MAHINDRA INSURANCE BROKERS LIMITED

Directors’ Report to the Shareholders

Your Directors have pleasure in presenting the Annual Report along with the audited accounts of your Company for the year ended
31st March, 2006.
Financial Results
Rupees
2005-06 2004-05
Income 6,40,24,992 3,43,51,983
Profit before Interest, Depreciation & Taxation 4,45,71,639 2,77,59,786
Interest — (4,384)
Depreciation / Amortisation (43,577) (1,24,086)
Profit before Taxation 4,45,28,062 2,76,31,316
Provision for Taxation (1,56,96,929) (1,02,90,346)
Profit after Taxation 2,88,31,133 1,73,40,970
Income-tax Provision Written Back — 1,247
Balance of Profit for prior years 1,73,00,052 2,97,042
Amount available for Appropriation 4,61,31,185 1,76,39,259
Appr opriations:
Appropriations:
Transfer to General Reserve 30,00,000 —
Dividend on Equity Shares (Interim) 2,00,00,000 —
Tax on Dividend (Interim) 28,05,000 —
Proposed Dividend on Equity Shares (Final) — 3,00,000
Tax on Proposed Dividend (Final) — 39,207
Surplus carried to Balance Sheet 2,03,26,185 1,73,00,052
4,61,31,185 1,76,39,259

Dividend also, primarily in the rural market, your Company achieved a

Your Directors declared an Interim Dividend of 400% (Rs. 40 per
Equity Share). The dividend entailing an outgo, including tax on
distributed profits, of Rs. 2.28 crores has already been paid to
the shareholders whose names appeared in the Register of
Members as on 23rd March, 2006. In view of Interim Dividend
declared of 400%, no further dividend is recommended for the
financial year ended 31st March, 2006.
The total dividend outgo on account of dividend payment on
Equity Shares for the financial year 2005-2006, inclusive of tax
on distributed profits, is Rs. 2.28 crores, as against Rs. 0.03 crore
paid for the previous year.
Operations
The year under review represents the second year of your
Company’s insurance broking operations. The primary focus
during this period was on consolidating the retail and corporate
lines of businesses, both in life and non-life portfolios, developed
during the previous year of operation.
The customized life insurance retail cover, “Mahindra Loan
Suraksha” (MLS), introduced in the previous year, continued to
receive a good response and grew by 28% from 26,724 lives to
34,171 lives covered with a Sum Assured of Rs. 743.45 crores
as against a Sum Assured of Rs. 601.90 crores in the previous
year. A significant portion of your Company’s business comes
from the rural markets. In the non-life retail (Motor) segment
growth of 126% from 12,438 cases in 2004-05 to 28,075 cases
in 2005-06.
During the year under review, your Company achieved a growth
of 95% in Premium generated, increasing from Rs. 21.73 crores
in 2004-05 to Rs. 42.30 crores in 2005-06. The Profit Before Tax
increased by 61% from Rs. 2.76 crores to Rs. 4.45 crores, and
the Profit After Tax increased by 66% from Rs. 1.73 crores to
Rs. 2.88 crores during the same period.
Cur
Currr ent Year
Year
Your Company plans to explore various new business
opportunities in the retail and corporate lines of businesses, in
both life and non-life insurance segments.
In order to manage the various business processes effectively
and enhance customer service levels, your Company proposes
to suitably invest in various Information Technology tools,
including specialized software systems for insurance brokers.
Quality Management Systems
Your Company was awarded the ISO 9001:2000 certification for
Quality Management Systems for services related to broking of
life and non-life insurance products to corporate customers in
September, 2005. This will go a long way in establishing your
Company as a Customer-Centric Corporation.
Your Company will maintain its Customer-Centric approach with
a focus on continuous improvements in service delivery.

305
MAHINDRA INSURANCE BROKERS LIMITED
Corporate Social Responsibility (CSR)
On the occasion of the 60th Anniversary Celebration of Mahindra
& Mahindra Ltd. during the period under review, a CSR initiative
was launched which envisages contribution of upto 1% of the
Profit After Tax (PAT) of the Group Companies on a continuing
basis. This would be used exclusively to support socially relevant
projects for the economically disadvantaged, educational
activities, medical aid for those whose hearing is severely
impaired, etc. As a part of this CSR initiative, your Company would
be contributing 1% of its PAT to recognised charitable and/or
other Institutions, including K.C. Mahindra Education Trust.
Dir ectors
Directors
In accordance with the Articles of Association of your Company,
all the Directors of your Company retire by rotation at the
forthcoming Annual General Meeting and, being eligible, offer
themselves for re-appointment.
Audit Committee
A team of internal auditors of Mahindra & Mahindra Limited, and
other experienced professionals under the overall supervision of
the Chief Internal Auditor of Mahindra & Mahindra Limited,
conduct internal audits to assess the adequacy of internal
controls, procedures and processes of the Company. Reports of
the Internal Auditors, as well as the Action taken on the matters
reported upon, are discussed at the Audit Committee Meetings.
During the year under review, your Company held two Audit
Committee meetings.
In the opinion of the Management, the internal control systems
are adequate and provide, among other things, reasonable
assurance of recording transactions of operations in all material
respects and of providing protection against significant misuse
or loss of Company assets.
Dir ectors’ Responsibility Statement
Directors’
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the
Operating Management, and after due enquiry, confirm that:-
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;
(ii) they have, in the selection of the accounting policies, consulted
the Statutory Auditors and these have been applied consistently
and reasonable and prudent judgments and estimates have
been made so as to give a true and fair view of the state of
affairs of the Company as at 31st March, 2006 and of the profit
of the Company for the year ended on that date;
(iii) proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern
basis.
Auditors
Messrs B. K. Khare & Co., Chartered Accountants, retire as
Auditors of the Company and have given their consent for
306
re-appointment. The shareholders will be required to elect
Auditors for the current year and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
the above Auditors proposed to be re-appointed to the effect
that their re-appointment, if made, would be in conformity with
the limits specified in the said section.
Public Deposits and Loans / Advances
The Company has not accepted any deposit from the public or
its employees during the year under review.
The particulars of loans/advances and investment in its own
shares by listed companies, their subsidiaries, associates, etc.,
required to be disclosed in the annual accounts of the Company
pursuant to Clause 32 of the Listing Agreement with the parent
Company, are furnished separately.
Conser vation of Ener
Conservation gy
gy,, T
Energy echnology Absorption and For
Technology eign
Foreign
Exchange Ear nings and Outgo
Earnings
In view of the nature of activities which are being carried on by
the Company, Rules 2A and 2B of the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988,
concerning conservation of energy and technology absorption
respectively, are not applicable to the Company.
There were no foreign exchange earnings or outgo during the
year under review.
Par ticulars of employees as rrequir
Particulars equir ed under section 217(2A)
equired
of the Companies Act, 1956 and Rules made ther eunder
thereunder
The Company had no employee who was in receipt of
remuneration of not less than Rs. 24,00,000 during the year ended
31st March, 2006 or not less than Rs. 2,00,000 per month during
any part of the said year.
Secr etarial Compliance Cer
Secretarial tificate
Certificate
In accordance with the provisions of section 383A of the
Companies Act, 1956, a certificate from Mr. J. P. Fernandes,
Company Secretary in Whole-time Practice, certifying that the
Company has complied with all the provisions of the Companies
Act, 1956, is given in the Annexure and forms part of this Report.
Acknowledgements
The Directors thank the Insurance Regulatory and Development
Authority for their continuous support and guidance rendered. The
Directors acknowledge the trust reposed by the customers, the
support of the shareholders, the guidance provided by the auditors
and the commendable performance of the employees, all of which
contributed to making this year a notable one.
For and on behalf of the Board
Rajeev Dubey
Chairman
Mumbai, 17th April, 2006
 MAHINDRA INSURANCE BROKERS LIMITED

Par ticulars of loans/advances and investment in its own shar

Particulars es by listed companies, their subsidiaries, associates, etc., rrequir
shares equir ed
equired
to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agr eement with the par
Agreement ent
parent
Company:
Loans and advances in the nature of loans to firms/companies in which directors are interested:
Rs. in lacs
Name of the Company Balance as on Maximum outstanding
31st March, 2006 during the year
Mahindra & Mahindra Financial Services Limited 142.00 329.00
The Company has not made any loans and advances in the nature of loans to subsidiaries, associates, and loans and advances in the
nature of loans where there is no repayment schedule or repayment beyond seven years or no interest or interest below section 372A
of the Companies Act, 1956.

307
MAHINDRA INSURANCE BROKERS LIMITED
Secretarial Compliance Certificate
Registration No.:- 11- 42609
Authorised Share Capital:- Rs. 1,00,00,000
Paid-up Share Capital:- Rs. 50,00,000
To,
Members,
Mahindra Insurance Brokers Limited,
Mahindra Towers,
Worli, Mumbai - 400 018.
I have examined the registers, records, books and papers of
Mahindra Insurance Brokers Limited (“the Company”) as required
to be maintained under the Companies Act, 1956, (“the Act”)
and the rules made thereunder and also the provisions contained
in the Memorandum and Articles of Association of the Company
for the financial year ended on 31st March, 2006. In my opinion
and to the best of my information and according to the
examinations carried out by me and explanations furnished to
me by the Company, its officers and agents, I certify that in
respect of the aforesaid financial year:-
1) The Company has kept and maintained all Registers as
stated in Annexure ‘A’ to this certificate, as per the provisions
of the Act and the Rules made thereunder and all entries
therein have been duly recorded.
2) The Company has duly filed the forms and returns as stated
in Annexure ‘B’ to this Certificate, with the Registrar of
Companies, within the time prescribed under the Act and
the Rules made thereunder except otherwise stated.
3) The Company is a Public Limited Company within the
meaning of the provisions of section 3(1)(iv) of the
Companies Act, 1956. The paid-up share capital of the
Company is Rs. 50 lakhs.
4) The Board of Directors duly met 4 (four) times on 15th April,
2005, 15th September, 2005, 17th December, 2005 and 1 st
March, 2006, in respect of which meetings proper notices
were given and the proceedings were properly recorded in
the Minutes Book and signed.
5) The Company has not closed/was not required to close its
Register of Members or Debenture-holders during the
financial year.
6) The Annual General Meeting (AGM) for the financial year
ended on 31st March, 2005 was held on 9th May, 2005, after
giving due notice to the members of the Company and the
resolutions passed thereat were duly recorded in the
Minutes Book maintained for the purpose.
7) No Extra Ordinary General Meeting was held during the
financial year ended 31st March, 2006.
8) The Company has not advanced any loans to its Directors
or persons or firms or companies referred to in section 295
of the Act.
308
9) The Company has not entered into any contracts falling
within the purview of section 297 of the Act.
10) The Company has made necessary entries in the register
maintained under section 301 of the Act.
11) As there was no instances falling within the purview of
section 314 of the Act, the Company has not obtained any
approvals from the Board of Directors, members or Central
Government.
12) The Company has not issued any duplicate share certificate.
13) (i) The Company has delivered all the certificates on
lodgement thereof for transfer and/or for other
purposes in accordance with the provisions of the Act;
(ii) The Company has deposited the final dividend
(FY 2004-05) and the interim dividend (FY 2005-06)
respectively in separate Bank Accounts within 5 days
of its declaration.
(iii) The Company has paid the final dividend (FY 2004-05)
and the interim dividend (FY 2005-06) to the
shareholders within the prescribed time.
(iv) Transfer of any unpaid dividend amount to Investor
Education and Protection Fund as required under the
provisions of section 205C of the Act was not applicable
to the Company;
The Company has duly complied with the requirements
of section 217 of the Act.
14) The Board of Directors of the Company is duly constituted
and the re-appointment of directors retiring by rotation have
been duly approved by the members of the Company at
the AGM.
15) The Company has not appointed any Managing Director/
Whole-time Director/Manager during the financial year.
16) The Company has not appointed any sole selling agents
during the financial year.
17) The Company has, wherever required, obtained all
necessary approvals of the Central Government, Company
Law Board, Regional Director, Registrar of Companies or
such other authorities as may be prescribed under the
various provisions of the Act.
18) The Directors have disclosed their interest in other firms/
companies to the Board of Directors pursuant to the
provisions of the Act and the Rules made thereunder.
19) The Company has not issued any Shares / Debentures /
Other Securities during the financial year under review.
20) The Company has not bought back any shares during the
financial year.

21) There was no redemption of preference shares or
debentures during the financial year.
22) The Company did not have to keep in abeyance rights to
the dividend, right shares and Bonus shares pending
registration of transfer of shares in compliance with the
provisions of the Act as the Company had declared no
dividend nor did it issue any rights or bonus shares during
the year under scrutiny.
23) The Company has not invited/accepted any deposits
including any unsecured loans falling within the purview of
section 58A of the Act during the financial year.
24) The Company has not made any borrowings during the
financial year ended 31st March, 2006.
25) The Company has placed inter-corporate deposits with other
bodies corporate. The Company has not given any
guarantees or provided securities to other bodies corporate.
The necessary entries have been made in the Register kept
for the purpose.
26) The Company has not altered the provisions of the
Memorandum with respect to situation of the Company’s
registered office from one State to another during the year
under scrutiny.
Annexure ‘A’ to the Compliance Certificate dated 15th April, 2006
Registers as maintained by the Company
Statutory Registers:
1) Register of Members under section 150 of the Act.
2) Minutes Books of Meetings of the Board of Directors and
of the General Meetings under section 193 of the Act.
3) Register of Directors under section 303 of the Act.
4) Register of Contracts under section 301of the Act.
5) Books of Account under section 209 of the Act.
6) Register of Renewed and Duplicate Share Certificates under
Rule 7 of the Companies (Issue of Share Certificates)
Rules, 1960.
7) Register of Investments or loans made, Guarantee given or
Security provided under section 372A of the Act.
Other Registers:
1) Transfer Register.
2) Register of Directors’ Attendance.
MAHINDRA INSURANCE BROKERS LIMITED
27) The Company has not altered the provisions of the
Memorandum with respect to the objects of the Company
during the year under scrutiny.
28) The Company has not altered the provisions of the
Memorandum with respect to name of the Company during
the year under scrutiny.
29) The Company has not altered the provisions of the
Memorandum with respect to share capital of the Company
during the year under scrutiny.
30) The Company has not altered its Articles of Association
during the financial year.
31) There was/were no prosecution/s initiated against or show
cause notices received by the Company and no fine or penalty
or any other punishment was imposed on the Company
during the financial year, for offences under the Act.
32) The Company has not received any money as security from
its employees during the financial year.
33) The Company has deposited both employee’s and
employer’s contribution to provident fund with the
prescribed authorities pursuant to section 418 of the Act.
J. P. FERNANDES
Company Secretary
Mumbai, 15th April, 2006 FCS No. 711, CP No. 2923
The Company has not maintained the following Registers as
it was informed that there were no entries/transaction to be
recorded therein.
1) Register of Investments under section 49 of the Act.
2) Register of Deposits under Rule 7 of the Companies
(Acceptance of Deposits) Rules, 1975.
3) Register of Securities Bought Back under section 77A of
the Act.
4) Register of Debenture-holders under section 152 of the Act.
5) Register of Charges under section 143/copies of Instruments
Creating Charge under section 136 of the Act.
6) Index of Members under section 151 of the Act.
7) Register of Destruction of Records/Documents as required
under the Companies (Preservation & Disposals of Records)
Rules, 1966.
8) Register of Directors’ Shareholdings under section 307 of
the Act.
309
MAHINDRA INSURANCE BROKERS LIMITED

Annexure ‘ B’ to the Compliance Certificate dated 15th April, 2006

Forms and returns as filed by the Company with the Registrar of Companies, during the financial year ended on 31st March, 2006.

Sr. Form No./ Filed under For Date of Whether If delay in

No. Return section filing filed within filing
the whether
prescribed requisite
time additional
fee paid

1. Form No. 32 303 For appointment of Mr. Rajeev 08/06/2005 Yes Not
Dubey as Director of the Company Applicable
with effect from 9th May, 2005.
2. Annual 220 The Annual Accounts for the year 07/06/2005 Yes Not
Accounts ended on 31st March, 2005 adopted Applicable
at the Annual General Meeting of
the Company held on 9th May, 2005
3. Compliance 383A Compliance Certificate issued by 07/06/2005 Yes Not
Certificate J.P. Fernandes, Company Secretary Applicable
in Practice.
4. Annual 159 Annual Return as at 9th May, 2005 07/07/2005 Yes Not
Return Applicable

310

AUDITORS’ REPORT
To,
The Members of MAHINDRA INSURANCE BROKERS LIMITED
We have audited the attached Balance Sheet of M/s. MAHINDRA
INSURANCE BROKERS LIMITED, as at 31st March, 2006, and
also the Profit and Loss Account, and also the Cash Flow
Statement for the year ended on that date annexed thereto. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the auditing standards
generally accepted in India. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
As required by the Companies (Auditor's Report) Order, 2003
issued by the Central Government of India in terms of sub-section
(4A) of Section 227 of the Companies Act, 1956, we enclose in
the Annexure a statement on the matters specified in paragraphs
4 and 5 of the said Order.
Further to our comments in the Annexure referred to above, we
report that:
(i) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purpose of our audit;
(ii) In our opinion, proper books of account as required by law
have been kept by the Company so far as appears from
our examination of those books and proper returns
adequate for the purposes of our audit have been received
from the branches not visited by us;
MAHINDRA INSURANCE BROKERS LIMITED
(iii) The Balance Sheet, Profit and Loss Account, and Cash Flow
Statement dealt with by this report are in agreement with
the books of account;
(iv) In our opinion, the Balance Sheet, and Profit and Loss
Account, and Cash Flow Statement dealt with by this report
comply with the accounting standards referred to in sub-
section (3C) of Section 211 of the Companies Act, 1956;
(v) On the basis of written representations received from the
directors, as on 31st March, 2006, and taken on record by
the Board of Directors, we report that none of the directors
is disqualified as on 31st March, 2006, from being appointed
as a director in terms of Clause (g) of sub-section (1) of
Section 274 of the Companies Act, 1956;
(vi) In our opinion and to the best of our information and
according to the explanations given to us, the said accounts,
read together with the Companies Accounting Policies and
the Notes thereto, give the information required by the
Companies Act, 1956, in the manner so required and give
a true and fair view in conformity with the accounting
principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs
of the Company as at 31st March, 2006, and
(b) in the case of the Profit and Loss Account, of the
profit for the year ended on that date.
(c) in the case of the Cash Flow Statement, of the cash
flows for the year ended on that date.
For B.K. KHARE AND CO.
Chartered Accountants
H.P. Mahajani
Partner
Membership No. 30168
Place: Mumbai
Date: 17th April, 2006
311
MAHINDRA INSURANCE BROKERS LIMITED
Annexure to the Auditors’ Report referred to in our report of even date:
1. (a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of the fixed assets. These assets were
physically verified by the Management during the year
at reasonable intervals and no discrepancies were
noticed on such verification.
(b) None of the fixed assets have been revalued during
the year.
(c) Fixed Assets disposed off during the year were not
substantial and therefore do not affect going concern
status.
2. The Company has no inventory and hence the requirements
of Para (ii) (a), (b) and (c) of the Order are not applicable.
3. (a) Based on the records examined by us and according
to the information and explanations given to us, the
Company has granted unsecured loans to one company
covered in the Register maintained under Section 301
of the Companies Act, 1956. The amount of the loan
at the beginning and at the end of the year was
Rs. 39,00,000/- and Rs. 1,42,00,000/- respectively. The
maximum amount outstanding at any point of time
during the year was Rs. 3,29,00,000/-. The Company
has not granted secured loan to any company covered
in the Register maintained under Section 301 of the
Companies Act, 1956.
(b) According to the information and explanations given
to us, in our opinion, the rate of interest and other terms
and conditions on which these loans are granted are
not prima facie prejudicial to the interest of the
Company.
(c) According to the information and explanations given
to us, payment of the principal amount and interest
are also regular.
(d) There was no overdue amount in respect of this loan.
(e) Based on the records examined by us and according
to the information and explanations given to us, the
Company has not taken any loans, secured or
unsecured, from companies, firms or other parties
covered in the Register maintained under Section 301
of the Companies Act, 1956, and hence the
requirements of Para (iii) (e), (f) and (g) are not
applicable.
4. In our opinion and according to the information and
explanations given to us, there is an adequate internal control
system commensurate with the size of the Company and
the nature of its business for the purchase of inventory and
fixed assets and for the sale of goods and services. We
have not came across any major weaknesses in internal
control.
312
5. (a) According to the information and explanations given
to us, the particulars of contracts or arrangements
referred to in Section 301 of the Act have been entered
in the register required to be maintained under that
Section.
(b) According to the information and explanations given
to us, the transactions made in pursuance of such
contracts or arrangements have been made at prices
which are reasonable having regard to the prevailing
market prices at the relevant time.
6. In our opinion and according to the information and
explanations given to us, the Company has not accepted
deposits from the public, and, therefore, the provisions of
Section 58A, 58AA or any other relevant provisions of the
Companies Act, 1956, and Rules thereunder are not
applicable to the Company.
7. In our opinion and according to the information and
explanations provided to us, the Company has an internal
audit system, which is commensurate with its size and
nature of its business.
8. On facts, the requirements of Para 4 (viii) requiring
maintenance of cost records are not applicable in case of
the Company.
9. (a) According to the records of the Company and
information and explanations given to us, the Company
has been regular in depositing undisputed statutory
dues with the appropriate authorities during the year.
(b) According to the records of the Company and
information and explanations given to us, as on 31st
March, 2006, there were no disputed dues of sales
tax/income tax/custom duty/wealth tax/service tax/
excise duty/cess.
10. The Company does not have accumulated losses as at the
end of the current year. The Company has not incurred cash
losses in such financial year and in the immediately
preceding financial year.
11. Based on the records examined by us and according to the
information and explanations given to us, the Company has
no dues to any financial institution or bank or debenture
holders.
12. Based on the records examined by us and according to the
information and explanations given to us, the Company has
not granted any loans and advances on the basis of security
by way of pledge of shares, debentures, or other securities.
13. The provisions of any special statute applicable to the Chit
Funds, Nidhi or Mutual Benefit Fund/Society are not
applicable to the Company.
 MAHINDRA INSURANCE BROKERS LIMITED

14. Based on the records examined by us and according to the 19. The Company has not issued debentures and hence the
information and explanations given to us, the Company is requirement of this clause is not applicable.
not dealing or trading in shares, securities, debentures and
other investments. 20. The Company has not raised money by any public issues
and hence the question of disclosure and verification of
15. According to the information and explanations given to us, end use of such money does not arise.
the Company has not given any guarantee for loans taken
by others from banks or financial institutions. 21. To the best of our knowledge and belief and according to
the information and explanations given to us, no fraud on
16. Based on the records examined by us and according to the or by the Company was noticed or reported during the year.
information and explanations given to us, the Company has
not obtained any term loans.
For B.K. KHARE AND CO.
17. Based on the records examined by us and according to the Chartered Accountants
information and explanations given to us, funds raised on
H.P. Mahajani
short-term basis have, prima facie not been used during
Partner
the year for long-term investment.
Membership No. 30168
18. The Company has not made preferential allotment of shares Place: Mumbai
to parties and companies covered in the Register maintained Date: 17th April, 2006
under Section 301 of the Act.

313
MAHINDRA INSURANCE BROKERS LIMITED

Balance Sheet as at March 31, 2006

Rupees Rupees
Schedule March 2006 March 2005
I. SOURCES OF FUNDS:
Shareholders' Funds:
Share Capital ............................................................... I 5,000,000 5,000,000
Reserves and Surplus ................................................. II 23,326,185 17,300,052
Deferred Tax Liability (net) 29,275 42,346
Total ............ 28,355,460 22,342,398

II. APPLICATION OF FUNDS:

Fixed Assets:
Gross Block ................................................................. 457,723 313,647
Less: Accumulated Depreciation ............................ 65,396 21,819
Net Block .................................................................... 392,327 291,828
Add: Advance for Purchase of Capital Assets ....... 0 0
III 392,327 291,828
Intangible Assets IV 0 204,533
Current Assets, Loans and Advances:
Sundry Debtors ........................................................... 7,991,572 7,320,081
Cash and Bank Balance .............................................. 6,241,849 14,938,346
Other Current Assets .................................................. 326,478 129,429
Loans and Advances ................................................... 17,260,813 4,341,434
31,820,712 26,729,290
Less: Current Liabilities and Provisions: VI
Current Liabilities ........................................... 1,927,579 4,139,145
Provisions ...................................................... 1,930,000 744,107
3,857,579 4,883,252
Net Current Assets ..................................................... 27,963,133 21,846,037
Total ............ 28,355,460 22,342,398

The Schedules referred to above form an integral part of the Balance Sheet.
This is the Balance Sheet referred in our report of even date

For B. K. KHARE & CO. Rajeev Dubey Chairman

Chartered Accountants
Ramesh Iyer
H. P. Mahajani V. Ravi Directors
Partner
Membership No. 30168 Jaideep Devare
Mumbai, 17th April, 2006 Mumbai, 17th April, 2006

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 MAHINDRA INSURANCE BROKERS LIMITED

Profit & Loss Account for the year ended March 31, 2006

Rupees Rupees
Schedule March 2006 March 2005
INCOME:
Income from Operations (Gross, inclusive of TDS of
Rs. 82,17,484/-; Previous Year Rs. 31,28,506/-) ................... VII 63,102,078 34,159,980
Interest (Gross, inclusive of TDS of Rs. 1,96,995/-; Previous
year Rs. 30,284/-) ................................................................. 922,914 192,003
Total ............ 64,024,992 34,351,983
EXPENDITURE:
Interest ................................................................................. 0 4,384
Bank Charges ....................................................................... 90,727 23,432
Employee Cost ..................................................................... VIII 10,145,836 1,774,154
Administration Support Charges .......................................... 1,909,827 974,223
Rent .................................................................................. 1,341,340 0
Insurance ............................................................................. 482,089 75,217
Rates & Taxes ...................................................................... 112,316 161,287
Legal & Professional Charges .............................................. 1,536,834 2,150,234
Loss on Sale/Retirement of Assets ..................................... 72,452 0
Travelling Expenses .............................................................. 1,068,005 434,702
Audit Fees ............................................................................ 110,200 82,650
General & Administrative Expenses .................................... 2,583,727 916,297
Depreciation/Amortisation ................................................... 43,577 124,086
Total ............ 19,496,930 6,720,667

Profit/(Loss) for the year before taxation ......................... 44,528,062 27,631,316

Less: Income Tax Expense
Provision for Current Tax ...................................................... 15,500,000 10,248,000
(Add)/Less: Provision for Deferred Tax ................................. 13,071 (42,346)
15,486,929 10,290,346
Add: Provision for Fringe Benefits Tax .............................. 210,000 0
15,696,929 10,290,346
Profit for the year after taxation ........................................ 28,831,133 17,340,970
Add: Income Tax Provision w/back (Net) .......................... 0 1,247
Add: Balance brought forward from earlier years ............. 17,300,052 297,042
AMOUNT AVAILABLE FOR APPROPRIATION .................. 46,131,185 17,639,259
APPROPRIATION:
General Reserve .................................................................. 3,000,000 0
Proposed Dividend (Interim) ................................................ 20,000,000 0
Corporate Dividend Tax (Interim) .......................................... 2,805,000 0
Proposed Dividend (Final) .................................................... 0 300,000
Corporate Dividend Tax (Final) .............................................. 0 39,207
Balance carried forward to Balance Sheet ........................... 20,326,185 17,300,052
46,131,185 17,639,259
NOTES ON ACCOUNTS ..................................................... IX

The Schedules referred to above and attached notes form an integral part of the Profit and Loss Account.
This is the Profit and Loss Account referred to in our report of even date

For B. K. KHARE & CO. Rajeev Dubey Chairman

Chartered Accountants
Ramesh Iyer
H. P. Mahajani V. Ravi Directors
Partner
Membership No. 30168 Jaideep Devare
Mumbai, 17th April, 2006 Mumbai, 17th April, 2006

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MAHINDRA INSURANCE BROKERS LIMITED

SCHEDULE
SCHEDULE I – Share Capital Rupees Rupees SCHEDULE II – Reserves & Surplus Rupees Rupees
March 2006 March 2005 March 2006 March 2005
Authorised: General Reserve:
1,000,000 (Previous Year: 1,00,000) Equity As per last Balance Sheet .............................. 0 0
Shares of Rs. 10 each ................... 10,000,000 1,000,000 Add: Transfer during the year ......................... 3,000,000 0
Issued, Subscribed & Paid up: 3,000,000 0
500,000 (Previous Year: 500,000) Equity Balance in Profit & Loss Account ................... 20,326,185 17,300,052
Shares of Rs. 10 each ................... 5,000,000 5,000,000
Total ............ 23,326,185 17,300,052
Total ............ 5,000,000 5,000,000
NOTE:
Mahindra & Mahindra Financial Services
Limited, the Holding Company holds 5,00,000
shares as on 31st March 2006 (including 6
shares held jointly with nominees)

SCHEDULE III – Fixed Assets Rupees

GROSS BLOCK AT COST DEPRECIATION NET BLOCK

Description of Assets As at Additions Deductions As at Upto Additions Deductions Upto As at As at
01.04.2005 for for 31.03.2006 01.04.2005 / Trf / Trf 31.03.2006 01.04.2005 31.03.2006
Purch/Trf Sale/Trf

Vehicles ........................... 282,847 0 0 282,847 20,834 26,870 0 47,705 262,013 235,142

Office Equipment ............ 0 32,387 0 32,387 0 5,315 0 5,315 0 27,072

Computers ...................... 30,800 111,689 0 142,489 985 11,391 0 12,376 29,815 130,113
Total ............................... 313,647 1,44,076 0 457,723 21,819 43,577 0 65,396 291,828 392327
As at 31.03.2004 ............. 0 313,647 0 313,647 0 21,819 0 21,819 0 291,828

SCHEDULE IV – Intangible Assets Rupees

Description of Assets Gross Additions Retirements Gross Accumulated Amortisation Deduction and Accumulated Net Balance Net Balance
carrying and and carrying amortisation during the adjustments amortisation as at as at
amount adjustments disposals amount to year at cost of amortisation as at 01.04.2005 31.03.2006
as at during the as at 01.04.2005 31.03.2006
01.04.2005 year at cost 31.03.2006

Software Expenditure ..... 306,800 0 306,800 0 102,267 0 102,267 0 204533 0

Total ............................... 306,800 0 306,800 0 102,267 0 102,267 0 204533 0
As at 31-03-2005 ............. 0 0 0 306,800 0 102,267 0 102,267 0 204533

SCHEDULE V – Current Assets, Rupees Rupees SCHEDULE VI – Current Liabilities & Rupees Rupees
Loans & Advances March 2006 March 2005 Provisions March 2006 March 2005
Interest accrued but not due — Others .......... 326,478 129,429

Sundry Debtors (Unsecured, considered good): Current Liabilities :

Less than six months old ............................... 7,229,139 7,320,081 Sundry Creditors ............................................ 569,375 3,052,112
More than six months old .............................. 762,433 0
TDS Payable ................................................... 143,227 143,520
7,991,572 7,320,081
Other Liabilities .............................................. 1,214,977 943,514
Cash and Bank Balances:
(A) ...................... 1,927,579 4,139,145
Cash on Hand ................................................. 186,212 10,226
Balance with Scheduled Banks in Current
Account .......................................................... 5,055,637 13,928,120
Term Deposit with Scheduled Banks [ear- Provisions:
marked as IRDA Deposit] ............................... 1,000,000 1,000,000
Provision for Fringe Benefit Tax (Net of Advance
(A) ...................... 14,559,899 22,387,856 Tax .................................................................. 30,000 0

Loans and Advances (considered good): Proposed Dividend ......................................... 0 300,000

Intercorporate Deposits .................................. 14,200,000 3,900,000 Corporate Dividend Tax .................................. 0 39,207
Other Advances ............................................. 748,973 0
Advance Income Tax (Net of Provision) .......... 2,311,840 441,434 Other Provisions ............................................. 1,900,000 404,900

(B) ....................... 17,260,813 4,341,434 (B) ....................... 1,930,000 744,107

Total (A + B) ....... 31,820,712 26,729,290 Total (A + B) ....... 3,857,579 4,883,252

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 MAHINDRA INSURANCE BROKERS LIMITED

SCHEDULE VII – Income from Operations Rupees Rupees 9) Provisions and Contingent Liabilities:
March 2006 March 2005 Provisions are recognised in accounts in respect of present probable obligations,
Brokerage ....................................................... 40,259,288 21,863,320 the amount of which can be reliably estimated.
Handling Charges ........................................... 22,842,790 12,296,660 Contingent liabilities are disclosed in respect of possible obligations that arise
Total ................... 63,102,078 34,159,980 from past events but their existence is confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within the
control of the Company.
SCHEDULE VIII – Employee Cost Rupees Rupees
March 2006 March 2005
NOTES TO THE ACCOUNTS:
Salary, Bonus & Incentives ............................. 9,372,860 1,715,757
1) The Company has obtained Direct Broker licence from the Insurance Regulatory
Company's Contribution to P.F.& Other Funds 651,926 50,618
& Development Authority (IRDA) in May 2004, and has commenced actual
Staff Welfare .................................................. 121,050 7,779 business of insurance broking from June 2004 only. Figures of the current year
Total ................... 10,145,836 1,774,154 are therefore not strictly comparable with figures of corresponding previous
financial year.

2) The Company is awaiting clarification from IRDA regarding compliance with

certain mandatory regulations governing brokerage business with a single client/
SCHEDULE IX – Notes to the Accounts for the Year ended March 31, 2006 group. Pending such clarification, in the opinion of the management, the
SIGNIFICANT ACCOUNTING POLICIES (SAP): Company has complied with all such mandatory regulations.

1) Basis for Preparation of Accounts: 3) In the opinion of the Board, Current Assets, Loans & Advances are approximately
The accounts have been prepared to comply in all the material aspects with of the value stated if realised in the ordinary course of business.
applicable accounting principles in India, the Accounting Standards issued by 4) The Company earns brokerage from several insurance companies. The accounts
the Institute of Chartered Accountants of India and relevant provisions of the of these insurance companies remain under reconciliation and are subject to
Companies Act, 1956. confirmation. The Company does not expect any significant variation in the
2) Revenue Recognition: book balances.

i. General: 5) Related Party Disclosure as per Accounting Standard 18:

The Company follows the accrual method of accounting for its income
and expenditure. List of the related parties:
ii. Brokerage Income: Holding Companies : Mahindra & Mahindra Financial
Brokerage Income is recognised on accrual basis when services are Services Ltd. (from 07/04/2004)
rendered and is net of Service Tax.
iii. Handling Charges Income: : Mahindra & Mahindra Ltd.
(from 07/04/2004).*
Handling Charges Income has been accounted for on accrual basis and is
net of Service Tax. Fellow subsidiary Companies : As per list given below
3) Share Issue Expenses: Automartindia Limited : Mahindra International Ltd.
Expenses incurred in connection with fresh issue of share capital are charged (w.e.f. 1st November, 2005)
to the Profit & Loss Account in the year in which they are incurred.
Bristlecone Ltd. : Mahindra World City Developers Ltd.
4) Fixed Assets:
Bristlecone Inc. Mahindra Logisoft Business
Fixed Assets are stated at cost of acquisition (including incidental expenses), Solutions Ltd.
less depreciation.
Mahindra Gesco Developers Ltd. : Mahindra MiddleEast Electrical Steel
5) Intangible Assets: Service (FZE)
All Intangible Assets are initially measured at cost and amortised so as to reflect
Mahindra Acres Consulting : Tech Mahindra Foundation
the pattern in which the asset's economic benefits are consumed.
Engineers Ltd. (w.e.f. 22nd March, 2006)
i. Special Application Software Expenditure:
The expenditure incurred is amortised over three financial years equally Mahindra Ashtech Ltd. : Mahindra & Mahindra South Africa
commencing from the year in which the expenditure is incurred. (Pty.) Ltd.

6) Depreciation: Mahindra Automotive Steels Pvt. Ltd.: Mahindra Overseas Investment

(w.e.f. 27th May, 2005) Company (Mauritius) Ltd.
Depreciation on fixed assets has been charged using Straight Line Method at
rates specified in Schedule XIV to the Companies Act, 1956, except for Office Tech Mahindra Ltd. : Mahindra Realty Ltd.
Equipment on which depreciation has been charged at the rate of 16.21% (w.e.f. 21st September, 2005)
instead of 4.75% as prescribed in Schedule XIV. Assets costing less than
Rs. 5,000/- are written off in the year of purchase. Tech Mahindra GmbH : Mahindra Renault Pvt. Ltd.
(w.e.f. 5th August, 2005)
7) Segment Reporting:
Tech Mahindra (Americas) Inc. : Mahindra Steel Service Centre Ltd.
The Company has single reportable segment namely insurance auxiliary services
for the purpose of Accounting Standard 17 on Segment Reporting. Mahindra-BT Investment Company : Mahindra Shubhlabh Services Ltd.
(Mauritius) Ltd.
8) Taxes on Income:
Current tax is determined as the amount of tax payable in respect of taxable Tech Mahindra (Singapore) Pte. Ltd. : Mahindra SAR Transmission Pvt. Ltd.
income for the year. Deferred tax is recognised, subject to consideration of Tech Mahindra (Thailand) Ltd. : Mahindra USA Inc.
prudence, on timing differences, being the difference between taxable income (w.e.f. 21st February, 2006)
and accounting income that originate in one period and are capable of reversal
in one or more subsequent periods. Deferred tax assets arising on account of Bristlecone India Ltd. : Mahindra Ugine Steel Company Ltd.
unabsorbed depreciation or carry forward of tax losses are recognised only to (w.e.f. 21st June, 2005)
the extent that there is virtual certainty supported by convincing evidence that
sufficient future tax income will be available against which such deferred tax Bristlecone GmbH : Mahindra World City (Jaipur) Ltd.
assets can be realised. (w.e.f. 26th August, 2005)

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MAHINDRA INSURANCE BROKERS LIMITED

Fellow subsidiary Companies : As per list given below Sl. Nature of Transactions Holding Fellow Subsidiary
Bristlecone Singapore Pte. Ltd. : NBS International Ltd. No. Companies * Companies
4. FINANCE:
Mahindra (China) Tractor Company : Tech Mahindra (R&D Services) Ltd.
Ltd. (w.e.f. 13th May, 2005) Inter Corporate Deposits given 142.00 —
(39.00) (—)
Mahindra Engg. & Chem. Products : Tech Mahindra (R&D Services) Inc.
Ltd. (w.e.f. 28th November, 2005) Dividends Paid (for previous year) 3.00 —
(—) (—)
Mahindra Engineering Design & : Tech Mahindra (R&D Services)
Dividends Paid (for current year) 200.00 —
Development Company Ltd. Pte. Ltd.
(—) (—)
(w.e.f. 28th November, 2005)
Receivables 8.07 —
Mahindra Europe s.r.l. : Stokes Group Limited (14.01) (3.09)
(w.e.f. 30th May, 2005) (w.e.f. 3rd January, 2006)
Payables 2.91 —
Mahindra Gujarat Tractor Ltd. : Jensand Limited (24.96) (—)
(w.e.f. 3rd January, 2006)
5. ADDITIONAL ISSUE OF
Mahindra Holdings & Finance Ltd. : Stokes Forgings Dudley Limited SHARE CAPITAL — —
(w.e.f. 3rd January, 2006) (40.00) (—)
Mahindra Holidays & Resorts India : Stokes Forgings Limited Figures in brackets represent corresponding figures of previous financial year.
Ltd. (w.e.f. 3rd January, 2006)
* Mahindra Insurance Brokers Limited is a 100% subsidiary of Mahindra &
Mahindra Holidays & Resorts (USA) : Plexion Technologies (India) Mahindra Financial Services Limited, which, in turn, is a subsidiary of Mahindra
Ltd. Private Limited & Mahindra Limited.
(w.e.f. 15th February, 2006)
Bristlecone UK Limited : Plexion Technologies (UK) Limited 6) Earnings Per Share: 2005-06 2004-05
(w.e.f. 15th February, 2006)
Amount used as numerator — (Rs.) 28,831,132 17,340,970
Mahindra Infrastructure Developers : Plexion Technologies GmbH
Ltd. (w.e.f. 15th February, 2006) Weighted average number of Equity Shares
used in computing basic earnings per share 500,000 493,531
Mahindra Intertrade Ltd. : Plexion Technologies Incorporated
(w.e.f. 15th February, 2006) Weighted average number of Equity Shares
used in computing diluted earnings per share 500,000 493,531
Related Parties Transactions are as under: (Rupees in lacs) Basic earnings per share (Rs.) 57.66 35.14
Sl. Nature of Transactions Holding Fellow Subsidiary Diluted earnings per share (Rs.) 57.66 35.14
No. Companies * Companies
1. INCOME: 7) In accordance with Accounting Standard 22 on Accounting for Taxes on Income
Interest (Gross) 8.78 — the Company has accounted for Deferred Asset/Liability. The break-up of the
(1.45) (—) Deferred Tax Asset of Rs. 29,275/- as at 31st March, 2006, is as under:
Handling Charges (Gross) 251.77 — (Rupees in lacs)
(132.42) (—) Particulars Deferred Tax Asset/ Deferred Tax Asset
2. EXPENSE: (Liability) — March 2006 (Liability) — March 2005
Interest — — Depreciation (0.29) (0.42)
(0.04) (—) Total (0.29) (0.42)
Other Expenses 20.00 —
(9.74) (—) 8) There are no dues payable to Small Scale industrial undertakings in view of the
3. DEPUTATION CHARGES PAID: nature of the business of the Company.
To Related Parties 13.19 —
(20.19) (—) 9) Previous year's figures have been re-grouped, wherever necessary.

Signatures to Schedule I to IX

For B. K. KHARE & CO. Rajeev Dubey Chairman

Chartered Accountants
Ramesh Iyer
H. P. Mahajani V. Ravi Directors
Partner
Membership No. 30168 Jaideep Devare
Mumbai, 17th April, 2006 Mumbai, 17th April, 2006

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 MAHINDRA INSURANCE BROKERS LIMITED

Cash Flow Statement

March 2006 March 2005

Rupees Rupees
A. CASH FLOW FROM OPERATING ACTIVITIES
Profit before Taxes and Contingencies ......................................... 44,528,062 27,631,316
Add/(Less):
Depreciation .................................................................................. 43,577 21,819
Amortisation on Intangible Assets ................................................ 0 102,267
Income received on Investing Activities ....................................... (877,866) (145,005)
(Profit)/Loss on Sale/Retirement of Assets ................................... 72,452 0
Operating Profit before Working Capital Changes ........................ 43,766,225 27,61,0397
Less:
(Increase)/Decrease in Trade Receivables .................................... (671,490) (7,320,081)
(Increase)/Decrease in Loans and Advances ................................ (946,022) (129,429)
(1,617,512) (7,449,510)
Add: Increase/(Decrease) in Current Liabilities ............................ (584,386) 4,522,445
(2,201,898) (2,927,065)
Cash Generated from Operations ................................................. 41,564,327 24,683,332
Advance Taxes Paid ...................................................................... (17,550,407) (10,619,931)
NET CASH FROM OPERATING ACTIVITIES .............................. (A) 24,013,920 14,063,402

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets ............................................................. (144,076) (313,647)
Purchase of Intangible Assets ...................................................... 0 (306,800)
Income Received on Investments ................................................ 877,866 145,005
Intercorporate Deposit Placed ...................................................... (10,300,000) (2,100,000)
NET CASH FROM INVESTING ACTIVITIES ............................... (B) (9566,210) (2,575,442)

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from Issue of Additional Equity Share Capital ............... 0 4,000,000
Increase/(Decrease) in Short-term Borrowings (Net) .................... 0 (1,000,000)
Dividend Paid ................................................................................ (23,144,207) 0
NET CASH FROM FINANCING ACTIVITIES .............................. (C) (23,144,207) 3,000,000
NET INCREASE/(DECREASE) IN
CASH AND CASH EQUIVALENT ................................................ (A+B+C) (8,696,497) 14,487,960
CASH AND CASH EQUIVALENTS AS AT:
Beginning of the Period ................................................................ 14,938,346 450,386
End of the Period .......................................................................... 6,241,849 14,938,346

Examined and found correct

For B. K. KHARE & CO. Rajeev Dubey Chairman
Chartered Accountants
Ramesh Iyer
H. P. Mahajani V. Ravi Directors
Partner
Membership No. 30168 Jaideep Devare
Mumbai, 17th April, 2006 Mumbai, 17th April, 2006

319
MAHINDRA INSURANCE BROKERS LIMITED

ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PART IV OF SCHEDULE VI TO THE COMPANIES

ACT, 1956.

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

I. REGISTRATION DETAILS
Registration No. : 1 1 - 4 2 6 0 9 State Code : 1 1

Balance Sheet Date 3 1 0 3 2 0 0 6

Date Month Year

II. CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousands)
Public Issue Rights Issue
N I L N I L
Bonus Issue Private Placement
N I L N I L
III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand)
Total Liabilities Total Assets
2 8 3 5 5 2 8 3 5 5
SOURCE OF FUNDS
Paid-up Capital Reserves & Surplus
5 0 0 0 2 3 3 2 6
Secured Loans Unsecured Loans
N I L N I L
Deferred Tax Liability (Net)
2 9
APPLICATION OF FUNDS
Net Fixed Assets Intangible Assets
3 9 2 N I L
Investments Net Current Assets
N I L 2 7 9 6 3
Miscellaneous Expenditure Accumulated Losses
N I L N I L
IV. PERFORMANCE OF COMPANY (Amount in Rs. Thousands)
Turnover Total Expenditure
6 4 0 2 4 1 9 4 9 6
+ / – Profit/Loss Before Tax + / – Profit/Loss After Tax
+ 4 4 5 2 8 + 2 8 8 3 1
Earning per Share (in Rupees) Dividend Rate %
Basic Diluted 4 0 0
5 7 . 6 6 5 7 . 6 6
V. GENERIC NAMES OF THREE PRINCIPAL PRODUCT/SERVICE OF THE COMPANY (as per monetary terms)
Item Code No. (ITC Code) N I L

Product Description I N S U R A N C E

A U X I L A R Y S E R V I C E

Rajeev Dubey Chairman

Ramesh Iyer

V. Ravi Directors

Jaideep Devare
Mumbai, 17th April, 2006

320
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

Directors’ Report to the Shareholders

Your Directors present their Nineteenth Annual Report together with the audited accounts of your Company for the year ended 31st
March 2006.

FINANCIAL RESULTS (Rupees Mn.)

For the year ended March 31 2006 2005

Income .......................................................................................................................... 12,284.50 9,295.93

Gross Profit ................................................................................................................... 2,780.24 1,687.42

Depreciation .................................................................................................................. (373.80) (315.27)
Profit before Tax ........................................................................................................... 2,406.44 1,372.15

Provision for taxation .................................................................................................... (205.23) (142.81)

Profit after tax before non-recurring / exceptional items .............................................. 2,201.21 1,229.34
Non-recurring / exceptional items ................................................................................. — (518.42)

Profit for the year after tax and non-recurring / exceptional items ............................... 2,201.21 710.92
Balance brought forward from previous years .............................................................. 3,753.58 3,382.71
Profit available for appropriation .................................................................................... 5,954.79 4,093.64

Transfer to General Reserve ......................................................................................... (230.00) (88.00)

Dividend Interim paid ................................................................................................. (623.32) (223.20)
Final (proposed) ........................................................................................... (415.99) —

Tax on dividend - On interim dividend .......................................................................... (87.42) (28.86)

- On final dividend ............................................................................... (58.34) —
Balance carried forward ................................................................................................ 4,539.72 3,753.58

DIVIDEND:
Your Directors declared four interim dividends for the year under review as under :

Date of No. of Face value Paid up Dividend Dividend Amount Total Dividend
declaration shares per share value per % per share Paid
(Rs.) Share (Rs.) (Rs.) (Rs.) (Rs.)
18th July
2005 102,025,355 2 2 15% 0.30 30,607,606.50 30,607,606.50
17th October 102,355,485 2 2 15% 0.30 30,706,645.50
2005 9,931,638 2 0.30 15% 0.045 446,924.00 31,153,569.50
16th January 102,456,065 2 2 30% 0.60 61,473,639.00
2006 9,931,638 2 0.30 30% 0.09 893,848.00 62,367,487.00
4th May 102,508,885 2 2 240% 4.80 492,042,648.00
2006 9,931,638 2 0.30 240% 0.72 7,150,779.00 499,193,427.00
Your Directors have announced a fourth interim dividend of 240% and recommend a final dividend of 200%. This total dividend of 440%
includes a one time special dividend of 400%. The final dividend will be paid to those members whose names will appear in the Register
of Members on 17th July, 2006, being the Record Date fixed for the purpose.
The final dividend will absorb a sum of Rs. 474.33 Mn, including Rs. 58.34 Mn as tax on distributed Profit.

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TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
INCREASE IN SHARE CAPITAL
In July 2005, the authorised capital of the Company was increased
from Rs. 250,000,000 to Rs. 300,000,000.
Your Company allotted 782,310 shares of Rs. 2 each on the
exercise of stock options, issued under the MBT ESOP PLAN
2000 and 9,931,638 partly paid shares to Mahindra-BT Investment
Company (Mauritius) Limited. Due to this, the number of issued
and subscribed equity shares of your Company increased from
101,726,575 shares to 112,440,523 shares.
BUSINESS PERFORMANCE
Your Company has experienced strong growth in revenues and
profits in the year under review.
During the year, your Company's total income grew by 32.15%
to Rs.12,284.50 Mn from Rs. 9,295.93 Mn in the previous year.
Profit after tax has increased to Rs. 2,201.21 Mn from Rs.
1,229.34 Mn in the previous year, a growth of 79.06%.
The Company witnessed growth in all the geographies it operates
in. Your Company's turnover grew by 14%, 225% and 90% in
Europe, USA and Rest of the World (ROW) respectively.
BUSINESS OVERVIEW
Your Company continues its focus on the telecom sector and has
positioned itself as a leader in this space. While strengthening its
position within the telecom service provider segment, it has also
grown significantly in the telecom equipment manufacturers
space and built strong relationships with independent software
vendors servicing the telecom sector. In fiscal 2005, your Company
was ranked by NASSCOM as the 8th largest Indian IT services
company in terms of export revenues.
The global telecommunications industry, driven by an increasing
demand for innovative products, value added services and a
rapidly evolving technological landscape, is likely to make
significant technological investments. Companies will need to
refurbish old generation networks and increase spending on
development of the next generation of products and services,
leading to increased IT spending. Most companies are looking to
use offshoring to radically improve the value delivered through
their IT spend.
Your Company is now well placed to take advantage of these
market opportunities, as it combines deep telecom expertise and
enhanced portfolio of services with proven off-shoring capabilities.
Your Company services now span a wide range, from applications
development and maintenance, solution integration, product
lifecycle management and testing to high end, higher value added
offerings such as consulting and managed services. Your Company
provides these services to its clients in the form of
telecommunications specific offerings and through a delivery
model which efficiently combines service delivery with domain
knowledge.
ACQUISITIONS
In November 2005 your Company entered into an agreement to
acquire Axes Technologies (India) Private Limited, which provides
technology solutions to leading Telecom Equipment
Manufacturers (TEM) in the areas of Research & Development
322
(R&D), Product Engineering and Life Cycle Support.
This is the first acquisition by your Company. This acquisition is
complementary to your Company's strong presence and
capabilities in the Telecom Service Provider space. Axes
capabilities would bridge a gap in the service offerings to the TEM
segment of the Telecom market and would be a key growth driver
for the organization going forward. Axes has significant telecom
product and protocol expertise; has deep rooted client relationships
and provides business critical services through their engagements.
Axes Technologies has now been renamed as Tech Mahindra
(R&D Services) Ltd.
RE-BRANDING TECH MAHINDRA LIMITED
Your Company has been aggressively diversifying its client base
across the complete telecom ecosystem. To develop a new
identity and to better position itself, your Company changed its
name to `Tech Mahindra Limited' effective 3rd February, 2006.
While BT is a large shareholder and continues to be the largest
customer, the changed name reflects your Company's growing
client base and capabilities.
QUALITY
Over the years your Company refined the process for the delivery
of large-scale business critical projects - based on the mature
understanding of business drivers, to enable in defining the best
solution, ensuring a smooth transition and enabling excellent on-
going operations. During this year your Company was assessed
at SEI CMMI Level 5 & PCMM Level 5, which are the highest
standards of process and quality leadership. The robust service
delivery framework mASTER™ coupled with Integrated Business
Management System comprising ISO 9001:2000, BS7799
adherent practices has led to high quality results, consistently
delivered within time lines and budgets.
HUMAN RESOURCES
Your Company believes that qualified and experienced people are
its most important assets and follows policies that aim to attract
and retain the best talent with a combination of monetary and
non-monetary benefits. Substantial progress has been made in
this key facet of operation during the year.
The human asset base was substantially augmented during the
year with the Company crossing the 10,000 employee mark. Your
Company conducts periodic training programs to enable
employees to remain up-to-date with latest developments in
relevant technological areas.
It is the endeavor of your Company to preserve top talent and
offer an opportunity to its employees to fulfill their career
aspirations and to ensure further growth and nurturing of their
talent, your Company launched a Career Development Program
called 'Mould'. Mould provides a platform to develop employees
by using resources such as Training Programs, knowledge
repositories and guidance by counselors appointed exclusively to
facilitate their career growth and development.
INFRASTRUCTURE
To support its rapid growth, your Company has expanded its
footprint with world-class facilities in locations like Kolkata, Noida,

Bangalore and Chennai. While most of these facilities are leased,
in the next phase of growth the Company proposes to have its
own campuses, mainly in Special Economic Zones (SEZs).
SUBSIDIARY COMPANIES
Consequent upon the change of name of the Company, the
names of all its subsidiaries were changed to bring them in line
with the parent company.
In line with the Company strategy to enlarge its global reach, the
Company established a new subsidiary in Thailand namely Tech
Mahindra (Thailand) Ltd. (formerly MBT (Thailand) Co. Ltd.).
During the year, your Company made its first acquisition when it
acquired Axes Technologies (India) Pvt. Limited, a company
providing IT services to telecom equipment manufacturers, along
with its subsidiaries in USA and Singapore, namely, Tech Mahindra
(R & D Services) Inc. and Tech Mahindra (R & D Services) Pte.
Limited, respectively. The acquisition will enable the Company to
reach a strategic position in the telecommunications equipment
manufacturers segment.
The Company has also recently promoted a non-profit organization
named `Tech Mahindra Foundation' under section 25 of the
Companies Act, 1956.
The audited statements of account of the Company's subsidiaries
for the year ended 31st March, 2006 together with reports of their
Directors and the Auditors and the Statement pursuant to section
212 of the Companies Act, 1956 are attached.
EMPLOYEE STOCK OPTION PLAN
The Company has various incentive plans for the employees, one
of which is the Employee Stock Option Plan (ESOP).
EMPLOYEE STOCK OPTION PLAN 2000
In order to supplement the available options with the MBT ESOP
Trust for further grants, the Compensation Committee of the
Board of Directors granted 200,000 options, equivalent to 200,000
equity shares of Rs. 2 each to the Trust. The Trust, on the
recommendation of the Compensation Committee, then granted
345,000 options to the employees and / or directors of the
Company and the holding company at an exercise price of Rs. 83
per share, as fixed by the Compensation Committee earlier in the
year as per report dated 8th July, 2005, submitted by M/s. Pravin
P. Shah & Associates, Chartered Accountants.
EMPLOYEE STOCK OPTION PLAN 2004
While there were no grants under this Scheme during the year,
2,271,078 options were vested during the year. None of the
options was exercised during the year.
EMPLOYEE STOCK OPTION PLAN 2006
As recommended by the Compensation Committee, the Board,
at its meeting held in October 2005, approved the ESOP 2006,
which was subsequently approved by the shareholders at their
meeting held on 16th January, 2006.
Under this plan, the Compensation Committee approved a grant
of 4,633,680 options to various employees at an exercise price of
Rs. 83 in accordance with the report referred above.
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
None of the Directors was granted any options during the year
under this plan.
ADDRESSING SOCIAL CONCERNS
Your Company, as a responsible corporate entity, believes in
discharging its social responsibility towards development of
underprivileged in the society. Apart from providing financial
support for such activities, it also donates computer hardware to
schools and charitable institutions. It encourages its employees
to actively participate in social activities.
In order to play a more involved role in this direction, your
Company has plans to action various social initiatives through
Tech Mahindra Foundation as also through other NGOs. The
Company has donated Rs. 150 Mn as Corpus to Tech Mahindra
Foundation.
CORPORATE GOVERNANCE PHILOSOPHY
Your Company believes that Corporate Governance is a voluntary
code of self-discipline. In line with this philosophy, the Company
follows healthy Corporate Governance practices and reports to
the shareholders the progress made on the various measures
undertaken. Although the Company is not listed on any Stock
Exchange, your Directors have been reporting the initiatives on
Corporate Governance adopted by your Company. The same is
included in the section 'Corporate Governance' in the Annual
Report.
DIRECTORS
Mr. Clive Goodwin and Mr. Anupam Puri retire by rotation, and
being eligible, offer themselves for re-election.
Mr. Paul Zuckerman was appointed as an independent Additional
Director of the Company with effect from 4th May, 2006. He
holds office upto the date of the forthcoming Annual General
Meeting. The Company has received a notice from a member
signifying his intention to propose Mr. Zuckerman as candidate
for the office of Director.
Mr. Frederick E. Becker resigned as alternate director to Mr. Clive
Goodwin effective 4th May, 2006. Mr. Paul Ringham has been
appointed as the new alternate director in place of Mr. Becker.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the Operating
Management, and after due enquiry, confirm that:
i. In the preparation of the annual accounts, the applicable
accounting standards have been followed;
ii. they have, in the selection of the accounting policies, consulted
the Statutory Auditors and these have been applied
consistently and reasonable and prudent judgments and
estimates have been made so as to give a true and fair view
of the state of affairs of the Company as at 31st March 2006
and of the profit of the Company for the year ended on that
date;
iii. proper and sufficient care has been taken for the maintenance
of adequate accounting records in accordance with the
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TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

provisions of the Companies Act, 1956 for safeguarding the required to be disclosed in the annual accounts of the Company
assets of the Company and for preventing and detecting pursuant to Clause 32 of the Listing Agreement with the parent
fraud and other irregularities; company, Mahindra & Mahindra Limited, are furnished separately.
iv. the annual accounts have been prepared on a going concern
AWARDS/RECOGNITION
basis.
The Company has been rated as the 8th Largest Software
AUDITORS exporter in India for fiscal 2005 by NASSCOM. It has also been
M/s Deloitte Haskins & Sells, Chartered Accountants, the Auditors rated as a leader in 'The Global Outsourcing 100' 2006 by
of the Company, hold office up to the conclusion of the forthcoming International Association of Outsourcing Professionals (IAOP).
Annual General Meeting of the Company and have given their
QAI has assessed the Company at People CMM level 5. The
consent for re-appointment. The shareholders will be required to
People Capability Maturity Model (People CMM) is a framework
elect auditors for the current year and fix their remuneration. The
that helps organizations successfully address their critical people
Company has received a written confirmation from M/s Deloitte
issues. Based on the best current practices in fields such as
Haskins & Sells to the effect that their appointment, if made,
human resources, knowledge management, and organizational
would be in conformity with the limits prescribed in section 224
development, the People CMM guides organizations in improving
of the Companies Act, 1956.The Board recommends the
their processes for managing and developing their workforces.
appointment of M/s Deloitte Haskins & Sells as the Auditors of
With this certification the Company is now in a select group of
the Company.
companies worldwide that are certified at PCMM level 5.
CONSERVATION OF ENERGY AND TECHNOLOGY
ACKNOWLEDGMENTS
ABSORPTION
Your Directors gratefully acknowledge the contributions made by
In view of the nature of activities that are being carried on by the
the employees towards the success of the Company. Your
Company, Rule 2A and 2B of the Companies (Disclosure of
Directors are also thankful for the co-operation and assistance
Particulars in the Report of Board of Directors) Rules, 1988,
received from its customers, vendors, bankers, STPI, regulatory
concerning conservation of energy and technology absorption,
and governmental authorities in India and abroad and its
respectively are not applicable to the Company. The Company is,
shareholders.
however, beginning to investigate ways of reducing energy
consumption as a commitment to the global environment; this will For and on behalf of the Board
cover accommodation facilities, communications and transport.
Anand G. Mahindra
O
FOREIGN EXCHANGE EARNINGS AND OUTGO Chairman
The foreign exchange earnings of your Company during the year
Mumbai, May 29, 2006.
were Rs. 11,961.61 Mn (Previous Year Rs. 9,199.70 Mn) while the
outgoings were Rs. 4,702.91 Mn (Previous Year Rs. 4,247.15 Mn).

PARTICULARS OF EMPLOYEES
As required under section 217(2A) of the Companies Act, 1956, Particulars of loans / advances and investment in its own
and the Rules made thereunder, a statement containing particulars shares by listed companies, their subsidiaries, associates,
of the Company's employees who were in receipt of remuneration etc., required to be disclosed in the annual accounts of the
of not less than Rs. 2,400,000 during the year ended 31st March Company pursuant to Clause 32 of the Listing Agreement
2006, or of not less than Rs. 200,000 per month, if, employed for with the parent company, Mahindra & Mahindra Limited
part of the year, is given in the Annexure to this Report.
Loans and advances in the nature of loans to subsidiaries:
The Department of Company Affairs, has amended the Companies
(Particulars of Employees) Rules, 1975 to the effect that particulars Name of the Balances as on Maximum outstanding
of employees of companies engaged in Information Technology Company March 31, 2006 during the year
sector posted and working outside India not being directors or
Tech Mahindra USD 5,000,000 USD 5,000,000
their relatives, drawing more than Rs. 2,400,000 per financial year
(Americas) Inc. (Equivalent to (Equivalent to
or Rs. 200,000 per month, as the case may be, need not be
Rs. 223,050,000) Rs. 223,050,000)
included in the statement but, such particulars shall be furnished
to the Registrar of Companies. Accordingly, the statement included Loans and advances in the nature of loans to associates, loans
in this report does not contain the particulars of employees who and advances in the nature of loans where there is no repayment
are posted and working outside India. schedule or repayment beyond seven years or no interest or
interest below section 372A of the Companies Act, 1956 and
DEPOSITS AND LOAN / ADVANCES
loans and advances in the nature of loans to firms/ companies in
The Company has not accepted any deposits from the public or which directors are interested - NIL
its employees during the year under review.
The particulars of loans/advances and investment in its own
shares by listed companies, their subsidiaries, associates, etc.,

324
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

Annexure to the Directors’ Report

INFORMATION AS PER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 AND FORMING
PART OF DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH 2006
Name Designation Gross Qualification Total Age Date of Last Employment Designation
remuneration experience (yrs) Joining (last employment)
(Rs. per annum) (yrs)
Uday Chintaman Vartak Offshore Delivery Head (ODH) 3,119,659 M.Sc Statistics 25 47 1-Feb-89 Premier Automobiles Senior Programmer
Sunil Ramakant Joshi Vice - President 4,028,714 M.Sc (Elect), DAM 22 45 19-Mar-90 Voltas Limited Asst. Systems
Manager
Prakash Parashram Devan Offshore Delivery Head (ODH) 2,822,158 BE,DSM 22 43 14-May-90 Leading Edge Systems Pvt.Ltd. Consultant
** Sachin Punalekar Sr. Project Manager 2,267,666 MCA 16 40 4-Jun-90 First Job Trainee Software
Engineer
Ashirwad Parashuram Tillu Offshore Delivery Head (ODH) 2,429,521 M.Tech 21 46 15-Dec-94 Godrej & Boyce Deputy Manager
Manufacturing Co.
** Jayant Dabadghaon Offshore Delivery Manager 1,432,454 MCA 17 41 3-Apr-95 Info Management Resources Sr.Systems Analyst
Sachin Khankhoje Sr. Project Manager 3,514,062 ME 11 34 9-Oct-95 First Job Trainee Software
Engineer
** Jerome Morris Sr People & Skill Develop Mgr 608,420 B.Sc 24 46 1-Dec-95 Thermax Sr. Manager -projects
Suresh Iyer Sr. Project Manager 5,649,527 M.Tech 15 38 1-Jul-96 Blue Star Ltd Assistant Manager-R & D
** Amit Mehta Vice - President 6,966,156 BE (ELECT), MS COMP 25 50 25-Nov-96 Tata information Services ltd Dy. General Manager
** Ramnath V.P. Project Manager 399,231 M. Tech 18 41 16-Jul-97 Lakme Limited Senior System Analyst
** Manoj Bhale Project Manager 225,141 DIPLOMA 12 36 27-Jan-98 Milton Plastics Ltd Asst Manager
Arun Gangadhar Tendulkar Offshore Delivery Head (ODH) 2,638,650 BE 20 44 2-Mar-98 KPMG Consultant
** Shirish Munj Principal Solution Architect 2,780,386 BE 18 39 15-Apr-98 Tata Consultancy Ltd Asst. Consultant
** Subhash Menon Sr.Technical Associate 198,154 BE 8 29 28-Jul-98 First Job Trainee Software
Engineer
Shankar Allimatti Business Unit Head 2,991,699 BE Electronics 34 59 4-Aug-98 National Radio & Electronics Dy. General Manager
Co. Ltd.
** Dipali Kanawadkar Sr.Technical Associate 203,020 BE 8 30 21-Aug-98 First Job Trainee Software
Engineer
** Aditya Ghosh Project Manager 246,090 Management Graduate 16 37 14-Sep-98 Asea Brown Boveri Ltd Sr. Engineer.
** Tapasi Sengupta Offshore Delivery Manager 2,410,984 B.Sc 12 42 15-Sep-98 Silverline Industries Sr. System Analyst
** Sanjay Awari Sr.Technical Associate 276,742 B.Tech 12 35 22-Sep-98 TELCO Sr. Sales Officer
** Manjushree Sharma Sr.Technical Associate 357,643 PhD 9 37 16-Nov-98 Claire Comforts P Ltd. Programmer/ EDP
Officer
** Deepti Purandare Project Manager 307,110 MSC 11 33 14-Dec-98 Tata Infotech Ltd System Analyst
** Rema Vinod Nair Associate Solution Designer 234,607 MS 11 33 14-Dec-98 CIDER Software Engineer
** Shisheer Panse Senior Manager 1,079,824 Management Graduate 17 40 4-Jan-99 Parakh Foods GM Finance
** Hrushikesh Arun Deshpande Sr.Technical Associate 193,541 BE 9 31 21-Jan-99 Niche Software Software Engineer
Krishna Gopal Asst. Vice President - BD 3,166,272 Management Graduate 23 46 10-Feb-99 Satyam Infoway Ltd Head of Business
Development
** Sharad V. Shanbhag Sr.Technical Associate 220,539 BE 7 30 1-Mar-99 CMC Ltd Trainee Software
Engineer
** Shyam S. Joshi Sr.Technical Associate 191,850 BE 8 29 1-Mar-99 Mahindra & Mahindra Ltd Trainee Software
Engineer
Ravi Jain Vice - President 4,143,640 ME 24 51 12-Jul-99 Contech Software Pvt. Ltd Vice President
** Subhamoy Guha Sr.Technical Associate 202,630 Management Graduate 14 39 11-Oct-99 KSB Pumps Ltd Officer
(S/w Professional)
** Anchal Singh Arora Project Manager 263,244 BE 9 31 15-Nov-99 Duet Technologies Ltd Member of Technical
Staff
A. Ranaweera Senior Vice - President 7,766,742 BSc(Hons) MSc, MBA 31 60 1-Apr-00 British Telecom Pl. - UK Development Manager
K V V Prasad Sr. Database Administrator 2,907,219 B.Tech 18 43 4-Sep-00 Zensar Technologies Ltd. Systems Analyst
Neelesh B Kalelkar Sr. TIM Engineer 2,378,551 DIPLOMA 11 31 15-Jan-01 CMC Ltd Enginneer Customer
services
Ravi Aiyer Project Manager 2,979,658 Management Graduate 13 38 12-Mar-01 U.S. Interactive (I) Ltd. Business Anaylst
Sunil Bagwe Function Head 3,247,772 B.Tech 29 54 19-Apr-01 DE Shaw India Software Pvt. Ltd. Consultant
** Sarama Pani Principal Quality Consultant 1,948,659 MA 23 55 30-Apr-01 Mastek Ltd Consultant
Abhijit Lahiri Function Head 3,034,706 B.Sc 16 37 17-Feb-03 UshaComm India Pvt.Ltd Sr. Director
Deepak Korpal Function Head 3,026,018 B.Sc 20 42 10-Mar-03 Innovatures Pvt Ltd Director;Head
(Technology)
** Amitava Dutta Vice - President 5,260,480 BSc - Engg 23 47 19-Mar-03 Usha Communications Vice President
Milind Kulkarni Vice - President 4,348,041 FCA 25 48 1-Oct-03 Mahindra & Mahindra Ltd Head - Corporate
Mgmt Services
Sonjoy Anand Chief Financial Officer 6,414,453 BA(Hons), ACA 22 46 1-Dec-03 ICI -UK Vice President (Finance)
** Girish Karnad Group Manager 423,507 Management Graduate 21 43 3-Feb-04 IBM India Ltd Deputy General
Manager (HR)

325
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

Annexure to the Directors’ Report (Contd.)

** Sanjiv Jadhav Sr.Principal Consultant 2,462,579 MS 22 46 22-Apr-04 Sprint Management Co. Manager-NMSD
** Harpriya Hajela Function Head 1,474,676 Management Graduate 10.2 39 26-Oct-04 Qwest Communications Sr.Director-Hosting
Prod. Mgt
Anthony D’Souza Business Unit Head 2,723,483 BCom 16.7 54 5-Jul-04 Reliance Infocom Ltd Vice President
Sanjay Kalra President, Strategic Initiatives 12,481,970 BE 20 43 17-Aug-04 DSL Software Executive Vice
President
** Hrushikesh Mangalampalli Principal Consultant 2,316,804 Management Graduate 21 42 18-Oct-04 Watson Wyatt (I) Pvt. Ltd Principal Conultant
C P Gurnani President, International Operations 11,975,524 BE 24 47 1-Nov-04 Perot Systems TSI COO
Mahesh N Vice - President 2,983,101 Management Graduate 11.6 37 25-Oct-04 DSL Software Head Operations
Vineet Nayyar Vice Chairman, Managing 17,296,692 Master in Development 38 67 17-Jan-05 HCL Perot Systems Founder & CEO
Director & CEO Economics
** Rakesh Soni Executive Vice - President 3,877,359 BE 31 54 16-May-05 Perot Systems TSI Executive Vice
President
** L.K. Bhatia Vice - President 2,543,963 M.Tech 41 62 20-Apr-05 HCL Perot Systems Head of Resource
Management
** Rajesh Chandiramani Corporate Manager - Marketing 1,267,832 Management Graduate 11.4 36 10-Nov-05 Comverse U K Ltd Director Sales &
Pre- Sales
** Sridhar Parthasarathy Offshore Delivery Head (ODH) 413,958 B.Tech 17.8 40 3-Feb-06 Wipro Technologies Group Head
** Murali L Offshore Delivery Manager 447,208 AMIE 20.1 42 20-Feb-06 BSNL Deputy General
Manager
** Employed for part of the year
Note :
1. Remuneration as shown above includes salary, commission/management incentive, as applicable, house rent allowance or value of perquisites for accommodation, car
perquisites / allowances as applicable, employers’ contribution to provident fund, superannuation fund, leave travel facility, reimbursement of medical expenses and all
other allowances, perquisites as applicable
2. None of the employees mentioned above is relative of any Director of the Company.
3. No Employee holds by himself/herself or alongwith his/her spouse and dependent children 2% or more of the equity shares of the Company

For and on behlaf of the Board

Anand G. Mahindra
Chairman
Mumbai, May 29, 2006

326
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE PHILOSOPHY

Your Company believes that Corporate Governance is a voluntary code of self-discipline. In line with this philosophy, the Company
follows healthy Corporate Governance practices and reports to the shareholders the progress made on the various measures undertaken.
Although the Company is not listed on any Stock Exchange, your Directors have been reporting the initiatives on Corporate Governance
adopted by your Company.

BOARD OF DIRECTORS
Your Company has a balanced combination of executive, non-executive and independent directors on the Board. The Board comprises
of representatives of Mahindra & Mahindra Limited and British Telecommunications plc. and independent directors. The Board is
chaired by Mr. Anand Mahindra as Non-Executive Chairman and the number of Independent Directors is more than 1/3rd of the total
number of Directors.
The Board meets at least 4 times a year and the maximum gap between two meetings is not more than four months.
During the year 2005-06, five meetings of the Board of Directors were held on 9th May 2005, 16th June 2005, 18th July 2005 , 17th
October 2005, and 16th January 2006. These were well attended.
The composition of the Board, the other directorships of the Board members and their attendance for the Board and the Annual
General Meeting held during FY 05-06 are as follows :

Name Category Directorship Position on Attendance Whether

in other Committees of Board attended
Companies (*) As Chairman As member Meetings last AGM
(Yes / No)
Mr. Anand G. Mahindra Non-Executive Chairman 11 NIL 1 5 No
Mr. Vineet Nayyar Vice Chairman. Managing
Director & CEO 6 1 NIL 5 No
Mr. Bharat Doshi Non-Executive 8 1 4 4 Yes
Mr. Clive Goodwin Non-Executive NIL — — 3 No
Hon. Akash Paul Non-Executive,
Independent NIL — — 2 No
Mr. Anupam Puri Non-Executive,
Independent 4 NIL 2 3 Yes
Dr. Raj Reddy Non-Executive,
Independent 1 — — 4 No
Mr. Al-Noor Ramji Non-Executive NIL — — 4 Yes
Mr. Arun Seth Non-Executive NIL — — 5 Yes
Mr. Ulhas N. Yargop Non-Executive 5 2 NIL 5 Yes
1
Mr. Frederick E. Becker Alternate to
Mr. Clive Goodwin NIL NIL NIL 1 Yes
2
Mr. Paul Ringham Alternate to
Mr. Clive Goodwin NA NA NA NA NA
Mr. Paul Zuckerman3 Non-Executive,
Independent NA NA NA NA NA

(*) This does not include private companies, foreign companies and companies under Section 25 of the Companies Act, 1956
1
Upto 4th May 2006
2
Appointed w.e.f. 4th May 2006
3
Appointed w.e.f. 4th May 2006

327
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

AUDIT SUB-COMMITTEE e) The Committee may delegate any of its powers to one
or more of its members or the Company Secretary.
1. Composition, names of members an Chairman
The composition of the Audit sub-committee is as follows: f) The recommendations of the Audit Committee on any
matter relating to financial management including the
Mr. Anupam Puri - Chairman
Audit Report shall be binding on the Board. However,
Mr. Bharat Doshi1 where such recommendations are not accepted by the
Mr. Clive Goodwin Board, the reasons for the same shall be recorded in
Dr. Raj Reddy the Minutes of the Board meeting and communicated
to the shareholders.
Mr. Paul Zuckerman2
1 Upto 4th May 2006 g) The Committee shall oversee the Company's financial
reporting process and the disclosure of its financial
2 From 4th May 2006 information to ensure that the financial statements are
correct, sufficient and credible.
2. Meetings and attendance during the year
Four meetings of the Audit sub-committee were held during h) The Committee shall recommend the appointment,
the Financial Year 2005-2006. The meetings were held on dismissal and removal of statutory auditor, fixation of
9th May 2005, 18th July 2005, 17th October 2005 and 16th audit fee and also approval for payment for any other
January 2006. services rendered by the auditors.

The details of the number of Audit sub-committee meetings
attended by its members are given below:
Name of Director Number of Audit sub-committee
meetings attended
Mr. Anupam Puri 3 report and accounts and other financial information
Mr. Bharat Doshi 3 including reviewing, with the statutory auditors scope
Mr. Clive Goodwin 4*
Dr. Raj Reddy 3 to the Board, with special emphasis on :
Mr. Paul Zuckerman NA
* One meeting attended by Mr. Frederick E. Becker, Alternate
Director.
3. Recommendations of the committee
All the recommendations of the Audit Sub-committee
were accepted by the Board of Directors.
4. Terms of reference
The Board of Directors had constituted the Audit sub-
committee of the Board by a circular resolution passed on
17th January 1996. The Board reconstituted the Audit sub-
committee on 26th February 1999, 24th August 2000, 26th
February 2001, 16th January 2003 and 4th May 2006.
The terms of reference of the Audit sub-committee are as
follows: -
a) The Committee shall have authority to investigate into
any matter or activity within its terms of reference and
in relation to items specified under section 292A of the
Companies Act, 1956 or referred to it by the Board.
b) The Committee shall have full access to information
contained in the records of the Company and may, if
necessary, seek external professional advice.
c) The Committee shall seek information from any
employee.
d) The Committee shall secure attendance of outsiders
with relevant expertise, if considered necessary.
i) The Committee shall review the performance of
statutory auditors including scope of their audit and
monitor the extent of their non-audit work.
j) The Committee shall review with management the
quarterly, half yearly, annual financial results, annual
and results of their audits and considering their
Management Letter before submission of their reviews
● Any changes in accounting policies and procedures
● Major accounting entries based on exercise of
judgment by management
● Qualifications in draft audit report
● Significant adjustments arising out of audit
● The going concern assumption
● Compliance with accounting standards
● Compliance with stock exchange (after listing) and
legal requirements concerning financial statements
● Any related party transactions, i.e. transactions of
the Company of material nature with promoters
or management, their subsidiaries or relatives etc.
that may have potential conflict with the interest
of Company at large.
k) The Committee shall review with the management,
statutory and internal auditors, the adequacy of internal
control systems.
l) The Committee shall review the adequacy of internal
audit function, including the structure of internal audit
department, if any, staffing and seniority of the official
heading the department, reporting structure coverage
and frequency of internal audit.
m) The Committee shall discuss with internal auditors any
significant findings and follow up thereon.
n) The Committee shall review the findings of any internal
investigations by the internal auditors into matters where

328
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

there is suspected fraud or irregularity or failure of c) Formation of Trust thereunder

internal control systems of a material nature and report d) Appointment of Trustees of the Trust
the matter to the Board.
o) The Committee shall discuss with statutory auditors GENERAL BODY MEETINGS
before the audit commences, the nature and scope
of audit as well as have post audit discussion to The details of the last three Annual General Meetings of the
Company are as under:
ascertain any area of concern.
p) The Committee shall review the company's financial and Year Venue of AGM Date Time
risk management policies. 2002-03 Wing 1, Oberoi July 18, 2003 5.00 pm
q) The Committee shall look into the reasons for substantial Estate Gardens,
defaults in the payment to the depositors, debenture Chandivali, Andheri (E),
holders, shareholders (in case of non-payment of Mumbai 400 072
dividend) and creditors. 2003-04 Oberoi Estate Gardens, July 16, 2004 4.30 pm
Chandivali, Andheri (E),
COMPENSATION (REMUNERATION) COMMITTEE: Mumbai 400 072
1. Composition, name of members and Chairman 2004-05 Oberoi Estate Gardens, July 19, 2005 2.30 pm
The composition of the Committee is as follows: Chandivali, Andheri (E),
Mumbai 400 072
Hon. Akash Paul - Chairman
Mr. Ulhas N. Yargop MEANS OF COMMUNICATIONS
Mr. Clive Goodwin1 As a `Corporate Governance' initiative, the Company has been
Mr. Arun Seth2 publishing its Quarterly, Half yearly and Annual results in the
business news papers.
1 Upto 16th January 2006
2 From 16th January 2006 GENERAL SHAREHOLDER INFORMATION
A. Forthcoming AGM
2. Meetings and attendance during the year The next AGM of the Company will be held on 18th July
Four meetings of the Compensation Committee were held 2006.
during the Financial Year 2005-2006. The meetings were
held on 9th May 2005 , 18th July 2005 , 17th October B. Financial Calendar
2005, and 16th January 2006. Tentative schedule Likely Board Meeting
schedule
The details of the number of Committee meetings attended
by its members are given below: Financial reporting for the Second fortnight of
quarter ending June 30, 2006 July 2006
Name Number of Compensation
committee meetings attended Financial reporting for the Second fortnight of
quarter ending September 30, October 2006
Hon. Akash Paul 2 2006
Mr. Clive Goodwin 3* Financial reporting for the Second fortnight of
Mr. Arun Seth 1 quarter ending December 31, January 2007
Mr. Ulhas N. Yargop 4 2006

* One meeting attended by Mr. Frederick E. Becker, Financial reporting for the First fortnight of May
Alternate Director. quarter ending March 31, 2007
2007
3. Terms of reference Annual General Meeting for Second fortnight of July
The Compensation committee was constituted for the the year ending March 31, 2006
purpose of determining the terms and conditions including 2006
the remuneration payable to Managing Director of the C. Record date for the purpose of dividend
Company. By a resolution passed on 23rd October 2000,
the Board of Directors enlarged the terms of reference of The record date to determine the entitlement of shareholders
the committee and entrusted it with the following terms of to receive the final dividend as may be declared for the year
reference, which were originally entrusted to the ESOP ended March 2006 will be 17th July 2006.
Compensation Committee: D. Address for correspondence
a) To take actions arising out of Employee Stock Option Secretarial & Legal Department, Tech Mahindra Limited,
Plan 2000 (ESOP 2000) Sharda Centre, Erandavane, Pune 411 004, INDIA.
b) Employee Stock Option Plan Scheme

329
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
AUDITORS’ REPORT
To the Members of Tech Mahindra Limited
(Formerly known as Mahindra-British Telecom Limited)
1. We have audited the attached Balance sheet of Tech Mahindra
Limited (Formerly known as Mahindra-British Telecom
Limited) as at 31st March 2006, the Profit and Loss Account
and the Cash Flow Statement for the year ended on that
date, annexed thereto. These financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those Standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
3. As required by Companies (Auditor’s Report) Order, 2003
issued by the Central Government in terms of section 227
(4A) of the Companies Act, 1956, we enclose in the Annexure
a statement on the matters specified in paragraphs 4 and 5
of the said Order.
4. Further to our comments in the Annexure referred to above,
we report that:
a) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
b) In our opinion, proper books of account as required by
law have been kept by the Company so far as appears
from our examination of the books;
c) The Balance sheet, Profit and Loss Account and Cash
Flow Statement dealt with by this report are in agreement
with the books of account;
330
d) In our opinion, the Balance sheet, Profit and Loss
Account and Cash Flow Statement dealt with by this
report comply with the accounting standards referred
to in sub-section (3C) of section 211 of the Companies
Act, 1956;
e) On the basis of written representations received from
the directors as on 31st March, 2006 and taken on record
by the Board of Directors, we report that none of the
directors is disqualified as on 31st March, 2006 from
being appointed as a director in terms of clause (g)
of sub- section (1) of section 274 of the Companies
Act, 1956.
f) In our opinion and to the best of our information, and
according to the explanations given to us, the said
accounts read with the Significant Accounting Policies
and notes thereon, give the information required by the
Companies Act, 1956, in the manner so required and
give a true and fair view in conformity with the accounting
principles generally accepted in India:
i) in case of the Balance sheet, of the state of affairs
of the Company as at 31st March, 2006;
ii) in case of the Profit and Loss Account, of the profit
for the year ended on that date; and
iii) in the case of the Cash Flow Statement, of the cash
flows for the year ended on that date.
For Deloitte Haskins & Sells
Chartered Accountants
A.B. Jani
Mumbai, Partner
15th May, 2006 Membership No. 46488

ANNEXURE TO THE AUDITORS’ REPORT
Re: Tech Mahindra Limited (Formerly known
as Mahindra-British Telecom Limited)
(Referred to in Paragraph 3 of our report of even date)
i) The nature of the Company’s activities are such that clauses
(xiii) and (xiv) of paragraph 4 of the Companies (Auditor’s
Report) Order, 2003 are not applicable to the Company for
the year.
ii) (a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of fixed assets.
(b) All fixed assets have not been physically verified by
the management during the year but there is a regular
program of verification which, in our opinion, is
reasonable having regard to the size of the Company
and the nature of its assets. No material discrepancies
were noticed on such verification.
(c) The Company has not disposed off a substantial part
of fixed assets during the year.
iii) The activities of the Company and the nature of its business
do not involve use of inventory. Accordingly, clause (ii) of
the Companies (Auditor’s Report) Order, 2003 is not
applicable.
iv) (a) The Company has granted unsecured loan to one of
its subsidiary companies covered in the register
maintained under Section 301 of the Companies Act,
1956. The maximum amount involved during the year
and the year-end balance of loan granted was
Rs.223,050,000/-.
(b) In our opinion, the rate of interest and other terms and
conditions of such loan are not, prima facie, prejudicial
to the interest of the Company.
(c) As per the terms of the contract the principal amounts
and interest amounts are not due for re-payment as at
the year-end and accordingly clause (d) of clause (iii)
is not applicable.
(d) There are no loans taken from Companies covered in
the register maintained under Section 301 of the
Companies Act, 1956 and hence clause (e), (f), (g) and
(h) of clause (iii) are not applicable to the Company.
v) In our opinion, and according to the information and
explanations given to us, there is an adequate internal
control system commensurate with the size of the Company
and nature of its business with regard to purchase of fixed
assets and sale of services. During the course of our audit
we have not observed any continuing failure to correct
major weaknesses in the internal control system.
vi) (a) According to the information and explanations given
to us, we are of the opinion that the particulars of
contracts/arrangements that need to be entered into
the register maintained under Section 301 of the
Companies Act, 1956 have been so entered.
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
(b) According to the information and explanations given
to us, where transactions in pursuance of such
contracts/arrangements are in excess of Rs. 5 lakhs
in respect of any party during the year, these are at
prices determined in negotiations with the said parties
and are prima facie reasonable having regard to
prevailing market prices where such market prices
are available with the Company.
vii) The Company has not accepted any deposits from the
public.
viii) In our opinion, the company has an internal audit system
commensurate with the size of the Company and nature of
its business.
ix) According to the information and explanations given to us,
the Central Government has not prescribed maintenance of
cost records under clause (d) of sub-section (1) of Section
209 of the Act. Therefore the provisions of clause (viii) of the
Companies (Auditor’s Report) Order, 2003 is not applicable
to the Company.
x) According to information and explanations given to us in
respect of statutory and other dues:
(a) The company has generally been regular in depositing
undisputed statutory dues in respect of Provident
Fund, Employees’ State Insurance, Income-tax, Sales-
tax, Wealth tax, Service tax, Custom duty, cess and
any other material statutory dues with the appropriate
authorities during the year.
(b) According to information and explanation given to us
there are no dues of Sales tax / Income-tax / Customs
duty / wealth tax / Service tax/ excise duty and cess,
which have not been deposited with the appropriate
authorities on account of any dispute, except in case
of income-tax which is as detailed below:
Forum where dispute Nature of dues Amount (Rs.) Financial Year
is pending to which
amount relates
Income-tax appellant tribunal Corporate tax 17,117,248/- 1998–1999
Income-tax appellant tribunal Corporate tax 13,514,013/- 1999–2000
Deputy commissioner of
Income-tax appeals Corporate 12,024,891/- 2000–2001
Total 42,656,152/-
xi) The Company has no accumulated losses at the end of the
financial year and it has not incurred cash losses in the
current year and in the immediately preceding financial
year.
xii) According to information and explanations given to us,
there are no dues payable to a financial institution or bank
or debenture holders.
xiii) According to the information and explanations given to us,
the Company has not granted any loans or advances on the
basis of security by way of pledge of shares, debentures
and other securities.
331
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

xiv) According to the information and explanations given to us, xviii) The Company has not issued any debentures during the
the Company has not given any guarantee for loans taken year.
by others from banks or financial institutions.
xix) The Company has not raised funds by way of public issues
xv) According to the information and explanations given to us, during the year.
there are no term loans obtained by the Company.
xx) According to the information and explanations given to us,
xvi) According to information and explanations given to us and no fraud on or by the Company was noticed or reported
on an overall examination of the balance sheet of the during the year.
Company, funds raised on short term basis have, prima
For Deloitte Haskins & Sells
facie, not been used during the year for long term
Chartered Accountants
investment.
xvii) The Company has not made any preferential allotment of
shares to parties and companies covered in the Register A.B. Jani
maintained under Section 301 of the Companies Mumbai, Partner
Act, 1956. 15 MAY, 2006 Membership No. 46488

332
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

BALANCE SHEET AS AT MARCH 31, 2006

As at As at
March 31, March 31,
2006 2005
Schedule Rupees Rupees
I. SOURCES OF FUNDS:
SHAREHOLDERS’ FUNDS:
Capital ........................................................................... I 207,997,261 203,453,150
Reserves and Surplus ................................................... II 5,770,647,929 4,624,778,688
TOTAL ... 5,978,645,190 4,828,231,838
II. APPLICATION OF FUNDS:
FIXED ASSETS: ............................................................ III
Gross Block ................................................................... 3,069,549,614 2,841,185,187
Less: Depreciation ........................................................ 1,501,590,748 1,140,672,013
Net Block ............................................................... 1,567,958,866 1,700,513,174
Capital Work-in-Progress, including Advances ...... 193,315,116 70,489,653
1,761,273,982 1,771,002,827
INVESTMENTS ............................................................ IV 2,947,512,505 1,149,347,396
DEFERRED TAX ASSET (NET) .................................... 4,868,662 2,007,380
CURRENT ASSETS, LOANS AND ADVANCES ......... V
Sundry Debtors ............................................................. 4,127,568,931 2,174,167,977
Cash and Bank Balances ............................................... 515,830,084 1,221,740,574
Loans and Advances ..................................................... 600,738,771 233,998,494
5,244,137,786 3,629,907,045
Less: CURRENT LIABILITIES AND PROVISIONS:
Liabilities ....................................................................... VI 1,957,671,077 1,117,684,188
Provisions ...................................................................... VII 2,021,476,668 606,348,622
3,979,147,745 1,724,032,810
Net Current Assets ...................................................... 1,264,990,041 1,905,874,235
TOTAL ... 5,978,645,190 4,828,231,838

SIGNIFICANT ACCOUNTING POLICIES AND NOTES

ON ACCOUNTS ........................................................... XI

Mr. Bharat Doshi

}
For Tech Mahindra Limited
As per our attached report of even date Mr. Clive Goodwin
Mr. Anupam Puri
For Deloitte Haskins & Sells Mr. Anand G. Mahindra – Chairman Hon. Akash Paul
Chartered Accountants Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Vineet Nayyar – Vice-Chairman & Mr. Arun Seth
A.B. Jani Managing Director Mr. Ulhas N. Yargop
Partner
Mr. Vikrant Gandhe Asst. Company
Mumbai, Dated: May 15, 2006 New York, Dated: May 4, 2006 Secretary

333
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

Year ended Year ended

March 31, March 31,
2006 2005
Schedule Rupees Rupees
INCOME ............................................................................... VIII 12,284,497,216 9,295,929,886
EXPENDITURE:
Personnel .............................................................................. IX 4,675,754,883 3,537,255,987
Operating and Other Expenses ............................................. X 4,828,499,788 4,071,256,731
Depreciation .......................................................................... 373,803,612 315,269,326
TOTAL ... 9,878,058,283 7,923,782,044
PROFIT BEFORE TAXATION AND NON-RECURRING/
EXCEPTIONAL ITEMS .......................................................... 2,406,438,933 1,372,147,842
Provision for Taxation (Refer note 17 of Schedule XI)
— Current tax [includes provision for wealth tax of
Rs. 186,355 (previous year Rs. Nil)] .............................. (175,087,277) (142,248,589)
— Deferred tax .................................................................. 2,861,282 (558,938)
— Fringe benefit tax .......................................................... (33,000,000) —
PROFIT AFTER TAXATION AND BEFORE NON-
RECURRING/EXCEPTIONAL ITEMS ..................................... 2,201,212,938 1,229,340,315
Non-recurring/exceptional items (Refer note 6 of schedule
XI) (net of tax Rs. Nil) ............................................................ — 518,418,278
PROFIT FOR THE YEAR AFTER TAXATION AND NON-
RECURRING/EXCEPTIONAL ITEMS ..................................... 2,201,212,938 710,922,037
Balance brought forward from previous year ........................ 3,753,582,131 3,382,713,289
Balance available for appropriation ........................................ 5,954,795,069 4,093,635,326
Interim Dividend – I ............................................................... (30,607,607) (121,658,250)
Interim Dividend – II .............................................................. (31,153,569) (101,537,765)
Interim Dividend – III ............................................................. (62,367,487) —
Interim Dividend – IV ............................................................. (499,193,427) —
Final Dividend ........................................................................ (415,994,523) —
Dividend Tax ......................................................................... (145,764,155) (28,857,180)
Transfer to General Reserve ................................................. (230,000,000) (88,000,000)
Balance Carried to Balance Sheet ......................................... 4,539,714,301 3,753,582,131
Earning Per Share (Refer note 19 of Schedule XI)
— Basic ................................................................................. 21.17 6.99
— Diluted .............................................................................. 17.13 6.23
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON
ACCOUNTS ........................................................................... XI

Mr. Bharat Doshi

}
For Tech Mahindra Limited
As per our attached report of even date Mr. Clive Goodwin
Mr. Anupam Puri
For Deloitte Haskins & Sells Mr. Anand G. Mahindra – Chairman Hon. Akash Paul
Chartered Accountants Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Vineet Nayyar – Vice-Chairman & Mr. Arun Seth
A.B. Jani Managing Director Mr. Ulhas N. Yargop
Partner
Mr. Vikrant Gandhe Asst. Company
Mumbai, Dated: May 15, 2006 New York, Dated: May 4, 2006 Secretary

334
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

CASH FLOW FOR THE YEAR ENDED MARCH 31, 2006

Particulars Current Year Previous Year

Rupees Rupees Rupees
A. Cash Flow from operating activities:
Net Profit before taxation and non-recurring/exceptional
items ................................................................................................... 2,406,438,933 1,372,147,842
Adjustments for:
Depreciation ....................................................................................... 373,803,612 315,269,326
Loss on sale of Fixed Assets (net) ..................................................... 4,055,980 3,174,459
Fixed Assets Written off .................................................................... — 47,505
Decrease in fair value of Current Investment .................................... 267,194 155,364
Exchange gain (net) ............................................................................ (21,089,447) (49,546,136)
Dividend from Current Investments ................................................... (47,097,620) (16,192,295)
Interest Income .................................................................................. (69,992,839) (30,848,248)
Profit on Sale of Investments ............................................................. (11,200,264) (28,315)
228,746,616 222,031,660
Operating profit before working capital changes ............................... 2,635,185,549 1,594,179,502
Adjustments for:
Trade and other receivables ............................................................... (2,321,831,478) 497,103,502
Trade and other payables ................................................................... 1,022,474,692 494,791,062
(1,299,356,786) 991,894,564
Cash generated from operations ........................................................ 1,335,828,763 2,586,074,066
Direct Taxes ....................................................................................... (1,084,434) (26,684,089)
(1,084,434) (26,684,089)
Net cash from operating activities ..................................................... 1,334,744,329 2,559,389,977
B. Cash flow from investing activities
Purchase of Fixed Assets ................................................................... (391,983,614) (546,608,653)
Purchase of Investments ................................................................... (2,507,118,434) (1,318,669,769)
Acquisition/Investments in Subsidiaries (Refer Note 4 of
Schedule XI)........................................................................................ (1,791,905,837) (120,691,875)
Sale of investments ............................................................................ 2,511,792,232 656,825,066
Sale of fixed assets ............................................................................ 5,947,199 1,239,951
Interest received ................................................................................ 71,683,094 29,218,788
Dividend on Current Investments received ........................................ 47,097,620 16,192,295
Net cash used in investing activities ..................................... (2,054,487,740) (1,282,494,197)
C. Cash flow from financing activities
Proceeds from issue of Shares (including Securities Premium)............. 134,281,182 15,941,220
Dividend (including Dividend Tax paid) ............................................... (141,537,708) (412,145,049)
Net cash from financing activities ...................................................... (7,256,526) (396,203,829)
Net (Decrease)/Increase in cash and cash equivalents (A+B+C) ............ (726,999,937) 880,691,951
Cash and cash equivalents at the beginning of the period ................. 1,223,489,421 342,797,470
Cash and cash equivalents at the end of the period .......................... 496,489,484 1,223,489,421
Notes:
1. Components of cash and cash equivalents include cash, bank balances in current and deposit accounts as disclosed under Schedule V(b) of the accounts.
2. Purchase of fixed assets are stated inclusive of movements of capital work-in-progress between the commencement and end of the period and are considered as part
of investing activity.
3. Cash and cash equivalents include: March 31, 2006 March 31, 2005
Rupees Rupees
Cash and Bank Balances 515,830,084 1,221,740,574
Unrealised (gain)/loss on foreign currency cash and cash equivalents (19,340,600) 1,748,847
Total cash and cash equivalents 496,489,484 1,223,489,421

Mr. Bharat Doshi

}
For Tech Mahindra Limited
As per our attached report of even date Mr. Clive Goodwin
Mr. Anupam Puri
For Deloitte Haskins & Sells Mr. Anand G. Mahindra – Chairman Hon. Akash Paul
Chartered Accountants Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Vineet Nayyar – Vice-Chairman & Mr. Arun Seth
A.B. Jani Managing Director Mr. Ulhas N. Yargop
Partner
Mr. Vikrant Gandhe Asst. Company
Mumbai, Dated: May 15, 2006 New York, Dated: May 4, 2006 Secretary

335
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE BALANCE SHEET

Schedule I As at March As at March Schedule II As at March As at March
SHARE CAPITAL: 31, 2006 31, 2005 RESERVES AND SURPLUS 31, 2006 31, 2005
Rupees Rupees Rupees Rupees Rupees
Authorised: General Reserve:
150,000,000 (previous year 125,000,000)
As per last Balance Sheet ............ 718,430,284 630,430,284
Equity Shares of Rs. 2/- each .... 300,000,000 250,000,000
Add: Transfer from Profit and Loss
300,000,000 250,000,000
Account ........................................ 230,000,000 88,000,000
Issued and Subscribed:
948,430,284 718,430,284
112,440,523 (previous year 101,726,575)
Securities Premium:
Equity Shares of Rs. 2/- each .... 224,881,046 203,453,150
Paid-up: As per last Balance Sheet ............ 152,766,273 137,550,093
102,508,885 (previous year 101,726,575) Add: Received during the year ..... 129,737,071 15,216,180
Equity Shares of Rs. 2/- each
fully paid-up .............................. 205,017,770 203,453,150 282,503,344 152,766,273
9,931,638 (previous year Nil) Equity Balance in Profit and Loss Account 4,539,714,301 3,753,582,131
Shares of Rs. 2/- each Rs. 0.30
Total ..... 5,770,647,929 4,624,778,688
paid-up ...................................... 2,979,491 —
Total ..... 207,907,261 203,453,150

1. Out of the above 57,600,060 [including Nil (previous year 200) held with
nominees] Equity Share of Rs. 2/- each fully paid-up are held by Mahindra &
Mahindra Ltd., the holding company.
2. The above includes 51,000,100 and 25,000,000 Equity Shares of Rs. 2/- each
issued as fully paid-up Bonus Shares by capitalisation of balance of Profit and
Loss Account and General Reserve, respectively.
Schedule III
FIXED ASSETS
GROSS BLOCK DEPRECIATION NET BLOCK
Description of Assets Cost as at Additions Deductions Cost as at Upto For Deductions Upto As at As at
April 01, during during March 31, March 31, the during March 31, March 31, March 31,
2005 the year the year 2006 2005 year the year 2006 2006 2005
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
Leased Assets:
Vehicles (Refer Note 12 of Schedule XI) ........................ 81,557,438 10,888,880 18,100,864 74,345,454 17,310,768 17,078,531 7,095,107 27,294,192 47,051,262 64,246,670
Other Assets
Office Building/Premises ................................................ 1,410,277,810 797,085 — 1,411,074,895 320,881,297 94,030,805 — 414,912,102 996,162,793 1,089,396,513
Computers ...................................................................... 616,301,600 171,825,970 5,998,661 782,128,909 415,079,349 137,898,420 5,725,669 547,252,100 234,876,809 201,222,251
Plant and Machinery ....................................................... 356,089,996 34,289,339 349,390 390,029,945 192,373,649 61,664,538 64,101 253,974,086 136,055,859 163,716,347
Furniture and Fixtures ..................................................... 376,958,343 14,876,526 — 391,834,869 195,026,950 59,752,445 — 254,779,395 137,055,474 181,931,393
Vehicles .......................................................................... — 20,135,542 — 20,135,542 — 3,378,873 — 3,378,873 16,756,669 —
Total ................................................................................ 2,841,185,187 252,813,342 24,448,915 3,069,549,614 1,140,672,013 373,803,612 12,884,877 1,501,590,748 1,567,958,866 1,700,513,174
Previous year .................................................................. 2,164,872,109 687,888,034 11,574,956 2,841,185,187 832,515,728 315,269,326 7,113,041 1,140,672,013
Capital Work-in-Progress, including Advances ............... 193,315,116 70,489,653
Total .......... 1,761,273,982 1,771,002,827
Note: Fixed assets include certain leased vehicles aggregating to Rs. 44,703,670 (previous year Rs. 74,754,716) on which vendors have a lien.

Schedule IV As at March As at March Schedule IV (contd.) As at March As at March

INVESTMENTS (AT COST) 31, 2006 31, 2005 INVESTMENTS (AT COST) 31, 2006 31, 2005
Long Term (unquoted) Rupees Rupees Rupees Long Term (unquoted) Rupees Rupees Rupees
Trade:
In Subsidiary Companies: 5,000 Equity Shares of Singapore
375,000 Ordinary Shares of US $1 $10 each fully paid-up of Tech
each fully paid-up of Tech Mahindra Mahindra (Singapore) Pte. Ltd.
(Americas) Inc. (Formerly known as (Formerly known as MBT Software
MBT International Incorporated Technologies Pte. Ltd., Singapore) 1,371,976 1,371,976
U.S.A.) .......................................... 11,794,500 11,794,500 9,203,500 Equity Shares (previous
Less: Provision for Diminution year Nil) of Tech Mahindra (R&D
(Refer Note 6 of Schedule XI) ....... 11,794,500 11,794,500 Services) Limited (Formerly known
3 Shares of Euro 25,000, 50,000 and as Axes Technologies (India) Private
500,000 each, fully paid-up Tech Limited) of Rs. 5 each fully paid-up
Mahindra GmbH (Formerly known (Refer Note 4 of schedule XI) ....... 1,787,889,148 —
as MBT GmbH (Refer Note
300,000 Equity Shares (previous year
1 below) ....................................... 388,827,375 388,827,375
Nil) of Tech Mahindra (Thailand)
Less: Provision for Diminution
Limited (formerly known as MBT
(Refer Note 6 of Schedule XI) ....... 353,632,342 353,632,342
Thailand Co. Limited) of THB. 100
35,195,033 35,195,033 each fully paid-up ......................... 3,516,749 —

336

SCHEDULES FORMING PART OF THE BALANCE SHEET
SCHEDULE IV (contd.)
INVESTMENTS (AT COST)
Long Term (Unquoted)
49,994 Equity shares (previous year
Nil) of Tech Mahindra Foundation of
Rs. 10 each fully paid-up ..............
Current Investments (at lower of
cost and fair value)
Non-Trade:
Nil (previous year 101,396.50) units
of Rs. Nil (previous year Rs. 1,001.10)
each of Franklin Templeton Mutual
Fund — Institutional Income Plan
92,347.61 (previous year Nil) units
of Rs. 1,000.58 each of Franklin
Templeton Mutual Fund Weekly
Dividend Institutional Plan [Cost Rs.
92,443,267 (previous year
Rs. Nil)] .........................................
Nil (previous year 4,144,029.86) units
of Rs. Nil (previous year Rs. 10.21)
each of DSP Merrill Lynch
— Short Term Fund — Dividend ..
Nil (previous year 8,116,274.55) units
of Rs. Nil (previous year Rs. 10.03)
each of DSP Merrill Lynch — Floating
Rate — Weekly Dividend .............
Nil (previous year 4,315,175.02) units
of Nil (previous year Rs. 11.84) each
of Prudential ICICI Mutual Fund
— Liquid Income Plan ..................
Nil (previous year 1,119,449.83) units
of Rs. Nil (previous year Rs. 10.85)
each of Prudential ICICI Mutual Fund
Institutional Short Term Plan ........
4,748,969.47 units of Rs. 10.53 each
of Prudential ICICI Mutual Fund
FMP Yearly Growth Plan ..............
11,665,474.85 (previous year Nil)
units of Rs. 10.00 each of Prudential
ICICI Mutual Fund Liquid Plan
Super Institutional ........................
Nil (previous year 9,313,161.61) units
of Rs. Nil (previous year Rs. 10.81)
each of Birla Mutual Fund
— Institutional Plan ......................
5,000,000 (previous year Nil) units
of Rs. 10.00 each of Birla Mutual
Fund — Fixed Term Growth Plan .
3,071,767.96 (previous year Nil) units
of Rs. 10.02 each of Birla Mutual
Fund — Institutional Plan [Cost
Rs. 30,810,447 (previous year
Rs. Nil)] .........................................
5,000,000 (previous year Nil) units
of Rs. 10.00 each of HSBC Mutual
Fund — Fixed maturity plan .........
5,029,509.92 (previous year Nil) units
of Rs. 10.00 each of HSBC Mutual
Fund — Fixed term series
institutional growth plan ...............
Nil (previous year 6,749,441.71) units
of Nil (previous year Rs. 10.45) each
of HSBC Mutual Fund
— Short Term Institutional Fund ..
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
As at March As at March SCHEDULE IV (contd.) As at March As at March
31, 2006 31, 2005 INVESTMENTS (AT COST) 31, 2006 31, 2005
Rupees Rupees Rupees Long Term (Unquoted) Rupees Rupees Rupees
Nil (previous year 2,696,842.37) units
of Nil (previous year Rs. 10.02) each
499,940 — of J.M. Mutual Fund —
Short Term Institutional Plan ........ — 27,013,492
1,828,472,846 36,567,009
6,952,192.63 (previous year
5,035,302.57) units of Rs. 10.03
(previous year Rs. 10.02) each of
J.M. Mutual Fund — High Liquidity
Super Institutional Plan ................. 69,748,080 50,449,649
Nil (previous years 3,034,216.23)
units of Nil (previous year Rs. 10.00)
— 101,508,060 each of Kotak Floater Long
Term— weekly dividend ............... — 30,353,388
4,098,246.52 (previous year Nil) units
of Rs. 10.03 each of Kotak Liquid
Institutional Premium — weekly
dividend ....................................... 41,096,908 —
92,401,094 —
5,000,000 (previous year Nil) units
of Rs. 10.00 (previous year Rs. Nil)
each of Kotak Mutual Fund — FMP
Growth ......................................... 50,000,000 —
— 42,326,321
5,214,307.74 (previous year
5,408,809.48) units of Rs. 10.03
(previous year Rs. 10.03) each of
Kotak Mutual Fund — Liquid
— 81,429,837
Institutional weekly dividend ....... 52,288,682 50,623,936
Nil (previous year 1,066,927.90) units
of Rs. Nil (previous year Rs. 10.04)
each of Principal Mutual Fund —
— 51,109,288
Institutional Plan Dividend
Reinvestment Monthly ................. — 10,712,914
Nil (previous year 4,032,914.19) units
— 12,150,841 of Rs. Nil (previous year Rs. 10.02)
each of Principal Mutual Fund
— Floating Rate Fund SMP .......... — 40,415,043
50,000,000 50,000,000 6,205,066.85 (previous year Nil) units
of Rs. 10.00 each of Principal Mutual
Fund — Liquid Institutional plan
weekly dividend [Cost Rs. 62,701,509
(previous year Rs. Nil)] ................. 62,672,596 —
116,668,816 —
Nil (previous year 3,310,999.22) units
of Rs. Nil (previous year Rs. 15.28)
each of Reliance Mutual Fund —
Treasury Plan Institutional Option — 50,586,064
— 100,705,538
Nil (previous year 2,000,000) units
of Rs. Nil (previous year of Rs. 10.00)
each of Reliance Mutual Fund —
50,000,000 —
Fixed Term Quarterly Plan Dividend
Option .......................................... — 20,000,000
5,000,000 units of Rs. 10.00 each
of Reliance Mutual Fund — FMP . 50,000,000 50,000,000
30,786,794 — 5,000,000 (previous year Nil) units
of Rs. 9.99 each of Reliance Fixed
Tenor Fund Growth Plan [Cost Rs.
50,000,000 — 50,000,000 (previous year Rs. Nil)] 49,927,500 —
Nil (previous year 2,000,000) units
of Rs. Nil (previous year of Rs. 10)
each of Reliance Mutual Fund —
50,295,099 — Growth Plan ................................. — 20,000,000
Nil (previous year 9,507,961.29) units
of Rs. Nil (previous year Rs. 10.63)
each of HDFC Cash Management
— 70,536,265 Fund Weekly Dividend ................. — 101,090,809
337
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE BALANCE SHEET

Schedule IV (contd.) As at March As at March Schedule V (contd.) As at March As at March
INVESTMENTS (AT COST) 31, 2006 31, 2005 CURRENT ASSETS, LOANS AND 31, 2006 31, 2005
Long Term (Unquoted) Rupees Rupees Rupees ADVANCES Rupees Rupees Rupees
(b) Cash and Bank Balances:
5,000,000 (previous year Balance with Scheduled
4,409,628.75) units of Rs. 10.00 each Banks:
(previous year Rs. 11.49) each of (i) In Current accounts ......... 231,486,518 766,477,954
Chola Fund Liquid Institutional Plus (ii) In Fixed Deposit
— Dividend Option ....................... 50,000,000 50,676,570 accounts .......................... 275,971,678 451,024,771
Balance with other banks:
Nil (previous year 9,811,360.90) units With Commonwealth Bank of
of Rs. Nil (previous year Rs. 10.30) Australia @ in Current accounts 8,371,888 4,237,849
each of Standard Chartered Mutual
Fund weekly dividend Plan ........... — 101,092,372 515,830,084 1,221,740,574
@ Maximum balance outstanding
5,000,000 (previous year Nil) units during the period/year: Current
of Rs. 9.98 each of Grindlays — FMP Account — Rs. 8,371,888
[Cost Rs. 50,000,000 (previous (previous year Rs. 28,822,855)
year Rs. Nil) .................................. 49,900,000 — (c) Loans and Advances:
90,695.00 (previous year Nil) units (Unsecured)
of Rs. 1,135.75 each of Tata Mutual Bills of Exchange (considered
Fund Liquid High Investment doubtful) ................................ 5,000,000 5,000,000
fund weekly dividend ................... 103,007,090 — Less: Provision ...................... 5,000,000 5,000,000
— —
5,000,000 (previous year Nil) units Loans to Subsidiary ............... 223,050,000 —
of Rs. 10.00 each of Sundaram Advances recoverable in cash
Mutual Fund — FMP .................... 50,000,000 — or in kind or for value to be
5,024,693.83 (previous year Nil) units received:
of Rs. 10.00 each of ABN Amro considered good ................... 377,688,771 233,998,494
Mutual Fund — FMP .................... 50,247,000 — considered doubtful .............. 3,758,992 3,758,992
381,447,763 237,757,486
1,119,039,659 1,112,780,387
Less: Provision ...................... 3,758,992 3,758,992
Total ..... 2,947,512,505 1,149,347,396 377,688,771 233,998,494

Notes: 600,738,711 233,998,494

1. Includes Rs. 359,806,875 (previous year Rs. 359,806,875) invested towards Total ..... 5,244,137,786 3,629,907,045
capital reserve of the company in accordance with the German Commercial
Code. Schedule VI As at March As at March
2. Refer note 20 of Schedule XI for additional information. CURRENT LIABILITIES: 31, 2006 31, 2005
Sundry Creditors: Rupees Rupees
Total outstanding dues to Small
Schedule V As at March As at March Scale Industrial Undertakings ....... — —
CURRENT ASSETS, LOANS AND 31, 2006 31, 2005 Total outstanding dues of Creditors
ADVANCES Rupees Rupees Rupees other than Small Scale Industrial
Undertakings* .............................. 1,957,671,077 1,117,684,188
Current Assets: * Includes —
Rs. 349,735,805 (previous year Rs.
(a) Sundry Debtors*:
48,471,143) due to Tech Mahindra
(Unsecured)
(Americas) Inc. USA, a subsidiary
Debts outstanding for a period company
exceeding six months: Rs. 53,138,178 (previous year Rs.
— considered good** .......... 145,101,029 189,209,995 54,921,003) due to Tech Mahindra
GmbH, a subsidiary company
— considered doubtful ........ 26,445,830 168,090,993
Rs. 16,916,357 (previous year Rs.
171,546,859 357,300,989 58,798) due to Tech Mahindra
Other debts, considered (Singapore) Pte. Ltd., a subsidiary
good *** ............................... 3,982,467,902 1,984,957,981 company
considered doubtful .............. 153,393,431 — Total ..... 1,957,671,077 1,117,684,188
4,307,408,192 2,342,258,970
Less Provision (Refer note 8 Schedule VII As at March As at March
of schedule XI) ...................... 179,839,261 168,090,993 PROVISIONS: 31, 2006 31, 2005
Rupees Rupees
4,127,568,931 2,174,167,977
Provision for Taxation
* Debtors include unbilled revenue of Rs. 437,865,019 (previous year Rs. (net of payments) ......................... 556,601,452 349,598,609
346,914,306) Proposed Dividend ....................... 915,187,950 —
** Net of advances of Rs. 63,188,086 (previous year Rs. Nil) pending adjustments Provision for Dividend tax ............. 128,355,110 —
with invoices Provision for Gratuity .................... 185,214,000 118,375,000
Provision for Leave Encashment .. 236,118,156 138,375,013
*** Net of advances of Rs. 29,217,991 (previous year Rs. 1,775,117,870) pending Total ..... 2,021,476,668 606,348,622
adjustments with invoices.

