Design and Developed by Bounce Design Printed by Thompson Press

DRIVEN BY PASSION

A N N UA L R E P O R T 0 7

0 8

Hero Honda Motors Limited 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi-110 057, India PH. 91-11-2614 2451, 2614 4121

GLAMOUR PLEASURE GLAMOUR www.herohonda.com FI KARIZMA SPLENDOR SUPER SPLENDORPLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CDSPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDORDELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSIONSUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FIPASSION PLUS CD DELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXGKARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ X-TREME PLEASUREACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDORGLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZPLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPERX-TREME PLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSIONSPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FIPASSION PLUS CD DELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXGKARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ X-TREME PLEASUREACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ X-TREME PLEASURE GLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDORGLAMOUR GLAMOUR FI KARIZMA SPLENDOR SUPER SPLENDOR SPLENDOR PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ PLUS SPLENDOR NXG ACHIEVER HUNK PASSION PASSION PLUS CD DELUXE CBZ

India and Bharat co-exist today. India comprises of fastgrowing cities and towns; Bharat is made up of villages entering the economic mainstream. As we enter our 25th year, we seek to walk and march with both India and Bharat.

H
Corporate Profile 04 Chairmans Message 10 Board of Directors 14

Management Discussion & Analysis 16 Industry and Segment Dynamics 18 Results and Financial Analysis 24 Operation, Reach & Supply Chain 28 People And Environment 32

CONTENT

Social Responsibility 36 Directors Report 43

Corporate Governance Report 47 FAQs 71

Auditors Report 74 Balance Sheet 78

Profit & Loss Account 79 Cash Flow Statement 80 US GAAP 115

02

03

CORPORATE PROFILE
If your actions inspire others to dream more, learn more, do more and become more, you are a leader.

In some ways, Hero and Honda are like two volumes of a single book. What has made the book a bestseller is the fact that right from the outset, the co-authors knew the script they had to write in order to be successful in the Indian market. Over the course of two and a half decades, both partners have finetuned and perfected their roles. As the largest motorcycle producer in the world, Honda has been able to consistently provide technical knowhow, design specifications and R&D innovations to its most prolific affiliate in the world, Hero Honda. This has led to the development of world class, valuefor-money motorcycles and scooters for the Indian market. On its part, the Hero Group has taken on the singular and onerous responsibility of developing the supply chain, ramping up production facilities, setting up distribution networks and creating customers. Since both partners are completely focused on their respective skills, they have been able not just to complement each other, but also draw from each others strengths. In the process, Hero Honda has gone on to create history, by becoming one of the most successful joint ventures in the world. Today, every second motorcycle sold in the country is a Hero Honda. There are more than 22 million Hero Hondas on

Indian roads today. There are more Hero Honda bikes on this country's roads than the total population of some European countries put together! The company's growth in the twowheeler market in India is the result of an intrinsic ability to increase reach in new geographies and growth markets. Hero Honda's motorcycles and scooters are sold and serviced through a network of over 3500 customer touch points. These outlets comprise of a mix of dealers, service centres and stockists located across rural and urban India, and with every passing year, the network is augmented. Hero Honda has built two world-class manufacturing facilities at Dharuhera and Gurgaon in Haryana. These two units now churn out over 3 million bikes per year. The company's third, and its largest and most sophisticated plant at Haridwar has also gone on-stream. All this has happened in the span of just two and a half decades! Leaders create pathways where none exist. In the 1980s much before green became a fashionable word, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads. The company introduced new generation motorcycles that set industry benchmarks for fuel thrift and low emission.

A legendary Fill it - Shut it - Forget it' campaign captured the imagination of commuters across India and Hero Honda sold millions of bikes purely on the commitment of increased mileage. Today, as Hero Honda enters its silver jubilee year, a riveting Dhak Dhak Go sets the tone for India's Gen Next, its emerging classes and its aspiring classes. The true test of champions comes when the going gets tough. Champions show the way by doing the basic things right. In a particularly difficult year, when the rest of the motorcycle industry shrunk by 14 per cent, Hero Honda has protected its turf and has actually grown its market share, by re-establishing a lead of more than one million bikes over its nearest rival. Not one to rest on its laurels, the company believes the best is yet to come. Today, Hero Honda is powering its way through a market that despite the short term hiccuphasn't still unleashed its true potential, since barely 2 per cent of the population has been penetrated so far. Not surprisingly, the company is in no mood to take its hand off the throttle. As Brijmohan Lall Munjal, the Chairman, Hero Honda Motors succinctly puts it, "We pioneered India's motorcycle industry, and it's our responsibility now to take the industry to the next level. We'll do all it takes to reach there.'

04

05

06

07

WE CELEBRATE EVENTS AND WE CELEBRATE TIME. BUT OUR MOST IMPORTANT CELEBRATIONS, ARE OF ACHIEVEMENTS.

CHAIRMANS MESSAGE

Dear Shareholders, As I sat on the stage during the inauguration of our third plant in April this year, a fleeting thought crossed my mind: have we really entered our 25th year? I remembered vividly how we started a quarter of a century ago: our first plant came up in the wilderness. We used dirt tracks to reach our factory. Yet here I was, sitting in front of India's first automobile factory that connects vendors through conveyor belts! Friedrich Nietzsche once famously remarked: For a tree to become tall, it must grow tough roots along the rocks''. As we enter our silver jubilee year, we have shown how. As interest rates climbed during the year, the industry went into de-growth, against all expectations and projections. Domestic motorcycle sales shrunk by 12 per cent and for the first time in more than a decade, motorcycle's share of the overall twowheeler pie actually came down by around 2 per cent. For most of the two-wheeler industry therefore, managing 2007-08 was like trying to grow on rocky terrain. The subsoil was far from nourishing and the business climate was harsh. Yet, strong companies, like strong trees, learn to adapt and adjust. They grow tough roots along the rocks.

10

11

Luckily, we weathered the storm -- and actually surpassed our tally of the previous year marginally. More significantly, your company boosted its share in the domestic motorcycle market to more than 54 per centthe highest share in recent memory. As the year ended, your company led its nearest competitor in the domestic two-wheeler market by more than 1 million units. I think it would be safe to summarise 2007-08 as the year in which we migrated from schemes to themes. Despite difficult market conditions, we resisted the temptation to bump up sales artificially through comprehensive festival-related discounts. Instead, we invested in new models and upgrades. Our performance in the domestic premium segment gives me special satisfaction, since our share increased from 15 per cent to nearly 24 per cent. In my last message, I talked about our plans to consolidate our presence in this part of the market; we are clearly on track. In my last message, I had said that we were taking measures to ensure that are profitability gets back on track. Near-stagnant topline performance forced us to look inwards: at process efficiencies, at our supply chain and at our sales frontline. We tweaked, changed and rationalised where possible and managed to increase our operating margins from 11.9 per cent to 13.1 per cent. Going forward, I expect our supply chain to become even leaner as ongoing online projects go live. I am happy to report that our online vendor connectivity program which seeks to links our plant with vendor premises on a real-time basis-- has made rapid progress, with more than 70 per cent of vendors seamlessly integrated. Likewise, dealer management system software is also rolling out on a national basis very shortly. In my last message, I had also said that the slowdown would be temporary. This year, when conditions are even more trying, I continue to hold this view. This company has coped with high interest

rates before. This company has coped with double-digit inflation before. So what we are seeing today is nothing extraordinary. Of course, good times do not last foreverperhaps years of 30 per cent growth will become rare in the future. But just as good times don't last forever, nor do bad times. The current degrowth in the industry is also an aberration caused by external factors outside the control of the auto industry. It is not driven by fundamentals. Indeed, the ground conditions that drove this country and this company have not changed. Two Indias exist today. Both excite me equally. By the end of this decade, India is expected to have an urban population of 173 million. This is significant, since urbanisation rises with GDP per capita in a hockey stick fashion. I am equally excited about rural India. Government development schemes are finally showing signs of working at the grassrootslandless farmers from Uttar Pradesh and Bihar who traditionally migrated to Punjab to work are now demanding higher wages to come, since there is work available at home, for the first time. In 1990, for every Rs. 4300 earned by an Indian villager, an urbanite made Rs. 3526 more. Today, the difference has dropped to Rs. 2408. This is a clear sign of progress. Increasingly, the rural economy is a microcosm of the national economy. Today, India's 700 million villagers now account for the majority of consumer spending in the country, more than Rs. 4300 billion a year. Millions step into consumerism each year, graduating from the economics of necessity to the economics of gratification, buying themselves products we make. We in Hero Honda are actively seeking to be part of this miracle. In December 2007, we launched a unique national level rural connect program called Haar Gaon, Haar Aangan (every village, every house). It is my belief that this program, as it gains critical momentum in the years to come, it will sustain this company well into the next decade.

Marching with India and walking with Bharatthis, I believe, should be our leitmotif in our silver jubilee year. We chose to see 2007-08 like a glass of half-full water; and we were able to make the most of adversity. Yet I would like to stress that the road ahead won't be entirely smooth. Throughout the year in review, customers in the entry and executive segments began to postpone buying decisions. By the middle of the fiscal, effective interest rates for the twowheeler industry hovered around 20 per cent. Being motorcycle-centric, we were also affected. The high rates led to largescale delinquencies and defaults in a number of regions. This in turn forced financiers to withdraw loan facilities in a number of dealerships. High interest rates continue as I write this, but these are beyond our control. Nevertheless, the management is convinced it can, to an extent, control rampant delinquencies by partnering NBFC lenders with regional strengths and strong grassroot connections, instead of depending entirely on national level banks. Though much smaller in size, regional non-banking financial companies are able to leverage their excellent domain knowledge on local borrowers. This ensures extremely low levels of nonperforming assets. These NBFCs could be our ideal finance partners, especially in smaller towns and rural areas, where national-level banks have poor distribution networks. We tied up with a regional financier during the year and hope to sew up more regional tieups in the months to come. Inflation is another concern. While it is true that double-digit inflation of 11-12 per cent would certainly upset household budgets and postpone certain purchases, the rise in auto fuel prices might actually turn out to be a blessing in disguise for the two-wheeler industry. It is my belief that costeffective and fuel-efficient modes of transport will become more popular. In fact, I will not rule out the possibility of a number of car-owning homes actually buying an additional two-wheeler to

reduce the impact of the monthly fuel bill on the household budget. Since fuel prices are not expected to soften in the near term, fuel-efficient industries such as ours could be beneficiaries. We will continue to be confident and aggressive about the future, we will also be patient. I read somewhere that patience is waiting. Not passively waiting - that is laziness; but to keep going when the going is hard and slow - that is real patience. Yours sincerely,

Brijmohan Lall Chairman

12

13

BOARD OF DIRECTORS

ALTERNATE DIRECTOR
Brijmohan Lall Munjal Chairman Om Prakash Munjal Non-Executive Director Satoshi Matsuzawa
(Alternate Director to Mr. Takashi Nagai)

OUTGOING DIRECTORS
Pawan Munjal Managing Director & CEO Masahiro Takedagawa Non-Executive Director Tatsuhiro Oyama
Non-Executive Director (upto May 11, 2007)

Dr. Vijay Laxman Kelkar

Non-Executive and Independent Director (upto December 31, 2007)

Toshiaki Nakagawa Joint Managing Director

Sunil Kant Munjal Non-Executive Director

Yutaka Kudo
Whole-time Director (upto May 31, 2008)

Sumihisa Fukuda Technical Director

(w.e.f. June 01, 2008)

Takashi Nagai Non-Executive Director

(w.e.f. May 11, 2007)

Narinder Nath Vohra

Non-Executive and Independent Director (upto June 24, 2008)

Pradeep Dinodia Non-Executive and Independent Director

Ms. Shobhana Bhartia Non-Executive and Independent Director

COMMITTEE OF DIRECTORS
Audit Committee

REMUNERATION COMMITTEE
Gen. (Retd.) Ved Prakash Malik
Chairman

SENIOR MANAGEMENT TEAM

Ravi Sud
Sr. Vice President & CFO

Gen. (Retd.) Ved Prakash Malik Non-Executive and Independent Director

Sunil Bharti Mittal Non-Executive and Independent Director

Pradeep Dinodia
Chairman

Anil Dua
Sr. Vice President-Sales, Marketing and Customer Care

Gen. (Retd.) Ved Prakash Malik

Member

Pradeep Dinodia
Member

Vikram S. Kasbekar Dr. Pritam Singh Non-Executive and Independent Director Meleveetil Damodaran Non-Executive and Independent Director (w.e.f. June 16, 2008) Dr. Pritam Singh
Member

COMPLIANCE OFFICER
Ilam C. Kamboj
G.M. Legal & Company Secretary

Plants Head-Operations and Supply Chain

Dr. Anadi S. Pande

Vice President-HRM, Corporate Planning and Strategy

SHAREHOLDERS' GRIEVANCE COMMITTEE

Dr. Pritam Singh
Chairman

Analjit Singh Non-Executive and Independent Director

Vijay Sethi
Vice President-Information Systems

Pradeep Dinodia
Member

For more information please visit www.herohonda.com

14

15

MANAGEMENT DISCUSSION & ANALYSIS

Industry And Segment Dynamics

Performance Across Segments

Results And Financial Analysis Operations, Reach & Supply Chain

Manufacturing Vendor Mangement Distribution Network Rural Network

People And Environment

The Human Touch Information Systems Environment

Cautionary statement Statements in this management discussion and analysis describing the Company's objectives, projections, estimates and expectations may be 'forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the company's operations include significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relations and interest costs.
16

17

INDUSTRY AND SEGMENT DYNAMICS

A leader leads by example, whether he intends to or not.

In the previous year, there were early signs that growth in the two wheeler industry was slowing. Within the space of a year, the pace of the fall has been quite dramatic, and perhaps for the first time since economic reforms started in 1991, India's domestic two wheeler market entered a period of de-growth. The industry clocked total volumes of 8.03 million during the year in review, a fall of nearly 5 per cent compared to the previous year. The picture was bleaker in the domestic market, where the industry clocked sales of 7.19 million, a decline of 8 per cent. While the motorcycle industry continues to dominate the structure of the two wheeler industry, this category's contribution to the domestic two wheeler industry actually declined during the year from 83 per cent to a little over 79 per centa clear symptom of the ongoing slowdown. In fact, this is the first time since the early nineties since motorcycles share of the two wheeler market has actually declined; reversing a consistently growing trend from the previous year. In contrast, there was another trend reversal during the year. After appearing to go into decline since the early 1990s, the scooter market clocked a revival of sorts during the year. After suffering at the hands of motorcycles for many years, scooter sales in the domestic market as a percentage of motorcycle

sales actually increased from 12.4 per cent to 14.8 per cent. As in previous years, the three price points in the motorcycle segment continued to grow at different paces. Dark clouds had started gathering in the entry segment during the previous year, with sales of entry level bikes growing at just 5 per cent. During the year in review, the entry segment in the domestic market shrunk visibly from over 36 per cent of total motorcycle sales to around 30 per cent. In just two years, the entry segment's share in the total motorcycle mix has declined by 10 percent. This sharp decline shows the clear impact of interest rates on two wheeler buyers at the entry level. Interest rates started firming up in early 2007, and have shown no signs of letting up ever since; the slump in the entry segment has coincided with this rise. This is an indication that the entry segment is very interest elastic, and buyers in this segment (SEC B and C) react to higher interest rates perhaps by either postponing or cancelling their purchase decisions. Rising interest rates impacted the deluxe segment of the motorcycle industry as well, albeit to a lesser extent. It was a matter of some irony that even where all the major players in the executive segment clocked an overall decline in numbers, the executive segment's share of the domestic

motorcycle market actually increased by 4.4 per cent. The executive segment now makes up nearly 57 per cent of the motorcycle segment, compared to 52.5 per cent in the previous year. Quite obviously, the decline of the entry segment has been so sharp, that the absolute reduction in executive segment sales has translated into a relative increase in the executive segment's overall share in the motorcycle mix. The premium segment was the only category of motorcycles that managed to actually increase absolute sales in a sharply declining market. Sales in the domestic market for this segment actually increased by 2.2 per centwhile the premium segment's overall share of the motorcycle market increased from 11.1 per cent to 13 per cent. This shows that of the three segments the interest effect has affected premium buyers the least. This isn't surprising, considering that buyers in the premium segment mostly fall in the SEC A category, who are the least likely to postpone purchase decisions on account of an increase in the EMI. At a broader level, there is no real cause for alarm in the executive segment or the premium segment, despite the current decline and slowdown. According to the National Council of Applied Economic Research (NCAER) in 2001-02, there were 61 million Indians belonging to families that

18

19

earned more than Rs. 2 lacs a year; by 2005-06, that number had crossed 100 million. In 2009-10, this number is projected to increase to 173 million. It is safe to assume that the bulk of the buyers from these segments will opt for either entry or deluxe segment motorcycle offerings. On the other hand, it has now been established beyond doubt that a large chunk of entry segment buyers will continue to react when there is a spike in interest

36.6 per centa clear indication that sales of manufacturers in the entry segment shrank substantially. In contrast, Hero Honda was able to limit the damage and in the process increased its market share. Hero Honda now finds itself in a situation to turn a position of relative weakness into a position of strength. Hero Honda's story in the executive segment was similar. Compared to the

up by a whopping 69 per cent compared to the previous year. In 200607, Hero Honda had grown 25 per cent in this segment. In the course of a single year, the company increased its share of the overall premium motorcycle segment by more than 8 percent; the company's premium bikes now account for 23.5 per cent of the total premium pie. Given the pace of growth of this segment

rates. In other words, two wheeler makers have few options but to ride out the difficult times. Performance Across Segments Hero Honda's sales in the entry segment declined by over 6 per cent; the same as the rest of the motorcycle industry. However, even in a declining market Hero Honda's share of entry segment went up from 28.7 per cent to

previous year, sales of executive segment bikes in the domestic market were down 1.18 per cent. However, the company still maintained its iron-grip in thisthe largest segment of the two wheeler market -- by increasing its share from 68.9 per cent to 71.5 per cent. Hero Honda turned in its best performance in the domestic market's premium segment, where its sales went

against the backdrop of a young and affluent middle class. There is no doubt that this segment will drive Hero Honda's growth in the future.

20

21

FOR US, EVERY CELEBRATION IS ENJOYABLE BECAUSE IT IS DIFFERENT. WHAT MAKES THEM MEMORABLE, ARE THE PEOPLE WE CELEBRATE WITH.

RESULTS AND FINANCIAL ANALYSIS

Sales : Despite a slow down in the two wheeler industry, the annual sales of the Company grew at 0.01 per cent. Hero Honda clocked sales volume of 3,337,142 units in 200708 compared to 3,336,756 units in 2006-07. In value terms total sales (net of excise duty) increased by 4.4 per cent to Rs.10332 crores from 9900 crores in 2006-07. Profitability : The Company's earnings before interest depreciation and taxes (EBITDA) margins increased from 11.9 per cent in 2006-07 to 13.1 per cent in 2007-08 and the Operating profit (PBT before other income) increased by 16.0 per cent from
PROFITS (Rs. in Crores)

Rs.1056 crores in 2006-07 to Rs.1225 crores in 2007-08. The improvements on the margins was accomplished through better sales realisations and effective cost rationalisation measures which included better control over Table 2: Key Indicators of Profitability 2006-07 2007-08
OPBDIT/Sales (%) OPBT/Sales (%) PBIT/Sales (%) PBT/Sales (%) PAT/Sales (%) ROACE (%) ROAE (%) 11.9 10.7 12.4 12.6 8.7 51.6 38.3 13.1 11.9 13.3 13.6 9.4 49.0 35.5

by 2.3 per cent from Rs. 190 crores in 2006-07 to Rs.185 crores in 2007-08. Cash Flows : Despite the nominal growth in sales turnover, better efficiencies in the working capital management has improved the cash flow from operations from Rs 625.05 crores to 1211.78 crores. Cash flows before working changes have also improved from Rs 1227.60 crores to Rs 1392.56 crores on account of better EBITDA margins. The Company spent a total of Rs.781 crores in investing activities, which included capacity expansion and investment in financial assests. There was also an outflow of Rs. 432 crores on account of liberal dividend outflows. Capital Expenditure : During the year the Company incurred a capital expenditure of Rs.375 crores. The funds were used towards setting up of new plant at Haridwar in Uttrakhand. The aggregate capital outlay for the new production facility is estimated at Rs.460 crores which has been funded over the last two financial years. Raw Material Costs:

Current Asset Turnover: This ratio, which shows sales as a proportion of average current assets, marginally decreased from 11.4 to 11.2, on account of higher average inventory & bank balance. DEBT STRUCTURE Hero Honda has been a debt free company for the last 7 years. The unsecured loan of Rs.132 crore from the state government of Haryana on account of sales tax deferment, is interest free and has no holding costs. Net interest payment by the company has been negative during the last few years.
Net Cash Flow From Operations (Rs. in Crores) 1400 1200 1000 800 600 400 200 0 03-04 04-05 05-06 06-07 07-08

DIVIDEND POLICY Over the years, the Company has consistently followed a policy of paying high dividends, keeping in mind the cash-generating capacities, the expected capital needs of the business and strategic considerations. For 200708, the board has recommended a dividend of 950 per cent which is higher than 850 per cent declared in the previous year. The payout ratio has for the year been pegged at 45.9 per cent vis-a-vis 46.3 per cent in the previous year. WORKING CAPITAL MANAGEMENT Hero Honda has always endeavored to efficiently use the various components of working capital cycle. Despite the adverse conditions in the two wheeler industry, the Company has been able to effectively control the receivable and inventories enabling it to continue to operate on negative working capital. As a part of its cost rationalization drive, the Company aggressively availed cash discounts from vendors by making payments before due dates. This not only helped us improve operating profit margins but also allowed the Company to deploy the surplus funds in the core business.
NOTES ON WORKING CAPITAL : The average of inventory, receivables and payables have been taken for the calculations of inventory period , operating and cash cycle.

Material cost, Marketing cost, Overheads apart from sharp focus on operational efficiencies. Other Income : Other income marginally declined

1253

1500 1076

1200 907

600

728

900

300

Due to softening metal prices particularly Aluminum & Nickel in second half of the year accompanied with better sales realisation in comparison to the previous year the share of material costs has reduced the overall cost structure. Raw material costs as a percentage of total sales declined from 72.5 per cent in 2006-07 to 71.6 per cent in 2007-08.

971

1056

1225
858 968

810

Table 1: WORKING CAPITAL MANAGEMENT & LIQUIDITY RATIOS 2005-06 Inventory Period (Days) Operating Cycle (Days) 10.5 14.9 (23.9) 0.74 0.54 2006-07 10.4 17.9 (12.2) 0.84 0.59 2007-08 11.9 21.2 (10.6) 0.68 0.45

0 03-04 04-05 OPBT

OPBT - PBT before other income

05-06 PAT

06-07

07-08

Cash Cycle (Days) Current Ratio

PBT - Profit before tax

PAT - Profit after tax

Acid Test Ratio

24

25

WITH EVERY STEP , WE EMBRACE THE WINDS OF CHANGE. AT EVERY BEND, WE RIDE UPON THE GROUND OF OPTIMISM. FOR US, LIFE IS A CELEBRATION.

OPERATIONS, REACH & SUPPLY CHAIN

Price is what you pay. Value is what you get

Manufacturing Hero Honda commissioned its third, plant at Haridwar during the year, with an initial installed capacity of 500,000 units. With this new capacity expansion, HHML now has an overall annual capacity of 4.5 million two wheelers. With this, the Company has become a global-scale manufacturer. The Haridwar complex is the largest of the three Hero Honda plants, spanning about 275 acres.

consumed within the factory. The plant has 70 per cent of its area as green open spaces, and approximately 45,000 square metres of the plant roof area is being converted into a green roof. Vendor Management Vendor management is critical to Hero Honda, as nearly 73 per cent of the production is currently made up of material cost. During the year, the company managed an average cost

capacity in collaboration with the Company. For example, the online vendor connectivity program has made rapid progress. Three years ago, the Company had only 46 vendors connected online to the company's factories. By the end of 2008-09, it is estimated that 72 per cent of the vendors and their supplies would be connected online. Around 100 ancillaries will be setting up their manufacturing base in Haridwar

The plant has lean manufacturing and practices that ensure efficiency. It is connected with vendors through conveyors so that the material can avoid multiple handling and is delivered on time. The Haridwar plant is one of the greenest automobile plants in the country. Effluents are minimised, and there is zero discharge on liquid effluents. All waste is treated and

reduction of Rs. 343 per vehicle despite volatility in metal prices. A national network of 256 vendors - including 36 ancillaries - forms the backbone of its plant operations. To improve plant efficiencies and inventory turns, Hero Honda has extended "Just in Time (JIT) beyond the shopfloor. Vendors are also making critical investments in quality and

over the next two years to ensure a fully integrated supply chain. To begin with, 40 ancillaries will set up their facility in the Industrial Parks that are being specially developed for Hero Honda ancillaries. During 2008-09, Hero Honda plans to work with vendors to develop new vendor production facilities. 3PL service providers have also been identified for the Haridwar plant a first for any two-wheeler company in India.

28

29

As part of an ongoing exercise aimed at quality control, members of senior management visited vendor premises for top quality audits. This has resulted in the reduction of rejection parts per million (PPM) by 20 per cent. During the year, the company launched a collaborative cost improvement program with vendors. In this programme the processes and

further study and tactfully optimise its supply chain. As part of this plan, raw materials will be optimised so that the best possible cost advantages accrue to the company. Distribution Network The company has a conscious strategy of penetrating new markets and unrepresented territories through its

marketing zones of the Company showed a uniform increase in new customers points during the year in review. Rural Network During the year, Hero Honda's ambitious rural connect program Har Gaon, Har Aangan also got underway. A total of 18,000 villages were covered

methods are continuously toned so that the material cost can be managed better. Hero Honda is also evaluating horizontal deployment of third party logistic services providers (3PL) to manage costs along the supply chain better. In 2008-09, the Company plans to

distribution network which is made up of dealers, authorized representatives, stockists and SSPs. In March 2001, the company had 826 such customers points in India. By March 2008, this number went up to over 3500. On an all India basis, 50 dealers, 150 SSPs, 267 dealers representatives and 45 city work agents were added. All the four

out of the targeted 23360 villages with a population of 5,000 people. In all, more than 100,000 opinion leaders in these villages were approached. The rural initiative was carried out by 500 specially trained rural sales executives at the dealership level.

30

31

PEOPLE AND ENVIRONMENT

Pupils should not be taught. Instead, they should be provided conditions in which they can learn.

The Human Touch Hero Honda is continuously making efforts to create a talent pipeline and to develop potential leaders. The Company encourages regular feedback for phasing-in process improvement and aligning employee's goals with business objectives. The detailed feedback process entered its fourth year in 2007-08 through the Gallup Q12 Employee Engagement Study. The findings from Gallup have already helped managers in building mutual trust and foster teamwork. In the process, this is helping make Hero Honda a better workplace. At Hero Honda's new plant at Haridwar, a number of best practices have been put in place. A flatter organization structure has been created, policies and guidelines have been framed and communicated, and job rotation was made mandatory for level migration. An assessment centre was also introduced to evaluate competency during level migration. During the year, an i-LEAP (Individual Learning Excellence and Award Program) was started for recognising the best training projects, and to identify internal trainers. A number of new inhouse programs were also rolled out, in order to augment and upgrade existing work-related and technology-related skills. Hero Honda has traditionally enjoyed

excellent industrial relations. Union elections during the year went off smoothly and the union body was formed amicably. To ensure smooth functioning at the plant, shop floor incharges were empowered to deal with grievances and discipline issues. At another level, a biometric attendance monitoring systems (to avoid proxy punching) has been started. Information Systems A number of key technology initiatives were either initiated or completed in 2007-08. The application infrastructure of the organization was extended to support business processes at the new production facility at Haridwar. This is expected to be operational in 2008-09. During the year, the organisation's entire network was revamped and redundancies were built to support business users. The IT team also deployed applications for sending real time business alerts related to production, sales, service notifications automatically from the system using SMS technology. This helped business users immensely. This real time system was also used by business partners to manage their dispatches and outstandings. To improve productivity, a number of applications with work flow capabilities were developed or enhanced. Also during the year, the entire information security policies of the organization were revamped in order to mitigate

risks. A new eco-friendly state-of-the-art data centre was set up and Hero Honda migrated to a new technology architecture that included blade servers and virtualization. This would help consolidate servers and storage as well as reduce complexity. To help Hero Honda prepare for the future, two major strategic initiatives are being planned for 2008-09. The first is Product Lifecycle Management software. This will help the company in managing the increase of complexity of a diverse product portfolio and help reduce cost and time for developing new models. The new software is also expected to improve and scale up design-level collaboration with vendors on an on-line basis. The software is also expected to reduce warranty costs. The second initiative comprised of rolling out a Dealer Management System software across the front end of the supply chain. This will help Hero Honda connect with its entire dealer network. Once the project is complete, it is expected to improve customer service and supply chain performance extensively. Environment For a number of years, Hero Honda has been one of India's most environmentally sustainable firms. The company believes that to create a sustainable enterprise, it is critical to

32

33

strike the right balance between business, mankind and nature. The Company has ensured complete compliance with all applicable environmental regulations and practices. For its efforts, Hero Honda was awarded for Safety Performance and Best working condition and Canteen facilities in the plant by the Government of Haryana for 2007. The Company has also been nominated for the Green Manufacturer of the year under the TERI Corporate Award Scheme. A green vendor development program

During the year, an environmental plan to reduce hazardous waste from the pollution control facilities was developed. As much as 30% of sludge generated was reduced through a sludge decanter system. The company also increased the conversion rate of paint sludge into useful primer from 15 MT to 25MT per month. Hero Honda has also successfully developed primer from the waste paint sludge, which used to be incinerated earlier. This development has been demonstrated to the state authorities, and the Company is seeking authorization to use this practice on a regular basis. The converted primer has

a forced draft ventilation system. An additional local exhaust system was provided in the weld shop and vehicle testing area to minimize the effects of airborne contaminants. Electrostatic precipitators were also installed in the machine shop to capture the aerosoles at source and prevent exposure of the workmen. Since the state of Haryana is one of the driest in the country, Hero Honda has always emphasized heavily on ground water recharging. During the year, 2 more injection wells were added, covering an additional area of 4500 Sq metres. In all, Hero Honda now as 25

was launched on the World Environment Day June 5, 2007. A green charter was released giving specific guidelines to the vendors and suppliers. A total of 31 vendors were selected in the first phase and in all, 256 vendors will be covered and certified as green vendors over a period of 5 years. Each vendor will initiate EARN programs in the areas of pollution prevention, waste reduction, water conservation, energy conservation and statutory compliances. Each vendor will be evaluated and certified cluster wise.

already been used on the products, which has passed all quality parameters. To fulfill its commitment towards water conservation, a recycling plant of 400KL per day capacity with reverse osmosis technology has been installed which recycles the sewage effluent into the process at the Haridwar plant. A similar project has also under progress at the Dharuhera plant and this is likely to be completed in 2008. The plant has been improved by adding

injection wells in the plants. Also during the year, an exhaustive feasibility study was conducted to extend the Rain Water Harvesting Scheme for Roads and other pucca surfaces in the plants. The project will be executed in 2008-09.

