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TVS Motor Company Directors Report, TVS Motor Reports by Directors

TVS Motor Company

BSE: 532343  |  NSE: TVSMOTOR  |  ISIN: INE494B01023  |  Auto - 2 & 3 Wheelers

Explore TVS Motor connections « Mar 07
Directors Report Year End : Mar '08
The directors present the sixteenth annual report and the audited
 accounts for the year ended 31st March 2008.
 
 i.  FINANCIAL HIGHLIGHTS
 
 Details                                  Year ended     Year ended
                                         31.03.2008      31.03.2007
 QUANTITATIVE
                                               (Numbers in lakhs)
 
 Sales:
 Motorcycles                            6.10                 9.23
 Mopeds                                 4.09                 3.44
 Scooters                               2.58                 2.59
 Total vehicles sold                   12.77                15.26
 
                                            (Rupees in crores)
 FINANCIAL
 
 Sales (net of excise duty) and
 other income                         3,310.35          3,920.89
 EBITDA                                 132.15            203.23
 Interest and finance charges (net)       2.19             24.78
 Depreciation                            94.59             87.60
 Profit before tax                       35.37             90.85
 Provision for tax
 (including deferred tax and
 fringe benefit tax)                     3.60              24.25
 Profit for the year (after tax)        31.77              66.60
 Surplus brought forward                29.09              35.50
 Tax relating to earlier years            -               (0.32)
 Profit available for appropriation     60.86             101.78
 APPROPRIATIONS:
 Interim dividend                          -               16.63
 Proposed dividend                      16.63               3.56
 Tax on dividend                         2.83               2.94
 Transfer to general reserve            10.00              49.56
 Surplus carried forward                31.40              29.09
 
 2. DIVIDEND
 
 The board of directors have recommended a dividend of Re. 0.70 per
 share for the year 2007-08 absorbing a sum of Rs. 16.63 crores. subject
 to the approval of shareholders in the ensuing annual general meeting.
 
 3. PERFORMANCE
 
 The total number of two wheelers sold by the Company during the year
 under review was 1.28 million units, registering a fall of 16% over the
 previous year. Motorcycles declined steeply by 33%, while mopeds grew
 by 19%. Scooter sales remained flat.  The Companys export sales grew
 by 32% to 1.36 lakh numbers from 1.03 lakhs in 2006-07.
 
 During the year 2007-08, the motorcycle category of the two wheeler
 industry registered a decline of 8%. The economy segment which has been
 the driver of growth in the past suffered maximum decline of 19%,
 because of non availability of retail finance and stringent credit
 norms imposed by the financiers, especially in small towns and rural
 markets. During the year, the motorcycle portfolio was largely
 dependent on Star brand of motorcycles, which is a significant player
 in the economy segment, dependent upon availability of retail credit.
 
 Despite the slowdown, keeping in mind specific requirements of
 customers, the Company launched a powerful 110 cc variant of Star City
 and a new Star Sport which delivers best in class mileage.
 
 The executive segment of the two wheeler industry declined marginally
 by 3% despite launch of new products by the manufacturers. This segment
 accounts for over 55% of total motorcycle sales. Launch of TVS Flame,
 in this segment by the company, was delayed due to litigation on usage
 of twin spark plug. While the legal process is still going on, in order
 to avoid business disruption, the Company launched TVS Flame with a
 single spark plug without compromising on any of the performance
 parameters towards the end of the year. The product portfolio of the
 Company is now complete with the launch of TVS Flame.
 
 The Company plans to launch new variants of Scooty and Apache RTR
 during the year 2008-09. With the complete product range now available,
 the Company hopes to reverse the decline and grow during 2008-09.
 
 During the year, the turnover declined to Rs. 3310 crores from Rs. 3921
 crores. The profit before tax (PBT) of Rs. 35 crores for the year was
 substantially lower than the previous years PBT of Rs. 91 crores due
 to lower sales and consequent reduction in margins.
 
