To The Members of HMT Limited
 
 The Annual Accounts of the Company for the year 2011 - 12 along with
 the Auditors'' Report and the Comments of the Comptroller & Auditor
 General of India are attached to this Report.
 
 CORPORATE PERFORMANCE
 
 The Indian macroeconomic overview reported that the economic growth in
 the Country decelerated during the year 2011-12 showing a drop from 7.7
 percent in the first quarter to 6.9 per cent in the second quarter and
 further down to 6.1 per cent in the third quarter & lastly to 6.9 per
 cent in the fourth quarter. Overall Growth decelerated significantly to
 6.1 per cent in the third quarter of last year, although it is expected
 to have recovered moderately in the fourth quarter. Based on current
 assessment, the economy is clearly operating below its post-crisis
 trend.  India''s GDP growth rate slowed to 6.9 per cent in 2011- 12
 against 8.4 per cent in the previous two financial years.
 
 On the demand side, gross fixed capital formation contracted both in
 the second and third quarters of the year 2011 -12, and on the other
 hand, the share of gross Fixed Capital Formation (GFCF) in GDP was down
 by almost 1 percentage point (from 30.4 per cent to 29.5 per cent). The
 more recent data on industrial production suggest that activity may
 have expanded at a slower pace than last year.
 
 Looking ahead, the overall growth outlook for the current year appears
 to be marginally better than it was last year.
 
 Accordingly, a projection of GDP growth for the current year is 7.3 per
 cent. Prospects for agriculture are encouraging. The assessment of
 leading indicators suggests that the overall situation of monsoon for
 the year 2012 may be near normal. Growth may have bottomed out in the
 3™ Quarter of 2011 -12, but recovery ahead is likely to be slow.
 Revival in the industrial sector hinges on the impetus to ease
 supply-side constraints, especially in the energy and mineral deficits.
 Government initiatives to revive the power sector would lead to
 reviving the growth momentum.
 
 On the Company''s main business portfolio of Tractors, the market
 indicators reveal that the industry recorded growth of 4% in terms of
 quantity, but there was a negative growth in value terms to 10% during
 the year under review.  As a result, your Company also had to face
 severe pressure on performance during the year. Your Company recorded a
 Production ofRs. 182.98 Crore (4453 Nos. of Tractors) as against Rs. 187.24
 Crore (4812 Nos. of Tractors), in the previous year, and Sales of Rs.
 161.12 Crores (3639 Nos. of Tractors) compared to Rs. 200.86 Crores (4920
 Nos. of Tractors) in the previous year.
 
 HMT Group along with its Subsidiaries achieved an aggregate Production
 of Rs. 428.83 Crore and Sales of Rs. 449.67 Crore for the year 2011-12. The
 overall performance was marginally better than that of the previous
 year.
 
 OPERATING RESULTS
 
 Your Company achieved a Gross Margin of Rs. 11.77 Crore during the Year
 under review as compared to the Gross Margin of Rs. 3.71 Crore in the
 previous year. The Operations of your Company resulted in a Net Loss of
 Rs. 82.20 Crore during the year 2011-12, when compared with Rs. 79.24
 Crores recorded in the previous year, which was mainly due to the
 higher interest burdens on account of Loans availed from the Govt of
 India under various heads. The financial highlights for the year 2011
 -12, are as under:
 
 FINANCIAL HIGHLIGHTS                              (Rs. in crore)
 
 Particulars                           2011-12           2010-11
 
 Gross Profit/(Loss)(PBIDT)            11.77               3.71
 
 Depreciation & Amortization            4.40               3.87
 
 Finance Cost                          89.55              79.08 
 
 Profit/(Loss) before PPA             (82.18)            (79.24)
 
 Less: Prior Period Adjustments
 (PPA)                                  0.02                 -
 
 Net Profit/(Loss) before tax         (82.20)            (79.24)
 
 Tax Provision (Net)
 
 Net Profit/(Loss) after tax          (82.20)            (79.24)
 
 Net Profit/(Loss) carried to
 
 Balance Sheet                        (82.20)            (79.24)
 
 DIVIDEND & PROVISIONS
 
 Owing to the losses incurred during the year, the Directors are unable
 to recommend any dividend on the paid up equity share capital. Hence,
 no reserve has been created for Bonds redemption as required.
 
 FINANCIAL POSITION
 
 Due to liquidity constraints, the production value of Tractors remained
 at Rs. 182.98 Crore during the year under review.  Further, the high
 interest on account of loans availed from Government of India to
 discharge liabilities, affected the bottom line to a large extent.
 
