CONSOLIDATED BALANCE SHEET

Transcription

1 AUDITORS REPORT TO THE BOARD OF DIRECTORS OF MARUTI UDYOG LIMITED 1. We have audited the attached consolidated balance sheet of Maruti Udyog Limited and its subsidiaries, joint ventures and associates (The Group) as at 31st March, 2006, the consolidated profit and loss account for the year ended on that date and the consolidated cash flow statement for the year ended on that date, annexed thereto, which we have signed under reference to this report. These consolidated financial statements are the responsibility of Company s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statements of the subsidiaries, joint ventures and associate companies for the year ended March 31, The financial statements of the subsidiaries and joint ventures reflect total assets of Rs. 8,467 million and Rs. 608 million, respectively as at March 31, 2006, total revenue of Rs. 849 million and Rs. 1,022 million respectively, and net cash flows from operating activities of Rs. (116) million and Rs. 51 million respectively, for the year ended on that date. The Financial Statements of associates reflect net profit after tax of Rs. 226 million for the year ended March 31, These financial statements have been audited by other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts included in respect of these subsidiaries, joint ventures and associates, is based solely on the report of the other auditors. Attention is invited to Note 9 (a) and 9 (b) of Notes to accounts (Schedule 24) regarding certain associates whose financial statements are unaudited, the impact of which is not likely to be material. 4. We report that the consolidated financial statements have been prepared by the company in accordance with the requirements of Accounting Standard 21 - Consolidated Financial Statements, Accounting Standard 23 - Accounting for investments in Associates in Consolidated Financial Statements and Accounting Standard 27 Financial Reporting of Interests in Joint Ventures, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited financial statements of Maruti Udyog Limited and its subsidiaries, joint ventures and associates included in the consolidated financial statements. 5. On the basis of the information and explanations given to us and on consideration of the separate audit reports on individual audited financial statements of Maruti Udyog Limited and its aforesaid subsidiaries, joint ventures and associates, in our opinion, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the consolidated balance sheet, of the consolidated state of affairs of the Group as at 31st March 2006; (b) in the case of the consolidated profit and loss account, of the consolidated results of operations of the Group for the year then ended on that date; and (c) in the case of the consolidated cash flow statement, of the consolidated cash flows of the Group for the year then ended on that date. Anupam Dhawan Membership Number F Partner For and on behalf of Place: New Delhi PRICE WATERHOUSE Date: 26th April, 2006 Chartered Accountants Maruti Udyog Limited-Consolidated ANNUAL REPORT

2 CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH, 2006 SCHEDULE SOURCES OF FUNDS SHAREHOLDERS FUNDS Capital 1 1,445 1,445 Reserves and Surplus 2 54,285 55,730 43,247 44,692 MINORITY INTEREST 95 - LOAN FUNDS Secured Loans ,241 Unsecured Loans 4 5,814 6, ,344 DEFERRED TAX (Note 15 on Schedule 24) Deferred Tax Liabilities 2,033 2,388 Deferred Tax Assets (1,223) 810 (1,265) 1,123 Total 63,331 49,159 APPLICATION OF FUNDS FIXED ASSETS 5 Gross Block 50,137 51,036 Less: Accumulated Depreciation 32,789 31,951 17,348 19,085 Capital Work-In-Progress 6 3,143 20, ,539 INVESTMENTS 7 21,147 15,833 CURRENT ASSETS, LOANS AND ADVANCES Inventories 8 8,894 6,734 Sundry Debtors 9 6,767 6,161 Cash and Bank Balances 10 19,874 10,353 Other Current Assets Loans and Advances 12 6,546 6,110 42,568 30,042 LESS: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 13 16,209 12,406 Provisions 14 4,666 3,849 20,875 16,255 Net Current Assets 21,693 13,787 Total 63,331 49,159 SIGNIFICANT ACCOUNTING POLICIES 23 NOTES TO ACCOUNTS 24 This is the Consolidated Balance Sheet referred to in our report of even date. The Schedules referred to above form an integral part of the Consolidated Balance Sheet. ANUPAM DHAWAN Membership Number - F Partner For and on behalf of PRICE WATERHOUSE Chartered Accountants New Delhi 26th April, 2006 JAGDISH KHATTAR H. NAGAO S. RAVI AIYAR Managing Director Joint Managing Director Company Secretary & Chief Legal Officer 82 Maruti Udyog Limited-Consolidated ANNUAL REPORT

3 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006 SCHEDULE For the year For the year ended ended INCOME Gross Sales , ,678 Less: Excise Duty 27,126 23,908 Net Sales 120, ,770 Income from Services (Net) Other Income 17 5,335 4,646 Total 126, ,908 EXPENDITURE Consumption of Raw Materials and Components 89,414 81,884 (Note 4 on Schedule 24) Purchase of Traded Goods 4,693 4,487 Consumption of Stores Employees Remuneration and Benefits 18 2,377 2,021 Manufacturing, Administrative and Other Expenses 19 6,533 5,035 Selling and Distribution Expenses 20 3,979 3,636 Total 107,820 97,709 Less: Vehicles/Dies for Own Use Add : (Increase) /Decrease in Work-in-progress, Finished Goods & Spare Parts 22 (2,006) (1,119) Total 105,747 96,366 Earnings before Interest, Depreciation, Tax and Amortisations 21,020 18,542 (EBIDTA) Interest Depreciation 2,891 4,621 Deferred Revenue Expenditure Charged Off (Note 8 (c) on Schedule 24) ,114 5,161 Consolidated Profit before Tax 17,906 13,381 Less : Tax Expense - Current Tax 5,991 5,263 - Deferred Tax (Note 15 on Schedule 24) (313) (731) - Fringe Benefit Tax 62 - Previous Years 48 Consolidated Profit after Tax but before Minority Interest 12,166 8,801 Minority Interest (25) Consolidated Profit after Tax and Minority Interest 12,191 8,801 Add: Brought forward from previous year s account 35,289 28,177 Consolidated Profit available for appropriation 47,480 36,978 Less: Appropriations : Debenture Redemption Reserve General Reserve 1, Proposed Dividend 1, Corporate Dividend Tax Balance carried forward to Consolidated Balance Sheet 45,107 35,289 Basic/Diluted Earnings Per Share (in Rupees) (Note 14 on Schedule 24) SIGNIFICANT ACCOUNTING POLICIES 23 NOTES TO ACCOUNTS 24 This is the Consolidated Profit and Loss Account referred to in our report of even date. The Schedules referred to above form an integral part of the Consolidated Profit and Loss Account. ANUPAM DHAWAN Membership Number - F Partner For and on behalf of PRICE WATERHOUSE Chartered Accountants New Delhi 26th April, 2006 JAGDISH KHATTAR H. NAGAO S. RAVI AIYAR Managing Director Joint Managing Director Company Secretary & Chief Legal Officer Maruti Udyog Limited-Consolidated ANNUAL REPORT