 THHEE WHEELER OPERATIONS
 
 The Company launched its three wheeler, TVS King in two variants - two
 stroke petrol and two stroke LPG in March 2008.  The product comes with
 many first time features in the industry and delivers higher comfort
 and convenience, better fuel efficiency and more importantly superior
 style to give pride of ownership to the drivers.
 
 The product has received encouraging response from the market.  TVS
 King has been launched in selected towns and will be gradually extended
 all over India by December 2008.
 
 The Company plans to introduce four stroke version in Petrol, LPG and
 CNG fuels for domestic and export markets during 2008-09.
 
 4.  MANAGEMENT DISCUSSION AND ANALYSIS
 
 During the year 2007-08, the Company commenced commercial production
 from its Nalagarh Plant located in Himachal Pradesh.  The Company
 enriched its portfolio in the motorcycle category with the launch of
 TVS Flame for the executive segment. The Company also entered the three
 wheeler segment in March 2008. Another important milestone crossed
 during the year was the commencement of commercial production from its
 state-of- the-art plant located at Karawang near Jakarta, Indonesia and
 successful launch of TVS Neo, the Bebek, exclusively developed for the
 Indonesian market by its subsidiary PT TVS Motor Company Indonesia.
 
 Indian two wheeler industry suffered on account of restricted
 availability of retail finance, high interest rates and stringent norms
 exercised by the financiers. This coupled with higher inflation
 dampened the spirit of the two wheeler buyers, leading to a sharp
 decline in sales during 2007-08.
 
 The Company achieved annual two wheeler sales of 1.28mn, a decline of
 16% from 1.53mn numbers sold in the previous year.  The turnover
 declined from Rs. 3,921 crores to Rs. 3,310crores.  The profit before
 tax of Rs. 35 crores for the year was substantially lower than the
 previous years PBT of Rs. 91 crores due to lower sales and consequent
 reduction in gross margins.
 
 The current year 2008-09 will continue to be a challenging year.
 Continued restricted availability of retail finance, high inflation and
 high fuel prices are likely to affect growth of two wheelers. In
 addition, steep increase in cost of raw materials and inability to
 fully pass on the cost increase will impact margins.
 
 However, the Company is now in a better position to leverage on its
 complete portfolio with the launch of TVS Flame and reverse the
 declining trend in sales. The Company further plans to launch more new
 products and partially neutralize the rise in costs by implementing
 aggressive cost reduction programmes in the current year.
 
 INDUSTRY STRUCTURE AND DEVELOPMENTS
 
 The two wheeler industry had been on a strong growth trajectory in the
 past years. Easy availability of retail finance with low down payment
 schemes, increasing household incomes and launch of more stylish and
 fuel efficient motorcycles had enabled the industry to grow.
 
 However, the year 2007-08 saw a decline of 5% in two-wheeler sales
 compared to the previous year. Motorcycles declined by 8% while
 ungeared scooters and mopeds which are less dependent on retail finance
 registered a robust growth of 16% and 10% respectively.
 
 In the motorcycle category, the economy segment which has been the
 driver of growth in the past suffered maximum decline of 19%, as this
 segment is most sensitive to retail finance. The executive segment
 declined marginally by 3% despite launch of new products by leading
 manufacturers. Premium segment recorded a growth of 8% over the
 previous year. The category Ungeared segment grew at a robust 16% as
 compared to 10% in the previous year, increasing its category share to
 13%.
 
 Mopeds grew at 10% as compared to 5% of previous year and maintained
 its category share.
 
