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Board of DirectorsVivek Chaand SehgalChairman
Toshimi ShirakawaDirector
Ram GanapatiDirector
Mohinder Singh GujralDirector
Hiroto MuraiDirector
Bimal DharDirector
Akihiko YamauchiWhole-Time Director
Maj. Gen. Amarjit Singh (Retd.)Director
Masahiro MatsushitaAlternate Director
Pankaj K. MitalAlternate Director
1
Founder Chairperson - (Late) Smt Swarn Lata SehgalChairman Emeritus - (Late) Sh. K.L. Sehgal
T O G E T H E R W E M A K E I T H A P P E N
Key InformationRegistered Office3rd Floor, Bhageria House43, Community CentreNew Friends ColonyNew Delhi – 110 065
Investor CellG.N. Gauba (Company Secretary)E-mail: [email protected]
AuditorsPrice WaterhouseChartered AccountantsP-1, Aditya Vihar,SaidulajabOpposite D-Block, SaketMehrauli Badarpur RoadNew Delhi – 110 030
BankersState Bank of IndiaICICI Bank Ltd.UTI Bank Ltd.Bank of Tokyo Mitsubishi Ltd.HDFC Bank Ltd.Citibank N.A.
CAUTIONARY STATEMENT: “Certain expectations and projections regarding future performance of the company referred to in this Annual Report may be “forward-looking” statements withinthe meaning of applicable securities law and regulations. These are statements which the management believes are true at the time of their preparation based on available data and informationand are subject to certain future events and uncertainties, which could cause actual results to differ materially from those anticipated in these forward-looking statements. Factors influencingforward-looking statements include the operating environment and foreign currency exchange fluctuations.”
MSSL Organisation
looking at mergers and acquisitions, particularly in theEuropean markets that are in line with our vision and holdgood potential. We have recently acquired two runningbusiness in Germany namely that of Reiner Präzision GmbHand G+S Kunststofftechnik GmbH.
The running business of Reiner Präzision GmbH formanufacturing precision machined components has beenacquired and placed under a new JV - Mothersonsumi ReinerGmbH. This JV specializes in manufacturing of precisionmachined components and is serving a niche in autocomponent industry.
G+S Kunststofftechnik GmbH is involved in manufacturingof injection moulded components. With this acquisition wehave also acquired technology for 2K moulding.
The above acquisitions bring with them newtechnologies and new customers (Tier 1suppliers to the European AutomotiveIndustry). Similar acquisitions in the futureare going to fuel inorganic growth of MSSL.While there is a possibility that we might missthe desired average in a particular year oreven exceed the same in another year, wewill remain focused on our Balance Sheetand on our return on capital at all times.
In the year 2000 we had targeted 30% oftotal sales to come from global customers,exports today amount to 29% of sales. Overthese years, we have strategically createda network of overseas manufacturingfacilities to serve our export customers. Bythe year 2010, we now envisage that 60%of our consolidated turnover will cater to the requirementsof our customers outside India. Overseas sales are poisedto be our major growth driver, while we will ensure that weremain our customers’ first choice in India.
Our major focus has been on European market. We havecreated a network of manufacturing locations andrepresentative offices. We have Injection Moulding andPrecision Machining facilities in Germany, Wiring Harness,Silicon Rubber Injection Moulding and Injection MouldingTool manufacturing facilities in Sharjah and Wiremanufacturing plant in Sri Lanka in addition to offices inSharjah, Singapore, Austria, Germany and UK and design& logistics centre in Ireland. We have a strong presence inwiring harnesses for 2-wheeler market in Europe with suppliesto major 2-wheeler manufacturers like Piaggio, Derbi, Ducati,
MBK, KTM and Yamaha. In addition to this we are alsofocusing on tier 1 & 2 suppliers as well as non-automotiveindustries. A significant contribution to exports comes fromsupplies to material handling and earthmoving equipmentsegments, where we are supplying to market leaders includingJC Bamford, NACCO Material Handling Group and MitsubishiCaterpillar Forklift Europe. We are also exporting to Japan,USA and Asian countries. Starting with export of rubbercomponents, we now export Wiring Harnesses, PlasticComponents and Assemblies, Rear Vision SystemComponents, Machined Metal Assemblies, RubberComponents and Injection Moulding Tools. In addition todirect exports, most of the JV companies are also exportingto their own collaborators like export of wiring harnessesto SWS Japan and SEWS Hungary, and rubber productsto WOCO, Germany.
In line with vision 2005, the largest customeris contributing to 27% of the consolidatedturnover. We now expect, by 2010, we willhave a customer profile where contributionfrom any individual customer in our turnovershall not be more than 20% of the totalturnover. Our approach will be to continueto service our existing customers andmarkets, and at the same time expand theoverall customer base/markets. We havereduced segmental dependence significantlyand have started serving different customersegments as discussed in the precedingsection. The Automotive Industry will remaina major segment, but within that we arenow serving the entire cross-section of theindustry and not only to a limited segment.
Applying the same approach to our product range, we arereducing dependence on any single product category. Froma near 100% dependence on wiring harnesses in the year1999-2000, now we have other product segments contributingto approximately 28 % of our turnover. Our effort will be toexpand all our product segments to an equitable levelaccording to their potential and have a more balanced productportfolio. This also brings us closer to our vision of being aglobally preferred systems solutions provider. The advantagesof this strategy are already visible from the fact that for certaincustomers, where we did not have a presence in wiringharnesses, we have attained the status of major supplier forplastic components and assemblies. The polymer division ofMSSL is a major supplier of plastic components, assembliesand modules to Ford India. It has also received the GlobalSupplier of the Year award for 2004 from General
3
We are settingan ambitious
target of makingMSSL a
Billion DollarCompany bythe year 2010
4
T O G E T H E R W E M A K E I T H A P P E N
Motors. Toyota also appreciated efforts of MSSL team by wayof Appreciation Award in recognition of Excellent Effort andCommitment in the area of Smooth Production Preparationfor the INNOVA PROJECT.
We have improved our performance on parameters of quality,cost, delivery, development and management. Our effortshave been recognized by our customers which reflects in thefact that in past 5 years we have received awards on overallbest performance, quality, delivery, cost and improvementsfrom our major customers as well as from our collaborators.
We had aimed at achieving a ROCE of 40%. We have beenable to achieve a ROCE of 39% in 2005. This is despite thefact that interest rates are comparatively down from the year2000 level. We will strive to maintain these levels of businessROCE though now we operate in many economies whereinterest rates are lower than India.
We had made a commitment to our investors that we willmaintain strong positive cash flows. We have pursued onlysustainable, profitable and positive cash generating businessin these five years. Going forward we will try to be even moreconsistent and generate enough free cash to cover dividendpayouts. Our philosophy is that net block should be funded outof net worth and not borrowing. In addition to the company’spolicy to reinvest the depreciation on replacements and upgradation of its facilities, we have added significant capacitiesacross our businesses over the last two years. While the amountof depreciation charged to company’s account will be sufficientfor maintenance of existing capacity, MSSL would continue tomake significant investments for creating additional capacitiesbased on its outlook for next 2-3 years. In order to finance thecapex as well as acquisitions and prepare for future growth,MSSL had appointed Nomura International (Hong Kong) Limitedand ICICI Securities Inc. as lead managers for issue of FCCB.I am pleased to inform you that the company has successfullysigned subscription agreement for issue of Euro 50.3 millions,Zero Coupon foreign currency convertible bonds which willhave a maturity of 5 years . This will be optionally convertibleat a conversion price of Rs 111.45 per share, at a premium of50% over the closing price of the shares of the company on7th July 2005. The foreign currency convertible bonds will carrya zero coupon rate with a yield to maturity of 4.8% per annumat the end of the tenure, if not converted into shares during thisperiod.
MSSL has been consistently improving its performance yearon year which raises the benchmarks for our futureperformance, putting pressure on us to improve further. Themarket has also acknowledged our performance by way ofenhanced valuation of our enterprise. I assure all the
stakeholders that we would continue to be driven by ourapproach to free cash and return on capital employed and notjust top line growth or asset creation. Our stated dividendpolicy of 40% payout of the company’s profits shall shift to40% of the consolidated profits by 2010.
We have set tough targets for ourselves for 2010. We willmaintain our customer focus. Our customers have been ourguiding force and most of our growth has been customerdriven. We will strive to develop newer and better productsand acquire new technologies to service our customers asFull System Solutions Provider. We are trying to create morevalue for our customers and become a single source formultiple products and services. This enhanced value will movebeyond conventionally supplied products to areas of engineeringsupport and technical services.
We have created a global network of facilities and supportfunctions that will form the foundation of our future growth. Ithas also given us the opportunity to create a truly internationalwork culture where people from different countries and cultureswill have a healthy interchange of ideas and workingmethodologies. It will also bring us more close to our customersin terms of their culture, language and approach.
Our relationships with our collaborators have grown fromstrength to strength. Starting from a technical assistance, wenow have three joint ventures with WOCO. Each of the JVs isdoing very well and contributing to the overall strength of theMSSL Group. Our relationship with our principal partner,Sumitomo Wiring Systems Ltd. (SWS), Japan has entered anew dimension. SWS has reaffirmed its commitment to Indiaand the importance it gives to its Indian operations by involvingMSSL in its operations on a global level. I feel privileged beingappointed as an Executive Officer of Sumitomo Wiring Systems,Ltd (SWS) by Board of Directors of SWS at the meeting heldon 28-6-2005. I am grateful to SWS management for havingso much faith in our partnership. This relationship built on trusthas become stronger and stronger in over 22 years of ourassociation. The opportunity to export back to our collaboratorsis a huge premium that we have over the others because theyare more willing to work with us as they are much more sureof quality, cost and delivery. We are thankful to our collaboratorswho have always supported us and helped us in our growth.
The world is looking at Indian businesses to outsource AutoComponents from India. We believe, we are at the right placeat the right time.
V. C. SehgalNoida, 9-7-2005
Consolidated
Net
Sal
esD
ivid
end
Payo
utPr
ofit
Bef
ore
Tax
/ P
rofit
Afte
r tax
Ave
rage
Ret
urn
onC
apita
l Em
ploy
ed /
Net
Wor
th
Stand-alone
Dividend to PA
T (%)
Dividend Amount Dividend to PAT
0%5%10%15%20%25%30%35%40%45%50%
Div
iden
d (R
s. in
Mill
ions
)
1999-00 2000-01 2001-02 2002-03 2003-04 2004-050
50
100
150
200
250
300
We would continue to be driven byour approach to free cash andreturn on capital employed and notjust top line growth or asset creation
MSSL : 2000 - 2005
5
1,5302,303
2,811 3,334
4,5725,536
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Rs.
in M
illio
ns 2,965
4,188
5,899
7,812
01,0002,000
3,0004,0005,0006,000
7,0008,0009,000
2001-02 2002-03 2003-04 2004-05
Rs.
in M
illio
ns0
1,0002,000
3,0004,0005,0006,000
7,0008,0009,000
PBT PAT PBT PAT2001-02 2002-03 2003-04 2004-05
192 27
1
291 41
3
681
850
621
485
290
170
165
160
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Rs.
in M
illio
ns
0
200
400
600
800
1000
1200
293 42
8
855
858
649
312
170
Rs.
in M
illio
ns
0
200
400
600
800
1000
1200 1,13
1
Net
wor
th/D
ebt (
Rs.
in M
illio
ns)
0
500
1000
1500
2000
2500
2001-2002 2002-2003 2003-2004 2004-20051999-00 2000-01 2001-02 2002-03 2003-04 2004-050%
10%
20%
30%
40%
50%
RO
CE/R
ON
W (%
)Div
iden
d (R
s. in
Mill
ions
)
0
500
1000
1500
2000
2500
Net Worth Debt Average ROCE Average RONWNet Worth Debt Average ROCE Average RONW
RO
CE/R
ON
W (%
)
1,60
9
2,20
0
948
1,13
8
1,23
8
955
742
1,00
9
39%40%
26%21%
45%47%
30%
18%
0%
10%
20%
30%
40%
50%
921
1,74
1
1,38
8
1,08
0
593
907
702
660
685
978
416
390
39%
37%
25%28
%
25%
39%
29%
22%
30%
40%
25%28
%
39%
29%30%
40%
26%
19%
78
268
177
132
4669
43%
36%
46%46%42%
29%
6
Financial Highlights
Rs. in Millions2002-2003 2003-2004 2004-2005 % Change
w.r.t Previous Yr.Sales - Net of Excise
Domestic 2,638.50 3,622.76 4,477.61 23.6%Export 695.85 948.93 1,057.90 11.5%Total Sales 3,334.35 4,571.69 5,535.51 21.1%
Profit Before Interest, Dep. & Tax (PBIDT) 710.85 982.85 1,133.78 15.4%Profit Before Tax (PBT) 412.69 681.03 849.99 24.8%Profit After Tax (PAT) 289.87 484.51 620.95 28.2%Equity Capital 156.59 156.59 234.89 50.0%Reserves and Surplus 923.41 1,231.26 1,506.07 22.3%Loan Funds 685.38 659.94 702.47 6.4%Earning Per Share* (EPS) - Rs. 1.23 2.06 2.64 28.2%Dividend (%) 75% 100% 100% 0.0%
MSSL: Stand-alone
*Figures have been recasted on present face value of Re. 1/- per share for 2002-03
T O G E T H E R W E M A K E I T H A P P E N
2002-03 2003-04 2004-05
Net Sales PAT
Net Sales & Profit After Tax
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Sale
s (R
s. in
Mill
ion)
0
100
200
300
400
500
600
700
800
900
1000
PAT (R
s. in Million)
290
4854,572
3,334
5,536621
Capital Employed & Average ROCE
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
RO
CE %
2002-03 2003-04 2004-05Net
Wor
th /
Loan
s (R
s. in
Mill
ion)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,00039%
37%
26%
1,08
0
1388
685 66
0
702
1741
Net Worth Loans ROCE %
Sales Profile
Ford7%
Honda siel5%
TKML5%
Piaggio4%
H.P.3%
Others39%
Maruti37%
2004-05Sales Domestic Vs Exports
Domestic81%
Exports19%
Financial Highlights
7
Rs. in Millions
2002-2003 2003-2004 2004-2005 % Change
w.r.t Previous Yr.
Sales - Net of Excise
Domestic 3,129.00 4,384.12 5,581.84 27.3%
Export 1,059.45 1,515.23 2,230.41 47.2%
Total Sales 4,188.45 5,899.35 7,812.25 32.4%
Profit Before Interest, Dep. & Tax (PBIDT) 769.34 1,203.91 1,501.71 24.7%
Profit Before Tax (PBT) 435.29 857.50 1,130.53 31.8%
Profit After Tax (PAT) 311.91 652.38 839.97 28.8%
Equity Capital 156.59 156.59 234.89 50.0%
Reserves and Surplus 982.06 1,452.30 1,964.79 35.3%
Loan Funds 742.49 954.62 1,238.18 29.7%
Earning Per Share* (EPS) - Rs. 1.33 2.78 3.58 28.8%
MSSL: Consolidated
*Figures have been recasted on present face value of Re. 1/- per share for 2002-03
Others36%
HondaSiel4%
NMHG5%
Woco6%
Hyundai12%
Ford6%
Maruti27%
TKML4%
Domestic71%
Exports29%
Sales Profile2004-05
Sales Domestic Vs Exports
Net Sales & Profit After Tax
2002-03 2003-04 2004-05
Net Sales PAT
4,188
5,899
7,812
312
840
652
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Sale
s (R
s. in
Mill
ion)
0
100
200
300
400
500
600
700
800
900
1000
PAT (R
s. in Million)
Capital Employed & Average ROCE
40%
26%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
RO
CE %
2002-03 2003-04 2004-05Net
Wor
th /
Loan
s (R
s. in
Mill
ion)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,00039%
1,13
8
1609
2200
955
1238
742
Net Worth Loans ROCE %
8
Management Discussion & Analysis
T O G E T H E R W E M A K E I T H A P P E N
The year 2004-05 has been another successful year foryour company. Almost all the segments of the companyhave shown good growth both in terms of turnover as wellas profitability.
MSSL Performance :
The performance of the business segments of the companyin the year 2004-05 are as follows:
Consolidated Sales
Product Group 2004-2005 2003-2004 % Increase
Wiring Harness, 5,647 4,211 34%Cords & Wires
Plastic Components 1,095 727 51%
Rubber Components, 1,070 961 11%Heat Sinks & Others
Total 7,812 5,899 32%
Stand-alone Sales
Product Group 2004-2005 2003-2004 % Increase
Wiring Harness, 4,162 3,186 31%Cords & Wires
Plastic Components 979 680 44%
Rubber Components, 395 705 (44%)*Heat Sinks & Others
Total 5,536 4,571 21%
(*Elastomer division transferred to a new JV)
Wiring Harness
MSSL has plants spread across the country at strategiclocations to efficiently service the requirements of itscustomers, producing over 3500 different types of harnesseswith an annual production of about 13 million nos. The salesof wiring harnesses (constituting over 70% of the consolidatedbusiness) grew by 34 % for the year on consolidated basisand by 31% on stand-alone basis over the previous year.
The sales of wiring harnesses in the Domestic Market grewby about 18 % for the year under review. MSSL hassuccessfully commenced manufacture and supply of wiringharnesses to Maruti Udyog Limited for its new model “Swift”,M&M for “Scorpio CRDi” and to Toyota Kirloskar Motor for“Innova”. In addition, the company’s joint venture KIML beganproduction of harnesses for “Getz” and “Elantra” for
Hyundai.The company’s growth was mainly contributedby higher sales to Honda Siel, Maruti, Hyundai Motorsand DCIL in the passenger car market and sales to HeroHonda and Honda Motor Cycle & Scooters in the twowheeler segment.
During the year Wiring Harness exports from India grewfrom Rs. 277 million to Rs 727 million including wiringharness exports of Rs 188 millions (previous year Rs 111millions) to our Joint Venture partner Sumitomo WiringSystems (SWS). The company’s increased exports fromIndia to Piaggio, Cummins and J C Bamford mainlycontributed to the company’s growth of exports. In additionto these, MSSL Mideast started exports of harnesses toSEWS, Hungary from its Sharjah plant.
During the year ending March 2005, the company hasexpanded its facilities at Noida with a new dedicated unit forexports. Due to the imbalance created by part implementationof VAT in a few states, the company is relocating some ofits facilities close to the customers. MSSL Mideast, a 100%subsidiary of MSSL, is adding another facility for manufactureof wiring harnesses to service increased shifting ofmanufacturing from Hungary to Sharjah. In line with thegrowth in the wiring harnesses capacities/requirements, thecompany has also expanded its wire manufacturing facilitiesby 33% approximately. The wire division will further expandthe capacity by over 25% by the year 2006-07.
During the year 2005-06, we expect to maintain our growthmomentum in the domestic market, apart from increasedexports to Europe from India as well as Sharjah.
Plastics
Motherson Automotive Technologies & Engineering (MATE),the plastic division of the company, which manufactures widerange of injection moulded components & assemblies, blowmoulded components, compression moulded door trims andintegrated modules, grew a healthy 44% during the year.We continue to work towards our strategy of increasing ourcontent per car. During the year 2004-05, the main growthof this division was contributed by Honda Siel, Ford Indiaand Hyundai Motors. The company started a new unit atChennai to cater to the requirements of Hyundai Motors andfor exports to GM Holden, Australia, that will commence inthe year 2005-06. During the year 2004-05, the companystarted supply of plastic parts to Hyundai for “Getz” & “Elantra”and Toyota Kirloskar Motor for “Innova”, in addition to supply
9
of parts (including large parts like Bumpers etc.), to Ford for“Fusion”. The division is now establishing its corecompetencies in manufacturing of large plastic parts as wellas in supply of body colour painted parts to OEM’s. Apartfrom giving a higher content in terms of value, this alsoenables MSSL to position itself as a Module Supplier to theCar Manufacturers. In addition to supplying products toautomobile manufacturer, it is making components andassemblies for other industries including white goodsindustry. It has established a unit at Pondicherry forsupplies to Whirlpool.
In addition to manufacture and supply of plastic componentsfrom units in India, the company’s subsidiary MSSL Mideastsupplied components to Ford Europe by getting the samemanufactured through contract manufacturing at Austria. Asan extension to this supply chain, MATE Chennai shall bemanufacturing parts for Ford Europe as a part of the contractawarded by Ford to MSSL Mideast.
MATE is expanding its facilities at Chennai to build capacityfor catering to increasing requirements of Ford India Limitedand also for export of components to Ford Europe. Asinformed last year, the division is also setting up facilities atManesar, which will become operational in this year. Thisdivision would continue to witness healthy growth. Duringthe year 2005-06, the company revenues are expected togrow on account of exports from India as well as supply ofadditional /new parts to Ford.
Rubber Components, Heat Sinks and others
On consolidated basis, this business segment has grownby about 11%. The main growth came from Automotive Mirrorsales as well as from higher exports of silicon rubber productsfrom Woco Motherson Ltd. (FZC), Sharjah.
As informed in last year’s Annual Report, the ElastomerDivision of the company was transferred to company’ssubsidiary – a joint venture named Woco MothersonElastomer Limited, hence the figures of this year are notstrictly comparable with last year on stand alone basis.Details of this business are discussed in the respectivecompanies under the Head “Joint Ventures” .
The sales of Rear View Mirrors, carried out through thecompany’s joint venture, Schefenacker Motherson Limited
grew from Rs 269 millions to Rs 412 millions, showing agrowth of 53 % over previous year.
The company’s Special Products Division which manufacturesHeat Sinks faced drop in off-take by its customer due toobsolescence of the models for which it was supplying theparts. Exports of heat sinks to HP amounted to Rs 189millions (Previous Year : Rs 273 millions), witnessed a dropof 31 % due to consolidation of this business. During theyear, the unit was re-located to a new unit and is now workingto increase its customer base.
Performance of Subsidiaries and Joint Ventures:
The summary of performance of company subsidiaries andjoint ventures is as follows:
Subsidiaries / Joint Ventures
Rs in Million)
Company MSSL Capital Gross Sales Profit After TaxHolding Employed
2004-05 2003-04 2004-05 2003-04
MSSL Mideast 100% 617.52 783.75 435.22 112.38 130.19(FZE) (+)
MSSL Ireland 100% 3.10 15.65 12.08 (3.7) (6.44)Pvt Ltd. (# +)
Motherson Electrical 100% 94.59 172.98 8.46 15.77 (6.64)Wires Lanka Private Ltd.(x)
Draexlmaier & 74%* 47.60 250.08 205.32 0.15 (3.03)Motherson ElectricalSystems India Ltd.
Motherson PUDENZ 56.10% 38.80 71.04 65.19 4.81 6.11WICKMANN Ltd.
MSSL Hag Toolings 53.30% 31.76 29.82 7.71 (4.46) (13.12)Ltd. (FZC) (# +)
Woco Motherson 50.01% @ 110.77 342.25 --- 19.39 ---Elastomer Ltd.
Kyungshin Industrial 50% 317.11 1584.06 1212.79 77.34 48.99Motherson Ltd.
Schefenacker 49% 133.81 472.99 307.54 54.27 18.78Motherson Ltd. (*)
Woco Motherson 33.33% 111.26 198.4 154.80 57.51 39.51Ltd. (FZC) (* # +)
* Year ended December 2004# Through MSSL Mauritius Holdings Ltd.+ Considering Parity at Euro = Rs 56.51 ( Previous Year 1 Euro = Rs 53.38)x Considering Parity at 1 Sr Rs = Rs 0.442 (Previous year 1 Sr Rs = Rs 0.4473)@ Represents transfer of Elastomer Division from MSSL w.e.f. 1-6-2004
10
T O G E T H E R W E M A K E I T H A P P E N
MSSL Mideast (FZE) - (Subsidiary)
The company is specializing in manufacturing of WiringHarnesses for Material Handling and Off-road Vehicles.During the year, the focus of the Company has been ongrowth in the automotive segment. During the year theCompany has successfully started supplies to SumitomoElectric Wiring Systems (SEWS) Hungary for meeting therequirements of European car manufacturer, pursuant tothe award of business under Global Production Policy(GPP) of Sumitomo Wiring Systems Ltd., Japan. TheCompany has also consolidated its position with the existingnon-automotive customers including NMHG, MCFE,Fritzmeier, Schneider, Claas and Ventrex.
During the year the Company has done exports of Euro13.87 Million (Previous year Euro 8.07 Million), recordinga growth of 72% and a Profit after tax of Euro 1.93 millionsas compared to Euro 2.44 millions in the previous year.There were substantial costs incurred for new businessadded during the year and the turnover from these businesswas not for the full year, thereby affecting the profits forthe year.
MSSL Mideast, strategically located at Sharjah, is the mainwindow and the manufacturing base for wiring harnesses,plastics and new products for the European Market. Thisbase supports the forward locations in the mainland Europe.As of now, MSSL Mideast and other joint ventures of MSSLin Sharjah employ approximately 500 personnel comingfrom India, Sri Lanka, Germany, Ireland and Australia.
