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CORPORATE INFORMATION

Board of Directors

L Ganesh - Chairman

L Lakshman

K P Balasubramaniam

V Ramachandran

C N Srivatsan

Krishna Kumar Seshadri

Audit Committee

C N Srivatsan - Chairman

L. Lakshman

K P Balasubramaniam

Stakeholders’ Relationship Committee

L Ganesh - Chairman

V Ramachandran

K P Balasubramaniam

Manager

S Krishnamurthy

Chief Financial Officer

H K Vadiraj

Secretary

Rekha N B

Shares listed with

Bangalore Stock Exchange Ltd., Bangalore

Madras Stock Exchange Ltd., Chennai

IndoNext Platform of BSE Ltd., Mumbai

Registered Office

“Maithri”,

132, Cathedral Road,

Chennai – 600 086

Auditors

M/s. Varma & Varma,

(Firm No. 004532 S)

Chartered Accountants,

#424, 4th C Main, 6th Cross,

OMBR Layout, Banaswadi,

Bangalore - 560 043

Bankers

State Bank of India

Overseas Branch,

St. Marks Road,

Bangalore - 560 001

The Karur Vysya Bank Limited

Malleswaram Branch

Sampige Road

Bangalore – 560 003

Standard Chartered Bank

No.19, Rajaji Salai,

Chennai - 600 001

Location of Plants

Plot No.26, 1st Phase,

Peenya Industrial Area,

Bangalore - 560 058

Plot No.36-B & 37,

Hirehalli Industrial Area,

Tumkur - 572 101

Annual General Meeting

On Friday,

25th July, 2014 at 10.15 a.m

Venue

Music Academy (Mini Hall),

New No.168, TTK Road,

Royapettah,

Chennai – 600 014

Registrar & Transfer Agents

Integrated Enterprises (India) Ltd.,

II Floor, “Kences Towers”,

No.1 Ramakrishna Street,

North Usman Road, T. Nagar,

Chennai – 600 017

Email: [email protected]

Page Nos

Financial Highlights 1

Notice of Annual General Meeting 2

Report of the Directors 13

Management Discussion and Analysis 16

Corporate Governance 21

Compliance report of Company Secretary 33

Independent Auditors’ Report 38

Balance Sheet 42

Profit and Loss Statement 43

Cash Flow Statement 44

Notes to Financial Statements 46

CONTENTS

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06-0

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05-0

620

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7.28

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8.40

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186.

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43.3

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41.4

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47.1

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55.5

141

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Regd. Office: “ Maithri”, 132, Cathedral Road, Chennai - 600 086visit us at http://rane.co.in CIN: L85110TN1936PLC071646

NOTICE TO SHAREHOLDERS

77 Annual General Meetingth

NOTICE is hereby given that the 77th Annual General Meeting (AGM) of Kar Mobiles Limited will be held at 10.15 a.m. on Friday, July 25, 2014, at ‘The Music Academy’ (Mini Hall), New No.168, TTK Road, Royapettah, Chennai 600 014 to transact following business:

Ordinary Business:

1. To receive, consider and adopt the directors’ report, the audited financial statements of the Company for the year ended March 31, 2014 and the auditors’ report thereon.

To consider adoption of the following resolution, as an ordinary resolution:

"Resolved that the audited financial statements of the Company for the year ended March 31, 2014 including balance sheet as at March 31, 2014, the profit and loss account for the year ended March 31, 2014 together with the reports of the directors and the auditors of the Company thereon, as presented to the meeting be and the same are hereby approved and adopted.”

2. To declare dividend on equity shares.

To consider adoption of the following resolution, with or without modification(s), as an ordinary resolution:

“Resolved that final dividend of ` 2.50 per equity share of ̀ 10 each on 22,40,000 equity shares be and is hereby declared out of the profits of the Company for the year ended March 31, 2014, absorbing an amount of ` 65,51,720/- (including dividend distribution tax and cess thereon) and that the dividend be paid to those shareholders, whose names appear in the Company’s register of members as on July 25, 2014 and in respect of shares in electronic form to those beneficial owners of the shares as at the end of business hours on July 18, 2014 as per the details furnished by the depositories for this purpose.”

3. To appoint a director in the place of Mr. V Ramachandran, who retires by rotation under article 116 & 118 of the articles of association of the Company and being eligible offers himself for re-election.


“Resolved that Mr. V Ramachandran (DIN: 00053007), who retires by rotation and being eligible for re-appointment, be and is hereby re-appointed as a director of the Company.”

4. To appoint auditors of the Company and to determine their remuneration. The retiring auditors M/s.Varma & Varma, Chartered Accountants, are eligible for re-appointment. The declaration to the effect that their appointment, if made, would be within the limits and that they are free from any disqualification specified in section 141 of the Companies Act, 2013, and the rules made thereunder, has been received from them.


"Resolved that M/s. Varma & Varma, Chartered Accountants (Registration No. 004532S with The Institute of Chartered Accountants of India), be and are hereby re-appointed as the auditors of the Company to hold office from the conclusion of this seventy seventh Annual General Meeting (AGM) until the conclusion of the eightieth AGM (subject to ratification of the appointment by the members at every AGM held after this AGM) on such remuneration as may be determined by the board of directors of the Company, in addition to reimbursement of travelling and other out-of-pocket expenses actually incurred by them in connection with the audit.”

Special Business:

5. To appoint Mr. K P Balasubramaniam, director, as an independent director.


“Resolved that pursuant to the provisions of sections 149, 150, 152 read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 and the rules made thereunder, (including any statutory

KAR MOBILES LIMITED

modification(s) or re-enactment thereof for the time being in force), Mr. K P Balasubramaniam (DIN: 00034686), director of the Company, in respect of whom the Company has received a notice in writing from a member proposing his candidature for the office of director, be and is hereby appointed as an independent director of the Company to hold office with effect from the conclusion of the seventy seventh AGM till the conclusion of the eightieth AGM.”

6. To appoint Mr. CN Srivatsan, director, as an independent director.


“Resolved that pursuant to the provisions of sections 149, 150, 152 read with Schedule IVand other applicable provisions, if any, of the Companies Act, 2013 and the rules made thereunder (including any statutory modification(s) or re-enactment thereof for the time being in force), Mr. C N Srivatsan (DIN: 00002194), a director of the Company , in respect of whom the Company has received a notice in writing from a member proposing his candidature for the office of director, be and is hereby appointed as an independent director of the Company to hold office with effect from the conclusion of the seventy seventh AGM till the conclusion of the eightieth AGM.”

7. To appoint Mr. Krishna Kumar Seshadri, director, as an independent director


“Resolved that pursuant to the provisions of sections 149, 150, 152 read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 and the rules made thereunder (including any statutory modification(s) or re-enactment thereof for the time being in force), Mr. Krishna Kumar Seshadri (DIN: 00062582), a director of the Company, in respect of whom the Company has received a notice in writing from a member proposing his candidature for the office of director, be and is hereby appointed as an independent director of the Company to hold office with effect from the conclusion of the seventy seventh AGM till the conclusion of the eightieth AGM.”

8 To approve the borrowing powers of the board

To consider adoption of the following resolution, with or without modification(s), as a special resolution:

“Resolved that in supersession of the ordinary resolution adopted at the seventy sixth AGM held on July 23, 2013 and pursuant to section 180(1)(c) and other applicable provisions of the Companies Act, 2013 and the rules made thereunder, (including any statutory modification(s) or re-enactment thereof for the time being in force), the consent of the Company be and is hereby accorded to the board of directors to borrow moneys in excess of the aggregate of the paid up share capital and free reserves of the Company, provided that the total amount borrowed and outstanding at any point of time, apart from temporary loans obtained/to be obtained from the Company’s bankers in the ordinary course of business, shall not be in excess of ` 12 crores (Rupees twelve crores) over and above the aggregate of the paid up share capital and free reserves of the Company.”

9. To approve appointment of Mr. S Krishnamurthy as ‘Manager’

To consider adoption of the following resolution, with or without modification(s), as a special resolution:

“Resolved that in accordance with the provisions of sections 196 , 197, 203 read with Schedule V and other applicable provisions, if any, of the Companies Act, 2013 and the rules made thereunder (including any statutory modification(s) or re-enactments thereof for the time being in force) Mr.S Krishnamurthy, be and is hereby appointed as ‘Manager’ within the meaning of section 2(53) of the Companies Act, 2013,with effect from May 20, 2014, in the designation of President, for a period commencing from May 20, 2014 till December 31, 2015 or such other lesser periods as may be decided by the board of directors of the Company, on the following terms :

a) Salary:

In the scale of `1,70,000 to `2,50,000 per month. Annual increase will be effective 1st of April every year and the quantum will be decided by the board of directors.

KAR MOBILES LIMITED

4

b) Benefits, perquisites and allowances :

Benefits, perquisites and allowances as may be determined by the board of directors from time to time in accordance with the applicable scheme of the Company, subject to a maximum of 150% of the salary per annum.

The perquisites will be evaluated as per Income-tax Rules, wherever applicable, and at actual cost to the Company in other cases.

c) Contribution to funds :

Company’s contribution to provident fund and superannuation fund will not be included in the computation of the ceiling on perquisites to the extent these singly or put together are not taxable under the Income-tax Act.

d) Gratuity:

Gratuity payable shall be as per the rules of the Company.

e) Incentive remuneration :

Incentive remuneration of such sum be paid based on the merits to be determined by the board, provided that the total remuneration shall not exceed the limits prescribed under the Companies Act, 2013 including any statutory modification(s) or re-enactments thereof or such other limits as may be prescribed by the government from time to time.”

“Resolved further that in the event of there being inadequacy or absence of profits in any financial year, during the currency of tenure of the Manager, he will be paid remuneration in terms of Part II of Schedule V to the Companies Act, 2013 including any statutory modification(s) or re-enactments thereof or such other limit as may be prescribed by the government from time to time as minimum remuneration.”

(By Order of the Board)

For Kar Mobiles Limited

Place : Chennai L GaneshDate : May 20, 2014 Chairman

NOTES

1. Any member entitled to attend and vote at the AGM may appoint a proxy to attend and vote instead of himself. The proxy need not be a member of the company. The proxies should however be deposited at the registered office of the company not less than 48 hours before the commencement of the meeting.

A person can act as proxy on behalf of members not exceeding fifty (50) and holding in the aggregate not more than ten percent of the total share capital of the Company carrying voting rights. A member holding more than ten percent of the total share capital of the Company carrying voting rights may appoint a single person as proxy and such person shall not act as a proxy for any other person or shareholder.

2. Corporate members intending to send their authorised representatives to attend the meeting are requested to send to the Company a certified copy of the board resolution authorising their representative to attend and vote on their behalf at the meeting.

3. The explanatory statement pursuant to section 102(1) of the Companies Act, 2013 in respect of the special business to be transacted at the AGM is annexed hereto.

4. The register of members of the Company will remain closed from Saturday, July 19, 2014 to Friday, July 25, 2014 (both days inclusive) for annual closing and determining the entitlement of shareholders to the dividend on equity shares for financial year 2013-14, if declared at the AGM.

5. Pursuant to the provisions of section 205A of the Companies Act, 1956 dividend for the financial year ended March 31, 2007 and thereafter which remain unclaimed for a period of seven years will be transferred to the Investor Education and Protection Fund (IEPF) of the central government.

The Company has sent reminders to all those members whose dividend payments during the last seven years remain unpaid as per Company records. Members are requested to contact the Company’s Registrar and Transfer Agents(RTA), for payment in respect of the unclaimed dividend on or after the financial year 2006-07.

th6. The notice of the 77 AGM along with the attendance slip and proxy form, is being sent by electronic mode to all members whose email addresses are registered with the Company / Depository Participant(s) (DP) unless a member has requested for a hard copy of the same. For members who have not registered their email addresses, physical copies of the aforesaid documents are being sent by the permitted mode.

We encourage your participation and expect your support in this green initiative. To receive communications from the Company in electronic form, please register your e-mail address with your DP/ RTA.

th7. Members may also note that the notice of the 77 AGM and the annual report 2014 will be available on the Company's website, www.rane.co.in.

8. Members holding shares in physical form are requested to notify any change in their addresses, bank details or e-mail addresses to RTA immediately at the following address:

M/s. Integrated Enterprises (India) LimitedII Floor, “Kences Towers”, No.1, Ramakrishna Street, North Usman Road, T.Nagar, Chennai 600 017.

Members holding shares in dematerialized form may inform the change in their addresses, bank details or e-mail addresses to their DP.

9. The Securities and Exchange Board of India (SEBI) has mandated the submission of Permanent Account Number (PAN) by every participant in securities market. Members holding shares in electronic form are, therefore, requested to submit their PAN to their DP with whom they are maintaining their demat accounts. Members holding shares in physical form can submit their PAN to the RTA.

10. Members who hold shares in physical form in multiple folios in identical names or joint holding in the same order of names are requested to send the share certificates to the RTA, for consolidation into a single folio.

11. Members holding shares in single name and physical form are advised to make nomination in respect of their shareholding in the Company. The nomination form can be downloaded from the Company’s website www.rane.co.in .

5

12. Members / Proxies should bring the attendance slip duly filled in for attending the meeting.

13. Relevant documents referred to in the accompanying notice and the explanatory statement pursuant to section 102 (1) of the Companies Act, 2013 will be available for inspection at the registered office of the Company during business hours on all working days up to the date of AGM.

14. Information pursuant to clause 49 of the listing agreement with the stock exchanges in respect of the directors seeking appointment / re-appointment at the AGM are furnished and forms part of the notice. The directors have furnished the requisite consents / declarations for their appointment / re-appointment.

15. In compliance with the provisions of section 108 of the Companies Act, 2013 and the Rules framed thereunder, the members are provided with the facility to cast their vote electronically, through the e-voting services provided by National Securities Depository Limited (NSDL), on all resolutions set forth in this notice. In the event of poll at the AGM, members who have exercised their right to vote through e-voting, shall not be eligible to vote again at the meeting.

Members may note the following process and manner for e-voting :

i. The e-voting period commences on Friday, July 19, 2014 (9.00 a.m. IST) and ends on Sunday, July 21, 2014 (6.00 p.m. IST). During this period, members of the Company, holding shares either in physical form or in dematerialized form, as on the cut-off date viz., June 20, 2014, may cast their vote electronically. The e-voting module shall be disabled by NSDL for voting thereafter. Once the vote on a resolution is cast by the member, he shall not be allowed to change it subsequently.

ii. The voting rights of members shall be in proportion to their share in the paid up equity share capital of the Company as on the cut-off date, June 20, 2014.

iii. Mr. Balu Sridhar, practicing company secretary (membership no. FCS 5869) has been appointed as the scrutinizer to scrutinize the voting process in a fair and transparent manner.

iv. The scrutinizer shall, within a period not exceeding three working days from the conclusion of the e-voting period, unblock the votes in the presence of at least two witnesses not in the employment of the Company and make a scrutinizer’s report of the votes cast in favour or against, if any, forthwith to the chairman of the Company.

v. The results declared alongwith the scrutinizer’s report shall be placed on the Company’s website www.rane.co.in and on the website of NSDL www.evoting.nsdl.com within two days of the passing of the resolutions at the seventy seventh AGM of the Company and communicated to the stock exchanges, where the shares of the Company are listed.

vi Instructions :

a. In case a member receives an e-mail from NSDL (for members whose e-mail addresses are registered with the Company/Depositories):

i. Open the e-mail and also open PDF file viz; “KMLAGM2014.pdf” with your client ID or folio number as password. The said PDF file contains your user ID and password for e-voting. Please note that the password is the initial password.

ii. Open the internet browser and type the following URL: https://www.evoting.nsdl.com/

iii. Click on shareholder – login.

iv. If you are already registered with NSDL for e-voting then you can use your existing user ID and password for casting your vote.

v. If you are logging in for the first time, please enter the user ID and password provided in the PDF file attached with the e-mail as initial password.

vi. The password change menu will appear on your screen. Change to a new password of your choice with minimum of 8 digits or characters or combination thereof. Note your new password. It is strongly recommended not to share your password with any other person and take utmost care to keep your password confidential.

