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MEASURESUCCESS?

Every business strives for success. Success however has many benchmarks and many interpretations. Some view success on a

purely financial plane, others view it in terms of their market reach while some argue it as their ability to survive in difficult terrain.

25 years of operation have taught us that there are many yardsticks and measures to qualify success. What however remains sacrosanct is the inexorable link between faith and success. If you

have faith, success is bound to follow.

This year’s annual report showcases our performance against some established benchmarks and more importantly, those that make us

truly successful.

HOW DO WE

CONTENTS

Corporate Profile 07

Journey of 25 Years 08

Chairman’s Message 10

Board of Directors 12

Management Discussion & Analysis 20

Directors’ Report 55

Corporate Governance Report 59

Auditors’ Report 84

Balance Sheet 88

Profit & Loss Account 89

Cash Flow Statement 90

US GAAP 125

Economic Environment 24

Industry and Segment Dynamics 26

Results and Financial Analysis 32

Risks and Outlook 34

Operations, Reach & Supply Chain 38

People and Environment 42

Social Responsibility 46

STATURE IN THE INDUSTRY?

HERO HONDA IS THE LARGEST MANUFACTURER OF TWO WHEELERS IN THE WORLD….

AND HAS BEEN SO OVER THE LAST EIGHT YEARS.

IS IT ABOUT THE

CORPORATE PROFILEA GLORIOUS HISTORY AND ANEVEN MORE GLORIOUS FUTURE

It all began with a dream…

The Hero Honda story began with a simple vision – the vision of a mobile and an empowered India, powered by Hero Honda. This vision was driven by Hero Honda's commitment to customer, quality and excellence, and while doing so, maintain the highest standards of ethics and societal responsibilities. Twenty five years and 25 million two wheelers later, Hero Honda is closer to fulfilling this dream. This vision is the driving force behind everything that we do at Hero Honda.

We understood that the fastest way to turn that dream into a reality is by remaining focused on that vision. There were many unknowns but we kept faith, and today, Hero Honda has been the largest two wheeler company in the world for eight consecutive years.

Our growth has kept compounding. The company crossed the ten million unit milestone over a 19-year span. In the new millennium, Hero Honda has scaled this to 15 million units in just five years!

In fact, during the year in review, Hero Honda sold more two wheelers than the second, third and fourth placed two-wheeler company put together. With Hero Honda, the domestic two wheeler market was able to show positive growth during the year in review. Without Hero Honda, the domestic market would have actually shrunk.

Over the course of two and a half decades, and three successive joint venture agreements later, both partners have fine-tuned and perfected their roles as joint venture partners.

What the two partners did was something quite basic. They simply stuck to their respective strengths. As one of the world's technology leaders in the automotive sector, Honda has been able to consistently provide technical know-how, design specifications and R&D innovations.

This has led to the development of world class, value-for-money motorcycles and scooters for the Indian market.

On its part, the Hero Group has taken on the singular and onerous responsibility of creating world-class manufacturing facilities with robust processes, building the supply chain, setting up an extensive distribution networks and providing insights into the mind of the Indian customer.

Since both partners continue to focus on their respective strengths, they have been able to complement each other. In the process, Hero Honda is recognized today as one of the most successful joint ventures in the world. It is therefore no surprise that there are more Hero Honda bikes on this country's roads than the total population of some European countries put together!

The company's meteoric growth in the two-wheeler market in India stems from an intrinsic ability to reach out and come closer to its customers, with every passing year. Hero Honda's bikes are sold and serviced through a network of over 3500 customer touch points, comprising a mix of dealers, service centres and stockists located across rural and urban India.

Hero Honda has built two world-class manufacturing facilities at Dharuhera and Gurgaon in Haryana, and its third and most sophisticated plant at Haridwar has just completed a full year of operations.

It is difficult to imagine that all this has happened in the span of just two and a half decades!

The best is yet to come. During the year in review, Hero Honda powered its way in a market that, for all practical purposes, was feeling the full effects of the economic slowdown in India. With an economic recovery now clearly on the cards, Hero Honda is all set to ride into another summit.

As Brijmohan Lall Munjal, the Chairman, Hero Honda Motors succinctly puts it, "We pioneered India's two wheeler industry, we've steered it through difficult times; now it is our responsibility to set the pace again.''

06/07

Hero Honda commences commercial production at Dharuhera Plant, rolls out 1st motorcycle (CD 100)

1985

Hero Honda new manufacturing plant at Gurgaon goes on stream

1997

Hero Honda forays into sports promotion with the Hero Cup – a five nation cricket series, more popular as mini world cup

1993 Hero Honda CBZ launched – First150 cc motorcycle in the Indian two

wheeler industry

1999

Hero Honda becomes the world no. 1 two wheeler manufacturer

2002

Hero Honda Karizma launched–industry's first 223 cc motorcycle

2003

Hero Honda Passport Programlaunched – A first of its kind CRM initiative in the Indian two wheeler industry.Hero Honda Splendor becomes the single largest selling motorcycle in the world

2000

Cumulative production volumesreached 10 million mark

2004

Hero Honda's new manufacturingplant at Haridwar goes on stream

2008

Hero Honda forays into scootersegment, launched 100 cc gearless

scooter, Pleasure.Cumulative production volumes

reached 15 million mark

2006

Hero Honda celebrated the 20million cumulative productionvolumes mark by conducting Bike –A - Thon - a national level bike rally

2007

Pawan Munjal, Managing Director & CEO, Hero Honda Motors Limited, received the coveted Man of the Year Hall of Fame awards by CNBC TV 18Overdrive Awards 2009.

2009

A JOURNEY OFTWENTY FIVE YEARS

08/09

Hero and Honda sign joint collaboration agreement

1983

Birth of a legend - Hero Honda Splendor motorcycle launched

1994

Cumulative production volume reached 5 lac mark

1991

Dr. Brijmohan Lall Munjal,Chairman, Hero Honda MotorsLimited, received the Padma Bhushan award from the President of India

2005

“Two roads diverged in a wood…and I took the one less travelled by, and that has made all the difference”.

These memorable lines by Robert Frost summarise Hero Honda's odyssey over these last 25 years. They also capture the spirit of the Indian people, who proved all pre-poll forecasts and predictions wrong to vote in the country's most stable and durable government in two decades.

The prospect of stability couldn't have come at a better time for India.

As the country's GDP growth plunged from a very impressive 9 per cent to 6 per cent during the year in review, the culture of consumerism that propelled India in the preceding four years, took a backstage. Family budgets shrank, and in many companies, pay packets became slimmer.

Expectedly, defaults also rose. As a result, banks became even more cautious in offering loans, particularly in towns where very little information was available to measure the creditworthiness of a customer.

The trend among consumers to postpone purchase decisions and the banks decision to withdraw from certain areas had an impact. The share of financing, which had increased rapidly to 50-60 per cent of the total retail sales by early 2007, has now come down to below 30 per cent.

This was a major setback for the two-wheeler industry, although just like the preceding year, your company bucked the trend. In value terms, both top line and bottom line was up in double digits. Hero Honda retailed more two wheelers in the domestic market than the second, third and fourth placed manufacturer put

together. Effectively, this helped your company boost its domestic motorcycle market share by more than four percentage points and scooter market share by three percentage points.

The healthy growth in sales also improved your company's bottom line. EBIDTA margins for the entire year increased by 120 basis points compared to the previous year.

Some of these financial numbers are the highest in our 25-year history. We are fortunate that these numbers are coinciding with our silver jubilee year. At the same time, I know they do not represent a peak, but just the beginning of a climb to another higher summit.

As I mentioned in the opening, we took the road less travelled. When the two-wheeler industry started going into a tailspin, our first strategic option was to remain rock-solid as the winds of the global crisis swept across companies, businesses and consumers based in urban India.

We certainly spent some time consolidating our business. We controlled costs on a war footing. Of course, plunging commodity prices helped bring down prices of key inputs such as steel, nickel and aluminum; this in turn helped us prune manufacturing costs.

Yet your company did not just get lucky; it took a number of sound business decisions through the year.

To give you an example, your company took a policy decision and resisted the temptation of offering discounts to stir up sales in a tepid market. However, we did not compromise on market development and customer focus; we upgraded our products, added features, introduced new products and increased our advertising spends.

Hero Honda also made its supply chain more robust with strong online connections both at the front end as well as at the back-end.

Your company didn't stop at consolidation; it sought to grow as well. As I mentioned last year, our objective as a company has been to develop across both India and Bharat.

We are strongly convinced that the new government's plan to strengthen inclusive programs in rural India will create job opportunities and aspiration demand. I have always believed that rural and small town India represents our future. Now, after last year's performance, I am convinced that we have to make rural India also an integral part of our present.

We have here a market that has incredible depth. This makes it less susceptible to global economic cycles and a market where every government which comes to power is guaranteed to invest heavily.

Although your company has always concentrated on

both urban and rural areas, we have now started adding more muscle to our rural initiatives; some of our efforts have started paying off.

It gives me great personal pleasure to see that over the course of my lifetime, I am being able to see the gradual evolution of India's villages and small towns: from being survivors to aspirants and consumers.

I remain confident about the near-term future. Of course, there will be challenges ahead. But I would rather see them as opportunities.

Over the next 12 months, the two-wheeler environment will become much more competitive as more players try to enter our higher volume executive segment. We welcome this emerging competition, since it will provide us with an opportunity to prove our mettleonce again.

There is also some buzz and anticipation surrounding the low-cost cars. Without doubt, these will be good for India's consumers. Nevertheless, from the perspective of our industry and our company, I am convinced that the two-wheeler segment will continue to remain the vehicle of choice by the masses in India.

Fuel efficiency and maintenance costs continue to be the most important considerations for the Indian customer today. They will be the most important considerations in the medium term as well.

There are more than seven million new bicycle users every year in India, and most of them aspire to upgrade to two-wheelers. The growing aspirations, expanding road networks and growth of satellite townships across India are some of the factors that will spur demand for two-wheelers in the near and medium term.

These factors will operate as the two-wheeler industry's biggest insurance in the coming decades.

In my preceding year's message, I talked about how strong companies are ones that are able to grow roots among the rocks. They have the capacity to hold the fort, while other bastions around them crumble. Champion companies don't just grow roots, they develop far-reaching branches.

Yours sincerely,

Brijmohan Lall Chairman

DEARSHAREHOLDERS,

10/11

Brijmohan Lall MunjalChairman

Pawan MunjalManaging Director & CEO

Ms. Shobhana BhartiaNon-Executive and Independent Director

Takashi NagaiNon-Executive Director

Sumihisa FukudaTechnical Director (w.e.f. June 01, 2008)

Pradeep DinodiaNon-Executive and Independent Director

Gen. (Retd.) V.P. MalikNon-Executive and Independent Director

Dr. Pritam SinghNon-Executive and Independent Director

Sunil Kant MunjalNon-Executive Director

Analjit Singh Non-Executive and Independent Director

Meleveetil DamodaranNon-Executive and Independent Director(w.e.f. June 16, 2008)

Toshiaki NakagawaJoint Managing Director

Om Prakash MunjalNon-Executive Director

Masahiro TakedagawaNon-Executive Director

BOARD OFDIRECTORS

BOTTOM ROW LEFT TO RIGHTTOP ROW LEFT TO RIGHT

For more information please visit www.herohonda.com

COMMITTEE OF DIRECTORS

AUDIT COMMITTEE

Pradeep DinodiaChairman

Gen. (Retd.) V. P. MalikMember

Dr. Pritam SinghMember

SHAREHOLDERS'

GRIEVANCE COMMITTEE

Dr. Pritam SinghChairman

Pradeep DinodiaMember

Meleveetil DamodaranMember

REMUNERATION COMMITTEE

Gen. (Retd.) V. P. MalikChairman

Pradeep DinodiaMember

COMPLIANCE OFFICER

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

SENIOR MANAGEMENT TEAM

Ravi SudSr. Vice President & CFO

Anil DuaSr. Vice President-Sales,

Marketing and Customer Care

Vikram S. KasbekarPlants Head-Operations

and Supply Chain

Dr. Anadi S. PandeVice President-HRM, Corporate

Planning and Strategy

Vijay SethiVice President-Information Systems

ALTERNATE DIRECTOR

Satoshi Matsuzawa(Alternate Director to Mr. Takashi

Nagai)

OUTGOING DIRECTORS

Yutaka KudoWhole-time Director

(upto May 31, 2008)

Narinder Nath VohraNon-Executive and Independent

Director

(upto June 24, 2008)

Sunil Bharti MittalNon-Executive and Independent

Director

(upto April 21, 2009)

Arun Nath MairaNon-Executive and Independent

Director

(upto July 23, 2009)

12/13/14

NEW PLANT AT HARIDWARTHE GATEWAY TO ANOTHERSUCCESS STORY

Literally translated, Haridwar means Gateway to God. In Hindu mythology, Haridwar is considered one of the seven holiest places in India, since the devas are said to have left their footprints here.

Not without reason, therefore, Haridwar was chosen as the venue for the third Hero Honda plant.

The temples of modern India, borrowing Pt. Nehru's phrase, are the factories that provide economic liberation to masses.

Hero Honda's journey to this modern temple, in Haridwar, has been nothing short of a holy pilgrimage. It began in October 2006, when the foundation stone was laid; it continued when the plant went onstream in April 2008, and gained momentum in March 2009, when the plant produced 4,000 two wheelers per day.

The journey continues at the time of writing.

The third plant is Hero Honda's finest manufacturing experience yet, with the essence of Honda and Hero's learnings and contemporary practices enshrined here.

The plant has lean manufacturing and practices that ensure efficiency. The main plant is connected with vendors units through conveyors so that material avoids multiple handling and is delivered on time.

In keeping with Hero Honda's green philosophy, production processes have been conceived in a way that effluents are minimized and there is zero discharge on liquid effluents. All waste are treated and consumed within the four walls of the factory.

An integral part of the long term vision at the Haridwar plant is an ambitious green roof project. The idea is not just to insulate the shopfloor but also to reduce the run offs, and promote greenery.

But then, the Hero Honda story at Haridwar is not just about this plant.

Wherever it sets up a factory, Hero Honda seeks to be a model corporate citizen, and co-opts local communities to participate in its progress.

Hero Honda has made a substantial difference in the socio-economic landscape of the Gurgaon-Dharuhera belt, and it seeks to make the same qualitative difference in Dev Bhoomi.

The Hero Group is committed to invest in social and tangible infrastructure to promote quality of life of people of Uttrakhand, and is in the process of building, schools, hospitals, theaters, houses and retail infrastructure in the region.

These projects will provide jobs, sustenance and prosperity over the years, and contribute to the all-round development of this region.

Hero Honda is also adopting a local ITI in the region.

This will not only to enhance the skill level of local people, it will also go a long way in ensuring a captive supply of skilled manpower for Hero Honda and its suppliers.

The Haridwar project is a backward integrated manufacturing plant which on realization of full capacity will engage around 5,000 persons.

Currently there are 10 suppliers up and running operations in the Hero-promoted industrial park next to the Haridwar factory. In the coming months an additional 23 no. of suppliers will start supplying to the factory hub.

In a vast country like India, what Hero Honda is attempting through this integrated approach is a drop in the ocean, but it is an important drop. As Mahatma Gandhi once said:”Whatever you do may be insignificant, but it is very important that you do it”.

It is said that as the Ganga flows from the Himalayas to the Bay of Bengal, it nourishes the soul and sustains many lives along the way. Hero Honda is convinced that this plant, this shrine of technology, will do the same.

15/16/17

RURAL

MARK

ETIN

G F

OCUS

REACHING THE LENGTHAND BREADTH OF INDIA

18/19

The company has made significant progress in its rural marketing initiative called Har Gaon, Har Aangan. This national level program has made strides into thousands of Indian villages with a population of 5,000 and above. In all, more than 125,000 opinion leaders in these villages were met by specially trained 523 rural sales executives. The program itself has added sales of 25,000 vehicles from these villages in just one year.

The program focuses on many activities to align with the objectives that go beyond commercial transactions, in order to build enduring relationship with the customers

in these villages. The program generally covers sales promotions, loan and exchange offers, free service and check up camps, along with host value adds like consultation for obtaining driving license, safe riding educational programs and other services like health check up and awareness camps. These services are offered free of charges in the interest of society at large.

Under the HGHA program the company makes all the efforts to be a part of the villages by conducting such programs either directly or by partnering or sponsoring

the events organized by the local administration on regular basis.

The company believes that the rural mobility is a major contributor to GDP growth in an agrarian economy like ours. 'Sikhao Baliye' is company's unique initiative in the rural market that aims at driving the mobility of rural women. The program aims at promoting company's light and zippy gearless scooter Pleasure by creating awareness amongst its TG which primarily are all rural men, particularly opinion leaders and those who wish to impart riding training to their wives, daughters,

daughter-in-laws, sisters etc., and prospects in general.The program covered 40 villages, 266 female riders received basic riding training, and 35 of themcould ride the scooter immediately after the training.

Economic Environment

Industry and Segment Dynamics

Results and Financial Analysis

Risks and Outlook

Operations, Reach & Supply Chain

People and Environment

Social Responsibility

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.

OUR TOP LINE HAS TOUCHEDOVER Rs. 12,300 CRORE

WITH OUR NEAREST COMPETITORSAND PEERS A LONG DISTANCE OFF

TOPLINE?

IS IT ABOUT THE

Like any other emerging country, India experienced the knock-on effects of the global crisis during the year in review. The effects were felt through the monetary, financial and real channels.

Drying up of global finance impacted from the middle of the fiscal impacted domestic capital finance; and corporate earnings came off peaks. In April 2009, Reserve Bank of India predicted that the Indian economy's growth for 2008-09 would slow to 6.6 per cent, breaking an excellent five-year growth sequence.

There were two dimensions to the economic slowdown. In the first half, inflation ran into double digits as a result of the global crude shock and the global food grain shortage. To control inflation, the RBI clamped down on money supply, and reduced liquidity in the economy. By the time inflation started coming under control, domestic interest rates started shooting up. Meanwhile, the global crisis erupted, putting further pressure on liquidity levels.

By October 2008, slowdown was clearly apparent in export-intensive sectors, both in the manufacturing and service side. By December, the slowdown turned into de-growth. The cutback in demand from Europe and the US was so sharp that even a competitive rupee, which devalued by around 12 per cent during the year, couldn't act as a buffer.

By December 2008, the growth momentum of the first six months was lost. Planned investment projects were shelved; live projects faced a shortage of funds as credit flows dried up. As money became dearer, pay packets became slimmer and risk aversion grew both from the demand and supply side.

Compulsions of coalition politics at the Centre and the impending Lok Sabha elections didn't help either, and slowed down reforms and implementation of projects, particularly in critical sectors like roads, ports and power.

The worst hit was the manufacturing sector. From the second half of the financial year, the index of industrial production contracted on three occasions, remained close to zero on two occasions, and was mildly positive only once.

There was moderation across other sectors as well.

Growth in the service sector slipped from double digits to single digits. Agriculture growth once again slipped

to less than 2 per cent, mostly on account of indifferent production of cotton and pulses.

On its part, the government came out with three rounds of fiscal measures to revive the economy. Yet the effects hadn't begun to show, at least till the financial year had ended.

While the year in review was disappointing by Indian standards, India was still an outperformer by global standards. Along with China, India still provided a beacon of light to the world.

There were in fact, some signs of some sort of recovery taking shape towards the end of the financial year, and this momentum continued in the first quarter of 2009-10 as well.

Cement despatches in April were the highest in five years, thanks to revival in construction activity.

The World Steel estimated that India would be the only major country in 2009 with a positive consumption trend.

In March, the monthly ABN Amro Purchasing Managers' Index crossed 50 for the first time since September 2008, indicating some increase in manufacturing expansion activity.

The NHAI invested 60 per cent of its funds in the second quarter of 2008-09 in various road projects.

Such investments, made during the peak of the slowdown, could create important multipliers in a slowing economy.

It is expected that some of these measures will create new multipliers and generate new sources of growth in the coming year.

The overall economy continues to remain a bit volatile, and yet a positive feel-good sentiment does seem to have returned, especially with the coming of a stable government at the centre.

ECON

OM

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NVIR

ON

MEN

T

IN ADVERSITYCREATING OPPORTUNITY

24/25

In the previous year, the domestic two-wheeler industry entered a period of de-growth. However, this was arrested in 2008-09, largely on the back of Hero Honda's performance. After the blip of last year, the two-wheeler industry went back to a growth phase, largely driven by Hero Honda and exports.

The industry clocked total volumes of 8.5 million during the year in review, a growth of 5 per cent compared to a fall of 5 per cent in the previous year. The pace of growth was lower in the domestic market, where the industry clocked sales of 7.43 million, a rise of only 2.60 per cent. This, however, was a significant improvement over the

previous year when the industry had shrunk by 8 per cent.

