Introduction
 
 The directors present their fourth annual report and the audited
 statements of accounts for the year ended 31 March 2011.
 
 The highlights are as under:
 
 Units in Numbers                     2011          2010
 
 Two-wheelers                    3,387,070     2,511,643
    
 Three wheelers                    436,884       340,937
 
 Total                           3,823,954     2,852,580
 
 Of which Exports                1,203,718       891,002
 
 
 Financials
 
                             Rs. In Crore
 
                                       2011         2010
 
 Net sales & other income         16,974.74    12,043.48
 
 Gross profit before 
 exceptional items,
 interest & depreciation           3,750.73     2,715.06
 
 Interest                              1.69         5.98
 
 Depreciation                        122.84       136.45
 
 Gross Profit before 
 Exceptional Items                 3,626.20     2,572.63
 
 Exceptional items:
 
 Surplus on pre-payment of 
 sales tax
 deferral liability/loan             826.82            —
 
 Provision for diminution in 
 value of investment
 in PT. Bajaj Auto Indonesia       (102.27)            —
 
 VRS compensation                         —     (183.30)
 
 Valuation losses of 
 derivative hedging instruments           —        21.80
 
 Profit before tax                  4,350.75    2,411.13
 
 Provision for tax                  1,011.02      707.50
 
 Profit for the year                3,339.73    1,703.63
 
 Add: Balance brought forward 
 from previous year                   854.99           —
 
 Profit available for 
 Appropriation                      4,194.72    1,700.11
  
 Transfer to General Reserve          334.00      170.27
 
 Proposed dividend (inclusive 
 of dividend tax)                   1,345.24      674.85
 
 Balance carried to Balance Sheet   2,515.48      854.99
 
 Earnings per share (Rs.)              115.4        58.8
 
 Bonus Shares
 
 Pursuant to the approval of the members of the company through postal
 ballot on 31 August 2010, the company issued and allotted Bonus
 share(s) of Rs. 10 each in the ratio of one bonus share for every one
 existing equity share held as on 10 September 2010 i.e. the record date
 fixed for the purpose. Consequently, the paid-up capital of the company
 went up from Rs. 144.68 crore to Rs. 289.37 crore during the year under
 review.
 
 Dividend
 
 The directors recommend for consideration of the shareholders at the
 ensuing annual general meeting, payment of a dividend of Rs. 40 per
 share, (400 per cent) for the year ended 31 March 2011 on the enhanced
 capital after the bonus issue made in the ratio of 1:1 during the year
 under review . The amount of dividend and the tax thereon aggregate to
 Rs. 1,345.24 crore.
 
 Dividend paid for the year ended 31 March 2010 was Rs. 40 per share
 (400 per cent). The amount of dividend and the tax thereon aggregated
 to Rs. 674.85 crore
 
 Operations
 
 The operations of the company are elaborated in the annexed Management
 Discussion and Analysis Report.
 
 Capacity expansion & New Projects
 
 The company plans to maintain the capacity of two and three-wheelers at
 the current level of 5,040,000 numbers per annum during the year ending
 31 March 2012.
 
 The 4 wheel vehicle development work is under progress and commercial
 launch of the first product from this platform is scheduled for 2012.
 
 Research & development and technology absorption
 
 During the year under review, your company continued to invest
 substantially in R & D facilities, resulting in the enhancement of its
 infrastructure for design, prototyping & testing. R&D continued to work
 on improving its operations in a number of areas during the year as
 stated below:
 
 - Manpower
 
 - Facilities
 
 - Technology
 
 - Total Productivity Management (TPM)
 
 Important products, which demonstrated the technical prowess of the
 company launched during the year under review, were as under:
 
 Avenger 220 DTS-i KTM Duke 125 Discover 150 Discover 125
 
 Your company continues to focus on expanding its design and testing
 teams, which has enabled it to make the new generation products.
 
 The developments in this area are set out in greater detail in the
 annexed Management Discussion and Analysis Report.
 
