Sona Koyo Steering Systems

The Directors have pleasure in presenting the Annual Report together
 with audited accounts of the Company for the year ended 31st March,
 2008.
 
 Performance
                                                 2007-08     2006-07
                                                 Rs./Lacs    Rs./Lacs
 
 Sales and Other Income                            68965     58346
 Profit before Interest & Depreciation              6955      6451
 Interest                                           1184       869
 Depreciation & Write Offs                          1827      1425
 Profit before Tax                                  3944      4157
 Less : Provision for Tax                            755      1175
 Provision for Deferred Tax Liability/(Assets)       574       160
 Provision for Fringe Benefit Tax                     96        51
 Profit after Tax                                   2519      2771
 Add : Profit Brought Forward                       1745       768
 Profit available for appropriations                4264      3539
 
 Appropriations
 Proposed Dividend                                   696      679
 Tax on Dividend                                     118      115
 Transfer to General Reserve                        1000     1000
 Balance Carried Forward                            2450     1745
                                                    4264     3539
 
 Dividend
 
 Your Directors have recommended a Dividend of 35% on Equity Share
 Capital of the Company for the Financial Year 2007-2008 as against the
 Dividend paid at the rate of 35% on Equity Share Capital for the
 previous Financial Year.
 
 Preferential Shares
 
 In terms of the Special Resolution passed by the Shareholders of the
 Company at the Extraordinary General Meeting held on 22nd November,
 2006, the Committee of Directors in its meeting held on 7th December,
 2006 had allotted 70,40,216 nos. of Convertible Warrants of Rs. 2/-
 each at a premium of Rs. 65.10 per Warrant to Sona Autocomp Holding
 Private Limited (formerly ‘Mandira Investment & Finance Co. Pvt. Ltd.’)
 and JTEKT Corporation, on preferential basis. Out of these 70,40,216
 nos. of Convertible Warrants, 46,16,535 nos. of Convertible Warrants
 were due for conversion in April, 2007 and balance 24,23,681 nos. of
 Convertible Warrants were due for conversion in April, 2008.
 
 As per the terms of allotment of the aforesaid Warrants, one
 Convertible Warrant of Rs. 67.10 was convertible into one Fully Paid Up
 Equity Share of Rs. 2/- at a premium of Rs. 65.10 per share. Both the
 aforesaid holders of Convertible Warrants had exercised the option for
 conversion of Warrants, due in April, 2007 and April, 2008, into Equity
 Shares of the Company and remitted the balance 90% subscription money.
 
 In place of 70,40,216 nos. of Convertible Warrants, the Committee of
 Directors in its meeting held on 28th April, 2007 and the Board of
 Directors in its meeting held on 18th April, 2008 have allotted
 46,16,535 and 24,23,681 nos. of Equity Shares respectively, to the
 following shareholders, consequent upon conversion of convertible
 warrants issued on preferential basis:
 
 Details of Equity Shares Allot
 
 SI.  Name of the No. Allottee(s)
 
 1.  JTEKT Corporation
 
 2.  Sona Autocomp Holding Private Limited (formerly ‘Mandira Investment
 & Finance Co. Pvt. Ltd.’)
 
 No. of Equity             No. of Equity
 Shares                    Shares
 Allotted                  Allotted
 on 28.04.07               on 18.04.08
 (Face Value of Rs. 2/- per share)
 
 9,27,923                  4,87,160
 36,88,612                19,36,521
 
 Consequent upon the above allotment of Shares, the Paid up Equity Share
 Capital of the Company, as on date, has increased to Rs. 19,87,41,832/-
 comprising of 9,93,70,916 Equity Shares of Rs. 2/- each.
 
 Subsidiary Companies
 
 During the year under review, the Company has entered into Joint
 Venture Agreements with JTEKT Corporation, Japan; Fuji Kiko Co. Ltd.,
 Japan and Arjan Auto Private Limited, India.  Consequent upon these
 Joint Venture Agreements, the Company has created following three new
 subsidiary companies:
 
 a) JTEKT Sona Automotive India Limited (JSAI)
 
 In JSAI, your Company is holding 49% of the Equity Capital but it has
 the right to nominate majority of the Directors on the Board of JSAI.
 This Joint Venture Company has been established with JTEKT Corporation,
 Japan with a business objective of manufacturing Column Type Electric
 Power Steering (C-EPS) Systems. JSAI has already got allotment of land
 admeasuring 10 Acres at Industrial Area, Bawal, Haryana, and the
 construction of plant is on. The commercial production of JSAI is
 expected to commence in April, 2010.
 
 b) Sona Fuji Kiko Automotive Limited (SFAL)
 
 In SFAL, your Company is holding 51% of the Equity Capital.  This Joint
 Venture Company has been established with Fuji Kiko Co. Ltd., Japan
 with a business objective of manufacturing Columns to be used in the
 manufacturing of C-EPS by JSAI. SFAL has also got allotment of land
 admeasuring 5 Acres at Industrial Area, Bawal, Haryana, and the
 construction activities have already been commenced.  The commercial
 production of SFAL is expected to commence in September, 2009.
 
 c) Arjan Stampings Limited (ASL)
 
 In ASL, your Company is holding 65% of the Equity Capital.  This Joint
 Venture Company has been established with Arjan Auto Private Limited,
 India, with a business objective of Sheet Metal Processing, comprising
 of press work and welding to cater the automotive component sector. ASL
 has got its works at Farukhnagar, Gurgaon and the commercial production
 has already started on 31st January, 2008.
 
