DRIVEN BY PASSION - Hero MotoCorp New Two Wheelers · PDF file · 2014-05-12DRIVEN BY PASSION A N N U A L R E P O R T 0 7 0 8 ... SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION

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Hero Honda Motors Limited

34, Community Centre, Basant Lok,

Vasant Vihar, New Delhi-110 057, India

PH. 91-11-2614 2451, 2614 4121

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India and Bharat co-exist today. India comprises of fast-

growing cities and towns; Bharat is made up of villages

thentering the economic mainstream. As we enter our 25

year, we seek to walk and march with both India and Bharat.

0203

HCONTENT

Corporate Profile

Chairman’s Message

Board of Directors

Management Discussion & Analysis

Social Responsibility

Directors’ Report

Corporate Governance Report

FAQ’s

Auditors’ Report

Balance Sheet

Profit & Loss Account

Cash Flow Statement

US GAAP

04

10

14

16

18

24

28

32

36

43

47

71

74

78

79

80

115

Industry and Segment Dynamics

Results and Financial Analysis

Operation, Reach & Supply Chain

People And Environment

In some ways, Hero and Honda are like

two volumes of a single book. What has

made the book a bestseller is the fact

that right from the outset, the co-authors

knew the script they had to write in order

to be successful in the Indian market.

Over the course of two and a half

decades, both partners have fine-

tuned and perfected their roles. As the

largest motorcycle producer in the

world, Honda has been able to

consistently provide technical know-

how, design specifications and R&D

innovations to its most prolific affiliate in

the world, Hero Honda. This has led to

the development of world class, value-

for-money motorcycles and scooters

for the Indian market.

On its part, the Hero Group has taken on

the singular and onerous responsibility

of developing the supply chain,

ramping up production facilities, setting

up distribution networks and creating

customers.

Since both partners are completely

focused on their respective skills, they

have been able not just to complement

each other, but also draw from each

others strengths. In the process, Hero

Honda has gone on to create history, by

becoming one of the most successful

joint ventures in the world.

Today, every second motorcycle sold in

the country is a Hero Honda. There are

more than 22 million Hero Hondas on

“If your actions inspire others to dream more, learn more, do more and become more, you are a leader.”

CORPORATE PROFILE

Indian roads today. There are more

Hero Honda bikes on this country's

roads than the total population of some

European countries put together!

The company's growth in the two-

wheeler market in India is the result of an

intrinsic ability to increase reach in new

geographies and growth markets. Hero

Honda's motorcycles and scooters are

sold and serviced through a network of

over 3500 customer touch points.

These outlets comprise of a mix of

dealers, service centres and stockists

located across rural and urban India,

and with every passing year, the

network is augmented.

Hero Honda has built two world-class

manufacturing facilities at Dharuhera

and Gurgaon in Haryana. These two

units now churn out over 3 million bikes

per year. The company's third, and its

largest and most sophisticated plant at

Haridwar has also gone on-stream.

All this has happened in the span of just

two and a half decades!

Leaders create pathways where none

exist. In the 1980’s – much before

“green” became a fashionable word,

Hero Honda became the first company

in India to prove that it was possible to

drive a vehicle without polluting the

roads. The company introduced new

generation motorcycles that set

industry benchmarks for fuel thrift and

low emission.

0405

A legendary ‘Fill it - Shut it - Forget it'

campaign captured the imagination of

commuters across India and Hero

Honda sold millions of bikes purely on

the commitment of increased mileage.

Today, as Hero Honda enters its silver

jubilee year, a riveting ‘Dhak Dhak Go’

sets the tone for India's Gen Next, its

emerging classes and its aspiring

classes.

The true test of champions comes

when the going gets tough. Champions

show the way by doing the basic things

right. In a particularly difficult year, when

the rest of the motorcycle industry

shrunk by 14 per cent, Hero Honda has

protected its turf and has actually grown

its market share, by re-establishing a

lead of more than one million bikes over

its nearest rival.

Not one to rest on its laurels, the

company believes the best is yet to

come. Today, Hero Honda is powering

its way through a market that —despite

the short term hiccup—hasn't still

unleashed its true potential, since

barely 2 per cent of the population has

been penetrated so far.

Not surprisingly, the company is in no

mood to take its hand off the throttle. As

Brijmohan Lall Munjal, the Chairman,

Hero Honda Motors succinctly puts it,

"We pioneered India's motorcycle

industry, and it's our responsibility now

to take the industry to the next level. We'll

do all it takes to reach there.'’

0607

WE CELEBRATE EVENTS AND WE CELEBRATE TIME.

BUT OUR MOST IMPORTANT CELEBRATIONS, ARE OF ACHIEVEMENTS.

CHAIRMAN’S MESSAGE

1011

Dear Shareholders,

As I sat on the stage during the

inauguration of our third plant in April this

year, a fleeting thought crossed my thmind: have we really entered our 25

year?

I remembered vividly how we started a

quarter of a century ago: our first plant

came up in the wilderness. We used dirt

tracks to reach our factory. Yet here I

was, sitting in front of India's first

automobile factory that connects

vendors through conveyor belts!

Friedrich Nietzsche once famously

remarked: “For a tree to become tall, it

must grow tough roots along the

rocks''. As we enter our silver jubilee

year, we have shown how.

As interest rates climbed during the

year, the industry went into de-growth,

aga ins t a l l e xpec ta t i ons and

projections. Domestic motorcycle

sales shrunk by 12 per cent and for the

first time in more than a decade,

motorcycle's share of the overall two-

wheeler pie actually came down by

around 2 per cent.

For most of the two-wheeler industry

therefore, managing 2007-08 was like

trying to grow on rocky terrain. The sub-

soil was far from nourishing and the

business climate was harsh. Yet, strong

companies, like strong trees, learn to

adapt and adjust. They grow tough

roots along the rocks.

Marching with India and walking with Bharat—this, I believe, should be our leitmotif in our silver jubilee year.

We chose to see 2007-08 like a glass of half-full water; and we were able to make the most of adversity. Yet I would like to stress that the road ahead won't be entirely smooth.

Throughout the year in review, customers in the entry and executive segments began to postpone buying decisions. By the middle of the fiscal, effective interest rates for the two-wheeler industry hovered around 20 per cent.

Being motorcycle-centric, we were also affected. The high rates led to large-scale delinquencies and defaults in a number of regions. This in turn forced financiers to withdraw loan facilities in a number of dealerships.

High interest rates continue as I write this, but these are beyond our control. Nevertheless, the management is convinced it can, to an extent, control rampant delinquencies by partnering NBFC lenders with regional strengths and strong grassroot connections, instead of depending entirely on national level banks.

Though much smaller in size, regional non-banking financial companies are able to leverage their excellent domain knowledge on local borrowers. This ensures extremely low levels of non-performing assets. These NBFC’s could be our ideal finance partners, especially in smaller towns and rural areas, where national-level banks have poor distribution networks. We tied up with a regional financier during the year and hope to sew up more regional tie-ups in the months to come.

Inflation is another concern. While it is true that double-digit inflation of 11-12 per cent would certainly upset household budgets and postpone certain purchases, the rise in auto fuel prices might actually turn out to be a blessing in disguise for the two-wheeler industry. It is my belief that cost-effective and fuel-efficient modes of transport will become more popular. In fact, I will not rule out the possibility of a number of car-owning homes actually buying an additional two-wheeler to

reduce the impact of the monthly fuel bill on the household budget.

Since fuel prices are not expected to soften in the near term, fuel-efficient industries such as ours could be beneficiaries.

We will continue to be confident and aggressive about the future, we will also be patient. I read somewhere that patience is waiting. Not passively waiting - that is laziness; but to keep going when the going is hard and slow - that is real patience.

Yours sincerely,

Brijmohan LallChairman

Luckily, we weathered the storm -- and actually surpassed our tally of the previous year marginally. More significantly, your company boosted its share in the domestic motorcycle market to more than 54 per cent—the highest share in recent memory. As the year ended, your company led its nearest competitor in the domestic two-wheeler market by more than 1 million units.

I think it would be safe to summarise 2007-08 as the year in which we migrated from schemes to themes. Despite difficult market conditions, we resisted the temptation to bump up sales artificially through comprehensive festival-related discounts. Instead, we invested in new models and upgrades.

Our performance in the domestic premium segment gives me special satisfaction, since our share increased from 15 per cent to nearly 24 per cent. In my last message, I talked about our plans to consolidate our presence in this part of the market; we are clearly on track.

In my last message, I had said that we were taking measures to ensure that are profitability gets back on track.

Near-stagnant topline performance forced us to look inwards: at process efficiencies, at our supply chain and at our sales frontline. We tweaked, changed and rationalised where possible and managed to increase our operating margins from 11.9 per cent to 13.1 per cent.

Going forward, I expect our supply chain to become even leaner as ongoing online projects go live. I am happy to report that our online vendor connectivity program – which seeks to links our plant with vendor premises on a real-time basis-- has made rapid progress, with more than 70 per cent of vendors seamlessly integrated. Likewise, dealer management system software is also rolling out on a national basis very shortly.

In my last message, I had also said that the slowdown would be temporary. This year, when conditions are even more trying, I continue to hold this view. This company has coped with high interest

rates before. This company has coped with double-digit inflation before. So what we are seeing today is nothing extraordinary.

Of course, good times do not last forever—perhaps years of 30 per cent growth will become rare in the future. But just as good times don't last forever, nor do bad times. The current de-growth in the industry is also an aberration caused by external factors outside the control of the auto industry. It is not driven by fundamentals. Indeed, the ground conditions that drove this country and this company have not changed.

Two Indias exist today. Both excite me equally. By the end of this decade, India is expected to have an urban population of 173 million. This is significant, since urbanisation rises with GDP per capita in a “hockey stick” fashion.

I am equally excited about rural India. Government development schemes are finally showing signs of working at the grassroots—landless farmers from Uttar Pradesh and Bihar who traditionally migrated to Punjab to work are now demanding higher wages to come, since there is work available at home, for the first time. In 1990, for every Rs. 4300 earned by an Indian villager, an urbanite made Rs. 3526 more. Today, the difference has dropped to Rs. 2408. This is a clear sign of progress.

Increasingly, the rural economy is a microcosm of the national economy. Today, India's 700 million villagers now account for the majority of consumer spending in the country, more than Rs. 4300 billion a year. Millions step into consumerism each year, graduating from the economics of necessity to the economics of gratification, buying themselves products we make.

We in Hero Honda are actively seeking to be part of this miracle. In December 2007, we launched a unique national level rural connect program called Haar Gaon, Haar Aangan (every village, every house). It is my belief that this program, as it gains critical momentum in the years to come, it will sustain this company well into the next decade.

1213

BOARD OF DIRECTORS

For more information please visit www.herohonda.com

COMMITTEE OF DIRECTORS

Audit Committee

Pradeep DinodiaChairman

Gen. (Retd.) Ved Prakash MalikMember

Dr. Pritam SinghMember

SHAREHOLDERS'

GRIEVANCE COMMITTEE

Dr. Pritam SinghChairman

Pradeep DinodiaMember

REMUNERATION

COMMITTEE

Gen. (Retd.) Ved Prakash MalikChairman

Pradeep DinodiaMember

COMPLIANCE OFFICER

Ilam C. Kamboj G.M. Legal & Company Secretary

SENIOR MANAGEMENT TEAM

Ravi SudSr. Vice President & CFO

Anil DuaSr. Vice President-Sales,

Marketing and Customer Care

Vikram S. KasbekarPlants Head-Operations

and Supply Chain

Dr. Anadi S. PandeVice President-HRM, Corporate

Planning and Strategy

Vijay SethiVice President-Information Systems

1415

Brijmohan Lall MunjalChairman

Pawan MunjalManaging Director & CEO

Toshiaki NakagawaJoint Managing Director

Sumihisa FukudaTechnical Director (w.e.f. June 01, 2008)

Pradeep DinodiaNon-Executive and Independent Director

Gen. (Retd.) Ved Prakash MalikNon-Executive and Independent Director

Dr. Pritam SinghNon-Executive and Independent Director

Analjit Singh Non-Executive and Independent Director

Om Prakash MunjalNon-Executive Director

Masahiro TakedagawaNon-Executive Director

Sunil Kant MunjalNon-Executive Director

Takashi NagaiNon-Executive Director(w.e.f. May 11, 2007)

Ms. Shobhana BhartiaNon-Executive and Independent Director

Sunil Bharti MittalNon-Executive and Independent Director

Meleveetil DamodaranNon-Executive and Independent Director(w.e.f. June 16, 2008)

ALTERNATE DIRECTOR

Satoshi Matsuzawa(Alternate Director to Mr. Takashi Nagai)

OUTGOING DIRECTORS

Tatsuhiro OyamaNon-Executive Director

(upto May 11, 2007)

Dr. Vijay Laxman KelkarNon-Executive and Independent Director

(upto December 31, 2007)

Yutaka KudoWhole-time Director

(upto May 31, 2008)

Narinder Nath VohraNon-Executive and Independent Director

(upto June 24, 2008)

MANAGEMENT DISCUSSION & ANALYSIS

Industry And Segment DynamicsPerformance Across Segments

Results And Financial Analysis

Operations, Reach & Supply ChainManufacturing

Vendor Mangement

Distribution Network

Rural Network

People And EnvironmentThe Human Touch

Information Systems

Environment

Cautionary statement Statements in this management discussion and analysis describing the Company's objectives, projections, estimates and expectations may be 'forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the company's operations include significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relations and interest costs.

1617

In the previous year, there were early

signs that growth in the two wheeler

industry was slowing. Within the space

of a year, the pace of the fall has been

quite dramatic, and perhaps for the first

time since economic reforms started in

1991, India's domestic two wheeler

market entered a period of de-growth.

The industry clocked total volumes of

8.03 million during the year in review, a

fall of nearly 5 per cent compared to the

previous year. The picture was bleaker

in the domestic market, where the

industry clocked sales of 7.19 million, a

decline of 8 per cent.

While the motorcycle industry continues

to dominate the structure of the two

wheeler industry, this category's

contribution to the domestic two

wheeler industry actually declined

during the year from 83 per cent to a little

over 79 per cent—a clear symptom of

the ongoing slowdown. In fact, this is

the first time since the early nineties

since motorcycles’ share of the two

wheeler market has actually declined;

reversing a consistently growing trend

from the previous year.

In contrast, there was another trend

reversal during the year. After appearing

to go into decline since the early 1990s,

the scooter market clocked a revival of

sorts during the year. After suffering at

the hands of motorcycles for many

years, scooter sales in the domestic

market as a percentage of motorcycle

sales actually increased from 12.4 per

cent to 14.8 per cent.

As in previous years, the three price

points in the motorcycle segment

continued to grow at different paces.

Dark clouds had started gathering in the

entry segment during the previous year,

with sales of entry level bikes growing at

just 5 per cent. During the year in review,

the entry segment in the domestic

market shrunk visibly from over 36 per

cent of total motorcycle sales to around

30 per cent. In just two years, the entry

segment's share in the total motorcycle

mix has declined by 10 percent.

This sharp decline shows the clear

impact of interest rates on two wheeler

buyers at the entry level. Interest rates

started firming up in early 2007, and

have shown no signs of letting up ever

since; the slump in the entry segment

has coincided with this rise. This is an

indication that the entry segment is very

interest elastic, and buyers in this

segment (SEC B and C) react to higher

interest rates perhaps by either

postponing or cancel l ing their

purchase decisions.

Rising interest rates impacted the

deluxe segment of the motorcycle

industry as well, albeit to a lesser extent.

It was a matter of some irony that even

where all the major players in the

executive segment clocked an overall

decline in numbers, the executive

segment's share of the domestic

motorcycle market actually increased

by 4.4 per cent. The executive segment

now makes up nearly 57 per cent of the

motorcycle segment, compared to

52.5 per cent in the previous year. Quite

obviously, the decline of the entry

segment has been so sharp, that the

absolute reduction in executive

segment sales has translated into a

relative increase in the executive

segment's overall share in the

motorcycle mix.

The premium segment was the only

category of motorcycles that managed

to actually increase absolute sales in a

sharply declining market. Sales in the

domestic market for this segment

actual ly increased by 2.2 per

cent—while the premium segment's

overall share of the motorcycle market

increased from 11.1 per cent to 13 per

cent. This shows that of the three

segments the interest effect has

affected premium buyers the least. This

isn't surprising, considering that buyers

in the premium segment mostly fall in

the SEC A category, who are the least

likely to postpone purchase decisions

on account of an increase in the EMI.

At a broader level, there is no real cause

for alarm in the executive segment or

the premium segment, despite the

current decline and slowdown.

According to the National Council of

Applied Economic Research (NCAER)

in 2001-02, there were 61 million

Indians belonging to families that

“A leader leads by example, whether he intends to or not.”

INDUSTRY AND

SEGMENT DYNAMICS

1819

earned more than Rs. 2 lacs a year; by

2005-06, that number had crossed 100

million. In 2009-10, this number is

projected to increase to 173 million. It is

safe to assume that the bulk of the

buyers from these segments will opt for

either entry or deluxe segment

motorcycle offerings. On the other

hand, it has now been established

beyond doubt that a large chunk of

entry segment buyers will continue to

react when there is a spike in interest

rates. In other words, two wheeler

makers have few options but to ride out

the difficult times.

Performance Across Segments

Hero Honda's sales in the entry

segment declined by over 6 per cent;

the same as the rest of the motorcycle

industry. However, even in a declining

market Hero Honda's share of entry

segment went up from 28.7 per cent to

36.6 per cent—a clear indication that

sales of manufacturers in the entry

segment shrank substantially. In

contrast, Hero Honda was able to limit

the damage and in the process

increased its market share. Hero Honda

now finds itself in a situation to turn a

position of relative weakness into a

position of strength.

Hero Honda's story in the executive

segment was similar. Compared to the

previous year, sales of executive

segment bikes in the domestic market

were down 1.18 per cent. However, the

company still maintained its iron-grip in

this—the largest segment of the two

wheeler market -- by increasing its

share from 68.9 per cent to 71.5 per

cent.

Hero Honda turned in its best

performance in the domestic market's

premium segment, where its sales went

up by a whopping 69 per cent

compared to the previous year. In 2006-

07, Hero Honda had grown 25 per cent

in this segment.

In the course of a single year, the

company increased its share of the

overall premium motorcycle segment

by more than 8 percent; the company's

premium bikes now account for 23.5

per cent of the total premium pie. Given

the pace of growth of this segment

against the backdrop of a young and

affluent middle class. There is no doubt

that this segment will drive Hero

Honda's growth in the future.

2021

FOR US, EVERY CELEBRATION IS ENJOYABLE BECAUSE IT IS DIFFERENT.

WHAT MAKES THEM MEMORABLE, ARE THE PEOPLE WE CELEBRATE WITH.

• Sales :

Despite a slow down in the two

wheeler industry, the annual sales

of the Company grew at 0.01 per

cent. Hero Honda clocked sales

volume of 3,337,142 units in 2007-

08 compared to 3,336,756 units in

2006-07. In value terms total sales

(net of excise duty) increased by

4.4 per cent to Rs.10332 crores

from 9900 crores in 2006-07.

• Profitability :

The Company's earnings before

interest depreciation and taxes

(EBITDA) margins increased from

11.9 per cent in 2006-07 to 13.1 per

cent in 2007-08 and the Operating

profit (PBT before other income)

increased by 16.0 per cent from

Rs.1056 crores in 2006-07 to

Rs.1225 crores in 2007-08. The

improvements on the margins was

accomplished through better sales

realisations and effective cost

rationalisation measures which

included better control over

Material cost, Marketing cost,

Overheads apart from sharp focus

on operational efficiencies.

• Other Income :

Other income marginally declined

by 2.3 per cent from Rs. 190 crores

in 2006-07 to Rs.185 crores in

2007-08.

• Cash Flows :

Despite the nominal growth in sales

turnover, better efficiencies in the

working capital management has

improved the cash flow from

operations from Rs 625.05 crores

to 1211.78 crores. Cash flows

before working changes have also

improved from Rs 1227.60 crores

to Rs 1392.56 crores on account of

better EBITDA margins.

The Company spent a total of

Rs.781 crores in investing activities,

which included capacity expansion

and investment in financial assests.

There was also an outflow of

Rs. 432 crores on account of liberal

dividend outflows.

• Capital Expenditure :

During the year the Company

incurred a capital expenditure of

Rs.375 crores. The funds were

used towards setting up of new

plant at Haridwar in Uttrakhand. The

aggregate capital outlay for the new

production facility is estimated at

Rs.460 crores which has been

funded over the last two financial

years.

• Raw Material Costs:

Due to softening metal prices

particularly Aluminum & Nickel in

s e c o n d h a l f o f t h e y e a r

accompanied with better sales

realisation in comparison to the

previous year the share of material

costs has reduced the overall cost

structure. Raw material costs as a

percentage of total sales declined

from 72.5 per cent in 2006-07 to

71.6 per cent in 2007-08.

• Current Asset Turnover:

This ratio, which shows sales as a

proportion of average current

assets, marginally decreased from

11.4 to 11.2, on account of higher

average inventory & bank balance.

DEBT STRUCTURE

Hero Honda has been a debt free

company for the last 7 years. The

unsecured loan of Rs.132 crore from

the state government of Haryana on

account of sales tax deferment, is

interest free and has no holding costs.

Net interest payment by the company

has been negative during the last few

years.

2425

OPBT - PBT before other income PBT - Profit before tax PAT - Profit after tax

PATOPBT

RESULTS

AND

FINANCIAL

ANALYSIS

DIVIDEND POLICY

Over the years, the Company has

consistently followed a policy of paying

high dividends, keeping in mind the

cash-generating capacities, the

expected capital needs of the business

and strategic considerations. For 2007-

08, the board has recommended a

dividend of 950 per cent which is higher

than 850 per cent declared in the

previous year. The payout ratio has for

the year been pegged at 45.9 per cent

vis-a-vis 46.3 per cent in the previous

year.

WORKING CAPITAL MANAGEMENT

Hero Honda has always endeavored to

efficiently use the various components

of working capital cycle. Despite the

adverse conditions in the two wheeler

industry, the Company has been able

to effectively control the receivable and

inventories enabling it to continue to

operate on negative working capital.

As a part of its cost rationalization drive,

the Company aggressively availed

cash discounts from vendors by

making payments before due dates.

This not only helped us improve

operating profit margins but also

allowed the Company to deploy the

surplus funds in the core business.

NOTES ON WORKING CAPITAL :

The average of inventory, receivables and payables have been taken for the calculations of inventory period , operating and cash cycle.

Table 1: WORKING CAPITAL MANAGEMENT & LIQUIDITY RATIOS

2005-06 2006-07 2007-08

Operating Cycle (Days) 14.9 17.9 21.2

Current Ratio 0.74 0.84 0.68

Inventory Period (Days) 10.5 10.4 11.9

Cash Cycle (Days) (23.9) (12.2) (10.6)

Acid Test Ratio 0.54 0.59 0.45

Table 2: Key Indicators of Profitability

2006-07 2007-08

OPBT/Sales (%) 10.7 11.9

PBT/Sales (%) 12.6 13.6

ROACE (%) 51.6 49.0

OPBDIT/Sales (%) 13.1

PBIT/Sales (%) 12.4 13.3

PAT/Sales (%) 8.7 9.4

ROAE (%) 38.3 35.5

11.9

Net Cash Flow From Operations(Rs. in Crores)

03-04 04-05 05-06 06-07 07-08

800

600

400

200

1000

0

1200

1400

12

53

97

110

76

81

090

7

72

8

10

56

85

8

04-05 05-06 06-0703-04 07-08

12

25

96

8

1200

900

600

300

0

PROFITS(Rs. in Crores)

1500

WITH EVERY STEP, WE EMBRACE THE WINDS OF CHANGE.

AT EVERY BEND, WE RIDE UPON THE GROUND OF OPTIMISM.

FOR US, LIFE IS A CELEBRATION.

OPERATIONS, REACH

& SUPPLY CHAIN“Price is what you pay. Value is what you get”

Manufacturing

Hero Honda commissioned its third,

plant at Haridwar during the year, with an

initial installed capacity of 500,000 units.

With this new capacity expansion,

HHML now has an overall annual

capacity of 4.5 million two wheelers.

With this, the Company has become a

global-scale manufacturer.

The Haridwar complex is the largest of

the three Hero Honda plants, spanning

about 275 acres.

The plant has lean manufacturing and

practices that ensure efficiency. It is

connected with vendors through

conveyors so that the material can

avoid multiple handling and is delivered

on time.

The Haridwar plant is one of the

greenest automobile plants in the

country. Effluents are minimised, and

there is zero discharge on liquid

effluents. All waste is treated and

consumed within the factory.

The plant has 70 per cent of its area as

green open spaces, and approximately

45,000 square metres of the plant roof

area is being converted into a green

roof.

Vendor Management

Vendor management is critical to Hero

Honda, as nearly 73 per cent of the

production is currently made up of

material cost. During the year, the

company managed an average cost

reduction of Rs. 343 per vehicle despite

volatility in metal prices.

A national network of 256 vendors

- including 36 ancillaries - forms the

backbone of its plant operations.

To improve plant efficiencies and

inventory turns, Hero Honda has

extended "Just in Time” (JIT) beyond

the shopfloor. Vendors are also making

critical investments in quality and

capacity in collaboration with the

Company. For example, the online

vendor connectivity program has made

rapid progress. Three years ago, the

Company had only 46 vendors

connected online to the company's

factories. By the end of 2008-09, it is

estimated that 72 per cent of the

vendors and their supplies would be

connected online.

Around 100 ancillaries will be setting up

their manufacturing base in Haridwar

over the next two years to ensure a fully

integrated supply chain. To begin with,

40 ancillaries will set up their facility in

the Industrial Parks that are being

specially developed for Hero Honda

ancillaries. During 2008-09, Hero

Honda plans to work with vendors to

develop new vendor production

facilities. 3PL service providers have

also been identified for the Haridwar

plant— a first for any two-wheeler

company in India.

2829

3031

As part of an ongoing exercise aimed at

quality control, members of senior

management visited vendor premises

for top quality audits. This has resulted

in the reduction of rejection parts per

million (PPM) by 20 per cent.

During the year, the company launched

a collaborative cost improvement

program with vendors. In this

programme the processes and

methods are continuously toned so that

the material cost can be managed

better. Hero Honda is also evaluating

horizontal deployment of third party

logistic services providers (3PL) to

manage costs along the supply chain

better.

In 2008-09, the Company plans to

further study and tactfully optimise its

supply chain. As part of this plan, raw

materials will be optimised so that the

best possible cost advantages accrue

to the company.

Distribution Network

The company has a conscious strategy

of penetrating new markets and

unrepresented territories through its

distribution network which is made up

of dealers, authorized representatives,

stockists and SSPs. In March 2001, the

company had 826 such customers

points in India. By March 2008, this

number went up to over 3500. On an all

India basis, 50 dealers, 150 SSPs, 267

dealers representatives and 45 city

work agents were added. All the four

marketing zones of the Company

showed a uniform increase in new

customers points during the year in

review.

Rural Network

During the year, Hero Honda's

ambitious rural connect program— Har

Gaon, Har Aangan also got underway. A

total of 18,000 villages were covered

out of the targeted 23360 villages with a

population of 5,000 people. In all, more

than 100,000 opinion leaders in these

villages were approached. The rural

initiative was carried out by 500

specially trained rural sales executives

at the dealership level.

PEOPLE AND ENVIRONMENT“Pupils should not be taught. Instead, they should be

provided conditions in which they can learn.”

The Human Touch

Hero Honda is continuously making

efforts to create a talent pipeline and to

develop potential leaders.

The Company encourages regular

feedback for phasing-in process

improvement and aligning employee's

goals with business objectives. The

detailed feedback process entered its

fourth year in 2007-08 through the

“Gallup Q12 Employee Engagement

Study”. The findings from Gallup have

already helped managers in building

mutual trust and foster teamwork. In the

process, this is helping make Hero

Honda a better workplace.

At Hero Honda's new plant at Haridwar,

a number of best practices have been

put in place. A flatter organization

structure has been created, policies

and guidelines have been framed and

communicated, and job rotation was

made mandatory for level migration. An

assessmen t cen t re was a l so

introduced to evaluate competency

during level migration.

During the year, an i-LEAP (Individual

Learning Excellence and Award

Program) was started for recognising

the best training projects, and to identify

internal trainers. A number of new in-

house programs were also rolled out, in

order to augment and upgrade existing

work-related and technology-related

skills.

Hero Honda has traditionally enjoyed

excellent industrial relations. Union

elections during the year went off

smoothly and the union body was

formed amicably. To ensure smooth

functioning at the plant, shop floor in-

charges were empowered to deal with

grievances and discipline issues. At

another level, a biometric attendance

monitoring systems (to avoid proxy

punching) has been started.

Information Systems

A number of key technology initiatives

were either initiated or completed in

2007-08. The application infrastructure

of the organization was extended to

support business processes at the new

production facility at Haridwar. This is

expected to be operational in 2008-09.

During the year, the organisation's entire

n e t w o r k w a s r e v a m p e d a n d

redundancies were built to support

business users. The IT team also

deployed applications for sending real

time business alerts related to

production, sales, service notifications

automatically from the system using

SMS technology. This helped business

users immensely.

This real time system was also used by

business partners to manage their

dispatches and outstandings. To

improve productivity, a number of

applications with work flow capabilities

were developed or enhanced. Also

during the year, the entire information

security policies of the organization

were revamped in order to mitigate

risks.

A new eco-friendly state-of-the-art data

centre was set up and Hero Honda

migrated to a new technology

architecture that included blade servers

and virtualization. This would help

consolidate servers and storage as well

as reduce complexity.

To help Hero Honda prepare for the

future, two major strategic initiatives are

being planned for 2008-09. The first is

Product Li fecycle Management

software. This will help the company in

managing the increase of complexity of

a diverse product portfolio and help

reduce cost and time for developing

new models. The new software is also

expected to improve and scale up

design-level collaboration with vendors

on an on-line basis. The software is also

expected to reduce warranty costs.

The second initiative comprised of

rolling out a Dealer Management

System software across the front end of

the supply chain. This will help Hero

Honda connect with its entire dealer

network. Once the project is complete,

it is expected to improve customer

service and supply chain performance

extensively.

Environment

For a number of years, Hero Honda has

b e e n o n e o f I n d i a ' s m o s t

environmentally sustainable firms. The

company believes that to create a

sustainable enterprise, it is critical to

3233

strike the right balance between

business, mankind and nature.

The Company has ensured complete

compliance with al l applicable

env i ronmenta l regulat ions and

practices. For its efforts, Hero Honda

was awarded for Safety Performance

and Best working condition and

Canteen facilities in the plant by the

Government of Haryana for 2007. The

Company has also been nominated for

the Green Manufacturer of the year

under the TERI Corporate Award

Scheme.