 The expenditure on research and development during 2010-11 and in the
 previous year was:
 
                                                  Rs. In Crore
 
                                         2011             2010
 
 i.  Capital
     (Including technical 
     know-how)                          11.65            31.23
 
 ii. Recurring                         112.95           103.53
 
     Total                             124.60           134.76
 
 iii.Total research and development 
     expenditure as a
     percentage of sales, net of 
     excise duty                       0.78 %           1.17 %
 
 Conservation of energy
 
 As a part of continuing efforts to conserve various resources,
 following steps were taken to conserve energy in plants situated at
 various locations:
 
 - Electrical energy saving was achieved by replacing
 
 conventional lamps with Light Emitting Diode (LED) street lights and
 LED mid-bay lamps; installation of portable as well as auto load/unload
 compressors in various shops, installatio of transparent roof sheets
 for optimum utilisation of natural lights; Installation of fan-less
 cooling towers for compressor house ;
 
 - Water saving was achieved by usage of recycled water, drip
 irrigation/sprinkler system for gardening, revising water change
 frequency of paint booth water circulation system; regulating pump
 on-off timing through timers and replacement of old underground water
 pipes by above- ground pipes to avoid wastage of water due to leakage;
 installation of time controlled auto system for water pumping in shops;
 Use of treated water for construction at Pantnagar plant;
 
 - Liquified petroleum gas (LPG)/propane saving was achieved by
 reduction in number of initial heat up occurrences from two to one for
 continuous gas carburising (CGC) furnace; installation of waste heat
 recovery system for pre-heating of combustion air in paint shop;
 reduction in hot water temperature for pre-treatment process; use of
 reflective coating inside furnaces for better heat retention;
 
 - Major initiatives in utilization of renewable energy were taken by
 use of solar water heating system for shops, canteens etc; installation
 of natural air exhaust (turbo Ventilators) in shops.
 
 Impact of measures taken
 
 As a result of the initiatives taken for conservation of energy and
 natural resources, the company has effected an overall reduction in
 consumption as under :-
 
 Reduction achieved in            2011 (%)      2010 (%)
 
 Electrical energy                  14.31          17.45
 
 Water                              13.33          26.96
 
 LPG                                14.40          12.37
 
 Investment/savings
 
 Investment for energy conservation activities Rs. 0.84 crore 
 
 Saving achieved through above activities      Rs. 1.12 crore
 
 International Business
 
 Bajaj Auto maintained its stellar growth in exports and continued to be
 Indias largest exporter of two and three-wheelers.  During 2011, the
 company exported 1,203,718 vehicles, achieving a growth of 35 % over
 the previous year. In 2011, total exports amounted to Rs. 4,552 crore
 (US $ 974.6 Million).
 
 More details of International Business are set out in the annexed
 Management Discussion & Analysis report.
 
 Foreign exchange earning & outgo
 
 The company continued to be a net foreign exchange earner during the
 year.
 
 Total foreign exchange earned by the company during the year under
 review was Rs. 4,564.78 crore, compared to Rs. 3,268.95 crore during
 the previous year.
 
 Total foreign exchange outflow during the year under review was Rs.
 844.50 crore as against Rs. 461.61 crore during the previous year.
 
 The above outflow includes an investment of Rs. 210.08 crore (Previous
 Year; Rs. 1.60 crore) made in its 100% subsidiary, Bajaj Auto
 International Holdings BV. Netherlands for increasing its stake in KTM
 Power Sports AG from 31.92 % to 39.26 %.
 
 Industrial relations
 
 Industrial Relations with staff and workmen across the plants at
 Akurdi, Waluj, Chakan and Pantnagar continued to be cordial.
 
 The wage settlements dated 21 May 2010 and 20 August 2010 were signed
 in conciliation between the management and Vishwa Kalyan Kamgar
 Sanghtana for BAL Chakan and BAL Akurdi respectively. Also the wage
 settlement dated 1 March 2011 was signed in conciliation between the
 management and Bajaj Auto Ltd. Employees Union for BAL Waluj.
 
 Three workmen of BAL Waluj, Aurangabad received the Prime Minister
 Shram Award at the hands of Prime Minister of India, on 15 September
 2010.
 
 Subsidiaries
 
 PT. Bajaj Auto Indonesia (PT BAI) is a majority shareholding (98.94%)
 subsidiary of Bajaj Auto Limited. The subsidiary assembles and markets
 Pulsars in Indonesia.
 