SOCIAL RESPONSIBILITY
Life laughs at you when you are sad; smiles at you when you are happy. But life salutes you when you make others happy.

Hero Honda Motors takes considerable pride in its community relationships, especially ones at the grassroots that have evolved over time. The Company has played a pivotal role in bringing an economically and socially backward region in Dharuhera, Haryana, into the national economic mainstream through direct interventions in education,

to 9 months. The Centre has also been equipped with modern machines to prepare the girls for the Garment Export Industry, where placement is 100%. Also during the year, women from four villages near the factory at Dharuhera benefitted from food-processing

place them with BPO/Call Centres, provided the students also have the requisite computer training. A vocational centre for boys is expected to start during 2008-09 and will run on the lines of an ITI. The centre will provide training in Fitter, Welding, Carpentry and Plumbing & Electrician Trades. It is planned to train approx. 50 students every year, and efforts will be made to accommodate them in group companies. The Foundation also runs an Adult Literacy Program, a marriage facilitation service for underprivileged girls, besides doorstep healthcare programs and medical camps for the local population. A graduate teacher from the targeted village is appointed to teach the elders. Approx 650 people have benefited from this scheme spread over 20 villages.

healthcare, vocational training, creation of social and physical infrastructure, and environment management. Most of the group's social enterprises including the Rural Development Centre-- are planned and executed by the Raman Kant Munjal Foundation. To help local people, especially women, Hero Honda has set up a vocational training centre which runs a 6 months Diploma Course for Tailoring, Embroidery and carpet weaving, etc. During the year in review, the Centre was upgraded. It now trains 50 girls per batch up from 25 & the duration of the course was increased from six months

courses conducted at the Centre. In February 2007, the Foundation had set up a computer training & learning centre in partnership with Microsoft. A total of 8 to 10 batches (boys and girls) are run simultaneously consisting of 1820 students per batch. Till date, close to 400 students have been trained at the centre. To enhance the value of rural youth in the job market, a spoken English course was started during the year. Currently the course is being run in three Batches during the day. It is proposed to train approx 120 students per year. The Foundation will make an effort to In every CSR Project undertaken, the Foundation always involves either a local NGO preferably the village itself or panchayat members not only during execution but also for subsequent sustainability/maintenance of project. In certain areas such as computer learning by rural youth Udyan Care, a reputed NGO has been made a partner in association with Microsoft. In Projects like Hygiene, Sanitation & Safe Drinking Water, Local Government Representatives such as Block Development Officers are also involved.

36

37

CORPORATE INFORMATION
Statutory Auditors A.F. Ferguson & Co. Chartered Accountants, 9, Scindia House, Kasturba Gandhi Marg, New Delhi 110 001, India Tel : 011-2331 5884 Principal Bankers ABN Amro Bank N.V. Bank of America NT & SA Canara Bank Citibank N.A. HDFC Bank Limited HSBC Limited ICICI Bank Limited Punjab National Bank Standard Chartered Bank The Bank of Tokyo-Mitsubishi UFJ Limited Cost Auditors Ramanath Iyer & Co. BL-4 (Paschmi), Shalimar Bagh Delhi 110 088 Tel. : 011-27481904 Technical & Financial Collaborators Honda Motor Co., Ltd., 1-1, 2 - chome, Minami - Aoyama, Minato - ku, Tokyo 107-8556, Japan www.world.honda.com Registered & Corporate Office 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi 110 057, India Tel.: 011-2614 2451, 2614 4121 Fax : 011-2615 3913 www.herohonda.com Registrar & Transfer Agents Karvy Computershare Pvt. Ltd. Plot No. 17-24, Vithlrao Nagar, Madha Pur, Hyderabad 500 081 Tel.: 040-23420815-820 Fax : 040-23420814 Dharuhera Plant 69 KM Stone, Delhi-Jaipur Highway, Dharuhera, Distt. Rewari, Haryana 122 100, India Tel.: 01274-264 012-15 Fax : 01274-267 024 Gurgaon Plant 37 KM Stone, Delhi-Jaipur Highway, Sector 33, Gurgaon, Haryana 122 001, India Tel.: 0124-2372 123-134 Fax : 0124-2373 141-142 Haridwar Plant Plot No. 3 Sector-10, 11E, SIDCUL, Roshanabad, Haridwar 248 001 Uttrakhand Tel.: 01334 - 239513 Fax : 01334 - 239512

38

39

A N N U A L R E P O R T 0 7

0 8

FINANCIAL HIGHLIGHTS & KEY RATIOS

Financial Highlights
(Rupees in crores) Particulars Sales (Nos.) Growth in sales (nos.) (%) Total net income Growth in Total inocme (%) Profit before tax Profit after tax Share capital Reserves and Surplus Total debt Net fixed assets Total assets (net) Market capitalisation Economic Value Added (EVA) 2003-04 2070147 23.4 5997 15.5 1072 728 39.94 1099 175 589 1314 9797 569 2004-05 2621400 26.6 7559 26.1 1217 810 39.94 1453 202 715 1695 10943 564 2005-06 3000751 14.5 8870 17.4 1412 971 39.94 1969 186 994 2195 17781 641 2006-07 3336756 11.2 10090 13.7 1246 858 39.94 2430 165 1355 2635 13753 485 2007-08 3337142 0.01 10517 4.2 1410 968 39.94 2946 132 1549 3118 13869 575

Key Ratios
Particulars Long term Debt/Equity OPBDIT*/Net Sales (%) OPBT**/Net Sales (%) Profit after tax/ Total income (%) Return on average equity (%) Return on average capital employed (%) EVA/Capital employed (%) Dividend per share (Rs.) Dividend payout (%) Earning per share (Rs.) Market value/book value (times) Notes: *OPBDIT: Operating Profit before Depreciation, Interest and Tax **OPBT: PBT before Other income 2003-04 Nil 16.8 15.6 12.1 72.9 92.8 49.3 20 61.9 36.5 8.6 2004-05 Nil 15.7 14.6 10.7 61.6 80.9 37.5 20 56.3 40.6 7.3 2005-06 Nil 15.7 14.4 11.0 55.5 72.3 32.9 20 46.9 48.6 8.8 2006-07 Nil 11.8 10.7 8.5 38.3 50.6 20.1 17 46.3 43.0 5.6 2007-08 Nil 13.1 11.9 9.2 35.5 49.0 20.0 19 45.9 48.5 4.6

40

41

A N N U A L R E P O R T 0 7

0 8

ECONOMIC VALUE ADDED (EVA) STATEMENT

(Rupees in crores)

DIRECTORS REPORT
On behalf of the Board, I take immense pleasure on presenting the 25th Annual Report of the Company. The report is being presented along with the Audited Statement of Accounts for the financial year ended March 31, 2008.

2003-04 Avg Cap Employed Avg Debt/Avg Capital (%) Avg Equity/Avg Capital (%) Cost of Debt (% post-tax ) Cost of Equity Beta Cost of Risk Free Debt (%) Market Premium (%) Cost Of Equity (%) EVA Profit after Tax Add: Interest*(1-tax rate) NOPAT=PAT + Interest*(1-t) Cost of Capital EVA Return on Capital Employed (%) Weighted Average Cost of Capital (%) EVA/Capital employed (%) ENTERPRISE VALUE Market Capitalisation Add: Debt Less: Financial Assets EV (Enterprise Value) EV/Yr. End Capital Employed (Times) 9797 175 1708 8264 6.3 728 1 729 160 569 63.2 13.9 49.3 0.90 5.13 10 14.18 1,154 2.2 97.8 0.7

2004-05 1,504 1.8 98.2 0.7 1.01 6.67 10 16.74

2005-06 1,945 1.3 98.7 1.0 0.98 7.52 10 17.32

2006-07 2,415 1.1 98.9 0.6 0.75 8.15 10 15.65

2007-08 2,877 1.1 98.9 0.9

FINANCIAL RESULTS
(Rupees in crores) For the year ended March 31, 2008 Gross Sales 12,038.53 10,517.22 1,534.79 (35.81) 160.32 1,410.28 March 31, 2007 11,542.04 10,089.81 1,362.89 (22.99) 139.78 1,246.10

0.59 7.94 10 13.83

Net Sales and other Income Profit before Finance charges and Depreciation Less: Finance charges Depreciation Profit before tax (PBT)

810 1 812 247 564 54.0 16.5 37.5

971 2 973 333 641 50.0 17.1 32.9

858 1 859 374 485 35.6 15.5 20.1

968 1 969 394 575

Less: Provision for tax Current Deferred Fringe Benefit Tax (FBT) 436.81 1.20 4.39 967.88 1,594.78 2,562.66 375.81 9.42 2.98 857.89 1,224.05 2,081.94

Profit after tax (PAT)

33.7 13.7 20.0

Add: Balance of profit brought forward Balance available for appropriation Appropriations Dividend - Proposed Final Corporate Dividend Tax Transfer to General Reserve Balance carried to Balance Sheet Dividend (%) Basic and Diluted Earnings Per Share (EPS) (Rs.)

10943 202 2044 9101 5.4

17781 186 2221 15746 5.9

13753 165 2010 11909 4.5

13869 132 2698 11303 3.6

379.41 64.48 97.00 2,021.77 950 48.47

339.47 57.69 90.00 1,594.78 850 42.96

42

43

A N N U A L R E P O R T 0 7

0 8

BUSINESS PERFORMANCE Your Company defied a process of de-growth in the industry and achieved cumulative sales of 33,37,142 units of two-wheelers. In the process, Hero Honda consolidated its leadership position in domestic two-wheeler market with more than 52 per cent market share. The Company successfully launched seven new models including variants during the year under review. On the financial front, total income (net of excise duty) of the Company grew by 4.2 per cent from Rs. 10, 090 crores in previous year to Rs. 10,517 crores during 2007-08. The Company posted a net profit (PAT) of Rs. 968 crores, compared to Rs. 858 crores in the previous fiscal, a growth of 13 per cent. Despite the increasing pressure on inputs, your Company was able to maintain EBIDTA margins at 13.1 per cent, compared to 11.9 per cent in the previous year. During the year, Hero Honda also retained, for the seventh year in a row, its position as the World's Number One Two Wheeler Company. During 2007-08, your Company achieved another landmark of reaching cumulative sales of 20 million bikes. In the course of the year, your Company launched new models (including variants) including Splendor NXG, Hunk, New Super Splendor, New Passion Plus, Commemorative Splendor+ and a refreshed version of Pleasure. A detailed discussion on the business performance and future outlook has been given in the chapter on Management Discussion & Analysis Report. DIVIDEND Few manufacturing companies in the Indian corporate sector have a better dividend pay out record than Hero Honda. We have recommended a Dividend of 950 per cent i.e. Rs.19 per equity share of Rs. 2 aggregating to Rs. 379.41 crores (exclusive of corporate dividend tax) for your approval for the financial year ended March 31, 2008. The dividend, if approved, will be paid to the eligible members well within the stipulated period. Our dividend policy is in line with our strong and consistent belief that if funds are not re-invested for capital investments, they should be optimally distributed to shareholders. TRANSFER TO GENERAL RESERVE A sum of Rs. 97 crores have been transferred to the General Reserve of the Company. This reaffirms the inherent financial strength of the Company. NEW MANUFACTURING FACILITY AT HARIDWAR Your Company inaugurated its third plant - the "Shrine of Technology" in the holy city of Haridwar in Uttarakhand. The plant has an initial

production capacity of 0.5 million units which would be scaled up to a million units by 2008-end. The total capital outlay on the new manufacturing facility has been around Rs. 375 crores. The new plant will employ flexible production techniques enabling production of different models in the Company's portfolio. In addition to manufacturing for the domestic market, the plant will also cater to export requirements. MATERIAL CHANGES AND COMMITMENTS No material changes and commitments affecting the financial position of the Company have occurred between April 1, 2008 and the date on which this Report has been signed. BOARD OF DIRECTORS During the period under review, Mr. Tatsuhiro Oyama resigned from directorship on May 11, 2007 and Mr. Takashi Nagai was appointed as an Additional Director in Non-Executive Category on May 11, 2007. Further, Dr. Vijay Laxman Kelkar has resigned from directorship on December 31, 2007. Mr. Satoshi Matsuzawa was appointed as an Alternate Director to Mr. Takashi Nagai w.e.f. April 24, 2008. Mr. Yutaka Kudo, Whole-time Director of the Company resigned from both the offices i.e. Director & Whole-time Director w.e.f. May 31, 2008. Mr Sumihisa Fukuda was appointed as an Additional and Technical Director in the whole-time employment of the Company in his stead on June 1, 2008. Mr. M. Damodaran was appointed as an Additional Director in the NonExecutive and Independent Category w.e.f. June 16, 2008. Mr. Narinder Nath Vohra has resigned from Directorship w.e.f. June 24, 2008. The Board place on record their sincere appreciation and gratitude for the work put in by the out going members, and wishes them a rewarding and satisfying career ahead. The Directors also welcome the new members on the Board and wish them a successful and fruitful tenure with the Company. At the ensuing Annual General Meeting, Ms. Shobhana Bhartia, Mr. Sunil Bharti Mittal, Mr. Masahiro Takedagawa and Mr. Pradeep Dinodia will retire by rotation and being eligible, offer themselves for re-appointment in terms of provisions of Articles of Association of the Company. The brief resume/details relating to Directors, who are to be appointed and re-appointed has been furnished after the Explanatory Statement to the Notice of the ensuing Annual General Meeting. Your Directors recommend their re-appointment at the ensuing Annual General Meeting. DIRECTORS' RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make

the following statement in terms of Section 217(2AA) of the Companies Act, 1956: 1. that in the preparation of the annual accounts for the year ended March 31, 2008, the applicable accounting standards have been followed; 2. that appropriate accounting policies have been selected and applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs as at March 31, 2008 and of the profit of the Company for the financial year ended March 31, 2008; 3. that 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; 4. that the annual accounts for the year ended March 31, 2008 have been prepared on a going concern basis. MANAGEMENT DISCUSSION & ANALYSIS REPORT A detailed chapter on, 'Management Discussion and Analysis'(MDA), pursuant to Clause 49 of the Listing Agreement forms part of this Report. CORPORATE GOVERNANCE At Hero Honda, it is our firm belief that the essence of Corporate Governance lies in the phrase 'Your Company'. It is 'Your' Company because it belongs to you - the shareholders. The Chairman and Directors are 'Your' fiduciaries and trustees. Their objective is to take the business forward in such a way that it maximises 'Your' long-term value. Your Company is committed to benchmark itself with global standards for providing good Corporate Governance and has put in place an effective Corporate Governance System which ensures that the provisions of Clause 49 of the Listing Agreement are duly complied with. The Board has also evolved and adopted a Code of Conduct based on the principles of Good Corporate Governance and best management practices being followed globally. The Code is available on the website of the Company www.herohonda.com. A report on Corporate Governance along with the Auditors' Certificate on its compliance is annexed hereto as Annexure - I. INTERNAL CONTROL SYSTEMS Hero Honda has a proper and adequate system of internal controls. This ensures that all assets are safeguarded and protected against

loss from unauthorised use or disposition and those transactions are authorised, recorded and reported correctly. An extensive programme of internal audits and management reviews supplement the process of internal control. Properly documented policies, guidelines and procedures are laid down for this purpose. The internal control system has been designed so as to ensure that the financial and other records are reliable for preparing financial and other statements and for maintaining accountability of assets. The Company also has an Audit Committee, comprising of three Independent, Non-Executive and professionally qualified Directors, who interact with the Statutory Auditors, Internal Auditors, Cost Auditors and Auditees in dealing with matters within its terms of reference. The Committee mainly deals with accounting matters, financial reporting and internal controls. During the year under review, the Committee met nine times. AUDIT COMMITTEE RECOMMENDATION During the year there was no such recommendation of the Audit Committee which was not accepted by the Board. Hence, there is no need for the disclosure of the same in this Report. RISK MANAGEMENT SYSTEM Your Company follows a comprehensive system of Risk Management. Your Company has adopted a procedure for assessment and minimization. It ensures that all the Risks are timely defined and mitigated in accordance with the well structured risk management Process. The Audit Committee reviews periodically the risk management process. RATINGS The rating agency ICRA Limited, has reviewed and reaffirmed the ratings assigned to the Company for its Non-convertible Debenture Programme as LAAA indicating the highest credit quality, A1+ for its Non-fund based facilities and LAAA to Fund based facilities. These ratings indicate the highest credit quality carrying lowest credit risk. Another rating agency CRISIL reviewed and assigned AAA/Stable rating to the bank loan and P1+ rating to the Cash Credit Limit & Letter of Credit Limit Facility. Further, CRISIL also has reaffirmed the 'GVC 1' rating assigned to the Company for the third consecutive time. This governance and value creation (GVC) rating indicates that the company's capability with respect to creating wealth for all its stakeholders while adopting sound corporate governance practices is the highest. The rating reflects the high standards of corporate governance practised by your Company.

44

45

A N N U A L R E P O R T 0 7

0 8

FIXED DEPOSITS During the year under review, the Company has not accepted any deposit under Sections 58A and 58AA of the Companies Act, 1956 read with the Companies (Acceptance of Deposits) Rules, 1975. AUDITORS M/s. A. F. Ferguson & Co., Chartered Accountants, New Delhi, Auditors of the Company will retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. The Company has received a certificate from the auditors to the effect that their re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. The Board recommends their re-appointment. AUDITORS' REPORT The observations of Auditors in their report, read with the relevant notes to accounts are self explanatory and therefore do not require further explanation. COST AUDITORS The Board has re-appointed M/s. Ramanath Iyer & Co., Cost Accountants, New Delhi, as the Cost Auditors of the Company under Section 233B of the Companies Act, 1956 for the financial year 2008-09 and necessary application for obtaining the requisite approval has been filed with the Government. The Cost Auditors' Report for 2007-08 will be forwarded to the Central Government in pursuance of the provisions of the Companies Act, 1956. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO Information required under Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given as per Annexure - II and forms an integral part of this Report. LISTING The shares of your Company are presently listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). The delisting application, was in-principle approved by the Committee of the Calcutta Stock Exchange Association Limited, the formal approval is awaited and is expected to be received in due course of time. PERSONNEL As on March 31, 2008 the total number of employees on the records of the Company were 4321.

Your Directors place on record their appreciation for the significant contribution made by all employees, who through their competence, dedication, hard work, co-operation and support have enabled the Company to cross new milestones on a continual basis. A detailed note is given in the chapter "Human Resource Management" of Management Discussion & Analysis, which forms part of this Annual Report. PARTICULARS OF EMPLOYEES Information of Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 forms an integral part of this Report. As per the provisions of Section 219(1)(b) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders of the Company excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of such statement may write to the G.M. Legal & Company Secretary at the Registered Office of the Company. ACKNOWLEDGMENT It is our strong belief that caring for our business constituents has ensured our success in the past and will do so in future. Your Directors acknowledge with sincere gratitude the co-operation and assistance extended by the Central Government, State Government(s), Financial Institution(s), Bank(s), Customers, Dealers, Vendors and Ancillary Undertakings. The Directors also place on record their appreciation for the valuable assistance and guidance extended to the Company by Hero Cycles Limited and Honda Motor Co., Ltd., Japan and for the encouragement and assurance, which our collaborator has given for the growth and development of the Company. The Board, also, takes this opportunity to express its deep gratitude for the continued co-operation and support received from its valued shareholders. For and on behalf of the Board

ANNEXURE - I TO DIRECTORS' REPORT

CORPORATE GOVERNANCE REPORT
Philosophy on 'Code of Corporate Governance' Hero Honda's philosophy of Corporate Governance stems from its belief that the Company's business strategy and plans should be consistent with the welfare of all its stakeholders, including shareholders. Good Corporate Governance practices enable a Company to attract financial and human capital and leverage these resources to maximize long-term shareholder value, while preserving the interests of multiple stakeholders, including society at large. Corporate Governance rests upon the four pillars of: transparency, full disclosure, independent monitoring and fairness to all, especially to minority shareholders. Hero Honda has always strived to promote Good Governance practices, which ensure that: A competent management team is at the helm of affairs; The Board is strong with an optimum combination of Executive and Non-Executive (including Independent) Directors, who represent the interest of all stakeholders; The Board is effective in monitoring and controlling the Company's affairs; The Board is concerned about the Company's shareholders; and The Management and Employees have a stable environment.

We believe that the essence of Corporate Governance lies in the phrase "Your Company". It is "Your" Company because it belongs to you - the shareholders. The Chairman and Directors are "Your" fiduciaries and trustees. Their objective is to take the business forward to maximise "Your" long-term value. The Securities and Exchange Board of India (SEBI) has specified certain mandatory governance practices, which are incorporated in Clause 49 of the Listing Agreement of Stock Exchanges. Hero Honda is committed to benchmark itself with the best standards of Corporate Governance, not only in form but also in spirit. This section, along with the section on 'Management Discussion & Analysis' and 'General Shareholder's Information' constitute Hero Honda's compliance with the Clause 49 of the Listing Agreement. BOARD OF DIRECTORS Composition of the Board As on March 31, 2008, the Company's Board of Directors consisted of fifteen Directors. Four Directors, including the Chairman, are Executive; four are Non-Executive and seven are Non-Executive and Independent. The fifty per cent of the Board consists of Independent Directors including Dr. Vijay Laxman Kelkar, Non-Executive and Independent Director, who resigned from the directorship of the Company w.e.f. December 31, 2007, the vacancy has been filled within the prescribed 180 days with the appointment of Mr. M. Damodaran, as Non-executive and Independent Director, therefore the composition of the Board is in consonance with the Clause 49. Details of the composition of the Board, number of meetings held during their tenure and attended by them etc., are given in Table 1.

Brijmohan Lall Munjal Chairman New Delhi July 29, 2008

46

47

A N N U A L R E P O R T 0 7

0 8

TABLE 1: DETAILS ABOUT COMPANY'S BOARD OF DIRECTORS / ATTENDANCE RECORD DURING FINANCIAL YEAR 2007-08

Name of Director

Number of Board Attendance at Meetings held during last AGM his/her tenure and attended by him/her Held Attended

Number of Committee Number of Committee Number of outside Memberships Chairmanships held Directorships held (including Chairman ships) held (excluding Private Companies, Foreign Companies and Section 25 Companies)

Executive Directors Mr. Brijmohan Lall Munjal Mr. Pawan Munjal Mr. Toshiaki Nakagawa Mr. Yutaka Kudo 6 6 6 6 6 6 6 6 Yes Yes Yes Yes None None None None None None None None 8 1 1 1

Four Directors namely Mr. Brijmohan Lall Munjal (Executive Chairman in the whole-time employment of the Company), Mr. Pawan Munjal (Managing Director & CEO), Mr. Om Prakash Munjal (Non-Executive Director) and Mr. Sunil Kant Munjal (Non-Executive Director) belong to the promoter family of the Hero Group, which owns 26 per cent equity in the Company. Four Directors namely Mr. Toshiaki Nakagawa (Joint Managing Director), Mr. Yutaka Kudo (Whole-time Director), Mr. Masahiro Takedagawa (Non-Executive Director) and Mr. Takashi Nagai (Non-Executive Director) are nominees of Honda Motor Co., Ltd., Japan, which too, owns 26 per cent equity in the Company. Apart from these, the rest of the Board constitutes of Non-Executive and Independent Directors. Board Meetings During 2007-08, the Board of Directors met 6 (six) times on May 11, 2007; May 31, 2007; July 24, 2007; September 18, 2007; October 18, 2007 and January 31, 2008. The longest gap between any two Board Meetings was for a period of 3 months and 13 days.

Further, there are no pecuniary relationships or transactions between the Independent Directors and the Company, except for the sitting fees drawn by the Non-executive Directors and sitting fees and commission drawn by the Non-executive and Independent Directors for attending the meeting of the Board and its Committee(s) thereof. Shareholding of Non-Executive Directors Name of the Director Mr. Om Prakash Munjal Mr. Sunil Kant Munjal Category Non-Executive Director Non-Executive Director No. of shares held 25,000 32,500

Apart from the above, none of the Non-Executive (including Independent) Directors hold any shares (as own or on behalf of other person on beneficial basis) in the Company. Information Supplied to the Board Board members are given agenda papers along with necessary documents and information in advance of each meeting of the Board and Committee(s). However, in case of business exigencies or urgency of matter, the resolutions are passed by way of circulation. In addition to the regular business items, the following items/ information are regularly placed before the Board to the extent applicable: Annual operating plans and Budgets, Capital budgets and updates; Purchase and disposal of major fixed assets; Quarterly and half yearly results of the Company; Minutes of the Audit Committee, Shareholders' Grievance Committee, Remuneration Committee and Committee of Director's meetings; Information on recruitment and remuneration of senior management just below the Board level including appointment or removal of CFO and Company Secretary; Any material defaults in financial obligations to and by the Company, or substantial non-payments for goods sold by the Company; Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems; Transactions that involve substantial payment towards goodwill, brand equity or intellectual property; Materially important show cause, demand, prosecution and penalty notices; Details of quarterly foreign exchange exposures and steps taken by the management to limit the risks of adverse exchange rate movement; Sale of material nature, of investments and assets, which are not in the normal course of business;

Non-Executive Directors Mr. Om Prakash Munjal Mr. Sunil Kant Munjal Mr. Masahiro Takedagawa Mr. Tatsuhiro Oyama Mr. Takashi Nagai2
1

6 6 6 1 5

Nil 5 3 Nil Nil

No Yes Yes N.A. No

None None 1 None None

None None None None None

10 14 2 1 Nil

Directors' Attendance Record and Directorships / Committee Memberships Details are given in Table 1. As per Clause 49 of the Listing Agreement entered into with the Stock Exchange(s), an Independent Director means a Non-Executive Director who; apart from receiving director's remuneration, does not have any material pecuniary relationships or transactions with the Company, its promoters, its directors, its senior management, its holding Company, its subsidiaries or associates which may affect independence of the director; is not related to promoters or persons occupying management positions at the board level or at one level below the board; has not been an executive of the company in the immediately preceding three financial years; is not a partner or an executive of the statutory audit firm or the internal audit firm that is associated with the company and has not been a partner or an executive of any such firm for the last three years and the legal firm(s) and consulting firm(s) that have a material association with the entity. is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect independence of the Director; is not a substantial shareholder of the Company i.e. owning two percent or more of the block of voting shares. None of the Director on the Board holds the office of Director in more than 15 companies nor are they members in Committees of the Board in more than 10 Committees or Chairman of more than 5 Committees.

Non-Executive and Independent Directors Mr. Narinder Nath Vohra Mr. Pradeep Dinodia Gen. (Retd.) Ved Prakash Malik Mr. Analjit Singh Dr. Pritam Singh Dr. Vijay Laxman Kelkar Ms. Shobhana Bhartia Mr. Sunil Bharti Mittal
3

6 6 6 6 6 5 6 6

3 6 4 2 3 2 2 1

Yes Yes Yes No Yes Yes No No

2 7 4 None 3 4 2 None

1 5 None None None None 2 None

1 8 3 12 5 13 14 8

Notes: 1. Mr. Tatsuhiro Oyama has resigned from his Directorship on May 11, 2007. 2. Mr. Takashi Nagai was appointed as an Additional Director on the Board w.e.f. May 11, 2007. 3. Dr. Vijay Laxman Kelkar has resigned from the Directorship on December 31, 2007. 4. Mr. Yutaka Kudo has resigned from his Directorship and Whole-time Directorship on May 31, 2008. 5. Mr. Narinder Nath Vohra has resigned from the Directorship on June 24, 2008.

48

49

A N N U A L R E P O R T 0 7

0 8

Details of Joint Ventures and Agreements or variations thereof; Quarterly Statutory Compliance Report; Non-compliance of any regulatory, statutory nature or listing requirements and shareholder's service such as non-payment of dividend, delay in share transfer etc.; Investments strategy/plan; Any issue which involves possible public or product liability claims of substantial nature, including any judgment or order which may have passed strictures on the conduct of the Company or taken an adverse view regarding another enterprise that can have negative implications on the Company; and Significant labour problems and their proposed solutions. Also, any significant development in Human Resources/Industrial Relations front like signing of Wage Agreement, implementation of Voluntary Retirement Schemes etc. Code of Conduct We at Hero Honda have laid down a code of conduct for all Board members and senior management of the Company. The code of conduct is available on the website of the Company www.herohonda.com. The code has been circulated to all the members of the Board and senior management and they have affirmed compliance with the code of conduct. A declaration signed by the Chief Executive Officer (CEO) to this effect is attached to the Annual Report. Risk Management We at Hero Honda have established an effective risk assessment and minimization procedures, which are reviewed by the Board periodically. There is a structure in place to identify and mitigate various risks faced by the Company from time to time. BOARD LEVEL COMMITTEES AUDIT COMMITTEE The genesis of Hero Honda's Audit Committee can be traced back to the Audit Sub-Committee, constituted in 1987. Since then it has been dealing with matters prescribed by the Board of Directors on a case to case basis. In general, the primary role/objective of the Audit Committee is to review the financial statements of the Company, strengthen internal controls & look into all transactions having monetary implications on the functioning of the Company. The nomenclature, constitution and terms of reference of the Committee were revised on January 16, 2001 and an Audit Committee was set up as per the provisions of the Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement of the Stock Exchange(s). As on March 31, 2008, the Committee had four Non-Executive and Independent Directors in accordance with the prescribed guidelines. Mr. Pradeep Dinodia, a leading Chartered Accountant, is the Chairman of the Committee. The other members are Dr. Pritam Singh,

Gen.(Retd.) Ved Prakash Malik and Mr. Narinder Nath Vohra, all learned personalities in their respective fields. The members of the Committee have adequate knowledge in the field of finance, accounting, and law. The role and "terms of reference" of the Audit Committee includes the following: Overseeing - the Company's financial reporting process and disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible. Recommending - the appointment, re-appointment, replacement and removal of the statutory auditor, fixation of audit fees and approving payments for any other services. Reviewing - with the management the annual financial statements with primary focus on matters required to be included in the Directors' Responsibility Statement, changes, if any in accounting policies and practices and reasons thereof, compliance with accounting standards and guidelines of stock exchange(s), major accounting entries, qualifications in draft audit reports, related party transactions & the going concern assumption. - with the management, the quarterly financial statements before submission to the board for approval. - the adequacy of internal control systems and the internal audit function and reviewing the Company's financial and risk management policies. - the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. - the reports furnished by the internal auditors, discussion with internal auditors on any significant findings and ensuring suitable follow up thereon. - Directors' overseas traveling expenses. - foreign exchange exposure. Complying - with the provisions of listing agreement laid down by the Stock Exchange(s) and legal requirements concerning financial statements. Discussing - with external auditors before the audit commences, of the nature and scope of audit. Also post audit discussion to ascertain any area of concern. Looking - into the reasons for substantial defaults in the payments to the shareholders (in the case of non-payment of declared dividends) and creditors.