Draexlmaier & Motherson Electrical SystemsIndia Limited (DMSIL) - (Subsidiary)
DMSIL is engaged in the manufacture of wiring harnessesand cockpit assembly with Daimler Chrysler India and JohnDeere as its customers. As reported in the last year’sAnnual report, Lisa Draexlmaier and MSSL examinedvarious options to reconstitute the JV and decided to haveTechnical Assistance Agreement with DAS - DraexlmaierAutomotive Systems GmbH for wiring harnesses suppliesto DCIL. MSSL has also purchased the entire holding heldby Lisa Draexlmaier ( 26% of the equity and Preferencecapital ), which has made DMSIL a 100% subsidiary of the
company. At the Board meeting held on 27-5-2005, theBoard decided to merge DMSIL into MSSL w.e.f. 1-4-2005,subject to necessary approvals. The financial performanceof this strategically important business would improve fromthe current year on account of operating advantages, oncethe merger is completed.
Motherson Electrical Wires Lanka Pvt. Ltd(MEWL) - (Subsidiary)
MSSL has set up a 100% subsidiary - Motherson ElectricalWires Lanka Pvt. Ltd. (MEWL), a wire manufacturing facility,in Sri Lanka. MEWL commenced commercial operationsin January'2004. In the first full year of operations (2004-05), the company did a turnover of Rs 173 millions, withProfit after Tax of Rs 15.77 millions. The plant is nowoperating at almost full capacity and we plan to expandthe capacity of this unit by 16 % in the current year.
MSSL HAG Toolings Limited (FZC) (MHTL)- (Subsidiary)
The company’s subsidiary, MHTL engaged in themanufacture of moulds at Sharjah, improved itsperformance, as compared to the previous year. Thecompany enhanced it product range by manufacturingmoulds up to 300 tonnes (earlier it manufactured mouldsup to 150 tonnes only ) and also commenced moulding ofplastic components to support MSSL Mideast for its plastic’scustomers. These operations will enable the group to offeran enhanced product range to its European customers.
Woco Motherson Elastomer Limited (WMEL)- (Subsidiary and Joint Venture)
Woco Motherson Elastomer Limited (WMEL), a joint venturebetween WOCO and MSSL, has taken over the ElastomerDivision of MSSL w.e.f. 1-6-2005. Presently, the companyis exporting most of its production to WOCO, Germany. InEuro terms, the exports from India to WOCO increasedfrom Euro 6.74 millions in 2003-04 to Euro 7.13 millions in2004-05, showing a modest increase of 6%, constrainedby the capacity at Noida plant. The exports to Woco areexpected to grow once the company’s third joint ventureWMART being set up at Kandla becomes operational.
Motherson PUDENZ WICKMANN Limited(MPWL) - (Subsidiary and Joint Venture)
Motherson PUDENZ WICKMANN Limited (MPWL is a JVbetween Wickmann Werke GmbH, Wilhelm Pudenz GmbH,Germany and Motherson Sumi Systems Limited). Thecompany is engaged in the business of manufacturingBlade Fuse Links and Fuse Holders for AutomotiveIndustry. Trading division of the company is engaged indistribution of Circuit Protection components and hasadded discrete Semiconductor products viz. Diodes,Rectifiers, Transistors & Mosfets to their product rangewhich find extensive usage in Electronics and Electricalindustry. The principals include Wickmann Werke, WilhelmPudenz and newly added M/s Taiwan Semiconductors.The growing product segments are Re-settable fuses andfuses for UPS and Invertor segment.
This year also saw merger of Heinrich Industrie AG (holdingcompany for Wickmann Werke and Wilhelm Pudenz) intoLittelfuse Inc., the world leader in circuit protection products.We are exploring new relationship and finding possibilitiesfor adding new products to this company.
Kyungshin Industrial Motherson Ltd. (KIML)-(Joint Venture)
Kyungshin Industrial Motherson Ltd. (KIML) is a joint venturebetween Kyungshin Industrial Co. Limited of South Koreaand Motherson Sumi Systems Limited. Kyungshin IndustrialCo. Limited is a leading manufacturer of integrated wiringharnesses in Korea and the major supplier to HyundaiMotors, Korea. During the year 2004-05, KIML's turnoverincreased to Rs 1357 millions from Rs 1044 millions andcorrespondingly PAT increased from Rs. 49 millions to Rs77 millions. The Board of Directors of KIML have proposeda dividend of 30% (previous year 20% ), subject to approvalof the shareholders.
During the year 2004-05, KIML has expanded itsmanufacturing facilities and consolidated the facilities bymerging the units into a new plant. This joint venture, beingdedicated to Hyundai Motors has built capacities in linewith customer’s growing requirements.
Schefenacker Motherson Ltd. (SML)- (Joint Venture)
A joint venture between MSSL and SchefenackerInternational, Germany, Schefenacker Motherson Ltd. is ablack box designer and manufacturer of Rear-VisionSystems for automobiles. The product range includesInterior and Exterior Automotive Mirrors (Manual, Remoteand Electric).
SML has consistently improved its performance. Duringthe calendar year 2004, this joint venture registered aturnover of Rs. 412 millions and PAT of Rs. 54 millions,showing a growth of 54% and 189% respectively over theprevious year. The operations of this joint venture have nowstabilized and would continue to perform at these levels.
Woco Motherson Ltd. (FZC) (WML)– (Joint Venture)
Woco Motherson Ltd. (FZC) is a joint venture of the SumiMotherson Group, and Woco Industrietechnik GmbH,Germany. Located in Sharjah Airport International Free Zone,WML specializes in Liquid Silicon Rubber Injection Moulding.The product range includes products for Automotive, Medicaland Kitchen Appliances, etc. During the calendar year 2004,WML recorded a turnover of Euro 3.51 million, a growth of22% over the previous year. We expect this joint venture tocontinue to perform well in future.
Woco Motherson Advanced RubberTechnologies Limited (WMART) - (Joint Venture)
WMART, a joint venture between WOCO and MSSL issetting up facilities for manufacturing of rubber and rubberto metal/plastic components at SEZ, Kandla. Consequentupon allotment of shares to WOCO and MSSL (for whichapplication money has been received in May 2005), theshareholding of WMART shall be held 2/3 by WOCO and1/3 by MSSL, though as on 31st March 2005 WMART is100% subsidiary of MSSL. The total investment on thisproject in Phase-I is estimated at Rs 320 millions and theunit is expected to commence commercial production inthe 2nd half of 2005-06.
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T O G E T H E R W E M A K E I T H A P P E N
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Support Subsidiaries Companies
MSSL together with its wholly owned subsidiaries hasincorporated overseas 100% subsidiaries, in addition to twoholdings companies, to support its international purchasingand facilitating communication with the market. The summaryof results of these subsidiaries is described below:
Figures in Rs / millions
Name of the Country Currency Investment Profitcompany of of by after tax
operation business MSSL as on
31-3-2005 2004-05 2003-04
MSSL Mauritius Mauritius Euro 29.67 9.01 14.20Holding Limited
MSSL GmbH Germany Euro 14.13 (0.23) -(subsidiary ofMSSL Mideast(FZE))
MSSL Handels Austria Euro 1.98 (1.47) (0.64)GmbH
MSSL GB Limited U.K. GBP 0.09 0.31 -(subsidiary ofMSSL Mideast(FZE))
MSSL(S ) Singapore SGD 2.68 0.08 (0.04)Pte Limited
MSSL Ireland Ireland Euro 2.83 (3.70) (6.44)Limited (Subsidiaryof MSSL MauritiusHoldings Limited)
Rates used for conversion
Euro 1= Rs 56.51(Previous year: Rs 53.38)Singapore 1 $ = Rs 26.81 (Previous Year: Rs 26.56)
GBP 1 = Rs 82.19
The Board would like to have on record the support extendedby these subsidiaries to MSSL and its other subsidiaries forachieving the growth.
ExportsConsolidated exports grew to Rs. 2230 millions as comparedto Rs. 1515 millions, growing at a healthy rate of 47%.Exports constitute almost 29% of the total sales of thecompany - close to our target set in year 1999-00 - “ To
achieve 30% of our sales from global customers by theyear 2005”.
Export Sales Rs in Million
Wiring RubberProduct Year harness, Plastic Components, TOTALGroup HT Cord Components Heat Sinks
& Wires & Others
2004-05 1,312 169 749 2,230
Consolidated 2003-04 680 73 762 1515
% increase 93% 131% (2%) 47%
2004-05 727 49 281 1,057
Stand alone 2003-04 277 46 625 948
% increase 162% 7% (55%) 11%
Out of the total exports of Rs 2230 million, 77% were Eurodenominated, 12% were US Dollar denominated, 8% wereJapanese Yen denominated and the balance were in otherconvertible currencies.
New Ventures/Initiatives
During the year 2004-05,MSSL Mideast (FZE), a whollyowned subsidiary of MSSL has incorporated a holdingcompany “MSSL GmbH” in Germany for the purpose ofholding investments in new companies / joint ventures to beincorporated/acquired in that region. MSSL GmbH has, inApril 2005, signed an agreement to form a joint venture“Mothersonsumi Reiner GmbH” (MSR ) with Reiner PräzisionGmbH who shall be holding 20% of the equity capital ofMSR. MSR has acquired the running business of ReinerPräzision GmbH w.e.f. 1st April 2005 – the annual turnoverof Reiner Präzision GmbH was Euro 6 millions p.a. and ismanufacturing machined parts for Tier 1 suppliers to theEuropean automobile manufacturers.
Customer Recognition
During the year 2004-05, MSSL & its Joint Ventures receivedGold Award for Quality from Honda Siel Cars India Ltd., threeawards from Maruti Udyog Ltd. (Suzuki) - Outstanding OverallPerformance, Award for Superior Performance Through Kaizenand Award for Cost Reduction Through VA / VE, the prestigiousGlobal Supplier of the Year Award from General Motors andOverall Best Performance Award from Hyundai Motors. Inaddition to this MSSL also received Quality Improvement
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Award from Sumitomo Wiring Systems Ltd. and award fromToyota for Excellent effort and commitment in the area ofSmooth preparation for the Innova project.
Cash Flow Analysis
(Rs. in millions)
MSSL MSSL -Consolidated
2004-05 % 2004-05 %
SOURCE OF CASH
Operating Profit Before 1,133 78% 1,506 76%Working Capital
Non - Operating Income 8 1% 1 0%
Refund of Loan From Subsidiary - - 18 1%
Increase in Debt 187 13% 402 20%
Proceeds from minority - - 53 3%
Share holders' 123 8% - -Consideration Received ontransfer of erstwhileElastomer Division
Total 1,451 100% 1,980 100%
APPLICATION OF CASH
Net Capital Expenditure 801 55% 1,015 51%
Increase in Working Capital 100 7% 255 13%
Net Debt Repayment 154 11% 180 9%
Investment in Subsidiaries 17 1% - -
Loan to Subsidiary 3 0% - -
Interest Charge & Lease Rental 24 2% 48 2%
Dividend Payout 2003-2004 176 12% 176 9%
Corporate Taxes 177 12% 222 11%
Total 1,452 100% 1,896 96%
Increase / (Decrease) In (1) 0% 84 5%Cash & Cash Equivalents
MSSL's payout for the year 2004-05 is proposed at 43% ofPAT v/s 36% of PAT in the previous year.
Capital Expenditure
MSSL had a cash outflow of approximately Rs. 1015 millions(net) on expansion/ setting up of new facilities during theyear 2004-05. On stand-alone basis, MSSL had a net outflow
of Rs. 801 millions on account of capital expenditure. Themajor break up of the investment is as follows:
Land & Building Rs 461 Mn
Plant & Machinery
- Wiring harness (including wire) Rs 116 Mn
- Plastics Rs 120 Mn
- Heat sinks & others Rs 8 Mn
- TOTAL Rs 244 Mn
During the year, new capacities have been set up acrossthe entire business portfolio. Wiring Harness Division hasshifted its export unit at Noida to new and larger premisesin order to meet the increased export volumes. The wireplant at Noida has been shifted to a new building and itsfacilities are being upgraded. MATE has also set up units atBangalore and Pondicherry (as stated earlier), apart fromthe 3rd plant at Chennai. The company’s subsidiary MSSLMideast has set up facilities for manufacture of wiringharnesses for exports to Hungary. Similarly, the company’sjoint venture, KIML has expanded its capacity for manufactureof wiring harnesses at Chennai. While the amount ofdepreciation charged to P/L account is sufficient towardsmaintenance capital expenditure, the company requiresadditional capital expenditure for expanding its capacity inadvance, prior to launch of the new vehicle models of itscustomers.
During the year 2005-06, the company would be makinginvestments in the following areas:
1. Setting up of new facilities for manufacture of wireharnesses as well as expanding and consolidatingthe current manufacturing plants to align with ourcustomers’ enhanced requirements as well as tooptimize resource utilisation in India.
2. Expansion of capacity for manufacture of wiringharnesses as well as adding plastic moulding facilitiesat MSSL Mideast, Sharjah.
3. Augmentation of wire manufacturing capacities atNoida and Sri Lanka
4. Setting up of new manufacturing facilities for PlasticMoulding at Haryana.
5. Setting up of a New Plastic Moulding and Higher LevelAssembly unit at Chennai for meeting the enhancedrequirements of our customers.
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T O G E T H E R W E M A K E I T H A P P E N
6. Facilities for manufacture of rubber components atWoco Motherson Advance Rubber Technologies(WMART)
The total investment on the above projects is estimated atRs 1000~1250 millions approximately.
In addition, MSSL is contemplating investments onimprovements and additional capacities for expanding thebusiness of the acquired companies.
At the Extra –Ordinary Shareholders meeting held on 7-5-2005, the shareholders have approved raising of long termfunds up to Rs 3000 millions.
Profits
Consolidated sales & Profit after Tax both grew by 32% ascompared to the last year. Standalone sales grew by 21 %to Rs. 5536 Million, while profit after tax grew 28% to Rs.621 Million over the previous year. Apart from achievinghigher internal efficiencies in all the divisions & subsidiaries,we benefited from the growth in the domestic automotivemarket and strengthening of the Euro internationally, thoughthere has been marginal impact of increases in raw materialcosts due to high oil and commodity prices. A large part ofcompany's exports is Euro denominated.
The company was able to reduce its finance costs significantlyby better working capital management & by taking advantageof low interest regime. Further, the interest costs for the year2004-05 were lower on account of one time add back of Rs4.9 millions approximately.
Our focus on cost reduction to remain competitive continues.While investments are being made for capacity expansion,we continue to remain a lean and flexible organization in linewith the business needs of an ever changing environment.
Internal Control Systems
The company has effective internal control systems,commensurate with its size covering all areas of operations.Auditors of the Company periodically review these systemsand suggested/desired improvements are implemented ona continuous basis.
Human Resources
All our employees/associates are an integral part of ourcompany and their involvement & participation is the keyto our success. Our company has endeavored toencourage maximum employee participation to create a“we” feeling through “in-office” as well as “out of office”activities like suggestion schemes, skill competition, sportscompetitions, painting competition for employee's children,celebration of festivals, annual day celebration, culturalactivities, picnics etc.
To carry this spirit forward, we have further strengthened theQuality Circle Movement by increasing the number of qualitycircles in MSSL to more than 60. Contributions of ourassociates/ employees are regularly appreciated at our in-house conventions. Our quality circles have also won awardsin competitions of Quality Circle Forum of India, ToyotaKirloskar Motor Supplier's association and ACMA QualityCircle Convention.
We as members of Motherson Sumi Systems Ltd. embarkedon the task of enhancing the technical skills and behavioralcompetencies of our employees to realize our organizationalgoals of delighting our customer, improving the quality of ourproduct and processes, enhancing productivity and reducingwasteful activities, thus reducing costs.
Environment, Health and Safety
MSSL is committed to protecting the environment and thehealth and safety of our people and those associated withus. We strive to be an environmentally responsible companyby developing safe, efficient and environmentally consciousproducts and manufacturing processes. A major eco-friendlymeasure undertaken has been the development of lead-freewires by the company. Most of the company’s facilities areISO -14001 certified.
Risks & Concerns
The company operates its business in two segments namelyAutomotive and Non Automotive. The domestic marketrevenues are largely dependent on the growth in the Indian
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Automotive market. All the segments namely, passenger car,commercial vehicles and two wheeler segments have grownin 2004-05. The following table shows the growth in thedomestic market:
Figures in Thousand (Nos)
Segment 2003-04 2004-05 % growth
Passenger Vehicles 1000 1215 21%
Commercial Vehicles 275 350 27%
Two Wheelers 5625 6527 16%
Source: SIAM
The cyclical nature of the automotive industry and the effectsof a slow-down in economic growth affect our performance.Global foreign exchange volatility and high crude oil pricesare a matter of concern for the company. To overcome thiswe are working on balancing our business portfolio andincreasing markets served by us. We are also aggressivelystepping up our export efforts by establishing a strong globalpresence, which will help us counter domestic cyclicality.
The presence of major global players in the industry in thedomestic market continues to keep competitive pressureshigh. We continue to work on streamlining the company,cutting costs and improving efficiency. With our intense focuson innovation, quality and customer satisfaction, we hopeto strengthen our position in the domestic market even aswe continue to grow overseas. Our established reputationas a world-class supplier of components, modules andintegrated systems and our long-standing customerrelationships gives us a competitive edge.
Non-automotive business constitutes around 14% of thegroups business and 9% of MSSL business. The businessmainly consists of export of Heat Sink components for theComputer Industry, Plastic Components for non-automotiveapplications, Wiring Harnesses for Material Handling & EarthMoving Equipments and other miscellaneous non-automotiveapplications. Non-automotive revenues have grown by 25%and 30% on consolidated and stand-alone bases respectively.This business is expected to maintain it's growth momentumin the coming years, but in view of the anticipated higher
growth of the automotive industry and the company's strongrelationships with passenger car manufacturers, the shareof non automotive business in the overall business of thecompany will continue to be at the same level and willcontinue to contribute to the profitability of the company.
Opportunities & Future Prospects
The discussion on Opportunities and Future Prospects hasbeen adequately covered in the preceding sections.
Shareholder Value
At MSSL, our goal is to become a globaly competitive playerin our chosen line of business.This will enable us to maintainour profitability and grow on a sustained basis. All ourendevours in future will continue to be guided by the principle
of creat ing and enhancing shareholder value.
Cautionary Statement
Certain statements made in the Chairman’s Review and ManagementDiscussions & Analysis Report relating to the company’s objectives,projections, outlook, expectations, estimates etc. may constitute ‘forwardlooking statements’ within the meaning of applicable laws and regulations.Actual results may differ materially from such expectations, projectionsetc. whether express or implied. Several factors could make significantdifference to the company’s operations. These include climatic conditions,economic conditions affecting demand and supply, government regulationsand taxations, natural calamities etc over which the company does nothave direct control.
Our Principal Partner
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Sumitomo Wiring Systems, Ltd. Japan
Established in1917,Sumitomo Wiring Systems
(SWS) has the second highest share in wireharnesses in Japan and the third highest worldwide
share in the market. Over a period of time, SWS has takenvarious initiatives to further expand its share of the global
market, climbing from 11% in fiscal 2002 and 12% in fiscal 2003to an anticipated 15% in fiscal 2005. The company’s
current revenues are Japanese Yen 373 billion with66 overseas affiliates spread over 28 countries.
SWS provides technical support to MSSL in the formof resident technical advisors, training of engineers &production personnel, manufacturing methodologies,Japanese manufacturing techniques, quality circleactivities, kaizen, collaborative design & development
and global benchmarking. SWS is aiming to realize at global level thebest quality at the most competitive cost, and production in optimum
locations. To achieve this goal, SWS conducts benchmarkingon three levels - company, plant and associates. This
global benchmarking has radically raised thecompet i t i ve env i ronment in
all levels.
POLAND
CANADAU.S.A.
MEXICO
BRAZIL
HUNGARY
TURKEY
ROMANIAITALY
UKGERMANY
FRANCE
SPAIN
INDIACHINA
VIETNAM
AUSTRALIA
THAILAND
JAPAN
SINGAPOREMALAYSIA
INDONESIA
MOROCCO
NETHERLANDSSLOVAKIA
PHILIPPINES
PORTUGAL
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T O G E T H E R W E M A K E I T H A P P E N
a Ensure Customer Delight
a Involve Employees as “Partners” in Progress
a Enhance Shareholder Value
a Set new standards in good corporate citizenship
Vision
Mission
Values
To be a Globally Preferred Solutions Provider
We are building a robust organisation that will help us consistelydeliver superior operating and financial results.
a Be a lean, responsive and learning organisation
a Continuously improve to achieve world-class standards andtotal customer satisfaction
a Proactively manage change
a Maintain high standards of integrity and safety
a Ensure a common culture and a common set of valuesthroughout the organisation
a Recognise individuals’ contribution
a Develop stronger leadership skills, greater teamwork and aglobal perspective
a Constantly upgrade the skill levels across the organisationthrough knowlege sharing programmes
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NOTICENOTICE IS HEREBY GIVEN THAT the Eighteenth Annual General Meeting of the members of Motherson Sumi Systems Limited will be held at FICCI Golden Jubilee Auditorium, Tansen Marg, New Delhi on Saturday the 20th day of August, 2005 at 11.00 a.m. to transact the following business:
AS ORDINARY BUSINESS :
1. To consider and adopt the Audited Balance Sheet as at March 31, 2005 and Profit and Loss Account for the year ended on that date and the reports of the Directors and Auditors thereon.
2. To consider declaration of dividend by the Company, as recommended by the Board of Directors for the year ended March 31, 2005.
3. To appoint a Director in place of Mr. M.S. Gujral who retires by rotation and, being eligible, offers himself for re-appointment.
4. To appoint a Director in place of Maj. Gen. Amarjit Singh (Retd.) who retires by rotation and, being eligible, offers himself for re-appointment.
5. To appoint Auditors of the Company to hold office up to the conclusion of next Annual General Meeting and to fix their remuneration.
AS SPECIAL BUSINESS :
6. To consider and if thought fit to pass with or without modification the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 198, 269, 309, read along with Schedule XIII or any other applicable provisions, if any, of the Companies Act, 1956 approval be and is hereby accorded to the reappointment of Mr. Pankaj Mital as Manager of the Company designated as Chief Operating Officer for a period till 31.03.07 w.e.f. 29th Janaury, 2005 on the following terms and conditions :
A. Salary :
Rs. 112,034/- per month w.e.f. 01.01.05 and Rs. 129,400/- per month w.e.f. 01.04.05. Chief Operating Officer shall also be entitled to Bonus as per the Company’s Rules.
B. Perquisites and Allowances :
Chief Operating Officer shall be entitled to perquisites and allowances like accommodation (furnished or otherwise) or House Rent Allowance in lieu thereof, medical reimbursement, leave travel concession for self and his family including dependants, other perquisites and amenities in accordance with the rules of the Company subject to overall ceiling on remuneration prescribed under Section 198 and 309 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956.
C. Provident Fund and Superannuation Fund etc.:
• Company’s Contribution to Provident Fund, Superannuation Fund or Annuity Fund to the extent these either singly or put together are not taxable under the Income Tax Act, 1961.
• Gratuity payable at the rate not exceeding half month salary for each completed year of service.
• Encashment of Leave at the end of tenure will be permitted in accordance with the rules of the Company.
• The Company shall provide a car for the use of Chief Operating Officer.
The above mentioned perquisites will not be included in the computation of the ceiling on remuneration.
D. Minimum Remuneration:
Notwithstanding anything herein, where in any financial year, during the currency of tenure of the Chief Operating Officer, the Company has no profits or its profits are inadequate in any financial year, the remuneration payable to him shall be governed by Section II of Part II of Schedule XIII of the Companies Act, 1956 or any statutory modification thereof.
By Order of the Boardfor MOTHERSON SUMI SYSTEMS LIMITED
Sd/-
Date : May 27, 2005 V.C. SEHGALPlace : Noida Chairman
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NOTES1. The relative Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 in respect of item 6 is annexed
hereto.
2. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO AP-POINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND A PROXY NEED NOT BE THE MEMBER OF THE COMPANY. Proxy must be deposited not later than 48 hours before the commencement of the meeting.
3. The Members / Proxies should bring their attendance slip, sent herewith, duly filled in, for attending the meeting.
4. Register of Members and Share Transfer Books of the Company will remain closed from 16.08.05 to 20.08.05 (both days inclusive).
5. The dividend on equity shares, if declared, shall be paid to those members whose names appear in the Register of Mem-bers of the Company as on 20.08.05, with respect of shares held in electronic form the dividend will be payable to the beneficial owners of the shares as on the closing hours of business on 13.08.05 as per details furnished by the Depositories for this purpose.
6. Pursuant to the provisions of Section 205A of the Companies Act, 1956, the amount of dividend which remains unclaimed for a period of 7 years would be transferred to the “Investor Education and Protection Fund (IEPF)”, constituted by the Central Government and the shareholder(s) would not be able to claim any amount of dividend so transferred to the Fund.
7. The proposed date for the transfer of dividend by the Company for the year 1997-1998 to IEPF is 8th September, 2005.
8. Payment of Dividend through ECS:
Members holding shares in physical form are advised to submit particulars of their bank account, viz., name and address of the branch of the bank, 9 digit MICR code of the branch, type of account and account number to MCS Limited at SriVenketash Bhavan, W-40 Okhla Industrial Area Phase – II, New Delhi – 110 020.
