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Mahindra & Mahindra Limited Annual Report 2007-08

youdriveus

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Directors Report

Management Discussion and Analysis

Corporate Governance

Accounts

Statement pursuant to Section 212

Consolidated Accounts

Contents

3

20

37

61

113

117

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To the customer.

For the customer.

With the customer.

At Mahindra & Mahindra,

we work with a simple philosophy

Customers drive us...

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DYOU

R

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At Mahindra our objective is not just to sell vehicles

but to build relationships. For us the most important

aspect of this relationship begins after the sale has

occurred. We strive to continue being a part of your

life. To ensure that you never regret having chosen us

above others for taking care of your needs.

IVEUS

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YOUBeing next to

dictates our reach

R

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I lived in the US for about nine years and have always beenan automobile enthusiast, owning a lot of classic cars. And

dont think I am exaggerating, if I say that the driving

experience of the jeep Legend comes very close to that of

Porsche Boxster. Moreover, the level of customer service

that I receive is unheard of in the world.

Mr. Mahendra Raj, Madurai

I find myself very secure and safe when I travel in myScorpio. It makes me feel comfortable and I don't feel worn

out. I believe it to be a very sturdy and low maintenance

vehicle. As a child, I used to envy M&M vehicles, but today

others envy me and I feel proud to be the owner of my

Mahindra Scorpio.

Anjali Pramod Jadhav, Mumbai

I was really pessimistic of Logan prior to its launch. Butafter studying every feature of cars from this segment as

against their price matrix, I eventually purchased Logan

because of its cost effectiveness. I really loved the

ceremonial delivery. The way they shoot and the way all

the staff members start clapping with respect, one really

feels special to be an owner of an M&M vehicle instead of

a Skoda or a Hyundai. And finally it was very touching to

receive apooja kit to cap it off.

Mr. Amandeep Singh, Ludhiana

It was really fast. They worked day and night. It was like awar field. I have never seen this kind of service in my life

time. I was totally amazed to see the teamwork I am

really proud of the Mahindra & Mahindra Brand. Through

this service you have made me your customer for life.

Elango Mani

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Dedication is not what others expect of you, it is what you can give to others.

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At the beginning of Barack Obamas campaign for the US

Presidential nomination, nobody expected him to stand a

serious chance. Supporters were few and campaign funds

were scarce. And yet the very first thing that Mr Obama did

was to spend his scarce funds on creating a customer service

centre, so that any one who called at any hour of the day or

night would always have a human voice at the other end to

listen to his or her concern.

The rest is history.

Against all odds, Mr Obama is today a Presidential candidate,

and his people-centred, bottom-up strategy of engaging

peoples hopes and emotions has played a large part in

putting him there.

It is interesting that TIMEmagazine reports that Mr Obama

decided from the beginning to run his campaign like a

business. Which meant that he followed the dictum of

customer is king. Its a dictum that we in M&M try to live up

to every day and in every way. A few years ago we publiclydeclared our ambition to become the most customer centric

corporation in the world. And we consciously try to gear all

our actions towards achieving this goal.

In the course of this journey, we have realised that customer

centricity springs from something much deeper than providing

the cheapest product or flaunting celebrity endorsements or

the most attractive freebies. Rather, it stems from seeing the

customer as a person rather than a statistic in a market share.

It comes from an ability to don the shoes of the customer and

to see a problem from a customer perspective. It comes from

offering customers something that nobody else does

whether it is a service or an experience or just genuine

attention and concern. It comes not from making sales but

from building relationships.

So when an M&M employee stops his car in the middle of his

holiday to help a customer who is stranded by the side of the

road we call that customer centricity. When the President of

our Automotive Sector goes on TV to pledge publicly that we

are striving to become the most customer caring auto

company in India we call that customer centricity. When we

offer a Mahindra On Call service one phone number for all

our products and a friendly voice at any time of the day or

night we call that customer centricity. We measure our levels

of customer centricity with an internal score and our

companies vie with each other for higher scores.

Our customers respond to this customer centricity with great

generosity. We have a Scorpio owner who jokingly calls

himself a GM of M&M because he has sold so many Scorpios

for us by recommending them to his friends. We have many

farmers who have influenced their village communities to buy

our tractors. And as our customer base grows beyond the

shores of India we hope we will have European, Chinese,

American, African, Australian and South American customers

also doing the same thing.

A happy customer is our best brand ambassador. And the day

that every customer becomes a self-appointed brand

ambassador for M&M will be the day when we become the

most customer centric corporation in the world.

YOUmatter the most

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1

MAHINDRA & MAHINDRA LIMITED

COMMITTEES OF THE BOARD

Audit CommitteeAudit CommitteeAudit CommitteeAudit CommitteeAudit CommitteeDeepak S. ParekhChairman

Nadir B. GodrejM. M. MurugappanR. K. Kulkarni

Share TShare TShare TShare TShare Transfer and Shareholders/ransfer and Shareholders/ransfer and Shareholders/ransfer and Shareholders/ransfer and Shareholders/Investors Grievance CommitteeInvestors Grievance CommitteeInvestors Grievance CommitteeInvestors Grievance CommitteeInvestors Grievance CommitteeKeshub MahindraChairman

Anand G. MahindraBharat DoshiA. K. NandaR. K. Kulkarni

Remuneration/Compensation CommitteeRemuneration/Compensation CommitteeRemuneration/Compensation CommitteeRemuneration/Compensation CommitteeRemuneration/Compensation CommitteeNarayanan VaghulChairman

Keshub Mahindra

Nadir B. GodrejM. M. Murugappan

Loans & Investment CommitteeLoans & Investment CommitteeLoans & Investment CommitteeLoans & Investment CommitteeLoans & Investment CommitteeKeshub MahindraChairman

Anand G. MahindraBharat DoshiA. K. NandaR. K. Kulkarni

Research & Development CommitteeResearch & Development CommitteeResearch & Development CommitteeResearch & Development CommitteeResearch & Development CommitteeA. S. GangulyChairman

Anand G. MahindraNadir B. Godrej

M. M. MurugappanBharat Doshi

GROUP MANAGEMENT BOARD

Anand G. MahindraVice-Chairman & Managing Director

Bharat DoshiGroup Chief Financial Officer

A. K. NandaPresident - Infrastructure Development Sector

Anjanikumar ChoudhariPresident - Farm Equipment Sector

Rajeev DubeyPresident - HR, After - Market & Corporate Services

Pawan Goenka

President - Automotive SectorHemant LuthraPresident - Systems & Technologies Sector

Raghunath MurtiPresident - Trade, Retail and Logistics Sector

Uday Y. PhadkePresident - Finance, Legal and Financial Services Sector

Ulhas N. YargopPresident - Information Technology Sector

BOARD OF DIRECTORS

Keshub MahindraChairman

Anand G. MahindraVice-Chairman & Managing Director

Deepak S. Parekh

Nadir B. Godrej

M. M. Murugappan

Narayanan Vaghul

A. S. GangulyR. K. Kulkarni

Anupam Puri

Thomas Mathew T.Nominee of Life Insurance Corporation of India

Bharat DoshiExecutive Director

A. K. NandaExecutive Director

Narayan ShankarCompany Secretary

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2

BankersBankersBankersBankersBankers

Bank of America N.A.

Bank of Baroda

Bank of IndiaCanara Bank

Central Bank of India

HDFC Bank Limited

Standard Chartered Bank

State Bank of India

Union Bank of India

AuditorsAuditorsAuditorsAuditorsAuditors

Deloitte Haskins & Sells

12, Dr. Annie Besant Road, Opp. Shiv Sagar Estate,

Worli, Mumbai 400 018.

AdvocatesAdvocatesAdvocatesAdvocatesAdvocates

Khaitan & Co., Meher Chambers,

R K Marg, Ballard Estate, Mumbai 400 038.

Registered OfficeRegistered OfficeRegistered OfficeRegistered OfficeRegistered Office

Gateway Building, Apollo Bunder, Mumbai 400 001.

BranchesBranchesBranchesBranchesBranches

7, Dr. Ishaque Road (Old KYD Street), Kolkata 700 016.

Mahindra Towers, 2-A Bhikaji Cama Place, New Delhi 110 066.

Mahindra Towers, First Floor, 17/18, Pattulous Road, Chennai 600 002.

Raheja Chambers, First Floor, 12, Museum Road, Bengaluru 560 001.

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3

Directors ReportDear ShareholdersYour Directors present their Report together with the

audited accounts of your Company for the year ended 31 st

March, 2008.

