Cummins India

The Directors of Cummins India Limited have pleasure in presenting the
 Forty-Seventh Annual Report and the Audited Accounts of the Company for
 the year ended March 31, 2008.
 
 1.  FINANCIAL RESULTS:
 
 During the year under review, net sales turnover was Rs. 23,308 million
 (Rs. 2,331 crore) as compared to Rs. 18,408 million (Rs. 1,841 crore)
 during the previous year (27% higher). Exports and other foreign
 exchange earnings were Rs. 7,420 million (Rs. 742 crore) as compared to
 Rs. 6,197 million (Rs. 620 crore) during the previous year (20%
 higher). Profit after tax was Rs. 2,807 million (Rs. 281 crore) as
 compared to Rs. 2,420 million (Rs. 242 crore) for the previous year
 (16% higher).
 
                                             2007-2008      2006-2007
                                             (Rs. 000)     (Rs. 000)
 
 APPROPRIATION OF PROFIT:
 
 Profit before taxation                      3,960,032      3,460,023
 Net Profit for the year after tax but
 before tax on proposed dividend             2,806,910      2,420,468
 Tax on dividend                               154,790        122,839
 Dividend                                      910,800        792,000
 Transferred to General Reserve                701,728        605,117
 Balance carried to Balance Sheet            3,154,023      2,114,431
 
 2.  DIVIDEND:
 
 Your Directors have recommended a final dividend of 130% on the equity
 share capital of Rs. 396 million for the year ended March 31, 2008, in
 addition to the interim dividend of 100% declared on January 30, 2008,
 aggregating to 230% for the year.
 
 3.  CONSOLIDATED FINANCIAL STATEMENTS:
 
 Consolidated Financial Statements of Cummins India Limited and its
 subsidiaries, associates and joint ventures as at March 31,2008, have
 been prepared in accordance with Accounting Standard 21 (AS 21) on
 Consolidated Financial Statements, Accounting Standard 23 (AS 23) on
 Accounting for Investments in Associates in Consolidated Financial
 Statements and Accounting Standard 27 (AS 27) on Financial Reporting
 of Interests in Joint Ventures, issued by the Institute of Chartered
 Accountants of India. As required by Clause 41 of the Listing Agreement
 with the Stock Exchanges, the Audited Consolidated Financial Statements
 are attached and form part of the Annual Report.
 
 4.  SUBSIDIARIES:
 
 - Cummins Sales and Service India Limited : (CS&S)
 
 The sales and other income of CS&S for the year ended March 31, 2008,
 was Rs. 5,321 million (Rs. 532 crore) which includes Rs. 53 million
 earned from disposal of Suraksha Stops by CS&S during the year as
 compared to Rs. 4,794 million (Rs. 479 crore) during the previous year.
 CS&S declared a dividend of 375% during the year ended March 31, 2008,
 as compared to 183% during the previous year. The paid-up share capital
 of CS&S is Rs. 60 million, which is held by your Company.  CS&S is
 engaged in the business of sales and after sales services for engines
 and generators manufactured by your Company.
 
 - Cummins Auto Services Limited : (CASL)
 
 Sales and other income of Cummins Auto Services Limited (CASL) for the
 year ended March 31,2008, was Rs. 71 million (Rs. 7 crore) as compared
 to Rs. 42 million (Rs. 4 crore) during the previous year.  CASL is
 engaged in the business of retailing parts and accessories for
 commercial vehicles.
 
 - Annual Reports of subsidiaries :
 
 The Company has obtained approval of the Central Government vide letter
 dated April 9,2008, under Section 212 (8) of the Companies Act, 1956,
 exempting the Company from attaching the Annual Report of its
 subsidiaries for the financial year 2007-2008 to this Annual Report.
 However, the Annual Report of the subsidiary companies and related
 detailed information will be made available to shareholders / investors
 of the Company on request. Further, the Annual Reports of the
 subsidiary companies will be kept open for inspection by any investor
 of the Company, during business hours on any working day at the (i)
 Registered Office of the Company and (ii) Registered Office of the
 concerned subsidiary company.
 