Members holding shares in demat form are advised to inform their particulars of their bank account to their respective depository participant.
9. The members are requested to:
a) Quote their folio number while corresponding with the Company.
b) Notify any change in their registered address immediately.
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EXPLANATORY STATEMENT(Pursuant to Section 173(2) of the Companies Act, 1956)
Item No. 6 : The Board of Directors of the Company in their meeting held on 27th January, 2005 have approved the reappointment of Mr. Pankaj Mital as Manager of the company designated as, Chief Operating Officer of the Company for a period till 31.03.07 and an increase in remuneration payable to him as mentioned hereunder :
A. Salary :
Rs. 112,034/- per month w.e.f. 01.01.05 and Rs. 129,400/- per month w.e.f. 01.04.05. Chief Operating Officer shall also be entitled to Bonus as per the Company’s Rules.
B. Perquisites and Allowances :
Chief Operating Officer shall be entitled to perquisites and allowances like accommodation (furnished or otherwise) or House Rent Allowance in lieu thereof, medical reimbursement, leave travel concession for self and his family including dependants, other perquisites and amenities in accordance with the rules of the Company subject to overall ceiling on remuneration prescribed under Section 198 and 309 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956.
C. Provident Fund and Superannuation Fund etc.:
• Company’s Contribution to Provident Fund, Superannuation Fund or Annuity Fund to the extent these either singly or put together are not taxable under the Income Tax Act, 1961.
• Gratuity payable at the rate not exceeding half month salary for each completed year of service.
• Encashment of Leave at the end of tenure will be permitted in accordance with the rules of the Company.
• The Company shall provide a car for the use of Chief Operating Officer.
The above mentioned perquisites will not be included in the computation of the ceiling on remuneration.
D. Minimum Remuneration:
Notwithstanding anything herein, where in any financial year, during the currency of tenure of the Chief Operating Officer, the Company has no profits or its profits are inadequate in any financial year, the remuneration payable to him shall be governed by Section II of Part II of Schedule XIII of the Companies Act, 1956 or any statutory modification thereof.
The terms of remuneration specified above are now being placed before the Members in General Meeting for their approval.
Mr. Pankaj Mital is a Science Graduate and Post Graduate in Management. He has been associated with the Company for the last 15 years and the Company has benefited immensely from his wide and varied experience. Mr. Pankaj Mital is a director of other Companies as mentioned hereunder :
• Schefenacker Motherson Limited • Saks Ancillaries Limited • Motherson Engineering Research & Integrated Technologies Limited • Motherson Innovative Technologies & Research • MSSL Ireland Pvt. Ltd. • MSSL Mideast (FZE)
24
Committee Memberships of other Companies:
• Schefenacker Motherson Limited - Audit Committee Mr. Pankaj Mital may be deemed to be interested in the resolution.
The resolution approving the reappointment and an increase in remuneration payable to Mr. Pankaj Mital shall be open to the inspection of any member of the Company at the Registered Office of the Company during public hours on any working day of the Company. Your Directors recommend the passing of the resolution. Except Mr. Pankaj Mital none of the Director is interested in the resolution.
By Order of the Boardfor MOTHERSON SUMI SYSTEMS LIMITED
Sd/-Date : May 27, 2005 V.C. SEHGALPlace : Noida Chairman
25
DIRECTORS’ REPORT
To the Members,
Your Directors have pleasure in presenting Eighteenth Annual Report together with the audited accounts. Key financial figures on the profitability for the year ended 31st March, 2005 are as follows:
FINANCIAL PERFORMANCE(Rs. in Millions)
For the year ended For the year ended March 31, 2005 March 31, 2004
Gross Sales 6,368.70 5,218.77 Net Sales 5535.51 4,571.69 Gross Profit before Depreciation, Interest & Tax 1133.77 982.86 Less: Depreciation 264.22 268.67 Less: Interest 19.57 33.16 Profit before tax 849.98 681.03 Less: Provision for Taxation 229.04 196.52 Profit after Tax 620.94 484.51 Add: Balance brought forward 596.77 388.92 Net Profit available for appropriation 1,217.71 873.43
Appropriations :
March 31, 2005 March 31, 2004
Proposed Dividend 234.89 156.59 Tax on Dividend 32.94 20.06 Transfer to General Reserve 150.00 100.00 Balance carried to Balance Sheet 799.88 596.77
PERFORMANCE OF OPERATIONS
The Company recorded a turnover of Rs. 5,535.51 millions as against Rs. 4,571.69 millions during the year 2004-2005 and Profit After Tax of Rs. 620.94 millions as against Rs. 484.51 millions during the previous year. The company’s performance is discussed at length in Management Discussion and Analysis, which forms part of the Directors report.
DIVIDEND
Your Directors have recommended a dividend of Re. 1.00 per share for the year ended 31.03.05. The dividend, on approval by shareholders, will be paid to those shareholders whose names appear in the register of members as on 20.8.2005 The total cash outgo on account of proposed dividend (inclusive of tax on dividend) is Rs. 234.89 millions (Previous Year Rs. 176.65 millions) which represents 43% of the Profit After Tax.
BONUS SHARES
During the year under review, the company has issued bonus shares in the proportion of one share against two shares held.
CONSOLIDATED FINANCIAL STAEMENTS
In accordance with the Accounting Standard AS -21 on Consolidated Financial Statements read with Accounting Standard AS – 23 on Accounting for Investments in Associates and AS –27 on Financial Reporting of Interests in Joint Venture in Consolidated Financial Statements, your Directors have pleasure in attaching the Consolidated Financial Statements which form part of the Annual Report. The summary of consolidated results is as follows :
26
(Rs. in Millions)
For the year ended For the year ended March 31, 2005 March 31, 2004
Gross sales 8827.25 6,681.88 Net Sales 7812.25 5,899.35 Profit before Interest, depreciation 1501.70 1,203.91 Share of Profit in Associate 3.52 2.54 Profit before Tax 1,130.54 857.50 Provision for Tax 272.25 208.48 Profit after Tax 858.29 649.02 Minority Interest 18.32 (3.36) Profit after Tax and Minority Interest 839.97 652.38
The performance of the Company on consolidated basis is discussed at length in Management Discussion & Analysis.
FINANCE
The Company continues to enjoy “A1+” rating by ICRA for its Commercial Paper/ Short Term Debt programme of Rs. 500 million (previous year Rs. 350 million).
POST BALANCE SHEET DEVELOPMENTS
The company has signed Technical Assistance Agreement with DAS Draxlmaier Automotivsysteme Gmbh, Germany for providing technical know how to the company for manufacture of wiring harnesses for Daimler Chrysler India Limited. The company has also purchased the entire equity and preference shares ( 26% ) held by Lisa Draexlmaier in Draexlmaier & Motherson Electrical Systems India Limited (DMSIL), consequently, DMSIL has become 100% subsidiary of the company. At the Board Meeting held on 27.5.2005, the Board decided to merge DMSIL into the company (subject to necessary approvals),which will give operating advantages to both the companies.
The Company’s subsidiary, MSSL Gmbh has incorporated subsidiary Mothersonsumi Reiner Gmbh ,which has purchased the running business from Reiner Gmbh, Germany. Reiner Gmbh was engaged in the manufacture of machined precision parts and the annual turnover of the company was Euro 6 million.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO
Particulars required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are annexed hereto in Annexure ‘A’.
PARTICULARS OF EMPLOYEES
As required by the provisions of Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees are set out in the Annexure B to the Directors’ Report.
MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis is enclosed and forms part of the Director’s Report.
EXPORTS
The company’s exports have grown from Rs. 948 millions in 2003-04 to Rs. 1,057 millions in 2004-05. On consolidated basis, the exports have grown by 47% from Rs. 1,515 millions in 2003-04 to Rs. 2,230 millions in 2004-05. The company has set up representative office in Germany to explore further possibilities of exports in that region. The company’s exports efforts and strategies are discussed at length in Management Discussion & Analysis.
27
SUBSIDIARIES / JOINT VENTURES
The Company has the following 100% subsidiaries viz. MSSL Mideast (FZE), MSSL Mauritius Holding Limited, MSSL Handles (GmbH), Motherson Electrical Wires Lanka Pvt. Ltd., MSSL Hag Toolings Ltd. (FZC) (through MSSL Mauritius), and MSSL Ireland Pvt Limited (through MSSL Mauritius), MSSL(S) Pte Ltd., MSSL (GB) Ltd.(subsidiary of MSSL Mideast), joint ventures subsidiaries viz. Draexlmaier Motherson Electrical Systems India Ltd., WOCO Motherson Elastomer Limited and WOCO Motherson Advanced Rubber Technologies Limited and Motherson PUDENZ WICKMANN Ltd. As per Section 212 of the Companies Act, 1956, your Company is required to attach the directors report, balance sheet and profit and loss account of these subsidiaries. The Company applied to the Central Government for an exemption from such attachment as it presents the audited consolidated accounts of the Company and its subsidiaries in its annual report. The Central Government has granted exemption with respect to the above mentioned subsidiaries. The accounts of MSSL Gmbh, subsidiary of MSSL Mideast (FZE) which is also subsidiary of your company are enclosed.
The annual accounts of the subsidiary companies, along with related information shall be available for inspection at the registered office of the Company and that of the subsidiary company during working hours on any working day.
Any shareholder of the Company / its subsidiaries interested in obtaining the annual accounts of the subsidiaries may write to the Secretary at the Registered Office of the Company.
The performance of the subsidiaries and joint ventures are discussed at length in Management Discussion and Analysis.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors confirm :
a) That in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departure have been made for the same;
b) That they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;
c) That they have taken proper and sufficient care 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;
d) That they have prepared the annual accounts on a going concern basis.
DIRECTORS
Mr. M.S. Gujral and Maj. Gen. Amarjit Singh (Retd.) retire by rotation and being eligible, offer themselves for reappointment at the ensuing Annual General Meeting.
CORPORATE GOVERNANCE
A separate section on Corporate Governance forming part of the Director’s Report and the certificate from the company’s auditors confirming compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement is included in the Annual Report.
AUDITORS
M/s. PriceWaterhouse, Chartered Accountants, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment. The Company has received a certificate from them pursuant to Section 224(1B) of the Companies Act 1956, confirming their eligibility for re-appointment.
FIXED DEPOSITS
The Company has neither invited nor accepted any deposits from the public during the year. There is no unclaimed or unpaid deposit lying with the Company.
28
LISTING
The shares of your Company are listed at Delhi Stock Exchange, Mumbai Stock Exchange, Ahemdabad Stock Exchange and National Stock Exchange. The listing fees for the year 2005-2006 have been paid well before the due date i.e. 30th April, 2005.
ACKNOWLEDGEMENT
Your Board of Directors would like to place on record their sincere appreciation for the whole hearted support and contributions made by all the employees of the Company, as well as, Customers, Suppliers, Bankers, Governments of Delhi, Haryana, Uttar Pradesh, Maharashtra, Tamilnadu and Karnataka towards the conduct of the efficient operations of your Company. Last but not the least the Board of Directors wish to thank the shareholders of the Company and the Collaborators Sumitomo Wiring Systems Limited and Sojitz Corporation, Japan for their unstinted support.
for and on behalf of the Boardfor MOTHERSON SUMI SYSTEMS LIMITED
Date : May 27, 2005 V.C. SEHGALPlace : Noida Chairman
29
ANNEXURE ‘A’
PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURES OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988
A. CONSERVATION OF ENERGY
The Company took various steps for energy conservation during the year :
I. Optimized the lux levels by reducing the number of lights in non productive areas like staircases, walkways and rest areas, based on the energy audit findings.
II. Usage of occupancy sensors in the meeting rooms to switch off the lights when not in use. III. The power factor is being monitored and controlled on daily basis. IV. Auto switching off of the lights and fans on the shop floors during tea and lunch breaks. V. Auto switching of water pumps through water level controllers on the water tanks. VI. Redistribution of the generators and Air Compressors across the manufacturing units to optimize their usage and
get better Standard Fuel Consumption.
B. TECHNOLOGY ABSORPTION
FORM ‘B’
Form for disclosure of particulars with respect to:
RESEARCH AND DEVELOPMENT
Specific area in which R& D carried out by the Company: The Company has been continuously working towards enhancing its research & development capabilities. The company
has been keeping pace with the technological advances by implementation of state of art integrated software for designing wiring harnesses.
The Company has worked very hard to meet the customer requirements by developing and providing the products, which are free of lead, chromium (hexavalent), mercury, asbestos and other non-eco friendly materials.
The Company has also introduced new range of latest technology components in the wiring harnesses thereby enhancing expected reliability and life of the electrical systems.
The Company has also introduced new processes of joining the wires using resistance welding technique, which again has enhanced the reliability of whole electrical distribution system in the automobile.
The Company has successfully launched the new range of harness for office automation and medical equipments and hence replaced the import of these harness with locally developed product.
Benefits derived as a result of above R&D
The benefits derived as a result of above research and development programmes are:
Standardization of products and process across all the manufacturing locations resulting in increased products reliability and manufacturing flexibility.
Centralized databank for ready access to wide product information, thereby enabling faster product development.
Future plan of actions:
30
All the products being developed/designed will be integrated with Capital H/IHS wiring harness softwares. These softwares integrate with the global wiring harness design/development standards/technology.
Expenditure on R&D for the year ended March 31, 2005
The company incurred revenue expenditure of Rs 9.42 millions (0.17% of the sales) and NIL capital expenditure during the year 2004-05.
TECHNOLOGY ABSORPTION , ADAPTATION AND INNOVATION The Company has made major efforts to enhance the technological base of its operations during the year. The Company
has been absorbing technology sourced from Sumitomo Wiring Systems, Japan, on an on going basis.
The Company has successfully developed and implemented the latest manufacturing technologies in the field of wiring harnesses. This year the company has successfully introduced the waterproofing of splice joints, Compact Point Guide Testers, Pressure / Vacuum test of sealed connectors, multiple board indexing conveyors and new associate training equipments etc. These technologies have given a substantial boost to the productivity and quality of the product.
1. Activities relating to export, incentives to increase exports & developments of new export markets.
The company has continued to maintain focus and avail of export opportunities based on economic consideration. The company has set up offices in Europe who regularly collect the information from the potential customers. The
company has recently set up a representative office in Germany. The company has set up additional facilities in EOU’s by adding new location to service its customers. During the year, the company has done exports (FOB value) worth Rs. 1,032 millions.
2. Total foreign exchange used and earned (Rs. in Millions) Foreign exchange earned Rs 1,040.35
Foreign exchange used Rs 1,498.47
31
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32
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32
REPORT ON CORPORATE GOVERNANCE
The Directors present the Company’s Report on Corporate Governance.
Company’s Philosophy on Corporate GovernanceAt MSSL, we are committed to the key elements of Corporate Governance- transparency, disclosure and independent supervision to ensure that all functions of the Company are discharged in a professionally sound, competent and transparent manner.
Board of DirectorsThe Board presently consists of a majority of non-executive/ independent directors, who are eminent professionals with experience in business/finance/public enterprises.
Name of the Director Executive/Non- Other Committee Committee Executive/Independent Directorships Memberships Chairmanships held*
Mr. V. C. Sehgal Non-Executive Chairman 14 4 1 Mr. Toshimi Shirakawa Non-Executive Director 2 1 NILMr. R. Ganapati Independent Director 1 2 1 Mr. M. S. Gujral Independent Director 4 6 3 Mr. Hiroto Murai Non-Executive Director 2 NIL NIL Maj. Gen. Amarjit Singh (Retd.) Independent Director 2 2 NIL Mr. Bimal Dhar Non Executive Director 6 2 NIL Mr. A. Yamauchi Executive/Whole-time Director 3 2 NIL Mr. Masahiro Matsushita (Alt. Director to Mr. Hiroto Murai) Non-Executive Director 1 NIL NIL Mr. Pankaj Mital(Alt. Director to Mr. Bimal Dhar) Executive/ Chief Operating Officer 3 1 1
*Excluding private and foreign companies
Attendance at Board Meetings and Annual General MeetingThe Board of Directors of the Company meets atleast once a quarter to review the quarterly results and other items on the agenda, and also at the time of the Annual General Meeting of the Company. The Board of Directors of the Company met ten times during the last financial year : (i) 23rd April, 2004 (ii) 28th May, 2004 (iii) 22nd July, 2004 (iv) 18th September, 2004 (v) 28th October, 2004 (vi) 22nd November, 2004 (vii) 7th January, 2005 (viii) 27th January, 2005 (ix) 3rd March, 2005 (x) 31st March, 2005. The Company placed before the Board the annual operating plans, performance of various units/ divisions and all statutory and other significant information to enable it to discharge its responsibilities of strategic supervision of the company and as trustees of stakeholders.
Name of the Director No. of Board Meetings Attended Attendance at last AGM
Mr. V. C. Sehgal 8 Yes Mr. Toshimi Shirakawa 2 YesMr. R. Ganapati 4 YesMr. M. S. Gujral 9 NoMr. Hiroto Murai 3 YesMaj. Gen. Amarjit Singh (Retd.) 10 YesMr. Bimal Dhar 6 Yes Mr. A. Yamauchi 10 YesMr. Masahiro Matsushita(Alt. Director to Mr. Hiroto Murai) 7 YesMr. Pankaj Mital(Alt. Director to Mr. Bimal Dhar) 8 Yes
33
Remuneration of Directors
Details of the payments made to the directors for the year ended March 31, 2005 are as follows :
Name of the Director Gross Remuneration Sitting Fee* Total (Rs.) (Rs.) (Rs.)
Mr. R. Ganapati - 1,20,000.00 1,20,000.00Mr. M. S. Gujral - 60,000.00 60,000.00Maj. Gen. Amarjit Singh (Retd.) - 55,000.00 55,000.00Mr. A. Yamauchi 32,09,911.00 - 32,09,911.00Mr. Pankaj Mital 21,87,187.00 - 21,87,187.00
*Includes sitting fees paid for Committee Meetings
Audit CommitteeThe members of Audit Committee met thrice during the financial year 2004 - 2005 and the Committee reviewed the half-yearly and annual financial statements before submission to the Board. The dates on which the meetings were held are as follows :(i) 28th May, 2004 (ii) 18th November, 2004 (iii) 3rd March, 2005The Audit Committee of the Company comprises of majority of independent directors and the composition and attendance of each member of the Committee is given below :
Name Designation Non executive/Independent Committee Meetings Attended
Mr. R. Ganapati* Member Independent/ Non Executive 2 Mr. Toshimi Shirakawa Member Non Executive NILMr. M.S. Gujral** Chairman Independent/ Non Executive 3Maj. Gen. Amarjit Singh Member Independent/ Non Executive 1 (Retd.)***
* Mr. R. Ganapati was a Chairman till 27.01.05.** Mr. M.S. Gujral became the Chairman of the Audit Committee w.e.f. 27.01.05*** Maj. Gen. Amarjit Singh (Retd.) became a member w.e.f. 27.01.05The term of reference of the Audit Committee includes the following:a) To hold periodic discussions with the Statutory Auditors and Internal Auditors of the Company concerning the accounts
of the Company, internal control systems, scope of audit and observations of the Auditors/ Internal Auditors.b) To review compliance with internal control systems.c) To review the half-yearly and annual financial results of the Company before submission to the Board.d) To investigate into any matter in relation to items specified in section 292A of the Companies Act, 1956 or as may be
referred to it by the Board and for this purpose to seek any relevant information contained in the records of the Company and also seek professional advice, if necessary.
e) To review the Company’s financial and risk management policies.f) To investigate into any matter in relation to items specified in section 292A of the Companies Act, 1956 or as may be
referred to it by the Board and for this purpose to seek any relevant information contained in the records of the Company and also seek professional advice, if necessary.
g) To review the Company’s financial and risk management policies.
Investors Grievance Committee
The Company has an Investors Grievance Committee which looks into shareholders and investors’ grievances. The following are the members of the Committee:
Name Designation Executive/Non-executive/Independent
Mr. R. Ganapati Chairman Independent/Non-executive Mr. M.S. Gujral Member Independent/Non-executiveMr. A. Yamauchi Member Executive
Mr. G.N. Gauba, the Company Secretary, is the Compliance Officer.
34
Share Transfersl All shares have been transferred and returned in about 20 days from the date of receipt, so long as the documents have
been clear in all respects.l The Share Transfer Committee meets normally once in a fortnight.l Total number of shares transferred during the year 2004 - 2005 was 138,484 compared to 35,548 during 2003 - 2004.l As on 31st March, 2005, there are NIL equity shares pending for transfer.
Investor Relations46 complaints relating to the non-receipt of shares after transfer, non-receipt of dividend etc. were received. Complaints received during the year have been cleared within the financial year except in cases that are constrained by disputes.The complaints are generally replied within 10 days from their lodgment with the Company.
Particulars of the Past three AGMs
AGM Date Time Venue No. of Special Resolutions passed
15th 05.09.02 11.00 A.M. Shah Auditorium, Delhi 2 16th 17.09.03 10.30 A.M. Shah Auditorium, Delhi 1 17th 18.09.04 11.00 A.M. FICCI Golden Jubilee NIL Auditorium, New Delhi
Postal BallotThe Company had sought the approval of the shareholders for creation of charges, mortgages, hypothecations on the movable and immoveable properties of the Company to secure the facilities sanctioned to the Company and/ or its subsidiaries.
Note on Director’s reappointment
a. Mr. M.S. Gujral aged about 81 years, is a Retd. Senior Government Officer, and has held the position(s) of Chairman - Coal India Ltd., Advisor - Planning Commission, Member - Public Enterprises Selection Board and Chairman - Railway Board. Mr. M.S. Gujral is on the Board of Directors since December, 1992.
He is on the Board/ Committee’s of the following companies namely : 1) Monnet Ispat Limited 2) Monnet Sugar Limited 3) BESCO Limited 4) MothersonSumi INfotech & Designs Limited
Committee Memberships - Audit Committee 1) Monnet Ispat Limited 2) BESCO Limited 3) MothersonSumi INfotech & Designs Limited - Chairman
b. Maj. Gen. Amarjit Singh (Retd.), is a mechanical engineer and a post graduate in Business Management. He joined MSSL’s Board after 7 years with the Group, handling a senior Corporate Management function.
Earlier after his retirement from the Indian Army, where he was awarded the Vishishta Seva Medal (VSM) for his distinguished services, he worked as CEO of an auto electrical company in Northern India for five years.
He is on the Board of the following Companies: 1) MothersonSumi INfotech & Designs Limited 2) Sumi Motherson Innovative Engineering Limited
Committee Memberships- Audit Committee 1) Sumi Motherson Innovative Engineering Limited
Mr. M.S. Gujral and Maj. Gen. Amarjit Singh (Retd.), Directors of the Company are retiring by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.
35
Disclosures
l No transaction of material nature has been entered into by the Company with Directors or Management and their relatives, etc. that may have a potential conflict with the interests of the Company.
l Transactions with the related parties are disclosed in Note no. B (20) on Schedule XII to the Accounts in the Annual Report.
l No penalties or strictures were imposed by SEBI or the Stock Exchanges.
Means of Communication
l The annual, half-yearly and quarterly results are regularly posted by the Company on its website www.motherson.com. These are also submitted to the Stock Exchanges in accordance with the Listing Agreement and published in leading newspapers like Economic Times.
l Management Discussion & Analysis forms part of this Annual Report.
Shareholders’ Information
1. Annual General Meeting
Date and Time : 20th August, 2005 at 11.00 a.m. Venue : FICCI Golden Jubilee Auditorium, Tansen Marg, New Delhi.
2. Financial Calendar (tentative and subject to change) Annual General Meeting for the year ending March 31, 2005 : 20th August, 2005 Financial reporting for the first quarter ending June 30, 2005 : July, 2005 Financial reporting for the second quarter ending September 30, 2005 : October, 2005 Financial reporting for the third quarter ending December 31, 2005 : January, 2006 Financial results for the year ending March 31, 2006 : May, 2006
3. Book Closure Date : 16th August, 2005 to 20th August, 2005
4. Dividend payment : Re 1/- per share, to those shareholders who are holding shares in physical form, whose name appears on the Register of members on 20.08.05. With respect to shares held in
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
(Rs. in Millions)Name of the Company Status Nature Balance as on Maximum outstanding 31st March, 2005 during the year
MSSL Mauritius Holdings Ltd. 100% Subsidiary Loan 15 15MSSL Ireland Private Ltd.* 100% Subsidiary Loan - 6 MSSL Hag Toolings Ltd.* 53.33% Subsidiary Loan 43 43MSSL Handels GmbH 100% Subsidiary Loan 3 3Hag Kunststofftechnik GmbH** Related Party Loan 56 73
* Through MSSL Mauritius Holdings Ltd.** Through MSSL Mideast (FZE)
36
electronic form the dividend shall be payable to beneficial owners of the shares as on the closing hours of business on 13.08.05 as per details furnished by the Depositories for the purpose.
