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MAHINDRA AND MAHINDRA LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Your Directors present their Report together with the audited accounts of
your Company for the year ended 31st March, 2010.

Financial Highlights (Rs. in crores)

2010 2009

Gross Income 20595 14983

Less: Excise Duty on Sales 1794 1619

Net Income 18801 13364

Profit before Depreciation, Interest,


Exceptional items and Taxation 3155 1363

Less: Depreciation/Amortisation 371 292

Profit before Interest,


Exceptional items and Taxation 2784 1071

Less: Interest (Net) 28 45

Profit before Exceptiona


items and Taxation 2756 1026

Add: Exceptional items 91 10

Profit before Taxation 2847 1036

Less: Provision for Tax -


Current Tax
(including Fringe Benefit Tax) 749 58

Less: Provision for Tax


- Deferred Tax (Net) 10 141

Profit for the year 2088 837

Add: Profit of Mahindra Holdings &


Finance Limited for the period
1st February; 2008 to 31st,
March, 2008 - 31

Balance of profit for the year 2088 868

Balance of profit for earlier


years 3365 2775

Add: Amount transferred on


Amalgamation of Mahindra
Holdings & Finance Limited - 160

Less: Transfer to Debenture


Redemption Reserve 31 30

Profits available for


appropriation 5422 3773

Less: General Reserve 210 100

Credit of Income-tax on Proposed


Dividend of previous year - (4)

Proposed Dividends 550 279


Income-tax on Proposed Dividends 74 33

Balance carried forward 4588 3365

Inspite of the global financial crisis, India's economic growth is steadily


gaining momentum, led by a very encouraging re-bound in industrial activity
during the year. The sharp increase in consumer durables and capital goods
production this fiscal is particularly heartening as it indicates
strengthening consumer and business confidence in the
country.

Agricultural GDP however, witnessed a decline this year due to the severe
drought experienced during the kharif season. Food prices as a consequence,
rose alarmingly and food inflation in India has leapfrogged to challenging
levels.

In these challenging times, the Automotive and Farm Divisions of your


Company have clocked one of their best performances reflecting in
substantial growth in the net income of the Company by 40.7% to Rs.18,801
crores in the year under review from Rs. 13,364 crores in the Financial
Year 2009. Consequent to this commendable performance, the profit after tax
of the Company for the current year was Rs.2,088 crores as against Rs.837
crores for the previous year.

Profits

The Profit for the year before Depreciation, Interest, Exceptional items
and Taxation was Rs.3,154.59 crores as against Rs. 1,362.97 crores in the
previous year, an increase of 131.45%. Profit after tax was Rs.2,087.75
crores as against Rs.836.78 crores in the previous year clocking an
increase of 149.50%. Your Company continues with its rigorous cost
restructuring exercises and efficiency improvements which have resulted in
significant savings through value engineering, economising, optimisation of
plant capacity utilisation and cost competitiveness in almost all areas
thereby enabling the Company to take full advantage of the recovery in the
economy.

Dividend

Your Directors are pleased to recommend a dividend of Rs.8.75 per Ordinary


(Equity) Share and also a Special Dividend of Rs.0.75 per Ordinary (Equity)
Share aggregating Rs.9.50 per Ordinary (Equity) Share of the face value of
Rs.5 each, payable to those Shareholders whose names appear in the Register
of Members as on the Book Closure Date. The Special Dividend is being
recommended in the light of the very successful listing of Mahindra
Holidays & Resorts India Limited Equity Shares on the Stock Exchanges. In
recognition of the impressive performance of the Company, a substantial
increase is being made in the proposed dividend as compared to the dividend
of Rs.10 per Equity Share paid in the previous year. Also the proposed
dividend will be paid on a slightly enlarged capital base of Rs.289.21
crores (as against Rs.278.82 crores in the previous year). The equity
dividend outgo for the Financial Year 2009-10, inclusive of tax on
distributed profits (after reducing the tax on distributed profits of
Rs.17.04 crores payable by the subsidiaries on the dividends receivable
from them during the current Financial Year) would absorb a sum of
Rs.623.75 crores (as against Rs.312.06 crores comprising the dividend of
Rs.10 per Equity Share of Rs. 10 each paid for the previous year).

Automotive Division:

Your Company recorded total sales of 2,36,759 vehicles and 45,360 three-
wheelers as compared to 1,61,882 vehicles and 44,806 three-wheelers in the
previous year registering a growth of 46.3% and 1.2% in vehicles sales and
three-wheeler sales respectively.

On the domestic sales front, your Company sold 2,27,114 vehicles [includes
2,14,128 Multi Utility Vehicles (MUVs), 3,722 small 4 wheelers 0.75 Ton
cargo and 9,264 mini 4 wheelers 0.5 Ton cargo] registering a growth of
47.8% over the previous year's volume of 1,53,654 vehicles [includes
1,53,653 MUVs and 1 Light Commercial Vehicle ('LCV')j. The domestic sales
volume of 44,438 three wheelers was lower by 0.2% as compared to the
previous year's volume of 44,533 three-wheelers.

The Company's domestic MUV sales volumes grew by 39.4% as against the
industry MUV sales growth of 26%. The Company strengthened its dominant
position in the domestic MUV segment by increasing its market share to
63.3% over the previous year's market share of 57.2%.

Xylo, which was launched in January, 2009 has been very well accepted in
the market. A total of 27,978 Xylos were sold in the year under review.

In a very competitive small 4-wheeler cargo segment (0.75 Ton), your


Company has launched the Maxximo, a small 4 wheeler cargo vehicle, with 2-
cylinder common rail engine, in February, 2010. In the 0.5 Ton Truck load
segment, your Company launched a compact Truck - Gio.

In the Overseas market, despite difficult economic conditions, your Company


registered superior growth. During the year under review, your Company sold
10,567 vehicles [including 1,323 vehicles sourced from Mahindra Navistar
Autornotives Limited ('MNAU') and 922 three wheelers] in the Overseas
market as compared to 8,501 vehicles [including 693 vehicles sourced from
MNAL and 273 three-wheelers] in the previous year registering a growth of
24.3%.

Spare parts sales for the year stood at Rs. 514.96 crores (including
Exports of Rs. 22.4 crores) as compared to Rs. 362.75 crores (including
Exports of Rs.27 crores) in the previous year, registering a growth of 42%.

Farm Division:

Your Company's Farm Division recorded sales of 1,75,196 tractors as against


1,20,202 tractors sold in the previous year, recording a significant growth
of 45.8%. For the previous year figures, the Company has taken into
consideration, the merger of Punjab Tractors Limited with your Company, the
appointed date of which was 111 August, 2008.

After 3 years of plateauing of the domestic tractor industry and despite


one of the worst South-West monsoons, this year saw a strong resurgence
with the domestic industry clocking sales of 4,00,203 tractors registering
a growth of 31.7% over the last year. Your Company outperformed the
industry with domestic sales of 1,66,359 tractors, a growth of 46.9% as
compared to 1,13,269 tractors sold in the previous year. This has also
helped gain market share which now stands at 41.4% as compared to 40.8% in
the previous Financial Year, thus completing 27 years of leadership in the
Indian tractor industry.

With the slow recovery in international markets, especially in the US,


tractor industry exports from India continued to be under strain. In
contrast, your Company's exports grew 27.5% to reach 8,837 tractors as
compared to 6,933 tractors exported in the previous year.

Beyond Agriculture, in the Powergen space under the Mahindra Powerol Brand,
your Company sold 48,011 engines in this Financial Year, as against 52,350
engines in the previous year. Your Company retained its leadership position
in the genset market catering to the telecom space, while strengthening its
presence in the retail segment.

Mahindra Defence Systems Division (MDS):

Your Company, through Mahindra Defence Systems (MDS) Operating Group, is


engaged in three defence related businesses - a) Land Systems b) Naval
Systems and c) Mahindra Special Services Group ('MSSG').

In the Land Systems business, your Company provides armouring solutions for
light combat vehicles and SUVs as well as high mobility vehicles for
defence, police and paramilitary use. Pursuant to an approval accorded by
the Shareholders by way of Postal Ballot on 4th April, 2009 this business
has been hived-off into a wholly owned subsidiary (Mahindra Defence Land
Systems Private Limited - now rechristened as Defence Land Systems India
Private Lin with effect from 1st July, 2009. Your Company has further
signed a Joint Venture Agreement on 30th November, 2009 with BAE Systems
Pic. to form a 74:26 Joint Venture for defence land systems products. Once
this Joint Venture is operational, it would further expand its product base
to include manufacture of artillery products and combat vehicles in
technical assistance with BAE Systems PIc.

In the Naval Systems business, your Company currently manufactures Sea


Mines, Decoy Launchers and composites for various naval and other
applications.

In the Special Services Group business, your Company provides corporate


risk management consultancy services and assists organisations in
maintaining their competitive edge by protecting Information, Physical and
Personnel assets through implementing the security strategy encompassing
people, process and technology. MSSG has been integrated with the MIDS
Operating Group from 1st April, 2009 in order to synergise the efficiencies
with other businesses of MDS. During the year, this business has expanded
to Northern and Southern India as well as some international markets.

Management Discussion and Analysis Report

A detailed analysis of the Company's performance is discussed in the


Management Discussion and Analysis Report, which forms part of this Annual
Report.

Corporate Governance

Your Company is committed to transparency in all its dealings and places


high emphasis on business ethics. Your Company received the Best Governed
Company 2009 Award from the Indian Merchants Chamber and the Asian Centre
for Corporate Governance and Sustainability. During the year, CRISIL has

re-affirmed the highest level rating, (Level 1) for Governance and Value
Creation for the fourth year in a row. This rating indicates that the
capability of the Company with respect to wealth creation for all its
stakeholders while adopting strong Corporate Governance practices is the
highest. A Report on Corporate Governance along with a Certificate from the
Statutory 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.

Share Capital

Increase in Share Capital

During the year under review, your Company allotted:

1) 10,00,000 Ordinary (Equity) Shares of Rs.10 each to the Trustees of


Mahindra & Mahindra Employees' Stock Option Trust; and

2) 93,95,974 Ordinary (Equity) Shares of Rs.10 each to Golboot Holdings


Limited upon compulsory conversion of 93,95,974 Fully and Compulsorily
Convertible Debentures.

Sub-division ('Stock-split') of Face Value of Equity Shares

Pursuant to the approval received from the Members of the Company by way of
Postal Ballot on 11th March, 2010, your Company has on 31st March, 2010,
upon sub-division, issued 2 (Two) Ordinary (Equity) Shares of Rs.5 each
fully paid-up in the Equity Share Capital of the Company for every 1 (One)
Ordinary (Equity) Share of the face value of Rs.10 fully paid-up held by
the Members in the Equity Share Capital of the Company as on the Record
Date i.e. 30th March, 2010.

Post allotment of Equity Shares and sub-division of Equity Shares as


aforesaid, the issued, subscribed and paid-up Share Capital of the Company
stands at Rs.289.21 crores comprising of 57,84,34,478 Ordinary (Equity)
Shares of Rs.5 each fully paid-up and the Authorised Share Capital of the
Company stands at Rs.625 crores comprising of 1,20,00,00,000 Ordinary
(Equity) Shares of Rs.5 each and 25,00,000 Unclassified Shares of Rs.100
each.
Consequent to the Stock-split, a new International Securities
Identification Number (ISIN) INE1O1AO1026 has been created by the
Depositories for the Company's Equity Shares of the face value of Rs.5
each.

Finance

Despite prolonged global challenges, the Indian economy showed signs of


recovery in most of the Sectors in the Financial Year 2009-10. The risk
appetite returned to financial markets as equities and debt raising gained
momentum on the back of abundant liquidity. Even though things looked to be
on an upswing, Corporates still faced the task of sustaining growth amidst
volatilities as well as surging inflation.

During the year, keeping in mind the volatile times, your Company continued
to focus on managing cash efficiently. I Even while financing its ongoing
modernisation and growth initiatives, it was ensured that your Company had
abundant liquidity. Your Company did not need to tap the capital market and
in fact used its strong liquidity at its disposal to repay foreign currency
loans aggregating USD 94.5 million without the need for refinancing.

As was reported in the previous year's Director's Report, your Company had,
in July, 2008, issued 9.25% p.a. Unsecured Fully and Compulsorily
Convertible Debentures ('FCD'), each FCD having a face value of Rs. 745 and
convertible into one Equity Share of Rs. 10 each in the Company at a price
of Rs. 745 per Share. In January, 20 10, in accordance with the terms of
the issue, the FCDs were converted into Equity Shares of the Company and
your Company allotted 93,95,974 Ordinary (Equity) Shares of Rs. 10 each,
adding Rs. 700 crores to its Net Worth.

Your Company follows a prudent financial policy and aims to maintain


optimum financial gearing at all times. The i Company's total Debt to
Equity Ratio was 0.37 as at 31st March, 2010.

Your Company has been rated by CRISIL, ICRA Limited (ICRA) and Credit
Analysis & Research Limited (CARE) for its Banking facilities under Basel
11 norms. During the year, CRISIL reaffirmed its rating of 'AN' and revised
its rating outlook to 'AA/ Stable' from 'AA/ Negative' for your Company's
Long Term Facilities under Basel 11. During the year, ICRA also reaffirmea
its rating of 'LAA+' for your Company and also revised its rating outlook
from 'LAA+/Negative' to 'LAA+/Stable' and CARE has maintained a Long Term
Rating of 'CARE AA+''.

CRISIL, ICRA and CARE have all reaffirmed the highest rating for your
Company's Short Term facilities. Your Company's Bankers Continue to rate
your Company as a prime customer and extend facilities/services at prime
rates.

Acquisitions and other of matters

Acquisitions of Aerosaff Australia and Gippsland Aeronautics

Your Company decided to make a foray into Aerospace Sector with the
intention of penetrating into global aerospace supply chain as a credible
registered manufacturer of components and assemblies with the leading
players in Aerospace and also to become small capacity aircraft
manufacturer. To meet these goals, your Company has made 2 acquisitions in
Australia as under:

Aerostaff Australia ('AA') manufactures high-precision close-tolerance


aircraft components and assemblies for large aerospace Original Equipment
Manufacturers ('OEMs').

Gippsland Aeronautics ('GA') is an established brand in general aviation


and has delivered more than 200 FAR 23 certified planes in 32 countries.

NM5 is a 5-seater Aircraft designing and manufacturing project which is


being developed by your Company with Hindustan Aeronautics Limited. The
NIV15 initiative compliments the product portfolio of GA.

Your Company's move into the Aerospace segment is supported by a renewed


demand for economical air transportation around the world. The Company's
investment in component capability addresses the growing needs of both the
civil and defence markets and in particular the offset opportunities that
have triggered world wide interest in Indian Aerospace.

2. Join Venture with BAE Systems Plc.

Through various initiatives, your Company had positioned itself to play a


major role in the Indian Defence Sector for the manufacture and integration
of weapon systems and platforms. Your Company had also been exploring
opportunities for partnerships with companies with globally proven high end
defence technologies. With this objective in mind, your Company had
evaluated various options and identified possibilities for forming separate
Joint Ventures/alliances with strategic partners.

As mentioned earlier in this Report, your Company has entered into a Joint
Venture with BAE Systems PIc. ('BAE'). BAE is a premier global defence,
security and aerospace company delivering a full range of products and
services for air, land and naval forces, as well as advanced electronics,
security, information technology solutions and customer support services.

3. Gear Vertical

Mahindra Gears & Transmissions Private Limited ('MGTPU') is a subsidiary of


your Company. With a view to derive optimum structuring and operational
benefits and unlock value in MGTPL, your Company divested 46.66% of the
Equity Share Capital in MGTPL in favour of ICICI Venture Fund during the
year. Subsequent to the divestment, the holding of your Company in MGTPL
stands at 53.34%.

4. Dernerger of Non Fruit Business of Mahindra Shubhlabh Services Limited


into the Company

Mahindra Shubhlabh Services Limited ('MSSU'), a subsidiary of your Company,


is in the business of a) domestic sales and exports of fresh fruit products
and b) production and distribution of Agri Inputs namely Seeds, Seed Potato
and Crop Care Products. MSSL's Fruits business is currently focused on
exports of grapes to Europe. MSSL proposes to expand its foray into other
Fruits businesses. MSSL has till now steadily developed a footprint in Agri
Input business, which is strategically an important business to your
Company, as it directly relates with the farmer and Farm Tech Prosperity,
essential for improving customer bonding, customer loyalty and market
penetration of your Company.

In view of the Agri Inputs business being a high gestation business, MSSL
now intends to streamline its operations and wants to focus only on the
Fruits Business and explore strategic options to grow this business
domestically and globally in terms of scale and profitability and going
forward, the Agri Inputs business would be dernerged into your Company
owing to its strategic importance and funding resources required for the
same.

To achieve the above objective, a Scheme of Arrangement between MSSL and


your Company and their respective Shareholders was announced by your
Company and MSSL on 30th March, 2010 which inter alia envisages dernerger
of the Agri Inputs Business along with other common assets and liabilities
('Non Fruit business') of MSSL into the Company under the provisions of
sections 391 to 394 of the Companies Act, 1956. The Appointed Date of the
Scheme would be 1st January, 2010 and pursuant to the Scheme, Shares held
by the Company and its wholly owned subsidiary, Mahindra Holdings Limited
('MHU') in MSSL shall stand cancelled. Upon the Scheme becoming effective,
the Company shall issue and allot to the Shareholder of MSSL (other than
the Company and MHL) as on the Record Date 34,730 fully paid-up Equity
Shares of Rs.5 each of the Company. Currently, the Scheme is in process of
being filed with the Stock Exchanges and the Honourable High Court of
Judicature at Bombay for approval.

5. Mahindra Forgings Limited Qualified Institutional Placement and issue of


Warrants to the Company

Mahindra Forgings Limited ('MFU'), a subsidiary of the Company, raised


capital by way of a Qualified Institutional Placement ('QIP') to Qualified
Institutional Buyers accompanied by a simultaneous issue of Warrants to
your Company, in terms of Securities and Exchange Board of India (Issue of
Capital and Disclosure Requirements) Regulations, 2009.

An amount of Rs. 175 crores was raised through a QIP by issue and allotment
of Equity Shares of the face value of Rs. 10 each at a price of Rs. 107.75
per Equity Share to Qualified Institutional Buyers. MFL has also allotted
72,99,270 Warrants on a preferential basis to your Company wherein each
Warrant entitles the Company to apply for and be allotted one Equity Share
of MFL of the face value of Rs.10 each at a price of Rs.137 per share, in
one or more tranches, at any time after the date of allotment of Warrants
but on or before the expiry of 18 months from the date of allotment of
Warrants. The Company has made an upfront payment of 25% of the aggregate
price amounting to approximately Rs.25 crores and has exercised, its option
to convert 30,00,000 Warrants into Equity Shares. The Company still has an
option to convert the balance 42,99,270 Warrants into Equity Shares, by 3rd
September, 2011. As a result of the above, the Company's shareholding in
MFL stands at 50.68%.

6. Acquisition of Shareholding of Renault s.a.s. in Mahindra Renault


Private Limited ('MRPU') and take over of the business of IVIRPL as a going
concern

The Company had entered into a Joint Venture with Renault s.a.s,
('Renault') for the manufacture and sale of the Logan sedan car principally
for the Indian market in 2005. Mahindra Renault Private Limited ('MIRPL'),
a subsidiary of the Company had commenced commercial production of the car
badged as Mahindra Renault logan from February, 2007.

The Company had been in discussions with Renault to arrive at a long term
solution to MRPUs continuing losses and subsequent to the year end, your
Company signed a Framework Agreement with Renault to buyout Renault's
Shares in MRPL which would result in MRPL becoming a wholly owned
subsidiary of your Company. Renault would continue to support the Company
and the Logan through a License Agreement and supply of key components.
Through this Agreement, your Company would strive to ensure continuity and
build on the positive customer equity that exists for the Logan in India.

7. Going Green Acquisition of Re va Electric Car Company Private Limited:

Given the concerns about environment, tighter on emission, debate on


greenhouse gases and taxation on emission, the demand for electric vehicles
('EV') is projected to increase manyfold. Most global OEMs are working on
EV programs and are at least 1 to 2 years away from commercial production.
Your Company is of the view that it should be focused on developing EV
capabilities that would assist it to be ready to exploit this opportunity,

Keeping in mind the above opportunity and with a view to consolidate its
presence in the Automotive Space, your Company subsequent to the year end
decided to acquire a majority stake in Reva Electric Car, Company Private
Limited ('Reva'). Established in 1994, Reva launched its first EV in 2001
under the 'Reva' brand and further extended it to London in 2004 under the
'G-Wiz' brand. With the help of its strong engineering team and frugal
mindset, it has developed significant proprietary technology which has
enabled it to create a fleet of EVs worldwide with over 3,000 vehicles on
the road in more than 20 countries including India, the United Kingdom and
other countries in Europe.

This acquisition would help your Company to compliment its other clean
energy initiatives on Hybrid, Hydrogen and Bio-diesel which is an important
element in the sustainable mobility: strategy of the Company.

Stock Options

On the recommendation of the Remuneration/ Compensation Committee of your


Company, the Trustees of the Mahindra & Mahindra Employees' Stock Option
Trust have granted 4,01,770 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 ('the Guidelines') are set out in Annexure I to this
Report.

Mahindra & Mahindra Limited Employees Stock Option Scheme - 2010

Your Company proposes to introduce a new Employee Stock Option Scheme known
as 'Mahindra & Mahindra Limited Employees Stock Option Scheme 2010' ('New
Scheme'). The New Scheme will facilitate grant of Options to the employees
in the form of Stock Options and/ or Restricted Stock Units ('RSU's') and
/or other instruments ('Options') exercisable into Equity Shares. It is
proposed that the Options can be exercised by the employees at a price
equal to or not less than the face value of the Equity Shares of the
Company. The necessary Resolutions seeking consent of the Members are being
sought as proposed in the Notice convening the Annual General Meeting.

The New Scheme has been formulated in accordance with the Guidelines and
other applicable laws.

Industrial Relations

Industrial Relations remained cordial and harmonious throughout the year.


As mentioned in the last year's Directors' Report, the workmen at the
Nashik plant of the Automotive Division of the Company resorted to one
illegal strike in May, 2009. The Management Discussion and Analysis Report
gives an overview of the developments in Human Resources/Industrial
Relations during the year.

Safety, Health and Environmental Performance

Health and Safety

Your Company continues to demonstrate a strong commitment towards Safety,


Occupational Health and Environment, Your Company has a well established
Safety, Occupational & Environmental Policy (SH&E). The objectives and
targets derived from the Policy are supported by Management Programs.

The Safety, Occupational Health & Environment of its employees are embedded
as core Organisational values of the Company. The Policy inter alia covers
and ensures safety of public, employees, plant and equipment, imparts
training to all its employees as per training calendar, carries out
statutory safety assurance and audits of its facilities as per legal
requirements, conducts regular medical and occupational check-up of its
employees and promotes eco-friendly activities.

New Certifications

The Sustainability Reporting System of your Company provides a framework


for environmental initiatives, objectives & targets and helps in
continually improving its Air, Water and Waste Management performance. All
Plants of Automotive Division have been certified with amended standard for
ISO 14001: 2004 & OHSAS 18001. Your Company's commitment to environment
stems from the Group's abiding concern for the Stakeholders engagement in
and around the society. its nature of operations has a low impact on the
environment due to implementation of Environment Management System which
provides a healthy work environment to its employees and ensures conduct of
environment friendly business.

Implementation of Occupational Health & Safety Management System Standard


has re-enforced the Company's commitment of Safety and Occupational Health
to high levels. OHSAS 18001:2007 is the best existing safety practice which
is implemented through the amended management system and all the Plants of
the Automotive Division have been certified during the year 2009-10. The
individual operational Units of the Automotive Division i.e. KandivIi,
Nashik, Igatpuri, Zaheerabad and Haridwar are also certified. The OHSAS
system aims to eliminate or minimise risk to employees and other interested
parties who may be exposed to Occupational Safety risks associated with its
activities.

Occupational Health Examination


Your Company's Plants continued its commitment to improve the well being of
the employees. During the year 2009-10, all employees in Hazardous
operations were medically examined once in six months and other employees
from Non-Hazardous operations were examined once in a year.

Environmental Initiatives:

Air Pollution Management

I With a clear view on sustaining green business growth, the need for clean
environment was given a renewed focus. By incorporation of new
technological upgraclations, your Company is now in the process of
calculating carbon foot print of Plants location wise and is taking
adequatte measures to mitigate the causes attributing to it. The Company
also has a roadmap to reduce Green House Gas ('GHG') emissions by
curtailing travel of its employees to client locations for Meetings and
discussions and this is achieved by promoting the use of Video
Conferencing. Your Company is constantly imbibing the major environment
sensitisation drives amongst its employees through various evenu such as
celebrations of World Environment Day, World Ozone Day alongwith active
participation of employee's families. Your Company has also implemented
an*ient and work place air monitoring, increased green zones, alongwith
effluent treatment and waste monitoring.

Water and Waste Water Management

Your Company rs convnitted towards resource conservation and has taken


varkm initiatives to achieve waste reduction and resource conservation.
Your Company has implemented various water management methods such as
recycling and re-use of treated waste water in process. The Company has
also introduced rainwater harvesting and recharging within Plant premises
and would extend it to other locations as well.

Solid Waste Management

Your Company's Plants at Kandivli, Nashik, lgatpuri and Zaheerabad believe


in responsible disposal of hazardous and non-hazardous waste. The
generation of waste to a greater extent has been reduced at source and if
adaptable, it is recycled and reused. Your Company is aggressively working
towards minimising waste disposal costs and is executing various Management
programmes at each location such as vermiculture, bio-gas Plants to convert
food waste to manure/cooking gas towards minimisation of the same. Your
Company is conscious towards environment and ensures environment friendly
disposal of e-waste.

Greenbelt Development

Your Company has community partners at each location for green belt
development. Mahindra Hariyali was one. of the initiatives which was
implemented at the Plants at Mumbai and Kanhe and at dealers & distributors
across India. Your Company's Plants at various locations have partnered
with Non-Govern mental Organisations and various academic institutions all
located in and around Mumbai, Nashik, Igatpuri, Zaheerabad and Haridwar.

Corporate Social Responsibility

From educating a girl child in Udaipur, providing healthcare to


inaccessible areas in Uttarkhand, enabling socially disadvantaged youth
become self reliant in Pune, to planting a million trees in India, your
Company's Corporate Social Responsibility ('CSR') initiatives continue to
provide strategic interventions that help the Nation help itself.

At Mahindra we call it 'Transform-nation'.

CSR continues to be an integral part of the vision of the Mahindra Group


and this year too, the Company has pledged 1% of its Profit after Tax for
CSR initiatives, largely to benefit the socially and economically
disadvantaged sections of Society.

Some of the major initiatives your Company has invested in are described
below:
Mahindra Pride Schools:

Mahindra Pride Schools ('MPS') unique partnership model speeds its


graduates' integration into the workforce, where they earn not only a
salary but also the respect of their family and peers. Since inception in
March, 2007, 1,720 students from socially disadvantaged communities have
completed the 3 month course at MPS. MPS provides these youth with
livelihood training in sunshine industries i.e. Hospitality, Customer
Relationship Management, Hardware & Networking and Call Centre Training.
All students are required to undergo mandatory courses in English, Life
skills and computer applications. There has been 100% placement of all
students participating in the placement process.

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.
Nanhi Kali brings about a complete transformation, by allowing the girls to
attend school and learn with dignity. Nanhi Kali sponsorship provides not
only academic support classes where concepts of Maths, Science and language
are taught to the girls but also provides uniforms, school bags, shoes,
etc. which free her family from hidden costs of education. The Mahindra
Group independently supports 11,000 girls across India. With support from
thousands of individuals and Corporate donors, Project Nanhi Kali now
supports the education of over 54,000 underprivileged girl children, in
poor urban, remote rural and conflict afflicted tribal communities across 8
States of India. The goal of Nanhi Kali is to provide educational support
to 1,00,000 underprivileged girls by 2011.

Mahindra All India Talent Scholarships (MAITS):

Instituted in 1995, MAITS are awarded to students from lower socio-economic


strata to enable them to pursue a job oriented diploma course at a
recognised Government Polytechnic Institute in India. Approximately 500
scholarships are given every year for students who undergo a three year
course. As a result in the last Financial Year, 1,525 students all over
India received financial support through MAITS. Till date, 4,772 students
have been MATS Scholars. A survey of students who have graduated indicate
that they have got good jobs and the living standards and economic status
of their families have improved.

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 60 profoundly
hearing-impaired, underprivileged children till date. Operations are
performed by Dr. Milind Kirtane, India's leading ENT surgeon and his Team.
All beneficiaries are hearing impaired children below the age of 5,
belonging to the lower socio-economic strata of Society.

Bihar Rehabilitation Project:

The river Kosi wreaked havoc in Bihar in 2008 with floods causing
incalculable loss of life and property besides snatching away the
livelihood of lakhs of people in the State. Following the same, Mahindra
Foundation and Mahindra Consulting Engineers Limited ('MACE'), a subsidiary
of the Company have entered into a Memorandum of Understanding ('MOU') with
the Collector, Madhepura District, Bihar to support the rehabilitation and
reconstruction activities in Pattori Gram Panchayat, Singheswar Block,
Madhepura District of Bihar for those ravaged by the Kosi floods in 2008.
Under the terms of the MOU, MACE would create the complete social inf
rastructu re in Pattori Gram Panchayat. This comprehensive programme
includes the construction of permanent houses with provision of basic
infrastructural facilities such as water supply and sanitation.

Employee Social Options:

Employee Social Options ('ESOPs') is the unique programme at the Mahindra


Group where each employee can do social work by volunteering in various CSR
initiatives. Till date, 31,317 employees have volunteered in various
initiatives in their local communities. ESOPs were formally launched in 3
new locations of Mahindra Group - Mahindra Two Wheelers; Pune, Mahindra Two
Wheelers; Pithampur and Mahindra Retail; Bangalore.

Some of the notable ESOPs initiatives this year were:

* The Lifeline Express in Wardha: This was jointly sponsored and organised
by the Farm Division and Mahindra & Mahindra Financial Services Limited, a
subsidiary of the Company. The Project was held at Wardha and 1,153
surgeries were performed free of cost and 281 Hearing Aids were
distributed. ESOPs Volunteers spent 13,752 man hours in this activity and
30,575 man hours were spent by volunteers from the Community, thus making
it an ideal public-private partnership initiative.

* Mahindra Hariyalli: A Survey was conducted on the survival rate of trees

planted in the Financial Year 2008-09. According to the Survey, the


survival rate as on 31st May, 2009 of the trees planted during the
abovernentioned period is 79.49%.

* ESOPs AWARDS 2009: is an internal Company award and was institutionalised


in 2008 to appreciate and promote healthy competition amongst employees and
locations.

Other ESOPs activities also included other initiatives in Education,


Health, Environment and Social arenas bringing long-lasting impact. 27
initiatives were conducted in Education (such as distributing educational
material, IT/vocational training, infrastructure development) impacting
24,664 lives. 54 Health initiatives such as medical camps, blood donation
camps, Pulse, Polio Campaigns, mobile dispensaries, etc. reached out to
over 14,573 people. HIV/AIDS awareness campaigns reached out to over
1,36,560 people in Nashik. For taking care of the Environment, 1,14,862
trees were planted for Gap Filling in Financial Year 2009-10. 71 Social
initiatives were conducted such as visiting Old Age Homes, interacting with
children, conducting Shraamclan, etc. which reached out to over 78,003
people.

'Sustainability' Initiative

In the last year's Directors' Report, a beginning was made to appraise the
Shareholders of the initiatives your Company had taken in reporting its
'Sustainability' performance for reviewing its commitments to the
Environment and Society, while generating profits.

During the year under review, the 2nd Sustainability Report for the year
2008-09 was published, in accordance with the latest Guidelines of the
internationally accepted Global Reporting Initiative or the GRI standards.
Again this year this Report was externally assured by Ernst & Young and
rated with the highest level of A+ and GRI checked. This 2nd Report
reflects that along with your Company's business growth, the Company's
responsibility to its stakeholders has also grown, expanded and
intensified. Your Company's progression in this journey and its commitment
to taking a more responsible and holistic approach to business is reflected
by the facts that a) all commitments made in the first Report were
satisfactorily met and b) a structured Sustainability road map over a 3 and
5 year time horizon has been drawn, with clear targets for reducing
consumption of energy and water and reduction in GHG emission and waste.
Details of this Group Level Road Map and further information on various
environment related initiatives taken by your Company which would help in
achieving the targets in the Road Map, have been elaborated elswhere in the
Annual Report.

