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Bajaj Auto Directors Report, Bajaj Auto Reports by Directors

Bajaj Auto

BSE: 532977  |  NSE: BAJAJ-AUTO  |  ISIN: INE917I01010  |  Auto - 2 & 3 Wheelers

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Directors Report Year End : Mar '08
Introduction
 
 The company was incorporated on 30 April 2007 as a wholly owned
 subsidiary of erstwhile Bajaj Auto Limited and received the Certificate
 of Commencement of Business on 7 May 2007.  The directors present their
 first annual report and the audited statements of accounts for the year
 ended 31 March 2008.
 
 Demerger
 
 During the year under review, the Honble High Court of Judicature at
 Bombay approved the scheme of arrangement of demerger of the erstwhile
 Bajaj Auto Ltd. (BAL) vide its order dated 18 December 2007.
 Accordingly, the manufacturing undertaking of the erstwhile BAL has
 been vested with the company and the strategic business undertaking
 consisting of wind farm business and financial services business of the
 erstwhile BAL has been vested with Bajaj Finserv Limited. The appointed
 date of this demerger was closing hours of business on 31 March 2007.
 
 Pursuant to the demerger, the company has been vested with the
 manufacturing undertaking
 
 of the erstwhile Bajaj Auto Ltd. and will focus on auto business.
 Consequently, the name of the company has changed from Bajaj Holdings &
 Investment Limited to Bajaj Auto Limited and a fresh certificate of
 incorporation in the new name of the company has been issued by the
 Registrar of Companies, Maharashtra, Pune on 5 March 2008.
 
 Operations & Financials
 
 The operations and financial results of the company are elaborated in
 the annexed Management Discussion and Analysis Report.  The highlights
 are as under:-
 
 Sales                          2007-08       2006-07
                                 (Nos)         (Nos)
 
 Motorcycles                   2,139,779      2,379,499
 Other two-wheelers               21,316         20,497
 Total Two wheelers            2,161,095      2,399,996
 Three wheelers                  290,312        321,828
 Total Two & Three wheelers    2,451,407      2,721,824
 Of the above, exports were
 Two wheelers                    482,026        301,766
 Three wheelers                  136,315        140,645
 Total Exports                   618,341        442,411
 
 * Figures pertain to the erstwhile Bajaj Auto Ltd.
 
 Since the company was incorporated only on 30 April 2007, and this year
 being the first financial year, there are no previous years figures of
 the company.
 
                                           2007-08
                                       Rs. Million
 
 Net sales & other income                   91,688
 Gross profit before VRS
 compensation, interest & depreciation      14,162
 VRS compensation                            1,023
 Interest                                       52
 Depreciation                                1,740
 Profit before taxation                     11,347
 Provision for taxation                      3,788
 Profit after tax                            7,559
 Disposable surplus                          7,558
 Proposed dividend
 (inclusive of dividend tax)                 3,385
 Earnings per share (Rs.)                     54.2
 
 
 Dividend
 
 The directors recommend for consideration of the shareholders at the
 ensuing annual general meeting, payment of a dividend of Rs.20/- per
 share (200 per cent) for the year ended 31 March 2008. The amount of
 dividend and the tax thereon aggregates to Rs.3,385 million.
 
 Dividend paid by the erstwhile BAL for the year ended 31 March 2007 was
 Rs.40 per share (400 per cent). The amount of dividend and the tax
 thereon aggregated to Rs.4,735 million. On account of the demerger,
 which has taken place during the year under review, the dividend
 figures for the two years are not comparable.
 
 New Plants / Projects
 
 Pantnagar plant, built on the unique concept of mother plant and its
 vendors in the same premises, was inaugurated on 9 April 2007.
 
 Starting with Platina and completing 100,000 units of its production in
 less than six months, the plant also commenced production of XCD- 125
 from December 2007. Capacity of the plant and supply chain has been
 enhanced upto 720,000 per annum.
 
 In its first year of operations, the plant produced over 275,000
 vehicles of both Platina and XCD-125 and has planned a production of
 600,000 vehicles in 2008-09. The achievement of such volumes in the
 very first year reflects the meticulous care that has been taken during
 the project planning and execution stage to preclude the problems that
 are generally faced during plant start up. Capability building of the
 manufacturing team, ability to carry out continuous improvements,
 ability to bring out new models, TPM way of thinking and the culture of
 pursuit of excellence at all levels of the plant are the main
 strengths of this plant.
 
