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10 Cummis Idia Limited Aual Report Deliverig o our Promise of Depedability

11 Table of Cotet Letter to the Shareholders...1 Board of Directors...12 Fiacial Summary - 5 years...14 Directors Report ad Fiacial Statemets...15 Busiess Resposibility Report...93

12 Aual Report To Our Shareholders Aat J. Talaulicar Chairma ad Maagig Director, Cummis Idia Limited Guided strogly by the Compay Visio, Missio, six Core Values, ad five Persoality Traits, your Compay cotiued to demostrate depedable performace i a year that was marked by ecoomic ucertaities. The Compay's Persoality Traits - Decisive, Drive to Wi, Agile, Passioate ad Carig, play a critical role i ifluecig the may decisios take to cotiue the legacy of positively ifluecig the lives of our stakeholders. Stayig true to these five traits, all the four busiesses of your Compay - Idustrial, Automotive, Power Geeratio ad Distributio, performed well i difficult times. I am pleased to share the performace of your Compay, Cummis Idia Limited, for the fiscal year Decisive Maagig challeges ad emergig as a great istitutio requires strog decisio makig capabilities. Your Compay cotiued to do well i this regard takig decisios focused o log-term profitable growth, while balacig short term deliverables, based o strog customer relatioships, techology leadership, service support ad people talet. It is with pride that I report the performace of Cummis Idia Limited for a year that has had opportuities ad challeges. I , et sales for Cummis Idia Limited at Rs. 4,509 Crores, represeted a icrease of 11.3 percet over last year. Net profit before tax (excludig exceptioal items) at Rs Crores, represeted a 28 percet icrease over the previous year. The Compay geerated sigificat amouts of cash, stregtheed its balace sheet ad fiacial positio ad most importatly cotiued to retur value to its shareholders. Your Compay had disbursed a iterim divided of 250 percet (Rs. 5 per fully paid-up equity share of Rs. 2 each) i February The fiacial year cocluded with recommedig a fial divided of 400 percet (Rs. 8 per fully paid-up equity share of Rs. 2 each) aggregatig to 650 percet (Rs. 13 per fully paid-up equity share of Rs. 2 each), subject to your approval at our forthcomig Aual Geeral Meetig. Over the last five fiscal years, the total retur has bee 19 percet o a compouded aual growth basis. 1

13 Despite sigificat pressure o margis due to applicatios. Desiged to maufacture 80 egies per iflatio ad slower ecoomic growth, your Compay day i two shifts, ad expad productio capacity has sustaied its profitable growth story. whe eeded with miimal ivestmet, this facility allows us to leverage operatioal efficiecies alog Cotiuig to build capabilities despite adverse with the existig facilities at the Megasite. market coditios also sigifies your Compay s decisiveess. A example of this cotiues to be the Aother facility, also the first o the Special Ecoomic Cummis Megasite at Phalta. Subsequet to startig Zoe (SEZ) of the Megasite, for maufacturig operatios at three facilities i early 2011, the Idia geerator sets ad G-drives for exports i the low ad Parts Distributio Ceter became fully operatioal i medium horsepower rage will commece productio 2012 ad has sice bee able to achieve ad sustai later this summer. The secod factory o the SEZ, for record world-class levels of spare parts fill rates for maufacturig high horsepower egies i the 19 litre customers. to 60 litre rage, is i progress ad is expected to be ready to commece operatios later this caledar The year also saw the opeig of the Phalta year. We also broke groud for the third plat of Tata Midrage Upfit Ceter, the fifth facility at the Megasite. Cummis Limited at the Megasite. This plat will The Upfit Ceter has bee established to assemble, maufacture B5.9 mechaical, ISB ad QSB5.9, ISB upfit, test ad pait diesel ad atural gas egies, ad QSB6.7, ISL ad QSL8.9 egies i additio to both mechaical ad electroic, ragig i size from beig the oly plat i Idia to maufacture the 2.8 litres to 8.9 litres. This rage will cater to various L series egies, to be used by your Compay i power geeratio, idustrial ad o highway applicatios ragig from automotive, power Egieered for success: The ewly-lauched Phalta Midrage Upfit Ceter for the B, L ad C series egies, caters to the power geeratio, idustrial ad highway applicatios. 2

14 Aual Report Reachig the future, faster: The global Techical Ceter at Kothrud that will build techologies for the future is expected to be ready by geeratio ad idustrial. 2011, ad was replicated yet agai with ACE III i 2011 through Durig the fiscal year , a Our plas to substatially expad the laboratories ad total of 250 projects helped geerate aualized egieerig facilities at our Kothrud site ito a global, savigs of Rs. 44 Crores for your Compay as full-fledged Techical Ceter that will support all compared to 300 projects ad 57 Crores i savigs Cummis busiess uits are progressig well. Geared geerated i the previous year. Upo successful towards stregtheig your Compay s capability to completio i 2014, this program is expected to desig techologies for the future, the Cummis geerate savigs of approximately Rs. 230 Crores for Techical Ceter Idia will house over 2,500 egieers your Compay, depictig a 20 percet reductio over ad is expected to become fully operatioal over the a period of three years. ext two years. Drive to wi Positioig itself for log-term success, your With the Cetral Pollutio Cotrol Board regulatig Compay cotiued to expad its capabilities i towards cleaer emissio orms for egies used i techology, product ad capacity ehacemets. This geerators, your Compay has evaluated umerous was evideced by Rs. 149 Crores i capital techologies ad products ad developed Fit for ivestmets i the curret fiscal as compared to Market solutios to best meet emissios regulatios Rs. 136 Crores i the previous fiscal. We believe these cost effectively. As we prepare to take advatage of will better prepare the Compay for decisive growth ew opportuities emaatig from the implemetatio upo market recovery. of the ew orms, we also cotiue to ivest i ext geeratio techologies ad products that will allow Sustaiig ad growig our cost efficiecy, we us to stay ahead i the markets we serve. cotiued to reduce the Total Cost of Owership for direct materials through the ACE (Accelerated Cost I beig drive to wi, your Compay had embarked Efficiecy) program. ACE, lasted from 2005 through upo the Fit for Market iitiative. Sice the, 2008, the got replicated with ACE II i 2008 through products such as the mechaically cotrolled 5.9 litre 3

15 egie for automotive ad costructio segmets, the measures across all aspects of our busiess, which 19 litre egie with ehaced operatioal efficiecy icluded, drivig cost cotrol programs more ad improved costs for rail power cars, ad lower kilowatt geerator sets have bee helpig your Compay cotiue to wi. Fit for market, fit for future growth: Cummis Fit for Market solutios eable the Compay to foray ito markets which it has t served i the past. aggressively tha ever, plat block closures, ad workig capital reductios i lie with reduced growth rates. Oe such program istituted thirtee years ago, Six Sigma, has geerated savigs of Rs. 48 Crores for your Compay. This year, of the 399 projects completed, collectively by the 1,180 belts, 78 projects focused o customers ad 43 o suppliers, egagig ad deepeig our relatioships with them. Additioally, Six Sigma has also prove to be a effective tool i buildig ad ehacig leadership skills ad drivig zero-defect results across the orgaizatio. Cotiuig to leverage the multi-fold beefits of Six Sigma, we have ow made it madatory for our employees to complete at least oe project successfully withi the performace year i order to get categorized as high performers. I early 2012, furtherig our dealership operatioal excellece, your Compay had successfully lauched a joit veture with oe of its existig dealers, SVAM Power Plats Private Limited, to form Cummis SVAM Sales ad Service Limited. As this associatio takes our customer experiece ad loyalty to the ext level of performace, this ew veture, spaig areas of NCR ad parts of Wester Uttar Pradesh, will also provide a greater uderstadig of market dyamics ad help drive improvemet i the dealership etwork to better serve our customers. Agile The agility demostrated by your Compay i adaptig to chagig market coditios has helped it sustai its profitable growth story, eve i difficult times. The Compay has demostrated agility to couter ecoomic ucertaities ad istituted Aother cost reductio program, TRIMS, lauched i 2010, to reduce the Total Cost of Owership i idirect materials ad services by 10 percet every year over a period of three years geerated combied bottom lie savigs (alog with purchasig projects i the idirect sped space) of Rs Crores with a avoidace savigs of Rs Crores for your Compay. Additioally, the program has also helped cosolidate the idirect materials ad services supply base while better leveragig our expediture. All these actios cotiue to cotribute sigificatly to the bottom lie. Passioate Your Compay s passio is most visible i its edeavour to serve the customer ad help them succeed. Helpig us realize this is the philosophy outlied for Customer Support Excellece (CSE). 4

16 Aual Report As part of our CSE efforts, sigificat ivestmets umerous iitiatives ad improved processes, your have bee made towards cotiuously ehacig the Compay s NPS has icreased from 53 percet i ed-user experiece. As a result, the year saw the to percet i Aother opeig of three ew traiig facilities - the Global sigificat iitiative has bee the Commo Dealer Traiig Ceter at Greater Noida, the Cummis Operatig System (CDOS), a Customer Relatioship Comprehesive Techical Traiig facility i Pue ad Maagemet (CRM) platform which will itegrate all the Chhidwara Ceter of Excellece i Madhya aspects of dealer operatios ad iformatio systems Pradesh. Improved service capability owig to these with those withi your Compay, thereby improvig ew facilities will further the depedability quotiet of the way your Compay iteracts with the customer. your Compay. This platform is desiged to deliver a paradigm shift i the overall customer service experiece. The Global Traiig Ceter, i partership with our OEM, Jakso Power Solutios, has bee set up to Your Compay s passio for brigig best-i-class bridge the techology divide by providig products, traslated ito may awards ad comprehesive traiig to techicias workig i our recogitio for Cummis: distributor etwork. This Ceter will provide traiig to For its outstadig cotributios towards approximately 1,000 egieers ad techicias developig the CNG series hybrid system, aually, o a broad rage of Cummis maufactured Cummis was awarded the Tata Motors products. The ew state-of-the-art Cummis Techology ad Iovatio Award Comprehesive Techical Traiig facility i Pue ecompasses the etire rage of products, maufactured ad supported by the Cummis Group i Idia. Built with the objective of providig both theoretical traiig, as well as practical experiece, this facility ecompasses a exclusive statio for filters ad a lube statio from Valvolie Cummis Limited, a joit veture betwee Ashlad Ic. ad your Compay. The Chhidwara Ceter of Excellece i Madhya Pradesh, built i collaboratio with the Cofederatio of Idia Idustry (CII), has bee desiged to impart i-depth kowledge ad uderstadig of latest techologies ad products to people from rural areas, so as to subsequetly absorb them i our dealerships across the coutry. Our progress i CSE is best measured via the Net Promoter Score (NPS) that gives a defiitive idicatio of where our customer loyalty levels stad. Owig to Cummis received the Egieerig Export Promotio Coucil s Natioal Award i the category of Egies, Turbies ad Parts: Large Eterprise, th for the 24 successive year. The Power Geeratio Busiess was preseted the th Silver Award i the 27 Aual Chapter Covetio o Quality Cocept. The Automotive Busiess received the Log Associatio Award for its cotiued support ad associatio sice 2005, by oe of Idia s established O Highway Commercial Vehicle OEMs - Asia Motor Works. Your Compay cotiues to be as passioate about its people as it is about its products ad services. Uderstadig the sigificace of Diversity at workplace, the Compay has bee focusig o improvig i particular, geder represetatio, for may years ow. Receivig the Best Employer for 5

17 Wome i Corporate Idia Award by the WILL Forum Idia (Forum for Wome i Leadership) is the fiest edorsemet of the efforts that your Compay has bee makig i this sigificat area. The WILL Forum bechmarks ad evaluates compaies for their practices ad policies aroud buildig a positive ecosystem for wome, advacemet i career, work-life balace, diversity iitiatives, geder leadership assessmet, leadership commitmet to geder maistreamig ad safety. Cummis is the oly Compay from the maufacturig sector amogst the five wiers i Carig Your Compay cotiues to believe that its purpose icludes carig for its employees, the commuities i which it operates ad the eviromet. I esurig a cleaer, healthier ad safer eviromet for employees, sigificat iitiatives towards ehacig idustrial hygiee were implemeted durig the year. Cotiuig with its commitmet to the commuities ad eviromet, your Compay has established various systems ad procedures to track the impact of the busiess o both these importat aspects. As a result, your Compay has achieved approximately 4 percet reductio i greehouse gases, 2.5 percet reductio i water cosumptio ad 30 percet reductio i total waste disposal sice last year. The success of our iitiatives ca be gauged by the awards received i the Health, Safety ad Eviromet category from Cummis Ic. These iclude the Sustaiable Costructio Award for the recetly iaugurated Power Geeratio facility at the SEZ at the Megasite i Phalta ad a award for Best Practices i Eergy Maagemet to your Compay s Award-wiig practices: Eergy-savig practices such as utilizig abudat atural light o the shop floor ad may more, reiterate our commitmet to health, safety ad the eviromet. The Sustaiable Award for the Power Geeratio facility at Phalta ad the award for Best Practices i Eergy Maagemet coferred by Cummis Ic. recogize these efforts. 6

18 Aual Report our direct recruitmet from campuses. This year, your Compay hired 182 graduates. I order to ehace their experiece ad egagemet with the orgaizatio, a structured year log module called the Youg Maagers Developmet Program (YMDP) has bee istituted. This has helped us arrest attritio i these raks to below 5 percet this year. Our pla is to itroduce similar modules for MBA ad M.Tech hires. We are committed to cotiuous egagemet ad developmet of youg talet, as we view this to be critical to your Compay s log-term success. Last, but a equally importat iitiative uder Hire-to- Develop philosophy ivolves presetig growth opportuities to employees to develop themselves by takig o resposibilities across fuctios ad busiesses. Approximately 312 professioal employees of your Compay moved ito differet roles or fuctios. Collectively, withi the five fully maaged Compaies of the Cummis Group, close to 400 employees trasitioed to ew opportuities. egie maufacturig facility i Pue owig to sigificat savigs i eergy ad reductio of greehouse gases. Demostratig care for its employees, your Compay cotiued to deploy various iitiatives to allow employees to develop, grow, ad pursue log-term relatioships with Cummis. We have a clear Hire-to- Develop philosophy, with multiple iitiatives that develop people from etry to seior levels. Oe such iitiative, called the Global Leadership Developmet Program (GLDP), desiged specifically for seior leaders, focuses o improvig leadership skills i additio to providig Cummis Ic. seior leaders with a isight ito Idia s talet. Now i its secod year, this program had 13 employees graduatig i 2012, geared to take o broader seior leadership roles ad develop ad execute strategies that drive your Compay s profitable growth i a highly competitive global eviromet. A secod iitiative etails sposorig higher educatio The above metioed philosophy rests heavily o i maagemet ad techical streams. This year, effective ad seamless movemet of talet across 106 employees have bee sposored for higher geographies ad busiesses. To facilitate this, we also educatio, at our parter istitutios such as The itroduced Global Positio Profiles this year. These are Kelley School of Busiess at the Idiaa Uiversity i stadardized job profiles for all roles across fuctios the US, the Cummiized IIM-Ahmedabad as well as ad busiesses globally. Besides ehacig our S.P. Jai post graduate maagemet programs ad processes for recruitmet, employee developmet the Masters level program i Egieerig at the ARAI- ad compesatio bechmarkig, we expect this Vellore Istitute of Techology. These employees will program to provide greater visibility to our employees soo be ready to move ito larger leadership roles o the vast variety of opportuities that are preset withi the Compay. withi the etire Cummis Ic. system. The third iitiative etails employig the right talet at the etry level ad developig them for future roles withi the orgaizatio. As a result, over the last couple of years, we have bee gradually icreasig Last year I spoke to you about two leadership developmet iitiatives: the Leadership Culture Series ad Buildig Success i Others. Both these programs provide a uderstadig of good leadership skills 7

19 eeded to facilitate career developmet of immediate to the ext level, that of much higher iclusio ad reportees ad others i the orgaizatio. We have egagemet. While i the past we have made cotiued to cascade both these programs at a chages i physical ifrastructure ad policies that are excellet pace ad mometum. The former reiforces essetial for attractio ad retetio of wome i the the five leadership skills idetified by the orgaizatio orgaizatio, havig adopted a more holistic approach as beig most critical: Coachig & Developig, to geder diversity, we have ow started to coduct Fosterig Ope Commuicatios, Talet Geder Sesitizatio Workshops to eable our Maagemet, Maagig Diversity ad Thikig employees collaborate better with a geder diverse Strategically. We bega cascadig Coachig & workforce, ecourage our wome employees to Developig two years ago. With 250 leaders havig cotribute ad succeed i the orgaizatio to a udergoe this sessio i , we ow have a greater extet ad allow the orgaizatio to leverage total of 800 leaders havig participated i this geder diversity to the maximum. Additioally, your program across all the Group Compaies i Idia, till Compay worked closely with the Govermet ad date. We started cascadig Fosterig Ope sought permissio to allow wome to work i the Commuicatio last year ad have covered close to secod shift o the shop floor. Cosequetly, at the 650 maagers across locatios i Idia. The Buildig Megasite i Phalta, there is close to 30 percet Success i Others Leadership Essetials has bee wome represetatio today. Edorsig regioal specifically desiged for first level leaders. Uder this diversity, your Compay cotiues to hire professioal program, we lauched a module titled Leadership workforce from other regios (East, South ad North) Coversatios. This workshop has so far witessed of Idia. participatio of 225 leaders, teachig tools ad techiques that help them uderstad leadership Cotiuig to stregthe our relatios with the behaviours ad their impact o achievig busiess Associate Uio, we itegrated a mothly icetive results. scheme i the recetly cocluded wage agreemet that rewards various metrics of quality, delivery ad O Diversity i the workplace, better geder ad output. This will positively impact the lives of over regioal represetatio cotiue to be the oes which 700 productio associates at your Compay s largest we have bee focussig o strogly for may years maufacturig plat. The Team Based Work System ow. I am proud to say that our commitmet to see istituted o the shop floor at the Megasite i Phalta wome comprise a large part of our workforce is further ehaces the eviromet that we are visible i all areas of the orgaizatio today. With a committed to providig to our associates percet record represetatio amogst professioal employees across Cummis Group Our efforts to have all employees uderstad ad Compaies i Idia, I am delighted to say that wome commit to the Cummis Code of Busiess Coduct are ow playig a crucial role i cotributig to your ad Treatmet of Others policies cotiue. This Compay s success. remais the core to providig the right eviromet to all our stakeholders, both iside ad outside the Takig this jourey forward, we are ow progressig orgaizatio. 8

20 A fresh approach to work: The ew Office Campus i Pue, desiged to house up to 6,000 employees, itegrates collaborative workspaces that meet various workig styles ad prefereces. Durig the course of the year, we took some time I last year s aual report, I had metioed about the aside to hoour istaces of exemplary allegiace to Office Campus i Balewadi, Pue where all our the six Core Values of your Compay, amely, professioal employees with the exceptio of Itegrity, Deliverig Superior Results, Global egieers would co-locate. This will create greater Ivolvemet, Corporate Resposibility, Iovatio ad syergies betwee your Compay ad all other Diversity, alog with Six Sigma, Customer Support Cummis maaged compaies i Idia. Desiged to Excellece ad Health, Safety & Eviromet. The house up to 6,000 employees, the ew Campus wiers were recogized at the CMD (Chairma ad itegrates collaborative workspaces, which is a Maagig Director) Awards Fuctio, a aual evet sigificat shift from traditioally isolated work spaces, which is ow i its seveth year. Durig this year, our with multiple optios to suit oes workig style ad global Chairma ad CEO, Tom Liebarger, ad I preferece. We view such a work place critical for our hosted the secod Maagemet Coferece ad held Core Values of Iovatio ad Diversity to flourish. a dedicated commuicatio sessio for more tha We propose to start movig to the ew Campus i 300 seior leaders across the Cummis Group i early Idia. This sessio facilitated greater uderstadig ad aligmet to our global strategies ad how they Your Compay cotiued to chaelize its efforts apply to Idia. This has eabled us to cotiue to towards Corporate Resposibility with meaigful, achieve great results for your Compay. sustaiable projects uder the focus areas of Higher 9

21 Educatio, Eergy & Eviromet, ad Local Cummis Idia Foudatio for the first time awarded a Commuity Ifrastructure Developmet. record 100 scholarships, up from 70 last year. Of the Subsequetly, employees across the Cummis Group 100 scholars, 59 are wome. Our egagemet with collectively devoted 40,032 hours to the Every the Cummis College of Egieerig for Wome Employee Every Commuity (EEEC) Program i (CCEW) i Pue, to establish it amogst the top This program requires every employee to devote up to 5 percet of the privately maaged egieerig four hours of Compay paid time to commuity istitutes i Idia, has also bee scaled up. service aually. It is hearteig to see our employees scale up the hours dedicated to improvig the Uder Eergy ad Eviromet, subsequet to commuities, year after year. The umber of hours implemetig the Zero Garbage project i the Katraj dedicated i 2012 is a sigificat icrease over the ward i Pue, work has begu to replicate the project 35,605 hours devoted i the previous year. at the secod ward adopted by your Compay i Additioally, 99 percet of the employees at your Balewadi, where the upcomig Office Campus is Compay cotributed fully ad more to the EEEC located. We are excited about makig a differece to program. the commuities eve as we prepare to relocate ito their eighbourhood. Ad fially, as part of Local Uder Higher Educatio, the Cummis Scholarship Ifrastructure Developmet, your Compay has made Program, which has ow become a tool to eable sigificat i-roads i brigig holistic developmet to studets from ecoomically weak backgrouds to the residets of Nadal, a village i close proximity to pursue higher educatio, expaded its reach. The Phalta. A wiig attitude: Cummis' cotiued egagemet with Cummis College of Egieerig for Wome is reflected i the all-girls team from the college wiig the secod prize i the Society of Automobile Egieers (SAE) Baja the flagship automotive evet for mechaical egieers i Idia. See here is Tom Liebarger, Chairma ad CEO, Cummis Ic., cogratulatig the girls. Commemoratig Cummis 50 years of operatios i Idia, for the first time ever, all our five fully maaged Compaies i Idia collectively executed a commo, atio-wide campaig for sesitizig school studets about the eviromet. With active participatio from 380 employees, we succeeded i egagig with 75,000 studets, from 200 schools across 50 cities i Idia. Titled as Catch them Youg, this project with its expase ad scale had i every sese of the word uleashed the power of Cummis for makig people s lives better. The impact may of our projects have had o improvig the commuities is evidet from the recogitio that has come our way: Cummis received recogitio from the Maharashtra State for our cotributio to the Zero 10

22 Youg mids, big chages: O the occasio of Cummis 50 years of operatios i Idia, 380 employees spoke to over 75,000 studets from 200 schools across 50 cities, sesitizig them about the eviromet. Titled Catch them Youg, this project, with its expase ad scale, uleashed i true sese the power of Cummis for makig people s lives better. Garbage Project piloted at the Katraj Ward i Pue. This project is ow ISO certified. Six projects submitted from Idia wo the 2012 Evirometal Challege from a total of 15 awards give worldwide by Cummis Ic. 109 projects participated worldwide i this aual evet. Note - Iformatio o the may other projects udertake durig the year to improve the eviromet ad commuities has bee published i the Busiess Resposibility Report of this Aual Report. esurig we ever lose sight of our bright future. Above all else, I remai grateful to you for your ustited cofidece i our capabilities. Stayig true to the Visio, Missio, Core Values, ad Persoality of your Compay, I recommit ad rededicate myself ad my etire team at Cummis Idia Limited to cotiue uleashig the power of Cummis to improve the vast umber of lives associated with it. I Closig The year has demostrated that the collective Persoality of beig Decisive, Drive to Wi, Agile, Passioate ad Carig of the 3,590 employees of your Compay, eve i times whe busiess coditios were ot as favourable, has resulted i deliverig superior results i a holistic maer. It is ideed my privilege to lead ad serve a team that is so committed. I remai thakful to our Board of Directors, whose support, experiece ad foresight is helpig us maage the short-term challeges, while Sicerely, Aat J. Talaulicar 11

23 BOARD OF DIRECTORS Aat J. Talaulicar Chairma ad Maagig Director Atoio Leitao Director Edward Pece Director James Kelly Director Nasser Mujee Director Patrick Ward Director P. M. Telag Director P. S. Dasgupta Director Rajeev Bakshi Director Veu Sriivasa Director J. M. Barrowma Alterate Director to Edward Pece Pradeep Bhargava Alterate Director to Patrick Ward 12

24 BANKERS : State Bak of Idia HDFC Bak Limited Citibak, N.A. Bak of America AUDITORS : PRICE WATERHOUSE Chartered Accoutats th Mutha Towers, 5 Floor, Suite No. 8, Airport Road, Yerwada, Pue REGISTRAR & TRANSFER AGENT : Lik Itime Idia Pvt. Limited C-13, Paalal Silk Mills Compoud, L.B.S. Marg, Bhadup (West), Mumbai Phoe : (022) Fax : (022) Cummis Idia Limited Regd. Office : Kothrud, Pue Phoe : (020) , Fax : (91) Website : 13

25 Fiacial Summary - 5 Years ` Crores Particulars Total icome 4, , , , , Raw material 2, , , , , Employee cost Mfg. exps. ad overheads Adm.,sellig ad other exps Fiace Cost Depreciatio Net profit before tax Exceptioal Item Tax provisio o icome (Net of Excess/Short provisio for prior years) Net profit after tax Divided Additioal Icome tax o divided Earigs i foreig exchage 1, , , , Divided % * Earig per share (Face value of ` 2 ) # Previous year's figures have bee regrouped/reclassified wherever ecessary. * Divided percetage for FY is calculated based o the ehaced share capital. # Earigs Per Share (EPS) have bee restated for the previous year's, i accordace with Accoutig Stadard (AS) 20 Earigs Per Share" otified uder Sectio 211(3C) of the Compaies Act,

26 52d Aual Report DIRECTORS REPORT Your Directors have pleasure i presetig the Fifty Secod Aual Report ad the Audited Accouts of the Compay for the year eded March 31, FINANCIAL RESULTS : Durig the fiacial year , et reveue from operatios was ` 458,938 Lacs as compared to ` 411,722 Lacs durig the previous year (11% higher). Exports ad other foreig exchage earigs were at ` 131,597 Lacs as compared to `123,616 Lacs durig the previous year (6% higher). Profit after tax icreased to ` 76,411 Lacs from ` 59,127 Lacs recorded for the previous year (29% higher) (` i Lacs) (` i Lacs) APPROPRIATION OF PROFIT : Profit before taxatio 105,133 82,463 Net Profit for the year after tax but before tax o proposed divided 76,411 59,127 Tax o divided 6,017 4,947 Divided 36,036 30,492 Trasferred to Geeral Reserve 7,641 5,913 Balace carried to Balace Sheet 124,857 98, DIVIDEND : Your Directors have recommeded a fial divided of ` 8/- per equity share of ` 2/- each fully paid-up, i additio to the iterim divided of ` 5/- per equity share of ` 2/- each fully paid declared o Jauary 31, 2013, aggregatig to ` 13/- per equity share of ` 2/- each fully paid-up share for the year eded March 31, JOINT VENTURES : a) Cummis Research ad Techology Idia Limited (CRTI) : The et reveue from the operatios of Cummis Research ad Techology Idia Limited (CRTI), a 50:50 joit veture betwee Cummis Ic., U.S.A. ad your Compay, for the year eded March 31, 2013 was ` 8,512 Lacs as compared to ` 6,550 Lacs durig the previous year (30% higher). CRTI has a Research ad Techology Cetre at Pue ad is egaged i providig Iformatio Techology eabled Mechaical Egieerig developmet services primarily to Cummis Ic., its subsidiaries ad joit vetures i all parts of the world. b) Valvolie Cummis Limited (VCL) : VCL,a 50:50 joit veture with Valvolie Iteratioal Ic., U.S.A., a global leader i lubricats ad egie oils geerated et reveue of ` 96,897 Lacs from its operatios for the year eded March 31, 2013 as compared to ` 83,900 Lacs durig the previous year (15% higher). c) Cummis SVAM Sales & Service Limited (CSSSL) : CSSSL is a 50:50 joit veture icorporated o Jauary 17, 2012 with SVAM Power Plats Private Limited, a Dealer of your Compay. CSSSL focuses o sales ad service of Cummis egies ad geerator sets i parts of Norther Idia. The et reveue for the year eded March 31, 2013 (beig the first year of operatios of CSSSL) was ` 6,209 Lacs ad was profitable. 15