During the year under review, a Carbon foot-printing exercise was


undertaken to inventorise GHG emissions from all the Company's business
operations under Scope I, II & III emissions as per internationally
accepted standards. This Would enable your Company to baseline data on its
emissions and undertake initiatives towards improving performance in this
area. This would be reported in your Company's 3 Sustainability Report,
which would be released shortly.

Realising that the equation of business with Environment and Society is


undergoing a radical change, through its strateqic approach of 'ALTERNATIVE
THINKING' your Company is committed to integrate sustainable development
for a sustainable business growth. For a detailed information on the Annual
Sustainability Reports for the years 2007-08 to 2008-09 please log on to
www.mahindra.com/sustainability.

Directors

Mr A.K. Nanda, Executive Director of the Company, after 37 illustrious


years of service in the Mahindra Group of Which 18 years were as an
Executive Director decided to step down from his executive position with
effect from the close of 31st March, 2010.

Considering his experience and expertise, Mr. A. K. Nanda was appointed as


an Additional Director of the Company with effect from 1st April, 2010 at
the Meeting of the Board of Directors of the Company held on 30th March,
2010.

The Board has placed on record its deep appreciation of Mr. Nanda's immense
contribution and valuable service during his 'long association with the
Company and acknowledged Mr. Nanda's outstanding experience and expertise
in serving the Mahindra Group since 1973 including his contribution as
Executive Director of the Company from 1992 onwards.

The Company has received a Notice from a Member signifying his intention to
propose Mr. Nanda for the office of Director at the forthcoming Annual
General Meeting,

Mr. Keshub Mahindra, Mr. Anupam Puri, Dr. A.S. Ganguly and Mr. R.K.
Kulkarni retire by rotation and, being eligible, toffer themselves for re-
appointment.

Directors' 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;

(i) 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, 2010 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

The subsidiary companies of your Company continue to contribute to the


overall growth of the Company. Major subsidiaries such as Mahindra &
Mahindra Financial Services Limited with a 61-96% growth in its
consolidated profits and Mahindra Holidays & Resorts India Limited with a
46.86% growth in its consolidated 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.2,478.56 crores as against Rs.1,405.41 crores earned in the previous
year.

During the year under review, MahirTdra Metal One Steel Service Centre
Limited, Raigad Industrial & Business Park Limited, Retail Initiative
Holdings Limited, Mahindra Retail Private Limited, Mahindra Technologies
Services Inc., Mahindra Punjab Tractors Private Limited, Mahindra EcoNova
Private Limited, Mahindra Conveyor Systems Private Limited, Tech Mahindra
(Nigeria) Limited, Tech Mahindra Bahrain Limited S.P.C. and BAH
Hotelanlagen AG became subsidiaries of your Company. During the year under
review, Mahindra Hinoday Industries Limited, Metalcastello S.p.A., and
Mahindra Technologies Inc., ceased to be subsidiaries of the Company.

Further, pursuant to an Agreement dated 10th May, 2005, signed between SBC
International Inc. [now AT&T International Inc.] ('AW'), Mahindra and
Mahindra Limited ('the Company'), British Telecommunications PIc.,
Mahindra-BT Investment Company (Mauritius) Limited ('MBTM') and Tech
Mahindra Limited ('Tech Mahindra') which entitled AT&T to exercise certain
Options over Equity Shares of Tech Mahindra on achieving certain Milestones
by Tech Mahindra at a pre-determined price, AT&T exercised its Options and
acquired 98,70,912 Equity Shares of Tech Mahindra, aggregating 8.07% of the
paid-up Equity Share Capital of Tech Mahindra on 22nd March, 2010 from
MBTM.

Upon the exercise of Options by AT&T, the Shareholding of the Company


alongwith its subsidiary MBTM in Tech Mahindra stands reduced to 44.01%,
resulting in Tech Mahindra ceasing to be a subsidiary of the Company with
effect from 22nd March, 2010.

Consequently, the subsidiaries of Tech Mahindra viz. Mahindra Logisoft


Business Solutions Limited, Tech Mahindra (Americas) Inc., Tech Mahindra
GrnbH, Tech Mahindra (Singapore) Pte. Limited, Tech Mahindra (Thailand)
Limited, Tech Mahindra Foundation, PT Tech Mahindra Indonesia, CanvasM
Technologies Limited, CanvasM (Americas) Inc., Tech Mahindra (Malaysia)
SDN.BHD, Tech Mahindra (Beijing) IT Services Limited, Tech Mahindra
(Nigeria) Limited, Tech Mahindra Bahrain Limited S.P.C. and Venturbay
Consultants Private Limited also ceased to be subsidiaries of the Company
with effect from 22nd March, 2010.

Subsequent to the year end, Mahindra Metal One Steel Service Centre Limited
has changed its name to Mahindra Electrical Steel Limited and Mahindra
Aerospace Australia Pty. Limited and Aerostaff Australia Pty. Limited
became wholly owned subsidiaries of Mahindra Aerospace Private Limited
which in turn is a subsidiary of your Company. Reva Electric Car Company
Private Limited also became a subsidiary of your Company.

The Statement pursuant to section 212 of the Companies Act, 1956 containing
details of the Company's subsidiaries is attached.

The Consolidated Financial Statements of the Company and its subsidiaries,


prepared in accordance with Accounting Standard AS21 form part of the
Annual Report.

In terms of the approval granted by the Central Government under section


212(8) of the Companies Act, 1956, copy, of the Balance Sheet, Profit and
Loss Account, Reports of the Board of Directors and Auditors of the
subsidiaries have not been attached to the Balance Sheet of the Company.
The Company Secretary would make these documents available upon receipt of
request from any Member of the Company interested in obtaining the same.
However, as directed by the Central Government, the financial data of the
subsidiaries have been separately furnished forming part of the Annual
Report. The accounts of the individual subsidiary companies shall be
uploaded on the Website of your Company. These documents would also be
available for inspection at the Head Office of the Company and at the
Office of the respective subsidiary companies, during working hours upto
the date of the Annual General Meeting.

Auditors

Messrs. Deloitte Haskins & Sells, Chartered Accountants, retire as Auditors


of the Company and have given their consent for re-appointment. The
Shareholders would be required to elect Auditors for the current year and
fix their remuneration.

As required under the provisions of section 224(lB) of the Companies Act,


1956, the Company has obtained a written Certificate from the above
Auditors proposed to be re-a0p6nted 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/Advances

Out of the total 17,101 deposits of Rs.1 66.22 crores from the Public and
Shareholders as at 31st March, 2010, 205 deposits amounting to Rs.0.67
crores had matured and had not been claimed as at the end of the Financial
Year. Since then, 93 of these deposits of the value of Rs.0.44 crores 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 Year

During the period 1 April, 2010 to 28th May, 2010, 45,821 vehicles were
despatched as against 34,797 vehicles during the corresponding period in
the previous year. During the same period, 29,699 tractors were despatched
as against 24,536 tractors despatched during the corresponding period in
the previous year.

Economies in many parts of the world have started to stabilise and recover
either from recession or severe slow down in the past two years. The Indian
Economy has displayed remarkable resilience over the course of the downturn
and is expected to grow strongly. The primary driver of growth in the year
under review was the Industrial Sector. The index of industrial production
grew 10.1% on a year on year basis between April, 2009 to February, 2010 as
compared to the 3.1% growth registered in the same period in the last
fiscal. With investments picking up in the last few months, as indicated by
the sharp rise in capital goods production and a normal monsoon forecast
for the current year, the prognosis for growth in the current fiscal is
positive.

However, the rising cost of commodities and the supply constraints on


certain critical components are a source of considerable concern, and your
Company hopes to counter this through an iritensive and continuous focus on
cost controls, product innovation and customer delight.

Energy Conservation, Technology Absorption and Foreign 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.

Particulars of Employees

The Company had 426 employees who were in receipt of remuneration of not
less than Rs.24,00,000 during the year ended 31st March, 2010 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(i)(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 MAHINDRA
Place: Mumbai Chairman
Date : 29th May, 2010

ANNEXURE I TO THE DIRECTORS' REPORT FOR THE YEAR ENDED 31ST MARCH, 2010

Information 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:


1,51,80,898

(b) The pricing formula:

1st Tranche:

Average price preceding the specified date - 27th September, 2001

2nd Tranche:

Average price preceding the specified date - 30th May, 2003

3rd Tranche:

Discount of 5.13% on the average price preceding the specified date - 31st
May, 2004

4th Tranche:

Discount 4.85% on the average price preceding the specified date - 30th
May, 2005

5th Tranche:

Average price preceding the specified date - 14th September, 2005

6th Tranche:

Discount of 5.02% on the average price preceding the specified date - 29th
May, 2006

7th Tranche:

Discount of 4.89% on the average price preceding the specified date - 13th
September, 2006

8th Tranche:

Discount of 4.97% on the average price preceding the specified date - 30th
July, 2007

9th Tranche:

Discount of 5.03% on the average price preceding the specified date - 4th
August, 2008

10th Tranche:

Discount of 5.03% on the average price preceding the specified date - 30th
July, 2009

Average price:

Average of the daily high and low of the prices for the Company's Equity
Shares quoted on Bombay Stock Exchange Limited during 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 : 82,90,283

(d) Options exercised : 45,88,703

(e) The total number of shares arising as a result of exercise of option:

45,88,703 Equity Shares of Rs-10 each. These were transferred from the
Trust to the Eligible Employees prior to sub-division of the Face Value of
Equity Share from Rs.10 to Rs.5.

(f) Options lapsed:

7,57,165

(g) Variation of terms of options:

At the Sixty-firs 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 1st April, 2007.

(h) Money realised by exercise of options:

Rs.79,24,98,738. This amount was received by the Trust.

(i) Total number of options in force:

98,35,030

(j) Employee-wise details of options granted to:

(i) Senior managerial personnel:

As per Statement attached

(ii) Any other employee who receives a grant in any one year of option
amounting to 5% or more of option granted during that year:

Names Options Names Options


granted granted
during the During the
year ended year ended
31st March, 31st March,
2004* 2005*

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.

** Out of these, the Options granted and outstanding as of 30th March 2010,
stands augmented by an equal number of Options and the Exercise Price
stands reduced to half on account of the sub-division of the Face Value ol
Equity Share from Rs. 10 to Rs. 5.

(iii) Identified employees 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

Nil

(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'

Rs. 35.61

(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:
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 30'~ June, 2003, the employee
compensation cost would have been higher by Rs.26.44 crores, Profit after
tax lower by Rs.26,44 crores and the basic and diluted earnings per share
would have been lower by Rs.0.48 and Rs.0.44 respectively.

(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:

Options Grant Date Exercise price Fair value


(Rs.) (Rs.)

4th November, 2009 724.00 414.84

(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:

The fair-value of the stock options granted on 4 th November, 2009 have


been calculated using Black-Scholes Options pricing Formula and the
significant assumptions made in this regard are as follows:

(i) Risk-free interest rate, : 6.41%

(ii) Expected life, : 2.50 years

(iii) Expected volatifty, : 53.56%

(iv) Expected dividends, and : 2.24%

(v) The price of ilhe underlying : Rs.929.50


share n rnadoet at the time
of option grant.

STATEMENT ATTACHED TO ANNEXURE I TO THE DIRECTORS' REPORT FOR THE YEAR


ENDED 31ST MARCH, 2010

Name of Senior Managerial A B C D E


Persons to whom Stock
Options have been granted

Mr. Deepak S. Parekh 20,000 5,000 Nil Nil Nil


Mr. Nadir B. Godrej 20,000 5,000 Nil Nil Nil
Mr. M. M. Murugappan 20,000 5,000 Nil Nil Nil
Mr. Narayanan Vaghul 20,000 5,000 Nil Nil Nil
Dr. A. S. Ganguly 20,000 5,000 Nil Nil Nil
Mr. R. K. Kulkarni 20,000 5,000 Nil Nil Nil
Mr. Anupam Puri 20,000 5,000 Nil Nil Nil
Mr. Bharat Doshi 1,00,000 ***10,000 ***11,345 ***8,362 ***29,039
Mr. A.K. Nanda 1,00,000 ****10,000 ***11,345 ***8,362 ***24,890

A = Options granted in December, 2001*


B = Options granted in June, 2005**
C = Options granted in September 2006
D = Options granted in July, 2007
E = Options granted in August, 2008

* All the above Options have been exercised.

** The Options granted stands 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.

*** Out of these, the Options granted and outstanding as on 3 01h March
2010, stands augmented by an equal number of Options and the Exercise.
Pfjcg stands reduced to half on account of the sub-division of Face Value
of Equity Share from Rs.10 to Rs.5.
ANNEXURE II TO THE DIRECTORS' REPORT FOR THE YEAR ENDED 31ST MARCH, 2010

PARTICULARS AS PER THE COMPANIES (DISCLOSURE 0F PARTICULARS IN THE REPORT


OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS'
REPORT FOR THE YEAR ENDED 31ST MARCH, 2010

A) Conservation of Energy

The Company has always been conscious of the need for conservation of
energy and has been steadil making progress towards this end. Energy
conservation initiatives have been implemented at all the plants and
offices of the Company by undertaking numerous energy conservation
projects.

(a) During the year, the Company has taken the following initiatives for
conservation of energy:

(i) Engineering Initiatives

* Modification in equipments like oil pumps and motors coupled with system
optimisations to reduce energy consumption.

* Replacement of higher HP motor with lower HP.

* Installation of heat pumps, metal halide lamps instead of sodium and


mercury vapor lamps.

* Installation of natural draft cooling towers instead of induced draft


cooling systems.

* Installation of capacitor banks, automatic timer circuits for lights and


fans,

* Installation of heat recovery system at ED oven.

* Shift to LPG Heating from Electric Heating.

(ii) Process Improvement

* Cycle time reduction of various manufacturing processes.

* Improving capacity utilisation of cylinder head washing units.

* Modifying furnace charging sequence.

* Optimising temperature settings of air conditioners considering seasonal


changes.

* Modification of Air Handling Ducts in paint shop to optimise use of Air


Blower power consumption.

(iii) Initiatives Generating Awareness an Energy Consumption

* Display of sustainability posters at workplace.

* Idea generation campaign for electrical energy saving.

* Celebration of Energy Conservation Day on 14th December, 2009 followed by


Energy Conservation Week between 14th December, 2009 to 21st December,
2009.

* Setting up of Stalls inside the Plant premises for awareness of Energy


Efficient and Renewable Energy Products,

* Reward and recognition for energy saving projects.

(b) Additional investments and proposals, if any, being implemented for


reduction of consumption of energy:

* Waste heat recovery projects in paint shops.


* Improvement in efficiency of central air conditioning units.

* Explore application of efficient lighting (LED, Magnetic coupled).

* Use of renewable energy (Solar and Wind).

(c) impact of the measures at (a) & (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:

The measures taken have resulted in lower energy consumption. In the


Automotive Division, the Specific Power consumption per equivalent vehicle
improved by 15% over the previous year. For the same period, the Farm
Equipment Sector achieved an improvement of 3.21% per equivalent tractor.

The work done by your Company has received recognition in the form of a
number of National and State level awards.

B) Technology Absorption

Research & Development:

1. Areas in which Research & Development is carried out:

During the year under review, the Automotive Division focused technology
development efforts in core areas of engine technology, safety, value
engineering through the use of modern manufacturing processes, alternate
material and developing capabilities in automotive electronics. The Farm
Equipment Sector too, focused on improvement in engine technology and new
product development.

2. Benefits derived as a result of the above efforts:

Some significant achievements for the year under review include the C2 CRDe
engine with DOHC which was launched on the Maxximo. The engine delivers
higher power and better fuel efficiency, thus delivering significant
customer benefit and competitive advantage to your Company. Your Company
also developed its first in-house Gasoline Engine which was launched on the
Scorpio targeting the overseas markets.

In the area of Suspension, a hydro-formed frame and front independent


suspension was developed for the Maxximo to give the pick-up segment users
a car like driving comfort.

Your Company has been working on developing the Scorpio Pick-UP for the US
market and in the process, has developed/attained significant capabilities
in the field of emission, safety, security and on board diagnostics. The
Company has confidence of complying to the latest FMVSS legislations for
model year 2010 and further years. In the area of sustainable mobility, the
Company developed a Micro Hybrid application on the Pick-UP. This was
launched on the new Bolero Maxi Truck and was received very well by the
customers.

During the year under review, your Company's Automotive Division applied
for 24 Patents and 8 Design Registrations.

Moving on to the Farm Equipment Sector, in the domestic market, the Farm
Division, during the year under review, developed and launched the 'Yuvraj
215', a 15HP tractor, to meet the needs of the small and marginal farmers.
The entire existing range of tractors, i.e. Bhoomiputra, Sarpanch and the
flagship Arjun range were upgraded, offering better fuel efficiency,
stability and comfort. in the same period, the Swaraj Division developed
and launched the Swaraj 843 XM (Xtra Mileage) tractor, the 1st new product
from the Swaraj stable after its merger with the Company.

In the international space, in the US market, the Compact series of


tractors were launched across the country, offering advanced features like
Hydrostatic Transmission, allowing the product to be easily operated by all
in the household. Your Company developed an Integrated Cabin, which was
also introduced in the US market. In China, the 125 HP tractor was
launched, significantly expanding your Company's tractor range.
In the case of Mahindra Powerol, the product range was increased to 320
kVA, at the higher end. At the lower end, the 5kVA genset has been
developed and introduced. In AppliTrac, the tracked type self propelled
harvester was developed and introduced in the southern rice belt.

Keeping in view the future technology requirements, your Company's tractor


engines are 216% compliant with the upcoming BS (Trem) IIIA norms in India
and has also undertaken a EAT n, programme to meet the challenging Tier-IV
emission norms of USA.

During the year in India, the Farm Equipment Sector filed 12 New Patents

and 2 New Design Registration applications.

3. Future plan of action

Your Company continues its focus on developing new products and


technologies to meet the ever growing customer needs, regulatory
requirements, competitive pressures and to prepare for the future.
Sustainable mobility solutions are a key focus area and your Company will
continue to aggressively pursue technology development in this area. Some
of the key thrust areas in this direction are weight reduction, fuel
efficiency improvement and development of alternative fuel powertrains.
Further, safety related technologies are another key area oT TOCUS Tor your
Company.

On the Farm Equipment side, your Company remains committed to improving


tarm productivity through a variety of product (Tractors and Implements)
and non-product initiatives. The focus will be on delivering new technology
to the customer for a multi-fold farm output. Product upgrades, new
products and implements will be focus areas.

4. Expenditure on R&D

Company spent Rs.664.86 crores (including Rs.390.72 crores on capital


expenditure) on Research and Development work during the year which was
approximately 3.23% of the total turnover.

Technology Absorption, adaptation and innovation:

1. Efforts, in brief, made towards technology absorption, aclaption and


innovation

The Company has continued its endeavor to absorb advanced technologies for
its product range to meet the requirements of a globally competitive
market. All of the Company's Vehicles, Engines and Tractors are compliant
with the prevalent regulatory norms in India and also in the countries to
which they are exported. The Company has also undertaken programs for
development of vehicles which would run on alternate fuels like CNG, Bio-
cliesel, Hydrogen and Electric traction.

2. Benefits derived as a result of the above efforts

* Compliance with new emission norms introduced in India with effect from
1st April, 2010.

* Build a knowledge base for the Company.

* Launch of Bolero Maxi Truck, Gio, Maxximo and Yuvraj.

* Introduction of Micro Hybrid Technology on a Pick-UP.

* Development of C2 CRDe engine with DOHC.

* Development of Electric Version of Maxximo.

* Development of Integrated Cabin for Tractor.

* Emphasis on value analysis/value engineering and innovative cost


reduction ideas to cut down costs.
3. Imported Technology for the last 5 years

Technology Imported Year of Status


Import

1. Development of Air 2005 In the process of Absorption


Bags on utility vehicle

2. Development of cruise
control on utility vehicle 2005 Technology Absorbed

3. Fatigue Lab and track


design for MRV, Chennai 2005 In the process of Absorption

4.Sandwich material for


noise absorption 2005 Technology Absorbed

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

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

7. Bio-Diesel and Gas


based engine 2005 Technology Absorbed

8. Transmission Design of
Compact Tractor 2006 Technology Absorbed

9. Development of
Integrated Cabin for Tractor 2006 Technology Absorbed

10. Hydrophilic Nano


coated Feature 2007 In the process of Absorption

11. Automatic Transmission


for SUV 2007 Technology Absorbed

12. Transmission for new SUV 2007 In the process of Absorption

13. New Generation system for


Brakes for SUV 2007 In the process of Absorption

14. New Electricals &


Electronics Features 2007 In the process of Absorption

15. CNG engines for LCV 2007 Technology Absorbed

16. Common Rail Diesel on


Light commercial vehicle 2007 Technology Absorbed

17. Next generation Common


rail adaptation 2007 Technology Absorbed

18. Hydrogen ICE 2007 Technology Absorbed

19. Fuel Cell Vehicle


Development 2007 In the process of Absorption

20. 2nd Generation Biofuels


(Biomass to Liquid/Gas to
Liquid) 2007 In the process of Absorption

21. Hybrid Vehicles 2008 In the process of Absorption

22. Transmission Upgrade 2008 In the process of Absorption

23. Electricals & Electronics 2008 Technology Absorbed


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

25. Start Stop Micro Hybrid 2009 Technology Absorbed

26. New Generation Engine


Management System 2009 In the process of Absorption

27. CNG Engines for


Pickups/3 Wheelers 2009 Technology Absorbed

28. Electronic Programs for


Safety, Stability & Steering
Control 2009 Technology Absorbed

29. CAN Based Networking 2009 Technology Absorbed

30. New Airbag Program 2009 In the process of Absorption

31. Advanced Materials


Technologies 2009 Technology Absorbed

32. Development of components 2010 In the process of Absorption


using alternate materials and
advanced manufacturing processes

33. Engine upgrades and


Emission improvement technologies 2010 In the process of Absorption

34. New transmissions for


compact vehicles and Utility
vehicles 2010 In the process of Absorption

35. Technology for NVH


management 2010 In the process of Absorption

36. Electrical and electronic


technologies in the areas of 2010 In the process of Absorption
safetv, infotainment and
convenience

37. Alternate fuel technologies 2010 In the process of Absorption

38. New suspension system for


improved comfort 2010 In the process of Absorption

39. Development of digital


service interface 2010 In the process of Absorption

40 Agri Implements Technology


transfer 2010 In the process of Absorption

C) Foreign Exchange Earnings and Outgo

The Company continues to strive to improve its export earnings. Further


details in respect of exports are set out elsewhere in the Annual Report.

The information on foreign exchange earnings and outgo is furnished in the


Notes on Accounts.

For and on behalf of the Board

KESHUB MAHINDRA
Chairman

Mumbai, 29th May, 2010

Particulars of loans/advances and investment in ifs 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.
Loans and advances in nature of loans to subsidiaries:

(Rupees in crores)

Name of the Company Balances as on Maximum outstanding


31st March, 2010 during the year

Mahindra & Mahindra Financial


Services Limited 0.00 15.00

Mahindra Intertrade Limited 0.00 0.15


(including loans where there
is no interest) (0.15)

Bristlecone India Limited 8.03 8.03

Mahindra Gujarat Tractor Limited 1.00 1.00

Mahindra Shubhlabh Services Ltd 0.00 2.00

NBS International Limited 2.00 2.00

Mahindra Forgings Limited 0.00 100.50

Bristlecone Limited 72.45 72.45

Mahindra Overseas Investment


Company (Mauritius) Limited 86.86 86.86

Mahindra Engineering & Chemical


Products Limited 68.53 68.53

Mahindra Two Wheelers Limited 41.00 46.00

Mahindra Vehicle Manufacturers


Limited 230.00 230,00

Mahindra Castings Limited 0.00 38.00

Mahindra Holdings Limited 25.00 25.00

Mahindra Automotive Australia


Pty. Ltd. 4.51 4.51

Mahindra Logistics Limited 0.00 22.84

Mahindra USA Inc. 0.00 7.20

Loans and advances in the nature of loans to firms/companies in which


Directors are Interested:

(Rupees in crores)

Name of the Company Balances as on Maximum outstanding


31st March, 2010 during the year

Infrastructure Development
& Finance Company Limited 0.00 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.

MANAGEMENT DISCUSSION AND ANALYSIS

Mahindra & Mahindra Limited ('M&M') or ('Mahindra') is the flagship Company


of the US$ 7.1 billion Mahindra Group which consists of 105 companies and
has businesse large and small in almost every continent of the world. The
different Sectors of the Mahindra Group cover a wide spectrum of industries
from Tractors to Information Technology, from Automobiles and Two Wheelers
to Airplanes, from Financial services and Holidays to Defence and
Infrastructure, An investor in M&M has the benefit of the Group's
involvement in all these Industries.

Positive sentiment and a renewed confidence in the India growth story


replaced the fear and uncertainty prevalent in the past year. Your Company
used the crisis to reboot and reinvent itself and to reignite its dreams.
It took the challenges head on and surged ahead with aspiration,
inspiration and motivation. The Automotive Sector contributed to the
revival of The Indian Auto Industry with the Mahindra Xylo, which was
launched at the height of the recession and which went on to become an
immensely successful vehicle. The Farm Equipment Sector crowned 27 tyears
of market leadership, with M&M becoming the single largest tractor Company
in the world by volume.

Industry Structure

The domestic Automotive Industry comprises of Multi Utility Vehicles


('MUVs'), which includes soft tops, hard tops and pick-ups, Light
Commercial Vehicles (LCVs'), three wheelers and C-segment cars.

The domestic Tractor Industry is traditionally segmented by horsepower into


the low horsepower of 20 hp - 30 hp segment, the middle segment of 30-40 hp
and the higher segment of above 40 hp.

Industry overview and trends

Indian economic growth recovered strongly and relatively faster from the
effects of the global financial crisis. 'The Government responded quickly
to the crisis with a large stimulus package including reduction in indirect
taxes and other fiscal and monetary measures to boost demand. As a result,
industrial growth made rapid strides, registering a double digit increase
in the second half of Financial Year 2010, as compared to nearly zero
growth in the comparable period of Financial Year 2009.

However, given the poor monsoon and rise in global commodity prices,
inflation has risen sharply since November, 2009. Containing inflation is
likely to remain a key challenge for the Govemment and policyrnakers in the
near term.

Indian Automotive Sector

The global Automobile Industry was one of the worst affected by the
financial crisis. Global Automobile production declined by 13.5% in the
year 2009, after a 3.7% decline in the year 2008 (Source: OICA).
Recognising the importance of the Automobile Industry to their economies
and employment, many Governments in developed and emerging markets
responded with measures to boost demand for Automobiles, especially through
providing incentives for scrapping old vehicles (also known as 'cash for
clunker' Schemes) and by reducing taxes.

Helped by the Indian Government's stimulus package (primarily comprising a


6% point reduction in excise duty) and multiple new product launches by
manufacturers, the Indian Automobile Industry registered a healthy growth
of 27.9% in Financial Year 2010 as compared to a decline of 4.8% in
Financial Year 2009.

Domestic F-08 F-09 F-10 F-09 F-10


industry sales

Passenger
vehicles 15,49,882 15,52,703 19,49,776 0.2% 25.6%

Cars 12,03,733 12,20,475 15,26,787 1.4% 25.1%


*Al: Mini 69,553 49,383 63,378 -29.0% 28.3%
A2: Compact 8,59,197 8,85,639 11,28,272 3.1% 27.4%
A3: Mid-size 2,25,725 2,41,683 2,76,071 7.1% 14.2%
A4: Executive 42,195 33,638 46,346 -20.3% 37.8%
A5: Premium 6,201 9,093 11,455 46.6% 26.0%
A6: Luxury 862 1,093 1,265 26.8% 15.7%
MPVs 1,00,865 1,06,607 1,50,256 5.7% 40.9%

UVs 2,45,284 2,25,621 2,72,733 -8.0% 20.0%

Commercial
vehicles 4,88,088 3,84,194 5,31,395 -21.3% 38.3%

LCVs 2,15,912 2,00,699 2,86,337 -7.0% 42.7%

Passenger 27,832 26,952 34,421 -3.2% 27.7%


Goods 1,88,080 1,73,747 2,51,916 -7.6% 45.0%

M&HCVs 2,74,582 1,83,495 2,45,058 -33.2% 33.6%

Passenger 38,647 34,892 43,081 -9.7% 23.5%


Goods 2,35,935 1,48,603 2,01,977 -37.0% 35.9%

3. Wheelers 3,64,781 3,49,727 4,40,368 -4.1% 25.9%

Passenger 2,34,774 2,68,463 3,49,662 14.3% 30.2%


Goods 1,30,007 81,264 90,706 -37.5% 11.6%

2 Wheelers 96,54,435 74,37,619 93,71,231 -23.0% 26.0%

Scooters 10,50,109 11,48,007 14,62,507 9.3% 27.4%


Motorcycles 57,68,342 58,31,953 73,41,139 1.1% 25.9%
Mopeds 4,13,759 4,31,214 5,64,584 4.2% 30.9%
Electric 17,068 26,445 3,001 54.9% -88.7%

Source: Society of Indian Automobile Manufacturers

* Classification of A1, A2 etc as per Society of Indian Automobile


Manufacturers

Within the overall Automobile Industry, the performance of different


segments varied significantly during the year.

The passenger car segment, which comprises of 78% of personal vehicles,


reported a healthy growth of 25.2%, led by the A2 segment which grew 27.4%.
The A4, A5 and A6 segments grew in average of 36-68% indicating the rising
Jncome levels, wealth and aspirations of the Indian consumers.

The Utility Vetide (IM segment, in which your Company participates as a


significant player, registered a growth of 21.0% as compared to a decline
of 7.6% in Financial Year 2009. This growth was driven by increasing
prosperity, development of infrastructure and growth in road travel.
Interestingly, over 40% of the growth in LIV industry volumes was
contributed by Mahindra Xylo.

The commercial vehicle industry registered a growth of 38.8% during the


year. The LCV market showed an increase of 42.7% during the year. This was
primarily driven by the small commercial vehicle segment (of less than 1
tonne payload), which grew by 47% (Source: M&M analysis). Medium and Heavy
commercial vehicle (M&HCV) segment

growth was 34.4%. Most of the growth in M&HCV sales came in the second half
of the fiscal, partly due to a sharp rebound in industrial growth and
partly due to a very low base in the corresponding period of the previous
year.

The Indian Tractor Industry, the world's largest, grew by 31.7% this year
to touch 4,00,203 Tractors, compared with 3,03,921 Tractors sold in the
corresponding period last year.

This growth, despite a weak monsoon and a badly-affected Kharif crop this
year, is because the dynamics of the rural economy has undergone some
fundamental changes in recent times. The Government has enhanced its
support for the Agriculture Sector with increased levels of credit and
better minimum support prices. Increased rural outlays including those
under initiatives like the National Rural Employment Guarantee Scheme
('NREGS') have helped improve rural incomes. New employment avenues have
emerged and on an average, farm incomes now contribute to less than half of
rural incomes. All this has resulted in higher rural liquidity, ensuring
strong demand, despite the poor monsoon.

Your Company's Performance

Automotive Sector - Leading the Industry

Financial Year 2010 was an epochal year for your Company' Automotive
Sector. Spurred to rise above the challenges

imposed by a stagnant market and declining customer spend, Mahindra broke


new ground. New vehicles were launched, a state-of-the-art factory was
inaugurated, even as your Company's ever popular vehicles, the Scorpio and
Bolero continued to show good growth in sales volumes:

Growth

M&M Domestic
sales F-08 F-09 F-10 F-09 F-10

Passenger
Vehicles 1,29,849 1,19,799 1,56,058 -7.7% 30.3%
Cars 25,907 13,423 5,332 -48.2% -60.3%
LIVS 1,03,942 1,06,376 1,50,726 2.3% 41.7%

Light
commercial
vehicles 55,222 55,881 86,217 1.2% 54.3%

3 Wheelers 33,927 44,533 44,438 31.3% -0.2%

2 Wheelers N/A 3,014 70,008 N/A 2,222.8%

Notes: Data as per classification of Society of Indian Automobile


Manufacturers. Includes sales of subsidiaries. Two wheeler sales for F-09
are for the period January 2009-March 2009.

* During the Financial Year 2010, your Company, along with its Joint
Venture subsidiaries Mahindra Navistar Automotives Limited ('MNAU') and
Mahindra Renault Private Limited ('MRPU'), sold a total of 2,86,713
vehicles in the domestic market, a growth of 30.0% over the previous year

* The Company's domestic UV sales volumes increased 41.7% to 1,50,058


units, as against a growth of 20.0% for industry UV sales. As a result,
your Company further strengthened its domination of the domestic UV sub
segment, increasing its market share to 55.3% over the previous year's
market share of 47.1% (Source: SIAM Data).