 Chakan 4-wheeler plant, development of Lite cargo vehicle code named
 PV1500 is progressing satisfactorily. This model is scheduled for
 launch in 2009. Company is also in a joint feasibility study with
 Renault and Nissan for its Lite passenger car project. On conclusion
 of the feasibility study, further details will be crystalised.
 
 Company has taken possession of a green-field site admeasuring 246.81
 acres in Chakan MIDC Industrial Area for its future projects.
 
 Research & development and technology absorption
 
 The developments in this area are set out in greater detail in the
 annexed Management Discussion and Analysis Report.
 
 Company continued to invest substantially in R&D facilities for testing
 and prototyping, as well as for advanced design and analysis.
 
 R&D was primarily involved with the work on the next wave of products
 to be launched in the year 2008-09. Two important products which
 demonstrated the technical prowess of the company were launched during
 this year.  These were the XCD 125 cc DTS-Si and the Three-wheeler
 Direct Injected auto rickshaw.
 
 Company continues to build its research and development infrastructure
 in all the areas of design, prototyping and validation. These are long
 term investments and are aimed to give flexibility, speed and insight
 into every field of interest in creating the product.
 
 The expenditure on research and development during 2007-08 and in the
 previous year was:
 
                                           2007-08         2006-07
                                       Rs. Million     Rs. Million
 i.  Capital (including 
     technical know-how)                    481.4           473.4
 
 ii. Recurring                              706,0           676.9
                                          1,187.4         1,150.3
 
 iii. Total research and development
      expenditure as a percentage of
      sales, net of excise duty              1,37            1.24
 
 * Figures pertain to the erstwhile Bajaj Auto Ltd.
 
 Conservation of energy
 
 As a part of continuing efforts to conserve various resources,
 following steps were taken to conserve energy :
 
 Electrical energy saving was achieved by installation of energy
 efficient motors, modifying the production processes by eliminating
 high power consuming machines / equipments, optimisation of central air
 conditioning plant, providing for automatic switch off for pump house
 motors, illumination systems, transparent roof sheets and use of CFL
 lamps in installation of natural draft air exhaust ventilators.
 
 Water saving was achieved by installation of PLC controlled auto
 system, re-routing and reducing the water line size, drip irrigation
 system for gardening, usage of treated water for bin washing and paint
 shop process, rain water harvesting and increase in frequency of
 de-sludge pit water replacement.
 
 LPG saving was achieved by optimisation of loading pattern in CGC and
 seal quench furnaces, revamping of canteen bio-gas plant, temperature
 control of burners in paint and heat treatment shops and stopping use
 of vaporisers in heat treatment shop.
 
 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 of electrical energy and water by 23% and 16% respectively,
 as compared to 20% and 26% respectively in the previous year.
 
 Investment / savings
 
 Investment for energy
 
 conservation activities Rs.10.45 million
 
 Saving achieved through
 
 above activities Rs.20.0 million
 
 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. 20,778 million, compared to Rs.17,298 million during the
 previous year.
 
 Total foreign exchange outflow during the year under review was Rs
 3,569 million, as against Rs. 5,647 million during the previous year.
 
 Industrial relations
 
 Bharatiya Kamgar Sena, the recognised union at Waluj, Aurangabad, was
 de-recognised by Industrial Court on 24 April 2007. Management
 thereafter signed the wage settlement on 23 July 2007 with Bajaj Auto
 Limited Employees Union, the union having the majority following, in
 conciliation and accordingly, the benefits of the settlement have been
 given to all daily rated employees at Waluj.
 
 Subsequently, with a view to downsizing the workforce at Waluj,
 Voluntary Retirement Scheme was floated for the permanent daily rated
 workmen. 712 workmen availed of the benefit under the scheme.
 
 The management discontinued its vehicle assembly facilities at its
 Akurdi plant with effect from 3 September 2007 due to the higher cost
 of manufacturing; as a result of which over 2000 workmen became
 surplus. Negotiations are on with the newly recognised union viz Vishwa
 Kalyan Kamgar Sanghatana to find a fair solution.
 
 Relations with staff and workmen across the plants at Akurdi, Waluj,
 Chakan and Pantnagar remained cordial.
 