27 4. INITIATIVES AT PHALTAN : Your Compay cotiues with its expasio iitiatives at the Megasite i Phalta with the followig projects: The Phalta Midrage Egie Upfit Ceter (PMUC) was iaugurated at the Megasite, Phalta i March, This is the fifth facility of the Cummis Group of Compaies i Phalta. The Upfit Ceter has bee established to assemble, upfit, test ad pait diesel ad atural gas egies, both mechaical ad electroic, of B ad L series. I additio, the facility will also maufacture C series egies. This etire rage will serve the power geeratio, idustrial ad o-highway applicatios. This facility will have a aual capacity of 24,000 egies ad shall cater to the requiremets of Costructio, Marie, Compressor ad Fire Pump sectors, as well o highway atural gas egies. A facility for Power Geeratio Busiess Uit to maufacture geerator sets ad geerator drive egies i the low ad medium kilowatt rage for export markets (with a matured capacity of 51,000 uits by 2016) is expected to commece operatio durig the secod quarter of 2013 i the MIDC Special Ecoomic Zoe. The Idia Parts Distributio Ceter (IPDC) facility, which became operatioal i the third quarter of , completed its ramp up i the year eablig Cummis to better fulfill the demad for aftermarket Parts i the domestic market. The first year of operatios was marked by several achievemets icludig becomig best-i-class for shipmet quality across all Cummis PDCs, improvemet i delivery, reductio i backorders ad improved fulfillmet for Egie Dow Orders. Your Compay s facility at Dama which catered to B series egie based geerators, closed dow its operatios w.e.f. August 3, 2012, due to the lowerig demad i market ad reductio i the subsidies to be availed of, at the facility. The closure of the said facility did ot have ay material impact o the busiess of your Compay as the demad for this product is beig catered effectively from the facility located at Piragut, Pue. 5. INDIA OFFICE CAMPUS (IOC) : Your Compay had etered ito a Uderstadig for the purchase of a te acre Office Campus at Balewadi, Pue (Idia Office Campus/IOC). The IOC shall house all professioal employees located at various offices i Pue with the exceptio of desig/developmet egieers who will be based at the Kothrud campus techical ceter, ad maufacturig support employees who will be located i the plats. Your Compay proposes to let out surplus office space, if ay, after housig all of its exempt employees to other Cummis Group compaies. This iitiative would offer the distict advatage of co-locatig most of the Cummis Group professioal employees at oe locatio ad derive syergies of co-locatio. The total capital expediture for IOC is about ` 73,000 Lacs. The same is expected to be ready for occupatio i phases commecig early MANAGEMENT DISCUSSION & ANALYSIS / CORPORATE GOVERNANCE REPORT : As per clause 49 of the Listig Agreemet with Stock Exchages, the Maagemet Discussio & Aalysis Report ad the Corporate Goverace Report are aexed ad form part of the Directors Report. 7. CODE OF CONDUCT COMPLIANCE : A declaratio siged by the Chairma ad Maagig Director affirmig compliace for the Fiacial Year with the Compay s Code of Coduct by the Directors ad Seior Maagemet as required uder Clause 49 of the Listig Agreemet with Stock Exchages, is aexed ad forms part of the Directors Report. 8. DIRECTORS RESPONSIBILITY STATEMENT : I pursuace of the provisios of sectio 217 (2AA) of the Compaies Act 1956, your Directors make the followig statemet: (i) that i the preparatio of the aual accouts, all applicable accoutig stadards have bee followed ad there was o material departure from the accoutig stadards; 16

28 52d Aual Report (ii) (iii) (iv) that the Directors have selected such accoutig policies ad applied them cosistetly ad made judgmets ad estimates that are reasoable ad prudet so as to give a true ad fair view of the state of affairs of the Compay as o March 31, 2013 ad of the profit for the period April 1, 2012 to March 31, 2013; that the Directors have take proper ad sufficiet care for the maiteace of adequate accoutig records i accordace with the provisios of the Compaies Act 1956, for safeguardig the assets of the Compay ad for prevetig ad detectig fraud ad other irregularities; ad that the Directors have prepared the aual accouts o a goig cocer basis. 9. CONSERVATION OF ENERGY : Your Compay cotiued to udertake various eergy coservatio iitiatives durig the year, some of which are give below: Egie Busiess Uit Plats (Kothrud ad Pue - Nagar Road) Reductio i compressor eergy cosumptio by efficiet operatio, leakage elimiatio, use of air gus, demad based pressure cotrol, etc. by 33%; 34% reductio i power cosumptio of pump houses by demad based pump rpm cotrol automatio usig PLC & automatio; NH/NT egie assembly eergy cosumptio was reduced by 22% by automatio of vetilatio blowers, lightig, sycool pump ad AC plat; Efficiet load sharig betwee the distributio trasformers leadig to eergy savigs; Six sigma project completed successfully for eergy savig i the Cylider Head machiig sectio; Maitaiig uity power factor by reducig lie eergy losses; Use of atural sky lights o roofs to esure miimal use of lights o the shop floor durig day time; ad Use of VRV air coditioers for the admiistrative buildig. Power Geeratio Busiess Uit Plats, Piragut Use of LED light fittigs i office wash rooms; Use of motio sesors i rest rooms to reduce electricity cosumptio; Pull cords istallatio at offices to reduce the lightig load cosumptio; Use of 5 star rated air coditioers for groud floor & first floor at office area; Use of eergy efficiet T-5 tubes i the shop floor to achieve eergy savigs; ad Use eergy efficiet HVLS fa for shop floor vetilatio. Distributio Busiess Uit Plats (Eradwae ad HHP Rebuild Ceter, Phalta) Use of APFC (Automatic Power Factor Correctio) pael for power factor correctio at the load ed; Alterate switchig off, of the street lights after duty hours; Use of T5 tubes with electroic ballast for the shop floor, street ad office area lightig; Maitaiig a uity power factor at the HHP Rebuild Ceter ad improvig the power factor at the Eradwae, Pue plat; Use of sky lights o roofs to esure miimal use of lights o the shop floor durig day time; Istallatio of EM6 cotroller for cotrollig of air compressors (auto switchig off the air compressors); Use of dry type trasformers to miimize eergy loss; Use of VRV air coditioers for Admiistrative Buildig at Phalta thereby achievig eergy savigs; 17

29 Load reductio i admiistratio buildig at Eradwae, Pue by localized lightig at work statios ad redesigig of geeral lightig as well as atural lightig; Pull cord switches for admiistratio block lightig; Reductio of AHU water pump Water supply to AHU give from the test cell pumps; Discotiued use of 30 HP Air compressor & istead use of portable air compressor of 5HP at Eradwae site; ad Icreased AHU prevetative maiteace frequecy resulted i to better efficiet with power savig. Parts Distributio Ceter, Phalta, Maharashtra Use of motio activated sesors i the rackig aisles ad the office area; Use of sky lights i the plat to reduce eed for lightig durig daytime; Use of motio sesors i rest rooms to reduce electricity cosumptio; Power off schedule & surprise audit through security team & safety poit leaders has esured optimum usage of available electrical equipmet; Pull cords istallatio at offices to reduce the lightig load cosumptio; Use of VRV air coditioers for the admiistrative block; Use of eergy efficiet T-5 tubes at ware house to achieve eergy savigs. IMPACT OF THE ABOVE MEASURES : The above iitiatives resulted i savigs of about ` 237 Lacs i additio to Greehouse Gas (GHG) emissio reductio by 2,552 tos durig the year. The eergy uits saved durig the year were about 2,721,251 kwh. 10. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION : With a view to satisfy legislative, customer ad market eeds, your Compay is committed to itroducig ew products ad improvig existig products to have better performace levels, lower life cycle costs, excellet safety ad recyclability characteristics ad meet striget emissio orms. The Techical Ceter of your Compay cotiues i its edeavour to idigeize compoets ad develop the ext geeratio of compoets ad systems i collaboratio with the paret compay - Cummis Ic., to reduce costs, improve fuel efficiecy, improve safety, ehace recyclability, ehace performace ad durability of its products. I order to improve techical productivity, ew methodologies ad techologies have bee itroduced ad ehacemets i capabilities are beig cotiuously pursued to reduce the costs associated with ew product developmet ad customer support. Cotiued implemetatio of Six Sigma iitiatives resulted i sigificat cost savigs ad improved operatig efficiecy. To esure the health ad safety of employees, the Techical Ceter also pursued several iitiatives to help drive towards the goal of zero recordable icidets. A. New Product Developmet: The followig ew Products were developed as part of the above iitiatives durig the year: 1. Emissios recipe to meet BSIII, BSIV ad OBDII emissio regulatios for Automotive ratigs. 2. Advaced BSIII electroic products to ehace competitiveess i the Automotive segmet ad drive towards lower fuel cosumptio ad higher power desity product offerigs for customers. 3. Multiple statioary egie families to meet the upcomig CPCB II Power Geeratio regulatios up to 800 kw. 4. Key Idustrial egie product families to support the icreasig Idustrial Busiess. 5. Key Marie egie product families to support the icreasig Commercial Marie Busiess. 18

30 52d Aual Report Fudametal electroics capability to help develop products that comply with OBD II (O Board Diagostics) legislatio. 7. Further ehacemet of o-diesel product developmet capability. 8. Improved capability i itake air characteristic measuremets to ehace uderstadig ad cotrol of the combustio process. B. Beefits derived as a result of the above activities are: 1. Ehaced developmet capabilities through use of electroic tools ad simulatio software to cotrol the egie performace ad combustio process. 2. Ehaced capability to tailor egie desigs to improve the value propositio for customers through deliverig superior power output, fuel ecoomy, trasiet respose ad reduced emissio. 3. Product ad compoet availability to meet the ew emissio orms ahead of implemetatio. 4. More safe, recyclable, reliable, durable ad performace efficiet products ad critical compoets were made available for the customers. 5. Compoet idigeisatio capability was improved through ehaced test capability, rig test ad flow bech developmet ad availability. 6. Sigificat ehacemets i measuremet capability were made to pursue busiess opportuities i odiesel markets to serve both the rural ad iteratioal commuities. C. Future plas iclude: 1. Developig local fit for market solutios to meet upcomig emissio regulatios, local ad rural market eeds. 2. Techological iovatio to add value to the products i the areas of alterate fuels, recycle / re-use ad hybrid egies. 3. Cotiued expasio of the product rage to serve the local ad global market eeds. 4. Providig eergy efficiet solutios to reduce carbo foot prit ad improve recyclability. 5. Cotiued focus o idigeizatio ad parterig with suppliers for waste elimiatio iitiatives. 6. Alterate source developmet for various egie compoets. 7. Expadig the coverage of our egie developmet for the Power Geeratio market. D. Your Compay cotiues to draw beefits from Cummis Ic. s techical capabilities ad advaced techology. With cotiued support from Cummis Ic., your Compay is committed to develop advaced fuel efficiet ad emissio compliat egies that work o a variety of fuel sources ad comply with forthcomig domestic ad global emissio regulatios, to help reduce Greehouse Gas emissio whilst also eablig the products to deliver superior performace, reliability, durability ad recyclability. E. Expediture o R & D: The total expediture o R & D was as follows: (` i Lacs) ( ` i Lacs) Capital 812 1,023 Recurrig 3,959 3,834 Total 4,771 4,857 Total R&D expediture as a percetage of total sales turover 1.04% 1.18% 19

31 11. FOREIGN EXCHANGE EARNINGS AND OUTGO : Durig the year uder review, your Compay exported 5,581 egies ad 6,715 geerator sets thereby achievig total export earigs of ` 127,035 Lacs. Foreig Exchage earigs ad gross outgo (icludig royalty, divided etc.) durig the year uder review were as follows : (` i Lacs) (` i Lacs) (a) Earigs 131, ,616 (b) Outgo - Raw Materials/compoets 51,308 45,193 - Capital Equipmet 623 1,918 - Others 26,554 26, PARTICULARS OF EMPLOYEES : 78,485 73,911 Iformatio as per Sectio 217 (2A) of the Compaies Act, 1956 (the Act ), read with the Compaies (Particulars of Employees) Rules, 1975, forms part of this Report. As per the provisios of Sectio 219(1)(b)(iv) of the Act, the Directors Report ad Accouts are beig set to the Shareholders excludig the statemet givig particulars of employees uder Sectio 217(2A) of the Act. Ay Shareholder iterested i obtaiig a copy of the statemet, may write to the Compay Secretary at the Registered Office of the Compay. 13. DIRECTORS : Mr. Aat J. Talaulicar was iitially appoited as the Maagig Director of the Compay for a period of 5 years from July 29, 2003 to April 24, 2008 ad the subsequetly re-appoited for a further period of 5 years from April 25, 2008 to April 24, At the Board Meetig held o Jauary 31, 2013, Mr. Aat J. Talaulicar was re-appoited as Maagig Director of the Compay for a further period of five years effective April 25, 2013, subject to approval of the Cetral Govermet ad the Shareholders. Durig the year, Mr. Sea Milloy, Alterate Director to Mr. Joh Wall, ceased to be a Director of the Compay effective July 28, 2012 upo arrival of Mr. Joh Wall, Origial Director, to the State of Maharashtra. Mr. Joh Wall, Mr. B. H. Reporter ad Mr. Mark A. Levett stepped dow as Directors of the Compay w.e.f. August 2, 2012, February 1, 2013 ad May 9, 2013 respectively. O accout of cessatio of Mr. Mark A. Levett as Director of the Compay, Mr. J.M. Barrowma, Alterate Director to Mr. Mark Levett also ceased to be a Director. Mr. Atoio Leitao, Mr. Prakash M. Telag ad Mr. Edward Phillip Pece were appoited as Additioal Directors of the Compay w.e.f. August 3, 2012, Jauary 31, 2013 ad May 10, 2013, respectively. Mr. J. M. Barrowma has bee appoited as Alterate Director to Mr. Edward Phillip Pece w.e.f. May 10, I accordace with the provisios of the Compaies Act, 1956 ad the Articles of Associatio of the Compay, M/s. James Kelly, Veu Sriivasa ad Rajeev Bakshi, Directors of the Compay, retire by rotatio ad are eligible for re-appoitmet. 14. INDUSTRIAL RELATIONS : Idustrial relatios at the Compay s plats cotiue to be cordial. 15. AUDITORS : The Auditors, Price Waterhouse, Chartered Accoutats, retire ad hold office util the coclusio of the esuig Aual Geeral Meetig ad are eligible for re-appoitmet. 20

32 52d Aual Report COST AUDITORS : Your Compay appoited M/s Parkhi Limaye & Co., Cost Auditors, Pue as its Cost Auditors for the year The Cost Audit report ad the Compliace Report for the year i the revised format, which was due o Jauary 31, 2013, was filed with the Miistry of Corporate Affairs o December 25, 2012 for the Compay. O behalf of the Board of Directors, Pue: May 10, 2013 Aat J. Talaulicar Chairma & Maagig Director 21

33 Maagemet Discussio ad Aalysis Report (Aexure to Directors Report) 1. Idustry Structure ad Developmets Ecoomic Treds ad Implicatios After strog growth i the past few years FY 2012 ad 2013 showed moderate GDP growth of 6.2% ad 5.0%, respectively. The slowdow i growth was largely drive by a lack of supportive policy measures by the Govermet. While ivestor ufriedly actios such as likely itroductio of GAAR ad trasfer pricig resulted i reductio of FDI ad FII, govermet iactio ad restrictive moetary policies slowed dow local ivestmets. The depreciatio of the rupee, the declie of the Europea ad US markets ad delayed / ueve mosoo further exasperated the situatio. I the midst of a slowdow, Idia also saw its fiscal deficit risig to 5.3% for FY 2013 ad curret accout deficit risig to the % rage. However, i the secod half of FY , the govermet took some measures such as itroductio of FDI i retail ad aviatio, postpoemet of GAAR, fuel subsidy reductio, etc. to support growth. With improvemets i FII & FDI flows, ivestor cofidece ad ivestmet climate appears to be set to perhaps improve. Additioally, measures take by the govermet to improve flow of agri credit are expected to drive proactive sowig that could boost growth i agriculture sector to 3.0% i FY Improvemet i the idustrial sector could be aided by a icrease i govermet approvals for project ivestmets that are curretly i the pipelie ad recovery i exports is also expected as the global markets recover gradually. Iflatio too has started to moderate ad is expected to be i the rage of 6-6.5% thus allowig RBI to cut iterest rates to boost idustrial productio. Give all of these factors most aalysts predict that the ecoomy has bottomed out ad most sources predict that the GDP for FY is likely to be aroud 6%. I the log term, Idia s growth story remais itact, supported by a positive demographic divided, rapid urbaizatio ad icreasig growig domestic cosumptio. Post the electios i 2014, it is likely that the ew govermet will take actios to revive growth. 2. Opportuities ad Threats Key Opportuities Power Geeratio : The average eergy deficit i Idia has bee 9.1% with peak power deficit of 9.5% despite a record power capacity additio of aroud 12 GW i the last year. However, utilizatio of power capacity has bee comig dow sigificatly because of factors like de-allocatio of coal blocks leadig to coal shortages, delayed gas outputs from KG D6 basi ad water shortages i Cetral ad South Idia. Additioally, the cotiued losses of the State Distributio Compaies (DISCOMs) ad high distributio losses drive are likely to cotiue uless sigificat measures are take aggressively to privatize distributio, ratioalize 22

34 52d Aual Report power tariffs, reduce free power ad ivest i ifrastructure. However, most of the actios seem ulikely i the short term give the impact of state level politics o major power distributio issues. With the GDP recoverig i FY ad more proactive measures to support growth, private cosumptio is expected to improve resultig i cotiued power deficit which would drive the growth of the geset market. Sectors such as Maufacturig, Commercial ad Residetial realty, IT & ITES ad Services are expected to drive the growth of geset demad. The ext stage of emissio orms are most likely to come ito effect i FY , ad will provide a opportuity to itroduce ew, lower emissios diesel geerator sets i the market. This is expected to sigificatly chage the competitive ladscape. Idustrial : The icrease i budget allocatio towards ifrastructure (road etworks, buildig of ew ports, idustrial corridors) ad other measures aouced i the recet budget will help i the overall ifrastructure developmet i the medium term (15 to 18 moths timeframe). This implies that the costructio equipmet idustry will grow at a 7 to 8 % sice the effect is likely to be felt with a lag due to the curret high levels of idle ivetory i the market. Your Compay ejoys strog busiess relatioships with the domestic as well as global costructio equipmet maufacturers ad is well positioed to serve the eeds of this sector. With the focus o ifrastructure, the cemet sector is expected to boost the demad for miig of limestoe which will icrease the demad for miig equipmet. To address the prevailig demad-supply gap i the power sector, the govermet plas to ecourage public private partership projects. The acute fuel scarcity facig power projects, may ot oly result i higher demad for miig equipmet, but is also likely to improve busiess prospects for shutig ad freight locomotives. The Rail budget for FY proposes icreased outlay with focus o safety, moderizatio ad fuel efficiecy. This idicates a rise i demad for egies for Diesel Electric Multiple Uits (DEMU), Power Car ad track maiteace machiery applicatios, thus creatig additioal opportuities for your Compay. With the icreasig populatio ad GDP growth, Idia s eergy eeds are o the rise. As a part of the Govermet iitiative to boost Idia s eergy security, there is a focus o oil ad gas exploratio ad productio ad this creates opportuities for your Compay to explore demad for its egies used i oil ad gas exploratio, productio ad distributio applicatios. A large umber of Costructio ad Compressor OEMs pla to establish Idia as their equipmet maufacturig hub ot oly to serve the Idia market but also to serve the Middle East, South East Asia ad Africa markets. This will provide a opportuity for your Compay to leverage its global presece. Your Compay is committed to stregtheig its partership with Idustrial OEMs by workig with them i itroducig ew applicatios, drivig a reductio i the TCO (Total Cost of Owership) of vehicles, ehacig our value propositio i terms of cost efficiecy, faster delivery, ad improvig lead time through Customer Focused Six Sigma (CFSS) projects. Automotive : The M&HCV market (Medium ad Heavy Commercial Vehicles - GVW >7.5 To) shrak by 26% i FY12-13 over the previous year. This was maily drive by lower GDP growth ad further impact of fuel subsidy reductio o diesel ad a poor mosoo. The market sceario cotiues to be ucertai. However, the market is expected to have see the worst ad the sceario is expected to improve slightly based o the ecoomic revival backed with the ifrastructure developmet ad ecoomy improvig owig to budget iitiatives alog with a positive outlook of a good mosoo. 23

35 The M&HCV space has see the etry of ew players thereby icreasig competitio. I the curret situatio of a shrikig market, this has led to the pheomeo of discoutig i the market which is causig some market share chages. Durig the year we have see some ew product lauches which might chage the dyamics withi the M&HCV space. The share of 4 cylider egies i the M&HCV space is expected to icrease. Your Compay s product rage, icludig both mechaical ad electroic products, is available for OEMs to meet their busiess ad regulatory requiremets. Your Compay is expected to maitai its strog positio i the market with its portfolio of products. Your Compay cotiues to ivest i the future o products that would improve the market share i the loger term. With the promised ew idustrial corridors, smart cities, bigger role of private firms i coal, a regulator for disputeridde highway sector ad ivestmet i costructio ad ifrastructure sector i this year s budget, it is expected that the automotive market sector would revive i the medium term. A 14% hike i allocatio to the defese sector is also expected to help icrease demad for your Compay. Distributio : Emissio regulatios (CPCB II orms) ad migratio to electroic egies is likely to improve the opportuities for the Distributio Busiess through icreased sales for rebuilt egies ad electroic parts. Improved customer reach, ehaced etwork capabilities ad cotiuous improvemet of service delivery ad quality remais the key to drive profitable growth through Customer Support Excellece. Cummis is cotiuig to ivest heavily i ifrastructure to support log term growth. Oe major iitiative is itroductio of a Commo Dealer Operatig System (CDOS) which will eable better data ad iformatio visibility across the dealer etwork ad cetrally by Cummis. Cummis is also cotiuig to ivest i developig traiig ceters across the atio to esure well traied techicias who will provide state of the art support to Cummis products. The Distributio Busiess has also grow ew lies of busiess i its Cosumer Busiess sector by offerig automotive, idustrial ad power geeratio batteries. Exports : With last years iitiative to improve upo O-time Delivery ad offer reduced leadtimes for our global customers, your Compay was able to improve the cofidece, which will eable the Compay to garer goodwill i terms of ew busiess opportuities i the future as well. I the log ru, the demad for export of the Compay s product portfolio is expected to remai strog. The Compay has idetified sigificat ew busiess opportuities for Heavy Duty ad High Horsepower Egies ad Parts exports. Seed uits i ew geographies have bee supplied; supplies to these ew territories will icrease over the comig years. Key Threats Accompayig the growth is a set of challeges. The revival of the ecoomy is largely depedet o the govermet s push for ecoomic reforms which have bee slow to come. There is cotiued risk of iflatio ad therefore high iterest rates (to curb iflatio) dampeig idustrial activity ad thus Idia s growth mometum. While all sectors are likely to be impacted, the demad i Costructio ad Commercial Marie sectors are likely to be most affected. Margi pressures are expected to cotiue with icreased commodity cost ad also cost efficiecy drives beig udertake by customers. 24

36 52d Aual Report Low liquidity i the market is causig some delay i projects, thereby impactig the growth mometum. Leadig iteratioal players are makig their foray ito Idia. Private players are also eterig PSU domiated sectors like miig ad exploratio which is likely to raise competitive itesity. Slow global ecoomic coditios have impacted the demad for egies across all egie families ad while we are tryig to explore ew sales aveues through ew busiess iitiatives, the ucertaity over the prologed slowdow is expected to cotiue to impact export reveues. 3. Product-wise Performace Power Geeratio : Higher power deficits, especially i South Idia, propelled power geeratio busiess i FY ad domestic sales i FY icreased 26% over FY Despite a slowdow across developed ecoomies ad itesifyig Euro Zoe crisis, low kilowatt geerator exports icreased 88% due to ew product itroductios such as (40-75kVA) S3.8 series ad (80-125kVA) 6BTA5.9 series. Idustrial : Reveue i the Idustrial busiess dropped 9% as compared to the previous year maily due to the drop i sales i the Marie ad Miig segmets. Sales of egies ito the Compressor segmet grew 16% due to the sustaied demad i the water well rigs due to deficiet mosoo coupled with a dip i the water table ad a shift towards higher capacity ode compressors. Marie egie sales dropped 49% o accout of postpoemet / defermet of projects due to a fiacial cruch at shipyards resultig from higher iterest rates, currecy devaluatio ad ba i miig activities i Karataka & Goa. Sales to the miig sector declied 44% propelled by the drop i demad for the dump truck market. Sales to the costructio sector remaied flat as compared to previous year, owig to a sharp declie i demad for costructio equipmet o accout of high iterest rates ad liquidity cruch. However, your Compay was able to reduce the impact o sales by icreasig market share ad developig ew applicatios / busiess relatioships. Automotive : Your Compay followed the decliig market tred i FY with volume decliig 36%. Its market share shruk 7%, partially because of the market mix chage i the segmet i which your Compay holds the leadership positio. However, your Compay cotiued to successfully serve its major customers. Your Compay is expected to perform better by acquirig ew customers ad cotributig to the growth of the existig oes. Distributio : Distributio Busiess witessed a growth of 18.4% i FY , with major growth comig from ew egies ad recoditioed parts ad egie offerigs. Exports : Sales witessed growth i the first quarter; however i subsequet quarters, the demad for export products declied due to global ecoomic slowdow. Your Compay supplied a record value of egies for Marie applicatios i global markets durig the year. 25