* The Scorpio, Bolero and Xylo continued to lead the Indian market,
increasing Mahindra's already dominant marketshare. The Bolero occupied the
numero uno slot for the fourth consecutive year, selling more than 70,000
vehicles during the year.

* In LCVs, M&M has a presence in < 3.5T GVW segment (small commercial
vehicles and pick-ups), while its subsidiary MNAL has a presence in the
3.5-7.51VIT GVW segment.

* In Financial Year 2010, your Company's overall LCV sales were 86,217
units, a growth of 54.3% as compared with a growth of 42.7% for the
industry. Your Company is the second largest player in the LCV segment with
a market share of nearly 30.0%. (Source: SIAM Data).

* In the passenger car segment, the Logan sold 5,332 units, a decline of
60.3% over the previous year as compared to a growth of 14.2% for the A3-
segment.

* The Company recently announced a restructuring of its Joint Venture with


Renault s.a.s. France, which it hopes will augment sales.
New products - Inspiration on roads

At Mahindra, the customer is king, and their satisfaction is the source of


the Company's motivation. Keeping customer focus in view, the Automotive
Sector launched new products in Financial Year 2010, which met with
encouraging response in the market, on the basis of which your Company is
ramping up production to meet market demand.

Three new products were launched in the < 3.5T GVW segment.

* mahindra was the first Company to introduce micro hybrid technology in


the LCv segment in the Bolero Maxtruck (BMT), which now accounts for more
than 30% of BMT volumes.

The Company also launched India's first compact truck, the Gio, with a 0.5T
payload, with car-like interiors and an attractive price point. By offering
attractive finance schemes, the Company expects the Gio to provide self-
employment opportunities to rural and semi-urban youth.

Mahindra launched the Maxximo, a technologically advanced compact truck


with a 0.85T payload. It features the world's first 2-cylinder 4-valve
common rail engine. The Maxximo offers a price-value proposition in terms
of performance and features that is much superior to what was hitherto
available in the market.

* In March, 2009 a refreshed version of the Scorpio, called the 'Mighty


Muscular Scorpio' was launched, which led to more than 20% growth in sales
of the brand during the year.

* Mahindra Navistar Autornotives Limited ('MNAL') (a subsidiary of your


Company) is developing products to address the full range of the commercial
vehicle market, some of which were displayed at the Auto Expo in January,
2010 to wide acclaim from media and customers. The commercial launch is
expected in the short term. MNAL is expected to have a full range of M&HCVs
in the next 3-4 years.

New Infrastructure - Aspiring to reach greater heights

Your Company is positive on the future of the Indian Automotive Industry


and is continuing with its expansion plans. To meet increased customer
requirements, the first phase of a brand new manufacturing facility at
Chakan, near Pune in Maharashtra, was commissioned in December, 2009. This
state-of-the-art plant is owned and operated by Mahindra Vehicle
Manufacturers Limited ('MVIVIL'), a wholly owned subsidiary of your
Company.

In another path breaking initiative, Mahindra commenced partial operations


at its brand new research and development facility - Mahindra Research
Valley, MRV at Chennai. The facility will be expanded further over the next
few years and will create a world class R&D infrastructure for product
development, testing and validation.

The Chakan Plant has the capability to manufacture the Company's range of
new generation UVs as well as commercial application vehicles. It will also
manufacture Commercial Vehicles for MNAL.

Overseas aperatons - Expanding frontiers

In the Global markets, while the overall economic conditions have improved
from the nadir of Financial Year 2009, they still remain challenging. The
Company's overseas automotive operations recovered in the second half of
last year with export sales growing nearly 24% to 10,567 units as compared
to 8,501 units in the previous year.

To build on the Company's heritage and build its brand in overseas markets,
your Company launched a new product, Mahindra Thar. The product has
received good response in targeted markets.

In addition to the above, your Company sold 1,000 Logan cars in overseas
markets through MRPL.
Farm Equipment Sector - The route to the numero uno position

The Financial year ended 31st March, 2010 was a landmark year for the
business. Your Company became the world's largest tractor Company, in terms
of the number tractors sold, fulfilling a long cherished dream. 'Mahindra
Tractom is an iconic brand and enjoys a strong following in the India rural
heardand.

M&M Domestic sales F-08 F-09 F-10 F-09 F-10

Tractors 99,042 1,20,202 1,75,196 21.4% 45.8%

Domestic 90,509 13,269 1,66,359 25.2% 46.9%

Exports 8,533 6,933 8,837 -18.8% 27.5%

* In this period, your Company sold 1,66,359 tractors under its Mahindra
and Swaraj brands as against 1,13,269 tractors sold in the previous year, a
46.91/o increase.

* This resulted in the ffiarket share going up to 41.4% from 40.8% last
year and marked the completion of 27 years of leadersNp of the Farm
Equipment Sector in the Indian Tractcx Market.

* The above volumes included the sale of more than 1,00,000 Mahindra
branded tractors in the domestic tractor market in a single financial year,
the 1 sl Tractor Company in the country to achieve this distinction.

New Products - Inspired by India

* Yuvraj 215 - A revolutionary 15 HP Tractor for the small and marginal


farmer, launched in Gujarat.

* 843 XM - The first ractor to be launched under the Swarai brand after
the merger of the erstwhile Punjab Tractors Limited with the Company.

* Arjun, Sarpanch, Bhoomiputra range Upgraded versions launched, enhancing


value for the customer.

International launches

United States

* Launch of the first hi-tech Integrated Cabin Tractor with both air-
conditioning and heating in the US, the first from a tractor that is 'Made
in India'.

* The Compact series of Tractors, another first from an Indian Tractor


Company, was launched nation-wide. These products have been very well
received in that country.

China

In China, the inauguration of the Joint Venture Company viz. Mahindra Yeuda
(Yancheng) Tractor Company Limited ('MYYTCL') in April, 2009 was
accompanied by the launch of the 125HP tractor, thus expanding your
Company's product portfolio range up to 125HP.

Overseas Operations - Global Reach

* Mahindra Tractors exported tractors to more than 35 countries across the


world.

* Exports grew 27.5% this year to-t6bch' 8,837 tractors as compared to


6,933 tractors exported last year, outperforming exports registered by the
Indian tractor industry which cle-grew 6.5% at 36 394 tractors.

* China is the second largest tractor market in the world with a rapidly
growing Chinese market, fuelled by increased Government subsidies focussed
on agricultural mechanisation. MYYTCL has been successfully operationalised
and has delivered 32% increase in domestic volumes in the first year of
operations. The two Joint Ventures of your Company in China together
account for the sale of around 30,000 tractors.

* In the US, the tractor industry continued to face the brunt of the
economic down turn, which impacted the sale of tractors by Mahindra USA,
Inc.

Beyond Agriculture - New growth engines Mahindra Powerol

Mahindra is a Company on the move. Having been the leading tractor maker
for close to three decades now, the Company has diversified in other
spheres such as power generators.

Mahindra Powerol has made a foray in the new area of Tele Infra

Management ('TIM'). This is a business where your Company will manage


telecom towers by providing the entire range of services required,
including diesel filling, preventive maintenance, security and surveillance
while ensuring world class uptime levels. The business has already
contracted more than - 7,000 sites for its services.

Mahi-ndra Powerdl hat'notched impressive growth in the retail space in


Financial Year 2010. It also tested an engine for rice mill application,
which was successfully introduced in the market.

Mahindra Powerol has expanded its genset product range to 320 kVA at the
higher end and introduced a new 5kVA DG at the lower end. Perhaps the most
significant product introduction for the retail segment from the Mahindra
Powerol stable has been the digital home UPS. With sales of over 7,000
numbers this year, this product is poised to take Mahindra into every home.

The Quality Way - Inspiring success

Strict adherence to quality is the abiding culture at Mahindra Tractors,


across its businesses and activities. Winning the most coveted
International Quality accolades such as the Deming Prize and the Japan
Quality Medal has inspired it to continue on the exalted path. The Farm
Equipment Sector ('FES') has continued on the Total Quality Management
('TQM') path with its own Assessment Model - the Mahindra Excellence Model.
To further strengthen its manufacturing capability, the Sector is pursuing
the path of Total Productive Maintenance ('TPM') under the guidance of
Japan Institute of Plant Maintenance. The rich TQM experience of FES is now
being horizontally deployed in the Swaraj Division to accelerate the
implementation of best practices. The Sector is relentlessly pursuing its
goal of business excellence and is taking this culture across to other
businesses in your Company as well.

Opportunities and threats

The Automotive Sector

The current low level of vehicle ownership in India is 14 per 1,000 people
as compared with the world average of 120 per 1,000 which implies a huge
opportunity for growth of the Automobile Industry. India's Automotive
Sector is expected to be one of the fastest growing in the world over the
next several years. However, the Company faces increasing competition from
the presence of a large number of automotive companies in the country.

The Automobile Industry is also a key contributor in economic growth. The


Indian Government's Automotive Mission Plan 2016 (AMP 2016) envisages a
doubling of Automotive Industrys share of the Indian economy by 2016.
However, stricter emission norms and an increased focus on public
transportation may discourage use of automobiles as a means of personal
transport.

The increased investments in infrastructure and the consequent growth in


industrial activity will lead to increased goods movement, resuffing in a
growing demand for commercial vehicles. The Company's subsidiary; MNAL is
set to launch a range of medium and heavy commercial vehicles over the next
few years. This will ensure the Company's participation in this large and
important segment of the Indian Automotive Industry.
The Farm Equipment Sector

* The improvement in rural liquidity and increase in non-agri component of


rural incomes is a strong positive since demand will have lesser
sensitivity to a single deficient monsoon as compared to earlier periods.

* Food security and rural development remain high on the Government agenda,
with the Union Budget for 2010-2011 showing an increase in agri credit
outlay by 15% to Rs.3.75 lakh crores; interest subvention on crop loans and
various initiatives for rural development also have enhanced outlays. This,
coupled with significantly low levels of mechanisation in Indian farms
compared to the global average, indicates that there is significant growth
potential for agricultural mechanisation in the country. Your Company is
well poised to leverage this opportunity. The Company may face increased
competition from other tractor manufacturers.

Amongst your Company's newly launched products, the Yuvraj 215 has the
potential to grow significant volumes in the upcoming period by creating an
entirely new category and catering to a large group of customers who had no
affordable option thus far.

Your Company will use every opportunity to leverage synergy both within the
Sector as well as with other Mahindra companies to create and improve
channel efficiencies, develop cutting edge technologies and introduce a
continuous pipeline of product upgraclations and new product introductions.
Your Company's strategy to make use of low cost manufacturing and sourcing
bases in India and abroad will enhance its cost competitiveness.

Having achieved Global Leadership, your Company will continue to focus on


expanding international volumes. With the 2 Joint Ventures in China, your
Company is well poised to participate in the growth in China, one of the
fastest growing tractor markets, fuelled by huge Government subsidies for
mechanisation. Similarly, with the US market slowly emerging out of a
recession, your Company expects the business to resume its growth path.

Perhaps the biggest opportunity will emerge as the FES gears up to bring
about Farm Tech Prosperity. The possibilities are endless in this area.

Your Company has the will to achieve and go where no other has gone before,
to travel the road less travelled and create its own pathways on its
continued journey to success and excellence.

Risks and Concerns

The Automotive Sector

Competition

Given that the Indian Automobile Industry is expected to be one of the


fastest growing markets in the world, many global players are significantly
expanding their presence in India. There is a concern that this will result
in an ever increasing level of competition and intense pressure on the
profit margins of all participants.

Increased competition will lead to more frequent product launches in all


industry segments and raise customer expectations in terms of performance,
quality and technology, leading to higher costs. Your Company views all of
this as an opportunity and a challenge.

Regulations

Stringent regulatory norms are being introduced to safeguard the


environment, especially in the area of emissions. Many of these measures
are likely to result in an increase in costs which cannot always be passed
on to customers through price increases in a highly competitive market
environment.

In India, there is a large differential in taxes levied on small cars and


larger vehicles. With the resulting lower price tag for small cars, many
customers may opt to postpone large car purchases or buy a small car, which
could impact the growth of UVs and the large car segment.

Fuel prices and alternate fuels

Fuel prices are an important element of the overall cost of ownership for
vehicles and tractors. Almost all of the Company's UV models are diesel
powered. Diesel is priced lower than petrol. Any reduction in the price
differential between petrol and diesel may increase the demand for petrol
UVs at the expense of diesel UVs and will be disadvantageous to the
Company.

There is also a growing customer trend, as well as promotion by the


Government, for vehicles powered by CNG, LPG and electric batteries, as
well as hybrid powertrains. To mitigate this risk, the Company has
developed products powered by alternate energy such as CNG and electricity
to provide lower polluting products. The Company has also developed
prototypes of a hybrid Scorpio and hydrogen powered three wheeler as well
as a bio-diesel powered Scorpio and Bolero, bio-diesel tractors and
Gensets.

Alternate modes of transportation

While the thrust by the Government on development of urban infrastructure


would lead to overall economic development and improve living standards, it
is also likely to provide alternate modes of transport for daily commuting
such as Bus Rapid Transit System ('BRTS'), Metrorail, monorails, etc.

Also, growing urbanisation and VeNcFd-popblation is leading to growing


pollution, congestion and shortage of parking spaces in cities. These
trends would likely discourage the use of automobiles as a means of
personal transport, though, given the aspirations of Indian consumers, it
may not have a. significant impact-on the demand for personal vehicles.

Financial market conditions

Availability of credit and affordable interest rates are important


facilitators for automobile and tractor sales. Any adverse change in these
factors would impact demand. However, several strategic tie-ups with
multiple banks and financing companies alleviates this concern to some
extent.

For overseas operations, which are a key thrust area for the Company, rupee
appreciation could be a risk for both the Sectors. However, M&M, as a
practice, is taking appropriate steps to hedge currency exposure, thus
limiting the impact of risk.

New projects

To maintain and extend its competitive advantage, the Company has created
significant new capacity at its new manufacturing plant at Chakan and is
simultaneously investing in an aggressive new product development
programme. Success of the new product launches and attaining optimal and
planned capacity utilisation of the new facility would have an important
bearing on the future profitability.

To mitigate the associated risks, your Company is taking great care in


building new products around the customers needs and plans to bring in the
incremental capacity from this new plant in phases.

Competition

The Indian domestic tractor market, the world's largest, has seen a round
of consolidation in the last few years, which includes the coming together
of TAFE and Eicher and the acquisition of Punjab Tractors Limited by your
Company. Having recorded a significant growth of over 30% in this financial
year, the market is expected to see more competition among the existing
domestic and international players.

Increased competition will lead to more frequent product launches in all


industry segments and raise customer expectations in terms of performance,
quality and technology, leading to higher costs. Your Company views all of
this as an opportunity and a challenge.

Regulations and alternative fuels

Stringent regulatory norms are being introduced to safeguard the


environment, especially in the areas of emissions. Your Company is ahead of
the curve, in terms of technology readiness, to meet the changes in norms.
In addition, in the area of alternative fuels, your Companys products both
in tractors and gensets are compatible with bio-fuels, ensuring the
customer can use such fuels whenever their commercial availability
improves.

Raw Materials

After a year of decline in raw material prices, Financial Year 2011 is


expected to see a firming of prices in the international market. While this
is an area of concern and will put pressure on margins, your Company will
continue to focus on cost re-engineering to minimise the impact of this
development.

Strategy

Automotive Sector: Expanding the addressable market

Your Company is investing significant resources in developing its capacity


and capabilities to grow its participation as a full range player in the
Indian automobile industry.

* Entry into new segments - In addition to sports utility vehicles, pick-up


trucks, light commercial vehicles and three-wheelers, your Company has
recently entered into the Multi Purpose Vehicle segment (through the Xylo),
the mini-truck segment (through the Maxximo) and the compact-truck segment
(through the Gio). The Company, through its subsidiary MNAL, will enter
into the medium and heavy commercial vehicle segment in the near term as
well. This will not only provide the Company with a much larger addressable
market but will also provide multiple avenues for growth and de risk the
business from dependence on a single segment.

* New products - The Company is refreshing and growing its product


portfolio to grow its sales volumes and defend its market position. As part
of the Company's aggressive product plan, it is planned to launch a number
of new products and multiple variants in the next three years. This
includes a new global Sports Utility Vehicle platform to be launched in the
near future.

* Technology upgradation and R&D - The Company is investing in upgrading


the technology and quality of its products. An important initiative in this
area is the new research facility being set up at Mahindra Research Valley
(MRV) in Chennai, which will provide world class R&D infrastructure.
Further, the impending launch of the Company's products in the US, the most
advanced automobile market, will help the Company keep abreast of
technological trends. The Company plans to harness its frugal engineering
capabilities to achieve its technology and new product development
objectives at a globally competitive cost.

* Overseas markets and partnerships - The Company plans to increase its


focus on developing overseas markets through new products and brand
building. During Financial Year 2011, the Company plans to enter the US

market with a pick-up. The Company also continues to actively search for
overseas partners to supplement and strengthen its domestic market in both
the Sectors.

Farm Equipment Sector: Aspiring for Farm Tech Prosperity

Going beyond just being a tractor company, FES aspires to make a difference
in the lives of farmers by delivering Farm Tech Prosperity, both in the
Indian context, as well as on a global scale, in the immediate and distant
future.

The Company's customers - the source of inspiration


At Mahindra, the Company undertakes research to identify the needs of both
its existing and potential customers in order to fulfil their aspirations.
These findings inspire the Company to follow the road less travelled. In
the past year ' FES took many steps along the road, to improve the lives of
its customers.

Yuvraj 215

There is wealth at the bottom of the pyramid. Research showed that the
lower income farmer is still forced to rely on manual labour and bullocks
to till his land. With this insight, your Company took upon itself the
challenge of creating a suitable solution at a suitable price. FES launched
the Yuvraj 215, a 15 HP tractor at an unbeatable price for small and
marginal farmers - your Company's contribution towards inclusive growth in
the country. This technological marvel meets the needs of over 80% of
India's farming populace, whose land holding is less than 5 acres, and for
whom a Rs.2.5 lakhs tractor is simply unafforclable.

Mahindra Applitrac

Research suggests that increasing rural affluence, multiple sources of


income in rural India and the success of social programmes like NREGS are
combining to make farm labour scarce and expensive. Also, the productivity
levels are very low on Indian farms, far lower than the global average.
This is the inspiration for the AppliTrac brand, which offers the Indian
farmer, complete mechanisation solutions for a range of crops, helping him
deal with labour shortage and also enhance productivity.

Mahindra Samriddhi

Farmer prosperity is the inspiration that has motivated FES to intensify


Mahindra Samriddhi, which is focused on increasing crop productivity. This
initiative includes soil and water testing labs, productivity demo farms,
agri-clinics and counselling centres. It brings the best of agricultural
know-how within reach of the farmer and helps him increase farm
productivity.

In the Financial Year ended 31 March, 2010, 75 Samriddhi centres were


operational across the country, Samriddhi is motivated by your Company's
desire to help millions of farmers across the country get more out of soil,
ensuring that there is and will be enough food to feed India's growing
population.

Outlook

In the long term, the Indian economy is projected to grow rapidly and
demand conditions are expected to remain strong. However, in the near term,
there are challenges in terms of higher commodity prices, rising inflation
and appreciation of the rupee which will have a bearing on demand and
profitability.

Both the Automotive and Farm Equipment Sectors with their updated product
portfolios and their exploration of global horizons, will strive to
maintain their leadership position in their respective markets.
Simultaneously, your Company will continue its focus on achieving cost
leadership through focused cost optimisation, value engineering, improved
efficiency measures like supply chain management, countrywide connectivity
of all its suppliers and dealers and exploiting synergies between its
Sectors.

Material Developments in Human Resourcesf Industrial Relations for


Automotive and Farm Equipment Sectors.

This year, HR in the Mahindra Group continued on its strategic purpose of


focusing on the HR Triple Bottom-line by creating a culture of sustained
business out performance, extreme care for all stakeholders, starting with
customers and employees, and strengthening the core values of the Group.

Going forward, the success of the Group will depend on individuals and
teams that are able to create value for the organisation. The levers of
organisation structure and design, reward and recognition, talent
acquisition, communication and performance management system are important
and are aligned. Leadership development, succession planning and employee
engagement demanded extra focus this year, given the prevalent economic
situation.

To showcase HR practices in various businesses and encourage best practice


sharing, the HR Best Practice Award was instituted.

The Talent Management process of the Group gave impetus to leadership


development programmes with a focus on creating synergy between Satyam
Computer Services Limited, Tech Mahindra Limited and the other businesses
of the Group. Continuing with leadership development programmes, this year
a partnership was forged with the Centre for Creative Leadership, USA in
line with the said purpose.

A cross-functional team of more than 150 HR, business and IT professionals


worked together for harnessing the power of IT through Parivartan - Project
Harmony, whose basic objective is to create a One Mahindra experience by
synergising and creating best practices in 24 HR processes across the
Group. 17,000 Officers across 29 Group companies spread over 156 locations
experienced this power when the system went live.

Your Company continued with its initiative of employer branding through


'The War Room', event which sees participation from the country's leading
Business Schools. The impact of this initiative was significant and there
was a marked increase in the number of participating teams this year.

Industrial Relations remained cordial and harmonious during the year for
both the Sectors, apart from a brief illegal, tool-down strike by workers
at the Na~shik Automotive Plant. However, the loss in production was
compensated and the Company did not suffer any major loss. Various training
programmes were organised at all Plants for developing personal,
interpersonal and technical skills of the Company's i workmen. These
training programs covered a wide range 1 of topics e.g. Positive Attitude,
Stress Management, Creativity, Team Effectiveness, Safety and Environment,
Quality Tools, TPM, Dexterity and Technical training. The workmen
wholeheartedly participated in all training programmes and in many cases on
a holiday or after working hours.

Workmen at all locations are involved in driving improvement activities.

The permanent employee strength of the Company as on 31st March, 2010 was
14,355.

Internal Control Systems

The Company maintains adequate internal control systems, which provide,


among other things, reasonable assurance of recording the transactions of
its operations in all materialrespects and of providing protection against
significant misuse or loss of Company assets, The Company uses an
Enterprise Resource Planning ('ERP') package, which enhances the internal
control mechanism. The Company has a strong and independent internal audit
function. The Chief Internal Auditor reports directly -to the Chairman of
the Board. Professionally qualified, technical and financial personnel of
the internal audit function conduct periodic audits to ensure that the
Company's internal control systems are adequate and are complied with.

Discussion on Financial Performance with respect to Operational Performance

Overview

The financial statements have been prepared in compliance with the


requirements of the Companies Act, 1956 and Generally Accepted Accounting
Principles ('GAAP') in India.

The Group's consolidated financial statements have been prepared in


compliance with the standard AS 21 on Consolidation of Accounts and
presented in a separate section. The Company has provided segment reporting
on d consolidated basis as per standard AS 17 on segment reporting. This
information appears along with the consolidated accounts.
Financial Information

Fixed Assets:

As at 31st March, 2010 the Gross Block of Fixed Assets and Capital Work in
Progress was Rs.6,240.49 crores as compared to Rs.5,540.62 crores as at
31st March, 2009. During the year, the Company incurred capital expenditure
of Rs.946.31 crores (previous year Rs.855.12 crores). The major items of
capital expenditure were on New Product Development like the Maximmo,
Capacity Enhancement and Research & Development including on the Company's
research facility in Chennai. This included the purchase of Intangible
assets aggregating Rs.225.28 crores (previous year Rs.170.35 crores).

Inventories:

Particulars 31 March, 31 March,


2010 2009
Raw materials and bought
out components as a % of
consumption 4.23% 4.46%

Finished goods as a % of
gross sales 2.48% 3.31%

The reduction in inventory levels is due to the Company's continued focus


on supply chain management and better planning and control.

Sundry Debtors:

Sundry debtors amount to Rs.1,258.08 crores as at 31st March, 2010, as


compared with Rs. 1,043.65 crores as at 31st March, 2009. While in absolute
terms the debtors have gone up, as a percentage of gross sales and income
from operations debtors are lower at 6.17% for the year ended 31st March,
2010 as compared to 7.09% for the previous year. The Company has been able
to achieve this: improvement in its debtor's level due to its proactive,
emphasis on collections.

Loan Funds:

The loans funds have decreased from Rs.4,052.76 crores in the previous year
to Rs.2,880.15 crores in the current year. The decrease is primarily on
account of the conversion of the Fully and Compulsorily Convertible
Debentures into, Equity Shares and the repayment of secured Foreign
Currency Loans from Banks.

RESULTS OF OPERATIONS

Income:
(Rs. crores)

Particulars Finanical Finanical Inc./(Dec.)


Year - 2010 Year- 2009
Amount % Amount % %

Gross Sales 19,832.06 106.61 14,268.41 108.97 38.99

Income from 564.06 3.03 444.62 3.40 26.86


Operations

Gross Sales &


Income from
Operations 20,396.12 109.64 14,713.03 112.37 38.63

Less: Excise
Duty on Sales 1,794.01 9.64 1,619.35 12.37 10.79

Net Sales &


Income from
Operations 18,602.11 100.00 13,093-68 100.00 42.07
Other Income 199.35 1.07 270.341 2.06 (26.26)

Net Sales, Income from Operations and Other Income:

The net sales and income from operations of the Company grew by 42% over
the previous year on a growth of 44% in the automotive business and 40% in
the Company's tractor business. This growth in the Automotive Sector was
driven by the robust growth in domestic UV volumes by 39%, increased
exports and the launch of the GIO and the Maximmo in the current year. The
tractor business growth was fuelled by a strong increase in sales in both
the domestic and export markets.

Other income during Financial Year 2010 at Rs.1 99.35 crores fell by 26% as
compared to the previous year amount of Rs.270.34 crores due to lower
dividend income from subsidiaries and lower profit from the sale of
investments in the current year.

(Rs. crores)

Expenditure:

Particulars Financial Year 2010 Financial Year 2009 Inc./(Dec)

Amount % to Net Amount % to Net %


Sales and Sales and
Income from Income from

Products 12,332.92 66. 30 9,274.23 70.83 32.98


Operations Operations

Raw materials,
Finished and
Semi-finished
Products 12,332.92 66.30 9,274.23 70.83 32.98

Personnel
expenses 1,198.47 6.44 1,024.61 7.83 16.97

Interest,
commitment and
finance charges 21.81 0.15 45.26 0.35 (38.56)

Depreciation/
Amortisation 370.78 1.99 291.51 2.23 27.19

Other expenses 2,115.48 11.37 1,702.21 13.00 24.28

Total
Expenditure 16,045.46 86.26 12,337.82 94.23 30.05

The total expenditure during the year as a percentage of Net sales/Income


from Operations is 86.26% as compared to 94.23% in the previous year.

Material Cost:

For the year ended 31st March, 2010 material cost increased by 33% which is
much lower than increase in net sales and income from operations due to
increased volumes in the current year, Thus, as a percentage of net sales,
material cost shows a decrease over the previous year. This is mainly due
to the full benefit of the decrease in commodity prices in the second half
of Financial Year 2009 accruing to the current year and the cost reduction
initiatives of the Company.

Personnel Cost:

Personnel cost has increased by 17% to Rs. 1,198.47 crores from Rs.1,024.61
crores in the previous year, This is mainly due to increase in flexible
manpower, officers' annual increments and impact of wage agreements signed
during the year. Also the current year had the impact of full year charge
of the erstwhile Punjab Tractors Limited in the books of the Company as
compared to an eight month charge in the previous year.
Other Expenses:

Other expenses as a percentage of net sales and operating income shows a


decrease over the previous year due to the increased income in the current
year. However, because of the increase in volumes, the expenses in absolute
terms are higher due to increases in freight, power and fuel, warranty and
marketing related expenses on incentives, advertisement, sales promotion,
etc.

Depreciation:

The depreciation for the year ended 31st March, 2010 is at Rs.370.78 crores
as compared to Rs.291.51 crores in the previous year due to the full impact
in the current year of capitalisation of Xylo related fixed assets and
intangibles and due to fresh capitalisation of projects in the current
year.

Interest (Net):

The interest expense of Rs.27.81 crores (net of interest income Rs.129.04


crores) for the year ended 31st March, 2010 is lower than the interest
expense of Rs.45.26 crores (net of interest income Rs.134.12 crores) in the
previous year. This is due to the higher earnings from surplus funds and
interest on IT refund received during the current year partially offset by
increased expense on account of increased fixed deposits and a longer
period impact of fully and compulsorily convertible debentures in the
current year.

Exceptional Items:

The profit from Exceptional items during the year ended 31st March, 2010 is
Rs.90.75 crores as against Rs.10.27 crores in the last year. The profit in
the current year is on account of profit on sale of shares of Mahindra
Holidays & Resorts India Limited offered as a part of that company's
Initial Public Offering, while in the previous year the exceptional income
was on account of surplus on transfer of the Company's Logistics business
to its wholly owned subsidiary.

Provision for taxation:

The provision for current tax, fringe benefit tax and deferred tax for the
year ended 31st March, 2010 as a percentage to profit before tax is higher
than the previous year, on account of the incremental profits during the
year being subjected to tax at the maximum marginal rate of 33.99%.

Consolidated Financial Position of the M&M Group

The current year has witnessed a strong sales performance which has
translated to healthy growth in both, revenues and profits of the Group.

The Gross turnover for the year ended 31st March, 2010 of Consolidated
Mahindra Group is Rs.33,790.10 crores as against Rs.28,991.99 crores for
the previous year. The Group's net turnover grew by 17,71% to Rs.31,687.97
crores in the current year from Rs.26,919.81 crores in Financial Year 2009.
The profit before exceptional items and tax for the current year is
Rs.3,779.73 crores as compared to Rs.2,330.51 crores, registering an
increase of 62.18% over the previous year. While the Group's performance
across all its segments has registered an improvement, the Systech segment
faced challenges on account of the situation prevailing in the European
countries which are yet to returm to normalcy post the global meltdown of
2009 which severely impacted the auto-components industry world over During
the year, there was an exceptional gain of Rs.264.56 crores mainly arising
from the sale of shares through an Initial Public Offering of Mahindra
Holidays and Resorts India Limited, gains on account of deemed divestitures
of the Company's holdings in group companies such as Mahindra Forgings
Limited, Tech Mahindra Limited and Mahindra Holidays & Resorts India
Limited. The consolidated Group Profit for the year after exceptional
items, prior period adjustments and tax and after deducting minority
interests is Rs.2,478.56 crores as against Rs.1,405.41 crores earnedf ast
year, a growth of 76.36%.
During the year, by virtue of exercise of options granted to AT&T, the
shareholding of the Company alongwith Mahindra BT Investment Company
(Mauritius) Limited in Tech Mahindra Liimited stands reduced to 44.01%,
resulting in Tech Mahindra Limited alongwith its subsidiary companies
ceasing to be subsidiaries of the Company with effect from 22nd March,
2010, Accordingly as on 31st March, 2010, Tech Mahindra Limited is a Joint
Venture of the Company, As on 31st March, 2010 the Group comprised of 90
Subsidiaries, 5 Joint Ventures and 10 Associates.

Tech Mahindra Limited, the Group's IT arm, registered a total income


(Consolidated) of Rs.4,700.77 crores as against Rs.4,426.86 crores in
Financial Year 2009 - an increase of 6.19%. Its Net Profit, after share of
minority interest, was, lower at Rs.700.42 crores during Financial Year
2010 as against Rs.1,014.37 crores in the previous year.

The Group's Finance company, Mahindra & Mahindra Financial Services Limited
(Consolidated), witnessed a revenue growth of 13.93% over the previous
year. Having put in place various initiatives towards improving cashflows,
reducing interest costs through broad basing the borrowing profile and
establishing banking relationships, it reported a total income of
Rs.1,595.60 crores during the current year as compared to Rs.1,400.45
crores in the last year. With a network of 459 offices it is one of the
leading NBFCs in i financing of utility vehicles, tractors and cars. Its
consolidated profit after tax for Financial Year 2010 grew by 61.96% from
Rs.219.70 crores in the previous year to Rs.355.82 crores in the current
year,

Mahindra Holidays & Resorts India Limited, during the year under review,
continued to grow towards dominance in the Holiday Segment with membership
growing by 18.38% from 92,825 numbers to 1,09,884 numbers. The total income
(Consolidated) grew by 17.90% from Rs. 442.12 crores to Rs. 521.28 crores.
The profit after tax for the year registered an increase of 46.86%
increasing from Rs.79.71 crores in Financial Year 2009 to Rs. 117.06 crores
in Financial Year 2010.

