Bajaj Auto Finance

1.  The Directors present their Twenty-first Annual
 
 Report and the Audited Statement of Accounts for the year ended 31st
 March, 2008.
 
 2.  Financial Results                      2007-08      2006-07
                                        Rs. million    Rs.million
 
 Income from Operations                     4,096.7       3,527.6
 Other Income                                 930.8         490.3
 Total                                      5,027.5       4,017.9
 Provision for Doubtful Debts and           1,091.8         808.8
 Bad Debts written off, net
 Depreciation                                  48.5          30.3
 Profit before Taxation                       299.8         712.5
 Provision for Taxation                        98.6         240.3
 [including Deferred Tax Credit and FBT]
 Profit for the year after Taxation           201.2         472.2
 Disposable surplus after earlier             205.8         476.4
 years adjustments
 Appropriations :
 Transfer to Reserve Fund                      41.5          96.0
 Transfer to Debenture Redemption              90.0         207.5
 Reserve
 Provision for Proposed Dividend               36.6         106.0
 Provision for Dividend Tax                     6.2          18.0
 Balance carried to General Reserve/           31.5          48.9
 Balance Sheet
 
 3.  Dividend :
 
 The Directors recommend for the consideration of the Members at the
 Annual General Meeting, payment of Dividend of Re.1/- per Share (10 per
 cent) for the year ended 31st March, 2008 on the enhanced capital of
 Rs.366 million, after the conversion of balance warrants issued to the
 Promoters on preferential basis into equity shares during the year. The
 total Dividend outgo including tax thereon will be Rs.42.82 million.
 
 Dividend paid for the year ended 31st March, 2007 was Rs.3/- per share
 (30 per cent) and the total Dividend outgo including tax thereon was
 Rs.124.1 million.
 
 The Dividend recommended by the Board for the year 2007-08, apart from
 decline in profits, is also lower due to the legal requirements
 relating to creation of Debenture Redemption Reserve and rules
 pertaining to transfer of profits to reserves.
 
 Working Results
 
 During the year 2007-08, your company deployed a total amount of
 Rs.30,363 million, of which Rs.27,406 million were under various
 financing schemes and Rs.2,957 million in AAA rated securitized retail
 asset pools which is a new business initiative by the company. As
 against this, during the previous year 2006-07, the total amount
 deployed was Rs.26,313 million, thus recording an increase of 1 5% over
 the previous year.
 
 The Assets under Finance, Loan and Securitized Retail Asset Pool
 receivables as on 31st March, 2008 were Rs.33,319 million as compared
 to Rs.27,610 million as on 31st March, 2007.
 
 The profit before tax for the year was at Rs.299.8 million, as against
 Rs.712.5 million in the previous year and the profit after tax for the
 year was Rs.201.2 million as compared to Rs.472.2 million in the
 previous year. This has been primarily because of reduced subvention
 offers from the two wheeler manufacturer (Rs.59 million in 2007-08
 against Rs.337 million in 2006-07), increased provision for doubtful
 debts and bad debts written off, net (Rs. 1,092 million in 2007-08
 against Rs.809 million in 2006-07) due to the companys increased focus
 on semi-urban and rural markets in the last 2-3 years.
 
 5.  Prospects :
 
 In the backdrop of strong GDP growth witnessed in the last few years,
 the retail finance business is continuously growing at a rapid pace.
 This strong growth is also aided by changes in demographic profiles,
 expanding base of potential consumers, higher disposable incomes and
 increased product/ brand choices available to the customer. This high
 growth level has attracted banks and other multi- national players into
 retail finance business, thereby resulting in increased competition.
 
 However, there are some concerns at the end of the year with regard to
 increasing inflationary pressures and slowdown of economy, which could
 have an adverse impact on the demand for two wheelers, consumer
 durables and other retail lending products. It could result in a slow
 down in retail finance services and if prolonged, it could adversely
 affect the future financial performance of financial services companies
 in general.
 
 After a fast paced growth over the last few years, the retail finance
 industry in general is currently witnessing stress in its portfolio
 quality. This current trend in provisioning and bad debts is expected
 to prevail in the near term.
 
 The company during the year added about 500 permanent employees
 including some employees at a senior level in various specialised
 business/ operational areas, the benefits of which will be realised in
 next few quarters.
 
 The company expects to maintain satisfactory growth during the current
 year and aims to remain a leading player in the retail financial
 services business in the country through appropriate product strategy,
 leveraging on its expertise, enhancing its risk management capabilities
 in order to control delinquencies and launching new business
 initiatives.
 
 6.  New Initiatives :
 
 Since the third quarter of the year 2007-08, the company has launched
 various new business initiatives like acquisition of AAA rated
 securitized retail asset pools of reputed banks/ NBFCs, IPO financing,
 insurance distribution to its customers, cross sell of personal loans
 to existing customers with clean repayment history, financing to SMEs/
 reputed educational institutions and universities for personal
 computers etc. The company is repositioning itself as a full-service
 NBFC offering wide range of products.
 
 7.  Share Capital :
 
 The company on 18th January, 2006, had allotted 3,006,540 Warrants to
 promoters - Bajaj Auto Ltd., on preferential basis, each Warrant being
 convertible at the option of Bajaj Auto Ltd., within 18 months from the
 date of allotment, into one fully paid Equity Share of Rs.10/- each on
 payment of an aggregate price of Rs.410/- per share.
 
 During the year under review, 1,247,940 Equity Shares were allotted to
 Bajaj Auto Ltd., on 17th July, 2007, on conversion of the balance
 Warrants on receipt of full consideration. With this allotment, the
 entire,3,006,540 Warrants allotted to them on preferential basis, now
 stand converted into Equity Shares. Earlier, 1,758,600 Warrants were
 converted into equity shares in March, 2007.
 