Motorcycles continue to constitute the largest chunk of the two-wheeler industry, and during the year in review, accounted for four fifth of sales. Interestingly, for the second year in succession, scooters increased their share in the two-wheeler pie from 14 per cent to 16 per cent. This is clearly a trend reversal from the last 10 years, where the share of scooters in the two-wheeler pie had been shrinking. Changing lifestyles among women, and the introduction of feature-rich, high-quality scooters possibly has much to do with the revival in demand.

The entry segment – made up of basic 100 cc bikes - had started slowing two years ago, and during the year in review, sales in this segment were down by more than 15 per cent. This could be attributed to the fact that Deluxe segment bikes have become affordable on account of a 4 per cent excise cut, 1 per cent reduction in CST and the special package of reduction in excise duty in December, which most manufacturers passed on to the consumers.

The deluxe segment-made up of value for money and feature-rich bikes in the 100-125 cc category-grew by 15.2 per cent.

The 125-250 cc category-grew at 8.8 per cent. The pace of growth has fallen from last year's levels. There is no doubt that the higher interest rates have brought down growth. Nevertheless, this segment was still able to clock a growth rate in high single digits mainly because of the excitement caused by a slew of new models that came into this segment during the year.

The bigger story, of course, is that buyers in small-town India and rural India, as well as employees of the state and Central government, were relatively less affected by the slowdown, and this benefitted the two wheeler industry.

INDUSTRY

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AN INDUSTRY THAT IS RIDING AHEAD

26/27

Hero Honda was the torchbearer for the two-wheeler industry during the year in review. It sold more two-wheelers during the year than the combined volumes of the second, third and fourth placed competitor.

Overall, the company sold 3.72 million two-wheelers, up 12 per cent. Motorcycle sales in the domestic market, which account for more than 95 per cent of Hero Honda's sales, were up 11 per cent.

HERO HONDA'S PERFORMANCESETTING THE BENCHMARK

During the year, the company also turned in a rollicking performance with its scooter portfolio, with a 49 per cent growth in domestic sales to 156,210 units. This performance allowed Hero Honda to increase its share in the domestic scooter market by more than three percentage points.

Hero Honda's performance in the two-wheeler industry was the only standout performance during the year amongst the large players. Without Hero Honda's numbers, the two wheeler industry growth would have been marginal.

28/29

BOTTOMLINE?

HERO HONDA HAS BEEN CONSISTENT IN WEALTH CREATION FOR NEARLY TWO

DECADES. AND OUR CURRENT PROFIT AFTER TAX OF OVER Rs. 1280 CRORES BEARS

TESTIMONY TO OUR BUSINESS ACUMEN.

IS IT ABOUT THE

32/33

OPBT - PBT before other income PAT - Profit after tax

PATOPBT

RESULTS ANDFINANCIAL ANALYSIS

TABLE 2

2007-08 2008-09

Inventory Period 11.9 11.0

Operating Cycle 21.2 16.9

Cash Cycle -10.6 -13.1

Current Ratio 0.68 0.64

Acid Test Ratio 0.45 0.43

WORKING CAPITAL MANAGEMENT & LIQUIDITY RATIOS

Sales

Despite a slowdown in the two-wheeler industry, sales of the company grew by 11.53 per cent. The company ended the year with a market share of around 57 per cent. Hero Honda sold 3,722,000 units in 2008-09 compared to 3,337,142 units in 2007-08. In value terms total sales (net of excise duty) increased by 19.2 per cent to Rs.12,319 crores from Rs.10,332 crores in 2007-08.

Profitability

The company's earnings before interest depreciation and taxes (EBITDA) margins increased from 13.33 per cent in 2007-08 to 14.16 per cent in 2008-09 and the operating profit (PBT before other income) increased by 28.4 per cent from Rs.1,221.79 crores in 2007-08 to Rs.1,568.86 crores in 2008-09. The margin improvements came from better sales realizations, cost rationlisation and optimization measures. These included better control over material cost, marketing cost and overheads, besides a sharp focus on operational efficiencies.

Other income,including non-operating income

Other income increased by 19.0 per cent from Rs. 185 crores in 2007-08 to Rs. 221 crores in 2008-09.

*Income from operations

Cash Flows

Growth in sales turnover and better efficiencies in working capital management improved the cash flow from operations from Rs. 1,211.78 crores to Rs. 1,359.03 crores. Cash flows before working changes also improved from Rs. 1,392.56 crores to Rs. 1,762.16 crores on account of better EBITDA margins.

The Company spent Rs. 861.19 crores in investing activities. Investments in production capacities lead to an outflow of Rs. 315.08 crores. The balance was deployed in financial assets. Financing activities accounted for an outflow of Rs. 499.93 crores attributable to dividend outflows.

Table 1

2007-08OPBDIT / IFO*(%) 13.3OPBT / IFO*(%) 11.8 12.7PBIT / IFO*(%) 13.3 14.2PBT / IFO*(%) 13.6 14.4PAT / IFO*(%) 9.3 10.4ROACE (%) 49.0 50.9ROAE (%) 35.5 37.8

KEY INDICATORS OF PROFITABILITY

2008-0914.2

1200

900

600

300

0

PROFITS(Rs. in crores)

1500

05-06 06-07 07-0804-05 08-09

1056

858

1253

971

810

1225

968

1561

1282

1076

Capital Expenditure

During the year the Company incurred a capital expenditure of Rs. 315.08 crores. The funds went into expansion of operations.

Raw Material costs

Softening metal prices particularly aluminum & nickel in second half of the year combined with better sales realisation to bring down the share of material costs considerably. Raw material costs as a proportion of total costs came down from 71.6 per cent to 71.0 per cent.

Current Asset turnover

This ratio, which shows sales as a proportion of average current assets, increased from 11.2 to 12.7 times, on account of higher average inventory & bank balance.

Debt structure

Hero Honda has been a debt free company for the last 8 years. The unsecured loan of Rs.78.49 crores 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.

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 2008-09, the board has recommended a dividend of 1000 per cent, which is higher than the 950 per cent declared in the previous year. However, the payout ratio has come down to 36.5 per cent vis-a-vis 45.9 per cent in the previous year.

Working capital management

Hero Honda has always sought to efficiently use the various components of the 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.

Notes on working capital

The average of inventory, receivables and payables has been taken for calculations of inventory period, operating and cash cycle.

Net Cash Flow From Operations(Rs. in crores)

800

600

400

200

1000

0

1200

05-06 06-07 07-0804-05 08-09

936

625

1212

1359

747

1400

RISKS AND CONCERNS

• Slowdown: Sales in the lucrative premium two-wheeler segment (150 cc and above) have been affected by the economic slowdown; a quick return to robust growth is unlikely, and this could affect Hero Honda's near term plans for an increased presence in this segment.

• Interest rates: Lending rates have started softening but effective lending rates for the two-wheeler industry remain high on account of risk aversion by banks. However, Hero Honda has de-risked its business by focusing on segments which are not too dependent on financing. Still, if interest rates for two-wheelers continue to remain high and the overall credit-squeeze persists, it is likely to adversely impact the company's efforts in realizing its full growth potential.

• Inflation: After climbing to double digits in the first half, inflation growth was close to zero per cent by year-end. However, high fiscal deficit and rising food prices could push up inflation again during the year. Rising inflation may limit the downward trend in interest rates.

• Increasing competition: Several two-wheeler companies introduced new models in the lucrative premium segment; over time this could impact the profitability of this segment. At the same time, the expected fresh competition in the 100 cc segment in 2010 poses a challenge to the company's stronghold on this segment.

• Input costs: Prices of critical inputs came down during the year thanks to lower commodity prices. However, prices may be close to bottom levels, and may start perking up in the second half of the coming year if there is an economic revival.

Outlook

At the end of the financial year, there were some signs that the worst might be over for the Indian economy. The emergence of a stable government at the Centre, and the prospects of policy stability and economic reforms over the next five years, could enhance the feel-good factor both within and outside the country.

However, for the coming year, at least for the first six to eight months, there could still be some pockets of pain across export-dependent sectors, and business sectors that depend heavily on urban markets.

Demand creation in urban India could remain a challenge for the two wheeler industry as a whole on account of job insecurity, lower pay packets and less disposable income. While Hero Honda's rural focus will continue to provide some buffer during the year, there could be volume pressure at the upper end of the market.

A regime of lower interest rates could provide some succor in urban markets. However, the higher fiscal deficit and government borrowing program could limit the fall in interest rates.

On the brighter side, metal prices could remain soft in

the near term. Even if they start rising in the second half against the backdrop of an economic revival in India and a downsizing of global inventories, the chances of a commodity bull run in the near term are remote.

In a nutshell, therefore, the company is likely to turn in a steady performance, rather than a rollicking performance during the year. The bottomline is likely to grow at a reasonable pace on the back of cost improvements, plant rationalisation process efficiencies, and steady metal prices.

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MANAGING RISK ISHALF THE BATTLE WON

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HERO HONDA SPANS OVER 3500 CUSTOMER TOUCH POINTS, 256

MANUFACTURING PARTNERS AND 3 MANUFACTURING PLANTS ACROSS THE

LENGTH AND BREADTH OF INDIA.

REACH?IS IT ABOUT

Operations

Hero Honda has two key priorities: first, to expand and grow aggressively, and second, to develop capabilities and innovate constantly. Keeping these priorities in mind, Hero Honda undertook the following activities during the year:

Commissioning of a new plant at Haridwar: The commissioning of this third plant gives Hero Honda a total installed capacity of 4.2 million two wheelers. A capacity of this magnitude has enabled Hero Honda to retain its position as the world's largest two-wheeler manufacturer for eight successive years.

The full commissioning of the Haridwar plant allowed the company to plan its production better. Depending on volumes, production was rationalized across the three plants. This reduced changeover time helped the company increase its overall efficiency level. In turn, this helped Hero Honda bring down overall manufacturing cost per vehicle during the year.

New Models: During the year, seven new models were introduced across segments. Out of these four models were launched in the space of a month. The variability of the product mix could have posed a challenge; but, flexible systems at the three plants allowed production to proceed smoothly.

Distribution Network: The company has a conscious strategy of penetrating new markets and unrepresented territories through its distribution network of dealers, authorized representatives, stockists and SSPs. In March 2001, the company had 826 such sales and service points in India. By March 2009, this number had grown to more than 3500. All the four marketing zones of the company demonstrated a uniform increase in new dealerships and SSPs during the year in review.

Rural network: During the year, Hero Honda's ambitious rural connect program—Har Gaon, Har Aangan gained critical mass. Currently, every non-metro dealership has a dedicated “Rural Sales Executive” who travels to villages, meets people and drives the initiative on a sustainable basis across the country. At the moment, there is a network of more than 500 rural sales executives working on the rural vertical—which works on the hub and spoke model. There is a plan to substantially boost this number in the coming years.

Typically, the rural executives fan out and visit villages with a population of more than 5000 people. Apart from meeting opinion leaders, the executives are alsotasked with organising Loan Melas in partnership with

OPER

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CH &

SUPPLY

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DRIVING TO NEW DESTINATIONS, STRENGTHENING PROCESSES ALONG THE WAY

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Gramin Banks, License Camps and Riding Schools. The idea is not just to increase awareness about the two wheeler industry but also to increase buy-in for Hero Honda products.

During the year, more than 23,000 villages with a 5000-plus population were covered by rural executives under the Har Gaon, Har Aangan initiative.

Information Technology: IT at Hero Honda is an integral part of the business. The organisation has a mix of packaged and in-house applications to support business transactions, integration with partners, reporting, productivity and compliance. The applications range from simple workflows to enterprise applications. Similarly, at the infrastructure end, the organisation has a robust and scalable world-class IT infrastructure.

The organisation continued to invest significantly in IT during the year. Two large initiatives – Product Lifecycle Management (PLM) and Dealer Management System (DMS) were initiated.

Most of the processes and operations in the organisation are fully integrated with IT. During the year, the organisation tried to leverage the capabilities of basic software by integrating with other applications.

For example, bar-coding systems are now extensively used and these are fully integrated with SAP R/3. There are also SMS based alerts to employees and dealers. Workflows have been designed to improve internal productivity. Dashboards and other reporting tools have been introduced to enhance decision-making abilities.

In addition, the CRM (Customer Relationship Management) software being used was upgraded. CRM Software is currently being used by dealers for ordering spares parts. By using a special feature called web shop, dealers can directly shop for spare parts through online catalogues. The system also allows the Dealers to view the status of dispatch or payments. Also as part of the CRM initiative, Hero Honda's flagship CRM program—the passport program—was made more technology enabled.

Working with Supply chain

Hero Honda continues to build and maintain sustainable relationships with its supply chain particularly in relation to long-term strategic direction of the business. Vendor management is critical to Hero Honda, as nearly 73 per cent of the production is currently made up of material cost. A national network of 256 vendors - including 36 ancillaries - forms the backbone of its plant operations.

Softening metal prices, particularly of aluminum & nickel in second half of the year, combined with better sales realization worked together to bring down the share of material costs considerably. Raw material costs as a proportion of total costs scaled down from 72.5 per cent to 69.5 per cent. Simultaneously, a more streamlined sourcing policy also helped in lowering costs.

During the year, the inbound logistic system at the Haridwar plant was revamped; Hero Honda switched from the individual logistic model to a specialized third party logistic service provider for all Haridwar-based suppliers. This switch helped the company reduce logistics cost and improve the operational efficiency of the value chain. During the year, the company also paid considerable attention to developing a multi-modal transport system, in order to derive cost economies.

Also at the Haridwar plant, Hero Honda switched from individual purchase of basic materials by supply chain partners to consolidated settlements by the company itself. The resulting economies of scale have resulted in greater leverage with suppliers and have helped bring down material costs.

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 72 per cent of the vendors and their supplies were connected online.

During the year, Hero Honda also worked with vendors to develop and produce alloy wheels within Haridwar. This considerably reduced dependence on costly imports.

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The Human Touch

Dedicated to investing in our people…

We believe it is the passion of our employees that enables the company to deliver exceptional performance and growth even in an adverse market environment.

Rewarding this passion:

Despite the adverse economic conditions and the automobile industry going through a very difficult year, the company stayed true to its policy of rewarding its employees and announced an increment of 7-9 per cent.

Hero Honda has traditionally enjoyed excellent industrial relations. Taking this a step forward, there were important wage settlements with the workers at the Dharuhera plant and Gurgaon plant. The agreements will go a long way in sustaining cordial and productive industrial relations in the company.

Encouraging the passion to learn:

Several new models were introduced on the shopfloor, and this involved mastering different skill sets and process capabilities on part of the workforce. The latter were able to cope admirably, leading to increased efficiency levels. In fact, Hero Honda managed to increase topline growth at a healthy pace while retaining control over the size of the organization, thereby increasing shareholder value.

At Hero Honda's new plant at Haridwar, a number of best practices have been put in place. One of the company's core competencies is “Speed of Implementation”. Taking this forward, a flatter and leaner manpower structure was introduced at this plant. Today, this plant is able to ensure considerably higher levels of output, without compromising on either cost or quality. Over time, the company plans to introduce a similar hierarchical and workflow structure at its other plants in Gurgaon and Dharuhera.

Hero Honda believes in empowering its employees – by providing them life-long learning opportunities. In sync with this belief, Hero Honda introduced a study leave program for the employees this year. The company hopes that this will provide employees with an

opportunity not only to augment their professional skills and knowledge, but also to improve their life skills.

Celebrating and sharing the passion: Hero Parivaar

Hero Honda held an annual day for the workers and a family day for employees across the organisation. The full-day gala event was held in a festive atmosphere and was attended by the entire management and Hero Honda employees, along with their families. Events flowed seamlessly throughout the day in a completely informal environment. It is planned to make this an annual feature from now.

Environmental Stewardship – Reducing our energy footprint

“We Care about How”

Hero Honda has continuously aspired to become one of India's most environmentally sustainable firms, and it strives to strike the right balance between business, mankind and nature.

It is the company's endeavour to create a culture of minimum waste across the business. As part of this philosophy, Hero Honda seeks to institutionalise resource conservation, in particular, in the areas of oil, water, electrical energy, paints and chemicals, and finally, usage of paper in various company offices round the country.

The company fully complies with all applicable environmental regulations and practices. Periodic energy audits are conducted by internal and external experts. These ensure continuous improvement in areas related to manufacturing processes and energy conservation.

The company has trained energy managers who focus on curbing the wasteful usage of energy. They also implement and encourage usage of equipment with better energy efficiency.

In the coming years, Hero Honda seeks to become a zero-discharge company. Towards this end, the company is also evaluating various proposals for buying renewable energy from various sources. The company has also initiated the process of putting together a policy to offset carbon credits, in order to mitigate global warming.

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HUMAN CAPITALTHE POWER OF

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Green technology

Constant adoption of innovative green practices at Hero Honda has resulted in the introduction of a special Acrylic Cathodic Electro Deposition (ACED) painting process for the frame body. This new process results in 99 per cent paint transfer efficiency and minimizes effluents. The water soluble paint used is environment friendly and delivers better quality and productivity.

At another level, the fluidized bed system, a thermal cleaning process for paint hangers, is more environment friendly than any other conventional cleaning method.

The incinerator used for sludge burning, along with a pollution monitoring and control system, provides proper treatment of flue gases before releasing it to the atmosphere.

Last year, the company successfully developed primer from waste paint sludge which had passed all quality parameters and was at par with the virgin primer. This ecologically friendly and cost effective re-cycling process is now an integral part of the manufacturing operations.

Safe manufacturing

Over the last few years, the company has progressively eliminated the use of a large number of harmful substances. Today, every raw material and chemical is thoroughly evaluated for its environmental impact before it is introduced in a production process.

The company has been successful in eliminating toxic substances. For example, lead-based balancers used for cast wheels have been changed to zinc. Hexavalent chrome has been replaced by trivalent chrome in all plated parts and asbestos has been completely eliminated from all product parts and manufacturing operations.

Conserving energy

In the area of energy conservation, the heat recovery unit installed in the incinerator exhaust is used for pre-heating the boiler feed water and furnace oil. This resulted in a cost saving of Rs. 60 lakh per year.

The boiler systems have also been reengineered and optimised to save fuel, energy and steam losses which have helped prune energy costs considerably. Dedicated power supply to respective shop floors, forced draft ventilation system and use of CFLs also helped bring down energy costs.

Hero Honda also ensures complete reuse of treated water in cooling towers. This saves up to 300 kilo litres of water in a day.

Rain Water Harvesting

Over the years, Hero Honda has been involved in rainwater harvesting projects to protect, preserve and enhance the environment.

The company has implemented the various recommendations of an extensive study that was done to assess the scope of Ground Water Recharge in the factory premises through Rooftop Harvesting, Storm water Harvesting & Open area Harvesting.

Green Roof

The green roof at the Haridwar plant was one of the major environment friendly initiatives during the year. Besides restoring ecological and aesthetic value, it helps in substantial amount of energy saving by moderating temperature of roof and surrounding areas. It also helps in reducing storm water runoff volume and peak flow rate, and increases the service life of water proofing membrane.

The Green Supply Chain

Hero Honda believes the process of sustainable development is incomplete without involving the company's supply chain.

With this in mind, the company has put together a “Green Vendor Development Program” for the front end and a “Green Dealer Development Program” for the back end of the supply chain. In each of these programs, the partners' are expected to manage their environment involving material resources, industrial wastes, energy resource, pollution and other effluents based on a number of pre-determined parameters.

Hero Honda plans to support all its partners in the Green Supply Chain venture by developing required competencies, sharing knowledge, and by providing technical support. 31 vendors enrolled under this program in 2007-08 underwent requisite training and were certified as green vendors during 2008-09. A fresh lot of 40 vendors were inducted during the year for the program.

Green Awards

For its diverse environment initiatives, the company has received the following certifications:

- Environmental Management Systems as per ISO 14001

- Occupational Health and Safety Management Systems as per OHSAS18001

- Quality Management Systems as per ISO 9001

The Company has also been awarded the Three Green Leaves Award for its overall environmental performance by the Centre for Science & Environment (CSE). It has also received “Environmental Excellence” Award, given by The Energy Resource Institute.

Hero Honda has been awarded TERI Corporate Awards for Environmental Excellence 2008.

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Behaving responsibly and contributing to the communities in which we operate is an essential part of our heritage. Hero Honda takes considerable pride in its community relationships, especially the ones at grassroots level 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, healthcare, vocational training, creation of social and physical infrastructure, and environment management. Most of the group's social activities are planned and executed by the Raman Kant Munjal Foundation, which was set up in memory of Hero Honda's founder managing director.

We have identified three priority areas for our community development initiatives where we focus our efforts and help make a difference:

Sustainable Enterprise/Vocational Training, Healthcare and Education

Sustainable Enterprise/Vocational Training:

As part of its outreach and capacity building initiative, the company organised a number of workshops in different areas. There were six fruit preservation workshops, four tie and dye workshops, a handicraft workshop, a training workshop for teachers, and four HIV awareness workshops. The workshops were attended by more than 600 villagers, teachers and schoolchildren in the Hero Honda catchment area.