                                        2006-07
 
 Particulars                Sales    Growth      Category
                           in mn      in %        share
 
 Motorcycles               7.10        15%          84%
 Ungeared scooters         0.87        10%          10%
 Geared scooters           0.10       -49%           1%
 Mopeds                    0.39         5%           5%
 Total two wheelers        8.46        12%         100%
 
           2007-08_
 Sales                Growth          Category
 in mn                 in %            share
 
 6.54                 -8%               81%
 1.01                 16%               13%
 0.06                -40%                1%
 0.43                 10%                5%
 8.04                 -5%              100%
 
 However, in the long term, growing population and economic activity
 will increase the overall need for mobility. In addition, the
 contributors to the mobility requirement include increasing women
 workforce, rising trend in self employment, emergence of satellite
 towns and growth in rural economy. The current penetration levels of
 two wheelers in the country are still low at 7% which offers
 considerable scope for growth.
 
 BUSINESS OUTLOOK AND OVERVIEW
 
 In 2007-08, the economy grew at 8.7% which is lower than the previous
 years growth of 9.4%. Agriculture continued to grow at a moderate pace
 of 2.6%, whereas Services and Industry grew by 10.6% and 8.6%
 respectively.
 
 In 2008-09, GDP growth is projected to be lower at 7%. High
 inflationary pressures and non-availability of retail finance
 especially in small towns and rural markets will continue to dampen the
 sentiments of two wheeler industry. Further, the increase in fuel
 prices is likely to affect customers buying behaviour adversely.
 Consequently, motorcycle segment is expected to remain flat during
 2008-09. Ungeared scooter segment and mopeds, which are less dependent
 on retail finance, are estimated to grow at 10% and 5% respectively.
 
 COMPANY PERFORMANCE
 
 New Product Launches and Initiatives
 
 During the year 2007-08, the Company launched various new products and
 variants.
 
 TVS Flame
 
 This is the hottest riding experience sporting many first time features
 (in the executive segment) like the embedded trafficators, Instant
 Mileage Indicator, Delta Edqe exhaust and glove box. Flame sports a
 revolutionary 3 Valve CCVTi engine which delivers best in class mileage
 without compromise on power. With this launch, the Company will
 actively compete in the executive segment.
 
 Apache RTR
 
 This 160cc Apache launched in the growing premium segment, was declared
 Performance Bike of the year 2008 by Auto Business Standard Motoring,
 NDTV and Overdrive. It also bagged the NDTV Car & Bike Award for Best
 Design of the year.
 
 Star Sport
 
 The new Star Sport with superior style, refreshing graphics, pleasing
 colours and contemporary design became an instant hit. More
 importantly, this bike delivers the best mileage in its class.  Star
 City 110 cc An upgrade of the existing and highly successful Star City,
 this new motorcycle packs a more powerful punch with increased power
 and higher fuel efficiency with VTi technology.
 
 Scooty TeenZ Electric
 
 This new entrant in the TVS Scooty family is an electric eco-friendly
 scooter.  This will address the growing demand for electric scooters in
 India. Scooty TeenZ Electric has been launched in Gujarat and
 Maharashtra. During the year 2008-09, this product will be made
 available across the country.
 
 TVS Tru4 Oil
 
 TVS Tru4 oil has been indigenously developed by the Company in
 association with BPCL. This is specifically designed for smooth clutch
 operations, smoother gearshift and enhanced engine protection providing
 an ultra smooth biking experience for the customer. This product has
 been certified by JASO (Japanese Automotive Standards Organisation) for
 MA2 with API 20W40 grade.
 
 Motorcycles
 
 In this category, the Company faced a steep decline of 33% during
 2007-08. The Companys motorcycle portfolio was largely dependent on
 Star brand of motorcycles and the impact of non- availability of retail
 finance was severe. Launch of TVS Flame was delayed due to litigation
 on usage of twin spark plug. While the legal process is still going on,
 in order to avoid business disruption, the Company has launched TVS
 Flame with a single spark plug without compromising on any of the
 performance parameters. With the complete product range now available,
 the Company hopes to reverse the decline and grow during 2008-09.
 