7

vii. Once the e-voting home page opens, click on e-voting: Active Voting Cycles.

viii. Select “EVEN” (E-Voting Event Number) of Kar Mobiles Ltd.

Now you are ready for e-voting as cast vote page opens

ix. Cast your vote by selecting appropriate option and click on “Submit” and also “Confirm” when prompted.

x. Upon confirmation, the message “vote cast successfully” will be displayed.

xi. Once you have voted on the resolution, you will not be allowed to modify your vote.

xii. Institutional shareholders (i.e. other than individuals, HUF, NRI etc.) are required to send scanned copy (PDF/JPG format) of the relevant board resolution/ authority letter etc. together with attested specimen signature of the duly authorized signatory(ies) who are authorized to vote, to the scrutinizer through e-mail: to [email protected] with a copy marked to [email protected]

xiii. In case of any queries, you may refer to the frequently asked questions (FAQs) for shareholders and e-voting user manual for shareholders available at the downloads section of www.e-voting.nsdl.com

b. In case of members’ receiving physical copy of the notice of AGM and desires to cast e-vote:

i. Initial password is provided at the bottom of the attendence slip: EVEN (E-Voting Event Number), user ID and password.

ii. Please follow all steps from Sl. No. ii to Sl. No. xiii of (a) above, to cast vote.




Explanatory Statement pursuant to section 102(1) of the Companies Act, 2013

Resolution No.5

Mr. K P Balasubramaniam was co-opted as an additional director on the board of the Company with effect from May 3, 1989. The period of his office as a director is subject to retirement by rotation under the applicable provisions of Companies Act, 1956. In terms of section 149 of the Companies Act, 2013 and the rules made thereunder and clause 49 of the listing agreement, the board proposes to appoint Mr. K P Balasubramaniam as an independent director for a period of three years commencing from the conclusion of the seventy seventh AGM till the conclusion of the eightieth AGM.

Mr. K P Balasubramaniam is a graduate in science and holds a diploma in business management. In view of his knowledge and wide experience, the board of directors considers that the continuance of Mr. K P Balasubramaniam on the board will be beneficial to the Company. Mr. K P Balasubramaniam is not disqualified from being appointed as a director in terms of section 164 of the Companies Act, 2013 and has given his consent to act as a director. The Company has received a declaration from Mr. K P Balasubramaniam that he meets the criteria of independence as prescribed both under sub-section (6) of section 149 of the Act and under clause 49 of the listing agreement.

The Company has received notice in writing under section 160 of the Companies Act, 2013 along with the requisite deposit amount from a member signifying the intention to propose his candidature to the office of director of the Company.

In the opinion of the board, Mr. K P Balasubramaniam fulfils the conditions for his appointment as an independent director as specified in the Companies Act, 2013 and the listing agreement. Mr. K P Balasubramaniam is independent of the management.

Copy of the draft letter for appointment of Mr. K P Balasubramaniam as an independent director setting out the terms and conditions is available for inspection by members at the registered office of the Company. This statement may also be regarded as a disclosure under clause 49 of the listing agreement with the stock exchanges.

Mr. K P Balasubramaniam is interested in the resolution as it relates to his own appointment. None of the other directors and KMP of the Company and their relatives are concerned or interested, financial or otherwise in this resolution, except to the extent of their shareholding, if any, in the Company.

Information about Mr. K P Balasubramaniam, in accordance with clause 49 IV of the listing agreement is attached.

Your directors commend the resolution for adoption.

Resolution No.6

Mr. C N Srivatsan joined the board of your company on July 20, 2006. The period of his office as a director is subject to retirement by rotation under the applicable provisions of Companies Act, 1956. In terms of section 149 of the Companies Act, 2013 and the rules made thereunder and clause 49 of the listing agreement, the board proposes to appoint Mr. C N Srivatsan as an independent director for a period of three years commencing from the conclusion of the seventy seventh AGM till the conclusion of the eightieth AGM.

Mr. C N Srivatsan is a Chartered Accountant and a Certified Information Systems Auditor (CISA) with over 30 years of diverse experience in handling Indian and overseas assignments. He was a member of Information Technology Control Practices Committee of ISACA. He has addressed innumerable seminars and is a regular faculty for training corporate heads in internal auditing, risk assessment and risk management.

In view of his knowledge and wide experience, the board of directors considers that the continuance of Mr. C N Srivatsan on the board will be beneficial to the Company. Mr. C N Srivatsan is not disqualified from being appointed as a director in terms of section 164 of the Companies Act, 2013 and has given his consent to act as a director. The Company has received a declaration from Mr. C N Srivatsan that he meets the criteria of independence as prescribed both under sub-section (6) of section 149 of the Act and under clause 49 of the listing agreement.


In the opinion of the board, Mr. C N Srivatsan, fulfils the conditions for his appointment as an independent director as specified in the Companies Act, 2013 and the listing agreement. Mr. C N Srivatsan is independent of the management.

8

Copy of the draft letter for appointment of Mr. C N Srivatsan as an independent director setting out the terms and conditions is available for inspection by members at the registered office of the Company. This statement may also be regarded as a disclosure under clause 49 of the listing agreement with the stock exchanges.

Mr. C N Srivatsan is interested in the resolution as it relates to his own appointment. None of the other directors and KMP of the Company and their relatives are concerned or interested, financial or otherwise in this resolution, except to the extent of their shareholding, if any, in the Company.

Information about Mr. C N Srivatsan, in accordance with clause 49 IV of the listing agreement is attached.


Resolution No. 7

Mr. Krishna Kumar Seshadri joined the board of your company on January 21, 2013. The period of his office as a director is subject to retirement by rotation under the applicable provisions of Companies Act, 1956. In terms of section 149 of the Companies Act, 2013 and the rules made thereunder and clause 49 of the listing agreement, the board proposes to appoint Mr. Krishna Kumar Seshadri as an independent director for a period of three years commencing from the conclusion of the seventy seventh AGM till the conclusion of the eightieth AGM.

Mr. Krishna Kumar Seshadri holds a Master of Engineering from Indian Institute of Science, Bangalore and has done Diploma in Business Management from Indian Institute of Management, Ahmedabad. He started his career in 1969 as Design Engineer at Tata Motors Ltd. and moved to an automobile component company as Head of Operations. Since then he has held number of senior positions and served as director on the boards of few companies including Rane Group. He has experience in the management of auto ancillary companies. Mr. Krishna Kumar Seshadri is presently an independent consultant and an executive coach accredited to Business Coaching Foundation of India.

In view of his knowledge and wide experience, the board of directors considers that the continuance of Mr. Krishna Kumar Seshadri on the board will be beneficial to the Company. Mr. Krishna Kumar Seshadri is not disqualified from being appointed as a director in terms of section 164 of the Companies Act, 2013 and has given his consent to act as a director. The Company has received a declaration from Mr. Krishna Kumar Seshadri that he meets the criteria of independence as prescribed both under sub-section (6) of section 149 of the Act and under clause 49 of the listing agreement.


In the opinion of the board, Mr. Krishna Kumar Seshadri, fulfils the conditions for his appointment as an independent director as specified in the Companies Act, 2013 and the listing agreement. Mr. Krishna Kumar Seshadri is independent of the management.

Copy of the draft letter for appointment of Mr. Krishna Kumar Seshadri as an independent director setting out the terms and conditions is available for inspection by members at the registered office of the Company. This statement may also be regarded as a disclosure under clause 49 of the listing agreement with the stock exchanges.

Mr. Krishna Kumar Seshadri is interested in the resolution as it relates to his own appointment. None of the other directors and KMP of the Company and their relatives are concerned or interested, financial or otherwise in this resolution, except to the extent of their shareholding, if any, in the Company.

Information about Mr. Krishna Kumar Seshadri, in accordance with clause 49 IV of the listing agreement is attached.


Resolution No. 8thThe shareholders of the Company at their 76 Annual General Meeting held on July 23, 2013 approved by way of an

ordinary resolution under section 293(1)(d) of the Companies Act, 1956 borrowings which shall not be in excess of`40 crores.

Section 180(1)(c) of the Companies Act, 2013 which is effective from September 12, 2013 requires that the board of directors shall not borrow money in excess of the company’s paid up share capital and free reserves, apart from temporary loans obtained from the company’s bankers in the ordinary course of business, except with the consent of the company accorded by way of a special resolution.

Ministry of Corporate Affairs through the circular No.04/2014 dated March 25, 2014 clarified that the resolution passed under section 293 of the Companies Act, 1956 prior to 12.09.2013 with reference to borrowings and / or creation of security on assets of the company will be regarded as sufficient compliance of the requirements of section 180 of the Companies Act, 2013 for a period of one year (i.e.till11.09.2014) from the date of notification of section 180 of the Companies Act, 2013.

9

Therefore, it is proposed to seek approval of members by way special resolution under section 180(1)(c) and other applicable provisions, if any, of the Companies Act, 2013, to enable the board of directors to borrow money in excess of the aggregate of the paid up share capital and free reserves of the Company. Approval of shareholders is being sought to borrow upto ̀ 12 crores over and above the aggregate of the paid up share capital and free reserves of the Company.

None of the directors and KMP of the Company and their relatives are concerned or interested, financial or otherwise in this resolution, except to the extent of their shareholding, if any, in the Company.


Resolution No. 9

The Company is engaged in manufacturing and marketing of medium and large engine valves for application in internal combustion engine. The financial performance of the Company for the year ended March 31, 2014 is given below:

Particulars for 2013-14 ` crores

Sales & operating revenues 120.17

Profit before tax 2.07

Provision for tax 0.69

Profit after tax 1.38

Exports (FOB value) during the year 51.21

Net foreign exchange loss 1.80

Mr. S Krishnamurthy, President of the Company is appointed as ‘Manager’ for a period commencing from May 20, 2014 to December 31, 2015 on the terms of remuneration as detailed in the resolution.

As required under the provisions of Schedule V to the Companies Act, 2013, the following information is provided.

The proposed remuneration package of the appointee is in line with the prevailing remuneration package in the industry, size of the Company, profile of the position, etc.

Name S Krishnamurthy

Father’s name Srinivasan

Date of birth 04.12.1955

Educational qualifications B Tech, GDMM

Date of appointment 20.05.2014

Other directorships Nil

Committee memberships Nil

Experience 36 Years

Past remuneration (for 2012-13) `56,09,670/-

Recognition / Awards Nil

Job profile and his suitability Overall management of the Company. Given his qualification and experience, Mr. S Krishnamurthy is considered well suited for the position.

Comparative remuneration profile with respect to the industry

Remuneration proposed Detailed in the resolution. The proposed remuneration is commensurate with the responsibilities of the appointee and is in line with the remuneration practices in the auto component industry.

10

Information about director seeking re-appointment in this AGM in respect of appointment / item Nos. 3, 5, 6 & 7 above (in accordance with clause 49 (IV) of the Listing Agreement)

Item No.3 Item No.5

Name of the director Mr. V Ramachandran Mr. K P Balasubramaniam

Father’s name Mr. S Venkataraman Mr. K Palani

Date of birth January 26, 1948 July 15, 1941

Educational qualifications B.E. B.Sc., Diploma in Business Management

Date of appointment May 29, 1992 May 3, 1989

Experience Mr. K P Balasubramaniam has over 44 years of experience in his profession.

Public Limited CompaniesThe Vellore Electric Corporation LimitedEl Forge LimitedVST Tillers Tractors Limited

Private Limited Companies

Sasyaka Engineering Solutions PrivateLimited

Member – Stake holders’ RelationshipKar Mobiles LimitedVST Tillers Tractors Limited

Member – AuditEl Forge LimitedVST Tillers Tractors Limited

Number of shares held 25,232 650

Mr. V Ramachandran had been the Executive Vice Chairman of the Company till March 31, 2008. He has over 42 years of experience in the business relating to automotive components.

Chairman - Audit Tasty Bite Eatables Limited

Member - AuditKar Mobiles Limited

Member-Stake holders’ RelationshipKar Mobiles Limited

Public Limited Companies Tasty Bite Eatables LimitedRitz Hotels (Mysore) Limited

Private Limited CompaniesJaybeear Investment Finance Private LimitedEIE Enterprises Private LimitedTMC Enterprises Private Limited

Committee memberships

Other directorships

Mr. S Krishnamurthy satisfies the conditions laid down in Schedule V to the Companies Act, 2013. He does not hold by himself or for any other person on a beneficial basis, any shares in the Company.

Mr. S Krishnamurthy does not have any other pecuniary relationship with the Company. He is neither related to any director nor promoter(s) of the Company.

Copy of the draft letter for appointment of Mr. S Krishnamurthy as Manager setting out the terms and conditions is available for inspection by members at the registered office of the Company. Mr. S Krishnamurthy is interested in the resolution as it relates to his own appointment

None of the Directors and Key Managerial Personnel and their relatives except S Krishnamurthy of the Company is concerned or interested, financial or otherwise, in the above resolution.

Your directors commend the resolution for adoption




11

Information about director seeking re-appointment in this AGM in respect of appointment / item Nos. 3, 5, 6 & 7 above (in accordance with clause 49 (IV) of the Listing Agreement)

Item No.6 Item No.7

Name of the director Mr. C N Srivatsan Mr. Krishna Kumar Seshadri

Father’s name Mr. C R Natarajan Mr. Seshadri Pudugramam Krishnaiyer

Date of birth May 25, 1957 May 10, 1946

Educational qualifications C.A., C.I.S.A., Master of Engineering, Indian Institute of Science, Bangalore

Diploma in Business Management, IIM, Ahmedabad

Date of appointment July 20, 2006 January 21, 2013

Mr. Krishna Kumar Seshadri has vast experience of 38 years in the management of auto ancillary companies. He is presently an independent consultant and an executive coach accredited to Business Coaching Foundation of India

Public Limited Companies

Rane Engine Valve Limited

Precot Meridian Limited

Chairman - Audit


Kar Mobiles Limited

Chairman - Nomination and Remuneration

Kar Mobiles Limited

Member - Nomination and Remuneration


Member - Audit


Member – Stakeholder’s Relationship


Number of shares held Nil Nil




Mr. C N Srivatsan has 30 years of diverse experience in handling Indian and overseas consultancy assignments. He has addressed innumerable seminars and is a regular faculty for training corporate heads in internal auditing, risk assessment and risk management.

Public Limited Companies Rane Engine Valve Limited

Corporate Social Responsibility


Kar Mobiles Limited


Other directorships

Experience

12

REPORT OF THE DIRECTORS

Your directors have pleasure in presenting their Seventy Seventh Annual Report together with the accounts for the year ended March 31, 2014. In terms of the clarification issued by the Ministry of Corporate Affairs (MCA) vide General Circular 08/ 2014 dated 04.04.2014 the financial statements and the directors report have been prepared in accordance with the disclosure requirements under the Companies Act, 1956 and the rules made thereunder.

1. Financial Performance

The financial highlights for the year under review are as follows:

During the year, the Company’s sales and operating revenues declined by 3% from the previous year. The profitability was lower by 34% compared to previous year mainly due to adverse market conditions, higher inflationary situation. This

resulted in lower earnings per share at `6.15 as

against ̀ 12.47 in the previous year.

2. Appropriation

Out of the profit available for appropriation of `2,87,17,825 the board of directors has recommended a dividend of 25% for the year. The total dividend amount inclusive of distribution tax and surcharge thereon would be `65,51,720. After transfer of ` 1,25,00,000/- to the general reserve, `96,66,105 has been retained as surplus in the profit and loss account.

3. Management Discussion and Analysis

Your Company is engaged in the manufacturing and marketing of medium and large engine valves for applications in internal combustion engines. A detailed analysis of the automotive industry, your Company’s performance etc. are discussed in the report on ‘Management Discussion and Analysis’ which forms part of this report and annexed as Annexure A.

4. Board of Directors

Mr. V Ramachandran retire by rotation at this Annual General Meeting (AGM) and being eligible, offers himself for re-election. The notice convening the ensuing AGM includes the proposal for his re-appointment as director.

Mr. C N Srivatsan, Mr. K P Balasubramaniam and Mr. S Krishna Kumar, Independent Directors on the Board, hold the office of director liable to retire by rotation, as per the resolution passed by the shareholders under the provisions of Companies Act, 1956.

