The Directors present their Ninth Annual report and Audited Financial Statements for the year ended 31 March 2016.

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1 Bajaj Auto Limited Directors' Report The Directors present their Ninth Annua report and Audited Financia Statements for the year ended 31 March Financia resuts The financia resuts of the Company are eaborated in the Management Discussion and Anaysis Report. The highights of the Financia Resuts are as under: Saes in Numbers FY2016 FY2015 Two-wheeers 3,358,252 3,292,084 Three-wheeers + Quadricyce 535, ,117 Tota 3,893,581 3,811,201 Of which Exports 1,739,629 1,806,078 (H In Crore) Particuars FY2016 FY2015 Tota revenue 23, , Tota expenses 18, , Profit before exceptiona items and tax 5, , Exceptiona items Profit before tax 5, , Tax expense 1, , Profit for the year 3, , Transfer to Genera Reserve Interim dividend (incusive of dividend tax) 1, Proposed dividend (incusive of dividend tax) , Provision for dividend tax for previous year written back (11.35) Baance carried to Baance Sheet 1, Earnings per share ( H ) Dividend The Board at its meeting hed on 9 March 2016 decared an interim dividend at the rate of H 50 per share (500%) for the year ended 31 March 2016, which was paid to a the eigibe sharehoders as on 17 March 2016, being the record date for the purpose of dividend. The amount of dividend and the tax thereon to the extent appicabe aggregated to H 1, crore. The directors now recommend for consideration of the sharehoders at the ensuing annua genera meeting, payment of fina dividend at the rate of H 5 per equity share (50%) for the financia year ended 31 March The amount of fina dividend and tax thereon to the extent appicabe aggregate to H crore. For the year ended 31 March 2016, the tota dividend incuding interim dividend, therefore, works out to H 55 per share (550%) and the tota dividend and tax thereon to the extent appicabe aggregate to H 1, crore. 52

2 For the year ended 31 March 2015, dividend paid was H 50 per share (500%). The amount of dividend and the tax thereon to the extent appicabe aggregated to H 1, crore. Share capita The paid up equity share capita as on 31 March 2016 was H crore. There was no pubic issue, rights issue, bonus issue or preferentia issue, etc. during the year. The Company has not issued shares with differentia voting rights, sweat equity shares, nor has it granted any stock options. Operations Detaied information on the operations of the Company and detais on the state of affairs of the Company are covered in the Management Discussion and Anaysis Report. Capacity expansion and new projects The Company s current instaed capacity is 6.06 miion units per annum. The Company pans to increase the instaed capacity to around 6.24 miion units per annum by March Detaied information on the quadricyce RE 60 and new projects, is provided in the Management Discussion and Anaysis Report. Research and Deveopment and technoogy absorption A) Products Many new products have been aunched during the year under review. Detaied information on the new products is covered in the Management Discussion and Anaysis Report. B) Process R&D has been working on improving its operations in a number of areas as isted beow: Manpower: R&D has been expanding its team size in areas of design, anaysis and vaidation in order to keep up with the rapidy expanding aspirations of the Company. Faciities: R&D continued to enhance its design, computing, prototype manufacturing and vaidation faciities. A number of new test faciities and prototyping faciities were added. C) Technoogy As in the past, new and improved technoogy has been introduced during the year under review and the detaied information on the same is covered in the Management Discussion and Anaysis Report. D) Outgo The expenditure on research and deveopment during and in the previous year was: (H In Crore) Particuars FY2016 FY2015 i. Capita (incuding technica know-how) ii. Recurring Tota iii. Tota research and deveopment expenditure as a percentage of saes, net of excise duty 1.48% 1.71% 53

