branch operations and their reports are reviewed by the Audit Committee of the Board. Policy and process corrections are undertaken based on input from these auditors. Reports of the internal auditors, as well as the action taken on the matters reported upon, are discussed at the Audit Committee meetings. In line with the requirements of becoming a listed company, we have considerably strengthened our corporate governance process to ensure that we fully comply with new regulatory guidelines.
Certain statements in the Management Discussion and Analysis describing the Companys objectives, predictions may be forward-looking statements within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates, new regulations and Government policies that may impact Companys business as well as its ability to implement the strategy. The Company does not undertake to update these statements.
273
Corporate Governance
Corporate Governance Philosophy Mahindra & Mahindra Financial Services Limited (MMFSL) strives to achieve business excellence and enhance long-term shareholder value while safeguarding the interests of all stakeholders. It is this motivation that has led the Company to make Corporate Governance intrinsic in all its operations. The Company has a professional Board, which provides it strong oversight and strategic counsel in this regard. Even before it became a listed entity, MMFSL had been following healthy Corporate Governance practices. In fact, the Company had setup an Audit Committee, way back in the year 2000. Now that the Company is listed, MMFSL has established systems and procedures to ensure that it remains fully compliant with all mandated regulations. In India, Corporate Governance standards for listed companies are regulated by the Securities and Exchange Board of India (SEBI) through Clause 49 of the Listing Agreement of the Stock Exchanges. The stipulations mandated by Clause 49 became applicable to your Company in March 2006 and have been fully complied with since then. This chapter, along with the chapters on Management Discussion and Analysis and Additional Shareholders Information, reports MMFSLs compliance with the revised Clause 49. Board of Directors The Company has a non-executive Chairman and more than 1/ 3rd of the total number of Directors are independent. 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 management of the Company is entrusted in the hands of the Key Management Personnel of the Company and is headed by the Managing Director who operates under the supervision and control of the Board. The Board reviews and approves strategy and oversees the actions and results of management to ensure that the long term objectives of enhancing stakeholder value are met. Mr. Anand G. Mahindra, Mr. Bharat Doshi, Mr. Uday Y. Phadke, Dr. Pawan Goenka and Mr. Anjanikumar Choudhari, non-executive Table 1: Composition of the Board of Directors Attendance Particulars Name of the Directors Category Number of Board Meetings Held Mr. Anand G. Mahindra (Chairman) Mr. Ramesh Iyer (Managing Director) Mr. Bharat N. Doshi NonIndependent Non-executive Executive NonIndependent Non-executive Last AGM No. of Directorships and Committee memberships / chairmanships # Directorships Committee Committee Memberships Chairmanships Directors of your Company are in the whole-time employment of the holding company, Mahindra & Mahindra Limited and draw remuneration from it. Apart from the above and apart from the reimbursements of expenses incurred in discharge of their duties and the remuneration that some of the non-executive Directors would be entitled to under the Companies Act, 1956, none of the Directors has any other material pecuniary relationships or transactions with the Company, its Promoters, its Directors, its Management, subsidiary and Associates which in their judgement would affect their independence. 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. Number of Board Meetings The Board of Directors met five times during 2005-06 on 27th April, 2005, 27th July, 2005, 27th October, 2005, 27th January, 2006 and 6th March, 2006. The maximum gap between any two meetings was not more than four months. All these meetings were well attended. Directors Attendance Record and Directorship Held As mandated by Clause 49, none of the Directors is a member of more than ten Board level Committees nor is any of them a Chairman of more than five Committees in which they are members. Table 1 gives the details. Composition of the Board As on 31st March, 2006, MMFSLs Board comprised ten members. The Chairman of the Board and four other members are non-independent non-executive Directors. The Managing Director, is an executive of the Company while remaining four are independent Directors. The names and categories of Directors, their attendance at the Board Meetings held during the year and at the last Annual General Meeting, as also the number of Directorships and Committee positions held by them in companies are given below:
Attended
5 5
4 5
No Yes
12 3
1 2
Yes
274
Attendance Particulars Name of the Directors Category Number of Board Meetings Held Mr. Alan E. Durante * NonIndependent Non-executive NonIndependent Non-executive NonIndependent Non-executive NonIndependent Non-executive NonIndependent Non-executive Last AGM
No. of Directorships and Committee memberships / chairmanships # Directorships Committee Committee Memberships Chairmanships
Attended
No
Mr. Uday Y. Phadke
No
Dr. Pawan Goenka**
No
Mr. Dipak Rudra ***
No
Mr. Anjanikumar Choudhari@
5 5 5 5 5
4 3 5 3 5
No No Yes No No
3 9 9 14 9
2 7 8 9 2
4 4 1
Mr. Dhananjay Mungale Independent Mr. M. G. Bhide Mr. Nasser Munjee Mr. Piyush Mankad Notes: * ** *** @ # Independent Independent Independent
Resigned with effect from 25th September, 2005 Appointed with effect from 27th October, 2005 Ceased to be a Director with effect from 10th June, 2005 Appointed with effect from 27th April, 2005 Excludes Directorships in private limited companies, foreign companies and government bodies but includes Directorships in MMFSL. Committees considered are Audit Committee and Shareholders Grievance Committee including in MMFSL.
Information Supplied to the Board The Company sends a detailed agenda folder to each Director in advance of Board and Committee meetings. To enable the Board to discharge its responsibilities effectively, the Managing Director apprises the Board at every meeting on the overall performance of the Company, followed by presentations by the Chief Financial Officer. A detailed functional report is also placed at Board Meetings. The Board also reviews strategy and business plans, annual operating and capital expenditure budgets, investment and exposure limits, review of major legal issues, adoption of quarterly/half-yearly/annual results, transactions pertaining to purchase/disposal of property, major 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 Compliance Officer. The Board periodically reviews compliance reports of all laws applicable to the Company, prepared by the Company as well as
steps taken by the Company to rectify instances of noncompliances. In addition to the above, pursuant to the revised Clause 49, the minutes of the Board meetings of your Companys unlisted subsidiary company and a statement of all significant transactions and arrangements entered into by the unlisted subsidiary company are also placed before the Board. Remuneration Policy The success of the organisation in achieving good performance and good governing practice depends on its ability to attract and retain quality individuals as executive and non-executive Directors. While deciding on the remuneration to directors, the Board, Remuneration/Compensation Committee considers the performance of the Company, the current trends in the industry, the qualification of the appointee, his experience, past performance and other relevant factors. Remuneration paid to Directors Detailed information of Directors remuneration for the year 2005-
275
06 is set forth in Table 2. The eligible non-executive Directors are paid commission up to a maximum of 1% of the net profits of the Company as specifically computed for this purpose. A commission of Rs. 24 lakhs has been provided as payable to the eligible non-executive Directors Table 2: Details of remuneration paid to Directors in 2005-06
in the accounts of 2005-06. In addition, non-executive Directors are also paid a sitting fee of Rs. 5,000 for every Meeting of the Board or Committee attended. Remuneration paid to the Managing Director is fixed by the Remuneration/ Compensation Committee and thereafter approved by shareholders at a General Meeting.
Name of the Director Mr. Anand G. Mahindra Mr. Ramesh Iyer $ Mr. Bharat N. Doshi Mr. Alan E. Durante * Mr. Uday Y. Phadke Dr. Pawan Goenka** Mr. Dipak Rudra *** Mr. Anjanikumar Choudhari@ Mr. Dhananjay Mungale Mr. M. G. Bhide Mr. Nasser Munjee Mr. Piyush Mankad
Category Non-executive Executive Non-executive Non-executive Non-executive Non-executive Non-executive Non-executive Independent Independent Independent Independent
SuperSalary annuation Sitting and and Fees Perquisites Provident Commission (Rs.) (Rs.) Fund# (Rs.) (Rs.) N.A. N.A. N.A. N.A. 50,000 10,000 5,000 15,000 30,000 50,000 35,000 25,000 N.A. 40,76,573 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 3,35,510 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. Nil 20,90,000 Nil Nil Nil Nil Nil Nil 6,00,000 6,00,000 6,00,000 1,00,000
Total (Rs.) Nil 65,02,083 Nil Nil 50,000 10,000 5,000 15,000 6,30,000 6,50,000 6,35,000 1,25,000
Stock Options N.A. 1,00,000 2,00,000 N.A. 10,000 10,000 N.A. 10,000 10,000 10,000 10,000 10,000
Notes: $ The notice period for Managing Director is three months. Commission is the only component of remuneration that is performance linked. All other components are fixed. Details regarding the Stock Options granted to the Managing Director are given in the Annexure I to the Directors Report. * Resigned with effect from 25th September, 2005 ** Appointed with effect from 27th October, 2005 *** Ceased to be a Director with effect from 10th June, 2005 @ Appointed with effect from 27th April, 2005 # Aggregate of the Companys contributions to Superannuation Fund and Provident Fund. During 2005-06, the Company did not advance any loans to any of its Directors. A total of 2,70,000 Stock Options have been granted to nonexecutive Directors under the Companys Stock Option Scheme in the year under review. Details of these are given in the Annexure I to the Directors Report. Shares and Convertible Instruments Held By Non-Executive Directors Apart from Mr. Bharat Doshi who holds 240 shares in the Company, no other non-executive Director holds any shares and/ or convertible instruments in the Company, other than the above stated Stock Options. Code of Conduct The Board has laid down Codes of Conduct for Board members and for senior management personnel of the Company. The
senior management personnel have affirmed compliance with the Code of Conduct. A declaration signed by the Managing Director to this effect is enclosed at the end of this report.
Risk Management The 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. The 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. Committees of the Board The Company has, interalia, four Board level Committees Audit Committee, Remuneration/Compensation Committee, Share Transfer and Shareholders/Investors Grievance Committee and Asset Liability Committee.
Codes have been posted on the Companys website www.mahindrafinance.com. All Board members and
276
All decisions pertaining to the constitution of Committees, appointment of members and fixing of terms of service for Committee members is taken by the Board of Directors. Details on the role and composition of these Committees, including the number of meetings held during the financial year and the related attendance, are provided below: a) Audit Committee As on 31st March, 2006, the Audit Committee comprised four non-executive Directors, of which three are independent. The Committee comprises Mr. M. G. Bhide (Chairman), Mr. Dhananjay Mungale and Mr. Nasser Munjee, all three being independent Directors, and Mr. Uday Y. Phadke, a nonexecutive Director. The terms of reference of this Committee are very wide. Besides having access to all the required information 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 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 company, Management Discussion & Analysis, Material individual transactions with related parties not in normal course of business or which are not on an arms length basis. Generally all items listed in Clause 49 II D of the Listing Agreement are covered in the terms of reference. The Audit Committee has been granted powers as prescribed under Clause 49 II C. The Chairman of the Audit Committee, Mr. M.G. Bhide was present at the Annual General Meeting of the Company held on 10th June, 2005. The Audit Committee met five times during the year on 26th April, 2005, 27th July, 2005, 27th October, 2005, 27th January, 2006 and 6th March, 2006.The time gap between any two meetings was less than four months. The details of the Audit Committee are given in Table 3. Table 3 : Attendance record of MMFSLs Audit Committee Name of Members Mr. M. G. Bhide Mr. Uday Y. Phadke Mr. Dhananjay Mungale Mr. Nasser Munjee Category Status No. of Meetings Held Attended 5 5 5 5 5 5 3 4
meetings. The Company Secretary is the Secretary to the Committee. All the members of the Audit Committee possess strong accounting and financial management knowledge. b) Remuneration/Compensation Committee As on 31st March, 2006, the Remuneration /Compensation Committee comprised six members Mr. Piyush Mankad (Chairman), Mr. Dhananjay Mungale and Mr. Nasser Munjee, all independent Directors and Mr. Anand G. Mahindra, Mr. Bharat N. Doshi and Mr. Uday Y. Phadke, non-executive Directors. The role of the Remuneration/Compensation Committee is to look into the entire gamut of remuneration package for the working director(s) and revise their remuneration suitably within the limits prescribed under the Companies Act, 1956, decide on commission payable to the Directors within the prescribed limits and as approved by the shareholders of the Company, formulate and administer Employees Stock Option Scheme and to attend to such other matters and functions as may be prescribed from time to time. The Committee met three times during the year under review on 21st April, 2005, 27th July, 2005 and 24th October, 2005. The attendance details of the Committee are given in Table 4. Table 4: Attendance record of MMFSLs Remuneration / Compensation Committee Name of Members Mr. Piyush Mankad* Mr. Anand G. Mahindra Mr. Bharat N. Doshi Mr. Dhananjay Mungale** Mr. Nasser Munjee** Mr. Uday Y. Phadke * Independent Independent Non-executive Member Member Member 3 3 3 1 2 3 Category Status No. of Meetings Held Attended 3 3 3 2 3
Independent Chairman Non-executive Non-executive Member Member
Independent Chairman Non-executive Independent Independent Member Member Member
Appointed as Chairman and Member with effect from 6th March, 2006.
** Appointed as a Member with effect from 27th July, 2005. c) Share Transfer and Shareholders/Investors Grievance Committee The Companys Share Transfer and Shareholders/ Investors Grievance Committee comprises four members Mr. Uday Y. Phadke, (Chairman) non-executive Director, Mr. Dhananjay Mungale, independent Director, Mr. Nasser Munjee, independent Director and Mr. Ramesh Iyer, Managing Director. The Committee meets as and when required, to deal with
277
The Managing Director, the Chief Financial Officer, Chief Internal Auditor of Mahindra & Mahindra Limited and Statutory Auditors are regularly invited to attend the Audit Committee
matters relating to transfers/transmissions of shares and debentures and monitors redressal of complaints from shareholders relating to transfers, non-receipt of balancesheet, non-receipt of dividends declared, etc. During the year under review, the Committee held three meetings.The Committee met on 30th September, 2005, 9th December, 2005 and 23rd February, 2006. The attendance details of the Committee are given in Table 5. Table 5: Attendance record of MMFSLs Share Transfer and Shareholders/Investors Grievance Committee Name of Members Mr. Uday Y. Phadke Mr. Dhananjay Mungale Mr. Dipak Rudra* Mr. Nasser Munjee ** Mr. Ramesh Iyer** Category Status No. of Meetings Held Attended Chairman Member Member Member Member 3 3 3 3 3 3 2 2
Mr. Uday Y. Phadke, non-executive Director and Mr. Dhananjay Mungale, independent Director, are the members of the Committee. The Committee held two meetings during the year under review. 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 reserves) exceeds 20% of the consolidated turnover or net worth respectively, of the listed holding company and its subsidiaries in the immediately preceding accounting year. Under this definition, the Company does not have a material non-listed Indian subsidiary. Management Management Discussion and Analysis Annual Report has a detailed chapter on Management Discussion and Analysis. Disclosures During the financial year 2005-06, 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 no. 20 in Schedule XX to Annual Accounts of the Annual Report. Disclosure of Accounting Treatment in Preparation of Financial Statements The Company has followed the Guidelines of Accounting Standards laid down by the Institute of Chartered Accountants of India (ICAI) in preparation of its financial statements. Details of Non-Compliance by the Company The Company has complied with all the requirements of regulatory authorities. No penalties/strictures were imposed on the Company by Stock Exchanges or SEBI or any statutory authority on any matter related to capital market since the listing of the Companys equity shares. Code for Prevention of Insider-Trading Practices In compliance with the SEBI regulation 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. Shareholders Re-appointment/Appointment of Directors Pursuant to the Articles of Association of the Company, at every Annual General Meeting of the Company, one-third of the rotational Directors retire by rotation or if their number is not three or a multiple of three, the number nearest to one-third retire from office. Mr. Bharat N. Doshi, Mr. Nasser Munjee and Mr. M.G. Bhide, Directors retire by rotation and being eligible, have offered themselves for re-appointment. Dr. Pawan Goenka, who was appointed in the casual vacancy caused by the resignation of Mr. Alan E. Durante, holds office upto the forthcoming Annual General Meeting. The Company has received a Notice from a Member
Non-executive Independent Non-executive Independent Managing Director
* Ceased to be a Member with effect from 10th June, 2005. ** Appointed with effect from 27th October, 2005. Details of queries and grievances received and attended to by the Company during the year 2005-06 are given in Table 6. Table 6: Nature of grievances received and attended to during 2005-06 Nature of Complaint Pending as Received Answered Pending on during during as on 1st April, the the 31st March, 2005 year year 2006 0 0 0 0 0 0 68 64 208 165 17 522 45 37 187 110 17 396 23 * 27 * 21 * 55 * 0 126 *
1. Status of Share Application 2. Non Receipt of Refund 3. Non Receipt of Electronic Credit 4. Correction of Refund Orders 5. Duplicate Refund Order Total
* Since then all of these have been attended/resolved. d) Asset Liability Committee The Asset Liability Committee (ALCO) was constituted by the Board in 2001. It reviews the working of the Asset Liability Working Committee, its findings and reports in accordance with the guidelines of the Reserve Bank of India.
278
signifying his intention to propose Dr. Pawan Goenka as candidate for the office of Director of the Company. Mr. Ramesh Iyer was reappointed by the Board as the Managing Director of the Company for a further period of 5 years with effect from 30th April, 2006, subject to the approval of the Members of the Company. The details of Directors seeking appointment/reappointment at the forthcoming Annual General Meeting is set forth in Table 7. re Ta b l e 7 : D e t a i l s o f D i r e c t o r s s e e k i n g a p p o i n t m e n t / Board r eappointment to the Board Director Name of Director Date of Birth Date of Appointment to the Board Expertise in specific functional area Mr. Mr. Bharat N. Doshi 12th June, 1949
HDFC Ltd. ITD Cementation India Ltd. Maharashtra Airport Development Company Ltd. Mahindra & Mahindra Financial Services Ltd. Repro India Ltd. Securities Trading Corporation of India Ltd. South West Port Ltd., Goa Unichem Laboratories Ltd. Voltas Limited AXA Bharti Life Insurance Co. Ltd. Membership of Committees in Public Limited Companies Audit Committee ABB Limited Cummins Limited Maharashtra Airport Development Company Limited Mahindra & Mahindra Financial Services Limited Securities Trading Corporation of India Limited South West Port Limited, Goa Unichem Laboratories Limited Voltas Limited Gujarat Ambuja Cements Limited ITD Cementation India Limited Maharashtra Airport Development Company Limited Mahindra & Mahindra Financial Services Limited South West Port Limited, Goa Voltas Limited Mahindra & Mahindra Financial Services Limited Nil
30th March, 1992 Finance and Accounts, Corporate Affairs and Information Technology and Trade and Finance Qualifications B.Com., FCA, FCS, LLM,Participated in the Programme for Management Development at the Harvard Business School Directorship in Mahindra & Mahindra Ltd. Public Limited Mahindra Intertrade Ltd. Companies Mahindra & Mahindra Financial Services Ltd. Mahindra Steel Service Centre Ltd. Tech Mahindra Ltd. Mahindra Holdings & Finance Ltd. Mahindra International Ltd. NSE.IT Ltd. Godrej Consumer Products Ltd. Membership of Committees in Public Limited Companies Audit Committee Tech Mahindra Ltd. Mahindra Steel Service Centre Ltd. Godrej Consumer Products Ltd. Mahindra International Ltd. Shareholders/Investors Mahindra & Mahindra Ltd. Grievance Committee Remuneration Mahindra Intertrade Ltd. Committee Mahindra & Mahindra Financial Services Ltd. Shareholding of Director in the Company 240
Remuneration Committee
Shareholders/Investors Grievance Committee Shareholding of Director in the Company Name of Director Date of Birth Date of Appointment to the Board Expertise in specific functional area Qualifications Directorship in Public Limited Companies
Mr. M. G. Bhide 14th February, 1939 24th October, 2000 Banking and Finance MA, CAIIB CRISIL Ltd. Shipping Corporation of India Ltd. Finolex Industries Ltd. Mahindra Shubhlabh Services Ltd. Mahindra & Mahindra Financial Services Ltd. Indian Oiltanking Ltd. Asset Reconstruction Co. (India) Ltd. Global Trade Finance Ltd. CRISIL Research & Information Services Ltd.
279
Director Name of Director Date of Birth Date of Appointment to the Board Expertise in specific functional area Qualifications Directorship in Public Limited Companies
Mr. Mr. Nasser Munjee 18th November, 1952 17th March, 2003 Monetary economist M.Sc. (Economics) U.K. Development Credit Bank Ltd. ABB Ltd. Cummins India Ltd. Gujarat Ambuja Cements Ltd.
Membership of Committees in Public Limited Companies Audit Committee CRISIL Ltd. Shipping Corporation of India Ltd. Finolex Industries Ltd. Mahindra Shubhlabh Services Ltd. Mahindra & Mahindra Financial Services Ltd. Global Trade Finance Ltd. Mahindra Shubhlabh Services Ltd. Asset Reconstruction Co. (India) Ltd. Shipping Corporation of India Ltd. Finolex Industries Ltd. Nil
Name of Director Date of Birth Date of Appointment to the Board Expertise in specific functional area Qualifications Directorship in Public Limited Companies
Mr. Ramesh G. Iyer 4th June, 1958 30th April, 2001 Finance B.Com., MBA Mahindra & Mahindra Financial Services Ltd. Mahindra Insurance Brokers Limited Automartindia Limited
Remuneration Committee Shareholders/Investors Grievance Committee Shareholding of Director in the Company Name of Director Date of Birth Date of Appointment to the Board Expertise in specific functional area Qualifications
Membership of Committees in Public Limited Companies Audit Committee Shareholders/Investors Grievance Committee Mahindra Insurance Brokers Limited Mahindra & Mahindra Financial Services Limited Nil
Dr. Pawan Kumar Goenka 23rd September, 1954 27th October, 2005 Automotive Design, Manufacturing and Marketing Mechanical Engineer with B. Tech from IIT, Kanpur and Ph.D from Cornell University, U.S.A., Advanced Management Programme from Harvard Business School Mahindra Engineering Design & Development Company Ltd. Mahindra & Mahindra Financial Services Ltd. Mahindra Intertrade Ltd. Mahindra International Ltd. Mahindra Renault Pvt. Ltd. Plexion Technologies (India) Pvt. Ltd.
Shareholding of Director in the Company
Means of Communication with Shareholders The Company has recently got listed at the Stock Exchanges and will publish quarterly, half-yearly and annual results in national and local dailies. The Companys results and official news releases are displayed on its website:http://www.mahindrafinance.com. The Company also makes presentations to international and national institutional investors and analysts, which are also put up on its website. The Company also regularly posts information relating to its financial results and shareholding pattern on Electronic Data Interpretation, Filing and Retrieval System (EDIFAR) at www.sebiedifar.nic.in. General Body Meetings Details of General Meetings held in the last three years Table 8 : Details of Annual General Meetings and Special Resolutions passed: Year Date Time Special Resolutions passed
Directorship in Public Limited Companies
Membership of Committees in Public Limited Companies Audit Committee Mahindra Engineering Design & Development Company Ltd. Mahindra Renault Pvt. Ltd. Mahindra International Ltd. Mahindra International Ltd. Mahindra Renault Pvt. Ltd. Nil
Remuneration Committee Shareholding of Director in the Company
2003 19th June, 3.00 p.m. 1. Issue of Redeemable 2003 Preference Shares 2. Increase in Authorised Share Capital of the Company 3. Alteration of Clause V of the Memorandum of Association of the Company 4. Alteration of Article 3 of the Articles of Association of the Company 2004 2nd August, 2004 5.00 p.m. None
280
2005 10th June, 3.00 p.m. 1. Payment of Commission to 2005 Non-wholetime Directors of the Company 2. Approval for Commencement of new business Table 9 : Details of Extraordinary General Meetings held during the past 3 years: Year 2004 2004 2005 2005 2005 2006 Date 8th March, 2004 10th December, 2004 24th October, 2005 14th November, 2005 9th December, 2005 3rd January, 2006 Time 3.00 p.m. 3.00 p.m. 5.30 p.m. 5.00 p.m. 5.00 p.m. 10.00 a.m.
Additional Shareholder Information 16th Annual General Meeting Date : 10th July, 2006 Time : 3.30 p.m. Venue : Y. B. Chavan Centre, Gen. Jagannathrao Bhosale Marg, Next to Sachivalaya Gymkhana, Nariman Point, Mumbai 400 021. Financial Year of the Company The financial year covers the period from 1st April, to 31st March. Financial Reporting for : Quarter ending 30th June, 2006 Half-year ending 30th September, 2006 Quarter ending 31st December, 2006 Year ending 31st March, 2007 Note: The above dates are indicative Book Closure From 17th June, 2006 to 10th July, 2006, inclusive of both days. Dividend Payment A dividend of Rs. 2.00 per equity share will be paid on or after 10th July, 2006 subject to approval by the shareholders at the Annual General Meeting. Registered Office Gateway Building, Apollo Bunder, Mumbai - 400 001. Listing The Companys Shares are listed on National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE).The requisite listing fees have been paid in full to both these Stock Exchanges. The non-convertible Debentures of the Company are listed with the BSE and the Company has paid the requisite listing fees in full. Table 1: MMFSLs stock exchange codes BSE NSE Demat ISIN in NSDL and CDSL for Equity Shares 532720 M&MFIN INE774D01016
End July, 2006 End October, 2006 End January, 2007 End April, 2007
Except for the AGM held in the year 2003 which was convened at Mahindra Towers, Dr. G. M. Bhosale Marg, P. K. Kurne Chowk, Worli, Mumbai 400 018, all other Meetings were held at Sadhana House, 2nd Floor, Behind Mahindra Towers, P. B. Marg, Worli, Mumbai 400 018. Postal Ballot None of the resolutions was required to be put through postal ballot. Compliance Mandatory Requirements The Company is fully compliant with the applicable mandatory requirements of the revised Clause 49. Adoption of Non-Mandatory Requirements The Company has adopted the following non-mandatory requirements of Clause 49 of the Listing Agreement relating to Corporate Governance. The Company has set up the Remuneration/Compensation Committee. Details of the Remuneration /Compensation Committee have been provided under the Section Remuneration/Compensation Committee. The financial statements of the Company are unqualified.
281
Stock Market Data Table 2 and Chart A give the required details Table 2: High, lows and volume of Companys shares for 2005-06 at BSE and NSE (BSE) Day and Month 17th March, 2006 20th March, 2006 21st March, 2006 22nd March, 2006 23rd March, 2006 24th March, 2006 27th March, 2006 28th March, 2006 29th March, 2006 30th March, 2006 31st March, 2006 High (Rs.) 250.00 241.80 253.90 244.70 247.90 246.70 249.00 257.90 254.50 251.85 246.20 Low (Rs.) 205.20 229.00 235.00 231.00 234.00 238.20 242.00 244.85 244.00 241.10 239.00 Volume (Nos.) 9567799 1888272 3454514 780843 1297343 630345 380337 1139715 203496 165597 128681 High (Rs.) 243.80 241.70 253.70 244.60 248.40 248.70 248.40 258.00 254.15 251.65 246.90 (NSE) Low (Rs.) 205.15 230.00 235.50 228.10 233.90 240.35 242.10 243.50 245.00 241.70 239.40 Volume (Nos.) 20061111 3450640 5209708 1911397 2170224 1092428 557831 1901377 334951 258214 156175
The Equity Shares of the Company were listed on the Stock Exchanges on 17th March, 2006
Chart A: MMFSLs share performance versus BSE Sensex

