Apollo Tyres

The Directors have pleasure in presenting the Annual Report along with
 the audited statement of accounts of your Company for the financial
 year ended March 31,2008.
 
 FINANCIAL PERFORMANCE
 
                                                          Year Ended 
                                        31.03.2008         31.03.2007
                                              (Rs./Millions)
 
 Sales & other Income                   42,562.06          37,773.14
 
 Profit before Depreciation &Tax         4,212.57           2,596 45
 
 Less: Depreciation                        878.10             742.26
 
 Provision for Tax-Current                 975.01             445.65
 
 -Deferred,                                121.43             238.32
 
 -Fringe Benefit Tax                        45.00              36.00
 
 Net Profit                              2,193.03           1,134.22
 
 Add: Transfer from Debenture 
 Redemption Reserve                         21,70              16.70
 
 Surplus Brought Forward From 
 Previous Year                           1,672.12           1,259.30
 
 Profit available for Appropriations     3,886.85           2,410.22
 
 Appropriations:
 
 Dividend to Equity Shareholders           252.01             208.81
 
 Dividend Tax                               42,83              29 29
 
 General Reserve                           600.00             500.00
 
 Balance Carried Forward                  2992.01           1,672,12
 
 OPERATIONS
 
 During the financial year ended March 31, 2008, sales from operations
 amounted to Rs,42,469,83 million as against Rs.37,743.43 million during
 the previous year, recording a growth of 12,52%.
 
 Operating profit, before interest and depreciation, amounted to
 Rs,4,732,98 million, as against Rs.3,122,93 million during the previous
 year. Net profit, after providing for interest, depreciation and tax
 amounted to Rs.2,193.03 million as against Rs.1,134,22 million during
 the previous year, registering an increase of 93,35%.
 
 Your Company has achieved all time high profit and robust growth in its
 operations supported by a motivated management team, aggressive
 marketing initiatives, better working capital management and overall
 cost reduction measures adopted by the Company. The cost management and
 production efficiencies helped in maintaining a good profitable track
 record despite increase in input costs.
 
 PRODUCTION
 
 During the year, your Company has achieved 7.81 % growth in production
 tonnage by registering production of 2,90,000 MT as against 2,69,000 MT
 in the previous year. All expansion programmes were implemented
 successfully as envisaged, by increasing total capacity across all
 plants to 744 MT/day from 736 MT/day.
 
 SHARE CAPITAL
 
 During the year; your Company has allotted 24.42 million equity shares
 of Re.1/- each at a premium of Rs,28,30 to Promoters on conversion of
 2.442 million warrants. Your Companys share capital as on 31st March,
 2008 has increased from Rs.464.02 million to Rs.488.44 million after
 the sad allotment. Subsequently, promoters have exercised last tranch
 of their option for conversion of 1.558 million warrants into 15.58
 million shares on 18th April, 2008, thereby, increasing share capital
 to Rs.504.02 million.
 
 The face value of equity shares of your Company has been splitted from
 1 equity share of Rs. 10/- each into 10 equity shares of Re. 1/ each
 w.e.f. 27th August, 2007, in pursuance of the resolution passed in the
 Annual General Meeting held on 26th July, 2007.
 
 DIVIDEND
 
 Your directors recommend a dividend of 50% per equity share for the
 financial year 2007-08, for your approval. There will be no tax
 deduction at source on dividend payments, but your Company will have to
 bear tax on dividend @ 16.995%, inclusive of surcharge
 
 The dividend, if approved, shall be payable to the shareholders
 registered in the books of the Company and the beneficial owners as per
 details furnished by the depositories, determined with reference to the
 book closure from 1st July, 2008 to 18th July, 2008 (both days
 inclusive)
 
 RAW MATERIALS
 
 The year under review witnessed softening of major raw material prices
 initially, followed by a sharp increase towards the end of the year.
 Natural rubber prices were stable during the first half of the year
 under review but witnessed continuous increase thereafter due to
 shortage of supply. Production of natural rubber was badly hit globally
 due to bad weather in Malaysia and Thailand and in particular in India
 where production was substantially down due to major spread of viral
 fever in Kerala.
 
 Crude oil prices increased approx. 25% during the year under review and
 the impact of the same was felt in prices of other petro based raw
 materials like nylon tyre cord fabric, synthetic rubber and carbon
 black but the depreciation of US dollar partially offset the increase
 
 Later part of the year under review also witnessed shortage in the
 supply of major raw materials like rubber chemicals, synthetic rubber,
 carbon black & bead wire. These shortages are due to closure of major
 plants, tight availability of intermediates like butadiene, carbon
 black feed stock, high carbon wire rod etc. and continuing strong
 demand from Asia.
 