338
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
Schedule VIII Year ended Year ended Schedule X (contd.) Year ended Year ended
INCOME March 31, March 31, OPERATING AND OTHER March 31, March 31,
2006 2005 EXPENSES 2006 2005
Rupees Rupees Rupees Rupees Rupees Rupees
Income from services (net) [Tax Software packages ....................... 124,603,324 80,029,919
deducted at source Rs. 5,967,604
(previous year Rs. 9,283,236)] ...... 11,943,343,402 9,190,808,613 Training ......................................... 90,007,138 71,425,395
Management fees (Net) ............... 28,094,771 32,565,075 Advertising, marketing and selling
11,971,438,173 9,223,373,688 expenses ...................................... 5,070,122 46,335,716
Interest on: Commission on services income . 39,821,048 34,378,472
Deposits with banks [Tax deducted Loss on sale of fixed assets (Net)
at source Rs. 9,245,040 (previous [Net of write back of leased liability
year Rs. 2,494,297)] ..................... 63,443,558 30,258,995 aggregating to Rs. 1,560,859
Others [Tax deducted at source (previous year Rs. Nil)] ................. 4,055,980 3,174,459
Rs. Nil (previous year Rs. 53,839)] 6,549,281 589,253 Excess of cost over fair value of
current investments ..................... 267,194 155,364
69,992,839 30,848,248 Provision for doubtful debts ......... 14,503,724 14,180,376
Dividend received on current Fixed assets written off ................ — 47,505
investments (non-trade) ............... 47,097,620 16,192,295 Advances/bad debts written off ... — 13,397,660
Profit on sales of current Investments Donations ..................................... 154,792,908 3,681,840
(Net) ........................................... 11,200,264 28,315 Miscellaneous expenses* ............ 140,519,201 111,508,226
Exchange fluctuations (Net) ......... 148,030,658 13,323,871
Excess provision for earlier years/ Total ..... 4,828,499,788 4,071,256,731
sundry credit balances written * Includes printing and stationery expenses, hospitality expenses, conveyance,
back .............................................. 31,582,315 220,779 etc.
Provision for doubtful debts/
advances written back ................. 2,755,456 8,502,342
Insurance claim received .............. 179,245 107,312 Schedule XI
Miscellaneous income ................. 2,220,646 3,333,036
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS FOR THE
Total ..... 12,284,497,216 9,295,929,886 YEAR ENDED MARCH 31, 2006
1. Significant accounting policies:
Schedule IX Year ended Year ended (a) Basis for preparation of accounts:
PERSONNEL March 31, March 31, The accounts have been prepared to comply in all material aspects with
2006 2005 applicable accounting principles in India, the Accounting Standards issued
Rupees Rupees Rupees by the Institute of Chartered Accountants of India (ICAI) and the relevant
Salaries, wages and bonus (Refer provisions of the Companies Act, 1956.
note 14 of schedule XI) ................ 4,118,066,467 3,134,319,663
(b) Use of Estimates:
Contribution to provident and other
funds ............................................ 280,628,217 253,907,360 The preparation of financial statements, in conformity with the generally
Staff welfare ................................. 277,060,199 149,028,964 accepted accounting principles, requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the date
Total ..... 4,675,754,883 3,537,255,987
of financial statements and the reported amounts of revenues and expenses
during the reported year. Differences between the actual results and
estimates are recognised in the year in which the results are known/
Schedule X Year ended Year ended
materialised.
OPERATING AND OTHER March 31, March 31,
EXPENSES 2006 2005 (c) Fixed Assets:
Rupees Rupees Rupees
Fixed assets are stated at cost less depreciation. Costs comprise of
Power ........................................... 67,792,661 46,987,908 purchase price and attributable costs, if any.
Rent ............................................. 116,724,497 138,597,626 (d) Assets taken on lease:
Rates and taxes ............................ 3,331,853 4,559,252 Assets taken on finance lease on or after April 1, 2001 are accounted for as
Communication expenses ............ 266,592,776 209,278,851 fixed assets in accordance with the Accounting Standard 19 on “Leases”,
Travelling expenses [Net of (AS 19) issued by The Institute of Chartered Accountants of India. Accordingly,
recoveries Rs. 12,654,700 (previous the assets have been accounted at fair value. Lease payments are apportioned
year Rs. 51,187,284)] ................... 1,502,336,797 2,022,590,973 between finance charge and reduction of outstanding liability.
Recruitment expenses ................. 69,858,781 32,125,277 (e) Depreciation on fixed assets:
Hire charges [includes car lease
The Company computes depreciation for all fixed assets including for assets
rentals Rs. 4,102,478 (previous year
taken on lease using the straight-line method based on estimated useful
Rs. 6,090,745)] ............................. 101,157,361 118,485,525
lives. Depreciation is charged on a pro rata basis for assets purchased or sold
Sub-contracting costs ................... 1,920,473,006 955,595,123 during the year. Management’s estimate of the useful life of fixed assets is
Repairs and maintenance: as follows:
Buildings (including leased premises) 14,393,023 14,689,134
Buildings 15 years
Machinery .................................... 34,532,640 22,011,760
Computers 3 years
Others .......................................... 35,058,006 19,202,163
Plant and machinery 3–5 years
83,983,669 55,903,057 Furniture and fixtures 5 years
Insurance ...................................... 24,034,103 14,419,746 Vehicles 5 years
Professional fees .......................... 98,573,645 94,398,461

339
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT (CONTD.)
(f) Impairment of Assets:
At the end of each year, the Company determines whether a provision
should be made for impairment loss on fixed assets by considering the
indications that an impairment loss may have occurred in accordance with
Accounting Standard 28 on “Impairment of Assets” issued by The Institute
of Chartered Accountants of India. Where the recoverable amount of any 2.
fixed asset is lower than its carrying amount, a provision for impairment loss
on fixed assets is made for the difference.
(g) Investments: 3.
Current investments are carried at lower of cost and fair value. Long-term
investments are carried at cost. Provision is made to recognise a decline
other than temporary in the carrying amount of long-term investment.
(h) Revenue recognition:
Revenue from software consists primarily of revenue earned from services 4.
performed on ‘time and material’ basis. The related revenue is recognised
as and when services are performed. Income from services performed by
the Company pending receipt of purchase orders from customers, which
are invoiced subsequently on receipt thereof, are recognised as unbilled
revenue.
The Company also performs time bound fixed price engagements, under
which revenue is recognised using the percentage of completion method of
accounting, unless work completed cannot be reasonably estimated.
Provision for estimated losses, if any on uncompleted contracts are recorded
in the period in which such losses become probable based on the current
contract estimates.
Dividend income is recognised when the Company’s right to receive dividend
is established. Interest income is recognised on time proportion basis. 5.
(i) Foreign current transactions:
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items are translated at the 6.
year-end rates. The exchange difference between the rate prevailing on the
date of transaction and on the date of settlement as also on translation of
monetary items at the end of the year, is recognised as income or expense,
as the case may be, except where they relate to fixed assets where they are
adjusted to the cost of fixed assets.
Any premium or discount arising at the inception of the forward exchange
contract is recognised as income or expense over the life of the contract,
except in the case where the contract is in connection with purchase of fixed
assets where the same is adjusted to the cost of fixed assets. Exchange
difference accounted on a forward exchange contract entered into to hedge
the foreign currency risk of a firm commitment is the difference between the
foreign currency amount of the contract translated at the exchange rate at
the reporting/settlement date and the said amount translated at the later
date of inception of the contract/last reporting date.
(j) Retirement Benefits:
Provision is made for gratuity and encashment of unavailed leave on
retirement on the basis of actuarial valuations.
(k) Income taxes:
Tax expense comprises of current tax, deferred tax and fringe benefit tax.
Current tax and Deferred tax are accounted for in accordance with the 7.
Accounting Standard 22 on “Accounting for Taxes on Income”, (AS 22)
issued by the ICAI. Current tax is measured at the amount expected to be
paid to/recovered from the tax authorities, using the applicable tax rates.
Deferred tax assets and liabilities are recognised for future tax consequences
attributable to timing differences between taxable income and accounting
income that are capable of reversal in one or more subsequent years and
are measured using relevant enacted tax rates. The carrying amount of
deferred tax assets at each Balance Sheet date is reduced to the extent
that it is no longer reasonably certain that sufficient future taxable income
will be available against which the deferred tax asset can be realised.
Fringe benefit tax is recognised in accordance with the relevant provisions
of the Income-tax Act, 1961 and the Guidance Note on Fringe Benefits Tax
issued by the ICAI. Tax on distributed profits payable in accordance with
the provisions of the Income-tax Act, 1961 is disclosed in accordance with
the Guidance Note on Accounting for Corporate Dividend Tax issued by
the ICAI.
340
(l) Contingent Liabilities:
These, if any, are disclosed in the notes and accounts. Provisions is made
in the accounts if it becomes probable that any outflow of resources
embodying economic benefits will be required to settle the obligation.
The estimated amount of contracts remaining to be executed on capital account,
and not provided for as at March 31, 2006 Rs. 421,608,250 (previous year
Rs. 92,431,940).
Contingent liabilities:
(a) Income tax demands disputed in appeal by the Company Rs. 42,656,152
(previous year Rs. 87,462,656) awaiting decision.
(b) Bank Guarantees outstanding Rs. 90,739,321 (previous year Rs. 47,362,405).
During the year, vide Share Purchase Agreement dated 15th November, 2005,
the Company has acquired Tech Mahindra (R&D services) Limited (Formerly
known as Axes Technologies (India) Private Limited), for a initial consideration
of Rs. 1,755,060,471 (including stamp duty). As a result, TMRDL and its two
wholly owned subsidiaries have become subsidiary/step subsidiaries of the
Company with effect from the date of acquisition, i.e., 28th November, 2005.
The terms of purchase also provide for payment of contingent consideration to
all the selling shareholders, payable over three years and calculated based on
achievement of specific targets. The contingent consideration is payable in cash
and cannot exceed Rs. 640,780,000. The consideration so payable would be
accounted in the books of account in the year of achieving the milestones under
the Agreement. Accordingly Rs. 32,828,677 has been accounted for as at the
year end, as additional cost of acquisition.
Confirmation letters have been sent to the debtors and creditors of the Company
and their balances are subject to reconciliation and consequent adjustments, if
any, on receipt of such confirmations.
The Company holds investments (unquoted) in two subsidiaries, viz., Tech
Mahindra (Americas) Inc. (TMI) (formerly known as MBT International
Incorporated, USA), Tech Mahindra GmbH (TMGMBH) (formerly known as MBT
GmbH, Germany) aggregating to Rs. 11,794,500 and Rs. 388,827,375 respectively
(Refer Schedule IV), which are held as strategic long-term investments. Further,
the Company has trade receivables aggregating to Rs. 372,324,042 and Rs.
42,186,455 from TMI and TMGMBH respectively and loan outstanding
aggregating to Rs. 223,050,000 from TMI.
As per the latest available audited accounts of the aforesaid companies as at
March 31, 2006, their respective net worth have been fully/substantially eroded.
These subsidiaries have incurred losses due to substantial costs incurred over
the past few years in building marketing capabilities but have made operating
profits during the last year. Moreover, the subsidiaries have growth plans and
expect to continue to earn profits in subsequent years resulting into positive net
worth over a period of time.
Considering the above, out of abundant caution, the Company has made
provisions in the previous year, to the extent of accumulated losses in these
subsidiaries as at the previous year end, aggregating, to Rs. 11,794,500 and
Rs. 353,632,342 towards diminution in the value of investments in TMI and
TMGMBH respectively and Rs. 152,991,436 towards debts recoverable
from TMI.
Payment to Auditors: 2006 2005
Particulars Rupees Rupees
1. Audit Fees ....................... 850,000 850,000
2. Audit of accounts as per
USGAAP .......................... 150,000 150,000
3. As advisor or in any other
capacity in respect of
taxation matters, etc. ...... 200,000 250,000
4. In any other manner for
certification, etc. .............. 390,000 365,000
5. For expenses ................... 63,178 116,663
6. For Service Tax ................ 162,180 111,185
Total ..... 1,815,358 1,842,848
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT (CONTD.)
8. (a) Value of Imports on C.I.F. Basis: 2006 2005 Particulars 2006 2005
Particulars Rupees Rupees Rupees Rupees Rupees
Capital goods [includes Loss of Sale of Assets as per
Rs. Nil (previous year Rs. Section 349 of the Companies
17,826,100) towards Act, 1956 (Net) ...................... 4,055,980 (3,174,459)
assets purchased in UK
office] .............................. 99,296,829 94,555,133 Directors’ Remuneration ....... 20,100,740 20,100,740
Provision for Doubtful Debts
(b) Expenditure in Foreign Currency:
and Advances ....................... 14,503,724 14,180,376
Professional Fees ............ 64,274,740 64,653,812
412,464,056 346,423,488
Subcontracting cost ........ 1,633,121,616 803,409,635
2,818,902,989 1,718,571,330
Travelling Expenses ........ 1,320,928,324 1,532,531,310 Less:
Salaries ............................ 1,262,970,395 1,223,572,940 Loss on Sales of Assets as
Software Packages ......... 39,452,637 40,133,442 per Books .............................. 4,055,980 (3,174,459)
Others [including UK Depreciation u/s 350 of
Corporation Tax Rs. Companies Act, 1956 ............ 373,803,612 315,269,326
71,727,590 (previous year Fixed Assets written off as per
Rs. 86,269,405)] .............. 382,163,032 582,845,703 Section 349 of the Companies
Total ..... 4,702,910,744 4,247,146,842 Act, 1956 (Net) ...................... — 47,505
Provision for Doubtful Debts/
9. Remittance in foreign currency on account of dividends to Non-Resident Advances written back .......... 2,755,456 8,502,342
Shareholders: 380,615,048 320,644,714
Number of Number of Amount Dividend Total ..... 2,438,287,941 1,397,926,616
Shareholders Equity Remitted Relating to
Commission payable to the
Shares Rupees Year ended
Managing Director and Executive
2005–2006 Director ................................. 7,308,000 4,700,000
Five Interim – 1 43,538,335 13,061,500 March 31, 2006 Commission payable on Non-
Six Interim – 2 53,469,973 13,508,425 March 31, 2006 Executive Directors ............... 15,500,000 7,212,300
Nine Interim – 3 53,482,603 27,024,426 March 31, 2006
12. Assets Acquired on Lease on or after April 1, 2001:
2004–2005
Four Final 43,502,015 60,902,821 March 31, 2004 The Company has acquired vehicles on lease, the fair value of which aggregates
to Rs. 74,345,454. As per AS 19, the Company has capitalised the said vehicles
Four Interim – 1 43,502,015 52,202,418 March 31, 2005
at their fair values as the leases are in the nature of finance leases as defined in
Three Interim – 2 43,528,325 43,528,325 March 31, 2005 AS 19. Lease payments are apportioned between finance charge and deduction
of outstanding liabilities. The details of lease rentals payable in future are as
10. Earnings in Foreign Exchange: 2006 2005 follows:
Particulars Rupees Rupees
Not later than Later than
Income from Services ........... 11,899,953,571 9,162,196,652 1 year 1 year not
Management Fees (Net) ....... 28,094,771 32,565,075 later than
Interest on Deposits with Bank 28,157,772 4,941,839 5 years
Interest on Loan to Subsidiary 5,405,921 — Minimum Lease rentals payable
(previous year Rs. 22,372,588
11. Managerial Remuneration paid to Managing Director, Executive Director and and Rs. 33,467,813 respectively) 19,147,044 19,297,314
Non-Executive Directors: Present value of Lease rentals
Particulars 2006 2005 payable (previous year Rs.
Rupees Rupees 20,294,438 and 26,209,591
respectively) .......................... 17,368,509 15,466,831
Managerial Remuneration ..... 17,102,700 8,188,440
Commission .......................... 22,808,000 11,912,300 13. As per Accounting Standard 17 on Segment reporting issued by The Institute of
Total ..... 39,910,700 20,100,740 Chartered Accountants of India, the Primary Segment of the Company is
Geographical by location of customers. The Secondary Segments are identified
The above remuneration excludes provision for gratuity and leave encashment based on the line of operations of the Company. The Accounting principles
since these are based on actuarial valuation done on an overall company basis. consistently used in the preparation of the financial statements are also applied
to record income and expenditure in individual segments. There are no inter-
Computation of Net Profit in accordance with Section 309(5) of the Company segment transactions during the year.
Act, 1956, for the year ended March 31, 2006.
The Primary Geographical Segments of the Company consist of regions of
Particulars 2006 2005 Europe, United States of America (USA) and Rest of the World (RoW). The
Rupees Rupees Rupees Secondary Segments consist of services provided in the Telecom sector and
Profit before Tax and other sectors.
Exceptional Items as per
Profit and Loss Account ........ 2,406,438,933 1,372,147,842

Add:
Depreciation charged in the
accounts ............................... 373,803,612 315,269,326
Fixed Assets written off ........ — 47,505

341
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT (CONTD.)
A. PRIMARY SEGMENTS (In Rupees) A. PRIMARY SEGMENTS (contd.) (In Rupees)
For the year ended GEOGRAPHICAL SEGMENTS BASED ON For the year ended GEOGRAPHICAL SEGMENTS BASED ON
March 31, 2006 LOCATION OF CUSTOMERS March 31, 2006 LOCATION OF CUSTOMERS
PARTICULARS EUROPE USA RoW TOTAL PARTICULARS EUROPE USA RoW TOTAL
REVENUES 9,530,234,565 1,786,995,779 654,207,829 11,971,438,173 OPERATING INCOME 1,299,591,644
DIRECT EXPENSES 5,221,993,170 1,439,707,700 576,254,405 7,237,955,275 OTHER INCOME 72,556,198
SEGMENTAL OPERATING NET PROFIT BEFORE TAX
INCOME 4,308,241,395 347,288,079 77,953,424 4,733,482,898 AND NON-RECURRING/
UNALLOCABLE EXPENSES EXCEPTIONAL ITEMS 1,372,147,842

1. Depreciation 373,803,612 INCOME TAXES

2. Other Unallocable — Current (142,248,589)
Expenses 2,266,299,396 — Deferred (558,938)
Total 2,640,103,008 NET PROFIT AFTER TAX
OPERATING INCOME 2,093,379,890 AND BEFORE NON-
RECURRING/EXCEPTIONAL ITEMS 1,229,340,315
OTHER INCOME 313,059,043
NON-RECURRING/
NET PROFIT BEFORE TAX
EXCEPTIONAL ITEMS 518,418,278
AND NON-RECURRING/
EXCEPTIONAL ITEMS 2,406,438,933 NET PROFIT AFTER TAX
AND NON-RECURRING/
INCOME TAXES EXCEPTIONAL ITEMS 710,922,037
— Current (175,087,277)
Segregating of assets, liabilities, depreciation and other non-cash expenses into
— Deferred 2,861,282
various primary segments has not been done as the assets are used
— Fringe Benefit (33,000,000) interchangeably between segments and the Company is of the view that it is not
NET PROFIT AFTER TAX AND practical to reasonably allocate liabilities and other non-cash expenses to
BEFORE NON-RECURRING/ individual segments and an ad hoc allocation will not be meaningful.
EXCEPTIONAL ITEMS 2,201,212,938
B. SECONDARY SEGMENTS:
NON-RECURRING/
Revenues from secondary segments are as under:
EXCEPTIONAL ITEMS —
Sector Amount in Rs.
NET PROFIT AFTER TAX AND
NON-RECURRING/ Telecom ................................ 9,223,373,688
EXCEPTIONAL ITEMS 2,201,212,938 Others .................................. —
Total ..... 9,223,373,688
Segregating of assets, liabilities, depreciation and other non-cash expenses into
various primary segments has not been done as the assets are used Segregation of assets into secondary segments has not been done as the assets
interchangeably between segments and the Company is of the view that it is not are used interchangeably between segments. Consequently the carrying amounts
practical to reasonably allocate liabilities and other non-cash expenses to of assets by location of assets is not given.
individual segments and an adhoc allocation will not be meaningful.
14. Salaries, Wages, Bonus include provision for Gratuity Rs. 66,839,000 (Previous
B. SECONDARY SEGMENTS:
year Rs. 27,510,000), Encashment of unavailed leave Rs. 97,743,143 (Previous
Revenues from secondary segments are as under: year Rs. 33,790,013).
Sector Amount in Rs.
Telecom ................................ 11,813,019,106 15. (A) The Company has instituted “Employee Stock Option Plan 2000” (ESOP) for
Others .................................. 158,419,067 its employees and directors. For this purpose it had created a trust, viz., MBT
ESOP trust. In terms of the said Plan, the trust has granted options to the
Total ..... 11,971,438,173
employees and directors in form of warrant which vest at the rate of 33.33%
Segregation of assets into secondary segments has not been done as the assets on each successive anniversary of the grant date. The options can be
are used interchangeably between segments. Consequently, the carrying exercised over a period of 5 years from the date of grant. Each warrant
amounts of assets by location of assets is not given. carries with it the right to purchase one equity share of the Company at the
exercise price determined by the trust on the basis of fair value of the equity
A. PRIMARY SEGMENTS (In Rupees) shares at the time of grant.

For the year ended GEOGRAPHICAL SEGMENTS BASED ON The details of the options are as under:
March 31, 2006 LOCATION OF CUSTOMERS March 31, March 31,
PARTICULARS EUROPE USA RoW TOTAL 2006 2005
Rupees Rupees
REVENUES 8,328,655,793 549,892,570 344,825,325 9,223,373,688
Options outstanding at the beginning
DIRECT EXPENSES 5,120,083,883 404,281,995 243,499,407 5,767,865,285 of the year ....................................... 2,229,740 1,818,080
SEGMENTAL Options granted during the year ..... 345,000 832,500
OPERATING INCOME 3,208,571,910 145,610,575 101,325,918 3,455,508,403 Options lapsed during the year ....... 313,340 58,320
UNALLOCABLE EXPENSES Options cancelled during the year ... 259,090 —
1. Depreciation 315,269,326 Options exercised during the year .. 782,310 362,520
2. Other Unallocable Options outstanding at the end of
Expenses 1,840,647,433 the year ........................................... 1,220,000 2,229,740
Total 2,155,916,759 Out of the options outstanding at the end of the year, 504,300 (previous year
1,357,380) options have vested, which have not been exercised.

342
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT (CONTD.)
(B) The Company has instituted “Employee Stock Option Plan 2004” (ESPO (a) List of Related Parties and Relationships
2004) for its employees. In terms of the said Plan, the Compensation
Committee has granted options to employees of the Company. The options Name of Related Party Relation
are divided into Upfront options and Performance options. The Upfront Mahindra & Mahindra Limited Holding Company
Options are divided into three sets which will entitled holders to subscribe British Telecommunications, plc. Promoter holding more
to option shares at the end of First year, Second year, and Third year. The than 20% stake
vesting of the Performance Options will be decided by the Compensation Mahindra BT Investment Company
Committee based on the performance of employees. (Mauritius) Limited Promoter Group Company
Tech Mahindra (Americas) Inc., USA
Options granted and outstanding at the end of the year are 10,219,860
(Formerly known as MBT International Inc.,
(previous year 10,219,860). 2,271,078 (previous year Nil) options have
USA) 100% Subsidiary company
vested as at the end of the year.
Tech Mahindra GmbH (Formerly known as
(C) During the year the Company has instituted “Employee Stock Option Plan MBT GmbH, Germany) 100% Subsidiary company
“(ESOP 2006) for the employees and directors of the Company and its Tech Mahindra (Singapore) Pte. Ltd.
subsidiary companies. In terms of the said plan, the compensation committee (Formerly known as MBT Software
has granted options to the employees of the Company. The vesting of the Technologies Pte. Ltd., Singapore) 100% Subsidiary company
options is 10%, 15%, 20%, 25%, and 30% of total options granted after 12, Tech Mahindra (R&D Services) Limited
24, 36, 48 and 60 months, respectively from the date of grant. The maximum (Formerly known as Axes Technologies
exercise period is 7 years from the date of grant. (India) Private Limited) 99.97% Subsidiary company
Tech Mahindra (Thailand) Limited 99.99% Subsidiary company
The details of the options are as under: Tech Mahindra Foundation 99.98% Subsidiary company
March 31, 2006 Mahindra Engineering and Chemical
Products Limited Fellow Subsidiary company
Options outstanding at the beginning of the year —
Mahindra Engineering Design and
Options granted during the year 4,633,680 Development Company Limited Fellow Subsidiary Company
Options lapsed during the year — Bristlecone India Ltd. Fellow Subsidiary Company
Options cancelled during the year 21,300 Mahindra & Mahindra Contech Limited Fellow Subsidiary Company

Options exercised during the year — Mr. Robert John Helleur* (Executive Key Management Personnel
Director and Chief Executive Officer)
Options outstanding at the end of the year 4,612,380 Mr. Vineet Nayyar (Vice Chairman & Key Management Personnel
Weighted average share price of the above options Managing Director)
on the date of the exercise Rs. 83 * Part of the previous year.
Out of the options outstanding at the end of the year,
none of the options have vested. (b) Related Party Transactions:
Transactions Promoter Subsidiary Fellow Key
(D) The Company uses the intrinsic value-based method of accounting for stock Companies Companies Subsidiary Management
options granted after April 1, 2005. The Company has done the accounting Companies Personnel
of ESOPs based on Guidance Note on Accounting for Employee Share- Rupees Rupees Rupees Rupees
based Payments, issued by the Institute of Chartered Accountants of India. Reimbursement of
Had the compensation cost for the Company’s stock-based compensation Expenses (Net) —
plan been determined in the manner consistent with the fair value approach Paid/(Receipt) (83,406,400) (162,589,990) 25,499,644 —
as described in the Guidance note, the Company’s net income would be [(43,642,006)] [192,245,525] [119,746] [—]
lower by Rs. 36,942 and earnings per share as reported would be lower as Income from Services &
indicated below: Management Fees 8,545,278,618 854,483,143 3,735,227 —
[7,933,535,493] [612,965,861] [1,525,000] [—]
Rupees
Interest on Loan — 5,405,921 — —
Net Profit
[—] [—] [—] [—]
As Reported 2,201,212,938 Commission on Sales — — — —
Less: Total stock-based employee compensation [—] [34,378,472] [—] [—]
expense determined under fair value base method 36,942 Sub-Contracting Cost — 1,459,977,190 — —
[—] [212,939,120] [5,841,954] [—]
Adjusted Net Profit 2,201,175,996
Dividend Paid 122,604,006 — — —
Basic Earnings Per Share [363,789,702] [—] [—] [152,652]
— As reported 21.17 Investment — 1,791,905,837 — —
[—] [120,691,875] [—] [—]
— Adjusted 21.17
Donation — 150,000,000 — —
Diluted earnings per share [—] [—] [—] [—]
— As reported 17.13 Provision for diminution
in value of investment — — — —
— Adjusted 17.13 [—] [365,426,842] [—] [—]
The fair value of each warrant is estimated on the date of grant based on the Loan Given/(Repaid) — 223,050,000 — —
following assumptions: [—] [—] [—] [—]
Salary and Perquisites — — — 17,102,700
Dividend yield (%) 6.89
[—] [—] [—] [8,188,440]
Expected life 5 years Provision for doubtful debtors — — — —
Risk-free interest Rate (%) 7.12 [—] [152,991,436] [—] [—]
Debit/(Credit) Balances
Volatility — (Net) outstanding as on
16. As required under Accounting Standard 18 (AS-18), following are details of March 31, 2006 3,031,737,577 260,871,048 (5,278,085) —
transactions during the year with the related parties of the Company as defined [1,707,318,367] [277,848,490] [(908,470)] [—]
in AS-18: (Figures in brackets “[ ]” are for the previous year)

343
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT (CONTD.)
Out of the above items transactions with Promoter Companies, Subsidiary
Companies and Key Management Personnel in the excess of 10% of the total
related party transactions are as under:
Transactions
Reimbursement of Expenses
(Net) — Paid/(Receipt)
Promoter Companies
— British Telecommunications
Plc.
Subsidiary Companies
— Tech Mahindra (Americas)
Inc. (Formerly known as
MBT International Inc.)
Income from Services
Promoter Companies
— British Telecommunications
Plc.
Sub-Contracting cost
Subsidiary Companies
— Tech Mahindra (Americas)
Inc. (Formerly known as
MBT International Inc.)
— Tech Mahindra GmbH
(Formerly known as
MBT GmbH
Commission on Sales
Subsidiary Companies
— Tech Mahindra GmbH
(Formerly known as
MBT GmbH)
Dividend Paid
Promoter Companies
— Mahindra & Mahindra
Ltd.
— British Telecommunications
plc.
Investment
Subsidiary Companies
— Tech Mahindra GmbH
(Formerly known as
MBT GmbH)
— Tech Mahindra (R&D
Services) Limited
(Formerly known as
Axes Technologies
India Pvt. Ltd.
Loan Given/(Repaid)
Subsidiary Companies
— Tech Mahindra (Americas)
Inc. (Formerly known as MBT
International Inc.)
Interest on Loan
Subsidiary Companies
— Tech Mahindra (Americas) Inc.
(Formerly known as MBT
International Inc.)
Donation
Subsidiary Companies
— Tech Mahindra Foundation
344
Transactions For the year For the year
ended March ended March
31, 2006 31, 2005
For the year For the year Rupees Rupees Rupees
ended March ended March Provision for Diminution in
31, 2006 31, 2005 value of Investment
Rupees Rupees Rupees Subsidiary Companies
— Tech Mahindra (Americas)
Inc. (Formerly known as
MBT International Inc.) — 11,794,500
— Tech Mahindra GmbH
(87,292,381) (51,069,289) (Formerly known as
MBT GmbH) — 353,632,342
— 365,426,842
Salary and Perquisites
163,350,674 188,948,983 Key Management Personnel
76,058,293 137,879,694 — Mr. Robert John Helleur* — 4,846,288
— Mr. Vineet Nayyar* 17,102,700 3,342,152
17,102,700 8,188,440
Provision for Diminution in
8,529,065,460 7,949,298,612 value of Debtors
Subsidiary Companies
— Tech Mahindra (Americas)
Inc. (Formerly known as
MBT International Inc.) — 152,991,436
1,219,751,858 124,472,831
Other related parties of the Companies are as under:
• Automartindia Limited
174,332,177 88,466,289 • Bristlecone Ltd. Cayman
1,394,084,035 212,939,120 • Bristlecone Inc.
• Mahindra Gesco Developers Ltd.
• Mahindra Acres and Consulting Engineers Ltd.
• Mahindra Ashtech Ltd.
— 34,412,683 • Mahindra Automotive Steels Pvt. Ltd.
• Bristlecone India Ltd.
• Bristlecone GmbH
69,120,072 207,360,216 • Bristlecone Singapore Pte. Ltd.
• Mahindra (China) Tractor Company Ltd.
52,143,163 156,429,486 • Mahindra Engg. & Chem. Products Ltd.
121,263,235 363,789,702 • Mahindra Engineering Design & Development Company Ltd.
• Mahindra Europe s.r.l.
• Mahindra Gujarat Tractor Ltd.
• Mahindra Holdings & Finance Ltd.
— 120,691,875 • Mahindra Holidays & Resorts India Ltd.
• Mahindra Holidays & Resorts (USA) Inc.
• Mahindra Insurance Brokers Ltd.
• Mahindra Infrastructure Developers Ltd.
1,787,889,148 —
• Mahindra Intertrade Ltd.
• Bristlecone (UK) Ltd.
• Mahindra International Ltd.
• Mahindra World City Developers Ltd.
223,050,000 —
• Mahindra Logisoft Business Solutions Ltd.
• Mahindra MiddleEast Electrical Steel Service Centre (FZE)
5,405,921 — • Mahindra & Mahindra Financial Services Ltd.
• Mahindra & Mahindra South Africa (Pty.) Ltd.
• Mahindra Overseas Investment Company (Mauritius) Ltd.
• Mahindra Realty Ltd.
150,000,000 — • Mahindra Renault Pvt. Ltd.
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT (CONTD.)
• Mahindra Steel Service Centre Ltd. (c) The year end foreign currency exposures that have not been specifically
• Mahindra Shubhlabh Services Ltd. hedged by a derivative instrument or otherwise are given below:

• Mahindra SAR Transmission Pvt. Ltd. *' Amounts receivable in foreign currency on account of the following:'

• Mahindra USA Inc. In Rupees In Foreign Currency

• Mahindra Ugine Steel Company Ltd. Debtors Rs. 2,814,528,306 Aud 683,965
Eur 1,562,766
• Mahindra World City (Jaipur) Ltd. Gbp 34,825,858
• NBS International Ltd. Nzd 198,272
• Tech Mahindra (R&D Services) Inc. Sgd 604,510

• Tech Mahindra (R&D Services) Pte. Ltd. Loans and Advances Rs. 113,073,519 Gbp 1,432,401
Thb 186,500
• Stokes Group Limited Dhr 75,804
• Jensand Limited Eur 4,190
• Stokes Forgings Dudley Limited Aud 20,889

• Stokes Forgings Limited Plexion Cash/Bank balances (Net) Rs. 31,372,790 Aud 772,810
Nzd 236,419
• Technologies (India) Private Limited Twd 136,700
• Plexion Technologies (UK) Limited Amounts payable in foreign currency on account of the following:
• Plexion Technologies GmbH In Rupees In Foreign Currency
• Plexion Technologies Incorporated Creditors (Net) Rs. 468,476,302 Eur 1063,457
• Mahindra Inframan Water Utilities Pvt. Ltd. Gbp 420,755
• Mahindra Sona Ltd. Sgd 617,040
Usd 8,113,114
• Mahindra Water Utilities Ltd.
Other current liabilities (Net) Rs. 117,312,888 Gbp 1,513,715
• PSL Erickson Ltd.
• Owens Corning (India) Ltd. (d) The amount of exchange difference in respect of forward exchange contracts
to be recognized in the profit and loss account for subsequent accounting
• Siroplast Ltd. year aggregates to Rs. 51,402,677 (Gain) (previous year 2,112,765).
• Mahindra Construction Company Ltd.
(e) Exchange gain/(loss)(net) accounted during the year:
• Officemartindia.com Ltd.
Particulars 2006 2005
• Rathna Bhoomi Enterprises Pvt. Ltd. Rupees Rupees
• Kota Farm Services Ltd. Income from services (68,509,521) (2,799,680)
• Mriyalguda Farm Solutions Ltd. Others 148,030,658 13,323,871
• Mega One Stop Farm Services Ltd. The disclosures made in paragraphs (b) and (c) have been made consequent
to an announcement by the Institute of Chartered Accountants of India in
There have been no transactions with the aforesaid companies during the year. December 2005, which is applicable to the financial periods ending on or
after March 31, 2006. Therefore, figures for the previous year have not been
17. The tax effect of significant timing differences that has resulted in deferred tax disclosed.
assets and liabilities are given below:
March 31, March 31, 19. Earnings Per Share is calculated as follows:
2006 2005 2006 2005
Rupees Rupees Rupees Rupees
Deferred Tax (a) Net Profit after tax but before
(a) Deferred tax liability: Exceptional Item (in Rupees) 2,201,212,938 1,229,340,315
Depreciation (1,435,453) (1,226,029) Less: Non-recurring/
(b) Deferred tax asset: Exceptional Items — 518,418,278

Gratuity, Leave Encashment, etc. 5,771,675 2,899,302 Net profit attributable to

shareholders 2,201,212,938 710,922,037
Doubtful Debts 532,440 334,107
(b) Weighted average number of
Total Deferred Tax Asset (Net) 4,868,662 2,007,380 Equity Shares
Basic 103,998,631 101,726,575
18. Exchange gain/(loss)(net) accounted during the year: Add: ESOPs outstanding at the
(a) The Company enters into foreign exchange forward contracts to offset the end of the year 16,052,240 12,449,600
foreign currency risk arising from the amounts denominated in currencies Partly Paid-up Shares not
other than the Indian rupee. The counter party to the Company’s foreign entitled for Dividend 8,441,892 —
currency forward contracts is generally a bank. These contracts are entered
Diluted 128,492,763 114,176,175
into to hedge the foreign currency risks of firm commitments.
(c) Nominal value of equity share Rs. 2 Rs. 2
(b) The following are the outstanding Forward Exchange Contracts entered into
by the Company as on 31st March, 2006: 20. Details of Investments Purchased and Sold during the year:
Particulars March 31, March 31,
Currency Amount outstanding Amount outstanding Exposure 2006 2006
at your end in at year end in to Buy/ Units Cost
Foreign Currency Rupees Sell TEMPLETON MUTUAL FUND
US Dollar 100,489,700 4,482,845,517 Sell Short Term Income Plan Monthly 87,993.54 90,000,000.00
UK Pound 15,000,000 1,162,500,000 Sell DSP MERRILL LYNCH MUTUAL FUND

345
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT (CONTD.)
Particulars March 31, March 31,
2006 2006 Particulars March 31, March 31,
Units Cost 2006 2006
Short Term Fund Dividend 4,791,291.35 50,000,000.00 Units Cost
Short Term Fund Monthly Dividend 9,145,199.02 94,430,581.53 Kotak Bond Short Term Growth 4,153,479.37 50,000,000.00
PRUDENTIAL ICICI MUTUAL FUND Kotak Bond Short Term Monthly
Short Term Dividend Plan 4,553,360.84 50,000,000.00 Dividend 3,975,036.77 40,000,000.00
Short Term Cumulative Plan 3,917,942.61 50,000,000.00 PRINCIPAL MUTUAL FUND
Liquid Institutional Plan Plus 8,428,718.33 100,000,000.00 Institutional Plan — Dividend
Reinvestment — Monthly 4,963,173.25 50,000,000.00
BIRLA SUNLIFE MUTUAL FUND
Institutional Premium Weekly Dividend 10,067,379.91 100,941,591.45 RELIANCE MUTUAL FUND
Reliance Short Term — Growth Plan 4,289,231.46 50,000,000.00
Birla Bond Plus Institutional
(Fortnightly Dividend) 2,864,891.71 30,000,000.00 Reliance Treasury Plan Retail Option
Weekly Dividend 4,968,128.58 51,385,850.70
HSBC MUTUAL FUND
HSBC Income Fund Short Term HDFC MUTUAL FUND
Institutional Dividend 4,652,764.21 50,000,000.00 HDFC Cash Management Fund
Weekly Dividend 4,701,899.57 50,000,000.00
DEUTSCHE MUTUAL FUND
Institutional Plan Weekly Dividend Plan 4,981,419.31 50,000,000.00 CHOLA MUTUAL FUND
Chola Liquid Institutional Plus
JM MUTUAL FUND
Weekly Dividend 4,274,271.45 50,000,000.00
Short Term Fund — Institutional Plan —
Dividend 3,904,076.83 40,000,000.00 ING VYSYA MUTUAL FUND
High Liquidity Fund — Super ING Vysya Liquid Fund Institutional —
Institutional Plan — Weekly Dividend 10,126,163.18 101,567,780.87 Weekly Dividend 4,984,100.72 50,000,000.00

Short Term Fund — Institutional Plan — TATA MUTUAL FUND

Growth 4,423,760.91 50,000,000.00 Tata Short Term Bond Fund —
Dividend 9,184,048.92 10,000,000.00
KOTAK MUTUAL FUND
Liquid Institutional Premium — 21. Previous year’s figures have been regrouped wherever necessary, to conform
Weekly Dividend 4,982,163.85 50,000,000.00 to the current year’s classification.

Mr. Bharat Doshi

}
For Tech Mahindra Limited
As per our attached report of even date Mr. Clive Goodwin
Mr. Anupam Puri
For Deloitte Haskins & Sells Mr. Anand G. Mahindra – Chairman Hon. Akash Paul
Chartered Accountants Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Vineet Nayyar – Vice-Chairman & Mr. Arun Seth
A.B. Jani Managing Director Mr. Ulhas N. Yargop
Partner
Mr. Vikrant Gandhe Asst. Company
Mumbai, Dated: May 15, 2006 New York, Dated: May 4, 2006 Secretary

346
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE:

I. Registration Details :
Registration No. 4 1 3 7 0 / 8 6 State Code 1 1
Balance Sheet Date 3 1 0 3 0 6
Date Month Year
II. Capital Raised during the year (Amount in Rs. Thousands) :
Public Issue Rights Issue
N I L N I L
Bonus Issue Private Placement
N I L 4 5 4 4

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) :

Total Liabilities (including Shareholders’ Funds) Total Assets

9 9 5 7 7 9 3 9 9 5 7 7 9 3

Paid-up Capital Reserves and Surplus

2 0 7 9 9 7 5 7 7 0 6 4 8

Secured Loans Unsecured Loans

N I L N I L

Net Fixed Assets Investments

1 7 6 1 2 7 4 2 9 4 7 5 1 2
Net Current Assets Deferred Tax Asset
1 2 6 4 9 9 0 4 8 6 9
Accumulated Losses
N I L

IV. Performance of Company (Amount in Rs. Thousands) :

Turnover (Sakes and Other Income) Total Expenditure
1 2 2 8 4 4 9 7 9 8 7 8 0 5 8

Profit/Loss Before Tax Profit/Loss After Tax

2 4 0 6 4 3 9 2 2 0 1 2 1 3

Earning per Share in Rs. Dividend Rate %

(Refer Note 18 above)
2 1 . 1 7 500
V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) :
Item Code No. (ITC Code) 852490
Product Description Computer Software Services

Mr. Bharat Doshi

}
For Tech Mahindra Limited
Mr. Clive Goodwin
Mr. Anupam Puri
Mr. Anand G. Mahindra – Hon. Akash Paul
Chairman Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Arun Seth
Mr. Vineet Nayyar – Vice-Chairman & Mr. Ulhas N. Yargop
Managing Director
Mr. Vikrant Gandhe Asst. Company
New York, Dated: May 4, 2006 Secretary

347
 STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO THE SUBSIDIARY COMPANIES

348
Particulars Names of the Subsidairy Companies
Tech Mahindra Tech Mahindra Tech Mahindra Tech Mahindra Tech Mahindra Tech Mahindra Tech Mahindra Tech Mahindra
( Americas)Inc. GMBH (Singapore) Pte ( Thailand) Co Foundation (Research & (R&D Services) (R&D Services)
Limited Limited Development Inc Pte Limited
Services) Limited
The Financial Year of the
Subsidairy ended on March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006
US $ Euro S$ THB INR INR US $ S$
TECH MAHINDRA LIMITED

Number of shares of the

subsidairy Company held
by Tech Mahindra Limited
at the above date
Equity 375,000 3 5,000 300,000 49,994 9,203,500 500,000 400,000
Extent of holding 100% 100% 100% 100% 100% 99.99% 99.99% 99.99%
The Net Agrgregate of
profits/losses of the
Subsidairy Company for its
financial year so far as they
are concern the memebers
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

of Tech Mahindra Limited

a) Dealth with in the
accounts of Tech
Mahindra for the Year
ended March 31,2006
b) Not dealth with in the
accounts of Tech
Mahindra for the Year
ended March 31,2006 792,250 313,977 (159,580) (3,397,196) (34,942) (70,784,875) 225,695 (6,612)
The Net Agrgregate of
profits/losses of the
Subsidairy Company for its
previous financial year so
far as they are concern the
memebers of Tech
Mahindra Limited
a) Dealt with in the
accounts of Tech
Mahindra for the Year
ended March 31,2005
b) Not dealt with in the
accounts of Tech
Mahindra for the Year
ended March 31,2005 (1,815,201) (2,182,296) 12,342 – – – – –
For Tech Mahindra Limited
Mr.Anand G.Mahindra Mr. Vineet Nayyar Mr.Bharat Doshi Dr. Raj Reddy
Chairman Vice Chairman & Managing Director Director Director
Mr. Clive Goodwin Mr.Arun Seth Mr. Anupam Puri Mr.Ulhas N. Yargop
Director Director Director Director
Hon. Akash Paul Mr. Al-Noor Ramji Mr.Vikrant Gandhe
Director Director Asst. Company Secretary
New York, Dated : May 4, 2006

Auditors’ Report on the Consolidated Financial Statements
To the Board of Directors of Tech Mahindra Limited
(Formerly known as Mahindra-British Telecom Limited)
1. We have audited the attached Consolidated Balance Sheet
of TECH MAHINDRA LIMITED and its subsidiaries as at
March 31, 2006, and also the Consolidated Profit and Loss
account and the Consolidated Cash Flow Statement for the
year ended on that date annexed thereto. These consolidated
financial statements are the responsibility of the Company’s
management and have been prepared by the management
on the basis of separate financial statements and other
financial information regarding components. Our responsibility
is to express an opinion on these financial statements based
on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those Standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
3. We did not audit the financial statements of the subsidiaries,
whose financial statements reflect total assets of Rs.
1,596,847,666/- as at March 31, 2006 and total revenues of
Rs. 482,301,887/- and cash flow amounting to Rs.
107,612,880/- for the year then ended. These financial
statements and other financial information have been audited
by other auditors whose reports have been furnished to us,
and our opinion is based solely on the report of other auditors.
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
4. We report that the consolidated financial statements have
been prepared by the Company in accordance with the
requirements of Accounting Standard (AS) 21, Consolidated
Financial Statements, issued by the Institute of Chartered
Accountants of India.
5. Based on our audit and on consideration of reports of other
auditors on separate financial statements and on the other
financial information of the components, and to the best of
our information and according to the explanation given to us,
we are of the opinion that the attached consolidated financial
statements give a true and fair view in conformity with the
accounting principles generally accepted in India:
(a) in the case of the Consolidated Balance Sheet, of the
state of affairs of the Group as at March 31, 2006;
(b) in the case of the Consolidated Profit and Loss Account,
of the profit for the year ended on that date; and
(c) in the case of the Consolidated Cash Flow Statement, of
the cash flows of the year ended on that date.
For Deloitte Haskins & Sells
Chartered Accountants
A.B. Jani
Mumbai, Partner
15th May, 2006 Membership No. 46488
349
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006

As at As at
March 31, March 31,
2006 2005
Schedule Rupees Rupees
I. SOURCES OF FUNDS :
SHAREHOLDERS’ FUNDS:
Capital ........................................................................... I 207,997,261 203,453,150
Reserves and Surplus ................................................... II 5,946,272,090 4,657,979,301
MINORITY INTEREST ................................................... 356,748 —

TOTAL ... 6,154,626,099 4,861,432,451

II. APPLICATION OF FUNDS :
FIXED ASSETS: ............................................................ III
Gross Block ................................................................... 4,579,632,590 2,866,690,576
Less : Depreciation ....................................................... 1,879,763,082 1,156,486,242

Net Block ....................................................................... 2,699,869,508 1,710,204,334

Capital Work-in-Progress, including Advances .............. 198,287,676 70,489,653
...................................................................................... 2,898,157,184 1,780,693,987
INVESTMENTS ............................................................ IV 1,504,823,264 1,112,780,387
DEFFERED TAX ASSET (NET) .................................... 111,677,939 133,728,512
CURRENT ASSETS, LOANS AND ADVANCES: ........ V
Sundry Debtors ............................................................. 4,377,337,724 2,211,684,007
Cash and Bank Balances ............................................... 759,690,097 1,284,958,022
Loans and Advances ..................................................... 440,664,512 243,300,791
...................................................................................... 5,577,692,333 3,739,942,820
Less : CURRENT LIABILITIES AND PROVISIONS: ....
Liabilities ....................................................................... VI 1,835,918,392 1,290,229,650
Provisions ...................................................................... VII 2,101,806,229 615,483,605
...................................................................................... 3,937,724,621 1,905,713,255
Net Current Assets ...................................................... 1,639,967,712 1,834,229,565
TOTAL ... 6,154,626,099 4,861,432,451

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON

ACCOUNTS ........................................................................... XI

Mr. Bharat Doshi

}
For Tech Mahindra Limited
As per our attached report of even date Mr. Clive Goodwin
Mr. Anupam Puri
For Deloitte Haskins & Sells Mr. Anand G. Mahindra – Chairman Hon. Akash Paul
Chartered Accountants Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Vineet Nayyar – Vice-Chairman & Mr. Arun Seth
A.B. Jani Managing Director Mr. Ulhas N. Yargop
Partner
Mr. Vikrant Gandhe Asst. Company
Mumbai, Dated: May 15, 2006 New York, Dated: May 4, 2006 Secretary

350
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

Year ended Year ended

March 31, March 31,
2006 2005
Schedule Rupees Rupees

INCOME ............................................................................... VIII 12,766,799,101 9,541,898,337

EXPENDITURE :
Personnel .............................................................................. IX 5,623,718,946 3,976,170,587
Operating and Other Expenses ............................................. X 4,124,241,970 4,129,988,032
Depreciation .......................................................................... 397,480,714 321,132,074
TOTAL ... 10,145,441,630 8,427,290,693

PROFIT BEFORE TAXATION ............................................... 2,621,357,471 1,114,607,644

Provision for Taxation
— Current tax [includes provision for wealth tax ............... (207,680,073) (142,248,589)
of Rs. 186,355 (previous year Rs. Nil)]
— Deferred tax .................................................................. (24,529,415) 51,540,476
— Fringe benefit tax .......................................................... (35,390,000) -
PROFIT BEFORE MINORITY INTEREST ............................. 2,353,757,983 1,023,899,531
Minority Interest ................................................................... (37,782) —
NET PROFIT FOR THE YEAR .............................................. 2,353,720,201 1,023,899,531
Balance brought forward from previous year ........................ 3,760,456,398 3,076,610,062
Balance available for appropriation ........................................ 6,114,176,599 4,100,509,593
Interim Dividend - I ................................................................ (30,607,607) (121,658,250)
Interim Dividend - II ............................................................... (31,153,569) (101,537,765)
Interim Dividend - III .............................................................. (62,367,487) —
Interim Dividend - IV ............................................................. (499,193,427) —
Final Dividend ........................................................................ (415,994,523) —
Dividend Tax ......................................................................... (145,764,155) (28,857,180)
Transfer to General Reserve ................................................. (230,000,000) (88,000,000)
Balance Carried to Balance Sheet ......................................... 4,699,095,831 3,760,456,398

Earning Per Share ( Refer note 12 of Schedule XI)

– Basic ............................................................................. 22.63 10.07
– Diluted .......................................................................... 18.32 8.97
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON
ACCOUNTS ........................................................................... XI

Mr. Bharat Doshi

}
For Tech Mahindra Limited
As per our attached report of even date Mr. Clive Goodwin
Mr. Anupam Puri
For Deloitte Haskins & Sells Mr. Anand G. Mahindra – Chairman Hon. Akash Paul
Chartered Accountants Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Vineet Nayyar – Vice-Chairman & Mr. Arun Seth
A.B. Jani Managing Director Mr. Ulhas N. Yargop
Partner
Mr. Vikrant Gandhe Asst. Company
Mumbai, Dated: May 15, 2006 New York, Dated: May 4, 2006 Secretary

351
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

CONSOLIDATED CASH FLOW FOR THE YEAR ENDED MARCH 31, 2006

Current Year Previous Year

Rupees Rupees Rupees
A. Cash Flow from Operating Activities:
Net Profit before taxation ................................................................... 2,621,357,471 1,114,607,644
Adjustments for:
Depreciation ....................................................................................... 397,480,714 321,132,074
Loss on sale of Fixed Assets, (net) .................................................... 4,407,226 3,357,211
Fixed Assets written off ..................................................................... — 47,505
Decrease in fair value of Current Investment .................................... 267,194 155,364
Exchange gain (net) ............................................................................ (21,089,447) (49,546,135)
Currency translation adjustment ........................................................ (10,099,676) 6,207,680
Dividend from current Investments ................................................... (52,950,921) (16,192,295)
Interest Income .................................................................................. (67,137,674) (31,561,412)
Profit on Sale of Investments ............................................................. (14,630,741) (28,315)
236,246,675 233,571,677
Operating profit before working capital changes ............................... 2,857,604,146 1,348,179,321
Adjustments for:
Trade and other receivables ............................................................... (2,038,525,378) 474,543,067
Trade and other payables ................................................................... 543,125,249 558,700,413
............................................................................................................ (1,495,400,129) 1,033,243,480
Cash generated from operations ........................................................ 1,362,204,017 2,381,422,801
Direct Taxes ....................................................................................... (35,995,558) 25,414,580
(35,995,558) 25,414,580
Net cash from operating activities ..................................................... 1,326,208,459 2,406,837,381
B Cash flow from investing activities
Purchase of Fixed assets ................................................................... (395,054,881) (549,409,983)
Purchase of Investments ................................................................... (2,510,736,853) (1,318,669,769)
Investment in Subsidiary .................................................................... (499,940) —
Acquisition of Business ...................................................................... (1,602,143,545) —
Sale of Investments ........................................................................... 2,515,222,709 656,825,066
Sale of Fixed Assets ........................................................................... 6,124,355 1,440,134
Interest received ................................................................................ 68,827,929 29,931,952
Dividend received ............................................................................... 52,950,921 16,192,295
Net cash used in investing activities .................................................. (1,865,309,305) (1,163,690,303)
C Cash flow from financing activities
Proceeds from issue of Shares (including Securities Premium) ........ 134,281,182 15,941,220
Dividend (including Dividend Tax paid) ............................................... (141,537,708) (412,145,049)
Net cash used in financing activities .................................................. (7,256,526) (396,203,829)
Net increase in cash and cash equivalents (A+B+C) ........................ (546,357,372) 846,943,249
Cash and cash equivalents at the beginning of the year .................... 1,286,706,869 439,763,620
Cash and cash equivalents at the end of the year ............................. 740,349,497 1,286,706,869
Notes:
1 Components of cash and cash equivalents include cash, bank balances in current and deposit accounts as disclosed under Schedule V (b) of the
accounts.
2 Purchase of fixed assets are stated inclusive of movements of capital work in progress between the commencement and end of the year and are
considered as part of investing activity.
March 31, 2006 March 31, 2005
Rs Rs
3 Cash and cash equivalents includes :
Cash and Bank Balances 759,690,097 1,284,958,022
Unrealised (Gain)/Loss on foreign currency Cash and cash equivalents (19,340,600) 1,748,847
Total Cash and Cash equivalents 740,349,497 1,286,706,869

Mr. Bharat Doshi

}
For Tech Mahindra Limited
As per our attached report of even date Mr. Clive Goodwin
Mr. Anupam Puri
For Deloitte Haskins & Sells Mr. Anand G. Mahindra – Chairman Hon. Akash Paul
Chartered Accountants Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Vineet Nayyar – Vice-Chairman & Mr. Arun Seth
A.B. Jani Managing Director Mr. Ulhas N. Yargop
Partner
Mr. Vikrant Gandhe Asst. Company
Mumbai, Dated: May 15, 2006 New York, Dated: May 4, 2006 Secretary

352
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND the Profit and
Loss Account for the year ended As
SCHEDULE I
31st
at
March,
As at
2002
SCHEDULE II As at As at
SHARE CAPITAL : March 31, March 31, RESERVES AND SURPLUS : March 31, March 31,
2006 2005 2006 2005
Rupees Rupees Rupees
Rupees Rupees
Authorised : As per last Balance Sheet .............. 718,430,284 630,430,284
150,000,000 (previous year 125,000,000) Add : Transfer from
Equity Shares of Rs. 2/- each ..... 300,000,000 250,000,000 Profit and Loss Account ...... 230,000,000 88,000,000
300,000,000 250,000,000 948,430,284 718,430,284
Issued and Subscribed : Securities Premium :
112,440,523 (previous year 101,726,575) As per last Balance Sheet .............. 152,766,273 137,550,093
Equity Shares of Rs. 2/- each .... 224,881,046 203,453,150 Add : Received during the year ..... 129,737,071 15,216,180

Paid up : 282,503,344 152,766,273

102,508,885 (previous year 101,726,575) Currency Translation Reserve
Equity Shares of Rs. 2/- each fully As per last Balance Sheet .............. 26,326,346 20,118,666
paid-up ....................................... 205,017,770 203,453,150 Addition during the year ................. (10,099,676) 6,207,680
9,931,638 (previous year Nil ) Equity Shares 16,226,670 26,326,346
of Rs 2/- each Rs 0.30 paid-up ... 2,979,491 —
TOTAL ....................................... 207,997,261 203,453,150 Capital Reserve 15,964 —
Balance in Profit and Loss Account 4,699,095,828 3,760,456,398
1. Out of the above 57,600,060 [including Nil (previous year 200) held with nominees] Total ........ 5,946,272,090 4,657,979,301
Equity Share of Rs. 2/- each fully paid-up are held by Mahindra & Mahindra Ltd.,
the holding company.
2. The above includes 51,000,100 and 25,000,000 Equity Shares of Rs. 2/- each
issued as fully paid-up bonus shares by capitalisation of balance of Profit and
Loss Account and General Reserve, respectively.
SCHEDULE III — FIXED ASSETS

GROSS BLOCK DEPRECIATION NET BLOCK

Description of Assets Cost at at *Additions Additions Deductions Cost as at Upto * On For the Deductions Upto As at As at
April 01, on during the during the March 31, March 31, acquisition year during the March 31, March 31, March 31,
2005 acquisition year year 2006 2005 year 2006 2006 2005
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
Goodwill on Consolidation – – 866,827,792 – 866,827,792 – – – – – 866,827,792 –
Leased Assets :
Vehicles 81,557,438 – 10,888,880 18,100,864 74,345,454 17,310,768 – 17,078,531 7,095,107 27,294,192 47,051,262 64,246,670
(Refer Note 5 of Schedule XI)
Other Assets :
Land – 91,374,785 – – 91,374,785 – – – – – 91,374,785 –
Office Building /
Premises 1,410,277,810 182,445,917 797,085 – 1,593,520,812 320,881,297 49,592,179 98,062,827 – 468,536,303 1,124,984,509 1,089,396,513
Computers 616,631,804 106,748,491 172,539,737 5,998,661 889,921,371 415,408,082 84,221,174 143,514,736 5,724,198 637,419,794 252,501,577 201,223,722
Plant and Machinery 369,139,360 127,049,687 34,383,329 2,128,128 528,444,248 200,281,198 113,166,314 67,880,616 1,308,200 380,019,928 148,424,320 168,858,162
Furniture and Fixtures 389,084,164 108,432,730 17,140,039 8,751,282 505,905,651 202,604,897 94,743,395 67,259,219 8,758,989 355,848,522 150,057,129 186,479,267
Vehicles – 9,156,935 20,135,542 – 29,292,477 – 6,959,558 3,684,785 – 10,644,343 18,648,134 –
Total 2,866,690,576 625,208,5451,122,712,404 34,978,935 4,579,632,590 1,156,486,242 348,682,620 397,480,714 22,886,494 1,879,763,082 2,699,869,508 1,710,204,334
Previous year 2,189,185,820 – 690,689,361 13,184,605 2,866,690,576 843,693,992 – 321,132,074 8,339,824 1,156,486,242
Capital Work in Progress 198,287,676 70,489,653
2,898,157,184 1,780,693,987
Note: 1) Fixed assets include certain leased vehicles aggregating to Rs 44,703,670 (previous year Rs.74,754,716) on which vendors have a lien.
2)* Refer note 3 of Schedule XI relating to Subsidiaries acquired during the year.

SCHEDULE IV As at March As at March As at March As at March

INVESTMENTS : (AT COST) 31, 2006 31, 2005 31, 2006 31, 2005
Rupees Rupees Rupees Rupees Rupees Rupees
Trade:
92,347.61 (previous year Nil ) units of
In Subsidiary Companies :
Rs 1,000.58 each of Franklin Templeton
49,994 Equity shares (previous year Nil ) Mutual Fund Weekly Dividend Institutional
of Tech Mahindra .................................... 499,940 — Plan [Cost Rs. 92,443,267 (previous year
Foundation of Rs. 10 each fully paid up Rs. Nil)] ................................................... 92,401,094 —
Current Investments(at lower of cost and
38,867.53 (previous year Nil) units of Rs.
fair value) (Refer Note 2 of Schedule XI)
1000.20 each of DSP Merrill Lynch -
Liquidity Fund ......................................... 38,875,302 —
Non Trade:
100,407.99 (previous year Nil) units of Rs.
Nil (previous year 101,396.50) units of 1000.00 each of DSP Merrill Lynch - Fixed
Rs Nil (previous year Rs.1,001.10) each of Term Plan Series B ................................. 100,408,363 —
Franklin Templeton Mutual Fund-
Institutional Income Plan ........................ — 101,508,060 200,000.00 (previous year Nil) units of
Rs. 1000.00 each of DSP Merrill Lynch -
Fixed Term Plan Series 3c ...................... 200,000,000 —

353
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

As at March As at March As at March As at March

31, 2006 31, 2005 31, 2006 31, 2005
Rupees Rupees Rupees Rupees Rupees Rupees
Nil (previous year 4,144,029.86) units of Nil (previous year 2,000,000) units of Rs.
Rs. Nil (previous year Rs. 10.21) each of Nil ( Previous year of Rs. 10.00 ) each of
DSP Merrill Lynch - Short Term Fund ..... — 42,326,321 Reliance Mutual Fund-Fixed Term
Nil (previous year 8,116,274.55) units of Quarterly Plan Dividend Option .............. — 20,000,000
Rs. Nil (previous year Rs 10.03 ) each of 5,000,000 (previous year 5,000,000) units
DSP Merrill Lynch - Floating Rate - Weekly of Rs. 10.00 each of Reliance Mutual Fund
Dividend ................................................. — 81,429,837 FMP ....................................................... 50,000,000 50,000,000
Nil (previous year 4,315,175.02) units of 5,000,000 (previous year Nil ) units of Rs.
Rs. Nil (previous year Rs. 11.84) each of 9.99 each of Reliance Fixed Tenor Fund
Prudential ICICI Mutual Fund-Liquid Growth Plan [Cost Rs. 50,000,000
Income Plan ........................................... — 51,109,288 (previous year Rs. Nil)] ........................... 49,927,500 —
Nil (previous year 1,119,449.83) units of Nil (previous year 3,310,999.22 ) units of
Rs. Nil (previous year Rs. 10.85) each of Rs. Nil (previous year Rs. 15.28) each of
Prudential ICICI Mutual Fund Institutional Reliance Mutual Fund - Treasury Plan
Short Term Plan ...................................... — 12,150,841 Institutional Option ................................. — 50,586,064
4,748,969.47 (previous year 4,748,969.47) Nil (previous year 2,000,000) units of
units of Rs. 10.53 (previous year Rs.10.53) Rs.Nil ( previous year of Rs. 10 ) each
each of Prudential ICICI Mutual Fund FMP 20,000,000of Reliance Mutual Fund
Yearly Growth Plan ................................. 50,000,000 50,000,000 Growth Plan ........................................... — 20,000,000
11,665,474.85 (previous year Nil ) units of Nil (previous year 9,507,961.29) units of
Rs. 10.00each of Prudential ICICI Mutual Rs. Nil (previous year Rs. 10.63 ) each of
Fund Liquid Plan Super Institutional ...... 116,668,816 — HDFC Cash Management Fund Weekly
Nil (previous year 9,313,161.61) units of Dividend ................................................. — 101,090,809
Rs Nil (previous . year Rs. 10.81) each of 5,000,000 (previous year 4,409,628.75)
Birla Mutual Fund - Institutional Plan ...... — 100,705,538 units of Rs. 10.00 each (previous year
Rs. 11.49 ) each of Chola Fund Liquid
5,000,000.00 (previous year Nil) units of Institutional Plus-Dividend Option .......... 50,000,000 50,676,570
Rs 10.00 each of Birla Mutual Fund - Fixed Nil (previous year 9,811,360.90 ) units of
term growth plan .................................... 50,000,000 — Rs. Nil (previous year Rs.10.30) each of
3,071,767.96(previous year Nil) units of Rs Standard Chartered Mutual Fund Weekly
10.02 each of Birla Mutual Fund - Dividend Plan ......................................... — 101,092,372
Institutional Plan [Cost Rs. 30,810,447 5,000,000 (previous year Nil ) units of Rs.
(previous year Rs. Nil)] ........................... 30,786,794 — 9.98 each of Grindlays - FMP [Cost
5,000,000(previous year Nil ) units of Rs.50,000,000 (previous year Rs. Nil)] ... 49,900,000 —
Rs.10.00 each of HSBC Mutual Fund- 4,600,000 (previous year Nil ) units of
Fixed Maturity Plan ................................ 50,000,000 — Rs. 10.00 each of TATA Fixed Horizon Fund
5,029,509.92 (previous year 6,749,441.71) Series III ................................................. 46,000,000 —
units of Rs. 10.00 (previous year Rs.10.45) 90,695.00 (previous year Nil ) units of
each of HSBC Mutual Fund - Fixed term Rs. 1,135.75 each of TATA Mutual Fund
series Institutional Growth Plan ............. 50,295,099 70,536,265 Liquid High Investment fund weekly
Nil (previous year 2,696,842.37) units of dividend .................................................. 103,007,090 —
Rs.Nil (previous year Rs.10.02 ) each of J 5,000,000 (previous year Nil ) units of
M Mutual Fund- Short Term Institutional Rs. 10.00 each of Sundaram Mutual Fund
Plan ........................................................ — 27,013,492 - FMP ..................................................... 50,000,000 —
6,952,192.63 (previous year 5,035,302.57) 5,024,693.83 (previous year Nil ) units of
units of Rs. 10.03 (previous year Rs.10.02 Rs. 10.00 each of ABN AMRO Mutual
) each of J M Mutual Fund- High Liquidity Fund - FMP ............................................. 50,247,000 —
Super Institutional Plan ........................... 69,748,080 50,449,649
1,504,323,324 1,112,780,387
Nil (previous year 3,034,216.23) units of
Rs. Nil (previous year Rs.10.00) each of 1,504,323,324 1,112,780,387
Kotak Floater Long Term - Weekly
Dividend ................................................. — 30,353,388 Total ............ 1,504,823,264 1,112,780,387
4,098,246.52 (previous year Nil) units of
Rs. 10.03 each of Kotak Liquid Institutional Note :
Premiun weekly dividend ....................... 41,096,908 — Refer note 13 of Schedule XI for additional information
5,000,000 (previous year Nil) units of SCHEDULE V As at March As at March
Rs. 10.00 (previousyear Rs. Nil ) each of CURRENT ASSETS, LOANS AND 31, 2006 31, 2005
Kotak Mutual Fund -FMP Growth ........... 50,000,000 — ADVANCES : Rupees Rupees Rupees
Current Assets :
5,214,307.74 (previous year 5,048,809.48) (a) Sundry Debtors * :
units of Rs. 10.03 (previous year Rs.10.03 (Unsecured)
) each of Kotak Mutual Fund - Liquid Debts outstanding for a period
Institiutional Weekly Dividend ................ 52,288,682 50,623,936 exceeding six months:
: considered good** ....................................... 145,101,029 189,209,996
Nil (previous year 4,032,914.19) units of : considered doubtful ........................................ 29,227,059 15,099,557
Rs.Nil (previous year Rs. 10.02 ) each of
Principal Mutual Fund - Floating Rate Fund 174,328,088 204,309,553
Other debts, considered good*** 4,232,236,695 2,022,474,011
SMP ....................................................... — 40,415,043 considered doubtful 401,995 2,419,737
6,265,066.85 (previous year 1,066,927.90) 4,406,966,778 2,229,203,301
units of Rs. 10.00 (previous year Rs. 10.04) Less: Provision ................................................ 29,629,054 17,519,294
each of Principal Mutual Fund -
Liquid Institutional Plan weekly dividend 4,377,337,724 2,211,684,007
[Cost Rs. 62,701,509 (previous year
Rs. 10,712,914)] ..................................... 62,672,596 10,712,914 * Debtors include unbilled revenue of Rs. 437,865,019 (previous year Rs.346,914,306)
** Net of advances of Rs. 63,188,086 (previous year Rs. Nil) pending adjustments with invoices.
*** Net of advances of Rs. 29,217,991 (previous year Rs. 1,775,117,870) pending adjustments with invoices.

354
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

As at March As at March Year ended Year ended

31, 2006 31, 2005 March 31, March 31,
Rupees Rupees Rupees 2006 2005
(b) Cash and Bank Balances : Rupees Rupees Rupees
Balance with Scheduled banks : SCHEDULE X
(i) In Current accounts ................................ 261,954,020 833,933,251 OPERATING AND OTHER
(ii) In Fixed Deposit accounts ...................... 359,943,072 451,024,771 EXPENSES :
Balance with other banks : Power ............................................................... 81,870,403 46,987,908
(i) In Current accounts ..................................... 137,793005 — Rent ............................................................... 143,470,350 160,026,515
759,690,097 1,284,958,022 Rates and taxes ........................................................ 9,472,617 4,559,252
(c) Loans and Advances : Communication expenses ........................................ 283,214,175 227,768,973
(Unsecured) Travelling expenses ................................................. 1,816,177,397 2,075,755,247
Bills of Exchange (considered doubtful) .......... 5,000,000 5,000,000 [Net of recoveries Rs.12,654,700 (previous year
Less: Provision ................................................ 5,000,000 5,000,000 Rs.51,187,284)]
Recruitment expenses .............................................. 71,971,334 32,735,064
— —
Advances recoverable in cash or in kind or Hire Charges [includes car lease rentals Rs. 4,102,478
for value to be received considered good ....... 440,664,512 243,300,791 ( previous year Rs.6,090,745)] .................................. 108,583,870 118,485,525
considered doubtful .................................................. 3,758,992 3,758,992 Sub-contracting costs ............................................... 763,788,383 799,891,178
Repairs and Maintenance :
444,423,504 247,059,783
Less : Provision .............................................. 3,758,992 3,758,992 Buildings (including leased premises) ...................... 14,408,158 14,689,134
Machinery ............................................................... 35,829,207 22,011,760
440,664,512 243,300,791
Others ............................................................... 35,512,676 19,202,163
440,664,512 243,300,791
............................................................... 85,750,041 55,903,057
5,577,692,333 3,739,942,820 Insurance ............................................................... 34,865,596 24,998,794
Professional fees ...................................................... 112,945,402 132,193,255
SCHEDULE VI
Software Packages ................................................... 141,622,275 80,029,919
CURRENT LIABILITIES :
Training ............................................................... 91,262,401 71,425,395
Sundry Creditors : Advertising, Marketing and Selling expenses ........... 5,215,153 82,224,380
Total outstanding dues to Small Scale Commission on Services Income ............................. 39,821,048 34,378,472
Industrial Undertakings .................................... — — Loss on sale of fixed assets [Net of write back of
Total outstanding dues of Creditors other leased liability agregating to Rs 1,560,859 (Previous
than Small Scale Industrial Undertakings ........ 1,835,918,392 1,290,229,650 year Rs Nil)] .............................................................. 4,407,226 3,357,211
Excess of cost over fair value of current investments .... 267,194 155,364
Total .................. 1,835,918,392 1,290,229,650 Advances / debts written off .................................... 372,599 13,397,660
SCHEDULE VII Provision for Doubtful Debts .................................... 16,659,134 14,180,376
PROVISIONS: Fixed Assets written off ........................................... — 47,505
Provision for taxation (net of payments) ................... 579,912,211 349,598,609 Donations ............................................................... 154,858,594 3,681,840
Proposed Dividends .................................................. 915,187,953 — Miscellaneous expenses * ....................................... 157,646,778 147,805,142
Provision for Dividend tax ......................................... 128,355,110 — 4,124,241,970 4,129,988,032
Provision for Gratuity ................................................ 195,814,001 118,375,000
Provision for Leave Encashment .............................. 282,536,954 147,509,996 * includes Printing and Stationery expenses, Hospitality expenses, Conveyance, etc.
Total .................. 2,101,806,229 615,483,605

SCHEDULES FORMING PART OF THE

CONSOLIDATED PROFIT AND LOSS ACCOUNT
SCHEDULE VIII Year ended Year ended
INCOME : March 31, March 31,
2006 2005
Rupees Rupees Rupees
Income from Services (net) ...................................... 12,398,572,984 9,423,846,117
[Tax deducted at source Rs. 6,468,139
( previous year Rs.9,283,236) ]
Management Fees (Net) ........................................... 28,094,771 32,565,075
12,426,667,754 9,456,411,192
Interest on :
Deposits with Banks ................................................ 65,875,883 30,972,159
[Tax deducted at source Rs. 9,649,693
(previous year Rs. 2,494,297)]
Others [Tax deducted at source Rs. Nil 1,261,792 589,253
(previous year Rs.53,839)]
67,137,674 31,561,412
Dividend received on current investments (non-trade) 52,950,921 16,220,610
Exchange fluctuation (Net) ........................................ 152,256,314 13,323,871
Profit on Sale of Current Investment (Net) ................ 14,630,741 28,315
Excess Provisions for earlier years / Sundry Credit
Balances Written Back .............................................. 31,582,315 220,779
Provision for Doubtful Debts/Advances written back 4,549,374 8,502,342
Insurance claim received ........................................... 179,245 107,312
Miscellaneous Income ............................................... 16,844,763 15,522,504
12,766,799,101 9,541,898,337

SCHEDULE IX
PERSONNEL :
Salaries, wages and bonus ........................................ 4,956,353,722 3,555,215,450
Contribution to Provident and Other Funds ............... 337,337,164 253,907,360
Staff Welfare .............................................................. 330,028,060 167,047,777
5,623,718,946 3,976,170,587

355
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)
SCHEDULE XI
SCHEDULES FORMING PART OF THE
CONSOLIDATED BALANCE SHEET AND
PROFIT & LOSS ACCOUNT
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS FORMING
PART OF CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED MARCH 31,
2006
1. Significant accounting policies:
(a) Basis for preparation of accounts:
The accompanying Consolidated Financial Statements of Tech Mahindra
Limited (TML) (“the holding company”) (formerly known as Mahindra-British
Telecom Limited) and its subsidiaries are prepared under the historical cost
convention in accordance with the generally accepted accounting principles
applicable in India (Indian GAAP), the provisions of the Companies Act, 1956
and the Accounting Standards issued by The Institute of Chartered
Accountants of India to the extent possible in the same format as that adopted
by the holding company for its separate financial statements.
The financial statements of the subsidiaries used in the consolidation are
drawn upto the same reporting date as that of the Holding company namely
March 31, 2006.
(b) Principles of consolidation:
The financial statements of the holding company and its subsidiaries have
been consolidated on a line by line basis by adding together the book value
of like items of assets, liabilities, income, expenses, after eliminating intra –
group transactions and any unrealized gain or losses on the on the balances
remaining within the group in accordance with the Accounting Standard - 21
(AS 21) on “Consolidated Financial Statements” issued by the Institute of
Chartered Accountants of India.
The financial statements of the holding company and its subsidiaries have
been consolidated using uniform accounting policies for like transaction and
others events in similar circumstances.
The excess of cost of investments in the subsidiary company/s over the
share of the equity of the subsidiary company/s at the date on which the
investment in the subsidiary company/s is made is recognized as ‘Goodwill
on Consolidation’ and is grouped with Fixed Assets in the Consolidated
Financial Statements.
Alternatively, where the share of equity in the subsidiary company/s as on
the date of investment is in excess of cost of the investment, it is recognized
as ‘Capital Reserve’ and grouped with ‘Reserves and Surplus’, in the
Consolidated Financial Statements.
Minority interest in the net assets of the consolidated subsidiaries consists
of the amount of equity attributable to the minority shareholders at the dates
on which investments are made in the subsidiary company/s and further
movements in their share in the equity, subsequent to the dates of
investments.
(c) Use of Estimates:
The preparation of Consolidated Financial Statements, in conformity with
the generally accepted accounting principles, requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported amounts of
revenues and expenses during the reported year. Differences between the
actual results and estimates are recognised in the year in which the results
are known/materialised.
(d) Assets taken on lease:
Assets taken on finance lease on or after April 1, 2001 are accounted for as
fixed assets in accordance with Accounting Standard 19 (AS 19) on “Leases”,
issued by The Institute of Chartered Accountants of India. Accordingly, the
assets have been accounted at fair value. Lease payments are apportioned
between finance charge and reduction of outstanding liability. (Refer note 7
below)
(e) Fixed Assets:
Fixed assets are stated at cost less depreciation. Costs comprise of purchase
price and attributable costs, if any.
(f) Depreciation on fixed assets:
Depreciation for all fixed assets including for assets taken on lease is
computed using the straight-line method based on estimated useful lives.
Depreciation is charged on a pro-rata basis for assets purchased or sold
during the year. Management’s estimate of the useful life of fixed assets is
as follows:
Buildings 15 years
Computers 3-5 years
Plant and machinery 3-5 years
Furniture and fixtures 5 years
Vehicles 5 years
356
(g) Impairment of Assets
At the end of each year, the company determines whether a provision should
be made for impairment loss on fixed assets by considering the indications
that an impairment loss may have occurred in accordance with Accounting
Standard 28 ‘‘Impairment of Assets’’ issued by the Institute of Chartered
Accountants of India. Where the recoverable amount of any fixed asset is
lower than its carrying amount, a provision for impairment loss on fixed
assets is made for the difference.
(h) Investments:
Current investments are carried at lower of cost and fair value. Long term
investments are carried at cost. Provision is made to recognise a decline
other than temporary in the carrying amount of long term investment.
(i) Revenue recognition:
Revenue from software consists primarily of revenue earned from
services performed on ‘time and material’ basis. The related revenue is
recognized as and when services are performed. Income from service is
performed by the Company pending receipt of purchase orders from
customers, which are invoiced subsequently on receipt thereof, are
recognized as unbilled revenue.
The Company also performs time bound fixed–price engagements, under
which revenue is recognized using the percentage of completion method
of accounting, unless work completed cannot be reasonably estimated.
Dividend income is recognized when the Company’s right to receive
dividend is established. Interest income is recognized on time proportion
basis.
Income from training is recognized over the period of instruction.
(j) Foreign currency transactions:
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items are translated at the
year-end rates. The exchange difference between the rate prevailing on the
date of transaction and on the date of settlement as also on translation of
monetary items at the end of the year, is recognised as income or expense,
as the case may be, except where they relate to fixed assets where they
are adjusted to the cost of fixed assets.
Any premium or discount arising at the inception of the forward exchange
contract is recognized as income or expense over the life of the contract,
except in the case where the contract is in connection with purchase of
fixed asset, where the same is adjusted to the cost of fixed assets. Exchange
difference on a forward exchange contract entered into to hedge the foreign
currency risk of a firm commitment is the difference between the foreign
currency amount of the contract translated at the exchange rate at the
reporting/settlement date and the said amount translated at the later date of
inception of the contract / last reporting date.
(k) Translation and Accounting of Financial Statement of Foreign subsidiaries :
The financial statements are translated to Indian Rupees in accordance with
the guidance issued by the Institute of Chartered Accountants of India in
the background material to AS 21 as follows :
1. All incomes and expenses are translated at the average rate of exchange
prevailing during the year
2. Assets and liabilities are translated at the closing rate on the Balance
sheet date
3. Share Capital is translated at historical rate
4. The resulting exchange differences are accumulated in currency
translation reserve.
(l) Retirement Benefits:
Provision is made for gratuity and encashment of unavailed leave on
retirement on the basis of actuarial valuations.
(m) Income taxes:
Tax expense comprises of current tax, deferred tax and fringe benefit tax.
Current tax is measured at the amount expected to be paid to/recovered
from the tax authorities, using the applicable tax rates. Deferred tax assets
and liabilities are recognised for future tax consequences attributable to timing
differences between taxable income and accounting income that are capable
of reversal in one or more subsequent years and are measured using relevant
enacted tax rates. Fringe benefits tax is recognized in accordance with the
relevant provisions of the Income-tax Act, 1961 and the Guidance Note on
Fringe Benefits Tax issued by the ICAI. Tax on distributed profits payable by
Indian Companies in accordance with the provisions of the Income-tax Act,
1961 is disclosed in accordance with the Guidance Note on Accounting for
Corporate Dividend Tax issued by the ICAI.
(n) Contingent Liabilities:
These, if any, are disclosed in the notes and accounts. Provision is made in
the accounts if it becomes probable that any outflow of resources embodying
economic benefits will be required to settle the obligation.
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

2. The consolidated financial statements present the consolidated accounts of 7. Assets acquired on Lease on or after April 1, 2001:
TML, which consists of the accounts of the holding company and of the following
subsidiaries TML has acquired vehicles on lease, the fair value of which aggregates to Rs.
74,345,454. As per AS-19 on Leases, issued by The Institute of Chartered
74,345,454
Name of the Subsidiary Country of Extent of Holding Accountants of India TML has capitalised the said vehicles at their fair values as
company incorporation (%) as on the leases are in the nature of finance leases as defined in AS-19. Lease payments
March 31, 2006 are apportioned between finance charge and deduction of outstanding liabilities.
Tech Mahindra United States 100 % The details of lease rentals payable in future are as follows:
(Americas) Inc. of America
(Formerly known as MBT Not later than Later than
International Inc.) 1 year 1 year not later
than 5 years
Tech Mahindra GmbH Germany 100 %
(Formerly known as Minimum Lease rentals payable 19,147,044 19,297,314
MBTI GmbH) (Previous year Rs. 22,372,588
Tech Mahindra (Singapore) Singapore 100 % and Rs. 33,467,813 respectively)
Pte. Ltd. (Formerly known
Present value of Lease rentals payable 17,368,509 15,466,831
as MBT Software Technologies
(Previous year Rs. 20,294,438 and
Pte. Ltd., Singapore)
26,209,591 respectively)
Tech Mahindra (Thailand) Limited Thailand 99.99%
8. As per Accounting Standard 17 on Segment reporting issued by the Institute of
Tech Mahindra (R & D India 99.97%
Chartered Accountants of India, the Primary Segment of the Company is
Services) Limited (Formerly
Geographical by location of customers. The Secondary Segments are identified
known as Axes Technologies
based on the line of operations. The Accounting principles consistently used in
(India) Private Limited) and
the preparation of the financial statements are also applied to record income
its following subsidiaries:
and expenditure in individual segments. There are no inter-segment transactions
a) Tech Mahindra (R & D Services) United States 99.97% during the year.
Inc. (Formerly known as Axes of America
Technologies Inc.) The Primary Geographical segments consist of regions of Europe, United States
of America (USA) and Rest of the world (RoW). The Secondary Segments consist
b) Tech Mahindra (R & D Singapore 99.97%
of services provided in the Telecom sector and other sectors.
Services) Pte. Ltd., (Formerly
known as Axes Technologies A. PRIMARY SEGMENTS (in Rupees)
(Asia pacific) Pte. Ltd.)
For the year ended March 31, 2006 Geographical Segments Based on
TML has an investment in a subsidiary company viz. Tech Mahindra Foundation Location of Customers
(TMF). TMF has been incorporated primarily for charitable purposes, where in Particulars Europe USA RoW Total
the profits will be applied for promoting its objects. Accordingly, the accounts of REVENUES 9,532,247,435 2,226,414,827 668,005,492 12,426,667,754
TMF are not consolidated in these financial statements, since TML will not DIRECT EXPENSES 5,216,237,872 1,594,188,623 586,040,493 7,396,466,988
derive any economic benefits from its investments in TMF. SEGMENTAL OPERATING
3. During the period, vide Share Purchase Agreement dated 15th November, 2005, INCOME 4,316,009,563 632,226,204 81,965,001 5,030,200,766
TML has acquired Tech Mahindra (R&D services) Limited (Formerly known as UNALLOCABLE EXPENSES
Axes Technologies (India) Private Limited.) for a initial consideration of Rs. 1. Depreciation 397,480,714
1,755,060,471 (including stamp duty). As a result, TMRDL and its two wholly 2. Other Unallocable Expenses 2,351,493,928
owned subsidiaries have become subsidiary / step subsidiaries of the Company
Total 2,748,974,642
with effect from the date of acquisition i.e. 28th November, 2005.
OPERATING INCOME 2,281,226,124
The terms of purchase also provide for payment of contingent consideration to Other Income 340,131,347
all the selling shareholders, payable over three years and calculated based on
NET PROFIT BEFORE TAXES 2,621,357,471
achievement of specific targets. The contingent consideration is payable in cash
and cannot exceed Rs. 640,780,000. The consideration so payable would be INCOME TAXES
accounted in the books of account in the year of achieving the milestones under - Current (207,680,073)
the Agreement and payment thereof. Accordingly Rs. 32,828,677 has been - Deferred (24,529,415)
provided for during the year. - Fringe Benefit Tax (35,390,000)

The excess of the above cost to TML over its share of the equity in TMRDL at NET PROFIT AFTER TAXES 2,353,757,983
the date on which the investment is made aggregating to Rs.866,827,792 has
been recognized as ‘Goodwill on Consolidation’ and disclosed along with Fixed Segregation of assets, liabilities, depreciation and other non-cash expenses into
Assets (Refer Schedule 3). various primary segments has not been done as the assets are used
interchangeably between segments and the management is of the view that it
4. The estimated amount of contracts remaining to be executed on capital account, is not practical to reasonably allocate liabilities and other non-cash expenses to
and not provided for as at March 31, 2006 Rs. 422,300,250 (Previous year: Rs. individual segments and an adhoc allocation will not be meaningful.
92,431,940).
B. SECONDARY SEGMENTS:
5. Contingent liabilities: Revenues from secondary segments are as under –
i) Income tax demands disputed in appeal by the Company Rs. 43,206,152 Sector Amount in Rs.
(Previous year Rs. 87,462,656) awaiting decision. Telecom 12,268,248,687
ii) Bank Guarantees outstanding R s . 1 1 4 , 5 5 4 , 5 4 0 (Previous year: Others 158,419,067
Rs. 53,529,879) Total 12,426,667,754
iii) Claims from Statutory Authorities (Provident Fund) Rs. 1,500,000 (Previous Segregation of assets into secondary segments has not been done as the assets
Year Rs. Nil) are used interchangeably between segments. Consequently the carrying
6. Confirmation letters have been sent to the debtors of TML and their balances amounts of assets by location of assets is not given.
are subject to reconciliation and consequent adjustments, if any, on receipt of
such confirmation.

357
TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

A. PRIMARY SEGMENTS (in Rupees) 25%,and 30 % of total options granted after 12, 24, 36, 48 and 60 months,
respectively from the date of grant. The maximum exercise period is 7 years
For the year ended March 31, 2005 Geographical Segments Based on
Location of Customers
from the date of grant.
Particulars Europe USA RoW Total The details of the options are as under:
REVENUES 8,415,699,981 659,978,323 380,732,888 9,456,411,192 March 31, 2006
DIRECT EXPENSES 5,221,822,735 484,595,737 265,805,554 5,972,224,026
SEGMENTAL OPERATING Options outstanding at the beginning of the year —
INCOME 3,193,877,246 175,382,586 114,927,334 3,484,187,166 Options granted during the year 4,633,680
UNALLOCABLE EXPENSES Options lapsed during the year —
1. Depreciation 321,132,074 Options cancelled during the year 21,300
2. Other Unallocable Expenses 2,133,934,593
Options exercised during the year —
Total 2,455,066,667
Options outstanding at the end of the year 4,612,380
OPERATING INCOME 1,029,120,499
Other income 85,487,145 Weighted average share price of the above options on the date of the exercise
NET PROFIT BEFORE TAXES 1,114,607,644 Rs 83
INCOME TAXES Out of the options outstanding at the end of the year, none of the options have
- Current (142,248,589) vested.
- Deferred 51,540,476 D) TML uses the intrinsic value-based method of accounting for stock options
NET PROFIT AFTER TAXES 1,023,899,531 granted after April 1, 2005. TML has accounted for the ESOPs based on Guidance
Note on Accounting for Employee Share-based Payments, issued by the Institute
Segregation of assets, liabilities, depreciation and other non-cash expenses into of Chartered Accountants of India. Had the compensation cost for TML stock
various primary segments has not been done as the assets are used based compensation plan been determined in the manner consistent with the
interchangeably between segments and the management is of the view that it fair value approach as described in the Guidance note, TML’s net income would
is not practical to reasonably allocate liabilities and other non-cash expenses to be lower by Rs 36,942 and earnings per share as reported would be lower as
individual segments and an adhoc allocation will not be meaningful. indicated below:
B. SECONDARY SEGMENTS: Rupees
Revenues from secondary segments are as under – Net profit As Reported 2,353,720,201
Sector Amount in Rs. Less: Total stock-based employee compensation expense
determined under fair value base method. 36,942
Telecom 9,456,411,192
Adjusted net profit 2,353,683,259
Others — Basic earnings per share
Total 9,456,411,192 - As reported 22.63
- Adjusted 22.63
Segregation of assets into secondary segments has not been done as the assets
Diluted earnings per share
are used interchangeably between segments. Consequently the carrying amount
of assets by location of assets is not given. - As reported 18.32
9. TML has instituted “Employee Stock Option Plan 2000” (ESOP) for its employees - Adjusted 18.32
and directors. For this purpose it had created a trust viz. TML ESOP trust. In The fair value of each warrant is estimated on the date of
terms of the said Plan, the trust has granted options to the employees and grant based on the following assumptions:
directors in form of warrant which vest at the rate of 33.33% on each successive Dividend yield (%) 6.89
anniversary of the grant date. The options can be exercised over a period of 5 Expected life 5 years
years from the date of grant. Each warrant carries with it the right to purchase Risk free interest rate (%) 7.12
one equity share of TML at the exercise price determined by the trust on the
Volatility —
basis of fair value of the equity shares at the time of grant.
The details of the options are as under: 10. As required under Accounting Standard 18 (AS – 18) on ‘‘Related Party
March 31, March 31, Disclosures’’, following are details of transactions during the year with the related
2006 2005 parties of TML as defined in AS – 18:
(a) List of Related Parties and Relationships
Options outstanding at the beginning
of the year 2,229,740 1,818,080 Name of the Related Party Relation
Options granted during the year 345,000 832,500 Mahindra & Mahindra Limited Holding Company
Options lapsed during the year 313,340 58,320 British Telecommunications, plc. Promoter holding
Options cancelled during the year 259,090 — more than 20% stake
Options exercised during the year 782,310 362,520 Mahindra-BT Investment Company
Options outstanding at the end of the year 1,220,000 2,229,740 (Mauritius) Ltd. Promoter Group Company
Tech Mahindra Foundation 99.98% Subsidiary Company
Out of the options outstanding at the end of the year, 504,300 (Previous year
1,357,380) options have vested, which have not been exercised. Mahindra Engineering and Chemical Fellow Subsidiary Company
B) During the year, TML has instituted “Employee Stock Option Plan 2004” (ESOP Products Limited
2004) for its employees. In terms of the said Plan, the Compensation Committee Mahindra Engineering Design Fellow Subsidiary Company
has granted options to employees of TML and its subsidiary companies. The Development Company Limited
options are divided into upfront options and Performance options. The Upfront Bristlecone India Limited Fellow Subsidiary Company
Options are divided into three sets which will entitle holders to subscribe to Mahindra & Mahindra Contech Limited Fellow Subsidiary Company
option shares at the end of First year, Second year and Third year. The vesting of
Mr. Robert John Helleur* Key Management personnel
the Performance Options will be decided by the Compensation Committee based
on the performance of employees. Executive Director and Chief Executive Officer
Options granted and outstanding at the end of the period are 10,219,860 (Previous Mr. Vineet Nayyar*
year 10,219,860). Vice Chairman and Managing Director Key Management Personnel
2,271,078 (Previous year Nil) options have vested as at the end of the year.
* for part of the previous year
C) During the year, TML has instituted “Employee Stock Option Plan 2006 “ (ESOP
2006) for the employees and directors of TML and its subsidiary companies. In
terms of the said plan, the compensation committee has granted options to the
employees of the Company. The vesting of the options is 10% , 15%, 20%,

358
 TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

(b) Related Party Transactions : ● Mahindra Insurance Brokers Ltd.

● Mahindra Infrastructure Developers Ltd.
Transactions Promoter Subsidiary Fellow Key ●
Companies Companies Subsidiary Management Mahindra Intertrade Ltd.
● Bristlecone UK Ltd.
Companies Personnel
● Mahindra International Ltd.
Rupees Rupees Rupees Rupees
● Mahindra World City Developers Ltd.
Reimbursement of
● Mahindra Logisoft Business Solutions Ltd.
Expenses (Net)- (83,406,400) — 25,499,644 —
● Mahindra Middleeast Electrical Steel Service Centre (FZE)
Paid/(Receipt) [(43,642,006)] [—] [119,746] [—]
● Mahindra & Mahindra Financial Services Ltd.
Income from Services 8,545,278,618 — 3,735,227 — ● Mahindra & Mahindra South Africa (Pty) Ltd.
& Management Fees [7,933,535,493] [—] [1,525,000] [—] ● Mahindra Overseas Investment Company (Mauritius) Ltd.
● Mahindra Realty Ltd. Mahindra Renault Pvt. Ltd.
Sub-contracting cost — — — —
● Mahindra Steel Service Centre Ltd.
[—] [—] [5,841,954] [—]
● Mahindra Shubhlabh Services Ltd.
Dividend Paid 122,604,006 — — —
● Mahindra SAR Transmission Pvt Ltd.
[363,789,702] [—] [—] [152,652]
● Mahindra USA Inc.
Investment — 499,940 — — ● Mahindra Ugine Steel Company Ltd.
[—] [—] [—] [—] ● Mahindra World City (Jaipur) Ltd.
Donations — 150,000,000 — — ● NBS International Ltd.
[—] [—] [—] [—] ● Tech Mahindra (R & D Services) Inc
Salary and Perquisites — — — 17,102,700 ● Tech Mahindra (R & D Services) Pte Ltd.
[—] [—] [—] [8,188,440] ● Stokes Group Limited
● Jensand Limited
Debit / (Credit) balances 3,031,737,577 — (5,278,085) —
● Stokes Forgings Dudley Limited
(Net) outstanding as on [1,707,318,367] [—] [(908,470)] [—]
● Stokes Forgings Limited Plexion
March 31, 2006
● Technologies (India) Private limited
(Figures in brackets “[ ]”are for the previous year) ● Plexion Technologies (UK) Limited
● Plexion Technologies GmbH
Out of the above items transactions with Promoter companies, Subsidiary ● Plexion Technologies Incorporated
Companies and Key Management Personnel in the excess of 10% of the total ● Tech Mahindra Foundation
related party transactions are as under: ● Mahindra Inframan Water Utilities Pvt. Ltd.
(Amount in Rupees) ● Mahindra Sona Ltd.
● Mahindra Water Utilities Ltd.
Transactions For the year For the year
● PSL Erickson Ltd.
ended March ended March
● Owens Corning (India) Ltd.
31,2006 31,2005
● Siroplast Ltd.
Reimbursement of Expenses ● Mahindra Construction Company Ltd.
(net) - Paid/(Receipt) ● Officemartindia.com Ltd.
Promoter Companies ● Rathna Bhoomi Enterprises Pvt. Ltd.
- British Telecommunications plc. (87,292,381) (51,069,289) ● Kota Farm Services Ltd.
Income from Services ● Mriyalguda Farm Solution Ltd.
Promoter Companies ● Mega One Stop Farm Services Ltd.
- British Telecommunications plc. 8,529,065,460 7,949,298,612 There have been no transactions with the aforesaid companies during the year.
Dividend Paid 11. The tax effect of significant timing differences that has resulted in deferred tax
Promoter Companies assets and liabilities are given below:
- Mahindra & Mahindra Ltd. 69,120,072 207,360,216 Rupees
Deferred Tax March 31, 2006 March 31, 2005
- British Telecommunications plc. 52,143,163 156,429,486
a) Deferred tax liability:
121,263,235 363,789,702
Depreciation (1,435,453) (1,226,029)
Salary and Perquisites
b) Deferred tax asset :
Key Management Personnel
Gratuity, Leave Encashment etc. 5,771,675 2,899,302
- Mr. Robert John Helleur* — 4,846,288
Doubtful Debts 532,440 334,107
- Mr. Vineet Nayyar* 17,102,700 3,342,152
Carry forward of Net operating
17,102,700 8,188,440 losses of a subsidiary 106,809,277 131,721,132
*for part of the previous year Total Deferred Tax Asset (Net) 111,677,939 133,728,512
Other related parties of TML are as under:
●
Tech Mahindra (Americas) Inc. has net operating losses aggregating to
Automartindia Limited
●
Rs. 255,247,129 which are available to be carried forward. As stated in the audited
Bristlecone Ltd. Cayman
●
financials of Tech Mahindra (Americas) Inc., Tech Mahindra (Americas) Inc. expects
Bristlecone Inc.
●
to be able to utilize the entire deferred tax benefit on the said losses.
Mahindra Gesco Developers Ltd
● Mahindra Acres and Consulting Engineers Ltd 12. Exchange gain/(loss)(net) accounted during the year:
● Mahindra Ashtech Ltd a) TML enters into foreign exchange forward contracts to offset the foreign
● Mahindra Automotive Steels Pvt. Ltd currency risk arising from the amounts denominated in currencies other
● Bristlecone India Ltd. than the Indian rupee. The counter party to TML’s foreign currency forward
● Bristlecone GmbH contracts is generally a bank. These contracts are entered into to hedge
● Bristlecone Singapore Pte. Ltd. the foreign currency risks of firm commitments.
● Mahindra (China) Tractor Company Ltd. b) The following are the outstanding Forward Exchange Contracts entered
● Mahindra Engg & Chem Products Ltd. into by TML as on 31st March, 2006:
● Mahindra Engineering Design & Development Company Ltd.
● Mahindra Europe S.R.L. Currency Amount outstanding Amount outstanding Exposure
● Mahindra Gujarat Tractor Ltd. at year end in Foreign at year end in to Buy/ Sell
● Mahindra Holdings & Finance Ltd. currency Rs.
● Mahindra Holidays & Resorts India Ltd. US Dollar 100,489,700 4,482,845,517 Sell
● Mahindra Holidays & Resorts (USA) Inc. UK Pound 15,000,000 1,162,500,000 Sell

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TECH MAHINDRA LIMITED
(FORMERLY KNOWN AS MAHINDRA-BRITISH TELECOM LIMITED)

c) The year end foreign currency exposures that have not been specifically 14. Details of Investments Purchased and Sold during the year by TML
hedged by a derivative instrument or otherwise are given below: March 31, 2006 March 31, 2006
Amounts receivable in foreign currency on account of the following:
Particulars Units Cost
In Rupees In foreign currency
Debtors Rs. 2,814,528,306 Aud 683,965 TEMPLETON MUTUAL FUND
Eur 1,562,766 Short Term Income Plan Monthly 87,993.54 90,000,000.00
Gbp 34,825,858 DSP MERRILL LYNCH
Nzd 198,272 Short Term Fund Dividend 4,791,291.35 50,000,000.00
Sgd 604,510 Short Term Fund Monthly Dividend 9,145,199.02 94,430,581.53
Loans and advances Rs. 113,073,519 Gbp 1,432,401 PRUDENTIAL ICICI MUTUAL
Thb 186,500 Short Term Dividend Plan 4,553,360.84 50,000,000.00
Dhr 75,804 Short Term Cumulative Plan 3,917,942.61 50,000,000.00
Eur 4,190 Liquid Institutional Plan Plus 8,428,718.33 100,000,000.00
Aud 20,889 BIRLA SUNLIFE MUTUAL
Cash/Bank balances (Net) Rs. 31,372,790 Aud 772,810 INSTITUTIONAL PLAN Institutional
Nzd 236,419 Premium Weekly Dividend 10,067,379.91 100,941,591.45
Twd 136,700 Birla Bond Plus Institutional
Amounts payable in foreign currency on account of the following: (Fortnightly Dividend) 2,864,891.71 30,000,000.00
In Rupees In foreign currency HSBC MUTUAL FUND
Creditors (Net) Rs. 468,476,302 Eur 1,063,457 HSBC Income Fund Short Term
Gbp 420,755 Institutional Dividend 4,652,764.21 50,000,000.00
Sgd 617,040
DEUTSCHE MUTUAL FUND
Usd 8,113,114 Institutional Plan Weekly Dividend Plan 4,981,419.31 50,000,000.00
Other current liabilities (Net) Rs. 117,312,888 Gbp 1,513,715
JM MUTUAL FUND
d) The amount of exchange difference in respect of forward exchange
Short Term Fund-Institutional
contracts to be recognized in the profit and loss account for subsequent
Plan-Dividend 3,904,076.83 40,000,000.00
accounting year aggregates to Rs. 51,402,677 (Gain) (previous year
2,112,765 ) High Liquidity Fund- Super Institututional
Plan-Weekly Dividend 10,126,163.18 101,567,780.87
e) Exchange gain/(loss)(net) accounted during the year: (In Rupees)
Short Term Fund-Institutional
Particulars 2006 2005 Plan-Growth 4,423,760.91 50,000,000.00
Income from services (68,509,521) (2,799,680) KOTAK MUTUAL FUND
Others 148,030,658 13,323,871 Liquid Institutional Premium -
The disclosures made in paragraphs (b) and (c) have been made consequent to Weekly Dividend 4,982,163.85 50,000,000.00
an announcement by the Institute of Chartered Accountants of India in Kotak Bond Short Term Growth 4,153,479.37 50,000,000.00
December, 2005, which is applicable to the financial periods ending on or after Kotak Bond Short Term Monthly
31st March, 2006. Therefore, figures for the previous year have not been Dividend 3,975,036.77 40,000,000.00
disclosed.
PRINCIPAL MUTUAL FUNDS
13. Earning Per Share is calculated as follows:
Institutional Plan - Dividend
2006 2005
reinvestment –monthly 4,963,173.25 50,000,000.00
Rupees Rupees
a. Net Profit after tax 2,353,757,983 1,023,899,531 RELIANCE MUTUAL FUND
Less: Minority Interest 37,782 — Reliance Short Term - Growth Plan 4,289,231.46 50,000,000.00
Reliance Treasury Plan Retail Option
Net profit attributable to shareholders 2,353,720,201 1,023,899,531
Weekly Dividend 4,968,128.58 51,385,850.70
b. Weighted average number of
HDFC Cash Management Fund
Equity Shares
Weekly Dividend 4,701,899.57 50,000,000.00
Basic 103,998,631 101,726,575
Chola Liquid Institutional Plus
Add: ESOPs outstanding at the Weekly Dividend 4,274,271.45 50,000,000.00
end of the year 16,052,240 12,449,600
ING Vysya Liquid Fund Institutional
Partly paid-up shares not - Weekly Dividend 4,984,100.72 50,000,000.00
entitled for dividend 8,441,892 — Tata Short term Bond Fund – Dividend 9,184,048.92 10,000,000.00
Diluted 128,492,763 114,176,175
c. Nominal value of equity share Rs. 2 Rs. 2 15. Previous year’s figures have been regrouped wherever necessary, to conform
to the current year’s classification.

Mr. Bharat Doshi

}
For Tech Mahindra Limited
As per our attached report of even date Mr. Clive Goodwin
Mr. Anupam Puri
For Deloitte Haskins & Sells Mr. Anand G. Mahindra – Chairman Hon. Akash Paul
Chartered Accountants Mr. Al-Noor Ramji Directors
Dr. Raj Reddy
Mr. Vineet Nayyar – Vice-Chairman & Mr. Arun Seth
A.B. Jani Managing Director Mr. Ulhas N. Yargop
Partner
Mr. Vikrant Gandhe Asst. Company
Mumbai, Dated: May 15, 2006 New York, Dated: May 4, 2006 Secretary

360
 TECH MAHINDRA (AMERICAS) INC.

DIRECTORS’ REPORT TO THE SHAREHOLDERS

Your Directors present their Report together with the audited accounts of your Company for the year ended 31st March, 2006.

Financial Results

For the year ended March, 31 2006 2006 2005 2005

USD INR USD INR

Income 27,537,110 1,229,807,333 14,577,666 651,038,564

Profit/(Loss) before tax 1,462,762 65,326,951 (3,001,518) (134,047,794)
Profit/(Loss) after tax 792,750 35,404,215 (1,815,201) (81,066,877)

Review of Operations:
During the fiscal year, the Company achieved sales of US $ 27,537,110, an increase of 89% over the sales for the previous year. The
Company continues to invest in strengthening its marketing infrastructure in the US which is identified as a future growth area. The
increase in business and the focus on right sizing the US operations while preparing for the next level of growth has helped the Company
to earn the profits compared to losses in the last few years.
Change of name:
During the year, the Company’s name was changed from MBT International Inc. to Tech Mahindra (Americas) Inc. This was done in line
with the change of name of the parent company, Tech Mahindra Limited.
Outlook for the current year:
The Company believes that the investments made over the last few years in cultivating long term relationships with major telecom
companies will result in further increase in the business and improvement in profits.
Acknowledgements:
Your Directors gratefully acknowledge the contributions made by the employees towards the success of the Company. Your Directors
are also thankful for the co-operation and assistance received from its customers, suppliers, bankers, State and Federal Government
Authorities and the shareholder.

Vineet Nayyar
Director
Pune, April 7, 2006.

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TECH MAHINDRA (AMERICAS) INC.

INDEPENDENT AUDITORS’ REPORT

Tech Mahindra (Americas) Incorporated
a wholly owned subsidiary of Tech Mahindra Limited, an India corporation
Richardson, Texas

We have audited the accompanying balance sheets of Tech Mahindra (Americas) Incorporated, a wholly owned subsidiary of Tech
Mahindra Limited, an India corporation, as of March 31, 2006 and 2005, and the related statements of income and retained earnings
and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures inthe financial statements, assessing the acounting principles used and significant estimates made by management,
as well as evaluating the overall financil statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tech Mahindra
(Americas) Incorporated, a wholly owned subsidiary of TechMahindra Limited, an India corporation, as of March 31, 2006 and 2005, and
the results of its operations and its cash flows for the years thenended in conformity with U.S. generally accepted accounting principles.

Our audits were conducted for the purpose of forming an opinion onthe basic financial statements taken as a whole. The Supplemental
Schedules of Income and Expenses on page 9 are presented for purposes of additional analysis and are not a required part of the basic
financial statements. Such information has been subjected to the auditing procedures applied inthe audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Capin Crouse LLP

Colorado Springs, Colorado
April 7, 2006

362
 TECH MAHINDRA (AMERICAS) INC.

INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTAL SCHEDULE

Tech Mahindra (Americas) Incorporated
a wholly owned subsidiary of Tech Mahindra Limited, an India corporation
Richardson, Texas

Our reports on our audits of the basic Financial Statements of Tech Mahindra (Americas) Incorporated, a wholly owned subsidiary of
Tech Mahindra Limited, an India corporation, for 2006 and 2005 appear on page 362. We conducted our audits in accordance with U.S.
generally accepted auditing standards for the purpose of forming an opinion on the basic financial statements taken as a whole. The
information on pages 364-368 are presented for purposes of additional analysis and are not a required part of the basic financial
statements. It has been subjected to the auditing procedures applied in the audits of the basic financial statements, and, in our opinion,
is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Foreign Currency amounts in the supplemental schedules are translated for convenience into Indian Rupees at the exchange rate of
Rs. 44.66 to 1.00 USD, which is the average of the telegraphic buying and selling rate quoted by the Mumbai Branch of the State Bank
of India on March 31, 2006.

Capin Crouse LLP

Colorado Springs, Colorado
April 7, 2006

363
TECH MAHINDRA (AMERICAS) INC.

SUPPLEMENTAL BALANCE SHEET

March 31,
2006 2006 2005 2005
USD INR USD INR
ASSETS:
Current Assets:
Cash (including $295,565 (13,199,933 INR) and
$412,000 (18,399,920 INR) in interest bearing
accounts as of March 31, 2006 and 2005,
respectively) ........................................................... 461,264 20,600,050 1,024,400 45,749,704
Accounts Receivable, Trade (Note 6) ......................... 2,269,237 101,344,124 3,089,997 137,999,266
Deferred Income Tax Asset (Note 3) .......................... 1,050,000 46,893,000 420,000 18,757,200
Employee Advances ................................................... 364,850 16,294,201 79,500 3,550,470
Prepaid Expenses and Other Current Assets ............. 3,355 149,834 55,960 2,499,174
Total Current Assets .............................................. 4,148,706 185,281,210 4,669,857 208,555,814
Deferred Income Tax Asset (Note 3) .......................... 1,344,290 60,035,991 2,589,393 115,642,291
Fixtures and Equipment (less accumulated deprecia-
tion of $64,873 (2,897,228 INR) and $172,955 (7,724,170
INR) as of March 31, 2006 and 2005, respectively) ... 44,051 1,967,318 104,080 4,648,213
Security Deposits ....................................................... 63,987 2,857,659 16,003 714,694
Total Assets ................................................................ 5,601,034 250,142,178 7,379,333 329,561,012
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current Liabilities:
Accounts Payable and Accrued Expenses ........ 2,627,046 117,323,874 1,263,601 56,432,421
Due to Parent (Note 4) ...................................... 586,599 26,197,511 9,521,093 425,212,013
Total Current Liabilities ...................................... 3,213,645 143,521,386 10,784,694 481,644,434
Note Payable to Parent (Note 5) ................................. 5,000,000 223,300,000 — —
Total Liabilities ................................................... 8,213,645 366,821,386 10,784,694 481,644,434
Stockholders’ Equity:
Common Stock — $1 par value — 500,000 share
authorized, 375,000 shares issued and outstanding 375,000 16,747,500 375,000 16,747,500
Retained Earnings (deficit) ..................................... (2,987,611) (133,426,707) (3,780,361) (168,830,922)
Total Stockholders’ Equity ................................. (2,612,611) (116,679,207) (3,405,361) (152,083,422)
Total Liabilities and Stockholders’ Equity ................... 5,601,034 250,142,178 7,379,333 329,561,012

364
 TECH MAHINDRA (AMERICAS) INC.

SUPPLEMENTAL STATEMENTS OF INCOME AND RETAINED EARNINGS

Years Ended March 31,

Schedule 2006 2006 2005 2005
USD INR USD INR

INCOME (Note 6) ...................................... I 27,537,110 1,229,807,333 14,577,666 651,038,564

EXPENSES:
Personnel .................................................. II 13,424,903 599,556,168 4,707,188 210,223,016
Operating and Other Expenses ................. III 12,561,354 560,990,070 12,820,621 572,568,934
Depreciation .............................................. 88,091 3,934,144 51,375 2,294,408
Total Expenses .......................................... 26,074,348 1,164,480,382 17,579,184 785,086,357
Income/(Loss) before Income Tax Expense 1,462,762 65,326,951 (3,001,518) (134,047,794)
Income Tax Expense (benefit) (Note 3) ..... 670,012 29,922,736 (1,186,317) (52,980,917)
NET INCOME/(LOSS) ................................ 792,750 35,404,215 (1,815,201) (81,066,877)
Retained Deficit, Beginning of Year .......... (3,780,361) (168,830,922) (1,965,160) (87,764,046)
Retained Deficit, End of Year .................... (2,987,611) (133,426,707) (3,780,361) (168,830,922)

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TECH MAHINDRA (AMERICAS) INC.

SUPPLEMENTAL STATEMENTS OF CASH FLOWS

Years Ended March 31,

2006 2006 2005 2005
USD INR USD INR
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(Loss) ...................................................... 792,750 35,404,215 (1,815,201) (81,066,877)
Adjustments to reconcile net income to cash used
by operating activities:
Depreciation ........................................................... 88,091 3,934,144 51,375 2,294,408
Changes in Operating Assets and Liabilities:
Accounts Receivable, Trade .............................. 820,760 36,655,142 (383,156) (17,111,747)
Employee Advances .......................................... (285,350) (12,743,731) (29,560) (1,320,150)
Prepaid Expenses and Other Current Assets .... 52,605 2,349,339 135,768 6,063,399
Accounts Payable and Accrued Expenses ........ 1,363,445 60,891,454 294,675 13,160,186
Deferred Income Tax benefit ............................ 615,103 27,470,500 (1,181,990) (52,787,673)
Due to Parent .................................................... (8,934,494) (399,014,502) 2,853,064 127,417,838
Net Cash Used by Operating Activities ...................... (5,487,090) (245,053,439) (75,025) (3,350,616)
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixtures and Equipment Purchased ............................ (28,062) (1,253,249) (24,903) (1,112,168)
Net Change in Security Deposits ............................... (47,984) (2,142,965) (2,763) (123,396)
Net Cash Used by Investing Activities ............................. (76,046) (3,396,214) (27,666) (1,235,564)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Note Payable from Parent .................. 5,000,000 223,300,000 — —
Net Cash Provided by Financing Activities ....................... 5,000,000 223,300,000 — —
Net Change in Cash ......................................................... (563,136) (25,149,654) (102,691) (4,586,180)
Cash, Beginning of Year ................................................... 1,024,400 45,749,704 1,127,091 50,335,884
Cash, End of Year ............................................................ 461,264 20,600,050 1,024,400 45,749,704
Supplemental Disclosures:
Cash Paid for Income Taxes ....................................... 19,528 872,120 747 33,361
Cash Paid for Interest (None capitalized) ................... 73,630 3,288,316 — —

366
 TECH MAHINDRA (AMERICAS) INC.

SUPPLEMENTAL NOTES TO FINANCIAL STATEMENTS consulting and programming support services related to certain contracts
March 31, 2006 and 2005 obtained by TMA. TMA paid TML 90% of the total contract revenues recognized
under this agreement.
1. NATURE OF ORGANIZATION:
TMA entered into a new contract, effective January 1, 2005, with TML. Under the
Tech Mahindra (Americas) Incorporated (TMA), formerly known as MBT new contract TMA pays TML 100% of all contract revenue. However, TML, has
International Incorporated, is a wholly-owned subsidiary of Tech Mahindra agreed to: 1) reimburse TMA all direct project expenses, plus 5.75% of these
Limited (TML), formerly known as Mahindra — British Telecom Limited, which expenses and 2) reimburse TMA all indirect costs, plus 4% for services as
is incorporated in the country of India. TMA was incorporated in the State of New marketing service provider. The above transactions are summarized as follows:
Jersey in November 1993, and provides computer consulting and programming
support services. Years Ended March 31,
2006 2006 2005 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: USD INR USD INR
The Financial Statements of TMA have been prepared on the accrual basis of Beginning Balance,
accounting. The preparation of Financial Statement in conformity with U.S. Due to Parent 9,512,093 425,212,013 6,668,029 297,794,175
generally accepted accounting principles requires management to make Secondment Fees
estimates and assumptions that affect certain reported amounts and disclosures. incurred — — 132,000 5,895,120
Accordingly, actual results could differ from those estimates. Certain prior year
amounts have been reclassified to conform to the current year presentation. The Contract Revenue
significant accounting policies are described as follows: (Note 6) 16,556,022 739,391,943 11,959,401 534,106,849
Income from Parent (27,506,047) (1,228,420,059) (134,862) (6,022,937)
Cash and Cash Equivalents:
Payments to Parent (18,837,153) (841,267,253) (12,695,103) (566,963,300)
Cash and cash equivalents consist of checking and savings accounts and a
certificate of deposit with an original maturity of less than three months. These Advances Received
accounts may, at times, exceed federally insured limits. TMA has not experienced from Parent 20,852,684 931,280,867 7,864,079 351,209,768
any losses on such accounts and believes it is not exposed to any significant Payments made
credit risk on cash and cash equivalents. on behalf of Parent — — (4,272,451) (190,807,662)
Accounts Receivable, Trade: Ending Balance,
Due to Parent 586,599 26,197,511 9,521,093 425,212,013
Accounts receivable consists primarily of amounts due from customers for
services provided by TMA and is net of an allowance for doubtful accounts of
Due to Parent consists of:
$15,000 (669,900 INR) and $55,283 (2,468,939 INR) as of March 31, 2006 and
2005, respectively. Management’s estimate of uncollectible accounts was Years Ended March 31,
based upon an analysis of past due accounts. This estimate is based upon 2006 2006 2005 2005
historical collections. Accounts are written off when all methods to collect have USD INR USD INR
been exhausted.
Amounts Due
Fixtures and Equipment: to Parent 8,426,451 376,325,302 10,620,960 474,332,074
Fixtures and equipment are recorded at cost and depreciated using the straight- Amounts Due
line method over an estimated remaining useful life of three years. TMA from Parent (7,839,852) (350,127,790) (1,099,867) (49,120,060)
capitalizes purchases greater than $500 (22,330 INR) with less amounts 586,599 26,197,511 9,521,093 425,212,013
expensed in the year purchased.

Revenue and Expense: 5. NOTE PAYABLE DUE TO PARENT:

TMA entered into a new contract, effective January 1, 2005, with TML. Under Note Payable Due to Parent consists of the following:
the new contract TMA pays TML 100% of all contract revenue. However, TML, Years Ended March 31,
has agreed to: 1) reimburse TMA all direct project expenses, plus 5.75% of these 2006 2006 2005 2005
expenses and 2) reimburse TMA all indirect costs, plus 4% for services as USD INR USD INR
marketing service provider. Expenses are recorded when incurred.
Unsecured note
3. INCOME TAXES: payable due to
parent, interest at
TMA accounts for income taxes under the provisions of Financial Accounting 4% per annum,
Standards (“SFAS”) No. 109, Accounting for Income Taxes. interest only
Income tax expense (benefit) consists of the following: payments due
Years Ended March 31, semi-annually,
unpaid interest and
2006 2006 2005 2005 principal due
USD INR USD INR July 2012 5,000,000 223,300,000 — —
Federal 521,746 23,301,176 (940,000) (41,980,400)
State 148,266 6,621,560 (246,317) (11,000,517) 6. CONCENTRATIONS:

670,012 29,922,736 (1,186,317) (52,980,917) Income from parent for the year ended March 31, 2006, is approximately 99.9%
of total income.
TMA has incurred net operating losses of $5,715,341 (255,247,129 INR) which In addition, two customers comprise a significant portion of contract revenue.
are available to be carried forward through March 31, 2019. TMA expects to be This revenue is received by TMA and transferred to TML. Contract revenue and
able to utilize the entire deferred tax benefit during that period, and therefore, accounts receivable concentrations are as follows:
no valuation allowance has been recorded to reduce the asset. Consulting Sales Revenue Concentrations:
Years Ended March 31,
4. TRANSACTIONS WITH RELATED PARTIES:
2006 2005
TMA had an agreement with TML, which was terminated on December 31,
Amount Concen- Amount Concen-
2004. Under this agreement TML made available to TMA qualified employees
tration tration
to work in the United States on a temporary basis. In addition to wages paid to
employees, TMA paid TML $1,200 (53,592 INR) per month for each employee. Convergys, Inc. 4,699,925 28% 2,309,485 16%
TMA was responsible for transportation between India and the United States for Qwest 5,763,414 35% 1,771,122 12%
such employees. In addition, TMA subcontracted with TML for computer

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TECH MAHINDRA (AMERICAS) INC.