Distribution of Shareholding Table 3 and 4 list the distribution of the shareholding of the equity shares of the Company by size and by ownership class as on 31st March, 2006. Table 3: Shareholding pattern by size as on 31st March, 2006 No. of Shares held 1 5000 5001 10000 10001 20000 20001 30000 30001 40000 40001 50000 50001 100000 100001 & Above Total No. of No. of shares % Shareholders held Shareholding 94,995 273 194 78 41 42 72 118 95,813 40,24,857 2,07,649 2,76,607 1,90,489 1,42,175 1,96,618 5,03,897 8,04,58,233 8,60,00,525 4.68 0.24 0.32 0.22 0.16 0.23 0.59 93.56 100.00 Table 4: Shareholding pattern by ownership as on 31st March, 2006 No. of shares held % of shareholding Promoters Persons acting in concert Mutual Funds & UTI Banks, Financial Institutions, Insurance companies FIIs Bodies Corporate Indian Public NRIs Trusts HUF Directors Clearing Members Total 5,82,41,532 26,86,550 6,77,712 67.72 3.13 0.79
78,890 1,63,97,046 14,61,679 59,41,947 49,211 1,298 3,09,437 240 1,54,983 8,60,00,525
0.09 19.06 1.70 6.91 0.06 0.00 0.36 0.00 0.18 100.00
282
Dematerialisation of Shares As on 31st March, 2006, 91% of the total equity capital was held in dematerialised form with National Securities Depository Limited and Central Depository Services (India) Limited. Registrar and Transfer Agent Karvy Computershare Private Limited Unit: Mahindra & Mahindra Financial Services Limited Karvy House, 46 Avenue 4, Street No.1, Banjara Hills, Hyderabad - 500 034. Tel: +91-040-23420815 to 820, Fax: + 91-040-23420814/57 email: [email protected] The Registrars and Transfer Agents also have an office at: Karvy Computershare Private Limited 16/22, Bake House, Maharashtra Chamber of Commerce Lane, Opp. MSC Bank, Fort, Mumbai 400 023. Tel: +91-022-66382666, Fax: +91-022-6633 1135 Share Transfer System Trading in Equity Shares of the Company 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. The Share Transfer and Shareholders/Investors Grievance Committee meets as and
when required to consider the other transfer proposals and attend to shareholder grievances. Address for Correspondence Shareholders may correspond with the Registrars and Transfer Agents at: Karvy Computershare Private Limited Unit: Mahindra & Mahindra Financial Services Limited Karvy House, 46 Avenue 4, Street No. 1, Banjara Hills, Hyderabad - 500 034. Tel: +91-040-23420815 to 820, Fax: + 91-040-23420814/57 email: [email protected] on all matters relating to transfer/dematerialisation of shares, payment of dividend and any other queries relating to shares of the Company. Shareholders would have to correspond with the respective Depository Participants for shares held in demat mode. For all investor related matters, the Compliance Officer can be contacted at Sadhana House, 2nd Floor, Behind Mahindra Towers, 570, P. B. Marg, Worli, Mumbai 400 018. Tel: +91-22-66526000, Fax:+91-22-24972741 email: [email protected] Company website: http://www.mahindrafinance.com
283
MANAGING DIRECTORS DECLARATION ON CODE OF CONDUCT As required by Clause 49 of the Listing Agreement, the CEO declaration for Code of Conduct is given below: To The Members of Mahindra & Mahindra Financial Services Limited I, Ramesh Iyer, Managing Director of the Company declare that all Board Members and Senior Management of the Company have affirmed compliance with the Code of Conduct. For Mahindra & Mahindra Financial Services Limited
Mr. Ramesh Iyer Managing Director Mumbai, 27th April, 2006.
CERTIFICATE TO THE MEMBERS OF MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED We have examined the compliance of conditions of Corporate Governance by Mahindra & Mahindra Financial Services Limited for the period from 17th March, 2006 to 31st March, 2006 as stipulated in clause 49 of the Listing Agreement of the said Company with the stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of 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 in respect of investor complaints received upto 31st March, 2006, 126 investors complaints were pending against the Company as on 31st March, 2006. We are informed by the Company that the same have since been resolved. We further 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 B. K. KHARE & CO. Chartered Accountants
PADMINI KHARE KAICKER Partner Membership No. 44784 Mumbai, 27th April, 2006.
284
Auditors Report to the Members of Mahindra and Mahindra Financial Services Limited
We have audited the attached Balance Sheet of SERVICES M/s. MAHINDRA & MAHINDRA FINANCIAL SER VICES LIMITED, LIMITED as at 31st March, 2006 and also the Profit and Loss Account 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 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 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, as amended from time to time, 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 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 purpose 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; (iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; (v) On the basis of written representations received from the directors, as on 31st March, 2006, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;
(vi) 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) (b) (c) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006, and in the case of the Profit and Loss Account, of the profit for the year ended on that date. in the case of Cash Flow Statement, of the cash flows for the year ended as on that date. For B. K. KHARE & CO. Chartered Accountants
(ii)
PADMINI KHARE KAICKER Partner Membership No. 44784 Place : Mumbai Date : 27th April, 2006
285
REPORT ANNEXURE TO THE AUDITORS REPORT Auditors Report refer eferr repor eport Annexure Annexur e to the Auditors Report referr ed to in our report of even date: 1. i. The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets other than those leased by the company. Some of the fixed assets have been physically verified by the management itself or by internal auditors during the year. In our opinion, managements programme of verification provides for physical verification of all fixed assets at reasonable intervals. No material discrepancies were noticed on such verification. The company has not verified the assets given by it on lease. Fixed assets disposed off during the year were not substantial and therefore do not affect going concern status. 4. vii
unsecured, taken by the company, are not prima facie prejudicial to the interest of the company. In our opinion and according to the information and explanations provided to us, during the year, payments of principal amount and interest have been generally regular / as per stipulated terms and conditions.
ii.
In our opinion and according to the information and explanations given to us, the company is having an adequate internal control system commensurate with the size and the nature of its business, for the purchase fixed assets and sale of services. The activities of the company do not involve purchase of inventory and sale of goods. No major weaknesses in internal control system were noticed in the course of our audit. i. In our opinion and according to the information and explanations given to us all the particulars of contracts and arrangements referred in section 301 of the Act have been entered in the register required to be maintained under that section. In our opinion and according to the information and explanations given to us each of these transactions in respect of any such party during the financial year have been made at prices, which are reasonable, having regard to the prevailing market prices at the relevant time.
iii.
5.
2. 3.
Clause 4(ii) of Companies (Auditors Report) Order, 2003 is not applicable to Stock on Hire. i In our opinion and according to the information and explanations provided to us, during the year, Company has granted unsecured loans to parties covered under section 301 of the Companies Act, 1956 amounting to Rs. 1200.44 (number of parties 1). At the year-end, the outstanding balance of loans granted is Rs. 1300.44 lacs (number of parties 2). In our opinion and according to the information and explanations provided to us, the rate of interest and other terms and conditions of such loans given by the company, secured or unsecured, are not prima facie prejudicial to the interest of the company. The receipts of principal amount and interest have during the year been regular/as per stipulated terms and conditions, except in the case of a loan of Rs. 100 lacs. As a matter of prudence, interest on the same is not recognised during the year. In our opinion and according to the information and explanations given to us, except for the case referred to in (iii) above, management has taken reasonable steps where the overdue amounts of more than Rs.1 lac were outstanding at the end of the year. During the year, Company has taken unsecured loans aggregating to Rs. 4,320 lacs from 3 parties & secured loan amounting to Rs. 2,000 lacs from 1 party entered in the register maintained under section 301 of the Companies Act, 1956. At the year-end, the outstanding balances of loans taken aggregated, to Rs 4,622.20 lacs (number of parties 6). In our opinion and according to the information and explanations provided to us, the rate of interest and other terms and conditions of such loans, secured or ii 7. ii.
6.
ii
In our opinion and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA and any other relevant provisions of the Act and the rules framed there under, in respect of deposits accepted from the public. In our opinion and according to the information and explanations provided to us the company has an internal audit system, which is generally commensurate with its size and nature of its business. In respect of the activities of the company, maintenance of cost records has not been prescribed by the Central Government under clause (d) of sub-section (1) of section 209 of the Act. i On the basis of our examination of books of account and according to the information and explanations given to us the company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-tax, Salestax, Wealth Tax and Service Tax, cess and other applicable statutory dues with the appropriate authorities. Following are the disputed tax dues that have not been deposited since the matters are pending before various forums:
iii
8.
iv
9.
vi
286
Governing Statutes
Nature of Dues
Amount (Rs. in lacs)
Period to which the amount relates (Financial Year) 1996 - 1997 1999 - 2000 2001 - 2002 2002 - 2003
Forum where dispute is pending
145.14 * 146.01 * Income Tax Laws Income Tax 287.19 * 609.40 **
Appellate Authority Tribunal Appellate Authority Tribunal Appellate Authority Tribunal Appellate Authority Commissioner of Income Tax Appellate Authority Deputy Commissioner of Sales Tax Appellate Authority Assistant Commissioner of Service Tax
17. On the basis of overall examination of the financial statements and other financial information furnished, including the statement of Structural Liquidity prepared in accordance with the Reserve Bank of India Guidelines, we report that the company has not used short-term funds for long-term investments. 18. During the year, the Company has made allotment of 26,86,550 equity shares of Rs.10 each at a premium of Rs.41 each, to Mahindra & Mahindra Financial Services Limited Employees Stock Option Trust on preferential basis being entity covered in the register maintained under section 301 of the Companies Act, 1956. The difference between issue price and intrinsic value of shares is being amortised over the period of vesting of Stock Options. Charge to Profit and Loss Account for the current year is Rs.78.80 lacs and the amount carried forward is Rs.324.18 lacs. (Refer Note 1 of Notes to the Accounts). The allotment of share has been made under the scheme of employee compensation and in our opinion the price at which shares have been allotted on preferential basis is not prima facie prejudicial to the interest of the company. 19. On the basis of our examination of books of account and documents and according to the information and explanations given to us appropriate securities have been created in respect of secured debentures issued by the company. 20. During the year, company has made initial public issue of its equity shares for financing / funding the loan disbursements to customers and for other general corporate purposes. We have verified the managements disclosure of end use of money raised through public issue. (Refer Note - 3 of Notes to the Accounts) 21. According to the information and explanations given to us no fraud of material nature, on or by the company has been noticed or reported during the year.
Sales Tax Laws Service Tax Laws
Sales tax
98.48 *
2001 - 2002
Service tax
88.41
2004 - 2005
* **
The demands have been fully met partly by payment and partly adjusted against refunds due to the Company. Rs. 200.00 lacs have been paid.
10. The company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year under audit or in the immediately preceding financial year. 11. On the basis of our examination of books of account and documents and according to the information and explanations given to us the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders. 12. From the examination of books of account and according to the information and explanations provided to us, the company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The company is not a Chit fund, nidhi, mutual benefit fund or a society. 14. The company is not dealing or trading in shares, securities, debentures or any other investments. 15. In our opinion and according to the information and explanations given to us the company has not given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company. 16. In our opinion and according to the information and explanations given to us, during the year, term loans were applied for the purpose for which the loans were obtained.
For B. K. KHARE & CO. Chartered Accountants
PADMINI KHARE KAICKER Partner Membership No. 44784 Place : Mumbai Date : 27th April, 2006
287
Balance Sheet As on March 31, 2006

