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9 Balance Sheet as at ASSETS Note No. 1 April 2015 NON-CURRENT ASSETS (a) Property, Plant and Equipment 2 145,589, ,919, ,986,237 (b) Capital Work-in-Progress 641,350 1,618,303 (c) Intangible Assets 3 166,741,745 93,094,424 64,778,416 (d) Intangible Assets Under Development 1,286,183 55,560,458 13,110,283 (e) Financial Assets Other Financial Assets 4 1,606,300 1,782,650 1,782,650 (f) Other Non-current Assets 5 19,416, ,269 1,663,909 SUB-TOTAL 334,640, ,206, ,939,798 CURRENT ASSETS (a) Inventories 6 27,553,041 12,656,729 4,903,493 (b) Financial Assets (i) Investments 7 32,144,954 24,632,373 74,247,650 (ii) Trade Receivables 8 40,563, , ,318 (iii) Cash and Cash Equivalents 9 293, ,405 8,717,808 (vi) Other Financial Assets 4 119, , ,500 (c) Other Current Assets 5 18,932,384 28,936,579 20,812,832 SUB-TOTAL 119,607,187 68,109, ,263,601 TOTAL ASSETS 454,248, ,316, ,203,399 EQUITY AND LIABILITIES EQUITY (a) Equity Share Capital ,500, ,500, ,500,000 (b) Other Equity 10A (221,519,577) (89,949,259) (34,238,218) SUB-TOTAL 162,980, ,550, ,261,782 LIABILITIES NON-CURRENT LIABILITIES (a) Financial Liabilities Borrowings 11 79,444, ,333, ,000,000 (b) Provisions 12 3,204,837 2,043, ,951 SUB-TOTAL 82,649, ,377, ,766,951 CURRENT LIABILITIES (a) Financial Liabilities (i) Borrowings ,831,704 37,251,585 (ii) Trade Payables 14 43,159,943 18,589,945 13,104,202 (iii) Other Financial Liabilities 15 40,014,640 57,677,305 15,817,844 (b) Provisions 12 3,221,653 1,440,457 1,269,204 (c) Other Current Liabilities 16 5,390,386 8,419,172 2,983,416 SUB-TOTAL 208,618, ,388,464 33,174,666 TOTAL 454,248, ,316, ,203,399 The accompanying notes 1 to 38 are an integral part of the Financial Statements In terms of our report attached For Deloitte Haskins & Sells Chattered Accountants For and on behalf of the Board of Directors 4\-(1./\ NA, 'Ne -7 k Jaideep Bhargava Partner Niranjan Kum Gupta Director DIN Oaju okken Director D Arjun Dawan Chief Financial Officer CoMp anka Kliatri ny Secretary Place : 4u^(3o-NA-\ Dat.er\Acti 2, Place : Date : m ai t

10 Statement of Profit and Loss for the year ended Note No. For the year ended For the year ended I Revenue from operations ,296,396 1,014,745 II Other Income 18 10,243,624 5,384,723 III Total Revenue (I + II) 227,540,020 6,399,468 IV EXPENSES (a) Cost of materials consumed 19(a) 115,950,777 3,073,451 (b) Purchases of Stock-in-trade 25,620,002 - (c) Changes in stock of finished goods, work-in-progress and stock- 19(b) (4,231,400) (1,828,500) (d) Employee benefit expense 20 73,678,028 38,341,927 (e) Finance costs 21 19,303,473 17,545,358 (f) Depreciation and amortisation expense 2, 3 33,647,310 17,792,084 (g) Other expenses 22 58,431,849 23,317,837 V Total Expenses 322,400,039 98,242,157 VI Profit/(loss) before tax (III - V) (94,860,019) (91,842,689) VII Tax Expense - VIII Profit/(loss) after tax (VI - VII) (94,860,019) (91,842,689) IX Other comprehensive income Items that will not be re-classified to profit or loss Remeasurements of the defined benefit plans (512,960) 131,648 X Total comprehensive income for the year (VIII + IX) (95,372,979) (91,711,041) XI Earnings per equity share : (1) Basic 23 (2.79) (4.28) (2) Diluted 23 (2.79) (4.28) In terms of our report attached For Deloitte Haskins & Sells Cha ered Accountants /\ CV\ ClAlTh For and on behalf of the Board of Directors Jaideep Bhargava y Niranjan Kum r A U Saju ookken Partner Director,, Director DIN IN A-,:i c,,... -,_, NEW DELHI -, ii.., Arjil Dewan P iicnka Khatri Chief Financial Officer Company Secretary Place : (-IVY-P-8'4" Place : Nekol Date : /1/411,azL- 7/0 n--- Date : McL44 -

11 Statement of Cash flows for the year ended For the year ended For the year ended Cash flows from operating activities Profit before tax for the year (94,860,019) (91,842,689) Adjustments for: Finance costs 19,303,473 17,545,358 Net gain on sale of investment (1,917,573) (6,169,976) Gain on discard of property, plant and equipment (2,984,044) Net (gain)/loss arising on financial assets mandatorily measured at FVTPL (1,595,008) 785,253 Depreciation and amortisation 33,647,310 17,792,084 (48,405,861) (61,889,970) Movements in working capital: (Increase)/decrease in trade receivables (39,895,599) (380,011) (Increase)/decrease in inventories (14,896,312) (7,753,236) (Increase)/decrease in other non current assets (18,138,304) 3,000 (Increase)/decrease in other assets 12,122,099 (8,123,747) (Increase)/decrease in other financial assets 663,155 (313,000) Increase/(Decrease) in trade and other payables 24,569,998 5,485,743 Increase/(Decrease) in short term provisions 1,781, ,253 Increase/(Decrease) in long-term provisions 648,165 1,408,409 Increase/(Decrease) in other liabilities 74,776 3,546,004 Cash generated from operating activities (81,476,687) (67,845,555) Income taxes paid (2,117,904) Net cash used in by operating activities (83,594,591) (67,845,555) Cash flows from investing activities Payments to acquire financial assets (20,000,000) Proceeds from sale of financial assets 16,000,000 55,000,000 Capital expenditure on fixed assets, including capital advances (102,071,576) (60,979,540) Proceeds from discard of property, plant and equipment 16,435,000 Net cash used in by investing activities (89,636,576) (5,979,540) Cash flows from financing activities Proceeds from issue of equity instruments of the Company 134,000,000 36,000,000 Equity Share Issuance Costs (197,339) Proceeds from borrowings 79,570,119 47,261,585 Repayment of borrowings (21,666,669) Interest paid (18,791,164) (17,544,893) Net cash generated by financing activities 172,914,947 65,716,692 Net increase in cash and cash equivalents (316,220) (8,108,403) Cash and cash equivalents at the beginning of the year 609,405 8,717,808 Cash and cash equivalents at the end of the year 293, ,405 In terms of our report attached For Deloitte Haskins & Sells For and on If of he :oard of Dir ctors Ch rt red Accountants Tk ( \,-- c C'1,---1, --r- Jaideep Bhargava Niranjan Kum. Gupta Saju ookken Partner A ti /.,:., Director Director DIN N C". Ci \ (...) 1 NEW DELHI \ 1,_.,c-,_,,, l-,, At 'Si C) Arjun Dewan Pr\y1k Khatri Chief Financial Officer Company S retary Place : CI _' v, 1' Place : i\-1,...; 0 cak,. Date : V ACui 9, 2<)1 )-- Date : 8`1c'., 1_, 1-,1 1-

