Kinetic Motor Company

The Directors present their Report on the business and operations of
 your Company for the period ended 30th September, 2008.
 
 FINANCIAL RESULTS
 
 The Accounting Year of the Company is for a period of 18 months ending
 30th September, 2008. The Statement of Accounts has been prepared
 accordingly.
 
                                         Accounting       Accounting
                                         Year ended       Year ended
                                      on 30.09.2008    on 31.03.2007
                                      (Rs. in Lakhs)  (Rs. in Lakhs)
 
 Gross Sales and
 Other Income                               17595             26013
 
 Net Profit /(Loss) for
 the period                                (11482)            (7858)
 
 Profit/(Loss)
 carried forward
 
 Last Year                                 (13579)            (5721)
 
 This Year                                 (25060)           (13579)
 
 During the Accounting Year ended 30th September, 2008 (period under
 review) your Company produced 47832 nos. Two-wheelers as against
 69,321 nos. in the Accounting Year ended 31.3.2007 (previous period).
 During the period under review, your Company sold 53378 nos of Two
 Wheelers as against sale of 80,841 nos in the previous period.
 
 MANAGEMENT DISCUSSION & ANALYSIS REPORT
 
 Technical Collaboration:
 
 During the previous period your Company had entered into an agreement
 for technical collaboration with San Yang Industry Company Limited, a
 .1 billion automotive giant from Taiwan, having manufacturing bases
 in Taiwan, China and Vietnam. With this Technical Collaboration, your
 Company has manufactured and introduced SYMs advanced technology range
 of models in India during the period under review.
 
 Business Restructuring
 
 Due to intense competition, and entry of multinational giants in Indian
 market, your Company had been sufferring losses in the past few years.
 In order to protect the interests of the stakeholders, your Company,
 therefore, has been evaluating different options, including having a
 joint venture with a competent player in the market.  In the process,
 your Company could finalise a deal with Mahindra & Mahindra Limited.
 Pursuant to the deal, the two wheeler business related assets have been
 transferred to Mahindra Two Wheelers Limited, a subsidiary of Mahindra
 & Mahindra Limited, for a cash consideration of Rs.110 crore and a 20%
 equity stake in Mahindra Two Wheelers Limited.
 
 The deal was given effect to after the date of close of the period
 under review, in the month of November, 2008, and, therefore, the same
 will find reflection in the period following the period under review.
 
 Your Company is now evaluating different avenues for newer businesses.
 
 Financial Restructuring
 
 Post the close of the period under review, the funds available from the
 sale of business assets relating to the two wheeler business of the
 Company, have been used up for paying up all the secured lenders,
 thereby making your Company 100% debt free.
 
 During the period under review, Billion Ally Limited (the nominees of
 Sanyang Industry Company Limited in India) were issued 871795 6%
 Compulsorily Convertible Cumulative Preference Shares (CCCPS) @ Rs. 39
 per CCCPS, and the proceeds were used for importing essential parts for
 the new two wheeler model FLYTE, which was launched.
 
 As a part of the deal with Mahindra & Mahindra Limited w.r.t. two
 wheeler business, the corporate mark & logo KINETIC was sub-licenced
 to Mahindra Two Wheelers Limited, for which correspondingly an
 extension of licence has been obtained from Kinetic Engineering
 Limited, and against which the Company has agreed to issue Redeemable
 Preference Shares of the value of Rs. 5 crore to Kinetic Engineering
 Limited.
 
 Research & Development And Technology Absorption
 
 During the period under review, the Companys R&D Department, under
 guidance of technical team of SYM headed by Executive Director, Mr.
 Chung Long Chen has developed and launched the SYM new scooter Model
 FLYTE.
 
 Total expenditure incurred by the Company on Research & Development
 (R&D) during the period under review was Rs.432.69 lakhs which
 represents 3.06% of the Companys turnover.
 
 Industry Overview
 
 The overall sales of two wheelers in Indian market have degrown during
 the year under review. This has been mainly caused by the general
 economic slowdown.
 
 Opportunities, threats, risks and concerns
 
 The Company having sold its assets relating to two wheeler business in
 November, 2008, its now focusing on opportunities for newer businesses.
 The Companys financial condition has been deteriorating over the
 years. The deal with Mahindra & Mahindra Limited, is expected to
 provide some respite, which, though, is not sufficient enough to cover
 all the unsecured liabilities adequately.
 
 Outlook
 
 After having sold its assets relating to two wheeler business in
 November, 2008 and after achieving a debt-free status, your Company is
 now evaluating different avenues for newer businesses. After studying
 different factors, the management would crystallise its course of
 action in the next few months. Additionally, the investment in Mahindra
 Two Wheelers Limited, in terms of 20% equity stake, is expected to grow
 in the years to come.
 
 Financial performance vis-a-vis Operational performance:
 
 Sales and Other Income
 
 Sales and other income in the period under review were Rs. 176 crores
 as against Rs. 260 crores in the previous period.
 
 Margin
 
 The company reported a net loss of Rs. 114.82 crores in the period
 under review as against net loss of Rs. 78.58 crores in the previous
 period.
 
 Interest Cost
 
 Interest cost in the period under review was Rs.  12.88 crores as
 against Rs. 10.40 crores in the previous period.
 
 Inventory
 
 Inventory for the period under review was Rs. 22.83 crores as against
 Rs. 35.39 crores in the previous period.
 