4 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006 For the year For the year ended ended A. Cash flow from Operating Activities: Net Profit before Tax 17,906 13,381 Adjustments for: Depreciation 2,891 4,621 Interest Expense Interest Income (1,076) (635) Dividend Income (723) (794) Net Loss on sale / discarding of Fixed Assets (Profit)/Loss on sale of Investments (100) (11) Deferred Revenue Expenditure written off 163 Provision for Doubtful Debts and Advances Provisions no longer required written back (54) (563) Operating Cash flow before Working Capital changes 19,297 16,669 Adjustments for changes in Working Capital : (Increase)/Decrease in Sundry Debtors (606) 833 (Increase)/Decrease in Other Current Assets, Loans & Advances (158) (207) (Increase)/Decrease in Inventories (2,160) (2,294) Increase/(Decrease) in Current Liabilities and Provisions 4,061 1,140 Cash generated from Operating Activities 20,434 16,141 Taxes (Paid) / Received (Net of TDS) (6,018) (5,092) Net Cash from Operating Activities 14,416 11,049 B. Cash flow from Investing Activities: Purchase of Fixed Assets (4,397) (4,916) Sale of Fixed Assets Sale of Investments 88,222 53,757 Purchase of Investments (93,436) (52,462) Interest received (revenue) Dividend received Net Cash from Investing Activities (7,569) (2,244) 84 Maruti Udyog Limited-Consolidated ANNUAL REPORT

5 For the year For the year ended ended C. Cash flow from Financing Activities: Proceeds from short term borrowings Repayment of short term borrowings (2,644) (318) Proceeds from Long term borrowings 5,690 Contribution from Minority Interest 120 Interest paid (220) (490) Dividend paid (578) (432) Net Cash from Financing Activities 2,674 (896) Net Increase/(Decrease) in Cash & Cash Equivalents 9,521 7,909 Cash and Cash Equivalents as at 1st April (Opening Balance) 10,353 2,444 Cash and Cash Equivalents as at 31st March (Closing Balance) 19,874 10,353 Cash and Cash Equivalents comprise 19,874 10,353 Cash, Cheques & Drafts (in hand) Balance with Scheduled Banks in Current Accounts Balance with Scheduled Banks in Deposit Accounts 19,274 9,503 Notes : 1 The Consolidated Cash Flow Statement has been prepared under the indirect method as set out in Accounting Standard -3 Cash Flow Statement issued by the Institute of Chartered Accountants of India. 2 Cash and Cash equivalent includes Rs. 2 Million (Previous Year Rs. 1 Million) in respect of unclaimed dividend. This is the Consolidated Cash Flow Statement referred to in our report of even date. ANUPAM DHAWAN Membership Number - F Partner For and on behalf of PRICE WATERHOUSE Chartered Accountants New Delhi 26th April, 2006 JAGDISH KHATTAR H. NAGAO S. RAVI AIYAR Managing Director Joint Managing Director Company Secretary & Chief Legal Officer Maruti Udyog Limited-Consolidated ANNUAL REPORT

6 SCHEDULES SCHEDULE 1 - SHARE CAPITAL AUTHORISED CAPITAL 310,000,000 Equity Shares of Rs. 5 each (Previous year 310,000,000 equity shares of Rs. 5 each) 1,550 1,550 ISSUED, SUBSCRIBED AND PAID-UP CAPITAL 1,445 1, ,910,060 Equity Shares of Rs. 5 each (Previous year 288,910,060 equity shares of Rs. 5 each) fully paid up. Of the above - - 8,840,000 Equity Shares of Rs. 5 each (Previous year 8,840,000 equity shares of Rs. 5 each) were issued for consideration other than cash to Government of India for vesting assets under Maruti Limited (Acquisition and Transfer of Undertaking) Act, ,618,440 Equity Shares of Rs. 5 each (Previous year 156,618,440 equity shares of Rs. 5 each) are held by Suzuki Motor Corporation, the Holding Company and its nominees SCHEDULE 2 - RESERVES AND SURPLUS 1,445 1,445 Balance Additions Transfer during Balance as at 1st April, during the the year 31st March 2005 year 2006 Capital Reserve on consolidation (includes Joint Venture share of Rs. 3 Million, Previous year Rs. 3 Million) Share Premium Account (Includes Joint Venture Share of Rs. 5 Million, previous year Rs. 5 Million) 4, ,246 Debenture Redemption Reserve General Reserve 2,979 1,764-4,743 Balance as per Profit and Loss Account (includes Joint Venture share of Rs. 45 Million, Previous Year Rs. 33 Million) 35,289 9,818-45,107 43,247 11, ,285 SCHEDULE 3 - SECURED LOANS LONG TERM LOANS 9% Non-Convertible Debentures- Series II secured by mortgage on specific Buildings and Plant and Machinery (the total loan of Rs Million Redeemable at par - 30% on 4th December 2005 (already paid) - 30% on 4th December, 2006 (classified as short term as at 31st March 2006), and balance 40% on 4th December 2007) SHORT TERM LOANS - FROM BANKS Cash Credit/Working Capital Demand Loans/Rupee Loans secured by pari passu first charge on the stock, book debts and other current assets - FROM OTHERS 11.2% Non-Convertible Debentures - Series I secured by mortgage on specific Buildings and Plant and Machinery (Redeemed at par on 24th July 2005 with put/call option.) 2,000 Maruti Udyog Limited-Consolidated ANNUAL REPORT