5. Listing on Stock Exchanges at : The National Stock Exchange of India Ltd. Exchange Plaza, 5th Floor Plot no. C/1, G Block Bandra - Kurla Complex Bandra (E), Mumbai Code : MOTHERSUMI
The Stock Exchange, Mumbai Phiroze Jeejeebhoy Towers Dalal Street, Mumbai Code : 517334
Delhi Stock Exchange Association Limited DSE House, 3/1, Asaf Ali Road New Delhi
Ahmedabad Stock Exchange Kamdhenu Complex, Near Polytechnic Panjara Pole, Ahmedabad6. Market Price Data*
Month The Stock Exchange, Mumbai National Stock Exchange of India
High Low High Low
Apr – 2004 36.27 30.17 37.23 30.20 May – 2004 31.40 22.23 32.00 22.47 June – 2004 30.80 19.83 31.03 22.00 July – 2004 32.97 26.27 33.27 26.33 Aug – 2004 41.33 29.67 41.00 29.83 Sep – 2004 51.33 40.50 51.27 41.27 Oct – 2004 56.00 46.00 55.97 45.67 Nov – 2004 65.67 52.67 66.67 52.80 Dec – 2004 69.40 53.53 69.50 54.17 Jan – 2005 80.00 58.00 76.53 58.07 Feb – 2005 74.67 64.50 72.60 64.05 Mar – 2005 73.50 51.35 72.50 52.00
*During the year the Company has issued Bonus Shares in the ratio of 1:2, the equity shares of the Company became ex–bonus w.e.f. 24.02.05. The previous month prices of equity shares have been recasted accordingly.
7. Performance in comparison to Broad Based Indices
37
8. Shareholding Pattern of the Company as on 31.03.05
Category No. of Shares Held % of Shareholding
Indian Promoters 86901052 37.00 Foreign Promoters 81506250 34.70 Institutional Investors 9814839 4.18 Private Corporate Bodies 19134426 8.15 Indian Public 33624592 14.31 NRIs/ OCBs 3908041 1.66
9. Registrar and Transfer Agents
MCS Limited Sri Venketash Bhawan W – 40, Okhla Industrial Area, Phase - II New Delhi
10. Share Transfer System
To expedite the share transfer process in the physical segment, authority has been delegated to the Share Transfer Committee which comprises of:
Mr. V.C. Sehgal Mr. R. Ganapati Mr. A. Yamauchi Mr. Pankaj Mital Share transfer/ transmissions approved by the Committee are placed at the Board Meeting from time to time.
11. Distribution of shareholding as on March 31, 2005
Share Holding of No. of % of shareholders No. of % of sharesNominal Value of Rs. shareholders to total shares to total
1 - 5000 16297 96.71 10771109 4.59 5001 - 10000 259 1.54 1835064 0.78 10001 - 20000 134 0.80 1857368 0.79 20001 - 30000 41 0.24 1006732 0.43 30001 - 40000 25 0.15 873161 0.37 40001 - 50000 6 0.04 266676 0.11 50001 - 100000 35 0.21 2484901 1.06 100001 and above 55 0.33 215794189 91.87
TOTAL 16852 100 234889200 100
The bonus shares were allotted in the ratio of 1:2 to the shareholders on 3rd March, 2005 while the same were credited to the beneficiary accounts on 6th April, 2005. 12. Dematerialisation of shares and liquidity Your company’s shares are tradable compulsorily in electronic form and your company has established connectivity with both the Depositories i.e. NSDL and CDSL. The members are requested to dematerialize their physical holding in view of various advantages in Dematerialized form.
Demat ISIN Number in NSDL & CDSL for equity shares: ISIN No. INE775A01035
13. Plant Locations
Noida (Uttar Pradesh) New Delhi Gurgaon (Haryana) Pune (Maharashtra) Bangalore (Karnataka) Chennai (Tamilnadu) Pondicherry
38
AUDITORS’ CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER CLAUSE 49 OF THE LISTING
AGREEMENT(S)
To the Members ofMotherson Sumi Systems Limited
1. We have reviewed the implementation of Corporate Governance procedures by Motherson Sumi Systems Limited (the Company) during the year ended March 31, 2005, with the relevant records and documents maintained by the Company, furnished to us for our review and the report on Corporate Governance as approved by the Board of Directors.
2. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to review of 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.
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.
3. On the basis of our review and according to the information and explanations provided to us, the conditions of Corporate Governance as stipulated in Clause 49 of the listing agreements with the Stock exchanges have been complied with in all material respect by the Company and that no investor grievances are pending for a period exceeding one month against the Company as per the records maintained by the Investors Grievances Committee.
KAUSHIK DUTTAPartner
Membership No. F 88540For and on behalf of
Place: New Delhi PRICE WATERHOUSEDated: May 27, 2005 Chartered Accountants
Representative Office(s)
Austria Sharjah Germany
14. Investors’ correspondence may be addressed to : Mr. G.N. Gauba Company Secretary & V.P. Finance 3rd Floor, Bhageria House 43, Community Centre New Friends Colony New Delhi - 110 065 Email : [email protected] [email protected]
39
AUDITORS’ REPORT
To the Members of
MOTHERSON SUMI SYSTEMS LIMITED
1. We have audited the attached Balance Sheet of Motherson Sumi Systems Limited, as at March 31, 2005, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the company’s 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 (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of ‘The Companies Act, 1956’ of India (the ‘Act’) and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanations given to us, we further report that:
(i) (a) The company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.
(b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed.
(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets
has not been disposed of by the company during the year.
(ii) (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year. In respect of inventory lying with third parties, these have substantially been confirmed by them. 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) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records
were not material.
(iii) (a) The company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act.
(b) 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 Act.
(iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items purchased are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations, there is an adequate internal control system commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the company, and according to the information and
40
explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.
(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.
(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.
(vi) The company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.
(vii) In our opinion, the company has an internal audit system commensurate with its size and nature of its business.
(viii) We have broadly reviewed the books of account maintained by the company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.
(ix) (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is 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 and other material statutory dues as applicable, with the appropriate authorities.
(b) According to the information and explanations given to us and the records of the company examined by us, there are no dues in respect of income-tax, wealth tax, service tax, customs duty, and cess as at March 31, 2005 which have not been deposited on account of a dispute. The particulars of dues of sales tax and excise duty which have not been deposited on account of a dispute are as follows -
Name of the Nature of dues Amount Period to which Forum where the statute (Rs.) the amount relates dispute is pending
Central Excise Excise duty 829,708 2003-2004 Commissioner of Central Act, 1944 and penalty Excise (Appeals), Chennai
Central Excise Service tax 311,367 1999-2000 and Commissioner of Central Act, 1944 2000-2001 Excise (Appeals), Chennai
Central Excise Excise duty 3,830,600 2001-2002 Commissioner of Central
Act, 1944 and penalty Excise (Appeals), Pune (x) The company has no accumulated losses as at March 31, 2005 and it has not incurred any cash losses in the financial
year ended on that date or in the immediately preceding financial year.
(xi) According to the records of the company examined by us and the information and explanation given to us, the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.
(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 provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/societies are not applicable to the company.
41
(xiv) In our opinion, the company is not a dealer or trader in shares, securities, debentures and other investments.
(xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the company.
(xvi) In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained.
(xvii) On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the information and explanations given to us, 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 Act during the year.
(xix) The company has issued debentures that are privately placed and are outstanding at the year end against which the company is not required to create any security or charge.
(xx) The company has not raised any money by public issues during the year.
(xxi) During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the company, noticed or reported during the year, nor have we been informed of such case by the management.
4. Further to our comments 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;
(b) 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;
(c) 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 Act;
(e) On the basis of written representations received from the directors, as on March 31, 2005 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2005 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act;
(f) 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 in the prescribed manner the information required by the Act 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 March 31, 2005; (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.
KAUSHIK DUTTAPartner
Membership Number: F 88540For and on behalf of
Place: Noida Price WaterhouseDate : May 27, 2005 Chartered Accountants
42
BALANCE SHEET AS AT MARCH 31, 2005 (Figures in Rs. thousands)
Schedule As at As at March 31, 2005 March 31, 2004SOURCES OF FUNDS
Shareholders’ Funds Share Capital I 234,889 156,593 Reserves & Surplus II 1,506,073 1,231,257
1,740,962 1,387,850
Loan Funds Secured Loans III 496,181 551,398 Unsecured Loans IV 206,290 108,540 Deferred tax liability (net) 120,465 129,047 (Refer A (10) & B (17) on Schedule XII)
TOTAL 2,563,898 2,176,835
APPLICATION OF FUNDS
Fixed Assets V Gross Block 3,158,476 2,597,436 Less: Depreciation 1,188,525 1,057,661
Net Block 1,969,951 1,539,775 Capital Work in Progress 99,411 4,817
2,069,362 1,544,592
Investments VI 159,354 145,027
Current Assets, Loans and Advances VII Inventories 632,182 470,832 Sundry Debtors 569,373 522,397 Cash & Bank Balances 26,544 39,258 Loans & Advances 372,480 302,575
1,600,579 1,335,062 Less: Current Liabilities and Provisions VIII Current Liabilities 891,235 622,892 Provisions 374,162 224,954
1,265,397 847,846
NET CURRENT ASSETS 335,182 487,216
TOTAL 2,563,898 2,176,835
Significant Accounting Policies and XIINotes forming part of the Accounts
This is the Balance Sheet referred to The schedules referred above form integral part of the Balance Sheetin our report of even date for and on behalf of the BoardKAUSHIK DUTTA V.C. SEHGAL A. YAMAUCHI PANKAJ MITALPartner Chairman Whole time Director Chief Operating OfficerM. No.: F 88540For and on behalf of Price Waterhouse G.N. GAUBA Chartered Accountants Co. Secretary & V.P. FinancePlace: NoidaDate : May 27, 2005
43
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2005(Figures in Rs. thousands)
Schedule For the year ended For the year ended March 31, 2005 March 31, 2004
INCOME Sale of Finished Goods (Gross) 6,368,700 5,218,766 Less: Excise duty 833,189 647,080 Sale of Finished Goods (Net) 5,535,511 4,571,686 Other Income IX 90,939 51,211
TOTAL 5,626,450 4,622,897
EXPENDITURE Manufacturing and other expenses X 4,492,679 3,640,043 Depreciation 264,223 268,665 Interest (Net) XI 19,566 33,160
TOTAL 4,776,468 3,941,868
Profit Before Taxation 849,982 681,029
Tax Expense Provision for Current Income Tax 240,000 199,500 Provision for Deferred Income Tax (Refer A (10) & B (17) on Schedule XII) (8,582) (3,913) Provision for Wealth Tax 500 500
618,064 484,942Less : Income Tax for earlier years (2,880) 435Profit After Taxation 620,944 484,507Add: Balance brought forward from previous year 596,770 388,919
Surplus Available For Appropriation 1,217,714 873,426
APPROPRIATIONS Transfer to General Reserve 150,000 100,000 Proposed Dividend 234,889 156,593 Tax on Dividend 32,943 20,063 Balance Carried to Balance Sheet 799,882 596,770
TOTAL 1,217,714 873,426
Earning per share (Basic/Diluted) of face value Re. 1/- each 2.64 2.06(Refer B (15) on Schedule XII)
Significant Accounting Policies and XII Notes forming part of the Accounts
This is the Profit & Loss Account referred to The schedules referred above form integral part of the in our report of even date Profit & Loss Account for and on behalf of the BoardKAUSHIK DUTTA V.C. SEHGAL A. YAMAUCHI PANKAJ MITALPartner Chairman Whole time Director Chief Operating OfficerM. No.: F 88540For and on behalf of Price Waterhouse G.N. GAUBA Chartered Accountants Co. Secretary & V.P. FinancePlace: NoidaDate : May 27, 2005
44
SCHEDULES FORMING PART OF THE BALANCE SHEET
CASH FLOW STATEMENT(Figures in Rs. thousands)
2004-05 2003-04
A. CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax 849,982 681,029
Adjustments for: Depreciation 264,223 268,665 Interest Expense 23,957 39,211 Interest Income (4,391) (6,051) Income from Investment - Dividends (8,083) (80) Lease Rent 4,759 9,215 (Profit)/Loss on Fixed Assets sold 1,638 (4,635) Debts / Advances Written off 9 309 Provision for Bad & Doubtful Debts / Advances (1,664) 1,589 Liability no longer required written back (10,972) (5,494) Provision for Gratuity & Leave Encashment 2,452 6,945 Provision for diminution in value of Investments 2,956 (882) Unrealised foreign exchange (gain) /loss 7,751 7,278 Provision for warranty (28) -
Operating profit before working capital changes 1,132,589 997,099
Adjustments for changes in working capital : - (INCREASE)/DECREASE in Sundry Debtors (86,144) (157,741) - (INCREASE)/DECREASE in Other Receivables (91,589) (64,484) - (INCREASE)/DECREASE in Inventories (203,377) (162,719) - INCREASE/(DECREASE) in Trade and Other Payables 281,379 178,654 Cash generated from operations 1,032,858 790,809 - Taxes (Paid)/Received (Net of TDS) (177,535) (171,072)
Net cash from operating activities 855,323 619,737
B. CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets Including CWIP - Addition During the year (811,958) (500,177) Proceeds from Sale of fixed assets 10,955 9,049 Purchase of investments (17,281) (31,346) Loan to Subsidiary (net) (2,892) 116,671 Lease Rent Payment (4,759) (9,215) Interest Received (Revenue) 3,602 7,646 Dividend Received 8,083 80 Consideration Received on transfer of erstwhile Elastomer Division to a Subsidiary (refer B(14) on Schedule XII) 123,094 –
Net cash used in investing activities (691,156) (407,292)
45
C. CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long term borrowings Receipts 87,398 199,179 Payments (114,527) (248,015) Proceeds from short term borrowings Receipts 100,000 — Payments — (42,500) Proceeds from Cash Credits (Net) (38,982) 59,532 Interest Paid (23,237) (40,379) Dividend Paid (156,088) (117,268) Dividend Tax Paid (20,063) (15,048)
Net cash used in financing activities (165,499) (204,499)
Net Increase/(Decrease) in Cash & Cash Equivalents (1,332) 7,946
Cash and cash equivalents as at 31.03.2004 39,258 31,825
Cash and Cash Equivalents on transfer of erstwhile Elastomer Division to a Subsidiary (Refer B(14) on Schedule XII) (11,572) —
Cash and cash equivalents as at 31.03.2005 26,354 39,771 Cash and cash equivalents comprise Cash and cash equivalents comprise Cash In Hand 2,510 1,904 Cheque In Hand 1,223 2,656 Balance with Scheduled Banks 14,945 33,241 Balance with Non-Scheduled Banks 7,866 1,457 Cash and cash equivalents as per Balance Sheet (restated) 26,544 39,258 Less: Net Unrealised Loss on Foreign Currency Cash & Equivalents (190) 513 Total Cash & Cash Equivalents as per cash flow statement 26,354 39,771
(I) The above Cash Flow Statement has been prepared under the Indirect Method as set out in the Accounting Standard - 3 on Cash Flow Statement issued by the Institute of Chartered Accountant of India.
(II) Previous year’s figures have been regrouped wherever necessary to conform to the current year’s classification.(III) Following non cash transactions have not been considered in the cash flow statement: Tax deducted at source on income(IV) Figures in brackets indicate cash outgo.
(Figures in Rs. thousands)
2004-05 2003-04
This is the cash flow statement referred to in our report of even date for and on behalf of the BoardKAUSHIK DUTTA V.C. SEHGAL A. YAMAUCHI PANKAJ MITALPartner Chairman Whole time Director Chief Operating OfficerM. No.: F 88540For and on behalf of Price Waterhouse G.N. GAUBA Chartered Accountants Co. Secretary & V.P. FinancePlace: NoidaDate : May 27, 2005
46
SCHEDULES FORMING PART OF THE BALANCE SHEET
SCHEDULE ISHARE CAPITAL*
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
Authorised 300,000,000 Equity Shares of Re. 1/- each (Previous Year 200,000,000 Equity Shares of Re. 1/- each) 300,000 200,000
Issued 234,892,400 Equity Shares of Re. 1/- each (Previous Year 156,596,000 Equity Shares of Re. 1/- each) 234,892 156,596
Subscribed and Paid up 234,889,200 Equity Shares of Re. 1/- each (Previous Year 156,592,800 Equity Shares of Re. 1/- each) 234,889 156,593 (Of the above shares 6,090,000 (6,090,000) shares are allotted as fully paidup pursuant to a contract for consideration other than cash)(Of the above shares 165,292,400 (86,996,000) shares are allotted as fully paidbonus shares by way of capitalisation of share premium & general reserve).
TOTAL 234,889 156,593
Note:*During the year the Company made allotment of 78,296,400 equity shares of Re. 1/- each as bonus shares in proportion of one equity share for every two equity shares. The credit of bonus shares have been given to respective beneficiary accounts of the shareholders by the depository.
As at As at March 31, 2005 March 31, 2004
Revaluation ReserveAs per Last Balance Sheet 20,031 20,031Additions during the year — —Deductions during the year — 20,031 — 20,031
Reserve on Amalgamation(Refer B19) on schedule XII)As per Last Balance Sheet 80,352 80,352Additions during the year — —Deductions during the year — 80,352 — 80,352
Securities Premium AccountAs per Last Balance Sheet 55,278 55,278Additions during the year — —Deductions during the year* 55,278 — — 55,278
General ReserveAs per Last Balance Sheet 378,826 378,826Additions during the year 150,000 100,000Deductions during the year* 23,018 605,808 — 478,826
Profit and Loss AccountAs per Last Balance Sheet 596,770 388,919Additions during the year 353,112 307,851Deductions during the year 150,000 799,882 100,000 596,770
TOTAL 1,506,073 1,231,257
* Utilised for capitalisation by way of bonus shares (Refer note on schedule 1)
SCHEDULE IIRESERVES & SURPLUS
(Figures in Rs. thousands)
47
SCHEDULE IIISECURED LOANS
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
1 Short term loans from banks* — Rupee Loan 156,963 220,701 — Foreign currency Loan 69,876 45,120
2 Long Term Loans # (i) From Banks — Rupee Loan** — 1,650 — Foreign currency Loan*** 191,770 175,982
(ii) From Others — Rupee Loan**** 77,572 107,945
TOTAL 496,181
SCHEDULE IVUNSECURED LOANS
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
Short term loans — Privately Placed Debentures * 100,000 — — Other Than Banks ** 32,400 —Long Term Loans # From Other Than Banks — Rupee Loan — 32,400 — Foreign Currency Loan 73,890 76,140
TOTAL 206,290 108,540
* Redeemable on May 13, 2005 . Further the debentures amounting to Rs. 50,000 thousand have put / call option at any time from seven days of issue. ** Repayable on Demand # Long Term Loan due within a Year Rs. 73,890 thousand (Previous Year Rs. 32,400 thousand)
Secured Loans referred above are : * Secured by first charge by way of hypothecation of all present and future stocks, book debts and other specified
moveable assets of the Company . ** Secured by way of hypothecation of specific vehicles. *** Secured by first pari-passu charge on entire fixed assets both moveable & immoveable of the company present &
future alongwith a term lender for a loan given to subsidiary and second pari-passu charge on the entire current as-sets of the company. These are also secured by way of deposit of title deeds of specified properties
**** Secured by hypothecation of specific moulds used for production of components. # Long terms loans due within a Year are Rs. 87,549 thousand (Previous Year Rs. 83,988 thousand).