Financial HighlightsFinancial HighlightsFinancial HighlightsFinancial HighlightsFinancial Highlights

(Rs. in crores)

20082008200820082008 2007Gross Income 1323813238132381323813238 11558

Less: Excise Duty on Sales 15661566156615661566 1337

Net Income 1167211672116721167211672 10221

Profit before Depreciation, Interest,

Exceptional items and Taxation 15051505150515051505 1458

Less: Depreciation / Amortisation 239239239239239 209

Profit before Interest, Exceptional

items and Taxation 12661266126612661266 1249

Less: Interest (Net) 2424242424 (67)

Profit before Exceptional items and Taxation 12421242124212421242 1316

Add: Exceptional items 165165165165165 122

Profit before Taxation 14071407140714071407 1438Less: Provision for tax Current tax

(including Fringe Benefit Tax) 279279279279279 366

Less: Provision for tax Deferred tax (Net) 2525252525 (15)

Profit for the year before prior period

adjustments 11031103110311031103 1087

Prior Period Adjustment (Net of Tax) ----- 19

Profit for the year 11031103110311031103 1068

Balance of profit for earlier years 21252125212521252125 1476

Add: Transfer (to)/from Debenture

Redemption Reserve (17)(17)(17)(17)(17) 16

Profit available for appropriation 32113211321132113211 2560

Less:General Reserve 115115115115115 110

Interim Dividend paid ----- 184

Income-tax on Interim Dividend paid ----- 26

Proposed Dividend 283283283283283 98

Income-tax on Proposed Dividend 3838383838 17

Balance carried forward 27752775277527752775 2125

PPPPPerformance Reviewerformance Reviewerformance Reviewerformance Reviewerformance Review

Automotive Sector:

For the sixth consecutive year the Companys vehicle

production and sales recorded outstanding performance

levels despite the industry slowdown during the year. A

total of 2,00,132 vehicles and 34,556 three-wheelers were

produced as against 1,44,090 vehicles and 34,892 three-

wheelers in the last year. These include 11,079 light

commercial vehicles (LCVs) and 26,653 cars (previous year

8,811 LCVs and 614 cars) manufactured and supplied to

two of your subsidiaries, Mahindra International Limited

(MIL) and Mahindra Renault Private Limited (MRPL).

Your Company recorded sales of 1,61,001 vehicles and

34,076 three-wheelers as compared to 1,35,961 vehicles

and 33,718 three-wheelers in the previous year registering

a growth of 18.4% and 1.1% in vehicles sales and three-

wheeler sales respectively.

The total domestic sales volume of 1,48,791 vehicles was

higher by 16.3% than the previous years volume of

1,27,958 vehicles.

Your Company reported a record sale of 1,48,761 multi

utility vehicles (MUV or MUVs) in the domestic market in

the year under review as against sale of 1,27,856 MUVs in

the previous year. The Companys domestic MUV sales

volume grew a very healthy 16.4%, against the industryMUV sales growth of 5.1%.

Your Company strengthened its dominant position in the

domestic MUV sub-segment by increasing its market

share to 51.5% over the previous years market share of

46.6%.

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4

The small pick up model, Maxi Truck, was responsible forthe Company pick up volumes registering a growth of

17% while the pick up sub-segment industry de-grew by

4%. As a result, your Companys market share jumped to

76.9% from the previous years market share of 63.2%.

In the Overseas Markets, your Companys initiatives resulted

in a strong growth of 54% in export volumes - from 8,021

vehicles [including 254 vehicles sourced from MIL] in the

previous year to 12,359 vehicles [including 363 vehicles

sourced from MIL] in the year under review.

Spare parts sales for the year stood at Rs.388.30 crores

(Exports Rs.39.89 crores) as compared to Rs.307.33 crores

(Exports Rs.23.54 crores) in the previous year.

Farm Equipment Sector:

Your Company registered a production of 98,917 Tractors

for the year under review as compared to 1,03,847 Tractors

in the previous year. This was despite the material supply

constraints faced by domestic tractor industry in the Financial

Year 2008. In addition, 31,922 Engines were produced for

the Mahindra Powerol brand. The strategy of increasing

production at the Companys Rudrapur Plant, compared to

earlier dependence on the Kandivali Plant, has significantly

contributed to lowering the manufacturing cost.

Your Company recorded sales of 99,042 Tractors, as

compared to 1,02,531 Tractors sold in the previous year.

Sale of domestic Tractors was 90,509 Tractors compared

to 95,006 Tractors sold in the previous year (a de-growth

of 4.7%). This was in a year that witnessed industry de-

growth of 5.1%, following four consecutive years of

Industry growth. The de-growth was mainly due to slow

down in bank financing on account of higher NPAs, andtightening of lending norms. The situation was further

aggravated by increased interest rates.

In this challenging scenario, your Company has maintained

its market leadership in the domestic market for the 25th

consecutive year.

Against the backdrop of strengthening of the Rupee againstthe US dollar, exports of the Companys Tractors have actually

increased to 8,533 Tractors, a growth of 13.4%, compared

to 7,525 Tractors exported last year. Your Companys Tractors

are now being sold in 6 continents of the world. Apart

from the US market and the African Countries, the

neighbouring countries of Sri Lanka, Bangladesh and Nepal

are the other large overseas markets. Forays have also been

made into new markets, namely New Zealand and the Latin

American Countries of Brazil and Chile.

A number of new products were introduced, in both thedomestic and international space, with many more in the

pipeline.

In the domestic market, the 30-40 HP Segment is the

largest, comprising nearly 55% of the market. Your

Company introduced the 295 DI Super Turbo, which was

the first turbo charged Tractor in this Segment. Also, the

595 DI Super Turbo (greater than 40 HP Segment) was

upgraded. The Arjun Ultra-1 has now been transformed

into a versatile product which has demonstrated superlative

performance both on and off the field. Mahindra Shaan -a 25 HP multi-utility Tractor, which was launched by your

Company in 2007, won the Outstanding Innovation

Award from ASABE (American Society for Agricultural and

Biological Engineers), USA. This Award has acknowledged

the Companys ability to conceive and deliver innovative

products.

On the International front, Tier III and Tier IV compliant

Tractors were introduced in the US market and to meet

the demand of the higher HP Segment in Africa, the 8000

Tractor series was launched there.

To leverage domain expertise in logistics and to enhance

effectiveness of the supply chain in operation, the Company

outsourced a significant part of its Logistics operations to

Mahindra Logistics, a Division of the Company. Additional

savings have been accrued as a result of this move.

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Under the Mahindra Powerol Brand, your Company sold31,922 engines during the year, as against 24,141 engines

last year, a growth of 32%. From having a single institutional

customer in the Financial Year 2002, today the engine

business has 22 corporate clients. Mahindra Powerol has

retained its market leadership in gensets market, catering

primarily to the telecom segment. Your Company expanded

the Mahindra Powerol genset product range up to 62.5

KVA with the introduction of 40, 50 and 62.5 KVA engines.

Mahindra Powerolwas recognised with the Frost and Sullivan

Voice of the Customer Award for being the Most PreferredGenset Brand in the Telecom Segment.

Your Company has been awarded the Japan Quality MedalJapan Quality MedalJapan Quality MedalJapan Quality MedalJapan Quality Medal

(JQM)(JQM)(JQM)(JQM)(JQM) in 2007, by the Union of Japanese Scientists and

Engineers (JUSE), Tokyo, Japan. JQM is a rare honour given

to a Company for excellence in Total Quality Management

(TQM). The Company is the only Tractor Company in the

world to win this Award. The Company had also won the

Deming Application Prize in 2003. Both of these prizes are

recognition of the Companys customer focus, commitment

to TQM practices and demonstration of results bysignificantly improving product and process quality.

Mahindra Defence Systems Division:

Your Company provides world class armouring solutions

for light combat vehicles and SUVs as well as high mobility

vehicles for defence use. Your Company developed the

AXE, a high mobility fast attack vehicle. This Vehicle was

awarded the Indigenous Design of the Year by Overdrive.

The Marksman is another modern light armoured vehicle

developed during the year.

Your Company continues to develop competencies in special

vehicles and is in the advanced stages of construction of

the Mahindra Special Military Vehicles facility at Faridabad.

This is the first such dedicated defence vehicle facility in

the private sector.

Your Company has established a manufacturing facil ity forunderwater systems at Pune and is now well placed to

deliver Sea Mines and Decoy Launchers to the Indian Navy.

Your Company has obtained an export order from Ghana

for up-armoured Scorpios during the year under review.

Mahindra Logistics Division:

The Logistics arm of your Company continues its impressive

growth by recording revenues of Rs.607 crores as compared

to Rs.383 crores in the previous year, registering a sustained

increase of over 50% on a year on year basis for the past few

years. The business has acquired its leadership position in the

Automotive / BPO and ITES Industry Segments and is now

building its presence in Retail and other Industry Segments.

Profits:

The Profit for the year before Depreciation, Interest,

Exceptional items and Taxation was Rs.1,504.47 crores as

against Rs.1,457.83 crores in the previous year registering

an increase of 3.20%. Profit after tax was Rs.1,103.37

crores as against Rs.1,068.39 crores in the previous year

recording an increase of 3.27%. Your Company continues

with its rigorous cost restructuring exercises by efficiency

improvements which have resulted in significant savings

through value engineering, cost re-engineering and

economising, optimum util isation of available

manufacturing locations, outsourcing of service activities,

optimisation of plant capacity uti l isation, cost

competitiveness and right sizing in almost all areas.

Management Discussion and Analysis ReportManagement Discussion and Analysis ReportManagement Discussion and Analysis ReportManagement Discussion and Analysis ReportManagement Discussion and Analysis Report

A detailed analysis of the Companys performance is

discussed in the Management Discussion and Analysis

Report, which forms part of this Annual Report.