In terms of Section 149 of the Companies Act, 2013, the Independent Directors are not liable to retire by rotation and can hold office for a tenure of five years. In order to comply with these provisions of the Companies Act, 2013, we propose all of the Independent Directors retire at the ensuing AGM in terms of their earlier appointment and re-appoint them as Independent Directors for a period of three years, as required under the Companies Act, 2013. All the Independent Directors have affirmed that they satisfy the criteria laid down under section 149 of the Companies Act, 2013 and clause 49 of the listing agreement.

5. Amalgamation of the Company with Rane Engine Valve Limited

Rane Engine Valve Ltd (REVL) is engaged in the manufacture of engine valves, guides and tappets for passenger cars, commercial vehicles, farm tractors and two/three wheelers. REVL has five manufacturing locations in Tamil Nadu and Andhra Pradesh. REVL is subsidiary company of Rane Holdings Limited.

The board of directors of your company, at its meeting held on May 20, 2014 has considered amalgamation of the company with REVL with a view to develop the potential for further growth and expansion of businesses and to have better synergies, optimization of resources and fund raising capabilities. The significant benefits expected as a result of the amalgamation are as follows:

vBusiness Synergy: Consolidation of business operations and significant impetus to growth since KML is also engaged in the similar areas of business.

vOptimal utilization of resources: Enhancement of the scale of operations and reduction in overheads, administrative, managerial and other expenditure, operational rationalization, sharing of technology, organizational efficiency, and optimal utilization of various resources.

(`in Crores)

Particulars 2013-14 2012-13

Sales & Operating Revenue 120.17 123.78

Profit before Tax 2.07 3.14

Provision for Tax 0.69 0.35

Profit after Tax 1.38 2.79

Surplus brought forward 1.49 1.87

Profit available for appropriation 2.87 4.66

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Enhancemen t i n sha reho lde r va lue : Improvement in shareholder value for both the companies by way of improved financial structure and cash flows, increased asset base and stronger consolidated revenue and profitability.

vExpansion: Enhancing the leveraging capability of the combined entity for larger expansion strategies and tapping bigger opportunities in the automotive industry.

vConsolidation of expertise: Consolidation of managerial expertise of the Companies will facilitate greater focus and utilization of resources.

Based on the valuation carried out by the independent chartered accountants, the board has approved the exchange ratio of 7 equity shares in REVL for every 10 equity shares of the Company, as consideration for the amalgamation.

The appointed date for the amalgamation is April 1, 2014 and is subject to regulatory, legal and other statutory approvals as may be required.

6. Fixed Deposits

The Company does not accept fixed deposit falling under the provisions of Section 58A of the Companies Act, 1956 and the rules framed thereunder.

7. Conservation of Energy

During the year, various initiatives have been taken to reduce consumption of energy like replacement of conventional hydraulic systems with energy efficient hydraulic systems, “Auto off” timers to all the machines, arresting the leakage in all the compressors. This has resulted reduction of energy by 385 units per day.

8. Research & Development Activities

During the year, the Company has not carried out any research & development activity. However, upgrade of products / processes are carried out on regular basis. The statement giving information as required under Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is enclosed to this report as Annexure B.

9. Foreign exchange earnings and outgo

Strategic initiatives are undertaken to increase export business in terms of customers, product and geographical location by identifying new business opportunities.

Foreign exchange earned (FOB) during 2013-14 was `51.24 crores and foreign exchange outgo was ` 20.89 crores.

v 10. Employees

As there are no employees who are drawing the specified remuneration, particulars of employees under section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are not given.

11. Auditors

Statutory Auditors

M/s Varma & Varma, Chartered Accountants, Bangalore, the auditors of the Company retire at the ensuing AGM.

In terms of the transition provisions of section 139 of the Companies Act, 2013, it is proposed to appoint M/s Varma & Varma as Statutory Auditors of the Company for a period of three years from the conclusion of the ensuing seventy seventh AGM until the conclusion of the eightieth AGM.

The Company has received letter from M/s Varma & Varma to the effect that their appointment, if made, would be within the limits prescribed in Companies Act, 2013 and the rules made thereunder. M/s Varma & Varma has submitted the Peer Review Certificate issued to them by The Institute of Chartered Accountants of India.

The notice of the ensuing AGM contains necessary resolution in this regard. Members may consider appointing M/s Varma & Varma as statutory auditors of the Company as per the provisions of the Companies Act, 2013 till the conclusion of the eightieth AGM. Continuation of their appointment as statutory auditors is subject to ratification by the members at every AGM of the Company.

Cost Auditors

Pursuant to the Cost Audit Orders issued by the MCA under section 233B of the Companies Act, 1956, the Cost Audit Report for the financial year 2012-13 was filed with the Ministry of Corporate Affairs (MCA) on September 24, 2013 which is well within the due date of September 30, 2013.

The board has appointed M/s. STR & Associates, Cost Accountants, Chennai to carry out the cost audit of the Company for the financial year 2013-14. The Company would be filing the Cost Audit Report for the financial year ended March 31, 2014 before the due date viz. September 30, 2014 or such other date extended by the MCA.

In terms of section 148 of the Companies Act, 2013, the Board has re-appointed M/s. STR & Associates, as cost auditors for the financial year 2014-15 based on the recommendation of the Audit Committee.

14

12. Directors’ Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956 and based on representations received from the operating management, the directors hereby confirm that they have:

i. Followed the applicable accounting standards in the preparation of the annual accounts for the financial year 2013-14 and there are no material departures;

ii. Selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for the year under review;

iii. Taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company for preventing and detecting fraud and other irregularities;

iv. Devised systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.

13. Corporate Social Responsibility (CSR)

The vision on Corporate Social Responsibility (CSR) is, “To be a socially and environmentally responsible organization committed to improve quality of life within and outside”. CSR activities of Rane Group are channelized through Rane Foundation, a public charitable and educational trust, in the social and environmental spectrum. The focus of Rane’s social development initiatives has been in the three specific areas of (a) education (b) healthcare and (c) community development. The following social development initiatives were undertaken by your Company in this year:-

vContribution of funds towards establishment of Polytechnic College at Trichy by Rane Foundation by way of donation.

vProvided uniform cloths to the Government Primary School children.

vProvided desks and benches to the Government Primary School.

vProvided water filter system to the Government Primary School.

vConducted health and blood donations camps.

Pursuant to the provisions of Section 135 of the Companies Act, 2013 read with Schedule VII to the Companies Act, 2013 and the rules notified thereunder, the Board at its meeting held on March 24, 2014 constituted CSR committee comprising of Mr. L Lakshman, director, Mr. L Ganesh, chairman and Mr. S Krishna Kumar, an independent director.

The Board at its meeting held on May 20, 2014 reviewed the CSR policy recommended by the CSR Committee and adopted the same in line with the provisions of section 135 and the rules made thereunder. The CSR policy of the Company has been posted on the Company’s website.

14. Corporate Governance Report

Your Company has complied with the Corporate Governance requirements as stipulated under clause 49 of the Listing Agreement. Detailed report on the compliance and a certificate by the statutory auditors forms part of this report as Annexure C.

15. Compliance Certificate

As required under section 383A of the Companies Act, 1956 (“the Act”) read with Companies (Appointment & Qualifications of Secretary) Rules, 1988, the Company has obtained certificate from a secretary in whole-time practice confirming the compliance with all the applicable provisions of the Act and a copy of the certificate is annexed to this report as Annexure D.

For and on behalf of the Board

Place : Chennai L Ganesh L LakshmanDate : May 20, 2014 Chairman Director

15

Annexure - A to Report of the Directors

Management Discussion and Analysis

Overview

Volume growth in %over previous year

( ` in Crores)

OEM Segment Aftermarket Segment

The Company is a manufacturer of medium and large engine valves for applications in internal combustion engines.

Industry Structure, Developments and Performance

During the financial year 2013-14, the domestic industry witnessed negative growth in all segments except Farm Tractors and Two Wheelers.

INDUSTRY GROWTH

During the year under review, the growth in the domestic automotive industry is given below:-

Domestic Market

Political uncertainties and high interest rates added with a lack of positive market sentiments slowed growth during the year 2013-14.

OEM and Aftermarket

The performance of the Company in the OEM, Aftermarket and Railways and Defence is given below:

Source : Society of Indian Automobile Manufacturers

2013-14 2012-13 %

32.97 27.43 20.20 21.68 21.83 (0.7) 10.99 11.49 (4.40)

2013-14 2012-13 % 2013-14 2012-13 %

Railways and Defence

Passenger Cars

Utility Vehicles

Small Commercial Vehicles

Light Commercial Vehicles

Medium & Heavy Commercial Vehicles

Three Wheelers

Two Wheelers

Farm Tractors

(5)

(1)

(25)

(4)

(21)

(1)

7

27

(4)

52

(17)

25

(28)

(4)

2

(1)

Vehicles 2013-14 2012-13

16

KAR MOBILES LIMITED

OEM sales were higher by 20% during the year under review as compared to 2012-13. Higher production and sales by the key tractor manufacturers where company has the privilege of being single source was the major contributor for higher OEM sales. Aftermarket sales were marginally lower over 2012-13. Railways and Defence sales were lower by 4.4% compared to previous year.

Exports

The overall economic activities were lower in key markets in the USA and Europe, whereas European Union continues to be under severe economic stress during 2013. The projections given by major aftermarket customers and more specifically by our key customers were lower than our original estimates which had a major impact on our exports. The Company’s focus to the export OEM markets has helped us to reduce the impact. The total export turnover was ̀ 51.98 crores against ̀ 59.49 crores which was 13% lower than previous year.

Operational and Financial Performance

Financial Review:

In the fiscal year ended March 31, 2014, the Company registered net sales and operating revenue of ̀ 120.17 crores, a decline of 2.92% from the previous year with the profit before tax of ̀ 2.07 crores, a decline of 34% from the previous year, mainly due to adverse market conditions, higher inflationary situation. Despite higher input costs, the company has continued to earn profit through optimization of the cost structure and improvement of operational efficiencies.

Operations and Manufacturing Review

The modernization and expansion of Tumkur plant was complete with commissioning of production lines at the plant for catering to large valve markets. The cost reduction measures such as operational improvement and alternate sourcing of raw material have resulted in savings of about 1.25% in the cost of raw materials.

Thrust continued on the implementation of Total Quality Management (TQM) across all plant locations. The quality improvement projects were implemented through a special quality improvement team and through quality circles. In recognition of the persistent efforts to improve quality standards, the Company received the ‘GOLD AWARD’ in QCFI QCC competition and ‘GOLD AWARD’ in QCFI Kaizen competition held in Bangalore.

Outlook

The Company remains cautiously optimistic about the growth of the automotive industry. It is expected that there will be a gradual pick up in momentum in market growth hoping good governance from newly elected government.

Domestic Market:

We expect the auto component industry’s revenue growth to remain weak, in absence of immediate demand triggers for end-users across all segments. While the company is cautiously optimistic about the growth with selective segments / customers where we enjoy the single source status. Overall we expect a marginal growth in OEM segment as compared to 2013-14.

Aftermarket will remain under price pressure as the excess capacities available with manufacturers will be diverted towards aftermarket and each manufacturer will try to gain market share.

Export Market

With some improvement in economic conditions in parts of the EU and US, the demand outlook would gradually improve during the year 2014-15. Overall the year 2014-15 appears to be a very challenging year and the Company plans to adopt a cautious approach tinged with some optimism.

17

Opportunities & Threats

Given the stability of the new government, the growth of Indian economy could be back on track to 7-8% levels. This could mean recovery and growth in automobile industry. If the infrastructure issues like power, roads and ports are addressed and some flexibility in employment is enabled through labour reforms, exports could open up larger opportunities.

In anticipation of formation of a stable government at the centre, the foreign investments have increased towards the year-end. India provides a large engineering talent pool with acclaimed designing and process engineering skill sets. The country’s quality manufacturing and test facilities are on par with global standards.

The Company’s strength continues in areas of:

vStrong parentage being part of the Rane group, an established player in Indian auto-ancillary industry

vRecognition as a medium & large valve manufacturer

vHigh brand equity in served markets

vVast dealer network and field force

vDiversified presence across industries like railways, defence and has significant presence in export market.

The main threats to which auto component industry is exposed to are:-

vHigh competitive intensity of the industry with presence of other domestic companies coupled with competition from countries like China and others.

vUnceasing cost reduction initiatives from OEMs from whom the major portion of the future growth is likely to come.

vSpiraling commodity prices affecting the input costs structure.

vDumping from China and FTA with ASEAN countries.

vApprehension about weak economic expansion in the developed countries.

Internal Control Systems and Risk Management

Your Company has an adequate system of internal controls in place. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls, monitoring of operations, protecting assets from unauthorized use or losses, compliances with regulations and for ensuring reliability of financial reporting. The strong internal control systems have been designed not only to prevent fraud and misuse of the Company resources but also to protect shareholders’ interest.

A well-established multi-disciplinary internal audit team, which reviews and reports to management and the Audit Committee about the compliance with internal controls and the efficiency and effectiveness of operations and the key process risks. The Audit Committee and the Board in consultation with the internal auditor, statutory auditor and operating management approve annual internal audit plan in the beginning of the year. Audit Committee of the Board of Directors, comprising independent directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards as well as reasons for changes in accounting policies and practices, if any. This process not only seeks to ensure the reliability of internal control systems and compliance with laws and regulations but also covers resource utilization and system efficacy.

The Board takes responsibility for the overall process of risk management in the organization. The business risk is managed through cross functional involvement and communication across businesses. The risks associated with each of the business processes and the sub-processes are reviewed periodically by the Audit Committee. The risks

18

are broadly classified into strategic risks, operational risks, financial risks and statutory compliance risks. These risks are rated based on factors such as past year experience, probability of occurrence, probability of non-detection and its impact on business. Every quarter the top management reviews the strategic risks, the risks with high probability and high impact and presents its report to the board of directors together with the risk mitigation plan on half-yearly basis. The strategic risks are taken into consideration in the annual planning processes. Other risks are covered as part of internal audit process and presented to the Audit Committee every quarter. The risk ratings are revalidated with the top management as part of the internal audit process every quarter. The overall re-assessment of risks at company level is carried out and presented to the board once in two years for their review.

Human Resource Development and Industrial Relations

In the Company’s journey towards profitable growth, business linked and solution focused learning is imperative. The HR strategies are aimed at building leadership pipeline and meeting the future competency needs. We have introduced the High Potential Leadership Development (HPLD) initiative designed in a contextual framework focussing on core competencies. High performing individuals at senior, middle and junior levels are identified and groomed to take on higher order challenges in the future. Such talent has a line of sight to the top management with specific and targeted growth measures such as career acceleration, larger and multi-dimensional roles, special projects and competitive compensation.

Competency development that contributes to business success was the theme for the learning and development space. Characteristic of this was the domain specific development initiative for marketing excellence, coupled with interactions with professionals from diverse backgrounds through learning series at the Rane Institute for Employee Development (RIED).

White collar productivity continues to be a focus area. The Company is teaming-up with industry experts to enhance white-collar productivity by conducting detailed studies on work force analysis and developing a robust framework.

Focus on innovation to drive business growth and manage costs effectively will continue to be in the agenda. The efforts are directed at aligning aspirations, inspiring to take on orbit shifting challenges and partnering in healthy and profitable growth. The Company’s pursuit of expanding horizons through innovation led initiatives will propel it on the path of profitable growth.

As at the end of March 31, 2014, the total number of employees stood at 389 against 419 as on March 31, 2013.

Cautionary Statement

The information and opinion expressed in this report may contain certain forward-looking statements, which the management believe are true to the best of its knowledge at the time of its preparation. Actual results may differ materially from those either expressed or implied in this report.

19

FORM - B Information as per 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 and forming part of the Directors' Report for the year ended

March 31, 2014.