3 Bajaj Auto Limited Conservation of energy Company continues its efforts to reduce and optimise energy consumption at a manufacturing faciities, incuding corporate office at Pune. Significant reduction in energy consumption has been achieved as set out beow: A) Eectrica energy Micro mapping of equipments for energy consumption and countermeasures thereon. Lifecyce cost anaysis and countermeasures at centraised cooant system. Instaation of DC brushess motor with direct drive in pace of AC induction motor at paint shop air suppy unit. Reduction in emission height of exhaust bowers. Use of eectrica bower in pace of pneumatic vacuum bower at de-watering stage in paint shop. Instaation of energy efficient pumps/motors, equipments, air dryers, exhaust bowers axia fans. Use of induction/led/cfls for street ighting/shop ighting/office. Use of auto shut off cooant pumps in machine shop to prevent excess pump oads. Use of isoator switches for standby transformers for reduction of fixed oad. Providing portabe compressor for jig stripping pant for non-working days. Instaation of breeze air cooers in record room in pace of air circuators. Use of HVLS (High Voume and Low Speed) fans for fixed oad reduction of air circuators. B) Water Reuse of treated water by using reverse osmosis pants. Use of auto cose water taps and orificing for controed consumption of water at wash basin. Instaation of water meters for monitoring and controing consumption of key users. Use of ETP/STP water for gardening and toiet fushing. Rain water harvesting at a pants. C) LPG/propane Therma imaging audit to assess the heat osses through paint shop ovens and countermeasures on them. Extending incinerator heat for backing ovens. Removabe hook arrangement for muti modes for fue tank jigs. Reducing coour change time from 11 min to 5 min/occurrence. 54

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5 Bajaj Auto Limited Optimisation of air veocity in ovens. Burner efficiency improvement through magnetic resonators. Provision of air curtains at oven exit to reduce heat oss. Weight reduction of job fixtures in heat treatment. Operation of ower size oven in heat treatment. Usage of soar water heaters for canteen. D) Utiisation of renewabe energy - key initiatives Use of soar energy through soar concentrator. Instaation of natura ight transparent roof sheets. Impact of measures taken As a resut of the initiatives taken for conservation of energy and natura resources, the Company has effected an overa reduction in consumption as given in the Tabe beow: % Reduction w.r.t. previous year Description FY2016 FY2015 Eectricity consumption Water consumption LPG/PNG consumption Investment/savings H In Crore Description FY2016 FY2015 Investment for energy conservation activities Annua savings achieved through above activities Awards and Accoades Sr. Detais 1 Exceence in Energy Conservation and Management by MEDA for Wauj Pant 2 Green Manufacturing Exceence Award by Frost and Suivan for Chakan Pant 3 Best Energy Efficient pant Award by TV 100 for Pantnagar Pant Internationa Business Bajaj Auto continues to be India s No.1 exporter of motorcyces and three-wheeers. It exports to 74 countries and enjoys the No.1 or No.2 position in more than 20 of them. During the year under review, exports accounted for 43.9 % of the Company s net saes. Detaied information on the Internationa Business is given in the Management Discussion and Anaysis Report. 56