Corporate GovernanceCorporate GovernanceCorporate GovernanceCorporate GovernanceCorporate Governance

Your Company is committed to transparency in all its

dealings and places high emphasis on business ethics. For

several years your Company has been following good

Corporate Governance procedures long before they were

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mandated. A Report on Corporate Governance along witha Certificate from the Auditors of the Company regarding

the compliance of conditions of Corporate Governance as

stipulated under Clause 49 of the Listing Agreement forms

part of the Annual Report.

DividendDividendDividendDividendDividend

Keeping in mind the overall performance during the year,

your Directors are pleased to recommend a dividend of

115% (Rs.11.50 per Equity Share), payable to those

Shareholders whose names appear in the Register of

Members as on the Book Closure Date. The equity dividend

outgo for the financial year 2007-08, inclusive of tax on

distributed profits (after reducing the tax on distributed

profits of Rs.9.55 crores payable by the subsidiaries on the

dividends receivable from them during the current financial

year) would absorb a sum of Rs.321.09 crores (as against

Rs.324.73 crores comprising an interim dividend of 75%

and the final dividend of 40% [comprising the final dividend

of 25% and a special dividend of 15%] paid for the previous

year).

FinanceFinanceFinanceFinanceFinance

During the year, your Company raised resources from the

capital markets to part finance its various ongoing

modernisation and expansion programmes. Your Company

successfully accessed both overseas and domestic markets

with diverse instruments, maturities and interest rate fixings.

The Company raised Unsecured External Commercial

Borrowing (ECB) of US$ 50 million. The ECB was raised at

an average maturity of six years at highly competitive rates.

In the domestic market, your Company raised Rs.200 crores

by way of Private Placement of Secured, Non-Convertible

Redeemable Debentures with a bullet maturity of 3 years.

ICRA has assigned a LAA+ rating to these Debentures

indicating high credit quality. Your Company also raised

Rs.100 crores through FCNR (B) Loan from a Consortium

Bank at a highly competitive rate.

In order to meet short-term mismatches, your Companyutilised its fund based working capital limits from time to

time, apart from making regular use of non-fund based

limits. Your Company inter alia raised Rs.100 crores through

issue of Commercial Paper at very competitive rates. The

Paper was rated P1+ by CRISIL, the highest rating for a

short term paper. The Consortium of Bankers continue to

rate the Company as a prime customer and extend facilities/

services at prime rates.

Your Company follows a prudent financial policy and aims

to maintain optimum financial gearing at all times. The

Companys total Debt to Equity Ratio was 0.60 as at 31st

March, 2008.

During the year, CRISIL has reaffirmed the AA+ with a

Negative outlook rating assigned by it to the Companys

outstanding Debentures in the previous financial year.

CRISILs rating indicates high safety on timely payment of

interest and principal.

Subsequent to 31st March, 2008, the Board of Directors of

your Company have considered and approved, subject toreceipt of requisite approvals and consent of the

Shareholders by means of a Postal Ballot, issuance of

93,95,974, 9.25% p.a. Unsecured Fully and Compulsorily

Convertible Debentures (FCD or FCDs) of the Face Value

of Rs.745 each aggregating Rs.700,00,00,630 to Golboot

Holdings Limited, an entity controlled by Goldman Sachs,

each FCD being convertible into one Equity Share of Rs.10

each in the Company at a price of Rs.745 per Share

(including premium of Rs.735 per Share) in accordance

with Chapter XIII of the Securities and Exchange Board of

India (Disclosure & Investor Protection) Guidelines, 2000.

The FCDs shall be convertible into Equity Shares at anytime

within 18 months from the date of allotment of FCDs at

the option of the Investor, and mandatorily convertible

into Equity Shares on the date falling 18 months from the

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7

date of allotment. Your Company will utilise the amountraised through this preferential offer towards its Automobile

and Farm Equipment businesses.

Stock OptionsStock OptionsStock OptionsStock OptionsStock Options

On the recommendation of the Remuneration/

Compensation Committee of your Company, the Trustees

of the Mahindra & Mahindra Employees Stock Option

Trust have granted 16,48,081 Stock Options to Eligible

Employees during the year under review.

Details required to be provided under the Securities and

Exchange Board of India (Employee Stock Option Scheme

and Employee Stock Purchase Scheme) Guidelines, 1999

are set out in Annexure I to this Report.

Industrial RelationsIndustrial RelationsIndustrial RelationsIndustrial RelationsIndustrial Relations

Industrial Relations generally remained cordial and

harmonious throughout the year. The Management

Discussion and Analysis Report gives an overview of the

developments in Human Resources/Industrial Relations

during the year. In a restructuring exercise to rightsize the

work force, the Company has, during the year under review

accepted Voluntary Retirement from 28 employees of the

Automotive Sector under the Scheme in existence since

1995 which has since been discontinued. These measures

will enable the Company to obtain optimum utilisation of

the existing work force and increase the level of productivity.

SafetySafetySafetySafetySafety, Health and Environmental P, Health and Environmental P, Health and Environmental P, Health and Environmental P, Health and Environmental Performanceerformanceerformanceerformanceerformance

Your Company has always demonstrated its strong

commitment and responsibil ity towards Safety,

Occupational Health and Environment which stems fromits Vision and enjoins upon the Company to sustain business

growth with deep commitment towards Safety,

Occupational Health and Environment.

Your Company has a well-established Safety, Occupational

Health and Environmental (SH&E) Policy drilled down from

the Corporate Policy revised and released during the year.The Safety, Occupational Health and Environment of its

employees are embedded in the core organisational values

of the Company. The SH&E Policy inter alia ensures safety

of public, employees, plant, equipment and business

associates, ensuring compliance with all statutory rules and

regulations on monthly basis, imparting training to its

employees and business associates as per Training Calendar,

carrying out Statutory safety audits of its facilities as per

legal requirement, conducting regular medical check up of

its employees and promoting eco-friendly activities. Variousinitiatives on Safety including Safety Promotions, Safety

Patrol Rounds, Safety and Surveillance Audits, Safety

Training, Safety Kaizens, reporting of near-miss incidents

are encouraged to resolve the safety issues and various

special initiatives such as emergency mock drills and

upgradation of Fire Protection Systems were carried out

thereby resulting in improved Safety Performance. Your

Companys Plants continue to strive to achieve Accident

Reduction in all its units ensuring a safety culture

throughout all levels of the organisation.

The Occupational Health and Safety (OHSAS) system aims to

eliminate or minimise risk to employees and other interested

parties who may be exposed to Occupational Health and

Safety risks associated with its activities. During the year 2007-

08, various product units of Haridwar and Nashik Plants have

also been certified for OHSAS Management System (OHSAS

18001:2007) amended standard.

All Plants of the Automotive Sector have been certified

with the amended standard for Environmental Management

System ISO 14001: 2004.

Your Company has given the utmost importance for

Environment Monitoring at all its Plants by implementing

various environmental initiatives such as effluent treatment,

increased green zones, water and waste water management,

solid waste management, air pollution management thereby

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8

complying with all relevant Environment Legislations. TheEnvironmental performance is well within the limits stipulated

in statutory guidelines for all operations and fulfills the

required statutory requirements of respective State Pollution

Control Boards. Major environmental parameters required

are being regularly monitored and reported to the concerned

regulatory bodies.

Your Companys Plants continued its commitment to

improve the well being of the employees. Medical Check-

ups, both curative and preventive Check-ups have been

organised at all its Plants including educating the employeeson Industrial Hygiene at the work place.

Corporate Social ResponsibilityCorporate Social ResponsibilityCorporate Social ResponsibilityCorporate Social ResponsibilityCorporate Social Responsibility

Corporate Social Responsibility (CSR) has always been an

integral part of the vision of the Mahindra Group and has

been the cornerstone of its core value of Good Corporate

Citizenship. CSR for the Company is all encompassing,

including making socially responsible products, engaging in

responsible employee relations, and not only making a

responsible commitment to the community but also

encouraging employee engagement in community initiatives.

The Mahindra Group has pledged amounts not exceeding

1% of its profit after tax (PAT) on a yearly basis for the

Companys CSR initiatives, largely to benefit the socially

and economically disadvantaged sections of society.

While the Companys focus area for CSR has been in the

field of education, as responsible citizens, the Company

has also been actively supporting issues such as health

and environment.

Some of the major initiatives your Company has invested

in are described below:

Mahindra Pride School:

As part of the 60th year celebrations, through the K. C.

Mahindra Education Trust, the Company has committed

to setting up two Mahindra Pride Schools. The Schools

aim to empower the youth from socially disadvantagedsections of society by extending livelihood training which

will enable them to gain employment based on the skills

learned at these Schools.

Mid Day Meal Kitchen:

The Company had entered into a tripartite public private

partnership with the Government of Rajasthan and Naandi

Foundation for setting up of a centralised Mid Day Meal

Kitchen at Govindgarh Taluka, Jaipur District, in the state

of Rajasthan. This kitchen will provide hygienic, nutritious

and wholesome mid day meals to approximately 25,000 35,000 primary school children studying in 314 Government

Schools in Govindgarh Taluka, Jaipur District.