37 Your Compay expaded the parts portfolio for exports, providig a opportuity for the Compay to icrease the cotributio i this sector i the comig years. New Busiess Iitiatives Power Geeratio : With iauguratio of a dedicated Export facility at the Megasite SEZ i the curret fiacial year, your Compay is well o its way to fulfill its potetial as a domiat global hub for low horsepower geerators. Idustrial : Your Compay executed ad shipped out a prototype egie for the Ed-O-Geeratio Load for Rail Power Car applicatio. This will help the Railways substatially improve their operatioal efficiecy ad cost. Your Compay was also able to develop value propositios for ew Costructio applicatios such as Fork Lifts, Skid Steer Loaders ad Backhoe Loaders ad also developed ew relatioships with various Costructio OEMs. I lie with the shift towards higher capacity Compressors, your Compay was able to seed the 19 liter egie i the Water Well Compressor sector with all major OEMs both for domestic ad export market eeds. Your Compay supported its OEM parters by developig various equipmets powered with Cummis egies i Compressor ad Costructio sector for exportig to various coutries i Africa, Middle East ad Korea. Your Compay captured ew busiess i the High Horse Power sector by positioig value packages i Rail (AC DEMU), Marie & Pump sector. Your Compay has coected with oe of our major Miig OEM to develop the idigeous higher toage dump trucks with our 50 & 60 liter egies. Your Compay bagged breakthrough orders for Offshore Craes & Offshore Emergecy Gesets. This marks a etry ito a utapped market i Oil & Gas sector for your Compay. Your Compay was able to develop several ew applicatios for the Defese sector like Couter Mie Flail ad Field Artillery truck applicatios with the 15 liter egies. Your Compay was able to ship the first 60 liter egie i the Idia Mai Propulsio marie egie market (Tug Applicatio). This will ope up ew market opportuities for your Compay i this sector. Automotive : Your Compay is explorig busiess opportuities with ew OEMs that are plaig to eter the Commercial Vehicle Market i Idia. Your Compay is also cosiderig leveragig relatioships with its existig customers for ew solutios. Distributio : To ehace the customer service capability ad capacity, Distributio Busiess Uit lauched three ew traiig facilities durig FY for our Service Egieers ad customers. These are Global Traiig Ceter i Noida, Cummis Comprehesive Techical Traiig facility i Pue ad the Chhidwara Cetre of Excellece i Madhya Pradesh. The three facilities are ehacig the techical capability of the Compay ad are expected to pave the way for additioal reveue ad profitability through improved customer support. Exports : As part of the iitiative to add ew geographies, your Compay supplied its first egies to Lati America which will help cosolidate ad diversify regioal busiess risk. 26

38 52d Aual Report I a iitiative to leverage the available capacities, your Compay started export of compoets to various Cummis egie maufacturig facilities ad after-markets across regios. This helped compesate part of the loss i reveue due to the declie i volumes i global egie demad. Achievemets Power Geeratio : Your Compay received the first CPCB-II orders of gesets ( kva) from DMRC ad cotiues gettig such major orders. Groud work o producer gas geset doe i FY seems to be yieldig results with major orders from gasifier maufacturers. Bulk orders were received from key distributors i Africa & LAO Regios. Idustrial : As part of the iitiative of buildig capacity ahead of demad, the state of the art facility - Phalta Megasite Upfit Ceter was set up ad iaugurated at Phalta for the tailorig of our Midrage egies to meet the customer eeds for our idustrial ad automotive gas egies ad cater to costructio, compressor, marie ad fire pump markets. A leadig OEM i the Costructio equipmet sector has coferred a Certificate of Hoor o your Compay for Corporate Resposibility durig the year Your Compay was able to develop ad certify the 28 liter egie with respect to IMO Tier II emissio orms. This local value propositio will be used to serve both our domestic ad global eeds i the marie segmet. Your Compay was able to ship the first 60 liter egie i the Idia Mai Propulsio marie egie market (Tug Applicatio). This will ope up ew market opportuities for your Compay i this segmet. Your Compay was able to successfully repower the armored recoaissace wheeled vehicle - BRDM i associatio with the Miistry of Defese. Your Compay was able to successfully seed the 4 liter egie i the BMP Dozer for powerig the dozig applicatio of the ifatry combat vehicle. This vehicle was icluded i this year s Republic Day Display Parade at New Delhi. Automotive : CNG Series Hybrid Egies : Your Compay was awarded with the Techology ad Iovatio Award by Tata Motors for its support i the CNG Series Hybrid Project. Product Excellece : Your Compay set a milestoe by demostratig 60k kilometer oil drai iterval with a mechaical egie ad lauch of ew spark plug with 3.5 times the life spa tha the origial oe. Customer Support Excellece : Your Compay itroduced the cocept of Net Promoter Score for oe of its key customers for the first time ad would cotiue this approach of quatifyig customer loyalty to serve its customers better. Your Compay was awarded with Log Associatio Award for its cotributio to growth of oe of its OEM customers. 27

39 Distributio : Distributio Busiess Uit lauched a ew retail chael for sales ad service of low kva gesets. The ew chael is beig developed with a itet of providig a oe stop shop for all customers eeds, thereby, ehacig the total customer experiece. With a cocerted effort to drive Customer Service Excellece, Distributio Uit was able to achieve sigificat improvemet i the customer satisfactio levels - the Net Promoter Score grew from 61.1% to 68.6%. Exports : Your Compay received the Egieerig Export Promotio Coucil s Natioal Award For Excellece i Exports for the year The Award was received i the category of Egies, Turbies ad Parts: Large Eterprise. 4. Outlook ad Iitiatives for the Curret Year ad Thereafter Power Geeratio : With the revival of demad i key sectors like Idustrial ad Ifrastructure, the log term demad outlook for diesel geerators is expected to remai high. With the Govermet aoucig a phased icrease i diesel prices to elimiate the diesel subsidy ad with CPCB implemetig more striget evirometal orms i the curret fiacial year, your Compay is positioed favorably as pioeers i producig egies with higher fuel efficiecy ad cleaer techology. Idustrial : With the growig middle class base, favorable demographics, risig disposable icome ad cosumptio levels, ad growig corporate sector icludig service ad idustry, the outlook remais positive for the Idustrial Busiess, more specifically the Costructio segmet i the medium to log term. The plaed ivestmets ad focus o ifrastructure will certaily help revive the ecoomy; however the ucertaities associated with the ecoomy cotiue to threate our growth targets i the short term. Your Compay is well egaged with the global ad domestic OEMs to capture ew busiess opportuities i Costructio ad Compressor for both domestic & export market eeds. Your Compay is i a good positio to actively support ad gai from Idia Railways focus o icreasig safety, improvig maiteace fleets, ad moderizig & itroducig high speed ad high capacity equipmet. Your Compay plas to explore utapped opportuities i both Oshore & Offshore Oil & Gas sectors as well as make iroads ito the Defese egies market by capturig both ew ad repower opportuities. Automotive : With ivestmets i ifrastructure developmet ad the ecoomy, the commercial vehicle sector is expected to revive particularly if aided with a good agricultural produce. Your Compay cotiued to support its key customers through a emissioized ad competitive product portfolio. The Bus segmet is expected to show some growth owig to govermet schemes like JNNURM II, Jamarg ad the growig IT Sector. Distributio : Durig FY , the Distributio Busiess Uit has developed a CRM platform amed the Cummis Dealer Operatig System (CDOS), desiged to itegrate all the dealer iformatio systems o pa Idia basis. This IT platform is to be lauched i FY ad is expected to be a paradigm shift i the overall customer service experiece. 28

40 52d Aual Report Exports : Your Compay is focused o icreasig the export sales of its products. The short term outlook is ucertai uder the impact of global ecoomic slowdow; however your Compay is positioed strogly i all its markets. There have bee substatial busiess developmet iitiatives to diversify ito ew territories with ew ad existig products; thus the impact of slowdow i existig markets will oly be moderate. 5. Risks ad Cocers the Maagemet Perceives The cash cruch caused due to iflatioary cocers ad high fiscal deficit is likely to cotiue ad cause a slowdow i idustrial ad ifrastructure growth i the first half of the year. The global ecoomy cotiues to be soft which may have some impact o export volumes i the first half of the year. Measures to mitigate risks : To couter the slowdow i ecoomic growth, it is imperative to maitai focus ad leadership i the domestic market. New product / market developmet, overall portfolio diversificatio ad better market peetratio for existig products will cotiue to be focus areas for your Compay. Cotiued focus o our efforts to reduce direct material cost, with iitiatives like Accelerated Cost Efficiecy (ACE) ad Six Sigma will help maitai cost leadership i the domestic market ad eable your Compay to remai the preferred source for exports. 6. Iteral Cotrol Systems ad its Adequacy Your Compay has established adequate iteral cotrol procedures, commesurate with the ature of its busiess ad size of its operatios. To provide reasoable assurace that assets are safeguarded agaist loss or damage ad that accoutig records are reliable for preparig fiacial statemets, Maagemet maitais a system of accoutig ad cotrols, icludig a iteral audit process. Iteral cotrols are evaluated by the Iteral Audit departmet ad supported by Maagemet reviews. All audit observatios ad follow up actios thereo are tracked for resolutio by the Iteral Audit ad Busiess Cotrol fuctio ad reported to the Fiace ad Audit Committee. 7. Discussio o Fiacial Performace with respect to Operatioal Performace Fiacial Review : The fiacial statemets have bee prepared i accordace with the requiremets of the Compaies Act, 1956 (Revised Schedule VI) ad Geerally Accepted Accoutig Priciples (GAAP). There are o material departures i adoptio of the prescribed accoutig stadards. The estimates ad judgmets relatig to the fiacial statemets have bee made o a reasoable basis, so that the fiacial statemets reflect the form ad substace of trasactios i a true ad fair maer, ad reasoably represet the Compay s state of affairs ad profit for the year. Icome : Your Compay s reveue grew 11% to ` 458,938 Lacs ad profit before tax grew 27% to ` 105,133 Lacs. Total employee cost was ` 33,862 Lacs as compared to ` 30,394 Lacs durig the previous year. The depreciatio charge icreased from ` 4,198 Lacs durig the previous year to ` 4,725 Lacs durig the year uder review. Fiace Cost (icludig bak charges) decreased to ` 461 Lacs as compared to ` 541 Lacs i the previous year. 29

41 Fixed Assets : Additios to the Fixed Assets block durig the year eded March 31, 2013 were ` 7,796 Lacs (` 15,118 Lacs i the previous year). The additio of ` 7,796 Lacs cosists maily of plat ad machiery amoutig to ` 5,266 Lacs, leasehold lad ` 1,319 Lacs ad buildigs of ` 502 Lacs for augmetig various maufacturig facilities. The depreciatio block as of March 31, 2013 was ` 54,804 Lacs as compared to ` 50,539 Lacs as at March 31, The deductios / disposals durig the year amouted to ` 679 Lacs as compared to ` 1,064 Lacs i the previous year. Cosequetly, the et fixed asset block icreased to ` 49,343 Lacs as of March 31, 2013 as compared to ` 46,491 Lacs as at March 31, The estimated amout of cotracts remaiig to be executed o capital accout ad ot provided for as of March 31, 2013 was ` 33,555 Lacs ad your Compay believes that it will be able to fud them iterally. Ivestmets : Ivestmets icreased from ` 59,755 Lacs i March 31, 2012 to ` 62,757 Lacs as o March 31, The et icrease was due to icreased divided payout ad fudig of the future expasio plas of your Compay. 8. Huma Resources Developmet ad Idustrial Relatios The total employee stregth of your Compay stood at 3,590 as o March 31, Leadership Excellece : The Global Leadership Developmet Program (GLDP), lauched i early 2011, had its first batch graduate i July This program, targeted towards seior leaders, focuses o improvig leadership skills while providig seior global leaders a isight ito Idia s talet. Furtherig your Compay s leadership developmet efforts, the Leadership Culture Series was lauched to reiforce key leadership skills, a key focus area for your Compay. The Coach ad Develop module rolled out i 2011, ecompasses a total of 800 leaders across the various Cummis Compaies i Idia till date, icludig 250 leaders i Your Compay also lauched the secod skill uder the Leadership Culture Series - Foster Ope Commuicatio, last year coverig close to 650 maagers across locatios. Additioally, Buildig Success i Others - Leadership Essetials, a program specifically desiged for first level leaders of professioal idividual cotributors, lauched a module o Leadership Coversatios last year. The pilot coducted i Jue, was followed by 10 sessios which covered 225 youg leaders. This workshop provided the tools ad techiques to uderstad good leadership behaviors while recogizig their impact o others as well as o busiess results achieved. This program also helps leaders facilitate the success of their direct reports, i curret ad future roles at Cummis. Hire-To-Develop ad Seamless Talet Deploymet : This forms a essetial part of the Great Place to Work strategy ad cotiues to be a key focus area. This strategy is importat to esure that your Compay hires the right talet at the etry level ad develops them ito seior roles withi the orgaizatio. It is strogly believed that this would help i: Assimilatig employees withi the Cummis Culture i the early stage of their career; Providig employees ample growth opportuities across various Cummis busiesses, fuctios ad geographic locatios, thus leadig to better retetio; Eablig Cummis to leverage talet across busiesses, fuctios ad geographic locatios to drive busiess growth; ad Facilitatig career plaig ad successio plaig for critical positios. Several ew iitiatives have bee lauched for itegratig ew hires ito Cummis ad acceleratig their developmet. The Site Oboardig program, lauched i 2011, to help ew hires acclimatize to work surroudigs ad work culture at the site, was further stregtheed. This structured approach towards o-boardig, lauched i the iitial stages of their 30

42 52d Aual Report associatio with Cummis, will help ew hires become productive ad itegrate withi a short period of joiig the Compay. Over the last couple of years, we have bee gradually icreasig recruitmet of youg talet from colleges. I order to egage our youg workforce better, we have a structured year log egagemet program called Youg Maagers Developmet Program (YMDP) for graduate egieerig campus hires across etities. I 2012, we believe this program helped us arrest attritio below 5%. Based o the respose from the YMDP egagemet, we will be itroducig similar programs for MBA ad M.Tech hires. We are committed to talet developmet ad cotiuous egagemet of youg talet, as we kow this would be a sigificat elemet towards achievig profitable growth targets. I lie with Cummis Hire-to-Develop philosophy, we cosciously look for opportuities to grow talet withi the orgaizatio. Reiteratig our commitmet towards the same, we are pleased to share that collectively withi the five fully maaged compaies of the Cummis group i Idia, early 400 such moves happeed i the year Our attempts to develop techical ad maagerial talet saw 106 employees beig sposored for higher educatio, at our parter istitutes i the year The programs iclude geeral maagemet modules i partership with Kelley School of Busiess, IIM Ahmedabad ad S. P. Jai ad a M. Tech program i partership with Automotive Research Associatio of Idia- Vellore Istitute of Techology (ARAI-VIT). These employees are ow ready to move ito leadership roles. Employee Egagemet : Various employee egagemet iitiatives were plaed ad executed cosistetly across etities. A Cummis Karaoke competitio was arraged which was istrumetal i brigig out the hidde talet amogst the employees. The begiig of 2013 witessed the Cummis Premier League, a iter-etity cricket touramet, which saw excellet participatio from across etities. The Times of Idia Quiz cotest was held at Cummis campus where Cummis bagged the first ad secod positios, competig agaist te giat multiatioal corporatios. The New Hire Affiity Group LiC - Lauch i Cummis that completed its first aiversary i November 2012, is a iitiative that drives egagemet for all our ew hires. This has bee very well received by the ew hires as they get a opportuity to iteract with the seior leadership. Diversity : At Cummis, Diversity is oe of the core values ad your Compay cotiues to be committed to creatig a iclusive workplace that hoors people from diverse backgrouds with both digity ad respect. From hirig female employees o the shop-floor to havig wome leadig busiess uits, your Compay is proud of the progress it is makig i this area. Workig with a diverse workforce calls for flexibility i orgaizatio policies, processes ad most importatly, mid-sets. Durig the year, your Compay rolled out work-life balace policies that are focused to drive this chage through the orgaizatio. It remais the prime focus of your Compay to esure that the eviromet i which this diverse workforce performs is safe, secure ad supportive. The jourey which was started with 5% wome professioals i has reached 27.5% i across the Cummis group etities i Idia. This year your Compay ivested i series of itervetios at our largest site to create a sese of iclusio which helped to leverage the geder diversity to the fullest at the workplace. These sessios will ow be exteded across the compay. Megasite update : At the Cummis Megasite, livig up to the spirit of Oe Cummis, your Compay cotiues to ivest i a team based iclusive eviromet. I aligmet with the same, Team Based Work Systems (TBWS) have bee lauched across all etities to stregthe team spirit amog shop-floor employees at the Megasite. The Megasite at Phalta has a 22% female populatio. The year witessed the employmet of female employees i the B-shift. TBWS bechmarkig visits are beig coducted i aligmet with creatig a agile workforce. Ifrastructure facilities like a Learig Cetre, Crèche ad Health Cetres are already i progress. The Wome s Affiity Group at the Megasite orgaized various sessios o self-defece, health ad fitess, pre-marital cousellig, awareess o various chroic ailmets ad leadership. This was i additio to the periodical Focus Group Discussios ad iteractive iter-etity competitios ecouragig creativity amog the employees. 31

43 Sessios o creatig iclusive eviromet to leverage geder diversity were also coducted. I aligmet with esurig a performace drive culture at the Megasite, a Performace Maagemet System (PMS) for associates has bee rolled out. Campus Hirig : Your Compay hired aroud 362 college hires i Over 125 egieers wet through the Youg Maagers Developmet Program (YMDP). A sizeable percetage of the ew recruits are wome, aliged with your Compay s efforts to icrease geder represetatio i the orgaizatio. Aroud 230 wome were hired i 2012 (which is 62.8 % of total hires i 2012), thus showcasig the commitmet towards diversity. Your Compay also cotiued to hire diverse workforce from other regios of Idia (East, South ad North) thus edorsig your Compay s iclusive eviromet culture. Your Compay also stregtheed parterships with distiguished MBA ad Egieerig colleges such as Idia Istitute of Maagemet-Ahmedabad (IIM-A), S. P. Jai Istitute of Maagemet & Research (S. P. Jai), Narsee Mojee Istitute of Maagemet Studies (NMIMS), Idia Istitute of Techology Bombay (IIT-Bombay), Idia Istitute of Techology Madras (IIT-Madras), Symbiosis Cetre of Maagemet ad Huma Resource Developmet (SCMHRD), Jamalal Bajaj Istitute of Maagemet Studies (JBIMS), College of Egieerig Pue (COEP), Symbiosis Istitute of Busiess Maagemet (SIBM), Xavier Labour Relatios Istitute (XLRI) Jamshedpur, Natioal Istitute of Idustrial Egieerig (NITIE) Mumbai, Tata Istitute of Social Scieces (TISS), Symbiosis Istitute of Operatios Maagemet (SIOM)- Nashik, by appoitig seior leaders as Sposors to take up the resposibility to egage with these colleges at various levels icludig participatig i guest lectures, symposiums, college evets, evet-sposorships, tech shows, case studies, etc. Right Eviromet : Your Compay cotiues to reiforce the Right Eviromet through various forums: Coductig olie ad face-to-face madatory ethics sessios icludig refresher sessios; The Ethics Ifrastructure which icludes the Ethics Poit website, Ethics Toll free helplie umber, Ethics Committee (chaired by the Chairma ad Maagig Director, comprisig Heads of HR, Legal ad Iteral Audit) ad exteral foresic agecies o a as eed basis; Aually coductig o-lie Ethics certificatio for selected employees from critical ad relevat fuctios; ad Leadership iteractios ad employee quarterly commuicatios. 9. Cautioary Statemet The Maagemet Discussio ad Aalysis Report cotais forward lookig statemets based upo the data available with the Compay, assumptios with regard to global ecoomic coditios, the govermet policies, etc. The Compay caot guaratee the accuracy of assumptios ad perceived performace of the Compay i future. Therefore, it is cautioed that the actual results may materially vary from those expressed or implied i the report. 32

44 52d Aual Report CORPORATE GOVERNANCE REPORT : (Aexure to Directors Report) 1. COMPANY S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE : Corporate Goverace is a set of priciples, processes ad systems to be followed by the directors, maagemet ad all employees of the Compay for ehacemet of shareholder value, keepig i view iterests of other stake holders. Itegrity, trasparecy ad compliace with regulatios i all dealigs with govermet, customers, suppliers, employees ad other stakeholders are the objectives of good corporate goverace. These priciples ad objects are embodied i your Compay s philosophy o the Code of Corporate Goverace. Your Compay cotiues to adopt ad practice these priciples of good Corporate Goverace while esurig itegrity, trasparecy ad accoutability at all levels i the orgaisatio. 2. BOARD OF DIRECTORS : Compositio of the Board of Directors : The Board of Directors of the Compay has a optimum combiatio of Promoter ad Idepedet Directors ad comprises of 10 Directors, with 5 Promoter Directors ad 5 Idepedet Directors. Mr. Aat J. Talaulicar, Maagig Director has bee Chairma of the Board of Directors of the Compay, effective April 25, Chages durig the year i the compositio of the Board of Directors : Appoitmets : Mr. Aat J. Talaulicar has bee re-appoited as Maagig Director for 5 years from April 25, 2013, subject to approval of the Shareholders. Durig the year, Mr. Atoio Leitao, Mr. Prakash Telag ad Mr. Edward Pece were appoited as Additioal Directors of the Compay w.e.f. August 3, 2012, Jauary 31, 2013 ad May 10, 2013 respectively. Mr. J. M. Barrowma has bee appoited as a Alterate Director to Mr. Edward Pece w.e.f. May 10, Cessatios : Mr. Sea Milloy, Alterate Director to Mr. Joh Wall, ceased to be a Director of the Compay effective July 28, 2012 upo arrival of Mr. Joh Wall, Origial Director, to the state of Maharashtra. Mr. Joh Wall, Mr. B. H. Reporter ad Mr. Mark Levett stepped dow as Directors of the Compay w.e.f. August 2, 2012, February 1, 2013 ad May 9, 2013 respectively. Mr. J.M. Barrowma, Alterate Director to Mr. Mark Levett also ceased to be a Director cosequet to resigatio of Mr. Levett. Board Meetigs : Durig the fiacial year, the Board of Directors met five times o May 15, 2012, August 2, 2012, September 13, 2012, November 8, 2012 ad Jauary 31,

45 Compositio ad Category of Directors : Name Category No. of other No. of other Directorships committee memberships Chairma Member Chairma Member Mr. Aat J. Talaulicar Promoter Executive Mr. M. A. Levett Promoter No-executive Mr. Atoio Leitao Promoter No-executive Mr. Patrick Ward Promoter No-executive Mr. James Kelly Promoter No-executive Mr. Rajeev Bakshi Idepedet No-executive 2 1 Mr. P. S. Dasgupta Idepedet No-executive Mr. Nasser Mujee Idepedet No-executive Mr. Prakash Telag Idepedet No-executive 6 1 Mr. Veu Sriivasa Idepedet No-executive Mr. J.M.Barrowma Mr. Pradeep Bhargava Alterate Director to Mr. M. A. Levett Alterate Director to Mr. Patrick Ward Notes : 1. As o March 31, 2013, Mr. Prakash Telag joitly with Mrs. Ajali Telag held 1,400 fully paid shares of Rs. 2/- each i the equity share capital of the Compay. 2. Directorships i Foreig Compaies, Private Limited Compaies ad compaies uder Sectio 25 of the Compaies Act, 1956 are excluded i the above table. Attedace at the Board Meetigs ad AGM : Durig the year, (i) Mr. Aat J. Talaulicar atteded all 5 meetigs, (ii) Mr. B. H. Reporter atteded 2 meetigs, (iii) M/s. Rajeev Bakshi ad Nasser Mujee atteded 4 meetigs, (iv) M/s. P. S. Dasgupta ad Veu Sriivasa atteded 3 meetigs ad (v) M/s. Patrick Ward, Atoio Leitao ad Mr. Prakash Telag atteded 1 meetig. Mr. J. M. Barrowma (Alterate Director to Mr. Mark A. Levett) atteded 2 meetigs ad Mr. Pradeep Bhargava (Alterate Director to Mr. Patrick Ward) atteded 4 meetigs. M/s. Aat J. Talaulicar, Nasser Mujee, P. S. Dasgupta, Rajeev Bakshi, J. M. Barrowma (Alterate Director) ad Pradeep Bhargava (Alterate Director) atteded the Aual Geeral Meetig (AGM) held o August 2, 2012, while M/s. B. H. Reporter, Veu Sriivasa, James Kelly, Patrick Ward ad Mark Levett could ot make it due to other commitmets. 3. COMMITTEES OF THE BOARD : (A) FINANCE AND AUDIT COMMITTEE : The Fiace ad Audit Committee cosists of 4 Idepedet Directors - M/s. Nasser Mujee (Chairma), P. S. Dasgupta, Rajeev Bakshi ad Prakash Telag; 1 Promoter / Executive Director - Mr. Aat J. Talaulicar ad 1 Promoter / No-Executive Director - Mr. Patrick Ward. Mr. B.H. Reporter, Member of the Committee, resiged w.e.f. February 1, 2013 ad Mr. Prakash Telag was appoited i place thereof. The Fiace ad Audit Committee had 5 meetigs durig the year o May 14, 2012, August 2, 2012, 34

46 52d Aual Report September 13, 2012, November 8, 2012 ad Jauary 31, Mr. Aat J. Talaulicar atteded all 5 meetigs; Mr. Nasser Mujee atteded 4 meetigs; M/s. P. S. Dasgupta ad Rajeev Bakshi atteded 3 meetigs; ad Mr. Patrick Ward atteded 1 meetig, durig the year. The Committee reviewed the balace sheet ad statemet of profit & loss, audited fiacial results for the year eded March 31, 2012 ad u-audited fiacial results for the quarters eded Jue 30, 2012, September 30, 2012 ad December 31, The Committee also reviewed (i) appoitmet of Statutory, Cost ad VAT Auditors of the Compay (ii) performace of Joit Vetures & Associates (iii) reports of the Iteral Auditor (iv) Cost Audit Report for the year (v) acquisitio / sale of assets (vi) Directors Resposibility Statemet (vii) Related Party trasactios (viii) performace of Statutory Auditors (ix) Legal Compliace Reports (x) major litigatios (xi) Code of Coduct moitorig ad (xii) Forex Maagemet Policy. The Committee had regular iteractio with the Iteral, Statutory ad Cost Auditors of the Compay. Broad terms of referece to the Fiace ad Audit Committee i brief : The Fiace ad Audit Committee of the Compay primarily oversees the Compay s fiacial reportig process ad esures that the fiacial statemets are correct, sufficiet ad credible. The Committee reviews the aual ad quarterly fiacial statemets before submissio to the Board for approval. The Committee also reviews Related Party Trasactios of the Compay. The Committee has bee etrusted with the resposibility of reviewig Iteral Audit fidigs ad esurig adequacy of iteral cotrol systems. The Committee recommeds to the Board, appoitmet of exteral auditors ad paymet of audit fees. The Committee holds regular discussios with the Iteral, Statutory ad Cost Auditors about their scope of audit ad holds post audit discussios with the Auditors. The Statutory ad Cost Auditors, Iteral Auditor, the Chief Operatig Officer, the Chief Fiacial Officer ad the Busiess Uit Heads of the Compay are ivited for the meetigs of the Committee. (B) SHAREHOLDERS / INVESTORS GRIEVANCE COMMITTEE : The Shareholders / Ivestors Grievace Committee cosists of 3 Directors - Mr. Prakash Telag (Chairma), Mr. P. S. Dasgupta ad Mr. Aat J. Talaulicar. Durig the year, Mr. B.H. Reporter, Chairma of the Committee resiged w.e.f. February 1, 2013 ad Mr. Prakash Telag was appoited as the Chairma of the Committee w.e.f. February 1, Durig the year, 4 meetigs of the Shareholders / Ivestors Grievace Committee were held o May 14, 2012, August 2, 2012, November 8, 2012 ad Jauary 31, Mr. Aat J. Talaulicar atteded 4 meetigs, Mr. P. S. Dasgupta atteded 3 meetigs ad Mr. B. H. Reporter atteded 1 meetig. Broad terms of referece to the Shareholders / Ivestors Grievace Committee : The Shareholders / Ivestors Grievace Committee reviews ad advises the Compay o ay grievace i relatio to (a) No-trasfer of shares (b) No-receipt of Aual Report (c) No-receipt of divided/ iterest warrats ad (d) Ay other ivestors grievace raised by ay shareholder. Compliace Officer : Mr. Trivikram Guda Geeral Maager - Legal & Compay Secretary 35