Segment Results (before exceptional item):

The results achieved by major business segments of the Group are given
below:

(Rupees Crores)

Segments Financial Year 2010 Financial Year 2009

1. Automotive 1,260.64 257.72


2. Farm Equipment 1,406.66 667.85
3. Financial Services 524.21 333.91
4. Steel Trading & Processing 82.64 94,80
5. Infrastructure 121.72 80.00
6. Hospitality 158.01 93.66
7. IT Services 1,026.36 1,126.28
8. Systech (108.08) 23.86
9. Others (108,08) (46.71)

Disclaimer

Certain statements in the Management Discussion and Analysis describing the


Company's objectives, projections, estimates, expectations or predictions
may be 'forward-looking statements' within the meaning of applicable
securities laws and regulations. Actual results could differ from those
expressed or implied. Important factors that could make a difference to the
Company's operations include raw material availability and prices, cyclical
demand and pricing in the Company's principal markets, changes in
Government regulations, tax regimes, economic developments within India and
the countries in which the Company conducts business and other incidental
factors.
Company >> Reports >> Auditors Report

Mahindra & Mahindra Ltd


Industry :Automobiles - Tractors

Auditor's Report for the year 2010

MAHINDRA AND MAHINDRA LIMITED

ANNUAL REPORT 2009-2010

AUDITORS' REPORT

To
The members of
Mahindra & Mahindra Limited

1. We have audited the attached Balance Sheet of Mahindra & Mahindra


Limited as at 31st March, 2010, the Profit and Loss Account and the Cash
Flow Statement of the Company for the year ended on that date, both annexed
thereto. These financial statements are the responsibility of the Company's
Management. Our responsibility is to express an opinion on these financial
statements based on our audit.

2. We conducted our audit in accordance with the auditing standards


generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and the
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and the significant estimates made by the
Management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (CARO)


issued by the Central Government in terms of Section 227(4A) of the
Companies Act, 1956, we enclose in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3


above, we report as follows:

(a) we have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our
audit;

(b) In our opinion, proper books of account as required by law have been
kept by the Company so far as it appears from our examination of those
books;

(c) The Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of
account;

(d) In our opinion, the Balance Sheet, the Profit and Loss Account and the
Cash Flow Statement dealt with by this report are in compliance with the
Accounting Standards referred to in Section 211 (3C) of the Companies Act,
1956;
(e) In our opinion and to the best of our information and according to the
explanations given to us, the said accounts give the information required
by the Companies Act, 1956 in the manner so required and give a true and
fair view in conformity with the accounting principles generally accepted
in India:

(i) In the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2010;

(ii) In the case of the Profit and Loss Account, of the profit of the
Company for the year ended on that date; and

(iii) In the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.

5. On the basis of the written representations received from the Directors


as on 31st March, 2010, and taken on record by the Board of Directors, we
report that none of the Directors is disqualified as on 31st March, 2010
from being appointed as a director in terms of Section 274(1) (g) of the
Companies Act, 1956.

For DELOITTE HASKINS & SELLS


Chartered Accountants
(Registration No.117364W)

B.P. Shroff
Partner
(Membership No.34382)

Place: Mumbai
Date : 29th May, 2010

Annexure to the Auditors' Report of Mahindra & Mahindra Limited for the
year ended 31st March, 2010.

(Referred to in paragraph (3) thereof)

i. In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of the fixed assets.

(b) The fixed assets were physically verified during the year by the
Management in accordance with a regular programme of verification which, in
our opinion, provides for physical verification of all the fixed assets at
reasonable intervals. According to the information and explanation given to
us, no material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not
constitute a substantial part of the fixed assets of the Company and such
disposal has, in our opinion, not affected the going concern status of the
Company.

ii. In respect of its inventory:

(a) As explained to us, the inventories were physically verified during the
year by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanation given
to us, the procedures of physical verification of inventories followed by
the Management were reasonable and adequate in relation to the size of the
Company and the nature of its business.

(c) In our opinion and according to the information and explanations given
to us, the Company has maintained proper records of its inventories and no
material discrepancies were noticed on physical verification.

iii. The Company has neither granted nor taken any loans, secured or
unsecured, to/from companies, firms or other parties listed in the Register
maintained under Section 301 of the Companies Act, 1956.
iv. In our opinion and according to the information and explanations given
to us, having regard to the explanations that some of the items purchased
are of special nature and suitable alternative sources are not readily
available for obtaining comparable quotations, there is an adequate
internal control system commensurate with the size of the Company and the
nature of its business with regard to purchases of inventory and fixed
assets and the sale of goods and services. During the course of our audit,
we have not observed any major weakness in such internal control system.

V. In respect of contracts or arrangements entered in the Register


maintained in pursuance of Section 301 of the companies Act, 1956, to the
best of our knowledge and belief and according to the information and
explanations given to us:

(a) The particulars of contracts or arrangements referred to Section 301


that needed to be entered in the Register maintained under the said Section
have been so entered.

(b) Where each of such transaction is in excess of Rs.5 lakhs in respect of


any party, having regard to the explanations that some of the items
purchased are of special nature and suitable alternative sources are not
readily available for obtaining comparable quotations, the transactions
have been made at prices which are prima facie reasonable having regard to
the prevailing market prices at the relevant time.

vi. In our opinion and according to the information and explanations given
to us, the Company has complied with the provisions of Sections 58A and
58AA or any other relevant provisions of the Companies Act, 1956 and the
Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits
accepted from the public. According to the information and explanations
given to us, no order has been passed by the Company Law Board or the
National Company Law Tribunal or the Reserve Bank of India or any court or
any other Tribunal.

vii. In our opinion, the Company has an adequate internal audit system
commensurate with the size and the nature of its business.

viii. We have broadly reviewed the books of account maintained by the


Company pursuant to the rules made by the Central Government for the
maintenance of cost records under Section 209(1) (d) of the Companies Act,
1956 in respect of manufacture of motor vehicles and tractors and are of
the opinion that prima facie the prescribed accounts and records have been
made and maintained. We have, however, not made a detailed examination of
the records with a view to determining whether they are accurate or
complete. To the best of our knowledge and according to the information
and explanations given to us, the Central Government has not prescribed the
maintenance of cost records for any other product of the Company.

ix. According to the information and explanations given to us in respect of


statutory dues:

(a) The Company has generally been regular in depositing undisputed dues,
including Provident Fund, Investor Education and Protection Fund,
Employees' State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax,
Value Added Tax, Customs Duty, Excise Duty, Cess and other material
statutory dues applicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Income-tax,


Wealth Tax, Customs Duty, Excise Duty, Cess and other material statutory
dues in arrears as at 31st March, 2010 for a period of more than six months
from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax,
Customs Duty, Excise Duty and Cess which have not been deposited as on 31st
March, 2010 on account of disputes are given below:

Statute & Forum where Period to Amount


Nature of Dues Dispute is pending which the involved
amount (Rs. in
relates crores)
Income-Tax Laws Appellate Authority - 2004-2007 8.12
& Income-Tax Tribunal Level

Appellate Authority - 1999-2008 5.99


Commissioner (Appeals)

Sales Tax Laws High Court 1987-2008 181.87


& Sales Tax

Appellate Authority -
Tribunal Level 1987-2007 0.39

Appellate Authority -
Commissioner (Appeals) 1989-2010 24.71

Service Tax LawsAppellate Authority -


& Service Tax Tribunal Level 2007-2008 1.16

Appellate Authority -
Commissioner 2002-2010 6.09

Excise Duty Laws


& Excise Duty- Supreme Court 1991-1996 418.22

Appellate Authority -
Tribunal Level 1987-2009 221.49

Appellate Authority -
Commissioner 1994-2010 34.83

Customs Duty Laws Appellate Authority


& Customs Duty - Tribunal Level 1992-2001 6.31

x. The Company does not have accumulated losses as at 31st March, 2010 and
has not incurred cash losses during the financial year ended on that date
and in the immediately preceding financial year.

xi. In our opinion and according to the information and explanations given
to us, the Company has not defaulted in the repayment of dues to banks,
financial institutions and debenture holders.

xii. In our opinion and according to the information and explanations given
to us, the Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.

xiii. The provisions of any special statute as specified under the clause
(xiii) of the said Order are not applicable to the Company.

xiv. In our opinion the Company is not dealing in or trading in shares,


securities, debentures and other investments. Accordingly, the provisions
of paragraph 4(xiv) of the Order are not applicable to the Company.

xv. According to the information and explanations given to us, the Company
has not given any guarantees for loans taken by others from banks or
financial institutions, the terms and conditions, whereof, in our opinion
are prejudicial to the interest of the Company.

xvi. In our opinion and according to the information and explanations given
to us, the term loans have been applied for the purposes for which they
were obtained.

xvii. In our opinion and according to the information and explanations


given to us and on an overall examination of the Balance Sheet, we report
that funds raised on short term basis have not been used during the year
for long term investments.

xviii.The Company has not made any preferential allotment of shares to


parties and companies covered in the register maintained under Section 301
of the Companies Act, 1956, during the year.

xix. According to the information and explanations given to us, the Company
has created security in respect of the debentures issued in earlier years.

xx. The Company has not raised any money by public issue during the year.

xxi. During the course of our examination of the books and records of the
Company, carried out in accordance with the generally accepted auditing
practices in India, and according to the information and explanations given
to us, we have neither come across any instance of significant fraud on or
by the Company, noticed or reported during the year nor have we been
informed of such case by the management.

For DELOITTE HASKINS & SELLS


Chartered Accountants
(Registration No.117364W)

B.P. Shroff
Partner
(Membership No.34382)

Place: Mumbai
Date : 29th May, 2010

Company >> Reports >> Notes To Accounts

Mahindra & Mahindra Ltd


Industry :Automobiles - Tractors

Notes for the year 2010

MAHINDRA AND MAHINDRA LIMITED

ANNUAL REPORT 2009-2010

NOTES ON ACCOUNTS

Significant Accounting Policies:

(A) Basis of Accounting:

The financial statements are prepared in accordance with the generally


accepted accounting principles in India and comply with the Accounting
Standards notified under sub-section QQ of Section 211 of the Companies
Act, 1956 and the relevant provisions thereof.

(B) Fixed Assets:

(a) (i) Fixed Assets are carried at cost less depreciation except as stated
in (ii) below. Cost includes financing cost relating to borrowed funds
attributable to the construction or acquisition of qualifying fixed assets
upto the date the assets are ready for use. Where the acquisition of fixed
assets are financed through long term foreign currency loans (having a term
of 12 months or more at the time of their origination) the exchange
differences on such loans are added to or subtracted from the cost of such
fixed assets.

When an asset is scrapped or otherwise disposed off, the cost and related
depreciation are removed from the books of account and resultant profit
(including capital profit) or loss, if any, is reflected in the Profit and
Loss Account.

(ii) Land and Buildings, had been revalued as at 31st October, 1984 at
depreciated replacement values on the basis of a valuation made by a firm
of Chartered Surveyors and Valuers. The indices, if any, used are not
stated in the valuation.

(b) (i) Leasehold land is amortised over the period of the lease.

(ii) Depreciation on assets is calculated on Straight Line Method at the


rates and in the manner prescribed in Schedule XIV to the Companies Act,
1956, except for:

(1) certain items of Plant and Machinery individually costing more than
Rs.5,000 - over their useful lives (2 years, 3 years, 5 years or 7 years,
as the case may be) as determined by the Company.

(2) Cars and Vehicles - at 15% of cost.

(iii) Depreciation charge for each year is after deducting the amount
representing the depreciation on the increase due to revaluation of Land
and Buildings, transferred from the Revaluation Reserve.

(C) Intangible Assets:

Intangible Assets are initially measured at cost and amortised so as to


reflect the pattern in which the asset's economic benefits are consumed.

(a) Technical Knowhow

The expenditure incurred is amortised over the estimated period of benefit,


not exceeding six years commencing with the year of purchase of the
technology.

(b) Development Expenditure:

The expenditure incurred on technical services and other project/product


related expenses are amortised over the estimated period of benefit, not
exceeding five years.

(c) Software Expenditure:

The expenditure incurred is amortised over three financial years equally


commencing from the year in which the expenditure is incurred.

(D) Investments:

Long term investments are valued at cost. However, provision for diminution
in value is made to recognise a decline other than temporary in the value
of investments. Current investments are valued at the lower of cost and
fair value, determined by category of investment.

(E) Inventories:

Inventories comprise all costs of purchase, conversion and other costs


incurred in bringing the inventories to their present location and
condition.

Raw materials and bought out components are valued at the lower of cost or
net realisable value. Cost is determined on the basis of the weighted
average method.

Finished goods produced and purchased for sale, manufactured components and
work-in-progress are carried at cost or net realisable value whichever is
lower. Excise duty is included in the value of finished goods inventory.

Stores, spares and tools other than obsolete and slow moving items are
carried at cost. Obsolete and slow moving items are valued at cost or
estimated realisable value, whichever is lower.

Long term contracts in progress are valued at cost.


(F) Miscellaneous Expenditure (to the extent not written off or adjusted):

Expenditure carried forward under this head is being amortised as follows:

(a) Finance Charges:

The expenditure incurred in raising long term borrowings is amortised over


the period of the borrowings. On early buyback, conversion or repayment of
borrowings, any unamortised expenditure is fully written off in that year.

(b) Separation and Other Costs:

Special Payments/Pensions under Voluntary Retirement Schemes.

The liability is amortised by the year ended March, 2010 from the month in
which the liability is incurred.

(G) Foreign Exchange Transactions:

Transactions in foreign currencies (other than firm commitments and highly


probable forecast transactions) are recorded at the exchange rates
prevailing on the date of transaction. Monetary items are translated at the
year-end rates. The exchange difference between the rate prevailing on the
date of transaction and on the date of settlement as also on translation of
monetary items at the end of the year (other than those relating to long
term foreign currency monetary items) is recognised as income or expense,
as the case may be.

Exchange differences relating to long term foreign currency monetary items,


to the extent they are used for financing the acquisition of fixed assets
are added to or subtracted from the cost of such fixed assets and the
balance accumulated in 'Foreign Currency Monetary Item Translation
Difference Account' and amortised over the balance term of the long term
monetary item or 311 March, 2011 whichever is earlier

Any premium or discount arising at the inception of a forward exchange


contract is recognised as income or expense over the life of the contract,
except in the case where the contract is designated as a cash flow hedge.

(H) Derivative Instruments and Hedge Accounting:

The Company uses foreign currency forward contracts and currency options to
hedge its risks associated with foreign currency fluctuations relating to
certain firm commitments and highly probable forecast transactions. The
Company does not hold derivative financial instruments for speculative
purposes. The Company has applied to such contracts the hedge accounting
principles set out in Accounting Standard 30 'Financial Instruments :
Recognition and Measurement' (AS 30) by marking them to market.

Changes in the fair value of the contracts that are designated and
effective as hedges of future cash flows are recognised directly in Hedging
Reserve Account and the ineffective portion is recognised immediately in
the Profit and Loss Account.

(I) Revenue Recognition:

Sales of products and services are recognised when the products are shipped
or services rendered including export benefits thereon.

Dividend from investments are recognised in the Profit and Loss Account
when the right to receive payment is established.

(J) Government Grants:

The Company is entitled to various incentives from a State Government, such


as grants by way of refund of octroi duty paid by the Company for its
manufacturing unit located in a developing region. In view of the
uncertainty in respect of the collection of these grants, such grants are
accounted for as and when the disbursements are received.
(K) Employee Benefits:

Defined Contribution Plan/Defined Benefit Plan/Long term Compensated


Absences.

Company's contributions paid/payable during the year to Superannuation


Fund, ESIC and Labour Welfare Fund are recognised in the Profit and Loss
Account.

Contributions to Provident Fund are made to a Trust administered by the


Company and are charged to Profit and Loss Account as incurred.

The Company is liable for the contribution and any shortfall in interest
between the amount of interest realised by the investment and the interest
payable to members at the rate declared by the Government of India.

Company's liability towards gratuity, long term compensated absences, post


retirement medical benefit and post retirement housing allowance schemes
are determined by independent actuaries, using the projected unit credit
method. Past services are recognised on a straight line basis over the
average period until the benefits become vested. Actuarial gains and losses
are recognised immediately in the statement of Profit and Loss Account as
income or expense. Obligation is measured at the present value of estimated
future cash flows using a discounted rate that is determined by reference
to the market yields at the Balance Sheet date on Government Bonds where
the currency and terms of the Government Bonds are consistent with the
currency and estimated terms of the defined benefit obligation.

(L) Borrowing Costs:

All borrowing costs are charged to the Profit and Loss Account except

(a) Borrowing costs that are attributable to the acquisition or


construction of assets that necessarily take a substantial period of time
to get ready for their intended use, which are capitalised as part of the
cost of such assets.

(b) Expenses incurred on raising long term borrowings are amortised over
the period of borrowings. On early buyback, conversion or repayment of
borrowings, any unamortised expenditure is fully written off in that year.

(M) Redemption Premium:

Premium payable on redemption of Bonds/Debentures is fully provided and


charged to Securities Premium Account (Net of Tax) in the year of issue.

(N) Product Warranty

In respect of warranties given by the Company on sale of certain products,


the estimated costs of these warranties are accrued at the time of sale.
The estimates for accounting of warranties are reviewed and revisions are
made as required.

(0) Leases:

The Company's significant leasing arrangements are in respect of operating


leases for premises (residential, office, stores, godowns, computer
hardware, etc.). The leasing arrangements, which are not non-cancellable,
range between eleven months and five years generally, and are usually
renewable by mutual consent on agreed terms. The aggregate lease rentals
payable are charged as rent.

(P) Taxes on Income:

Current tax is determined as the amount of tax payable in respect of


taxable income for the year. Deferred tax is recognised, subject to
consideration of prudence, on timing differences, being the difference
between taxable income and accounting income that originate in one period
and are capable of reversal in one or more subsequent periods. Deferred tax
assets arising on account of unabsorbed depreciation or carry forward of
tax losses are recognised only to the extent that there is virtual
certainty supported by convincing evidence that sufficient future tax
income will be available against which such deferred tax assets can be
realised.

(Q) Excise duty recovered on sales is included in 'Sales - Traded and


Manufactured Goods'. Excise duty in respect of Finished Goods manufactured
is shown separately as an item of expense and included in valuation of
finished goods produced.

2. Share Capital:

Issued and Subscribed Capital include

(a) 3,33,618 Ordinary (Equity) Shares of Rs. 5 each (2009 : 1,66,809


Ordinary (Equity) Shares of Rs. 10 each) allotted as fully paid-up pursuant
to a contract without payment having been received in cash.

(b) 34,12,15,008 Ordinary (Equity) Shares of Rs. 5 each (2009 :


17,06,07,504 Ordinary (Equity) Shares of Rs. 10 each) allotted as fully
paid-up by way of Bonus Shares by capitalisation of Securities Premium
Account and Reserves.

(c) 25,13,124 Ordinary (Equity) Shares of Rs. 5 each (2009 : 12,56,562


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with the Union Bank of India Limited. Of these, 27,474
Ordinary (Equity) Shares of Rs. 5 each (2009 : 13,737 Ordinary (Equity)
Shares of Rs. 10 each) were issued on conversion of 41,211 8% Bonds.

(d) 25,96,404 Ordinary (Equity) Shares of Rs. 5 each (2009 : 12,98,202


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with International Tractor Company of India Limited without
payment having been received in cash.

(e) 3,76,332 Ordinary (Equity) Shares of Rs. 5 each (2009 : 1,88,166


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with Mahindra Spicer Limited without payment having been
received in cash.

(f) 19,46,400 Ordinary (Equity) Shares of Rs. 5 each (2009 : 9,73,200


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with Mahindra Nissan Allwyn Limited without payment having
been received in cash.

(g) 2,56,55,104 Ordinary (Equity) Shares of Rs. 5 each (2009 : 1,28,27,552


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with Mahindra Holdings and Finance Limited without payment
having been received in cash.

(h) 4,05,03,800 Ordinary (Equity) Shares of Rs. 5 each (2009 : 2,02,51,900


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with Punjab Tractors Limited without payment having been
received in cash.

3. Reserves and Surplus

Rupees crores

2010 2009
(a) Movements during the year

(i) Securities Premium Account

Additions, arising out of exercise of options 2.07 1.02

Additions, arising out of issue of Ordinary


(Equity) Shares to M&M ESOP Trust 71.40 -

Premium on conversion of Debentures and Bonds 690.60 -

Reversal of Premium on buyback of Zero Coupon


Convertible Bonds [Net of Tax of Rs. Nil
(2009 : Rs. 5.07 crores)] - 9.84

Reduction of provision for premium on


redemption of Zero Coupon Convertible Bonds
[Net of Tax of Rs. 10.30 crores
(2009 : Rs. Nil)] 20.72 -

784.79 10.86

Applied, in accordance with Section 78 of


the Companies Act, 1956, towards Writing-off
of share and bonds/debenture issue expenses
[Net of Tax of Rs. 0.47 crores (2009 :
Rs. 0.54 crores)] 5.88 4.95

Effect of tax rate change on amounts debited


to Securities Premium Account 0.71 -

Increase of provision for premium on


redemption of Zero Coupon Convertible
Bonds [Net of Tax of Rs. Nil
(2009 : Rs. 20.20 crores )] - 39.25

6.59 44.20

(ii) Revaluation Reserve

Adjusted against depreciation for


the year [Note 1(B)(b)(iii)] 0.41 0.38

Adjusted in respect of revalued


Buildings demolished 0.01 -

0.42 0.38

(b) The Guidance Note on Accounting for Employee Share-based Payments


issued by The Institute of Chartered Accountants of India requires that
shares allotted to a trust but not transferred to employees be reduced from
Share Capital and Reserves. Accordingly, the Company has reduced the Share
Capital by Rs. 3.63 crores (2009 : Rs. 3.10 crores), Securities Premium
Account by Rs. 84.29 crores (2009 : Rs. 15.20 crores) for the 72,63,296
shares of Rs. 5 each (2009 : 31,02,653 shares of Rs. 10 each) held by the
trust pending transfer to the eligible employees.

The Share Capital of the Company has also been reduced and the General
Reserve increased by Rs. 2.63 crores (2009 : Rs. 3.10 crores) for the
52,63,296 bonus shares of Rs. 5 each (2009 : 31,02,653 bonus shares of Rs.
10 each) issued by the Company in September, 2005 to the trust but not yet
transferred by the trust to the employees. The above monies which are
treated as advance received from it, is included under current liabilities.

(c) Consequent to the announcement issued by The Institute of Chartered


Accountants of India dated 2 9th March, 2008 in respect of forward exchange
contracts and currency and interest rate swaps, the Company has applied the
Hedge Accounting principles set out in the Accounting Standard (AS) 30
'Financial Instruments : Recognition and Measurement'. Accordingly, such
contracts are marked to market and the loss aggregating Rs. 0.91 crores
(Net of Tax of Rs. 0.45 crores) [2009 : Rs. 434.19 crores (Net of Tax of
Rs. 223.57 crores)] arising consequently on contracts that were designated
and effective as hedges of future cash flows has been recognized directly
in the Hedging Reserve Account.

4. Loans:

(a) Debentures are redeemable as follows

(i) Rs. 200.00 crores on 9th January, 2011.

(ii) Rs. 400.00 crores in three equal instalments from 12 th December,


2013.
(iii) Rs. 0.01 crores of 12.50% Debentures and Zero Interest Bonds on
receipt of balance amount due on allotment.

(b) (i) Debentures of Rs. 600.01 crores are secured by a pari-passu charge
on immovable properties of the Company both present and future, subject to
certain exclusions and are also secured by pari-passu charge on the movable
properties of the Company including movable machinery, machinery spares,
tools and accessories, both present and future.

(ii) Loans and Advances on cash credit accounts from the Company's bankers
are secured by a first charge on a pari-passu basis on the whole of the
current assets of the Company namely inventories, book debts, outstanding
monies, receivables, claims, etc. both present and future.

(c) The following amounts are repayable/convertible by 31st March, 2011

(i) Debenture holders : Rs. 200.00 crores


(2009 : Rs. 700.00 crores)

(ii) Foreign currency loans from Banks:

(a) Secured : Rs. Nil


(2009 : Rs. 253.70 crores)

(b) Unsecured : Rs. 175.86 crores


(2009 : Rs. 101 .48 crores)

(iii) Fixed Deposit holders : Rs. 78.15 crores


(2009 : Rs. 4.88 crores)

(iv) Rupee Loans:

(a) From banks : Rs. Nil


(2009 : Rs. 80.00 crores)

(b) From financial institutions : Rs. 2.60 crores


(2009 Rs. Nil)

(c) From others : Rs. 8.08 crores


(2009 Rs. 10.13 crores)

The Company had issued during the year ended 31st March, 2007, Zero Coupon
Foreign Currency Convertible Bonds (Bonds 2011 aggregating US$ 200 million,
at par The bond holders have an option to convert these bonds into Equity
Shares with full voting rights or Global Depository Receipts (GDRs)
determined at an initial conversion price of Rs. 461.02 per share of Rs. 5
each (2009 : Rs. 922.04 per share of Rs. 10 each) with fixed exchange rate
of conversion of Rs. 44.42 = US$ 1, at any time on or after 7th May, 2006
upto 7th March, 2011.

The Bonds 2011 may be redeemed, in whole but not in part, at the option of
the Company at any time on or after 13th April, 2008 subject to
satisfaction of certain conditions. Unless previously converted, redeemed
or purchased and cancelled, the bonds fall due for redemption on 14th
April, 2011 at 128.03 per cent of their principal amount. Bonds 2011 of the
face value of US$ 10.50 million have been bought back and cancelled in the
previous year. Upto 31st March, 2010, none of the Bonds 2011 have been
converted into equity shares/GDRs.

The net proceeds of Rs. 48.46 crores, unutilised as at 31st March, 2010, is
disclosed under Cash and Bank balances.

The Company's 93,95,974 Unsecured Fully and Compulsorily Convertible


Debentures (FCD's) having face value of Rs. 745 per FCD issued during the
year ended 31st March, 2009, were compulsorily converted on 27th January,
2010 into 93,95,974 Ordinary (Equity) Shares of Rs. 10 each [before sub-
division of the Ordinary (Equity) Shares] of the Company at a premium of
Rs. 735 per share. Consequent to the conversion the Share Capital and
Securities Premium Account of the Company have increased by Rs. 9.40 crores
and Rs. 690.60 crores respectively.
5. (a) Buildings include Rs. * crores (2009 : Rs. * crores) being the value
of shares in co-operative housing societies.

(b) Additions to fixed assets and capital work-in-progress include:

(i) Interest capitalised during the year Rs. 26.56 crores (2009 : Rs. 15.63
crores).

(ii) Foreign exchange fluctuation capitalised during the year Rs. 117.79
crores credit (Net) [2009 : Rs. 172.97 crores debit (Net)].

(c) (i) The depreciation charge for the year excludes:

(a) An amount of Rs. 0.41 crores (2009 : Rs. 0.38 crores), representing
depreciation on the increase due to revaluation of Land and Buildings
transferred from the Revaluation Reserve.

(b) An amount of Rs. 0.01 crores (2009 : Rs. Nil), representing


depreciation on revalued buildings demolished during the year.

(ii) The net credit to the Profit and Loss Account consequent to the above
adjustments to the Revaluation Reserve is Rs. 0.42 crores (2009 : Rs. 0.38
crores).

6. Cash and Bank Balances include balances lying with non-scheduled banks

In Current Account

Rupees crores

Bank Bank of Bank of The The


Tejarat, Australia China Municipal Ahmednagar
Tehran Co-op. Merchant's
Bank Ltd.Co-op.
Bank Ltd.

Balance as at
31st March, 2010 * 6.39 * 5.14 *

Balance as at
31st March, 2009 * 3.34 0.09 2.13 *

Maximum balance
during the year *11.91 0.59 5.68 *

Maximum balance* 9.51 1.47 3.23 *


during the
previous year

7. Loans and Advances include:

(a) Fixed/Call deposits with/loans to limited companies Rs. 525.72 crores


(2009 : Rs. 411 .14 crores) including Rs. 519.23 crores (2009 Rs. 404.65
crores) with/to subsidiaries.

(b) Amounts paid towards joint development of property Rs. Nil (2009 :
Rs.1.54 crores).

8. Micro, Small and Medium enterprises have been identified by the Company
on the basis of the information available. Total outstanding dues of Micro
and Small enterprises, which are outstanding for more than the stipulated
period are given below:

Rupees crores

2010 2009

(a) Dues remaining unpaid as at 31st March

Principal 0.89 2.42


Interest on the above 0.07 0.05

(b) Interest paid in terms of Section 16


of the Act, along with the amount of
payment made to the supplier beyond the
appointed day during the year

Principal paid beyond the appointed date 7.39 18.12

Interest paid in terms of Section 16 of the Act - 0.03

(c) Amount of interest due and payable for


the period of delay on payments made beyond
the appointed day during the year 0.11 0.15

(d) Further interest due and payable even in


the succeeding years, until such date when the
interest due as above are actually paid to the
small enterprises 0.32 0.13

(e) Amount of interest accrued and remaining


unpaid as at 31st March 0.50 0.32

9. (a) Provision - Others Rs. 219.66 crores (2009 : Rs. 167.45 crores)
includes provision for contingencies Rs. 3.58 crores (2009 Rs. 8.25
crores), provision for warranty Rs. 179.61 crores (2009 : Rs. 137.45
crores), provision for post retirement medical benefits Rs. 9.65 crores
(2009 : Rs. 4.84 crores), provision for post retirement housing allowance
Rs. 10.99 crores (2009 : Rs. Nil) and provision for diminution in value of
certain assets substantially retired from active use Rs. 15.83 crores (2009
: Rs. 16.89 crores). Provision for contingencies is in respect of labour
demands under negotiations at certain locations of the Company. Provision
for warranties relates to warranty provision made in respect of sale of
certain products, the estimated cost of which is accrued at the time of
sale. The products are generally covered under a free warranty period
ranging from 6 months to 3 years. denotes amounts less than Rs. 50,000.

(b) The movement in provisions for warranty, contingency and retired assets
is as follows:

Rupees crores

Warranty Contingency Retired assets


2010 2009 2010 2009 2010 2009

Balance as at 137.45 106.42 8.25 8.16 16.89 17.01


1st April

Add On Amalgamation
during the year - 0.25 - - - -

Add Provision made


during the year 105.59 85.05 3.58 5.41 - -

Less Utilisation
during the year 63.43 54.27 8.25 5.32 1.06 0.12

Balance as at
31st March 179.61 137.45 3.58 8.25 15.83 16.89

10.(a) Dividends on other investments include Rs. 45.56 crores (2009 :


Rs.44.89 crores) in respect of current investments and Rs. 3.91 crores
(2009 : Rs. 1.32 crores) in respect of long term investments.

(b) Profit on sale of investments (Net) includes profit on disposal of


current investments (Net) Rs. 1.53 crores (2009 : Rs. 14.73 crores), and
profit on disposal of long term investments (Net) Rs. 8.87 crores (2009 :
Rs. 38.49 crores).

(c) Interest on Government Securities, Debentures and Bonds includes tax


deducted at source Rs. 0.05 crores (2009 : Rs. 0.11 crores) and comprise
Rs. 0.50 crores (2009 : Rs. 0.50 crores) and Rs. 4.18 crores (2009 Rs. 4.26
crores) in respect of long term and current investments respectively.

(d) Interest received - others includes tax deducted at source Rs. 12.21
crores (2009 Rs. 15.11 crores).

11. Repairs and Maintenance includes machinery spares consumed Rs. 33.85
crores (2009 Rs. 26.25 crores) but does not include items included under
Consumption of Raw Materials and Bought-out Components and amounts charged
to salaries and wages (amounts not ascertained).

12. Miscellaneous Expenses include:

(a) Amounts paid/payable to Auditors (Net of service tax where applicable)

Rupees crores

Statutory Cost
Auditors Auditors

(i) Audit Fees 1.24 0.03

1.08 0.02
(ii) Company Law matters

(iii) Other Services 0.66 -

0.63 -

(iv) Reimbursement of expenses 0.01 -

0.05 -

1.91 0.03

1.76 0.02

(b) An amount of Rs. 1.44 crores (2009 : Rs. 0.96 crores) payable as
commission to non-wholetime Directors - Note 13 and Schedule XV.

13. Managerial remuneration for Directors included in the Profit and Loss
Account is Rs. 8.19 crores (2009 Rs. 6.29 crores) including Directors' fees
of Rs. 0.14 crores (2009 : Rs. 0.09 crores), perquisites Rs. 1.68 crores
(2009 : Rs. 1.27 crores) and commission Rs. 4.53 crores (2009 : Rs. 3.16
crores) (See Schedule XV) and excluding charge for gratuity, provision for
leave encashment and post retirement medical benefit as separate actuarial
valuation figures are not available. The above perquisites include
amortisation of Employees Stock Options amounting to Rs. 0.06 crores (2009
: Rs. 0.09 crores).