12 Statement Of Changes In Equity for the year ended A. Equity share capital 1 April 2015 Changes in equity share capital during the year Changes in equity share capital during the year Issue of share capital (refer note -10) Amount in Rupees 214,500, ,500, ,000, ,500,000 B. Other Equity Share application money pending allotment* Reserves and Surplus Retained Earnings Items of other comprehensive income Actuarial Gain / (Loss) 1 April (34,238,218) - (34,238,218) Profit / (Loss) for the year (91,842,689) (91,842,689) Other Comprehensive Income / (Loss) 131, ,648 Total Comprehensive Income for the year (91,842,689) 131,648 (91,711,041) Share application money pending allotment * 36,000,000 36,000,000 36,000,000 (126,080,907) 131,648 (89,949,259) Profit / (Loss) for the year (94,860,019) (94,860,019) Other Comprehensive Income / (Loss) (512,960) (512,960) Total Comprehensive Income for the year (94,860,019) (512,960) (95,372,979) Equity Share Issuance Costs - (197,339) (197,339) - (221,138,265) (381,312) (221,519,577) Total Remeasurment gain / loss (net) on defined benefit plans Rs. 5,12,960 loss (previous other comprehensive income. year Rs.1,31,648 gain) is recognised during the year as a part of * Notes: a. Number of equity shares of Rs. 10 each proposed to be issued (Nos) b. Equity share capital proposed to be issued (Rs.) Year ended - Year ended 3,600,000 36,000,000 c. The Company has sufficient authorised equity share capital to cover the share as of March 31,2016. capital amount on allotment of shares out of the share application money d. No shares are pending for allotment beyond the maximum period of allotment as of March 31,2017. In terms of our report attached For Deloitte Haskins & Sells C rtered Accountants For an beh If o he Board of Directors Jaideep Bhargava Partner Place : L Date : il -, v(e-fs----,,, "LI 1,--01 -'1" Niranjan Kum -r Director DIN Gupta.., rt, (--,_ -,,,, Ariusewan Chief Financial Officer Place : Nt..,...:,i - t.(_- lk, - Date : 1",A.--I '7 / S Moo :fen 'rector kkv1 nka Khatri Compt Secretary s

13 1. CORPORATE INFORMATION HMC MM Auto Limited (the Company) is a public company domiciled in India and incorporatedunder the provisions of the Companies Act, 1956 on November 11, 2013 with the objective to design, develop, manufacture, distribute, assemble, buy and sell electronic fuel injection systems and related components and sub-assemblies. It is a joint venture between Hero MotoCorp Limited and MagnetiMarelli S.p.A. SIGNIFICANT ACCOUNTING POLICIES a. Statement of Compliance The financial statements have been prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, Upto the year ended March 31, 2016, the Company prepared its financial statements in accordance with the requirements of previous GAAP, which includes Standards notified under the Companies (Accounting Standards) Rules, These are Company's first Ind AS financial statements. The date of transition to Ind AS is April 1, b. Basis of preparation and presentation The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: 1. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; 2. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and 3. Level 3 inputs are unobservable inputs for the asset or liability. c. Property, plant and equipment Fixed assets are carried at cost less accumulated depreciation and impairment losses, if any. The cost of fixed assets comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Subsequent expenditure on fixed assets after its purchase / completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance. Fixed assets acquired and put to use for project purpose are capitalised and depreciation thereo the project cost till commissioning of the project.

14 Capital work-in-progress: Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest. Pre-operative expenditure (pending allocation) Expenses directly related to construction activity or incidental thereto, are allocated to fixed of completion of the project. assets at the time Intangible Assets Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Internally-generated intangible assets - research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: The technical feasibility of completing the intangible asset so that it will be available for use or sale The intention to complete the intangible asset and use or sell it; The ability to use or sell the intangible asset; How the intangible asset will generate probable future economic benefits; The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and The ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internallygenerated intangible asset can be recognised, development expenditure is recognised profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in profit or loss when the asset is derecognised. Intangible assets under development Expenditure on Research and development eligible for capitalisation are carried as Intangible assets under development where such assets are not yet ready for their intended use.revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss unless a product's technological feasibility has been established, in which case such expenditure is capitalised. The amount capitalised comprises expenditure that can be directly attributed or allocated on a reasonable and consistent basis to creating, producing and making the asset r `Cti fa qti - \ / ordan intended use. Fixed assets utilised for research and development are capitalised and depreciated ' with the policies stated for Fixed Assets The carrying values of assets / cash generating units at each Balance Sheet d e e r viewed for i C_) 'A EcLefil t0 4 0

15 d. Depreciation and amortisation Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 which are as follows Assets type Useful life Plant and Machinery Furniture and Fittings Electrical Installation Tool,Dies and Jigs Office Equipment Computers and Hardware Servers and network Vehicle 15 years 10 years 10 years 8 years 5 years 3 years 6 years 10 years Intangible assets are amortised over their estimated useful life on straight line method as follows: Technical know how Computer software Product development 10 years 5 years 5 years The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any. e. Impairment of tangible and intangible fixed assets At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs of disposal and value in use. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash- generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior ye.arat:r:- reversal of an impairment loss is recognised immediately in profit or loss. A, 2