7 SCHEDULE 3 -SECURED LOANS (Contd.) 9% Non-Convertible Debentures- Series II secured by mortgage on specific Buildings and Plant and Machinery (Redeemable at par on 4th December 2006) (Long term as at 31st March 2005) (See above) Others ,076 Share in Joint Ventures ,241 SCHEDULE 4 - UNSECURED LOANS LONG TERM LOANS - FROM BANKS Foreign Currency Loans 5,690 SHORT TERM LOANS Share in Joint Ventures , SCHEDULE 5 FIXED ASSETS Particulars Gross Block Accumulated Depreciation Net Block Additions/ Deductions/ For the Deductions/ Adjustments Adjustments year Adjustments Freehold land (Note 1 & 5) 1, (19) 1, ,283 1,083 Leasehold land Building (Note 2) 2, (51) 2, (20) 742 2,131 2,118 Plant and Machinery (Note 3) 45,234 1,036 (2,390) 43,880 30,538 2,677 (1,950) 31,265 12,615 14,696 Electronic Data Processing Equipment (42) (41) Furniture, Fixtures and Office Appliances (3) (1) Vehicles (102) (41) Total 51,036 1,708 (2,607) 50,137 31,951 2,891 (2,053) 32,789 17,348 19,085 Previous Year Figures 46,102 5,225 (291) 51,036 27,465 4,621 (135) 31,951 19,085 18,637 Share in Joint Ventures (Note 4) (19) (1) Previous Year Figures (1) Cost of land amounting to Rs. 4 million (Previous year Rs. 4 million) is not yet registered in the name of the Maruti Udyog Ltd. A part of this land has been made available to group companies. (2) Cost of building amounting to Rs. 32 million (Previous year Rs. 32 million) is not yet registered in the name of the Maruti Udyog Ltd. (3) Plant and Machinery includes pro-rata cost amounting to Rs. 374 million (Previous year Rs. 374 million) of a Gas Turbine jointly owned by the group companies and other companies. (4) The Joint Ventures share is included in the above schedule and also includes Leased Assets of Joint Ventures of Rs. 16 Million (Net) [Previous Year Rs. 29 Million (Net)]. (5) Freehold land includes 600 acres of land (Previous year 500 acres) allotted to Maruti Udyog Ltd. by HSIDC, a part of which has been made available to group companies. SCHEDULE 6 - CAPITAL WORK-IN-PROGRESS Plant and Machinery Civil Work-in-progress 1, Capital Advances , Share in Joint Venture , Maruti Udyog Limited-Consolidated ANNUAL REPORT

8 SCHEDULES SCHEDULE 7 - INVESTMENTS Long Term : Investment in Associates 1,805 1,402 (Includes Rs. 28 Million of Capital Reserves on acquisition of certain associates) Other Investments: Long Term (Unquoted): Mutual funds 14,398 3,070 Current (Unquoted) : Redeemable Non Convertible Debentures 65 Mutual funds 4,942 11,294 21,145 15,831 Share in Joint Ventures ,147 15,833 SCHEDULE 8 - INVENTORIES COMPONENTS AND RAW MATERIALS In transit/under inspection 1,880 1,948 With vendors At factory 846 2,828 1,056 3,099 STORES AND SPARES Vehicles Machinery 5 4 Consumables In transit/under inspection Tools at factory Dies and Moulds Work-in-Progress Finished Goods (Includes finished goods in transit Rs. Nil previous year Rs. 1 Million) 4,857 2,262 8,810 6,664 Share in Joint Ventures ,894 6,734 SCHEDULE 9 - SUNDRY DEBTORS DEBTS OUTSTANDING FOR MORE THAN SIX MONTHS Unsecured - Considered Good Considered Doubtful Less: Provision for Doubtful Debts Other Debts : Unsecured - Considered Good 5,979 5,659 6,682 6,113 Share in Joint Ventures ,767 6,161 Maruti Udyog Limited-Consolidated ANNUAL REPORT

9 SCHEDULE 10 - CASH AND BANK BALANCES Cash in hand 6 2 Cheques in hand Bank Balances with Scheduled Banks in : Current Accounts:* Deposit Accounts: 19,274 9,500 19,868 10,348 Share in Joint Ventures ,874 10,353 * Includes Unclaimed Dividend amounting to Rs. 2 Million (Previous year Rs. 1 Million) SCHEDULE 11 - OTHER CURRENT ASSETS INTEREST ACCRUED ON DEPOSITS, LOANS AND ADVANCES Secured - Considered Good Considered Doubtful Less: Provision for Doubtful Interest Unsecured - Considered Good Considered Doubtful Less: Provision for Doubtful Interest CLAIMS - UNSECURED Considered Good Considered Doubtful Less: Provision for Doubtful Claims Interest Accrued on Investments - Secured Share in Joint Ventures Maruti Udyog Limited-Consolidated ANNUAL REPORT

