c.e.o. company secretary cost auditors solicitors · solicitors desai & diwanji ... to appoint...

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BOARD OF DIRECTORS S.M. Patel - ChairmanP.M. Patel - Managing DirectorT.M. Patel - Executive DirectorC.U. ShahY.H. MalegamS.K. DiwanjiV.C. VaidyaJal R. Patel

C.E.O. B. N. Vidholia

COMPANY SECRETARY S.B. Desai

AUDITORS Parikh & ShahChartered Accountants

COST AUDITORS B.J.D. Nanabhoy & Co.Cost Accountants

SOLICITORS Desai & DiwanjiAdvocates & Solicitors

BANKERS Bank of BarodaCorporation BankUTI Bank Ltd.Kotak Mahindra Bank Ltd.

REGISTERED OFFICE 402-B, Poonam Chambers,Dr. Annie Besant Road,Worli, Mumbai 400 018.

REGISTRARS & Bigshare Services Pvt. Ltd.TRANSFER AGENTS E-2, Ansa Industrial Estate,

Sakivihar Road, Saki Naka,Andheri (E), Mumbai 400 072.

WORKS 1. Pandit Jawaharlal Nehru Marg,Lonavla 410 401,Maharashtra State.

2. Plot No.1-B,GIDC Industrial Estate,Bharuch - 392 015,Gujarat State.

3. Plot No.109-B, GIDC Industrial Estate,Bharuch 392 015,Gujarat State.

CONTENTS PAGE NO.

Notice…………………………………………………………………………………………………………….................... 2

Directors’ Report …………………………………………………………..……………………………………………....…. 5

10 Years’ Highlights ………………....…………………………………………………………………………………….... 7

Corporate Governance Report ……....…………………………………………....……………………………………...…8

Management Discussion & Analysis …....…………………………………....…………………………………………...15

Auditors’ Report ………………..………....……………………………………………………..………………………….16

Balance Sheet ………………………..…....……………………………………………………………………………..…18

Profit and Loss Account ………..…………………....………………………………………………………………….....19

Schedules 1 to 16 ...……………….……………...…………………………………………………………….……….....20

Cash Flow Statement ……………….………………..…………………………………………………………………......30

Balance Sheet Abstract and Company’s General Business Profile .………………………….………………...........31

ABC Bearings Limited

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NOTICE

NOTICE is hereby given that the Forty-fifth Annual General Meeting of the Members of ABC Bearings Limited will beheld on Thursday, the 10th August, 2006 at 4.00 p.m. at Walchand Hirachand Hall, Indian Merchants’ ChamberBuilding, 76, Veer Nariman Road, Churchgate, Mumbai – 400 020, to transact the following business:

ORDINARY BUSINESS:

1. To receive, consider and adopt the Audited Balance Sheet of the Company as at 31st March, 2006 and the Profit andLoss Account for the year ended on that date and the Reports of the Directors and the Auditors thereon.

2. To declare dividend on Equity Shares.

3. To appoint a Director in place of Mr. S.M. Patel, who retires by rotation and being eligible, offers himself forre-appointment.

4. To appoint a Director in place of Mr. Jal R. Patel, who retires by rotation and being eligible, offers himself forre-appointment.

5. To appoint Auditors and to fix their remuneration.

SPECIAL BUSINESS:

6. To consider and, if thought fit, to pass with or without modifications, the following resolution as an ORDINARYRESOLUTION:-

“RESOLVED THAT pursuant to provisions of Sections 198, 269, 309, 310 and other applicable provisions, if any, ofthe Companies Act, 1956, the Company hereby approves the re-appointment of Mr. P.M. Patel as ManagingDirector of the Company for a period of five years with effect from 1st August, 2006, on the terms and conditionsincluding remuneration as are set out in the draft Agreement to be entered into by the Company with him, whichagreement is hereby specifically sanctioned with authority to the Board of Directors to alter and vary the terms andconditions of the said appointment and/or Agreement, in accordance with Schedule XIII to the Companies Act,1956, and/or any amendments and/or modifications including any guidelines or notifications on managerialremuneration which may be issued or any rules that may be prescribed by the Central Government thereunder fromtime to time and acceptable to Mr. P.M. Patel or as may be varied by the General Meeting.”

“RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to vary and/oralter and/or modify the terms and conditions relating to remuneration, commission payable and perquisites to beprovided for Mr. P.M. Patel as Managing Director of the Company in accordance with any change that may beeffected from time to time in Schedule XIII to the Companies Act, 1956, if any, any amendments and/or modificationsincluding any guidelines or modifications as may be made by the Central Government from time to time.”

“RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to take suchsteps as may be necessary to give effect to this resolution.”

7. To consider and, if thought fit, to pass with or without modifications, the following resolution as a SPECIALRESOLUTION:-

“RESOLVED THAT pursuant to Section 309(1) and other applicable provisions, if any, of the Companies Act, 1956and subject to the approval of Central Government and all concerned authorities, the consent of the Company beand is hereby accorded for payment of increased fee of Rs. 2,00,000/- (Rupees Two lacs only) per month toMr. S.M. Patel, a Director and Financial Advisor of the Company, with effect from 1st April, 2006.”

“RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to take suchsteps and to do all such acts, deeds and things as may be considered necessary, proper and expedient to giveeffect to this Resolution.”

8. To consider and, if thought fit, to pass with or without modifications, the following resolution as a SPECIALRESOLUTION:-

“RESOLVED THAT pursuant to Section 309(1) and other applicable provisions, if any, of the Companies Act, 1956,and subject to the approval of Central Government and all concerned authorities, the consent of the Company be

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and is hereby accorded for reimbursement of expenses incurred by Mr. S.M. Patel, a Director and Financial Advisorof the Company, in relation to electricity bills, telephone bills including mobile bills, rates and taxes, for an amountnot exceeding Rs. 2,00,000/- per annum and reimbursement of actual medical expenses for self and wife, witheffect from 1st April, 2006.”

“RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to take suchsteps and to do all such acts, deeds and things as may be considered necessary, proper and expedient to giveeffect to this Resolution.”

NOTES:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead ofhimself and the proxy need not be a member of the Company. The instrument of proxy should, however bedeposited at the registered office of the Company not less than forty-eight hours before the commencement of themeeting.

2. An Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956, relating to the Special Businessto be transacted at the meeting is annexed hereto.

3. The Register of Members and Share Transfer Books of the Company will be closed from Thursday, the 3rd August,2006 to Thursday, the 10th August, 2006 (both days inclusive).

4. Pursuant to Section 205A of the Companies Act, 1956, the unclaimed dividend upto the financial year ended31st March, 1998 has been transferred to Investor Education and Protection Fund (IEPF) established underSection 205C of the Companies Act, 1956.

5. As per SEBI’s Notification dated 16th February, 2000, the equity shares of the Company have been compulsorilydematerialised and sale/purchase of the same is required to take place in dematerialised form only. You are advisedto get your shares dematerialised through NSDL or CDSL. They have allotted ISIN Number INE 779A01011.Members are requested in their interest, to please return the physical certificates through their Depository Participants(DP).

6. The Securities and Exchange Board of India has made it mandatory for all companies to use the bank accountdetails furnished by the depositories/members for depositing dividend or payment through Electronic Clearing Service(ECS) to investors wherever ECS and bank details are available, for distribution of dividend.

7. Members seeking any information with regard to Accounts are requested to write to the Company at least10 days in advance so as to enable the Company to keep the information ready.

8. Members are requested to send all future correspondence in respect of their change of address, transfer of sharesor any other query, directly to the Share Transfer Agents at the following address:-

BIGSHARE SERVICES PVT. LTD. TEL. NOS: 022-28473747E-2, ANSA INDUSTRIAL ESTATE, 022-56936291SAKIVIHAR ROAD, SAKI NAKA, FAX NO: 022-28475207ANDHERI (E), MUMBAI-400 072.

9. Members are requested to quote their Folio/DP ID Number(s) in all correspondence with the Company’s ShareTransfer Agents.

10. Members/Proxy should bring the attendance slip duly filled-in for attending the meeting.

11. Members are requested to bring their copy of Annual Report to the Meeting.

S. B. DesaiCompany Secretary

By Order of the Board of DirectorsRegistered Office:

402-B, Poonam Chambers,Dr. Annie Besant Road,Worli, Mumbai – 400 018.

Date: 22nd June, 2006


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EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OFTHE COMPANIES ACT, 1956.

Item No. 6 :The Directors have at their meeting held on 22nd June, 2006, re-appointed Mr. P.M. Patel as Managing Director, for a furtherperiod of 5 years with effect from 1st August 2006, on the following terms and conditions:a) Salary: Rs.5,00,000/- (Rupees Five Lacs Only) per month from 1st August, 2006, with annual increment of 20% or more as

the Board of Directors may decide.b) Commission: As may be decided by the Board of Directors at the end of each year calculated with reference to the net profit

of the Company during the financial year, subject to overall ceiling as prescribed in Sections 198 and 309 of the CompaniesAct, 1956.

c) Perquisites & Allowances: In addition to salary, the Managing Director shall be entitled to perquisites and benefits likeaccommodation (furnished or otherwise) or House Rent Allowance in lieu thereof, maintenance and upkeep, monthlyoutgoings, cost of repairs, furnishings, payment of actual expenses for gas, electricity, water, reimbursement of actualexpenditure on medical treatment for self and family, leave travel for self and family, club fees, medical/accident insurance,and such other perquisites subject to overall ceiling of remuneration stipulated in Sections 198 and 309 of the CompaniesAct, 1956.

Minimum Remuneration: Notwithstanding anything herein contained, where, in any financial year during the currency of tenureof the Managing Director, the Company has no profits or the profits are inadequate, the Company will pay remuneration by wayof salary and perquisites as stated above but shall not exceed the limits prescribed under Schedule XIII to the Companies Act,1956 and other provisions thereof or any amendments, variations, modifications or re-enactment.All other terms and conditions remain unchanged.The Managing Director shall not be paid any sitting fees for attending meetings of the Board of Directors or Committeesthereof.The particulars set out above may be treated as an abstract of the Agreement, proposed to be entered into between theCompany and Mr. P.M. Patel under the provisions of Section 302(2) of the Companies Act, 1956.None of the Directors of the Company is in any way deemed to be concerned or interested in the aforesaid resolution exceptMr. P.M. Patel himself, Mr. S.M. Patel and Mr. T.M. Patel being brothers and as such related to each other.Mr. P.M. Patel shall not be subject to retirement by rotation during his tenure in office as Managing Director of the Company, inaccordance with the provisions of the Articles of Association of the Company.The Board of Directors recommends the resolution for approval of the members.The draft Agreement, referred to above, to be entered into with Mr. P.M. Patel is available for inspection by the members of theCompany at the Registered Office of the Company between 10.00 a.m. and 1.00 p.m. on all working days, except Saturdays tillthe date of the Annual General Meeting.