14. Employee Benefits:

General description of defined benefit plans

Gratuity

The Company operates a gratuity plan covering qualifying employees. The


benefit payable is the greater of the amount calculated as per the Payment
of Gratuity Act or the Company scheme applicable to the employee. The
benefit vests upon completion of five years of continuous service and once
vested it is payable to employees on retirement or on termination of
employment. In case of death while in service, the gratuity is payable
irrespective of vesting. The Company makes annual contribution to the group
gratuity scheme administered by the Life Insurance Corporation of India
through its Gratuity Trust Fund.

* denotes amounts less than Rs. 50,000

Post retirement medical


The Company provides post retirement medical cover to select grade of
employees to cover the retiring employee and their spouse upto a specified
age through mediclaim policy on which the premiums are paid by the Company.
The eligibility of the employee for the benefit as well as the amount of
medical cover purchased is determined by the grade of the employee at the
time of retirement. Post retirement housing allowance The Company operates
a post retirement benefit scheme for a certain cadre of employees in which
a monthly allowance determined on the basis of the last drawn basic salary
at the time of retirement, is paid to the retiring employee in lieu of
housing.

Defined benefit plans - as per actuarial valuation on 31st March, 2010

Rupees Crores

Funded Plan Unfunded Plans


Gratuity Post retirement Post retirement
medical housing
allowance

2010 2009 2010 2009 2010 2009

1. Expense recognised
in the Statement of
Profit and Loss
Account for the year
ended 31st March

1. Current service
cost 19.17 16.59 0.37 0.22 1.50 -

2. Interest cost 23.91 18.30 0.40 0.24 0.84-

3. Expected return
on plan assets (16.23) (18.16) - - --

4. Actuarial
(Gain)/Loss (7.69) 33.40 4.32 1.81 (1.77)-

5. Past service cost 12.15 - - - --

6. Total expense
included in
Personnel
(Schedules XI) 31.31 50.13 5.09 2.27 0.57-

7. Actual return
on plan assets 20.75 18.16 - - --

II. Net Asset/


(Liability)
recognised in the
Balance Sheet
as at 31st March

1. Present value
of defined benefit
obligation as at
31st March 334.20 300.61 9.65 4.84 10.99-

2. Fair value of
plan assets as
at 31st March 266.10 206.14 - - --

3. Net Asset/
Wability) as at
31st March (68.10) (94.47) (9.65) (4.84) (10.99)-

III. Change in the


obligation during
the year ended
31st March

1. Present value
of defined benefit
obligation at
the beginning of
the year 300.61 201.76 4.84 2.79 10.42-

2. Addition on
account of
amalgamation - 40.90 - - - -

3. Current
service cost 19.17 16.59 0.37 0.22 1.50 -

4. Interest cost 23.91 18.30 0.40 0.24 0.84 -

5. Actuarial
(Gain)/Loss (3.17) 33.40 4.32 1.81 (1.77) -

6. Past
service cost 12.15 - - - --

7. Benefit payments (18.47) (10.34) (0.28) (0.22) --

8. Present value
of defined benefit
obligation at the
end of the year 334.20 300.61 9.65 4.84 10.99-

IV. Change in fair


value of assets
during the year
ended 31st March

1. Fair value of
plan assets at
the beginning
of the year 206.14 163.58 - - --

2. Addition on
account of
amalgamation - 29.16 - - --

3. Expected return
on plan assets 16.23 18.16 - - --

4. Actuarial
Gain/(Loss) 4.52 - - - --

5. Contributions
by employer
(including benefit
payments
recoverable) 57.68 5.58 0.28 0.22 --

6. Benefit payments (18.47) (10.34) (0.28) (0.22) --

7. Fair value of
plan assets at the
end of the year 266.10 206.14 - - --

8. Actual return
on plan assets 20.75 18.16 - - --

V. The major
categories of
plan assets as
a percentage
of total plan
Insurer managed
funds 100% 100% - - - -

VI. Actuarial
assumptions

1. Discount rate 8.45% 7.75% 8.45% 7.75% 8.45%-

2. Expected rate
of return on plan
assets 7.50% 7.50% - - --

3. Attrition rate 5.00% 5.00% 5.00% 5.00% --

4. Medical premium
inflation - 5.00% 5.00% - --

VII. Effect of one percentage One percentage point One percentage


point change in the assumed increase in medical point decrease
medical inflation rate inflation rates in medical
inflation rates

2010 2009 2010 2009

1. Effect on the aggregate


service and interest cost
of post employment medical
benefits 0.25 0.14 (0.20) (0.11)

2. Effect on the accumulated


post employment medical
benefits obligations 1.36 0.72 (1.10) (0.60)

VIII. Experience Adjustments Period ended

2010 2009 2008 2007

Gratuity

1. Defined benefit obligation 334.20 300.61 201.76 184.43

2. Fair value of plan assets 266.10 206.14 163.58 127.04

3. Surplus/(Deficit) (68.10) (94.47) (38.18) (57.39)

4. Experience adjustment on
plan liabilities [(Gain)/Loss] 7.93 5.87 4.55 -

5. Experience adjustment on
plan assets [Gain/(Loss)] 4.44 - - -

Post retirement medical

1. Defined benefit obligation 9.65 4.84 2.79 3.22

2. Plan assets - - - -

3. Surplus/(Deficit) (9.65) (4.84) (2.79) (3.22)

4. Experience adjustment on
plan liabilities [(Gain)/Loss] 5.21 1.24 (0.55) 0.07
Post retirement housing
allowance

1. Defined benefit obligation 10.99 - - -

2. Plan assets - - - -

3. Surplus/(Deficit) (10.99) - - -
4. Experience adjustment
on plan liabilities
[(Gain)/Loss] 0.15 - - -

The Payment of Gratuity (Amendment) Bill 2010 amending the maximum gratuity
payable under The Payment of Gratuity Act 1972 from Rs. 3.50 lakhs to
Rs.10.00 lakhs has been passed by both houses of Parliament in May, 2010
and will come into effect from a date to be notified by the Central
Government. Since the said Bill has been substantively enacted, the Company
has given effect to the same in valuing its actuarial liability for
gratuity as at 31st March, 2010. Due to this change in the maximum limit
under the Act, the profit after tax for the current year is lower by Rs.
8.02 crores.

On account of defined contribution plans the Company's contribution to


Provident Fund and Superannuation Fund aggregating Rs. 66.15 crores (2009 :
Rs. 57.78 crores) has been recognized in the statement of Profit and Loss
Account under the head personnel.

The post retirement housing allowance scheme of the Company for select
cadre of employees has been introduced in the current year and the opening
liability as at 1st April, 2009 of Rs. 10.42 crores has been recognized as
an expense in the current year

The expected rate of return on plan assets is based on the average long
term rate of return expected on investments of the fund during the
estimated term of obligation.

The estimate of future salary increases, considered in actuarial valuation,


takes account of inflation, seniority, promotion and other relevant
factors, such as supply and demand in the employment market.

15. The Company has allotted 55,24,219 and 10,00,000 Ordinary (Equity)
Shares of Rs. 10 each in the years ended 31st March, 2002 and 31st March,
2010 respectively to the Mahindra & Mahindra Employees' Stock Option Trust
set up by the Company. The trust holds these shares for the benefit of the
employees and issues them to the eligible employees as per the
recommendation of the Compensation Committee.

In respect of options granted prior to 29th September, 2006, the equity


settled options vest one year from the date of the grant and are
exercisable on specified dates in 3 tranches within a period of 5 years
from the date of vesting. The number of options exercisable in each tranche
is between the minimum of 100 and a maximum of 1/3rd of the options vested,
except in case of the last date of exercise, where the employee can
exercise all the options vested but not exercised till that date.

Options granted on or after 29th September, 2006 vest in 4 equal


instalments on the expiry of 12 Months, 24 Months, 36 Months and 48 Months
from the date of grant. The options may be exercised on the date of vesting
and on specified dates within 5 years from the date of vesting. Number of
vested options exercisable on each specified date is subject to a minimum
of 50 or number of options vested whichever is lower, except in case of the
last date of exercise, where the employee can exercise all the options
vested but not exercised till that date.

The compensation costs of stock options granted to employees are accounted


by the Company using the intrinsic value method.

Summary of Stock Options No. of stock Weighted average


options exercise price
(Rs.)

Options outstanding on 1st April, 2009 56,15,921 556.55

Options granted during the year 4,01,770 724.00

Options forfeited/lapsed during the year 1,58,167 585.81

Options exercised during the year 9,42,009 413.71


Additional options pursuant to
sub-division of shares 49,17,515 298.33

Options outstanding on 31st March, 2010 98,35,030 298.33

Options vested but not exercised on


31st March, 2010 35,38,627 300.57

Average share price on the date of


exercise of the options are as under:

Date of exercise Average share


price (Rs.)

11th June, 2009 790.70


14th June, 2009 803.80
31st July, 2009 863.65
13th August, 2009 793.25
29th September, 2009 858.85
26th October, 2009 928.90

Information in respect of options outstanding as at 31st March, 2010.

Range of exercise price Number of options Weighted average


remaining life

Rs. 107.50 - Rs. 113.50 5,29,662 1.14 yrs

Rs. 180.50 35,484 1.57 yrs

Rs. 308.00 - Rs. 310.00 12,47,066 3.86 yrs

Rs. 381.00 29,91,922 4.80 yrs

Rs. 250.00 42,69,056 6.11 yrs

Rs. 362.00 7,61,840 7.09 yrs

The fair value of options granted during the year on 4th November, 2009 is
Rs. 414.84 per share.

The fair value has been calculated using the Black Scholes Options Pricing
Model and the significant assumptions made in this regard are as follows:

Grant dated 4-Nov-09

Risk free interest rate 6.41%


Expected life 2.50 Years
Expected volatility 53.56%
Expected dividend yield 2.24%
Exercise price (Rs.) 724.00
Stock price (Rs.) 929.50

In respect of Options granted under the Employee Stock Option plan, in


accordance with guidelines issued by SEBI, the accounting value of the
options is accounted as deferred employee compensation, which is amortised
on a straight line basis over the period between the date of grant of
options and eligible dates for conversion into equity shares. Consequently,
salaries, wages, bonus, etc. includes Rs. 3.54 crores (2009 Rs. 3.57
crores) being the amortisation of deferred employee compensation, after
adjusting for reversals on account of options lapsed.

Had the Company adopted fair value method in respect of options granted on
or after 1st April, 2005, the employee compensation cost would have been
higher by Rs. 26.44 crores, Profit after tax lower by Rs. 26.44 crores and
the basic and diluted earning per share would have been lower by Rs. 0.48 &
Rs. 0.44 respectively.

16. The estimated amount of contracts remaining to be executed on capital


account and not provided for as at 31st March, 2010 is Rs. 781.83 crores
(2009 : Rs. 756.32 crores).
17. The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) by its
order dated 7th December, 2009 has rejected the Company's appeal against
the order dated 3 oth March, 2005 passed by the Commissioner of Central
Excise (Adjudication), Navi Mumbai confirming the demand made on the
Company for payment of differential excise duty (including penalty) of Rs.
304.11 crores in connection with the classification of Company's Commander
range of vehicles, during the years 1991-1996. Whilst the Company had
classified the Commander range of vehicles as 10-seater attracting a lower
rate of excise duty, the Commissioner of Central Excise (Adjudication),
Navi Mumbai, has held that these vehicles could not be classified as 10-
seater as they did not fulfil the requirement of 10-seater vehicles, as
provided under the Motor Vehicles Act, 1988 (MVA) and Maharashtra Motor
Vehicles Rules, 1989 (MMVR) and as such attracted a higher rate of excise
duty.

In earlier collateral proceedings on this issue, the CESTAT had by an Order


dated 19th July, 2005 settled the controversy in the Company's favour. The
CESTAT had accepted the Company's submission that MVA and MMVR could not be
referred to for determining the classification for the purpose of levy of
excise duty and rejected the Department's appeal against the Order of the
Collector, Central Excise classifying the Commander range of vehicles as
10-seater The Department's appeal against the CESTAT Order dated 19th July,
2005 is pending before the Supreme Court of India but the operation of the
Order has not been stayed.

The Company has filed an appeal against the aforesaid order dated 7th
December, 2009 inter alia, on the grounds that the MVA and MMVR cannot be
referred to for the purpose of determining the excise classification, as
has been repeatedly held by various judicial fora, including the Supreme
Court and particularly by CESTAT vide its order dated 19th July, 2005 in
the Company's own case referred to above.

Without prejudice to the grounds raised in the appeal, the Company has paid
an amount of Rs. 40.00 crores in January, 2010. Pending admission of the
Company's appeal, the Supreme Court has passed an interim order staying the
recovery of the balance amount till further orders.

In another case relating to Armada range of vehicles manufactured during


the years 1992 to 1996, by the Company at its Nashik facility, the
Commissioner of Central Excise, Nashik passed an order dated 2 oth March,
2006 confirming a demand of Rs. 24.75 crores, on the same grounds as
adopted for Commander range of vehicles. The CESTAT has given an
unconditional stay against this order, which is yet to be finally heard by
the Tribunal.

The Company strongly believes, based on legal advise it has received, that
the CESTAT order dated 7th December, 2009 which is under appeal in the
Supreme Court is not sustainable in law and hence the Company has a very
good chance of succeeding in the matter As such, the Company does not
expect any liability on this account. However, in view of the CESTAT order,
the Company has reflected the above amount aggregating Rs. 328.86 crores
and the interest of Rs. 168.05 crores accrued on the same upto 31st March,
2010, as a Contingent Liability in the Accounts and the same is included in
the amounts disclosed under Note 18 (b)(i).

18. Contingent Liability:

(a) Guarantees given by the Company:

Rupees crores

Amount of guarantees Outstanding amounts


against the guarantees

2010 2009 2010 2009

For employees 1.05 1.05 * *

For other companies 327.61 168.46 286.91 163.67


* denotes amount less than Rs. 50,000

(b) Claims against the Company not acknowledged as debts comprise of:

(i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company
relating to issues of applicability and classification aggregating
Rs.968.22 crores (Net of Tax : Rs. 698.04 crores) [2009 : Rs. 386.32 crores
(Net of Tax : Rs. 274.20 crores)].

i) Other matters (excluding claims where amounts are not ascertainable) :


Rs. 17.78 crores (Net of Tax : Rs. 12.41 crores) [2009 Rs. 17.37 crores
(Net of Tax : Rs. 12.14 crores)].

(iii) Claims on capital account : Rs. 1.18 crores (2009 : Rs. 1.18 crores).

(c) Uncalled liability on equity shares partly paid Rs. 10.50 crores (2009
: Rs. 10.50 crores).

(d) Taxation matters:

(i) Demands against the Company not acknowledged as debts and not provided
for, relating to issues of deductibility and taxability in respect of which
the Company is in appeal and exclusive of the effect of similar matters in
respect of assessments remaining to be completed:

- Income-tax : Rs. 181.07 crores (2009 : Rs. 168.25 crores).

(ii) Items in respect of which the Company has succeeded in appeal, but the
Income-tax Department is pursuing/likely to pursue in appeal/reference and
exclusive of the effect of similar matters in respect of assessments
remaining to be completed:

Income-tax matters : Rs. 70.58 crores (2009 : Rs. 58.63 crores).


Surtax matters : Rs. 0.13 crores (2009 : Rs. 0.13 crores).

(e) Bills discounted not matured Rs. Nil (2009 : Rs. 59.55 crores).

19. Research and Development expenditure:

(a) In recognised Research and Development units:

(i) debited to the Profit and Loss Account, including certain expenditure
based on allocations made by the Company, aggregate Rs.248.25 crores (2009
: Rs. 220.09 crores) [excluding depreciation and amortisation of Rs. 81.03
crores (2009 : Rs. 56.19 crores)].

(ii) Development Expenditure incurred during the year Rs. 131.28 crores
(2009 : Rs. 128.94 crores).

(iii) Capitalisation of assets Rs. 41.64 crores (2009 : Rs. 15.64 crores).

(b) In other units:

(i) debited to the Profit and Loss Account, including certain expenditure
based on allocations made by the Company, aggregate Rs.25.89 crores (2009 :
Rs. 18.69 crores) [excluding depreciation and amortisation of Rs. 2.25
crores (2009 : Rs. 1.50 crores)].

(ii) Development Expenditure incurred during the year Rs. 38.59 crores
(2009 : Rs. 7.50 crores).

(iii) Capitalisation of assets Rs. 4.34 crores (2009 : Rs. 3.56 crores).

20. The net difference in foreign exchange loss debited to the Profit and
Loss Account is Rs. 113.48 crores (2009 Rs. 237.20 crores).

21. Exceptional items of Rs. 90.75 crores (2009 : Rs. 10.27 crores)
comprise of:

(a) Profit on sale of certain long term investments Rs. 90.75 crores (2009:
Rs. Nil).
(b) Surplus on transfer of Logistics business Rs. Nil (2009 : Rs. 10.27
crores).

22. The components of Deferred Tax Liability and Assets as at 31st March,
2010 are as under:

Rupees crores

2010 2009

Deferred Tax Liability

(i) On fiscal allowances on fixed assets 296.12 322.06

ii) Others 126.38 71.32

422.50 393.38

Deferred Tax Assets:

(i) On Provision for compensated absences 86.41 78.62

(ii) On Provision for doubtful debts/advances 36.54 27.33

(iii) On Premium on redemption of Zero


Coupon Convertible Bonds 18.10 40.08

(iv) On Provision for employee benefits 13.69 17.61

(v) Loss on mark to market of forward


contracts 0.45 223.57

(vi) Others 26.98 24.44

182.17 411.65

Net Deferred Tax (Asset)/Liability 240.33 (18.27)

23. Scheme of Amalgamations:

(a) In the previous year, pursuant to the Scheme of Amalgamation (the


scheme) as approved by the shareholders of the Company and subsequently
sanctioned by the Honourable High Court of Bombay on 18th July, 2008, the
entire business and all the assets and liabilities, duties and obligations
of Mahindra Holdings and Finance Limited (MHFL) (an erstwhile wholly owned
subsidiary of the Company) were transferred to and vested in the Company,
with effect from 11th February, 2008. The excess of the value of the net
assets of MHFL over the face value of the shares allotted, the face value
of the shares cancelled and the amount of General Reserve and Profit and
Loss Account of MHFL transferred to the Company was credited to the
existing Investment Fluctuation Reserve Account.

(b) In the previous year, pursuant to the Scheme of Amalgamation (the


scheme) as approved by the shareholders of the Company and subsequently
sanctioned by the Honourable High Court of Bombay and the Honourable High
Court of Punjab & Haryana on 9th January, 2009 and 16th January, 2009
respectively, the entire business and all the assets and liabilities,
duties and obligations of Punjab Tractors Limited (PTL) (an erstwhile
subsidiary of the Company) were transferred to and vested in the Company,
with effect from 1st August, 2008. The excess of the value of the net
assets of PTL over the face value of the shares allotted was credited to
the existing Investment Fluctuation Reserve Account.

(c) Accordingly, the figures for the current year are not strictly
comparable with that of the previous year.

24. Earnings per Share

2010 2009
Amount used as the numerator - Balance
of profit (Rupees crores) 2087.75 867.51

Effect on earnings of convertible bonds/


debentures (Gain)/Loss (Rupees crores) 32.64 17.29

Amount used as the numerator for diluted


earnings per share (Rupees crores) 2120.39 884.80

Weighted average number of equity shares


used in computing basic earnings per share 54,98,38,769 54,50,45,894

Effect of potential Ordinary (Equity)


Shares on conversion of bonds/debentures 4,56,31,897 4,44,38,826

Weighted average number of equity shares


used in computing diluted earnings per
share 59,54,70,666 58,94,84,720

Basic Earnings per share (Rs.) (Face


value of Rs. 5 per share) 37.97 15.92

Diluted Earnings per share (Rs.) 35.61 15.01

In the computation of earnings per share for the periods above, the Company
has given effect to the sub-division in March, 2010 of the Company's
Ordinary (Equity) Share of Rs. 10 each into 2 Ordinary (Equity) Shares of
Rs. 5 each.

25. Provision for doubtful debts and advances for the year comprises

Rupees crores

2010 2009

Provision for doubtful debts and advances


made during the year (Net) [including
Rs. Nil (2009 : Rs. 19.52 crores) pursuant
to the schemes of arrangement/amalgamation
approved by the Hon'ble High Courts] 51.02 50.96

Less: Transfer from Investment Fluctuation


Reserve pursuant to the above schemes of
arrangement/amalgamation - 19.52

Total 51.02 31.44

26. Provision for diminution in the value of long term investments for the
year comprises

Rupees crores

2010 2009

Provision for diminution in value of


investments, made during the year (Net)
[including provision of Rs. 70.00 crores
(2009 : Rs. 154.38 crores) pursuant to
the schemes of arrangement/amalgamation
approved by the Hon'ble High Courts] 70.00 154.38

Less: Transfer from Investment


Fluctuation Reserve pursuant to
the above schemes of arrangement/
amalgamation 70.00 154.38

Total - -

27. Donations and contributions include contributions to:

(a) Indian National Congress : Rs. 1.00 crore (2009 Rs. Nil)
(b) Bhartiya Janata Party : Rs. 1.00 crore (2009 Rs. Nil)
(c) Shiv Sena : Rs. 0.50 crores (2009 Rs. Nil)
(d) Nationalist Congress Party : Rs. 0.50 crores (2009 Rs. Nil)
(e) Bihar Pradesh Janata Dal (United) : Rs. 0.25 crores (2009 Rs. Nil)

28. The outstanding derivative instruments as on 31st March, 2010

The Company has taken foreign exchange contracts amounting to US$ 54.80
crores comprising Forward Contracts US$ 32.10 crores (2009 US$ 60.30
crores), Range Forwards US$ 7.20 crores (2009 : US$ 10.20 crores) and US$
15.50 crores (2009 : US$ 33.20 crores) of derivative structures in the form
of 'strips'.

The foreign currency exposures not hedged by derivative instrument or


otherwise as on 31st March, 2010 are - Receivables of ZAR 4.67 crores, EUR
0.58 crores, AUD 0.39 crores, GBP 0.27 crores, NZD 0.02 crores, CHIF *
crores and Payables of JPY 2.20 crores, US$ 1.33 crores, SEK 0.03 crores,
SAR 0.01 crores, SGID * crores (2009 : Receivables of AUD 0.38 crores, RMB
0.01 crores, SEK * crores and Payables of US$ 2.71 crores, EUR 0.03 crores,
GBP * crores, CHF * crores, JPY 2.38 crores, ZAR * crores, SAR 0.04 crores,
SGID * crores, DKK * crores, NZD * crores).

The Company has outstanding borrowings of JPY 1,126.44 crores (2009 : JPY
1,126.44 crores and US$ 9.45 crores) as Foreign Currency Borrowings. The
borrowing of JPY 450.24 crores (2009 : JPY 450.24 crores) has been
completely hedged using cross currency swap structure fixing the liability
into a full fledged rupee liability. The borrowing of JPY 676.20 crores
(2009 : JPY 676.20 crores) has been fixed to a US$ liability using a cross
currency swap structure. The borrowing of US$ Nil (2009 : US$ 2.00 crores)
has been hedged using a forward cover The Company had made an issue of US$
20.00 crores in the form of Foreign Currency Convertible Bonds in April,
2006. Out of this issue, Bonds of value US$ 18.95 crores (2009 : US$ 18.95
crores) are outstanding and have not been hedged.

* Denotes amounts less than 50,000 of respective currency.

29. Related Party Disclosure:

(a) Related parties where control exist

(i) Subsidiaries:

Name of the Company

1. Mahindra Engineering and Chemical Products Limited

2. Mahindra Logisoft Business Solutions Limited (upto 22 nd March, 2010)

3. Mahindra First Choice Wheels Limited

4. Mahindra USA Inc.

5. Mahindra Gujarat Tractor Limited

6. Mahindra (China) Tractor Company Limited

7. Mahindra Shubhlabh Services Limited

8. Mahindra & Mahindra South Africa (Proprietary) Limited

9. Mahindra Europe s.r.l.

10. Mahindra Engineering Services Limited

11. Mahindra Gears & Transmissions Private Limited (formerly


known as Mahindra SAR Transmission Private Limited)

12. Mahindra Overseas Investment Company (Mauritius) Limited

13. Mahindra-BT Investment Company (Mauritius) Limited


14. Mahindra Intertracle Limited

15. Mahindra Steel Service Centre Limited

16. Mahindra Middlecast Electrical Steel Service Centre (FZC)

17. Mahindra Consulting Engineers Limited

18. Mahindra Holidays & Resorts India Limited

19. Mahindra Holidays and Resorts USA Inc.

20. NBS International Limited

21. Mahindra Ugine Steel Company Limited

22. Mahindra & Mahindra Financial Services Limited

23. Mahindra Insurance Brokers Limited

24. Tech Mahindra Limited (upto 22nd March, 2010)

25. Tech Mahindra (Americas) Inc. (upto 22nd March, 2010)

26. Tech Mahindra GmbH (upto 22nd March, 2010)

27. Tech Mahindra (Singapore) Pte. Limited


(upto 22nd March, 2010)

28. Tech Mahindra (Thailand) Limited (upto 22 nd March, 2010)

29. Tech Mahindra Foundation (upto 22nd March, 2010)

30. Bristlecone Limited

31. Bristlecone Inc.

32. Bristlecone (UK) Limited

33. Bristlecone India Limited

34. Bristlecone (Singapore) Pte. Limited

35. Bristlecone GmbH

36. Mahindra Renault Private Limited

37. Mahindra Navistar Autornotives Limited

38. Stokes Group Limited

39. Jensand Limited

40. Stokes Forgings Limited

41. Stokes Forgings Dudley Limited

42. Mahindra Engineering Services (Europe) Limited

43. Mahindra Engineering GmbH (formerly known as Flexion Technologies GmbH)

44. Mahindra Technologies Inc. (Upto loth March, 2010)

45. Mahindra Lifespace Developers Limited

46. Mahindra World City (Jaipur) Limited

47. Mahindra World City Developers Limited

48. Mahindra Infrastructure Developers Limited


49. Mahindra Integrated Township Limited

50. Mahindra World City (Maharashtra) Limited

51. PT Tech Mahindra Indonesia (upto 22 nd March, 2010)

52. Mahindra Forgings International Limited

53. CanvasM Technologies Limited (upto 22 nd March, 2010)

54. CanvasM (Americas) Inc. (upto 22 nd March, 2010)

55. Mahindra Forgings Europe AG

56. Gesenkschmiecle Schneider GmbH

57. JECO-Jellinghaus GmbH

58. Falkenroth Umformtechnik GmbH

59. Mahindra Vehicle Manufacturers Limited

60. Sch6neweiss & Co. GmbH

61. MHR Hotel Management GmbH

62. Mahindra Forgings Limited

63. Mahindra Rural Housing Finance Limited

64. Mahindra Hotels and Residences India Limited

65. Mahindra Forgings Global Limited

66. Bristlecone (Malaysia) SDN.BHD

67. Tech Mahindra (Malaysia) SDN.BHD (upto 22 nd March, 2010)

68. Mahindra Castings Limited (formerly known as Mahindra Castings Private


Limited)

69. Knowledge Township Limited (formerly known as Mahindra Knowledge City


Limited)

70. Mahindra Holdings Limited

71. Mahindra Logistics Limited

72. Tech Mahindra (Beijing) IT Services Limited (upto 22 nd March, 2010)

73. Mahindra Navistar Engines Private Limited

74. Mahindra Residential Developers Limited

75. Mahindra Graphic Research Design s.rl.

76. Mahindra Aerospace Private Limited

77. Heritage Bird (M) SDN.BHD

78. Mahindra First Choice Services Limited

79. Mahindra Bebanco Developers Limited

80. Mahindra Gears Global Limited

81. Mahindra Gears Cyprus Limited

82. Mahindra Gears International Limited

83. Metalcastello s.r.l. (formerly known as Mahindra Metalcastello s.rl.)


84. Industrial Township (Maharashtra) Limited (formerly known as Mahindra
Industrial Township Limited)

85. Metalcastello S.p.A (upto 311t December, 2009)

86. Crest Geartech Private Limited

87. Engines Engineering s.r.l.

88. EFF Engineering s.r.l.

89. ID-EE s.r.l.

90. Mahindra Business & Consulting Services Private Limited (formerly


known as Mahindra IT Consulting Private Limited)

91. Mahindra Automotive Australia Pty. Ltd.

92. Mahindra Two Wheelers Limited

93. Mahindra United Football Club Private Limited

94. Defence Land Systems India Private Limited (formerly known as Mahindra
Defence Land Systems Private Limited)

95. Mahindra Yeuda (Yancheng) Tractor Company Limited

96. Venturbay Consultants Private Limited (upto 22nd March, 2010)

97. Mahindra Metal One Steel Service Centre Limited (w.e.f. 11th June,
2009)

98. Raigad Industrial & Business Park Limited (w.e.f. 18th June, 2009)

99. Retail Initiative Holdings Limited (w.e.f. 1st July, 2009)

100. Mahindra Retail Private Limited (w.e.f. 1st July, 2009)

101. Mahindra Technologies Services Inc. (w.e.f. 4th June, 2009)

102. Tech Mahindra (Nigeria) Limited (from 18th August, 2009 to 22nd March,
2010)

103. Mahindra Punjab Tractors Private Limited (w.e.f. 9th October, 2009)

104. Tech Mahindra Bahrain Limited S.P.C. (w.e.f. 3rd November, 2009 & upto
22nd March, 2010)

105. Mahindra EcoNova Private Limited (w.e.f. 2nd January, 2010)

106. Mahindra Conveyor Systems Private Limited (w.e.f. 4th January, 2010)

107. BAH Hotelanlagen AG (w.e.f. 11th January, 2010)

(b) Other parties with whom transactions have taken place during the year.

(i) Associates:

Name of the Company

1. Mahindra Composites Limited

2. Mahindra Construction Company Limited

3. Owens Comings (India) Limited

4. Satyam Computer Services Limited (from 5th May, 2009 to 22nd March,
2010)

5. Swaraj Automotives Limited


6. Swaraj Engines Limited

7. Mahindra Water Utilities Limited

(ii) Joint Venture

Name of the Company

1. Mahindra Sona Limited

2. Tech Mahindra Limited (w.e.f 23 rd March, 2010)

(iii) Key Management Personnel

Vice Chairman and Managing Director : Mr. Anand Mahindra


Executive Directors : Mr. B.N. Doshi
Mr. A.K. Nanda

(iv) Welfare Funds

Name of the Fund

1. Mahindra World School Education Trust

2. M&M Benefit Trust

3. M&M Employee's Welfare Fund

4. M&M Employee's Farm Equipment Sector Employee's Welfare Fund

(c) The related party transactions are as under

Rupees crores

Nature of Subsidiaries Associate Joint Key Welfare


Transactions Companies Ventures ManagementFunds
Personnel
1. Purchases

Goods 9,65.63 3,08.90 84.60 - -


(6,58.26) (1,58.49) (66.72) - -

Fixed Assets 14.34 - - - -


(7.41) (-) (-) (-) (-)

Services 6,25.67 0.04 - - -


(3,34.45) (-) (-) (-) (-)

2. Sales

Goods 5,41.53 1.31 - - -


(4,09.72) (1.22) (-) (-) (-)

Fixed Assets 2.10 - - - -


(8.19) (0.16) (-) (-) (-)

Services 1,03.93 0.55 0.05 - -


(1,25.00) (4.96) (0.05) (-) (-)

3. Investments

Purchase/Subscribed 4,34.66 - - - -
(10,04.39) (-) (-) (-) (0.01)

Sales/Redemption 39.99 - - - -
(28.75) (-) (-) (-) (-)

4. Deputation of
Personnel:
From Related Parties 0.23 - - - -
(1.59) (-) (-) (-) (-)

To Related Parties 10.98 4.15 - - -


(17.35) (0.52) (-) (-) (-)

5. Write off of 2.20 - - - -


Receivables (-) (-) (-) (-) (-)

6. Write Back of 19.52 - - - -


Provision for doubtful (-) (-) (-) (-) (-)
debts/advances

7. Provision for - - - -10.00


doubtful debts/ (19.52) (-) (-) (-) (-)
advances

8. Managerial- - - 6.56 -
Remuneration (-) (-) (-) (5.15) (-)

9. Stock Options - - - 0.05 -


(-) (-) (-) (0.07) (-)

10. Finance:

Inter Corporate 4,22.24 - - - -


Deposits given (6,19.59) (-) (-) (-) (-)

Inter Corporate 2,88.41 - - - -


Deposits refunded(2,99.61) (-) (-) (-) (-)
by parties.