 The past year had recorded a significant growth in volumes compared to
 last year. The growth was led by the Light Sports Pulsar 135.
 Indonesia, being a light weight high acceleration step-through market
 (bebek), Pulsar 135 LS is positioned competitively to upgrade from
 bebek for the thrill seeking youngsters. The product is well received
 by the customers and continued to do well. So far, there are more than
 50,000 satisfied customers, owning Bajaj motorcycles in Indonesia.
 
 Product portfolio will be expanded under Pulsar brand with Pulsar 220
 in the first quarter of 2011-12.
 
 During the year under review, sales and service showrooms were expanded
 to cover 3 additional provinces. The company plans to increase the
 number of sales & service show rooms from 84 Nos.  to 130 Nos. in the
 current year.
 
 In an effort to bring down the customs duty liability, the subsidiary
 has localised some of the assembly operations. It would continue to
 pursue the localisation of sub- assemblies further in 2011-12. Custom
 duty rates for SKD and CKD operations have been reduced by 5% from
 December 2010 by Govt. of Indonesia
 
 With the addition of Pulsar 135 & Pulsar 220 to the model lineup and
 with increased local sub-assembly operations, the subsidiary would be
 in a position to reduce its losses in 2011-12.
 
 Notwithstanding what is stated above, considering the continuing losses
 and longer gestation period, the company has assessed the carrying
 value of investments made in PT. Bajaj Auto Indonesia and determined an
 amount of Rs. 102.27 crore at present as a diminution in the value of
 investment and has accordingly made a provision of the said amount.
 
 Bajaj Auto International Holdings BV, Netherlands (BAIHBV)
 
 During the year under review, BAIHBV invested further € 32 million to
 increase its stake in KTM Power Sports AG (KTM PS) to 39.26%.
 
 The first product KTM Duke 125cc went into production on 7 March 2011.
 This product stands testimony to Bajaj Autos design, development and
 production engineering skills.
 
 KTM Duke 125cc has been extensively tested by European Auto Magazine
 and has had rave reviews. The product has been launched in Europe in
 April 2011.
 
 KTM 200 from this platform is under development.
 
 Signing for Anti-corruption Initiative of World Economic Forum (WEF)
 
 In support of the initiative taken by WEF with a view to strengthening
 the efforts to counter bribery and corruption, your company has now
 become a signatory to the “Commitment to anti-corruption” and has also
 decided to support the “Partnering Against Corruption – Principles for
 Countering Bribery” derived from Transparency Internationals Business
 Principles. This calls for a commitment to two fundamental actions viz.
 a zero-tolerance policy towards bribery and development of practical
 and effective implementation program.
 
 Approval of Shareholders for Payment of commission
 
 Directors seek your approval by way of a special resolution for payment
 of commission to non-executive directors of a sum not exceeding 1% of
 the net profits of the Company for a further five years term from 1
 April 2011 to 31 March 2016, subject to applicable provisions of the
 Companies Act, 1956. Earlier such approval has expired on 31 March
 2011.
 
 Corporate social responsibility
 
 During the year 2010-11, Bajaj Auto continued its Affirmative Action
 Plan & Corporate Social Responsibility initiatives in various fields.
 Activities in this area are set out in greater detail in the annexed
 CSR Report.
 
 Directors
 
 Nanoo Pamnani, Manish Kejriwal, P Murari and Niraj Bajaj retire from
 the board by rotation this year and being eligible, offer themselves
 for re-appointment.
 
 Directors responsibility statement
 
 As required by sub-section (2AA) of section 217 of the Companies Act,
 1956, directors state:
 
 - that in the preparation of annual accounts, the applicable accounting
 standards have been followed along with proper explanation relating to
 material departures.
 
 - that the directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent, so as to give a true and fair view of the state of affairs
 of the company at the end of the financial year and of the profit of
 the company for that period.
 
 - that the directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956 for safeguarding the assets of
 the company and for preventing and detecting fraud and other
 irregularities.
 
 - that the annual accounts have been prepared on a going concern basis.
 
