Ashok Leyland

The Directors are pleased to present the Annual Report of the Company,
 together with the audited Accounts, for the year ended March 31, 2008.
 
 Financial Results                                        (Rs. Millions)
                                               2007-2008      2006-2007
 
 Profit before tax                              6,381.50       6,045.06
 
 Less: Provision for taxation                   1,688.40       1,632.20
 
                                                4,693.10       4,412.86
 
 Add: Transfer from / (to):
 
 Debenture redemption reserve                      50.00         135.00
 
 Balance profit from last year                   3,616.86      2,303.70
 
 General Reserve                                (1,000.00)    (1,000.00)
 
                                                 7,359.96      5,851.56
 
 Add: Excess provision written back
 
 - Dividend (Including Corporate Dividend Tax)       -            29.62
 
 Profit available for appropriation              7,359.96      5,881.18
 
 Appropriation:
 
 Dividend 2006-07                                    -         1,985.81
 
 Proposed Dividend 2007-08                       1,997.71          -
 
 Corporate Dividend Tax                            339.51        278.51
 
 Balance profit carried to Balance sheet         5,022.74      3,616.86
 
 Earnings per Share (Face Value Re.1/-) - Basic      3.53          3.38
 
 - Diluted                                           3.53          3.36
 
 Dividend
 
 The Directors recommend a dividend of 150% (Rs.1.50 per equity share of
 Re.1/-) for the year ended March 31, 2008.  This Dividend will also be
 payable on the shares arising from conversion of Foreign Currency
 Convertible Notes (FCCNs) issued in April 2004, to the extent converted
 upto the Book Closure Date(s).
 
 Business operations
 
 The domestic market for the Company’s products experienced a slowdown
 in the year under review. Your Company was however able to secure a
 higher share in the passenger vehicles market. Total sales of vehicles,
 engines and spares registered increases over the previous year.
 
 The highlights are discussed in detail in the Management Discussion and
 Analysis Report attached as Annexure-D to this Report.
 
 External Commercial Borrowings (ECBs)
 
 During the fnancial year, despite a difficult situation in the fnancial
 market, the Company contracted for ECBs for a sum of US$ 270 mn. to
 part fund its capex requirements and overseas investments. Out of the
 above, the Company has drawn US$ 90 mn. during the year 2007-08 and the
 balance would be drawn during 2008-09. The Company has fully complied
 with the guidelines prescribed by RBI in this regard.
 
 Research and development, technology absorption, energy conservation
 etc.
 
 The Company continues to lay emphasis on investing for the future
 through Research and Development activities. The facilities in the
 Company’s Technical Centre at Chennai have been further upgraded, to
 ensure contemporary development capabilities in order to offer
 competitive products to the market place.
 
 The particulars prescribed by the Companies (Disclosure of Particulars
 in the Report of Board of Directors) Rules,1988 relating to
 Conservation of Energy, Technology Absorption, Foreign Exchange are
 furnished in Annexure-A to this Report.
 
 Other Ventures
 
 Joint Venture with Nissan Motor Co. Ltd., Japan
 
 The Company will be expanding its business and entering the area of
 Light Commercial Vehicles with the promotion of Joint Venture with
 Nissan Motor Co. Ltd., Japan. Discussions on the Joint Venture
 Agreements are in an advanced stage. This will be a major project and
 will cater not only to the domestic market, but also to the export
 markets.
 
 Ashley Alteams India Private Ltd.
 
 A Joint Venture Agreement was signed on July 3, 2007 with Alteams O.Y.
 Finland, for the manufacture and sale of High Pressure Die Casting
 components for the telecom and automotive industries, including for the
 Company’s own requirements. Ashley Alteams India Private Ltd., the
 Joint Venture Company, is making steady progress in the implementation
 of the project. Commencement of commercial production is expected by
 end 2008.
 
 Automotive Infotronics Private Ltd.
 