The Sr. Vice President & CFO, Internal Auditors, Statutory Auditors and Cost Auditors attend the meetings of the Committee on the invitation of the Chairman. Mr Ilam C. Kamboj, G.M. Legal & Company Secretary acts as the Secretary of the Committee. During the year, 9 (Nine) meetings of the Audit Committee were held on April 09, 2007; April 23, 2007; May 11, 2007; July 24, 2007; September 18, 2007; September 28, 2007; October 18, 2007; December 14, 2007; and January 29, 2008 in due compliance with the stipulated provisions. The attendance record of members of the Audit Committee is given in Table 2. TABLE 2: DETAILS OF THE AUDIT COMMITTEE
Name of committee member Position held No. of meetings held during his tenure No. of meetings attended

Remuneration Policy Remuneration paid to Executive Directors The remuneration paid to Executive Directors is recommended by the Remuneration Committee and approved by the Board of Directors, in the Board meeting, subject to the subsequent approval by the shareholders at the general meeting and such other authorities, as the case may be. At the Board meeting, only the Non-Executive and Independent Directors participate in approving the remuneration paid to the Executive Directors. The remuneration is fixed considering various factors such as qualification, experience, expertise, prevailing remuneration in the corporate world and the financial position of the Company. The remuneration structure comprises of Basic Salary, Commission, Perquisites and allowances, Contribution to provident fund and other funds. Besides these, a fixed commission @ 1 per cent of net profit computed in accordance with Section 198 of the Companies Act, 1956, is paid as per the terms of appointment. As of now, the Company does not have any Employee Stock Options Plans (ESOPs). Term of appointment of Executive Director is 5 (five) years. Further, no notice period and severance fee is applicable for the above-mentioned Executive Directors. Remuneration paid to Non-Executive Directors The Non-Executive Directors of the Company are paid sitting fees of Rs. 16,500 for each meeting of the Board, Audit Committee, Remuneration Committee and Shareholders' Grievance Committee attended by them. However, in addition to the sitting fees, Non-executive and Independent Directors shall be entitled to remuneration by way of commission upto 0.10 per cent of profits of the Company for every financial year as approved by the members at their 24th Annual General Meeting held on July 24, 2007. Tables 3 and 4 gives details of remuneration paid to Directors. During 2007-08, the Company did not advance any loans to any of its Directors.

Mr. Pradeep Dinodia Gen. (Retd.) V.P Malik . Dr. Pritam Singh Mr. N.N.Vohra

Chairman Member Member Member

9 9 9 9

9 7 7 7

REMUNERATION COMMITTEE The Company had set up a Remuneration Committee on January 16, 2001 to review and recommend the payment of annual salaries, commission, and finalise service agreements and other employment conditions of Executive Directors. The Committee takes into consideration the best remuneration practices being followed in the industry while fixing appropriate remuneration packages. As on March 31, 2008, the Committee had three Non-Executive and Independent Directors as its members in accordance with the prescribed guidelines. Gen. (Retd.) Ved Prakash Malik, is the Chairman of the Committee. The other members are Mr. Narinder Nath Vohra and Mr. Pradeep Dinodia. Mr. Ilam C. Kamboj, G.M. Legal & Company Secretary acts as the Secretary of the Committee. During the year the committee did not meet, as there was no business to transact.

TABLE 3: REMUNERATION TO EXECUTIVE DIRECTORS Executive Directors Mr. Brijmohan Lall Munjal Mr. Pawan Munjal Mr. Toshiaki Nakagawa Mr. Yutaka Kudo Salary* (Rs.) 97,99,178 95,32,492 41,91,795 34,29,869 Commission Fixed ** (Rs.) 14,78,25,000 14,78,25,000 14,78,25,000 14,78,25,000 Total (Rs.) 15,76,24,178 15,73,57,492 15,20,16,795 15,12,54,869

Notes: * Salary includes Basic Salary, Perquisites and allowances, Contribution to provident and other funds. ** Total Commission is calculated @ 1% of the net profit calculated in accordance with Section 198 of the Companies Act, 1956.

50

51

A N N U A L R E P O R T 0 7

0 8

TABLE 4: REMUNERATION TO NON-EXECUTIVE DIRECTORS Non-Executive Directors Mr. Sunil Kant Munjal Mr. Pradeep Dinodia Mr. N.N. Vohra Gen.(Retd.) V.P Malik . Dr. Pritam Singh Mr. Analjit Singh Ms. Shobhana Bhartia Dr. Vijay L. Kelkar1 Mr. Sunil Bharti Mittal Mr. Masahiro Takedagawa Sitting fees (Rs.) 82,500 3,13,500 2,31,000 1,81,500 2,14,500 33,000 33,000 33,000 Nil# Nil# Commission (Rs.) N.A. 11,50,000 7,50,000 6,50,000 6,13,000 1,00,000 1,00,000 1,00,000
#

SHAREHOLDERS' GRIEVANCE COMMITTEE Total (Rs.) 82,500 14,63,500 9,81,000 8,31,500 8,27,500 1,33,000 1,33,000 1,33,000 Nil Nil The Company has an efficient system of dealing with investors' grievances. The Chairman and the Managing Director & CEO of the Company take personal interest in all matters of concern for investors as and when necessary. The Company Secretary being the Compliance Officer carefully looks into each issue and reports the same to the Shareholders' Grievance Committee. In the meetings of the committee the status of all shareholders' complaints, requests etc. alongwith letters received from all statutory authorities were reviewed. During the year, 4 (four) meetings of the Shareholders' Grievance Committee were held on April 09, 2007; July 24, 2007; October 18, 2007 and January 29, 2008. Details of shareholders complaints and their status are given in the section on "General Shareholder's Information". The attendance record of members of the Shareholders' Grievance Committee is given in Table 5.
TABLE 5: DETAILS OF SHAREHOLDERS' GRIEVANCE COMMITTEE
Name of committee member Position held No. of meetings held during his tenure No. of meetings attended

SHARE TRANSFER COMMITTEE This Committee was constituted on January 31, 2007 as a measure of Good Corporate Governance practice and to streamline the work related to share transfer etc. which was earlier approved by the Committee of Directors. Mr. Ravi Sud, Sr. Vice President & CFO and Mr. Ilam C. Kamboj, G.M. Legal & Company Secretary are its members. This Committee meets whenever required. During the year under review 35 (thirty five) meetings of the Committee were held. DISCLOSURES Related Party Transactions The Company follows the following policy in disclosing the related party transactions to the Audit Committee: a) A Statement in the Summary form of transactions with related parties in the ordinary course of business is placed periodically before the Audit Committee. b) There are no material individual transactions with related parties, which are not in the normal course of business and which are not on an arm's length basis. Disclosures on materially significant related party transactions that may have potential conflict with the interest of the company at large. There are no materially significant transactions made by the Company with its promoters, Directors or Management or relatives etc. that may have potential conflict with the interest of the Company at large. Accounting Treatment in preparation of Financial Statements The guidelines/accounting standards laid down by the Institute of Chartered Accountants of India (ICAI) have been followed in preparation of the financial statements of the Company.

This Committee, constituted on January 16, 2001, specifically looks into redressal of shareholders' and investors' grievances arising out of issues regarding share transfers, dividends, dematerialisation and related matters. As on March 31, 2008, the Committee had three Non-Executive and Independent Directors in accordance with the prescribed guidelines. Mr. Narinder Nath Vohra, is the Chairman of the Committee. The other members are Dr. Pritam Singh and Mr. Pradeep Dinodia. Mr. Ilam C. Kamboj, G.M. Legal & Company Secretary acts as the Secretary of the Committee.

N.A.

No sitting fee was paid to Mr. Om Prakash Munjal, Mr. Tatsuhiro Oyama (Director upto May 11, 2007) & Mr. Takashi Nagai (Director w.e.f. May 11, 2007) as they did not attend any of the meetings of the Board held during the financial year 2007-08. # Mr. Sunil Bharti Mittal & Mr. Masahiro Takedagawa have opted not to receive sitting fees which were accrued to them on account of attending the meetings of the Board. 1 Dr. Vijay Laxman Kelkar has resigned from the Directorship w.e.f. December 31, 2007.

Mr. N.N. Vohra Chairman Mr. Pradeep Dinodia Member Dr. Pritam Singh Member COMMITTEE OF DIRECTORS

4 4 4

4 4 3

Compliances by the Company There has neither been any non-compliance of any legal provision of applicable law, nor any penalty, stricture imposed by the stock exchanges or SEBI or any other authorities, on any matters related to capital market during the last three years. Insider Trading In compliance with the SEBI regulation on prevention of insider trading, the Company has instituted a comprehensive code of conduct for its management, staff and relevant business associates. The code lays down guidelines, which advises them on procedures to be followed and disclosures to be made, while dealing with shares of the Company and cautioning them on consequences of non-compliances.

Apart from these Committees, the Company also has a Committee of Directors. As on March 31, 2008, the Committee comprised of Mr. Brijmohan Lall Munjal, Chairman; Mr. Pawan Munjal, Managing Director & CEO; Mr. Toshiaki Nakagawa, Joint Managing Director; Mr. Yutaka Kudo, Whole-time Director, Mr. Ravi Sud, Sr. Vice President & CFO and Mr. Ilam C. Kamboj, G.M. Legal & Company Secretary as its members. Constituted in 1985, the Committee deals with matters delegated by the Board from time to time. This Committee meets whenever required. During the year under review 4 (four) meetings of the Committee were held.

52

53

A N N U A L R E P O R T 0 7

0 8

CEO & CFO CERTIFICATION Certificate from Mr. Pawan Munjal, Managing Director & CEO and Mr. Ravi Sud, Sr. Vice President & CFO in terms of Clause 49(V) of the Listing Agreement for the year under review was placed with the Board of Directors of the Company in their meeting held on April 24, 2008. A copy of the same certificate on the financial statements for the financial year ended March 31, 2008 and the Code of Conduct is given along with this Report. APPOINTMENT AND RE-APPOINTMENT OF DIRECTORS Ms. Shobhana Bhartia, Mr. Sunil Bharti Mittal, Mr. Masahiro Takedagawa and Mr. Pradeep Dinodia, Directors of the Company, retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offer themselves for re-appointment. Further, since the last AGM, Mr. Sumihisa Fukuda and Mr. M. Damodaran were appointed as Additional Directors on the Board of the Company and has been proposed to be appointed as Directors by the shareholders at the ensuing AGM of the Company. The brief resume of the said Directors proposed to be appointed and re-appointed is given alongwith the Notice of the AGM being sent along with the Annual Report. MEANS OF COMMUNICATION The Company has regularly sent, both by post as well as by fax (within 15 minutes of closure of the Board meeting) the annual audited as well as quarterly un-audited results to both the Stock exchanges, BSE & NSE, after they are taken on record by the Board of Directors.

The Company's half yearly results (period ended September 30, 2007) and annual results (year ended March 31, 2008) have been published in English, Hindi and other Regional newspapers (viz. The Times of India, The Economic Times, Hindustan Times, Financial Express, The Mint, Navbharat Times, Mumbai Mirror and Financial Times). Results for the quarter ended June 30, 2007 and December 31, 2007 have been published in English, Hindi and other Regional newspapers (viz. The Economic Times, The Times of India, The Hindustan Times, Financial Times, Mumbai Mirror, Bangalore Mirror, Ahmedabad Mirror, Financial Express and Jansatta). Further, the Company's quarterly, half yearly and annual results have also been sent to the individual shareholders of the Company. Results for each quarter, half year and annual results for the year ended March 31, 2008 have been displayed on the Company's website www.herohonda.com. The website also displays official news releases and distribution schedule, as required by Clause 35 of the Listing Agreement. Moreover, pursuant to Clause 51 of the Listing Agreement, financial information like annual and quarterly financial statements and shareholding pattern etc. are available on the SEBI web-site www.sebiedifar.nic.in. The Company Secretary being the Compliance Officer ensures the correctness and authenticity of the information filed in the said website. During the year ended March 31, 2008, various presentations were made to analysts and Institutional investors. Further, the Management Discussion & Analysis (MDA) Report, throwing light on the operations, business performance, financial and other important aspects of the Company's functioning forms part of this Annual Report.

GENERAL BODY MEETINGS

Details of Annual General Meeting (AGM) Location, date and time of general meetings held during the last three years and Ordinary and Special resolutions passed thereat are given in Table 6. Pursuant to the provisions of Section 192A of the Companies Act, 1956, there was no matter as required to be dealt by the Company to be passed through postal ballot. TABLE 6: DETAILS OF AGM'S Year 2006-07 Time, Day, Date & Location 10:30 A.M. Tuesday, July 24, 2007, Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010 Summary of Resolutions Passed Ordinary Resolutions Appointment of Mr. Yutaka Kudo as Director and Whole-time Director. Appointment of Mr. Takashi Nagai as Director. Special Resolution Payment of commission to Non-Executive Independent Director(s).

2005-06

04:30 P .M. Thursday, September 14, 2006, Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010

Ordinary Resolutions Appointment of Mr. Sunil Bharti Mittal as Director. Appointment of Mr. Toshiaki Nakagawa as Director and Joint Managing Director. Appointment of Mr. Masahiro Takedagawa as Director. Re-appointment of Mr. Pawan Munjal as Managing Director. Special Resolutions Re-appointment of Mr. Brijmohan Lall Munjal as Chairman and Director in the Whole-time employment of the Company. Keeping of Registers/Returns/ Documents at the Registered Office.

2004-05

10:00 A.M. Tuesday, August 23, 2005, Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010

Ordinary Resolutions Appointment of Mr. Analjit Singh as Director. Appointment of Dr. Pritam Singh as Director. Appointment of Ms. Shobhana Bhartia as Director. Appointment of Dr. Vijay Laxman Kelkar as Director. Appointment of Mr. Miki Yamamoto as Director and Joint Managing Director. Appointment of Mr. Takao Eguchi as Director and Whole-time Director. Appointment of Mr. Motohide Sudo as Director.

54

55

A N N U A L R E P O R T 0 7

0 8

GENERAL SHAREHOLDER'S INFORMATION

Annual General Meeting Date: Day: Time: Venue: September 25, 2008 Thursday 11:00 A.M. Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010 Financial Calendar Financial year: April 1 to March 31 For the year ended March 31, 2008 results were announced on: First quarter ended June 30, 2007 Second quarter and half year ended September 30, 2007 Third quarter ended December 31, 2007 Fourth quarter and year ended March 31, 2008 For the year ending March 31, 2009, results will be announced on: (Tentative and subject to change) First quarter ending June 30, 2008 Second quarter and half year ending September 30, 2008 Third quarter ending December 31, 2008 Fourth quarter and year ending March 31, 2009 July, 2008 (4th week) October, 2008 (3rd week) January, 2009 (3rd week) April, 2009 (3rd week) July 24, 2007 October 18, 2007 January 31, 2008 April 24, 2008

Stock Codes The Company's stock codes at the primary exchanges are: Stock Code BSE NSE 500182 HEROHONDA Reuters Code HROH.BO HROH.NS Bloomberg HH IN NHH IN

Stock Market Data The Company's market capitalisation is included in the computation of the BSE -100, BSE - 200, BSE - 500, BSE Sectoral Indices, S&P CNX Nifty, S&P CNX 500 and CNX 100. Monthly high and low quotations as well as the volume of shares traded at the National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE) is given in Table 7.

TABLE 7: SHARE PRICE DATA FOR 2007-08 (IN RS.) (SHARES OF RS. 2 PAID UP VALUE) National Stock Exchange of India Limited, Mumbai (NSE) Month Total Volume Quantity April' 07 May' 07 June' 07 July' 07 August' 07 September' 07 October' 07 November' 07 December ' 07 January' 08 February' 08 4265707 5406193 4348615 4379334 5055233 3710303 4984564 5086172 3683215 5329007 6687308 7300970 High (In Rs.) 700.00 742.80 744.85 730.00 684.00 775.00 774.70 752.00 749.00 721.00 779.00 785.00 25-Apr-07 31-May-07 1-Jun-07 3-Jul-07 9-Aug-07 25-Sep-07 15-Oct-07 2-Nov-07 26-Dec-07 3-Jan-08 4-Feb-08 3-Mar-08 Date Volume on that date Quantity 335022 1082189 287935 103368 219978 337672 332802 335338 52786 730380 454881 815989 Low (In Rs.) 620.90 647.80 650.00 655.10 610.00 633.50 690.00 619.90 680.00 550.00 662.30 631.35 12-Apr-07 22-May-07 19-Jun-07 11-Jul-07 24-Aug-07 5-Sep-07 3-Oct-07 23-Nov-07 10-Dec-07 22-Jan-08 12-Feb-08 24-Mar-08 Date Volume on that date Quantity 238021 123080 153965 222773 81740 65151 161838 219044 91320 282771 368631 507010

Book closure The dates of book closure are from Thursday, September 11, 2008 to Thursday, September 25, 2008 (both days inclusive). 1. Bombay Stock Exchange Limited, (BSE) based at Phiroz Jeejeebhoy Towers, 25th Floor, Dalal Street, Mumbai 400 001; & 2. National Stock Exchange of India Limited, (NSE) based at Exchange Plaza, Plot No. C/1 G Block, Bandra Kurla Complex, Bandra East, Mumbai 400 051. Further, the Company had applied for delisting of its shares from The Calcutta Stock Exchange Association Limited (CSE) and complied with the procedural formalities for the same immediately after the approval received from the shareholders, but the final approval of the same is still awaited. However, the in-principal approval has been received after the grant of approval by the De-listing Committee of the CSE. Listing Fees Listing on Stock Exchange As on March 31, 2008, the securities of the Company are listed on the following exchanges: Listing fees for the year 2008-09 has been paid to the stock exchanges, wherein the equity shares of the Company are listed (i.e. BSE & NSE) within the stipulated time.

March' 08

HERO HONDAS SHARE PRICE MOVEMENT VIS A VIS NIFTY (Monthly High)
HHML NIFTY

Dividend payment The Board of Directors has recommended 950 per cent dividend for the financial year 2007-08. The dividend, if approved by shareholders at the ensuring AGM shall be paid to those shareholders whose names appear on the Register of Members as on Thursday, September 25, 2008. In respect of shares held in electronic form, the dividend will be payable to the beneficial owners of the shares as on the closing hours of business on Wednesday, September 10, 2008 as per the details furnished by the Depositories for this purpose.

795 785 775 765 755 745 735 725 715 705 695 685 675

6400 6200 6000 5800 5600 5400 5200 5000 4800 4600 4400 4200

Share Price

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2007-08

Nifty

56

57

A N N U A L R E P O R T 0 7

0 8

Bombay Stock Exchange Limited, Mumbai (BSE) Month Total Volume Quantity April' 07 May' 07 June' 07 July' 07 August' 07 September' 07 October' 07 November' 07 December' 07 January' 08 February' 08 March' 08 956109 1197136 1167911 788397 1137264 935331 1251800 692195 702928 1455231 2704988 1314564 High (In Rs.) 696.90 739.00 745.00 726.90 685.00 786.00 775.00 747.95 735.00 723.90 785.00 785.00 26-Apr-07 31-May-07 1-June-07 18-July-07 9 Aug-07 25-Sep-07 11- Oct-07 30-Nov-07 6- Dec-07 4-Jan-08 4-Feb-08 4-Mar-08 Date Volume on that date Quantity 61839 203059 114285 83270 34586 63652 48306 41356 29714 14345 122844 274302 Low (In Rs.) 565.00 655.20 651.05 663.00 605.05 631.50 701.00 655.00 680.00 561.00 662.00 633.00 19-Apr-07 25-May-07 19-Jun-07 12-July-07 29-Aug-07 6- Sep-07 19- Oct-07 9- Nov-07 31-Dec-07 22-Jan-08 12- Feb-08 24-Mar-08 Date Volume on that date Quantity 28068 11429 187870 46457 18467 41094 33451 4532 9463 92235 16904 14193

Distribution of Shareholding by Size Table 8 lists the distribution of Shareholding by number of shares held and Shareholding Pattern in percentage (pursuant to Clause 35 of the Listing Agreement) as on March 31, 2008. TABLE 8: No. of shares held (Rs.2 paid up) Numbers Upto 500 501 - 1000 1001- 5000 5001-10000 10001- 50000 50001 and above TOTAL 39189 7634 1872 153 180 178 49206 Folios % 79.64 15.51 3.80 0.31 0.38 0.36 100.00 Shares of Rs. 2 paid up Numbers 3833856 5782140 3661189 1067062 4465555 180877698 199687500 % 1.92 2.90 1.83 0.53 2.24 90.58 100.00

Shareholding Pattern Category code Category of shareholder Number of shareholders Total number of shares Number of shares held in dematerialized form Total shareholding as a percentage of total number of shares As a percentage of (A+B) (A) Shareholding of Promoter and Promoter Group Indian Individuals/ Hindu Undivided Family Central Government/ State Government(s) Bodies Corporate Financial Institutions/ Banks Any Other (Specify) Sub-Total (A)(1) Foreign Individuals (Non-Resident Individuals / Foreign Individuals) Bodies Corporate Institutions Any Other (specify) Sub-Total (A)(2) Total Shareholding of Promoter and Promoter Group (A)= (A)(1)+(A)(2) (B) (1) (a) (b) Public shareholding Institutions Mutual Funds/ UTI Financial Institutions/ Banks As a percentage of (A+B+C)

HERO HONDAS SHARE PRICE MOVEMENT VIS A VIS SENSEX . (Monthly High)
HHML 800 790 780 770 760 750 740 730 720 710 700 690 680 670 660 650 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2007-08 Sensex 21200 20800 20400 20000 19600 19200 18800 18400 18000 17600 17200 16800 16400 16000 15600 15200 14800 14400 14000

(1) (a) (b)

Sensex

59 0 8 0 0 67

4044715 0 53788840 0 0 57833555

361365 0 52163330 0 0 52524695

2.03 0 26.93 0.00 0.00 28.96

2.03 0 26.93 0.00 0.00 28.96

Share Price

(c) (d) (e) (2) (a) (b) (c) (d)

1 0 0 1 68

51918750 0 0 51918750 109752305

0 0 0 0 52524695

26.00 0.00 0.00 26.00 54.96

26.00 0.00 0.00 26.00 54.96

81 35

7753072 315464

7677237 295409

3.88 0.16

3.88 0.16

58

59

A N N U A L R E P O R T 0 7

0 8

Contd... (c) (d) (e) (f) (g) (h) (2) (a) (b) Central Government/ State Government(s) Venture Capital Funds Insurance Companies Foreign Institutional Investors Foreign Venture Capital Investors Any Other (Foreign Banks) Sub-Total (B)(1) Non-institutions Bodies Corporate Individuals i. Individual shareholders holding nominal share capital up to Rs. 1 lakh. ii. Individual shareholders holding nominal share capital in excess of Rs. 1 lakh. Any Other (Specify) - Non Resident Indians - Clearing Members - Trusts - Foreign Nationals Sub-Total (B)(2) Total Public Shareholding (B)= (B)(1)+(B)(2) TOTAL (A)+(B) Shares held by Custodians and against which Depository Receipts have been issued GRAND TOTAL (A)+(B)+(C)

the financial year 2007-08 were 83,586 which were completed in the prescribed period. Shares under objection were returned within two weeks time. 18 261 14867980 49208761 14867980 49170561 7.45 24.64 7.45 24.64 Confirmations in respect of the requests for dematerialisation of shares are being sent to the respective depositories i.e. NSDL & CDSL expeditiously.

Investors' Services The Company has Board Level Committees dealing with investor issues, which have been discussed in detail earlier. Table 9 lists the complaints/requests/reminders received and redressed during 200708. During the financial year, the Company has attended to most of the investors' grievances/correspondence within a period of 10-15 days from the date of receipt of the same.

395 795 47238 5

72145277 1448160 13885673 1070315

72011187 1412594 9186764 65650

36.13 0.73 6.95 0.54

36.13 0.73 6.95 0.54

TABLE 9: COMPLAINTS/REQUESTS RECEIVED AND REDRESSED DURING 2007-08 Sl. No 1. 2. 3. 4. 5. 6. Nature of Complaints / Requests Non receipt of shares Request for issue of duplicate shares Non receipt of dividend warrant Change of address Mandate cases/bank description Miscellaneous (Shares) Received 159 104 352 354 187 2070 Cleared 158 104 352 354 187 2070 Pending 1 0 0 0 0 0

(c)

576 116 12 1 48743 49138 49206 0 49206

182408 19302 1182810 1250 17789918 89935195 199687500 0 199687500

182338 19302 1182810 1250 12050708 84061895 136586590 0 136586590

0.09 0.01 0.59 0.00 8.91 45.04 100.00 0.00 100.00

0.09 0.01 0.59 0.00 8.91 45.04 100.00 0.00 100.00

(C)

COMPANY'S REGISTERED ADDRESS 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi 110 057 Tel: 011 2614 2451, 2614 4121 Fax: 011 2615 3913 website: www.herohonda.com PLANT LOCATIONS

NON-MANDATORY REQUIREMENTS The Company has not adopted the non-mandatory requirements as specified in Annexure - 3 of the Listing Agreement except clause (b) relating to Remuneration Committee. Investors' Correspondence may be addressed to Mr. Ilam C. Kamboj, G.M.-Legal & Company Secretary, e-mail: ickamboj@herohonda.com or to the Registrar & Transfer Agents i.e Karvy Computershare Pvt. Ltd. e-mail: mailmanager@karvy.com Queries Relating to the Financial Statements of the Company may be addressed to Mr. Ravi Sud, Sr. Vice President & CFO, e-mail: ravisud@herohonda.com For and on behalf of the Board

Dematerialisation of Shares and Liquidity The shares of the Company are traded in compulsory demat segment. As on March 31, 2008, 68.40 per cent of the total share capital is held in dematerialised form with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). During the year under review, share certificates involving 5,26,11,075 shares of Rs. 2 each, were dematerialised by the shareholders. These represent 26.35 percent of the total share capital of the Company. Outstanding GDR's/ADR's/Warrants or any Convertible Instruments Conversion Date and likely impact on equity Not Applicable Details of Public Funding obtained in the last three years The Company has not obtained any public funding in the last three years.

Registrar & Transfer Agents All work related to Share Registry, both in physical form and electronic form, is handled by the Company's Registrar and Transfer Agents. Company has appointed M/s. Karvy Computershare Private Limited as the Registrar & Share Transfer Agent of the Company in place of M/s. MCS Limited w.e.f. June 1, 2007. Karvy Computershare Pvt.Ltd. (Unit: Hero Honda Motors Limited) Plot No. 17-24, Vithalrao Nagar, Madhapur, Hyderabad-500081, Tel No : 040-23420815-820, Fax : 040-23420814 E-mail: mailmanager@karvy.com Share Transfer System The Share Transfers (pertaining to shares in physical mode) are approved by the Share Transfer Committee which meets regularly on a weekly/fortnightly basis. The total number of shares transferred during

Gurgaon Plant 37 K.M. Stone, Delhi-Jaipur Highway, Sector 33, Gurgaon 122 001 Haryana Tel: 0124 - 2372 123-134 Fax: 0124 - 2373 141-142 Dharuhera Plant 69 K.M. Stone, Delhi-Jaipur Highway, Dharuhera, Distt. Rewari 122 100 Haryana Tel: 01274 - 264 012-015 Fax: 01274 - 267 024 Haridwar Plant Plot No. 3, Sector - 10, 11E, SIDCUL, Roshanabad, Haridwar 248 001 Uttrakhand Tel: 01334 - 239513 Fax: 01334 - 239512

Brijmohan Lall Chairman July 29, 2008 New Delhi

60

61

A N N U A L R E P O R T 0 7

0 8

CERTIFICATE
TO THE MEMBERS OF HERO HONDA MOTORS LIMITED
We have examined the compliance of conditions of Corporate Governance by Hero Honda Motors Limited for the year ended March 31, 2008, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement. We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For A .F. FERGUSON & CO. Chartered Accountants

CERTIFICATE OF CEO & CFO

CERTIFICATION BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF THE COMPANY
We, Pawan Munjal, Managing Director & Chief Executive Officer (CEO) and Ravi Sud, Sr. Vice President & Chief Financial Officer (CFO) of Hero Honda Motors Limited, to the best of our knowledge and belief certify that: 1. We have reviewed the Balance Sheet and Profit and Loss Account of the Company for the year ended March 31, 2008 and all its schedule and notes on accounts, as well as the Cash Flow Statement. To the best of our knowledge and information: a. these statements do not contain any materially untrue statement or omit to state a material fact or figures or contains statement that might be misleading; b. these statements together present a true and fair view of the Company's affairs and are in compliance with existing accounting standards, applicable laws and regulations. 3. We also certify, that based on our knowledge and the information provided to us, there are no transactions entered into by the Company, which are fraudulent, illegal or violate the company's code of conduct. We are responsible for establishing and maintaining internal controls and procedures for the Company, and we have evaluated the effectiveness of the Company's internal controls and procedures. We have disclosed, based on our most recent evaluation, wherever applicable, to the company's auditors and through them to the audit committee of the Company's Board of Directors: a. Significant changes in internal control during the year; b. Any fraud, which we have become aware of and that involves Management or other employees who have a significant role in the Company's internal control systems;

2.

4.

Manjula Banerji Partner (Membership no. 86423)

5.

Place: New Delhi Date: July 29, 2008

c. Significant changes in accounting policies during the year. We further declare that all board members and senior management have affirmed compliance with the code of conduct for the year 2007-08.

For Hero Honda Motors Ltd.

For Hero Honda Motors Ltd.