47 The followig shareholder complaits were received ad resolved durig the year April 1, 2012 to March 31, 2013 : Sr. No. Nature of complait No. of complaits 1. No-receipt of Aual Reports 4 2. No- receipt of Divided Warrats 4 3. No-receipt of Share Certificates 2 Total 10 Number of complaits pedig with the Compay : 1 Number of pedig share trasfers : Nil Isider Tradig Code : The Compay has a separate Isider Tradig Code i lie with SEBI (Prohibitio of Isider Tradig) Regulatios, The said Code is applicable to all Directors ad specified persos / employees of the Compay. The Code govers sale ad purchase of shares of the Compay by Directors ad specified employees. I terms of this code, Directors ad specified employees of the Compay ca deal i shares of the Compay oly whe the Tradig Widow is ope ad ot otherwise, except with the prior approval of the Compliace Officer appoited uder the Code i.e. Head of Fiace. 4. REMUNERATION OF DIRECTORS : The No-Executive Idepedet Directors are paid sittig fees ad commissio. Commissio is paid o equal basis to all No-Executive Idepedet Directors. The Chairma ad Maagig Director is paid remueratio as approved by the Shareholders. Details of Sittig Fees ad Commissio to No Executive Directors for the year April 1, 2012 to March 31, 2013 : Name of the Director Sittig fees Commissio Total Mr. Rajeev Bakshi Mr. P. S. Dasgupta Mr. Nasser Mujee Mr. B. H. Reporter Mr. Veu Sriivasa ` i Lacs Details of remueratio paid to Mr. Aat J. Talaulicar, Chairma ad Maagig Director for the year April 1, 2012 to March 31, 2013 : ` i Lacs Sittig Salary Commi- House Gas/Elect./ Medical Other Total fees ssio ret water Beefits Mr. Aat J. Talaulicar Notes : 1. The Compay does ot have a Stock Optio Scheme ad o severace fees are payable to ay Director. 2. There is o otice period for severace of the Maagig Director. 36

48 52d Aual Report GENERAL SHAREHOLDER INFORMATION : Registered Office Kothrud, Pue Phoe No. : (020) , Fax No. : (020) Website : Aual Geeral Meetig Date ad Time : August 1, 2013 at 12:00 oo Fiacial Year Veue : Yashada, MDC Auditorium, Baer Road, Pue st st The Fiacial Year of the Compay is 1 April to 31 March. Fiacial caledar Results for quarter edig Jue 30, By first week of August, Results for quarter ad half year edig September 30, By secod week of November, Results for quarter ad ie moths edig December 31, By first week of February, Results for the year edig March 31, By secod week of May, Dates of Book Closure Iterim divided paymet date February 28, Fial Divided paymet date August 29, July 27, 2013 to August 1, 2013 (both days iclusive). Listig o Stock Exchages Name of Exchage Stock Code Paymet of Listig Fees 1. BSE Limited (BSE) P. J. Towers, Dalal Street, Mumbai : Natioal Stock Exchage of Idia Limited (NSE) CUMMINSIND Exchage Plaza, Badra - Kurla Complex, Badra (E), Mumbai : The Compay has paid i advace the Listig Fees to both the Stock Exchages for the Fiacial Year Market price data : High, Low durig each moth i the fiacial year BSE NSE Moth High (`) Low ( `) Moth High ( `) Low ( `) April April May May Jue Jue July July August August September September October October November November December December Jauary Jauary February February March March

49 Performace i Chart A depicts the comparable movemet of Cummis Idia Limited s compariso to Equity Shares agaist BSE Sesex, durig the year eded March 31, broad-based idices such as BSE Sesex. Cummis Idia Limited (mothly closig share price) versus BSE Sesex (mothly closig Sesex) BSE Sesex CIL Share price 0 Apr- 12 May- 12 Ju- 12 Jul- 12 Aug- 12 Sep- 12 Oct- 12 Nov- 12 Dec- 12 Ja- 13 Feb- 13 Mar BSE Sesex CIL Share Price Registrar ad Trasfer Aget Share Trasfer System The Compay has appoited Lik Itime Idia Private Limited, Mumbai as its Registrar ad Trasfer Aget. Share trasfers, dematerialisatio of shares, divided paymet ad all other ivestor related activities are atteded to ad processed at the office of the Registrar ad Trasfer Aget :- Lik Itime Idia Private Limited Uit : Cummis Idia Limited C-13, Paalal Silk Mills Compoud, L. B. S. Marg, Bhadup (West), Mumbai Phoe No. (022) Fax No. (022) Cotact Perso : Mrs. Maheshwari Patil maheshwari.patil@likitime.co.i / rt.helpdesk@likitime.co.i Time: to 1600 hours (Mo. to Fri. excl. public holidays) Share Trasfer requests i physical form are processed withi 15 days from the date of receipt. The requests for dematerialisatio of shares are cofirmed withi 21 days from the date of receipt. 38

50 52d Aual Report Distributio of shareholdig Category No. of shares % of as o March 31, 2013 of ` 2/- each shareholdig FIIs Corp. Bodies Idia Public NRIs Baks/ Fi. Ist./ Isurace Cos. Mutual Fuds Promoters Promoters 141,372, Mutual Fuds 36,421, Baks / Fiacial Istitutios / Isurace Compaies 18,554, Foreig Istitutioal Ivestors (FIIs) 43,002, Corporate Bodies 11,385, Idia Public 25,759, NRIs 704, TOTAL 277,200, Distributio of shareholdig withi various categories (as o March 31, 2013) Category (shares) No. of shareholders No. of Shares % of shares to total shares ,350 2,627, ,000 2,533 1,764, ,001-5,000 3,422 7,603, ,001-10, ,791, ,001-50, ,349, , , ,379, ,001 ad above ,684, Total ,200, Dematerialisatio of shares ad liquidity (as o March 31, 2013) Sub-divided share certificate i lieu of old certificates Outstadig GDRs / ADRs / Warrats or ay Covertible istrumets, coversio date ad likely impact o equity 98.60% shares are i demat form. The Compay had o February 10, 1987, sub-divided each Equity Share of the face value of ` 100/- each ito te Equity Shares of the face value of ` 10/- each. Subsequetly, o December 4, 2000, the Compay sub-divided each Equity Share of the face value of ` 10/- each ito five Equity Shares of the face value of ` 2/- each. The Compay has set a remider i the past to those Shareholders who have ot claimed ew certificates for sub-divided Shares of the face value of ` 2/- each. Shareholders who have ot so far surredered their old certificates i exchage for ew certificates for sub-divided shares of the face value of ` 2/- each, are requested to do so immediately. The Compay has ot issued GDRs / ADRs / Warrats or ay Covertible istrumets. 39

51 Plat locatios 1. Kothrud, Pue Plot No. 206/2, Off. Nagar Road, Haveli, Pue Gat No. 311/B&1B, Kasar Amboli , Dist. Pue, Maharashtra A/1/2 Eradwae, Pue MIDC Phalta, Village Survadi, Dist. Satara, Maharashtra. Address for correspodece Registered Office : Kothrud, Pue Tel: Fax : ) Mr. Pradip Phasalkar, Sr. Maager, Secretarial - pradip.s.phasalkar@cummis.com 2) Mr. Trivikram Guda, Geeral Maager - Legal & Compay Secretary - trivikram.guda@cummis.com Registrar ad Trasfer Aget : Lik Itime Idia Private Limited Please refer details above for address / cotact details etc. 6. ANNUAL GENERAL MEETINGS (AGMs) : Particulars FY FY FY Date ad Time at 12 oo at 12 oo at 12 oo Veue Yashada, MDC Auditorium, Yashada, MDC Auditorium, Hotel Le Meridie Baer Road, Pue Baer Road, Pue Raja Bahadur Mill Road, Pue Special resolutios passed at the last 3 Geeral Body Meetigs : At its Extra-ordiary Geeral Meetig held o September 9, 2011, the members of the Compay passed a Special Resolutio for Alteratio of the Articles of Associatio of the Compay to give effect to icrease i the Authorised Share Capital of the Compay to facilitate issuace of Bous shares i the ratio of 2:5. At its Aual Geeral Meetig held o August 2, 2012, the members of the Compay passed a Special Resolutio for paymet of sum, i additio to sittig fees, by way of remueratio i the form of commissio to the Idepedet Directors, who are ot i the whole-time employmet of the Compay ot exceedig oe percet of the et profits of the Compay, calculated i accordace with the provisios of sectios 198, 349 ad 350 of the Act for a period of 5 years effective April 1, Postal Ballot : Durig the fiacial year o resolutio was passed through Postal Ballot. 7. DISCLOSURES : i) The Compay does ot have materially sigificat related party trasactios (i.e. trasactios of the Compay of material ature with its Promoters, Directors or the Maagemet, or their subsidiaries or relatives etc.) which may have potetial coflict with the iterest of the Compay at large. ii) The Compay has complied with the requiremets of regulatory authorities o capital markets ad o pealties / strictures have bee imposed agaist it i the last 3 years. iii) Noe of the Directors of the Compay are related to each other. 40

52 52d Aual Report iv) The Compay has complied with the madatory Corporate Goverace requiremets of Clause 49 of the Listig Agreemet. v) The Compay released a Whistle Blower Policy durig the fiacial year which is a o-madatory requiremet as per Clause 49 of the Listig Agreemet. No perso has bee deied access to the Fiace ad Audit Committee uder the Whistle Blower Policy. 8. MEANS OF COMMUNICATION : The quarterly shareholdig patter ad quarterly / half-yearly / yearly uaudited / audited fiacial results were posted o the Compay s website The official ews releases of the Compay were displayed o the Compay s website The aual audited ad quarterly / half-yearly uaudited fiacial results for the year eded March 2012 ad quarters eded Jue, September ad December 2012, were published i Busiess Stadard ad Maharashtra Times. Trascript of Coferece calls with the Aalysts held o May 16, 2012, August 3, 2012, November 9, 2012, February 1, 2013 ad the Chairma s Presetatio to the Shareholders made at the AGM held o August 2, 2012 were displayed o the Compay s website 9. COMPLIANCE CERTIFICATE OF THE AUDITORS : The Compay has obtaied a Certificate from the Statutory Auditors cofirmig compliace with coditios of the Code of Corporate Goverace as stipulated i Clause 49 of the Listig Agreemet with the Stock Exchages ad the same is aexed. Declaratio Code of Coduct As per Clause 49 of the Listig Agreemet with the Stock Exchages, all Board Members ad Seior Maagemet persoel have affirmed compliace with the applicable Code of Coduct for the fiacial year For Cummis Idia Limited Pue: May 10, 2013 Aat J. Talaulicar Chairma & Maagig Director 41

53 Auditors Certificate regardig compliace of coditios of Corporate Goverace To the Members of Cummis Idia Limited We have examied the compliace of coditios of Corporate Goverace by Cummis Idia Limited, for the year eded March 31, 2013, as stipulated i Clause 49 of the Listig Agreemets of the said Compay with stock exchages i Idia. The compliace of coditios of Corporate Goverace is the resposibility of the Compay s maagemet. Our examiatio was carried out i accordace with the Guidace Note o Certificatio of Corporate Goverace (as stipulated i Clause 49 of the Listig Agreemet), issued by the Istitute of Chartered Accoutats of Idia ad was limited to procedures ad implemetatio thereof, adopted by the Compay for esurig the compliace of the coditios of Corporate Goverace. It is either a audit or a expressio of opiio o the fiacial statemets of the Compay. I our opiio ad to the best of our iformatio ad accordig to the explaatios give to us, we certify that the Compay has complied with the coditios of Corporate Goverace as stipulated i the above metioed Listig Agreemets. We state that such compliace is either a assurace as to the future viability of the Compay or the efficiecy or effectiveess with which the maagemet has coducted the affairs of the Compay. For Price Waterhouse Firm Registratio Number: E Chartered Accoutats Jeetedra Mirchadai Place : Mumbai Parter Date : May 10, 2013 Membership Number:

54 52d Aual Report Idepedet Auditors Report To the Members of Cummis Idia Limited Report o the Fiacial Statemets 1. We have audited the accompayig fiacial statemets of Cummis Idia Limited (the Compay ), which comprise the Balace Sheet as at March 31, 2013, ad the Statemet of Profit ad Loss ad Cash Flow Statemet for the year the eded, ad a summary of sigificat accoutig policies ad other explaatory iformatio, which we have siged uder referece to this report. Maagemet s Resposibility for the Fiacial Statemets 2. The Compay s Maagemet is resposible for the preparatio of these fiacial statemets that give a true ad fair view of the fiacial positio, fiacial performace ad cash flows of the Compay i accordace with the Accoutig Stadards referred to i sub-sectio (3C) of sectio 211 of the Compaies Act, 1956 of Idia (the Act ). This resposibility icludes the desig, implemetatio ad maiteace of iteral cotrol relevat to the preparatio ad presetatio of the fiacial statemets that give a true ad fair view ad are free from material misstatemet, whether due to fraud or error. Auditors Resposibility 3. Our resposibility is to express a opiio o these fiacial statemets based o our audit. We coducted our audit i accordace with the Stadards o Auditig issued by the Istitute of Chartered Accoutats of Idia. Those Stadards require that we comply with ethical requiremets ad pla ad perform the audit to obtai reasoable assurace about whether the fiacial statemets are free from material misstatemet. 4. A audit ivolves performig procedures to obtai audit evidece, about the amouts ad disclosures i the fiacial statemets. The procedures selected deped o the auditors judgmet, icludig the assessmet of the risks of material misstatemet of the fiacial statemets, whether due to fraud or error. I makig those risk assessmets, the auditors cosider iteral cotrol relevat to the Compay s preparatio ad fair presetatio of the fiacial statemets i order to desig audit procedures that are appropriate i the circumstaces. A audit also icludes evaluatig the appropriateess of accoutig policies used ad the reasoableess of the accoutig estimates made by Maagemet, as well as evaluatig the overall presetatio of the fiacial statemets. 5. We believe that the audit evidece we have obtaied is sufficiet ad appropriate to provide a basis for our audit opiio. Opiio 6. I our opiio, ad to the best of our iformatio ad accordig to the explaatios give to us, the accompayig fiacial statemets give the iformatio required by the Act i the maer so required ad give a true ad fair view i coformity with the accoutig priciples geerally accepted i Idia: (a) i the case of the Balace Sheet, of the state of affairs of the Compay as at March 31, 2013; (b) i the case of the Statemet of Profit ad Loss, of the profit for the year eded o that date; ad (c) i the case of the Cash Flow Statemet, of the cash flows for the year eded o that date. Report o Other Legal ad Regulatory Requiremets 7. As required by the Compaies (Auditor s Report) Order, 2003, as ameded by the Compaies (Auditor s Report) (Amedmet) Order, 2004, issued by the Cetral Govermet of Idia i terms of sub-sectio (4A) of sectio 227 of the Act (hereiafter referred to as the Order ), ad o the basis of such checks of the books ad records of the Compay as we cosidered appropriate ad accordig to the iformatio ad explaatios give to us, we give i the Aexure a statemet o the matters specified i paragraphs 4 ad 5 of the Order. 43

55 8. As required by sectio 227(3) of the Act, we report that: (a) (b) (c) We have obtaied all the iformatio ad explaatios which, to the best of our kowledge ad belief, were ecessary for the purpose of our audit; I our opiio, proper books of accout as required by law have bee kept by the Compay so far as appears from our examiatio of those books; The Balace Sheet, Statemet of Profit ad Loss, ad Cash Flow Statemet dealt with by this Report are i agreemet with the books of accout; (d) I our opiio, the Balace Sheet, Statemet of Profit ad Loss, ad Cash Flow Statemet dealt with by this report comply with the Accoutig Stadards referred to i sub-sectio (3C) of sectio 211 of the Act; (e) O the basis of writte represetatios received from the directors as o March 31, 2013, ad take o record by the Board of Directors, oe of the directors is disqualified as o March 31, 2013, from beig appoited as a director i terms of clause (g) of sub-sectio (1) of sectio 274 of the Act. For Price Waterhouse Firm Registratio Number: E Chartered Accoutats Jeetedra Mirchadai Mumbai Parter May 10, 2013 Membership Number

56 52d Aual Report Aexure to Auditors Report Referred to i paragraph 7 of the Auditors Report of eve date to the members of Cummis Idia Limited o the fiacial statemets as of ad for the year eded March 31, 2013 i. (a) The Compay is maitaiig proper records showig full particulars, icludig quatitative details ad situatio, of fixed assets. (b) (c) The fixed assets are physically verified by the Maagemet accordig to a phased program desiged to cover all the items over a period of two years which, i our opiio, is reasoable havig regard to the size of the Compay ad the ature of its assets. Pursuat to the program, a portio of the fixed assets has bee physically verified by the Maagemet durig the year ad o material discrepacies have bee oticed o such verificatio. I our opiio, ad accordig to the iformatio ad explaatios give to us, a substatial part of fixed assets has ot bee disposed off by the Compay durig the year. ii. (a) The ivetory excludig stocks with third parties has bee physically verified by the Maagemet durig the year. I respect of ivetory lyig with third parties, these have substatially bee cofirmed by them. I our opiio, the frequecy of verificatio is reasoable. (b) (c) I our opiio, the procedures of physical verificatio of ivetory followed by the Maagemet are reasoable ad adequate i relatio to the size of the Compay ad the ature of its busiess. O the basis of our examiatio of the ivetory records, i our opiio, the Compay is maitaiig proper records of ivetory. The discrepacies oticed o physical verificatio of ivetory as compared to book records were ot material. iii. iv. The Compay has ot grated/take ay loas, secured or usecured, to compaies, firms or other parties covered i the register maitaied uder Sectio 301 of the Act. Therefore, the provisios of Clause 4(iii)(b), (c) ad (d) / (f) ad (g) of the said Order are ot applicable to the Compay. I our opiio, ad accordig to the iformatio ad explaatios give to us, there is a adequate iteral cotrol system commesurate with the size of the Compay ad the ature of its busiess for the purchase of ivetory ad fixed assets ad for the sale of goods ad services. Further, o the basis of our examiatio of the books ad records of the Compay, ad accordig to the iformatio ad explaatios give to us, we have either come across, or have bee iformed of, ay cotiuig failure to correct major weakesses i the aforesaid iteral cotrol system. v. Accordig to the iformatio ad explaatios give to us, there have bee o cotracts or arragemets that eed to be etered i the register maitaied uder Sectio 301 of the Act. vi. vii. viii. The Compay has ot accepted ay deposits from the public withi the meaig of Sectios 58A ad 58AA of the Act ad the rules framed there uder. I our opiio, the Compay has a iteral audit system commesurate with its size ad the ature of its busiess. We have broadly reviewed the books of accout maitaied by the Compay i respect of products where, pursuat to the rules made by the Cetral Govermet of Idia, the maiteace of cost records has bee prescribed uder clause (d) of sub-sectio (1) of Sectio 209 of the Act, ad are of the opiio that, prima facie, the prescribed accouts ad records have bee made ad maitaied. We have ot, however, made a detailed examiatio of the records with a view to determie whether they are accurate or complete. ix. (a) Accordig to the iformatio ad explaatios give to us ad the records of the Compay examied by us, i our opiio, the Compay is regular i depositig the udisputed statutory dues, icludig providet fud, ivestor educatio ad protectio fud, employees state isurace, icome tax, sales tax, wealth tax, service tax, customs duty, excise duty ad other material statutory dues, as applicable, with the appropriate authorities. 45

57 (b) Accordig to the iformatio ad explaatios give to us ad the records of the Compay examied by us, the particulars of dues of icome tax, sales tax, customs duty ad excise duty as at March 31, 2013 which have ot bee deposited o accout of a dispute are as follows: Name of the statute Nature of dues Amout (Rs. i Lacs) Period to which the amout relates Forum where the dispute is pedig The Icome Tax Act, 1961 The Maharashtra Sales Tax o Trasfer of Property i goods ivolved i the Executio of Works Cotract (Reeacted) Act, 1989 Demad o accout of trasfer pricig adjustmets, other disallowaces ad iterest thereo Demad o accout of Purchase tax/ Works cotract tax ad surcharge thereo 3, Icome-tax Appellate Tribual, Pue /Commissioer Icome Tax (Appeals), Pue High Court, Mumbai The Cetral Sales Tax Act, 1956/Bombay Sales Tax Act, 1959 (B.S.T.)/Maharashtra Value Added Tax Act, 2002 Taxatio of sales turover uder B.S.T. Act ad disallowace of claim of VAT set-off ad iter-state sale u/s 3(a) of C.S.T. Act, , to Joit Commissioer of Sales Tax (Appeal)/Sr Deputy Commissioer of Sales Tax (Appeals) - Pue/ Maharashtra Sales Tax Tribual, Mumbai The Cetral Sales Tax Act, 1956 (C.S.T.)/Bombay Sales Tax Act, 1959 (B.S.T.) Disallowaces of Sales Tax Declaratio forms, disallowaces of set off claimed uder rule 41D ad 42H ad iterest thereo to Maharashtra Sales Tax Tribual, Mumbai The Cetral Excise Act, 1944 Disallowace of credit take o iputs Cetral Excise ad Service Tax Appelate Tribual (Mumbai/Ahmedabad) x. The Compay has o accumulated losses as at the ed of the fiacial year ad it has ot icurred ay cash losses i the fiacial year eded o that date or i the immediately precedig fiacial year. xi. xii. xiii. xiv. As the Compay does ot have ay borrowigs from ay fiacial istitutio or bak or has it issued ay debetures as at the balace sheet date, the provisios of Clause 4(xi) of the Order are ot applicable to the Compay. The Compay has ot grated ay loas ad advaces o the basis of security by way of pledge of shares, debetures ad other securities. Therefore, the provisios of Clause 4(xii) of the Order are ot applicable to the Compay. As the provisios of ay special statute applicable to chit fud/ idhi/ mutual beefit fud/ societies are ot applicable to the Compay, the provisios of Clause 4(xiii) of the Order are ot applicable to the Compay. I our opiio, the Compay is ot dealig i or tradig i shares, securities, debetures ad other ivestmets. Accordigly, the provisios of Clause 4(xiv) of the Order are ot applicable to the Compay. 46

58 52d Aual Report xv. xvi. I our opiio, ad accordig to the iformatio ad explaatios give to us, the Compay has ot give ay guaratee for loas take by others from baks or fiacial istitutios durig the year. Accordigly, the provisios of Clause 4(xv) of the Order are ot applicable to the Compay. The Compay has ot raised ay term loas. Accordigly, the provisios of Clause 4(xvi) of the Order are ot applicable to the Compay. xvii. The Compay has ot raised ay loas o short term basis. Accordigly, the provisios of Clause 4(xvii) of the Order are ot applicable to the Compay. xviii. The Compay has ot made ay preferetial allotmet of shares to parties ad compaies covered i the register maitaied uder Sectio 301 of the Act durig the year. Accordigly, the provisios of Clause 4(xviii) of the Order are ot applicable to the Compay. xix. xx. xxi. The Compay has ot issued ay debetures durig the year ad does ot have ay debetures outstadig as at the begiig of the year ad at the year ed. Accordigly, the provisios of Clause 4(xix) of the Order are ot applicable to the Compay. The Compay has ot raised ay moey by public issues durig the year. Accordigly, the provisios of Clause 4(xx) of the Order are ot applicable to the Compay. Durig the course of our examiatio of the books ad records of the Compay, carried out i accordace with the geerally accepted auditig practices i Idia, ad accordig to the iformatio ad explaatios give to us, we have either come across ay istace of material fraud o or by the Compay, oticed or reported durig the year, or have we bee iformed of ay such case by the Maagemet. For Price Waterhouse Firm Registratio Number: E Chartered Accoutats Jeetedra Mirchadai Mumbai Parter May 10, 2013 Membership Number

59 Balace Sheet as at March 31, 2013 Particulars Note No. As at As at March 31, 2013 March 31, 2012 EQUITY AND LIABILITIES Shareholders Fuds Share Capital 2 5,544 5,544 Reserves ad Surplus 3 233, , , ,315 No-curret Liabilities Deferred Tax Liabilities (Net) 10 3,278 Log-term Liabilities 4 1,504 1,470 Log-term Provisios 5 12,935 10,065 17,717 11,535 Curret Liabilities Trade Payables (Note 27) 57,652 51,662 Other Curret Liabilities 6 18,038 15,165 Short-term Provisios 7 34,882 27, ,572 94,319 TOTAL 366, ,169 ASSETS No-curret Assets Fixed Assets Tagible Assets 8 48,958 45,895 Itagible Assets Capital Work-i-progress 12,079 4,967 No-curret Ivestmets 9 5,339 7,551 Deferred Tax Assets (et) Log-term Loas ad Advaces 11 47,263 34, ,024 93,998 Curret Assets Curret Ivestmets 12 57,417 52,204 Ivetories 13 53,035 56,761 Trade Receivables 14 85,499 67,834 Cash ad Bak Balaces 15 35,465 22,350 Short-term Loas ad Advaces 16 20,619 16,525 Other Curret Assets , ,171 TOTAL 366, ,169 Summary of sigificat accoutig policies 1 The otes are a itegral part of these fiacial statemets I terms of our report of eve date For Price Waterhouse For ad o behalf of the Board Firm Registratio No E Chartered Accoutats Jeetedra Mirchadai Aat J. Talaulicar Nasser Mujee Parter Chairma & Director Membership Number Maagig Director Mumbai Mumbai Date: May 10, 2013 Date: May 10, Trivikram Guda Geeral Maager Legal & Compay Secretary

60 52d Aual Report Statemet of Profit ad Loss for the year eded March 31, 2013 Particulars Note No. Year Eded March 31, 2013 Year Eded March 31, 2012 Reveue from operatios (gross) , ,053 Less : Excise duty 31,061 29,331 Reveue from operatios (et) 458, ,722 Other icome 19 20,672 12,333 Total Reveue 479, ,055 Expeses: Cost of materials cosumed (Note 35) 270, ,664 Purchases of traded goods (Note 36) 18,543 25,768 Chage i ivetories of fiished goods, work-i-progress ad traded goods (5,890) Employee beefits expese 21 33,862 30,394 Fiace costs Depreciatio ad amortizatio expese 4,725 4,198 Other expeses 23 52,845 47,061 Total expeses 380, ,736 Profit before exceptioal items ad tax 98,974 77,319 Exceptioal items 24 6,159 5,144 Profit before tax 105,133 82,463 Tax expese Curret tax [icludig (excess)/short provisio of tax relatig to 24,749 22,158 earlier years (` 3,550 lacs) (previous year ` 32 lacs)] Deferred tax (icludig reversal of deferred tax asset of ` 3,203 lacs 3,973 1,178 (previous year ` NIL)) Total Tax Expese 28,722 23,336 Profit after Tax 76,411 59,127 Basic ad diluted Earigs per share (`) (Nomial value per share ` 2) Summary of sigificat accoutig policies 1 The otes are a itegral part of these fiacial statemets I terms of our report of eve date For Price Waterhouse For ad o behalf of the Board Firm Registratio No E Chartered Accoutats Jeetedra Mirchadai Aat J. Talaulicar Nasser Mujee Parter Chairma & Director Membership Number Maagig Director Mumbai Mumbai Date: May 10, 2013 Date: May 10, 2013 Trivikram Guda Geeral Maager Legal & Compay Secretary 49