 A Joint Venture Agreement was entered into with Siemens VDO on July 16,
 2007 (now known as VDO Automotive A.G.  a Company of Continental
 Corporation, Germany) for design, development and adaptation of
 electrical and electronic automotive components and customer-specific
 software applications. Automotive Infotronics Private Ltd., the Joint
 Venture Company is slated to commence commercial activities during
 2008-09.
 
 Ashok Leyland (UAE) LLC, Ras Al Khaimah, UAE
 
 Your Company has made an investment in Ashok Leyland (UAE) LLC for
 setting up a manufacturing facility at Ras Al Khaimah, UAE. The plant
 is expected to be commissioned in a phased manner by June 2008. The
 plant will have capacity to assemble and produce upto 2000 buses per
 year and will cater to the growing market for the Company’s products in
 UAE and other neighbouring countries.
 
 Defiance Testing and Engineering Services, Inc.
 
 The investment in Defiance Testing and Engineering Service, Inc.
 Michigan, USA was made on July 17, 2007. The company is implementing
 plans to turnaround, despite recessionary conditions in the automobile
 industry in the USA.
 
 Avia Ashok Leyland Motors s.r.o. (AALM)
 
 The commercial vehicles business of Avia acquired by the Company in
 2006, through a special purpose vehicle, has made steady progress
 during the year 2007. During this period, AALM focused on consolidating
 its business, setting up processes, integrating its research and
 product development activities with the Company, widening its market
 reach, etc. AALM successfully developed and positioned vehicles meeting
 Euro IV emission, safety and other standards prevailing in Europe and
 achieved sales in excess of 700 units during the previous calendar
 year.
 
 Albonair GmbH
 
 Your Company has made an investment in Albonair GmbH for development of
 vehicle emission treatment / control systems and products. Albonair
 GmbH will focus on the development, production and sales of exhaust
 after-treatment systems for environment-friendly diesel engines. Over
 the longer term, these cost effective systems are also expected to fnd
 application in Europe and the USA. The venture has already commenced
 operations and has been strengthened with the recruitment of
 appropriate technical personnel.
 
 Foreign Currency Convertible Notes (FCCNs)
 
 The Foreign Currency Convertible Notes (FCCNs) for USD 100 mn. issued
 in April 2004 are convertible into shares of the Company (Fixed
 Exchange Rate USD 1 = Rs.44.10). As of March 31, 2008, 99,000 Notes
 (99%) have already been converted into underlying shares, thereby
 increasing the paid-up capital as of March 31, 2008.
 
 All the procedures consequent to the conversion are being completed on
 time and these shares, which rank pari passu with the earlier shares in
 all respects, are tradeable on the Indian Stock Exchanges. The enhanced
 share capital as on March 31, 2008 and the corresponding revised
 shareholding pattern are shown in the Corporate Governance Report
 (Annexure-B) to this Report.
 
 Subdivision of shares
 
 The subdivision of your Company’s shares (from a face value of Rs.10/-
 each to a face value of Re.1/- each) was effected in July 2004. The
 number of shareholders continues to increase and as on March 31, 2008,
 the number of shareholders was 303,954 as against 200,091 shareholders
 as of March 31, 2007.
 
 Part II – Corporate matters
 
 Change in the Registered Office of the Company
 
 Your Directors are happy to inform that your Company has constructed a
 modern Corporate Office at a prestigious location at No.1 Sardar Patel
 Road, Guindy, Chennai 600 032. The registered office will be shifted to
 this address shortly.
 
 Corporate Governance
 
 Your Company has consistently adopted high standards of Corporate
 Governance. The Code of Conduct for the Board and the Senior Management
 was adopted by the Company in March 2005. Your Company is fully
 compliant with the latest guidelines, and has even exceeded them in
 some aspects. All the Directors (and also the members of the Senior
 Management – of the rank of General Managers and above) have confirmed
 in writing their compliance and adherence with the Code of Conduct. The
 details are furnished in Annexure-B to this Report.
 