New Delhi, April 24, 2008

Pawan Munjal Managing Director & CEO

Ravi Sud Sr. Vice President & CFO

62

63

A N N U A L R E P O R T 0 7

0 8

ANNEXURE - II TO DIRECTORS' REPORT

Information Under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended March 31, 2008 ; I. CONSERVATION OF ENERGY Hero Honda Motors Limited has always recognised the importance of energy. Energy is a vital resource for industrialization and economic growth but also is responsible for factors leading to climate change. By reducing emissions, energy conservation is an important part of lessening climate change. Energy conservation is often the most economical solution to energy shortages and is a more environmentally benign alternative to increased energy production. The company has BEE trained energy managers who are continuously working to curb the wasteful usage of energy and adopting equipments with better energy efficiency. a) Energy conservation measures taken and their impact Power consumption has been reduced with the following measures taken during the year under review: Installation of VFD on air supply unit in paint shop - saving energy 71000 KWH/ year. Replacement of Fixed speed compressors with VFD compressors in AC & Refrigeration system - saving energy 12342 KWH / year. Installation of VFD on cooling tower fans - saving energy in winter season 2448 KWH / year. Provision of FRP fans in place of aluminum casting in cooling towers - saving energy 264132 KWH/year. Replacement of low rating oil injected compressors with higher rating oil free compressors - saving energy 51000 KWH/ year. Installation of real timer on FDV's - saving energy 150000 KWH / year. Installation of individual circuits for main machine - saving power of AC chillers 6000 KWH/year. Additional Investments and Proposals being implemented for reduction of consumption of energy For the reduction in power consumption the following measures has been envisaged and planned for: BIO MASS gasifier power generating set Vapour Absorption machine for chillers Heat Recovery from Incinerator Heat Recovery from DG sets at HHD Alternate power i.e wheeling power from Electrical grid

Note: The additional investment cannot be precisely ascertained, and is part of the Repairs and Maintainence; consumables expenditure and investments in fixed assets. c) Impact of measures at a) and b) for reduction of energy consumption and consequent impact on the cost of production of goods. It is difficult to quantify the impact of individual projects on production as no. of equipments are being added during the period. d) Total energy consumption and energy consumption per unit of production as per Form - A given below.

For Gurgaon Plant A.

Current year

Previous year

New sources added for existing models During the year under review 6 more items have been localised. Compliance made to the Regulations 3 Future plan of action Launching of new Models; Indigenisation plan 17 more items to be localized; Compliance Plan for Future Regulations :T.A & COP for Safety Critical Components, EMC, Mass Emission Norms (BS- IV), Safety Related Standards, E-10 compliance (Rupees in Crores) Year Ended March 31, 2008 I) Capital ii) Recurring iii)Total R & D expenditure as a percentage of Sales (as per P & L A/c) 19.42 18.78 0. 37 Year Ended March 31, 2007 8.11 17.85 0. 26

Power and fuel consumption per unit of production Product unit (Motorcycle) 1660865 1740975 1. Electricity a) Purchased Unit (KWH) Nil Nil Amount (Rs.) Nil Nil Rate/unit Nil Nil Own generation Through diesel generator unit Self (KWH) Hired (KWH) Unit per-ltr.of Diesel Oil Cost/unit Self, (KWH/Ltr.) Hired (KWH/Ltr.) Furnace Oil, LDO, HPS etc.** Quantity (K.Ltrs) Total amount (Rs.) Average Rate/Ltr. (Rs.) Consumption per unit of production 1) Electricity (KWH/Motorcycle) 2) Furnace Oil. LDO, HPS etc. (Ltr./Motorcycle)

b)

56115270 Nil 4.08 Nil 159.201 4,398,916 27.63 Current Year 33.79 0.10

56830801 Nil 4.11 Nil 481.893 1,10,05,176 22.84 Previous Year 32.64 0.28

FORM-A Form for Disclosure of Particulars with respect to Conservation of Energy For Dharuhera Plant A. Current Year Previous Year

4. Expenditure on R & D

2.

Power and fuel consumption per unit of production 1672595 1598921 B.

Product Unit (Motorcycle 1. a) Electricity Purchased Units (KWH) Amount (Rs.) Rate/unit (Rs.) Own generation Through diesel generator Unit Self (KWH) Hired (KWH) Unit per-ltr.of Diesel Oil (Cost/unit) Self (KWH/Ltr.) Hired (KWH/Ltr.) 2. Furnace Oil, LDO, HPS* etc. Quantity (K.Ltrs) Total amount (Rs.) Average Rate/Ltr. (Rs.)

5426026 23,464,923 4.32

8451452 34,295,811 4.06

B) Technology Absorption, Adaptation and Innovation 1 Efforts in brief, made India technology absorption, adaptation and innovation More parts development approval in India Benefits derived as a result of the above efforts e.g. product improvement, cost reduction, product development, import substitution New Model Development to increase market share Supply capacities and quality of bought out parts (BOP) increased with Multi Source Development to support the increasing production Indigenisation - to meet cost challenge. Compliance to latest regulations. Further in the last five years the Companys ancillaries have imported technologies regarding Emission Devices (Cat. Converter), Digital Speedo Meter, Gear Primary Driven (Forging), Cast Wheels, Drive Chain (Solid Bush Type), Fuel Injection, Real Time Mileage Indicator, Non-asbestos Brake Shoe & Gasket, Trichrome, Low Friction High F.E. Engine Technology, LED Lighting Devices, Puncture Resistant Wheel Tube & Rear Cushion with Reservoir Tank etc.

b)

**used for the purpose of hot water generator used for production of motorcycle. II. PARTICULARS AS PER FORM B

41664025 Nil 4.12 Nil

34847158 Nil 3.98 Nil 1824.905 3,02,48,767 16.58 27.08 1.14

(A) Research & Development (R&D) 1 Specific areas in which R & D carried out by the Company New Model Technology Absorption carried out by the company. Indigenisation of CKD Parts Multi Source Approval Meeting Legislative Norms Active Participation in deciding the needs of future Automobile regulations in India 2 Benefits derived as a result of the above R & D activities Splendor NXG (100 cc - 4 Stroke), Hunk (150 cc - 4 Stroke), Pleasure New Aesthetics, Super Splendor Cast Wheel, Passion Plus Cast Wheel, CD Deluxe Cast Wheel, Splendor Plus Cast Wheel and Splendor Plus Limited Edition were launched. Multi source Components have been added to existing models

2.

2,067.888 41,704,620 20.17

B.

Consumption per unit of production 1) Electricity (KWH/Motorcycle) 28.15 2) Furnace Oil, LDO, HPS etc 1.24 (Ltr./Motorcycle)

*used for the purpose of Boiler used for production of motorcycle.

64

65

A N N U A L R E P O R T 0 7

0 8

III. FOREIGN EXCHANGE EARNINGS AND OUTGO A) Export Activities / Initiatives to Increase Exports / Development of New Export Markets / Export Plans

Continue Sales & Service training as ongoing process in overseas markets; Launch seasonal/festival based Promotional and Contest schemes; Focus on workshop Automation and after sale service to the customer; Explore to increase spare parts business. B) EARNINGS & OUTGO

DETAILS OF DIRECTORS OF HERO HONDA MOTORS LIMITED

Name of Director Mr. Brijmohan Lall Munjal Status EC Directorship held Daimler Hero Commercial Vehicles Limited Easy Bill Limited Hero Cycles Limited Hero Financial Services Limited Hero Honda Finlease Limited Hero Honda Motors Limited Munjal Auto Industries Limited Munjal Showa Limited Shivam Autotech Limited Sunbeam Auto Limited BCM Energies Private Limited Munjal Bros. Private Limited Daimler Hero Commercial Vehicles Limited Hero Honda Finlease Limited Hero Honda Motors Limited Hero Investment Private Limited Hero Honda Finlease Limited Hero Honda Motors Limited Hero Honda Finlease Limited Hero Honda Motors Limited Easy Bill Limited Hero Cycles Limited Hero Financial Services Limited Hero Global Design Limited Hero Honda Finlease Limited Hero Honda Motors Limited Hero Motors Limited Highway Industries Limited Majestic Auto Limited Munjal Auto Industries Limited Shivam Autotech Limited Munjal Bros. Private Limited Roma Cycle Manufacuturing Co. (P) Limited Abhyuday Manufacturing & Automotive Limited Arrow Infrastructure Limited Daimler Hero Commercial Vehicles Limited DCM Shriram Consolidated Limited Easy Bill Limited Flourish Manufacturing & Automotive Limited Hero Corporate Services Limited Hero Cycles Limited Hero Ergo Life Insurance Company Limited Hero Honda Motors Limited Committee Membership Committee Chairmanship

EXPORT INITIATIVES IN 2007-08 During the year under review, your Company exported 90571 twowheelers, and in value terms, this implied a decline of 7 per cent. There was no significant growth in exports as per projection. The Company however was successful in launching New CD Deluxe, Passion, Glamour, Splendor NXG and HUNK in Bangladesh and Sri Lanka. The Company was also able to combat the competition in the premium segment due to the positive response from HUNK. The concept of Just 4 her showroom and the New Pleasure launch in Sri Lanka helped us gain higher share in the Scooter category. Infrastructure development and process improvement on the after sale service front has been undertaken extensively. EXPORT PLAN FOR 2008-09 Concentration on existing markets and Exploration of New channels for business growth; To maintain market leadership in Bangladesh; Launch Splendor NXG in Columbia;

Foreign exchange earnings during the period under report was Rs. 243.64 crores, compared to Rs. 263.50 crores in the previous year. On account of Royalty, Technical Guidance Fee, Technical Know-how fee, Export Commission, Travel and other accounts, Advertisement a n d P u b l i c i t y, t h e f o r e i g n e x c h a n g e o u t g o w a s Rs. 332.49 crores, compared to Rs. 371.61 crores in the previous year, a decline of 10.52 per cent. The outgo on account of Dividend was Rs. 88.26 crores compared to Rs.103.84 crores in the previous year. Outgo for import of components, spare parts, raw materials and capital goods outgo was Rs. 574.06 crores compared to Rs. 283.07 crores in the previous year. Mr. Pawan Munjal MD

Mr. Toshiaki Nakagawa Mr. Sumihisa Fukuda Mr. Om Prakash Munjal

JMD TD NED

Mr. Sunil Kant Munjal

NED

66

67

A N N U A L R E P O R T 0 7

0 8

Name of Director

Status

Directorship held Hero Management Service Limited Hero Mindmine Institute Limited Hero Motors Limited Satyam Auto Components Limited Shivam Autotech Limited Bahadur Chand Investments (P) Limited Thakurdevi Hydro (P) Limited Thakurdevi Investments (P) Limited

Committee Membership

Committee Chairmanship

Name of Director

Status

Directorship held Hero Honda Motors Limited

Committee Membership Audit Committee

Committee Chairmanship Shareholders' Grievance Committee

Parsvnath Developers Limited Mr. Analjit Singh NEID Acqvire Talent Services Limited Hero Corporate Services Limited Hero Honda Motors Limited IDBI Limited Malsi Estates Limited Malsi Holdings Limited Max Health Staff International Limited Max Healthcare Institute Limited Max India Limited Max Medical Services Limited Max New York Life Insurance Company Limited Neeman Medical International (Asia) Limited Vodafone Essar Limited BAS Investments Private Limited Boom Investments Private Limited Delhi Guest Houses Private Limited Doon Holiday Resorts Private Limited Dynavest India Private Limited Mohair Investments and Trading Co. (P) Limited MV Healthcare Services Private Limited Scorpios Beverages Private Limited Terra Planet Estates Private Limited Trophy Estates Private Limited Trophy Holdings Private Limited Trophy Resorts Guest Houses Private Limited TVP Investments Private Limited Urban Space Consultants Private Limited Vitasta Estates Private Limited Air Travel Bureau Limited Britex India Limited Firefly e-ventures Limited Goldmerry Investment & Trading Co. Limited Hero Honda Motors Limited HT Media Limited HT Music and Entertainment Limited HTL Investment & Trading Co. Limited Nilgiri Plantation Limited

Mr. Masahiro Takedagawa

NED

Hero Honda Motors Limited Honda Siel Cars India Limited Honda Siel Power Products Limited Honda Motor India Private Limited Honda Motorcycle & Scooters India Private Limited Hero Honda Motors Limited BSES Rajdhani Power Limited BSES Yamuna Power Limited Hero Honda Motors Limited Reliance Infrastructure Limited DCM Shriram Consolidated Limited

Audit Committee

Mr. Takashi Nagai Gen. (Retd.) Ved Prakash Malik

NED NEID

Audit Committee Audit Committee Audit Committee Audit Committee Audit Committee Shareholders' Grievance Committee Audit Committee Audit Committee

Mr. Pradeep Dinodia

NEID

DFM Foods Limited Hero Corporate Services Limited Hero Honda Motors Limited

Shareholders' Grievance Committee

Audit Committee

Micromatic Grinding Technologies Limited RSWM Limited Shriram Pistons & Rings Limited SPR International Auto Exports Limited Ultima Finvest Limited Manisha Commercial Pvt. Limited Panasonic Sales and Services India Pvt. Limited Seracom Pvt. Limited Serva Commercial Pvt. Limited Shabnam Commercial Pvt. Limited Shriram Holographics Pvt. Limited Dr. Pritam Singh NEID Delhi Stock Exchange Limited Dish TV India Limited Godrej Properties Limited Audit Committee

Audit Committee

Ms.Shobhana Bhartia

NEID

Audit Committee

68

69

A N N U A L R E P O R T 0 7

0 8

FREQUENTLY ASKED QUESTIONS (FAQS)

Name of Director Status Directorship held Ronson Traders Limited Shradhanjali Investment & Trading Co. Limited The Hindustan Times Limited Udit (India) Limited Usha Flowell Limited Yashovardhan Investment & Trading Co. Limited Earthstone Holding Private Limited Earthstone Holding (one) Private Limited Earthstone Holding (two) Private Limited Earthstone Holding (three) Private Limited Mr. Sunil Bharti Mittal NEID Bharti Airtel Limited Bharti AXA General Insurance Company Limited Bharti AXA Life Insurance Company Limited Bharti Enterprises Limited Bharti Telecom Limited Bharti Telesoft Limited Bharti Teletech Limited Bharti Ventures Limited Hero Honda Motors Limited Bharti (LM) Holdings Pvt. Limited Bharti (SBM) Holdings Pvt. Limited Bharti Enterprises (Holdings) Pvt. Limited Bharti Retail (Holdings) Pvt Limited Bharti Wal-Mart Pvt Limited Field Fresh Foods Pvt. Limited Hero Honda Motors Limited Tech Mahindra Limited SREI Sahaj e-Village Limited Committee Membership Committee Chairmanship Q: There is nominal growth in Topline but Profitability has increased in double digit of the Company, reasons? Total Turnover during the financial year 2007-08 increased 4.24% to a record high of Rs.10,517.22 crores from Rs.10,089.81 crores during 2006-07. The Profit after tax (PAT) for 2007-08 was recorded at Rs. 967.88 crores as compared to Rs.857.89 crores in 2006-07. PAT as a percentage of Total Turnover has been increased from 8.50% to 9.20%. The improvements on the margins was accomplished through better sales realisations and effective cost rationalisation measures which included better control over Material cost, Marketing cost, Overheads and all-round focus on operational efficiencies . Q: What is the Company strategy on exploring new markets for exports ? The penetration level of two wheelers in India is still very low and it is perceived that domestic demand would continue to be robust in the foreseeable future. Therefore, the Company would focus primarily on fulfillment of the domestic demand. With the start of new manufacturing facilities at Hardwar, the Company would enhance focus on export segment as well and explore new markets in co-operation with Honda.

A: Audit Committee

A:

Q:

When the New Plant at Haridwar would start, level of capacity and its impact on profitability of the Company? The new plant at Haridwar has been started in April 2008 with initial capacity of 500,000 units. New plant would be using a state of the art technology with significant scalability option at relativity low investment. We plan to increase the capacities to 1,000,000 and subsequently to 1,500,000 over the coming years. Considering the excise and income tax incentive available to the new plant there would be positive impact on the profitability of the Company.

A:

Q: A:

What is your outlook on two wheeler industry? The long term outlook for two wheelers and motorcycles in particular remains positive given the low levels of penetration which provide tremendous growth potential and a healthy GDP growth in years to come. However, our outlook for the next fiscal ie 2008-09 remains conservative driven by continued slackness in credit availability and higher financing cost and rising inflation, which erodes the purchasing power of the consumer. Last year Company has launched several new models, please appraise us the performance of these models and what about new launch during the current year ? During the year 2007-08 Company has launched following new models HUNK & SPLENDOR-NXG along with several new variants and refreshes. These new models have been very well accepted by the market and now running under mass production. Q: There are several new and improved models in pipeline and will be disclosed in due course of time. A:

Q:

What is the management's outlook on the operating margin in the coming period considering hardening of metal prices and weakening of rupee ? The incessant increase in most of the input commodities ranging from Steel Aluminum Rubber etc would adversely affect the operating margins of any automobile manufacturer. However we have tried protecting our margins through various measures, which include higher sales realization, increased focus on controlling cost and operational efficiencies.

Q:

A:

Mr. Meleveetil Damodaran

NEID

A:

Notes: EC MD JMD TD NED NEID : : : : : : Executive Chairman Managing Director Joint Managing Director Technical Director Non- Executive Director Non- Executive & Independent Director A: Q:

What steps the Company has taken to improve corporate governance? The Company is committed to benchmark itself with global standards in all areas including corporate governance. The Company's annual report contains substantial disclosures on the Board of Director, audit committee, remuneration committee, shareholders grievance committee, financial and stock performance, etc. In addition, an attempt has been made to benchmark governance with the guidelines recommended by the SEBI Committee on Corporate Governance (SEBI is the apex authority for regulating capital markets in India) Financial results are published as per the latest Accounting Standards prescribed by the Institute of Chartered Accountants of India. The results are published in a transparent manner and there has been no non-compliance of any legal provision of applicable laws.

With the hardening of interest rates, would the demand for motorcycles be affected ? A sizeable segment of the two wheelers sales today happens through financing. Hence, any increase in the interest cost would adversely affect the sales growth. However, the low levels of two wheeler penetrations, rising disposable income and a favourable age demography of Indian population would help in increasing the market size. The Company has tie-ups with various preferred financers and is in the process to empanelling regional players with proven credentials to increase the penetration in smaller towns semi urban and rural areas.

Details of Directorships is as on July 29, 2008

70

71

Auditors' Report Annexure to Auditors' Report Balance Sheet, Profit & Loss Account and Cash Flow Statement Schedules US GAAP

A N N U A L R E P O R T 0 7

0 8

AUDITORS REPORT
TO THE MEMBERS OF HERO HONDA MOTORS LIMITED
1. We have audited the attached balance sheet of Hero Honda Motors Limited, as at March 31, 2008 and also the profit and loss account and the cash flow statement for the year ended on that date, 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. We conducted our audit in accordance with 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 misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditor's Report) Order, 2003, issued by the Central Government of India in terms of sub-section (4A) of section 227 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. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: i) 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; ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; iii) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; iv) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement, dealt with by this report, comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; v) on the basis of written representations received from the Directors and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2008 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; vi) 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: a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2008; b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and c) in the case of Cash Flow statement, of the cash flows for the year ended on that date.

ANNEXURE REFERRED TO IN PARAGRAPH '3' OF THE AUDITORS REPORT TO THE MEMBERS OF HERO HONDA MOTORS LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2008.
(I) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. (b) As explained to us, the Company has a system of physical verification, which is designed to cover all fixed assets over a period of three years and in accordance therewith, physical verification of a major portion of fixed assets of the Company was carried out during the current year. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and the nature of its fixed assets. (c) In our opinion and according to the information and explanations given to us, a substantial part of the fixed assets has not been disposed off by the Company during the year. (ii) (a) During the year, the inventories have been physically verified by the management. In our opinion, the frequency of verification is reasonable. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) On the basis of our examination of the records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account. (iii) (a) According to the information and explanations given to us, the Company has, during the year, not granted any loan, secured or unsecured to Companies, firms and other parties covered in the registered maintained under Section 301 of the Companies Act, 1956, other than unsecured loans aggregating Rs. 240 crores granted to a Company covered in the registered maintained under Section 301 of the Companies Act, 1956. The maximum amount due during the year was Rs. 60 crores and the year end balance of loans granted was Rs. 50 crores. (b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of the loans granted by the Company, as referred to in paragraph 4(iii)(a) of the Companies (Auditor's Report) Order, 2003 (hereinafter referred to as the Order) above, are, prima- facie, not prejudicial to the interest of the Company. (c) According to the information and explanations given to us, the parties, to whom the loans have been granted by the Company, as referred to in paragraph 4(iii)(a) above, have been regular in repayment of the principal amount as stipulated and have been regular in payment of interest. (d) According to the information and explanations given to us, there are no overdue amounts in respect of the loans granted as referred to in paragraph 4(iii) (a) above and interest thereon. (e) According to the information and explanations given to us, the Company has, during the year, not taken any loans, secured or unsecured, from companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (f) and (g) of the Order are not applicable. (iv) According to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventories, fixed assets and with regard to the sale of goods. There are no sales of services during the year. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have been informed of any instance of major weaknesses in the aforesaid internal control system. (v) (a) According to the information and explanations given to us, we are of the opinion that during the year, the particulars of the contracts/arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section. (b) According to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, and exceeding the value of Rs. 5 lacs in respect of any party during the year, having regard to the explanation that some of services/ items purchased are of a specialized nature for which there are no alternate sources of supply to enable comparison of the prices, these have been made at prices which are reasonable to prevailing market prices at the relevant time. (vi) The Company has not accepted any deposits from the public. (vii) According to the information and explanations given to us, the Company has an adequate internal audit system commensurate with its size and nature of its business.

2.

3.

4.

FOR A.F. FERGUSON & CO. Chartered Accountants

Manjula Banerji Partner (Membership number: 86423)

Place: New Delhi Date: April 24, 2008

74

75

A N N U A L R E P O R T 0 7

0 8

(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 and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete. (ix) (a) According to the information and explanations given to us and the records of the Company examined by us, the Company has been regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax,

wealth tax, customs duty, excise duty, cess, value added tax, Haryana local area development tax and other material statutory dues applicable to it with the appropriate authorities. We are informed that there are no undisputed statutory dues as at the year end, outstanding for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us and the records of the Company examined by us, there are no disputed dues in respect of wealth tax, customs duty and cess, which have not been deposited. The following are the particulars of sales tax, excise duty, service tax and income tax dues not deposited/deposited under protest by the Company on account of disputes as at March 31, 2008:-

(x)

The Company does not have accumulated losses at the end of the financial year March 31, 2008. Further, the Company has not incurred any cash losses during the financial year ended March 31, 2008 and in the immediately preceding financial year ended March 31, 2007. According to the records of the Company examined by us and on the basis of information and explanations given to us, the Company has not defaulted in repayment of dues to banks during the year. The Company has not taken any loans from financial institutions and has not issued debentures during the year.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that short term funds have not been used to finance long term investments.
(xviii) The Company has not made any preferential allotment of shares

(xi)

during the year. (xix) The Company has not issued any debentures during the year. (xx) The Company has not raised any money by way of public issue during the year. (xxi) Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit for the year ended March 31, 2008.

(xii) In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances during the year on the basis of security by way of pledge of shares, debentures and other securities. (xiii) According to the information and explanations given to us, the provisions of any special statute as specified under paragraph 4(xiii) of the Order are not applicable to the Company. (xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. (xv) According to the information and explanations given to us, the Company has not given any guarantees during the year for loans taken by others from banks or financial institutions. (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.

Name of the Statute

Nature of dues

Amount* (Rs. in crores)

Amount paid under protest (Rs. in crores) 1.90

Period to which the amount relates

Forum where dispute is pending

For A.F. FERGUSON & CO. Chartered Accountants

Sales Tax laws

Sale Tax

1.90

1998-1999 to 1999-00

Commissioner (Appeals) CESTAT Commissioner (Appeals) CESTAT Income Tax Appellate Tribunal Commissioner (Appeals)

Central Excise Laws

Excise Duty

0.32 0.39

2000-01 2002-03 to 2005-06

Manjula Banerji Partner (Membership No.: 86423)

Service Tax Income-tax Act Income Tax

22.10 5.73

0.45 5.73

2002-03 to 2005-06 2000-01 to 2001-02

Place : New Delhi Date: April 24, 2008

31.44

31.44

2001-02 to 2003-04

* Amount as per demand orders including interest and penalty wherever quantified in the order.

The following matters have been decided in favour of the Company, although the department has preferred appeals at higher levels:

Name of the Statute

Nature of the dues

Amount (Rs. in crores) 2.57 6.43

Period to which amount relates 1986-87 to 1990-91 1987-88, 1989-90, 1992-93 1993-94, 1995-96, 1996-97 1995-96, 1997-98, 2000-01

Forum where dispute is pending Supreme Court High Court

Central Excise Laws Income-tax Act

Excise Duty Income-Tax

0.96

Income Tax Appellate Tribunal

76

77

A N N U A L R E P O R T 0 7

0 8

HERO HONDA MOTORS LIMITED

BALANCE SHEET AS AT MARCH 31, 2008
(Rupees in crores) Schedule No. SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share capital Reserves and surplus LOAN FUNDS Unsecured DEFERRED TAX LIABILITIES TOTAL APPLICATION OF FUNDS FIXED ASSETS Gross block Less: Depreciation Net block Capital work in progress PRE - OPERATIVE EXPENSES (PENDING ALLOCATION) INVESTMENTS DEFERRED TAX ASSETS CURRENT ASSETS, LOANS AND ADVANCES Inventories Sundry debtors Cash and bank balances Other current assets Loans and advances Less: CURRENT LIABILITIES AND PROVISIONS Current liabilities Provisions Net current assets TOTAL Notes to the accounts Per our report attached For A. F. FERGUSON & CO. Chartered Accountants MANJULA BANERJI Partner Membership no. 86423 New Delhi April 24, 2008 13 For and on behalf of the Board of Directors BRIJMOHAN LALL MUNJAL PAWAN MUNJAL PRADEEP DINODIA RAVI SUD ILAM C. KAMBOJ Chairman Managing Director & CEO Director Sr. Vice President & CFO G.M. Legal & Company Secretary 4 1,938.78 782.52 1,156.26 392.44 1,548.70 5 6 9 7 317.10 297.44 131.09 5.69 185.46 936.78 8 1,324.98 499.76 1,824.74 (887.96) 3,248.83 1041.92 437.24 1479.16 (565.89) 2764.81 275.58 335.25 35.78 3.60 263.06 913.27 16.05 2,566.82 5.22 1800.63 635.10 1165.53 189.92 1355.45 1973.87 1.38 1 2 3 132.00 132.00 130.59 3,248.83 165.17 165.17 129.58 2764.81 39.94 2,946.30 2,986.24 39.94 2,430.12 2,470.06 As at March 31, 2008 As at March 31, 2007

HERO HONDA MOTORS LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2008
(Rupees in crores) Schedule No. INCOME Gross sales Less: Excise duty Net sales Other income EXPENDITURE Manufacturing and other expenses Depreciation Interest (net) Profit for the year before tax Provision for taxation - current - deferred - fringe benefit Profit after tax Balance of profit brought forward Balance available for appropriation APPROPRIATIONS Proposed dividend Tax on dividend Transfer to general reserve Balance carried to balance sheet Basic and diluted earnings per share face value Rs. 2/-each ( in rupees) Notes to the accounts 13 12,038.53 1,706.73 10,331.80 185.42 10,517.22 8,982.43 160.32 (35.81) 9,106.94 1,410.28 436.81 1.20 4.39 967.88 1,594.78 2,562.66 379.41 64.48 97.00 2,021.77 2,562.66 48.47 11,542.04 1,642.08 9,899.96 189.85 10,089.81 8,726.92 139.78 (22.99) 8,843.71 1,246.10 375.81 9.42 2.98 857.89 1,224.05 2,081.94 339.47 57.69 90.00 1,594.78 2,081.94 42.96 Year ended March 31, 2008 Year ended March 31, 2007

10

11 4 12

Per our report attached to the balance sheet For A. F. FERGUSON & CO. Chartered Accountants MANJULA BANERJI Partner Membership no. 86423 New Delhi April 24, 2008

For and on behalf of the Board of Directors BRIJMOHAN LALL MUNJAL PAWAN MUNJAL PRADEEP DINODIA RAVI SUD ILAM C. KAMBOJ Chairman Managing Director & CEO Director Sr. Vice President & CFO G.M. Legal & Company Secretary

78

79

A N N U A L R E P O R T 0 7

0 8

HERO HONDA MOTORS LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2008
(Rupees in crores) Year ended March 31, 2008 A. CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax Adjustments for: Add: Depreciation Loss on fixed assets sold/discarded Exchange differences Loss on sale of non-trade current investments Provision for diminution in value of investment: Current non trade investment Long term non trade investment Interest - others and financial charges Provision for doubtful debts Less: Interest received on long term non-trade investments Interest received on loans, deposits etc. Profit on sale of fixed assets Dividend income: On current Investments - Non-trade On long-term investments-Trade Profit on sale of non-trade investments: On current investments Operating profit before working capital changes Adjustments for: Add: Increase / (decrease) in trade payables Increase in security deposits from dealers Less: Increase /(decrease) in trade and other receivables Increase in inventories Cash generated from operations Less: Direct taxes paid Net cash from operating activities B. CASH FLOW FROM INVESTING ACTIVITIES Sale of fixed assets Sale of investments Inter corporate deposits received back Interest received on long term non-trade investments Interest received on loans, deposits etc. Dividend income: On current investments-Non-trade On long-term investments-Trade 1.03 13,703.86 190.00 10.72 37.81 4.24 2.72 13,950.38 3.87 13,633.86 211.75 10.57 24.60 6.53 5.43 13,896.61 Per our report attached to the balance sheet For A. F. FERGUSON & CO. Chartered Accountants MANJULA BANERJI Partner Membership no. 86423 New Delhi April 24, 2008 For and on behalf of the Board of Directors BRIJMOHAN LALL MUNJAL PAWAN MUNJAL PRADEEP DINODIA RAVI SUD ILAM C. KAMBOJ Chairman Managing Director & CEO Director Sr. Vice President & CFO G.M. Legal & Company Secretary 1,410.28 160.32 4.36 (0.98) 19.54 1.29 1.28 2.00 4.59 192.40 12.81 37.81 0.09 4.24 2.72 152.45 210.12 1,392.56 185.64 2.04 187.68 (115.05) 41.52 (73.53) 1,653.77 441.99 1,211.78 Year ended March 31, 2007 1,246.10 139.78 13.80 1.66 19.62 1.00 1.27 1.61 0.30 179.04 10.64 24.60 0.32 6.53 5.43 150.02 197.54 1,227.60 (30.83) 2.34 (28.49) 129.68 49.03 178.71 1,020.40 395.35 625.05 Less: Purchase of fixed assets Inter corporate deposits paid Purchase of investments Net cash (used) in investing activities C. CASH FLOW FROM FINANCING ACTIVITIES Interest paid - others and financial charges Dividend paid Tax on dividend Repayment of long term borrowings 2.00 339.47 57.69 33.17 432.33 Net cash (used) in financing activities (432.33) 1.61 415.23 56.01 20.61 493.46 (493.46) 374.92 190.00 14,166.47 14,731.39 (781.01) Year ended March 31, 2008 (Rupees in crores) Year ended March 31, 2007 519.03 233.00 13,417.71 14,169.74 (273.13)

D.