To help local people, especially women, the Raman Kant Munjal Foundation has, in the last decade, set up a vocational training centre which runs diploma courses in Tailoring, Embroidery and carpet weaving etc. Last year, the Centre was upgraded, and it is now possible to train 50 girls per batch. Till date, more than 700 girls have completed their courses at the centre. While most of the trainees have been placed in the garment industry, a number of girls are also self-employed in their respective village and neighboring towns. On an average, their earnings range from Rs. 6000-7000 per month.

Healthcare:

Healthcare outreach is an important cog in Hero Honda's social outreach matrix, and during the year, the company organised three cataract surgery camps, three heart check up camps, eleven mental

health checkup camps, and one camp each for skin care and the physically challenged. Around 1000 people from the catchment area benefitted from these camps during the year.

Education:

In February 2007, the Foundation had set up a computer training & learning centre in partnership with Microsoft. A total of 9 batches (boys and girls) are run simultaneously, consisting of 18-20 students per batch. Till date, a sizeable number of students have been trained at the centre. To enhance the value of rural youth in the job market, a spoken English course was started recently. Currently, the course is being run in three batches during the day.

The Raman Kant Munjal Foundation also runs ASHA, an educational programme for village children who are first generation learners and attend Govt. Schools. The objective is to provide these children with additional support to improve their educational standard and to achieve their overall development.

The ASHA program was started three years ago and currently, 10 centres are being managed across 8 villages, and more than 385 children have enrolled.

To ensure that there is overall personality development of ASHA children, the Foundation organises recreational activities and soft skills trainings. Regular get togethers are also organised with Raman Munjal Vidya Mandir children from time to time.

The Foundation also runs an Adult Literacy program, a marriage facilitation service for underprivileged girls, besides doorstep healthcare programs and with medical camps for the local population.

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 sustaining them in the future.

In Projects like Hygiene, Sanitation, Safe Drinking Water, Local Government Representatives such as Block Development Officers are also involved for Govt. funding & Technical knowhow of the projects.

A number of tree planting initiatives were also carried out in government schools located in surrounding villages, along with maintenance activities like repairing roofs and boundary walls.

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CREATING SUSTAINABLE BUSINESSES,MAKING A DIFFERENCE TO THE LIVES OF STAKEHOLDERS

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MEASURE OF OURSUCCESS?

?

SO WHAT REALLY IS THE TRUE

OURRELATIONSHIPS

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FINANCIAL HIGHLIGHTS AND KEY RATIOS

Financial Highlights

(Rupees in crores)

Particulars 2004-05 2005-06 2006-07 2007-08 2008-09

Sales (Nos.) 26,21,400 30,00,751 33,36,756 33,37,142 37,22,000

Growth in sales (nos.) - % 26.6 14.5 11.2 0.01 11.53

Total net income 7,559 8,870 10,090 10,517 12,540

Growth in total income - % 26.1 17.4 13.7 4.2 19.2

Profit before tax 1,217 1,412 1,246 1,410 1,781

Profit after tax 810 971 858 968 1,282

Share capital 39.94 39.94 39.94 39.94 39.94

Reserves and surplus 1,453 1,969 2,430 2,946 3,761

Total debt 202 186 165 132 78

Net fixed assets 715 994 1,355 1,549 1,694

Total assets (net) 1,695 2,195 2,635 3,118 3,879

Market capitalisation 10,943 17,781 13,753 13,869 21,390

EVA 564 641 485 575 835

Key Ratios

Particulars 2004-05 2005-06 2006-07 2007-08 2008-09

Long term debt/Equity Nil Nil Nil Nil Nil

OPBDIT*/Income from operations-% 16.0 16.0 12.2 13.3 14.2

OPBT**/Income from operations-% 14.8 14.6 10.8 11.8 12.7

Profit after tax/ Income from operations-% 10.9 11.1 8.6 9.3 10.4

Return on average equity- % 61.6 55.5 38.3 35.5 37.8

Return on average capital employed- % 80.9 72.3 51.6 49.0 50.9

EVA/Capital employed-% 37.5 32.9 20.1 20.0 23.9

Dividend per share (Rs.) 20.0 20.0 17.0 19.0 20.0

Dividend Payout- % 56.3 46.9 46.3 45.9 36.5

Earning per share (Rs.) 40.6 48.6 43.0 48.5 64.2

Market value/book value (times) 7.3 8.8 5.6 4.6 5.6

Notes:

* OPBDIT: Operating Profit before Depreciation, Interest and Tax

** OPBT: PBT before Other income

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A N N U A L R E P O R T 0 8 - 0 9

CORPORATEINFORMATION

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.

Cost Accountants,

BL-4 (Paschmi), Shalimar Bagh

Delhi 110 088

Tel. : 011-2748 1904, 4702 8048

Email: arrricon@gmail.com

Technical & Financial Collaborator

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 & Share Transfer Agents

Karvy Computershare Pvt. Ltd.

Plot No. 17-24, Vithalrao Nagar,

Madhapur, Hyderabad 500 081

Tel.: 040-2342 0815-820

Fax : 040-2342 0814

Email: mailmanager@karvy.com

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,

I.I.E. SIDCUL,

Roshanabad, Haridwar 248 001

Uttrakhand

Tel.: 01334-239 513

Fax : 01334-239 512

(Rupees in crores)

DIRECTORS’ REPORTthWe, the Directors of Hero Honda Motors Limited are delighted to present the 26 Annual Report for the Silver Jubilee Year. The Report is

being presented along with the Audited Statement of Accounts for the financial year ended March 31, 2009.

FINANCIAL RESULTS

For the year ended

March 31, 2009 March 31, 2008

Gross Sales 13,543.09 12,038.53

Net Sales and other Income 12,539.84 10,517.22

Profit before Finance charges and Depreciation 1,930.44 1,534.79

Less: Finance charges (31.68) (35.81)

Depreciation 180.66 160.32

Profit before tax (PBT) 1781.46 1410.28

Less: Provision for tax

- Current 475.65 436.81

- Deferred 19.06 1.20

- Fringe Benefit Tax (FBT) 4.99 4.39

Profit after tax (PAT) 1,281.76 967.88

Add: Balance of profit brought forward 2,021.77 1,594.78

Balance available for appropriation 3,303.53 2,562.66

Appropriations

Dividend

- Proposed Final 399.38 379.41

Corporate Dividend Tax 67.87 64.48

Transfer to General Reserve 129.00 97.00

Balance carried to Balance Sheet 2,707.28 2,021.77

Dividend (%) 1,000 950

Basic and Diluted Earnings Per Share (EPS)(Rs.) 64.19 48.47

The Audited statement of accounts for the year ended March 31, 2009 is attached along with the Report.

(Rupees in crores)

ECONOMIC VALUE ADDED (EVA) STATEMENT

2004-05 2005-06 2006-07 2007-08 2008-09

Average Cap Employed 1,504 1,945 2,415 2,877 3,499

Average Debt/Average Capital (%) 1.8 1.3 1.1 1.1 0.6

Average Equity/Average Capital (%) 98.2 98.7 98.9 98.9 99.4

Cost of Debt (% post-tax ) 0.7 1.0 0.6 0.9 1.6

Cost of Equity

Beta 1.01 0.98 0.75 0.59 0.59

Cost of Risk Free Debt (%) 6.7 7.52 8.15 7.94 6.99

Market Premium (%) 10 10 10 10 10

Cost of Equity (%) 16.74 17.32 15.65 13.83 12.85

EVA

Profit after Tax 810.47 971.34 857.89 967.88 1281.76

Add: Interest*(1-tax rate) 1.22 1.85 1.02 1.32 1.67

NOPAT= PAT + Interest*(1-t) 812 973 859 969 1283

Cost of Capital 247 333 374 394 448

EVA 564 641 485 575 835

Return on Capital Employed (%) 54.0 50.0 35.6 33.7 36.7

Weighted Average Cost of Capital (%) 16.5 17.1 15.5 13.7 12.8

EVA/Capital employed (%) 37.5 32.9 20.1 20.0 23.9

ENTERPRISE VALUE

Market Capitalisation 10943 17781 13753 13869 21390

Add: Debt 202 186 165 132 78

Less: Financial Assets 2044 2221 2010 2698 3588

EV (Enterprise Value) 9101 15746 11909 11303 17880

EV/Yr. End Capital Employed (Times) 5.4 5.9 4.5 3.6 4.6

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A N N U A L R E P O R T 0 8 - 0 9

BUSINESS PERFORMANCE

During the year under review your Company, despite a

slowdown in the two wheeler industry, achieved the 11.53 per

cent growth in annual sales by clocking the sales volume of

3,722,000 units compared to 3,337,142 units in 2007-08. In

value terms total sales (net of excise duty) increased by 19.2 per

cent to Rs.12,319 crores from Rs.10,332 crores in 2007-08. Your

Company consolidated its leadership position in domestic motor

cycle market with 57 percent market share. The Company

successfully launched eight new models including variants

during the year under review.

On the financial front, total income of the Company grew by

19.2 per cent from Rs. 10,517 crores in previous year to

Rs. 12,540 crores during 2008-09. The Company posted a Profit

after tax (PAT) of Rs. 1,282 crores, compared to Rs. 968 crores in

the previous fiscal, a growth of 32 per cent. The Company's

earnings before interest depreciation and taxes (EBITDA) margins

increased from 13.33 per cent in 2007-08 to 14.16 per cent in

2008-09. The improvements on the margins was accomplished

through better sales realizations, effective cost rationalisation

measures which included better control over material cost,

marketing cost and overheads, apart from sharp focus on

operational efficiencies.

During the year, Hero Honda also retained for the eighth year in a

row, its position as the World's Number One Two Wheeler

Company.

A detailed discussion on the business performance and future

outlook has been given in the chapter on Management

Discussion & Analysis.

DIVIDEND

Very few manufacturing companies in the Indian corporate

sector have a better dividend payout record than Hero Honda.

We are pleased to recommend a Dividend of 1000 per cent i.e.

Rs. 20 per equity share of Rs. 2 aggregating to Rs. 399.38 crores

(exclusive of corporate dividend tax) for your approval for the

financial year ended March 31, 2009. 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. 129 crores have been transferred to the General

Reserve of the Company. This reaffirms the inherent financial

strength of the Company.

MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments affecting the financial

position of the Company have occurred between April 1, 2009

and the date on which this Report has been signed.

BOARD OF DIRECTORS

During the period under review, 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. Meleveetil Damodaran was appointed as an Additional

Director in the Non-Executive and Independent Category w.e.f.

June 16, 2008 and Mr. N.N.Vohra resigned from the Board w.e.f.

June 24, 2008 on his being appointed as Governor of the state of

Jammu & Kashmir. Mr. Arun Nath Maira was appointed as an

Additional Director w.e.f. December 20, 2008. Since he has been

appointed as member of Planning Commission, he resigned

from the Board of the Directors on July 23, 2009. The members

while congratulating Mr. Maira, has accepted his resignation in

the Meeting of Board of Directors held on July 29, 2009.

Mr. Sunil Bharti Mittal resigned from the Directorship on April 21,

2009.

The Board places on record its sincere appreciation and gratitude

for the guidance and 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

wishes them a successful and fruitful tenure with the Company.

At the ensuing Annual General Meeting, Gen. (Retd.) V.P. Malik,

Mr. Brijmohan Lall Munjal, Mr. Sunil Kant Munjal and Mr. Takashi

Nagai 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 of the

Directors, who are to be re-appointed has been furnished after

the notes 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, 2009, the applicable accounting standards

have been followed;

2. that appropriate accounting policies have been selected and

applied consistently and judgments 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, 2009 and

of the Profit of the Company for the financial year ended

March 31, 2009;

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, 2009

have been prepared on a going concern basis.

MANAGEMENT DISCUSSION & ANALYSIS

A detailed chapter on, 'Management Discussion and Analysis'

(MDA), pursuant to Clause 49 of the Listing Agreement is

annexed and forms part of this Report.

CORPORATE SOCIAL RESPONSIBILITY

At Hero Honda, Corporate Social Responsibility (CSR)

encompasses much more than social outreach programs and is

an integral part of the way the Company conducts its business.

Detailed information on the initiatives of the Company towards

CSR activities is provided in the Social Responsibility section of

the MDA.

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

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 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 seven 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 risk

assessment and its minimization. It ensures that all the Risks are

timely defined and mitigated in accordance with the well

structured Risk Management Process. The Audit Committee and

Board reviews periodically the Risk Management Process.

RATINGS

The rating agency ICRA Limited, has reviewed and reaffirmed the

rating assigned to the Company for its Non-convertible

Debenture Programme as LAAA [pronounced “L triple A”]

indicating the highest credit quality and A1+ [pronounced “A

one Plus”] for its Non-fund based facilities and LAAA

[pronounced “L triple A”] to Fund based facilities indicating the

highest credit quality rating carrying lowest credit risk.

The rating agency CRISIL, during the year under review assigned

the bank loan ratings of “AAA/Stable” and P1+ to the Cash Credit

Limit & Letter of Credit Limit facility respectively to your Company.

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FIXED DEPOSITS

During the year under review, the Company has not accepted

any deposit under Section 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 re-appointment. 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 2009-10 and necessary application for obtaining the

requisite approval has been filed with the Government. The Cost

Auditors' Report for 2008-09 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, 2009 the total number of employees on the

records of the Company was 4513.

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 “People and

Environment” of MDA, 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) (iv) 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

Sr. G.M. Legal & Company Secretary at the Registered Office of

the Company.

ACKNOWLEDGEMENT

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 Ltd. 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

Brijmohan Lall

Chairman

New Delhi

July 29, 2009

ANNEXURE - I TO DIRECTORS' REPORT

CORPORATE GOVERNANCE REPORT

Philosophy on 'Code of Corporate Governance'

Hero Honda's philosophy of Corporate Governance stems from

a 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. In turn, these

resources are leveraged 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 benchmarking 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 of Stock Exchanges.

BOARD OF DIRECTORS

Composition of the Board

As on March 31, 2009, the Company's Board of Directors

comprised of Sixteen Directors. Four Directors, including the

Chairman, are Executive; four are Non-Executive and eight are

Non-Executive and Independent. Fifty per cent of the Board

consists of Independent Directors, 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.

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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. Sumihisa Fukuda (Technical Director in the Whole-

time employment of the Company), 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 comprises of Non-Executive and

Independent Directors.

Board Meetings

During 2008-09, the Board of Directors met 4 (four) times on April

24, 2008; July 29, 2008; October 21, 2008 and January 20, 2009.

Number of Board Attendance at Number of Committee Number of Committee Number of outside Meetings held during last AGM Memberships Chairmanships held Directorships held

his/her tenure and (including Chairman

Name of Director attended by him/her ships) held

Held Attended (excluding Private Companies, Foreign Companies andSection 25 Companies)

Executive Directors

Mr. Brijmohan Lall Munjal 4 4 Yes None None 9Mr. Pawan Munjal 4 4 Yes None None 2Mr. Toshiaki Nakagawa 4 4 Yes None None 1

2Mr. Yutaka Kudo 1 1 N.A. None None 13Mr. Sumihisa Fukuda 3 3 Yes None None 1

Non-Executive Directors Mr. Om Prakash Munjal 4 Nil No None None 10Mr. Sunil Kant Munjal 4 4 Yes None None 14Mr. Masahiro Takedagawa 4 Nil No 1 None 2

1Mr. Satoshi Matsuzawa 4 4 No None None None

Non-Executive and Independent Directors

4Mr. Narinder Nath Vohra 1 1 N.A. 2 1 1Mr. Pradeep Dinodia 4 4 Yes 8 4 8Gen. (Retd.) V.P. Malik 4 4 Yes 4 None 3Mr. Analjit Singh 4 2 No None None 13Dr. Pritam Singh 4 4 No 3 None 5Ms. Shobhana Bhartia 4 1 No 2 2 14Mr. Sunil Bharti Mittal 4 1 No 2 2 7

5Mr. Meleveetil Damodaran 3 2 No None None 36Mr. Arun Nath Maira 1 1 N.A. 1 1 5

Notes:

1. Mr. Satoshi Matsuzawa was appointed as an Alternate Director to Mr. Takashi Nagai w.e.f. April 24, 2008.

2. Mr. Yutaka Kudo resigned from the Directorship and Whole-time Directorship on May 31, 2008.

3. Mr. Sumihisa Fukuda was appointed as an Additional Director and Technical Director in the Whole-time employment of the Company w.e.f. June 1, 2008.

4. Mr. Narinder Nath Vohra resigned from the Directorship on June 24, 2008.

5. Mr. Meleveetil Damodaran was appointed as an Additional Director on the Board w.e.f. June 16, 2008.

6. Mr. Arun Nath Maira was appointed as an Additional Director on the Board w.e.f. December 20, 2008.

TABLE 1: DETAILS ABOUT COMPANY'S BOARD OF DIRECTORS / ATTENDANCE RECORD DURING FINANCIAL YEAR 2008-09 The longest gap between any two Board Meetings was for a

period of 3 months and 4 days.

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;

• is not less than 21 years of age.

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. 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 Category No. of

shares held

Mr. Om Prakash Munjal Non-Executive Director 25,000

Mr. Sunil Kant Munjal Non-Executive Director 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 urgencies, 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;

• 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.;

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• 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 i.e.

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) and Chief Financial

Officer (CFO) to this effect is attached to the Annual Report.

Risk Management

We at Hero Honda have established 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 that have 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, 2009, the Committee had three 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 and Gen.(Retd.) V.P. Malik, 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

- the annual financial statements with the management 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.

- the quarterly financial statements with the management

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; and

- 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, Sr. G.M. Legal & Company Secretary acts as the

Secretary of the Committee.

During the year, 7 (Seven) meetings of the Audit Committee

were held on April 07, 2008; April 24, 2008; June 02, 2008; July

29, 2008; October 21, 2008; January 08, 2009 and January 20,

2009 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 Position No. of No. of

member held meetings meetings

held during attended

his tenure

Mr. Pradeep Dinodia Chairman 7 7

Gen. (Retd.) V.P.Malik Member 7 7

Dr. Pritam Singh Member 7 5

1Mr. N.N.Vohra Member 3 2

1. Mr. Narinder Nath Vohra has resigned from the Directorship

on June 24, 2008.

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, 2009, the Committee had two Non-Executive

and Independent Directors as its members in accordance with

the prescribed guidelines. Gen. (Retd.) V.P. Malik, is the

Chairman of the Committee and Mr. Pradeep Dinodia is the

member of the Committee. Mr Ilam C. Kamboj, Sr. G.M. Legal &

Company Secretary acts as the Secretary of the Committee.

During the year, 2 (two) meetings of the Remuneration

Committee were held on May 12, 2008 and December 2, 2008.

TABLE 3: DETAILS OF THE REMUNERATION COMMITTEE

Name of Committee Position No. of No. of

member held meetings meetings

held during attended

his tenure

Gen. (Retd.) V.P.Malik Chairman 2 2

Mr. Pradeep Dinodia Member 2 2

1Mr. N.N.Vohra Member 1 1

1. Mr. Narinder Nath Vohra has resigned from the Directorship

on June 24, 2008.

Remuneration Policy

Remuneration paid to Executive Director

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

Directors 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.

Tables 4 and 5 gives details of remuneration paid to Directors.

During 2008-09, the Company did not advance any loans to any

of its Directors.

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TABLE 5: REMUNERATION TO NON-EXECUTIVE DIRECTORS

Non-Executive Directors Sitting fees (Rs.) Commission (Rs.) Total (Rs.)

Mr. Sunil Kant Munjal 66,000 N.A. 66,000

Mr. Pradeep Dinodia 2,80,500 10,25,000 13,05,500

1 #Mr. Satoshi Matsuzawa Nil N.A. Nil

2Mr. Meleveetil Damodaran 33,000 1,00,000 1,33,000

3Mr. Narinder Nath Vohra 82,500 3,25,000 4,07,500

Gen.(Retd.) V.P. Malik 2,14,500 7,25,000 9,39,500

Dr. Pritam Singh 2,14,500 7,00,000 9,14,500

Mr. Analjit Singh 33,000 1,00,000 1,33,000

4Mr. Arun Nath Maira 16,500 50,000 66,500

Ms. Shobhana Bhartia 16,500 1,00,000 1,16,500

#Mr. Sunil Bharti Mittal Nil N.A. Nil

#Mr. Masahiro Takedagawa Nil N.A. Nil

No sitting fee was paid to Mr. Om Prakash Munjal as he did not attend any of the meetings of the Board held during the financial

year 2008-09.

# Mr. Sunil Bharti Mittal, Mr. Masahiro Takedagawa and Mr. Satoshi Matsuzawa (Alternate Director to Mr. Takashi Nagai), have

opted not to receive sitting fees which were accrued to them on account of attending the meetings of the Board.