 While anti dumping duties continued on raw materials like nylon tyre
 cord fabric, rubber chemicals and EPDM, fresh investigation started on
 some other major rubber chemicals which were not having anti dumping
 duty so far.
 
 Your company, in order to remain competitive in sourcing raw materials,
 had to resort to effective leverage of strategic procurement tools like
 long term relationship with vendors, forecasting and planning based on
 real time information in a dynamic environment.
 
 The raw material environment continues to challenge our industry in
 terms of cost pressure. The inverted duty structure where customs duty
 on imported natural rubber is 20% against 10% customs duty on import of
 finished tyres further aggravates the pressure. Your Company continued
 to focus on strategic partnership with key suppliers of raw materials
 and expanding the sourcing network across the world to
 leverage.competitive prices
 
 DOMESTIC MARKETING
 
 Having achieved leadership in the Indian market by leveraging the
 spirit of enterprise of our people, strengths in quality manufacturing
 processes and product development, your company is today seeking new
 challenges and markets, identifying customer needs, innovating to
 design new products and develop new delivery systems and growing with
 certainty and responsibility.
 
 Yours is a Company that has always measured its success and well being
 in that of its stakeholders; be it customer, dealer, employee or member
 of the wider community. Consistent performance has translated into
 customer delight, profits, and return on investment.
 
 This year saw your Company exceeding the overall industry growth and
 meeting its targets in all the product categories. During the year
 under review, the Company recorded a healthy growth of 7.3% in truck,
 20.4% in passenger car radial, 39.7% in light commercial vehicles and
 8.9% in tractor rear
 
 Significant strides were made in the realm of the marketing strategy
 tripod covering Product Leadership, Customer Intimacy and Operators
 Excellence.
 
 The efforfs at building greater brand equity in global markets have
 received a fillip with the launch of Winter Tyres and Concept Tyres at
 the New Delhi Auto Expo in January this year. Acelere Ice and Hawkz Ice
 (meant for passenger vehicles and 4x4s), are the first ever India Made
 winter tyres and will be sold across Europe and North America. On a
 similar note, showcasing of indigenously developed Aspire TT and
 Dolphin Concept Tyres marked another first in the Indian tyre industry.
 
 In the realm of commercial vehicles, Endurance, a premium radial is
 currently undergoing extensive road tests and will be launched in the
 forthcoming fiscal. This new product compliments the companys existing
 radial range in the category of Duramile for light commercial vehicles
 and the Regal Transport for medium to heavy commercial vehicles.
 
 This year also saw the introduction of the 360 Degree Offer - Complete
 Tyre Solutions for commercial vehicle customers. The Apollo Exchange
 Offe and Own Today Pay Later are two initiatives which are an
 industry first in the Indian market and complete product offerings
 covering new bias tyres (Apollo, Kaizen), new radial tyres (Regal),
 retreading material (Duratread), and retread tyres as a product
 (Duratyre)
 
 The 2008 J.D. Power India original equipment tyre total customer
 satisfaction index report for the year 2007-08 ranks your Company in
 the second place. The rating is for all the passenger vehicle tyre
 brands that are fitted as OE and is significant progress for the
 Company given that its OEM journey in passenger vehicle tyres is young.
 
 By consistently outpacing the market growth, your Company has been the
 fastest growing tyre brand in the country. More and more OEMs have
 added Apollo as an approved supplier - General Motors, Hyundai, Skoda,
 ICML, Tata Motors - have been.recent additions to the list,
 
 To facilitate the development of organization wide culture of data and
 knowledge driven analysis and decision making, your Company embarked
 upon the Six Sigma journey. The first batch of Black Belts has
 successfully completed their projects and their achievements. This
 indicates that the efforts are on the right track in companys quality
 journey.
 
 EXPORTS
 
 The passenger car tyres exports lead the exports growth story with
 sales, in numbers, registering over 30% growth during the year under
 review. In doing so, Apollo also retains the distinction of being the
 largest exporter of passenger car tyres from India.
 
 Apollo also pushed ahead with new marketing initiatives, the most
 distinct being the high decibel participation at the Singapore Tyre
 Expo in September, 2007, the largest tyre expo in South East Asia.
 Though this was Companys first participation, it was awarded the Gold
 Award for being the most innovative tyre stand.
 