Increase/(decrease) in cash and cash equivalents (A+B+C) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Cash and bank balances Unrealised exchange loss/(gain) 15.19 (0.09)

(1.56) 16.66

(141.54) 158.72 16.66 0.52 17.18

15.10

Notes to the accounts

Schedule 13

80

81

A N N U A L R E P O R T 0 7

0 8

HERO HONDA MOTORS LIMITED

SCHEDULES 1 to 13 ANNEXED TO AND FORMING PART OF THE ACCOUNTS
1) SHARE CAPITAL (Rupees in crores) As at March 31, 2008 AUTHORISED 25,00,00,000 (Previous year 25,00,00,000 ) Equity shares of Rs. 2 each 4,00,000 (Previous year 4,00,000 ) Cumulative convertible preference shares of Rs. 100 each 4,00,000 (Previous year 4,00,000 ) Cumulative redeemable preference shares of Rs. 100 each ISSUED, SUBSCRIBED AND PAID UP 19,96,87,500* (Previous year 19,96,87,500) Equity shares of Rs. 2 each fully paid up * Of the above 11,98,12,500 (Previous year 11,98,12,500) shares had been allotted as fully paid bonus shares by capitalisation of general reserve. 39.94 39.94 39.94 39.94 Tangible assets Land - Freehold - Leasehold 2) RESERVES AND SURPLUS (Rupees in crores) As at March 31,2007 CAPITAL RESERVES On shares forfeited (#Rs. 4250) Share premium account on forfeited shares reissued(##Rs. 25500) REVENUE RESERVES General reserve Surplus, being balance in profit and loss account 1,594.78 2,430.12 Previous year 1,969.39 426.99 523.99 460.73 7.81 2,021.77 2,946.30 Note : 2,430.12 * Includes Rs. Nil (Previous year decrease of Rs. 1.13 crore) due to fluctuation in exchange rates # Include land at Haridwar pending registration in the name of the Company. * Adjustment of employee benefit schemes as per revised accounting standard AS 15, net of deferred tax assets of Rs 4.03 crores (refer note - 14) @ Includes Rs. 1.16 crores(Previous year Rs. Nil) transferred to Pre- operative expenditure (pending allocation) Capital work in progress {including capital advances Rs. 73.39 crores (Previous year Rs. 38.26 crores)} 392.44 189.92 1,548.70 1,355.45 835.34 97.00 7.81* 924.53 ## ## # # Additions Deductions As at March 31, 2008 Buildings Plant and machinery Furniture, fixtures and office equipment Vehicles Computer and data processing machines Intangible assets - Model fee Total Previous year 151.17 1,800.63 1,471.97 31.32 157.51 373.29 182.49 70.87 37.01 14.06 27.28 107.88 635.10 74.61 80.30 1,165.53 19.36 1,938.78 44.63 1,800.63 635.10 161.48@ 522.60 139.78 782.52 1,156.26 43.32 4.43 0.82 46.93 29.01 4.13 0.75 32.39 14.54 14.31 17.64 14.78 3.50 8.04 1.79 1.69 19.35 21.13 5.30 4.04 1.12 3.14 0.60 0.75 5.82 6.43 13.53 14.70 12.34 10.74 77.55 81.80# 191.68 1,222.69 3.24 20.46 86.52 * 80.79 81.80 212.14 0.52 29.30 1.15 6.13 11.96 1.67 35.43 592.90 80.79 80.13 176.71 701.25 77.55 81.28 162.38 726.63 4.00 58.00 4.00 58.00 As at March 31, 2007 4.00 4.00 50.00 50.00 As at March 31, 2007 UNSECURED LOANS Other loans and advances Sales tax deferment from the State Government of Haryana (Include Rs. 53.51 crores (previous year Rs. 33.17 crores) due within one year) 132.00 165.17 132.00 165.17 As at March 31, 2008 3) LOAN FUNDS (Rupees in crores) As at March 31, 2007

4) FIXED ASSETS (Rupees in crores) Gross block (at cost) Additions Deductions As at March As at March Depreciation For the On year deductions As at March Net block As at March As at March

31, 2008 31, 2007

31, 2008 31, 2008 31, 2007

15.06 1,294.15

496.06 108.80

82

83

A N N U A L R E P O R T 0 7

0 8

5)

PRE-OPERATIVE EXPENDITURE (PENDING ALLOCATION) (Rupees in crores) As at March 31, 2008 As at March 31, 2007 -

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007

Consumption of raw materials and components Consumption of stores and spares Power and fuel Payments to and provisions for employees: Salaries, wages, bonus, gratuity and leave encashment benefit Contribution to provident and other funds Rent Exchange fluctuation Insurance Rates and Taxes Technical guidance fee Professional charges Depreciation 4.12 0.33 0.09 0.82 0.53 0.45 0.40 2.18 1.16 16.05 0.19 0.05 5.73

25000000 (Previous year Nil) units in FMP Series36-Eighteen Months Plan B -Institutional Growth 25000000 (Previous year Nil) units in Interval Fund II Quarterly Interval Plan C-Retail Cumulative 40000000 (Previous year Nil) units in FMP Series 39-Six Months Plan A Retail Cumulative 25000000 (Previous year Nil) units in FMP Series41-Fourteen Months Plan Institutional Cumulative 15000000 (Previous year Nil) units in FMP Series42-Three Months Plan A Retail Growth 12500000(Previous year Nil) units in FMP Series43-Thirteen Months Plan B Institutional Growth 20000000 (Previous year Nil) units in FMP Series43-Thirteen Months Plan D Retail Growth Birla Sunlife Mutual Fund Nil (Previous year 16000000) units in fixed term plan series D -Growth Nil (Previous year 7500000) units in FTP -Quarterly-Series-5 -Growth Nil (Previous year 15000000) units in FTP -Half Yrly-Series-2 -Growth 20000000 (Previous year 20000000) units in FTP -INSTL-Series U-Growth 15000000 (Previous year Nil) units in FTP -INSTL-Series V-Growth 20000000 (Previous year Nil) units in Qtly Interval-Series 5-Growth 30000000 (Previous year Nil) units in FTP-INSTL-Series AK-Growth 24475250 (Previous year Nil) units in Interval Income Fund -INSTL-Quarterly-Series 2-Growth 4227865 (Previous year Nil) units in Income Plus-Growth HDFC Mutual Fund Nil(Previous year 20000000) units in FMP 13 M June 2006 (1)-Institutional Plan- Growth Nil (Previous year 5000000) units in FMP 90 D January 2007 (3)-Wholesale Plan- Growth 25000000 (Previous year Nil) units in FMP 18M November 2007 (VI) Wholesale Plan- Growth 30000000 (Previous year Nil) units in FMP 18M January 2008 (VII) Wholesale Plan- Growth 18100000 (Previous year Nil) units in Arbitrage Fund Wholesale Plan - Growth Standard Chartered Mutual Fund Nil (Previous year 5000000) units in Grindlays fixed maturity 7th plan -B -Growth Nil (Previous year 25000000) units in Grindlays fixed maturity -16th plan A -Growth Nil (Previous year 5000000) units in fixed maturity Plan - Yearly Series 1-Growth Nil (Previous year 10000000) units in fixed maturity Plan - Quarterly Series 3-Growth

25.00 25.00 40.00 25.00 15.00 12.50 20.00

6)

INVESTMENTS As at March 31, 2008 (Rupees in crores) As at March 31, 2007

CURRENT INVESTMENTS (cost or fair value which ever is lower) Non-trade Unquoted In Mutual fund units: Debt fund (Units of the face value of Rs. 10 each) ICICI Prudential Mutual Fund Nil (Previous year 46644836) units in institutional FMP -15 months plan-series-XXV Nil (Previous year 70653402) units in blended plan A-Growth Nil (Previous year 20000000) units in hybrid fixed maturity plan-13 months plan-Institutional-Growth Nil (Previous year 35000000) units in FMP Series 35-Three Months Plan A-Retail -Growth Nil (Previous year 96344009) units in FMP Series 35-Three Months Plan B-Retail -Growth Nil (Previous year 10000000) units in FMP Series 34-1 Year Plan A-Institutional -Growth 30000000 (Previous year 30000000) units in FMP Series 34-Fifteen Months Plan -Institutional -Growth 20000000 (Previous year 20000000) units in FMP Series 34-One Year Plan B Institutional Growth 70000000 (Previous year 175000000) units in equity and derivatives fund -Income optimiser-Institutional Growth

20.00 15.00 20.00 30.00 25.00 15.00

16.00 7.50 15.00 20.00 -

25.00 30.00 18.10

20.00 5.00 -

30.00 20.00 70.00

50.00 73.25 20.00 35.00 96.34 10.00 30.00 20.00 175.00

5.00 25.00 5.00 10.00

84

85

A N N U A L R E P O R T 0 7

0 8

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007 10.00 5.00 -

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007 51.85 20.00 5.00 -

Nil (Previous year 10000000) units in fixed maturity Plan - Quarterly Series 4-Growth Nil (Previous year 5000000) units in fixed maturity Plan - Quarterly Series 7-Growth 20000000 (Previous year Nil) units in fixed maturity Plan - Yearly Series 8-Growth 9641249 (Previous year Nil) units in Arbitrage Fund -Plan B-Growth 24488468 (Previous year Nil) units in Arbitrage Fund -Plan B-Dividend Tata Mutual Fund Nil (Previous year 25000000) units in fixed horizon fund series 6-scheme B-Growth Nil (Previous year 25000000) units in fixed horizon fund series 8-scheme D-IG-Growth Nil (Previous year 10000000) units in fixed horizon fund series 8-scheme E-Growth-Inst Plan Nil (Previous year 15000000) units in fixed horizon fund series 8-scheme F-Growth-Inst Plan 12000000(Previous year 12000000) units in S I P FUND -Scheme I-Growth Nil (Previous year 5000000) units in fixed horizon fund series 9-scheme E-Growth-Inst Plan 19143885 (Previous year Nil) units in Dynamic Bond Fund Option B-Growth 20000000 (Previous year Nil) units in Fixed Horizon Fund Series 17 Scheme D-Institutional Plan -Growth 15000000 (Previous year Nil) units in Fixed Income Portfolio Fund Scheme A2 Institutional -Growth 15000000 (Previous year Nil) units in Fixed Income Portfolio Fund Scheme B2 Institutional -Growth 24740431(Previous year Nil) units in Floating Rate Fund Long Term-Growth Kotak Mutual Fund Nil (Previous year 5000000) units in FMP series 14 -Growth Nil (Previous year 7500000) units in FMP 3 M series 8 -Growth 15000000 (Previous year 15000000) units in FMP 15 M Series 2 -Growth 20000000 (Previous year Nil) units in FMP 12 M Series 4 Institutional-Growth 51056254 (Previous year Nil) units in FMP 3 M Series 26-Growth 7124384 (Previous year Nil) units in Bond (Short Term)-Growth Templeton Mutual Fund Nil (Previous year 15000000) units in Fixed Horizon Fund 3 months plan-inst. -Growth 20000000 (Previous year Nil) units in Fixed Horizon Fund Series VII -Plan D -institutional -Growth HSBC Mutual Fund Nil (Previous year 35000000) units in fixed term series 9-Growth ABN Amro Mutual Fund Nil (Previous year 41703848) units in fixed term plan series 4 quarterly plan D Growth Nil (Previous year 15000000) units in fixed term plan series 4 quarterly plan E Growth

20.00 10.00 25.35

12.00 25.00 20.00 15.00 15.00 30.00

25.00 25.00 10.00 15.00 12.00 5.00 -

Nil (Previous year 51848377) units in fixed term plan series 4 Half Yearly plan A Growth Nil (Previous year 20000000) units in Dual Advantage Fund Plan A Series 1 Inst Growth 5000000 (Previous year 5000000) units in FTPS5 14 Mths plan Inst Growth 5000000 (Previous year Nil) units in Fixed Term Plan -Ser-8-Yly Plan A -Inst. Growth 9572584 (Previous year Nil) units in Flexible short Term Plan -Ser A Gr.-Renewal 33542575 (Previous year Nil) units in Interval Fund Quarterly Plan H Growth-Ren 15000000 (Previous year Nil) units in FTP Ser 10 Plan F Inst. Growth 40256676 (Previous year Nil) units in Flexi Debt Fund -Regular -Growth Deutsche Mutual Fund Nil (Previous year 25000000) units in fixed term fund-series 14-Growth Plan Nil (Previous year 10000000) units in fixed term fund-series 23-Growth Option Nil (Previous year 5000000) units in fixed term fund-series 27-Growth Option 5000000 (Previous year 5000000) units in fixed term fund-series 24-Institutional Plan-Growth Option Escorts Mutual Fund Nil (Previous year 471885) units in income plan - Growth ING Vysya Mutual Fund Nil (Previous year 20000000) units in fixed maturity fund series VII -Growth option Nil (Previous year 10000000) units in fixed maturity fund series xxi -Growth option 5000000 (Previous year 5000000) units in fixed maturity fund series xxii -Growth option Nil (Previous year 3000000) units in fixed maturity fund series xxiv -Growth 5000000 (Previous year Nil) units in fixed maturity fund- xxviii -Growth Reliance Mutual Fund Nil (Previous year 50000000) units in fixed tenor fund plan A -Growth Option 10000000(Previous year 10000000) units in fixed tenor fund plan B -Growth Plan 5000000(Previous year 5000000) units in fixed Horizon fund- Institutional plan C -Series I-Institutional Growth plan Nil (Previous year 40000000) units in fixed Horizon fund I- Annual Plan -Series III-Institutional Growth plan Nil (Previous year 77401572) units in fixed Horizon fund II- Quarterly Plan -Series II-Institutional Growth plan Nil (Previous year 25000000) units in fixed Horizon fund II- Quarterly Plan -Series I-Institutional Growth plan 25000000(Previous year 25000000) units in fixed Horizon fund III- Annual Plan Series IV-Institutional Growth Plan 10000000 (Previous year Nil) units in Annual Interval Fund -Series1-Institutional Growth Plan 25000000 (Previous year Nil) units in Fixed Horizon Fund IV -Series 6-Institutional Growth Plan

5.00 5.00 10.00 35.00 15.00 50.00

5.00

25.00 10.00 5.00 5.00

1.00

5.00 5.00

20.00 10.00 5.00 3.00 -

15.00 20.00 51.05 10.00

5.00 7.50 15.00 -

10.00 5.00

50.00 10.00 5.00

25.00 10.00 25.00

40.00 77.40 25.00 25.00 -

20.00

15.00 -

35.00 41.71 15.00

86

87

A N N U A L R E P O R T 0 7

0 8

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007 25.00 -

30000000 (Previous year Nil) units in Fixed Horizon Fund IV -Series 7-Institutional Growth Plan 46542367 (Previous year Nil) units in Monthly Interval Fund -Series II-Institutional Growth Plan 5000000 (Previous year Nil) units in Fixed Horizon Fund -VI -Series 2-Institutional Growth Plan 12500000 (Previous year Nil) units in Fixed Horizon Fund -IX -Series 1-Institutional Growth Plan 20000000 (Previous year Nil) units in Fixed Horizon Fund VII -Series 5-Institutional Growth Plan Principal Mutual Fund Nil (Previous Year 47963255) units in income fund Growth plan Nil (Previous year 25000000) units in fixed maturity plan (FMP-31) Series III Instt. Growth plan-Nov 06 Lotus India Mutual Fund 20000000 (Previous year Nil) units in FMP-14 Months -Series II-Institutional Growth 20000000 (Previous year Nil) units in FMP-14 Months -Series III-Institutional Growth (Units of the face value of Rs.100 each) Reliance Mutual Fund 68780 (Previous year Nil) units in Gold ETF -Open Ended Scheme (Units of the face value of Rs. 1000 each) AIG Global Investment Group Mutual Fund 150000 (Previous year Nil) units in Short Term Fund Institutional Growth DSP Merrill Lynch Mutual Fund Nil (Previous year 154224) units in fixed term plan - series 1 H-Growth Institutional Nil (Previous year 203789) units in fixed term plan - series1 I-Growth Institutional 606525 (Previous year Nil) units in Strategic Bond Fund -Institutional- Growth 250000 (Previous year Nil) units in fixed term plan series3D-Institutional-Growth 50000 (Previous year Nil) units in fixed term plan series3H-Institutional Growth Repurchase Price Rs. 1302.86 crores (Previous year Rs. 1425.42 crores) Fund of Funds (Units of the face value of Rs. 10 each) Optimix Mutual Fund 21612178 (Previous year 25000000) units of active debt multi -manager FOF scheme- Growth

30.00 50.00 5.00 12.50 20.00

Nil (Previous year 25000000) units of dynamic multi- manager FOF scheme -Series 2-Growth 14000000 (Previous year Nil) units of dynamic multi- manager FOF scheme -Series 3-Growth 13300000 (Previous year Nil) units of dynamic multi- manager FOF scheme -Series 4-Growth 5000000 (Previous year Nil) units of Active Short Term FOF -Growth ABN AMRO MUTUAL FUND 15000000 (Previous year 15000000) units in Multi Manager Fund Series 2A Growth 5000000 (Previous year 5000000) units in Multi Manager Fund Series 3- Growth Less: Provision for Diminution in Value Repurchase Price Rs. 76.46 crores (Previous year Rs. Rs. 69.00 crores) Equity fund (Units of the face value of Rs. 10 each) Escorts Mutual Fund 21839119 (Previous year 14734210) units in opportunities fund -dividend 2439024 (Previous year 3414634) in units of high yeild equity plan-Dividend 3000000 (Previous year Nil) in units of Infrastructure Fund-Growth ING Vysya Mutual Fund Nil (Previous year 1000000) units in CUB fund - Dividend Option

14.00 13.30 5.00

15.00 5.00 73.91 73.91

15.00 5.00 70.00 (1.00) 69.00

50.00 25.00

20.00 20.00

29.41 2.50 3.00

19.12 3.50 -

1.00

7.00

DSP Merrill Lynch Mutual Fund Nil (Previous year 5000000) units in DSP Merrill Lynch Small and Mid Cap -Reg Dividend Optimix Mutual Fund 25000000 (Previous year Nil) units in Multi-Manager Equity fund - Option A-Growth

5.00

25.00

15.00

ABN Amro Mutual Fund 5000000 (Previous year Nil) units in Sustainable Development Fund - Growth Birla Sunlife Mutual Fund 4000000 (Previous year Nil) units in Long Term Advantage Fund Series 1 - Growth 10000000 (Previous year Nil) units in Special Situations Fund - Growth JP Morgan Mutual Fund 1955990 (Previous year Nil) units in India Smaller Companies Fund- Growth Plan Tata Mutual Fund 7000000 (Previous year Nil) units in Indo-Global Infrastructure Fund- Growth

5.00

61.39 25.00 5.00 1,249.89

15.42 20.38 1,383.35

4.00 10.00

2.00

7.00

21.61

25.00

88

89

A N N U A L R E P O R T 0 7

0 8

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007

LIC Mutual Fund 3000000 (Previous year Nil) units in Infrastructure Fund- Growth Plan Repurchase Price Rs. 89.04 crores (Previous year Rs. 28.71 crores) Less: Provision for diminution in value Liquid fund (Units of the face value of Rs. 10 each) ICICI Prudential Mutual Fund 115809498 (Previous year 83112217) units in Institutional Liquid Plan -Super Institutional Growth Birla Sunlife Mutual Fund 43365134 (Previous year 4210065) units in cash plus- institutional premium-Growth HSBC Mutual Fund Nil (Previous year 8492857) units in cash fund - institutional plus - Growth Reliance Mutual Fund 111112150 (Previous year 116324079) units in Liquidity Fund- Growth Option Kotak Mutual Fund 14710840 (Previous year Nil) units in Liquid (Institutional Premium)- Growth ABN Amro Mutual Fund 104536055 (Previous year Nil) units in Money Plus Institutional Growth Lotus India Mutual Fund 31498614 (Previous year Nil) units in Liquid Fund -Super Institutional Growth (Units of the face value of Rs. 1000 each) DSP Merrill Lynch Mutual Fund 292149 (Previous year 320146) units in liquidity Fund Instt. - Growth Reliance Mutual Fund 914761 (Previous year Nil) units in Liquid Plus Fund- Institutional Option-Growth Option AIG Global Investment Group Mutual Fund 481912 (Previous year Nil) units in Liquid Fund- Super Institutional Growth Mirae Asset Mutual Fund 500000 (Previous year Nil) units in Liquid Plus Fund- Super Inst Growth Option Repurchase Price Rs. 747.04 crores (Previous year Rs. 272.09 crores)

Debentures 3.00 90.91 (1.87) 89.04 28.62 28.62 CitiFinancial Consumer Finance India Ltd Citi Financial 500 Debentures -Redeemable Non Convertible Secured NCD Issue Series-326 of Rs 100000 each Repurchase Price Rs. 5.00 crores (Previous year Rs. Nil) Non-trade Unquoted Investments under Portfolio Management Services # 56.00 5.00 ICICI Prudential Asset Management Company Debt Fund ICICI Prudential Mutual Fund (units of the face value of Rs.10 each) Nil (Previous year 7642650) units in FMP Series 34-3 Months C 2000000 (Previous year Nil) units in FMP Series 42-3 Months Plan B Retail Growth 10503452 (Previous year Nil) units in Interval Fund-Quarterly Interval Plan1Retail Growth Liquid Fund ICICI Prudential Mutual Fund (units of the face value of Rs.10 each) 8448391 (Previous year 2202315) units in liquid plan Super institutional Growth Option Debentures 50 Debentures (Previous year Nil) of Citicorp Finance Ref NCD SR 187 MD 20/01/2010 of Rs 980000 each Repurchase Price Rs. 28.31 crores (Previous year Rs. 10.23 crores) IIM -Optimix Portfolios- Capital Enhancer 33.02 35.00 Liquid Fund Principal Mutual Fund (Units of Face Value of Rs 10 each) Nil (Previous year 180485) units in Principal Cash Management Fund Liquid Option Growth Debt Fund Reliance Mutual Fund - Debt Fund (units of the face value of Rs.10 each) Nil (Previous year 25506476) units in Fixed Horizon Fund -2 Qly PLN Series -5 ICICI Prudential Mutual Fund (units of the face value of Rs.10 each) 20991585 (Previous year Nil) units in Flexible Income Fund - Growth Deutsche Mutual Fund (units of the face value of Rs.10 each) 49198196 (Previous year Nil) units in DWS Money Plus Advantage Instl Fund Repurchase Price Rs. 82.30 crores (Previous year Rs. 25.92 crores) 5.00 -

5.00

137.80

91.15

10.00

135.00

130.55

2.00 10.77

7.64 -

24.00

10.04

2.38

125.01

4.90 27.71

10.02

35.00

0.25

100.00

31.30 50.02 81.32

25.51 25.76

50.20

50.00 746.03

271.70

90

91

A N N U A L R E P O R T 0 7

0 8

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007

6)

INVESTMENTS (contd.) (Rupees in crores) As at March 31, 2008 As at March 31, 2007 48.87 (0.42) 48.45 5.94 3.14 3.14 -

Reliance Portfolio Management Debentures Reliance Blended Debt Plus -Hybrid Option -Series II-500000 Debentures of Citicorp Finance (India) Ltd NCDS Series 163 of Rs 100.00 each Reliance Blended Debt Plus -Hybrid Option -Series VII-1000000 Debentures of DSP Merrill Lynch Capital Ltd Series 2007/EQ of Rs 100.00 each Reliance Blended Debt Plus -Hybrid Option -Series X-1000000 Debentures of DSP Merrill Lynch Capital Ltd Series 2008/AM of Rs 100.00 each Repurchase Price Rs. 25.00 crores (Previous year Rs. 5.10 crores) Escorts Securities Limited Debt Fund Escorts Mutual Fund (units of the face value of Rs.10 each) 14641 (Previous year 29747) units in Floating Rate Fund -Growth Option Liquid Fund Templeton Mutual Fund- (units of the face value of Rs.1 each) Nil (Previous year 121800000) units in India Money Market Account -Dividend Plan Escorts Mutual Fund (units of the face value of Rs.10 each) 2825896 (Previous year Nil) units in Liquid Plan Growth HDFC Mutual Fund (units of the face value of Rs.10 each) 7646722 (Previous year Nil) units in Cash Management Fund Savings Plan Repurchase Price Rs. 16.30 crores (Previous year Rs. 12.22 crores) Equity Shares Quoted Nil (Previous year 20000) equity shares of Rs. 1.00 each fully paid up of Ashok Leyland Nil (Previous year 40000) equity shares of Rs. 10 each fully paid up of IFCI Ltd Nil (Previous year 1250) equity shares of Rs. 2 each fully paid up of IVRCL Infrastructure & Project Ltd Nil (Previous year 1500) equity shares of Rs. 10 each fully paid up of IPCL Nil (Previous year 4000) equity shares of Rs. 10 each fully paid up of Syndicate Bank Market Price Rs. Nil (Previous year Rs. 0.33 crores) # Investments have been made under the Discretionary Portfolio Management Agreement entered into between the Company and ICICI Prudential Asset Management Company Limited, IIM-Optimix Portfolios -Capital Enhancer, Escorts Securities Ltd, Reliance Portfolio Management (Portfolio Managers) are being held in the name of the Portfolio Manager as envisaged in the aforesaid Agreement. Non-trade In Equity Shares: Quoted Nil (Previous year 6181) equity shares of Rs. 10 each fully paid up of Parsvnath Developers Limited Nil (Previous year 152202) equity shares of Rs. 10 each fully paid up of Idea Cellular Ltd Nil (Previous year 55200) equity shares of Rs. 2 each fully paid up of HCL Tech Ltd 0.19 1.14 1.81 5.00 10.00 10.00 25.00 5.00 5.00

125523 (Previous year Nil) equity shares of Rs. 10 each fully paid up of Bharat Heavy Electricals Ltd 52238 (Previous year Nil) equity shares of Rs.10 each fully paid up of ICICI Bank 276654 (Previous year Nil) equity shares of Rs.2 each fully paid up of Siemens Ltd 6430 (Previous year Nil) equity shares of Rs10 each fully paid up of Mundra Port & Special Economic Zone Ltd 109489 (Previous year Nil) equity shares of Rs10 each fully paid up of Rural Electrification Corporation Ltd Market value Rs. 48.45 crores (Previous year Rs. 3.21 crores) Less: Provision for diminution in value Unquoted 10800 (Previous year Nil) equity shares of Rs.5496.12 each fully paid up of Bombay Stock Exchange

16.04 5.11 26.29 0.28 1.15

0.02

0.03

12.18

LONG TERM INVESTMENTS (at cost less provision for permanent diminution, if any) Non-trade Quoted In Bonds UNIT TRUST OF INDIA 15918732 (Previous year 15918732) 6.75% Tax free US64 bonds of Rs.100 each 60903 (Previous year 60903) 6.60% Tax free ARS bonds of Rs.100 each Less: Provision for diminution in value Market value Rs.160.75 crores (Previous year Rs.154.32 crores) Maturity value Rs 159.80 crores (Previous year Rs 159.80 crores) Unquoted National Bank For Agriculture and Rural Development 42700 (Previous year Nil) Bhavishya Nirman Bonds @ 8200 each A 10 Year Zero Coupen Bond of NABARD- maturity Rs 20000.00 per bond Trade Unquoted In Equity Shares: 2715000 (Previous year 2715000) equity shares of Rs. 10 each fully paid up of Hero Honda Finlease Limited.