6 Foreign exchange earnings and outgo The Company continued to be a net foreign exchange earner during the year. Tota foreign exchange earned by the Company during the year under review was H 9, crore, compared to H 9, crore during the previous year. Tota foreign exchange outfow during the year under review was H crore as against H crore during the previous year. Industria reations Industria reations with staff and workmen across a the pants, viz. Akurdi, Wauj, Chakan and Pantnagar continued to be cordia. At Akurdi and Chakan, periodic wage review is due with effect from 1 Apri 2016, as per the terms of the respective wage settements signed for a period of nine years, in the year Both, Management and Union have exchanged their Charter of Demands/Requirements with each other. Negotiations/diaogues to concude the review process have commenced and are going on in a congenia atmosphere at both the ocations. The Empoyers Federation of India (EFI) conferred The Nationa Award for Exceence in Empoyee Reations on Bajaj Auto Ltd., Motorcyce Division, Wauj, Aurangabad, in recognition of 'Strong Commitment to Empoyee Reations', at Mumbai, on 9 December One workman from Engine Assemby (MCD) Wauj, received Nationa Vishwakarma Rashtriya Puraskar from the Labour and Empoyment Ministry, Government of India, for the year The empoyees of Chakan Pant won first prize five times in TPM Circe Nationa Leve Competition and once in Nationa Leve Champion s Competition organised by Confederation of Indian Industry (CII). The Chakan Pant aso received first prize in the Productivity Case Study Contest 2016 organised by Indian Institute of Industria Engineering (IIIE). The empoyees of Pantnagar Pant won first prize in Breakthrough Kaizen category in Nationa Leve Kaizen Competition organised by CII. Likewise, the Pantnagar Pant aso received TV 100 Exceence Award for impementing various Kaizens for Energy Saving. The Award was given by the Hon be Chief Minister of State of Uttarakhand, Mr. Harish Rawat. Subsidiaries and joint ventures PT. Bajaj Auto Indonesia Routine business operations of PT. Bajaj Auto Indonesia have stopped. In March 2016, Bajaj Auto and KTM entered into an agreement vide which Bajaj Auto wi estabish the KTM brand in Indonesia, the argest motorcyce market in South-East Asia. Bajaj Auto Internationa Hodings BV, Netherands (BAIH BV) Bajaj Auto Internationa Hodings BV is a 100% Netherands based subsidiary of Bajaj Auto Ltd. Over the years, through this subsidiary, Bajaj Auto has invested a tota of miion (H 1,219 crore), and hods approximatey 48% stake in KTM AG of Austria (KTM), the fastest growing motorcyce brand in the word. Caendar year 2015 has again been a record year for KTM, with highest saes in units and highest turnover in the history of the Company. Detaied information on the deveopments at the subsidiary and KTM AG is provided in the Management Discussion and Anaysis Report. 57

7 Bajaj Auto Limited Signing of anti-corruption initiative of Word Economic Forum (WEF) In support of the initiative taken by WEF, with a view to strengthening the efforts to counter bribery and corruption, your Company is a signatory to the 'Commitment to anti-corruption' and is supporting the 'Partnering Against Corruption-Principes for Countering Bribery' derived from Transparency Internationa s Business Principes. This cas for a commitment to two fundamenta actions, viz.a zero-toerance poicy towards bribery, and deveopment of practica and effective impementation programme. Extract of annua return The extract of Annua Return as provided under sub-section (3) of section 92 of the Companies Act, 2013, in the prescribed Form MGT-9 is annexed to this Report. Number of meetings of the board There were eight meetings of the Board hed during the year. Detaied information is given in the Corporate Governance Report. Directors responsibiity statement As required under cause (c) of sub-section (3) of section 134 of the Companies Act, 2013, directors, to the best of their knowedge and beief, state that in the preparation of the annua accounts, the appicabe Accounting Standards had been foowed aong with proper expanation reating to materia departures; the directors had seected such accounting poicies and appied them consistenty and made judgments and estimates that are reasonabe and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financia year and of the profit and oss of the Company for that period; the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irreguarities; the directors had prepared the annua accounts on a going concern basis; the directors had aid down interna financia contros to be foowed by the Company and that such interna financia contros are adequate and were operating effectivey; and the directors had devised proper systems to ensure compiance with the provisions of a appicabe aws and that such systems are adequate and were operating effectivey. Detais in respect of frauds reported by auditors under section 143(12) During the year under review, there were no frauds reported by the auditors to the Audit Committee or the Board under section 143(12) of the Companies Act, Decaration by independent directors The independent directors have submitted the decaration of Independence, as required pursuant to section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in sub-section (6). 58