6. CONCENTRATIONS (Contd.): SUPPLEMENTAL SCHEDULES OF INCOME AND EXPENSES

Consulting Sales Revenue Concentrations (INR): Years Ended March 31,

Years Ended March 31, 2006 2006 2005 2005

USD INR USD INR
2006 2005
Amount Concen- Amount Concen- Schedule I
tration tration INCOME:
Convergys, Inc. INR209,898,651 28% INR 103,141,600 16% Contract Revenue 16,556,022 739,391,943 14,432,537 644,557,102
Qwest INR257,394,069 35% INR 79,098,309 12% Transfers to Parent (16,556,022) (739,391,943) — —
— — 14,432,537 644,557,102
Accounts Receivable Concentration:
Income from
March 31,
Parent (see Note 4) 27,506,047 1,228,420,059 134,862 6,022,937
2006 2005
Interest Income on
Amount Concen- Amount Concen- Bank Deposits 31,063 1,387,274 10,267 458,524
tration tration
27,537,110 1,229,807,333 14,577,666 651,038,564
Convergys, Inc. 829,551 37% 767,983 25%
Qwest 730,841 32% 447,852 14% Schedule II
Personnel Expenses:
Accounts Receivable Concentrations (INR):
Salaries:
Year Ended March 31,
Software Engineers 8,777,478 392,002,167 1,777,736 79,393,690
2006 2005
Administrative 2,770,656 123,737,497 2,245,476 100,282,958
Amount Concen- Amount Concen-
tration tration Payroll Taxes 895,014 39,971,325 273,683 12,222,683
Convergys, Inc. INR 37,047,748 37% INR 34,298,121 25% Employee Benefits 981,755 43,845,178 410,293 18,323,685
Qwest INR 32,639,359 32% INR 20,001,070 14% 13,424,903 599,556,168 4,707,188 210,223,016

Schedule III
7. COMMITMENTS:
Operating and Other Expenses:
TMA leases office space under operating leases. Rent expense under these
operating leases was $203,578 (9,091,793 INR) and $229,041 (10,228,971 INR) Contracted Services 5,598,183 250,014,853 559,505 24,987,493
for the years ended March 31, 2006 and 2005, respectively. Future minimum TML Secondment
lease payments under operating leases are as follows: Fees — — 132,000 5,895,120
Years Ending March 31, USD INR TML Offshore
Project Charges — — 9,313,087 415,922,465
2007 178,781 7,984,359
Marketing and
2008 78,144 3,489,911
Advertising 62,474 2,790,089 627,666 28,031,564
256,925 11,474,271
Insurance 100,908 4,506,551 233,406 10,423,912
In June 2005, TMA entered into a sublease agreement, which expires September Travel 5,974,695 266,829,879 427,519 19,092,999
2007. Future minimum rent income under this sublease at March 31, 2006, is Entertainment 27,858 1,244,138 3,283 146,619
as follows:
Professional Fees 164,893 7,364,121 860,783 38,442,569
Years Ending March 31, USD INR
Rent 203,578 9,091,793 229,041 10,228,971
2007 96,829 4,324,383
Communications 150,308 6,712,755 263,656 11,774,877
2008 52,662 2,351,885
Office Expenses 35,135 1,569,129 53,130 2,372,786
149,491 6,676,268
Interest Expense 119,955 5,357,190 — —

8. FINANCIAL CONDITION: Recruiting — — 13,885 620,104

As of March 31, 2006, TMA had a deficit in stockholders’ equity of $2,612,611 Miscellaneous
Expenses 123,367 5,509,570 103,660 4,629,456
(116,679,207 INR). TML has represented that they will continue to support TMA
until its stockholders’ equity is positive. Additionally, TMA has entered into a 12,561,354 560,990,070 12,820,621 572,568,934
contract with TML, which generated a profit for them (see Note 4).

368
 TECH MAHINDRA GmbH
(Formerly MBT GmbH)

Memo
Date: April 11, 2006
To: Tech Mahindra GmbH, Düsseldorf
From: Detlef Herrel
Subject: Converting of Financial Statements of Tech Mahindra GmbH (formerly MBT GmbH), Düsseldorf
Dear Sirs,
Please find attached the Balance Sheet and Profit and Loss Account of TECH MAHINDRA GmbH, Düsseldorf, signed for identification
purposes only.
Foreign Currency amounts (including prior year amounts) are translated for convenience into Indian Rupees (INR) at the exchange rate
of Rs. 54.32 = EUR 1, which is the average of the telegraphic transfer buying and selling rates quoted by the Mumbai branch of State
Bank of India on March 31, 2006.
Kind regards,

Deloitte & Touche GmbH

Wirtschaftsprüfungsgesellschaft

(Detlef Herrel)
Wirtschaftsprüfer

Enc.

369
TECH MAHINDRA GmbH
(Formerly MBT GmbH)

MANAGING DIRECTORS’ REPORT TO THE SHAREHOLDERS

Your Managing Director presents his report together with the audited accounts for the period ended March 31, 2006.
Financial Results

For the year ended March, 31 2006 2006 2005 2005

Euro INR Euro INR

Income 5,259,043 285,671,026 5,226,551 283,906,227

Profit/(Loss) after tax 313,978 17,055,274 (2,182,297) (118,542,368)

The income for the year has increased by 32,492 Euros over the previous year. The Company continued its investment in sales &
marketing in Europe and focused on optimizing costs.
Share Capital
The Company’s share capital is Euro 575,000. The share capital is fully paid-up.
Change of Name
During the year, the Company’s name was changed from MBT GmbH to Tech Mahindra GmbH. This was done in line with the change
of name of the Parent Company, Tech Mahindra Limited.
Management
The current Chairman of the Supervisory Board is Mr. Vineet Nayyar. The other members of the Board are Mr. Ulhas N. Yargop and
Mr. Clive Goodwin.
Mr. Sonjoy Anand is the sole Managing Director of the Company.
Acknowledgements
Your Managing Director gratefully acknowledges the contributions made by the employees towards the success of the Company. Your
Directors are also thankful for the co-operation and assistance received from its customers, suppliers, bankers, State and Federal
Government Authorities and the shareholders.

Sonjoy Anand
Managing Director
Pune, April 11, 2006.

370
 TECH MAHINDRA GmbH
(Formerly MBT GmbH)

Independent Auditors’ Report

We have audited the annual financial statements, together with the bookkeeping system, of TECH MAHINDRA GmbH, Düsseldorf, for
the business year from 1 April, 2005 to 31 March, 2006. The maintenance of the books and records and the preparations of the annual
financial statements pursuant to German commercial law are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these annual financial statements, together with the bookkeeping system, based on our audit.

We conducted our audit of the annual financial statements by appropriate application of § 317 HGB [“Handelsgesetzbuch”: “German
Commercial Code”] and German generally accepted standards for the audit of financial statements promulgated by the Institute der
Wirtschaftsprüfer. Those standards require that we plan and perform the audit such that misstatements materially affecting the
presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with German
principles of proper accounting are detected with reasonable assurance. Knowledge of the business activities and the economic and
legal environment of the Company and evaluations of possible misstatements are taken into account in the determination of audit
procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the
books and record and the annual financial statements are examined primarily on a test basis within the framework of the audit. The audit
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the annual financial statements. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, the annual financial statements give a true and fair view of the net assets, financial position and the results of operations
of TECH MAHINDRA GmbH, Düsseldorf, in accordance with German principles of proper accounting.

Without qualifying the conclusion, we draw attention to the fact that the continued existence of TECH MAHINDRA GmbH, Düsseldorf,
depends on the appropriate funding by the shareholder and the maintenance of the contracts governing the mutual business
relationships concluded with the shareholder.

Düsseldorf, 7 April, 2006

Deloitte & Touche GmbH

Wirtschaftsprüfungsgesellschaft

Signed: Thiede Signed: Herrel

Wirtschaftsprüfer Wirtschaftsprüfer
[German Public Auditor] [German Public Auditor]

371
TECH MAHINDRA GmbH
(Formerly MBT GmbH)

BALANCE SHEET AS AT MARCH 31, 2006

Assets March 31, March 31, March 31, March 31,
2006 2006 2005 2005
EUR INR EUR INR
A. Fixed Assets
I. Intangible Assets
Software 8.253,38 448,324 19.886,17 1,080,217
II. Tangible Assets
Other equipment, factory and
office equipment 30.217,98 1,641,441 69.057,01 3,751,177
38.471,36 2,089,765 88.943,18 4,831,394
B. Current Assets
I. Inventories
Unfinished Services — — 86.725,60 4,710,935
II. Receivables and
Other Assets
1. Trade Receivables 1.022.304,75 55,531,594 1.120.147,81 60,846,429
2. Receivables from
Affiliated Companies 994.295,10 54,010,110 963.864,57 52,357,123
3. Other Assets 49.549,64 2,691,536 28.670,02 1,557,355
2.066.149,49 11,233,240 2.112.682,40 119,471,842
III. Cash-in-Hand, Bank Balances 331.800,30 18,023,392 285.406,21 15,503,265
2.397.949,79 130,256,632 2.484.814,21 134,975,107
C. Prepaid Expenses 16.465,19 894,389 12.444,80 676,002
2.452.886,34 133,240,786 2.586.202,19 140,482,503
Equity and Liabilities
A. Equity
I. Subscribed Capital 575.000,00 31,234,000 575.000,00 31,234,000
II. Capital Reserve 6.625.000,00 359,870,000 6.625.000,00 359,870,000
III. Net Retained Losses (6.281.213,89) (341,195,539) (4.098.917,02) (222,653,173)
IV. Net Gain/Loss for the year 313.977,82 17,055,276 (2.182.296,87) (118,542,366)
1.232.763,93 66,963,737 918.786,11 49,908,461
B. Accruals
Other Accruals 290.317,29 15,770,035 427.628,38 23,228,774
C. Liabilities
1. Payments received in advance — — 120.000,00 6,518,400
2. Trade Payables 103.352,76 5,614,122 456.166,54 24,778,966
3. Payables to Affiliated Companies 783.486,20 42,558,970 519.195,10 28,202,678
4. Other Liabilities 42.966,16 2,333,922 144.426,06 7,845,224
Of which taxes:
EUR 22.809,16 (Prior year: EUR 98.715,32)
Of which relating to social security and
similar obligations:
EUR 0,00 (Prior year: EUR 44.045,25)
929.805,12 50,507,014 1.239.787,70 67,345,268
2.452.886,34 133,240,786 2.586.202,19 140,482,503

Note: Foreign Currency amounts are translated for convenience into Indian Rupees (INR) at the exchange rate of Rs. 54.32 = EURO
1, which is the average of the telegraphic transfer buying and selling rates quoted by the Mumbai branch of State Bank of India
on March 31, 2006.

372
 TECH MAHINDRA GmbH
(Formerly MBT GmbH)

PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM APRIL 01, 2005 TO MARCH 31, 2006

2005-2006 2005-2006 2004-2005 2004-2005

EUR INR EUR INR

1. Sales 5.319.645,23 288,963,129 4.923.764,79 267,458,903

2. Variance in Inventories (86.725,60) (4,710,935) 86.725,60 4,710,935
3. Other Operating Income 24.917,14 1,353,499 211.519,67 11,489,748
4. Cost of Services (2.743.589,76) (149,031,796) (2.556.047,86) (138,844,520)
5. Personnel Expenses
a) Wages and Salaries (1.472.931,50) (80,009,639) (3.019.504,45) (164,019,482)
b) Social Security (193.505,86) (10,511,238) (357.572,37) (19,423,331))
6. Depreciation on Intangible
Fixed Assets and Tangible Assets (43.590,24) (2,367,822) (56.747,49) (3,082,524)
7. Other Operating Expenses (491.444,34) (26,695,257) (1.418.814,04) (77,069,979)
8. Other Interest and similar income 1.202,75 65,333 4.540,52 246,641
9. Interest and similar expenses — — (161,24) (8,759)

10. Net Gain/(Loss) for the year 313.977,82 17,055,274 (2.182.296,87) (118,542,368)

373
TECH MAHINDRA GmbH
(Formerly MBT GmbH)

MOVEMENTS IN FIXED ASSETS IN THE BUSINESS YEAR 2005–2006

Acquisition/Production Cost Accumulated Depreciation Net Book Values

Balance Balance Balance Balance

as at as at as at as at
April 1, Additions Disposals March 31, April 1, Additions Disposals March 31, March 31, Prior year
2005 2006 2005 2006 2006
EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR

I. Intangible Assets
Software 41.638,20 — — 41.638,20 21.752,03 11.632,79 — 33.384,82 8.253,38 19.886,17

II. Tangible Assets

Other Equipment,
factory and office
equipment 184.363,96 — (30.200,04) 154.163,92 115.306,95 31.957,45 (23.318,46) 123.945,94 30.217,98 69.057,01
226.002,16 — (30.200,04) 195.802,12 137.058,98 43.590,24 (23.318,46) 157.330,76 38.471,36 88.943,18

Acquisition/Production Cost Accumulated Depreciation Net Book Values

Balance Balance Balance Balance

as at as at as at as at
April 1, Additions Disposals March 31, April 1, Additions Disposals March 31, March 31, Prior year
2005 2006 2005 2006 2006
INR INR INR INR INR INR INR INR INR INR

I. Intangible Assets
Software 2,261,787 — — 2,261,787 1,181,570 631,893 — 1,813,463 448,324 1,080,217

II. Tangible Assets

Other Equipment,
factory and office
equipment 10,014,650 — (1,640,466) 8,374,184 6,263,474 1,735,929 (1,266,659) 6,732,743 1,641,441 3,751,177
12,276,437 — (1,640,466) 10,635,971 7,445,044 2,367,822 (1,266,659) 8,546,206 2,089,765 4,831,394

374
 TECH MAHINDRA GmbH
(Formerly MBT GmbH)

NOTES TO THE FINANCIAL STATEMENT FOR THE BUSINESS YEAR 2005-2006

A. General Information D. Other Required Disclosures

The annual financial statements for the business year from April 1, 2005 to As at the balance sheet date, the financial commitments as stipulated by Sec.
March 31, 2006, comply with the valid stipulations of the German Commercial 285 para. 3 German Commercial Code are as follows:
Code (HGB) and the statues for limited liability companies (GmbHG). The
Company has partly taken favour of disclosure simplifications of the German Financial Commitments from Rent Contracts EUR INR
Commercial Code. Up to one year 72.124,80 4,026,459
The Company is a small corporation according to Section 267 para. 1 German One to two years 580,80 31,549
Commercial Code.
Two to three years 580,80 31,549
B. Information on Accounting and Valuation Methods Later 24,20 1,315
Intangible assets are valued at acquisition cost less scheduled straight-line Financial Commitments from
amortisation and depreciation. Leasing Contracts EUR INR
Fixed assets are valued at acquisition cost less scheduled straight-line amortisation Up to one year 39.522,47 2,145,861
and depreciation in accordance with their estimated useful life. Low value assets
(less than EUR 410) are fully depreciated in the year of their acquisition. One to two years 15.282,00 830,118
Receivables and other assets as well as liquid funds are capitalised at nominal Two to three years 1.177,50 63,962
value. If necessary, allowances for implied risk are set up. Later — —
The subscribed capital is valued at nominal value. Management
Other accruals cover all risks and contingent liabilities identifiable as the balance Managing directors were:
sheet date.
Marcus Schüler, Sprockhüvel, Germany, (until 31 July, 2005)
The liabilities are recorded at the amount at which they will be repaid. Sonjoy Anand, Pune, India
C. Notes to the Balance Sheet Supervisory Board
Receivables and Other Assets: The supervisory board comprises of the following three members:
All receivables and other assets have a residual term of less than one year. Ulhas Yagrop, Mumbai, India
Clive Goodwin, Middlesex, Great Britain
The receivables from affiliated companies relate to trade receivables. Receivables Vineet Nayyar, New Delhi, India, Chairman
from affiliated companies in the amount of EUR 994.295,10 (INR 54,010,109)
relate to shareholders. Group Affiliation
Other Accruals: TECH MAHINDRA Ltd., Mumbai, India, prepares the consolidated financial
statements for the smallest and largest group of companies in which the annual
Other accruals comprise mainly of accruals for vacation not taken (EUR 45 financial statements of TECH MAHINDRA GmbH, Düsseldorf, are included.
thousand, INR 2,444 thousand), management bonuses (EUR 98 thousand, INR These annual financial statements are available at the registered office of TECH
5,323 thousand), year-end audit (EUR 13 thousand, INR 706 thousand) and other MAHINDRA Ltd., Mumbai, India.
accruals (EUR 134 thousand, INR 7,279 thousand).

Liabilities: Düsseldorf, April 5, 2006

All liabilities have a residual term of less than one year. Sonjoy Anand
Managing Director
The liabilities to affiliated companies relate to trade payables. Payables to
affiliated companies in the amount of EUR 783.486,20 (INR 42,558,970) relate
to shareholders.

375
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

REPOR
REPORTT OF THE DIRECTORS

The directors present their report together with the audited 4 DIRECTORS’ RECEIPT AND ENTITLEMENT TO
financial statements of the company for the financial year ended CONTRACTUAL BENEFITS
March 31, 2006. Since the beginning of the financial year, no director has
received or become entitled to receive a benefit which is
1 DIRECTORS required to be disclosed under Section 201(8) of the
The directors of the company in office at the date of this Singapore Companies Act, by reason of a contract made by
report are: the company or a related corporation with the director or
Lim Tiong Beng with a firm of which he is a member, or with a company in
Sonjoy Anand which he has a substantial financial interest. Certain
directors received remuneration from related corporations
in their capacities as directors and/or executives of those
2 ARRANGEMENTS TO ENABLE DIRECTORS TO
related corporations.
ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION
OF SHARES AND DEBENTURES
5 OPTION TO TAKE UP UNISSUED SHARES
Neither at the end of the financial year nor at any time during
the financial year did there subsist any arrangement whose During the financial year, no option to take up unissued
object is to enable the directors to acquire benefits by means shares of the company was granted.
of the acquisition of shares or debentures in the company
or any other body corporate. 6 OPTION EXERCISED
During the financial year, there were no shares of the
3 DIRECTORS’ INTERESTS IN SHARES AND company issued by virtue of the exercise of an option to
DEBENTURES take up unissued shares.
The directors holding office at the end of the financial year
had no interests in the share capital of the company and 7 UNISSUED SHARES UNDER OPTION
related corporations as recorded in the register of directors’ At the end of the financial year, there were no unissued
shareholdings kept by the company under Section 164 of shares of the company under option.
the Singapore Companies Act, except as follows:
8 AUDITORS
Options registered
The auditors, Deloitte & Touche, have expressed their
in the name of director
willingness to accept re-appointment.
Name of director At beginning At end
and company in which of year of year
interest is held Lim Tiong Beng
Tech Mahindra Units of Indian Sonjoy Anand
Limited Rupee 2 each
April 3, 2006
Sonjoy Anand 25,000 29,400

376

AUDITORS' REPORT
to the Member of Tech Mahindra (Singapore) Pte. Limited
(Formerly known as MBT Software Technologies Pte. Limited)
We have audited the accompanying financial statements of
Tech Mahindra (Singapore) Pte. Limited as set out on pages
378 to 383 for the year ended March 31, 2006. These financial
statements are the responsibility of the company’s directors.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with Singapore
Standards on Auditing. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
the directors, as well as, evaluating the overall financial
statements presentation. We believe that our audit provides
a reasonable basis for our opinion.
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)
In our opinion,
a) the accompanying financial statements are properly drawn
up in accordance with the provisions of the Singapore
Companies Act, Cap. 50 (the “Act”) and Singapore Financial
Reporting Standards so as to give a true and fair view of the
state of affairs of the company as at March 31, 2006 and of
the results, changes in equity and cash flows of the company
for the year ended on that date; and
b) the accounting and other records required by the Act to be
kept by the company have been properly kept in accordance
with the provisions of the Act.
Certified Public Accountants
Singapore
April 3, 2006
377
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

BALANCE SHEET
March 31, 2006

Note 2006 2005

$ $
ASSETS
Current Assets:
Cash and bank balances ....................................... 6 200,246 70,531
Trade receivables ................................................. 7 744,706 675,944
Other receivables and prepayments .................... 8 48,761 17,382
Total current assets ............................................. 993,713 763,857

Non-current assets:
Equipment ............................................................ 9 13,217 —
Total assets ......................................................... 1,006,930 763,857

LIABILITIES AND EQUITY

Current liability:
Other payables ..................................................... 10 692,192 289,539

Capital and reserves:

Issued capital ....................................................... 11 50,000 50,000
Accumulated profits ............................................. 264,738 424,318
Total equity .......................................................... 314,738 474,318
Total liabilities and equity ................................. 1,006,930 763,857

See accompanying Notes to Financial Statements.

378
 TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

PROFIT AND LOSS STATEMENT

Year ended March 31, 2006

Note 2006 2005

$ $

Revenue ............................................................... 12 3,798,920 1,737,222

Cost of sales ........................................................ (620,722) —

Gross profit .......................................................... 3,178,198 1,737,222

Other operating expenses ................................... 13 (3,338,003) (1,724,880)
Other income ....................................................... 225 —

(Loss) Profit before income tax ............................ 14 (159,580) 12,342

Income tax 15 — —

(Loss) Profit after income tax ............................... (159,580) 12,342

STATEMENT OF CHANGES IN EQUITY

Year ended March 31, 2006

Issued Accumulated Total

Capital Profits
$ $ $

Balance at April 1, 2004 ............................ 50,000 411,976 461,976

Net Profit for the year ............................... — 12,342 12,342
Balance at March 31, 2005 ....................... 50,000 424,318 474,318
Net Loss for the year ................................ — (159,580) (159,580)
Balance at March 31, 2006 ....................... 50,000 264,738 314,738

See accompanying Notes to Financial Statements.

379
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

CASH FLOW STATEMENT

Year ended March 31, 2006

2006 2005
$ $
Cash Flows from Operating Activities:
(Loss)/Profit before Income Tax ................................. (159,580) 12,342
Adjustment for
Interest Income ..................................................... (223) —
Allowance for Doubtful Debts ............................... 77,027 —
Depreciation Expense ............................................ 8,998 12,257
Operating (Loss)Profit before Working Capital Changes (73,778) 24,599
Trade Receivables .................................................. (145,789) (337,373)
Other Receivables and Prepayments .................... (31,269) 65,722
Other Payables ...................................................... 402,653 251,512
Cash Generated from Operations .............................. 151,817 4,460
Interest Received ....................................................... 113 —
Income Tax Paid ......................................................... — (28)
Net Cash from Operating Activities ................................. 151,930 4,432
Cash Flows used in Investing Activities:
Increase in Pledged Fixed Deposits ........................... (113) (20,000)
Purchase of Equipment .............................................. (22,215) (12,257)
Net Cash used in Investing Activities .............................. (22,328) (32,257)
Net Increase/(Decrease) in Cash and Cash Equivalents .. 129,602 (27,825)
Cash and Cash Equivalents at beginning of year ............. 50,531 78,356
Cash and Cash Equivalents at end of year (Note 6) .... 180,133 50,531

See accompanying Notes to Financial Statements.

380

NOTES TO FINANCIAL STATEMENTS MARCH 31, 2006
1. General
The company (Registration No. 200203658M) is incorporated in the Republic
of Singapore with its principal place of business and registered office at 152
Beach Road #32-01/04, Gateway East, Singapore 189721. The financial
statements are expressed in Singapore dollars.
The company is principally engaged in providing consultancy and services
relating to information technology and development of software solutions and
products.
The company changed its name from MBT Software Technologies Pte. Limited
to Tech Mahindra (Singapore) Pte. Limited on January 16, 2006.
The financial statements of the company for the financial year ended March 31,
2006 were authorised for issue by the Board of Directors on April 3, 2006.
2 Summary of Significant Accounting Policies
BASIS OF ACCOUNTING - The financial statements are prepared in accordance
with the historical cost convention and are drawn up in accordance with the
provisions of the Singapore Companies Act and Singapore Financial Reporting
Standards ("FRS").
In the current financial year, the company has adopted all the new and revised
FRSs and Interpretations of FRS ("INT FRS") issued by the Council on Corporate
Disclosure and Governance that are relevant to its operations and effective for
annual periods beginning on or after January 1, 2005. The adoption of these
new/revised FRSs and INT FRSs has no material effect on the financial
statements.
At the date of authorisation of these financial statements, the following FRSs,
INT FRSs and amendments to FRSs were issued but not effective:
FRS 40 - Investment Property
FRS 102 - Share - Based Payment
FRS 106 - Exploration for and Evaluation of Mineral Resources
FRS 107 - Financial Instruments: Disclosures
INT FRS 104 - Determining whether an Arrangement contains a Lease
INT FRS 105 - Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
INT FRS 106 - Liabilities Arising from Participating in a Specific Market -
Waste Electrical and Electronic Equipment
INT FRS 107 - Applying the Restatement Approach under FRS 39 Financial
Reporting in Hyperinflationary Economies
Amendments to FRS 1 Presentation of Financial Statements on Capital
Disclosures.
Amendments to FRS 21 The Effects of Changes in Foreign Exchange Rates on
net investment in a foreign operation.
Amendments to FRS 39 Financial Instruments: Recognition and Measurement
on hedge accounting provisions, fair value option and financial guarantee
contracts.
Amendments to FRS 101 First-time Adoption of Financial Reporting Standards
on comparative disclosures for FRS 106 Exploration for and Evaluation of
Mineral Resources.
Amendments to FRS 104 Insurance Contracts on financial guarantee contracts.
Consequential amendments were also made to various standards as a result
of these new/revised standards.
The directors anticipate that the adoption of these FRSs, INT FRSs and
amendments to FRSs that were issued but not yet effective until future periods
will not have a material impact on the financial statements of the company.
FINANCIAL INSTRUMENTS – Financial assets and financial liabilities are
recognised on the company's balance sheet when the company becomes a
party to the contractual provisions of the instrument.
Cash and bank balances – Cash and bank balances comprise cash at bank and
fixed deposits that are subject to an insignificant risk of changes in value.
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)
Trade and other receivables – Trade and other receivables are measured at
initial recognition at fair value, and are subsequently measured at amortised
cost using the effective interest rate method. Appropriate allowances for
estimated irrecoverable amounts are recognised in the profit and loss statement
when there is objective evidence that the asset is impaired. The allowance
recognised is measured as the difference between the asset's carrying amount
and the present value of estimated future cash flows discounted at the
effective interest rate computed at initial recognition.
Financial liabilities and equity – Financial liabilities and equity instruments
issued by the company are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability
and an equity instrument. An equity instrument is any contract that evidences
a residual interest in the assets of the company after deducting all of its
liabilities. The accounting policies adopted for specific financial liabilities and
equity instruments are set out below.
Trade and other payables – Trade and other payables are initially measured
at fair value, and are subsequently measured at amortised cost, using the
effective interest rate method.
Equity instruments – Equity instruments issued by the company are recorded
at the proceeds received, net of direct issue costs.
EQUIPMENT – Equipment are carried at cost less accumulated depreciation
and any impairment loss where the recoverable amount of the asset is
estimated to be lower than its carrying amount.
Depreciation is charged so as to write off the cost of assets, over their
estimated useful lives, using the straight-line method, on the following basis:
Equipment – 1 year
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised as income.
Fully depreciated assets still in use are retained in the financial statements.
IMPAIRMENT OF ASSETS – At each balance sheet date, the company
reviews the carrying amounts of its assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it is not possible
to estimate the recoverable amount of an individual asset, the company
estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to
their present value using pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset/cash-generating unit is estimated to be
less than its carrying amount, the carrying amount of the asset/cash-generating
unit is reduced to its recoverable amount. An impairment loss is recognised as
an expense immediately.
When an impairment loss subsequently reverses, the carrying amount of the
asset/cash-generating unit is increased to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment
loss been recognised for the asset/cash-generating unit in prior years. A
reversal of an impairment loss is recognised as income immediately.
PROVISIONS – Provisions are recognised when the company has a present
obligation as a result of a past event, and it is probable that the company will
be required to settle that obligation. Provisions are measured at the directors'
best estimate of the expenditure required to settle the obligation at the balance
sheet date, and are discounted to present value where the effect is material.
LEASES – Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease.
381
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)
REVENUE RECOGNITION – Revenue is measured at the fair value of the
consideration received or receivable and represents amounts receivable for
goods and services provided in the normal course of business, net of discounts
and sales related taxes. Revenue from the rendering of services that are of a
short duration is recognised when the services are completed.
RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement
benefit plans are charged as an expense as they fall due. Payments made to
state-managed retirement benefit schemes, such as the Singapore Central
Provident Fund, are dealt with as payments to defined contribution plans where
the company's obligations under the plans are equivalent to those arising in a
defined contribution retirement benefit plan.
EMPLOYEE LEAVE ENTITLEMENT – Employee entitlements to annual leave
are recognised when they accrue to employees. A provision is made for the
estimated liability for annual leave as a result of services rendered by employees
up to the balance sheet date.
INCOME TAX – Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit
differs from profit as reported in the profit and loss statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are not taxable or tax deductible. The
company's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the period
when the liability is settled or the asset realised. Deferred tax is charged or
credited to profit or loss, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable
right to set off current tax assets against current tax liabilities and when they
relate to income taxes levied by the same taxation authority and the company
intends to settle its current tax assets and liabilities on a net basis.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION – The financial
statements of the company are presented in the currency of the primary
economic environment in which the entity operates (its functional currency).
The financial statements of the company are presented in Singapore dollars,
which is the functional currency of the company.
In preparing the financial statements of the company, transactions in currencies
other than the entity's functional currency are recorded at the rates of exchange
prevailing on the date of the transaction. At each balance sheet date, monetary
items denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the rates prevailing on the
date when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on
retranslation of monetary items are included in profit or loss for the period.
Exchange differences arising on the retranslation of non-monetary items carried
at fair value are included in profit or loss for the period except for differences
arising on the retranslation of non-monetary items in respect of which gains and
losses are recognised directly in equity. For such non-monetary items, any
exchange component of that gain or loss is also recognised directly in equity.
3 Critical Accounting Judgements and key sources of estimation uncertainty
Critical judgements in applying the company's accounting policies
In the process of applying the entity's accounting policies, which are described
in Note 2 to the financial statements and key assumptions concerning the
future, management is not aware of any judgements that have the most
significant effect on the amounts recognised in the financial statements.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
382
material adjustment to the carrying amounts of assets and liabilities within the
next financial year is as discussed below.
Allowances for bad and doubtful debts
The company makes allowances for bad and doubtful debts based on an
assessment of the recoverability of trade receivables. Allowances are applied
to trade receivables when events or changes in circumstances indicate that the
balance may not be collectible. The identification of bad and doubtful debts
requires the use of judgement and estimates. Where the expectation is
different from the original estimate, such difference will impact the carrying
value of trade receivables and doubtful debts expenses in the period in which
such estimate has been changed.
4 Financial Risks and Management
(i) Credit Risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in a loss to the company. The company
has adopted the policy of only dealing with creditworthy counterparties.
The carrying amount of financial assets recorded in the financial statements,
net of any provision for losses, represents the company's maximum
exposure to credit risk without taking account of the value of any collateral
or other security obtained.
(ii) Foreign Currency Risk
The company does not enter into derivative foreign exchange contracts
and foreign currency borrowings to hedge against foreign currency risk.
It is the company's policy not to trade in derivative contracts.
(iii) Interest Rate and Liquidity Risk
The company's exposure to interest rate and liquidity risks is insignificant.
(iv) Fair value of Financial Assets and Financial Liabilities
The carrying amounts of cash and cash equivalents, trade and other
receivables and other payables approximate their respective fair values
due to the relatively short-term maturity of the financial instruments.
5 Holding Company and Related Company Transactions
The company is a subsidiary of Tech Mahindra Limited (2005:Mahindra British
Telecom Ltd); incorporated in India which is also the company's ultimate
holding company. Related companies in these financial statements refer to
members of the ultimate holding company's group of companies.
Some of the company's transactions and arrangements are between members
of the group and the effect of these on the basis determined between the
parties is reflected in these financial statements. The intercompany balances
are unsecured, interest-free and repayable within the next twelve months
unless otherwise stated.
Significant intercompany transactions, other than those disclosed elsewhere
in the notes to the profit and loss statement are as follows:
2006 2005
$ $
Rendering of services (2,434,957) —
Secondment fees 241,800 449,800
Marketing and administration support fees 604,510 —
6 Cash and Bank Balances
2006 2005
$ $
Cash at bank 180,133 50,531
Pledged fixed deposits 20,113 20,000
200,246 70,531
Cash and cash equivalents comprise cash held by the company. The carrying
amounts of these assets approximate their fair values.
Fixed deposits bear interest at an average rate of 0.80% (2005 : 0.56%) per
annum and are for a tenor of approximately 365 days (2005 : 365 days). The
fixed deposits are pledged to a bank for the issuance of bank guarantee.
 TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

7 Trade Receivables 12 Revenue

2006 2005
2006 2005
$ $
$ $
Rendering of services 3,798,920 1,737,222
Outside parties 204,798 675,944
Less allowance for doubtful debts (77,027) —
13 Other Operating Expenses
127,771 675,944 2006 2005
Holding company (Note 5) 616,935 — $ $
Staff costs 2,039,105 1,371,354
744,706 675,944
Marketing and administration support fees (Note 5) 604,510 —
Others 694,388 353,526
8 Other Receivables and Prepayments
2006 2005 3,338,003 1,724,880
$ $
Staff advances 36,974 — 14 (Loss) Profit Before Income Tax
Deposits 6,827 5,527 (Loss) Profit before income tax has been arrived at after charging (crediting):
Prepayments 2,150 3,492 2006 2005
Other receivables 2,810 8,363 $ $
` 48,761 17,382 Directors' fees 2,000 2,000
Staff costs 2,039,105 1,371,354

9 Equipment Cost of defined contribution plans

included in staff costs 41,774 14,276
$ Allowance for doubtful debts 77,027 —
Cost:
Interest income from outside parties (223) —
At April 1, 2004 —
Foreign exchange adjustment gain (965) (2,871)
Additions 12,257
Depreciation of equipment 8,998 12,257
At April 1, 2005 12,257
Additions 22,215
15 Income Tax
At March 31, 2006 34,472 2006 2005
Accumulated depreciation: $ $
At April 1, 2004 — Current — —
Depreciation charge for the year 12,257
The income tax (benefit) expense varied from the amount of income tax
At April 1, 2005 12,257
(benefit) expense determined by applying the Singapore income tax rate of
Depreciation charge for the year 8,998 20% (2005 : 20%) to (loss) profit before income tax as a result of the following
differences:
At March 31, 2006 21,255
2006 2005
Carrying amount:
$ $
At March 31, 2006 13,217
Income tax (benefit) expense statutory rate (31,916) 2,468
At March 31, 2005 — Deferred tax asset not recognised 31,916 —
Exempt income — (2,468)
10 Other Payables
Total income tax — —
2006 2005
The company has tax loss carryforwards available for offsetting against
$ $
future taxable income as follows:
Holding company (Note 5) 604,509 207,099 2006 2005
Other payables 87,683 82,440
$ $
692,192 289,539 Amount at beginning of year — —
Amount in current year 159,580 —
11 Issued Capital Amount at end of year 159,580 —
2006 2005 2006 2005 Deferred tax benefit on above not recorded 31,916 —

Number of ordinary $ $ No deferred tax assets has been recognised in respect of the above due to the
shares of $10 each unpredictability of future profit streams.
Authorised 10,000 10,000 100,000 100,000
16 Contingent Liabilities
2006 2005
Issued and paid up:
At beginning and at end $ $
of year 5,000 5,000 50,000 50,000 Bank guarantees (secured) 139,140 169,090

383
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

Statement of Directors

In the opinion of the directors, the accompanying financial statements set out on pages 378 to 383 are drawn up so as to give
a true and fair view of the state of affairs of the company as at March 31, 2006 and of the results, changes in equity and cash
flows of the company for the financial year then ended and at the date of this statement there are reasonable grounds to believe
that the company will be able to pay its debts as and when they fall due.

Lim Tiong Beng

Sonjoy Anand
April 3, 2006

384
 TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

MEMO

Date : 3 April 2006

To : Sonjoy Anand

From : Deloitte & Touche Singapore

Subject : Accounts of Tech Mahindra (Singapore) Pte. Limited for the Year Ended March 31, 2006, denominated in Indian Rupees.

Dear Sirs,

Please find attached the Balance Sheet, Profit and Loss Statement, Statement of Changes in Equity, Cash Flow Statement, and
Notes to Accounts of Tech Mahindra (Singapore) Pte. Limited, signed for identification purposes only in respect of the above
financial year end.

All balances (including prior year balances) are translated for convenience into Indian Rupees (Rs.) at the exchange rate of Rs. 27.59 =
SGD 1 which is the average of the telegraphic transfer buying and selling rates quoted by the Mumbai Branch of State Bank of India on
March 31, 2006.

Kind regards,

DELOITTE & TOUCHE

385
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

BALANCE SHEET
March 31, 2006

Note 2006 2005

$ Rs. $ Rs.
ASSETS
Current Assets:
Cash and Cash Equivalents .................................. 1 200,246 5,524,787 70,531 1,945,950
Trade Receivables ................................................ 2 744,706 20,546,438 675,944 18,649,295
Other Receivables and Prepayments ................... 3 48,761 1,345,316 17,382 479,570
Total Current Assets ............................................ 993,713 27,416,541 763,857 21,074,815

Non-Current Assets:
Equipment ............................................................ 4 13,217 364,657 — —
Total Assets ........................................................ 1,006,930 27,781,198 763,857 21,074,815

LIABILITIES AND EQUITY

Current Liability:
Other Payables ..................................................... 5 692,192 19,097,577 289,539 7,988,381

Capital and Reserves:

Issued Capital ....................................................... 6 50,000 1,379,500 50,000 1,379,500
Accumulated Profits ............................................. 264,738 7,304,121 424,318 11,706,934
Total Equity .......................................................... 314,738 8,683,621 474,318 13,086,434
Total Liabilities and Equity ................................ 1,006,930 27,781,198 763,857 21,074,815

See accompanying Notes to Financial Statements.

386
 TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

PROFIT AND LOSS STATEMENT

Year ended March 31, 2006

Note 2006 2005

$ Rs. $ Rs.

Revenue ............................................................... 7 3,798,920 104,812,203 1,737,222 47,929,955

Cost of Sales ........................................................ (620,722) (17,125,720) — —
Gross Profit .......................................................... 3,178,198 87,686,483 1,737,222 47,929,955
Other Operating Expenses .................................. 8 (3,338,003) (92,095,503) (1,724,880) (47,589,439)
Other Income ....................................................... 225 6,208 — —
(Loss)/Profit before Income Tax ........................... 9 (159,580) (4,402,812) 12,342 340,516
Income Tax Expense ............................................ 10 — — — —
(Loss)/Profit after Income Tax .............................. (159,580) (4,402,812) 12,342 340,516

See accompanying Notes to Financial Statements.

STATEMENT OF CHANGES IN EQUITY

Year ended March 31, 2006

Issued Capital Accumulated Profits Total

$ Rs. $ Rs. $ Rs.

Balance at April 1, 2004 ............................ 50,000 1,379,500 411,976 11,366,417 461,976 12,745,917
Net Profit for the year ............................... — — 12,342 340,516 12,342 340,516
Balance at March 31, 2005 ....................... 50,000 1,379,500 424,318 11,706,933 474,318 13,086,433
Net Loss for the year ................................ — — (159,580) (4,402,812) (159,580) (4,402,812)
Balance at March 31, 2006 ....................... 50,000 1,379,500 264,738 7,304,121 314,738 8,683,621

See accompanying Notes to Financial Statements.

387
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

CASH FLOW STATEMENT

Year ended March 31, 2006

2006 2005
$ Rs. $ Rs.
Cash Flows from Operating Activities:
(Loss)/Profit before Income Tax ................................. (159,580) (4,402,812) 12,342 340,516
Adjustment for
Interest Income ..................................................... (223) (6,152) — —
Allowance for Doubtful Debts ............................... 77,027 2,125,175 — —
Depreciation Expense ............................................ 8,998 248,255 12,257 338,171
Operating Profit before Working Capital Changes ..... (73,778) (2,035,534) 24,599 678,687
Trade Receivables .................................................. (145,789) (4,022,319) (337,373) (9,308,121)
Other Receivables and Prepayments .................... (31,269) (862,712) 65,722 1,813,270
Other Payables ...................................................... 402,653 11,109,196 251,512 6,939,216
Cash Generated from Operations .............................. 151,817 4,188,631 4,460 123,052
Interest Received ....................................................... 113 3,118 — —
Income Tax Paid ......................................................... — — (28) (773)
Net Cash from Operating Activities ................................. 151,930 4,191,749 4,432 122,279
Cash Flows used in Investing Activities:
Increase in Pledged Fixed Deposits ........................... (113) (3,118) (20,000) (551,800)
Purchase of Equipment .............................................. (22,215) (612,912) (12,257) (338,171)
Net Cash used in Investing Activities .............................. (22,328) (616,030) (32,257) (889,971)
Net Increase/(Decrease) in Cash and Cash Equivalents .. 129,602 3,575,719 (27,825) (767,692)
Cash and Cash Equivalents at beginning of year ............. 50,531 1,394,150 78,356 2,161,842
Cash and Cash Equivalents at end of year (Note 1) .... 180,133 4,969,869 50,531 1,394,150

See accompanying Notes to Financial Statements.

388
 TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

1. Cash and Bank Balances 6. Issued Capital

2006 2005 2006 2005
2006 2005
Number of Ordinary $ Rs. $ Rs.
$ Rs. $ Rs. Shares of $10 each
Cash at Bank 180,133 4,969,869 50,531 1,394,150
Authorized 10,000 10,000 100,000 2,759,000 100,000 2,759,000
Pledged fixed deposits 20,113 554,918 20,000 551,800
Issued and Paid:
Total 200,246 5,524,787 70,531 1,945,950
At beginning and
end of year 5,000 5,000 50,000 1,379,500 50,000 1,379,500
Cash and cash equivalents comprise cash held by the company. The carrying
amounts of these assets approximate their fair values.
7. Revenue
Fixed deposits bear interest at an average rate of 0.80% (2005:0.56%) per 2006 2005
annum and are for a tenor of approximately 365 days (2005 : 365 days). The fixed
deposits are pledged to a bank for the issuance of bank guarantee. $ Rs. $ Rs.
Rendering of
2. Trade Receivables Services 3,798,920 104,812,203 1,737,222 47,929,955
2006 2005
$ Rs. $ Rs. 8. Other Operating Expenses
Outside Parties 204,798 5,650,376 675,944 18,649,295 2006 2005
Less Allowance for $ Rs. $ Rs.
Doubtful Debts (77,027) (2,125,175) — —
Staff Costs 2,039,105 56,258,907 1,371,354 37,835,657
127,771 3,525,201 675,944 18,649,295
Marketing and
Holding Company 616,935 17,021,237 — — Administration
744,706 20,546,438 675,944 18,649,295 Support fees 604,510 16,678,431 — —
Others 694,388 19,158,165 353,526 9,753,782
3. Other Receivables and Prepayments 3,338,003 92,095,503 1,724,880 47,589,439
2006 2005
$ Rs. $ Rs. 9. (Loss)/Profit Before Income Tax
Staff Advances 36,974 1,020,112 — — 2006 2005
Deposits 6,827 188,357 5,527 152,491 $ Rs. $ Rs.
Prepayments 2,150 59,319 3,492 96,344
Directors’ Fees 2,000 55,180 2,000 55,180
Other Receivables 2,810 77,528 8,363 230,735
Staff Costs 2,039,105 56,258,907 1,371,354 37,835,657
48,761 1,345,316 17,382 479,570 Cost of defined
contribution plans
4. Equipment included in
Staff Costs 41,774 1,152,545 14,276 393,875
Cost: 2006
Allowance for
$ Rs. Doubtful Debts 77,027 2,125,175 — —
At April 1, 2004 — — Foreign Exchange
Additions 12,257 338,171 adjustments gain (965) (26,624) (2,871) (79,211)
Interest Income
At April 1, 2005 12,257 338,171
from outside parties (223) (6,152) — —
Additions 22,215 612,912
Depreciation of
At March 31, 2006 34,472 951,083 Equipment 8,998 248,255 12,257 338,171
Accumulated Depreciation:
At April 1, 2004 — — 10. Income Tax Expense
Depreciation Charge for the year 12,257 338,171 2006 2005
At April 1, 2005 12,257 338,171 $ Rs. $ Rs.
Depreciation Charge for the year 8,998 248,255 Current — — — —
At March 31, 2006 21,255 586,426
The income tax (benefit) expense varied from the amount of income tax (benefit)
Carrying Amount:
expense determined by applying the Singapore income tax rate of 20% (2005:
At March 31, 2006 13,217 364,657 20%) to (loss)/profit before income tax as a result of the following differences:
At March 31, 2005 — — 2006 2005
$ Rs. $ Rs.
5. Other Payables Income Tax
2006 2005 (benefit) Expense
$ Rs. $ Rs. statutory rate (31,916) (880,562) 2,468 68,092
Deferred Tax
Holding Company 604,509 16,678,403 207,099 5,713,861
Asset not
Other Payables 87,683 2,419,174 82,440 2,274,520 recognized 31,916 (880,562) — —
692,192 19,097,577 289,539 7,988,381 Exempt Income — — (2,468) (68,092)
Total Income — — — —

389
TECH MAHINDRA (SINGAPORE) PTE. LIMITED
(Formerly known as MBT Software Technologies Pte. Limited)

The Company has tax loss carry forwards available for offsetting against future 11. Holding Company and Related Company Transactions
taxable income as follows:
The company is a subsidiary of Tech Mahindra Limited (2005:Mahindra British
2006 2005 Telecom Ltd); incorporated in India which is also the company's ultimate
$ Rs. $ Rs. holding company. Related companies in these financial statements refer to
Amount at members of the ultimate holding company's group of companies.
beginning of year — — — — Some of the company's transactions and arrangements are between members
of the group and the effect of these on the basis determined between the
Amount in parties is reflected in these financial statements. The intercompany balances
current year 159,580 4,402,812 — —
are unsecured, interest-free and repayable within the next twelve months
unless otherwise stated.
Amount at
end of year 159,580 4,402,812 — — Significant intercompany transactions, other than those disclosed elsewhere
Deferred tax in the notes to the profit and loss statement are as follows:
benefit on above 2006 2005
not recorded 31,916 880,562 — —
$ Rs. $ Rs.
Rendering of services (2,434,957) (67,180,464) — —
No deferred tax assets have been recognized in respect of the above due to the unpredictability of Secondment fees 241,800 6,671,262 449,800 12,409,982
future profit streams.
Marketing and administration
support fees 604,510 16,678,431 — —

390
 TECH MAHINDRA (THAILAND) LIMITED
(Formerly named MBT (Thailand) Co. Ltd.)

DIRECTORS’ REPORT TO THE SHAREHOLDERS

Your Directors present their Report together with the audited accounts of your Company for the period ended 31st March, 2006.

Financial Results

For the year ended March, 31 2006 2006

THB INR

Income NIL NIL

Profit/(Loss) before tax (3,397,196) (3,906,775)
Profit/(Loss) after tax (3,397,196) (3,906,775)

Review of Operations:
The Company started its operations during the year, therefore no income was recorded for the year. The Company continues to invest
in strengthening its marketing infrastructure in Thailand which is identified as future growth area.
Change of name:
During the year, the Company’s name was changed from MBT (Thailand) Co. Limited to Tech Mahindra (Thailand) Limited. This was done
in line with the change of name of the Parent Company, Tech Mahindra Limited.
Outlook for the current year:
The Company believes that there is good potential for growth in Thailand and the investments will begin to bear fruit in the near future.
Acknowledgements:
Your Directors gratefully acknowledge the contributions made by the employees towards the success of the Company. Your Directors
are also thankful for the co-operation and assistance received from its customers, suppliers, bankers, State and Federal Government
Authorities and the shareholder.

Munish Kumar
Director
April 6, 2006.

391
TECH MAHINDRA (THAILAND) LIMITED
(Formerly named MBT (Thailand) Co. Ltd)

REPORT OF THE INDEPENDENT AUDITOR

To the Shareholders of Tech Mahindra (Thailand) Limited (Formerly named “MBT (Thailand) Co. Ltd.”)

I have audited the Balance Sheet of Tech Mahindra (Thailand) Limited (Formerly named “MBT (Thailand) Co. Ltd.”) as at 31 March 2006,
the related statements of income and changes in shareholders’ equity for the periods from 26 August 2005 to 31 March 2006. These
Financial Statements are the responsibility of the Company’s management as to their correctness and completeness of presentation.
My responsibility is to express an opinion on these Financial Statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards. These standards require that I plan and perform the audit
to obtain reasonable assurance about whether the Financial Statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the Financial Statements referred to above present fairly, in all material respects, the financial position of Tech Mahindra
(Thailand) Limited (Formerly named “MBT (Thailand) Co. Ltd.”) as at 31 March 2006, and the result of its operations for the periods from
26 August 2005 to 31 March 2006 in conformity with generally accepted accounting principles.

Without qualifying my opinion, I draw attention to Note 5 to the Financial Statements. As at 31 March 2006, the Company has capital
deficiency of Baht 397,196 (Indian Rupee 456,775). However, management of the Company believe that it is appropriate to adopt the
going concern basis in the preparation of the Financial Statements as in year 2006 the Company had not yet started commercial
operations. In addition, the major shareholders of the Company have given a letter of undertaking to provide adequate financial support
to the Company to enable it to continue its operations during the next fiscal year. As these Financial Statements have been prepared
on a going concern basis, they do not include any adjustments relating to the recoverability and classification of liabilities that might be
necessary should the Company not be able to continue as a going concern.

Ms. Suleeporn Triyaprasertporn

Certified Public Accountant Registration No. 5236

Audit Plus Limited

Bangkok

April 06 , 2006

392
 TECH MAHINDRA (THAILAND) LIMITED
(Formerly named MBT (Thailand) Co. Ltd.)

BALANCE SHEET
as at 31 March 2006

ASSETS
(Exchange rate
1 Baht = 1.15 INR)
Note Baht Indian Rupee

CURRENT ASSETS
Deposit at Financial Institutions ...................................................... 2,425,922 2,789,810
Other Current Assets ...................................................................... 28,392 32,651
TOTAL CURRENT ASSETS .................................................................. 2,454,314 2,822,461
TOTAL ASSETS .................................................................................... 2,454,314 2,822,461

LIABILITIES AND CAPITAL DEFICIENCY

CURRENT LIABILITIES
Amount Due to related companies ........................................................ 4 2,538,590 2,919,378
Accrued Expenses ................................................................................. 118,700 136,505
Other Current Liabilities ......................................................................... 194,220 223,353
TOTAL CURRENT LIABILITIES ............................................................ 2,851,510 3,279,236
TOTAL LIABILITIES .............................................................................. 2,851,510 3,279,236

LIABILITIES AND CAPITAL DEFICIENCY

CAPITAL DEFICIENCY
Share Capital — common share at Baht 100 par value .........................
— Authorized 50,000 shares .......................................................... 5,000,000 5,750,000
— Issued and 60 per cent paid up .................................................. 3,000,000 3,450,000
Net Loss for the period .......................................................................... (3,397,196) (3,906,775)
CAPITAL DEFICIENCY .......................................................................... (397,196) (456,775)
LIABILITIES NET OF CAPITAL DEFICIENCY ....................................... 2,454,314 2,822,461

The Notes to the Financial Statements form an integral part of these financial statements.

393
TECH MAHINDRA (THAILAND) LIMITED
(Formerly named MBT (Thailand) Co. Ltd)

STATEMENT OF INCOME
for the periods from 26 August 2005 to 31 March 2006

(Exchange rate
1 Baht = 1.15 INR)
Note Baht Indian Rupee
EXPENSES
Administrative Expenses ................................................................ 3,397,196 3,906,775
TOTAL EXPENSES ............................................................................... 3,397,196 3,906,775

NET LOSS FOR THE PERIOD ............................................................... (3,397,196) (3,906,775)

BASIC LOSS PER SHARE

Net Loss ......................................................................................... (67.94) (78.13)

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

for the periods from 26 August 2005 to 31 March 2006
(Exchange rate 1 Baht = 1.15 INR)
Baht Indian Rupee
Paid-up Net Loss Paid-up Net Loss
Share for the Share for the
Capital Period Total Capital Period Total

Balance as at 26 August 2005 ........................ 3,000,000 — 3,000,000 3,450,000 — 3,450,000

Net Loss for the period ................................... — (3,397,196) (3,397,196) — (3,906,775) (3,906,775)
Balance as at 31 March 2006 .......................... 3,000,000 (3,397,196) (397,196) 3,450,000 (3,906,775) (456,775)

The Notes to the Financial Statements form an integral part of these financial statements.

394
 TECH MAHINDRA (THAILAND) LIMITED
(Formerly named MBT (Thailand) Co. Ltd.)

NOTES TO THE FINANCIAL STATEMENTS Use of Accounting Estimates

as at 31 March 2006
The preparation of the Financial Statements in conformity with generally
accepted accounting principles requires management to make estimates and
1. GENERAL INFORMATION assumptions that affect the reported amounts of income, expenses, assets,
Tech Mahindra (Thailand) Co., Ltd. (Formerly named “MBT (Thailand) Co., Ltd.”) liabilities and disclosure of contingent assets and liabilities. Actual results may
was registered as a limited company under the Thai Civil and Commercial Code differ from those estimates.
on 26 August 2005. The Company is engaged in providing IT services and
development for computer software. The address of the registered office is 87 4. RELATED PARTY TRANSACTIONS
M Thai Tower, 23rd Floor, All Seasons Place, Wireless Road, Lumpini, Phatumwan,
Bangkok. The Company has transactions with its related parties. These companies are
related through common shareholding and/or directorship. Thus the Financial
The Company registered the change of its name from “MBT (Thailand) Co., Ltd.” Statements reflect the effects of these transactions on the basis agreed upon
to “Tech Mahindra (Thailand) Co., Ltd.” on 21 March 2006. between the Company and related companies which basis might be different
from the transactions with unrelated companies.
The information about the Company’s employees for the periods from 26
August 2005 to 31 March 2006 is as follows: The significant account balances with related parties as at 31 March 2006 are
as follows:
For the period
26 Aug. 05 to 31 Mar. 06 (Exchange rate
1 Baht = 1.15 INR)
Average Number of Employees (Persons) 5
Baht Indian Rupee
Employee Expenses (Million Baht) 1.87
Amount Due to related companies
Employee Expenses (Million Indian Rupee) 2.15
Tech Mahindra Limited 2,538,590 2,919,378

2. BASIS OF FINANCIAL STATEMENT PREPARATION

The accompanying Financial Statements are prepared in accordance with the
generally accepted accounting principles issued under the Accounting Act
(B.E. 2543), being those Thai Accounting Standards issued under the Accounting
Profession Act B.E. 2547.
3. SIGNIFICANT ACCOUNTING POLICIES
Expenses Recognition
Expenses are recognized on an accrual basis.
Foreign Currency Translation
Foreign currency amounts are translated for convenience into Indian Rupees at
the exchange rate of Baht 1 equal to Rs. 1.15, which is the market rate as on 31
March 2006.
Basic Loss Per Share
The basic loss per share is determined by dividing the net loss for the period by
the weighted average number of common shares outstanding during the period.
5. THE COMPANY AS A GOING CONCERN
As at 31 March 2006, the Company has capital deficiency of Baht 397,196
(Indian Rupee 456,775). However, management of the Company believe that
it is appropriate to adopt the going concern basis in the preparation of the
Financial Statements as in year 2006 the Company had not yet started
commercial operations. In addition, the major shareholders of the Company
have given a letter of undertaking to provide adequate financial support to the
Company to enable it to continue its operations during the next fiscal year. As
these financial statements have been prepared on a going concern basis, they
do not include any adjustments relating to the recoverability and classification
of liabilities that might be necessary should the Company not be able to
continue as a going concern.
These financial statements are approved at the general shareholders meeting
of Tech Mahindra (Thailand) Limited dated on June 21, 2006.
Munish Kumar
Managing Director

395
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

DIRECTORS’ REPORT
Your Directors present their Eleventh Annual Report together with the audited Accounts of the Company for the year ended
31st March 2006.

FINANCIAL RESULTS (Rupees Mn)

Year ended Year ended
March 31,2006 March 31, 2005
Income 1,291.64 1,187.69
Depreciation 163.76 55.81
Profit Before Tax & Extra Ordinary items 141.37 140.53
Provision for Taxation 50.02 2.97
Provision for Deferred Taxes 19.61 4.38
Provision for Fringe Benefit Tax 3.65 —
Extra Ordinary Items (178.11) Nil
Profit/(Loss) after Tax (70.79) 133.18

APPROPRIATIONS
Transfer to General Reserve Nil 133.18
Proposed dividend ( Equity) Nil 83.49
Dividend Distribution tax Nil 10.91
Profit Carried forward to Balance Sheet 630.34 701.14

Despite difficult market conditions and increased competition, DIVIDEND:

income for the year marginally grew up to Rs. 1,291.64 Mn as
compared to Rs. 1,187.69 Mn in the previous year, an increase of
9%. Net loss after tax for the year was Rs. 70.79 Mn compared
to a profit of Rs. 133.18 Mn in the previous year. The Profits have
declined sharply on account of the extra ordinary items for
contractual payment to Alcatel and acquisition related expenses.
Your Company remains committed to delivering shareholders’
value through increased business, control over cost and better
profitability.
STATUS OF THE COMPANY AFTER ACQUISITION:
The Company became a subsidiary of Tech Mahindra Limited
(Formerly Mahindra-British Telecom Limited). With the acquisition
of the Company, Tech Mahindra Limited now holds more than
99% of the paid up share capital of the Company.
CHANGE OF NAME AND CONVERSION OF THE COMPANY
FROM PRIVATE TO PUBLIC LIMITED:
In order to be identified with the parent Company, your Company’s
name was changed from Axes Technologies (India) Private Limited
to Tech Mahindra (R & D Services) Private Limited. Further the
status of the Company was changed from Private Limited to
Public Limited. Subsequently the name of the Company was
changed to Tech Mahindra (R&D Services) Limited.
INCREASE IN SHARE CAPITAL:
During the year under review, the Company issued shares in
terms of the ESOP plan. Consequently the paid up share
capital of the Company has increased from Rs. 42.18 Mn to
Rs. 46.03 Mn.
In order to further strengthen the financials of the Company, your
Directors do not recommend any dividend for the year under
review.
HUMAN RESOURCE MANAGEMENT:
Recognizing the value of human resources as the Company’s
growth potential, your Company has been focusing on
development and management of human resources in the
Company. The Company has put in place a scalable recruitment
and human resource management process, enabling it to attract
and retain high caliber employees. Your Company added 274
employees during the year.
The Company recognizes the fact that to grow and compete in
an extremely fierce competitive environment it needs to retain
and grow the best talent in the industry. Number of steps were
taken during the year to further strengthen the HR Processes
within the Company.
FIXED DEPOSITS:
Your Company has not accepted any fixed deposits and, as such,
no amount of principal or interest was outstanding as on the
balance sheet date.
FINANCE:
The Company continues to deploy its surplus liquidity primarily in
debt oriented schemes of different reputed mutual funds. Such
investments are made on the twin objective of capital preservation
and optimization of returns. A part of the temporary surplus funds
are also invested in liquid/short term schemes of mutual funds.
The Company keeps a close watch on the developments in forex

396

market and obtains forward covers in respect of its receivables as
and when deemed necessary.
SUBSIDIARY COMPANIES :
The Company has its Subsidiaries in Singapore and USA. During
the year under review, both the subsidiaries changed their names
From Axes Technologies Inc. to Tech Mahindra ( R & D Services)
Inc. and Axes Technologies (Asia Pacific) Pte. Ltd. to Tech
Mahindra ( R & D Services) Pte. Ltd.
CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated Financial Statements of the Company and its
subsidiaries are attached.
In accordance with Accounting Standard 21- Consolidated Financial
statements, form part of this Report. The Consolidated accounts
have been prepared on the basis of audited financial statements
received from the Subsidiary Companies as approved by their
respective Boards.
INTERNAL CONTROL SYSTEMS AND ADEQUACY:
Your Company has an adequate system of internal control
commensurate with the size of the Company and the nature of its
business which ensures that transactions are recorded, authorized
and reported correctly apart from safeguarding its assets against
loss from wastage, unauthorized use and disposition.
The internal control system is supplemented by well documented
policies, guidelines and procedures. An extensive programme of
internal audit by a firm of chartered accountants and management
review of the same is in place.
DIRECTORS :
Mr. Paul Pandian, Mr. S Udaya Kumar, Dr. M. V. Pitke and Mr. Jay
Whitehurst resigned from the Board consequent to Tech Mahindra
Limited (formerly Mahindra-British Telecom Limited) acquiring
majority stake in the Company. The Board was reconstituted with
the appointment of Mr. Vineet Nayyar, Mr. Paul Pandian, Mr. C.
P. Gurnani, Mr. Sunil Joshi and Mr. Sanjay Kalra as Additional
Directors on 28th November 2005. They all hold office upto the
completion of ensuing Annual General Meeting. The Company
has received notices from shareholders in terms of section 257
of the Companies Act, 1956 proposing their candidature for the
office of Director.
AUDITORS:
The Auditors, Narayanan, Patil & Ramesh, Chartered Accountants,
retire at the ensuing Annual General Meeting and have confirmed
their eligibility and willingness to accept office, if re-appointed.
CONSERVATION OF ENERGY, RESEARCH AND
DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN
EXCHANGE EARNINGS AND OUTGO:
1. Conservation of Energy:
The operations of your Company are not energy-intensive.
However, adequate measures have been taken to reduce
energy consumption by using energy-efficient computers
and by the purchase of energy-efficient equipment with
latest technologies. Your company constantly evaluates new
technologies and invests in them to make its infrastructure
more energy efficient. Currently your Company uses CFL
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)
fittings to reduce the power consumption of fluorescent
tubes. Energy saving Air conditioners have been acquired
for effectiveness. As energy costs comprise a very small part
of your company’s total expenses, the financial impact of
these measures is not material.
2. Research & Development ( R&D):
Research and development of new services, designs,
frameworks, process and methodologies continue to be of
importance to the Company. This allows your Company to
increase quality, productivity and customer satisfaction
through continuous innovation.
3. Foreign Exchange earnings and outgo:
Major portion of the income of the Company is through
exports, the earnings and outgo of foreign exchange is as
under :
(Rupees Mn)
For the year ended March 31, 2006 2005
Foreign Exchange Earnings 1,184.69 901.65
Dividend from Subsidiary 4.86 4.57
Foreign Exchange outgo:-
I) Revenue items 52.15 23.75
II) Capital Items 11.87 6.81
PARTICULARS OF EMPLOYEES:
As required under Section 217(2A) of the Companies Act, 1956,
and the Rules made there under, a statement containing particulars
of the Company’s employees who were in receipt of remuneration
of not less than Rs. 24,00,000 during the year ended 31st March
2006, or of not less than Rs. 2,00,000 per month, if, employed for
part of the year, is given in the Annexure to this Report.
The Department of Company Affairs, has amended the Companies
(Particulars of Employees) Rules, 1975 to the effect that particulars
of employees of companies engaged in Information Technology
sector posted and working outside India not being directors or
their relatives, drawing more than Rs. 24,00,000 per financial year
or Rs. 2,00,000 per month, as the case may be, need not be
included in the statement but, such particulars shall be furnished
to the Registrar of Companies. Accordingly, the statement included
in this report does not contain the particulars of employees who
are posted and working outside India.
DIRECTORS’ RESPONSIBILITY STATEMENT:
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the Operating
Management, and after due enquiry, confirm that:
I. in the preparation of the annual accounts, the applicable
accounting standards have been followed;
II. they have, in the selection of the accounting policies, consulted
the Statutory Auditors and these have been applied
consistently and reasonable and prudent judgments and
estimates have been made so as to give a true and fair view
of the state of affairs of the Company as at 31st March 2006
and of the loss of the Company for the year ended on that
date;
397
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

III. proper and sufficient care has been taken for the maintenance of Commerce, the Ministry of Finance, the Reserve Bank of India,
of adequate accounting records in accordance with the VSNL, the Department of Telecommunications, the State
provisions of the Companies Act, 1956 for safeguarding the Governments and other Government agencies for their support
assets of the Company and for preventing and detecting and look forward to their continued support in the future.
fraud and other irregularities;
IV. the annual accounts have been prepared on a going concern
basis.
ACKNOWLEDGEMENTS: For and on behalf of the Board
The Directors thank Alcatel, vendors, investors, bankers for their
continued support during the year. Your Directors place on record
Vineet Nayyar
their sincere appreciation of the contribution made by the
employees at all levels, who through their competence, hard Bangalore, May 2, 2006. Chairman
work, solidarity, co-operation and support, have enabled the
Company to achieve consistent growth.
Your Directors thank the Government of India, particularly the
Department of Electronics, the Customs and Excise departments,
the Software Technology parks, Bangalore, Chennai, the Ministry

398
 TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

Annexure to the Director's Report

Information as per Section 217(2A) of the Companies Act, 1956, read with the companies Act, 1956, read with the companies (Particulars
of employees) Rules, 1975 and forming part of the Director's Report for the period ended 31st March, 2006.

Sr. Name Yearly Paid Designation Qualification Total Exp- Age Date of Last Designation
No Gross during erience (yrs) Joining Employment (org.) (last employment)
the year (yrs)
1 RAMA KRISHNA B 2,880,360 2,880,360 CHIEF OPERATING ME - CS 28 53 30-Aug-95 Electronic Corporation of Manager
OFFICER India Ltd

2 PRASAD A K 2,601,627 2,601,627 CHIEF OPERATING BE - E&C 28 56 31-Jul-97 SELF EMPLOYED Consultant
OFFICER

3 RAGHAVENDRA RAO A 2,533,256 2,533,256 PROJECT CHIEF M.Tech - 20 43 1-Dec-95 Indian Telephone Senior Engineer
Electrical Engg. Industries Ltd

4 NAGASUNDAR RAM C 2,454,868 2,454,868 PROJECT CHIEF M.Tech - Ins. 28 49 1-Oct-97 Bharat Electronics Manager
Corporation Ltd

5 MURTHY M S N 2,474,932 2,474,932 PROJECT CHIEF M.Sc - Maths 30 50 16-Dec-95 Electronic Corporation Senior Technical
of India Ltd Officer

6 RAVICHANDRAN* 4,400,040 189,251 CHIEF OPERATING M.S. Computer 29 49 16-Mar-06 Mcontech Ltd COO
OFFICER BT/APAC Science

7 SANKAR GHOSH* 3,200,160 137,640 Centre Head - Kolkatta M.Tech 31 56 16-Mar-06 Mcontech Ltd Vice President

8 GEORGE* 3,200,160 137,640 Centre Head - M.Tech 20 44 16-Mar-06 Mcontech Ltd Vice President
MUNDESSARY Bangalore

9 PRAVEEN KUMAR* 2,400,000 103,227 Centre Head - Noida B.Tech, M.Tech, 22 50 16-Mar-06 Mcontech Ltd Centre Head
SHARMA MBA

10 AJIT ASHUTOSH KALE* 2,400,000 103,227 Corporate Head MCA 18 43 16-Mar-06 Mcontech Ltd Principal Consultant

11 DIWAKAR MENON* 2,400,000 6,453 Corporate Head BE 18 40 31-Mar-06 SELF EMPLOYED Consultant

*Employed for part of the year.

Notes :
1. Nature of employment is contractual.
2. The above employees are not related to any other director.
3. No employee holds by himself/herself or along with his/her spouse and dependent children 2% or more of the equality shares of
the Company.
4. Terms and conditions are as per Company's Rules/Contract.
5. Gross remuneration received as shown in the statement includes Salary, Commission, Bonus, House Rent Allowance or value of
perquisites for accommodation, car, perquisites value/allowance as applicable, employers contribution to Provident Fund and
Superannuation Scheme including group insurance premium, leave encashment, leave travel facility, reimbursement of medical
expenses and all allowances/perquisites and terminal benefits as applicable.

399
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

AUDITORS’ REPORT
To the members of TECH MAHINDRA (R & D SERVICES) LIMITED (formerly Axes Technologies (India) Private Limited)

1. We have audited the attached Balance Sheet of TECH
MAHINDRA (R & D SERVICES) LIMITED, as at 31st March
2006 and also the Profit & Loss Account and the Cash Flow
Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the
company’s management. Our responsibility is to express an
opinion on these Financial Statements based on our audit.
2. We conducted our audit in accordance with Auditing
Standards generally accepted in India. Those Standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the Financial Statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
3. As required by the Companies (Auditors Report) Order,
2003, issued by the Central Government of India, in terms of
Sub-section (4A) of Section 227 of the Companies Act, 1956,
we enclose in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the said order.
4. Further to our comments in the Annexure referred to in
Paragraph 3 above, we report that:
a) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purpose of our audit.
b) In our opinion, proper books of accounts as required by
Law have been kept by the Company so far as appears
from our examination of such books.
c) The Balance Sheet, Profit & Loss Account and Cash
Flow Statement dealt with by this report are in
agreement with the books of account.
d) In our opinion, the Balance Sheet, Profit and Loss
Account and Cash Flow Statement dealt with this
report comply with the Accounting Standards referred
to in Sub-section (3C) of Section 211 of the Companies
Act, 1956.
e) On the basis of written representations received from
the Directors and taken on record by the Board of
Directors, we report that none of the Directors of the
company are disqualified as on 31.03.2006 from being
appointed as Directors of the company under clause (g)
of sub section (1) of Section 274 of Companies Act,
1956.
f) In our opinion and to the best of our information and
according to the explanations given to us, the accounts
together with the notes thereon give the information
required under the Companies Act, 1956 in the manner
so required and give a true and fair view in conformity
with the Accounting Principles generally accepted in
India:
i) In the case of Balance Sheet, of the state of affairs
of the company as at 31st March 2006.
ii) In the case of Profit and Loss Account, of the Loss
for the year ended on that date.
iii) In the case of Cash Flow Statement, of the cash
flows for the year ended on that date.
For Narayanan, Patil and Ramesh
Chartered Accountants
Place : Bangalore, L R Narayanan
Date : April 26, 2006 Partner

400

ANNEXURE TO AUDITORS’ REPORT
Annexure referred to in paragraph 3 of the Auditors’ Report to the members of TECH MAHINDRA (R & D SERVICES) LIMITED
for the period ended March 31, 2006. We report that:
(i) (a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of Fixed Assets.
(b) All the fixed assets have been physically verified by
the management during the year and no material
discrepancies were noticed on such verification.
(c) During the year, the company has not disposed off
any major part of Plant & Machinery that would affect
the Going Concern status of the Company.
(ii) According to the information and explanations given to us
the provision of Clause 4(ii) is not applicable, as the company
has no inventory.
(iii) According to the information and explanations given to us,
the company has neither granted nor taken any loans,
secured or unsecured, to or from any companies, firms or
other parties covered in the register maintained under
section 301 of the Act. Hence provision of clause 4(iii) is not
applicable.
(iv) In our opinion and according to the information and
explanations given to us, there are adequate internal control
procedures commensurate with the size of the company
and the nature of its business, with regard to purchase of
inventory, fixed assets and for the sale of goods to the
extent applicable to the company. During the course of
audit, we have not observed any continuing failure to
correct major weaknesses in internal controls.
(v) (a) According to the information and explanations given
to us, we are of the opinion that the contracts or
arrangements that need to be entered into a register
in pursuance of section 301 of the Companies Act,
1956 have been so entered.
(b) In our opinion and according to the information and
explanations given to us, the transactions made in
pursuance of contracts or arrangements entered in
the register maintained under Section 301 of the
Companies Act, 1956 and exceeding the value of
rupees five lakhs in respect of any party during the
year have been made at prices which are reasonable
having regard to prevailing market prices at the relevant
time.
(vi) According to the information and explanations given to us,
the company has not accepted deposits from the public and
hence, the directives issued by the Reserve Bank of India
and the provisions of Sections 58A and 58AA or any other
relevant provisions of the Act and the rules framed there
under, are not applicable to the Company.
(vii) In our opinion, the company has an internal audit system
commensurate with it’s the size and nature of its business.
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)
(viii) According to the information and explanations given to us
the provision of clause 4(viii) is not applicable.
(ix) (a) The company is regular in depositing with appropriate
authorities undisputed statutory dues including
Provident Fund, Income Tax, Wealth Tax, Service
Tax, Sales Tax, and any other statutory dues applicable
to it.
(b) According to the information and explanations given
to us, no undisputed amounts payable in respect of
Provident Fund, Income Tax, Sales Tax, Wealth Tax,
Service Tax and other material statutory dues were in
arrears, as at 31.03.2006 for a period of more than six
months from the date they became payable.
According to the information and explanations given
to us, there are no dues of Income Tax, Sales Tax,
Service Tax and Wealth Tax which have not been
deposited with appropriate authorities on account of
any dispute excepting the below mentioned.
Name of the Nature Disputed Period to which Forum where
Statute of Dues Amount the amount dispute is
related pending
Income Income Tax 5.51 Lacs AY 2003-04 Assessing
Tax Act Officer
(x) According to the information and explanations given to us
the provision of clause 4(x) is not applicable.
(xi) In our opinion, and according to the information and
explanations given to us, the Company does not have any
outstanding dues to any financial institution or banks during
the year.
(xii) In our opinion, the company has not granted any loans and
advances on the basis of security by way of pledge of
shares, debentures and other securities. Hence,
maintenance of records is not applicable.
(xiii) In our opinion, the company is not a chit fund or nidhi mutual
benefit fund / society and therefore, the provisions of
clause 4(xiii) of the Order are not applicable to the company.
(xiv) According to the information and explanations given to us,
the company is not dealing in or trading in shares, securities,
debentures and other investments and accordingly, the
provisions of clause 4(xiv) of the Order are not applicable to
the company.
(xv) In our opinion and according to the information and
explanations given to us, the company has not given
guarantees for loans taken by others from banks accordingly,
the provisions of clause 4(xv) of the Order is not applicable
to the company.
401
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

(xvi) In our opinion and according to the information and the provisions of clause 4(xix) of the Order are not applicable
explanations given to us, the company has not taken any to the company.
term loans from banks and therefore, the provisions
(xx) According to the information and explanations given to us,
of clause 4(xvi) of the Order are not applicable to
the provisions of Clause 4(xx) of the Order are not applicable
the company.
to the company since the company has not raised any
(xvii) According to the information and explanations given to us money through public issue of shares.
and on an overall examination of the balance sheet of the
(xxi) According to the information and explanations given to us,
company, we report that no funds raised on short-term
no fraud on or by the company has been noticed or reported
basis have been used for long-term investment.
during the course of our audit.
(xviii) According to the information and explanations given to us,
the Company has not made any preferential allotment of For Narayanan, Patil and Ramesh
shares during the year to parties and companies covered in Chartered Accountants
the Register maintained under Section 301 of the Act and
therefore, the provisions of clause 4(xviii) of the Order are
not applicable to the company.
(xix) According to the information and explanations given to us,
Place : Bangalore, L R Narayanan
the Company has not issued any debenture and therefore,
Date : April 26, 2006 Partner

402
 TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

BALANCE SHEET

As at As at
March 31, 2006 March 31, 2005
Schedule INR INR
I. SOURCES OF FUNDS :
SHAREHOLDERS’ FUNDS:
Share Capital ......................................................................... I 46,033,500 42,184,000
Share Application Money ...................................................... — 768,500
Reserves and Surplus ............................................................ II 943,067,570 977,768,497
Deferred Tax Liability ............................................................. — 19,614,933
TOTAL ................................................................................... 989,101,070 1,040,335,930

II. APPLICATION OF FUNDS :

FIXED ASSETS: .................................................................... III
Gross Block ........................................................................... 626,390,629 633,120,873
Less : Depreciation ................................................................ 365,698,141 225,408,769

Net Block ............................................................................... 260,692,488 407,712,104

Capital Work-in-Progress, including Advances ...................... 4,972,560 4,321,563
265,665,048 412,033,667
INVESTMENTS ...................................................................... IV 385,518,566 321,874,725
CURRENT ASSETS, LOANS AND ADVANCES: .................... V
Sundry Debtors ..................................................................... 450,322,119 285,844,324
Cash and Bank Balances ....................................................... 75,183,954 27,813,645
Loans and Advances ............................................................. 34,479,286 31,161,223
559,985,359 344,819,192
Less : CURRENT LIABILITIES AND PROVISIONS:
Liabilities ................................................................................ VI 164,260,719 9,141,595
Provisions .............................................................................. VII 57,807,184 29,250,059
222,067,903 38,391,654
Net Current Assets ................................................................ 337,917,456 306,427,538
TOTAL ................................................................................... 989,101,070 1,040,335,930

SIGNIFICANT ACCOUNTING POLICIES

AND NOTES ON ACCOUNTS XI

As per our attached Report of even date For Tech Mahindra (R&D Services) Limited

Mr. Vineet Nayyar Mr. C. P. Gurnani

For Narayanan, Patil & Ramesh Director Director
Chartered Accountants

Ms. Sudha Rani

Company Secretary
A.R. Narayanan
Partner
Membership No. 25588

Bangalore, 26 April, 2006

403
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED

March 31, 2006 March 31, 2005

Schedule INR INR

INCOME ................................................................................................ VIII 1,291,637,469 1,187,687,486

EXPENDITURE :
Personnel ............................................................................................... IX 451,317,600 335,546,204
Operating and Other Expenses .............................................................. X 535,191,718 655,800,030
Depreciation ........................................................................................... 163,754,942 55,810,934
TOTAL .................................................................................. 1,150,264,260 1,047,157,168
PROFIT BEFORE TAXATION ................................................................ 141,373,209 140,530,318
Provision for Taxation
– Current tax ........................................................................................ 50,020,000 2,965,000
– Deferred tax ..................................................................................... (19,614,933) 4,382,688
– Fringe benefit tax ............................................................................. 3,650,000 —
PROFIT AFTER TAXATION ................................................................... 107,318,142 133,182,630
Acquisition related expenses ................................................................. (61,566,480) —
Contractual Compensation Payment ..................................................... (116,543,616) —
PROFIT FOR THE YEAR AFTER TAXATION ........................................ (70,791,954) 133,182,630
Balance brought forward from previous year/period .............................. 701,135,168 675,677,278

Balance available for appropriation ......................................................... 630,343,214 808,859,908

Interim Dividend ..................................................................................... — 83,494,756
Dividend Tax .......................................................................................... — 10,911,721
Transfer to General Reserve .................................................................. — 13,318,263
Balance Carried to Balance Sheet .......................................................... 630,343,214 701,135,168

Earning Per Share (Refer note 10 of notes to accounts)

– Basic ................................................................................................ (7.93) 15.95
– Diluted ............................................................................................. (7.69) 14.58

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS XI

As per our attached Report of even date For Tech Mahindra (R&D Services) Limited

Mr. Vineet Nayyar Mr. C. P. Gurnani

For Narayanan, Patil & Ramesh Director Director
Chartered Accountants

Ms. Sudha Rani

Company Secretary
A.R. Narayanan
Partner
Membership No. 25588

Bangalore, 26 April, 2006

404
 TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

CASH FLOW FOR THE PERIOD ENDED

Particulars March 31, 2006 March 31, 2005

INR INR
A. Cash Flow from Operating Activities
Net Profit before taxation ................................................................ 141,373,209 140,530,318
Adjustments for:
Depreciation .................................................................................... 163,754,942 55,810,934
Loss on sale of Fixed Assets, (net) ................................................. 1,012,079 (89,898)
Decrease in fair value of Long Term Investment ............................ 249,999 2,815,585
Acquisition related expenses .......................................................... (61,566,480) —
Contractual Compensation Payment ............................................... (116,543,616) —
Dimunition in the value of Investment ............................................ 114,429 —
Exchange gain (net) ......................................................................... — —
Dividend from current Investments ................................................ (14,909,064) (22,090,193)
Employee Compensation Expense on ESOP .................................. 36,091,027 100,632,473
Interest Income ............................................................................... (2,124,137) (1,974,212)
(Profit) /Loss on Sale of Investments .............................................. (31,833,639) —

(25,754,460) 135,104,689
Operating profit before working capital changes ............................ 115,618,749 275,635,007
Adjustments for:
Trade and other receivables ............................................................ (158,817,517) (70,867,426)
Trade and other payables ................................................................ 163,930,219 (8,313,123)
........................................................................................................ 5,112,703 (79,180,549)
Cash generated from operations ..................................................... 120,731,452 196,454,459
Direct Taxes .................................................................................... (37,902,311) (3,155,393)
Net cash from operating activities .................................................. 82,829,141 193,299,066
B. Cash Flow from Investing Activities
Purchase of Fixed assets ................................................................ (18,720,450) (35,930,924)
Purchase of Investments (net) ........................................................ (64,008,269) (18,467,498)
Sale of Fixed Assets ........................................................................ 322,046 475,351
Interest received ............................................................................. 2,124,136 1,974,212
Dividend on current investments received ..................................... 46,742,704 22,090,193
Net cash from investing activities ................................................... (33,539,833) (29,858,666)
C. Cash Flow from Financing Activities
Proceeds from issue of Shares (including Securities Premium) ..... 3,081,000 1,301,500
Share Application Money ................................................................ — —
Dividend (including Dividend Tax paid) ............................................ (5,000,000) (158,427,397)
Net cash from financing activities ................................................... (1,919,000) (157,125,897)
Net increase /(decrease) in cash and cash equivalents (A+B+C) 47,370,308 6,314,502
Cash and cash equivalents at the beginning of the period ....... 27,813,646 21,499,143
Cash and cash equivalents at the end of the period .................. 75,183,954 27,813,646

As per our attached Report of even date For Tech Mahindra (R&D Services) Limited

Mr. Vineet Nayyar Mr. C. P. Gurnani

For Narayanan, Patil & Ramesh Director Director
Chartered Accountants

Ms. Sudha Rani

Company Secretary
A.R. Narayanan
Partner
Membership No. 25588

Bangalore, 26 April, 2006

405
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

As at As at
SCHEDULES FORMING PART OF THE March 31, 2006 March 31 2005
BALANCE SHEET INR INR

As at As at SCHEDULE IV
March 31, March 31, INVESTMENTS (AT COST)
2006 2005 Long Term (unquoted)
INR INR
Trade:
SCHEDULE I
In Subsidiary Companies :
SHARE CAPITAL :
5,00,000 Ordinary Shares of
Authorised : US$ 0.01 each fully paid-up of
12,000,000 Equity Shares Tech Mahindra (R & D Services)
of Rs.5/- each ................................................. 60,000,000 60,000,000 Inc, USA 234,900 234,900
60,000,000 60,000,000 Less : Provision for Dimunition — —

Issued & Subscribed : 234,900 234,900

9,206,700 Equity Shares of Rs.5/- each 2,40,000 Shares of SGD 1 each,
(Previous Year: 8,436,800 Equity Shares Face Value SGD 2,40,000
of Rs.5/- each) ................................................ 46,033,500 42,184,000 fully paid-up of Tech Mahindra
(R & D Services) Pte Limited,
Paid-up : Singapore 6,307,200 6,307,200
9,206,700 Equity Shares of Rs.5/- each Less : Dimunition in
(Previous Year: 8,436,800 Equity Shares Investments 6,307,199 6,057,200
of Rs.5/- each) ................................................ 46,033,500 42,184,000
1 250,000
TOTAL ........................................................... 46,033,500 42,184,000
234,901 484,900
Current Investments
SCHEDULE II Non Trade :
RESERVES AND SURPLUS: Indira Vikas Patra — 500
General Reserve : DSPML Liquidity Fund-
As per last Balance Sheet 60,834,856 47,516,593 Institutional Plan 38,875,302 —
Add : Transfer from Profit (38,867.528 Units Of
and Loss Account — 13,318,263 Face Value Rs 1000,
60,834,856 60,834,856 Market Value Rs. 38,875,302)

Securities Premium : Tata Fixed Horizon Fund -

Series III 46,000,000 —
As per last Balance Sheet 99,592,400 84,242,000
(46, 00,000 Units Of
Add : Additions during
Face Value Rs 10,
the year 152,297,100 15,350,400
Market Value Rs 46,273,240)
251,889,500 99,592,400 DSPML Fixed Term
Balance in Profit and Plan Series 3C 200,000,000 —
Loss Account 630,343,214 701,135,168 (2,00,000 Units Of
ESOP Outstanding — 116,206,073 Face Value Rs 1000,
Market Value Rs. 200,000,000)
TOTAL 943,067,570 977,768,497 DSPML Fixed Term Plan-
Series One B 100,408,363 —

SCHEDULE III
GROSS BLOCK DEPRECIATION NET BLOCK
Description of Assets Cost as at Additions Deductions Regrouping Cost as at Upto Restatement Acc Depn For the Deductions Upto As at As at
March , 31 during during March, 31 March, 31 on Change SLM-Upto year during the March, 31 March,31 March,31
2005 the year the year 2006 2005 of Method March 31, 05 year 2006 2006 2005
Land 91,374,785 — — — 91,374,785 — — — — — — 91,374,785 91,374,785
Building 182,445,917 — — — 182,445,917 29,221,245 12,668,607 41,889,852 11,734,349 — 53,624,201 128,821,716 153,224,672
Plant & Machinery
— Computers 103,660,587 10,423,124 6,786,913 (440,849) 106,855,949 65,569,030 7,369,911 72,938,941 22,121,344 5,466,689 89,593,596 17,262,353 38,091,557
— Electrical
Installation 48,307,454 292,599 — 37,675 48,637,728 22,326,509 16,425,148 38,751,657 6,241,095 — 44,992,752 3,644,975 25,980,945
— Others 65,278,761 619,377 511,119 — 65,387,019 31,832,934 22,171,875 54,004,809 6,835,085 511,119 60,328,775 5,058,244 33,445,827
Software Purchase 15,217,119 219,091 15,877,059 440,849 — 5,378,224 10,279,744 15,657,968 219,091 15,436,210 — — 9,838,895
Furniture & Fixtures 105,324,992 4,284,813 230,634 (15,451) 109,363,720 59,144,947 26,330,166 85,475,113 13,068,793 216,733 98,327,173 11,036,544 46,180,045
Office Equipments 12,688,596 502,204 — (22,224) 13,168,576 6,076,036 4,021,443 10,097,479 1,468,694 — 11,566,173 1,602,403 6,612,560
Vehicles 8,822,660 1,728,245 1,393,970 — 9,156,935 5,859,840 1,533,480 7,393,321 1,266,117 1,393,970 7,265,468 1,891,467 2,962,820
Total 633,120,871 18,069,453 24,799,695 — 626,390,629 225,408,765 100,800,374 326,209,140 62,954,568 23,024,721 365,698,138 260,692,488 407,712,106
Capital Work-in-progress 4,321,563 650,997 — — 4,972,560 — — — — — — 4,972,560 4,321,563
Total 265,665,048 412,033,669

406
 TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

(1,00,407.993 Units Of As at As at
Face Value Rs.1000 Each, March 31, 2006 March 31 2005
Market Value Rs. 100,499,032.) INR INR
DSPML Equity Fund — 487,517 SCHEDULE V
DSPML Floating Rate Fund — 534,526 CURRENT ASSETS, LOANS AND
Franklin India Prima Fund — —
ADVANCES :
HDFC Capital Builder Fund — 1,335,920
Current Assets :
HDFC Cash Management
Savings Plus — — (a) Sundry Debtors :
HDFC Multiple Yield Fund — — (Unsecured)
ICICI Discovery Fund — — Debts outstanding for a
period exceeding six months:
ICICI Emerging Star Fund — —
: considered good — —
ICICI Infrastructure Fund — —
: considered doubtful — —
Prudential ICICI Floating Rate Plan C — —
SBI Magnum Sectorfund — — — —
SBIMF Magnum Institutional Other debts : considered good 450,322,119 285,844,324
Income Fund — — : considered doubtful — —
Sundaram Select Midcap — — 450,322,119 285,844,324
Birla Advantage Fund Plan Less: Provision — —
A-F/N 1011291668 — 4,145,377
450,322,119 285,844,324
Birla Bond Plus-F/N 1011291668 — 100,000
(b) Cash and Bank Balances :
Birla Fixed Maturity Plan — 22,496,114
Cash In Hand 868,984 752,226
Franklin India Prima Funds-
F/N 0019900795595 — 2,000,000 Balance with
Scheduled banks :
GFRF- Long Term Plan-
(i) In Current accounts 8,276,130 9,902,679
F/N 228090/65 — 36,000,000
(ii) In Fixed Deposit
HDFC Balanced Fund — 4,001,110
accounts 66,038,840 17,158,740
HDFC Cash Management
Balance with other banks :
Savings Plus-F/N 1154426/91 — 596,671
In Current accounts — —
HDFC Equity Fund-F/N 1154426/19 — 2,206,652
HDFC Floating Rate Fund- 75,183,954 27,813,645
Short Term-F/N 1154426/91 — 22,000,000 (c) Loans and Advances :
HDFC Multiple Yield Fund- (Unsecured)
F/N 1154426/9 — 20,000,000 Advances recoverable
HSBC Equity Fund-Dividend- in cash or in kind or for
F/N 77982 — 2,399,508 value to be received
HSBC Income Fund (i) considered good 34,479,286 31,161,224
Short Term-F/N 54582 — 546,486 (ii) considered doubtful — —
Prudential ICICI Floating Rate Plan– 34,479,286 31,161,224
F/N 692775/94 — 28,506,236
Less : Provision — —
Reliance Equity Opportunities Fund — 9,938,200
Reliance Fixed Term Scheme- 34,479,286 31,161,224
F/N 4194186012 — 54,000,000
TOTAL 559,985,359 344,819,193
Reliance Fixed Term Scheme-
Plan 15/16-Fn 4195907815 — 10,000,000
Reliance Fixed Term Scheme-
Qrtl Plan ( Series Viii) — 12,000,000 Schedule VI
Reliance Growth Fund- CURRENT LIABILITIES :
F/N 4195094864 — 10,487,820 Sundry Creditors : 164,260,719 9,141,595
Reliance Index Fund — 4,941,700
TOTAL 164,260,719 9,141,595
Tata Infrastructure Fund — 5,000,000
Tata Liquid Fund-F/N 441364/55 — 1,642,844
Tata Opportunity Equity Fund-F/
N 441364/55 — 3,000,000 Schedule VII
Tata Short Term Bond Fund- PROVISIONS:
F/N 441364/55 — 212,487 Provision for taxation
Temepleton Floating Income Fund- (net of payments) 18,357,058 1,548,560
F/N 1529900771364 — 1,362,263
Templeton Flexi-Cap Fund — 4,820,000 Provision for wealth tax 32,776 35,000
Templeton India Treasury- Provision for Gratuity 10,600,001 5,902,665
F/N 0149900795595 — 55,915,364
Tata Consultancy Services Limited — 497,250 Provision for Leave 28,817,349 21,763,834
Encashment
Punjab National Bank — 215,280
TOTAL 57,807,184 29,250,059
3I Infotech Limited — —
385,283,665 321,389,825
TOTAL 385,518,566 321,874,725

407
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT Schedule XI

As at As at I. SIGNIFICANT ACCOUNTING POLICIES:
March 31, 2006 March 31 2005 1. Basis for Preparation of Financial Statements:
INR INR The Financial statements are prepared under the historical cost convention, in
accordance with generally accepted accounting principles and the provisions of
Schedule VIII the Companies Act, 1956, as adopted consistently by the company. All income
INCOME and expenditure having a material bearing on the financial statements are
recognized on the accrual basis.
Income from services (net) 1,215,020,926 1,156,374,299 2. Use of Estimates:
[(Tax deducted at source Rs.500,535) The preparation of financial statements in conformity with Generally Accepted
(previous period Rs.73,829)] Accounting Principles requires management to make estimates and assumptions
Interest on : that affect the reported amounts of assets and liabilities and disclosure of
Deposits with banks 1,783,895 1,471,544 contingent liabilities at the date of the financial statements and the results of
operations during the reporting yearend. Although these estimates are based
[(Tax deducted at source upon management’s best knowledge of current events and actions, actual
Rs.404,653) results could differ from these estimates.
(previous period Rs.301,737)] Management periodically assesses using external and internal sources whether
Interest on Staff Loans 340,241 502,668 there is an indication that an asset may be impaired. Impairment occurs where the
carrying value exceeds the present value of future cash flows expected arise from
2,124,136 1,974,212 the continuing use of the asset and its eventual disposal. The impairment loss to
Dividend received on current be expensed is determined as the excess of the carrying amount over the higher
investments (non - trade) 14,909,064 15,901,168 of the asset’s net sale price or present value as determined above. Contingencies
Profit on sale of current investments 31,833,639 6,184,490 are recorded when it is probable that a liability will be incurred, and the amount can
be reasonably estimated. Actual results could differ from these estimates.
Exchange fluctuations (Net) 13,228,351 4,193,558
3. Revenue Recognition:
Miscellaneous income 14,521,353 3,059,759 Revenue is recognized upon completion of milestones described in customer
TOTAL 1,291,637,469 1,187,687,486 orders wherever payments are linked to such milestones. In cases where
payments are based on completion of each man-month of service rendered,
revenue is recognized upon completion of each man-month of service.
Income from fixed income bearing investments/advances is recognized on
Schedule IX time basis considering the amount invested/advanced and the rate of interest.
PERSONNEL Income from training is recognized over the period of instruction.
Salaries, wages and bonus 404,913,943 299,625,301 Dividend income is recognized when the company’s right to receive the
Contribution to provident dividend is established. Profit on sale of investments is recognized on
and other funds 27,362,163 18,457,654 transfer of title from the company and is determined as the difference
between the sale price and the carrying value of the investment.
Staff welfare 19,041,494 17,463,249
4. Expenditure:
TOTAL 451,317,600 335,546,204 Expenses are accounted on the accrual basis and provisions are made for all
known losses and liabilities.
Schedule X 5. Foreign Currency Transaction:
OPERATING AND OTHER EXPENSES Foreign currency transactions during the year are translated at the exchange rates
prevailing on the date of transaction. Current Assets and Current Liabilities
Power 37,732,943 34,305,455
outstanding in foreign currency as on the date of the Balance Sheet are translated
Rent 23,239,723 25,468,724 at exchange rates prevailing as on the last day of the relevant financial year.
Rates and taxes 3,274,204 2,227,156 Differences arising out of rate fluctuations are charged to revenue accounts.
Communication expenses 10,024,774 8,208,422 The Company uses foreign exchange forward contracts to hedge its exposure
Travelling expenses 87,827,934 95,603,556 to movement in foreign exchange rates. The use of these foreign exchange
forward contracts reduces the risk or cost to the company and the company
Recruitment expenses 268,738 378,888 does not use the foreign exchange contracts for trading or speculation purposes.
Hire charges 5,561,779 4,625,615 The company records the gain or loss on effective hedges over the period of
Repairs and maintenance : forward contract and is transferred to the profit and loss account of that period.
Buildings 6. Fixed Assets:
(including leased premises) 40,017 — Fixed assets are stated at cost of acquisition, less accumulated depreciation. All
Direct costs are capitalised till the assets are ready to be put to use. Capital Work-
Machinery 4,434,169 3,937,890 in-progress is stated at cost.
Others 1,258,901 1,350,374 7. Depreciation:
The Company has changed its accounting policy on method of depreciation with
5,733,087 5,288,264
effect from April 01, 2005 and has adopted the Straight Line Method of
Insurance 4,821,351 5,808,222 depreciation in place of Written Down Value Method.
Professional fees 4,478,509 6,288,205 Depreciation in respect of Fixed Assets, is provided adopting straight-line
Software packages 841,800 — method over the useful life of the asset as estimated by the management.
Depreciation for the assets purchased/sold during the period is proportionately
Training 2,469,183 3,527,470
charged. Individual low cost assets (acquired for less than Rs.5,000/-) are
Advertising, marketing and entirely depreciated in the year of acquisition. The useful life of all the assets
selling expenses 70,110 1,789,363 estimated by the management are as below:
Onsite Fees 72,339,106 — Buildings 15 years
Marketing Fees 203,521,349 333,477,641 Computers 3 years
Loss on sale of fixed assets (Net) 1,012,079 (89,898) Plant & Machinery 3-5 years
ESOP Compensation Written Off 36,091,027 100,632,473 Furniture & Fixtures 5 years
Dimunition in the value of Investment 364,428 2,815,585 Vehicles 5 years
8. Retirement Benefits:
Advances / bad debts written off (65,380) 3,668,657
Gratuity: in accordance with the Payment of Gratuity Act, 1972, company
Exchange fluctuations (Net) 5,968,688 — provides for gratuity, a defined benefit retirement plan (the Gratuity Plan)
Miscellaneous expenses * 29,616,286 21,776,232 covering eligible employees. The gratuity plan provides a lump-sum payment to
vested employees at retirement, death, incapacitation or termination of
TOTAL 535,191,718 655,800,030 employment, of an amount based on the employee salary and the tenure of
employment. Liabilities with regard to the gratuity plan are determined by
* includes Printing and stationery expenses,hospitality expenses, office maintenance, actuarial valuation, based upon which the company contributes all the ascertained
etc. liabilities to the ‘Axes Technologies Gratuity Trust’. Trustees administer

408
 TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

contributions made to the trust and contributions are invested in the specific 5,000,000 equity shares of Rs.5/- each totaling to Rs.25,000,000/-
designated instruments, as permitted by law. 4. Fixed Assets:
Provident Fund: Eligible employees receive benefits from a provident fund, The Company possesses assets worth Rs. 15,915.17 Lakhs whose ownership
which is a defined contribution plan. Both the employees and the company make does not vest with the Company and are in use by the company on a “Loan
monthly contributions to the provident fund plan equal to a specified percentage basis”. No entries are passed in the books of the Company in respect of these
of the covered employees’ salary. assets. The Details of such Fixed Assets are as below:
9. Investments:
Investments are categorized into Long Term Investments and Current Name of the Party Amount (Rs. Lakhs)
Investments. Long Term Investments are stated at cost unless there is a Alcatel Inc., USA 14,574.20
decline, other than temporary, in value thereof in which case the recorded value Motorola 443.79
is reduced to recognize the decline. Current Investments are carried at lower of Ipgen Inc 85.55
Cost or Fair Market value as on the date of Balance Sheet. Coppercom 109.33
10. Income Taxes and Deferred Taxes: Paradyne 232.72
The differences that result between the profit offered for income taxes and the Ulticom 30.82
profit as per the financial statements are identified, and thereafter a deferred tax Others 438.76
asset or deferred tax liability is recorded for timing differences, namely the
differences that originate in one accounting period and reverse in another, based Total 15,915.17
on the tax effect of the aggregate amount being considered. The tax effect is 5. Contingent Liability:
calculated on the accumulated timing differences at the end of an accounting
period based on prevailing enacted or substantially enacted regulations. Deferred (Amt. in Rs. Lakhs)
tax assets are recognized only if there is reasonable certainty that they will be Particulars 2005 - 2006 2004 - 2005
realized and are reviewed for the appropriateness of their respective carrying a) Towards Bank Guarantees given
values at each balance sheet date. to Government Authorities 200.00 167.20
11. Earnings per Share: b) Estimated amount of contracts
Basic earning per share is computed by dividing net income by the weighted remaining to be executed on capital
average number of common stock outstanding during the period. account and not provided for 6.92 40.20
The number of shares used in computing diluted earnings per share comprises c) Claims from Statutory Authorities 20.50 15.00
the weighted average shares considered for deriving basic earning per share, 6. Foreign Exchange Inflow and Outflow:
and also the weighted average number of equity shares that could have been The Foreign Exchange Inflow and Outflow of the Company during the year was
issued on the conversion of all dilutive potential equity shares. The diluted as follows:
potential equity shares are adjusted for the proceeds receivable, had the shares
been actually issued at fair value (i.e., the average market value of the Inflow 2005 – 2006 2004 – 2005
outstanding shares). Diluted potential equity shares are deemed converted as Towards Software Sales Rs. 116,23,89,182/- Rs. 89,66,55,763/-
of the beginning of the period, unless issued at a later date.
(US$ 2,62,32,522/-) (US$ 1,98,70,664/-)
12. Cash Flow Statement:
Towards reimbursement of expenses Rs. 2,07,85,011/- Rs. 44,58,417/-
Cash flows are reported using the indirect method, whereby profit before tax
is adjusted for the effects of transactions of a non-cash nature and any deferrals (US$ 4,71,114.75)- (US$ 1,01,568/-)
or accruals of past or future cash receipts or payments. The cash flows from Towards Dividends Rs. 48,58,500/- Rs. 45,65,000/-
regular revenue generating; financing and investing activities of the company (US$ 1,00,000/-) (US$ 1,00,000/-)
are segregated. Towards Share Capital Rs. 15,18,936./- Rs. 5,33,000/-
13. Events occurring after the date of Balance Sheet: (US$ 34,824.84/-) (US$ 12,174.50)
Material events occurring after date of Balance Sheet are taken into cognizance. Outflow
II. NOTES ON ACCOUNTS for the year ended March 31, 2006 (forming an Revenue Items (Travel, Marketing) Rs. 52,13,35,035./- Rs. 23,75,48,741/-
integral part of accounts) (US$ 119,08,326/-) (US$ 53,26,669/-)
1. Corporate Transaction: Capital Items purchased Rs. 118,74,776/- Rs. 68,15,570/-
During the current period, the Shareholders of the Company have entered into (US$ 2,69,526/-) (US$ 1,51,164/-)
a Share Purchase Agreement with M/s. Tech Mahindra Limited (TML) (formerly Dividend Rs. 50,00,000/- Rs. 1,82,05,479/-
M/s. Mahindra British Telecom Limited) on November 15, 2005, under which, (US$ 114207/-) (US$ 4,06,494/-)
99.93% of the shares of the Company are sold to TML under the terms of the
Share Purchase Agreement entered into between the said Shareholders, the 7. Employee Stock Option Plan:
Company and the TML. Consequent to the said Share Purchase Agreement and During the previous years, the Company had granted 4,23,000 employee stock
the recording of the transfer of shares in favour of TML, the company would options to the employees of Tech Mahindra (R & D Services) Pte Limited,
become a wholly-owned subsidiary of TML. Singapore (formerly Axes Technologies (Singapore) Pte Ltd) and Tech Mahindra
2. Change in Method of charging depreciation: (R & D Services) Inc, USA (formerly Axes Technologies Inc), subsidiaries of the
The Board of Directors of the company in the meeting held on October 20, 2005 company as per terms enunciated in the “Axes ESOP Plan – 1” and had forfeited
have changed the Accounting Policy of the company in respect of charging 6,500 options.
Depreciation with effect from April 1, 2005. The Company was following Also the company had granted 4,92,600 employee stock options to its own
Written Down Value Method of charging the depreciation at the rates as employees as per the terms enunciated in the “Axes ESOP Plan – 1” and had
prescribed under Schedule XIV of Companies Act, 1956. Pursuant to the Board forfeited 21,500 options during previous years.
resolution changing the Accounting Policy the Company has changed the
method of charging Depreciation on Fixed Assets, from Written Down Value The excess of fair market value (as determined by the Board) of the underlying
Method to Straight Line Method over the useful lives of the assets as equity shares as of the date of the grant of the options over the exercise price
determined by the management, retrospectively, from the date of inception. of the options, including up-front payments, if any, is recognized and amortized
on a straight line basis over the vesting period. The amortization during the
Depreciation on Fixed Assets has been calculated as per new method
current period on this basis, including the reversal on forfeited options, amounts
retrospectively for all the assets of the Company. As a result of such change,
to a sum of Rs. 3,60,91,027/-, which is shown separately in Schedule X to the
the Company has recognized the additional depreciation amounting to
Profit & Loss Account. The said amortization includes amount recognized as
Rs.100,800,375/- and the same is charged to Profit and Loss Account as a
expense relating to accelerated vesting on the options on account of the
separate item for the current period and accordingly disclosed separately in the
corporate transaction.
Profit and Loss Account.
Had the Company continued to charge the depreciation according to the old Out of the options granted during the previous years, all the employees have
method, the charge of depreciation for the current year would have been exercised and the company has allotted 466,300 shares to employees of Tech
Rs. 47,194,339/- and hence the net profit for the year has been reduced to the Mahindra (R & D Services) Limited at face value of Rs.5/- per share & the
extent of Rs 116,560,603/-. company has allotted 303,600 shares to employees of Tech Mahindra (R & D
Services) Inc at face value of Rs.5/- per share.
3. Share Capital:
During the current year, 769,900 Equity Shares of Rs.5/- each, were issued and A sum of Rs.15,22,97,100/- has been recognized as securities premium,
allotted at Rs.5/- each, amounting to Rs. 3,849,500/- to Employees of the representing the difference between the fair market value of the shares (as
Company and its subsidiaries. determined by the Board) and the issue price per share.
The Issued, Subscribed & Paid up Equity Capital as at the end of the year includes Number of options granted, exercised and forfeited during the year for employees
the allotment of equity shares, fully paid-up issued by way of Bonus shares, of Tech Mahindra (R & D Services) Inc:

409
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

B. Summary of Transactions with Related Parties are as below:

Particulars Year ended on
Amt in Rs. Lakhs
31.03.2006 31.03.2005
Particulars TMRDS TMRDS Trans- Ipgen
Options outstanding at the beginning of the year 309,900 214,750 USA Singapore Global USA
Granted Nil 208,250 Inc
Less: Exercised 303,600 106,600 Capital Assets taken on loan
Forfeited 6,300 6,500 basis as at end of the year Nil Nil Nil 85.55
Options outstanding at the end of the year Nil 309,900 Amount of sale of materials /
services rendered during the year 12,061.67 Nil Nil Nil
Number of options granted, exercised and forfeited during the year for employees
Amount of purchase of materials /
of the Company. services received during the year 2,758.60 Nil Nil Nil
Particulars Year ended on Amount receivable / (payable)
31.03.2006 31.03.2005 at the end of the year 4,488.46 Nil Nil Nil
Options outstanding at the beginning of the year 471,100 Nil Investments made by the
Granted Nil 492,600 company outstanding at the
end of the year 2.35 63.07 Nil Nil
Less: Exercised 466,300 Nil
Forfeited 4,800 21,500 Details with respect to remuneration to Directors are disclosed in Note 15
Options outstanding at the end of the year Nil 471,100 below.
8. Deferred Taxation 12. Extra-ordinary Items shown in Profit and Loss Account:
During the year, the company has accounted for Rs19,614,933/- towards During the current year, pursuant to the Corporate transaction entered into by
reversal of opening Deferred Tax Liability in accordance with AS 22 – Accounting the shareholders of the company, the Company has incurred the following
for Taxes on Income and has considered the same as a reversal to profit and loss expenses in the nature of extra-ordinary items and the same is disclosed
account. This is consequent to the change in depreciation policy of the separately in the Financial Statements:
Company. The Company has incurred a total sum of Rs.615.66 Lakhs in relation to transfer
The company has during the year, a deferred tax Asset on account of difference of shares from the erstwhile share holders to TML. The amount spent is in the
in depreciation charged as per Company books and as per Income Tax Act. nature of consultancy fees and other transfer related expenses.
Considering prudence, in the absence of certainty of future taxable income from 13. Contractual Compensation under Client Contracts:
some of the undertakings, the company has not recognized any deferred tax
asset in respect of such depreciation difference. During the relevant period, the company has entered into an addendum to the
Development Agreement with its principal Client - Alcatel Inc, USA, whereby in
9. Segmental Reporting:
lieu of securing current and future Contracts from the said Client and certain
The company’s operations predominantly relate to providing IT services delivered modifications to certain terms of the original Development Agreement, the
to eventual customers in the United States of America and operating in the Company has provided for a sum of Rs.1165.44 Lakhs, as payable to the said
telecom industry segment. Accordingly, IT services Revenues are represented M/s Alcatel Inc, USA. This has been disclosed separately as an extraordinary
along single industry class represents the primary basis of segmental information item in the Financial Statements.
and the geographical location of customers represents the Secondary segment
of reporting. 14. Auditor’s Remuneration:
During the current period the financials of the company represent a single Auditor’s remuneration debited to Profit & Loss Account during the year are as
Primary segment (Telecom industry). With respect to the Secondary segment, follows;
the company’s Revenues would represent two segments in terms of Geography Particulars 2005-06 2004-05
– USA & Domestic.
In view of the fact that the primary segment is represented by a single segment Audit Fees 3,37,340 1,89,000
and in the case of the Secondary Segment, the Revenues from the Domestic Tax Audit Fees 50,000 37,800
segment is less than 0.73% of the total Revenues of the company the providing Certification & Other Services 3,27,896 43,200
of Segmental Information is not applicable to the company.
10. Earnings Per share 15. Managerial remuneration paid to the Chairman and Vice Chairman:
Paul Pandian (Chairman) Rs. 5,62,500/-
Particulars Period ended on
Equity Share of par value Rs.5/- each 31.03.2006 31.03.2005 S Udaya Kumar (Vice Chairman) Rs. 12,00,000/-
Basic (7.93) 15.95 16. CIF Value of imports during the period is Rs. 1,156.09 Lakhs. (PY Rs. 1,490.78
Diluted (7.69) 14.58 Lakhs)
Number of shares used in computing earnings per share 17. Amount shown as Miscellaneous expenses in Schedule X – Operating Expenses
Basic 89,29,163 8,349,477 includes Prior period expenses of Rs. 3,75,224 (Previous Year. Rs 2,38,468).
Diluted 92,11,368 9,132,244 18. Quantitative details:
The Company is engaged in the development of Software. The production and
11. Related Party Disclosure:
sale of such software cannot be expressed in any generic unit. Hence, it is not
A. Details of Related Parties as at the end of current year are given below: possible to give the quantitative details of sales and the information as
1. Holding Companies : Tech Mahindra Limited required under paragraphs 3, 4C, and 4D of part II of Schedule VI of the
2. Subsidiary Companies : 1. Tech Mahindra (R & D Services) Inc., USA. Companies Act, 1956.
2. Tech Mahindra (R & D Services) Pte Ltd, 19. As at the end of current year, the company had no outstanding dues to small -
Singapore scale industrial undertakings in excess of Rs.1,00,000/-.
3. Associate Companies : 1. Transglobal Technologies Inc., USA 20. Previous year figures have been regrouped and reclassified wherever necessary
2. Ipgen Technologies India Private Limited
3. Ipgen Technologies Inc., USA
4. Tech Mahindra (Singapore) Pte Ltd,
Singapore For Tech Mahindra (R&D Services) Limited For Narayanan, Patil & Ramesh
5. Tech Mahindra (Americas) Inc, USA Chartered Accountants
6. Tech Mahindra GmbH, Germany Mr. Vineet Nayyar Mr. C. P. Gurnani A.R. Narayanan
7. Tech Mahindra (Thailand) Limited, Thailand Director Director Partner
4. Whole Time Directors : 1. Mr. Vineet Nayyar
2. Mr. Paul Pandian Date: April 26, 2006 Ms. Sudha Rani
3. Mr. C P Gurnani Place: Bangalore Company Secretary
4. Mr. Sunil Joshi
5. Mr. Sanjay Kalra

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 TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

Balance Sheet Abstract and Company’s General Business Profile :

I. Registration Details :

Registration No. 1 8 6 7 3 State Code

Balance Sheet Date 3 1 0 3 2 0 0 6 0 8

Date Month Year

II. Capital raised during the year:
Public Issue Rights Issue
N I L N I L

Bonus Issue Private Placement

N I L 3 8 4 9 5 0 0
III. Position of mobilisation and deployment of funds

Total Liabilities Total Assets

9 8 9 1 0 1 0 7 0 9 8 9 1 0 1 0 7 0

Sources of Funds
Paid-up Capital Reserves and Surplus
4 6 0 3 3 5 0 0 9 4 3 0 6 7 5 7 0

Secured Loans Unsecured Loans

2 2 9 2 8 4 N I L

Deferred Taxation Secured Loans

N I L N I L
Unsecured Loans
N I L
Application of Funds

Net Fixed Assets Investments

2 6 5 6 6 5 0 4 8 3 8 5 5 1 8 5 6 6
Net Current Assets Miscellaneous Expenditure
5 5 9 9 8 5 3 5 9 N I L

IV. Performance of the Company

Total Income Total Expenditure

1 2 9 1 6 3 7 4 6 9 1 3 2 8 3 7 4 3 5 6

+ (–) Profit/(Loss) Before Tax + (–) Profit/(Loss) After Tax

– 3 6 7 3 6 8 8 7 – 7 0 7 9 1 9 5 4

Earning per Share (Rs) Dividend %

– 7 . 9 3 N I L

V. Generic names of three principal products/services of company (as per monetary terms)

Item Code No. (ITC Code) 8 5 2 4 4 9 0 . 0 2

Product Description C O M P U T E R S O F T W A R E

For Tech Mahindra (R&D Services) Limited

Mr. Vineet Nayyar Mr. C. P. Gurnani

Director Director
Date: April 26, 2006 Ms. Sudha Rani
Place: Bangalore Company Secretary

411
TECH MAHINDRA (R & D SERVICES) LIMITED
(Formerly known as Axes Technologies (India) Private Limited)

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT,1956

RELATING TO THE SUBSIDIARY COMPANIES
A. Name of the Subsidiary Tech Mahindra (R&D Services) Inc. Tech Mahindra (R&D Services)
Pte Ltd.
B. Financial year of the Subsidiary ended on March, 31st 2006 March, 31st 2006
C. The Company’s interest in the subsidiary on the aforesaid date.
a) Number of shares held The Company held the entire common stock of 2,40,000 Ordinary Shares
aggregate value of US $ 5000
b) Face value per share US $ 0.01 Singapore $ 1.00
c) Extent of Holding 100% 60%
D. The net aggregate of the Profit/(Losses) of the Subsidiary
so far it concerns the members of the Company
a) Not dealt with in the accounts of the Company amounted to
1. For the Subsidiary’s financial year ended as in “B” above USD 225,718 SGD (6,613)
2. For the Previous financial years of the subsidiary
since it became Company’s subsidiary USD 195.800 SGD (13,429)
b) Dealt with in the accounts of the Company amounted to
1. For the Subsidiary’s financial year ended as in “B” above NA NA
2. For the Previous financial years of the subsidiary since it
became Company’s subsidiary NA NA

For Tech Mahindra (R&D Services) Limited

Mr. Vineet Nayyar Mr. C. P. Gurnani

Director Director
Date: April 26, 2006 Ms. Sudha Rani
Place: Bangalore Company Secretary

412
 TECH MAHINDRA (R&D SERVICES), INC.

DIRECTORS’ REPORT TO THE SHAREHOLDERS

Your Directors present their Report together with the audited accounts of your Company for the year ended 31st March, 2006.

Financial Results

For the year ended March, 31 2006 2006 2005 2005

USD INR USD INR

Income 6,233,686 278,396,419 7,417,082 331,246,882

Profit/(Loss) before tax 352,850 15,758,288 326,389 14,576,533
Profit/(Loss) after tax 225,719 10,080,576 195,800 8,744,428

Review of Operations:
During the fiscal year, the Company achieved sales of US$ 6.23 million, with a decline of 16% over the sales of previous year.
Acquisition of the Company:
The Company became a step-down subsidiary of Tech Mahindra Limited (Formerly Mahindra - British Telecom Limited), with the
acquisition of its Parent Company, Tech Mahindra (R & D Services) Limited (Formerly Axes Technologies (India) Private Limited). Tech
Mahindra Limited now holds 100% of the paid-up share capital of Tech Mahindra (R&D Services) Ltd.
Change of Name:
In order to be identified with the Parent Company, your Company’s name was changed from Axes Technologies Inc. to Tech Mahindra
(R & D Services) Inc.
Outlook for the current year:
Your Company invested in cultivating long term relationships with major telecom companies. The Company believes that there is
potential growth in USA and the long term investments will begin to bear fruit in the near future.
Acknowledgements:
Your Directors gratefully acknowledge the contributions made by the employees towards the success of the Company. Your Directors
are also thankful for the co-operation and assistance received from its customers, suppliers, bankers, State and Federal Government
Authorities and the shareholder.

April 03, 2006.