1. Mr. Satoshi Matsuzawa has been appointed as an Alternate Director to Mr. Takashi Nagai w.e.f. April 24, 2008.

2. Mr. Meleveetil Damodaran was appointed as an Additional Director on the Board w.e.f. June 16, 2008.

3. Mr. Narinder Nath Vohra has resigned from the Directorship on June 24, 2008.

4. Mr. Arun Nath Maira was appointed as an Additional Director on the Board w.e.f. December 20, 2008.

SHAREHOLDERS' GRIEVANCE COMMITTEE

This Committee, constituted on January 16, 2001, specifically

looks to redress shareholders' and investors' grievances arising

out of issues regarding share transfers, dividends,

dematerialisation and related matters.

As on March 31, 2009, the Committee had two Non-Executive

and Independent Directors as its members in accordance with

the prescribed guidelines. Dr. Pritam Singh is the Chairman of the

Committee. The other member of the Committee is Mr. Pradeep

Dinodia. Mr Ilam C. Kamboj, Sr. G.M. Legal & Company

Secretary, acts as the Secretary of the Committee.

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, queries etc. along with letters received

from all statutory authorities were reviewed.

During the year, 4 (four) meetings of the Shareholders' Grievance

Committee were held on April 24, 2008; July 29, 2008; October

21, 2008 and January 20, 2009.

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 6.

TABLE 6: DETAILS OF SHAREHOLDERS' GRIEVANCE COMMITTEE

Name of Committee Position No. of No. of

member held meetings meetings

held during attended

his tenure

1Mr. N.N. Vohra Chairman 1 1

2Dr. Pritam Singh Chairman 4 4

Mr. Pradeep Dinodia Member 4 4

1. Mr. Narinder Nath Vohra has resigned from the Directorship

on June 24, 2008.

2. Dr. Pritam Singh was appointed as Chairman w.e.f. July 29,

2008.

COMMITTEE OF DIRECTORS

Apart from these Committees, the Company also has a

Committee of Directors. As on March 31, 2009, the Committee

comprised of Mr. Brijmohan Lall Munjal, Chairman; Mr. Pawan

Munjal, Managing Director & CEO; Mr. Toshiaki Nakagawa, Joint

Managing Director; Mr. Sumihisa Fukuda, Technical Director in

the whole-time employment of the Company; Mr. Ravi Sud, Sr.

Vice President & CFO and Mr. Ilam C. Kamboj, Sr. 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 2 (two) meetings of the Committee were held.

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 , Sr. G.M. Legal

& Company Secretary are its members.

This Committee usually meets whenever required. During the

year under review 15 (fifteen) 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.

TABLE 4: REMUNERATION TO EXECUTIVE DIRECTORS

Executive Directors Salary* (Rs.) Commission (Fixed) ** (Rs.) Total (Rs.)

Mr. Brijmohan Lall Munjal 11,828,384.00 186,100,000.00 197,928,384.00

Mr. Pawan Munjal 10,767,535.95 186,100,000.00 196,867,535.95

Mr. Toshiaki Nakagawa 4,721,406.00 186,100,000.00 190,821,406.00

1Mr. Yutaka Kudo 919,221.00 30,591,780.00 31,511,001.00

2Mr. Sumihisa Fukuda 3,143,210.00 154,998,356.00 158,141,566.00

Notes:

1. Mr. Yutaka Kudo resigned from the Directorship and Whole-time Directorship on May 31, 2008.

2. Mr. Sumihisa Fukuda was appointed as an Additional Director and Technical Director in the whole-time employment of the Company

w.e.f. June 1, 2008.

* 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.

64/65

A N N U A L R E P O R T 0 8 - 0 9

A N N U A L R E P O R T 0 8 - 0 9

Year Time, Day, Date & Location Summary of Resolutions Passed 2007-08 11:00 A.M.

Thursday,September 25, 2008Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010

2006-07 10:30 A.M.Tuesday, July 24, 2007,Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010

2005-06 04:30 P.M.Thursday, September 14, 2006,Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110010

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 7.

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 7: DETAILS OF AGM'S

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.

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 before the Board of Directors of the Company in their

meeting held on April 21, 2009. A copy of the same certificate on

the financial statements for the financial year ended March 31,

2009 and the Code of Conduct is given along with this Report.

APPOINTMENT AND RE-APPOINTMENT OF DIRECTORS

Gen. (Retd.) V.P. Malik, Mr. Brijmohan Lall Munjal, Mr. Sunil Kant

Munjal and Mr. Takashi Nagai, Directors of the Company, retire

by rotation at the ensuing Annual General Meeting (AGM) and

being eligible, offer themselves for re-appointment.

The brief resume of the said Directors proposed to be

re-appointed is being provided along with the Notice of the

AGM which is 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,

2008) and annual results (year ended March 31, 2009) 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 etc).

Results for the quarter ended June 30, 2008 and December 31,

2008 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 etc).

Further, the Company's quarterly, half yearly 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, 2009 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

web-site www.corpfiling.com. 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, 2009, 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.

Ordinary Resolutions• Appointment of Mr. Sumihisa Fukuda Director & as Technical Director in the

Whole-time employment of the Company.• Appointment of Mr. Meleveetil Damodaran as Director.

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).

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.

66/67

GENERAL SHAREHOLDER'S INFORMATION

Annual General Meeting

Date: September 22, 2009

Day: Tuesday

Time: 04:30 P.M.

Venue: Sri Satya Sai International Centre,

Pragati Vihar, Lodhi Road, New Delhi 110 003

Financial Calendar

Financial year: April 1 to March 31

For the year ended March 31, 2009 results were announced on:

First quarter ended June 30, 2008 July 29, 2008

Second quarter and half year ended September 30, 2008 October 21, 2008

Third quarter ended December 31, 2008 January 20, 2009

Fourth quarter and year ended March 31, 2009 April 21, 2009

For the year ending March 31, 2010, results will be announced on: (Tentative and subject to change)

First quarter ending June 30, 2009 July, 2009 (3rd week)

Second quarter and half year ending September 30, 2009 October, 2009 (3rd week)

Third quarter ending December 31, 2009 January, 2010 (3rd week)

Fourth quarter and year ending March 31, 2010 April, 2010 (3rd week)

Book closure

The dates of book closure are from Tuesday, September 1, 2009

to Friday, September 4, 2009 (both days inclusive).

Dividend payment

The Board of Directors has recommended 1000 per cent

dividend for the financial year 2008-09. The dividend, if

approved by shareholders at the ensuing AGM shall be paid to

those shareholders whose names appear on the Register of

Members as on Friday, September 4, 2009. 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 Monday, August 31, 2009 as per details furnished by

the Depositories for this purpose.

Listing on Stock Exchange

As on March 31, 2009, the securities of the Company are listed

on the following exchanges:

1. Bombay Stock Exchange Limited, (BSE) based at Phiroz thJeejeebhoy Towers, 25 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 fees for the year 2009-10 has been paid to the stock

exchanges, wherein the equity shares of the Company are listed

(i.e. BSE & NSE) within the stipulated time.

Stock Codes

The Company's stock codes at the primary exchanges are:

Stock Code Reuters Code Bloomberg

BSE 500182 HROH.BO HH IN

NSE HEROHONDA HROH.NS 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 NSE & BSE is given in Table 8.

TABLE 8: SHARE PRICE DATA FOR 2008-09 (IN RS.) (SHARES OF RS. 2 PAID UP VALUE)

National Stock Exchange of India Limited, Mumbai (NSE)

Month Total High Date Volume on Low Date Volume onVolume that date that date

Quantity (In Rs.) Quantity (In Rs.) Quantity

April'08 4655726 867.70 29-Apr-08 558930 694.00 01-Apr-08 269683

May'08 4933922 865.00 02-May-08 342126 732.35 30-May-08 258499

June'08 3963125 835.00 11-Jun-08 178037 663.00 25-Jun-08 218902

July'08 5792164 808.90 31-Jul-08 619127 632.50 16-Jul-08 183679

August'08 5810646 848.00 05-Aug-08 642626 770.25 01-Aug-08 244947

September'08 10533296 890.00 04-Sep-08 618649 740.00 12-Sep-08 306664

October'08 12005090 898.00 03-Oct-08 751098 661.10 27-Oct-08 427550

November'08 10086006 823.70 28-Nov-08 845901 691.25 21-Nov-08 685629

December'08 9203005 842.80 19-Dec-08 550335 720.05 02-Dec-08 533848

January'09 8965518 890.00 29-Jan-09 601241 751.25 09-Jan-09 462178

February'09 8047182 999.60 10-Feb-09 431505 861.25 02-Feb-09 271465

March'09 12605701 1103.85 27-Mar-09 934713 896.00 3-Mar-09 315750

HERO HONDA'S SHARE PRICE MOVEMENT VIS A VIS NIFTY HHML VS NSE NIFTY (Monthly High)

HHML NIFTY

750.00

850.00

950.00

1050.00

1150.00

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

2008-2009

Share

Pri

ce

2750.00

3000.00

3250.00

3500.00

3750.00

4000.00

4250.00

4500.00

4750.00

5000.00

5250.00

5500.00

Nif

ty

68/69

A N N U A L R E P O R T 0 8 - 0 9

Bombay Stock Exchange Limited, Mumbai (BSE)

Month Total High Date Volume on Low Date Volume onVolume that date that date

Quantity (In Rs.) Quantity (In Rs.) Quantity

April'08 639777 864.90 30-Apr-08 113310 694.00 1-Apr- 08 60292

May'08 334551 865.00 02-May-08 115328 725.00 26-May-08 21998

June'08 224745 829.00 11-Jun-08 37777 665.00 25-Jun-08 70725

July'08 862112 809.80 31-Jul-08 325055 630.15 16-Jul-08 44219

August'08 491203 880.00 25-Aug-08 22605 760.00 4-Aug-08 47831

September'08 2589650 888.00 08-Sep-08 75124 786.05 18-Sep-08 79027

October'08 441782 894.80 03-Oct-08 58267 663.00 27-Oct-08 34734

November'08 533828 813.75 28-Nov-08 40467 690.00 21-Nov-08 82221

December'08 1081591 840.00 19-Dec-08 265638 725.00 02-Dec-08 80932

January'09 204170 887.35 30-Jan-09 40497 755.00 09-Jan-09 81872

February'09 1678661 950.00 18-Feb-09 48819 863.05 05-Feb-09 27109

March'09 716582 1098.00 27-Mar-09 90266 889.00 04-Mar-09 47324

HERO HONDA’S SHARE PRICE MOVEMENT VIS A VIS SENSEX .(Monthly High)

750.00

800.00

850.00

900.00

950.00

1000.00

1050.00

1100.00

1150.00

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

2008-2009

Sh

are

Pri

ce

9000.00

10000.00

11000.00

12000.00

13000.00

14000.00

15000.00

16000.00

17000.00

18000.00

19000.00

20000.00

Se

nse

x

HHML Sensex

Distribution of Shareholding by Size

Table 9 lists the distribution of Shareholding by number of shares held, Shareholding Pattern (pursuant to Clause 35 of the Listing Agreement) and consolidated shareholding pattern in percentage as on March 31, 2009.

TABLE 9

No. of shares held (Rs.2 paid up) Folios Shares of Rs. 2 paid up

Numbers % Numbers %

Upto 500 34092 77.93 3483765 1.74

501 - 1000 7146 16.33 5413633 2.71

1001-5000 1778 4.06 3532117 1.77

5001-10000 188 0.43 1352834 0.68

10001-50000 275 0.63 6862665 3.44

50001 and above 268 0.61 179042486 89.66

TOTAL 43747 100.00 199687500 100.00

Shareholding Pattern

Sl. No. CATEGORY Number of Number of Number of PercentageShareholders Shares Held Shares Dematted

A PROMOTERS

1 Indian 67 57833555 52524695 28.96

2 Foreign 1 51918750 0 26.00

B PUBLIC SHAREHOLDING

1 Mutual Funds / UTI 158 9430549 9358434 4.72

2 Financial Institutions / Banks 23 62496 42441 0.03

3 Insurance Companies 33 9613873 9613873 4.81

4 Foreign Institutional Investors 489 53983362 53945162 27.03

5 Bodies Corporate 696 1169640 1134074 0.59

6 Indian Public 41525 13893018 8456049 6.96

7 Trusts 14 1185232 1185232 0.59

8 Clearing Members 107 415910 415910 0.21

9 Non Resident Indians 634 181115 181045 0.09

Grand Total 43747 199687500 136856915 100.00

Consolidated Shareholding Pattern

Category No. of Holders % to Total Total Shares % to Equityholders

Physical 9407 21.50 62830585 31.46

NSDL 28816 65.87 135779847 68.00

CDSL 5524 12.63 1077068 0.54

TOTAL 43747 100.00 199687500 100.00

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A N N U A L R E P O R T 0 8 - 0 9

TABLE 10: COMPLAINTS/REQUESTS RECEIVED AND REDRESSED DURING 2008-09

SL. NO NATURE OF COMPLAINTS/ REQUESTS OPENING RECEIVED CLEARED PENDING

1. Non receipt of shares 1 188 189 0

2. Request for issue of duplicate shares 0 56 56 0

3. Non receipt of dividend warrant 0 692 692 0

4. Change of address 0 287 287 0

5. Mandate cases/bank description 0 82 82 0

6. Miscellaneous 0 1997 1997 0

Dematerialisation of Shares and Liquidity

The shares of the Company are traded in compulsory demat

segment. As on March 31, 2009, 68.54 per cent of the total

share capital is held in dematerialised form with National

Securities Depository Limited (NSDL) and Central Depository

Services (India) Limited (CDSL). During the year under review,

share certificates involving 2,73,646 shares of Rs. 2 each, were

dematerialised by the shareholders. These represent 0.14

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, M/s. Karvy Computershare Private Limited. The

communication address of the Registrar and Transfer Agents is as

follow:

Karvy Computershare Private Limited.

(Unit: Hero Honda Motors Limited)

Plot No. 17-24, Vithalrao Nagar,

Madhapur, Hyderabad-500 081,

Tel No : 040-2342 0815-820, Fax : 040-2342 0814

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 whenever required. The total number of shares

transferred during the financial year 2008-09 were 39,960

which were completed in the prescribed period. Shares under

objection were returned within two weeks time.

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 10 lists

the complaints/requests/queries received and redressed during

2008-09. 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.

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

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: 01274-264 012-15

Fax: 01274-267 024

Haridwar Plant

Plot No. 3, Sector – 10,

I.I.E., SIDCUL,

Roshanabad, Haridwar 248 001

Uttrakhand

Tel: 01334-239513

Fax: 01334-239512

NON-MANDATORY REQUIREMENTS

The Company has not adopted the non-mandatory

requirements as specified in Annexure – IA of the Listing

Agreement except clause (b) relating to Remuneration

Committee.

Investors' Correspondence may be addressed to

Mr. Ilam C. Kamboj

Sr. G.M. Legal & Company Secretary & Compliance Officer,

e-mail: ickamboj@herohonda.com or

to the Registrar & Transfer Agents i.e

Karvy Computershare Pvt. Limited

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

BRIJMOHAN LALL

Chairman

June 10, 2009

New Delhi

72/73

A N N U A L R E P O R T 0 8 - 0 9

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, 2009, 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

Manjula Banerji

Partner

(Membership No. 86423)

Place: New Delhi

Date : June 10, 2009

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, 2009 and all its schedule and notes on accounts, as well as the Cash Flow Statement.

2. 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.

4. 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.

5. 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;

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 2008-09.

For Hero Honda Motors Ltd. For Hero Honda Motors Ltd.

New Delhi,April 21, 2009

Pawan Munjal Managing Director & CEO

Ravi SudSr. Vice President & CFO

74/75

A N N U A L R E P O R T 0 8 - 0 9

A N N U A L R E P O R T 0 8 - 0 9

- T.A. & COP for Safety Critical Components - Phase-II & III

- EMC

- Mass Emission Norms (BS-IV)

- Safety Related Standards

- E-10 Compliance (on-going)

- Spray Suppression

4. Expenditure on R & D

(Rupees in Crores)

Particulars Year Ended Year EndedMarch 31, 2009 March 31, 2008

i) Capital 8.59 19.42

ii) Recurring 23.71 18.78

iii) Total R & D expenditure 0.26 0. 37as a percentage of sale(as per P & L A/c) (%)

B) Technology Absorption, Adaptation and Innovation

1 Efforts in brief, made towards technology absorption, adaptation and innovation

More parts development Approval in India

2. 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 last five years the Company's ancillaries have imported technologies regarding Emission Devices - Cat. Converter, Digital Speedometer, Gear Primary Driven (Forging), Cast Wheel, CV Carb., Drive Chain (Solid Bush type), Fuel Injection, RTMI (Real Time Mileage Indicator), Non-Asbestos Brake Shoe & Gaskets, Migration from Hexachrome to Trichrome, Low Friction High F.E Engine Technology, LED Lighting Device, Self Sealing - Puncture Resistance Wheel Tube, Rear Cushion with Reservoir Tank and Emission Devices - Low Cost Cat. Converter etc.

III. FOREIGN EXCHANGE EARNINGS AND OUTGO

A) Export Activities / Initiatives To Increase Exports / Development Of New Export Markets / Export Plans

EXPORT INTIATIVES 2008-09

During the year under review, your Company exported 81,194 two-wheelers, a decline of 10 per cent. There was no significant growth in exports as per projection and no new markets were added. The proposal for Development of new markets is being discussed with Honda Motors Co., Ltd., Japan.

The Company however was successful in launching Splendor NXG Self start; Passion Pro and New CBZ in Srilanka & Bangladesh markets which helped it to improve its share in the markets. For the first time, Glamour with fuel injection technology was launched in Sri Lanka. Further, Splendor NXG was launched in Columbia resulting in improved market share of the Company in Columbia's market. The Pleasure scooter was introduced to the Bangladesh market for the first time during the previous financial year.

The Company successfully organised a Customer meet with Brand Ambassadors in Sri Lanka in a promotional campaign during the Cricket test matches. The Company also initiated the process of Training the technical and sales staff for the Export Markets. The Company is focusing on improved after sales service, through automation of workshops and process improvements in each market.

EXPORT PLAN FOR 2009-10

• Concentrate on existing market for business growth.

• Maintain leadership in Bangladesh and to achieve No. 1 position in other markets also.

• Promotional activities through campaigns, contests etc.

• Strengthening of after sale service back up.

• Focus on training process.

B) EARNINGS & OUTGO

Foreign exchange earnings during the period under report was Rs. 248.11 crores, compared to Rs. 243.64 crores in the previous year.

On account of Royalty, Technical Guidance Fee, Model Fee, Export Commission, Travel and other accounts, Advertisement and Publicity, the foreign exchange outgo was Rs. 377.80 crores, compared to Rs. 332.49 crores in the previous year, a growth of 13.63 per cent.

The outgo on account of Dividend was Rs. 98.65 crores compared to Rs.88.26 crores in the previous year.

Outgo for import of components, spare parts, raw materials and capital goods outgo was Rs. 476.05 crores compared to Rs. 574.06 crores in the previous year.

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, 2009;

I. CONSERVATION OF ENERGY

a) Techno-economic viability of few energy saving proposals are being carried out and few proposals have been already implemented

Energy conservation measures taken and their impact

- Power consumption has been reduced with the following measures taken during the year under review

• Replacement of CT Fan Blades FRP Blades

• Reduction in usage of Cooling Towers from 2 to 1 thereby reducing the Pumps required to run the Cooling towers from 6 to 4

• Replacement of tube lights with CFL Bulbs in ignored areas of the plant with effective reflector, maintaining same lux level.

• Erection and Commissioning of RO Plant

• Installation of Automatic Power Factor Control Panel for controlling and regulating the Load on Generators

• Automation of Boilers

• Automatic Blowdown

• Oxygen Trimming

• Lighting Automation

- Power generation cost has been reduced with Waste Heat Recovery System installation done to utilize the waste heat from the MAN DG sets

- Fuel consumption has been reduced with use of Effimax System

b) 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

• Study scope of vapour Absorption System

• Waste Heat Recovery Boiler

• Installation of Waste Heat Recovery Unit at HHD as well

- For the reduction in power generation cost, installation of more and more HPS DG Sets has been envisaged.

- For effective resource utilization it has been decided to Study of transmission and distribution losses to reduce the same and installation of vapor absorption chiller machine for air conditioning.

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 year.

d) Total energy consumption and energy consumption per unit of production as per Form - A is given in Table - A.

II. PARTICULARS AS PER FORM B

(A) RESEARCH & DEVELOPMENT(R&D)

1 Specific areas in which R & D carried out by the Company

• New Model Technology Absorption

• 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

• Launched Passion Pro (100 cc - 4 Stroke), CBZ-Extreme (150cc - 4 Stroke), Pleasure New Aesthetics, Splendor NXG (Self Start), CD Deluxe (Self Start), Glamour FI, Glamour (Carb.), HUNK Special Edition;

• 198 Multi source Components and 6 new sources added for existing models;

• Indigenisation of 10 items was done during the year;

• Compliance to the Regulations

• T.A. & COP for Safety Critical Components - Phase-I (AIS-037 : Tyres, Brake Hose, Horns)

• E-10 Compliance (on-going)

• BS-III Compliance ground work.