16 f. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates and other similar allowances. Sale of goods Revenue from the sale of goods is recognised when the goods are dispatched and titles have passed, at which time all the following conditions are satisfied: The Company has transferred to the buyer the significant risks and rewards of ownership of the goods; The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; The amount of revenue can be measured reliably; It is probable that the economic benefits associated with the transaction will flow to the Company; and The costs incurred or to be incurred in respect of the transaction can be measured reliably. Rendering of services Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. Servicing fees included in the price of products sold are recognised by reference to the proportion of the total cost of providing the servicing for the product sold. Interest income Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on, time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. g. Inventories Raw materials and components, stores and spares, loose tools, finished goods and work in progress are valued at cost or net realisable value, whichever is lower. The basis of determining cost for various categories of inventories is as follows:- Stores and spares, loose tools, raw materials and components Materials in transit Work in progress and finished goods Moving weighted average cost Actual cost Material cost plus appropriate share of labour, manufacturing overheads and excise duty h. Foreign currency transactions and translations Exchange differences are dealt with as follows:- Transactions in foreign currency are recorded at the exchange rate prevailing at the time of the transaction. All loss or gain on translation is charged to revenue in the period in which it is incurred. Monetary assets and liabilities denominated in foreign currency are restated at the rate prevailing at the year end and resultant gain or loss is recognized.

17 i. Employee Benefits Retirement Benefit For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows: Service cost (including current service cost, past service cost, as well as gains and losses or curtailments and settlements); Net interest expense or income; and Re-measurement The Company presents the first two components of defined benefit costs in profit or loss in the line item 'Employee benefits expense'. Curtailment gains and losses are accounted for as past service costs. The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company's defined benefit plans. Short-term and other long-term employee benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service. Liabilities recognised in respect of other long-term employee benefits such as annual leave and sick leave are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date j. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rental expense from operating leases is generally recognised on a straight line basis over the term of relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessor's expected inflationary cost increase, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred k. Earnings per share Basic earnings per share are computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit after tax as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. I. Taxation C.) NEW DELHI Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax' as reported in the statement of profit and loss because of items of income or expense that are taxable or

18 deductible in other years and items that are never taxable or deductible. The Company's current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax is recognised, subject to the consideration of prudence on timing differences, being the deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. m. Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Warranties Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products, at the management's best estimate of the expenditure required settle the Company's obligation.

19 n. Operating Cycle The Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. o. Financial instruments Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. p. Financial assets All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Classification of financial assets Debt instruments that meet the following conditions are subsequently measured at amortised cost (except for debt instruments that are designated as at fair value through profit or loss on initial recognition): The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income ("FVTOCI") (except for debt instruments that are designated as at fair value through profit or loss on initial recognition): the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income is recognised in profit or loss for FVTOCI debt instruments. All other financial assets are subsequently measured at fair value. Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in profit or loss and is included in the "Other income" line item.

20 Financial assets at fair value through profit or loss (FVTPL) Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading. Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL. A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the 'Other income' line item. Dividend on financial assets at FVTPL is recognised when the Company's right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Impairment of financial assets The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, trade receivables, other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL. Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. De recognition of financial assets The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. q. Financial liabilities and equity instruments Classification as debt or equity Debt and equity instruments issued by Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Financial liabilities V Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at,anlorti4illi, cost at the end of subsequent accounting periods. The carrying amounts of financial liabili at are 0 subsequently measured at amortised cost are determined based on the effective interest met Z I terdesetlhi (-- expense that is not capitalised as part of costs of an asset is included in the 'Finance cysts' Line ite 2 --I.C:7

21 The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability. All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTP L. Derecognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or have expired. r. First-time adoption - mandatory exceptions, optional exemptions Overall principle The Company has prepared the opening balance sheet as per Ind AS as of April 1, 2015 (the transition date) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognised assets and liabilities. However, this principle is subject to the following exceptions availed by the Company as detailed below: Classification of debt instruments The Company has determined the classification of debt instruments in terms of whether they meet the amortised cost criteria or the FVTOCI criteria based on the facts and circumstances that existed as of the transition date. s. Critical accounting judgements and key sources of estimation uncertainty In the application of the Company accounting policies, the management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following are the areas of estimation uncertainty and critical judgements that the management has made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognised in the financial statements:- Recoverability of intangible asset During the year, the Company assessed the recoverability of the intangible assets under development. Capitalisation of cost in intangible assets under development is based on management's judgement that technological and economic feasibility is confirmed and asset under development will generate economic benefits in future. This situation is closely monitored, and adjustments made in future periods if future market activity indicates that such adjustments are appropriate. Defined benefit plans The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future; salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

22 Useful lives of depreciable assets Management reviews the useful lives of depreciable assets at each reporting date. March 31, 2017 management assessed that the useful lives represent the expected utility of the assets to the Company. Further, there is no significant change in the useful lives as compared to previous yea

23 Note No. 2 - Property, Plant and Equipment Description of Assets I. Gross Carrying Amount Plant and Equipment Office Equipment Furniture and Fixtures Computers and Data processing eauloment Tools, Jigs & Fixtures Electrical Installation Vehicles Balance as at 1 April ,342, , ,699 5,552,892 6,260,489 7,423,937 74, ,344,636 Additions 18,659, , , , ,763 56,961 15,000 32,358,876 Discards 10, ,214,012 16,315,012 Balance as at ,715 1, ,639,881 6, , ,898 89, ,388,500 II. Accumulated depreciation and impairment Balance as at 1 April ,838, ,640 83,805 1,676, , ,166 5,560 13,425,453 Depreciation expense for the year 8,786, , ,247 1,322,196 1,135, ,387 7,323 12,237,301 Eliminated on discard of assets 1,400,345-1,463,711 2,864,056 Balance as at 17,223, , ,052 2,998, ,474 1,469,553 12,883 22,798,698 III. Net carryinoti it ( I-II) 122,676, ,338 1,455,829 3,439,430 11,370,766 6,011,345 76, ,589,802 Total Description of Assets Plant and Equipment Office Equipment Furniture and Fixtures Computers and Data processing eauinment Tools, Jigs & Fixtures Electrical Installation Vehicles I. Gross Carrying Amount Balance as at 1 April ,540, , ,627 5,276,971 4,912,108 5,211, ,408,143 Additions , , ,921 1, ,896 74,170 7,936,493 Balance as at , ,937 74, ,344,636 II. Accumulated depreciation and impairment Balance as at 1 April ,660, ,206 12, ,966 57,958 84,847 2,421,906 Depreciation expense for the year 8,177, ,434 71,051 1,207, , ,319 5,560 11,003,547 Balance as at 9,838, ,640 83,805 1,676, , ,166 5,560 13,425,453 III. Net carrying amount (I-II) 121,504, , ,894 3,876,734 5,514,420 6,660,771 68, ,919,183 Total