 Winning Edge, the incentive oriented marketing programme, continued
 to shore up the Apollo brand equity at the grassroot levels, with
 increased participation from the network in creating new and innovative
 visibility at retail level. As part of the fraternization initiatives
 with the local network, a team of key retailers from Kenya visited the
 companys factory in India to know first hand about the Company and its
 product.
 
 A centralized supply chain concept is also gaining ground, to supply to
 customers from different plant locations across India & South Africa
 and planned facilities at other places including Europe, keeping the
 logistics costs to the minimum and thus passing the benefit to the
 customers.
 
 While 2007-08 has been a year of growth in volumes, the new financial
 year 2008-09, would embark Apollo truly on a global platform with
 supplies from transnational locations, with increased brand portfolio,
 and continued efforts on brand building & other marketing initiatives.
 
 EXPANSION PROGRAMME/FUTURE OUTLOOK
 
 During the year under review, your Company has announced setting up of
 a greenfield plant for manufacture of radial tyres in Hungary. The
 project will have an estimated investment of Rs. 12,000 million. (• 200
 million) over next 5 years and the plant would achieve a capacity of 7
 million passenger car radial tyres per annum. One of the key strategies
 of your Company is to establish a foothold in the mature and large
 market of Europe and the proposed plant in Hungary would help in
 achieving that objective. This plant would take us closer to the
 customer and make us a local player along with global majors in the
 European markets.
 
 In line with the objective of profitable growth in all segments, your
 Company embarked upon setting up a manufacturing facility for
 production of bias OTR (Off The Road) tyres at Limda plant. The plant
 would have a capacity of 10 MT/day and is scheduled to go on stream by
 end of 2008-09.
 
 In order to keep.pace with the high growth area of passenger car
 market, your Company commenced project activities to set up a State of
 the art manufacturing base for production of 3.5 Million passenger car
 tyres per year in Oragadam, Chennai. The facility would cater to
 original equipment manufacturers and to replacement market
 requirements.
 
 Your Company earmarked an investment of Rs.3.2 billion for OTR and
 Chennai plants put together.
 
 To cater to growing demand, existing capacity of radial passenger car,
 radial light truck and truck bus radial tyres in Limda is proposed to
 be expanded from approx. 12,200 nos. per day to approx. 17,800 nos. per
 day. The expanded capacity is scheduled to go on stream by end of
 2008-09.
 
 Existing bias capacity in Perambra plant is proposed to be increased by
 approx. 11 %. The expanded capacity is scheduled to go on stream by 3rd
 quarter of 2008-09.
 
 SUBSIDIARY COMPANIES
 
 During the year under review, in order to achieve its vision of Global
 player, your Company incorporated Apollo Tyres AG (Switzerland) w.e.f.
 4th July,
 
 2007 as wholly owned subsidiary of Apollo Tyres Ltd. which has further
 incorporated two subsidiaries viz. Apollo Tyres Kft (Hungary) w.e.f.
 11th February,
 
 2008 and Apollo Tyres GmbH (Germany) w.e.f. 27th February, 2008
 respectively. Apollo (Mauritius) Holdings Pvt. Ltd. (Mauritius), your
 Companys subsidiary has also incorporated its subsidiary Apollo Tyres
 Pte Ltd. (Singapore) w.e.f. 28th February, 2008.
 
 During the year, two subsidiary companies, Apollo Automotive Tyres Ltd.
 and Apollo Radial Tyres Ltd. have been desubsidiarized w.e.f. 21st
 December, 2007.
 
 The members may refer to the statement under Section 212 of the
 Companies Act, 1956,forming part of accounts, for further information
 on companys subsidiaries.
 
 The Central Government vide its letter No.47/194/2008-CL-lll dated 9th
 April, 2008 has accorded its approval under Section 212 (8) of the
 Companies Act, 1956, exempting the company from attaching the accounts
 of the subsidiary companies. However, the consolidated accounts are
 attached to the accounts of your Company.
 
 The copy of the annual report of the subsidiary companies will be made
 available to shareholders on request and will also be kept for
 inspection by any shareholder at the registered office and corporate
 office of your company, and its subsidiary companies.
 
 FIXED DEPOSITS
 
 Your company is not accepting fixed deposits from the
 public/shareholders. In respect of fixed deposit issued earlier,
 cheques had been issued for the deposit amount and interest thereon
 amounting to Rs.1.73 million, which remained unencashed as on March
 31,2008. Out of this amount, Rs.0.42 million has remained unclaimed for
 more than seven years, and had been transferred to Investor Education
 and Protection Fund on 11th May, 2005.
 