A green vendor development program

w a s l a u n c h e d o n t h e Wo r l d

Environment Day June 5, 2007. A green

charter was released giving specific

guidelines to the vendors and

suppliers. A total of 31 vendors were

selected in the first phase and in all, 256

vendors will be covered and certified as

green vendors over a period of 5 years.

Each vendor will initiate EARN programs

in the areas of pollution prevention,

waste reduction, water conservation,

energy conservation and statutory

compliances. Each vendor will be

evaluated and certified cluster wise.

During the year, an environmental plan

to reduce hazardous waste from the

pol lut ion control faci l i t ies was

developed. As much as 30% of sludge

generated was reduced through a

sludge decanter system. The company

also increased the conversion rate of

paint sludge into useful primer from 15

MT to 25MT per month.

Hero Honda has also successfully

developed primer from the waste paint

sludge, which used to be incinerated

earlier. This development has been

demonstrated to the state authorities,

and the Company is seeking

authorization to use this practice on a

regular basis. The converted primer has

already been used on the products,

wh ich has passed a l l qua l i ty

parameters.

To fulfill its commitment towards water

conservation, a recycling plant of 400KL

per day capacity with reverse osmosis

technology has been installed which

recycles the sewage effluent into the

process at the Haridwar plant. A similar

project has also under progress at the

Dharuhera plant and this is likely to be

completed in 2008.

The plant has been improved by adding

a forced draft ventilation system. An

additional local exhaust system was

provided in the weld shop and vehicle

testing area to minimize the effects of

airborne contaminants. Electrostatic

precipitators were also installed in the

machine shop to capture the aerosoles

at source and prevent exposure of the

workmen.

Since the state of Haryana is one of the

driest in the country, Hero Honda has

always emphasized heavily on ground

water recharging. During the year, 2

more injection wells were added,

covering an additional area of 4500 Sq

metres. In all, Hero Honda now as 25

injection wells in the plants. Also during

the year, an exhaustive feasibility study

was conducted to extend the Rain

Water Harvesting Scheme for Roads

and other pucca surfaces in the plants.

The project will be executed in 2008-09.

Hero Honda Motors takes considerable pride in its community relationships, especially ones at the grassroots that have evolved over time. The Company has played a pivotal role in bringing an economically and socially backward region in Dharuhera, Haryana, into the national economic mainstream through direct interventions in education,

healthcare, vocational training, creation of social and physical infrastructure, and environment management.

Most of the group's social enterprises – including the Rural Development Centre-- are planned and executed by the Raman Kant Munjal Foundation.

To help local people, especially women, Hero Honda has set up a vocational training centre which runs a 6 months Diploma Course for Tailoring, Embroidery and carpet weaving, etc. During the year in review, the Centre was upgraded. It now trains 50 girls per batch up from 25 & the duration of the course was increased from six months

to 9 months. The Centre has also been equipped with modern machines to prepare the girls for the Garment Export Industry, where placement is 100%.

Also during the year, women from four villages near the factory at Dharuhera benefitted from food-processing

courses conducted at the Centre.

In February 2007, the Foundation had set up a computer training & learning centre in partnership with Microsoft. A total of 8 to 10 batches (boys and girls) are run simultaneously consisting of 18-20 students per batch. Till date, close to 400 students have been trained at the centre.

To enhance the value of rural youth in the job market, a spoken English course was started during the year. Currently the course is being run in three Batches during the day. It is proposed to train approx 120 students per year. The Foundation will make an effort to

SOCIAL RESPONSIBILITY“Life laughs at you when you are sad; smiles at youwhen you are happy. But life salutes you when you

make others happy.”

3637

place them with BPO/Call Centres, provided the students also have the requisite computer training.

A vocational centre for boys is expected to start during 2008-09 and will run on the lines of an ITI. The centre will provide training in Fitter, Welding, Carpentry and Plumbing & Electrician Trades. It is planned to train approx. 50 students every year, and efforts will be made to accommodate them in g roup companies.

The Foundation also runs an Adult Literacy Program, a marriage facilitation service for underprivileged girls, besides doorstep healthcare programs and medical camps for the local population. A graduate teacher from the targeted village is appointed to teach the elders. Approx 650 people have benefited from this scheme spread over 20 villages.

In every CSR Project undertaken, the Foundation always involves either a local NGO preferably the village itself or panchayat members not only during execution but also for subsequent sustainability/maintenance of project. In certain areas such as computer learning by rural youth Udyan Care, a reputed NGO has been made a partner in association with Microsoft.

In Projects like Hygiene, Sanitation & Safe Drinking Water, Local Government Representatives such as Block Development Off icers are also involved.

Statutory Auditors

A.F. Ferguson & Co.

Chartered Accountants,

9, Scindia House,

Kasturba Gandhi Marg,

New Delhi 110 001, India

Tel : 011-2331 5884

Principal Bankers

ABN Amro Bank N.V.

Bank of America NT & SA

Canara Bank

Citibank N.A.

HDFC Bank Limited

HSBC Limited

ICICI Bank Limited

Punjab National Bank

Standard Chartered Bank

The Bank of Tokyo-Mitsubishi UFJ Limited

Cost Auditors

Ramanath Iyer & Co.

BL-4 (Paschmi), Shalimar Bagh

Delhi 110 088

Tel. : 011-27481904

Technical & Financial Collaborators

Honda Motor Co., Ltd.,

1-1, 2 - chome,

Minato - ku,

Tokyo 107-8556, Japan

www.world.honda.com

Registered & Corporate Office

34, Community Centre,

Basant Lok, Vasant Vihar,

New Delhi 110 057, India

Tel.: 011-2614 2451, 2614 4121

Fax : 011-2615 3913

www.herohonda.com

Registrar & Transfer Agents

Karvy Computershare Pvt. Ltd.

Plot No. 17-24, Vithlrao Nagar,

Madha Pur, Hyderabad 500 081

Tel.: 040-23420815-820

Fax : 040-23420814

Minami - Aoyama,

Dharuhera Plant

69 KM Stone,

Delhi-Jaipur Highway,

Dharuhera, Distt. Rewari,

Haryana 122 100, India

Tel.: 01274-264 012-15

Fax : 01274-267 024

Gurgaon Plant

37 KM Stone,

Delhi-Jaipur Highway,

Sector 33, Gurgaon,

Haryana 122 001, India

Tel.: 0124-2372 123-134

Fax : 0124-2373 141-142

Haridwar Plant

Plot No. 3 Sector-10,

11E, SIDCUL,

Roshanabad,

Haridwar 248 001

Uttrakhand

Tel.: 01334 - 239513

Fax : 01334 - 239512

CORPORATE

INFORMATION

3839

FINANCIAL HIGHLIGHTS & KEY RATIOS

Financial Highlights(Rupees in crores)

Particulars 2003-04 2004-05 2005-06 2006-07 2007-08

Sales (Nos.) 2070147 2621400 3000751 3336756 3337142

Growth in sales (nos.) (%) 23.4 26.6 14.5 11.2 0.01

Total net income 5997 7559 8870 10090 10517

Growth in Total inocme (%) 15.5 26.1 17.4 13.7 4.2

Profit before tax 1072 1217 1412 1246 1410

Profit after tax 728 810 971 858 968

Share capital 39.94 39.94 39.94 39.94 39.94

Reserves and Surplus 1099 1453 1969 2430 2946

Total debt 175 202 186 165 132

Net fixed assets 589 715 994 1355 1549

Total assets (net) 1314 1695 2195 2635 3118

Market capitalisation 9797 10943 17781 13753 13869

Economic Value Added (EVA) 569 564 641 485 575

Key Ratios

Particulars 2003-04 2004-05 2005-06 2006-07 2007-08

Long term Debt/Equity Nil Nil Nil Nil Nil

OPBDIT*/Net Sales (%) 16.8 15.7 15.7 11.8 13.1

OPBT**/Net Sales (%) 15.6 14.6 14.4 10.7 11.9

Profit after tax/ Total income (%) 12.1 10.7 11.0 8.5 9.2

Return on average equity (%) 72.9 61.6 55.5 38.3 35.5

Return on average capital employed (%) 92.8 80.9 72.3 50.6 49.0

EVA/Capital employed (%) 49.3 37.5 32.9 20.1 20.0

Dividend per share (Rs.) 20 20 20 17 19

Dividend payout (%) 61.9 56.3 46.9 46.3 45.9

Earning per share (Rs.) 36.5 40.6 48.6 43.0 48.5

Market value/book value (times) 8.6 7.3 8.8 5.6 4.6

Notes:

*OPBDIT: Operating Profit before Depreciation, Interest and Tax

**OPBT: PBT before Other income

4041

A N N U A L R E P O R T 0 80 7

(Rupees in crores)

ECONOMIC VALUE ADDED (EVA) STATEMENT

2003-04 2004-05 2005-06 2006-07 2007-08

Avg Cap Employed 1,154 1,504 1,945 2,415 2,877

Avg Debt/Avg Capital (%) 2.2 1.8 1.3 1.1 1.1

Avg Equity/Avg Capital (%) 97.8 98.2 98.7 98.9 98.9

Cost of Debt (% post-tax ) 0.7 0.7 1.0 0.6 0.9

Cost of Equity

Beta 0.90 1.01 0.98 0.75 0.59

Cost of Risk Free Debt (%) 5.13 6.67 7.52 8.15 7.94

Market Premium (%) 10 10 10 10 10

Cost Of Equity (%) 14.18 16.74 17.32 15.65 13.83

EVA

Profit after Tax 728 810 971 858 968

Add: Interest*(1-tax rate) 1 1 2 1 1

NOPAT=PAT + Interest*(1-t) 729 812 973 859 969

Cost of Capital 160 247 333 374 394

EVA 569 564 641 485 575

Return on Capital Employed (%) 63.2 54.0 50.0 35.6 33.7

Weighted Average Cost of Capital (%) 13.9 16.5 17.1 15.5 13.7

EVA/Capital employed (%) 49.3 37.5 32.9 20.1 20.0

ENTERPRISE VALUE

Market Capitalisation 9797 10943 17781 13753 13869

Add: Debt 175 202 186 165 132

Less: Financial Assets 1708 2044 2221 2010 2698

EV (Enterprise Value) 8264 9101 15746 11909 11303

EV/Yr. End Capital Employed (Times) 6.3 5.4 5.9 4.5 3.6

DIRECTORS’ REPORT

On behalf of the Board, I take immense pleasure on presenting the 25th Annual Report of the Company. The report is being presented along with the

Audited Statement of Accounts for the financial year ended March 31, 2008.

FINANCIAL RESULTS

For the year ended

March 31, 2008 March 31, 2007

Gross Sales 12,038.53 11,542.04

Net Sales and other Income 10,517.22 10,089.81

Profit before Finance charges

and Depreciation 1,534.79 1,362.89

Less: Finance charges (35.81) (22.99)

Depreciation 160.32 139.78

Profit before tax (PBT) 1,410.28 1,246.10

Less: Provision for tax

- Current 436.81 375.81

- Deferred 1.20 9.42

- Fringe Benefit Tax (FBT) 4.39 2.98

Profit after tax (PAT) 967.88 857.89

Add: Balance of profit brought forward 1,594.78 1,224.05

Balance available for appropriation 2,562.66 2,081.94

Appropriations

Dividend

- Proposed Final 379.41 339.47

Corporate Dividend Tax 64.48 57.69

Transfer to General Reserve 97.00 90.00

Balance carried to Balance Sheet 2,021.77 1,594.78

Dividend (%) 950 850

Basic and Diluted Earnings Per Share (EPS) (Rs.) 48.47 42.96

(Rupees in crores)

4243


4445

BUSINESS PERFORMANCE

Your Company defied a process of de-growth in the industry and

achieved cumulative sales of 33,37,142 units of two-wheelers. In the

process, Hero Honda consolidated its leadership position in domestic

two-wheeler market with more than 52 per cent market share. The

Company successfully launched seven new models including

variants during the year under review.

On the financial front, total income (net of excise duty) of the Company

grew by 4.2 per cent from Rs. 10, 090 crores in previous year to

Rs. 10,517 crores during 2007-08. The Company posted a net profit

(PAT) of Rs. 968 crores, compared to Rs. 858 crores in the previous

fiscal, a growth of 13 per cent. Despite the increasing pressure on

inputs, your Company was able to maintain EBIDTA margins at 13.1

per cent, compared to 11.9 per cent in the previous year.

During the year, Hero Honda also retained, for the seventh year in a row,

its position as the World's Number One Two Wheeler Company. During

2007-08, your Company achieved another landmark of reaching

cumulative sales of 20 million bikes.

In the course of the year, your Company launched new models

(including variants) including Splendor NXG, Hunk, New Super

Splendor, New Passion Plus, Commemorative Splendor+ and a

refreshed version of Pleasure.

A detailed discussion on the business performance and future outlook

has been given in the chapter on Management Discussion & Analysis

Report.

DIVIDEND

Few manufacturing companies in the Indian corporate sector have a

better dividend pay out record than Hero Honda. We have

recommended a Dividend of 950 per cent i.e. Rs.19 per equity share of

Rs. 2 aggregating to Rs. 379.41 crores (exclusive of corporate

dividend tax) for your approval for the financial year ended March 31,

2008. The dividend, if approved, will be paid to the eligible members

well within the stipulated period.

Our dividend policy is in line with our strong and consistent belief that if

funds are not re-invested for capital investments, they should be

optimally distributed to shareholders.

TRANSFER TO GENERAL RESERVE

A sum of Rs. 97 crores have been transferred to the General Reserve of

the Company. This reaffirms the inherent financial strength of the

Company.

NEW MANUFACTURING FACILITY AT HARIDWAR

Your Company inaugurated its third plant - the "Shrine of Technology" in

the holy city of Haridwar in Uttarakhand. The plant has an initial

production capacity of 0.5 million units which would be scaled up to a

million units by 2008-end. The total capital outlay on the new

manufacturing facility has been around Rs. 375 crores. The new plant

will employ flexible production techniques enabling production of

different models in the Company's portfolio. In addition to

manufacturing for the domestic market, the plant will also cater to

export requirements.

MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments affecting the financial position

of the Company have occurred between April 1, 2008 and the date on

which this Report has been signed.

BOARD OF DIRECTORS

During the period under review, Mr. Tatsuhiro Oyama resigned from

directorship on May 11, 2007 and Mr. Takashi Nagai was appointed as

an Additional Director in Non-Executive Category on May 11, 2007.

Further, Dr. Vijay Laxman Kelkar has resigned from directorship on

December 31, 2007.

Mr. Satoshi Matsuzawa was appointed as an Alternate Director to Mr.

Takashi Nagai w.e.f. April 24, 2008. Mr. Yutaka Kudo, Whole-time

Director of the Company resigned from both the offices i.e. Director &

Whole-time Director w.e.f. May 31, 2008. Mr Sumihisa Fukuda was

appointed as an Additional and Technical Director in the whole-time

employment of the Company in his stead on June 1, 2008. Mr. M.

Damodaran was appointed as an Additional Director in the Non-

Executive and Independent Category w.e.f. June 16, 2008. Mr.

Narinder Nath Vohra has resigned from Directorship w.e.f. June 24,

2008.

The Board place on record their sincere appreciation and gratitude for

the work put in by the out going members, and wishes them a

rewarding and satisfying career ahead. The Directors also welcome

the new members on the Board and wish them a successful and fruitful

tenure with the Company.

At the ensuing Annual General Meeting, Ms. Shobhana Bhartia,

Mr. Sunil Bharti Mittal, Mr. Masahiro Takedagawa and Mr. Pradeep

Dinodia will retire by rotation and being eligible, offer themselves for

re-appointment in terms of provisions of Articles of Association of the

Company. The brief resume/details relating to Directors, who are to be

appointed and re-appointed has been furnished after the Explanatory

Statement to the Notice of the ensuing Annual General Meeting.

Your Directors recommend their re-appointment at the ensuing Annual

General Meeting.

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the

information and explanations obtained by them, your Directors make

the following statement in terms of Section 217(2AA) of the Companies

Act, 1956:

1. that in the preparation of the annual accounts for the year ended

March 31, 2008, the applicable accounting standards have been

followed;

2. that appropriate accounting policies have been selected and

applied consistently and judgements and estimates that are

reasonable and prudent have been made so as to give a true and

fair view of the state of affairs as at March 31, 2008 and of the profit of

the Company for the financial year ended March 31, 2008;

3. that proper and sufficient care has been taken for the maintenance

of adequate accounting records in accordance with the provisions

of the Companies Act, 1956 for safeguarding the assets of the

Company and for preventing and detecting fraud and other

irregularities;

4. that the annual accounts for the year ended March 31, 2008 have

been prepared on a going concern basis.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

A detailed chapter on, 'Management Discussion and Analysis'(MDA),

pursuant to Clause 49 of the Listing Agreement forms part of this

Report.

CORPORATE GOVERNANCE

At Hero Honda, it is our firm belief that the essence of Corporate

Governance lies in the phrase 'Your Company'. It is 'Your' Company

because it belongs to you - the shareholders. The Chairman and

Directors are 'Your' fiduciaries and trustees. Their objective is to take the

business forward in such a way that it maximises 'Your' long-term value.

Your Company is committed to benchmark itself with global standards

for providing good Corporate Governance and has put in place an

effective Corporate Governance System which ensures that the

provisions of Clause 49 of the Listing Agreement are duly complied

with.

The Board has also evolved and adopted a Code of Conduct based

on the principles of Good Corporate Governance and best

management practices being followed globally. The Code is available

on the website of the Company www.herohonda.com. A report on

Corporate Governance along with the Auditors' Certificate on its

compliance is annexed hereto as Annexure - I.

INTERNAL CONTROL SYSTEMS

Hero Honda has a proper and adequate system of internal controls.

This ensures that all assets are safeguarded and protected against

loss from unauthorised use or disposition and those transactions are

authorised, recorded and reported correctly.

An extensive programme of internal audits and management reviews

supplement the process of internal control. Properly documented

policies, guidelines and procedures are laid down for this purpose.

The internal control system has been designed so as to ensure that the

financial and other records are reliable for preparing financial and other

statements and for maintaining accountability of assets.

The Company also has an Audit Committee, comprising of three

Independent, Non-Executive and professionally qualified Directors,

who interact with the Statutory Auditors, Internal Auditors, Cost Auditors

and Auditees in dealing with matters within its terms of reference. The

Committee mainly deals with accounting matters, financial reporting

and internal controls. During the year under review, the Committee met

nine times.

AUDIT COMMITTEE RECOMMENDATION

During the year there was no such recommendation of the Audit

Committee which was not accepted by the Board. Hence, there is no

need for the disclosure of the same in this Report.

RISK MANAGEMENT SYSTEM

Your Company follows a comprehensive system of Risk Management.

Your Company has adopted a procedure for assessment and

minimization. It ensures that all the Risks are timely defined and

mitigated in accordance with the well structured risk management

Process. The Audit Committee reviews periodically the risk

management process.

RATINGS

The rating agency ICRA Limited, has reviewed and reaffirmed the

ratings assigned to the Company for its Non-convertible Debenture

Programme as LAAA indicating the highest credit quality, A1+ for its

Non-fund based facilities and LAAA to Fund based facilities. These

ratings indicate the highest credit quality carrying lowest credit risk.

Another rating agency CRISIL reviewed and assigned AAA/Stable

rating to the bank loan and P1+ rating to the Cash Credit Limit & Letter

of Credit Limit Facility.

Further, CRISIL also has reaffirmed the 'GVC 1' rating assigned to the

Company for the third consecutive time. This governance and value

creation (GVC) rating indicates that the company's capability with

respect to creating wealth for all its stakeholders while adopting sound

corporate governance practices is the highest. The rating reflects the

high standards of corporate governance practised by your Company.


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FIXED DEPOSITS

During the year under review, the Company has not accepted any

deposit under Sections 58A and 58AA of the Companies Act, 1956

read with the Companies (Acceptance of Deposits) Rules, 1975.

AUDITORS

M/s. A. F. Ferguson & Co., Chartered Accountants, New Delhi, Auditors

of the Company will retire at the conclusion of the ensuing Annual

General Meeting and being eligible, offer themselves for re-

appointment. The Company has received a certificate from the

auditors to the effect that their re-appointment, if made, would be in

accordance with Section 224(1B) of the Companies Act, 1956.

The Board recommends their re-appointment.

AUDITORS' REPORT

The observations of Auditors in their report, read with the relevant notes

to accounts are self explanatory and therefore do not require further

explanation.

COST AUDITORS

The Board has re-appointed M/s. Ramanath Iyer & Co., Cost

Accountants, New Delhi, as the Cost Auditors of the Company under

Section 233B of the Companies Act, 1956 for the financial year

2008-09 and necessary application for obtaining the requisite approval

has been filed with the Government. The Cost Auditors' Report for

2007-08 will be forwarded to the Central Government in pursuance of

the provisions of the Companies Act, 1956.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,

FOREIGN EXCHANGE EARNINGS AND OUTGO

Information required under Section 217(1)(e) of the Companies Act,

1956, read with Companies (Disclosure of Particulars in the Report of

the Board of Directors) Rules, 1988 is given as per Annexure - II and

forms an integral part of this Report.

LISTING

The shares of your Company are presently listed on Bombay Stock

Exchange Limited (BSE) and National Stock Exchange of India Limited

(NSE). The delisting application, was in-principle approved by the

Committee of the Calcutta Stock Exchange Association Limited, the

formal approval is awaited and is expected to be received in due

course of time.

PERSONNEL

As on March 31, 2008 the total number of employees on the records of

the Company were 4321.

Your Directors place on record their appreciation for the significant

contribution made by all employees, who through their competence,

dedication, hard work, co-operation and support have enabled the

Company to cross new milestones on a continual basis.

A detailed note is given in the chapter "Human Resource Management"

of Management Discussion & Analysis, which forms part of this Annual

Report.

PARTICULARS OF EMPLOYEES

Information of Particulars of Employees as required under Section

217(2A) of the Companies Act, 1956 read with the Companies

(Particulars of Employees) Rules, 1975 forms an integral part of this

Report. As per the provisions of Section 219(1)(b) of the Companies

Act, 1956, the Report and Accounts are being sent to the shareholders

of the Company excluding the statement of particulars of employees

under Section 217(2A) of the Companies Act, 1956. Any shareholder

interested in obtaining a copy of such statement may write to the

G.M. Legal & Company Secretary at the Registered Office of the

Company.

ACKNOWLEDGMENT

It is our strong belief that caring for our business constituents has

ensured our success in the past and will do so in future. Your Directors

acknowledge with sincere gratitude the co-operation and assistance

extended by the Central Government, State Government(s), Financial

Institution(s), Bank(s), Customers, Dealers, Vendors and Ancillary

Undertakings. The Directors also place on record their appreciation for

the valuable assistance and guidance extended to the Company by

Hero Cycles Limited and Honda Motor Co., Ltd., Japan and for the

encouragement and assurance, which our collaborator has given for

the growth and development of the Company.

The Board, also, takes this opportunity to express its deep gratitude for

the continued co-operation and support received from its valued

shareholders.

For and on behalf of the Board

Brijmohan Lall Munjal

Chairman

New Delhi

July 29, 2008

ANNEXURE - I TO DIRECTORS' REPORT

CORPORATE GOVERNANCE REPORT

Philosophy on 'Code of Corporate Governance'

Hero Honda's philosophy of Corporate Governance stems from its belief that the Company's business strategy and plans should be consistent with the welfare of all its stakeholders, including shareholders. Good Corporate Governance practices enable a Company to attract financial and human capital and leverage these resources to maximize long-term shareholder value, while preserving the interests of multiple stakeholders, including society at large.

Corporate Governance rests upon the four pillars of: transparency, full disclosure, independent monitoring and fairness to all, especially to minority shareholders. Hero Honda has always strived to promote Good Governance practices, which ensure that:

• A competent management team is at the helm of affairs;

• The Board is strong with an optimum combination of Executive and Non-Executive (including Independent) Directors, who represent the interest of all stakeholders;

• The Board is effective in monitoring and controlling the Company's affairs;

• The Board is concerned about the Company's shareholders; and

• The Management and Employees have a stable environment.

We believe that the essence of Corporate Governance lies in the phrase "Your Company". It is "Your" Company because it belongs to you - the shareholders. The Chairman and Directors are "Your" fiduciaries and trustees. Their objective is to take the business forward to maximise "Your" long-term value.

The Securities and Exchange Board of India (SEBI) has specified certain mandatory governance practices, which are incorporated in Clause 49 of the Listing Agreement of Stock Exchanges.

Hero Honda is committed to benchmark itself with the best standards of Corporate Governance, not only in form but also in spirit. This section, along with the section on 'Management Discussion & Analysis' and 'General Shareholder's Information' constitute Hero Honda's compliance with the Clause 49 of the Listing Agreement.

BOARD OF DIRECTORS

Composition of the Board

As on March 31, 2008, the Company's Board of Directors consisted of fifteen Directors. Four Directors, including the Chairman, are Executive; four are Non-Executive and seven are Non-Executive and Independent. The fifty per cent of the Board consists of Independent Directors including Dr. Vijay Laxman Kelkar, Non-Executive and Independent Director, who resigned from the directorship of the Company w.e.f. December 31, 2007, the vacancy has been filled within the prescribed 180 days with the appointment of Mr. M. Damodaran, as Non-executive and Independent Director, therefore the composition of the Board is in consonance with the Clause 49. Details of the composition of the Board, number of meetings held during their tenure and attended by them etc., are given in Table 1.


Number of Board Attendance at Number of Committee Number of Committee Number of outside Meetings held during last AGM Memberships Chairmanships held Directorships heldhis/her tenure and (including Chairman

Name of Director attended by him/her ships) held

Held Attended (excluding Private Companies, Foreign Companies andSection 25 Companies)

Executive Directors

Mr. Brijmohan Lall Munjal 6 6 Yes None None 8

Mr. Pawan Munjal 6 6 Yes None None 1

Mr. Toshiaki Nakagawa 6 6 Yes None None 1

Mr. Yutaka Kudo 6 6 Yes None None 1

Non-Executive Directors

Mr. Om Prakash Munjal 6 Nil No None None 10

Mr. Sunil Kant Munjal 6 5 Yes None None 14

Mr. Masahiro Takedagawa 6 3 Yes 1 None 2

1Mr. Tatsuhiro Oyama 1 Nil N.A. None None 1

2Mr. Takashi Nagai 5 Nil No None None Nil

Non-Executive and

Independent Directors

Mr. Narinder Nath Vohra 6 3 Yes 2 1 1

Mr. Pradeep Dinodia 6 6 Yes 7 5 8

Gen. (Retd.) Ved Prakash Malik 6 4 Yes 4 None 3

Mr. Analjit Singh 6 2 No None None 12

Dr. Pritam Singh 6 3 Yes 3 None 5

3Dr. Vijay Laxman Kelkar 5 2 Yes 4 None 13

Ms. Shobhana Bhartia 6 2 No 2 2 14

Mr. Sunil Bharti Mittal 6 1 No None None 8

TABLE 1: DETAILS ABOUT COMPANY'S BOARD OF DIRECTORS / ATTENDANCE RECORD DURING FINANCIAL YEAR 2007-08 Four Directors namely Mr. Brijmohan Lall Munjal (Executive Chairman in the whole-time employment of the Company), Mr. Pawan Munjal (Managing Director & CEO), Mr. Om Prakash Munjal (Non-Executive Director) and Mr. Sunil Kant Munjal (Non-Executive Director) belong to the promoter family of the Hero Group, which owns 26 per cent equity in the Company. Four Directors namely Mr. Toshiaki Nakagawa (Joint Managing Director), Mr. Yutaka Kudo (Whole-time Director), Mr. Masahiro Takedagawa (Non-Executive Director) and Mr. Takashi Nagai (Non-Executive Director) are nominees of Honda Motor Co., Ltd., Japan, which too, owns 26 per cent equity in the Company. Apart from these, the rest of the Board constitutes of Non-Executive and Independent Directors.

Board Meetings

During 2007-08, the Board of Directors met 6 (six) times on May 11, 2007; May 31, 2007; July 24, 2007; September 18, 2007; October 18, 2007 and January 31, 2008.

The longest gap between any two Board Meetings was for a period of 3 months and 13 days.

Directors' Attendance Record and Directorships / Committee Memberships

Details are given in Table 1.

As per Clause 49 of the Listing Agreement entered into with the Stock Exchange(s), an Independent Director means a Non-Executive Director who;

• apart from receiving director's remuneration, does not have any material pecuniary relationships or transactions with the Company, its promoters, its directors, its senior management, its holding Company, its subsidiaries or associates which may affect independence of the director;

• is not related to promoters or persons occupying management positions at the board level or at one level below the board;

• has not been an executive of the company in the immediately preceding three financial years;

• is not a partner or an executive of the statutory audit firm or the internal audit firm that is associated with the company and has not been a partner or an executive of any such firm for the last three years and the legal firm(s) and consulting firm(s) that have a material association with the entity.

• is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect independence of the Director;

• is not a substantial shareholder of the Company i.e. owning two percent or more of the block of voting shares.

None of the Director on the Board holds the office of Director in more than 15 companies nor are they members in Committees of the Board in more than 10 Committees or Chairman of more than 5 Committees.

Notes:1. Mr. Tatsuhiro Oyama has resigned from his Directorship on May 11, 2007. 2. Mr. Takashi Nagai was appointed as an Additional Director on the Board w.e.f. May 11, 2007.3. Dr. Vijay Laxman Kelkar has resigned from the Directorship on December 31, 2007.4. Mr. Yutaka Kudo has resigned from his Directorship and Whole-time Directorship on May 31, 2008.5. Mr. Narinder Nath Vohra has resigned from the Directorship on June 24, 2008.

Further, there are no pecuniary relationships or transactions between the Independent Directors and the Company, except for the sitting fees drawn by the Non-executive Directors and sitting fees and commission drawn by the Non-executive and Independent Directors for attending the meeting of the Board and its Committee(s) thereof.

Shareholding of Non-Executive Directors

Name of the Director Category No. of shares held

Mr. Om Prakash Munjal Non-Executive 25,000Director

Mr. Sunil Kant Munjal Non-Executive 32,500Director

Apart from the above, none of the Non-Executive (including Independent) Directors hold any shares (as own or on behalf of other person on beneficial basis) in the Company.