 Consolidated financial statements
 
 The directors also present the audited consolidated financial
 statements incorporating the duly audited financial statements of the
 subsidiaries, viz. PT. Bajaj Auto Indonesia and Bajaj Auto
 International Holdings BV. Netherlands and as prepared in compliance
 with the accounting standards and listing agreement as prescribed by
 SEBI.
 
 Information in aggregate for each subsidiary company is disclosed
 separately in the consolidated balance sheet.
 
 Statutory disclosures
 
 Ministry of Corporate Affairs (MCA) vide Circular No. 51/12/2007-
 CL-III dated 8 February 2011 has given general exemption with regard to
 attaching of the balance sheet, profit and loss account and other
 documents of its subsidiary companies subject to fulfillment of
 conditions mentioned therein. Prior to the issue of this Circular, the
 company had applied for exemption under Section 212(8) of the Companies
 Act, 1956. In response, the company received a communication from MCA
 mentioning about the applicability of this general exemption and that
 further no exemption would be necessary. The company has fulfilled all
 the
 
 necessary conditions in this regard. The summary of the key financials
 of the companys subsidiaries is included in this annual report.
 
 The annual accounts of the subsidiary companies and the related
 detailed information will be made available to the members of the
 company and its subsidiary companies, seeking such information at any
 point of time. The annual accounts of the subsidiary companies will be
 kept for inspection by any member of the company at its registered
 office and also at the registered office of the concerned subsidiary
 company.
 
 As required under the provisions of sub-section (2A) of section 217 of
 the Companies Act, 1956 read with the Companies (Particulars of
 Employees) Rules 1975 as amended, particulars of the employees are set
 out in an Annexure to the directors report.  As per provisions of
 section 219 (1) (b) (iv) of the said Act, these particulars will be
 made available to any shareholder on request.
 
 Particulars regarding technology absorption, conservation of energy and
 foreign exchange earning and outgo required under section 217(1)(e) of
 the Companies Act, 1956 and Companies (Disclosure of Particulars in the
 report of board of directors) Rules, 1988 have been given in preceding
 paragraphs.
 
 Directors Responsibility Statement as required by section 217(2AA) of
 the Companies Act, 1956 appears in a preceding paragraph.
 
 Certificate from auditors of the company regarding compliance of
 conditions of corporate governance is annexed to this report as
 Annexure 1.
 
 A cash flow statement for the year 2010-11 is attached to the balance
 sheet.
 
 Corporate governance
 
 Pursuant to clause 49 of the listing agreement with stock exchanges, a
 separate section titled Corporate Governance has been included in
 this annual report, along with the reports on Management Discussion and
 Analysis and General Shareholder Information.
 
 All board members and senior management personnel have affirmed
 compliance with the code of conduct for the year 2010-11. A declaration
 to this effect signed by the Chief Executive Officer (CEO) of the
 company is contained in this annual report.
 
 The CEO and Chief Financial Officer (CFO) have certified to the board
 with regard to the financial statements and other matters as specified
 in clause 49 of the listing agreement and the said certificate is
 contained in this annual report.
 
 Secretarial standards of ICSI
 
 Secretarial standards issued by the Institute of Company Secretaries of
 India (ICSI) from time to time are currently recommendatory in nature.
 Your company is, however, complying with the same.
 
 Group
 
 Pursuant to an intimation from the Promoters, the names of the
 Promoters and entities comprising “Group” as defined under the
 Monopolies and Restrictive Trade Practices (“MRTP”) Act, 1969 are
 disclosed in the Annual Report for the purpose of Regulation 3(1)(e) of
 the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
 1997.
 
 Auditors report
 
 The observations made in the Auditors Report, read together with the
 relevant notes thereon are self-explanatory and hence, do not call for
 any comments under section 217 of the Companies Act, 1956.
 
 Auditors
 
 The members are requested to appoint Messers Dalal & Shah, Chartered
 Accountants, as auditors for the period from the conclusion of the
 ensuing annual general meeting till the conclusion of the next annual
 general meeting and to fix their remuneration.
 
 Mr A P Raman, cost accountant, Pune has been appointed as cost auditor
 to conduct the said audit for the year 2011-12, and the government
 approval in this regard has been received.
 
 On behalf of the board of directors
 
 Rahul Bajaj 
 Chairman
 
                                    18 May 2011