Inter Corporate - - - - -
Deposits taken(5.00) (-) (-) (-) (-)

Inter Corporate - - - - -
Deposits refunded (5.00) (-) (-) (-) (-)
to parties

Interest received 54.31 0.46 - - -


(24.19) (1.85) (-) (-) (-)

Interest Paid 0.44 - - - -


(1.47) (-) (-) (-) (-)

Dividend received 83.29 2.60 1.31 - -


(1,31.83) (0.28) (0.98) (-) (-)

Security Deposits 0.81 - - - -


Paid (-) (-) (-) (-) (-)

Security Deposits 0.66 - - - -


Refunded (-) (-) (-) (-) (-)

11. Issue of Ordinary - - - - -


(Equity) Shares (-) (-) (-) (-) (14,59.76)

12. Dividends- - - 0.4526.86


(-) (-) (-) (0.52) (1.05)

13. Guarantees & 1,67.99 - - - -


Collaterals given(1,19.58) (-) (-) (-) (-)

14. Other
Transactions:

Other Income 9.64 0.29 - -25.91


(10.88) (0.28) (-) (-) (-)

Other Expenses 20.60 - - - -


(17.71)
Reimbursements 1,10.16 1.04 0.03 - -
received from (2,01.55) (0.02) (0.03) (-) (-)
parties

Reimbursements 87.44 0.02 - - (25.91)


made to parties (1,29.43) (0.02) (-) (-) (-)

Advance Given 8.49 - - - 7.00


(5.74) (-) (-) (-) (15.00)

Advance Received 1.00 - - - -


(-) (-) (-) (-) (-)
15. Outstandings
Payable 1,73,25 1.36 7.61 3.10 -
(1,24.62) (3.26) (11.20) (2.21) (-)

Receivable 3,49.13 2.72 0.01 22.00 -


(1,38.46) (12.31) (0.01) (15.00) (-)

Debenture issued 50.00 - - - -


by parties (45.00) (-) (-) (-) (-)

Inter Corporate 5,14.72 4.59 - - -


Deposits given (4,00.78) (4.59) (-) (-) (-)

Guarantees & - - - - -
Collaterals given 2,86.91 - - - -
(1,63.67) (-) (-) (-) (-)

Security Deposit5.79 - - - -
Paid (5.03) (-) (-) (-) (-)

Security Deposit1.85 - - - -
Received (2.51) (-) (-) (-) (-)

16. Provision for 5.99 6.69 - - 10.00


doubtful debts/ (25.51) (6.69) (-) (-) (-)
advances

Previous year's figures are given in brackets.

The significant related party transactions are as under:

Rupees crores

AssociateJoint
Nature of Amount Companies Amount Ventures Amount
Transactions
& Subsidiaries

1. Purchase-Goods &
Mahindra Intertrade 1,60.19 Swaraj 2,94.63 Mahindra84.60
Limited (1,24.93) Engines (1,50.60) Sona (66.72)
Limited Limited

Mahindra Ugine Steel 3,84.61


Company Limited (3,08.92)

Mahindra Forgings 1,11.14


Limited (77.32)

Mahindra Vehicle 1,08.60


Manufacturers Ltd(-)

2. Purchase-Services
& Mahindra Logistics 5,13.81 Satyam 0.04
Limited (2,37.42) Computer (-)
Services
Limited
Mahindra Engineering -
Services Limited (44.05)

3. Sale-Goods &
Mahindra USA Inc. 1,35.45 Swaraj 1.31
(1,05.37) Engines (1.22)
Limited
Mahindra Navistar 1,48.28
Automotives Limited (92.61)

Mahindra & Mahindra 65.76


South Africa (58.22)
(Proprietary) Ltd

NBS International Ltd 79.12


(64.89)

4. Sale-Services &

Mahindra Navistar 43.90 Owens 0.47 Mahindra 0.05


Automotives Limited (34.37) Corning (3.21) Sona Ltd (0.05)
(India) Ltd

Mahindra Renault 44.38 Satyam 0.07


Private Limited (76.27) Computer (-)
Services
Limited

Swaraj
Engines-
Limited (1.43)
5. Investments -
Purchase &
Mahindra Navistar 43.69
Automotives Limited (1,12.97)

Mahindra Vehicle 1,00.00


Manufacturers Ltd(3,60.20)

Mahindra Overseas 65.82


Investment Company (1,09.43)
(Mauritius) Limited

Mahindra Forgings 55.83


Limited (-)

Mahindra Navistar 62.98


Engines Private Ltd (-)

Mahindra Gears -
International Ltd(1,53.14)

Mahindra Two -
Wheelers Limited (1,17.99)

6. Investments-Sale
& Tech Mahindra 5.71
Limited (-)

Mahindra Intertrade 14.27


Limited (-)

7. Investments -
Redemption &
Mahindra & Mahindra 20.00
Financial Services (10.00)
Limited

Mahindra Intertrade-
Ltd (18.75)
8. Advances Given & 5.39
Mahindra Integrated (-)
Township Limited

Defence Land Systems 2.73


India Private Limited

Mahindra Ugine -
Steel Company Limited (2.13)

Mahindra Automotive-
Australia Pty. Ltd. (3.57)

9. Inter Corporate
Deposits given &
Mahindra Overseas 62.38
Investment Company (-)
(Mauritius) Limited

Mahindra Forgings 56.50


Limited (-)

Mahindra Vehicle 2,05.00


Manufacturers Ltd(1,00.00)

Mahindra Two -
Wheelers Limited (1,02.00)

Mahindra & Mahindra


Financial Services -
Limited (1,85.00)

10. Inter Corporate


Deposits refunded
by parties &

Mahindra Forgings 1,00.50


Limited (-)

Mahindra Vehicle 75.00


Manufacturers Ltd

Mahindra Castings 38.00


Limited (-)

Mahindra & Mahindra


Financial Services -
Limited (1,70.00)

Mahindra Engineering -
Services Limited (40.00)

Mahindra Two -
Wheelers Limited (67.00)

11. Guarantees given


& Mahindra USA Inc. 94.42
(-)

Mahindra Forgings 73.57


Limited

Mahindra Renault -
Private Limited (1,19.58)

Previous year's figures are given in brackets.

MAHINDRA & MAHINDRA LIMITED

30. Joint Venture Disclosure


(i) Jointly Controlled Entities by the Company

Name of the Entity Country of Incorporation % Holding

a) Tech Mahindra Limited


(w.e.f. 23rd March, 2010India 43.99%

b) Mahindra Sona LimitedIndia 29.77%

c) PSL Erickson Limited India 18.06%

(ii) Interests in the Assets, Liabilities, Income and Expenses with respect
to Jointly Controlled Entities.

Rupees crores

2010 2009
1. ASSETS

1. Fixed Assets 415.17 8.03

2. Investments 1,326.13 0.05

3. Current Assets, Loans


and Advances

(a) Inventories 7.26 4.59

(b) Sundry Debtors 469.43 10.22

(c) Cash and Bank Balances 100.83 3.40

(d) Loans and Advances 297.02 1.23

4. Deferred Tax - Net 12.14 0.25

II. LIABILITIES

1. Loan Funds

(a) Secured Loans 330.24 0.82

(b) Unsecured Loans 271.51 -

2. Current Liabilities and Provisions

(a) Liabilities 267.61 6.14

(b) Provisions 124.78 1.62

3. Deferred Revenue 337.71 -

III. INCOME

1.Sales 109.61 44.57

2. Other Income 4.60 2.21

IV. EXPENSES

1. Raw Materials, Finished and


Semi Finished Products 34.65 26.73

2. Excise Duties 3.83 4.09

3. Manufacturing, Selling Expenses, etc. 54.11 9.34

4. Depreciation/Amortisation 2.69 0.76

5. Provision for Taxation 4.85 2.20


V. OTHER MATTERS

1. Contingent Liabilities 59.50 3.90

2. Capital Commitments 118.01 0.29

31. Additional information pursuant to the provisions of paragraphs 3(i)(a)


and (ii), 4C and 4D of Part 11 of Schedule VI to the Companies Act, 1956 -
See Schedule XVIL Previous year's figures are indicated below the current
year's figures.

32. Additional information pursuant to the provisions of Part IV of


Schedule VI to the Companies Act, 1956 - See Schedule XVII.

33. Previous year's figures have been regrouped/restated wherever


necessary.

34. Additional Information pursuant to the Provisions of Paragraphs 3


(i)(a) and (ii), 4C and 4D, of Part 11 of Schedule VI to the Companies Act,
1956.

(A) PARTICULARS IN RESPECT OF GOODS MANUFACTURED:

Class of Goods A B C D EF

1. a. On Road
Automobiles
having four or
more wheels
such as light,
medium and heavy
commercial
vehicles, jeep
type vehicles
and passenger
cars covered
under sub heading
(5) of Heading (7)
of First Schedule Nos. 3,60,000 3,04,000 2,33,533 2,937 108.11
2,76,000 2,50,000 1,58,715 5,826 256.52

b. Three Wheelers Nos. 66,000 60,000 45,717 1,205 13.89


1,11,000 72,000 43,278 2,753 29.28

2. a. Agricultural
Tractors [Note
(iv) below] Nos. 2,29,000 2,33,000 1,71,550 8,671 232.77
2,14,000 2,33,000 1,17,847 9,438 254.16
b. Tractor Skids These are 1,726 23 1.66
manufactured 1,251 168 6.61
again st
spare
capacity
under 2(a)

3. Manufactured
and Purchased
Parts and
Accessories for
sale [Notes
(iii)(a) and
(b) below] Nos. These are 4,91,260 - 91.53
manufactured 4,27,952 - 94.97
against
spare
capacity
under 1
and 2 above
4. Internal
Combustion
Piston Engines Nos. 1,75,000 1,75,000 1,68,683 1,361 10.08
1,75,000 1,50,000 1,18,036 1,162 8.15

5. Diesel Genset Nos. 24,000 Assembly 21,751 159 2.96


24,000 at 3rd Party 26,227 115 2.04
Locations

6. Engines Nos. These are 26,144 385 2.1


manufactured 25,904 439 2.7
against
spare
capacity
under 2(a)

7. Forklifts Nos. 300 300 110 6 0.41


300 300 46 7 0.51

8. Harvester
Combines Nos. 300 300 324 1 0.11
300 300 136 2 0.25

9. Others 0.03
0.01

10. Export benefits

Class of Goods G H IJ

1. a. On Road
Automobiles
having four or
more wheels
such as light,
medium and heavy
commercial
vehicles, jeep
type vehicles
and passenger
cars covered
under sub heading
(5) of Heading (7)
of First Schedule Nos. 4,365 155.98 2,31,703 10,721.10
2,937 108.11 1,61,189 7,646.72

b. Three Wheelers Nos. 1,525 15.14 45,360 530.15


1,205 13.89 44,806 517.68

2. a. Agricultural
Tractors [Note
(iv) below] Nos. 6,963 191.11 1,73,217 6,408.61
8,671 232.77 1,18,565 4,333.56
b. Tractor Skids 98 4.27 1,647 92.06
23 1.66 1,386 65.35

3. Manufactured
and Purchased
Parts and
Accessories for
sale [Notes
(iii)(a) and
(b) below] Nos. - 90.01 - 888.16
- 91.53 - 621.08

4. Internal
Combustion
Piston Engines Nos. 1,225 9.49 11,179 106.66
1,361 10.08 9,034 89.25

5. Diesel Genset Nos. 114 1.83 21,796 451.78


159 2.96 26,183 592.15

6. Engines Nos. 903 3.43 25,626 246.15


385 2.17 25,958 248.41

7. Forklifts Nos. 2 0.13 113 8.24


6 0.41 46 3.52

8. Harvester
Combines Nos. 23 2.73 302 42.41
1 0.11 137 16.47

9. Others 0.17 10.04


0.03 4.42

10. Export benefits 18.97


26.99

Total 19,524.33
14,165.60
*****
A = Unit of Measurement

B = Licenced Capacity per annum [Note (i)]

C = Installed Capacity per annum [Note (i)]

D = Actual Production [Notes (ii) & (iii)(a)]

E = Opening Stock - Quantity

F = Opening Stock - Value Rupees crores

G = Closing Stock - Quantity

H = Closing Stock - Value Rupees crones

I = Sales - Quantity

J = Sales - Value Rupees crones

Notes:

(i) (a) The installed capacity has been certified by President/Chief


Executives, which the auditors have relied on without verification as this
is a technical matter.

(b) The licensed capacities include/represent, as the case may be,


registrations granted and Industrial Entrepreneur Memorandum filed with,
and duly acknowledged by, the Government pursuant to the schemes of cle-
licensing [Also see note (iv) below].

(c) Within the overall licensed capacity in itern 1 above, the Company is
permitted to manufacture for outside sale 10,000 petrol/cliesel engines and
4,000 tonnes grey iron castings.

(d) Bullet proof work and fabrication on base vehicles has been carried out
at third party facilities. Nil (2009 : 110) Vehicles were produced and sold
using such third party facilities and are included in itern (A) 1(a).

(e) The installed capacity mentioned against itern no. (A) 1 (a) above
includes 48,000 (2009 : 48,000) for production of vehicles for third
parties.

(ii) Actual Production includes production for captive consumption.

(iii) (a) The actual production disclosed against manufactured corn


ponents/sub-assern blies/steel blanks is the number of such components
transferred during the year to the Marketing Unit/Spare Parts Stores for
sale or sold otherwise.
(b) The Opening and Closing Stocks and Sales of goods shown under itern 3
above consist of manufactured and purchased parts. The bifurcation of
stocks/sales into manufactured and bought-out parts is not practicable.

(iv) Licenced capacity in respect of Agricultural Tractor includes a Letter


of Intent from the Government of India for expansion of the manufacturing
capacityfrorn 25,000 to 60,000 tractors at Mumbai subject to fulfillment of
conditions mentioned therein; an Industrial Licence will be issued on
fulfillment of the conditions mentioned in the Letter of Intent.

(B) PARTICULARS IN RESPECT OF GOODS TRADED:

Purchases Opening Stock

Unit of
Class of Goods Measurement Quantity Value Quantity Value
Rupees Rupees Rupees Rupees
crores crores crores crores

1. Tractors Nos. 317 9.00 501.75


269 7.29 36 1.13

2. Agricultural
Implements Nos. 10,168 57.35 436 5.98
6,178 41.47 2,230 3.62

3. Four Nos. 5,272 151.40 - -


Wheelers 693 27.41 - -

4. Bought-out
Spares for
Resale [Note
(iii)(b) to375.64
item 'A'] 263.96

5. Diesel
Genset &
Genset
Engines Nos. 1,523 18.61 68 0.34
277 3.09 - -

6. Others 49.05 0.02


2.93 -

Total 661.05 8.09


346.15 4.75

Note (iv) to item (A).

Closing Stock Sales

Unit of
Class of Goods Measurement Quantity Value Quantity Value
Rupees Rupees Rupees Rupees
crores crores crores crores

1. Tractors Nos. 35 1.24 332 12.47


50 1.75 251 8.90

2. Agricultural
Implements Nos. 865 9.41 9,739 69.34
436 5.98 7,972 50.32

3. Four Nos. 211 5.01 5,056 149.16


Wheelers - - 693 31.20

4. Bought-out
Spares for
Resale [Note
(iii)(b) to - - - -
item 'A'] - - - -
5. Diesel
Genset &
Genset
Engines Nos. 166 1.33 589 17.93
68 0.34 209 3.16

6. Others 0.10 58.83


0.02 9.23

Total 17.09 307.73


8.09 102.81

Note (iv) to item (A).

(C) PARTICULARS OF RAW MATERIALS AND COMPONENTS CONSUMED

Unit of Value
Description Measurement Quantity Rupees crores

1. Steel Items
(Sheets, Tubes, etc.) Nos. 1,13,459 }
89,522 } 274.13
Metric Tonnes 48,042 } 191.00
32,290 }

2. Aluminium Sections
and Other Aluminium
Items Kgs. 38,801 0.47
10,339 0.14

3. Other Metals
(Steel Shots, Lead,
Tin, etc.) Metric Tonnes 120 0.45
119 0.56

4. Paints Nos. 8,75,017 }


7,49,035 }
Metres 2,58,903 }
1,83,583 } 96.11
Kgs. 26,35,185 } 72.85
19,36,747 }
Litres 47,30,889 }
35,76,788 }
5. Steel Scrap Metric
Tonnes 8,891 17.24
7,898 19.83
6. Pig Iron Metric
Tonnes 11,157 23.64
8,880 25.42

7. Miscellaneous
Foundry Materials Nos. 19,28,687 }
15,45,939 }
Metric Tonnes 14,396 } 16.59
12,585 } 16.32
Litres 4,42,660 }
3,36,844 }

8. Other Materials
(Direct Stores,
Patterns, Oils, etc.) Not practicable to *102.76
give quantitative
details *78.19

9. Tyres and Tubes Nos. *35,45,832 *664.70


*27,31,682 *473.90

10. Components other


than Tyres and Tubes
(including processing
charges) *10,091.32
*7,593.08

11. Material handling


and transportation
charges, etc. incurred
on the above items not
separately allocable 408.15
300.50

Total 11,695.56
8,771.79

Includes items used for other than production, amounts not ascertained.

Notes :

(i) The consumption in value has been ascertained on the basis of opening
stock plus purchases less closing stock and includes the adjustment of
excesses and shortages as ascertained on physical count and write-off of
obsolete and unserviceable raw materials and components.

(ii) The consumption in value shown against item 10 is a balancing figure


based on the total consumption shown in the Profit and Loss Account.

(D) VALUE OF IMPORTS ON C.I.F BASIS ACCOUNTED FOR DURING THE YEAR

Rupees crores

2010 2009

1. Raw Materials 1.17 0.65

2. Components, Spare Parts, etc . 225.86 153.81

3. Capital Goods 98.61 81.48

4. Items imported for Resale 27.01 13.77

Total 352.65 249.71

Notes:

(i) Credits, if any, recoverable in respect of short landings, etc. are not
considered.

(ii) The value of imports shown above includes:

(a) Imports on C&F basis as per suppliers' invoices Rs. 12.55 crores (2009
: Rs.4.82 crores)

(b) Imports on 'cost' basis Rs. 203.09 crores (2009 : Rs. 163.52 crores)

(E) EXPENDITURE IN FOREIGN CURRENCIES (SUBJECT TO DEDUCTION OF TAX WHERE


APPLICABLE)

Rupees crores

2010 2009

1. Professional and Consultancy


Fees [including Rs. 0.89 crores
(2009 : Rs. 6.35 crores) capitalised] 34.82 43.35

2. Commission on Exports 1.21 0.84

3. Interest & Commitment charges 42.85 55.31

4. Others 69.68 70.32

Total 148.56 169.82


Notes:

(1) Fee for use of technology, development expenditure and software


expenditure [refer to in Note 1 (C):

(a) written off during the year Rs. 9.17 crores (2009 : Rs. 8.91 crores);
and

(b) amount remitted during the year Rs. 76.18 crores (2009 : Rs. 59.81
crores) net of tax deducted at source of Rs. 5.92 crores (2009 : Rs. 6.11
crores) are not included in the above figures.

(F) REMITTANCE IN FOREIGN CURRENCY ON ACCOUNT OF DIVIDENDS TO NON-RESIDENT


SHAREHOLDERS

Number of Amount Dividend relating to


remitted
Shareholders Equity shares

2010 : 1 120 * Year ended 31st March, 2009


2009 : 1 120 * Year ended 31st March, 2008

(G) EARNINGS IN FOREIGN EXCHANGE

Rupees crores

2010 2009

1. Export of goods
on F.O.B. basis 719.37 632.36

2. Interest 9.60 14.74

3. Others (freight, etc.) 32.47 44.15

Total 761.44 691.25

Notes:

F.O.B. value of exports includes local sales which qualify for export
benefits and for which payment is receivable in foreign currency and
local/export sales under rupee credit which qualify for export benefits.

(H) VALUE OF IMPORTED AND INDIGENOUS CONSUMPTION:

aw Materials and Components


Rupees crores %

1. Imported 177.61 1.52


121.97 1.39

2. Indigenously obtained 11,517.95 98.48

8,649.82 98.61

Total 11,695.56 100.00

8,771.79 100.00

Includes items used for other than production, amount not ascertained.

Notes:

(1) Items purchased through canalising agencies have been considered as


imported.

(2) See Note (i) to item (C).

(3) In giving the above information the Company has taken the view that
spares and components as referred to in paragraph 4 (D)(c) of Part 11 of
Schedule VI covers only such items as go directly into production.

* Denotes amounts less than Rs. 50,000

M.M. Murugappan
N. Vaghul
R.K. Kulkarni
A.S. Ganguly
A.P. Puri
N.B. Godrej
A.K. Dasgupta
Deepak S. Parekh
Directors

Keshub Mahindra
Chairman

Anand G. Mahindra
Vice Chairman & Managing Director

Bharat Doshi
Executive Director

Narayan Shankar
Company Secretary

Place: Mumbai
Date : 29th May, 2010

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Mahindra & Mahindra Ltd


Industry :Automobiles - Tractors

Notes for the year 2010

MAHINDRA AND MAHINDRA LIMITED

ANNUAL REPORT 2009-2010

NOTES ON ACCOUNTS

Significant Accounting Policies:

(A) Basis of Accounting:

The financial statements are prepared in accordance with the generally


accepted accounting principles in India and comply with the Accounting
Standards notified under sub-section QQ of Section 211 of the Companies
Act, 1956 and the relevant provisions thereof.

(B) Fixed Assets:

(a) (i) Fixed Assets are carried at cost less depreciation except as stated
in (ii) below. Cost includes financing cost relating to borrowed funds
attributable to the construction or acquisition of qualifying fixed assets
upto the date the assets are ready for use. Where the acquisition of fixed
assets are financed through long term foreign currency loans (having a term
of 12 months or more at the time of their origination) the exchange
differences on such loans are added to or subtracted from the cost of such
fixed assets.

When an asset is scrapped or otherwise disposed off, the cost and related
depreciation are removed from the books of account and resultant profit
(including capital profit) or loss, if any, is reflected in the Profit and
Loss Account.

(ii) Land and Buildings, had been revalued as at 31st October, 1984 at
depreciated replacement values on the basis of a valuation made by a firm
of Chartered Surveyors and Valuers. The indices, if any, used are not
stated in the valuation.

(b) (i) Leasehold land is amortised over the period of the lease.

(ii) Depreciation on assets is calculated on Straight Line Method at the


rates and in the manner prescribed in Schedule XIV to the Companies Act,
1956, except for:

(1) certain items of Plant and Machinery individually costing more than
Rs.5,000 - over their useful lives (2 years, 3 years, 5 years or 7 years,
as the case may be) as determined by the Company.

(2) Cars and Vehicles - at 15% of cost.

(iii) Depreciation charge for each year is after deducting the amount
representing the depreciation on the increase due to revaluation of Land
and Buildings, transferred from the Revaluation Reserve.

(C) Intangible Assets:

Intangible Assets are initially measured at cost and amortised so as to


reflect the pattern in which the asset's economic benefits are consumed.

(a) Technical Knowhow

The expenditure incurred is amortised over the estimated period of benefit,


not exceeding six years commencing with the year of purchase of the
technology.

(b) Development Expenditure:

The expenditure incurred on technical services and other project/product


related expenses are amortised over the estimated period of benefit, not
exceeding five years.

(c) Software Expenditure:

The expenditure incurred is amortised over three financial years equally


commencing from the year in which the expenditure is incurred.

(D) Investments:

Long term investments are valued at cost. However, provision for diminution
in value is made to recognise a decline other than temporary in the value
of investments. Current investments are valued at the lower of cost and
fair value, determined by category of investment.

(E) Inventories:

Inventories comprise all costs of purchase, conversion and other costs


incurred in bringing the inventories to their present location and
condition.

Raw materials and bought out components are valued at the lower of cost or
net realisable value. Cost is determined on the basis of the weighted
average method.

Finished goods produced and purchased for sale, manufactured components and
work-in-progress are carried at cost or net realisable value whichever is
lower. Excise duty is included in the value of finished goods inventory.

Stores, spares and tools other than obsolete and slow moving items are
carried at cost. Obsolete and slow moving items are valued at cost or
estimated realisable value, whichever is lower.

Long term contracts in progress are valued at cost.

(F) Miscellaneous Expenditure (to the extent not written off or adjusted):

Expenditure carried forward under this head is being amortised as follows:

(a) Finance Charges:

The expenditure incurred in raising long term borrowings is amortised over


the period of the borrowings. On early buyback, conversion or repayment of
borrowings, any unamortised expenditure is fully written off in that year.

(b) Separation and Other Costs:

Special Payments/Pensions under Voluntary Retirement Schemes.

The liability is amortised by the year ended March, 2010 from the month in
which the liability is incurred.

(G) Foreign Exchange Transactions:

Transactions in foreign currencies (other than firm commitments and highly


probable forecast transactions) are recorded at the exchange rates
prevailing on the date of transaction. Monetary items are translated at the
year-end rates. The exchange difference between the rate prevailing on the
date of transaction and on the date of settlement as also on translation of
monetary items at the end of the year (other than those relating to long
term foreign currency monetary items) is recognised as income or expense,
as the case may be.

Exchange differences relating to long term foreign currency monetary items,


to the extent they are used for financing the acquisition of fixed assets
are added to or subtracted from the cost of such fixed assets and the
balance accumulated in 'Foreign Currency Monetary Item Translation
Difference Account' and amortised over the balance term of the long term
monetary item or 311 March, 2011 whichever is earlier

Any premium or discount arising at the inception of a forward exchange


contract is recognised as income or expense over the life of the contract,
except in the case where the contract is designated as a cash flow hedge.

(H) Derivative Instruments and Hedge Accounting:

The Company uses foreign currency forward contracts and currency options to
hedge its risks associated with foreign currency fluctuations relating to
certain firm commitments and highly probable forecast transactions. The
Company does not hold derivative financial instruments for speculative
purposes. The Company has applied to such contracts the hedge accounting
principles set out in Accounting Standard 30 'Financial Instruments :
Recognition and Measurement' (AS 30) by marking them to market.

Changes in the fair value of the contracts that are designated and
effective as hedges of future cash flows are recognised directly in Hedging
Reserve Account and the ineffective portion is recognised immediately in
the Profit and Loss Account.

(I) Revenue Recognition:

Sales of products and services are recognised when the products are shipped
or services rendered including export benefits thereon.

Dividend from investments are recognised in the Profit and Loss Account
when the right to receive payment is established.

(J) Government Grants:


The Company is entitled to various incentives from a State Government, such
as grants by way of refund of octroi duty paid by the Company for its
manufacturing unit located in a developing region. In view of the
uncertainty in respect of the collection of these grants, such grants are
accounted for as and when the disbursements are received.

(K) Employee Benefits:

Defined Contribution Plan/Defined Benefit Plan/Long term Compensated


Absences.

Company's contributions paid/payable during the year to Superannuation


Fund, ESIC and Labour Welfare Fund are recognised in the Profit and Loss
Account.

Contributions to Provident Fund are made to a Trust administered by the


Company and are charged to Profit and Loss Account as incurred.

The Company is liable for the contribution and any shortfall in interest
between the amount of interest realised by the investment and the interest
payable to members at the rate declared by the Government of India.

Company's liability towards gratuity, long term compensated absences, post


retirement medical benefit and post retirement housing allowance schemes
are determined by independent actuaries, using the projected unit credit
method. Past services are recognised on a straight line basis over the
average period until the benefits become vested. Actuarial gains and losses
are recognised immediately in the statement of Profit and Loss Account as
income or expense. Obligation is measured at the present value of estimated
future cash flows using a discounted rate that is determined by reference
to the market yields at the Balance Sheet date on Government Bonds where
the currency and terms of the Government Bonds are consistent with the
currency and estimated terms of the defined benefit obligation.

(L) Borrowing Costs:

All borrowing costs are charged to the Profit and Loss Account except

(a) Borrowing costs that are attributable to the acquisition or


construction of assets that necessarily take a substantial period of time
to get ready for their intended use, which are capitalised as part of the
cost of such assets.

(b) Expenses incurred on raising long term borrowings are amortised over
the period of borrowings. On early buyback, conversion or repayment of
borrowings, any unamortised expenditure is fully written off in that year.

(M) Redemption Premium:

Premium payable on redemption of Bonds/Debentures is fully provided and


charged to Securities Premium Account (Net of Tax) in the year of issue.

(N) Product Warranty

In respect of warranties given by the Company on sale of certain products,


the estimated costs of these warranties are accrued at the time of sale.
The estimates for accounting of warranties are reviewed and revisions are
made as required.

(0) Leases:

The Company's significant leasing arrangements are in respect of operating


leases for premises (residential, office, stores, godowns, computer
hardware, etc.). The leasing arrangements, which are not non-cancellable,
range between eleven months and five years generally, and are usually
renewable by mutual consent on agreed terms. The aggregate lease rentals
payable are charged as rent.

(P) Taxes on Income:


Current tax is determined as the amount of tax payable in respect of
taxable income for the year. Deferred tax is recognised, subject to
consideration of prudence, on timing differences, being the difference
between taxable income and accounting income that originate in one period
and are capable of reversal in one or more subsequent periods. Deferred tax
assets arising on account of unabsorbed depreciation or carry forward of
tax losses are recognised only to the extent that there is virtual
certainty supported by convincing evidence that sufficient future tax
income will be available against which such deferred tax assets can be
realised.

(Q) Excise duty recovered on sales is included in 'Sales - Traded and


Manufactured Goods'. Excise duty in respect of Finished Goods manufactured
is shown separately as an item of expense and included in valuation of
finished goods produced.

2. Share Capital:

Issued and Subscribed Capital include

(a) 3,33,618 Ordinary (Equity) Shares of Rs. 5 each (2009 : 1,66,809


Ordinary (Equity) Shares of Rs. 10 each) allotted as fully paid-up pursuant
to a contract without payment having been received in cash.

(b) 34,12,15,008 Ordinary (Equity) Shares of Rs. 5 each (2009 :


17,06,07,504 Ordinary (Equity) Shares of Rs. 10 each) allotted as fully
paid-up by way of Bonus Shares by capitalisation of Securities Premium
Account and Reserves.

(c) 25,13,124 Ordinary (Equity) Shares of Rs. 5 each (2009 : 12,56,562


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with the Union Bank of India Limited. Of these, 27,474
Ordinary (Equity) Shares of Rs. 5 each (2009 : 13,737 Ordinary (Equity)
Shares of Rs. 10 each) were issued on conversion of 41,211 8% Bonds.

(d) 25,96,404 Ordinary (Equity) Shares of Rs. 5 each (2009 : 12,98,202


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with International Tractor Company of India Limited without
payment having been received in cash.

(e) 3,76,332 Ordinary (Equity) Shares of Rs. 5 each (2009 : 1,88,166


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with Mahindra Spicer Limited without payment having been
received in cash.

(f) 19,46,400 Ordinary (Equity) Shares of Rs. 5 each (2009 : 9,73,200


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with Mahindra Nissan Allwyn Limited without payment having
been received in cash.

(g) 2,56,55,104 Ordinary (Equity) Shares of Rs. 5 each (2009 : 1,28,27,552


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with Mahindra Holdings and Finance Limited without payment
having been received in cash.

(h) 4,05,03,800 Ordinary (Equity) Shares of Rs. 5 each (2009 : 2,02,51,900


Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the Scheme of
Amalgamation with Punjab Tractors Limited without payment having been
received in cash.

3. Reserves and Surplus

Rupees crores

2010 2009
(a) Movements during the year

(i) Securities Premium Account

Additions, arising out of exercise of options 2.07 1.02


Additions, arising out of issue of Ordinary
(Equity) Shares to M&M ESOP Trust 71.40 -

Premium on conversion of Debentures and Bonds 690.60 -

Reversal of Premium on buyback of Zero Coupon


Convertible Bonds [Net of Tax of Rs. Nil
(2009 : Rs. 5.07 crores)] - 9.84

Reduction of provision for premium on


redemption of Zero Coupon Convertible Bonds
[Net of Tax of Rs. 10.30 crores
(2009 : Rs. Nil)] 20.72 -

784.79 10.86

Applied, in accordance with Section 78 of


the Companies Act, 1956, towards Writing-off
of share and bonds/debenture issue expenses
[Net of Tax of Rs. 0.47 crores (2009 :
Rs. 0.54 crores)] 5.88 4.95

Effect of tax rate change on amounts debited


to Securities Premium Account 0.71 -

Increase of provision for premium on


redemption of Zero Coupon Convertible
Bonds [Net of Tax of Rs. Nil
(2009 : Rs. 20.20 crores )] - 39.25

6.59 44.20

(ii) Revaluation Reserve

Adjusted against depreciation for


the year [Note 1(B)(b)(iii)] 0.41 0.38

Adjusted in respect of revalued


Buildings demolished 0.01 -

0.42 0.38

(b) The Guidance Note on Accounting for Employee Share-based Payments


issued by The Institute of Chartered Accountants of India requires that
shares allotted to a trust but not transferred to employees be reduced from
Share Capital and Reserves. Accordingly, the Company has reduced the Share
Capital by Rs. 3.63 crores (2009 : Rs. 3.10 crores), Securities Premium
Account by Rs. 84.29 crores (2009 : Rs. 15.20 crores) for the 72,63,296
shares of Rs. 5 each (2009 : 31,02,653 shares of Rs. 10 each) held by the
trust pending transfer to the eligible employees.