Information Supplied to the Board

Board members are given agenda papers along with necessary documents and information in advance of each meeting of the Board and Committee(s). However, in case of business exigencies or urgency of matter, the resolutions are passed by way of circulation. In addition to the regular business items, the following items/ information are regularly placed before the Board to the extent applicable:

• Annual operating plans and Budgets, Capital budgets and updates;

• Purchase and disposal of major fixed assets;

• Quarterly and half yearly results of the Company;

• Minutes of the Audit Committee, Shareholders' Grievance Committee, Remuneration Committee and Committee of Director's meetings;

• Information on recruitment and remuneration of senior management just below the Board level including appointment or removal of CFO and Company Secretary;

• Any material defaults in financial obligations to and by the Company, or substantial non-payments for goods sold by the Company;

• Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems;

• Transactions that involve substantial payment towards goodwill, brand equity or intellectual property;

• Materially important show cause, demand, prosecution and penalty notices;

• Details of quarterly foreign exchange exposures and steps taken by the management to limit the risks of adverse exchange rate movement;

• Sale of material nature, of investments and assets, which are not in the normal course of business;

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• Details of Joint Ventures and Agreements or variations thereof;

• Quarterly Statutory Compliance Report;

• Non-compliance of any regulatory, statutory nature or listing requirements and shareholder's service such as non-payment of dividend, delay in share transfer etc.;

• Investments strategy/plan;

• Any issue which involves possible public or product liability claims of substantial nature, including any judgment or order which may have passed strictures on the conduct of the Company or taken an adverse view regarding another enterprise that can have negative implications on the Company; and

• Significant labour problems and their proposed solutions. Also, any significant development in Human Resources/Industrial Relations front like signing of Wage Agreement, implementation of Voluntary Retirement Schemes etc.

Code of Conduct

We at Hero Honda have laid down a code of conduct for all Board members and senior management of the Company. The code of conduct is available on the website of the Company www.herohonda.com. The code has been circulated to all the members of the Board and senior management and they have affirmed compliance with the code of conduct. A declaration signed by the Chief Executive Officer (CEO) to this effect is attached to the Annual Report.

Risk Management

We at Hero Honda have established an effective risk assessment and minimization procedures, which are reviewed by the Board periodically. There is a structure in place to identify and mitigate various risks faced by the Company from time to time.

BOARD LEVEL COMMITTEES

AUDIT COMMITTEE

The genesis of Hero Honda's Audit Committee can be traced back to the Audit Sub-Committee, constituted in 1987. Since then it has been dealing with matters prescribed by the Board of Directors on a case to case basis. In general, the primary role/objective of the Audit Committee is to review the financial statements of the Company, strengthen internal controls & look into all transactions having monetary implications on the functioning of the Company. The nomenclature, constitution and terms of reference of the Committee were revised on January 16, 2001 and an Audit Committee was set up as per the provisions of the Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement of the Stock Exchange(s).

As on March 31, 2008, the Committee had four Non-Executive and Independent Directors in accordance with the prescribed guidelines. Mr. Pradeep Dinodia, a leading Chartered Accountant, is the Chairman of the Committee. The other members are Dr. Pritam Singh,

Gen.(Retd.) Ved Prakash Malik and Mr. Narinder Nath Vohra, all learned personalities in their respective fields. The members of the Committee have adequate knowledge in the field of finance, accounting, and law. The role and "terms of reference" of the Audit Committee includes the following:

• Overseeing

- the Company's financial reporting process and disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible.

• Recommending

- the appointment, re-appointment, replacement and removal of the statutory auditor, fixation of audit fees and approving payments for any other services.

• Reviewing

- with the management the annual financial statements with primary focus on matters required to be included in the Directors' Responsibility Statement, changes, if any in accounting policies and practices and reasons thereof, compliance with accounting standards and guidelines of stock exchange(s), major accounting entries, qualifications in draft audit reports, related party transactions & the going concern assumption.

- with the management, the quarterly financial statements before submission to the board for approval.

- the adequacy of internal control systems and the internal audit function and reviewing the Company's financial and risk management policies.

- the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

- the reports furnished by the internal auditors, discussion with internal auditors on any significant findings and ensuring suitable follow up thereon.

- Directors' overseas traveling expenses.

- foreign exchange exposure.

• Complying

- with the provisions of listing agreement laid down by the Stock Exchange(s) and legal requirements concerning financial statements.

• Discussing

- with external auditors before the audit commences, of the nature and scope of audit. Also post audit discussion to ascertain any area of concern.

• Looking

- into the reasons for substantial defaults in the payments to the shareholders (in the case of non-payment of declared dividends) and creditors.

The Sr. Vice President & CFO, Internal Auditors, Statutory Auditors and Cost Auditors attend the meetings of the Committee on the invitation of the Chairman. Mr Ilam C. Kamboj, G.M. Legal & Company Secretary acts as the Secretary of the Committee.

During the year, 9 (Nine) meetings of the Audit Committee were held on April 09, 2007; April 23, 2007; May 11, 2007; July 24, 2007; September 18, 2007; September 28, 2007; October 18, 2007; December 14, 2007; and January 29, 2008 in due compliance with the stipulated provisions. The attendance record of members of the Audit Committee is given in Table 2.

TABLE 2: DETAILS OF THE AUDIT COMMITTEE

Name of committee Position No. of meetings No. of meetingsmember held held during attended

his tenure

Mr. Pradeep Dinodia Chairman 9 9

Gen. (Retd.) V.P. Malik Member 9 7

Dr. Pritam Singh Member 9 7

Mr. N.N.Vohra Member 9 7

REMUNERATION COMMITTEE

The Company had set up a Remuneration Committee on January 16, 2001 to review and recommend the payment of annual salaries, commission, and finalise service agreements and other employment conditions of Executive Directors. The Committee takes into consideration the best remuneration practices being followed in the industry while fixing appropriate remuneration packages.

As on March 31, 2008, the Committee had three Non-Executive and Independent Directors as its members in accordance with the prescribed guidelines. Gen. (Retd.) Ved Prakash Malik, is the Chairman of the Committee. The other members are Mr. Narinder Nath Vohra and Mr. Pradeep Dinodia. Mr. Ilam C. Kamboj, G.M. Legal & Company Secretary acts as the Secretary of the Committee.

During the year the committee did not meet, as there was no business to transact.

Remuneration Policy

Remuneration paid to Executive Directors

The remuneration paid to Executive Directors is recommended by the Remuneration Committee and approved by the Board of Directors, in the Board meeting, subject to the subsequent approval by the shareholders at the general meeting and such other authorities, as the case may be.

At the Board meeting, only the Non-Executive and Independent Directors participate in approving the remuneration paid to the Executive Directors. The remuneration is fixed considering various factors such as qualification, experience, expertise, prevailing remuneration in the corporate world and the financial position of the Company. The remuneration structure comprises of Basic Salary, Commission, Perquisites and allowances, Contribution to provident fund and other funds. Besides these, a fixed commission @ 1 per cent of net profit computed in accordance with Section 198 of the Companies Act, 1956, is paid as per the terms of appointment.

As of now, the Company does not have any Employee Stock Options Plans (ESOPs). Term of appointment of Executive Director is 5 (five) years. Further, no notice period and severance fee is applicable for the above-mentioned Executive Directors.

Remuneration paid to Non-Executive Directors

The Non-Executive Directors of the Company are paid sitting fees of Rs. 16,500 for each meeting of the Board, Audit Committee, Remuneration Committee and Shareholders' Grievance Committee attended by them.

However, in addition to the sitting fees, Non-executive and Independent Directors shall be entitled to remuneration by way of commission upto 0.10 per cent of profits of the Company for every

thfinancial year as approved by the members at their 24 Annual General Meeting held on July 24, 2007.

Tables 3 and 4 gives details of remuneration paid to Directors. During 2007-08, the Company did not advance any loans to any of its Directors.

TABLE 3: REMUNERATION TO EXECUTIVE DIRECTORS

Executive Directors Salary* (Rs.) Commission Fixed ** (Rs.) Total (Rs.)

Mr. Brijmohan Lall Munjal 97,99,178 14,78,25,000 15,76,24,178

Mr. Pawan Munjal 95,32,492 14,78,25,000 15,73,57,492

Mr. Toshiaki Nakagawa 41,91,795 14,78,25,000 15,20,16,795

Mr. Yutaka Kudo 34,29,869 14,78,25,000 15,12,54,869

Notes:* Salary includes Basic Salary, Perquisites and allowances, Contribution to provident and other funds.** Total Commission is calculated @ 1% of the net profit calculated in accordance with Section 198 of the Companies Act, 1956.

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TABLE 4: REMUNERATION TO NON-EXECUTIVE DIRECTORS

Non-Executive Directors Sitting fees (Rs.) Commission (Rs.) Total (Rs.)

Mr. Sunil Kant Munjal 82,500 N.A. 82,500

Mr. Pradeep Dinodia 3,13,500 11,50,000 14,63,500

Mr. N.N. Vohra 2,31,000 7,50,000 9,81,000

Gen.(Retd.) V.P. Malik 1,81,500 6,50,000 8,31,500

Dr. Pritam Singh 2,14,500 6,13,000 8,27,500

Mr. Analjit Singh 33,000 1,00,000 1,33,000

Ms. Shobhana Bhartia 33,000 1,00,000 1,33,000

1Dr. Vijay L. Kelkar 33,000 1,00,000 1,33,000

# #Mr. Sunil Bharti Mittal Nil Nil

#Mr. Masahiro Takedagawa Nil N.A. Nil

No sitting fee was paid to Mr. Om Prakash Munjal, Mr. Tatsuhiro Oyama (Director upto May 11, 2007) & Mr. Takashi Nagai (Director w.e.f. May 11, 2007) as they did not attend any of the meetings of the Board held during the financial year 2007-08.

# Mr. Sunil Bharti Mittal & Mr. Masahiro Takedagawa have opted not to receive sitting fees which were accrued to them on account of attending the meetings of the Board.

1 Dr. Vijay Laxman Kelkar has resigned from the Directorship w.e.f. December 31, 2007.

SHAREHOLDERS' GRIEVANCE COMMITTEE

This Committee, constituted on January 16, 2001, specifically looks into redressal of shareholders' and investors' grievances arising out of issues regarding share transfers, dividends, dematerialisation and related matters. As on March 31, 2008, the Committee had three Non-Executive and Independent Directors in accordance with the prescribed guidelines. Mr. Narinder Nath Vohra, is the Chairman of the Committee. The other members are Dr. Pritam Singh and Mr. Pradeep Dinodia. Mr. Ilam C. Kamboj, G.M. Legal & Company Secretary acts as the Secretary of the Committee.

The Company has an efficient system of dealing with investors' grievances. The Chairman and the Managing Director & CEO of the Company take personal interest in all matters of concern for investors as and when necessary. The Company Secretary being the Compliance Officer carefully looks into each issue and reports the same to the Shareholders' Grievance Committee. In the meetings of the committee the status of all shareholders' complaints, requests etc. alongwith letters received from all statutory authorities were reviewed.

During the year, 4 (four) meetings of the Shareholders' Grievance Committee were held on April 09, 2007; July 24, 2007; October 18, 2007 and January 29, 2008.

Details of shareholders complaints and their status are given in the section on "General Shareholder's Information". The attendance record of members of the Shareholders' Grievance Committee is given in Table 5.

TABLE 5: DETAILS OF SHAREHOLDERS' GRIEVANCE COMMITTEE

Name of committee Position No. of meetings No. of meetingsmember held held during attended

his tenure

Mr. N.N. Vohra Chairman 4 4

Mr. Pradeep Dinodia Member 4 4

Dr. Pritam Singh Member 4 3

COMMITTEE OF DIRECTORS

Apart from these Committees, the Company also has a Committee of Directors. As on March 31, 2008, the Committee comprised of Mr. Brijmohan Lall Munjal, Chairman; Mr. Pawan Munjal, Managing Director & CEO; Mr. Toshiaki Nakagawa, Joint Managing Director; Mr. Yutaka Kudo, Whole-time Director, Mr. Ravi Sud, Sr. Vice President & CFO and Mr. Ilam C. Kamboj, G.M. Legal & Company Secretary as its members.

Constituted in 1985, the Committee deals with matters delegated by the Board from time to time.

This Committee meets whenever required. During the year under review 4 (four) meetings of the Committee were held.

SHARE TRANSFER COMMITTEE

This Committee was constituted on January 31, 2007 as a measure of Good Corporate Governance practice and to streamline the work related to share transfer etc. which was earlier approved by the Committee of Directors. Mr. Ravi Sud, Sr. Vice President & CFO and Mr. Ilam C. Kamboj, G.M. Legal & Company Secretary are its members.

This Committee meets whenever required. During the year under review 35 (thirty five) meetings of the Committee were held.

DISCLOSURES

Related Party Transactions

The Company follows the following policy in disclosing the related party transactions to the Audit Committee:

a) A Statement in the Summary form of transactions with related parties in the ordinary course of business is placed periodically before the Audit Committee.

b) There are no material individual transactions with related parties, which are not in the normal course of business and which are not on an arm's length basis.

Disclosures on materially significant related party transactions that may have potential conflict with the interest of the company at large.

There are no materially significant transactions made by the Company with its promoters, Directors or Management or relatives etc. that may have potential conflict with the interest of the Company at large.

Accounting Treatment in preparation of Financial Statements

The guidelines/accounting standards laid down by the Institute of Chartered Accountants of India (ICAI) have been followed in preparation of the financial statements of the Company. Compliances by the Company

There has neither been any non-compliance of any legal provision of applicable law, nor any penalty, stricture imposed by the stock exchanges or SEBI or any other authorities, on any matters related to capital market during the last three years.

Insider Trading

In compliance with the SEBI regulation on prevention of insider trading, the Company has instituted a comprehensive code of conduct for its management, staff and relevant business associates. The code lays down guidelines, which advises them on procedures to be followed and disclosures to be made, while dealing with shares of the Company and cautioning them on consequences of non-compliances.

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Year Time, Day, Date & Location Summary of Resolutions Passed 2006-07 10:30 A.M.

Tuesday, July 24, 2007,Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010

2005-06 04:30 P.M.Thursday, September 14, 2006,Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010

2004-05 10:00 A.M.Tuesday, August 23, 2005,Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010

GENERAL BODY MEETINGS

Details of Annual General Meeting (AGM)

Location, date and time of general meetings held during the last three years and Ordinary and Special resolutions passed thereat are given in Table 6.

Pursuant to the provisions of Section 192A of the Companies Act, 1956, there was no matter as required to be dealt by the Company to be passed through postal ballot.

TABLE 6: DETAILS OF AGM'S

CEO & CFO CERTIFICATION

Certificate from Mr. Pawan Munjal, Managing Director & CEO and Mr. Ravi Sud, Sr. Vice President & CFO in terms of Clause 49(V) of the Listing Agreement for the year under review was placed with the Board of Directors of the Company in their meeting held on April 24, 2008. A copy of the same certificate on the financial statements for the financial year ended March 31, 2008 and the Code of Conduct is given along with this Report.

APPOINTMENT AND RE-APPOINTMENT OF DIRECTORS

Ms. Shobhana Bhartia, Mr. Sunil Bharti Mittal, Mr. Masahiro Takedagawa and Mr. Pradeep Dinodia, Directors of the Company, retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offer themselves for re-appointment.

Further, since the last AGM, Mr. Sumihisa Fukuda and Mr. M. Damodaran were appointed as Additional Directors on the Board of the Company and has been proposed to be appointed as Directors by the shareholders at the ensuing AGM of the Company.

The brief resume of the said Directors proposed to be appointed and re-appointed is given alongwith the Notice of the AGM being sent along with the Annual Report.

MEANS OF COMMUNICATION

The Company has regularly sent, both by post as well as by fax (within 15 minutes of closure of the Board meeting) the annual audited as well as quarterly un-audited results to both the Stock exchanges, BSE & NSE, after they are taken on record by the Board of Directors.

The Company's half yearly results (period ended September 30, 2007) and annual results (year ended March 31, 2008) have been published in English, Hindi and other Regional newspapers (viz. The Times of India, The Economic Times, Hindustan Times, Financial Express, The Mint, Navbharat Times, Mumbai Mirror and Financial Times).

Results for the quarter ended June 30, 2007 and December 31, 2007 have been published in English, Hindi and other Regional newspapers (viz. The Economic Times, The Times of India, The Hindustan Times, Financial Times, Mumbai Mirror, Bangalore Mirror, Ahmedabad Mirror, Financial Express and Jansatta). Further, the Company's quarterly, half yearly and annual results have also been sent to the individual shareholders of the Company. Results for each quarter, half year and annual results for the year ended March 31, 2008 have been displayed on the Company's website www.herohonda.com. The website also displays official news releases and distribution schedule, as required by Clause 35 of the Listing Agreement.

Moreover, pursuant to Clause 51 of the Listing Agreement, financial information like annual and quarterly financial statements and shareholding pattern etc. are available on the SEBI web-site www.sebiedifar.nic.in. The Company Secretary being the Compliance Officer ensures the correctness and authenticity of the information filed in the said website.

During the year ended March 31, 2008, various presentations were made to analysts and Institutional investors. Further, the Management Discussion & Analysis (MDA) Report, throwing light on the operations, business performance, financial and other important aspects of the Company's functioning forms part of this Annual Report.

Ordinary Resolutions• Appointment of Mr. Yutaka Kudo as Director and Whole-time Director.• Appointment of Mr. Takashi Nagai as Director.

Special Resolution• Payment of commission to Non-Executive Independent Director(s).

Ordinary Resolutions• Appointment of Mr. Sunil Bharti Mittal as Director.• Appointment of Mr. Toshiaki Nakagawa as Director and Joint Managing Director.• Appointment of Mr. Masahiro Takedagawa as Director.• Re-appointment of Mr. Pawan Munjal as Managing Director.

Special Resolutions• Re-appointment of Mr. Brijmohan Lall Munjal as Chairman and Director in the

Whole-time employment of the Company.• Keeping of Registers/Returns/ Documents at the Registered Office.

Ordinary Resolutions• Appointment of Mr. Analjit Singh as Director.• Appointment of Dr. Pritam Singh as Director. • Appointment of Ms. Shobhana Bhartia as Director.• Appointment of Dr. Vijay Laxman Kelkar as Director.• Appointment of Mr. Miki Yamamoto as Director and Joint Managing Director.• Appointment of Mr. Takao Eguchi as Director and Whole-time Director.• Appointment of Mr. Motohide Sudo as Director.


GENERAL SHAREHOLDER'S INFORMATION

Annual General Meeting

Date: September 25, 2008

Day: Thursday

Time: 11:00 A.M.

Venue: Airforce Auditorium, Subroto Park,

Dhaula Kuan, New Delhi 110010

Financial Calendar

Financial year: April 1 to March 31

For the year ended March 31, 2008 results were announced on:

First quarter ended June 30, 2007 July 24, 2007

Second quarter and half year ended September 30, 2007 October 18, 2007

Third quarter ended December 31, 2007 January 31, 2008

Fourth quarter and year ended March 31, 2008 April 24, 2008

For the year ending March 31, 2009, results will be announced on: (Tentative and subject to change)

First quarter ending June 30, 2008 July, 2008 (4th week)

Second quarter and half year ending September 30, 2008 October, 2008 (3rd week)

Third quarter ending December 31, 2008 January, 2009 (3rd week)

Fourth quarter and year ending March 31, 2009 April, 2009 (3rd week)

Book closure

The dates of book closure are from Thursday, September 11, 2008 to Thursday, September 25, 2008 (both days inclusive).

Dividend payment

The Board of Directors has recommended 950 per cent dividend for the financial year 2007-08. The dividend, if approved by shareholders at the ensuring AGM shall be paid to those shareholders whose names appear on the Register of Members as on Thursday, September 25, 2008. In 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 Wednesday, September 10, 2008 as per the details furnished by the Depositories for this purpose.

Listing on Stock Exchange

As on March 31, 2008, the securities of the Company are listed on the following exchanges:

1. Bombay Stock Exchange Limited, (BSE) based at Phiroz thJeejeebhoy Towers, 25 Floor, Dalal Street, Mumbai 400 001; &

2. National Stock Exchange of India Limited, (NSE) based at

Exchange Plaza, Plot No. C/1 G Block, Bandra Kurla Complex, Bandra East, Mumbai 400 051.

Further, the Company had applied for delisting of its shares from The Calcutta Stock Exchange Association Limited (CSE) and complied with the procedural formalities for the same immediately after the approval received from the shareholders, but the final approval of the same is still awaited. However, the in-principal approval has been received after the grant of approval by the De-listing Committee of the CSE.

Listing Fees

Listing fees for the year 2008-09 has been paid to the stock exchanges, wherein the equity shares of the Company are listed (i.e. BSE & NSE) within the stipulated time.

Stock Codes

The Company's stock codes at the primary exchanges are:

Stock Code Reuters Code Bloomberg

BSE 500182 HROH.BO HH IN

NSE HEROHONDA HROH.NS NHH IN

Stock Market Data

The Company's market capitalisation is included in the computation of the BSE -100, BSE - 200, BSE - 500, BSE Sectoral Indices, S&P CNX Nifty, S&P CNX 500 and CNX 100. Monthly high and low quotations as well as the volume of shares traded at the National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE) is given in Table 7.

HERO HONDA’S SHARE PRICE MOVEMENT VIS A VIS NIFTY (Monthly High)

TABLE 7: SHARE PRICE DATA FOR 2007-08 (IN RS.) (SHARES OF RS. 2 PAID UP VALUE)

National Stock Exchange of India Limited, Mumbai (NSE)

Month Total High Date Volume on Low Date Volume onVolume that date that date

Quantity (In Rs.) Quantity (In Rs.) Quantity

April' 07 4265707 700.00 25-Apr-07 335022 620.90 12-Apr-07 238021

May' 07 5406193 742.80 31-May-07 1082189 647.80 22-May-07 123080

June' 07 4348615 744.85 1-Jun-07 287935 650.00 19-Jun-07 153965

July' 07 4379334 730.00 3-Jul-07 103368 655.10 11-Jul-07 222773

August' 07 5055233 684.00 9-Aug-07 219978 610.00 24-Aug-07 81740

September' 07 3710303 775.00 25-Sep-07 337672 633.50 5-Sep-07 65151

October' 07 4984564 774.70 15-Oct-07 332802 690.00 3-Oct-07 161838

November' 07 5086172 752.00 2-Nov-07 335338 619.90 23-Nov-07 219044

December ' 07 3683215 749.00 26-Dec-07 52786 680.00 10-Dec-07 91320

January' 08 5329007 721.00 3-Jan-08 730380 550.00 22-Jan-08 282771

February' 08 6687308 779.00 4-Feb-08 454881 662.30 12-Feb-08 368631

March' 08 7300970 785.00 3-Mar-08 815989 631.35 24-Mar-08 507010

5657


675

685

695

705

715

725

735

745

755

765

775

785

795

Sh

are

Pri

ce

4200

4400

4600

4800

5000

5200

5400

5600

5800

6000

6200

6400

Nift

y

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

2007-08

HHML NIFTY


Bombay Stock Exchange Limited, Mumbai (BSE)

Month Total High Date Volume on Low Date Volume onVolume that date that date

Quantity (In Rs.) Quantity (In Rs.) Quantity

April' 07 956109 696.90 26-Apr-07 61839 565.00 19-Apr-07 28068

May' 07 1197136 739.00 31-May-07 203059 655.20 25-May-07 11429

June' 07 1167911 745.00 1-June-07 114285 651.05 19-Jun-07 187870

July' 07 788397 726.90 18-July-07 83270 663.00 12-July-07 46457

August' 07 1137264 685.00 9 Aug-07 34586 605.05 29-Aug-07 18467

September' 07 935331 786.00 25-Sep-07 63652 631.50 6- Sep-07 41094

October' 07 1251800 775.00 11- Oct-07 48306 701.00 19- Oct-07 33451

November' 07 692195 747.95 30-Nov-07 41356 655.00 9- Nov-07 4532

December' 07 702928 735.00 6- Dec-07 29714 680.00 31-Dec-07 9463

January' 08 1455231 723.90 4-Jan-08 14345 561.00 22-Jan-08 92235

February' 08 2704988 785.00 4-Feb-08 122844 662.00 12- Feb-08 16904

March' 08 1314564 785.00 4-Mar-08 274302 633.00 24-Mar-08 14193

Distribution of Shareholding by Size

Table 8 lists the distribution of Shareholding by number of shares held and Shareholding Pattern in percentage (pursuant to Clause 35 of the Listing Agreement) as on March 31, 2008.

TABLE 8:

No. of shares held (Rs.2 paid up) Folios Shares of Rs. 2 paid up

Numbers % Numbers %

Upto 500 39189 79.64 3833856 1.92

501 - 1000 7634 15.51 5782140 2.90

1001- 5000 1872 3.80 3661189 1.83

5001-10000 153 0.31 1067062 0.53

10001- 50000 180 0.38 4465555 2.24

50001 and above 178 0.36 180877698 90.58

TOTAL 49206 100.00 199687500 100.00

Shareholding Pattern

Category Category of Number of Total number Number of Total shareholding code shareholder shareholders of shares shares held in as a percentage of

dematerialized form total number of shares

As a As a percentage percentageof (A+B) of (A+B+C)

(A) Shareholding of Promoter and Promoter Group

(1) Indian(a) Individuals/ Hindu 59 4044715 361365 2.03 2.03

Undivided Family(b) Central Government/ 0 0 0 0 0

State Government(s)(c) Bodies Corporate 8 53788840 52163330 26.93 26.93(d) Financial Institutions/ 0 0 0 0.00 0.00

Banks(e) Any Other (Specify) 0 0 0 0.00 0.00

Sub-Total (A)(1) 67 57833555 52524695 28.96 28.96(2) Foreign(a) Individuals (Non-Resident Individuals

/ Foreign Individuals)(b) Bodies Corporate 1 51918750 0 26.00 26.00(c) Institutions 0 0 0 0.00 0.00(d) Any Other (specify) 0 0 0 0.00 0.00

Sub-Total (A)(2) 1 51918750 0 26.00 26.00

Total Shareholding of 68 109752305 52524695 54.96 54.96Promoter and Promoter Group (A)= (A)(1)+(A)(2)

(B) Public shareholding(1) Institutions(a) Mutual Funds/ UTI 81 7753072 7677237 3.88 3.88(b) Financial Institutions/ Banks 35 315464 295409 0.16 0.16

HERO HONDA’S SHARE PRICE MOVEMENT VIS A VIS SENSEX .(Monthly High)

HHML Sensex

5859

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

2007-08

650660670680690700710720730740750760770780790800

Sh

are

Pri

ce

14000144001480015200156001600016400168001720017600180001840018800192001960020000204002080021200

Sen

sex

6061

Dematerialisation of Shares and Liquidity

The shares of the Company are traded in compulsory demat segment. As on March 31, 2008, 68.40 per cent of the total share capital is held in dematerialised form with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). During the year under review, share certificates involving 5,26,11,075 shares of Rs. 2 each, were dematerialised by the shareholders. These represent 26.35 percent of the total share capital of the Company.

Outstanding GDR's/ADR's/Warrants or any Convertible Instruments Conversion Date and likely impact on equity

Not Applicable

Details of Public Funding obtained in the last three years

The Company has not obtained any public funding in the last three years.

TABLE 9: COMPLAINTS/REQUESTS RECEIVED AND REDRESSED DURING 2007-08

Sl. No Nature of Complaints / Requests Received Cleared Pending

1. Non receipt of shares 159 158 1

2. Request for issue of duplicate shares 104 104 0

3. Non receipt of dividend warrant 352 352 0

4. Change of address 354 354 0

5. Mandate cases/bank description 187 187 0

6. Miscellaneous (Shares) 2070 2070 0

Registrar & Transfer Agents

All work related to Share Registry, both in physical form and electronic form, is handled by the Company's Registrar and Transfer Agents. Company has appointed M/s. Karvy Computershare Private Limited as the Registrar & Share Transfer Agent of the Company in place of M/s. MCS Limited w.e.f. June 1, 2007.

Karvy Computershare Pvt.Ltd.(Unit: Hero Honda Motors Limited) Plot No. 17-24, Vithalrao Nagar, Madhapur, Hyderabad-500081,Tel No : 040-23420815-820, Fax : 040-23420814E-mail: [email protected]

Share Transfer System

The Share Transfers (pertaining to shares in physical mode) are approved by the Share Transfer Committee which meets regularly on a weekly/fortnightly basis. The total number of shares transferred during

(c) Central Government/ State Government(s)(d) Venture Capital Funds(e) Insurance Companies 18 14867980 14867980 7.45 7.45(f) Foreign Institutional Investors 261 49208761 49170561 24.64 24.64(g) Foreign Venture Capital Investors(h) Any Other (Foreign Banks)

Sub-Total (B)(1) 395 72145277 72011187 36.13 36.13(2) Non-institutions(a) Bodies Corporate 795 1448160 1412594 0.73 0.73(b) Individuals -

i. Individual shareholders holding 47238 13885673 9186764 6.95 6.95nominal share capital up to Rs. 1 lakh.ii. Individual shareholders holding 5 1070315 65650 0.54 0.54nominal share capital in excess of Rs. 1 lakh.

(c) Any Other (Specify) 576 182408 182338 0.09 0.09- Non Resident Indians 116 19302 19302 0.01 0.01- Clearing Members- Trusts 12 1182810 1182810 0.59 0.59- Foreign Nationals 1 1250 1250 0.00 0.00Sub-Total (B)(2) 48743 17789918 12050708 8.91 8.91Total Public Shareholding 49138 89935195 84061895 45.04 45.04(B)= (B)(1)+(B)(2)

TOTAL (A)+(B) 49206 199687500 136586590 100.00 100.00(C) Shares held by Custodians and against 0 0 0 0.00 0.00

which Depository Receipts have been issued

GRAND TOTAL (A)+(B)+(C) 49206 199687500 136586590 100.00 100.00

Contd... the financial year 2007-08 were 83,586 which were completed in the prescribed period. Shares under objection were returned within two weeks time.

Confirmations in respect of the requests for dematerialisation of shares are being sent to the respective depositories i.e. NSDL & CDSL expeditiously.

COMPANY'S REGISTERED ADDRESS34, Community Centre, Basant Lok, Vasant Vihar, New Delhi 110 057Tel: 011 2614 2451, 2614 4121Fax: 011 2615 3913website: www.herohonda.com

PLANT LOCATIONS

Gurgaon Plant37 K.M. Stone, Delhi-Jaipur Highway, Sector 33,Gurgaon 122 001 Haryana Tel: 0124 - 2372 123-134 Fax: 0124 - 2373 141-142

Dharuhera Plant69 K.M. Stone, Delhi-Jaipur Highway,Dharuhera, Distt. Rewari 122 100 Haryana Tel: 01274 - 264 012-015Fax: 01274 - 267 024

Haridwar Plant Plot No. 3, Sector - 10, 11E, SIDCUL, Roshanabad, Haridwar 248 001Uttrakhand Tel: 01334 - 239513 Fax: 01334 - 239512

NON-MANDATORY REQUIREMENTSThe Company has not adopted the non-mandatory requirements as specified in Annexure - 3 of the Listing Agreement except clause (b) relating to Remuneration Committee.