 5.  AMALGAMATION OF SUBSIDIARY COMPANIES:
 
 The Board of Directors of your Company, at their meeting held on
 January 30, 2008, have approved the Scheme of Amalgamation for
 amalgamating Cummins Sales and Service India Limited (CS&S) and Cummins
 Auto Services Limited (CASL), Subsidiaries of the Company, with the
 Company, subject to the necessary approvals and sanction by the Honble
 Bombay High Court. The amalgamation will help the Company capture
 synergies in marketing, sourcing and aftersales support and would also
 offer opportunities to reduce administrative costs.
 
 6.  JOINT VENTURES:
 
 a.  Cummins Exhaust India Limited: (CEIL)
 
 The sales and other income of CEIL, a 50:50 Joint Venture between
 Cummins Filtration Inc., U.S.A.  and your Company, for the year ended
 March 31, 2008, was Rs. 478 million (Rs. 48 crore) as compared to Rs.
 339 million (Rs. 34 crore) during the previous year (41% higher). CEIL
 Board of Directors have recommended a dividend of 105 % for the year
 ended March 31, 2008. The paid-up share capital of CEIL is Rs. 40
 million. CEIL is engaged in the business of manufacture and sale of
 exhaust silencers and mufflers for Internal Combustion Engines.
 
 b.  Cummins Research and Technology India Limited : (CRTI)
 
 The sales and other income of Cummins Research and Technology India
 Limited (CRTI), a 50:50 Joint Venture between Cummins Inc., U.S.A. and
 your Company, for the year ended March 31, 2008, was Rs. 308 million
 (Rs. 31 crore) as compared to Rs. 249 million (Rs. 25 crore) during the
 previous year (24% higher). CRTI has a Research and Technology Centre
 at Pune and is engaged in providing Information Technology Enabled
 Mechanical Engineering Development Services to Cummins Inc., its
 subsidiaries and joint ventures across the world.
 
 7.  CAPACITY EXPANSION:
 
 Your Company has undertaken expansion of its manufacturing capacities
 to meet growing demand for its products. These include -
 
 a. KV Engine Facility, Kothrud, Pune: Expansion of the manufacturing
 facility at Kothrud, Pune was commissioned in March 2008. This expanded
 facility manufactures mechanical and electronic KV series engines
 ranging from 750 HP to 2250 HP to meet the demands of power generation,
 marine, construction, mining and locomotive applications.
 
 b.  Power Generation - New Engine Plant, Kasar Amboli, Pune: A new
 manufacturing facility was commissioned at Kasar Amboli, Dist. Pune in
 January 2008, for manufacture of sub 160 kVA range of engines and for
 upfit & distribution of G- Drives for the Power Generation market.
 
 c.  Industrial land at Phaltan: Your Company is in the process of
 acquiring about 150 acres of land from the MIDC (Maharashtra Industrial
 Development Corporation) near Phaltan, in Satara District, Maharashtra,
 around 100 kms from Pune. This site will cater to your Companys future
 expansion plans. Your Company will also develop common infrastructure/
 facilities like Sewage Treatment Plant (STP), Roads, Fire Fighting
 System, Water Tanks, Training Centre, Health Centre etc. for the entire
 land.
 
 In order to facilitate better synergies, logistical convenience and
 cost benefits, it is proposed to sub-lease a part of the said land and
 common infrastructure/ facilities to Cummins group companies (who are
 also suppliers, vendors and / or customers of the Company) on a need
 basis.
 
 8.  MANAGEMENT DISCUSSION & ANALYSIS / CORPORATE GOVERNANCE REPORT:
 
 As per Clause 49 of the Listing Agreement with the Stock Exchanges, the
 Management Discussion & Analysis Report and Corporate Governance Report
 are annexed and form part of the Directors Report.
 