10 SCHEDULES SCHEDULE 12 - LOANS AND ADVANCES LOANS Secured - Considered Good Considered Doubtful Less: Provision for Doubtful Loans Unsecured - Considered Good 1, Considered Doubtful 1 1 1, Less: Provision for Doubtful Loans 1 1, ADVANCES RECOVERABLE IN CASH OR IN KIND OR FOR VALUE TO BE RECEIVED: Unsecured - Considered Good 182 1,333 - Considered Doubtful ,406 Less: Provision for Doubtful Advances ,333 DEPOSITS - CONSIDERED GOOD UNLESS OTHERWISE STATED Balance with Customs, Port Trust and other Government Authorities 4,523 4,068 Inter Corporate Deposits Considered Doubtful Less :Provision for Doubtful Deposits Other Deposits ,512 6,084 Share in Joint Ventures ,546 6,110 SCHEDULE 13 - CURRENT LIABILITIES Sundry Creditors 6,351 4,730 Advances from Customers/Dealers Book Overdraft Unclaimed Dividend* 2 1 Other Liabilities 5,855 4,113 Deposits from Dealers, Contractors and Others 1,739 1,531 Interest Accrued but not due on: Loans Others ,058 12,291 Share in Joint Ventures ,209 12,406 *Not due to be credited to the Investor Education and Protection Fund Maruti Udyog Limited-Consolidated ANNUAL REPORT

11 SCHEDULE 14 - PROVISIONS Litigation Related Provisions Leave Encashment Warranty & Product Recall Proposed Dividend 1, Corporate Dividend Tax Others Provisions Taxation (Net of Advance-tax) ,665 3,849 Share in Joint Ventures 1 4,666 3,849 SCHEDULE 15 - MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED) Balance Addition Written off Balance during during the the year year Miscellaneous Expenditure written off Previous Year Figures SCHEDULE 16 - SALES For the year For the year ended ended Vehicles 138, ,638 Spare Parts / Dies and Moulds / Components 8,367 7, , ,914 Share in Joint Ventures , , Maruti Udyog Limited-Consolidated ANNUAL REPORT

12 SCHEDULES SCHEDULE 17 - OTHER INCOME For the year For the year ended ended Interest on: a) Fixed Deposits/Securities (Gross) (Includes TDS of Rs. 124 Million - Previous year Rs. 38 Million) b) Receivables from Dealers (Gross) (Includes TDS of Rs. 29 Million - Previous year Rs. 19 Million) c) Advances to Vendors (Includes TDS of Rs. 47 Million - Previous year Rs. 33 Million) d) Others 7 1, Sale of Scrap (Net of Excise) 1, Sales Tax Benefit (Includes Rs. 55 Million relating to prior period -previous year Rs. Nil) Income from Associates Miscellaneous Receipts (Gross) (Includes TDS of Rs. 162 Million - previous year Rs. 100 Million) 1,513 1,158 Profit on Sale of Investments: Long Term Investment 68 Short Term Investment Dividend: Trade Investments- Long Term Others Provisions no longer required written back Recovery of Service Charges Less: Repair Cost of Damaged Vehicles ,321 4,633 Share in Joint Ventures ,335 4,646 SCHEDULE 18 - EMPLOYEES REMUNERATION AND BENEFITS For the year For the year ended ended Salaries, Wages, Allowances and Other Benefits 2,043 1,724 Contribution to Provident and Other Funds Staff Welfare Expenses Group Insurance 2 2 2,332 1,986 Share in Joint Ventures ,377 2,021 Maruti Udyog Limited-Consolidated ANNUAL REPORT

13 SCHEDULE 19 - MANUFACTURING, ADMINISTRATIVE AND OTHER EXPENSES For the year For the year ended ended Power and Fuel (Net) Rent Rates, Taxes and Fees Insurance Repairs and Maintenance : Plant and Machinery Building Others Royalty 2,544 1,986 Tools/ Machinery Spares Charged Off Net Loss on Sale/discarding of Fixed Assets Provision for Doubtful Debts, Claims, Loans and Advances Exchange Variation (Net) 400 (118) Dimunition in value of investment 83 Other Miscellaneous Expenses 1,650 1,625 6,445 4,967 Share in Joint Ventures ,533 5,035 SCHEDULE 20 - SELLING AND DISTRIBUTION EXPENSES For the year For the year ended ended Advertisement and Sales Promotion 2,670 2,045 Warranty Claims Provision for Product Recall 254 Transportation and Distribution Expenses 1,069 1,133 3,973 3,627 Share in Joint Ventures 6 9 3,979 3,636 SCHEDULE 21 - INTEREST For the year For the year ended ended INTEREST Fixed: Advances from Dealers Debentures Others Share in Joint Ventures Maruti Udyog Limited-Consolidated ANNUAL REPORT

14 SCHEDULES SCHEDULE 22 - (INCREASE)/DECREASE IN WORK-IN-PROGRESS, FINISHED GOODS & SPARE PARTS For the year For the year ended ended WORK-IN-PROGRESS Opening Stock Less: Closing Stock (321) FINISHED GOODS Opening Stock 2,261 1,285 Less: Closing Stock 4,857 2,261 (2,596) (976) Less: Excise Duty on (Increase)/Decrease of Finished Stock (363) (2,233) (313) (663) SPARE PARTS - TRADED Opening Stock Less: Closing Stock 573 (14) 559 (120) (1,996) (1,104) Share in Joint Ventures (10) (15) 2,006 (1,119) Maruti Udyog Limited-Consolidated ANNUAL REPORT