The Share Capital of the Company has also been reduced and the General
Reserve increased by Rs. 2.63 crores (2009 : Rs. 3.10 crores) for the
52,63,296 bonus shares of Rs. 5 each (2009 : 31,02,653 bonus shares of Rs.
10 each) issued by the Company in September, 2005 to the trust but not yet
transferred by the trust to the employees. The above monies which are
treated as advance received from it, is included under current liabilities.

(c) Consequent to the announcement issued by The Institute of Chartered


Accountants of India dated 2 9th March, 2008 in respect of forward exchange
contracts and currency and interest rate swaps, the Company has applied the
Hedge Accounting principles set out in the Accounting Standard (AS) 30
'Financial Instruments : Recognition and Measurement'. Accordingly, such
contracts are marked to market and the loss aggregating Rs. 0.91 crores
(Net of Tax of Rs. 0.45 crores) [2009 : Rs. 434.19 crores (Net of Tax of
Rs. 223.57 crores)] arising consequently on contracts that were designated
and effective as hedges of future cash flows has been recognized directly
in the Hedging Reserve Account.

4. Loans:
(a) Debentures are redeemable as follows

(i) Rs. 200.00 crores on 9th January, 2011.

(ii) Rs. 400.00 crores in three equal instalments from 12 th December,


2013.

(iii) Rs. 0.01 crores of 12.50% Debentures and Zero Interest Bonds on
receipt of balance amount due on allotment.

(b) (i) Debentures of Rs. 600.01 crores are secured by a pari-passu charge
on immovable properties of the Company both present and future, subject to
certain exclusions and are also secured by pari-passu charge on the movable
properties of the Company including movable machinery, machinery spares,
tools and accessories, both present and future.

(ii) Loans and Advances on cash credit accounts from the Company's bankers
are secured by a first charge on a pari-passu basis on the whole of the
current assets of the Company namely inventories, book debts, outstanding
monies, receivables, claims, etc. both present and future.

(c) The following amounts are repayable/convertible by 31st March, 2011

(i) Debenture holders : Rs. 200.00 crores


(2009 : Rs. 700.00 crores)

(ii) Foreign currency loans from Banks:

(a) Secured : Rs. Nil


(2009 : Rs. 253.70 crores)

(b) Unsecured : Rs. 175.86 crores


(2009 : Rs. 101 .48 crores)

(iii) Fixed Deposit holders : Rs. 78.15 crores


(2009 : Rs. 4.88 crores)

(iv) Rupee Loans:

(a) From banks : Rs. Nil


(2009 : Rs. 80.00 crores)

(b) From financial institutions : Rs. 2.60 crores


(2009 Rs. Nil)

(c) From others : Rs. 8.08 crores


(2009 Rs. 10.13 crores)

The Company had issued during the year ended 31st March, 2007, Zero Coupon
Foreign Currency Convertible Bonds (Bonds 2011 aggregating US$ 200 million,
at par The bond holders have an option to convert these bonds into Equity
Shares with full voting rights or Global Depository Receipts (GDRs)
determined at an initial conversion price of Rs. 461.02 per share of Rs. 5
each (2009 : Rs. 922.04 per share of Rs. 10 each) with fixed exchange rate
of conversion of Rs. 44.42 = US$ 1, at any time on or after 7th May, 2006
upto 7th March, 2011.

The Bonds 2011 may be redeemed, in whole but not in part, at the option of
the Company at any time on or after 13th April, 2008 subject to
satisfaction of certain conditions. Unless previously converted, redeemed
or purchased and cancelled, the bonds fall due for redemption on 14th
April, 2011 at 128.03 per cent of their principal amount. Bonds 2011 of the
face value of US$ 10.50 million have been bought back and cancelled in the
previous year. Upto 31st March, 2010, none of the Bonds 2011 have been
converted into equity shares/GDRs.

The net proceeds of Rs. 48.46 crores, unutilised as at 31st March, 2010, is
disclosed under Cash and Bank balances.

The Company's 93,95,974 Unsecured Fully and Compulsorily Convertible


Debentures (FCD's) having face value of Rs. 745 per FCD issued during the
year ended 31st March, 2009, were compulsorily converted on 27th January,
2010 into 93,95,974 Ordinary (Equity) Shares of Rs. 10 each [before sub-
division of the Ordinary (Equity) Shares] of the Company at a premium of
Rs. 735 per share. Consequent to the conversion the Share Capital and
Securities Premium Account of the Company have increased by Rs. 9.40 crores
and Rs. 690.60 crores respectively.

5. (a) Buildings include Rs. * crores (2009 : Rs. * crores) being the value
of shares in co-operative housing societies.

(b) Additions to fixed assets and capital work-in-progress include:

(i) Interest capitalised during the year Rs. 26.56 crores (2009 : Rs. 15.63
crores).

(ii) Foreign exchange fluctuation capitalised during the year Rs. 117.79
crores credit (Net) [2009 : Rs. 172.97 crores debit (Net)].

(c) (i) The depreciation charge for the year excludes:

(a) An amount of Rs. 0.41 crores (2009 : Rs. 0.38 crores), representing
depreciation on the increase due to revaluation of Land and Buildings
transferred from the Revaluation Reserve.

(b) An amount of Rs. 0.01 crores (2009 : Rs. Nil), representing


depreciation on revalued buildings demolished during the year.

(ii) The net credit to the Profit and Loss Account consequent to the above
adjustments to the Revaluation Reserve is Rs. 0.42 crores (2009 : Rs. 0.38
crores).

6. Cash and Bank Balances include balances lying with non-scheduled banks

In Current Account

Rupees crores

Bank Bank of Bank of The The


Tejarat, Australia China Municipal Ahmednagar
Tehran Co-op. Merchant's
Bank Ltd.Co-op.
Bank Ltd.

Balance as at
31st March, 2010 * 6.39 * 5.14 *

Balance as at
31st March, 2009 * 3.34 0.09 2.13 *

Maximum balance
during the year *11.91 0.59 5.68 *

Maximum balance* 9.51 1.47 3.23 *


during the
previous year

7. Loans and Advances include:

(a) Fixed/Call deposits with/loans to limited companies Rs. 525.72 crores


(2009 : Rs. 411 .14 crores) including Rs. 519.23 crores (2009 Rs. 404.65
crores) with/to subsidiaries.

(b) Amounts paid towards joint development of property Rs. Nil (2009 :
Rs.1.54 crores).

8. Micro, Small and Medium enterprises have been identified by the Company
on the basis of the information available. Total outstanding dues of Micro
and Small enterprises, which are outstanding for more than the stipulated
period are given below:
Rupees crores

2010 2009

(a) Dues remaining unpaid as at 31st March

Principal 0.89 2.42

Interest on the above 0.07 0.05

(b) Interest paid in terms of Section 16


of the Act, along with the amount of
payment made to the supplier beyond the
appointed day during the year

Principal paid beyond the appointed date 7.39 18.12

Interest paid in terms of Section 16 of the Act - 0.03

(c) Amount of interest due and payable for


the period of delay on payments made beyond
the appointed day during the year 0.11 0.15

(d) Further interest due and payable even in


the succeeding years, until such date when the
interest due as above are actually paid to the
small enterprises 0.32 0.13

(e) Amount of interest accrued and remaining


unpaid as at 31st March 0.50 0.32

9. (a) Provision - Others Rs. 219.66 crores (2009 : Rs. 167.45 crores)
includes provision for contingencies Rs. 3.58 crores (2009 Rs. 8.25
crores), provision for warranty Rs. 179.61 crores (2009 : Rs. 137.45
crores), provision for post retirement medical benefits Rs. 9.65 crores
(2009 : Rs. 4.84 crores), provision for post retirement housing allowance
Rs. 10.99 crores (2009 : Rs. Nil) and provision for diminution in value of
certain assets substantially retired from active use Rs. 15.83 crores (2009
: Rs. 16.89 crores). Provision for contingencies is in respect of labour
demands under negotiations at certain locations of the Company. Provision
for warranties relates to warranty provision made in respect of sale of
certain products, the estimated cost of which is accrued at the time of
sale. The products are generally covered under a free warranty period
ranging from 6 months to 3 years. denotes amounts less than Rs. 50,000.

(b) The movement in provisions for warranty, contingency and retired assets
is as follows:

Rupees crores

Warranty Contingency Retired assets


2010 2009 2010 2009 2010 2009

Balance as at 137.45 106.42 8.25 8.16 16.89 17.01


1st April

Add On Amalgamation
during the year - 0.25 - - - -

Add Provision made


during the year 105.59 85.05 3.58 5.41 - -

Less Utilisation
during the year 63.43 54.27 8.25 5.32 1.06 0.12

Balance as at
31st March 179.61 137.45 3.58 8.25 15.83 16.89

10.(a) Dividends on other investments include Rs. 45.56 crores (2009 :


Rs.44.89 crores) in respect of current investments and Rs. 3.91 crores
(2009 : Rs. 1.32 crores) in respect of long term investments.
(b) Profit on sale of investments (Net) includes profit on disposal of
current investments (Net) Rs. 1.53 crores (2009 : Rs. 14.73 crores), and
profit on disposal of long term investments (Net) Rs. 8.87 crores (2009 :
Rs. 38.49 crores).

(c) Interest on Government Securities, Debentures and Bonds includes tax


deducted at source Rs. 0.05 crores (2009 : Rs. 0.11 crores) and comprise
Rs. 0.50 crores (2009 : Rs. 0.50 crores) and Rs. 4.18 crores (2009 Rs. 4.26
crores) in respect of long term and current investments respectively.

(d) Interest received - others includes tax deducted at source Rs. 12.21
crores (2009 Rs. 15.11 crores).

11. Repairs and Maintenance includes machinery spares consumed Rs. 33.85
crores (2009 Rs. 26.25 crores) but does not include items included under
Consumption of Raw Materials and Bought-out Components and amounts charged
to salaries and wages (amounts not ascertained).

12. Miscellaneous Expenses include:

(a) Amounts paid/payable to Auditors (Net of service tax where applicable)

Rupees crores

Statutory Cost
Auditors Auditors

(i) Audit Fees 1.24 0.03

1.08 0.02
(ii) Company Law matters

(iii) Other Services 0.66 -

0.63 -

(iv) Reimbursement of expenses 0.01 -

0.05 -

1.91 0.03

1.76 0.02

(b) An amount of Rs. 1.44 crores (2009 : Rs. 0.96 crores) payable as
commission to non-wholetime Directors - Note 13 and Schedule XV.

13. Managerial remuneration for Directors included in the Profit and Loss
Account is Rs. 8.19 crores (2009 Rs. 6.29 crores) including Directors' fees
of Rs. 0.14 crores (2009 : Rs. 0.09 crores), perquisites Rs. 1.68 crores
(2009 : Rs. 1.27 crores) and commission Rs. 4.53 crores (2009 : Rs. 3.16
crores) (See Schedule XV) and excluding charge for gratuity, provision for
leave encashment and post retirement medical benefit as separate actuarial
valuation figures are not available. The above perquisites include
amortisation of Employees Stock Options amounting to Rs. 0.06 crores (2009
: Rs. 0.09 crores).

14. Employee Benefits:

General description of defined benefit plans

Gratuity

The Company operates a gratuity plan covering qualifying employees. The


benefit payable is the greater of the amount calculated as per the Payment
of Gratuity Act or the Company scheme applicable to the employee. The
benefit vests upon completion of five years of continuous service and once
vested it is payable to employees on retirement or on termination of
employment. In case of death while in service, the gratuity is payable
irrespective of vesting. The Company makes annual contribution to the group
gratuity scheme administered by the Life Insurance Corporation of India
through its Gratuity Trust Fund.

* denotes amounts less than Rs. 50,000

Post retirement medical

The Company provides post retirement medical cover to select grade of


employees to cover the retiring employee and their spouse upto a specified
age through mediclaim policy on which the premiums are paid by the Company.
The eligibility of the employee for the benefit as well as the amount of
medical cover purchased is determined by the grade of the employee at the
time of retirement. Post retirement housing allowance The Company operates
a post retirement benefit scheme for a certain cadre of employees in which
a monthly allowance determined on the basis of the last drawn basic salary
at the time of retirement, is paid to the retiring employee in lieu of
housing.

Defined benefit plans - as per actuarial valuation on 31st March, 2010

Rupees Crores

Funded Plan Unfunded Plans


Gratuity Post retirement Post retirement
medical housing
allowance

2010 2009 2010 2009 2010 2009

1. Expense recognised
in the Statement of
Profit and Loss
Account for the year
ended 31st March

1. Current service
cost 19.17 16.59 0.37 0.22 1.50 -

2. Interest cost 23.91 18.30 0.40 0.24 0.84-

3. Expected return
on plan assets (16.23) (18.16) - - --

4. Actuarial
(Gain)/Loss (7.69) 33.40 4.32 1.81 (1.77)-

5. Past service cost 12.15 - - - --

6. Total expense
included in
Personnel
(Schedules XI) 31.31 50.13 5.09 2.27 0.57-

7. Actual return
on plan assets 20.75 18.16 - - --

II. Net Asset/


(Liability)
recognised in the
Balance Sheet
as at 31st March

1. Present value
of defined benefit
obligation as at
31st March 334.20 300.61 9.65 4.84 10.99-

2. Fair value of
plan assets as
at 31st March 266.10 206.14 - - --
3. Net Asset/
Wability) as at
31st March (68.10) (94.47) (9.65) (4.84) (10.99)-

III. Change in the


obligation during
the year ended
31st March

1. Present value
of defined benefit
obligation at
the beginning of
the year 300.61 201.76 4.84 2.79 10.42-

2. Addition on
account of
amalgamation - 40.90 - - - -

3. Current
service cost 19.17 16.59 0.37 0.22 1.50 -

4. Interest cost 23.91 18.30 0.40 0.24 0.84 -

5. Actuarial
(Gain)/Loss (3.17) 33.40 4.32 1.81 (1.77) -

6. Past
service cost 12.15 - - - --

7. Benefit payments (18.47) (10.34) (0.28) (0.22) --

8. Present value
of defined benefit
obligation at the
end of the year 334.20 300.61 9.65 4.84 10.99-

IV. Change in fair


value of assets
during the year
ended 31st March

1. Fair value of
plan assets at
the beginning
of the year 206.14 163.58 - - --

2. Addition on
account of
amalgamation - 29.16 - - --

3. Expected return
on plan assets 16.23 18.16 - - --

4. Actuarial
Gain/(Loss) 4.52 - - - --

5. Contributions
by employer
(including benefit
payments
recoverable) 57.68 5.58 0.28 0.22 --

6. Benefit payments (18.47) (10.34) (0.28) (0.22) --

7. Fair value of
plan assets at the
end of the year 266.10 206.14 - - --

8. Actual return
on plan assets 20.75 18.16 - - --

V. The major
categories of
plan assets as
a percentage
of total plan

Insurer managed
funds 100% 100% - - - -

VI. Actuarial
assumptions

1. Discount rate 8.45% 7.75% 8.45% 7.75% 8.45%-

2. Expected rate
of return on plan
assets 7.50% 7.50% - - --

3. Attrition rate 5.00% 5.00% 5.00% 5.00% --

4. Medical premium
inflation - 5.00% 5.00% - --

VII. Effect of one percentage One percentage point One percentage


point change in the assumed increase in medical point decrease
medical inflation rate inflation rates in medical
inflation rates

2010 2009 2010 2009

1. Effect on the aggregate


service and interest cost
of post employment medical
benefits 0.25 0.14 (0.20) (0.11)

2. Effect on the accumulated


post employment medical
benefits obligations 1.36 0.72 (1.10) (0.60)

VIII. Experience Adjustments Period ended

2010 2009 2008 2007

Gratuity

1. Defined benefit obligation 334.20 300.61 201.76 184.43

2. Fair value of plan assets 266.10 206.14 163.58 127.04

3. Surplus/(Deficit) (68.10) (94.47) (38.18) (57.39)

4. Experience adjustment on
plan liabilities [(Gain)/Loss] 7.93 5.87 4.55 -

5. Experience adjustment on
plan assets [Gain/(Loss)] 4.44 - - -

Post retirement medical

1. Defined benefit obligation 9.65 4.84 2.79 3.22

2. Plan assets - - - -

3. Surplus/(Deficit) (9.65) (4.84) (2.79) (3.22)

4. Experience adjustment on
plan liabilities [(Gain)/Loss] 5.21 1.24 (0.55) 0.07
Post retirement housing
allowance
1. Defined benefit obligation 10.99 - - -

2. Plan assets - - - -

3. Surplus/(Deficit) (10.99) - - -

4. Experience adjustment
on plan liabilities
[(Gain)/Loss] 0.15 - - -

The Payment of Gratuity (Amendment) Bill 2010 amending the maximum gratuity
payable under The Payment of Gratuity Act 1972 from Rs. 3.50 lakhs to
Rs.10.00 lakhs has been passed by both houses of Parliament in May, 2010
and will come into effect from a date to be notified by the Central
Government. Since the said Bill has been substantively enacted, the Company
has given effect to the same in valuing its actuarial liability for
gratuity as at 31st March, 2010. Due to this change in the maximum limit
under the Act, the profit after tax for the current year is lower by Rs.
8.02 crores.

On account of defined contribution plans the Company's contribution to


Provident Fund and Superannuation Fund aggregating Rs. 66.15 crores (2009 :
Rs. 57.78 crores) has been recognized in the statement of Profit and Loss
Account under the head personnel.

The post retirement housing allowance scheme of the Company for select
cadre of employees has been introduced in the current year and the opening
liability as at 1st April, 2009 of Rs. 10.42 crores has been recognized as
an expense in the current year

The expected rate of return on plan assets is based on the average long
term rate of return expected on investments of the fund during the
estimated term of obligation.

The estimate of future salary increases, considered in actuarial valuation,


takes account of inflation, seniority, promotion and other relevant
factors, such as supply and demand in the employment market.

15. The Company has allotted 55,24,219 and 10,00,000 Ordinary (Equity)
Shares of Rs. 10 each in the years ended 31st March, 2002 and 31st March,
2010 respectively to the Mahindra & Mahindra Employees' Stock Option Trust
set up by the Company. The trust holds these shares for the benefit of the
employees and issues them to the eligible employees as per the
recommendation of the Compensation Committee.

In respect of options granted prior to 29th September, 2006, the equity


settled options vest one year from the date of the grant and are
exercisable on specified dates in 3 tranches within a period of 5 years
from the date of vesting. The number of options exercisable in each tranche
is between the minimum of 100 and a maximum of 1/3rd of the options vested,
except in case of the last date of exercise, where the employee can
exercise all the options vested but not exercised till that date.

Options granted on or after 29th September, 2006 vest in 4 equal


instalments on the expiry of 12 Months, 24 Months, 36 Months and 48 Months
from the date of grant. The options may be exercised on the date of vesting
and on specified dates within 5 years from the date of vesting. Number of
vested options exercisable on each specified date is subject to a minimum
of 50 or number of options vested whichever is lower, except in case of the
last date of exercise, where the employee can exercise all the options
vested but not exercised till that date.

The compensation costs of stock options granted to employees are accounted


by the Company using the intrinsic value method.

Summary of Stock Options No. of stock Weighted average


options exercise price
(Rs.)

Options outstanding on 1st April, 2009 56,15,921 556.55


Options granted during the year 4,01,770 724.00

Options forfeited/lapsed during the year 1,58,167 585.81

Options exercised during the year 9,42,009 413.71

Additional options pursuant to


sub-division of shares 49,17,515 298.33

Options outstanding on 31st March, 2010 98,35,030 298.33

Options vested but not exercised on


31st March, 2010 35,38,627 300.57

Average share price on the date of


exercise of the options are as under:

Date of exercise Average share


price (Rs.)

11th June, 2009 790.70


14th June, 2009 803.80
31st July, 2009 863.65
13th August, 2009 793.25
29th September, 2009 858.85
26th October, 2009 928.90

Information in respect of options outstanding as at 31st March, 2010.

Range of exercise price Number of options Weighted average


remaining life

Rs. 107.50 - Rs. 113.50 5,29,662 1.14 yrs

Rs. 180.50 35,484 1.57 yrs

Rs. 308.00 - Rs. 310.00 12,47,066 3.86 yrs

Rs. 381.00 29,91,922 4.80 yrs

Rs. 250.00 42,69,056 6.11 yrs

Rs. 362.00 7,61,840 7.09 yrs

The fair value of options granted during the year on 4th November, 2009 is
Rs. 414.84 per share.

The fair value has been calculated using the Black Scholes Options Pricing
Model and the significant assumptions made in this regard are as follows:

Grant dated 4-Nov-09

Risk free interest rate 6.41%


Expected life 2.50 Years
Expected volatility 53.56%
Expected dividend yield 2.24%
Exercise price (Rs.) 724.00
Stock price (Rs.) 929.50

In respect of Options granted under the Employee Stock Option plan, in


accordance with guidelines issued by SEBI, the accounting value of the
options is accounted as deferred employee compensation, which is amortised
on a straight line basis over the period between the date of grant of
options and eligible dates for conversion into equity shares. Consequently,
salaries, wages, bonus, etc. includes Rs. 3.54 crores (2009 Rs. 3.57
crores) being the amortisation of deferred employee compensation, after
adjusting for reversals on account of options lapsed.

Had the Company adopted fair value method in respect of options granted on
or after 1st April, 2005, the employee compensation cost would have been
higher by Rs. 26.44 crores, Profit after tax lower by Rs. 26.44 crores and
the basic and diluted earning per share would have been lower by Rs. 0.48 &
Rs. 0.44 respectively.

16. The estimated amount of contracts remaining to be executed on capital


account and not provided for as at 31st March, 2010 is Rs. 781.83 crores
(2009 : Rs. 756.32 crores).

17. The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) by its
order dated 7th December, 2009 has rejected the Company's appeal against
the order dated 3 oth March, 2005 passed by the Commissioner of Central
Excise (Adjudication), Navi Mumbai confirming the demand made on the
Company for payment of differential excise duty (including penalty) of Rs.
304.11 crores in connection with the classification of Company's Commander
range of vehicles, during the years 1991-1996. Whilst the Company had
classified the Commander range of vehicles as 10-seater attracting a lower
rate of excise duty, the Commissioner of Central Excise (Adjudication),
Navi Mumbai, has held that these vehicles could not be classified as 10-
seater as they did not fulfil the requirement of 10-seater vehicles, as
provided under the Motor Vehicles Act, 1988 (MVA) and Maharashtra Motor
Vehicles Rules, 1989 (MMVR) and as such attracted a higher rate of excise
duty.

In earlier collateral proceedings on this issue, the CESTAT had by an Order


dated 19th July, 2005 settled the controversy in the Company's favour. The
CESTAT had accepted the Company's submission that MVA and MMVR could not be
referred to for determining the classification for the purpose of levy of
excise duty and rejected the Department's appeal against the Order of the
Collector, Central Excise classifying the Commander range of vehicles as
10-seater The Department's appeal against the CESTAT Order dated 19th July,
2005 is pending before the Supreme Court of India but the operation of the
Order has not been stayed.

The Company has filed an appeal against the aforesaid order dated 7th
December, 2009 inter alia, on the grounds that the MVA and MMVR cannot be
referred to for the purpose of determining the excise classification, as
has been repeatedly held by various judicial fora, including the Supreme
Court and particularly by CESTAT vide its order dated 19th July, 2005 in
the Company's own case referred to above.

Without prejudice to the grounds raised in the appeal, the Company has paid
an amount of Rs. 40.00 crores in January, 2010. Pending admission of the
Company's appeal, the Supreme Court has passed an interim order staying the
recovery of the balance amount till further orders.

In another case relating to Armada range of vehicles manufactured during


the years 1992 to 1996, by the Company at its Nashik facility, the
Commissioner of Central Excise, Nashik passed an order dated 2 oth March,
2006 confirming a demand of Rs. 24.75 crores, on the same grounds as
adopted for Commander range of vehicles. The CESTAT has given an
unconditional stay against this order, which is yet to be finally heard by
the Tribunal.

The Company strongly believes, based on legal advise it has received, that
the CESTAT order dated 7th December, 2009 which is under appeal in the
Supreme Court is not sustainable in law and hence the Company has a very
good chance of succeeding in the matter As such, the Company does not
expect any liability on this account. However, in view of the CESTAT order,
the Company has reflected the above amount aggregating Rs. 328.86 crores
and the interest of Rs. 168.05 crores accrued on the same upto 31st March,
2010, as a Contingent Liability in the Accounts and the same is included in
the amounts disclosed under Note 18 (b)(i).

18. Contingent Liability:

(a) Guarantees given by the Company:

Rupees crores

Amount of guarantees Outstanding amounts


against the guarantees
2010 2009 2010 2009

For employees 1.05 1.05 * *

For other companies 327.61 168.46 286.91 163.67

* denotes amount less than Rs. 50,000

(b) Claims against the Company not acknowledged as debts comprise of:

(i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company
relating to issues of applicability and classification aggregating
Rs.968.22 crores (Net of Tax : Rs. 698.04 crores) [2009 : Rs. 386.32 crores
(Net of Tax : Rs. 274.20 crores)].

i) Other matters (excluding claims where amounts are not ascertainable) :


Rs. 17.78 crores (Net of Tax : Rs. 12.41 crores) [2009 Rs. 17.37 crores
(Net of Tax : Rs. 12.14 crores)].

(iii) Claims on capital account : Rs. 1.18 crores (2009 : Rs. 1.18 crores).

(c) Uncalled liability on equity shares partly paid Rs. 10.50 crores (2009
: Rs. 10.50 crores).

(d) Taxation matters:

(i) Demands against the Company not acknowledged as debts and not provided
for, relating to issues of deductibility and taxability in respect of which
the Company is in appeal and exclusive of the effect of similar matters in
respect of assessments remaining to be completed:

- Income-tax : Rs. 181.07 crores (2009 : Rs. 168.25 crores).

(ii) Items in respect of which the Company has succeeded in appeal, but the
Income-tax Department is pursuing/likely to pursue in appeal/reference and
exclusive of the effect of similar matters in respect of assessments
remaining to be completed:

Income-tax matters : Rs. 70.58 crores (2009 : Rs. 58.63 crores).


Surtax matters : Rs. 0.13 crores (2009 : Rs. 0.13 crores).

(e) Bills discounted not matured Rs. Nil (2009 : Rs. 59.55 crores).

19. Research and Development expenditure:

(a) In recognised Research and Development units:

(i) debited to the Profit and Loss Account, including certain expenditure
based on allocations made by the Company, aggregate Rs.248.25 crores (2009
: Rs. 220.09 crores) [excluding depreciation and amortisation of Rs. 81.03
crores (2009 : Rs. 56.19 crores)].

(ii) Development Expenditure incurred during the year Rs. 131.28 crores
(2009 : Rs. 128.94 crores).

(iii) Capitalisation of assets Rs. 41.64 crores (2009 : Rs. 15.64 crores).

(b) In other units:

(i) debited to the Profit and Loss Account, including certain expenditure
based on allocations made by the Company, aggregate Rs.25.89 crores (2009 :
Rs. 18.69 crores) [excluding depreciation and amortisation of Rs. 2.25
crores (2009 : Rs. 1.50 crores)].

(ii) Development Expenditure incurred during the year Rs. 38.59 crores
(2009 : Rs. 7.50 crores).

(iii) Capitalisation of assets Rs. 4.34 crores (2009 : Rs. 3.56 crores).

20. The net difference in foreign exchange loss debited to the Profit and
Loss Account is Rs. 113.48 crores (2009 Rs. 237.20 crores).

21. Exceptional items of Rs. 90.75 crores (2009 : Rs. 10.27 crores)
comprise of:

(a) Profit on sale of certain long term investments Rs. 90.75 crores (2009:
Rs. Nil).

(b) Surplus on transfer of Logistics business Rs. Nil (2009 : Rs. 10.27
crores).

22. The components of Deferred Tax Liability and Assets as at 31st March,
2010 are as under:

Rupees crores

2010 2009

Deferred Tax Liability

(i) On fiscal allowances on fixed assets 296.12 322.06

ii) Others 126.38 71.32

422.50 393.38

Deferred Tax Assets:

(i) On Provision for compensated absences 86.41 78.62

(ii) On Provision for doubtful debts/advances 36.54 27.33

(iii) On Premium on redemption of Zero


Coupon Convertible Bonds 18.10 40.08

(iv) On Provision for employee benefits 13.69 17.61

(v) Loss on mark to market of forward


contracts 0.45 223.57

(vi) Others 26.98 24.44

182.17 411.65

Net Deferred Tax (Asset)/Liability 240.33 (18.27)

23. Scheme of Amalgamations:

(a) In the previous year, pursuant to the Scheme of Amalgamation (the


scheme) as approved by the shareholders of the Company and subsequently
sanctioned by the Honourable High Court of Bombay on 18th July, 2008, the
entire business and all the assets and liabilities, duties and obligations
of Mahindra Holdings and Finance Limited (MHFL) (an erstwhile wholly owned
subsidiary of the Company) were transferred to and vested in the Company,
with effect from 11th February, 2008. The excess of the value of the net
assets of MHFL over the face value of the shares allotted, the face value
of the shares cancelled and the amount of General Reserve and Profit and
Loss Account of MHFL transferred to the Company was credited to the
existing Investment Fluctuation Reserve Account.

(b) In the previous year, pursuant to the Scheme of Amalgamation (the


scheme) as approved by the shareholders of the Company and subsequently
sanctioned by the Honourable High Court of Bombay and the Honourable High
Court of Punjab & Haryana on 9th January, 2009 and 16th January, 2009
respectively, the entire business and all the assets and liabilities,
duties and obligations of Punjab Tractors Limited (PTL) (an erstwhile
subsidiary of the Company) were transferred to and vested in the Company,
with effect from 1st August, 2008. The excess of the value of the net
assets of PTL over the face value of the shares allotted was credited to
the existing Investment Fluctuation Reserve Account.
(c) Accordingly, the figures for the current year are not strictly
comparable with that of the previous year.

24. Earnings per Share

2010 2009

Amount used as the numerator - Balance


of profit (Rupees crores) 2087.75 867.51

Effect on earnings of convertible bonds/


debentures (Gain)/Loss (Rupees crores) 32.64 17.29

Amount used as the numerator for diluted


earnings per share (Rupees crores) 2120.39 884.80

Weighted average number of equity shares


used in computing basic earnings per share 54,98,38,769 54,50,45,894

Effect of potential Ordinary (Equity)


Shares on conversion of bonds/debentures 4,56,31,897 4,44,38,826

Weighted average number of equity shares


used in computing diluted earnings per
share 59,54,70,666 58,94,84,720

Basic Earnings per share (Rs.) (Face


value of Rs. 5 per share) 37.97 15.92

Diluted Earnings per share (Rs.) 35.61 15.01

In the computation of earnings per share for the periods above, the Company
has given effect to the sub-division in March, 2010 of the Company's
Ordinary (Equity) Share of Rs. 10 each into 2 Ordinary (Equity) Shares of
Rs. 5 each.