March 2006 Rs. in lacs March 2005 Rs. in lacs
Schedule SOURCES OF FUNDS: Shareholders' Funds: Capital ......................................................................................... Employee Stock Option Outstanding .......................................... Reserves & Surplus ................................................................... Loan Funds: Secured Loans ............................................................................ Unsecured Loans ........................................................................
I II III
13,331.40 78.80 59,868.27 73,278.47
12,015.61 0.00 28,541.70 40,557.31 220,357.19 25,057.38 285,971.88
IV V
348,368.71 39,925.61 461,572.79
APPLICATION OF FUNDS: Fixed Assets: Gross Block ................................................................................. Less: Depreciation ...................................................................... Net Block .................................................................................... Add: Advance for purchase of Capital Assets ............................. Intangible Assets ....................................................................... Investments ............................................................................... Working Capital Fund: .............................................................. Current Assets, Loans & Advances ......................................... Stock on Hire (Net of unmatured finance charges) ..................... Sundry Debtors ........................................................................... Other Current Assets .................................................................. Cash & Bank Balances ................................................................ Loans & Advances ...................................................................... Less: Current Liabilities ............................................................ Provisions ....................................................................... Net Current Assets .................................................................... Deferred Tax Asset (Refer Notes to the Accounts -21) ........... VI
3,483.01 1,211.65 2,271.36 26.01 2,297.37 117.98 31,685.15
2,461.62 834.61 1,627.01 54.07 1,681.08 56.27 3,682.82
VII VIII
52.46 212.77 33.04 13,026.41 443,027.08 IX X XI 456,351.76 28,078.07 5,476.03 422,797.66 4,674.63 461,572.79
149.02 1,314.19 75.50 11,137.07 289,733.35 302,409.13 21,502.30 3,991.00 276,915.83 3,635.88 285,971.88
The Schedules referred to above form an integral part of the Balance Sheet. This is the Balance Sheet referred in our report of even date. For B. K. Khare & Co. Chartered Accountants Anand G. Mahindra Ramesh Iyer Bharat Doshi Anjanikumar Choudhari Uday Y. Phadke Dhananjay Mungale M.G. Bhide Nasser Munjee Piyush Mankad Pawan Goenka Mumbai, 27th April, 2006
Directors
Padmini Khare Kaicker Partner
V.Ravi Chief Financial Officer
Narayan Shankar Company Secretary