15 SCHEDULE 23 - SIGNIFICANT ACCOUNTING POLICIES 1. GROUP COMPANIES Maruti Udyog Limited (The Company) has six subsidiaries, five of them are wholly owned, two joint venture companies and fourteen associate companies (The Group), as given in the following table. During the current year, the company has acquired one new subsidiary. Sl. No. Name of Company Relationship Country of Percentage of ownership Incorporation interest as on 31st March Maruti Insurance Brokers Limited Subsidiary India Maruti Insurance Distribution Services Limited Subsidiary India True Value Solutions Limited Subsidiary India Maruti Insurance Agency Network Limited Subsidiary India Maruti Insurance Agency Solutions Limited Subsidiary India Maruti Suzuki Automobiles India Limited. Subsidary India J.J Impex (Delhi) Private Limited Joint Venture India Mark Exhaust Systems Limited Joint Venture India Suzuki Powertrain India Limited Associate India Climate Systems India Limited Associate India Mark Auto Industries Limited Associate India Jay Bharat Maruti Limited Associate India Maruti Countrywide Auto Financial Services Limited Associate India Citicorp Maruti Finance Limited Associate India Caparo Maruti Limited Associate India Machino Plastics Limited Associate India Bharat Seats Limited Associate India Krishna Maruti Limited Associate India Asahi India Glass Limited Associate India Denso India Limited Associate India Nippon Thermostat (India) Limited Associate India Sona Koyo Steering Systems Limited Associate India BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS: The consolidated financial statements of the Group have been prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India and comply with the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India to the extent applicable. The financial statements of the parent company and the subsidiaries have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances / transactions in full as per Accounting Standard 21 on Consolidated Financial Statements. Investment in associates (entity over which the company exercises significant influence, which is neither a subsidiary nor a joint venture) are accounted for using the equity method as per Accounting Standard 23 on Accounting for Investments in Associates in Consolidated Financial Statements. Investments in joint venture undertakings over which the company exercises joint control are accounted for using proportionate consolidation as per Accounting Standard 27 on Financial Reporting of Interests in Joint Ventures. 96 Maruti Udyog Limited-Consolidated ANNUAL REPORT

16 SCHEDULES All unrealized surpluses and deficits on transactions between the group companies are eliminated. Accounting policies between group companies are consistent to the extent practicable. Appropriate disclosure is made of significant deviations from the company accounting policies, which have not been adjusted. 3. REVENUE RECOGNITION Domestic and Export Sales are recognised on transfer of significant risk and rewards to the customer which takes place on dispatch of goods from the factory/stockyard/storage area and port respectively. Finance charges on hire purchase business/lease rental income are recognized on the basis of implicit rate of return on the value of assets hired out/leased. Agency Commission is recognized based on the total net premium collected based on policies issued. 4. FIXED ASSETS Fixed Assets (except freehold land) are carried at cost of acquisition or construction or at manufacturing cost (in case of own manufactured assets) in the year of capitalisation less accumulated depreciation. 5. BORROWING COSTS Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised till the month in which the asset is put to use as part of the cost of that asset. 6. DEPRECIATION a) Fixed Assets except for lease hold land are depreciated on straight line method on a pro-rata basis from the month in which the asset is put to use, at the following rates. i) Assets capitalised before Depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of the Companies Act, 1956, in terms of Circular No. 1/86 dated of the Government of India. ii) Assets capitalized on or after Depreciation has been provided at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for certain fixed assets where based on management s estimate of the useful life of the assets, higher depreciation has been provided on straight line method at the following rates: Plant and Machinery: Single Shift 7.31% Double Shift 11.88% Triple Shift 15.83% Dies and Jigs 20% to 41% iii) Depreciation has been provided on Straight Line Method at rate higher than Schedule XIV for some associate companies as follows: Assets Depreciation rates Office Buildings 2% Factory Buildings 5% Electrical Fittings 33.33% Plant & Machinery 7.14% % Furniture & Fittings 15.00% % Vehicles 20% Electronic Processing Equipment s 20.00% to 33.33% b) Leasehold land is amortised over the period of lease. Maruti Udyog Limited-Consolidated ANNUAL REPORT

17 c) Plant and machinery the written down value of which at the beginning of the year is Rs. 5,000/- or less and other assets the written down value of which at the beginning of the year is Rs. 1,000/- or less are depreciated at the rate of 100%. Assets purchased during the year costing Rs. 5000/- or less are depreciated at the rate of 100%. d) In case the historical cost of an asset undergoes a change due to increase or decrease in the long term liability on account of foreign exchange fluctuation, change in duties etc., the depreciation on revised unamortised depreciable amount is provided prospectively over the residual useful life of the asset. 7. GOODWILL Goodwill arising on acquisition is amortised to expense on a straight-line basis over the period of estimated benefit but not exceeding three years. 8. INVENTORIES a) Inventories are valued at lower of cost, determined on the weighted average basis, and net realisable value. b) Tools are written off over a period of three years except for tools valuing Rs. 5,000/- or less individually which are charged off to revenue in the year of purchase. c) Machinery spares (other than those supplied alongwith main plant and machinery, which are capitalized and depreciated accordingly) are charged off to revenue on consumption except those valuing Rs. 5,000/- or less individually, which are charged off to revenue in the year of purchase. 9. INVESTMENTS Current investments are valued at lower of cost and fair value. Long-term investments are valued at cost except in case of permanent diminution in their value, wherein necessary provision is made. 10. RESEARCH AND DEVELOPMENT Revenue expenditure on research and development is charged off against the profit of the year in which it is incurred. Capital expenditure on research and development is shown as an addition to fixed assets and depreciated accordingly. 11. FOREIGN CURRENCY TRANSLATIONS a) Foreign Currency transactions are recorded at the exchange rate prevailing at the date of transaction. Exchange differences arising on settlement of transactions, except those relating to fixed assets, are recognised as income or expense in the year in which they arise. The cost of the respective fixed assets is adjusted for exchange differences arising on repayment of liabilities incurred for the purpose of acquiring such fixed assets. b) At the balance sheet date all assets, other than fixed assets, and liabilities denominated in foreign currency but not covered by forward contracts are reported at the exchange rate prevailing at the balance sheet date. The cost of the respective fixed assets is adjusted for increase or decrease in liabilities incurred for the purpose of acquiring such fixed assets due to application of the exchange rate prevailing at the balance sheet date. c) The difference between the forward rate and the exchange rate at the inception of a forward contract is recognised as income or expense over the life of the contract except in respect of liabilities incurred for acquiring fixed assets in which case such difference is adjusted in the cost of the respective fixed assets. d) At the balance sheet date, all assets and liabilities covered by forward contracts are stated at the forward contract rates. e) Profit or Loss arising on cancellation or renewal of a forward contract is recognised as income or expense in the year in which such cancellation or renewal has been made except in case of a forward contract relating to liabilities incurred for acquiring fixed assets, where profit or loss is adjusted in the cost of the respective fixed assets. 12. RETIREMENT BENEFIT COSTS Gratuity and leave encashment benefits on retirement are accounted for on the basis of actuarial valuation made at the end of the year. In case of certain associate companies, provision for leave encashment has been made on accrual basis. In case of certain joint venture and associate companies, contributions towards gratuity are charged to Profit & Loss Account on the basis of premium paid to the Life Insurance Corporation of India. 98 Maruti Udyog Limited-Consolidated ANNUAL REPORT