 Ungeared scooters
 
 Scooty Pep+ continues to be the market leader in sub 100cc market.
 Emergence of electric scooters segment has affected TVS Scooty sales
 marginally. The newly launched TeenZ Electric will address this issue.
 This product is also rated the best amongst the competing brands by
 Overdrive Magazine (June 2008 issue). The Company will also be
 launching a new variant of Scooty and a big scooter during the year
 2008-09 to expand its customer base.
 
 Mopeds
 
 Mopeds grew by 19% and increased its market share to 95% from 89% in
 the previous year. Focused efforts on non-south states have helped to
 achieve this growth.
 
 International Business
 
 In 2007-08, export business saw steep growth of 32% as compared to 28%
 in the previous year. During this period, 5 more countries were
 included, taking the total countries to which the Company exports to
 53.
 
 Three Wheeler Operations
 
 The three wheeler industry has grown at a compounded average growth
 rate (CAGR) of 12% over the last 5 years to reach 5 lakh units in
 2007-08. Passenger segment accounts for 73% and balance being goods
 carriers. In addition to domestic demand, exports offer an attractive
 opportunity.
 
 The Company launched its three wheeler, TVS King in two variants - two
 stroke petrol and two stroke LPG in March 2008.  The product comes with
 many first time features in the industry and delivers higher comfort
 and convenience, better fuel efficiency and more importantly superior
 style to give pride of
 
 ownership to the drivers.
 
 The product has received encouraging response from the market. TVS King
 has been launched in selected towns and will be gradually extended to
 all over India by December 2008.
 
 The Company plans to introduce four stroke version in Petrol, LPG and
 CNG fuels for domestic and export markets during 2008-09.
 
 OPPORTUNITIES AND THREATS
 
 Growth in two wheeler demand would come mainly from rising population
 in relevant age and income groups and increasing use of personal
 transport.
 
 The Star brand stands to gain from this, but the current retail finance
 situation may hinder its growth in the current year.
 
 Apache RTR is gaining popularity with the younger male population. To
 retain this segment of customers, who are very conscious about style
 and performance, frequent refreshes and upgrades are required.
 
 The executive segment accounts for over 50% of the motorcycle category.
 The recently launched TVS Flame has been well received by discerning
 customers.
 
 The Company has a strong presence in the sub 10Occ ungeared scooter
 segment. However, the Company has no presence in the large scooter
 format which accounts for 70% of the total ungeared scooters. The
 Company plans to launch a new product during the year to target these
 customers. Emergence of electric scooters, especially in the context of
 rising fuel prices provides a new avenue of growth.
 
 OPERATIONS REVIEW
 
 Quality
 
 The Company has significantly improved the quality performance of all
 its products through a systematic task force approach. The fact that
 the Company came out with Industry first five year extended warranty
 program on Star brand is a testimony to its manufacturing quality.
 
 TQM
 
 The Company continues to benefit from 100% participation of employees
 in TQM activities. The employees have completed more than 1,200
 projects through QC Circles and Cross Functional Teams. The average
 number of suggestions implemented per employee was 69 during 2007-08.
 
 Cost management
 
 The Company continues its rigorous focus on costs through an effective
 deployment system. Value engineering and aggressive global sourcing
 projects are being pursued to reduce material costs and also to
 partially neutralize input material cost increase.
 
 TPM is practiced in all the plants to ensure significant improvement in
 productivity and reduction in manufacturing cost.  During 2007-08, the
 Hosur and Mysore plants were awarded the TPM excellence certificate by
 the Japanese Institute of Plant Management (JIPM).
 
 Research and development
 
 The Companys R&D team has a strong technical talent pool and modern
 computer aided laboratory, capable of developing new and innovative
 styles and designs. It also has state-of-art- facilities for engine
 testing, NVH measurements and life testing.  At present, more than 450
 engineers are working on the development of new products and in other
 advanced areas of technology. The Company works with leading
 technological research laboratory and institutions.
 
 The Companys R&D is cognizant of 2010 emission norms and is focused on
 ensuring complete compliance in all its products.  The Company is also
 working on development of fuel-efficient technologies and alternate
 fuel technologies to take care of emerging needs of the consumers and
 environment.
 