288
Profit & Loss Account for the year ended March 31, 2006
Schedule INCOME: Income from Operations ............................................................. Other Income .............................................................................. TOTAL INCOME ......................................................................... EXPENDITURE: Financial Expenses ...................................................................... Employee Cost ............................................................................ Provisions & Write Offs .............................................................. Depreciation & Amortisation ....................................................... Other Expenses .......................................................................... TOTAL EXPENDITURE .............................................................. PROFIT BEFORE TAXATION ..................................................... Less : Current tax ............................................................... Add/(Less): Deferred tax ............................................................. Less : Provision for Fringe Benefit Tax ............................... Less : Provision for Wealth tax ........................................... PROFIT AFTER TAXATION ........................................................ Add/Less : Excess/(Short) Provision for Income Tax - earlier years (net) Add: Balance profit for earlier year ...................... XII XIII March 2006 Rs. in lacs 58,231.65 1,409.22 59,640.87 XIV XV XVI XVII XVIII 21,944.16 4,054.66 8,160.64 517.33 8,748.64 43,425.43 16,215.44 6,297.00 (1,038.74) 128.50 1.44 10,827.24 0.00 10,827.24 10,164.09 20,991.33 1,090.00 2,166.00 0.00 345.00 48.39 1,052.34 147.59 1,635.08 229.32 14,277.61 20,991.33
XX
March 2005 Rs. in lacs 39,693.66 782.67 40,476.33 13,320.02 2,714.27 5,600.17 384.86 5,175.75 27,195.07 13,281.26 5,583.00 (529.51) 0.00 1.10 8226.67 1.53 8,228.20 7,022.35 15,250.55 830.00 1,646.00 0.00 176.75 23.10 1,030.60 134.68 1,092.16 153.17 10,164.09 15,250.55
AMOUNT AVAILABLE FOR APPROPRIATION ......................... APPROPRIATION: General Reserve ......................................................................... Statutory Reserve ....................................................................... Debenture Redemption Reserve ................................................ Dividend on Preference Shares (Interim) .................................... Corporate Dividend Tax on Preference Shares (Interim) ............. Dividend On Equity Shares (Interim) ........................................... Corporate Dividend Tax on Equity Shares (Interim) .................... Proposed Dividend on Equity Shares (Final) ............................... Corporate Dividend Tax on Equity Shares (Final) ........................ Balance Profit carried to Balance Sheet ......................................
NOTES ON ACCOUNTS .........................................................................................
The Schedules referred to above and attached notes form an integral part of the Profit and Loss Account. This is the Profit and Loss Account referred in our report of even date. For B. K. Khare & Co. Chartered Accountants Anand G. Mahindra Ramesh Iyer Bharat Doshi Anjanikumar Choudhari Uday Y. Phadke Dhananjay Mungale M.G. Bhide Nasser Munjee Piyush Mankad Pawan Goenka
Directors

289
SCHEDULE I SHARE CAPITAL Authorised: 9,00,00,000 Equity shares of Rs.10/- each (Previous Year 7,50,00,000 shares) . 50,00,000 Redeemable Preference shares of Rs.100/- each (Previous Year 50,00,000 shares) ............................ Issued : 8,60,00,525 Equity shares of Rs.10/- each (Previous Year 7,01,56,080 shares) . 50,00,000 6.90% Cumulative Redeemable Preference shares of Rs.100/- each (Redeemable at par at the end of 36 months from the date of allotment with put/call option at the end of 24 months from the date of allotment) (Previous Year 50,00,000 shares) .... Subscribed and Paid-up : 8,60,00,525 Equity shares of Rs.10/- each fully paid up (Previous Year 7,01,56,080 shares) ............................................. Less : Shares issued to ESOS Trust but not alloted by it to employees (26,86,550 shares issued to ESOS Trust) ............................................... (Refer Notes to the accounts 1) ...... 50,00,000 6.90% Cumulative Redeemable Preference shares of Rs.100/- each fully paid up (Redeemable at par at the end of 36 months from the date of allotment with put/call option at the end of 24 months from the date of allotment) (Previous Year 50,00,000 shares) ............................................. Total ....................
March 2006 Rs. in lacs
9,000.00
7,500.00
5,000.00
5,000.00
8,600.05
7,015.61
5,000.00
5,000.00
8,600.05
7,015.61
268.66 8,331.40
0.00 7,015.61
SCHEDULE IV SECURED LOANS Non-Convertible Debentures # ........................... (Secured by pari passu charge over immovable assets and first charge over Lease/HP/Loan agreements and relative rentals/book debts) (Refer Notes to the Accounts - 25) Loans & Advances from Banks a) Term Loans .................................................... (Repayable within a year Rs. 8,900 lacs; Previous Year Rs. 8,400 lacs) (Secured by hypothecation over the Companys current assets covered by Lease/HP/Loan agreements and relative rentals/book debts) b) Cash Credit .................................................... (Repayable fully within a year) (Secured by hypothecation over the Companys current assets covered by Lease/HP/Loan agreements and relative rentals/book debts) c) Foreign Currency Loans ................................. (against FCNR deposits of Banks, Repayable fully within a year; Previous Year Rs.Nil) (Secured by hypothecation over the Companys current assets covered by Lease HP/Loan agreements and relative rentals/book debts) Loans & Advances from Others ......................... 8.35% Term Loan from International Finance Corporation (Repayable within a year Rs. 490 lacs ; Previous Year Rs. 490 lacs) (Secured by hypothecation over the Companys current assets covered by Lease/HP/Loan agreements and relative rentals/book debts) Total .............
March 2006 Rs. in lacs 260,000.00
March 2005 Rs. in lacs 169,100.00
59,900.00
33,800.00
19,604.60
8,103.08
4,944.11
4,944.11
3,920.00
4,410.00
348,368.71
22,0357.19
5,000.00 13,331.40
5,000.00 12,015.61
# Of the above NCDs issued to Banks Rs. 96,000 lacs and others Rs. 164,000 lacs; (Previous Year NCDs issued to Banks Rs. 73,600 lacs and others Rs. 95,500 lacs.) SCHEDULE V UNSECURED LOANS Fixed Deposits ..................................................... (Repayable within a year Rs.935.19 lacs; Previous Year Rs.1728.30 lacs ) Non-Convertible Debentures # Non-Convertible Debentures - others (Refer Notes to the Accounts - 26) ............................................. Unsecured Bonds (Subordinate Debt) a) 11.19% Unsecured Bond - Mahindra & Mahindra Ltd. (Redeemable after 66 months from the date of allotment, i.e. 28-03-2002) ... b) 10.165% Unsecured Bond-International Finance Corporation (Redeemable after 66 months from the date of allotment, i.e. 12-07-2002) .................................................... c) 7.50% Unsecured Bond - UTI Bank Ltd. (Redeemable after 66 months from the date of allotment, i.e. 08-03-2004) ......................... d) 7.50% Unsecured Bond - UTI Bank Ltd. (Redeemable after 68 months from the date of allotment, i.e. 03-09-2004) ......................... e) 7.75% Unsecured Bond - UTI Bank Ltd. (Redeemable after 66 months from the date of allotment, i.e. 26-10-2004) ......................... f) 7.40% Unsecured Bond - UTI Bank Ltd. (Redeemable after 70 months & 15 days from the date of allotment, i.e. 15-06-2005) ............... Short Term Loans & Advances from Banks : Commercial Paper (Maximum amount outstanding at any time during the year Rs. 27500 lacs; Previous Year Rs. 6000 lacs) ................................. Short Term Loans & Advances from Others : Inter Corporate Deposits (Repayable fully within a year) ................................................................... Total .................... March 2006 Rs. in lacs 1,303.61 March 2005 Rs. in lacs 2,926.38
Note : Mahindra & Mahindra Ltd., the Holding Company holds 5,82,41,532 shares as on 31st March, 2006. SCHEDULE II EMPLOYEE STOCK OPTIONS OUTSTANDING . Employee Stock Options Outstanding : ................ Less : Deferred Employee Compensation Expenses (Refer Notes to the accounts - 1) .................... March 2006 Rs. in lacs 402.98 324.18 78.80 March 2006 Rs. in Lacs 10,350.34 25,785.70 1,101.49 727.16 34,307.39 Statutory Reserve As per last Balance Sheet ..................................... Add : Transfer during the year ............................... General Reserve As per last Balance Sheet ..................................... Add : Transfer during the year ............................... Debenture Redemption Reserve As per last Balance Sheet ..................................... Add : Transfer during the year ............................... (Refer Notes to the accounts - 23) ........................ Balance in Profit & Loss Account ....................... Total 4,956.62 2,166.00 7,122.62 3,022.58 1,090.00 4,112.58 48.07 0.00 48.07 14,277.61 59,868.27 March 2005 Rs. in lacs 0.00 0.00 0.00 March 2005 Rs. in Lacs 6,537.23 3,813.11 0.00 0.00 10,350.34 3,310.62 1,646.00 4,956.62 2,192.58 830.00 3,022.58 48.07 0.00 48.07 10,164.09 28,541.70
8,500.00
0.00
SCHEDULE III RESERVES & SURPLUS Securities Premium Account As per last Balance Sheet ..................................... Add : Additions during the year ............................. Less : Shares issued to ESOS Trust but not alloted by it to employees ................................................. Less : Share issue expenses ................................. (Refer Notes to the accounts - 5) ..........................
400.00
400.00
3,500.00 5,000.00 4,000.00 4,000.00 5,000.00
3,500.00 5,000.00 4,000.00 4,000.00 0.00
8,000.00 222.00 39,925.61
5,000.00 231.00 25,057.38
# Of the above NCDs issued to Banks Rs. Nil and others Rs. 8,500 lacs; (Previous Year NCDs issued to Banks Rs. Nil and others Rs. Nil)
290
SCHEDULE VI FIXED ASSETS GROSS BLOCK AT COST

Description of Assets A : Assets on Lease: Computers Sub Total - A B : Owned Assets : Freehold Land Premises Office Equipments Vehicles Furniture Computers Sub Total - B C : Repossessed Assets : Vehicles Sub Total - C Total (A+B+C) D: Assets held for sale : Furniture Sub Total - D GRAND TOTAL As at 31-03-2005 As at 01.04.05 Additions for Purch/Trf 0.00 0.00 0.00 0.00 197.29 200.73 288.20 472.23 1,158.45 0.00 0.00 1,158.45 0.00 0.00 1,158.45 928.67 Deductions for Sale/Trf 9.32 9.32 0.00 0.00 1.14 91.83 0.00 20.38 113.35 0.00 0.00 122.67 14.39 14.39 137.06 751.60 As at 31.03.06 Upto 01.04.05 For the year/ Trf 1.19 1.19 0.00 1.78 72.32 116.37 83.91 162.59 436.97 0.00 0.00 438.16 0.00 0.00 438.16 325.07
DEPRECIATION
Deductions/ Trf 7.67 7.67 0.00 0.00 0.87 34.02 0.00 18.35 53.24 0.00 0.00 60.91 0.00 0.00 60.91 266.53 Upto 31.03.06
LEASE TERMINAL ADJUSTMENT

Upto 01.04.05 For the year 0.51 0.51 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.51 0.00 0.00 0.51 24.52 Deductions/ Trf 0.72 0.72 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.72 0.00 0.00 0.72 188.85 Upto 31.03.06
DEPRECIATION
Upto 01.04.05 Upto 31.03.06
Rs. in lacs NET BLOCK