Item No. 7 :At the 43rd Annual General Meeting of the Company held on 20th July, 2004, shareholders have approved the appointment ofMr. S.M. Patel, a Director of the Company, as Financial Advisor of the Company on a fee of Rs.1,00,000/- per month withentitlement of reimbursement of actual expenses incurred by him in performance of his duties along with providing him a carand maintenance thereof for official use in discharging his duties.The Central Government has also given its approval vide its letter No.6/29/2004-CL.VII dated 20th June, 2005. Considering theexperience and nature of services provided by Mr. S.M. Patel, it is proposed to increase the said fee to Rs.2,00,000/- per monthwith effect from 1st April, 2006.The Board of Directors recommends the resolution for approval of the members.None of the Directors of the Company is in any way deemed to be concerned or interested in the aforesaid resolution exceptMr. S.M. Patel himself, Mr. P.M. Patel and Mr. T.M. Patel being brothers and as such related to each other.

Item No. 8 :At present, Mr. S.M. Patel, a Director and Financial Advisor of the Company, is entitled for reimbursement of actual expensesincurred by him in performance of his duties along with provision of car and maintenance thereof, for official use in discharginghis duties.In addition to the above, it is proposed to reimburse electricity bills, telephone bills including mobile bills, rates and taxes paidby Mr. S.M. Patel for an amount not exceeding Rs.2,00,000/- per annum and further reimbursement of medical expensesactually incurred by him for self and wife, with effect from 1st April, 2006.The Board of Directors recommends the resolution for approval of the members.None of the Directors of the Company is in any way deemed to be concerned or interested in the aforesaid resolution exceptMr. S.M. Patel himself, Mr. P.M. Patel and Mr. T.M. Patel being brothers and as such related to each other.

By Order of the Board of Directors

Place: Mumbai S.B. DesaiDate: 22nd June, 2006 Company Secretary

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believe that this would increase shareholder value and eventuallylead to a higher return threshold.

COLLABORATION :

NSK Japan, who are your Company’s technology partner, continue toassist significantly in updating processes and quality, in line withinternational standards.

QUALITY CERTIFICATION :

During the year the company was audited and certified as per ISO/TS16949 by TUV. Most of the customers have awarded self-certificationto the Company for its products for Direct Online Supply.

DIRECTORS’ RESPONSIBILITY STATEMENT :

Pursuant to Section 217(2AA) of the Companies Act 1956,the Directors report that:-

i. in the preparation of annual accounts, the applicable accountingstandards have been followed along with proper explanationrelating to material departures, if any.

ii. such accounting policies have been selected and appliedconsistently and the judgments and estimates made arereasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial yearand of the Profit or Loss of the Company for that year.

iii. proper and sufficient care has been taken for the maintenanceof adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding theassets of the Company and for preventing and detecting fraudand other irregularities.

iv. the annual accounts have been prepared on a going concernbasis.

FIXED DEPOSITS :

Deposits amounting to Rs.0.12 lacs matured on or before 31st March,2006, were not claimed by the depositors as on that date.

DIRECTORS :

Mr. S.M. Patel and Mr. Jal R. Patel retire by rotation and being eligible,offer themselves for re-appointment. Necessary resolutions for theirre-appointment are being placed before the members for their approval.

CORPORATE GOVERNANCE :

Your Company has complied with the requirements of the Code ofCorporate Governance in accordance with Clause 49 of the ListingAgreement with BSE. A separate report on Corporate Governancealong with Auditors’ certificate on its compliance is attached to thisReport. Management Discussion and Analysis, as prescribed by theListing Agreement, also forms a part of the Annual Report.

REPORT ON ENERGY CONSERVATION ANDRESEARCH AND DEVELOPMENT ACTIVITIES :

Information relating to Energy Conservation, Foreign Exchange Earnedand Spent and Research and Development activities undertaken bythe Company in accordance with the provisions of Section 217(1)(e)of the Companies Act, 1956, read with Companies (Disclosure ofParticulars in the Report of the Board of Directors) Rules, 1988, isgiven in the Annexure to the Directors’ Report.

AUDITORS :

M/s. Parikh & Shah, Chartered Accountants, Statutory Auditors of theCompany, hold office until the conclusion of the forthcoming AnnualGeneral Meeting and being eligible offer themselves for re-appointment.The Company has received confirmation that their appointment, ifmade, will be within the limits prescribed under Section 224(1B) ofthe Companies Act, 1956.

DIRECTORS’ REPORTTo the Members,

Your Directors are pleased to present the Forty-fifth Annual Reportwith the Audited Statement of Accounts for the year ended 31st March,2006.

FINANCIAL RESULTS :

Year ended Year ended31.03.2006 31.03.2005Rs. in lacs Rs. in lacs

Gross Profit before Interest,Depreciation and Tax 3267.73 2795.74Less: Interest & Finance Charges 269.36 280.96

Depreciation 684.15 630.19Profit before Tax 2314.22 1884.59Less: Provision for tax

Fringe Benefit Tax (19.15) —Current tax (960.00) (910.00)Deferred tax 235.62 177.64

Profit after Tax 1570.69 1152.23Add: Balance brought forward from previous year 364.26 7.13Amount available for appropriations 1934.95 1159.36Appropriations:Proposed Dividend 462.00 346.50Tax on proposed dividend 64.80 48.60Transfer to General Reserves 900.00 400.00Balance carried to Balance Sheet 508.15 364.26

1934.95 1159.36

OPERATIONS :

Your Company’s results for the year ended 31st March, 2006 showeda remarkable increase with profit after tax standing at Rs. 1570.69lacs as against Rs.1152.23 lacs during the corresponding period ofthe previous year. Exports decreased from Rs. 221.36 lacs duringF.Y 2004-05 to Rs. 39.61 lacs during the year under report.

Your company’s largest dependence is on Medium and HeavyCommercial Vehicles (M/HCV), where the demand was almost flat.But with better share of business with customers, improved productmix and support from LCV (demand growth 24%) and Tractor industry(demand growth 13%), the sales of your company grew by nearly18%. Improved production and productivity, cost control and lowerinterest burden, helped the Company to achieve a healthy bottom line.The Company’s performance was backed by strong support fromOEMs as also operational efficiency and good planning.

The manufacturing operations at the Lonavla Unit were stopped on15th October, 2005 after all the workers having opted for the VoluntaryRetirement Scheme. All the usable machinery has been transferredto the Bharuch Unit.

DIVIDEND :

The Directors have recommended a dividend of Rs. 4/- per EquityShare on 1,15,50,000 Equity Shares of Rs.10/- each for the financialyear ended 31st March, 2006, which, if approved at the forthcomingAnnual General Meeting, will be paid to (i) all those Equity Shareholderswhose names appear on the Register of Members as on 10th August,2006 and (ii) to those whose names as beneficial owners are furnishedby National Securities Depository Limited and Central DepositoryServices (India) Limited as on that date.

The dividend pay out for the year under review has been formulatedin accordance with the Company’s policy of striving to pay stabledividend linked to long term performance, keeping in view theCompany’s need for capital, its growth plans and the intent to financesuch plans through internal accruals to the maximum. Your Directors


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COST AUDITORS :

In pursuance of Section 233-B of the Companies Act, 1956, yourDirectors have appointed M/s. B. J. D. Nanabhoy & Co., CostAccountants, as the Cost Auditors to conduct cost audit of the product‘Bearing’ for the year 2006-07, subject to the approval of the CentralGovernment. The Company has received confirmation that theirappointment, if made, will be within the limits prescribed under Section224(1B) of the Companies Act, 1956.

PARTICULARS RELATING TO EMPLOYEES :

Information required under Section 217 (2A) of the Companies Act1956 read with the Companies (Particulars of Employees) Rules,1975 is given in the Annexure forming part of this Report. However,as per the provisions of Section 219(1)(b)(iv), the Report and Accountsare being sent to all Shareholders of the Company excluding the

Statement of Particulars of Employees. Any Shareholder interested inobtaining such particulars may inspect the same at the RegisteredOffice of the Company or write to the Company for a copy.

ACKNOWLEDGEMENT :

The Directors wish to place on record their deep sense of appreciationfor the committed services of the employees of the Company at alllevels.The Directors also express their sincere appreciation for theassistance and co-operation received from Banks, Customers andDealers, during the year.

For and on behalf of the Board

Place: Mumbai S. M. PATELDate: 22nd June, 2006 Chairman

ANNEXURE TO DIRECTORS’ REPORT

Particulars under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

A. CONSERVATION OF ENERGY :

Efforts for conservation of energy continued during the year are listed below:

1. Peak load staggering management was very closely monitored throughout the year.

2. Power factor maintained at 0.98 resulting in substantial rebate from GEB.

3. Tube lights for plant illumination were readjusted and 15-20% reduction in no. of tube lights could be effected.

4. Insulation of furnaces further improved to reduce heat losses.

5. Air leakages and optimum compressors utilisation effected in plants.

B. TECHNOLOGY ABSORPTION :

1. NSK’s active participation into various technology activities continued during the year. The technology for the manufacture ofspecial type of cylindrical roller bearings for Toyota-India’s export oriented unit is now in full use to produce full compliment bearingson mass production basis.

2. ABC engineers are being continuously trained by NSK experts to enhance the absorption activities by their several visits to Bharuchduring the year.

3. NSK also actively participate into bearing life testing lab. upgradation and continuously monitor the testing methods.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO :

Earnings : Rs. 39.61 lacs

Outgo : Rs. 988.72 lacs.



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10 YEARS’ HIGHLIGHTS:

Sales & Other Income 11779.18 8030.53 7367.20 10732.50 11408.92 7717.56 8620.60 11200.74 15264.22 18255.23

Materials Consumed 4750.45 2926.95 3329.07 4078.40 5305.62 3349.51 3451.84 4963.87 6790.84 8239.07

Excise Duty 1513.34 901.51 885.48 1708.77 1259.41 1031.07 1138.58 1464.84 2019.08 2413.71

Employee Cost 873.44 1032.49 1137.74 1441.48 1357.46 1108.07 1067.36 853.09 1069.49 1186.26

Interest & Finance

Charges 930.43 946.70 1036.71 861.15 1053.48 736.87 608.24 342.00 280.96 269.36

Depreciation 796.95 533.57 484.88 597.83 535.92 408.72 546.69 676.85 630.19 684.15

Other Expenses 2003.97 1606.87 1496.63 1820.97 1532.18 1365.52 1590.02 1701.05 2366.32 2749.38

Profit/(Loss) before tax

& exceptional Items 910.60 82.44 -1003.31 223.90 364.85 -282.20 217.87 1199.04 2107.34 2713.30

Exceptional Items - - - - - - - 222.75 222.75 399.08

Diminution in value of

Investments - - - - - 293.80 - - - -

Provision for current tax 135.00 9.00 - 7.90 35.00 - 10.56 91.00 910.00 960.00

Provision for deferred tax - - - - - -100.46 -61.41 -270.72 177.64 235.62

Profit/(Loss) after tax

& exceptional Items 775.60 73.44 -1003.31 216.00 329.85 -475.54 145.90 621.86 1152.23 1570.69