3 Future plan of action

• New Model Launch

• Indigenisation plan, 8 more items to be localised

• Participation at different Forums for formation of two wheeler Regulations in India & GTRs.

• Compliance Plan for Future Regulations :-

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DETAILS OF DIRECTORS OF HERO HONDA MOTORS LIMITED

Name of Director Status Directorship held Committee Committee Membership Chairmanship

Mr. Brijmohan Lall Munjal EC Easy Bill Limited NIL NILHero Cycles LimitedHero Honda Finlease LimitedHero Honda Motors LimitedMunjal Auto Industries Limited Munjal Showa LimitedShivam Autotech LimitedSunbeam Auto LimitedBCM Energies (P) LimitedBML Investments (P) LimitedMunjal Bros. (P) Limited

Mr. Pawan Munjal MD & CEO Hero Honda Finlease Limited NIL NILHero Honda Motors LimitedHero Investment (P) Limited

Mr. Toshiaki Nakagawa JMD Hero Honda Finlease Limited NIL NILHero Honda Motors Limited

Mr. Sumihisa Fukuda TD Hero Honda Finlease Limited NIL NILHero Honda Motors Limited

Mr. Om Prakash Munjal NED Easy Bill Limited NIL NILHero Cycles LimitedHero Financial Services LimitedHero Global Design LimitedHero Honda Finlease LimitedHero Honda Motors LimitedHero Motors LimitedHighway Industries Limited Majestic Auto Limited Munjal Auto Industries Limited Shivam Autotech LimitedMunjal Bros (P) LimitedRoma Cycle Manufacuturing Co. (P) Limited

Mr. Sunil Kant Munjal NED Abhyuday Manufacturing & Automotive Limited NIL NILArrow Infrastructure LimitedDCM Shriram Consolidated LimitedEasy Bill LimitedHero Corporate Services LimitedHero Cycles LimitedHero Honda Motors LimitedHero Life Insurance Company LimitedHero Management Service LimitedHero Mindmine Institute LimitedHero Motors LimitedSatyam Auto Components LimitedShivam Autotech LimitedWeave Engineering and Design LimitedBahadurchand Investments (P) LimitedBML Investments (P) LimitedThakurdevi Hydro (P) LimitedThakurdevi Investments (P) Limited

TABLE - A

TOTAL ENERGY CONSUMPTION AND ENERGY CONSUMPTION PER UNIT OF PRODUCTION AS PER FORM - A FOR GURGAON, DHARUHERA AND HARIDWAR PLANT(S) OF THE COMPANY.

Particulars Gurgaon Plant Dharuhera Plant Haridwar Plant

Current Previous Current Previous Current Previous Year Year Year Year Year Year

A Power and Fuel consumptionper unit of Production

Product Unit (Two Wheeler) 1558928 1660865 1533141 1672595 629775 NA

1. Electricity

(a) Purchased Units (KWH) Nil Nil 6710089 5426026 15093925 NA

Total Amount (Rs.) Nil Nil 29,233,697 23,464,923 61,543,296 NA

Rate/unit (Rs.) Nil Nil 4.36 4.32 4.08 NA

(b) Own generation Through Diesel Generator Units

Self (KWH) 55883492 56115270 40998530 41664025 414700 NA

Hired (KWH) Nil Nil Nil Nil Nil NA

Unit per ltr. of Diesel Oil Cost/Unit

Self (KWH / Ltr.) 4.02 4.08 4.19 4.12 3.66 NA

Hired (KWH / Ltr.) Nil Nil Nil Nil Nil NA

2. Furnace Oil, HSD etc. ** * **

Quantity (K.ltrs) 109.956 159.201 1,765.062 2,067.888 171.485 NA

Total Amount (Rs.) 2,758,011 4,398,916 43,450,167 41,704,620 5,108,834 NA

Average Rate/ Ltrs. (Rs.) 25.08 27.63 24.62 20.17 29.79 NA

B Consumption per unit of Production

1. Electricity (KWH / Veh.) 35.85 33.79 31.12 28.15 24.63 NA

2. Furnace Oil, HSD etc.(Ltr./ Veh.) 0.07 0.10 1.15 1.24 0.27 NA

* fuels (Furnace Oil/HSD) used in direct production (Boiler) of two wheeler only

** fuels (Furnace Oil/HSD) used in direct production (Hot Water Generator) of two wheeler only

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Delhi Guest Houses Private LimitedDoon Holiday Resorts Private LimitedDynavest India Private LimitedLeo Retaling and Health Services Private LimitedMohair Investments and Trading Co. (P) LimitedMV Healthcare Services Private LimitedNurture Health Services Private LimitedScorpios Beverages Private LimitedTerra Planet Estates Private LimitedTrophy Estates Private LimitedTrophy Holdings Private LimitedUrban Space Consultants Private LimitedVeer Health Services Private LimitedVitasta Estates Private Limited

Ms.Shobhana Bhartia NEID Air Travel Bureau LimitedBritex (India) LimitedFirefly e-Ventures LimitedGoldmerry Investment & Trading Co. LimitedHero Honda Motors LimitedHT Media Limited Audit CommitteeHT Music and Entertainment Co. LimitedHTL Investment & Trading Co. LimitedNilgiri Plantation LimitedRonson Traders LimitedShradhanjali Investment & Trading Co. LimitedThe Hindustan Times Limited Audit CommitteeUdit (India) LimitedUsha Flowell LimitedYashovardhan Investment & Trading Co. LimitedEarthstone Holding Private LimitedEarthstone Holding (one) Private LimitedEarthstone Holding (two) Private LimitedEarthstone Holding (three) Private Limited

Mr. Meleveetil Damodaran NEID Hero Honda Motors Limited Shareholders'Grievance Committee

Tech Mahindra LimitedSREI Sahaj e-Village LimitedING Vysya Bank Limited ING Investment Management (India) Private Limited

Notes:

EC : Executive Director

MD : Managing Director

JMD : Joint Managing Director

TD : Technical Director

NED : Non-Executive Director

NEID: Non-Executive & Independent Director

Details of Directorships is as on July 29, 2009

Mr. Masahiro Takedagawa NED Hero Honda Motors LimitedHonda Siel Cars India Limited Honda Siel Power Products Limited Audit CommitteeHonda Motor India Private Limited Honda Motorcycle & Scooters India (P) Limited

Mr. Takashi Nagai NED Hero Honda Motors LimitedHonda Motorcycle & Scooters India (P) Ltd.

Gen. (Retd.) V.P. Malik NEID BSES Rajdhani Power Limited Audit CommitteeBSES Yamuna Power Limited Audit CommitteeHero Honda Motors Limited Audit CommitteeReliance Infrastructure Limited Audit Committee

Mr. Pradeep Dinodia NEID DCM Shriram Consolidated Limited Audit Committee Shareholders'Grievance Committee

DFM Foods Limited Audit CommitteeHero Corporate Services Limited Audit CommitteeHero Honda Motors Limited Shareholders' Audit Committee

Grievance Committee

JK Lakshmi Cement LimitedMicromatic Grinding Technologies LimitedShriram Pistons & Rings Limited Audit Committee

Shareholders'Grievance Committee

SPR International Auto Exports LimitedUltima Finvest Limited

Dr. Pritam Singh NEID Delhi Stock Exchange LimitedDena Bank LimitedDish TV India Limited Audit CommitteeGodrej Properties LimitedHero Honda Motors Limited Audit Committee Shareholders'

Grievance Committee

Parsvnath Developers Limited

Mr. Analjit Singh NEID Dabur India Limited NIL NILGrow Talent Company LimitedHero Honda Motors LimitedIDBI LimitedMalsi Estates LimitedMalsi Holdings LimitedMax Bupa Health Insurance Limited Max Healthcare Institute LimitedMax India LimitedMax Neeman Medical International LimitedMax New York Life Insurance Company LimitedTata Tea LimitedVodfafone Essar LimitedBAS Enterprises Private LimitedBoom Investments Private LimitedCapricon Health Services Private Limited Capricon Retailing and Services Private Limited

Name of Director Status Directorship held Committee Committee Membership Chairmanship

Name of Director Status Directorship held Committee Committee Membership Chairmanship

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RESULTS2008-2009

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FINANCIAL

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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, 2009 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.

2. 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.

3. 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.

4. 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, 2009 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, 2009;

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 the Cash Flow Statement, of the cash

flows for the year ended on that date.

FOR A.F. FERGUSON & CO.Chartered Accountants

Manjula BanerjiPartner(Membership number: 86423)

Place: New DelhiDate: April 21, 2009

(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 programme of physically verifying all of its fixed assets over a period of three years and in accordance therewith, physical verification of certain fixed assets of the Company was carried out during the 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. The discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.

(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 the 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 register maintained under Section 301 of the Companies Act, 1956, other than unsecured loans aggregating Rs. 545.50 crores granted to a company covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount due during the year was Rs. 210 crores and there is no amount outstanding at the year end.

(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 party, to whom the loans have been granted by the Company, as referred to in paragraph 4(iii)(a) above, has been regular in repayment of principal amount as stipulated and has 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, paragraph 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 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 or 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.

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, 2009.

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(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.

(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, sales tax, customs duty, and cess, which have not been deposited. The following are the particulars of excise duty, service tax and income-tax dues not deposited/ deposited under protest by the Company on account of disputes as at March 31, 2009:-

(x) The Company does not have accumulated losses at the end of the financial year March 31, 2009. Further, the Company has not incurred any cash losses during the financial year ended March 31, 2009 and in the immediately preceding financial year ended March 31, 2008.

(xi) 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.

(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.

(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 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) During the course of our examination of the books of account and records of the Company, carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year ended March 31, 2009 nor have we been informed of such case by the management.

For A.F. FERGUSON & CO.Chartered Accountants

Manjula BanerjiPartner(Membership No.: 86423)

Place: New DelhiDate : April 21, 2009

Name of the Statute Nature of dues Amount* Amount paid Period to which (Rs. in crores) under protest the amount relates dispute is pending

(Rs. in crores)

Central Excise Laws Excise Duty 9.03 0.09 2000,2002-03 to CESTAT2004-05

0.14 - 2005-06 Commissioner (Appeals)

Service Tax 1.90 0.45 2004-05 to 2005-06 CESTAT

Income Tax Act Income Tax 9.61 9.61 2000-01 to 2001-02 Income Tax Appellate Tribunal

128.61 52.90** 2001-02 to 2004-05 Commissioner (Appeals)

* Amount as per demand orders including interest and penalty wherever quantified in the order.** Balance of unpaid demand has been stayed.

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

Forum where

Name of the Statute Nature of the dues Amount Period to which Forum where dispute (Rs. in crores) amount relates is pending

Central Excise Laws Excise Duty 2.57 1986-87 to 1990-91 Supreme Court

Income Tax Act Income Tax 8.18 1987-88, 1989-90, 1992-93 High Court1993-94, 1995-96, 1996-971998-99, 2000-01

12.30 1999-00, 2001-02 Income Tax Appellate Tribunal

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Per our report attachedFor A. F. FERGUSON & CO.Chartered Accountants

MANJULA BANERJIPartnerMembership no. 86423

New Delhi April 21, 2009

For and on behalf of the Board of Directors

BRIJMOHAN LALL MUNJAL Chairman

PAWAN MUNJAL Managing Director & CEO

PRADEEP DINODIA Director

RAVI SUD Sr. Vice President & CFO

ILAM C. KAMBOJ Sr. G.M. Legal & Company Secretary

HERO HONDA MOTORS LIMITED

BALANCE SHEET AS AT MARCH 31, 2009(Rupees in crores)

Schedule As at March As at March

No. 31, 2009 31, 2008

SOURCES OF FUNDS

SHAREHOLDERS' FUNDS

Share capital 1 39.94 39.94

Reserves and surplus 2 3,760.81 2,946.30

3,800.75 2,986.24

LOAN FUNDS 3

Unsecured 78.49 132.00

78.49 132.00

DEFERRED TAX LIABILITIES 9 153.08 130.59

TOTAL 4,032.32 3248.83

APPLICATION OF FUNDS

FIXED ASSETS 4

Gross block 2,516.27 1938.78

Less: Depreciation 942.56 782.52

Net block 1,573.71 1156.26

Capital work in progress 120.54 392.44

1,694.25 1548.70

PRE - OPERATIVE EXPENSES (PENDING ALLOCATION) 5 - 16.05

INVESTMENTS 6 3,368.75 2566.82

DEFERRED TAX ASSETS 9 8.65 5.22

CURRENT ASSETS, LOANS AND ADVANCES 7

Inventories 326.83 317.10

Sundry debtors 149.94 297.44

Cash and bank balances 219.57 131.09

Other current assets 5.89 5.69

Loans and advances 311.26 185.46

1,013.49 936.78

Less: CURRENT LIABILITIES AND PROVISIONS 8

Current liabilities 1,525.85 1324.98

Provisions 526.97 499.76

2,052.82 1824.74

Net current assets (1,039.33) (887.96)

TOTAL 4,032.32 3248.83

Notes to the accounts 13

Per our report attached to the balance sheetFor A. F. FERGUSON & CO.Chartered Accountants

MANJULA BANERJIPartnerMembership no. 86423

New Delhi April 21, 2009

For and on behalf of the Board of Directors

BRIJMOHAN LALL MUNJAL Chairman

PAWAN MUNJAL Managing Director & CEO

PRADEEP DINODIA Director

RAVI SUD Sr. Vice President & CFO

ILAM C. KAMBOJ Sr. G.M. Legal & Company Secretary

HERO HONDA MOTORS LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009(Rupees in crores)

Schedule Year Ended Year Ended

No. March 31, 2009 March 31, 2008

INCOME

Gross sales 13,543.09 12,038.53

Less: Excise duty 1,223.97 1,706.73

Net sales 12,319.12 10,331.80

Other income 10 220.72 185.42

12,539.84 10,517.22

EXPENDITURE

Manufacturing and other expenses 11 10,609.40 8,982.43

Depreciation 4 180.66 160.32

Interest (net) 12 (31.68) (35.81)

10,758.38 9,106.94

Profit for the year before tax 1,781.46 1,410.28

Provision for taxation

- current 475.65 436.81

- deferred 19.06 1.20

- fringe benefit 4.99 4.39

Profit after tax 1,281.76 967.88

Balance of profit brought forward 2,021.77 1,594.78

Balance available for appropriation 3,303.53 2,562.66

APPROPRIATIONS

Proposed dividend 399.38 379.41

Tax on dividend 67.87 64.48

Transfer to general reserve 129.00 97.00

Balance carried to balance sheet 2,707.28 2,021.77

3,303.53 2,562.66

Basic and diluted earnings per share face value Rs. 2/-each (in rupees) 64.19 48.47

Notes to the accounts 13

(Rupees in crores)

Year ended Year ended March 31, 2009 March 31, 2008

HERO HONDA MOTORS LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009(Rupees in crores)

Year ended Year endedMarch 31, 2009 March 31, 2008

A. CASH FLOW FROM OPERATING ACTIVITIESNet profit before tax 1,781.46 1,410.28

Adjustments for:

Add: Depreciation 180.66 160.32

Loss on fixed assets sold/discarded 3.57 4.36

Exchange differences (0.64) (0.98)

Loss on sale of non-trade current investments 38.89 19.54

Provision for diminution in value of investment:

Current non trade investment 0.20 1.29

Long term non trade investment 12.49 1.28

Interest - others and financial charges 2.53 2.00

Provision for doubtful debts/ written back (0.75) 4.59

236.95 192.40

Less: Interest received on long term non-trade investments 22.04 12.81

Interest received on loans, deposits etc. 34.21 37.81

Profit on sale of fixed assets 0.19 0.09

Dividend income

On current Investments - Non-trade 12.77 4.24

On long-term investments-Trade 2.72 2.72

Profit on sale of non-trade investments

On current investments 184.32 152.45256.25 210.12

Operating profit before working capital changes 1,762.16 1,392.56

Adjustments for:

Add: Increase / (decrease) in trade payables 111.95 185.64

Increase in security deposits from dealers 0.89 2.04

112.84 187.68

Less: Increase /(decrease) in trade and other receivables 4.60 (115.05)

Increase in inventories 9.74 41.52

14.34 (73.53)

Cash generated from operations 1,860.66 1,653.77

Less:Direct taxes paid 501.63 441.99

Net cash from operating activities 1,359.03 1,211.78

B. CASH FLOW FROM INVESTING ACTIVITIES

Sale of fixed assets 1.54 1.03

Sale of investments 18,042.65 13,703.86

Inter corporate deposits received back 545.50 190.00

Interest received on long term non-trade investments 21.84 10.72

Interest received on loans, deposits etc. 34.21 37.81

Dividend income

On current investments-Non-trade 12.77 4.24

On long-term investments-Trade 2.72 2.72

18,661.23 13,950.38

Less: Purchase of fixed assets 315.08 374.92

Inter corporate deposits paid 495.50 190.00

Purchase of investments 18,711.84 14,166.47

19,522.42 14,731.39

Net cash (used) in investing activities (861.19) (781.01)

C. CASH FLOW FROM FINANCING ACTIVITIES

Interest paid - others and financial charges 2.53 2.00

Dividend paid 379.41 339.47

Tax on dividend 64.48 57.69

Repayment of long term borrowings 53.51 33.17

499.93 432.33

Net cash (used) in financing activities (499.93) (432.33)

D. Increase/(decrease) in cash and cash equivalents (A+B+C) (2.09) (1.56)

Cash and cash equivalents at the beginning of the year 15.19 16.66

Cash and cash equivalents at the end of the year

Cash and bank balances 13.45 15.19

Unrealised exchange loss/(gain) (0.35) (0.09)

13.10 15.10

Notes to the accounts Schedule 13

Per our report attached to the balance sheetFor A. F. FERGUSON & CO.Chartered Accountants

MANJULA BANERJIPartnerMembership no. 86423

New Delhi April 21, 2009

For and on behalf of the Board of Directors

BRIJMOHAN LALL MUNJAL Chairman

PAWAN MUNJAL Managing Director & CEO

PRADEEP DINODIA Director

RAVI SUD Sr. Vice President & CFO

ILAM C. KAMBOJ Sr. G.M. Legal & Company Secretary

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SCHEDULES 1 to 13 ANNEXED TO AND FORMING PART OF THE ACCOUNTS

1) SHARE CAPITAL (Rupees in crores)

As at March As at March

31, 2009 31, 2008

AUTHORISED

25,00,00,000 (Previous year 25,00,00,000 )

Equity shares of Rs. 2 each 50.00 50.00

4,00,000 (Previous year 4,00,000 ) Cumulative

convertible preference shares of Rs. 100 each 4.00 4.00

4,00,000 (Previous year 4,00,000 ) Cumulative

redeemable preference shares of Rs. 100 each 4.00 4.00

58.00 58.00

ISSUED, SUBSCRIBED AND PAID UP

19,96,87,500* (Previous year 19,96,87,500) Equity

shares of Rs. 2 each fully paid up 39.94 39.94

39.94 39.94

* 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.