24 Note No. 3 - Intangible Assets Description of Assets Technical Knowhow Product Development Computer Software Total I. Gross Carrying Amount Balance as at 1 April ,982,160-1,382, ,364,182 Additions from separate acquisitions 36,130,260 58,927,070-95,057,330 Balance as at 136,112,420 58,927,070 1,382, ,421,512 II. Accumulated depreciation and impairment Balance as at 1 April ,861, ,767 8,269,758 Amortisation expense for the year 11,156,364 9,977, ,404 21,410,009 Balance as at 19,018,355 9,977, ,171 29,679,767 III. Net carrying amount (I-II) 117,094,065 48,949, , ,741,745 Description of Assets Technical Knowhow Product Development Computer Software Total Intangible Assets Gross Carrying Amount Balance as at 1 April ,991,555 1,268,082 66,259,637 Additions from separate acquisitions 34,990, ,940 35,104,545 Balance as at 31 March, ,982,160 1,382, ,364,182 II. Accumulated depreciation and impairment Balance as at 1 April ,335, ,778 1,481,221 Amortisation expense for the year 6,526, ,989 6,788,537 Balance as at 31 March, ,861, ,767 8,269,758 III. Net carrying amount (I-II) 92,120, ,255 93,094,424

25 Note No. 4 - Other financial assets 1 April 2015 Current Non- Current Current Non- Current Current Non- Current Financial assets at amortised cost Security Deposits 119,695 1,606, ,500 1,782, ,500 1,782, ,695 1,606, ,500 1,782, ,500 1,782,650 Refer Note 24 for disclosures related to credit risk, impairment under expected credit loss model and related financial instrument disclosures. Note No. 5 - Other assets- Current and Non-Current... 1 April 2015 Current Non- Current Current Non- Current Current Non- Current (a) Capital advances (i) For Capital work in progress 1,094, ,405 1,654,544 (ii) For intangible asset under development 177,609 83,499 (b) Advances other than capital advances (i) Advances to Employees 5,500-91,709 19,363 (ii) Balances with government authorities (other than income taxes) 15,800,000 18,139,804 28,075,627 20,215,813 - (iii) Advance Tax 2,117, (iv) Prepaid Expenses 720,689 4, ,339 6, ,758 9,365 (v) Other Advances 288, , ,898 18,932,384 19,416,809 _ 28,936, ,269 _ 20,812,832 _ 1,663,909 I I I Note: Short-term loan and advances include amount due from Magneti Marelli India Pvt. Ltd. 218,491 (Private Company in which director is a director)

26 Note No. 6 - Inventories 1 April 2015 (a) Raw materials 21,244,989 10,700,581 4,584,609 (b) Work-in-progress 1,160,507 1,828,500 (c)finished goods 2,955,401 - (d) Stock-in-trade of goods acquired for trading 1,943,992 - (e) Stores and spares 248, , ,884 Total Inventories (at lower of cost and net realisable value) 27,553, :724 4,903,493 Note No. 7 - Investments 1 A 'Hi 2015 Particular QTY Amounts QTY Amounts QTY Amounts Designated as Fair Value Through Profit and Loss (FVTPL) Current Current Current Unquoted Investments (all fully paid) Investments in Mutual Funds ICICI Prudential Flexible Income Plan Direct Growth Reliance Mutual Fund - direct growth plan 66, , ,808,358 11,336,596 49, , ,819,859 9,812, , , ,196,102 44,051,548 Total Unquoted Investments INVESTMENTS CARRIED AT FVTPL Of the above, investments designated as FVTPL Total investments carried at fair value 71, ,144,954 54, ,632, , ,247,650 I I I 71, ,144, , ,632, , ,247,650 71, ,144,954 54, ,632, , ,247,650 71, ,144, , ,632, , ,247,650.\,0,j\ A (i?so 2 NEW DELHI

27 Notes to the financial statements for the year ended 31 Note No. 8 - Trade receivables _ 1 April 2015 Current Current Current Trade receivables Unsecured, considered good Total 40,563, , ,318 40,563, , ,318 Of the above, trade receivables from: - Related Parties - Others Total 34,910, , ,318 5,653, ,563,928 _ 668, ,318 I I Note No. 9 - Cash and cash equivalents 1 April 2015 Cash and cash equivalents (a) Balances with banks (b) Cash on hand 292, ,699 57,706 8,649,774 68,034 Total Cash and cash equivalents 293, ,405 8,717,808 I I A Co\ (C) ṟ NEW DELHI y7 I

28 Note No Equity Share Capital 1 AprII 2015 No. of shares No. of shares No. of shares Authorised: Equity shares of Rs. 10 each with voting rights 50,000, ,000,000 50,000, ,000,000 50,000, ,000,000 Issued. Subscribed and Fully Paid: Equity shares of Rs. 10 each with voting rights 38,450, ,500,000 21,450, ,500,000 21,450, ,500,000 Total 38,450, ,500,000 21,450, ,500,000 21,450, , (i) Reconciliation of the number of shares outstanding at the beginning and at the end o the period. Opening Balance Fresh Issue Closing Balance (a) Equity Shares with Voting rights* Year Ended No. of Shares 21,450,000 17,000,000 38,450,000 Amount 214,500, ,000, ,000 Year Ended Year Ended 1 April 2015 No. of Shares 21,450,000 21,450,000 Amount 214,500, ,500,000 No. of Shares 21,450,000 21,450,000 Amount 214,500, ,500,000 (ii) Rights, preferences and restrictions attached to equity shares The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by Board of Directors is subject to approval of the shareholders in the ensuing annual general meeting. Further, the Board of Directors may also announce an interim dividend which would need to be confirmed by the shareholders at the forthcoming Annual General Meeting. In the event of liquidation, the shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholdings. (iii) Details of shares held by the holding company, the ultimate holding company, their subsidiaries and associates: No. of Shares Equity Shares with Voting rights Hero MotoCorp Limited, the Holding Company 23,069,993 Hero MotoCoro Limited, the Holding Company 12,869,993 1 April 2015 Hero MotoCorp Limited, the Holding Company 12,869,993 (iv) Details of shares held by each shareholder holding more than 5% shares: Class of shares / Name of shareholder Number of shares held 1 April 2015 % holding in that Number of % holding in that Number of class of shares shares held class of shares shares held % holding in that class of shares Equity shares with voting rights Hero MotoCorp Limited Magneti Marelli S.p.A 23,069,993 15,380, ,869,993 8,580, ,869,993 8,580, Note No. 10A Other Equity 31 March April 2015 (a) Reserves and surplus Retained Earnings (221,138,265) (126,080,907) (34,238,218) (b) Share application money pending allotment 36,000,000 (c) Other equity (381,312) 131,648 - Total (221, ) ( ) (34 238,218)