Prior period adjustment (net) - - - - - 58.54 - - - -

Equity Dividend Rs. 202.96 63.57 - - - - - 173.25 346.50 462.00

Equity Dividend % 35.00 10.00 - - - - - 15 30 40

Retained Earnings 572.64 9.87 -1003.31 216.00 329.85 -475.54 145.90 426.41 757.13 1043.90

Gross Fixed Assets 11062.96 11459.33 11499.26 11655.99 8683.15 8821.30 8865.47 9054.62 9168.41 10183.96

Net Fixed Assets 7295.23 7158.03 6834.21 6450.77 4546.46 4349.79 3853.18 3405.68 2970.69 3378.52

Investments 183.22 183.22 183.02 183.02 383.02 22.91 17.46 21.73 21.73 139.05

Net Current Assets 3499.83 4066.27 3354.38 4192.76 4002.45 3241.53 3152.31 3429.45 4042.36 4960.63

Deferred Revenue Exp. - - - - - 160.32 663.23 440.48 217.74 834.37

Total Assets (Net) 10978.28 11407.52 10371.61 10826.55 8931.93 7134.05 6984.27 6324.71 6457.53 8753.20

Share Capital – Equity 577.89 577.89 577.89 1155.00 1155.00 1155.00 1155.00 1155.00 1155.00 1155.00

Reserves and Surplus 2971.11 2980.98 1977.67 2193.67 2523.52 1248.48 1394.38 1820.79 2577.92 3621.82

Net Worth 3549.00 3558.87 2555.56 3348.67 3678.52 2403.48 2549.38 2975.79 3732.92 4776.82

Borrowings 7429.28 7848.65 7816.05 7477.88 5253.41 4730.57 4434.89 3348.92 2724.61 3449.58

Total Funds Employed 10978.28 11407.52 10371.61 10826.55 8931.93 7134.05 6984.27 6324.71 6457.53 8226.40

Earnings per Share 13.42 1.27 -17.36 2.52 2.86 -4.62 1.26 5.38 9.98 13.60

Book value per Share 61.41 61.58 44.22 28.99 31.85 20.81 22.07 25.76 32.32 41.36

Debt: Equity 2.09 2.21 3.06 2.23 1.43 2.11 2.35 1.32 0.78 0.88

Turnover/Inventory (Times) 4.03 2.50 3.09 3.33 6.84 5.78 6.00 6.86 6.82 6.24

Turnover/Net Block 1.61 1.12 1.08 1.66 2.51 1.77 2.24 3.29 5.14 5.40

Current Assets/

Current Liabilities 2.39 3.23 2.73 2.85 3.09 3.35 3.02 2.80 2.96 3.25

Number of Shareholders 7252 7302 7397 7820 8764 8603 8298 7870 7161 7097

Number of Employees 1353 1358 1394 1341 1198 878 567 526 509 314

1996-97 1997-98 1998-99 2000-011999-00 2001-02 2002-03 2003-04 2004-05 2005-06

(Rupees in lacs)

PARTICULARS


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CORPORATE GOVERNANCE REPORT :

COMPANY’S PHILOSOPHY ON CODE OF GOVERNANCE:

Your Company has a basic philosophy of achieving excellence aimed at increasing value for all stakeholders and understands the right toinformation of its shareholders with respect to the performance of the Company.

Since inception, your Company has been committed to the practice of good corporate governance. Pursuant to Clause 49 (including revisionthereof) of the Listing Agreement, a detailed report on compliance by the Company is given here below:

BOARD OF DIRECTORS :

The Board of Directors comprises a fair number of independent, professionally competent and acclaimed Non-executive Directors. TheCompany has a Non-executive Chairman, with the number of Independent Directors being more than 50% and the number of Non-executiveDirectors being more than two-third of the total number of Directors.

As stipulated, none of the Directors on the Board is a Member on more than 10 Committees and Chairman of more than 5 Committees. Particularsin respect of their various Directorships, Chairmanships and Memberships of Board/Committees and attendance at Board/General Meeting ofthe Company are given here below:

During the financial year 2005-06, four Board meetings were held on the following dates i.e. on 16th May, 2005, 19th July, 2005, 27th October,2005 and 25th January, 2006 and the Annual General Meeting was held on 19th July, 2005.

CODE OF CONDUCT :

The Board of Directors has adopted the Code of Business conduct and Ethic for Directors and Senior Management. The said Code has beencommunicated to the Directors and members of the Senior Management. The Code has also been posted on the Company’s website –www.abcbearings.com

The Code has been circulated to all the members of the Board and Senior Management and the compliance of the same has been affirmed bythem. A declaration signed by the Managing Director is given below:

I hereby confirm that:

The Company has obtained from all the members of the Board and Senior Management, affirmation that they have complied with the Code ofBusiness Conduct and Ethics for Directors and Senior Management in respect of Financial Year 2005-2006.

P. M. PatelManaging Director

AUDIT COMMITTEE :

The Audit Committee of the Company has such powers as are detailed under Section 292A of the Companies Act, 1956, and also as aredetailed in terms of Clause 49 of the Listing Agreement.

The responsibilities of the Audit Committee include inter-alia, overseeing the financial reporting process to ensure proper disclosure of financialstatements, recommending appointment/removal of external auditors and fixing their remuneration, reviewing the quarterly, half yearly andannual financial statements before submission to the Board, reviewing the adequacy of the internal audit functions, ensuring compliance ofinternal control systems and discussing the scope of audit with external auditors. The Company has adopted a separate Charter for AuditCommittee.

No. of outside Membership Chairmanship No. of Board Whether

Name of the Director Executive/Non-Executive/ Directorships in held in held in Meetings attended last

Independent Public Companies Committee Committee attended AGM

of Directors of Directors Yes/No

Mr. S.M. Patel Non-Executive Chairman 2 3 1 4 Yes

Mr. Y.H. Malegam Non-Executive – Independent 10 4 3 2 No

Mr. S.K. Diwanji Non-Executive – Independent 6 3 1 4 Yes

Mr. V.C. Vaidya Non-Executive – Independent 6 3 2 4 Yes

Mr. C.U. Shah Non-Executive – Independent - - - 1 Yes

Mr. T.M. Patel Executive Director 2 4 1 4 Yes

Mr. P.M. Patel Managing Director 2 3 - 4 Yes

Mr. Jal R. Patel Non-Executive – Independent 4 4 2 3 Yes

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During the Financial year 2005-06, five Audit Committee Meetings were held on the following dates i.e. on 16th May, 2005, 15th July, 2005,19th July, 2005, 27th October, 2005 and 25th January, 2006.

REMUNERATION COMMITTEE :

The general scope of work entrusted to the Remuneration Committee includes recommendation of remuneration packages for the Managing/Executive Directors and review thereof, based on performance and achievements, within the provisions of the Companies Act, 1956 andamendments thereto.

The Remuneration Committee has not held a meeting during the financial year 2005-06. The composition of the Remuneration Committee is asunder:

The remuneration, as approved by the Board of Directors and confirmed by the shareholders at the general meeting as per agreementsentered into between them and the Company, has been reviewed and recommended by the Remuneration Committee. The remunerationstructure of the Managing/Executive Directors consists of salary, perquisites, contribution to Provident Fund, Superannuation and Gratuity asper the present trend in the industry. The tenure of re-appointment of the Managing/Executive Directors/details of salary and perquisites andcontribution to Provident Fund and Superannuation paid for the financial year ended 31st March, 2006 are as given below:

The Non-Executive Directors are paid sitting fee @ Rs.5,000/- for attending Board and Audit Committee Meeting and for attending RemunerationCommittee Meeting @ Rs.2,500/-. –The Non-Executive Directors are also paid commission not exceeding 1% of the net profits of the Companyin such proportion as may be decided by the Board.

The total amount of sitting fees paid during the year was Rs.1,85,000/-. The details of sitting fees paid to the Non-Executive Directors duringthe year under report and their shareholding in the company, are as given below:

As decided by the Board, commission payable to Non-Executive Director, Mr. S.M. Patel is Rs.46.12 lacs (including for financial year 2004-05Rs.15.52 lacs).

Name of the Non-Executive Director Sitting Fees paid during the period No. of shares held01.04.2005 to 31.03.2006 As on 31st March, 2006.

(Rs.) (Nos.)

Mr. S.M. Patel 45,000 —

Mr. Y.H. Malegam 10,000 7,445

Mr. S.K. Diwanji 45,000 14,020

Mr. C.U. Shah 5,000 10,000

Mr. Jal R. Patel 35,000 800

Mr. V.C. Vaidya 45,000 —

Name Tenure Salary Perquisites Commission Contribution to TotalProvident Fund/Superannuation

(Rupees) (Rupees) (Rupees) (Rupees) (Rupees)

Mr. P.M. Patel 5 years from 01.08.2001 36,30,000 4,20,688 1,01,85,185 9,80,100 1,52,15,973

Mr. T.M. Patel 5 years from 01.02.2003 34,98,000 3,22,429 98,14,815 9,44,460 1,45,79,704

Name of the Director Category No. of Committee

Meetings Attended

Mr. S.K. Diwanji Independent Non-executive Director (Chairman)

Mr. V.C. Vaidya Independent Non-executive Director (Member)

Mr. S.M. Patel Non-Executive Director (Member) Not Applicable

Mr. C.U. Shah Independent Non-executive Director (Member)

Mr. Jal R. Patel Independent Non-executive Director (Member)

The composition of the Audit Committee is as under :

Name of the Director Category No. of Audit CommitteeMeetings attended

Mr. Jal R. Patel Independent Non-executive Director (Chairman) 4

Mr. V.C. Vaidya Independent Non-executive Director (Member) 5

Mr. S.M. Patel Non-executive Director (Member) 5

Mr. S.K. Diwanji Independent Non-executive Director (Member) 5


10

The Transfer-Cum-Shareholders’/Investors’ Grievance Committee is vigilant in the redressal of all investors’ grievances. The powers ofapproving the issue of duplicate certificates and all matters connected with securities’ transfers, transmissions, sub-divisions, consolidationsetc. have been delegated by the Board to the Registrar & Transfer Agents of the Company, subject to placing of a periodic summary statement,depicting transfer, transmission, etc. of securities of the Company, at every meeting of the Transfer-Cum-Shareholders’/Investors’ GrievanceCommittee.

The Transfer-Cum-Shareholders’/Investors’ Grievance Committee of the Company held its meetings on the following dates during the year, viz:on 13th April, 2005, 2nd May, 2005, 17th May, 2005, 31st May, 2005, 15th June, 2005, 30th June, 2005, 11th July, 2005, 5th August, 2005, 19th August,2005, 5th September, 2005, 19th September, 2005, 30th September, 2005, 14th October, 2005, 28th October, 2005, 11th November, 2005,25th November, 2005, 9th December, 2005, 23rd December, 2005, 6th January, 2006, 20th January, 2006, 1st February, 2006, 15th February, 2006,28th February, 2006, 16th March, 2006 and 31st March, 2006.

Mr. S.B. Desai, Company Secretary, is the Compliance Officer. All complaints received from shareholders/investors have been generallyresolved to the satisfaction of the complainants.