RESEARCH AND DEVELOPMENT (R & D)

1. Specific areas in which R & D is carried by Company : NIL

2. Benefits derived as a result of R & D and future plan of action : Not applicable

3. Expenditure on R & D : NIL

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts in brief : Commissioned one production line

at Plant 2 with integration of Lean

Production system

1. Benefits derived as a result of the above efforts : Quality Improvement and consistent

output with reduction in total

employee cost

2. (a) Technology imported (Technology imported during the last 5 years reckoned from the beginning of the financial year) : NIL

(b) Year of import : Not Applicable

(c) Has technology been fully absorbed : Not Applicable

(d) Areas where technology not fully absorbed, reason and future plan of action : Not Applicable


Place : Chennai L Ganesh L LakshmanDate : May 20, 2014 Chairman Director

20

Annexure - C to Report of the Directors

CORPORATE GOVERNANCE

1. Philosophy on Code of Governance:

Rane Group's time tested philosophy of Governance is based on principles of integrity, transparency and fairness. The Rane businesses seek enhancement to shareholder value within this framework. Employee behaviour is nourished by this culture and is governed through a policy document "Ethical Standards of Behaviour" that regulates employees and directors.

Our belief in good corporate citizenship drives internal processes towards statutory and regulatory compliances.

2. Board of Directors:

As of March 31, 2014, the Company has six directors including the non-executive chairman. Of the six non-executive directors, three (50%) are independent directors. The composition of the Board is in conformity with clause 49 of the listing agreement entered into with stock exchanges. None of the directors on the Board is member of more than 10 committees or chairman of more than 5 committees across all the companies in which they are directors. Necessary disclosures regarding committee positions in other public companies as on March 31, 2014 have been made by the directors.

The board met 5 times during the year on May 21, 2013, July 23, 2013, October 24, 2013, January 21, 2014 and March 24, 2014. The names and categories of the directors on the Board, their attendance at Board meetings held during the year and the number of directorships and committee chairmanships / memberships held by them in other companies are given below:

No. of Whether No. of Directorship No. of Board attended in other companies # Committees @

Name of the Director Category Meetings lastattended AGM Chairman Member Chairman Member

Mr. L Ganesh Non-Executive 5 Yes 6 4 2 7Chairman & Promoter

Mr. L Lakshman Non-Executive Director 4 Yes 1 9 3 5& Promoter

Mr. V Ramachandran Non-Executive Director 4 No - 3 2 2& Promoter

Mr. K P Balasubramaniam Independent & 3 Yes - 2 1 2Non-Executive Director

Mr. C N Srivatsan Independent & 5 Yes - 2 2 2Non-Executive Director

Mr. Krishna Kumar Seshadri Independent & 5 Yes - 1 - -Non-Executive Director

# - Excludes companies exempted under Section 278 of the Companies Act, 1956 and foreign companies

@ - Membership in Audit Committee and Investors’ Service / Grievance committee only is considered

Mr. L Lakshman and Mr. L Ganesh are related to each other.

The information as required under Annexure IA to clause 49 of the listing agreement such as annual operating plans and budgets, quarterly results for the Company, minutes of meetings of audit committee and other committees of the board, quarterly details of foreign exchange exposures, risk management and mitigation measures etc. are placed before the Board of Directors.

The board and audit committee meeting annual calendars are circulated in advance to the directors, to facilitate them in attending the meetings. The directors are provided with detailed agenda for the meetings along with necessary annexures to effectively participate in discussions. The Company has a post board meeting review mechanism to monitor and follow up the effective execution of the decisions, directions or suggestions of the Board and its Committees, by the management.

21

3. Audit Committee :

Overall purpose / objective:

The purpose of the Audit Committee is to assist the Board of Directors (the "Board") in reviewing the financial information which will be provided to the shareholders and others, reviewing the systems of internal controls established in the company, appointing, retaining and reviewing the performance of independent accountants/internal auditors and overseeing the Company's accounting and financial reporting processes and the audit of the Company's financial statements.

The scope of reference to the committee includes:

1. Discuss the scope of audit and post-audit area of concern, if any, with Statutory Auditors and Internal Auditors.

2. Recommending the appointment of Statutory Auditor and fixation of audit fee.

3. Review of quarterly / annual financial statements with Statutory Auditors and Management before submission to the Board.

4. Review of internal control systems with the Management, Statutory Auditors and Internal Auditors.

5. Reviewing the adequacy of internal audit function.

6. Review of financial and risk management policies of the Company.

7. Reviewing defaults, if any, in payments to shareholders and creditors.

8. Reviewing the statement of significant related party transactions submitted by the management.

9. Reviewing the management letters/ letters of internal control weaknesses issued by the Statutory Auditors, if any.

10. Reviewing the internal audit reports relating to internal control weaknesses, if any.

11. Management discussion and analysis of financial condition and results of operation.

The composition of Audit Committee as on March 31, 2014 is as follows:

Mr. C N Srivatsan - Chairman - Independent Non-Executive Director

Mr. L Lakshman - Member - Non Executive Director

Mr. K P Balasubramaniam - Member - Independent Non-Executive Director

Mr. S Krishna Kumar* - Member - Independent Non-Executive Director

All the members of the audit committee are financially literate and possess accounting and related financial management expertise.

The committee met on May 21, 2013, July 23, 2013, October 24, 2013 and January 21, 2014.

*for the meeting held on May 21, 2013 he was co-opted as a member of Audit Committee

Name No. of meetings attended

Mr. C N Srivatsan 4

Mr. L Lakshman 3

Mr. K P Balasubramaniam 3

Mr. S Krishna Kumar* 1

22

The statutory auditors and internal auditors were present as invitees in all the meetings.

The President and the Head Finance of the Company attended the meetings by invitation. Based on the requirement, other directors attended the meetings by invitation.

In compliance with clause 41 of the Listing Agreement, the Audit Committee reviews the quarterly unaudited financial results of the Company. These results are subjected to limited review by the Statutory Auditors of the Company. The statutory auditors are eligible to issue Limited Review Report as the audit firm has been subjected to peer review process of The Institute of Chartered Accountants of India (ICAI) and hold a valid certificate issued by the Peer Review Board of ICAI.

The audit committee reviews all mandatory information under clause 49 of the Listing Agreement.

4. Remuneration to Directors:

During the year 2013-14, the Company has paid sitting fees of Rs.20,000 for attending each meeting of the Board / Audit Committee and a sitting fee of Rs.2,500 to the non-executive directors for attending meeting of other committees of the Board, apart from reimbursement of actual travel and out-of-pocket expenses incurred by them for attending the meetings. No other remuneration is paid to the non-executive directors except commission to Mr. L Ganesh, Chairman. The details of commission paid to Mr. L Ganesh, Chairman for the year 2013-14 is given in note 25 of the financial statements.

5. Code of Conduct :

The Board of Directors has laid down a code of conduct for all Board Members and Senior Management of the Company. The same has also been posted on the website of the Company, viz. http://www.rane.co.in/pdf/policies/coc.pdf. The Board Members and Senior Management Personnel have affirmed their compliance with the code of conduct for the year under review. Declaration from the Chief Executive Officer to this effect forms part of this report.

The Board of Directors has also laid down a code of conduct for prevention of insider trading. The designated persons have disclosed their shareholding and their dependent relatives’ shareholding, if any, in a prescribed form as laid down under the Rane Group’s code of conduct for prevention of Insider Trading.

6. Stakeholders’ Relationship Committee:

The Composition of the Committee is as follows :

Mr. L Ganesh - Chairman

Mr. V Ramachandran - Member

Mr. K P Balasubramaniam – Member

During the year, the Committee met on January 21, 2014 and all the committee members attended the meeting.

During the year, the Company received one investor complaint for non-receipt of Annual Report and the same was duly disposed-off. The Company did not receive any complaint from Registrar and Transfer Agent / Stock Exchanges / Ministry of Corporate Affairs/ SEBI, including SEBI Complaints Redress System (SCORES). No investor complaints were pending unresolved at the year end.

23

The details of sitting fees paid to the directorsduring the year 2013-14 are as follows: Number of shares held by the directors are as follows :

None of the other directors hold any share in theCompany.

Name of director Sitting fees (in ̀ ) Name of director No. of shares

Mr. L Ganesh 1,05,000 Mr. L Ganesh 50

Mr. K P Balasubramaniam 1,22,500 Mr. K P Balasubramaniam 650

Mr. L Lakshman 1,42,500 Mr. V Ramachandran 25,232

Mr. C N Srivatsan 1,80,000

Mr. V Ramachandran 82,500

Mr. Krishna Kumar Seshadri 1,20,000

8. Disclosures:

During the year, the Company had not entered into any transaction of material nature with any of the promoters, directors, management or relatives etc., which was in conflict with the interest of the Company. The details of the related party transactions, as stated in note 34 of the financial statements, have been reviewed by the Audit Committee. The Company does not have any subsidiary.

There was no instance of non-compliance by the Company on any matters relating to the capital markets, nor was there any penalty / strictures imposed by the stock exchanges or SEBI or any other statutory authority on such matters.

The Company has complied with all the mandatory requirements prescribed under revised clause 49 of the listing agreement. The CEO and CFO of the Company have certified to the Board on the integrity of the financial statements, effectiveness of internal controls and significant changes in internal control /accounting policies during the year as required under clause 49 (V) of the listing agreement.

The Company has complied with the following non-mandatory requirements:-

i. maintaining an office for the Chairman at the registered office of the Company.

ii. adopting the best practices to ensure a regime of unqualified financial statements.

iii. individual communication of half-yearly results to shareholders.

To comply with all laws governing the operations and conduct of affairs of the Company in accordance with the highest ethical and legal standards, the Company has adopted a Statutory Compliance Kit (STACK). STACK is a structured process providing comprehensive reference framework to facilitate education to dealing personnel, execution, escalation and regular reviews to strengthen compliance management. A new system for updating the laws for compliance was introduced during the year. The master list of statutory requirements is effectively complied through practice of Daily Routine Management (DRM) and Vital Activity Monitoring (VAM) charts. Reports relating to the compliance with various laws applicable to the Company are regularly reviewed and the vital issues are presented to the Audit Committee and the Board.

9. Whistle blower mechanism:

The Company established a formal whistle blower policy, providing the mechanism for reporting with reliable information on any improper or unethical practices or actions which are violative (actual or potential) of the code of the Company by any employee or others dealing with the Company. It also addresses the protection of whistle blower who makes protected disclosures under the policy and provides for direct access to the Chairman of the Audit Committee.

The policy and the mechanism for reporting has been appropriately communicated across all locations of the Company. The whistle blower policy has also been posted in the Company’s website URL: http://www.rane.co.in/pdf/policies/kmlwbpolicy.pdf

During the year, no instance was reported under this policy.

7. General Body Meetings :

Details of last three Annual General Meetings (AGM) are as follows :

Date of AGM Special Resolutions Passed Time Venue

The Music Academy (Mini Hall),July 23, 2013 No special resolution was passed 10.30 a.m(76th AGM) New No. 168, T.T.K Road,

Royapettah, Chennai 600 014

July 24, 2012 No special resolution was passed(75th AGM) New No. 168, T.T.K Road,

The Music Academy (Mini Hall),


No resolution was required to be passed by means of postal ballot by the members of the Company during the year2013-14

July 21, 2011 10.30 a.m(74th AGM)

Payment of Commission to Mr. L Ganesh, Chairman (Mini Hall), No. 314, T.T.K Road,

Chennai 600 018

Narada Gana Sabha

10.30 a.m

24

10. Means of Communication :

The quarterly / annual financial results are published in “Business Standard”(English) and “Dinamani” (Tamil). The financial results and the shareholding pattern were uploaded in the website of the stock exchanges and Company viz:www.rane.co.in. During the year, a presentation was made to analysts/institutional investors and was published in the website of the Company. A management discussion and analysis report is part of the annual report.

11. General Shareholder Information:

I) Information about director seeking re-appointment in this AGM

Name of the director Mr. V Ramachandran Mr. K P Balasubramaniam

Father’s name Mr. S Venkataraman Mr. K Palani

Date of birth January 26, 1948 July 15, 1941

Educational qualifications B.E. B.Sc., Diploma in Business Management

Date of appointment May 29, 1992 May 3, 1989

Experience Mr. K P Balasubramaniam has over 44 years of experience in his profession.


The Vellore Electric Corporation Limited

El Forge Limited

VST Tillers Tractors Limited


Sasyaka Engineering Solutions Private

Limited

Member – Stake holders’ Relationship

Kar Mobiles Limited


Member – Audit

El Forge Limited


Number of shares held 25,232 650

Mr. Ramachandran had been the Executive Vice Chairman of the Company till March 31, 2008. He has over 42 years of experience in the business relating to automotive components.

Chairman - Audit

Tasty Bite Eatables Limited

Member - Audit

Kar Mobiles Limited

Member-Stake holders’ Relationship

Kar Mobiles Limited


Other directorships


Tasty Bite Eatables Limited

Ritz Hotels (Mysore) Limited


Jaybeear Investment Finance Private Limited

EIE Enterprises Private Limited

TMC Enterprises Private Limited

25

26

Name of the director Mr. Krishna Kumar Seshadri

Father’s name Mr. C R Natarajan Mr. Seshadri Pudugramam Krishnaiyer

Date of birth May 25, 1957 May 10, 1946

Educational qualifications C.A., C.I.S.A., Master of Engineering, Indian Institute of Science, Bangalore

Diploma in Business Management IIM, Ahmedabad

Date of appointment July 20, 2006 January 21, 2013

Mr. Krishna Kumar Seshadri has vast experience of 38 years in the management of auto ancillary companies. He is presently an independent consultant and an executive coach accredited to Business Coaching Foundation of India




Chairman - Audit


Kar Mobiles Limited

Chairman - Nomination and Remuneration

Kar Mobiles Limited

Member - Nomination and Remuneration


Member - Audit


Member – Stakeholder’s Relationship


Number of shares held Nil Nil

Mr. C N Srivatsan

Mr. C N Srivatsan has 30 years of diverse experience in handling Indian and overseas consultancy assignments. He has addressed innumerable seminars and is a regular faculty for training corporate heads in internal auditing, risk assessment and risk management.

Public Limited Companies Rane Engine Valve Limited

Corporate Social Responsibility


Kar Mobiles LimitedCommittee memberships

Other directorships

Experience

ii) Annual General Meeting: July 25, 2014 at 10.15 a.m

The Music Academy (Mini Hall),

New No.168, TTK Road,


(v) Listing on Stock Exchanges :

Stock Exchange Stock Code

Bangalore Stock Exchange Ltd.Stock Exchange Towers,51, 1st Cross, JC Road, Bangalore – 560 027.

Madras Stock Exchange Ltd.

KARMOBILES

KMBSecond Line Beach,Chennai – 600 001.

Listing Fee: Annual Listing fee for the financial year 2014-15 has been paid to both the stock exchanges.

(iv) Book Closure & Dividend

The book closure period is from July 19, 2014 (Saturday) to July 25, 2014 (Friday), both days inclusive.

Dividend

The Board of directors at its meeting held on May 20, 2014, has recommended a dividend of Rs.2.50 per equity share. The dividend, if declared by the shareholders, will be paid on August 1, 2014 to all those members whose name appear in the register of members as on July 25, 2014 and in respect of shares in electronic form to those beneficial owners of the shares as at the end of business hours on July 18, 2014.

(vi) BSE IndoNext

Trading of Equity Shares on BSE IndoNext :

The equity shares of the Company are traded on the BSE Ltd. under BSE IndoNext platform with effect from January 31, 2006.

Scrip Code : 590053

Scrip ID : KARMOB

(vii) Unpaid/Unclaimed dividends:

Pursuant to the provisions of section 205A of the Companies Act, 1956, dividend for the financial year ended March 31, 2007 and thereafter which remain unclaimed for a period of seven years will be transferred to the Investor Education and Protection Fund (IEPF) of the Central Government.

iii) Financial Year – 1st April - 31st March

Financial Calendar:

Board Meeting for approval of Tentative Date

Annual Accounts for the year ended March 31, 2014 May 20, 2014

Un-audited results for the 1st quarter ending June 30, 2014 July 25, 2014

Un-audited results for the 2nd quarter ending September 30, 2014 October 24, 2014

Un-audited results for the 3rd quarter ending December 31, 2014 January 21, 2015

Annual Accounts for the year ending March 31, 2015 By last week of May 2015

27

(viii) Unclaimed share certificates:

Under clause 5A (II) of the listing agreement entered with stock exchanges, the Company had sent three reminders to the shareholders for getting their confirmation on unclaimed shares.