29 Note No Non-Current Borrowings Unsecured Borrowings - at amortised Cost Term Loans From Banks * Total Unsecured Borrowings Total Borrowings Rate of Interest Bank base rate + 50 basis 'points Maturity 31 March April 2015 Amount Amount Amount 7 December, ,444, ,333, ,000,000 79,444, ,333, ,000,000 79,444, ,333,332 I 120,000,000 I I I * Repayable in 18 quarterly installments starting with effect from 07 September, 2016, last installment due on 07 December, Rate of Interest -Bank base rate + 50 basis points. The Company has not defaulted in repayment of term loan and interest thereon.(refer note 15) Note No Provisions 1 April 2015 Current Non- Current Current Non- Current Current Non- Current (a) Provision for employee benefits Long-term Employee Benefits Provision for compensated absences Provision for Gratuity 693,975 1,672,992 1,371,447 1,833, ,832 1,014, ,299 1,121, ,380 1,009, , ,212 (b) Other Provisions Warranty Total Provisions 854,686 3,221,653 3,204,837 1,440,457 2,043,712 1,269, ,951 I I I I - -

30 Note No Current Borrowings 1 April 2015 Unsecured Borrowings Loans repayable on demand From Banks Total Unsecured Borrowings Total Current Borrowings.116,831,704 37,261, _ 3,7 261, ,831,704 37,261,585 - I I - Note No Trade Payables 1 April 2015 Current Current Current Trade payable - Micro and small enterprises Trade payable - Other than micro and small enterprises - 43,159,943-18,589,945 13,104,202 Total trade payables 43,159,943 18,589,945 13,104,202 I I Trade Payables represent the amount due on account of goods purchased or services received in the normal course of business. Company's credit risk management processes are explained in Note 24. According to the records available with the Company, dues payable to entities that are classified as Micro and Small Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 during the year is Rs. Nil (previous year Rs. Nil). Further, no interest has been paid or was payable to such parties under the said Act during the year. Dues to Micro, small and medium enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Company. This information has been relied upon by the auditors. Note No Other Financial Liabilities I 1 April 2015 Other Financial Liabilities Measured at Amortised Cost Current (a) Current maturities of long-term debt * 28,888,891 21,666,668 - (b) Interest accrued but not due on borrowings 547,295 34,986 34,521 (c) Other liabilities (1) Creditors for capital supplies/services 2,893,876 31,072,338 9,312,555 (2) Retention Money - 322,297 (3) Security Deposits 300, , ,000 (4) Employee Benefits Payable 7,384,578 4,231,016 6,220,768 Total other financial liabilities 40,014,640 57,677,30A 15,817,844 * Refer note 11 I Note No Other Current Liabilities 1 April 2015 Statutory dues - taxes payable - Employee Recoveries and Employer Contributions Total Other Current Liabilities 4,896,126 7,961,169 2,633, , , ,133 5,390,386 8,419,172 2,983,416 j NEV ELHI C:1)

31 Notes to the consolidated financial statements for the year ended Note No Revenue from Operations For the year ended For the year ended (a) Revenue from sale of products (including excise duty) Manufactured Products 191,969,686 1,014,745 Sale of Traded Goods 25,312,398 - (b) Other operating revenue Scrap Sales 14,312 Total Revenue from Operations 217,296,396 1,014,745 I Note No Other Income For the year ended For the year ended (a) Net Gain / (Loss) on sale of investments 1,917,573 6,169,976 (b) Forex gain/loss(net) 3,746,999 (c) Profit on discard of assets 2,984,044 - (d) Net gain/(loss) arising on financial assets mandatorily measured at FVTPL 1,595,008 (785,253) Total Other Income 10,243,624 5,384,723 I Note No. 19(a) - Cost of materials consumed Opening stock Add: Purchases Less: Closing stock Cost of materials consumed For the year For the year ended ended 10,700,581 4,584, ,495,185 9,189, ,195,766 13,774,032 21,244,989 10,700, ,950,777 3,073,451 I Note 19(b) Changes in inventories of finished goods, work-in-progress and stock-in-trade For the year ended For the year ended Inventories at the end of the year: Finished goods 2,955,401 - Work-in-progress 1,160,507 1,828,500 Stock-in-trade 1,943, ,900 1, Inventories at the beginning of the year: Finished goods - Work-in-progress 1,828,500 Stock-in-trade - 1,828,500 - Net (increase) / decrease (4,231,400), (1,828,500) 1

32 Note No Employee Benefits Expense For the year ended For the year ended (a) Salaries and wages, including bonus 68,696,372 34,077,204 (b) Contribution to provident and other funds 2,772,256 2,111,176 (c) Gratuity expenses 857, ,650 (d) Staff welfare expenses 1,352,016 1,551,897 Total Employee Benefit Expense 73,678,028 38,341,927 Note No Finance Cost (a) Interest expenses on loans/ borrowings (b) Interest on delayed payment of taxes Total finance costs For the year ended 19,303,473 - For the year ended 17,542,521 2,837 19,303,473 17,545,358 I Note No Other Expenses For the year ended For the year ended (a) Stores consumed 546, ,910 (b) Power and Fuel 2,176, ,837 (c) Rent including lease rentals 9,250,881 7,341,416 (d) Rates and taxes 113,489 47,910 (e) Insurance 757, ,566 (f) Repairs and maintenance - Buildings 631, ,200 (g) Repairs and maintenance - Machinery 634, ,391 (h) Repairs and maintenance - Others 724, ,258 (i) Freight outward 681,503 1,708 (j) Travelling and Conveyance 6,275,045 1,277,994 (k) Excise duty on sale of products 21,032, ,429 (I) Net loss / (gain) on foreign currency transactions - 221,702 (m) Auditors remuneration and out-of-pocket expenses (i) As Auditors 1,000,000 1,000,000 (ii) For reimbursement of expenses 36,060 35,340 (n) Legal and other professional 5,839,667 7,145,409 (o) Royalty 2,282,174 (p) Warranty 854,686 - (q) Communication expenses 1,490,665 1,175,650 (r) Printing and stationery 157, ,871 (s) Security charges 980, ,692 (t) House keeping expenses 174, ,048 (u) Director's sitting fees 474, ,000 (v) Recruitement Expenses 148, ,823 (w) Increase/ (Decrease) in excise duty on closing stock 422,911 (x) Miscellaneous expenses 1,747, ,683 Total Other Expenses 58,431, ,837 ("N.\ I \)\\/ CTE vh,..._aji), 4,ck 0