 The Company has applied for over 200 patents and its R&D team has
 published 44 technical papers in national and international
 conferences.
 
 In addition to the requirements of domestic markets, the R&D team has
 developed products for ASEAN markets. The team has also developed three
 wheelers.
 
 TVS Racing Group, which is an integral part of the R&D, participated in
 the major two-wheeler racing events in the country and won nearly 90%
 of the events.
 
 Information technology
 
 ERP system is used to integrate all the business processes across the
 Company. The Company has also integrated its dealers and suppliers into
 its IT systems.
 
 During the year 2007-08, the Company has implemented Product Lifecycle
 Management system to digitize the new product development process. This
 solution will help in faster introduction of new products into the
 market. It integrates different processes within the Company and
 enables electronic collaboration with product development vendors.
 
 The Company has also introduced Business Intelligence tool to get quick
 access to information through dashboards for effective decision-making.
 
 During the year, the Company won the Team Tech 2007 Award of Excellence
 for Integrated use of Advanced Computer Aided Engineering Technologies
 in product development. The company also won the prestigious SAP ACE
 2007 Awards for Customer Excellence in the Most Innovative Netweaver
 Category for several SAP implementations that are put in place.
 
 An external security audit of IT system was conducted during the year.
 The recommendations made by auditors have since been implemented.
 Supply Chain Management During the year, the Company streamlined its
 global sourcing operations apart from strengthening its domestic supply
 base.  Supplier cluster programmes enabled transfer of best practices
 from the Company to the suppliers and also among the suppliers.
 
 The domestic dealership network was further strengthened with addition
 of 48 dealers in 2007-08. The Company now has 604 exclusive dealers and
 over 2,500 authorised sub dealers and service centres.
 
 The customer loyalty programme - Smiles forever - has been upgraded and
 revamped. The current customer base of the CRM programme is over 4.3
 lakh members.
 
 PT TVS Motor Company Indonesia
 
 PT TVS Motor Company Indonesia, a subsidiary of the Company, has
 established a manufacturing facility at Karawang (near Jakarta),
 Indonesia with an annual capacity of 3,00,000 units.
 
 The new product exclusively developed for the Indonesian market
 
 was launched during 2007-08 in select markets. The response from the
 customers has been extremely satisfactory. Apache RTR launched during
 2007-08 has also caught the fancy of Indonesian customers. The Company
 has established a network of 25 dealers as on 31st March 2008 and plans
 to add another 125 during 2008-09.
 
 Financial Performance
 
 The companys financial performance for the year 2007-08 as compared to
 the previous year is furnished in the following table:
 
 PARTICULARS                                    Rs            in
                                              crores           %
 
 Sales:
 Motorcycles                                 1,706.54       51.6
 Mopeds                                        617.54       18.7
 Scooters                                      613.18       18.5
 Spares and accessories                        281.49        8.5
 and provision of technical
 know-how
 Three wheeler                                   0.75        -
 Other income                                   90.85       2.7
 TOTAL REVENUE                               3,310.35     100.0
 
 Rs. in  
 crores         %
 
 2,513.78     64.1
 501.84       12.8
 611.33       15.6
 228.01        5.8
 65.93         1.7
 3,920.89    100.0
 
 Year 2007-08             Year 2006-07
 Year 2007-08
 
 PARTICULARS                      
                                   crores           %
 
 Raw Material consumed            2,445.51       73.9
 Staff cost                         176.37        5.3
 Stores and tools consumed           30.87        0.9
 Power and fuel                      40.72        1.2
 Repairs and maintenance             31.46        0.9
 Packing and freight charges         93.47        2.8
 Advertisement and publicity        104.37        3.2
 Other expenses                     255.43        7.7
 Interest & Finance charges           2.19        0.1
 Depreciation                        94.59        2.9
 TOTAL EXPENDITURE                3,274.98       98.9
 Profit before tax                   35.37        1.1
 Provision for tax
 (incl. deferred tax)                3.60         0.1
 PROFIT AFTER TAX                   31.77         1.0
 