61 Cash Flow Statemet for the year eded March 31, 2013 Previous year I. Cash flows from operatig activities : Cash geerated from operatios 79,431 65,797 Tax paid (et of refuds) (26,571) (21,548) Net cash provided by operatig activities 52,860 44,249 II. Cash flows from ivestig activities : Fixed assets Purchase (22,882) (22,882) Sale 1, Iterest received 1,353 1,503 Divided received 6,886 4,287 Ivestmets Purchase (196,962) (217,299) Sale/redemptio 199, ,766 Ivestmet i Joit Veture (600) Divestmet i Joit Veture 5,344 Sale of Log Term (Trade) Ivestmets 6,355 Tax o divestmet of Joit Veture (417) Ivestmet i bak deposits (havig origial maturity of more tha three moths) (31,001) (15,502) Redemptio / Maturity of bak deposits (havig origial maturity of more tha three moths) 13,002 13,504 Net cash used for ivestig activities (21,863) 774 III. Cash flows from fiacig activities : Fiace cost (461) (541) Divided paid (icludig tax o divided) (35,439) (34,518) Net cash used for fiacig activities (35,900) (35,059) IV. Net chage i cash ad cash equivalets (I+II+III) (4,903) 9,964 V. Cash ad cash equivalets at the begiig of the year 11,522 1,558 Cash ad cash equivalets at the ed of the year (IV+V) 6,619 11,522 50

62 52d Aual Report Cash Flow Statemet for the year eded March 31, 2013 (Cotd.) 1) Cash geerated from operatios has bee arrived at as follows : Previous year Profit before exceptioal items ad tax 98,974 77,319 Adjustmets for - a) No cash item /items required to be disclosed separately :- Depreciatio 4,725 4,198 Fiace Costs Iterest icome (gross) (1,760) (1,802) Divided eared (gross) (6,886) (4,287) (Gai)/Loss o assets sold, discarded etc. (1,185) (5) Gai o redemptio /sale of ivestmets (et) (6,215) (2,276) Provisio for doubtful debts (10,713) (3,277) b) Chages i workig capital ad other provisios :- Trade Receivable (17,811) 3,628 Ivetories 3,726 (4,865) Loas ad Advaces (7,269) (5,988) Trade Payable 5,991 (5,282) Log term liabilities 34 (509) Other curret liabilities 2,855 4,066 Provisios 3, (8,830) (8,245) Total adjustmets (a+b) (19,543) (11,522) Cash geerated from operatios 79,431 65,797 2) Purchase of fixed assets iclude paymets for items i capital work i progress ad advaces for purchase of fixed assets. Adjustmets for icrease/decrease i liabilities related to acquisitio of fixed assets have bee made to the extet idetified. 51

63 Cash Flow Statemet for the year eded March 31, 2013 (Cotd.) 3) Cash ad cash equivalets comprise : Cash i had Balaces with bak o curret accout 6,615 7,518 1,553 Balaces with bak o deposit accout (less tha 3 moths maturity) 4,000 Total 6,619 11,522 1,558 4) The figures i brackets represet outflows of cash ad cash equivalets. 5) Previous year's figures have bee regrouped/reclassified, wherever ecessary. I terms of our report of eve date For Price Waterhouse For ad o behalf of the Board Firm Registratio No E Chartered Accoutats Jeetedra Mirchadai Aat J. Talaulicar Nasser Mujee Parter Chairma & Director Membership Number Maagig Director Mumbai Mumbai Date: May 10, 2013 Date: May 10, 2013 Trivikram Guda Geeral Maager Legal & Compay Secretary 52

64 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Summary of Sigificat accoutig policies a) Basis of preparatio of fiacial statemets (i) (ii) (iii) The fiacial statemets are prepared uder historical cost covetio as a goig cocer o accrual basis ad to comply i all material aspects with all the applicable accoutig priciples i Idia, the applicable accoutig stadards otified uder sectio 211 (3C) of the Compaies Act, 1956 ad the relevat provisios of the Compaies Act, All assets ad liabilities have bee classified as curret ad o-curret as per the Compay s ormal operatig cycle ad other criteria set out i the Schedule VI to the Compaies Act, Based o the ature of products ad services ad their realisatio i cash ad cash equivalets, the Compay has ascertaied its operatig cycle as 12 moths for the purpose of curret ad o-curret classificatio of assets ad liabilities. The preparatio of fiacial statemets i coformity with geerally accepted accoutig priciples requires maagemet to make estimates ad assumptios that affect the reported amouts of assets, liabilities, reveue ad expeses ad disclosure of cotiget assets ad liabilities. The estimates ad assumptios used i the accompayig fiacial statemets are based upo maagemet s evaluatio of the relevat facts ad circumstaces as of the date of the fiacial statemets. Actual results may differ from the estimates ad assumptios used i preparig the accompayig fiacial statemets. Ay revisios to accoutig estimates are recogised prospectively i curret ad future periods. b) Fixed assets ad depreciatio (i) (ii) c) Ivestmets Tagible assets are stated at cost of acquisitio or costructio less accumulated depreciatio. All sigificat costs relatig to the acquisitio ad istallatio of Tagible assets are capitalised. Depreciatio is provided usig the straight-lie method i the maer specified i Schedule XIV to the Compaies Act, 1956 ad at rates prescribed therei or based o the useful life of assets, whichever is higher. Leasehold lad is amortised over the period of lease. Computers ad related assets are depreciated over a period of four years. Itagible assets are recorded at the cosideratio paid for acquisitio. Itagible assets are amortized over a period of their respective useful lives ragig betwee three years to seve years. Ivestmets that are readily realisable ad are iteded to be held for ot more tha oe year from the date, o which such ivestmets are made, are classified as curret ivestmets. All other ivestmets are classified as log-term ivestmets. Curret ivestmets (excludig curret portio of log-term ivestmets) are carried at cost or fair value, whichever is lower. Log-term ivestmets are carried at cost. However, provisio for dimiutio is made to recogise a declie, other tha temporary, i the value of ivestmets. d) Ivetories Ivetories are stated at lower of cost ad et realisable value after providig for obsolescece. The material costs are determied o weighted average basis ad the valuatio of maufactured goods represets the combied cost of material, labour ad all maufacturig overheads. Material i trasit is valued at cost icurred till date. e) Foreig currecy trasactios Trasactios i foreig currecies are accouted at the exchage rates prevailig o the date of trasactios. Moetary foreig currecy curret assets ad liabilities are traslated at the year-ed exchage rates. The resultig profits ad losses are appropriately recogised i the Statemet of Profit ad Loss. The Compay uses foreig exchage forward cotracts to cover its foreig currecy cash flow risks, arisig from exposures from exports ad imports, agaist movemets i foreig exchage rates. Foreig exchage forward cotracts are ot used for tradig or speculatio purpose. Premium/Discouts are recogized over the life of the cotracts. Exchage differeces at the ed of each accoutig period are recogized i the Statemet of Profit ad Loss ad correspodigly i the Balace sheet agaist the respective lie items covered. 53

65 Notes to Fiacial Statemets for the year eded March 31, 2013 f) Reveue recogitio (i) (ii) (iii) (iv) Sales are recogised whe the substatial risks ad rewards of owership i the goods are trasferred to the buyer as per the terms of the cotract ad are recogised et of sales tax/value added tax ad excise duty. Reveue from Log Term Service Cotracts is recogized usig the proportioate completio method. Completio is determied as a proportio of cost icurred to date to the total estimated cotract cost. Provisio is made for ay loss i the period i which it is foresee. Billig i excess of cotract reveue has bee reflected as Ueared Reveue uder Liabilities i the Balace Sheet. I case of other Service cotracts, reveue is recogized o a straight lie basis. Divided icome from ivestmets is recogised whe the right to receive paymet is established. Iterest icome is recogised o a time proportio basis takig ito accout the amout outstadig ad the rate applicable. g) Lease charges uder operatig leases Lease charges uder operatig leases are recogised as expese o straight-lie basis over the lease term. h) Product warraty ad New Egie Performace Ispectio (NEPI) fees Product warraty costs ad New Egie Performace Ispectio fees are accrued i the year of sale of products, based o past experiece. The Compay periodically reviews the adequacy of above provisios ad adjusts, if ecessary, the accrued provisio, for actual experiece. i) Employee beefits (i) (ii) Post-employmet Beefits a) Defied Cotributio Plas: The Compay has Defied Cotributio Plas for Post employmet beefits i the form of Superauatio Fud for maagemet employees ad Providet Fud for o maagemet employees which is admiistered by Life Isurace Corporatio / Regioal Providet Fud Commissioer. I case of Superauatio Fud for maagemet employees ad Providet Fud for o maagemet employees the Compay has o further obligatio beyod makig the cotributios. b) Defied Beefit Plas: Fuded Pla: The Compay has defied beefit plas for Post-employmet beefits i the form of Gratuity for all employees, pesio for o maagemet employees ad Providet Fud for maagemet employees which are admiistered through Compay maaged Trust / Life Isurace Corporatio (LIC). Ufuded Pla: The Compay has ufuded Defied Beefit plas i the form of Post Retiremet Medical Beefits ad Ex-gratia beefits as per the policy of the Compay. Liability for above defied beefit plas is provided o the basis of valuatio, as at the Balace Sheet date, carried out by idepedet actuary. The actuarial method used for measurig the liability is the Projected Uit Credit method. I case of Providet Fud for maagemet employees, the Compay has a obligatio to make good the shortfall, if ay, betwee the retur from the ivestmets of the trust ad the otified iterest rate. The Compay s cotributios ad such shortfall are charged to the Statemet of Profit ad Loss as ad whe icurred. Other Log-term Employee Beefits: Liability for Compesated Abseces is provided o the basis of valuatio, as at the Balace Sheet date, carried out by idepedet actuary. The Actuarial valuatio method used for measurig the liability is the Projected Uit Credit method. Uder this method, projected accrued beefit is calculated at the begiig of the year ad agai at the ed of the year for each beefit that will accrue for active members of the Pla. The projected accrued beefit is based o the Pla s accrual formula ad upo service as of the begiig or ed of the year, 54

66 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, 2013 (iii) (iv) but usig a member s fial compesatio, projected to the age at which the employee is assumed to leave active service. The Pla liability is the actuarial preset value of the projected accrued beefits as at the ed of the year for active members. Termiatio beefits are recogized i the Statemet of Profit ad Loss as a expese as ad whe icurred. The Actuarial gais ad losses arisig durig the year are recogized i the Statemet of Profit ad Loss of the year without resortig to ay amortizatio. j) Research ad developmet costs Research ad developmet expediture of a capital ature is added to Fixed Assets. All other research ad developmet expediture is writte off i the year i which it is icurred. k) Icome Tax Provisio for curret icome tax is made o the assessable icome at the tax rate applicable to the relevat assessmet year. Deferred icome taxes are recogised for the future tax cosequeces attributable to timig differeces betwee the fiacial statemet carryig amouts of existig assets ad liabilities ad their respective tax bases. The effect o deferred tax assets ad liabilities of a chage i the tax rates is recogised usig the tax rates ad tax laws that have bee eacted or substatively eacted by the balace sheet date. Deferred tax assets arisig from uabsorbed depreciatio or carry forward of losses uder tax laws are recogised oly to the extet that there is virtual certaity of realizatio. Other deferred tax assets are recogised ad carried forward to the extet that there is reasoable certaity of realizatio. l) Provisios ad Cotiget Liabilities A provisio is recogised whe there is a preset obligatio as a result of past evet; it is probable that a outflow of resources will be required to settle the obligatio, i respect of which a reliable estimate ca be made. These are reviewed at each balace sheet date ad adjusted to reflect the curret best estimates. A disclosure for a cotiget liability is made where there is a possible obligatio or a preset obligatio that may, but probably will ot, require a outflow of resources. m) Impairmet of Asset The Compay tests for impairmets at the close of the accoutig period if ad oly if there are idicatios that suggest a possible reductio i the recoverable value of a asset. If the recoverable value of a Asset, i.e. the et realizable value or the ecoomic value i use of a cash geeratig uit, is lower tha the carryig amout of the asset the differece is provided for as impairmet. However, if subsequetly the positio reverses ad the recoverable amout becomes higher tha the the carryig value the provisio to the extet of the the differece is reversed, but ot higher tha the amout provided for. 55

67 Notes to Fiacial Statemets for the year eded March 31, Share Capital Authorised : As at As at March 31, 2013 March 31, ,000,000 equity shares of ` 2 each 8,000 8,000 Issued, Subscribed ad Fully paid-up shares : 277,200,000 equity shares of ` 2 each 5,544 5,544 Total 5,544 5,544 a. Recociliatio of umber of shares Equity shares: As at As at March 31, 2013 March 31, 2012 No. of Shares No. of Shares Balace as at the begiig of the year 277,200,000 5, ,000,000 3,960 Add : Bous shares Issued durig the year * 79,200,000 1,584 Balace as at the ed of the year 277,200,000 5, ,200,000 5,544 * Equity shares allotted as fully paid bous shares by capitalizatio of Geeral Reserves. b. Rights, prefereces ad restrictios attached to shares The Compay has oly oe class of equity shares havig a par value of ` 2 per share. Each shareholder is etitled to oe vote per share held. The divided proposed by the Board of Directors is subject to the approval of the shareholders i the esuig Aual Geeral Meetig, except i case of iterim divided. I the evet of liquidatio of the Compay, the equity shareholders are eligible to receive remaiig assets of the Compay, after distributio of all preferetial amouts, i the proportio to their shareholdig. c. Of the above equity shares, 141,372,000 (previous year 141,372,000) shares of ` 2 each are held by the Holdig Compay, Cummis Ic. USA d. Details of shareholders holdig more tha 5% of the aggregate shares i the Compay As at As at March 31, 2013 March 31, 2012 Nos. % Nos. % Equity shares of ` 2 each fully paid Cummis Ic., the holdig compay 141,372, % 141,372, % Life Isurace Corporatio of Idia 21,522, % 23,619, % (Through various schemes) e. Shares allotted as fully paid up by way of bous shares (durig 5 years immediately precedig March 31, 2013) : Equity shares allotted as fully paid up bous shares by Year No. of Shares capitalizatio of Free Reserves 31 March March ,200, March March March

68 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Reserves ad surplus As at As at March 31, 2013 March 31, 2012 Capital Redemptio Reserve Accout Geeral Reserve Balace as at the begiig of the year 100,561 96,232 Less: Amouts utilised for issue of fully paid bous shares 1,584 Add: Trasferred from surplus i Statemet of Profit ad Loss durig the year 7,641 5,913 Balace as at the ed of the year 108, ,561 Surplus i Statemet of Profit ad Loss Balace as at the begiig of the year 98,140 80,365 Profit for the Year 76,411 59,127 Less: Appropriatios Proposed Divided (` 8 per share (previous year ` 6 per share)) 22,176 16,632 Iterim Divided (` 5 per share (previous year ` 5 per share)) 13,860 13,860 Divided Distributio Tax 6,017 4,947 Trasfer to Geeral Reserve 7,641 5,913 Total appropriatios 49,694 41,352 Balace as at the ed of the Year 124,857 98,140 Total Reserves ad Surplus 233, , Log-term Liabilities Dealer Deposit 1,180 1,226 Ueared reveue Others 195 Total 1,504 1, Log-term Provisios Provisio for employee beefits Provisio for post retiremet beefit ad leave etitlemet (Note 42) 4,750 3,574 4,750 3,574 Other provisios (Note 32) Provisio for warraties 5,928 4,246 Provisio for statutory matters 1,670 1,649 Provisio for New Egie Performace Ispectio (NEPI) ,185 6,491 Total 12,935 10,065 57

69 Notes to Fiacial Statemets for the year eded March 31, Other Curret Liabilities As at As at March 31, 2013 March 31, 2012 Ueared reveue Upaid Divided Statutory Dues 1,623 1,508 Advaces from Customers Royalty 5,236 5,289 Others 9,666 6,497 Total 18,038 15, Short-term Provisios Provisio for employee beefits Provisio for post retiremet beefit ad leave etitlemet (Note 42) Other provisios Provisio for warraties (Note 32) 7,197 6,108 Provisio for NEPI (Note 32) 1,187 1,480 Proposed divided 22,176 16,632 Tax o proposed divided 3,769 2,698 34,329 26,918 Total 34,882 27,492 58

70 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Fixed Assets Particulars Tagible Assets: Gross block (at cost) Depreciatio ad Amortisatio Net block As at Additios Deductios As at As at Additios Deductios As at As at As at April 1, 2012 March 31, 2013 April 1, 2012 March 31, 2013 March 31, 2013 March 31, 2012 Lad Leasehold ** 245 1,319 1, , Leasehold Improvemets Roads 1, , ,636 1,640 Buildigs 15, ,482 2, ,764 12,718 12,770 Plat ad machiery 71,819 5, ,634 42,904 3, ,397 30,237 28,915 Furiture ad fittigs 1, , ,367 1,210 Vehicles ,885 7, ,002 45,990 4, ,044 48,958 45,895 (77,831) (15,118) (1,064) (91,885) (43,006) (3,982) (998) (45,990) (45,895) ( ) Itagible Assets: Software * Techical Kowhow 2,060 2,060 1, , Global Sourcig Cosideratio 2,143 2,143 2,143 2,143 5,145 5,145 4, , (5,145) ( ) ( ) (5,145) (4,333) (216) ( ) (4,549) (596) ( ) Icludes reservatios by Pue Muicipal Corporatio for Garde, Ecoomically Weaker Sectio (EWS), Materity Home ad Road. ** Pedig fialisatio of formal leasehold agreemet with MIDC * Amout is below Roudig Off Norms adopted by the Compay Figures i brackets are i respect of the previous year. 59

71 Notes to Fiacial Statemets for the year eded March 31, No Curret Ivestmets: Face value As at As at per uit March 31, 2013 March 31, 2012 Number ` Log-term Ivestmets Trade Ivestmets (valued at cost) a) Quoted equity istrumets 5,155,163 2 KPIT Cummis Ifosystems Limited b) Uquoted equity istrumets Ivestmets i Joit Vetures : (refer ote o. 33) 9,500, Valvolie Cummis Limited , Cummis Research ad Techology Idia Limited , Cummis Svam Sales & Service Limited Ivestmet i Associates : 779, Cummis Geerator Techologies Idia Limited (% Holdig : 48.54%) 1,720 1,720 Other Ivestmets (valued at cost uless stated otherwise) a) Quoted equity istrumets Housig Developmet Fiace Corporatio Limited 3,336 3, HDFC Bak Limited 0 15,000 2 Kirloskar Oil Egies Limited * 0 0 1, Kirloskar Idustries Limited * b) Uquoted equity istrumets 1, The Shamrao Vithal Co-operative Bak Limited * 0 0 1, The Saraswat Co-operative Bak Limited * c) Quoted Tax Free Redeemable / No Cumulative Bods 5.50% Nuclear Power Corporatio Limited Carried forward 3,336 4,048 60

72 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, No Curret Ivestmets: (Cotd.) Face value As at As at per uit March 31, 2013 March 31, 2012 Number ` Brought forward 3,336 4,048 d) Quoted Govermet of Idia Bods 1 50,000, % Govermet of Idia ,000, % Govermet of Idia ,000, % Govermet of Idia ,851 1,851 e) Quoted Corporate Bods 12 1,250, % Power Grid Corporatio of Idia f) Uquoted Mutual Fuds Debt Fud (Growth Optio) DWS Fixed Maturity Pla - Series 10 (DFMP - 10) - Growth 500 DWS Fixed Maturity Pla - Series 6 (DFMP - 6) - Growth 500 IDFC FMP 13 MS 8 -Growth 500 1,500 Total 5,339 7,551 Aggregate cost of quoted ivestmets 2,204 2,916 Aggregate cost of uquoted ivestmets 3,135 4,635 5,339 7,551 Aggregate market value of quoted ivestmets 6,670 14,333 * Amout is below the roudig off orm adopted by the Compay 61

73 Notes to Fiacial Statemets for the year eded March 31, Deferred Tax Assets / (Liability) (et) As at As at March 31, 2013 March 31, 2012 Deferred Tax Asset Provisio for doubtful debts Provisio for employee beefits 1,681 1,202 Disallowaces uder Icome Tax Act, Other timig differeces 3,172 Total Deferred Tax Asset 2,437 5,085 Deferred Tax Liability Depreciatio 5,715 4,390 Total Deferred Tax Liability 5,715 4,390 Net Deferred Tax Asset / (Liability) (3,278) Log-term Loas ad Advaces Usecured, Cosidered good; Capital advaces 19,242 11,268 Security deposits 1,356 1,236 Other Loas ad Advaces: Balaces with statutory/govermet authorities 23,188 19,962 Advace icome-tax (et of provisio for taxatio) 3,364 1,542 Others Total 47,263 34,294 62

74 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Curret Ivestmets: Face value As at As at per uit March 31, 2013 March 31, 2012 Number ` At Cost: Curret portio of Log term ivestmets a) Quoted Tax Free Redeemable / No Cumulative Bods 5.75% Natioal Housig Bak , % Nuclear Power Corporatio Limited 500 b) Uquoted Mutual Fuds Fixed Maturity Pla (Growth Optio) Birla Su Life Fixed Term Pla - Series CY - Growth 500 HDFC FMP 370D Jue 2011 (2) - Growth Optio 500 ICICI Prudetial Fixed Maturity Pla Series 54-1 Year Pla A - Growth 500 5,000, IDFC FMP YS 65 - Growth Kotak FMP Series 45 (370 Days) - Growth 500 SBI Debt Fud Series Days 13 - Growth 531 UTI-FTIF Series-XI Pla III (368 Days) Growth Optio 1,000 5,000, Birla Su Life Iterval Icome Fud - Aual Pla II-Direct Pla-Growth 500 5,000, Birla Su Life Iterval Icome Fud - Aual Pla III-Direct Pla-Growth 500 5,000, DWS Fixed Maturity Pla - Series 10 (DFMP - 10) - Growth 500 5,410, DWS Fixed Maturity Pla - Series 24 (DFMP - 24) - Direct Pla - Growth 541 5,000, DWS Fixed Maturity Pla - Series 6 (DFMP - 6) - Growth 500 5,000, HDFC Aual Iterval Fud - Series I - Pla B- Direct Optio-Growth Optio 500 5,872, HDFC FMP 371D August 2012 (1)-Growth Optio 587 5,000, ICICI Prudetial Fixed Maturity Pla-Series Days Pla B - Direct Pla - Cumulative 500 5,000, IDFC FMP 13 MS 8 -Growth 500 5,000, IDFC FMP 366 DS 73 -Growth 500 Carried forward

75 Notes to Fiacial Statemets for the year eded March 31, Curret Ivestmets: (Cotd.) Face value As at As at per uit March 31, 2013 March 31, 2012 Number ` Brought forward ,000, IDFC FMP 366 DS 74 - Growth 500 5,000, IDFC FTP Series 13 -Direct Pla-Growth 500 5,000, IDFC YS Iterval Fud - Series III -Direct Pla- Growth 500 5,000, Kotak FMP Series 87 (370 Days) - Growth 500 5,000, Kotak FMP Series 88 (370 Days) - Growth 500 5,000, Kotak FMP Series 94 - Direct - Growth 500 5,000, L&T FMP- VII (March367D A) - Growth - Direct pla 500 5,000, TFMP Series 40 Scheme F - Growth Optio 500 5,000, UTI FTIF Series XIV -V (366 DAYS) Growth Optio -DIRECT 500 5,000, UTI-FTIF Series-XII Pla IV (369 Days) Growth Optio 500 5,000, Birla Su Life Fixed Term Pla - Series HD (366 days) - Direct Pla-Growth 500 5,000, Birla Su Life Fixed Term Pla-Series FD-Growth 500 5,000, Birla Su Life Fixed Term Pla-Series FP-Growth 500 5,000, HDFC Aual Iterval Fud - Series I - Pla A- Direct Optio-Divided Optio 500 5,000, ICICI Prudetial Fixed Maturity Pla-Series Days Pla D - Direct Pla - Cumulative 500 5,000, ICICI Prudetial Fixed Maturity Pla-Series Days Pla F - Direct Pla - Cumulative 500 5,000, ICICI Prudetial Fixed Maturity Pla-Series Days Pla H - Direct Pla - Cumulative 500 5,000, SBI Debt Fud Series Days Growth 500 5,000, SBI Debt Fud Series Days Growth ,000, SBI Debt Fud Series Days Growth 1,000 5,013, SBI Debt Fud Series Days Growth 501 5,000, SBI Debt Fud Series Days Direct Pla - Growth ,129 4,031 Total Curret portio of Log Term Ivestmets 17,629 4,445 64

76 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Curret Ivestmets: (Cotd.) Face value As at As at per uit March 31, 2013 March 31, 2012 Number ` At Cost or market value whichever is lower Uquoted Mutual Fuds Fixed Maturity Pla (Divided Optio) Birla Su Life Fixed Term Pla-Series DH-Divided 1,010 Birla Su Life Fixed Term Pla-Series DQ-Divided 500 Birla Su Life Fixed Term Pla-Series DS-Divided 500 Birla Su Life Fixed Term Pla-Series DT-Divided 500 Birla Su Life Fixed Term Pla-Series EA-Divided 500 Birla Su Life Fixed Term Pla-Series EB-Divided 546 Birla Su Life Fixed Term Pla-Series EF-Divided 500 Birla Su Life Fixed Term Pla-Series EK-Divided 500 Birla Su Life Fixed Term Pla-Series EM-Divided 500 Birla Su Life Fixed Term Pla-Series EQ-Divided 500 Birla Su Life Short Term FMP- Series 29-Divided 500 DSP BlackRock FMP - Series 23-12M - Divided Optio 500 DWS Fixed Maturity Pla - Series 1 (DFMP - 1) - Divided (Payout Optio) 500 DWS Fixed Term Fud - Series 88- Divided (Payout ad Sweep) 500 Fidelity Fixed Maturity Pla Series VI- Pla C - Divided Optio 546 HDFC FMP 370D February 2012 (3) - Divided Optio 500 HDFC FMP 370D Jauary 2012 (1) - Divided Optio 500 HDFC FMP 370D JULY 2011 (1) - Normal Divided Optio 500 HDFC FMP 370D November 2011 (2) - Divided Optio 1,000 HDFC FMP 370D November 2011 (3) Divided Optio 500 ICICI Prudetial Fixed Maturity Pla - Series 56-1 Year Pla E Cumulative 500 ICICI Prudetial Fixed Maturity Pla - Series 59-1 Year Pla B Divided 500 ICICI Prudetial Fixed Maturity Pla-Series 62-1 Year Pla C Divided 500 IDFC FMP - YS 46 -Divided 505 Carried forward 65