As at 01.04.05 As at 31.03.06
9.32 9.32 6.96 108.92 263.07 881.51 345.96 831.49 2,437.91 0.00 0.00 2,447.23 14.39 14.39 2,461.62 2,284.55
0.00 0.00 6.96 108.92 459.22 990.41 634.16 1,283.34 3,483.01 0.00 0.00 3,483.01 0.00 0.00 3,483.01 2,461.62
6.48 6.48 0.00 1.60 114.83 180.61 138.95 391.93 827.92 0.00 0.00 834.40 0.00 0.00 834.40 775.86
0.00 0.00 0.00 3.38 186.28 262.96 222.86 536.17 1,211.65 0.00 0.00 1,211.65 0.00 0.00 1,211.65 834.40
0.21 0.21 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.21 0.00 0.00 0.21 164.54
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.21
6.69 6.69 0.00 1.60 114.83 180.61 138.95 391.93 827.92 0.00 0.00 834.61 0.00 0.00 834.61 940.40
0.00 0.00 0.00 3.38 186.28 262.96 222.86 536.17 1211.65 0.00 0.00 1,211.65 0.00 0.00 1,211.65 834.61
2.63 2.63 6.96 107.32 148.24 700.89 207.00 439.58 1,609.99 0.00 0.00 1,612.62 14.39 14.39 1,627.01 1344.15
0.00 0.00 6.96 105.54 272.94 727.45 411.30 747.17 2,271.36 0.00 0.00 2,271.36 0.00 0.00 2,271.36 1,627.01
SCHEDULE VII INTANGIBLE ASSETS Description Gross Additions and of carrying adjustments Assets amount as at during the 01.04.05 year at cost Software Expenditure 192.69 140.37 Total 192.69 140.37 As at 31-03-2005 119.50 73.19 SCHEDULE VIII INVESTMENTS Numbers Face value Particulars per unit
Retirements Gross carrying Accumulated and amount amortisation disposals as at to 31.03.06 01.04.05 0.00 333.06 136.42 0.00 333.06 136.42 0.00 192.69 101.15
Amortisation Deduction and Accumulated during the adjustments of amortisation year at amortisation as at cost 31.03.06 78.66 0.00 215.08 78.66 0.00 215.08 35.27 0.00 136.42
Net Balance as at 01.04.05 56.27 56.27 18.35
Rs. in lacs Net Balance as at 31.03.06 117.98 117.98 56.27
Note
March 2006 Rs. in lacs Rs. in lacs Long Term Current 147.58 9.48 98.79
March 2005 Rs. in lacs Rs. in lacs Long Term Current
I - Government Securities: 1,49,75,000 $ (a) 91 Days T-Bills ............................................................................... 1,000,000 $ (b) 364 Days T-Bills ............................................................................... 10,025,000 $ (c) 91 Days T-Bills ............................................................................... 50,000,000 $ (d) 364 Days T-Bills ............................................................................... 5,000,000 $ (e) 364 Days T-Bills ............................................................................... (a) II - Shares (Non-trade and fully paid): (a) Investments in Subsidiary Companies: (i) Mahindra Insurance Brokers Limited ........................................................ III-Investments in Mutual Fund units : (Quoted, Non trade, At cost) Prudential ICICI Mutual Fund .................................................................. Kotak Mutual Fund .................................................................................. ABN Amro Mutual Fund ......................................................................... UTI Mutual Fund ..................................................................................... Birla Mutual Fund .................................................................................... HSBC Mutual Fund ................................................................................. Reliance Mutual Fund ............................................................................. J M Mutual Fund .................................................................................... Chola Mutual Fund .................................................................................. Principal Mutual Fund ............................................................................. DSP Merrill Lynch Mutual Fund .............................................................. HDFC Mutual Fund ................................................................................. Templeton India Mutual Fund ................................................................. (b) 54.76 IV-Balance of unutilised monies raised by issue of Equity shares .......... 54.76 0.00
479.88 47.81 255.85 0.00 527.69
500,000 34,788,517 25,165,076 5,000,674 3,587,871 17,765,642 35,781,770 19,001,476 45,021,918 9,975,340 38,028,577 125,398 19,224,433 200,207
10 10 10 10 10 10 10 10 10 10 10 1,000 10 1,000
54.76 3,478.85 3,077.21 500.07 625.31 1,780.03 3,580.18 1,900.74 4,502.19 1,000.54 3,803.12 1,254.23 2,004.45 2,002.57 29,509.50 29,765.35 1,865.04 31,630.39 31,685.15
54.76 2,500.30 600.07
3,100.37 54.76 54.76 3,628.06 3,628.06 3,682.82
Aggregate market value of quoted investments 29,765.70 3,648.49 $ - Face Value Notes: (a) Following are the movements in Government Securities during the period :Treasury Bills of the face value of Rs. 610 lacs (Previous year Rs. 550 lacs) were purchased and those of the face value of Rs. 900 lacs (Previous Year Rs. 550 lacs) were sold/redeemed/matured during the year
291
(b)
Following are the movements in Units during the year: Acquired Sr.No. Name of Mutual Fund 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. ABN Amro Mutual Fund ............................................................................... Birla Mutual Fund .......................................................................................... Chola Mutual Fund ........................................................................................ Deutsche Mutual Fund ................................................................................. DSP Merrill Lynch Mutual Fund .................................................................... Grindlays Mutual Fund .................................................................................. HDFC Mutual Fund ....................................................................................... HSBC Mutual Fund ....................................................................................... ING Vyasa Mutual Fund ................................................................................ JM Mutual Fund ........................................................................................... Kotak Mutual Fund ........................................................................................ LIC Mutual Fund ........................................................................................... Principal Mutual Fund ................................................................................... Prudential ICICI Mutual Fund ........................................................................ Reliance Mutual Fund ................................................................................... SBI Mutual Fund ........................................................................................... Tata Mutual Fund .......................................................................................... Templeton Mutual Fund ................................................................................ UTI Mutual Fund ........................................................................................... Units 209153501 260927526 54488160 101880394 69352842 107615843 47943953 330394207 112076380 263948054 370008725 9139237 224790622 347220864 163535226 91334346 1332810 775599 11111027 Rs Lacs 20908.45 26135.72 5454.33 10203.44 15581.78 10752.91 5055.66 33035.59 11202.09 26424.96 45226.83 1000.99 22462.90 38431.04 18167.22 9153.13 14821.37 7753.69 19698.51 Sold Units 204152827 243161885 44512820 101880394 69227444 107615843 28719520 294612437 112076380 218926136 349750922 9139237 186762045 333529313 144533751 91334346 1332810 575392 7523157
SCHEDULE IX Current Assets, Loans & Advances (A) Current Assets: Interest accrued on a) Investments ............. b) Others ...................... Stock on Hire ......................................................... Less : Unmatured Finance charges ....................... Less : Provision for Non Performing Assets & Doubtful debts ...................................................... Stock on Hire (Repossessed Cases) ..................... Less : Unmatured Finance charges (Repossessed Cases) ................................................................... (Refer Notes to the Accounts - 9) .......................... Less : Provision for Non Performing Assets & Doubtful debts ......................................................
March 2006 Rs. in lacs 1.23 19.56 84.41 17.55 66.86 14.40 52.46 0.00 0.00 0.00 0.00 0.00
March 2005 Rs. in lacs 20.83 42.81 987.88 759.00 228.88 82.00 146.88 12.51 1.77 10.74 8.60 2.14 346.24 3,252.31 3,598.55 2,284.36 1,314.19 11.86 803.69 5,489.01 65.30 1.63 250.00 4,527.44 12,675.78
SCHEDULE IX (Contd.) Current Assets, Loans & Advances [B] Loans & Advances (Unsecured unless otherwise stated) .................... Dues from Subsidiaries ......................................... Bills of Exchange ................................................... Less : Bills rediscounted ................................... Less : Provision for Non Performing Assets & Doubtful Debts .......................................
0.00 169.00 0.00 169.00 8.05 160.95
10.66 190.68 0.00 190.68 8.05 182.63
Bills Considered good ............................................ Advances recoverable in cash or in kind or for value to be received : Advances under Loan Agreements ....................... Less : Provision for Non Performing Assets & Doubtful Debts ....................................... Advances Considered good ................................... Inter Corporate Deposits Given ............................. Less : Provision for Non Performing Assets ...... Deposits Considered good ...................... Advance payment of tax (net of provisions) .......... Deposits for office premises ................................. Deposits - Others .................................................. Loans against Assets (Secured) (including overdue loans) considered good ..................................... considered doubtful ................................ Less : Provision for Non Performing Assets & Doubtful debts ........................................
18,796.60 404.20 18,392.40 10,100.00 100.00 10,000.00 209.10 184.21 235.28
14,161.12 738.86 13,422.26 252.95 100.00 152.95 571.69 143.84 22.66
Sundry Debtors : HP and LEASE (Secured) Less than six months old .......................... More than six months old .......................... Less : Provision for Non Performing Assets & Doubtful debts ....................................... Debtors Considered good ......................... Other Current Assets ........................................... Cash & Bank balances : Cash & Cheques on hand ....................... Balance with Scheduled Bank in current account ................................................... Balance with Scheduled Bank in Cash Credit A/c ................................................ Balance in Unclaimed dividend Bank Account ................................................... Term Deposits with Scheduled Banks Free of lien ............................... Under lien ................................. (Refer Notes to the accounts - 17) .......... Total (A) ......
445.64 1,122.34 1,567.98 1,355.21 212.77 12.25 1,435.47 7,801.63 187.61 2.74 120.00 3,478.96 13,324.68
394,452.06 22,573.26 417,025.32 8,645.04 408,380.28 3,977.44 1487.42 443,027.08 456,351.76
258,370.20 15,660.98 274,031.18 4,513.23 269,517.95 5,275.27 433.44 289,733.35 302,409.13
Retained Interest in Securitised Assets ................ Loans and advances unsecured Considered good ................................................... Total (B) ...... Total Current Assets, Loans & Advances (A + B)
292
SCHEDULE X Current Liabilities Sundry Creditors ................................................... Dues to Subsidiary Company ................................ Discount received but not due (Bills) ..................... Deposits/Advances received against Loan agreements ........................................................... * Amount due to Investors Education and Protection Fund : Unclaimed Debentures ............................. Unclaimed Dividend ................................. Unclaimed Fixed Deposit Interest ............ Credit balances in Current Accounts with Banks .. Other Current Liabilities ........................................ Amount Received in advance from ESOS Trust .... Less : Loan given to the ESOS Trust ..................... Interest accrued but not due Loans ................ Others ............... Total .................... * There are no amounts outstanding and unpaid to be credited to the Investors Education and Protection Fund. .................................................... SCHEDULE XI Provisions Proposed Dividend ................................................ Corporate Dividend Tax ......................................... Provision for Estimated Loss/Expenses on Securitisation ......................................................... Provision for Retirement Benefits ......................... Total .................... SCHEDULE XII Income From Operations Income from Bills .................................................. Income from Lease ............................................... Income from Hire Purchase .................................. Income from Loan ................................................. Income from Retained Interest in Securitised Assets ................................................................... Income from Securitisation ................................... (Refer Notes to the Accounts - 19) Total .................... SCHEDULE XIII Other Income Profit/Premium on Sale/Redemption of Long Term Investment ............................................................ Income from Investments Long Term ............. Trade ..................... Dividend Received ................................................ Interest on Term Deposits ..................................... Interest on ICD ...................................................... (TDS Rs.12.08 lacs, Previous Year Rs. 5.85 lacs) Income - others ..................................................... [includes Bad debts recoveries of Rs. 256.45 lacs; (Previous Year Rs.162.31 lacs) and interest on income tax refund Rs. Nil; (Previous Year Rs.124.90 lacs)] Total .................... SCHEDULE XIV Financial Expenses Interest on Fixed loans ................................................ Debentures ................................................ Others ....................................................... Bank Charges ........................................................ Total ....................
March 2006 Rs. in lacs 8,935.96 2.69 1.37 827.44
March 2005 Rs. in lacs 7,297.26 0.00 2.45 651.13
SCHEDULE XV Employee Cost Salary, Bonus & Incentives .................................... Companys Contribution to P.F. & other funds ....... Staff Welfare ......................................................... Employee Compensation Expense on account of ESOS (Refer Notes to the accounts - 1) ................ Total ............
Rs. in Lacs March 2006 3,545.34 293.42 137.10 78.80 4,054.66 Rs. in Lacs March 2006 5,641.62 389.72 2,129.30 8,160.64 Rs. in Lacs March 2006 438.16 0.51 78.66 Total ............ 517.33 Rs. in Lacs March 2006 158.87 471.95 175.31 16.39 111.70 230.48 2.20 40.75 2,325.82 1,426.62 8.71 11.02 16.44 0.00 18.00 3,734.38 8,748.64
Rs. in Lacs March 2005 2,467.81 112.37 134.09 0.00 2,714.27 Rs. in Lacs March 2005 4,095.96 459.52 1,044.69 5,600.17 Rs. in Lacs March 2005 325.07 24.52 35.27 384.86 Rs. in Lacs March 2005 94.25 309.73 10.70 20.97 83.19 234.10 1.50 39.90 1,828.54 336.98 44.50 11.02 10.71 40.00 10.80 2,098.86 5,175.75
8.90 1.26 7.36 1,658.49 8,267.33 1,370.15 1,200.44 169.71 8,182.83 14.73 28,078.07
9.15 0.43 7.36 651.07 6,920.00 0.00 0.00 0.00 5,944.44 19.01 21,502.30
SCHEDULE XVI Provisions & Write offs Bad Debts & Write offs ......................................... Provision for Non Performing Assets (as per RBI norms) ............................................................ Additional provision for Non Performing Assets .... (Refer Notes to the accounts - 6 ) Total ............ SCHEDULE XVII Depreciation & Amortisation Depreciation : Statutory Special Amortisation of Intangible Assets
Rs. in lacs March 2006 1,635.08 229.32 3,476.90 134.73 5,476.03 Rs. in Lacs March 2006 39.75 8.50 1,189.86 51,650.93 451.09 4,891.52 58,231.65 Rs. in Lacs March 2006 4.70 0.00 20.18 760.58 251.47 38.96 333.33
Rs. in lacs March 2005 1,092.16 153.17 2,689.46 56.21 3,991.00 Rs. in Lacs March 2005 25.74 60.49 2,478.92 34,747.30 448.10 1,933.11 39,693.66 Rs. in Lacs March 2005 3.47 0.00 24.20 119.78 267.74 43.42 324.06
SCHEDULE XVIII Other Expenses Electricity Charges ................................................ Rent ...................................................................... Repairs & Maintenance - Building ........................ - Others .......................... Insurance ............................................................... Rates & Taxes ....................................................... Directors Remuneration - Fees ............................. - Commission ................. Commission & Brokerage ..................................... Legal & Professional Charges ............................... Loss on Sale / retirement of Owned Assets ......... Auditors Remuneration - Audit Fees .................... - Other Services ............. Donations - Political Parties ................................... - Others ................................................ (Refer Notes to the accounts - 14) General & Administrative Expenses ...................... Total ............
SCHEDULE XIX Schedule to the Balance Sheet of a Non-Banking Financial Company (as required in terms of Paragraph 9BB of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998) Rs. in Lacs March 2006 Liabilities Side Amount Outstanding Amount Overdue (unclaimed) Rs. in Lacs March 2005 Amount Outstanding Amount Overdue (unclaimed)
(1) Loans and advances availed by the NBFCs inclusive of interest accrued thereon but not paid: 1,409.22 Rs. in Lacs March 2006 4,415.71 15,182.89 1,765.25 580.31 21,944.16 782.67 Rs. in Lacs March 2005 2,477.48 9,117.91 1,242.38 482.25 13,320.02 (a) Debentures : Secured 260,000.00 : Unsecured 8,500.00 (other than falling within the meaning of public deposits) (b) Deferred Credits 19,604.60 (c) Term Loans 63,820.00 (d) Inter-corporate loans and borrowing 222.00 (e) Commercial Paper 8,000.00 (f) Public Deposits ***** 1,529.97 (g) FCNR Loans 4,944.11 (h) Subordinate debt 21,900.00 0.00 169,100.00 0.00 0.00 0.00 0.00
0.00 8,103.08 0.00 38,210.00 0.00 231.00 0.00 5,000.00 64.06 3,396.57 0.00 4,944.11 0.00 16,900.00
0.00 0.00 0.00 0.00 50.60 0.00 0.00
293
SCHEDULE XIX (Contd.) Rs. in Lacs March 2006 Amount Outstanding (2) Break-up of (1)(F) above (Outstanding public deposits inclusive of interest accrued thereon but not paid) (a) In the form of Unsecured debentures 9.46 (b) In the form of partly secured debentures 0.00 i.e. debentures where there is a shortfall in the value of security (c) Other public deposits ***** 1,520.51 Assets Side (3) Break-up of Loans and Advances including bills receivables [other than those included in (4) below] (a) Secured (b) Unsecured (4) Break up of Leased Assets and stock on hire and hypothecation loans counting towards EL/HP activities (i) Lease assets including lease rentals under sundry debtors : (a) Financial lease (b) Operating lease (ii) Stock on hire including hire charges under sundry debtors : (a) Assets on hire (b) Repossessed Assets (iii) Hypothecation loans counting towards EL/HP activities (a) Loans where assets have been repossessed (b) Loans other than (a) above (5) Break-up of Investments : Current Investments : 1. Quoted : (i) Shares : (a) Equity (b) Preference (ii) Debentures and Bonds (iii) Units of Mutual Funds (iv) Government Securities 2. Unquoted : (i) Shares : (a) Equity (b) Preference (ii) Debentures and Bonds (iii) Units of Mutual Funds (iv) Government Securities Long Term Investments : 1. Quoted : (i) Shares : (a) Equity (b) Preference (ii) Debentures and Bonds (iii) Units of Mutual Funds (iv) Government Securities 2. Unquoted : (i) Shares : (a) Equity (b) Preference (ii) Debentures and Bonds (iii) Units of Mutual Funds (iv) Government Securities 0.00 0.00 9.71 0.00 0.00 0.00 Amount Overdue (unclaimed) Rs. in Lacs March 2005 Amount Outstanding Amount Overdue (unclaimed)
(6) Borrower group-wise classification of all leased assets, stock-on-hire and loans and advances:
Rs. in Lacs March 2006 Amount net of provisions Secured Unsecured Total Rs. in Lacs March 2005 Amount net of provisions Secured Unsecured Total
Category
1.
Related Parties (a) Subsidiaries (b) Companies in the same group (c) Other related parties 0.00 0.00 6.95 0.00 0.00 0.00 0.00 0.00 6.95 0.00 0.00 3.71 0.00 0.00 0.00 0.00 0.00 3.71
2.
Other than related parties Total
412,615.99 30,040.77 442,656.76 276,255.35 14,191.28 412,622.94 30,040.77 442,663.71 276,259.06 14,191.28
290,446.63 290,450.34
64.06
3,386.86
50.60
(7) Investor group-wise classification of all investments (current and long term) in shares and securities (bothquoted and unquoted):
Rs. in Lacs March 2006 Category Market Value/ Break up or Fair Value or NAV Book Value (Net of (Provisions) Rs. in Lacs March 2005 Market Value/ Break up or Fair Value or NAV Book Value (Net of (Provisions)
Amount outstanding
Amount outstanding
0.00 34,646.80
0.00 20,215.40
1.
Related Parties (a) Subsidiaries (b) Companies in the same group (c) Other related parties 54.76 54.76 54.76 54.76
230.25 0.00
241.44 0.00
2.
Other than related parties 31,630.39 Total 31,685.15
31,630.39 31,685.15
3,628.06 3,682.82
3,628.06 3,682.82
(8) Other information: 1,191.55 213.04 3,116.71 471.91 Particulars (i) Gross Non-Performing Assets 3,616.37 420,167.89 2,985.00 278,143.15 (a) Related parties (b) Other than related parties (ii) Net Non-Performing Assets (a) Related parties (b) Other than related parties 29,509.50 255.85 3,100.37 527.69 (iii) Assets acquired in satisfaction of debt 0.00 13,433.42 0.00 0.00 11,264.93 0.00 0.00 26,827.87 0.00 21,709.62 Rs. in Lacs March 2006 Rs. in Lacs March 2005
***** Represents unclaimed deposit & interest thereof in respect of which the Company is yet to receive instructions for repayment/renewal from the depositors.
54.76
54.76
294
SCHEDULE XX Notes to the Accounts for the year ended March 31, 2006 Significant Accounting Policies (SAP): 1) Basis for Preparation of Accounts: The accounts have been prepared to comply in all the material aspects with applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956. Further, the Company follows directions issued by The Reserve Bank of India for Non-Banking Financial Companies. 2) Stock on Hire / Loans against assets: Stock on hire is stated at agreement value net of instalments due less unmatured finance charges. Loan against receivables are stated at agreement value net of instalments received less unmatured finance charges. 3) Depreciation: i. Depreciation on fixed assets, other than leased assets and repossessed assets capitalised for own use, has been charged using Straight Line Method at rates specified in Schedule XIV to the Companies Act, 1956 except for office equipment on which depreciation is charged at the rate of 16.21% instead of 4.75% as prescribed in Schedule XIV based on the estimated useful life of the asset. Assets costing less than Rs.5,000/- are fully depreciated in the year of purchase. Leased assets (acquired prior to 01.04.2001) are depreciated at rates specified in Schedule XIV to the Companies Act, 1956 as required by the old Guidance note on lease accounting issued by the Institute of Chartered Accountants of India prior to issuance of Accounting Standard 19 on leasing transactions. To ensure capital recovery over the primary lease period, the difference between the depreciation charged as computed using the IRR implicit in the lease and the charge as disclosed for the year, is reflected in the lease equalisation account. Repossessed assets that have been capitalised for own use are depreciated @ 15% using the Straight Line Method over the remaining useful life of these assets. The same have been grouped under the head Owned Assets. 7)
In case of assignment of receivables the assets are derecognised as all the rights, title, future receivables & interest thereof are assigned to the purchaser. On derecognition, 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. Income on Retained Interest in Securitised Assets is booked on accrual basis. vii. Income from Investments: a) b) 5) Dividend from investments is accounted for as income when the right to receive dividend is established. Interest income is accounted on accrual basis.
Fixed Assets: Fixed assets are stated at cost of acquisition (including incidental expenses), less depreciation. Assets held for sale are stated at the lower of their net book value and net realisable value.
6)
Foreign Exchange Transactions: All assets and liabilities in foreign currencies are translated at the relevant rates of exchange prevailing at the year end, except those covered by forward exchange contracts which are translated at contracted rates, where the difference between the contracted rate and the spot rate on the date of the transaction (other than in respect of the contracts for the acquisition of fixed assets) is charged to Profit and Loss Account over the period of the contract. In case of the current assets, current liabilities and long term liabilities (other than those for acquisition of fixed assets and technical know-how) the exchange differences are recognised in the Profit and Loss Account. Investments: Investments held as long-term investments are stated at cost comprising of acquisition and incidental expenses less permanent diminution in value, if any. Investments other than long-term investments are classified as current investments and valued at cost or fair value whichever is less.
ii.
iii.
4)
Revenue Recognition: i. General: The Company follows the accrual method of accounting for its income and expenditure except delayed payment charges and Interest on Trade advance, which on account of uncertainty of ultimate collection are accounted on receipt basis. Also in accordance with the guidelines issued by the Reserve Bank of India for Non-Banking Finance Companies, income on business assets classified as non-performing assets, is recognised on receipt basis. ii. Income from Lease: 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. iii. Income from Hire Purchase: Income from Hire Purchase transactions entered into prior to 01.04.2001 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 into by the company on or after 01.04.2001 the income is accounted for by applying the interest rate implicit in such contracts. iv. Income from Loan: Income from loan transactions is accounted for by applying the interest rate implicit in such contracts. v. Income from Subvention/Service/Document Charges: Subvention received from dealers/manufacturers on retail cases is booked over the period of the contract. However, service charges & documentation charges are booked at the commencement of the contract. vi. Income from Securitisation & Assignment: Securitised assets are derecognised as the contractual rights therein are transferred to the special purpose vehicle or Buyer 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/expenses and incidental expenses related to the transaction is recognised as gain or loss arising on securitisation. 9) 8)