Investors' Correspondence may be addressed toMr. Ilam C. Kamboj, G.M.-Legal & Company Secretary, e-mail: [email protected] or to the Registrar & Transfer Agents i.e Karvy Computershare Pvt. Ltd. e-mail: [email protected]

Queries Relating to the Financial Statements of the Company may be addressed toMr. Ravi Sud, Sr. Vice President & CFO, e-mail: [email protected]

For and on behalf of the Board

Brijmohan Lall

Chairman

July 29, 2008New Delhi

Investors' Services

The Company has Board Level Committees dealing with investor issues, which have been discussed in detail earlier. Table 9 lists the complaints/requests/reminders received and redressed during 2007-08. During the financial year, the Company has attended to most of the investors' grievances/correspondence within a period of 10-15 days from the date of receipt of the same.


CERTIFICATE

TO THE MEMBERS OF HERO HONDA MOTORS LIMITED

We have examined the compliance of conditions of Corporate Governance by Hero Honda Motors Limited for the year ended March 31, 2008, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement.

We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For A .F. FERGUSON & CO. Chartered Accountants

Manjula BanerjiPartner(Membership no. 86423)

Place: New DelhiDate: July 29, 2008

CERTIFICATION BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF THE COMPANY

We, Pawan Munjal, Managing Director & Chief Executive Officer (CEO) and Ravi Sud, Sr. Vice President & Chief Financial Officer (CFO) of Hero Honda Motors Limited, to the best of our knowledge and belief certify that:

1. We have reviewed the Balance Sheet and Profit and Loss Account of the Company for the year ended March 31, 2008 and all its schedule and notes on accounts, as well as the Cash Flow Statement.

2. To the best of our knowledge and information:

a. these statements do not contain any materially untrue statement or omit to state a material fact or figures or contains statement that might be misleading;

b. these statements together present a true and fair view of the Company's affairs and are in compliance with existing accounting standards, applicable laws and regulations.

3. We also certify, that based on our knowledge and the information provided to us, there are no transactions entered into by the Company, which are fraudulent, illegal or violate the company's code of conduct.

4. We are responsible for establishing and maintaining internal controls and procedures for the Company, and we have evaluated the effectiveness of the Company's internal controls and procedures.

5. We have disclosed, based on our most recent evaluation, wherever applicable, to the company's auditors and through them to the audit committee of the Company's Board of Directors:

a. Significant changes in internal control during the year;

b. Any fraud, which we have become aware of and that involves Management or other employees who have a significant role in the Company's internal control systems;

c. Significant changes in accounting policies during the year.

We further declare that all board members and senior management have affirmed compliance with the code of conduct for the year 2007-08.

For Hero Honda Motors Ltd. For Hero Honda Motors Ltd.

CERTIFICATE OF CEO & CFO

New Delhi,April 24, 2008

Pawan Munjal Managing Director & CEO

Ravi SudSr. Vice President & CFO

6263


6465

ANNEXURE - II TO DIRECTORS' REPORT

Information Under Section 217(1)(e) of the Companies Act, 1956 read

with Companies (Disclosure of Particulars in the Report of Board of

Directors) Rules, 1988 and forming part of the Directors' Report for the

year ended March 31, 2008 ;

I. CONSERVATION OF ENERGY

a) Energy conservation measures taken and their impact

- Power consumption has been reduced with the following

measures taken during the year under review:

Additional Investments and Proposals being implemented for

reduction of consumption of energy

For the reduction in power consumption the following measures has

been envisaged and planned for:

•

Hero Honda Motors Limited has always recognised the importance of

energy. Energy is a vital resource for industrialization and economic

growth but also is responsible for factors leading to climate change. By

reducing emissions, energy conservation is an important part of

lessening climate change. Energy conservation is often the most

economical solution to energy shortages and is a more

environmentally benign alternative to increased energy production.

The company has BEE trained energy managers who are continuously

working to curb the wasteful usage of energy and adopting

equipments with better energy efficiency.

• Installation of VFD on air supply unit in paint shop - saving

energy 71000 KWH/ year.

• Replacement of Fixed speed compressors with VFD

compressors in AC & Refrigeration system - saving energy

12342 KWH / year.

• Installation of VFD on cooling tower fans - saving energy in

winter season 2448 KWH / year.

• Provision of FRP fans in place of aluminum casting in cooling

towers - saving energy 264132 KWH/year.

• Replacement of low rating oil injected compressors with higher

rating oil free compressors - saving energy 51000 KWH/ year.

• Installation of real timer on FDV's - saving energy

150000 KWH / year.

• Installation of individual circuits for main machine - saving

power of AC chillers 6000 KWH/year.

BIO MASS gasifier power generating set

• Vapour Absorption machine for chillers

• Heat Recovery from Incinerator

• Heat Recovery from DG sets at HHD

• Alternate power i.e wheeling power from Electrical grid

Note: The additional investment cannot be precisely ascertained, and

is part of the Repairs and Maintainence; consumables expenditure and

investments in fixed assets.

c) Impact of measures at a) and b) for reduction of energy

consumption and consequent impact on the cost of

production of goods.

d) Total energy consumption and energy consumption per unit of

production as per Form - A given below.

FORM-A

Form for Disclosure of Particulars with respect to Conservation of

Energy

For Dharuhera Plant Current Year Previous Year

A. Power and fuel consumption per unit of production

Product Unit (Motorcycle 1672595 1598921

1. Electricity

a) Purchased

Units (KWH) 5426026 8451452

Amount (Rs.) 23,464,923 34,295,811

Rate/unit (Rs.) 4.32 4.06

b) Own generation

Through diesel generator Unit

Self (KWH) 41664025 34847158

Hired (KWH) Nil Nil

Unit per-ltr.of Diesel Oil (Cost/unit)

Self (KWH/Ltr.) 4.12 3.98

Hired (KWH/Ltr.) Nil Nil

2. Furnace Oil, LDO, HPS* etc.

Quantity (K.Ltrs) 2,067.888 1824.905

Total amount (Rs.) 41,704,620 3,02,48,767

Average Rate/Ltr. (Rs.) 20.17 16.58

B. Consumption per unit of production

1) Electricity (KWH/Motorcycle) 28.15 27.08

2) Furnace Oil, LDO, HPS etc 1.24 1.14

(Ltr./Motorcycle)

*used for the purpose of Boiler used for production of motorcycle.

It is difficult to quantify the impact of individual projects on

production as no. of equipments are being added during the

period.

For Gurgaon Plant Current year Previous year

A. Power and fuel consumption per unit of production

Product unit (Motorcycle) 1660865 1740975

1. Electricity

a) Purchased Unit (KWH) Nil Nil

Amount (Rs.) Nil Nil

Rate/unit Nil Nil

b) Own generation

Through diesel generator unit

Self (KWH) 56115270 56830801

Hired (KWH) Nil Nil

Unit per-ltr.of Diesel Oil Cost/unit

Self, (KWH/Ltr.) 4.08 4.11

Hired (KWH/Ltr.) Nil Nil

2. Furnace Oil, LDO, HPS etc.**

Quantity (K.Ltrs) 159.201 481.893

Total amount (Rs.) 4,398,916 1,10,05,176

Average Rate/Ltr. (Rs.) 27.63 22.84

B. Consumption per Current Year Previous Year

unit of production

1) Electricity (KWH/Motorcycle) 33.79 32.64

2) Furnace Oil. LDO, HPS etc. 0.10 0.28

(Ltr./Motorcycle)

**used for the purpose of hot water generator used for

production of motorcycle.

II. PARTICULARS AS PER FORM B

(A) Research & Development (R&D)

1 Specific areas in which R & D carried out by the Company

• New Model Technology Absorption carried out by the

company.

• Indigenisation of CKD Parts

• Multi Source Approval

• Meeting Legislative Norms

• Active Participation in deciding the needs of future

Automobile regulations in India

2 Benefits derived as a result of the above R & D activities

• Splendor NXG (100 cc - 4 Stroke), Hunk (150 cc - 4 Stroke),

Pleasure New Aesthetics, Super Splendor Cast Wheel,

Passion Plus Cast Wheel, CD Deluxe Cast Wheel, Splendor

Plus Cast Wheel and Splendor Plus Limited Edition were

launched.

• Multi source Components have been added to existing

models

• New sources added for existing models

• During the year under review 6 more items have been

localised.

• Compliance made to the Regulations

3 Future plan of action

• Launching of new Models;

• Indigenisation plan 17 more items to be localized;

• Compliance Plan for Future Regulations :-

T.A & COP for Safety Critical Components, EMC, Mass

Emission Norms (BS- IV), Safety Related Standards, E-10

compliance

4. Expenditure on R & D

(Rupees in Crores)

Year Ended Year Ended

March 31, 2008 March 31, 2007

I) Capital 19.42 8.11

ii) Recurring 18.78 17.85

iii)Total R & D expenditure 0. 37 0. 26

as a percentage of Sales

(as per P & L A/c)

B) Technology Absorption, Adaptation and Innovation

1 Efforts in brief, made India technology absorption,

adaptation and innovation

More parts development approval in India

2. Benefits derived as a result of the above efforts e.g. product

improvement, cost reduction, product development, import

substitution

• New Model Development to increase market share

• Supply capacities and quality of bought out parts (BOP)

increased with Multi Source Development to support the

increasing production

• Indigenisation - to meet cost challenge.

• Compliance to latest regulations.

Further in the last five years the Company’s ancillaries have imported

technologies regarding Emission Devices (Cat. Converter), Digital

Speedo Meter, Gear Primary Driven (Forging), Cast Wheels, Drive

Chain (Solid Bush Type), Fuel Injection, Real Time Mileage Indicator,

Non-asbestos Brake Shoe & Gasket, Trichrome, Low Friction High F.E.

Engine Technology, LED Lighting Devices, Puncture Resistant Wheel

Tube & Rear Cushion with Reservoir Tank etc.


6667

III. FOREIGN EXCHANGE EARNINGS AND OUTGO

A) Export Activities / Initiatives to Increase Exports /

Development of New Export Markets / Export Plans

EXPORT INITIATIVES IN 2007-08

During the year under review, your Company exported 90571 two-

wheelers, and in value terms, this implied a decline of 7 per cent.

There was no significant growth in exports as per projection.

The Company however was successful in launching New CD Deluxe,

Passion, Glamour, Splendor NXG and HUNK in Bangladesh and

Sri Lanka. The Company was also able to combat the competition in

the premium segment due to the positive response from HUNK.

The concept of Just 4 her showroom and the New Pleasure launch in

Sri Lanka helped us gain higher share in the Scooter category.

Infrastructure development and process improvement on the after sale

service front has been undertaken extensively.

EXPORT PLAN FOR 2008-09

• Concentration on existing markets and Exploration of New

channels for business growth;

• To maintain market leadership in Bangladesh;

• Launch Splendor NXG in Columbia;

• Continue Sales & Service training as ongoing process in

overseas markets;

• Launch seasonal/festival based Promotional and Contest

schemes;

• Focus on workshop Automation and after sale service to the

customer;

• Explore to increase spare parts business.

B) EARNINGS & OUTGO

Foreign exchange earnings during the period under report was

Rs. 243.64 crores, compared to Rs. 263.50 crores in the previous year.

On account of Royalty, Technical Guidance Fee, Technical Know-how

fee, Export Commission, Travel and other accounts, Advertisement

a n d P u b l i c i t y, t h e f o r e i g n e x c h a n g e o u t g o w a s

Rs. 332.49 crores, compared to Rs. 371.61 crores in the previous year,

a decline of 10.52 per cent.

The outgo on account of Dividend was Rs. 88.26 crores compared to

Rs.103.84 crores in the previous year.

Outgo for import of components, spare parts, raw materials and capital

goods ou tgo was Rs . 574.06 c ro res compared to

Rs. 283.07 crores in the previous year.

DETAILS OF DIRECTORS OF HERO HONDA MOTORS LIMITED

Name of Director Status Directorship held Committee Committee Membership Chairmanship

Mr. Brijmohan Lall Munjal EC Daimler Hero Commercial Vehicles Limited

Easy Bill Limited

Hero Cycles Limited

Hero Financial Services Limited

Hero Honda Finlease Limited


Munjal Auto Industries Limited

Munjal Showa Limited

Shivam Autotech Limited

Sunbeam Auto Limited

BCM Energies Private Limited

Munjal Bros. Private Limited

Mr. Pawan Munjal MD Daimler Hero Commercial Vehicles Limited



Hero Investment Private Limited

Mr. Toshiaki Nakagawa JMD Hero Honda Finlease Limited


Mr. Sumihisa Fukuda TD Hero Honda Finlease Limited


Mr. Om Prakash Munjal NED Easy Bill Limited

Hero Cycles Limited

Hero Financial Services Limited

Hero Global Design Limited



Hero Motors Limited

Highway Industries Limited

Majestic Auto Limited

Munjal Auto Industries Limited


Munjal Bros. Private Limited

Roma Cycle Manufacuturing Co. (P) Limited

Mr. Sunil Kant Munjal NED Abhyuday Manufacturing & Automotive Limited

Arrow Infrastructure Limited

Daimler Hero Commercial Vehicles Limited

DCM Shriram Consolidated Limited

Easy Bill Limited

Flourish Manufacturing & Automotive Limited

Hero Corporate Services Limited

Hero Cycles Limited

Hero Ergo Life Insurance Company Limited



6869

Hero Management Service Limited

Hero Mindmine Institute Limited

Hero Motors Limited

Satyam Auto Components Limited


Bahadur Chand Investments (P) Limited

Thakurdevi Hydro (P) Limited

Thakurdevi Investments (P) Limited

Mr. Masahiro Takedagawa NED Hero Honda Motors Limited

Honda Siel Cars India Limited

Honda Siel Power Products Limited Audit Committee

Honda Motor India Private Limited

Honda Motorcycle & Scooters India Private Limited

Mr. Takashi Nagai NED Hero Honda Motors Limited

Gen. (Retd.) Ved Prakash Malik NEID BSES Rajdhani Power Limited Audit Committee

BSES Yamuna Power Limited Audit Committee

Hero Honda Motors Limited Audit Committee

Reliance Infrastructure Limited Audit Committee

Mr. Pradeep Dinodia NEID DCM Shriram Consolidated Limited Audit Committee Shareholders'

Grievance

Committee

DFM Foods Limited Audit Committee

Hero Corporate Services Limited Audit Committee

Hero Honda Motors Limited Shareholders'

Grievance

Committee Audit Committee

Micromatic Grinding Technologies Limited

RSWM Limited

Shriram Pistons & Rings Limited Audit Committee

SPR International Auto Exports Limited

Ultima Finvest Limited

Manisha Commercial Pvt. Limited

Panasonic Sales and Services India Pvt. Limited

Seracom Pvt. Limited

Serva Commercial Pvt. Limited

Shabnam Commercial Pvt. Limited

Shriram Holographics Pvt. Limited

Dr. Pritam Singh NEID Delhi Stock Exchange Limited

Dish TV India Limited Audit Committee

Godrej Properties Limited

Hero Honda Motors Limited Audit Committee Shareholders'

Grievance

Committee

Parsvnath Developers Limited

Mr. Analjit Singh NEID Acqvire Talent Services Limited

Hero Corporate Services Limited


IDBI Limited

Malsi Estates Limited

Malsi Holdings Limited

Max Health Staff International Limited

Max Healthcare Institute Limited

Max India Limited

Max Medical Services Limited

Max New York Life Insurance Company Limited

Neeman Medical International (Asia) Limited

Vodafone Essar Limited

BAS Investments Private Limited

Boom Investments Private Limited

Delhi Guest Houses Private Limited

Doon Holiday Resorts Private Limited

Dynavest India Private Limited

Mohair Investments and Trading Co. (P) Limited

MV Healthcare Services Private Limited

Scorpios Beverages Private Limited

Terra Planet Estates Private Limited

Trophy Estates Private Limited

Trophy Holdings Private Limited

Trophy Resorts Guest Houses Private Limited

TVP Investments Private Limited

Urban Space Consultants Private Limited

Vitasta Estates Private Limited

Ms.Shobhana Bhartia NEID Air Travel Bureau Limited

Britex India Limited

Firefly e-ventures Limited

Goldmerry Investment & Trading Co. Limited


HT Media Limited Audit Committee

HT Music and Entertainment Limited

HTL Investment & Trading Co. Limited

Nilgiri Plantation Limited




7071

Ronson Traders Limited

Shradhanjali Investment & Trading Co. Limited

The Hindustan Times Limited Audit Committee

Udit (India) Limited

Usha Flowell Limited

Yashovardhan Investment & Trading Co. Limited

Earthstone Holding Private Limited

Earthstone Holding (one) Private Limited

Earthstone Holding (two) Private Limited

Earthstone Holding (three) Private Limited

Mr. Sunil Bharti Mittal NEID Bharti Airtel Limited

Bharti AXA General Insurance Company Limited

Bharti AXA Life Insurance Company Limited

Bharti Enterprises Limited

Bharti Telecom Limited

Bharti Telesoft Limited

Bharti Teletech Limited

Bharti Ventures Limited


Bharti (LM) Holdings Pvt. Limited

Bharti (SBM) Holdings Pvt. Limited

Bharti Enterprises (Holdings) Pvt. Limited

Bharti Retail (Holdings) Pvt Limited

Bharti Wal-Mart Pvt Limited

Field Fresh Foods Pvt. Limited

Mr. Meleveetil Damodaran NEID Hero Honda Motors Limited

Tech Mahindra Limited

SREI Sahaj e-Village Limited

Notes:

EC : Executive Chairman

MD : Managing Director

JMD : Joint Managing Director

TD : Technical Director

NED : Non- Executive Director

NEID : Non- Executive & Independent Director

Details of Directorships is as on July 29, 2008

Q: There is nominal growth in Topline but Profitability has increased in double digit of the Company, reasons?

A: Total Turnover during the financial year 2007-08 increased 4.24% to a record high of Rs.10,517.22 crores from Rs.10,089.81 crores during 2006-07. The Profit after tax (PAT) for 2007-08 was recorded at Rs. 967.88 crores as compared to Rs.857.89 crores in 2006-07. PAT as a percentage of Total Turnover has been increased from 8.50% to 9.20%.

The improvements on the margins was accomplished through better sales realisations and effective cost rationalisation measures which included better control over Material cost, Marketing cost, Overheads and all-round focus on operational efficiencies .

Q: What is your outlook on two wheeler industry?

A: The long term outlook for two wheelers and motorcycles in particular remains positive given the low levels of penetration which provide tremendous growth potential and a healthy GDP growth in years to come. However, our outlook for the next fiscal ie 2008-09 remains conservative driven by continued slackness in credit availability and higher financing cost and rising inflation, which erodes the purchasing power of the consumer.

Q: Last year Company has launched several new models, please appraise us the performance of these models and what about new launch during the current year ?

A: During the year 2007-08 Company has launched following new models HUNK & SPLENDOR-NXG along with several new variants and refreshes. These new models have been very well accepted by the market and now running under mass production.

There are several new and improved models in pipeline and will be disclosed in due course of time.

Q: With the hardening of interest rates, would the demand for motorcycles be affected ?

A: A sizeable segment of the two wheelers sales today happens through financing. Hence, any increase in the interest cost would adversely affect the sales growth. However, the low levels of two wheeler penetrations, rising disposable income and a favourable age demography of Indian population would help in increasing the market size. The Company has tie-ups with various preferred financers and is in the process to empanelling regional players with proven credentials to increase the penetration in smaller towns semi urban and rural areas.

Q: What is the Company strategy on exploring new markets for exports ?

A: The penetration level of two wheelers in India is still very low and it is perceived that domestic demand would continue to be robust in the foreseeable future. Therefore, the Company would focus primarily on fulfillment of the domestic demand. With the start of new manufacturing facilities at Hardwar, the Company would enhance focus on export segment as well and explore new markets in co-operation with Honda.

Q: When the New Plant at Haridwar would start, level of capacity and its impact on profitability of the Company?

A: The new plant at Haridwar has been started in April 2008 with initial capacity of 500,000 units. New plant would be using a state of the art technology with significant scalability option at relativity low investment. We plan to increase the capacities to 1,000,000 and subsequently to 1,500,000 over the coming years.Considering the excise and income tax incentive available to the new plant there would be positive impact on the profitability of the Company.

Q: What is the management's outlook on the operating margin in the coming period considering hardening of metal prices and weakening of rupee ?

A: The incessant increase in most of the input commodities ranging from Steel Aluminum Rubber etc would adversely affect the operating margins of any automobile manufacturer. However we have tried protecting our margins through various measures, which include higher sales realization, increased focus on controlling cost and operational efficiencies.

Q: What steps the Company has taken to improve corporate governance?

A: The Company is committed to benchmark itself with global standards in all areas including corporate governance. The Company's annual report contains substantial disclosures on the Board of Director, audit committee, remuneration committee, shareholders grievance committee, financial and stock performance, etc. In addition, an attempt has been made to benchmark governance with the guidelines recommended by the SEBI Committee on Corporate Governance (SEBI is the apex authority for regulating capital markets in India)

Financial results are published as per the latest Accounting Standards prescribed by the Institute of Chartered Accountants of India. The results are published in a transparent manner and there has been no non-compliance of any legal provision of applicable laws.

FREQUENTLY ASKED QUESTIONS (FAQS)



Auditors' Report

Annexure to Auditors' Report

Balance Sheet, Profit & LossAccount and Cash Flow Statement

Schedules

US GAAP

7475

AUDITORS’ REPORT

TO THE MEMBERS OF HERO HONDA MOTORS LIMITED

1. We have audited the attached balance sheet of Hero Honda Motors Limited, as at March 31, 2008 and also the profit and loss account and the cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the 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 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, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

i) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

iii) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement, dealt with by this report, comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v) on the basis of written representations received from the Directors and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2008 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2008;

b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

c) in the case of Cash Flow statement, of the cash flows for the year ended on that date.

FOR A.F. FERGUSON & CO.Chartered Accountants

Manjula BanerjiPartner(Membership number: 86423)

Place: New DelhiDate: April 24, 2008

(I) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) As explained to us, the Company has a system of physical verification, which is designed to cover all fixed assets over a period of three years and in accordance therewith, physical verification of a major portion of fixed assets of the Company was carried out during the current year. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and the nature of its fixed assets.

(c) In our opinion and according to the information and explanations given to us, a substantial part of the fixed assets has not been disposed off by the Company during the year.

(ii) (a) During the year, the inventories have been physically verified by the management. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management 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 records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the Company has, during the year, not granted any loan, secured or unsecured to Companies, firms and other parties covered in the registered maintained under Section 301 of the Companies Act, 1956, other than unsecured loans aggregating Rs. 240 crores granted to a Company covered in the registered maintained under Section 301 of the Companies Act, 1956. The maximum amount due during the year was Rs. 60 crores and the year end balance of loans granted was Rs. 50 crores.

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of the loans granted by the Company, as referred to in paragraph 4(iii)(a) of the Companies (Auditor's Report) Order, 2003 (hereinafter referred to as the Order) above, are, prima- facie, not prejudicial to the interest of the Company.

(c) According to the information and explanations given to us, the parties, to whom the loans have been granted by the Company, as referred to in paragraph 4(iii)(a) above, have been regular in repayment of the principal amount as stipulated and have been regular in payment of interest.

(d) According to the information and explanations given to us, there are no overdue amounts in respect of the loans granted as referred to in paragraph 4(iii) (a) above and interest thereon.

(e) According to the information and explanations given to us, the Company has, during the year, not taken any loans, secured or unsecured, from companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (f) and (g) of the Order are not applicable.

(iv) According to the information and explanations given to us, there is

an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventories, fixed assets and with regard to the sale of goods. There are no sales of services during the year. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have been informed of any instance of major weaknesses in the aforesaid internal control system.

(v) (a) According to the information and explanations given to us, we are of the opinion that during the year, the particulars of the contracts/arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section.

(b) According to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, and exceeding the value of Rs. 5 lacs in respect of any party during the year, having regard to the explanation that some of services/ items purchased are of a specialized nature for which there are no alternate sources of supply to enable comparison of the prices, these have been made at prices which are reasonable to prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(vii) According to the information and explanations given to us, the Company has an adequate internal audit system commensurate with its size and nature of its business.

ANNEXURE REFERRED TO IN PARAGRAPH '3' OF THE AUDITORS’ REPORT TO THE MEMBERS

OF HERO HONDA MOTORS LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2008.


7677

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that, 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 determining 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, the Company has been regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax,

wealth tax, customs duty, excise duty, cess, value added tax, Haryana local area development tax and other material statutory dues applicable to it with the appropriate authorities. We are informed that there are no undisputed statutory dues as at the year end, outstanding for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no disputed dues in respect of wealth tax, customs duty and cess, which have not been deposited. The following are the particulars of sales tax, excise duty, service tax and income tax dues not deposited/deposited under protest by the Company on account of disputes as at March 31, 2008:-

(x) The Company does not have accumulated losses at the end of the financial year March 31, 2008. Further, the Company has not incurred any cash losses during the financial year ended March 31, 2008 and in the immediately preceding financial year ended March 31, 2007.

(xi) According to the records of the Company examined by us and on the basis of information and explanations given to us, the Company has not defaulted in repayment of dues to banks during the year. The Company has not taken any loans from financial institutions and has not issued debentures during the year.

(xii) In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances during the year on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) According to the information and explanations given to us, the provisions of any special statute as specified under paragraph 4(xiii) of the Order are not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

(xv) According to the information and explanations given to us, the Company has not given any guarantees during the year for loans taken by others from banks or financial institutions.

(xvi) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that short term funds have not been used to finance long term investments.

(xviii) The Company has not made any preferential allotment of shares during the year.

(xix) The Company has not issued any debentures during the year.

(xx) The Company has not raised any money by way of public issue during the year.

(xxi) Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit for the year ended March 31, 2008.

For A.F. FERGUSON & CO.Chartered Accountants

Manjula BanerjiPartner(Membership No.: 86423)

Place : New DelhiDate: April 24, 2008

Name of the Statute Nature of dues Amount* Amount paid Period to which (Rs. in crores) under protest the amount relates dispute is pending

(Rs. in crores)

Sales Tax laws Sale Tax 1.90 1.90 1998-1999 to 1999-00 Commissioner (Appeals)

Central Excise Laws Excise Duty 0.32 - 2000-01 CESTAT

0.39 - 2002-03 to 2005-06 Commissioner (Appeals)

Service Tax 22.10 0.45 2002-03 to 2005-06 CESTAT

Income-tax Act Income Tax 5.73 5.73 2000-01 to 2001-02 Income Tax Appellate Tribunal

31.44 31.44 2001-02 to 2003-04 Commissioner (Appeals)

* Amount as per demand orders including interest and penalty wherever quantified in the order.

Forum where

The following matters have been decided in favour of the Company, although the department has preferred appeals at higher levels:

Name of the Statute Nature of the dues Amount Period to which Forum where dispute (Rs. in crores) amount relates is pending

Central Excise Laws Excise Duty 2.57 1986-87 to 1990-91 Supreme Court

Income-tax Act Income-Tax 6.43 1987-88, 1989-90, 1992-93 High Court1993-94, 1995-96, 1996-97

0.96 1995-96, 1997-98, 2000-01 Income Tax Appellate Tribunal


7879

HERO HONDA MOTORS LIMITED

BALANCE SHEET AS AT MARCH 31, 2008

(Rupees in crores)

Schedule As at March As at March

No. 31, 2008 31, 2007

SOURCES OF FUNDS

SHAREHOLDERS' FUNDS

Share capital 1 39.94 39.94

Reserves and surplus 2 2,946.30 2,430.12

2,986.24 2,470.06

LOAN FUNDS 3

Unsecured 132.00 165.17

132.00 165.17

DEFERRED TAX LIABILITIES 9 130.59 129.58

TOTAL 3,248.83 2764.81

APPLICATION OF FUNDS

FIXED ASSETS 4

Gross block 1,938.78 1800.63

Less: Depreciation 782.52 635.10

Net block 1,156.26 1165.53

Capital work in progress 392.44 189.92

1,548.70 1355.45

PRE - OPERATIVE EXPENSES (PENDING ALLOCATION) 5 16.05 -

INVESTMENTS 6 2,566.82 1973.87

DEFERRED TAX ASSETS 9 5.22 1.38

CURRENT ASSETS, LOANS AND ADVANCES 7

Inventories 317.10 275.58

Sundry debtors 297.44 335.25

Cash and bank balances 131.09 35.78

Other current assets 5.69 3.60

Loans and advances 185.46 263.06

936.78 913.27

Less: CURRENT LIABILITIES AND PROVISIONS 8

Current liabilities 1,324.98 1041.92

Provisions 499.76 437.24

1,824.74 1479.16

Net current assets (887.96) (565.89)

TOTAL 3,248.83 2764.81

Notes to the accounts 13

Per our report attachedFor A. F. FERGUSON & CO.Chartered Accountants

MANJULA BANERJIPartnerMembership no. 86423

New Delhi April 24, 2008

For and on behalf of the Board of Directors

BRIJMOHAN LALL MUNJAL Chairman

PAWAN MUNJAL Managing Director & CEO

PRADEEP DINODIA Director

RAVI SUD Sr. Vice President & CFO

ILAM C. KAMBOJ G.M. Legal & Company Secretary

Per our report attached to the balance sheetFor A. F. FERGUSON & CO.Chartered Accountants










PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2008

(Rupees in crores)

Schedule Year ended Year ended

No. March 31, 2008 March 31, 2007

INCOME

Gross sales 12,038.53 11,542.04

Less: Excise duty 1,706.73 1,642.08

Net sales 10,331.80 9,899.96

Other income 10 185.42 189.85

10,517.22 10,089.81

EXPENDITURE

Manufacturing and other expenses 11 8,982.43 8,726.92

Depreciation 4 160.32 139.78

Interest (net) 12 (35.81) (22.99)

9,106.94 8,843.71

Profit for the year before tax 1,410.28 1,246.10

Provision for taxation

- current 436.81 375.81

- deferred 1.20 9.42

- fringe benefit 4.39 2.98

Profit after tax 967.88 857.89

Balance of profit brought forward 1,594.78 1,224.05

Balance available for appropriation 2,562.66 2,081.94

APPROPRIATIONS

Proposed dividend 379.41 339.47

Tax on dividend 64.48 57.69

Transfer to general reserve 97.00 90.00

Balance carried to balance sheet 2,021.77 1,594.78

2,562.66 2,081.94

Basic and diluted earnings per share face value Rs. 2/-each ( in rupees) 48.47 42.96

Notes to the accounts 13


8081

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2008(Rupees in crores)

Year ended Year endedMarch 31, 2008 March 31, 2007

A. CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax 1,410.28 1,246.10

Adjustments for:

Add: Depreciation 160.32 139.78

Loss on fixed assets sold/discarded 4.36 13.80

Exchange differences (0.98) 1.66

Loss on sale of non-trade current investments 19.54 19.62

Provision for diminution in value of investment:

Current non trade investment 1.29 1.00

Long term non trade investment 1.28 1.27

Interest - others and financial charges 2.00 1.61

Provision for doubtful debts 4.59 0.30

192.40 179.04

Less: Interest received on long term non-trade investments 12.81 10.64

Interest received on loans, deposits etc. 37.81 24.60

Profit on sale of fixed assets 0.09 0.32

Dividend income:

On current Investments - Non-trade 4.24 6.53

On long-term investments-Trade 2.72 5.43

Profit on sale of non-trade investments:

On current investments 152.45 150.02

210.12 197.54

Operating profit before working capital changes 1,392.56 1,227.60

Adjustments for:

Add: Increase / (decrease) in trade payables 185.64 (30.83)

Increase in security deposits from dealers 2.04 2.34

187.68 (28.49)

Less: Increase /(decrease) in trade and other receivables (115.05) 129.68

Increase in inventories 41.52 49.03

(73.53) 178.71

Cash generated from operations 1,653.77 1,020.40

Less: Direct taxes paid 441.99 395.35

Net cash from operating activities 1,211.78 625.05

B. CASH FLOW FROM INVESTING ACTIVITIES

Sale of fixed assets 1.03 3.87

Sale of investments 13,703.86 13,633.86

Inter corporate deposits received back 190.00 211.75

Interest received on long term non-trade investments 10.72 10.57

Interest received on loans, deposits etc. 37.81 24.60

Dividend income:

On current investments-Non-trade 4.24 6.53

On long-term investments-Trade 2.72 5.43

13,950.38 13,896.61

Per our report attached to the balance sheetFor A. F. FERGUSON & CO.Chartered Accountants










Less: Purchase of fixed assets 374.92 519.03

Inter corporate deposits paid 190.00 233.00

Purchase of investments 14,166.47 13,417.71

14,731.39 14,169.74

Net cash (used) in investing activities (781.01) (273.13)

C. CASH FLOW FROM FINANCING ACTIVITIES

Interest paid - others and financial charges 2.00 1.61

Dividend paid 339.47 415.23

Tax on dividend 57.69 56.01

Repayment of long term borrowings 33.17 20.61

432.33 493.46

Net cash (used) in financing activities (432.33) (493.46)

D. Increase/(decrease) in cash and cash equivalents (A+B+C) (1.56) (141.54)

Cash and cash equivalents at the beginning of the year 16.66 158.72

Cash and cash equivalents at the end of the year

Cash and bank balances 15.19 16.66

Unrealised exchange loss/(gain) (0.09) 0.52

15.10 17.18

Notes to the accounts Schedule 13

(Rupees in crores)

Year ended Year ended March 31, 2008 March 31, 2007


8283

SCHEDULES 1 to 13 ANNEXED TO AND FORMING PART OF THE ACCOUNTS

1) SHARE CAPITAL(Rupees in crores)

As at March As at March

31, 2008 31, 2007

AUTHORISED

25,00,00,000 (Previous year 25,00,00,000 )

Equity shares of Rs. 2 each 50.00 50.00

4,00,000 (Previous year 4,00,000 ) Cumulative

convertible preference shares of Rs. 100 each 4.00 4.00

4,00,000 (Previous year 4,00,000 ) Cumulative

redeemable preference shares of Rs. 100 each 4.00 4.00

58.00 58.00

ISSUED, SUBSCRIBED AND PAID UP

19,96,87,500* (Previous year 19,96,87,500) Equity

shares of Rs. 2 each fully paid up 39.94 39.94

39.94 39.94

* Of the above 11,98,12,500 (Previous year 11,98,12,500) shares had been allotted as fully paid

bonus shares by capitalisation of general reserve.