Investor queries/complaints handled during the year under report were as follows:

Nature of queries/complaints No. of letters Received

Relating to change of address 82

Relating to non receipt of shares after transfer 15

Relating to advice procedure for name deletion 46

Relating to non receipt of certificate against indemnity 5

Relating to non receipt of dividend warrant 16

Relating to sent for revalidation/name correction 2

Letter informing removal of stop transfer 1

Relating to non receipt of annual reports 2

Relating to Stock Exchange 3

Relating to non receipt of demat rejected share certificates 7

Relating to non receipt of demat credit 19

Relating to miscellaneous letters 55

Bank Mandate 3

Nomination 1

Duplicate Request received 8

Remat pending 2

Consolidation request received 1

Debenture Redemption/Buyback 2

Total 270

All the queries/complaints were attended to promptly and resolved within 30 days.

All valid share transfers, received during the year ended 31st March, 2006, have been acted upon and there were no share transfers pendingas on 31st March, 2006.

GENERAL BODY MEETINGS :

Location and time where the last three Annual General Meetings were held are as under:

Financial Year Date Location of the Meeting Time

2002-2003 16th September, 2003 Walchand Hirachand Hall, Indian Merchants’ Chamber

Building, 76, Veer Nariman Road, Churchgate, Mumbai – 400 020. 4.30 p.m.

2003-2004 20th July, 2004 Walchand Hirachand Hall, Indian Merchants’ Chamber


2004-2005 19th July, 2005 Walchand Hirachand Hall, Indian Merchants’ Chamber


SHAREHOLDERS’/INVESTORS’ GRIEVANCE COMMITTEE :The composition of the Transfer-Cum-Shareholders’/Investors’ Grievance Committee is as under:

Name of the Director Category No. of Committee Meetings attended

Mr. S.M. Patel Non-executive Director (Chairman) 21

Mr. P.M. Patel Managing Director (Member) 24

Mr. T.M. Patel Executive Director (Member) 8

11

Out of the previous 3 years, the Company has passed Special Resolutions in the Annual General Meeting for the year 2003-04 and 2004-05.

No Special Resolution requiring Postal Ballot as required by the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001/Clause 49of the Listing Agreement has been placed for Shareholders’ approval at the last Annual General Meeting nor is any resolution proposed to betaken up through postal ballot at the ensuing Annual General Meeting.

DISCLOSURES REGARDING APPOINTMENT OR RE-APPOINTMENT OF DIRECTORS :

1. Mr. S.M. Patel, aged 61 years, is the Non-Executive Chairman of the Company. He has a finance background with a qualification of Diplomain Accountancy & Finance and C.A. (Inter) Kenya. He has been associated with the Bearings Industry for over two decades. He joinedthe Board of the Company on 2nd September, 1989 and is also a Director of the following public limited companies :-

Name of the Company Designation/Membership of Board/Committees

Mipco Seamless Rings (Gujarat) Limited Managing Director / Member of Transfer-cum-Shareholders’/Investors’ Grievance Committee

Daikaffil Chemicals India Ltd. Director/Member of Audit Committee

2. Mr. Jal R. Patel, aged 67 years, is a Financial & Management Consultant. He is an Associate Member of Institute of Company Secretariesof India and Institute of Chartered Accountants of India. He has held the position of Managing Director of FAG Bearings India Ltd. for23 years and he retired from the organisation as the Chairman. He is also a Director of the following public limited companies:-


Gujarat Gas Company Limited Director/ Chairman of Audit Committee/ Member of

Shareholders Grievance Committee.

Mipco Seamless Rings (Gujarat) Limited Director/ Member of Audit Committee/Member of

Remuneration Committee.

Lanxess ABS Ltd. Director/Member of Audit Committee

Shri Dinesh Mills Ltd. Director/Member of Shareholders Grievance Committee

DISCLOSURES :

During the year 2005-06, the Company had no materially significant related party transaction, which is considered to have potential conflictwith the interests of the Company at large.

There has not been any non-compliance, penalties or strictures imposed on the Company by the Stock Exchange, SEBI or any other statutoryauthority, on any matter relating to the capital markets, during the last three years.

The Company has complied with all mandatory requirements and it is in the process of compliance with various non-mandatory requirements.

MEANS OF COMMUNICATION :

The Board of Directors of the Company approves and takes on record the unaudited financial results of the Company within one month of theclose of the quarter/half year and announces forthwith the results to the Stock Exchange, where the shares of the Company are listed, as alsothe same are published within 48 hours in two newspapers as prescribed. As the Company publishes the audited annual results within thestipulated period of three months, as required by the Listing Agreement with the Stock Exchange, the unaudited results for the last quarter ofthe financial year are not published.

The Company’s results and official news releases are displayed on the Company’s website, i.e www.abcbearings.com. There were nopresentations made to the institutional investors or analysts.

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

3. Mr. P.M. Patel, aged 58 years, is the Managing Director of the Company. He is a graduate from the University of Bombay and M.B.A. fromU.S.A. He has joined our Company on 7th September 1973. He has been associated with the Bearings Industry since the past threedecades. He is also a Director of the following public limited companies:


Elecon Engineering Co. Ltd. Director/Member of Audit Committee/Member of Remuneration Committee/

Member of Shareholders/Investors Grievance Committee.

Eimco Elecon (India) Ltd. Chairman


12

GENERAL SHAREHOLDER INFORMATION:

Annual General Meeting

Date : 10th August, 2006

Time : 4.00 p.m.

Venue : Walchand Hirachand Hall, Indian Merchants’ Chamber Building,76, Veer Nariman Road, Churchgate, Mumbai – 400 020.

Financial Year :

The Company follows April-March as its financial year. The results for every quarter are declared in the month following the quarter exceptfor the quarter January-March, for which the audited results are declared in May/June as permitted under the Listing Agreement.

Date of Book Closure

3rd August, 2006 to 10th August, 2006 (both days inclusive)

Dividend Payment Date

After 10th August, 2006.

Listing on Stock Exchanges

The Company’s shares are listed on Bombay Stock Exchange Limited, Mumbai.

Stock Code

Bombay Stock Exchange Limited, Mumbai (BSE) - 505665Demat International Security Identification Number (ISIN)in NSDL & CDSL for Equity Shares - INE 779A01011

Stock Price Data

Bombay Stock Exchange Limited, Mumbai (BSE)

Month High (Rs.) Low (Rs.)

April, 2005 97.40 73.60

May, 2005 129.00 84.05

June, 2005 95.80 80.00

July, 2005 102.80 80.10

August, 2005 124.70 96.10

September, 2005 133.00 92.25

October, 2005 112.10 93.00

November, 2005 110.95 97.00

December, 2005 142.30 103.80

January, 2006 147.00 114.00

February, 2006 119.00 105.30

March, 2006 129.40 106.00

13

Performance in comparison to BSE Sensex

Distribution of Shareholding:

Category SharesNumber % to Total

Promoters 3613236 31.28

Mutual Funds & UTI 8345 0.07

Banks, Financial Institutions, 1209547 10.47

Insurance Companies

Foreign Institutional Investors 188317 1.63

Private Corporate Bodies 575082 4.98

Indian Public 2963361 25.66

NRIs/ OCBs 2919840 25.28

Others (Shares in Transit) 72272 0.63

Total 1,15,50,000 100.00

Range Number % to Total Number% to Total

1 - 50 1,898 26.74 51,390 0.44

51 - 100 1,534 21.62 1,30,459 1.13

101 - 300 1,971 27.77 3,86,626 3.35

301 - 500 648 9.13 2,80,120 2.43

501 - 1000 560 7.89 4,31,451 3.74

1001 - 5000 381 5.37 8,20,332 7.10

5001 and above 105 1.48 94,49,622 81.81

Total 7,097 100.00 1,15,50,000 100.00

Registrars and Transfer AgentsBigshare Services Pvt. Ltd.E-2, Ansa Industrial Estate, Sakivihar Road,Saki Naka, Andheri (E), Mumbai 400 072.Tel. No.: 28473747/56936291 Fax No.: 28475207

Distribution of Shareholding as on 31st March 2006.Categories of Shareholding as on 31st March, 2006.

Shareholders Shares


14

Share Transfer System

A Share Transfer Committee of Directors has been constituted by the Board. The Committee attends to share transfer formalities at least twicein a month. Transfer of shares are processed and registered within the stipulated time, provided all the documents are valid and complete inall respects. The Board of Directors has appointed the Company Secretary as Compliance Officer of the Company to monitor the share transferprocess. Share transfers approved by the Committee are placed at the Board Meeting from time to time. As on 31.03.2006 no shares werepending for transfer for more than 15 days.

Dematerialisation of Shares and Liquidity:

92.40% equity shares of the Company have been dematerialised as on 31st March, 2006.

Outstanding GDRs/ADRs/Warrants or any Convertible instruments, conversion date andlikely impact on equity:

Company has not issued any GDRs/ADRs/Warrants or any Convertible Instruments.

Plant Locations

1. Lonavla, Maharashtra State. 2. Bharuch, Gujarat State.

Address for Correspondence

Shareholders may correspond on all matters relating to transfer/dematerialisation of shares, payment of dividend, and any other query relatingto shares of the Company with Registrars and Share Transfer Agents, at the address given below:

M/s. Bigshare Services Pvt. Ltd.

E-2, Ansa Industrial Estate, Sakivihar Road,

Saki Naka, Andheri (E), Mumbai 400 072.

Tel. No.: 022-28473747/56936291 Fax No.: 022-28475207

Shareholders would have to correspond with the respective Depository Participants for shares held in demat mode.



Auditors’ Certificate regarding compliance of Corporate Governance

To the Members of ABC Bearings Limited

We have examined the compliance of the conditions of Corporate Governance by ABC Bearings Limited for the year ended 31st March, 2006,

as stipulated in Clause 49 of the Listing Agreement of the said company with Stock Exchange.

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.

We have conducted our review on the basis of the relevant records and documents maintained by the Company. Based on such review and

as per the information and explanations given to us by the Company, in our opinion, the Company has complied with the conditions of Corporate

Governance, as stipulated in Clause 49 of the said Listing Agreement.

We state that as per the records maintained by the company there were no investor grievances remaining unattended/pending for more than

30 days.

We further 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 PARIKH & SHAHChartered Accountants

Mumbai, 22nd June, 2006. H. K. DESAI Partner

15

MANAGEMENT DISCUSSION AND ANALYSIS:

a) Industry Structure and Developments

Bearing Industry in India can be divided into two segments– the organised sector and unorganised sector. Domesticmarket comprises twelve major players in the organisedsector and innumerable units in the unorganised sector.Annual bearing demand in India is estimated at Rs.3200crores, of which about one third is met by imports and therest is met through indigenous production. The sales oforganised bearing industry in India are estimated at Rs.1900crores. The bearing industry experienced a growth of 16 to17%.

Bearing industry covers both ball and roller bearings.Bearings are precision products requiring sophisticatedmachinery and the industry is characterised by high capitalcosts and intensive technology & skill requirements. Almostall the major international bearing manufacturers arerepresented in India by way of technical and/or financialcollaborations.