48
SCHEDULE VFIXED ASSETS(Refer A(2) on Schedule XII)
GROSS BLOCK DEPRECIATION NET BLOCK
Particulars As at Addi- Dele- Total Upto Depre- Depre- Upto As at As at March 31, tions tions/ as at March 31, ciation ciation March 31, March 31, March 31, 2004 during Sale/ March 31, 2004 for the on Dele- 2005 2005 2004 the year Adjust- 2005 year tions/ ments sale/ (b) Adjust- ments Tangible AssetsLeasehold Land 56,205 162,891 — 219,096 2,094 2,216 — 4,310 214,786 54,111Freehold Land 37,049 49,495 — 86,544 — — — — 86,544 37,049Leasehold Improvements 27,210 19,621 — 46,831 9,764 8,901 — 18,665 28,166 17,446Building 399,199 229,664 680 628,183 59,201 15,341 77 74,465 553,718 339,998Plant & Machinery 1,793,976 244,332 153,265 1,885,043 846,879 194,198 90,576 950,501 934,542 947,097Furniture, Fixtures & Office Equipments 90,242 9,010 5,343 93,909 19,79 6,944 1,138 25,603 68,306 70,445Computers 81,443 16,785 6,479 91,749 57,269 13,904 5,339 65,834 25,915 24,174Vehicles* 85,068 36,543 14,490 107,121 36,961 21,371 9,185 49,147 57,974 48,107Intangible Assets Technical Knowhow Fees 22,544 — 22,544 — 21,414 1,130 22,544 — — 1,130Business & Commercial Rights 4,500 — 4,500 — 4,282 218 4,500 — — 218
T O T A L 2,597,436 768,341 207,301 3,158,476 1,057,661 264,223 133,359 1,188,525 1,969,951 1,539,775
Previous Year 2,186,122 437,419 26,105 2,597,436 810,689 268,665 21,693 1,057,661
Capital Work In Progress 99,411 4,817
2,069,362 1,544,592
Addition to Fixed Assets include adjustment on account of exchange gain of Rs. 43 thousand (Previous Year exchange loss Rs. 407 thousand). * Includes Rs. nil (Previous Year Rs.699 thousand) in respect of vehicles acquired under finance lease. # Includes fixed assets of erstwhile Elastomer division transferred to a subsidiary (refer B(14) on schedule XII)
(Figures in thousands)
49
SCHEDULE VIINVESTMENTS(Refer A(3) on Schedule XII) (Figures in thousands)
As at As at March 31, 2005 March 31, 2004
A. UNQUOTED (At Cost) In Subsidiaries (Long-term Investments)
Motherson PUDENZ WICKMANN Ltd.* 9,045 9,045 1403226 equity shares (1403226) of Rs. 10/- each fully paid up
Draexlmaier & Motherson Electrical Systems (I) Ltd.* 13,838 13,838 2767600 equity shares (2767600) of Rs.10/- each fully paid up Draexlmaier & Motherson Electrical Systems (I) Ltd.* — — 1076565 8% Non Cumulative Non Convertible Redeemable preference shares (1076565) of 10/- each fully paid up MSSL Mauritius Holding Ltd.* 22,452 22,452 525000 equity shares (525000) of 1 Euro each fully paid up MSSL Mideast (FZE)* 1,997 1,997 1 equity shares (1) of AED 150000 equivalent to Euro 46,875 each fully paid up MSSL Handels GmbH* 1,835 1,835 1 share (1) of Euro 35000 Motherson Electrical Wires Lanka Pvt. Ltd.* 6,857 6,857 1456202 shares (1456202) of Srilankan Rs. 10/- each fully paid up MSSL (S) Pte Ltd.* 2,655 2,655 100000 shares (100000) of S$ 1/- each fully paid up Woco Motherson Elastomers Ltd.* 16,750 — 1675000 equity shares (Nil) of Rs. 10/- each fully paid up Woco Motherson Advanced Rubber Technologies Ltd.* 500 — 50000 equity shares (Nil) of Rs. 10/- each fully paid up In Others (Long-term Investments) Schefenacker Motherson Ltd.* 67,368 67,368 6712990 equity shares (6712990) of Rs. 10/- each fully paid up Saks Ancillaries Ltd.* 10,724 10,724 1000000 equity shares (1000000) of Rs. 10/- each fully paid up Kyungshin Industrial Motherson Ltd.* 36,080 36,080 3600000 equity shares (3600000) of Rs. 10/- each fully paid up Motherson Air Travel Agencies Ltd.* 1,206 1,206 120000 equity shares (120000) of Rs. 10/- each fully paid up (Current Investments) Inapex Auto Export Pvt. Ltd — — 60000 equity shares (60000) of Rs. 10/- each fully paid up Lord Krishna Bank Ltd. 102 102 8444 equity shares (8444) of Rs. 10/- each fully paid up Cyberspace Infosys Ltd — — 300 equity shares (300) of Rs. 10/- each fully paid up SKS Ltd — — 1000 equity shares (1000) of Rs. 10/- each fully paid up
Total (A) 191,409 174,159
50
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
(Long-term Investments) Motherson Sumi Infotech & Designs Ltd.* 13,800 13,800 1200000 Equity shares (1200000) of 10/- each fully paid up
(Current Investments) 94 63 Balrampur Chinni Mills Ltd 11200 equity shares (1000) of Rs. 10/- each fully paid up
S.J.Max Golden Co.Ltd — 3,362 336200 equity shares (336200) of 10/- each fully paid up
Daewoo Motors Ltd — 55 6150 equity shares (6150) of Rs. 10/- each fully paid up
Munjal Auto (Formerly Gujrat Cycles Ltd) 10 10 1000 equity shares (1000) of Rs. 10/- each fully paid up
Hero Honda Motors Ltd 4 4 250 equity shares (250) of Rs 2/ each fully paid up
ICICI Bank Ltd 59 44 150 equity shares (150) of Rs. 10/- each fully paid up
IL & FS Venture Corporation Ltd 67 29 1000 equity shares (1000) of Rs. 10/- each fully paid up Inox Leasing & Finance Ltd — 1 100 equity shares (100) of Rs. 10/- each fully paid up Electrolux Kelvinator Ltd. (Formerly Intron Ltd.) — 12 1250 equity shares (1250) of Rs. 10/- each fully paid up Jaysynth Dyechem Ltd — — 100 equity shares (100) of Rs. 10/- each fully paid up
GIVO Ltd. 500 142 49800 equity shares (49800) of Rs. 10/- each fully paid up
Athena Financial Services (Formerly Kinetic Lease & Finance Ltd) — — 66 equity shares (66) of Rs. 10/- each fully paid up
Kinetic Motors Company Ltd 26 14 500 equity shares (500) of Rs. 10/- each fully paid up
LML Ltd 202 166 4600 equity shares (4600) of Rs. 10/- each fully paid up
Mahindra & Mahindra Ltd 407 407 1822 equity shares (1822) of Rs. 10/- each fully paid up
Morgan Stanley Mutual Fund 2,500 2,500 250000 Units (250000) of Rs. 10/- each fully paid up
Pearl Engineering Polymers Ltd 24 10 3160 equity shares (3160) of Rs. 10/- each fully paid up
Pearl Global Ltd 4 1 100 equity shares (100) of Rs. 10/- each fully paid up
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Subros Ltd 9 9 980 equity shares (490) of Rs. 10/ each fully paid up
Tata Motors 239 239 800 equity shares (800) of Rs. 10/- each fully paid up
Total (B) 17,945 20,868
Total (A+B) 209,354 195,027
Less: Provision for Diminution 50,000 50,000
Net Total 159,354 145,027
* Trade Investment
Note :a) Market value of quoted investments 21,073 22,552 (Based on last traded price available as at March 31, 2005)
No. of Shares Rs. in Thousands b) Investments made during the year Woco Motherson Elastomers Ltd. 1,675,000 16,750 Woco Motherson Advanced Rubber Technologies Ltd 50,000 500 Balrampur Chinni Mills Ltd. 120 31
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
SCHEDULE VIICURRENT ASSETS, LOANS AND ADVANCES (Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
A. Current Assets
(1) Stock in Trade (Refer A((4) on Schedule XII) (i) Finished Goods 153,558 86,636 (ii) Work in Progress 106,091 83,468 (iii) Raw Material & Components 312,626 239,139 (iv) Goods in Transit (Raw Material & Components) 56,742 57,278 (v) Tools, Store & Spares 3,165 4,311
TOTAL (1) 632,182 470,832
(2) Sundry Debtors* (Unsecured, unless otherwise stated) (i) Outstanding for more than six months Considered Good — 924 Considered Doubtful 3,511 3,047
3,511 3,971 Less: Provision for doubtful debts 3,511 3,047 — 924
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(ii) Other Debts Considered good 569,373 521,473 Considered Doubtful 2,800 4,186
572,173 525,659 Less Provision for doubtful debts 2,800 4,186 569,373 521,473
TOTAL (2) 569,373 522,397
(3) Cash and Bank Balances : (i) Cash in hand 2,510 1,904 (ii) Cheques in hand 1,223 2,656 (iii) Balance with (a) Scheduled Banks in (i) Current Accounts 9,597 28,719 (ii) Deposit account** 2,984 2,694 (iii) Dividend Account 2,363 1,828 (b) Non Scheduled Banks in*** (i) Current Account with Bank Austria 2,158 695 (ii) Current Account with HSBC Bank Middle East Ltd. 5,709 762
TOTAL (3) 26,544 39,258
TOTAL A (1+2+3) 1,228,099 1,032,487
B. Loans and Advances (Unsecured, unless otherwise stated)
(i) Advances recoverable in cash or in kind or for value to be received **** — Considered good 219,135 212,243 — Considered doubtful 4,116 4,858
223,251 217,101 Less Provision for doubtful advances 4,116 4,858 219,135 212,243
(ii) Loan to Subsidiaries 17,587 13,689 (iii) Deposits with Excise, Customs & Govt Authorities 135,758 76,643
TOTAL B 372,480 302,575
GRAND TOTAL (A+B) 1,600,579 1,335,062
* Includes due from subsidiaries Rs.13,470 thousand (Previous Year Rs. 19,374 thousand)** Includes Deposits pledged with Excise & Sales Tax authorities Rs.156 thousand (Previous Year Rs. 30 thousand) and margin
money Rs. 2,560 thousand (Previous Year Rs. 2,560 thousand)*** Maximum balance outstanding during the Year Rs. 10,385 thousand (Previous Year Rs. 4,884 thousand)**** i) Includes due from subsidiaries Rs. 891 thousand (Previous Year Rs. 1,420 thousand) ii) Includes capital advances of Rs. 64,428 thousand (Previous Year Rs. 82,597 thousand)
SCHEDULE VII (CONTD.)CURRENT ASSETS, LOANS AND ADVANCES (Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
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SCHEDULE VIIICURRENT LIABILITIES AND PROVISIONS (Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
A. Current Liabilities (Refer B(3) on Schedule XII) (i) Sundry Creditors* Small Scale Industrial Undertakings 17,278 11,812 Others 714,085 527,955 (ii) Advance from customers 122,172 59,467 (iii) Other Liabilities 34,321 21,503 (iv) Investor Education & Protection Fund shall be credited by the following amount: - Unpaid Dividend 2,364 1,860 (v) Interest Accrued but not due 1,015 295
TOTAL (A) 891,235 622,892
B. Provisions (Refer A(5) & A (10) and B (18) on Schedule XII) (i) For Dividend (including tax thereon) 267,832 176,656 (ii) For Wealth tax 500 1,500 (iii) For Income tax (net)** 89,319 32,711 (iv) For Employee benefit 14,539 12,087 (v) For Warranty 1,972 2,000
Total (B) 374,162 224,954
TOTAL(A+B) 1,265,397 847,846
* Includes due to subsidiaries Rs. 30,030 thousand (Previous Year Rs. 7,644 thousand)** Net of Advance Tax Rs. 464,525 thousand (Previous Year Rs. 302,120 thousand)
SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT
SCHEDULE IXOTHER INCOME (Figures in Rs. thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
1) Non-operating Income (a) Dividend Received * - From Other than subsidiary companies 8,083 80 (b) Rent 12,830 8,232 (c) Change in carrying amount of current investments — 882 (d) Service Income 9,227 8,663 (e) Sundries written back 10,972 5,494 (f) Miscellaneous Income 30,486 23,225 (g) Exchange fluctuation (net) 19,341 — (h) Profit on sale of Fixed assets (net) — 4,635
TOTAL 90,939 51,211
Tax deducted on source (a) Rent 2,699 1,687 (b) Misc.Income 711 611
* Includes dividend from Short term Non- Trade investments 883 80
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SCHEDULE XCOST OF MATERIALS ANDMANUFACTURING & OTHER EXPENSES (Figures in Rs. thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Materials consumed Opening Stock Raw materials 239,139 170,762 Work-in-progress 83,468 56,721 Finished goods 86,636 45,943 409,243 273,426
Add : Purchases of Raw materials 3,141,621 2,427,758 Less : Closing Stock Raw materials (312,626) (239,139) Work-in-progress (106,091) (83,468) Finished goods (153,558) (86,636)
Less : Transfer of Elastomer Division to aSubsidiary (Refer B (14) on Schedule XII) Raw materials (16,422) — Work-in-progress (5,854) — Finished goods (520) — (595,071) (409,243)
Total consumption for goods sold 2,955,793 2,291,941
Salary, wages & bonus 411,148 323,460Contribution to Provident & Other Fund 40,687 36,736 Staff Welfare 49,868 47,198 Electricity, Water and Fuel 129,038 111,060 Repairs and Maintenance : Machinery 59,491 71,502 Building 44,138 34,158 Others 47,446 51,718 Consumption of Store and Spare parts 78,904 65,662 Conversion charges 105,428 100,621 Lease rent (Refer A(9) & B(16) on schedule XII) 4,759 9,215 Rent 30,692 28,510 Rates & taxes 8,309 9,304 Insurance 18,401 15,417 Donation 4,414 2,930 Travelling 95,286 90,578 Freight & forwarding 76,300 60,016 Royalty 33,938 27,637 Cash Discount 13,513 12,421
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SCHEDULE XIINTEREST (NET) (Figures in Rs. thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Interest Expense -Subsidiaries 120 — -Privately Placed Debentures 3,678 — -Fixed loans 8,491 18,598 -Others 11,668 20,613 Less : Interest Income (Gross) -From Subsidiaries 2,335 5,471 -From Bank Deposits 388 296 -From Income Tax Refund 1,452 — -From Employees 216 284
TOTAL 19,566 33,160
Tax deducted on source
Interest Income 390 101
SCHEDULE X (CONTD.)COST OF MATERIALS ANDMANUFACTURING & OTHER EXPENSES (Figures in Rs. thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Commission 1,197 3,409 Loss on sale of fixed assets (net) * 1,638 — Provision for dimunition in value of Short Term Investments 2,956 — Bad Debts / Advances written off 9 309 Doubtful Debts/ Advances — 1,589 Legal & professional expenses 99,613 71,236 Exchange fluctuation(net) — 11,305 Miscellaneous expenses 179,713 162,111
TOTAL 4,492,679 3,640,043
* Includes loss on transfer of erstwhile Elastomer Division (Refer B (14) on Schedule XII)
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SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE XII
SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF THE ACCOUNTS
A. SIGNIFICANT ACCOUNTING POLICIES
1. Convention
The Financial Statements are prepared under the historical cost convention as modified to include revaluation of certain fixed assets as indicated in (2) below, in accordance with applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant presentational requirements of the Companies Act, 1956.
2. Fixed Assets and Depreciation
Fixed Assets
i) The fixed assets except as stated in (ii) below are stated at cost less accumulated depreciation. Cost of acquisition or construction is inclusive of inward freight, duties and taxes and other incidental expenses.
ii) The fixed assets of the Component Division of erstwhile Motherson Auto Components Engineering Limited (MACE) have been stated at an amount inclusive of appreciation arising on revaluation of the assets by an approved valuer on December 31, 1998. The method adopted for revaluation of the assets are as under:
a) Land: Prevailing market rate of land as on the date of revaluation. b) Buildings, Indigenous Plant and Machinery, Furniture and Fixtures, Moulds and Dies: Replacement value. c) Vehicles: Current price of the vehicles and reducing depreciation for the numbers of years of use and also
considering the value in secondary car market. d) Air conditioning and Electrical Equipment: Present value of the assets taking into consideration the original
cost and price inflation index.
The Company charges assets Costing less than Rs 5,000 to expense, which could otherwise have been included as Fixed Asset, because the amount is not material in accordance with ‘Accounting Standard 10-Accounting for Fixed Assets’
Depreciation
i) Depreciation on fixed assets except as stated in (ii) to (iv) below, is provided from the month the asset is ready for commercial production on a pro-rata basis at the SLM rates prescribed in schedule XIV to the Companies Act, 1956 or based on useful life, whichever is higher. In accordance with the above policy the following assets are depreciated, at rates higher than those prescribed in schedule XIV of the Companies Act, 1956:
Rate (%)
Computers 33.33 Vehicles 25 Plant & Machinery (Racks, Stands & Trolleys) 100 Specific Identified Plant & Machinery 25
ii) In respect of revalued assets, depreciation is being provided on the revalued amounts over the remaining useful life of the assets at the SLM rates. Leasehold Land is amortised over the balance period of lease.
iii) Technical Know How fees paid to a foreign collaborator by the erstwhile Elastomer Division is being depreciated on a straight line basis over the remaining tenure of the agreement.
iv) The amount paid for business and commercial rights by the erstwhile Elastomer Division is being depreciated over the remaining tenure of agreement.
3. Investments
Investments are classified into long term and current investments. Long-term investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long term investments.
Current investments are carried at lower of cost and fair value. Fair value in the case of quoted investments refers to the market value of the investments arrived at on the basis of last traded prices as at the year-end.
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4. Inventories
Stores and spares, loose tools are valued at cost or net realisable value, whichever is lower.
Raw materials, components, finished goods and work in progress are valued at cost or net realisable value, whichever is lower. The basis of determining cost for various categories of inventories are as follows:
i) Stores and Spares, Raw Materials and - First in First Out (FIFO) method Components ii) Work in Progress and Finished Good - Material cost plus appropriate share of labour and
production overheads. iii) Tools - Cost less amortisation based on useful life of the
items ascer tained on a technical estimate by the management.
5. Retirement Benefits
The Company’s contribution to defined contribution schemes such as provident fund, family pension fund and superannuation fund are charged to the profit and loss account as incurred. The Company also provides gratuity benefits to the employees, which is funded through a LIC group gratuity scheme. The liability at the year-end for the same is determined by an actuarial valuation done at year-end and shortfall/surplus over the amount contributed to the scheme is charged off to the profit and loss account or treated as prepaid, as the case may be. Provision for Leave Encashment is made on the basis of actuarial valuation done at the year-end.
6. Revenue Recognition
Sales are recognised upon the transfer of significant risks and rewards of ownership to the customers.
7. Foreign Exchange Transactions
Transactions involving foreign currencies are recorded at the exchange rate prevailing on the transaction date. Foreign currency monetary items are translated at the exchange rate prevailing at the balance sheet date and the gain/loss arising on such translation other than monetary items related to acquisition of fixed assets is credited / charges to profit and loss account. The gain/loss arising on translation of monetary items related to acquisition of fixed assets are adjusted to the cost of fixed assets. Premium or discount arising at the inception of a forward exchange contract is amortised as expense or income over the life of contract.
8. Borrowing Costs
The borrowing costs on funds other than those directly attributable to the acquisition of a qualifying asset i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use, are charged to revenue in the period in which they are incurred.
The borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of that asset.
9. Leases
Lease rental in respect of operating lease arrangements are charged to expense when due as per the terms of the related agreement on a straight-line basis.
Lease rentals in respect of finance lease transactions entered into prior to 31st March 2001 is charged to expense when due as per the terms of the related agreement. Finance lease transactions entered into after this date are considered as financing arrangements in accordance with Accounting Standard 19 and the leased asset is capitalized at an amount equal to the present value of future lease payments and a corresponding amount is recognized as a liability. The lease payments made are apportioned between finance charge and reduction of outstanding liability in relation to leased asset.
10. Taxation
Current Tax
Current tax is provided on the basis of tax payable on estimated taxable income computed in accordance with the applicable provisions of Income tax Act, 1961 after considering the benefits available under the said Act.
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Deferred Taxes
In accordance with Accounting Standard 22 – Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India, the deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as of the balance sheet date.
Deferred Tax Assets arising from temporary timing differences are recognised to the extent there is reasonable certainty that the assets can be realised in future.
B. NOTES TO THE ACCOUNTS
1. Contingent Liabilities : (Rs. in thousands)
As at As at March 31, 2005 March 31, 2004
a) In respect of Excise * 24,303 21,844
b) In respect of Entry Tax 145 107 c) In respect of Sales Tax 4,851 3,147
d) In respect of Service tax 3,523 6,507
e) In respect of Stamp Duty 3,608 4,742
f) In respect of Income Tax 864 1,331
g) In respect of Labour Cases 11,365 4,332
h) The Company has given corporate guarantee in respect of: **
i) Subsidiary company # 553,205 248,160
ii) Joint Ventures 97,500 79,355
i) Bank Guarantees furnished by the company 36,349 42,719
* Excludes interest.
** Actual amount outstanding
Subsidiary Company Rs. 367,311 thousand (Rs. 221,596 thousand)
Joint Ventures Rs. 141,528 thousand (Rs. 65,900 thousand)
# The guarantee given on behalf of MSSL Mideast (FZE), (a subsidiary) is further to be secured by a charge to be
created on all assets including moveable & immoveable properties both present & future subject to prior charges on
current assets created in favour of company’s bankers for working capital loans.
2. Outstanding Capital Commitments : (Rs. in thousands) As at As at
March 31, 2005 March 31, 2004
Unexpired amount of the contracts on capital
accounts and not provided for (net of advance) 328,729 244,905
Outstanding Lease Commitments — 28
3. The small scale industrial undertakings to whom the Company owes and which is outstanding for more than 30 days as at March
31, 2005 are:
Alfa Industries, Alfa Rubber & Springs P Ltd, Ashoka Insulation, Aunde Faze Three Autofab Ltd, Autonix Auto Industries P Ltd, Bafna
Packaging Pvt Ltd, Bhilwara Melba De Wittee Pvt Ltd, Cello Plast Industries, Chaitanya Dip Moulding Works, Chennai Polypack Pvt
Ltd, Concept Engineering India Pvt Ltd, Evergreen Packers, Exotech Plastics Pvt Ltd, Falcon Packers, Grand Industries, Hartech Plastics
P Ltd, Indica Chemical Inds. Ltd, Interface Connectronics Ltd, Interface Microsystems, Krishna Packing Cases, L.M.C.Enterprises P.
Ltd., Microtec Services, Nippon Audiotronix, Pacoline Industries, Paragon Autotech Products Pvt Ltd, Pioneer Industries, Pranay
Insulations And Packaging (P) Ltd, Priya Plastics, Protochem Industries Pvt Ltd, R. Engineering, Raj-Shree Industries, Sakshi Poly Tubes
Pvt Ltd, Senna Polymers, SGR Elastomers (India) Pvt.Ltd, Shree Balasai Industries, Shree Shive Engg Works, Shriram Engineering,
Sree Ganapathy Industries, Techno Auto Components (I) Pvt. Ltd.
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The above information regarding small scale industrial undertaking has been determined to the extent such parties have been identified on the basis of information available with the Company.
4. Managerial Remuneration :(Rs. in thousands)
For the year ended For the year ended March 31, 2005 # March 31, 2004
a) Salaries 2,701 2,349
b) Contribution to Provident and other Funds 313 240
c) Perquisites 2,384 2,567
d) Directors Sitting Fees 235 250
TOTAL 5,633 5,406
# As the employee-wise break up of gratuity and leave encashment is not ascertainable, the amount related to one of the directors has not been included in the above particulars.
Further the appointment and remuneration of one of the managerial personnel is subject to the approval of the company in the annual general meeting.
5. Payment to Auditors (including service tax) :(Rs. in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004 a) Statutory Audit Fee 3,196 2,808
b) Taxation Matters 101 102
c) Reimbursement of Expenses 252 213
d) Others (certification charges & other services) — 2,326
TOTAL 3,549 5,449
6. Value of imports on CIF Basis in respect of :
(Rs. in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
a) Raw Material 1,195,511 907,513
b) Capital Goods 85,371 149,237
c) Spare Parts 34,649 37,348
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7.Expenditure in foreign currency on account of: (Cash Basis) (Net of Taxes)(Rs. in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
a) Royalty 22,760 27,651
b) Travelling 44,314 37,810
c) Interest 1,957 1,397
d) Professional Fee 16,914 27,087
e) Technical Assistance fess 6,730 —
f) Commission — 2,107
g) Others (Includes software charges, training, 35,924 48,113
salary, bank charges, moulds purchased &
Representative office expenses of salary, rent etc)
8. Value of imported and indigenous consumed and percentage of each to total consumption:
A. Raw Materials and Components(Rs. in thousands)
(%) For the year ended (%) For the year ended March 31, 2005 March 31, 2004
a) Imported 40 1,216,342 34 802,190
b) Indigenous 60 1,835,370 66 1,557,191
TOTAL 100 3,051,712 100 2,359,381
B. Stores & Spares (Rs. in thousands)
(%) For the year ended (%) For the year ended March 31, 2005 March 31, 2004
a) Imported 42 33,464 31 20,343
b) Indigenous 58 45,440 69 45,319
TOTAL 100 78,904 100 65,662
9. Actual Production, opening stock, closing stock and sales:
A. Quantity (Numbers in thousands)
For the year ended For the year ended
March 31, 2005 March 31, 2004
Wiring High Rubber Plastic Wiring High Rubber Plastic Harness Tension Comp. Comp. Wires Harness Tension Comp. Comp. Wires Cords Cords (No’s.) (No’s.) (No’s.) (No’s.) (Km’s.) (No’s.) (No’s.) (No’s.) (No’s.) (Km’s.)
Opening Stock 185 7 671 319 9 180 5 339 304 10 Production 12,647 356 21,270 27,991 362 12,858 343 128,718 22,327 360 Total 12,832 363 21,941 28,310 371 13,038 348 129,057 22,631 370 Sales/Consumption 12,583 362 21,941 27,971 358 12,853 341 128,386 22,312 361
Closing Stock 249 1 — 339 13 185 7 671 319 9
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B. Value (Rs. in thousands) For the year ended For the year ended March 31, 2005 March 31, 2004
Wiring High Rubber Plastic Wiring High Rubber Plastic Harness Tension Comp. Comp. Wires Others* Total Harness Tension Comp. Comp. Wires Others* Total Cords Cords
Opening Stock 44,981 1,200 1,613 1,292 24,135 13,415 86,636 20,825 637 405 2,351 17,632 4,093 45,943 Sales 3,826,407 106,132 58,720 959,667 342,413 242,172 5,535,511 2,841,381 105,568 350,966 680,048 239,379 354,344 4,571,686 Closing stock 59,588 9 — 3,263 61,944 28,754 1,53,558 44,981 1,200 1,613 1,292 24,135 13,415 86,636
* Quantitative information in respect of value disclosed in others is not being given separately as the related revenue and costs are less than 10% of total revenue and cost of the Company.
10. Earnings in foreign currency during the year :(Rs. in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
a) FOB value of Exports* 1,031,660 929,415 b) Interest Received from Subsidiary 689 5,471 c) Reimbursement from Customers 1,476 5,482 d) Service Income 6520 8,663
*Include Deemed Exports of Rs. 18,777 thousand (Previous year Rs. 10,883 thousand)
11. Remittance in foreign currency during the year on account of dividend :(Rs. in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
a) Amount remitted 54,338 40,753 b) Number of non-resident shareholders 2 2 c) Number of shares held by them (in thousands) 54,338 10,868 (Refer Schedule 1) d) Year to which dividend pertains Year ended March 31, 2004 Year ended March 31, 2003
12. Licensed and Installed Capacity :(Figures in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
a) Licensed Capacity N.A. N.A. b) Installed Capacity of* a) Wiring Harness (Nos.) N.A N.A b) High Tension Cords (Nos.) N.A N.A c) Rubber Components (M. T.) N.A N.A d) Plastic Components (M. T.) N.A N.A e) Wires (Km’s.) N.A N.A c) Actual Production of a) Wiring Harness (Nos.) 12,647 110,211 b) High tension Cords (Nos.) 356 343 c) Rubber Components (Nos.) 21,270 128,718 d) Plastic Components (Nos.) 27,991 22,327 e) Wires (Km’s.) 362 360
* Not ascertainable as the products manufactured by the company are of variable size & technical complexities.
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13. Raw Materials and Components consumed during the year :(Figures in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Raw Materials and Components Qty Value Qty Value a) Copper (Kg’s.) 5,152 820,939 3,373 457,553
b) Others* — 2,230,773 — 1,901,828
*No single raw material or components account for more than 10% of total consumption.
14. The Company has entered into a Joint Venture Agreement with WOCO Franz Josef Wolf Holding GmbH & WOCO Industrieteknik GmbH on May 16, 2004 to establish a new Joint venture entity and transfer its existing Elastomer business as a going concern comprising of all fixed assets (excluding Land & Building), inventories, other current assets, accruals and liabilities having following book values as at May 31, 2004 at an agreed selling price of Rs. 123,094 thousand.
(Figures in thousands )
Fixed Assets ( Excluding Land and Building) (A) 68,950 Current Assets:
Cash & Bank 11,572 Inventories 42,027 Debtors 39,748
Advances recoverable in cash or in kind 3,633 Total (B) 96,980
Current Liabilities: Sundry Creditors 34,654 Other Liabilities 581 Total (C) 35,235
Total (A) + (B) – (C) 130,695
Pursuant to the above agreement, a company, Woco Motherson Elastomer Ltd. (WMEL) was incorporated on March 16, 2004. During the year, the company has subscribed to 1,675,000 equity shares of Rs 10/- each of WMEL.
15. Earnings per share
For the year ended For the year ended March 31, 2005 March 31, 2004
Weighted Average number of Equity Shares of Re. 1 /- each (Previous Year Re 1/- each ) outstanding at the end of the year 234,889,200 234,889,200 *
Net profit after tax available for equity Shareholders (Rs in thousand) 620,944 484,507
Basic/ Diluted Earnings (in Rupees) Per Share of Re. 1/- each. (Previous Year Re 1/- each ) 2.64 2.06
*Consequent to the issue of equity shares of 78,296,400 as bonus shares in proportion of one equity share for every two equity shares.
16. Leases Leases payment made under cancelable operating leases have been recognized as an expense in the Profit and Loss
Account. The Company has not entered into any non-cancelable operating lease. In respect of finance lease
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17. Deferred Tax
(i) The break up and movement of net deferred tax liability for the year ended March 31, 2005 is as under:
(Rs. in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Timing differences Deferred Deferred Charge/ Deferred Deferred on account of: Tax Assets Tax Liability (Credit) Tax Assets Tax Liability
Depreciation — 128,915 (8,779) — 137,694 Provision for Diminution in Investments 1,017 — (606) 411 — Debtors/Loans & Advances 3,510 — 828 4,338 — Employee Benefits 3,211 — (669) 2,542 — Miscellaneous Expenditure 712 — 644 1,356 —
Total 8,450 128,915 (8,582) 8,647 137,694
Net Deferred Tax Liability 120,465 129,047
(ii) In view of the Company’s past financial performance and future profit projections, the company expects to fully recover the Deferred Tax Assets.