2) RESERVES AND SURPLUS

(Rupees in crores)

As at Additions Deductions As at

March 31,2007 March 31, 2008

CAPITAL RESERVES

On shares forfeited (#Rs. 4250) # - - #

Share premium account on forfeited

shares reissued(##Rs. 25500) ## - - ##

REVENUE RESERVES

General reserve 835.34 97.00 7.81* 924.53

Surplus, being balance in profit

and loss account 1,594.78 426.99 - 2,021.77

2,430.12 523.99 7.81 2,946.30

Previous year 1,969.39 460.73 - 2,430.12

* Adjustment of employee benefit schemes as per revised accounting standard AS 15, net of deferred tax assets of Rs 4.03 crores (refer note - 14)


3) LOAN FUNDS

(Rupees in crores)


31, 2008 31, 2007

UNSECURED LOANS

Other loans and advances

Sales tax deferment from the

State Government of Haryana 132.00 165.17

(Include Rs. 53.51 crores (previous year Rs. 33.17 crores) due within one year)

132.00 165.17

4) FIXED ASSETS

(Rupees in crores)

Gross block (at cost) Depreciation Net block

As at Additions Deductions As at As at For the On As at As at As at

March March March year deductions March March March

31, 2007 31, 2008 31, 2007 31, 2008 31, 2008 31, 2007

Tangible assets

Land

- Freehold 77.55 3.24 - 80.79 - - - - 80.79 77.55

- Leasehold 81.80# - - 81.80 0.52 1.15 - 1.67 80.13 81.28

Buildings 191.68 20.46 - 212.14 29.30 6.13 - 35.43 176.71 162.38

Plant and machinery 1,222.69 86.52 * 15.06 1,294.15 496.06 108.80 11.96 592.90 701.25 726.63

Furniture, fixtures and

office equipment 17.64 3.50 1.79 19.35 5.30 1.12 0.60 5.82 13.53 12.34

Vehicles 14.78 8.04 1.69 21.13 4.04 3.14 0.75 6.43 14.70 10.74

Computer and data

processing machines 43.32 4.43 0.82 46.93 29.01 4.13 0.75 32.39 14.54 14.31

Intangible assets

- Model fee 151.17 31.32 - 182.49 70.87 37.01 - 107.88 74.61 80.30

Total 1,800.63 157.51 19.36 1,938.78 635.10 161.48@ 14.06 782.52 1,156.26

Previous year 1,471.97 373.29 44.63 1,800.63 522.60 139.78 27.28 635.10 1,165.53

Capital work in progress {including capital advances Rs. 73.39 crores (Previous year Rs. 38.26 crores)} 392.44 189.92

1,548.70 1,355.45

Note :

* Includes Rs. Nil (Previous year decrease of Rs. 1.13 crore) due to fluctuation in exchange rates

# Include land at Haridwar pending registration in the name of the Company.

@ Includes Rs. 1.16 crores(Previous year Rs. Nil) transferred to Pre- operative expenditure (pending allocation)


5) PRE-OPERATIVE EXPENDITURE (PENDING ALLOCATION)

(Rupees in crores)


31, 2008 31, 2007

Consumption of raw materials

and components 0.19 -

Consumption of stores and spares 0.05 -

Power and fuel 5.73 -

Payments to and provisions for employees:

Salaries, wages, bonus, gratuity and

leave encashment benefit 4.12 -

Contribution to provident and other funds 0.33 -

Rent 0.09 -

Exchange fluctuation 0.82 -

Insurance 0.53 -

Rates and Taxes 0.45 -

Technical guidance fee 0.40 -

Professional charges 2.18 -

Depreciation 1.16 -

16.05 -

25000000 (Previous year Nil) units in FMP Series36-Eighteen Months

Plan B -Institutional Growth 25.00 -

25000000 (Previous year Nil) units in Interval Fund II Quarterly Interval

Plan C-Retail Cumulative 25.00 -

40000000 (Previous year Nil) units in FMP Series 39-Six Months

Plan A Retail Cumulative 40.00 -

25000000 (Previous year Nil) units in FMP Series41-Fourteen Months

Plan Institutional Cumulative 25.00 -

15000000 (Previous year Nil) units in FMP Series42-Three Months

Plan A Retail Growth 15.00 -

12500000(Previous year Nil) units in FMP Series43-Thirteen Months

Plan B Institutional Growth 12.50 -

20000000 (Previous year Nil) units in FMP Series43-Thirteen Months

Plan D Retail Growth 20.00 -

Birla Sunlife Mutual Fund

Nil (Previous year 16000000) units in fixed term plan series D -Growth - 16.00

Nil (Previous year 7500000) units in FTP -Quarterly-Series-5 -Growth - 7.50

Nil (Previous year 15000000) units in FTP -Half Yrly-Series-2 -Growth - 15.00

20000000 (Previous year 20000000) units in FTP -INSTL-Series U-Growth 20.00 20.00

15000000 (Previous year Nil) units in FTP -INSTL-Series V-Growth 15.00 -

20000000 (Previous year Nil) units in Qtly Interval-Series 5-Growth 20.00 -

30000000 (Previous year Nil) units in FTP-INSTL-Series AK-Growth 30.00 -

24475250 (Previous year Nil) units in Interval Income 25.00 -

Fund -INSTL-Quarterly-Series 2-Growth

4227865 (Previous year Nil) units in Income Plus-Growth 15.00 -

HDFC Mutual Fund

Nil(Previous year 20000000) units in FMP 13 M June 2006

(1)-Institutional Plan- Growth - 20.00

Nil (Previous year 5000000) units in FMP 90 D January 2007

(3)-Wholesale Plan- Growth - 5.00

25000000 (Previous year Nil) units in FMP 18M November 2007

(VI) Wholesale Plan- Growth 25.00 -

30000000 (Previous year Nil) units in FMP 18M January 2008

(VII) Wholesale Plan- Growth 30.00 -

18100000 (Previous year Nil) units in Arbitrage Fund Wholesale Plan - Growth 18.10 -

Standard Chartered Mutual Fund

Nil (Previous year 5000000) units in Grindlays fixed maturity 7th plan -B -Growth - 5.00

Nil (Previous year 25000000) units in Grindlays fixed maturity -16th plan A -Growth - 25.00

Nil (Previous year 5000000) units in fixed maturity Plan - Yearly Series 1-Growth - 5.00

Nil (Previous year 10000000) units in fixed maturity Plan - Quarterly Series 3-Growth - 10.00

6) INVESTMENTS (contd.)

(Rupees in crores)


31, 2008 31, 2007

6) INVESTMENTS

(Rupees in crores)


31, 2008 31, 2007

CURRENT INVESTMENTS

(cost or fair value which ever is lower)

Non-trade

Unquoted

In Mutual fund units:

Debt fund

(Units of the face value of Rs. 10 each)

ICICI Prudential Mutual Fund

Nil (Previous year 46644836) units in institutional FMP -15 months plan-series-XXV - 50.00

Nil (Previous year 70653402) units in blended plan A-Growth - 73.25

Nil (Previous year 20000000) units in hybrid fixed maturity plan-13 months plan-Institutional-Growth - 20.00

Nil (Previous year 35000000) units in FMP Series 35-Three Months Plan A-Retail -Growth - 35.00

Nil (Previous year 96344009) units in FMP Series 35-Three Months Plan B-Retail -Growth - 96.34

Nil (Previous year 10000000) units in FMP Series 34-1 Year Plan A-Institutional -Growth - 10.00

30000000 (Previous year 30000000) units in FMP Series 34-Fifteen Months Plan -Institutional -Growth 30.00 30.00

20000000 (Previous year 20000000) units in FMP Series 34-One Year Plan B Institutional Growth 20.00 20.00

70000000 (Previous year 175000000) units in equity and derivatives fund -Income

optimiser-Institutional Growth 70.00 175.00

8485




20000000 (Previous year Nil) units in fixed maturity Plan - Yearly Series 8-Growth 20.00 -

9641249 (Previous year Nil) units in Arbitrage Fund -Plan B-Growth 10.00 -

24488468 (Previous year Nil) units in Arbitrage Fund -Plan B-Dividend 25.35 -

Tata Mutual Fund

Nil (Previous year 25000000) units in fixed horizon fund series 6-scheme B-Growth - 25.00

Nil (Previous year 25000000) units in fixed horizon fund series 8-scheme D-IG-Growth - 25.00

Nil (Previous year 10000000) units in fixed horizon fund series 8-scheme

E-Growth-Inst Plan - 10.00


F-Growth-Inst Plan - 15.00

12000000(Previous year 12000000) units in S I P FUND -Scheme I-Growth 12.00 12.00


E-Growth-Inst Plan - 5.00

19143885 (Previous year Nil) units in Dynamic Bond Fund Option B-Growth 25.00 -

20000000 (Previous year Nil) units in Fixed Horizon Fund Series 17

Scheme D-Institutional Plan -Growth 20.00 -

15000000 (Previous year Nil) units in Fixed Income Portfolio Fund

Scheme A2 Institutional -Growth 15.00 -

15000000 (Previous year Nil) units in Fixed Income Portfolio Fund

Scheme B2 Institutional -Growth 15.00 -

24740431(Previous year Nil) units in Floating Rate Fund Long Term-Growth 30.00 -

Kotak Mutual Fund

Nil (Previous year 5000000) units in FMP series 14 -Growth - 5.00

Nil (Previous year 7500000) units in FMP 3 M series 8 -Growth - 7.50

15000000 (Previous year 15000000) units in FMP 15 M Series 2 -Growth 15.00 15.00

20000000 (Previous year Nil) units in FMP 12 M Series 4 Institutional-Growth 20.00 -

51056254 (Previous year Nil) units in FMP 3 M Series 26-Growth 51.05 -

7124384 (Previous year Nil) units in Bond (Short Term)-Growth 10.00 -

Templeton Mutual Fund

Nil (Previous year 15000000) units in Fixed Horizon Fund -

3 months plan-inst. -Growth - 15.00

20000000 (Previous year Nil) units in Fixed Horizon Fund Series VII -Plan

D -institutional -Growth 20.00 -

HSBC Mutual Fund

Nil (Previous year 35000000) units in fixed term series 9-Growth - 35.00

ABN Amro Mutual Fund

Nil (Previous year 41703848) units in fixed term plan series 4 quarterly plan D Growth - 41.71

Nil (Previous year 15000000) units in fixed term plan series 4 quarterly plan E Growth - 15.00


(Rupees in crores)


31, 2008 31, 2007

Nil (Previous year 51848377) units in fixed term plan series 4 Half Yearly plan A Growth - 51.85

Nil (Previous year 20000000) units in Dual Advantage Fund Plan A Series 1 Inst Growth - 20.00

5000000 (Previous year 5000000) units in FTPS5 14 Mths plan Inst Growth 5.00 5.00

5000000 (Previous year Nil) units in Fixed Term Plan -Ser-8-Yly Plan A -Inst. Growth 5.00 -

9572584 (Previous year Nil) units in Flexible short Term Plan -Ser A Gr.-Renewal 10.00 -

33542575 (Previous year Nil) units in Interval Fund Quarterly Plan H Growth-Ren 35.00 -

15000000 (Previous year Nil) units in FTP Ser 10 Plan F Inst. Growth 15.00 -

40256676 (Previous year Nil) units in Flexi Debt Fund -Regular -Growth 50.00 -

Deutsche Mutual Fund

Nil (Previous year 25000000) units in fixed term fund-series 14-Growth Plan - 25.00

Nil (Previous year 10000000) units in fixed term fund-series 23-Growth Option - 10.00

Nil (Previous year 5000000) units in fixed term fund-series 27-Growth Option - 5.00

5000000 (Previous year 5000000) units in fixed term fund-series

24-Institutional Plan-Growth Option 5.00 5.00

Escorts Mutual Fund

Nil (Previous year 471885) units in income plan - Growth - 1.00

ING Vysya Mutual Fund

Nil (Previous year 20000000) units in fixed maturity fund series VII -Growth option - 20.00

Nil (Previous year 10000000) units in fixed maturity fund series xxi -Growth option - 10.00

5000000 (Previous year 5000000) units in fixed maturity fund series xxii -Growth option 5.00 5.00

Nil (Previous year 3000000) units in fixed maturity fund series xxiv -Growth - 3.00

5000000 (Previous year Nil) units in fixed maturity fund- xxviii -Growth 5.00 -

Reliance Mutual Fund

Nil (Previous year 50000000) units in fixed tenor fund plan A -Growth Option - 50.00

10000000(Previous year 10000000) units in fixed tenor fund plan B -Growth Plan 10.00 10.00

5000000(Previous year 5000000) units in fixed Horizon fund- Institutional 5.00 5.00

plan C -Series I-Institutional Growth plan

Nil (Previous year 40000000) units in fixed Horizon fund I- Annual

Plan -Series III-Institutional Growth plan - 40.00

Nil (Previous year 77401572) units in fixed Horizon fund II- Quarterly

Plan -Series II-Institutional Growth plan - 77.40

Nil (Previous year 25000000) units in fixed Horizon fund II- Quarterly

Plan -Series I-Institutional Growth plan - 25.00

25000000(Previous year 25000000) units in fixed Horizon fund III- Annual

Plan Series IV-Institutional Growth Plan 25.00 25.00

10000000 (Previous year Nil) units in Annual Interval Fund

-Series1-Institutional Growth Plan 10.00 -

25000000 (Previous year Nil) units in Fixed Horizon Fund IV

-Series 6-Institutional Growth Plan 25.00 -


(Rupees in crores)


31, 2008 31, 2007

8687


8889

30000000 (Previous year Nil) units in Fixed Horizon Fund IV

-Series 7-Institutional Growth Plan 30.00 -

46542367 (Previous year Nil) units in Monthly Interval Fund -Series

II-Institutional Growth Plan 50.00 -

5000000 (Previous year Nil) units in Fixed Horizon Fund -VI -Series

2-Institutional Growth Plan 5.00 -

12500000 (Previous year Nil) units in Fixed Horizon Fund -IX -Series


20000000 (Previous year Nil) units in Fixed Horizon Fund VII -Series


Principal Mutual Fund

Nil (Previous Year 47963255) units in income fund Growth plan - 50.00

Nil (Previous year 25000000) units in fixed maturity plan (FMP-31) Series

III Instt. Growth plan-Nov 06 - 25.00

Lotus India Mutual Fund

20000000 (Previous year Nil) units in FMP-14 Months -Series II-Institutional Growth 20.00 -

20000000 (Previous year Nil) units in FMP-14 Months -Series III-Institutional Growth 20.00 -

(Units of the face value of Rs.100 each)


68780 (Previous year Nil) units in Gold ETF -Open Ended Scheme 7.00 -


AIG Global Investment Group Mutual Fund

150000 (Previous year Nil) units in Short Term Fund Institutional Growth 15.00 -

DSP Merrill Lynch Mutual Fund

Nil (Previous year 154224) units in fixed term plan - series 1 H-Growth Institutional - 15.42

Nil (Previous year 203789) units in fixed term plan - series1 I-Growth Institutional - 20.38

606525 (Previous year Nil) units in Strategic Bond Fund -Institutional- Growth 61.39 -

250000 (Previous year Nil) units in fixed term plan series3D-Institutional-Growth 25.00 -

50000 (Previous year Nil) units in fixed term plan series3H-Institutional Growth 5.00 -

Repurchase Price Rs. 1302.86 crores (Previous year Rs. 1425.42 crores) 1,249.89 1,383.35

Fund of Funds


Optimix Mutual Fund

21612178 (Previous year 25000000) units of active debt

multi -manager FOF scheme- Growth 21.61 25.00


(Rupees in crores)


31, 2008 31, 2007


(Rupees in crores)


31, 2008 31, 2007

Nil (Previous year 25000000) units of dynamic multi- manager FOF scheme -Series 2-Growth - 25.00

14000000 (Previous year Nil) units of dynamic multi- manager FOF scheme -Series 3-Growth 14.00 -

13300000 (Previous year Nil) units of dynamic multi- manager FOF scheme -Series 4-Growth 13.30 -

5000000 (Previous year Nil) units of Active Short Term FOF -Growth 5.00 -

ABN AMRO MUTUAL FUND

15000000 (Previous year 15000000) units in Multi Manager Fund Series 2A Growth 15.00 15.00

5000000 (Previous year 5000000) units in Multi Manager Fund Series 3- Growth 5.00 5.00

73.91 70.00

Less: Provision for Diminution in Value - (1.00)

Repurchase Price Rs. 76.46 crores (Previous year Rs. Rs. 69.00 crores) 73.91 69.00

Equity fund


Escorts Mutual Fund

21839119 (Previous year 14734210) units in opportunities fund -dividend 29.41 19.12

2439024 (Previous year 3414634) in units of high yeild equity plan-Dividend 2.50 3.50

3000000 (Previous year Nil) in units of Infrastructure Fund-Growth 3.00 -

ING Vysya Mutual Fund

Nil (Previous year 1000000) units in CUB fund - Dividend Option - 1.00


Nil (Previous year 5000000) units in DSP Merrill Lynch Small and Mid Cap -Reg Dividend - 5.00

Optimix Mutual Fund

25000000 (Previous year Nil) units in Multi-Manager Equity fund - Option A-Growth 25.00 -


5000000 (Previous year Nil) units in Sustainable Development Fund - Growth 5.00 -


4000000 (Previous year Nil) units in Long Term Advantage Fund Series 1 - Growth 4.00 -

10000000 (Previous year Nil) units in Special Situations Fund - Growth 10.00 -

JP Morgan Mutual Fund

1955990 (Previous year Nil) units in India Smaller Companies Fund- Growth Plan 2.00 -

Tata Mutual Fund

7000000 (Previous year Nil) units in Indo-Global Infrastructure Fund- Growth 7.00 -


9091


(Rupees in crores)


31, 2008 31, 2007


(Rupees in crores)


31, 2008 31, 2007

LIC Mutual Fund

3000000 (Previous year Nil) units in Infrastructure Fund- Growth Plan 3.00 -

Repurchase Price Rs. 89.04 crores (Previous year Rs. 28.71 crores) 90.91 28.62

Less: Provision for diminution in value (1.87) -

89.04 28.62

Liquid fund


ICICI Prudential Mutual Fund

115809498 (Previous year 83112217) units in Institutional Liquid Plan -Super Institutional Growth 137.80 91.15


43365134 (Previous year 4210065) units in cash plus- institutional premium-Growth 56.00 5.00

HSBC Mutual Fund

Nil (Previous year 8492857) units in cash fund - institutional plus - Growth - 10.00


111112150 (Previous year 116324079) units in Liquidity Fund- Growth Option 135.00 130.55

Kotak Mutual Fund

14710840 (Previous year Nil) units in Liquid (Institutional Premium)- Growth 24.00 -


104536055 (Previous year Nil) units in Money Plus Institutional Growth 125.01 -

Lotus India Mutual Fund

31498614 (Previous year Nil) units in Liquid Fund -Super Institutional Growth 35.00 -



292149 (Previous year 320146) units in liquidity Fund Instt. - Growth 33.02 35.00


914761 (Previous year Nil) units in Liquid Plus Fund- Institutional Option-Growth Option 100.00 -

AIG Global Investment Group Mutual Fund

481912 (Previous year Nil) units in Liquid Fund- Super Institutional Growth 50.20 -

Mirae Asset Mutual Fund

500000 (Previous year Nil) units in Liquid Plus Fund- Super Inst Growth Option 50.00 -


Debentures

CitiFinancial Consumer Finance India Ltd

Citi Financial 500 Debentures -Redeemable Non Convertible Secured 5.00 -

NCD Issue Series-326 of Rs 100000 each

Repurchase Price Rs. 5.00 crores (Previous year Rs. Nil) 5.00 -

Non-trade

Unquoted

Investments under Portfolio Management Services #

ICICI Prudential Asset Management Company

Debt Fund

ICICI Prudential Mutual Fund (units of the face value of Rs.10 each)

Nil (Previous year 7642650) units in FMP Series 34-3 Months C - 7.64

2000000 (Previous year Nil) units in FMP Series 42-3 Months Plan B Retail Growth 2.00 -

10503452 (Previous year Nil) units in Interval Fund-Quarterly Interval Plan1Retail Growth 10.77 -

Liquid Fund


8448391 (Previous year 2202315) units in liquid plan Super institutional Growth Option 10.04 2.38

Debentures

50 Debentures (Previous year Nil) of Citicorp Finance Ref 4.90 -

NCD SR 187 MD 20/01/2010 of Rs 980000 each


IIM -Optimix Portfolios- Capital Enhancer

Liquid Fund

Principal Mutual Fund (Units of Face Value of Rs 10 each)

Nil (Previous year 180485) units in Principal Cash Management Fund Liquid Option Growth - 0.25

Debt Fund

Reliance Mutual Fund - Debt Fund (units of the face value of Rs.10 each)

Nil (Previous year 25506476) units in Fixed Horizon Fund -2 Qly PLN Series -5 - 25.51


20991585 (Previous year Nil) units in Flexible Income Fund - Growth 31.30 -

Deutsche Mutual Fund (units of the face value of Rs.10 each)

49198196 (Previous year Nil) units in DWS Money Plus Advantage Instl Fund 50.02 -



9293


(Rupees in crores)


31, 2008 31, 2007

Reliance Portfolio Management

Debentures

Reliance Blended Debt Plus -Hybrid Option -Series II-500000 Debentures of 5.00 5.00

Citicorp Finance (India) Ltd NCDS Series 163 of Rs 100.00 each

Reliance Blended Debt Plus -Hybrid Option -Series VII-1000000 Debentures of 10.00 -

DSP Merrill Lynch Capital Ltd Series 2007/EQ of Rs 100.00 each

Reliance Blended Debt Plus -Hybrid Option -Series X-1000000 Debentures of 10.00 -

DSP Merrill Lynch Capital Ltd Series 2008/AM of Rs 100.00 each


Escorts Securities Limited

Debt Fund

Escorts Mutual Fund (units of the face value of Rs.10 each)

14641 (Previous year 29747) units in Floating Rate Fund -Growth Option 0.02 0.03

Liquid Fund

Templeton Mutual Fund- (units of the face value of Rs.1 each)

Nil (Previous year 121800000) units in India Money Market Account -Dividend Plan - 12.18

Escorts Mutual Fund (units of the face value of Rs.10 each)

2825896 (Previous year Nil) units in Liquid Plan Growth 3.31 -

HDFC Mutual Fund (units of the face value of Rs.10 each)

7646722 (Previous year Nil) units in Cash Management Fund Savings Plan 12.73 -


Equity Shares Quoted

Nil (Previous year 20000) equity shares of Rs. 1.00 each fully paid up of Ashok Leyland - 0.09

Nil (Previous year 40000) equity shares of Rs. 10 each fully paid up of IFCI Ltd - 0.12

Nil (Previous year 1250) equity shares of Rs. 2 each fully paid up of IVRCL Infrastructure & Project Ltd - 0.05

Nil (Previous year 1500) equity shares of Rs. 10 each fully paid up of IPCL - 0.04

Nil (Previous year 4000) equity shares of Rs. 10 each fully paid up of Syndicate Bank - 0.03

Market Price Rs. Nil (Previous year Rs. 0.33 crores) - 0.33

# Investments have been made under the Discretionary Portfolio Management

Agreement entered into between the Company and ICICI Prudential Asset

Management Company Limited, IIM-Optimix Portfolios -Capital Enhancer,

Escorts Securities Ltd, Reliance Portfolio Management (Portfolio Managers)

are being held in the name of the Portfolio Manager as envisaged in the aforesaid Agreement.