2) RESERVES AND SURPLUS

(Rupees in crores)

As at Additions Deductions As at

March 31,2008 March 31, 2009

CAPITAL RESERVES

On shares forfeited (#Rs. 4250) # - - #

Share premium account on forfeited

shares reissued(##Rs. 25500) ## - - ##

REVENUE RESERVES

General reserve 924.53 129.00 - 1,053.53

Surplus, being balance in profit

and loss account 2,021.77 685.51 - 2,707.28

2,946.30 814.51 3,760.81

Previous year 2,430.12 523.99 7.81* 2,946.30

* Adjustment of employee benefit schemes as per revised accounting standard AS 15, net of deferred tax assets of Rs Nil (Previous Year Rs. 4.03 crores)

HERO HONDA MOTORS LIMITED

4) FIXED ASSETS

(Rupees in crores)

Gross block (at cost) Depreciation Net block

As at Additions Deductions As at As at For the On As at As at As at

March March March year deductions March March March

31, 2008 31, 2009 31, 2008 31, 2009 31, 2009 31, 2008

Tangible assets

Land

- Freehold 80.79 3.16 - 83.95 - - - - 83.95 80.79

- Leasehold # 81.80 - - 81.80 1.67 0.83 - 2.50 79.30 80.13

Buildings 212.14 203.46 0.03 415.57 35.43 12.51 0.03 47.91 367.66 176.71

Plant and machinery 1,294.15 340.39 17.32 1,617.22 592.90 123.26 14.42 701.74 915.48 701.25

Furniture, fixtures and

office equipment 19.35 8.03 0.54 26.84 5.82 1.55 0.20 7.17 19.67 13.53

Vehicles 21.13 8.73 2.33 27.53 6.43 3.87 0.99 9.31 18.22 14.70

Computer and data

processing machines 46.93 15.21 5.32 56.82 32.39 5.76 4.98 33.17 23.65 14.54

Intangible assets

- Model fee 182.49 24.05 - 206.54 107.88 32.88 - 140.76 65.78 74.61

Total 1,938.78 603.03 25.54 2,516.27 782.52 180.66 20.62 942.56 1,573.71

Previous year 1,800.63 157.51 19.36 1,938.78 635.10 161.48 @ 14.06 782.52 1,156.26

Capital work in progress {including capital advances Rs. 37.21 crores (Previous year Rs. 73.39 crores)} 120.54 392.44

1,694.25 1,548.70

Note :

# Include land at Haridwar pending registration in the name of the Company.

@ Includes Rs. Nil (Previous year Rs. 1.16 crores) transferred to Pre- operative expenditure (pending allocation)

3) LOAN FUNDS

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

UNSECURED LOANS

Other loans and advances

Sales tax deferment from the

State Government of Haryana 78.49 132.00

(Include Rs. 12.45 crores (previous year Rs. 53.51 crores) due within one year)

78.49 132.00

92/93

20000000 (previous year 20000000) units in FMP Series43-Thirteen Months

Plan D Retail Growth 20.00 20.00

20000000 (previous year Nil) units in FMP Series 42-Fifteen Months

Plan Institutional Growth 20.00 -

15000000 (previous year Nil) units in FMP Series 42-Thirteen Months Plan

D Institutional Growth 15.00 -

10000000 (previous year Nil) units in FMP Series 44-One Year Plan A Institutional Growth 10.00 -

10000000 (previous year Nil) units in FMP Series 46-One Year Plan A Institutional Growth 10.00 -

5480736 (previous year Nil) units in Institutional Income Plan Growth 15.06 -

58499249 (previous year Nil) units in Floating Rate Plan D-Growth 75.55 -

22894268 (previous year Nil) units in Long Term Floating Rate Plan C-Growth 22.93 -

8998489 (previous year Nil) units in Income Opportunities Fund Institutional -Growth 9.05 -

51430640 (previous year Nil) units in Short Term Plan Cumulative Option 93.06 -

Nil (previous year 70000000) units in Equity & Derivatives Fund-Income

Optimiser -Institutional Growth - 70.00

Birla Sunlife Mutual Fund

Nil (previous year 20000000) units in FTP -INSTL-Series U-Growth - 20.00

Nil (previous year 15000000) units in FTP -INSTL-Series V-Growth - 15.00

Nil (previous year 20000000) units in Qtly Interval-Series 5-Growth - 20.00

30000000 (previous year 30000000) units in FTP-INSTL-Series AK-Growth 30.00 30.00

Nil (previous year 24475250) units in Interval Income Fund -INSTL-Quarterly-Series 2-Growth - 25.00

Nil (previous year 4227865) units in Income Plus-Growth - 15.00

10000000 (previous year Nil) units in FTP-INSTL-Series AZ-Growth 10.00 -

HDFC Mutual Fund

25000000 (previous year 25000000) units in FMP 18M November 2007

(VI) Wholesale Plan- Growth 25.00 25.00

30000000 (previous year 30000000) units in FMP 18M January 2008

(VII) Wholesale Plan- Growth 30.00 30.00

42046745 (previous year Nil) units in High Interest Fund -Short Term Plan-Growth 70.01 -

28447832 (previous year Nil) units in Short Term Plan-Growth 47.46 -

Nil (previous year 18100000) units in Arbitrage Fund-Wholesale Plan-Growth - 18.10

IDFC MUTUAL FUND

Nil (previous year 20000000) units in fixed maturity Plan - Yearly Series 8-Growth - 20.00

17433600 (previous year Nil) units in SSIF-ST-Plan D-Growth 20.00 -

157067324 (previous year Nil) units in Money Manager Fund -Treasury

Plan -Super Inst Plan C-Growth 161.03 -

Nil (previous year 9641249) units in Arbitrage Fund-Plan B-Growth - 10.00

Nil (previous year 24488468) units in Arbitrage Fund-Plan B-Dividend - 25.35

Tata Mutual Fund

Nil (previous year 12000000) units in S I P Fund -Scheme I-Growth - 12.00

Nil (previous year 19143885) units in Dynamic Bond Fund Option B-Growth - 25.00

Nil (previous year 20000000) units in Fixed Horizon Fund Series 17

Scheme D-Institutional Plan -Growth - 20.00

5) PRE-OPERATIVE EXPENDITURE (PENDING ALLOCATION)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

Consumption of raw materials and components 0.19 0.19

Consumption of stores and spares 0.05 0.05

Power and fuel 5.73 5.73

Payments to and provisions for employees:

Salaries, wages, bonus, gratuity and

leave encashment benefit 4.12 4.12

Contribution to provident and other funds 0.33 0.33

Rent 0.09 0.09

Exchange fluctuation 0.82 0.82

Insurance 0.53 0.53

Rates and Taxes 0.45 0.45

Technical guidance fee 0.40 0.40

Professional charges 2.18 2.18

Depreciation 1.16 1.16

16.05 16.05

Less: Allocated to fixed assets and capital work in progress 16.05 -

- 16.05

6) INVESTMENTS

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

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 30000000) units in FMP Series 34-Fifteen Months Plan -Institutional -Growth - 30.00

Nil (previous year 20000000) units in FMP Series 34-One Year Plan B Institutional Growth - 20.00

Nil (previous year 25000000) units in FMP Series36-Eighteen Months Plan B -Institutional Growth - 25.00

Nil (previous year 25000000) units in Interval Fund II Quarterly Interval Plan C-Retail Cumulative - 25.00

Nil (previous year 40000000) units in FMP Series 39-Six Months Plan A Retail Cumulative - 40.00

25000000 (previous year 25000000) units in FMP Series41-Fourteen Months Plan

Institutional Cumulative 25.00 25.00

Nil (previous year 15000000) units in FMP Series42-Three Months Plan A Retail Growth - 15.00

12500000 (previous year 12500000) units in FMP Series43-Thirteen Months

Plan B Institutional Growth 12.50 12.50

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

94/95

A N N U A L R E P O R T 0 8 - 0 9

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

Nil (previous year 15000000) units in Fixed Income Portfolio Fund

Scheme A2 Institutional -Growth - 15.00

Nil (previous year 15000000) units in Fixed Income Portfolio Fund

Scheme B2 Institutional -Growth - 15.00

Nil (previous year 24740431) units in Floating Rate Fund Long Term-Growth - 30.00

19173646 (previous year Nil) units in Fixed Investment Plan -2

Scheme-A-Institutional Plan -Growth 19.17 -

Kotak Mutual Fund

Nil (previous year 15000000) units in FMP 15 M Series 2 -Growth - 15.00

Nil (previous year 20000000) units in FMP 12 M Series 4 Institutional-Growth - 20.00

Nil (previous year 51056254) units in FMP 3 M Series 26-Growth - 51.05

Nil (previous year 7124384) units in Bond (Short Term)-Growth - 10.00

15000000 (previous year Nil) units in FMP 13 M Series 5-Growth 15.00 -

94909187 (previous year Nil) units in Floater Long Term -Growth 130.54 -

Frankilin Templeton Investments

20000000 (previous year 20000000) units in Fixed Horizon Fund

Series VII -Plan D -Institutional -Growth 20.00 20.00

20000000 (previous year Nil) units in Fixed Horizon Fund Series IX -Plan B -Growth 20.00 -

HSBC Mutual Fund

60820129 (previous year Nil) units in Floating Rate Fund

-Long Term Plan-Institutional Option -Growth 83.02 -

Fortis Mutual Fund

Nil (previous year 5000000) units in FTPS5 14 Mths Plan Inst Growth - 5.00

Nil (previous year 5000000) units in Fixed Term Plan -Ser-8-Yly Plan A -Inst. Growth - 5.00

Nil (previous year 9572584) units in Flexible short Term Plan -Ser A Gr.-Renewal - 10.00

Nil (previous year 33542575) units in Interval Fund Quarterly Plan H Growth-Ren - 35.00

Nil (previous year 15000000) units in FTP Ser 10 Plan F Inst. Growth - 15.00

Nil (previous year 40256676) units in Flexi Debt Fund -Regular -Growth - 50.00

52684375 (previous year Nil) units in Money Plus Institutional -Growth 66.56 -

15000000 (previous year Nil) units in FTP Ser 10 Plan F Inst. Growth 15.00 -

15000000 (previous year Nil) units in FTP Ser 14 Plan C Inst. Growth 15.00 -

Deutsche Mutual Fund

Nil (previous year 5000000) units in Fixed Term Fund-Series 24-Institutional Plan-Growth Option - 5.00

70000000 (previous year Nil) units in DWS Fixed Term Fund Series 52- Institutional Growth 70.00 -

ING Vysya Mutual Fund

Nil (previous year 5000000) units in Fixed Maturity Fund series xxii -Growth option - 5.00

Nil (previous year 5000000) units in Fixed Maturity Fund- xxviii -Growth - 5.00

Reliance Mutual Fund

Nil (previous year 10000000) units in Fixed Tenor Fund Plan B -Growth Plan - 10.00

Nil (previous year 5000000) units in Fixed Horizon Fund- Institutional Plan

C -Series I-Institutional Growth Plan - 5.00

Nil (previous year 25000000) units in Fixed Horizon Fund III- Annual Plan

Series IV-Institutional Growth Plan - 25.00

23553564 (previous year 10000000) units in Annual Interval Fund

-Series1-Institutional Growth Plan 25.00 10.00

25000150 (previous year 25000000) units in Fixed Horizon

Fund IV -Series 6-Institutional Growth Plan 28.09 25.00

29999911 (previous year 30000000) units in Fixed Horizon Fund IV

-Series 7-Institutional Growth Plan 33.51 30.00

Nil (previous year 46542367) units in Monthly Interval Fund

-Series II-Institutional Growth Plan - 50.00

Nil (previous year 5000000) units in Fixed Horizon Fund -VI

-Series 2-Institutional Growth Plan - 5.00

12500000 (previous year 12500000) units in Fixed Horizon Fund -IX

-Series 1-Institutional Growth Plan 12.50 12.50

19999989 (previous year 20000000) units in Fixed Horizon Fund VII

-Series 5-Institutional Growth Plan 22.05 20.00

40030230 (previous year Nil) units in Fixed Horizon Fund XII -Series 3

-Super Institutional Plan-Growth 40.03 -

60045345 (previous year Nil) units in Fixed Horizon Fund XII

-Series 4-Super Institutional Plan-Growth 60.05 -

17904653 (previous year Nil) units in Income Fund -Retail Plan

-Growth Plan -Growth Option 52.04 -

Religare Mutual Fund

20000000 (previous year 20000000) units in FMP-14 Months -Series II-Institutional Growth 20.00 20.00

20000000 (previous year 20000000 ) units in FMP-14 Months -Series III-Institutional Growth 20.00 20.00

Fidelity Mutual Fund

5000000 (previous year Nil) units in Flexi Gilt Fund -Growth 5.00 -

(Units of the face value of Rs. 100 each)

Reliance Mutual Fund

68781 (previous year 68781) units in Gold ETF -Open Ended Scheme 7.00 7.00

(Units of the face value of Rs. 1000 each)

AIG Global Investment Group Mutual Fund

Nil (previous year 150000) units in Short Term Fund Institutional Growth - 15.00

DSP BlackRock Mutual Fund

Nil (previous year 606525) units in Strategic Bond Fund -Institutional- Growth - 61.39

Nil (previous year 250000) units in Fixed Term Plan Series 3D-Institutional-Growth - 25.00

Nil (previous year 50000) units in Fixed Term Plan Series 3H-Institutional Growth - 5.00

Repurchase Price Rs. 1555.16 crores (previous year Rs. 1302.86 crores) 1,501.21 1,249.89

96/97

A N N U A L R E P O R T 0 8 - 0 9

Fund of Funds

(Units of the face value of Rs. 10 each)

Optimix Mutual Fund

Nil (previous year 21612178) units of Active Debt Multi -Manager FOF scheme- Growth - 21.61

Nil (previous year 14000000) units of Dynamic Multi- Manager FOF scheme -Series 3-Growth - 14.00

Nil (previous year 13300000) units of Dynamic Multi- Manager FOF scheme -Series 4-Growth - 13.30

Nil (previous year 5000000) units of Active Short Term FOF -Growth - 5.00

Fortis Mutual Fund

Nil (previous year 15000000) units in Multi Manager Fund Series 2A Growth - 15.00

Nil (previous year 5000000) units in Multi Manager Fund Series 3- Growth - 5.00

DSP BlackRock Mutual Fund

3690582 (previous year Nil) units in World Gold Fund -Growth 5.00 -

AIG Mutual Fund

5000000 (previous year Nil) units in World Gold Fund Growth 5.00 -

10.00 73.91

Less: Provision for diminution in Value (0.91) -

Repurchase Price Rs. 9.09 crores (previous year Rs. 76.46 crores) 9.09 73.91

Equity fund

(Units of the face value of Rs. 10 each)

Escorts Mutual Fund

24888747 (previous year 21839119) units in Opportunities Fund -Dividend 31.16 29.41

2439024 (previous year 2439024) in units of High Yeild Equity Plan-Dividend 2.50 2.50

2000000 (previous year 3000000) in units of Infrastructure Fund-Growth 2.00 3.00

Optimix Mutual Fund

Nil (previous year 25000000) units in Multi-Manager Equity fund - Option A-Growth - 25.00

Fortis Mutual Fund

Nil (previous year 5000000) units in Sustainable Development Fund - Growth - 5.00

Birla Mutual Fund

Nil (previous year 4000000) units in Long Term Advantage Fund Series 1 - Growth - 4.00

Nil (previous year 10000000) units in Special Situations Fund - Growth - 10.00

JP Morgan Mutual Fund

Nil (previous year 1955990) units in India Smaller Companies Fund- Growth Plan - 2.00

Tata Mutual Fund

Nil (previous year 7000000) units in Indo-Global Infrastructure Fund- Growth - 7.00

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

LIC Mutual Fund

Nil (previous year 3000000) units in Infrastructure Fund- Growth Plan - 3.00

ICICI Prudential Mutual Fund

60975610 (previous year Nil) units in Equity & Derivatives Fund-Income

Optimiser -Institutional Growth 66.47 -

IDFC Mutual Fund

13304241 (previous year Nil) units in Arbitrage Fund-Plan B-Growth 14.49 -

24488469 (previous year Nil) units in Arbitrage Fund-Plan B-Dividend 25.35 -

20764327 (previous year Nil) units in Arbitrage Plus Fund-Plan B-Growth 21.46 -

HDFC Mutual Fund

44409641 (previous year Nil) units in Arbitrage Fund-Wholesale Plan-Growth 47.65 -

211.08 90.91

Less: Provision for diminution in value - (1.87)

Repurchase Price Rs. 214.94 crores (previous year Rs. 89.04 crores) 211.08 89.04

Liquid fund

(Units of the face value of Rs. 10 each)

ICICI Prudential Mutual Fund

212663052 (previous year 115809498) units in Institutional Liquid Plan

-Super Institutional Growth 275.13 137.80

Birla Sunlife MutualFund

Nil (previous year 43365134) units in Cash Plus- Institutional Premium-Growth - 56.00

Reliance Mutual Fund

211168475 (previous year 111112150) units in Liquidity Fund- Growth Option 279.50 135.00

Kotak Mutual Fund

Nil (previous year 14710840) units in Liquid (Institutional Premium)- Growth - 24.00

Fortis Mutual Fund

Nil (previous year 104536055) units in Money Plus Institutional Growth - 125.01

93523069 (previous year Nil) units in Overnight- Institutional Plus-Growth 102.00 -

Religare Mutual Fund

Nil (previous year 31498614) units in Liquid Fund -Super Institutional Growth - 35.00

HDFC Mutual Fund

101578892 (previous year Nil) units in Liquid Fund -Premium Plan -Growth 178.11 -

Principal Mutual Fund

14192863 (previous year Nil) units in Cash Management Fund

-Liquid Option Instl.Prem.Plan-Growth 19.50 -

98/99

A N N U A L R E P O R T 0 8 - 0 9

Fortis Mutual Fund

27154982 (previous year Nil) units in Flexi Debt Fund Regular Daily Div 26.28 -

6076810 (previous year Nil) units in Money Plus Fund IP Growth 8.00 -

Repurchase price Rs. 36.33 crores (previous year Rs. 95.67 crores) 36.15 94.11

Liquid Fund

(Units of the face value of Rs.10 each)

ICICI Prudential Mutual Fund

Nil (previous year 8448391) units in liquid Plan Super institutional Growth Option - 10.04

Escorts Mutual Fund

718478 (previous year 2825896 ) units in Liquid Plan Growth 0.88 3.31

HDFC Mutual Fund

220928 (previous year 7646722) units in Cash Management Fund Savings Plan 0.40 12.73

Birla Mutual Fund

21756507 (previous year Nil) units in Savings Fund -Inst -Growth 36.07 -

(Units of the face value of Rs.1000 each)

Reliance Mutual Fund

258332 (previous year Nil) units in Liquid Plus Fund Instt -Growth Plan 30.19 -

UTI Mutual Fund

78241 (previous year Nil) units in Treasury Advantage Fund -Institutional Plan -Growth 9.00 -

Repuchase price Rs. 77.56 crores (previous year Rs. 26.34 crores) 76.54 26.08

Debentures

50 (previous year 50) Bonds Citicorp finance NCD SR 187 of Rs 980000 each 4.90 4.90

(Debentures of face value of Rs. 100 each)

Reliance Blended Debt Plus -Hybrid Option -Series II- Nil (previous year 500000)

Debentures of Citicorp Finance (India) Ltd NCDS Series 163 - 5.00

Reliance Blended Debt Plus -Hybrid Option -Series VII-1000000

(previous year 1000000) Debentures of DSP Merrill Lynch Capital Ltd Series 2007/EQ 10.00 10.00

Reliance Blended Debt Plus -Hybrid Option -Series X-1000000

(previous year 1000000) Debentures of DSP Merrill Lynch Capital Ltd Series 2008/AM 10.00 10.00

Reliance Blended Debt Plus -Hybrid Option -Series XII-1000000

(previous year Nil) Debentures of CitiFinancial Consumer Finance India Limited Series 338 10.00 -

Reliance Blended Debt Plus -Hybrid Option -Series XIIIB-1000000

(previous year Nil) Debentures of CitiFinancial Consumer Finance India Limited Series 359 10.00 -

Reliance Blended Debt Plus -Hybrid Option -Series XIVA-1000000 (previous year Nil)

Debentures of CitiFinancial Consumer Finance India Limited Series 394 10.00 -

100000 units (previous year Nil) 8.55% IRFC NCD 9.97 -

(Debentures of face value Rs. 100000 each)

18300 (previous year Nil) Non Convertibile Debentures Emerald Wealth Management 183.00 -

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

(Units of the face value of Rs. 1000 each)

DSP BlackRock Mutual Fund

Nil (previous year 292149) units in Liquidity Fund Instt. - Growth - 33.02

Reliance Mutual Fund

Nil (previous year 914761) units in Liquid Plus Fund- Institutional Option-Growth Option - 100.00

AIG Global Investment Group Mutual Fund

Nil (previous year 481912) units in Liquid Fund- Super Institutional Growth - 50.20

Mirae Asset Mutual Fund

Nil (previous year 500000) units in Liquid Plus Fund- Super Inst Growth Option - 50.00

Tata Mutual Fund

962567 (previous year Nil) units in Liquid Super High Inv. Fund- Appreciation 155.82 -

Repurchase Price Rs. 1013.20 crores (previous year Rs. 747.04 crores) 1,010.06 746.03

Debentures

CitiFinancial Consumer Finance India Ltd.