 Year 2006-07
 Rs. in
 crores          %
 
 2,903.37      74.0
 172.27         4.4
 42.53          1.1
 43.10          1.1
 29.50          0.8
 112.67         2.9
 162.82         4.2
 251.40         6.4
 24.78          0.6
 87.60          2.2
 3,830.04      97.7
 90.85          2.3
 24.25          0.6
 66.60          1.7
 
 During the year, in the motor cycle portfolio, the Company was largely
 dependent on entry level motor cycles. For a major part of the year,
 the Company had no presence in the executive segment which accounts for
 more than 50% of motor cycle category. As mentioned earlier, the
 reduced availability of retail finance had a severe impact on sale of
 retail finance dependent entry level motor cycles. Further, the other
 major players in the industry resorted to high cost promotion. Despite
 lower sales, the Company was forced to offer promotion on its products
 also to remain competitive in the market. This led to reduction in
 operating margin. The interest and finance charges of Rs. 2.2 crores
 for the year 2007-08 is net of credit of Rs. 26.8 crores being the
 effect of restatement of external commercial borrowings.
 
 The Company will have the benefit of TVS Flame, launched in executive
 segment towards the end of 2007-08. This along with other new launches
 planned during 2008-09 will help the Company to reverse the declining
 trend in sales and to report improved results. All the operating ratios
 will also improve consequent to benefit of full years production
 available from both the Himachal Pradesh and Three wheeler plants.
 
 RISKS AND CONCERNS
 
 Prices of raw materials have gone up sharply, especially steel,
 aluminum, nickel, copper, plastics and rubber. This development poses a
 significant risk to the profitability of the Company. The Company has a
 strategy to aggressively reduce its cost base and it is actively
 pursuing value engineering and global sourcing to mitigate this risk.
 
 Further, the motorcycle industry has slowed down significantly over the
 last year and continuance of high inflation, increase in price of
 petrol, interest rates and restricted availability of retail finance
 pose significant demand side risk. Low down payment options may not be
 offered and more stringent norms will continue to be followed by
 financiers. The free flowing credit which spurred the two wheeler
 growth in the past will be absent in the current year. The consequent
 slackening of demand could lead to lower capacity utilization and
 intense competition. The Company is exploring partnerships with
 regional retail finance players to mitigate this risk.
 
 The fluctuating value of Indian Rupee against the US Dollar poses a
 significant risk in the context of forex exposure due to increasing
 export sales and global sourcing. In addition, the Company had borrowed
 USD 100 Mn through external commercial borrowings to fund the new
 projects. To mitigate the forex exposure risks, appropriate risk
 management policy has been implemented.
 
 INTERNAL CONTROL AND THEIR ADEQUACY
 
 The Company has a proper and adequate Internal control system to ensure
 that all the assets of the Company are safeguarded and protected
 against any loss and that all the transactions are properly authorised,
 recorded and reported.
 
 HUMAN RESOURCE DEVELOPMENT
 
 The Company focuses on attracting the best talent through strategic
 recruitment from reputed Engineering Colleges and Business Schools
 across the country.
 
 Managers are developed through structured foundation programs in
 association with reputed institutions. The Company sponsors managers to
 overseas and inland universities for developing their capabilities to
 handle new technologies and management practices. They are also deputed
 to international conferences and seminars to gain global exposure.
 
 Leadership development programs have been institutionalized as part of
 career development for senior executives. Career development workshops
 help identifying the high potential talents. This is reinforced with
 robust development plans supported by reward and recognition system.
 
 The Company has developed a blueprint for creating Centers of
 Excellence in the key business processes. These Centers of Excellence
 build competencies required for the present and the future to provide
 competitive advantage.
 
 The Company continues to maintain its record on industrial relations
 with not a single day of work being lost because of labour unrest.
 