Non-trade

In Equity Shares:

Quoted

Nil (Previous year 6181) equity shares of Rs. 10 each fully paid up of Parsvnath Developers Limited - 0.19

Nil (Previous year 152202) equity shares of Rs. 10 each fully paid up of Idea Cellular Ltd - 1.14

Nil (Previous year 55200) equity shares of Rs. 2 each fully paid up of HCL Tech Ltd - 1.81


(Rupees in crores)


31, 2008 31, 2007

125523 (Previous year Nil) equity shares of Rs. 10 each fully paid up of Bharat Heavy Electricals Ltd 16.04 -

52238 (Previous year Nil) equity shares of Rs.10 each fully paid up of ICICI Bank 5.11 -

276654 (Previous year Nil) equity shares of Rs.2 each fully paid up of Siemens Ltd 26.29 -

6430 (Previous year Nil) equity shares of Rs10 each fully paid up of 0.28 -

Mundra Port & Special Economic Zone Ltd

109489 (Previous year Nil) equity shares of Rs10 each fully paid up of 1.15 -

Rural Electrification Corporation Ltd

Market value Rs. 48.45 crores (Previous year Rs. 3.21 crores) 48.87 3.14

Less: Provision for diminution in value (0.42) -

48.45 3.14

Unquoted

10800 (Previous year Nil) equity shares of Rs.5496.12 each fully paid up of Bombay Stock Exchange 5.94 -

LONG TERM INVESTMENTS

(at cost less provision for permanent diminution, if any)

Non-trade

Quoted

In Bonds

UNIT TRUST OF INDIA

15918732 (Previous year 15918732) 6.75% Tax free US64 bonds of Rs.100 each 165.47 165.47

60903 (Previous year 60903) 6.60% Tax free ARS bonds of Rs.100 each 0.63 0.63

166.10 166.10

Less: Provision for diminution in value (6.10) (4.82)

Market value Rs.160.75 crores (Previous year Rs.154.32 crores) 160.00 161.28

Maturity value Rs 159.80 crores (Previous year Rs 159.80 crores)

Unquoted

National Bank For Agriculture and Rural Development

42700 (Previous year Nil) Bhavishya Nirman Bonds @ 8200 each

A 10 Year Zero Coupen Bond of NABARD- maturity Rs 20000.00 per bond 35.01 -

Trade

Unquoted

In Equity Shares:

2715000 (Previous year 2715000) equity shares of Rs. 10 each fully paid up

of Hero Honda Finlease Limited. 3.46 3.46

2,566.82 1,973.87


9495

Mutual Funds

Liquid Funds

Units of the face value of Rs.1000 each 681320 75.00 681320 75.00



Debt Funds


Debentures

Debentures of Citicorp Finance Ref NCD

SR 187 MD 20/01/2010 of Rs 980000 each 50 4.90 - -

Reliance Blended Debt Plus -Hybrid Option -Series

VII-1000000 Debentures of DSP Merrill Lynch Capital Ltd

Series 2007/EQ of Rs 100.00 each 1000000 10.00 - -

Reliance Blended Debt Plus -Hybrid Option -

Series X-1000000 Debentures of DSP Merrill Lynch

Capital Ltd Series 2008/AM of Rs 100.00 each 1000000 10.00 - -

Equity SharesShares of Face value of Rs 10 each

ABG Shipyard Limited 530 0.02 530 0.02

Allsec Technologies Limited 852 0.03 852 0.03

Alstom Projects India Limited 43522 2.68 43522 2.68

Arvind Mills Ltd 483500 2.38 483500 2.38

Axis Bank Limited 1500 0.07 1500 0.07

Bank Of India 8015 0.13 8015 0.13

Bharat Heavy Electricals Ltd 1450 0.21 1450 0.21

Bhushan Steel Limited 250 0.02 250 0.02

Britannia Industries Ltd 17 0.00 17 0.00

Cairn India Limited 2000 0.03 2000 0.03

Canara Bank 3000 0.06 3000 0.06

Cummins India Ltd. 1250 0.03 1250 0.03

Deccan Aviation Limited 5100 0.08 5100 0.08

Educomp Solutions Limited 150 0.02 150 0.02

Era Infra Engineering Limited 3000 0.15 3000 0.15

Escorts Ltd 775 0.01 775 0.01

HDFC Bank Ltd 750 0.07 750 0.07

Hindustan Petroleum Corporation Ltd. 1300 0.05 1300 0.05

ICICI Bank Limited 4202 0.44 4202 0.44

IFCI Limited 1079432 7.23 1119432 7.34

Indian Petrochemichals Corporation Ltd 23300 0.75 18200 0.58


The following investments were purchased and sold during the year under portfolio management scheme At Cost(Rupees in crores)

Purchase Sold

Units Amount Units Amount

Mutual Funds

Debt Funds

Units of the face value of Rs.10 each 1817355216 1,914.26 2061474411 2,125.30


Fund of Funds


Equity Fund


Liquid Fund



Equity Shares

Shares of Face value of Rs 10 each

Parsvnath Developers Limited - 6181 0.19

Idea Cellular Limited - 152202 1.14

ICICI Bank Limited 278476 26.71 226238 21.60

Bharat Heavy Electricals Ltd 401364 51.27 275841 35.24

Omaxe Ltd 11250 0.35 11250 0.35

Central Bank of India 38094 0.39 38094 0.39

Bombay Stock Exchange 10800 5.94 - -

PowerGrid Corporation of India Ltd 122380 0.64 122380 0.64

Mundra Port and Special Economic Zone Ltd 7430 0.33 1000 0.04

Rural Electrification Corporation Ltd 109489 1.15 - -


HCL Technologies Limited - 55200 1.81

Siemens Ltd 346654 32.94 70000 6.65

Bonds

Bhavishya Nirman Bonds @ 8200 each-A 10 Year Zero 42700 35.01 -

Coupen Bond of NABARD- maturity Rs 20000.00 per bond

Debentures

Citi Financial Debentures -Redeemable Non Convertible 500 5.00 -

Secured NCD Issue Series-326 of Rs 100000 each

12,695.61 12,196.88


(Rupees in crores)

Purchase Sold


The following investments were purchased and sold during the year At Cost



(Rupees in crores)

Purchase Sold


Infrastructure Development Finance Company Limited 22750 0.20 22750 0.20

Jaiprakash Hydro-Power Limited 544269 2.04 544269 2.04

Kalpataru Power Transmission Ltd 750 0.08 750 0.08

Mangalore Refinery And Petrochemicals Ltd. 1125 0.00 1125 0.00

Man Aluminium Limited 3000 0.05 3000 0.05

Mphasis Limited 50450 1.48 50450 1.48

Nagarjuna Fertiliser & Chemicals Ltd. 1957889 4.23 1957889 4.23

NIIT Technologies Limited 2351 0.09 2351 0.09

Nucleus Software Exports Limited 2200 0.08 2200 0.08

Orchid Chemicals & Pharmaceuticals Ltd 130827 3.43 130827 3.43

Petronet LNG Limited 4400 0.02 4400 0.02

Power Finance Corporation Limited 2000 0.02 2000 0.02

Power Grid Corporation Of India Limited 7700 0.08 7700 0.08

Punjab National Bank 1500 0.07 1500 0.07

Reliance Capital Limited 5650 0.96 5650 0.96

Reliance Industries Ltd - - 1320 0.21

Reliance Petroleum Limited 135675 3.09 135675 3.09

Sasken Communication Technologies Limited 1100 0.04 1100 0.04

Spanco Telesystems And Solutions Ltd 1500 0.04 1500 0.04

Strides Arcolab Limited 336 0.01 336 0.01

Syndicate Bank 15000 0.09 19000 0.12

Tata Elxsi (India) Ltd 1500 0.05 1500 0.05

Tata Teleservices (Maharashtra) Limited 1829950 7.68 1829950 7.68

Tech Mahindra Limited 400 0.06 400 0.06

TRF Ltd 500 0.03 500 0.03

Union Bank Of India 12000 0.13 12000 0.13

United Spirits Limited 500 0.04 500 0.04

Vijaya Bank 238406 1.50 238406 1.50

Voltamp Transformers Limited 500 0.03 500 0.03


Havells India Limited 4000 0.24 4000 0.24

Infosys Technologies Ltd. 450 0.08 450 0.08

Maharashtra Seamless Ltd 1067 0.05 1067 0.05

Reliance Communications Ltd 2700 0.11 2700 0.11

Reliance Natural Resources Limited 2767391 11.77 2767391 11.77

Welspun Gujarat Stahl Rohren Limited 4800 0.05 4800 0.05


New Delhi Television Limited 175710 6.45 175710 6.45


ABB Limited 150 0.05 150 0.05

Amtek Auto Ltd 1500 0.06 1500 0.06

Berger Paints (I) Ltd 4391 0.02 4391 0.02

Bharat Forge Co. Ltd 2000 0.06 2000 0.06

Deccan Chronicle Holdings Ltd. 2000 0.03 2000 0.03

DLF Limited 55602 3.15 55602 3.15

Elecon Engineering Co Ltd 300 0.01 300 0.01

Everest Kanto Cylinder Limited 200 0.02 200 0.02

HCLTechnologies Ltd 2000 0.06 2000 0.06

IVRCL Infrastructures & Projects Ltd 29151 1.35 30401 1.41

Larsen & Toubro Limited 1050 0.23 1050 0.23

Nagarjuna Construction Co. Ltd 6500 0.11 6500 0.11

Nicholas Piramal India Ltd 2500 0.06 2500 0.06

Punj Lloyd Limited 2000 0.08 2000 0.08

Satyam Computer Services Ltd 17310 0.76 17310 0.76

Siemens Ltd 988 0.11 988 0.11

Wipro Ltd 2700 0.13 2700 0.13


Ashok Leyland Ltd 87479 0.33 107479 0.43

Centurion Bank Of Punjab Limited 45300 0.21 45300 0.21

Dabur India Ltd 2700 0.03 2700 0.03

Hindustan Construction Co. Ltd 1400 0.02 1400 0.02

Hindustan Unilever Limited 25862 0.55 25862 0.55

Marico Limited 2640 0.02 2640 0.02

Panacea Biotec Ltd. 2315 0.10 2315 0.10

Tata Consultancy Services Limited 1350 0.14 1350 0.14

Voltas Ltd 10756 0.11 10756 0.11

1,470.86 1,374.07

As at March 31,2008 As at March 31,2007

Aggregate value of Book value Market value Book value Market value

Quoted investments -Long Term 160.00 160.75 161.28 154.32

Quoted investments-Current 48.45 48.45 3.47 3.53

Unquoted investments 2,358.37 - 1809.12 -

2,566.82 1973.87


(Rupees in crores)

Purchase Sold


9697


7) CURRENT ASSETS, LOANS AND ADVANCES(Rupees in crores)

As at March As at March31, 2008 31, 2007

CURRENT ASSETS

INVENTORIES #

Stores and spares (at cost or under) 22.27 19.30

Loose tools (at cost or under) 13.46 12.95

Raw materials and components * 219.77 167.59

Finished goods *

Two wheelers 30.92 44.31

Spare parts 14.08 13.46

Work in progress * 16.60 17.97

317.10 275.58

* Lower of cost and net realisable value

# Includes goods in transit Rs. 64.87 crores (Previous year Rs 17.78 crores)

SUNDRY DEBTORS

Debts outstanding for a year exceeding

six months

Secured - considered good 1.19 0.49

Unsecured - considered good 2.76 1.49

- considered doubtful 6.96 2.37

Other debts

Secured - considered good 14.77 14.20

Unsecured - considered good 278.72 319.07

304.40 337.62

Less: Provision for doubtful debts 6.96 2.37

297.44 335.25

CASH AND BANK BALANCES

Cash in hand 0.25 0.21

Cheques in hand 0.11 0.25

With scheduled banks:

On current accounts 14.32 15.64

On deposit accounts 0.51 0.51

On dividend current accounts 115.90 19.12

With post office (pledged with excise authorities)

On deposit account - 0.01

On savings account - 0.04

131.09 35.78

OTHER CURRENT ASSETS

Interest accrued on investments 5.69 3.60

5.69 3.60

LOANS AND ADVANCES

(Unsecured and considered good)

Advances recoverable in cash or in kind or for

value to be received 82.32 165.05

Inter corporate deposits 50.00 50.00

8) CURRENT LIABILITIES AND PROVISIONS

(Rupees in crores)


CURRENT LIABILITIES

Sundry creditors: ( refer note no. 12)

Total outstanding dues of small and micro

Enterprises # - 3.75

Total outstanding dues of creditors other

than small scale industrial undertakings 756.07 551.07

Other liabilities ## 541.21 461.44

Security deposits from dealers 27.70 25.66

1,324.98 1041.92

PROVISIONS

Proposed dividend 379.41 339.47

Provision for taxation less payments 6.39 3.85

Provision for tax on dividend 64.48 57.69

Employee benefit schemes 5.80 -

Warranties 43.68 36.23

499.76 437.24

# The Company does not owe any sum which is outstanding for more than 30 days

## Other liabilities do not include any amount outstanding as on March 31, 2008 which are required to be credited to the Investor

Education and Protection Fund (Fund)

9) DEFERRED TAX ASSETS AND LIABILITIES (Rupees in crores)


31, 2008 31, 2007

DEFERRED TAX ASSETS

Accrued expenses deductible on payment 1.97 0.24

Others 3.25 1.14

5.22 1.38

DEFERRED TAX LIABILITIES

Accumulated depreciation 130.59 129.58

130.59 129.58

7) CURRENT ASSETS, LOANS AND ADVANCES(Rupees in crores)


Income-tax recoverable 47.51 43.52

Income-tax deducted at source 3.50 4.16

Deposits with excise authorities on

current account 2.13 0.33

185.46 263.06

9899


10) OTHER INCOME

(Rupees in crores)

Year ended Year ended

March 31, 2008 March 31, 2007

Dividend income

On current investments - Non trade 4.24 6.53

On long term investments - Trade 2.72 5.43

6.96 11.96

Interest on long term non trade investments 12.81 10.64

Profit on sale of non trade current investments* 132.91 130.40

Profit on sale of fixed assets 0.09 0.32

Exchange difference 1.38 -

Miscellaneous income 31.27 36.53

185.42 189.85

* After adjusting loss on sale of current investments aggregating Rs. 19.54 crores (previous year Rs. 19.62 crores)

11) MANUFACTURING AND OTHER EXPENSES

(Rupees in crores)


March 31, 2008 March 31, 2007

MATERIALS CONSUMED

Purchase of spares etc. for re-sale - 58.56

Consumption of raw materials and components 7911.58 7335.83

Less: - Sale of components to ancillaries on cost to cost basis 470.53 178.28

7441.05 7157.55

Less: - Cash discount 39.44 28.21

7401.61 7129.34

Add: Opening stock



Work in progress 17.97 13.95

75.74 72.54

Less: Excise duty on opening stock 11.22 5.78

Net opening stock 64.52 66.76

Less: Closing stock



Work in progress 16.60 17.97

61.60 75.74

Less: Excise duty on closing stock 7.78 11.22

Net closing stock 53.82 64.52

Net consumption 7412.31 7190.14

Less: Scrap sales 9.77 11.43

7402.54 7178.71

OTHER EXPENSES#

Payments to and provisions for employees:

Salaries, wages, bonus, gratuity and

leave encashment benefit 350.48 327.74

Contribution to provident and other funds 14.01 12.21

Staff welfare expenses 18.96 13.86

Expenses for manufacturing, administration and selling:

Stores and tools consumed 63.75 67.76

Power and fuel 56.55 52.45

Rent 4.22 3.36

Repairs and maintenance:

Plant and machinery 27.41 25.80

Buildings 3.66 2.96

Others 0.83 0.64

Insurance 10.90 11.40

Exchange fluctuation - 0.70

Rates and taxes 15.27 13.50

Packing, forwarding, freight etc. 266.75 250.06

Royalty 276.70 254.37

Advertisement and publicity 221.78 241.43

Commission:

Export 11.60 12.59

Others 3.49 3.02

15.09 15.61

Donations 0.91 1.37

Lease rent 11.47 12.15


Other expenses 209.63 224.47

Provision for diminution in value of investments:

Current non trade investment 1.29 1.00

Long term non trade investment 1.28 1.27

2.57 2.27

Loss on fixed assets sold/discarded 4.36 13.80

8,982.43 8,726.92

# Research and development expenses of Rs. 18.78 crores (previous year Rs. 17.85 crores) have been

charged to respective heads

12) INTEREST (NET)

(Rupees in crores)


March 31, 2008 March 31, 2007

Interest - others and financial charges 2.00 1.61

Less: Interest received on loans, deposits, etc* 37.81 24.60

(35.81) (22.99)

* Income tax deducted at source Rs. 2.15 crores (previous year Rs. 1.03 crores)

100101


13) NOTES TO THE ACCOUNTS

1 SIGNIFICANT ACCOUNTING POLICIES

i ) Accounting convention

The financial statements are prepared under the historical cost convention, in accordance with applicable accounting standards and

relevant presentational requirements of the Companies Act, 1956.

ii) Fixed / Intangible assets and depreciation / amortisation

Fixed assets are stated at cost less accumulated depreciation. Cost of acquisition is inclusive of freight, duties , taxes and other

incidental expenses. Roll over charges on forward exchange contracts and loss or gain on translation of foreign currency liabilities for

acquisition of fixed assets from a country outside India incurred upto March 31, 2007 are added to or deducted from the cost of the

assets. All loss or gain on translation of foreign currency liabilities for fixed assets commissioned subsequent to March 31, 2007 are

charged to revenue in the year in which they arise.

Depreciation is charged on a pro-rata basis at the straight line method rates prescribed in schedule XIV to the Companies Act, 1956

except where the historical cost of a depreciable asset has undergone a change due to increase or decrease in foreign currency

liability on account of exchange fluctuations. The depreciation on the revised unamortised depreciable amount is provided

prospectively over the residual useful life of the asset. Assets covered under employee benefit schemes are amortised over a period

of five years. Assets costing upto Rs. 5000 each are fully depreciated in the year of purchase.

Intangible assets, comprising of expenditure on model fee etc, incurred are being amortised on a straight line method over a period of

five years.

Leasehold land has been amortised over the period of lease.

iii) Preoperative expenses pending allocation

Expenses directly related to construction activity or incidental thereto, are allocated to fixed assets at the time of completion of the

project.

iv) Investments

Current investments are stated at lower of cost and fair value computed categorywise. Long term investments are stated at cost less

provision for permanent diminution, if any.

v) Inventories

Stores and spares and loose tools are stated at cost or under.

Raw materials and components, finished goods and work in progress are valued at cost or net realisable value, whichever is lower.

The bases of determining cost for various categories of inventories are as follows:-

Stores and spares, loose tools, raw materials and components - Weighted average cost

Materials in transit - Actual cost

Work in progress and finished goods - Material cost plus appropriate share of

labour, manufacturing overheads and excise duty.

vi) Employee benefits

a) Defined contribution plan

Provident fund, Superannuation fund and Employee' State Insurance Corporation (ESIC) are the defined contribution schemes

offered by the Company. The contributions to these schemes are charged to the profit and loss account of the year in which

contribution to such schemes becomes due.

b) Defined benefit plan and Long term Employee benefits

Gratuity liability and long term employee benefits, are provided on the basis of an actuarial valuation made at the end of each financial

year. Actuarial gains or loss arising from such valuation are charge to revenue in the year in which they arise.

vii) Foreign currency transactions

Exchange differences are dealt with as follows:-

Transactions in foreign currency are recorded at the exchange rate prevailing at the time of the transaction. In case of liabilities relating

to the acquisition of fixed assets from a country outside India, incurred upto March 31, 2007, the loss or gain on translation (at the rates

prevailing at the year end or at the forward rates where forward cover has been taken) and roll over charges in respect of forward cover

are included in the carrying amount of the related fixed assets and liabilities. All loss or gain on translation subsequent to March, 31

2007 are charged to revenue in the year in which it is incurred other than expenses relating to preoperative period.

Current assets (other than inventories) and current liabilities, (other than relating to fixed assets) are restated at the rate prevailing at the

year end. In respect of forward contracts, the forward premium or discount is recognised as income or expense over the life of contract

in the profit and loss account and the exchange difference between the exchange rate prevailing at the year end and the date of the

inception of the forward exchange contract is recognised as income or expense in the profit and loss account.

viii) Sales

Sale of goods is recognised at the point of despatch of finished goods to the customers. Gross sales are inclusive of applicable

excise duty and freight but are exclusive of sales tax.

- Scrap is accounted for on sale basis.

ix) Warranty claims

Warranty costs are provided on accrual basis on the total sales of two wheelers during the year, which are based on past experience of

claims.

x) Research and development expenses

Research and development expenditure of a revenue nature is expensed out under the respective heads of account in the year in

which it is incurred.

xi) Taxation

The provision for taxation is ascertained on the basis of assessable profits computed in accordance with the provisions of the Income-

tax Act, 1961.

Deferred tax is recognised, subject to the consideration of prudence, on timing differences, being the difference between taxable

income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

xii) Provisions and contingent liabilities

Provision involving substantial degree of estimation in measurement are recognized when there is a permanent obligation as a result

of past events and it is probable that there will be an out flow of resources. Contingent liabilities are not recognized but are disclosed in

the notes.

xiii) Derivatives

Foreign currency derivatives are used to hedge risk associated with foreign currency transactions. All open position as at the close of

the year are valued by marking them to the market and provision is made for losses if any.

2. CONTINGENT LIABILITIES :

(Rs. in crores)

This year Previous year

i) In respect of income-tax cases pending at various stages of appeal with the authorities - 20.24

102103


The above matters are subject to legal proceedings in the ordinary course of business. The legal proceeding when ultimately concluded will

not, in the opinion of management, have a material effect on the result of operation or the financial position of the Company.

3. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 56.37 crores (Previous year Rs. 145.35

crores).

4. The Company has also entered into operating lease agreements for motor vehicles, dies and data processing machines. These lease

arrangements are cancellable in nature and range between two to four years. The aggregate lease rentals under these arrangements

amounting to Rs. 11.47 crores (Previous year Rs. 12.15 crores) have been charged under "Lease rentals " in Schedule 11.

5. As the Company's business activity falls within a single primary business segment viz. "Two wheelers and its parts" and is a single geographical

segment, the disclosure requirements of Accounting Standard (AS-17) "Segment Reporting", issued by The Institute of Chartered

Accountants of India are not applicable.

6. Two wheeler sales are covered by a warranty period of two/three years. The details of provision for warranties are as under:

(Rs. in crores)


Provision at the beginning of the year 36.23 30.50

Additional provision made during the year 33.35 30.01

Amount used during the year 25.90 24.28

Provision at the end of the year 43.68 36.23

7 Related party disclosures under Accounting Standard 18

a) Parties in respect of which the Company is a joint venture/associate.

Honda Motor Co. Limited, Japan

Hero Cycles Limited

Bhadurchand Investments Private Limited

Hero Investments Private Limited


b) Key management personnel

Mr. Brijmohan Lall Munjal - Chairman

Mr. Pawan Munjal - Managing Director & CEO

Mr. Toshiaki Nakagawa - Joint Managing Director

Mr. Yutaka Kudo - Whole time director (wef April 1, 2007)

Mr. Takao Eguchi - Whole time director (Upto March 31, 2007)

c) Enterprises over which key management personnel and their relatives are able to exercise significant influence:-

Brijmohan Lall Associates, A.G. Industries Private Limited, Hero Corporate Services Limited, Highway Industries Limited, Majestic

Auto Limited, Munjal Auto Industries Limited, Munjal Showa Limited, Rockman Industries Limited, Sunbeam Auto Limited, Satyam

Auto Components Limited, Hero Motors Limited, Shivam Autotech Limited, Cosmic Kitchen Private Limited, Easy Bill Limited,

Hero Mindmine Institute Limited, Indian School of Business and Raman Kant Munjal Foundation.

Transactions with related parties during the year

a) Parties in respect of which the Company is an joint venture/associate.

(Rs. in crores)


Honda Motors Co. Limited, Japan


Royalty 276.70 254.37

Export commission 11.60 12.59

Model fees 31.32 47.13

Technical guidance fee 0.87 1.38

Purchase of raw materials, components and spares 16.39 19.87

Hero Cycles Limited


Purchase of raw materials, components and spares 63.59 53.62

Hero Investments Private Limited


Bhadurchand Investments Private Limited



Lease rental expenses 11.47 12.15

Dividend received 2.72 5.43

Intercorporate deposits given 190.00 233.00

Intercorporate deposits repaid 190.00 208.00

Interest received on Inter corporate deposits 1.51 1.22

Expenses recovered - 3.99

Balance outstanding at the year end

-Receivables 50.00 50.00

-Payables 3.84 4.33

b) Key management personnel

(Rs. in crores)


Managerial Remuneration

Mr. Brijmohan Lall Munjal 15.76 14.00

Mr. Pawan Munjal 15.74 13.89

Mr. Takao Eguchi (upto March 31, 2007) - 13.32

Mr. Toshiaki Nakagawa 15.20 13.44

104105


Mr Yutaka Kudo (wef April 1, 2007) 15.13 -

Balance outstanding at the year end

-Payables (including commission) 59.20 52.16

c) Enterprises over which key management personnel and their relatives are able to exercise significant influence

(Rs. in crores)


Purchase of raw materials and components 1976.60 2034.93

Sale of components etc 2.83 5.11

Intercorporate deposits repaid - 3.75

Interest received on Inter corporate deposits - 0.01

Payment towards rent and other services 3.56 3.47

Donation 0.60 0.73

Balance outstanding as at the year end

-Receivables - -

-Payables 177.22 145.87

Significant related party transactions included in the above are as under :-

(Rs. in crores)


Purchase of raw materials and component

Munjal Auto Industries Limited 186.56 172.91

Munjal Showa Limited 556.06 566.90

Sunbeam Auto Limited 379.23 470.50

Sale of components etc.

Satyam Auto Components Limited 1.69 3.03

Sunbeam Auto Limited - 0.97

Hero Motors Limited 0.85 -

Payment for services

Hero Corporate Services Limited 3.20 3.20

Donation

Raman Kant Munjal Foundation 0.60 0.40

Indian School of Business - 0.33

8. Earnings per share

This Year Previous Year

Profit after taxation as per profit and loss account (Rs.in crores) 967.88 857.89

Weighted average number of equity shares outstanding 19,96,87,500 19,96,87,500

Basic and diluted earnings per share in rupees (face value -Rs.2 per share) 48.47 42.96

9. The Company has entered into Discretionary Portfolio Management Agreements, administered through ICICI Prudential Asset Management

Company Limited, IIM-Optimix Porfolios-Capital enhancer, Escorts Securities Limited, Reliance Portfolio Manager (Portfolio Managers). In

terms of the said agreements, the Portfolio Managers have dealt in mutual funds, debentures, equity stock futures, equity stock options and

equity index options on behalf of the Company. However, there are no outstanding derivative contracts as at March 31, 2008.

10. Information pursuant to clause 4 (ix) (b) of the Companies (Auditor's Report) Order, 2003 in respect of disputed dues, not deposited as at

March 31, 2008, pending with various authorities

Name of the Statute Nature of dues Amount* Amount paid under Period to which Forum where pending

(Rs in crores) protest (Rs in crores) the amount relates

Sales Tax Laws Sales tax 1.90 1.90 1998-99 to 1999-00 Commissioner (Appeals)

Central Excise Laws Excise duty 0.32 - 2000-01 CESTAT

0.39 - 2002-03 To 2005-06 Commissioner (Appeals)

Services Tax 22.10 0.45 2002-03 to 2005-06 CESTAT

Income-tax Act Income-Tax 5.73 5.73 2000-01 to 2001-02 Income Tax

Appellate Tribunal

31.44 31.44 2001-02 to 2003-04 Commissioner (Appeals)

* Amount as per demand orders including interest and penalty wherever quantified in the order.

The following matters have been decided in favour of the Company, although the department has preferred appeals at higher levels:

Name of the Statute Nature Amount Period to which Forum where

(Rs in crores) the amount relates Department has

(various years covering preferred appeals

the period)

Central Excise Laws Excise Duty 2.57 1986-87 to 1990-91 Supreme Court

Income-tax Act Income-tax 6.43 1987-88, 1989-90, 1992-93, High Court

1993-94, 1995-96, 1996-97

0.96 1995-96, 1997-98, 2000-01 Income Tax

Appellate Tribunal

11. The Company's borrowing facilities, comprising fund based and non fund based limits from various bankers, are secured by way of

106107


108109

Current service cost 2.15

Benefits paid (0.95)

Actuarial (gain)/ loss on obligation 3.59

Present value of defined benefit obligation at the end of the year 32.23

Changes in the present value of the plan asset is as follows

Fair value of plan asset at the beginning of the year 17.44

Return on plan asset 1.62

Contributions 14.12

Benefits paid -

Actuarial (gain)/ loss on obligation (0.95)

Fair value of plan asset at the end of the year 32.23

Reconciliation of the present value of defined benefit obligation and the fair value of the plan assets

Present value of defined benefit obligation at the end of the year 32.23

Fair value of plan asset at the end of the year 32.23

Net asset/(liability) as at the close of the year -

Expenses recognised in the profit and loss account

Current service cost 2.15

Interest cost 2.03

Return on plan assets (1.62)

Net actuarial (gain) / loss 3.59

Expenses recognised in the profit and loss account. 6.15

Discount rate 8.00%

Expected Rate of return on plan assets 9.10%

Note:- The estimates of future salary increases considered in the actuarial valuation take into account inflation, seniority, promotion and other relevant

factors such as supply and demand in the employment market

hypothecation of inventories, receivables, movable assets and other current assets.

12. The Company has identified parties covered under the "The Micro, Small, and Medium Enterprises Development Act, 2006” on the basis of the

confirmation received. There is no outstanding balance payable as at the close of the financial year to such parties. Further, no interest has

been paid or payable to such parties under the said Act. In the previous year amount of Rs 3.75 crores was related to small scale industrial

undertakings.

13. The unhedged foreign currency exposures as at March 31 are as under:

Purpose This Year Previous Year

Amount in Foreign Amount in Rs Amount in Foreign Amount in Rs

currency (crores) (crores) currency (crores) (crores)

Receivables USD 1.10 44.43 USD 0.69 29.90

Payables JPY 38.71 15.28 JPY 3.09 1.12

USD - USD 0.07 2.95

EURO 0.02 1.21 EURO 0.27 15.49

14. Employee Benefit Schemes

During the year the Company has adopted Accounting Standard 15 (Revised 2005) Employee Benefits. Accordingly, the Company has

provided for defined benefit schemes and long term employee benefits on the basis of actuarial valuation done as per projected unit credit

method. In accordance with the transitional provision in the revised accounting standard Rs 7.81 crores net of deferred tax asset of Rs 4.03

crores has been adjusted from the opening balance of general reserves.

Defined contribution plans


(Rs. in crores) (Rs. in crores)

Employer Contribution to Provident Fund 9.77 8.39

Employer Contribution to Supperannuation Fund 4.27 3.53

Employer Contribution to ESIC 3.03 2.90

Defined benefit plans

In accordance with the Payment of Gratuity Act 1972, Company provides for gratuity, a defined benefit plan. The gratuity plan provides for a

lumsum payment to the employees at the time of separation from the service on completion of vested period of employment i.e five years.

The liability of gratuity plan is provided based on actuarial valuation as at the end of each financial year based on which the Company

contributes the ascertained liability to a fund.

This year

(Rs. in crores)

Changes in the present value of the defined benefit plan are as follows

Present value of defined benefit obligation at the beginning of the year 25.41

Interest cost 2.03

15. Additional Information

a) Details of capacity and production:

Class of goods Units Licensed capacity* Installed capacity** Actual Production***

This year Previous year This year Previous year This year Previous year

Motorised two wheelers upto

350CC engine capacity Nos. 200000 200000 3400000 3400000 3333460 3339896


110111

*The Company's products are exempt from Licensing requirements under New Industrial Policy in terms of Notification no. S.O.477(E) dated 25th July,1991.

** On triple shift basis, as certified by the management and relied on by the auditors being a technical matter.

*** Includes 175 (Previous year 243) two wheelers produced and capitalised during the year.

b) Particulars in respect of opening stock, purchases, sales and closing stock for each class of goods dealt with by the Company:

Class of goods Units Opening stock Purchases

This year Previous year This year Previous year

Quantity Value Quantity Value Quantity Value Quantity Value

(Rs. in crores) (Rs. in crores) (Rs. in crores) (Rs.in crores)

Two wheelers Nos. 14812 44.31 11915 31.43 - - - -

Spares - * 13.46 * 27.16 * - * 58.56

57.77 58.59 - 58.56

Class of goods Units Gross Sales Closing stock

This year Previous year This year Previous yearQuantity Value Quantity Value Quantity Value Quantity Value

(Rs. in crores) (Rs. in crores) (Rs. in crores) (Rs.in crores)

Two wheelers Nos. 3337142+ 11,353.48 3336756+ 10,913.08 10955 30.92 14812 44.31

Spares - * 684.73 * 628.16 * 14.08 * 13.46

Miscellaneous * 0.32 * 0.80 Components

12,038.53 11,542.04 45.00 57.77

* It is not practicable to furnish quantitative information in view of the considerable number of items diverse in size and nature. These items in

value individually account for less than 10% of the total value of the purchases, stocks and turnover of the aforesaid spares and miscellaneous

components.

+ Excluding 175 (Previous year 243) two wheelers capitalised.

c) Raw materials and components consumed:

Class of goods Units This year Previous year

Quantity Value Quantity Value


Steel sheets MT 6130.02 27.94 7514.26 35.73

Components * 7,413.11 * 7,121.82

7,441.05 ** 7,157.55 **

* It is not practicable to furnish quantitative information of components consumed in view of the considerable number of items diverse in

size and nature. These items in value individually account for less than 10% of the total value of components consumed.

**Excludes Rs.0.44 crore (Previous year Rs.0.64 crore) for two wheelers produced and capitalised during the year.

d) CIF Value of imports:

Class of goods This year Previous year(Rs. in crores) (Rs. in crores)

Capital goods* 66.14 109.13

Raw materials ** 103.92 7.58

Components, spare parts and others ** 404.00 166.36

* Excludes increase of Rs. Nil (Previous year increase of Rs.1.13 crore) capitalised due to fluctuation in exchange rates.