Paul Pandian
Director

413
TECH MAHINDRA (R&D SERVICES), INC.

INDEPENDENT AUDITOR'S REPORT

To: Tech Mahindra (R&D Services) Inc.,
I have audited the accompanying balance sheets of Tech
Mahindra (R&D Services), Inc. (a Delaware corporation wholly
owned by Tech Mahindra (R&D Services) Pvt. Ltd.) as of March
31, 2006 and 2005, and the related statements of income,
retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. I believe that my audits provide a reasonable basis
for my opinion.
In my opinion the financial statements referred to in the first
paragraph present fairly, in all material respects, the financial
position of Tech Mahindra (R& D Services), Inc. as of March 31,
2006 and 2005, and the results of its operations and its cash
flows for the years then ended in conformity with accounting
principles generally accepted in the United Sates of America.
Hector Homero Flores
April 3, 2006

414
 TECH MAHINDRA (R&D SERVICES), INC.

INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION

Tech Mahindra (R&D Services) Inc., Foreign Currency amounts in the supplemental schedules are
translated for convenience into Indian Rupees at the exchange
My report on my audits of the basic financial statements of Tech rate of Rs. 44.66 to 1.00 USD, which is the average of telegraphic
Mahindra (R & D Services), Inc., a wholly owned subsidiary of buying and selling rate quoted by the Mumbai Branch of the
Tech Mahindra (R & D Services) Pvt. Ltd, an India corporation, State Bank of India on March 31, 2006.
for 2006 and 2005 appear on page 414. I conducted my audits in
accordance with the U.S. generally accepted auditing standards
for the purpose of forming an opinion on the basic financial
statements taken as a whole. The information on pages 416 to
420 is presented for purposes of additional analysis and are not
a required part of the basic financial statements. It has been
subjected to the auditing procedures applied in the audit of the
basic financial statements and, in my opinion, is fairly stated in
all material respects in relation to the basic financial statements Hector Homero Flores
taken as a whole. April 3, 2006

415
TECH MAHINDRA (R&D SERVICES), INC.

SUPPLEMENTAL BALANCE SHEET FOR THE YEAR ENDED MARCH 31, 2006

2006 2006 2005 2005

USD INR USD INR
ASSETS

Current Assets

Cash ..................................................................... 2,730,852 121,959,860 898,285 40,117,408

Due from Parent ................................................. — — 26,968 1,204,391

Prepaid expenses ................................................. 68,269 3,048,896 75,644 3,378,261

Total Current Assets ............................................. 2,799,121 125,008,755 1,000,897 44,700,060

TOTAL ASSETS .................................................... 2,799,121 125,008,755 1,000,897 44,700,060

LIABILITIES & SHAREHOLDER'S EQUITY

Liability

Current Liabilities

Accounts payable ........................................... 35,290 1,576,059 62,523 2,792,277

Accrued liabilities ............................................ 257,642 11,506,316 207,323 9,259,045

Due to parent .................................................. 1,580,819 70,599,395 — —

Dividend payable ............................................ — — 100,000 4,466,000

Income tax payable ......................................... 68,600 3,063,672 — —

Total Current Liabilities ......................................... 1,942,352 86,745,442 369,846 16,517,322

TOTAL LIABILITIES .............................................. 1,942,352 86,745,442 369,846 16,517,322

Shareholders' Equity

Common stock, $ 0.01 par value, authorized 500,000 shares;

issued 500,000 shares .................................... 5,000 223,300 5,000 223,300

Retained earnings ........................................... 851,769 38,040,013 626,051 27,959,438

Total Shareholder’s Equity .............................. 856,769 38,263,313 631,051 28,182,738

TOTAL LIABILITIES & EQUITY ............................. 2,799,121 125,008,755 1,000,897 44,700,060

See accompanying notes to financial statements.

416
 TECH MAHINDRA (R&D SERVICES), INC.

SUPPLEMENTAL STATEMENT OF INCOME FOR THE YEAR ENDED MARCH 31, 2006

2006 2006 2005 2005

USD INR USD INR

Revenues ............................................................ 6,233,686 278,396,419 7,417,082 331,246,882

Expenses

Software development ................................... 3,154,692 140,888,542 4,624,151 206,514,584

General and administrative ............................. 1,721,868 76,898,612 1,875,792 83,772,871

Sales and marketing ....................................... 1,004,276 44,850,978 590,750 26,382,895

Total Expenses ..................................................... 5,880,836 262,638,132 7,090,693 316,670,349

Net income before income taxes ................... 352,850 15,758,288 326,389 14,576,533

Provision for income taxes ................................... 127,132 5,677,712 130,589 5,832,105

Net income .......................................................... 225,718 10,080,576 195,800 8,744,428

See accompanying notes to financial statements.

417
TECH MAHINDRA (R&D SERVICES), INC.

SUPPLEMENTAL STATEMENT OF STOCKHOLDER'S EQUITY FOR THE YEAR ENDED

MARCH 31, 2006

2006 2006 2005 2005

USD INR USD INR
Common Retained Common Retained Common Retained Common Retained
Stock Earnings Stock Earnings Stock Earnings Stock Earnings
Balance, beginning of year 5,000 626,051 223,300 27,959,438 5,000 530,251 223,300 23,681,010

Net Income — 225,718 — 10,080,576 — 195,800 — 8,744,428

Dividend declared — — — — — (100,000) — (4,466,000)

Balance, end of year 5,000 851,769 223,300 38,040,013 5,000 626,051 223,300 36,891,438

See accompanying notes to financial statements.

418
 TECH MAHINDRA (R&D SERVICES), INC.

SUPPLEMENTAL STATEMENTS OF CASH FLOW FOR THE YEAR ENDED MARCH 31,

2006 2006 2005 2005

USD INR USD INR

OPERATING ACTIVITIES

Net Income ............................................................................ 225,718 10,080,576 195,800 8,744,428

Adjustments to reconcile net income to net cash

provided by operations:

Decrease in due from parent ........................................... 26,968 1,204,391 452,596 20,212,937

Decrease / (Increase) in prepaid expenses ...................... 7,375 329,368 (31,515) (1,407,460)

Decrease in accounts payable ......................................... (27,233) (1,216,226) (131,096) (5,854,747)

Increase in accrued liabilities ........................................... 50,319 2,247,247 162,133 7,240,860

Increase / (Decrease) in income tax payable ................... 68,600 3,063,676 (15,736) (702,770)

Increase in due to parent ................................................. 1,580,820 70,599,421 — —

Net cash provided by operating activities ............................. 1,932,567 86,308,452 632,182 28,233,248

Cash Flows from financing activities:

Dividend paid on common stock ....................................... (100,000) (4,466,000) (100,000) (4,466,000)

Net cash used by financing activities ...................................... (100,000) (4,466,000) (100,000) (4,466,000)

Net cash increase for period .................................................... 1,832,567 81,842,452 532,182 23,767,248

Cash and cash equivalents at beginning of year .................... 898,285 40,117,408 366,103 16,350,160

Cash and cash equivalents at end of year .............................. 2,730,852 121,959,860 898,285 40,117,408

Supplemental Disclosure of Cash Flow Information

Cash Paid during the Period for Taxes .................................... 71,135 3,176,889 160,040 7,147,386

See accompanying notes to financial statements.

419
TECH MAHINDRA (R&D SERVICES), INC.

SUPPLEMENTAL NOTES TO FINANCIAL STATEMENT FOR THE YEAR ENDED

MARCH 31, 2006 AND 2005
1) Summary of Significant Accounting Policies 3) Commitments and Contingencies
a) Business and Nature of Operations The Company leases office space and equipment, which are
classified as operating leases. A summary of future
Tech Mahindra (R & D Services), Inc. (Company), formerly
commitments on the leases is as follows as of March 31.
known as Axes Technologies, Inc., is a Delaware
corporation formed in 2001 for the purpose of providing
technology staffing services to Tech Mahindra (R & D Office Space Equipment
Services) Ltd., (TMI). formerly known as Axes Technology USD INR USD INR
(India) Private Limited. Company performs marketing,
managerial and administrative functions needed to service 2006 234,084 10,483,347 32,600 1,455,916
the TMI customers based in the United States. 2007 189,259 8,452,307 17,964 802,272
b) Reporting Entity 2008 189,259 8,452,307 1,114 51,091
The accompanying financial statements do not include 2009 189,259 8,452,307
the assets, liabilities and net assets of Tech Mahindra
2010 189,259 8,452,307
(R & D Services) Ltd.
2011 78,858 3,521,798
c) Basis of Accounting
Total 1,069,978 47,814,373 51,708 2,309,279
The financial statements of the Company have been
prepared on the accrual basis of accounting.
4) Related Party Transactions
d) Use of Estimates
The Company performs administrative, managerial and
The process of preparing financial statements in marketing duties on behalf on TMI. One of these specific
conformity with accounting principles generally accepted functions is to provide billing and collection services. In
in the United States requires the use of estimates and providing these services the Company receives payment for
assumptions regarding certain types of assets, liabilities, services provided by TMI to its customers based in the United
revenue and expenses. Such estimates primarily relate States. These funds are received by the Company and
to unsettled transaction and events as of the date of the transmitted to TMI. The Company invoices TMI for expenses
financial statements. Accordingly, upon settlement, actual incurred in performing its administrative, a managerial and
results may differ from estimated amounts. marketing functions.
e) Cash Equivalents The Company collects amounts due from customers and
For the purpose of reporting cash flows, the Company remits these funds to TMI in total. The Company in turn
considers all cash in banks to be cash equivalents. invoices TMI for the cost of operating plus a profit as
described in Note 1(f). As of March 31, 2006 and 2005 the
f) Revenue Recognition inter-company amounts are as follows:
A transfer pricing study performed established that a net 2006 2006 2005 2005
operating margin in the range of 4.88% to 8.59% with a USD INR USD INR
median of 6.03% was a reliable profit level indicator. Based
on this study Axes recognizes revenue that will result in Due to India 11,946,958 533,551,144 10,904,962 487,015,602
a net operating margin in accordance with the transfer Due from Customers (8,443,594) (377,090,898) (6,351,255) (283,647,048)
pricing study. Due from India for
Operating Expenses (1,922,545) (85,860,851) (4,580,675) (204,572,945)
2) Income Taxes
Due to (From) Parent 1,580,819 70,599,395 (26,968) (1,204,391)
The components of income tax expenses are as follows:
2006 2006 2005 2005
Current USD INR USD INR
State 3,919 175,021 15,819 706,477
Federal 123,213 5,502,691 114,770 5,125,628
127,132 5,677,712 130,589 5,832,105

420
 TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)

REPORT OF THE DIRECTORS

The directors have pleasure in submitting their report together reason of a contract made by the company or a related corporation
with the audited accounts of the company for the financial year with the director or with a firm of which he is a member, or with a
ended 31 March 2006. company in which he has a substantial financial interest.

Directors of the company Share options granted

The directors in office at the date of this report are:- No options were granted during the financial year to take up
unissued shares of the company.
Saeed Ullah Khan
Paul Chelliah Pandian
Share options exercised
Sonjoy Anand (appointed on 28.11.2005)
Sunil Joshi (appointed on 28.11.2005) No shares were issued by virtue of the exercise of options to take
Masillamoney Paul Premraj (resigned on 28.11.2005) up unissued shares of the company during the financial year.

Arrangement for directors to acquire shares or debentures Unissued shares under option
Neither at the end of nor at any time during the financial year was There were no unissued shares under option at the end of the
the company a party to any arrangement whose object is to financial year.
enable the directors of the company to acquire benefits through
the acquisition of shares in or debentures of the company or any Auditors
other body corporate. The auditors, Y C Foo & Co, Certified Public Accountants,
Singapore, have indicated their willingness to accept re-
Directors' interest in shares or debentures appointment.
According to the register of directors' shareholdings required to
be kept by the company under section 164 of the Companies Act, On behalf of the directors
Cap. 50, none of the directors who held office at the end of the
financial year had no interest in the shares of the company. Saeed Ullah Khan

Directors' contractual benefits

Paul Chelliah Pandian
Since the end of the previous financial year, no director has
received or become entitled to receive a benefit which is required Singapore
to be disclosed by section 201(8) of the Companies Act, Cap. 50 by May 23, 2006.

421
TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)

STATEMENT BY DIRECTORS

We, the undersigned, being directors of Tech Mahindra (R & D to believe that the company will be able to pay its debts as
Services) Pte. Limited (Formerly known as Axes Technologies and when they fall due.
(Asia Pacific) Pte Ltd), do hereby state that in our opinion:-
On behalf of the directors
(a) The accompanying financial statements are drawn up so as
to give a true and fair view of the state of affairs of the Saeed Ullah Khan
company as at 31 March 2006 and of the results of the
business, changes in equity and cash flows of the company Paul Chelliah Pandian
for the financial year then ended on that date. Singapore
(b) At the date of this statement there are reasonable grounds Dated: 23 May 2006

422

REPORT OF THE AUDITORS TO THE MEMBERS OF
TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(formerly known as Axes Technologies (Asia Pacific) Pte Ltd)
We have audited the accompanying balance sheet of In our opinion:-
TECH MAHINDRA (R & D SERVICES) PTE. LIMITED (Formerly
(a)
known as Axes Technologies (Asia Pacific) Pte Ltd) as at 31
March 2006. The profit and loss account, statement of changes
in equity and cash flow statement for the financial year then
ended. These financial statements are the responsibility of the
company's directors. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with Singapore
Standards on Auditing. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about (b)
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a Singapore
reasonable basis for our opinion. Dated: 23 May 2006
TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)
the financial statements are properly drawn up in accordance
with the provisions of the Companies Act (the "Act") and
Singapore Financial Reporting Standards and so as to give a
true and fair view of :-
(i) the state of affairs of the company as at 31 March 2006 and
of the results, changes in equity and cash flows of the
company for the financial year then ended on that date; and
(ii) the other matters required by section 201 of the Act to
be dealt with in the accounts;
the accounting and other records required by the Act to be
kept by the company have been properly kept in accordance
with the provisions of the Act.
Y C FOO & CO
CERTIFIED PUBLIC ACCOUNTANTS
SINGAPORE
423
TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)

BALANCE SHEET
AS AT MARCH 31, 2006

Note 2006 2006 2005 2005

$ Rs. $ Rs.
Share Capital and Reserve
Authorised:
500,000 ordinary shares of $1 each ..................... 500,000 13,795,000 500,000 13,795,000
Issued and paid-up:
400,000 ordinary shares of $1 each ..................... 400,000 11,036,000 400,000 11,036,000
Accumulated losses ............................................. (401,338) (11,072,915) (394,725) (10,890,463)
(1,338) (36,915) 5,275 145,537

Represented by:
Non-current assets:
Plant and equipment ............................................ 3 1 28 1 28

Current assets:
Amount owing from a shareholder ...................... 4 — — 16,052 442,875
Prepayment .......................................................... — — 563 15,533
Cash and bank balances ....................................... 10,661 294,137 37,244 1,027,561
10,661 294,137 53,859 1,485,969

Less: Current liabilities

Other payables ..................................................... 5 12,000 331,080 48,585 1,340,460
Net current (liabilities)/assets ............................... (1,339) (36,943) 5,274 145,510
(1,338) (36,915) 5,275 145,537

The annexed notes form an integral part of and should be read in conjunction with the accompanying financial statements.

424
 TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)

PROFIT AND LOSS ACCOUNT

FOR THE FINANCIAL YEAR ENDED MARCH 31, 2006

Note 2006 2006 2005 2005

$ Rs. $ Rs.

Revenue ............................................................... 70,405 1,942,474 68,009 1,876,368

Other income ....................................................... 196 5407 — —

Depreciation of plant and equipment ................... 3 — — (587) (16,195)

Operating expenses ............................................. (77,214) (2,130,333) (80,851) (2,230,679)

Net loss before taxation ....................................... 6 (6,613) (182,452) (13,429) (370,506)

Taxation ................................................................ 7 — — — —

Net loss after taxation .......................................... (6,613) (182,452) (13,429) (370,506)

Accumulated losses brought forward .................. (394,725) (10,890,463) (381,296) (10,519,957)

Accumulated losses carried forward .................... (401,338) (11,072,915) (394,725) (10,890,463)

The annexed notes form an integral part of and should be read in conjunction with the accompanying financial statements.

425
TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)

STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED MARCH 31, 2006

Share Share (Accumulated (Accumulated Total Total

capital capital losses) losses)
$ Rs. $ Rs. $ Rs.

Balance at 01-04-2004 ......... 400,000 11,036,000 (381,296) (10,519,957) 18,704 516,043

Net loss for the financial

year ...................................... — — (13,429) (370,506) (13,429) (370,506)

Balance at 31-03-2005 ......... 400,000 11,036,000 (394,725) (10,890,463) 5,275 145,537

Net loss for the financial

year ................................... — — (6,613) (182,452) (6,613) (182,452)

Balance at 31-03-2006 ......... 400,000 11,036,000 (401,338) (11,072,915) (1,338) (36,915)

The annexed notes form an integral part of and should be read in conjunction with the accompanying financial statements.

426
 TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)

CASH FLOW STATEMENT

FOR THE FINANCIAL YEAR ENDED MARCH 31, 2006

Note 2006 2006 2005 2005

$ Rs. $ Rs.
Cash flows from operating activities:
Net loss before taxation ....................................... (6,613) (182,452) (13,429) (370,506)

Adjustment for :
Depreciation ......................................................... 3 – — 587 16,195

Net loss before working capital changes ............. (6,613) (182,452) (12,842) (354,311)

Amount owing from a shareholder ...................... 16,052 442,875 — —

Prepayment .......................................................... 5,63 15,532 119 3,283

Other payables ..................................................... (36,585) (1,009,380) 33,557 925,838

Amount due to a director ..................................... — — (12,400) (342,116)

Net increase/(decrease) in cash and cash

equivalents ........................................................... (26583) (733,425) 8,434 232,694

Cash and cash equivalents at beginning of

financial year ........................................................ 37,244 1,027,562 28,810 794,868

Cash and cash equivalents at end of financial

year ...................................................................... 10,661 294,137 37,244 1,027,562

The annexed notes form an integral part of and should be read in conjunction with the accompanying financial statements.

427
TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)

NOTES TO THE FINANCIAL STATEMENTS FOR THE

YEAR ENDED MARCH 31, 2006
These notes form an integral part of and should be read in conjunction with the accompanying
financial statements.
1. GENERAL Deferred tax liabilities are recognised for all taxable temporary differences.
a) Country of incorporation and domicile
Deferred tax assets are recognised for all deductible temporary differences,
The company is incorporated and domiciled in the Republic of Singapore carry-forward of unused tax assets and unused tax losses, to the extent
with its registered office at 460 Alexandra Road #24-05 PSA Building that it is probable that taxable profit will be available against which the
Singapore 119963. deductible temporary differences, carry-forward of unused tax assets
and unused tax losses can be utilised.
b) Principal activities
The principal activities of the company are those of developing software The carrying amount of deferred tax assets is reviewed at each balance
and multimedia and providing technical assistance and maintenance sheet date and reduced to the extent that it is no longer probable that
services. sufficient taxable profit will be available to allow all or part of the deferred
tax asset to be utilised.
There have been no significant changes in the nature of these activities
during the financial year. Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the year when the asset is realised or the liability is
c) Number of employees settled, based on tax rates (and tax laws) that have been enacted or
Other than the directors, the company has no employees as at 31 March subsequently enacted at the balance sheet date.
2006 and 31 March 2005.
f) Revenue recognition
d) Authorisation of financial statements Consultancy income is recognised upon performance of services.
The financial statements were authorised for issue by the board of
g) Impairment
directors on 23 May 2006.
The carrying amounts of the company's assets are reviewed at each
e) Change of company's name balance sheet date. If any indication of impairment exists, an impairment
The name of the company had been changed from AXES TECHNOLOGIES loss is recognised to the extent of the excess of the carrying amount over
(ASIA PACIFIC) PTE. LTD TO TECH MAHINDRA (R & D SERVICES) PTE. the estimated recoverable amount.
LIMITED with effect from 15 March 2006.
h) Provisions
2. SIGNIFICANT ACCOUNTING POLICIES Provisions are recognised when the company has a present obligation
a) Statement of compliance (legal or constructive) as a result of a past event, it is probable that an
The financial statements are prepared in accordance with Singapore outflow of resources embodying economic benefits will be required to
Financial Reporting Standards (FRS) including related Interpretations settle the obligation and a reliable estimate can be made of the amount
promulgated by the Council on Corporate Disclosure and Governance of the obligation.
(CCDG). i) Financial Instruments
b) Basic of accounting The main risks from the company's financial instruments including
The financial statement, expressed in Singapore dollars, are prepared in liquidity risk, foreign currency risk, credit risk and interest rate risk are
accordance with the historical cost convention. described as follows:

c) Plant and equipment (i) Liquidity risk

Plant and equipment is stated at cost less accumulated depreciation. The
cost of an asset comprises its purchase price and any directly attributable
costs of bringing the asset to working condition for its intended use.
Expenditure for additions, improvements and renewals are capitalised
and expenditure for maintenance and repairs are charged to the profit and
loss account. When plant and equipment are sold or retired, their cost and
accumulated depreciation are removed from the financial statements and
any gain or loss resulting from their disposal is included in the income
statement.
d) Depreciation of plant and equipment
Depreciation is calculated to write off the cost of plant and equipment by
the straight-line method over their estimated useful lives. The annual
rates used are as follows:
Office equipment 33%
Fully depreciated plant and equipment are retained in the financial
statements until they are no longer in use.
e) Taxation
Income tax expense is calculated on the basis of tax effect accounting,
using the liability method and is applied to all significant temporary
differences.
Deferred income tax is provided, using the liability method, on all
temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting
purposes.
Liquidity risk arises when difficulty is encountered in raising funds
to meet commitments associated with financial instruments.
The company has no liquidity risk.
(ii) Foreign currency risk
Foreign currency risk arises from potential changes in foreign
exchange rates that have an adverse effect on the company in the
current reporting year or in future years.
Since the majority of the company's activities are denominated in
local currency, therefore, no significant risk arises from changes in
foreign exchange rates.
(iii) Credit risk
Credit risk arises when one party to a financial instrument fails to
discharge an obligation and cause the other party to incur a financial
loss.
The carrying amounts of receivables represent the company's
maximum exposure to credit risk. The company has no significant
concentrations of credit risk with any single customer.
(iv) Interest rate risk
Interest rate risk arises from potential changes in interest rates that
may have adverse effect on the company in the current reporting
year or in future years.
The company has no significant exposure to market risk for changes
in interest rates as it has no borrowings.

428
 TECH MAHINDRA (R & D SERVICES) PTE. LIMITED
(Formerly known as Axes Technologies (Asia Pacific) Pte. Ltd)

J) Foreign currency conversion 7. TAXATION

Foreign currency amounts are translated for convenience into Indian
Rupees at the exchange rate of Rs 27.59 = SGD1 which is the average
of the telegraphic transfer buying and selling rates quoted by the Mumbai
Branch of State Bank of India on 31 March 2006.
k) Employee benefits
As at 31 March 2006, the company has unabsorbed tax losses of approximately
$383,000 (2005: $377,000) available to offset against future taxable income
subject to there being no substantial change in the shareholders of the
company and their shareholdings within the meaning of Section 37 of the
Singapore Income Tax Act and agreement by the Inland Revenue Authority of
Singapore.

(i) Defined contribution plan 8. IMMEDIATE AND ULTIMATE HOLDING COMPANY

As required by law, the company makes contributions to state The immediate and ultimate holding company is Tech Mahindra (R & D
pension scheme, the Central Provident Fund (CPF). CPF contributions Services) Ltd (Formerly known as Axes Technologies (India) Private Limited),
are recognized as compensation expense in the same year as the incorporated in India.
employment that gives rise to the contribution.

(ii) Employee leave entitlement 9. SIGNIFICANT RELATED PARTY TRANSACTIONS

Employee leave entitlements to annual leave are recognised when During the financial year, the company had significant related party transactions
they accrue to employees. An accrual is made of the estimated on terms agreed between the parties as follows:
liability for leave as a result of services rendered by employees up 2006 2006 2005 2005
to the balance sheet date. $ Rs $ Rs

3. PLANT AND EQUIPMENT Consultancy income earned 70,405 1,942,474 68,009 1,876,368
Office Office Total Total Reimbursement of expenses 49,500 1,365,705 70,500 1,945,095
equipment equipment
$ Rs $ Rs 10. GOING CONCERN
Cost The financial statement have been prepared on a going concern basis,
At 01-04-2005 and 31-03-2006 6,783 187,143 6,783 187,143 notwithstanding the deficiency in shareholders' funds, on the assumption that
the directors/shareholders will continue to provide the necessary financial
Accumulated depreciation support to enable the company to continue its operations.
At 01-04-2005 6,782 187,115 6,782 187,115
Charge for 2006 — — — — Schedules of Staff Costs and Operating Expenses for the financial year ended
At 31-03-2006 6,782 187,115 6,782 187,115 31 March 2006
2006 2006 2005 2005
Charge for 2005 587 161,95 587 16,195
Net book value $ Rs $ Rs
At 31-03-2006 1 28 1 28 Operating expenses

At 31-03-2005 1 28 1 28 Accounting fee 1,200 33,108 1,200 33,108

Auditors' remuneration 3,295 90,909 1,365 37,660

4. AMOUNT OWING FROM SHAREHOLDER Bad debt written off 16,052 4,442,875 — —
The amount owing from a shareholder was non-trade in nature, unsecured, Bank charges 310 8,553 225 6,208
interest-free and had no fixed terms of repayment.
Courier services 497 13,712 387 10,677
5. OTHER PAYABLES Entertainment and refreshment 213 5,877 176 4,856
2006 2006 2005 2005
Miscellaneous 68 1,876 — —
$ Rs $ Rs
Repairs and maintenance 10 276 307 8,470
Other creditor 10,000 275,900 — —
Printing and stationery 809 22,320 715 19,727
Amount due to a shareholder — — 46,500 1,282,935
Accrued operating expenses 2,000 55,180 2,085 57,525 Professional fees 1,813 50,020 2,524 69,637
Reimbursement of expenses 49,500 1,365,705 70,500 1,945,095
12,000 331,080 48,585 1340,460
Telephone 2,807 77,445 2,973 82,025
6. NET (LOSS)/PROFIT BEFORE TAXATION
Transport 231 6,373 165 4,553
2006 2006 2005 2005
$ Rs $ Rs Utilities 409 11,284 314 8,663

Net (loss)/profit before taxation 77,214 2,130,333 80,851 2,230,679

is arrived at after charging:
Auditors' remuneration 3,295 90,909 1,365 37,660
This schedule does not form part of the audited financial statements.

429
TECH MAHINDRA FOUNDATION
DIRECTORS’ REPORT
Your Directors present their First Annual Report of your Company
for the period ended 31st March 2006.
FINANCIAL RESULTS
For the period ended March 31, 2006 Rs.
Income 30,308
Profit/(Loss) before tax (34,942)
Profit/(Loss) after tax (34,942)
INCORPORATION OF THE COMPANY
The Board is pleased to announce that the Company was formed
on March 22, 2006 as a non-profit making organization, a ‘Section
25’ Company in terms of the Companies Act, 1956.
As per the requirements of the Companies Act, 1956, the license
for the organization was received from the Regional Director,
State of Maharashtra on 20th March 2006 and the company was
formed.
The Company was thus incorporated on March 22, 2006, as a
100% subsidiary of Tech Mahindra Limited.
RATIONALE FOR INCORPORATION
The Parent Company, Tech Mahindra Limited, has always played
a vital role in the area of Corporate Social Responsibility. Keeping
up with this, it was thought appropriate to incorporate such a
company, which could concentrate on rendering assistance to
the needy and under privileged people in the society.
FUTURE OBJECTIVES
Food, Shelter, Clothing and Education are the basic necessities
for every person and therefore your Company proposes to assist
needy students and children with books, equipments, freeship /
scholarship, educate them in public health care, sanitation,
cleanliness and other related objects.
The Company plans assistance to indigent men, women and
children; assistance for appropriate literacy and vocation training
programs; provide shelter, education and medical care.
DIRECTORS
The first Directors of your Company are
1. Mr. Milind Kulkarni
2. Mr. Atanu Sarkar
3. Mr. Vikrant Gandhe
430
Pursuant to the provisions of the Articles of Association of the
Company, all the Directors retire by rotation and being eligible
offer themselves for re-appointment.
DIRECTORS’ RESPONSIBILITY STATEMENT
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the
Operating Management, and after due enquiry, confirm that:
i. in the preparation of the annual accounts, the applicable
accounting standards have been followed;
ii. they have, in the selection of the accounting policies,
consulted the Statutory Auditors and these have been
applied consistently and reasonable and prudent judgments
and estimates have been made so as to give a true and fair
view of the state of affairs of the Company as at 31st March
2006 and of the loss of the Company for the period ended
on that date;
iii. proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
iv. the annual accounts have been prepared on a going concern
basis.
AUDITORS:
The Auditors, B.K.Khare & Co.,Chartered Accountants, retire at
the ensuing Annual General Meeting and have confirmed their
eligibility and willingness to accept office, if re-appointed.
PARTICULARS OF EMPLOYEES:
The Company did not have any employees during the period
ended March 31, 2006.
ACKNOWLEDGEMENTS
The Board takes this as an opportunity to thank the promoters of
the Company for their faith and patronage.
For and on behalf of the Board
Milind Kulkarni
Pune, April 6, 2006 Chairman
 TECH MAHINDRA FOUNDATION

Report of the Auditors to the Members of Tech Mahindra Foundation

We have audited the attached, balance sheet of Tech Mahindra sub-section (3C) of Section 211 of the Companies
Foundation as at March 31, 2006, and also the Income and Act, 1956;
Expenditure Account for the year ended on that date annexed
e. On the basis of the written representations received
thereto. These financial statements are the responsibility of the
from the Directors, as on March 31, 2006, and taken
Company’s management. Out responsibility is to express an
on record by the Board of Directors, we report that
opinion on these financial statement based on our audit.
none of the Directors is disqualified as on March 31,
We conducted our audit in accordance with the auditing standards 2006 from being appointed as Director in terms of
generally accepted in India. Those Standards require that we clause (g) of sub-section (1) of section 274 of the
plan and perform the audit to obtain reasonable assurance about Companies Act, 1956;
whether the financial statements are free of material
In our opinion and to the best of our information and according
misstatement. An audit includes examining, on a test basis,
to the explanations given to us, the said accounts read together
evidence supporting the amounts and disclosures in the financial
with the notes, give the information required by the Companies
statements. An audit also includes assessing the accounting
Act, 1956, in the manner so required and give a true and fair
principles used and significant estimates made by management,
view in conformity with the accounting principles generally
as well as evaluating the overall financial statement presentation.
accepted in India:
We believe that our audit provides a reasonable basis for our
opinion. i. in the case of the Balance Sheet, of the state of
affairs of the Company as on March 31, 2006
1. As the Company is licensed under Section 25 of the
and
Companies Act, 1956, the Companies (Auditor’s Report)
Order, 2003, issued by the Central Government of India, in ii. in the case of the Income and Expenditure
terms of Section 227(4A) of the Act does not apply to it, as Account of the deficit for the year ended on that
per paragraph 1(2)(iii) of the said Order. date.
2. Further to our comments to in paragraph 1 above, we report
that:
a. we have obtained all the information and explanations
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
b. in our opinion, proper books of account as required by
law have been kept by the Company so far as appears
For B. K. Khare & Co.
from our examination of the books;
Chartered Accountants
c. the balance sheet and the Income and Expenditure
Account dealt by the report are in agreement with the
books of account; R. D. Onkar
Partner
d. in our opinion, the attached balance sheet and Income Pune, April 6, 2006 Membership No. 45716
and Expenditure Account dealt with by this report
comply with the accounting standards referred to in

431
TECH MAHINDRA FOUNDATION

BALANCE SHEET AS AT MARCH 31, 2006

As at
Schedule March 31, 2006
Rupees
I. SOURCES OF FUNDS :
Corpus Funds ......................................................................... I 150,500,000

Total .......... 150,500,000

II. APPLICATION OF FUNDS :

CURRENT ASSETS, LOANS AND ADVANCES .................... II
Interest accrued (on bank deposit) ................................... 30,308
Cash and Bank Balances .................................................. 150,495,000

150,525,308

Less: Current Liabilities and Provisions : ............................. III

Liabilities ......................................................................... 60,250

60,250

Net Current Assets 150,465,058

Deficit in Income and Expenditure Account ........................ 34,942

Total .......... 150,500,000

SIGNIFICANT ACCOUNTING POLICIES

AND NOTES ON ACCOUNTS .................................................. VI

As per our attached report of even date. For Tech Mahindra Foundation

For B.K. Khare & Co.

Chartered Accountants

R. D. Onkar Mr. Milind Kulkarni Mr. Atanu Sarkar

Partner Chairman Director
M. No. 45716

Pune, April 6, 2006 Pune, April 6, 2006

432
 TECH MAHINDRA FOUNDATION

INCOME & EXPENDITURE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

March 31, 2006

Schedule Rupees

INCOME ......................................................................................... IV 30,308

Total .......... 30,308

EXPENDITURE :
Operating and other Expenses ....................................................... V 65,250

Total .......... 65,250

Excess of expenditure over income ................................................ 34,942
Total ......... 30,308
SIGNIFICANT ACCOUNTING POLICIES ...................................... VI
As per our attached report of even date

As per our attached report of even date. For Tech Mahindra Foundation

For B.K. Khare & Co.

Chartered Accountants

R. D. Onkar Mr. Milind Kulkarni Mr. Atanu Sarkar

Partner Chairman Director
M. No. 45716

Pune, April 6, 2006 Pune, April 6, 2006

433
TECH MAHINDRA FOUNDATION

SCHEDULES FORMING PART OF THE SCHEDULES FORMING PART OF THE

BALANCE SHEET INCOME AND EXPENDITURE ACCOUNT
March 31,
2006
As at Rupees Rupees
March 31,
2006 SCHEDULE IV
Rupees Rupees INCOME
SCHEDULE I
CORPUS FUNDS Interest on :
SHARE CAPITAL : Deposits with banks 30,308

Authorised : (Tax deducted at source Rs. 6,802)

50,000 Equity Shares of Rs. 10 each
fully paid-up 500,000 Total 30,308

Issued, Subscribed & Paid up :

50,000 Equity Shares of Rs. 10/- each
fully paid up 500,000
March 31,
Specific Donations 2006
As per last Balance Sheet — Rupees Rupees
Add: Received during the period/year 150,000,000 SCHEDULE V
Operating and other Expenses
150,500,000
Professional Fees 45,250
Total 150,500,000
Donation 5,000
Audit Fees 15,000
SCHEDULE II
CURRENT ASSETS, LOANS Total 65,250
AND ADVANCES :

(a) Cash and Bank Balances :

SCHEDULE: VI
Balance with Scheduled banks
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNT FOR THE
(i) In current account .............................. 2,995,000
YEAR ENDED MARCH 31, 2006 :
(ii) In Fixed Deposit account ................... 147,500,000
150,495,000 1. Significant Accounting Policies:
(b) Loans and Advances : A. Basis of Preparation of Accounts:
Advances recoverable in cash or in kind of for The accounts have been prepared to comply in all material aspects with
value to be received – considered good 30,308 applicable accounting principles in India, the Accounting Standards issued
– considered doubtful — by the Institute of Chartered Accountants of India (ICAI) and the relevant
provisions of the Indian Companies Act, 1956.
Total 30,308
Less : Provision — B. Revenue recognition:
Interest income is recognized on the proportion basis.
C. Donations :
30,308
Donations received with a specific direction from the donors that they shall
30,308 form part of the corpus/specific funds have been accounted for accordingly.
Total 150,525,308 2. Pre-operative expenses have been charged off to the income & expenditure
account fully in the year of incurrence of expenses.
SCHEDULE III
3. Previous year’s figures have not been presented being the first year of
CURRENT LIABILITIES operation.
Sundry Creditors 60,250

Total 60,250

As per our attached report of even date. For Tech Mahindra Foundation

For B.K. Khare & Co.

Chartered Accountants

R. D. Onkar Mr. Milind Kulkarni Mr. Atanu Sarkar

Partner Chairman Director
M. No. 45716

Pune, April 6, 2006 Pune, April 6, 2006

434
 TECH MAHINDRA FOUNDATION

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE:

I. Registration Details :
Registration No. 1 1 - 1 7 1 5 4 4 N State Code 1 1
Balance Sheet Date 3 1 0 3 0 6
Date Month Year
II. Capital Raised during the year (Amount in Rs. Thousands) :
Public Issue Rights Issue
N I L N I L
Bonus Issue Private Placement
N I L 5 0 0

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) :

Total Liabilities (including Shareholders’ Funds) Total Assets

1 5 0 5 0 0 1 5 0 5 0 0

Paid-up Capital Reserves and Surplus

5 0 0 N I L

Secured Loans Unsecured Loans

N I L N I L

Net Fixed Assets Investments

N I L N I L
Net Current Assets Deferred Tax Asset
1 5 0 4 6 5 N I L
Accumulated Losses
3 5

IV. Performance of Company (Amount in Rs. Thousands) :

Turnover (Sakes and Other Income) Total Expenditure

N A N A
Profit/Loss Before Tax Profit/Loss After Tax
N A N A
Earning per Share in Rs. Dividend Rate %
(Refer Note 18 above)
N A NA

V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) :
Item Code No. (ITC Code)
Product Description

For Tech Mahindra Foundation

Mr. Milind Kulkarni Mr. Atanu Sarkar

Chairman Director

Pune, April 6, 2006

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BRISTLECONE LIMITED

Directors’ Report for the year ended March 31, 2006

The Directors are pleased to present their report together with the audited Accounts of your Company for the year ended
March 31, 2006.
Year ended Year ended Year ended Year ended
March 31, 2006 March 31, 2006 March 31, 2005 March 31, 2005
USD INR USD INR
Total income 398 17,775 3,731 166,626
Loss before taxes (252,792) (11,289,690) (268,675) (11,999,026)
Loss after taxes (252,792) (11,289,690) (268,675) (11,999,026)

Review for the year ended March 31, 2006:
The Company, incorporated on February 3, 2004, implemented a
restructuring and acquisition transaction (“Transaction”) between
companies in the Mahindra Group and Bristlecone Inc on May 17,
2004.
The year under review has been a significant turning point in the
Company’s US subsidiary, Bristlecone Inc. There has been a
significant growth in the revenues and margins and reduction in
the losses. Total income was higher by over 59% as compared to
the previous year. Loss after tax was lower by over 90%.
The year under review reflected a similar trend for the Company’s
Indian subsidiary, Bristlecone India Ltd. During the year, Income
for the Company represented a growth of 46%. The Company
made a significant turnaround during the year and ended the year
with a Profit After Tax as compared to a loss in the previous year.
Outlook for the current year ending March 31, 2007:
In the US, the Company management anticipates both revenue
and profitability growth.
The industry is currently witnessing a consolidation in providing
of services as well as a consolidation of service providers. The
Company expects to maintain and improve its share of business
revenues in spite of current trends.
The Company had business deals from certain new customers
and expects to strengthen its position through business
partnerships with these companies. The sales order book and
pipeline are promising and the Company, as part of the continuing
effort to control costs and improve profitability, expects to initiate
and sustain its current cost control initiatives.
The Rest of the World (ROW) Operations plan to increase its
development center capacity in Pune to cater to off-shore business.
It also plans to set up centers at Delhi and Chennai to address the
local market in India. The Company continues to invest in process
improvements to improve customer satisfaction and plans to
implement Balance Score card for managing strategic initiatives.
The Company plans to focus on Middle East and European
markets to boost its export growth. All these initiatives will help
ROW operations achieve better performance in the year ahead.
The Board acknowledges the continued support the
Company receives from its parent holding company, Mahindra
& Mahindra Ltd.
For and on behalf of the Board
Anand G. Mahindra
Chairman
28 th April, 2006

436

Report of Independent Auditors
Board of Directors
Bristlecone Ltd.
We have audited the special-purpose statement of assets and
liabilities of Bristlecone Ltd. ('the Company') as of March 31, 2006
and March 31, 2005, and the related special-purpose statements
of revenues and expenses and of the cash flows for the years
then ended. These financial statements are the responsibility of
the Company’s Management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards,
generally accepted in the United States of America as established
by the Auditing Standards Board of the American Institute of
Certified Public Accountants. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes consideration of internal control
over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by the
Management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
BRISTLECONE LIMITED
The accompanying special-purpose financial statements were
prepared for the purpose of consolidation with the financial
statements of Mahindra & Mahindra Limited, the Holding
Company, as discussed in Note 2(a), and are not intended to be
a presentation in conformity with generally accepted accounting
principles.
In our opinion, the special-purpose financial statements referred
to above present fairly, in all material respects, the assets and
liabilities of the Company at March 31, 2006 and March 31, 2005,
and the revenues, expenses and cash flows for the years then
ended, on the basis of accounting described in Note 2.
This report is intended solely for the information and use of the
board of directors and management of Bristlecone Ltd. and
Mahindra & Mahindra Limited for the purpose of meeting the
requirement of consolidation of the attached financial statements
with the financial statements of Mahindra & Mahindra Limited,
the holding company, and is not intended to be and should not be
used by anyone other than these specified parties.
Grant Thornton
April 26, 2006
Mumbai, India
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BRISTLECONE LIMITED

Special Purpose Financial Statements March 31, 2006 and March 31, 2005
Statement of Assets and Liabilities

As at As at
As at March 31, As at March 31,
March 31, INR March 31, 2005
2006 2006 2005 INR
USD (Refer Note 13) USD (Refer Note 13)
ASSETS:
Current Assets
Cash and Cash Equivalents .............................................. 511,838 22,858,685 110,345 4,928,008
Accounts Receivable ........................................................ 170,827 7,629,134 — —
Loans and Advances ........................................................ — — 42,009 1,876,122
Total Current Assets ...................................................... 682,665 30,487,819 152,354 6,804,130
Investments .................................................................... 15,508,331 692,602,061 14,087,134 629,131,403

Total Assets .................................................................... 16,190,996 723,089,880 14,239,488 635,935,533

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Other Current Liabilities ................................................... 403,951 18,040,451 80,432 3,592,093
Total Liabilities ............................................................... 403,951 18,040,451 80,432 3,592,093

Stockholders’ Equity
Ordinary Shares Par Value ............................................... 6,743 301,142 6,685 298,552
Series A Preferred Stock — Par Value ............................. 7,300 326,018 7,300 326,018
Series B Preferred Stock — Par Value ............................. 6,920 309,047 — —
Advance Share Subscription ............................................ — — 1,600,000 71,456,000
Additional Paid-in Capital .................................................. 16,287,549 727,401,938 12,813,746 572,261,896
Accumulated Deficit ......................................................... (521,467) (23,288,716) (268,675) (11,999,026)
Total Stockholders’ Equity ............................................ 15,787,045 705,049,429 14,159,056 632,343,440
Total Liabilities and Stockholders’ Equity .................... 16,190,996 723,089,880 14,239,488 635,935,533

(The accompanying notes are an integral part of these financial statements)

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 BRISTLECONE LIMITED

Special Purpose Financial Statements March 31, 2006 and March 31, 2005
STATEMENT OF REVENUES AND EXPENSES

Year ended Year ended

Year ended March 31, Year ended March 31,
March 31, 2006 March 31, 2005
2006 INR 2005 INR
USD (Refer Note 13) USD (Refer Note 13)

Interest Income ................................................................ 398 17,775 3,731 166,626

Total Income .................................................................... 398 17,775 3,731 166,626

Cost and Expenses:

Salaries, Bonuses and Other Remuneration .................... 235,337 10,510,150 258,991 11,566,538
General and Administration Expenses ............................. 17,853 797,315 13,415 599,114
Total Cost and Expenses ................................................. 253,190 11,307,465 272,406 12,165,652
Net Loss Before Tax ........................................................ (252,792) (11,289,690) (268,675) (11,999,026)
Income Tax ...................................................................... — — — —
Net Loss ........................................................................... (252,792) (11,289,690) (268,675) (11,999,026)

(The accompanying notes are an integral part of these financial statements)

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BRISTLECONE LIMITED

Special Purpose Financial Statements March 31, 2006 and March 31, 2005
Statement of Stockholders’ Equity for the year ended March 31, 2006

Preference Shares Ordinary Shares

Authorized Issued and Authorized Issued and Additional Accumu- Total

Outstanding Outstanding Paid in lated stock-
Capital Deficit holders
Equity
Shares Value Shares Value Shares Value Shares Value Value Value Value
(USD) (USD) (USD) (USD) (USD) (USD) (USD)

Balance as on April 1, 2005 8,200,000 8,200 7,299,977 7,300 25,000,000 25,000 6,684,616 6,685 14,413,746 (268,675) 14,159,056

Shares issued during the

year 12,000,000 12,000 6,920,000 6,920 — — 58,259 58 3,473,803 — 3,480,781

Advance share
subscription — — — — — — — — (1,600,000) — (1,600,000)

Net loss for the year — — — — — — — — — (252,792) (252,792)

Balance as on
March 31, 2006 20,200,000 20,200 14,219,977 14,220 25,000,000 25,000 6,742,875 6,743 16,287,549 (521,467) 15,787,045

Statement of Stockholders’ Equity for the year ended March 31, 2005

Preference Shares Ordinary Shares

Authorized Issued and Authorized Issued and Additional Accumu- Total

Outstanding Outstanding Paid in lated stock-
Capital Deficit holders
Equity
Shares Value Shares Value Shares Value Shares Value Value Value Value
(USD) (USD) (USD) (USD) (USD) (USD) (USD)

Shares issued during the

year 8,200,000 8,200 7,299,977 7,300 25,000,000 25,000 6,684,616 6,685 12,813,746 — 12,827,731

Advance share
subscription — — — — — — — — 1,600,000 — 1,600,000

Net loss for the year — — — — — — — — — (268,675) (268,675)

Balance as on
March 31, 2005 8,200,000 8,200 7,299,977 7,300 25,000,000 25,000 6,684,616 6,685 14,413,746 (268,675) 14,159,056

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 BRISTLECONE LIMITED

Special Purpose Financial Statements March 31, 2006 and March 31, 2005
Statement of Stockholders’ Equity for the year ended March 31, 2006 (Refer Note 13)

Preference Shares Ordinary Shares

Authorized Issued and Authorized Issued and Additional Accumu- Total

Outstanding Outstanding Paid in lated stock-
Capital Deficit holders
Equity
Shares Value Shares Value Shares Value Shares Value Value Value Value
(INR) (INR) (INR) (INR) (INR) (INR) (INR)

Balance as on April 1, 2005 8,200,000 366,212 7,299,977 326,018 25,000,000 1,116,500 6,684,616 298,552 643,717,896 (11,999,026) 632,343,440

Shares issued during the

year 12,000,000 535,920 6,920,000 309,047 — — 58,259 2,590 155,140,042 — 155,451,679

Advance share
subscription — — — — — — — — (71,456,000) — (71,456,000)

Net loss for the year — — — — — — — — — (11,289,690) (11,289,690)

Balance as on
March 31, 2006 20,200,000 902,132 14,219,977 635,065 25,000,000 1,116,500 6,742,875 301,142 727,401,938 (23,288,716) 705,049,429

Statement of Stockholders’ Equity for the year ended March 31, 2005 (Refer Note 13)

Preference Shares Ordinary Shares

Authorized Issued and Authorized Issued and Additional Accumu- Total

Outstanding Outstanding Paid in lated stock-
Capital Deficit holders
Equity
Shares Value Shares Value Shares Value Shares Value Value Value Value
(INR) (INR) (INR) (INR) (INR) (INR) (INR)

Shares issued during the

year 8,200,000 366,212 7,299,977 326,018 25,000,000 1,116,500 6,684,616 298,552 572,261,896 — 572,886,466

Advance share
subscription — — — — — — — — 71,456,000 — 71,456,000

Net loss for the year — — — — — — — — — (11,999,026) (11,999,026)

Balance as on
March 31, 2005 8,200,000 366,212 7,299,977 326,018 25,000,000 1,116,500 6,684,616 298,552 643,717,896 (11,999,026) 632,343,440

(The accompanying notes are in integral part of these Financial Statements)

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BRISTLECONE LIMITED

Special Purpose Financial Statements March 31, 2006 and March 31, 2005
STATEMENT OF CASH FLOWS

Year ended Year ended

Year ended March 31, Year ended March 31,
March 31, 2006 March 31, 2005
2006 INR 2005 INR
USD (Refer Note 13) USD (Refer Note 13)
Cash flows from operating activities:
Net loss ............................................................................ (252,792) (11,289,690) (268,675) (11,999,026)

Adjustments to reconcile net income to net cash used

in operating activities:

Changes in assets and liabilities:

(Increase)/Decrease in other current assets .................... (128,818) (5,753,012) (42,009) (1,876,122)
Increase/(Decrease) in other current liabilities ................. 323,519 14,448,358 80,432 3,592,093
Net cash used in operating activities ........................... (58,091) (2,594,344) (230,252) (10,283,055)

Cash flows from investing activities:

Investments in Bristlecone India Ltd. .............................. (721,197) (32,208,658) (1,575,403) (70,357,497)
Investment in Bristlecone Inc. ......................................... (700,000) (31,262,000) (6,684,000) (298,507,440)
Net cash used in investing activities ............................ (1,421,197) (63,470,658) (8,259,403) (368,864,937)

Cash flows from financing activities:

Proceeds from issue of Ordinary Shares ......................... 20,781 928,079 — —
Proceeds from issue of Preference Shares ..................... 1,860,000 83,067,600 7,000,000 312,620,000
Advance Share subscription ............................................. — — 1,600,000 71,456,000
Net cash provided by financing activities ......................... 1,880,781 83,995,679 8,600,000 384,076,000
Net increase in cash and cash equivalents ...................... 401,493 17,930,677 110,345 4,928,008
Cash and cash equivalents at the beginning of the year . 110,345 4,928,008 — —
Cash and cash equivalents at the end of the year ....... 511,838 22,858,685 110,345 4,928,008

Supplemental non-cash information:

Investments acquired consequent to the contribution
agreement for consideration other than cash:
1. Shares in Bristlecone Inc. ........................................... — — 2,840,905 126,874,817
2. Shares in Bristlecone India Ltd. (formerly known as
Mahindra Consulting Ltd.) .......................................... — — 841,205 37,568,215
3. Shares in Mahindra Consulting Inc. (merged with
Bristlecone Inc. effective June 1, 2004) ..................... — — 1,764,984 78,824,185
4. Shares in Bristlecone (UK) Ltd. (formerly known as
Mahindra Intertrade (UK) Ltd. ..................................... — — 380,637 16,999,248

(The accompanying notes are an integral of these financial statements)

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 BRISTLECONE LIMITED

SFAS No. 123, “Accounting for Stock-Based Compensation”, established

Special Purpose Financial Statements accounting and disclosure requirements using a fair-value-based method of
March 31, 2006 and March 31, 2005 accounting for stock-based employee compensation plans. The Company has
elected its current method of accounting as described above, and has adopted
NOTES TO FINANCIAL STATEMENTS the disclosure requirements of SFAS No. 148, ”Accounting for Stock-Based
Compensation — Transition and Disclosure”, an amendment of SFAS No. 123.
NOTE 1 — NATURE OF BUSINESS Had compensation cost of the Company's stock option plan been determined
Bristlecone Limited (“the Company”) was incorporated under the law of The Cayman on the fair value at the grant dates for employee compensation arrangements
Islands on February 3, 2004. The Company commenced commercial operations on consistent with the method required by SFAS No. 123, the Company's net loss
May 17, 2004. The Company is a subsidiary of Mahindra & Mahindra Ltd., an India would have been increased to the pro forma amounts indicated below:
Company. Year ended Year ended
The Company is a holding company and its subsidiaries provide technology solutions Year ended 31-3-2006 Year ended 31-3-2005
and consulting services. The Company's wholly owned subsidiaries are Bristlecone 31-3-2006 INR 31-3-2005 INR
India Ltd., Bristlecone Inc., Bristlecone (UK) Ltd., Bristlecone GmbH and Bristlecone USD (Refer Note 13) USD (Refer Note 13)
(Singapore) Pte. Ltd.
During the previous year, pursuant to a Contribution Agreement, the Company Net loss
acquired the business of Mahindra Consulting Ltd., Mahindra Consulting Inc., As reported (252,792) (11,289,690) (268,675) (11,999,026)
Mahindra Intertrade (UK) Ltd., (all subsidiaries of Mahindra & Mahindra Ltd.), and Add: Compensation
Bristlecone Inc. The consideration was settled through the issue of Ordinary Shares cost determined
and Preference Shares to Mahindra & Mahindra Ltd., and the issue of Ordinary using the fair
Shares, Preference Shares and cash payments to the erstwhile shareholders of value model (5,632) (251,525) (1,637) (73,108)
Bristlecone Inc.
Pro forma (258,424) (11,541,215) (270,312) (12,072,134)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the
accompanying financial statements are as follows: NOTE 3 — CASH AND CASH EQUIVALENTS
a) Basis of Presentation: Cash balance comprised of the following:
i) The accompanying financial statements are prepared under the historical As at As at
cost convention on the accrual basis of accounting in accordance with the As at March 31 As at March, 31
accounting policies described in these notes. The financial statements have March 31, 2006 March 31, 2005
been prepared for the purpose of consolidation with the financial statements 2006 INR 2005 INR
of Mahindra & Mahindra Limited, the holding company, and are not intended USD (Refer Note 13) USD (Refer Note 13)
to be a presentation in conformity with generally accepted accounting
principles. All amounts are stated in U.S. dollars (“USD”). Checking account in
ii) The financial statements are for the period from April 1, 2005, through March Silicon Valley Bank 430,824 19,240,600 29,730 1,327,742
31, 2006, along with comparatives for the period from April 1, 2004, through Money Market account
March 31, 2005. in Silicon Valley Bank 81,014 3,618,085 80,615 3,600,266
iii) Estimates and Assumptions: 511,838 22,858,685 110,345 4,928,008
In preparing the Company's financial statements in conformity with accounting
policies stated herein, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and NOTE 4 — ACCOUNTS RECEIVABLE
the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the Accounts receivable comprises amounts to be recovered from the Company's
reporting period. Although these estimates are based upon management's subsidiary, Bristlecone Inc.
best knowledge of current events and actions, actual results could differ
from those estimates.
NOTES 5 — OTHER CURRENT ASSETS
iv) Certain reclassifications have been made to confirm prior year data to the
current presentations. These reclassifications had no effect on reported Other current assets comprised of the following:
earnings. As at As at
b) Foreign Currencies: As at March 31 As at March, 31
Transactions in foreign currencies are translated at the exchange rate ruling at March 31, 2006 March 31, 2005
the date of transaction. Monetary assets and liabilities denominated in foreign 2006 INR 2005 INR
currencies are translated at the exchange rate ruling at the balance sheet date. USD (Refer Note 13) USD (Refer Note 13)
Foreign exchange gains and losses resulting from the settlement of such Loans and Advances — — 42,009 1,876,122
transactions and from the translation of monetary assets and liabilities at year-
end exchange rates are recognized in the income statement. — — 42,009 1,876,122

c) Cash and Cash Equivalents:

Cash and cash equivalents include highly liquid investments and deposits with NOTES 6 — INVESTMENTS
an original maturity of ninety-one days or less.
Investments comprised of the following:
d) Investment:
Investments, including those in subsidiaries and associate companies are As at As at
carried at cost. Cost is determined based on the cash paid and other liabilities As at March 31 As at March, 31
assumed by the Company. Consideration that has been settled by issue of the March 31, 2006 March 31, 2005
Company's stock is also considered in arriving at the cost of investments. 2006 INR 2005 INR
USD (Refer Note 13) USD (Refer Note 13)
e) Stock-based Compensation:
The Company accounts for stock-based compensation using the intrinsic Bristlecone
value method prescribed in APB 25, and related interpretation in accounting India Ltd. 3,137,805 140,134,371 2,416,608 107,925,713
for employee and director options, including options given to employees of Bristlecone Inc. 11,989,889 535,468,442 11,289,889 504,206,442
subsidiary companies Compensation cost for stock options is measured as the
excess of the fair value of the Company's stock on the measurement date over Bristlecone (UK) Ltd. 380,637 16,999,248 380,637 16,999,248
the amount an employee must pay to acquire the stock and is recognized over 15,508,331 692,602,061 14,087,134 629,131,403
the vesting period.

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BRISTLECONE LIMITED

NOTES 7 — STOCK BASED COMPENSATION c) Bristlecone Ltd. Amended and Restated 2004 Stock Option Plan:

The Company has operated four Stock Option Plans during the current year. Options granted under the Plan may be incentive stock options or non-
statutory stock options. Incentive stock options may only be granted to
a) Bristlecone Ltd., 2004, Stock Option Plan (arising out of conversion of the earlier
employees. Twenty-five per cent (25%) of the Shares subject to the Option
Bristlecone Inc. existing Stock Option Plan)
shall vest on the completion of 12 calendar months from the Vesting
Pursuant to the terms of the acquisition of Bristlecone Inc. by Bristlecone Ltd., Commencement Date, and no vesting shall occur prior to the completion such
on May 17, 2004 (the “transaction”), the then existing outstanding Options of period of 12 months. Subsequently 6.25% of the Shares subject to the Option
Bristlecone Inc. aggregating to a total of 2,058,493 Options were cancelled and shall vest on the completion of each 3-month period thereafter until full vesting
fresh Options were issued by Bristlecone Ltd., based on the exchange criteria
is completed, subject to Optionee continuing to be an employee through each
set out in the transaction documents.
such date. The term of each Option shall be stated in the Option Agreement,
Options granted under the Plan may be incentive stock options or non-statutory provided, however, that the term shall be no more than Five (5) years from the
stock options. Incentive stock options may only be granted to employees. date of grant thereof. The exercise price of each Option (a) granted to an
Twenty-five per cent (25%) of the Shares subject to the Option shall vest on the Employee who at the time of grant of such Option, owns stock representing
one (1) year anniversary of the Vesting Commencement Date, and 1/48 of the more than ten percent (10%) of the voting power of all classes of stock of the
Shares subject to the Option shall vest each month thereafter on the same day
Company of any Parent or Subsidiary, shall be no less than 110% of the Fair
of the month as the Vesting Commencement Date, subject to Optionee
Market Value per Share as determined by the Board on the date of grant (b)
continuing to be a Service Provider through each such date. The term of each
granted to any other Employee, the per Share exercise price shall be no less
Option shall be stated in the Option Agreement, provided, however, that the
term shall be no more than ten (10) years from the date of grant thereof. The than 100% of the Fair Value per Share determined by the Board on the
exercise price of each Option, (a) granted to an employee who at the time of date of grant.
grant of such Option, owns stock representing more than ten per cent (10%) of For purposes of the pro forma disclosure, the fair value of each option grant was
the voting power of all classes of stock of the Company or any Parent or
estimated on the date of grant using the minimum value method with the
Subsidiary, shall be no less than 110% of the Fair Market Value per Share as
following assumptions: no dividend yield, risk-free interest rates of 4.67% and
determined by the Board on the date of grant (b) granted to any other employee,
the per Share exercise price shall be no less than 100% of the Fair Market Value an expected life of 5 years.
per Share determined by the Board on the date of grant. The following table summarizes information about these Amended and Restated
For purposes of the pro forma disclosure, the fair value of each option grant was 2004 Stock options
estimated on the date of grant using the minimum value method with the
Shares arising Weighted Shares arising Weighted
following assumptions: no dividend yield, risk-free interest rates of 4.67% and
an expected life of 5 years. out of average out of Average
outstanding exercise outstanding Exercise
The following table summarizes information about the Options issued under options price options price
this Plan: 2006 2006 2005 2005
Shares arising Weighted Shares arising Weighted
out of average out of Average Outstanding
outstanding exercise outstanding Exercise at April 1 770,000 USD 0.10 — —
options price options price
Granted 342,100 USD 0.10 770,000 USD 0.10
2006 2006 2005 2005
Outstanding at Exercised 3,750 USD 0.10 — —
April 1 468,950 USD 0.67 — — Expired 120,625 USD 0.10 — —
Granted — — 567,818 USD 0.67
Exercised 54,509 USD 0.67 — — Forfeited — — — —
Expired 109,102 USD 0.67 98,868 USD 0.67 Outstanding
Forfeited — — — — at March 31 987,725 USD 0.10 770,000 USD 0.10
Outstanding
at March 31 305,339 USD 0.67 468,950 USD 0.67 d) Bristlecone Ltd. 2005 Stock Option Plan for Bristlecone India employees:
Options granted under the Plan may be incentive stock options or non-
b) Bristlecone Ltd., Key Employee Option Grants: statutory stock options. Incentive stock options may only be granted to
At the date of the Transaction, Performance Stock Options were issued to certain
employees. Twenty-five percent (25%) of the Shares subject to the Option
key management personnel of the Company. While these Performance Options
shall vest on the completion of 12 calendar months from the Vesting
were issued under the terms of the Bristlecone Ltd. 2004, Stock Option Plan
Commencement Date, and no vesting shall occur prior to the completion of
outlined under (a) above, the exercise price and vesting of these Options was
different as outlined further below. The vesting of these Options shall occur on the such period of 12 months. Subsequently 6.25% of the Shares subject to the
achievement of certain revenue milestones by the Company as determined under Option shall vest on the completion of each 3-month period thereafter until
the Agreement for the financial years ended March 31, 2006, 2007 and 2008. full vesting is completed, subject to Optionee continuing to be an
Employee through each such date. The term of each Option shall be stated
The following table summarizes information about these Performance Options:
in the Option Agreement; provided, however, that the term shall be no more
Shares arising Weighted Shares arising Weighted than Five (5) years from the date of grant thereof. The exercise price of each
out of average out of Average Option (a), granted to an Employee who at the time of grant of such Option,
outstanding exercise outstanding Exercise owns stock representing more than ten percent (10%) of the
options price options price
voting power of all classes of stock of the Company or any Parent or
2006 2006 2005 2005
Subsidiary, shall be no less than 110% of the Fair Market Value per Share
Outstanding at as determined by the Board on the date of grant (b) granted to any
April 1 1,135,522 USD 0.10 — — other Employee, the per Share exercise price shall be no less than 100%
Granted — — 1,703,283 USD 0.10 of the Fair Market Value per Share determined by the Board on the date
Exercised — — — — of grant.
Expired — — — — For purposes of the pro forma disclosure, the fair value of each option grant
Forfeited — — 567,761 USD 0.10 was estimated on the date of grant using the minimum value method with the
following assumptions: no dividend yield, risk-free interest rate of 4.67% and
Outstanding
an expected life of 5 years.
at March 31 1,135,522 USD 0.10 1,135,522 USD 0.10

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 BRISTLECONE LIMITED

The following table summarizes information about these Bristlecone Ltd. 2005 NOTE 10 — RELATED PARTY TRANSACTIONS
Stock options plan for Bristlecone India Limited employees: The Company had following transactions with its affiliates/subsidiaries:
Shares arising out Weighted Year ended Year ended
of Outstanding Average Year ended 31-3-2006 Year ended 31-3-2005
Options Exercise price 31-3-2006 INR 31-3-2005 INR
2006 2006 USD (Refer Note 13) USD (Refer Note 13)
Outstanding at April 1 — —
Transactions with
Granted 369,950 USD 0.10 Mahindra &
Exercised — — Mahindra Ltd.:
Expired 29,200 USD 0.10 Issue of Ordinary Shares
Forfeited — — for consideration other
than cash — — 4,222,250 188,565,685
Outstanding at March 31 340,750 USD 0.10
Issue of Series A
Preference Shares — — 7,000,000 312,620,000
NOTE 8 — COMMITMENTS AND CONTINGENCIES Issue of Series B
Legal Claims Preference Shares* 3,460,000 154,523,600 — —
The Company is subject to legal claims in the normal course of business. Management Advance Shares
believes that there are no such claims that would be material to the financial condition Subscription — — 1,600,000 71,456,000
or results of operations.
Investments in
Subsidiaries:
NOTE 9 — SHAREHOLDERS’ EQUITY
Bristlecone India Ltd. 721,197 32,208,658 2,416,608 107,925,713
The Company’s authorized share capital comprised of 8,200,000 Series A Preference
Shares at par of USD 0.001 each, 12,000,000 Series B Preference Shares at par of Bristlecone Inc. 700,000 31,262,000 11,289,889 504,206,443
USD 0.001 each and 25,000,000 Ordinary Shares at par of USD 0.001 each as of Bristlecone (UK) Ltd. — — 380,637 16,999,248
March 31, 2006 of which 7,299,977 Series A Preference Shares, 6,920,000 Series Bristlecone Inc.:
B Preference Shares and 6,742,875 Ordinary Shares were issued and outstanding as
of March 31, 2006. Recovery of Expenses
(Net) 170,827 7,629,134 1,099,352 49,097,060
Conversion of Preference Shares:
Receivable from
Each Series A Preference Share and Series B Preference Share are entitled to be Bristlecone Inc. 170,827 7,629,134 — —
converted, without payment of any additional consideration, into one fully paid
Payments to Key
Ordinary Share.
Management Personnel—
Voting: Padman Ramankutty —
CEO and Director:
Every member, present in person or by proxy, is entitled to one vote for each Ordinary
Share held. Each Series A Preference Shareholder and Series B Preference Shareholder Salaries, Bonuses and
are entitled to that many votes, if he converted such Preference Shares to Ordinary other Remuneration 235,337 10,510,150 258,991 11,566,538
Shares on the record date of the Meeting or if no record date is established, the date Loan Outstanding — — 21,005 938,083
the poll is taken.
* Includes Series B Preference Shares allotted against advance share subscription
Liquidation: amounting to USD 1,600,000 received as of March 31, 2005.
In the event of any liquidation, dissolution or winding up of the Company, holders of
Series A and B Preferences Shares are entitled to an amount of one hundred and fifty NOTE 11 — FAIR VALUE OF FINANCIAL INSTRUMENTS
percent (150%) of the original purchase price of such Shares (as adjusted for any The carrying amount of the Company’s cash equivalents, other current assets and
recapitalization, stock combinations, dividends, stock splits and the like) in preference other current liabilities approximated their fair value due to their short maturities.
to any distribution to holders of Ordinary Shares.

Additional Paid-in Capital Comprises the following: NOTE 12 — SEGMENT INFORMATION

1. On issue of Ordinary Shares — USD 6,698,654 (INR 299,161,887) [2005: USD The Company operates as a holding company, and the standalone financial statements
6,677,931 (INR 298,236,398)] are considered as a single business segment.
2. On issue of Series A Preference Shares — USD 7,292,677 (INR 325,690,955)
[2005: USD 7,292,677 (INR 325,690,955)] NOTE 13 — TRANSLATION
3. On issue of Series B Preference Shares — USD 3,453,080 (INR 154,214,553) For the convenience of the readers including the investors of the ultimate parent
[2005: USD Nil (INR Nil)] company, Mahindra & Mahindra Ltd., the financial statements for the year ended
4. On acquisition of shares in Mahindra Consulting Ltd., Mahindra Consulting March 31, 2006, along with comparatives for the year ended March 31, 2005, have
Inc. Mahindra Intertrade (UK) Ltd. and Bristlecone Inc - USD (1,156,862) been translated Indian Rupees (“INR”) at the average of the telegraphic transfer
(INR 51,665,457)] buying and selling rates quoted by the Mumbai Branch of State Bank of India on
March 31, 2006 of USD = INR 44.66. The convenience translation should not be
construed as representation that the Indian Rupee amounts or the USD amount
referred to in these financial statements have been, could have been, or could in the
future be, converted into USD or INR, as the case may be, at this or any other rate
of exchange, or at all.

445
BRISTLECONE INC.

Directors’ Report for the period ended March 31, 2006

The Directors are pleased to present their report together with the audited Accounts of your Company for the period ended
March 31, 2006.
Year ended Year ended Year ended Year ended
March 31, March 31, March 31, March 31,
2006 2006 2005 2005
USD INR USD INR
Total Income ................................................................................. 18,345,425 819,306,680 11,494,404 513,340,083
Loss before tax ............................................................................. (403,204) (18,007,091) (5,055,020) (225,757,192)
Loss after tax ................................................................................ (434,921) (19,423,572) (5,057,020) (225,846,512)

Review of Operations:
The year under review has been a significant turning point in the
Company’s operations. There has been a significant growth in the
revenues and margins and reduction in the losses incurred by the
Company. Total income was higher by over 59% as compared to
the previous year. Loss after tax was lower by over 90%.
Outlook for the current year:
The management anticipates both revenue and profitability im-
provements during the current year.
The industry is currently witnessing a consolidation in providing
of services as well as a consolidation of service providers. The
Company expects to maintain and improve its share of business
revenues in spite of current trends.
The Company has won business from certain new customers
and expects to further strengthen its position during the current
year. The sales order book and pipeline are promising and the
Company, as a part of its continuing effort to control costs and
improve profitability, expects to sustain its focus on cost control
initiatives.
The Board acknowledges the continued support the Company
receives from its parent holding company, Bristlecone Ltd.
Ulhas Yargop
Chairman
26th April, 2006

446

Report of Independent Auditors
Board of Directors
Bristlecone Inc.
We have audited the accompanying Balance Sheet of Bristlecone
Inc. (‘the Company’) as of March 31, 2006 and 2005, and the
related Statements of Income, Stockholders’ Surplus and Cash
Flow for the years then ended. These financial statements are the
responsibility of the Company’s Management. Our responsibility
is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with the Auditing Standards,
generally accepted in the United States of America as established
by the Auditing Standards Board of the American Institute of
Certified Public Accountants. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes consideration of internal control
over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s
BRISTLECONE INC.
internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by the
Management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly in all material respects, the financial position of the Company
as of March 31, 2006 and 2005, and the results of its operations
and its cash flows for the years then ended, in conformity with the
accounting principles generally accepted in the United States of
America.
Grant Thomton
April 26, 2006
Mumbai, India
447
BRISTLECONE INC.

BALANCE SHEET

As at As at
As at 31-3-2006 As at 31-3-2005
31-3-2006 INR 31-3-2005 INR
USD (Refer Note 19) USD (Refer Note 19)
ASSETS:
Current assets
Cash and cash equivalents ............................................... 967,889 43,225,923 335,065 14,964,003
Restricted cash ................................................................ — — 152,778 6,823,065
Accounts receivable, net of allowances:
Due from related party ............................................... 7,622 340,399 8,000 357,280
Others ........................................................................ 4,042,974 180,559,219 2,262,505 101,043,473
Other current assets ........................................................ 329,769 14,727,484 155,711 6,954,053
Total current assets ........................................................ 5,348,254 238,853,025 2,914,059 130,141,874
Property and equipment, net ........................................... 294,217 13,139,731 332,172 14,834,802
Other assets .................................................................... 15,872 708,844 20,227 903,338
Total assets ..................................................................... 5,658,343 252,701,600 3,266,458 145,880,014

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Accounts payable:
Due to related party ......................................................... 975,116 43,548,681 759,792 33,932,311
Others .............................................................................. 620,272 27,701,348 226,778 10,127,905
Accrued expenses and other current liabilities ................ 2,479,550 110,736,704 802,613 35,844,697
Deferred rent ................................................................... 4,885 218,164 14,828 662,218
Short term borrowings ..................................................... 18,500 826,210 167,506 7,480,818
Total current liabilities ................................................... 4,098,323 183,031,107 1,971,517 88,047,949
Total liabilities ................................................................ 4,098,323 183,031,107 1,971,517 88,047,949
Stockholders’ equity
Series A Preferred stock, no par value ............................. 774,518 34,589,974 774,518 34,589,974
Series B Preferred stock, no par value ............................. 5,939,606 265,262,804 5,939,606 265,262,804
Common stock, no par value ........................................... 136,664 6,103,414 136,664 6,103,414
Additional paid-in capital ................................................... 6,284,886 280,683,009 5,584,886 249,421,009
Accumulated deficit ......................................................... (11,575,654) (516,968,708) (11,140,733) (497,545,136)
Total stockholders’ equity ............................................. 1,560,020 69,670,493 1,294,941 57,832,065
Total liabilities and stockholders’ equity ...................... 5,658,343 252,701,600 3,266,458 145,880,014

(The accompanying notes are an integral part of these financial statements)

448
 BRISTLECONE INC.

STATEMENT OF INCOME

Year ended Year ended Year ended Year ended

31-3-2006 31-3-2006 31-3-2005 31-3-2005
USD INR USD INR
(Refer Note 19) (Refer Note 19)
REVENUES:
Operating revenues ......................................................... 18,345,425 819,306,680 11,494,404 513,340,083
Cost and expenses
Cost of revenues .............................................................. 12,277,546 548,315,204 10,045,802 448,645,517
Selling, general and administrative expenses .................. 6,390,166 285,384,814 6,402,799 285,949,003
Depreciation ..................................................................... 154,846 6,915,422 220,111 9,830,157
Total cost and expenses ................................................ 18,822,558 840,615,440 16,668,712 744,424,677

Operating loss ................................................................ (477,133) (21,308,760) (5,174,308) (231,084,594)

Interest expenses ............................................................ (9,695) (432,979) (28,212) (1,259,948)
Other income ................................................................... 83,624 3,734,648 147,500 6,587,350
Net loss before tax ......................................................... (403,204) (18,007,091) (5,055,020) (225,757,192)
Income tax expenses ....................................................... 31,717 1,416,481 2,000 89,320
Net loss ........................................................................... (434,921) (19,423,572) (5,057,020) (225,846,512)

(The accompanying notes are an integral part of these financial statements)

449
BRISTLECONE INC.

Statement of stockholders’ equity for the year ended March 31, 2006

Preference Stock Common Stock

Authorized Issued and Authorized Issued and Additional Accumu- Total

Outstanding Outstanding Paid in lated stock-
Capital Deficit holders
equity
Shares Value Shares Value Shares Value Shares Value Value Value Value
(USD) (USD) (USD) (USD) (USD) (USD) (USD)

Balance as on April 1, 2005 4,494,500 No par 3,615,535 6,714,124 30,000,000 No par 8,492,157 136,664 5,584,886 (11,140,733) 1,294,941

Additional paid in
capital contributed
during the year — — — — — — — — 700,000 — 700,000

Net loss for the year — — — — — — — — — (434,921) (434,921)

Balance as on
March 31, 2006 4,494,500 No par 3,615,535 6,714,124 30,000,000 No par 8,492,157 136,664 6,284,886 (11,575,654) 1,560,020

Statement of stockholders’ equity for the year ended March 31, 2005

Preference Stock Common Stock

Authorized Issued and Authorized Issued and Additional Accumu- Total

Outstanding Outstanding Paid in lated stock-
Capital Deficit holders
equity
Shares Value Shares Value Shares Value Shares Value Value Value Value
(USD) (USD) (USD) (USD) (USD) (USD) (USD)

Balance as on April 1, 2004 4,494,500 No par 3,615,535 6,714,124 30,000,000 No par 8,392,157 121,664 — (6,083,713) 752,075

Common stock issued

during the year — — — — — — 100,000 15,000 5,059,000 — 5,074,000

Additional paid in
capital contributed
during the year — — — — — — — — 525,886 — 525,886

Net loss for the year — — — — — — — — — (5,057,020) (5,057,020)

Balance as on
March 31, 2005 4,494,500 No par 3,615,535 6,714,124 30,000,000 No par 8,492,157 136,664 5,584,886 (11,140,733) 1,294,941

450
 BRISTLECONE INC.

Statement of stockholders’ equity for the year ended March 31, 2006 (Refer Note 19)

Preference Stock Common Stock

Authorized Issued and Authorized Issued and Additional Accumu- Total

Outstanding Outstanding Paid in lated stock-
Capital Deficit holders
equity
Shares Value Shares Value Shares Value Shares Value Value Value Value
(INR) (INR) (INR) (INR) (INR) (INR) (INR)

Balance as on April 1, 2005 4,494,500 No par 3,615,535 299,852,778 30,000,000 No par 8,492,157 6,103,414 249,421,009 (497,545,136) 57,832,065

Additional paid in capital

contributed during the year — — — — — — — — 31,262,000 — 31,262,000

Net loss for the year — — — — — — — — — (19,423,572) (19,423,572)

Balance as on March
31, 2006 4,494,500 No par 3,615,535 299,852,778 30,000,000 No par 8,492,157 6,103,414 280,683,009 (516,968,708) 69,670,493

Statement of stockholders’ equity for the year ended March 31, 2005 (Refer Note 19)

Preference Stock Common Stock

Authorized Issued and Authorized Issued and Additional Accumu- Total

Outstanding Outstanding Paid in lated stock-
Capital Deficit holders
equity
Shares Value Shares Value Shares Value Shares Value Value Value Value
(INR) (INR) (INR) (INR) (INR) (INR) (INR)

Balance as on April 1, 2004 4,494,500 No par 3,615,535 299,852,778 30,000,000 No par 8,392,157 5,433,514 — (271,698,624) 33,587,668

Common stock issued

during the year — — — — — — 100,000 669,900 225,934,940 — 226,604,840

Additional paid in capital

contributed during the year — — — — — — — — 23,486,069 — 23,486,069

Net loss for the year — — — — — — — — — (225,846,512) (225,846,512)

Balance as on March
31, 2005 4,494,500 No par 3,615,535 299,852,778 30,000,000 No par 8,492,157 6,103,414 249,421,009 (497,545,136) 57,832,065

(The accompanying notes are an integral part of these financial statements)

451
BRISTLECONE INC.

STATEMENT OF CASH FLOWS

Year ended Year ended Year ended Year ended

31-3-2006 31-3-2006 31-3-2005 31-3-2005
USD INR USD INR
(Refer Note 19) (Refer Note 19)
Cash flows from operating activities
Net loss ............................................................................ (434,921) (19,423,572) (5,057,020) (225,846,512)

Adjustments to reconcile net loss to net cash

Depreciation ..................................................................... 154,846 6,915,422 220,111 9,830,157
Loss on disposal of fixed assets ...................................... 7,235 323,115 15,156 676,867

Changes in assets and liabilities

(Increase)/Decrease in accounts receivable ..................... (1,780,091) (79,498,865) 6,980 311,727
(Increase)/Decrease in other current assets .................... (169,703) (7,578,937) (556) (24,831)
Increase/(Decrease) in accounts payable ......................... 608,818 27,189,813 (434,235) (19,392,935)
Increase/(Decrease) in other current liabilities ................. 1,666,994 74,447,953 387,386 17,300,658

Net cash provided by/(used in) operating activities .... 53,178 2,374,929 (4,862,178) (217,144,869)
Cash flow from investing activities ..............................
Purchase of property and equipment, net ....................... (124,126) (5,543,466) (71,313) (3,184,839)
Net cash used in investing activities ............................ (124,126) (5,543,466) (71,313) (3,184,839)
Cash flows from financing activities ............................
Additional paid in capital ................................................... 700,000 31,262,000 5,074,000 226,604,840
Repayment of term loan .................................................. (149,006) (6,654,608) (164,604) (7,351,215)
Net cash provided by financing activities .................... 550,994 24,607,392 4,909,396 219,253,625
Net increase/(decrease) in cash and cash equivalents 480,046 21,438,855 (24,095) (1,076,083)
Cash and cash equivalents at the beginning of the year . 487,843 21,787,068 366,276 16,357,886
Cash and cash equivalents acquired on merger of
Mahindra Consulting Inc. with the Company ................... — — 145,662 6,505,265
Cash and cash equivalents at the end of the year ........... 967,889 43,225,923 487,843 21,787,068
Supplemental cash flow information ...........................
Interest paid ..................................................................... 9,695 432,979 28,212 1,259,948
Income taxes paid ............................................................ 8,184 365,497 10,393 464,151
Supplemental non-cash information
In accordance with the Merger Agreement effected on
May 31, 2004, the Company acquired assets and liabilities
of Mahindra Consulting Inc., a wholly owned subsidiary of
its holding company Bristlecone Ltd. ............................... — — 525,886 23,486,069

(The accompanying notes are an integral of these financial statements)

452

NOTES TO FINANCIAL STATEMENTS
NOTE 1 — BACKGROUND INFORMATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the
accompanying financial statements are as follows:
1. Background of the Business
Bristlecone Inc. (‘the Company’) was incorporated under the laws of the state
of California in 1998. The Company is focused on providing technology solutions
and consulting services.
The Company is a wholly owned subsidiary of Bristlecone Ltd., a Cayman
company.
In May of 2004, the Company became a wholly owned subsidiary of Bristlecone
Ltd., a Cayman company. The Company’s stockholders and stock option
holders, in exchange for their stock interest in Bristlecone Inc., received cash,
common stock, preferred stock, warrants and common stock options of
Bristlecone Ltd.
Effective June 1, 2004, Mahindra Consulting Inc., a wholly owned subsidiary of
Bristlecone Ltd. was merged with the Company. The Company accounted for
this transaction as a transaction between entities under common control. The
Company recorded the assets and liabilities of Mahindra Consulting Inc. at their
carrying amounts as of May 31, 2004, and the difference between the asset
value over the liabilities is reflected as additional paid in capital in the financial
statements.
2. Basis of Presentation
a) The financial statements are prepared as per the generally accepted
accounting principles of United States of America. All amounts are stated in
U.S. dollars (‘USD’).
b) The financial statements are for the period from April 1, 2005, through March
31, 2006, along with comparatives for the period from April 1, 2004, through
March 31, 2005.
c) Estimates and assumptions:
In preparing the Company’s financial statements in conformity with accounting
principles, generally accepted in the United States of America, the
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Although
these estimates are based upon management’s best knowledge of current
events and actions, actual results could differ from those estimates.
d) Certain reclassifications have been made to confirm prior year data to the
current presentation. These reclassifications had no effect on reported
earnings.
3. Foreign Currencies
Transactions in foreign currencies are translated at the exchange rate ruling at
the date of transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the exchange rate ruling at the balance sheet date.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities at year-
end exchange rates are recognized in the income statement.
4. Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments and deposits with
an original maturity of ninety-one days or less.
5. Restricted Cash
The Company considers cash and cash equivalents subject to legal restriction
on usage or withdrawal as restricted cash.
6. Revenues
Revenues comprise income from software consultancy services.
Revenues with respect to time and material contracts are recognized as related
costs are incurred and services are performed in accordance with the terms of
the specific contracts.
Revenues from fixed price contracts are recognized in accordance with the
percentage of completion method measured by the percentage of man-hours
BRISTLECONE INC.
incurred to date in relation to the estimated total man-hours for each of such
contracts. This method is used because the management considers man-hours
to be the best available measure of progress on these contracts. Provisions for
estimated losses on uncompleted contracts are recorded in the period in which
such losses become probable based on the current contract estimates. Amounts
included in the financial statements, which relate to recoverable costs and
accrued margins, if any, not yet billed on contracts are classified in current assets
as “unbilled revenue on contracts”. Billings on uncompleted contracts in excess
of accrued cost and accrued margins, if any, are classified in current liabilities
under the heading “unearned revenue”.
The Company revaluated the criteria outlined in Emerging Issues Task Force
(“EITF”) Issue No. 99-19, Reporting Revenue Gross at a Principal Versus Net as
an Agent, in determining whether it is appropriate to record the gross amount
of software consulting revenues and related costs or the net amount of
consultancy charges earned as a sub-contractor. In certain of the Company’s
contracts with customers, the Company is not the primary obligor, hence does
not take contractual risk and the amounts earned as consultancy charges are
based on a fixed rate. Accordingly, the Company does not reflect the revenues
or the cost of sales for acting as the flow-through entity for providing these
services, and instead presents these amounts on a net basis.
In accordance with EITF 01-14 “Income Statement Characterization of
Reimbursements Received for ‘Out-of-Pocket’ Expenses Incurred” the Company
has accounted for reimbursements received for out-of-pocket expenses incurred
as revenues in the statement of operations. The Company typically incurs travel
related costs that are billed to and reimbursed by customers. Accordingly,
revenues include reimbursements of out-of-pocket expenses amounting to
USD 1,163,014 (INR 51,940,205) [2005: USD 759,203 (INR 33,906,006)].
7. Cost of Revenues
Cost of revenues comprises of salaries and employee benefits, project related
travel costs, application software costs and professional fees.
8. Accounts Receivable, Net of Allowances
The Company provides allowance for doubtful accounts equal to the estimated
uncollectible amounts in the aggregate, following the specific identification
method after considering historical experience with each customer and the
current economic environment.
9. Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated under the straight-line method over estimated
economic useful life of assets.
Leasehold improvements are amortized over the shorter of the lease term or the
estimated life of the asset.
The estimated useful lives used to determine depreciation are:
Computer equipment 3–5 years
Furniture and fixtures 5–7 years
Software 3 years
Office equipment 5 years
Vehicles 5 years
Leasehold improvements 2–3 years
10. Employee Benefit Plans
Contributions to defined contribution plans are charged to income in the year in
which they accrue.
The Company’s liability towards compensated absences is determined on an
arithmetical basis for the entire unavailed vacation balance standing to the credit
of each employee as at year-end.
11. Stock-based Compensation
The employees of the Company have been granted stock options based on the
stock of the holding company. Financial Accounting Standards Board Interpretation
No. 44 (“FIN 44”), “Accounting for Certain Transactions Involving Stock
Compensation” requires the application of Accounting Principles Board Opinion
N. 25 (“APB 25”) to stock compensation based on stock of the holding company
granted to employees of the consolidated subsidiary for the purposes of
reporting in the separate financial statements of that subsidiary. Accordingly,
the Company accounts for the compensation cost relating to the options of the
holding company issued to the Company’s employees.
453
BRISTLECONE INC.

The Company accounts for stock-based compensation using the intrinsic value NOTE 2 — CASH AND CASH EQUIVALENTS
method prescribed in APB 25, and related interpretations in accounting for Cash and cash equivalents comprise of:
employer and director options. Compensation cost for stock options is measured
as the excess of the fair value of the Company’s stock on the measurement date As at As at
over the amount an employee must pay to acquire the stock and is recognized As at 31-3-2006 As at 31-3-2005
over the vesting period. 31-3-2006 INR 31-3-2005 INR
USD (Refer Note 19) USD (Refer Note 19)
SFAS No. 123, “Accounting for Stock-Based Compensation,” established
accounting and disclosure requirements using a fair-value-based method of Balance in checking and
accounting for stock-based employee compensation plans. The Company has money market accounts 967,889 43,225,923 335,065 14,964,003
elected its current method of accounting as described above, and has adopted
the disclosure requirements of SFAS No. 148, “Accounting for Stock-Based NOTE 3 — RESTRICTED CASH
Compensation — Transition and Disclosure’” an amendment of SFAS No. 123.
Restricted cash comprise of:
Had compensation cost for the Company’s stock option plan been determined
As at As at
on the fair value at the grant dates for employee compensation arrangements
As at 31-3-2006 As at 31-3-2005
consistent with the method required by SFAS No. 123, the Company’s net loss
31-3-2006 INR 31-3-2005 INR
would have been increased to the pro forma amounts indicated below:
USD (Refer Note 19) USD (Refer Note 19)
Year ended Year ended Cash on deposit with
Year ended 31-3-2006 Year ended 31-3-2005 Silicon Valley Bank — — 152,778 6,823,065
31-3-2006 INR 31-3-2005 INR
USD (Refer Note 19) USD (Refer Note 19) Cash on deposit, during the previous year, was maintained as a security against a
bank guarantee issued to a client by Silicon Valley Bank.
Net loss

As reported (434,921) (19,423,572) (5,057,020) (225,846,512) NOTE 4 — ACCOUNTS RECEIVABLE

The Company’s accounts receivable are primarily related to software consultancy
Add: Compensation
services and include reimbursable expenses invoiced to customers. Credit is
cost determined
extended based on prior experience with the customer and evaluation of customers’
using the fair
financial condition. As of March 31, 2006, the Company had gross receivables of USD
value model (2,998) (133,891) (1,637) (73,108)
4,050,596 (INR 180,899,618) [2005: USD 2,520,505 (INR 112,565,753)].
Pro forma (437,919) (19,557,463) (5,058,657) (225,919,620) The allowance for uncollectibles reflected the following activity during the year:
Year ended Year ended
12. Income Taxes Year ended 31-3-2006 Year ended 31-3-2005
31-3-2006 INR 31-3-2005 INR
The Company accounts for income taxes in accordance with the Statement of
USD (Refer Note 19) USD (Refer Note 19)
Financial Accounting Standards No. 109 (“SFAS No. 109”), “Accounting for
Income Taxes,” which requires recognition of deferred tax assets and liabilities Balance at the beginning 250,000 11,165,000 370,000 16,524,200
for the expected future tax consequences of events that have been included in Provision for uncollectible
the financial statements or tax returns. Under this method, deferred tax assets adjusted/reversed (250,000) (11,165,000) (120,000) (5,359,200)
and liabilities are determined based on the differences between the financial
statement and tax bases of assets and liabilities, using enacted tax rates in effect Balance at year end — — 250,000 11,165,000
for the year in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to The allowance for doubtful accounts represents the Company’s best estimate
amounts expected to be realized. The current charge for income taxes is regarding receivables that are doubtful of recovery.
calculated in accordance with the relevant tax regulations applicable to the
NOTE 5 — PROPERTY AND EQUIPMENT
Company.
Property and equipment consisted of the following:
13. Advertising Costs As at As at
Costs associated with advertising are expensed as incurred. Advertisement As at 31-3-2006 As at 31-3-2005
expense for the year ended March 31, 2006 in USD 7,845 (INR 350,358) [2005: 31-3-2006 INR 31-3-2005 INR
USD 11,594 (INR 517,788)]. USD (Refer Note 19) USD (Refer Note 19)
Computer equipment 943,823 42,151,135 842,181 37,611,803
14. Valuation of Long-Lived Assets
Furniture and fixtures 207,312 9,258,554 207,312 9,258,554
The Company reviews long-lived assets for impairment, whenever an event or
Software 114,543 5,115,490 110,747 4,945,961
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The carrying values of long-lived assets are assessed for Office equipment 77,802 3,474,637 75,132 3,355,396
recoverability by reference to the estimated future undiscounted cash flows Vehicles 6,000 267,960 6,000 267,960
associated with them. Where this assessment indicates a deficit, the assets are
Leasehold improvements 25,299 1,129,853 25,299 1,129,853
written down to market value. For assets, which do not have a readily
determinable market value, the assets are written down to their estimated 1,374,779 61,397,629 1,266,671 56,569,527
market value, calculated by reference to the estimated future discounted cash
Less: Accumulated
flows. Assets to be disposed are reported at the lower of the written down value
depreciation (1,080,562) (48,257,898) (934,499) (41,734,725)
or the fair value, less the cost to sell.
294,217 13,139,731 332,172 14,834,802
15. Leases
NOTE 6 — SHORT TERM BORROWINGS
The Group classifies all leases at the inception date as either a capital lease or
an operating lease. Lease of assets under which there is transfer or substantially Short term borrowings comprised of the following:
all of the risk and rewards incident to ownership as per FAS 13 are classified as As at As at
capital leases otherwise all leases are classified as operating lease. Assets As at 31-3-2006 As at 31-3-2005
under capital leases are capitalized and leases payments are appropriated 31-3-2006 INR 31-3-2005 INR
towards the lease obligation and interest on the obligation amount. Lease USD (Refer Note 19) USD (Refer Note 19)
payments under an operating lease are recognized as an expense on a straight-
line basis over the lease term. Line of credit from Bank 18,500 826,210 167,506 7,480,818

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 BRISTLECONE INC.

The Company has been sanctioned a revolving line of credit amounting to USD [2005: USD 255,000 (INR 11,388,300) and USD 277,000 (12,370,820)]. The federal
1,500,000 by the State Bank of India (California). The line of credit bears an interest tax credit carry forward expire beginning in 2023 and state tax credit carry forward
rate of 7.75% and repayable one year from the date of sanction of credit. As of March have no expiration.
31, 2006, the Company has drawn USD 18,500 (INR 826,210) against the said line The Company has been incurring losses over the years. At the current date, until the
of credit. financial performance of the Company stabilizes, it is likely that the deferred tax asset
arising from the carry forward federal and state net operating losses and tax credits
NOTE 7 — COST OF REVENUES will not be realized and therefore a fully compensating valuation allowance of USD
Cost of revenues comprised of the following: 5,935,133 (INR 265,063,040) [2005: USD 5,404,816 (INR 241,379,082) ]was recorded
against the deferred tax asset.
Year ended Year ended
Year ended 31-3-2006 Year ended 31-3-2005 The Company has been advised that the carry forward of the NOLs prior to the date
31-3-2006 INR 31-3-2005 INR of change of ownership, will be impacted by Sec. 382 limitation under the Internal
USD (Refer Note 19) USD (Refer Note 19) Revenue Code. In terms of this limitation, while the carry forward of all NOLs will not
be restricted, there will be a limitation on the annual amounts available for set-off
Employee costs and under the Code, (currently computed as the value of Bristlecone Inc. prior to the
contributions 6,120,560 273,344,209 5,857,147 261,580,185 Transaction x 4.45%).
Contractor services 4,637,867 207,127,140 3,002,578 134,095,133
License fees 23,963 1,070,188 35,169 1,570,648 NOTE 10 — STOCKHOLDERS’ EQUITY

Travel and other expenses 332,142 14,833,462 391,705 17,493,545 The Company’s authorized share capital comprised of 4,494,500 preference shares
at no par value and 30,000,000 common shares at no par value as of March 31, 2006,
Out of pocket expenses 1,163,014 51,940,205 759,203 33,906,006 of which 865,540 preferred stock Series A 2,749,995 preferred stock Series B and
12,277,546 548,315,204 10,045,802 448,645,517 8,492,157 common stock were issued and outstanding as of March 31, 2006.

Conversion of Preferred Stock:

NOTE 8 — GENERAL AND ADMINISTRATIVE EXPENSES Each preferred stock Series A and preferred stock Series B are entitled to be
General and administrative expenses comprised of the following: converted, without payment of any additional consideration, into one fully paid
Year ended Year ended common stock.
Year ended 31-3-2006 Year ended 31-3-2005 Voting:
31-3-2006 INR 31-3-2005 INR
USD (Refer Note 19) USD (Refer Note 19) Every holder of preferred stock Series A and preferred stock Series B are entitled to
one vote for each common stock held into which such Series A or Series B preferred
Employee costs and stock could be converted.
contributions 3,813,564 170,313,768 3,752,460 167,584,864
Liquidation:
Travel and marketing
expenses 595,188 26,581,096 601,211 26,850,083 In the event of a liquidation, dissolution or winding up of the Company:
Sales commission 689,586 30,796,911 216,159 9,653,661 (a) Holders of preferred stock Series A and preferred stock Series B, shall on a pari
passu basis, in preference to any distribution to holders of common stock
Professional, recruiting
receive an amount per share capital equal to (i) USD 0.94 for each outstanding
and legal fees 302,086 13,491,161 817,291 36,500,216
share of preferred stock Series A, and (ii) USD 2.21 for each outstanding share
Facilities 208,585 9,315,406 181,750 8,116,955 of preferred stock Series B subject to appropriate adjustments for stock splits,
Others 781,157 34,886,472 833,928 37,243,224 stock dividends, combinations or recapitalization, etc. If upon the occurrence of
such event the assets available for distribution shall be insufficient to permit the
6,390,166 285,384,814 6,402,799 285,949,003 payment of the full aforesaid preferential amounts, then the available funds shall
be distributed ratably in proportion to the preferential amount each such holder
NOTE 9 — TAXES is otherwise entitled to receive pursuant to this Clause.
The following is the summary of items giving rise to deferred tax assets/(liabilities): (b) Upon the completion of distribution required by Clause (a) above, the remaining
assets available for distribution shall be distributed among the holders of Series
As at As at
A preferred stock, Series B preferred stock and common stock pro rata based
As at 31-3-2006 As at 31-3-2005
on the number of shares of common stock held by each, provided that the
31-3-2006 INR 31-3-2005 INR
common stock holders shall not receive any distribution unless the Series A
USD (Refer Note 19) USD (Refer Note 19)
preferred stock holders have received an aggregate of USD 0.47 per share and
Net operating loss the Series B preferred stock holders have received an aggregate of USD 1.11
carried forward 5,407,686 241,507,257 5,049,039 225,490,082 per share (not including amounts paid pursuant to Clause (a) above).
Research and
development credit 125,951 5,624,971 111,187 4,965,611 NOTE 11 — EMPLOYEE BENEFIT PLAN
Provision for The Company has a 401(k) plan that provides defined contribution retirement
uncollectibles — — 107,100 4,783,086 benefits for all the employees. Participants may contribute a portion of their
compensation to the plan, subject to the limitations under the Internal Revenue
Provision for expenses 493,536 22,041,318 186,603 8,333,690 Code. The Company’s contributions to the plan are at the discretion of the Board. The
Depreciation (92,040) (4,110,506) (49,113) (2,193,387) Company did not make any contributions to the plan during the year.
Net deferred tax asset 5,935,133 265,063,040 5,404,816 241,379,082 Accrual for compensated absences is estimated at current employee compensation
Less: Valuation allowance 5,935,133 265,063,040 5,404,816 241,379,082 rates for the entire unavailed leave balance standing to the credit of the employees
at period end. The total provision during the year ended March 31, 2006, is USD
Net deferred tax asset — — — — 357,000 (INR 15,943,620) [2005: USD 300,000 (INR 13,398,000)].

As at March 31, 2006, the Company had USD 13,757,417 (INR 614,406,243) [2005:
USD 13,363,500 (INR 596,813,910)] in US Federal Net Operating Loss (“NOL”)
carryovers, including USD 5,614,338 (INR 250,736,335) of Mahindra Consulting Inc.
(subject to certain limitations under US tax laws), and USD 6,179,571 (INR 275,979,641)
[2005: USD 5,613,000 (INR 250,676,580)] in State Operating Losses carried forward
which can be carried forward for future utilization within 6–18 years.
Additionally the Company has federal and state tax credit carry forwards of
approximately USD 254,583 (INR 11,369,677) and USD 277,220 (INR 12,380,645)
NOTE 12 — STOCK BASED COMPENSATION
Bristlecone Ltd., the Holding Company, has operated three Stock Option Plans
during the current year.
(a) Bristlecone Inc. Existing Stock Options Plan (Effective April 1, 2004, upto the
date of the acquisition by Bristlecone Ltd., May 17, 2004 (“Transaction”).
Prior to the date of the Transaction, the Company operated an Option Plan for
its employees. Options granted under the Plan may be incentive stock options

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BRISTLECONE INC.

or non-statutory stock options. Options were granted at different exercise prices The following table summarizes information about these Performance Options:
varying from USD 0.05 to USD 0.25 each. Options under this plan vested over Shares arising Weighted Shares arising Weighted
different vesting periods as outlined in the individual agreements of each out of average out of Average
optionee. No grants under this plan were made in the current year. outstanding exercise outstanding Exercise
The following table summarizes information about the Options issued under this options price options price
Plan: 2006 2006 2005 2005
Shares arising out Weighted
Outstanding at April 1 1,135,522 USD 0.10 — —
of outstanding Average
Options Exercise price Granted — — 1,703,283 $0.10
2005 2005 Exercised — — — —
Outstanding at April 1, 2004 2,307,581 USD 0.20 Expired — — — —
Granted — — Forfeited — — 567,761 $0.10

Exercised 100,000 USD 0.15 Outstanding at

March 31 1,135,522 USD 0.10 1,135,522 $0.10
Expired 149,088 USD 0.25
Forfeited — — (d) Bristlecone Ltd. Amended the Restated 2004 Stock Option Plan:
Outstanding at May 17, 2004 2,058,493 USD 0.20 Options granted under the Plan may be incentive stock options or non-statutory
stock options. Incentive stock options may only be granted to employees.
(b) Bristlecone Ltd. 2004 Stock Option Plan (arising out of conversion of the earlier Twenty-five percent (25%) of the Shares subject to the Option shall vest on the
Bristlecone Inc. existing Stock Option Plan: completion of 12 calendar months from the Vesting Commencement Date, and
no vesting shall occur prior to the completion of such period of 12 months.
Pursuant to the terms of the acquisition of Bristlecone Inc. by Bristlecone Ltd.
Subsequently, 6.25% of the Shares subject to the Option shall vest on the
on May 17, 2004 (the “transaction”), the then existing outstanding Options of
completion of each 3-month period thereafter until full vesting is completed,
Bristlecone Inc. aggregating to a total of 2,058,493 Options were cancelled and
subject to Optionee continuing to be an Employee through each such date. The
fresh Options were issued by Bristlecone Ltd. based on the exchange criteria set
term of each Option shall be stated in the Option Agreement, provided,
out in the transaction documents.
however, that the term shall be no more than five (5) years from the date of grant
Options granted under the Plan may be incentive stock options or non- thereof. The exercise price of each Option (a) granted to an Employee who at the
statutory stock options. Incentive stock options may only be granted to time of grant of such Option, owns stock representing more than ten per cent
employees. Twenty-five percent (25%) of the Shares subject to the Option (10%) of the voting power of all classes of stock of the Company or any Parent
shall vest on the one (1) year anniversary of the Vesting Commencement Date, or Subsidiary, shall be no less than 110% of the Fair Market Value per Share as
and 1/48 of the Shares subject to the Option shall vest each month thereafter determined by the Board on the date of grant (b) granted to any other Employee,
on the same day of the month as the Vesting Commencement Date, subject the per Share exercise price shall be no less than 100% of the Fair Market Value
to Optionee continuing to be a Service Provident through each such date. The per Share determined by the Board on the date of grant.
term of each Option shall be stated in the Options Agreement, provided,
For the purposes of the pro forma disclosure, the fair value of each option grant
however, that the term shall be no more than ten (10) years from the date of
was estimated on the date of grant using the minimum value method with the
grant thereof. The exercise price of each Option, (a) granted to an employee
following assumptions: No dividend yield; risk-free interest rate of 4.67% and an
who at the time of grant of such option, owns stock representing more than ten
expected life of 5 years.
percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, shall be no less than 110% of the Fair Market Value The following table summarizes information about these Amended and Restated
per Share as determined by the Board on the date of grant (b) granted to any 2004 Stock options:
other employee, the per Share exercise price shall be no less than 100% of the Shares arising Weighted Shares arising Weighted
Fair Market Value per Share determined by the Board on the date of grant. out of average out of Average
For purpose of the pro forma disclosure, the fair value of each option grant was outstanding exercise outstanding Exercise
estimated on the date of grant using the minimum value method with the options price options price
following assumption: No dividend yield, risk-free interest rates of 4.67% and an 2006 2006 2005 2005
expected life of 5 years.
Outstanding at April 1 770,000 USD 0.10 — —
The following table summarizes information about the Options issued under
this Plan: Granted 342,100 USD 0.10 770,000 $0.10
Shares arising Weighted Shares arising Weighted Exercised 3,750 USD 0.10 — —
out of average out of Average Expired 120,625 USD 0.10 — —
outstanding exercise outstanding Exercise
options price options price Forfeited — — — —
2006 2006 2005 2005 Outstanding at
Outstanding at April 1 468,950 USD 0.67 — — March 31 987,725 USD 0.10 770,000 $0.10
Granted — — 567,818 $0.67
Exercised 54,509 USD 0.67 — — NOTE 13 — COMMITMENTS AND CONTINGENCIES
Expired 109,102 USD 0.67 98,868 $0.67 Legal Claims:
Forfeited — — — — The Company is subject to legal claims in the normal course of business. The
Company received a notice on September 16, 2005, from the US Equal Employment
Outstanding at
March 31 305,339 USD 0.67 468,950 $0.67 opportunity Commission for dismissal of an employee on charges of discrimination.
The case is pending before the US Equal Employment Opportunity Commission.
(c) Bristlecone Ltd. Key Employee Option Grants: The Commission has yet to give its ruling on the litigation. The amount of the
At the date of the Transaction, Performance Stock Options were issued to liability, if any, has not been determined or quantified. Management believes that
there are no such claims that would be material to the financial conditions or results
certain key management personnel of the Company. While these Performance
Options were issued under the terms of the Bristlecone Ltd. 2004 Stock Option of operations.
Plan outlined under (a) above, the exercise price and vesting of these Options
was different as outlined further below. The vesting of these Options shall occur NOTE 14 — OPERATION LEASES
on the achievement of certain revenue milestones by the Company as determined The Company leases office space. The current lease expires in 2007 and the future
under the Agreement for the financial years ended March 31, 2006, 2007 minimum rental payments required under the lease during the year ending March 31,
and 2008. 2007, is USD 96,575 (INR 4,313,040).

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 BRISTLECONE INC.

NOTE 15 — RELATED PARTY TRANSACTIONS NOTE 16 — CONCENTRATION OF CREDIT RISK

The Company had following transactions with its parent Company, Bristlecone Financial instruments that potentially subject the Company to concentrations of
Limited, other fellow subsidiaries (including subsidiaries of the ultimate parent, credit risk consist principally of cash equivalents, trade receivables and bank
Mahindra & Mahindra Limited) Bristlecone India Ltd., Bristlecone GmbH, Bristlecone deposits. By their nature, all such financial instruments involve risk including the
(Singapore) Pte. Ltd., and Mahindra USA Inc. credit risk of non-performance by counter parties.
Year ended Year ended The Company’s cash equivalents bank deposits and restricted cash are invested
Year ended 31-3-2006 Year ended 31-3-2005 with banks with high investment grade credit ratings. Trade receivables (primarily
31-3-2006 INR 31-3-2005 INR demonstrated in USD) are typically unsecured and are derived from revenues
USD (Refer Note 19) USD (Refer Note 19) earned from large multinational customers. The Company monitors the credit
worthiness of its customers to which it grants credit terms in the normal course
Bristlecone Ltd. of the business. The Company had 5 major customers in 2006. Revenues from
Contribution towards these customers amounted to USD 8,711,384 (INR 389,050,409) [2005: USD
additional paid in capital 5,542,731 (INR 247,538,366)] or 47.5% [2005: 48.2%] of total revenue. Total
during the year 700,000 31,262,000 5,059,000 225,934,940 accounts receivable from these customers are USD 1,455,580 (INR 65,006,203)
[2005: USD 581,943 (INR 25,989,574)] at March 31, 2006 or 36% [2005: 25.7%]
Recovery of expenses
of total receivables.
(Net) 170,827 7,629,134 1,099,352 49,097,060
Payable as at year end 170,827 7,629,134 — — Management believes there is no significant risk of loss in the event of non-
performance of the counter parties to these financial instruments, other than the
Bristlecone India Ltd.
amounts already provided for in the financial statements.
Deputation expenses
for the year 141,000 6,297,060 51,000 2,277,660 NOTE 17 — FAIR VALUE OF FINANCIAL INSTRUMENTS
Software consultancy
The carrying amount of the Company’s cash equivalents, accounts payable and
expenses for the year 3,337,248 149,041,496 1,559,444 69,644,769
accrued expenses approximated their fair values due to their short maturities. The
Sale of fixed assets 6,000 267,960 — — carrying value of short term borrowings approximates fair value based upon the
Recovery of expenses market interest rate available to the Company for debt with similar risk and
(Net) (88,310) (3,943,925) 131,630 5,878,596 maturities.
Payable as at year end 804,289 35,919,547 759,792 33,932,311
NOTE 18 — SEGMENT INFORMATION
Bristlecone GmbH
The Company provides services to companies in the United States. For the purpose
Recovery of expenses of disclosure of segment information, the Company considers its consulting services
(Net) (7,622) (340,399) — — as a single business segment.
Receivable as at
year end 7,622 340,399 — — NOTE 19 — TRANSLATION
Bristlecone (Singapore) For the convenience of the readers, including the investors of the ultimate parent
Pte. Ltd. Company, Mahindra & Mahindra Limited, the financial statements for the year ended
March 31, 2006, along with comparative for the year ended March 31, 2005, have
Recovery of expenses 1,061 47,384 — —
been translated Indian Rupees (“INR”) at the average of the telegraphic transfer
Mahindra USA Inc. buying and selling rates quoted by the Mumbai Branch of State Bank of India on
Software consultancy March 31, 2006, of 1 USD = INR 44.66. The convenience translation should not be
revenue during the year 258,510 11,545,057 129,230 5,771,412 construed as a representation that the Indian Rupee amounts or the USD amounts
referred to in these financial statements have been, could have been, or could in the
Receivable as at
future be, converted into USD or INR, as the case may be, at this or at any other rate
year end — — 8,000 357,280
of exchange, or at all.

457
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

Directors’ Report to the Shareholders

Your Directors present their Fifteenth Report together with the audited accounts for the financial year ended 31st March, 2006.

Financial Results
(Rupees in lakhs)
Particulars 2006 2005

Income .......................................................................................................................... 6983.49 4779.09

Profit/(Loss) before Depreciation, Interest, taxation and prior period items ................. 789.50 (337.62)
Depreciation .................................................................................................................. (84.54) (87.66)
Profit/(Loss) before Interest, taxation and prior period items ....................................... 704.96 (425.28)
Interest .......................................................................................................................... (154.28) (147.13)
Profit/(Loss) before taxation and prior period items ...................................................... 550.68 (572.41)
Provision for taxation for the year
– Current Tax .............................................................................................................. (73.60) —
– Deferred Tax ............................................................................................................ — (130.00)
– Fringe Benefit Tax .................................................................................................... (32.00) —
Profit/(Loss) for the year after taxation ......................................................................... 445.08 (702.41)
Excess/(Short) provision for taxation in respect of earlier years ................................... — 0.89
Profit/(Loss) after tax ..................................................................................................... 445.08 (701.52)
Balance of Profit for earlier years .................................................................................. (646.98) 54.54
Balance carried forward ................................................................................................ (201.90) (646.98)

SHARE CAPITAL The Company’s specialist manpower grew by 60% over previous
During the year under review, your Company allotted 3,17,000 year in spite of severe resource shortage in the job market. The
equity shares of Rs.100 each aggregating Rs.3.17 crores on a challenging career offered by the Company helped in attracting
rights basis. talent from top business schools in India.

OPERATIONS OUTLOOK FOR THE CURRENT YEAR

Income during the year increased from Rs.4779 lakhs to Rs.6983
lakhs representing a growth of 46%. Your Company made a
significant turnaround during the year and ended the year with a
Profit after tax of Rs.445 lakhs compared to a loss of Rs.702 lakhs
in the previous year.
The domestic business grew at 28%. The Company enhanced its
solutions for Auto-Ancillaries to meet the business needs of
discrete manufacturing mid-market customers. Your Company
won “Best SAP APA Channel Partner” in Asia Pacific and “Partner
Project Team of the year 2005- South Region” award from SAP.
The offshore business more than doubled to Rs.2676 lakhs and
now comprises 38% of the total revenue making a significant
contribution to the bottom line. Your Company expanded its
service offerings to SAP AG in the areas of Product development,
Product testing and Infrastructure support. This resulted in
significant offshore revenue growth and helped Company build
new capabilities in the latest SAP Technology.
Your Company’s remote Applications Management services to
overseas customers mainly from USA grew significantly. During
the year the Company won major customer contracts in this
space against international competition.
Your Company plans to increase its development centre capacity
in Pune to cater to off-shore business. Your Company also plans
to set up centres in Delhi and Chennai to address the growing
needs of the local market.
Your Company continues to invest in process improvements to
enhance customer satisfaction and plans to implement Balance
Score card for managing strategic initiatives.
Your Company plans to focus on Middle East and European
markets to boost its export growth.
These initiatives will help the Company achieve better performance
in the current year and the years ahead.
SUBSIDIARY COMPANIES
The audited statements of accounts for the year ended
st
31 March, 2006 of the Company’s subsidiaries together with the
reports of their Directors and Auditors, and Statement pursuant
to section 212 of the Companies Act, 1956 are attached.
DIRECTORS’ RESPONSIBILITY STATEMENT
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the Operating

458

Management, and after due enquiry, confirm that :
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;
(ii) they have, in the selection of the accounting policies,
consulted the Statutory Auditors and these have been
applied consistently and reasonable and prudent judgments
and estimates have been made so as to give a truest and fair
view of the state of affairs of the Company as at 31 March,
2006 and of the profit of the Company for the year ended on
that date;
(iii) proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern
basis.
DIRECTORS
Mr. Anjanikumar Choudhari retires by rotation and, being eligible,
offers himself for re-election at the forthcoming Annual General
Meeting.
Mr. C. Krishnadas was appointed as an Additional Director at the
Meeting
th
of the Board of Directors of the Company held on
19 December, 2005. Mr. C. Krishnadas holds office upto the
date of the forthcoming Annual General Meeting of the Company.
The Company has received a notice from a member signifying his
intention to propose Mr. C. Krishnadas as Director of the Company
at the forthcoming Annual General Meeting.
Mr. V. K. Garg and Mr. V. thMani resigned as Directors of the
th
Company with effect from 19 December, 2005 and 27 February,
2006 respectively. The Board has placed on record its deep
appreciation of the valuable services rendered by Mr. V. K. Garg
and Mr. V. Mani during their tenure as Director of the Company.
AUDIT COMMITTEE
Consequent to the resignation of Mr.
th
V. K. Garg, the Audit
Committee was re-constituted on 19 December, 2005.
The Audit Committee presently comprises Mr. Ulhas N. Yargop
(Chairman of the Committee), Mr. Anjanikumar Choudhari and
Mr. Zhooben Bhiwandiwala. The Audit Committee met twice
during the year under review.
AUDITORS
Messrs. Deloitte Haskins & Sells, Chartered Accountants, retire
as Auditors of the Company at the forthcoming Annual General
Meeting and have given their consent for re-appointment. The
shareholders will be required to elect Auditors for the current year
and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
Messrs. Deloitte Haskins & Sells, Chartered Accountants, to the
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)
effect that their re-appointment, if made, would be in conformity
with the limits specified in the said section.
DIRECTORS’ EXPLANATION TO AUDITORS REPORT
The auditors in their report (Sr. no. vi of the report) have drawn
attention of the members of the Company as regards remuneration
of Rs.3,644,573/- (Previous Year Rs.2,881,676/-) paid to Mr V.
Mani, a Director of the Company which is in excess of the limits
prescribed under section 309 of the Companies Act, 1956, for
which an application is being made by the Company to the Central
Government for waiver of the recovery of the aforesaid amounts.
The Directors’ response in this respect has been elaborately
provided under Note Number 5 of Schedule XV of the accounts,
the contents of which are self explanatory and do not call for any
further comments.
PUBLIC DEPOSITS AND LOANS / ADVANCES
The Company has not accepted deposits from the public or its
employees during the year under review.
The Company has not made any loans/advances which are
required to be disclosed in the annual accounts of the Company
pursuant to Clause 32 of the Listing Agreement with the parent
company, Mahindra & Mahindra Limited.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION
AND FOREIGN EXCHANGE EARNINGS AND OUTGO
In view of the nature of activities which are being carried on by the
Company, Rules 2A and 2B of the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988,
concerning conservation of energy and technology absorption
respectively are not applicable to the Company.
The information on foreign exchange earnings and outgo is
furnished in the Notes on Accounts.
PARTICULARS OF EMPLOYEES AS REQUIRED UNDER
SECTION 217(2A) OF THE COMPANIES ACT, 1956 AND THE
RULES THEREUNDER
As required under section 217(2A) of the Companies Act, 1956
and Rules thereunder, a statement containing particulars of the
Company’s employees who were in receipt of remunerationst
of
not less than Rs. 24,00,000 during the year ended 31 March,
2006 or not less than Rs. 2,00,000 per month during any part of
the said year is given in the Annexure to this Report.
For and on behalf of the Board
Ulhas N. Yargop Zhooben Bhiwandiwala
Director Director
Mumbai, 27th April, 2006.
459
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

Annexure to the Directors’ Report

Additional information as required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 and forming
part of the Directors’ Report for the year ended 31st March, 2006.

Name of the Designation/ Gross Qualification Experience Age Date of Last Employment held
Employee Nature Remuneration (years) (years) Commencement (Organisation and
of Duties (subject to tax) of Employment Designation)
(Rs.)

Mr. V. Mani Vice President - 3,998,402 B.E. (Mech- Hons), 22 47 1-Aug-00 Mahindra British Telecom
Delivery P.G.D.I.E. Limited, Corporate Manager

Mr. Prashant Vice President - 2,841,688 L.M.E., VJTI 24 49 1-Sep-98 Mahindra & Mahindra
Karkhanis Business Limited, Sr. Executive
Development (Grade E) - SAP Projects

Mr. Tanmay Vice President - 2,765,830 M.S.(Computer 19 45 1-Aug-00 Mahindra British Telecom
Kumar Delivery Science-New Jersey), Limited, Business
(US Offshore) B.E.(Mechnical) Manager

Mr. N. Ramkrishnan Vice President 2,588,922 B.Com, FCA, CWA, 26 46 24-Sep-04 Qatar Petroleum, Doha,
- Delivery CISA, CISM Qatar, Head - SAP Project

Notes :
1. Nature of employment is permanent, subject to termination on two month notice on either side.
2. None of the above employees is a relative of any Director of the Company.
3. No employee holds by himself/herself or alongwith his/her spouse and dependent children 2% or more of equity shares of the Company.
4. Terms and conditions of employment are as per Company's Rules.
5. Gross remuneration received as shown in the statement includes Salary, Bonus, House Rent Allowance or value of perquisites for accommodation, car perquisites value/
allowances applicable, employers contribution to Provident Fund and Superannuation Scheme including group insurance premium, leave travel facility, reimbursement
of medical expenses, and all allowances/perquisites and terminal benifits as applicable.