3.31

165.47 0.63 166.10 (6.10) 160.00

12.73 16.06

12.21

165.47 0.63 166.10 (4.82) 161.28

0.09 0.12 0.05 0.04 0.03 0.33

35.01

3.46 2,566.82

3.46 1,973.87

92

93

A N N U A L R E P O R T 0 7

0 8

6) INVESTMENTS (contd.) The following investments were purchased and sold during the year Purchase Units Mutual Funds Debt Funds Units of the face value of Rs.10 each Units of the face value of Rs.1000 each Fund of Funds Units of the face value of Rs.10 each Equity Fund Units of the face value of Rs.10 each Liquid Fund Units of the face value of Rs.10 each Units of the face value of Rs.1000 each Equity Shares Shares of Face value of Rs 10 each Parsvnath Developers Limited Idea Cellular Limited ICICI Bank Limited Bharat Heavy Electricals Ltd Omaxe Ltd Central Bank of India Bombay Stock Exchange PowerGrid Corporation of India Ltd Mundra Port and Special Economic Zone Ltd Rural Electrification Corporation Ltd Shares of Face value of Rs 2 each HCL Technologies Limited Siemens Ltd Bonds Bhavishya Nirman Bonds @ 8200 each-A 10 Year Zero Coupen Bond of NABARD- maturity Rs 20000.00 per bond Debentures Citi Financial Debentures -Redeemable Non Convertible Secured NCD Issue Series-326 of Rs 100000 each 26.71 51.27 0.35 0.39 5.94 0.64 0.33 1.15 6181 152202 226238 275841 11250 38094 122380 1000 0.19 1.14 21.60 35.24 0.35 0.39 0.64 0.04 Amount Units At Cost (Rupees in crores) Sold Amount

6)

INVESTMENTS (contd.) At Cost (Rupees in crores) Sold Amount Units Amount

The following investments were purchased and sold during the year under portfolio management scheme Purchase Units

Mutual Funds 1817355216 1366378 1,914.26 137.79 2061474411 599085 2,125.30 60.20 Liquid Funds Units of the face value of Rs.1000 each Units of the face value of Rs.10 each Units of the face value of Rs.1 each Debt Funds Units of the face value of Rs.10 each Debentures Debentures of Citicorp Finance Ref NCD SR 187 MD 20/01/2010 of Rs 980000 each Reliance Blended Debt Plus -Hybrid Option -Series VII-1000000 Debentures of DSP Merrill Lynch Capital Ltd Series 2007/EQ of Rs 100.00 each Reliance Blended Debt Plus -Hybrid Option Series X-1000000 Debentures of DSP Merrill Lynch Capital Ltd Series 2008/AM of Rs 100.00 each Equity Shares Shares of Face value of Rs 10 each ABG Shipyard Limited Allsec Technologies Limited Alstom Projects India Limited Arvind Mills Ltd Axis Bank Limited Bank Of India Bharat Heavy Electricals Ltd Bhushan Steel Limited Britannia Industries Ltd Cairn India Limited Canara Bank Cummins India Ltd. Deccan Aviation Limited Educomp Solutions Limited Era Infra Engineering Limited Escorts Ltd HDFC Bank Ltd Hindustan Petroleum Corporation Ltd. ICICI Bank Limited IFCI Limited Indian Petrochemichals Corporation Ltd 681320 751219003 94700000 75.00 870.19 9.47 681320 685482598 217175389 75.00 796.71 21.65

32300000

32.30

28387822

28.39

372646256

424.67

372300345

413.74

95813299

99.29

36728009

37.00

5866673866 33481146

6,815.99 3,536.25

5657780794 31612468

6,539.90 3,338.04

50

4.90

1000000

10.00

1000000

10.00

278476 401364 11250 38094 10800 122380 7430 109489

346654

32.94

55200 70000

1.81 6.65

42700

35.01

500

5.00 12,695.61

12,196.88

530 852 43522 483500 1500 8015 1450 250 17 2000 3000 1250 5100 150 3000 775 750 1300 4202 1079432 23300

0.02 0.03 2.68 2.38 0.07 0.13 0.21 0.02 0.00 0.03 0.06 0.03 0.08 0.02 0.15 0.01 0.07 0.05 0.44 7.23 0.75

530 852 43522 483500 1500 8015 1450 250 17 2000 3000 1250 5100 150 3000 775 750 1300 4202 1119432 18200

0.02 0.03 2.68 2.38 0.07 0.13 0.21 0.02 0.00 0.03 0.06 0.03 0.08 0.02 0.15 0.01 0.07 0.05 0.44 7.34 0.58

94

95

A N N U A L R E P O R T 0 7

0 8

6)

INVESTMENTS (contd.) (Rupees in crores) Purchase Units Amount 0.20 2.04 0.08 0.00 0.05 1.48 4.23 0.09 0.08 3.43 0.02 0.02 0.08 0.07 0.96 3.09 0.04 0.04 0.01 0.09 0.05 7.68 0.06 0.03 0.13 0.04 1.50 0.03 Units 22750 544269 750 1125 3000 50450 1957889 2351 2200 130827 4400 2000 7700 1500 5650 1320 135675 1100 1500 336 19000 1500 1829950 400 500 12000 500 238406 500 Sold Amount 0.20 2.04 0.08 0.00 0.05 1.48 4.23 0.09 0.08 3.43 0.02 0.02 0.08 0.07 0.96 0.21 3.09 0.04 0.04 0.01 0.12 0.05 7.68 0.06 0.03 0.13 0.04 1.50 0.03

6)

INVESTMENTS (contd.) (Rupees in crores) Purchase Units Amount 0.06 0.03 3.15 0.01 0.02 0.06 1.35 0.23 0.11 0.06 0.08 0.76 0.11 0.13 Units 2000 2000 55602 300 200 2000 30401 1050 6500 2500 2000 17310 988 2700 Sold Amount 0.06 0.03 3.15 0.01 0.02 0.06 1.41 0.23 0.11 0.06 0.08 0.76 0.11 0.13

Infrastructure Development Finance Company Limited Jaiprakash Hydro-Power Limited Kalpataru Power Transmission Ltd Mangalore Refinery And Petrochemicals Ltd. Man Aluminium Limited Mphasis Limited Nagarjuna Fertiliser & Chemicals Ltd. NIIT Technologies Limited Nucleus Software Exports Limited Orchid Chemicals & Pharmaceuticals Ltd Petronet LNG Limited Power Finance Corporation Limited Power Grid Corporation Of India Limited Punjab National Bank Reliance Capital Limited Reliance Industries Ltd Reliance Petroleum Limited Sasken Communication Technologies Limited Spanco Telesystems And Solutions Ltd Strides Arcolab Limited Syndicate Bank Tata Elxsi (India) Ltd Tata Teleservices (Maharashtra) Limited Tech Mahindra Limited TRF Ltd Union Bank Of India United Spirits Limited Vijaya Bank Voltamp Transformers Limited Shares of Face value of Rs 5 each Havells India Limited Infosys Technologies Ltd. Maharashtra Seamless Ltd Reliance Communications Ltd Reliance Natural Resources Limited Welspun Gujarat Stahl Rohren Limited Shares of Face value of Rs 4 each New Delhi Television Limited Shares of Face value of Rs 2 each ABB Limited Amtek Auto Ltd Berger Paints (I) Ltd

22750 544269 750 1125 3000 50450 1957889 2351 2200 130827 4400 2000 7700 1500 5650 135675 1100 1500 336 15000 1500 1829950 400 500 12000 500 238406 500

Bharat Forge Co. Ltd Deccan Chronicle Holdings Ltd. DLF Limited Elecon Engineering Co Ltd Everest Kanto Cylinder Limited HCLTechnologies Ltd IVRCL Infrastructures & Projects Ltd Larsen & Toubro Limited Nagarjuna Construction Co. Ltd Nicholas Piramal India Ltd Punj Lloyd Limited Satyam Computer Services Ltd Siemens Ltd Wipro Ltd Shares of Face value of Rs 1 each Ashok Leyland Ltd Centurion Bank Of Punjab Limited Dabur India Ltd Hindustan Construction Co. Ltd Hindustan Unilever Limited Marico Limited Panacea Biotec Ltd. Tata Consultancy Services Limited Voltas Ltd

2000 2000 55602 300 200 2000 29151 1050 6500 2500 2000 17310 988 2700

87479 45300 2700 1400 25862 2640 2315 1350 10756 1,470.86

0.33 0.21 0.03 0.02 0.55 0.02 0.10 0.14 0.11

107479 45300 2700 1400 25862 2640 2315 1350 10756

0.43 0.21 0.03 0.02 0.55 0.02 0.10 0.14 0.11 1,374.07

Aggregate value of 4000 450 1067 2700 2767391 4800 0.24 0.08 0.05 0.11 11.77 0.05 4000 450 1067 2700 2767391 4800 0.24 0.08 0.05 0.11 11.77 0.05 Quoted investments -Long Term Quoted investments-Current Unquoted investments

As at March 31,2008 Book value Market value 160.00 48.45 2,358.37 2,566.82 160.75 48.45 -

As at March 31,2007 Book value Market value 161.28 3.47 1809.12 1973.87 154.32 3.53 -

175710

6.45

175710

6.45

150 1500 4391

0.05 0.06 0.02

150 1500 4391

0.05 0.06 0.02

96

97

A N N U A L R E P O R T 0 7

0 8

7)

CURRENT ASSETS, LOANS AND ADVANCES (Rupees in crores) As at March 31, 2008 As at March 31, 2007

7)

CURRENT ASSETS, LOANS AND ADVANCES (Rupees in crores) As at March 31, 2008 As at March 31, 2007 43.52 4.16 0.33 263.06

CURRENT ASSETS INVENTORIES # Stores and spares (at cost or under) Loose tools (at cost or under) Raw materials and components * Finished goods * Two wheelers Spare parts Work in progress *

22.27 13.46 219.77 30.92 14.08 16.60 317.10

19.30 12.95 167.59 44.31 13.46 17.97 275.58

Income-tax recoverable Income-tax deducted at source Deposits with excise authorities on current account

47.51 3.50 2.13 185.46

8)

CURRENT LIABILITIES AND PROVISIONS (Rupees in crores) As at March 31, 2008 As at March 31, 2007

* Lower of cost and net realisable value # Includes goods in transit Rs. 64.87 crores (Previous year Rs 17.78 crores) SUNDRY DEBTORS Debts outstanding for a year exceeding six months Secured - considered good Unsecured - considered good - considered doubtful Other debts Secured - considered good Unsecured - considered good Less: Provision for doubtful debts CASH AND BANK BALANCES Cash in hand Cheques in hand With scheduled banks: On current accounts On deposit accounts On dividend current accounts With post office (pledged with excise authorities) On deposit account On savings account OTHER CURRENT ASSETS Interest accrued on investments LOANS AND ADVANCES (Unsecured and considered good) Advances recoverable in cash or in kind or for value to be received Inter corporate deposits

1.19 2.76 6.96 14.77 278.72 304.40 6.96 297.44 0.25 0.11 14.32 0.51 115.90 131.09 5.69 5.69

0.49 1.49 2.37 14.20 319.07 337.62 2.37 335.25 0.21 0.25 15.64 0.51 19.12 0.01 0.04 35.78 3.60 3.60

CURRENT LIABILITIES Sundry creditors: ( refer note no. 12) Total outstanding dues of small and micro Enterprises # Total outstanding dues of creditors other than small scale industrial undertakings Other liabilities ## Security deposits from dealers PROVISIONS Proposed dividend Provision for taxation less payments Provision for tax on dividend Employee benefit schemes Warranties

756.07 541.21 27.70 1,324.98 379.41 6.39 64.48 5.80 43.68 499.76

3.75 551.07 461.44 25.66 1041.92 339.47 3.85 57.69 36.23 437.24

# The Company does not owe any sum which is outstanding for more than 30 days ## Other liabilities do not include any amount outstanding as on March 31, 2008 which are required to be credited to the Investor Education and Protection Fund (Fund) 9) DEFERRED TAX ASSETS AND LIABILITIES As at March 31, 2008 DEFERRED TAX ASSETS Accrued expenses deductible on payment Others DEFERRED TAX LIABILITIES Accumulated depreciation 1.97 3.25 5.22 130.59 130.59 (Rupees in crores) As at March 31, 2007 0.24 1.14 1.38 129.58 129.58

82.32 50.00

165.05 50.00

98

99

A N N U A L R E P O R T 0 7

0 8

10) OTHER INCOME Year ended March 31, 2008 Dividend income On current investments - Non trade On long term investments - Trade Interest on long term non trade investments Profit on sale of non trade current investments* Profit on sale of fixed assets Exchange difference Miscellaneous income * After adjusting loss on sale of current investments aggregating Rs. 19.54 crores (previous year Rs. 19.62 crores) 11) MANUFACTURING AND OTHER EXPENSES Year ended March 31, 2008 MATERIALS CONSUMED Purchase of spares etc. for re-sale Consumption of raw materials and components Less: - Sale of components to ancillaries on cost to cost basis Less: - Cash discount Add: Opening stock Two wheelers Spare parts Work in progress Less: Excise duty on opening stock Net opening stock Less: Closing stock Two wheelers Spare parts Work in progress Less: Excise duty on closing stock Net closing stock Net consumption Less: Scrap sales 7911.58 470.53 7441.05 39.44 7401.61 44.31 13.46 17.97 75.74 11.22 64.52 (Rupees in crores) Year ended March 31, 2007 58.56 7335.83 178.28 7157.55 28.21 7129.34 31.43 27.16 13.95 72.54 5.78 66.76 4.24 2.72 6.96 12.81 132.91 0.09 1.38 31.27 185.42 (Rupees in crores) Year ended March 31, 2007 6.53 5.43 11.96 10.64 130.40 0.32 36.53 189.85

OTHER EXPENSES# Payments to and provisions for employees: Salaries, wages, bonus, gratuity and leave encashment benefit Contribution to provident and other funds Staff welfare expenses Expenses for manufacturing, administration and selling: Stores and tools consumed Power and fuel Rent Repairs and maintenance: Plant and machinery Buildings Others Insurance Exchange fluctuation Rates and taxes Packing, forwarding, freight etc. Royalty Advertisement and publicity Commission: Export Others Donations Lease rent Provision for doubtful debts Other expenses Provision for diminution in value of investments: Current non trade investment Long term non trade investment Loss on fixed assets sold/discarded

350.48 14.01 18.96 63.75 56.55 4.22 27.41 3.66 0.83 10.90 15.27 266.75 276.70 221.78 11.60 3.49 15.09 0.91 11.47 4.59 209.63 1.29 1.28 2.57 4.36 8,982.43

327.74 12.21 13.86 67.76 52.45 3.36 25.80 2.96 0.64 11.40 0.70 13.50 250.06 254.37 241.43 12.59 3.02 15.61 1.37 12.15 0.30 224.47 1.00 1.27 2.27 13.80 8,726.92

30.92 14.08 16.60 61.60 7.78 53.82 7412.31 9.77 7402.54

44.31 13.46 17.97 75.74 11.22 64.52 7190.14 11.43 7178.71

# Research and development expenses of Rs. 18.78 crores (previous year Rs. 17.85 crores) have been charged to respective heads 12) INTEREST (NET) Year ended March 31, 2008 2.00 37.81 (35.81) (Rupees in crores) Year ended March 31, 2007 1.61 24.60 (22.99)

Interest - others and financial charges Less: Interest received on loans, deposits, etc* * Income tax deducted at source Rs. 2.15 crores (previous year Rs. 1.03 crores)

100

101

A N N U A L R E P O R T 0 7

0 8

13) 1

NOTES TO THE ACCOUNTS SIGNIFICANT ACCOUNTING POLICIES i) Accounting convention The financial statements are prepared under the historical cost convention, in accordance with applicable accounting standards and relevant presentational requirements of the Companies Act, 1956. ii) Fixed / Intangible assets and depreciation / amortisation Fixed assets are stated at cost less accumulated depreciation. Cost of acquisition is inclusive of freight, duties , taxes and other incidental expenses. Roll over charges on forward exchange contracts and loss or gain on translation of foreign currency liabilities for acquisition of fixed assets from a country outside India incurred upto March 31, 2007 are added to or deducted from the cost of the assets. All loss or gain on translation of foreign currency liabilities for fixed assets commissioned subsequent to March 31, 2007 are charged to revenue in the year in which they arise. Depreciation is charged on a pro-rata basis at the straight line method rates prescribed in schedule XIV to the Companies Act, 1956 except where the historical cost of a depreciable asset has undergone a change due to increase or decrease in foreign currency liability on account of exchange fluctuations. The depreciation on the revised unamortised depreciable amount is provided prospectively over the residual useful life of the asset. Assets covered under employee benefit schemes are amortised over a period of five years. Assets costing upto Rs. 5000 each are fully depreciated in the year of purchase. Intangible assets, comprising of expenditure on model fee etc, incurred are being amortised on a straight line method over a period of five years. Leasehold land has been amortised over the period of lease. iii) Preoperative expenses pending allocation Expenses directly related to construction activity or incidental thereto, are allocated to fixed assets at the time of completion of the project. iv) Investments Current investments are stated at lower of cost and fair value computed categorywise. Long term investments are stated at cost less provision for permanent diminution, if any. v) Inventories Stores and spares and loose tools are stated at cost or under. Raw materials and components, finished goods and work in progress are valued at cost or net realisable value, whichever is lower. The bases of determining cost for various categories of inventories are as follows:Stores and spares, loose tools, raw materials and components Materials in transit Work in progress and finished goods vi) a) Employee benefits Defined contribution plan Provident fund, Superannuation fund and Employee' State Insurance Corporation (ESIC) are the defined contribution schemes offered by the Company. The contributions to these schemes are charged to the profit and loss account of the year in which contribution to such schemes becomes due. b) Defined benefit plan and Long term Employee benefits Gratuity liability and long term employee benefits, are provided on the basis of an actuarial valuation made at the end of each financial year. Actuarial gains or loss arising from such valuation are charge to revenue in the year in which they arise. 2. Weighted average cost Actual cost Material cost plus appropriate share of labour, manufacturing overheads and excise duty.

vii)

Foreign currency transactions Exchange differences are dealt with as follows:Transactions in foreign currency are recorded at the exchange rate prevailing at the time of the transaction. In case of liabilities relating to the acquisition of fixed assets from a country outside India, incurred upto March 31, 2007, the loss or gain on translation (at the rates prevailing at the year end or at the forward rates where forward cover has been taken) and roll over charges in respect of forward cover are included in the carrying amount of the related fixed assets and liabilities. All loss or gain on translation subsequent to March, 31 2007 are charged to revenue in the year in which it is incurred other than expenses relating to preoperative period. Current assets (other than inventories) and current liabilities, (other than relating to fixed assets) are restated at the rate prevailing at the year end. In respect of forward contracts, the forward premium or discount is recognised as income or expense over the life of contract in the profit and loss account and the exchange difference between the exchange rate prevailing at the year end and the date of the inception of the forward exchange contract is recognised as income or expense in the profit and loss account.

viii)

Sales Sale of goods is recognised at the point of despatch of finished goods to the customers. Gross sales are inclusive of applicable excise duty and freight but are exclusive of sales tax. - Scrap is accounted for on sale basis.

ix)

Warranty claims Warranty costs are provided on accrual basis on the total sales of two wheelers during the year, which are based on past experience of claims.

x)

Research and development expenses Research and development expenditure of a revenue nature is expensed out under the respective heads of account in the year in which it is incurred.

xi)

Taxation The provision for taxation is ascertained on the basis of assessable profits computed in accordance with the provisions of the Incometax Act, 1961. Deferred tax is recognised, subject to the 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.

xii)

Provisions and contingent liabilities Provision involving substantial degree of estimation in measurement are recognized when there is a permanent obligation as a result of past events and it is probable that there will be an out flow of resources. Contingent liabilities are not recognized but are disclosed in the notes.

xiii)

Derivatives Foreign currency derivatives are used to hedge risk associated with foreign currency transactions. All open position as at the close of the year are valued by marking them to the market and provision is made for losses if any.

CONTINGENT LIABILITIES : (Rs. in crores) This year i) In respect of income-tax cases pending at various stages of appeal with the authorities Previous year 20.24

102

103

A N N U A L R E P O R T 0 7

0 8

The above matters are subject to legal proceedings in the ordinary course of business. The legal proceeding when ultimately concluded will not, in the opinion of management, have a material effect on the result of operation or the financial position of the Company. 3. 4. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 56.37 crores (Previous year Rs. 145.35 crores). The Company has also entered into operating lease agreements for motor vehicles, dies and data processing machines. These lease arrangements are cancellable in nature and range between two to four years. The aggregate lease rentals under these arrangements amounting to Rs. 11.47 crores (Previous year Rs. 12.15 crores) have been charged under "Lease rentals " in Schedule 11. As the Company's business activity falls within a single primary business segment viz. "Two wheelers and its parts" and is a single geographical segment, the disclosure requirements of Accounting Standard (AS-17) "Segment Reporting", issued by The Institute of Chartered Accountants of India are not applicable. Two wheeler sales are covered by a warranty period of two/three years. The details of provision for warranties are as under: (Rs. in crores) This year Provision at the beginning of the year Additional provision made during the year Amount used during the year Provision at the end of the year 36.23 33.35 25.90 43.68 Previous year 30.50 30.01 24.28 36.23

Transactions with related parties during the year a) Parties in respect of which the Company is an joint venture/associate. (Rs. in crores) This year Honda Motors Co. Limited, Japan Dividend paid Royalty Export commission Model fees Technical guidance fee Purchase of raw materials, components and spares Hero Cycles Limited Dividend paid Purchase of raw materials, components and spares Hero Investments Private Limited Dividend paid Bhadurchand Investments Private Limited 29.42 34.61 29.42 63.59 34.61 53.62 88.26 276.70 11.60 31.32 0.87 16.39 103.84 254.37 12.59 47.13 1.38 19.87 Previous year

5.

6.

Related party disclosures under Accounting Standard 18 a) Parties in respect of which the Company is a joint venture/associate. Honda Motor Co. Limited, Japan Hero Cycles Limited Bhadurchand Investments Private Limited Hero Investments Private Limited Hero Honda Finlease Limited

Dividend paid Hero Honda Finlease Limited Lease rental expenses Dividend received Intercorporate deposits given Intercorporate deposits repaid Interest received on Inter corporate deposits

29.42

34.61

11.47 2.72 190.00 190.00 1.51 -

12.15 5.43 233.00 208.00 1.22 3.99

b)

Key management personnel Mr. Brijmohan Lall Munjal Mr. Pawan Munjal Mr. Toshiaki Nakagawa Mr. Yutaka Kudo Mr. Takao Eguchi Chairman Managing Director & CEO Joint Managing Director Whole time director (wef April 1, 2007) Whole time director (Upto March 31, 2007)

Expenses recovered Balance outstanding at the year end -Receivables -Payables

50.00 3.84

50.00 4.33

b)

Key management personnel (Rs. in crores)

c)

Enterprises over which key management personnel and their relatives are able to exercise significant influence:Brijmohan Lall Associates, A.G. Industries Private Limited, Hero Corporate Services Limited, Highway Industries Limited, Majestic Auto Limited, Munjal Auto Industries Limited, Munjal Showa Limited, Rockman Industries Limited, Sunbeam Auto Limited, Satyam Auto Components Limited, Hero Motors Limited, Shivam Autotech Limited, Cosmic Kitchen Private Limited, Easy Bill Limited, Hero Mindmine Institute Limited, Indian School of Business and Raman Kant Munjal Foundation. Managerial Remuneration Mr. Brijmohan Lall Munjal Mr. Pawan Munjal Mr. Takao Eguchi (upto March 31, 2007) Mr. Toshiaki Nakagawa

This year

Previous year

15.76 15.74 15.20

14.00 13.89 13.32 13.44

104

105

A N N U A L R E P O R T 0 7

0 8

Mr Yutaka Kudo (wef April 1, 2007) Balance outstanding at the year end -Payables (including commission)

15.13

8.

Earnings per share This Year Previous Year 857.89 19,96,87,500 42.96

59.20

52.16

Profit after taxation as per profit and loss account (Rs.in crores) Weighted average number of equity shares outstanding

967.88 19,96,87,500 48.47

c)

Enterprises over which key management personnel and their relatives are able to exercise significant influence (Rs. in crores) This year Purchase of raw materials and components Sale of components etc Intercorporate deposits repaid Interest received on Inter corporate deposits Payment towards rent and other services Donation Balance outstanding as at the year end -Receivables -Payables 177.22 145.87 1976.60 2.83 3.56 0.60 Previous year 2034.93 5.11 3.75 0.01 3.47 0.73 10. 9.

Basic and diluted earnings per share in rupees (face value -Rs.2 per share)

The Company has entered into Discretionary Portfolio Management Agreements, administered through ICICI Prudential Asset Management Company Limited, IIM-Optimix Porfolios-Capital enhancer, Escorts Securities Limited, Reliance Portfolio Manager (Portfolio Managers). In terms of the said agreements, the Portfolio Managers have dealt in mutual funds, debentures, equity stock futures, equity stock options and equity index options on behalf of the Company. However, there are no outstanding derivative contracts as at March 31, 2008.

Information pursuant to clause 4 (ix) (b) of the Companies (Auditor's Report) Order, 2003 in respect of disputed dues, not deposited as at March 31, 2008, pending with various authorities Name of the Statute Sales Tax Laws Central Excise Laws Nature of dues Sales tax Excise duty Amount* (Rs in crores) 1.90 0.32 0.39 Amount paid under protest (Rs in crores) 1.90 0.45 5.73 31.44 Period to which the amount relates Forum where pending

1998-99 to 1999-00 Commissioner (Appeals) 2000-01 CESTAT

2002-03 To 2005-06 Commissioner (Appeals) 2002-03 to 2005-06 2000-01 to 2001-02 CESTAT Income Tax Appellate Tribunal

Significant related party transactions included in the above are as under :(Rs. in crores) This year Purchase of raw materials and component Munjal Auto Industries Limited Munjal Showa Limited Sunbeam Auto Limited Sale of components etc. Satyam Auto Components Limited Sunbeam Auto Limited Hero Motors Limited Payment for services Hero Corporate Services Limited Donation Raman Kant Munjal Foundation Indian School of Business 0.60 0.40 0.33 11. 3.20 3.20 1.69 0.85 3.03 0.97 Central Excise Laws Income-tax Act 186.56 556.06 379.23 172.91 566.90 470.50 Previous year Income-tax Act

Services Tax Income-Tax

22.10 5.73 31.44

2001-02 to 2003-04 Commissioner (Appeals)

* Amount as per demand orders including interest and penalty wherever quantified in the order.

The following matters have been decided in favour of the Company, although the department has preferred appeals at higher levels: Name of the Statute Nature Amount (Rs in crores) Period to which the amount relates (various years covering the period) 1986-87 to 1990-91 1987-88, 1989-90, 1992-93, 1993-94, 1995-96, 1996-97 0.96 1995-96, 1997-98, 2000-01 Income Tax Appellate Tribunal Forum where Department has preferred appeals Supreme Court High Court

Excise Duty Income-tax

2.57 6.43

The Company's borrowing facilities, comprising fund based and non fund based limits from various bankers, are secured by way of

106

107

A N N U A L R E P O R T 0 7

0 8

hypothecation of inventories, receivables, movable assets and other current assets. 12. The Company has identified parties covered under the "The Micro, Small, and Medium Enterprises Development Act, 2006 on the basis of the confirmation received. There is no outstanding balance payable as at the close of the financial year to such parties. Further, no interest has been paid or payable to such parties under the said Act. In the previous year amount of Rs 3.75 crores was related to small scale industrial undertakings. The unhedged foreign currency exposures as at March 31 are as under:

Current service cost Benefits paid Actuarial (gain)/ loss on obligation Present value of defined benefit obligation at the end of the year

2.15 (0.95) 3.59 32.23

13.

Changes in the present value of the plan asset is as follows Previous Year Fair value of plan asset at the beginning of the year Amount in Rs (crores) 29.90 1.12 2.95 15.49 Reconciliation of the present value of defined benefit obligation and the fair value of the plan assets Present value of defined benefit obligation at the end of the year Fair value of plan asset at the end of the year Net asset/(liability) as at the close of the year Expenses recognised in the profit and loss account Current service cost This year (Rs. in crores) Previous year (Rs. in crores) 8.39 3.53 2.90 Interest cost Return on plan assets Net actuarial (gain) / loss Expenses recognised in the profit and loss account. Discount rate Expected Rate of return on plan assets 2.15 2.03 (1.62) 3.59 6.15 8.00% 9.10% 32.23 32.23 Return on plan asset Contributions Benefits paid Actuarial (gain)/ loss on obligation Fair value of plan asset at the end of the year 17.44 1.62 14.12 (0.95) 32.23

Purpose

This Year Amount in Foreign currency (crores) Amount in Rs (crores) 44.43 15.28 1.21

Amount in Foreign currency (crores) USD 0.69 JPY 3.09 USD 0.07 EURO 0.27

Receivables Payables

USD 1.10 JPY 38.71 USD EURO 0.02

14.

Employee Benefit Schemes During the year the Company has adopted Accounting Standard 15 (Revised 2005) Employee Benefits. Accordingly, the Company has provided for defined benefit schemes and long term employee benefits on the basis of actuarial valuation done as per projected unit credit method. In accordance with the transitional provision in the revised accounting standard Rs 7.81 crores net of deferred tax asset of Rs 4.03 crores has been adjusted from the opening balance of general reserves. Defined contribution plans

Employer Contribution to Provident Fund Employer Contribution to Supperannuation Fund Employer Contribution to ESIC

9.77 4.27 3.03

Defined benefit plans In accordance with the Payment of Gratuity Act 1972, Company provides for gratuity, a defined benefit plan. The gratuity plan provides for a lumsum payment to the employees at the time of separation from the service on completion of vested period of employment i.e five years. The liability of gratuity plan is provided based on actuarial valuation as at the end of each financial year based on which the Company contributes the ascertained liability to a fund. Note:- The estimates of future salary increases considered in the actuarial valuation take into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market

15. This year (Rs. in crores) Changes in the present value of the defined benefit plan are as follows Present value of defined benefit obligation at the beginning of the year Interest cost 25.41 2.03 a)

Additional Information Details of capacity and production: Class of goods Units Licensed capacity* This year Motorised two wheelers upto 350CC engine capacity Nos. 200000 200000 3400000 3400000 3333460 3339896 Previous year Installed capacity** This year Previous year Actual Production*** This year Previous year

108

109

A N N U A L R E P O R T 0 7

0 8

*The Company's products are exempt from Licensing requirements under New Industrial Policy in terms of Notification no. S.O.477(E) dated 25th July,1991. ** On triple shift basis, as certified by the management and relied on by the auditors being a technical matter. *** Includes 175 (Previous year 243) two wheelers produced and capitalised during the year. b) Particulars in respect of opening stock, purchases, sales and closing stock for each class of goods dealt with by the Company: Class of goods Units This year Quantity Two wheelers Spares Nos. 14812 * Opening stock Previous year Value Quantity Value (Rs. in crores) (Rs. in crores) 44.31 11915 13.46 57.77 * 31.43 27.16 58.59 Purchases This year Quantity Value (Rs. in crores) * Previous year Quantity Value (Rs.in crores) * 58.56 58.56

d)

CIF Value of imports: Class of goods Capital goods* Raw materials ** Components, spare parts and others ** This year (Rs. in crores) 66.14 103.92 404.00 Previous year (Rs. in crores) 109.13 7.58 166.36

* Excludes increase of Rs. Nil (Previous year increase of Rs.1.13 crore) capitalised due to fluctuation in exchange rates. ** Includes items sold to ancillaries on cost to cost basis for assembling of components. e) Value of imported and indigenous raw materials, components and spares consumed and percentage of each to the total consumption: Class of goods Value This year Percentage % Value (Rs. in crores) Previous year Percentage %

Class of goods

Units This year Quantity

Gross Sales

Closing stock Raw materials -Imported ** -Indigenous Components -Imported ** -Indigenous 45.00 57.77 Spares consumed (charged to repairs and maintenance) -Imported -Indigenous

(Rs. in crores)

Previous year This year Previous year Value Quantity Value Quantity Value Quantity Value (Rs. in crores) (Rs. in crores) (Rs. in crores) (Rs.in crores) 11,353.48 3336756+ 684.73 0.32 12,038.53 * * 10,913.08 10955 628.16 0.80 11,542.04 * 30.92 14812 14.08 * 44.31 13.46

0.24 27.70

0.00 0.38

0.30 35.43

0.00 0.50

Two wheelers Spares Miscellaneous Components

Nos. 3337142+ * *

49.99 7,363.12 7,441.05 *

0.67 98.95 100.00

78.97 7,042.85 7,157.55 *

1.10 98.40 100.00

* It is not practicable to furnish quantitative information in view of the considerable number of items diverse in size and nature. These items in value individually account for less than 10% of the total value of the purchases, stocks and turnover of the aforesaid spares and miscellaneous components. + Excluding 175 (Previous year 243) two wheelers capitalised. c) Raw materials and components consumed: Class of goods Units This year Quantity Steel sheets Components MT 6130.02 * Value (Rs. in crores) 27.94 7,413.11 7,441.05 ** Quantity 7514.26 * Previous year Value (Rs. in crores) 35.73 7,121.82 7,157.55 ** f)

5.96 11.53 17.49

34.08 65.92 100.00

4.71 12.12 16.83

27.99 72.01 100.00

*Excludes Rs.0.44 crore (Previous year Rs 0.64 crore) for two wheelers produced and capitalised during the year ** Excludes items sold and purchased as indigenous components. Expenditure in foreign currency (on accrual basis) : This year (Rs. in crores) Royalty Technical guidance fee Model fee Export commission Travel and other accounts Advertisement and Publicity 276.70 2.62 29.87 11.60 5.45 6.25 Previous year (Rs. in crores) 254.37 2.36 47.13 12.59 3.64 51.52

* It is not practicable to furnish quantitative information of components consumed in view of the considerable number of items diverse in size and nature. These items in value individually account for less than 10% of the total value of components consumed. **Excludes Rs.0.44 crore (Previous year Rs.0.64 crore) for two wheelers produced and capitalised during the year.