 Government of Maharashtra declared 51 Gunwant Kamgars for the year
 2007. Out of these, Bajaj Auto received 14 awards; 4 workers from
 Akurdi and 10 from Waluj Plant.
 
 Two employees from Waluj Plant have received the prestigious Shram
 Bhushan and Shram Veer awards this year.
 
 Subsidiaries
 
 PT. Bajaj Auto Indonesia (PTBAI), was incorporated as a subsidiary
 company in Indonesia with an issued, subscribed & paid up capital of
 US$ 12.5 million (Rs.562 million) in 2006-07. Bajaj Auto holds 97.5%
 shares in this company, with balance being held by a local partner.
 Semi-knocked down components are currently sent from India for assembly
 of motorcycles in Indonesia.
 
 During the year under review, sales and service network reach has been
 expanded substantially covering the major cities of Jawa, Sumatara,
 Bali and Sulawesi islands. Total showroom strength stands at around 50
 numbers, covering 30 cities of Indonesia.
 
 PTBAI assembles and markets Bajaj Pulsar in Indonesia, establishing
 Bajaj as a high quality tech-savvy brand. The company plans to expand
 its presence, product range and reach towards becoming a strong player
 in this market currently dominated by Japanese 2-wheeler majors.
 
 Bajaj Auto International Holdings BV, Netherlands (BAIHBV), was
 incorporated as a wholly owned subsidiary company in Netherlands with
 an issued, subscribed & Paid up capital of Euros 200,000 during the
 year under review.  Further capital of Euro 98.2 million was invested
 in this company during the year, by way of premium, taking the total
 investment to Euro 98.4 million (Rs.5,692 million). It is proposed to
 make strategic investments in overseas ventures, by way of equity
 shares and / or loans and to undertake related activities through this
 company.
 
 Other highlights of the year 2007-08 are as under :
 
 BAIHBV invested Euro 98.4 million (Rs.5681 million) to acquire 24.45%
 of outstanding equity capital of KTM Power Sports AG, Austria - the
 second largest European Motorcycle Manufacturer.
 
 KTM is a strong high-end motorcycle brand, well known in developed
 country markets of Europe, US and Japan. Synergies in technology,
 product development, market reach, combined with non-overlapping brand
 positions between Bajaj and KTM, make for a win-win long term
 cooperation between the two companies.
 
 Joint product development programs are progressing satisfactorily.
 Select Metros in India will see launch of KTM bikes in the current
 fiscal year.
 
 Rajiv Bajaj, managing director of the company joined the Supervisory
 Board of KTM Power Sports AG on 30 November 2007.
 
 Corporate social responsibility
 
 Code of conduct for affirmative action
 
 The company continues to place emphasis on inclusive growth and has put
 in place certain processes for delivering the intended social outcome
 in measurable terms. The company has adopted a voluntary code of
 conduct for affirmative action, which is effective from 1 December 2006
 and has placed the same on its website. The company believes strongly
 that its competitiveness is interlinked with the well being of all
 sections of Indian society and that equal opportunity for all sections
 of the society is a component of its growth and competitiveness.  The
 company will constantly endeavour to ensure that no discrimination of
 any type is shown to the socially disadvantaged sections of the society
 in the work place. 16% of the fresh employees added during the year
 belonged to the weaker sections (SC / ST) of the society under the
 affirmative action drive, and was well above the 6% for the period
 prior to the drive.
 
 Centre for AIDS patients
 
 Under the Government of India, Ministry of Health and Family Welfare,
 National Aids Control Organisation (NACO) at the initiative of CM has
 come forward for Public Private Partnership (PPP) in order to provide
 better health care to Aids patients. The company has signed an MoU with
 NACO to set up an Anti Retroviral Treatment Center (ART Centre) with
 the co-operation of Yeswantrao Chavan Municipal Hospital, Pimpri, for
 the benefit of the affected people in the surrounding areas. This will
 be the first such Centre in Pimpri Chinchwad Municipal Corporation
 area. The company will fully equip this Centre and provide necessary
 medical and paramedical staff at a capital expenditure of around BRs.35
 lakhs and an annual outgo of Rs.15 lakhs. This initiative will bring
 solace to the 3,000 affected poor families in PCMC area, besides
 containing the spread of this dreaded disease and helping humanity.
 