Bearing industry is subject to fluctuations in its user industriesviz: automobiles, general engineering, railways, electricalapplications, pumps, fans and agricultural machineries. Itsgrowth, though, is predominantly dependant upon its majoruser – automobile industry. During the year under report therehas been a good growth in the automobile industry. Thoughthe demand of medium/heavy commercial vehicles was flat,light commercial vehicles and tractor industry grew nearly24% and 13% respectively. The sales growth of 2 wheelerindustry, specially motorcycle has stabilised at 15%. Theperformance of bearing industry during the year under reporthas been commendable.

b) Opportunities and Threats

Indian economy has performed well. The GDP growthindications are encouraging and will provide opportunitiesfor increase in production and optimum capacity utilisation.With expected increase in output of tractors, the industrydemand is likely to be good, since commercial vehicles andtwo-wheeler industry is expected to continue with existinggrowth. Your company is expected to grow faster than theindustry growth.

The counterfeiting of bearings is the biggest threat to theindustry since these spurious bearings affect the businessand brand image. Your Company is taking steps to curtailspurious trade by improved packaging, creating awarenessand other necessary action. Necessary action has alsobeen taken at industry level to check the menace of counterfeit,which has increased over last few years.

c) Segment-wise-performance

The Company has only one segment of activity namely‘Bearings’ as defined by AS-17 issued by the Institute ofChartered Accountants of India.

d) Outlook

The potential growth in the automobile industry would givethe necessary fillip to our industry. The better expectedperformance in the Tractor segment is expected to furtherimprove the condition of the industry. In the current scenario,a good export market coupled with improvement in theagricultural sector and upbeat mood of manufacturing sector

indicates a promising future. Execution of large deemedexport order from TKM for transmission bearing, which willbe at full production level this year, will help improve volumes.

e) Risks and concern

The performance of your Company is highly dependent onthe automotive sector, particularly the Commercial Vehicle andTractor segments. The checkered fortunes of the past ofthese, if it repeats, could adversely affect the business. Theworking capital requirements in our industry are relativelyhigh. Pricing pressure, increased credit periods and increaseddiscounts threaten to impede trade. Pressure on margins onaccount of stiff competition in the bearing market is inevitable.Efforts are being made to improve exports and strengthenlocal dealer network to reduce dependences on automotiveOEMs.

f) Internal control systems and their adequacy

The Company has in place an effective and independentinternal control system covering all areas of operations. Thetransactions are authorised by authorised persons. A firm ofChartered Accountants, staffed with qualified andexperienced persons, have been engaged to conduct theInternal Audit of the Company. A regular review is done inrespect of the financial and operating controls at variouslocations of the Company. The Audit Committee at its periodicmeetings, reviews observations and recommendationscontained in Internal Audit Reports, where both Statutory aswell as Internal Auditors participate. Independent opinionsare expressed on issues of concern and the consequentialcorrective actions are reviewed by the Audit Committee.

g) Financial performance with respect to operations

The overall business situation of the Company showed amarked improvement during the year under report vis-à-visthe last couple of years. During F.Y.2005-06, net sales grewfrom Rs.128.97 crores during F.Y. 2004-05 to Rs.151.96crores, an increase of 18% of Net sales. Exports reducedduring the year under report. Greater operation efficiency,strong position in OEM market, innovative products and goodplanning has resulted in improved performance of theCompany.

h) Human Resources and Industrial Relations

The Company firmly believes that the Human Resources arethe valuable assets for growth and success. Satisfactionand morale of the employees remained high throughout theyear. Industrial relations continued to be cordial.

The performance linked bonus and rewards were instituted,which not only helped improve productivity but also broughtthe culture of healthy competitive performance within theorganisation. The gap between existing and desired skillshas been filled up in the employees through training anddevelopment. Training of employees at collaborators plantshelped in understanding and absorbing new technology.

Your Company has an employee strength of 314 as at31st March, 2006.




16

Auditors’ Report

ToThe Members ofABC Bearings Limited

We have audited the attached Balance Sheet of ABC BearingsLimited as at 31st March, 2006 and also the Profit and Loss Accountand the Cash Flow Statement for the year ended on that dateannexed thereto. These financial statements are the responsibility ofthe Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standardsgenerally accepted in India, which requires that we plan and performthe audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, and also includes assessingthe accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basisfor our opinion.

As required by the Companies (Auditor’s Report) Order, 2003 issuedby the Central Government of India in terms of Sub-section (4A) ofsection 227 of the Companies Act, 1956 and on the basis of suchchecks of books and records of the Company as consideredappropriate and as per the information and explanations given to us,we enclose in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, wereport that:

1. we have obtained all the information and explanations, which thebest of our knowledge and belief, were necessary, for thepurpose of our audit;

2. in our opinion, proper books of account as required by law havebeen kept by the Company so far as appears from our examinationof those books;

3. the Balance Sheet, Profit and Loss Account and Cash FlowStatement dealt with by this report are in agreement with thebooks of account of the Company;

4. in our opinion, the Balance Sheet, Profit and Loss Account andCash Flow Statement dealt with by this report comply with theAccounting Standards referred to in sub-section (3C) of Section211 of the Companies Act, 1956;

5. on the basis of written representations received from the Directorsand taken on record by the Board of Directors, we report thatnone of the Directors is disqualified as on 31st March, 2006 frombeing appointed as a Director in terms of Section 274(1)(g) of theCompanies Act, 1956;

6. in our opinion and to the best of our information and according tothe explanations given to us, the said accounts read with thenotes thereon give the information required by the CompaniesAct, 1956 in the manner so required and give a true and fair viewin conformity with the accounting principles generally acceptedin India;a. In the case of the Balance Sheet, of the state of affaire of

the Company as at 31st March, 2006;b. In the case of the Profit and Loss Account, of the Profit for

the year ended on that date; andc. In the case of Cash Flow Statement, of the cash flows for

the year ended on that date. For PARIKH & SHAH Chartered Accountants

H. K. DesaiPartner

Place : Mumbai, Membership No.13719Date : 22nd June, 2006.

Re: ABC Bearings Limited

ANNEXURE TO AUDITORS’ REPORT ON THE ACCOUNTS FOR THEYEAR ENDED 31ST MARCH 2006

1) a) The Company has maintained proper records showingfull particulars including quantitative details and locationof all its fixed assets.

b) We are informed that the Company has programme ofphysical verification of all the fixed assets over a periodof three years. Accordingly, the physical verification ofpart of the fixed assets has been carried out by theManagement during the year and no material discrepancieshave been noticed on such verification.

c) Fixed assets disposed off during the year were notsubstantial and therefore do not affect the going concernstatus of the Company.

2) a) The inventory has been physically verified at reasonableintervals during the year by the Management exceptstocks with third parties for which confirmations areobtained.

b) In our opinion the procedures of physical verificationfollowed by the Management are reasonable and adequatein relation to the size of the Company and the nature of itsbusiness.

c) The Company has maintained proper records of inventory.The discrepancies noticed on physical verification,between physical stocks and books records, were notmaterial in relation to the operations of the company andhave been properly dealt with in the books of account.

3) a) The Company has not granted any loans, secured orunsecured to companies, firms or other parties coveredin the register maintained under Section 301 of theCompanies Act, 1956.

b) The Company has not taken any loans, secured orunsecured from companies, firms or other parties coveredin the register maintained under Section 301 of theCompanies Act, 1956.

4) According to the information and explanations given to us, thereare, in our opinion, adequate internal control systemscommensurate with the size of the Company and nature of thebusiness for the purchase of inventory, fixed assets and forsale of goods. No major weaknesses are noticed in the courseof our audit in this behalf.

5) In our opinion, and according to the information and explanationsgiven to us, there are no contracts and arrangements theparticulars of which need to be entered into the registermaintained under Section 301 of the Companies Act, 1956.

6) In our opinion and according to the information and explanationsgiven to us, the Company has complied with the provisions ofSections 58A and 58AA of the Companies Act, 1956 and theCompanies (Acceptance of Deposits) Rules, 1975 with regardto the deposits accepted from the public. No order has beenpassed by the Company Law Board in this behalf.

7) In our opinion the Company has an internal audit systemcommensurate with the size and nature of its business.

8) We have broadly reviewed the books of Accounts maintainedby the Company pursuant to the order made by the CentralGovernment for the maintenance of cost records under Section209(1)(d) of the Companies Act, 1956 and are of the opinion thatprima facie the prescribed accounts and records have beenmaintained. We have not, however, made a detailed examinationof the records with a view to determining whether they areaccurate or complete.

17

10) The Company does not have any accumulated losses atthe end of the financial year and has not incurred cashlosses in the financial year covered by our audit and theimmediately preceding financial year.

11) According to the records of the Company examined by usand on the basis of information and explanations given tous, the Company has not defaulted in repayment of dues tobanks during the year. The Company has not taken anyloans from financial institutions and has not issueddebentures during the year.

12) As the company has not granted loans and advances onthe basis of security by way of pledge of shares,debentures and other securities clause 4(xii) of the Orderis not applicable.

13) The company is not a chit fund/nidhi/mutual benefit fundsociety. Accordingly the provisions of the clause 4(xiii) ofthe Order are not applicable.

14) As the Company is not dealing or trading in shares,securities, debentures and other investments, paragraph4(xiv) of the Order is not applicable.

15) According to the information and explanations given to us,the Company has not given any guarantee for loans takenby others from banks or financial institutions.

Name of Statute Nature of Amount Period to which Forum where the dispute is pendingDues (Rs. in lacs) it relates

State and Central Sales Tax 26.70 1992-93 Maharashtra Sales Tax Tribunal, MumbaiSales Tax Acts 2.29 1999-00 Deputy Commissioner of Sales Tax, Appeals,

Worli Division, Mumbai.

The Central Excise Excise Duty 0.24 1983-84 CEGAT, Mumbai Act, 1944 0.94 1990-91 CEGAT, Mumbai

5.91 1998-99 CEGAT, Mumbai

Income Tax Income Tax 1.68 2000-01 Income Tax Appellate Tribunal, Mumbai.Act, 1961 Penalty 2.00 2000-01 Commissioner of Income Tax (Appeals), Mumbai.

Income Tax 21.03 2002-03 Commissioner of Income Tax (Appeals), Mumbai.

16) The term loans have been applied for the purpose for whichthey were obtained.

17) On the basis of examination of the Accounts and as perinformation and explanation given in our opinion the fundsraised on short term basis have prima facie not been usedfor long term investments.

18) The Company has not made any preferential allotment ofshares to any parties and companies covered under theregister maintained u/s.301of the Companies Act, 1956during the year.

19) No security or charge is required to be created since thecompany has not issued any Debentures.

20) The Company has not raised any money by public issueduring the year.

21) On the basis of examination of books of account and otherrelevant records in the course of our audit and informationand explanation given to us no fraud on or by the Companyhas been noticed or reported during the year.

For PARIKH & SHAHChartered Accountants

H. K. DesaiPartner

Membership No.13719

9) a) On the basis of our examination of the books of accountand other relevant records, the Company has beengenerally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund,investor education and protection fund, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise-duty,cess and other material statutory dues applicable to it and

no such dues were outstanding as at 31-03-2006 for aperiod of more than six months from the date they becomepayable.

b) According to information and explanation given to us thedisputed dues in respect of Sales Tax, Excise duty andIncome tax that have not been deposited by the Companyare as follows:

Place: Mumbai,Date: 22nd June, 2006.