 9.  CODE OF CONDUCT COMPLIANCE:
 
 As per Clause 49 of the Listing Agreement with the Stock Exchanges, a
 declaration signed by the Chairman and Managing Director affirming
 compliance with the Code of Conduct by Directors and Senior Management,
 for the Financial Year 2007-2008, is annexed and forms part of the
 Directors Report.
 
 10.  DIRECTORS RESPONSIBILITY STATEMENT:
 
 In pursuance of the provisions of Section 217 (2AA) of the Companies
 Act 1956, your Directors make the following statement: -
 
 (i) that in the preparation of annual accounts, the applicable
 accounting standards have been followed and there was no material
 departure from the accounting standards;
 
 (ii) 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 as on March 31, 2008 and of the profit for
 the period April 1, 2007 to March 31, 2008;
 
 (iii) 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; and
 
 (iv) that the Directors have prepared the annual accounts on a going
 concern basis.
 
 11.  CONSERVATION OF ENERGY:
 
 Your Company continues to conserve energy and improve energy
 utilisation through the following efforts and initiatives:
 
 - Kothrud and Nagar Road plants, Pune:
 
 - Installation and commissioning of a VAM Waste Heat Recovery System;
 
 - Energy efficient lighting in the administrative blocks and stores;
 
 - Installation of Engine Jacket Water Heat Recovery System at the Power
 House;
 
 - Improvement in overhead lighting in the CNC Lathe section;
 
 - Installation and commissioning of new and energy efficient 22KV HT
 panel & 1500 kVA transformer.
 
 - Reduction in energy consumption and improvement in lighting lux
 level.
 
 These energy conservation initiatives/ projects generated savings of
 about Rs. 15.85 million (2.88 million Kwh units) during the year.
 
 Additional energy conservation measures being implemented at the
 Companys newly commissioned plants include:
 
 - KV Engine Facility, Kothrud :
 
 - Natural lighting during day time at upfit and dispatch area;
 
 - Use of energy efficient lighting i.e. metal halide lamps in the shop;
 
 - Energy efficient air conditioning cooling system for the Engine
 Assembly area;
 
 - Installation of two Capacitor panels to have power factor unity to
 get maximum rebate in electricity consumption bill.
 
 - Kasar Amboli Plant:
 
 - Energy efficient lighting on the shop floor;
 
 - Saving in kVA demand as well as cable losses through a Real Time
 Power Factor cum Harmonic Filtration system (RTPFC);
 
 - Saving identification through an Energy Management System;
 
 - Saving through natural air circulation and natural sun light on the
 shop floor.
 
 12.  RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION:
 
 Your Company is committed to introducing new products and improving
 existing products which meet stringent emission norms, have higher
 levels of performance and lower life cycle costs, to satisfy market
 needs.
 
 The Technical Centre of your Company continues in its endeavour to
 reduce costs through indigenization of components and developing
 electronic controls & systems to improve fuel efficiency, performance
 and durability of the products.
 
 A.  Some specific areas of R&D initiatives undertaken by the Company
 are :
 
 a) New Product Development: The following new Products were developed
 during the year:
 
 1.  50 litre (1200 rpm)Tier-ll emissions compliant engine for the oil
 and gas global market.
 
 2.  8.3 litre engine for marine application and a new 14 litre engine
 for gas compression applications.
 
 3.  5.9 litre (160 kVA) engine for Power Generation application meeting
 the current CPCB emission regulations.
 
 4.  Low cost 14 litre engine for Dumper application.
 
 b) Full authority electronic engines were introduced for Power
 Generation and Industrial markets.
 
 c) Various new ratings for engines for Industrial, Power Generation and
 Automotive applications were certified for compliance with emission
 norms.
 
 d) A new state-of-the-art facility for measurement of gaseous &
 particulate emissions was commissioned at the Companys Technical
 Centre in Pune.
 
 B.  Benefits derived as a result of the above activities are:
 
 - Complete range of fuel efficient and emission compliant products were
 made available to customers in the shortest possible time, at
 significantly low development cost, thereby enhancing value to
 customers.
 
 - Improvement in quality, reliability, durability and performance of
 engines and critical engine components.
 