For and on behalf of the Board

Ulhas N. Yargop Zhooben Bhiwandiwala

Director Director
th
Mumbai, 27 April, 2006.

460

Auditors’ Report
To the Members of Bristlecone India Limited
1. We have audited the attached Balance Sheet of
Bristlecone India Limited as at 31st March, 2006, the
Profit and Loss Account and also the Cash Flow
Statement of the Company for the year ended on that
date, annexed thereto. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
2. We conducted our audit in accordance with auditing
standards generally accepted in India. Those Standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles
used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order,
2003, issued by the Central Government of India in terms
of sub-section (4A) of Section 227 of the Companies Act,
1956, we enclose in the Annexure, a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to
above, we report that :
i) We have obtained all the information and
explanations, which to the best of our knowledge
and belief were necessary for the purposes of our
audit ;
ii) In our opinion, proper books of account as required
by law have been kept by the Company so far as
appears from our examination of the books ;
iii) The Balance Sheet, Profit and Loss Account and
Cash Flow Statement dealt with by this report are
in agreement with the books of account;
iv) In our opinion, the Balance Sheet, Profit and Loss
Account and Cash Flow Statement dealt with by
this report comply with the accounting standards
referred to in sub-section (3C) of Section 211 of
the Companies Act, 1956 ;
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)
v) On the basis of the written representations
received from the directors as on 31st March, 2006
and taken on record by the board of directors, we
report that none of the directors is disqualified as
on 31st March, 2006 from being appointed as a
director in terms of clause (g) of sub-section (1) of
Section 274 of the Companies Act, 1956 on the
said date;
vi) Attention is invited to Note no. 5 of Schedule XV
of the accounts regarding remuneration of
Rs. 36,44,573/- (previous year Rs. 28,81,676/-) paid
to a Director of the Company which is in excess of
the limits prescribed under Section 309 of the
Companies Act, 1956, for which an application is
being made by the Company to the Central
Government for waiver of the recovery of the
aforesaid amounts as detailed in the note;
vii) Subject to the above, in our opinion and to the best
of our information and according to the explanations
given to us, the said accounts, read along with the
significant accounting policies and other notes
thereon, give the information required by the
Companies Act, 1956, in the manner so required
and give a true and fair view in conformity with the
accounting principles generally accepted in India:
a) in the case of the Balance Sheet, of the state
of affairs of the Company as at 31st March,
2006;
b) in the case of the Profit and Loss Account,
of the profit for the year ended on that date;
and
c) in the case of the Cash Flow Statement, of
the Cash Flows for the year ended as on that
date.
For Deloitte Haskins & Sells
Chartered Accountants
A. B. JANI
Partner
Mumbai, April 27, 2006 Membership No. 46488
461
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)
Annexure to the Auditors’ Report
Re : Bristlecone India Limited
(Referred to in Paragraph 3 of our Report of even date)
(i) The nature of the Company’s activities are such that the
requirements of clauses (viii), (xiii) and (xiv) of paragraph 4
of the Companies (Auditor’s Report) Order, 2003 are not
applicable to the Company for the year.
(ii) In respect of its fixed assets:
(a) The Company has maintained proper records
showing full particulars, including quantitative details
and situation of fixed assets.
(b) We are informed that the physical verification of fixed
assets was carried out by the management during
the year and no material discrepancies were noticed
by the management on such verification. In our
opinion, the frequency of verification is reasonable.
(c) The Company has not disposed off a substantial part
of the fixed assets during the year.
(iii) The activities of the Company and the nature of its business
do not involve the use of inventory. Accordingly,
clause (ii) of the Companies (Auditor's Report) Order,
2003 is not applicable.
(iv) (a) The Company has not granted any loan secured or
unsecured to companies, firms or other parties
covered in the register maintained under Section 301
of the Companies Act, 1956 during the year under
review. Accordingly, clauses (iii) (a) to (d) of the
Companies (Auditor's Report) Order, 2003 are not
applicable.
(b) The Company has taken unsecured loan from one
party covered in the register maintained under
Section 301 of the Companies Act, 1956. The
maximum amount involved during the year is
Rs. 80,275,500/- and the year end balance of such
loan taken aggregated to Rs. 80,275,500/-.
(c) In our opinion the rate of interest and other terms
and conditions on which loans have been taken by
the Company are not prima facie, prejudicial to the
interest of the Company.
(d) The Company is regular in repaying of principal
amounts as stipulated and has been regular in
payment of interest.
(v) In our opinion and according to the information and
explanations given to us, there is an adequate internal
control system commensurate with the size of the
Company and the nature of its business for the purchase
of fixed assets and with regard to sale of services. The
activities of the Company do not involve purchase of
inventory and sale of goods. During the course of our audit,
we have not observed any continuing failure to correct
major weaknesses in internal control system.
(vi) In respect of transactions entered in the register maintained
in pursuance of section 301 of the Companies Act 1956:
(a) According to the information and explanations given
to us, particulars of contracts or arrangements that
need to be entered into the register have been so
entered.
(b) According to the information and explanations given
to us, each of such transactions made in pursuance
of such contracts or arrangement are at prices
determined in negotiations with the said party and
are prima facie reasonable having regard to the
prevailing market prices where such market prices
are available with the Company.
462
(vii) The Company has not accepted any deposits from the public.
(viii) In our opinion, the Company has an internal audit system
commensurate with the size of the Company and the
nature of its business.
(ix) (a) The Company has been regular in depositing with
the appropriate authorities, undisputed statutory
dues including provident fund, employees' state
insurance, income tax, sales tax, wealth tax, service
tax, custom duty, excise duty, cess and any other
material statutory dues applicable to it (Refer Note 4
of Schedule XV). According to the information and
explanation given to us, no undisputed amount
payable in respect of provident fund, employees'
state insurance, income tax, sales tax, wealth tax,
service tax, custom duty, excise duty and cess were
in arrears as on March 31, 2006 for a period of more
that six months from the date they became payable.
(b) According to the information and explanations given
to us there are no dues of income tax / sales tax /
wealth tax / custom duty / excise duty and cess, which
have not been deposited on account of any dispute.
(x) The accumulated losses of the company as at the end of
the financial year have not exceeded fifty percent of its
net worth. The Company has not incurred cash losses
during the current year but has incurred cash losses in the
immediately preceding financial year.
(xi) In our opinion and according to the information and
explanations given to us the company has not defaulted in
the repayment of dues to bank. According to the
information and explanations given to us, there are no dues
of financial institutions or debenture holders.
(xii) According to the information and explanations given to us,
the Company has not granted any loans and advances on
the basis of security by the way of pledge of shares,
debentures and any other securities.
(xiii) According to the information and explanations given to us,
the Company has not given any guarantees for loans taken
by others from banks or financial institutions.
(xiv) According to the information and explanations given to us,
there are no term loans obtained by the Company.
(xv) According to the information and explanations given to us,
and overall examination of the Balance Sheet of the
Company, funds raised on short term basis have prima facie,
not been used during the year for long term investment.
(xvi) The Company has not made preferential allotment of shares
to parties and companies covered in the Register
maintained under Section 301 of the Companies Act, 1956.
(xvii) The Company has not issued any debentures during
the year.
(xviii) The Company has not raised any money by way of public
issues during the year.
(xix) According to the information and explanations given to us,
no fraud on or by the Company was noticed or reported
during the year.
For Deloitte Haskins & Sells
Chartered Accountants
A. B. Jani
Partner
Mumbai, April 27, 2006 Membership No. 46488
 BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

BALANCE SHEET AS AT 31ST MARCH, 2006

As at 31st As at 31st
March, 2006 March, 2005
Schedule Rupees Rupees Rupees

I SOURCES OF FUNDS :

SHAREHOLDERS’ FUNDS
Share Capital .................................................................... I 110,494,400 78,794,400
Reserves and Surplus ....................................................... II 8,834,425 8,834,425
LOAN FUNDS
Secured Loan ................................................................... III 52,282,619 67,612,381
Unsecured Loan ............................................................... IV 80,275,500 80,275,500
TOTAL............. 251,886,944 235,516,706

II APPLICATION OF FUNDS :

FIXED ASSETS ................................................................. V

Gross Block ...................................................................... 124,386,577 108,949,179
Less: Depreciation ............................................................ (83,007,997) (75,012,125)

Net Block .......................................................................... 41,378,580 33,937,054

INVESTMENTS ............................................................... VI 13,514,768 13,514,768

CURRENT ASSETS, LOANS AND ADVANCES ............. VII

Sundry Debtors ................................................................ 230,857,370 165,497,379
Cash and Bank Balances .................................................. 2,622,762 12,474,510
Loans and Advances ........................................................ 75,270,181 53,630,914
308,750,313 231,602,803

Less: CURRENT LIABILITIES AND PROVISIONS

Current Liabilities .............................................................. VIII 104,062,457 84,194,129
Provisions ......................................................................... IX 14,499,848 10,657,116
118,562,305 94,851,245
NET CURRENT ASSETS ................................................. 190,188,008 136,751,558

Profit and Loss Account ................................................... 20,190,583 64,698,321

Less : General Reserve deducted Per Contra .................. 13,384,995 13,384,995

6,805,588 51,313,326
TOTAL............. 251,886,944 235,516,706

Significant Accounting Policies and Notes on Accounts XV

As per our attached report of even date

For Deloitte Haskins & Sells

}
Ulhas N. Yargop
Chartered Accountants Anjanikumar Choudhari
Zhooben Bhiwandiwala Directors
A. B. Jani C. Krishnadas
Partner

Mumbai, dated: 27th April, 2006 Mumbai, dated: 27th April, 2006

463
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006
Previous
Year
Schedule Rupees Rupees

INCOME .................................................................................... X 698,348,927 477,909,059

EXPENDITURE

Cost of Trading Goods ........................................................... XI — 1,825,726

Personnel expenses .............................................................. XII 393,709,456 277,529,639
Operating and other expenses .............................................. XIII 225,689,632 232,315,579
Interest .................................................................................. XIV 15,428,330 14,713,436
Depreciation .......................................................................... 8,453,771 8,765,720
TOTAL............. 643,281,189 535,150,100

PROFIT/ (LOSS) BEFORE TAXATION ...................................... 55,067,738 (57,241,041)

Provision of taxation :
Current Tax (Refer note 3(a) of Schedule XV) ........................ (7,360,000) —
Deferred Tax .......................................................................... — (13,000,000)
Fringe Benefit Tax ................................................................. (3,200,000) —
..............................................................................................

PROFIT / (LOSS) AFTER TAXATION ....................................... 44,507,738 (70,241,041)

Excess provision for Income-tax in respect of earlier years ........... — 89,043
Balance brought forward from previous year ............................. (64,698,321) 5,453,677
BALANCE CARRIED TO BALANCE SHEET ............................. (20,190,583) (64,698,321)
Earning Per Share (Refer note 13 of Schedule XV)
— Basic and Diluted ........................................................... 46.63 (177.77)

Significant Accounting Policies and Notes on Accounts XV

As per our attached report of even date

For Deloitte Haskins & Sells

}
Ulhas N. Yargop
Chartered Accountants Anjanikumar Choudhari
Zhooben Bhiwandiwala Directors
A. B. Jani C. Krishnadas
Partner

Mumbai, dated: 27th April, 2006 Mumbai, dated: 27th April, 2006

464
 BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

Cash Flow for the year ended March 31, 2006

Current Year Previous Year
Rupees Rupees Rupees
A. Cash Flow from Operating Activities
Net Profit / (Loss) before Tax .............................................................................. 55,067,738 (57,241,041)
Adjustments for :
Depreciation ....................................................................................................... 8,453,771 8,765,720
Loss on Sale of Fixed Assets (Net) .................................................................... 103,273 255,000
Foreign Exchange gain (Net) .............................................................................. (73,158) (137,853)
Interest on Borrowings and ICDs 15,428,330 14,713,436
Dividend received (15,000) (15,000)
Interest received (791,086) (227,660)
23,106,130 23,353,643
Operating Profit/(Loss) before working capital changes .................................... 78,173,868 (33,887,398)
Adjustments for :
Trade and Other Receivables ............................................................................. (84,296,668) (58,897,212)
Trade and Other Payables .................................................................................. 14,301,730 21,156,770
(69,994,938) (37,740,442)
Cash generated from / (used in) operations ....................................................... 8,178,930 (71,627,840)
Direct Taxes ........................................................................................................ (12,667,590) (8,110,378)
(12,667,590) (8,110,378)
Net Cash used in operating activities ............................................................. (4,488,660) (79,738,218)
B. Cash Flow from investing activities
Purchase of Fixed Assets ................................................................................... (13,795,080) (10,200,891)
Purchase of Investments ................................................................................... — (9,205,940)
Sale of Fixed Assets ........................................................................................... 127,323 1,734,656
Interest received ................................................................................................ 791,086 227,660
Dividend received ............................................................................................... 15,000 15,000
Net Cash Used in investing activities ............................................................. (12,861,671) (17,429,515)
C. Cash Flow from financing activities
Proceeds from Issue of Shares .......................................................................... 31,700,000 71,600,000
Proceeds from borrowings ................................................................................. (15,329,762) 36,517,410
Interest payment on Borrowings and ICDs ........................................................ (8,944,813) (7,081,451)
Net cash generated from Financing activities ............................................... 7,425,425 101,035,959
Net (Decrease) / Increase in cash and cash equivalents (A+B+C) ................ (9,924,906) 3,868,226
Cash and Cash equivalents at the beginning of the year ............................. 12,422,517 8,554,291
Cash and Cash equivalents at the end of the year ........................................ 2,497,611 12,422,517

Notes :
1. Components of cash and cash equivalents include cash, remittance in transit and bank balances in current and deposit accounts as disclosed under
schedule VII forming part of the Balance Sheet and Profit and Loss Account.
2. Purchase of fixed assets are stated inclusive of movements of capital work in progress between the commencement and end of the period and are
considered as part of investing activity.
31st March 2006 31st March 2005
Rupees Rupees
3. Cash and cash equivalents includes :
Cash and Bank Balances 2,622,762 12,474,510
Unrealised Gain on foreign currency Cash and cash equivalent (125,151) (51,993)
Total cash and Cash equivalents 2,497,611 12,422,517

As per our attached report of even date

For Deloitte Haskins & Sells

}
Ulhas N. Yargop
Chartered Accountants Anjanikumar Choudhari
Zhooben Bhiwandiwala Directors
A. B. Jani C. Krishnadas
Partner

Mumbai, dated: 27th April, 2006 Mumbai, dated: 27th April, 2006

465
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006.
SCHEDULE I As at 31st As at 31st SCHEDULE II As at 31st As at 31st
SHARE CAPITAL: March, 2006 March, 2005 RESERVES AND SURPLUS : March, 2006 March, 2005
Rupees Rupees Rupees Rupees Rupees Rupees
Authorised Capital Reserve
As per last balance sheet .................... 8,834,425 8,834,425
16,00,000 Equity shares of Rs.100/- each ............ 160,000,000 160,000,000 General Reserve
Issued As per last balance sheet .................... 13,384,995 13,384,995
Less : Debit Balance in Profit and Loss
1,124,130 (Previous year 807,130) Equity Shares of account deducted per contra .............. 13,384,995 13,384,995
Rs.100/- each ........................................................ 112,413,000 80,713,000
— —
Subscribed and Paid-up
1,104,944 (Previous year 787,944) Equity shares of TOTAL ................ 8,834,425 8,834,425
Rs.100/- each fully paid-up. ................................... 110,494,400 78,794,400
SCHEDULE III
Notes : LOAN FUNDS : Note
1. All the above shares are held by Bristiecone SECURED LOANS :
Limited, Cayman Island the holding company Cash Credit Account :
(including 36 shares held jointly) From The Zoroastrian Co-operative Bank Ltd. 1 43,297,121 49,764,514
From UTI Bank Ltd. 2 8,985,498 17,847,867
2. Out of the above, 10,214 Equity shares have 1. Secured by first charge by way of
been issued for consideration other than cash, hypothecation of entire present and future
pursuant to a Scheme of Arrangement. current assets and movable fixed assets
(excluding vehicles) and ranking pari-passu
with the charge mentioned in 2 below.
TOTAL ...... 110,494,400 78,794,400
2. Secured by first charge by way of
hypothecation of entire present and future
current assets and movable fixed assets
(excluding vehicles) and ranking pari-passu
with the charge mentioned in 1 above.
52,282,619 67,612,381

SCHEDULE IV
UNSECURED LOANS :
Short term Loans and Advances :
From Ultimate Holding Company ............................... 80,275,500 80,275,500
TOTAL ........................................ 80,275,500 80,275,500

SCHEDULE V
Fixed Assets : (In Rupees)

GROSS BLOCK DEPRECIATION NET BLOCK

Description of Assets As at Additions Deductions As at Upto For the Deductions Upto As at As at
01.04.2005 31.03.2006 31.03.2005 year 31.03.2006 31.03.2006 31
31.. 03
03.. 2005
2005
Computers 86,608,432 12,738,481 359,925 98,986,988 67,691,969 6,860,030 291,215 74,260,784 24,726,204 18,916,463
Furniture and Fixtures 5,885,338 237,428 — 6,122,766 3,111,335 495,710 — 3,607,045 2,515,721 2,774,003
Office Equipments 13,586,876 2,428,504 15,600 15,999,780 3,158,509 809,349 680 3,967,178 12,032,602 10,428,367
Vehicles 2,868,533 721,480 312,970 3,277,043 1,050,312 288,682 166,004 1,172,990 2,104,053 1,818,221
Total 108,949,179 16,125,893 688,495 124,386,577 75,012,125 8,453,771 457,899 83,007,997 41,378,580 33,937,054
Previous year 100,077,462 12,018,973 3,147,256 108,949,179 67,404,005 8,765,720 1,157,600 75,012,125 33,937,054

SCHEDULE VII As at 31st As at 31st

SCHEDULE VI As at 31st As at 31st March, March,
March, March, CURRENT ASSETS, LOANS AND ADVANCES: 2006 2005
INVESTMENTS : 2006 2005 Rupees Rupees Rupees
Rupees Rupees Rupees Currr ent Assets:
A) Cur
Long Term Investments Unquoted (at cost) a) Sundr
Sundry y Debtors
Non Trade : ( Unsecured ) :
In wholly owned subsidiary company : Debts outstanding for a period
120,000 Ordinary shares of the Face exceeding six months
Value of SGD 1/- each, fully paid up, — Considered Good ...................... 10,569,737 18,352,736
— Considered Doubtful ................. 9,035,403 7,839,014
of Bristlecone (Singapore) Pte. Ltd.
.................................................. 3,269,734 3,269,734 19,605,140 26,191,750
Other debts, Considered good ......... 220,287,633 147,144,643
1 ( Share of the face value of Euro
50,000 fully paid up of Bristelcone 239,892,773 173,336,393
GmbH.* (Formerly known as Less : Provision ................................ (9,035,403) (7,839,014)
Mahindra Consulting GmbH. ............ 10,145,034 10,145,034 230,857,370 165,497,379
13,414,768 13,414,768 b) Cash and Bank Balances
Other Investments : Cash on hand [Including
Cheques on Hand Rs.NIL ................. 110,100 5,457,052
4,000 Equity shares of Rs. 25/- each
(Previous year Rs. 5,409,973/-)]
fully paid up of The Zoroastrian
Co-operative Bank Ltd. ..................... 100,000 100,000 Remittance in Transit ........................ — 566,588
............................................................................
...................................... TOTAL 13,514,768 13,514,768 Balance with Banks
............................................................................
............................................................................ With Scheduled Banks
(i) In Current Account ............... 2,417,662 3,250,645
*Includes Rs. 7,294,524/- invested towards capital reserve of
the company in accordance with the German Commercial Code. (ii) In Margin Account ................. 95,000 456,000
With Others* ........................ — 2,744,225
2,512,662 6,450,870

466
 BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006.
*Represents balance with : SCHEDULE XI Previous
2,622,762 12,474,510 year
BNP Paribas, Qatar Rs. NIL (Previous year Rs.
Rupees Rupees
383,170/-) [maximum balance outstanding at COST OF TRADING GOODS :
any time during the year Opening Stock ................................... — —
Rs. 1,587,554/- (Previous year Rs. 4,285,817/-)].
Add : Purchases ................................. — 1,825,726
Qatar National Bank, Qatar Rs. NIL (previous
year Rs. 2,361,056) [Maximum balance — 1,825,726
outstanding at any time during the year Rs.
Less : Closing Stock .......................... — —
3,693,852/- (Previous year Rs. 9,773,681/-)]
TOTAL ..... — 1,825,726
B) Loans and Advances:
(Unsecured, considered good ) :
Advances recoverable in cash or
in kind or for value to be received 48,417,575 29,480,898 SCHEDULE XII Previous
Advance payment of Income-tax year
(net of provision of Rs. 7,360,000/-) Rupees Rupees Rupees
(Previous year Rs. NIL) 26,852,606 24,150,016 PERSONNEL EXPENSES :
75,270,181 53,630,914 Salaries, wages, bonus, etc. .............. 371,043,871 257,847,591
TOTAL 308,750,313 231,602,803 [(net of recovery Rs.997,772/-
(Previous year Rs.2,778,697/-)]
Note :
Loans and Advances include : Contribution to Provident and other
i) Rs. 29,044,369/- (Previous year Rs.16,375,163/-) towards Security deposits for rented funds (Refer note 4 of schedule XV) . 12,198,471 9,166,678
premises. Gratuity .............................................. 2,867,752 4,073,909
ii) Rs.4,139,688/-(Previous year Rs.2,705,784/-) due from subsidiary companies.
Staff welfare ...................................... 7,599,362 6,441,461
TOTAL ......... 393,709,456 277,529,639

SCHEDULE VIII As at 31st As at 31st SCHEDULE XIII

March, 2006 March, 2005 OPERATING AND OTHER EXPENSES:
Rupees Rupees Rupees Power ................................................ 6,401,740 5,211,124
CURRENT LIABILITIES : Rent [net of recovery Rs. 352,512/- ..
Sundry Creditors (Previous year Rs 441,593/-)] ............. 49,275,540 40,589,087
Total outstanding dues to small scale Rates and taxes ................................. 3,436,702 3,318,721
industrial undertaking ........................ — — Communication expenses ................. 11,573,724 10,013,625
Total outstanding dues to creditors Travelling and conveyance ................. 80,062,884 72,393,108
other than small scale industrial Recruitment expenses ...................... 12,213,749 10,197,502
undertakings ...................................... 73,225,447 59,840,636 Repairs and maintenance – Machinery 2,803,954 2,124,820
73,225,447 59,840,636 Repairs and maintenance – Others ... 2,082,135 3,945,406
Insurance ........................................... 365,050 461,237
Interest accrued but not due on loan .... 30,837,010 24,353,493
Professional fees ............................... 23,425,981 35,643,252
TOTAL ..... 104,062,457 84,194,129 Business Promotion Expenses .......... 3,981,378 9,882,694
SCHEDULE IX Lease Charges ................................... — 83,416
PROVISIONS : Software expenditure ........................ 5,268,333 6,173,037
Provision for gratuity .......................... 7,696,848 6,198,116 Training expenses .............................. 5,252,628 3,752,182
Provision for encashable leave .......... 6,208,000 4,459,000 Bad Debts .......................................... 469,538 1,758,067
Provision for Fringe Benefit tax [(net Less : Provision for doubtful debts
of advance tax of Rs. 2,605,000/- ...... written back ....................................... — 1,291,530
(Previous year Rs. Nil) ........................ 595,000 —
469,538 466,537
TOTAL ..... 14,499,848 10,657,116 Provision for Doubtful Debts ............. 1,196,389 3,735,294
Commission & Sales Rebate ............. 5,274,856 10,958,108
SCHEDULE X Previous Loss on sale of Fixed Assets (net) .... 103,273 255,000
year
Miscellaneous expenses ................... 12,501,778 13,111,429
Rupees Rupees
TOTAL......... 225,689,632 232,315,579
INCOME :
Income from services ........................ 692,001,251 466,814,418
Miscellaneous expenses include sales promotion expenses, audit fees, office expenses,
Sale of computer software and printing and stationery, etc.
hardware ............................................ — 1,890,781
Interest on :
Deposits with Banks [(Tax De- SCHEDULE XIV
ducted at Source Rs.2,457/-) INTEREST
(Previous year Rs. Rs.13,666/-)] .. 18,247 119,274 – On Cash Credit Account ............... 5,795,267 4,852,685
Others ......................................... 772,839 108,386
– On Short term Loans .................... 9,633,063 9,860,751
Dividend from Long Term Investment 15,000 15,000
Facilities charges recovered .............. 2,575,500 2,575,500 TOTAL........ 15,428,330 14,713,436
Exchange Gain (net) ........................... 145,153 362,247
Excess provision of earlier years written
back ................................................... 2,663,937 6,023,453
Sundry Balances written back ........... 157,000 —
TOTAL ..... 698,348,927 477,909,059

467
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006.
SCHEDULE XV
Where the recoverable amount of any fixed asset is lower than its carrying amount,
1. Significant accounting policies a provision for impairment loss on fixed assets is made for the difference.
Basis for Preparation of Accounts: Operating Lease :
The accounts have been prepared to comply in all material aspects with applicable Assets taken on lease under which, all the risk and rewards of ownership are
accounting principles in India, the Accounting Standards issued by the Institute of effectively retained by the lessor are classified as operating lease. Lease payments
Chartered Accountants of India (ICAI) and the relevant provisions of the Companies under operating leases are recognized as expenses on accrual basis in accordance
Act, 1956. with the respective lease agreements.
Use of Estimates Provisions, Contingent Liabilities and Contingent Assets :
The Preparation of financial statements, in conformity with the generally accepted Provisions involving substantial degree of estimation in measurement are recognized
accounting principles requires estimates and assumptions to be made that affect the when there is present obligation as a result of past events and it is probable that
reported amounts of assets and liabilities on the date of financial statements and the there will be an outflow of resources. Contingent Liability if any, is disclosed in the
reported amounts of revenues and expenses during the reported period. Differences notes on accounts. Contingent Assets are neither recognized nor disclosed in the
between the actual results and the estimates are recognised in the period in which financial statements.
the results are known / materialise. 2. Contingent Liabilities :
Revenue Recognition : Bank Guarantees outstanding Rs. 230,000/- (Previous year Rs. 3,890,000/-)
Sale of products is recognized when the products are dispatched 3. (a) Current tax includes provision for Income Tax payable in 'Qatar' aggregating to
Revenue from software services performed on 'time and material' basis is recognized Rs. 7,000,000/- and Income Tax aggregating to Rs. 360,000/- payable as per the
as and when services are performed. Income from services performed by the provisions of Income Tax Act 1961.
Company pending receipt of approved timesheets from customers, which are (b) The tax effect of significant timing differences during the year that have resulted
invoiced subsequently on receipt thereof, are recognized as unbilled revenue. in deferred tax assets and liabilities are given below.
The Company also performs time bound fixed-price engagements, under which
revenue is recognized using the percentage of completion method of accounting, Particulars 31.03.2006 31.03.2005
unless work completed cannot be reasonably estimated. (Rupees) (Rupees)
Fixed Assets: Deferred Tax Liabilities :
All fixed assets are stated at cost less depreciation. Costs comprise purchase price Depreciation 6,735,647 6,664,825
and any attributable costs.
Total deferred tax liabilities 6,735,647 6,664,825
Depreciation on fixed assets :
Deferred tax assets :
Depreciation is provided on the straight-line method at the rates and in the manner
prescribed in Schedule XIV to the Companies Act, 1956 Other timing differences : 6,467,853 5,360,654
Investments : Carry forward loss and unabsorbed 45,015,831 50,760,458
Current investments are carried at lower of cost and fair value. Long term investments depreciation as per tax laws
are carried at cost. Provision is made to recognise a decline other than temporary in
the carrying amount of long term investment. Total deferred tax assets 51,483,684 56,121,112
Borrowing Cost : Deferred tax assets (net) 44,748,037 49,456,287
Borrowing costs that are attributable to the acquisition or construction of qualifying The net Deferred tax asset as at 31st March 2006 has not been accounted in view of the
assets are capitalised as part of the cost of such assets. A qualifying asset is one requirements of certainty / virtual certainty as stated in the Accounting Standard 22
that necessarily takes a substantial period of time to get ready for its intended use "Accounting for Taxes on Income".
or sale. All other borrowing costs are charged to revenue. 4. The company has during the year contributed Rs. 2,243,644/- to the provident fund
Inventories : trust constituted for the employees on account of shortfall as at 31st March 2005 in
the earnings of trust as per the provisions of the trust deed.
Trading goods are valued at cost on FIFO basis or net realisable value whichever is
lower. 5. The Company had on 5th August, 2004, appointed Mr. V. Mani (an employee of the
company since 1st August, 2000) as a director of the Company. Mr. V. Mani resigned
Retirement Benefits: from Board of Directors of the Company with effect from 27th February, 2006.
Retirement Benefits in respect of gratuity and en-cashable leave are provided for During this period, Mr. V. Mani continued to receive remuneration as an employee
based on valuations as at the Balance Sheet date, made by independent actuaries. of the Company in accordance with the terms of his employment with the company.
Superannuation benefits for employees are funded by contributions made by the Remuneration aggregating to Rs. 36,44,573/- has been paid to Mr. V. Mani during
company to the Life Insurance Corporation of India. the year (previous year Rs. 28,81,676/-), in excess of the limits prescribed under
Foreign Currency Transactions : Section 309 of the Companies Act, 1956, for which an application is being made by
the Company to the Central Government seeking their approval for waiver of recovery
Transactions in foreign currencies are recorded at the exchange rates prevailing on of the aforesaid amounts from Mr. V. Mani.
the date of transaction. Monetary items are translated at the year-end rates. The 6. As required under Accounting Standard 18 (AS-18), following are details of
exchange difference between the rate prevailing on the date of transaction and on transactions during the year with the related parties of the Company as defined in
the date of settlement as also on translation of Monetary items at the end of the AS-18 :
year, is recognised as income or expense, as the case may be, except where they
relate to fixed assets where they are adjusted to the cost of fixed assets. (a) List of Related Parties & Relationships
Any premium or discount arising at the inception of the forward exchange contract Name of related party Relation
is recognized as income or expense over the life of the contract, except in the case Mahindra and Mahindra Limited Ultimate Holding Company
where the contract is in connection with purchase of fixed asset, where the same Bristlecone Ltd. Holding Company
is adjusted to the cost of fixed assets. Exchange difference on a forward exchange Bristlecone Inc. Fellow subsidiary Company
contract is the difference between the foreign currency amount of the contract Tech Mahindra Ltd (formerly known as
translated at the exchange rate at the reporting / settlement date and the said amount Mahindra -British Telecom Ltd.) Fellow Subsidiary Company
translated at the later date of inception of the contract / last reporting date. Bristlecone GmbH (formerly known as
Income Taxes : Mahindra Consulting GmbH) Subsidiary Company
Tax expense comprises of current tax, deferred tax and fringe benefit tax. Current Bristlecone Singapore Pte. Ltd. (formerly
tax and Deferred tax are accounted for in accordance with Accounting standard 22 known as Mahindra Consulting (Singapore)
on "Accounting For Taxes on Income" (AS 22) issued by the ICAI. Current tax is Pte Ltd) Subsidiary Company
measured at the amount expected to be paid to / recovered from the tax authorities, Mahindra Engineering Design & Development
using the applicable tax rates. Deferred income taxes reflects the impact of the Company Ltd. Fellow subsidiary Company
current year timing differences between taxable income and accounting income for Mahindra Intertrade Ltd. Fellow subsidiary Company
the year and reversal of timing differences of earlier years. Deferred tax assets are Bristlecone UK Ltd. (formerly known as
recognised only to the extent that there is reasonable certainly that sufficient future Mahindra Intertrade UK Ltd) Fellow subsidiary Company
taxable income will be available except that deferred tax assets arising on account Mahindra International Ltd. (formerly known
of unabsorbed depreciation and losses are recognised if there is virtual certainly as Mahindra International Pvt Ltd.)* Fellow subsidiary Company
that sufficient future taxable income will be available to realise the same (Refer Mahindra Logisoft Business Solutions Ltd. Fellow subsidiary Company
Note 3 below). Fringe benefit tax is recognized in accordance with the relevant
provisions of the Income-tax Act, 1961 and the Guidance Note on Fringe Benefit Mahindra Renault Pvt. Ltd.* Fellow subsidiary Company
Tax issued by the ICAI. Mahindra Ugine Steel Company Ltd. *
(from 01.07.2005) Fellow subsidiary Company
Impairment of Assets : Mahindra Ugine Steel Company Ltd. *
At the end of each year, the company determines whether a provision should be (till 30.06.2005) Fellow Associate Company
made for impairment loss on fixed assets by considering the indications that an Mr. Padman Raman Kutty, CEO Key Management Personnel
impairment loss may have occurred in accordance with Accounting Standard 28 Mr. V. Mani, Director * Key Management Personnel
"Impairment of Assets" issued by The Institute of Chartered Accountants of India.
*indicates that these parties were Related for part of the year

468
 BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

b) Related Party Transactions :

Holding Ultimate Subsidiary Fellow Subsidiary Fellow Associate Key Management

Company Holding Company Companies Companies Company Personnel
Reimbursement of — 5,660,993 429,141 11,463,519 — —
Expenses Paid (358,139) (1,553,765) (1,548,845) (256,586) (—) (—)
Reimbursement of — 2,186,479 6,488,062 7,198,529 — —
Expenses Recieved (—) (3,144,444) (4,664,210) (1,786,587) (—) (—)
Sales of Computer — — — — — —
Software and Hardware (—) (1,890,781) (—) (—) (—) (—)
Income from Services
rendred 124,796,412 181,904,500 180,606,769 356,188 —
(—) (126,883,167) (58,966,787) (102,135,487) (2,046,202) (—)
Facilities Charges
recovered — 2,575,500 — — — —
(—) (2,575,500) (—) (—) (—) (—)
Business Promotion
expenses — — 2,688,793 1,292,585 — —
(—) (—) (4,397,204) (5,485,490) (—) (—)
Interest Paid on Loans — 9,633,063 — — — —
(—) (9,860,751) (—) — (—) (—)
Purchase of Software — — — — — —
(—) (—) (—) (139,620) (—) (—)
Bad Debts written off — — — — — —
(—) (—) (—) (466,537) (—) (—)
Other expenses — 179,152 — — — —
(—) (1,211,112) (—) (979,916) (—) (—)
Investments made — — — — — —
(—) (—) (9,205,940) (—) (—) (—)
Loans taken and repaid
during the year — — — — — —
(—) (9,000,000) (—) (—) (—) (—)
Loans Outstanding as on
31-03-2006 — 80,275,500 — — — —
(—) (80,275,500) (—) (—) (—) (—)
Salary and perquisites — — — — — 3,644,573
(—) (—) (—) (—) (—) (3,922,670)
Sale of Fixed Assets at
WDV — — — — — —
(—) (1,424,487) (—) (—) (—) (—)
Purchase of Fixed
Assets — — — 270,000 — —
(—) (—) (—) (272,652) (—) (—)
Debit / (Credit) balances
(Net) Outstanding
as on 31st March, 2006 — 10,050,001 73,927,961 40,248,564 — —
Debit/(Credit) balances
(Net) Outstanding
as on 31st March, 2005 358,139 2,993,230 30,080,393 47,538,660 872,530 —

(Figures in brackets "( )” are for the previous year.

SCHEDULES FORMING PART OF THE BALANCE SHEET AND

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006.
(c) Out of the above items, transactions with subsidiaries, fellow subsidiaries and
key management personnel in excess of 10% of total related party transactions Fellow Subsidiary Companies :
are as under: (Amount Rupees) Bristlecone (UK) Ltd 1,292,585 5,485,490
Pur chase of Softwar
Purchase e:
Software
For the For the
Fellow Subsidiary Companies :
year ended year ended
Mahindra Logisoft Business Solutions Ltd — 139,620
Transaction 31st March, 31st March,
2006 2005 Other Expenses :
Fellow Subsidiary Companies :
Reimbursement of expenses paid
Mahindra Logisoft Business Solutions Ltd — 596,500
Subsidiary Companies :
Mahindra & Mahindra Financial Services Ltd — 383,416
Bristlecone Singapore Pte Ltd 381,397 1,548,845
Bad Debts written ofofff :
Fellow Subsidiar y Companies :
Subsidiary
Fellow Subsidiary Companies :
Bristlecone Inc 11,146,150 —
Automartindia Ltd — 330,537
Reimbursement of Expenses Received: Mahindra Subhlabh Services Ltd — 136,000
Subsidiary Companies : Investment made :
Bristlecone Singapore Pte. Ltd 5,351,466 4,415,727 Subsidiary Companies :
Fellow Subsidiary Companies : Bristlecone Singapore Pte Ltd — 1,911,416
Bristlecone Inc 7,092,593 682,555 Bristlecone GmbH — 7,294,524
Income from services rendered
Pur chase of Fixed Assets:
Purchase
Subsidiary Companies : Fellow Subsidiary Companies
Bristlecone GmbH 163,816,307 46,932,468 Bristlecone Inc. 270,000 —
Fellow Subsidiary Companies : Mahindra & Mahindra Financial Services Ltd. — 272,652
Bristlecone Inc 154,661,692 71,938,771
Business Pr omotion Expenses :
Promotion Salar
Salaryy & Per quisites :
Perquisites
Subsidiary Companies : Key Management Personnel
Bristlecone Singapore Pte Ltd 776,749 2,328,921 V Mani 3,644,573 3,922,670
Bristlecone GmbH 1,912,045 2,068,284

469
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

Other related parties (Fellow Subsidiary Companies) are as under : 9. Additional information pursuant to the provisions of Paragraphs 3(i)(a) and (ii)
of Part II of Schedule VI to the Companies Act, 1956.
● Automartindia Ltd.
Quantitative details in respect of Goods Traded
● Mahindra Gesco Developers Limited
● Mahindra Acres Consulting Engineers Ltd. Opening Stock Purchases Sales Closing Stock
● Mahindra Ashtech Ltd. Class of
Goods Qty. Value Qty. Value Qty. Value Qty. Value
● Mahindra Automotive Steels Pvt. Ltd.*
● Tech Mahindra GmbH (formerly known as MBT GmbH) Nos. Rupees Nos. Rupees Nos. Rupees Nos. Rupees
● Tech Mahindra (Americas) Inc (formerly known as MBT International Inc.) Software — — — — — — — —
● Mahindra-BT Investment Company (Mauritius) Ltd.* (—) (—) (3) (139,620) (3) (250,000) (—) (—)
● Tech Mahindra (Singapore) Pte. Ltd. (formerly known as MBT Software
Hardware — — — — — — — —
Technologies Pte. Ltd.)
● Tech Mahindra (Thailand) Ltd. (formerly known as MBT (Thailand) Company Ltd.)* (—) (—) (45) (1,686,106) (45) (1,640,781) (—) (—)
● Mahindra (China) Tractor Company Ltd.* Total — — — — — — — —
● Mahindra Engg & Chem Products Ltd.
● Mahindra Europe s.r.l. * (—) (—) (—) (1,825,726) (—) (1,890,781) (—) (—)
● Mahindra Gujarat Tractor Ltd. Note: Figures of the previous year are indicated in brackets.
● Mahindra Holdings & Finance Ltd.
● Mahindra Holidays & Resorts India Limited 10. Expenditure in Foreign Currency (on accrual basis) : 2006 2005
● Mahindra Holidays & Resorts (USA) Inc
● Mahindra Insurance Brokers Ltd (i) Travelling ...................................................... 27,615,976 24,408,567
● Mahindra Infrastructure Developers Ltd
● Mahindra World City Developers Ltd. (formerly known as Mahindra (ii) Professional Fees ........................................ 1,707,794 2,256,918
Industrial Park Ltd.) (iii) Marketing Expenses .................................... 39,81,378 9,882,694
● Mahindra MiddleEast Electrical Steel Service Centre (FZE)
● Mahindra & Mahindra Financial Services Ltd. (iv) Others (Includes Commission, rent, training,
● Mahindra & Mahindra South Africa (Pty) Ltd. etc.) .............................................................. 59,88,051 16,233,594
● Mahindra Overseas Investment Company (Mauritius) Ltd
● Mahindra Realty Ltd.* 11. Earnings in Foreign Exchange:
● Mahindra Steel Service Centre Ltd. Professional and consultancy fees in respect of
● Mahindra Shubhlabh Services Ltd. services rendered (including out of pocket
● Mahindra SAR Transmission Pvt Ltd expenses) ............................................................ 363,776,744 207,652,583
● Mahindra USA Inc.
● Mahindra World City (Jaipur) Ltd.* 12. Remuneration to Auditors includes: 2006 2005
● NBS International Ltd.
● Tech Mahindra (R&D Services) Ltd. (formerly known as Axes Technologies (i) Audit fees ..................................................... 230,000 175,000
(India) Private Limited)* (ii) For Expenses ............................................... 1,498 3,750
● Tech Mahindra (R&D Services) Inc. (formerly known as Axes Technologies, Inc, USA)*
● Tech Mahindra (R&D Services) Pte Ltd. (formerly known as Axes (iii) For Certification ............................................ 120,000 115,000
Technologies (Asia-Pacific) Pte. Ltd) * (iv) For Service Tax ............................................. 35,292 24,150
● Stokes Group Limited
● Jensand Limited 386,790 317,900
● Stokes Forgings Dudley Limited
● Stokes Forgings Limited
● Plexion Technologies (India) Private limited 13. Earning Per Share is calculated as follows : 2006 2005
● Plexion Technologies (UK) Limited Rupees Rupees
● Plexion Technologies GmbH
● Plexion Technologies Incorporated
a. Net Profit/(Loss) after tax ................................. 44,507,738 (70,241,041)
* indicates that these companies were Related for part of the year Excess/(short) provision for income tax in
There have been no transactions with the aforesaid companies during the year. respect of earlier years .................................... — 89,043
7. Segmental Reporting Net Profit/(Loss) after tax (including
excess/ (short Provision for income-tax
a) Primary Segment : Business Segment
in respect of earlier years) ............................... 44,507,738 (70,151,998)
The business of the company is of rendering Information Technology Services. All
other activities of the company revolve around its main business. Hence, there are b. Weighted average number of Equity Shares
no separate reportable primary segments as defined by Accounting Standard 17 - Basic ................................................................ 954,407 394,626
"Segment Reporting" Diluted .............................................................. 954,407 394,626
b) Secondary Segment : Geographical Segment c. Nominal value of equity share ......................... 100 100
(Rupees) .........................................................................
Total Domestic Overseas d. Earning Per Share ............................................ 46.63 (177.77)
Revenue Attributable to 697,542,841 333,766,097 363,776,744
location of Customers 14. Figures of previous year have been regrouped wherever necessary to confirm with
the figures of the current year
(477,666,399) (270,013,816) (207,652,583)
Note: Figures for Previous Year are given in bracket
Segration of assets into Secondary Segments has not been done as the assets are
used interchangeably between segments. Consequently the carrying amounts of
assets by location of assets is not given.
8. The Company has taken on lease office premises under operating lease for a
Signature to Schedule I to XV
period of 33 months (Previous year 30 months) The lease rental expense
recognized in the Profit and Loss Account for the year Rs. 11,540,786/- (Previous As per our attached report of even date
year 6,419,869/-). The future minimum lease payments are payment profile of For Deloitte Haskins
non-cancellable lease are as follows :
Total minimum lease Total minimum lease
& Sells
Ulhas N. Yargop

}
payments outstanding payments outstanding Chartered Accountants
as on 31-03-2006 as on 31-03-2005 Anjanikumar Choudhari
(Rupees) (Rupees) A. B. Jani Zhooben Bhiwandiwala Directors
Partner C. Krishnadas
Not later than one year 17,933,964 6,797,508
Later than one year but not later 24,402,323 3,776,393
than five years
Mumbai, dated: 27th April, 2006
Later than five years NIL NIL
Total 42,336,287 10,573,901

470
 BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

SCHEDULES FORMING PART OF THE BALANCE SHEET AND

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2005.
15. Balance Sheet Abstract and Company’s General Business Profile.

I. Registration Details

Registration No. 1 1 – 6 4 3 6 8 State Code : 1 1

Balance Sheet Date 3 1 0 3 0 6

Date Month Year

II. Capital raised during the year at Face Value (Amount in Rs. Thousand)

Public Issue Right Issue

N I L 3 1 7 0 0
Bonus Issue Private Placement
N I L N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousand)

Total Liabilities including Shareholders Funds Total Assets

3 7 0 4 4 9 3 7 0 4 4 9

Sources of Funds :

Paid-up Capital Reserves & Surplus

1 1 0 4 9 4 8 8 3 4
Secured Loans Unsecured Loans

5 2 2 8 3 8 0 2 7 6

Application of Funds :

Net Fixed Assets Investments

4 1 3 7 8 1 3 5 1 5
Net Current Assets Deferred Tax Asset

1 9 0 1 8 8 N I L
Accumulated Losses Miscellaneous Expenditure

6 8 0 6 N I L

IV. Performance of Company (Amount in Rs. Thousand)

Turnover (Sales and Other Income) Total Expenditure

6 9 8 3 4 9 6 4 3 2 8 1
+ – Profit Before Tax + – Profit After Tax

+ 5 5 0 6 8 + 4 4 5 0 8

(Please tick appropriate box + for profit – for loss)

Earning per Share in Rupees Dividend Rate %

(Refer Note 11 above)

+ 4 6 . 6 3 N I L

471
BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

V. Generic Names of Three Principal Products/Services of Company

(as per monetary items):

Item Code No. (ITC Code) N. A.

Product Description C O M P U T E R C O N S U L T A N C Y S E R V I C E S

Item Code No. (ITC Code) 8 5 2 4 5 1 0 0 . 1 0

Product Description C O M P U T E R S O F T W A R E

Item Code No. (ITC Code) N I L

Product Description C O M P U T E R H A R D W A R E

Item Code No. (ITC Code) N I L

}
Ulhas N. Yargop
Anjanikumar Choudhari
Zhooben Bhiwandiwala Directors
C. Krishnadas

Mumbai, dated: 27th April, 2006

472
 BRISTLECONE INDIA LIMITED
(Formerly known as Mahindra Consulting Limited)

Statement Pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies

Name of the Subsidiary Companies

Particulars Bristlecone Singapore Bristlecone GmbH
Pte. Ltd.

The financial year of the Subsidiary Company ended on .............................. March 31, 2006 March 31, 2006
Rupees Rupees

Number of Shares of the Subsidiary Company held by Bristlecone India

Limited at the above date

Equity .................................................................................................... 120,000 1

Extent of holding ................................................................................... 100% 100%

The Net aggregate of profits/losses of the Subsidiary Company for its

Financial year so far as they concern the members of Bristlecone India
Limited:

(a) Dealt with in the accounts of Bristlecone India Limited for the
Year ended 31st March, 2006 ............................................................... — —

(b) Not dealt with in the accounts of Bristlecone India Limited for the
Year ended 31st March, 2006 ............................................................... 1,060,560 2,554,335

The Net aggregate of profits/losses of the Subsidiary Company for its

previous financial years, so far as they concern the members of Bristlecone
India Limited: :

(a) Dealt with in the accounts of Bristlecone India Limited for the
Year ended 31st March, 2005 ............................................................... — —

(b) Not dealt with in the accounts of Bristlecone India Limited for the
Year ended 31st March, 2005 ............................................................... 1,871,297 (5,803,755)

}
Ulhas N. Yargop
Anjanikumar Choudhari
Zhooben Bhiwandiwala Directors
C. Krishnadas

Mumbai, dated: 27th April, 2006

473
BRISTLECONE (SINGAPORE) PTE. LTD.

Report of the Directors

The directors present their report together with the audited 2. Arrangements to Enable Directors to Acquire Benefits by
financial statements of the Company for the financial year ended Means of the Acquisition of Share and Debentures:
March 31, 2006. Neither at the end of the financial year nor at any time during
1 . Directors: the financial year did there subsist any arrangement whose
object is to enable the directors to acquire benefits by means
The directors of the Company in office at the date of this
of the acquisition of shares or debentures in the Company or
report are:
any other body corporate except for the options mentioned
Mr. Mani Venkataramanan below.
Mr. Lim Tiong Beng
3 . Directors’ Interests in Shares and Debentures:
Mr. Zhooben Dossabhoy
The directors holding office at the end of the financial year
Bhiwandiwala
had no interests in the Share Capital and Debentures of the
Mr. Anjanikumar Choudhari Company and related corporations as recorded in the register
of directors’ shareholdings kept by the Company under
Section 164 of the Singapore Companies Act except as
follows:
Shareholdings in which
Shareholdings registered directors are deemed
in the names of directors to have an interest
At the beginning of At the beginning of
the year or the date the year or the date
Name of Directors and Companies of appointment, At the end of appointment, At the end
in which interests are held if later of the year if later of the year
Stock Options Stock Options Stock Stock
Mahindra & Mahindra Ltd. Units of Indian Rupees 10 each
Anjanikumar Choudhari 18,120 8,160 36,240 16,320 — —
Zhooben Dossabhoy
Bhiwandiwala 7,017 2,694 19,422 5,000 361 722

Bristlecone Ltd., Cayman Units of US $0.001 each

Zhooben Dossabhoy
Bhiwandiwala — 50,000 — 50,000 — —
Mani Venkataramanan — — — 18,900 — —

4. Directors’ Receipt and Entitlement to Contractual Benefits: 7 . Unissued Shares Under Option:
Since the beginning of the financial year, no director has At the end of the financial year, there were no unissued
received or become entitled to receive a benefit which is shares of the Company under option.
required to be disclosed under Section 201(8) of the Singapore
8 . Auditors:
Companies Act, by reason of a contract made by the Company
or a related corporation with the director or with a firm of The Auditors, Deloitte & Touche, have expressed their
which he is a member, or with a company in which he has a willingness to accept re-appointment.
substantial financial interest. Certain directors have received
remuneration from related corporations in their capacities as
directors and/or executives of those related corporations.
5 . Option to Take-up Unissued Shares: On behalf of the Directors
During the financial year, no option to take-up unissued
shares of the Company was granted.
Anjanikumar Choudhari
6 . Option Exercised:
During the financial year, there were no shares of the
Company issued by virtue of the exercise of an option to take- Mani Venkataramanan
up unissued shares. April 25, 2006

474

Auditors’ Report to the Members of Bristlecone (Singapore) Pte. Ltd.
[formerly known as Mahindra Consulting (Singapore) Pte. Ltd.]
We have audited the accompanying financial statements of
Bristlecone (Singapore) Pte. Ltd. for the year ended March 31,
2006. These financial statements are the responsibility of the
Company’s Directors. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with the Singapore
Standards on Auditing. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by the directors,
as well as, evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable
basis for our opinion.
BRISTLECONE (SINGAPORE) PTE. LTD.
In our opinion :
a) the accompanying financial statements are properly drawn
up in accordance with the provisions of the Singapore
Companies Act, Cap. 50 (the "Act") and Singapore Financial
Reporting Standards so as to give a true and fair view of the
state of affairs of the company as at March 31, 2006 and of
the results, changes in equity and cash flows of the company
for the year ended on that date; and
b) the accounting and other records required by the Act to be
kept by the company have been properly kept in accordance
with the provisions of the Act.
Certified Public Accountants
Singapore, April 25, 2006
475
BRISTLECONE (SINGAPORE) PTE. LTD.

Balance Sheet
March 31, 2006

Note 2006 2005

$ $
ASSETS

Current assets:

Cash and bank balances ................................................... 172,337 88,381

Trade receivables ............................................................. 6 475,100 347,675

Other receivables and prepayments ................................ 7 105,328 37,969

Total current assets ......................................................... 752,765 474,025

Non-current asset:

Equipment ........................................................................ 8 5,619 7,152

Total assets ..................................................................... 758,384 481,177

LIABILITIES AND EQUITY

Current liabilities:

Trade payable ................................................................... 9 206,522 144,049

Other payables ................................................................. 10 320,112 141,428

Income tax payable .......................................................... 2,828 5,218

Total current liabilities ...................................................... 529,462 290,695

Capital and reserves:

Share capital ..................................................................... 11 120,000 120,000

Accumulated profits ......................................................... 108,922 70,482

Total equity ...................................................................... 228,922 190,482

Total liabilities and equity ............................................... 758,384 481,177

See accompanying notes to financial statements.

476
 BRISTLECONE (SINGAPORE) PTE. LTD.

Profit and Loss Statement

March 31, 2006

Note 2006 2005

$ $

Revenue ........................................................................... 12 1,372,922 969,607

Cost of sales ................................................................... (899,244) (700,103)

Gross profit ..................................................................... 473,678 269,504

Selling expenses .............................................................. (386,199) (197,697)

Administrative expenses .................................................. (48,368) (35,559)

Other income ................................................................... — 848

Profit before tax .............................................................. 13 39,111 37,096

Income tax expense ......................................................... 14 (671) (3,500)

Profit for the year ........................................................... 38,440 33,596

See accompanying notes to financial statements.

477
BRISTLECONE (SINGAPORE) PTE. LTD.

Statement of Changes in Equity

Year ended March 31, 2006

Share Accumulated
Capital Profits Total
$ $ $

Balance at April 1, 2004 ............................................. 50,000 36,886 86,886

Issue of Shares .......................................................... 70,000 — 70,000

Profit for the year ....................................................... — 33,596 33,596

Balance at March 31, 2005 ........................................ 120,000 70,482 190,482

Profit for the year ....................................................... — 38,440 38,440

Balance at March 31, 2006 ........................................ 120,000 108,922 228,922

478
 BRISTLECONE (SINGAPORE) PTE. LTD.

Cash Flow Statement

Year ended March 31, 2006

2006 2005
$ $
Operating Activities:
Profit before Income Tax ............................................. 39,111 37,096

Adjustments for:
Depreciation Expense ............................................. 1,533 1,521
Gain on Disposal of Equipment ............................... — (40)
Operating Profit before movement in working capital 40,644 38,577
Trade Receivables ................................................... (127,425) (156,250)
Other Receivables and Prepayments ..................... (67,359) (31,341)
Trade Payables ........................................................ 62,473 20,738
Other Payables ........................................................ 178,684 99,213
Cash generated from (used in) operations ................. 87,017 (29,063)
Income tax paid ........................................................... (3,061) (2,000)
Net cash from (used in) from operating activities ............ 83,956 (31,063)

Investing activities:
Purchase of equipment ............................................... — (620)
Proceed from sales of equipment ............................... — 40
Net cash used in investing activities ................................ — (580)

Financing Activity:
Proceeds from Issue of shares ................................... — 70,000
Net cash from financing activity ....................................... — 70,000

Net increase in cash and bank balances .......................... 83,956 38,357

Cash and bank balances at beginning of year .................. 88,381 50,024
Cash and bank balances at end of year ........................ 172,337 88,381

479
BRISTLECONE (SINGAPORE) PTE. LTD.
Notes to the Financial Statements
March 31, 2006
1 GENERAL
The company (Registration No. 200300626G) is incorporated in the Republic of
Singapore with its principal place of business at 30 Raffles Place, #23-00 Caltex
House, Singapore 048622 and registered office at 6 Shenton Way, #28-09 DBS
Building, Tower Two, Singapore 068809. The financial statements are expressed
in Singapore dollars, which is the functional currency of the company.
The company is principally engaged in providing various types of computer
software services.
The financial statements of the company for the year ended March 31, 2006
were authorised for issue by the Board of Directors on April 25, 2006.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements are prepared in accordance
with the historical cost convention and are drawn up in accordance with the
provisions of the Singapore Companies Act and Singapore Financial Reporting
Standards (“FRS”).
In the current financial year, the company has adopted all the new and revised
FRSs and Interpretations of FRS (“INT FRS”) issued by the Council on Corporate
Disclosure and Governance that are relevant to its operations and effective for
annual years beginning on or after January 1, 2005. The adoption of these new/
revised FRSs and INT FRSs has no material effect on the financial statements.
At the date of authorisation of these financial statements, the following FRSs,
INT FRSs and amendments to FRSs were issued but not effective:
FRS 40 - Investment Property
FRS 102 - Share-Based Payment
FRS 106 - Exploration for and Evaluation of Mineral Resources
FRS 107 - Financial Instruments : Disclosures
INT FRS 104 - Determining whether an Arrangement contains a Lease
INT FRS 105 - Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
INT FRS 106 - Liabilities arising from Participating in a Specific Market-
Waste Electrical and Electronic Equipment
INT FRS 107 - Applying the Restatement Approach under FRS 29 Financial
Reporting in Hyperinflationary Economics
Amendments to FRS 1 - Presentation of Financial Statements on Capital
Disclosures.
Amendments to FRS 21 – The Effects of Changes in Foreign Exchange Rates
on Net Investment in a Foreign Operation.
Amendments to FRS 39 - Financial Instruments : Recognition and Measurement
on hedge accounting provisions, fair value option and financial guarantee
contracts.
Amendments to FRS 101 - First-time Adoption of Financial Reporting Standards
on comparative disclosures for FRS 106 Exploration for and Evaluation of Mineral
Resources.
Amendments to FRS 104 - Insurance Contracts on financial guarantee contracts.
Consequential amendments were also made to various standards as a result of
these new/revised standards.
The directors anticipate that the adoption of the above-mentioned FRSs, INT FRSs
and amendments to FRSs that were issued but not yet effective until future years
will not have a material impact on the financial statements of the company.
FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are
recognised on the company’s balance sheet when the company becomes a
party to the contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and
are subsequently measured at amortised cost using the effective interest rate
480
method. Appropriate allowances for estimated irrecoverable amounts are
recognised in the profit and loss statement when there is objective evidence
that the asset is impaired. The allowance recognised is measured as the
difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the effective interest rate computed
at initial recognition.
Cash and bank balances
Cash and bank balances comprise cash on hand and bank balances.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the company are classified
according to the substance of the contractual arrangements entered into and
the definitions of a financial liability and an equity instrument. An equity instrument
is any contract that evidences a residual interest in the assets of the company
after deducting all of its liabilities. The accounting policies adopted for specific
financial liabilities and equity instruments are set out below.
Trade and other payables
Trade and other payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received,
net of direct issue costs.
LEASES - Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Rentals payable under operating leases are charged to profit or loss on a straight-
line basis over the term of the relevant lease.
EQUIPMENT – Equipment is carried at cost less accumulated depreciation and
any accumulated impairment losses.
Depreciation is charged so as to write off the cost of assets over their estimated
useful lives, using the straight-line method, on the following bases:
Office equipment – 4.75% to 16.21%
Fully depreciated assets still in use are retained in the financial statements.
The gain or loss arising on disposal or retirement of an item of equipment is
determined as the difference between the sales proceeds and the carrying
amounts of the asset and is recognised in the profit and loss statement.
IMPAIRMENT OF ASSETS - At each balance sheet date, the company
reviews the carrying amounts of its assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the
company estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset.
If the recoverable amount of an asset (cash-generating unit) is estimated to be
less than its carrying amount, the carrying amount of the asset (cash-generating
unit) is reduced to its recoverable amount. An impairment loss is recognised
immediately in the profit and loss statement, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of an
impairment loss is recognised immediately in the profit and loss statement,
unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
 BRISTLECONE (SINGAPORE) PTE. LTD.

PROVISIONS - Provisions are recognised when the company has a present
obligation as a result of a past event, and it is probable that the company will
be required to settle that obligation. Provisions are measured at the directors’
best estimate of the expenditure required to settle the obligation at the
balance sheet date, and are discounted to present value where the effect is
material.
REVENUE RECOGNITION - Revenue is measured at the fair value of the
consideration received or receivable and represents amounts receivable for
services provided in the normal course of business, net of discounts and sales
related taxes.
Revenue from the rendering of services are recognised when the services are
rendered.
RETIREMENT BENEFIT COSTS - Payments to defined contribution retirement
benefit plans are charged as an expense as they fall due. Payments made to
state-managed retirement benefit schemes, such as the Singapore Central
Provident Fund, are dealt with as payments to defined contribution plans where
the company’s obligations under the plans are equivalent to those arising in a
defined contribution retirement benefit plan.
EMPLOYEE LEAVE ENTITLEMENT – Employee entitlements to annual leave
are recognised when they accrue to employees. A provision is made for the
estimated liability for annual leave as a result of services rendered by employees
up to the balance sheet date.
INCOME TAX - Income tax expense represents the sum of the tax currently
payable and deferred tax.
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
i) Critical judgements in applying the company’s accounting policies
In the process of applying the company’s accounting policies, which are
described in Note 2, the management is of the opinion that any instances of
application of judgements are not expected to have a significant effect on
the amounts recognised in the financial statements (apart from those
involving estimates).
ii) Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of
estimation uncertainty at the balance sheet date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
4 FINANCIAL RISKS AND MANAGEMENT
i) Foreign exchange risk
The company’s foreign currency exposures arise mainly from the exchange
rate movements of the United States dollar and the Singapore dollar as the
company has sales and purchases that are denominated in United States
dollar. As far as possible, the company relies on natural hedges of matching
foreign currency denominated assets and liabilities to manage this risk.
ii) Interest rate risk
The company’s exposure to interest rate and liquidity risks is insignificant.

The tax currently payable is based on taxable profit for the year. Taxable profit iii) Credit risk
differs from profit as reported in the profit and loss statement because it excludes Credit risk refers to the risk that a counterparty will default on its contractual
items of income or expense that are taxable or deductible in other years and it obligations resulting in a loss to the company. The company has adopted
further excludes items that are not taxable or tax deductible. The company’s the policy of only dealing with creditworthy counterparties.
liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date. The carrying amount of financial assets recorded in the financial statements,
net of any provision for losses, represents the company’s maximum exposure
Deferred tax is recognised on differences between the carrying amounts of to credit risk without taking account of the value of any collateral or other
assets and liabilities in the financial statements and the corresponding tax bases security obtained.
used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all iv) Liquidity risk
taxable temporary differences and deferred tax assets are recognised to the In the management of liquidity risk, the company monitors and maintains a
extent that it is probable that taxable profits will be available against which level of cash and bank balances deemed adequate by management to finance
deductible temporary differences can be utilised. the company’s operations and mitigate effects of fluctuations in cash flows.
The carrying amount of deferred tax assets is reviewed at each balance v) Fair value of financial assets and financial liabilities
sheet date and reduced to the extent that it is no longer probable that The carrying values of financial assets and financial liabilities reported in the
sufficient taxable profits will be available to allow all or part of the asset to balance sheet approximate the fair values of those assets and liabilities due
be recovered. to their relatively short-term maturity.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is charged 5 HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS
or credited to profit or loss, except when it relates to items charged or credited The company is a subsidiary of Bristlecone India Limited., incorporated in India.
directly to equity, in which case the deferred tax is also dealt with in equity. The company’s ultimate holding company is Mahindra & Mahindra Limited, also
incorporated in India. Related companies in these financial statements refer to
Deferred tax assets and liabilities are offset when there is a legally enforceable
members of the ultimate holding company’s company of companies.
right to set off current tax assets against current tax liabilities and when they
relate to income taxes levied by the same taxation authority and the company Some of the company’s transactions and arrangements are between members
intends to settle its current tax assets and liabilities on a net basis. of the group and the effect of these on the basis determined between the
parties are reflected in these financial statements. The intercompany balances
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - In preparing
are unsecured, interest-free and repayable on demand.
the financial statements of the company, transactions in currencies other
than the company’s functional currency are recorded at the rates of exchange Significant intercompany transactions, other than those disclosed elsewhere in
prevailing on the date of the transaction. At each balance sheet date, monetary the notes to profit and loss statement are as follows:
items denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date. Non-monetary items carried at fair value 2006 2005
that are denominated in foreign currencies are retranslated at the rates $ $
prevailing on the date when the fair value was determined. Non-monetary Marketing fee income (29,048) (86,272)
items that are measured in terms of historical cost in a foreign currency are Subcontracting fees 652,304 403,262
not retranslated. Secondment fees 32,400 44,400
Exchange differences arising on the settlement of monetary items, and on Consultant expenses 29,922 107,484
retranslation of monetary items are included in profit or loss for the period.
Exchange differences arising on the retranslation of non-monetary items carried 6. TRADE RECEIVABLES
at fair value are included in profit or loss for the period except for differences 2006 2005
arising on the retranslation of non-monetary items in respect of which gains $ $
and losses are recognised directly in equity. For such non-monetary items, Outside parties 425,391 327,014
any exchange component of that gain or loss is also recognised directly in Holding company (Note 5) 49,709 20,661
equity.
Total 475,100 347,675

481
BRISTLECONE (SINGAPORE) PTE. LTD.

The company’s trade receivables that are not denominated in the functional 11. SHARE CAPITAL:
currency are as follows: 2006 2005 2006 2005
2006 2005 Number of Ordinary $ $
$ $ Shares of $1 each
Malaysian ringgit 4,685 —
Authorised 300,000 300,000 300,000 300,000
Euro — 19,032
United States dollars 275,823 176,892 Issued and Paid:
At the beginning of the year 120,000 50,000 120,000 50,000
280,508 195,924 Issued during the year — 70,000 — 70,000
At the end of year 120,000 120,000 120,000 120,000
7. OTHER RECEIVABLES AND PREPAYMENTS:
2006 2005 The company has one class of ordinary shares which carry no right to fixed income.
$ $ In 2005, the company issued 70,000 ordinary shares of $1 each and the
Advances to employees 1,639 15,838 proceeds were used for working capital purposes.
Deposits 8,400 5,600 12. REVENUE:
Prepayments 2,288 788 2006 2005
Claims receivables 45,089 5,598 $ $
Rendering of services 1,372,922 969,607
Withholding tax 45,619 10,135
Others 2,293 10 13. PROFIT BEFORE TAX:
Total 105,328 37,969 2006 2005
$ $
The company’s other receivables and prepayments that are not denominated a) Staff costs (including
in the functional currency are as follows: directors' fees) 1,111,028 736,304
Directors’ Fees 2,000 2,000
2006 2005
$ $ Depreciation 1,533 1,521
Malaysian ringgit 11,371 — Gain on disposal of
equipment — 40
United States dollars 34,249 —
Foreign exchange
45,620 — adjustment loss 7,065 3,222

8. EQUIPMENT: b) The directors are also the key management of the company during the
Office equipment year. Remuneration of the directors, other than Lim Tiong Beng, is paid by
$ its ultimate/immediate holding company.
Cost:
Balance at April 1, 2004 10,587 14. INCOME TAX EXPENSE:
Additions 620 2006 2005
$ $
Disposal (160) Current tax 2,822 3,500
Balance at March 31, 2005 and March 31, 2006 11,047 Overprovision in prior year (2,151) —
Accumulated depreciation: Total 671 3,500
Balance at April 1, 2004 2,534
Depreciation for the year 1,521 The Income Tax Expense varied from the amount of income tax expense
Disposal (160) determined by applying the Singapore income tax rate of 20% (2005: 20%) to
profit before income tax as a result of the following differences:
Balance at March 31, 2005 3,895
2006 2005
Depreciation for the year 1,533 $ $
Balance at March 31, 2006 5,428 Income tax expense at statutory rate 7,822 7,419
Carrying amount: At March 31, 2006 5,619 Overprovision in prior year (2,151) —
Exempt income (4,692) (3,919)
At March 31, 2005 7,152
Others (308) —

9. TRADE PAYABLE: Total Income tax expense 671 3,500

2006 2005
$ $ 15. OPERATING LEASE COMMITMENTS:
Holding Company (Note 5) 206,522 144,049 2006 2005
$ $
Minimum lease payments
The company’s trade payable that is not denominated in the functional currency
under operating leases 25,690 18,111
is as follows:
2006 2005
$ $ At the Balance Sheet date, the company has outstanding non-cancellable
operating leases, which fall due as follows:
United States dollars 158,728 —
2006 2005
$ $
10. OTHER PAYABLES: Within one year 22,838 17,250
2006 2005
In the second to fifth years inclusive — —
$ $
Holding Company (Note 5) 285,257 116,008 22,838 17,250
Other Payables 34,855 25,420
Operating lease payments represent rentals payable by the company for its
320,112 141,428 office premises. Leases are negotiated for an average term of 1 year and
rentals are fixed for an average of 1 year.

482
 BRISTLECONE (SINGAPORE) PTE. LTD.

Statement of Directors

In the opinion of the directors, the accompanying financial

statements are drawn up so as to give a true and fair view of the
state of affairs of the company as at March 31, 2006 and of the
results, changes in equity and cash flows of the company for the
financial year then ended and at the date of this statement there
are reasonable grounds to believe that the company will be able
to pay its debts as and when they fall due.

On behalf of the Directors

Anjanikumar Choudhari

Mani Venkataramanan

April 25, 2006

483
BRISTLECONE (SINGAPORE) PTE. LTD.

THE ACCOMPANYING SUPPLEMENTARY ACCOUNTS

HAVE BEEN PREPARED FOR MANAGEMENT PURPOSE ONLY

AND DO NOT FORM PART OF THE AUDITED FINANCIAL STATEMENTS

484
 BRISTLECONE (SINGAPORE) PTE. LTD.

Balance Sheet
March 31, 2006

2006 2005
Note $ Rs. $ Rs.
ASSETS
Current assets:
Cash ................................................................................. 172,337 4,754,778 88,381 2,438,432
Trade receivables ............................................................. F 475,100 13,108,009 347,675 9,592,353
Other receivables and prepayments ................................ G 105,328 2,906,000 37,969 1,047,565
Total current assets ......................................................... 752,765 20,768,787 474,025 13,078,350

Non-current asset:
Equipment ........................................................................ H 5,619 155,028 7,152 197,323
Total assets ...................................................................... 758,384 20,923,815 481,177 13,275,673

LIABILITIES AND EQUITY

Current liabilities:
Trade payables ................................................................. I 206,522 5,697,942 144,049 3,974,312
Other payables ................................................................. J 320,112 8,831,890 141,428 3,901,998
Income tax payable .......................................................... 2,828 78,025 5,218 143,965
Total current liabilities ...................................................... 529,462 14,607,857 290,695 8,020,275

Capital and reserves:

Issued capital ................................................................... K 120,000 3,310,800 120,000 3,310,800
Accumulated profits ......................................................... 108,922 3,005,158 70,482 1,944,598
Total equity ...................................................................... 228,922 6,315,958 190,482 5,255,398
Total liabilities and equity ................................................. 758,384 20,923,815 481,177 13,275,673

485
BRISTLECONE (SINGAPORE) PTE. LTD.

Profit and Loss Account

Year ended March 31, 2006

2006 2005
Note $ Rs. $ Rs.

Revenue ........................................................................... L 1,372,922 37,878,918 969,607 26,751,457

Costs of sales ................................................................. (899,244) (24,810,142) (700,103) (19,315,842)

Gross profit ..................................................................... 473,678 13,068,776 269,504 7,435,615

Selling expenses .............................................................. (386,199) (10,655,230) (197,697) (5,454,460)

Administrative expenses .................................................. (48,368) (1,334,473) (35,559) (981,072)

Other income ................................................................... — — 848 23,396

Profit before income tax ................................................. M 39,111 1,079,073 37,096 1,023,479

Income tax expense ........................................................ N (671) (18,513) (3,500) (96,565)

Profit for the year ........................................................... 38,440 1,060,560 33,596 926,914

486
 BRISTLECONE (SINGAPORE) PTE. LTD.

Statement of Changes in Equity

Year ended March 31, 2006

Issued Accumulated
Capital Profits Total
$ Rs. $ Rs. $ Rs.

Balance at April 1, 2004 ............................................. 50,000 1,379,500 36,886 1,017,684 86,886 2,397,184

Issue of Shares .......................................................... 70,000 1,931,300 — — 70,000 1,931,300

Profit for the year ....................................................... — — 33,596 926,914 33,596 926,914

Balance at March 31, 2005 ........................................ 120,000 3,310,800 70,482 1,944,598 190,482 5,255,398

Profit for the year ....................................................... — — 38,440 1,060,560 38,440 1,060,560

Balance at March 31, 2006 ........................................ 120,000 3,310,800 108,922 3,005,158 228,922 6,315,958

487
BRISTLECONE (SINGAPORE) PTE. LTD.

Cash Flow Statement

Year ended March 31, 2006

2006 2005
$ Rs. $ Rs.
Operating Activities:
Profit before Income Tax ............................................. 39,111 1,079,073 37,096 1,023,479

Adjustments for:
Depreciation Expense ............................................. 1,533 42,295 1,521 41,964
Gain on Disposal of Equipment ............................... — — (40) (1,104)
Operating Profit before movement in working capital 40,644 1,121,368 38,577 1,064,339
Trade Receivables ................................................... (127,425) (3,515,656) (156,250) (4,310,938)
Other Receivables and Prepayments ..................... (67,359) (1,858,435) (31,341) (864,698)
Trade Payables ........................................................ 62,473 1,723,630 20,738 572,161
Other Payables........................................................ 178,684 4,929,892 99,213 2,737,288
Cash generated from (used in) operations ................. 87,017 2,400,799 (29,063) (801,848)
Income tax paid ........................................................... (3,061) (84,453) (2,000) (55,180)
Net cash (used in) from operating activities .................... 83,956 2,316,346 (31,063) (857,028)

Investing activities:
Purchase of equipment ............................................... — — (620) (17,106)
Proceed from sales of equipment ............................... — — 40, 1,104
Net cash used in investing activities ................................ — — (580) (16,002)

Financing Activity:
Proceeds from Issue of shares ................................... — — 70,000 1,931,300
Net cash from financing activity ....................................... — — 70,000 1,931,300

Net increase in cash and bank balances .......................... 83,956 2,316,346 38,357 1,058,270
Cash and bank balances at beginning of year .................. 88,381 2,438,432 50,024 1,380,162
Cash and bank balances at end of year ........................ 172,337 4,754,778 88,381 2,438,432

488

Notes to the Financial Statements
March 31, 2006
A GENERAL
The company (Registration No. 200300626G) is incorporated in the Republic of
Singapore with its principal place of business at 30 Raffles Place, #23-00 Caltex
House, Singapore 048622 and registered office at 6 Shenton Way, #28-09 DBS
Building, Tower Two, Singapore 068809. The financial statements are expressed
in Singapore dollars, which is the functional currency of the company.
The accompanying Indian Rupees financial statements is used solely for the
purpose of presenting the company’s financial statements along with the
financial statements of the ultimate holding company and is disclosed as
supplementary information only.
The company is principally engaged in providing various types of computer
software services.
The financial statements of the company for the year ended March 31, 2006
were authorised for issue by the Board of Directors on April 25, 2006.
B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements are prepared in accordance
with the historical cost convention and are drawn up in accordance with the
provisions of the Singapore Companies Act and Singapore Financial Reporting
Standards (“FRS”).
In the current financial year, the company has adopted all the new and revised
FRSs and Interpretations of FRS (“INT FRS”) issued by the Council on Corporate
Disclosure and Governance that are relevant to its operations and effective for
annual years beginning on or after January 1, 2005. The adoption of these new/
revised FRSs and INT FRSs has no material effect on the financial statements.
At the date of authorisation of these financial statements, the following FRSs,
INT FRSs and amendments to FRSs were issued but not effective:
FRS 40 - Investment Property
FRS 102 - Share-Based Payment
FRS 106 - Exploration for and Evaluation of Mineral Resources
FRS 107 - Financial Instruments : Disclosures
INT FRS 104 - Determining whether an Arrangement contains a Lease
INT FRS 105 - Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
INT FRS 106 - Liabilities arising from Participating in a Specific Market-
Waste Electrical and Electronic Equipment
INT FRS 107 - Applying the Restatement Approach under FRS 29 Financial
Reporting in Hyperinflationary Economics
Amendments to FRS 1 - Presentation of Financial Statements on Capital
Disclosures.
Amendments to FRS 21 – The Effects of Changes in Foreign Exchange Rates
on net investment in a foreign operation.
Amendments to FRS 39 - Financial Instruments : Recognition and Measurement
on hedge accounting provisions, fair value option and financial guarantee
contracts.
Amendments to FRS 101 - First-time Adoption of Financial Reporting Standards
on comparative disclosures for FRS 106 Exploration for and Evaluation of Mineral
Resources.
Amendments to FRS 104 - Insurance Contracts on financial guarantee contracts.
Consequential amendments were also made to various standards as a result of
these new/revised standards.
The directors anticipate that the adoption of the above-mentioned FRSs, INT
FRSs and amendments to FRSs that were issued but not yet effective until
future years will not have a material impact on the financial statements of the
company.
FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are
recognised on the company’s balance sheet when the company becomes a
BRISTLECONE (SINGAPORE) PTE. LTD.
party to the contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and
are subsequently measured at amortised cost using the effective interest rate
method. Appropriate allowances for estimated irrecoverable amounts are
recognised in the profit and loss statement when there is objective evidence
that the asset is impaired. The allowance recognised is measured as the
difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the effective interest rate computed
at initial recognition.
Cash and bank balances
Cash and bank balances comprise cash on hand and bank balances.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the company are classified
according to the substance of the contractual arrangements entered into and
the definitions of a financial liability and an equity instrument. An equity
instrument is any contract that evidences a residual interest in the assets of the
company after deducting all of its liabilities. The accounting policies adopted for
specific financial liabilities and equity instruments are set out below.
Trade and other payables
Trade and other payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds
received, net of direct issue costs.
LEASES - Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Rentals payable under operating leases are charged to profit or loss on a straight-
line basis over the term of the relevant lease.
EQUIPMENT – Equipment is carried at cost less accumulated depreciation and
any accumulated impairment losses.
Depreciation is charged so as to write off the cost of assets over their estimated
useful lives, using the straight-line method, on the following bases:
Office equipment – 4.75% to 16.21%
Fully depreciated assets still in use are retained in the financial statements.
The gain or loss arising on disposal or retirement of an item of equipment is
determined as the difference between the sales proceeds and the carrying
amounts of the asset and is recognised in the profit and loss statement.
IMPAIRMENT OF ASSETS - At each balance sheet date, the company reviews
the carrying amounts of its assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where it is not possible to estimate the
recoverable amount of an individual asset, the company estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (cash-generating unit) is estimated to be
less than its carrying amount, the carrying amount of the asset (cash-generating
unit) is reduced to its recoverable amount. An impairment loss is recognised
immediately in the profit and loss statement, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of an
489
BRISTLECONE (SINGAPORE) PTE. LTD.
impairment loss is recognised immediately in the profit and loss statement,
unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
PROVISIONS - Provisions are recognised when the company has a present
obligation as a result of a past event, and it is probable that the company will be
required to settle that obligation. Provisions are measured at the directors’
best estimate of the expenditure required to settle the obligation at the
balance sheet date, and are discounted to present value where the effect is
material.
REVENUE RECOGNITION - Revenue is measured at the fair value of the
consideration received or receivable and represents amounts receivable for
services provided in the normal course of business, net of discounts and sales
related taxes.
Revenue from the rendering of services are recognised when the services
are rendered.
RETIREMENT BENEFIT COSTS - Payments to defined contribution retirement
benefit plans are charged as an expense as they fall due. Payments made to
state-managed retirement benefit schemes, such as the Singapore Central
Provident Fund, are dealt with as payments to defined contribution plans where
the company’s obligations under the plans are equivalent to those arising in a
defined contribution retirement benefit plan.
EMPLOYEE LEAVE ENTITLEMENT – Employee entitlements to annual leave
are recognised when they accrue to employees. A provision is made for the
estimated liability for annual leave as a result of services rendered by employees
up to the balance sheet date.
INCOME TAX - Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit
differs from profit as reported in the profit and loss statement because it excludes
items of income or expense that are taxable or deductible in other years and it
further excludes items that are not taxable or tax deductible. The company’s
liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is charged
or credited to profit or loss, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable
right to set off current tax assets against current tax liabilities and when they
relate to income taxes levied by the same taxation authority and the company
intends to settle its current tax assets and liabilities on a net basis.
INDIAN RUPEES FINANCIAL STATEMENTS - All balance sheet and profit and
loss items are translated at the rate of one Singapore dollar to Indian Rupee
(“Rs.”) 27.59 (2005 : S$1 = Indian Rupee 27.59), the rate prevailing at the
balance sheet date. The translation should not be construed as representations
that Indian Rupee have been or could be converted to Singapore dollars and
vice versa and is disclosed as supplementary information only.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - In preparing the
financial statements of the company, transactions in currencies other than the
company’s functional currency are recorded at the rates of exchange prevailing
on the date of the transaction. At each balance sheet date, monetary items
denominated in foreign currencies are retranslated at the rates prevailing on
the balance sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the rates prevailing on
the date when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not retranslated.
490
Exchange differences arising on the settlement of monetary items, and on
retranslation of monetary items are included in profit or loss for the period.
Exchange differences arising on the retranslation of non-monetary items carried
at fair value are included in profit or loss for the period except for differences
arising on the retranslation of non-monetary items in respect of which gains
and losses are recognised directly in equity. For such non-monetary items, any
exchange component of that gain or loss is also recognised directly in equity.
C CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
i) Critical judgements in applying the company’s accounting policies
In the process of applying the company’s accounting policies, which are
described in Note 2, the management is of the opinion that any instances
of application of judgements are not expected to have a significant effect
on the amounts recognised in the financial statements (apart from those
involving estimates).
ii) Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of
estimation uncertainty at the balance sheet date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
D FINANCIAL RISKS AND MANAGEMENT
i) Foreign currency exchange risk
The company’s foreign currency exposures arise mainly from the exchange
rate movements of the United States dollar and the Singapore dollar as the
company has sales and purchases that are denominated in United States
dollar. As far as possible, the company relies on natural hedges of matching
foreign currency denominated assets and liabilities to manage this risk.
ii) Interest rate risk
The company’s exposure to interest rate and liquidity risks is insignificant.
iii) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual
obligations resulting in a loss to the company. The company has adopted
the policy of only dealing with creditworthy counterparties.
The carrying amount of financial assets recorded in the financial statements,
net of any provision for losses, represents the company’s maximum
exposure to credit risk without taking account of the value of any collateral
or other security obtained.
iv) Liquidity risk
In the management of liquidity risk, the company monitors and maintains a
level of cash and bank balances deemed adequate by management to finance
the company’s operations and mitigate effects of fluctuations in cash flows.
v) Fair value of financial assets and financial liabilities
The carrying values of financial assets and financial liabilities reported in the
balance sheet approximate the fair values of those assets and liabilities due
to their relatively short-term maturity.
E HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS
The company is a subsidiary of Bristlecone India Limited., incorporated in India.
The company’s ultimate holding company is Mahindra & Mahindra Limited,
also incorporated in India. Related companies in these financial statements
refer to members of the ultimate holding company’s company of companies.
Some of the company’s transactions and arrangements are between members
of the group and the effect of these on the basis determined between the
parties are reflected in these financial statements. The intercompany balances
are unsecured, interest-free and repayable on demand.
Significant intercompany transactions, other than those disclosed elsewhere in
the notes to profit and loss statement are as follows:
2006 2005
$ Rs. $ Rs.
Marketing fee income (29,048) (801,434) (86,272) (2,380,244)
Subcontracting fees 652,304 17,997,067 403,262 11,125,999
Secondment fees 32,400 893,916 44,400 1,224,996
Consultant expenses 29,922 825,548 107,484 2,965,484
 BRISTLECONE (SINGAPORE) PTE. LTD.

Notes to the Financial Statements K. SHARE CAPITAL:

2006 2005 2006 2005
March 31, 2006 (Contd...) Number of Ordinary $ Rs. $ Rs.
F. TRADE RECEIVABLES Shares of $1 each
2006 2005 Authorised 300,000 300,000 300,000 8,277,000 300,000 8,277,000
$ Rs. $ Rs.
Outside parties 425,391 11,736,538 327,014 9,022,316 Issued and Paid:
Holding company (Note E) 49,709 1,371,471 20,661 570,037 At the beginning of the year 120,000 50,000 120,000 3,310,800 50,000 1,379,500
Issued during the year — 70,000 — — 70,000 1,931,300
Total 475,100 13,108,009 347,675 9,592,353
At the end of year 120,000 120,000 120,000 3,310,800 120,000 3,310,800
The company’s trade receivables that are not denominated in the functional
currency of the company are as follows: The company has one class of ordinary shares which carry no right to fixed
2006 2005 income.
$ Rs. $ Rs. In 2005, the company issued 70,000 ordinary shares of $1 each and the funds
Malaysian ringgit 4,685 129,259 — — were used for working capital purposes.
Euro — — 19,032 525,093
United States dollars 275,823 7,609,957 176,892 4,880,450 L. REVENUE:
2006 2005
280,508 7,739,216 195,924 5,405,543
$ Rs. $ Rs.
G. OTHER RECEIVABLES AND PREPAYMENTS: Rendering of services 1,372,922 37,878,918 969,607 26,751,457
2006 2005
M. PROFIT BEFORE TAX:
$ Rs. $ Rs.
2006 2005
Advances to employees 1,639 45,220 15,838 436,970
Deposits 8,400 231,756 5,600 154,504 $ Rs. $ Rs.
Prepayments 2,288 63,127 788 21,741 a) Staff costs (including
Cliams receivables 45,089 1,244,005 5,598 154,449 directors' fees) 1,111,028 30,653,263 736,304 20,314,627
Withholding tax 45,619 1,258,628 10,135 279,625 Directors’ Fees 2,000 55,180 2,000 55,180
Others 2,293 63,264 10 276 Depreciation 1,533 42,295 1,521 41,964
Gain on disposal of
Total 105,328 2,906,000 37,969 1,047,565 equipment — — 40 1,104
Foreign exchange
The company’s other receivables and prepayments that are not denominated
adjustment loss 7,065 194,923 3,222 88,895
in the functional currency of the company are as follows:
2006 2005
$ Rs. $ Rs. b) The directors are also the key management of the company during the
Malaysian ringgit 11,371 313,726 — — year. Remuneration of the directors, other than Lim Tiong Beng, is paid by
United States dollars 34,249 944,930 — — its ultimate/immediate holding company.
45,620 1,258,656 — — N. INCOME TAX EXPENSE:
2006 2005
H. EQUIPMENT: $ Rs. $ Rs.
Office equipment Current tax 2,822 77,859 3,500 96,565
$ Rs. Overprovision in
Cost: prior year (2,151) (59,346) — —
Balance at April 1, 2004 10,587 292,095
Additions 620 17,106 Total 671 18,513 3,500 96,565
Disposal (160) (4,414)
Balance at March 31, 2005 and 2006 11,047 304,787 The Income Tax Expense varied from the amount of income tax expense
Accumulated depreciation: determined by applying the Singapore income tax rate of 20% (2005: 20%) to
Balance at April 1, 2004 2,534 69,914 profit before income tax as a result of the following differences:
Depreciation for the year 1,521 41,964 2006 2005
Disposal (160) (4,414) $ Rs. $ Rs.
Income tax expense at
Balance at March 31, 2005 3,895 107,464
statutory rate 7,822 215,809 7,419 204,690
Depreciation for the year 1,533 42,295 Overprovision in prior year (2,151) (59,346) — —
Balance at March 31, 2006 5,428 149,759 Exempt income (4,692) (129,452) (3,919) (108,125)
Others (308) (8,498) — —
Net Book Value:
Total Income tax expense 671 18,513 3,500 96,565
At March 31, 2006 5,619 155,028
At March 31, 2005 7,152 197,323 O. OPERATING LEASE COMMITMENTS:
2006 2005
I. TRADE PAYABLE:
$ Rs. $ Rs.
2006 2005
$ Rs. $ Rs. Minimum lease payments
under operating leases 25,690 708,787 18,111 499,682
Holding Company (Note E) 206,522 5,697,942 144,049 3,974,312

The company’s trade payable that is not denominated in the functional currency At the Balance Sheet date, the company has outstanding non-cancellable
of the company is as follows: operating leases, which fall due as follows:
2006 2005 2006 2005
$ Rs. $ Rs. $ Rs. $ Rs.
Within one year 22,838 630,100 17,250 475,928
United States dollars 158,728 4,379,306 —  —
In the second to fifth
J. OTHER PAYABLES: years inclusive — — — —
2006 2005
$ Rs. $ Rs. 22,838 630,100 17,250 475,928
Holding Company (Note E) 285,257 7,870,241 116,008 3,200,660
Other Payables 34,855 961,649 25,420 701,338 Operating lease payments represent rentals payable by the company for its
office premises. Leases are negotiated for an average term of 1 year and
320,112 8,831,890 141,428 3,901,998
rentals are fixed for an average of 1 year.

491
BRISTLECONE GmbH

MANAGING DIRECTORS’ REPORT TO THE SHAREHOLDERS

Your Managing Directors present their Third Report together with the audited accounts for the financial year ended 31st March, 2006

Financial Results (in Rupees)

Particulars Financial year Financial year
ended ended
31st March, 2006 31st March, 2005
Sales and Income from Operations ....................................................... 19,54,29,192 5,61,44,195
Other Income ......................................................................................... 27,352 11,277

Total ....................................................................................................... 19,54,56,544 5,61,55,472

(Loss)/Profit before Interest, Depreciation,
Taxation and Extraordinary Items ........................................................... 27,08,970 (54,65,098)
Less : Interest ........................................................................................ 87 141
Depreciation ........................................................................................... 1,47,300 91,594

(Loss) / Profit before Tax ........................................................................ 25,61,583 (55,56,833)

Tax on Income ....................................................................................... (2,863) 2,878

Other Taxes ........................................................................................... (4,385) (23,095)
Net Profit / (Loss) after Tax .................................................................... 25,54,335 (55,77,050)
Balance of Profit / (Loss) brought forward from last year ...................... (55,68,980) 8,070
Profit & Loss Account Balance carried forward ..................................... (30,14,645) (55,68,980)

Share Capital
The Company’s share capital is €1,75,000 (Rs.95,06,000) including
Capital Reserve of €1,25,000 (Rs.67,90,000). The share capital is
fully paid up by the sole shareholder Bristlecone India Limited ,
Mumbai/India.
Directors’ Responsibility Statement
The Directors state as an averment of the responsibility that :
(iv) the annual accounts have been prepared on a going concern
basis.
Management and Representative Authority
Mr. Venkatramanan Mani, Mr. Zhooben Bhiwandiwala and Mr.
Nikhil Nayak are Managing Directors of the Company. Each
Managing Director of the Company represents the Company
jointly with another Managing Director.

(i) in the preparation of the annual accounts, the applicable Auditors

accounting standards have been followed;
The auditors WWS Wirtz, Walter, Schmitz GmbH, have expressed
(ii) they have, in the selection of the accounting policies, consulted their willingness to accept re-appointment.
the Statutory Auditors and these have been applied
consistently and reasonable and prudent judgments and
estimates have been made so as to give a true and fair view For and on behalf of the Board
of the state of affairs of the Company as at 31st March, 2006
and of the profit of the Company for the year ended on that
date; V. Mani Nikhil Nayak
(iii) proper and sufficient care has been taken for the maintenance Managing Directors
of adequate accounting records for safeguarding the assets 25th April, 2006.
of the Company and for preventing and detecting fraud and
other irregularities;

492

Auditors' Report to the Members of Bristlecone GmbH
A. Audit Engagement:
After appointment as auditor at the shareholder’s meeting
of Bristlecone GmbH, Frankfurt am Main,
(hereinafter also referred to “the Company”) the
Management of the Company has assigned us to audit the
annual financial statements for the year ended March 31,
2006, including the accounting records.
The terms governing this assignment are set out in the
General Terms of Engagement for public accountants and
firms of public accountants in the version of January 1, 2002,
which are attached as Appendix 6 to this Report
The performance and results of our audit are included in this
report to which the audited financial statements (consisting
of Balance Sheet, Income Statement and Notes) are enclosed
as Annex 1–3. This report includes remarks in connection
with HGB § 321 (1) sentence 3 (German Commercial Code)
as well as a summary of the other results of the audit and the
audit opinion. The performance and the results of the audit
are specified in Chapter C, and D of this report in detail.
Prepared this report in accordance with the German standard
of Auditing No. 450, which is published by the IDW (Institut
der Wirtschaftsprüfer; German Institute of Public
Accountants).
B. Basic Conclusions:
Though the year end audit isn’t aimed to detect criminal
liabilities and breach of by law outside the accounting, we
are bound by law to indicate such facts which represent
serious violations of the legal representatives or of employees
against the law or the by-law of the Company. Our audit has
not revealed any such facts.
C. Objects, Nature and Scope of the Audit:
We have audited the annual financial statements, including
the accounting records, of Bristlecone GmbH for the financial
year ended March 31, 2006. The bookkeeping and the
preparation of the annual financial statements is the
responsibility of the Company’s Management. Our
responsibility is to express an opinion on the annual financial
statements based on our audit.
The audit of the compliance of other legal regulations is only
part of the annual year end audit, if the regulations have
usually an impact on the financial statements.
We have conducted the audit of the annual financial statements
in accordance with §316 HGB considering the German
generally accepted standard on Auditing No. 200: “Objectives
and general principles of orderly performance of financial
statements audits”. The standard requires to plan and perform
the audit, that reasonable assurance can be obtained, that the
accounting records and the financial statements are free of
material misstatements. The audit includes the assessment
of the accounting-, valuation- and classification-principles as
well as the evaluation of the overall presentation of the annual
BRISTLECONE GmbH
financial statements. The internal control system has been
included in the audit as far as it relates to the regular
accounting system; however, we have not examined the
internal control system as whole. We believe that our audit
provides a reasonable basis for our opinion.
Within the audit the following main audit procedures were
carried out:
• Reconciliation statements for trade debtors;
• Check of the corresponding booking between the inter-
group companies and the shareholder;
• Reconciliation statements of the banks;
• Check of the significant expenses and income positions
with regard to completeness as well as consistency in
classification and presentation compared to last year.
We have carried out the audit within April 2006.
All requested information and verifications were given to us.
The Management supplied us with a letter of representation
confirming the completeness of the accounting records and
the financial statements.
D. Observation and Explanations of the Financial
Accounting:
I. Accuracy of the accounting:
1. Accounting records and further documents:
The Company’s accounting records are properly
maintained. The function of the accounting documents
comply with requirement. The accounting records and
further documents audited, comply with German legal
regulations and the supplementary articles of the
association.
2. Financial statements:
The financial statements as of March 31, 2006, are
orderly developed from the accounting records and
other necessary records of the Company.
The balance sheet and the income statement are prepared
in accordance with the regulations in German Commercial
Code for the accounting of private limited companies
[GmbH]. The notes to the financial statements include all
legally required information.
We have no knowledge of significant matters that
happened after the end of the financial year 2005/2006,
which should be reported.
II. Overall statement of financial statements:
1. Observation to overall statement of the financial
statements:
In our opinion, the financial statements show a true and
fair view of the Company in accordance with the German
principles of proper accounting.
2. Essential valuation methods:
The essential valuation methods are specified correctly
by the Company in the Notes. Essential changes of the
valuation methods in comparison with the year before
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BRISTLECONE GmbH

cannot be recorded. Composition of the cash flow at the end of fiscal

year:
III. Analysis of the financial statements of the Company: Liquid funds ........................................................... + 182 + 95
The economic situation in the financial year ended March 31, 3. Results of operation
2006, compared with the previous financial year ended 2005/2006 2004/2005 +/–
March 31, 2005, can be summarized as follows: KP % KP % KP
1. Composition of assets, shareholder’s equity and Sales 3.548 100,0 1.023 100,0 2.525
liabilities: Operating income 3.548 100,0 1.023 100,0 2.525
March 31, March 31, +/–
Cost of purchased
2006 2005
services 3.073 86,6 825 80,6 2.248
KP % K€ % K€
Property, Plant and Personnel Expenses 300 8,5 194 19,0 106
Equipment 8 0,6 4 0,7 4 Depreciation on Fixed
Assets 3 0,1 2 0,2 1
Non-current Assets 8 0,6 4 0,7 4
Other Operating
Receivable and Expenses 175 4,9 116 11,3 59
Other Assets 1.176 86,0 505 83,5 671
Cash 182 13,3 95 15,7 87 Operating Expenses 3.551 100,1 1.137 111,1 2.414
Prepaid Expenses 2 0,1 1 0,2 1 Other Operating Income 50 1,4 11 1,1 39
Current Assets 1.360 99,4 601 99,4 759 Net Result 47 1,3 –103 –10,0 150
Total Assets 1.368 100,0 605 100,0 763
E. Replication of Audit Opinion
Subscribed Capital 50 3,7 50 8,3 0
Capital Reserve 125 9,1 125 20,6 0 We have granted the following audit opinion as stated below
Accumulated Deficit/ to the financial statements as of March 31, 2006, of
Retained Earnings –103 –7,5 0 0,0 –103 Bristlecone GmbH, Frankfurt am Main:
Net Profit/Net Loss for “We have audited the annual financial statements,
the Financial Year 47 3,4 –103 –17,0 150 comprising the Balance Sheet, the Income Statement and
the Notes to the Financial Statements, together with the
Total Equity 119 8,7 72 11,9 47
bookkeeping system of Bristlecone GmbH, Frankfurt am
Accrued Liabilities 55 4,0 27 4,5 28 Main, for the business year from April 1, 2005, until March
Short-term Liabilities 44 3,2 79 13,0 –35 31, 2006. The maintenance of the books and records and the
Liabilities Due to preparation of the annual financial statements in accordance
Affiliates 1.150 84,1 427 70,6 723 with German Commercial Code and supplementary
Total Liabilities 1.249 91,3 533 88,1 716 provisions in the articles of incorporation are the responsibility
of the Company’s Management. Our responsibility is to
Total Shareholders’ express an opinion on the annual financial statements
Equity and Liabilities 1.368 100,0 605 100,0 763 including the bookkeeping system based on our audit.
2. Cash Flow Statement We conducted our audit of the annual financial statements
2005/2006 2004/2005 in accordance with § 317 HGB [“Handelsgesetzbuch: German
KP KP Commercial Code”] and the German generally accepted
Net Profit/Net Loss for the year ............................ + 47 – 103
Depreciation on Fixed Assets ................................ + 3 + 2
standards for the audit of financial statements promulgated
Cash Earnings according to DVFA/SG ................... + 50 – 101
by the Institut der Wirtschaftsprüfer in Deutschland (IDW).
Increase of inventories, accounts receivable trade as Those standards require that we plan and perform the audit
well as other assets, which have not to be allocate such that misstatements materially affecting the presentation
to cash flow from investment and financing of the net assets, financial position and results of operations
operation ............................................................... – 672 – 313
Increase of accounts payable trade as well as other in the annual financial statements are detected with
liabilities which have not to be allocate to cash flow reasonable assurance. Knowledge of the business activities
from investment and financing operation .............. + 716 + 342 and the economic and legal environment of the Company
= Cash flow from operations ................................. + 94 – 72 and expectations as to possible misstatements are taken
Payments for investments in fixed assets ............... – 7 – 5 into account in the determination of audit procedures. The
= Cash flow from investments .............................. – 7 – 5 effectiveness of the accounting-related internal control
Payments into the capital reserve ......................... 0 + 125 system and the evidence supporting the disclosures in the
= Cash flow from financing ................................... 0 + 125 books and records and the annual financial statements are
Effective cash variations of liquid funds ................ + 87 + 48 examined primarily on a test basis within the framework of
Liquid funds at the beginning of the fiscal year ..... + 95 + 47 the audit. The audit includes assessing the accounting
= Liquid funds at the end of the fiscal year ........... + 182 + 95 principles used and significant estimates made by the

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 BRISTLECONE GmbH

Management as well as evaluating the overall presentation

of the annual financial statements. We believe that our audit
provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the
annual financial statements comply with the legal
requirements and supplementary provisions of the articles
of incorporation and give a true and fair view of the net
assets, financial position and results of operations of the
Company in accordance with the German principles of
proper accounting.”

Nettetal, April 25, 2006 WWS Wirtz, Walter, Schmitz GmbH

Wirtschaftsprüfungsgesellschaft
Steuerberatungsgesellschaft
Walter Post
Wirtschaftsprüfer Wirtschaftsprüfer

495
BRISTLECONE GmbH

Balance Sheet as of March 31, 2006

ASSETS 2006/3/31 2006/3/31 2005/3/31 2005/3/31

P Rs P Rs
A. Fixed Assets:
I. Intangible Assets ................................................ 1,00 54 57,00 3,096
II. Property, Plant and Equipment ........................... 7.501,00 4,07,454 3.629,00 1,97,127
B. Current Assets:
I. Accounts Receivable and Other Assets
1. Trade Receivables .......................................... 1.169.851,27 6,35,46,321 495.697,55 2,69,26,291
2. Other Assets .................................................. 6.521,23 3,54,233 9.469,31 5,14,373
— thereof with remaining term of more than
one year: P 2.500,00 prior year: P 2.160,00)
1.176.372,50 6,39,00,554 505.166,86 2,74,40,664
II. Bank Balances .................................................... 181.770,17 98,73,756 95.076,77 51,64,570
C. Prepaid Expenses ................................................... 2.380,82 1,29,327 1.427,69 77,553
1.368.025,49 7,43,11,145 605.357,32 3,28,83,010

EQUITY AND LIABILITIES 2006/3/31 2006/3/31 2005/3/31 2005/3/31

P Rs P Rs
A. Equity:
I. Subscribed Capital .............................................. 50.000,00 27,16,000 50.000,00 27,16,000
II. Capital Reserves ................................................. 125.000,00 67,90,000 125.000,00 67,90,000
III. Accumulated Deficit/Retained Earnings ............. –102.521,73 (–55,68,980) 148,56 8,070
IV. Net Profit/Net Loss ............................................. 47.023,84 25,54,335 –102.670,29 (–55,77,050)
119.502,11 64,91,355 72.478,27 39,37,020
B. Accruals:
1. Tax Accruals ....................................................... 0 0 49,00 2,662
2. Other Accruals .................................................... 54.471,00 29,58,865 27.270,00 14,81,306
54.471,00 29,58,865 27.319,00 14,83,968
C. Liabilities:
1. Trade Payable ..................................................... 10.339,73 5,61,654 5.763,59 3,13,078
— thereof with a remaining term of less than one
year: P 10.339,73 (prior year: P 5.763,59)
2. Payable to shareholders ..................................... 1.144.040,51 6,21,44,280 427.076,48 2,31,98,795
— thereof with a remaining term of less than one
year: P 1.144.040,51 (prior year: P 427.076,48)
3. Payable to Affiliated Companies ......................... 6.297,00 3,42,053 0 0
— thereof with a remaining term of less than one
year: P 6.297,00 (prior year: P 0,00)
4. Other Liabilities .................................................. 33.375,14 18,12,938 72.719,98 39,50,149
— thereof for taxes: P 18.842,96 (prior year:
P 70.043,47)
— thereof for social security contributions:
P 0,00 (prior year: P 1.362,40)
— thereof with a remaining term of less than one
year: P 33.375,14 (prior year: P 72.719,98)
1.194.052,38 6,48,60,925 505.560,05 2,74,62,022
1.368.025,49 7,43,11,145 605.357,32 3,28,83,010

496
 BRISTLECONE GmbH

Profit and Loss Account for the period April 1, 2005 through March 31, 2006

2005/4/1–2006/3/31 2005/4/1–2006/3/31 2004/4/1–2005/3/31 2004/4/1–2005/3/31

P P Rs. Rs. P P Rs. Rs

1. Sales ............................................. 3.548.060,81 19,27,30,663 1.022.861,00 5,55,61,810

2. Other Operating Income ............... 49.678,37 26,98,529 10.721,38 5,82,385

3. Costs of Purchased Services ........ 3.073.049,79 16,69,28,065 824.579,04 4,47,91,133

— thereof from shareholder
P 3.066.752,79 (prior year:
P 824.579,04)

4. Personnel Expenses

a) Wages and Salaries ................ 285.717,59 1,55,20,179 179.398,10 97,44,905

b) Social Security, Pension and

Other Benefit Costs ................ 14.730,60 8,00,166 14.465,53 7,85,768
300.448,19 1,63,20,345 193.863,63 1,05,30,673

5. Depreciation on Intangible Fixed

Assets and Tangible Assets ......... 2.711,70 1,47,300 1.686,20 91,594

6. Other Operating Expenses ........... 174.874,15 94,99,164 115.956,64 62,98,764

7. Other Interest and Similar Income 503,53 27,352 207,61 11,277

8. Interest and Similar Expenses ...... 1,60 87 2,60 141

9. Results from Ordinary Activities ... 47.157,28 25,61,583 –102.298,12 –55,56,833

10. Taxes on Income .......................... 52,72 2,863 –53,00 –2,878

11. Other Taxes .................................. 80,72 4,385 425,17 23,095

12. Net Profit/Net Loss of the Financial
Year .............................................. 47.023,84 25,54,335 –102.670,29 –55,77,050

497
BRISTLECONE GmbH

Notes to the Financial Statements as of March 31, 2006 advisory fees (KP 3) (Rs. 1,79,799), accruals for bookkeeping expenses and
fees for the preparation of the financial statements (KP 2) (Rs. 97,776) as
I. GENERAL EXPLANATIONS FOR THE BALANCE SHEET AND STATEMENT well as other accruals (KP 1) (Rs. 54,320).
ON INCOME
The Financial Statements of Bristlecone GmbH, Frankfurt am Main (referred to 3. Liabilities:
below as ‘the Company’), have been prepared according to the regulations of the All liabilities stated in the balance sheet are with a remaining term of less
German Commercial Code (HGB) and the Law on Limited Liabilities Companies than one year.
(GmbH).
The cost-summary method has been applied in accordance with Sect. 275 4. Liabilities Due to Shareholders:
Para. 2, German Commercial Code (HGB). Liabilities due to shareholders result from current business operations.
The Company is a small corporation according to Sect. 267 Para. 1 German
5. Liabilities Due to Affiliated Companies:
Commercial Code (HGB)
Liabilities due to affiliated companies result from current business operations.
II. ACCOUNTING POLICIES
IV. OTHER INDIVIDUAL COMMENTS
1. Fixed Assets:
1. Financial Commitments:
Intangible assets are stated at acquisition cost less regular depreciation
according to the rates permitted by tax law. As of March 31, 2006, the Company has not concluded any long-term rental
and lease commitments.
Tangible assets are stated at acquisition cost less regular depreciation
according to the rates permitted by tax law. 2. Contingent Liabilities:
Depreciation on additions to tangible assets is calculated pro rata temporis As of balance sheet date there are no further contingent liabilities according
according to the regulation of Para. 44 Sect. 2, Income Tax Directions to Sect. 251 German Commercial Code (HGB), which have to be reported.
(EStR) 2003.
Low value items in the sense of Section 6, Paragraph 2, Income Tax Law 3. Management and Representative Authority:
(EStG) are fully depreciated. The managing directors of the Company during the fiscal year were the
The following depreciation methods have been used for the depreciation of following:
fixed assets: • Nikhil S. Nayak, Mumbai, India;
Item Depreciation Method Useful • Venkataramanan Mani, Thane, Maharashtra, India;
Lifetime
• Zhooben Bhiwandiwala, Mumbai, India.
Software Straight line 1 year
Each managing director of the Company represents the Company jointly
Other equipment, operational and with an other managing director. If only one managing director is appointed
office equipment Straight line 3 years he has single power of representation. The managing directors are released
Low value assets Straight line 1 year from the regulations of Sect. 181 of the German Civil Code (BGB).

2. Accounts Receivables and Other Assets: 4. Management Remunerations:

Accounts receivables and other assets are stated at nominal value. The Company will not disclose the remunerations of the management
according to an option in line with Sect. 286 Para. 4, German Commercial
3. Accrued Liabilities: Code (HGB).
Accruals for uncertain liabilities are provided to the extent required by
5. Headcount at Yearly Average:
reasonable business judgement and cover all identifiable risks as of balance
sheet date. During the fiscal year the Company employed an average of 1 employee
(prior year: 1 employee).
4. Liabilities:
6. Consolidated Financial Statements:
Liabilities are stated at the repayable amount.
Mahindra & Mahindra Ltd., Mumbai, India, is the ultimate parent company
5. Foreign Currency Accounts: responsible for preparing the consolidated financial statements for the
Receivables and liabilities in foreign currencies are stated with the exchange largest and smallest group of companies.
rate applicable at the date of transaction considering the lower of cost or The consolidated financial statements are available in the office of Mahindra
market principle. & Mahindra Ltd., Mumbai, India.

6. Affiliated Companies: 7. Disposition of Earnings:

All companies in which Bristlecone Limited, Cayman Islands, Great Britain, The profit for the fiscal year as of March 31, 2006 in the amount of
has directly or indirectly — majority ownership or which are controlled by P 47.023,84 (Rs. 25,54,335) and the accumulated deficit as of April 1, 2005,
Bristlecone Limited, Cayman Islands, Great Britain, are considered as in the amount of P 102.521,73 (Rs. 55,68,980) will be carried forward to
affiliated companies. new account.

8. Translation into Indian Rupees:

III. INDIVIDUAL COMMENTS TO THE BALANCE SHEET
The amounts in Euros are translated for convenience into Indian Rupees at
1. Fixed Assets:
the exchange rate of Euro 1 = Rs. 54.32, which is the average of the
Reference is made to the separate analysis of fixed assets for 2005 (see telegraphic transfer buying and selling rates quoted by the Mumbai branch
page 5 of this exhibit). of State Bank of India on March 31, 2006.
2. Other Accruals:
Mumbai April 25, 2006
Other accruals in the amount of KP 54 (Rs. 29,58,865) mainly represent
accruals for personnel expenses (KP 43) (Rs. 23,55,370), accruals for the Management
audit of the financial statements (KP 5) (Rs. 2,71,600), accruals for legal and

498
 BRISTLECONE GmbH

Development of Fixed Assets for the year ended March 31, 2006
At cost Accumulated Depreciation Net Book Value
April 1, Addi- Retire- March 31, April 1, Addi- Retire- March 31, March 31, March 31,
2005 tions ments 2006 2005 tions ments 2006 2006 2005
P P P P P P P P P P
I. Intangible Assets
Software ......................................... 345,60 0 0 345,60 288,60 56,00 0 344,60 1,00 57,00
Rs. 18,773 0 0 18,773 15,677 3,042 0 18,719 54 3,096
II. Property, Plant and Equipment
Other equipment, operational and
Office equipment ............................ 5.026,60 6.527,70 475,70 11.078,60 1.397,60 2.655,70 475,70 3.577,60 7.501,00 3.629,00
Rs. 2,73,045 3,54,585 25,840 6,01,790 75,918 1,44,258 25,840 1,94,336 4,07,454 1,97,127
5.372,20 6.527,70 475,70 11.424,20 1.686,20 2.711,70 475,70 3.922,20 7.502,00 3.686,00
Rs. 2,91,818 3,54,585 25,840 6,20,563 91,595 1,47,300 25,840 2,13,055 4,07,508 2,00,223

Audit Opinion Explanations to the Financial Statements

Balance Sheet as of March 31, 2006
We have audited the annual Financial Statements, comprising
the Balance Sheet, the Income Statement and the Notes to the ASSETS
A. Fixed Assets:
Financial Statements, together with the bookkeeping system of
Bristlecone GmbH, Frankfurt am Main, for the business year from 2006/3/31 2006/3/31 2005/3/31 2005/3/31
P Rs. P Rs.
April 1, 2005 until March 31, 2006. The maintenance of the books
and records and the preparation of the annual financial statements I. Intangible Assets 1,00 54 57,00 3,096
in accordance with the German Commercial Code and II. Property, Plant and Equipment
supplementary provisions in the articles of incorporation are the 1. Other Equipment
responsibility of the Company’s management. Our responsibility Operational and
is to express an opinion on the annual financial statements Office Equipment 7.501,00 4,07,454 3.629,00 1,97,127
including the bookkeeping system based on our audit. B. Current Assets:
We conducted our audit of the annual financial statements in I. Accounts Receivable
and Other Assets
accordance with § 317 HGB [“Handelsgesetzbuch: German
Commercial Code”] and the German generally accepted standards 1. Trade Receivables 1.169.851,27 63,546,321 495.697,55 26,926,291
for the audit of financial statements promulgated by the Institut 2. Other Assets 6.521,23 3,54,233 9.469,31 5,14,373
der Wirtschaftsprüfer in Deutschland (IDW). Those standards Content:
require that we plan and perform the audit such that misstatements Receivable Due to
materially affecting the presentation of the net assets, financial Employee 3.800,00 2,06,416 6.083,36 3,30,449
position and results of operations in the annual financial statements Rent Deposit 2.500,00 1,35,800 2.160,00 1,17,331
are detected with reasonable assurance. Knowledge of the Tax Refund Claim 221,23 12,017 61,95 3,365
Creditors with
business activities and the economic and legal environment of Debit Balances 0 0 1.164,00 63,228
the Company and expectations as to possible misstatements are
6.521,23 354,233 9.469,31 514,373
taken into account in the determination of audit procedures. The
Receivable due to employee results from a loan granted by the employer to
effectiveness of the accounting-related internal control system
the employee
and the evidence supporting the disclosures in the books and
II. Bank Balances 181.770,17 98,73,756 95.076,77 51,64,570
records and the anuunal financial statements are examined
primarily on a test basis within the framework of the audit. The Content:
audit includes assessing the accounting principles used and Dresdner Bank AG,
Frankfurt am Main,
significant estimates made by the Management as well as Current Account 130.822,93 71,06,302 53.677,18 29,15,744
evaluating the overall presentation of the annual financial Dresdner Bank AG,
statements. We believe that our audit provides a reasonable Frankfurt am Main,
basis for our opinion. Daily Benefit Account 33.222,10 18,04,624 33.111,62 17,98,623
Dresdner Bank AG,
Our audit has not led to any reservations. Frankfurt am Main,
In our opinion, based on the findings of our audit, the annual Currency Account USD 17.725,14 9,62,830 8.287,97 4,50,203
financial statements comply with the legal requirements and 181.770,17 98,73,756 95.076,77 51,64,570
supplementary provisions of the articles of incorporation and give
a true and fair view of the net assets, financial position and results Cash in bank accounts with the Dresdner Bank AG, Frankfurt am Main, agrees to
the bank statements as of March 31, 2006.
of operations of the Company in accordance with the German
principles of proper accounting. C. Prepaid Expenses 2.380,82 1,29,327 1.427,69 77,553
Content:
Nettetal, April 25, 2006 WWS Wirtz, Walter, Schmitz GmbH Office Rent 1.250,00 67,900 1.086,31 59,009
Wirtschaftsprüfungsgesellschaft Contributions to the
Chamber of Commerce 311,82 16,939 311,25 16,907
Steuerberatungsgesellschaft
Miscellaneous 819,00 44,488 30,13 1,637
Walter Post
2.380,82 1,29,327 1.427,69 77,553
Wirtschaftsprüfer Wirtschaftsprüfer

499
BRISTLECONE GmbH

2006/3/31 2006/3/31 2005/3/31 2005/3/31 2005/4/1– 2005/4/1– 2004/4/1– 2004/4/1

P Rs. P Rs. 2006/3/31 2006/3/31 2005/3/31 2005/3/31
EQUITY AND LIABILITIES P Rs. P Rs.