** Includes items sold to ancillaries on cost to cost basis for assembling of components.

e) Value of imported and indigenous raw materials, components and spares consumed and percentage of each to the total

consumption:

Class of goods This year Previous year

Value Percentage Value Percentage

(Rs. in crores) % (Rs. in crores) %

Raw materials

-Imported ** 0.24 0.00 0.30 0.00

-Indigenous 27.70 0.38 35.43 0.50

Components

-Imported ** 49.99 0.67 78.97 1.10

-Indigenous 7,363.12 98.95 7,042.85 98.40

7,441.05 * 100.00 7,157.55 * 100.00

Spares consumed (charged to

repairs and maintenance)

-Imported 5.96 34.08 4.71 27.99

-Indigenous 11.53 65.92 12.12 72.01

17.49 100.00 16.83 100.00

*Excludes Rs.0.44 crore (Previous year Rs 0.64 crore) for two wheelers produced and capitalised during the year

** Excludes items sold and purchased as indigenous components.

f) Expenditure in foreign currency (on accrual basis) :



Royalty 276.70 254.37

Technical guidance fee 2.62 2.36

Model fee 29.87 47.13

Export commission 11.60 12.59

Travel and other accounts 5.45 3.64

Advertisement and Publicity 6.25 51.52


112113

g) Earnings in foreign currency (on accrual basis) :



FOB value of exports 242.79 262.56

Freight and insurance 0.85 0.94

h) Managerial remuneration:



Whole time Directors* Remuneration 2.70 2.55

Commission 59.13 52.10

61.83 54.65

Non-Executive Independent Directors Commission 0.35 -

62.18 54.65

Directors' sitting fee 0.11 0.13

62.29 54.78

* Excludes incremental contribution for gratuity, as the contributions are determined for the Company as a whole.

Computation of net profit in accordance with section 198 of the Companies Act,1956.



Profit before taxation as per

profit and loss account 1,410.28 1,246.10

Add:-

Managerial remuneration 62.29 54.78


Provision for diminution in value of investment long term 1.28 1.27

Net profit as per section 349 of the

Companies Act,1956 1,478.44 1,302.45

Maximum managerial remuneration to four whole time

directors( including commission) at 10% of net profit 147.84 130.25

Maximum managerial remuneration to non whole time

directors( including commission) at 1% of net profit 14.78 -

162.62 130.25

Commission component of managerial remuneration to

- Four whole time directors restricted to 1% of net profit

( 1% of net profit) per director 59.13 52.10

- Non-Executive Independent Directors

0.10% of net profit. Restricted to 0.35 -

Commission restricted to 59.48 52.10

I) Provision and/or payment in respect of Auditors' Remuneration :



a) As auditors (Audit fee) 0.28 0.28

b) In other capacity

- limited review of unaudited financial results 0.20 0.20

- corporate governance and other certification 0.01 0.03

c) Out of pocket expenses # #

# This year Rs 80329 (Previous year Rs 85871 )

j) Amount remitted in foreign currencies towards dividends during the year:


No. of No. of equity Dividend No. of No of equity Dividend

Non-Resident shares held remitted Non-Resident shares held remitted

shareholders (Rs. in crores) shareholders (Rs. in crores)

2005-2006 - Final - 1 51918750 103.84

2006-2007 - Final 1 51918750 88.26 -

88.26 103.84

16. Previous year's figures have been recast/regrouped wherever necessary.

New Delhi

April 24, 2008








PART IV OF SCHEDULE VI

TO THE COMPANIES ACT, 1956

Balance Sheet Abstract and Company's General Business Profile

I. Registration Details

Registration No. 17354

State Code 55

Balance Sheet Date 31.03.2008

II. Capital Raised during the year (Rupees in crores)

Public Issue Nil Rights Issue Nil

Bonus Issue Nil Private Placement Nil

III. Position of Mobilisation and Deployment of Funds (Rupees in crores)

Total Liabilities 3118.24 Total Assets 3118.24

Sources of Funds Application of Funds

Paid-Up Capital 39.94 Net Fixed Assets 1548.70

Reserves & Surplus 2946.30 Investments 2566.82

Secured Loans Nil Net Current Assets* (997.28)

Unsecured Loans 132.00 Misc. Expenditure Nil

*Includes Deferred Tax Liability (Net) Rs. 125.37 crores

IV. Performance of Company (Rupees in crores)

Turnover 10517.22

Total Expenditure 9106.94

Profit before tax 1410.28

Profit after Tax 967.88

Earnings per share (Rs.) 48.47

Dividend Rate (%) 950

V. Generic names of Three Principal Products/ Services of Company (as per monetary terms)

Item Code No. (ITC Code)

Product Description 87112003

New Delhi

April 24, 2008







Reconciliation of Net Income as per US GAAP Accounts and Audited Accounts as per Indian Companies Act 1956

(Rupees in Millions)

2008 2007 2006 2005 2004

Net Profit after tax for the year as per audited accounts 9,678.80 8,578.90 9,713.40 8,104.70 7,283.21 Add / (Less) : Profit / (Loss) of

- Income from investments ( unrealised gain/loss )

- affiliated company 12.16 10.67 30.60 57.19 8.66

- held to maturity securities - - 22.90 (11.77) (11.13)

- Exchange fluctuations - 11.30 (8.40) (3.90) 2.40

- Depreciation effect of exchange fluctuations 0.68 5.37 18.26 21.75 18.27

- Depreciation on leased assets - (76.60) (93.18) (137.96)

- Lease rentals paid - 135.58 117.83 132.16

- Interest portion of lease rentals - (9.90) (15.51) (31.60)

- Provision for deferred tax 180.33 (167.24) (103.56) (2.11) 1.30

- Deferred revenue expenditure - - - 7.00

Net Income as per US GAAP 9,871.97 8,439.00 9,722.28 8,175.00 7,272.31

Balance sheet as at March 31


2008 2007 2006 2005 2004

ASSETS

Current Assets

Cash and cash equivalents 1,310.92 357.82 1,587.22 176.01 371.20

Trade accounts receivables 2,974.38 3,352.48 1,586.58 895.49 438.01

Inventories 3,171.04 2,755.84 2,265.54 2,042.62 1,881.99

Pre-paid expenses and other current assets 1,911.49 2,666.58 2,773.08 2,431.20 2,398.70

Total current assets 9,367.83 9,132.72 8,212.42 5,545.32 5,089.90

Investment (held to maturity securities) 1,599.99 1,612.79 1,595.18 1,596.07 1,601.56

Investment in mutual funds 24,617.11 18,522.31 19,680.81 18,973.12 14,663.41

Investment in affiliate, at equity 264.58 252.42 241.75 211.14 153.96

Property, plant and equipment 15,494.75 13,401.08 9,765.51 7,049.94 5,860.07

Total assets 51,344.26 42,921.32 39,495.67 33,375.59 27,368.90

114115


Statement of income for the year ended March 31


2008 2007 2006 2005 2004

Net sales 103,318.00 98,999.60 87,139.81 74,216.53 58,324.32

Cost of goods sold 82,724.62 79,931.23 67,548.97 57,308.71 43,933.64

Selling, administrative and general expense 8,619.10 8,558.40 6,979.60 6,055.73 5,296.11

Other (income) and expense (1,783.26) (1,748.47) (1,572.20) (1,397.42) (1,635.94)

Interest net expense (income) (358.10) (229.90) (51.40) 4.61 18.10

Total expense 89,202.36 86,511.26 72,904.97 61,971.63 47,611.91

Income before income taxes 14,115.64 12,488.34 14,234.84 12,244.90 10,712.41

Indian taxes on income 4,243.97 4,049.34 4,512.56 4,069.90 3,440.10

Net income 9,871.97 8,439.00 9,722.28 8,175.00 7,272.30

Net earning per share

On share value of Rs. 2 each 49.44 42.26 48.69 40.94 36.42

Average common stock outstanding (numbers) 199,687,500 199,687,500 199,687,500 199,687,500 199,687,500


2008 2007 2006 2005 2004

LIABILITIES

Trade accounts payable 7,560.70 5,548.20 6,462.70 6,619.60 6,989.90

Accrued expenses 494.82 417.58 305.02 247.50 195.70

Indian income taxes 63.90 38.50 40.30 45.70 113.50

Other current liabilities 5,689.15 4,871.05 4,266.15 3,538.05 3,048.75

Long term debt due within one year 184.93 206.10 227.27 222.83 190.23

Total current liabilities 13,993.50 11,081.43 11,301.44 10,673.68 10,538.08

Deferred income taxes 1,391.67 1,529.68 1,375.63 981.67 964.78

Long-term debt 1,135.07 1,445.60 1,630.53 1,920.45 1,784.76

Total liabilities 16,520.24 14,056.71 14,307.60 13,575.80 13,287.62

STOCKHOLDER’S EQUITY

Common stock, par value; Rs. 2 (previous year Rs 2)

Authorised 250,000,000 ;

Outstanding shares 199687500

( Previous year 199687500) of Rs 2 each 399.38 399.38 399.38 399.38 399.38

Capital surplus 0.03 0.03 0.03 0.03 0.03

Retained earnings 34,424.61 28,465.20 24,788.66 19,400.38 13,681.87

Total stockholder’s equity 34,824.02 28,864.61 25,188.07 19,799.79 14,081.28

Total liabilities and stockholder’s equity 51,344.26 42,921.32 39,495.67 33,375.59 27,368.90

116117


NOTICE

ORDINARY BUSINESS:

SPECIAL BUSINESS:

As Ordinary Resolutions:

8. APPOINTMENT OF MR. SUMIHISA FUKUDA AS DIRECTOR

AND TECHNICAL DIRECTOR IN THE WHOLE-TIME

EMPLOYMENT OF THE COMPANY

thNOTICE is hereby given that the 25 ANNUAL GENERAL MEETING of

the Members of HERO HONDA MOTORS LIMITED will be held on

Thursday, September 25, 2008 at 11:00 A.M., at Airforce Auditorium,

Subroto Park, Dhaula Kuan, New Delhi - 110 010 to transact the

following business:

1. To receive, consider and adopt the Audited Balance Sheet of

the Company as at March 31, 2008 and the Profit and Loss

Account for the year ended on that date together with the

reports of the Directors and Auditors thereon.

2. To declare a dividend of Rs. 19 per Equity Share on

19,96,87,500 Equity Shares of Rs. 2 each for the financial year

2007-08.

3. To appoint a Director in place of Mrs. Shobhana Bhartia, who

retires by rotation and being eligible, offers herself for

re-appointment.

4. To appoint a Director in place of Mr. Sunil Bharti Mittal, who

retires by rotation and being eligible, offers himself for

re-appointment.

5. To appoint a Director in place of Mr. Masahiro Takedagawa,

who retires by rotation and being eligible, offers himself for

re-appointment.

6. To appoint a Director in place of Mr. Pradeep Dinodia, who

retires by rotation and being eligible, offers himself for

re-appointment.

7. To appoint M/s. A.F.Ferguson & Co., Chartered Accountants,

New Delhi, the retiring auditors, to hold office as auditors from

the conclusion of this meeting until the conclusion of the next

Annual General Meeting and to fix their remuneration.

To consider, and if thought fit, to pass, with or without modification(s),

the following resolutions:

"RESOLVED THAT Mr. Sumihisa Fukuda, who was appointed

as an Additional Director of the Company by the Board of

Directors, in terms of Section 260 of the Companies Act, 1956

w.e.f. June 1, 2008 and in respect of whom the Company has

received a notice under Section 257 of the Companies Act,

1956 together with a deposit of Rs. 500 (Rupees five hundred)

as required under the Act, be and is hereby appointed as a

Director of the Company and the period of his office shall be

liable to determination by retirement of Directors by rotation.

RESOLVED FURTHER THAT pursuant to the recommendation

of the Remuneration Committee and subject to the approval of

the Central Government under Sections 269, 198, 309 read

with Schedule XIII and other applicable provisions, if any, of the

Companies Act, 1956 approval of the Company be and is

hereby accorded to the appointment of Mr. Sumihisa Fukuda,

as Technical Director in the Whole-time employment of the

Company for a period of five years w.e.f. June 1, 2008 on a

remuneration including minimum remuneration and on terms

and conditions as set out in the Explanatory Statement

attached hereto.

RESOLVED FURTHER THAT the aggregate amount of

remuneration payable to Mr. Sumihisa Fukuda in a particular

financial year will be subject to the overall ceiling limit laid down

in Sections 198 and 309 read with Schedule XIII of the

Companies Act, 1956.”

“RESOLVED THAT Mr. Meleveetil Damodaran, who was

appointed as an Additional Director of the Company by the

Board of Directors, in terms of Section 260 of the Companies

Act, 1956 w.e.f. June 16, 2008 and in respect of whom the

Company has received a notice under Section 257 of the

Companies Act, 1956 together with a deposit of Rs. 500

(Rupees five hundred) as required under the Act, be and is

hereby appointed as a Director of the Company and the period

of his office shall be liable to determination by retirement of

Directors by rotation.”

By Order of the Boardfor Hero Honda Motors Limited

New Delhi Ilam C. Kamboj

July 29, 2008 G.M. Legal & Company Secretary

Registered Office:



New Delhi-110 057

9. APPOINTMENT OF MR. MELEVEETIL DAMODARAN AS

DIRECTOR OF THE COMPANY

01


NOTES:

A MEMBER ENTITLED TO ATTEND AND VOTE AT THE

MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND

AND VOTE (ON A POLL ONLY) INSTEAD OF

HIMSELF/HERSELF AND THE PROXY NEED NOT BE A

MEMBER OF THE COMPANY. PROXIES IN ORDER TO BE

EFFECTIVE MUST BE RECEIVED AT THE REGISTERED

OFFICE OF THE COMPANY NOT LESS THAN 48 HOURS

BEFORE THE MEETING.

1. The Explanatory Statement pursuant to Section 173(2) of the

Companies Act, 1956, which sets out details relating to

Special Business to be transacted at the meeting is attached

hereto.

2.

3. Pursuant to Section 154 of the Companies Act, 1956, the

Register of Members and the Share Transfer Books of the

Company will remain closed from Thursday, September 11,

2008 to Thursday, September 25, 2008 (both days inclusive).

4. Pursuant to Clause 49 of the Listing Agreement, the brief

resume/profile of the Directors eligible for re-appointment vide

Item Nos. 3 to 6 are attached hereto.

5. The dividend as recommended by the Board of Directors, thupon declaration by the members at the 25 Annual General

Meeting, shall be paid to those members whose names

appear on the Register of Members of the Company on

Thursday, September 25, 2008.

In respect of shares held in electronic form, the dividend will be

payable to the beneficial owners of the shares as on closing

hours of business on Wednesday, September 10, 2008 as per

details furnished by the Depositories for this purpose.

6. In view of the circular no. DCC/FIIT/Cir-3/2001 dated October

15, 2001 issued by SEBI, the ECS facility should mandatorily

be used by the Companies for the distribution of dividend to its

members. Your Company has already started this process and

sent the required forms and details to all the members on

various occasions. Those members holding shares in

physical form, who inspite of repeated reminders have not yet

sent the duly filled in ECS form, which can be downloaded

from the website of the Company to avail the benefits of this

facility, are once again requested to send the same at the

earliest. In case of members holding shares in demat mode,

they should furnish details in the prescribed format to their

Depositories Participant (DP).

7. The Company is obliged to print such bank details on the

dividend warrants as furnished by National Securities

Depository Limited (NSDL) and Central Depository Services

Limited (CDSL), "the Depositories" to the Company and the

Company can not entertain any request for deletion/change of

bank details already printed on the dividend warrant(s) based

on the information received from the concerned Depositories,

without confirmation from them. In this regard, members are

advised to contact their DP and furnish them the particulars of

any change desired.

8. Pursuant to the provisions of Section 205A(5) of the

Companies Act, 1956, the amount of dividend which remains

unpaid/unclaimed for a period of 7 years is transferred to the

"Investor Education and Protection Fund (IEPF)", constituted

by the Central Government and member(s) would not be able

to claim any amount of dividend so transferred to the IEPF. As

such, member(s) who have not yet encashed his/their

dividend warrant(s) is/are requested in his/their own interest to

write to the Registrar & Transfer Agent of the Company i.e. M/s

Karvy Computershare Private Limited for

claiming outstanding dividend declared by the Company

during the years 2002 and onward.

The dividend paid for the year from 1995 to 2001 and

remaining unpaid/ unclaimed in the accounts has already

been transferred to IEPF.

9. Members must quote their Folio Number / De-mat Account

No. and contact details such as email address, contact no.

etc. in all correspondence with the Company/ Registrar and

Transfer Agent.

10. Pursuant to the provisions of Section 109A of the Companies

Act, 1956, every member or joint holders holding shares in

physical form may nominate, in the prescribed manner, a

person to whom all the rights in the shares shall vest in the

event of death of the sole holder or all the joint holders. Member

or joint holders holding shares in demat form may contact their

respective DP for availing this facility.

11. Members are requested to notify

in case of their physical holdings to the

Registrar & Transfer Agent of the Company i.e. M/s Karvy

Computershare Private Limited and to the respective DP in

case of shares held in electronic mode.

12. Entry to the Auditorium will be strictly against entry coupon

available at the counters at the venue and against the

exchange of duly filled in, signed and valid attendance slip.

13. Any briefcase / bags / eatables will not be allowed to be taken

inside the Auditorium.

14. Corporate Members intending to send their authorized

representatives to attend the Meeting are requested to send a

certified copy of Board Resolution authorizing their

representative to attend and vote on their behalf in the Meeting.

15. Members are requested to bring their copy of the Annual

Report to the meeting.

immediately

immediately any change in

address and signature

EXPLANATORY STATEMENT

Item No. 8

pursuant to Section 173(2) of the Companies Act, 1956

Mr. Yutaka Kudo, Whole-time Director of the Company has been

assigned another responsibility by Honda Motor Co., Ltd., Japan.

Consequently, he has tendered his resignation from the position of

Director and Whole-time Director of the Company w.e.f. May 31, 2008.

He was associated with the management of the Company since

April 1, 2007.

Mr. Kudo has been succeeded by Mr. Sumihisa Fukuda w.e.f. June 1,

2008. Mr. Fukuda aged 53 years, was born on December 12, 1955 at

Nagasaki, Japan and after completing a course in Mechanical

Engineering, he joined Honda Motor Co., Ltd., Japan as an Engineer &

has completed various assignments in Honda. Immediately before

joining the Company, he was working as Manager in Asian Autoparts

Co. Ltd., Thailand. His specialization to name a few are:

• New model quality & standard control methods;

• Production, manufacturing and quality control for overseas

production; and

• Production and support for overseas production.

Apart from being on the Board of Hero Honda Motors Limited, Mr.

Fukuda is Director on the Board of Hero Honda Finlease Limited.

Mr. Fukuda does not hold any shares (as own or on behalf of other

person on beneficial basis) in the Company.

Your Board of Directors on the recommendation by the Remuneration

Committee in its meeting held on May 12, 2008, appointed Mr.

Sumihisa Fukuda as an Additional Director and Technical Director in

the whole time employment of the Company by way of passing a

resolution by circulation on May 13, 2008 pursuant to Sections 260,

269, 198, 309 read with Schedule XIII and other applicable provisions,

if any, of the Companies Act, 1956 w.e.f. June 1, 2008 for a period of 5

(five) years subject to the approval of the Central Government, if

required and the shareholders in the General Meeting on the

remuneration, including minimum remuneration and other terms and

conditions given hereunder.

I. Basic Salary: Rs. 2,01,314 ( Rupees Two lacs one thousand

three hundred fourteen only) per month; (Subject to an

increase of 10% per annum on the Basic Salary of preceding

year);

II. Commission: He will also be allowed remuneration by way of

commission in addition to Basic Salary, Perquisites and any

other Allowances, benefits or amenities subject to the

condition that the amount of commission shall not exceed 1%

of the net profit of the Company in a particular financial year as

computed in the manner referred to in Section 198 of the

Companies Act, 1956;

III. Perquisites and allowances: In addition to the above Basic

Salary and Commission, he shall be entitled to the following

Perquisites and allowances:

I) Residential Accommodation: The appointee shall be

provided free furnished residential accommodation. In

addition to this the appointee shall be provided with

cook(s), servant(s) and security guard(s);

ii) Medical Reimbursement: Actual Medical Expenses

incurred by the appointee and his family shall be

reimbursed;

iii) Club Fees: Actual fees of clubs will be reimbursed;

iv) Personal Accident Insurance: Actual premium to be paid

by the Company;

v) Insurance of House-hold goods: Actual premium to be

paid by the Company;

vi) Car: Facility of car with driver to be used for the business of

the Company;

vii) Telephone: Free telephone facility at residence including

Mobile phone to be used for the business of the

Company;

viii) Leave: One month's leave with full salary for every 11

months of service subject to the condition that leave

accumulated but not availed will not be encashed; and

ix) Reimbursement of expenses: Reimbursement of

entertainment, traveling, hotel and other expenses actually

and properly incurred for the business of the Company.

IV. Leave Travel Concession: For the appointee and his family

once in a year incurred in accordance with the rules of the

Company. In case it is proposed that the leave be spent in

home country instead of anywhere in India, return passage

may be allowed for self and family in accordance with the rules

of the Company;

V. Children's Education Allowance: In case of children studying

in India or abroad expenses subject to maximum of Rs. 5,000

per month per child shall be reimbursed by the Company.

Such allowance shall be admissible upto a maximum of two

children;

VI. Holiday passage for children studying outside India/family

staying abroad: Return holiday passage is admissible once in

a year by economy class or once in two years by first class to

children from their place of study abroad to India and to the

members of the family from the place of their stay abroad to

India if they are not residing in India with the appointee;

VII. Reimbursement of expenses incurred for joining duty and

0203


returning to home country after completion of tenure: Actual

expenses incurred on travel and packing, forwarding, loading/

unloading as well as freight, insurance, custom duty, clearing

expenses, local transportation and installation expenses in

connection with the moving of personal effects for self and

family for joining duty in India. On completion of the tenure, all

the expenses referred to herein above for travel and forwarding

the personal effects to Japan including the passage money

shall also be allowable to the appointee on his finally leaving

the employment of the Company.

If however, the appointee joins another branch of the

same/related multinational Company, the Company shall not

bear their expenses.

Explanation: For the aforesaid purposes "Family" means the

spouse, the dependent children and dependent parents of

the appointee; and

VIII. Minimum Remuneration:

If in any financial year during the currency of tenure of the

Whole-time Director, the Company has no profits or its profits

are inadequate, the appointee shall be entitled to minimum

remuneration by way of Basic Salary, Perquisites, allowances,

not exceeding the ceiling limit of Rs. 2,00,000 per month and in

addition thereto, he shall also be eligible to the perquisites not

exceeding the limits specified, under para 2 of Section II, Part II

of Schedule XIII to the Companies Act, 1956 or such other

limits as may be prescribed by the Government from time to

time as Minimum Remuneration.

However, the appointee shall not be entitled to any sitting fee for

attending meetings of the Board and/or Committee of Directors. His

office shall be liable to determination by retirement of Director by

rotation.

Mr. Sumihisa Fukuda may be deemed to be interested/ concerned in

the Resolution contained under Item No. 8 of the notice. None of the

other directors is deemed to be interested/concerned in the Ordinary

Resolution under Item No. 8 of the Notice.

The Board of Directors of your Company recommends passing of the

aforesaid Ordinary Resolution.

Mr. Meleveetil Damodaran has been appointed as an Additional

Director on the Board on June 16, 2008.

Mr. Meleveetil Damodaran, son of Late Sh. P. Chandrasekhara

Menon aged 61 years was born on May 4, 1947.

Mr. Damodaran belongs to the Indian Administrative Service,

Manipur-Tripura cadre and had held various coveted positions in

Government/ Public Sector and Regulatory Bodies.

In the past he held the position of Joint Secretary (Banking Division) in

Item No. 9

RELEVANT INFORMATION

Mrs. Shobhana Bhartia

Mr. Sunil Bharti Mittal

pursuant to Clause 49 IV(G) (i) of the Listing Agreement regarding

Directors being appointed and re-appointed:

Mrs. Shobhana Bhartia, wife of Mr. Shyam Sunder Bhartia, aged 51

years was born on January 4, 1957 at Kolkata. She belongs to the

distinguished Birla family and has married into another major Industrial

family, the Bhartia Group. Presently, she is the Vice Chairperson and

Editorial Director of HT Media Limited and by virtue of her considerable

domain expertise, especially in the media business she has been

nominated as Rajya Sabha member. She has been conferred the

"Padam Shri" by the Union Government for her contribution to the

media. Mrs. Bhartia is also the Chairperson of International Press

Institute (India Chapter).

She is presently holding the membership of the Board/ Committee(s)

of the following Companies.

Sl. No. Name of Company Nature of Office

1. Air Travel Bureau Limited Director

2. Britex India Limited Director

3. Firefly e-ventures Limited Director

4. Goldmerry Investment & Trading Co. Ltd. Director

5. Hero Honda Motors Limited Director

6. HT Media Limited V. C. & Editorial

Director

Chairperson -

Audit Committee

7. HT Music and Entertainment Limited Director

8. HTL Investment & Trading Co. Limited Director

9. Nilgiri Plantation Limited Director

10. Ronson Traders Limited Director

11. Shradhanjali Investment & Trading Co. Ltd. Director

12. The Hindustan Times Limited Director

Chairperson -

Audit Committee

13. Udit (India) Limited Director

14. Usha Flowell Limited Director

15. Yashovardhan Investment & Trading Co. Ltd. Director

Mrs. Bhartia does not hold any shares (as own or on behalf of other


Mr. Sunil Bharti Mittal, son of Late Sh. Sat Paul Mittal, a parliamentarian,

aged 50 years was born on October 23, 1957 at Ludhiana. He has

been appointed as an Additional Director on the Board of the

Company w.e.f. December 30, 2005. He is the founder Director of

Bharti Tele-Ventures Limited (now Bharti Airtel Limited). He is an

Alumnus of Harvard Business School, MA, USA. He is a member of the

Prime Minister's Council on Trade & Industry and is also the founder,

past president and Member of various telecom industry associations.

Mr. Mittal is immediate past President of the Confederation of Indian

Industry (CII) and the Honorary Consul General of the Republic of

Seychelles in India. He has been conferred the "Padam Bhushan" by

the Union Government for his contribution to the industry. He is winner

of number of awards at national and international level and has been

inducted into the globally renowned and respected International

Telecommunication Union (ITU) Telecom Board, Geneva. He brings

with him around thirty years of rich and diversified industrial experience.

He is presently on the Board of following Companies and does not

hold membership of any other committee of the Board of Directors.


1. Bharti Airtel Limited Chairman &

Managing Director

2. Bharti AXA General Insurance Co. Ltd. Chairman

3. Bharti AXA Life Insurance Co. Ltd. Chairman

4. Bharti Enterprises Limited Chairman

5. Bharti Telecom Limited Chairman

6. Bharti Telesoft Limited Chairman

7. Bharti Teletech Limited Chairman

8. Bharti Ventures Limited Chairman


He (either own or held by/for other persons on a beneficial basis)

does not have any shareholding in the Company.

Mr. Masahiro Takedagawa, son of Mr. Hironobu Takedagawa, aged 53

years was born on April 26, 1955 at Kyoto, Japan. He has been

appointed as an Additional Director of the Company w.e.f. May 30,

2006. Mr. Takedagawa started his career with Honda Motor Co.,

Limited, Japan in the year 1979 after having completed his graduation

in Economics from Rikkyo University, Japan. Since then, he has served

Honda at various responsible positions in countries across the globe in

the Sales and Marketing division. At present, he is working as President

& CEO of Honda Siel Cars India Limited, India.

He is presently holding the membership of the Board/ Committee(s) of

the following Companies.



2. Honda Siel Cars India Limited President & CEO

3. Honda Siel Power Products Limited Director

Member-

Audit Committee

He (either own or held by/for other persons on a beneficial basis)

does not have any shareholding in the Company.

Mr. Masahiro Takedagawa

the Ministry of Finance, Chairman Unit Trust of India. He headed the

IDBI Bank before being appointed as the Chairman of the Securities

and Exchange Board of India (SEBI), the country's financial market

watchdog. He was also appointed as Officer on Special Duty with the

Reserve Bank of India dealing primarily with the restructuring of 3

identified weak public sector banks.

He is presently, holding the membership of the Board of the following

Companies.



2. Tech Mahindra Limited Director

3. SREI Sahaj e-Village Limited Director

Mr. Damodaran does not hold any shares (as own or on behalf of other


Mr. Damodaran may be deemed to be interested/ concerned in the

Resolution contained under Item No. 9 of the notice. None of the other

directors is deemed to be interested/concerned in the Ordinary

Resolution under Item No. 9 of the Notice.

The Board of Directors of your Company recommends passing of the

aforesaid Ordinary Resolution.

By Order of the Boardfor Hero Honda Motors Limited

New Delhi Ilam C. Kamboj

July 29, 2008 G.M. Legal & Company Secretary

Registered Office:



New Delhi-110 057

0405


0607

Mr. Pradeep Dinodia

Mr. Pradeep Dinodia, son of Sh. S. R. Dinodia, aged 54 years was born

on December 2, 1953, at New Delhi. He joined the Board of the

Company w.e.f. March 31, 2001. Mr. Dinodia is a Law Graduate (L.LB)

and a fellow member of The Institute of Chartered Accountants of India

(ICAI). He is a senior partner of M/s. S.R. Dinodia & Company,

Chartered Accountants, New Delhi, looking after Accounting, Legal

and Taxation issue particularly FEMA, Company Law and Direct Tax

matters of various Indian Companies and Multinational Corporations.

Presently he is the Chairman of Taxtation Committee of Federation

Indian Chamber of Commerce and Industry and member of the peer

review Board of the ICAI and member of Executive Committee -

International Fiscal Association, Indian Branch. He has wide and rich

experience in the field of corporate affairs and allied legal, Taxtation

matters. Since his appointment as a Director, he has been regularly

making valuable contributions in the meetings of Board of Directors

and Committee(s) thereof held from time to time.

He is presently holding the membership of the Board/ Committee(s) of

the following Companies.


1. DCM Shriram Consolidated Limited Director

Member-

Audit Committee

Chairman-

Shareholders’

Grievance Comm.

2. DFM Foods Limited Director

Chairman-

Audit Committee


3. Hero Corporate Services Limited Director

Chairman-

Audit Committee


Chairman-

Audit Committee

Member-

Shareholders’

Grievance Comm.

5. Micromatic Grinding Tech. Limited Director

6. RSWM Limited Director

7. Shriram Pistons & Rings Limited Director

Chairman-

Audit Committee

8. SPR International Auto Exports Ltd. Director

9. Ultima Finvest Limited Director

He (either own or held by/for other persons on a beneficial basis) does

not have any shareholding in the Company.

The brief profile of Mr. Sumihisa Fukuda has been given in the

Explanatory Statement to Ordinary Resolution No. 8 of this Notice.

The brief profile of Mr. Meleveetil Damodaran has been given in the

Explanatory Statement to Ordinary Resolution No. 9 of this Notice.

Mr. Sumihisa Fukuda

Mr. Meleveetil Damodaran

CONTENTS

I. At a Glance

II. Investor Service and Grievance Handling Mechanism

III. Matters requiring urgent attention of Shareholders’

IV. Dividend

V. Dematerialisation / Rematerialisation of Shares

VI. Nomination Facility

VII. Transfer / Transmission / Transposition / Duplicate Certificates

etc.