 As on 31st March 2008, the Company had 4,284 employees on its rolls.
 
 ENVIRONMENT, HEALTH & SAFETY
 
 An integrated EHS Management System is instituted both at Hosur and
 Mysore units. Both the sites have been certified under ISO 14001 for
 Environment Management System and under OHSAS 18001 for Occupational
 Health & Safety Management System.
 
 The Company continues to excel in key environmental performance areas,
 achieving a 35% reduction in fresh water consumption, 45% per unit
 reduction in landfill waste disposal and 33% reduction in paint sludge
 generation.
 
 In line with the World Environment Day - 2008 theme Kick the Habit -
 Towards Low Carbon Economy, the Company is making a conscious effort
 to reduce its Carbon Foot print. Accordingly, it has taken various
 energy conservation measures like the use of waste heat from central
 power plants, use of energy efficient motors, use of CFL lighting
 systems, use of natural lights, special V Belts in machine drives etc.
 The eventual goal is to become a Carbon Neutral Manufacturing Company.
 
 COMMUNITY DEVELOPMENT AND SOCIAL RESPONSIBILITY
 
 Srinivasan Services Trust (SST) is a trust co-sponsored by TVS Motor
 Company with the vision of building self-reliant rural communities.
 
 SST extended its coverage to 363 villages, serving a population of 3.71
 lakhs. Some of the significant achievements are :
 
 - Regular income of over Rs.4,000/- per month for 14,446 families.
 
 - No case of Infant and maternal mortality in the project areas.
 
 - Morbidity caused by poor sanitation & hygiene reduced from 37% to
 13%.
 
 - 100% enrolment of children in Balwadis and Schools.
 
 - 1,12,000 hectares of degraded forest land reforested.
 
 - 5,830 hectares were covered under Watershed Program.
 
 CAUTIONARY STATEMENT
 
 Statements in the management discussion and analysis report describing
 the companys objectives, projections, estimates and expectations may
 be forward looking statements within the meaning of applicable
 securities laws and regulations. Actual results could differ materially
 from those expressed or implied.  Important factors that could make a
 difference to the Companys operations include, among others, economic
 conditions affecting demand / supply and price conditions in the
 domestic and overseas markets in which the Company operates, changes in
 the Government regulations, tax laws and other statutes and incidental
 factors.
 
 5.  SUBSIDIARY COMPANIES
 
 PT TVS Motor Company Indonesia, a subsidiary of the Company has
 established a manufacturing facility at Karawang (near Jakarta),
 Indonesia with an annual capacity of 300,000 units.  The new product
 exclusively developed for the Indonesian market was launched during
 2007-08 in select markets. The response from the customers has been
 extremely satisfactory.  Apache RTR launched during 2007-08 has also
 caught the fascination of Indonesian customers. The Company has
 established a network of 25 dealers as on 31st March 2008 and plans to
 add another 125 during 2008-09.
 
 As on date of this report, the following are the subsidiaries of the
 Company:
 
 Name of the Company                      Subsidiary of M/s
 
 Sundaram Auto Components Limited   TVS Motor Company Limited
 TVS Motor Singapore Pte. Limited   TVS Motor Company Limited
 TVS Motor Company (Europe) B.V     TVS Motor Company Limited
 PT TVS Motor Company Indonesia    TVS Motor Company (Europe) B.V.
 
 An application in terms of Section 212(8) of the Companies Act, 1956
 has been made to the Central Government, seeking exemption from
 attaching the balance sheet and profit and loss account of the
 subsidiaries alongwith the report of the board of directors and that of
 the auditors thereon, with the companys accounts and the Company
 awaits the approval of the Central Government.
 
 The accounts of the subsidiaries are consolidated with the accounts of
 the Company in accordance with Accounting Standard 21 (AS 21)
 prescribed by The Institute of Chartered Accountants of India. The
 consolidated accounts duly audited by the Statutory Auditors and the
 consolidated balance sheet information form part of the annual report.
 