33 Note No Earning Per Share For the year ended For the year ended Basic earnings per share Diluted earnings per share (2.79) (4.28) (2.79) (4.28) Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: For the year ended For the year ended Profit / (loss) for the year attributable to owners of the Company (94,860,019) (91,842,689) Profit / (loss) for the year used in the calculation of basic earnings per share (94,860,019) (91,842,689) Weighted average number of equity shares 33,976,028 21,450,000 Earnings per share from continuing operations - Basic (2.79) (4.28) Diluted earnings per share For the year ended For the year ended Profits used in the calculation of diluted earnings per share (94,860,019) (91,842,689) The weighted average number of ordinary shares for the purpose of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Weighted average number of equity shares used in the calculation of Basic EPS Add: Effect of potential equity shares Weighted average number of equity shares used in the calculation of Diluted EPS For the year ended For the year ended 33,976,028 21,450,000 Nil * Nil * 33,976,028 21,450,000 *Nil, as anti-dilutive potential shares in view of loss for the year. ELHI JOV

34 Note No Financial Instruments Capital management The Company's capital management objectives are: - to ensure the Company's ability to continue as a going concern - to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The Company manages capital risk in order to maximize shareholders' profit by maintaining sound/optimal capital structure through monitoring of financial ratios, such as debt-to-equity ratio on a monthly basis and implements capital structure improvement plan when necessary. There is no change in the overall capital risk management strategy of the Company compared to last year. The Company uses debt ratio as a capital management index and calculates the ratio as total borrowings (including interest accrued) divided by total equity. The Company is not subject to externally enforced capital regulation. Debt-to-equity ratio as of, and 1 April 2015 is as follows: 31-Mar Mar-16 1-Apr-15 Debt (A) 225,712, ,296, ,034,521 Equity (B) 162,980, ,550, ,261,782 Debt Ratio (A / B) Categories of financial assets and financial... 1 April 2015 Amortised Costs FVTPL Amortised FVTPL Amortised Costs FVTPL Costs Non-current Assets Security Deposits 1,606,300 1,782,650 1,782,650 Current Assets Investments 32,144,954-24,632,373 74,247,650 Trade Receivables 40,563, , ,318 Cash and Cash Equivalents 293, ,405 8,717,808 Security Deposits 119, , ,500 Non-current Liabilities Borrowings 79,444, ,333, ,000,000 Current Liabilities Borrowings 116,831,704 37,261,585 Trade Payables 43,159,943 18,589,945 13,104,202 Other Financial Liabilities Current maturities of long-term debt 28,888,891 21,666,668 Interest accrued but not due on long term 547,295 34,986 34,521 horrowinas Creditors for capital supplies/services 2,893,876 31,072,338 9,312,555 - Retention Money 322,297 Security Deposits 300, , ,000 Employee Benefits Payable 7,384,578 4,231,016 6,220,768 Financial Risk Management Framework The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk. In order to manage the aforementioned risks, the Company operates a risk management policy and a program that performs close monitoring of and responding to each risk factors. CREDIT RISK Credit risk management Credit risk arises when a counterparty defaults on its contractual obligations to pay resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collatarel, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Company uses other publicly available financial information and its own trading records to rate its major customers. The Company's exposure and credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counter party limits that are reviewed and approved by the management annually. Trade receivables consist of Hero MotoCorp which is holding company and TVS Motors. Ongoing credit evaluation is performed is on the financial condition of accounts receivable.

35 LIQUIDITY RISK (I) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company's short-, medium- and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. (ii) Maturities of financial liabilities The following tables detail the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amount disclosed in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay. Less than 1 Year 1-3 Years 3 Years to 5 years and 5 Years above INR INR INR INR Non-derivative financial liabilities Non-interest bearing 54,285,692 Variable interest rate instruments 116,831,704 Fixed interest rate instruments 28,888,891 57,777,780 21,666,660 Total 200,006,287 57,777,780 21,666,660 - Non-interest bearing 54,600,582 Variable interest rate instruments 37,261,585 - Fixed interest rate instruments 21,666,668 57,777,781 50,555,551 Total 113,528,835 57,777,781 50,555, April 2015 Non-interest bearing 28,922,046 Fixed interest rate instruments 46,666,670 53,333,337 19,999,993 Total 28,922,046 46,666,670 53,333,337 19,999,993 (iii) Financing arrangements The Company had access to following undrawn borrowing facilities at the end of the reporting period: 01 April 2015 Secured Bank Overdraft/CC/ WCDL facility - Expiring within one year - Expiring beyond one year Letter of Credit - Expiring within one year - Expiring beyond one year 158,162, ,739,000 75,000,000 75,000,000 75,000,000 75,000, ,162, ,739, ,000,000 - (iv) Maturities of financial assets The following table details the Company's expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Company's liquidity risk management as the liquidity is managed on a net asset and liability basis. Non-derivative financial assets Non-interest bearina Total Less than 1 Year 1-3 Years 3 Years to 5 5 years and Years above INR INR INR INR , I (1 I Ann Non-interest bearing Total 26,516, ,350 26,516, ,350 1,129,500 1,129, , , April 2015 Non-interest bearing Total 83,547, ,350 1,406,300 83,547, ,350-1,406,300 C