 During January 2012, your Company received financial assistance in the
 form of Non Plan Loan of Rs. 38 Crore from the Government of India, for
 meeting the urgent working capital needs of the Tractor Division, which
 helped improve the Production in the last Quarter of the year under
 review.
 
 FUTURE OUTLOOK
 
 Two distinct trends are emerging in the Indian tractor market, first
 being the increase in market share of low HP tractors. Although low HP
 tractors have only a negligible
 
 presence even now, the segment has more than doubled its market share
 in the past three years. There is an inherent expansion in tractor
 demand in this segment because of shortage of farm labour/increase in
 wage rates due to alternative employment opportunities available to
 workers under National Rural Employment Guarantee Act leading to
 increased tractor viability even for small/medium size land owners. Low
 HP tractors are also affordable for farmers with small land holdings
 that make them a viable option.
 
 Growth in the segment is expected to remain buoyant because of
 increased application of lower HP tractors for smaller grounds, narrow
 spaces, orchards and cropping, etc.
 
 The other trend that is evident is increased use of tractors in
 infrastructure and construction sectors which has led to a huge growth
 in purchase of higher HP tractors. High growth in this segment is
 expected to continue because of the following:
 
 - Replacement demand turning towards higher HP tractors.
 
 - Increased usage of tractors for non-agricultural applications across
 India
 
 The Industry growth is projected at 8-12 per cent for current financial
 year 2012-13, with the monsoon being normal.
 
 The Tractor Industry will continue to grow in the year 2012-13 due to
 thrust of Govt, on Agriculture and infrastructure. The growth drivers
 of Tractor Industry such as boost in rural economy, increased focus on
 agriculture and rural development, credit availability, shorter
 replacement cycle, several policy initiatives by the Government, etc.,
 are aiding the growth trends. Tractor sales are expected to witness
 growth of 8 -10% during the year 2012-13. The demand for I.P.Engnes is
 also expected to grow substantially due to shortage of power across the
 Country and installation of cellular towers by the Mobile telephone
 operators.
 
 The Tractor Business Group of your Company has already initiated a host
 of measures towards performance improvement in right earnest, by
 appointment of new Distributors and Dealers in potential
 areas/territories, up gradation of the tractor engines for compliance
 to new emission norms for all models of tractors, entering into Molls
 with Banks/Financing Agencies for priority loan sanction for the
 purchase of HMT Tractors, dynamic business strategies, etc., which are
 expected to yield results in the current financial year.
 
 The future plans of your Company envisages plant modernization and
 technology upgradation which will contribute to better productivity and
 give a thrust to the growth trends in the coming years. A Business Plan
 has been prepared in association with a reputed Consultancy Firm, which
 comprises of various strategic initiatives to sustain the operations
 and achieve growth and has been recommended by the Board for
 Reconstruction of Public Sector Enterprises (BRPSE) in the form of a
 Revival Plan and is being processed for approval by the Government of
 India.
 
 SUBSIDIARY COMPANIES
 
 - HMT Machine Tools Limited
 
 The Subsidiary achieved Sales of Rs. 240.46 Crore and Production of Rs.
 218.17 Crore with a Net loss of Rs. 46.14 Crore during the year 2011-12.
 The Subsidiary has implemented the revival plan proposals and plant up-
 gradation. The Subsidiary is also pursuing with various agencies for
 extending the reliefs and concessions sanctioned by the BIFR under the
 Rehabilitation Scheme.  Some of these Parties including the Consortium
 of Banks have preferred appeals against the reliefs and concessions
 sanctioned by the BIFR, which is being contested by the Subsidiary. The
 Merger of Praga Tools Ltd, Hyderabad, with the Subsidiary, which was
 part of the sanctioned Scheme of BIFR has since been completed.
 
 - HMT Watches Limited
 
 This Subsidiary could not show significant improvement in performance
 during the year under review. Major factors affecting the performance
 of this Subsidiary were paucity of working capital, erosion of trade
 channel and high cost of borrowings. Despite these constraints, this
 Subsidiary could achieve a Sales level of Rs.  10.24 Crore and Production
 of Rs. 13.04 Crore during the year under review. The Net Loss for the
 year stood at Rs. 224.04 Crore as compared to Rs. 253.74 Crore incurred
 during the previous year. The Revival Plan in respect of this
 Subsidiary has been submitted to the Government based on the business
 plans prepared by a reputed Consultancy Firm. The Subsidiary was able
 to reduce its manpower by introduction of VRS, funded by Government of
 India (Gol) Loans. Atotal of 124 employees have been retired by the
 Subsidiary under VRS during the year 2011-12 involving an outgo of Rs.
 26.29 Crore, thereby reducing its manpower strength to 1219 as on
 31.3.2012.
 