 Other major initiatives
 
 2 SC-ST students were offered the course fee of Rs.35,000 per head to
 train them for IIT Joint Entrance Examination - JEE and financial aid
 will be extended to cover their full course duration of 4 years on
 their securing admission to IIT.
 
 For employees who opted for voluntary retirement, the company took a
 number of steps to develop and implement a new initiative, viz.
 Guidance and Future Planning Program. The Program was a resounding
 success, which was reflected in the company receiving the Best HR
 Initiative of the year award from Auto Monitor declared on 7 March
 2008.
 
 Rural and community development activities and empowerment of women
 
 The company continued its rural development activities in Pune and
 Aurangabad districts of Maharashtra through Jankidevi Bajaj Gram Vikas
 Sanstha (JBGVS). JBGVS aims at integrated development of 44 selected
 villages, to be carried out by the villagers under their own leadership
 and through unified efforts forged by local organisations with JBGVS
 acting as a catalyst.
 
 During the year, JBGVS conducted a number of development programmes
 including watershed development, sanitation, health care, dairy
 development, education, women empowerment etc.
 
 JBGVS continued supporting 104 Self Help Groups (SHG) and organised
 training programmes for SHGs. Out of 28 Gram Panchayats in JBGVS area,
 14 have lady Sarpanch, one of whom has been felicitated as the Best
 Lady Tribal Sarpanch by Zilla Parishad, Pune.
 
 Five of the villages, where JBGVS had worked in the past, received
 Nirmal Gram Abhiyan award. JBGVS has withdrawn from these villages as
 they attained 80% development as per its laid down indicators. It
 continues to give them guidance when necessary.
 
 Samaj Seva Kendra (SSK) as part of JBGVS provides facilities for social
 development of the residents of Akurdi, Nigdi and adjoining townships,
 with the aim of improving their quality of life, through skill
 development training, hobby centre, nursery education, health care,
 sports.  music, dance, cultural programmes etc.
 
 The Rotary Club of Enshede Netherlands and the Rotary Club of Poona
 North together through JBGVS donated one cow each to 164 poor farmers.
 These 164 families are now additionally earning Rs.2200 per family per
 month, to supplement their family income.
 
 Directors
 
 The board of directors appointed Madhur Bajaj.  D S Mehta, Kantikumar R
 Podar, Shekhar Bajaj, D J Balaji Rao, J N Godrej, S H Khan.  Ms Suman
 Kirloskar, Naresh Chandra, Nanoo Pamnani, Manish Kejriwal, P Murari and
 Niraj Bajaj as additional directors during the period under review. All
 these directors hold office till the date of ensuing annual general
 meeting and are to be appointed directors in that meeting. With this,
 the total number of directors has become sixteen.
 
 During the period under review, Rahul Bajaj was appointed as executive
 chairman, Madhur Bajaj was appointed as executive vice chairman, Rajiv
 Bajaj was appointed as managing director and Sanjiv Bajaj was appointed
 as executive director with effect from 20 February 2008, the effective
 date of the scheme of arrangement of demerger.
 
 Rahul Bajaj, Rajiv Bajaj and Sanjiv Bajaj, first directors of the
 company retire from the board at the ensuing annual general meeting 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 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 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 in
 one page of the consolidated balance sheet.
 
 Statutory disclosures
 
 The company has received an exemption from the central government under
 section 212 (8) of the Companies Act, 1956 with regard to attaching of
 the balance sheet, profit and loss account and other documents of its
 subsidiary companies, viz. PT Bajaj Auto Indonesia and Bajaj Auto
 International Holdings BV, Netherlands for the year 2007-08. 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 the 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.
 
 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 Additional Shareholder Information.
 
 All board members and senior management personnel have affirmed
 compliance with the code of conduct for the year 2007-08.  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.
 
 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 note that Messrs Dalai & Shah, Chartered
 Accountants, are the first auditors of the company and hold office
 until the conclusion of first annual general meeting.
 
 The members are requested to appoint 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.
 
 Your company has applied for government order to conduct the audit of
 cost accounts.  maintained by the company for the year ended 31 March
 2008. Mr. A P Raman, cost accountant, Pune has been appointed as cost
 auditor to conduct the said audit, and the government approval in this
 regard is awaited.
 
                                  On behalf of the board of directors
 
                                             Rahui Bajaj
                                                Chairman      
 22 May 2008
Source : Religare Technova

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