Le Corbusier, the famous Swiss architect, once remarked: Less is more.
 Less is truly more, when you are committed to the right less.
 
 Over the two and a half decades since Hero Honda came into being,
 automobile businesses around India have diversified and expanded at
 breakneck speed: four wheelers, tractors, commercial vehicles,
 financing and what have you...
 
 Through these years, Hero Honda has resolutely stuck to its knitting,
 because of a deep down belief within both JV partners that in emerging
 countries such as India, less, could actually be more.
 
 So we focused on our core business - the two wheeler business. We
 channelised our funds, energies and resources into this business, with
 a single minded objective: to provide world class, low-maintenance and
 affordable transport to people who needed mobility but had limited
 budgets.
 
 Of course, during our evolution, we looked for new opportunities. We
 created new paradigms and benchmarks.  These endeavours, however, have
 always been part of our search for excellence in the two wheeler
 business.
 
 In Indias auto industry today, Hero Honda represents the TWO WHEELS OF
 GROWTH and in our 26th year, this riveted focus on motorcycles and
 scooters has borne rich dividends.
 
 By any yardstick and through any stretch of imagination, Hero Honda has
 seen its best year yet. Annual sales of over 4.6 million, Economic
 Times Company of the Year, record profits, record market
 capitalisation, record EBIDTA margins, highest ever EVA....the list is
 endless. Your management has contributed only partly to these outcomes.
 
 These numbers are the result of critical contributions from millions of
 real people - the customer managing his household budget and making his
 first vehicle purchase in a far-flung village in India, the retail
 shareholder buying his first lot of Hero Honda shares, or the young
 worker on an assembly line making his first contribution towards
 process improvement during a TPM program, our efficient supply chain
 partners - the list could go on and on.
 
 In various different ways, - these people have contributed towards
 making the year in review extra special. There is no better forum than
 this report, to express my gratitude to them. No matter where Hero
 Honda is today or dreams to be tomorrow, their wishes and aspirations
 will always be instrumental to our future.
 
 The future excites me for two reasons. First, India will be a better
 place to live in. As infrastructure services expand across larger
 swathes of India and as rural development programs create more impact
 in the new decade, the quality of life will improve for the common man.
 
 Second, we will see a different facet of India unfold before us: I am
 convinced that this will be the decade where lower middle class
 households (earning between Rs 2 lakh to Rs 5 lakh a year) will become
 Indias largest and most influential consuming class, more powerful
 than the middle-middle class, the upper middle class and the upper
 class. In fact, if the last decade belonged to the Great Indian Middle
 Class, this decade will belong to the Great Lower Middle Class Indian.
 
 Consumer companies that wish to succeed in this environment will have
 to make the lower middle Indian central to their design of products,
 processes and strategies.
 
 The two wheeler industry in general and companies such as Hero Honda in
 particular, already have a head start in this area with appropriate
 products and distribution networks.
 
 In my message last year, I mentioned how champion companies grow by
 developing far-reaching branches. I am happy to report that our rural
 vertical, which seeks to access Bharat, has now rolled out nation-wide
 and in the coming years, will emerge as the primary growth engine of
 this Company.
 
 For these very reasons, I wont be surprised at all if the two wheeler
 industry is able to easily sustain a growth of 10 percent and more over
 the next 10 years.
 
 To be sure, there will be greater competition and there will be greater
 pressure on market share. Yet this is only natural, since the exciting
 market will definitely attract fresh investments, better products and
 better networks. But this should be a cause for great joy and
 celebration because it will surely benefit the customer.
 
 It is not that I dont see challenges ahead. The global macro
 environment is uncertain. Despite the strong performance of the Indian
 economy, there are fears of a double dip recession, especially in
 Europe. Should this happen, some of growth momentum in India could
 dissipate. On the other hand, if the crisis passes and we see a strong
 recovery, it would impact commodity prices and interest rates.
 
 At a Company level, fresh capacity creation in a growth market is a
 challenge. Pressures on our supply chain to make quick ramp ups without
 compromising on quality is a second major challenge. Optimising
 manpower productivity against a backdrop of antiquated labour laws is a
 third challenge.
 
 Nevertheless, I am confident that we at Hero Honda have the versatility
 to refine and redefine ourselves. I know we have the skills to sail
 through these uncertain waters.
 
 I believe we have the vision to navigate through the new decade into a
 new India.
 
 Yours Sincerely
 
 Brijmohan Lall,
 Chairman