Supporting Nanhi Kali:

Nanhi Kali, which supports the education of the

disadvantaged girl child has been the flagship programme

of the K. C. Mahindra Education Trust. The Mahindra Group

has committed to independently support 6,000 girls in urban,

rural and tribal parts of India by providing academic support

as well as material support in the form of uniforms, clothes,

school bags, shoes, etc. In addition, the Company hasentered into a partnership with the Government of Rajasthan

to jointly support the education of 10,000 disadvantaged

girl children in the tribal area of Udaipur District.

Gifting Cochlear Implants:

By gifting the power of sound through the donation of

cochlear implants, the Mahindra Group has changed the

life and future of 41 profoundly hearing-impaired,

underprivileged children till date. Operations are performed

by Dr. Milind Kirtane, Indias leading ENT surgeon. All

recipients are selected in consultation with Dr. Kirtane andhis team of doctors, audiologists, teachers of the hearing

impaired and social counselors.

Supporting Government Schools:

Continuing its commitment to make quality education

accessible to all children, the Mahindra Group has continued

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support to 6 Government Schools in Mumbai (5 Schools atKandivli and 1 in Worli). Naandi Foundation, the

implementation partner for the School Adoption Programme,

has through its Ensuring Children Learn strategy, been

running Gyan Jyothi Centres or academic support classes

to ensure that children coming to BMC Schools acquire

grade specific learning competencies.

Mahindra All India Talent Scholarships (MAITS):

498 students from 11 Centres all over India were awarded

the MAITS in the last financial year to enable them to

pursue a job oriented diploma course at a recognised

Government Polytechnic in India. These students have been

provided with this scholarship for a 3 year period. A

majority of the scholarship awardees are girls, as the Trust

is keen to empower girls through vocational education.

Employee Social Options (ESOPS):

Employee Social Options (ESOPS) the unique programme

at the Mahindra Group where each employee can exercise

his own social responsibility by volunteering in CSR initiatives

received great support, with 14,535 employees volunteeringfor various initiatives with ESOPS expanding to 6 new States

namely Uttar Pradesh, Assam, Madhya Pradesh, Rajasthan,

Bihar and Tamil Nadu.

Some of the Notable ESOPS initiatives this year were:

The Lifeline Express; undertaken by the Tractor Plant in

Rudrapur, where 647 surgeries were performed free of cost.

Mahindra Hariyali; The Managements vision of planting

One million trees has already reached the 2.8 lakhs mark

across the country.

AIDS Awareness Campaign; inaugurated in July, 2007, and

conducted in partnership with an NGO AAS Centre for

Human Hope aims to create Aids awareness among the

Companys employees, school/college students, vendor/

suppliers and other citizens of Nashik City.

The Company has been recognised for its CSR work and feelsprivileged to have received the Businessworld FICCI SEDF CSR

Award and the BSR Business for Social Responsibility Award.

DirectorsDirectorsDirectorsDirectorsDirectors

Mr. Anand G. Mahindra, Mr. A. K. Nanda, Mr. Nadir B.

Godrej and Mr. M. M. Murugappan retire by rotation and,

being eligible, offer themselves for re-appointment.

Directors Responsibility StatementDirectors Responsibility StatementDirectors Responsibility StatementDirectors Responsibility StatementDirectors Responsibility Statement

Pursuant to section 217(2AA) of the Companies Act, 1956,

your Directors, based on the representations received from

the Operating Management, and after due enquiry, confirm

that:

(i) in the preparation of the annual accounts, the

applicable accounting standards have been followed;

(ii) they have, in the selection of the accounting policies,

consulted the Statutory Auditors and these have been

applied consistently and reasonable and prudent

judgments and estimates have been made so as to

give a true and fair view of the state of affairs of the

Company as at 31st March, 2008 and of the profit of

the Company for the year ended on that date;

(iii) 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;

(iv) the annual accounts have been prepared on a going

concern basis.

Subsidiary CompaniesSubsidiary CompaniesSubsidiary CompaniesSubsidiary CompaniesSubsidiary Companies

The subsidiary companies of your Company have reflected

a significantly improved performance over the previous

year and are moving from strength to strength, thereby

contributing to the overall growth of the Company and

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appreciation in Shareholders value. The major subsidiariessuch as Tech Mahindra Limited with a 399.5% growth in

profits, Mahindra Holidays & Resorts India Limited with a

92.82% growth in profits and Mahindra & Mahindra

Financial Services Limited with a 33.22% growth in profits,

deserve special mention. The consolidated Group Profit for

the year after exceptional items, prior period adjustments

and tax and after deducting minority interests is Rs.1,571.12

crores as against Rs.1,497.15 crores earned last year - a

growth of 4.94%.

During the year under review, Mahindra Retail Private

Limited, Mahindra Hotels and Residences India Limited,

Mahindra Holdings Limited, Mahindra Rural Housing

Finance Limited, Tech Mahindra (Malaysia) SDN.BHD, Tech

Mahindra (Beijing) IT Services Limited, Bristlecone (Malaysia)

SDN.BHD, Mahindra Residential Developers Limited,

Mahindra Technology Park Limited, Mahindra Automotive

Limited, Punjab Tractors Limited, Mahindra Logistics

Limited, Mahindra Forgings Limited, Mahindra Castings

Private Limited, Mahindra Navistar Engines Private Limited,

Heritage Bird (M) Sdn Bhd, Mahindra First Choice Services

Limited, Mahindra Graphic Research Design s.r.l., Mahindra

Aerospace Private Limited and Ashtamudi Resorts Private

Limited became subsidiaries of your Company.

During the year under review, Mahindra Forgings Overseas

Limited, Mahindra Forgings Mauritius Limited, Falkenroth

Grundstucksgesellschaft GmbH, Tech Mahindra

(R&D Services) Pte. Limited, Fried. Hunninghaus GmbH, Fried.

Hunninghaus GmbH & Co. KG, Mahindra Stokes Holding

Company Limited, Plexion Technologies (India) Private Limited,

Mahindra Ashtech Limited and Ashtamudi Resorts Private

Limited ceased to be subsidiaries of the Company.

Subsequent to the year-end, iPolicy Networks Limited andTech Mahindra (R&D Services) Limited ceased to be

subsidiaries of the Company.

The Statement pursuant to section 212 of the Companies

Act, 1956 containing details of the Companys subsidiaries

is attached.

The Consolidated Financial Statements of the Companyand its subsidiaries, prepared in accordance with

Accounting Standard AS 21 form part of the Annual

Report.

The Company has made an application to the Ministry of

Corporate Affairs seeking exemption from attaching the

copy of the Balance Sheet, Profit and Loss Account, Reports

of the Board of Directors and Auditors of the subsidiaries

with the Balance Sheet of the Company. If in terms of the

approval granted by the Ministry of Corporate Affairs under

section 212(8) of the Companies Act, 1956, the copy of

the Balance Sheet, etc. of the subsidiaries are not required

to be attached to the Balance Sheet of the Company, the

Company Secretary will make these documents available

upon receipt of request from any Member of the Company

interested in obtaining the same. These documents will

also be available for inspection at the Head Office of the

Company and the office of the respective subsidiary

companies, during working hours upto the date of the

Annual General Meeting.

AuditorsAuditorsAuditorsAuditorsAuditors

Messrs. Deloitte Haskins & Sells, Chartered Accountants,

retire as Auditors of the Company and have given their

consent for re-appointment. The Shareholders will be

required to elect Auditors for the current year and fix their

remuneration.

As required under the provisions of section 224(1B) of the

Companies Act, 1956, the Company has obtained a written

certificate from the above Auditors proposed to be re-

appointed to the effect that their re-appointment, if made,

would be in conformity with the limits specified in the said

section.

Public Deposits and Loans/AdvancesPublic Deposits and Loans/AdvancesPublic Deposits and Loans/AdvancesPublic Deposits and Loans/AdvancesPublic Deposits and Loans/Advances

Out of the total 2,070 deposits of Rs.372.19 lakhs from

the public and Shareholders as at 31st March, 2008, 141

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deposits amounting to Rs.22.14 lakhs, which had matured,had not been claimed as at the end of the financial year.

Since then, 17 of these deposits of the value of Rs.2.90

lakhs have been claimed.

The particulars of loans/advances and investment in its

own shares by listed companies, their subsidiaries,

associates, etc., required to be disclosed in the annual

accounts of the Company pursuant to Clause 32 of the

Listing Agreement are furnished separately.

Current YCurrent YCurrent YCurrent YCurrent Yearearearearear

During the period 1st April, 2008 to 27th May, 2008, 32,468

vehicles were produced as against 28,680 vehicles and

32,214 vehicles were despatched as against 27,247 vehicles

during the corresponding period in the last year. During the

same period 15,834 Tractors were produced and 15,639

Tractors despatched as against 16,010 Tractors produced

and 16,099 Tractors despatched during the corresponding

period in the previous year.