Based on the response received from the shareholders, the Company had transferred 19,915 unclaimed shares pertaining to 518 shareholders in physical form into one folio in the name of “Kar Mobiles Limited - Unclaimed Shares Suspense Account” and dematerialised the same. During the year, one shareholder had approached the Company for transfer of 800 shares from the unclaimed shares which were duly transferred. 19,115 shares pertaining to 517 shareholders were lying as unclaimed as on March 31, 2014.

The voting rights of these shareholders shall remain frozen till the rightful owner claims the same.

(ix) Green Initiative:

The Ministry of Corporate Affairs ("MCA") has taken a "green initiative in the corporate governance" by allowing companies to make paperless compliances and service of notice / documents including annual reports to the shareholders of the Company through electronic mode. As a responsible corporate citizen, your Company welcomes and supports the green initiative taken by the MCA, as this will reduce paper consumption to a great extent and allow the members to contribute towards a greener environment. This will also ensure prompt receipt of communication and avoid loss in postal transit.

During last year, the shareholders of the Company whose e-mail addresses were registered with the Company / Depository Participants (DPs) and who have opted to receive the documents in electronic mode and not in physical mode were provided with a link to the annual report of the company via., e-mail. In order to continue supporting this initiative, members are requested to register their e-mail addresses, with the DPs, in case shares are held in dematerialized form and with the Registrar and Transfer agent, in case the shares are held in physical form.

* - Interim dividend

(`)

During the year, the Company had transferred to IEPF an unclaimed dividend amount of `80,252 for the financial year ended March 31, 2006. The Company has sent reminder letters to each of the shareholder’s whose dividend is remaining unclaimed as per the records available with the Company. Information in respect of such unclaimed dividend due for transfer to the said fund is given below:

31.03.2007 20.07.2007 3.00 179,949.00 17.08.2014 15.09.201431.03.2008* 21.03.2008 4.00 2,49,924.00 25.04.2015 24.05.201531.03.2009 23.07.2009 2.00 103,614.00 27.08.2016 25.09.201631.03.2010* 22.01.2010 3.00 2,02,020.00 26.02.2017 27.03.201731.03.2010 22.07.2010 1.50 89,628.00 24.08.2017 22.09.201731.03.2011* 20.01.2011 4.00 2,80,976.00 24.02.2018 25.03.201831.03.2011 21.07.2011 1.00 66,414.00 25.08.2018 22.09.201831.03.2012* 23.01.2012 5.00 3,57,345.00 25.02.2019 26.03.201931.03.2012 24.07.2012 3.50 2,34,493.00 28.08.2019 26.09.201931.03.2013* 21.01.2013 2.00 1,59,164.00 24.02.2020 24.03.202031.03.2013 23.07.2013 2.50 1,94,412.50 28.08.2020 25.09.2020

During the year, the Company had filed with Registrar of Companies, the details of all unpaid and unclaimed amounts as on July 23, 2013 in accordance with the Investor Education and Protection Fund (uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012. The above details were also uploaded in the website of the Company viz. www.rane.co.in.

28

Year Date of Dividend Amount Last Date for Due date fordeclaration per share outstanding claiming transfer

in Unclaimed unpaid to IEPFDividend dividend u/s 205A(5)Account

(as on 31.03.2014)

(`)

#

(xi) Registrar & Transfer Agents :

The contact details of Registrar & Transfer Agents are as follows:-

M/s. Integrated Enterprises (India) LimitedII Floor, “Kences Towers”,No.1, Ramakrishna Street,North Usman Road,T.Nagar, Chennai 600 017.Phone: 28140801 – 03Fax: 28142479, 28143378.e-mail: [email protected]

Name of the contact person: Mr. K Suresh Babu, Vice President

(x) Share Price Data :

There has been no active trading both in Bangalore Stock Exchange Limited and Madras Stock Exchange Limited.

The share price data as quoted on the BSE Ltd. during the last financial year viz. April 1, 2013 – March 31, 2014, is given below:

Share price

Month High (`) Low (`) High (`) Low (`)

Source: www.bseindia.com

Apr-13 19504.18 18226.48 128.00 108.50May-13 20286.12 19575.64 124.00 112.25Jun-13 19610.48 18540.89 117.95 115.95Jul-13 20302.13 19177.76 120.00 100.00Aug-13 19367.59 17905.91 114.90 94.40Sep-13 20646.64 18234.66 109.20 95.00Oct-13 21164.52 19517.15 90.35 77.75Nov-13 21239.36 20194.40 78.00 73.50Dec-13 21326.42 20612.14 75.00 71.05Jan-14 21373.66 20498.25 109.95 78.75Feb-14 21120.12 20193.35 114.95 99.90Mar-14 22386.27 20946.65 104.75 92.00

SENSEX

Share price

BSE Ltd.

(xii) Share Transfer System:

The power to approve transfer of shares has been delegated by the Board to the share transfer committee. Share transfer process is completed within 15 days from the date of receipt of transfer documents by the Registrar and Transfer Agents (RTA). Requests for dematerialisation are generally confirmed on a weekly basis by the RTA.

29

(xiii) Distribution of Shareholdings as on March 31, 2014

Shareholders Shares

Number % to total Number % to total

No. ofshares held

No. of

Upto 500 1,723 84.75 2,20,132 9.83

501-1000 170 8.36 1,27,799 5.70

1001-2000 72 3.54 1,08,084 4.83

2001-5000 37 1.82 1,17,155 5.23

5001-10000 11 0.54 69,898 3.12

10001-20000 9 0.44 1,44,609 6.46

20001-50000 6 0.30 2,07,732 9.27

50001-100000 3 0.15 2,41,122 10.76

100001 & above 2 0.10 10,03,469 44.80

Total 2,033 100.00 22,40,000 100.00

(xiv) Pattern of Shareholding

Sl. As on March 31, 2014 As on March 31, 2013

No. Category

No. of No. of % to total No. of No. of % to total

Shareholders Shares capital Shareholders Shares capital

A Promoters 11 9,77,987 43.66 11 9,75,987 43.57

B Govt. of Kerala 1 37,500 1.67 1 37,500 1.67

C Banks 4 3,978 0.18 4 3,978 0.18

D Private Bodies Corporate 42 2,24,237 10.01 50 2,26,601 10.12

E NRI's 8 3,317 0.15 9 3,302 0.15

F Indian Public & Others 1,967 9,92,981 44.33 1,976 9,92,632 44.31

Total 2,033 22,40,000 100.00 2,051 22,40,000 100.00

On a half-yearly basis the compliance with the share transfer formalities is audited by a Practising Company Secretary (PCS) in terms of clause 47(c) of the Listing Agreement with the stock exchanges and a certificate to this effect is filed with the stock exchanges. Also reconciliation of share capital audit in terms of Regulation 55A of SEBI (Depositories and Participants) Regulations, 1996 is taken up on a quarterly basis and the report of the PCS is filed with the stock exchanges certifying that the total listed capital of the Company is in agreement with the total number of shares in physical and dematerialized form and that there is no difference between the issued and the listed capital of the Company.

30

OR

(xvi) Plant Locations : Given in the first page of the Annual Report.

To,The Members,Kar Mobiles Limited

Declaration by Chief Executive Officer onCode of Conduct under clause 49 of the Listing Agreement

I, hereby declare that to the best of my knowledge and information, all the board members and senior managementpersonnel have affirmed compliance with the code of conduct for the year ended March 31, 2014

Place : Chennai S Krishnamurthy

Date : May 20, 2014 Manager

(xvii) Address for Communication :

Mr. H.K Vadiraj Mr. K Suresh Babu Compliance Officer Vice PresidentKar Mobiles Ltd., Integrated Enterprises (India) Ltd.,Rane Corporate Centre II Floor, ‘Kences Towers’‘Maithri’ 132, Cathedral Road, No.1, Ramakrishna Street, North Usman Road,Chennai - 600 086 T. Nagar, Chennai – 600 017

Phone : 28112472, Fax : 28112449 Phone:28140801–03, Fax:28142479.

e-mail : [email protected] e-mail: [email protected]

Comparative chart of physical and demat holdings for the current and previous financial year is given below:

Number of shares % to total capital

Particulars As on As on As on As on

March 31, 2014 March 31, 2013 March 31, 2014 March 31, 2013

xv) Dematerialisation of Shares

The Company has entered into necessary agreements with NSDL & CDSL (depositories) for dematerialization of shares held by investors. As of March 31, 2014, about 90.30% of the shareholdings are in dematerialised form.

Physical 2,17,334 2,43,124 9.70 10.85

Demat 20,22,666 19,96,876 90.30 89.15

Total 22,40,000 22,40,000 100.00 100.00

The equity shares held by the promoter & promoter group in the Company are entirely in dematerialised mode.

Demat ISIN Number : INE 916E01011.Corporate Identity Number: L85110TN1936PLC071646

31

The Members,

Kar Mobiles Limited,Chennai

We have examined the compliance of conditions of corporate governance by Kar Mobiles Limited, for the year ended on March 31st, 2014 as stipulated in clause 49 of Listing Agreement with Stock Exchanges as contained in SEBI Guidelines, in respect of Equity Shares of the said Company.

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 the 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 above mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

Place : ChennaiDate : May 20, 2014

32

Annexure - D to the report of the Directors

R. Balasubramaniam “Newry Suprit”, 2A, No.27,B.A, B.L. F.C.S 2nd Floor, J Block, 2nd Street,Practising Company Secretary Anna Nagar East, Chennai - 600 102C.P. No.1340 Tel No. - 044 - 2626 9826

Compliance Report

To

The Members Company No. : 71646Kar Mobiles Limited, CIN : L85110TN1936PLC071646“Maithri”, 132, Cathedral Road, Nominal Capital : `2.50 CroresChennai - 600 086 Paid-up Capital : `2.24 Crores

I have examined the registers, records, books and papers of Kar Mobiles Limited (the Company) as required to be maintained under the Companies Act, 1956, (the Act) and the rules made thereunder and also the provisions contained in the Memorandum and Articles of Association of the Company for the financial year ended on March 31, 2014. In my opinion and to the best of my information and according to the examinations carried out by me and explanations furnished to me by the company and its officers, I certify that in respect of the aforesaid financial year:

1. The company has kept and maintained all registers as stated in Annexure ‘A’ to this certificate, as per the provisions and the rules made thereunder and all entries therein have been duly recorded.

2. The company has duly filed the forms and returns as stated in Annexure ‘B’ to this certificate, with the Registrar of Companies and Central Government within the time prescribed under the Act and the rules made thereunder. The company was not required to file any forms or returns to Regional Director and Company Law Board during the financial year.

3. With respect to non-invitation of public subscription for its shares and non-invitation or acceptance of deposits other than its members, directors or their relatives, being related to a Private Limited Company, this item is not applicable to the Company.

4. The Board of Directors duly met five (5) times on May 21, 2013, July 23, 2013, October 24, 2013, January 21, 2014 and March 24, 2014 in respect of which meetings proper notices were given and the proceedings were properly recorded and signed in the Minutes Book maintained for the purpose.

5. The company closed its register of members from Saturday, July 13, 2013 to Tuesday, July 23, 2013 (both days inclusive) and necessary compliance of Section 154 of the Act has been made.

6. The annual general meeting for the financial year ended on March 31, 2013 was held on July 23, 2013 after giving due notice to the members of the company and the resolutions passed thereat were duly recorded in Minutes Book maintained for the purpose.

7. No Extra-Ordinary general meeting was held during the financial year.

8. The company has not advanced any loans to its directors and/or persons or firms or companies referred in the section 295 of the Act.

9. The company has not entered into any contracts falling within the purview of Section 297 of the Act.

10. The company has made necessary entries in the register maintained under section 301 of the Act.

33

11. As there were no instances falling within the purview of Section 314 of the Act, the company has not obtained any approvals from the Board of Directors, Members or Central Government.

12. No duplicate share certificate was issued during the financial year.

13. The Company has:

(i) delivered all the certificates on lodgement thereof for transfer in accordance with the provisions of the Act. There was no allotment of securities and transmissions happened during the financial year.

(ii) deposited the amount of dividend declared in a separate Bank Account within five days from the date of declaration of such dividend, viz;

(a) For final dividend declared on July 23, 2013, the amount deposited on July 26, 2013.

(iii) paid /posted instruments for dividends to all members within thirty days from the date of declaration and all unclaimed/unpaid dividends have been duly transferred to Unpaid Dividend Account of the Company with Bank as follows:

(a) Final dividend for the year ended March 31, 2013 paid on and from July 30, 2013 and amount transferred to Unpaid Dividend Account of the Company with Yes Bank Ltd on August 28, 2013.

(iv) transferred to Investor Education and Protection Fund, the unclaimed dividend amount of `80,252 /- for the financial year ended March 31, 2006.

(v) duly complied with the requirements of Section 217 of the Act.

14. The Company has an appointment of no additional director during the year. There was no appointment of alternate directors and directors to fill casual vacancy during the financial year.

15. The company has not appointed any Managing Director/ Whole-time director or Manager during the financial year.

16. The company has not appointed any sole-selling agents during the financial year.

17. The Company was not required to obtain any approval from the Central Government, the Company Law Board, Regional Director and Registrar of Companies during the financial year, except the approvals for the E-Forms mentioned in Annexure ‘B’, filed with Registrar of Companies.

18. The directors have disclosed their interest in other firms / companies to the Board of Directors pursuant to the provisions of the Act and the rules made thereunder.

19. The company has not issued any shares / debentures / other securities during the financial year.

20. The company has not bought back any shares during the financial year ended March 31, 2014.

21. There was no redemption of preference shares / debentures during the financial year.

22. There were no transactions necessitating the company to keep in abeyance the rights to dividend, rights shares and bonus shares pending registration of transfer of shares.

23. The Company has not invited / accepted any Deposits including any unsecured loans falling within the purview of Section 58A of the Act, during the financial year.

24. The amounts borrowed by the company from banks/ financial institutions during the financial year ended March 31, 2014 are within the borrowing powers of the Company, in terms of section 293(1)(d) of the Companies Act, 1956.

34

25. The company has not made loans, investments or given guarantees, provided securities to other bodies corporate pursuant to Section 372A of the Act and hence the requirement to maintain registers is not applicable.

26. The company has not altered the provisions of the memorandum with respect to the registered office of the company during the year.

27. The company has not altered the provisions of the memorandum with respect to the objects of the company during the year under scrutiny.

28. The company has not altered the provisions of the memorandum with respect to name of the company during the year under scrutiny.

29. The company has not altered the provisions of the memorandum with respect to share capital of the company during the year under scrutiny.

30. The company has not altered its articles of association during the financial year.

31. There was no prosecution initiated against or show cause notices received by the company and no fines or penalties or any other punishment was imposed on the company during the financial year, for offences under the Act.

32. The company has not received any money as security from its employees during the year under certification.

33. The company has duly deposited both employee’s and employer’s contribution to Provident Fund with prescribed authorities.