Retirement Benefits: a) The Companys liability towards gratuity and superannuation to its employees is covered by a group gratuity policy with LIC of India. Charge to the Profit and Loss Account includes premium paid to LIC of India and change in Actuarial valuation during the year net of fund value available. Liability on account of encashment of leave to employees is provided on the basis of actuarial valuation.
b)
Borrowing Cost: Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue in the year of incurrence.
10) Leasehold improvements: Expenditure incurred on improvements to leasehold premises is classified into Capital and Revenue. Addition of assets are capitalised under Fixed Assets and balance expenditure, if any, is debited to Profit & Loss Account. 11) 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 taxable income will be available against which such deferred tax assets can be realised. 12) 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.
295
13) Software Expenses: Software expenses are either treated as revenue expense or treated as Intangible Assets which are amortised over a period of 36 months depending upon the type of software and evaluation of future benefits there from. 14) Miscellaneous Expenditure: Preliminary Expenses: Preliminary and pre-operative expenses are amortised over a period of five years. 15) Impairment of Assets: Management periodically assesses using external and internal sources whether there is an indication that an asset may be impaired. An impairment occurs where the carrying value exceeds the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. The impairment loss to be expensed is determined as the excess of the carrying amount over the higher of the assets net sales price or present value as determined above. 16) Provisions and Contingent Liabilities: Provisions are recognised in accounts in respect of present probable obligations, the amount of which can be reliably estimated. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. 17) Share Issue Expenses: Expenses incurred in connection with fresh issue of share capital are either charged to Profit & Loss Account or adjusted against Securities Premium account in the year in which they are incurred. 18) Derivatives: The hedging contracts comprise of interest rate swap undertaken to hedge interest rate risk on certain liabilities. These hedges are accounted for like the underlying liabilities. The net interest payable is accounted on accrual basis over the life of the swap. NOTES TO THE ACCOUNTS: 1) During the year the Company has issued, 26,86,550 Equity shares of Rs.10 each at a premium of Rs. 41 each to the Mahindra & Mahindra Financial Services Limited Employees Stock Option Trust under the Employee Stock Option Scheme (ESOS) of the company. The details of the Employee Stock Option Scheme are : Type of Arrangement Employee Share-Based Payment Plan administered through Employee Stock Option Trust. Number of Options Granted Grant Date Contractual life Exercise Price Method of Settlement Vesting Conditions 26,86,550 C. 7th December, 2005 Options will lapse if not exercised within 6 years from the date of grant i.e. 7th December, 2005. Rs. 51 per share By Issue of Shares at Exercise Price 35% On expiry of 12 months from the date of grant 25% On expiry of 24 months from the date of grant 20% On expiry of 36 months from the date of grant 10% On expiry of 48 months from the date of grant 10% On expiry of 60 months from the date of grant a) The Company has adopted intrinsic value method in accounting for employee cost on account of ESOS. The intrinsic value of the shares based on the valuation obtained from an independent valuer is Rs. 65.53 (rounded up to Rs.66) per share based on Net Asset Value/Asset Based Method. The difference between the intrinsic value & the exercise price of Rs.51 per share is being amortised as employee compensation cost over the vesting period. Commencing from the date of grant viz. 7th December, 2005 the total amount to be amortised over the vesting period is Rs.402.98 lacs. Accordingly the charge to Profit & Loss account during the current year is Rs.78.80 lacs and the amount carried forward is Rs.324.18 lacs. 7) 5) @ D. 2) b)
The fair value of options, based on the valuation of the independent valuer as of date of grant i.e. 7th December, 2005: Vesting period in years 1 2 3 4 5 Expected Vesting 940292 671638 537310 268655 268655 2686550 Had this method been used, the charge to Profit & Loss account on account of amortisation of difference between the fair value and the exercise price of Rs.51 per share during the year would have been Rs.124.85 lacs. The total amount that would have been amortised over the vesting period is Rs.650.59 lacs. The Company has granted a loan of Rs.1200.44 lacs without interest to Mahindra & Mahindra Financial Services Limited Employees Stock Option Trust for the purchase of shares of the company under the stock option scheme. Fair Value (Rs.) 23.39 23.54 24.56 25.82 26.51
On January 5, 2006, the Company has allotted 31,57,895 equity shares of Rs.10 each at premium of Rs.180 per share on preferential basis to Copa Cabana (a Mauritius based Foreign Institutional Investor, which is a 100% subsidiary of ChrysCapital III, LLC and is registered with SEBI). On March 9, 2006, the Company made public issue of 20,000,000 Equity Shares of Rs. 10 each for cash at a price of Rs. 200 per Equity Share, comprising a Fresh Issue of 10,000,000 Equity Shares of Rs. 10 each and an offer for Sale of 10,000,000 Equity Shares of Rs. 10 each by Mahindra & Mahindra Limited and certain other shareholders of the Company. Proceeds from initial public issue are utilised to provide funding for loans to our customers and for other general corporate purposes as disclosed in the prospectus to the issue and the amount remaining unutilised is Rs.1865.04 lacs.
3)
4)
Earnings Per Share as required by Accounting Standard 20 read with the Guidance Note on Accounting for Employee share-based Payments is as follows: Intrinsic Value Method A. Net Profit After Tax (Rs. in lacs) Less: Preference dividend Amount used as the numerator B. Weighted Average number of Equity Shares of Rs.10/- each Earnings Per Share - Basic (Rs.) Earnings Per Share - Diluted @ (Rs.) 10827.24 393.39 10433.85 71530269 14.59 14.41 Fair Value Method 10781.19 393.39 10387.80 71530269 14.52 14.34
Dilution in Earnings Per Share is on account of 2686550 equity shares issued to Employees Stock Option Trust on 6th December, 2005 under the Employees Stock Option Scheme.
The issue expenses relating to shares under ESOS, Private placement and Public issue have been debited to Securities Premium account as permitted under Section 78 of Companies Act,1956. The Company has made adequate provision for the Non-performing assets identified, in accordance with the guidelines issued by the Reserve Bank of India. Also, the Company has made an additional provision of Rs. 2129.30 lacs (previous year Rs. 1044.69 lacs) on a prudential basis. Bad debts & Write offs includes loss on termination which mainly represents shortfall on settlement of certain contracts due to realisation of lower value from such Hire Purchase/Leased/Loan assets on account of poor financial position of such customers. Lease Disclosures as per Accounting Standard 19: The Company has not undertaken any fresh leases after 01.04.2001. The existing leasing transactions continue to be shown under Fixed Assets and adequate depreciation is provided as required by the old Guidance note on lease accounting issued by the Institute of Chartered Accountants of India prior to issuance of Accounting Standard 19 on leasing transactions.
6)
8)
296
a)
Reconciliation of Gross Investment & Present Value of Minimum Lease Payments (MIP) Receivables for Contracts Booked on or after 1/4/2001
Rs. in lacs Maturity Profile Particulars Balance as on Mar-06 Gross Investment Outstanding Unmatured Finance Charges Mar-05 less than 1 year Mar-06 Mar-05 between 1 & 5 years Mar-06 Mar-05 more than 5 years Mar-06 Mar-05
19) a)
The Reserve Bank of India issued guidelines on securitisation transaction vide its circular dated February 1, 2006 under reference no. DBOD No. BP.BC.60/21/04.48/2005-06, wherein the profit/premium arising on securitisation is required to be amortised over the life of the securities issued while any loss arising on account of securitisation is recognised in the period in which the transaction occurs. Since the company has entered into all the securitisation transactions prior to the issuance of the said guidelines (i.e. in respect of the securitisation transactions up to January 31, 2006), any gain or loss from the sale of receivables has been recognised upfront on the date on which the sale occurred. As the assignment transactions fall outside the purview of theses guidelines, the Company has continued to recognise upfront gain/loss on all such transactions.
86.79
926.74
86.79
824.00
0.00
102.74
Nil
Nil
(6.04)
(88.37)
(6.04)
(81.34)
0.00
(7.03)
Nil
Nil
b)
Present Value of Minimum Lease Payments Outstanding 80.75
838.37
80.75
742.66
0.00
95.71
Nil
Nil
The disclosure in respect of total gross investments & present value of minimum lease payments in lease contracts is considered to mean gross investment and present value of minimum lease payments outstanding on balance sheet date. b) c) d) e) f) g) h) 9) The unearned finance income as on 31st March, 2006 is Rs. 6.04 lacs (previous year Rs. 88.37 lacs). The Unguaranteed Residual Values accruing to the benefit of the company is nil. The accumulated provision for uncollectible minimum payments receivable is Rs. 555.83 lacs (previous year Rs. 1928.74 lacs). No Contingent rent has been recognised in the statement of Profit & Loss Account for the year ended 31st March, 2006 (previous year nil). The Company is engaged in financing vehicles and farm equipments under various hire purchase schemes. The Company incurs initial cost of Dealer Commission and stamp duty, which are charged to Profit and Loss Account on accrual basis. During the year ended 31st March, 2006, Rs. 0.51 lacs (previous year Rs. 24.52 lacs) have been debited to Lease equalisation account. Repossessed Assets in case of hire purchase contracts is shown under Current Assets as Stock on Hire net of unmatured finance charges.
During the year the Company has without recourse securitised loan receivables of 6251 (Previous year 20863) contracts amounting to Rs.15474.35 lacs (previous year Rs. 42586.09 lacs) (including future interest receivable) for a consideration of Rs.14274.35 lacs (previous year Rs. 39877.18 lacs). As the income booked in respect of securitisation of receivables includes certain amount towards cost of future servicing of the securitised pool, an appropriate amount has been provided towards expenditure for future services. The Securitisation income booked is Rs.1035.82 lacs (previous year Rs.3000.77 lacs), and provision for estimated loss/expenses of Rs.348.11 lacs (previous year Rs.1178.22 lacs). During the year ended the Company has without recourse assigned loan receivables of 16393 (previous year 1627) contracts amounting to Rs. 40156.23 lacs (previous year Rs. 2691.60) (including future interest receivable) for a consideration of Rs. 37193.87 lacs (previous year Rs.2552.66 lacs). As the income booked in respect of assignment of receivables includes certain amount towards cost of future servicing of the assigned pool, an appropriate amount has been provided towards expenditure for future services. On assignment of receivables income booked is Rs.4682.18 lacs (previous year Rs.251.90 lacs), & provision for estimated loss/expenses of Rs.1734.55 lacs (previous year Rs.77.50 lacs). During the year provision in respect of securitisation and assignment of Rs.609.47 lacs (net of tax) considered no longer necessary has been written back.
c)
d)
20) Related Party Disclosure as per Accounting Standard 18: List of the related parties: Holding Company Subsidiary Company Fellow subsidiary Companies Automartindia Limited Bristlecone (Singapore) Pte. Limited Bristlecone (UK) Limited Bristlecone GmbH Bristlecone Inc. Bristlecone India Limited Bristlecone Limited Cayman Islands Mahindra & Mahindra South Africa (Pty) Limited Mahindra Acres Consulting Engineers Limited Mahindra Ashtech Limited Mahindra Engineering & Chemicals Products Limited Mahindra Engineering Design & Development Company Limited (w.e.f. 27th December, 2004) Mahindra Gesco Developers Limited Mahindra Gujarat Tractor Limited : Mahindra & Mahindra Limited : Mahindra Insurance Brokers Limited (w.e.f. 07/04/04) : As per list given below Mahindra Holidays & Resorts India Limited Mahindra Holidays & Resorts USA Inc. Mahindra Infrastructure Developers Limited Mahindra Intertrade Limited Mahindra Logisoft Business Solutions Limited Mahindra SAR Transmission Pvt. Limited Mahindra Shubhlabh Services Limited Mahindra Steel Service Centre Limited Mahindra USA, Inc Mahindra MiddleEast Electrical Steel Service Center (FZE) Tech Mahindra GmbH Tech Mahindra Ltd.
10) Commission & Brokerage represents amount incurred in respect of acquisition of customers. 11) The Company has single reportable segment namely financial services for the purpose of Accounting Standard 17 on Segment Reporting. 12) In the opinion of the Board, Current Assets, Loans and Advances are approximately of the value stated if realised in the ordinary course of business. 13) Current Liabilities include Deposits/Advances received on account of Lease/ Hire Purchase/Loan, which are repayable over the period of the contract. 14) During the year under audit the Company has donated Rs. Nil (previous year Rs. 40 lacs, out of which Rs. 25 lacs to Shiv Sena and Rs.15 lacs to Mumbai Regional Congress Committee) as a contribution to the political party. 15) The Foreign Currency Loan availed by the Company in respect of which the Company has obtained a forward cover has been translated at the forward contract rate and forward exchange risk of Rs. Nil is debited to Profit & Loss Account (previous year Rs. 2.53 lacs). 16) Disclosure on Derivatives a) b) c) There were 25 (previous year 17) Derivative instruments for hedging interest rate risk outstanding as on 31st March, 2006. All the instruments are for hedging interest rate risk. There was in unhedged exposure of Japanese Yen (JPY) of 7.47 lacs i.e. Rs. 2.83 lacs (previous year nil) on account of cross currency interest swap.
17) Term Deposits include Rs.3478.96 lacs (previous year Rs. 4527.44 lacs) maintained as cash collateral in accordance with the assignment agreements. 18) Expenditure in Foreign Currency Membership & Subscription Rs. 0.15 lacs. (previous year Rs. 1.81 lacs). Other Expenses Rs. 2.32 lacs (previous year Rs. 24.35 lacs).
Mahindra Overseas Investment Company (Mauritius) Limited Tech Mahindra (Americas) Inc
297
Mahindra Holdings & Finance Limited NBS International Limited Mahindra Automotive Steels Private Limited Mahindra Europe S.r.l. Mahindra BT Investment Company (Mauritius) Limited Mahindra International Ltd. (w.e.f. 01st November, 2005) Mahindra Renault Pvt. Ltd. (w.e.f. 05th August, 2005) Tech Mahindra (R & D Services) Ltd. (w.e.f. 20th November, 2005) Jensand Limited Stokes Forgings Limited Plexion Technologies (UK) Ltd. Plexion Technologies Inc. Tech Mahindra (Thailand) Ltd. Key Management Personnel
Tech Mahindra (Singapore) Pte. Ltd. Mahindra (China) Tractor Company Limited Mahindra Ugine Steel Company Limited Mahindra World City Developers Ltd. Mahindra World City (Jaipur) Ltd. Mahindra Realty Ltd. Tech Mahindra (R & D Services) Inc. (w.e.f. 20th November, 2005) Tech Mahindra (R & D Services) Pte. Ltd. (w.e.f. 20th November, 2005) Stokes Group Limited Stokes Forgings Dudley Limited Plexion Technologies (India) Pvt. Ltd. Plexion Technologies GmbH Tech Mahindra Foundation : Mr. Ramesh Iyer (Managing Director)
21) In accordance with Accounting Standard 22 on Accounting for Taxes on Income the company has accounted for Deferred Asset/Liability. The break up of the deferred tax asset as on 31st March, 2006 of Rs. 4674.63 lacs (Previous year Rs. 3635.88 lacs) is as under: Rs. in lacs Deferred Tax Asset/(Liability) March 2005 3459.23 125.16 51.49 3635.88
Particulars
Deferred Tax Asset/ (Liability) March 2006 4572.21 2.48 99.94 4674.63
Provision for Non Performing Assets Depreciation Other Disallowances Total 22) Contingent Liability not provided for:i.
Taxation matters: 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: Rs. 1,187.74 lacs (Previous year Rs. 565.30 lacs). # Sales tax: Rs. 98.48 lacs (Previous year Rs. 98.48 lacs). These demands are met to the extent of Rs. 778.34 lacs, part with payment and part adjusted against refunds due to the company. Out of this Turnover Tax of Rs.31.18 lacs paid under protest in the state of Bihar where the Company is in reassessment process.
Related Parties transactions are as under. Sl. Nature of Holding Subsidiary No. Transactions Company Company 1 Income Hire Purchase / Lease / Loan income (53.82) Other income 213.24 (85.77) Expenses Interest Other Expenses 3 4 Purchase of shares from third parties Finance Unsecured Bonds placed (incl. int accrued) NCD Issued 267.11 (314.15) 5.46 (3.90)
Rs. in lacs Fellow Key subsidiary Management Companies Personnel 2.21 (13.82) 0.10 (8.24) 5.37 (5.53) 10.52 (2.28) 60.87 (53.76)
* # ii.
223.00 (9.74) 8.78 (1.45) 251.77 (132.42) (40.00)
The Company has given a performance guarantee in respect of which the Company stands fully indemnified for the loss, if any, which would be incurred on failure, if any, to perform the guaranteed act for Rs. 200 lacs. (previous year Rs. 200 lacs). On account of outstanding Capital Commitments Rs. 76.29 lacs. (previous year Rs. 37.25 lacs). Corporate undertaking on Securitisation/assignment Rs.7121.80 lacs (previous year Rs. 650.09 lacs). Guarantee of Rs. 200 lacs (previous year nil) provided to NSE towards listing of companys shares.
iii. iv. v.
2,410.35 (400.49) 2,102.46 (3,607.15)
144.47 (40.08)
(90.48)
23)
vi. Legal Suits filed by the customers in Consumer Forums and Civil courts claiming compensation against company amounting to Rs. 603.70 lacs (previous year Rs. 203.75 lacs). The company has no debentures issued to the public as at 31st March, 2006, hence no amount has been credited to the Debenture Redemption Reserve account during the current year. There are no dues payable to Small Scale industrial undertakings in view of the nature of the business of the Company.
Dividend paid 2,083.21 for previous year (1,999.93) Inter Corporate Deposits taken (including interest accrued but not due) Net receivable on Hire Purchase/ Loan / Lease agreements 5 6 Share Issue Expenses Other Transactions Reimbursement made to parties Reimbursement from parties 7 Outstandings Receivables Payables 635.07 28.16 (28.93) 11.52 (11.27) 888.41 (329.98)
24)
9.46 (13.85) 2.91 (23.59) 5.60 (12.93)
6.95 (3.71) 2.00 (0.12)
Figures in bracket represent corresponding figures of previous financial year.
298
25)
Secured Non-Convertible Debentures Series No. Amount Rs. in lacs as on 31.03.2006 0 0 0 0 0 0 0 0 0 0 0 2500 0 2500 0 5000 0 0 2500 2500 2500 0 0 2500 0 0 0 0 0 2500 1500 2500 0 1000 0 0 5000 7500 2500 1000 2500 5000 5000 6000 2500 5000 4000 2500 5000 2500 Amount Rs. in lacs as on 31.03.2005 2000 2000 2400 2000 1500 2000 1700 500 1000 1500 1000 2500 2000 2500 2500 5000 2500 2000 2500 2500 2500 500 1500 2500 2500 2000 1500 2500 2500 2500 1500 2500 1000 1000 1500 1000 5000 7500 2500 1000 2500 5000 5000 6000 2500 5000 4000 2500 5000 2500 Date of Allotment 16-Aug-02 18-Sep-02 03-Oct-02 23-Oct-02 25-Oct-02 07-May-03 20-May-03 22-May-03 10-Jun-03 10-Jun-03 10-Jun-03 04-Jul-03 07-Jul-03 08-Jul-03 01-Aug-03 05-Aug-03 10-Aug-03 25-Aug-03 27-Aug-03 10-Oct-03 10-Oct-03 15-Oct-03 15-Oct-03 07-Nov-03 13-Nov-03 14-Nov-03 14-Nov-03 08-Dec-03 24-Dec-03 01-Jan-04 07-Jan-04 01-Mar-04 17-Mar-04 24-Mar-04 26-Mar-04 05-Apr-04 16-Apr-04 16-Apr-04 16-Apr-04 19-Apr-04 20-Apr-04 30-Apr-04 03-May-04 28-Jun-04 07-Jul-04 07-Jul-04 28-Jul-04 28-Jul-04 30-Jul-04 03-Aug-04 Earliest Redemption Date
Series HU Series IG Series IQ Series IY Series IZ Series NC Series NJ Series NL Series NH-III-1 Series NH-III-2 Series NI Series OO Series OP Series OR Series OZ Series OY Series NS Series PI Series PJ Series QI-1 Series QI-2 Series QJ-1 Series QJ-2 Series QV Series QY Series QZ Series RB Series RK Series RR-2 Series RT Series RU-1 Series SP Series SR Series SW Series SX Series SV Series TG-I Series TG-II Series TH Series TI Series TJ Series TL Series TN Series TR-1 Series TT Series TZ Series UC Series UD Series UE Series UF
36 months from date of allotment 36 months from date of allotment 36 months from date of allotment 36 months from date of allotment 36 months from date of allotment 24 months from date of allotment 24 months from date of allotment 689 days from date of allotment 24 months from date of allotment 24 months from date of allotment 22 months from date of allotment 36 months from date of allotment 24 months from date of allotment 36 months from date of allotment 24 months from date of allotment 36 months from date of allotment 24 months from date of allotment 24 months from date of allotment 36 months from date of allotment 36 months from date of allotment 36 months from date of allotment 24 months from date of allotment 24 months from date of allotment 36 months from date of allotment 18 months from date of allotment 24 months from date of allotment 24 months from date of allotment 19 months from date of allotment 546 days from date of allotment 36 months from date of allotment 30 months from date of allotment 771 days from date of allotment 415 days from date of allotment 741 days from date of allotment 731 days from date of allotment 364 days from date of allotment 3 years from date of allotment 3 years from date of allotment 2 years from date of allotment 3 years and 11 days from date of allotment 3 years and 10 days from date of allotment 2 years from date of allotment 3 years from date of allotment 3 years from date of allotment 2 years and 36 days from date of allotment 3 years from date of allotment 2 years and 6 months from date of allotment 3 years from date of allotment 3 years from date of allotment 3 years from date of allotment
299
Series No.
Amount Rs. in lacs as on 31.03.2006 0 0 2500 0 1000 2500 1500 5000 5000 5000 2500 2500 2500 2500 2500 2500 2500 15000 5000 5000 5000 2000 5000 2500 5000 2500 2500 2500 3000 10000 1000 1000 500 5000 1900 1000 10000 2500 2000 5000 15000 7500 2900 2000 5000 1500 1000 1500 2500 2700 260000
Amount Rs. in lacs as on 31.03.2005 5000 5000 2500 2500 1000 2500 1500 5000 5000 5000 2500 2500 2500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 169100
Date of Allotment 07-Dec-04 07-Dec-04 08-Dec-04 08-Dec-04 17-Dec-04 17-Dec-04 17-Dec-04 17-Dec-04 23-Dec-04 12-Jan-05 12-Jan-05 13-Jan-05 17-Jan-05 27-Apr-05 27-Apr-05 27-Apr-05 27-Apr-05 16-May-05 24-May-05 24-May-05 24-May-05 15-Jun-05 14-Jun-05 24-Aug-05 24-Aug-05 24-Aug-05 20-Oct-05 20-Oct-05 28-Oct-05 10-Nov-05 11-Nov-05 11-Nov-05 11-Nov-05 16-Nov-05 29-Nov-05 02-Dec-05 06-Dec-05 08-Dec-05 15-Dec-05 29-Dec-05 03-Jan-06 10-Jan-06 10-Jan-06 23-Jan-06 24-Jan-06 06-Feb-06 06-Feb-06 13-Feb-06 17-Feb-06 17-Feb-06
Earliest Redemption Date
Series VI Series VJ Series VL Series VM Series VK-1 Series VK-2 Series VK-3 Series VK-4 Series VR Series VW-1 Series VW-2 Series VX Series VY Series EJ2005-1 Series EJ2005-2 Series EJ2005-3 Series EJ2005-4 Series EK2005 Series EL2005 Series EM2005 Series EN2005 SeriesEO2005 Series EP2005 Series EV2005 Series EV2005 Series EW2005 Series ER2005 Series ER2005 Series GI2005 Series GS2005 Series GW2005 Series GW2005 Series GW2005 Series GX2005 Series HR2005 Series HL2005 Series HV2005 Series IC2005 Series IE2005 Series IM2005 Series IP2005 Series IL2005 Series AB2006 Series AD2006 Series AC2006 Series AE2006 Series AE2006 Series AF2006 Series AG2006 Series AH2006 Total
364 days from date of allotment 364 days from date of allotment 2 years from date of allotment 364 days from date of allotment 730 days from date of allotment 730 days from date of allotment 730 days from date of allotment 730 days from date of allotment 3 years from date of allotment 3 years from date of allotment 3 years from date of allotment 3 years from date of allotment 3 years from date of allotment 730 days from date of allotment 730 days from date of allotment 730 days from date of allotment 730 days from date of allotment 1096 days from date of allotment 1096 days from date of allotment 1096 days from date of allotment 692 days from date of allotment 1096 days from date of allotment 1096 days from date of allotment 1096 days from date of allotment 1096 days from date of allotment 1096 days from date of allotment 1096 days from date of allotment 1096 days from date of allotment 595 days from date of allotment 914 days from date of allotment 913 days from date of allotment 913 days from date of allotment 913 days from date of allotment 546 days from date of allotment 553 days from date of allotment 549 days from date of allotment 370 days from date of allotment 579 days from date of allotment 634 days from date of allotment 125 days from date of allotment 1098 days from date of allotment 1098 days from date of allotment 604 days from date of allotment 464 days from date of allotment 128 days from date of allotment 455 days from date of allotment 455 days from date of allotment 455 days from date of allotment 458 days from date of allotment 580 days from date of allotment
300
26)
Unsecured Non-Convertible Debentures Series No. Amount Rs.in lacs as on 31/03/2006 2500 2500 1000 2500 8500 Amount Rs.in lacs as on 31/03/2005 0 0 0 0 0 Rupees in lacs Financial Year 2004 2005 13,281.26 349.59 74.26 1,504.21 873.55 343.83 44.50 3,845.60 20,061.04 Less : Depreciation u/s 350 of the Companies Act, 1956 Profit / Premium on Sale / Redemption of Long Term Investments 4.70 443.37 Total Managing Directors Remuneration and other Directors sitting fees Commission payable to the wholetime Directors @ 0.25% restricted to Commission payable to the non-wholetime Directors @ 1% restricted to 19,617.67 3.47 353.06 16,118.14 438.67 3,189.94 16,471.20 349.59 Date of Allotment Earliest Redemption Date
Series AI2005 Series AI2005 Series AJ2005 Series AK2005 Total 27)
27-Feb-06 27-Feb-06 27-Feb-06 28-Feb-06
88 days from date of allotment 88 days from date of allotment 87 days from date of allotment 86 days from date of allotment
Computation of Net Profit in accordance with Section 309(5) of the Companies Act, 1956 for the year ended on 31st March 2006. Financial Year 2005 2006 Profit before Taxation as per Profit and Loss Account Add: Depreciation charged in the Account Directors Remuneration including Directors fees Provision for non-performing assets (Net) Estimated Loss on Securitisation Provision for expenses on securitisation Loss on sale, etc. of Fixed Assets (Net) 438.67 87.07 2,519.02 457.91 334.22 8.71 16,215.44
46.32
34.36
16.75
20.90
24.00 87.07
19.00 74.26
28)
Previous years figures have been regrouped wherever necessary.
Signatures to Schedule I to XX
For B. K. Khare & Co. Chartered Accountants
Anand G. Mahindra Ramesh Iyer Bharat Doshi Anjanikumar Choudhari Uday Y. Phadke Dhananjay Mungale M.G. Bhide Nasser Munjee Piyush Mankad Pawan Goenka Mumbai, 27th April, 2006
Directors
301
Cash Flow Statement