 - HMT Chinar Watches Limited
 
 The performance of this Subsidiary could not be sustained at optimum
 levels due to the disturbed situation prevailing in the J&K Valley
 apart from working capital constraints for production. Majority of the
 employees have been separated on VRS leaving about 111 employees at
 Srinagar and Jammu Units of the Subsidiary. Under these circumstances,
 the Subsidiary''s Sales was limited to Rs. 0.08 Crore during the year
 compared to Rs. 0.10 Crore in the previous year, with NIL Production for
 the year. In view of the virtual non operating levels, the Subsidiary
 incurred a Net loss of Rs. 44.04 Crore during the year.
 
 - HMT (International) Limited
 
 The export Subsidiary achieved a turnover of Rs. 32.40 Crore as against Rs.
 27.89 Crore recorded in the previous year, i.e. 2010-11, registering a
 growth of 16%. The Order procurement during the year also showed a
 satisfactory increase atRs. 37.98 Crore as against Rs.27.45 Crore achieved
 in the previous year, registering a growth of 38%. With the increased
 Turnover levels, the Subsidiary was able to achive the Profit Before
 Tax (PBT) of Rs. 1.74 Crore as against Rs. 0.31 Crore achieved in the
 previous year, thereby continuing the trend of achieving profits. The
 Subsidiary has maintained its consistent dividend payment record and
 has recommended a dividend of 20% for the year 2011 -12 on its Paid-up
 equity share capital.
 
 - HMT Bearings Limited
 
 During the year under review, your Company was able to achieve a Sales
 of Rs. 16.12 Crore, registering growth of 40% as against the Previous
 Year''s Sales of Rs. 11.48 Crore.  In terms of Production also, the
 Company was able to achieve Rs. 14.64 Crore registering a growth of 30%
 as compared to the Previous Year''s Production level of Rs. 11.24 Crore.
 
 The Revival Plans of this Subsidiary has been prepared and submitted
 for consideration by the Government through the BRPSE. Meanwhile, the
 bankers to the Company holding security in the form of immovable
 properties have initiated action against the mortgaged property under
 the SARFAESI Act and the matter is now pending before DRT, Hyderabad,
 in appeal.
 
 ASSOCIATE /JOINT VENTURE COMPANY
 
 SUDMO-HMT Process Engineers (India) Limited
 
 Business was not transacted by this Joint Venture Company during the
 year under review. For the financial year 2011-12, this Company showed
 a Profit after tax of Rs. 0.91 Lakhs on account of the interest income
 ofRs. 3.36 lakhs, out of the Fixed Deposits kept with the Banks. The
 Company is in the process of re-starting the operations of this
 Company.
 
 Gujarat State Machine Tools Corporation Ltd
 
 This Joint Venture Company between HMT and GIIC Ltd has discontinued
 its operations since long. It is therefore proposed to divest from this
 Associate Company jointly with the JV Partner. The process of
 disinvestment is under consideration by the Company in consultation
 with the JV Partner.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 As required under the Listing Agreement, Consolidated Financial
 Statements of the Company along with that of the Subsidiaries for the
 financial year 2011 -12, conforming to the applicable Accounting
 Standards, are attached to this Report along with the Auditors'' Report
 on the same.
 
 In terms of the General Circular No. 2/2011 dated 8th February, 2011,
 issued by the Central Government in terms of Section 212(8)of the
 Companies Act, 1956, the Directors have consented not to attach copy of
 the Balance Sheet, Profit and Loss Account, Report of the Board of
 Directors and Auditors of the five (5) Subsidiary Companies viz., HMT
 Machine Tools Limited; HMT Watches Limited; HMTChinar Watches Limited;
 HMT Bearings Limited and HMT (International) Limited to the Balance
 Sheet of the Company (Holding Company). However, these documents will
 be made available upon request by any member of the Company and
 Subsidiary Companies interested in obtaining the same. Further, in
 compliance with the conditions of the above referred Government
 circular, the financial information of each of these subsidiary
 Companies have been furnished as part of the Consolidated Balance Sheet
 of the Company. The annual accounts and other detailed information of
 each of the Subsidiary Companies will be available for inspection by
 any member at the Registered Office of the Company. A statement
 pursuant to Section 212(1) of the Companies Act, 1956, in respect of
 each of the Subsidiary Companies is attached to this report.
 
 HUMAN CAPITAL
 
 Information in accordance with the provisions of Section 217(2A) of the
 Companies Act, 1956 read with the Companies (Particulars of Employees),
 Rules, 1975, as amended, is NIL for the year 2011-12.
 