The Indian economic performance has been impressive with

a healthy GDP Growth Rate coupled with strong growth in

the Industry as well as in the Services Sector. The expectednormal monsoon and increase in the support prices

announced by the Government should brighten the outlook

for agriculture. While these macro economic factors remain

strong, higher oil, commodity and food prices resulting in

inflation, a sharply appreciating rupee, slowing world

growth and fluid domestic and international financial

conditions are likely to persist which will create pressure

on pricing and margins. Consumer demand will remain

below potential until interest rates soften. The Company

expects to meet these challenges through innovative cost

control, process efficiencies and designing products thatexceed consumer expectations.

Acquisitions and other mattersAcquisitions and other mattersAcquisitions and other mattersAcquisitions and other mattersAcquisitions and other matters

Punjab Tractors Limited:

As mentioned in the last Annual Report, your Company

with a view to further consolidating its presence in the

Tractor Industry, along with Mahindra Holdings & FinanceLimited (MHFL), entered into a Share Purchase Agreement

with Actis Group and the Burman Family to acquire 43.3%

of the issued and fully paid-up equity capital of Punjab

Tractors Limited (PTL). In addition to this, your Company

along with MHFL had made an open offer to acquire an

additional stake of upto 20% in PTL and also for acquiring

upto 20% stake in Swaraj Engines Limted and Swaraj

Automotives Limited, in accordance with Regulations 10

and 12 of the Securities and Exchange Board of India

(Substantial Acquisition of Shares and Takeovers)

Regulations, 1997, as amended. Pursuant to these openoffers, your Company acquired 20% additional stake in

PTL, 20% in Swaraj Automotives Limited and 0.1% in Swaraj

Engines Limited in the fiscal year 2007-08.

PTL is a strategic fit to your Company. Its Swaraj Brand has

a good reputation in the market for reliability and efficient

working. PTL has also significant unutilised capacity which

the Company would be utilising to ramp up not only sales

of Swaraj Tractors but also exploit synergies with the Farm

Equipment Sector of your Company. The Company will be

in a unique position to leverage upon these opportunities

coupled with other advantages such as economies of scale,

sourcing benefits and some amount of vendor

rationalisation. To add to these, PTL has certain products

in the above 50 HP range which will add to the portfolio

of the Company.

Mahindra Graphic Research Design s.r.l.:

With a view to further consolidating its presence in the

Automotive Sector, your Company, through Mahindra

Overseas Investment Company (Mauritius) Ltd. (MOICML),

a wholly owned subsidiary of the Company, entered into

an Asset Purchase Agreement with G.R. Graphica RicercaDesign S.r.l. to purchase its assets and business. GR Design,

started in 1996, has a rich experience in automotive body

and trim design and a systematic and process oriented

methodology. Since 1998, their quality system is ISO 9001

certified. Since July, 2005 they have adopted a quality-

environmental integrated system and in 2006, they have

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obtained ISO 14001:2004 Certificates. Their capabilitiescover the development of chassis, body, external and

internal trim on automobiles, light and heavy trucks. The

purpose of acquisition is to create an in-house design centre

to meet the requirements of the Companys Automotive

Sector.

Merger of the Forgings Business:

In order to build a robust, global scale business in forging

and to reap the benefits of operational synergy and enhance

stakeholder value, the forging entities of the group namely,

Stokes Group Limited, Jeco Holding AG and Schneweiss

& Co. GmbH were integrated by way of a Scheme of

Arrangement between Mahindra Stokes Holding Company

Limited, Mahindra Forgings Mauritius Limited and Mahindra

Forgings Overseas Limited with Mahindra Forgings Limited.

The Scheme which was approved by the Honourable

Bombay High Court on 23rd November, 2007, was made

effective on 27th December, 2007 and the Appointed Date

for the same was 1st April, 2007.

Mahindra Holdings & Finance Limited:

In order to simplify and consolidate the group holding

structure, your Company decided to merge its wholly owned

subsidiary Mahindra Holdings & Finance Limited (MHFL)

into your Company. This would help rationalise operations

for both the companies. Besides, the restructuring would

benefit the companies and its stakeholders on account of

enhanced financial strength and capabil ity. The

amalgamation would integrate operations of both

companies and would provide efficient management control

and systems. In addition, the proposed Scheme would

enhance your Companys financial strength, and result in

higher Shareholder value creation and distribution. The

proposed Scheme was approved by the Shareholders at a

Court Convened Meeting held on 12th April, 2008. Thismerger would be effective post the approval by the

Honourable Bombay High Court and the Appointed Date

for the same is 1st February, 2008.

Divestment in Mahindra Ashtech Limited:

Given the priority of your Company to invest only in its

core businesses, your Company divested its holding in

Mahindra Ashtech Limited, a wholly owned subsidiary of

your Company, engaged in the business of Ash handling

systems and Traveling Water Screen in favour of Fusion

Fittings (India) Limited.Energy Conservation, TEnergy Conservation, TEnergy Conservation, TEnergy Conservation, TEnergy Conservation, Technology Absorption andechnology Absorption andechnology Absorption andechnology Absorption andechnology Absorption andFFFFForeign Exchange Earnings and Outgooreign Exchange Earnings and Outgooreign Exchange Earnings and Outgooreign Exchange Earnings and Outgooreign Exchange Earnings and Outgo

Particulars required to be disclosed under the Companies

(Disclosure of Particulars in the Report of Board of Directors)

Rules, 1988 are set out in Annexure II to this Report.

PPPPParticulars of Employeesarticulars of Employeesarticulars of Employeesarticulars of Employeesarticulars of Employees

The Company had 237 employees who were in receipt of

remuneration of not less than Rs.24,00,000 during the

year ended 31st March, 2008 or not less than Rs.2,00,000

per month during any part of the said year. However, as

per the provisions of section 219(1)(b)(iv) of the Companies

Act, 1956, the Directors Report and Accounts are being

sent to all the Shareholders of the Company excluding the

Statement of particulars of employees. Any Shareholder

interested in obtaining a copy of the Statement may write

to the Company Secretary of the Company.

For and on behalf of the Board

KESHUB MAHINDRAKESHUB MAHINDRAKESHUB MAHINDRAKESHUB MAHINDRAKESHUB MAHINDRA

Chairman

Mumbai, 28th May, 2008

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ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31STSTSTSTST MARCH, 2008MARCH, 2008MARCH, 2008MARCH, 2008MARCH, 2008Information to be disclosed under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock

Purchase Scheme) Guidelines, 1999:

(a) Options granted 72,27,250

(b) The pricing formula 1st Tranche 2nd Tranche 3rd Tranche 4th Tranche 5th Tranche 6th Tranche 7th Tranche 8th Tranche

Average Average Discount Discount Average Discount Discount Discount

price price of 5.13% of 4.85% price of 5.02% of 4.89% of 4.97%

preceding preceding on the on the preceding on the on the on the

the the average average the average average average

specified specified price price specified price price price

date - 27th date - 30th preceding preceding date - 14th preceding preceding preceding

September, May, 2003 the the September, the the the

2001 specified specified 2005 specified specified specifieddate - 31st date - 30th date - 29th date - 13th date - 30th

May, 2004 May, 2005 May, 2006 September, July, 2007

2006

Average price - Average of the daily high and low of the prices for the Companys

Equity Shares quoted on Bombay Stock Exchange Limited during

the 15 days preceding the specified date.

The specified date - Date on which the Remuneration/Compensation Committee decided

to recommend to the Mahindra & Mahindra Employees Stock Option

Trust (Trust), the grant of Options.

(c) Options vested 47,56,553 Options stand vested on 31st March, 2008.

(d) Options exercised 31,83,568

(e) The total number of shares 31,83,568 Equity Shares of Rs.10 each. These were transferred from the Trust to the Eligible

arising as a result of exercise Employees.

of option

(f) Options lapsed 4,57,314

(g) Variation of terms of options At the Sixty-first Annual General Meeting of the Company held on 30th July, 2007, the

Mahindra & Mahindra Limited Employees Stock Option Scheme was amended to provide for

recovery from Eligible Employees, the fringe benefit tax in respect of Options which are

granted to or vested or exercised by the Eligible Employees on or after the 1 st day of April,

2007.

(h) Money realised by exercise Rs.30,05,17,410. This amount was received by the Trust.

of options

(i) Total number of options 35,86,368

in force

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(j) Employee-wise details of

options granted to:

(i) Senior managerial As per Statement attached

personnel

(ii) Any other employee Names Options granted Names Options granted

who receives a grant in during the year during the year

any one year of option ended 31st March, ended 31st March,

amounting to 5% or 2004* 2005*

more of option granted

during that year

Mr. Raghunath Murti 15,000 Mr. Pranab Datta 15,240

Mr. Hemant Luthra 15,240 Mr. Rajeev Dubey 15,000

Mr. Ramesh Iyer 25,920 Mr. Allen Sequeira 10,160

Mr. Prince M. Augustin 5,080

* The Options granted stand augmented by an equal number of Options and the Exercise

Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005.