36 MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises currency risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. There has been no significant changes to the Company's exposure to market risk or the methods in which they are managed or measured. Currency Risk The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company's exposure to currency risk relates primarily to the Company's operating activities when transactions are denominated in a different currency from the Company's functional currency. The carrying amounts of the Company's unhedged foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows. Currency 31-Mar Mar-16 1-Apr-15 Trade Payables USD 19, ,000 70,320 EUR 296, ,073 22,582 RMB 508, , ,000 Advances USD - EUR 1,150 RMB 2,677 Foreign Currency Sensitivity The following tables demonstrate the sensitivity to a reasonably possible change in USD, EUR and RMB exchange rates, with all other variables held constant. The impact on the Company's profit before tax is due to changes in the fair value of monetary assets and liabilities. The Company's exposure to foreign currency changes for all other currencies is not material. Currency Change in rate Effect on profit/ (loss) before tax USD +10% (125,460) USD -10% 125,460 EUR +10% (2,054,754) EUR -10 0/0 2,054,754 RMB +10 0/0 (478,985) RMB -10 0/0 478,985 USD +10 /0 (3,316,645) USD -10% 3,316,645 EUR +10% (1,269,738) EUR -10% 1,269,738 RMB +10 /0 (148,033) RMB -10% 148,033 Profit is less sensitive to movements in the INR/USD rates in 2017 than 2016 because of the decreased USD denominated payables. In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the expos re at the end of the reporting period does not reflect the exposure during the year. \\7 14,t, 0 ( 0 : N DELHI 'A

37 Note No Fair Value Measurement Fair Valuation Techiques and Inputs used - recurring Items Financial assets/ financial liabilities measured at Fair value Fair value as at. Fair value hierarchy Valuation technique(s) and key input(s) Financial assets Investments Mutual fund investments Total financial assets 31-Mar Mar-16 1-Apr-15 32,144,954 24,632,373 74,247,650 Level 1 Published NAV value by MF Houses 32,144,954 24,632,373 74,247,650 Fair value of financial assets and financial liabilities that are not measured at fair value 31-Mar Mar-16 1-Apr-15 Carrying Carrying Carrying amount Fair value amount Fair value amount Fair value Financial assets Financial assets carried at Amortised Cost -Security Deposits 1,725,995 1,725,995 2,389,150 2,389,150 2,076,150 2,076,150 -trade receivables 40,563,928 40,563, , , , ,318 -Balances with banks 292, , , ,699 8,649,774 8,649,774 -Cash on hand ,706 57,706 68,034 68,034 Total 42,583,108 42,583,108 3,666,884 3,666,884 11,082,276 11,082,276 Financial liabilities Financial liabilities held at amortised cost - trade and other payables 43,159,943 43,159,943 18,589,945 18,589,945 13,104,202 13,104,202 Current maturities of long-term debt 28,888,891 28,888,891 21,666,668 21,666, Interest accrued but not due on long term borrc 547, ,295 34,986 34,986 34,521 34,521 - Creditors for capital supplies/services 2,893,876 2,893,876 31,072,338 31,072,338 9,312,555 9,312,555 Retention Money 322, , Security Deposits 300, , , , , ,000 - Employee Benefits Payable 7,384,578 7,384,578 4,231,016 4,231,016 6,220,768 6,220,768 Total 83,174,583 83,174,583_ 76,267,250 76,267,250 28,922,046 28,922,046 The Management consider the nature of financial assets/ liabilities recognised in the financial statements approximating their fair value. (\\

38 Notes to the consolidated financial statements for the year ended Note No Leases mount in Rupees 1 April 2015 Details of leasing arrangements Operating Lease The Company has entered into operating lease arrangements for certain facilities and office premises. The leases are non-cancellable and are for a period of one to five years and may be renewed for a further period based on mutual agreement of the parties. The lease agreements provide for an increase in the lease payments by 5% every year. Future Non-Cancellable minimum lease commitments not later than one year later than one year and not later than five years later than five years Total Expenses recognised in the Statement of Profit and Loss Minimum Lease Payments 2,036,119 6,656,678 20, ,640, ,036,119 27,146,897 _ 14,973,890 9,250,881 7,341,416 2,995,490

39 Note No Employee benefits (a) Defined Contribution Plan The Company's contribution to Provident Fund Rs. 3,04,394 (Previous year Rs. 1,187,305) has been recognised in product development expense and Rs. 27,22,564 (Previous year Rs.21,09,656) has been recognised in the Statement of Profit or Loss under the head Employee Benefits Expense in Note 18. (b) Defined Benefit Plans: Gratuity The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act, 1972 or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below: Asset volatility The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets under perform compared to the government bonds discount rate, this will create or increase a deficit. The defined benefit plans hold a significant proportion of equity type assets, which are expected to outperform government bonds in the long-term while providing volatility and risk in the short-term. Changes in bond yields A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plans' bond holdings and interest rate hedging instruments. Inflation risk Some of the Company's pension obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation). Life expectancy The majority of the plan's obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plan's liabilities. This is particularly significant in the Company's defined benefit plans, where inflationary increases result in higher sensitivity to changes in life expectancy. The significant actuarial assumptions used for the purposes of the actuarial valuations were as follows: Significant Actuarial Assumptions For the year ended For the year ended Discount rate(s) Expected rate(s) of salary increase 5.50% 5.50% Average Longevity 58 Years 58 Years Defined benefit plans - as on 31st March, 2017 Unfunded Plan Gratuity Year ended March Year ended March Amounts recognised in comprehensive income in respect of these defined benefit plans are as follows: Current Service Cost Net interest expense Components of defined benefit costs reconised in profit or loss 686, , , , , ,650 Remeasurement on the net defined benefit liability Actuarial gains and (loss) arising form changes in financial assumptions Actuarial gains and (loss) arising form experience adjustments 88, , (132,410) Components of defined benefit costs recognised in other comprehensive income Total 512,960 (131,648) 1,370,344 I 470,002

40 I. Net Asset/(Liability) recognised in the Balance Sheet as at 31 March 1. Present value of defined benefit obligation as at 31st March 3,506,382 2,136, Current portion of the above 1,672,992 1,014, Non current portion of the above 1,833,390 1,121,413 II. Change in the obligation during the year ended 31 March 1. Present value of defined benefit obligation at the beginning of th 2,136,038 1,666, Expenses Recognised in Profit and Loss Account - Current Service Cost 686, ,532 - Interest Expense (Income) 170, , Recognised in Other Comprehensive Income Remeasurement gains / (losses) - Actuarial Gain (Loss) arising from: ii. Financial Assumptions 88, iii. Experience Adjustments 424, Present value of defined benefit obligation at the end of t 3,506,382 _ 2,136,038 The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is: Principal assumption Year Changes in Impact on defined benefit assumption obli ation Increase in assumption Decrease in assumption Discount rate % (99,504) 107, % (61,789) 66,688 Salary growth rate % 109,452 (101,820) % 67,999 (63,483) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance sheet. The methods and types of assumptions used in preparing the sensitivity analyses did not change compared to previous year. VIII. Experience Adjustments : Experience adjustment on plan liabilities f(gain)/lossl Year Ended Gratuity 424,895 I (132,410) The estimate of future salary increases, considered in actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Since the liability is not funded, therefore information with regard to plan assets has not been furnished. The current service cost and the net interest expense pertaining to the gratuity expense for the year are incl." d in the employee benefits expense in profit or loss under note 20. u 0 NEW DELHI r