 The employee strength of the Company as on March 31, 2012, stood at
 1699 Nos. as compared to 2088 Nos. at the end of the previous year.
 There are 340 employees in the Officer Cadre and 1359 Non-Executive in
 Workmen cadre.  The number of employees on the rolls of the Company as
 on March 31, 2012 in SC/ST, Ex-servicemen, Physically Handicapped and
 Women Employee Categories etc. is detailed below:
 
 Scheduled Castes                            397
 
 Scheduled Tribes                             57
 
 Other Backward Classes                      117
 
 Ex-Servicemen                                 4
 
 Persons with Disabilities                    16
 
 Women employees                              48
 
 Minorities                                  258
 
 INDUSTRIAL RELEATIONS
 
 The overall Industrial Relations situation in the Company during the
 year remained cordial.
 
 IMPLEMENTATION OF OFFICIAL LANGUAGE
 
 The efforts towards implementation of Official Language Act, Rules &
 Policy as per the directives of the Government in the Company is
 continuous. The Official Language Implementation Committee have been
 constituted in all the Units of the Company and the Subsidiaries,
 including the Corporate Office at Bangalore to monitor implementation
 of Official Language Act, Rules, Policy, etc. which meets at regular
 intervals in every quarter.
 
 In order to propagate the usage of Hindi as Official Language, HINDI
 DIWAS/HINDI FORTNIGHT was observed during the month of September,
 2011. Various competitions in Hindi such as Hindi Story Writing, Hindi
 News Paper Reading, Hindi Quiz Writing, Hindi Conversation, Hindi
 Antyakshari, etc., were organized and participants were awarded prizes.
 A workshop was organised during the above period. The Hindi
 Magazines/Newspapers are being procured to propagate the usage of Hindi
 among employees.  The concerned Officials of the Company regularly take
 part in the meetings of the Town Official Language Implementation
 Committee. The Company also sponsors some of the Hindi competitions
 under Bangalore Town Official Language Implementation Committee.
 
 VIGILANCE ACTIVITIES
 
 The Chief Vigilance Officer appointed by the Government of India heads
 the Corporate Vigilance Department of the Company. The Chief Vigilance
 Officer is assisted at Unit level by Assistant Vigilance Officers
 appointed specifically for this purpose.The Corporate Vigilance
 Department carries out vigilance functions in the Company as well as in
 the Subsidiaries. The vigilance functions in the manufacturing Units
 and Marketing Offices are looked after by Vigilance Officers, under the
 guidance of Chief Vigilance Officer.
 
 The Unit Vigilance Officers submit monthly vigilance and inspection
 reports to CVO. The reports so received are scrutinized at CVO Office
 for further action. Unit Vigilance Officers also verify Annual Property
 Returns submitted by the Unit level Officers. Apart from regular
 inspections by Unit Vigilance Officers, CVO conducts CTE type surprise
 and regular inspections of high value purchase /contracts and systems.
 Violations of rules and procedures, if any, observed during the
 inspection of files by CVO/Unit VOs are pointed out and comments of the
 concerned officers obtained. Wherever required, appropriate action
 against the concerned officers are recommended, instructions issued to
 the effect that the violations of rules and procedures pointed out by
 the Vigilance Department do not recur.
 
 In line with CVC''s direction, emphasis was laid on preventive vigilance
 by striving towards strict adherence to all procedures and norms of
 transparency in tendering process.  CVC''s guidelines for ''Improving
 vigilance administration by leveraging technology and increasing
 transparency through effective use of website'' are considered. Some of
 the systems put in place by the Company are:
 
 1.  Hosting of all open tenders and high value Limited Tenders on
 www.tenders.gov.in (website of Gol).
 
 2.  Publishing details regarding all purchase orders / contracts
 concluded during the month, above the threshold value (presentlyRs. 5.00
 lakhs).
 
 3.  Application form for vendor registration along with list of items
 required by different Units of the Company and Subsidiaries are made
 available on Company website so as to enable the interested vendors to
 download the application form and submit the same to the Unit of their
 choice. Efforts are being made for periodical uploading of status of
 every vendor application on website.
 
 4.  Wherever possible Company has adopted e-payment mode for
 remittance.
 
 Quarterly vigilance workshops were organized at all manufacturing Units
 to enhance the level of vigilance awareness among the employees and
 other stakeholders.  Vigilance Awareness Week 2011 was observed in all
 Units and Offices of the Company and Subsidiaries as per the guidelines
 of CVC.
 