18. The company has the following provision in the books of accounts as on March 31,2005
Description Balance as Additions Utilised/ Balance On during Reversed as on 01.04.2004 year during year 31.03.2005
Warranty 2,000 572 600 1,972
Warranty provision relate to the estimated outflow in respect of warranty for products sold by the company. Due to the very nature of such costs, it is not possible to estimate the timing / uncertainties relating to the outflows of economic benefits
19. Reserve on Amalgamation
The “Reserve on Amalgamation” was created during the financial year 2001-2002 on the amalgamation of erstwhile Motherson Sumi Electric Wires Limited (MSEW) and erstwhile Motherson Automotive Technologies and Engineering Limited (MATE) with the company. The reserve amounting to Rs. 80,352 thousand is in the nature of a free reserve.
20. Related Party disclosures
Related party disclosures, as required by AS18, “Related Party Disclosures”, are given below:
I Relationships where control exists: Subsidiaries of the company: MSSL Mauritius Holdings Limited MSSL Mideast (FZE)
entered into by the company during the year minimum lease payment outstanding and their present value at balance sheet date is as under::
(Rs. in thousands)
Particulars Minimum Lease Finance Present value of payments Charges Lease payments
Current Previous Current Previous Current Previous Year Year Year Year Year Year
Due within one year — 391 — 13 — 378
Consequent to the end of the period of lease the company has purchased the assets.
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MSSL Ireland Pvt. Ltd. Motherson PUDENZ WICKMANN Limited Draexlmaier & Motherson Electrical Systems India Limited MSSL Handels GmbH Motherson Electrical Wires Lanka (P) Ltd. MSSL Hag Toolings Ltd. (FZC) MSSL (S) Pte Ltd WOCO Motherson Elastomers Limited WOCO Motherson Advanced Rubber Technologies Ltd. MSSL GmbH MSSL (GB) Limited
II. Other Related Parties
a. Joint Ventures: Kyungshin Industrial Motherson Limited Schefenacker Motherson Limited WOCO Motherson Ltd. (FZC)
b. Associate Companies: Saks Ancilliaries Limited
c. Key Management Personnel: i) Board of Directors: Mr. V C Sehgal Mr. Toshimi Shirakawa Mr. M S Gujral Mr. R Ganapati Mr. Bimal Dhar Mr. H Murai Mr. A Yamauchi Mr. M Matsushita Maj. Gen Amarjit Singh (Retd) Mr. Pankaj Mital
ii) Other Key Management Personnel: Mr. Vivek Avasthi Mr. Ramesh Dhar Mr. Ravindra Mathur Mr. G.N. Gauba Mr. Vijay Mediratta Mr. N Ramanathan
iii) Relatives of Key Management Personnel: Mr. Laksh Vaaman Sehgal Mrs. Renu Sehgal Ms. Vidhi Sehgal Mrs. Geeta Soni Mrs. Neelu Mehra Mrs. Sunita Gauba Mr. P. Avasthi Mrs. P. Avasthi Mr. Harjit Singh Ms. Upkar Gujral Ms Subina Avasthi d. Companies in which Key Managerial Personnel or their relatives have significant influence:
Motherson Air Travel Agencies Limited Motherson Advanced Systems and Solutions Limited Sumi Motherson Innovative Engineering Limited MothersonSumi Infotech and Designs Limited Motherson Techno Tools Limited
65
Motherson Sehgal Cables Vaaman Auto Industries Ganapati Auto Industries Motherson Auto Private Limited South City Motors Ltd. A Basic Concepts Designs Pty Ltd. A Basic Concepts Designs India Private Ltd. Motherson Engineering Research and Integrated Technologies Limited Motherson Triplex & Optic System Technologies Pvt. Ltd. ASI Motherson Communication Solution Ltd. SWS India Management Support & Services (P) Ltd. Motherson Advance Polymers Ltd. Moon Meadows Pvt. Ltd. Sis Bro Creations Pvt. Ltd. Radha Rani Motors Pvt Ltd. Motherson Advanced Auto Solutions Pvt. Ltd. Motherson Tool Engg. & Design Pvt. Ltd. Motherson Auto Solutions Pvt. Ltd. Motherson Automations Pvt. Ltd. Motherson Advanced Auto Engg. Pvt. Ltd. Motherson Consultancy Pvt. Ltd. Samvardhana Motherson Finance Ltd. ATAR Mauritius Pvt. Ltd.
e. Joint Venturers: Sumitomo Wiring Systems Limited, Japan Lisa Draexlmaier GmbH, Germany Wilhelm Pudenz GmbH, Germany Schefenacker International AG & Co. Kyungshin Industrial Co., Korea WOCO Franz Josef Wolf Holding GmbH Hag Kunststofftechnik GmbH
III. Details of transactions, in the ordinary course of business at commercial terms, and balances with related parties as mentioned in I & II above:
(Rs. in thousands)
S.No. Particulars Parties mentioned Parties mentioned Parties mentioned Parties mentioned in 20 (1) above in 20 (II) (a) & in 20 (II) (b) & in 20 (II) (c) (II) (e) above (d) above above
Current Previous Current Previous Current Previous Current Previous Year Year Year Year Year Year Year Year
1 Sale of Goods 72,585 34,098 510,073 659,450 11,528 6,536 — —2 Rendering of Services 7,649 — 360 1,078 5,696 5,107 — —3 Sale of Fixed Assets 2,383 34 — — 11 — — —4 Purchase of Goods 190,653 23,283 182,930 84,598 346,364 363,431 — —5 Purchase of Fixed Assets 2,851 1,647 3,241 2,246 21,269 7,589 — —6 Purchase of Services 11,920 8,879 12,801 19,887 177,806 173,843 2,349* 2,8647 Reimbursement 3,361 243 21 738 1,776 2,877 — —8 Investments made during the year 17,250 11,346 — 20,000 — — — —9 Royalty — — 33,938 27,940 — — — —10 Remuneration/Sitting Fees of Directors — — — — — — 12,782 12,87311 Interest Income 2,335 5,472 — — — — — —12 Interest Expense 120 — 1,653 1,646 — 2,229 — —13 Dividend Paid — — 39,150 29,363 48,450 33,124 9,761** 4,61514 Dividend Received — — 7,200 — — — — —15 Inter Corporate Deposits accepted during the year 5,000 — — — — 225,000 — — 16 Inter Corporate Deposits repaid during the year 5,000 198,203 — — — 267,500 — —
66
21. Segment Information
a) Information about Primary Business Segments (Rs. in thousands)
Automotive Non Automotive Unallocated Total
Current Previous Current Previous Current Previous Current Previous Year Year Year Year Year Year Year Year
Segment revenueExternal 5,081,867 4,209,893 5,32,901 410,766 21,521 9,195 5,636,289 4,629,854 Inter segment 9,839 6,957 — — — — 9,839 6,957 Total revenue 5,072,028 4,202,936 5,32,901 410,766 21,521 9,195 5,626,450 4,622,897
Results
Segment result 758,216 647,492 92,768 63,767 — — 850,984 711,259 Inter segment — — — — — — — Interest expense(net of Interest income) — — — — 19,566 33,160 19,566 33,160 Other Unallocable (Net of Income) — — — — (18,564) — (18,564) (2,930) Profit before taxation — — — — — — 849,982 681,029 Provision for taxation — — — — 229,038 196,522 229,038 196,522 Net profit after tax — — — — — — 620,944 484,507
Other items Segment assets 3,386,912 2,691,529 265,133 174,195 177,250 158,957 3,829,295 3,024,681 Segment liabilities 827,196 598,027 77,168 36,798 1,183,969 1,002,006 2,088,333 1,636,831 Capital expenditure 720,277 420,693 48,064 16,726 — — 768,341 437,419 Depreciation 256,631 265,292 7,592 3,373 — — 264,223 268,665
17 Inter Corporate Deposits placed during the year 2,866 77,222 — — — — — — Balances as at year end 18 Investments 75,928 58,678 103,448 103,448 25,730 25,730 — — 19 Security Deposits Received — — — — 2,743 — 542 — 20 Security Deposits Given — — — — 8,066 2,626 — — 21 Loans & Advances Payable — — 73,890 76,140 — — — — 22 Loans Receivable 17,587 13,689 936 — 5,969 — — — 23 Guarantees Closing 553,205 248,160 97,500 79,355 — — — — 24 Trade Payable 30,030 7,644 67,173 27,358 81,185 63,574 — — 25 Trade Receivable 14,361 20,794 90,844 74,377 19,446 5,247 — —
* Rent of Rs.2, 349 thousand paid to relatives, Mr. V.C Sehgal, Mr. Laksh Vaaman Sehgal, Mrs. Renu Sehgal, Ms. Vidhi Sehgal & Mr. P. Avasthi.**. Dividend of Rs. 9,761 thousand paid to relatives, Mr. Laksh Vaaman Sehgal, Mr. V.C. Sehgal, Mrs. Neelu Mehra Mrs. Geeta Soni, Ms. Vidhi Sehgal,
Mr Pankaj Mital, Mr M.S. Gujral, Mr G.N.Gauba, Mr Vivek Avasthi, Mrs. Renu Sehgal, Ms. Padma Avasthi, Mrs Subina Avasthi, Mr Upkar Gujral & Mr Harjit Singh
(Rs. in thousands)
S.No. Particulars Parties mentioned Parties mentioned Parties mentioned Parties mentioned in 20 (1) above in 20 (II) (a) & in 20 (II) (b) & in 20 (II) (c) (II) (e) above (d) above above
Current Previous Current Previous Current Previous Current Previous
b) Information about Secondary Business Segments (Rs. in thousands) India Outside India* Unallocated TotalRevenue by geographical markets Current Previous Current Previous Current Previous Current Previous Year Year Year Year Year Year Year Year
External 4,547,636 3,664,777 1,057,901 948,925 20,913 9,195 5,626,450 4,622,897 Total 4,547,636 3,664,777 1,057,901 948,925 20,913 9,195 5,626,450 4,622,897 Carrying amount of segment assets 3,447,260 2,752,861 204,785 112,863 177,250 158,957 3,829,295 3,024,681 Addition to fixed assets 766,321 435,424 2,020 1,995 — — 768,341 437,419
* Includes Europe, Americas, Asia Pacific and Middle East
67
c) Composition of Business Segments
The Company is organised into two main business segments, namely: Automotive Wiring Harness, High Tension Cords, Wire, Plastic Components, Rubber Components Non Automotive Wiring Harness, Pen-Stamp Assembly, Plastic Components, Household Wires, Plates
d) Inter Segment Transfer Pricing
Inter Segment prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, with an overall optimisation objective for the company.
22. Interests in Joint Ventures:
The company’s interests, as a venture, in jointly controlled entities as at March 31, 2005 are: -
Name of the Company Country of % Voting power % Voting power Incorporation held As at held As at March 31, 2005 March 31, 2004
Schefenacker Motherson limited India 49% 49% Kyungshin Industrial Motherson Limited India 50% 50%
The following amounts represent the Groups share of the assets and liabilities and revenue and expenses of the joint venture and are included in the consolidated balance sheet and consolidated profit & loss account:
(Rs. in thousands)
Particulars 2005 2004 Assets Fixed Assets 143,925 73,511 Capital Work in Progress 4,737 16,450 Current Assets 286,665 185,379 Miscellaneous Expenditure 8 16 Liabilities Secured Loans 72,429 43,179 Unsecured Loans 6,000 986 Current Liabilities & Provisions 215,302 136,953 Deferred Tax (Net) (4,096) 1,464 Reserves & Surplus 42,570 (10,356) Revenues Sales 880,350 653,739 Other Income 8,485 5,406 Expenditure 803,473 614,449 Profit before Tax 85,362 44,696 Provision for Tax 20,102 10,996 Profit after Tax 65,260 33,700
22. The company is in the process of completing the required transfer pricing study. The impact if any, which may arise consequent to the study, has not been considered in these accounts and would be accounted on completion of the said study.
23. The corresponding figures of previous year have been regrouped, rearranged wherever necessary.
for and on behalf of the Board
V.C. SEHGAL A. YAMAUCHI PANKAJ MITAL Chairman Whole time Director Chief Operating Officer
. G.N. GAUBA Co. Secretary & V.P. Finance
Place: NoidaDate : May 27, 2005
68
INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT,1956
Balance Sheet Abstract and Company’s General Business Profile
I. Registration Details
Registration No. State Code Balance Sheet Date Date Month Year
II. Capital Raised during the year (Amount in Rs. Thousands) Public Issue Rights Issue
Bonus Issue Private Placement
III. Position of Moblisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities Total Assets Sources of Funds Paid - up Capital Reserves & Surplus
Secured Loans Unsecured Loans
Deferred Tax (Net)
Application of Funds Net Fixed Assets Investments
Net Current Assets Misc. Expenditure
Accumulated Losses
IV. Performance of the Company (Amount in Rs. Thousands) Turnover Total Expenditure
Profit/Loss before Tax Profit/Loss after Tax
Earning per share in Rs. Dividend Rate %
V. Generic Names of three principal products/services of the Company (as per monetary terms) Product Description Item Code
for and on behalf of the Board
V.C. SEHGAL A. YAMAUCHI PANKAJ MITAL Chairman Whole time Director Chief Operating Officer
Place : Noida G.N. GAUBA Date : May 27, 2005 Co. Secretary & V.P. Finance
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71
AUDITORS’ REPORT
To the Directors’ of MOTHERSON SUMI SYSTEMS LIMITED
1. We have audited the attached Consolidated Balance Sheet of Motherson Sumi Systems Limited and its subsidiaries, joint ventures and associate as at March 31, 2005 the Consolidated Profit and Loss Account for the year ended on that date annexed thereto, and the Consolidated Cash Flow Statement for the year ended on that date, which we have signed under reference to this report. These consolidated financial statements are the responsibility of the management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
2. We have 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 prepared, in all material respects, in accordance with an identified financial reporting framework and 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. We did not audit the financial statements of certain subsidiaries, joint ventures and associate, whose financial statements reflect total assets of Rs. 1,462,678 thousand as at March 31, 2005 and total revenues of Rs. 2,557,576 thousand for the year ended on that date. These financial statements have been audited by other auditors, whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included in respect of these subsidiaries, joint ventures and associate, is based solely on the report of the other auditors.
4. We report that the consolidated financial statements have been prepared by the company in accordance with the requirements of Accounting Standard 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited financial statements of Motherson Sumi Systems Limited and its subsidiaries, joint ventures and associate, included in the consolidated financial statements.
5. On the basis of the information and explanations given to us and on consideration of the separate audit reports on individual audited financial statements of Motherson Sumi Systems Limited and its aforesaid subsidiaries, joint ventures and associate, in our opinion, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:
(a) in the case of the consolidated balance sheet, of the consolidated state of affairs of Motherson Sumi Systems Limited and its subsidiaries as at March 31, 2005;
(b) in the case of the consolidated profit and loss account, of the consolidated results of operations of Motherson Sumi Systems Limited and its subsidiaries for the year ended on that date; and
(c) in the case of the consolidated cash flow statement, of the consolidated cash flows of Motherson Sumi Systems
Limited and its subsidiaries for the year ended on that date. KAUSHIK DUTTA Partner Membership No.: F88540 For and on behalf ofPlace: Noida Price Waterhouse Date: May 27, 2005 Chartered
Accountants
72
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2005 (Figures in Rs. thousands)
Schedule As at As at March 31, 2005 March 31, 2004
SOURCES OF FUNDS Shareholders’ Funds Share Capital I 234,889 156,593 Reserves & Surplus II 1,964,792 1,452,296
2,199,681 1,608,889 Minority Interest Capital 42,767 25,296 Reserves 31,784 (3,965) Loan Funds Secured Loans III 942,220 817,890 Unsecured Loans IV 221,404 115,395 Deferred tax liability (net) 123,963 133,652 (Refer A(12) & B (7) on Schedule XIII)
TOTAL 3,561,819 2,697,157
APPLICATION OF FUNDS Fixed Assets Gross Block V 3,946,598 3,014,014 Less: Depreciation 1,498,642 1,198,992 Net Block 2,447,956 1,815,022 Capital Work in Progress 117,360 23,689
2,565,316 1,838,711 Investments VI 37,277 37,924 Current Assets, Loans and Advances VII Inventories 1,058,344 675,687 Sundry Debtors 836,740 696,259 Cash & Bank Balances 209,024 125,606 Loans & Advances 454,627 420,132
2,558,735 1,917,684
Less: Current Liabilities & Provisions VIII Current Liabilities 1,218,003 868,229 Provisions 381,506 228,933
1,599,509 1,097,162
NET CURRENT ASSETS 959,226 820,522
Miscellaneous Expenditure (To the extent not written off or adjusted) IX — –
TOTAL 3,561,819 2,697,157Significant Accounting Policies and XIIINotes forming part of the Accounts
This is the Consolidated Balance Sheet The schedules referred above form integral part of the Consolidated referred to in our report of even date Balance Sheet for and on behalf of the Board
KAUSHIK DUTTA V.C. SEHGAL A. YAMAUCHI PANKAJ MITALPartner Chairman Whole time Director Chief Operating OfficerM. No.: F 88540For and on behalf of Price Waterhouse G.N. GAUBA Chartered Accountants Co. Secretary & V.P. FinancePlace: NoidaDate : May 27, 2005
73
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31,2005(Figures in Rs. thousands)
Schedule For the year ended For the year ended March 31, 2005 March 31, 2004
INCOME Sale of Finished Goods (Gross) 8,827,251 6,681,882 Less: Excise duty 1,014,997 782,530 Sale of Finished Goods (Net) 7,812,254 5,899,352 Other Income X 107,115 71,434
TOTAL 7,919,369 5,970,786
EXPENDITURE Manufacturing and other expenses XI 6,417,660 4,766,067 Depreciation & Amortisation 341,156 304,151 Interest (net) XII 33,539 44,790 Miscellaneous Expenditure written off IX — 814
TOTAL 6,792,355 5,115,822
Share of Profit in Associate (Refer A(2) & B (3B) on Schedule XIII) 3,525 2,540
Profit Before Taxation 1,130,539 857,504Tax ExpenseProvision for Current Income Tax 283,487 211,419Provision for Deferred IncomeTax (Refer A (12) & B (7) on Schedule XIII) (9,689) (3,877)Provision for Wealth Tax 530 500 856,211 649,462Less: Income Tax for earlier years (2,083) 435
Profit After Taxation 858,294 649,027 — Concern share 839,972 652,382 — Minority 18,322 (3,355)Add: Balance brought forward from previous year 792,525 416,799
Surplus Available For Appropriation 1,632,497 1,069,181
APPROPRIATIONS Transfer to General Reserve 160,378 100,000 Proposed Dividend 234,889 156,593 Tax on Dividend 32,943 20,063 Tax paid on Dividend by consolidated company 923 — Balance Carried to Balance Sheet 1,203,364 792,525
TOTAL 1,632,497 1,069,181
Earning per share (Basic/Diluted) of face valueRe. 1/- each 3.58 2.78(Refer B (6) on Schedule XIII)Significant Accounting Policies and XIII Notes forming part of the Accounts
This is the Consolidated Profit & Loss Account The schedules referred above form integral part of thereferred to in our report of even date Consolidated Profit & Loss Account for and on behalf of the Board
KAUSHIK DUTTA V.C. SEHGAL A. YAMAUCHI PANKAJ MITALPartner Chairman Whole time Director Chief Operating OfficerM. No.: F 88540For and on behalf of Price Waterhouse G.N. GAUBA Chartered Accountants Co. Secretary & V.P. FinancePlace: NoidaDate : May 27, 2005
74
CONSOLIDATED CASH FLOW STATEMENT (Figures in Rs. thousands)
2004-2005 2003-2004
A. CASH FLOW FROM OPERATING ACTIVITIES
Net (loss)/profit before tax 1,130,539 857,504 Adjustments for : Share of Profit in Associate (3,525) (2,540) Depreciation 341,156 304,151 Interest Expense 39,858 48,430 Interest Income (6,319) (3,640) Income from Investment - Dividends (883) (80) Lease Rent 16,162 10,100 (Profit)/Loss on Fixed Assets sold 1,430 (6,866) Miscellaneous Expenditure written off - 814 Debts / Advances Written off 342 398 Provision for Bad & Doubtful Debts / Advances (1,318) 1,575 Liability no longer required written back (27,097) (8,419) Provision for Gratuity & Leave Encashment 5,481 8,030 Provision for diminution in value of Investments 2,956 (883) Unrealised foreign exchange (gain) /loss 7,788 10,240 Provision for warranty (283) 199
Operating profit before working capital changes 1,506.287 1,219,013
Adjustments for changes in working capital : - (INCREASE)/DECREASE in Sundry Debtors (139,616) (225,312) - (INCREASE)/DECREASE in Other Receivables (78,722) (271,660) - (INCREASE)/DECREASE in Inventories (382,659) (213,997) - INCREASE/(DECREASE) in Trade and Other Payables 346,117 396,941
Cash generated from operations 1,251,407 904,985
- Taxes (Paid)/Received (Net of TDS) (221,475) (184,198)
Net cash from operating activities 1,029,932 720,787
B. CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets Including CWIP - Addition During the year (1,029,246) (672,535) Proceeds from Sale of fixed assets 14,063 25,661 Purchase of investments (31) - Lease Rent Payment (16,162) (10,081) Interest Received (Revenue) 6,805 3,230 Dividend Received 883 80 Loan advanced (71,020) — Loan received back 18,365 —
Net cash used in investing activities (1,005,323) (724,665)
75
C. CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from minority Share holders’ 52,290 — Proceeds from long term borrowings Receipts 296,687 459,429 Payments (179,094) (274,797) Proceeds from short term borrowings Receipts 100,000 13,835 Payments (986) (60,572) Proceeds from Cash Credits (net) 5,088 53,167 Finance Lease Rent (interest part only) - (98) Interest Paid (38,881) (49,777) Dividend Paid (156,088) (117,268) Dividend Tax Paid (20,063) (15,048) Net cash used in financing activities 58,953 8,871
Net Increase/(Decrease) in Cash & Cash Equivalents 83,562 4,993
Cash and cash equivalents as at March 31 , 2004 125,606 121,126
Cash and cash equivalents as at March 31 , 2005 209,168 126,119
Cash and cash equivalents comprise
Cash In Hand 3,647 3,366 Cheque In Hand 3,210 4,036 Deposit Account 43,807 12,115 Balance with Banks 158,360 106,089 Total Cash and cash equivalents 209,024 125,606 Cash and Cash Equivalents include :
Cash & bank balances 209,024 125,606 Net Unrealised Loss on Foreign Currency Cash & Equivalents 144 513 209,168 126,119
(I) The above Cash Flow Statement has been prepared under the Indirect Method as set out in the Accounting Standard - 3 on Cash Flow Statement issued by the Institute of Chartered Accountant of India.
(ii) Previous year’s figures have been regrouped wherever necessary to conform to the current year’s classification.
(iii) Following non cash transactions have not been considered in the cash flow statement :
Tax deducted at source on income
(iv) Figures in brackets indicate cash outgo.
This is the Consolidated Cash Flow Statement for and on behalf of the Boardreferred to in our report of even date
KAUSHIK DUTTA V.C. SEHGAL A. YAMAUCHI PANKAJ MITALPartner Chairman Whole time Director Chief Operating OfficerM.No.: F 88540 For and on behalf of Price Waterhouse G.N. GAUBA Chartered Accountants Co. Secretary & V.P. Finance
Place: Noida Date : May 27, 2005
(Figures in Rs. thousands)
2004-2005 2003-2004
76
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
SCHEDULE ISHARE CAPITAL*
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
Authorised 300,000,000 Equity Shares of Rs. 1/- each (Previous Year 200,000,000 Equity Shares of Rs. 1/- each) 300,000 200,000
Issued 234,892,400 Equity Shares of Rs. 1/- each (Previous Year 156,596,000 Equity Shares of Rs. 1/- each) 234,892 156,596
Subscribed and Paid up 234,889,200 Equity Shares of Rs. 1/- each (Previous Year 156,592,800 Equity Shares of Rs. 1/- each) 234,889 156,593 (Of the above shares 6,090,000 (6,090,000) shares are allotted as fully paidup pursuant to a contract for consideration other than cash)(Of the above shares 165,292,400 (86,996,000) shares are allotted as fully paidbonus shares by way of capitalisation of share premium & general reserve).
