Dear Shareholder,
 
 It is my pleasure and privilege to reach you through this annual
 report. The year 2010-11 has been, in many ways, a very exciting year.
 The market surprised everyone with its strength. In the context of the
 events of 2008 and 2009, the predictions were that 2010-11 would see
 moderate growth of about 10 -12 per cent. In fact, the car industry
 grew at about 29 per cent. A very pleasant surprise but it posed huge
 challenges to your Company and its vendors, in terms of production
 capacity. The Gurgaon plant was already working to full capacity. At
 Manesar we had planned that the second line would be commissioned in
 the second half of 2011-12, as it did not seem that the market demand
 would require earlier completion. The vendors had also planned their
 production schedules for the targets projected by us and other experts.
 
 It is to the credit of our production team that they could bring in
 many innovations on the production system, which resulted in total
 sales increasing in 2010-11 to 1.27 million cars from 1.02 million in
 the previous year- an increase of 25 per cent. Producing 250,000 extra
 cars, without any new additions to capacity was really an outstanding
 achievement. At the same time, our supply chain teams worked with
 vendors to enable them to increase their output to match our
 requirements. Vendors indeed rose to the occasion and enabled us to
 reach a record level of production. This ability to improvise and find
 solutions when faced with difficulties is one of the strengths of your
 company and its vendors, and augurs well for the future.
 
 We carried out in-depth studies to determine the likely trends in
 consumer demand for cars in the future. It was interesting to note that
 in the last few years the real cost of buying cars in India had
 declined sharply, due to the high rates of growth of the economy and
 consequently per capita incomes, and the relatively much slower
 increase in car prices. On the basis of these studies, we expect the
 demand for cars to double in the next five years and grow at this rate
 through the rest of the decade.  We also realised, on the basis of past
 experience, that the growth curve was very unlikely to be linear, but
 instead would have sharp ups and downs. That is exactly what is
 happening this year, when the demand, which was projected by the auto
 industry in the 10 -15 per cent range, may even be somewhat lower. This
 is also partly the result of the large increases in petrol prices and
 interest rates on car loans. However, we have confidence that in the
 longer term the Indian market for cars will continue to be strong. On
 that basis we decided to move forward the
 
 second line at Manesar and it would be in production in September 2011.
 Work is also proceeding rapidly on the third line at Manesar, and it is
 scheduled to be completed by September 2012.
 
 At the same time, looking at future demand, and the gestation time in
 starting production at a green field site, we have started to look for
 another site where we can establish our next production lines. We are
 keeping in view the strong possibility of increasing the export of
 small cars to world markets, particularly Europe, the need to reduce
 risk of production disruptions, the logistical and infrastructural
 imperatives and the availability of an industrially friendly
 environment.
 
 The future success of the Company critically depends on our ability to
 meet the customer aspirations and needs.  Technology, design skills and
 creativity and quality have to be combined in a manner where the
 customer gets the best value for money. Suzuki Motor Corporation is
 actively helping us to achieve this goal. Our R&D facility being
 established in Rohtak is a major step towards this end. The R&D
 engineers in Japan and India are working in very close cooperation with
 each other and we are now a part of the integrated development of cars
 which was earlier all done in Japan. I am sure that this R&D centre,
 and the knowledge which our engineers are acquiring will give us a
 competitive edge in the coming years. At the same time, we started
 production of the K-series engines, developed by Suzuki. These engines
 are lighter, give better fuel efficiency and are cleaner than the
 engines which we were using earlier. We continue joint efforts with
 Suzuki to make vehicles lighter, and to give better value to customers.
 The term ‘techno_logical’ has been coined to reflect what we are doing.
 It is the combination of technology and logic, from the customer’s view
 point, so as to produce cars which best meet the needs of all segments
 of society. Our engineers remain very conscious of the changing
 environment, and its impact on customer needs and will use this
 approach to keep the ‘value for money’ edge.
 
 Our biggest resource and asset are our employees.  We have always been
 fully committed to developing the potential of this resource as that
 really creates a win-win situation not only for the employees and the
 Company, but for all the other stakeholders. We did have an unfortunate
 situation developing in Manesar in June 2011, and are determined to
 learn from this and re-double our efforts to create a mutually
 productive and beneficial relationship with our workers there.
 
 The prospects and future of the Indian economy are bright. We are an
 integral part of that economy and will continue to participate in
 accelerating economic growth and manufacturing, and giving our
 customers and our stakeholders the benefits of the technology and the
 values which have been our driving force. I thank all of you
 shareholders for your consistent support to the management and assure
 you that your Company will, as always, come up to your expectations.
 
 R. C. Bhargava
 
 Chairman