A. Equity: Sales from Other

Projects 16% VAT 19.330,06 10,50,009 0 0
I. Subscribed Capital 50.000,00 27,16,000 50.000,00 27,16,000
Sales from Other
II. Capital Reserve 125.000,00 67,90,000 125.000,00 67,90,000 Projects not VAT
taxable 10.650,00 5,78,508 0 0
To cover start-up losses the shareholder has granted cash contributions which have Sales from On-site
been allocated to a capital reserve in the sense of Sect. 272 Para. 2, No. 4, German Projects 16% VAT 0 0 46.000,00 24,98,720
Commercial Code (HGB). 3.548.060,81 192,730,663 1.022.861,00 55,561,810
III. Accumulated Deficit/
2. Other Operating
Retained Earnings –102.521,73 –55,68,980 148,56 8,070
Income
IV. Net Profit/Net Loss 47.023,84 25,54,335 –102.670,29 –55,77,050 Foreign Exchange
Gains 49.148,52 26,69,748 10.721,38 5,82,385
B. Accruals: Income from the
1. Tax Accruals 0 0 49,00 2,662 Reversal of Accruals 529,85 28,781 0 0
49.678,37 26,98,529 10.721,38 5,82,385
2. Other Accruals 54.471,00 29,58,865 27.270,00 14,81,306
3. Cost of Purchased
Content: Services
Bonuses to Services for
Employees 30.061,00 16,32,914 20.600,00 11,18,992 Offshore Projects 3.047.422,73 16,55,36,004 822.812,10 4,46,95,153
Vacation not Services for
yet taken 13.300,00 7,22,456 0 0 Other Projects 25.627,06 13,92,061 0 0
Audit Expenses 5.000,00 2,71,600 4.500,00 2,44,440 Services On-site
Legal and Projects 0 0 1.766,94 95,980
Consultancy Fees 3.310,00 1,79,799 1.650,00 89,628 3.073.049,79 16,69,28,065 824.579,04 4,47,91,133
Bookkeeping 1.200,00 65,184 0 0
4. Personnel Expenses
Financial Statements 600,00 32,592 0 0
a) Wages and
Miscellaneous 1.000,00 54,320 520,00 28,246 Salaries 285.717,59 1,55,20,179 179.398,10 97,44,905
54.471,00 29,58,865 27,270,00 14,81,306 b) Social Security,
C. Liabilities Pension and
Other Benefit
1. Trade Payable 10.339,73 5,61,654 5.763,59 3,13,078 Costs 14.730,60 8,00,166 14.465,53 7,85,768
2. Payable to 300.448,19 1,63,20,345 193.863,63 1,05,30,673
Shareholders 1.144.040,51 62,144,280 427.076,48 23,198,795
5. Depreciation on
Bristlecone India Ltd., India, liabilities resulting from current operations. Intangible Fixed
Assets and
3. Payable to Affiliated Tangible Assets 2.711,70 1,47,300 1.686,20 91,594
Companies 6.297,00 3,42,053 0 0
6. Other Operating
Bristlecone Inc., USA, liabilities resulting from current operations. Expenses
Foreign Exchange
4. Other Liabilities 33.375,14 18,12,938 72.719,98 39,50,149 Losses 40.268,30 21,87,374 15.566,26 8,45,559
Travel Expenses 36.653,43 19,91,014 18.183,92 9,87,751
Content: Communication
Expenses 19.953,82 10,83,892 12.619,96 6,85,516
Value Added Tax 18.842,96 10,23,550 62.001,18 33,67,904
Rent 14.301,98 7,76,884 13.933,21 7,56,852
Travel Expenses 14.532,18 7,89,388 1.314,11 71,382
Representative and
Wage Tax 0 0 8.042,29 4,36,857 Entertainment
Social Security Expenses 13.878,65 7,53,888 7.173,45 3,89,662
Contributions 0 0 1.362,40 74,006 Legal and
33.375,14 18,12,938 72.719,98 39,50,149 Consultancy Fees 12.819,17 6,96,337 15.910,00 8,64,231
Audit Expenses
and Fees for the
PROFIT AND LOSS ACCOUNT
preparation of the
2005/4/1– 2005/4/1– 2004/4/1– 2004/4/1 Financial Statements 12.200,00 6,62,704 14.086,00 7,65,152
2006/3/31 2006/3/31 2005/3/31 2005/3/31 Accounting Fees 10.800,00 5,86,656 10.800,00 5,86,656
P Rs. P Rs. Bank Charges 8.374,39 4,54,897 3.179,50 1,72,710
1. Sales: Outside Services 2.956,35 1,60,589 2.435,52 1,32,297
Sales from Offshore Office Supplies 945,49 51,359 667,90 36,280
Projects 16% VAT 3.482.080,75 18,91,46,626 940.861,00 5,11,07,570 Contributions and Levies 770,57 41,857 961,33 52,219
Reimbursement of Maintenance Expenses 536,00 29,116 0 0
Costs for Market Miscellaneous 416,00 22,597 439,59 23,879
Access — not VAT 174.874,15 94,99,164 115.956,64 62,98,764
taxable 36.000,00 19,55,520 36.000,00 19,55,520

500
 BRISTLECONE GmbH

2005/4/1– 2005/4/1– 2004/4/1– 2004/4/1

2006/3/31 2006/3/31 2005/3/31 2005/3/31
P Rs. P Rs.

7. Other Interest and

Similar Income 503,53 27,352 207,61 11,277

8. Interest and
Similar Expenses 1,60 87 2,60 141

9. Results from
Ordinary Activities 47.157,28 25,61,583 –102.298,12 –55,56,833

10. Taxes on Income 52,72 2,863 –53,00 –2,878

11. Other Taxes 80,72 4,385 425,17 23,095

12. Net Profit/Net Loss 47.023,84 25,54,335 –102.670,29 –55,77,050

501
BRISTLECONE GmbH
[Translator’s notes are in square brackets]
General Engagement Terms
for
Wirtschaftsprüfer and Wirtshaftsprüfungsgesellschaften
{German Public Auditors and Public Audit Firms]
as of January 1, 2002
This is an English translation of the German text, which is the sole authoritative version
1. Scope
(1) These engagement terms are applicable to contracts between Wirtschaftsprüfer
[German Public Auditors] or Wirtshaftsprüfungsgesellschaften [German Public Audit
Firms] (hereinafter collectively referred to as the “Wirtschaftsprüfer”) and their
clients for audits, consulting and other engagements to the extent that something
else has not been expressly agreed to in writing or is not compulsory due to legal
requirements.
(2) If, in an individual case, as an exception contractual relations have also been
established between the Wirtschaftsprüfer and persons other than the client, the
provision of No. 9 below also apply to such third parties.
2. Scope and performance of the engagement
(1) Subject of the Wirtschaftsprüfer’s engagement is the performance of agreed
services — not a particular economic result. The engagement is performed in
accordance with the Grundsätze ordnungsmäßiger Berufsausübung [Standards of
Proper Professional Conduct]. The Wirtschaftsprüfer is entitled to use qualified
persons to conduct the engagement.
(2) The engagement of foreign law requires — except for financial attention
engagements — an express written agreement.
(3) The engagement does not extend — to the extent it is not directed thereto — to
an examination of the issue of whether the requirements of tax law or special
regulations, such as, for example, laws on price controls, laws limiting competition
and Bewirtschaftungsrecht [laws controlling certain aspects of specific business
operations] were observed, the same applies to the determination as to whether
subsidies, allowances or other benefits may be claimed. The performance of an
engagement encompasses auditing procedures aimed at the detection of the
defalcation of books and records and other irregularities only if during the conduct of
audits grounds therefor arise or if this has been expressly agreed to in writing.
(4) If the legal position changes subsequent to the issuance of the final professional
statement, the Wirtschaftsprüfer is not obliged to inform the client of changes or any
consequences resulting therefrom.
3. The client’s duty to inform
(1) The client must ensure that the Wirtschaftsprüfer — even without his special
request — is provided, on a timely basis, with all supporting documents and records
required for and is informed of all events and circumstances which may be significant
to the performance of the engagement. This also applies to those supporting
documents and records, events and circumstances which first become known
during the Wirtschaftsprüfer’s work.
(2) upon the Wirtschaftsprüfer’s request, the client must confirm in a written
statement drafted by the Wirtschaftsprüfer that the supporting documents and
records and the information and explanations provided are complete.
4. Ensuring independence
The client guarantees to refrain from everything which may endanger the independence
of the Wirtschaftsprüfer’s staff. This particularly applies to offers of employment and
offers to undertake engagements on one’s own account.
5. Reporting and verbal information
If the Wirtschaftsprüfer is required to present the results of his work in writing, only
that written presentation is authoritative. For audit engagements the long-form
report should be submitted in writing to the extent that nothing else has been agreed
to Verbal statements and information provided by the Wirtschaftsprüfer’s staff
beyond the engagement agreed to are never binding.
6. Protection of the Wirtschaftsprüfer’s intellectual property
The client guarantees that expert opinions, organizational charts, drafts, sketches,
schedules and calculation — especially quantity and cost computations — prepared
502
by Wirtschaftsprüfer within the scope of the engagement will be used only for his
own purposes.
7. Transmission of the Wirtschaftsprüfer’s professional statement
(1) The transmission of a Wirtschaftsprüfer’s profession statements (long-form
reports, expert opinions and the like) to a third party requires the Wirtschaftsprüfer’s
written consent to the extent that the permission to transmit to a certain third party
does not result from the engagement terms. The Wirtschaftsprüfer is liable (within
the limits of No. 9) towards third parties only if the prerequisites of the first sentence
are given.
(2) The use of the Wirtschaftsprüfer’s professional statements for promotional
purposes is not permitted, an infringement entities the Wirtschaftsprüfer to
immediately cancel all engagements not yet conducted for the client.
8. Correction of deficiencies
(1) Where there are deficiencies, the client is entitled to subsequent fulfillment [of
the contract]. The client may demand a reduction in fees or the cancellation of the
contract only for the failure to subsequently fulfill [the contract], if the engagement
was awarded by a person carrying on a commercial business as part of that
commercial business, a government-owned legal person under public law or a
special government-owned fund under public law, the client may demand the
cancellation of the contract only if the services rendered are of no interest to him due
to the failure to subsequently fulfill [the contract]. No. 9 applies to the extent that
claims for damages exist beyond this.
(2) The client must assert his claim for the correction of deficiencies in writing without
delay. Claims pursuant to the first paragraph not arising from an intentional tort cease
to be enforceable one year after the commencement of the statutory time limit for
enforcement.
(3) Obvious deficiencies, such as typing and arithmetical errors and formelle Mängel
[deficiencies associated with technicalities] contained in a Wirtschaftsprüfer’s
professional statements (long-form reports, expert opinions and the like) may be
corrected — and also be applicable versus third parties — by the Wirtschaftsprüfer
at any time. Errors which may call into question the conclusion contained in the
Wirtschaftsprüfer’s professional statements entitle the Wirtschaftsprüfer to
withdraw — also versus third parties — such statements. In the cases noted the
Wirtschaftsprüfer should first hear the client, if possible.
9. Liability
(1) The liability limitation of § [‘Article’] 323 (2) [‘paragraph 2’] HGB
[“Handelsgesetzbuch”, German Commercial Code] applies to statutory audits
required by law.
(2) Liability for negligence: An individual case of damages
If neither No. 1 is applicable nor a regulation exists in an individual case, pursuant
to § 54a (1) No. 2 WPO [“Wirtschaftsprüferordnung”: Law regulating the Profession
of Wirtschaftsprüfer] the liability of the Wirtschaftsprüfer for claims of compensatory
damages of any kind — except for damages resulting from injury to life, body or
health — for an individual case of damages resulting from negligence is limited to
P 4 million; this also applies if liability to a person other than the client should be
established. An individual case of damages also exists in relation to a uniform
damage arising from a number of breaches of duty. The individual case of damages
encompasses all consequences from a breach of duly without taking into account
whether the damages occurred in one year or in a number of successive years. In
this case multiple acts or omissions of acts based on a similar source of error or on
a source of error of an equivalent nature are deemd to be auniform breach of duty
if the matters in question are legally or economically connected to one another in
this event the claim against the Wirtschaftsprüfer is limited P 5 million. The
limitation to the fivefold of the minimum amount insured does not apply to
compulsory audits required by law.

(3) Preclusive deadlines
A compensatory damages claim may only be lodged within a preclusive deadline of
one year of the rightful claimant having become aware of the damage and of the
event giving rise to the claim — at the very latest, however, within 5 years
subsequent to the event giving rise to the claim. The claim expires if legal action is
not taken within a six month deadline subsequent to the written refusal of acceptance
of the indemnity and the client was informed of this consequence. The right to assert
the bar of the preclusive deadline remains unaffected. Sentences 1 to 3 also apply
to legally required audits with statutory liability limits.
10. Supplementary provisions for audit engagement
(1) A subsequent amendment of abridgement of the financial statements or
management report audited by a Wirtschaftsprüfer and accompanied by an auditor’s
report requires the written consent of the Wirtschaftsprüfer even if these documents
are not published. If the Wirtschaftsprüfer has not issued an auditor’s report, a
reference to the audit conducted by the Wirtschaftsprüfer in the management report
or elsewhere specified for the general public is permitted only with the
Wirtschaftsprüfer’s written consent and using the wording authorized by him.
(2) If the Wirtschaftsprüfer revokes the auditor’s report, it may no longer be used. If
the client has already made use of the auditor’s report, he must announce its
revocation upon the Wirtschaftsprüfer’s request.
(3) The client has a right to 5 copies of the long-form report. Additional copies will be
charged for separately.
11. Supplementary provisions for assistance with tax matters
(1) When advising on an individual tax issue as well as when furnishing continuous
tax advice, the Wirtschaftsprüfer is entitled to assume that the facts provided by the
client — especially numerical disclosures — are correct and complete; this also
applies to bookkeeping engagements. Nevertheless, he is obliged to inform the
client of any errors he has discovered.
(2) The tax consulting engagement does not encompass procedures required to
meet deadlines, unless the Wirtschaftsprüfer has explicitly accepted the engagement
for this. In the event the client must provide the Wirtschaftsprüfer, on a timely basis,
all supporting documents and records — especially tax assessments — material to
meeting the deadlines, so that the Wirtschaftsprüfer has an appropriate time-period
available to work therewith.
(3) In the absence of other written agreements, continuous tax advice encompasses
the following work during the contract period:
a) preparation of annual tax returns for income tax, corporation tax and business tax,
as well as net worth tax returns on the basis of the annual financial statements
and other schedules and evidence required for tax purposes to be submitted by
the client
b) examination of tax assessments in relation to the taxes mentioned in (a)
c) negotiation with tax authorities in connection with the returns and assessments
mentioned in (a) and (b)
d) participation in tax audits and evaluation of the results of tax audits with respect
to the taxes mentioned in (a)
e) participation in Einspruchs — und Beschwerdeverfahren [appeals and complaint
procedures] with respect to the taxes mentioned in (a).
In the afore-mentioned work the Wirtschaftsprüfer takes material published legal
decisions and administrative interpretations into account.
(4) If the Wirtschaftsprüfer receives a fixed fee for continuous tax advice, in the
absence of other written agreements the work mentioned under paragraph 3(d) and
(e) will be charged separately.
(5) Services with respect to special individual issues for income tax, corporate tax,
business tax, valuation procedures for property and net worth taxation, and net worth
tax as well as all issues in relation to sales tax, wages tax, other taxes and dues
require a special engagement. This also applies to:
BRISTLECONE GmbH
a) the treatment of non-recurring tax matters, e.g., in the field of estate tax, capital
transactions tax, real estate acquisition tax
b) participation and representation in proceedings before tax and administrative
courts and in criminal proceedings with respect to taxes, and
c) the granting of advice and work with respect to expert opinions in connection
with conversions of legal form, mergers, capital increases and reductions,
financial reorganizations, admission and retirement of partners or shareholders,
sale of a business, liquidations and the like.
(6) To the extent that the annual sales tax return is accepted as additional work, this
does not include the review of any special accounting prerequisites nor of the issue
as to whether all potential legal sales tax reductions have been claimed. No guarantee
is assumed for the completeness of the supporting documents and records to
validate the deduction of the input tax credit.
12. Confidentially towards third parties and data security
(1) Pursuant to the law the Wirtschaftsprüfer is obliged to treat all facts that he comes
to know in connection with his work as confidential, irrespective of whether these
concern the client himself or his business associations, unless the client releases him
from this obligation.
(2) The Wirtschaftsprüfer may only release long-form report, expert opinions and
other written statements on this results of his work to third parties with the consent
of his client.
(3) The Wirtschaftsprüfer is entitled — within the purposes stipulated by the
client — to process personal data entrusted to him or allow them to be processed
by third parties.
13. Default of acceptance and lack of cooperation on the part of the client
If the client defaults in accepting the services offered by the Wirtschaftsprüfer or if
the client does not provide the assistance incumbent on him pursuant to No. 3 or
otherwise, the Wirtschaftsprüfer is entitled to cancel the contract immediately. The
Wirtschaftsprüfer‘s right to compensation for additional expenses as well as for
damages caused by the default or the lack of assistance is not affected, even if the
Wirtschaftsprüfer does not exercise his right to cancel.
14. Remuneration
(1) In addition to his claims for fess or remuneration, the Wirtschaftsprüfer is entitled
to reimbursement of his outlays: sales tax will be billed separately. He may claim
appropriate advances for remuneration and reimbursement of outlays and make the
rendering of his services dependent upon the complete satisfaction of his claims.
Multiple clients awarding engagements are jointly and severally liable.
(2) Any set off against the Wirtschaftsprüfer’s claims for remuneration and
reimbursement of outlay is permitted only for undisputed claims or claims determined
to be legally valid.
15. Retention and return of supporting documentation and records
(1) The Wirtschaftsprüfer retains, for seven years, the supporting documents and
records in connection with the completion of the engagement — that had been
provided to him and that he has prepared himself — as well as the correspondence
with respect to the engagement.
(2) After the settlement of his claims arising from the engagement, the
Wirtschaftsprüfer, upon the request of the client, must return all supporting documents
and records obtained from him or for him by reason of his work on the engagement.
This does not, however, apply to correspondence exchanged between the
Wirtschaftsprüfer and his client and to any documents of which the client already has
the original or a copy. The Wirtschaftsprüfer may prepare and retain copies or
photocopies of supporting documents and records which he returns to the client.
16. Applicable law
Only German law applies to the engagement, its conduct and any claims arising
therefrom.
503
BRISTLECONE UK LIMITED

Report of the Directors for the year ended of the state of affairs of the company and of the profit or loss of
the company for that period. In preparing those financial
31st March 2006 statements, the directors are required to

The Directors present their report with the financial statements
of the company for the year ended 31st March 2006.
PRINCIPAL ACTIVITY
The principal activity of the company in the year under review
was that of provision of IT consulting services.
REVIEW OF BUSINESS
The results for the year and financial position of the company
are as shown in the annexed financial statements.
DIVIDENDS
No dividends will be distributed for the year ended 31st March
2006.
— select suitable accounting policies and then apply them
consistently;
— make judgements and estimates that are reasonable and
prudent;
— prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time
the financial position of the company and to enable them to
ensure that the financial statements comply with the Companies
Act 1985. They are also responsible for safeguarding the assets
of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

DIRECTORS STATEMENT AS TO DISCLOSURE OF INFORMATION TO

AUDITORS
The directors during the year under review were:
So far as the directors are aware, there is no relevant audit
Z Bhiwandiwala — resigned 25/4/2005 information (as defined by Section 234ZA of the Companies Act
A Choudhari — resigned 25/4/2005 1985) of which the company’s auditors are unaware, and each
V Mani — resigned 25/4/2005 director has taken all the steps that he ought to have taken as a
director in order to make himself aware of any relevant audit
C Krishnadas — appointed 25/4/2005 information and to establish that the company’s auditors are
N Nayak — appointed 25/4/2005 aware of that information.
The directors holding office at 31st March 2006 did not hold any
beneficial interest in the issued share capital of the company at AUDITORS
date of appointment or 31st March 2006. The auditors, Butler & Co., will be proposed for re-appointment
in accordance with Section 385 of the Companies Act 1985.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the financial statement On behalf of the Board
in accordance with applicable law and United Kingdom generally
accepted accounting practise. N Nayak
April 25, 2006 Director
Company law requires the directors to prepare financial
statements for each financial year which give a true and fair view

504

Report of the Independent Auditors to the Shareholders of Bristlecone UK Limited
We have audited the financial statements of Bristlecone UK
Limited for the year ended 31st March 2006 on pages six to ten.
These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the company’s members, as a body,
in accordance with Section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to
them in an auditors’ report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND
AUDITORS
As described on page one, the company’s directors are
responsible for the preparation of financial statements in
accordance with applicable law and United Kingdom Accounting
Standards.
Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial
statements give a true and fair view and are properly prepared in
accordance with the Companies Act 1985. We also report to
you if, in our opinion, the Report of the Directors is not consistent
with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information
and explanations we require for our audit, or if information
specified by law regarding directors’ remuneration and other
transactions is not disclosed.
We read the Report of the Directors and consider the implications
for our report if we become aware of any apparent misstatements
within it.
BRISTLECONE UK LIMITED
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an asessment of the
significant estimates and judgements made by the directors in
the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the
financial statements.
OPINION
In our opinion the financial statements:
— give a true and fair view, in accordance with United Kingdom
Generally Accepted Accounting Practice, of the state of the
company’s affairs as at 31st March 2006 and of its profit for
the year then ended; and
— have been properly prepared in accordance with the
Companies Act 1985.
Butler & Co
Chartered Accountants
& Registered Auditors
Walmar House
288-292 Regent Street
London
25th April 2006 WIB 3AL
505
BRISTLECONE UK LIMITED

Profit and Loss Account for the year ended 31st March, 2006

2006 2006 2005 2005

Notes £ Rs. £ Rs.

TURNOVER ..................................................................... 24,709 1,925,325 209,852 16,351,668

Cost of Sales .................................................................... 5,904 460,040 69,786 5,437,725

GROSS PROFIT ............................................................... 18,805 1,465,285 140,066 10,913,943

Administrative expenses .................................................. 18,930 1,475,025 131,659 10,258,870

OPERATING (LOSS)/PROFIT .......................................... 3 (125) (9,740) 8,407 655,073

Interest receivable and similar income ............................ 439 34,207 579 45,116

PROFIT ON ORDINARY ACTIVITIES

BEFORE TAXATION ........................................................ 314 24,467 8,986 700,189

Tax on profit on ordinary activities ................................... — — — —

PROFIT FOR THE FINANCIAL

YEAR AFTER TAXATION ................................................ 314 24,467 8,986 700,189

RETAINED PROFIT FOR THE YEAR ............................... 314 24,467 8,986 700,189

CONTINUING OPERATIONS
None of the company’s activities were acquired or discontinued during the current and previous years.

TOTAL RECOGNISED GAINS AND LOSSES

The company has no recognised gains or losses other than the profits for the current and previous years.

The notes form part of these financial statements

506
 BRISTLECONE UK LIMITED

Balance Sheet as at 31st March, 2006

2006 2006 2005 2005

Notes £ Rs. £ Rs.

CURRENT ASSETS
Debtors ...................................................................... 6 86,077 6,707,120 78,001 6,077,838
Cash at Bank .............................................................. 32,823 2,557,568 45,272 3,527,594
118,900 9,264,688 123,273 9,605,432

CREDITORS
Amounts falling due within one year ......................... 7 4,471 348,380 9,158 713,591
NET CURRENT ASSETS .......................................... 114,429 8,916,308 114,115 8,891,841
TOTAL ASSETS LESS CURRENT LIABILITIES ....... 114,429 8,916,308 114,115 8,891,841
CAPITAL AND RESERVES
Called up share capital ............................................... 8 250,000 19,480,000 250,000 19,480,000
Profit and loss account ............................................... 9 (135,571) (10,563,692) (135,885) (10,588,159)

SHAREHOLDERS’ FUNDS ....................................... 12 114,429 8,916,308 114,115 8,891,841

On behalf of the Board

N Nayak
Director

Approved by the Board on 25th April 2006

The notes form part of these financial statements

507
BRISTLECONE UK LIMITED

Notes to the Financial Statements for the year ended 31st March 2006

1. Accounting Policies 5. Tangible Fixed Assets

Computer Computer
Accounting convention equipment equipment
The financial statements have been prepared in accordance with applicable £ Rs.
accounting standards and under the historical cost convention.
COST
At 1st April 2005 and 31st March 2006 ........ 5,948 463,468
Financial Reporting Standard Number 1
DEPRECIATION
Exemption has been taken from preparing a cash flow statement on the At 1st April 2005 and 31st March 2006 ........ 5,948 463,468
grounds that the company qualifies as a small company.
NET BOOK VALUE
At 31st March 2006 ..................................... — —
Turnover
Turnover represents the invoiced amount of services provided & expenses At 31st March 2005 ..................................... — —
recovered. The turnover and profit are attributable to the principal activity of
the company.
6. Debtors: Amounts falling due within one year
Tangible fixed assets 2006 2006 2005 2005
Depreciation is provided on all tangible fixed assets at the rates calculated to £ Rs. £ Rs.
write off the cost or valuation, less estimated residual value, of each asset
Trade debtors .................. — — 9,400 732,448
over its expected life, as follows:
Amounts owed by group
Computer Equipment 50%
undertakings ................... 83,296 6,490,424 66,701 5,197,342
Fixtures & Fittings 25%
Other debtors .................. 2,781 216,696 1,900 148,048

Deferred tax 86,077 6,707,120 78,001 6,077,838

Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date.
7. Creditors: Amounts falling due within one year
Foreign currencies 2006 2006 2005 2005
£ Rs. £ Rs.
Assets and liabilities in foreign currencies are translated into sterling at the Amounts owed to group
rates of exchange ruling at the balance sheet date. Transactions in foreign undertakings ................... 1,197 93,270 1,197 93,270
currencies are translated into sterling at the rate of exchange ruling at the
date of transaction. Exchange differences are taken into account in arriving at Social security and
the operating result. other taxes ...................... 474 36,934 1,812 141,191
Other creditors ................ — — 2,692 209,761
2. Staff costs Accruals and deferred
2006 2006 2005 2005 income ............................ 2,800 218,176 3,457 269,369
£ Rs. £ Rs. 4,471 348,380 9,158 713,591
Wages and salaries ......... 10,092 786,369 134,705 10,496,214
Social security costs ....... 271 21,116 11,802 919,612
8. Called Up Share Capital
10,363 807,485 146,507 11,415,826 Authorised:
Number Class Nominal 2006 2006 2005 2005
Value £ Rs. £ Rs.
The average monthly number of employees during the year was as follows:
2006 2005 1,000,000 Ordinary £1 1,000,000 77,920,000 1,000,000 77,920,000

Management ................... 1 1
Allotted and issued:
Consultancy .................... 1 3
Number Class Nominal 2006 2006 2005 2005
2 4 Value £ Rs. £ Rs.

1,000,000 Ordinary £1 250,000 19,480,000 250,000 19,480,000

3. Operating (Loss) / Profit
The operating loss (2005 - operating profit) is stated after charging: Ordinary shares of £ 1.00 each (£0.25 called and paid up)

2006 2006 2005 2005

£ Rs. £ Rs. 9. Reserves
Depreciation – owned assets — — 1,146 89,296 Profit and Loss Account
Profit Profit
Auditors remuneration 1,000 77,920 1,500 116,880 and loss and loss
Directors’ emoluments — — — — account account
£ Rs.

4. Taxation At 1st April 2005 ................................... (135,885) (10,588,159)

Retained profit for the year ................... 314 24,467
Analysis of the tax charge
At 31st March 2006 .............................. (135,571) (10,563,692)
No liability to UK corporation tax arose on ordinary activities for the year ended
31st March 2006 nor for the year ended 31st March 2005.

508
 BRISTLECONE UK LIMITED

10. Ultimate Parent Company

Trading and Profit and Loss Account for the
The ultimate holding company is Mahindra & Mahindra Ltd., a company
incorporated in India. year ended 31st March 2006
2006 2006 2005 2005
11. Contingent Liabilities £ Rs. £ Rs.
Due to the on-going PAYE investigation with the Inland Revenue, there could Turnover
be a possible liability payable to the Inland Revenue upon the conclusion of Consulting Income ............... 8,000 623,360 143,151 11,154,326
the investigation. The amount of the liability is not quantifiable at present. Miscellaneous Income ......... 16,709 1,301,965 66,701 5,197,342
24,709 1,925,325 209,852 16,351,668
12. Reconciliation of movements in Shareholders’ Fund Cost of sales
2006 2006 2005 2005 Miscellaneous Purchases ..... 294 22,908 1,197 93,270
£ Rs. £ Rs. Consultants Wages .............. 4,876 379,938 68,589 5,344,455
Consultants Expenses .......... 734 57,194 — —
Profit for the financial year 314 24,467 8,986 700,189
5,904 460,040 69,786 5,437,725
Net addition to
shareholders’ funds 314 24,467 8,986 700,189 Gross Profit ......................... 18,805 1,465,285 140,066 10,913,943
Opening shareholders’ Other Income
funds 114,115 8,891,841 105,129 8,191,652 Deposit account interest ...... 439 34,207 579 45,116
Closing Shareholders’ 19,244 1,499,492 140,645 10,959,059
funds 114,429 8,916,308 114,115 8,891,841 Expenditure
Wages .................................. 5,216 406,431 66,116 5,151,759
13. Foreign Currency Translation Social security ...................... 271 21,116 11,802 919,612
The Foreign currency amounts are translated for convenience into Indian Rupee Rent & Service Charges ....... 4,400 342,848 6,910 538,427
at the exchange rate of Rs. 77.92 = 1.00 GBP which is the average telegraphic Insurance .............................. 635 49,478 710 55,323
transfer buying and selling rates quoted by the Mumbai branch of State Bank Telephone & Fax Services .... 1,368 106,595 5,705 444,534
of India on March 31, 2006. Printing, Postage & Stationery 117 9,117 1,229 95,764
Travelling .............................. 43 3,350 10,678 832,030
Books & Subscriptions ......... — — 1,777 138,464
Information Technology ........ 25 1,948 615 47,921
Sundry expenses .................. — — 2 156
Other Staff Costs ................. — — 1,874 146,022
Accountancy & Book keeping
Fees ..................................... 3,510 273,499 5,979 465,883
Professional Expenses ......... 1,527 118,984 4,943 385,158
Legal fees ............................. 250 19,480 — —
Auditors’ remuneration ......... 1,000 77,920 1,500 116,880
Entertainment ...................... 65 5,065 978 76,206
Bad Debts ............................ — — 2,618 203,995
Marketing Expenses ............ — — 6,296 490,584
Depreciation of tangible
fixed assets:
Computer equipment ........... — — 1145 89,218
18,427 1,435,831 130,877 10,197,936

Finance costs
Bank charges ........................ 503 39,194 726 56,570
Credit card ............................ — — 56 4,364
503 39,194 782 60,934
Net Profit ............................. 314 24,467 8,986 700,189

This page does not form part of the statutory financial statements

509
MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED

Directors’ Report to the Members

Your Directors present their Seventh Report together with the audited Accounts of your Company for the year ended 31st March, 2006.

FINANCIAL RESULTS
(Rs. in lakhs)
Particulars 2006 2005

Income ...................................................................................................................... 192.65 173.41

Profit before Depreciation/Amortisation and Tax ...................................................... 83.41 85.91

Depreciation/Amortisation ........................................................................................ (2.23) (3.02)

Profit before tax ........................................................................................................ 81.18 82.89

Less : Provision for Tax-Fringe Benefit Tax ............................................................... (0.57) –

Profit after Tax for the year ....................................................................................... 80.61 82.89

Balance brought forward from the previous years .................................................... (1102.05) (1184.94)

Loss carried to Balance Sheet .................................................................................. (1021.44) (1102.05)

Operations
During the year under review, your Company continued to focus
on its Dealership Management Software (DMS) Products and
increased business in Infrastructure and application management
services. Several modules of the DMS product were modified to
optimize processes. Your Company also developed service and
spares modules for a new customer.
Income during the year from services and sale of products/
licenses is at Rs.186 lakhs, 11% higher than the previous year.
Your Company posted a Profit of Rs.81 lakhs for the year
compared to a profit of Rs.83 lakhs in the previous year.
Current Year
Your Company expects continued demand during the current year
for its DMS Products from existing and new customers. The
Company also plans to develop a new product using latest
technologies which is expected to lower the total cost of
ownership for dealers in a variety of segments.
Capital
During the year under review your Company allotted 45,00,000
Equity Shares of Rs.10 each for cash at par aggregating Rs.450
lakhs on a Rights basis to the existing members of the Company.
The proceeds of the Rights issue were utilised to redeem
45,00,000 - 5% Cumulative Redeemable Preference Shares of
Rs.10 each aggregating Rs.450 lakhs.
Consequently the paid-up share capital of the Company stands
at Rs.1245 lakhs divided into 1,24,50,000 Equity Shares of Rs.10
each.
Directors
Mr. Ulhas Yargop and Mr. V. Mani retire by rotation and, being
eligible, offer themselves for re-appointment.
Directors' Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the
Operating Management, and after due enquiry, confirm that:
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;
(ii) they have, in the selection of the accounting policies,
consulted the Statutory Auditors and these have been applied
consistently and reasonable and prudent judgments and
estimates have been made so as to give a true and fair view
of the state of affairs of the Company as at 31st March, 2006
and of the profit of the Company for the year ended on that
date;
(iii) proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
(iv) as mentioned in the Notes on Accounts, the annual accounts
have been prepared on a going concern basis.
Corporate Social Responsibility Initiatives
As a socially responsible citizen, the Mahindra Group has

510

contributed not only to the economic well being of the
communities it interacts with, but has also enhanced their
social well being. Since its inception, the Mahindra Group has
always been engaged in activities which add value to the
community around us. A step forward was taken in this
direction by the announcement made on the occasion of the
60th Anniversary of Mahindra & Mahindra Limited, the ultimate
holding company, that the Group would support a range of
Corporate Social Responsibility (CSR) initiatives by committing
1% of Profit after Tax (PAT) on a continuing basis. The 1% PAT
would specifically benefit the economically disadvantaged and
socially weaker sections of the society. Accordingly, the Board
of your Company has resolved to contribute to recognised
charitable and/or other Institutions, including K. C. Mahindra
Education Trust and/or Mahindra Foundation, not related to
the business of the Company or the welfare of the employees,
towards Corporate Social Responsibilities of the Company,
such amounts which in the aggregate in any financial year will
not exceed 1% of the Company's estimated PAT for the year
on a continuing basis until further review by the Board.
A beginning in this direction was made by your Company during
the current year by making a contribution of Rs.82,888 to K.C.
Mahindra Education Trust.
Audit Committee
The Audit Committee of the Board of Directors of the Company
comprises Mr. V. K. Garg (Chairman of the Committee), Mr. A. G.
Tawde and Mr. S. Durgashankar. The Audit Committee met twice
during the year under review.
Auditors
Messrs Deloitte Haskins & Sells, Chartered Accountants, retire
as Auditors at the forthcoming Annual General Meeting and have
given their consent for re-appointment. The members will be
required to appoint Auditors for the current year and fix their
remuneration.
MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
Messrs Deloitte Haskins & Sells, Chartered Accountants, to the
effect that their re-appointment, if made, would be in conformity
with the limits specified in the said section.
Public Deposits and Loans/Advances
The Company has not accepted any deposits from the public or
its employees during the year under review.
The Company has not made any loans/advances, which are
required to be disclosed in the annual accounts of the Company
pursuant to Clause 32 of the Listing Agreement with the parent
company, Mahindra & Mahindra Limited.
Conservation of Energy and Technology Absorption and
Foreign Exchange Earnings and Outgo
In view of the nature of activities which are being carried on by
the Company, Rules 2A and 2B of the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988
concerning conservation of energy and technology absorption
respectively are not applicable to the Company.
There were no foreign exchange earnings and outgo during the
year under review.
Particulars of employees as required under section 217(2A)
of the Companies Act, 1956 and Rules framed thereunder
The Company had no employee who was in receipt of
remuneration of not less than Rs.24,00,000 during the year ended
31st March, 2006 or not less than Rs. 2,00,000 per month during
any part thereof.
For and on behalf of the Board
Ulhas N. Yargop V. K. Garg
Director Director
Mumbai, 25th April, 2006.
511
MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED
Auditors Report
To the Members of Mahindra Logisoft Business Solutions Ltd.
1. We have audited the attached Balance Sheet of Mahindra
Logisoft Business Solutions Limited as at 31st March, 2006,
and also the Profit and Loss Account and the Cash Flow
Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the
Company’s Management. Our responsibility is to express an
opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards, generally accepted in India. Those Standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates
made by the management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order,
2003, issued by the Central Government in terms of sub-
section (4A) of Section 227 of the Companies Act, 1956, we
enclose in the Annexure, a statement on the matters specified
in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above,
we report that:
i) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
ii) In our opinion, proper books of account as required by
law have been kept by the Company so far as appears
from our examination of the books;
iii) The Balance Sheet, Profit and Loss Account, and Cash
Flow Statement dealt with by this report are in
agreement with the books of account;
512
iv) In our opinion, the Balance Sheet, Profit and Loss
Account, and Cash Flow Statement dealt with by this
report comply with the accounting standards referred
to in sub-section (3C) of Section 211 of the Companies
Act, 1956;
v) On the basis of written representation received from
the directors as on 31st March, 2006, and taken on
record by the board of directors, we report that none
of the directors is disqualified as on 31st March, 2006,
from being appointed as a director in terms of Clause
(g) of sub-section (1) of Section 274 of the Companies
Act, 1956;
vi) Without qualifying our opinion, we draw attention to
Note No. 3 of Schedule X, regarding accounts of the
Company being prepared on a going concern basis;
vii) In our opinion and to the best of our information and
according to the explanations given to us, the said
accounts read with the significant accounting policies
and other notes thereon, give the information required
by the Companies Act, 1956, in the manner so required
and give a true and fair view in conformity with the
accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of
affairs of the Company as at 31st March, 2006;
(b) in the case of the Profit and Loss Account, of the
profit for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the
cash flows for the year ended on that date.
For Deloitte Haskins & Sells
Chartered Accountants
A.B. Jani
Mumbai Partner
Dated: 28th April, 2006 Membership No. 46488

Annexure to the Auditors’ Report
Re: Mahindra Logisoft Business Solutions Limited
(Referred to in Paragraph 3 of our report of even date)
i) The nature of the Company’s activities during the year
have been such that Clauses (xiii) and (xiv) of paragraph 4
of the Companies (Auditor’s Report) Order, 2003, are not
applicable to the Company for the year.
ii) In respect of its fixed assets:
(a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of fixed assets.
(b) We are informed that the physical verification of fixed
assets was carried out by the Management during the
year and no material discrepancies were noticed by
the Management on such verification as compared
with the records of the fixed assets maintained by the
Company. In our opinion, the frequency of verification
is reasonable.
(c) During the year, the Company has sold/written-off a
major part of fixed assets on shifting from its rented
premises. According to information and explanations
given to us, we are of the opinion that the said
disposal has not affected the going concern status of
the Company.
iii) The Company did not have any inventories during the
year/at the year end and accordingly sub-clauses (a), (b)
and (c) of Clause (ii) are not applicable to the Company.
iv) The Company has not granted or taken any loans, secured
or unsecured, to or from companies, firms or other parties
covered in the register maintained under Section 301 of
the Companies Act, 1956, and accordingly the sub-clauses
(a), (b), (c), (d), (e), (f) and (g) or Clause (iii) are not applicable
to the Company.
v) In our opinion, and according to the information and
explanations given to us, there is an internal control
system commensurate with the size of the Company and
nature of its business for the purchase of fixed assets and
sale of services. During the course of our audit we have
not observed any continuing failure to correct major
weaknesses in internal control system.
vi) (a) According to the information and explanations given to
us, we are of the opinion that the particulars of
contracts/arrangements that needed to be entered
into the register maintained under Section 301 of the
Companies Act, 1956, have been so entered.
(b) According to the information and explanations given to
us, there are no transactions in pursuance of such
contracts/arrangements, which are in excess of
Rs. 5 lakhs in respect of any party and accordingly
sub-clause (b) of Clause (v) are not applicable to
the Company.
vii) The Company has not accepted any deposits from
the public.
viii) In our opinion, the Company has an internal audit system
commensurate with the size of the Company and nature
of its business.
ix) According to the information and explanations given to us,
the Central Government has not prescribed maintenance
MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED
of cost records under Clause (d) of sub-section (1) of
Section 209 of the Act. Therefore the provisions of Clause
(viii) of the Companies (Auditor's Report) Order, 2003, are
not applicable to the Company.
x) According to the information and explanations given to us
in respect of statutory and other dues:
(a) The Company has been generally regular in depositing
undisputed statutory dues including Provident Fund,
Employees' State Insurance, Income-tax, Sales-tax,
Wealth tax, Service tax, Custom duty, Excise duty,
cess and any other material statutory dues, with the
appropriate authorities during the year.
(b) According to the information and explanations given to
us there are no dues of Income tax/Sales tax/Service
tax/Custom duty/Wealth tax and Cess, which have not
been deposited with the appropriate authorities on
account of any dispute.
xi) The accumulated losses of the Company at the end of the
financial year have exceeded fifty per cent of its net worth.
The Company has not incurred cash losses during the
financial year under audit and in the immediately preceding
financial year.
xii) According to information and explanations given to us,
there are no dues payable to a financial institution or bank
or debenture holders.
xiii) According to information and explanations given to us, the
Company has not granted any loans or advances on the
basis of security by way of pledge of shares, debentures
and other securities.
xiv) According to the information and explanations give to us,
the Company has not given any guarantee for loans taken
by others from banks or financial institutions.
xv) According to the information and explanations given to us,
there are no term loans obtained by the Company.
xvi) According to the information and explanations given to us
and on an overall examination of the Balance Sheet of the
Company, we report that, funds raised on short term basis
have, prima facie, not been used during the year for long
term investment.
xvii) The Company has not made any preferential allotment
of shares to parties and companies covered in the Register
maintained under Section 301 of the Companies
Act, 1956.
xviii) The Company has not issued any debentures during
the year.
xix) The Company has not raised any money by way of public
issues during the year.
xx) To the best of our knowledge and belief and according to
the information and explanations given to us, no fraud on
or by the Company was noticed or reported during
the year.
For Deloitte Haskins & Sells
Chartered Accountants
A.B. Jani
Mumbai Partner
Dated: 28th April, 2006 Membership No. 46488
513
MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED

Balance Sheet as at 31st March, 2006

As at 31st As at 31st
March, 2006 March, 2005
Schedule Rupees Rupees Rupees
I SOURCES OF FUNDS
Shareholders’ Funds:
Share Capital ................................................................. I 124,500,000 124,500,000
Total ....... 124,500,000 124,500,000
II APPLICATION OF FUNDS
Fixed Assets: ................................................................ II
Gross Block ................................................................... 46,051,241 49,505,474
Less: Depreciation ........................................................ (45,754,647) (46,935,593)
Net Block ....................................................................... 296,594 2,569,881
Investments ................................................................. III 3,000 3,000
Current Assets, Loans and Advances ........................ IV
Sundry Debtors ............................................................. 1,685,821 1,757,800
Cash and Bank Balances ............................................... 18,656,649 9,383,941
Other Current Assets .................................................... 2,704 2,367
Loans and Advances ..................................................... 3,177,847 1,486,200
23,523,020 12,630,308
Less: Current Liabilities and Provisions:
Current Liabilities .......................................................... V 833,999 521,385
Provisions ...................................................................... VI 632,829 387,230
1,466,828 908,615
Net Current Assets ...................................................... 22,056,192 11,721,693
Profit and Loss Account .............................................. 102,144,214 110,205,426
Total ....... 124,500,000 124,500,000
SIGNIFICANT ACCOUNTING POLICIES AND NOTES
ON ACCOUNTS ................................................................... X

As per our attached Report of even date For Mahindra Logisoft Business Solutions Limited

Ulhas N. Yargop

}
For Deloitte Haskins & Sells Vishnu K. Garg
Chartered Accountants
Arvind G. Tawde Directors

A.B. Jani V. Mani

Partner
S. Durgashankar

Mumbai, 28th April, 2006 Mumbai, 25th April, 2006

514
 MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED

Profit and Loss Account for the year ended 31st March, 2006

Previous Year
Schedule Rupees Rupees

INCOME ............................................................................... VII 19,265,284 17,341,394

Total ....... 19,265,284 17,341,394

EXPENDITURE:
Purchase of Trading Goods (Software) ................................. — 86,250
Personnel Expenses ............................................................. VIII 6,067,125 4,944,643
Operating and Other Expenses ............................................. IX 4,856,802 3,719,823
Depreciation/Amortisation .................................................... 222,794 301,872
Total ....... 11,146,721 9,052,588

PROFIT BEFORE TAX .......................................................... 8,118,563 8,288,806

Provision for Tax: .................................................................. — —
Fringe Benefit Tax ................................................................. 57,350 —
PROFIT AFTER TAX ............................................................. 8,061,213 8,288,806
Balance brought forward from previous year ........................ (110,205,426) (118,494,232)
Balance carried to Balance Sheet ......................................... (102,144,214) (110,205,426
Earnings per Share (Refer Note 8 of Schedule X)
Basic and Diluted .................................................................. 0.71 0.76

SIGNIFICANT ACCOUNTING POLICIES AND NOTES

ON ACCOUNTS ................................................................... X

As per our attached Report of even date For Mahindra Logisoft Business Solutions Limited

}
Ulhas N. Yargop

For Deloitte Haskins & Sells Vishnu K. Garg

Chartered Accountants
Arvind G. Tawde Directors

V. Mani
A.B. Jani
Partner S. Durgashankar

Mumbai, 28th April, 2006 Mumbai, 25th April, 2006

515
MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED

Statement of Cash Flow for the year ended 31st March, 2006
Previous Year
Rupees Rupees Rupees
A. Cash Flow from Operating Activities:
Net Profit Before Tax ............................................................. 8,118,563 8,288,806
Adjustments for:
Depreciation .......................................................................... 222,794 301,872
Loss on Sale of Fixed Assets (Net) ....................................... 409,712 70,941
Fixed Assets written off ........................................................ 1,293,332 —
Income from Investments ..................................................... (337) (337)
1,925,501 372,476
Operating Profit before Working Capital Changes ................ 10,044,063 8,661,282
Adjustments for:
Trade and Other Receivables ................................................ (933,069) (1,139,194)
Trade and Other Payables ..................................................... 558,213 (2,322,114)
(374,856) (3,461,308)
Cash Generated from Operations ......................................... 9,669,207 5,199,974
Taxes (Tax Deducted at Source) ........................................... (744,286) 398,024
(744,286) 398,024
Net Cash from Operating Activities ................................... 8,924,921 5,597,998

B. Cash Flow from Investing Activities:

Purchase of Fixed Assets ...................................................... (65,000) (67,792)
Sale of Fixed Assets .............................................................. 412,449 27,105
Interest Received .................................................................. 337 337
Net Cash used in Investing Activities ................................ 347,786 (40,350)

C. Cash Flow from Financing Activities:

Proceeds from issue of Equity Shares .................................. 45,000,000 —
Redemption of Preference Shares ........................................ (45,000,000) —
Net Cash used in Financing Activities ............................... — —
Net Increase in Cash and Cash Equivalents (A+B+C) ....... 9,272,707 5,557,648
Cash and Cash Equivalents at the beginning of the year 9,383,941 3,826,293
Cash and Cash Equivalents at the end of the year ........... 18,656,649 9,383,941

Note: Components of cash and cash equivalents include cash, bank balances in current and deposit accounts as disclosed under
Schedule IV of the accounts.

As per our attached Report of even date For Mahindra Logisoft Business Solutions Limited

Ulhas N. Yargop

}
For Deloitte Haskins & Sells Vishnu K. Garg
Chartered Accountants
Arvind G. Tawde Directors

A.B. Jani V. Mani

Partner
S. Durgashankar

Mumbai, 28th April, 2006 Mumbai, 25th April, 2006

516
 MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED

Schedules forming part of the Balance Sheet and the Profit and Loss Account for the year ended
31st March, 2006
SCHEDULE I (contd.) As at 31st As at 31st
SHARE CAPITAL: March, 2006 March, 2005
SCHEDULE I As at 31st As at 31st Rupees Rupees
SHARE CAPITAL: March, 2006 March, 2005
Rupees Rupees & Mahindra Limited, the Holding Company.
Authorised: In the Previous year 480,000 Equity Shares
141,000,000 (Previous year 9,600,000) Equity of Rs. 10/- each fully paid-up were held by
Shares of Rs. 10/- each 141,000,000 96,000,000 Mahindra Holdings & Finance Limited, a
Nil (Previous year 4,500,000) wholly owned subsidiary of Mahindra &
Preference Shares of Rs. 10/- Mahindra Limited.
each .......................................... — 45,000,000
2. 4,500,000 5% Cumulative Redeemable
141,000,000 141,000,000 Preference Shares of Rs. 10/- each fully
paid-up, issued without payment having
Issued, Subscribed and Paid-up: been received in cash consequent to
12,450,000 (Previous year 7,950,000) Equity acquisition of the Information Systems
Shares of Rs. 10/- each fully Division from Mahindra Holidays & Resorts
paid-up ...................................... 124,500,000 79,500,000 India Limited (MHRIL) in an earlier year,
Nil (Previous year 4,500,000) 5% have been redeemed during the year, in
Cumulative Redeemable accordance with letters exchanged with
Preference Shares of Rs. 10/- MHRIL. The Preference Shares were
each fully paid-up ...................... — 45,000,000 redeemable at par in five equal annual
Notes: instalments commencing 1st April, 2007.
1. Out of the above 12,450,000 (Previous The terms of the issue of the shares could
year 7,470,000) Equity Shares of Rs. 10/- be varied with the express consent of the
each fully paid-up (including 6 shares held Company and the Shareholders at any time
jointly with nominees) are held by Mahindra during the period the Shares are outstanding.
Total 124,500,000 124,500,000
SCHEDULE II
FIXED ASSETS: (In Rupees)
Gross Block Depreciation /Amortisation Net Block

Description As at Addi- Deduc- As at Upto For the Deduc- Upto As at As at

31-03-2005 tions tions 31-03-2006 31-03-2005 Year tions 31-03-2006 31-03-2006 31-03-2005
Intangible Asset:
Software Products .................... 45,582,245 — 80,000 45,502,245 45,580,109 2,136 80,000 45,502,245 — 2,136
Sub-total (A) ............................... 435,582,245 — 80,000 45,502,245 45,580,109 2,136 80,000 45,502,245 — 2,136
Other Assets
Computer Equipment ................ 258,306 65,000 90,798 232,508 210,778 32,892 90,798 152,872 79,636 47,528
Office Equipment ...................... 1,675,545 — 1,360,207 315,338 430,264 77,144 409,028 98,380 216,958 1,245,281
Furniture and Fixtures ............... 1,989,378 — 1,988,228 1,150 714,442 110,622 823,914 1,150 — 1,274,936
Sub-total (B) ............................... 3,923,229 65,000 3,439,233 548,996 1,355,484 220,658 1,323,740 252,402 296,594 2,567,745
Total (A) + (B) ............................ 49,505,474 65,000 3,519,233 46,051,241 46,935,593 222,794 1,403,740 45,754,647 296,594 2,569,881
Previous Year ............................ 58,650,407 67,792 9,212,725 49,505,474 55,748,400 301,872 9,114,679 46,935,593 2,569,881
Notes:
1. Deduction in other assets represents assets sold/written off on shifting of rented office premises during the year.
2. Deduction in intangible assets represents redundant software products, which has been already fully amortised.

SCHEDULE III As at 31st As at 31st SCHEDULE IV As at 31st As at 31st

INVESTMENTS March, 2006 March, 2005 CURRENT ASSETS, LOANS AND March, 2006 March, 2005
(Long-term), at Cost Rupees Rupees Rupees ADVANCES Rupees Rupees Rupees
In Government Securities A) Current Assets:
National Savings Certificate 3,000 3,000 a) Sundry Debtors (Unsecured)
(Deposited with Sales Tax Debts Outstanding for a
Authorities) period exceeding six months
— Considered Good 181,232 —
Total ..... 3,000 3,000
— Considered Doubtful — 33,819
181,232 33,819
Other Debts,
Considered Good 1,504,589 1,757,800
1,685,821 1,791,619
Less: Provision — 33,819
1,685,821 1,757,800

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MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED

SCHEDULE IV (contd.) As at 31st As at 31st SCHEDULE IX Previous Year

CURRENT ASSETS, LOANS AND March, 2006 March, 2005 OPERATING AND OTHER EXPENSES Rupees Rupees
ADVANCES Rupees Rupees Rupees Rent, Rates and Taxes 102,257 501,491
b) Cash and Bank Balances Power and Fuel 11,051 152,557
Balance with Insurance 14,210 14,235
Scheduled Banks Repairs – Machinery 53,193 83,551
— in Current Accounts 1,010,133 179,941 – Others 14,016 28,947
— in Deposit Accounts 17,646,516 9,204,000 Communication Expenses 99,163 121,831
18,656,649 9,383,941 Deputation Charges 1,275,483 743,300
c) Other Current Assets Travelling Expenses 920,200 831,350
Interest accrued on Computer Software Expenses — 129,011
Investments 2,704 2,367 Loss on Sale of Fixed Assets (Net) 409,712 70,941
B) Loans and Advances Fixed Assets written off 1,293,332 —
(Unsecured and Considered Legal and Professional Fees 305,361 477,941
Good) Filing Fees 3,252 2,715
Advances recoverable in Provision for Doubtful Debts — 33,819
Cash or in Kind or for Bad Debts written off 33,819 —
Value to be received 1,619,893 672,532 Miscellaneous Expenses 321,754 528,134
Advance Payment of Taxes 1,557,954 813,668 Total ..... 4,856,802 3,719,823
3,177,847 1,486,200
Miscellaneous expenses include consumables, printing and stationery, courier
The above includes:
charges, training expenses, membership fees, etc.
Security Deposits for
rented premises Rs. 189,583/-
SCHEDULE X
(Previous year Rs. 207,610/-)
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS
Total ..... 23,523,020 12,630,308
1. SIGNIFICANT ACCOUNTING POLICIES:
SCHEDULE V As at 31st As at 31st a) Basis of Preparation of Financial Statements:
CURRENT LIABILITIES March, 2006 March, 2005
The accounts have been prepared to comply in all material aspects with
Rupees Rupees Rupees
applicable accounting principles in India, the Accounting Standards issued
Sundry Creditors: by the Institute of Chartered Accountants of India (ICAI) and the relevant
Total Outstanding Dues to provisions of the Companies Act, 1956.
Small Scale Industrial Undertakings — —
Total Outstanding Dues to Creditors b) Use of Estimates:
other than Small Scale Industrial The preparation of financial statements in conformity with generally accepted
Undertakings 833,999 521,385 accounting principles requires estimates and assumptions to be made that
Total ..... 833,999 521,385 affect the reported amounts of assets and liabilities on the date of financial
statements and the reported amounts of revenues and expenses during the
SCHEDULE VI As at 31st As at 31st reported period. Differences between the actual results and the estimates
PROVISIONS March, 2006 March, 2005 are recognised in the period in which the results are known/materialise.
Rupees Rupees Rupees
c) Fixed Assets:
Provision for Gratuity 280,089 165,281
Tangible Assets:
Provision for Leave Encashment 352,740 221,949
Tangible assets are stated at cost less depreciation. Costs comprise of
Total ..... 632,829 387,230 purchase price and any attributable cost.
Intangible Assets:
SCHEDULE VII Previous Year
INCOME Rupees Rupees Software products is stated at initially incurred cost less accumulated
amortisation.
Income from Services 18,615,445 12,970,080
[Tax deducted at source Rs. 971,422/- d) Depreciation/Amortisation on Fixed Assets:
(Previous year Rs. 389,570/-)] Depreciation/Amortisation is provided for on the straight-line method at the
Interest on: rates and in the manner prescribed in the Schedule XIV of the Companies
a) Deposit with Bank [Tax Act, 1956, except on computer software and computer hardware, which are
deducted at source depreciated over a period of four years and three years respectively, based
Rs. 132,908/- (Previous on technical/evaluation of their useful economic life.
year Rs. 64,054/-)] 595,889 306,329
b) Long-term Investments 337 337 e) Revenue Recognition:
c) Others 19,794 56,919 Sale of products and services are recognised when the products are
Sale of Software Products/Licences — 3,861,722 dispatched or services are rendered.
Provision for Doubtful Debts written back 33,819 —
Sundry Balances written back — 108,007 f) Foreign Currency Transactions:
Miscellaneous Income — 38,000 Transactions in foreign currencies are recorded at the exchange rates
Total ..... 19,265,284 17,341,394 prevailing on the date of transaction. Monetary items are translated at the
year-end rates. The exchange difference between the rate prevailing on the
SCHEDULE VIII Previous Year date of transaction and on the date of settlement as also on translation of
PERSONNEL Rupees Rupees Monetary items at the end of the year, is recognised as income or expense,
Salary, Wages, Bonus, etc. 5,609,169 4,666,325 as the case may be, except where they relate to fixed assets, where they
Contribution to Provident Fund and are adjusted to the cost of fixed assets.
other funds 329,301 234,710 g) Retirement Benefits:
Gratuity 114,808 4,894
Staff Welfare Expenses 13,847 38,714 Gratuity:

Total ..... 6,067,125 4,944,643 Provision for gratuity liability is made in accordance with the Payment of
Gratuity Act, 1972.

518
 MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED

Leave Encashment: 6. Expenditure in Foreign Currency: Previous Year

Provision is made towards liability for leave encashment in accordance with Rupees Rupees
the Company’s Policy. i) Computer Software Expenses — 128,541
ii) Travelling Expenses — 22,375
h) Income Taxes: — 150,916
Income taxes are accounted for in accordance with Accounting Standard 22
on “Accounting For Taxes on Income” (AS 22), issued by The Institute of 7. No provision for current income tax under the provisions of the Income-tax Act,
Chartered Accountants of India. Tax expense comprises of current tax, 1961, is made since in the opinion of the Company there will be no taxable
deferred tax and fringe benefit tax. Current tax is measured at the amount income in view of the carry forward losses available under the provisions of the
expected to be paid to/recovered from the tax authorities, using the said Act.
applicable tax rates. Deferred tax assets and liabilities are recognised for
In accordance with the Accounting Standard 22 on “Accounting For Taxes on
future tax consequences attributable to timing differences between taxable
Income”, (AS 22) issued by The Institute of Chartered Accountants of India,
income and accounting income that are capable of reversal in one or more
Deferred tax assets and liabilities should be recognised for all timing differences
subsequent years and are measured using relevant enacted tax rates. Fringe
in accordance with the said standard. However, considering the present
benefits tax is recognised in accordance with the relevant provisions of the
financial position and the requirement of the accounting standard regarding
Income-tax Act, 1961, and the Guidance Note on Fringe Benefits Tax issued
certainty/virtual certainty, the same is not provided for as an asset (net).
by the ICAI.
However, the same will be reassessed at a subsequent balance sheet date, and
i) Contingent Liabilities: will be accounted for in the year of certainty/virtual certainty in accordance with
the aforesaid accounting standard.
These, if any, are disclosed in the notes on accounts. Provision is made in
the accounts if it becomes probable that an outflow of resource embodying
8. Earnings per share is calculated as follows:
economic benefits will be required to settle the obligation.
2005–06 2004–04
Previous Year
Rupees Rupees a) Net Profit/(Loss) for the year (in Rupees) 8,061,213 8,288,806
2. a) Suit filed by two employees for Less: Preference Dividend (in Rupees) — 2,250,000
reinstatement with Deputy Net Profit/(Loss) for the year after
Commissioner Labour (Appeals), Preference Dividend (in Rupees) 8,061,213 6,038,806
Chennai 1,015,067 1,084,253
b) Weighted average number of Equity
b) Arrears of cumulative dividend on Shares — Basic and Diluted 11,325,000 7,950,000
Preference Shares — 2,262,328
c) Nominal Value of Shares Rs. 10 Rs. 10
The amount stated in 2. (a) above has been deposited with High Court as per
the instructions of the High Court. 9. Segment Reporting:
3. This is the second consecutive year, wherein the operations of the Company The principal business of the Company is of development of software and facility
have resulted in profits. The accumulated losses have also reduced from Rs. management. All other activities of the Company revolve around its main
1,102.05 lakhs to Rs. 1,021.44 lakhs. The share capital continues to be business. Hence, there are no separate reportable segments as defined by
substantially eroded. Accounting Standard 17 — “Segment Reporting”.
During the year under review, income from services towards implementation of
10. Related Party Disclosures:
Dealership Management Software products and Annual maintenance contracts
has increased, since the Company has been able to get additional business. As required under Accounting Standard 18 — “Related Party Disclosures”
Further, as a result of continued operational efficiency and cost containment (AS-18), following are details of transactions during the year with the related
efforts, the Company has continued its profit trend in the current year. The parties of the Company as defined in AS-18.
Company has plans to develop a product that will suit dealers of a variety of
a) Listed of Related Parties and Relationships
segments, using latest technologies to remain profitable. The Company has also
plans to explore the Overseas Market for growth. Name of Related Party Relation
Accordingly, the accounts of the Company have been prepared on a going Mahindra Holidays & Resorts India Limited Fellow Subsidiary Company
concern basis, which is dependent upon development of product and growth in Bristlecone India Limited Fellow Subsidiary Company
business as envisaged.
Mahindra World City Developers Limited
(formerly known as Mahindra Industrial
4. Additional information pursuant to the provisions of Paragraphs 3(i)(a) and (ii) of
Park Limited) Fellow Subsidiary Company
Part II of Schedule VI to the Companies Act, 1956.
Mahindra Gesco Developers Limited Fellow Subsidiary Company
Quantitative details in respect of Goods Traded:
Mahindra Intertrade Limited Fellow Subsidiary Company
Opening Stock Purchases Sales Closing Stock
Class of Qty. Value Qty. Value Qty. Value Qty. Value Mahindra & Mahindra Limited Holding Company
Goods Nos. Rupees Nos. Rupees Nos. Rupees Nos. Rupees b) Related Party Transactions:
Software — — — — — —— — —
(—) (—) (2) (86,250) (2) (86,250) (—) (—) Transactions Holding Fellow Subsidiary
Company Company
Total — — — — — — — — (Rupees) (Rupees)
(—) (—) (2) (86,250) (2) (86,250) (—) (—)
Income from Services and
Note: Figures of the Previous year are indicated in brackets. Sale of Product/Licenses 4,105,037 11,900,000
(1,735,000) (10,310,750)
5. Remuneration of Auditors:
Previous Year Rental Income — —
Rupees Rupees (—) (18,000)
i) Audit Fees 50,000 40,000 Miscellaneous Income — —
ii) In any other manner Certification, etc. 15,000 15,000 (—) (20,000)
iii) Out of Pocket Expenses — 750 Reimbursement of Expenses (Net) *367,092 *476,681
iv) Service Tax 6,630 5,280 (42,975) *(174,776)
71,630 61,030 Deputation of Personnel 1,166,942 108,540
(—) (743,300)

519
MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED
b) Related Party Transactions: (contd.)
Transactions
Rent Paid
Sale of Fixed Assets
Issue of Equity Shares
Redemption of Preference Shares
Closing Balances as on 31st March, 2006
Receivables
Payables
(*): Represents amounts receivable
Note: Figures of the previous year are indicated in brackets.
c) Out of the above items transactions in excess of 10% of the total related
party transactions are as under:
For the year ended
Transactions 31st March, 2006
Rupees
Income from Services and
Sale of Product/Licenses
— Mahindra Holidays &
Resorts India Limited
— Mahindra & Mahindra Limited
Miscellaneous Income
— Bristlecone India Limited
Reimbursement of Expenses (Net)
— Mahindra & Mahindra Limited
— Bristlecone India Limited
— Mahindra World City
Developers Limited
— Mahindra Gesco Developers
Limited
Deputation of Personnel
— Mahindra & Mahindra Limited
— Bristlecone India Limited
Rent Paid
— Bristlecone India Limited
Sale of Fixed Assets
— Mahindra Holidays &
Resorts India Limited
Rental Income
— Mahindra Holidays &
Resorts India Limited
Issue of Equity Shares
— Mahindra & Mahindra Limited
Redemption of Preference Shares
— Mahindra Holidays &
Resorts India Limited
Note: * Represents amounts receivable.
As per our attached Report of even date
For Deloitte Haskins & Sells
Chartered Accountants
A.B. Jani
Partner
Mumbai, 28th April, 2006
520
Other related parties of the Company are as under:
Holding Fellow Subsidiary Name of Related Party
Company Company Mahindra Engineering & Chemical Products Limited
(Rupees) (Rupees) Mahindra & Mahindra Financial Services Limited
Mahindra Steel Service Centre Limited
— —
(—) (60,000) Mahindra Holdings & Finance Limited
Mahindra Acres Consulting Engineers Limited
— — Mahindra Ashtech Limited
(—) (7,500) NBS International Limited
45,000,000 — Mahindra Holidays & Resorts USA, Inc.
(—) (—) Mahindra Infrastructure Developers Limited
45,000,000 — Tech Mahindra Limited (formerly known as Mahindra-British Telecom
(—) (—) Limited)
Tech Mahindra (Americas) Inc. (formerly known as MBT International Inc.)
Tech Mahindra GmbH (formerly known as MBT GmbH)
— 6,891 Tech Mahindra Singapore (Pte.) Limited (formerly known as MBT
(1,204,515) (151,300) Software Technologies Pte. Ltd.)
594,652 — Tech Mahindra (R&D Services) Limited (w.e.f. 28-11-2005)
(—) (—) Tech Mahindra (R&D Services) Inc. (w.e.f. 28-11-2005)
Tech Mahindra (R&D Services) Pte. Limited (w.e.f. 28-11-2005)
Tech Mahindra (Thailand) Limited (w.e.f. 21-2-2006)
Tech Mahindra Foundation (w.e.f. 22-3-2006)
Bristlecone (Singapore) Pte. Ltd.
Bristlecone GmbH
For the year ended Automartindia Limited
31st March, 2005 Mahindra USA Inc.
Rupees Birstlecone UK Ltd.
Mahindra Gujarat Tractor Limited
Mahindra Shubhlabh Services Limited
Mahindra Insurance Brokers Limited
11,900,000 9,600,000 Bristlecone Limited, Cayman Islands
4,105,037 1,735,000 Bristlecone Inc.
Mahindra MiddleEast Electrical Steel Service Centre (FZE)
Mahindra & Mahindra South Africa (Pty.) Limited
— 20,000
Mahindra Overseas Investment Company (Mauritius) Limited
Mahindra Engineering Design & Development Company Limited
*367,092 42,975 Mahindra SAR Transmission Private Limited
— *249,980 Console Estate & Investment Limited (Ceased w.e.f. 20-3-2006)
Mahindra World City (Jaipur) Limited (w.e.f. 26-8-2005)
— 75,204 Mahindra International Limited (w.e.f. 1-11-2005)
Stokes Group Limited (w.e.f. 3-1-2006)
*387,538 —
Plexion Technologies (India) Private Limited (w.e.f. 15-2-2006)
Jensand Limited (w.e.f. 3-1-2006)
1,166,943 — Stokes Forgings Limited (w.e.f. 3-1-2006)
— 743,300 Stokes Forgings Dudley Limited (w.e.f. 3-1-2006)
Plexion Technologies (UK) Ltd. (w.e.f. 15-2-2006)
— 60,000 Plexion Technologies GmbH, Germany (w.e.f. 15-2-2006)
Mahindra Realty Limited (w.e.f. 21-9-2005)
Mahindra Automative Steels Private Limited (w.e.f. 2-6-2005)
— 7,500 Mahindra Renault Private Limited (w.e.f. 5-8-2005)
Plexion Technologies Incorporated — USA (w.e.f. 15-2-2006)
Mahindra (China) Tractor Company Ltd. (w.e.f. 13-5-2005)
Mahindra Ugine Steel Company Ltd. (w.e.f. 21-6-2005)
— 18,000
Mahindra BT Investment Company (Mauritius) Limited (w.e.f. 9-5-2005)
Mahindra Europe s.r.l. (w.e.f. 30-5-2005)
450,000,000 —
There have been no transactions with the aforesaid companies during
the year.
450,000,000 — 11. Previous year’s figures have been regrouped wherever necessary, to confirm
with the current year’s figures.
Signature to Schedules I to X
For Mahindra Logisoft Business Solutions Limited
}
Ulhas N. Yargop
Vishnu K. Garg
Arvind G. Tawde Directors
V. Mani
S. Durgashankar
Mumbai, 25th April, 2006
 MAHINDRA LOGISOFT BUSINESS SOLUTIONS LIMITED

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

AS REQUIRED UNDER PART IV, SCHEDULE VI TO THE COMPANIES ACT, 1956

I. Registration Details:
Registration No. 1 1 9 3 6 0 State Code 1 1
Balance Sheet Date 3 1 - 0 3 - 2 0 0 6

II. Capital Raised During the Year (Amount in Rs. Thousands)

Public Issue Rights Issue : Eqiuity
N I L 4 5 0 0 0
Bonus Issue Preference Shares
N I L N I L
Private Placement
N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities
(including shareholders' funds) Total Assets
1 2 5 9 6 7 1 2 5 9 6 7
Sources of Funds
Paid-up Capital Reserves and Surplus
1 2 4 5 0 0 N I L
Secured Loans Unsecured Loans
N I L N I L
Application of Funds
Net Fixed Assets
(including Capital WIP and Advances) Investments
2 9 7 3
Net Current Assets Miscellaneous Expenditure
2 2 0 5 6 N I L
Accumulated Losses
1 0 2 1 4 4

IV. Performance of the Company (Amount in Rs. Thousands)

Turnover/Income
(including Other Income) Total Expenditure
1 9 2 6 5 1 1 1 4 7
Profit/(Loss) Before Tax Profit/(Loss) After Tax
8 1 1 9 8 0 6 1
Earnings per Share (Rs.)
(Refer Note 8 above) Interim Dividend %
0 . 7 1 N I L

V. Generic names of three principal products/services of the Company (as per monetary terms)
Product Description I N F O R M A T I O N T E C H N O L O G Y S E R V I C E S
Item Code No. (ITC Code) N O T A P P L I C A B L E

For Mahindra Logisoft Business Solutions Limited

Ulhas N. Yargop
Vishnu K. Garg
Arvind G. Tawde
V. Mani
S. Durgashankar

Mumbai, 25th April, 2006

} Directors

521
AUTOMARTINDIA LIMITED

Directors’ Report to the Shareholders

Your Directors present the Twelfth Annual Report together with the audited accounts of your Company for the year ended
31st March, 2006.

FINANCIAL RESULTS
(Rs. in lakhs)
2006 2005

Income ...................................................................................................................... 14199.26 11153.38

Profit before interest, depreciation and tax ............................................................... 294.84 123.95

Less : Depreciation ................................................................................................... 31.71 83.20

Profit before interest and tax .................................................................................... 263.13 40.75

Less : Interest ........................................................................................................... 162.32 132.95

Profit/(Loss) before tax .............................................................................................. 100.81 (92.20)

Provision for Tax - Fringe Benefit Tax ....................................................................... 12.57 -

Profit/(Loss) for the year ........................................................................................... 88.24 (92.20)

Loss brought forward from earlier years ................................................................... (2029.53) (1937.33)

Loss carried to Balance Sheet .................................................................................. (1941.29) (2029.53)

Operations
During the year under review, your Company, focussed its
operations in appointing franchisees to expand its network. Your
Company opened 20 additional dealer outlets and 1 owned outlet
during the year.
Income during the year increased from Rs.11,153.38 lakhs to
Rs.14,199.26 lakhs representing a growth of 27%. Your Company
posted a profit of Rs.88.24 lakhs for the year as compared to a
loss of Rs.92.20 lakhs in the previous year.
Outlook for the current year
Your Company proposes to set up Superstores which would
cater not only the used cars but also exclusive premium cars, new
car counters with amenities for children’s play area, car enthusiast
corner, cafeteria etc. and built in capacity for stocking more than
100 cars at any time. The Company believes that the Superstores
would increase the brand value of the Company and attract
prospective customers.
Your Company expects to open 3 owned outlets and appoint 35
additional franchisees during the current year thereby expanding
its reach across the country.
Directors’ Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the Operating
Management, and after due enquiry, confirm that:
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;
(ii) they have, in the selection of the accounting policies, consulted
the Statutory Auditors and these have been applied consistently
and reasonable and prudent judgments and estimates have
been made so as to give a true and fair view of the state of
affairs of the Company as at 31st March, 2006 and of the profit
of the Company for the year ended on that date;
(iii) proper and sufficient care has been taken for the maintenance
of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the
assets of the Company and for preventing and detecting
fraud and other irregularities;
(iv) as mentioned in the Notes on Accounts, the annual accounts
have been prepared on a going concern basis.
Directors
Mr. Alan E. Durante resigned as Director of the Company effective
from 25th September, 2005. The Board has placed on record its
deep appreciation of the valuable services rendered by Mr.
Durante during his tenure as Director of the Company.
Dr. Pawan Kumar Goenka was appointed as an Additional Director
at the meeting of the Board of Directors of the Company held on
29th April, 2006. Dr. Goenka holds office up to the date of the
forthcoming Annual General Meeting of the Company.
The Company has received a notice from a member signifying his
intention to propose appointment of Dr. Goenka as a Director of
the Company at the forthcoming Annual General Meeting.
Mr. Anand G. Mahindra and Mr. Hemant Luthra retire by rotation
and are eligible for re-election.

522
 AUTOMARTINDIA LIMITED

Audit Committee Conservation of Energy, Technology Absorption and Foreign

The Audit Committee presently comprises Mr. Arun Sanghi
(Chairman of the Committee), Mr. Sanjay Labroo and Mr. Hemant
Luthra. The Audit Committee met twice during the year under
review.
Auditors
Messrs Deloitte Haskins & Sells, Chartered Accountants, retire
as Auditors of the Company at the forthcoming Annual General
Meeting and have given their consent for re-appointment. The
shareholders will be required to elect Auditors for the current year
and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
Messrs Deloitte Haskins & Sells, Chartered Accountants, to the
effect that their re-appointment, if made, would be in conformity
with the limits specified in the said section.
Public Deposits and Loans/Advances
The Company has not accepted deposits from the public or its
employees during the year under review.
The Company has not given any loans/advances which are
required to be disclosed in the annual accounts of the Company
pursuant to Clause 32 of the Listing Agreement with the parent
company, Mahindra & Mahindra Ltd.
Exchange Earnings and Outgo
In view of the nature of activities which are being carried on by
the Company, Rules 2A and 2B of the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988,
concerning conservation of energy and technology absorption
respectively are not applicable to the Company.
There was no inflow of foreign exchange involved during the year
under consideration. The particulars of foreign exchange outgo
are given in the Notes on Accounts.
Particulars of employees as required under section 217(2A)
of the Companies Act, 1956 and the Rules made thereunder
As required under section 217(2A) of the Companies Act, 1956
and Rules made thereunder, a statement containing particulars
of the Company’s employees, who were in receipt of remuneration
of not less than Rs. 24,00,000 during the year ended 31st March,
2006 or not less than Rs. 2,00,000 per month during any part of
the said year is given in the Annexure to this Report.
For and on behalf of the Board
Anand G.Mahindra Hemant Luthra
Director Director
Mumbai: 29th April, 2006

Annexure to the Directors’ Report

Additional Information as required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of
Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended 31st March, 2006

Name of the Designation/ Gross Remuneration Qualification(s) Expe- Age Date of Last Employment
employee Nature of received (subject to rience (years) Commence held
(Organisation)
duties Income tax) (years) ment of and Designation)
(Rupees) Employment

Mr. Vinay Sanghi Chief Executive 4,879,473 B.Com 14 36 01.10.2000 Automartindia Ltd.,
Officer Consultant

NOTES :
1. Nature of employment of Mr. Vinay Sanghi is permanent subject to termination on three month's notice from either side.
2. The above employee is not a relative of any Director of the Company.
3. No employee holds by himself /herself or alongwith his/her spouse and dependent children 2% or more of the equity shares of
the Company.
4. Terms and conditions of employment are as per Company Rules.
5. Gross remuneration received as shown in the statement includes salary, commission/ex-gratia as applicable, house rent allowance
or value of perquisite for accomodation, car perquisite value/allowance as applicable, employer's contribution to Provident Fund
and Superannuation Fund, leave travel facility, reimbursement of medical expenses and all other allowances/perquisites and
terminal benefits as applicable.
For and on behalf of the Board

Anand G. Mahindra Hemant Luthra

Director Director
th
Mumbai: 29 April, 2006

523
AUTOMARTINDIA LIMITED
AUDITOR’S REPORT
To the members of Automartindia Limited.
1. We have audited the attached Balance Sheet of Automartindia
Limited as at 31st March 2006 and also the Profit and Loss
Account and the Cash Flow Statement of the Company for
the year ended on that date, annexed thereto. These financial
statements are the responsibility of the company’s
management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order,
2003, issued by the Central Government of India in terms of
sub-section (4A) of Section 227 of the Companies Act, 1956,
we enclose in the Annexure, a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above,
we report that:
i) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
ii) In our opinion, proper books of account as required by
law have been kept by the Company so far as appears
from our examination of the books;
iii) The Balance Sheet, Profit and Loss Account and Cash
Flow Statement dealt with by this report are in
agreement with the books of account;
iv) In our opinion, the Balance Sheet, Profit and Loss
Account and Cash Flow Statement dealt with by this
report comply with the accounting standards referred
to in sub-section (3C) of section 211 of the Companies
Act, 1956;
524
v) On the basis of the written representations received
from the directors as on 31st March 2006 and taken on
record by the Board of Directors, we report that none
of the directors is disqualified as on 31st March 2006
from being appointed as a director in terms of clause (g)
of sub-section (1) of section 274 of the Companies
Act, 1956;
vi) Without qualifying our opinion, we draw attention to
note no. 2 of Schedule XV, regarding accounts of the
company being prepared on a going concern basis. Our
audit report on the financial statement for the year
ended 31st March 2005 contained a similar observation
and was modified accordingly.
vii) In our opinion and to the best of our information and
according to the explanations given to us, the said
accounts, read along with the significant accounting
policies and other notes thereon, give the information
required by the Companies Act, 1956, in the manner so
required and give a true and fair view on conformity
with the accounting principles generally accepted in
India:
a) in the case of the Balance sheet, of the state of
affairs of the Company as at 31st March 2006; and
b) in the case of the Profit and Loss Account, of the
profit for the year ended on that date;
c) in the case of the Cash Flow Statement, of the
cash flows for the year ended as on that date.
For Deloitte Haskins & Sells
Chartered Accountants
A.B. Jani
Partner
Membership No. 46488
Mumbai, dated: April 29, 2006

ANNEXURE TO THE AUDITORS' REPORT
Re: Automartindia Limited
(Referred to in paragraph 3 of our report of even date)
(i) The nature of the Company’s activities are such that the
requirement’s of clauses (viii), (xiii) and (xiv) of paragraph 4
of the Companies (Auditor’s Report) Order, 2003 are not
applicable to the Company for the year.
(ii) (a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of fixed assets.
(b) We are informed that the physical verification of fixed
assets was carried out by the management during the
year and no material discrepancies were noticed by
the management on such verification. In our opinion,
the frequency of verification is reasonable.
(c) The company has not disposed off a substantial part
of the fixed assets during the year.
(iii) (a) The inventories of finished goods have been physically
verified during the year by the management. In our
opinion, the frequency of verification is reasonable.
(b) The procedures of physical verification of inventories
followed by the management is reasonable and
adequate in relation to the size of the Company and
the nature of its business.
(c) The Company has maintained proper records of its
inventories and no material discrepancies were noticed
on physical verification.
(iv) (a) The company has not granted or taken any loan
secured or unsecured to/from companies, firms or
other parties covered in the register maintained under
section 301 of the Companies Act, 1956 during the
year under review. Accordingly, clauses (iii) (a) to (g)
of the Companies (Auditor’s Report) Order, 2003 are
not applicable.
(v) In our opinion and according to the information and
explanations given to us, there is an adequate internal
control system for the purchase of fixed assets and sale of
services and for the purchase of inventory and for the sale
of goods, the same is being strengthened to be
commensurate with the size of the Company and the
nature of its business. During the course of our audit, we
have not observed any continuing failure to correct major
weaknesses in the internal control system expect as stated
above.
(vi) In respect of transactions entered in the register maintained
in pursuance of Section 301 of the Companies Act 1956:
(a) According to the information and explanations given
to us, particulars of contracts or arrangements that
need to be entered into the register have been so
entered.
(b) According to the information and explanations given
to us, each of such transaction made in pursuance of
AUTOMARTINDIA LIMITED
such contracts or arrangement which is in excess of
Rs. 5 lakhs in respect of any party, are at prices
determined in negotiations with the said party and
prima facie reasonable having regard to the prevailing
market prices where such market prices are available
with the Company.
(vii) The Company has not accepted any deposits from the
public.
(viii) In our opinion, the Company has an internal audit system
commensurate with the size of the Company and the
nature of its business.
(ix) (a) The Company has generally been regular in depositing
with the appropriate authorities, undisputed statutory
dues including provident fund, employee’s state
insurance, income tax, sales tax, custom duty, excise
duty, cess and any other material statutory dues
applicable to it. According to the information and
explanation given to us, no undisputed amount payable
in respect of provident fund, employees’ state
insurance, income tax, sales tax, wealth tax, service
tax, custom duty, excise duty and cess were in
arrears as on March 31, 2006 for a period of more than
six months from the date they became payable.
(b) According to the information and explanations given
to us there are no dues of income tax/sales tax/wealth
tax/service tax/ custom duty/excise duty and cess,
which have not been deposited on account of any
dispute.
(x) The accumulated losses of the company as at the end of the
financial year have exceeded fifty percent of its net worth.
The Company has not incurred cash losses during the
current year but has incurred cash losses in the immediately
preceding financial year.
(xi) In our opinion and according to the information and
explanations given to us the company has not defaulted in
the repayment of dues to bank. According to the information
and explanations given to us, there are no dues of financial
institutions or debenture holders.
(xii) According to the information and explanations given to us,
the Company has not granted any loans and advances on
the basis of security by the way of pledge of shares,
debentures and any other securities.
(xiii) According to the information and explanations given to us,
the Company has not given any guarantees for loans taken
by others a from banks or financial institutions.
(xiv) According to the information and explanations given to us,
the Company has applied term loans for the purpose for
which the loans were obtained.
525
AUTOMARTINDIA LIMITED

(xv) According to the information and explanations given to us, (xix) According to the information and explanations given to us,
and overall examination of the balance sheet of the Company, no fraud on or by the company was noticed or reported
funds raised on short term basis have prima facie, not been during the year.
used during the year for long term investment.
(xvi) The Company has not made preferential allotment of share
For Deloitte Haskins & Sells
to parties and companies covered in the Register maintained
Chartered Accountants
under Section 301 of the Companies Act, 1956.
(xvii) The Company has not issued any debentures during the A.B. Jani
year. Partner
(xviii) The Company has not raised any money by the way of Membership No. 46488
public issues during the year. Mumbai, dated: April 29, 2006

526
 AUTOMARTINDIA LIMITED

Balance Sheet as at 31st March, 2006

As at 31st As at 31st
March, 2006 March, 2005
Schedule Rupees Rupees Rupees
I. SOURCES OF FUNDS:
SHAREHOLDERS’ FUNDS
Share Capital ........................................................................ I 98,119,900 98119,900
Reserves and Surplus .......................................................... II 125,152,670 125,152,670
LOAN FUNDS
Secured Loans ..................................................................... III 229,284,059 155,743,179
TOTAL ................................................................ 452,556,629 379,015,749
II APPLICATION OF FUNDS:
Fixed Assets ........................................................................ IV
Gross Block .......................................................................... 68,182,320 64,955,093
Less : Depreciation .............................................................. 56,365,482 53,194,058
Net Block 11,816,838 11,761,035
Investments ......................................................................... V 100,000 100,000
Current Assets, Loans and Advances .................................. VI
Inventories ........................................................................... 182,614,568 116,459,797
Sundry Debtors .................................................................... 102,918,874 70,770,792
Cash and Bank Balances ...................................................... 13,131,911 26,841,163
Loans and Advances ............................................................ 39,668,491 11,901,757
338,333,844 225,973,509
Less : Current Liabilities and Provisions
Current liabilities ...................................................... VII 88,763,466 59,578,705
Provisions ................................................................ VIII 3,059,353 2,193,000
91,822,891 61,771,705

Net Current Assets .............................................................. 246,511,025 164,201,804

Profit and Loss Account ....................................................... 194,128,766 202,952,910
TOTAL ................................................................ 452,556,629 379,015,749

Significant Accounting Policies and Notes on Accounts ..... XV

As per our attached Report of even date For and on behalf of the Board of Directors
Anand G. Mahindra

}
Hemant Luthra
Arun Sanghi
For Deloitte Haskins & Sells
Sanjay Labroo Directors
Chartered Accountants
N Ram
Ramesh Iyer
Rajeev Dubey
A. B. Jani
Vinay Sanghi } C. E. O.
Partner
Ravi Khurana } C. F. O.
Mumbai, Dated: 29th April, 2006
Mumbai, Dated: 29th April, 2006

527
AUTOMARTINDIA LIMITED

Profit and Loss Account for the year ended on 31st March, 2006

Previous Year
Schedule Rupees Rupees

INCOME:
Sales (including accessories) (net of sales returns) ............................... 1,254,253,496 1,008,105,478
Income from services ............................................................................ IX 80,352,669 39,055,028
Other Income ......................................................................................... X 19,164,963 19,600,990
Increase in stock of trading goods ......................................................... XI 66,154,771 48,576,490
TOTAL .................................................................................. 1,419,925,899 1,115,337,986

EXPENDITURE:
Purchase of trading goods (including accessories) ................................ 1,165,001,332 941,092,431
Personal Expenses ................................................................................. XII 48,475,112 41,996,389
Operating and Other Expences .............................................................. XIII 176,965,117 119,853,765
Depreciation ........................................................................................... 3,171,424 8,319,675
Interest ................................................................................................... XIV 16,232,142 13,295,524
TOTAL .................................................................................. 1,409,845,127 1,124,557,784
............................................................................................................... 10,080,772 (9,219,798)
Profit/(Loss) before taxation
– Fring Benefit tax ............................................................................... 1,256,628 —
Profit/(Loss) after taxation ...................................................................... 8,824,144 (9,219,798)
Balance brought forward from previous year ......................................... (202,952,910) (193,733,112)
Balance carried to Balance Sheet .......................................................... (194,128,766) (202,952,910)

Earning Per Share (Refer Note no. 11 of Schedule XV) .........................

Basic and Diluted ................................................................................... 0.90 (1.05)

Significant Accounting Policies and Notes on Accounts ........................ XV

As per our attached Report of even date For and on behalf of the Board of Directors
Anand G. Mahindra

}
Hemant Luthra
For Deloitte Haskins & Sells Arun Sanghi
Sanjay Labroo Directors
Chartered Accountants
N Ram
Ramesh Iyer
Rajeev Dubey
A. B. Jani
Vinay Sanghi } C. E. O.
Partner
Ravi Khurana } C. F. O.

Mumbai, Dated: 29th April, 2006 Mumbai, Dated: 29th April, 2006

528
 AUTOMARTINDIA LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006
2006 2005
Rs. Rs. Rs. Rs.
A Cash Flow From Operating Activities :
Profit/(Loss) before tax ................................................................ 10,080,772 (9,219,798)
Adjustment for :
Depreciation ................................................................................. 3,171,424 8,319,675
Investment Income ..................................................................... (15,000) (15,000)
Interest Commitment and Finance charges ................................ 16,232,142 13,295,524
Amortisation of expenses ............................................................ — 133,271
Interest Income ........................................................................... (67,750) (16,521)
Loss on fixed assets sold, scrapped, written off ......................... — 202,291
19,320,816 21,919240
Operating Profit before Working capital charges ......................... 29,401,588 12,699,442
Adjustments for :
Trade and other receivables ......................................................... (60,467,402) (29,755,241)
Inventories ................................................................................... (66,154,771) (48,576,490)
Trade and other payable ............................................................... 29,938,761 22,818,666
Cash used in operations .............................................................. (96,683,412) (55,513,065)
Direct taxes .................................................................................. (591,689) (409,310)
Net Cash Used in Operating Activities : ...................................... (67,873,513) (43,222,933)
B. Cash Flow From Investing Activities :
Purchase of fixed assets ............................................................. (3,227,227) (5,869,019)
Fixed Assets discarded ................................................................ — 40,500
Interest received .......................................................................... 67,750 16,521
Dividends received ...................................................................... 15,000 15,000
Net Cash used in Investing Activities : ........................................ (3,144,477) (5,796,998)
C. Cash Flow From Financing Activities :
Proceeds from the issue of share capital .................................... — 140,128,750 140,128,750
Proceeds / (Repayment) from other borrowings ......................... 73,630,058 (46,738,304)
Interest paid ................................................................................. (16,321,320) (19,096,458)
Net Cash From Financing Activities : ........................................... 57,308,738 74,293,988
Net (Decrease)/Increase in Cash and Cash Equivalents .............. (13,709,252) 25,274,057

Cash and Cash equivalents at the beginning of the year ............. 26,841,163 1,567,106
Cash and Cash equivalents at the end of the year ...................... 13,131,911 26,841,163
Notes:
1) Components of Cash and cash equivalents include cash on hand and bank balance in the current accounts and deposit
accounts as disclosed under Schedule VI forming part of
the Balance Sheet and Profit and Loss Account.
2) Addition to fixed assets and sale of fixed assets are considered as part of investing activities.
3) Cash and cash equivalent includes: 31st March 2006 31 Mach 2005
Rs. Rs.
Cash and Bank Balance 13,131,991 28,841,163

As per our attached Report of even date For and on behalf of the Board of Directors
Anand G. Mahindra

}
Hemant Luthra
For Deloitte Haskins & Sells Arun Sanghi
Chartered Accountants Sanjay Labroo Directors
N Ram
Ramesh Iyer
A. B. Jani Rajeev Dubey
Partner Vinay Sanghi } C. E. O.
Mumbai, Dated : 29th April, 2006 Ravi Khurana } C. F. O.
Mumbai, Dated: 29th April, 2006

529
AUTOMARTINDIA LIMITED

Schedules forming part of the Balance Sheet and Profit and Loss Account for the year ended
31st March, 2006
SCHEDULE I As at 31st As at 31st SCHEDULE V As at 31st As at 31st
March, 2006 March, 2005 INVESTMENTS March, 2006 March, 2005
SHARE CAPITAL : Rupees Rupees Rupees Rupees Rupees
Authorised Long Term Unquoted (At cost)
12,000,000 (Previous Year 11,000,000) Non trade
Equity Shares of Rs. 10/- each 120,000,000 110,000,000 4,000 Equity shares of Rs. 25/- each fully paid up
of The Zoroastrian Co-operative Bank Ltd. 100,000 100,000
Issued, Subscribed and paid up 9,811,990 TOTAL 100,000 100,000
Equity Shares of Rs. 10 each fully paid up 98,119,900 98,119,900
Note : SCHEDULE VI
7,446,658 (Including 4,506,658 issued on rights basis) CURRENT ASSETS, LOANS
Equity Shares of Rs. 10/- each are held by AND ADVANCES
Mahindra & Mahindra Limited,
the holding company A) Cur
Currr ent Assets:
a) Inventories
(including 7 shares held jointly) Stock of trading Goods 182,614,568 116,459,797
TOTAL 98,119,900 98,119,900
b) Sundr
Sundryy Debtors
(Unsecured, Considered Good)
Debts outstanding for a period
SCHEDULE II exceeding six months 435,073 215,355
RESERVES AND SURPLUS Other Debts 102,483,801 70,555,437
Securities Premium Account : 102,918,874 70,770,792

As per last balance sheet 125,152,670 41,134,820 c) Cash and Bank Balances
Cash on hand (Including
Add : Received during the year — 84,017,850 cheques on hand
Rs. 215,425/- (Previous Year
TOTAL 125,152,670 25,152,670 Rs. 648,853/-) 5,345,022 1,100,470
Balances with Banks
with Schedules Bank
SCHEDULE III – in Current Account 7,736,889 25,740,693
SECURED LOANS – in Fixed Deposit account * 50,000 —
Loans and advances from banks Note *Deposited with sales tax
– Term Loan 1 50,000,000 50,000,000 authorities 13,131,911 26,841,163
– Cash Credit Account 2 119,199,127 45,654,001 B) Loans and advances :
– Working Capital Demand Loan 3 60,084,932 60,000,000 (Unsecured, considered good)
Advances recoverable in cash
229,284,059 155,654,001 or in kind or for value
to be received. 39,316,821 10,997,502
Add : Interest accrued and due — 89,178 Tax deducted at source 351,670 904,255
TOTAL 229,284,059 155,743,179 39,668,491 11,901,757
Notes : Note :
– Loans and Advances include amounts
1. To be Secured by second charge by way of hypothecation of entire current aggregating to Rs. 9,522,658/-
assets both present and future. (Previous Year Rs. 7,097,697/-)
2. Secured by first charge by way of hypothecation of entire current assets both paid towards security deposit for rented
present and future and ranking part-passu with the charge mentioned in 3 below. premises and Rs. 13,573,695/-
(Previous Year Rs. NIL) towards
3. Secured by first charge by way of hypothecation of entire current assets deposit on vehicles procured
both present and future and ranking pari-passu with the charge mentioned in "park and sell" scheme.
2 above. TOTAL 338,333,844 225,973,509

SCHEDULE IV
Fixed Assets : (In Rupees)
GROSS BLOCK DEPRECIATION NET BLOCK
As at Additions Deductions As at Upto For the Deductions Upto As at As at
Description of Assets 01/04/2005 31/03/2006 31/03/2005 year 31/03/2006 31/03/2006 31/03/2005
(A) Tangible Assets
– Improvements to Leasehold Property 17,052,574 625,000 — 17.677,574 15,775.241 466,343 — 16,241,584 1,435,990 1,277,333
– Computers 6,409,774 1,090,045 — 7,499,819 3,519,613 1,080,977 — 4,600,590 2,899,229 2,890,161
– Furniture and Fixtures 2,721,621 611,842 — 3,333,463 1,618,407 444,011 — 2,062,418 1,271,045 1,103,214
– Office Equipments 5,304,379 900,340 6,204,719 1,012,531 331,949 — 1,344,481 4,860,238 4,291,847
– Vehicles 3,466,745 — — 3,466,745 1,268,265 848,144 — 2,116,409 1,350,336 2,198,480
Sub Total (A) 34,955,093 3,227,227 — 38,182,320 23,194,058 3,171,424 — 26,365,482 11,816,838 11,761,035
(B) Intangible Assets
– Portal (Website) 30,000,000 — — 30,000,000 30,000,000 — — 30,000,000 — —
Sub Total (B) 30,000,000 — — 30,000,000 30,000,000 — — 30,000,000 — —
Total (A) + (B) 64,955,093 3,227,227 — 68,182,320 53,194,058 3,171,424 — 56,365,482 11,816,838 11,761,035
Previous year 59,363,782 5,869,019 277,708 64,955,093 44,909,300 8,319,675 34,917 53,194,058 11,761,035

* Note:- Includes NIL vehicles (Previous year 8 vehicles of Rs. 2,544,686/-) capitalised during the year from inventories.

530
 AUTOMARTINDIA LIMITED

Schedules forming part of the Balance Sheet and Profit and Loss Account for the year ended
31st March, 2006
SCHEDULE VII As at 31st As at 31st SCHEDULE XIII Previous Year
CURRENT LIABILITIES March, 2006 March, 2005 OPERATING AND OTHER EXPENSES Rupees Rupees
Rupees Rupees Rent 11,275,091 10,058,986
Sundry Creditors: Rates and Taxes ............................................. 12,123,310 658,689
Total outstanding dues of small Tools and accessories consumed .................... — 66,295
scale industrial undertakings ........ — — Repairs and Maintenance-Others ................... 1,512,276 1,135,030
Total outstanding dues to creditors Car insurance ................................................. 5,454,504 4,376,828
other than small scale industrial Insurance ........................................................ 1,491,738 553,333
undertakings ................................. 88,391,891 88,391,891 59,207,130 Electricity and Water Charges ........................ 1,479,742 1,518,661
Interest acrued but not due on loans 371,575 371,575 Advertising and Sales Promotion Exp. ................. 9,193,699 9,503,828
[Net of recovery Rs.4,336,623/- (Previous Year
Total.......... 88,763,466 59,578,705 Rs.813,594/-)]
Refurbishment Expenses ............................... 43,421,089 29,904,128
SCHEDULE VIII As at 31st As at 31st Registration expenses .................................... 9,358,401 5,481,522
PROVISIONS March, 2006 March, 2005 Travelling and Conveyance ............................. 13,808,163 11,341,397
Rupees Rupees
Printing and Stationery ................................... 1,578,090 1,369,031
Provision for Gratuity .................... 1,435,000 1,138,000 Legal and Professional Fees ........................... 911,597 468,353
Provision for encashable leave ..... 1,212,000 930,000 Commission & Brokerage .............................. 47,124,428 28,224,856
Provision for Fringe Benefit Tax Web Hosting Charges .................................... 79,895 97,116
(net of advance tax Rs. 1,144,275/-) 112,353 — Office Expenses ............................................. 4,471,822 3,093,057
Provision for Warranty .................. 300,000 125,000 Communication Charges ................................ 3,656,689 3,506,130
Total.......... 3,059,353 2,193,000 Preliminary expense written off ..................... — 133,271
Bad debts written off ..................................... 408,115 324,618
Loss on Fixed Assets discarded (net) ............. — 202,291
SCHEDULE IX Previous Year Bank Charges ................................................. 2,267,015 1,215,793
INCOME FROM SERVICES Rupees Rupees Miscellaneous Expenses ................................ 7,349,453 6,620,562
Registration Services, Insurance etc. 51,810,747 19,006,241
Certification Fees ......................... 2,497,908 3,233,657 Total........... 176,965,117 119,853,765
[Tax deducted at sour ce Note:
Rs. 26,179/- (Previous Year Miscellaneous Expenses include, after sales services, Servicing expenses, Octroi
Rs.34,944/- )] and Transportation Charges etc.
Data Processing charges — 1,231,789
[Tax deducted at source Rs. Nil SCHEDULE XIV Previous Year
(Previous Year Rs.2,209/-)] INTEREST Rupees Rupees
Commission income ..................... 26,044,014 15,583,340
[Tax deducted at sour ce Term Loan ...................................................... 4,375,000 4,378,000
Rs. 78,750/-(Previous Year On Short term loans ....................................... — 2,002,739
Rs.374,366/-)] On Cash Credit Account etc. .......................... 11,329,667 6,662,275
Total.......... 80,352,669 39,055,027 On Others ...................................................... 527,475 252,510
Total.......... 16,232,142 13,295,524
SCHEDULE X Previous Year
OTHER INCOME Rupees Rupees SCHEDULE XV:
Refurbishment income etc ........... 532,272 1,460,365 SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS
Internet
– on Fixed Deposits ................... 1,797 — 1) Significant Accounting Policies :
– on Others ................................ 65,953 16,521 Basis of preparation of accounts:
– on income tax refunds ............ 76,094 — The accounts have been prepared to comply in all material aspects with
Dividend income .......................... 15,000 15,000 applicable accounting principles in India, the Accounting Standards issued by
Dealer Sign Up Fees .................... 16,900,000 16,200,000 the Institute of Chartered Accountants of India (ICAI) and the relevant provisions
Sundry Credit balances written back 60,889 418,156 of the Companies Act, 1956
Excess provision of earlier year Use of estimates:
written back .................................. 33,649 — The preparation of the financial statements, in conformity with the generally
Miscellaneous income ................. 1,479,309 1,490,948 accepted accounting principles, requires estimates and assumptions to be made
Total.......... 19,164,963 19,600,990 that affect the reported amounts of assets and liabilities on the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Differences between actual results and estimates are
SCHEDULE XI Previous Year recognised in the period in which the results are known/materialise.
INCREASE IN STOCK Rupees Rupees Revenue Recognition:
OF TRADING GOODS In appropriate circumstances, revenue (income) is recognised when no
Stock as on 31st March, 2006 ...... 182,614,568 116,459,797 significant uncertainty as to collectibility or realisability exists.
Stock as on 1st April, 2005 ........... 116,459,797 67,883,307
Increase in stock Fixed Assets:
Total.......... 66,154,771 48,576,490 Tangible Assets:
Tangible Assets are stated at cost less Depreciation. Costs comprise of purchase
price and any attributable cost.
SCHEDULE XII Previous Year Intangible Assets:
PERSONNEL EXPENSES Rupees Rupees Portal (Website) is stated at initially incurred cost less accumulated amortization.
Salaries, Wages, Bonus, Etc. 43,288,941 37,450,204 Operating Lease:
Contribution to Provident Fund and Assets taken on lease under which, all the risk and rewards of ownership are
other funds ................................... 2,654,983 2,339,096 effectively retained by the lessor are classified as operating lease. Lease
Gratuity ........................................ 340,494 341,000 payments under operating leases are recognized as expenses on accrual basis
Leave encashment ....................... 415,801 384,063 in accordance with the respective lease agreements.
Staff Welfare ................................ 1,774,893 1,482,026
Depreciation/Amortisation :
Total.......... 48,475,112 41,996,389 (a) Depreciation on fixed assets is provided on Straight Line Method at the
rates and in the manner specified in schedule XIV to the Companies Act,
1956 except for vehicles which are depreciated over a period of three years.

531
AUTOMARTINDIA LIMITED

(b) Depreciation on leasehold improvements made in respect of premises 4) Assets acquired on Lease
taken on short term lease is provided over period of the lease. a) Asset acquired on lease prior to April 1, 2001
(c) Cost of the website purchased is being amortised over a period of 5 years
The future obligations on assets acquired on lease as at 31 st March, 2006
on time proportion basis.
are Rs. 1,518,000/-
Investments:
Current investments are carried at lower of cost and fair value. Long term b) Asset acquired on lease after April 1, 2001
investments are carried at cost. Provision is made to recognise a decline, other The Company has taken on lease office premises under operating lease
than temporary, in the carrying amount of long term investment. ranging between 3 years to 6 years. (Previous year 3 years – 6 years). The
Inventories: lease rentals recognised in the Profit and Loss Account for the year are
Trading goods are valued at cost and or net realisable value, whichever is lower. Rs. 11,018,238/- (Previous year Rs. 97,34,771/-)
The cost includes purchase price and incidental expenses, i. e., commission/
brokerage, refurbishment cost. Total minimum lease Total minimum lease
payments outstanding as on payments outstanding as on
Borrowing Costs: 31st March, 2006 31st March, 2005
Borrowing costs that are attributable to the acquisition or construction of (Rupees) (Rupees)
qualifying assets are capitalised as part of the cost of such assets. A qualifying
asset is one that necessarily takes a substantial period of time to get ready for Note later than one year 8,562,792 8,215,056
its intended use or sale. All other borrowing costs are charged to revenue.
Later than one year but
Foreign Currency Transaction: not later than five years 5,912,940 8,686,462
Transactions in foreign currencies are recorded at the exchange rates prevailing
on the date of transaction. Monetary items are translated at the year-end rates. Later than five years NIL NIL
The exchange difference between the rate prevailing on the date of transaction Total 14,475,732 16,901,518
and on the date of settlement as also on translation of monetary items at the
end of the year, is recognised as income or expense, as the case may be, 5) No provision for current Income Tax under the provision of the Income Tax Act,
except in case of fixed assets where it is adjusted to the cost of fixed assets. 1961 is necessary in view of the carry forward losses/ deductions available
Retirement Benefits: under the provision of the said Act.
Retirement benefits in respect of gratuity and encashable leave at retirement / In accordance with the Accounting Standard 22 on “Accounting For Taxes on
cessation are provided on the basis of actuarial valuations. Income “ (AS 22) issued by ICAI, deferred tax assets and liabilities should be
Income taxes: recognized for all timing differences in accordance with AS 22. However,
Tax expense comprises of current tax, deferred tax and fringe benefit tax. Current considering the present financial position and the requirement of the AS 22
tax and Deferred tax are accounted for in accordance with Accounting standard 22 regarding certainty/virtual certainty, the same is not provided for as an asset
on "Accounting For Taxes on Income", (AS 22) issued by the ICAI.Current tax is (net). However, the same will be reassessed at a subsequent Balance Sheet
measured at the amount expected to be paid to/recovered from the tax authorities, date and will be accounted for in the year of certainty/virtual certainty in
using the applicable tax rates. Deferred tax assets and liabilities are recognised for accordance with the aforesaid Accounting Standard.
future tax consequences attributable to timing differences between taxable income
and accounting income that are capable of reversal in one or more subsequent
years and are measured using relevant enacted tax rates. Fringe benefits tax is 6) Related Party Transactions
recognized in accordance with the relevant provisions of the Income-tax Act, 1961 As required under Accounting Standard 18 (AS-18), following are details of
and the Guidance Note on Fringe Benefits Tax issued by the ICAI. transactions during the year with the related parties of the Company as defined
Warranty: in AS-18:
Provision for Product Warranty claims is recognized when it is probable that an i. List of Related Parties and Relationships
outflow of resources will be required to settle the claims and a realizable
estimate can be made of the amounts. Name of the Related Party Relation
Contingent Liabilities: Mahindra & Mahindra Limited. Holding Company
These, if any, are disclosed in the notes on accounts. Provision is made in the Mahindra & Mahindra Financial Fellow Subsidiary
accounts if it becomes probale that an outflow of resorces embodying economic Services Limited. Company
benefilts will be required to settle the obligation. Bristlecone India Limited Fellow Subsidiary Company
Notes on Accounts: Mahindra Intertrade Limited. Fellow Subsidiary Company
2) The accumulated losses of the Company as at the year-end have substantially Mahindra Holidays & Resorts India Limited. Fellow Subsidiary Company
eroded the share capital of the Company. ii. Related Party Transactions
During the year under review, the Company opened 29 new Franchisee Outlets Holding Fellow
as part of its long term Business Plan. The Operation of the Company has Company Subsidiaries
resulted into increase in turnover and net profit for the year which has contributed Companies
to a reduction in the accumulated losses as at the year end. Further as per the a) Unsecured Loan
aforesaid plan, the company plans to further open 35 such outlets in the next
Balance as on 01/04/2005 NIL NIL
year. This will result in further increase in sales volume and consequent effect
(55,000,000) (30,000,000)
on profitability and net worth. Accordingly, the account of the Company have
been prepared on a going concern basis, which is dependent on availability of Add : ICD taken NIL NIL
finance and growth in business as anticipated. (NIL) (NIL)
3) The Company has instituted “Associate Stock Option Plan 2000 (ASOP)”. For Less : ICD Repaid (NIL) NIL
this purpose the Board of Directors have constituted a committee known as the (NIL) (30,000,000)
ASOP Committee. Under the said ASOP, 460,000 options by way of issue of Balance as on 31/03/2006 NIL NIL
warrants have been granted in an earlier year to eligible persons selected by the NIL NIL
ASOP committee. The said option entitles the holders to apply for 460,000 Equity
b) Interest accrued
Shares Rs.10/- each at par after the vesting period as per the terms of the ASOP.
Balance as on 01/04/2005 NIL NIL
The scheme has been discontinued w.e.f. 30th June 2005 as the maximum
period of 5 years is lapsed on that date. (4,864,174) (1,757,877)
The details of the options are as under: Interest Payable during NIL NIL
31st March, 31st March, the year (1,178,355) (824,384)
2006 2005 Less : Interest paid during the year NIL NIL
(6,042,529) (2,582,261)
Options granted and outstanding at the
beginning of the year 391,200 409,100 Balance as on 31/03/2006 NIL NIL
(NIL) (NIL)
Option exercised during the year NIL 9,900
c) Sundry Creditors
Options vested during the year NIL 365,600 Balance as on 01/04/2005 1,073,256 302,827
Options lapsed 391,200 NIL (4,862,732) (613,246)
Balance as on 31/03/2006 430,943 NIL
Options outstanding at the (1,073,256) (302,827)
end of the year NIL 3,91,200

532
 AUTOMARTINDIA LIMITED

d) Sundry Debtors There have been no transactions with the aforesaid companies during this
Balance as on 01/04/2005 NIL NIL period.
(NIL) (NIL) 7) The Principal business of the Company is the business of trading in used cars.
Balance as on 31/03/2006 NIL NIL All other activities of the Company revolve around / are connected with its
(NIL) (NIL) main business. Considering this, the Company has only one reportable segment.
e) Purchase 8) Additional information pursuant to the provisions of paragraph 3(i) (a) &
Purchase of Acessories NIL 12,518 (ii) of part II of schedule VI to the companies Act, 1956 (to the extent
(NIL) (NIL)
applicable):
f) Expenditure
Quantitative details in respect of Goods Traded
Rent 2,093,688 NIL
Class of Adjust-
(1,228,500) (NIL) Goods Opening Stock Purchases ments* Sales Closing Stock
Reimbursement of Cost 39,937 NIL Qty. Value Qty. Value Qty. Qty. Value Qty. Value
(115,000) (NIL) Nos. Rupees Nos. Rupees Nos. Nos. Rupees Nos. Rupees
Insurance 40,141 NIL Vehicles 558 116,459,797 5695 1,163,346,843 — 5533 1,252,643,099 763 1,80,790,543
(18,750) (308,670) (332) (67,883,307) (4548) (941,092,431) (9)* (4313)* (1,008,105,478) (558) (116,459,797)
g) Other Income Acces- — — 1,654,489 — — 1,610,397 — 1,824,025
Miscellaneous Income NIL NIL sories (—) (—) (—) (—) (—) (—) (—) (—)
(NIL) (330,537) Total 116,459,797 1,165,001,332 1,254,253,496 182,614,568
Out of the above items, transactions with fellow subsidiaries in excess of (67,883,307) (941,092,431) (1,008,105,478) (116,459,797)
10% of the total related party transactions are as under:
Transaction Amount Rs. Note: Previous year figures are given in brackets.
* include 8 cars capitalized and 1 car lost in accident.
Purchase of Accessories
Fellow Subsidiary Company 9) Expenditure in Foreign Currency
Mahindra Intertrade Ltd. 12,518/- (on accrual basis)
Notes : 31st March, 31st March,
1. Previous year figures are given in brackets. 2006 2005
Other related parties of the Company are as under: Particulars Rupees Rupees
• Mahindra Ashtech Ltd
• Mahindra Engineering and Chemical Products Ltd. Travelling 240,372/- 230,178/-
• Mahindra Shublabh Services Ltd.
• Mahindra Holdings and Finance Ltd. 10) Remuneration to Auditors includes:
• Mahindra Steel Service Centre Ltd.
• Mahindra Logisoft Business Solutions Ltd. 31st March, 31st March,
• Mahindra Holidays and Resorts USA Inc 2006 2005
• Mahindra Acres Consulting Engineers Ltd. Particulars Rupees Rupees
• Mahindra Infrastructure Developers Ltd. (i) Audit Fees ................................................... 3,00,000/- 200,000/-
• Mahindra USA Inc (ii) In any other manner, for certification etc. ... 25,000/- 25,000/-
• Mahindra Gujarat Tractor Ltd. (iii) For expenses .............................................. 9,679/- 10,926/-
• NBS International Ltd.
(iv) For service tax ............................................ 39,780/- 22,950/-
• Mahindra Gesco Developers Ltd.
• Bristlecone GmbH Ltd. Total ............................................................ 3,74,459/- 258,876/-
• Bristlecone Inc.
• Bristlecone Ltd., Cayman Islands 11) Earning Per Share is calculated as follows:
• BristleconeUK Ltd. 31st March, 31st March,
• Mahindra Middle East Electrical Steel Service Centre (FZE) (w.e.f 8th 2006 2005
August, 2004) Rupees Rupees
• Mahindra SAR Transmission Pvt. Ltd.
• Mahindra Overseas Investment Company (Mauritius Limited) (w.e.f. 24th a) Net profit/(loss) after tax for the year (Rs.) 88,24,144 (9,219,798)
December, 2004) b) Weighted average number of
• Mahindra Insurance Brokers Ltd. (w.e.f 7th April, 2004) Equity Shares Basic & Diluted 9,811,990 8,761,863
• Bristlecone Singapore Pte. Ltd. c) Nominal Value of Equity Shares (Rs.) 10 10
• Tech Mahindra (R&D) Services Pte Ltd. (w.e.f. 28th Nov. 2005) d) Earning per shares – Basic & Diluted 0.90 (1.05)
• Tech Mahindra (R&D) Services Inc (w.e.f. 28th Nov. 2005)
• Console Estate & Investments Ltd (w.e.f. 21st June, 2005 upto 20th March, 12. Provision for warranty is estimated considering the pattern/history of such
2006) claims admitted by the Company. The details of such provision are as under:
• Jensand Ltd (3rd Jan. 2006) Balance outstanding as at the
• Mahindra & Mahindra South Africa (Proprietary) Ltd. beginning of the year 125,000 —
• Mahindra (China) Tractor Company Ltd (w.e.f. 13th May, 2005) Add: Provision made during the year 300,000 125,000
• Mahindra Engineering Design & Development Company Ltd. Less: Payments made during the year 125,000 —
• Mahindra Europe S.R.L. (w.e.f. 30th May, 2005)
• Mahindra Automotive Steels Limited (w.e.f. 27th May, 2005) Balance outstanding as at the year end 300,000 125,000
• Mahindra International Limited (w.e.f. 1st Nov. 2005) 13. Previous year figures have been regrouped whereever necessary to
• Mahindra Realty Limited (w.e.f. 21st Sept. 2005) correspond with the current year figures.
• Mahindra Renault Pvt. Limited (w.e.f. 5th Aug. 2005
• Mahindra Ugine Steel Company Ltd (w.e.f. 21st June, 2005) Signature to Schedule I to XV
• Mahindra World City (Jaipur) Ltd (w.e.f. 26th Aug. 2005)
• Mahindra World City Developers Ltd. As per our attached For and on behalf of the Board of Directors
• Mahindra – BT Investment Company (Mauritius) Ltd (w.e.f. 9th May, 2005) Report of even date

}
Anand G. Mahindra
• Plexion Technologies (UK) Ltd (w.e.f. 15th Feb. 2006)
• Plexion Technologies GmbH, Germany (w.e.f. 15th Feb. 2006) Hemant Luthra
• Plexion Technologies Incorporated, USA (w.e.f. 15th Feb. 2006) For Deloitte Haskins & Sells Arun Sanghi Directors
• Plexion Technologies (India) Pvt. Ltd. (w.e.f. 15th Feb. 2006) Chartered Accountants Sanjay Labroo
• Stockes Forgings Dudley Ltd (w.e.f. 3rd Jan. 2006) N. Ram
• Stockes Forgings Ltd (w.e.f. 3rd Jan. 2006)
• Stocks Groups Ltd (w.e.f. 3rd Jan. 2006) Ramesh Iyer
• Tech Mahindra (R&D Services) Ltd. (w.e.f. 28th Nov. 2005) Rajeev Dubey
• Tech Mahindra (Americas) Inc. A. B. Jani
• Tech Mahindra (GmbH) Partner Vinay Sanghi C. E. O.
• Tech Mahindra (Singapore) Pte Ltd.
• Tech Mahindra Ltd. Ravi Khurana C.F.O.
• Tech Mahindra (Thailand) Ltd. (w.e.f. 21st Feb. 2006)
• Tech Mahindra Foundation (w.e.f. 22nd March, 2006) Mumbai, Dated : 29th April, 2006 Mumbai, Dated: 29th April, 2006

533
AUTOMARTINDIA LIMITED

14. Balance Sheet Abstract and Company’s General Business Profile :

I. Registration Details :

Registration No. 1 1 - 8 3 9 9 6 State Code

Balance Sheet Date 3 1 0 3 2 0 0 6 1 1

Date Month Year

II. Capital raised during the year (amount in Rupees thousands)

Public Issue Rights Issue

N I L

Bonus Issue Private Placement

N I L

III. Position of mobilisation and deployment of funds (amount in Rupees thousands)

Total Liabilities Total Assets

4 5 2 5 5 7 4 5 2 5 5 7

Sources of Funds (amount in rupees thousands)

Paid-up Capital Reserves and Surplus
9 8 1 2 0 1 2 5 1 5 3

Secured Loans Unsecured Loans

2 2 9 2 8 4 N I L

Advance against Share Capital

N I L

Application of Funds (amount in Rupees thousands)

Net Fixed Assets Investments

1 1 8 1 6 1 0 0

Net Current Assets Miscellaneous Expenditure

2 4 6 5 1 1 N I L

Accumulated Losses
1 9 4 1 2 9

IV. Performance of the Company (amount in Rupees thousands)

Turnover
(Including Other Income) Total Expenditure
1 2 5 4 2 5 3 1 4 0 9 8 4 5

+ (–) Profit/(Loss) Before Tax + (–) Profit/(Loss) After Tax

ü 1 0 0 8 0 ü 8 8 2 4

Earning per Share (Rupees) Dividend %

[see note 13 below]
0 . 9 0 N I L

534
 AUTOMARTINDIA LIMITED

V. Generic names of three principal products/services of company (as per monetary terms)

Item Code No. (ITC Code) N A

Product Description D E A L I N G I N U S E D C A R S

For and on behalf of the Board of Directors

Anand G. Mahindra

}
Hemant Luthra
Arun Sanghi
Sanjay Labroo Directors
N Ram
Ramesh Iyer
Rajeev Dubey

Vinay Sanghi } C. E. O.
Ravi Khurana } C. F. O.

Mumbai, Dated: 29th April, 2006

535
MAHINDRA USA, INC.

Directors’ Report
Your Directors present their Report together with the audited accounts of your Company for the year ended 31st March, 2006.