77 Notes to Fiacial Statemets for the year eded March 31, Curret Ivestmets: (Cotd.) Face value As at As at per uit March 31, 2013 March 31, 2012 Number ` Brought forward IDFC FMP YS Divided 500 IDFC FMP -QS-69 - Divided 500 IDFC FMP YS 49 - Divided 500 IDFC FMP YS 52 - Divided 1,000 IDFC FMP YS 53 - Divided 625 IDFC FMP YS 54 -Divided 1,000 IDFC FMP YS 59 -Divided 500 IDFC FMP YS-62 - Divided 1,000 Kotak FMP Series 56 (370 Days) - Divided 500 Kotak FMP Series 69 (370 Days) - Divided 500 Kotak FMP Series 70 (370 Days) - Divided 548 Kotak FMP Series 72 (370 Days) - Divided 500 Kotak FMP Series 79 (370 Days) - Divided 500 SBI Debt Fud Series Days Divided 500 SBI Debt Fud Series Days Divided 506 SBI Debt Fud Series Days Divided 500 SBI Debt Fud Series Days Divided 500 SBI Debt Fud Series Days Divided 500 SBI Debt Fud Series Days Divided 500 SBI Debt Fud Series Days Divided 505 SBI SDFS 367 DAYS DIVIDEND PAYOUT 500 TFMP 37 Scheme C- Periodic Divided Optio 1,000 TFMP 39 Scheme A- Periodic Divided 500 TFMP Series 36 B Periodic Divided Payout Optio 500 UTI F I I F Series II -Quarterly Iterval Pla VI- Divided Optio 500 UTI F I I F Aual Iterval Pla Series II Istitutioal Divided Optio 500 UTI Fixed Icome Iterval Fud Aual Iterval Pla Series I ( Ist Divided Optio ) 500 UTI Fixed Iterval Icome Fud (Aual Iterval Fud) Series III Ist Divided Optio 500 UTI-FTIF Series-XI Pla IV (367 Days)- Divided Optio 500 UTI-FTIF Sr. X Pla VI (368 Days) Divided Optio 549 UTI-FTIF Sr. X Pla VIII (368 Days) Divided Optio 500 UTI-FTIF Sr. X Pla X (367 Days) Divided Optio 500 Carried forward 31,340 66

78 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Curret Ivestmets: (Cotd.) Face value As at As at per uit March 31, 2013 March 31, 2012 Number ` Brought forward 31,340 Liquid Fud (Divided) Birla Su Life Floatig Rate Fud-Short Term Pla- Istitutioal Divided 4,167 1,005, Birla Su Life Ultra Short Term Fud - Daily Divided 1,006 40,137, Birla Su Life Short Term Fud-Pla C(Mothly Divided) 4,668 DWS Ultra Short Term Fud- Ist Pla - Daily Divided 1 40,977, DWS Treasury Fud Ivestmet Pla Regular Divided optio 4,189 5,011, DWS Bakig ad PSU Debt fud- Regular Pla- Mothly Divided 501 DWS Ista Cash Plus Fud Super Istitutioal Pla- Daily Divided 501 4,687, DWS MONEY PLUS FUND - INST DIVIDEND 521 HDFC Liquid Fud-Premium Pla - Divided-Daily 397 5,001, HDFC Floatig Rate Icome Fud-Short Term Pla - Wholesale Optio - Divided - Daily 504 4,462, HDFC Icome Fud-Divided 509 ICICI Prudetial Liquid Pla -Super Istitutioal Divided Daily 156 4,317, ICICI Prudetial Flexible Icome - Regular Pla - Daily Divided 4,565 IDFC CF-Pla C-Daily Divided 1,226 IDFC Ultra Short Term Fud - Daily Divided 1,581 16,090, IDFC Ultra Short Term Fud -Regular Pla- Daily Divided 1,611 45,760, IDFC-Moey Maager Fud-Ivestmet Pla-Regular Pla-Mothly Div. 4,652 5,046, IDFC Super Saver Icome Fud - Short Term - Regular Pla-Fortightly Divided 516 Kotak Liquid-Istitutioal Premium Pla - (Daily Divided) 1,102 10,505, Kotak Floater Log-Term-Daily Divided 1,059 24,902, L&T Ultra Short Term Fud- Daily Divided 2,530 SBI Magum Icome Fud - F R P - Short Term - Daily (D) 2,126 SBI Premier Liquid Fud - Istitutioal - Daily Divided 1,403 Carried forward 31,340 67

79 Notes to Fiacial Statemets for the year eded March 31, Curret Ivestmets: (Cotd.) Face value As at As at per uit March 31, 2013 March 31, 2012 Number ` Brought forward 31, ,244 1,010 SBI MAGNUM INSTA CASH FUND - LIQUID FLOATER - DIRECT PLAN - DAILY DIVIDEND 3, ,489 1,001 SBI ULTRA SHORT TERM DEBT FUND - REGULAR PLAN -DAILY DIVIDEND 1,096 9,151, SBI SHORT TERM DEBT FUND - REGULAR PLAN - MONTHLY DIVIDEND 1,032 82,889 1,004 Tata Floater Fud- Pla A- Daily Divided 832 Tata Liquid Super High Ivestmet Pla - Daily 1,224 UTI- Liquid Fud-Cash Pla-INST - Icome 2, ,120 1,077 UTI - FLOATING RATE STP-DAILY DIVIDEND-Direct 4, ,649 1,000 UTI - Treasury Advatage Fud - Istitutioal-Daily Divided 2,467 Liquid Fud (Growth) 39,288 16,419 3,213, ICICI Prudetial Icome Opportuities Fud - Regular Pla - Growth 500 Total Curret Ivestmets 39,788 47,759 Total 57,417 52,204 Aggregate cost of quoted ivestmets Aggregate cost of uquoted ivestmets 56,917 51,790 57,417 52,204 Aggregate market value of quoted ivestmets

80 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Ivetories Raw materials ad compoets (icludes i trasit ` 4,692 lacs (previous year ` 7,549 Lacs )) As at As at March 31, 2013 March 31, ,653 29,988 Work-i-progress 8,119 8,227 Fiished goods 16,815 16,583 Traded goods (icludig stock-i-trasit ` 63 lacs (previous year ` 275 lacs)) Stores ad spares Loose tools Total 53,035 56, Trade Receivables Secured, cosidered good Outstadig for a period exceedig six moths from the date they are due for paymet Others 2,800 2,692 Usecured, cosidered good Outstadig for a period exceedig six moths from the date they are due for paymet 1,095 1,150 Others 81,482 63,941 Usecured, cosidered doubtful Outstadig for a period exceedig six moths from the date they are due for paymet Others Less: Provisio for doubtful debts (555) (440) Total 85,499 67,834 69

81 Notes to Fiacial Statemets for the year eded March 31, Cash ad bak balaces Cash ad cash equivalets As at As at March 31, 2013 March 31, 2012 Cash o had 4 4 Bak Balaces I curret accouts 6,615 7,518 Demad Deposits (less tha 3 moths maturity) 4,000 Sub-Total 6,619 11,522 Other bak balaces Deposits with origial maturity of more tha 3 moths but less tha 12 moths 28,501 10,502 Upaid divided accout (restricted) Sub-Total 28,846 10,828 Total 35,465 22, Short-term Loas ad Advaces Usecured, Cosidered good Security deposits Loa ad advaces to related parties 3,097 1,571 Other Loas ad Advaces Balaces with statutory/govermet authorities 7,103 9,158 Others 10,028 5,452 Total 20,619 16, Other Curret Assets Usecured, Cosidered good Iterest accrued o ivestmets Total

82 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Reveue from operatios Year eded Year eded March 31, 2013 March 31, 2012 Sale of products (Note 34) 464, ,096 Sale of services (Note 34) 17,245 14,452 Other operatig reveue Scrap sales 1,061 1,078 Export Icetives 2,064 1,916 Commissio 564 1,112 Other 4,349 2,399 Reveue from operatios (gross) 489, ,053 Less: Excise duty 31,061 29,331 Reveue from operatios (et) 458, , Other icome Icome from ivestmets: Iterest Icome - O Bods (Log Term Ivestmets) O Fixed Deposits with Baks 1,563 1,085 1,746 1,266 Divided Icome Other tha trade - O Curret Ivestmets 4,872 2,883 - O Log Term Ivestmets i Associates ad Joit Vetures 2,014 1,404 6,886 4,287 Gai o sale/redemptio of ivestmets - O Curret Ivestmets 1,307 - O Log Term ivestmets 4,908 2,276 6,215 2,276 Iterest o icome tax refuds, from customers ad o deposits, etc Provisio for earlier years writte back 452 Exchage gai (et) 1,645 1,396 Net gai o fixed assets sold or discarded 1,185 5 Miscellaeous icome 2,981 2,115 Total 20,672 12,333 71

83 Notes to Fiacial Statemets for the year eded March 31, Chage i ivetories of fiished goods, work-i-progress ad traded goods Year eded Year eded March 31, 2013 March 31, 2012 Ivetories at the ed of the year Work-i-progress 8,119 8,227 Fiished goods 16,815 16,583 Traded goods ,381 25,400 Ivetories at the begiig of the year Work-i-progress 8,227 9,025 Fiished goods 16,583 9,554 Traded goods ,400 19,510 Total 19 (5,890) 21. Employee beefit expese Salaries, wages ad bous 27,905 25,490 Cotributio to providet ad other fuds 3,534 2,457 Staff welfare expeses 2,423 2,447 Total 33,862 30, Fiace costs Iterest Bak charges Total

84 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Other expeses Year eded Year eded March 31, 2013 March 31, 2012 Commissio o sales 3,108 2,894 Cosumptio of stores ad spare parts 5,501 4,341 Warraty Expeses (Note 32) 10,770 7,943 Tools ad gauges Repairs to buildigs Repairs to machiery Other repairs Power ad fuel cosumed 3,809 3,175 Ret (Note 30) 1,397 1,156 Rates ad Taxes Isurace Outside Processig charges 2,276 2,867 Doatios ad cotributios Techical fees ad royalties 6,502 6,488 Paymet to Auditors (Refer details below) Other expeses (Note 29) 15,292 13,611 Total 52,845 47,061 Paymet to Auditors: Statutory Audit (icludig Limited Reviews) Other services Reimbursemet of expeses 2 3 Total

85 Notes to Fiacial Statemets for the year eded March 31, Exceptioal items Year eded Year eded March 31, 2013 March 31, 2012 Profit o Sale of shares * 6,159 5,144 Total 6,159 5,144 * Exceptioal Items represets profit o sale of log term (trade) ivestmets. 25. Earig per share (EPS) Earigs per share is calculated by dividig the profit attributable to the Equity Shareholders by the weighted average umber of Equity Shares outstadig durig the year. The umbers used i calculatig basic ad diluted earigs are stated below : March 31, 2013 March 31, 2012 (a) Profit for the year after taxatio () 76,411 59,127 (b) Weighted average umber of shares outstadig durig the year 277,200, ,200,000 (c) Earigs per share (Basic ad Diluted) (`) Face value per share (`)

86 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Capital ad other commitmets As at As at March 31, 2013 March 31, 2012 Estimated amout of cotracts i capital accout remaiig to be executed (et of capital advaces) 33,555 42, Trade payables iclude: Total outstadig dues of micro ad small eterprises 605 4,184 Details of dues to micro ad small eterprises as defied uder the MSMED Act, 2006 are as uder: 1 Pricipal Amout 605 4,184 2 Iterest accrued 3 Paymet made to suppliers (other tha iterest) beyod the appoited day, durig the year 4,022 9, Iterest paid to suppliers uder MSMED Act, 2006 (other tha sectio 16) 5 Iterest paid to suppliers uder MSMED Act, 2006 (Sectio 16) Iterest due ad payable to suppliers uder MSMED Act, 2006 for the paymets already made 7 Iterest accrued ad remaiig upaid at the ed of the year to suppliers uder MSMED Act, 2006 The Compay has compiled this iformatio based o itimatios received from the suppliers of their status as Micro or Small Eterprises ad / or its registratio with the appropriate authority uder the Micro, Small ad Medium Eterprises Developmet Act,

87 Notes to Fiacial Statemets for the year eded March 31, Cotiget liabilities As at As at March 31, 2013 March 31, 2012 a. Bills discouted ot matured b. Icome Tax matters 9,385 8,735 c. Cetral excise duty/service tax matters d. Duty drawback matters (excludes iterests, if ay) 4,816 4,816 e. Sales Tax matters 8,315 6,872 f. Claims agaist the Compay ot ackowledged as debts (excludes iterests, pealties if ay, ad claims which caot be quatified) g 9 9 Civil liability / secodary civil liability i respect of suits filed agaist the Compay Total 23,017 21, Other expeses iclude provisio for doubtful debts `147 lacs (previous year ` 354 lacs) 30. Operatig Leases The compay has etered ito o-cacellable operatig leases for warehouse, office ad residetial premises. These lease arragemets rage for a period betwee 12 moths ad 60 moths with lock i period betwee 12 moths ad 24 moths, which iclude both reewal ad o-reewal leases. These leases also iclude escalatio clauses. The miimum lease paymets recogised i the Statemet of Profit ad Loss (icluded uder 'Ret' i ote o. 23) for the year amout to ` 1,397 lacs (previous year ` 1,156 lacs). Future miimum retals payable uder o-cacellable operatig leases are as follows: As at As at March 31, 2013 March 31, 2012 Withi oe year After oe year but ot more tha five years Total The total research ad developmet expeses icurred by the Compay are as uder : Year eded Year eded March 31, 2013 March 31, 2012 a. O capital accout 812 1,023 b. O reveue accout 3,959 3,834 Total 4,771 4,857 76

88 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Disclosure o Provisios made, utilised ad reversed durig the year as per AS-29 (i) Provisio for Warraty The provisio for warraty is o accout of warraties give o products sold by the Compay. The provisio is based o historical iformatio of the ature, frequecy ad average cost of warraty claims ad maagemet estimates regardig possible future icidece. The timig ad amout of cash flows that will arise from these matters will be determied at the time of receipt of claims. Amout expected to be paid i 1 year is classified as Curret As at As at March 31, 2013 March 31, 2012 Balace as at the begiig of the year 10,354 9,390 Additios 11,197 7,943 Utilisatio 7,999 6,979 Reversal 427 Balace as at the ed of the year 13,125 10,354 Classified as No-curret: 5,928 4,246 Classified as Curret: 7,197 6,108 (ii) Provisio for Statutory Matters The provisios for statutory matters are o accout of legal matters where the Compay aticipates probable outflow. The amout of provisio is based o estimates made by the Compay cosiderig the facts ad circumstaces of each case. The timig ad amout of cash flows that will arise from these matters will be determied by the relevat authorities oly o settlemet of these cases. As at As at March 31, 2013 March 31, 2012 Balace as at the begiig of the year 1,649 1,617 Additios Utilisatio 79 Reversal Balace as at the ed of the year 1,670 1,649 Classified as No-curret: 1,670 1,649 Classified as Curret: 77

89 Notes to Fiacial Statemets for the year eded March 31, 2013 (iii) Provisio for New Egie Performace Ispectio (NEPI) The provisio for New Egie Performace Ispectio (NEPI) is o accout of checks to be carried out by the Compay at specified itervals. The provisio is based o historical iformatio of the ature, frequecy ad average cost of claims ad maagemet estimates regardig possible future icidece. The timig ad amout of the cash flows that will arise from these matters will be determied at the time of receipt of claims. Amout expected to be paid i 1 year is classified as Curret. As at As at March 31, 2013 March 31, 2012 Balace as at the begiig of the year 2,076 1,887 Additios 1, Utilisatio Reversal Balace as at the ed of the year 1,774 2,076 Classified as No-curret: Classified as Curret: 1,187 1, The Compay has 50% iterest i Joit Vetures amely Cummis Research ad Techology Idia Limited, Cummis Svam Sales & Service Limited (w.e.f. Jauary 17, 2012), ad Valvolie Cummis Limited icorporated i Idia. The followig represets the Compay's share of Assets ad Liabilities as at 31st March, 2013 ad Icome ad Expeses for the year eded o that date. Iterest i Joit Vetures : As at As at March 31, 2013 March 31, 2012 Assets 26,345 21,072 Liabilities 9,773 6,256 Icome 56,584 45,803 Expeses (icludig provisio for tax) 50,892 42,176 Cotiget Liabilities Capital ad other commitmets 253 1,419 78

90 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Details of Sales Fiished goods: Year eded Year eded March 31, 2013 March 31, 2012 Iteral Combustio Egies 289, ,373 Geeratig sets (icludig semi fiished geeratig sets) powered by Iteral Combustio Egies 44,168 20,696 Traded goods: Egies 16,046 23,834 Spare parts, accessories ad compoets* 83,529 71,862 Sale of Services: Reveue from Service Cotract 17,245 14,452 Total 450, ,217 * icludes sale of traded parts 35. Details of materials cosumed i) Castigs - various 3,018 3,519 ii) Forgigs - various 2,938 2,924 iii) Compoets 209, ,019 iv) Egies 32,282 24,153 v) Log Blocks vi) Others icludig semi-fiished compoets 22,014 45,734 Total 270, ,664 Item (iii) icludes the cost of accessories sold ad cost of purchased compoets sold as spare parts (for the goods maufactured ad sold by the Compay), this activity beig acillary to the Compay's maufacturig activity. 36. Details of purchase of Traded goods Year eded Year eded March 31, 2013 March 31, 2012 Egies 12,891 19,813 Others 5,652 5,955 Total 18,543 25,768 79

91 Notes to Fiacial Statemets for the year eded March 31, Value of imported ad idigeous raw materials ad compoets cosumed Year eded Year eded March 31, 2013 March 31, 2012 Imported 57,672 48,268 % 21% 20% Idegeeously procured 212, ,396 % 79% 80% Total 270, , Value of imports calculated o CIF basis a) Raw materials 6,588 5,765 b) Compoets 44,719 39,428 c) Machiery spares d) Capital goods 623 1,918 e) Tools, stores, etc. 78 1,334 Total 52,113 48, Expediture i foreig currecy (subject to deductio of tax where applicable) o accrual basis a) Royalty 6,502 6,488 b) Others (icludig IT Service charges, Customer Support Charges, travellig, subscriptios, membership fees, commissio o exports, foreig bak charges, etc.) 4,319 3,719 Total 10,821 10, Remittaces durig the year i foreig currecy o accout of divided to o-residet Shareholders were as follows: Number of shareholders 1 1 Number of equity shares (shares of Rs.2 each) 141,372, ,372,000 Amout remitted: For the year eded 31st March, 2013 (Iterim) 7,069 For the year eded 31st March, 2012 (Fial) 8,482 For the year eded 31st March, 2011 (Fial) 8,078 For the year eded 31st March, 2012 (Iterim) 7,069 80

92 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Earigs i foreig exchage Year eded Year eded March 31, 2013 March 31, 2012 Export o FOB basis 127, ,076 Other icome (assembly ad testig charges, developmet charges, 4,562 4,540 recovery of certificatio charges, refud of claims, etc.) Total 131, , Disclosures i Accordace with Revised AS-15 o "Employee Beefits" 1. Defied Cotributios Plas - The Compay has recogised the followig amouts i statemet of Profit ad Loss for the year : Particulars Total Cotributio to Employees Providet Fud 449 (447) Particulars Total Cotributio to Maagemet Superauatio Fud 1013 (873) 2. Defied Beefits Plas - The followig figures are as per actuarial valuatio, as at the Balace Sheet date, carried out by a idepedet actuary. a. A recociliatio of opeig ad closig balaces of the preset value of the Defied Beefit Obligatio (DBO): Sr. No. Particulars Gratuity Pesio Ex- Gratia PRMB PF Total Opeig DBO as o 6,010 1, ,911 16,560 st 01 April 2012 (5,658) (1,831) (73) (55) (7,771) (15,388) i) Curret Service Cost ,061 2,614 (456) (65) (3) (2) (1,289) (1,815) ii) Iterest Cost ,288 (429) (134) (5) (4) (560) (1,132) iii) Actuarial -Gais / Losses (4) (49) (-201) (-6) (17) (264) (123) iv) Beefits Paid (881) (354) (16) (10) (1,654) (2,915) (-582) (-319) (-16) (-8) (-1,261) (-2,186) v) Past Service Cost ( ) ( ) ( ) ( ) ( ) ( ) vi) Acquisitios/ Trasfer out ( ) ( ) ( ) ( ) (288) (288) vii) Pla Amedmets ( ) ( ) ( ) ( ) ( ) ( ) Closig DBO as o 6,964 1, ,436 18,964 st 31 March 2013 (6,010) (1,510) (59) (70) (8,911) (16,560) 81

93 Notes to Fiacial Statemets for the year eded March 31, 2013 b. A recociliatio of the opeig ad closig balaces of the fair value of pla assets: Sr. No. Particulars Gratuity Pesio Ex- Gratia PRMB PF Total Opeig Fair Value of 5,392 2,057 8,719 16,168 Pla Assets (3,973) (2,212) ( ) ( ) (7,764) (13,949) i) Expected Retur o Pla ,379 Assets (363) (164) ( ) ( ) (641) (1,168) ii) Actuarial Gais / -Losses (53) (28) (81) (-80) ( ) ( ) ( ) ( ) (-80) iii) Cotributio by the 419 2,365 2,784 Employer (1,718) ( ) ( ) ( ) (1,575) (3,293) iv) Beefits Paid (881) (354) (1,654) (2,889) (-582) (-319) ( ) ( ) (-1,261) (-2,162) v) Acquisitio/Trasfer out ( ) ( ) ( ) ( ) ( ) ( ) Closig Fair Value of Pla 5,316 1,835 10,210 17,361 Assets (5,392) (2,057) ( ) ( ) (8,719) (16,168) c. Amout recogized i Balace Sheet icludig a recociliatio of the preset value of the defied obligatio i (a) ad the fair value of the pla assets i (b) to the assets ad liabilities recogized i the balace sheet for curret year ad last 3 years : Sr. No. Particulars Gratuity Pesio Ex- Gratia PRMB PF Total i) Preset value of Fuded 6,962 1,445 10,436 18,843 Obligatios (6,010) (1,510) ( ) ( ) (8,720) (16,240) (5,658) (1,831) ( ) ( ) (7,764) (15,254) (4,442) (2,145) ( ) ( ) (6,757) (13,345) ii) Fair value of Pla Assets (5,315) (1,835) (10,210) (17,360) (-5,392) (-2,057) ( ) ( ) (-8,719) (-16,168) (-3,973) (-2,212) ( ) ( ) (-7,764) (-13,949) (-3,986) (-2,501) ( ) ( ) (-6,757) (-13,244) iii) Amout ot recogized as a asset, because of ( ) ( ) ( ) ( ) ( ) ( ) the limit i para 59(b) ( ) (130) ( ) ( ) ( ) (130) ( ) (116) ( ) ( ) ( ) (116) iv) Preset Value of Ufuded Obligatios ( ) ( ) (60) (70) (191) (321) ( ) ( ) (73) (55) (7) (136) ( ) ( ) (84) (58) (2) (144) v) Net Liability/ -Asset 1,647 (130) ,863 recogized i Balace Sheet (618) (-547) (60) (70) (192) (393) (1,686) (-251) (73) (55) (7) (1,570) (456) (-239) (84) (58) (2) (361) vi) Experiece Gai/ -Loss (183) 32 (1) 6 (146) adjustmets o pla (-341) (160) (4) (-19) ( ) (-196) Liabilities (-516) (-24) (-2) (7) ( ) (-535) (94) (221) (-4) (-5) ( ) (307) vii) Experiece Gai/ -Loss (53) (28) (81) adjustmets o pla Assets (-80) ( ) ( ) ( ) ( ) (-80) (94) (35) ( ) ( ) ( ) (129) (-118) (33) ( ) ( ) ( ) (-85) viii) Actuarial Gai/ -Loss due to (680) (46) (1) (2) (729) Chage o assumptios (292) (41) (2) (3) ( ) (338) (-529) (18) (1) (-3) ( ) (-513) (-83) (-6) (-6) (-18) ( ) (-113) 82

94 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, 2013 d. The total expese recogised i the Statemet of Profit ad Loss: Sr. No. Particulars Gratuity Pesio Ex- Gratia PRMB PF Total i) Curret Service Cost ,411 (456) (65) (3) (2) (529) (1,055) ii) Iterest Cost ,288 (429) (134) (5) (4) (560) (1,132) iii) Expected Retur o Pla (439) (160) (668) (1,267) Assets (-363) (-164) ( ) ( ) (-560) (-1,087) iv) Actuarial -Gais / (4) (26) 931 Losses (129) (-201) (-5) (17) (183) (122) v) Past Service Cost ( ) ( ) ( ) ( ) ( ) ( ) Total 1, ,471 (651) (-166) (3) (23) (712) (1,222) All of the above have bee icluded i the lie 'Compay's cotributio to providet ad other fuds', i Note 21 of the Statemet of Profit ad Loss. e. For each major category of pla assets, followig is the percetage that each major category costitutes of the fair value of the total pla assets : Sr. No. Particulars Gratuity Pesio PF Curret Year Previous Year Curret Year Previous Year Curret Year Previous Year i) Govermet of Idia Securities 0.00% 0.00% 0.00% 0.00% 30.46% 35.05% ii) Corporate Bods 0.00% 0.00% 0.00% 0.00% 52.60% 42.84% iii) Special Deposit Scheme 0.00% 0.00% 0.00% 0.00% 16.94% 18.51% iv) Equity Shares of Listed Compaies 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% v) Property 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% vi) Isurer Maaged Fuds % % % % 0.00% 0.00% vii) Others 0.00% 0.00% 0.00% 0.00% 0.00% 3.60% Total % % % % % % The overall expected rate of retur o assets is based o the expectatios of the average log term rate of retur expected o ivestmets of the fud durig the estimated term of obligatios. f. The Actual Retur o Pla Assets is as follows: Sr. No. Particulars Gratuity Pesio PF Total i) Actual retur o pla assets ,296 (283) (164) (641) (1,088) 83

95 Notes to Fiacial Statemets for the year eded March 31, 2013 g. Followig are the Pricipal Actuarial Assumptio used as at the balace sheet date: Particulars Gratuity Pesio Ex-gratia PRMB PF Discout Rate 8.10% 8.10% 8.10% 8.10% 8.10% 8.60% 8.60% 8.60% 8.60% 8.60% Expected Rate of Retur o Pla Assets 8.50% 8.50% NA NA NA 8.50% 8.50% NA NA NA Expected retur o assets for exempt PF fud NA NA NA NA 8.25% NA NA NA NA 8.10% NA NA NA NA 8.50% NA NA NA NA 8.25% 2015 ad thereafter NA NA NA NA 8.50% NA NA NA NA 8.50% Salary Escalatio Rate - Maagemet Staff 10% NA NA NA NA 9% NA NA NA NA Salary Escalatio Rate - No-Maagemet Staff 7% NA NA NA NA 7% NA NA NA NA Aual Icrease i Healthcare Costs - First 10 years NA NA NA 10% NA NA NA NA 10% NA Aual Icrease i Healthcare Costs - Next 5 years NA NA NA 8% NA NA NA NA 8% NA Aual Icrease i Healthcare Costs - Thereafter NA NA NA 6% NA NA NA NA 6% NA Log term EPFO rate NA NA NA NA 8.60% NA NA NA NA 8.60% 2013 ad thereafter NA NA NA NA 8.60% NA NA NA NA 8.60% The estimates of future salary icreases cosidered i actuarial valuatio takes ito accout iflatio, seiority, promotio ad other relevat factors. h. The effect of a icrease of oe percetage poit ad the effect of a decrease of oe percetage poit i assumed medical care cost tred rates o: Particulars Oe percetage poit icrease Oe percetage poit decrease The aggregate of the curret service cost ad iterest cost Compoets of et periodic post-employmet medical costs; ad 0.63 (0.64) (0.18) (-0.22) The accumulated post-employmet beefit obligatio for medical costs 4.15 (3.72) Figures i brackets are i respect of the previous year. (4.19) (-4.30) 84