(iii) Identified employees Nil

who were granted option,

during any one year, equal

to or exceeding 1% of the

issued capital (excluding

outstanding warrants and

conversions) of the

company at the time of

grant

(k) Diluted Earnings Per Share (EPS) pursuant to issue of shares

on exercise of option calculated in accordance with

Accounting Standard (AS) 20 Earnings per Share

(l) Where the company has calculated the employee

compensation cost using the intrinsic value of the stock

options, the difference between the employee

compensation cost so computed and the employee

compensation cost that shall have been recognised if it

had used the fair value of the options, shall be disclosed.

The impact of this difference on profits and on EPS of the

company shall also be disclosed.

Rs.41.52

The Company has calculated the employee compensation cost

using the intrinsic value of stock options. Had the fair value

method been used, in respect of stock options granted on or

after 30th June, 2003, the employee compensation cost would

have been higher by Rs.23.01 crores, Profit after tax lower by

Rs.23.01 crores and the basic and diluted earnings per share

would have been lower by Re.0.96 and Re.0.90 respectively.

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(m) Weighted-average exercise prices and weighted-average

fair values of options shall be disclosed separately for

options whose exercise price either equals or exceeds or is

less than the market price of the stock.

(n) A description of the method and significant assumptions

used during the year to estimate the fair values of options,

including the following weighted-average information:

(i) risk-free interest rate, 7.34%

(ii) expected life, 2.50 years

(iii) expected volatility, 53.40%

(iv) expected dividends, and 3.04%

(v) the price of the underlying share in market at the Rs.728.80

time of option grant.

STSTSTSTSTAAAAATEMENT ATEMENT ATEMENT ATEMENT ATEMENT ATTTTTTTTTTACHED TO ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ACHED TO ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ACHED TO ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ACHED TO ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ACHED TO ANNEXURE I TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31 STSTSTSTST MARCH, 2008MARCH, 2008MARCH, 2008MARCH, 2008MARCH, 2008

Name of Senior ManagerialName of Senior ManagerialName of Senior ManagerialName of Senior ManagerialName of Senior Managerial Options granted inOptions granted inOptions granted inOptions granted inOptions granted in Options granted inOptions granted inOptions granted inOptions granted inOptions granted in Options granted inOptions granted inOptions granted inOptions granted inOptions granted in Options granted inOptions granted inOptions granted inOptions granted inOptions granted in

PPPPPersons to whom Stockersons to whom Stockersons to whom Stockersons to whom Stockersons to whom Stock DecemberDecemberDecemberDecemberDecember, 2001*, 2001*, 2001*, 2001*, 2001* June, 2005**June, 2005**June, 2005**June, 2005**June, 2005** SeptemberSeptemberSeptemberSeptemberSeptember, 2006, 2006, 2006, 2006, 2006 JulyJulyJulyJulyJuly, 2007, 2007, 2007, 2007, 2007

Options have been grantedOptions have been grantedOptions have been grantedOptions have been grantedOptions have been granted

Mr. Deepak S. Parekh 20,000 5,000 Nil NilMr. Nadir B. Godrej 20,000 5,000 Nil Nil

Mr. M. M. Murugappan 20,000 5,000 Nil Nil

Mr. Narayanan Vaghul 20,000 5,000 Nil Nil

Dr. A. S. Ganguly 20,000 5,000 Nil Nil

Mr. R. K. Kulkarni 20,000 5,000 Nil Nil

Mr. Anupam Puri 20,000 5,000 Nil Nil

Mr. Bharat Doshi 1,00,000 10,000 11,345 8,362

Mr. A. K. Nanda 1,00,000 10,000 11,345 8,362

* All the above Options have been exercised.

** The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account

of the 1:1 Bonus Issue made in September, 2005.

Options Grant Date Exercise price Fair value

(Rs.) (Rs.)

31st July, 2007 762.00 252.98

The fair-value of the stock options granted on 31st July, 2007

have been calculated using Black-Scholes Options pricing

Formula and the significant assumptions made in this regard

are as follows:

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PARTICULARS AS PER THE COMPANIES (DISCLOSURE OF

PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS)

RULES, 1988 AND FORMING PART OF THE DIRECTORS

REPORT FOR THE YEAR ENDED 31ST MARCH, 2008

A )A )A )A )A ) Conservation of EnergyConservation of EnergyConservation of EnergyConservation of EnergyConservation of Energy

Energy Conservation Measures:

1.1.1.1.1. Engineering InitiativesEngineering InitiativesEngineering InitiativesEngineering InitiativesEngineering Initiatives

a) Insta llation of energy eff ic ient screw

compressors at various locations.

b) Installation of Heat pump for heating ofsynclean solution in Igatpuri, Kandivali.

c) Supply duct modification in paint shop at Nashik.

d) Unique development of super heat recovery

from air conditioning units to eliminate use of

conventional electrical heaters at washing

machines in Transmission PU.

e) Installation of Variable Frequency Drives for

pumps, blowers.

f) Natural draft Turbine air ventilators instead of

electrical driven exhaust fans at Kandivali

replacing powered exhaust blowers.g) Automatic power factor controllers at various

locations which has improved power factor

from 0.92 to 0.993.

h) Installation of fix capacitor bank for the motor

above 50 KW rating.

i) Controll ing the temperature of split Air

Conditioner installed in the office space by

modifying the microcontroller and setting it

to a 23deg.C instead of 16 deg. C.

j) Installation of Beblec-make energy saver panel

to lighting load at Tractor P. U. in KandivaliPlant.

k) Reduction in power consumed by a i r

compressor by plugging all the air leaks,

replacing pneumatic tools by DC nut runners

and by increasing unloading time of

compressors.

l) To eliminate uneven fuel consumption in heat

exchanger, fuel pump pressure adjusted to

optimum level and heat exchanger replaced

for better efficiency of Diesel consumption.

2.2.2.2.2. Through Process ImprovementThrough Process ImprovementThrough Process ImprovementThrough Process ImprovementThrough Process Improvement

a) Waste heat recovery from Exhaust Flue gas at

continuous Gas carburizing Furnace in Heat

Treatment to eliminate use of electrical heaters

at post wash.

b) Ingenious ideas implemented at Kandivali/

Nashik/ Igatpuri/ Zaheerabad /Haridwar such as:

i) Energy alert system for air compressors.

ii) Temperature Controllers for window air

conditioning units.

iii) Auto valves for water and compressed air

application.

iv) Timers for blowers, fans and lights.

v) Occupancy sensor auto-switches for shop

floor lighting.

vi) Higher H.P to lower H.P motors.

vii) Use of compact fluorescent Lamps (CFL).

viii) Continuous to intermittent operation of

motors.

ix) Electronic chokes and new reflector tube

lights.

c) Installation of heat pump at canteen which

eliminates the 40 KW heater and 4.5KW water

cooler in Canteen.

d) El iminate low productiv ity by tackle

modification so the NST hood & SFC grill can

be loaded on single tackle.

e) Reduction of air consumption by stopping air

blowing & completely drying the chassis before

taken to oven in paint shop.

3.3.3.3.3. Awareness for Energy ConservationAwareness for Energy ConservationAwareness for Energy ConservationAwareness for Energy ConservationAwareness for Energy Conservation

a) Celebrated Energy Conservation Week from

14th December, 2007 to 21st December, 2007

ANNEXURE II TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ANNEXURE II TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ANNEXURE II TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ANNEXURE II TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31ANNEXURE II TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31STSTSTSTST MARCH, 2008MARCH, 2008MARCH, 2008MARCH, 2008MARCH, 2008

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to promote energy saving and conservationof resources. Energy Conservation Products

displayed in the plant for awareness.

b) Conducted slogan, poster and suggestion

competition on Energy efficiency with

overwhelming response by receiving 987

entries from all the product units. Winners of

the competition are suitably rewarded.

c) Distributed leaflets with Energy Saving tips to

all employees.

d) Energy Conservation awareness has been

created amongst vendors, suppliers andexternal agencies like Indian Railway officials,

FICCI, etc. by various interactions and seminars.

e) Emails and posters used to create awareness

among the Employees about the need for

saving energy.

f) Cross functional team for reducing the

consumption of electricity during non-

production time.

g) Reward and Recognition for energy saving

projects.

h) Red tag system to reduce the air leakages.i) Training provided to cell members to think

innovatively to reduce the energy consumption.

j) Display of Energy generation and consumption

process.

k) Detailed Energy audit conducted by external

Agency to quantify energy consumption and

make people aware of potential areas of action.

The above initiatives and other efforts have resulted

in reduction in energy consumption. These

measures have also resulted in cost savings for

the Company, aggregating approximately Rs.21crores. In recognition of these efforts, the Company

received following prestigious awards viz:

The Automotive Sector, Zaheerabad Plant won the

first prize in National Energy Conservation Award

from BEE.

The Automotive Sector, Nashik Plant won secondexcellence Award at National Energy Conservation

Award from BEE.

Both the above Awards were received from the

Honourable President of India, Smt. Pratibha Patil.

The Automotive Sector, Nashik and Kandivali Plants

won the Maharashtra State Level Award - First

and Second prize respectively.

The Automotive Sector, Nashik Plant also won the

water conservation excellence award from CII.