 Joint Ventures
 
 During the year, the Company has also entered into a Joint Venture
 Agreement with AAM International Holdings Inc., USA, whereby a Joint
 Venture Company in the name of AAM Sona Axle Private Limited has been
 established. Sona Koyo shall be holding 30% equity in this Company.
 This Joint Venture Company has been established with the business
 objective of manufacturing Axles.  The Commercial production of this
 Joint Venture Company is expected to commence in August, 2008.
 
 Subsidiary Companies Accounts
 
 In terms of approval granted by the Central Government under Section
 212(8) of the Companies Act, 1956, copies of the Balance Sheets, Profit
 & Loss Accounts, reports of the Board of Directors and Auditors of the
 subsisting subsidiaries have not been attached with the Balance Sheet
 of your Company. These documents will be made available upon request by
 any member of the Company interested in obtaining the same. However, as
 directed by the Central Government, the financial data of the
 subsidiaries have been furnished under ‘Summarised Statement of
 Financials of Subsidiary Companies’ forming part of the Annual Report.
 Further, pursuant to Accounting Standard AS-21 issued by the Institute
 of Chartered Accountants of India, Consolidated Financial Statements
 presented by the Company includes financial information of its
 subsidiaries.
 
 Consolidation of Accounts
 
 In accordance with the Accounting Standard AS-21 on Consolidated
 Financial Statements read with Accounting Standard AS-27 on Financial
 Reporting for Interest in Joint Ventures, the audited Consolidated
 Financial Statements are provided in the Annual Report.
 
 Corporate Governance
 
 The Company has been pro-active in following the principles and
 practices of good Corporate Governance. The Company has taken adequate
 steps to ensure that the conditions of Corporate Governance as
 stipulated in Clause 49 of the Listing Agreements with the Stock
 Exchanges are complied in its letter and spirit.
 
 A separate statement on Corporate Governance is produced as a part of
 the Annual Report along with the Auditors’ Certificate on its
 compliance.
 
 Listing
 
 The Securities of your Company are listed at National Stock Exchange
 and Bombay Stock Exchange and the Company has paid the Listing Fee due
 to them.
 
 Fixed Deposits
 
 During the year, the Company has not invited any deposits from the
 public.
 
 Directors
 
 Our colleagues Mr. Tomizo Nakaya, Nominee of JTEKT Corporation, Japan
 (JTEKT) and Mr. Shinichi Takeuchi, Nominee of Maruti Suzuki India
 Limited (formerly ‘Maruti Udyog Limited’) (MSIL), due to withdrawal of
 nomination, have ceased to be Directors of the Company effective from
 18th October, 2007.  Dr. Omkar Goswami has also ceased to be Director
 of the Company with effect from 30th April, 2008.
 
 During the year, the Board of Directors of your Company has appointed
 Mr. Waichiro Ijiri, Nominee of JTEKT as Director of the Company on 18th
 October, 2007, to fill the casual vacancy caused by the withdrawal of
 nomination of Mr. Tomizo Nakaya.
 
 Mr. Tsuneo Kobayashi, Nominee of MSIL, who was appointed as Director,
 by the Board of Directors of the Company in its meeting held on 18th
 October, 2007, to fill the casual vacancy of Mr.  Shinichi Takeuchi,
 has also ceased to be a Director on 18th January, 2008 due to
 withdrawal of his nomination by MSIL and in his place Mr. Noriyuki
 Fujita, Executive Officer (Supply Chain) of MSIL, was appointed as an
 additional Director by the Board of Directors of the Company in its
 meeting held on 18th January, 2008.
 
 Your Directors take this opportunity to place on record the
 appreciation of services rendered by Mr. Tomizo Nakaya, Mr.  Shinichi
 Takeuchi, Mr. Tsuneo Kobayashi and Dr. Omkar Goswami during their
 association with the Company.
 
 The Board of Directors in their meeting held on 30th April, 2008
 appointed Lt. Gen. (Retd.) Shamsher Singh Mehta as an Additional
 Director on the Board of your Company. Also, as part of its drive to
 inculcate professionalism in management of business, the Company
 proposed to induct its Chief Operating Officer to participate in the
 decisions at the Board level. Accordingly, the Board of Directors in
 their meeting held on 30th April, 2008 have appointed Mr. K.M.
 Deshmukh, Chief Operating Officer of the Company, to the position of
 Dy. Managing Director of the Company effective from 1st May 2008.
 