 The certification by the Managing Director regarding the Code of
 Conduct, as required by SEBI guidelines, is also furnished separately.
 
 The Statutory Auditors of the Company have examined the Company’s
 compliance, and have certified the same, as required under SEBI
 guidelines. Such certificate is reproduced as Annexure-C to this
 Report.
 
 The Directors’ Responsibility Statement as required under Section
 217(2AA) of the Companies Act, 1956 is furnished in Annexure-E to this
 Report.
 
 The particulars of employees as prescribed by the Companies
 (particulars of employees) Rules, 1975 are furnished in Annexure-F to
 this Report.
 
 The CEO / CFO certification as required under the SEBI guidelines is
 attached - as Annexure-G to this Report.
 
 Directors
 
 The present term of Mr R Seshasayee, Managing Director is due to expire
 on May 31, 2009. Under his stewardship, the Company has scaled great
 heights and has expanded its operations significantly. The Company has
 embarked on several new initiatives, not only in India, but globally.
 Bearing in mind the above, the Remuneration Committee and the Board
 consider it essential to continue to secure his leadership of the
 Company and have decided to foreclose / overlap the last year of his
 current term and has re-appointed him as Managing Director for a period
 of three years from 1/4/2008 to 31/3/2011 with a suitable revision in
 the terms of remuneration, subject to the approval of the shareholders
 at the ensuing General Meeting. Necessary resolutions relating to his
 re-appointment are being placed before the shareholders for approval.
 
 Mr Vinod K Dasari, the Chief Operating Officer of the Company, who was
 co-opted to the Board as an Additional Director vacates office at the
 ensuing Annual General Meeting.
 
 Notice under Section 257 of the Companies Act, 1956 has been received
 from a member proposing his appointment as a Director. Necessary
 resolution relating to his appointment as Wholetime Director is also
 being placed before the shareholders for approval.
 
 Mr D J Balaji Rao, Mr P N Ghatalia and Mr D G Hinduja, Directors,
 retire by rotation at the forthcoming Annual General Meeting and are
 eligible for re-appointment.
 
 Necessary resolutions are being placed before the shareholders for
 approval.
 
 Mr D J Balaji Rao and Mr P N Ghatalia are Independent Directors and
 Chairman of the Remuneration Committee and Audit Committee of the Board
 respectively. Mr D G Hinduja is a Promoter Director.
 
 Cost Auditors
 
 The Government has stipulated Cost Audit of the Company’s records in
 respect of motor vehicles as well as engines.  M/s Geeyes & Co., Cost
 Auditors have carried out these audits. Their findings have been
 satisfactory.
 
 Secretarial Audit
 
 As directed by Securities and Exchange Board of India (SEBI),
 Secretarial Audit is being carried out at the specified periodicity by
 a Practising Company Secretary. The findings of the Secretarial Audit
 have been satisfactory.
 
 Auditors
 
 M/s M S Krishnaswami & Rajan, Chartered Accountants and M/s Deloitte
 Haskins & Sells, Chartered Accountants, retire at the close of this
 Annual General Meeting and are eligible for re-appointment. The Company
 has received confirmation from both the firms that their appointment
 will be within the limits prescribed under Section 224(1B) of the
 Companies Act, 1956. The Audit Committee of the Board has recommended
 their re-appointment. The necessary resolution is being placed before
 the shareholders for approval.
 
 Acknowledgement
 
 The Directors wish to express their appreciation of the continued
 co-operation of the Central and State Governments, bankers, fnancial
 institutions, customers, dealers and suppliers and also the valuable
 assistance and advice received from major shareholders Hinduja
 Automotive Limited, the Hinduja Group, and all the shareholders. The
 Directors also wish to thank all the employees for their contribution,
 support and continued co-operation through the year.
 
 
                               On behalf of the Board of Directors
 
 Chennai                       R J SHAHANEY
 May 8, 2008                   Chairman