Signature:Name of the Company Secretary: R BalasubramaniamC.P. No.: 1340

Place: ChennaiDate: May14, 2014

35

Annexure A

Annexure B

Registers as maintained by the Company

1. Register of charges under section 143 of the Act.

2. Register of Members under section 150 of the Act.

3. Register of Contracts under section 301 of the Act

4. Register of Directors under section 303 of the Act.

5. Register of Directors’ Shareholding under section 307 of the Act

6. Register of Share Transfers/ renewed and duplicate share certificates.

Forms and Returns as filed by the Company with the Registrar of Companies, Regional Director, Central Government or other authorities during the financial year ended on 31st March, 2014:

1 E-Form 23C 28-June-13 233B(2) Application to the Central Government for appointment of Cost Auditor

2 E-Form 32 7-Aug-13 Sections 303(2), 264(2) or 266(1)(a) Appointment and cessation of directorsand 266(1)(b)(iii)

3 E-Form 66 9-Aug-13 Section 383A Submission of Compliance Certificate

4 E-Form 23 21-Aug-13 192 Registration of resolution(s) and agreements

5 E-Form 23AC 22-Aug-13 220 Balance Sheet as on March 31, 2013XBRL

6 E-Form 23ACA 22-Aug-13 220 Profit & Loss a/c for the year endedXBRL March 31, 2013

7 E-Form 20B 17-Sep-13 159 Annual return for the year ended March 31, 2013

8 E-Form I-XBRL 24-Sep-13 233B(4) Cost Audit Report for the year ended March 31, 2013

9 E-Form 1 INV 27-Sep-13 205C Transfer of unclaimed dividends to Investor Education and Protection Fund

S l Form No. Date of Section PurposeNo. Filling

36

Signature:

Name of the Company Secretary: R Balasubramaniam

C.P. No.1340

Place: Chennai

Date: May 14, 2014

10 E-Form 5 INV 19-Oct-13 ‘Z’ Statement of unclaimed and unpaid amounts

11 E-Form 17 22-Oct-13 138 Satisfaction of Charge

12 E-Form 8 31-Oct-13 125-135 Creation of Charge

13 E-Form 8 23-Dec-13 125-135 Modification of Charge

14 E-Form 17 21-Feb-14 138 Satisfaction of Charge

S l Form No. Date of Section PurposeNo. Filling

IEPF ( Uploading of information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012

37

INDEPENDENT AUDITORS' REPORT

The Members,Kar Mobiles Limited,Chennai.

Report on the Financial Statements

We have audited the accompanying financial statements of Kar Mobiles Limited (“the Company”) which comprise the Balance Sheet as at 31st March 2014, the Profit and Loss Statement and the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The management of the company is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the Companies Act, 1956 (“the Act”) and the Accounting Standards referred to in sub section (3C) of Section 211 of “the Act” read with the general circular 15/2013 dated 13.09.2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the said

financial statements read together with the significant accounting policies and notes to accounts attached thereto, give the information required by the Act 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 31st March 2014;

b. In the case of the Profit and Loss Statement, 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.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in Paragraphs 4 and 5 of the said Order;

2. As required by section 227(3) of the Act, 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 and Profit and Loss Statement, 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 Statement 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 read with the general circular 15/2013 dated 13.09.2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013;

(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 of the company is disqualified as on March 31st, 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

For VARMA & VARMAChartered Accountants

FRN.004532S

CHERIAN K BABYPlace : Chennai PartnerDate : May 20, 2014 M.No.16043

38

ANNEXURE TO INDEPENDENT AUDITORS’

ANNEXURE REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING “REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS” OF OUR INDEPENDENT AUDIT REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF KAR MOBILES LIMITED FOR THE YEAR ENDED 31ST MARCH 2014

1. (a) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) We are informed that most of the fixed assets of the company have been physically verified by the management during the previous year based on the fixed assets verification programme laid down by the management of the company which, in our opinion is reasonable having regard to the size of the company and the nature of assets.

(c) The company has not disposed off substantial part of fixed assets during the year.

2. (a) We are informed that the inventory of raw materials, stores and spares in the custody of the company are physically verified by the management on a continuing basis as per a programme of perpetual inventory and inventories of other items have been physically verified at the year-end, the frequency of which, in our opinion is reasonable, having regard to the size of the company and the nature of its business;

(b) In our opinion and according to the explanations given to us, the procedures of physical verification of inventory followed by the management are fairly reasonable and adequate in relation to the size of the company and the nature of its business;

(c) The company is maintaining proper records of inventory and as informed to us, discrepancies of material nature noticed on physical verification, by the management, have been appropriately adjusted in the books of account.

3. (a) The company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 except an interest free loan of `.0.75Crores given in an earlier year to Rane Foundation, a public charitable trust. The maximum amount involved during the year and the year-end balance of such loan is ̀ 0.75 crores;

(b) In our opinion, the terms and conditions of such loan is not prima facie prejudicial to the interests of the company;

(c) The aforesaid mentioned loan is due for repayment during financial year ending 31st March 2016. Accordingly there are no over dues as at the Balance Sheet date;

(d) The company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us, there are fairly adequate internal control procedures commensurate with the size of the company and nature of its business for the purchase of inventory and fixed assets and for the sale of goods. We have not noted any continuing failure to correct major weaknesses in the internal control system, subject to Auditor’s Responsibility paragraph mentioned in the Independent Auditor’s Report above.

5. According to the information and explanations given to us, all transactions which require to be entered in a register maintained pursuant to Section 301 of the Companies Act, 1956 have been so entered. Where each of such transactions is in excess of ̀ 5 lakhs in respect of any party, they have been made at cost/ negotiated prices and they either compare favourably with market prices or there are no comparable prices.

REPORT

39

6. The company has not accepted any deposits from the public during the year and there are no deposits outstanding as at the beginning and end of the year. Hence, the compliance of provisions of sections 58A and 58AA of the Companies Act, 1956 is not applicable.

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

8. We have broadly reviewed the records maintained by the company pursuant to the order issued by the Central Government under Section 209(1) (d) of the Companies Act, 1956, for the maintenance of cost records in respect of the products of the company and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of these records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and as per our verification of the records of the company, the company has been fairly regular in depositing undisputed statutory dues including Provident fund, Employee’s State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess, Investor Education and Protection Fund and other statutory dues with the appropriate authorities during the year to the extent applicable. There are no arrears of undisputed statutory dues of a material nature outstanding for a period of more than six months from the date on which they became payable;

(b) According to the information and explanations given to us and as per our verification of the records of the company, there are no disputed amounts of tax/ duty that have not been deposited with appropriate authorities as at 31st March 2014 except for the following:

10. There are no accumulated losses at the end of the financial year. The company has also not incurred any cash losses during the year and in the immediately preceding financial year.

11. According to the information and explanations given to us and as per our verification of the records of the company, the company has not defaulted in repayment of dues to the financial institutions and banks.

1 Finance Act, 1994 0.07 Apr-2005 to July-2007 Customs Excise and Service Tax Appellate Tribunal

2 Finance Act, 1994 0.03 Sept-2004 to Mar-2005 Customs Excise and Service Tax Appellate Tribunal

3 Finance Act, 1994 0.003 Apr-2011 to Aug-2011 Commissioner of Central Excise (Appeals)

4 Finance Act, 1994 0.02 Nov-2006 to Mar-2009 Commissioner of Central Excise (Appeals)

5 Finance Act, 1994 0.01 Oct-2007 to Mar-2012 Commissioner of Central Excise (Appeals)

6 Customs Act, 1962 0.06 May-2005 Joint Commissioner of Customs

7 Income Tax Act, 1961 0.08 AY 2011-12 Assistant Commissioner of Income Tax

Forum where dispute is pendingSl. No.

Name of the Statutes

Amount ( `. In Cr.)

Period to which the

dispute relates

40

12. The company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities.

13. Since the company is not a chit fund/nidhi/mutual benefit fund/society, the related reporting requirements are not applicable.

14. Since the company is not dealing or trading in shares, securities, debentures or other investments, the related reporting requirements are not applicable.

15. According to the information and explanations given to us and as per the verification of the records of the company, there are no guarantees given by the company for loans taken by others from banks or financial institutions.

16. According to the information and explanation given to us and as per the verification of the records of the company, the term loans obtained and to the extent utilized during the year were applied for the purpose for which such loans were obtained.

17. According to the information and explanations given to us and as per our verification of the records of the company, the company has not utilized funds raised on short-term basis for long term purposes, except for an instance of repayment of a term loan using cash credit facility, which was regularized within a week.

18. The company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act.

19. The company has not issued any debentures during the year.

20. The company has not raised any money by public issues during the year.

21. According to the information and explanations given to us and as per our verification of the records of the company, no fraud either on or by the company has been noticed or reported during the year.

For VARMA & VARMA

Chartered AccountantsFRN.004532S

CHERIAN K BABYPlace : Chennai PartnerDate : May 20, 2014 M.No.16043

41

(` in Crores)BALANCE SHEET AS AT 31ST MARCH, 2014

Note 31 March, 31 March,Particulars No. 2014 2013

EQUITY AND LIABILITIES

Shareholders' Funds

(a) Share Capital 2 2.24 2.24

(b) Reserves and Surplus 3 29.07 28.17

Non-Current Liabilities

(a) Long term borrowings 4 6.65 4.29

(b) Deferred Tax Liabilities (Net) 5 1.44 1.31

(c) Long term provisions 6 5.87 5.65

Current Liabilities

(a) Short-term borrowings 7 18.80 15.80

(b) Trade payables 8 15.35 16.56

(c) Other current liabilities 9 7.95 13.78

(d) Short-term provisions 10 1.22 1.18

TOTAL 88.59 88.98

ASSETS

Non-current assets

(a) Fixed assets 11

(i) Tangible assets 38.08 38.35

(ii) Intangible assets 0.03 0.05

(iii) Capital work-in-progress - 0.49

(b) Long term loans and advances 12 3.35 2.90

Current assets

(a) Inventories 13 15.01 14.46

(b) Trade receivables 14 27.22 26.35

(c) Cash and bank balances 15 0.24 0.25

(d) Short-term loans and advances 16 1.74 1.75

(e) Other current assets 17 2.92 4.38

TOTAL 88.59 88.98

Significant accounting policies and other notes to accounts 1 &

24-36

S Krishnamurthy Manager

Rekha NBSecretary

Place : Chennai

L Ganesh L LakshmanChairman Director


Date : May 20, 2014

HK VadirajChief Financial Officer

As per our report of even date attached


FRN.004532S


PartnerM.No.16043

CHERIAN K BABY

42

PROFIT AND LOSS STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2014

Note Year ended Year endedParticulars No. 31 March, 2014 31 March, 2013

(` in Crores)

REVENUE FROM OPERATIONS:

Revenue from Operations 18 128.77 131.94

Less: Excise duty 8.80 8.44

Total Revenue from Operations 119.97 123.50

Other Income 19 0.20 0.28

Total Revenue 120.17 123.78

EXPENSES:

Cost of materials consumed 49.11 53.14

Purchase of Stock-in-Trade - 0.01

Changes in inventories of finished goods, work-in-progressand Stock-in-Trade 20 0.22 (0.87)

Employee benefit expense 21 28.47 28.08

Finance Costs 22 2.73 3.62

Depreciation and amortization expense 11 3.80 3.48

Other expenses 23 33.77 33.18

Total Expenses 118.10 120.64

Profit before tax 2.07 3.14

Tax expense:

Current tax 0.48 0.61

Add/(Less): MAT Credit (Entitlement)/Reversed 0.01 (0.01)

Net Current Tax 0.49 0.60

Deferred tax Expense/ (Gain) 0.14 0.43

Short/ (Excess) current tax provision relating to prior years written back(Net) 0.06 (0.62)

Short/ (Excess) Fringe benefit tax provision relating to prior years written back - (0.06)

Profit /(Loss) for the year 1.38 2.79

Earnings per equity share:

Basic 6.15 12.47

Diluted 6.15 12.47

Significant accounting policies and other notes to accounts 1 & 24-36


Rekha NBSecretary

Place : Chennai



Date : May 20, 2014




FRN.004532S


PartnerM.No.16043

CHERIAN K BABY

43

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2014

Particulars 31.03.2014 31.03.2013

(` in Crores)

A CASH FLOWS FROM OPERATING ACTIVITIES

Net profit before taxation and extraordinary items 2.07 3.14

Adjustments for:

Depreciation and amortization expenses 3.80 3.48

Finance Costs 2.73 3.62

Loss on sale/ discarding of fixed assets 0.04 0.09

Income from investments - -

Interest received (0.07) (0.15)

Interest on Income Tax refund (0.03) (0.04)

Gain on sale of fixed assets (0.01) (0.01)

Exchange variation on Forward contracts 0.17 0.13

OPERATING PROFIT BEFORE THE CHANGES IN WORKING CAPITAL 8.70 10.26

(Increase)/ Decrease in Inventories (0.55) 2.00

(Increase)/ Decrease in Trade Receivables (0.88) 2.32

(Increase)/ Decrease in Long term Loans and Advances (0.74) (0.23)

(Increase)/ Decrease in Short-term Loans and Advances 0.01 (0.16)

(Increase)/ Decrease in Other Current Assets 1.68 0.14

Increase/ (Decrease) in Trade Payables (1.18) (4.15)

Increase/ (Decrease) in Other Current Liabilities 0.13 (0.14)

Increase/ (Decrease) in Long term Provisions 0.22 0.70

Increase/ (Decrease) in Short term Provisions 0.03 (0.13)

CASH GENERATED FROM OPERATIONS 7.42 10.61

Income tax paid (Net of refunds) (0.26) (0.38)

Interest on Income tax refunds 0.03 0.04

NET CASH GENERATED FROM OPERATING ACTIVITIES - (A) 7.19 10.27

B CASH FLOW FROM INVESTING ACTIVITIES

Proceeds from sale of fixed assets 0.01 0.03

Purchase of fixed assets (3.07) (8.76)

Income from investments - -

Interest received 0.04 0.14

NET CASH USED IN INVESTING ACTIVITIES - (B) (3.02) (8.59)

44

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2014

Particulars 31.03.2014 31.03.2013

(` in Crores)

C CASH FLOWS FROM FINANCING ACTIVITIES

(Repayment)/ Proceeds from long term borrowings (3.65) (2.15)

(Repayment)/ Proceeds from short term borrowings 3.01 1.63

Dividend and Dividend Tax Paid (0.66) (1.43)

Finance Costs (2.72) (3.64)

Exchange variation on Forward contracts (0.16) (0.13)

NET CASH USED GENERATED FROM FINANCING ACTIVITIES - (C) (4.18) (5.72)

NET CASH FLOWS DURING THE YEAR (A+B+C) (0.01) (4.04)

Opening balance of cash and cash equivalents 0.25 4.29

Closing balance of cash and cash equivalents ** 0.24 0.25

** Includes money held in unpaid dividend accounts and margin money given to bank which are not available for use by the company 0.21 0.19


Rekha NBSecretary

Place : Chennai



Date : May 20, 2014




FRN.004532S


PartnerM.No.16043

CHERIAN K BABY

45

NOTES FORMING PART OF ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2014

1 Significant Accounting Policies

a) Basis of Preparation of Financial Statements

b) Use of Estimates

c) Fixed Assets

Capital work-in-progress:

Depreciation and Amortisation

The financial statements are prepared under the historical cost convention, in accordance with the provisions of the Companies Act, 1956 and the Companies (Accounting Standards) Rules, 2006 (Indian GAAP) as adopted consistently by the company. As a non SMC company all accounting standards are applicable to the company. All income and expenditure having a material bearing on financial statements are recognised on accrual basis.

These financial statements are prepared under the historical cost convention on accrual basis as mentioned above except for certain financial instruments which are measured at fair values, in accordance with the Accounting Standard 30 issued by the Institute of Chartered Accountants of India. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing standard requires a change in the accounting policy hither to in use.

The preparation of the financial statements in conformity with Indian GAAP requires that the management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of financial statements and the reported amounts of revenue and expense during the reported period. Although such estimates were made on a reasonable and prudent basis taking into account all available information, actual results could differ from estimates and such differences are recognised in the year in which the results are ascertained.

Fixed Assets are valued at cost, namely, cost of acquisition and other incidental expenses directly related to their installation/ erection less accumulated depreciation and impairment, if any. Computer software giving rise to future economic benefit is recognized as intangible assets. Intangible assets are carried at cost less amortization and impairment, if any, where it is probable that future economic benefits will arise for an amount not less than the carrying value.

If an asset is carried at a value more than the recoverable amount through use or sale of the asset, such impairment of asset is recognised as expediture of the year. If such impairment ceases to exist then the same is recognised as income of that year.

All capital expenditure excluding advances paid for the construction of fixed assets are shown as capital work-in-progress until completion of the project or until the asset is ready to be put to use. These costs are capitalised to the relevant items of the fixed assets on completion or putting to use.

Depreciation on tangible fixed assets is charged on Straight Line Method at the rates and in the manner specified in Schedule XIV of the Companies Act, 1956 except that depreciation on certain fixed assets is provided on straight-line method over the useful lives of assets estimated by the management. Depreciation

46

for the assets purchased / sold during the period is proportionately charged. Individual low cost assets (acquired for Rs.10,000/- or less) are depreciated over a period of one year. The management has estimated the useful lives of some of the fixed assets at less number of years than that are contemplated in Schedule XIV to the Companies Act, 1956. The revised expected lives are as follows:

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Intangible assets are amortised over their respective individual estimated period for which future economic benefits will arise or ten years whichever is lower.