500 (previous year 500) Debentures of Citi Financial -Redeemable Non

Convertible Secured NCD Issue Series-326 of Rs 100000 each 5.00 5.00

Repurchase Price Rs. 5.00 crores (previous year Rs. 5.00 crores) 5.00 5.00

Investments under Portfolio Management Services #

Debt Fund

(Units of the face value of Rs.10 each)

ICICI Prudential Mutual Fund

Nil (previous year 2000000) units in FMP Series 42-3 Months Plan B Retail Growth - 2.00

Nil (previous year 10503452) units in Interval Fund-Quarterly Interval Plan1Retail Growth - 10.77

IIM -Optimix Portfolios- Capital Enhancer

Nil (previous year 20991585) units in Flexible Income Fund - Growth - 31.30

Deutsche Mutual Fund

Nil (previous year 49198196) units in DWS Money Plus Advantage Instl Fund - 50.02

Escorts Mutual Fund

14641 (previous year 14641) units in Floating Rate Fund -Growth Option 0.02 0.02

442612 (previous year Nil) units in Income Plan -Growth Option 1.10 -

400000 (previous year Nil) units in Fixed Maturity Plan 0.40 -

152373 (previous year Nil) units in Income Bond Fund 0.35 -

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

100/101

A N N U A L R E P O R T 0 8 - 0 9

Asset Linked Portfolio -Accelerator-Series 2 -5000 (previous year Nil)

Debentures of Citi Financial Consumer Finance India Limited. 50.00 -

Asset Linked Portfolio -Accelerator-Series 5 -1500 (previous year Nil) Debentures of

Barclays Investment & Loans India Ltd INR Equity Linked Principal Protected Debentures 15.00 -

312.87 29.90

Less: Provision for diminution in value (0.05) -

Repuchase price Rs. 312.82 crores (previous year Rs. 29.90 crores) 312.82 29.90

Commerical Paper

500000 (previous year Nil) of Tata Capital Ltd. 4.54 -

500000 (previous year Nil) of Reliance Communications Ltd. 4.50 -

500000 (previous year Nil) of Birla Global Finance Co. Ltd. 4.47 -

Repuchase price Rs. 14.54 crores (previous year Nil) 13.51 -

Bonds

50 (previous year Nil) 11% PFC 2018 5.91 -

5000000 (previous Year Nil) 6.05% GOI 2019 48.43 -

54.34 -

Less: Provision for diminution in value (1.39) -

Market price Rs. 52.95 crores (previous year Rs. 151.91 crores) 52.95 -

491.97 150.09

# Investments have been made under the Discretionary Portfolio Management

Agreement entered into between the Company and ICICI Prudential Asset

Management Company Limited-PMS, IIM-Optimix Portfolios -Capital Enhancer,

Escorts Securities Ltd, Reliance Capital Asset Management Ltd (Portfolio Management

Services), Fortis Investment Mangement and Birla Sunlife Asset Management Company

Private Limited 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 52238) equity shares of Rs.10 each fully paid up of ICICI Bank Ltd. - 5.11

Nil (previous year 6430) equity shares of Rs10 each fully paid up of Mundra Port &

Special Economic Zone Ltd. - 0.28

Nil (previous year 109489) equity shares of Rs10 each fully paid up of

Rural Electrification Corporation Ltd. - 1.15

Nil (previous year 125523) equity shares of Rs. 10 each fully paid up of

Bharat Heavy Electricals Limited.* - 16.04

Nil (previous year 276654) equity shares of Rs.2 each fully paid up of Siemens Ltd.* - 26.29

- 48.87

Less: Provision for diminution in value - (0.42)

Market value Nil (previous year 48.45 crores) - 48.45

LONG TERM INVESTMENTS

Non-trade

In Equity Shares:

Quoted*

70331(previous year*) equity shares of Rs. 10 each fully paid up of

Bharat Heavy Electricals Limited. 8.98 -

172904 (previous year*) equity shares of Rs.2 each fully paid up of Siemens Ltd. 16.42 -

367200 (previous year Nil ) equity shares of Rs. 2 each fully paid up of

Larsen & Tubro Limited. 50.02 -

75.42 -

Less: Provision on reclassification of current investment (12.42)

Market value Rs. 39.94 crores (previous year Nil) 63.00 -

* During the year the company has reclassified current investment into

long term investment and has provided for loss on reclassifiaction.

Unquoted

75000 (previous year Nil) equity shares of Rs. 10 each fully paid up of

National Stock Exchange 26.26 -

140400 (previous year 10800) equity shares of Rs.1each fully paid up of

Bombay Stock Exchange. 5.94 5.94

32.20 5.94

In Bonds

Quoted

UNIT TRUST OF INDIA

Nil (previous year 15918732) 6.75% Tax free US64 bonds of Rs.100 each - 165.47

60903 (previous year 60903) 6.60% Tax free ARS bonds of Rs.100 each 0.63

0.63 0.63

0.63 166.10

Less: Provision for diminution in value (0.02) (6.10)

Market value Rs.0.61 crores (previous year Rs.154.32 crores) 0.61 160.00

Maturity value Rs 0.61 crores (previous year Rs 159.80 crores)

Non-trade

Unquoted

National Bank For Agriculture and Rural Development

50200 (previous year 42700) Bhavishya Nirman Bonds @ 8182 each

A 10 Year Zero Coupon Bond of NABARD- maturity Rs 20000.00 per bond 41.07 35.01

41.07 35.01

Trade

Unquoted

In Equity Shares:

2715000 (previous year 2715000) equity shares of Rs. 10 each fully paid up of

Hero Honda Finlease Limited. 3.46 3.46

3,368.75 2,566.82

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

6) INVESTMENTS (contd.)

(Rupees in crores)

As at March As at March

31, 2009 31, 2008

102/103

A N N U A L R E P O R T 0 8 - 0 9

Mutual Funds

Liquid Funds

Units of the face value of Rs.1000 each 117474 13.24 41673 4.45

Units of the face value of Rs.10 each 219779873 322.40 237254919 316.80

Debt Funds

Units of the face value of Rs.10 each 289336375 415.77 316089900 437.65

Debentures

Reliance Blended Debt Plus -Hybrid Option -Series II-

Debentures of Citicorp Finance (India) Ltd NCDS Series 163 - - 500000 5.00

Reliance Blended Debt Plus -Hybrid Option -Series XII-Debentures

of CitiFinancial Consumer Finance India Limited Series 338 1000000 10.00 - -

Reliance Blended Debt Plus -Hybrid Option -Series XIIIB-

Debentures of CitiFinancial Consumer Finance

India Limited Series 359 1000000 10.00 - -

Reliance Blended Debt Plus -Hybrid Option

-Series XIVA-Debentures of CitiFinancial Consumer

Finance India Limited Series 394 1000000 10.00 - -

Asset Linked Portfolio -Accelerator-Series 2

-Debentures of Citi Financial Consumer Finance India Limited 5000 50.00 - -

Asset Linked Portfolio -Accelerator-Series 5 -Debentures of

Barclays Investment & Loans India Ltd. 1500 15.00 - -

10.75% Reliance Industries Ltd. 1000000 10.34 1000000 10.34

7.5% GOI Bonds 2034 5000000 54.65 5000000 54.65

7.95% GOI Bonds 2032 3900000 45.27 3900000 45.27

8.24% GOI Bonds 2018 3500000 39.95 3500000 39.95

8.55% IRFC NCD 2019 1000000 9.97 - -

6.05% GOI Bonds 2019 5000000 48.42 - -

Emerald Wealth Management 23300 233.00 5000 50.00

10% Tata Motors Finance NCD 5000000 5.00 5000000 5.00

11% PFC 2018 50 5.91 - -

BONDS

Indian Bond ReceivablesTr08 Sr 1 10000 100.00 10000 100.00

Lotus Trust PTC-IDBI Trust 20000 200.00 20000 200.00

Commercial Papers

Tata Capital Ltd. 100 4.55 - -

Reliance Communication Ltd. 100 4.50 - -

Birla Global Finance Co. Ltd. 100 4.47 - -

Mutual Funds

Liquid Fund

Units of the face value of Rs.10 each 7905962611 10,350.37 7589332498 9,883.93

Units of the face value of Rs.1000 each 27694342 3,497.53 28920599 3,574.93

Fund of Funds

Units of the face value of Rs.10 each 15166814 17.00 80388411 80.91

Equity Fund

Units of the face value of Rs.10 each 221187548 264.11 233381340 267.40

Debt Fund

Units of the face value of Rs.10 each 2460475824 2,854.29 2281880618 2,559.53

Units of the face value of Rs.1000 each - - 450000 45.00

Equity Shares

Shares of Face value of Rs 10 each

ICICI Bank Limited. 3077 0.22 55315 5.34

Bharat Heavy Electricals Ltd. - - 55192 7.05

Mundra Port and Special Economic Zone Ltd. - - 6430 0.28

Rural Electrification Corporation Ltd. - - 109489 1.15

Shares of Face value of Rs 2 each

Siemens Ltd. 104 0.01 103854 9.87

Larsen & Toubro Limited. 393200 53.57 26000 3.54

Shares of Face value of Rs 1 each

Sesa Goa Ltd. 140129 4.61 140129 4.61

National Stock Exchange 75000 26.26 - -

Bonds

Bhavishya Nirman Bonds @ Rs 8200 each-A 10 Year Zero

Coupon Bond of NABARD- maturity Rs 20000.00 per bond 7500 6.06 - -

Unit Trust of India -6.75% Bonds -US 64@ Rs100 - - 15918732 159.19

17,074.03 16,602.73

6) INVESTMENTS (contd.)

(Rupees in crores)

Purchase Sold

Units Amount Units Amount

The following investments were purchased and sold during the year under Portfolio Management Scheme At Cost

6) INVESTMENTS (contd.)

(Rupees in crores)

Purchase Sold

Units Amount Units Amount

The following investments were purchased and sold during the year At Cost

104/105

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A N N U A L R E P O R T 0 8 - 0 9

Equity Shares

Shares of Face value of Rs 1 each

Glenmark Pharmaceuticals Ltd. 33473 0.75 33473 0.75

Tata Consultancy Services Ltd. 4716 0.22 4716 0.23

Dabur India Ltd. 42050 0.34 42050 0.34

Hindustan Unilever Ltd. 13600 0.33 13600 0.33

ITC Ltd. 86625 1.48 86625 1.48

Wire and Wireless (India) Ltd. 216904 0.95 216904 0.95

Shares of Face value of Rs 2 each

Crompton Greaves Ltd. 28932 0.38 28932 0.38

Cummins India Ltd. 12374 0.24 12374 0.24

Divis Laboratories Ltd. 4351 0.38 4351 0.38

DLF Ltd. 16848 0.35 16848 0.35

Larsen & Toubro Ltd. 3229 0.22 3229 0.22

Sintex Industries 52513 0.48 52513 0.48

Sterlite Industries Ltd. 13015 0.34 13015 0.34

United Phosphorous Ltd. 57797 0.50 57797 0.50

GMR Infrastructure Ltd. 87500 0.65 87500 0.65

HCL Infosystems Ltd. 2028 0.02 2028 0.02

Jaiprakash Associates Ltd. 12000 0.22 12000 0.22

Satyam Computer Services Ltd. 34541 0.54 34541 0.54

Shares of Face value of Rs 5 each

Maruti Suzuki India Ltd. 9867 0.54 9867 0.54

Ranbaxy Laboratories Ltd. 25161 0.92 25161 0.92

Infosys Technologies Ltd. 800 0.12 800 0.12

Reliance Communications Ltd. 2450 0.10 2450 0.10

Shares of Face value of Rs 10 each

Aditya Birla Nuvo Ltd. 8591 0.47 8591 0.47

Bank of India 11883 0.30 11883 0.30

Bharat Heavy Electricals Ltd. 1078 0.14 1078 0.14

Cairn India Ltd. 14927 0.23 14927 0.23

Great Eastern Shipping Company Ltd. 6655 0.12 6655 0.12

HDFC Bank Ltd. 5598 0.61 5598 0.61

ICICI Bank Ltd. 10044 0.43 10044 0.43

Infrastructure Development Finance Company Ltd. 100519 0.60 100519 0.60

Mahindra & Mahindra Ltd. 7216 0.00 7216 0.00

Punjab National Bank 16051 0.57 16051 0.57

Reliance Capital Ltd. 8017 0.30 8017 0.30

Reliance Industries Ltd. 1908 0.28 1908 0.28

State Bank of India. 4249 0.56 4249 0.56

Tata Motors Ltd. 11749 0.35 11749 0.35

Tata Power Ltd. 3635 0.24 3635 0.24

Andhra Bank 21900 0.12 21900 0.12

Arvind Ltd. 137600 0.50 137600 0.50

Canara Bank 4400 0.08 4400 0.08

Chambal Fertilizers & Chemicals Ltd. 17250 0.11 17250 0.11

Dena Bank 24798 0.14 24798 0.14

Hindustan Oil Exploration Co. Ltd. 193870 2.76 193870 2.76

IFCI Ltd. 295500 1.38 295500 1.38

Ispat Industries Ltd. 29050 0.07 29050 0.07

Jaiprakash Hydro-Power Ltd. 3125 0.01 3125 0.01

Mangalore Refinery and Petrochemicals Ltd. 6675 0.04 6675 0.04

Mahanagar Telephone Nigam Ltd. 10500 0.07 10500 0.07

Nagarjuna Fertilizer & Chemicals Ltd. 215450 1.04 215450 1.04

NTPC Ltd. 30100 0.53 30100 0.53

Oriental Bank of Commerce 3600 0.04 3600 0.04

Petronet LNG Ltd. 30000 0.10 30000 0.10

Power Finance Corporation Ltd. 3100 0.03 3100 0.03

Power Grid Corporation of India Ltd. 12430 0.09 12430 0.09

Pyramid Saimira Theatre Ltd. 10000 0.08 10000 0.08

Reliance Petroleum Ltd. 51925 0.95 51925 0.95

Rural Electrification Corporation Ltd. 27300 0.26 27300 0.26

Spice Communications Ltd. 50000 0.34 50000 0.34

Steel Authority of India Ltd. 37800 0.53 37800 0.53

Tata Teleservices (Maharashtra) Ltd. 245575 0.68 245575 0.68

Union Bank of India 10250 0.15 10250 0.15

1,637.81 1,294.49

(Rupees in crores)

Quoted investments -Long Term 63.61 40.55 160.00 160.75

Quoted investments-Current - - 48.45 48.45

Unquoted investments 3,305.14 - 2358.37 -

3,368.75 2566.82

As at March 31,2009 As at March 31,2008

Aggregate value of Book value Market value Book value Market value

6) INVESTMENTS (contd.)

(Rupees in crores)

Purchase Sold

Units Amount Units Amount

6) INVESTMENTS (contd.)

(Rupees in crores)

Purchase Sold

Units Amount Units Amount

106/107

7) CURRENT ASSETS, LOANS AND ADVANCES(Rupees in crores)

As at March As at March31, 2009 31, 2008

CURRENT ASSETS

INVENTORIES #

Stores and spares (at cost or under) 27.19 22.27

Loose tools (at cost or under) 14.51 13.46

Raw materials and components * 201.44 219.77

Finished goods *

Two wheelers 28.52 30.92

Spare parts 32.49 14.08

Work in progress * 22.68 16.60

326.83 317.10

* Lower of cost and net realisable value

# Includes goods in transit Rs.18.33 crores (Previous year Rs 64.87 crores)

SUNDRY DEBTORS

Debts outstanding for a period exceeding

six months

Secured - considered good 0.70 1.19

Unsecured - considered good 3.24 2.76

- considered doubtful 5.26 6.96

Other debts

Secured - considered good 7.12 14.77

Unsecured - considered good 138.88 278.72

155.20 304.40

Less :Provision for doubtful debts 5.26 6.96

149.94 297.44

CASH AND BANK BALANCES

Cash in hand 0.20 0.25

Cheques in hand 0.18 0.11

With scheduled banks:

On current accounts 10.99 14.32

On deposit accounts 2.08 0.51

On dividend current accounts 206.12 115.90

219.57 131.09

OTHER CURRENT ASSETS

Interest accrued on investments 5.89 5.69

5.89 5.69

LOANS AND ADVANCES

(Unsecured and considered good)

Advances recoverable in cash or in kind or for

value to be received 237.42 82.32

Inter corporate deposits - 50.00

Income-tax recoverable 62.51 47.51

8) CURRENT LIABILITIES AND PROVISIONS

(Rupees in crores)

As at March As at March31, 2009 31, 2008

CURRENT LIABILITIES

Sundry creditors: #

Total outstanding dues of creditors other

than Micro and small enterprises 703.03 756.07

Other liabilities ## 794.23 541.21

Security deposits from dealers 28.59 27.70

1,525.85 1324.98

PROVISIONS

Proposed dividend 399.38 379.41

Provision for taxation less payments 8.06 6.39

Provision for tax on dividend 67.87 64.48

Employee benefit schemes 6.73 5.80

Warranties 44.93 43.68

526.97 499.76

# No due to Micro and small enterprises (refer note - 13 of Schedule - 13)

## Other liabilities do not include any amount outstanding as on March 31, 2009 which are required to be credited to the Investor

Education and Protection Fund (Fund)

9) DEFERRED TAX ASSETS AND LIABILITIES (Rupees in crores)

As at March As at March

31, 2009 31, 2008

DEFERRED TAX ASSETS

Accrued expenses deductible on payment 2.29 1.97

Others 6.36 3.25

8.65 5.22

DEFERRED TAX LIABILITIES

Accumulated depreciation 153.08 130.59

153.08 130.59

7) CURRENT ASSETS, LOANS AND ADVANCES(Rupees in crores)

As at March As at March31, 2009 31, 2008

Income-tax deducted at source 11.16 3.50

Deposits with excise authorities on

current account 0.17 2.13

311.26 185.46

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11) MANUFACTURING AND OTHER EXPENSES

(Rupees in crores)

Year ended Year ended

March 31, 2009 March 31, 2008

MATERIALS CONSUMED

Consumption of raw materials and components 9369.28 7911.58

Less:- Sale of components to ancillaries on cost to cost basis 552.81 470.53

8816.47 7441.05

Less:- Cash discount 46.11 39.44

8770.36 7401.61

Add: Opening stock

Two wheelers 30.92 44.31

Spare parts 14.08 13.46

Work in progress 16.60 17.97

61.60 75.74

Less: Excise duty on opening stock 7.78 11.22

Net opening stock 53.82 64.52

Less: Closing stock

Two wheelers 28.52 30.92

Spare parts 32.49 14.08

Work in progress 22.68 16.60

83.69 61.60

Less: Excise duty on closing stock 11.66 7.78

Net closing stock 72.03 53.82

Net consumption 8752.15 7412.31

Less: Scrap sales 10.14 9.77

8742.01 7402.54

OTHER EXPENSES#

Payments to and provisions for employees:

Salaries, wages, bonus, gratuity and leave encashment benefit 409.14 350.48

Contribution to provident and other funds 17.34 14.01

Staff welfare expenses 22.17 18.96

Expenses for manufacturing, administration and selling

Stores and tools consumed 71.78 63.75

Power and fuel 73.70 56.55

Rent 5.25 4.22

Repairs and maintenance:

Plant and machinery 30.07 27.41

Buildings 3.58 3.66

Others 2.20 0.83

Insurance 16.44 10.90

Exchange fluctuation 13.74 -

Rates and taxes 30.32 15.27

Packing, forwarding, freight etc. 316.09 266.75

Royalty 324.01 276.70

Advertisement and publicity 249.60 221.78

Commission

Export 11.67 11.60

Others 4.80 3.49

16.47 15.09

Donations 6.43 0.91

Lease rent 10.51 11.47

Other expenses 230.25 209.63

Provision for diminution in value of investments

Current non trade investment 12.49 1.29

Long term non trade investment 0.20 1.28

12.69 2.57

Loss on sale of long term non trade investments 2.04 -

Doubtful debts written off 0.95

Less: Charged against provision for doubtful debts 0.95 -

Provision for doubtful debts - 4.59

Loss on fixed assets sold/discarded 3.57 4.36

10,609.40 8,982.43

# Research and development expenses of Rs. 23.71 crores (previous year Rs. 18.78 crores) have been

charged to respective heads

12) INTEREST (NET)

(Rupees in crores)

Year ended Year ended

March 31, 2009 March 31, 2008

Interest - others and financial charges 2.53 2.00

Less: Interest received on loans, deposits, etc.* 34.21 37.81

(31.68) (35.81)

* Income tax deducted at source Rs. 1.87 crore (previous year Rs. 2.15 crore)

10) OTHER INCOME

(Rupees in crores)

Year ended Year ended

March 31, 2009 March 31, 2008

Dividend income

On current investments - Non trade 12.77 4.24

On long term investments - Trade 2.72 2.72

15.49 6.96

Interest on long term non trade investments 22.04 12.81

Profit on sale of non trade current investments* 145.43 132.91

Provision for doubtful debts written back 0.75 -

Profit on sale of fixed assets 0.19 0.09

Exchange difference - 1.38

Miscellaneous income 36.82 31.27

220.72 185.42

* After adjusting loss on sale of current investments aggregating Rs. 38.89 crores (previous year Rs. 19.54 crores)

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13) NOTES TO THE ACCOUNTS

1) 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. 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. 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 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 - Weighted average cost

Materials in transit - Actual cost

Work in progress and finished goods - Material cost plus appropriate share of

labour, manufacturing overheads and excise duty.

vi) Employee benefits

a) 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 as per unit credit method. Actuarial gains or losses arising from such valuation are charged to revenue in the year

in which they arise.

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. All loss or gain on

translation are charged to revenue in the year in which it is incurred other than expenses relating to preoperative period.

Current assets and current liabilities, 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

Income Tax 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 positions as at the

close of the year are valued by marking them to the market and provision is made for losses if any.

2. CONTINGENT LIABILITIES :

(Rupees in crores)

This year Previous year

i) In respect of excise matters 8.17 -

The above matters are subject to legal proceedings in the ordinary course of business. The legal proceedings when ultimately concluded will not, in the opinion of management, have a material effect on the results of operations or the financial position of the Company.