 - Significant cost savings through engine component indigenization and
 Six Sigma initiatives.
 
 - Reduction in product development cost to enable profitable business
 growth.
 
 C.  Future plans include:
 
 - Continued thrust on indigenization, cost reduction and supplier
 partnership based waste elimination initiatives and alternate source
 development for various engine components.
 
 - Introduction of full authority electronic engines for the Automotive
 market.
 
 - Development of advanced emissions compliant engines for global and
 domestic Power Generation, Industrial and Automotive markets.
 
 - Installation and commissioning of Euro-IV level emissions measurement
 facility.
 
 D.  Your Company continues to focus on deriving the benefits of
 state-of-the-art technology assistance from Cummins Inc., U.S.A. With
 strong support from Cummins Inc., U.S.A., your Company is committed to
 develop advanced fuel efficient and emissions compliant engines to
 comply with forthcoming stringent, worldwide emissions regulations.
 Your Company is also committed to introduce environment friendly
 engines, running on alternate fuels. Your Company is confident of
 absorbing a wide and diverse set of technologies in Internal Combustion
 engines to effectively eater to the market dynamics.
 
 E.  Expenditure on R & D:
 
 The total expenditure on R & D was as follows:-
 
                                           2007-2008       2006-2007
                                          (Rs. 000)      (Rs. 000)
 
 a) Capital                                 37,247           25,127
 
 b) Recurring                              269,692          187,819
 
 c) Total                                  306,939          212,946
 
 d) Total R&D expenditure as a
    percentage of total sales turnover       1.32%            1.16%
 
 13.  FOREIGN EXCHANGE EARNINGS AND OUTGO:
 
 During the year under review, the Company exported 5,862 engines and
 4,012 generator sets thereby achieving export earnings of Rs. 7,239
 million (Rs. 724 crore).
 
 Foreign Exchange earnings and gross outgo (including royalty, dividend
 etc.) during the year under review were as follows:-
 
                                     2007-2008               2006-2007
                                     (Rs. 000)              (Rs. 000)
 
 (a)    Earnings                     7,420,494               6,197,407
 
 (b)    Outgo -
 
 -  Raw Materials/components  3,726,212           3,228,483
 -  Capital equipment            80,736              61,289
 -  Others                      998,921             913,110
                                     4,805,869               4,202,882
 
 14.  PARTICULARS OF EMPLOYEES:
 
 Information as per Section 217(2A) of the Companies Act, 1956 (the
 Act), read with the Companies (Particulars of Employees) Rules, 1975,
 forms part of this Report. As per the provisions of Section 219(1
 )(b)(iv) of the Act, the Directors Report and Accounts are being sent
 to the Shareholders excluding the statement giving particulars of
 employees under Section 217(2A) of the Act.
 
 Any Shareholder interested in obtaining a copy of the statement, may
 write to the Assistant Company Secretary at the Registered Office of
 the Company.
 
 15.  DIRECTORS:
 
 Mr. Anant J. Talaulicar was appointed as Managing Director of the
 Company for a period from July 29, 2003 to April 24, 2008. At the Board
 Meeting held on January 30, 2008, Mr. Anant J. Talaulicar was
 re-appointed as Managing Director of the Company for a further period
 of five years effective April 25, 2008, subject to approval of the
 Shareholders.
 
 Mr. Pradeep Bhargava has been appointed as an Alternate Director to Mr.
 S.M. Chapman effective October 25, 2007.
 
 In accordance with the provisions of the Companies Act, 1956 and the
 Articles of Association of the Company, M/s. Mark Levett, Venu
 Srinivasan and Glyn Price, Directors of the Company, retire by rotation
 and are eligible for re-appointment.
 
 16.  AUDITORS:
 
 The Auditors, Price Waterhouse, Chartered Accountants, retire and are
 eligible for re-appointment.
 
                                   On behalf of the Board of Directors,
 
                                              Anant J. Talaulicar
 Pune: May 22, 2008                       Chairman & Managing Director