 AUDITORS REPORT
 
 The comments on the statement of account referred to in the report of
 the auditors are self explanatory.
 
 COST AUDIT
 
 M/s. N, R Gopalakrishnan & Co., cost accountants, have been appointed
 to conduct cost audit for the year ended March 31,2008. They will
 submit their report to the Board of Directors before forwarding it to
 the Ministry of Corporate Affairs, Government of India.
 
 BOARD OF DIRECTORS
 
 Mr. K. Jose Cyriac, Nominee Director of Govt, of Kerala has resigned
 from the directorship of the Company w.e.f. Ef May, 2008. The Board
 places on record its appreciation for the contribution made by Mr. K.
 Jose Cyriac during his tenure of Directorship.
 
 Mr. A. K, Purwar was appointed as an additional director of the company
 w.e.f. 26th October, 2007. He holds office till the date of the ensuing
 Annual General Meeting. The Company has received requisite notice
 together with deposit, as provided under Section 257 of the Companies
 Act, 1956, from a shareholder proposing the appointment of Mr. A. K.
 Purwar as a director liable to retire by rotation.
 
 The present tenure of Mr. Neeraj Kanwar, Vice Chairman & Jt. Managing
 Director and Mr. Sunam Sarkar as Whole-time Director is up to 27 May,
 2009 and 27th January, 2009 respectively. The Remuneration Committee
 and Board of Directors at their meeting held on 9th May, 2008
 considered and approved the re-appointment of Mr. Neeraj Kanwar, Vice
 Chairman & Jt. Managing Director and Mr. Sunam Sarkar as Whole-time
 Director for a further period of five years w.e.f. 28th May, 2009 and
 28th January, 2009 respectively subject to approval of the members at
 the ensuing annual general meeting.
 
 Mr. I Balaknshnan, Mr. Robert Steinmetz and Mr. Raaja Kanwar retire by
 rotation at the forth cominig annual general meeting and being eligible
 offer themselves for re-appointment.
 
 None of the Directors are disqualified under Section 274 (1)(g) of the
 Companies Act, 1956.  
 
 CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS
 AND OUTGO
 
 The information as required u/s 217(1 )(e) of the Companies Act, 1956,
 read with the Companies (Disclosure of Particulars in the Report of
 Board of Directors) Rules, 1988, regarding conservation of energy,
 technology absorption, foreign exchange earnings and outgo are given in
 Annexure-A to this report.
 
 CORPORATE GOVERNANCE REPORT
 
 A detailed report on corporate governance duly certified by the
 auditors is given in Annexure-B to this report.  
 
 AUDITORS
 
 M/S Deloitte Haskins & Sells, Chartered Accountants, the auditors of
 your Company, will retire at the ensuing annual general meeting and are
 eligible for reappointment.
 
 PARTICULARS OF EMPLOYEES
 
 Information as per Section 217 (2A) of the Companies Act, 1956, read
 with the Companies (Particulars of Employees) Rules, 1975, as amended,
 is given in Annexure-C of this report, ,
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 As required by Section 217 (2AA) of the Companies Act, 1956, your
 directors state that:
 
 I) In preparation of the annual accounts for the year ended March
 31,2008, the applicable accounting standards have been followed and
 there has been no material departure;
 
 ii) The selected accounting policies were applied consistently and the
 Directors made judgements and estimates that are reasonable and prudent
 so as to give a true and fair view of the state of affairs of the
 company as of March 31,2008, and of the profit of the company for the
 year ended as on date;
 
 iii) Proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of the company and for
 preventing and detecting fraud and other irregularities; and
 
 iv) The annual accounts have been prepared on a going concern basis.
 
 ACKNOWLEDGEMENT
 
 Your Directors express their sincere thanks to the Central Government
 and the State Governments of Kerala, Gujarat, Maharashtra and Haryana
 for their continued co-operation. Your Directors wish to place on
 record their sincere appreciations to all the bankers, financial
 institutions, customers, suppliers and stakeholders for their continued
 support and patronage during the year under review. The Board further
 wishes to record their deep sense of appreciation for the committed
 services of the people across the organisation.
 
                            For and on behalf of the Board of Directors
 
 Place: Gurgaon.                   (Onkar S. Kanwar)
 Date : 9th May, 2008       Chairman & Managing Director