Greaves Cotton

The Directors present the eighty-ninth Annual Accounts for the
 financial year ended June 30, 2008.
 
 Financial highlights (Rs. in crores)
 
                                                  Year ended Year ended
                                                        June       June
                                                     30,2008   30, 2007
 
 Gross Revenue
 
 (incl. Excise Duty)                                1322,27     1225,36
 Profit before Interest,
 Depreciation, Tax and
 Exceptional Items                                   168.04      175.39
 
 Less: Interest and
 Commitment charges                                   20.10       15.66
 
 Less: Depreciation/
 Obsolescence/Amortisation                            20.72       16.01
 
 Profit Before Tax and
 
 Exceptional Items                                   127.22      143.72
 
 Add: Exceptional Items                               10.79         -
 
 Profit Before Tax                                   138.01      143.72
 
 Less: Provision for Tax including                    19.10       16.00
 
 Fringe Benefit Tax
 Less: Deferred Tax                                    8.75        5.40
 
 Profit After Tax                                    110.16      122.32
 
 Profit brought forward                               82.15       38.95
 
 Profit available for appropriation                  192,31      161.27
 
 Appropriations:
 
 Interim Dividends                                    29.30       29.30
 
 Final Dividend                                         -          4.88
 
 Dividend Distribution Tax                             4.98        4.94
 
 Transfer to General Reserve                          40.00       40.00
 
 Balance carried to Balance Sheet                    118.03       82.15
 
                                                     192.31      161.27
 
 Dividend
 
 Your Directors have declared three Interim Dividends, each of Rs. 2/-
 per share on November 2, 2007, January 18, 2008 and April 18, 2008
 respectively, which have already been paid to the Members. Thus, the
 total dividend amounts to Rs. 6/- per share (i.e. 60%) and the total
 cash outgo  (inclusive of Dividend Distribution Tax) works out to Rs.
 34.3 crores. Your Directors have decided not to recommend any Final
 Dividend, keeping in mind the lower profits, the need to conserve its
 resources for future expansion plan and also the prevailing economic
 environment.
 
 Business review
 
 During the year under review, the total revenue went up modestly by 8%
 at Rs. 1322 crores. The Earning Before Interest, Depreciation, Tax and
 Amortisation (EBIDTA) dropped marginally to Rs. 168 crores as against
 Rs. 175 crores in the previous year. The operating margins were lower
 mainly due to higher input costs. The Infrastructure Equipment business
 performed extremely well registering a growth of 51% over the previous
 year. The Light Engines business for the first time after nearly 4 to 5
 years of robust growth, registered a decline due to negative growth in
 the 3- wheeler automotive sector. The business highlights are discussed
 in detail in the Management Discussion & Analysis annexed to this
 Report.
 
 Outlook
 
 - During the year under review, the Company continued to expand its
 different business segments, by setting up the following new
 facilities:
 
 a.  at Aurangabad, Maharashtra, for manufacture of twin cylinder
 engines/power train.
 
 b.  at Chinchwad, Pune, Maharashtra, for manufacture of G series
 multi cylinder diesel engines.
 
 c.  at Gummidipoondi, Tamilnadu, for manufacture of road compaction
 equipments.
 
 Continuing its emphasis on self reliance in R&D, your Company also set
 up a state-of-the-art Technology Centre at Chinchwad, Pune, for the
 design, development and testing of large multi cylinder diesel engines.
 
 The Company also expanded its portfolio by introduction of new products
 across all Business Groups. It is taking various initiatives to enhance
 market share in different business segments. Although, the Company is
 faced with the challenges of rising input costs and a slow down in the
 auto sector, the Directors are hopeful of overall improved performance
 in the current financial year due to various initiatives taken by it
 such as creation of new manufacturing facilities, introduction of
 several new products, entry into growth markets like four wheelers and
 complete generating sets and a thrust in exports.
 
 Re-issue of forfeited shares
 
 10,137 Equity Shares of Rs, 10/- each allotted by the Company last year
 to its certain key Executives, have now become fully paid-up and have
 been listed on the Bombay Stock Exchange Limited and National Stock
 Exchange of India Limited.
 
 Promoter Group
 
 The Company is a part of B M Thapar Group. The Promoter Group holding
 is currently 50.67% of the Companys Equity Capital. The Members may
 note that B M Thapar Group, inter alia, comprises of the following
 Companies (1) English Indian Clays Limited (2) Premium Energy
 Transmission Limited (3) Pembril Industrial & Engineering Company
 Private Limited (4) DBH International Private Limited (5) Karun Carpets
 Private Limited (6) Greaves Leasing Finance Limited (7) Bharat Projects
 Private Limited (8) Dee Greaves Limited (9) KCT Chemicals & Electricals
 Limited (10) Standard Refinery & Distillery Limited (11) Bharat Starch
 Products Limited (12) Greaves Farymann Diesel GmbH (13) Greaves Cotton
 Netherlands B.V. (14) DBH Global Holdings Limited (15) Greaves Auto
 Limited.
 
 Subsidiaries
 
 The Company has the following Subsidiaries:
 
 1.  Greaves Farymann Diesel GmbH, Lampertheim, Germany
 
 For the financial year ended June 30, 2008, the Company had recorded a
 turnover of Euro 6.45 million with a loss of Euro 0.86 million. The
 Company suffered a set back in its business mainly due to adverse
 Euro/Dollar rate and weak US market demand.
 
 2.  Greaves Cotton Netherlands B.V.
 
 This Company has been set up to act as a Holding and an Investment
 Company overseas.
 