B )B )B )B )B ) Research & Development and TResearch & Development and TResearch & Development and TResearch & Development and TResearch & Development and TechnologyechnologyechnologyechnologyechnologyAbsorptionAbsorptionAbsorptionAbsorptionAbsorption

During the year under review, pursuant to R & D efforts

on development of new technologies, new models l ike

Scorpio VLX with mHawk Engine and NGT530R

improved transmission, Alfa Passenger, Bolero Camper

DX, Scorpio Getaway Double Cab, 295 DI Super Turbo

and Upgraded Sarpanch 595DI Super Turbo for the

domestic market, 8000DI for Africa and Tier III

and Tier IV upgrades for the US market, etc. were

launched.

Keeping in view the future requirements oftechnological upgradation, the Company has

undertaken various programs like development of

engines to meet future regulatory norms in India, USA

and other countries to which the Companys products

are exported.

During the year, the Companys Tractor Division has

filed 9 Patent applications and 8 Design registration

applications (including 5 in USA). Seven Patents were

granted to the Companys Tractor Division during the

year, applications for which were filed in earlier years.

Three Patents were granted to the Companys

Automotive Division during the year.

The Company spent Rs.245.33 crores (including

Rs. 53.81 crores for Capital Expenditure) on Research

and Development work during the year which was

approximately 1.85% of the total turnover.

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C )C )C )C )C ) Imported TImported TImported TImported TImported Technology for the last 5 yearsechnology for the last 5 yearsechnology for the last 5 yearsechnology for the last 5 yearsechnology for the last 5 yearsSrSrSrSrSr. No.. No.. No.. No.. No. TTTTTechnology Importedechnology Importedechnology Importedechnology Importedechnology Imported YYYYYear of Importear of Importear of Importear of Importear of Import StatusStatusStatusStatusStatus

1. Power shift transmission for higher HP Tractors 2003 In the process of Absorption

2. NEF TCI 2004 Technology Absorbed

3. NEF Performance improvements 2004 Technology Absorbed

4. MDI Engine upgradation 2004 Technology Absorbed

5. Anticlock Braking System on utility vehicle 2004 Technology Absorbed

6. Common Rail Diesel on utility vehicle 2004 Technology Absorbed

7. New CRDe Engine Development 2004 Technology Absorbed

8. Development of a new MPV 2004 In the process of Absorption

9. Euro IV Emission developments for exports 2004 Technology Absorbed

10. Multi Link Suspension for utility vehicle 2004 Technology Absorbed

11. Development of Air Bags on utility vehicle 2005 In the process of Absorption12. Development of cruise control on utility vehicle 2005 Technology Absorbed

13. Fatigue Lab and track design for MRV, Chennai 2005 In the process of Absorption

14. Sandwich material for noise absorption 2005 In the process of Absorption

15. Development of Nano-Technology for IP etc. 2005 Technology Absorbed

16. Climate control (Heated and Cooled) seats 2005 In the process of Absorption

17. Bio-Diesel and Gas based engine 2005 In the process of Absorption

18. Transmission Design of Compact Tractor 2006 Technology Absorbed

19. Development of Integrated Cabin for Tractor 2006 In the process of Absorption

20. Hydrophilic Nano coated Feature 2007 In the process of Absorption

21. Automatic Transmission for SUV 2007 In the process of Absorption

22. Transmisison for new SUV 2007 In the process of Absorption

23. New Generation system for Brakes for SUV 2007 In the process of Absorption24. New Electricals & Electronics Features 2007 In the process of Absorption

25. CNG engines for LCV 2007 Technology Absorbed

26. Common Rail Diesel on Light commercial vehicle 2007 Technology Absorbed

27. Next generation Common rail adaptation 2007 Technology Absorbed

28. Hydrogen ICE 2007 In the process of Absorption

29. Fuel Cell Vehicle Development 2007 In the process of Absorption

30. 2nd Generation Biofuels (Biomass to Liquid / Gas to Liquid) 2007 In the process of Absorption

31. Hybrid Vehicles 2008 In the process of Absorption

32. Transmission Upgrade 2008 In the process of Absorption

33. Electricals & Electronics Update 2008 In the process of Absorption

34. Design for New Tractor Transmission 2008 In the process of Absorption

FFFFForeign Exchange Earnings and Outgooreign Exchange Earnings and Outgooreign Exchange Earnings and Outgooreign Exchange Earnings and Outgooreign Exchange Earnings and OutgoThe Company continues to strive to improve its export earnings. Further details in respect of exports are set out elsewhere in the Report.

The information on foreign exchange earnings and outgo is furnished in the Notes on Accounts.For and on behalf of the Board

KESHUB MAHINDRAKESHUB MAHINDRAKESHUB MAHINDRAKESHUB MAHINDRAKESHUB MAHINDRAMumbai, 28th May, 2008 Chairman

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PPPPParticulars of loans/advances and investment in its own shares by listed companies, their subsidiaries,articulars of loans/advances and investment in its own shares by listed companies, their subsidiaries,articulars of loans/advances and investment in its own shares by listed companies, their subsidiaries,articulars of loans/advances and investment in its own shares by listed companies, their subsidiaries,articulars of loans/advances and investment in its own shares by listed companies, their subsidiaries,associates, etc., required to be disclosed in the Annual Accounts of the Company pursuant to Clauseassociates, etc., required to be disclosed in the Annual Accounts of the Company pursuant to Clauseassociates, etc., required to be disclosed in the Annual Accounts of the Company pursuant to Clauseassociates, etc., required to be disclosed in the Annual Accounts of the Company pursuant to Clauseassociates, etc., required to be disclosed in the Annual Accounts of the Company pursuant to Clause

32 of the Listing Agreement.32 of the Listing Agreement.32 of the Listing Agreement.32 of the Listing Agreement.32 of the Listing Agreement.

Loans and advances in nature of loans to subsidiaries:Loans and advances in nature of loans to subsidiaries:Loans and advances in nature of loans to subsidiaries:Loans and advances in nature of loans to subsidiaries:Loans and advances in nature of loans to subsidiaries:

(Rupees in crores)(Rupees in crores)(Rupees in crores)(Rupees in crores)(Rupees in crores)

Name of the CompanyName of the CompanyName of the CompanyName of the CompanyName of the Company Balances as onBalances as onBalances as onBalances as onBalances as on Maximum outstandingMaximum outstandingMaximum outstandingMaximum outstandingMaximum outstanding

3131313131ststststst March, 2008March, 2008March, 2008March, 2008March, 2008 during the yearduring the yearduring the yearduring the yearduring the year

Mahindra & Mahindra Financial Services Limited 4.00

Mahindra Intertrade Limited 0.15 3.13

(including loans where there is no interest) (0.15) (3.13)Bristlecone India Limited 8.03 8.03

Mahindra Gujarat Tractor Limited 1.00 1.00

Mahindra Shubhlabh Services Limited 8.25 8.25

NBS International Limited 2.00 2.00

Mahindra Forgings Limited 233.98

(Mahindra Forgings Overseas Limited, Mahindra Forgings

Mauritus Limited and Stokes Forgings Holding Company

Limited since merged with Mahindra Forgings Limited

(Appointed Date - 01.04.2007)

Bristlecone Limited 40.67 40.67

Mahindra Ashtech Limited 6.50

Loans and advances in the nature of loans to firms/companies in which Directors are Interested:Loans and advances in the nature of loans to firms/companies in which Directors are Interested:Loans and advances in the nature of loans to firms/companies in which Directors are Interested:Loans and advances in the nature of loans to firms/companies in which Directors are Interested:Loans and advances in the nature of loans to firms/companies in which Directors are Interested:

(Rupees in lakhs)(Rupees in lakhs)(Rupees in lakhs)(Rupees in lakhs)(Rupees in lakhs)

Name of the CompanyName of the CompanyName of the CompanyName of the CompanyName of the Company Balances as onBalances as onBalances as onBalances as onBalances as on Maximum outstandingMaximum outstandingMaximum outstandingMaximum outstandingMaximum outstanding

3131313131ststststst March, 2008March, 2008March, 2008March, 2008March, 2008 during the yearduring the yearduring the yearduring the yearduring the year

Infrastructure Development Finance Company Limited 15.00 15.00

Except as indicated above, the Company has not made any loans and advances in the nature of loans to associates or

loans and advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no

interest or interest below section 372A of the Companies Act, 1956.

Investments by the Loanee in the shares of Subsidiary CompanyInvestments by the Loanee in the shares of Subsidiary CompanyInvestments by the Loanee in the shares of Subsidiary CompanyInvestments by the Loanee in the shares of Subsidiary CompanyInvestments by the Loanee in the shares of Subsidiary Company, when the Company has made loans or advances in the, when the Company has made loans or advances in the, when the Company has made loans or advances in the, when the Company has made loans or advances in the, when the Company has made loans or advances in the

nature of loan:nature of loan:nature of loan:nature of loan:nature of loan:

Nil

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Management Discussion & AnalysisIndustry StructureIndustry StructureIndustry StructureIndustry StructureIndustry Structure

The Automotive Sector

The automotive industry is one of the key contributors to

the Indian manufacturing economy. The Indian automotive

industry achieved a turnover in excess of Rs.1,65,000 crores

in 2005-06. It accounted for over 13 mn direct and indirect

jobs and 17% of the total indirect taxes as per the

Automotive Mission Plan 2016, Government of India.