VIII. Miscellaneous

IX. Investor Servicing and Grievance Redressal at External

Agencies

X. Important Contact Details

SHAREHOLDERS’

REFERENCER

I. AT A GLANCE

II. INVESTOR SERVICE AND GRIEVANCE HANDLING

MECHANISM

III. MATTERS REQUIRING THE URGENT ATTENTION OF

SHAREHOLDERS

Company in present:

• Has over 47000 folios of shareholders holding Equity Shares in

the Company.

• Face value of its Equity Shares is Rs. 2.

• 68 per cent of the Company's Equity Shares are held in demat

form. The ISIN No. of the Company is INE158A01026.

• Share are under compulsory trading in demat form only.

• Equity Shares are listed on Bombay Stock Exchange Limited

(BSE) stock code being 500182 and National Stock Exchange

of India Limited (NSE) stock code being HEROHONDA.

• Company’s shares are most actively traded security on both

BSE and NSE.

• Share are freely transferable except as may be required

statutorily.

• Karvy Computershare Private Limited (Karvy), Hyderabad, an

ISO 9002 Certified Registrars and Transfer Agents, is the

Registrars and Transfer Agents (R&TA) of the Company.

All share related transactions viz., transfer, transmission, transposition,

nomination, dividend, change of name / address / signature,

Registration of mandate / Power of Attorney, replacement / split /

consolidation of share certificates / demat / remat of shares, issue of

duplicate certificates etc. are being handled by Karvy.

Karvy, the largest Registrar in the country, discharges investor service

functions effectively, efficiently and expeditiously. Investors are

requested to correspond directly with Karvy, on all share related

matters.

The Board of Directors of the Company has constituted a

Shareholders' Grievance Committee which oversees and reviews the

redressal of shareholders' complaints related to shares, non-receipt of

Annual Report, non receipt of dividend etc. The Committee oversees

performance of the R&TA and recommends measures for overall

improvement in the quality of investor services.

Register your e-mail address and contact details

Shareholders are requested to register their email address and other

contact details i.e. Mobile / Telephone No., Fax No., etc. with Karvy in

order to get prompt and timely response/communication in the future.

Open Demat Account and Dematerialise your shares

Investors should convert their physical holdings of securities into

demat (electronic) holdings. Holding securities in demat form helps

investors to get immediate transfer of securities. No stamp duty is

payable on transfer of shares held in demat form and risks associated

with physical certificates such as forged transfers, fake certificates and

bad deliveries are avoided.

Consolidate Multiple Folios

Investors should consolidate their shareholding held in multiple folios.

This would facilitate one-stop tracking of all corporate benefits on the

shares and would reduce time and efforts required to monitor multiple

folios.

Register ECS Mandate and furnish correct bank account particulars

with Company / Depository Participant

Investor should provide an ECS mandate to the Company in case of

shares held in physical form and ensure that the correct and updated

particulars of their bank account are available with the Depository

Participant (DP) in case of shares held in demat form. This would

facilitate in their receiving direct credits of dividends, refunds etc., from

companies and avoid postal delays and loss in transit.

Fill and submit Nomination Form

Investors should register the nominations, in case of physical shares,

with the Company and in case of dematerialised shares with their DP.

Nomination would help successors to get the shares transmitted in

their favor without hassles.

Change in Details

To avoid any hassle and fraudulent transfers, the shareholders are

requested to inform the Karvy about any change in address, signatures

etc. Similarly, information of death of shareholders should also be

communicated immediately to Karvy.

Important Matters relating to Shareholders.

Electronic Clearing Service (ECS) facility

What is payment of dividend through ECS Facility and how does it

operate?

Reserve Bank of India's ECS facility provides investors an option to

receive dividend / interest directly in their bank accounts rather than

receiving the same through post. Under this option, investor's bank

account is directly credited and an advice thereof is issued by the

Company after the transaction is effected. The concerned bank

branch credits investor's account and indicates the credit entry as

"ECS" in his / her passbook / statement of account. The investor does

not have to open a new bank account for the purpose.

What are the benefits of ECS (payment through electronic facilities)?

Some of the major benefits of ECS facility are:

a) Avoid visits to bank for depositing the physical warrant.

b) Prompt credit to the bank account.

c) Fraudulent encashment of warrants is avoided.

IV. DIVIDEND

d) Exposure to delays / loss in postal service avoided.

e) As there can be no loss in transit of warrants, issue of duplicate

warrants is not required.

Which cities provide ECS facility?

ECS Facility is currently available to the shareholders at following 68

locations:

Ahmedabad, Agra, Allahabad, Amritsar, Aurangabad, Bengaluru,

Baroda, Bhilwara, Bhopal, Bhubaneshwar, Burdwan, Calicut,

Chandigarh, Chennai, Coimbatore, Dehradun, Dhanbad, Durgapur,

Erode, Gorakhpur, Guwahati, Gwalior, Haldia, Hubli, Hyderabad,

Indore, Jabalpur, Jaipur, Jalandhar, Jammu, Jamshedpur, Jodhpur,

Kakinada, Kanpur, Kochi / Ernakulam, Kolhapur, Kolkata, Lucknow,

Ludhiana, Madurai, Mangalore, Mumbai, Mysore, Nagpur, Nashik,

Nellore, New Delhi, Panaji, Patna, Pondicherry, Pune, Raipur, Rajkot,

Ranchi, Salem, Shimla, Sholapur, Siliguri, Surat, Thiruvananthapuram,

Tirupati, Tirupur, Trichur, Trichy, Udaipur, Varanasi, Vijaywada and

Visakhapatnam.

How to avail of ECS Facility?

Investors holding shares in physical form may send their ECS Mandate

Form, duly filled in, to Karvy. The Form may be downloaded from the

Company's website www.herohonda.com under the section "Investor

Relations" However, if shares are held in dematerialised form, ECS

mandate has to be sent to the concerned Depository Participant (DP)

directly, in the format / procedure prescribed by the DP.

Why cannot the Company take on record bank details in case of

dematerialised shares?

As per the Depository Regulations, the Company is obliged to pay

dividend on dematerialised shares as per the bank account details

furnished by the concerned Depository. The Company is not

authorized to make any changes in such details received from the

Depository. Therefore, investors are requested to keep their bank

particulars updated with the Depository Participants.

Can ECS Facility be opted out by investors?

Investors have a right to opt out from this mode of payment by giving an

advance notice of four weeks, prior to payment of dividend, either to

the Karvy or to the concerned DP, as the case may be.

Course of Action in case of Non-receipt of Dividend, Revalidation of

Dividend Warrant etc.

What should a shareholder do in case of non-receipt of dividend?

Shareholders may write to the Karvy furnishing the particulars of the

dividend not received, and quoting the folio number/DPID and Client

ID particulars (in case of dematerialised shares). On checking the

details Karvy shall issue duplicate dividend warrant if the dividend

remains unpaid in the records of the Company after expiry of the validity

period of the warrant which is normally three months from the date of its

issue. If the validity period of the lost dividend warrant has not expired,

shareholders will have to wait till the expiry date since duplicate warrant

cannot be issued during the validity of the original warrant. On expiry of

the validity period, if the dividend warrant is still shown as unpaid in

records of the Company, duplicate warrant will be issued. Karvy would

request the concerned shareholder to execute an indemnity before

issuing the duplicate warrant.

No duplicate warrant will be issued in respect of dividends which have

remained unpaid / unclaimed for a period of seven years in the unpaid

dividend account of the Company as they are required to be

transferred to the Investor Education and Protection Fund (IEPF)

constituted by the Central Government.

Why do the shareholders have to wait till the expiry of the validity

period of the original warrant?

As the dividend warrants are payable at par at several centres across

the country, banks do not accept 'stop payment' instructions. Hence,

shareholders have to wait till the expiry of the validity of the original

warrant.

What is the procedure for revalidation of dividend warrants?

Shareholders who have not encashed their dividend warrants within

the validity period may send their request of revalidation to Karvy

enclosing the said dividend warrants. Karvy will after due verification of

the records, issue a revalidated dividend warrant. The revalidated

warrant will be valid for a period not exceeding 3 months from the date

of such warrant.

How can a bank or any other person be authorised to receive

dividends on behalf of shareholders?

Shareholders may write to Karvy furnishing the name and address of

the authorised person/bank along with folio number and current

communication address. Karvy will despatch the respective

shareholders' dividend warrants to the concerned person / bank. This

facility is applicable only for the shareholders holding shares in physical

form.

Unclaimed / Unpaid Dividend

What are the statutory provisions governing unclaimed dividend?

Prior to amendment of Section 205A and enactment of Section 205C

by the Companies (Amendment) Act, 1999, companies were required

to transfer to the General Revenue Account of the Central Government,

any moneys transferred to the 'unpaid dividend account' and which

remained unpaid or unclaimed for a period of 3 years from the date of

transfer to the unpaid dividend account. With effect from October 31,

1998, any moneys transferred to the 'unpaid dividend account' of the

Company and remaining unpaid or unclaimed for a period of 7 years

from the date it becomes due, shall be transferred to the Investor

Education and Protection Fund (IEPF). Investors are requested to note

that no claims shall lie against the Company or IEPF for any moneys

transferred to IEPF in accordance with the provisions of Section 205C

of the Companies Act, 1956.

0809


What is the status of unclaimed dividend for different years?

In view of the statutory provisions, as aforesaid, the status of unclaimed

and unpaid dividend of the Company is given below:

Year Particulars of Percent Date of Declaration Last Date of

Dividend Paid Claiming unpaid

Dividend

2001-02 Interim 250 17-Oct-01

2001-02 Final 600 12-Aug-02 11-Aug-09

2002-03 Final 900 01-Aug-03 31-Jul-10

2003-04 Interim 500 23-Jan-04 22-Jan-11

2003-04 Final 500 17-Aug-04 16-Aug-11

2004-05 Final 1000 22-Aug-05 21-Aug-12

2005-06 Final 1000 14-Sep-06 13-Sep-13

2006-07 Final 850 24-Jul-07 23-Jul-14

What is dematerialisation of shares?

Dematerialisation (Demat) is the process by which securities held in

physical form are cancelled and destroyed and the ownership thereof

is entered into and retained in a fungible form on a depository by way of

electronic balances. Trading in demat form is regulated by the

Depositories Act, 1996 and is monitored by the Securities and

Exchange Board of India (SEBI). The two depositories presently

functioning are National Securities Depository Limited (NSDL) and

Central Depository Services (India) Limited (CDSL).

Why dematerialise shares?

SEBI has notified various companies whose shares shall be traded in

demat form only. By virtue of such notification, the shares of the

Company are also subject to compulsory trading only in demat form on

the Stock Exchanges.

Benefits of Demat

• A safe, convenient way to hold securities;

• Immediate transfer of securities;

• No stamp duty on transfer of securities;

• Elimination of risks associated with physical certificates such

as bad delivery, fake securities, delays in transit, thefts etc.

• Reduction in paperwork involved in transfer of securities;

• Reduction in transaction cost;

• No odd lot problem, even one share can be sold;

• Change in address recorded with DP gets registered with all

companies in one go in which the investor holds securities

electronically thereby eliminating the need to correspond with

each of them separately;

• Easy Nomination facility;

• Smooth Transmission of securities in case of any eventualities.

16-Oct-08

V. DEMATERIALISATION / REMATERIALISATION OF SHARES

How to dematerialise shares?

The procedure for dematerialising shares is as under:

• Open Beneficiary Account with a Depository Participant (DP)

registered with SEBI.

• Submit Demat Request Form (DRF) as given by the DP, duly

signed by all the holders with the names and signatures in the

same order as appearing in the concerned certificate(s) and

the Company records.

• Obtain acknowledgment from the DP on handing over the

share certificate(s) along with the DRF.

• Demat confirmations are required to be completed in 21 days

as against 30 days (excluding time for despatch) for physical

transfer. Service standards prescribed by the Company for

completing demat is three days from the date of the receipt of

requisite documents for the purpose.

• Receive a confirmation statement of holdings from the DP.

Statement of holdings is sent by the DPs from time to time.

Presently, confirmation is given by DPs on an immediate basis

through email or SMS facilities, thus enabling shareholders to

further trade in the securities immediately. Shareholders should

not send share certificate(s) / documents to the Company /

Company's R&TA directly.

How to get dividend on dematerialised shares? Will such

shareholders be eligible for receiving Annual Report every year and

also to attend General Meetings?

Dividend of shareholders holding shares in dematerialised will be

credited through ECS/ electronically to the bank accounts as opted by

them while opening the Beneficiary Accounts with the DP. In other

cases, dividend warrants will be despatched to them with the bank

account details, as furnished by the Depositories, printed thereon.

Holding shares in dematerialised form will not have any adverse affect

on the rights of the Shareholders. As members of the Company, they

will be entitled to receive Annual Report, attend General Meetings and

participate and vote thereat to the extent of their shareholding.

Is pledge of dematerialised shares possible?

Dematerialised shares can be pledged for the purpose of availing of

any funding / loan arrangement with a bank.

What is rematerialisation of shares?

It is the process through which shares held in demat form are

converted into physical form by issuance of share certificate(s).

What is the procedure for rematerialisation of shares?

• Shareholders should submit duly filled in Rematerialisation

Request Form (RRF) to the concerned DP.

• DP intimates the relevant Depository of the request through the

system.

• DP submits RRF to the Company's R&TA.

• Depository confirms rematerialisation request to the

Company's R&TA.

• The Company's R&TA updates accounts and prints

certificate(s) and informs the Depository.

• Depository updates the Beneficiary Account of the shareholder

by deleting the shares so rematerialised.

• Share certificate(s) is despatched to the shareholder.

What is nomination facility and to whom it is more useful? What is the

procedure of appointing a nominee?

Section 109A of the Companies Act, 1956 provides the facility of

nomination to shareholders. This facility is mainly useful for individuals

holding shares in sole name. In the case of joint holding of shares by

individuals, nomination will be effective only in the event of the death of

all joint holders.

Investors, especially those who are holding shares in single name, are

advised to avail of the nomination facility by submitting the prescribed

Form 2B to Karvy. The said Form may be downloaded from the

Company's website, www.herohonda.com under the section "Investor

Relations". However, if shares are held in dematerialised form,

nomination has to be registered with the concerned DP directly, as per

the format prescribed by the DP.

Who can appoint a nominee and who can be appointed as a

nominee?

Individual shareholders holding the shares / debentures in single name

or joint names can appoint a nominee. In case of joint holding, joint

holders together have to appoint the nominee. While an individual can

be appointed as a nominee, a trust, society, body corporate,

partnership firm, karta of HUF or a power of attorney holder cannot be

appointed as nominee(s). Minors can, however, be appointed as a

nominee.

How to avail of nomination facility for more than one folio?

There can be only one nomination for one folio. Folios having different

order or combination of names of shareholders will require separate

nominations.

Can a nomination once made be revoked / varied?

It is possible to revoke / vary a nomination once made. If nomination is

made by joint holders, and one of the joint holders dies, the remaining

joint holder(s) can make a fresh nomination by revoking the existing

nomination.

Are the joint holders deemed to be nominees to the shares?

Joint holders are not nominees, they are joint holders of the relevant

shares having joint rights on the same. In the event of death of any one

of the joint holders, the surviving joint holder(s) of the shares is / are the

only person(s) recognized under law as holder(s) of the shares. Joint

Shareholders may together appoint a nominee.

VI. NOMINATION FACILITY

What rights are conferred on the nominee and how can he exercise

the same?

The nominee is entitled to all the rights of the deceased shareholder to

the exclusion of all other persons. In the event of death of the

shareholder, all the rights of the shareholder shall vest in the nominee.

In case of joint holding, all the rights shall vest in the nominee only in the

event of death of all the joint holders. The nominee is required to apply

to the Company by reporting death of the nominator along with the duly

attested copy of the death certificate. The nominee has an option to

decide to register himself as a shareholder or he/she could send an

application to have the shares transferred to any other person to whom

the nominator could have otherwise transferred the shares. If the

nominee opts to transfer the shares to a third party, he/she should

submit to the Company's R&TA, the transfer deed(s) duly stamped and

executed, along with the relevant certificate(s) and other documentary

proof(s). If shares are held in dematerialised form, nomination has to be

registered with the concerned DP directly, as per the format prescribed

by the DP.

How to get shares registered in favour of transferee(s)?

Transferee(s) need to send share certificate(s) along with share transfer

deed in the prescribed form 7B, duly filled in, executed and affixed with

share transfer stamps, to Karvy. It takes about 7 days for them to

process the transfer, although the statutory time limit fixed for

completing a transfer is one month under the Listing Agreement and

two months under the Companies Act, 1956.

The Government of India, Ministry of Finance, Department of Revenue,

has fixed the Stamp Duty on Transfer (whether with or without

consideration) of shares at the rate of twenty five paise (25 paise) for

every Rs. 100 or part thereof of the market value of the shares on the

date of execution of the transfer deed. The transfer deed is valid for a

period of one year from the date of presentation or till the book closure

date, whichever is later. In case the transfer deed has expired, the

holder may approach the Registrar of Companies to get the same

revalidated. In case of dematerialised shares, the shares are credited

to the purchaser's account by the respective Depository Participant

under the directions of the concerned Depository. Presently, transfer of

dematerialised shares does not attract stamp duty.

Can shares be transferred to a minor, Hindu Undivided Family, Firm,

Trust etc.?

Yes, shares can be transferred to a minor. In such a case the share

transfer deed is required to be signed by the natural guardian on behalf

of the minor.

In the case of Hindu Undivided Family (HUF) shares can be transferred

in the name of the Karta of HUF, in the case of a Firm shares can be

transferred to a partner of the firm and in the case of a Trust shares can

be transferred to a trustee of the trust.

VII. TRANSFER / TRANSMISSION / TRANSPOSITION / DUPLICATE

CERTIFICATES ETC.

1011


Can single holding of shares be converted into joint holdings or joint

holdings into single holding? If yes, what is the procedure involved

in doing the same?

Yes, conversion of single holding into joint holdings or joint holdings

into single holding or transfer within the family members leads to a

change in the pattern of ownership, and therefore, procedure for a

normal transfer as mentioned above needs to be followed.

How to get shares registered which are received by way of gift?

Does it attract stamp duty?

The procedure for registration of shares gifted (held in physical form) is

same as the procedure for a normal transfer. The stamp duty payable

for registration of gifted shares would be @ 25 paise for every Rs. 100

or part thereof, of the face value or the market value of the shares

prevailing as on the date of the document, if any, conveying the gift or

the date of execution of the transfer deed, whichever is higher. The

procedure for registration of shares gifted (held in demat form) is the

same as the procedure for transfer of shares in demat form in off

market mode.

What is the procedure for getting shares in the name of surviving

shareholder(s), in case of joint holding, in the event of death of one

shareholder?

The surviving shareholder(s) will have to submit a request letter

supported by a duly attested copy of the death certificate of the

deceased shareholder and accompanied by the relevant share

certificate(s). Karvy on receipt of the said documents and after due

scrutiny, will delete the name of the deceased shareholder from its

records and return the share certificate(s) to the surviving

shareholder(s) with necessary endorsement.

If a shareholder who holds shares in his sole name dies without

leaving a Will, how can his legal heir(s) claim the shares?

The legal heir(s) should obtain a Succession Certificate or Letter of

Administration with respect to the shares and send a true copy of the

same, duly attested, along with a request letter, transmission form, and

the share certificate(s) in original, to Karvy for transmission of the shares

in his / their name(s).

In case of a deceased shareholder who held shares in his / her own

name (single) and had left a Will, how do the legal heir(s) get the

shares transmitted in their name(s)?

The legal heir(s) will have to get the Will probated by the Court of

competent jurisdiction and then send to Karvy a copy of the probated

copy of the Will, along with relevant details of the shares, the relevant

share certificate(s) in original and transmission form for transmission of

the shares in his / their name(s).

How can the change in order of names (i.e. transposition) be

effected?

Share certificates along with a request letter duly signed by all the joint

holders may be sent to Karvy for change in order of names, known as

'transposition'.

Transposition can be done only for the entire holdings under a folio and

therefore, requests for transposition of part holding will not be

accepted by Karvy.

What is the procedure for obtaining duplicate share certificate(s) in

case of loss / misplacement of original share certificate(s)?

Immediately on the knowledge of loss of share certificates, one should

inform Karvy. The information should contain the details of share

certificates so lost, folio no., no. of shares and other relevant

particulars. The said information needs to be signed by the first holder

as per the specimen signature recorded with Hero Honda Motors

Limited. Karvy after checking the details and signatures will mark a

cautionary stop on the folio to prevent any further transfer of such lost

share certificates. On receipt of such request Karvy will send the

complete procedure of obtaining duplicate share certificates.

In the meanwhile, one should lodge a complaint with the police

regarding loss of share certificates.

Change of address

What is the procedure to get change of address registered in the

Company's records?

Shareholders holding shares in physical form, may send a request

letter duly signed by all the holders giving the new address along with

Pin Code. Shareholders are also requested to quote their folio number

and furnish a duly attested copy of any of the following documents i.e.

Ration Card / PAN Card / Passport / Latest Electricity or Telephone Bill /

Lease Agreement etc. towards proof of address.

If shares are held in dematerialised form, information about change in

address needs to be sent to the DP concerned.

Change of name

What is the procedure for registering change of name of

shareholders?

Shareholders may request Karvy for effecting change of name in the

share certificate(s) and records of the Company. Original share

certificate(s) along with the supporting documents like marriage

certificate, court order etc. should be enclosed. Karvy after verification,

will effect the change of name and send the share certificate(s) in the

new name of the shareholders. Shareholders holding shares in demat

form, may request the concerned DP in the format prescribed by DP.

Authority to another person to deal with shares

What is the procedure for authorising any other person to deal with

the shares of the Company?

Shareholders need to execute a Power of Attorney in favour of the

concerned person and submit a notarised copy of the same to Karvy.

After scrutiny of the documents, they will register the Power of Attorney

and inform the shareholders concerned about the registration number

of the same. Whenever a transaction is done by the Power of Attorney

holder this registration number should be quoted in the

communication.

VIII.MISCELLANEOUS

Shareholders' General Rights - interalia

• To receive not less than 21 days notice of general meetings

unless consented for a shorter notice.

• To receive notice and forms for Postal Ballots in terms of the

provisions of the Companies Act, 1956 and the concerned

Rules issued thereunder.

• To receive copies of Balance Sheet and Profit and Loss

Account along with all annexures.

• To participate and vote at general meetings either personally or

through proxy (proxy can vote only in case of a poll).

• To receive dividends and other corporate benefits like bonus,

rights etc. once approved.

• To demand poll on any resolution at a general meeting in

accordance with the provisions of the Companies Act, 1956.

• To inspect statutory registers and documents as permitted

under law.

• To require the Board of Directors to call an extraordinary general

meeting in accordance with the provisions of the Companies

Act, 1956.

Duties / Responsibilities of Shareholders’

• To remain abreast of corporate developments, company

specific information and take informed investment decision(s).

• To be aware of relevant statutory provisions and ensure

effective compliance therewith.

• Not to indulge in fraudulent and unfair trading in securities nor

to act upon any unpublished price sensitive information.

• To participate effectively in the proceedings of shareholders'

meetings.

• To respond to communications seeking shareholders'

approval through Postal Ballot.

• To respond to communications of SEBI / Depository /

Depository Participant / Brokers / Sub-brokers / Other

Intermediaries / Company, seeking investor feedback /

comments.

i) Ministry of Corporate Affairs

Ministry of Corporate Affairs (MCA) has launched a major

e-Governance initiative - "MCA 21" on the MCA portal

(www.mca.gov.in). One of the key benefits of this initiative includes

timely redressal of investor grievances. MCA 21 system accepts

complaints under the e-form prescribed, which has to be filed online.

The nature of complaint may relate to:

• Shares / Dividends

IX. INVESTOR SERVICING AND GRIEVANCE REDRESSAL AT

EXTERNAL AGENCIES

• Debentures / Bonds

• Fixed Deposits - non receipt of amount

• Miscellaneous - non receipts

• Any other

The status of complaint can be viewed by quoting the Service Request

Number (SRN) provided at the time of filing the complaint.

ii) Investor Education and Protection Fund (IEPF)

IEPF is for promotion of investors' awareness and protection of the

interests of investors. IEPF through Investor Helpline is assisting

investors free of charge, in redressal of their grievances. It provides a

facility, to the investors, to lodge their grievance on the website itself.

This facility is available on website www.investorhelpline.in. The

complaints can be lodged on various issues such as:

• Refund Order / Allotment Advice related

• Non-Receipt of Dividend

• Non-Receipt of Share certificates / Units after allotment /

transfer / Bonus / Transmission etc.

• Non-Receipt of Debentures / Bond Certificate or Interest /

Redemption Amount

• Offer for Rights Issue

• Non-Receipt of Investments and returns thereon on Collective

Investment Schemes / Plantation Companies

• Non-Receipt of Annual Report / AGM Notice / Proxy Form

• Non-Registration of Change in Address of Investor

• Non-Receipt of Fixed / Public Deposits related amounts

• Demat related Grievances

iii) Securities and Exchange Board of India (SEBI)

SEBI, in its endeavour to protect the interest of investors, has provided

a platform wherein the investors can lodge their grievances. This facility

is available on the SEBI website (www.sebi.gov.in) under the Investor

Guidance Section. The complaints can be lodged on various issues

such as:

• Non receipt of dividend

• Non receipt of share certificates after transfer

• Matters pertaining to non-receipt of allotment advice/ Refund

Orders

• Matters pertaining to Debentures

• Non receipt of letter of offer of rights

• Any other

After lodging the complaint, the Investors can track the status as well.

1213


iv) Stock Exchanges

a. National Stock Exchange of India Limited (NSE)

NSE has formed an Investor Grievance Cell (IGC) to redress investors'

grievances electronically. IGC is manned by a team of professionals

who possess relevant experience in the areas of capital markets,

company and legal affairs; especially trained to identify the problem

faced by the investor, and to find and resolve at the earliest. The

Investors have to log on to the website of NSE i.e. www.nseindia.com

and in the Investors Service Centre Section they can fill in Form I or

Form II depending upon the type of complaint and file the same

electronically with NSE. Generally, complaints are resolved within a

period of 45 days.

b. Bombay Stock Exchange Limited (BSE)

BSE provides an opportunity to its members to file their complaints

electronically through its website www.bseindia.com under the

Investor Desk Section. Here again as in case of NSE, the Investors can

fill in various complaint forms depending upon the nature of their

complaint and file them electronically.

v) Depositories

a. National Securities Depository Limited (NSDL)

In order to help its clients resolve their doubts, queries, complaints,

NSDL has provided an opportunity wherein they can raise their queries

by logging on to www.nsdl.co.in under the 'Query Now' section or an

email can be marked mentioning the query to [email protected].

b. Central Depository Services (India) Limited (CDSL)

Investors who wish to seek general information on depository services

may mail their queries to [email protected]. With respect to the

complaints / grievances of the demat accountholders relating to the

services of the Depository participants, mails may be addressed to

[email protected].

Registrars and Transfer Agents

Karvy Computershare Private Limited

Plot No. 17-24,

Vithalrao Nagar, Madhapur,

Hyderabad - 500 081

e-mail : [email protected]

Tel : 040 - 23420272 3333

Fax : 040 - 2272 3199 / 2272 2072

Ministry of Corporate Affairs

Shastri Bhawan, 5th Floor, A Wing,

Dr. Rajendra Prasad Road, New Delhi - 110 001.

Tel : 011 - 23384660, 23384470, 23389403

Website : www.mca.gov.in

X. IMPORTANT CONTACT DETAILS

Regional Director (North)

A-14, Sector 1,

PDL Bhawan,

Noida - 201 301

Tel : 0120 - 2445342

Fax : 0120 - 2445341

Registrar of Companies (ROC)

4th Floor, IFCI Tower,

61, Nehru Place,

New Delhi - 110 019

Tel : 011 - 26235704

Fax : 011 - 26235702

Depositories

National Securities Depository Limited (NSDL)

Trade World, A Wing, 4th & 5th Floors,

Kamala Mills Compound, Senapati Bapat Marg,

Lower Parel, Mumbai 400 013.

Tel : 022 - 2499 4200

Fax : 022 - 2497 2993 / 2497 6351

Website : www.nsdl.co.in

Central Depository Services (India) Limited (CDSL)

Phiroze Jeejeebhoy Towers,

16th Floor, Dalal Street,

Mumbai 400 023.

Tel : 022 - 2272 3333

Fax : 022 - 2272 3199 / 2272 2072

Website : www.cdslindia.com

Securities and Exchange Board of India (SEBI)

SEBI Bhavan, Plot No. C4-A,

'G' Block, Bandra-Kurla Complex, Bandra (East),

Mumbai 400 051.

Tel : 022 - 26449000 / 40459000

Fax : 022 - 26598514

Website : www.sebi.gov.in

Bombay Stock Exchange Limited (BSE)

Phiroze Jeejeebhoy Towers,

Dalal Street,

Mumbai 400 001.

Tel : 022 - 2272 1233 / 4

Fax : 022 - 2272 1919

Website : www.bseindia.com

The National Stock Exchange of India Limited (NSE)

"Exchange Plaza" Plot No. C/1,

"G" Block Bandra-Kurla Complex, Bandra (E),

Mumbai 400 051.

Tel : 022 - 2659 8100 / 8114

Fax : 022 - 22 2659 8120

Website : www.nseindia.com

HERO HONDA MOTORS LIMITEDRegd. Office : 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi - 110 057

Please complete this attendance slip and hand it over at the entrance of the meeting hall.

L.F. No. No. of Shares Held

Dp.Id.* Client Id.*

Name(s) in full Father's/Husband's Name Address as Regd. with the Company

1.

2.

3.

thI/We hereby record my/our presence at the 25 Annual General Meeting of the Company being held o , 2008 at 11:00 a.m. at Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010.

Signature of the shareholder(s)/proxy**

1. 2. 3.

* Applicable for investors holding shares in electronic form** Strike out whichever is not applicableNote: Attendance slip in original should be complete in all respects.

n Thursday, September 25

ATTENDANCE SLIP

HERO HONDA MOTORS LIMITEDRegd. Office : 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi - 110 057

L.F. No. No. of Shares Held

Dp.Id.* Client Id.*

I/We;Name(s) in full Father's/Husband's Name Address as Regd. with the Company

1.

2.

3.

being a member/members of Hero Honda Motors Limited hereby appoint of or failing him/her thof as my/our proxy to vote for me/us and on my/our behalf at the 25 Annual General Meeting of the Company

being held on Thursday, September 25, 2008 at 11:00 a.m. at Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010.

Signature of the shareholder(s) Signature of Proxy(s)

1. 2. 3. 1.

2.

* Applicable for investors holding shares in electronic form

Note: The proxy must be returned so as to reach the registered office of the Company not less than 48 hours before the time for holding the aforesaid meeting. The proxy need not be a member of the Company.

PROXY

No gift of any nature will be distributed at the Annual General Meeting.The members seeking gifts may excuse us.

Affix15 PaiseRevenueStamp

Date:DD MM YY