Schedule A. CASH FLOW FROM OPERATING ACTIVITIES Profit before taxes and contingencies Add/(Less) : Non Cash Expenses : Depreciation incl. Lease equalisation Adjustment Amortisation of Intangible Assets Provision for non-performing assets (net) Employee Compensation Expense on account of ESOS Add/(Less) : Income considered separately : Income received on investing activities (Profit)/Loss on sale/Retirement of assets (Profit)/Loss on sale of Investment Income from Securtisation Operating profit before working capital changes Less : (Increase)/Decrease in interest accrued on Investments/others (Increase)/Decrease in Stock on hire (net) (Increase)/Decrease in Trade receivables (Increase)/Decrease in Loans & Advances (Increase)/Decrease in Leased assets (net) Add : Increase in Current liabilities Cash generated from operations Advance taxes paid NET CASH FROM OPERATING ACTIVITIES B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets Sale of fixed assets Purchase of Investments Sale of Investments Purchase of Oracle Software / Intangible Assets Income received on investments NET CASH FROM INVESTING ACTIVITIES CASH FLOW FROM FINANCING ACTIVITIES Issue of Preference Shares Issue of Equity Shares (net of issue expenses) Increase/(Decrease) in Bank borrowings (net) Increase/(Decrease) in long term borrowings (net) Increase/(Decrease) in short term borrowings (net) Increase/(Decrease) in Fixed Deposits (net) Proceeds from Securtisation Dividend paid NET CASH FROM FINANCING ACTIVITIES NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENT CASH AND CASH EQUIVALENTS AS AT: Beginning of the period End of the year * ** (II) (I+II) (I) Rs.in lacs March 2006 16,215.44 438.67 78.66 2,519.02 78.80 3,115.15 (780.76) 8.71 (4.70) (4,930.56) (5,707.31) 13,623.28 23.25 172.76 2,303.36 (201,784.55) 0.93 (199,284.25) 6,654.29 (192,629.97) (179,006.69) (6,064.35) (185,071.04) (185,071.04) (1,130.39) 65.79 (26,664.98) 532.39 (140.37) 800.36 (26,537.20) 0.00 25,272.84 11,501.52 95,410.00 37,591.00 (1,622.77) 51,097.16 (2,838.65) 216,411.10 4,802.86 6,609.63 11,412.49 Rs.in lacs March 2005 13,281.26 349.59 35.27 1,504.21 0.00 1,889.07 (143.98) 44.50 (3.47) (2,035.30) (2,138.25) 13,032.08 (12.42) 7597.46 2,403.02 (149,472.24) 170.40 (139,313.78) 3,177.20 (136,136.58) (123,104.50) (6,104.93) (129,209.43) (129,209.43) (949.55) 66.93 (3,678.52) 537.57 (73.19) 135.68 (3,961.08) 5,000.00 4,766.39 3,718.41 82,510.00 2,717.22 (669.44) 36,635.33 (2,527.78) 132,150.13 (1,020.38) 7,630.01 6,609.63
(A)
(B)
C.
(C) (A+B+C)*
**
Cash and Cash Equivalent does not include Term Deposits under lien for securitised debts. Balance of unutilised monies raised by issue of Equity shares considered as cash and cash equivalent.
As per our Report attached hereto