 Debtors
 
 Debtors for the period under review were Rs. 4.83 Crores as against Rs.
 31.63 crores in the previous period
 
 Internal Control System
 
 Your Company has adequate internal control system commensurate with its
 size and nature of business for ensuring efficiency of operations and
 protection of companys assets. The companys Audit Committee
 periodically reviews compliance with companys policies, procedures and
 laws.
 
 Human Resource Development
 
 During period under review, HR Department conducted programmes for
 training, health and safety of employees for development of their
 capabilities. As a result of acquiring Two Wheeler business during the
 period under review, the number of employees increased to 1197 as on
 31st March 2007. Throughout the period under review, the relationship
 with labour has been cordial.
 
 Cautionary Statement
 
 This Management & Discussion Analysis Report is a forward looking
 statement, based on companys projections, estimates and perceptions
 about socio-economic conditions, government policies etc. The company
 does not guarantee its accuracy and cautions that circumstance beyond
 control of the Management may affect the actual working.
 
 FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 The information on foreign exchange earnings and outgo is contained in
 Schedule 14, Notes to the Accounts (Point Nos. 12,13 and 14)
 
 CONSERVATION OF ENERGY
 
 The energy conservation cell of the company creates awareness among
 employees for energy conservation and also encourages employees for
 efficient utilization of energy within the organization by means of
 imparting training, displaying posters, control usage & massaging
 through e-mails. Following measures for conservation of energy were
 taken during the period under review:
 
 1) Maintaining the plant power factor to unity by the effective
 monitoring which has helped the Company to get maximum Power Factor
 incentive from Madhya Pradesh Paschim Kshetra Vidyut Vitran Co.Ltd.
 
 2) Implementation of the Demand Side Management within the organization
 helped in reduction of Maximum Demand & system losses to the great
 extent.
 
 3) Switched Off non-essential loads in logical sequence during
 non-productive hours like Air compressors, shops & street lightings,
 idle running of machines.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors
 confirm that:
 
 1.  In preparation of the accounts for the period under review, your
 company has followed the applicable accounting standards.
 
 2.  Appropriate accounting policies have been selected and applied
 consistently and have 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 at 30th September, 2008 and of the loss of the
 Company for the period ended on that date.
 
 3.  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.
 
 4.  The Annual Accounts for the period under review have been prepared
 on a Going Concern basis.
 
 CORPORATE GOVERNANCE
 
 Your Company is implementing Corporate Governance code as per the
 Listing Agreement with Stock Exchange. A separate Report on Corporate
 Governance is given as Annexure to the Directors Report.
 
 PARTICULARS OF EMPLOYEES
 
 Particulars of Employees as required under Section 217 (2A) of the
 Companies Act, 1956 read with Companies (Particulars of Employees)
 Rules, 1975 and forming part of this Report. However, as per the
 provisions of Section 219(1 )(b)(vi) of the Companies Act, 1956, the
 Report and Annual Accounts are being sent to the shareholders of the
 Company, excluding the particulars of employees.  Any shareholder
 interested in obtaining a copy of the said Statement may write to the
 Company.
 
 DIRECTORS
 
 The Directors note the sad demise of Mr. S. S.  Marathe, on 28.9.2008.
 Mr. Marathe had a distinguished background as an economist, and
 contributed to the cause of the growth of the Company.
 
 Mr. Liu Wu Hsiung and Mr. Chung Long Chen, who were appointed as
 Additional Directors in the previous period, were confirmed as
 directors at the last AGM.
 
 During the year Air Chief Marshal H. Moolgavkar (Retd.) has resigned as
 a director. Further, Mr. A.  M. Shirolkar resigned as a director of the
 Company w.e.f. 18th November, 2008, and Mr. Chung Long Chen resigned as
 director of the Company w.e.f.  24th December, 2008. The Company notes
 their contribution and support to the cause of the growth of the
 Company.
 
 Mr. Dinesh Munot & Mr. M. Venkataiah are liable for retirement by
 rotation at the ensuing AGM of the Company, and they are eligible for
 reappointment.
 
 Mr. S. R. Kotecha, who has been appointed as an Additional Director of
 the Company in terms of the provisions of Section 260 of the Companies
 Act, 1956, holds office as such till the ensuing Annual General
 Meeting. The Company has received a Notice in writing from a Member
 proposing his candidature for the office of Director.
 
 AUDITORS
 
 The auditors M/s A. F. Ferguson & Co, Chartered Accountants, hold
 office until the ensuing Annual General Meeting and have furnished a
 certificate in terms of Sec. 224(1) of the Companies Act, 1956, about
 their eligibility.
 
 FIXED DEPOSITS
 
 The company has not accepted any fixed deposit from public during the
 period under review.
 
 ACKNOWLEDGEMENT
 
 Your Directors appreciate support from Financial Investors and
 cooperation received from vendors and dealers. The Board of Directors
 wishes to thank Central Government and Government of Madhya Pradesh and
 banks for their cooperation.  The Directors also wish to thank our
 shareholders and customers for their continued support and place on
 record their appreciation of the services rendered by the employees of
 the company.
 
                                     By Order of the Board of Directors
                                      For KINETIC MOTOR COMPANY LIMITED
 
 Pune,                                                    A. H. FIRODIA
 19th December, 2008                                           Chairman