110

111

A N N U A L R E P O R T 0 7

0 8

g)

Earnings in foreign currency (on accrual basis) : This year (Rs. in crores) FOB value of exports Freight and insurance 242.79 0.85 Previous year (Rs. in crores) 262.56 0.94

I)

Provision and/or payment in respect of Auditors' Remuneration : This year (Rs. in crores) a) As auditors (Audit fee) b) In other capacity - limited review of unaudited financial results 0.20 0.01 # 0.20 0.03 # 0.28 Previous year (Rs. in crores) 0.28

h)

Managerial remuneration: This year (Rs. in crores) Whole time Directors* Remuneration Commission 2.70 59.13 61.83 Non-Executive Independent Directors Commission 0.35 62.18 Directors' sitting fee 0.11 62.29 * Excludes incremental contribution for gratuity, as the contributions are determined for the Company as a whole. Computation of net profit in accordance with section 198 of the Companies Act,1956. This year (Rs. in crores) Profit before taxation as per profit and loss account Add:Managerial remuneration Provision for doubtful debts Provision for diminution in value of investment long term Net profit as per section 349 of the Companies Act,1956 Maximum managerial remuneration to four whole time directors( including commission) at 10% of net profit Maximum managerial remuneration to non whole time directors( including commission) at 1% of net profit Commission component of managerial remuneration to - Four whole time directors restricted to 1% of net profit ( 1% of net profit) per director - Non-Executive Independent Directors 0.10% of net profit. Restricted to Commission restricted to 1,410.28 62.29 4.59 1.28 Previous year (Rs. in crores) 1,246.10 54.78 0.30 1.27 16. Previous year (Rs. in crores) 2.55 52.10 54.65 54.65 0.13 54.78 j)

- corporate governance and other certification c) Out of pocket expenses # This year Rs 80329 (Previous year Rs 85871 )

Amount remitted in foreign currencies towards dividends during the year: This year No. of Non-Resident shareholders 2005-2006 - Final 2006-2007 - Final 1 51918750 No. of equity shares held Dividend remitted (Rs. in crores) 88.26 88.26 No. of Non-Resident shareholders 1 Previous year No of equity shares held 51918750 Dividend remitted (Rs. in crores) 103.84 103.84

Previous year's figures have been recast/regrouped wherever necessary.

1,478.44

1,302.45 For and on behalf of the Board of Directors BRIJMOHAN LALL MUNJAL Chairman PAWAN MUNJAL Managing Director & CEO PRADEEP DINODIA Director New Delhi April 24, 2008 RAVI SUD ILAM C. KAMBOJ Sr. Vice President & CFO G.M. Legal & Company Secretary

147.84

130.25

14.78 162.62

130.25

59.13 0.35 59.48

52.10 52.10

112

113

A N N U A L R E P O R T 0 7

0 8

PART IV OF SCHEDULE VI
TO THE COMPANIES ACT, 1956 Balance Sheet Abstract and Company's General Business Profile I. Registration Details Registration No. State Code Balance Sheet Date 17354 55 31.03.2008

Reconciliation of Net Income as per US GAAP Accounts and Audited Accounts as per Indian Companies Act 1956
(Rupees in Millions) 2008 Net Profit after tax for the year as per audited accounts Add / (Less) : Profit / (Loss) of - Income from investments ( unrealised gain/loss ) - affiliated company - held to maturity securities Nil Nil Rights Issue Private Placement Nil Nil - Exchange fluctuations - Depreciation effect of exchange fluctuations - Depreciation on leased assets 3118.24 1548.70 2566.82 (997.28) Nil - Lease rentals paid - Interest portion of lease rentals - Provision for deferred tax - Deferred revenue expenditure Net Income as per US GAAP 9,871.97 12.16 0.68 180.33 (167.24) 8,439.00 10.67 11.30 5.37 30.60 22.90 (8.40) 18.26 (76.60) 135.58 (9.90) (103.56) 9,722.28 57.19 (11.77) (3.90) 21.75 (93.18) 117.83 (15.51) (2.11) 8,175.00 8.66 (11.13) 2.40 18.27 (137.96) 132.16 (31.60) 1.30 7.00 7,272.31 9,678.80 2007 8,578.90 2006 9,713.40 2005 8,104.70 2004 7,283.21

II. Capital Raised during the year (Rupees in crores) Public Issue Bonus Issue

III. Position of Mobilisation and Deployment of Funds (Rupees in crores) Total Liabilities Sources of Funds Paid-Up Capital Reserves & Surplus Secured Loans Unsecured Loans *Includes Deferred Tax Liability (Net) Rs. 125.37 crores IV. Performance of Company (Rupees in crores) Turnover Total Expenditure Profit before tax Profit after Tax Earnings per share (Rs.) Dividend Rate (%) 10517.22 9106.94 1410.28 967.88 48.47 950 39.94 2946.30 Nil 132.00 3118.24 Total Assets Application of Funds Net Fixed Assets Investments Net Current Assets* Misc. Expenditure

Balance sheet as at March 31

(Rupees in Millions) 2008 ASSETS Current Assets Cash and cash equivalents Trade accounts receivables 1,310.92 2,974.38 3,171.04 1,911.49 9,367.83 1,599.99 24,617.11 264.58 15,494.75 51,344.26 357.82 3,352.48 2,755.84 2,666.58 9,132.72 1,612.79 18,522.31 252.42 13,401.08 42,921.32 1,587.22 1,586.58 2,265.54 2,773.08 8,212.42 1,595.18 19,680.81 241.75 9,765.51 39,495.67 176.01 895.49 2,042.62 2,431.20 5,545.32 1,596.07 18,973.12 211.14 7,049.94 33,375.59 371.20 438.01 1,881.99 2,398.70 5,089.90 1,601.56 14,663.41 153.96 5,860.07 27,368.90 2007 2006 2005 2004

V. Generic names of Three Principal Products/ Services of Company (as per monetary terms) Item Code No. (ITC Code) Product Description 87112003

Inventories Pre-paid expenses and other current assets For and on behalf of the Board of Directors BRIJMOHAN LALL MUNJAL PAWAN MUNJAL PRADEEP DINODIA RAVI SUD Chairman Managing Director & CEO Director Sr. Vice President & CFO G.M. Legal & Company Secretary Total current assets Investment (held to maturity securities) Investment in mutual funds Investment in affiliate, at equity Property, plant and equipment Total assets

New Delhi April 24, 2008 ILAM C. KAMBOJ

114

115

A N N U A L R E P O R T 0 7

0 8

(Rupees in Millions) 2008 LIABILITIES Trade accounts payable Accrued expenses Indian income taxes Other current liabilities Long term debt due within one year Total current liabilities Deferred income taxes Long-term debt Total liabilities STOCKHOLDERS EQUITY Common stock, par value; Rs. 2 (previous year Rs 2) Authorised 250,000,000 ; Outstanding shares 199687500 ( Previous year 199687500) of Rs 2 each Capital surplus Retained earnings Total stockholders equity Total liabilities and stockholders equity 399.38 0.03 34,424.61 34,824.02 51,344.26 399.38 0.03 28,465.20 28,864.61 42,921.32 399.38 0.03 24,788.66 25,188.07 39,495.67 399.38 0.03 19,400.38 19,799.79 33,375.59 399.38 0.03 13,681.87 14,081.28 27,368.90 7,560.70 494.82 63.90 5,689.15 184.93 13,993.50 1,391.67 1,135.07 16,520.24 5,548.20 417.58 38.50 4,871.05 206.10 11,081.43 1,529.68 1,445.60 14,056.71 6,462.70 305.02 40.30 4,266.15 227.27 11,301.44 1,375.63 1,630.53 14,307.60 6,619.60 247.50 45.70 3,538.05 222.83 10,673.68 981.67 1,920.45 13,575.80 6,989.90 195.70 113.50 3,048.75 190.23 10,538.08 964.78 1,784.76 13,287.62 2007 2006 2005 2004

Statement of income for the year ended March 31

(Rupees in Millions) 2008 Net sales Cost of goods sold Selling, administrative and general expense Other (income) and expense Interest net expense (income) Total expense Income before income taxes Indian taxes on income Net income Net earning per share On share value of Rs. 2 each Average common stock outstanding (numbers) 49.44 199,687,500 42.26 199,687,500 48.69 199,687,500 40.94 199,687,500 36.42 199,687,500 103,318.00 82,724.62 8,619.10 (1,783.26) (358.10) 89,202.36 14,115.64 4,243.97 9,871.97 2007 98,999.60 79,931.23 8,558.40 (1,748.47) (229.90) 86,511.26 12,488.34 4,049.34 8,439.00 2006 87,139.81 67,548.97 6,979.60 (1,572.20) (51.40) 72,904.97 14,234.84 4,512.56 9,722.28 2005 74,216.53 57,308.71 6,055.73 (1,397.42) 4.61 61,971.63 12,244.90 4,069.90 8,175.00 2004 58,324.32 43,933.64 5,296.11 (1,635.94) 18.10 47,611.91 10,712.41 3,440.10 7,272.30

116

117

A N N U A L R E P O R T 0 7

0 8

NOTICE
NOTICE is hereby given that the 25th ANNUAL GENERAL MEETING of the Members of HERO HONDA MOTORS LIMITED will be held on Thursday, September 25, 2008 at 11:00 A.M., at Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi - 110 010 to transact the following business:

liable to determination by retirement of Directors by rotation. RESOLVED FURTHER THAT pursuant to the recommendation of the Remuneration Committee and subject to the approval of the Central Government under Sections 269, 198, 309 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956 approval of the Company be and is hereby accorded to the appointment of Mr. Sumihisa Fukuda, as Technical Director in the Whole-time employment of the Company for a period of five years w.e.f. June 1, 2008 on a remuneration including minimum remuneration and on terms and conditions as set out in the Explanatory Statement attached hereto. RESOLVED FURTHER THAT the aggregate amount of remuneration payable to Mr. Sumihisa Fukuda in a particular financial year will be subject to the overall ceiling limit laid down in Sections 198 and 309 read with Schedule XIII of the Companies Act, 1956. 9. APPOINTMENT OF MR. MELEVEETIL DAMODARAN AS DIRECTOR OF THE COMPANY RESOLVED THAT Mr. Meleveetil Damodaran, who was appointed as an Additional Director of the Company by the Board of Directors, in terms of Section 260 of the Companies Act, 1956 w.e.f. June 16, 2008 and in respect of whom the Company has received a notice under Section 257 of the Companies Act, 1956 together with a deposit of Rs. 500 (Rupees five hundred) as required under the Act, be and is hereby appointed as a Director of the Company and the period of his office shall be liable to determination by retirement of Directors by rotation.

ORDINARY BUSINESS: 1. To receive, consider and adopt the Audited Balance Sheet of the Company as at March 31, 2008 and the Profit and Loss Account for the year ended on that date together with the reports of the Directors and Auditors thereon. To declare a dividend of Rs. 19 per Equity Share on 19,96,87,500 Equity Shares of Rs. 2 each for the financial year 2007-08. To appoint a Director in place of Mrs. Shobhana Bhartia, who retires by rotation and being eligible, offers herself for re-appointment. To appoint a Director in place of Mr. Sunil Bharti Mittal, who retires by rotation and being eligible, offers himself for re-appointment. To appoint a Director in place of Mr. Masahiro Takedagawa, who retires by rotation and being eligible, offers himself for re-appointment. To appoint a Director in place of Mr. Pradeep Dinodia, who retires by rotation and being eligible, offers himself for re-appointment. To appoint M/s. A.F.Ferguson & Co., Chartered Accountants, New Delhi, the retiring auditors, to hold office as auditors from the conclusion of this meeting until the conclusion of the next Annual General Meeting and to fix their remuneration.

2.

3.

4.

5.

6.

7.

By Order of the Board for Hero Honda Motors Limited

SPECIAL BUSINESS: To consider, and if thought fit, to pass, with or without modification(s), the following resolutions: As Ordinary Resolutions: 8. APPOINTMENT OF MR. SUMIHISA FUKUDA AS DIRECTOR AND TECHNICAL DIRECTOR IN THE WHOLE-TIME EMPLOYMENT OF THE COMPANY "RESOLVED THAT Mr. Sumihisa Fukuda, who was appointed as an Additional Director of the Company by the Board of Directors, in terms of Section 260 of the Companies Act, 1956 w.e.f. June 1, 2008 and in respect of whom the Company has received a notice under Section 257 of the Companies Act, 1956 together with a deposit of Rs. 500 (Rupees five hundred) as required under the Act, be and is hereby appointed as a Director of the Company and the period of his office shall be Registered Office: 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi-110 057 New Delhi July 29, 2008 Ilam C. Kamboj G.M. Legal & Company Secretary

01

A N N U A L R E P O R T 0 7

0 8

NOTES:
1. The Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956, which sets out details relating to Special Business to be transacted at the meeting is attached hereto. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE (ON A POLL ONLY) INSTEAD OF HIMSELF/HERSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES IN ORDER TO BE EFFECTIVE MUST BE RECEIVED AT THE REGISTERED OFFICE OF THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE MEETING. Pursuant to Section 154 of the Companies Act, 1956, the Register of Members and the Share Transfer Books of the Company will remain closed from Thursday, September 11, 2008 to Thursday, September 25, 2008 (both days inclusive). Pursuant to Clause 49 of the Listing Agreement, the brief resume/profile of the Directors eligible for re-appointment vide Item Nos. 3 to 6 are attached hereto. The dividend as recommended by the Board of Directors, upon declaration by the members at the 25th Annual General Meeting, shall be paid to those members whose names appear on the Register of Members of the Company on Thursday, September 25, 2008. In respect of shares held in electronic form, the dividend will be payable to the beneficial owners of the shares as on closing hours of business on Wednesday, September 10, 2008 as per details furnished by the Depositories for this purpose. 6. In view of the circular no. DCC/FIIT/Cir-3/2001 dated October 15, 2001 issued by SEBI, the ECS facility should mandatorily be used by the Companies for the distribution of dividend to its members. Your Company has already started this process and sent the required forms and details to all the members on various occasions. Those members holding shares in physical form, who inspite of repeated reminders have not yet sent the duly filled in ECS form, which can be downloaded from the website of the Company to avail the benefits of this facility, are once again requested to send the same at the earliest. In case of members holding shares in demat mode, they should furnish details in the prescribed format to their Depositories Participant (DP). The Company is obliged to print such bank details on the dividend warrants as furnished by National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), "the Depositories" to the Company and the Company can not entertain any request for deletion/change of bank details already printed on the dividend warrant(s) based 11.

on the information received from the concerned Depositories, without confirmation from them. In this regard, members are advised to contact their DP and furnish them the particulars of any change desired. 8. Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the amount of dividend which remains unpaid/unclaimed for a period of 7 years is transferred to the "Investor Education and Protection Fund (IEPF)", constituted by the Central Government and member(s) would not be able to claim any amount of dividend so transferred to the IEPF. As such, member(s) who have not yet encashed his/their dividend warrant(s) is/are requested in his/their own interest to write to the Registrar & Transfer Agent of the Company i.e. M/s Karvy Computershare Private Limited immediately for claiming outstanding dividend declared by the Company during the years 2002 and onward. The dividend paid for the year from 1995 to 2001 and remaining unpaid/ unclaimed in the accounts has already been transferred to IEPF. 9. Members must quote their Folio Number / De-mat Account No. and contact details such as email address, contact no. etc. in all correspondence with the Company/ Registrar and Transfer Agent. Pursuant to the provisions of Section 109A of the Companies Act, 1956, every member or joint holders holding shares in physical form may nominate, in the prescribed manner, a person to whom all the rights in the shares shall vest in the event of death of the sole holder or all the joint holders. Member or joint holders holding shares in demat form may contact their respective DP for availing this facility. Members are requested to notify immediately any change in address and signature in case of their physical holdings to the Registrar & Transfer Agent of the Company i.e. M/s Karvy Computershare Private Limited and to the respective DP in case of shares held in electronic mode. Entry to the Auditorium will be strictly against entry coupon available at the counters at the venue and against the exchange of duly filled in, signed and valid attendance slip. Any briefcase / bags / eatables will not be allowed to be taken inside the Auditorium. Corporate Members intending to send their authorized representatives to attend the Meeting are requested to send a certified copy of Board Resolution authorizing their representative to attend and vote on their behalf in the Meeting. Members are requested to bring their copy of the Annual Report to the meeting.

EXPLANATORY STATEMENT
pursuant to Section 173(2) of the Companies Act, 1956 Item No. 8 Mr. Yutaka Kudo, Whole-time Director of the Company has been assigned another responsibility by Honda Motor Co., Ltd., Japan. Consequently, he has tendered his resignation from the position of Director and Whole-time Director of the Company w.e.f. May 31, 2008. He was associated with the management of the Company since April 1, 2007. Mr. Kudo has been succeeded by Mr. Sumihisa Fukuda w.e.f. June 1, 2008. Mr. Fukuda aged 53 years, was born on December 12, 1955 at Nagasaki, Japan and after completing a course in Mechanical Engineering, he joined Honda Motor Co., Ltd., Japan as an Engineer & has completed various assignments in Honda. Immediately before joining the Company, he was working as Manager in Asian Autoparts Co. Ltd., Thailand. His specialization to name a few are: New model quality & standard control methods; Production, manufacturing and quality control for overseas production; and Production and support for overseas production.

III.

Perquisites and allowances: In addition to the above Basic Salary and Commission, he shall be entitled to the following Perquisites and allowances: I) Residential Accommodation: The appointee shall be provided free furnished residential accommodation. In addition to this the appointee shall be provided with cook(s), servant(s) and security guard(s); Medical Reimbursement: Actual Medical Expenses incurred by the appointee and his family shall be reimbursed;

2.

ii)

iii) Club Fees: Actual fees of clubs will be reimbursed; iv) Personal Accident Insurance: Actual premium to be paid by the Company; v) Insurance of House-hold goods: Actual premium to be paid by the Company;

3.

4.

vi) Car: Facility of car with driver to be used for the business of the Company; vii) Telephone: Free telephone facility at residence including Mobile phone to be used for the business of the Company; viii) Leave: One month's leave with full salary for every 11 months of service subject to the condition that leave accumulated but not availed will not be encashed; and ix) Reimbursement of expenses: Reimbursement of entertainment, traveling, hotel and other expenses actually and properly incurred for the business of the Company. IV. Leave Travel Concession: For the appointee and his family once in a year incurred in accordance with the rules of the Company. In case it is proposed that the leave be spent in home country instead of anywhere in India, return passage may be allowed for self and family in accordance with the rules of the Company; Children's Education Allowance: In case of children studying in India or abroad expenses subject to maximum of Rs. 5,000 per month per child shall be reimbursed by the Company. Such allowance shall be admissible upto a maximum of two children; Holiday passage for children studying outside India/family staying abroad: Return holiday passage is admissible once in a year by economy class or once in two years by first class to children from their place of study abroad to India and to the members of the family from the place of their stay abroad to India if they are not residing in India with the appointee; Reimbursement of expenses incurred for joining duty and

5.

10.

Apart from being on the Board of Hero Honda Motors Limited, Mr. Fukuda is Director on the Board of Hero Honda Finlease Limited. Mr. Fukuda does not hold any shares (as own or on behalf of other person on beneficial basis) in the Company. Your Board of Directors on the recommendation by the Remuneration Committee in its meeting held on May 12, 2008, appointed Mr. Sumihisa Fukuda as an Additional Director and Technical Director in the whole time employment of the Company by way of passing a resolution by circulation on May 13, 2008 pursuant to Sections 260, 269, 198, 309 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956 w.e.f. June 1, 2008 for a period of 5 (five) years subject to the approval of the Central Government, if required and the shareholders in the General Meeting on the remuneration, including minimum remuneration and other terms and conditions given hereunder. I. Basic Salary: Rs. 2,01,314 ( Rupees Two lacs one thousand three hundred fourteen only) per month; (Subject to an increase of 10% per annum on the Basic Salary of preceding year); Commission: He will also be allowed remuneration by way of commission in addition to Basic Salary, Perquisites and any other Allowances, benefits or amenities subject to the condition that the amount of commission shall not exceed 1% of the net profit of the Company in a particular financial year as computed in the manner referred to in Section 198 of the Companies Act, 1956;

V.

12.

13. 14.

VI.

II.

7.

15.

VII.

02

03

A N N U A L R E P O R T 0 7

0 8

returning to home country after completion of tenure: Actual expenses incurred on travel and packing, forwarding, loading/ unloading as well as freight, insurance, custom duty, clearing expenses, local transportation and installation expenses in connection with the moving of personal effects for self and family for joining duty in India. On completion of the tenure, all the expenses referred to herein above for travel and forwarding the personal effects to Japan including the passage money shall also be allowable to the appointee on his finally leaving the employment of the Company. If however, the appointee joins another branch of the same/related multinational Company, the Company shall not bear their expenses. Explanation: For the aforesaid purposes "Family" means the spouse, the dependent children and dependent parents of the appointee; and VIII. Minimum Remuneration: If in any financial year during the currency of tenure of the Whole-time Director, the Company has no profits or its profits are inadequate, the appointee shall be entitled to minimum remuneration by way of Basic Salary, Perquisites, allowances, not exceeding the ceiling limit of Rs. 2,00,000 per month and in addition thereto, he shall also be eligible to the perquisites not exceeding the limits specified, under para 2 of Section II, Part II of Schedule XIII to the Companies Act, 1956 or such other limits as may be prescribed by the Government from time to time as Minimum Remuneration. However, the appointee shall not be entitled to any sitting fee for attending meetings of the Board and/or Committee of Directors. His office shall be liable to determination by retirement of Director by rotation. Mr. Sumihisa Fukuda may be deemed to be interested/ concerned in the Resolution contained under Item No. 8 of the notice. None of the other directors is deemed to be interested/concerned in the Ordinary Resolution under Item No. 8 of the Notice. The Board of Directors of your Company recommends passing of the aforesaid Ordinary Resolution.

the Ministry of Finance, Chairman Unit Trust of India. He headed the IDBI Bank before being appointed as the Chairman of the Securities and Exchange Board of India (SEBI), the country's financial market watchdog. He was also appointed as Officer on Special Duty with the Reserve Bank of India dealing primarily with the restructuring of 3 identified weak public sector banks. He is presently, holding the membership of the Board of the following Companies.

RELEVANT INFORMATION
pursuant to Clause 49 IV(G) (i) of the Listing Agreement regarding Directors being appointed and re-appointed: Mrs. Shobhana Bhartia Mrs. Shobhana Bhartia, wife of Mr. Shyam Sunder Bhartia, aged 51 years was born on January 4, 1957 at Kolkata. She belongs to the distinguished Birla family and has married into another major Industrial family, the Bhartia Group. Presently, she is the Vice Chairperson and Editorial Director of HT Media Limited and by virtue of her considerable domain expertise, especially in the media business she has been nominated as Rajya Sabha member. She has been conferred the "Padam Shri" by the Union Government for her contribution to the media. Mrs. Bhartia is also the Chairperson of International Press Institute (India Chapter). She is presently holding the membership of the Board/ Committee(s) of the following Companies.

Mr. Mittal is immediate past President of the Confederation of Indian Industry (CII) and the Honorary Consul General of the Republic of Seychelles in India. He has been conferred the "Padam Bhushan" by the Union Government for his contribution to the industry. He is winner of number of awards at national and international level and has been inducted into the globally renowned and respected International Telecommunication Union (ITU) Telecom Board, Geneva. He brings with him around thirty years of rich and diversified industrial experience. He is presently on the Board of following Companies and does not hold membership of any other committee of the Board of Directors.

Sl. No. Name of Company

1. 2. 3. Hero Honda Motors Limited Tech Mahindra Limited SREI Sahaj e-Village Limited

Nature of Office
Director Director Director

Sl. No. Name of Company

1. 2. 3. 4. 5. 6. 7. 8. 9. Bharti Airtel Limited Bharti AXA General Insurance Co. Ltd. Bharti AXA Life Insurance Co. Ltd. Bharti Enterprises Limited Bharti Telecom Limited Bharti Telesoft Limited Bharti Teletech Limited Bharti Ventures Limited Hero Honda Motors Limited

Nature of Office
Chairman & Managing Director Chairman Chairman Chairman Chairman Chairman Chairman Chairman Director

Mr. Damodaran does not hold any shares (as own or on behalf of other person on beneficial basis) in the Company. Mr. Damodaran may be deemed to be interested/ concerned in the Resolution contained under Item No. 9 of the notice. None of the other directors is deemed to be interested/concerned in the Ordinary Resolution under Item No. 9 of the Notice. The Board of Directors of your Company recommends passing of the aforesaid Ordinary Resolution.

Sl. No. Name of Company

1. 2. 3. 4. 5. 6. Air Travel Bureau Limited Britex India Limited Firefly e-ventures Limited Goldmerry Investment & Trading Co. Ltd. Hero Honda Motors Limited HT Media Limited

Nature of Office

By Order of the Board for Hero Honda Motors Limited

New Delhi July 29, 2008 Registered Office: 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi-110 057

Ilam C. Kamboj G.M. Legal & Company Secretary

7. 8. 9. 10. 11. 12.

13. 14. 15.

Director Director Director Director Director V. C. & Editorial Director Chairperson Audit Committee HT Music and Entertainment Limited Director HTL Investment & Trading Co. Limited Director Nilgiri Plantation Limited Director Ronson Traders Limited Director Shradhanjali Investment & Trading Co. Ltd. Director The Hindustan Times Limited Director Chairperson Audit Committee Udit (India) Limited Director Usha Flowell Limited Director Yashovardhan Investment & Trading Co. Ltd. Director

He (either own or held by/for other persons on a beneficial basis) does not have any shareholding in the Company. Mr. Masahiro Takedagawa Mr. Masahiro Takedagawa, son of Mr. Hironobu Takedagawa, aged 53 years was born on April 26, 1955 at Kyoto, Japan. He has been appointed as an Additional Director of the Company w.e.f. May 30, 2006. Mr. Takedagawa started his career with Honda Motor Co., Limited, Japan in the year 1979 after having completed his graduation in Economics from Rikkyo University, Japan. Since then, he has served Honda at various responsible positions in countries across the globe in the Sales and Marketing division. At present, he is working as President & CEO of Honda Siel Cars India Limited, India. He is presently holding the membership of the Board/ Committee(s) of the following Companies. Sl. No. Name of Company 1. 2. 3. Hero Honda Motors Limited Honda Siel Cars India Limited Honda Siel Power Products Limited Nature of Office Director President & CEO Director MemberAudit Committee

Item No. 9 Mr. Meleveetil Damodaran has been appointed as an Additional Director on the Board on June 16, 2008. Mr. Meleveetil Damodaran, son of Late Sh. P Chandrasekhara . Menon aged 61 years was born on May 4, 1947. Mr. Damodaran belongs to the Indian Administrative Service, Manipur-Tripura cadre and had held various coveted positions in Government/ Public Sector and Regulatory Bodies. In the past he held the position of Joint Secretary (Banking Division) in

Mrs. Bhartia does not hold any shares (as own or on behalf of other person on beneficial basis) in the Company. Mr. Sunil Bharti Mittal Mr. Sunil Bharti Mittal, son of Late Sh. Sat Paul Mittal, a parliamentarian, aged 50 years was born on October 23, 1957 at Ludhiana. He has been appointed as an Additional Director on the Board of the Company w.e.f. December 30, 2005. He is the founder Director of Bharti Tele-Ventures Limited (now Bharti Airtel Limited). He is an Alumnus of Harvard Business School, MA, USA. He is a member of the Prime Minister's Council on Trade & Industry and is also the founder, past president and Member of various telecom industry associations.

He (either own or held by/for other persons on a beneficial basis) does not have any shareholding in the Company.

04

05

Mr. Pradeep Dinodia Mr. Pradeep Dinodia, son of Sh. S. R. Dinodia, aged 54 years was born on December 2, 1953, at New Delhi. He joined the Board of the Company w.e.f. March 31, 2001. Mr. Dinodia is a Law Graduate (L.LB) and a fellow member of The Institute of Chartered Accountants of India (ICAI). He is a senior partner of M/s. S.R. Dinodia & Company, Chartered Accountants, New Delhi, looking after Accounting, Legal and Taxation issue particularly FEMA, Company Law and Direct Tax matters of various Indian Companies and Multinational Corporations. Presently he is the Chairman of Taxtation Committee of Federation Indian Chamber of Commerce and Industry and member of the peer review Board of the ICAI and member of Executive Committee International Fiscal Association, Indian Branch. He has wide and rich experience in the field of corporate affairs and allied legal, Taxtation matters. Since his appointment as a Director, he has been regularly making valuable contributions in the meetings of Board of Directors and Committee(s) thereof held from time to time. He is presently holding the membership of the Board/ Committee(s) of the following Companies.

Sl. No. Name of Company 3. Hero Corporate Services Limited

Nature of Office Director ChairmanAudit Committee Director ChairmanAudit Committee MemberShareholders Grievance Comm. Director Director Director ChairmanAudit Committee Director Director

4.

Hero Honda Motors Limited

5. 6. 7.