18

Balance Sheet as at 31st March, 2006

As at 31st As at 31stMarch, 2006 March, 2005

Rupees Rupees RupeesSchedules in lacs in lacs in lacs

SOURCES OF FUNDS

1 SHAREHOLDERS’ FUNDSShare Capital 1 1155.00 1155.00Reserves and Surplus 2 3621.82 2577.92

4776.82 3732.92

2 LOAN FUNDSSecured 3 3412.34 1648.65Unsecured 3 37.24 1075.96

3449.58 2724.61

3 DEFERRED TAX LIABILITY 4 559.37 794.99

4 TOTAL FUNDS EMPLOYED 8785.77 7252.52

APPLICATION OF FUNDS

5 FIXED ASSETS 5 3378.52 2970.69

6 INVESTMENTS 6 139.05 21.73

7 CURRENT ASSETS, LOANS & ADVANCESInventories 7 2923.97 2236.79Debtors 8 3215.65 2552.32Cash and Bank Balances 9 275.56 213.37Loans and Advances 10 747.01 1102.63

7162.19 6105.118 Less: CURRENT LIABILITIES & PROVISIONS 11

Current Liabilities 2125.42 1615.97Provisions 602.94 446.78

2728.36 2062.75

9 NET CURRENT ASSETS 4433.83 4042.36

10 MISCELLANEOUS EXPENDITURE(to the extent not written off ‘or’ adjusted)Deferred Revenue Expenditure 834.37 217.74

11 TOTAL ASSETS 8785.77 7252.52

SIGNIFICANT ACCOUNTING POLICIES ANDNOTES TO ACCOUNTS 16

This is the Balance Sheet referred For and on behalf of the Boardto in our report of even date.

For PARIKH & SHAH S. M. PATELChartered Accountants Chairman

H. K. DESAI P. M. PATELPartner Managing Director

Mumbai, 22nd June, 2006 Mumbai, 22nd June, 2006

S. B. DESAICompany Secretary

19

Profit and Loss Account for the year ended 31st March, 2006 For the year For the year ended 31st ended 31st March, 2006 March, 2005

Rupees RupeesSchedules in lacs in lacs

1 INCOMESales - Gross 17609.74 14916.22

Less: Excise Duty 2413.71 2019.08

Sales - Net 15196.03 12897.14

Other Income 12 645.49 348.00

15841.52 13245.14

2 INCREASE/(DECREASE) IN STOCKS 13 422.03 426.35

16263.55 13671.49

3 EXPENDITURE

Manufacturing & Other Expenses 14 12596.74 10653.00

Depreciation 684.15 630.19

Interest & Finance Charges 15 269.36 280.96

13550.25 11564.15

4 PROFIT BEFORE EXCEPTIONAL ITEM & TAX 2713.30 2107.34

5 EXCEPTIONAL ITEMS (NOTE NO. B- 4) 399.08 222.75

6 PROFIT AFTER EXCEPTIONAL ITEM & BEFORE TAX 2314.22 1884.59

7 PROVISION FOR TAXIncome tax (960.00) (910.00)

Fringe Benefit Tax (19.15) -

Deferred tax credit 235.62 177.64

8 PROFIT AFTER TAX 1570.69 1152.23

9 BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR 364.26 7.13

10 AMOUNT AVAILABLE FOR APPROPRIATIONS 1934.95 1159.36

11 APPROPRIATIONS

a) Proposed Dividend 462.00 346.50

b) Tax on proposed dividend 64.80 48.60

c) Transfer to General Reserve 900.00 400.00

d) Balance carried to Balance Sheet 508.15 364.26

1934.95 1159.36

This is the Profit & Loss Account referred For and on behalf of the Boardto in our report of even date.

For PARIKH & SHAH S. M. PATEL

Chartered Accountants Chairman





20

Schedules forming part of the Balance SheetAs at 31st As at 31st

March, 2006 March, 2005Rupees Rupees Rupeesin lacs in lacs in lacs

1 SHARE CAPITAL

AUTHORISED

1,20,00,000 Equity Shares of Rs.10/- each 1200.00 1200.00

ISSUED AND SUBSCRIBED1,15,50,000 Equity Shares of Rs.10/- each fully paid-up

(of the above 26,59,095 shares of Rs.10/- each were allotted as fully paid-up Bonus Shares by capitalisation of Reserves and Share Premium Account) 1155.00 1155.00

2 RESERVES AND SURPLUS

a) SHARE PREMIUM ACCOUNTAs per last Balance Sheet 152.14 152.14

b) CASH SUBSIDY RESERVEAs per last Balance Sheet 40.00 40.00

c) GENERAL RESERVEAs per last Balance Sheet 2021.53 1621.53Transfer from Profit and Loss Account 900.00 400.00

2921.53 2021.53d) SURPLUS

As per Profit & Loss Account 508.15 364.26

3621.82 2577.933 LOAN FUNDS

SECUREDFrom Banks : Notesa) Cash Credit 1a 839.44 714.73

b) Short Term Loan 1a 1930.00 600.00

c) Term Loan ( for Vehicles ) 1b 32.90 58.92

From Others:c) Term Loan 1c 610.00 275.00

3412.34 1648.65UNSECUREDShort Term Loan from Banks - 225.00Sales Tax under Deferment Schemes 2 37.12 360.72

Fixed Deposits 0.12 490.24

37.24 1075.96

3449.58 2724.61NOTES :1a. Secured by hypothecation of stock-in-trade and book debts and second charge on Fixed Assets of

the Company. Short term loan from a Bank is further secured by Equitable mortgage of Land & Buildingat Lonavla.

b. Secured by hypothication of vehicles acquired under the loan.c. Secured by first charge on certain plant and machinery.

2. Sales tax deferement represents balance of unpaid instalments for interest free amount availed at Lonavlaplant under Incentive Scheme of the State Government.

21

As at 31st As at 31stMarch, 2006 March, 2005

Rupees Rupeesin lacs in lacs

6 INVESTMENTS (At cost)

Long Term

NON TRADEUnquoted :

a) 7 year National Savings Certificates(lodged with Collector of Central Excise/Sales Tax) 0.10 0.10

b) 12,629 6.75% Tax Free US64 Bonds of Rs.100/- each 12.63 12.63

c) 189,000 5% Cumulative Redeemable Preference Shares ofRs.100/- each fully paid in Mipco Seamless Rings (Gujarat) Ltd. 189.00 189.00

5 FIXED ASSETS

COST DEPRECIATION NET BLOCKParticulars As at As at Up to Deletion / For Up to As at As at

1st April Additions Deductions 31st March 31st March Adjustment the 31st March 31st March31st March2005 2006 2005 year 2006 2006 2005

Tangible Assets :Land - Freehold 5.94 - - 5.94 - - - - 5.94 5.94

Leasehold 18.54 267.63 - 286.17 2.37 - 0.76 3.13 283.04 16.17Buildings 442.91 136.40 - 579.31 139.76 - 13.03 152.79 426.52 303.15Plant and Machinery 7521.79 456.34 80.51 7897.62 5503.35 (76.43) 560.30 5987.22 1910.40 2018.44Equipments, Appliances& Tools 635.85 142.07 - 777.92 333.41 - 52.49 385.90 392.02 302.44Electrical Installations 217.62 14.52 - 232.14 149.26 - 19.24 168.50 63.64 68.36Furniture & Fixtures 101.32 12.20 - 113.52 48.57 - 4.90 53.47 60.05 52.75Vehicles 117.10 5.54 - 122.64 21.00 - 10.63 31.63 91.01 96.10Intangible Assets :Software - 116.05 - 116.05 - - 22.80 22.80 93.25 -(including licence fees)

Total 9061.07 1150.75 80.51 10131.31 6197.72 (76.43) 684.15 6805.44 3325.87 2863.35

(Previous Year) 8939.36 253.31 131.59 9061.07 5648.94 (81.40) 630.19 6197.72 2863.35 3290.42

Capital Work-in-Progress includingadvances on Capital Accounts 52.65 52.65(Previous Year) 107.34 107.34

Total 10183.96 3378.52

(Previous Year) 9168.41 2970.69

(Rs. in lacs)

Schedules forming part of the Balance Sheet

DEFERRED (CHARGE) DEFERREDTAX ASSET/ /CREDIT TAX ASSET(LIABILITY) FOR THE (LIABILITY)

As at 1st CURRENT As at 31stApril, 2005 YEAR March, 2006

Rupees Rupees Rupees4 DEFERRED TAX LIABILITY in lacs in lacs in lacs

Difference between book & tax Depreciation (851.87) 222.69 (629.18)Expenses allowable for Tax purpose when paid 1.76 0.36 2.12

Provision for doubtful debts 14.63 10.17 24.80

Provision for leave encashment 18.91 (8.51) 10.40

VRS Dues 21.58 10.91 32.49

TOTAL (794.99) 235.62 (559.37)


22

Schedules forming part of the Balance Sheet As at 31st As at 31stMarch, 2006 March, 2005

Rupees Rupees Rupeesin lacs in lacs in lacs

TRADEQuoted :

d) 8,88,600 Equity Shares of Rs.10/- eachfully paid in Mipco Seamless Rings (Gujarat) Ltd.(Market Value Rs. 8.18 lacs) (Previous year Rs.7.11 lacs) 95.86 95.86

e) 11,72,166.046 Units of HSBC Mutual Fund of Rs.10/- eachin Cash Fund. Weekly Dividend Plan. 117.32 -

414.91 297.59

Less : Provision for Diminution in value of Investments 275.86 275.86

139.05 21.73

CURRENT ASSETS, LOANS & ADVANCESA) CURRENT ASSETS :7 INVENTORIES

(As certified by the Management)(At lower of cost ‘or’ realisable value)a) Stores, Spares and Tools (including in transit Rs. 27.47 lacs) 164.89 143.60b) Raw Materials 819.53 575.67c) Work-in-Progress 843.08 786.52d) Finished Goods 1096.47 731.00

2923.97 2236.79

8 DEBTORS (Unsecured)a) Considered good :

Over six months 117.94 238.35

Others 3097.71 2313.97

3215.65 2552.32

b) Considered doubtfulOver six months 69.32 35.61

Less: Provision (69.32) (35.61)3215.65 2552.32

9 CASH AND BANK BALANCESa) Cash on hand 1.15 4.02b) With Scheduled Banks

In Current Account 184.02 170.82In Margin Money Account 90.39 38.53

274.41 209.35

275.56 213.37

B) LOANS AND ADVANCES (UNSECURED)

10 ADVANCESConsidered Gooda) Advances recoverable in cash or in kind or for

value to be received (Including ConsideredDoubtful Rs. 4.35 lacs) (Previous year Rs. 4.35 lacs) 598.17 365.85Less: Provision (4.35) (4.35)

593.82 361.50b) Consideration receivable on sale of assets - 600.00c) Sundry Deposits 66.50 56.05d) Balance with Customs and Central Excise 86.69 68.11e) Income Tax (net of provision) - 16.97