Operating lease payments are recognised as an expense in the Profit and Loss statement on a systematic basis.

Inventories are valued at lower of cost or estimated net realisable value. Material cost is ascertained on weighted average basis and conversion and other costs incurred for bringing the inventories to their present location and condition allocated to the extent required.

Excise Duty in respect of goods sold is reduced from Sales.

(ii) Customs duty and Excise Duty applicable on goods under clearance have been computed and provided for by adding the same to the value of relative inventories.

(iii) The net effect of Excise Duty on opening and closing stock of finished goods and other adjustments relating to Excise Duty are disclosed separately in the profit and loss statement.

Investment subsidy received from the Government and Grant received from Industrial Credit and Investment Corporation of India - Productivity Fund are considered as a part of the Capital Reserve.

Transactions in foreign currency are accounted at the exchange rates prevailing at the time of entering into the transaction or at the contracted rates.

Premium or discount on forward exchange contracts which are not intended for trading or speculation purpose and is to establish the amount of reporting currency required at the settlement date of the transaction is recognised in the profit and loss statement over the period of contracts. The exchange differences on the contract are recognised in the year in which the contract terminates.

Exchange differences arising from settlement or restatement of foreign currency loans relating to fixed assets/ capital work-in-progress to the extent regarded as an adjustment to interest cost are treated as borrowing cost net of corresponding difference arising from restatement of the forward contract where applicable.

Other exchange differences arising from settlement or restatement of long term monetary items into reporting currency are adjusted in the carrying cost of related assets / Foreign Currency Monetary Item Translation Difference Account and those relating to short term monetary items are adjusted in the profit and loss statement.

Office Equipments - 3 Years

Computers - 4 Years

Furniture and Fixtures - 5 Years

Vehicles - 5 Years

Licenses (Major Software) - 3 Years

d) Leases

e) Inventories

f) Customs Duty and Excise Duty

(I)

g) Capital Reserve

h) Foreign Exchange Transactions

47

i) Derivative Instruments and Hedge Accounting

j) Employee Benefits

a) Short term employee benefits

b) Defined Contribution Plans

c) Defined Benefit Plans

i. Gratuity

ii. Compensated absences (Earned Leave Encashment)

k) Borrowing Costs

The Company is exposed to foreign currency fluctuations on foreign currency assets, liabilities and forecasted cash flows denominated in foreign currency. It uses foreign currency derivative contracts to hedge its risks associated with foreign currency fluctuations and enters into derivative contracts, where the counterparty is a bank. The use of foreign currency derivative contracts is governed by the company's policies approved by the board of directors. It does not use derivative financial instruments for speculative purposes.

The company has adopted Accounting Standard 30 (AS 30) "Financial Instruments: Recognition and Measurement", and accordingly, the changes in the fair values of derivative contracts designated as cash flow hedges are recognised directly in 'Hedging Reserve Account' which is part of shareholders' funds and reclassified into the profit and loss statement upon the occurrence of the hedged transactions. The changes in fair value relating to the ineffective portion of the cash flow hedge derivative contracts, if any, are recognised in the profit and loss statement as they arise.

The amounts paid/ payable on account of short term employee benefits, comprising largely of salaries & wages, short term compensated absences and annual bonus is valued on an undiscounted basis and charged to the profit and loss statement for the year.

The company has defined contribution plans for its employees comprising of Provident Fund, Superannuation Fund and Employee's State Insurance. The contributions paid/payable to these plans during the year are charged to the profit and loss statement for the year. The Company has no other obligation in this regard.

The company's Gratuity scheme is administered through the Employee's Group Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of India. The net present value of the obligation for gratuity benefits as determined on actuarial valuation, conducted annually using the projected unit credit method, as adjusted for unrecognized past services cost, if any and as reduced by the fair value of plan assets, is recognised in the accounts. Actuarial gains and losses are recognised in full in the profit and loss statement for the period in which they occur.

The company has a scheme for compensated absences for employees, the liability other than for short term compensated absences is determined on the basis of actuarial valuation carried out at the end of the year, using projected unit credit method. Actuarial gains and losses are recognised in full in the profit and loss statement for the period in which they occur.

Borrowing costs that are attributable to the acquisition or construction of qualifying assets that require a substantial period of time are capitalized as part of the cost of the asset if they will result in future economic benefit to the company. All other borrowing costs are charged to revenue.

48

l) Revenue Recognition

Sales:

Export Incentives:

Interest:

m) Income Tax

n) Provisions and Contingencies

o) Cash Flow Statement

Sales are recognised on despatch of goods to customers except in respect of domestic original equipment customers where it is recognised on delivery. Sales are net of sales tax, trade discount and returns.

Export incentives are recognised when there is certainty of realisation.

Interest income is recognised on time proportion basis taking into account the amount outstanding and the rate applicable.

Tax expense comprising current tax and deferred tax are recognised in the profit and loss statement for the year. Current tax is the amount of income tax determined to be payable in respect of taxable income as computed under tax laws.

Certain items of income and expenditure are not reported in tax returns and financial statements in the same year. The net tax effect calculated at the current enacted tax rates of this timing difference as also that relating to carried forward unabsorbed depreciation and business loss as at the end of an accounting year is reported as deferred income tax asset/liability. The effect on deferred tax assets and liabilities due to change in such assets/liabilities as at the end of the previous accounting year and due to a change in tax rates are recognised in the income statement of the year.

Provision for losses and contingencies arising as a result of a past event where the management considers it probable that a liability may be incurred are made on the basis of the best reliable estimates of the expenditure required to settle the present obligation on the Balance Sheet date and are not discounted to its present value. Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate.

Contingent liabilities to the extent the management is aware, are disclosed by way of notes to the accounts.

Cash Flow statement has been prepared in accordance with the indirect method prescribed in Accounting Standard - 3 of Companies (Accounting Standards) Rules, 2006.

49

(` in Crores)NOTES FORMING PART OF BALANCE SHEET

Particulars as at 31st as at 31stMarch, 2014 March, 2013

2 Share Capital

2.1 Authorised Share Capital:

23,50,000 Equity Shares (23,50,000) of `10 each 2.35 2.35

1,50,000, 13.50% Preference Shares (1,50,000) of `10/- each 0.15 0.15

Issued, Subscribed and Fully Paid Up:

22,40,000 Equity Shares (22,40,000) of `10/- each 2.24 2.24

2.2 Reconciliation of shares at the beginning and at the end of the financial year

Details of shareholders holding more than 5% shares in the company *

% No. of Shares % No. of Shares

Rane Holdings Limited 39.57% 39.48% 884,369

Gagandeep Credit Capital Private Limited 5.23% 1

886,369

17,100 5.23% 117,100

* As per records of the company, including its register of members

Number ` in Crores Number ` in Crores

Equity Shares outstanding:

at the beginning of the period 2,240,000 2.24 2,240,000 2.24

2.24at the end of the period 2,240,000 2.24 2,240,000 2.24

Change in the number of Equity Shares Outstanding NIL NIL

2,240,000

2.3 Terms/ rights attached to Equity Shares:

Each holder of equity shares is entitled to one vote per share.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to number of equity shares held by the shareholders.

2.4 Notes on Share Capital

The Company has not issued any securities convertible into equity/ preference shares.

During any of the last five years from year ended 31st March, 2009:

No shares were allotted as fully paid up pursuant to contract(s) without payment being received in cash.

No shares were allotted as fully paid up by way of bonus shares.

No shares were bought back.

50


3 Reserves and Surplus

3.1 Capital Reserve

Preference Share Redemption Reserve 0.10 0.10

Investment Subsidy from Government of Karnataka for Tumkur Unit 0.15 0.15

Grant Received from Industrial Credit and Investment Corporation Productivity Fund 0.04 0.04

0.29 0.29

3.2 General Reserve

Balance as at the beginning of the year 26.38 24.38

Add: Transferred during the year from surplus in profit and loss statement 1.25 2.00

Balance as at the end of the year 27.63 26.38

3.3 Hedge Reserve Account

Balance as at the beginning of the year 0.01 -

Add: Net gain recognised on cash flow hedges 0.19 0.01

Less: Net gain/ (loss) reversed to profit and loss statement 0.01 -


3.4 Surplus in Profit and loss statement

Balance as at the beginning of the year 1.49 1.87

Profit for the year as per profit and loss statement 1.38 2.79

Less: Appropriations

Interim dividend paid on the equity shares for the year [ Per share - NIL (P.Y.`2) ] - 0.45

Dividend distribution tax on interim dividend on equity shares - 0.07

Proposed dividend on the equity shares for the year [ Per share ̀ 2.50 (P.Y.`2.50) ] 0.56 0.56

Dividend distribution tax on proposed dividend on equity shares 0.10 0.09

Transfer to General Reserve 1.25 2.00


Total Reserves and Surplus 29.07 28.17

3.5 Final dividend of ̀ 2.50 per share (P.Y. ̀ 2.50) proposed by Board is subject to approval of shareholders in the ensuing Annual General Meeting.


51



4 Long Term Borrowings

4.1 Secured

Foreign Currency Term Loan from Standard Chartered Bank 2.15 4.29

Term Loan from Karur Vysya Bank 4.50 -

6.65 4.29


5 Deferred Tax Liabilities/ (Assets) (Net)

Asset

In respect of timing difference of expenses

In respect of timing difference of doubtful debts

In respect of timing difference of deferred revenue expenses

In respect of timing difference on depreciation

Liability

Net Deferred Tax Liabilities

(2.22)

(0.01)

(0.08)

(2.31)

3.75

1.44

(2.14)

(0.03)

(0.11)

(2.28)

3.59

1.31

4.2 Nature of security of long term borrowings and other terms of repayment

i Term loans from banks are secured by first charge on pari passu basis on all immoveable and moveable fixed assets, present and future, of the company's Peenya Unit and Tumkur Unit and second charge on pari passu basis on all current assets, present and future, of the Company.

ii None of the above loans have been guaranteed by any Directors or others except for counter guarantee given by the Company.

iii Term loan from Standard Chartered Bank is repayable in 16 equal quarterly installments from April 18, 2012 along with interest rate of 8.95% (P.Y. 8.95%).

iv Term loan from Karur Vysya Bank is repayable in 11 equal quarterly installments from January 5, 2014 along with interest rate of 12.00% (P.Y. Nil).

v There has been no continuing default as on Balance Sheet date in repayment of loans and interest.

vi During the earlier years, the company had availed foreign currency denominated loans towards capital investment/ expansion of its plants. It has also entered into a back to back cross currency rate swaps with the banks for the repayment of its commitments against the said loans. Consequently, the exposure of the company against the loan commitments is fixed in Indian Rupees and there is no possibility of any further exposure to the company in this regard and hence no foreign exchange fluctuation has been recognised on this transaction and corresponding changes in the fair value of the contracts have also not been recognised.

52

NOTES FORMING PART OF BALANCE SHEET


(` in Crores)

6 Long Term Provisions

Provision for employee benefits [ Refer Note 32 ]

Provision for Gratuity 4.18 4.12

Provision for Leave Encashment 1.69 1.53

5.87 5.65

7 Short Term Borrowings

7.1 Secured

Cash credit/ Packing credit/ Buyer's Credit from State Bank of India 18.80 13.16

Packing credit from Hongkong Shanghai Banking Corporation Limited - 2.64

18.80 15.80

7.2 Short Term borrowings from State Bank of India and Hongkong Shanghai Banking Corporation Limited are secured by hypothecation of stock of raw materials, consumables, spares, semi finished goods and book debts wherever located on pari passu basis. Further, short term borrowings from State Bank of India is also secured by second charge on land and buildings and plant and machineries of the company's Peenya and Tumkur Units.

7.3 None of the above loans have been guaranteed by any Directors or others except for counter guarantee given by the Company.

8 Trade Payables

- Due to micro & small enterprises [ Refer Note 31 ] 0.24 0.78

- Due to others 15.11 15.78

15.35 16.56

9 Other Current Liabilities

Advance from Customers 0.07 0.12

Current maturities of long term debt 5.15 11.15

Interest accrued but not due on borrowings 0.16 0.14

Employees' benefits payable 1.41 1.35

Unclaimed dividends * 0.21 0.19

Duties and Taxes payable 0.85 0.69

Due to Chairman 0.07 0.11

Deposit from dealers 0.03 0.03

7.95 13.78

* There are no amounts outstanding for more than 7 years to be deposited in the Investor Education and Protection Fund.

53


Particulars as at 31st March, 2014 as at 31st March, 2013

10 Short Term Provisions

Provision for employee benefits [Refer Note 32 ]

Provision for Gratuity 0.45 0.43

Provision for Leave Encashment 0.11 0.100.56 0.53

Provision for settlement of claims* - -

Proposed Dividend on Equity Shares 0.56 0.56

Tax on Proposed Equity Dividend 0.10 0.090.66

0.65

1.22 1.18

(` in Crores)

*Amount is below the rounding off norm adopted by the Company

54

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55

(` in Crores)


12 Long Term Loans and Advances

12.1 Capital Advances

Unsecured, Considered good 1.18 0.56

12.2 Security Deposits

Unsecured, considered good

Electricity / Gas Deposits 0.70 0.64

Rent Deposits - 0.04

Earnest Money Deposits with STUs 0.01 0.01

Other Deposits 0.01 0.01

12.3 Loans and advances to related parties

Unsecured, considered good 0.75 0.75

12.4 Taxes paid in advance

Advance Income Tax and TDS (Net of Provisions) 0.44 0.66

Advance Fringe Benefit Tax (Net of Provisions) 0.07 0.14

Service tax/ sales tax receivable 0.02 0.02

Service Tax/ Sales Tax paid under protest 0.15 0.05

12.5 Prepaid Expenses 0.02 0.02

3.35 2.90

13 Inventories

(Valued at Lower of Cost or Net Realisable value)

Stores and Spares 1.19 1.20

Stores and Spares in transit 0.19 0.16

Raw Materials 5.84 5.11

Raw Materials in transit 1.86 1.84

Finished Goods * 2.27 2.33

Finished Goods in transit * 1.19 0.76

Work in Progress * 2.46 2.97

Others 0.01 0.09

15.01 14.46

* The company has only one product i.e. IC Engine Valves and hence no classwise break up is disclosed.


56



14 Trade Receivables

14.1 Outstanding for a period of more than six months

Unsecured

Considered good - 0.02

Considered doubtful 0.03 0.04

0.03 0.06

Less:- Provision for doubtful debts 0.03 0.04

- 0.02

14.2 Other Trade Receivables

Unsecured

Considered good 27.22 26.33

Considered doubtful 0.01 0.05

27.23 26.38

Less:- Provision for doubtful debts 0.01 0.05

27.22 26.33

Total Trade Receivables 27.22 26.35

15 Cash and bank balances

15.1 Cash and Cash equivalents

Cash on hand 0.02 0.04

In Current accounts 0.01 0.02

0.03 0.06 15.2 Other Bank Balances

Unpaid dividend accounts 0.21 0.19

Margin money * - -

Total of Cash and bank balances 0.24 0.25

16 Short Term Loans and Advances

(Unsecured, Considered good)

Advances for supply of goods and rendering of services 0.08 0.30

Advances to be recoverable in cash or in kind 0.12 0.01

Balance with excise department 1.13 1.02

Minimum Alternate Tax Credit - 0.01

Prepaid expenses 0.41 0.41

1.74 1.75

* Amount is below the rounding off norm adopted by the company.57

KAR MOBILES LIMITED



17 Other Current Assets

Claims receivable * - 0.24

Deferred Premium on forward contract 0.06 0.01

Forward Contract Gain 0.55 0.14

Export Incentive receivable 1.86 1.77

Rebate on Excise duty on Exports 0.39 2.19

Interest accrued on investment and deposit 0.06 0.03

Assets held for sale * - -

2.92 4.38

* Amount is below the rounding off norm adopted by the company.