 The annual accounts, reports and other documents of the subsidiary
 companies will be made available to the members and investors on
 receipt of a request from them.
 
 The annual accounts of the subsidiary companies will be available at
 the registered office of the Company and at the respective subsidiary
 companies concerned, if any member or investor wishes to inspect the
 same during the business hours of any working day.
 
 6.  DIRECTORS
 
 Mr. H. Lakshmanan, Mr. T.R. Prasad and Mr. K.S. Bajpai, directors,
 retire at the ensuing annual general meeting of the Company and being
 eligible, offer themselves for re-appointment.
 
 The brief resume of the aforesaid directors and other information have
 been detailed in the notice convening sixteenth annual general meeting
 of the Company. Appropriate resolutions for their re-appointment are
 being placed for approval of the share holders at the ensuing annual
 general meeting. Directors recommend their re-appointment as directors
 of the company.
 
 7. AUDITORS
 
 M/s Sundaram & Srinivasan, Chartered Accountants, Chennai, retire at
 the ensuing annual general meeting and are eligible for re-appointment.
 
 8. CORPORATE GOVERNANCE
 
 As required by Clause 49 of the Listing Agreement, a report on
 corporate governance is enclosed. A certificate from the auditors of
 the Company regarding compliance of the conditions of corporate
 governance as stipulated by the clause is attached to this report.
 
 The chairman and managing director and senior vice president - finance
 of the Company have certified to the board on financial statements and
 other matters in accordance with the clause 49 (v) of the Listing
 Agreement pertaining to CEO/CFO certification for the financial year
 ended 31st March 2008.
 
 9.  STATUTORY STATEMENTS
 
 Conservation of energy, technology absorption and foreign exchange
 earnings and outgo
 
 As per the requirements of Section 217(1)(e) of the Companies Act, 1956
 read with the Companies (Disclosure of particulars in the report of
 board of directors) Rules, 1988, the information regarding conservation
 of energy, technology absorption and foreign exchange earnings and
 outgo are given in Annexure I to this report.
 
 Particulars of employees
 
 The particulars required pursuant to Section 217(2A) of the Companies
 Act, 1956 read with the Companies (Particulars of employees) Rules,
 1975 as amended, are given in Annexure II to this report.
 
 However, in terms of the provisions of Section 219(1)(b)(iv) of the
 Companies Act, 1956, the Directors Report (excluding Annexure II) is
 being sent to all the shareholders of the Company.  Any shareholder
 interested in obtaining a copy of the said annexure may write to the
 Company Secretary at the registered office of the Company.
 
 Directors Responsibility Statement
 
 In accordance with the provisions of Section 217(2AA) of the Companies
 Act, 1956 with respect to Directors Responsibility Statement, it is
 hereby stated
 
 i. that in the preparation of annual accounts for the financial year
 ended 31st March 2008, the applicable Accounting Standards had been
 followed along with proper explanation relating to material departures;
 
 ii. that the directors had selected such accounting policies and
 applied them consistently and made judgements and estimates that were
 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 of the Company for the year under review;
 
 iii. that the directors had 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; and
 
 iv. that the directors had prepared the accounts for the financial year
 ended 31st March 2008 on a going concern basis.
 
 10. ACKNOWLEDGEMENT
 
 The directors gratefully acknowledge the continued support and
 co-operation received from the holding company i.e. Sundaram- Clayton
 Limited, Chennai. The directors thank the bankers, investing
 institutions, customers, dealers, vendors and sub- contractors for
 their valuable support and assistance.
 
 The directors wish to place on record their appreciation of the very
 good work done by all the employees of the Company during the year
 under review.
 
 The directors also thank the investors for their continued faith in the
 Company.
 
                                          For and on behalf of the Board
 Bangalore                                               VENU SRINIVASAN
 June 30, 2008                                                  Chairman
Source : Religare Technova

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