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3. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 92.37 crores (previous year Rs. 56.37 crores).

4. Commercial production commenced at Haridwar plant on April 7, 2008. Expenditure incurred on the project upto April 6, 2008 has been included in Schedule 5 under the head ' Pre-operative Expenditure (pending allocation)'. Pre-operative expenditure other than those which are directly allocable has been allocated pro-rata to fixed assets and capital work in progress.

5. The Company has 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. 10.51 crores (previous year Rs. 11.47 crores) have been charged under "Lease rentals " in Schedule 11.

6. 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", specified in the Companies (Accounting Standards) Rules, 2006 are not applicable.

7. Two wheeler sales are covered by a warranty period of two/three years. The details of provision for warranties are as under:

(Rupees in crores)

This year Previous year

Provision at the beginning of the year 43.68 36.23

Additional provision made during the year 27.37 33.35

Amount used during the year 26.12 25.90

Provision at the end of the year 44.93 43.68

8. Related party disclosures under Accounting Standard 18

a) i) Parties in respect of which the Company is a Joint venture:

Honda Motor Co. Limited, Japan

Hero Cycles Limited

Bhadurchand Investments Private Limited

Hero Investments Private Limited

ii) Associate of the Company:

Hero Honda Finlease Limited

b) Key management personnel

Mr. Brijmohan Lall Munjal Chairman

Mr. Pawan Munjal Managing Director & CEO

Mr. Toshiaki Nakagawa Joint Managing Director

Mr. Yutaka Kudo Whole time director (w.e.f. April 1, 2007 to May 30,2008)

Mr. Sumihisa Fukuda Whole time director (w.e.f .June 1, 2008)

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.

Transactions with related parties during the year

a) Parties in respect of which the Company is a joint venture and associate of the Company.

(Rupees in crores)

This year Previous year

Honda Motor Co. Limited, Japan

Dividend paid 98.65 88.26

Royalty 324.01 276.70

Export commission 11.67 11.60

Model fees 32.54 31.32

Technical guidance fee 0.38 0.87

Purchase of raw materials, components and spares 15.36 16.39

Hero Cycles Limited

Dividend paid 32.88 29.42

Purchase of raw materials, components and spares 72.90 63.59

Hero Investments Private Limited

Dividend paid 32.88 29.42

Bhadurchand Investments Private Limited

Dividend paid 32.88 29.42

Hero Honda Finlease Limited

Lease rental expenses 10.51 11.47

Dividend received 2.72 2.72

Intercorporate deposits given 495.50 190.00

Intercorporate deposits repaid 545.50 190.00

Interest received on Inter corporate deposits 3.63 1.51

Balance outstanding at the year end

-Receivables - 50.00

-Payables 8.82 3.84

b) Key management personnel

(Rupees in crores)

This year Previous year

Managerial Remuneration

Mr. Brijmohan Lall Munjal 19.79 15.76

Mr. Pawan Munjal 19.69 15.74

Mr. Toshiaki Nakagawa 19.08 15.20

Mr. Yutaka Kudo (w.e.f April 1, 2007 to May 30,2008) 3.15 15.13

Mr. Sumihisa Fukuda (w.e.f June 1, 2008) 15.81 -

114/115

Balance outstanding at the year end

-Payables (including commission) 74.80 59.20

c) Enterprises over which key management personnel and their relatives are able to exercise significant influence

(Rupees in crores)

This year Previous year

Purchase of raw materials and components 2622.86 1976.60

Sale of components etc 2.82 2.83

Payment towards rent and other services 4.09 3.56

Donation 5.67 0.60

Balance outstanding as at the year end

- Payables 233.28 177.22

Significant related party transactions included in the above are as under :-

(Rupees in crores)

This year Previous year

Purchase of raw materials and components

A .G. Industries 278.51 188.54

Munjal Showa Limited 676.80 556.06

Sunbeam Auto Limited 437.72 379.23

Rockman Cycle Industries Limited 324.91 167.44

Satyam Auto Components Limited 267.35 147.07

Sale of components etc.

A.G.Industries Private Limited 0.61 0.22

Majestic Auto Limited 0.50 -

Satyam Auto Components Limited 0.53 1.69

Munjal Auto Industries 0.85 -

Hero Motors Limited 0.26 0.85

Payment for services

Hero Corporate Services Limited 3.20 3.20

Donation

Raman Kant Munjal Foundation 0.30 0.60

Indian School of Business 5.37 -

9. Earnings per share

This Year Previous Year

Profit after taxation as per profit and loss account (Rupees in crores) 1281.76 967.88

Weighted average number of equity shares outstanding 19,96,87,500 19,96,87,500

Basic and diluted earnings per share in rupees (face value -Rs.2 per share) 64.19 48.47

10. The Company has entered into Discretionary Portfolio Management Agreements, administered through ICICI Prudential Asset Management Company Limited-PMS, IIM-Optimix Porfolios-Capital enhancer, Escorts Securities Limited, Reliance Capital Asset Management Ltd, Fortis Investment Management, Birla Sunlife Asset Management Company Private Limited collectively called Portfolio Managers. In terms of the said agreements, the Portfolio Managers have dealt in mutual funds, debentures, bonds, government securities, equity shares, equity stock futures, equity stock options equity index options and such other securities, made on behalf of the Company. However, there are no outstanding derivative contracts as at March 31, 2009.

11. 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, 2009, pending with various authorities

Name of the Statute Nature of dues Amount* Amount paid under Period to which Forum where dispute(Rs in crores) protest (Rs in crores) the amount relates is pending

Central Excise Laws Excise Duty 9.03 0.09 2000,2002-03 To CESTAT

2004-05

0.14 - 2005-06 Commissioner (Appeals)

Services Tax 1.90 0.45 2004-05 to 2005-06 CESTAT

Income Tax Act Income Tax 9.61 9.61 2000-01 to 2001-02 Income Tax Appellate Tribunal

128.61 52.90** 2001-02 to 2004-05 Commissioner (Appeals)

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

** Balance of unpaid demand has been stayed.

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 Period to which Forum where (Rs in crores) the amount relates Department has

(various years covering preferred appealsthe period)

Central Excise Laws Excise Duty 2.57 1986-87 to 1990-91 Supreme Court

Income Tax Act Income Tax 8.18 1987-88, 1989-90, 1992-93, High Court

1993-94, 1995-96, 1996-97

1998-99, 2000-01

12.30 1999-00, 2001-02 Income Tax Appellate Tribunal

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This year Previous year(Rupees in crores) (Rupees in crores)

Changes in the present value of the plan asset is as follows

Fair value of plan asset at the beginning of the year 32.23 17.44

Return on plan asset 3.02 1.62

Contributions 6.67 14.12

benefits paid (1.14) (0.95)

Actuarial (gain)/ loss on obligation - -

Fair value of plan asset at the end of the year 40.78 32.23

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 40.78 32.23

Fair value of plan asset at the end of the year 40.78 32.23

Net asset/(liability) as at the close of the year - -

Expenses recognised in the profit and loss account

Current service cost 2.77 2.15

Interest cost 2.26 2.03

Return on plan assets (3.02) (1.62)

Net actuarial (gain) / loss 4.66 3.59

Expenses recognised in the profit and loss account 6.67 6.15

Discount rate 7.00% 8.00%

Expected Rate of return on plan assets 9.40% 9.10%

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.

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

of hypothecation of inventories, receivables, movable assets and other current assets.

13. The Company has identified parties covered under the "The Micro, Small, and Medium Enterprises Development Act, 2006' on

the basis of the confirmations 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.

14. The unhedged foreign currency exposures are as under:

Purpose As at March 31, 2009 As at March 31, 2008

Amount in Foreign Amount in Amount in Foreign Amount incurrency in crores Rs. in crores currency in crores Rs. in crores

Receivables USD 0.64 32.74 USD 1.10 44.43

Payables JPY 13.81 7.08 JPY 38.71 15.28

USD 0.41 20.99 - -

- - EURO 0.02 1.21

15. Employee Benefits

Defined contribution plans

This Year Previous Year(Rupees in crores) (Rupees in crores)

Employer's Contribution to Provident Fund 11.67 9.77

Employer's Contribution to Superannuation Fund 5.17 4.27

Employer's Contribution to ESIC 0.49 0.30

Defined benefit plans

In accordance with the Payment of Gratuity Act 1972, Company provides for gratuity, as 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 Group Gratuity Scheme of Life Insurance Corporation of India.

This year Previous year(Rupees in crores) (Rupees in crores)

Changes in the present value of the defined benefit obligation is as follows

Present value of defined benefit obligation at the beginning of the year 32.23 25.41

Interest cost 2.26 2.03

Current service cost 2.77 2.15

Benefits paid (1.14) (0.95)

Actuarial (gain)/ loss on obligation 4.66 3.59

Present value of defined benefit obligation at the end of the year 40.78 32.23

16. Additional Information

a) Details of capacity and production:

Class of goods Units Licensed capacity* Installed capacity** Actual Production***

This year Previous year This year Previous year This year Previous year

Motorised two wheelers upto

350CC engine capacity Nos. 200000 200000 5200000 3400000 3721844 3333460

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*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 220 (Previous year 175) two wheelers produced and capitalised during the year.

d) CIF Value of imports:

Class of goods This year Previous year(Rs. in crores) (Rs. in crores)

Capital goods 48.51 66.14

Raw materials* 31.54 103.92

Components, spare parts and others * 396.00 404.00

* 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 This year Previous year

Value Percentage Value Percentage(Rs. in crores) % (Rs. in crores) %

Raw materials

-Imported ** 0.79 0.01 0.24 0.00

-Indigenous 25.41 0.30 27.70 0.38

Components

-Imported ** 69.28 0.79 49.99 0.67

-Indigenous 8,720.99 98.90 7,363.12 98.95

8,816.47 * 100.00 7,441.05 * 100.00

Spares consumed (charged to

repairs and maintenance)

-Imported 6.47 30.38 5.96 34.08

-Indigenous 14.83 69.62 11.53 65.92

21.30 100.00 17.49 100.00

*Excludes Rs. 0.55 crore (Previous year Rs 0.44 crore) for two wheelers produced and capitalised during the year.

** Excludes items sold and purchased as indigenous components.

f) Expenditure in foreign currency (on accrual basis) :

This year Previous year

(Rs. in crores) (Rs. in crores)

Royalty 324.01 276.70

Technical guidance fee 3.33 2.62

Model fee 30.78 29.87

Export commission 11.67 11.60

Travel and other accounts 3.78 5.45

Advertisement and Publicity 4.23 6.25

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 Opening stock Purchases

This year Previous year This year Previous year

Quantity Value Quantity Value Quantity Value Quantity Value

(Rs. in crores) (Rs. in crores) (Rs. in crores) (Rs.in crores)

Two wheelers Nos.

Spares -

Class of goods Units Gross Sales Closing stock

This year Previous year This year Previous yearQuantity Value Quantity Value Quantity Value Quantity Value

(Rs. in crores) (Rs. in crores) (Rs. in crores) (Rs.in crores)

Two wheelers Nos.

Spares -

Miscellaneous Components

* 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 220 (Previous year 175) two wheelers capitalised.

c) Raw materials and components consumed:

Class of goods Units This year Previous year

Quantity Value Quantity Value(Rs. in crores) (Rs. in crores)

Steel sheets MT 6130.02 27.94

Components * 7,413.11

7,441.05 **

* 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.0.55 crore (Previous year Rs.0.44 crore) for two wheelers produced and capitalised during the year.

10955 30.92 14812 44.31 - - - -

* 14.08 * 13.46 - - - -

45.00 57.77 - -

3722000+ 12,719.77 3337142+ 11,353.48 10579 28.52 10955 30.92

* 823.32 * 684.73 * 32.49 * 14.08

* - * 0.32

13,543.09 12,038.53 61.01 45.00

5369.46 26.20

* 8,790.27

8,816.47**

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g) Earnings in foreign currency (on accrual basis) :

This year Previous year

(Rs. in crores) (Rs. in crores)

FOB value of exports 247.04 242.79

Freight and insurance 1.07 0.85

This year Previous year

(Rs. in crores) (Rs. in crores)

h) Managerial remuneration:

Whole time Directors

Remuneration* 3.14 2.70

Commission** 74.39 59.13

77.53 61.83

Non-Executive Independent Directors

Commission 0.31 0.35

77.84 62.18

Directors' sitting fee 0.10 0.11

77.94 62.29

*Excludes incremental contribution for gratuity, as the contributions are determined for the Company as a whole.

** Mr.Yutaka Kudo, whole time director was in employment with the Company up to May 30, 2008. Mr. Sumihisa Fukuda

joined the Company in place of Mr. Yutaka Kudo with effect from June 01, 2008. Accordingly, commission on profit has been

apportioned on a pro-rata basis to these whole-time directors and to the other three whole-time directors on a full year basis.

Computation of net profit in accordance with section 198 of the Companies Act,1956.

This year Previous year (Rs. in crores) (Rs. in crores)

Profit before taxation as per profit and loss account 1,781.46 1,410.28

Add:-

Managerial remuneration 77.94 62.29

Provision for doubtful debts - 4.59

Provision for diminution in value of investment long term 0.20 1.28

Loss on sale of long term non-trade investments 2.04 -

Net profit as per section 349 of the Companies Act,1956 1,861.64 1,478.44

Maximum managerial remuneration to four whole time

directors( including commission) at 10% of net profit 186.16 147.84

Maximum managerial remuneration to non whole time

directors( including commission) at 1% of net profit 18.61 14.78

204.77 162.62

Commission component of managerial remuneration to

- Four whole time directors restricted to 1% of net profit

( 1% of net profit) per director 74.39 59.13

- Non-Executive Independent Directors

0.10% of net profit. Restricted to 0.31 0.35

Commission restricted to 74.70 59.48

i) Provision and/or payment in respect of Auditors' Remuneration :

This year Previous year(Rs. in crores) (Rs. in crores)

a) As auditors (Audit fee) 0.38 0.28

b) In other capacity- limited review of unaudited financial results 0.24 0.20 - corporate governance and other certification 0.02 0.01

c) Out of pocket expenses # #

# This year Rs 40143 (Previous year Rs 80329 )

j) Amount remitted in foreign currencies towards dividends during the year:

This year Previous year

No. of No. of equity Dividend No. of No of equity Dividend

Non-Resident shares held remitted Non-Resident shares held remitted

shareholders (Rs. in crores) shareholders (Rs. in crores)

2006-2007 - Final - 1 51918750 88.26

2007-2008 - Final 1 51918750 98.65 -

98.65 88.26

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

New Delhi

April 21, 2009

For and on behalf of the Board of Directors

BRIJMOHAN LALL MUNJAL Chairman

PAWAN MUNJAL Managing Director & CEO

PRADEEP DINODIA Director

RAVI SUD Sr. Vice President & CFO

ILAM C. KAMBOJ Sr. G.M. Legal & Company Secretary

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PART IV OF SCHEDULE VITO THE COMPANIES ACT, 1956

Balance Sheet Abstract and Company's General Business Profile

I. Registration Details

Registration No. 17354

State Code 55

Balance Sheet Date 31.03.2009

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

Public Issue Nil Rights Issue Nil

Bonus Issue Nil Private Placement Nil

III. Position of Mobilisation and Deployment of Funds (Rupees in crores)

Total Liabilities 3879.24 Total Assets 3879.24

Sources of Funds Application of Funds

Paid-Up Capital 39.94 Net Fixed Assets 1694.25

Reserves & Surplus 3760.81 Investments 3368.75

Secured Loans Nil Net Current Assets* (1183.76)

Unsecured Loans 78.49 Misc. Expenditure Nil

*Includes Deferred Tax Liability (Net) Rs. 144.43 crores

IV. Performance of Company (Rupees in crores)

Turnover 12,539.84

Total Expenditure 10,758.38

Profit before tax 1,781.46

Profit after Tax 1,281.76

Earnings per share Rs. 64.19

Dividend Rate 1000%

V. Generic names of Three Principal Products/ Services of Company (as per monetary terms)

Item Code No. (ITC Code) 87112003

Product Description Motorised two wheelers upto 350cc engine capacity

New Delhi

April 21, 2009

For and on behalf of the Board of Directors

BRIJMOHAN LALL MUNJAL Chairman

PAWAN MUNJAL Managing Director & CEO

PRADEEP DINODIA Director

RAVI SUD Sr. Vice President & CFO

ILAM C. KAMBOJ Sr. G.M. Legal & Company Secretary

Reconciliation of Net Income as per US GAAP Accounts and Audited Accounts as per Indian Companies Act 1956

(Rupees in Millions)

2009 2008 2007 2006 2005

Net Profit after tax for the year as per audited accounts 12,817.60 9,678.80 8,578.90 9,713.40 8,104.70

Add / (Less) : Profit / (Loss) of

- Income from investments ( unrealised gain/loss )

- affiliated company 2.62 12.16 10.67 30.60 57.19

- held to maturity securities - - - 22.90 (11.77)

- Exchange fluctuations - - 11.30 (8.40) (3.90)

- Depreciation effect of exchange fluctuations 0.68 0.68 5.37 18.26 21.75

- Depreciation on leased assets - - (76.60) (93.18)

- Lease rentals paid - - 135.58 117.83

- Interest portion of lease rentals - - (9.90) (15.51)

- Provision for deferred tax (151.18) 180.33 (167.24) (103.56) (2.11)

- Deferred revenue expenditure - - - - -

Net Income as per US GAAP 12,669.72 9,871.97 8,439.00 9,722.28 8,175.00

Balance sheet as at March 31

(Rupees in Millions)

2009 2008 2007 2006 2005

ASSETS

Current Assets

Cash and cash equivalents 2,195.72 1,310.92 357.82 1,587.22 176.01

Trade accounts receivables 1,499.38 2,974.38 3,352.48 1,586.58 895.49

Inventories 3,268.34 3,171.04 2,755.84 2,265.54 2,042.62

Pre-paid expenses and other current assets 3,171.48 1,911.49 2,666.58 2,773.08 2,431.20

Total current assets 10,134.92 9,367.83 9,132.72 8,212.42 5,545.32

Investment (held to maturity securities) 416.79 1,599.99 1,612.79 1,595.18 1,596.07

Investment in mutual funds 33,637.31 24,617.11 18,522.31 19,680.81 18,973.12

Investment in affiliate, at equity 267.20 264.58 252.42 241.75 211.14

Property, plant and equipment 16,790.44 15,494.75 13,401.08 9,765.51 7,049.94

Total assets 61,246.66 51,344.26 42,921.32 39,495.67 33,375.59

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Statement of income for the year ended March 31 (Rupees in Millions)

2009 2008 2007 2006 2005

Net sales 123,191.20 103,318.00 98,999.60 87,139.81 74,216.53

Cost of goods sold 97,838.08 82,724.62 79,931.23 67,548.97 57,308.71

Selling, administrative and general expense 9,871.34 8,619.10 8,558.40 6,979.60 6,055.73

Other (income) and expense (2,019.32) (1,783.26) (1,748.47) (1,572.20) (1,397.42)

Interest net expense (income) (316.80) (358.10) (229.90) (51.40) 4.61

Total expense 105,373.30 89,202.36 86,511.26 72,904.97 61,971.63

Income before income taxes 17,817.90 14,115.64 12,488.34 14,234.84 12,244.90

Indian taxes on income 5,148.18 4,243.97 4,049.34 4,512.56 4,069.90

Net income 12,669.72 9,871.97 8,439.00 9,722.28 8,175.00

Net earning per share

On share value of Rs. 2 each 63.45 49.44 42.26 48.69 40.94

Average common stock outstanding (numbers) 199,687,500 199,687,500 199,687,500 199,687,500 199,687,500

(Rupees in Millions)

2009 2008 2007 2006 2005

LIABILITIES

Trade accounts payable 7,030.30 7,560.70 5,548.20 6,462.70 6,619.60

Accrued expenses 516.62 494.82 417.58 305.02 247.50

Indian income taxes 80.60 63.90 38.50 40.30 45.70

Other current liabilities 8,228.25 5,689.15 4,871.05 4,266.15 3,538.05

Long term debt due within one year 184.93 184.93 206.10 227.27 222.83

Total current liabilities 16,040.70 13,993.50 11,081.43 11,301.44 10,673.68

Deferred income taxes 1,671.49 1,391.67 1,529.68 1,375.63 981.67

Long-term debt 599.97 1,135.07 1,445.60 1,630.53 1,920.45

Total liabilities 18,312.16 16,520.24 14,056.71 14,307.60 13,575.80

STOCKHOLDER’S 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 399.38 399.38 399.38 399.38 399.38

Capital surplus 0.03 0.03 0.03 0.03 0.03

Retained earnings 42,535.09 34,424.61 28,465.20 24,788.66 19,400.38

Total stockholder’s equity 42,934.50 34,824.02 28,864.61 25,188.07 19,799.79

Total liabilities and stockholder’s equity 61,246.66 51,344.26 42,921.32 39,495.67 33,375.59

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