58

NOTES FORMING PART OF PROFIT AND LOSS STATEMENT

Year ended 31st Year ended 31stMarch, 2014 March, 2013

(` in Crores)

18 Revenue from Operations

Sale of Manufactured Products

Valves 126.29 128.27

Sale of Traded Products

Guides - 0.02

Collets* - - 126.29 128.29

Other Operating Revenues

Sale of Scrap 1.17 1.43

Sale of Materials 0.09 0.02

Export Incentives 1.04 2.04

Other Receipts 0.18 0.16 2.48 3.65

128.77 131.94

19 Other Income

Income from investments* - -

Interest received on deposits 0.07 0.15

Interest on income tax refund 0.03 0.04

Net foreign exchange gain - 0.03

Gain on sale of assets 0.01 0.01

Sundry balances written back 0.09 0.05

Other non-operating income * - -

0.20 0.28


20 Changes in inventories of finished goods, work-in-progress and Stock-in-Trade

Balance as at the beginning of the year

Finished Goods 3.09 1.93

Work-in-progress 2.97 3.30

Stock-in-trade - -

Scrap 0.09 0.05 6.15 5.28

Balance as at the end of the year

Finished Goods 3.46 3.09

Work-in-progress 2.46 2.97

Stock-in-trade - -

Scrap 0.01 0.09 5.93 6.15

0.22 (0.87)

59



(` in Crores)

21 Employee Benefits

Salaries and Wages 22.09 21.67

Contribution to Provident and other funds 2.57 2.89

Staff welfare expenses 3.81 3.52

28.47 28.08

22 Finance Costs

Interest on borrowings from banksTerm Loans 1.43 1.69 Working Capital Loans 1.02 1.61

Other Interest 0.01 0.02 Loan processing charges/ renewal charges 0.19 0.14 Net loss/ (gain) on foreign currency transactions and translation 0.08 0.16

2.73 3.62

23 Other Expenses

Consumption of Stores and Spare parts 6.06 6.82 Freight Inwards 0.97 1.01 Job charges 3.36 3.06 Power and fuel 5.09 5.12 Rent 0.01 0.03 Repairs and Maintenance:

Buildings 0.85 0.68 Machinery 3.60 3.73 Others 0.09 0.06

Watch and Ward Expenses 0.49 0.45 Insurance 0.39 0.39 Rates and taxes 0.38 0.55 Postage and Telephone Expenses 0.24 0.22 Printing and Stationery 0.32 0.26 Travelling and Conveyance Expenses 1.58 1.65 Information Systems expenses 0.70 0.67 Packing and Forwarding Charges ** 3.30 3.75 Advertisement and Sales Promotion 1.04 1.09 Trade mark fee 0.31 0.32 Sales Commission and Discount 1.32 1.43 Professional Charges 1.18 1.15 Bank Charges 0.23 0.21 Directors' Sitting Fees 0.08 0.08 Auditors' Remuneration 0.10 0.10 Net Foreign Exchange Loss - Other than considered under Finance Costs 1.80 - General Charges 0.29 0.27 Loss on Sale / Discarding of Fixed Assets 0.04 0.09 Bad debts written off * - 0.02 Provision for doubtful debts (0.05) (0.03)

33.77 33.18

** includes packing materials consumed 1.59 1.75


60



(` in Crores)

23.1 Auditors' Remuneration

As Auditor 0.04 0.04

For Tax Audit 0.01 0.01

For Limited Review 0.01 0.01

For Taxation matters 0.02 0.02

For Certification Matters 0.02 0.02

For Reimbursement of Expenses * - -

Total 0.10 0.10


61



25 Remuneration of the Chairman

a Commission @ 3% of the Net Profit as computed undersection 309 (5) of the Companies Act,1956 as approvedby AGM / Board of Directors held on July 21, 2011 0.07 0.11

b Computation of Net Profit under section 198, 309 and 349 of the Companies Act, 1956 for ManagerialRemuneration

24 Contingent Liabilities and commitments:

1.1 Contingent Liabilities

a Claims against the Company not acknowledged as debts:

Service tax/ Customs Duty disputed 0.19 0.13

Sales tax disputed (Against this a sum of `0.05 Crores has been deposited under protest) 0.05 0.05

Income Tax Disputed 0.08 -

b On account of LCs and Bank Guarantees issued by bank 0.73 1.20

Subtotal 1.05 1.38

1.2 Commitments

a Expenditure on capital account remaining to be executed, net of advances 2.11 1.16

Total Contingent Liabilities and Commitments 3.16 2.54

1.3 The Company has dismissed four employees for the misconduct during strike period in 2009-10, after completing the necessary enquiry procedures. The aggrieved employees had challenged the dismissal in the labour court which has awarded reinstatement of the workmen without back wages. The company has filed a writ petition before the Honourable High Court of Karnataka challenging a portion of the award of the labour court. The company has neither made any provision for this in its books of account nor shown a contingent liability since the amount involved cannot be ascertained.


Net Profit for the year as per Statement of Profit and Loss 2.07 3.14

Add / (Less):

Remuneration paid/ provided to Chairman 0.07 0.11

Directors' Sitting Fees 0.08 0.08

Depreciation provided in the books 3.80 3.48

Provision for doubtful debts (0.05) (0.03)

Depreciation ascertained as per Section 350 (at the rates specified in Schedule XIV) (3.59) (3.29)

Net Profit as per Section 198, 309 and 349 of the Companies Act, 1956 2.38 3.49

Maximum remuneration permissible to Chairman @ 3% of the net profits 0.07 0.11


26 In the opinion of the Board, none of the assets have a value lower on realization in the ordinary course of business than the amount at which they are stated in the Balance Sheet.

62

(` in Crores)


The company has the following outstanding derivative contracts, which have been designated ascash flow hedges.

Particulars

Year ended Year ended31 March, 2014 31 March, 2013

Fair ValueGain/ (Loss)

Fair ValueGain/ (Loss)

Notionalamount

of forwardcontracts

Notionalamount

of forwardcontracts

Forward contracts

USD .

EURO

10 68

0.97

0.33

0.02

9.44

1.58

0.09

0.04

28 The company has adopted Accounting Standard AS 30 "Financial Instruments: Recognition and Measurement" and designated all outstanding forward contracts entered into to hedge highly probable forecast transactions as cash flow hedges. The changes in fair value of forward contracts designated as cash flow hedges to the extent they are related to forecast transactions that have occurred by the year end amounting to `0.35 gain (PY - 0.13 gain) are recognised in the Statement of Profit and Loss and included in Net foreign exchange loss in Note No. 23 - Other Expenses. In respect of those contracts which relate to forecast transactions pending to be undertaken and considered as effective hedges, the changes in fair value of the forward contracts are recognised directly in Hedging Reserve Account in Note No.3 - Reserves and Surplus.

`

29 Foreign Currency Exposure - Hedged and not hedged

Particulars


FC in ` in FC in ` inCrores Crores Crores Crores

Forward contract to hedge current payables

USD 0.06 3.73 0.03 1.41

JPY - - 0.55 0.33Forward contracts to hedge highly probable forecast receivables

USD 0.18 11.56 0.18 9.73

EURO 0.01 1.05 0.02 1.68

Foreign exchange exposures hedged by Derivative instruments

USD Receivable 0.09 5.34 0.18 9.44

EURO Receivable 0.01 0.49 0.02 1.56

USD Payable 0.06 3.73 0.03 1.41

JPY Payable - - 0.55 0.33

Foreign exchange exposures not hedged by Derivative instruments:

USD Receivable 0.13 7.97 0.03 1.84

GBP Receivable 0.00 0.19 0.00 0.33

EURO Receivable 0.00 0.25 - -

JPY Receivable 0.45 0.27 - -

USD Payable 0.09 5.26 0.02 1.06

JPY Payable 1.03 0.61 - -

27 Some of the Trade Receivables, Loans and Advances and Trade Payables shown in the Balance Sheet are subject to confirmation/ reconciliation

63

(` in Crores)

ii. Defined Benefit Plans

a. Gratuity- Funded Obligation

b. Compensated absences-Unfunded Obligation

i. Actuarial Assumptions

NOTES FORMING PART OF ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2014 (` in Crores)

30 Provision for current Income Tax liability is made on the basis of assessment / appellate orders received/ company’s own estimates. In respect of cases, wherein refunds due to the Company are continued to be held in the books, even though some of these orders are very old. The Company has initiated specific steps for follow up and is confident of receiving them.

.31 The Company has identified Micro and Small Enterprises as defined in the Micro, Small and Medium Enterprises

Development Act, 2006. Particulars of these parties are as under:

ParticularsYear ended

31 March, 2014

Year ended31 March, 2013

32 Employee benefits

a. Details of the employee benefits are given below:

i. Defined Contribution Plans

During the year the following amounts have been recognised in the Statement of Profit and Loss on account of defined contribution plans


31 March, 2014

Year ended31 March, 2013

Employer's contribution to Provident Fund 1.57 1.47

Employer's contribution to Superannuation Fund 0.22 0.21

Employer's contribution to Employees' State Insurance 0.15 0.14

1.94 1.82

Principal amount outstanding (including overdue amount) at the beginning of the year 0.78 -

Interest amount outstanding at the beginning of the year * - -

Interest (out of the above) paid during the year * - -

Amount paid after the due date during the year 0.33 0.55

Interest paid on the amount paid after due date during the year * - -

Overdue amount outstanding at the end of the year - -

Principal amount (except overdue amount) outstanding at the end of the year 0.58 0.78

Interest amount accrued and remaining unpaid at the end of the year * - -

* Amount is below the rounding off norm adopted by the company

Discount Rate (per annum) 9.12% 9.12% 8.00% 8.00%

Expected return on plan assets 8.00% - 8.00% -

Salary escalation rate* 7.00% 7.00% 7.00% 7.00%

Expected average remaining lives of working employees (years)

*The assumption of future salary increases takes into account inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.


Gratuity Compensated Gratuity Compensatedba sences absences

LIC (2006-08) ultimate mortality table

LIC (1994-96) ultimate mortality table

64



ii. Reconciliation of present value of obligation Funded Unfunded Funded Unfunded

Scheme Scheme Scheme Scheme

Present value of obligation 9.27 1.64 8.66 1.72

Current Service Cost 0.55 0.46 0.94 0.44

Interest Cost 0.79 0.12 0.66 0.12

Actuarial (gain)/loss (0.47) 0.21 (0.14) (0.06)

Benefits Paid (1.16) (0.62) (0.85) (0.58)

Present value of obligation at end of the year 8.98 1.81 9.27 1.64


iii. Reconciliation of fair value of plan assets

Funded Scheme Funded Scheme

Fair value of plan assets beginning of the year 4.72 4.77

Expected return on plan assets 0.35 0.36

Actuarial gain/(loss) 0.03 0.05

Contributions 0.41 0.39

Benefits paid (1.16) (0.85)

Fair value of plan assets at end of the year 4.35 4.72

iv. Net (Asset)/Liability recognised in the Balance Sheet as at year end

a) Funded Scheme

Present value of obligation at end of the year 8.98 9.27 8.66 8.84 8.08

Fair value of plan assets at end of the year 4.35 4.72 4.77 4.88 4.54

Net present value of unfunded obligation recognised as (asset)/liability in the Balance Sheet 4.63 4.55 3.89 3.96 3.54


31st March

2014

Year ended

31st March

2013

Year ended

31st March

2012

Year ended

31st March

2011

Year ended

31st March

2010

Year endedYear ended31 March, 2014 31 March, 2013

Present value of obligation at end of the year 1.81 1.64

Fair value of plan assets at end of the year - -

Net present value of unfunded obligation recognised as (asset)/liability in the Balance Sheet 1.81 1.64

Particulars

b) Unfunded Scheme

65


33 Segment Reporting

Primary Segment (Business)

The entire operation of the Company relates to only one segment viz. Components for transportation Industry. In respect of Secondary Segment information, the Company has identified its geographical segments as Within India and Outside India.

Secondary Segment (Geographical)

Revenue by Geographical Area:

Segment Assets:

India

Rest of the World

75.23

13.36

88.59

77.88

11.10

88.98

All other assets and liabilities of the company are located in India.


Funded Unfunded Funded Unfunded

v. (Income)/ Expense recognised in theStatement of Profit and Loss

Scheme Scheme Scheme Scheme

Current Service Cost 0.55 0.46 0.94 0.44

Interest Cost 0.79 0.12 0.66 0.11

Expected return on plan assets (0.35) - (0.36) -

Actuarial (gain) /loss (0.50) 0.21 (0.20) (0.06)

Accretion of to the fund on transfer of employee from group company - - - -

Total (income)/ expense recognised in the Statement of Profit and Loss for the year 0.49 0.79 1.04 0.49

Actual return on plan assets 0.38 - 0.42 -

The above disclosures are based on information certified by an independent actuary and relied upon by the auditors.

Year ended Year ended31st March, 2014 31st March, 2013

India 73.05 69.54

Rest of the World 46.92 53.96

119.97 123.50

66

(` in Crores)NOTES FORMING PART OF ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2014

34 Related party disclosures

A Company having significant influence :


1 Rane Holdings Limited

(Has holding of shares in excess of 20% and have common directors)

Transactions during the year with the above party:

Services received (excluding service tax) 1.49 1.30

Trade mark fee 0.31 0.32

Purchase of SAP User ID Licences - 0.04

Balance outstanding at the year end [Dr / (Cr)] 0.03 0.08

2 Rane Engine Valve Limited

(Has common key management personnel exercising significant influence)


Sale of materials (excluding duties and taxes) 0.07 0.02

Purchase of fixed assets - 0.37

Purchase of materials 0.29 0.56

Reconditioning charges of machinery 0.40 0.53

Balance outstanding at the year end [Dr./(Cr.)] 0.01 (0.40)

3 Rane (Madras) Limited



Reimbursement of expenses incurred on behalf of company * - -

Sale of Valves * - -

Balance outstanding at the year end [Dr /(Cr.)] * - -

* Amount is below the rounding off norm adopted by the company

4 Rane Holdings America Inc.



Marketing Services 0.23 0.22

Balance outstanding at the year end [Dr /(Cr.)] (0.11) -

Related parties with whom the company has had transactions during the year are given below :

67



Year ended31st March, 2014

Year ended31st March, 2013

5 Rane Foundation



Donation paid 0.20 0.20

Balance outstanding at the year end [Dr /(Cr.)] 0.75 0.75

Balance of Rane Foundation pertains to Loan given by the company. The maximum amount outstanding any time during the previous year of the said loan is ̀ 0.75 Crs.

B Key Management Personnel :

L.Ganesh - Chairman

Sitting Fees 0.01 0.01

Remuneration 0.07 0.11

For details of remuneration paid refer note no. 25(a), 25(b)

Relatives of Key Management Personnel :

L.Lakshman - Director

Sitting Fees 0.01 0.02

35 Additional Information:

a) Raw Material consumed

i. Valve Steel Long Bars 39.69 43.17

ii. Others 9.42 9.97

49.11 53.14

b) Value of Imports calculated on CIF basis

i. Raw Material 20.17 19.62

ii. Components and Spares 0.02 0.18

iii. Capital Goods - 0.06

20.19 19.86

68

NOTES FORMING PART OF ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2014 (` in Crores)



c) Value of raw materials, stores and spares consumed during the year

i. Raw Material

a) Imported 20.58 42% 23.71 44%

b) Indigenous 28.53 58% 29.43 56%

49.11 100% 53.14 100%

ii. Stores and spares (Including for repairs & maintenance)

a) Imported 0.03 0% 0.07 1%

b) Indigenous 9.64 100% 10.48 99%

9.67 100% 10.55 100%

d) Expenditure in foreign currency

Travelling expenses 0.04 0.12

Segregation Charges 0.05 -

Commission on sales 0.38 0.80

Marketing Services 0.23 0.22

e) Earnings in Foreign Exchange

Exports of goods at FOB Value 51.21 58.27

Other Receipts 0.03 -

36 The figures for the previous year have been regrouped wherever necessary to conform to current year’s classification.

Signature to Notes No.1 to 36


Rekha NBSecretary

Place : Chennai



Date : May 20, 2014




FRN.004532S


PartnerM.No.16043

CHERIAN K BABY

69

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