TOTAL 234,889 156,593
Note :
*During the year the company has made allotment of 78,296,400 equity shares of Re. 1/- each as bonus shares in proportion of one equity share for every two equity shares. The credit of bonus shares have been given to respective beneficiary accounts of the shareholders by the depository
SCHEDULE II
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
Revaluation ReserveAs per Last Balance Sheet 20,032 20,032Additions during the year — —Deductions during the year — 20,032 — 20,032
Reserve on amalgamation(Refer B(10) on Schedule XIII)As per Last Balance Sheet 80,352 80,352 Additions during the year — —Deductions during the year — 80,352 — 80,352
Securities Premium AccountAs per Last Balance Sheet 55,278 55,278 Additions during the year — —Deductions during the year* 55,278 — — 55,278
77
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
General ReserveAs per Last Balance Sheet 480,428 380,428Additions during the year 160,378 100,000Deductions during the year* 23,018 617,788 — 480,428
Exchange Reserve on Consolidation(Refer A(9) on Schedule XIII)As per Last Balance Sheet (6,238) (746)Additions during the year 2,141 (5,492)Deductions during the year — (4,097) — (6,238)
Capital Reserve on Consolidation(Refer A(2) on Schedule XIII)As per Last Balance Sheet 29,919 29,919Additions during the year 17,434 —Deductions during the year — 47,353 — 29,919
Profit and Loss AccountAs per Last Balance Sheet 792,525 416,799Additions during the year 571,217 475,726Deductions during the year 160,378 1,203,364 100,000 792,525
TOTAL 1,964,792 1,452,296
* Utilised for capitalisation by way of bonus shares (Refer note on Schedule 1)
78
SCHEDULE IIISECURED LOANS
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
1 Short Term Loans (i) From Banks* — Rupee Loan 191,901 241,373 — Foreign currency Loan 90,953 45,120
(ii) From Others** — Rupee Loan 8,726 — 2 Long Term Loans# (i) From Banks*** — Rupee Loan 36,883 19,637 — Foreign currency Loan 371,262 397,084 (ii) From Others**** — Rupee Loan 77,572 114,676 — Foreign currency Loan 164,923 —
TOTAL 942,220 817,890
Secured Loans referred above are :
* Rs. 26,820 thousand is secured against hypothecation of stocks and book debts, a guarantee from promoters of the company of Kyungshin Industrial Motherson Limited, Rs. 21,077 thousand is secured by hypothecation over plant & machinery, inventories, stocks and a corporate guarantee from promoters of the company of Motherson Electrical Wires Lanka Private Limited, Rs. 8,119 thousand secured by first charge by way of hypothecation of all current assets including present and future stocks, book debts and other specified moveable assets of Woco Motherson Elastomer Limited and first charge on entire fixed assets of the company present & future, balance secured by first charge by way of hypothecation of all present and future stocks, book debts and other specified moveable assets of the Company .
** Rs. 8,726 thousand secured by hypothecation of specific moulds, tools & dies of Schefenacker Motherson Limited used for production of components.
*** Rs. 415 thousand secured by way of hypothecation of specific vehicles of Schefenacker Motherson Limited, Rs. 36,468 thousand is secured against fixed assets, a guarantee from promoters of the company of Kyungshin Industrial Motherson Limited, Rs. 5,391 thousand is secured by hypothecation over plant & machinery, inventories, stocks and a corporate guarantee from promoters of the company of Motherson Electrical Wires Lanka Private Limited and balance secured by first pari-passu charge on entire fixed assets both moveable & immoveable of the company present & future, these are also secured by way of deposit of title deeds of specified properties, further Rs. 269,342 thousand are also secured by second pari-passu charge on the entire current assets of the company.
**** Rs. 77,572 thousand secured by hypothecation of specific moulds, tools & dies used for production of components and Rs. 164,923 thousand secured by way of corporate guarantee given by shareholder of MSSL Mideast (FZE).
# Long terms loans due within a Year are Rs. 96,395 thousand (Previous Year Rs. 138,168 thousand).
79
SCHEDULE IVUNSECURED LOANS
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
Short Term Loans — Privately Placed debentures* 100,000 — — Other than Banks** 32,400 986Long Term Loans#
From Other than Banks — Rupee Loan 6,000 38,269 — Foreign currency Loan 83,004 76,140
TOTAL 221,404 115,395
* Reedemable on May 13,2005 . Further the debentures amounting to Rs 50,000 thousand have put / call option at any time from seven days of issue.
** Repayable on demand # Long Term Loan due within a Year Rs. 73,890 thousand (Previous Year Rs. 32,400 thousand)
SCHEDULE VFIXED ASSETS(Refer A(3), A(4) on Schedule XIII) (Figures in Rs. thousands)
GROSS BLOCK DEPRECIATION NET BLOCK
Particulars As at Addi- Dele- Exchange Total Upto Depre- Depre- Exchange Upto As at As at March 31, tions tions/ Trans- as at March 31, ciation ciation on Trans- March 31, March 31, March 31, 2004 during Sale/ lation March 31, 2004 for the deletions/ lation 2005 2005 2004 the Adjust- Adjust- 2005 year sale/ Adjust- year ments ment Adjust- ment ment
Leasehold Land 60,574 162,891 — — 223,465 2,094 2,216 — — 4,310 219,155 58,480 Freehold Land 37,050 49,495 — — 86,545 — — — — — 86,545 37,050 Leasehold improvements 31,255 21,605 662 69 52,267 11,287 9,553 661 1 20,180 32,087 19,968Building 465,561 274,417 1,48 3,259 741,752 61,536 19,704 85 103 81,258 660,494 404,025 Plant & machinery 2,079,156 383,706 11,985 1,122 2,451,999 957,867 247,890 3,648 438 1,202,547 1,249,452 1,121,289Furniture, fixtures &Office equipments* 108,672 19,298 3,055 301 125,216 27,263 11,179 307 136 38,271 86,945 81,409Computers 103,371 23,458 1,649 131 125,311 71,045 19,822 1,104 45 89,808 35,503 32,326Vehicles** 101,294 45,654 10,686 352 136,614 42,198 26,771 8,227 95 60,837 75,777 59,096Technical Knowhow fees 22,581 3,390 22,544 2 3,429 21,421 2,554 22,544 — 1,431 1,998 1,160 Business & Commercial Rights 4,500 — 4,500 — — 4,281 219 4,500 — — — 219
TOTAL 3,014,014 983,914 56,566 5,236 3,946,598 1,198,992 339,908 41,076 818 1,498,642 2,447,956 1,815,022Previous Year 2,437,492 623,102 42,772 (3,808) 3,014,014 920,816 302,903 23,976 (751) 1,198,992
Capital Work in Progress 117,360 23,689
2,565,316 1,838,711
* Includes Rs. Nil (Previous Year Rs. 225 thousand) in respect of office equipment held under finance lease.** Includes Rs. 296 thousand (Previous Year Rs. 843 thousand) in respect of Vehicles acquired under finance lease.
80
SCHEDULE VIINVESTMENTS(Refer A(5) on Schedule XIII)
(Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
Long-term Investments1. In Associate
Saks Ancilliaries Limited- Goodwill On Consolidation 6,239 Less : Amortisation 3,744 2,495 3,743
- Net Assets Value On Consolidation 12,004 Share of Profit in Associate 3,525 15,529 12,004
2. In Others 15,006 18,368
Short Term Investments 4,247 3,809
TOTAL 37,277 37,924
SCHEDULE VIICURRENT ASSETS, LOANS AND ADVANCES (Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
A. Current Assets
1. Stock in Trade (Refer A(6) on Schedule XIII)
(i) Finished Goods 271,895 128,614 (ii) Work in Progress 140,645 113,079 (iii) Raw Material & Components 509,817 342,118 (iv) Goods in Transit(Raw Material & Components) 111,195 83,718 (v) Store & Spares 24,792 8,158
TOTAL (I) 1,058,344 675,687
2. Sundry Debtors (Unsecured, unless otherwise stated) (i) Outstanding for more than six months Considered Good 8,762 1,449 Considered Doubtful 6,116 5,412
14,878 6,861Less : Provision for doubtful debts 6,116 5,412
8,762 1,449
81
(ii) Other Debts Considered good 827,978 694,810 Considered Doubtful 2,811 4,186
830,789 698,996 Less : Provision for doubtful debts 2,811 4,186 827,978 694,810
TOTAL (2) 836,740 696,259
3. Cash and Bank Balances (i) Cash in hand 3,647 3,366 (ii) Cheques in hand 3,210 4,036 (iii) Balance with Banks in (a) Current Accounts 155,997 104,261 (b) Deposit account* 43,807 12,115 (c) Dividend Account 2,363 1,828
TOTAL (3) 209,024 125,606
TOTAL A (1+2+3) 2,104,108 1,497,552
B. Loans and Advances (Unsecured, unless otherwise stated)
(i) Advances recoverable in cash or in kind or for value to be received ** Considered good 296,557 328,166 Considered doubtful 4,750 5,397
301,307 333,563Less : Provision for doubtful advances 4,750 5,397
296,557 328,166(ii) Deposits with Excise, Customs & Govt Authorities 158,070 91,966
TOTAL B 454,627 420,132
GRAND TOTAL (A+B) 2,558,735 1,917,684
* Includes Deposits pledged with Excise, Sales Tax & Custom authorities Rs. 955 thousand ( Previous Year Rs. 30 thousand) and margin money Rs. 2,560 thousand (Previous Year Rs. 2,796 thousand)
** Includes capital advances of Rs. 67,843 thousand (Previous Year Rs. 89,173 thousand)
SCHEDULE VII (CONTD.)CURRENT ASSETS, LOANS AND ADVANCES (Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
82
SCHEDULE VIIICURRENT LIABILITIES AND PROVISIONS (Figures in Rs. thousands)
As at As at March 31, 2005 March 31, 2004
A. Current Liabilities (i) Sundry Creditors Small Scale Industrial Undertakings 23,480 13,424 Others 939,274 711,284 (ii) Advance from customers 129,806 45,010 (iii) Other Liabilities 120,585 95,135 (iv) Investor Education & Protection Fund 2,364 1,860 (v) Interest Accrued but not due 2,494 1,516
1,218,003 868,229
B. Provisions (Refer A(7), A(12) & B(8) on Schedule XIII) (i) For Dividend (including tax thereon) 267,832 176,656 (ii) For Wealth tax 530 1,500 (iii) For Income tax (net)* 88,272 31,103 (iv) For Employee Benefit 21,878 16,397 (v) For Warranty 2,994 3,277
381,506 228,933
TOTAL 1,599,509 1,097,162
* Net of Advance tax Rs. 524,659 thousand (Previous Year Rs.319,200 thousand)
SCHEDULE IX MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)
As at As at March 31, 2005 March 31, 2004
(i) Deferred Revenue Expenses — 780 Less: Written off during the year — 780 — —(ii) Preliminary Expenses — 34 Less: Written off during the year — 34 — —
TOTAL (i+ii) — —
83
SCHEDULE XOTHER INCOME (Figures in Rs. thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
1) Other Income (a) Dividend Received* - From Others 883 80 (b) Rent 8,562 8,232 (c) Change in carrying amount of current investments — 883 (d) Service Income 9,227 8,663 (e) Sundries written back 27,097 8,419 (f) Miscellaneous Income 32,403 31,640 (g) Exchange fluctuation(net) 28,943 6,651 (h) Profit on sale of Fixed assets — 6,866
TOTAL 107,115 71,434
Tax deducted on source (a) Rent 2,699 1,687 (b) Misc.Income 963 918
* Includes dividend from Short term Non-Trade investments 883 80
SCHEDULE XICOST OF MATERIALS ANDMANUFACTURING & OTHER EXPENSES (Figures in Rs. thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Materials consumedOpening Stock Raw materials 342,118 248,919 Work-in-progress 113,079 67,253 Finished goods 128,614 88,714 Increase in opening stock on account of early adoption ofthe revised provision of AS-27 Raw materials — 3,706 Work-in-progress — 780 Finished goods — 442 583,811 409,814
Add : Purchases of Raw materials 4,615,197 3,318,518 Less : Closing Stock Raw materials (509,817) (342,118) Work-in-progress (140,645) (113,079) Finished goods (271,895) (128,614) (922,357) (583,811)
84
SCHEDULE XI (CONTD.)COST OF MATERIALS ANDMANUFACTURING & OTHER EXPENSES (Figures in Rs. thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Total consumption for goods sold 4,276,651 3,144,521 Salary, wages, bonus etc 552,256 403,760 Contribution to Provident & Other Fund 46,997 39,610 Staff Welfare 91,800 66,870 Electricity, Water and Fuel 167,113 127,398 Repairs and Maintenance : Machinery 79,869 76,114 Building 49,639 35,220 Others 63,123 59,774 Consumption of Store and Spare parts 106,467 78,691 Conversion charges 116,945 99,712 Lease rent (Refer A(11) & B(9) on Schedule XIII) 16,162 10,100 Rent 70,198 52,872 Rates & taxes 9,208 9,836 Insurance 26,056 20,250 Donation 5,501 3,189 Travelling 138,935 113,033 Freight & forwarding 130,978 76,411 Royalty 45,297 35,108 Cash Discount 14,465 12,421 Commission 1,257 3,409 Loss on sale of fixed assets(net) 1,430 — Provision for dimunition in value of Short Term Investments 2,956 — Bad Debts / Advances written off 342 398 Doubtful Debts/ Advances — 1,575 Legal & professional expenses 152,731 88,488 Miscellaneous expenses 251,284 207,307
TOTAL 6,417,660 4,766,067
SCHEDULE XIIINTEREST (NET) (Figures in Rs. thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Interest Expense - Privately Placed Debentures 3,678 — - Fixed loans 23,478 32,906 - Others 12,702 15,524
Less : Interest Income (Gross) - From Bank Deposits 388 506 - From Income Tax Refund 1,452 — - From Others 4,479 3,134
TOTAL 33,539 44,790
Tax deducted on source Interest Income Others 598 169
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SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS
SCHEDULE XIII
SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS
A. SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Accounting
The Financial Statements are prepared under the historical cost convention as modified to include revaluation of certain fixed assets as indicated in (3) below, in accordance with applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant presentational requirements of the Companies Act, 1956.
2. Principles of Consolidation
The Consolidated Financial Statements relate to Financial Statements of Motherson Sumi Systems Limited (‘the Company’) and it’s Subsidiary Companies, Joint Ventures and Associates (‘the Group’).
The consolidated financial statements have been prepared on the following basis:
a) Subsidiaries
- The subsidiaries have been consolidated by applying Accounting Standard 21 “Consolidated Financial Statements”.
- Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are no longer consolidated from the date of disposal.
- The financial statements of the company & its Subsidiary Companies have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra-group balances & intra-group transactions resulting in unrealized profits or losses.
- The excess of the Company’s portion of equity and reserves of the Subsidiary Company as at the time of its investment is recognized in the financial statements as Capital Reserve.
b) Investments in business entities over which the Company exercises joint control and the company does not hold majority voting power are accounted for using proportionate consolidation in accordance with Accounting Standard 27 “Financial Reporting of Interest in Joint Venture”.
c) Investments in Associates (entity over which the Company exercises significant influence, which is neither a subsidiary nor a joint venture) are accounted for using the equity method in accordance with Accounting Standard 23 “Accounting for Investments in Associates in Consolidated Financial Statements”.
The consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the Company’s separate financial statements.
3. Fixed Assets
i) The fixed assets except as stated in (ii) below are stated at cost less accumulated depreciation. Cost of acquisition or construction is inclusive of inward freight, duties and taxes and other incidental expenses.
ii) The fixed assets of the Component Division of erstwhile Motherson Auto Components Engineering Limited (MACE) have been stated at an amount inclusive of appreciation arising on revaluation of the assets by an approved valuer on December 31, 1998. The method adopted for revaluation of the assets are as under:
a) Land: Prevailing market rate of land as on the date of revaluation.
b) Buildings, Indigenous Plant and Machinery, Furniture and Fixtures, Moulds and Dies : Replacement value.
c) Vehicles: Current price of the vehicles and reducing depreciation for the numbers of years of use and also
considering the value in secondary car market.
d) Air conditioning and Electrical Equipment: Present value of the assets taking into consideration the original cost and price inflation index.
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The Company charges assets Costing less than Rs 5,000 to expense, which could otherwise have been included as Fixed Asset, because the amount is not material in accordance with ‘ Accounting Standard 10– Accounting for Fixed Assets’
4. Depreciation
i) Depreciation on fixed assets except as stated below, is provided from the month the asset is ready for commercial production on a pro-rata basis at the SLM rates prescribed in schedule XIV to the Companies Act, 1956 or based on useful life, whichever is higher. The following assets are amortized, on the straight line method over a period of their estimated useful lives, at rates higher than those prescribed in schedule XIV of the Companies Act, 1956:
Rates (%) Computers 33.33 Vehicles 25 Plant & Machinery (Racks, Stands & Trolleys) 100 Specific Identified Plant & Machinery 25
ii) In respect of revalued assets, depreciation is being provided on the revalued amounts over the remaining useful life of the assets at the SLM rates. Leasehold Land is amortised over the balance period of lease.
iii) Technical Know How fees paid to a foreign collaborator by erstwhile Elastomer Division is being depreciated on a straight line basis over the remaining tenure of the agreement.
iv) The amount paid for business and commercial rights by the erstwhile Elastomer Division is being depreciated over the remaining tenure of agreement.
5. Investments
Investments other than subsidiaries, joint ventures and associates, which are accounted for separately as per 2 above, are classified into long term and current investments. Long term investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long term investments.
Current investments are carried at lower of cost and fair value. Fair value in the case of quoted investments refers to the market value of the investments arrived at on the basis of last traded prices as at the year-end.
6. Inventory
Stores and spares, loose tools are valued at cost or net realisable value, whichever is lower. Raw materials, components, finished goods and work in progress are valued at cost or net realisable value, whichever
is lower. The basis of determining cost for various categories of inventories are as follows:
i) Stores and Spares, Raw Materials and - First in First Out (FIFO) method Components ii) Work in Progress and Finished Goods - Material cost plus appropriate share of labour and production
overheads. iii) Tools - Cost less amortisation based on useful life of the items
ascertained on a technical estimate by the management.
7. Retirement Benefits
In respect of the companies incorporated in India, the Group makes defined contribution for provident fund, family pension fund and superannuation fund and the same are charged to the profit and loss account as incurred. In respect of Gratuity, which is funded through a LIC group gratuity scheme, the Groups liability at the year-end is determined by an actuarial valuation done at year-end and shortfall/surplus over the amount contributed to the scheme is charged off to the profit and loss account or treated as prepaid, as the case may be.
In respect of the companies incorporated outside India, where applicable the companies makes defined contribution on a monthly basis towards retirement benefit plans. Provision for Leave Encashment is made on the basis of actuarial valuation done at the year-end.
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8. Revenue Recognition
Sales are recognised upon the transfer of significant risks and rewards of ownership to the customers.
9. Foreign Exchange Transactions
Transactions involving foreign currencies are recorded at the exchange rate prevailing on the transaction date. Foreign currency monetary items are translated at the exchange rate prevailing at the balance sheet date and the gain/loss arising on such translation other than monetary items related to acquisition of fixed assets is credited / charges to profit and loss account. The gain / loss arising on translation of monetary items related to acquisition of fixed assets are adjusted to the cost of fixed assets. Premium or discount arising at the inception of a forward exchange contract is amortised as expense or income over the life of contract.
For the purpose of consolidation, the Company has translated Assets and Liabilities of subsidiaries outside India at the year-end exchange rate and Income and Expenditure items at an average exchange rate that approximates to the exchange rate prevailing on the date of transaction. The resultant translation adjustment is reflected as a separate component of Shareholders’ funds as “ Exchange Reserve on Consolidation”.
10. Borrowing Costs
The borrowing costs on funds other than those directly attributable to the acquisition of a qualifying asset i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use, are charged to revenue in the period in which they are incurred.
The borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of that asset.
11. Leases
Lease rental in respect of operating lease arrangements are charged to expense when due as per the terms of the related agreement on a straight line basis.
Lease rentals in respect of finance lease transactions entered into prior to 31st March 2001 is charged to expense when due as per the terms of the related agreement. Finance lease transactions entered into after this date are considered as financing arrangements in accordance with Accounting Standard 19 and the leased asset is capitalized at an amount equal to the present value of future lease payments and a corresponding amount is recognized as a liability. The lease payments made are apportioned between finance charge and reduction of outstanding liability in
relation to leased asset.
12. Taxation
Current Tax Current tax is provided on the basis of tax payable on estimated taxable income computed in accordance with the
applicable provisions after considering the tax allowances & exemptions.
Deferred Taxes In accordance with Accounting Standard 22 – Accounting for Taxes on Income, issued by the Institute of Chartered
Accountants of India, the deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as of the balance sheet date.
Deferred Tax Assets arising from temporary timing differences are recognised to the extent there is reasonable certainty that the assets can be realised in future.
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B. NOTES TO THE ACCOUNTS
1. Contingent Liabilities : (Rs. in thousands)
As at As at March 31, 2005 March 31, 2004
a) In respect of Excise * 25,884 23,288 b) In respect of Entry Tax 145 107 c) In respect of Sales Tax 5,104 3,818 d) In respect of Service Tax 4,361 6,507 e) In respect of Stamp Duty 3,608 4,742 f) In respect of Income Tax 893 1,331 g) In respect of Labour Cases 11,400 4,332 h) The Company has given corporate guarantee in respect of: ** a) Joint Ventures 97,500 79,355 i) Bank Guarantees furnished by the company 41,551 42,719
* Excludes interest. ** Actual amount outstanding Joint Ventures Rs. 141,528 thousand (Rs. 65,900 thousand)
2. Outstanding Capital Commitments : (Rs. in thousands)
As at As at March 31, 2005 March 31, 2004
Unexpired amount of the contracts on capital accounts and not provided for (net of advance) 344,168 339,775 Outstanding Lease Commitments — 28
3. Consolidation:
A. Details of Motherson Sumi Systems Limited subsidiaries which have been considered in these consolidated accounts are as follows:
Name of the Company Country of % Voting power held As at Incorporation 31st March, 2005
MSSL Mauritius Holdings Limited Mauritius 100% MSSL Mideast (FZE) UAE 100% Motherson Electrical Wires Lanka Pvt. Ltd. Srilanka 100% MSSL Handels GmbH Austria 100% MSSL (S) Pte Ltd. Singapore 100% Motherson PUDENZ WICKMANN Limited India 56.13% Draexlmaier & Motherson Electrical Systems India Limited India 74% WOCO Motherson Elastomers Limited India 50.01% WOCO Motherson Advanced Rubber Technologies Ltd. India 100% MSSL GmbH Germany 100% MSSL (GB) Limited U.K. 100% MSSL Ireland Private Limited (through MSSL Mauritius Holdings Limited) Ireland 100% MSSL Hag Toolings Ltd. (FZC) (through MSSL Mauritius Holdings Limited) UAE 53.33%
B. Details of Associate Company are as follows:
Name of the Company Country of % Voting power held As at Incorporation 31st March, 2005
SAKS Ancillaries Limited India 40.01%
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C. Details of Joint Venture Companies which have been considered in these consolidated accounts are as follows:
Name of the Company Country of % Voting Reporting Dates Incorporation power held used for As at 31st March, 2005 Consolidation
Schefenacker Motherson Limited India 49% 31st December 2004 Kyungshin Industrial Motherson limited India 50% 31st March 2005 WOCO Motherson Limited (FZC) (through
MSSL Mauritius Holdings Limited) UAE 33.33% 31st December 2004 4. Payment to the Company’s Auditors (including service tax) :
(Rs. in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004 a) Statutory Audit Fee 5,781 6,004 b) Reimbursement of Expenses 391 285 c) Taxation Matters 293 327 d) Others 801 3,338
TOTAL 7,266 9,954
5. The Company has entered into a Joint Venture Agreement with WOCO Franz Josef Wolf Holding GmbH & WOCO Industrieteknik GmbH on May 16, 2004 to establish a new Joint venture entity and transfer its existing Elastomer business as a going concern comprising of all fixed assets (excluding Land & Building), inventories, other current assets, accruals and liabilities having following book values as at May 31, 2004, at an agreed sale price of Rs. 123,094 thousand:
(Rs. in thousands)
Fixed Assets (Excluding Land and Building) (A) 68,950
Current Assets:
Cash & Bank 11,572
Inventories 42,027
Debtors 39,748
Advances recoverable in cash or in kind 3,633
Total (B) 96,980
Current Liabilities:
Sundry Creditors 34,654
Other Liabilities 581
Total (C) 35,235
Total (A) + (B) – (C) 130,695
Pursuant to the above agreement, a company, Woco Motherson Elastomer Ltd. (WMEL) was incorporated on
March 16, 2004. During the year, the company has subscribed to 1,675,000 equity shares of Rs 10/- each at par being
50.01% of equity share capital of WMEL. Balance 49.99% of equity share capital & 100% of preference share capital of
Rs. 10/- each was subscribed by the joint venture partner at a premium of Rs. 20/- per share. The excess of our share in
the net worth of the Company over our cost of investment amounting to Rs. 17,434 thousand has been accounted for
as Capital Reserve in Consolidated Financial Statements.
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6. Earnings per share For the year ended For the year ended March 31, 2005 March 31, 2004
Weighted Average number of Equity Shares of Re. 1 /- each outstanding at the end of the year 234,889,200 234,889,200 * Net profit after tax available for equity Shareholders (Rs in thousand) 839,972 652,382 Basic/ Diluted Earnings (in Rupees) Per Share of Re. 1/- each. (Previous Year Rs. 1/- each ) 3.58 2.78
*Adjusted consequent to the issue of equity shares of 78,296,400 as bonus shares during the current year in proportion of one equity share for every two equity shares.