18 SCHEDULES 13. DEFERRED REVENUE EXPENDITURE Deferred Revenue Expenditure incurred upto 31st March 2003, is being written off over the period of its benefit. Similar Expenditure incurred on or after 1st April 2003 is being written off as current expenses, in accordance with the provisions of Accounting Standard 26 issued by the Institute of Chartered Accountants of India which defines Intangible Assets. 14. CUSTOMS DUTY Customs Duty paid on components imported specifically for export vehicles is debited to customs duty deposit account and duty drawback recoverable on export of vehicles is credited to this account. Other categories of duties available as drawback are debited to purchases and credited to income on export of vehicles. 15. GOVERNMENT GRANTS Government Grants are recognised in the profit and loss account in accordance with the related scheme and in the period in which these are accrued. 16. DEFERRED TAX Tax expense for the period, comprising current tax and deferred tax, is considered in determining the net profit/(loss) for the year. Deferred tax is recognized for all the timing differences. Deferred tax assets are carried forward to the extent it is reasonably/ virtually certain that future taxable profit will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed at each balance sheet date and written down/written up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realized. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted at the balance sheet date. 17. IMPAIRMENT OF ASSETS At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized in the profit and loss account to the extent the carrying amount exceeds recoverable amount. SCHEDULE 24 - NOTES TO ACCOUNTS: 1) Contingent Liabilities: a) Claims against the Group not acknowledged as debts: i) Disputed Sales-tax demands of Rs. 63 million (includes share of Joint Venture Rs. 7 million) (Previous year Rs. 64 million, includes share of Joint Venture Rs. 7 million). Against this, the Group has deposited a sum of Rs. 2 million under protest (Previous year Rs. 2 million). ii. iii. Disputed Excise demands/show-cause notices of Rs. 1,867 million (Previous year Rs. 1,452 million). Against this, the Group has deposited a sum of Rs. 29 million (Previous year Rs. 5 million) under protest. Disputed Customs demands/show-cause notices of Rs. 120 million (Previous year Rs. 121 million). Against this, the Group has deposited a sum of Rs. 22 million (Previous year Rs. 22 million) under protest. iv. Disputed Income-tax demands of Rs. 7,625 million (Previous year Rs. 5,812 million) net of amounts attributable to timing differences. Against this, the Group has deposited a sum of Rs. 2,756 million under protest (Previous year Rs. 2,756 million). v. Disputed Service-tax show-cause notices of Rs. 557 million (Previous year Rs. 488 million). vi. Disputed claims against the Group for recovery of Rs. 706 million (includes share of Joint Venture Rs. 3 million) (Previous year Rs. 1,510 million) (includes share of Joint Venture Rs. 3 million) lodged by various parties, pending litigation. b) Guarantee given to HDFC Limited for term loan of Rs. 300 million (Previous year Rs. 300 million) given by HDFC Limited to Maruti Employees Co-operative House Building Society, Bhondsi. Against it, the contingent liability as at the year-end is Rs. 34 million (Previous year Rs. 64 million). Maruti Udyog Limited-Consolidated ANNUAL REPORT