Financial Highlights:

2006 2005
US $ INR US $ INR

Income ............................................................ 150,395,389 6,692,594,810 123,287,050 5,401,205,661

Profit before tax .............................................. 920,571 40,965,410 1,764,028 77,282,067
Profit after tax ................................................. 616,542 27,436,119 1,109,079 48,588,751

During the year under review, your Company’s total income
recorded a growth of 22% over the previous year - from $123.3
million in F-05 to $150.4 million in F-06. The Company’s profit
before tax however declined in F-06 from $1,764,028 in F-05 to
$920,571 in F-06 – a decrease of 48%. This was largely due to steel
price increases and interest rate increases. The Company sold
10,006 tractors during the year April, 2005 to March, 2006 as
against 8,481 tractors sold during the last year, a growth of 18%.
In the year F-2006 the industry retail sales declined more than
2%. During the same period your Company showed impressive
retail growth of 25%. The Company outperformed industry and
achieved this impressive growth by introduction of new models,
new dealers recruitment, supported by an aggressive retail
finance program.
In the last one year, your Company has increased the name
awareness in the US market and in the current year your Company
will be more focused on the brand in southern states. Your
Company will continue to focus on developing new markets and
as a first step to support these new markets, your Company has
set up a new distribution center at Red Bluff, California. With
aggressive dealer recruitment and a wider range of tractors and
tractor applications, your Company expects to achieve a
satisfactory growth in the current year.
Anjanikumar Choudhari
Date: 8th May, 2006. Chairman

536
 MAHINDRA USA, INC.

Independent Auditor’s Report

April 21, 2006

To the Stockholder and

the Board of Directors
MAHINDRA USA, INC.

We have audited the accompanying balance sheets of Mahindra
USA, Inc. (a Texas Corporation) as of March 31, 2006 and March
31, 2005, and the related statements of income, stockholder’s
equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Mahindra
USA, Inc. as of March 31, 2006 and March 31, 2005, and the
results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted
in the United States of America.
The presentation of financial information in Indian rupees in the
financial statements is not a required part of the basic financial
statements. We have verified the arithmetic accuracy of the
presentation based upon an exchange rate provided by
management. We did not audit and do not express an opinion
on such information.
KAHANEK, FRANKE & ASSOCIATES, L.C.

537
MAHINDRA USA, INC.

Balance Sheets as of March 31, 2006 and March 31, 2005

2006 2005
U.S. $ INR U.S. $ INR
ASSETS
Currents assets:
Cash and cash equivalents .................................................. $ 188,067 8,399,072 $ 61,579 2,750,118
Accounts receivable:
Customers, net ............................................................. 26,722,103 1,193,409,120 16,692,201 745,473,697
Employees ..................................................................... 50,202 2,242,021 82,396 3,679,805
Inventories ........................................................................... 39,922,159 1,782,923,621 37,358,303 1,668,421,812
Deferred taxes ..................................................................... 439,040 19,607,527 297,153 13,270,853
Prepaid expenses and deposits .......................................... 30,250 1,350,965 31,872 1,423,404
Total current assets ............................................................. 67,351,821 3,007,932,326 54,523,504 2,435,019,689
Property and equipment, net ..................................................... 2,573,461 114,930,768 2,286,867 102,131,480
Total assets ................................................................................ $ 69,925,282 3,122,863,094 $ 56,810,371 2,537,151,169

LIABILITIES AND STOCKHOLDER’S EQUITY

Current liabilities:
Accounts payable:
Related party ................................................................. $ 22,730,001 1,015,121,845 $ 22,177,494 990,446,882
Other ............................................................................. 16,777,079 749,264,348 9,458,976 422,437,868
Accrued expenses ............................................................... 4,845,427 216,396,770 3,332,420 148,825,877
Income taxes payable .......................................................... 221,491 9,891,788 342,314 15,287,743
Warranty reserve ................................................................. 75,826 3,386,389 75,826 3,386,389
Note payable ........................................................................ 16,517,708 737,680,839 13,005,000 580,803,300
Current portion of deferred compensation payable ............ 72,667 3,245,308 174,249 7,781,961

Total current liabilities .......................................................... 61,240,199 2,734,987,287 48,566,279 2,168,970,020

Long-term deferred compensation payable, less
current portion ........................................................................... — — 175,551 7,840,108

Total liabilities ............................................................................. 61,240,199 2,734,987,287 48,741,830 2,176,810,128

Stockholder’s equity:
Common stock ($.10 par value; 50,000,000 shares
authorized and 45,000,000 issued) ..................................... 4,500,000 200,970,000 4,500,000 200,970,000
Retained earnings ................................................................ 4,185,083 186,905,807 3,568,541 159,371,041
Total stockholder’s equity .......................................................... 8,685,083 387,875,807 8,068,541 360,341,041
Total liabilities and stockholder’s equity ..................................... $ 69,925,282 3,122,863,094 $ 56,810,371 2,537,151,169

The accompanying notes are an integral part of this statement.

538
 MAHINDRA USA, INC.

Statements of Income for the years ended March 31, 2006 and March 31, 2005

2006 2005
U.S. $ INR U.S. $ INR

Revenues:
Sales of tractors and parts ................................................... $ 150,395,389 6,716,658,073 $ 123,287,050 5,505,999,653

Total revenues ............................................................... $ 150,395,389 6,716,658,073 $ 123,287,050 5,505,999,653

Cost of sales:
Tractors and parts ................................................................ 114,606,890 5,118,343,707 93,017,352 4,154,154,940
Other direct costs ................................................................ 2,249,525 100,463,787 1,898,629 84,792,771
Total cost of sales ......................................................... 116,856,415 5,218,807,494 94,915,981 4,238,947,711
Gross profit ................................................................................ 33,538,974 1,497,850,579 28,371,069 1,267,051,942
General and administrative expenses ........................................ 32,073,239 1,432,390,854 26,366,777 1,177,540,261
Income from operations ............................................................ 1,465,735 65,459,725 2,004,292 89,511,681
Other income (expense):
Interest income ................................................................... 204,496 9,132,791 109,966 4,911,082
Interest expense .................................................................. (758,267) (33,864,204) (359,191) (16,041,470)
Gain on disposal of assets ................................................... 8,607 384,389 8,961 400,198
Total other income (expense), net ....................................... (545,164) (24,347,024) (240,264) (10,730,190)
Income before income taxes ..................................................... 920,571 41,112,701 1,764,028 78,781,491
Income tax expense:
Current ................................................................................. 445,916 19,914,609 832,760 37,191,062
Deferred .............................................................................. (141,887) (6,336,674) (177,811) (7,941039)
Net Income ................................................................................ $ 616,542 27,534,766 $ 1,109,079 49,531,468

The accompanying notes are an integral part of this statement.

539
MAHINDRA USA, INC.

Statements of Stockholder's Equity for the years ended March 31, 2006 and March 31, 2005

U.S. $

Total
Common Stock Retained Stockholders
Shares Amount Earnings Equity
Balance – April 1, 2004 45,000,000 $ 4,500,000 $ 2,459,462 $ 6,959,462
Net income 1,109,079 1,109,079

Balance – April 1, 2005 45,000,000 4,500,000 3,568,541 8,068,541

Net Income 616,542 616,542
Balance – March 31, 2006 45,000,000 $ 4,500,000 $ 4,185,083 $ 8,685,083

INR

Total
Common Stock Retained Stockholders
Shares Amount Earnings Equity
Balance – April 1, 2004 45,000,000 200,970,000 109,839,573 310,809,573
Net income 49,531,468 49,531,468

Balance – April 1, 2005 45,000,000 200,970,000 159,371,041 360,341,041

Net Income 27,534,766 27,534,766

Balance – March 31, 2006 45,000,000 200,970,000 186,905,807 387,875,807

The accompanying notes are an integral part of this statement.

540
 MAHINDRA USA, INC.

Statements of Cash Flows for the years ended March 31, 2006 and March 31, 2005 (increase
(decrese) in cash and cash equivalents)

2006 2005
U.S. $ INR U.S. $ INR

Cash flows from operating activities:

Net income .......................................................................... $ 616,542 27,534,766 $ 1,109,079 49,531,468
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation ........................................................................ 399,515 17,842,340 350,327 15,645,604
Deferred income tax ............................................................ (141,887) (6,336,673) (177,812) (7,941,084)
Gain on disposal of assets ................................................... (8,631) (385,460) (8,961) (400,198)
Federal and state income taxes .......................................... (120,823) (5,395,955) – –
(Increase) decrease in:
Accounts receivable – trade .......................................... (10,029,902) (447,935,423) (4,419,542) (197,376,746)
Accounts receivable – employees ................................ 32,194 1,437,784 (13,760) (614,522)
Accounts receivable – other .......................................... – – 455,767 20,354,554
Inventories .................................................................... (2,563,856) (114,501,809) (13,114,984) (585,715,185)
Prepaid expenses .......................................................... 1,622 72,439 (10,724) (478,934)
Increase (decrease) in:
Accounts payable .......................................................... 7,870,610 351,501,443 6,016,335 268,689,521
Accrued expenses ......................................................... 1,235,874 55,194,130 762,383 34,048,026
Warranty reserve ........................................................... – – 8,278 369,695
Net cash provided (used) by operating activities ....................... (2,708,742) (120,972,418) (9,043,614) (403,887,801)

Cash flows from investing activities:

Capital expenditures ............................................................ (786,255) (35,114,148) (689,669) (30,800,618)
Proceeds from sale of assets .............................................. 108,777 4,857,981 47,923 2,140,242
Net cash provided (used) by investing activities ....................... (677,478) (30,256,167) (641,746) (28,660,376)
Cash flows from financing activities:
Proceeds from issuance of debt ......................................... 7,542,708 336,857,339 10,000,000 446,600,000
Principal payments on debt ................................................. (4,030,000) (179,979,800) (1,998,966) (89,273,822)
Net cash provided (used) by financing activities ....................... 3,512,708 156,877,539 8,001,034 357,326,178
Net increase (decrease) in cash and cash equivalents .............. 126,488 5,648,954 (1,684,326) (75,221,999)
Cash and cash equivalents:
Beginning of year ................................................................. 61,579 2,750,118 1,745,905 77,972,117
End of year ......................................................................... $ 188,067 8,399,072 $ 61,579 2,750,118

The accompanying notes are an integral part of this statement.

541
MAHINDRA USA, INC.

NOTES TO FINANCIAL STATEMENTS MARCH 31, 2006 AND Supplemental disclosure of cash flow information for the year ended March 31:
MARCH 31, 2005 2006 2005
U.S. $ INR U.S. $ INR
NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: Interest Paid $ 821,093 36,670,013 $ 224,082 10,007,502

The Company Income Taxes Paid $ 548,438 24,493,241 $ 618,391 27,617,342

Mahindra USA, Inc. (the Company) was incorporated June 8, 1994 and commenced
business on March 15, 1995. The Company is owned by Mahindra and Mahindra Advertising –
Ltd., Mahindra and Mahindra Ltd. is a publicly traded corporation headquartered in The Company subsidizes product advertising carried on by dealers within each
Mumbai, India which, among other activities, manufactures farming equipment and dealer's local market. Additionally, the Company advertises in trade magazines, at
automobiles. The Company sells tractors, parts, attachments and accessories in trade shows and uses various other means of promotions, including product
North America under wholesale distribution agreements. The Company's sales are brochures, to increase the brand awareness and sale of the products in the market.
to a network of more than 240 dealers throughout North America. The Company also conducts dealers' conferences. All of these are treated as
expenses in the year incurred.
Financial Presentation in U.S. Dollars and India Rupees
NOTE 2 – ACCOUNTS RECEIVABLE – CUSTOMERS:
Financial information in this report is shown in U.S. dollars ("U.S. $') and in Indian
The Company's customers are the retail dealers authorized to sell Mahindra tractors.
rupees ("INR"). For both March 31, 2006 and March 31, 2005, dollar amounts are
During the year ending March 31, 2005 and for the current fiscal year, the Company
translated for convenience into Indian rupees at exchange rate of 44.66 Rs per
offered varying discounts for payments. Dealers are also offered interest free
dollar which is the average of the telegraphic transfer buying and selling rates quoted
financing for up to 270 days after date of purchase. The Company has also arranged
by the Mumbai Branch of State Bank of India on March 31, 2006. Within the notes
for dealers to finance tractors purchased through commercial lenders who remit
to the financial statements, Indian rupee amounts are shown parenthetically following
payment directly to the Company.
the U.S. dollar amount.
NOTE 3 – INVENTORIES AND VEHICLE FINANCING:
Significant Accounting Policies
Inventories were comprised of the following at March 31:
Accounting method – 2006 2005
The Company uses the accrual method of accounting. U.S. $ INR U.S. $ INR
Use of estimates – New Tractors $ 26,190,755 1,169,679,118 $ 25,913,535 1,157,298,473
The preparation of financial statements in conformity with generally accepted Parts, accessories and other 13,731,404 613,244,503 11,444,768 511,123,339
accounting principles requires management to make estimates and assumptions $ 39,922,159 1,782,923,621 $ 37,358,303 1,668,421,812
that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ NOTE 4 – PROPERTY AND EQUIPMENT:
from those estimates. Property and equipment is comprised of the following at March 31:
Receivables – 2006 2005
Est. Useful
Receivables are stated at the amount invoiced for the sale to the various dealers. Life US $ INR US$ INR
There is currently an allowance for uncollectible accounts of $225,653 (10,077,663 Machinery & equip. 7 yrs $ 74,502 3,327,259 $ 57,056 2,548,121
INR) and $195,450 (8,728,797 INR) at March 31, 2006 and March 31, 2005, Office furniture & equip. 5-7 yrs 724,616 32,361,351 789,552 35,261,392
respectively, which management considers sufficient to cover uncollectible accounts.
(See Note 2 for a discussion of dealer financing arrangements.) Buildings 39 yrs 1,937,200 86,515,352 1,785,939 79,760,036
Land – 60,000 2,679,600 60,000 2,679,600
Revenue recognition –
Heavy equipment 7 yrs 322,001 14,380,565 279,787 12,495,287
Revenue from the sale of tractors, parts, attachments and accessories is recognized Vehicles 5 yrs 680,489 30,390,639 567,748 25,355,626
when the ordered goods are invoiced to the dealer after completion of credit approval. Capitalized WIP-SAP – 202,400 9,039,184 0 0
Dealers are responsible for shipment of goods purchased.
Capitalized Tractor 5 yrs 142,740 6,374,768 161,041 7,192,091
Inventories
4,143,948 185,068,718 3,701,123 165,292,153
New tractors, parts and accessories are stated at the lower of cost or market. Cost Less – accumulated
is determined by moving average. depreciation and
amortization (1,570,487) (70,137,950) (1,414,256) (63,160,673)
Property and equipment –
$ 2,573,461 114,930,768 $ 2,286,867 102,131,480
Property and equipment are stated at cost. The cost of additions and improvements
are capitalized and expenditures for repairs and maintenance are expensed in the NOTE 5 – RELATED PARTY TRANSACTIONS:
period incurred. When items of property and equipment are sold or retired, the
The Company purchases tractors and parts from Mahindra and Mahindra Ltd., which
related costs and accumulated depreciation are removed from the accounts and
owns 100% of the Company. As of March 31, 2006 and March 31, 205, the Company
any gain or loss on disposition is included in the statement of income.
owed Mahindra and Mahindra Ltd., $22,730,001 (1,015,121,845 INR) and
Depreciation is provided over the useful lives of the related assets using the straight- $22,177,494 (990,446,882 INR), respectively which are net of amounts the Company
line method for financial reporting and the modified accelerated cost recovery method has paid for warranty claims and legal fees on behalf of Mahindra and Mahindra
for tax purposes. Ltd. Mahindra and Mahindra Ltd. provides tractors to the Company on an open
account, which is paid when due.
Income taxes –
As of March 31, 2006, and March 31, 2005, respectively, the Company owed $0
Income for financial reporting purposes is different than income for income tax and $8,000 (357,280 INR) to Bristlecone for computer services and support. These
reporting purposes due principally from timing differences relating to allowances amounts are shown as accounts payable.
for inventory valuation, allowance for doubtful accounts, depreciation and expense Bristlecone is an affiliate of Mahindra and Mahindra Ltd.
accruals.
NOTE 6 – ACCRUED EXPENSES:
Statement of cash flows –
Expenses accrued for the years ending March 31, 2006 and March 31, 2005 include
For purposes of the statement of cash flows, the Company considers all cash advertising, marketing program costs, cash discounts,state franchise taxes, payroll
accounts, money market accounts, and certificates of deposit with maturities of and payroll taxes, employee bonuses, salesmen and customer bonuses, legal fees,
less than three months to be cash and cash equivalents. property taxes and insurance deductibles.

542
 MAHINDRA USA, INC.

NOTE 7 – NOTES PAYABLE: NOTE 10 – EMPLOYEE BENEFIT PLANS:

The Company has an available credit facility with a bank in the amount of $30,000,000 The Company adopted a 401(K) retirement plan effective April 1, 1998. All of the
(1,339,800,000 INR), secured by inventory and accounts receivable which terminates Company's employees who are at least 21 years of age are eligible upon the first
on January 5, 2007. At March 31, 2006, two loans totaling $16,517,708 (737,680,839 enrollment date (January 1 or July 1) after their hire date to participate in a 401(K)
INR) were outstanding against the facility. $15,000,000 (669,900,000 INR) bears profit sharing plan (the Plan). Eligible employees may make contributions up to
interest at 5.125% and $1,517,708 (67,780,839 INR) bears interest at 5.75%. There 12% of their compensation. The Plan provides for matching contributions by the
were no outstanding letters of credit as at March 31, 2006. Company in an amount equal to the employee contributions, not to exceed 3% of
Loans outstanding under the line at March 31, 2005 were $ 13,005,000 eligible contributions. Employee contributions and employer matching contributions
(580,803,300 INR). are invested in mutual funds. The Company's contributions for the years ended
NOTES 8 – INCOME TAXES: March 31, 2006 and 2005, were $51,487 (2,299,409 INR) and $ 47,121 (2,104,424
INR), respectively.
The components of the provision for state and federal income taxes are as follows
for the period ended March 31: The Company also has a nonqualified deferred compensation plan which will pay
2006 2005 certain employees upon completion of a specified term of employment. The accrued
costs of these payments are provided in these financial statements.
US $ INR US $ INR
Current income taxes $ 445,916 19,914,609 $ 832,760 37,191,062 NOTE 11 – LEASES:
Deferred income taxes
(benefit) (141,887) (6,336,673) (177,811) (7,941,039) The Company has various leases for land and buildings which are classified as
$ 304,029 13,577,936 $ 654,949 29,250,023 operating leases. Total rent expense for all operating leases for 2006 and 2005
were $417,188 (18,631,616 INR) and $243,350 (10,868,011 INR), respectively.
The Company's total deferred tax assets at March 31, are as follows: Future minimum lease payments under the noncancelable operating leases with
2006 2005 initial or remaining terms of one year or more are as follows:
US $ INR US $ INR U.S. $ INR
Total deferred tax assets $ 439,040 19,607,526 $ 297,153 13,270,853 2007 $ 251,817 11,246,147

Deferred income taxes are provided on timing differences resulting from expense 2008 255,083 11,392,007
accruals, allowance for uncollectible accounts and differences in depreciation
expense and inventory valuation for book and income tax purposes. 2009 263,091 11,749,644

NOTE 9 – CASH BALANCES IN EXCESS OF INSURED LIMITS: 2010 209,606 9,361,004

During the fiscal years ending March 31, 2006 and March 31, 2005, the Company Thereafter 64,800 2,893,968
maintained cash balances in excess of insured limits. The Company invests uninsured
cash balances in collateralized repurchase agreements on a daily basis to better
utilize idle funds and reduce credit risk.

543
MAHINDRA GUJARAT TRACTOR LIMITED

Directors’ Report to the Members

Your Directors present their Twenty-seventh Report together with the audited Accounts of your Company for the year ended
31IJ March, 2006.

Financial Results Rupees

2006 2005
Income ................................................................................................... 78,80,58,984 65,09,35,102
Profit/(Loss)before Interest, Depreciation and Taxation ......................... 62,38,532 (6,28,018)
Interest, Commitment and Bank charges .............................................. (1,77,45,051) (1,98,41,996)
Depreciation ........................................................................................... (23,91,148) (27,17,483)
Loss for the year before Taxation .......................................................... (1,38,97,667) (2,31,87,497)
Provision for Taxation – Current tax ...................................................... — —
Fringe Benefit Tax .................................................................................. (12,26,209) —
Provision for Taxation – Deferred tax ..................................................... (1,49,341) 55,702
Loss after Taxation ................................................................................. (1,52,73,217) (2,31,31,795)
Balance of Loss brought forward from earlier years .............................. (43,32,73,991) (41,01,42,196)
Balance of Loss carried to Balance Sheet ............................................. (44,85,47,208) (43,32,73,991)

Operations (i) in the preparation of the annual accounts, the applicable

During the year under review, your Company sold 2,751 tractors
as compared to 2,450 tractors sold in the previous year, registering
a growth of 12%.
In the course of the year, your Company achieved a reasonable
growth by revamping its dealer network, improvement in product
quality, improving its spares and service support arrangements,
reduction in debtors outstanding due to judicious credit
management and controls.
accounting standards have been followed;
(ii) they have, in the selection of the accounting policies, consulted
the Statutory Auditors and these have been applied
consistently and reasonable and prudent judgments and
estimates have been made so as to give a true and fair view
of the state of affairs of the Company as at 31IJ March, 2006
and of the loss of the Company for the year ended on that
date;

In the current year, your Company plans to focus on greater cost
effectiveness as well as launching new products to cater to
customer requirements.
Directors
Mr. Sanjay Lalbhai and Mrs. Indira Parikh retire by rotation and,
being eligible, offer themselves for re-appointment.
Mr. Partha Banerjee resigned as the Manager & Chief Executive
Officer of the Company with effect from 9JD September, 2005.
The Board places on record its sincere appreciation of the
services rendered by Mr. Banerjee during his tenure as Manager
& Chief Executive Officer of the Company.
Mr. Andrey Purushottam was appointed as the Chief Executive
Officer with effect from 9JD September 2005. Mr. Subhash
Modak was appointed as the Manager of the Company with
effect from 9JD September, 2005 for a period of 5 years. Mr.
Modak’s appointment as Manager is required to be approved by
the members at the forthcoming Annual General Meeting as
required under the Companies Act, 1956.
Directors’ Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the Operating
Management, and after due enquiry, confirm that:
(iii) proper and sufficient care has been taken for the maintenance
of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the
assets of the Company and for preventing and detecting
fraud and other irregularities;
(iv) as mentioned in the Notes on Accounts, the annual accounts
have been prepared on a going concern basis.
Audit Committee
The Audit Committee of the Board of Directors of the Company
comprises Mr. U. Y. Phadke (Chairman of the Committee), Mr.
Anjanikumar Choudhari and Mr. A. K. Rakesh. The Audit Committee
met twice during the year under review.
Auditors
Messrs. A. F. Ferguson & Co., Chartered Accountants, retire as
Auditors at the forthcoming Annual General Meeting and have
given their consent for re-appointment. The members will be
required to appoint Auditors for the current year and fix their
remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
the above Auditors proposed to be re-appointed to the effect that
their re-appointment, if made, would be in conformity with the
limits specified in the said section.

544

Since more than 25% of the subscribed capital of the Company
is held by the Government of Gujarat, the appointment or re-
appointment of Auditors is required to be made by a Special
Resolution.
Deposits and Loans/Advances
The Company has not accepted any deposits from the public or
its employees during the year under review.
The Company has not made any loans/advances which is required
to be disclosed in the annual accounts of the Company pursuant
to Clause 32 of the Listing Agreement with the parent company,
Mahindra & Mahindra Limited.
Status with the Board for Industrial and Financial
Reconstruction
The BIFR vide order dated 19JD July, 2004 declared the Company
as a sick industrial undertaking under section 3(1)(o) of the Sick
Industrial Companies (Special Provisions) Act, 1985 (the Act).
Thereafter the Company has submitted a Rehabilitation scheme
under section 17(2) of the Act to the BIFR authorities.
Industrial Relations
Industrial relations have generally remained cordial throughout
the year.
Conservation of Energy and Technology Absorption and
Foreign Exchange Earnings and Outgo
The operations in the factory are not energy intensive. However,
various measures are taken to contain and bring about saving in
power consumption through improved operational methods,
better house-keeping and awareness programmes.
MAHINDRA GUJARAT TRACTOR LIMITED
Rule 2(B) of the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988, concerning technology
absorption is currently not applicable to the Company.
There were no foreign exchange earnings during the year.
Information on foreign exchange outgo is furnished in the Notes
on Accounts.
Safety, Health and Environmental Performance
Your Company pursues various safety improvement measures.
The safety performance has improved during the year and there
are least instances of man days lost due to accidents. The
statutory requirements specified by the Pollution Control Board
were fully complied with.
Particulars of employees as required under section 217(2A)
of the Companies Act, 1956 and Rules framed thereunder
The Company had no employee who was in receipt of remuneration
of not less than Rs. 24,00,000 during the year ended 31IJ March,
2006, or not less than Rs. 2,00,000 per month during any part of
the year under review.
For and on behalf of the Board
Anjanikumar Choudhari U. Y. Phadke
Director Director
Mumbai, 26th April, 2006
545
MAHINDRA GUJARAT TRACTOR LIMITED
Auditors’ Report to the Members of Mahindra Gujarat Tractor Limited
1. We have audited the attached Balance Sheet of Mahindra
Gujarat Tractor Limited, as at 31st March, 2006, the Profit
and Loss Account and the Cash Flow Statement for the year
ended on that date annexed thereto., These financial
statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
3. As required by the Companies (Auditor's Report) Order, 2003,
amended by the Companies (Auditor's Report) (Amendment)
Order, 2004 (hereinafter referred to as “the Order”) issued
by the Central Government of India in terms of sub-section
4(A) of Section 227 of the Companies Act, 1956, we enclose
in the Annexure a statement on the matters specified in
paragraphs 4 and 5 of the Order.
4. We draw attention to Note 1(A) on Schedule XIII stating that
the accumulated losses have exceeded the share capital and
reserves, by Rs. 22,38,14,900 (as at 31-03-2005: Rs.
20,85,41,683) as at the year-end. The Company has prepared
the Accounts on a going concern basis for the reasons
mentioned in the same Note, on which we have relied upon
without verification.
5. Further to our comments in the Annexure referred to above,
we report that:
(i) we have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
546
(ii) in our opinion, proper books of account as required by
law have been kept by the Company so far as appears
from our examination of those books;
(iii) the Balance Sheet, Profit and Loss Account, and Cash
Flow Statement dealt with by this report are in
agreement with the books of account;
(iv) in our opinion, the Balance Sheet, Profit and Loss
Account and Cash Flow Statement dealt with by this
report comply with the accounting standards referred
to in Sub-section (3C) of Section 211 of the Companies
Act, 1956;
(v) on the basis of the written representations received from
the directors, as on 31st March, 2006, and taken on
record by the Board of Directors, we report that none of
the directors is disqualified as on 31st March, 2006, from
being appointed as a director in terms of Clause (g)
of sub-section (1) of section 274 of the Companies
Act, 1956;
(vi) in our opinion and to the best of our information and
according to the explanations given to us, the said
accounts give the information required by the Companies
Act, 1956, in the manner so required and give a true and
fair view in conformity with the accounting principles
generally accepted in India:
(a) in the case of the Balance Sheet, of the state of
affairs of the Company as at 31st March, 2006;
(b) in the case of Profit and Loss Account, of the loss
for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash
flows for the year ended on that date.
For A.F. Ferguson & Co.
Chartered Accountants
A.S. Varma
Partner
Mumbai : 26th April, 2006 Membership No.: 15458

Annexure to the Auditors’ Report of Mahindra Gujarat Tractor Limited for the year ended
31st March, 2006 (Referred to in paragraph (3) thereof)
(i) (a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of fixed assets.
(b) No Physical verification of fixed assets was carried
out in accordance with the Company’s policy of
verifying the assets once in three years. In our
opinion, the frequency of verification is at reasonable
intervals.
(c) During the year, in our opinion, a substantial part of
fixed assets has not been disposed off by the
Company.
(ii) (a) The inventory of the Company has been physically
verified by the management as at the year end. In
respect of stocks lying with third parties, a substantial
portion has been confirmed by third parties. In our
opinion, the frequency of verification is reasonable.
(b) In our opinion and according to the information and
explanations given to us, the procedures of physical
verification of inventory followed by the management
were found reasonable and adequate in relation to
the size of the Company and the nature of its
business.
(c) On the basis of our examination of records of
inventory, in our opinion, the Company has
maintained proper records of inventory and the
discrepancies noticed on physical verification
between the physical stocks and the book records
were not material and have been properly dealt with
in the books of account.
(iii) According to the information and explanations given to
us, the Company has not taken / granted any loans,
secured or unsecured, from/to companies, firms or other
parties listed in the register maintained under Section 301
of the Companies Act, 1956. Therefore, the provisions of
clause 4(iii)(a), (b), (c), (d), (e), (f) and (g) of the Companies
(Auditor's Report) Order, 2003 are not applicable to
the Company.
(iv) In our opinion and according to the information and
explanations given to us, having regard to the explanation
that many of the items are of a special nature and their
prices cannot be compared with alternative quotations,
there is an adequate internal control system
commensurate with the size of the Company and the
nature of its business for the purchase of inventory and
fixed assets and for the sale of goods and services.
Further, on the basis of our examination and according to
the information and explanations given to us, we have
neither come across nor have we been informed of any
instance of major weaknesses in the aforesaid internal
control system.
MAHINDRA GUJARAT TRACTOR LIMITED
(v) In our opinion and according to the information and
explanations given to us, the particulars of contracts or
arrangements referred to in Section 301 of the Companies
Act, 1956. have been entered in the register required to
be maintained under that Section. As there are no
transactions made in pursuance of such contracts or
arrangements, which are in excess of Rs. five lacs in
respect of each party, paragraphs 4(v) (b) of the Order is
not applicable.
(vi) In our opinion and according to the information and
explanations given to us, during the year, the Company
has not accepted any deposits from public to which
the provisions of sections 58A, 58AA or any other
relevant provisions of the Companies Act, 1956, and
the Companies (Acceptance of Deposits) Rules, 1975,
apply.
(vii) In our opinion, the Company has an internal audit
system commensurate with its size and nature of its
business.
(viii) We have broadly reviewed the books of account
maintained by the Company relating to the manufacture
of vechicles and tractors pursuant to the rules made by
the Central Government for the maintenance of cost
records under section 209(1)(d) of the Companies Act,
1956, and we are of the opinion that prima facie the
prescribed accounts and records have been maintained
and are being made up. We have not, however, made a
detailed examination of the records with a view of
determining whether they are accurate or complete.
(ix) (a) According to the information and explanations given
to us, and according to the books and records as
produced and examined by us, in our opinion, the
undisputed statutory dues including provident fund,
investor education and protection fund, employees’
state insurance, income-tax, sales-tax, wealth tax,
service tax, customs duty, excise duty, cess and any
other statutory dues as applicable, have generally
been regularly deposited by the Company during the
year with the appropriate authorities. According to
the information and explanations given to us, there
are no arrears of outstanding statutory dues as
mentioned above as at 31st March, 2006, for a period
of more than six months from the date they became
payable.
(b) As at 31st March, 2006, according to the records of
the Company and the information and explanation
given to us, the following are the particulars of dues
on account of sales-tax, income-tax, customs duty,
wealth tax, service tax, excise duty and cess matters
that have not been deposited on account of any
dispute:
547
MAHINDRA GUJARAT TRACTOR LIMITED

Name of the Nature of Amount Period to Forum where terms and conditions, where of, in our opinion, are
Statute the Dues (Rs.) which the dispute is prejudicial to the interest of the Company.
amount pending
relates
(xvi) In our opinion and according to the information and
Central Excise Duty 73,50,805 April 1996 Commissioner explanations given to us, the Company has not obtained
Excise Act, to May of Central any term loan during the year.
1944 1998 Excise.

Vadodara Property tax 15,88,809 1998 to 2005 Supreme

Municipal Court
Corporation
(x) The accumulated losses of the Company have exceeded
fifty percent of its net worth as at 31st March, 2006. The
Company has not incurred cash losses during the financial
year ended on that date but has incurred cash losses in
the immediately preceding financial year.
(xi) In our opinion and according to the information and
explanations given to us, the Company has not defaulted
in repayment of dues to a financial institution, bank or to
debenture holders during the year.
(xii) In our opinion and according to the information and
explanations given to us, the Company has not granted
any loans and advances on the basis of security by way
of pledge of shares, debentures and other securities.
(xiii) As the Company is not a chit fund or a nidhi/mutual benefit
fund/society, paragraph 4(xiii) of the Order is not applicable
to the Company.
(xiv) Since the Company is not dealing in or trading in shares,
securities, debentures and other investments, paragraph
4(xiv) of the Order is not applicable to the Company.
(xvii) Based on the information and explanations given to
us and on an overall examination of the Balance Sheet
of the Company as at 31st March, 2006, in our opinion,
short term funds to the extent of Rs. 7,26,95,736 have
been utilised for long term investments (included in
the form of adverse balance in the Profit and Loss
Account).
(xviii) The Company has not made any preferential allotment of
shares to parties and companies covered in the register
maintained under section 301 of the Companies Act, 1956
during the year.
(xix) Since the Company has not issued any debentures,
paragraph 4(xix) of the Order is not applicable to the
Company.
(xx) Since the Company has not raised any money by public
issue during the year, paragraph 4(xx) of the Order is not
applicable to the Company.
(xxi) According to the information and explanations given to
us, during the year, no fraud on or by the Company has
been noticed or reported.
For A.F. Ferguson & Co.
Chartered Accountants

(xv) According to the information and explanations given to A.S. Varma

us, the Company has not given any guarantee for loans Partner
taken by others from banks or financial institutions, the Mumbai : 26th April, 2006 Membership No.: 15458

548
 MAHINDRA GUJARAT TRACTOR LIMITED

Balance Sheet as at 31st March, 2006

As at As at As at
Schedule 31-3-2006 31-3-2006 31-3-2005
Rupees Rupees Rupees
I. SOURCES OF FUNDS:
SHAREHOLDERS’ FUNDS:
Capital ................................................................................. I 203,019,790 203,019,790
Reserves and Surplus ......................................................... II 21,712,518 21,712,518
224,732,308 224,732,308
Loan Funds:
Secured Loans .................................................................... 52,473,480 59,746,702
Unsecured Loans ................................................................ III 167,029,259 157,889,379
219,502,739 217,636,081
Deferred Tax Liability (Note 12) .......................................... 1,908,281 1,758,940
Total ............. 446,143,328 444,127,329
II. APPLICATION OF FUNDS:
FIXED ASSETS: .................................................................. IV
Gross Block ......................................................................... 90,449,536 89,970,301
Less: Depreciation .............................................................. 77,364,495 75,259,534
13,085,041 14,710,767
Capital Work-in-Progress and Advances ............................. 4,272,335 —
Net Block ............................................................................. 17,357,376 14,710,767
Investments ........................................................................ V 461,000 461,000
Current Assets, Loans and Advances .............................. VI
Inventories .......................................................................... 122,120,437 133,037,913
Sundry Debtors ................................................................... 35,060,036 82,628,776
Cash and Bank Balances ..................................................... 15,745,218 13,944,615
Loans and Advances ........................................................... 9,546,683 10,304,876
182,472,374 239,916,180
Less: Current Liabilities and Provisions .......................... VII
Current Liabilities ................................................................ 165,757,996 208,292,665
Provisions ............................................................................ 36,936,634 35,941,944
202,694,630 244,234,609
Net Current Assets ............................................................ (20,222,256) (4,318,429)
Profit and Loss Account ...................................................... 448,547,208 433,273,991
Total ............. 446,143,328 444,127,329
NOTES ON ACCOUNTS ............................................................ XIII

Per our report attached For and on behalf of the Board

{
Anjanikumar Choudhari
For A.F. Ferguson & Co.
Chartered Accountants U.Y. Phadke
Directors
Gautam Nagwekar
A.S. Varma Indira J. Parekh
Partner
Subhash Modak Manager

Mumbai: 26th April, 2006 Mumbai: 26th April, 2006

549
MAHINDRA GUJARAT TRACTOR LIMITED

Profit and Loss Account for the year ended 31st March, 2006

Year ended Year ended Year ended

Schedule 31-3-2006 31-3-2006 31-3-2005
Rupees Rupees Rupees
INCOME:
Sales (Gross) ............................................................................... 780,948,306 661,417,574
Less: Excise Duty ....................................................................... 2,242,099 21,111,954
Sales (Net) ................................................................................... 778,706,207 640,305,620
Other Income .............................................................................. VIII 9,352,777 10,629,482
Total ............. 788,058,984 650,935,102

EXPENDITURE:
Raw Materials, Finished and Semi-finished Products ................. IX 609,927,248 488,557,237
Personnel .................................................................................... X 74,380,354 67,661,763
Interest, Commitment and Bank Charges .................................. XI 17,745,051 19,841,996
Depreciation ................................................................................ 2,391,148 2,717,483
Other Expenses .......................................................................... XII 97,512,850 95,344,120
Total ............. 801,956,651 674,122,599
Loss before Taxation for the year ............................................... 13,897,667 23,187,497
Add: Provision for Taxation
Current Tax ................................................................................. — —
Fringe Benefit Tax ....................................................................... 1,226,209 —
Deferred Tax (Income)/Expense ................................................. 149,341 (55,702)
Loss after taxation for the year ................................................... 15,273,217 23,131,795
Add: Adverse balance brought forward ...................................... 433,273,991 410,142,196
Adverse balance carried to Balance Sheet ................................. 448,547,208 433,273,991
Earnings per Equity Share:
Basic and Diluted (Note 11) ........................................................ (1.31) (1.83)
(Face Value Rs. 10 per Equity Share)
NOTES ON ACCOUNTS ............................................................. XIII

Per our report attached For and on behalf of the Board

{
Anjanikumar Choudhari
For A.F. Ferguson & Co.
Chartered Accountants U.Y. Phadke
Directors
Gautam Nagwekar
A.S. Varma Indira J. Parekh
Partner
Subhash Modak Manager

Mumbai: 26th April, 2006 Mumbai: 26th April, 2006

550
 MAHINDRA GUJARAT TRACTOR LIMITED

Cash Flow Statement for the year ended 31st March, 2006

2005–06 2004–05
Rupees Rupees Rupees
A. CASH FLOW FROM OPERATING ACTIVITIES:
Loss before Taxation ........................................................... (13,897,667) (23,187,497)
Adjustments for:
Depreciation ................................................................ 2,391,148 2,717,483
Interest, commitment and bank charges .................... 17,745,051 19,841,996
Profit on sale of fixed assets (Net) .............................. (185,585) (236,228)
19,950,614 22,323,251
Operating Profit/(Loss) before Working capital changes ..... 6,052,947 (864,246)
Changes in:
Trade and other receivables ........................................ 48,374,573 (552,318)
Inventories .................................................................. 10,917,476 (57,403,634)
Trade and other payables ............................................ (41,539,903) 55,831,461
17,752,146 (2,124,491)
Cash generated from operations ........................................ 23,805,093 (2,988,737)
Income taxes paid/refunds .................................................. (47,716) (30,589)
Fringe Benefit Tax paid ....................................................... (1,226,209) —
NET CASH FROM OPERATING ACTIVITIES .................... 22,531,168 (3,019,326)
B. CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed assets ..................................................... (5,121,595) (847,547)
Sale of fixed assets ............................................................. 269,423 395,500
NET CASH USED IN INVESTING ACTIVITIES ................. (4,852,172) (452,047)
C. CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings ................................................. (7,273,222) 24,628,118
Repayments of borrowings ................................................. — (8,000,000)
Interest, commitment and bank charges paid .................... (8,605,171) (10,022,501)
NET CASH FROM/(USED IN) FINANCING ACTIVITIES .. (15,878,393) 6,605,617
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS .................................................................... 1,800,603 3,134,244
CASH AND CASH EQUIVALENTS (see Note below)
Opening Balance ................................................................. 13,944,615 10,810,371
Closing Balance ................................................................... 15,745,218 13,944,615
Note:
Cash and cash equivalents include:
Cash on hand ...................................................................... 155,408 75,031
Cheques on hand ................................................................ 13,770,292 6,859,838
Balances with Scheduled Banks:
(i) On Current Account .................................................... 45,104 4,403,925
(ii) On Margin Money ....................................................... 1,685,000 2,467,898
(iii) On Fixed Deposit Account (placed with government authorities) 89,414 137,923
15,745,218 13,944,615

Per our report attached For and on behalf of the Board

{
Anjanikumar Choudhari
For A.F. Ferguson & Co.
Chartered Accountants U.Y. Phadke
Directors
Gautam Nagwekar
A.S. Varma Indira J. Parekh
Partner
Subhash Modak Manager

Mumbai: 26th April, 2006 Mumbai: 26th April, 2006

551
MAHINDRA GUJARAT TRACTOR LIMITED

SCHEDULE – I As at A at SCHEDULE – V As at As at
SHARE CAPITAL (Note 2): 31-3-2006 31-3-2005 INVESTMENTS(Long Term at Cost, 31-3-2006 31-3-2005
Rupees Rupees unless otherwise specified): Rupees Rupees
Authorised: Face Value
20,000,000 Equity Shares of Rs. 10 each ............. 200,000,000 200,000,000 Per Unit
Number Rupees
10,000,000 Cumulative Redeemable Preference Share (Non-trade and fully paid-
Shares of Rs. 10 each ........................ 100,000,000 100,000,000 up unless otherwise specified)
Total ..... 300,000,000 300,000,000 Unquoted:
Issued and Subscribed: 154 500 Parishram Industrial Co-operative
15,301,979 Equity Shares of Rs. 10 each fully Society Limited .......................... 77,000 77,000
paid-up ................................................ 153,019,790 153,019,790
140 500 Adarsh Industrial Co-operative
5,000,000 8.5% Cumulative Redeemable Society Limited .......................... 70,000 70,000
Preference Shares of Rs. 10 each fully
227 500 Akshay Industrial Co-operative
paid-up ................................................ 50,000,000 50,000,000
Society Limited .......................... 113,500 113,500
Total ..... 203,019,790 203,019,790
140 500 Sarvoday Industrial Co-operative

SCHEDULE – II Society Limited .......................... 70,000 70,000

RESERVES AND SURPLUS: 1 500 Ajay Industrial Co-operative
Capital Reserve ..................................................... 21,712,518 21,712,518 Society Limited .......................... 500 500
Total ...................................................................... 21,712,518 27,712,518 31 500 Urja Industrial Co-operative
Society Limited .......................... 15,500 15,500
SCHEDULE – III 1 500 Mahashakti Industrial Co-operative
LOAN FUNDS: Society Limited .......................... 500 500
(A) Secured: 228 500 Pragati Industrial Co-operative
Loans and Advances from a Bank (Note 3): Society Limited .......................... 114,000 114,000
Cash Credit .................................................... 52,473,480 59,746,702 Total ..... 461,000 461,000
Total ..... 52,473,480 59,746,702
(B) Unsecured:
(1) Short term Loans from:
Holding Company [including interest
accrued and due Rs. 19,766,112 (as at
31-3-2005: Rs. 13,595,436)] ..................... 78,266,112 72,095,436
(2) Other Loans from:
Government of Gujarat [including interest
accrued and due Rs. 57,080,647 (as at
31-3-2005: Rs. 54,111,443)] ..................... 88,763,147 85,793,943
167,029,259 157,889,379
Total ..... 219,502,739 217,636,081

Amount repayable within next one year Rs. 167,029,259 (as at 31-3-2005:
Rs. 157,889,379)

SCHEDULE – IV
FIXED ASSETS: (in Rupees)

Cost Additions Deduc- Cost Deprecia- Deprecia- Deprecia- Deprecia- Net Balance Net Balance
As at 31st during the tions as at 31st tion to 31st tion tion tion to 31st as at 31st as at 31st
March, year during the March, March, for the on deduc- March, March, March,
2005 at cost year 2006 2005 year tions 2006 2006 2005

Land (Free hold) ........................................................ 103,453 — — 103,453 — — — — 103,453 103,453

Building ..................................................................... 9,742,413 — — 9,742,413 5,999,009 358,097 — 6,357,106 3,385,307 3,743,404

Plant and Machinery .................................................. 73,802,145 804,836 16,450 74,590,531 65,008,902 1,438,554 13,862 66,433,594 8,156,937 8,793,243

Furniture and Fixtures ............................................... 1,756,821 44,425 — 1,801,246 1,568,120 37,768 — 1,605,888 195,358 188,701

Vehicles, etc. ............................................................. 4,565,469 — 353,576 4,211,893 2,683,505 556,729 272,327 2,967,907 1,243,986 1,881,966

Total .......................................................................... 89,970,301 849,261 370,026 90,449,536 75,259,536 2,391,148 286,189 77,364,495 13,085,041 14,710,767

Previous Year ............................................................ 91,885,549 847,547 2,762,795 89,970,301 75,145,576 2,717,483 2,603,525 75,259,534 14,710,767

552
 MAHINDRA GUJARAT TRACTOR LIMITED

SCHEDULE – VI As at As at As at SCHEDULE – VII As at As at As at

CURRENT ASSETS, LOANS AND 31-3-2006 31-3-2006 31-3-2005 CURRENT LIABILITIES AND 31-3-2006 31-3-2006 31-3-2005
ADVANCES: Rupees Rupees Rupees PROVISIONS: Rupees Rupees Rupees
(A) Current Assets: (A) Current Liabilities:
Stores and Spares (at or below Acceptances ......................... 1,537,115 776,628
Cost) ..................................... 3,853,839 4,219,080 Sundry Creditors:
Tools (at or below Cost) ........ 13,161,463 13,545,134 (i) Total outstanding Dues of
small scale industrial under-
Stock in Trade and Work-in- takings (Note 13) ............. 6,417,413 8,361,753
progress:
(at cost or net realizable value (ii) Total outstanding Dues of
whichever is lower) creditors other than small
scale industrial undertaking 157,803,468 199,154,284
(i) Finished Goods ............... 14,741,541 11,748,152
165,757,996 208,292,665
(ii) Work-in-progress ............. 26,925,238 30,415,245
(B) Provisions:
(iii) Raw Materials, Compo- Provision for Gratuity ............ 28,409,778 26,948,057
nents and Spare Parts ..... 63,438,356 73,110,302
Provision for Leave
122,120,437 133,037,913 Encashment .......................... 5,922,293 5,471,365

Sundry Debtors: Provision for Warranties ........ 2,604,563 3,522,522

Unsecured unless otherwise stated: 36,936,634 35,941,944

Outstanding over six months: Total ..... 202,694,630 244,234,609

Considered good ................... 1,847,791 12,256,271

SCHEDULE – VIII Year ended Year ended Year ended
Considered doubtful .............. 44,928,252 41,217,813 OTHER INCOME: 31-3-2006 31-3-2006 31-3-2005
46,776,043 53,474,084 Rupees Rupees Rupees
Other Debts, considered good 33,212,245 70,372,505 Rent ........................................ 115,755 124,856
79,988,288 123,846,589 Job Work Charges (T.D.S. Rs.
10,539 (2004–05: Rs. 1,368)] ....... 1,459,750 1,424,232
Less: Provision for bad and Interest Received on Bank Deposits
doubtful debts ....................... 44,928,252 41,217,813 and overdue balances from
35,060,036 82,628,776 customers [T.D.S. Rs. 220,828
(2004–05: Rs. 29,221)] ................. 2,489,042 3,062,688
Cash and Balance Balances: Miscellaneous Income ................. 5,102,644 5,781,478
Cash on hand ........................ 155,408 75,031 Profit on Fixed Assets sold/discarded
(net) ........................................ 185,586 236,228
Cheques on hand .................. 13,770,292 6,859,838
Total ..... 9,352,777 10,629,482
13,925,700 6,934,869
SCHEDULE – IX
Balances with Scheduled Banks: RAW MATERIALS, FINISHED AND
(i) On Current Account ........ 45,104 4,403,925 SEMI-FINISHED PRODUCTS:
(ii) On Margin Money ........... 1,685,000 2,467,898 (A) Decrease/(increase) in Stock
of Finished Goods, Work-in-
(iii) On Fixed Deposit Account Progress and Manufactured
(placed with government Components:
authorities) ...................... 89,414 137,923 Opening Stock:
1,819,518 7,009,746 (i) Finished Goods ............... 11,748,152 1,299,970
15,745,218 13,944,615 (ii) Work-in-Progress ............. 30,415,245 8,917,169
42,163,397 10,217,139
Less: Closing Stock
(B) Loans and Advances: (i) Finished Goods ............... 14,741,541 11,748,152
(Unsecured, considered good (ii) Work-in-Progress ............. 26,925,238 30,415,245
unless otherwise stated):
41,666,779 42,163,397
Advances recoverable in cash
Decrease/(Increase) in Stock 496,618 (31,946,258)
or kind for value to be received
Considered good ................... 9,323,216 10,168,828 (B) Consumption of Raw
Materials and Bought-out
Considered doubtful .............. 25,176,784 24,856,640 Components:
34,500,000 35,025,468 Opening Sock ........................ 73,110,302 49,239,880
Less: Provision for Doubtful Add: Purchase [including
Advances .............................. 25,176,784 24,856,640 outside processing charges Rs.
19,050,237 (2004–05:
9,323,216 10,168,828
Rs. 16,800,322)] .................... 599,758,684 544,373,917
Income-tax Payments ........... 159,778 112,062 672,868,986 593,613,797
Balance — Excise ................. 63,689 23,986 Less: Closing Stock ............... 63,438,356 73,110,302
9,546,683 10,304,876 609,430,630 520,503,495
Total ..... 182,472,374 239,916,180 Total ..... 609,927,248 488,557,237

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MAHINDRA GUJARAT TRACTOR LIMITED

SCHEDULE – X Year ended Year ended Year ended pending consent from GOG) under Section 17(2) of the Act to the BIFR
PERSONNEL: 31-3-2006 31-3-2006 31-3-2005 authorities.
Rupees Rupees Rupees
Salary, Wages, Bonus, etc. .......... 63,158,131 58,066,942 (B) Fixed Assets:
Contribution to Provident Fund and (a) All Fixed Assets are carried at cost less depreciation, except for land,
Other Funds ................................. 4,556,838 4,553,045 which is freehold and is therefore stated at cost.
Gratuity ........................................ 3,814,083 2,292,976 Certain fixed assets transferred to Industrial Co-operative Societies on
hire purchase basis have been reduced from the Fixed Assets of the
Welfare ........................................ 2,851,302 2,748,800 Company in the year of actual transaction, though they remain the
Total ..... 74,380,354 67,661,763 property of this Company till the last instalment is paid.
SCHEDULE – XI When an asset is scrapped or otherwise disposed off, the cost and
INTEREST, COMMITMENT AND related depreciation are removed from the books of account and
BANK CHARGES: resultant profit (including capital profit) or loss, if any, is reflected in the
On Term Loans ............................ 3,801,900 3,801,900 Profit and Loss Account.

On others ..................................... 12,082,626 14,087,510 (b) Depreciation on assets is calculated on Reducing Balance Method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Bank charges ................................ 1,860,525 1,952,586 Act, 1956.
Total ..... 17,745,051 19,841,996
(C) Intangible Assets:
SCHEDULE – XII
OTHER EXPENSES: All intangible assets are initially measured at cost and amortised so as to
reflect the pattern in which assets economic benefits are consumed.
Stores Consumed ........................ 3,554,690 3,086,979
The expenditure incurred on technical services and other project/product
Tools Consumed .......................... 2,587,200 2,191,975
related expenses are amortised over the estimated period of benefit, not
Power and Fuel ............................ 10,596,446 12,041,282 exceeding five years.
Rates and Taxes ........................... 3,002,410 4,089,385
(D) Investments:
Rent ........................................ 387,376 358,650
Long Term Investments are valued at cost or lower, if written down, to
Insurance ...................................... 327,285 500,727
recognise a decline which is other than temporary.
Repairs and Maintenance:
— Building ................................. 822,272 706,092 (E) Inventories:
— Machinery ............................. 3,007,922 2,359,366 Inventories are valued at cost or net realisable value, whichever is lower.
— Others ................................... 558,979 641,597 Cost is arrived at on a weighted average method and includes, where
appropriate, manufacturing overheads and excise duty.
4,389,173 3,707,055
Travelling Expenses ..................... 12,982,338 9,506,246 (F) Foreign Exchange Transactions:
Sales Promotion Expenses ........... 4,267,017 3,486,974 All foreign currency monetary items are translated at the relevant rates of
Freight outward ............................ 7,842,034 4,920,760 exchange prevailing at the year end. The transaction differences are
recognised in the Profit and Loss Account.
Warranty Claims ........................... 2,982,084 1,122,570
Provision for Doubtful Debts and (G) Revenue Recognition:
Advances ..................................... 4,030,583 21,109,821 Sales of products and services are recognised when the products are
Research and Development despatched/shipped or services rendered.
Expenses ...................................... 129,232 1,355,375
Discount on Sales ........................ 21,532.691 10,176,162 (H) Research and Development Expenses:
Cash discounts ............................. — 124,000 Revenue expenditure on Research and Development is charged to the Profit
and Loss Account in the year in which it is incurred.
Commission on sales ................... 242,958 285,170
Miscellaneous Expenses .............. 18,659,333 17,280,989 (I) Retirement Benefits:
Total ..... 97,512,850 95,344,120 Retirement benefits in respect of gratuity and leave encashable at retirement/
cessation are provided for based on valuations, as at the Balance Sheet date,
SCHEDULE – XIII made by an independent actuary.
NOTES ON ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006
(J) Product Warranty:
1. Significant Accounting Policies:
In respect of the warranties given by the Company on sale of certain
(A) The accumulated losses as at the year-end have exceeded the Share Capital products, the estimated costs of these warranties are accrued at the time
and reserves of the Company by Rs. 22,38,14,900 (as at 31-3-2005: Rs. of sale. The estimates for accounting of warranties are reviewed and
20,85,41,683). During the current financial year, the operation level has revisions are made as required.
improved by 10% over last year. The management expects further
improvement in the profitability and consequently in the net worth of the (K) Income Tax:
Company. Further, plan for operational efficiency, cost reduction coupled
with strengthening the marketing set up and to explore newer markets are Current tax is determined as the amount of tax payable to the taxation
under implementation on an on-going basis. Accordingly, the accounts of the authorities in respect of taxable income for the year.
Company have been prepared on a going concern basis. Deferred tax is recognised, subject to the consideration of prudence, on
The Company had made a reference to the Board for Industrial and Financial timing differences being differences between taxable income and accounting
Reconstruction (BIFR) on 20th August, 2002 and a revival plan submitted to income, that originate in one period and are capable of reversal in one or more
the Government of Gujarat (GOG), was awaiting approval. The BIFR vide subsequent periods.
order dated 19th July, 2004, declared the Company as a sick industrial Deferred tax assets are not recognised on unabsorbed depreciation and
undertaking under Section 3(1)(O) of the Sick Industrial Companies (Special carry forward of losses unless there is a virtual certainty that sufficient
Provisions) Act, 1985 (the Act. Thereafter the company submitted a proposal taxable profits will be available against which such deferred tax assets can
of Rehabilitation Scheme (along with the consent of secured creditor, but be realised.

554
 MAHINDRA GUJARAT TRACTOR LIMITED

2. Share Capital: order on the Company on 22-02-06 for issuance of notice to the Vadodara
Municipal Corporation to deposit Rs. 9.00 lacs towards outstanding dues of
Issued and Subscribed Capital include: the property tax. The Company has filed an appeal in Supreme Court against
(A) (a) 15,00,000 Equity Shares of Rs. 10 each issued to Government of Gujarat the order of Gujarat High Court. The appeal is admitted and notice is issued
as fully paid up, without receiving payment in cash, being the consideration to Vadodara Municipal Corporation.
for transfer of the undertaking of Hindustan Tractors Limited to the
Company. (F) Contracts remaining to be executed on capital account and not provided for
(b) 11,979 Equity Shares of Rs. 10 each issued to Government of Gujarat as as at 31st March, 2006 — Rs. 812,300 (2005: Rs. Nil).
fully paid up, being the reimbursement of preliminary expenses incurred
by them on the formation of the Company. 6. On account of the brought forward book loss and loss for the year, no provision
(c) 1,37,90,000 Equity Shares of Rs. 10 each issued to Government of has been made for 8.5% dividend payable amounting to Rs. 20,646,175 on
Gujarat consequent upon conversion of loan of Rs. 137,900,000 into preference shares for the period 23rd May, 2000 (being the date of allotment)
Equity Share Capital. to the preceding year ended 31st March, 2005 and Rs. 4,250,000 for the current
year, and additional tax thereon.
(B) Out of 1,53,01,979 Equity Shares, 91,81,188 Equity Shares are held by
Mahindra & Mahindra Limited, the Holding Company, including 7 Equity 7. Managerial Remuneration:
Shares jointly with its nominees. (i) The Company is not required to bear any managerial remuneration in respect
of the ‘Manager’ appointed under Section 269 and other applicable provisions
(C) 50,00,000 8.5% Cumulative Redeemable Preference Shares of Rs. 10 each of the Companies Act, 1956, from time to time, as per the terms approved.
issued to Government of Gujarat (GOG) as fully paid up on 23rd May, 2000,
consequent upon conversion of loan of Rs. 50,000,000. These shares were (ii) The aggregate remuneration paid to the aforesaid ‘Manager’ during the
redeemable at par at the end of four years from the date of allotment, i.e., current accounting year and borne by the holding company Mahindra &
on 22nd May, 2004. The Company has requested GOG to accord its consent Mahindra Limited was Rs. 2,636,410 (2004–05: Rs. 2,996,857).
to the proposed Rehabilitation Scheme [referred in Note 1(A) above], which
includes re-schedulement of redemption of Cumulative Redeemable (iii) During the year, a new manager under the Companies Act, 1956, has been
Preference Shares from May 2004 to May 2009. Consequently the Preference appointed with effect from 9th September, 2005, for a period of five years.
Shares have not been redeemed. His appointment is subject to approval of the Company in the General
Meeting.
3. Secured Loans:
Loans and advances from a Bank (cash credit) to the extent of Rs. 500 lacs are 8. Miscellaneous Expenses include:
secured by hypothecation of entire current assets, present and future, as first Amounts paid/payable to Auditors Statutory Cost
charge over movable machinery and ten acres of land. Auditors Auditors
Rupees Rupees
4. Capital work-in-progress includes intangible assets under development (i) Audit Fees (including service tax
Rs. 1,512,335 (2005: Rs. Nil). Rs. 18,360 (2004–05: Rs. 12,750) 168,360 33,672
137,750 33,060
5. Contingent liabilities not provided for: (ii) Reimbursement of expenses 32,052 6,281
(A) Guarantee given by the Company to a financial institution for housing loans 33,724 5,500
given by the financial institution to the employees of the Company. An Figures in bold are for the current year.
aggregate amount of Rs. 678,739 (2005: Rs. 1,156,666) was outstanding to
be paid by the employees to the financial institution as at 31st March, 2006. 9. The Company has, by applying the definitions of ‘Business Segment’ and
‘Geographical Segment’, contained in Accounting Standard 17 ‘Segment
(B) Bills discounted but not matured Rs. 2,857,427 (2005: Rs. 3,664,943) — Reporting’, concluded that there is neither more than one Business Segment nor
represents customers bills discounted. more than one Geographical Segment, and therefore segment information as
per Accounting Standard 17 is not required to be disclosed.
(C) Excise Duty:
Excise matters for which the Company is contingently liable — Rs. 7,350,805 10. As per Accounting Standard 18 ‘Related Party’ issued by the Institute of
(2005: Rs. 15,876,560). Chartered Accountants of India, the Company has identified all the related
This relates to demand of excise duty on Transmission Assemblies/Chassis parties having transactions during the year as per the details given below:
Assemblies used in the manufacture of Tractors of less than 25HP, which
were exempted from payment of duty, during the period April 1996 to May Related parties where control exists:
1998. The demand is confirmed by the Commissioner of Central Excise and Holding Company Mahindra & Mahindra Limited (M & M)
Customs, Vadodara and the Company has filed an appeal in The Customs,
Fellow Subsidiary Automartindia Limited
Excise and Service Tax Appellate Tribunal, Mumbai. The Customs, Excise
and Service Tax Appellate Tribunal, Mumbai has remanded the matter for re- Tech Mahindra (R&D) Services Pte. Ltd.
determination of exact classification and the rate of duty vide the order dated Tech Mahindra (R&D) Services Inc.
28/10/2005. Bristlecone Limited, Cayman Islands
Bristlecone (Singapore) Pte. Limited
(D) The Wage agreement with labour union had expired on 31-03-98, a charter Bristlecone (UK) Limited
of demand was received in June, 1998. Subsequent to that the union had
Bristlecone GmbH
filed complaint for conciliation proceeding before Deputy Commissioner of
Bristlecone Inc.
Labour, Vadodara. The matter is pending before the Industrial Court,
Vadodara since November 2001. The amount of liability, if any, is not Bristlecone India Limited
ascertainable. Console Estates & Investments Ltd.
Jensand Limited
(E) The Vadodara Municipal Corporation served a recovery notice on the Mahindra & Mahindra Financial Services Limited
Company dated 07-02-06 towards property taxes of Rs. 1,588,809/- for the Mahindra & Mahindra South Africa (Proprietary) Limited
period 1988 to 2006 payable by four co-operative societies to whom the
Mahindra Engineering Design & Developments Co. Ltd.
Company has given premises on lease basis. As per the hire purchase
agreement with these societies the above liability is payable by the hire Mahindra (China) Tractor Company Limited
purchases societies. The Company had filed an appeal against recovery Mahindra Acres Consulting Engineers Limited
notice in Gujarat High Court. The Gujarat High Court passed a conditional Mahindra Intertrade Limited

555
MAHINDRA GUJARAT TRACTOR LIMITED

Mahindra Holding & Finance Ltd. Outstanding receivables as on:

Mahindra Engineering & Chemical Products Ltd. 31-3-2006 31-3-2005
Mahindra Europe s.r.l. Rupees Rupees
Mahindra Gesco Developers Ltd. From Fellow Subsidiary — —
Mahindra Ashtech Limited Outstanding payables as on:
Mahindra Holidays & Resorts (India) Limited To Holding Company* 199,539,896 205,604,974
Mahindra Holidays & Resorts USA, Inc. To Fellow Subsidiary — 26,517
Mahindra Infrastructure Developers Limited * includes equity share capital.
Mahindra Insurance Brokers Limited
Outstanding guarantee as on:
Mahindra Automotive Steels Ltd.
From Fellow Subsidiary 3,000,000 1,500,000
Mahindra International Ltd.
The significant related party transactions are as under:
Mahindra Logisoft Business Solutions Limited
Mahindra Middleeast Electrical Steel Service Centre (FZC) Sl. Nature of Transaction Fellow Company 2005–06 2004–05
Mahindra Overseas Investment Company (Mauritius) Ltd. No. Rupees Rupees
Mahindra Realty Limited 1. Reimbursement made Mahindra Intertrade 93,616 33,060
Mahindra Renault Private Limited to parties Ltd.
Mahindra SAR Transmission Pvt. Ltd. 2. Guarantee issued by Mahindra Intertrade 3,000,000 1,500,000
Mahindra Shubhlabh Services Limited parties Ltd.
Mahindra Steel Service Centre Limited (i) In respect of the outstanding balances recoverable as at 31st March, 2006, no
Mahindra Ugine Steel Company Limited provision for doubtful debts has been made in respect of these parties.
Mahindra USA, Inc. (ii) During the year, there were no amounts written off and written back from such
parties.
Mahindra World City (Jaipur) Limited
Mahindra World City Developers Limited 11. Earnings Per Equity Share:
Mahindra-BT Investment Company (Mauritius) Limited Earnings Per Equity Share (EPS) calculation (basic and diluted):
NBS International Limited Unit 2005–06 2004–05
Plexion Technologies (UK) Ltd. (a) Amount used as the numerator —
(Loss) after taxation and after
Plexion Technologies GmbH, Germany
considering dividend on preference
Plexion Technologies Incorporated, USA shares, and additional tax thereon
Plexion Technologies (India) Private Limited (Note 5) Rupees (20,119,279) (27,937,217)
Stokes Forgings Dudley Limited (b) Weighted average number of equity
Stokes Forgings Limited shares used as the denominator Nos 15,301,979 15,301,979
Stokes Group Limited (c) Nominal values of equity shares Rupees 153,019,790 153,019,790
Tech Mahindra (R&D Services) Limited (d) Earnings per equity share Rupees (1.31) (1.83)
Tech Mahindra (Americas) Inc. 12. Deferred Taxes:
Tech Mahindra GmbH 2006 2005
Tech Mahindra (Singapore) Pte. Limited Rupees Rupees
Component of Deferred tax liability as at 31st
Tech Mahindra Limited
March, 2006, is due to difference between
Tech Mahindra (Thailand) Limited accounting and tax depreciation (cumulative),
Tech Mahindra Foundation tax depreciation being higher 1,908,281 1,758,940
Other related parties with whom the Company has transaction, etc.: 13. (i) The identification of suppliers as Small Scale Industrial undertakings (SSIs)
has been done on the basis of the information to the extent provided by the
Key Managerial Personnel Mr. Partha Banerjee (upto 8th September, 2005)
suppliers to the Company. On this basis, the disclosure of total outstanding
(as ‘Manager’ under the Mr. Subhash Modak (from 9th September, 2005
dues of SSIs and the names of SSIs shown below has been made.
Companies Act, 1956 onwards for a period of five years)
(ii) Following are the names of Small Scale Industrial Undertakings (SSIs) to
Disclosure of transactions between the Company and related parties and whom the Company owes any sum together with interest and which are
the status of outstanding balance as on 31-3-1006: outstanding for more than 30 days as on 31st March, 2006:
(Income/Receipt)/Expenditure/payment A.P. Sales Corporation Manko Industries
Holding Company Fellow Subsidiary Astir Engineers Pvt. Ltd. Mechelec Steel Products
Ambica Engineering Works Mech Industries
2005–06 2004–05 2005–06 2004–05 Autocom Industries N core Cables
Rupees Rupees Rupees Rupees Accurate Products Corp. Pvt. Ltd. Neolite Industries
Purchase of components ......... 36,888,078 33,850,437 — — Auto Pump Engineers Puromatic Filters Ltd.
Bharat Plastic & General Industries Precision Foundry & Engineering Co.
Job work charges income ........ (1,511,918) (1,309,550) — — Baroda Cap Liners Pramukh Engineers
Sales of finished goods exclud- Bhushan Engineers Pentagon Engineering Works
ing sales tax) ............................ (24,701,763) (1,758,756) — — Castings & Castings P.M. Castings
Deputation of personnel from Circlips India Pvt. Ltd. Sumati Engineering Company
related parties .......................... 2,074,498 4,012,274 — — D.C. Engineering Industries Star Products
D.S. Auto Shashi Sudha Industries
Reimbursement received from Devesh Engineering Company Structo Engineers
related parties .......................... (1,288,169) (1,785,429) — — Electro-Chem Shree Rang Converters
Reimbursement made to parties 801,712 264,036 99,180 59,577 EKO Rubber Industries Sarang Spring Manufacturing Co.
Interest on inter Corporate Fair Fastners Sethi Tools Pvt. Ltd.
Deposit ..................................... 7,956,000 7,786,838 — — Hindustion Fastners The Miniature Bulb Industries Pvt. Ltd.
Inducto Cast Turbo Bearings Pvt. Ltd.
Inter Corporate Deposits taken — (10,000,000) — — Kartikeya Engg Works Umiyaji Industrial Corporation
Guarantee issued by parties ..... — — 3,000,000 1,500,000 Aum Industries Unique Forgings

556
 MAHINDRA GUJARAT TRACTOR LIMITED

14. Value of Materials Consumed: 16. Expenditure in foreign currency:

2005–06 2004–05 2005–06 2004–05

Quantity Value Quantity Value Rupees Rupees
Rupees Rupees Travelling — 7,584
Forgings, Castings, Semi-
Finished Materials (Nos.) 97,180 42,555,053 75,464 39,973,503
Steel Rods (Nos.) 19,308 5,774,121 23,569 11,239,555 17. Repairs and Maintenance includes machinery spares consumed Rs. 365,241
Tyres and Tubes (Nos. 21,534 46,150,120 20,502 35,180,824 (2004–05: Rs. 134,028).
Wheel Rims (Nos.) 10,901 18,790,162 10,274 13,237,087
Hydraulic Power lift (Nos.) 2,757 41,431,450 2,532 36,005,627 18. Disclosures in pursuance of the Accounting Standard 29 ‘Provisions, Contingent
Others 454,729,724 384,866,899 Liabilities and Contingent Assets’ issued by the ICAI:

609,430,630 520,503,495 Provision for Warranties 2005–06 2004–05

Notes: Rupees Rupees
(i) The consumption in value has been ascertained on the basis of opening stock (a) Carrying amount at the beginning of the year 3,522,522 4,416,097
plus purchases less closing stock and includes the adjustment of excesses and
shortages as ascertained on physical count and write-off of obsolete and (b) Additional provision made during the year 2,982,084 2,303,194
unserviceable raw material and components.
(c) Amount used during the year (3,900,044) (2,016,145)
(ii) The consumption in value shown against others is a balancing figure based on
the total consumption shown in the Profit and Loss Account. (d) Unused amount reversed during the year — (1,180,624)
(e) Carrying amount at the end of the year 2,604,562 3,522,522
15. Value of Imported and Indigenous Material Consumed:
2005–06 2004–05 The above provision has been recognised for expected warranty claims on
% Rupees % Rupees products sold during the last two financial years. It is expected that the majority
of this expenditure will be incurred in the next financial year, and all within two
Raw Material, Components and years of the balance sheet date.
Spare Parts:
19. The Company’s leasing arrangements entered on or after 1st April, 2001, are in
Imported — — — — respect of operating lease for premises (residential, office, godowns). The
Indigenous 100.00 609,430,630 100.00 520,503,495 leasing arrangements range between 11 months and three years generally, and
100.00 609,430,630 100.00 520,503,495 are usually renewable by mutual consent on agreed terms. The aggregate lease
rentals payable are charged as rent.

20. Information in respect of licensed and installed capacities, production, opening and closing stocks and sale of tractors:

Sl. Class of Unit of Licensed Installed Actual

No. Goods Measu- Capacity Capacity Production Opening Stock Closing Stock Sales
rement per per annum [Note (iii)
annum [Note (i) below Quantity Value Quantity Value Quantity Value
below] Rupees Rupees Rupees
1. (i) Agricultural Tractors
Diesel wheeled up to

{
30–45 HP Nos. 5,000
(ii) Agricultural Tractors
3,000 2,760 58 11,748,152 67 14,741,541 2,751 760,838,113
Diesel wheeled up to
55–80 HP Nos. 2,000
7,000 2,200 2,499 9 1,299,970 58 11,748,152 2,450 651,302,204
2. Parts and accessories of
Tractors [Note (ii) below] 20,110,193
10,115,370
Total 780,948,306
661,417,574
Notes: (i) The installed capacity has been certified by the management, which the Auditors have relied on without verification, as this is a technical matter.
(ii) These are manufactured and bought-out parts and accessories of Tractors. The Company is in the process of aligning its systems so as to disclose the information
regarding purchases, opening and closing stocks of bought out parts and accessories.
(iii) Actual production includes production for captive consumption.

557
MAHINDRA GUJARAT TRACTOR LIMITED

21. Information pursuant to the provisions of Part IV of Schedule VI to the Companies Act, 1956.
Balance Sheet Abstract and Company's General Business Profile:
I. Registration Details:
Registration No. G 3 1 2 7 State Code 0 4
Balance Sheet Date 3 1 0 3 2 0 0 6
Date Month Year
II. Capital raised during the year (Amount in Rs. Thousands):
Public Issue Rights Issue
N I L N I L
Bonus Issue Private Placement
N I L N I L
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands):
Total Liabilities
including Shareholders' Funds Total Assets
6 4 8 8 3 8 6 4 8 8 3 8
Sources of Funds:
Paid-up Capital Reserve and Surplus
2 0 3 0 2 0 2 1 7 1 3
Secured Loans Unsecured Loans
5 2 4 7 3 1 6 7 0 2 9
Deferred Tax Liability (Net)
1 9 0 8
Application of Funds:
Net Fixed Assets Investments
1 7 3 5 7 4 6 1
Net Current Assets Miscellaneous Expenditure
( 2 0 2 2 2 ) N I L
Accumulated Losses
4 4 8 5 4 7
IV. Performance of Company (Amount in Rs. Thousands):
Turnover (Total Income) Total Expenditure
7 8 8 0 5 9 8 0 1 9 5 6
+ – Profit/Loss Before Tax + – Profit/Loss After Tax
( 1 3 8 9 7 ) ( 1 5 2 7 3 )
(Please tick appropriate box + for Profit – for Loss)
Earnings per Share in Rupees Dividend Rate %
Basic and Diluted
( 1 . 3 1 ) N I L
V. Generic Names of Three Principal Products/Services of the Company (as per Monetary Terms):
Item Code No. (ITC Code) Product Description
8 7 0 1 T r a c t o r
8 4 0 8 I C E n g i n e
8 7 0 8 T r a c t o r P a r t s

For and on behalf of the Board

{
Anjanikumar Choudhari
U.Y. Phadke
Gautam Nagwekar Directors
Indira J. Parekh
Subhash Modak Manager

Mumbai: 26th April, 2006

558
 MAHINDRA SHUBHLABH SERVICES LIMITED

DIRECTORS’ REPORT TO THE SHAREHOLDERS

Your Directors present their Sixth Report, together with the audited accounts of the Company for the year ended 31st March, 2006.
FINANCIAL RESULTS
Particulars (Rupees in Lacs)

Year ended Year ended

31.3.2006 31.3.2005

Income including increase in Stock of Trading goods/seeds ................. 2068.90 2352.80

Loss before Interest, Depreciation and Amortisation and Tax ............... 353.39 252.86

Interest ................................................................................................... 4.11 —

Loss before Depreciation and Amortisation and Tax ............................. 357.50 252.86

Depreciation and Amortisation ............................................................... 9.42 15.37

Loss before Provision for Tax ................................................................ 366.92 268.23

Provision for taxation-Fringe benefit Tax ................................................ 7.90 —

Loss for the year after provision for Tax ................................................ 374.82 268.23

Balance of Loss brought forward from earlier years .............................. 2230.05 1961.82

Loss carried to Balance Sheet ............................................................... 2604.87 2230.05

OPERATIONS
The year under review had been a difficult one for the operations
of the Company. The Company’s Income was low at Rs. 20.69
crores as compared to Rs. 23.53 crores of the previous year.
Contract Farming, the main business activity of the Company
witnessed a decline, mainly due to the withdrawal of funding of
loans by Banks to the farmers. On the other hand the sales of
Mahindra branded pesticides, did not reach projected levels as
the demand decreased across the States. In spite of these
adverse conditions, your Company was able to maintain
Revenues as close to that of last year. This was possible due to
expansion of markets in other states such as Madhya Pradesh,
Chhattisgarh, Rajasthan and Gujarat. The Seed potato business
has performed substantially better than last year and this
contributed to the improvement in the margin realised.
Your Company obtained Primary Marketing Organisation (PMO)
certification under EUREPGAP for export of grapes. The grapes
were exported to a large multinational in Europe.
The acreage under the Company’s farmer advisory services was
71,000 acres concentrated mainly in Punjab.
Your Company has taken Bank facilities to finance its exports
and other operations.
CURRENT YEAR
The Company anticipates a better growth in its operations during
the current year. The Company proposes to introduce some
additional agro chemicals in the plant nutrition area. The export
of fresh produce is expected to be higher in the current year.
Seed potato is another area where business is expected to
perform better. The Company plans to get quality seeds produced
under Contract farming and market the same under the Mahindra
brand. These would include seeds for field crops such as Wheat,
Paddy, Millet, Soyabean, Mustard, Maize and Cotton and in
vegetable seeds would include Tomatoes, Aubergines, Okra,
Cabbage, Cauliflower, Cucurbits, Carrot, Radish, Spinach, etc.
AUDIT COMMITTEE
The Audit Committee of the Board presently comprises Mr. M.
G. Bhide (Chairman), Mr. Uday Y. Phadke and Mr. S.
Durgashankar. The Committee met twice during the year.
REMUNERATION/ COMPENSATION COMMITTEE
During the year the Board constituted a Remuneration/
Compensation Committee comprising of Mr. Raghunath Murti
(Chairman), Mr. M. G. Bhide and Mr. Uday Y. Phadke. This
Committee met once during the year.
DIRECTORS’ RESPONSIBILITY STATEMENT
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the
Operating Management, and after due enquiry, confirm that:
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;

559
MAHINDRA SHUBHLABH SERVICES LIMITED

(ii) they have, in the selection of the accounting policies, DEPOSITS AND LOANS/ADVANCES
consulted the Statutory Auditors and these have been
The Company has not accepted any deposits from the public or
applied consistently and reasonable and prudent judgments
its employees during the year under review.
and estimates have been made so as to give a true and fair
view of the state of affairs of the Company as at 31 st March, The Company has not made any loans/advances, which require
2006 and of the loss of the Company for the year ended on to be disclosed in the Annual Accounts of the Company pursuant
that date; to Clause 32 of the Listing Agreement of the parent company,
Mahindra and Mahindra Limited.
(iii) proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act, 1956 for CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION
AND FOREIGN EXCHANGE EARNINGS AND OUTGO
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities; In view of the nature of activities that are being carried on by the
(iv) the annual accounts have been prepared on a going concern Company, Rules 2A and 2B of the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988,
basis.
concerning conservation of energy and technology absorption
respectively are not applicable to the Company.
DIRECTORS
The information on foreign exchange earnings and outgo is
Mr. Raghunath Murti retires by rotation and, being eligible, offers
furnished in the Notes on Accounts.
himself for re-election at the forthcoming Annual General
Meeting.
PARTICULARS OF EMPLOYEES AS REQUIRED UNDER
SECTION 217(2A) OF THE COMPANIES ACT, 1956, AND THE
AUDITORS
RULES MADE THEREUNDER
Messrs Deloitte Haskins and Sells, Chartered Accountants, retire
The Company had no employee who was in receipt of
as Auditors of the Company, and have given their consent for re-
remuneration of not less than Rs. 24,00,000 during the year ended
appointment. The shareholders will be required to elect Auditors
31st March, 2006 or Rs. 2,00,000 per month during any part of
for the current year and fix their remuneration.
the said year.
As required under the provisions of section 224 of the Companies
By order of the Board
Act, 1956, the Company has obtained a written certificate from
the above Auditors proposed to be re-appointed to the effect
that their re-appointment, if made, would be in conformity with Raghunath Murti
the limits specified in the said section. Mumbai, 21st April, 2006 Chairman

560

AUDITORS' REPORT
To the members of Mahindra Shubhlabh Services Limited.
1. We have audited the attached Balance Sheet of Mahindra
Shubhlabh Services Limited as at 31st March 2006, and also
the Profit and Loss Account and the Cash Flow statement of
the Company for the year ended on that date, annexed
thereto. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those Standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates
made by the management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order,
2003, issued by the Central Government in terms of
Section 227(4A) of the Companies Act, 1956, we enclose
in the Annexure, a statement on the matters specified in
paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above,
we report that:
i) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
ii) In our opinion, proper books of account as required by
law have been kept by the Company so far as appears
from our examination of the books;
iii) The balance sheet, profit and loss account and cash
flow statement dealt with by this report are in
agreement with the books of account;
iv) In our opinion, the balance sheet, profit and loss
account, and cash flow statement dealt with by this
MAHINDRA SHUBHLABH SERVICES LIMITED
report comply with the accounting standards referred
to in sub-section (3C) of Section 211 of the Companies
Act, 1956;
v) On the basis of written representation received from
the directors as on 31st March, 2006 and taken on
record by the board of directors, we report that none
of the directors is disqualified as on 31st March, 2006
from being appointed as a director in terms of clause
(g) of sub-section (1) of Section 274 of the Companies
Act, 1956;
vi) Without qualifying our opinion, we draw attention to
note no. 12 of Schedule XVI, regarding accounts of the
company being prepared on a going concern basis;
vii) In our opinion and to the best of our information and
according to the explanations given to us, the said
accounts read along with the Significant Accounting
Policies and other notes thereon, give the information
required by the Companies Act, 1956, in the manner
so required and give a true and fair view in conformity
with the accounting principles generally accepted in
India:
(a) in the case of the balance sheet, of the state of
affairs of the Company as at 31st March 2006;
(b) in the case of the profit and loss account, of the
loss for the year ended on that date and
(c) in the case of the cash flow statement, of the cash
flows for the year ended on that date.
For Deloitte Haskins & Sells
Chartered Accountants
A.B. Jani
Partner
Membership No. 46488
Mumbai, 21st April, 2006
561
MAHINDRA SHUBHLABH SERVICES LIMITED
ANNEXURE TO THE AUDITORS’ REPORT
Re: Mahindra Shubhlabh Services Limited
(Referred to in paragraph 3 of our report of even date)
i) The nature of the Company’s activities are such that the
clauses (viii), (xiii) and (xiv) of paragraph 4 of the Companies
(Auditor’s Report) Order, 2003 are not applicable to the
Company for the year.
ii) a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of fixed assets.
b) We are informed that the physical verification of fixed
assets was carried out by the management during the
year and no material discrepancies were noticed on
such verification. In our opinion, the frequency of
verification is reasonable.
c) In our opinion and according to information given to us,
the Company has not disposed off a substantial or a
major part of the fixed assets during the year.
iii) a) The inventories have been physically verified during
the year by the management. In our opinion, the
frequency of verification is reasonable.
b) The procedures of physical verification of inventories
followed by the management are reasonable and
adequate in relation to the size of the Company and the
nature of its business.
c) The Company has maintained proper records of its
inventories and no material discrepancies were noticed
on physical verification.
iv) a) The Company has not granted any loans secured or
unsecured to companies, firms or other parties covered
in the register maintained under section 301 of the
Companies Act, 1956, hence, clauses (iii), (a), (b), (c)
and (d) of paragraph 4 of the Companies (Auditor’s
Report) Order, 2003 are not applicable to the Company
for the year. The Company has taken secured loan for
assets taken under hire purchase arrangements from
one company covered in the register maintained under
section 301 of the Companies Act, 1956. The maximum
amount involved during the year aggregate to
Rs. 199,436/- and the year-end balance of such loan
aggregate to Rs. 50,285/-. The Company had taken an
Inter Corporate Deposit from the holding company,
aggregating to Rs. 25,000,000/-. The maximum balance
outstanding during the year for the same was
Rs. 25,000,000/-. The said deposit has been repaid
during the year.
b) In our opinion, the rate of interest and other terms and
conditions on which loans have been taken by the
Company are not prima facie, prejudicial to the interest
of the Company.
c) The Company is regular in repaying the principal
amounts as stipulated and has been regular in the
payment of interest.
v) In our opinion and according to the information and
explanations given to us,there are adequate internal control
systems commensurate with the size of the Company
and the nature of its business for the purchase of inventory
and fixed assets and for the sale of goods and services.
During the course of our audit we have not observed any
continuing failure to correct major weaknesses in internal
control system.
vi) a) According to the information and explanations given to
us, we are of the opinion that the particulars of
contracts / arrangements that need to be entered into
562
the register maintained under section 301 of the
Companies Act, 1956 have been so entered.
b) According to the information and explanations given to
us, where each of such transactions in pursuance
of such contracts / arrangements are in excess of
Rs. 5 lakhs in respect of any party during the year, are
at prices determined in negotiations with the said
parties and are prima facie reasonable having regard to
the prevailing market prices available with the
Company.
vii) The Company has not accepted any deposits from the
public.
viii) In our opinion, the Company has an internal audit system
commensurate with the size of the Company and nature
of its business.
ix) a) The Company has been generally regular in depositing
undisputed statutory dues including Provident Fund,
Employees’ State Insurance,Income-tax, Sales tax,
Wealth tax, Service tax, Custom duty, Cess and any
other material statutory dues with the appropriate
authorities during the year.
b) According to the information and explanations given to
us, there are no dues of Income-tax / Sales tax / Wealth
tax / Service tax / Custom duty / Excise duty and Cess,
which have not been deposited with the appropriate
authorities on account of dispute.
x) The accumulated losses of the Company have exceeded
fifty per cent of its networth and the Company also has
incurred cash losses in the current as well as in the
immediately preceding financial year.
xi) According to information and explanations given to us, the
Company has not defaulted in repayment of dues to bank.
There were no dues relating to repayment of loan taken
from financial institution as per the terms of the loan. The
Company has not taken any loan by way of issue of
debentures.
xii) According to the information and explanations given to us,
the Company has not granted any loans or advances on
the basis of security by way of pledge of shares, debentures
and other securities.
xiii) According to the information and explanations give to us,
the Company has not given any guarantees for loans
taken by others from banks or financial institutions.
xiv) According to the information and explanations given to us,
there are no term loans obtained by the Company.
xv) According to the information and explanations given to us
and on an overall examination of the balance sheet of the
Company, funds raised on short-term basis have, prima
facie, not been used during the year for long-term
investment.
xvi) The Company has not made any preferential allotment of
shares to parties and companies covered in the Register
maintained under Section 301 of the Companies Act, 1956.
xvii) The Company has not issued any debentures during
the year.
xviii) The Company has not raised funds by way of public issue
during the year.
xix) According to the information and explanations given to us,
no fraud on or by the Company was noticed or reported
during the year.
For Deloitte Haskins & Sells
Chartered Accountants
A.B. Jani
Partner
Membership No. 46488
Mumbai, 21st April, 2006
 MAHINDRA SHUBHLABH SERVICES LIMITED

Balance Sheet as at 31st March, 2006

As at As at
Schedule 31st March, 2006 31st March, 2005
Rupees Rupees
SOURCES OF FUNDS
Shareholders’ Funds
Share Capital ..................................................................................... I 242,382,240 242,382,240
Reserves and Surplus ....................................................................... II 50,529,941 50,529,941
Loan Funds
Secured Loans .................................................................................. III 30,490,151 199,436
TOTAL .... 323,402,332 293,111,617
APPLICATION OF FUNDS
Fixed Assets ..................................................................................... IV
Gross block ....................................................................................... 21,376,954 20,622,495
Less: Depreciation ............................................................................ 6,238,253 5,302,635
Net block ........................................................................................... 15,138,701 15,319,860
Investments ..................................................................................... V 54,500 3,969,500
Current Assets, Loans and Advances ............................................ VI
Inventories ........................................................................................ 73,213,775 18,813,495
Sundry Debtors ................................................................................. 28,717,614 13,187,690
Cash and Bank Balances ................................................................... 18,079,460 22,073,635
Other Current Assets ........................................................................ 42,526 33,128
Loans and Advances ......................................................................... 10,958,339 27,680,563
131,011,714 81,788,511
Less: Current Liabilities and Provisions
Current Liabilities .............................................................................. VII 82,943,922 38,482,163
Provisions .......................................................................................... VIII 345,476 292,877
83,289,398 38,775,040
Net Current Assets .......................................................................... 47,722,316 43,013,471
Miscellaneous Expenditure
(to the extent not written off or adjusted) ......................................... IX — 7,803,414
Profit and Loss Account .................................................................. 260,486,815 223,005,372
TOTAL .... 323,402,332 293,111,617

Significant Accounting Policies and Notes on Accounts ............. XVI

As per our attached Report of even date For Mahindra Shubhlabh Services Limited
Raghunath Murti Chairman
For Deloitte Haskins & Sells,

}
Chartered Accountants U.Y. Phadke

A.B. Jain M.G. Bhide Directors

Partner S. Durgashankar

Suhas S. Borgaonkar Financial Controller

F.H. Baria Company Secretary

Mumbai, 21st April, 2006 Mumbai, 21st April, 2006

563
MAHINDRA SHUBHLABH SERVICES LIMITED

Profit and Loss Account for the year ended 31st March, 2006

Year Ended Year Ended

Schedule 31st March, 2006 31st March, 2005
Rupees Rupees
INCOME:
Sale of Goods and Services .............................................................. X 145,651,682 205,041,188
Other Income .................................................................................... XI 6,838,240 13,528,840
Increase in Stock of Trading Goods / Seeds ..................................... XII 54,400,280 16,709,612
TOTAL .... 206,890,202 235,279,640

EXPENDITURE:
Purchase of Traded Goods ................................................................ 149,431,093 199,012,760
Cost of Cultivation ............................................................................. 22,730,528 —
Personnel Costs ................................................................................ XIII 18,389,072 20,747,292
Operating and Other Expenses ......................................................... XIV 43,874,103 27,195,653
Interest .............................................................................................. XV 411,056 —
Depreciation and Amortisation .......................................................... 942,285 1,537,372
Preliminary Expenses written off ...................................................... — 233,076
Deferred Revenue Expenses Written Off ......................................... 7,803,414 13,377,264
TOTAL .... 243,581,551 262,103,417

Loss for the year before provision for Tax ........................................ (36,691,349) (26,823,777)
Provision for Tax
— Fringe Benefit Tax ........................................................................ 790,094 —
Loss for the year after Provision for Tax ........................................... (37,481,443) (26,823,777)
Balance brought forward from earlier year ....................................... (223,005,372) (196,181,595)
Balance carried to Balance Sheet ..................................................... (260,486,815) (223,005,372)

Earnings per Share (Refer note no. 7 of Schedule XVI)

— Basic and Diluted .......................................................................... (1.55) (1.11)
Significant Accounting Policies and Notes on Accounts ................... XVI

As per our attached Report of even date For Mahindra Shubhlabh Services Limited
Raghunath Murti Chairman
For Deloitte Haskins & Sells,

}
Chartered Accountants U.Y. Phadke

A.B. Jain M.G. Bhide Directors

Partner S. Durgashankar

Suhas S. Borgaonkar Financial Controller

F.H. Baria Company Secretary

Mumbai, 21st April, 2006 Mumbai, 21st April, 2006

564
 MAHINDRA SHUBHLABH SERVICES LIMITED

Cash Flow Statement for the year ended 31st March, 2006
Year Ended Year Ended
Particulars 31st March, 2006 31st March, 2005
Rupees Rupees Rupees
A. CASH FLOW FOR OPERATING ACTIVITIES:
Net Profit before exceptional item, taxation and adjustments
pertaining to previous years ............................................................... (36,691,349) (26,823,777)
Adjustments for:
Depreciation and Amortisation ........................................................... 942,285 1,537,372
Foreign Exchange ............................................................................... 55,200 —
Interest ............................................................................................... 411,056 —
Loss on Sale/Write-off of Fixed Assets .............................................. 21,333 205,877
Long-term Investment written-off ...................................................... — 6,000
Advances written-off .......................................................................... 42,391 —
Provision for diminution in value of Long-term Investments ............. 3,916,000 —
Provision for Doubtful debts/Advances .............................................. 11,281,355 2,622,338
Income from Investments .................................................................. (438,805) (974,067)
Preliminary Expenses written off ....................................................... — 233,076
Deferred Revenue Expenses written off ........................................... 7,803,414 13,377,264
24,034,229 17,007,860
Operating Profit before Working capital changes ......................... (12,657,120) (9,815,917)
Adjustments for:
Trade and other receivables ............................................................... (9,706,339) (6,967,277)
Inventories .......................................................................................... (54,400,280) (16,709,612)
Trade and other payables ................................................................... 44,481,660 9,321,761
(19,624,959) (14,355,128)
Cash generated from operations .................................................... (32,282,079) (24,171,045)
Income taxes paid (net) ...................................................................... (1,111,497) (145,858)
NET CASH FROM OPERATING ACTIVITIES ................................... (33,393,576) (24,316,903)
B. CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets ................................................................... (782,459) (631,000)
Sale of Fixed Assets ........................................................................... — 117,994
Purchase of investments ................................................................... (1,000) —
Interest received ................................................................................ 325,703 2,049,754
NET CASH USED IN INVESTING ACTIVITIES .................................... (457,756) 1,536,748
C. CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings ................................................................. 30,384,666 —
Repayments of borrowings ................................................................ (149,151) (133,986)
Interest, Commitment and Finance charges paid .............................. (378,358) —
NET CASH (USED IN) / FROM FINANCING ACTIVITIES ......................... 29,857,157 (133,986)
Net (Decrease)/Increase in cash and cash equivalents ............................ (3,994,175) (22,914,141)
Cash and Cash equivalents at the beginning of the year .......................... 22,073,635 44,987,776
Cash and Cash equivalents at the end of the year ................................... 18,079,460 22,073,635
Notes:-
1. Components of Cash and Cash equivalents include cash, bank balances in current and deposit accounts.
2. Addition to Fixed Assets and sale of Fixed Assets are considered as part of investing activities.
3. The cash flow statement has been prepared under the ‘Indirect Method’ as set out in Accounting Standard 3 on “Cash Flow Statements”, issued
by The Institute of Chartered Accountants of India.

As per our attached Report of even date For Mahindra Shubhlabh Services Limited
Raghunath Murti Chairman
For Deloitte Haskins & Sells,

}
Chartered Accountants U.Y. Phadke
A.B. Jain M.G. Bhide Directors
Partner S. Durgashankar

Suhas S. Borgaonkar Financial Controller

F.H. Baria Company Secretary

Mumbai, 21st April, 2006 Mumbai, 21st April, 2006

565
MAHINDRA SHUBHLABH SERVICES LIMITED

Schedules forming part of the Balance Sheet and the Profit and Loss Account
SCHEDULE I As at As at SCHEDULE II As at As at
SHARE CAPITAL: 31st March, 31st March, RESERVES AND SURPLUS: 31st March, 31st March,
2006 2005 2006 2005
Rupees Rupees Rupees Rupees
Authorised: Securities Premium Account
26,000,000 Equity Shares of Rs. 10/- each .. 260,000,000 260,000,000 Balance as per last Balance Sheet ................. 50,529,941 50,529,941
Issued, Subscribed and paid up: TOTAL ......... 50,529,941 50,529,941
24,238,224 Equity shares of Rs. 10/- each,
fully paid up .............................. 242,382,240 242,382,240 SCHEDULE III As at As at
Note: Out of the above: SECURED LOANS: 31st March, 31st March,
17,639,665 fully paid up Equity Shares are 2006 2005
Rupees Rupees
held by Mahindra & Mahindra
Limited, the holding company Due to a company under hire purchase
including 7 shares held jointly. agreements (Secured by hypothecation of assets
taken under hire purchase arrangement) ........ 50,285 199,436
TOTAL ......... 242,382,240 242,382,240 From Financial Institution
— Foreign Currency Loan (Secured by
hypothecation of current assets pertaining to
fruits and vegetable operations, both present
and future.) ..................................................... 5,383,200 —
From Bank
— Cash Credit Account (Secured by
hypothecation of stock and book debts —
except export goods) ...................................... 25,056,666 —
TOTAL ......... 30,490,151 199,436
SCHEDULE IV
FIXED ASSETS: (In Rupees)
Gross block Depreciation and Amortisation Net block

Description of Assets As at Addi- Deduc- As at Upto For the Deduc- Upto As at As at

1st April, tions tions 31st March, 31st March, Year tions 31st March, 31st March, 31st March,
2005 2006 2005 2006 2006 2005
Intangible Asset:
Portal (Website) ......................... 2,669,465 — — 2,669,465 2,669,465 — — 2,669,465 — —
Assets taken on Hire Purchase*
Computers ................................ 177,050 — — 177,050 100,121 28,699 — 128,820 48,230 76,929
Vehicles
(Refer Note 5 of Schedule XVI) . 600,000 — — 600,000 140,196 57,000 — 197,196 402,804 459,804
Other Assets
Land .......................................... 2,483,200 — — 2,483,200 — — — — 2,483,200 2,483,200
Building ..................................... 8,961,320 — — 8,961,320 650,011 146,070 — 796,081 8,165,239 8,311,309
Plant and Machinery .................. 1,634,798 210,284 — 1,845,082 311,760 121,865 — 433,625 1,411,457 1,323,038
Furniture and Fixtures ............... 178,649 19,326 28,000 169,975 61,694 46,005 6,667 101,032 68,943 116,955
Computers ................................ 1,884,452 188,937 — 2,073,389 923,585 332,336 — 1,255,921 817,468 960,867
Office Equipment ...................... 391,460 75,912 — 467,372 133,704 42,767 — 176,471 290,901 257,756
Vehicles ..................................... 1,642,101 288,000 — 1,930,101 312,099 167,543 — 479,642 1,450,459 1,330,002
Total .......................................... 20,622,495 782,459 28,000 21,376,954 5,302,635 942,285 6,667 6,238,253 15,138,701 15,319,860
Previous Year ............................ 20,452,341 631,000 460,846 20,622,495 3,902,238 1,537,372 136,975 5,302,635 15,319,860
* Note: The vendors have a lien on these assets.
SCHEDULE V As at As at SCHEDULE V (Contd.) As at As at
INVESTMENTS (At Cost) 31st March, 31st March, 31st March, 31st March,
(Long Term — Unquoted) 2006 2005 2006 2005
Rupees Rupees Rupees Rupees Rupees Rupees
Non Trade: 273,420 Equity Shares of Rs. 10/-
each fully paid-up of Kota Farm
In Government Securities:
Services Ltd. ................................ 2,734,200 2,734,200
In National Savings Certificates .... 64,500 63,500 1,000 Equity Shares of Rs. 100/-
[Deposited with Sales tax authorities each fully paid-up of Hadoti Krishi
Rs. 16,000/- and with Agriculture Vihar Private Limited .................... 100,000 100,000
market committee Rs. 30,500/-] 30,000 Equity Shares of Rs. 10/-
Less:- Provision for diminution in each fully paid-up of Harsolia Agri
value of Investments .................... 10,000 — Sales and Services Private Limited 300,000 300,000
54,500 63,500 200 Equity Shares of Rs. 100/- each
Trade: fully paid-up of Yadgiri Farm
In Other Companies: Solutions Private Limited .............. 20,000 20,000
351,000 Equity Shares of Rs. 10/- 2,000 Equity Shares of Rs. 10/- each
each fully paid-up of Mega One fully paid-up of Srinivasa Farm
Stop Farm Services Limited ......... 3,510,000 3,510,000 Solutions Private Limited .............. 20,000 20,000
337,500 Equity Shares of Rs. 10/- 15,180 Equity Shares of Rs. 10/-
each fully paid-up of Mriyalguda each fully paid-up of Farm Vision
Farm Solution Limited .................. 3,375,000 3,375,000 Agri-Tech Private Limited ............. 151,800 151,800

566
 MAHINDRA SHUBHLABH SERVICES LIMITED

SCHEDULE V (Contd.) As at As at SCHEDULE VII As at As at

31st March, 31st March, CURRENT LIABILITIES: 31st March, 31st March,
2006 2005 2006 2005
Rupees Rupees Rupees Rupees Rupees Rupees
20,000 Equity Shares of Rs. 10/- Sundry Creditors:
Total Outstanding dues to small
each fully paid-up of Sowbhagya
Krishi Vikas Private Limited .......... 200,000 200,000 scale industrial undertakings ........ — —
1,800 Equity Shares of Rs. 100/- Total Outstanding dues of creditors
other than small scale industrial
each fully paid-up of Bhuvi Care
Private Limited ............................. 180,000 180,000 undertakings ................................. 72,824,409 25,121,669
6,000 Equity Shares of Rs. 10/- each 72,824,409 25,121,669
fully paid-up of Richfield Crop Advances received from customers 10,086,815 13,360,494
Solutions India Private Limited ..... 60,000 60,000 Interest accrued but not due ........ 32,698 —
6,000 Equity Shares of Rs. 10/- each TOTAL ...... 82,943,922 38,482,163
fully paid-up of Covai Crop
Care India Private Limited ............ 60,000 60,000 SCHEDULE VIII As at As at
8,000 Equity Shares of Rs. 10/- each PROVISIONS: 31st March, 31st March,
fully paid-up of Manjara Agri 2006 2005
Tech Private Limited .................... 80,000 80,000 Rupees Rupees Rupees
10,791,000 10,791,000 Provision for leave encashment ... 89,228 65,882
Less:- Provision for diminution in Provision for Gratuity .................... 256,248 226,995
value of Investments .................... 10,791,000 6,885,000 TOTAL ...... 345,476 292,877
TOTAL ...... 54,500 3,969,500 SCHEDULE IX As at As at
MISCELLANEOUS EXPENDITURE: 31st March, 31st March,
SCHEDULE VI As at As at 2006 2005
CURRENT ASSETS, 31st March, 31st March, Rupees Rupees Rupees
LOANS AND ADVANCES 2006 2005
Rupees Rupees Rupees [To the extent not written-off or adjusted]
A) Current Assets: Deferred Revenue Expenditure .... — 7,803,414
a) Inventories (at cost or net TOTAL ...... — 7,803,414
realisable value which-
ever is lower) SCHEDULE X As at As at
Traded Goods ................ 62,194,223 18,813,495 SALE OF GOODS AND SERVICES: 31st March, 31st March,
Stock of Seeds 2006 2005
(Refer Note 15 of Rupees Rupees Rupees
Schedule XVI) ................. 11,019,552 — Sale of traded goods .................... 121,476,603 192,270,473
73,213,775 18,813,495 Sale of seeds ................................ 17,096,954 7,874,760
b) Sundry Debtors (Unsecured) Royalty and other fees ................. 7,078,125 4,895,955
Debts outstanding for a (Tax Deducted at source Rs. 347,306/-,
period exceeding six Previous year Rs. 54,480/-)
months TOTAL ...... 145,651,682 205,041,188
— Considered Good ....... 1,033,000 1,490,377
— Considered Doubtful . 12,595,105 6,021,230 SCHEDULE XI As at As at
13,628,105 7,511,607 OTHER INCOME: 31st March, 31st March,
Other Debts 2006 2005
— Considered Good ....... 27,684,614 11,697,313 Rupees Rupees Rupees
— Considered Doubtful . 19,070 — Interest on Fixed Deposits ........... 433,834 964,561
27,703,684 11,697,313 (Tax deducted at source
Rs. 70,557/-, Previous year
41,331,789 19,208,920 Rs. 247,372/-)
Less:- Provision ............. 12,614,175 6,021,230 Interest on long-term investment . 4,971 9,506
TOTAL ...... 28,717,614 13,187,690 Discounts Received ..................... 2,890,017 5,254,677
c) Cash and Bank Balances Subvention Charges ..................... — 2,454,480
Cash on hand ................. — — (Tax Deducted at source Rs. Nil,
Balance with Scheduled Previous year Rs. 125,460/-)
Banks: Excess provision for earlier years
— In Fixed Deposit written back ................................. 1,893,692 543,513
Accounts ................... 3,461,000 8,965,792 Insurance claim received .............. — 556,464
Commission received ................... 376,727 2,666,707
— In Current Accounts .. 14,618,460 13,107,843
(Tax Deducted at source
18,079,460 22,073,635 Rs. 39,243/-, Previous year
TOTAL ...... 18,079,460 22,073,635 Rs. 16,932/-)
B) Other Current Assets Miscellaneous Income ................. 1,238,999 1,078,932
Interest Accrued on Long- TOTAL ...... 6,838,240 13,528,840
term investment ................... 42,526 33,128
C) Loans and advances (Unsecured): SCHEDULE XII As at As at
Advances recoverable in cash or INCREASE IN STOCK OF 31st March, 31st March,
in kind or for value to be 2006 2005
received TRADING GOODS/SEEDS: Rupees Rupees Rupees
— Considered Good .............. 2,334,188 4,647,299 Traded Goods
— Considered Doubtful ......... 6,257,113 1,568,703 Stock as on March 31, 2006 62,194,223 18,813,495
8,591,301 6,216,002 Less:- Stock as on April 1, 2005 18,813,495 2,103,883
Less:- Provision ..................... 6,257,113 1,568,703 Less:- Used for cultivation 172,760 —
2,334,188 4,647,299 (Refer Note 15 of Schedule XVI) 18,640,735 2,103,883
Advance to Suppliers ............ 7,691,450 22,421,966 43,553,488 16,709,612
Advance payment of income Stock of Seeds
tax ....................................... 932,701 611,298 Stock as on March 31, 2006 11,019,552 —
Less:- Stock as on April 1, 2005 172,760 —
10,958,339 27,680,563
10,846,792 —
TOTAL ...... 131,011,714 81,788,511
TOTAL . 54,400,280 16,709,612

567
MAHINDRA SHUBHLABH SERVICES LIMITED

SCHEDULE XIII As at As at made that affect the reported amounts of assets and liabilities on the date
PERSONNEL COST: 31st March, 31st March, of the financial statements and the reported amounts of revenues and
2006 2005 expenses during the reporting period. Differences between actual results
Rupees Rupees and estimates are recognised in period in which the results are known/
materialise.
Salaries ......................................... 16,445,278 18,957,810
Contributions to Provident Fund ... 778,541 764,947 c) Revenue Recognition
Gratuity ........................................ 29,253 — Revenues from sale of Agri Products (Pesticides, Fertilisers and Seeds) are
Staff Welfare Expenses ................ 1,136,000 1,024,536 recognised when the title to the products is transferred on delivery of goods.
TOTAL ...... 18,389,072 20,747,292 Revenues from Exports (Fresh Fruit Produce) are recognised on the basis of
sales effected by Consignees.
SCHEDULE XIV As at As at In appropriate circumstances, revenue (income) is recognised when no
OPERATING AND OTHER EXPENSES: 31st March, 31st March, significant uncertainty as to collectibility or realisability exists.
2006 2005 d) Fixed Assets
Rupees Rupees Tangible Assets
Travelling and conveyance expenses 9,086,000 6,509,905 Fixed assets are stated at cost less depreciation. Cost comprises of
Professional fees and Consultancy purchase price and attributable costs, if any.
charges ........................................ 5,687,117 2,197,788 Assets taken on lease (Hire Purchase)
Rent ............................................. 365,442 579,351
Assets taken on lease after 1st April, 2001 including taken under hire
Communication expenses ............ 1,953,119 1,986,003
purchase arrangements, wherein the company has an option to acquire the
Advertisement and Sales
asset are accounted for as fixed assets in accordance with the Accounting
Promotion Expenses .................... 2,812,955 3,312,016
Standard 19 on “Leases”, (AS 19).
Freight Outwards including
loading and unloading ................... 2,391,507 839,924 Intangible Assets
Lease Rent (including Hire Purchase Portal (website) is stated at initially incurred cost less accumulated
Charges Rs. 22,088/-, Previous amortisation.
year Rs. 99,210/-) ......................... 237,531 383,746
Electricity Charges ....................... 180,573 157,961 e) Foreign Currency Transactions
Insurance Charges ....................... 404,220 490,008 Transactions in foreign currency are recorded at the Exchange rates prevailing
Rates and Taxes ........................... 255,515 166,007 on the date of transaction. Monetary items are translated at the year-end
Repairs and Maintenance: rates. The Exchange difference between the rate prevailing on the date of
— Building .................................. 59,484 86,144 transaction and on the date of settlement as also on translation of Monetary
— Plant and Machinery ............... 8,772 5,748 items at the end of the year, is recognised as income or expense, as the case
— Others .................................... 599,481 1,223,587 may be, except in case of fixed assets where it is adjusted to the cost of the
Loss on sales/write-off of Fixed fixed assets.
Assets .......................................... 21,333 205,877 Any premium or discount arising at the inception of the forward exchange
Long-term Investments (NSC) contract is recognised as income or expense over the life of the contract,
written off .................................... — 6,000 except in the case where the contract is in connection with purchase of fixed
Advance written off ...................... 42,391 — asset, where the same is adjusted to the cost of fixed assets. Exchange
Provision for diminution in value of difference on a forward exchange contract entered into to hedge the foreign
Investments ................................. 3,916,000 — currency risk of a firm commitment is the difference between the foreign
Provision for Doubtful Debts/ currency amount of the contract translated at the exchange rate at the
Advances ..................................... 11,281,355 2,622,338 reporting date and the said amount translated at the later date of inception
Commission / Discount paid ......... 782,446 2,570,598 of the contract/last reporting date.
Loss on foreign exchange f) Depreciation
fluctuation .................................... 55,200 —
• Depreciation is provided on straight-line method at the rates and in the
Miscellaneous Expenses .............. 3,733,662 3,852,652
manner specified in Schedule XIV to the Companies Act, 1956.
TOTAL ...... 43,874,103 27,195,653 • The cost of the portal development (website) is amortised over a period
of 3 years on time proportion basis.
Note: Miscellaneous expenses include Office expenses, Training expenses, Printing
and Stationery expenses, Bank charges, etc. g) Retirement Benefits
SCHEDULE XV As at As at Provision is made for gratuity and encashment of unavailed leave on
INTEREST: 31st March, 31st March, retirement on the basis of actuarial valuations.
2006 2005
Rupees Rupees h) Investments
Investments classified as long term investments are stated at cost. Provision
On Loan from Bank ...................... 88,864 — is made to recognise a diminution, other than temporary, in the value of such
On Loan from holding company ... 322,192 — investments.
TOTAL ...... 411,056 —
i) Inventories
Traded goods are valued at Weighted Average Cost or Net Realisable Value
SCHEDULE XVI
whichever is lower.
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS The Cost of seeds which are at various stages of cultivation, includes cost
1) Significant Accounting Policies of mini-tubers, multiplication charges, cost of cultivation and other direct
a) Basis of preparation of financial statements costs incurred to bring the inventory in present location and condition.
The accompanying financial statements have been prepared under the j) Borrowing Cost
historical cost convention in accordance with the generally accepted
Borrowing costs, if any, that are attributable to the acquisition or construction
accounting principles in India, the Accounting Standards issued by The
of qualifying assets are capitalised as part of such assets. A qualifying asset
Institute of Chartered Accountants of India (ICAI) and the relevant provisions
is the one that necessarily takes substantial period of time to get ready for
of the Companies Act, 1956.
intended use. All other borrowing costs are charged to revenue.
b) Use of estimates k) Income taxes
The preparation of the financial statements, in conformity with the generally Tax expense comprises of current tax, deferred tax and fringe benefit tax.
accepted accounting principles, requires estimates and assumptions to be Current tax and Deferred tax are accounted for in accordance with Accounting

568
 MAHINDRA SHUBHLABH SERVICES LIMITED

standard 22 on “Accounting for Taxes on Income”, (AS 22) issued by the In accordance with the Accounting Standard 22 on “Accounting For Taxes on
ICAI. Current tax is measured at the amount expected to be paid to/ Income” (AS 22), deferred tax assets and liabilities should be recognised for all
recovered from the tax authorities, using the applicable tax rates. Deferred timing differences in accordance with the AS 22. However, considering the
tax assets and liabilities are recognised for future tax consequences present financial position and the requirement of AS 22 regarding certainty/
attributable to timing differences between taxable income and accounting virtual certainty, the same is not provided for as an asset (net). However, the
income that are capable of reversal in one or more subsequent years and are same will be reassessed at a subsequent balance sheet date and will be
measured using relevant enacted tax rates. The carrying amount of deferred accounted for in the year of certainty/virtual certainty in accordance with the
tax assets at each Balance sheet date is reduced to the extent that it is no aforesaid accounting standard.
longer reasonably certain that sufficient future taxable income will be
available against which the deferred tax asset can be realised. Fringe 7) Earning Per Share is calculated as follows:
benefits tax is recognised in accordance with the relevant provisions of the 2006 2005
Income-tax Act, 1961, and the Guidance Note on Fringe Benefits Tax issued Rupees Rupees
by the ICAI.
a) Net Loss for the Year ................ 37,481,443 26,823,777
l) Miscellaneous Expenditure (to the extent not written off or adjusted)
b) Weighted average number of
Expenditure carried forward under this head is being amortised as follows: Equity Shares ............................ 24,238,224 24,238,224
• Preliminary expenses:
Basic and Diluted
The expenses are written off over a period of five years from the year of
commencement of commercial activities. c) Nominal value of equity share ... 10 10
• Deferred Revenue Expenditure: d) Earning Per Share ...................... (1.55) (1.11)
Expenses incurred for project feasibility studies have been considered
as deferred revenue expenditure to be written off over a period of sixty 8) Expenditure in Foreign Currencies:
months from the commencement of commercial activities.
2006 2005
m) Contingent Liabilities Rupees Rupees
These, if any, are disclosed in the notes on accounts. Provisions are made Expenses relating to export sales 54,371 1,148,123
in the accounts if it becomes probable that an outflow of resources
embodying economic benefit will be required to settle the obligation. 9) Earnings in Foreign Exchange:
2006 2005
2) Contingent Liabilities: Rupees Rupees
Claims against the Company for loss of business/Services (excluding interest
Export of Goods on F.O.B. basis 4,583,805 6,405,251
claimed), etc., not acknowledged as debts and not provided for Rs. 548,590/-
(Previous year: Rs. 1,027,325/-).
10) Hitherto, the company followed the FIFO method for valuing its Traded Goods.
3) Payment to Auditors: However, during the year, in order to have a better presentation of the financial
statements, the company has valued such stocks by way of Weighted Average
2006 2005 Cost method. Due to this change the stock of Traded Goods is higher by Rs.
Rupees Rupees 4,085,084/- and the loss for the year is lower by the same amount.
Audit Fees ....................................... 180,000 180,000
11) The Company has made a provision of Rs. 2,734,200/- for the diminution in the
In any other manner (certification, etc.) 22,040 32,000
value of the investment in Kota Farm Services Ltd. (KFSL) as the accumulated
For Service Tax ............................... 18,960 22,920 losses have totally eroded the share capital of KFSL as per the latest available
Out of Pocket Expenses ................. 7,233 4,705 Balance Sheet of KFSL. The company has made further provisions aggregating
to Rs. 1,171,800/- for the diminution in the value of the investments made in
Total .... 228,233 239,625
franchisee companies, considering the reduced business operations with them
and financial position of the company.
4) Lease Rentals (for assets acquired prior to April 1, 2001):
2006 2005 12) The accumulated losses of the Company as at the year -end have substantially
Rupees Rupees eroded the Share Capital and Reserves of the Company. During the year, the
Company has expanded its geographical presence in the Central and Northern
Lease Rentals [Payable within one year
States of India. The Company has also considerably expanded its cultivation
Rs. Nil (Previous year Rs. 182,781)] 182,781 313,644
business of seeds during the year. There has also been a sizeable increase in
exports of fresh fruit produce. The Company is also exploring into cereal and
5) Assets taken on lease (Hire Purchase):
vegetable seeds business on a commercial scale.
The Company has acquired assets on hire purchase, the fair value of which
The increase in business operations, as stated above, are expected to improve
aggregates to Rs. 777,050/-. The Company has capitalised the said assets at
the revenues and, in-turn the profitability of the Company in the coming years.
their fair values considering the hire purchase arrangements are in the nature of
Accordingly, the accounts of the Company have been prepared on a going
finance lease as defined in AS 19. Instalment payments are apportioned
concern basis, which is dependant upon the growth of the business as
between finance charge and deduction of liabilities disclosed under secured
anticipated and availability of finance.
loans. The details of instalments payable in future are as follows:
Not later than Later than 13) As required under Accounting Standard 18 (AS-18), following are details of
1 year 1 year not later transaction during the year with the related parties of the Company as defined
than 5 years in AS-18:-
Rupees Rupees
a) List of Related Parties and Relationships:
Minimum Instalments payable Name of the Related Parties
(Previous year Rs. 171,238/- and where control exists Relation
Rs. 52,469/- respectively) 52,469 —
Mahindra & Mahindra Ltd. Holding Company
Present Value of Instalments payable Mahindra & Mahindra Financial
(Previous year Rs. 149,150/- and Services Ltd. Fellow Subsidiary Company
Rs. 50,285/- respectively) 50,285 —
Mahindra Gujarat Tractor Ltd. Fellow Subsidiary Company
Mega One Stop Farm Services Ltd. Holding more than 20% stake
6) No provision for current income tax under the provisions of the Income-tax Act,
1961, is made due to the accumulated losses available to be carried forward as Miryalguda Farm Solution Ltd. Holding more than 20% stake
per the provisions of the Income-tax Act, 1961. Kota Farm Services Ltd. Holding more than 20% stake

569
MAHINDRA SHUBHLABH SERVICES LIMITED

b) The Related Party Transactions: c) Other Fellow Subsidiaries of the Company are as under:-
Sr. Nature of Transaction Holding Fellow Associate 1. Mahindra Engineering & Chemical Products Limited
No. Company Subsidiaries Companies 2. Mahindra Steel Service Centre Limited
Companies 3. Mahindra Holdings & Finance Limited
(Rupees) (Rupees) (Rupees)
4. Mahindra Acres Consulting Engineers Limited
1. Investments as on
5. Mahindra Ashtech Limited
31st March, 2006 ............. — — 9,619,200
(—) (—) (9,619,200) 6. Mahindra Holidays & Resorts India Limited
2. Purchases: 7. Mahindra Holidays & Resorts USA Inc.
a) Goods ......................... — — 5,782,632 8. Mahindra SAR Transmission Pvt. Limited
(—) (—) (122,387) 9. Tech Mahindra Limited (Formerly known as Mahindra British Telecom
b) Fixed Assets ............... — 9,705 — Limited)
(—) (338,650) (—)
10. Tech Mahindra (Americas) Inc. (Formerly known as MBT International Inc.)
3. Sales:
a) Goods ......................... — — 2,040,430 11. Tech Mahindra GmbH (Formerly known as MBT GmbH)
(—) (—) (3,473,564) 12. Tech Mahindra (Singapore) Pte. Ltd. (Formerly known as MBT Software
b) Services ...................... — — — Technologies Pte. Ltd.)
(—) (—) (170,375) 13. Bristlecone Inc.
4. Deputation of personnel: 14. Bristlecone GmbH
a) From Related Parties 4,390,217 — —
15. Bristlecone (Singapore) Pte. Limited
(2,927,879) (—) (—)
b) To Related Parties ....... 199,264 — — 16. Mahindra Logisoft Business Solutions Limited
(1,069,891) (—) (34,675) 17. Automartindia Limited
5. Reimbursement 18. Bristlecone India Ltd.
Received from Parties ...... — — 3,654 19. Mahindra USA, Inc.
(206,527) (76,303) (—) 20. Bristlecone (UK) Limited
6. Reimbursement
21. Mahindra Infrastructure Developers Limited
made to Parties ................ 501,613 — 197,629
(—) (—) (185,594) 22. Mahindra Gesco Developers Limited
7. Other Income ................... — — — 23. Bristlecone Limited Cayman Islands
(—) (262,247) (559) 24. Mahindra Insurance Brokers Ltd.
8. Other Expenses — 204,869 — 25. Mahindra & Mahindra South Africa (Proprietary) Limited
(—) (367,519) (52,248) 26. Mahindra Overseas Investment Company (Mauritius) Limited
9. Repayment during the year — — — 27. Mahindra Middleeast Electrical Steel Service Center (FZC)
(—) (200,000) (—) 28. Mahindra Engineering Design & Development Company Limited
10. Closing Balance as on 29. Mahindra Automotive Steels Pvt. Ltd.
31st March, 2006
Receivables ...................... — — 3,132,402 30. Mahindra-BT Investment Company (Mauritius) Ltd. (w.e.f. 9.5.2005)
(—) (344,713) (3,841,329) 31. Tech Mahindra (Thailand) Ltd. (Formerly known as MBT (Thailand) Company
Advances .......................... — — 3,521,471 Limited) (w.e.f. 21.2.2006)
(—) (—) (1,518,571) 32. Mahindra (China) Tractor Company Ltd. (w.e.f. 13.5.2005)
Payable towards Service 33. Mahindra Europe s.r.l. (w.e.f. 30.5.2005)
and Reimbursement
of Cost .............................. 10,855,577 50,285 — 34. Mahindra International Ltd.
(6,169,416) (199,436) (—) 35. Mahindra Realty Ltd. (w.e.f. 21.9.2005)
11. Provision for Diminution 36. Mahindra Renaualt Pvt. Ltd. (w.e.f. 5.8.2005)
in value of investment 37. Mahindra Ugine Steel Company Ltd.
(during the year) — — 2,734,200
38. Mahindra World City (Jaipur) Ltd. (w.e.f. 26.8.2005)
(—) (—) (—)
12. Provision for Diminution 39. Tech Mahindra (R&D Services) Ltd. (Formerly known as Axes Technologies
in value of investment (India) Pvt. Ltd.) (w.e.f. 28.11.2005)
(as on Balance Sheet date) — — 9,619,200 40. Tech Mahindra (R&D Services) Inc. (Formerly known Axes Technologies,
(—) (—) (6,885,000) Inc. USA) (w.e.f. 28.11.2005)
13. Provision for Doubtful 41. Tech Mahindra (R&D Services) Pte. Ltd. (Formerly known as Axes
debts/Advances Technologies (Asia-Pacific) Pte. Ltd., Singapore) (w.e.f. 28.11.2005)
(during the year) ................ — — 2,002,900 42. Stokes Group Limited (w.e.f. 3.1.2006)
(—) (—) (1,428,571) 43. Jensand Limited (w.e.f. 3.1.2006)
14. Provision for Doubtful 44. Stokes Forgings Dudley Limited (w.e.f. 3.1.2006)
Debts/Advances
45. Stokes Forgings Limited (w.e.f. 3.1.2006)
(as on Balance Sheet date) — — 4,653,826
(—) (—) (2,650,926) 46. Plexion Technologies (UK) Limited (w.e.f. 15.2.2006)
15. Inter Corporate 47. Plexion Technology (India) Private Limited (w.e.f. 15.2.2006)
Deposit Taken ................... 25,000,000 — — 48. Plexion Technologies GmbH, Germany (w.e.f. 15.2.2006)
(—) (—) (—) 49. Tech Mahindra Foundation (w.e.f. 22.3.2006)
16. Inter Corporate 50. NBS International Ltd.
Deposit Repaid ................. 25,000,000 — — 51. Mahindra Intertrade Ltd.
(—) (—) (—)
52. Console Estate & Investment Limited (ceased w.e.f. 20.3.2006)
17. Interest on Inter
53. Mahindra World City Developers Limited
Corporate Deposit ............. 322,192 — —
(—) (—) (—) 54. Plexion Technologies Incorporated, USA (w.e.f. 15.2.2006)
There have been no transactions with the aforesaid companies during the
Note: Figures in brackets pertain to previous year period.