 The requisite resolutions pertaining to the appointment of Lt.  Gen.
 (Retd.) Shamsher Singh Mehta and Mr. K.M. Deshmukh as detailed in Item
 Nos. 9 and 11 of the Notice and relevant Explanatory Statements, are
 commended to the Members’ approval.
 
 Mr. Ramesh Suri, who was appointed as a Director of the Company in the
 casual vacancy caused due to sad demise of Mr. Lalit Suri, shall also
 retire at the forthcoming Annual General Meeting pursuant to the
 provisions of Section 262 of the Companies Act, 1956. Mr. Noriyuki
 Fujita, Lt. Gen. (Retd.) Shamsher Singh Mehta and Mr. K.M. Deshmukh,
 being additional directors shall vacate office in terms of the
 provisions of Section 260 of the Act. Requisite notices have been
 received under Section 257 from members for their re-appointment.  The
 resolutions are commended for the Members’ approval.
 
 Pursuant to Article 122 of the Articles of Association of the Company
 Mr. J.M. Kapur, Mr. Ravi Bhoothalingam and Mr.  P.K. Chadha will retire
 by rotation at the forthcoming Annual General Meeting and being
 eligible, offer themselves for reappointment.
 
 Audit Committee
 
 Pursuant to the provisions of Section 292A of the Companies Act, 1956
 and Clause 49 of the Listing Agreements with Stock Exchanges, the Audit
 Committee of Directors of the Company consisted of the following
 members :
 
 i) Mr. Ravi Bhoothalingam;
 
 ii) Mr. P.K. Chadha;
 
 iii) Dr. Omkar Goswami; and
 
 iv) Mr. Sunjay Kapur
 
 The Audit Committee in its meeting held on 20th May, 2002, had
 appointed Mr. Ravi Bhoothalingam as the Chairman of the Audit
 Committee.
 
 Since, Dr. Omkar Goswami has ceased to be a Director with effect from
 30th April, 2008, the Board of Directors of the Company in their
 meeting held on 30th April, 2008 reconstituted the Audit Committee of
 Directors.
 
 The Audit Committee of Directors of the Company now consists of the
 following members :
 
 i) Mr. Ravi Bhoothalingam; ii) Mr. P.K. Chadha; and iii) Mr. Sunjay
 Kapur
 
 Directors’ Responsibility Statement
 
 As required under Section 217(2AA) of the Companies Act, 1956, your
 Directors confirm having :
 
 i) followed in the preparation of the Annual Accounts, the applicable
 accounting standards with proper explanation relating to material
 departures;
 
 ii) selected such accounting policies and applied them consistently and
 made judgement and estimates that are reasonable and prudent so as to
 give a true and fair view of the state of affairs of your Company at
 the end of the financial year and of the profit of your Company for
 that period;
 
 iii) 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 your Company and for
 preventing and detecting fraud and other irregularities; and
 
 iv) prepared the Annual Accounts on a going concern basis.
 
 Auditors
 
 M/s. S.P. Puri & Co., Chartered Accountants, hold office as Auditors
 until the conclusion of the forthcoming Annual General Meeting and have
 indicated their willingness to be reappointed as Auditors. The
 requisite certificate under Section 224(1B) of the Companies Act, 1956,
 has been received from them. The notes to accounts referred to in the
 Auditors Report are self-explanatory.
 
 Conservation of Energy, Technology Absorption, Foreign Exchange
 Earnings and Outgo.
 
 A statement containing the necessary information as required under the
 Companies (Disclosure of particulars in the Report of
 
 Directors) Rules, 1988 and forming part of the Directors’ Report for
 the year ended March 31, 2008 is given as Annexure - ‘A’ to this
 report.
 
 Employees
 
 In accordance with the provisions of Section 217(2A) of the Companies
 Act, 1956 read with the Companies (Particulars of Employees) Rules,
 1975, the particulars of employees are given in Annexure - ‘B’ forming
 part of this report.
 
 Acknowledgements
 
 Your Directors acknowledge with gratitude the co-operation and support
 extended by Sona’s customers namely Maruti Suzuki India Limited,
 Hyundai Motors (India) Ltd., Toyota Kirloskar, Tata Motors Ltd.,
 Mahindra & Mahindra, Hindustan Motors Ltd., JTEKT Corporation, Japan,
 Mando Corporation, Korea and Fuji Autotech Europe S.A.S, the Financial
 Institutions, Banks, various agencies of the Government, Sona’s
 collaborators– JTEKT Corporation, Japan, Mando Corporation, Korea and
 Fuji Autotech AB, Sweden.
 
 Your Directors also wish to place on record their sincere appreciation
 of the services rendered by all employees of the Company and are
 thankful to the Shareholders for their continued patronage.
 
                                         For and on behalf of the Board
 
 Place : New Delhi                            Dr. Surinder Kapur
 Dated : 30th April, 2008                 Chairman & Managing Director