19 c) Guarantee given to Finance Companies for term loan of Rs. 7 million (Previous year Rs. 21 million) and lease finance of Rs. 57 million (Previous year Rs. 122 million) given to various vendors of the company for purchase of dies and moulds of certain models. d) As co-lessee in agreements entered into between various vendors of the company, as lessee, and Banks as lessors for leasing of dies and moulds for certain models aggregating to Rs. 15 million (Previous year Rs. 259 million). e) Guarantee given to HDFC Bank against Non-Fund based facilities granted by the Bank to group companies Maruti Suzuki Automobiles India Limited and Suzuki Powertrain India Limited of Rs. 4,000 million (Previous year Rs. Nil). Against this, the contingent liability as at the yearend is Nil. (Previous Year Rs. NIL) f) Guarantee given to HSBC Limited against Non-Fund based facilities granted by the Bank to group companies Maruti Suzuki Automobiles India Limited and Suzuki Powertrain India Limited of Rs. 6,000 million (Previous year Rs. Nil). Against this, the contingent liability as at the year-end is Rs. 2,802 million (Previous Year Rs. NIL). g) The amounts shown in the item (a) represent the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on outcome of the different legal processes which have been invoked by the company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interests and has been advised that it has strong legal positions against such disputes. The amount shown in item (b) to (f) represent guarantees given in the normal course of the company s operations and are not expected to result in any loss to the company on the basis of the beneficiaries fulfilling their ordinary commercial obligations. 2) Outstanding commitments under Letters of Credit established by the Group aggregate to Rs. 879 million (includes share of Joint Venture Rs. 26 million) (Previous year Rs. 570 million) (includes share of Joint Venture Rs. 16 million). 3) Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for, amounts to Rs. 10,555 million (includes share of Joint Venture Rs. 3 million) (Previous year Rs. 2,506 million) (includes share of Joint Venture Rs. 4 million). 4 a) Consumption of raw materials and components has been computed by adding purchases to the opening stock and deducting closing stock, verified physically by the management. b) Consumption of raw material and components includes a provision of Rs. 56 million (Previous year Rs. 220 million) and is net of Rs. 72 million (Previous year Rs. 350 million) for earlier years, on account of estimated reversal of tax benefit on quantity differences on inputs. 5) Vehicle prices were reduced with effect from 1st March, 2006 to give customers the benefit of the reduction in the rate of excise duty on small cars from 25.63% to 17.47%. To support the dealers in this process, the company has paid them Rs. 349 Million for vehicles purchased by them at prices which included the higher rate of excise duty and remaining unsold at 28th February, This has resulted in a reduction in Net Sales and Profit before Tax during the quarter and year ended 31st March, 2006 by the same amount. 6) The Company was granted sales tax benefit in accordance with the provisions of Rule 28C of Haryana General Sales Tax Rules, 1975 for the period from 1st August, 2001 to 31st July, The ceiling amount of concession to be availed of during entitlement period is Rs. 5,644 million. Till 31st March 2006, the company has availed of sales tax benefit amounting to Rs. 1,150 million (Previous year Rs. 827 million). 7) The Group is primarily in the business of manufacture, purchase and sale of Motor Vehicles and spare parts ( automobiles ). The other activities of the Company comprise facilitation of Pre-Owned Car sales, Fleet Management and Car Financing. The income from these activities, which are incidental to the Company s business is not material in the financial terms but contribute significantly in generating the demand for the products of the Company. Accordingly segment information has not been disclosed. 8) Differences between accounting policies of the Company and other group companies: a) In case of certain associate companies, provision for leave encashment has been made on accrual basis. b) In case of certain associate and joint venture companies, contributions towards gratuity is charged to Profit & Loss Account on the basis of premium paid to the Life Insurance Corporation of India. c) Deferred Revenue Expenditure of Joint Venture and Associate Companies have been charged to Profit & Loss Account in the year of incurrence. 9) a) The Profit after tax of Denso India Limited and Asahi India Glass Limited has been annualised based on unaudited financial statements of nine months ended 31 st December It is unlikely that the audited results would be materially different from annualised results. b) The Profit after tax of Climate Systems India Limited, Citicorp Maruti Finance Limited, Maruti Countrywide Auto Financial Services Limited, Krishna Maruti Limited, Mark Auto India Limited and Nippon Thermostat (India) Limited has been taken on the basis of unaudited financial statements for financial year ended 31 st March It is unlikely that the audited results would be materially different from unaudited results. 10) Reserves of the Joint Venture pertaining to period prior to 1 st April 2005 have been adjusted in the opening reserves of the company as on that date. 100 Maruti Udyog Limited-Consolidated ANNUAL REPORT

20 SCHEDULES ) The following expenses incurred on Research and Development are included under respective account heads: Employees Remuneration and Benefits Deferred Revenue Expenditure written off 4 Other Expenses of Manufacturing and Administration (including Depreciation on Research and Development assets) ) a) MANAGERIAL REMUNERATION Salaries and Allowances Commission/Performance linked Bonus Contribution to Provident Fund Gratuity and Leave Encashment Paid Estimated value of perquisites Share of Joint Ventures b) The above mentioned amount of Rs million (Previous year Rs million) does not include any provision for gratuity or leave encashment benefit as the separate figures for the directors are not available. 13) AUDITORS REMUNERATION Statutory Audit Other Audit Services/Certification Reimbursement of Expenses (including out of pocket) Share of Joint Ventures ) STATEMENT OF EARNING PER SHARE Net Profit after tax attributable to shareholders (in Million Rupees) 12,191 8,801 Weighted Average Number of Equity Shares Outstanding during the year 288,910, ,910,060 Nominal value per share (In Rupees) Basic/Diluted Earning Per Share (In Rupees) Maruti Udyog Limited-Consolidated ANNUAL REPORT

21 15) DEFERRED TAX Major Components of Deferred Tax arising on account of temporary timing differences alongwith their movement as at March 31, 2006 are : Movement during Assets the year Provision for Doubtful debts / advances Contingent Provisions Others 545 (110) 435 1,254 (43) 1,211 Share of Joint Ventures Total (A) 1,265 (42) 1,223 Liabilities Depreciation on Fixed Assets 1,891 (375) 1,516 Allowances under Income Tax Act, (11) 462 Deferred Revenue Expenditure ,354 (364) 1,990 Share in Joint Ventures Total (B) 2,388 (355) 2,033 Net Deferred Tax Liability (B) - (A) 1,123 (313) Maruti Udyog Limited-Consolidated ANNUAL REPORT