 3.  Greaves Leasing Finance Limited (GLFL)
 
 GLFL is engaged in leasing and finance activities mainly confined to
 the Greaves Group. GLFL reported a total revenue of Rs. 2.35 crores
 during the financial year ended March 31,2008 with a Profit after Tax
 of Rs. 1.06 crores.
 
 4.  Dee Greaves Limited (DGL)
 
 DGL is a Wholly Owned Subsidiary of Greaves Leasing Finance Limited,
 engaged in trading activities. For the financial year ended March 31,
 2008, DGL achieved a total revenue of Rs. 4.31 crores with a Profit
 after Tax of Rs. 1.29 crores.
 
 5.  Greaves Auto Limited
 
 Greaves Auto Limited has been recently set up to act as a Special
 Purpose Vehicle for new business that the Company may undertake in
 future. This Company is yet to commence its business operations.
 
 In terms of approval granted by the Central Government under Section
 212(8) of the Companies Act, 1956, copies of the Balance Sheet and
 Profit & Loss Account, Reports of the Directors and Auditors of the
 Subsidiaries, have not been attached to the Annual Accounts of the
 Company. These documents, will however, be made available upon request
 by any Member of the Company. As directed by the Central Government in
 its approval, the financial data of the Subsidiaries have been annexed
 and form part of this Annual Report.
 
 Directors
 
 Mr. S. D. Nayyar was appointed as an Additional Director by the Board
 on October 18, 2007. Mr. Nayyar, aged 66 years, brings with him
 experience in banking and finance of over 40 years, having worked with
 different Banks such as Grindlays Bank, ING Bank, etc. Currently, he is
 associated with Development Credit Bank Limited as a Director and also
 as Chairman of its Executive and Credit Committee.
 
 Mr. Karan Thapar and Mr. Vijay Rai retire by rotation and are eligible
 for re-appointment.
 
 The profiles of Mr. Nayyar, Mr. Thapar and Mr. Rai seeking appointment
 / re-appointments form part of the Notice convening the Annual General
 Meeting. The Board recommends appointment/re-appointments of these
 Directors.
 
 Directors Responsibility Statement
 
 Pursuant to the provisions under Section 217(2AA) of the Companies Act,
 1956, your Directors confirm that:
 
 a.  In the preparation of the Accounts, the applicable accounting
 standards have been followed.
 
 b.  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 as at June 30,2008 and profits for the year ended June
 30,2008.
 
 c.  Proper and sufficient care has been taken 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.
 
 d.  The Annual Accounts have been prepared on a going concern basis.
 
 Code of Conduct
 
 Pursuant to Clause 49 of the Listing Agreement, a Declaration signed by
 the Managing Director & CEO regarding compliance of Code of Conduct for
 the financial year 2007-08, is annexed and forms part of this Report.
 
 Fitch Ratings
 
 The Company had approached Fitch Ratings India Private Limited for
 assigning a rating to the Company as well as the credit facilities
 being enjoyed by the Company.
 
 The Directors are pleased to report that the Company has been assigned
 a rating of AA-(ind) with a stable outlook. They have also assigned a
 rating of AA-(ind) to the Companys fund based cash credit limits of
 Rs. 650 million and a rating of F1+(ind) to its non-fund based limits
 of Rs. 2100 million.  These ratings reflect the sound financial health
 of the Company.
 
 Corporate Governance
 
 The Company has fully complied with the Corporate Governance Code, as
 prescribed under Clause 49 of the Stock Exchange Listing Agreement. A
 Report on Corporate Governance, along with a Certificate from Auditors
 confirming the compliance, is annexed and forms part of this Report.
 
 Auditors and Auditors Report
 
 Messrs Sharp & Tannan, Chartered Accountants, Mumbai, will retire at
 the ensuing Annual General Meeting and are eligible for re-appointment.
 They have confirmed their eligibility for re- appointment under the
 provisions of Section 224(1 B) of the Companies Act, 1956. The
 Directors recommend their re- appointment.
 
 Cost Auditors
 
 Pursuant to the provisions of Section 233B of the Companies Act, 1956,
 audit of cost accounts in respect of Diesel Engines, IC Engines and
 Power Driven Pumps, is being regularly carried out by the Cost
 Auditors. The Directors have re-appointed M/s.  Dhananjay V. Joshi &
 Co., Cost Accountants, as Cost Auditors of the Company for the
 financial year 2008-09, in respect of which the approval of Central
 Government has been duly received.
 
 Public Deposits
 
 Pursuant to the provisions of Section 205C of the Companies Act, 1956,
 all unpaid Public Deposits and interest due thereon, have been
 transferred to the Investor Education and Protection Fund, on the
 respective due dates. As on June 30, 2008, the unclaimed Deposits
 amounts to Rs. 0.13 crore.
 
 Human Resources
 
 The employee relations, by and large, remained cordial at all
 Units/Offices of the Company, except that the matter relating to
 Charter of Demands has been referred by the Workers Union at Ranipet,
 to the Industrial Tribunal.
 
 Information as required, pursuant to Section 217(2A) of the Companies
 Act, 1956, read with Companies (Particulars of Employees) Rules, 1975,
 as amended, is given in Annexure A forming part of this Report.
 
 Particulars of Conservation of Energy, Technology Absorption and
 Foreign Exchange Earnings and Outgo
 
 A statement pursuant to Section 217(1 )(e) of the Companies Act, 1956,
 read with Companies (Disclosure of Particulars in the Report of the
 Board of Directors) Rules, 1988, forms part of this Report, as Annexure
 B.
 
 Acknowledgment
 
 Your Directors acknowledge the contribution made by all the
 stakeholders and the support given by its Bankers and other Lenders.
 
 
                            For and on behalf of the Board of Directors
 
 Place: Mumbai                                             Karan Thapar
 Date : August 8, 2008                                         Chairman