747.01 1102.63

23

Schedules forming part of the Balance Sheet As at 31st As at 31stMarch, 2006 March,2005

Rupees Rupeesin lacs in lacs

11 CURRENT LIABILITIES AND PROVISIONS

a) CURRENT LIABILITIESi) Creditors

(Including due to small scale industries Rs.146.20 lacs)(Previous year Rs. 60.91 lacs) 1180.80 817.02

ii) Interest accrued but not due on loans 9.39 47.08iii) * Unclaimed Dividends 6.51 2.66iv) Other Liabilities 928.72 749.21

2125.42 1615.97b) PROVISIONSi) Proposed Dividend 462.00 346.50ii) Tax on proposed dividend 64.80 48.60iii) Income Tax (net of payment) 39.10 -iv) Fringe Benefit Tax 6.14 -v) Leave encashment 30.90 51.68

602.94 446.782728.36 2062.75

* Presently there are no amounts due and outstanding to be credited to Investor Education and Protection Fund under

Section 205C of the Companies Act, 1956

Schedules forming part of the Profit and Loss AccountFor the year For the year

ended 31st ended 31stMarch, 2006 March, 2005


12 OTHER INCOMEa) Income from Investments (gross) 0.85 0.85b) Dividend from Mutual Fund 1.21 -c) Interest Received :

Banks 2.50 0.08Others 38.26 35.29(Tax deducted at source Rs. 8.19 lacs)(Previous year Rs. 6.55 lacs) 40.76 35.37

d) Surplus on Redemption of Investment 0.58 3.96e) Profit on Fixed Assets sold/scrapped (net) 14.40 - f) Claims received 59.42 18.72g) Sale of Scrap 73.31 80.77h) Miscellaneous Income 402.74 140.49i) Income from power generation 35.75 45.58j) Excess Provision no longer required written back 3.15 22.26k) Difference in exchange 13.32 -

645.49 348.00

13 INCREASE/(DECREASE) IN STOCK OFWORK-IN-PROGRESS AND FINISHED GOODSa) Opening Stock 1517.52 1091.17b) Closing Stock 1939.55 1517.52

422.03 426.35


24

Schedules forming part of the Profit and Loss AccountFor the year For the year

ended 31st ended 31stMarch, 2006 March, 2005


14 MANUFACTURING AND OTHER EXPENSESa) Raw Materials and Components consumed 7990.61 6523.97b) Stores and Spares consumed 670.49 693.22c) Power and Fuel 407.39 403.42d) Processing and Other Charges 825.58 468.01e) Employees’ remuneration and benefits :

Salaries, Wages and Bonus 1018.75 840.07Contribution to Provident and other Funds 74.09 81.03Gratuity 61.15 110.39Welfare Expenses 32.27 38.00

1186.26 1069.49f) Repairs:

Buildings 40.39 27.35Machinery 77.29 69.79Others 28.88 18.13

146.56 115.27g) Rent 17.33 17.09h) Rates and Taxes 12.28 17.60i) Insurance 51.76 49.82j) Postage, Telegrams and Telephones 43.20 37.52k) Travelling Expenses 84.28 78.07l) Remuneration to Auditors

Audit fees 1.75 1.60For Tax Audit 0.55 0.50For Certification & other matters 0.74 0.54For Expenses (including Service Tax) 0.02 0.27

3.06 2.91m) Cost Audit fees 0.35 0.39n) License & Technical Assistance Fees 16.25 116.42o) Commission and Discount on Sales 486.09 435.55p) Carriage Outward 219.08 187.93q) Bad Debts / Advances Written off (net of Provision) - 3.92

(Previous Year Rs.10.35 lacs)r) Provision for Doubtful Debts 33.71 20.63s) Directors’ fees 1.85 1.20t) Loss on Fixed Assets sold / scrapped (Net) - 30.61u) Other Expenses 400.61 379.96

12596.74 10653.0015 INTEREST AND FINANCE CHARGES

a) On Fixed LoansBanks 129.87 68.40Others 50.98 116.72

180.85 185.12b) On Other Loans 73.23 86.74c) Exchange variation 10.78 5.96d) Finance Charges 4.50 3.14

269.36 280.96

25

Schedules Forming part of the Accounts

16. SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS

A. SIGNIFICANT ACCOUNTING POLICIES

1. FIXED ASSETS

a) Fixed Assets are stated at their historical cost.b) Addition to fixed assets comprise the purchase price and directly attributable costs.c) Tools each costing Rs. 25,000/- or more are treated as fixed assets.d) Depreciation is provided in the manner and at the rates prescribed in Schedule XIV to the Companies Act,

1956, as under :i) On straight line basis for assets acquired prior to 1st April, 1987 and after 31st March, 1991.ii) On written down value basis for assets acquired during 1st April, 1987 to 31st March, 1991.

e) Cost of Lease-hold land is amortised over the period of lease.f) Assets acquired under finance lease from 1st April 2001 are depreciated over the estimated useful life or

the lease term whichever is lower.g) Intangible asset is amortised equally over a period of three years.

2. INVESTMENTS

Investments are stated at cost, less diminution, if any, and are meant to be held for long-term period.

3. INVENTORY VALUATION

a) Stock of Stores and Spares : At lower of cost (on FIFO / Moving Averagebasis) or net realisable value.

b) Raw Materials and ToolsAt lower of cost (on FIFO basis) or net realisable value.

c) Work in Progress

d) Finished Goods : At lower of cost or market value.

e) Excise duty payable on finished goods stocks at the end of the year is accounted for and considered forvaluation.

4. FOREIGN CURRENCY TRANSACTIONS

Exchange difference other than on Fixed Assets is dealt with in the Profit and Loss Account.

5. RETIREMENT BENEFITS

Retirement benefits to employees comprise of payment of gratuity, superannuation and provident fund underthe approved schemes of the company / statutory regulation.Gratuity liability is provided on the basis ofactuarial valuation and funded with an approved Trust. Leave encashable on retirement is accounted on accrualbasis and provided for.

6. SALES

Sales are recognised on despatch to customers. Sales comprise sale of goods including excise duty andother incidental recoveries.

7. TAXES ON INCOME

Current TaxProvision for Income Tax is determined in accordance with the provisions of Income Tax Act,1961.

Deferred Tax ProvisionDeferred Tax is recognised, on timing differences, being the difference between the taxable income andaccounting income that originate in one period and are capable of reversal in one or more subsequent periods.

8. OTHERS

Compensation to employees who have opted for retirement under the voluntary separation scheme is amortisedover five years except for separation scheme at Lonavla, which is amortised over thirty-six months and thirtymonths.

}


26

2005-2006 2004-2005Rupees Rupeesin lacs in lacs

B. CONTINGENT LIABILITIES AND NOTES TO ACCOUNTS1. Contingent Liabilities not provided for :

(i) (a) Bills discounted with Banks 297.22 82.27(b) For counter-guarantees to the Bank against Bank’s

guarantee to the Government of India and other authorities 187.68 138.80(ii) Excise Duty demand disputed 29.81 7.09(iii) Income tax demand contested in appeal 24.71 1.63(iv) Property tax demand contested in appeal 18.81 17.22(v) Sales tax demand contested in appeal 28.99 45.17

2. Estimated amount of contracts remaining to be executed on capital accountand not provided for 764.39 383.58

3. Sales Tax deferment availed at Lonavla plant under Incentive Scheme of the State Government duringthe period 1998-2003 aggregating Rs. 302.23 lacs has been fully discharged at its Net Present Value atRs.132.90 lacs as per provisions of Bombay Sales Tax Act and balance of Rs.169.33 lacs is written backand included under Miscellaneous Income (Schedule - 12).

4. The Company has paid Rs. 1807.72 lacs (including paid during the year Rs. 1015.71 lacs) (Previous yearRs. 792.01 lacs) towards compensation to the employees who have retired under the voluntary seprarationschemes. The expenditure so incurred is treated as Deferred Revenue Expenditure to be charged over aperiod of five years / 36 and 30 months. Accordingly, a sum of Rs. 399.08 lacs (Previous year Rs. 222.75lacs) pro rata for the year, is charged to Profit & Loss Account for the year ended 31.3.2006.

5. a) Sundry Creditors (Schedule 11 Item No.(a)(i)) includes Rs. 37.25 lacs ( Previous year Rs.18.29 lacs ) dueto small scales industrial undertakings with dues exceeding Rs.1lac each outstanding for morethan 30 days, within the agreed terms to the extent identified from available information. Given below isa list of such outstandings: (Om Plastic Industries, Khodiyar Engineering, KVA Engineers,VandanEngineers, Gayatri Engg.Works, Ravi Metal, OM Heat Treatment, Micro Tech Roller Pvt. Ltd., Galaxy Forge,Clean Home)

b) As on date, there are no ascertainable claims on the Company towards overdue interest on the aboveoutstandings.

6. The Company’s business activity falls within a single primary segment viz., manufacture of Bearings. Assuch there are no separate reportable segments as envisaged under Accounting Standard - 17.

7. Related party disclosure as required by Accounting Standard -18 :

A. Related Parties :

i) Associate Companies : ii) Executive Directors : iii) Non-Executive Directors :

Mipco Seamless Rings (Guj.) Ltd. Mr. P. M. Patel (Managing Director) Mr. S.M. Patel

Mipco Investments Pvt. Ltd. Mr. T.M. Patel (Executive Director) Mr. C.U. Shah

Manoway Investments Pvt. Ltd. Mr. Y.H. Malegam

Maple Investments Co. Pvt. Ltd. Mr. S.K. Diwanji

Emsons Leasing Co. Pvt. Ltd. Mr. V.C. Vaidya

Ziwani Properties Pvt. Ltd. Mr. J. R. Patel

Saturn Holdings Pvt. Ltd.

Essex Holdings Pvt. Ltd.

Izumi Engineering India Pvt. Ltd.

27

2005-2006 2004-2005B. Related Party Transaction : Rupees Rupees

in lacs in lacsTransactions Associate CompaniesRaw Material Processing Charges 190.38 267.56Finance Charges / Interest - 27.18Rent (including leased assets) 5.29 5.59Lease charges received 0.49 -Purchases of Fixed Assets 436.00 -Advance 1.79 -

Executive DirectorsRemuneration (Refer Note 14(b)) 297.96 151.83

Non Executive DirectorsRemuneration (Refer Note 14(c)) 30.60 -

Professional Fees 22.02 -

C. Outstanding Balances as at 31.03.2006 31.03.2005Associate Companiesi) Creditors (134.96) (20.85)

D. There are no write-off / write back of any amounts for any of the above related parties.

8. In accordance with AS-22 Accounting for Taxes on Income, the Company has considered Deferred Taxes duringthe year.Accordingly the net deferred tax Credit of Rs.235.62 lacs for the year has been recognised in the Profit& Loss Account resulting in increase of Profit for the year by the same amount.