8 Directors Remuneration Poicy and criteria for matters under section 178 Information regarding Directors Remuneration Poicy and criteria for determining quaifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178 are provided in the Corporate Governance Report. Particuars of oans, guarantees or investments Information regarding oans, guarantees and investments covered under the provisions of section 186 of the Companies Act, 2013 are detaied in the Financia Statements. Reated party transactions There were no Reated Party Transactions (RPTs) entered into by the Company during the financia year, which attracted the provisions of section 188 of the Companies Act, There being no materia reated party transactions as defined under reguation 23 of SEBI Listing Reguations, 2015, there are no detais to be discosed in Form AOC-2 in that regard. During the year , pursuant to section 177 of the Companies Act, 2013 and reguation 23 of SEBI Listing Reguations, 2015, a RPTs were paced before the Audit Committee for its approva. The Poicy on RPTs as approved by the Board is upoaded on the Company s website Materia changes and commitments There have been no materia changes and commitments affecting the financia position of the Company, which have occurred between the end of the financia year and the date of this Report. Risk Management Poicy Information on the deveopment and impementation of a Risk Management Poicy for the Company incuding identification therein of eements of risk which, in the opinion of the Board, may threaten the existence of the Company, is given in the Corporate Governance Report. Corporate Socia Responsibiity (CSR) Detaied information on Corporate Socia Responsibiity Poicy deveoped and impemented by the company on CSR initiatives taken during the year pursuant to section 135 of the Companies Act, 2013 is given in the annexed Annua Report on CSR activities. Forma annua evauation of the performance of Board, its Committees and Directors Information on the manner in which forma annua evauation has been made by the Board of its own performance and that of its Committees and individua directors is given in the Corporate Governance Report. Presentation of financia statements The financia statements of the Company for the year ended 31 March 2016 have been discosed as per Schedue III to the Companies Act, Consoidated financia statements The directors aso present the audited consoidated financia statements incorporating the duy audited financia statements of the subsidiaries, and as prepared in compiance with the Companies Act, 2013, appicabe Accounting Standards and SEBI Listing Reguations, 2015 as prescribed by SEBI. 59

9 Bajaj Auto Limited A separate statement containing the saient features of its subsidiaries in the prescribed form (AOC-1) is annexed separatey. Statutory discosures The summary of the key financias of the Company s subsidiaries (Form AOC-1) is incuded in this Annua Report. A copy of audited financia statements for each of the subsidiary companies wi be made avaiabe to the members of the Company seeking such information at any point of time. The audited financia statements for each of the subsidiary companies wi be kept for inspection by any member of the Company at its registered office during business hours. The same are paced on the Company s website Detais as required under the provisions of section 197(12) of the Companies Act, 2013, read with rue 5(1) of Companies (Appointment and Remuneration of Manageria Personne) Rues, 2014, are paced on the Company s website as an annexure to the Directors Report. A physica copy of the same wi be made avaiabe to any sharehoder on request. Detais as required under the provisions of section 197(12) of the Companies Act, 2013, read with rue 5(2) and 5(3) of Companies (Appointment and Remuneration of Manageria Personne) Rues, 2014, which form part of the Directors Report, wi be made avaiabe to any sharehoder on request, as per provisions of section 136(1) of the said Act. A Cash Fow Statement for the year is attached to the Baance Sheet. Pursuant to the egisation 'Prevention, Prohibition and Redressa of Sexua Harassment of Women at Workpace Act, 2013' introduced by the Government of India, which came into effect from 9 December 2013, the Company has framed a Poicy on Prevention of Sexua Harassment at Workpace. There was no case reported during the year under review under the said Poicy. Directors and Key Manageria Personne-changes The Directors regret to report about the sad demise of S H Khan, an independent director of the Company, on 12 January The directors record their whoe-hearted appreciation of the vauabe contribution made by him during his ong tenure as director in the Company. Pradeep Shrivastava, COO, has been appointed as an Additiona Director and whoe-time director with the designation of Executive Director for a period of five years commencing from 1 Apri The members are requested to approve his appointment in the ensuing annua genera meeting. In ight of the provisions of the Companies Act, 2013, Sanjiv Bajaj and Manish Kejriwa retire from the Board by rotation this year and being eigibe, offer themseves for re-appointment. The information as required to be discosed under reguation 36(3) of the SEBI Listing Reguations, 2015 in case of re-appointment of the directors is provided in the Notice of the ensuing annua genera meeting. There was no other change in the directors and KMP during the year under review. Detaied information on the directors is provided in the annexed Corporate Governance Report. Significant and materia orders passed by the reguators or courts During the year under review, there were no significant and materia orders passed by the reguators or courts or tribunas, which may impact the going concern status of the Company and its operations in future. 60