22 SCHEDULES 16) STATEMENT OF TRANSACTIONS WITH RELATED PARTIES Holding Company Key Management Personnel Associates Fellow subsidiaries Suzuki Motor Corporation Mr. Jagdish Khattar - Managing Director Asahi India Glass Limited Suzuki Motor Poland Limited Mr. Hirofumi Nagao - Joint Managing Director Bharat Seats Limited Suzuki France S A Joint Ventures Mr. Shinichi Takeuchi - Joint Managing Director Caparo Maruti Limited Suzuki Italia S P A J.J. Impex (Delhi) Private Limited Mr. Kinji Saito - Director (Marketing & Sales) Climate Systems India Limited Suzuki Australia Pty. Limited Mark Exhaust Systems Limited Denso India Limited Suzuki Austria Automobil Handels Gmbh Jay Bharat Maruti Limited Suzuki GB PLC Krishna Maruti Limited Magyar Suzuki Corp. Machino Plastics Limited Suzuki Cars (Ireland) Limited Mark Auto Industries Limited Suzuki Powertrain India Limited Nippon Thermostat (India) Limited Suzuki International Europe Gmbh Sona Koyo Steering Systems Limited S. Iberica (including Suzuki Madrid) Citicorp Maruti Finance Limited Maruti Countrywide Auto Financial Services Limited Joint Associates Holding Fellow Key Total Joint Associates Holding Fellow Key Total Ventures Company Subsidiaries Management Ventures Company Subsidiaries Management Personnel Personnel Outstanding at year end Loans and advances recoverable Suzuki Powertrain India Limited Others Total Amounts payable Suzuki Motor Corporation - - 2, , , ,667 Others 87 1, , Total 87 1,161 2, , , ,502 Guarantees given to third parties by the Company Suzuki Powertrain India Limited Others Total Proposed Dividend Suzuki Motor Corporation Total Amount recoverable Jay Bharat Maruti Limited Machino Plastics Limited Caparo Maruti Limited Suzuki Powertrain India Limited Others Total Transaction during the year in the - ordinary course of business Purchases of Capital items Suzuki Motor Corporation Others Total Sale of goods Caparo Maruti Limited Suzuki GB PLC ,096-1, ,702-2,702 Magyar Suzuki Corporation ,209-1,209 Others ,775-2,262 Total ,935-2, ,686-6,437 Maruti Udyog Limited-Consolidated ANNUAL REPORT

23 Other Income Joint Associates Holding Fellow Key Total Joint Associates Holding Fellow Key Total Ventures Company Subsidiaries Management Ventures Company Subsidiaries Management Personnel Personnel Finance income/ commission/ Dividend Maruti Countrywide Auto Financial Services Limited Suzuki Powertrain India Limited Citicorp Maruti Finance Limited Others Total Other Miscellaneous Income Mark Auto Industries Limited Machino Plastic Limited Jay Bharat Maruti Limited Suzuki Powertrain India Limited Others Total Expenditure Purchases of goods Jay Bharat Maruti Limited - 3, ,659-3, ,705 Krishna Maruti Limited - 3, ,203-2, ,468 Suzuki Motor Corporation , , , ,078 Others 1,085 9,440-1,795-12, ,860-1,267-10,953 Total 1,085 16,302 12,037 1,795-31, ,033 12,078 1,267-29,204 Royalty Suzuki Motor Corporation - - 2, , , ,986 Total - - 2, , , ,986 Receiving of services Suzuki Motor Corporation Others Total Other-expenditure Suzuki Italia SPA Suzuki GB PLC Suzuki International Europe Gmbh Others Total Managerial Remuneration Mr. Jagdish Khattar Mr. Hirofumi Nagao Mr. Shinichi Takeuchi Mr. Kinjo Saito Total Note: -Suzuki Powertrain India Limited (formerly known as Suzuki Metal India Limited) is also an associate of Maruti Udyog Limited 104 Maruti Udyog Limited-Consolidated ANNUAL REPORT

24 SCHEDULES 17) The company has the following provisions in the books of account as on : Description Balance as on Additions during Utilized/ Balance as on the year Reversed during the year a) Litigation related provisions b) Warranty / Product Recall c) Others a) Litigation related provisions pertain to claims in respect of various taxes/ other claims, all of which have been disputed by the company. Disclosure of further details will prejudice the interest of the company. b) Warranty and Product Recall provisions relate to the estimated outflow in respect of warranty and recall cost for products sold during the year.due to the very nature of such costs, it is not possible to estimate the timing / uncertainties relating to their outflows as well as the expected reimbursements from such estimates. c) Other provisions relate to excise duty, export obligation and guarantees etc. given. Due to the very nature of such costs, it is not possible to estimate the timing / uncertainties relating to their outflows as well as the expected reimbursements from such estimates 18) The board of directors of Maruti Udyog Limited (MUL) in its meeting held on 13th April 2006 has approved the proposals of purchasing the entire equity stake of Suzuki Motor Corporation in Maruti Suzuki Automobiles India Limited (MSAIL), thereby converting it into a wholly owned subsidiary company and its amalgamation/ merger with MUL with effect from 1st April, ) Derivative Instruments outstanding at the Balance Sheet date 1(a) Forward Contract on Imports: The company has outstanding forward contracts to buy 7 Billion JPY against USD at an average rate of JPY/USD maturing on various dates between April and June The above contracts have been undertaken to hedge against the foreign exchange exposures on import transactions. (b) Interest Rate swap: The company has entered into a Constant Maturity Interest Rate swap in the year with a bank for its Non-convertible Debentures (Series - II), under which the bank will bear the fixed interest liability of 9% p.a. till maturity and the company will bear the floating interest burden at a fixed spread over the 5 year Government Security yields. The Outstanding liability of the underlying debentures was Rs.700 million as on 31st March The above contract has been undertaken for hedging against interest rate risk on debenture interest liability. 2. The foreign currency exposures that are not hedged by a derivative instrument or otherwise is as follows: (Amount in Million) YEN USD EURO Receivables Payables ) Previous Year s figures have been recasted/ regrouped where considered necessary to make them comparable with current year s figures. Maruti Udyog Limited-Consolidated ANNUAL REPORT