9. Opening and Closing Stock of goods manufactured during the year :

Class of goods manufactured Rupees Rupees

Nos. in lacs Nos. in lacs

Ball & Roller Bearings 2005-2006 371,788 655.21 539,598 1025.48

2004-2005 293,308 562.02 371,788 655.21

Components 2005-2006 112,640 75.78 123,233 70.99

2004-2005 9,300 4.73 112,640 75.78

10. (A) Information for each class of goods manufactured and sold during the year :

InstalledClass of goods Capacity Production Quantity Value

RupeesNos.* Nos. Nos.** in lacs

Ball & Roller Bearings 2005-2006 6,400,000 5,216,445 5,048,635 17,152.812004-2005 6,400,000 4,571,990 4,493,510 14,540.70

Components 2005-2006 - 372,113 361,520 456.932004-2005 - 705,518 602,178 375.52

2005-2006 - - - 17,609.74Total 2004-2005 - - - 14,916.22

i) Licensed capacity has not been shown as the industry has been delicensed.

ii) Installed Capacity is as certified by the Management and accepted by the Auditors. *

iii) Sales includes free samples/captive consumption 2971 nos. (previous year 911 nos.) **

Opening Stock Closing Stock

Sales


28

(B) Raw Materials and Components consumed :

Unit 2005-2006 2004-2005 2005-2006 2004-2005

(i) Steel MT 4658.91 4360.69 2,815.25 2,460.15(ii) Rolled/Forged Rings Nos. 6,366,551 5,818,255 2,773.55 2,365.87

(iii) Bought-out Components 2,401.81 1,697.95

7,990.61 6,523.97

(C) Percentage of Consumption :

2005-2006 2004-2005Rupees Rupees

2005-2006 2004-2005 in lacs in lacs(i) Raw Materials and Components:

Imported ( at landed cost) 9.07 4.94 724.87 322.31

Indigenous 90.93 95.06 7265.74 6201.66

100.00 100.00 7990.61 6523.97

(ii) Stores and Spares :Imported (at landed cost) 3.68 5.12 24.67 35.49

Indigenous 96.32 94.88 645.82 657.73

100.00 100.00 670.49 693.22

2005-2006 2004-2005Rupees Rupees Rupees

in lacs in lacs in lacs11. CIF Value of Imports

Raw MaterialsStores and Spares 754.91 312.06Capital Goods 23.32 22.99

181.64 68.9612. Earnings in Foreign Exchange :

F.O.B. Value of Exports 39.61 221.36

13. Expenditure in Foreign Currency (on mercantile basis) :Interest on NRI deposits 2.14 84.00Travelling Expenses 10.46 10.23Technical service/assistance fees 16.25 116.42

14. Computation of Net profit as per Section 309(5) andSection 198 of the Companies Act, 1956(a) Profit as per profit and loss Account 2314.23 1884.59

Add: Remuneration to Managing / WholetimeDirectors (including perquisites) 297.96 151.83Remuneration to Non Wholetime Directors 30.60 -Depreciation debited in accounts 684.15 630.19Loss on sale of Assets (net) - 30.61Provision for Doubtful Debts 33.71 20.63Dues under Voluntary Separation Scheme 399.08 222.75

1445.50 1056.013759.73 2940.60

Less: Profit on Fixed Assets sold / scrapped (Net) 14.40 -Provision for Doubtful Debts / Advances written back - 10.35Surplus on Redemption of Investment 0.58 3.96Depreciation as per Section 350 of 684.15 630.19the Companies Act,1956

699.13 644.503,060.60 2,296.10

Less: Deficit of earlier years - (744.50)Net Profit as per Section 349 3,060.60 1,551.60

% of total consumption

Quantity Value Rupees in lacs

29

2005-2006 2004-2005Rupees Rupees

in lacs in lacs

(b) Remuneration to Managing / Wholetime Directors

under Section 198 of the Companies Act, 1956:

Salary 71.28 64.80

Commission for the year to Managing and Executive Directors

subject to ceiling of 10% of the Net Profit restricted to amount

as approved by the Board 200.00 63.00

Contribution to Provident Fund and Superannuation Scheme 19.25 17.50

Other perquisites 7.43 6.53

297.96 151.83

(c) Commission to Non Wholetime Directors @ 1% of the net profit. 30.60 -

(The Company has obtained approval from Department of Company

Affairs for commission payable to Non Wholetime Directors effective

from financial year 2004-05. Accordingly an amount Rs. 15.52 lacs

pertaining to financial year 2004-05 has also been provided in the

financial year 2005-06)

Total Managing / Wholetime & Non Wholetime Directors’

remuneration including perquisites 328.56 151.83

15. Figures for the previous year have been regrouped wherever necessary for comparison.

16. Figures in italics are in respect of previous year.

17. Information pursuant to Part IV of Schedule VI to the Companies Act, 1956 is attached herewith.

Signatures to Schedules 1 to 16

As per our report of even date For and on behalf of the Board






30

CASH FLOW STATEMENT2005-2006 2004-2005

A CASH FLOW FROM OPERATING ACTIVITIES : Rupees Rupees Rupeesin lacs in lacs in lacs

NET PROFIT BEFORE TAX 2,314.22 1,884.59Adjustment for :Depreciation 684.15 630.19Bad Debts / Advances written off - 3.92Provision for Doubtful Debts 33.71 20.63Dues Under Voluntary Separation Scheme 399.08 222.75(Profit) / Loss on Sale of Fixed Assets (net) (14.40) 30.61Interest & Finance charges 269.36 280.97Dividend & Interest Income (42.82) (36.22)Claims Received (59.42) (18.72)Sundry Balances written back (4.14) 8.56Excess provision written back (3.15) (22.26)Sales Tax Deferment written back (169.33) -Surplus on redemption of investment (0.58) (3.96)

1,092.46 1,116.47OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 3,406.68 3,001.06

Trade & Other Receivables (375.60) (153.20)Inventories (687.17) (602.19)Trade Payable 529.80 17.80

(532.97) (737.59)CASH GENERATED FROM OPERATIONS 2,873.71 2,263.47Interest paid (307.05) (309.80)Direct Taxes Paid (including Fringe Benefit Tax) (916.94) (941.30)

(1,223.99) (1,251.10)CASH FLOW BEFORE EXTRA-ORDINARY ITEMS 1,649.72 1,012.37Claims ReceivedDues under Voluntary Seperation scheme 76.64 1.50

(1,015.71) -(939.07) 1.50

NET CASH FROM OPERATING ACTIVITIES (A) 710.65 1,013.87

B CASH FLOW FROM INVESTING ACTIVITIES :Purchase of Fixed Assets (1,096.06) (255.86)Purchase / Sale - Redemption of Investments (Net) (116.74) 3.96Sale of Fixed Assets 18.48 9.90Dividend & Interest Income 42.82 42.05

NET CASH USED IN INVESTING ACTIVITIES (B) (1,151.50) (199.95)

C CASH FLOW FROM FINANCING ACTIVITIES :

Proceeds / (Repayments) from Borrowings (net) 894.29 (624.31)Dividend Paid (342.65) (172.52)Taxes Paid on Distributed Profits (48.60) (22.20)

NET CASH USED IN FINANCING ACTIVITIES (C) 503.04 (819.03)NET INCREASE IN CASH AND CASH EQUIVALENTS (A-B-C) 62.19 (5.11)

CASH AND CASH EQUIVALENTS OPENING BALANCE 213.37 218.48CASH AND CASH EQUIVALENTS CLOSING BALANCE 275.56 213.37

62.19 (5.11)This is the Cash Flow Statement referredto in our report of even date.




Mumbai, 22nd June, 2006


31

i Registration details

Registration No. 1 2 0 2 8 State Code 1 1

Balance Sheet Date 3 1 0 3 2 0 0 6 Date Month Year

ii Capital raised during the year (Amount in Rs. Thousands)

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement

N I L N I L

iii Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands)

Total Liabilities 8 7 8 5 7 7 Total Assets 8 7 8 5 7 7

Sources of Funds

Paid-up Capital 1 1 5 5 0 0 Reserves & Surplus 3 6 2 1 8 2

Secured Loans 3 4 1 2 3 4 Unsecured Loans 3 7 2 4

Deferred Tax Liability 5 5 9 3 7

Application of Funds

Net Fixed Assets 3 3 7 8 5 2 Investments 1 3 9 0 5

Net Current Assets 4 4 3 3 8 3 Misc. Expenditure 8 3 4 3 7

Accumulated Losses N I L

iv Performance of the Company (Amount in Rs. Thousands)

Turnover 1 5 8 4 1 5 2 Total Expenditure 1 3 5 2 7 3 0+ - + -

Profit /Loss before tax 2 3 1 4 2 2 Profit /Loss after tax 1 5 7 0 6 9

Earning per Share in Rs. 1 3 . 6 0 Dividend Rate % 4 0

v Generic Names of Three Principal Products / Services of Company [as per monetary terms]

Item Code No. [HS Code] 8 4 8 2 1 0

Product Description B A L L B E A R I N G S


Product Description C Y L I N D R I C A L R O L L E R B E A R I N G S


Product Description T A P E R R O L L E R B E A R I N G S

Information pursuant to part IV of the Companies Act, 1956Balance Sheet Abstract and Company’s General Business Profile

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32

ABC Bearings LimitedRegd. Office: 402-B, Poonam Chambers, Dr. Annie Besant Road, Worli, Mumbai – 400 018.

ATTENDANCE SLIP

To be handed over at the entrance of the meeting hallFull Name of theMember attendingFull Name of theFirst Joint holder

(To be filled in if first named joint-holder does not attend the meeting)

Name of Proxy

(To be filled in if Proxy Form has been duly deposited with the Company)I hereby record my presence at the FORTY-FIFTH ANNUAL GENERAL MEETING of the Company held on Thursday, the10th August, 2006 at 4.00 p.m. at Walchand Hirachand Hall, Indian Merchants’ Chamber Building, 76, Veer NarimanRoad, Churchgate, Mumbai – 400 020.

Regd. Folio/ID No.

No. of Shares held

Member’s/Proxy’s signature(to be signed at the time of

handing over this slip)..............................................................................................................................................................................

(Please cut here)

ABC Bearings LimitedRegd. Office: 402-B, Poonam Chambers, Dr. Annie Besant Road, Worli, Mumbai – 400 018.

PROXY FORM

I/We

of in the district of

being member(s) of the above named company,

hereby

appoint

of in the district of

or failing him

of in the district ofas my/our proxy and to vote for me/us on my/our behalf at the FORTY-FIFTH ANNUAL GENERAL MEETING of theCompany to be held on Thursday, the 10th August, 2006, at 4.00 p.m. at Walchand Hirachand Hall, Indian Merchants’

Chamber Building, 76, Veer Nariman Road, Churchgate, Mumbai – 400 020 or any adjournment thereof.

Signed this day of 2006.

Regd. Folio/ID No

.

No. of Shares held

The Companies Act, 1956 lays down that an instrument appointing a proxy shall be deposited at the Registered Officeof the Company not less than 48 hours before the time for holding the meeting.

Please affix30 PaisaRevenue

Stamp

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c.e.o. company secretary cost auditors solicitors · solicitors desai & diwanji ... to appoint...

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