The total production of Multi Utility Vehicles (MUVs), Light

Commercial Vehicles (LCVs) and three wheelers in India

during the year under review grew by 1% over the previous

year and stood at 1,100,303 vehicles. (Source: SIAM). The

Company produced 208,035 vehicles during the same

period, a growth of 16% over the previous year. The

Company accounted for 18.9% of the Indian production

of MUVs, LCVs and three wheelers in the year under review.

MUVs are a family of vehicles capable of versatileapplications such as passenger transport, goods transport

or a combination of the two. There are six manufacturers

of multi utility vehicles in India. The Company is the largest

manufacturer of MUVs in India, offering a range of over

20 models. 288,600 MUVs were sold in India in the year

F-08, a growth of 5.1 % over F-07 (Source: Industry and

internal). MUVs are further categorized into soft tops, hard

tops and pick-ups.

LCVs (carrying a payload of 2MT to 4 MT) are commercial

vehicles used mostly for intra-state movement of goods. InF-08 44,957 LCVs of this category were sold a growth of

4.3% over F-07 (Source: Industry and internal).The company

competes in this segment through its subsidiary Mahindra

International Ltd (MIL). There are six manufacturers in India

in this specific LCV segment.

India is the largest market in the world for three

wheelers. In F-08 this segment decelerated by 9.7% over

F-07, with 364,700 three wheelers being sold in India.

(Source: SIAM).

The Farm Equipment Sector

The Indian Tractor market is the largest in the world, in

terms of sales volume. In the current year all the tractor

manufacturers together sold 3,02,241 tractors in the

domestic market. Additionally, 44,260 tractors were

exported.

The domestic tractor market is segmented by horsepower

into the low horsepower 25 HP segment, the mid segment

of 35 HP and the high segment of above 45 HP. Most of

the major players cater to all the three segments. However,

their relative strengths and market positions differ from

segment to segment. The domestic tractor industry is

fragmented, with about 14 major players and some small

local players.

Many factors affect tractor sales including monsoons,

means of irrigation, water levels, government declared

support prices for crops, general commodity prices,

crop production expenses (including seeds, fuel,

fertilizer, pesticides and other costs) and the credit

policy announced by RBI. The availability of finance is one

of the most significant factors influencing tractor demand,

as more than 90% of tractors are sold through bank

finance.

M&Ms Farm Equipment Sector (FES), which designs,

develops, manufactures and markets tractors for Indian

and overseas markets, is the largest manufacturer of tractors

in India. FES has sustained its market leadership in the

Indian tractor market for over 25 years.

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Industry DevelopmentsIndustry DevelopmentsIndustry DevelopmentsIndustry DevelopmentsIndustry Developments


The Indian automotive industry had experienced a strong

growth wave over the last five years. F-08 however, saw a

drop in production (including two wheelers) by 2.3% and

a drop in sales (including two wheelers) by 4.7% (Source:

SIAM). The only segments that registered growth in sales

were passenger vehicles (12.2%) and commercial vehicles

(4.1%). The three wheeler and two wheeler segments

witnessed a drop in growth of 9.7% and 7.9% respectively.

A combination of factors contributed to this situation, the

main ones being a rise in interest rates, continued increase

in fuel prices, sharp commodity inflation leading to higher

costs and a slight economic slowdown.

The total number of MUVs sold in India increased by 5.1%,

Within the MUV sub segments, the hard top sub segment,

which is the largest sub segment in MUVs, saw a volume

increase of 9% in the year under review as compared to

16% in the previous year. The soft tops sub segment,

which has been declining significantly over the last fewyears, declined a further 6 % in the year under review. The

pick-up market declined by 4% this year, after a 20%

growth last year.

The mid size car segment where the Logan competes,

increased by 16%.

In the LCV segment (2-4 MT of payload) the sales increased

by 4.3%. The volumes in the small three-wheeler segment

(0.5T load) declined by 18.6% and the large three-wheeler

segment witnessed a decline in volumes of 37.3%. (Source:

Industry and internal)

The Farm Equipment Sector

The first monsoon (between June and Sept) of FY 07-08

was 105% of the Long Period Average, resulting in a good

Kharif crop. The second monsoon was lesser than normal

in more than half of the areas across India. Hence, Rabisowing was lower than F-07 by 3%. However crop

production during F-08 (Rabi and Kharif combined) is

estimated to be 3% higher than the last year. The

Government also announced significantly higher Minimum

Support Prices for various crops for both Rabi and Kharif

periods. Overall, it is estimated that the agricultural GDP

of India will grow by 2.6% in F-08.

Credit allocation to agriculture had been increased to

Rs.2,25,000 Crores. Yet, due to higher NPAs, we witnessed

a slow down in bank financing and a tightening of lendingnorms. This, coupled with increased interest rates, caused

a drop of 5.1% in domestic sales in the tractor industry

over F-07. The domestic industry closed at 3,02,241 tractors

in F-08, compared to 3,18,328 tractors in F-07. Exports

from India totalled 44,260 tractors in F-08, a growth of

31.5% over the last year.

The industry had to bear the impact of hikes in the price

of raw materials. Over the last four years, the prices of

important input materials like steel, pig iron, and lead

have continuously increased. The prices of crude oilincreased significantly in the current year. Simultaneously,

exports were impacted due to a significant appreciation of

the rupee against the U.S. Dollar. Margins therefore

continued to be under pressure.

The industry is witnessing consolidation in the domestic

market. In F-06, Tractor and Farm Equipment Ltd. (TAFE)

bought Eicher Tractors Ltd. In F-08, M&M FES increased its

dominance of the domestic market with the acquisition of

Punjab Tractors Ltd. (PTL), With this acquisition, M&M FES

now commands nearly 40% of the domestic market.

M&M PM&M PM&M PM&M PM&M Performanceerformanceerformanceerformanceerformance


The Automotive Sector (AS) of the Company is engaged in

the Multi Utility Vehicle (MUV) and three wheeler segments

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directly. It competes in the Light Commercial Vehicle (LCV)segment through its joint venture subsidiary MIL, and in

the passenger car segment through another joint venture

subsidiary Mahindra Renault Pvt. Ltd (MRPL). The Company

manufactures LCVs for MIL and passenger cars for MRPL

on contract basis. The Company also markets these LCVs

and cars for the two companies respectively under

distribution contract for a fee.

For the sixth consecutive year, the Companys vehicle

production and sales touched an all-time high during the

year under review, despite the industry slowdown. A totalof 234,688 vehicles (including 34,556 three wheelers, 11,079

LCVs for MIL and 26,653 cars for MRPL) were produced,

which is a growth of 31.1 % over the previous year.

On the domestic sales front, the company along with its

subsidiaries MIL and MRPL sold a total of 218,998 vehicles

(including 33,927 three wheelers, 10,373 LCVs through

MIL and 25,907 cars through MRPL), recording a growth

of 28.7% over the previous year.

The Companys domestic MUV sales volumes grew a very

healthy 16.4%, against the industry MUV sales growth of

5.1%. A record number of 148,761 MUVs were sold by

M&M in the domestic market in the year under review as

against the sale of 127,856 MUVs in the previous year.

The company strengthened its domination of the domestic

MUV sub segment by increasing its market share to 51.5%

over the previous years market share of 46.6%

In the hard top MUV sub segment, the success of the

refreshed Scorpio and the Bolero models helped the

Company grow its volumes by 19%. The refreshed version

of the Bolero that was launched in March 2007 was a hit

with customers and the Bolero brand sales volume increased

by 33% over the previous year. In the process, Bolero brand

sales crossed the milestone of 50,000 vehicles sold in a

year and Bolero continued to be Indias largest selling

MUV, for the third year in a row.

November 2007 saw the launch of the VLX variant of theScorpio. Powered by the m-Hawk - a new indigenously

developed, state of the art, 2.2 liter common rail diesel

engine - and bundled together with a host of electronic

features. The Scorpio VLX has found great favour with the

customer.

In the soft top sub segment, the Companys soft-top sale

volume declined by 7 % in line with the industry decline

of 6%.

The Company pick up volumes registered a growth of

17% in spite of an industry de-growth of 4% in this sub

segment. As a result, the Companys market share jumped

to 76.9% from the previous years share of 63.2%. The

credit goes to the success of the small pick up model, the

Maxi Truck.

In LCVs, M&M, through its subsidiary MIL, has a presence

only in the lower payload (< 4MT) segment of the market.

The Companys sales in this sub segment improved by

20.3%, as against an industry sub segment growth of 4.4

% in the year under review. This was due to recent launches

in the passenger segment as well as the repositioning of a

load carrying model. One of the principal reasons for this

very healthy growth was the increased focus on the business

through MIL. This led to an increase in the Groups market

share in the segment from 20.1% in the previous year to

23.1% in the year under review. The subsi

Documents

MandM-AR-2007-2008