7. Deferred Tax (i) The break up of net deferred tax liability as at 31 March, 2005 is as under:
(Rs. in thousands)
For the year ended For the year ended March 31, 2005 March 31, 2004
Timing differences Deferred Deferred Charge/ Deferred Deferred on account of: Tax Assets Tax Liability (Credit) Tax Assets Tax Liability
Depreciation — 142,752 (8,890) — 151,642 Provision for Diminution in Investments 1,017 — (606) 411 — Debtors/Loans & Advances 3,922 — 416 4,338 — Employee Benefits 3,546 — (608) 2,938 — Miscellaneous Expenditure 761 — 715 1,476 — Carried Forward losses/unabsorbed depreciation 9,543 — (716) 8,827 —
Total 18,789 142,752 (9,689) 17,990 151,642
Net Deferred Tax Liability 123,963 133,652
(ii) In view of the Company’s past financial performance and future profit projections, the company expects to fully recover the Deferred Tax Assets.
8. The company has the following provision in the books of accounts as on March 31,2005 :
Description Balance as Additions Utilised/ Balance
On during Reversed as on
01.04.2004 year during year 31.03.2005
Warranty 3,277 595 878 2,994
Warranty provision relate to the estimated outflow in respect of warranty for products sold by the company. Due
to the very nature of such costs, it is not possible to estimate the timing / uncertainties relating to the outflows of
economic benefits.
9. Leases Lease payment made under cancelable operating leases have been recognized as an expense in the Profit and Loss
Account. The Company has not entered into any non-cancelable operating lease. In respect of finance lease entered into by the company during the year minimum lease payment outstanding and their present value at balance sheet date is as under:
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a. For Vehicles (Rs. in thousands) Particulars Minimum Lease Finance Present value of payments Charges Lease payments Current Previous Current Previous Current Previous Year Year Year Year Year Year Due within one year 40 559 14 34 26 525 Due within 2 to 5 years 10 — 4 — 6 —
b. For Office Equipments (Rs. in thousands) Particulars Minimum Lease Finance Present value of payments Charges Lease payments Current Previous Current Previous Current Previous Year Year Year Year Year Year
Due within one year — 180 — 36 — 144
The Company has the option to buy back the assets at the end of the Finance Lease Agreements.
10. Reserve on Amalgamation
The “Reserve on Amalgamation” was created during the financial year 2001-2002 on the amalgamation of erstwhile Motherson Sumi Electric Wires Limited (MSEW) and erstwhile Motherson Automotive Technologies and Engineering Limited (MATE) with the company. The reserve amounting to Rs 80,352 thousand is in the nature of a free reserve.
11. Related Party Disclosures
Related party disclosures, as required by AS18, “Related Party Disclosures”, are given below:
I. Relationships where control exists:
a. Joint Ventures:
Kyungshin Industrial Motherson Limited Schefenacker Motherson Limited WOCO Motherson Limited (FZC)
b. Associate Companies:
Saks Ancillaries Limited
c. Key Management Personnel:
i) Board of Directors:
Mr. V.C. Sehgal Mr. Toshimi Shirakawa Mr. M S Gujral Mr. R Ganapati Mr. Bimal Dhar Mr. H Murai Mr. A Yamauchi Mr. M Matsushita Maj. Gen Amarjit Singh (Retd) Mr. Pankaj Mital
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ii) Other Key Management Personnel:
Mr. Vivek Avasthi Mr. Ramesh Dhar Mr. Ravindra Mathur Mr. G.N. Gauba Mr. Vijay Mediratta Mr. N Ramanathan
iii) Relatives of Key Management Personnel: Mr. Laksh Vaaman Sehgal Mrs. Renu Sehgal Ms. Vidhi Sehgal Mrs. Geeta Soni Mrs. Neelu Mehra Mrs. Sunita Gauba Mr. P. Avasthi Mrs. P. Avasthi Mr. Harjit Singh Ms. Upkar Gujral Ms Subina Avasthi
d. Companies in which Key Managerial Personnel or their relatives have significant influence: Motherson Air Travel Agencies Limited Motherson Advanced Systems and Solutions Limited Sumi Motherson Innovative Engineering Limited MothersonSumi Infotech and Designs Limited Motherson Techno Tools Limited Motherson Sehgal Cables Vaaman Auto Industries Ganapati Auto Industries Motherson Auto Private Limited South City Motors Ltd. A Basic Concepts Designs Pty Ltd. A Basic Concepts Designs India Private Ltd. Motherson Engineering Research and Integrated Technologies Limited Motherson Triplex & Optic System Technologies Pvt. Ltd. ASI Motherson Communication Solution Ltd. SWS India Management Support & Services (P) Ltd. Motherson Advance Polymers Ltd. Moon Meadows Pvt. Ltd. Sis Bro Creations Pvt. Ltd. Radha Rani Motors Pvt Ltd. Motherson Advanced Auto Solutions Pvt. Ltd. Motherson Tool Engg. & Design Pvt. Ltd. Motherson Auto Solutions Pvt. Ltd. Motherson Automations Pvt. Ltd. Motherson Advanced Auto Engg. Pvt. Ltd. Motherson Consultancy Pvt. Ltd. Samvardhana Motherson Finance Ltd. ATAR Mauritius Pvt. Ltd.
e. Joint Venturers:
Sumitomo Wiring Systems Limited, Japan Lisa Draexlmaier GmbH, Germany Wilhelm Pudenz GmbH, Germany Schefenacker International AG & Co. Kyungshin Industrial Co., Korea WOCO Franz Josef Wolf Holding GmbH Hag Kunststofftechnik GmbH
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II. Details of transactions, in the ordinary course of business at commercial terms, and balances with related parties as mentioned in 1 above:
(Rs. in thousands)
S.No. Particulars Parties mentioned Parties mentioned Parties mentioned in 11 (a) & in 11 I(b) & (d) in 11 I(c) (e) above above
Current Previous Current Previous Current Previous Year Year Year Year Year Year
1 Sale of goods 881,765 670,696 11,528 6,618 — — 2 Rendering of Services 360 1,854 5,945 5,971 — — 3 Sale of Fixed assets — 9,125 11 — — — 4 Purchase of Goods 299,137 135,928 349,689 364,705 — — 5 Purchase of Fixed Assets 16,515 6,103 22,409 9,970 — — 6 Purchase of Services 38,371 18,815 233,633 202,089 3,887* 6,339 7 Reimbursement 708 2,468 1,995 2,973 — — 8 Investments made during the year — 20,813 — — — — 9 Royalty 41,524 27,940 — 30 — — 10 Proceeds from Joint Venturer as capital / share premium in subsidiaries 52,290 — — — — — 11 Intercorporate deposits accepted during the year 2,818 — 17,500 267,500 — — 12 Intercorporate deposits repaid during the year 18,365 5,360 39,550 225,000 — — 13 Intercorporate Deposit placed during the year 7,000 — 27,050 — — — 14 Security Deposits Received — — 2,743 — 542 — 15 Security Deposits Given — — 8,066 2,696 — 16 Remuneration/Sitting Fees of directors — — — — 15,397 16,925 17 Loans & Advances placed with related party — 73,075 — — — — 18 Loans & Advances received from related party — — — — — — 19 Interest income 3,193 1,783 213 — — — 20 Interest expense 2,178 1,646 221 2,229 — — 21 Dividend Paid 41,459 29,363 48,450 33,124 9,761** 4,615 22 Dividend Received 7,200 — — — — — Balances as at year end 23 Investments 103,448 104,257 25,730 25,730 — — 24 Loans & Advances Payable 82,624 82,009 — — — — 25 Loans Receivable 57,294 74,078 5,969 — — — 26 Guarantees Closing 97,500 79,355 — — — — 27 Trade Payables 106,908 48,673 86,461 68,055 — — 28 Trade Receivables 141,493 76,811 19,446 5,522 — — 29 Minority Interest 74,551 21,331 — — — —
* Rent of Rs. 2,349 thousand paid to relatives, Mr. V.C Sehgal, Mr. Laksh Vaaman Sehgal, Mrs. Renu Sehgal, Ms. Vidhi Sehgal & Mr. P. Avasthi.
**. Dividend of Rs. 9,761 thousand paid to relatives, Mr. Laksh Vaaman Sehgal, Mr. V.C. Sehgal, Mrs. Neelu Mehra, Mrs. Geeta Soni, Mr./Mrs. Vidhi Sehgal, Mr. Pankaj Mital, Mr. Gujral, Mr. G.N.Gauba, Mr. Vivek Avasthi, Mrs. Renu Sehgal, Mrs. Padma Avasthi, Mrs. Subina Avasthi, Mr. Upkar Gujral & Mr. Harjit Singh
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12. SEGMENT INFORMATION
a) Information about Primary Business Segments (Rs. in thousands)
Automotive Non Automotive Unallocated Total
Current Previous Current Previous Current Previous Current Previous Year Year Year Year Year Year Year Year
Segment revenueExternal 6,831,549 5,100,949 1,088,214 867,599 9,445 9,195 7,929,208 5,977,743Inter segment 9,839 6,957 — — — — 9,839 6,957 Total revenue 6,821,710 5,093,992 1,088,214 867,599 9,445 9,195 7,919,369 5,970,786
Results Segment result 902,238 719,750 251,823 177,073 — — 1,154,061 896,824Interest expense (net of Interest income) — — — — 33,539 44,790 33,539 44,790Other Unallocable (net of income) — — — — (6,492) (2,930) (6,492) (2,930)Profit of Associates — — — — 3,525 2,540 3,525 2,540Profit before taxation — — — — — — 1,130,539 857,504Provision for taxation — — — — — — 272,245 208,477Net profit after tax — — — — — — 858,294 649,027- Concern share — — — — — — 839,972 652,382- Minority — — — — — — — (18,322) (3,355)
Other Items Segment Assets 4,427,058 3,196,141 696,993 560,253 37,277 37,925 5,161,328 3,794,319Segment Liabilities 1,191,993 758,156 120,573 149,220 1,649,081 1,278,055 2,961,647 2,185,431Capital Expenditure 906,637 507,710 77,277 115,392 — — 983,914 623,102Depreciation & Amortisation 320,180 291,388 20,976 12,763 — — 341,156 304,151Non-cash items other than depreciation — 814 — — — — — 814 b) Information about Secondary Business Segments
(Rs. in thousands)
India Outside India* Unallocated Total
Revenue by geographical markets Current Previous Current Previous Current Previous Current Previous Year Year Year Year Year Year Year Year
External 5,679,519 4,446,361 2,230,405 1,515,230 9,445 9,195 7,919,369 5,970,786 Total 5,679,519 4,446,361 2,230,405 1,515,230 9,445 9,195 7,919,369 5,970,786 Carrying amount of segment assets 3,947,383 3,019,453 1,176,668 736,941 37,277 37,925 5,161,328 3,794,319 Addition to fixed assets 828,894 468,082 132,159 155,020 — — 983,914 623,102
* Includes Europe, Americas, Asia Pacific and Middle East
c) Composition of Business Segments
The Company is organised into two main business segments, namely:
Automotive Wiring Harness, High Tension Cords, Wire, Plastic Components, Rubber Components, Blade Fuse Link, Fuse Holder, Cockpit Assembly Non Automotive Wiring Harness, Pen-Stamp Assembly, Plastic Components, Household Wires, Plates
d) Inter Segment Transfer Pricing
Inter Segment prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, with an overall optimisation objective for the company.
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for and on behalf of the Board
V.C. SEHGAL A. YAMAUCHI PANKAJ MITAL Chairman Whole time Director Chief Operating Officer
. Place : Noida G.N. GAUBADate : May 27, 2005 Co. Secretary & V.P. Finance
13. Interest in Joint Ventures
The company’s interests, as a venture, in jointly controlled entities (including joint venture through a subsidiary) as at March 31, 2005 are: -
Name of the Company Country of % Voting power % Voting power Incorporation held As at held As at March 31, 2005 March 31, 2004
Schefenacker Motherson limited India 49% 49% Kyungshin Industrial Motherson Limited India 50% 50% WOCO Motherson Limited (FZC) (through MSSL Mauritius Holdings Limited) UAE 33.33% 33.33%
The following amount represents the Groups share of the assets and liabilities and revenue and expenses of the joint venture and are included in the consolidated balance sheet and consolidated profit & loss account:
(Rs. in thousands) Particulars 2005 2004
Assets Fixed Assets 156,412 83,755 Capital Work in Progress 4,736 16,450 Inventory 105,759 85,448 Cash & Bank 37,482 13,784 Debtors 113,643 87,123 Loans & Advances 58,228 16,016 Miscellaneous Expenditure 8 16
Liabilities Secured Loans 72,429 43,179 Unsecured Loans 6,000 986 Current Liabilities & Provisions 214,096 138,771 Deferred Tax (Net) 838 1,463
Reserves & Surplus 78,957 14,245
Revenues Sales 946,483 705,334 Other Income 9,916 6,144 Expenditure 851,867 653,313 Profit before Tax 104,532 58,165 Provision for Tax 20,102 10,996 Profit after Tax 84,430 47,169
14. The Company has acquired 26% of equity and preference share capital of Draexlmaier & Motherson Electrical Systems India Ltd (DMSIL) from Lisa Draexlmaier GmbH, Germany. Pursuant to this acquisition DMSIL has become 100% subsidiary of the company. Further Board of Directors in their meeting held on May 27, 2005 has approved the amalgamation of Draexlmaier & Motherson Electrical Systems India Limited with the company w.e.f. 1st April 2005 subject to necessary approvals.
15. The company is in the process of completing the required transfer pricing study. The impact if any, which may arise consequent to the study, has not been considered in these accounts and would be accounted on completion of the said study.
16. The corresponding figures of previous year have been regrouped, rearranged wherever necessary.
MSSL GmbH
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DIRECTORS’ REPORT
Your Directors have pleasure in presenting First Report together with the audited accounts of the Company for the period ended on March 31, 2005.
The Company was incorporated on 28th January, 2005 as a wholly owned subsidiary of MSSL Mideast (FZE), which is incorporated as a Free Zone Establishment (FZE) with limited liability in Sharjah, UAE. MSSL Mideast (FZE) is 100% subsidiary of Motherson Sumi Systems Limited (“the Ultimate Holding Company”), which is incorporated in India.
The main object of your company is maintenance and management (including acquisition and transfer) of ownership property, specifically of companies which develop, produce and sell rubber, synthetic, plastic and metal products, as well as trade with such products, machines, tools and other accessories.
The Board of Directors place on record the support extended by shareholders, associates, bankers and various government and regulatory authorities.
For and on behalf of the Boardfor MSSL GmbH
Place: Frankfurt Jen CordesDate: 21st May, 2005 General Manager
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDER OF MSSL GmbH
We have audited the accompanying balance sheet of MSSL GmbH (“the company”) as at 31 March 2005 and the related statements of income and cash flows for the period 28 January 2005 to 31 March 2005. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with 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 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.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the company as at 31 March 2005 and the results of its operations and its cash flows for the period 28 January 2005 to 31 March 2005 in accordance with International Financial Reporting Standards.
Place: New Delhi Lovelock & LewesDate: 21 May, 2005 Chartered Accountants
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BALANCE SHEET AS AT 31st MARCH, 2005
As At Schedule March 31, 2005
Notes 2005 2005 Euros Rs in thousandsAssets
Current assetsOther receivables and prepayments 2 381 22Cash and cash equivalents 3 249,153 14,122
Total assets 249,534 14,144
Equity and LiabilitiesCapital and reservesShare capital 4 250,000 14,170Retained earnings (3,516) (199) 246,484 13,971
Current liabilitiesTrade and other payables 5 3,050 173
3,050 173
Total equity and liabilities 249,534 14,144
These financial statements were approved on May 21, 2005 and were signed by: for and on behalf of MSSL GmbH
Jens CordesGeneral Manager
101
STATEMENT OF INCOME FOR THE PERIOD 28 JANUARY 2005 TO 31 MARCH 2005
Notes For the period For the period January 2005 to January 2005 to 31 March 2005 31 March 2005 Euros Rs in thousands
Interest income 401 23 401 23Expenses
General and administration 6 3,917 222Profit/(Loss) (3,516) 199
Statement of changes in equity for the period 28 January 2005 to 31 March 2005 Notes Share Retained Capital Earnings Total Total Euros Euros Euros Rs. in thousands
At 1 April 2004 — — — —
Adjustment for the year 4 250,000 (3,516) 246,484 13,971
At 31 March 2005 250,000 (3,516) 246,484 13,971
Rs in thousands 14,170 (199) 13,971
Statement of cash flows for the period 28 January 2005 31 March 2005
Notes For the period 28 For the period 28 January 2005 to January 2005 to 31 March, 2005 31 March, 2005 Euros Rs. in thousands
Operating activitiesLoss for the period 28 January 2005 to 31 March 2005 (3,516) (199)
Changes in working capital:
Trade and other payables 5 3,050 173
Other receivables and prepayments 2 (381) (22)Net cash (used in)/provided by operating activities (847) (48)
Financing activities
Proceeds from issuance of share capital 4 250,000 14,170
Net cash (used in) / provided by financing Activities 250,000 14,170
Net (decrease)/increase in cash and cash equivalents 249,153 14,122
Cash and cash equivalents, beginning of the year — —
Cash and cash equivalents, end of the year 3 249,153 14,122
102
ACCOUNTING POLICIES
The significant accounting policies adopted by the company in the preparation of these financial statements are as follows:
Basis of preparation
The financial statements have been prepared in accordance with and comply with International Financial Reporting Standards, including International Accounting Standards (“IAS”) and the interpretations issued by the International Accounting Standards Board. The financial statements have been prepared under the historical cost convention.
The financial statements are presented in Euros as this is the functional currency for its transactions as the Company is incorporated in Germany
ReceivablesReceivables are carried at original cost less provision, if any, made for impairment of these receivables. A provision for impairment of receivables is established when there is an objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits and current accounts with banks.
Trade and Other Payables
Trade and other payables have been reported in the amount of the anticipated use by the Company.
Other Income Interest income is recognised on an accrual basis unless collectibility is in doubt.
Notes to the financial statements for the period 28 January 2005 to 31 March 2005
1. Incorporation and activities
MSSL GmbH (“the Company”) is a wholly owned subsidiary of MSSL Mideast (FZE), which is incorporated as a Free Zone Establishment (FZE) with limited liability in Sharjah, UAE. MSSL Mideast (FZE) is 100% subsidiary of Motherson Sumi Systems Limited (“the Ultimate Holding Company”), which is incorporated in India. MSSL GmbH was incorporated on January 28, 2005 in Germany as Limited Liability Company, with its registered office at District Court, Frankfurt am Main, under registration number HRB 74553. The purpose of the company is the maintenance and management (including acquisition and transfer) of ownership property, specifically of companies which develop, produce and sell rubber, synthetic, plastic and metal products and other products of an equivalent or similar nature, as well as machines, tools and other accessories for the manufacture of such products, as well as trade with such products, machines, tools and other accessories and perform a holding function and provide consulting and other similar services for such companies. The company can participate in, take-over, represent and set up branch offices of equivalent or similar companies. The Company is also entitled to transact all deals appropriate for directly or indirectly serving its purpose.
103
2. Other receivables and prepayments
As at As at 31st March 2005 31st March 2005 Euros Rs in thousands
Prepayments Corporation tax and solidarity supplement 127 7 Input tax deductible in following year 138 8 VAT for current business year 116 7
Total 381 22
3. Cash and Cash equivalent
Cash on hand 100 6 Cash at Bank
- in Current account 9,053 513 - in Deposit account 240,000 13,603
Total 249,153 14,122
At 31 March 2005, the current and deposit account were placed with a branch of an international bank. The deposits with bank carry an interest rate of 1.30% per annum.
Notes to the financial statements for the period 28 January 2005 to 31 March 2005 (continued)
4. Share capital
Share capital comprises of 1 share of Euros 250,000.
5. Trade and other payables As at As at 31st March 2005 31st March 2005 Euros Rs in thousands
Trade payables 1,000 57 Other payables and accruals 2,050 116
Total 3,050 173
6. General and administration expenses
For the period 28 For the period 28 January 2005 to January 2005 to 31 March 2005 31 March 2005 Euros Rs in thousands
Legal and Professional 3,917 222
Total 3,917 222
104
7. Fair value
The fair value of the company’s financial assets and liabilities at 31 March 2005 approximated their net book amounts as reflected in these financial statements.
8. Comparatives
This being first year of Company’s incorporation, hence no comparative figures are available.
Note : Indian Rupee equivalent of figures have been arrived at by applying the year end interbank exchange rate Euro 1 = Rs 56.68 and do not form part of the reports of MSSL GmbH as made out in accordance with the laws of the country of incorporation.
ELECTRONIC CLEARING SERVICES (ECS) MANDATE FORMAT
MCS LimitedSri Venketash BhavanW – 40, Okhla Industrial Area, Phase - IINew Delhi – 110 020
UNIT : MOTHERSON SUMI SYSTEMS LIMITEDREF : PAYMENT OF DIVIDEND
I wish to participate in the Electronic Clearing Service (ECS)
I do not wish to participate in the ECS. However, kindly print the bank particulars given below on the dividend warrantbeing issued to me.
(Tick in the box provided above to indicate your option)
Name of the Shareholder : _________________________________
Folio No. : _________________________________
Address : _________________________________
_________________________________Particulars of Bank
a) Name of the Bank : __________________________________
b) Branch Address : __________________________________
c) 9 digit Code Number :of the Bank & Branchas appearing on theMICR cheque issuedby the Bank
d) Account Type :(Please Tick) Savings Current Cash
Credit
e) Ledger Folio No. :(if any) of your BankAccount _________________________________
f) Account No. : _________________________________
I hereby declare that the particulars given above are correct and complete. I undertake to inform any subsequent changesin the above particulars before the relevant closure date(s). If the payment is delayed or not effected at all for anyreason(s) beyond the control of the Company, I would not hold the Company responsible.
Date: ________________________Signature of the Shareholder
Notes :1) Please ensure that the details submitted by you are correct as any error therein could result in the dividend amount
being credited to a wrong account.2) The nine digit code number of your bank and branch is mentioned on the MICR band next to the cheque number.
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NOMINATION FORM
[To be filled in by individual(s)]
To, From Name of shareholder and address_________________________________
Motherson Sumi Systems Limited
C/o MCS Limited, _________________________________Sri Venakatesh Bhawan,W – 40, Okhla Industrial Area, Folio No _________________________________Phase – II,New Delhi – 110 020. No. of Shares _________________________________
I/We am/are holder(s) of shares of the Company as mentioned above. I/We nominate the following person in whom allrights of transfer and/or amount payable in respect of Equity Shares shall vest in the event of my/our death.
Nominee’s Name Age
To be furnished in case the nominee is a minor Date of Birth
Guardian’s Names & Address*
Occupation of 1 Service 2 Business 3 Student 4 Household
Nominee Tick (�) 5 Professional 6 Farmer 7 Others
Nominee’s Address
Pin Code
Telephone No. FAX No.
Email Address STD Code
Specimen Signature
of Nominee/
Guardian*
*To be filled in case nominee is a minor
Kindly take the aforesaid details on recordThanking you,Yours faithfully Date . . . . . . . . . . . .
Name and address of equity shareholder Signature (as per specimen
{as appearing on the Certificate(s)} with Company)
Sole/1st holder (address)
2nd holder
3rd holder
4th holder
Witnesses (two)
Name and Address Signature & Date
1.
2.
Proxy.p65 7/26/2005, 2:31 AM107
INSTRUCTIONS:
1. Please read the instructions given below very carefully and follow the same to the letter. If the form is not filled asper instructions, the same will be rejected.
2. Individuals can make the nomination only. This facility is not available to non individuals including society, trust, bodycorporate, partnership firm, Karta of Hindu Undivided Family and holders of power of attorney. If the shares areheld jointly all joint holders must sign (as per the specimen registered with the Company) the nomination form.
3. A holder of Shares can nominate a minor and in that event the holder should give the name and address of theGuardian.
4. The nominee cannot be a trust, society, body corporate, partnership firm, Karta of Hindu Undivided Family, or apower of attorney holder. A non–resident Indian can be a nominee on re–patriable basis.
5. Transfer of Shares in favour of a nominee shall be a valid discharge by the Company against the legal heir(s).
6. Only one person can be nominated for a given folio.
7. Details of all holders in a folio need to be filled in; else the request will be rejected.
8. The nomination will be registered only when it is complete in all respects including the signature of (a) all registeredholders (as per specimen lodged with the Company) and (b) the nominee.
9. This nomination will stand rescinded whenever the Shares in the given folio are entirely transferred or dematerialised.
10. Upon receipt of a duly executed nomination form, the Registrar and Transfer Agent of the Company will registerthe form and allot a registration number. The registration number and folio no. should be quoted by the nominee inall future correspondence.
11. The nomination can be varied or cancelled by executing fresh nomination form.
12. The Company will not entertain any claim other than that of a registered nominee, unless so directed by anycompetent court.
13. The intimation regarding nomination / nomination form should be filed in duplicate with the Registrar and TransferAgents of the Company who will return one copy thereof to the Shareholders.
14. For shares held in dematerialised mode nomination is required to be filed with the Depository Participant in theirprescribed form.
FOR OFFICE USE ONLY
Nomination Registration Number
Date of Registration
Checked by (Name and Signature)
Proxy.p65 7/26/2005, 2:31 AM108