96 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Related Party Disclosures a) Name of the related party ad ature of relatioship where cotrol exists Name of related party Nature of relatioship Cummis Ic. Holdig Compay b) Trasactios with related parties as per the books of accout durig the year eded March 31, 2013 Trasactio Name of the Party Total Purchases of goods Cummis Ic. 18,981 (16,045) Tata Cummis Limited 36,758 (46,847) Cummis Limited, UK 14,823 (16,000) Others 25,059 (25,320) Sale of goods Cummis Limited, UK 71,639 (82,062) Others 39,609 (22,051) Purchase of fixed assets Cummis Ic. 83 (34) Cummis Techologies Idia Limited 23 ( ) Sale of fixed assets Tata Cummis Limited 56 (8) Others 1 ( ) Services Redered Cummis Ic. 3,832 (1,905) Tata Cummis Limited 1,867 (803) Valvolie Cummis Limited 931 (764) Cummis Techologies Idia Limited 954 (304) Others 911 (1,194) 85

97 Notes to Fiacial Statemets for the year eded March 31, 2013 Trasactio Name of the Party Total Remueratio Paid Aat Talaulicar 23 (Refer ote (iii) below) (15) Mahesh Narag 161 ( ) Raj Meo 79 (261) Services Received Cummis Techologies Idia Limited 8,775 (5,556) Cummis Ic. 1,922 (920) Others 1,173 (1,839) Trasfer of Techology icludig royalty Cummis Ic. 6,502 (6,488) Iter Corporate Deposits Give Cummis Techologies Idia Limited (1,200) Iter Corporate Deposits Recovered Cummis Techologies Idia Limited (3,950) Iterest Received o iter corporate deposit Cummis Techologies Idia Limited (301) Ivestmet i Joit Veture Cummis SVAM Sales ad Service Limited (600) Issue of Bous Shares Cummis Ic. (808) Divided Received Cummis Geerator Techologies Idia Limited 1,014 (1,404) Cummis Research ad Techology Idia Limited 1,000 ( ) Valvolie Cummis Limited 950 ( ) Divided paid Cummis Ic. 15,551 (15,147) 86

98 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, 2013 c) Amouts outstadig as at March 31, Particulars Name of the Party Total Trade Payables Cummis Ic. 6,090 (4,382) Cummis Limited, UK 2,938 (3,176) Cummis Techologies Idia Limited 2,502 (2,347) Tata Cummis Limited 1,755 ( ) Others 3,164 (2,697) Other Curret Liabilities Cummis Ic. 5,122 (5,096) Others 307 ( ) Trade Receivables Cummis Limited, UK 11,773 (8,571) Others 10,690 (8,388) Advaces recoverable Cummis Ic. 683 (482) Tata Cummis Limited 1,994 (859) Others 420 (230) 87

99 Notes to Fiacial Statemets for the year eded March 31, 2013 Notes: i) The ames of the related parties uder the appropriate relatioship icluded i otes 43(b) ad (c) above are as follows: Nature of Relatioship Name of the Party Holdig Compay Cummis Ic. Fellow subsidiaries (with which there are trasactios durig the year) Cummis Brazil Limited Cummis Co-Geeratio Idia Pvt. Ltd. Cummis Hogkog Limited Cummis Makia Saayi Ve Ticaret Ltd. Sirketi Cummis Westport Ic. Cummis Agola LDA Cummis Asia Pacific Pte. Ltd. Cummis Commercializadora S. de R.L. de C.V. Cummis De Los Ades S.A. Cummis Deutschlad GmbH Cummis Diesel Italia Spa Cummis Diesel Ltd. Cummis Diesel N. V. Cummis DKSH (Sigapore) Pte. Ltd. Cummis DKSH (Thailad) Limited Cummis East Asia Research & Developmet Co. Ltd. Cummis Emissio Solutios Cummis (Chia) Ivestmet Co. Ltd. Cummis Egie (Shaghai) Services & Tradig Co. Ltd. Cummis Egie (Shaghai) Compay Ltd. Cummis Filtratio Ic. Cummis Frace S.A. Cummis Fuel Systems (Wuha) Co. Ltd. Cummis Ghaa Limited Cummis Japa Limited Cummis Limited, UK Cummis Middle East Fze Cummis Natural Gas Egies, Ic. Cummis Power Geeratio (Chia) Co. Ltd. Cummis Power Geeratio (Sigapore) Pte. Ltd. Cummis Power Geeratio Ic. Cummis Power Geeratio Limited, Ket 88

100 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, 2013 Nature of Relatioship Name of the Party Cummis Qatar LLC Cummis Rocky Moutai LLC Cummis S De R L De CV Cummis Romaia S.R.L. Cummis Sales & Service Philippies, Ic. Cummis Sales ad Service Korea Co., Ltd. Cummis Sales ad Service Sigapore Pte. Ltd. Cummis Serbomote Cummis South Africa (Pty.) Ltd. Cummis South Pacific Pty. Limited Cummis Spai S.L. Cummis Techologies Idia Limited Cummis, Belgium Distribuidora Cummis Peru Komatsu Cummis Chile. Ltda. Distribuidora Cummis S.A. OOO Cummis Shaghai Cummis Trade Co. Ltd. Key Maagemet Persoel Aat Talaulicar (Chairma ad Maagig Director) Mahesh Narag (Chief Operatig Officer - w.e.f. July 1, 2012) Raj Meo (Chief Operatig Officer - upto Jue 30, 2012) Associate Cummis Geerator Techologies Idia Limited Joit Veture Valvolie Cummis Limited Cummis SVAM Sales ad Service Limited Cummis Reseach ad Techology Idia Limited Eterprise with commo Key Maagemet Persoel (Aat Talaulicar) Tata Cummis Limited ii) iii) iv) Reimbursemet of expeses icurred by related parties for ad o behalf of the compay ad vice-versa have ot bee icluded above. The Chairma ad Maagig Director ad some seior employees are also etitled to participate i the Employees Stock Optio pla of Cummis Ic. (the holdig compay), the cost of which is bore by Cummis Ic. The iformatio give above, has bee reckoed o the basis of iformatio available with the Compay ad relied upo by the auditors. v) Figures i brackets are i respect of the previous year. 89

101 Notes to Fiacial Statemets for the year eded March 31, Segmet Iformatio a) Primary Segmet The Compay had i the previous years idetified two separate reportable busiess segmets, amely 'Egie Busiess Segmet' (maufacture ad sale of Iteral combustio egies, gesets ad parts thereof) ad 'Others' (Service solutios busiess). O a review of all the relevat aspects icludig, i particular, the system of iteral fiacial reportig to the Board of Directors ad Maagig Director, the relative "risks ad returs" goverig the operatios ad products & its related services, the Compay has ow idetified a sigle segmet viz. 'Egie Busiess Segmet' without distiguishig betwee the products & its related services. b) Secodary Segmet Two secodary segmets have bee idetified based o the geographical locatios of customers: domestic ad export. Iformatio about geographical segmets Domestic Export Total (Secodary Segmets) Segmet reveue 323, , ,900 (286,141) (119,076) (405,217) Notes: i) The Compay's tagible assets are located etirely i Idia. ii) Figures i brackets are i respect of the previous year. 90

102 52d Aual Report Notes to Fiacial Statemets for the year eded March 31, Derivatives - Forward Cotracts a) Forward Cotracts outstadig as at Balace Sheet date Currecy Amout US $ Sell Cross Currecy March 31, 2013 March 31, 2012 Currecy Amout Sell/Buy Cross Currecy () Currecy Amout Sell/Buy Cross Currecy USD 308 Sell ` USD 211 Sell ` EURO 7 Sell ` b) The year ed foreig currecy exposures that have ot bee hedged by a derivative istrumet or otherwise are give below: () Receivables As at March 31, 2013 As at March 31, 2012 Foreig Currecy ` Foreig Currecy ` USD 175 9, ,918 Euro GBP * Payables USD 168 9, ,247 Euro GBP * Amout is below the roudig off orm adopted by the Compay. 46. Previous year's figures have bee regrouped / reclassified, wherever ecessary. Sigatures to the otes 1 to 46 For Price Waterhouse For ad o behalf of the Board Firm Registratio No E Chartered Accoutats Jeetedra Mirchadai Aat J. Talaulicar Nasser Mujee Parter Chairma & Director Membership Number Maagig Director Mumbai Mumbai Date: May 10, 2013 Date: May 10, 2013 Trivikram Guda Geeral Maager Legal & Compay Secretary 91

103 92 NOTES

104 Busiess Resposibility Report 93

105 Itroductio Visio, missio, values ad priciples Visio Makig people s lives better by uleashig the Power of Cummis. Missio We uleash the Power of Cummis by: Motivatig people to act like owers, workig together. Exceedig customer expectatios by always beig the first to market with the best products. Parterig with our customers to make sure they succeed. Demadig that everythig we do leads to a cleaer, healthier, safer eviromet. Creatig wealth for all stakeholders. Values Itegrity Strive to do what is right ad what we say we will do. Iovatio Apply the creative igeuity ecessary to make us better, faster, first. Deliver superior results Exceed expectatios cosistetly. Corporate resposibility Serve ad improve the commuities i which we live. Diversity Embrace the diverse perspectives of all people ad hoor both with digity ad respect. Global ivolvemet Seek a world view ad act without boudaries. Strategic priciples Leverage Complemetary Busiesses Cummis is a family of complemetary busiesses that create value for our customers by leveragig relatioships ad applyig iovative techology across busiess boudaries. Icrease Shareholder Value Cummis fiacial success is measured by growth i shareholder value. We will focus o ROE / ROANA ad Earigs Growth (ot Reveue Growth) as the pricipal drivers of shareholder value. Seek Profitable Growth Cummis will seek profitable growth by leveragig our assets ad capabilities to grow i market segmets with favorable idustry dyamics ad where Cummis ca establish a advatage. Reletlessly Pursue Cost Leadership Cummis will pursue a operatioal strategy of cost leadership. Lead i Critical Techologies Cummis will be the market leader i techologies most critical to our customers success ad our Compay s performace. Create the Right Work Eviromet Cummis will assure that the physical ad cultural work eviromet is coducive to excellet performace ad cotiuous improvemet. Persoality Decisive Drive to wi Agile Passioate Carig 94

106 Busiess Resposibility Report Sectio A Geeral Iformatio about the Compay - Cummis Idia Limited - Corporate Idetity Number (CIN): L29112PN1962PLC Registered Office Address: Kothrud, Pue Website: - Id: sameer.chugh@cummis.com - Fiacial Year reported: Busiess Sectors Cummis Idia Limited was established i 1962 ad is a leadig maufacturer of diesel ad atural gas egies, geerator sets ad related services. The Compay comprises of four busiess uits as follows: Idustrial Egie Busiess:The Idustrial Egie Busiess Uit caters to almost the etire gamut of egie requiremets for the idustrial sector. Startig from 65 HP spaig up to 3500 HP, the offerigs are meat to power Costructio, Miig, Compressors, Marie, Rail, Pumps, Gas Compressio, Oilfield, Defece ad re power segmets i the idustry. Power Geeratio Busiess:The Power Geeratio Busiess Uit is the market leader i the diesel, atural gas, producer gas ad biogas geerator set segmet, with a sigle widow for complete power solutios, offerig top of the lie products ad services. Beyod geerator sets, it udertakes power projects ad provides alterate fuel solutios ad power quality improvemet services across umerous idustry sectors icludig telecom, costructio, IT / ITES, realty, hospitality, textiles, auto & auto acillaries, food processig, govermet, pharma, gas ad maufacturig. To meet the icreasig demad for low horsepower geerator sets for exports, the Compay recetly set up a ew facility at the Special Ecoomic Zoe i MIDC at the Megasite i Phalta. Automotive Busiess Uit:The Automotive Busiess Uit was established i 2005 i order to expad the Compay s offerigs i the growig automotive segmet i Idia. This busiess uit caters to the commercial vehicle segmet i Idia with its rage of egie platforms ad related techologies alogside parts ad customer support. Distributio Busiess Uit:The fourth busiess, Distributio, operates uder the brad ame Cummis Sales ad Service Idia (CSS). Acquired i 1967, with the objective of providig products, packages, services ad solutios for uptime of Cummis equipmets, CSS has sice bee egaged i the busiess of sale of egies, providig after-market support to customers i Idia, Nepal ad Bhuta as well as providig after-market support for statioary power ad off-highway applicatios. It maily provides spare parts, service cotracts, re-powerig & recoditioig services for egies ad geeratig set equipmet. Key products of the Compay as per Balace Sheet The Compay s primary products are Compressio igitio iteral combustio egies ad Compoet Parts thereof bearig ITC Code No ad respectively. Locatios from which busiess activity is udertake by the Compay The Compay has its operatios spread all across the coutry with its registered office ad admiistrative office at Pue. Additioally, the Compay has four zoal offices at Mumbai, Gurgao, Kolkata ad Bagalore ad has area offices at 16 locatios across Idia. The maufacturig operatios are carried out 95

107 from 7 differet plats that are situated at Pue, Piragut ad Megasite i Phalta. Apart from these, the Compay's Group etities have its admiistrative offices at Pue, Delhi, Rudrapur, Bareilly ad Ghaziabad ad maufacturig plats at Ahmedagar, Rajagao, Noida ad Rampur. Markets served by the Compay The Compay serves the domestic market i Idia, Nepal ad Bhuta ad also exports its products to various coutries across the globe with USA, UK, Mexico, Sigapore ad Chia beig the top five export destiatios. CIF is made by various Cummis group etities i Idia. The Compay has udertake to sped up to 1% of profit after taxes each year o Corporate Resposibility projects. Sectio C Other Details The Compay does ot have ay subsidiaries. However, the Compay ows 50% equity shares i Cummis Research ad Techology Idia Limited, Valvolie Cummis Limited ad Cummis Svam Sales & Service Limited ad approximately 48% equity shares i Cummis Geerator Techologies Idia Limited. Sectio B Fiacial details of the Compay Paid-up capital: Rs. 5,544 Lacs Net Sales: Rs. 450,900 Lacs Total Profit after taxes: Rs. 76,411 Lacs Corporate Social Resposibility (CSR) sped: The Compay s participatio i improvig lives of the 30%. commuities goes beyod mere philathropy. To progress its Corporate Resposibility iitiatives, Cummis Idia Foudatio (CIF) was istituted i 1990 by the Cummis Group i Idia with a view to chaelize the Compay s commitmet towards the society at large. Utilizig its expertise ad kowledge The Compay has busiess with various Cummis etities i Idia ad they i tur take active participatio i the busiess resposibility iitiatives of the Compay. However, the etities outside Cummis viz., suppliers, distributors etc., are ot icluded i the BR iitiatives of the Compay ad do ot participate i the same. The overall participatio percetage would be less tha Sectio D BR Iformatio 1. Details of Director resposible for BR a) Details of the Director resposible for implemetatio of the BR policy ad egagig its people, the Compay cotiues to DIN Number : work o various projects (as detailed i this report) Name : Mr. Aat J. Talaulicar udertake i the three focus areas as idetified by CIF: Desigatio : Chairma & Maagig Director (i) Higher Educatio; b) Details of the BR head : (ii) Eergy ad Eviromet; Name : Mr. Sameer Chugh (iii) Local Commuity Ifrastructure Developmet. Desigatio : Vice Presidet, Legal & Secretarial Telephoe : , Durig FY , CIF has spet approximately Id : sameer.chugh@cummis.com Rs. 7 Crores i forms of doatio ad otherwise 2. Priciple-wise (as per NGVs) BR Policy towards for various projects i Idia. The cotributio to The Natioal Volutary Guidelies o Social, 96

108 Busiess Resposibility Report Evirometal ad Ecoomic Resposibilities of Busiess NVGs released by Miistry of Corporate Affairs has adopted ie areas of Busiess Resposibility. These briefly are as uder: P1 - Busiesses should coduct ad gover themselves with Ethics, Trasparecy ad Accoutability P2 - Busiesses should provide goods ad services that are safe ad cotribute to sustaiability throughout their life cycle P3 - Busiesses should promote the wellbeig of all employees P4 - Busiesses should respect the iterests of, ad be resposive towards all stakeholders, especially those who are disadvataged, vulerable ad margialized. P5 - Busiesses should respect ad promote huma rights P6 - Busiess should respect, protect, ad make efforts to restore the eviromet P7 - Busiesses, whe egaged i ifluecig public ad regulatory policy, should do so i a resposible maer P8 - Busiesses should support iclusive growth ad equitable developmet P9 - Busiesses should egage with ad provide value to their customers ad cosumers i a resposible maer Replies to the questios o above priciples are stated i this matrix Busiess Ethics Product Resposibility Wellbeig of Employees Stakeholder Egagemet Huma Rights Eviromet Public Policy CSR Customer Relatios Questios P1 P2 P3 P4 P5 P6 P7 P8 P9 1 Do you have a policy / policies for... Y Y* Y Y Y* Y N Y Y* 2 Has the policy bee formulated i cosultatio with the relevat stakeholders? Y Y Y Y Y 3 Does the policy coform to ay atioal / iteratioal stadards? Y Y Y Y 4 Has the policy beig approved by the Board? If yes, has it bee siged by MD/Ower/CEO/appropriate Board Director? Y N N Y Y 5 Does the compay have a specified committee of the Board/ Director/Official to oversee the implemetatio of the policy? Y Y Y Y Y 6 Idicate the lik for the policy to be viewed olie? # 7 Has the policy bee formally commuicated to all relevat iteral ad exteral stakeholders? Y** Y** Y ** Y** Y** 8 Does the compay have i-house structure to implemet the policy/policies? Y Y Y Y Y 9 Does the compay have a grievace redressal mechaism related to the policy/policies to address stakeholders' grievaces related to the policy/policies? Y Y Y Y Y 10 Has the compay carried out idepedet audit/evaluatio of the workig of this policy by a iteral or exteral agecy? N N N Y N *The policies related to safe ad sustaiable products, Huma Rights ad Customer relatios are embedded i the Compay's Visio, Missio, Values, Strategic Priciples, the Cummis Operatig System ad the Compay's Code of Coduct. **Policies are commuicated to iteral stakeholders ad wherever required they are also commuicated to the exteral stakeholders. 97

109 # Ethics Helplie The Compay has a ethics helplie where employees ca place aoymous complaits agaist ethics violatios as per the policy of the Compay. The ethics helplie ca be reached i the followig ways: - Olie: ethics.cummis.com - Ethics Hotlie : , after the prompt dial the umber [Aoymous report is possible ad you ca file report i Hidi.] - Cotact Ethics & Compliace: to ethicsadcompliace@cummis.com - Idia whistle - blower Number (Whistle Blower Policy); (voice recorded message 3 miutes) (aoymous report possible) Wherever aswer to S.No. 1 agaist ay priciple, is ''No'', explaatio is give below. Busiess Ethics Product Resposibility Wellbeig of Employees Stakeholder Egagemet Huma Rights Eviromet Public Policy CSR Customer Relatios Questios P1 P2 P3 P4 P5 P6 P7 P8 P9 1 The compay has ot uderstood the Priciples 2 The compay is ot at a stage where it fids itself i a positio to formulate ad implemet the policies o specified priciples 3 The compay does ot have fiacial or mapower resources available for the task 4 It is plaed to be doe withi ext 6 moths 5 It is plaed to be doe withi the ext 1 year 6 Ay other reaso (please specify) # # The Compay has a track record of pioeerig achievemets, log experiece ad is a leader i the egie ad power geeratio busiess ad iitiates dialogue with Govermet through various Idustry bodies ad associatios. However, o eed for a formal policy has bee felt. 3. Goverace related to BR Sectio E The Board of Directors of the Compay review the BR performace of the Compay o a regular basis but at least aually. The Chairma ad Maagig Director reviews the BR activities of the Compay o a regular basis. The Compay shall publish a sustaiability report aually which shall accompay the Aual Report. The hyperlik for viewig this report is Priciple-wise Performace Priciple 1 : Busiess should coduct ad gover themselves with Ethics, Trasparecy ad Accoutability Cummis believes that a sustaiable compay is built o a foudatio of good goverace that promotes ethical behaviour at all levels. The Compay's view o ethics is reflected i the statemets from Cummis 98

110 Busiess Resposibility Report Ic.'s Chief Executive Officer, Tom Liebarger ad Chairma ad Maagig Director, Cummis Idia Limited, Aat J. Talaulicar. Accordig to Tom Liebarger, Actig i accordace with our code of Busiess Coduct is the resposibility of every employee at Cummis ad the creatio of this ew ethics ad compliace orgaizatio does ot chage the primary accoutability each of us has to live Cummis' values i every aspect of our work. The Cummis Code of Coduct applies to all its employees, customers ad suppliers. I additio the Cummis Code of Coduct is also applicable to the Joit Vetures ad its employees, customers ad suppliers. All employees are expected to follow the Code of Coduct o or off compay property whe they are o Cummis busiess or actig as a aget or o behalf of Cummis. The suppliers too are expected, i their cotracts, to uderstad ad comply with the policy. Aat J. Talaulicar has said, As itegral as ethics is to esurig a great place to work, we practise zero tolerace towards o adherece. At Cummis, several priciples uder the Cummis Code of Coduct are implemeted effectively to drive ethical behaviour at all levels. The Cummis Code of Coduct covers te basic priciples which all Cummis employees are expected to follow: We will follow the law everywhere We will embrace diverse perspectives ad backgrouds ad treat all people with digity ad respect We will compete fairly ad hoestly We will avoid coflicts of iterest We will demad that everythig we do leads to a cleaer, healthier ad safer eviromet We will protect our techology, our iformatio ad our itellectual property We will demad that our fiacial records are accurate ad that our reportig processes are clear ad uderstadable We will strive to improve our commuities We will commuicate hoestly ad with itegrity We will create a culture where all employees take resposibility for ethical behaviour Cummis has bee successfully doig busiess through alliaces with parters ad joit veture agreemets. The Compay takes appropriate steps to esure these busiess relatioships share Cummis values regardless of whether the Compay directly maages the alliaces ad joit vetures. The Cummis Code of Coduct is implemeted ad moitored o a regular basis through several mechaisms: New Hire ad Ogoig Traiig ad Compliace Certificatio Ethics Help-lie, Orgaizatioal Support ad Whistle Blower Policy Regular updates to Seior Maagemet New Hire ad Ogoig Traiig ad Compliace Certificatio Cummis puts its ethics ad compliace priciples ito practice through a comprehesive compliace traiig programme targetig appropriate employee groups to promote ethical behaviour. All employees are required to atted the 'Treatmet of Each Other at Work Policy' Traiig course ad complete refresher courses as eeded. New employees are scheduled ito the course at New Hire Orietatio ad are required to complete the course withi their first three moths of 99

111 employmet. O a regular basis, all employees are required to certify themselves with the Cummis Code of Coduct ad report ay exceptios. Ethics Help-lie, Orgaizatioal Support ad Whistle Blower Policy At Cummis, employees have several differet optios to report ethics related issues. Besides beig able to reach out to Maagers or HR, employees have the optio to aoymously report issues through three separate chaels*: Regularly moitored voice mail box Olie at ethics.cummis.com Toll-free umber Statistics: The Compay received 41 complaits durig the year uder the Ethics ivestigatio mechaism out of which 39 complaits were resolved ad the balace complaits are uder ivestigatio. *Note: As stated earlier i this report. Cummis has a Whistle Blower Policy which is strictly eforced to esure more employees feel free to reach out ad report likely issues. Cummis Idia has specifically appoited people withi the orgaizatio to be able to moitor ad ivestigate ay ethics related issues. Reported issues are regularly reviewed by a team comprised of Cummis Seior Maagemet. Regular Updates to Seior Maagemet Cummis Seior Leadership closely moitors the implemetatio of the policies. Each quarter, the Seior Maagemet receives a update o issues reported i their regio or busiess, ad the actios take thereafter. Additioally, the same is also placed before the Audit Committee of the Board of Directors o quarterly basis. Priciple 2 Busiess should provide goods ad services that are safe ad cotribute to sustaiability throughout their life cycle Cummis develops egies ad compoets for the automotive, idustrial ad power geeratio markets. I each of the markets, Cummis esures its products meet all required stadards set by law. Additioally, Cummis cotiues to develop products ad techologies to further develop fuel efficiet products which help reduce the use of diesel ad other fuels to reduce the total cost of owership for its ed users ad to reduce GHG emissios. I its idustrial busiess, Cummis has lauched several electroic egies such as QSK19, QSK38 ad QSK50 to replace older mechaical egies. Through itroductio of electroic egies, Cummis has reduced the emissios from its egies ad also icreased the fuel efficiecy of its products. Cummis also lauched a Selective Catalytic Reductio (SCR) product to support the trasitio of its OEM customers to meet tighter emissio orms while reducig the fuel usage. SCR techology provides the ed user up to 5% reductio i diesel cosumptio thus resultig i lower greehouse gas emissios from the vehicles apart from limitig emissios to very low levels that comply with Bharat Stage IV, CPCB2 ad Euro Stage 3A levels. I the automotive segmets, Cummis has developed a ew electroically cotrolled egie for the tractor trailer segmet to reduce the fuel requiremet of tractor 100

112 l Busiess Resposibility Report trailers by 2.8%. The ew product oce lauched will result i lower diesel cosumptio i the product. There are four mai priciples followed to accomplish the strategic goals: Cummis has worked extesively to develop a detailed procuremet procedure to esure sustaiability of its suppliers. The procedure is curretly beig implemeted i Idia. The procedure icludes seve separate areas icludig, Sourcig, Cotract Developmet & Negotiatio, Procure to Pay, Supplier Maagemet, Risk Maagemet, Chage Maagemet & Supplier Quality Improvemet. The procedure icludes steps to elimiate Lead i all products supplied to Cummis. The procedure also icludes the Supplier Code of Coduct (SCOC) which esures that the supplier follows key ethical priciples set forth by Cummis icludig the Supplier beig required to protect the eviromet. Cummis supports local ad small producers icludig the commuity aroud itself. Curretly, Cummis procures direct ad idirect material from 525 medium ad small scale suppliers. Of this 168 are utilized for direct purchases ad 357 are utilized for idirect purchases. SUSTAINABILITY DISPOSAL RECYCLE RE-USE REDUCE - Global Packagig Stadards - Materials Substitutio - Ivetory Maagemet - Right-Sizig - Process Redesig - Materials Exchages - Returable Packagig - Solvet Recover / Reuse - Machiig Fluids Filtratio - Grey Water Reuse - Used oil reclamatio - Compostig - Metals, paper, plastic, cardboard, wood - Absorbets Lauderig - Fuels bledig & waste to eergy - Ladfill - Icieratio The Compay cotiued to iitiate waste reductio efforts durig the year through several iitiatives like Pollutio Prevetio traiig, Six Sigma projects specifically o waste maagemet, proposed waste maagemet strategy at a global ad regioal level, to ame a few. Cummis believes strogly i esurig that the waste geerated i its facilities is disposed i compliace with all local rules ad regulatios. Cummis globally ad i Idia has three strategic target areas to reduce waste: Reduce Waste Icrease Waste Reuse / Reduce Waste Disposed Icrease Zero Waste Sites I order to accomplish the goals, the Compay creates formal targets, uses the reductio toolkit ad maages a waste scorecard. Formal Targets Reductio Toolkit Waste Scorecard io t u ll Po Compliace P re y r vetio to u a g e R R e so u oservatio r c e C 101