41 Note No Related Party Transactions Name of the parent Company Party in respect of which the Company is associate Subsidiary of party of which Company is associate Hero Motocorp Limited Magneti Marelli S.p.A Magnetti Marelli UM Electronics Systems Pvt. Ltd. Magnetti Marelli India Pvt. Ltd. Magnetti Marelli (China) Co. Ltd. Details of transaction between the Company and its related parties are disclosed below: Nature of transactions with Related Parties Sale of goods* For the year ended 31-Mar-17 Parent Company 202,506,147 Magneti Marelli S.p.A Magnetti Marelli UM Electronics Systems Pvt. Ltd. Magnetti Magnetti Marelli India Marelli Pvt. Ltd. (China) Co. Ltd. 16, Mar-16 1,057,362 Purchase of goods 31-Mar-17 45,297,458 43,038,243 46,837, Mar ,604 3,764,944 1,846,838 Purchase of property and other assets 31-Mar-17 1,886, Mar-16 Compensation for assets discared # 31-Mar-17 18,900, Mar-16 Receiving of services/ Expense Reimbursement 31-Mar-17 7,201,381 1,326, Mar-16 12,593,799 Royalty 31-Mar-17 2,259, Mar-16 Equity contribution to the Company 31-Mar ,000,000 68,000, Mar-16 Share application money received 31-Mar-17 Other transactions : Technical Know How 31-Mar-16 36,000, Mar Mar-16 34,085,150 33,166,450 Nature of Balances with Related Parties Balance as on Parent Company Equity share capital 31-Mar ,699,930 Magneti Marelli S.p.A 153,800,010 Magnetti Marelli UM Electronics Systems Pvt. Ltd. Magnetti Marelli India Pvt. Ltd. Magnetti Marelli (China) Co. Ltd Mar ,699,930 85,800,010 Share Application Money 31-Mar Mar-16 36,000,000 Trade payables 31-Mar-17 16,450,414 5,255,920 6,802, Mar-16 41,052, ,593 1,427,076 Trade Receivables 31-Mar-17 34,910, Mar ,329 * including sales tax and excise duty # Including service tax )

42 Notes to the consolidated financial statements for the year ended March 31, 2017 Note No First-time adoption of Ind-AS First Time Ind AS Adoption reconciliations (i) Reconciliation of Total Equity as at and 1 April 2015: Notes 31 March 1 April Equity as reported under previous GAAP 85,320, ,246,783 Ind AS: Adjustments increase (decrease): Employee future benefits - actuarial gains and losses b 131,648 Acturial gain recognised in other comprehensive income (131,648) Cheange due to FVTPL of Investment 3,229,746 4,014,999 Share application money pending allotment 36,000,000 Equity as reported under IND AS 124,550, ,261,782 (ii) Reconciliation of Total Comprehensive Income for the year ended : PARTICULARS Notes Year ended Profit or Loss as per previous GAAP (90,925,788) Ind AS: Adjustments increase (decrease): Fair value of investments under Ind As a (785,253) Employee future benefits - actuarial gains and losses b (131,648) Total adjustment to profit or loss Profit or Loss under Ind AS (91,842,689) Other comprehensive income 131,648 Total comprehensive income under Ind ASs (91,711,041) Note: No statement of comprehensive income was produced under previous GAAP. Therefore the reconciliation starts with profit under previous GAAP. (iii) Reconciliation of Balance sheet items as at and 1 April 2015: Notes 31 March April 2015 Incestment as reported under previous GAAP 21,402,627 70,232,651 Ind AS: Adjustments increase (decrease): Increase/ (Decrease ) in Investment due to FVTPL under Ind AS a 3,229,746 4,014,999 Closing Balance as per Ind AS 24,632,373 74,247,650 (iv) Reconciliation of statement of profit and loss items as at : Year ended Notes Ind AS Previous GAAP Adjustments Ind AS Revenue from operations c 730, ,429 1,014,745 Other Income a 6,169,976 (785,253) 5,384,723 Employee benefit expense b 38,210, ,648 38,341,927 Other expenses c 23,033, ,429 23,317,837 Notes: (a) Under previous GAAP, current investments were measured at lower of cost or fair value. Under Ind AS, these financial assets have been classified as FVTPL on the date of transition. The fair value changes are recognised in profit or loss, on transitioning to Ind AS, these financial assets have been measured at their fair values which is higher than cost as per previous GAAP as on , resulting in an increase in carrying amount by Rs.4,014,999 and as on the carrying value decrease by Rs.785,253 due to which other income has been decreased and remained at Rs.5,384,723, net increase in carrying value of investment after taken both in to account is Rs.3,229,746 making the closing balance of investment as on Rs. 24,632,373. (b) Under previous GAAP, actuarial gains and losses were recognised in profit or loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability / asset which is recognised in other comprehensive income. Thus the employee benefit cost is increased by Rs. 131,648 and Remeasurement gains on defined benefit plans has been recognized in the OCI. (c) Under Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind-AS, sale of goods includes excise duty. Excise duty on sale of goods is separately presented on the face of statement of profit and loss. Thus sale of goods under Ind-AS has increased by Rs. 284,429 with a corresponding increase in other expense. (v) Mat PARTICULARS Previous GAAP Year ended Ind AS Adjustments Ind AS Net cash flows from operating activities (67,845,555) (67,845,555) Net cash flows from investing activities (5,979,540) (5,979,540) Net cash flows from financing activities 65,716,692 65,716,692 Net increase (decrease) in cash and cash equivalents (8,108,403) (8,108,403) Cash and cash equivalents at beginning of period 8,717,808 8,717,808 Cash and cash equivalents at end of period 609, ,405 Analysis of cash and cash equivalents as at and 1 April 2015 for the purpose of Statement h flows under Ind AS PARTICULARS 31 March April 2015 Vc, Cash and cash equivalents for the purpose of Statement of Cash flows as per Previous GAAP 609,405 8,717,808 Cash and cash equivalents for the purpose of Statement of Cash flows as per Ind AS 609,405 8,717,808