Micromatic Grinding Tech. Limited RSWM Limited Shriram Pistons & Rings Limited

8. 9.

SPR International Auto Exports Ltd. Ultima Finvest Limited

He (either own or held by/for other persons on a beneficial basis) does not have any shareholding in the Company.

Sl. No. Name of Company 1. DCM Shriram Consolidated Limited

Nature of Office Director MemberAudit Committee ChairmanShareholders Grievance Comm. Director ChairmanAudit Committee

Mr. Sumihisa Fukuda The brief profile of Mr. Sumihisa Fukuda has been given in the Explanatory Statement to Ordinary Resolution No. 8 of this Notice.

Mr. Meleveetil Damodaran The brief profile of Mr. Meleveetil Damodaran has been given in the Explanatory Statement to Ordinary Resolution No. 9 of this Notice.

SHAREHOLDERS REFERENCER
CONTENTS
I. II. III. IV. V. VI. VII. VIII. IX. X. At a Glance Investor Service and Grievance Handling Mechanism Matters requiring urgent attention of Shareholders Dividend Dematerialisation / Rematerialisation of Shares Nomination Facility Transfer / Transmission / Transposition / Duplicate Certificates etc. Miscellaneous Investor Servicing and Grievance Redressal at External Agencies Important Contact Details

2.

DFM Foods Limited

06

07

A N N U A L R E P O R T 0 7

0 8

I.

AT A GLANCE Company in present: Has over 47000 folios of shareholders holding Equity Shares in the Company. Face value of its Equity Shares is Rs. 2. 68 per cent of the Company's Equity Shares are held in demat form. The ISIN No. of the Company is INE158A01026. Share are under compulsory trading in demat form only. Equity Shares are listed on Bombay Stock Exchange Limited (BSE) stock code being 500182 and National Stock Exchange of India Limited (NSE) stock code being HEROHONDA. Companys shares are most actively traded security on both BSE and NSE. Share are freely transferable except as may be required statutorily. Karvy Computershare Private Limited (Karvy), Hyderabad, an ISO 9002 Certified Registrars and Transfer Agents, is the Registrars and Transfer Agents (R&TA) of the Company.

payable on transfer of shares held in demat form and risks associated with physical certificates such as forged transfers, fake certificates and bad deliveries are avoided. Consolidate Multiple Folios Investors should consolidate their shareholding held in multiple folios. This would facilitate one-stop tracking of all corporate benefits on the shares and would reduce time and efforts required to monitor multiple folios. Register ECS Mandate and furnish correct bank account particulars with Company / Depository Participant Investor should provide an ECS mandate to the Company in case of shares held in physical form and ensure that the correct and updated particulars of their bank account are available with the Depository Participant (DP) in case of shares held in demat form. This would facilitate in their receiving direct credits of dividends, refunds etc., from companies and avoid postal delays and loss in transit. Fill and submit Nomination Form Investors should register the nominations, in case of physical shares, with the Company and in case of dematerialised shares with their DP . Nomination would help successors to get the shares transmitted in their favor without hassles. Change in Details To avoid any hassle and fraudulent transfers, the shareholders are requested to inform the Karvy about any change in address, signatures etc. Similarly, information of death of shareholders should also be communicated immediately to Karvy. Important Matters relating to Shareholders. IV. DIVIDEND

d) e)

Exposure to delays / loss in postal service avoided. As there can be no loss in transit of warrants, issue of duplicate warrants is not required.

Which cities provide ECS facility? ECS Facility is currently available to the shareholders at following 68 locations: Ahmedabad, Agra, Allahabad, Amritsar, Aurangabad, Bengaluru, Baroda, Bhilwara, Bhopal, Bhubaneshwar, Burdwan, Calicut, Chandigarh, Chennai, Coimbatore, Dehradun, Dhanbad, Durgapur, Erode, Gorakhpur, Guwahati, Gwalior, Haldia, Hubli, Hyderabad, Indore, Jabalpur, Jaipur, Jalandhar, Jammu, Jamshedpur, Jodhpur, Kakinada, Kanpur, Kochi / Ernakulam, Kolhapur, Kolkata, Lucknow, Ludhiana, Madurai, Mangalore, Mumbai, Mysore, Nagpur, Nashik, Nellore, New Delhi, Panaji, Patna, Pondicherry, Pune, Raipur, Rajkot, Ranchi, Salem, Shimla, Sholapur, Siliguri, Surat, Thiruvananthapuram, Tirupati, Tirupur, Trichur, Trichy, Udaipur, Varanasi, Vijaywada and Visakhapatnam. How to avail of ECS Facility? Investors holding shares in physical form may send their ECS Mandate Form, duly filled in, to Karvy. The Form may be downloaded from the Company's website www.herohonda.com under the section "Investor Relations" However, if shares are held in dematerialised form, ECS mandate has to be sent to the concerned Depository Participant (DP) directly, in the format / procedure prescribed by the DP . Why cannot the Company take on record bank details in case of dematerialised shares? As per the Depository Regulations, the Company is obliged to pay dividend on dematerialised shares as per the bank account details furnished by the concerned Depository. The Company is not authorized to make any changes in such details received from the Depository. Therefore, investors are requested to keep their bank particulars updated with the Depository Participants. Can ECS Facility be opted out by investors? Investors have a right to opt out from this mode of payment by giving an advance notice of four weeks, prior to payment of dividend, either to the Karvy or to the concerned DP as the case may be. , Course of Action in case of Non-receipt of Dividend, Revalidation of Dividend Warrant etc. What should a shareholder do in case of non-receipt of dividend? Shareholders may write to the Karvy furnishing the particulars of the dividend not received, and quoting the folio number/DPID and Client ID particulars (in case of dematerialised shares). On checking the details Karvy shall issue duplicate dividend warrant if the dividend remains unpaid in the records of the Company after expiry of the validity period of the warrant which is normally three months from the date of its issue. If the validity period of the lost dividend warrant has not expired, shareholders will have to wait till the expiry date since duplicate warrant

cannot be issued during the validity of the original warrant. On expiry of the validity period, if the dividend warrant is still shown as unpaid in records of the Company, duplicate warrant will be issued. Karvy would request the concerned shareholder to execute an indemnity before issuing the duplicate warrant. No duplicate warrant will be issued in respect of dividends which have remained unpaid / unclaimed for a period of seven years in the unpaid dividend account of the Company as they are required to be transferred to the Investor Education and Protection Fund (IEPF) constituted by the Central Government. Why do the shareholders have to wait till the expiry of the validity period of the original warrant? As the dividend warrants are payable at par at several centres across the country, banks do not accept 'stop payment' instructions. Hence, shareholders have to wait till the expiry of the validity of the original warrant. What is the procedure for revalidation of dividend warrants? Shareholders who have not encashed their dividend warrants within the validity period may send their request of revalidation to Karvy enclosing the said dividend warrants. Karvy will after due verification of the records, issue a revalidated dividend warrant. The revalidated warrant will be valid for a period not exceeding 3 months from the date of such warrant. How can a bank or any other person be authorised to receive dividends on behalf of shareholders? Shareholders may write to Karvy furnishing the name and address of the authorised person/bank along with folio number and current communication address. Karvy will despatch the respective shareholders' dividend warrants to the concerned person / bank. This facility is applicable only for the shareholders holding shares in physical form. Unclaimed / Unpaid Dividend What are the statutory provisions governing unclaimed dividend? Prior to amendment of Section 205A and enactment of Section 205C by the Companies (Amendment) Act, 1999, companies were required to transfer to the General Revenue Account of the Central Government, any moneys transferred to the 'unpaid dividend account' and which remained unpaid or unclaimed for a period of 3 years from the date of transfer to the unpaid dividend account. With effect from October 31, 1998, any moneys transferred to the 'unpaid dividend account' of the Company and remaining unpaid or unclaimed for a period of 7 years from the date it becomes due, shall be transferred to the Investor Education and Protection Fund (IEPF). Investors are requested to note that no claims shall lie against the Company or IEPF for any moneys transferred to IEPF in accordance with the provisions of Section 205C of the Companies Act, 1956.

II. INVESTOR SERVICE AND GRIEVANCE HANDLING MECHANISM All share related transactions viz., transfer, transmission, transposition, nomination, dividend, change of name / address / signature, Registration of mandate / Power of Attorney, replacement / split / consolidation of share certificates / demat / remat of shares, issue of duplicate certificates etc. are being handled by Karvy. Karvy, the largest Registrar in the country, discharges investor service functions effectively, efficiently and expeditiously. Investors are requested to correspond directly with Karvy, on all share related matters. The Board of Directors of the Company has constituted a Shareholders' Grievance Committee which oversees and reviews the redressal of shareholders' complaints related to shares, non-receipt of Annual Report, non receipt of dividend etc. The Committee oversees performance of the R&TA and recommends measures for overall improvement in the quality of investor services. III. MATTERS REQUIRING THE URGENT ATTENTION OF SHAREHOLDERS Register your e-mail address and contact details Shareholders are requested to register their email address and other contact details i.e. Mobile / Telephone No., Fax No., etc. with Karvy in order to get prompt and timely response/communication in the future. Open Demat Account and Dematerialise your shares Investors should convert their physical holdings of securities into demat (electronic) holdings. Holding securities in demat form helps investors to get immediate transfer of securities. No stamp duty is

Electronic Clearing Service (ECS) facility What is payment of dividend through ECS Facility and how does it operate? Reserve Bank of India's ECS facility provides investors an option to receive dividend / interest directly in their bank accounts rather than receiving the same through post. Under this option, investor's bank account is directly credited and an advice thereof is issued by the Company after the transaction is effected. The concerned bank branch credits investor's account and indicates the credit entry as "ECS" in his / her passbook / statement of account. The investor does not have to open a new bank account for the purpose. What are the benefits of ECS (payment through electronic facilities)? Some of the major benefits of ECS facility are: a) b) c) Avoid visits to bank for depositing the physical warrant. Prompt credit to the bank account. Fraudulent encashment of warrants is avoided.

08

09

A N N U A L R E P O R T 0 7

0 8

What is the status of unclaimed dividend for different years? In view of the statutory provisions, as aforesaid, the status of unclaimed and unpaid dividend of the Company is given below:
Year Particulars of Percent Date of Declaration Last Date of Dividend Paid Claiming unpaid Dividend Interim Final Final Interim Final Final Final Final 250 600 900 500 500 1000 1000 850 17-Oct-01 12-Aug-02 01-Aug-03 23-Jan-04 17-Aug-04 22-Aug-05 14-Sep-06 24-Jul-07 16-Oct-08 11-Aug-09 31-Jul-10 22-Jan-11 16-Aug-11 21-Aug-12 13-Sep-13 23-Jul-14

How to dematerialise shares? The procedure for dematerialising shares is as under: Open Beneficiary Account with a Depository Participant (DP) registered with SEBI. Submit Demat Request Form (DRF) as given by the DP duly , signed by all the holders with the names and signatures in the same order as appearing in the concerned certificate(s) and the Company records. Obtain acknowledgment from the DP on handing over the share certificate(s) along with the DRF. Demat confirmations are required to be completed in 21 days as against 30 days (excluding time for despatch) for physical transfer. Service standards prescribed by the Company for completing demat is three days from the date of the receipt of requisite documents for the purpose. Receive a confirmation statement of holdings from the DP . Statement of holdings is sent by the DPs from time to time. Presently, confirmation is given by DPs on an immediate basis through email or SMS facilities, thus enabling shareholders to further trade in the securities immediately. Shareholders should not send share certificate(s) / documents to the Company / Company's R&TA directly.

Depository confirms rematerialisation request to the Company's R&TA. The Company's R&TA updates accounts and prints certificate(s) and informs the Depository. Depository updates the Beneficiary Account of the shareholder by deleting the shares so rematerialised. Share certificate(s) is despatched to the shareholder. VI. NOMINATION FACILITY What is nomination facility and to whom it is more useful? What is the procedure of appointing a nominee? Section 109A of the Companies Act, 1956 provides the facility of nomination to shareholders. This facility is mainly useful for individuals holding shares in sole name. In the case of joint holding of shares by individuals, nomination will be effective only in the event of the death of all joint holders. Investors, especially those who are holding shares in single name, are advised to avail of the nomination facility by submitting the prescribed Form 2B to Karvy. The said Form may be downloaded from the Company's website, www.herohonda.com under the section "Investor Relations". However, if shares are held in dematerialised form, nomination has to be registered with the concerned DP directly, as per the format prescribed by the DP . Who can appoint a nominee and who can be appointed as a nominee? Individual shareholders holding the shares / debentures in single name or joint names can appoint a nominee. In case of joint holding, joint holders together have to appoint the nominee. While an individual can be appointed as a nominee, a trust, society, body corporate, partnership firm, karta of HUF or a power of attorney holder cannot be appointed as nominee(s). Minors can, however, be appointed as a nominee. How to avail of nomination facility for more than one folio? There can be only one nomination for one folio. Folios having different order or combination of names of shareholders will require separate nominations. Can a nomination once made be revoked / varied? It is possible to revoke / vary a nomination once made. If nomination is made by joint holders, and one of the joint holders dies, the remaining joint holder(s) can make a fresh nomination by revoking the existing nomination. Are the joint holders deemed to be nominees to the shares? Joint holders are not nominees, they are joint holders of the relevant shares having joint rights on the same. In the event of death of any one of the joint holders, the surviving joint holder(s) of the shares is / are the only person(s) recognized under law as holder(s) of the shares. Joint Shareholders may together appoint a nominee.

What rights are conferred on the nominee and how can he exercise the same? The nominee is entitled to all the rights of the deceased shareholder to the exclusion of all other persons. In the event of death of the shareholder, all the rights of the shareholder shall vest in the nominee. In case of joint holding, all the rights shall vest in the nominee only in the event of death of all the joint holders. The nominee is required to apply to the Company by reporting death of the nominator along with the duly attested copy of the death certificate. The nominee has an option to decide to register himself as a shareholder or he/she could send an application to have the shares transferred to any other person to whom the nominator could have otherwise transferred the shares. If the nominee opts to transfer the shares to a third party, he/she should submit to the Company's R&TA, the transfer deed(s) duly stamped and executed, along with the relevant certificate(s) and other documentary proof(s). If shares are held in dematerialised form, nomination has to be registered with the concerned DP directly, as per the format prescribed by the DP . VII. TRANSFER / TRANSMISSION / TRANSPOSITION / DUPLICATE CERTIFICATES ETC. How to get shares registered in favour of transferee(s)? Transferee(s) need to send share certificate(s) along with share transfer deed in the prescribed form 7B, duly filled in, executed and affixed with share transfer stamps, to Karvy. It takes about 7 days for them to process the transfer, although the statutory time limit fixed for completing a transfer is one month under the Listing Agreement and two months under the Companies Act, 1956. The Government of India, Ministry of Finance, Department of Revenue, has fixed the Stamp Duty on Transfer (whether with or without consideration) of shares at the rate of twenty five paise (25 paise) for every Rs. 100 or part thereof of the market value of the shares on the date of execution of the transfer deed. The transfer deed is valid for a period of one year from the date of presentation or till the book closure date, whichever is later. In case the transfer deed has expired, the holder may approach the Registrar of Companies to get the same revalidated. In case of dematerialised shares, the shares are credited to the purchaser's account by the respective Depository Participant under the directions of the concerned Depository. Presently, transfer of dematerialised shares does not attract stamp duty. Can shares be transferred to a minor, Hindu Undivided Family, Firm, Trust etc.? Yes, shares can be transferred to a minor. In such a case the share transfer deed is required to be signed by the natural guardian on behalf of the minor. In the case of Hindu Undivided Family (HUF) shares can be transferred in the name of the Karta of HUF, in the case of a Firm shares can be transferred to a partner of the firm and in the case of a Trust shares can be transferred to a trustee of the trust.

2001-02 2001-02 2002-03 2003-04 2003-04 2004-05 2005-06 2006-07

V. DEMATERIALISATION / REMATERIALISATION OF SHARES What is dematerialisation of shares? Dematerialisation (Demat) is the process by which securities held in physical form are cancelled and destroyed and the ownership thereof is entered into and retained in a fungible form on a depository by way of electronic balances. Trading in demat form is regulated by the Depositories Act, 1996 and is monitored by the Securities and Exchange Board of India (SEBI). The two depositories presently functioning are National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Why dematerialise shares? SEBI has notified various companies whose shares shall be traded in demat form only. By virtue of such notification, the shares of the Company are also subject to compulsory trading only in demat form on the Stock Exchanges. Benefits of Demat A safe, convenient way to hold securities; Immediate transfer of securities; No stamp duty on transfer of securities; Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays in transit, thefts etc. Reduction in paperwork involved in transfer of securities; Reduction in transaction cost; No odd lot problem, even one share can be sold; Change in address recorded with DP gets registered with all companies in one go in which the investor holds securities electronically thereby eliminating the need to correspond with each of them separately; Easy Nomination facility; Smooth Transmission of securities in case of any eventualities.

How to get dividend on dematerialised shares? Will such shareholders be eligible for receiving Annual Report every year and also to attend General Meetings? Dividend of shareholders holding shares in dematerialised will be credited through ECS/ electronically to the bank accounts as opted by them while opening the Beneficiary Accounts with the DP In other . cases, dividend warrants will be despatched to them with the bank account details, as furnished by the Depositories, printed thereon. Holding shares in dematerialised form will not have any adverse affect on the rights of the Shareholders. As members of the Company, they will be entitled to receive Annual Report, attend General Meetings and participate and vote thereat to the extent of their shareholding. Is pledge of dematerialised shares possible? Dematerialised shares can be pledged for the purpose of availing of any funding / loan arrangement with a bank. What is rematerialisation of shares? It is the process through which shares held in demat form are converted into physical form by issuance of share certificate(s). What is the procedure for rematerialisation of shares? Shareholders should submit duly filled in Rematerialisation Request Form (RRF) to the concerned DP . DP intimates the relevant Depository of the request through the system. DP submits RRF to the Company's R&TA.

10

11

A N N U A L R E P O R T 0 7

0 8

Can single holding of shares be converted into joint holdings or joint holdings into single holding? If yes, what is the procedure involved in doing the same? Yes, conversion of single holding into joint holdings or joint holdings into single holding or transfer within the family members leads to a change in the pattern of ownership, and therefore, procedure for a normal transfer as mentioned above needs to be followed. How to get shares registered which are received by way of gift? Does it attract stamp duty? The procedure for registration of shares gifted (held in physical form) is same as the procedure for a normal transfer. The stamp duty payable for registration of gifted shares would be @ 25 paise for every Rs. 100 or part thereof, of the face value or the market value of the shares prevailing as on the date of the document, if any, conveying the gift or the date of execution of the transfer deed, whichever is higher. The procedure for registration of shares gifted (held in demat form) is the same as the procedure for transfer of shares in demat form in off market mode. What is the procedure for getting shares in the name of surviving shareholder(s), in case of joint holding, in the event of death of one shareholder? The surviving shareholder(s) will have to submit a request letter supported by a duly attested copy of the death certificate of the deceased shareholder and accompanied by the relevant share certificate(s). Karvy on receipt of the said documents and after due scrutiny, will delete the name of the deceased shareholder from its records and return the share certificate(s) to the surviving shareholder(s) with necessary endorsement. If a shareholder who holds shares in his sole name dies without leaving a Will, how can his legal heir(s) claim the shares? The legal heir(s) should obtain a Succession Certificate or Letter of Administration with respect to the shares and send a true copy of the same, duly attested, along with a request letter, transmission form, and the share certificate(s) in original, to Karvy for transmission of the shares in his / their name(s). In case of a deceased shareholder who held shares in his / her own name (single) and had left a Will, how do the legal heir(s) get the shares transmitted in their name(s)? The legal heir(s) will have to get the Will probated by the Court of competent jurisdiction and then send to Karvy a copy of the probated copy of the Will, along with relevant details of the shares, the relevant share certificate(s) in original and transmission form for transmission of the shares in his / their name(s). How can the change in order of names (i.e. transposition) be effected? Share certificates along with a request letter duly signed by all the joint holders may be sent to Karvy for change in order of names, known as 'transposition'.

Transposition can be done only for the entire holdings under a folio and therefore, requests for transposition of part holding will not be accepted by Karvy. What is the procedure for obtaining duplicate share certificate(s) in case of loss / misplacement of original share certificate(s)? Immediately on the knowledge of loss of share certificates, one should inform Karvy. The information should contain the details of share certificates so lost, folio no., no. of shares and other relevant particulars. The said information needs to be signed by the first holder as per the specimen signature recorded with Hero Honda Motors Limited. Karvy after checking the details and signatures will mark a cautionary stop on the folio to prevent any further transfer of such lost share certificates. On receipt of such request Karvy will send the complete procedure of obtaining duplicate share certificates. In the meanwhile, one should lodge a complaint with the police regarding loss of share certificates. VIII.MISCELLANEOUS Change of address What is the procedure to get change of address registered in the Company's records? Shareholders holding shares in physical form, may send a request letter duly signed by all the holders giving the new address along with Pin Code. Shareholders are also requested to quote their folio number and furnish a duly attested copy of any of the following documents i.e. Ration Card / PAN Card / Passport / Latest Electricity or Telephone Bill / Lease Agreement etc. towards proof of address. If shares are held in dematerialised form, information about change in address needs to be sent to the DP concerned. Change of name What is the procedure for registering change of name of shareholders? Shareholders may request Karvy for effecting change of name in the share certificate(s) and records of the Company. Original share certificate(s) along with the supporting documents like marriage certificate, court order etc. should be enclosed. Karvy after verification, will effect the change of name and send the share certificate(s) in the new name of the shareholders. Shareholders holding shares in demat form, may request the concerned DP in the format prescribed by DP . Authority to another person to deal with shares What is the procedure for authorising any other person to deal with the shares of the Company? Shareholders need to execute a Power of Attorney in favour of the concerned person and submit a notarised copy of the same to Karvy. After scrutiny of the documents, they will register the Power of Attorney and inform the shareholders concerned about the registration number of the same. Whenever a transaction is done by the Power of Attorney holder this registration number should be quoted in the communication.

Shareholders' General Rights - interalia To receive not less than 21 days notice of general meetings unless consented for a shorter notice. To receive notice and forms for Postal Ballots in terms of the provisions of the Companies Act, 1956 and the concerned Rules issued thereunder. To receive copies of Balance Sheet and Profit and Loss Account along with all annexures. To participate and vote at general meetings either personally or through proxy (proxy can vote only in case of a poll).

Debentures / Bonds Fixed Deposits - non receipt of amount Miscellaneous - non receipts Any other The status of complaint can be viewed by quoting the Service Request Number (SRN) provided at the time of filing the complaint. ii) Investor Education and Protection Fund (IEPF) IEPF is for promotion of investors' awareness and protection of the interests of investors. IEPF through Investor Helpline is assisting investors free of charge, in redressal of their grievances. It provides a facility, to the investors, to lodge their grievance on the website itself. This facility is available on website www.investorhelpline.in. The complaints can be lodged on various issues such as: Refund Order / Allotment Advice related Non-Receipt of Dividend Non-Receipt of Share certificates / Units after allotment / transfer / Bonus / Transmission etc. Non-Receipt of Debentures / Bond Certificate or Interest / Redemption Amount Offer for Rights Issue Non-Receipt of Investments and returns thereon on Collective Investment Schemes / Plantation Companies Non-Receipt of Annual Report / AGM Notice / Proxy Form Non-Registration of Change in Address of Investor Non-Receipt of Fixed / Public Deposits related amounts Demat related Grievances iii) Securities and Exchange Board of India (SEBI) SEBI, in its endeavour to protect the interest of investors, has provided a platform wherein the investors can lodge their grievances. This facility is available on the SEBI website (www.sebi.gov.in) under the Investor Guidance Section. The complaints can be lodged on various issues such as: Non receipt of dividend Non receipt of share certificates after transfer Matters pertaining to non-receipt of allotment advice/ Refund Orders Matters pertaining to Debentures Non receipt of letter of offer of rights Any other

To receive dividends and other corporate benefits like bonus, rights etc. once approved. To demand poll on any resolution at a general meeting in accordance with the provisions of the Companies Act, 1956. To inspect statutory registers and documents as permitted under law. To require the Board of Directors to call an extraordinary general meeting in accordance with the provisions of the Companies Act, 1956. Duties / Responsibilities of Shareholders To remain abreast of corporate developments, company specific information and take informed investment decision(s). To be aware of relevant statutory provisions and ensure effective compliance therewith. Not to indulge in fraudulent and unfair trading in securities nor to act upon any unpublished price sensitive information. To participate effectively in the proceedings of shareholders' meetings. To respond to communications seeking shareholders' approval through Postal Ballot. To respond to communications of SEBI / Depository / Depository Participant / Brokers / Sub-brokers / Other Intermediaries / Company, seeking investor feedback / comments. IX. INVESTOR SERVICING AND GRIEVANCE REDRESSAL AT EXTERNAL AGENCIES i) Ministry of Corporate Affairs Ministry of Corporate Affairs (MCA) has launched a major e-Governance initiative - "MCA 21" on the MCA portal (www.mca.gov.in). One of the key benefits of this initiative includes timely redressal of investor grievances. MCA 21 system accepts complaints under the e-form prescribed, which has to be filed online. The nature of complaint may relate to: Shares / Dividends

After lodging the complaint, the Investors can track the status as well.

12

13

A N N U A L R E P O R T 0 7

0 8

iv) Stock Exchanges a. National Stock Exchange of India Limited (NSE)

NSE has formed an Investor Grievance Cell (IGC) to redress investors' grievances electronically. IGC is manned by a team of professionals who possess relevant experience in the areas of capital markets, company and legal affairs; especially trained to identify the problem faced by the investor, and to find and resolve at the earliest. The Investors have to log on to the website of NSE i.e. www.nseindia.com and in the Investors Service Centre Section they can fill in Form I or Form II depending upon the type of complaint and file the same electronically with NSE. Generally, complaints are resolved within a period of 45 days. b. Bombay Stock Exchange Limited (BSE)

Regional Director (North) A-14, Sector 1, PDL Bhawan, Noida - 201 301 Tel : 0120 - 2445342 Fax : 0120 - 2445341 Registrar of Companies (ROC) 4th Floor, IFCI Tower, 61, Nehru Place, New Delhi - 110 019 Tel : 011 - 26235704 Fax : 011 - 26235702 Depositories National Securities Depository Limited (NSDL) Trade World, A Wing, 4th & 5th Floors, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai 400 013. Tel : 022 - 2499 4200 Fax : 022 - 2497 2993 / 2497 6351 Website : www.nsdl.co.in Central Depository Services (India) Limited (CDSL) Phiroze Jeejeebhoy Towers, 16th Floor, Dalal Street, Mumbai 400 023. Tel : 022 - 2272 3333 Fax : 022 - 2272 3199 / 2272 2072 Website : www.cdslindia.com Securities and Exchange Board of India (SEBI) SEBI Bhavan, Plot No. C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051. Tel : 022 - 26449000 / 40459000 Fax : 022 - 26598514 Website : www.sebi.gov.in Bombay Stock Exchange Limited (BSE) Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 001. Tel : 022 - 2272 1233 / 4 Fax : 022 - 2272 1919 Website : www.bseindia.com The National Stock Exchange of India Limited (NSE) "Exchange Plaza" Plot No. C/1, "G" Block Bandra-Kurla Complex, Bandra (E), Mumbai 400 051. Tel : 022 - 2659 8100 / 8114 Fax : 022 - 22 2659 8120 Website : www.nseindia.com

HERO HONDA MOTORS LIMITED

Regd. Office : 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi - 110 057

ATTENDANCE SLIP

Please complete this attendance slip and hand it over at the entrance of the meeting hall. L.F. No. Dp.Id.* Name(s) in full 1. 2. 3. I/We hereby record my/our presence at the 25th Annual General Meeting of the Company being held on Thursday, September 25, 2008 at 11:00 a.m. at Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010. Signature of the shareholder(s)/proxy** 1. 2. 3. Father's/Husband's Name No. of Shares Held Client Id.* Address as Regd. with the Company

BSE provides an opportunity to its members to file their complaints electronically through its website www.bseindia.com under the Investor Desk Section. Here again as in case of NSE, the Investors can fill in various complaint forms depending upon the nature of their complaint and file them electronically. v) Depositories a. National Securities Depository Limited (NSDL)

In order to help its clients resolve their doubts, queries, complaints, NSDL has provided an opportunity wherein they can raise their queries by logging on to www.nsdl.co.in under the 'Query Now' section or an email can be marked mentioning the query to relations@nsdl.co.in. b. Central Depository Services (India) Limited (CDSL)

* Applicable for investors holding shares in electronic form ** Strike out whichever is not applicable Note: Attendance slip in original should be complete in all respects.
No gift of any nature will be distributed at the Annual General Meeting. The members seeking gifts may excuse us.

HERO HONDA MOTORS LIMITED

Regd. Office : 34, Community Centre, Basant Lok, Vasant Vihar, New Delhi - 110 057

PROXY

Investors who wish to seek general information on depository services may mail their queries to investors@cdslindia.com. With respect to the complaints / grievances of the demat accountholders relating to the services of the Depository participants, mails may be addressed to complaints@cdslindia.com. X. IMPORTANT CONTACT DETAILS

L.F. No. Dp.Id.* I/We; Name(s) in full 1. 2. 3.

No. of Shares Held Client Id.*

Registrars and Transfer Agents Karvy Computershare Private Limited Plot No. 17-24, Vithalrao Nagar, Madhapur, Hyderabad - 500 081 e-mail : mailmanager@karvy.com Tel : 040 - 23420272 3333 Fax : 040 - 2272 3199 / 2272 2072 Ministry of Corporate Affairs Shastri Bhawan, 5th Floor, A Wing, Dr. Rajendra Prasad Road, New Delhi - 110 001. Tel : 011 - 23384660, 23384470, 23389403 Website : www.mca.gov.in

Father's/Husband's Name

Address as Regd. with the Company

being a member/members of Hero Honda Motors Limited hereby appoint of or failing him/her of as my/our proxy to vote for me/us and on my/our behalf at the 25th Annual General Meeting of the Company being held on Thursday, September 25, 2008 at 11:00 a.m. at Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010. Signature of the shareholder(s) 1.
DD MM YY

Signature of Proxy(s) 2. 3.
Affix 15 Paise Revenue Stamp

1.

Date: * Applicable for investors holding shares in electronic form

2.

Note: The proxy must be returned so as to reach the registered office of the Company not less than 48 hours before the time for holding the aforesaid meeting. The proxy need not be a member of the Company.