 After this allotment, the companys Paid-up Equity Share Capital is now
 Rs.366 million.
 
 8.  Repurchase of Debentures
 
 The company under its Rights Issue, had allotted 5,248,365 - 6% Non
 Convertible Debentures (NCDs) of the face value of Rs.500/- each
 aggregating Rs.2,624.2 million on 9th February, 2007. Of these, the
 company, as a treasury operation, repurchased 2,186,380 fully paid NCDs
 from the open market, at an average price of Rs.469.60 per NCD, in
 terms of the Letter of Offer dated 1st December, 2006.
 
 9.  Fixed Deposits :
 
 Your company received fresh deposits of Rs. 1.2 million and with
 renewals of Rs.6.8 million, the total deposits mobilised during the
 year under review, stood at Rs.8 million. Public Deposits outstanding
 at the year-end were Rs.61.1 million and the number of depositors was
 2,539. At the end of the financial year under review, there were 191
 deposits aggregating Rs.3.00 million which matured but remained
 unclaimed as on that date. The company had written to these depositors
 and as on date, deposits aggregating Rs.0.7 million have been
 repaid/renewed.
 
 10.  Credit Rating :
 
 CRISIL has re-affirmed the highest rating of FAAA/Stable for the
 Fixed Deposit programme of your company. This rating indicates very
 strong degree of safety with regard to timely payment of interest and
 principal. Your company is one of the very few Non-Banking Finance
 Companies (NBFCs) which enjoys the highest rating.
 
 The company also enjoys the highest rating of P1 + from CRISIL for
 Rs.7,000 million Commercial Paper programme.
 
 The Non-Convertible Debentures allotted on Rights basis to the
 shareholders have been assigned AA+/Stable rating by CRISIL and
 LAA+ rating by ICRA.
 
 As regards the Bank Loan Ratings for the bank facilities stipulated by
 RBI, as a part of BASEL II guidelines, CRISIL has assigned AA+/Stable
 rating for the companys Cash Credit/ Working Capital Demand Loan
 amounting to Rs.5,850 million and Long Term Loan facilities amounting
 to Rs.2,510 million and P1 + rating for the Short Term Loan
 facilities amounting to Rs.4,000 million.
 
 11.  RBI Guidelines :
 
 Your company continues to fulfill all the norms and standards laid down
 by the Reserve Bank of India (RBI) pertaining to non-performing assets,
 capital adequacy, statutory liquidity ratio etc. As against the RBI
 norm of 12 per cent, the capital adequacy ratio of your company is
 40.69 per cent.
 
 In line with the RBI guidelines for Asset-Liability Management (ALM)
 system for NBFCs, the company has in place an Asset-Liability
 Committee.
 
 12.  Statutory Disclosures :
 
 As required under the provisions of Section 217(2A) of the Companies
 Act, 1956, read with the Companies (Particulars of Employees) Rules,
 1975, as amended, particulars of employees are set out in the Annexure
 to the Directors Report. As per the provisions of Section 219(1
 )(b)(iv) of the said Act, these particulars will be made available to
 any shareholder on request.
 
 The company, being a Non-Banking Finance Company, not having any
 manufacturing or foreign exchange activity, the Directors have nothing
 to report on Conservation of Energy, Technology Absorption, Foreign
 Exchange earnings and outgo.
 
 13.  Directors Responsibility Statement :
 
 In compliance of Section 217(2AA) of the Companies Act, 1956, your
 Directors state that:
 
 (i) In the preparation of the annual accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to material departures;
 
 (ii) 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;
 
 (iii) 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;
 
 (iv) The Directors have prepared the annual accounts on a going concern
 basis.
 
 14.  Directors :
 
 Shri Dipak Poddar, in view of his pre-occupation, resigned as the
 Managing Director of the company with effect from 1st April, 2008. Mr.
 Poddar has been the Managing Director of the company since its
 inception in 1987 and has been a key force in bringing the company to
 the present status of one of the leading retail finance company in
 India from a very small beginning. Although Mr. Poddar has ceased to be
 the Managing Director, he continues as a Director on the Board of the
 company and hence his valuable advice would always be available. The
 Board places on record its sincere appreciation for the valuable
 contribution made by Shri Dipak Poddar during his tenure as Managing
 Director of the company.
 
 Shri Rahul Bajaj, Shri Sanjiv Bajaj and Shri Madhur Bajaj, Directors,
 retire from the Board by rotation this year and being eligible, offer
 themselves for re- appointment.
 
 The information on the particulars of Directors seeking appointment /
 re-appointment as required under Clause 49 of the Listing Agreement
 with the Stock Exchanges has been given under the report on Corporate
 Governance.
 
 1 5. Appointment of Manager under the Companies Act, 1956 :
 
 Subject to the approval of the shareholders, the Board of Directors
 have appointed Shri Rajeev Jain, Chief Executive Officer (CEO) of the
 company as the Manager under the Companies Act, 1956 for a period of
 three years with effect from 1 st April, 2008, on the terms of
 remuneration set out in the resolution in the Notice for the ensuing
 Annual General Meeting. The resolution is recommended for approval of
 the shareholders at the Annual General Meeting.
 
 16. Auditors :
 
 You 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.
 
 17.  Corporate Governance :
 
 Your company complies with all the mandatory requirements pertaining to
 Corporate Governance, in terms of Clause 49 of the Listing Agreement
 with the Stock Exchanges. A detailed report on Corporate Governance has
 been included in this report along with a certificate from the auditors
 of the company regarding compliance of conditions of Corporate
 Governance. Further, a separate Management Discussion and Analysis
 report is also given in this report.
 
                                On behalf of the Board of. Directors
 
 Pune                                       Rahul Bajaj
 21st May, 2008                                Chairman