113 As a result of our cotiual efforts at Cummis Idia Limited, we have show remarkable improvemet of 30% reductio i total waste disposal i absolute terms from We have recycled 91% of our total waste geeratio ad disposed 9% i the year Waste Geeratio: LBS Waste Recyclig: 91% recyclig rate Waste Disposal: 9% disposal rate Category No. of complaits No. of complaits filed durig the pedig as o the ed fiacial year of the fiacial year Child labour/ forced labour/ ivolutary labour Nil Nil Sexual Harassmet 3 3 Discrimiatory employmet Nil Nil Cummis aspires to be recogized as a globally respected compay that reflects the markets we serve, by creatig a work eviromet that embraces today s diverse world. Diversity ad iclusio is a core value at Cummis. Diversity is represeted i our workforce ad supportig it requires that Cummis allow flexibility of work arragemets i order to best suit the eeds of its employees, customers ad shareholders. Priciple 3 : Busiesses should promote the wellbeig of all employees The Compay employs aroud 3,590 persos out of which aroud 514 are wome employees ad two permaet employees with partial disabilities. Apart from this, the Compay also employs aroud 844 temporary / cotractual / casual basis employees. The Compay has ever egaged ay child / forced / ivolutary labours i ay of its facilities ad there have bee o complaits pertaiig to discrimiatory employmet durig the fiacial year. Safety ad skill up gradatio traiig to various categories of employees are redered as per the traiig policy of the Compay. The Compay has recogised trade uios for productio ad staff associates ad the uioized work force forms approximately 23 % of the permaet employees of the Compay. To derive the greatest beefit from diversity, Cummis believes it must do the followig: Create a workplace populatio with represetatio that is similar to the markets i which it operates. Demad that the workplace is safe ad iclusive for all idividuals ad orgaizatios. Develop a collective behaviour that ecourages all idividuals ad employees to best use their talets. Capitalize o a diverse workforce to ehace the Compay's competitive positio i the marketplace. Cummis has developed work life balace policies that eable our employees to give their best to Cummis, grow with Cummis ad at the same time atted to their persoal exigecies, maitaiig a sesible balace of work ad life obligatios / commitmets. The various work-life balace policies at Cummis are: Flexi work hour policy flexibility to come i ad 102

114 Busiess Resposibility Report move out at a coveiet time, but esurig that the stipulated hours of work are completed ad team work is ot disrupted uder ay circumstaces. Materity ad New Mothers policy a lady employee who has give birth to a child or adopted a child who is less tha oe year of age is etitled to materity leave of up to 12 weeks, exteded Materity Leave, Part time work as well as flexi work hours to support her as a ew mother. Part time work policy where a employee ca work o a reduced work pla to be able to balace a persoal exigecy. Additioally, Cummis has crèche facilities at its plats ad plas to cotiue buildig crèches i all its ew facilities to support workig mothers. The Compay has Affiity Groups i Idia typically orgaized aroud a specific demographic trait withi its workforce. The core work of such affiity groups is to provide support ad ehacemet opportuities to employees they represet. I additio, they ca provide meaigful leadership developmet experiece for members. The Wome s Affiity Group (WAG) is a employee-led group devoted to the recruitig, retetio ad career developmet of wome at Cummis. The missio observed by WAG is to: Provide a iclusive eviromet for diverse work teams to come together cohesively i order to achieve busiess objectives. Esurig a safe ad equal workplace for wome thus fosterig higher attractio, retetio ad growth i Cummis Idia. Diversity at Cummis: Iitiatives udertake at the Cummis Megasite esure a safe ad iclusive workplace for wome. 103

115 WAG aims at improvig commuicatio about address idividual health eeds. Our maagers ad iitiatives through advocacy, focusig o iclusio of busiess leaders support these iitiatives ad programs hourly workers i idetifyig barriers to wome at as they believe that healthier employees are more Cummis ad expadig support iitiatives geared productive employees. towards workig parets. With strog leadership i place, ad a large, active membership, WAG shall Our Global Well-beig Strategy supports Cummis cotiue to champio wome for years to come. efforts to build capacity ahead of demad. The Global Well-beig Strategy emphasizes the impact employees WAG i collaboratio with the Megasite Leadership health has o productivity as well as provides a works to esure that the followig are provided for the framework for extedig welless cocepts ad geder diverse workforce o the shop floors: iitiatives aroud the globe. The strategy would apply Aaemia prevetio program. Health awareess sessios Special sessios that cover diet ad pre-marital cousellig, awareess cosistetly ad would be flexible eough to ecourage locally appropriate welless iitiatives i all Cummis locatios. The strategy is built o three foudatioal o aaemia, breast cacer, cotraceptives etc. at compoets: (1) Educatio, (2) Self-Awareess, ad (3) office premises ad at wome hostels. Improvemet ad Maiteace. These compoets Hostel facilities 5 reted properties as hostels at Phalta for wome employees with 24 x7 security ad availability of Hostel Rector. Wome s day celebratios A cultural evet which icludes dace competitios ad talet shows. Need based cousellig for wome o persoal issues. Cummis has wome shop-floor employees who work o a cotractual basis uder the lear ad ear scheme while pursuig their studies. Cummis is committed to promotig the health ad wellbeig of employees ad their families through access to health ad beefits programs developed to address orgaizatioal ad idividual eeds withi the local busiess cotext. Our Welless Strategy which has bee lauched recetly is aimed to provide globally ad locally appropriate well-beig programs desiged to support all aspects of health ad well-beig o physical, emotioal, fiacial ad workplace health. This strategy emphasizes that we care about employees health eough to provide educatio ad programs to form the foudatio for establishig local welless iitiatives. Cummis has a log stadig ad well embedded value of o-discrimiatio. We hire ad promote employees strictly o qualificatio ad merit, irrespective of caste, creed, geder, race, religio, disability or sexual orietatio. We have robust hirig ad performace maagemet systems to support this value. All developmetal opportuities - whether through iteral job postigs, projects or traiig - are ope to all. We have a traiig caledar published where employees ca omiate themselves as per the established process. Developmetal opportuities are ope to all irrespective of regio, caste, religio etc. We have well desiged leadership developmet itervetios which all maagers go through. We also have regular leader-led sessios. Cummis esures that Health Safety ad Eviromet (HSE) related traiig is imparted to all relevat stakeholders at regular itervals. For this purpose, the 104

116 Busiess Resposibility Report defie ad articulate its visio, missio ad core values so that they might guide the Compay i its jourey towards sustaied excellece i all it does. Oe of the key Missio statemets for Cummis icludes Creatig Wealth for all stakeholders. Cummis focuses o the well-beig of all its stakeholders icludig shareholders, customers, vedors, employees ad the commuities it is part of. I order to support the commuity, ad especially the disadvataged, vulerable ad margialized, Cummis has take up several differet iitiatives- Compay coducts workshops to trai HSE employees with sessios o Pollutio Prevetio for plat floor employees. Cummis has a structured process to idetify potetial associates i order to cofer rewards ad recogitio. Cummis has successfully completed a Six Sigma project to look for more learig opportuities to its associates, reward ad recogitio of associatios ad scholarships for employees childre. As a outcome of this Six Sigma project, Cummis has orgaized sports activities for its employees to promote employee morale ad career developmet through elighteed huma resource itervetios. Priciple 4 : Busiesses should respect the iterest of, ad be resposive towards all stakeholders, especially those who are disadvataged, vulerable ad margialised. More tha a decade ago, Cummis set out to clearly Developig Nadal village ear the Megasite at Phalta ito a Model village Employmet for Locals at Phalta Providig sustaiable water harvestig solutio to Majarsumbha village Employmet opportuities for differetly abled people A Model village: I developig Nadal (a village i close proximity to the Cummis Megasite i Phalta) ito a Model village, Cummis brigs ifrastructure developmet, improved health ad saitatio, vocatioal educatio ad etrepreeurial opportuities for livelihood ad ehaced lifestyle. 105

117 Gift of Life for Little Oes which icludes health check-up camps coverig 1,100 Providig food ad other ratios to drought affected areas Supportig the Blid Girls School i Kothrud, Pue Some of the key iitiatives are explaied i more detail below: Developig Nadal ito a Model village After cosiderable study ad eed aalysis, Cummis selected Nadal, a village ear Phalta, Maharashtra, for developig ito a Model village. The village faces severe water scarcity i summer which leads to low agricultural productivity ad low icome. Illiteracy amog the village dwellers compouds the problem. There is also a immediate eed to educate the villagers o saitatio ad hygiee. households. Team of employees who worked o this project also created tie ups with local hospitals which will provide affordable medical assistace to the farmers. 29 villagers have also udergoe cataract operatio i the earby hospital as a result of this effort. I order to improve saitatio, the Compay also costructed 40 toilets ad created awareess amog the villagers o beefits of usig toilets. Cummis will costruct 40 additioal toilets for the villagers i the comig year. Creatig local employmet at Phalta The Compay believes i erichig the society where it belogs ad oe major step towards this iitiative was to provide employmet to locals i the Phalta regio at the Megasite. Cummis has devised a three-proged developmetal approach ecompassig ifrastructural up gradatio, improved health ad saitatio, educatio ad etrepreeurial opportuities for livelihood ad improved lifestyle. The program is beig implemeted i two- phases with support from the Yashwatrao Chava Ceter ad the Krishi Vigya Kedra. I the first phase, buds have bee costructed to provide farmers with the resultat water recharge for irrigatio. Locatios have bee idetified for buildig a rai water harvestig system. Villagers have bee educated i aimal husbadry. Through artificial isemiatio of the cattle, milk productio is beig augmeted, thereby icreasig icome geeratio. Cummis regularly orgaizes agriculture traiig camps where experts educate the villagers o practices that would help maximize their yield. I the secod phase, villagers have bee educated o soil ad water coservatio, ad also bee give improved seeds. Improved lifestyle ad etrepreeurship developmet is beig tackled ow, alogside a committed focus o health ad saitatio, Providig sustaiable water harvestig solutio to Majarsumbha village Village Majarsumbha with a area of about 1,000 hectares ad a populatio of about 1,100 is a rai depedat village for drikig water ad irrigatio. The village, facig acute drought coditios, had wome who travel about 3 4 kms each day to fetch a pot of water. Agriculture productio touched a record low. About 3,000 sapligs plated earlier by Compay employees faced the dager of extictio. A project was idetified by Cummis to provide a cost effective ad sustaiable solutio for short ad log term, keepig i mid the deficit raifall coditios. With the help of a NGO, the village commuity ad the Compay employees, the project helped to icrease the capacity of a percolatio tak from 10 millio litres to 20 millio litres for irrigatio purpose, ehaced the storage capacity of a pod from 1 millio litres to 2 millio litres for drikig water ad cleared a earby abadoed well. 106

118 Makig people s lives better at Phalta: Employig from amogst the residets of Phalta, Cummis reiforces commitmet to the commuities i which it operates. 107

119 As a result, i spite of 75% deficit rais, water is ow available abudatly. Bore wells i the viciity of 1 km radius from the village are all charged, the abadoed well i the village ow has a static water colum of 15 feet ad taker water supply to the village was stopped for the first time i 40 years. Each farmer eared cosiderable amout this year from agricultural yield. geerate employmet for differetly abled people of the commuity. Cummis idetified a supplier to support the effort, give their experiece i ad demostrated passio i hadlig differetly abled people. Today, oe fourth of the said supplier s employees are differetly abled. As a result of the project, 1.7 tos of scrap has bee reused. Opportuity to differetly abled people A Six Sigma project was implemeted to idetify opportuities ad recommed appropriate workig eviromet for employmet of differetly abled people at Cummis. Cummis has had a history of employees (Associates) with Speech ad Hearig impairmet, who worked ad retired from the shop floor. The project recommeded a phase wise road map ad has take a target of recruitig 1% of its ew employees as differetly abled. A pilot was ru to check the feasibility of the recommedatios. Medical SOP ad Risk assessmet by HSE professioals were doe to check the ergoomics of the plat ad facilities before the employees joied the departmet. A cotrol pla has bee prepared to esure process compliace. Cummis is cotiuig to work o other support efforts such as assistive techology, sesitizig of existig employees ad etworkig opportuities for differetly abled to esure smooth assimilatio of the differetly abled i its work force. Additioally, Cummis has idetified support for differetly abled by selectig suppliers with a large part of their work force comprised of differetly abled. Cummis Kothrud facility gets lots of imported parts i woode boxes. Cummis idetified the usage of this scrap i iovative ways, oe of them beig variety of woode items required for material hadlig. Till this project, Cummis had to purchase such items made from forest wood. Cummis used this opportuity to Priciple 5 : Busiesses should respect ad promote huma rights Diversity ad iclusio have bee a part of Cummis' core values for more tha 40 years datig back to the global Cummis Ic. CEO J. Irwi Miller who led the Compay util Miller believed i the power of listeig. He wated to hear from a wide variety of voices before reachig a decisio, believig o sigle geder, race, or ethicity had a moopoly o wisdom. The Compay strives to be iclusive ad esure that employees ad other stakeholders are always treated with digity ad respect. We are stroger because of the diversity of our employees ad as a global compay, we eed a work eviromet that is welcomig ad allows employees to best use their uique talets ad diverse perspectives so ideas ad iovatio ca flourish. Cummis strictly forbids discrimiatio, harassmet ad retaliatio ad strives to provide equal opportuity ad fair treatmet for all. Cummis respects laws of the lad ad adheres to provisio pertaiig to huma rights embedded i the Costitutio of Idia to prohibit ay discrimiatio o grouds of religio, race, caste, sex or place of birth. We support huma rights aroud the world ad will comply with all applicable laws regardig treatmet of our employees ad other stakeholders. Cummis does 108

120 Busiess Resposibility Report ot tolerate child or forced labor aywhere ad does ot do busiess with ay compay that does. Cummis respects employees freedom of associatio, right to bargai collectively ad all other workplace huma rights. Cummis is committed to fair treatmet which also exteds to its joit vetures, suppliers ad other parters. Cummis makes sure that its suppliers ad parters treat their stakeholders i a way cosistet with its ow value through the Supplier Code of Coduct. Cummis does busiess oly with those suppliers ad parters that share its passio for sustaiable practices ad policies. sustaiability. As the Cummis Ic. Chairma ad CEO, Tom Liebarger says, Cummis must be a catalyst for evirometal sustaiability actio. Our visio ad missio demads it, our busiess success depeds o it, ad the igeuity ad eergy of our employees ca make it happe. The Compay meticulously abides by all the Health, Safety ad Evirometal (HSE) laws of the lad. Cummis has comprehesive policies ad procedures govered by a dedicated HSE departmet, which covers the Compay, Cotractors, Dealerships, Group Joit Vetures, ad Suppliers etc., to implemet ad moitor the same. Cummis Ic. s cotiued efforts resulted i receivig a perfect ratig for a seveth cosecutive year from the Huma Rights Campaig (i 2012), the largest advocacy group for lesbia, gay, bisexual ad trasgeder (LGBT) employees ad similar efforts are beig adopted by the Compay. Cummis Ic. was recogized for its efforts i creatig a global driver risk assessmet, as well as for the moitorig ad improvemet program developed through the Virtual Risk Maager applicatio. This recogitio came to Cummis Ic. for its work i the areas of social resposibility ad goverace. The Compay uderstads the importace of adoptig a proactive approach to address issues like climate chage ad global warmig. GHG emissio, water cosumptio ad waste geeratio was set as the compay s leadig eviromet idicators which provide a represetative picture of evirometal coditios ad pressures o the eviromet. All Eviromet Performace idicators (EPI s) are adequately reported ad updated o a quarterly basis iterally. The evirometal data of all facilities are collated ad used for trackig of performace agaist set target. Priciple 6 : Busiesses should promote respect, protect ad make efforts to restore the eviromet At Cummis, our missio demads that Everythig we do leads to a cleaer, healthier ad safer eviromet. The Compay uderstads that it is our resposibility as a good corporate citize to also be a good steward of Cummis achieved 31% reductio i emissios i 2010 from 2005 baselie ad followed progressive targets of 5% reductio i total emissios o year o year basis. As a result of cotiual efforts, the Compay had achieved approximately 4% reductio i gree house gases ad 2.5% reductio i water cosumptio i our air, lad ad water. Oe out of our three focus areas absolute terms i 2012 from for Corporate Resposibility is supportig Evirometal 109

121 110 Gift of life for little oes: Rai-water harvestig techiques implemeted by Cummis employees, brig clea potable water to the school childre of Deep Griha Society, Chaufula.

122 Busiess Resposibility Report Sice all of our operatioal facilities are EMS (IS 14001) sharig betwee the distributio trasformers. ad OHSAS (IS 18001) certified as a part of system All operatioal facilities of the Compay religiously implemetatio, each site has developed HSE policy moitor ad track the quatity ad quality of their ad idetified its sigificat evirometal risks i form emissios / wastes geeratio as per their coset of aspects ad impacts. The idetificatio of the requiremet ad report it to cocered Pollutio Cotrol evirometal aspects is a ogoig process that Boards o a aual basis i the form of Eviromet determies the past, curret ad potetial impact Statemet. (positive or egative) of a orgaizatio's activities o the eviromet. The Compay esured that all show cause otices received from the Pollutio Cotrol Board were Though the Compay curretly does ot idulge i ay satisfactorily resolved. The Compay also carries out project related with Clea Developmet Mechaism, it is idepedet audit / evaluatio of the workig of its focused to promote eviromet sustaiability through policy by a iteral or exteral agecy. Gree Buildigs. Our existig costructio stadards provide madates ad guidace to build a eco- Besides the efforts i its ow facilities Cummis has efficiet buildig, with pollutio prevetio measures also supported several commuity projects to help its icluded as well. The ew Power Geeratio Busiess stakeholders achieve sustaiability as detailed below. Uit facility at the Special Ecoomic Zoe at Phalta Megasite was also costructed accordig to the Gree Gift of life for little oes desig cocept which displayed commitmet to Deep Griha Society (Marathi for Light House ) was evirometal stewardship with a triple-bottom-lie formed i Pue i Origially set-up as a Cetre (people, plaet, profit) approach. The facility was for medical ad health care for those residig i the preseted a award by Cummis Ic. for Desig for slums of Pue, it has expaded over the years to work Costructio Sustaiability. o various programs icludig health care, child care, educatio, wome empowermet, youth empowermet O the Operatios frot, the Compay cotiued ad awareess o HIV / AIDS programs. eergy coservatio programs with more projects observed this year for reducig GHG footprit of site The employees of the Compay toiled to brig drikig ad promotig eergy efficiecy. We had iitiated water to the primary school at Deep Griha Society, several iitiatives which iclude Six Sigma projects o Chaufula. The idea was to make use of atural eergy coservatio, uplugged challege, eergy resources ad create a evirometally-sustaiable audits, eergy champio s traiig ad proposed system that would work idepedetly. Cosequetly, it adoptio of Eergy Maagemet System IS to was decided that rai water harvestig would be the ame a few. The Kothrud Plat achieved aual eergy ideal approach to satisfactorily supply clea drikig savigs of 1,784,849 KWH ad i tur reductio of water to the childre. GHG emissio by 1,677 tos by reducig fixed eergy cosumptio of plat area wise, replacemet of Metal The project was segregated i two phases. I Phase 1, halide lamps by T5 light fittigs ad efficiet load our egieers implemeted a Rai Water Harvestig 111

123 system at the Primary School to augmet the groud water level. I Phase 2, Cummis provided sustaiable source of drikig water to the childre at the same Eglish Medium School at Deep Griha. The various striget processes ad umerous Six Sigma tools used i the plaig of the project esured smooth implemetatio. This project saw active participatio by the employees right from plaig to the implemetatio stage icludig buildig a small play area ad platig trees. The highlights of the system are as follows: Rai Water System has the potetial of haressig iterally for differet festivals. Paper bags usage helped i reductio of 7 tos of GHG which was made possible by cotributio of 400 kg of ewspaper collected through ewspaper doatio drive by Cummis employees. Wome Self Help Groups (SHG) received order of more tha 5,000 bags last year. Local shops were approached ad ecouraged to use paper bags resultig i reductio of 3.5 tos of GHG i the commuity. Over 3.6 Tos of GHG was reduced at our supplier ed as they started usig paper bags. Aroud 80% of all fast movig items were shipped i paper bags. These paper bags were used i packagig gaskets, O-rigs & shell bearigs etc. To achieve this success, proper traiig of product costig, marketig 142,000 litres of water every year. If ot harvested, ad persoality developmet was provided. this water would have goe waste. Provisio of 300 litres / day of potable water sufficiet for 400 childre, which at the momet is o-existet. Providig safe ad filtered water, thereby elimiatig probability of water-bore diseases. Log-term sustaiable mechaism, as storage of water is made available through this project. Besides that, there is o additioal burde of electricity o the eviromet as the water purificatio system rus o solar power. There is provisio for the system to ru o electricity, i case of a emergecy. The system Tree Platatio Cummis believes that trees are the most importat lik i the etire value chai for ot oly savig ad protectig our eviromet but also improvig ad maitaiig it i a sustaiable maer. Cummis orgaized a tree platatio evet i Bhimashakar. The evet was coordiated with Maharashtra Arogya Madal (MAM) at Kharoshi Ahwaz, ear Bhimashakar- 130 kms from Pue. The village has bee adopted by MAM as part of the 1,190 hectare NABARD Watershed Developmet Program. is self-sustaiig ad miimal effort is required to The Compay plated 110 trees ad about 20,000 operate ad maitai it. Most importatly, o chemicals are added to purify the water. Sayig No to Plastic Bags seeds coverig over 20 hectares of slopig hills ad a total of 356 employee EEEC hours were clocked i the process. Cummis idetified oe more opportuity to reduce the Creatig evirometal awareess with 75,000 harmful impacts of plastic usage by replacig it with School childre across Idia ews paper bags, wherever feasible. Over 45,000 Today's childre are tomorrow's torch bearers ad they plastic bags were replaced by paper bags ad 6,000 ca help us make a differece. Childre are kow to os. from amogst these paper bags were utilized be very persuasive ad a ifluecig factor i their 112

124 Busiess Resposibility Report homes. We decided to sesitize them to the orms to improve the quality of air i the coutry. This is evirometal challeges faced i Idia ad empower also our cotributio to the society as we propoud that them to be torch bearers. better techology ca be a effective solutio for cleaer air. Cummis lauched a project Catch Them Youg with the objective to create awareess amogst 75,000 We also ecourage fuel ecoomy as that ot oly school childre across the coutry o the importace of coserves precious fossil fuels ad provides a lower preservig our eviromet ad to showcase various carbo footprit o the eviromet, but also results i iitiatives by Cummis towards bettermet of lower operatig costs for the user. All these efforts are eviromet, especially o two atioal issues like doe uder the aegis of oe or more Idustry Water Body Pollutio durig festival times ad Solid Associatios. Waste Maagemet. The project received a overwhelmig respose ad we decided to cotiue Our targets for the future are better ad cleaer egies this project i the comig year with a goal to cover ad geerators ruig o cleaer fuel ad focus o 200,000 studets across the coutry. better techology for lower emissios. Priciple 7 : Busiesses, whe egaged i Priciple 8 : Busiesses should support iclusive ifluecig public ad regulatory policy, should do growth ad equitable developmet so i a resposible maer Two out of our three priciples of Corporate Cummis works o various advocacy iitiatives with the Resposibility guide us i supportig iclusive growth respective Idustry Associatios as parters. All the through iitiatives focused o Educatio ad Social issues that we work o are related to the idustries we Justice. I Idia, we have supported several iitiatives to are part of or we provide products to. Typically, i Idia, provide educatio to differet uderprivileged ad there are Associatios formed o the basis of product weaker sectios of society. Some of our iitiatives lies. For example, Society of Idia Automobile iclude: Maufacturers (SIAM) takes up issues o the Auto Cummis Scholarship Program sector with the Govermet, NGOs ad Thik taks. Cummis College of Egieerig for Wome i So, our advocacy issues o Auto are with SIAM as a Pue parter. Similarly, for issues o Power Geeratio, we Up-gradatio of ITI Phalta work with the Idia Diesel Egies Maufacturers Associatio (IDEMA). O broader issues relatig to Cummis Scholarship Programme eviromet ad society, we work with CII, FICCI ad Every year, Cummis awards scholarships to Assocham. meritorious studets from ecoomically weaker sectios of the society for college level educatio (both Our major advocacy focus is o issues related to Bachelors as well as Masters level programs). I 2012, emissios - both for the Power Geeratio sector as a total of 100 studets (a icrease of 40% over last well as Auto sector. We work with respective year) were selected for scholarship of which 59% Associatios to ecourage better ad tighter emissio scholars were female. 113

125 Wome Power: Cummis scales up its egagemet with the Cummis College of Egieerig for Wome i order to rak it amogst the top 5 percet privately-maaged egieerig istitutes i Idia. ( ) the emphasis will be o graduate Cummis College of Egieerig for Wome i programs. Pue I 2007, supported by the CIF, i ways moetary ad Cummis seior executives are deeply ivolved i the beyod, the Cummis College of Egieerig for Sigature Project, frequetly iteractig with the staff Wome had opeed admissios to the first four-year BE ad studets. The studets get a chace to iteract Degree program i Mechaical Egieerig i Idia. I with the idustry through iterships ad exchage 2011, the first all-wome batch of 65 mechaical programs. Regular PhDs ad paper presetatios keep egieers i Idia, graduated with flyig colors. the staff updated o techology. Cotiuous developmet of the College is beig esured through The Cummis College of Egieerig for Wome ew ifrastructure ad up-gradatio of lab equipmet. (CCEW), coceptualized ad lauched i 1991 i Pue, was established last year as a Sigature Project. Uder Up-gradatio of the ITI Phalta this iitiative, the Compay aims to ehace the quality Approximately 10 kilometres from the Cummis of educatio so as to rak CCEW amogst the top 5% Megasite is Phalta s oly Idustrial Traiig Istitute privately-maaged egieerig istitutes i Idia. The (ITI). About 210 studets study i this govermet-ru Compay alog with the istitutio, has developed a Istitute. Cummis oticed that the Istitute was facig road map for accomplishig this objective. I the first challeges such as poor ifrastructure, low geder phase ( ), the focus will be o the diversity, ad lack of motivatio amogst studets ad udergraduate programs ad i the secod phase staff, ad decided to adopt ad upgrade the Istitute. 114

126 Busiess Resposibility Report A step towards excellece: Cummis has devised a detailed four-year developmet pla for up-gradatio of the Idustrial Traiig Istitute (ITI) at Phalta, i order to trasform it ito a Ceter of Excellece. this year as compared to 19 i the previous year. Cummis has devised a three-proged approach for upgradig the Istitute: 1) Ehacig the ifrastructure ad ladscape - The façade of the buildig was give a facelift. 200 Cummis employees spet over 800 hours creatig this ladscape; 2) Improvig workshop equipmet ad layout - Egieers from Cummis redesiged the workshops at the ITI as well as the Cetre of Excellece ad trasformed them ito state-of-theart workshops with CNC machiig cells ad other idustry-relevat equipmet; 3) Itroducig skills traiig ad additioal courses - Cummis created additioal classrooms ad supplied traiig aids. I less tha six moths, two ew courses were itroduced Diesel Mechaic ad Machiist. It is hearteig to ote that 45 wome joied the ITI Cummis has created a detailed four-year developmet pla for further up-gradatio of the ITI. Priciple 9 : Busiesses should egage with ad provide value to their customer ad cosumers i a resposible maer Cummis works closely with ad supports its customers ad ed users i a resposible maer through developig high quality state-of-the-art products ad providig regular after-market service. Cummis works closely with OEMs it supplies its products to uderstad their requiremets ad make appropriate product modificatios to support their requiremets. Further, Cummis also egages with the ed users of the products to esure it ca provide high quality products with a low total cost of operatio. As a example, Cummis has started supplyig recoditioed parts to its ed users to reduce their total cost of operatio. 115