25. Provision for doubtful debts and advances for the year comprises

Rupees crores

2010 2009

Provision for doubtful debts and advances


made during the year (Net) [including
Rs. Nil (2009 : Rs. 19.52 crores) pursuant
to the schemes of arrangement/amalgamation
approved by the Hon'ble High Courts] 51.02 50.96

Less: Transfer from Investment Fluctuation


Reserve pursuant to the above schemes of
arrangement/amalgamation - 19.52

Total 51.02 31.44

26. Provision for diminution in the value of long term investments for the
year comprises

Rupees crores

2010 2009

Provision for diminution in value of


investments, made during the year (Net)
[including provision of Rs. 70.00 crores
(2009 : Rs. 154.38 crores) pursuant to
the schemes of arrangement/amalgamation
approved by the Hon'ble High Courts] 70.00 154.38

Less: Transfer from Investment


Fluctuation Reserve pursuant to
the above schemes of arrangement/
amalgamation 70.00 154.38

Total - -

27. Donations and contributions include contributions to:

(a) Indian National Congress : Rs. 1.00 crore (2009 Rs. Nil)
(b) Bhartiya Janata Party : Rs. 1.00 crore (2009 Rs. Nil)
(c) Shiv Sena : Rs. 0.50 crores (2009 Rs. Nil)
(d) Nationalist Congress Party : Rs. 0.50 crores (2009 Rs. Nil)
(e) Bihar Pradesh Janata Dal (United) : Rs. 0.25 crores (2009 Rs. Nil)

28. The outstanding derivative instruments as on 31st March, 2010

The Company has taken foreign exchange contracts amounting to US$ 54.80
crores comprising Forward Contracts US$ 32.10 crores (2009 US$ 60.30
crores), Range Forwards US$ 7.20 crores (2009 : US$ 10.20 crores) and US$
15.50 crores (2009 : US$ 33.20 crores) of derivative structures in the form
of 'strips'.

The foreign currency exposures not hedged by derivative instrument or


otherwise as on 31st March, 2010 are - Receivables of ZAR 4.67 crores, EUR
0.58 crores, AUD 0.39 crores, GBP 0.27 crores, NZD 0.02 crores, CHIF *
crores and Payables of JPY 2.20 crores, US$ 1.33 crores, SEK 0.03 crores,
SAR 0.01 crores, SGID * crores (2009 : Receivables of AUD 0.38 crores, RMB
0.01 crores, SEK * crores and Payables of US$ 2.71 crores, EUR 0.03 crores,
GBP * crores, CHF * crores, JPY 2.38 crores, ZAR * crores, SAR 0.04 crores,
SGID * crores, DKK * crores, NZD * crores).

The Company has outstanding borrowings of JPY 1,126.44 crores (2009 : JPY
1,126.44 crores and US$ 9.45 crores) as Foreign Currency Borrowings. The
borrowing of JPY 450.24 crores (2009 : JPY 450.24 crores) has been
completely hedged using cross currency swap structure fixing the liability
into a full fledged rupee liability. The borrowing of JPY 676.20 crores
(2009 : JPY 676.20 crores) has been fixed to a US$ liability using a cross
currency swap structure. The borrowing of US$ Nil (2009 : US$ 2.00 crores)
has been hedged using a forward cover The Company had made an issue of US$
20.00 crores in the form of Foreign Currency Convertible Bonds in April,
2006. Out of this issue, Bonds of value US$ 18.95 crores (2009 : US$ 18.95
crores) are outstanding and have not been hedged.

* Denotes amounts less than 50,000 of respective currency.

29. Related Party Disclosure:

(a) Related parties where control exist

(i) Subsidiaries:

Name of the Company

1. Mahindra Engineering and Chemical Products Limited

2. Mahindra Logisoft Business Solutions Limited (upto 22 nd March, 2010)

3. Mahindra First Choice Wheels Limited

4. Mahindra USA Inc.

5. Mahindra Gujarat Tractor Limited

6. Mahindra (China) Tractor Company Limited

7. Mahindra Shubhlabh Services Limited

8. Mahindra & Mahindra South Africa (Proprietary) Limited

9. Mahindra Europe s.r.l.

10. Mahindra Engineering Services Limited


11. Mahindra Gears & Transmissions Private Limited (formerly
known as Mahindra SAR Transmission Private Limited)

12. Mahindra Overseas Investment Company (Mauritius) Limited

13. Mahindra-BT Investment Company (Mauritius) Limited

14. Mahindra Intertracle Limited

15. Mahindra Steel Service Centre Limited

16. Mahindra Middlecast Electrical Steel Service Centre (FZC)

17. Mahindra Consulting Engineers Limited

18. Mahindra Holidays & Resorts India Limited

19. Mahindra Holidays and Resorts USA Inc.

20. NBS International Limited

21. Mahindra Ugine Steel Company Limited

22. Mahindra & Mahindra Financial Services Limited

23. Mahindra Insurance Brokers Limited

24. Tech Mahindra Limited (upto 22nd March, 2010)

25. Tech Mahindra (Americas) Inc. (upto 22nd March, 2010)

26. Tech Mahindra GmbH (upto 22nd March, 2010)

27. Tech Mahindra (Singapore) Pte. Limited


(upto 22nd March, 2010)

28. Tech Mahindra (Thailand) Limited (upto 22 nd March, 2010)

29. Tech Mahindra Foundation (upto 22nd March, 2010)

30. Bristlecone Limited

31. Bristlecone Inc.

32. Bristlecone (UK) Limited

33. Bristlecone India Limited

34. Bristlecone (Singapore) Pte. Limited

35. Bristlecone GmbH

36. Mahindra Renault Private Limited

37. Mahindra Navistar Autornotives Limited

38. Stokes Group Limited

39. Jensand Limited

40. Stokes Forgings Limited

41. Stokes Forgings Dudley Limited

42. Mahindra Engineering Services (Europe) Limited

43. Mahindra Engineering GmbH (formerly known as Flexion Technologies GmbH)

44. Mahindra Technologies Inc. (Upto loth March, 2010)

45. Mahindra Lifespace Developers Limited


46. Mahindra World City (Jaipur) Limited

47. Mahindra World City Developers Limited

48. Mahindra Infrastructure Developers Limited

49. Mahindra Integrated Township Limited

50. Mahindra World City (Maharashtra) Limited

51. PT Tech Mahindra Indonesia (upto 22 nd March, 2010)

52. Mahindra Forgings International Limited

53. CanvasM Technologies Limited (upto 22 nd March, 2010)

54. CanvasM (Americas) Inc. (upto 22 nd March, 2010)

55. Mahindra Forgings Europe AG

56. Gesenkschmiecle Schneider GmbH

57. JECO-Jellinghaus GmbH

58. Falkenroth Umformtechnik GmbH

59. Mahindra Vehicle Manufacturers Limited

60. Sch6neweiss & Co. GmbH

61. MHR Hotel Management GmbH

62. Mahindra Forgings Limited

63. Mahindra Rural Housing Finance Limited

64. Mahindra Hotels and Residences India Limited

65. Mahindra Forgings Global Limited

66. Bristlecone (Malaysia) SDN.BHD

67. Tech Mahindra (Malaysia) SDN.BHD (upto 22 nd March, 2010)

68. Mahindra Castings Limited (formerly known as Mahindra Castings Private


Limited)

69. Knowledge Township Limited (formerly known as Mahindra Knowledge City


Limited)

70. Mahindra Holdings Limited

71. Mahindra Logistics Limited

72. Tech Mahindra (Beijing) IT Services Limited (upto 22 nd March, 2010)

73. Mahindra Navistar Engines Private Limited

74. Mahindra Residential Developers Limited

75. Mahindra Graphic Research Design s.rl.

76. Mahindra Aerospace Private Limited

77. Heritage Bird (M) SDN.BHD

78. Mahindra First Choice Services Limited

79. Mahindra Bebanco Developers Limited


80. Mahindra Gears Global Limited

81. Mahindra Gears Cyprus Limited

82. Mahindra Gears International Limited

83. Metalcastello s.r.l. (formerly known as Mahindra Metalcastello s.rl.)

84. Industrial Township (Maharashtra) Limited (formerly known as Mahindra


Industrial Township Limited)

85. Metalcastello S.p.A (upto 311t December, 2009)

86. Crest Geartech Private Limited

87. Engines Engineering s.r.l.

88. EFF Engineering s.r.l.

89. ID-EE s.r.l.

90. Mahindra Business & Consulting Services Private Limited (formerly


known as Mahindra IT Consulting Private Limited)

91. Mahindra Automotive Australia Pty. Ltd.

92. Mahindra Two Wheelers Limited

93. Mahindra United Football Club Private Limited

94. Defence Land Systems India Private Limited (formerly known as Mahindra
Defence Land Systems Private Limited)

95. Mahindra Yeuda (Yancheng) Tractor Company Limited

96. Venturbay Consultants Private Limited (upto 22nd March, 2010)

97. Mahindra Metal One Steel Service Centre Limited (w.e.f. 11th June,
2009)

98. Raigad Industrial & Business Park Limited (w.e.f. 18th June, 2009)

99. Retail Initiative Holdings Limited (w.e.f. 1st July, 2009)

100. Mahindra Retail Private Limited (w.e.f. 1st July, 2009)

101. Mahindra Technologies Services Inc. (w.e.f. 4th June, 2009)

102. Tech Mahindra (Nigeria) Limited (from 18th August, 2009 to 22nd March,
2010)

103. Mahindra Punjab Tractors Private Limited (w.e.f. 9th October, 2009)

104. Tech Mahindra Bahrain Limited S.P.C. (w.e.f. 3rd November, 2009 & upto
22nd March, 2010)

105. Mahindra EcoNova Private Limited (w.e.f. 2nd January, 2010)

106. Mahindra Conveyor Systems Private Limited (w.e.f. 4th January, 2010)

107. BAH Hotelanlagen AG (w.e.f. 11th January, 2010)

(b) Other parties with whom transactions have taken place during the year.

(i) Associates:

Name of the Company

1. Mahindra Composites Limited

2. Mahindra Construction Company Limited


3. Owens Comings (India) Limited

4. Satyam Computer Services Limited (from 5th May, 2009 to 22nd March,
2010)

5. Swaraj Automotives Limited

6. Swaraj Engines Limited

7. Mahindra Water Utilities Limited

(ii) Joint Venture

Name of the Company

1. Mahindra Sona Limited

2. Tech Mahindra Limited (w.e.f 23 rd March, 2010)

(iii) Key Management Personnel

Vice Chairman and Managing Director : Mr. Anand Mahindra


Executive Directors : Mr. B.N. Doshi
Mr. A.K. Nanda

(iv) Welfare Funds

Name of the Fund

1. Mahindra World School Education Trust

2. M&M Benefit Trust

3. M&M Employee's Welfare Fund

4. M&M Employee's Farm Equipment Sector Employee's Welfare Fund

(c) The related party transactions are as under

Rupees crores

Nature of Subsidiaries Associate Joint Key Welfare


Transactions Companies Ventures ManagementFunds
Personnel
1. Purchases

Goods 9,65.63 3,08.90 84.60 - -


(6,58.26) (1,58.49) (66.72) - -

Fixed Assets 14.34 - - - -


(7.41) (-) (-) (-) (-)

Services 6,25.67 0.04 - - -


(3,34.45) (-) (-) (-) (-)

2. Sales

Goods 5,41.53 1.31 - - -


(4,09.72) (1.22) (-) (-) (-)

Fixed Assets 2.10 - - - -


(8.19) (0.16) (-) (-) (-)

Services 1,03.93 0.55 0.05 - -


(1,25.00) (4.96) (0.05) (-) (-)

3. Investments

Purchase/Subscribed 4,34.66 - - - -
(10,04.39) (-) (-) (-) (0.01)
Sales/Redemption 39.99 - - - -
(28.75) (-) (-) (-) (-)

4. Deputation of
Personnel:

From Related Parties 0.23 - - - -


(1.59) (-) (-) (-) (-)

To Related Parties 10.98 4.15 - - -


(17.35) (0.52) (-) (-) (-)

5. Write off of 2.20 - - - -


Receivables (-) (-) (-) (-) (-)

6. Write Back of 19.52 - - - -


Provision for doubtful (-) (-) (-) (-) (-)
debts/advances

7. Provision for - - - -10.00


doubtful debts/ (19.52) (-) (-) (-) (-)
advances

8. Managerial- - - 6.56 -
Remuneration (-) (-) (-) (5.15) (-)

9. Stock Options - - - 0.05 -


(-) (-) (-) (0.07) (-)

10. Finance:

Inter Corporate 4,22.24 - - - -


Deposits given (6,19.59) (-) (-) (-) (-)

Inter Corporate 2,88.41 - - - -


Deposits refunded(2,99.61) (-) (-) (-) (-)
by parties.

Inter Corporate - - - - -
Deposits taken(5.00) (-) (-) (-) (-)

Inter Corporate - - - - -
Deposits refunded (5.00) (-) (-) (-) (-)
to parties

Interest received 54.31 0.46 - - -


(24.19) (1.85) (-) (-) (-)

Interest Paid 0.44 - - - -


(1.47) (-) (-) (-) (-)

Dividend received 83.29 2.60 1.31 - -


(1,31.83) (0.28) (0.98) (-) (-)

Security Deposits 0.81 - - - -


Paid (-) (-) (-) (-) (-)

Security Deposits 0.66 - - - -


Refunded (-) (-) (-) (-) (-)

11. Issue of Ordinary - - - - -


(Equity) Shares (-) (-) (-) (-) (14,59.76)

12. Dividends- - - 0.4526.86


(-) (-) (-) (0.52) (1.05)

13. Guarantees & 1,67.99 - - - -


Collaterals given(1,19.58) (-) (-) (-) (-)

14. Other
Transactions:

Other Income 9.64 0.29 - -25.91


(10.88) (0.28) (-) (-) (-)

Other Expenses 20.60 - - - -


(17.71)

Reimbursements 1,10.16 1.04 0.03 - -


received from (2,01.55) (0.02) (0.03) (-) (-)
parties

Reimbursements 87.44 0.02 - - (25.91)


made to parties (1,29.43) (0.02) (-) (-) (-)

Advance Given 8.49 - - - 7.00


(5.74) (-) (-) (-) (15.00)

Advance Received 1.00 - - - -


(-) (-) (-) (-) (-)
15. Outstandings
Payable 1,73,25 1.36 7.61 3.10 -
(1,24.62) (3.26) (11.20) (2.21) (-)

Receivable 3,49.13 2.72 0.01 22.00 -


(1,38.46) (12.31) (0.01) (15.00) (-)

Debenture issued 50.00 - - - -


by parties (45.00) (-) (-) (-) (-)

Inter Corporate 5,14.72 4.59 - - -


Deposits given (4,00.78) (4.59) (-) (-) (-)

Guarantees & - - - - -
Collaterals given 2,86.91 - - - -
(1,63.67) (-) (-) (-) (-)

Security Deposit5.79 - - - -
Paid (5.03) (-) (-) (-) (-)

Security Deposit1.85 - - - -
Received (2.51) (-) (-) (-) (-)

16. Provision for 5.99 6.69 - - 10.00


doubtful debts/ (25.51) (6.69) (-) (-) (-)
advances

Previous year's figures are given in brackets.

The significant related party transactions are as under:

Rupees crores

AssociateJoint
Nature of Amount Companies Amount Ventures Amount
Transactions
& Subsidiaries

1. Purchase-Goods &
Mahindra Intertrade 1,60.19 Swaraj 2,94.63 Mahindra84.60
Limited (1,24.93) Engines (1,50.60) Sona (66.72)
Limited Limited

Mahindra Ugine Steel 3,84.61


Company Limited (3,08.92)

Mahindra Forgings 1,11.14


Limited (77.32)

Mahindra Vehicle 1,08.60


Manufacturers Ltd(-)
2. Purchase-Services
& Mahindra Logistics 5,13.81 Satyam 0.04
Limited (2,37.42) Computer (-)
Services
Limited

Mahindra Engineering -
Services Limited (44.05)

3. Sale-Goods &
Mahindra USA Inc. 1,35.45 Swaraj 1.31
(1,05.37) Engines (1.22)
Limited
Mahindra Navistar 1,48.28
Automotives Limited (92.61)

Mahindra & Mahindra 65.76


South Africa (58.22)
(Proprietary) Ltd

NBS International Ltd 79.12


(64.89)

4. Sale-Services &

Mahindra Navistar 43.90 Owens 0.47 Mahindra 0.05


Automotives Limited (34.37) Corning (3.21) Sona Ltd (0.05)
(India) Ltd

Mahindra Renault 44.38 Satyam 0.07


Private Limited (76.27) Computer (-)
Services
Limited

Swaraj
Engines-
Limited (1.43)
5. Investments -
Purchase &
Mahindra Navistar 43.69
Automotives Limited (1,12.97)

Mahindra Vehicle 1,00.00


Manufacturers Ltd(3,60.20)

Mahindra Overseas 65.82


Investment Company (1,09.43)
(Mauritius) Limited

Mahindra Forgings 55.83


Limited (-)

Mahindra Navistar 62.98


Engines Private Ltd (-)

Mahindra Gears -
International Ltd(1,53.14)

Mahindra Two -
Wheelers Limited (1,17.99)

6. Investments-Sale
& Tech Mahindra 5.71
Limited (-)

Mahindra Intertrade 14.27


Limited (-)

7. Investments -
Redemption &
Mahindra & Mahindra 20.00
Financial Services (10.00)
Limited

Mahindra Intertrade-
Ltd (18.75)

8. Advances Given & 5.39


Mahindra Integrated (-)
Township Limited

Defence Land Systems 2.73


India Private Limited

Mahindra Ugine -
Steel Company Limited (2.13)

Mahindra Automotive-
Australia Pty. Ltd. (3.57)

9. Inter Corporate
Deposits given &
Mahindra Overseas 62.38
Investment Company (-)
(Mauritius) Limited

Mahindra Forgings 56.50


Limited (-)

Mahindra Vehicle 2,05.00


Manufacturers Ltd(1,00.00)

Mahindra Two -
Wheelers Limited (1,02.00)

Mahindra & Mahindra


Financial Services -
Limited (1,85.00)

10. Inter Corporate


Deposits refunded
by parties &

Mahindra Forgings 1,00.50


Limited (-)

Mahindra Vehicle 75.00


Manufacturers Ltd

Mahindra Castings 38.00


Limited (-)

Mahindra & Mahindra


Financial Services -
Limited (1,70.00)

Mahindra Engineering -
Services Limited (40.00)

Mahindra Two -
Wheelers Limited (67.00)

11. Guarantees given


& Mahindra USA Inc. 94.42
(-)

Mahindra Forgings 73.57


Limited

Mahindra Renault -
Private Limited (1,19.58)

Previous year's figures are given in brackets.

MAHINDRA & MAHINDRA LIMITED

30. Joint Venture Disclosure

(i) Jointly Controlled Entities by the Company

Name of the Entity Country of Incorporation % Holding

a) Tech Mahindra Limited


(w.e.f. 23rd March, 2010India 43.99%

b) Mahindra Sona LimitedIndia 29.77%

c) PSL Erickson Limited India 18.06%

(ii) Interests in the Assets, Liabilities, Income and Expenses with respect
to Jointly Controlled Entities.

Rupees crores

2010 2009
1. ASSETS

1. Fixed Assets 415.17 8.03

2. Investments 1,326.13 0.05

3. Current Assets, Loans


and Advances

(a) Inventories 7.26 4.59

(b) Sundry Debtors 469.43 10.22

(c) Cash and Bank Balances 100.83 3.40

(d) Loans and Advances 297.02 1.23

4. Deferred Tax - Net 12.14 0.25

II. LIABILITIES

1. Loan Funds

(a) Secured Loans 330.24 0.82

(b) Unsecured Loans 271.51 -

2. Current Liabilities and Provisions

(a) Liabilities 267.61 6.14

(b) Provisions 124.78 1.62

3. Deferred Revenue 337.71 -

III. INCOME

1.Sales 109.61 44.57

2. Other Income 4.60 2.21

IV. EXPENSES

1. Raw Materials, Finished and


Semi Finished Products 34.65 26.73
2. Excise Duties 3.83 4.09

3. Manufacturing, Selling Expenses, etc. 54.11 9.34

4. Depreciation/Amortisation 2.69 0.76

5. Provision for Taxation 4.85 2.20

V. OTHER MATTERS

1. Contingent Liabilities 59.50 3.90

2. Capital Commitments 118.01 0.29

31. Additional information pursuant to the provisions of paragraphs 3(i)(a)


and (ii), 4C and 4D of Part 11 of Schedule VI to the Companies Act, 1956 -
See Schedule XVIL Previous year's figures are indicated below the current
year's figures.

32. Additional information pursuant to the provisions of Part IV of


Schedule VI to the Companies Act, 1956 - See Schedule XVII.

33. Previous year's figures have been regrouped/restated wherever


necessary.

34. Additional Information pursuant to the Provisions of Paragraphs 3


(i)(a) and (ii), 4C and 4D, of Part 11 of Schedule VI to the Companies Act,
1956.

(A) PARTICULARS IN RESPECT OF GOODS MANUFACTURED:

Class of Goods A B C D EF

1. a. On Road
Automobiles
having four or
more wheels
such as light,
medium and heavy
commercial
vehicles, jeep
type vehicles
and passenger
cars covered
under sub heading
(5) of Heading (7)
of First Schedule Nos. 3,60,000 3,04,000 2,33,533 2,937 108.11
2,76,000 2,50,000 1,58,715 5,826 256.52

b. Three Wheelers Nos. 66,000 60,000 45,717 1,205 13.89


1,11,000 72,000 43,278 2,753 29.28

2. a. Agricultural
Tractors [Note
(iv) below] Nos. 2,29,000 2,33,000 1,71,550 8,671 232.77
2,14,000 2,33,000 1,17,847 9,438 254.16
b. Tractor Skids These are 1,726 23 1.66
manufactured 1,251 168 6.61
again st
spare
capacity
under 2(a)

3. Manufactured
and Purchased
Parts and
Accessories for
sale [Notes
(iii)(a) and
(b) below] Nos. These are 4,91,260 - 91.53
manufactured 4,27,952 - 94.97
against
spare
capacity
under 1
and 2 above

4. Internal
Combustion
Piston Engines Nos. 1,75,000 1,75,000 1,68,683 1,361 10.08
1,75,000 1,50,000 1,18,036 1,162 8.15

5. Diesel Genset Nos. 24,000 Assembly 21,751 159 2.96


24,000 at 3rd Party 26,227 115 2.04
Locations

6. Engines Nos. These are 26,144 385 2.1


manufactured 25,904 439 2.7
against
spare
capacity
under 2(a)

7. Forklifts Nos. 300 300 110 6 0.41


300 300 46 7 0.51

8. Harvester
Combines Nos. 300 300 324 1 0.11
300 300 136 2 0.25

9. Others 0.03
0.01

10. Export benefits

Class of Goods G H IJ

1. a. On Road
Automobiles
having four or
more wheels
such as light,
medium and heavy
commercial
vehicles, jeep
type vehicles
and passenger
cars covered
under sub heading
(5) of Heading (7)
of First Schedule Nos. 4,365 155.98 2,31,703 10,721.10
2,937 108.11 1,61,189 7,646.72

b. Three Wheelers Nos. 1,525 15.14 45,360 530.15


1,205 13.89 44,806 517.68

2. a. Agricultural
Tractors [Note
(iv) below] Nos. 6,963 191.11 1,73,217 6,408.61
8,671 232.77 1,18,565 4,333.56
b. Tractor Skids 98 4.27 1,647 92.06
23 1.66 1,386 65.35

3. Manufactured
and Purchased
Parts and
Accessories for
sale [Notes
(iii)(a) and
(b) below] Nos. - 90.01 - 888.16
- 91.53 - 621.08
4. Internal
Combustion
Piston Engines Nos. 1,225 9.49 11,179 106.66
1,361 10.08 9,034 89.25

5. Diesel Genset Nos. 114 1.83 21,796 451.78


159 2.96 26,183 592.15

6. Engines Nos. 903 3.43 25,626 246.15


385 2.17 25,958 248.41

7. Forklifts Nos. 2 0.13 113 8.24


6 0.41 46 3.52

8. Harvester
Combines Nos. 23 2.73 302 42.41
1 0.11 137 16.47

9. Others 0.17 10.04


0.03 4.42

10. Export benefits 18.97


26.99

Total 19,524.33
14,165.60
*****
A = Unit of Measurement

B = Licenced Capacity per annum [Note (i)]

C = Installed Capacity per annum [Note (i)]

D = Actual Production [Notes (ii) & (iii)(a)]

E = Opening Stock - Quantity

F = Opening Stock - Value Rupees crores

G = Closing Stock - Quantity

H = Closing Stock - Value Rupees crones

I = Sales - Quantity

J = Sales - Value Rupees crones

Notes:

(i) (a) The installed capacity has been certified by President/Chief


Executives, which the auditors have relied on without verification as this
is a technical matter.

(b) The licensed capacities include/represent, as the case may be,


registrations granted and Industrial Entrepreneur Memorandum filed with,
and duly acknowledged by, the Government pursuant to the schemes of cle-
licensing [Also see note (iv) below].

(c) Within the overall licensed capacity in itern 1 above, the Company is
permitted to manufacture for outside sale 10,000 petrol/cliesel engines and
4,000 tonnes grey iron castings.

(d) Bullet proof work and fabrication on base vehicles has been carried out
at third party facilities. Nil (2009 : 110) Vehicles were produced and sold
using such third party facilities and are included in itern (A) 1(a).

(e) The installed capacity mentioned against itern no. (A) 1 (a) above
includes 48,000 (2009 : 48,000) for production of vehicles for third
parties.
(ii) Actual Production includes production for captive consumption.

(iii) (a) The actual production disclosed against manufactured corn


ponents/sub-assern blies/steel blanks is the number of such components
transferred during the year to the Marketing Unit/Spare Parts Stores for
sale or sold otherwise.

(b) The Opening and Closing Stocks and Sales of goods shown under itern 3
above consist of manufactured and purchased parts. The bifurcation of
stocks/sales into manufactured and bought-out parts is not practicable.

(iv) Licenced capacity in respect of Agricultural Tractor includes a Letter


of Intent from the Government of India for expansion of the manufacturing
capacityfrorn 25,000 to 60,000 tractors at Mumbai subject to fulfillment of
conditions mentioned therein; an Industrial Licence will be issued on
fulfillment of the conditions mentioned in the Letter of Intent.

(B) PARTICULARS IN RESPECT OF GOODS TRADED:

Purchases Opening Stock

Unit of
Class of Goods Measurement Quantity Value Quantity Value
Rupees Rupees Rupees Rupees
crores crores crores crores

1. Tractors Nos. 317 9.00 501.75


269 7.29 36 1.13

2. Agricultural
Implements Nos. 10,168 57.35 436 5.98
6,178 41.47 2,230 3.62

3. Four Nos. 5,272 151.40 - -


Wheelers 693 27.41 - -

4. Bought-out
Spares for
Resale [Note
(iii)(b) to375.64
item 'A'] 263.96

5. Diesel
Genset &
Genset
Engines Nos. 1,523 18.61 68 0.34
277 3.09 - -

6. Others 49.05 0.02


2.93 -

Total 661.05 8.09


346.15 4.75

Note (iv) to item (A).

Closing Stock Sales

Unit of
Class of Goods Measurement Quantity Value Quantity Value
Rupees Rupees Rupees Rupees
crores crores crores crores

1. Tractors Nos. 35 1.24 332 12.47


50 1.75 251 8.90

2. Agricultural
Implements Nos. 865 9.41 9,739 69.34
436 5.98 7,972 50.32

3. Four Nos. 211 5.01 5,056 149.16


Wheelers - - 693 31.20

4. Bought-out
Spares for
Resale [Note
(iii)(b) to - - - -
item 'A'] - - - -

5. Diesel
Genset &
Genset
Engines Nos. 166 1.33 589 17.93
68 0.34 209 3.16

6. Others 0.10 58.83


0.02 9.23

Total 17.09 307.73


8.09 102.81

Note (iv) to item (A).

(C) PARTICULARS OF RAW MATERIALS AND COMPONENTS CONSUMED

Unit of Value
Description Measurement Quantity Rupees crores

1. Steel Items
(Sheets, Tubes, etc.) Nos. 1,13,459 }
89,522 } 274.13
Metric Tonnes 48,042 } 191.00
32,290 }

2. Aluminium Sections
and Other Aluminium
Items Kgs. 38,801 0.47
10,339 0.14

3. Other Metals
(Steel Shots, Lead,
Tin, etc.) Metric Tonnes 120 0.45
119 0.56

4. Paints Nos. 8,75,017 }


7,49,035 }
Metres 2,58,903 }
1,83,583 } 96.11
Kgs. 26,35,185 } 72.85
19,36,747 }
Litres 47,30,889 }
35,76,788 }
5. Steel Scrap Metric
Tonnes 8,891 17.24
7,898 19.83
6. Pig Iron Metric
Tonnes 11,157 23.64
8,880 25.42

7. Miscellaneous
Foundry Materials Nos. 19,28,687 }
15,45,939 }
Metric Tonnes 14,396 } 16.59
12,585 } 16.32
Litres 4,42,660 }
3,36,844 }

8. Other Materials
(Direct Stores,
Patterns, Oils, etc.) Not practicable to *102.76
give quantitative
details *78.19
9. Tyres and Tubes Nos. *35,45,832 *664.70
*27,31,682 *473.90

10. Components other


than Tyres and Tubes
(including processing
charges) *10,091.32
*7,593.08

11. Material handling


and transportation
charges, etc. incurred
on the above items not
separately allocable 408.15
300.50

Total 11,695.56
8,771.79

Includes items used for other than production, amounts not ascertained.

Notes :

(i) The consumption in value has been ascertained on the basis of opening
stock plus purchases less closing stock and includes the adjustment of
excesses and shortages as ascertained on physical count and write-off of
obsolete and unserviceable raw materials and components.

(ii) The consumption in value shown against item 10 is a balancing figure


based on the total consumption shown in the Profit and Loss Account.

(D) VALUE OF IMPORTS ON C.I.F BASIS ACCOUNTED FOR DURING THE YEAR

Rupees crores

2010 2009

1. Raw Materials 1.17 0.65

2. Components, Spare Parts, etc . 225.86 153.81

3. Capital Goods 98.61 81.48

4. Items imported for Resale 27.01 13.77

Total 352.65 249.71

Notes:

(i) Credits, if any, recoverable in respect of short landings, etc. are not
considered.

(ii) The value of imports shown above includes:

(a) Imports on C&F basis as per suppliers' invoices Rs. 12.55 crores (2009
: Rs.4.82 crores)

(b) Imports on 'cost' basis Rs. 203.09 crores (2009 : Rs. 163.52 crores)

(E) EXPENDITURE IN FOREIGN CURRENCIES (SUBJECT TO DEDUCTION OF TAX WHERE


APPLICABLE)

Rupees crores

2010 2009

1. Professional and Consultancy


Fees [including Rs. 0.89 crores
(2009 : Rs. 6.35 crores) capitalised] 34.82 43.35
2. Commission on Exports 1.21 0.84

3. Interest & Commitment charges 42.85 55.31

4. Others 69.68 70.32

Total 148.56 169.82

Notes:

(1) Fee for use of technology, development expenditure and software


expenditure [refer to in Note 1 (C):

(a) written off during the year Rs. 9.17 crores (2009 : Rs. 8.91 crores);
and

(b) amount remitted during the year Rs. 76.18 crores (2009 : Rs. 59.81
crores) net of tax deducted at source of Rs. 5.92 crores (2009 : Rs. 6.11
crores) are not included in the above figures.

(F) REMITTANCE IN FOREIGN CURRENCY ON ACCOUNT OF DIVIDENDS TO NON-RESIDENT


SHAREHOLDERS

Number of Amount Dividend relating to


remitted
Shareholders Equity shares

2010 : 1 120 * Year ended 31st March, 2009


2009 : 1 120 * Year ended 31st March, 2008

(G) EARNINGS IN FOREIGN EXCHANGE

Rupees crores

2010 2009

1. Export of goods
on F.O.B. basis 719.37 632.36

2. Interest 9.60 14.74

3. Others (freight, etc.) 32.47 44.15

Total 761.44 691.25

Notes:

F.O.B. value of exports includes local sales which qualify for export
benefits and for which payment is receivable in foreign currency and
local/export sales under rupee credit which qualify for export benefits.

(H) VALUE OF IMPORTED AND INDIGENOUS CONSUMPTION:

aw Materials and Components


Rupees crores %

1. Imported 177.61 1.52


121.97 1.39

2. Indigenously obtained 11,517.95 98.48

8,649.82 98.61

Total 11,695.56 100.00

8,771.79 100.00

Includes items used for other than production, amount not ascertained.

Notes:
(1) Items purchased through canalising agencies have been considered as
imported.

(2) See Note (i) to item (C).

(3) In giving the above information the Company has taken the view that
spares and components as referred to in paragraph 4 (D)(c) of Part 11 of
Schedule VI covers only such items as go directly into production.

* Denotes amounts less than Rs. 50,000

M.M. Murugappan
N. Vaghul
R.K. Kulkarni
A.S. Ganguly
A.P. Puri
N.B. Godrej
A.K. Dasgupta
Deepak S. Parekh
Directors

Keshub Mahindra
Chairman

Anand G. Mahindra
Vice Chairman & Managing Director

Bharat Doshi
Executive Director

Narayan Shankar
Company Secretary

Place: Mumbai
Date : 29th May, 2010

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