For B. K. Khare & Co. Chartered Accountants Anand G. Mahindra Ramesh Iyer Bharat Doshi Anjanikumar Choudhari Uday Y. Phadke Dhananjay Mungale M.G. Bhide Nasser Munjee Piyush Mankad Pawan Goenka Mumbai, 27th April, 2006
Directors

302
ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956. BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE
I. Registration Details Registration No. : Balance Sheet Date II. 1 3 Date Public Issue 1 Bonus Issue N III. Total Liabilities 4 Source of Funds Paid-up Capital 1 3 Application of Funds Net Fixed Assets 2 3 N 4 IV. 2 1 I 6 9 6 L 7 4 6 3 Total Expenditure 7 4 3 4 2 5 4 3 7 8 3 5 7 1 5 Investments Miscellaneous Expenditure Deferred Tax Asset (Net) Intangible Assets 1 4 N 1 2 I 7 2 L 9 7 8 9 7 6 6 Net Current Assets Accumulated Losses 3 4 3 8 3 3 1 6 4 8 0 7 1 Secured Loans Reserves & Surplus 5 3 9 9 9 9 4 2 7 5 0 6 7 1 Unsecured Loans 6 1 5 7 2 7 9 I L 0 0 0 0 0 1 1 5 0 Month 9 3 6 4 2 Year Rights Issue N I L 2 0 0 6 State Code : 1 1
Capital Raised during the Year (Amount in Rs. Thousands)
Private Placement 5 8 4 4 4
Position of Mobilisation and Deployment of Funds (Amount in Rs. thousands) Total Assets 4 6 1 5 7 2 7 9
Performance of Company (Amount in Rs. Thousands) Turnover 5 9 6 4 0 8
Profit/Loss Before Tax + 1 6 2 1 5 4 4
Profit/Loss After Tax + 1 0 8 2 7 2 4
Earning per Share in Rs. Basic 1 V. 4 . 5 9 1 4 Diluted . 4 1
Dividend Rate% 3 5
Generic Name of THREE Principal Product/Service of the Company (as per monetary terms) Item Code No. (ITC Code) Product Description N L H B L I O I I E L A R L A N E L S I P D N U I G R S C C H O A U S N E T I N G
Anand G. Mahindra Ramesh Iyer Bharat Doshi Anjanikumar Choudhari Uday Y. Phadke Dhananjay Mungale M.G. Bhide Nasser Munjee Piyush Mankad Pawan Goenka Mumbai, 27th April, 2006
Directors
303

1 Mah Subsidiary Anuual Report 05-06

Uploaded by

Copyright:

Available Formats

1 Mah Subsidiary Anuual Report 05-06

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

1 Mah Subsidiary Anuual Report 05-06

Uploaded by

Copyright:

Available Formats

Subsidiary Companies

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Directors Report to the Shareholders

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

For and on behalf of the Board Hemant Luthra Chairman

Mumbai, 27th April, 2006.

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Annexure 'A' to the Directors Report

Mumbai, 27th April, 2006.

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Pune, 27th April, 2006

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Annexure to the Auditors' Report

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Pune, 27th April, 2006

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Balance Sheet as at 31st March, 2006

53,984,720 254,376,501 308,361,221 553,261 14,000,000 2,300,000 11,700,000

53,984,720 192,921,467 246,906,187 31,007,080 14,100,000 900,000 13,200,000 291,113,267

Pune, 27th April, 2006

Mumbai, 27th April, 2006

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Schedule INCOME: Gross Sales .................................................................................

Less: Excise Duty ......................................................................

Less: Provision for Taxation

Excess Provision for current taxation for earlier years ....

Pune, 27th April, 2006

Mumbai, 27th April, 2006

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Cash Flow Statement

2005 Rupees 148,437,831

104,257,613 (31,286,440) 72,971,173

(6,830,117) 67,592 (85,738,111) 50,094,879 3,179,076 738,110 (38,488,571)

(37,706,651) 175,000 (107,343,973) 107,370,179 55,033,795 1,004,597 18,532,947

(30,453,819) (380,382) (30,834,201) 3,648,401

(87,973,263) (6,091,448) (94,064,711) (26,813,767)

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Pune, 27th April, 2006

Mumbai, 27th April, 2006

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Schedules forming part of the Balance Sheet as at 31st March, 2006

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

10,110,906 1,883,340 11,994,246 225,955,631 2006 Rupees

12,087,973 1,716,320 13,804,293 245,810,477 2005 Rupees

78,497,019 8,347,047 86,844,066 13,350,650 100,194,716 3,233,034 3,763,276 6,996,310 107,191,026

10,929,210 6,900,310 17,829,520 118,311,644 136,141,164 6,900,310 129,240,854

Less: Provision for Doubtful Debts ................

91,502 12,380,739 5,822,734 18,294,975

1,421,845 1,989,146 2,524,477 32,000 16,050,000 1,299,379 4,056,220 30,005,554

1,770,084 71,910 8,500 15,585 13,657 17,171,864 547,883 3,293,750 77,283,066

MAHINDRA ENGINEERING & CHEMICAL PRODUCTS LIMITED

Add: Consumption of Stores, Tools for Production

4,761,635 5,485,233 71,207,818

4,781,357 3,683,333 64,238,573

20052006 Rupees 380,382 380,382 20052006 Rupees 426,358

20042005 Rupees 6,091,448 6,091,448 20042005 Rupees 437,906

1,985,946 804,984 2,676,449 414,813 2,195,594 8,669,477

13,705,511 673,652 2,945,379 1,764,712 2,090,044 6,976,320

673,440 84,180 12,277 769,897

661,200 82,650 17,790 761,640