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11 Bajaj Auto Limited Detais of interna financia contros with reference to the financia statements The Company has documented its interna financia contros considering the essentia components of various critica processes, physica and operationa, which incudes its design, impementation and maintenance aong with periodica interna review of operationa effectiveness and sustenance. This ensures ordery and efficient conduct of its business, incuding adherence to Company s poicies, safeguarding of its assets, prevention of errors, accuracy and competeness of the accounting records and the timey preparation of reiabe financia information. The interna financia contros with reference to the financia statements were adequate and operating effectivey. Corporate governance Pursuant to SEBI Listing Reguations, 2015, a separate chapter tited Corporate Governance has been incuded in this Annua Report, aong with the reports on Management Discussion and Anaysis and Genera Sharehoder Information. A Board members and Senior Management personne have affirmed compiance with the Code of Conduct for the year A decaration to this effect signed by the Managing Director (CEO) of the Company is contained in this Annua Report. The Managing Director and CFO have certified to the Board with regard to the financia statements and other matters as required under reguation 17 (8) of the SEBI Listing Reguations, Certificate from Auditors of the company regarding compiance of conditions of corporate governance is annexed to this Report. Business Responsibiity Report Reguation 34(2) of the SEBI Listing Reguations, 2015, inter aia, provides that the annua report of the top 100 isted entities based on market capitaisation (cacuated as on March 31 of every financia year), sha incude a Business Responsibiity Report. Since Bajaj Auto Ltd. is one of the top 100 isted entities, the Company, as in the previous years, has presented its BR Report for the financia year , which is part of this Annua Report. As a green initiative, the BR Report has been hosted on the Company s website A physica copy of the BR Report wi be made avaiabe to any sharehoder on request. Secretaria Standards of ICSI Pursuant to the approva given on 10 Apri 2015 by the Centra Government to the Secretaria Standards specified by the Institute of Company Secretaries of India, the Secretaria Standards on Meetings of the Board of Directors (SS-1) and Genera Meetings (SS-2) came into effect from 1 Juy The Company is in compiance with the same. Auditors Statutory Auditor Pursuant to the provisions of section 139 of the Companies Act, 2013 and the Rues made thereunder, the current auditors of the Company, Daa & Shah LLP, Chartered Accountants (registration number: W) were appointed by the members at the 7th annua genera meeting to hod office unti the concusion of the 10th annua genera meeting, subject to ratification by members at each annua genera meeting. 62

12 The members are requested to ratify the appointment of Daa & Shah LLP, Chartered Accountants (registration number: W/W100110) as statutory auditors of the Company and to fix their remuneration for the year The Statutory Audit Report does not contain any quaification, reservation or adverse remark or discaimer made by Statutory Auditor. Secretaria Auditor Pursuant to the provisions of section 204 of the Companies Act, 2013 and rues made thereunder, the Company has re-appointed, Shyamprasad D Limaye, (Membership No.1587) Company Secretary in Practice to undertake the secretaria audit of the Company. Secretaria Audit Report for the year issued by him in the prescribed form MR-3 is annexed to this Report. The said Secretaria Audit Report does not contain any quaification, reservation or adverse remark or discaimer made by the Secretaria Auditor. On behaf of the Board of Directors, Rahu Bajaj Chairman Pune: 25 May