 CORPORATE GOVERNANCE
 
 Pursuant to Clause 49 of the Listing Agreement with the Stock
 Exchanges, a Report on the Corporate Governance is annexed as part of
 this Report along with the Compliance Certificate from the Auditors. A
 Report on Management Discussion and Analysis is also appended to this
 Report separately. Further, a declaration by the Chairman & Managing
 Director for having obtained affirmation of compliance of the Code of
 Conduct by the Board Member (s)and Senior Management for the year ended
 March 31, 2012, is also appended.
 
 The Audit Committee could not be reconstituted as per CI.  49 of the
 Listing Agreement in the absence of Independent Directors to be
 appointed by the Government on the Board.
 
 The Register of Members and Share Transfer Records both in respect of
 the shares held in physical and depository form are maintained by Karvy
 Computershare Private Limited, the Registrars & Share Transfer Agents
 of the Company.
 
 INFORMATION REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
 FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 Particulars in respect of conservation of energy, technology absorption
 and foreign exchange earnings and outgo, as required under the
 Companies (Disclosures of Particulars) Rules, 1988, are annexed to this
 Report.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to Sub-Section (2AA) of Section 217 of the Companies Act,
 1956, the Board of Directors hereby state and confirm that:
 
 - In the preparation of the Annual Accounts, the applicable accounting
 standards have been followed along with proper explanation relating to
 material departures;
 
 - 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/loss of
 the Company for that period;
 
 - 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;
 
 - The Directors have prepared the annual accounts on a going concern
 basis.
 
 AUDITORS
 
 M/s S.R.R.K.Sharma , Bangalore, were appointed as Statutory Auditors of
 the Company for the year 2011 -12 by the Comptroller & Auditor General
 of India. Three firms of Chartered Accountants were also appointed as
 Branch Auditors for the other Units/Divisions of the Company.  M/s
 Khurana & Co., Cost Accountants were appointed as Cost Auditors for the
 year 2011 -12 in respect of Tractors.
 
 Replies to the observations by the Statutory Auditors in their Report
 are given by way of an addendum to this Report.
 
 DIRECTORS
 
 Vide Presidential Order No. 5(32)/2009-P.E.X dated 19th September 2011
 issued by the Department of Heavy Industry, Shri S.G. Sridhar, Director
 (Operations) has been appointed as the Chairman & Managing Director of
 the Company for a period of five years from the date he assumes the
 charge of the post or till the date of his superannuation or until
 further orders, whichever is earliest. Shri Sridhar took charge of the
 Post on September 19, 2011.
 
 Shri Harbhajan Singh, Director, retires by rotation at the ensuing
 Annual General Meeting and is eligible for re- appointment.
 
 The Ministry of Heavy Industries and Public Enterprises, Department of
 Heavy Industry, New Delhi has appointed Dr. Vijay Shankar Madan,
 Additional Secretary and Financial Advisor as a Director on the Board
 of the Company with effect from 18.07.2012 Vice Shri Saurabh Chandra,
 Director.
 
 Shri Antony Chacko was appointed as Director (Operations) in the
 vacancy caused by the elevation of Shri S.G. Sridhar as Chairman &
 Managing Director vide presidential order F.No. 5 (33)/2011PE.X. dated
 16.07.2012. He assumed charge of post on 23-08-2012.
 
 Pursuant to Article 67(4) of the Article of Association of the Company
 and Section 255 read with Sections 257 and 262 of the Companies Act,
 1956, as amended, Dr. Vijay Shankar Madan who was appointed as
 Directors of the Company, who retires by rotation at ensuing Anual
 General Meeting and is eligible for re-appointment.
 
 The Directors wish to place on record the services rendered by Shri
 Saurabh Chandra, Director.
 
 ACKNOWLEDGEMENTS
 
 Your Directors are thankful to the various Departments and Ministries
 in the Government of India, particularly the Department of Heavy
 Industry, Ministry of Corporate Affairs, Comptroller and Auditor
 General of India, Principal Director- Commercial Audit, Statutory and
 Branch Auditors, various State Governments, Foreign Collaborators, the
 Subsidiary Companies, Suppliers, Reserve Bank of India, the Consortium
 of Banks lead by UCO Bank and the valued Customers of the Company both
 in India and abroad for their continued co-operation and patronage.
 
 Your Directors would also like to take this opportunity to express
 their appreciation for the contributions made by the Company''s
 employees and look forward to their continued services in pursuit of
 building a world class Indian Company.
 
                        For and on behalf of the Board of Directors
  
                                                     (S. G. Sridhar)
 
                                       Chairman & Managing Director