570
 MAHINDRA SHUBHLABH SERVICES LIMITED

d) Out of the above items transactions in the excess of 10% of the total 14) The Principal business of the Company is of Agri-Farm business and related
related party transactions are as under: services. All other activities of the Company revolve around/are connected
Transaction For the year For the year with its main business. Considering this, the Company has only one
Ended Ended reportable segment.
31st March, 31st March,
2006 2005 15) Additional information pursuant to the provisions of paragraph 3(i)(a) and (ii)
Rupees Rupees Rupees of Part II of Schedule VI to the Companies Act, 1956 (to the extent
a) Turnover applicable).
— Kota Farm Services Ltd. 2,040,430 3,643,939 Particulars Opening Purchase Sales Closing Stock
b) Purchases Qty. Value Qty. Value Qty. Value Qty. Value
Goods
— Kota Farm Services Ltd. 5,782,632 122,387 Fertilisers
Fixed Assets (No. of Bags) 20,086 1,318,719 2,012 551,774 11,035 2,493,030 11,063 932,390
— NBS International Ltd. — 240,000 (—) (—) (68,548) (3,228,799) (62,228) (3,140,870) (6,320) (84,380)
— Mahindra & Mahindra
Mahindra
Financial Services Ltd. 9,705 98,650
Branded
5,792,337 461,037 Pesticides
c) Expenditure (in Ltrs.) 49,909 10,627,710 239,067 51,763,060 164,184 35,958,108 124,792 26,353,449
Other Expenses
(—) (—) (234,843) (44,704,387) (184,934) (43,963,550) (49,909) (10,627,710)
— Mahindra & Mahindra
Financial Services Ltd. 204,869 367,519 Mahindra
— Kota Farm Services Ltd. — 52,248 Branded
204,869 419,767 Pesticides
d) Income (in Kgs.) 75,644 4,755,848 346,043 43,303,164 379,237 44,055,606 42,450 14,192,965
Other Income (—) (—) (380,847) (32,657,650) (305,203) (28,450,881) (75,644) (4,755,848)
— Mahindra
Intertrade Ltd. — 126,247 Mahindra
— Bristlecone India Ltd. — 136,000 Branded
Seed (in Kgs.) — — 48,586 2,310,127 22,647 3,274,820 25,939 634,417
— 262,247
(—) (—) (—) (—) (—) (—) (—) (—)
e) Deputation of personnel
From Related Parties Pesticides
— Mahindra & (No. of Bottles) 3,469 176,874 59,396 20,099,159 54,288 20,721,726 8,577 1,281,818
Mahindra Ltd. 4,390,217 2,927,879 (—) (—) (73,703) (56,672,227) (70,234) (58,308,809) (3,469) (176,874)
To Related Parties:
— Mahindra & Seed Potato
Mahindra Ltd. 199,264 1,069,891 (in Kgs.) 43,333 172,760 15,000 146,250 2,469,659 *17,276,954 — —
4,589,481 3,997,770 (295,000) (1,080,093) (806,589) (4,935,000) (1,058,626) (7,874,760) (43,333) (172,760)
f) Reimbursement Mini Tubers
Received from Parties
Seed Potato
— Mahindra &
(Nos.) — — 24,000 60,000 24,000 60,000 — —
Mahindra Ltd. 501,613 206,527
— Mahindra (—) (—) (—) (—) (—) (—) (—) (—)
Intertrade Ltd. — 49,787 Other Seeds
501,613 256,314 (in Pack) — — 54,333 10,828,134 46,800 8,975,050 7,533 2,880,970
g) Reimbursement (—) (—) (3,052,226) (44,560,474) (3,051,856) (47,897,568) (—) (—)
made to Parties
— Kota Farm Services Ltd. 197,629 185,594 Gherkin (Kgs.) — — 153,707 924,613 153,707 1,091,076 — —
(—) (—) (—) (—) (—) (—) (—) (—)
h) Advances during the year
— Mega one-stop Fresh Fruit
Farm Services Ltd. 1,985,500 1,124,221 Produce
— Miryalguda Farm (in Kgs.) 32,805 1,743,102 131,158 19,444,812 77,125 4,667,187 86,838 15,899,734
Solution Ltd. — 394,350 (4,200) (1,005,310) (122,214) (8,284,231) (93,609) (7,153,514) (32,805) (1,743,102)
1,985,500 1,518,571 Others (Nos.) 2 18,480 — — — — 2 18,480
i) Provision for doubtful (2) (18,480) (39,020) (3,969,992) (25,254) (3,355,281) (13,768) (1,252,819)
Debts/Advances
— Mega one-stop Total 18,813,495 149,431,093 138,573,557 62,194,223
Farm Services Ltd. 1,985,500 2,135,520 (2,103,883) (199,012,760) (200,145,233) (18,813,495)
— Miryalguda Farm * Includes Sale of Cultivated Seeds
Solution Ltd. — 515,406 Note: Figures in brackets pertain to previous year
1,985,500 2,650,926
j) Provision for Diminution 16) Previous year figures have been regrouped wherever necessary, to confirm
in value of investment to the current year’s classification.
(during the year)
— Kota Farm Services Ltd. 2,734,200 —
k) Repayment during the year
— Bristlecone India Ltd. — 200,000 As per our attached Report of even date For Mahindra Shubhlabh Services Limited
l) Inter Corporate Deposit Taken For Deloitte Haskins & Sells
Raghunath Murti Chairman
— Mahindra & Mahindra Ltd. 25,000,000 — Chartered Accountants
U.Y. Phadke
m) Inter Corporate Deposit repaid
— Mahindra & Mahindra Ltd. 25,000,000 —
A.B. Jain
Partner
M.G. Bhide
S. Durgashankar
} Directors

n) Interest on Inter Suhas S. Borgaonkar Financial Controller

Corporate Deposit F.H. Baria Company Secretary
— Mahindra & Mahindra Ltd. 322,192 —
Note:- Figures in brackets pertain to previous year. Mumbai, 21st April, 2006 Mumbai, 21st April, 2006

571
MAHINDRA SHUBHLABH SERVICES LIMITED

Balance Sheet Abstract and Company's General Business Profile

I. Registration details
Registration No. 1 1 - 1 2 5 7 8 1 State Code 1 1
Balance sheet date 3 1 0 3 2 0 0 6
II. Capital raised during the year (amount in Rs. thousands)
Public Issue Rights Issue
N I L N I L
Bonus Issue Private Placement
N I L N I L
III. Position of mobilisation and deployment of funds (amount in Rs. thousands)
Total liabilities Total assets
4 0 6 6 9 2 4 0 6 6 9 2
Sources of Funds
Paid-up capital Reserves and surplus
2 4 2 3 8 2 5 0 5 3 0
Secured loans Unsecured loans
3 0 4 9 0 N I L
Advance against share capital
N I L
Application of funds
Net fixed assets Investments
1 5 1 3 9 5 5
Net current assets Miscellaneous expenditure
4 7 7 2 2 N I L
Accumulated losses
2 6 0 4 8 7
IV. Performance of the Company (amount in Rs. thousands)
Turnover (Including Other Income
and Decrease in Stock) Total expenditure
2 0 6 8 9 0 2 4 3 5 8 1
+/(–) Profit/(Loss) before Tax +/(–) Profit/(Loss) after Tax
(–) 3 6 6 9 1 (–) 3 7 4 8 1
Earnings per share (Rupees)
(Refer Note 7 above) Interim Dividend %
(–) 1 . 5 5 N I L
V. Generic names of three principal products/services of the Company (as per monetary terms)
Item Code No. (IT Code) N O T A P P L I C A B L E
Product Description A G R I F A R M B U S I N E S S
A N D S E R V I C E S

For Mahindra Shubhlabh Services Limited

Raghunath Murti Chairman

}
U.Y. Phadke
M.G. Bhide Directors
S. Durgashankar
Suhas S. Borgaonkar Financial Controller
F.H. Baria Company Secretary
Mumbai, 21st April, 2006
572
 MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED
ANNUAL FINANCIAL STATEMENTS FOR THE
YEAR ENDED 31 MARCH 2006
Directors’ responsibilities and approval of the annual financial
statements
The directors are required by the South African Companies Act,
1973, to maintain adequate accounting records and are responsible
for the content and integrity of the annual financial statements
and related financial information included in this report. It is the
responsibility of the directors to ensure that the annual financial
statements fairly present the state of affairs of the company as
at the end of the financial year and the results of its operations and
cash flows for the year then ended, in conformity with International
Financial Reporting Standards. The company’s external auditors
are engaged to express an independent opinion on the company’s
annual financial statements.
The directors are responsible for selecting and adopting sound
accounting practices, for maintaining an adequate and effective
system of accounting records, for the safeguarding of assets, and
for developing and maintaining a system of internal control that,
among other things, will ensure the preparation of financial
statements that achieve fair presentation.
After conducting appropriate procedures the directors are satisfied
that the company will be a going concern for the foreseeable
future and have continued to adopt the going concern basis in
preparing the financial statements.
The annual financial statements set out on pages 575 to 583 were
approved by the board of directors on 17 April 2006.
REPORT OF THE INDEPENDENT AUDITORS
To the members of
MAHINDRA AND MAHINDRA SOUTH AFRICA
(PROPRIETARY) LIMITED ON FACTUAL FINDINGS
We have performed the procedures agreed with Mahindra and
Mahindra Limited as described below on the audited financial
statements of Mahindra and Mahindra South Africa (Proprietary)
Limited presented in South Africa Rands.
Procedure
We have been requested to verify the arithmetical accuracy of the
translation of the audited statutory financial statements of
Mahindra and Mahindra South Africa (Proprietary) Limited
presented in South African Rands into Indian Rupees, at the
exchange rate provided by Mahindra and Mahindra Limited of
ZAR 1 = INR 7.23
Result
We have merely verified the arithmetical accuracy of the translation
into Indian Rupees at the exchange rate provided by Mahindra
and Mahindra Limited. These financial statements are translated
from the audited statutory financial statements of Mahindra and
Mahindra South Africa (Proprietary) Limited.
Supplementary information
The supplementary schedules set out on pages 582 to 583 do not
form part of the annual financial statements and are presented as
additional information. We have not audited these schedules and
accordingly we do not express an opinion on them.
Grant Thornton
Registered Accountants and Auditors
Chartered Accountants (S.A.)
PRETORIA
17 April 2006
GVR
573
MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

REPORT OF THE DIRECTORS
To the members of
MAHINDRA AND MAHINDRA SOUTH AFRICA
(PROPRIETARY) LIMITED
Your directors submit their report for the year ended 31 March
2006.
Review of activities
Main business and operations:
• Mahindra South Africa started activities in October 2004. The
company in the past 17 months of operations has grown from
strength to strength. The growth has been exponential in all
areas of business.
— Mahindra SA has a national presence through a dealer
base of thirty one dealers, spread across all the nine
provinces of the country.
— The product range has expanded with a number of new
variants introduced under both the brands of Scorpio and
Bolero.
— Continuous monitoring of customer feedback has helped
the company to make appropriate modifications in its
product range, from small aesthetic changes to major
aggregate changes, which has led to good acceptability of
the products.
— Adequate local manpower in all areas of business were
deployed to support the exponential growth.
— A number of ingenious approaches were taken to build the
Mahindra brand in South Africa and make it a force to
reckon with in the South African auto industry.
— There is a lot of focus to ensure high levels of after sales
satisfaction through product and technical training for the
dealership personnel on an ongoing basis.
• A company is an integral part of society and hence has a
responsibility towards developing a strong and stable country
by investing in its social development. Mahindra SA has taken
a number of initiatives in the area of corporate social
responsibility, namely sponsorship of the book ‘Sunrise to
Sunset’ for the black schools in South Africa. It has also
sponsored a Scorpio to Netcare 911, one of the leading
medical rescue services in the country.
Review of the company’s affairs and results of operations for
the year:
For the first time in the history of Mahindra and Mahindra's
automotive business, an all-new product is being globally launched
outside India. The company plans to launch the Scorpio SC and
DC in South Africa in April 2006. Also based on customer
feedback, the company has made necessary modifications on
the Scorpio platform and plans to launch the refreshed Scorpio in
South Africa in April 2006.
Customer focus and building the Mahindra brand in South Africa
will continue to be focus areas for the company. The company
also plans to increase the dealer network to meet the market
needs and support the business growth.
In the new financial year the company will adequately staff and
evolve the required IT platform to support the growth plans.
Events after balance sheet date
There were no material post balance sheet events.
Authorised and issued share capital
There were no changes in the authorised or issued share capital
of the company during the year under review.
Dividends
The dividend already declared and paid to members during the
year is as reflected in the attached statement of changes in
equity.
Since the year end, an ordinary dividend of R 5,250,000 was
proposed by the directors.
Directors
The directors of your company during the year and to the date of
this report are as follows:
Alan Durante (Chairman) Indian (Resigned on
25 September 2005)
Pawan Goenka (Chairman) U.S. (Appointed on
25 January 2006)
Uday Phadke Indian
Pravin Shah Indian
Ivor Ichikowitz South African
Moeletsi Mbeki South African
Craig Savides South African
Consequent to the resignation of Mr. Jacques Lochner,
Mr. Steven Katzenstein has been appointed as company secretary
effective 17 April 2006.

All of this led to the company achieving sales of 2320 vehicles for Business address : 2nd Floor
the year. This has led the company to achieve sales of R 280 138 West Road
million/Rs. 2.05 billion (2005: R 43 million/Rs. 310 million) and a Sandton
net profit after tax of R 19 million/Rs. 137 million (2005: R 6 million/ Post address : Private Bag X2009
Rs. 43 million). Houghton
2041
Future prospects
Holding Company
The company plans to continue riding the wave of growth in the
next financial year. There is a robust plan to achieve the targets The company’s holding company is Mahindra & Mahindra Limited,
for the next financial year. a company incorporated in the Republic of India.

574
 MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

Balance Sheet at 31 March 2006

2006 2005
Note R. Rs'000 R. Rs'000
ASSETS
Non-current assets ............................................. 1,777,563 12,852 562,582 4,068

Property, plant and equipment ............................. 2 512,978 3709 216,138 1,563

Deferred taxation ................................................. 3 1,264,585 9143 346,444 2,505

Current assets ..................................................... 123,250,021 891,099 47,597,291 344,129

Inventory .............................................................. 4 60,375,596 436,516 19,827,175 143,351

Trade and other receivables ................................. 5 52,767,435 381,509 18,339,143 132,592
Forward exchange contract asset ........................ 6 — — 706,682 5,109
Term deposits ...................................................... 5,000,000 36,150 — —
Cash and cash equivalents ................................... 5,106,990 36,924 8,724,291 63,077

Total assets ......................................................... 125,027,584 903,951 48,159,873 348,197

EQUITY AND LIABILITIES

Equity capital and reserves ............................... 31,148,891 225,203 12,577,399 90,934

Share capital ......................................................... 7 7,000,000 50,610 7,000,000 50,610

Retained earnings ................................................ 24,148,891 174,593 5,577,399 40,324

Current liabilities ................................................ 93,878,693 678,748 35,582,474 257,263

Trade and other payables ..................................... 8 73,804,064 533,608 31,634,019 228,716

Taxation ................................................................ 8,761,071 63,343 2,753,819 19,910
Provisions ............................................................. 9 4,437,142 32,081 1,194,636 8,637
Bank overdraft .................................................... 10 5,440,315 39,333 — —
Forward exchange contract liability ................. 11 1,436,101 10,383 — —

Total equity and liabilities .................................. 125,027,584 903,951 48,159,873 348,197

575
MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2006

2006 2005
Note R Rs. ‘000 R Rs. ‘000
Turnover ............................................................... 279,756,208 2,022,637 42,863,373 309,902
Cost of sales ........................................................ (234,223,865) (1,693,439) (31,440,220) (227,313)
Gross profit .......................................................... 45,532,343 329,198 11,423,153 82,589
Other operating costs .......................................... (17,524,114) (126,701) (3,414,513) (24,687)
Operating profit .................................................... 15 28,008,229 202,497 8,008,640 57,902
Interest received .................................................. 17 689,587 4,986 287,302 2,077
Finance charges ................................................... 18 (1,653,394) (11,954) (311,168) (2,250)
Profit before taxation ........................................... 27,044,422 195,529 7,984,774 57,729
Taxation ................................................................ 19 (7,912,930) (57,211) (2,407,375) (17,405)
Net profit for the year .......................................... 19,131,492 138,318 5,577,399 40,324

Refer to page 9 for net profit attributable to equity holders.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2006

Share capital Retained earnings Total

R Rs. ‘000 R Rs. ‘000 R Rs. ‘000
Issue of share capital ................................ 7,000,000 50,610 _ _ 7,000,000 50,610
Net profit for the year ............................... — _ 5,577,399 40,324 5,577,399 40,324

Balance at 31 March 2005 ........................ 7,000,000 50,610 5,577,399 40,324 12,577,399 90,934
Net profit for the year ............................... _ _ 19,131,492 138,318 19,131,492 138,318
Dividends .................................................. _ _ (560,000) (4,049) (560,000) (4,049)
Balance at 31 March 2006 7,000,000 50,610 24,148,891 174,593 31,148,891 225,203

NET PROFIT ATTRIBUTABLE TO EQUITY HOLDERS

2006 2005
R Rs. ‘000 R Rs. ‘000
Attributable to:
— Holding company ............................................. 9,757,061 70,542 2,844,473 20,565
— Minority interest .............................................. 9,374,431 67,776 2,732,926 19,759
19,131,492 138,318 5,577,399 40,324

576
 MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2006

2006 2005
Note R Rs. ‘000 R Rs. ‘000
CASH FLOW FROM OPERATING ACTIVITIES .... (3,615,838) (26,143) 1,957,791 14,154
Cash receipts from customers ............................. 245,327,916 1,773,721 24,524,230 177,310
Cash paid to suppliers and employees ................ (244,596,128) (1,768,431) (22,542,573) (162,983)
Cash generated from operations ......................... 23.2 731,788 5,290 1,981,657 14,327
Interest received .................................................. 689,587 4,986 287,302 2,077
Interest paid ......................................................... (1,653,394) (11,954) (311,168) (2,250)
Dividends paid ...................................................... (560,000) (4,049) — —
Normal taxation paid ............................................ (2,753,819) (19,910) — —
Secondary taxation on companies paid ............... (70,000) (506) — —
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
— Additions ......................................................... (441,778) (3,194) (233,500) (1,688)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital ................... — — 7,000,000 50,610
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS .......................................... (4,057,616) (29,337) 8,724,291 63,076
Cash and cash equivalents at the beginning of
the year ................................................................ 23.3 8,724,291 63,076 — —
Cash and cash equivalents at the end of the year 23.3 4,666,675 33,739 8,724,291 63,076

577
MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS — 31 MARCH 2006
1. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with International
Financial Reporting Standards and the Companies Act of South Africa. The
financial statements have been prepared on the historical cost basis, except
for the measurement of certain financial instruments at fair value, and
incorporate the accounting policies set out below.
SIGNIFICANT JUDGEMENTS
In the process of applying the entity’s accounting policies, management has
made a significant judgement, relating to the basis of determining the
provision for warranty claims. In determining this provision, management has
taken into account past experience to arrive at an acceptable rate.
1.1 Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation and any
accumulated impairment losses.
Depreciation is provided on all property, plant and equipment other than
freehold land, to write down the cost less residual values by equal instalments
over their useful lives as follows:
Motor vehicles 3, 5 years
Computer hardware 3 years
Computer software 2 years
1.2 Financial instruments
Initial recognition and measurement
Financial instruments are recognised when the company becomes a party to
the transaction. Initial measurement is at cost, which includes transaction
cost. Subsequent to initial recognition, these instruments are measured as
follows:
Trade and other receivables
Trade and other receivables originated by the enterprise are stated at fair value
of consideration received less provision for doubtful debts.
Cash and cash equivalents
Cash and cash equivalents are measured at fair value.
Foreign exchange contracts
Derivatives are measured at fair value. Gains and losses on subsequent
measurement are recognised as follows:
— Fair value hedges
Gains and losses from measuring fair value hedging instruments are recognised
immediately in the results of the period in which they arise.
1.3 Inventory
Inventory is valued at the lower of cost and estimated net realisable value. Cost
is determined on the following bases:
Maintenance spares are valued at invoice cost on the weighted average cost
basis.
Vehicles are valued at landed cost on the specific identification cost basis.
1.4 Taxation
The charge for current tax is based on the results for the year as adjusted for
items which are non-assessable or disallowed. It is calculated using tax rates
that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in
respect of temporary differences arising from differences between the
carrying amount of assets and liabilities in the financial statements and the
corresponding tax basis used in the computation of taxable profit. In principle,
deferred tax asserts are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill (or negative goodwill) or from the initial
recognition (other than in a business combination) of other assets and liabilities
in a transaction which affects neither the tax profit nor the accounting profit.
Deferred taxation assets are the amounts of income taxes recoverable in
future periods in respect of:
578
— deductible temporary differences, or
— the carry forward of unused tax losses.
A deferred taxation liability is recognised for all taxable temporary differences,
unless the deferred taxation liability arises from:
— goodwill for which amortisation is not deductible for tax purposes; or
— the initial recognition of an asset or liability in a transaction which:
— is not a business combination; and
— at the time of the transaction, affects neither accounting profit nor
taxable profit.
A deferred taxation asset is recognised to the extent that it is probable that
future taxable profit will be available against which the unused tax losses (and
unused tax credits) can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled. Deferred tax is
charged or credited in the income statement, except when it relates to items
credited or charged directly to equity, in which case the deferred tax is also
dealt with in equity.
A deferred taxation asset is recognised for all deductible temporary differences
arising from investments in subsidiaries, joint ventures and associates, only
to the extent that, it is probable that:
— the temporary difference will reverse in the foreseeable future; and
— taxable profit will be available against which the temporary difference can
be utilised.
1.5 Provisions
Provisions are recognised when the company has a present obligation as a
result of a past event which it is probable will result in an outflow of economic
benefits that can be reasonably estimated.
1.6 Turnover
Revenue is measured at the fair value of the consideration received or
receivable and represents the amounts receivable for goods provided in the
normal course of business, net of trade discounts and volume rebates, and
value added tax.
Revenue from the sale of goods is recognised when all the following
conditions have been satisfied:
• the company has transferred to the buyer the significant risks and rewards
of ownership of the goods;
• the company retains neither continuing managerial involvement to the
degree usually associated with ownership nor effective control over the
goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will
flow to the company; and
• the costs incurred or to be incurred in respect of the transaction can be
measured reliably.
Income from investments
Interest is recognised on a time proportion basis that takes into account the
effective yield on the asset.
1.7 Cost of sales
Cost of sales consists of the cost of inventories sold during the period including
costs of conversion and other costs incurred in bringing the inventories to their
present location and condition.
1.8 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances with banks.
1.9 Warranties
In respect of warranties given by the Company on sale of certain products, the
estimated costs of these warranties are accrued at the time of sale. The
estimates for accounting of warranties are reviewed and the revisions are
made as required.
 MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

NOTES TO THE FINANCIAL STATEMENTS — 31 MARCH 2006 (Contd.)

2006 2005 Trade receivables are encumbered as per note 10.

R Rs.’000 R Rs. ’000 6. FORWARD EXCHANGE CONTRACT ASSET
2. PROPERTY, PLANT AND 2006 2005
EQUIPMENT — OWNED R Rs.’000 R Rs. ’000
Cost: Forward exchange contracts
Motor vehicles .............. 521,262 3,768 195,836 1,416 at fair value .................... — — 706,682 5,109
Computer software ....... 21,510 156 8,770 63
Office equipment .......... 2,497 18 — — Forward exchange contracts
Computer hardware ...... 130,009 940 28,894 209
675,278 4,882 233,500 1,688 Total foreign currency Weighted average forward Date of maturity
US$ 3,123,759 contract exchange rate Ranging from 29 April 2005 to
Accumulated depreciation: 6.0907 12 August 2005
Motor vehicles .............. 125,175 905 13,056 94
Computer software ....... 10,198 74 1,096 8 The weighted average forward exchange contract rate at 31 March 2005
Office equipment .......... 166 1 — — for simillar contracts were R 6.3169
Computer hardware ...... 26,761 193 3,210 23
Total foreign currency Weighted average forward Date of maturity
162,300 1,173 17,362 125 US$ 3,123,759 contract exchange rate Ranging from 29 April 2005 to
44.03576 12 August 2005
Carrying amount:
Motor vehicles .............. 396,087 2,863 182,780 1,322 The weighted average forward exchange contract rate at 31 March 2005
Computer software ....... 11,312 82 7,674 55 for simillar contracts were Rs. 45.67
Office equipment .......... 2,331 17 — —
Computer Hardware ...... 103,248 747 25,684 186
7. SHARE CAPITAL
512,978 3,709 216,138 1,563 10000000 ordinary shares
of R 1 each .................... 10,000,000 72,300 10,000,000 72,300
2.1 Movement for the year
Cost: 7000000 ordinary shares
At beginning of year ...... 233,500 1,688 — — of R 1 each .................... 7,000,000 50,610 7,000,000 50,610
Additions ....................... 441,778 3,194 233,500 1,688
— Motor vehicles ......... 325,427 2,353 195,836 1,416
— Office equipment ..... 2,496 18 — — 8. TRADE AND OTHER PAYABLES
— Computer hardware . 101,115 731 28,894 209 Trade and other creditors
— Computer software .. 12,740 92 8,770 63 comprise amounts out-
standing for trade
At end of year ................ 675,278 4,882 233,500 1,688 purchases and ongoing
expenses ....................... 73,804,064 533,608 31,634,019 228,716
2.2 Movement for the year
Depreciation Included in the above are
At the beginning of year: 17,362 125 — — the following related party
— Charge for year ......... 144,938 1,048 17,362 125 balances:
Mahindra and Mahindra
At end of year ................ 162,300 1,173 17,362 125
Ltd. ................................ 55,404,336 400,573 28,155,030 203,561

3. DEFERRED TAXATION 2006 2005

R Rs.’000 R Rs. ’000
Non-deductible provision
for warranties ................ 1,264,585 9,143 346,444 2,505 9. PROVISIONS
Reconciliation of deferred At beginning of the year:
taxation asset: — Vehicle warranty claims 1,194,636 8,637 — —
Additional provisions
At beginning of year ...... 346,444 2,505 — — — Vehicle warranty claims 3,242,506 23,444 1,194,636 8,637
Originating temporary
difference on provisions .. 918,141 6,638 346,444 2,505 At end of the year:
— Vehicle warranty claims 4,437,142 32,081 1,194,636 8,637
At end of year ................ 1,264,585 9,143 346,444 2,505
The warranty provision represents management’s best estimate of the
Based on the current period’s results and the future prospects of the company,
company’s liability under two year warranties granted on vehicles, based on
it can reasonably be assumed that enough future taxable profits will be
prior experience.
available to utilise the deferred tax asset.
10. BANK OVERDRAFT 5,440,315 39,333 — —
4. INVENTORY
2006 2005 The bank overdraft is secured by:
R Rs.’000 R Rs. ’000
Goods-in-transit ............. 39,766,701 287,513 17,711,445 128,054 — A cession of book debts due to the company.
Import Rebate Certificates 71,487 517 1,003,733 7,257 — A notarial bond registered over all the moveable assets (including inventory)
Motor Vehicles .............. 12,697,312 91,802 — — of the company in favour of the State Bank of India.
Spares ........................... 7,840,096 56,684 1,111,997 8,040
11. FORWARD EXCHANGE CONTRACT LIABILITY
60,375,596 436,516 19,827,175 143,351
Forward exchange con-
tracts at fair value .......... 1,436,101 10,383 — —
5. TRADE AND OTHER RECEIVABLES
2006 2005 Forward exchange contracts
R Rs.’000 R Rs. ’000
Total Foreign Weighted average forward Date of maturity
Sale of goods ................ 52,634,722 380,550 18,241,092 131,883 currency contract exchange rate
Other receivables .......... 132,713 959 98,051 709
US $10,316,477 6.3969 Ranging from 25 April 2006 to
52,767,435 381,509 18,339,143 132,592 27 October 2006

579
MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

NOTES TO THE FINANCIAL STATEMENTS — 31 MARCH 2006 (Contd.)

The weighted average forward exchange contract rate at 31 March 2006 for 2006 2005
similar contracts were R 6.2577 R Rs.’000 R Rs. ’000
Total Foreign Weighted average forward Date of maturity 16. AUDITORS’ REMUNERATION
currency contract exchange rate
Per income statement
US $10,316,477 46.24959 Ranging from 25 April 2006 to
27 October 2006 — Current year ............. 80,000 578 — —
The weighted average forward exchange contract rate at 31 March 2006 for — Other services .......... 15,953 115 29,324 212
similar contracts were Rs. 45.24317 95,953 693 29,324 212
12. DIVIDEND
17. INCOME FROM INVESTMENTS
Ordinary
— Holding company ..... 285,600 2,065 — — Income from investments
— Other shareholders .. 274,400 1,984 — — — Interest ..................... 689,587 4,986 287,302 2,077
At end of year ................ 560,000 4,049 — —
Ordinary dividends per 18. FINANCE CHARGES
share — at 8% Banks ............................ 1,653,394 11,954 311,168 2,250
Paid during the year ....... 8 Cents per 58 Paise per
Share Share — — 19. TAXATION
Major components of
13. COMMITMENTS taxation expense:
Operating leases SA Normal taxation ........ 8,761,071 63,343 2,753,819 19,910
Future leasing charges for Current:
Deferred taxation
residential housing:
— Current year ............. (918,141) (6,638) (346,444) (2,505)
Within one year
Secondary taxation on
— Residential housing .. 178,800 1,293 — —
companies ..................... 70,000 506 — —
One to five years
— Residential housing .. 35,670 258 — — 7,912,930 57,211 2,407,375 17,405
Reconciliation between
14. RISK MANAGEMENT
accounting profit and
14.1 Foreign exchange risk taxation expense:
It is the policy of Mahindra and Mahindra South Africa (Proprietary) Limited Accounting profit ........... 27,044,422 195,529 7,984,774 57,729
to take out forward cover on all foreign purchases. Taxation at the applicable
14.2 Interest rate risk tax rate of 29% (2005:
The company finances its operations through a mixture of retained reserves 30%) .............................. 7,842,882 56,703 2,395,432 17,319
and banking facilities. Overdraft facilities of USD 1 million were available at Adjustments .................. 70,047 506 11,947 86
prime rate, and a Letter of Credit facility of USD 11 million were available at — Change in tax rate .... — — 11,947 86
LIBOR plus 50 basis points. — Sundry expense ....... 47 — — —
— Secondary taxation on
14.3 Credit risk
companies ............... 70,000 506 — —
The company minimises its exposure to credit risk with regards to trade
accounts receivable by utilising floorplans, and performing credit evalvations 7,912,929 57,209 2,407,379 17,405
on all dealers.
During the period the tax rate of 30% was reduced to 29%
14.4 Liquidity risk
The company follows prudent financial practices to ensure proper management 20. DIRECTORS’ EMOLUMENTS
of liquidity requirements. No emoluments were paid to the directors during the year.

15. OPERATING PROFIT 21. RELATED PARTIES AND RELATED PARTY TRANSACTIONS
2006 2005 Related parties
R Rs.’000 R Rs. ’000
Related parties where control existed during the year are as follows:
Operating profit for the
year is stated after Directors : Pawan Goenka
accounting for the : Uday Phadke
following: : Pravin Shah
Charges: : Ivor Ichikowitz
Loss on foreign exchange 1,731,145 12,516 504,807 3,650 : Moeletsi Mbeki
Operating lease charges: : Craig Savides
— Premises .................. 284,772 2,059 60,245 436 Shareholders : Mahindra & Mahindra Limited (incorporated in India)
Property, plant and : African Automotive Investment Corporation (Pty.) Ltd.
equipment: Related parties with whom the company transacted during the year:
Depreciation .................. 144,938 1,048 17,362 125
— Motor vehicles ......... 112,119 811 13,056 94 : Captain Stirling Investments 98 (Pty.) Ltd.
: Mahindra and Mahindra Limited
— Computer software .. 9,102 66 1,096 8
: Mechanology (Pty.) Ltd.
— Office equipment ..... 166 1 — — : Mechanology Properties (Pty.) Ltd.
— Computer hardware . 23,551 170 3,210 23 : Thomas Molete Communications CC
Research and development 393,787 2,847 — — Key management personnel:
Salaries and wages ....... 3,292,260 23,803 391,110 2,828 : Vijay Nakra
: Hetal Shah

580
 MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

NOTES TO THE FINANCIAL STATEMENTS — 31 MARCH 2006 (Contd.)

21. RELATED PARTIES AND RELATED PARTY TRANSACTIONS

Trading transactions
During the year, the company entered into the following transactions with related parties:

South Africa Rand

Transactions with the Transactions with other Key management
holding company related parties Compensation
Year Period Year Period Year Period
ended ended ended ended ended ended
31/03/06 31/03/05 31/03/06 31/03/05 31/03/06 31/03/05
R R R R R R

Short-term employee benefits ................................................ — — — — 893,286 200,158

Goods in transit ...................................................................... 39,766,701 17,711,445 — — — —

Operating expenses ............................................................... 163,187 — 1,445,092 852,415 — —

Purchases of vehicles and spares .......................................... 187,877,439 — — — — —

Other income received ........................................................... 46,094 — — — — —

Indian Rupees
Transactions with the Transactions with other Key management
holding company related parties Compensation
Year Period Year Period Year Period
ended ended ended ended ended ended
31/03/06 31/03/05 31/03/06 31/03/05 31/03/06 31/03/05
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Short-term employee benefits ........................... — — — — 6,458 1,447

Goods in transit .................................................. 287,513 128,054 — — — —

Operating expenses ........................................... 1,180 — 10,448 163 — —

Purchases of vehicles and spares ...................... 1,358,354 — — — — —

Other income received ....................................... 333 — — — — —

22. COMPARATIVE FIGURES 2006 2005

The comparative figures have been reclassified in certain cases R Rs.’000 R Rs. ’000

The comparative figures are for the period 21 October 2004 to 31 March 2005. Operating profit before
working capital changes .. 33,538,452 242,480 8,513,956 61,555
Increase in working capital (32,806,664) (237,190) (6,532,299) (47,228)
23. CASH FLOW STATEMENT
— Increase in inventories (40,548,421) (293,165) (19,827,175) (143,350)
23.1 The following convention applies to figures other than adjustments. Outflows — Increase in trade and
of cash are represented by figures in brackets. Inflows of cash are represented other receivables ...... (34,428,288) (248,917) (18,339,143) (132,592)
by figures without brackets. — Increase in trade and
other payables .......... 42,170,045 304,892 31,634,019 228,714
23.2 Statement of cash generated from operations
Cash generated from
2006 2005 operations ..................... 731,788 5,290 1,981,657 14,327
R Rs.’000 R Rs. ’000
Profit before taxation for 23.3 Cash and cash equivalents
the year ......................... 27,044,422 195,529 7,984,774 57,729
Cash and cash equivalents
Adjustments .................. 6,494,030 46,951 529,182 3,826 included in the cash flow
— Depreciation and statement comprise the
amortisation ............. 144,938 1,048 17,362 125 following balance sheet
— Investment income .. (689,587) (4,986) (287,302) (2,077) amounts:
— Finance charges ....... 1,653,394 11,954 311,168 2,250 Cash and cash equivalents 5,106,990 36,924 8,724,291 63,076
— Movement in forward Term deposits ............... 5,000,000 36,150 — —
exchange contracts .. 2,142,779 15,492 (706,682) (5,109)
Bank overdraft ............... (5,440,315) (39,335) — —
— Provision for vehicle
warranty claims ........ 3,242,506 23,443 1,194,636 8,637 Cash and cash equivalents 4,666,675 33,739 8,724,291 63,076

581
MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

UNAUDITED SUPPLEMENTARY SCHEDULES TO THE FINANCIAL STATEMENTS —

31 MARCH 2006
2006 2005
Page R Rs. ‘000 R Rs. ‘000
DETAILED INCOME STATEMENT
SALES .................................................................. 279,756,208 2,022,637 42,863,373 309,902
COST OF SALES .................................................. (234,223,865) (1,693,439) (31,440,220) (227,313)
GROSS PROFIT ................................................... 45,532,343 329,198 11,423,153 82,589
OPERATING COSTS ............................................ 27 (17,524,114) (126,701) (3,414,513) (24,687)
OPERATING INCOME BEFORE INTEREST ......... 28,008,229 202,497 8,008,640 57,902
FINANCE RECEIVED ............................................ 689,587 4,986 287,302 2,077
FINANCE CHARGES ............................................ (1,653,394) (11,954) (311,168) (2,250)
PROFIT BEFORE TAXATION ............................... 27,044,422 195,529 7,984,774 57,729

582
 MAHINDRA AND MAHINDRA SOUTH AFRICA (PROPRIETARY) LIMITED

UNAUDITED SUPPLEMENTARY SCHEDULES TO THE FINANCIAL STATEMENTS —

31 MARCH 2006

2006 2005 R Rs. ’000

R Rs.’000 R Rs. ’000 TAXABLE INCOME
OPERATING COST SCHEDULE Profit per income statement ...... 27,044,422 195,529
OTHER INCOME ........................ 70,660 510 2,166,722 15,665 Special allowances not claimed
Brandbuilding income from India .. — _ 2,126,185 15,372 in the income statement ............ (221,442) (1,601)

Incentives ................................. 21,061 152 — — — Prepaid expenditure (as

limited by section 23H) ......... (90,338) (653)
Royalties ................................. 46,094 333 — —
— Depreciation as per tax laws
Sundry Income ........................... 3,505 25 40,537 293 (section 11(e)) ....................... (131,104) (948)
OTHER EXPENSES .................... (17,594,774) (127,211) (5,581,235) (40,352) Non-deductible amounts debited
Advertising and promotions ....... 7,688,688 55,589 3,710,055 26,824 to the income statement ............ 3,387,609 24,492
Auditors’ remuneration ............... 95,953 694 29,324 212 — Depreciation according to the
Bank charges ............................. 889,892 6,434 383,350 2,772 financial statements ............. 144,938 1,048

Computer Technical support ...... 6,825 49 1,621 12 — Provisions not deductible

current year .......................... 3,242,506 23,443
Depreciation ............................... 144,938 1,048 17,362 125
— Sundry expenses ................... 165 1
Discount allowed ........................ 193,373 1,398 — —
TAXABLE INCOME .................... 30,210,589 218,420
Hire of equipment ...................... 866,186 6,263 — —
TAXATION CALCULATION
Insurance ................................. 81,416 589 25,168 182
S A Normal tax @ 29% ............... 8,761,071 63,342
Legal and Professional fees ....... 408,154 2,951 17,881 129
Legal expenses .......................... — — 53,700 388
Loss of foreign exchange ........... 1,731,145 12,516 504,807 3,650
Motor vehicle expenses ............. 285,107 2,061 38,304 277
Printing and stationery ............... 80,727 584 22,611 163
Regional Service Council levies .. 366,212 2,648 55,993 405
Rent — premises ....................... 284,772 2,059 60,245 436
Repairs and maintenance ........... — — 7,120 51
Research and development ....... 393,787 2,847 — —
Revenue stamps ........................ — — 67,950 491
Salaries and wages .................... 3,292,260 23,803 391,110 2,828
Sales Hospitality ......................... 104,576 756 13,774 100
Sundry expenses ........................ 40,415 292 10,576 76
Telephone and fax ...................... 89,475 647 28,397 205
Training ................................. 8,423 61 5,371 39
Travel — local ............................. 341,023 2,466 83,155 601
Travel — overseas ..................... 201,427 1,456 53,361 386
(17,524,114) (126,701) (3,414,513) (24,687)

583
MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

Directors’ Report to the Shareholders

Your Directors present their Eleventh Report together with the audited accounts of your Company for the year ended 31st March, 2006.

FINANCIAL RESULTS
(Rs. in lakhs)
2006 2005
Income ...................................................................................................................................... 2380.20 171.62
Profit/(Loss) before Depreciation,Amortisation, Interest, taxation ............................................ 648.70 (1.39)
Depreciation & Amortisation ..................................................................................................... (166.89) (65.72)
Profit/(Loss) before Interest, taxation ....................................................................................... 481.81 (67.11)
Interest ...................................................................................................................................... (5.40) (8.08)
Profit/(Loss) before taxation ...................................................................................................... 476.41 (75.19)
Provision for taxation for the year
– Current Tax ................................................................................................................. — —
– Deferred Tax ............................................................................................................... (9.61) —
– Fringe Benefit Tax ....................................................................................................... (22.33) —
Profit/(Loss) for the year after taxation ..................................................................................... 444.47 (75.19)
Balance of loss from earlier years ............................................................................................. (78.62) (3.43)
Balance carried forward ............................................................................................................ 365.85 (78.62)

Operations allotment of the Shares, the paid-up capital of the Company

The year witnessed a significant increase in the commercial stands increased to Rs. 705 lakhs.
operations of the Company. The Income increased substantially
Directors
to Rs.2380 lakhs as compared to Rs.172 lakhs in the previous
year. Your Company has entered into a long term agreement Dr. Pawan Kumar Goenka retires by rotation and, being eligible,
with International Trucks, USA for providing engineering services offers himself for re-appointment.
and has developed a dedicated Offshore Development Centre
(ODC) for the purpose at Chinchwad, Pune. The ODC has been Audit Committee
registered with Software Technology Park of India (STPI), Pune. The Audit Committee comprises of Mr. Ulhas N. Yargop (Chairman
Revenue per employee increased from the previous year level of the Committee), Dr. Pawan Kumar Goenka and Mr. Prabal
of Rs. 2 lakhs per annum to the current level of Rs. 16 lakhs Banerji. The Committee met once during the year under review.
per annum resulting in phenomenal growth in Profit After Tax
to Rs. 444 lakhs as compared to a loss of Rs. 75 lakhs in the Directors’ Responsibility Statement
previous year. Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representations received from the
The Company has also commenced operations through its Operating Management, and after due enquiry, confirm that-
branch office in the USA and is exploring possible business
opportunities in Europe as well. The holding company, 1. in the preparation of the annual accounts, the applicable
Mahindra & Mahindra Limited acquired Plexion Technologies accounting standards have been followed;
(India) Private Limited, a Bangalore based engineering service 2. they have, in the selection of the accounting policies,
company with specific skills in automotive and aerospace consulted the Statutory Auditors and these have been
which acquisition will bring about synergy to the business applied consistently and reasonable and prudent
operations of your Company. judgements and estimates have been made so as to give
Capital a true and fair view of the state of affairs of the Company
as at 31st March, 2006 and of the Profit of the Company
During the year under review, the Company issued and allotted for the year ended on that date;
15,00,000 equity shares of Rs. 10 each for cash at par, on a
Rights basis to Mahindra & Mahindra Limited, the holding 3. proper and sufficient care has been taken for the
company, aggregating Rs. 150 lakhs. Consequent upon the maintenance of adequate accounting records in accordance

584
 MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED
with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
4. the annual accounts have been prepared on a going concern
basis.
Auditors
Messrs B. K. Khare & Co., Chartered Accountants, retire as
Auditors of the Company at the forthcoming Annual General
Meeting and have given their consent for re-appointment. The
shareholders will be required to appoint Auditors for the current
year and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
the above Auditors to the effect that their re-appointment, if made,
would be in conformity with the limits specified in the said section.
Deposits and Loans/Advances
The Company has not accepted deposits from the public or its
employees during the year under review.
The Company has not made any loans/advances which are
required to be disclosed in the annual accounts of the Company
pursuant to Clause 32 of the Listing Agreement with the parent
company, Mahindra & Mahindra Limited.
Conservation of Energy, Technology Absorption and Foreign
Exchange Earnings & Outgo
In view of the nature of activities which are being carried on by
the Company, Rules 2A & 2B of the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988,
concerning conservation of energy and technology absorption
respectively are not applicable to the Company.
The information on foreign exchange earnings and outgo during
the year under review is furnished in the Notes on Accounts.
Human Resource
The Human Resource base of the Company increased to 238 on
31st March, 2006 from 108 on 31st March, 2005. Qualified &
experienced personnel are the most valuable asset in this
business and the Company constantly endeavors to attract and
retain the best talent by offering appropriate monetary
compensation and skill upgradation opportunities.
Particulars of Employees as required under section 217(2A)
of the Companies Act, 1956 and Rules made thereunder
The Company had no employee who was in receipt of
remuneration of not less than Rs.24,00,000 during the year ended
31st March, 2006 or not less than Rs. 2,00,000 per month during
any part thereof.
Acknowledgements
Your Directors gratefully acknowledge the valuable contribution
by the employees and also the support & co-operation received
from Government departments, STPI-Pune, Suppliers and
Bankers.
For and on behalf of the Board
HEMANT LUTHRA
Chairman
Mumbai, 27th April, 2006
585
MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

AUDITOR’S REPORT
To the Members of Mahindra Engineering Design and Development Company Limited

1. We have audited the attached Balance Sheet of Mahindra books of account.

Engineering Design and Development Company Limited
as at 31st March 2006 and the Profit and Loss Account and
the Cash Flow Statement of the Company for the year ended
on that date, annexed thereto. These financial statements
are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
2. We conducted our audit in accordance with the Auditing
Standards generally accepted in India. Those Standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
3. As required by the Companies (Auditor’s Report) Order,
2003, issued by the Central Government in terms of Section
227 (4A) of companies Act, 1956, we give in the Annexure
a statement on the matters specified in paragraphs 4 and 5
of the said Order.
4. Further to our comments in the Annexure referred to in
paragraph (3) above, we report that:
a) We have obtained all the information and explanations
which to the best of our knowledge and belief were
necessary for the purpose of our audit.
b) In our opinion, proper books of account as required by
law have been kept by the Company so far as it appears
from our examination of the books.
c) The Balance Sheet and the Profit and Loss Account
dealt with by this report are in agreement with the
d) In our opinion, the Balance Sheet, the Profit and Loss
Account and the Cash Flow Statement comply with the
Accounting Standards referred to in sub-section (3C) of
Section 211 of the Companies Act, 1956.
e) In our option and to the best of our information and
according to the Explanations given to us, the said
accounts read with the notes thereon give the
information required by the Companies Act, 1956, in
the manner so required, give a true and fair view in
conformity with the accounting principles generally
accepted in India:
i) in the case of the Balance Sheet, of the state of
affairs of Company as at 31st March, 2006,
ii) in the case of the Profit and Loss Account, of the
profit for the year ended on that date, and
iii) in the case of Cash Flow Statement, of the cash
flows for the year ended on that date.
5. On the basis of the written representations received from
the Directors as on 31st March, 2006, and taken on record by
the Board of Directors, we report that, none of the Directors
is disqualified as on 31st March, 2006 from being appointed
as a Director in terms of Clause (g) of sub-section (1) of
Section 274 of the Companies Act, 1956.
For and on behalf of
B.K. Khare and Co.
Chartered Accountants
Santosh Parab
Partner
M. No. 047942
Mumbai, April 27, 2006

586
 MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED
Annexure to the Auditors' Report
Referred to in Paragraph (3) of our report of even date on the
accounts of Mahindra Engineering Design and Development
Company Limited for the year ended 31st March 2006.
1) i) The Company is maintaining proper records showing
full particulars, including quantitative details and situation
of fixed assets.
ii) The Company has a program for physical verification of
fixed assets at periodic intervals. In our opinion, the
period of verification is reasonable having regard to the
size of the Company and the nature of its assets. No
material discrepancies have been reported on such
verification.
iii) There is no disposal of fixed assets during the year.
2) There are no inventories carried by the Company, hence
disclosure requirements under sub-paragraphs (ii) (a), (ii) (b)
and (ii) (c) of the Clause 4 of the Order are not applicable.
3) i) The Company had taken unsecured loan from one
company listed in the register maintained under Section
301 of the Companies Act, 1956, which was repaid
during the year. The maximum amount of loan
outstanding during the year was Rs. 1,90,00,000.
ii) In our opinion and according to the information and
explanations given to us, the rates of interest and other
terms and conditions on which loan has been taken are
not, prima facie, prejudicial to the interest of the
Company.
iii) The payment of the principle amount and interest is
regular.
iv) The Company has not granted any loans, secured or
unsecured, from companies, firms or other parties
listed in the register maintained under Section 301 of
the Companies Act, 1956.
4) In our opinion and according to the information and
explanations given to us, there are adequate internal control
procedures commensurate with the size of the Company
and the nature of its business, for the purchases of fixed
assets and for the sale of services. During the course of our
audit, no major weakness has been noticed in the internal
controls.
5) i) In our opinion and according to the information and
explanations given to us, the particulars of contracts or
arrangements referred to in Section 301 of the Act
have been entered in the register required to be
maintained under that section, have been so entered.
ii) In our opinion and according to the information and
explanations given to us, having regard to the
explanation that many of the items are of a special
nature and their prices cannot be compared with
alternative quotations, the transactions made in
pursuance of contracts or arrangements have been
made at prices which are reasonable having regard to
the prevailing market prices at the relevant time.
6) In our opinion and according to the information and
explanations given to us, the Company has not accepted any
deposits from the public within the meaning of Section 58A
and 58AA of the Companies Act,1956, and the rules framed
thereunder.
7) In our opinion, the Company has an internal audit system,
which in our opinion is commensurate with the size of the
Company and the nature of its business.
8) As informed to us, maintenance of cost records has not
been prescribed by the Central Government under Section
209(1) (d) of the companies Act, 1956, in respect of the
activities carried on by the Company.
9) i) According to the records of the Company, the Company
is generally regular in depositing undisputed statutory
dues including Provident Fund, Investor Education and
Protection Fund, Employees’ State Insurance , Income
Tax, Sales Tax, Wealth Tax, Service Tax, Customs
Duty, Excise Duty, Cess and other statutory dues
applicable to it with the appropriate authorities.
According to the information and explanations given to
us, no undisputed amounts payable in respect of Income
Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty
and Excise Duty were outstanding, at the year end for
a period of more than six months from the date they
became payable.
ii) According to the information and explanations given to
us, there are no dues of Income Tax, Sales Tax, Service
Tax , Customs Duty, Wealth Tax, Excise Duty, Cess
and other statutory dues, which have not been disputed
on account of any dispute.
10) The company does not have accumulated losses at the end
of the financial year and it has not incurred any cash losses
in the current year. The Company had incurred cash loss in
the immediately preceding financial year.
11) The Company has not borrowed from financial institutions /
banks.
12) According to the information and explanations given to us,
the Company has not granted loans and advances on the
basis of security by way of pledge of shares and other
securities.
13) In our opinion and according to the information and
explanations given to us, the nature of activities of the
Company does not attract any special statute applicable to
chit fund and nidhi / mutual benefit fund / societies.
587
MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

14) The company does not deal or trade in shares, securities, 20) The Company has not raised any money through a public
debentures and other investments. issue during the year.

15) According to the information and explanation given to us, 21) Based on the audit procedures performed and information
the Company has not given any guarantee for loans taken by and explanations given by the management, we report that
others from banks or financial institutions, the terms and no fraud on or by the Company has been noticed or reported
conditions whereof are prejudicial to the interest of Company. during the year.

16) As informed to us, the term loans were applied for the
purpose for which the loans were obtained.

17) According to the information and explanations given to us on For and on behalf of
an overall examination of the Balance Sheet and Cash Flows
of the Company, we report that the Company has not utilized
funds raised on short-term basis for long-term investment. B.K. Khare and Co.
Chartered Accountants
18) The Company has not made any preferential allotment of
shares to parties or companies covered in the register
maintained under section 301of the Companies Act,1956. Santosh Parab
Partner
19) The Company did issue any debentures during the year. Mumbai, April 27, 2006 M. No. 047942

588
 MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

Balance Sheet as at March 31, 2006

2006 2005
Schedule Rupees Rupees
I. SOURCES OF FUNDS :
Shareholders’ Funds
Share Capital ................................................................................... I 70,500,000 55,500,000
Reserves & Surplus
Profit & Loss Account ..................................................................... 36,585,053 —
Deferred Tax Liability (Net) .......................................................... 960,797 —
108,045,850 55,500,000

II. APPLICATION OF FUNDS :

Fixed Assets
Gross Block ..................................................................................... II 10,793,265 4,681,474
Less : Depreciation ........................................................................ 1,865,080 573,367
Net Block ........................................................................................ 8,928,185 4,108,107
Intangible Assets
Gross Value ..................................................................................... III 46,193,014 18,061,154
Less : Amortisation ......................................................................... 21,418,056 6,020,385
Net Value ........................................................................................ 24,774,957 12,040,769
Investments ................................................................................... IV 10,039,726 —
Working Capital Fund
Current Assets, Loans and Advances .......................................... V
Sundry Debtors ............................................................................... 79,894,359 14,224,726
Cash and Bank Balances ................................................................. 2,268,578 40,836,054
Loans and Advances ....................................................................... 30,171,390 2,812,572
112,334,327 57,873,352
Less : Current Liabilities .............................................................. VI 47,556,345 26,372,269
Provision for Retirement benefits .................................... 475,000 11,613
Net Current Assets ........................................................................ 64,302,982 31,489,470

Profit & Loss Account ................................................................... — 7,861,654

108,045,850 55,500,000

Significant Accounting Policies and Notes on Accounts X

The Schedules referred to above form an integral part of the Balance Sheet. Mr. Hemant Luthra Chairman
This is the Balance Sheet referred to in our report of even date.

}
For B. K. Khare & Co. Dr. Pawan Goenka
Chartered Accountants
Mr. Ulhas N. Yargop Directors
Santosh Parab
Mr. Prabal Banerji
Partner
M. No. 047942

Mumbai, April 27, 2006 Mumbai, April 27, 2006

589
MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

Profit and Loss Account for the year ended March 31, 2006

2006 2005
Schedule Rupees Rupees

INCOME :

Income from Operations ............................................................. 236,180,505 16,839,018

Other Income .............................................................................. VII 1,839,640 322,684

238,020,145 17,161,703

EXPENDITURE :

Employee Cost ............................................................................ VIII 65,218,932 6,100,100

Operating Expenses .................................................................... IX 107,931,079 11,200,788

Depreciation ................................................................................ 1,291,714 551,170

Amortisation of Intangible Assets ............................................... 15,397,671 6,020,385

Interest Paid ................................................................................ 540,246 808,356

190,379,641 24,680,799

Profit/(Loss) before Tax ............................................................... 47,640,504 (7,519,097)

Less: Provision for Tax – Current Tax (under MAT provisions) 1,070,000
Less: MAT Credit Entitlement (1,070,000) — —
– Deferred Tax (net) 960,797 —
– Fringe Benefit Tax 2,233,000 —

Profit / (Loss) after Tax ........................................................... 44,446,707 (7,519,097)

Balance of Profit/(Loss) for earlier year ....................................... (7,861,654) (342,557)
Balance of Profit/(Loss) for 2005-2006 and earlier year carried to
Balance Sheet ............................................................................. 36,585,053 (7,861,654)

Significant Accounting Policies and Notes on Accounts X

The Schedules referred to above and attached notes form an integral part of the Mr. Hemant Luthra Chairman
Profit & Loss Account.
This is the Profit & Loss Account referred to in our report of even date.

}
Dr. Pawan Goenka
For B. K. Khare & Co. Mr. Ulhas N. Yargop Directors
Chartered Accountants
Mr. Prabal Banerji
Santosh Parab
Partner
M. No. 047942
Mumbai, April 27, 2006
Mumbai, April 27, 2006
590
 MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

Cash Flow Statement for the Year ended 31st March, 2006
2006 2005
Rupees Rupees Rupees
A. CASH FLOW FROM OPERATING ACTIVITIES:
Net Profit/(Loss) before taxation 47,640,504 (7,519,097)
Adjustment for:
Depreciation/Amortisation ................................................................ 16,689,385 6,571,555
Interest Income ................................................................................ (371,051) (317,841)
Interest and Finance Charges ........................................................... 540,246 808,356
Dividend Income .............................................................................. (492,643) —
Profit on sale of Investment ............................................................. (39,726) —
16,326,211 7,062,070
Operating Profit before Working Capital changes ............................ 63,966,715 (457,027)
Changes in:
Trade and other receivables ............................................................. (86,057,561) (11,690,754)
Trade and other payables ................................................................. 21,647,463 25,956,479
(64,410,099) 14,265,725
Cash generated from operations ...................................................... (443,383) 13,808,697

Income Taxes Paid ........................................................................... (6,947,890) (462,750)

Fringe Benefit Tax Paid ..................................................................... (2,256,000) —
NET CASH FROM OPERATING ACTIVITIES (9,647,273) 13,345,947

B. CASH FLOW FROM INVESTING ACTIVITIES:

Purchase of fixed assets .................................................................. (6,111,791) (4,378,646)
Payments for Intagible Assets ......................................................... (28,131,860) (18,061,154)
Purchase of Current Investments .................................................... (161,500,000) —
Sale of Current Investments ............................................................ 151,992,643 —
Interest received .............................................................................. 371,051 282,641
NET CASH USED IN INVESTING ACTIVITIES .................................. (43,379,957) (22,157,159)
C. CASH FLOW FROM FINANCING ACTIVITIES:
Issue of Share Capital ....................................................................... 15,000,000 55,000,000
Inter corporate deposits (net) ........................................................... — (10,000,000)
Interest and Finance Charges ........................................................... (540,246) (773,156)
NET CASH USED IN FINANCING ACTIVITIES ................................. 14,459,754 44,226,844
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (38,567,476) 35,415,632
Opening Balance .............................................................................. 40,836,054 5,420,422
Closing Balance ................................................................................ 2,268,578 40,836,054

Mr. Hemant Luthra Chairman

}
For B. K. Khare & Co. Dr. Pawan Goenka
Chartered Accountants
Mr. Ulhas N. Yargop Directors
Santosh Parab
Mr. Prabal Banerji
Partner
M. No. 047942

Mumbai, April 27, 2006 Mumbai, April 27, 2006

591
MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

Schedules forming part of the Accounts for the year ended March 31, 2006

SCHEDULE I 2006 2005 2006 2005

SHARE CAPITAL : Rupees Rupees Rupees Rupees
ISSUED AND SUBSCRIBED & PAID UP :
Authorised: 70,50,000 Equity Shares of Rs. 10 each
10,000,000 Equity Shares of Rs. 10 each. ................ 100,000,000 100,000,000 fully paid up of the above 70,50,000
shares(2005:55,50,000) are held by
Mahindra & Mahindra Limited, the
holding company. ........................................................ 70,500,000 55,500,000
70,500,000 55,500,000

SCHEDULE II
FIXED ASSETS : (In Rupees)

GROSS BLOCK DEPRECIATION NET BLOCK

Description of Assets As at Additions As at Upto For the year As at As at
01.04.2005 31.03.2006 01.04.2005 ended 31st 31.03.2006 31.03.2006
March 2006
Office Equipments — 202,731 202,731 — 8,062 8,062 194,669
EDP Equipments 4,681,474 5,909,060 10,590,534 573,367 1,283,652 1,857,019 8,733,515
Total 4,681,474 6,111,791 10,793,265 573,367 1,291,714 1,865,080 8,928,185
As at 31.03.2005 302,828 4,378,646 4,681,474 22,197 551,170 573,367 4,108,107

SCHEDULE III
INTANGIBLE ASSETS : (In Rupees)

GROSS BLOCK AMORTISATION* NET BALANCE

Description of Assets As at Additions As at Upto For the year As at As at
01.04.2005 31.03.2006 01.04.2005 ended 31st 31.03.2006 31.03.2006
March 2006
Software Licences 18,061,154 28,131,860 46,193,014 6,020,385 15,397,672 21,418,056 24,774,957
Total 18,061,154 28,131,860 46,193,014 6,020,385 15,397,672 21,418,056 24,774,957
As at 31.03.2005 — 18,061,154 18,061,154 — 6,020,385 6,020,385 12,040,769

* Refer to Annexure X(A) Notes to Accounts No. 5

SCHEDULE IV 2006 2005 c) Loans, Advances And Provisions :

INVESTMENTS (AT COST) : Rupees Rupees (Unsecured and Considered good)
Current Investments: Advances recoverable in cash or in kind or for
Units: Unquoted: value to be received ....................................... 22,739,131 2,328,203
995,208,869 (F 2005: Nil) units of Rs. 10 each of Advance Payment of Income Tax and Tax
Standard Chartered Mutual Fund Deducted at source ........................................ 6,362,259 484,369
– G65 Standard Chartered
MAT Credit Entitlement ................................. 1,070,000 —
Liquidity Manager – Growth 10,039,726 —
10,039,726 — 30,171,390 2,812,572

The following are the Movement of Total Current Assets, Loans and Advances
& Deposits ............................................................ 112,334,327 57,873,352
Investments during the year
Acquired Sold
Units Rs. Units
Prudential ICICI SCHEDULE VI 2006 2005
Mutual Fund 10,082,491 119,492,643 10,082,491 CURRENT LIABILITIES : Rupees Rupees
Standard Chartered
Sundry Creditors
Mutual Fund 4,215,416 42,500,000 3,220,207
— Expenses ................................................ 41,741,071 13,261,455
SCHEDULE V 2006 2005 — Others ..................................................... 5,815,274 13,110,814
CURRENT ASSETS, LOANS AND ADVANCES : Rupees Rupees
a) Sundry Debtors : 47,556,345 26,372,269
(Unsecured and Considered good)
— Less than six months old ........................ 79,891,065 14,224,726
— More than six months old ....................... 3,294 —
SCHEDULE VII 2006 2005
79,894,359 14,224,726 OTHER INCOME : Rupees Rupees
b) Cash & Bank balances : Foreign Exchange Translation Difference .............. 936,220 4,843
— Cash in hand — — Interest on Deposit with Banks (Tax deducted
Balance with Scheduled bank :— at Source Rs. 85,281 F 2005 Rs. 55,897) .............. 371,051 316,869
— In Current Account .................................. 737,424 4,836,054 Interest Others ...................................................... — 972
— In Fixed Deposit .................................... 950,000 36,000,000 Profit on sale of investments ................................ 39,726 —
Balance with Non-Schudled Banks Dividend Income ................................................... 492,643 —
— In Current Account .................................. 581,154 —
1,839,640 322,684
2,268,578 40,836,054

592
 MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

SCHEDULE VIII 2006 2005 7. Borrowing Cost:

EMPLOYEE COST : Rupees Rupees
Borrowing costs that are attributable to the acquisition or construction of
Salary ............................................................... 59,947,654 5,804,881 qualifying assets are capitalised as art of the cost of such assets. A qualifying
Contribution to Providend & other funds ............... 2,138,740 210,576 asset is one that necessarily takes a substaintial period of time to get
Gratuity ............................................................... 210,919 71,016 ready for its intended use or sale. All other borrowing costs are charged to
revenue.
Welfare Expneses ................................................. 2,921,618 13,627
8. Retirement Benefits:
65,218,932 6,100,100
Retirement benefits in respect of gratuity and en-cashable leave are
provided for based on valuations, as at the Balance Sheet date, made by
SCHEDULE IX 2006 2005 independant actuaries.
OPERATING EXPENSES : Rupees Rupees
9. Contigent Liability:

Professional Fees 24,026,354 5,625,179 Present possible obligations are disclosed in the notes to accounts.
Provision is made in the accounts in respect of present probable obligation.
Rent including lease rentals .................................. 28,800,008 3,975,504
10. Foreign Currency Transactions:
Repairs & Maintainance – Leased Premises ... 3,438,848 —
– Computer ............... 292,909 — Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Current assets and Current liabilities
– Others .................... 283,375 3,500
are translated at the year end rates. The exchange difference between the
Hire Charges ......................................................... 6,524,905 — rate prevailing on the date of transaction and on the date of settlement as
Travelling and Conveyance expenses .................... 30,566,618 212,725 also on translation of current assets and current liabilities at the end of the
Recruitment Expenses .......................................... 3,439,637 — year is recognised as income or expenses, as the case may be, except in
case of fixed assets where it is adjusted to the cost of fixed assets. In
Sales Promotion Expenses .................................... — 269,615 case of forward contracts, the exchange difference between the forward
Miscellaneous Expenses ....................................... 10,558,424 1,114,266 rate and the exchane rate at te date of transaction is recognised as income
or expenses over life of the contract except in the case of fixed assets
107,931,079 11,200,788
where it is adjusted to the cost of the fixed assets.
11. Leases:
SCHEDULE X
Lease payment under operating lease are recognised as a expense on
SIGNIFICANT ACCOUNT POLICIES AND NOTES ON ACCOUNTS FOR THE
straight line basis over the lease period.
YEAR ENDED 31st MARCH 2006
12. Segment Reporting:
(A) Significant accounting policies :
The company has single reporting segment namely Engineering &
1. Basis of preparation of financial statements :
Desigining services for the purpose of Accounting Standard 17 on Segment
The accounts have been prepared to comply in all the material aspects reporting.
with applicable accounting principles in India, the Accounting Standards
issued by the Institute of Chartered Accountants of India and relevant 13. Income Taxes :
provisions of the Companies Act, 1956. Income taxes are accounted for in accordance with Accounting standard
2. Revenue recognition : 22 on “Accounting For Taxes on Income”, (AS 22) issued by the Institute
of Chartered Accountants of India. Tax expense comprises both current
The Company follows the accrual method of accounting for its income and deferred tax. Current tax is measured at the amount expected to be
and expenditure. In respect of service activity, income is accounted for as paid to/recovered from the tax authorities, using the applicable tax rates.
and when the services are rendered. Deferred tax assets and liabilities are recognised for future tax
3. Fixed Assets : consequences attributable to timing differences between taxable income
and accounting income that are capable of reversal in one or more
a) All fixed assets are stated at cost of acquisition (including incidental
subsequent periods and are measured using relevant enacted tax rates.
expenses) less depreciation.
The carrying amount of deferred tax assets at each balance sheet date is
b) Carrying amount of cash generating units/assets are reviewed at recognised to the extent it is reasonably certain that sufficient future taxable
balance sheet date to determine whether there is any indication of income will be available against which the deferred tax asset can be
impairment. If any such indication exists the recoverable amount is realized.
estimated as the higher of net relisable price & value in use. Impairment
loss, if any, is recognised whenever carrying amount exceeds the (B) Notes to the Accounts:
recoverable amount.
1. Estimated amount of contracts remaining to be executed on capital account
4. Depreciation on fixed assets : and not provided for as at 31st March, 2006 is Rs. 2,06,258.
Depreciation on fixed assets has been charged using Straight Line Method 2. Till last year, the Company had provided for gratuity on the basis of accrued
at the rates and in the manner prescribed in Schedule XIV to the Companies gratuity contributable to the Group Gratuity Fund. During the year, the
Act, 1956. Company has provided liability towards Gruaity based on the actuarial
5. Intabgible Assets: valuation done by independent actuaries.
All intangible assets are initially measured at cost and amortised so as to 3. In the opinion of the management based on the future cash flows no
reflect the pattern in which the assets’ economic benefits are consumed, provision for impairment loss is necessary.
as per AS 26 issued by the Institute of Chartered Accountants of India.
4. The significant leasing arrangements of the Company are in respect of
Software expenditure: The expenditure incurred is amortised over three operating leases for equipments. Lease expenditure for operating leases
financial years equally commencing from the year in which the expenditure is recognised on straight line basis over the period of lease. Details of
is incurred. lease rentals payable in future are as follows:
6. Investments: Current Year Previous Year
Investments held as long term investments are stated at cost comprising Rs. Rs.
of acquisition and incidental expenses less permanent diminution in value, * Not latter than 1 year 65,08,149 31,11,772
if any.
* Later than 1 year and 81,82,337 57,13,559
Investments other than long term investments are classified as current not later than 5 years
investments and valued at cost or fair value whichever is less. * Later than 5 year — —

593
MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

5. Amounts paid/payable to auditors (inclusive of service tax where applicable) 12. Mahindra Holidays & Resorts U.S.A.
Current Year Previous Year 13. Mahindra Gesco Developers Limited
Rs. Rs. 14. Mahindra Infrastructure Developers Limited
Audit Fees 40,000* 16,530 15. Tech Mahindra Limited (formerly known as Mahindra-British Telecom
Other Services 20,000* 16,530 Limited)
60,000 33,060 16. Tech Mahindra (Americas) Inc (formery known as MBT International Inc.)
(*Exclusive of Service Tax) 17. Tech Mahindra GmbH (formerly MBT GmbH)
Current Year Previous Year 18. Tech Mahindra Singapore (Pte.) Limited (formerly known as MBT Software
Rs. Rs. Technologies Pte. Ltd.)
6. Earning in Foreign Exchange :- 19. Bristlecone India Limited
From services rendered 22,36,37,797 69,43,046
20. Bristlecone (Singapore) Pte. Ltd.
Current Year Previous Year 21. Bristlecone GmbH
Rs. Rs. 22. Mahindra Logisoft Business Solutions Limited
7. Expenditure in foreign currency
Professional and Consultancy Fees 5,19,014 — 23. Automartindia Limited
For other expenses 2,27,21,748 2,69,615 24. Mahindra USA Inc.
Foreign Branch Expenses 1,67,95,588 — 25. Bristlecone (UK) Limited
Total 4,00,36,350 2,69,615
26. Mahindra Gujarat Tractor Limited
8. Until the last year, the Company had not created any deferred tax asset as a 27. Mahindra Shubhlabh Services Limited
matter of prudence. During the year, since the Company is reasonably certain 28. Mahindra Insurance Brokers Limited
of absorbing the carried forward business losses and unabsorbed depreciation,
it has created deferred tax assets and deferred tax liability. The corresponding 29. Mahindra World City Developers Limited (formerly known as Mahindra
net debit amounting to Rs. 9,60,797/- has been accounted in the Profit and Industrial Park Limited)
Loss Account. 30. Bristlecone Limited, Cayman Islands.
The components of Deferred Tax liability and assets as at 31st March, 2006 are 31. Bristlecone Inc.
as under: 32. Mahindra Middleeast Electrical Stel Service Centre (FZE)
Deferred Tax Liability : 33. Mahindra & Mahindra South Africa (Pty.) Limited
On fiscal allownace on fixed assets 15,44,897 34. Mahindra Overseas Investment Company (Mauritius) Limited.
15,44,987 35. Mahindra SAR Transmission Private Limited (with effect from 14th January,
Deferred Tax Assets : 2005).
On Unabsorbed depreciation/business loss 4,38,201
On disallowances u/s. 43 B 1,45,809 36. Bristlecone Inc (formerly kmnown as Mahindra Consulting Inc.)

5,84,100 37. Mahindra World City (Jaipur) Ltd. (with effect from 26th August, 2005)
Net Deferred Tax Liability 9,60,797 38. Mahindra International Limited (with effect 1st November, 2005)
39. Stokes Group Limited (with effect from 3rd January, 2006)
9. The Company has obtained an approval dated October 17, 2005 for setting up 40. Plexion Technology (India) Private Limited (with effect from 15th February,
unit in Software Technology Park of India located at Pune. This new STPI unit 2006)
has commenced the activity from January 1, 2006.
41. Jensand Limited (with effect from 3rd January, 2006)
10. Cash and Bank Balances include balances on Current Account lying with
42. Stokes Forgings Limited (with effect from 3rd January, 2006)
non-scheduled bank:
43. Stokes Forgings Dudley Limited (with effect from 3rd January, 2006)
Bank - One, Michigan, US
Rs. 44. Plexion Technologies (UK) Ltd. (with effect from 15th February, 2006)
45. Plexion Technologies GmbH, Germany (with effect from 15th February,
Balance as at 31st March, 2006 5,81,154
2006)
Balance as at 31st March, 2005 NIL
Maximum balance during the year 55,08,355 46. Plexion Technologies Incorporated-USA (with effect from 15th February,
Maximum balance during the previous year NIL 2006)
47. Mahindra Realty Limited (with effect from 21st September, 2005)
11. Related Party Disclosure per Accounting Standard 18:
48. Mahindra Automotive Sheets Private Limited (with effect from 2nd June,
List of Related Parties
2005)
Holding Company : Mahindra & Mahindra Limited
49. Mahindra Renaulit Private Limited (with effect from 5th August, 2005)
Fellow subsidiary Companies : As per list given below
50. Tech Mahindra (R&D Services) Limited (with effect from 28th November,
1. Mahindra Engineering & Chemical Products Limited 2005)
2. Mahindra & Mahindra Financial Services Limited 51. Tech Mahindra (R&D Services) Inc. (with effect from 28th November, 2005)
3. Mahindra Intertrade Limited 52. Tech Mahindra (R&D Services) Pte. (with effect from 28th November, 2005)
4. Mahindra Steel Service Centre Limited 53. Tech Mahindra (Thailand) Limited (with effect from 21st February, 2006)
5. Mahindra Holdings & Finance Limited 54. Tech Mahindra Foundation (with effect from 22th March, 2006)
6. Mahindra Acres Consulting Engineers Limited 55. Mahindra (China) Tractor Company Limited (with effect from 13th May,
7. Mahindra Ashtech Limited 2005
8. Mahindra Holidays & Resorts India Limited 56. Mahindra Ugine Steel Company Ltd. (with effect from 21st June, 2005)
9. NBS International Limited 57. Mahindra BT Investment Company (Mauritius) Limited (with effect from
9th May, 2005)
58. Mahindra Europe s.r.l. (with effect from 30th May, 2005)

594
 MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

Related Parties transaction as under:

Nature of Transactions
Holding Company Fellow Subsidiaries
Purchase: Services NIL 62,86,908
(NIL) (58,48,594)
Sales : Services 90,24,713 —
(9,19,161) (48,20,076)
Finance:
Inter Corporate Deposits Taken 2,40,00,000 —
(NIL) (1,00,00,000)
Inter Corporate Deposits Refunded 2,40,00,000 —
(1,00,00,000)
Interest Payment 5,40,246
(NIL) (8,08,356)
Other Transactions:
Other Expenses 1,8221,971 —
(30,54,714) (NIL)
Reimbursement of Expenses made 1,44,13,511 —
(29,028) (NIL)
Deposits Given 1,81,42,900 —
(NIL) (NIL)
Outstandings:
Payable 1,25,55,861 60,48,856
(30,87,094) (56,36,627)
Receivable 86,25,184 —
(3,90,362) (50,59,634)

12. Earnings per Share:

Current Year Previous Year
Rs. Rs.
Net Profit after Tax 4,44,46,707 (75,19,097)
Weighted Average No. of
equity shares of Rs. 10/- each. 65,07,534 1,76,250
Earnings per share 6.83 (42.66)
13. Figures of previous year have been regrouped wherever necessary to
confirm with the figures of the current year.

Signatures to Schedule I to X

As per our attached report of even date Mr. Hemant Luthra Chairman
For B. K. Khare & Co.

}
Dr. Pawan Goenka
Chartered Accountants
Mr. Ulhas N. Yargop Directors
Santosh Parab
Partner Mr. Prabal Banerji
M. No. 047942

Mumbai, 27th April, 2006 Mumbai, 27th April, 2006

595
MAHINDRA ENGINEERING DESIGN & DEVELOPMENT COMPANY LIMITED

Business Profile (Information as required under Part IV of Schedule VI of the Companies Act, 1956)
Balance sheet abstract and company's general business profile as required under Part IV, Schedule VI to the Companies Act, 1956

I. Registration Details:
Registration No. 1 1 - 9 1 4 0 4 State Code 1 1

Balance Sheet Date 3 1 0 3 2 0 0 6

Date Month Year

II. Capital raised during the year (Amount in Rs. Thousands):

Public Issue Rights Issue
N I L 1 5 0 0 0
Bonus Issue Private Placement
N I L N I L
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)
Total Liabilities
(Including Shareholders’ Funds) Total Assets
1 0 8 0 4 5 8 5 0 1 0 8 0 4 5 8 5 0
Sources of Funds:
Paid-up Capital Reserves and Surplus
7 0 5 0 0 0 0 0 N I L
Secured Loans Unsecured Loans
N I L N I L
Application of Funds:
Net Fixed Assets Investments
(Including intagibles capital wip & advances)
3 3 7 0 3 1 4 2 1 0 0 3 9 7 2 6
Net Current Assets Miscellaneous Expenditure
6 4 3 0 2 9 8 2 N I L
Accumulated Losses
N I L

IV. Performance of Company (Amount in Rs. ):

Turnover/Income from services Total Expenditure
2 3 6 1 8 0 5 0 5 1 9 0 3 7 9 6 4 1
+ – Profit/(Loss )before Tax + – Profit/(Loss) after Tax
✓ 4 7 6 4 0 5 0 4 ✓ 4 4 4 4 6 7 0 7
Earning Per Share in Rupees Dividend Rate %
6 . 8 3 N I L

V. Generic Names of Three Principal Products/Services of the Company (as per monetary terms):
Product Description E N G I N E E R I N G C O N S U L T A N C Y
S E R V I C E S
Item Code No. (ITC Code) N . A .

Mr. Hemant Luthra Chairman

}
Dr. Pawan Goenka

Mr. Ulhas N. Yargop Directors

Mr. Prabal Banerji

Mumbai, dated: 27th April, 2006

596
 MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD

MAHINDRA OVERSEAS INVESTMENT

COMPANY (MAURITIUS) LTD.
Corporate Data Commentary of the Directors
Date Appointed
Directors Couldip Basanta Lala 7 December 2004 Results
Fareed Soreefan 7 December 2004 The results for the year are shown in the Income Statement and
Durgashankar Subramaniam 7 December 2004 related notes.
Vankipuram S Parthasarathy 7 December 2004
Zhooben Bhiwandiwala 27 April 2005 Directors
Pravin Nagindas Shah 21 October 2005 The present membership of the Board is set out on page 597.
Administrator International Financial Directors' Responsibilities
and Secretary Services Limited
IFS Court Company law requires the directors to prepare financial
Twenty Eight statements for each financial year which present fairly the
Cybercity financial position, finacial performance and the cash flows of the
Ebene
Company. The directors are also responsible for keeping
Republic of Mauritius
accounting records which:
Registered Office IFS Court
(With effect from TwentyEight correctly record and explain the transactions of the Company;
05 December 2005) Cybercity disclose with reasonable accuracy at any time the financial
Ebene position of the Company; and
Republic of Mauritius
would enable them to ensure that the financial statements
(Upto 05 December 3rd Floor, Les Cascades comply with the Mauritius Companies Act 2001.
2005) Edith Cavell Street
Port Louis The directors confirm that they have complied with the above
Republic of Mauritius requirements in preparing the financial statements.
Auditors Grant Thornton Auditors
2nd Floor, Fairfax House
21, Mgr Gonin Street The audiors, Grant Thornton, have indicated their willingness to
Port Louis continue in office.
Republic of Mauritius
Certificate from the Secretary under section 166 (d)
Banker HSBC Offshore Banking Unit
of the Mauritius Companies Act 2001.
5th Floor, Les Cascades
Edith Cavell Street We certify, to the best of our knowledge and belief, that we
Port Louis have filed with the Registrar of Companies all such returns as
Republic of Mauritius are required of Mahindra Overseas Investment Company
(Mauritius) Ltd. under the Mauritius Companies Act 2001 during
the financial year ended 31 March 2006.

For International Financial Services Limited

Secretary

Registered Office:
IFS Court,
TwentyEight,
Cybercity,
Ebene,
Republic of Mauritius

28 April, 2006

597
MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD

AUDITORS REPORT
To
The Members of M/s. Mahindra Overseas Investment Company (Mauritius) Ltd.
We have audited the financial statements of Mahindra Overseas We have no relationship with, or any interests in, the company
Investment Company (Mauritius) Ltd, the "Company" on pages 7 other than in our capacity as auditors.
to 19 which have been prepared in accordance with the accounting
Opinion
policies set out on page 603.
We have obtained all the information and explanations that we
This report is made solely to the Company's shareholder, as a
have required.
body, in accordance with Section 205 of the Mauritius Companies
Act 2001. Our audit work has been undertaken so that we might In forming our opinion, we draw attention on the fair values of the
state to the Company's Shareholder those matters we are unquoted investments, as described in Note 4 to the financial
required to state to it in an auditor's report and for no other statements. The investments are stated at cost as there exists no
purpose. To the fullest extent permitted by law, we do not accept method where the fair values can be reliably measured. However,
or assume responsibility to anyone other than the Company and in view of the investments which have been made in emerging
the Company's shareholder as a body, for our audit work, for this markets, the directors consider the cost of USD 9,694,104 to be
report, or for the opinions we have formed. a reflection of the fair value.
Directors' responsibilities Because of the significance of the adjustments that may be
deemed necessary if the cost of the investments is in excess of
The directors are responsible for the preparation of the financial
its fair value, we consider that this fact should be brought to your
statements which are in accordance with and comply with the
attention but our opinion is not qualified in this respect.
Mauritius Companies Act 2001 and International Financial
Reporting Standards, and which present fairly the financial position In our opinion :
of the Company at 31 March 2006 and of its financial performance,
(a) proper accounting records have been kept by the Company
changes in equity and cash flows for the year then ended. They
as far as appears from our examination of those records; and
are also reponsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and (b) the financial statements on pages 599 to 605:
detection of fraud and other irregularities.
(i) have been prepared in accordance with and comply
Auditors'responsibilities with the Mauritius Companies Act 2001 and
International Financial Reporting Standards;
It is our responsibility to form an independent opinion, based on
our audit, on those financial statements and to report our opinion (ii) give a true and fair view of the matters to which they
to you. relate; and
Basis of opinion (iii) present fairly the financial position of the Company at
31 March 2006 and of its financial performance, changes
We conducted our audit in accordance with International Standards
in equity and cash flows for the year then ended.
on Auditing. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant
estimates and judgements made by the directros in the preparation
of the financial statements, and of whether the accounting
policies are appropriate to the Company's circumstances,
consistently applied and adequately disclosed. Grant Thornton
Chartered Accountants
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable Y NUBEE, FCCA
assurance as to whether the financial statements are free from Signing Partner
material misstatement. In forming our opinion, we also evaluated
the overall adequacy of the presentation of information in the Date: 28 Apr 2006
financial statements. We believe that our audit provides a Port Louis, Mauritius
reasonable basis for our opinion.

598
 MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD

BALANCE SHEET AT 31 MARCH 2006

Notes 2006 2006 2005 2005
USD INR USD INR
(Note 1) (Note 1)

ASSETS
Non-current assets
Investment ............................................... 4 9,694,104 432,938,685 — —

Current assets
Loan .......................................................... 5 665,173 29,706,626 — —
Receivables and prepayment .................... 2,907 129,827 7,027 307,853
Cash at bank ............................................ 155,239 6,932,974 8,043,637 352,391,737

823,319 36,769,427 8,050,664 352,699,590

Total assets .............................................. 10,517,423 469,708,112 8,050,664 352,699,590

EQUITY AND LIABILITIES

Capital and reserves
Stated capital ........................................... 6 520,000 23,223,200 10,000 438.100
Share application monies ....................... 7 8,290,000 370,231,400 7,990,000 350,041,900
Revenue reserves .................................... 152,145 6,794,797 35,549 1,557,401

8,962,145 400,249,397 8,035,549 352,037,401

Current liabilities
Borrowings .............................................. 8 1,548,849 69,171,596 — —
Payables and accruals ............................ 9 6,155 274,882 15,115 662,189
Taxation ................................................... 3 274 12,237 — —

1,555,278 69,458,715 15,115 662,189

Total equity and liabilities ...................... 10,517,423 469,708,112 8,050,664 352,699,590

Approved by the Board on 28 April 2006 and signed on its behalf by :

Couldip Basanta Lala Fareed Soreefan

Director Director

The notes on pages 603 to 605 form an integral part of these financial statements.

599
MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD

INCOME STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006

Year ended Period from 7 December
Notes 31 March 2006 2004 to 31 March 2005

USD INR USD INR

(Note 1) (Note 1)

INCOME
Interest on bank deposits ........................... 178,046 7,951,535 47,811 2,094,600
Interest on loan .......................................... 15,173 677,626 — —
193,219 8,629,161 47,811 2,094,600

EXPENSES
Interest on loan .......................................... 48,849 2,181,596 — —
Administration fees and disbursements .... 10,053 448,967 6,435 281,918
Notary fees ................................................. 10,782 481,524 — —
Loss on exchange ...................................... 6,209 277,294 — —
Audit fees ................................................... 2,300 102,718 1,840 80,610
Directors' fees ............................................ 1,250 55,825 417 18,269
Licence fees ............................................... 1,500 66,990 500 21,905
Secretarial fees .......................................... 1,250 55,825 417 18,269
Set up costs ............................................... — — 2,590 113,468
Registrar of Companies fees ...................... 250 11,165 63 2,760
Bank charges .............................................. 746 33,316 — —
83,189 3,715,220 12,262 537,199

Operating Profit 110,030 4,913,941 35,549 1,557,401

Loan written back ....................................... 9 6,840 305,474 — —

Profit before taxation 116,870 5,219,415 35,549 1,557,401

Taxation ...................................................... 3 (274) (12,237) — —
Profit for the year/period ............................. 116,596 5,207,178 35,549 1,557,401

The notes on pages 603 to 605 form an integral part of these financial statements.

600
 MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2006

Share
Stated application Revenue
Capital monies reserves Total
USD USD USD USD
Issue of shares ...................................................... 10,000 — — 10,000
Funds received during the period .......................... — 7,990,000 — 7,990,000
Profit for the Period ............................................... — — 35,549 35,549

At 31 March 2005 ................................................. 10,000 7,990,000 35,549 8,035,549

Issue of shares ...................................................... 510,000 — — 510,000
Funds received during the year ............................. — 300,000 — 300,000
Profit for the year .................................................. — — 116,596 116,596
At 31 March 2006 ................................................. 520,000 8,290,000 152,145 8,962,145

Share
Stated application Revenue
Capital monies reserves Total
INR INR INR INR
(Note 1) (Note 1) (Note 1) (Note 1)
Issue of shares ...................................................... 438,100 — — 446,600
Funds received during the period .......................... — 350,041,900 — 356,833,400
Profit for the Period ............................................... — — 1,557,401 1,557,401

At 31 March 2005 ................................................. 438,100 350,041,900 1,557,401 352,037,401

Issue of shares ...................................................... 22,776,600 — — 22,776,600
Funds received during the year ............................. — 13,398,000 — 13,398,000
Profit for the year .................................................. — — 5,207,178 5,207,178
Exchange difference ............................................. 8,500 6,791,500 30,218 6,830,218
At 31 March 2006 ................................................. 23,223,200 370,231,400 6,794,797 400,249,397

The notes on pages 603 to 605 form an integral part of these financial statements.

601
MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2006

Year ended Period from 7 December
31 March 2006 2004 to 31 March 2005

USD INR USD INR

(Note 1) (Note 1)
Cash flow from operating activities
Profit before tax .......................................................... 116,870 5,219,415 35,549 1,557,401
Adjustments for:
Loss on exchange ....................................................... 6,209 277,294 — —
Loan from related company written back ................... (6,840) (305,474) — —
Interest income ........................................................... (193,219) (8,629,161) (47,811) (2,094,600)
Interest expense ......................................................... 48,849 2,181,596 — —

(28,131) (1,256,330) (12,262) (537,199)

Decrease / (increase) in receivables and prepayments 4,173 186,366 (2,854) (125,034)
(Decrease) / increase in payables and accruals ........... (2,120) (94,679) 15,115 662,189
Cash flows used in operating activities ................... (26,078) (1,164,643) (1) (44)
Interest received ......................................................... 177,993 7,949,167 43,638 1,911,781

Net cash flows generated from operating activities 151,915 6,784,524 43,637 1,911,737

Cash flows from investing activities

Purchase of investments ............................................ (9,700,313) (433,215,979) — —
Cash flows used in investing activities .................... (9,700,313) (433,215,979) — —

Cash flows from financing activities

Issue of shares ............................................................ 510,000 22,776,600 10,000 438,100
Share application monies received .............................. 300,000 13,398,000 7,990,000 350,041,900
Loans given ................................................................. (650,000) (29,029,000) — —
Borrowings .................................................................. 1,500,000 66,990,000 — —
Cash flows generated from financing activities ..... 1,660,000 74,135,600 8,000,000 350,480,000

Net (decrease) / increase in cash and cash

equivalents ................................................................. (7,888,398) (352,295,855) 8,043,637 352,391,737

Cash and cash equivalents at start of the year / period 8,043,637 352,391,737 — —
Net (decrease) / increase in cash and cash equivalents (7,888,398) (352,295,855) 8,043,637 352,391,737
Effects of exchange difference ................................... — 6,837,092 — —

Cash and cash equivalents at end of the year / period 155,239 6,932,974 8,043,637 352,391,737

Cash and cash equivalents made up of:

Cash at bank ................................................................ 155,239 6,932,974 8,043,637 352,391,737

The notes on pages 603 to 605 form an integral part of these financial statements.

602

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 MARCH 2006
1. GENERAL
Mahindra Overseas Investment Company (Mauritius) Ltd, the "Company", was
incorporated in the Republic of Mauritius under the Mauritius Companies Act 2001
on 7 December 2004 as a private company limited by shares and holds a Category
1 Global Business Licence issued by the Financial Services Commission. The
Company's registred office is IFS Court, TwentyEight, Cybercity, Ebene, Mauritius.
The prinicipal activity of the Company is to hold investments.
The financial statments of the Company are expressed in United States Dollars
("USD"). The Company's business or other activity is carried out in a currency other
than the Mauritian Rupees, which is a requirement of the Financial Services
Development Act 2001. The Company's functional currency is the USD, the currency
of the primary economic environment in which it operates.
INR amounts are included solely for convenience. These transactions should not be
construed as representations that the USD amounts acutally represent, or have been
or could be converted into INR. As the amounts shown in INR are for convenience
only, that rate of 1 USD = INR 44.66 (2005: INR 43.81) has been used for the purpose
of presentation of the INR amounts in the accompanying financial satements. The
exchange rate used at 31 March 2006 is the average of telegraphic transfer buying
and selling rates quoted by the Mumbai Branch of State Bank of India on 31 March
2006.
2. ACCOUNTING POLICIES
The financial statements are prepared in accordance with and comply with International
Financial Reporting Standards.
The principal accouting policies adopted in the preparation of these financial
statements are set out below. The preparation of financial statements in accordance
with International Financial Reporting Standards requires management to make
certain assumptions and estimates that affect the reported amounts of assets and
liabilities, revenues and expenses and contingent liabilities. Acutal amounts could in
certain cases differ from those assumptions and estimates. Changes are taken into
account with income satement effect if new information comes to light.
(a) Basis of accounting
The financial satements are prepared under the historical cost convention.
(b) Investments
The Company has classfied its investments as available-for-sale.
Available-for-sale investments are valued at fair value and the resulting temporary
unrealised gains/ (losses) (including unrealised foreign exchange gains/ (losses) on
retranslation at the closing rate, if any) are reported as a separate component of
equity as "Invesment Revaluation Reserve", till the underlying investment is sold or
permanently written off, when the total realised gains/(losses) are included in the
Income Statement.
The carrying values of unquoted securities are determined using the present value
or other estimation and valuation techniques such as the net asset value method and
discounted cash flow analysis.
Available for sale investements whose fair values cannot be measured reliably are
carried at cost, less impairment.
The valuation of investments may not necessarily represent the amounts that may
eventually be realised from sales or other dispositions.
(C) Consolidated financial statements
The Company owns majority shareholdings in the issued share capital of Mahindra
China Tractor Company Ltd, Mahindra Europe SRL and Mahidra-BT Investment
Company (Mauritius) Limited, all unquoted companies incorporated in the People's
Republic of China, Italy and the Republic of Mauritius respectively. It has taken
advantage of paragraph 10 of International Accounting Standard 27, Consolidated
and Separate Financial Statements and Section 212 of the Mauritius Companies Act
2001, which provides exemption from the need to present consolidated financial
statements, as it is a wholly owned subsidiary of Mahidra & Mahindra Ltd, a company
incorporated in India. The registered office of Mahidra & Mahindra Ltd is Gateway
Building, Apollo Bunder, Mumbai - 400 001.
(d) Loans originated by the Company
Loans originated by the Company are recognised when cash is advanced to
borrowers and are initially recorded at cost, which is the fair value of the cash given
to originate the loan, including any transaction costs.
Loans are subsequently measured at amortised cost using the effective interest
method, less any provision for impairment. Any change in their value is recognised
in the income statement.
An allowance for credit losses is established if there is objective evidence that the
Company will be unable to collect all amounts due on a claim accordings to the
original contractual terms.
MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD
(e) Receivables
Receivalbes are carried at anticipated realisable value. A provision for impairment on
receivables is established when there is an objective evidence that the Company will
not be able to collect all amounts due according to the original terms of receivables.
The amount of the provision is the differece between the carrying amounts and the
recoverable amount.
(f) Cash and cash equivalents
Cash comprises cash at bank. Cash equivalents are short term, highly liquid
investment that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of change in value.
(g) Equity
Stated capital is determined using the nominal values of shares that have been
issued.
Revenue reserves include all current and prior results as disclosed in the income
statement.
(h) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred.
Borrowings are subsequently stated at amortised cost; any difference between the
proceeds (net of transaction costs) and the redemption value is recognised in the
Income Statement over the period of the borrowings using the effective interest
method.
(i) Financial instruments
Financial intruments carried on the balance sheet include loans originated by the
Company, receivables, cash and cash equivalents, borrowings, payables and accruals.
The particular recognition methods adopted are diclosed in the individual policy
statements associated with each item.
Disclosures about financial instruments to which the Company is a party are provided
in Note 10.
(j) Deffered taxation
Deffered taxation is provided, using the liability method, for all temporary differences
arising between the tax bases of assets and liabilities and their carrying values for
financial reporting purposes. Currenlty enacted tax rates are used to determine
deferred tax.
Deferred tax asstes are recognised to the extent that it is probable that future taxable
profits will be available against which the temporary differences can be utilised.
(k) Foreign currencies
Foreign currency transactions are accounted for at the exchange rates prevailing at
the date of the transactions. Gains and losses resulting from the settlement of such
trasactions and from the translation of monetary assets and liabilities denominated
in foreign currencies are recognised in the income statement. Such balances are
translated at year-end exchange rates unless hedged by forward foreign exchange
contracts, in which case the rates specified in such forward contracts are used.
(l) Revenue recognition
Interest income is recognised on the accrual basis unless collectibility is in doubt.
Dividend income is recognised when the Company's right to receive such dividend
is established.
(m) Expense recognition
All expenses are accounted for in the income statement on the accrual basis.
(n) Related parties
Parties are considered to be related if any one party has the ability to control the other
party or exercise significant influence over the other party in making financial and
operating policy decisions.
(o) Provisions
Provisions are recognised when the Company have a present legal or constructive
obligation as a result of past events, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made. At the time of the effective
payment, the provision is deducted from the corresponding expenses. All known
risks at balance sheet date are reviewed in detail and provision is made where
necessary.
(p) Impairment of assets
At each balance sheet date the Company reviews the carrying amounts of its assets
to determine whether there is any indication that those assets have suffered any
impairment loss. When an indication of impairment loss exists, the carrying amount
of the asset is assessed and written down to its recoverable amount.
(q) Set up costs
Set up costs are expensed in the period in which they are incurred.
603
MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD

3. TAXATION 8. BORROWINGS
(i) Income tax 2006 2006 2005 2005
USD INR USD INR
The Company is a tax incentive company in Mauritius and under current laws and (Note 1) (Note 1)
regulations liable to pay income tax on its net income at a rate of 15%. The Company
is, however, entitled to a tax credit equivalent to the higher of actual foreign tax Bank loan 1,548,849 69,171,596 — —
suffered and 80% of Mauritius tax payble in respect of its foreign source income thus
reducing its maximum effective tax rate to 3%. Capital gains from sales of units and
securities are exempted from income tax in Mauritius. The Company has contracted a loan of USD 1,500,000 during the year from Standard
Chartered Bank (Mauritius) Limited. The loan is unsecured and is due to mature on
At 31 March 2006, the Company had an income tax libility of USD 274 (2005 : nil).
07 July 2006.
(ii) Income statement The loan bears an annual interest rate of 0.5% above the one year London Interbank
2006 2006 2005 2005 Offer Rate (LIBOR), set on the date of the drawdown.
USD INR USD INR
9. PAYABLES AND ACCRUALS
(Note 1) (Note 1)
Income tax on adjusted profit 274 12,237 — — 2006 2006 2005 2005
USD INR USD INR
Balance sheet (Note 1) (Note 1)
Income tax liability 274 12,237 — — Amount due to holding
company (see note (a) below) — — 6,840 299,660
Accruals 6,155 274,882 8,275 362,529
(iii) Deferred taxation
Deferred income tax is calculated on all temporary differences under the liability 6,155 274,882 15,115 662,189
method at the rate of 3%. At 31 March 2006, the Company had no temporary
differences and therefore no provision for deferred taxation is necessary.
(a) Amount due to holding company
4 INVESTMENTS
2006 2006
2006 2006 2005 2005
USD INR
USD INR USD INR
(Note 1)
(Note 1) (Note 1)
Balance at 01 April 2005 6,840 299,660
(i) Unquoted investments at cost :
Additions during the year 9,700,313 433,215,979 — — Amount written back (6,840) (305,474)
Exchange difference (6,209) (277,294) — — Exchange difference — 5,814

At 31 March 2006 9,694,104 432,938,685 — — Balance at 31 March 2006 -— —

The amount due to the holding company has been written back as the holding
(ii) Details pertaining to the investments are as follows : company has waived its right on this loan.
Country of % Cost Cost
Name of investee companies incorporation holding 2006 2006 10. FINANCIAL INSTRUMENTS
USD INR (a) Values of financial instruments
(Note 1)
The Company's investment is valued as described in Note 2.
Mahindra China Tractor
Company Ltd China 80% 7,360,000 328,697,600 The Company's other financial assets and liabilities include loan given to a
related party, receivables, cash at bank, borrowings and payables whose
Mahindra Europe SRL Italy 80% 966,104 43,146,205
carrying amounts approximate their fair values.
Mahindra - BT Investment
Company (Mauritius) Ltd Mauritius 57% 1,368,000 61,094,880 (b) Financial risks
The Company's investment activities expose it to the various types of risks
9,694,104 432,938,685
which are associated with the financial instruments and markets in which it
invests. The following is a summary of the main risks:
(iii) The directors consider the cost of the investments to be a reflection of the fair value
(i) Currency risk
(iv) The Company has "control" over the investee companies but no consolidated
financial statements have been prepared as Mahindra Overseas Investment Company The Company invests in shares denominated in Euro (EUR) and Chinese
(Mauritius) Ltd is itself a wholly owned subsidiary of Mahindra & Mahindra Ltd, a Yuan Renminbi (CNY). Consequently, the Company is exposed to the risk
company incorporated in India. The registered office of the holding company is that the exchange rate of the United States Dollars (USD) relative to the
Gateway Building, Apollo Bunder, Mumbai 400 001. EUR and the CNY may change in a manner which has a material effect on
the reported values of the Company's assets which are denominated in
5. LOAN EUR and the CNY. The Company has in place policies that will mitigate the
The loan to a related party, Mahindra China Tractor Company Ltd, is unsecured and adverse effect by a diversification of the investment portfolio.
receivable within one year. (ii) Concentration risk
The loan bears an annual interest rate of 1% above the six months London Interbank At 31 March 2006, a significant portion of the Company's total assets
Offer Rate (LIBOR) and is renewable. consisted of an investment in a Company incorporated in the People's
Republic of China which involves certain considerations and risks not
6. STATED CAPITAL typically associated with investments on other more developed countries.
2006 2006 2005 2005 Further economic and political development in the People's Republic of
USD INR USD INR China could adversely affect the value of the securities in which the
(Note 1) (Note 1)
Company has invested.
Issued and fully paid
Ordinary shares of USD 1 each 520,000 23,223,200 10,000 438,100 (iii) Liquidity risk
Liquidity risk is managed by maintaining sufficient cash at bank and also by
During the year, the issued share capital was increased to USD 520,000 by the securing committed credit facilities.
creation of 510,000 ordinary shares of USD 1 each. (iv) Interest rate risk
7. SHARE APPLICATION MONIES The Company has interest bearing borrowing and loan and is therefore
subject to interest rate risk. The interest rate is based on market interest
Share application monies represented funds invested by the holding company and, rates.
for which shares were allotted subsequent to the balance sheet date.

604
 MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD

(c) Currency Profile Debit Debit/(Credit)

The currency profile of the Company's financial assets and liabilities is as balances at balances at
follows : Nature of Volume of 31 March 31 March
Nature of relationship transactions transactions 2006 2005
Financial Financial Financial Financial
USD USD USD
assets liabilities assets liabilities
2006 2006 2005 2005 Subsidiary company Loan 665,173 665,173 —
Holding company Financing 6,840 — (6,840)
USD USD USD USD Directors Emoluments 1,250 833 833
United States
Dollars (USD) 2,188,465 1,555,004 8,047,810 15,115 Debit Debit/(Credit)
Euro (EUR) 966,104 — — — balances at balances at
Chinese Yuan Nature of Volume of 31 March 31 March
Renminbi (CNY) 7,360,000 — — —
Nature of relationship transactions transactions 2006 2005
10,514,569 1,555,004 8,047,810 15,115 INR INR INR
(Note 1) (Note 1) (Note 1)
Financial Financial Financial Financial
Subsidiary company Loan 29,706,626 29,706,626 —
assets liabilities assets liabilities Holding company Financing 305,474 — (299,660)
2006 2006 2005 2005 Directors Emoluments 55,825 37,202 36,494
INR INR INR INR
(Note 1) (Note 1) (Note 1) (Note 1) The loan to a related party, Mahindra China Tractor Company Ltd, is unsecured and
receivable within one year. The loan bears an annual interest rate of 1% above the 6
United States months London Interbank Offer Rate (LIBOR) and is renewable.
Dollars (USD) 97,736,847 69,446,479 352,574,556 662,188 All other related party transactions are carried out at arm's length.
Euro (EUR) 43,146,205 — — —
Chinese Yuan 12. CONTINGENT LIABILITIES
Renminbi (CNY) 328,697,600 — — — The Company has no material litigation claims outstanding, pending or threatened
against it which could have a material adverse effect on the Company's financial
469,580,652 69,446,479 352,574,556 662,188 position or results.
13. HOLDING COMPANY
11. RELATED PARTY TRANSACTIONS The directors regard Mahindra & Mahindra Limited, a company incorporated in India,
During the year 31 March 2006, the Company had transactions with related parties. as the Company's holding company.
The nature, volume of transactions and balances with the related parties are as
follows :

605
MAHINDRA (CHINA) TRACTOR CO., LIMITED
Directors’ report for Mahindra (China) Tractor Co. Ltd.
April 2006
Overall
Mahindra (China) Tractor Co., Ltd. (MCTCL) is a joint venture with
Jiangling Motor Co. Group, (JMCG) an Auto-major in Jiangxi
province of China. MCTCL bought assets of JMCG’s tractor unit
Jiangling Tractor Company (JTC). MCTCL is located in Nanchang.
The joint venture was signed in December 2004. After completing
all the formalities MCTCL became operational in June’05 &
currently recruiting around 400 people. This unit has produced
2880 tractors, sold 2718 including export of 820 numbers in our
debut year of operations.
Some of the significant achievements of the year are as follows:
Manufacturing & BPR
● Mini BPR (Business Process Re-engineering) activities were
initiated aimed primarily towards productivity improvement.
Some of the activities were multi-manning, multi machining,
layout modifications, paint booth modification, de-
bottlenecking critical operations, fatigue reduction, tooling &
fixture modifications, provision of gauges etc.
● Work culture improvement – Cellular/modular manufacturing
concept was brought in to improve manpower flexibility &
enhancing the skills of our workforce.
● MCTCL has now reached production capacity of 600 tractors
a month on single shift basis.
Product Development
● This year the product improvement team developed two
models of tractors to suit market needs of 2 different
countries, India & USA.
● Model FS 200-1 (For India) – This tractor will participate
in lower HP segment (below 25) which is so far not fully
explored by tractor manufacturers in India.
606
● Model 254 II (For USA) – This tractor will cater to the
medium-end small tractor segment of hobby farmers in
USA. In future this tractor will also be marketed in
Europe, Australia & some other countries.
● For the Native market higher HP tractor (30 HP) model FS
300-1 was re-launched after major re-hauling. This product is
accepted well in the market.
Quality
● A special supplier-quality improvement program is being
carried out to ensure the incoming quality level of supplied
material. The first phase covered 30 critical suppliers. This
program will continue in the coming year & will cover 20 more
suppliers.
● Systems have been introduced to ensure quality of out going
products.
Native Marketing
● Total Industry in China for four wheeled-geared tractors in
F06 was 139,000 & our relevant industry was 24,000.
● Marketing team has successfully managed to revive &
rationalize the existing channel of JTC & further develop it.
Today we have 48 dealers, out of which 25 are revived
dealers of JTC.
● Service & Spares have been our differentiating factors. Many
proactive initiatives like customer help line for online query
resolution, Product Complaint Report (PCR) for resolving
field issue, promotion of genuine spare parts, training center
in the plant for dealers & mechanics are examples to name
a few.
MCTCL has been continuously working on its cultural integration
program to make this Indo-China JV a success. This activity will
be continued & strengthened in future.

Report of the Auditors
To the Board of Directors of Mahindra (China) Tractor Co., Limited
(incorporated in the People’s Republic of China with limited
liability)
We have audited the accompanying consolidated Balance Sheet
of Mahindra (China) Tractor Co., Limited (“the Company”) as of
31st March, 2006, and the related statements of income, cash
flows for the year then ended. These financial statements set out
on pages 608 to 613 are the responsibility of the Company’s
Management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We consider our audit in accordance with the International
Standards on Auditing as promulgated by the International
Federation of Accountants. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
MAHINDRA (CHINA) TRACTOR CO., LIMITED
statement. An audit also includes assessing the accounting
principles used and significant estimates made by the
Management, as well as evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
31st March, 2006, and the results of its operations and its cash
flows for the year then ended in accordance with the International
Financing Reporting Standards promulgated by the International
Accounting Standards Board.
Jiangxi DeLongDongsheng & Company
Certified Public Accountants (Partner)
Nanchang, China, 26th April, 2006
607
MAHINDRA (CHINA) TRACTOR CO., LIMITED

Assets Row Beginning of Ending Ending Debt and Owner’s Equity Row Beginning of Ending Ending
the year Amount Amount the year Amount Amount
RMB RMB RS RMB RMB RS

Current Assets: Current Liability

Currency Fund 1 4,800,409.96 4,604,186.76 25,645,320.25 Short-term Loan 39 2,421,900.00 11,014,950.00 61,353,271.50
Short-term Investment 2 - - - Bill Payable 40 - - -
Bills Receivable 3 - - - Account Payable 41 17,908,562.45 14,544,158.28 81,010,961.62
Dividend Receivable 4 - - - Prepaid Income 42 777,970.00 240,770.00 1,341,088.90
Interest Receivable 5 - - - Accrued Payroll 43 - 1,295,308.00 7,214,865.56
Account Receivable 6 3,719,416.98 2,996,984.84 16,693,205.56 Welfare Payable 44 534,589.03 831,909.67 4,633,736.86
Other Account Receivable 7 2,061,690.72 3,971,415.61 22,120,784.95 Dividend Payable 45 - - -
Advance Payment 8 63,200.00 130,205.00 725,241.85 Tax Payable 46 -2,456,929.83 -2,398,520.39 -13,359,758.57
Subsidy Receivable 9 - - - Other Payables(for Government Etc.) 47 - - -
Provision for Bad Debts 10 - - - Other Payables 48 58,145,814.42 8,015,093.52 44,644,070.91
Inventory 11 15,071,803.28 12,595,436.01 70,156,578.58 Withholding Expenses 49 3,697,093.37 3,868,963.86 21,550,128.70
Raw Material 12 7,709,218.17 5,894,853.59 32,834,334.50 Projected Liability 50 - - -
Wip and Semi-manufacture Goods 13 2,921,677.03 3,277,527.85 18,255,830.12 Long-term Liability Payable
Finished Goods and Outsourcing Goods 14 3,783,830.40 2,932,702.07 16,335,150.53 within One Year 51 - - -
Less - Provision for Inventory 15 273,608.80 798,969.25 4,450,258.72 Other Current Liability 52 - - -
Inventory Net Value 16 14,798,194.48 11,796,466.76 65,706,319.85 Total Current Liability 58 81,028,999.44 37,412,632.94 208,388,365.48
Unamortization Loan 17 - - - Long-term Liability - - -
- - - Long-term Loan 59 - - -
Total Currenct Assets 19 25,442,912.14 23,499,258.97 130,890,872.46 Bond Payable 60 - - -
Long-term Investment - - - Long-term Payables 61 - - -
Long-term Property Investment 20 - - - Special Project Payables 62 - - -
Reduction Provision of Long-term Other Long-term Liability 63 - - -
Investment 21 - - - Total Long-term Liability 64 - - -
Appropriated Capital - - - - - -
Total Long-term Investment 22 - - - Deferred Tax Item: - - -
Fixed Assets - - - Deferred Tax Credit 66 - - -
Orginal Price of Fixed Assets 23 59,294,814.80 62,705,427.94 349,269,233.63 Total Liabilities 67 81,028,999.44 37,412,632.94 208,388,365.48
Deduct: Accumulated Depreciation 24 2,480,813.20 3,721,148.03 20,726,794.53 - - -
Fixed Assets Net Value 25 56,814,001.60 58,984,279.91 328,542,439.10 Owner’s Equity (Stockholder’s Equity) - - -
Deduct: Reduction Preparation Called up Capital (capital Stock) 69 24,829,500.00 74,598,140.00 415,511,639.80
Of Fixed Assets 26 - - - Deduct:Returned Investment 70 - - -
Fixed Assets Net Amount 27 56,814,001.60 58,984,279.91 328,542,439.10 Net Amount of Called Up
Project Material 28 - - - Capital (Capital Stock) 71 24,829,500.00 74,598,140.00 415,511,639.80
Work in Process 29 - - - Certified Capital 72 - 770,317.00 4,290,665.69
Fixed Assets Clearing 30 - - - Capital Surplus 73 - - -
Fixed Assets Losses In Suspense 31 - - - Thereinto: Legal Commonweal 74 - - -
Total Fixed Assets 32 56,814,001.60 58,984,279.91 328,542,439.10 Retained Earnings 75 -15,043,802.71 -15,043,802.71 -83,793,981.09
Intangible Assets and Other Assets - - - Profit for the Current Year 76 - -5,928,835.54 -33,023,613.96
Intangible Assets 33 8,557,782.99 9,324,912.81 51,939,764.35 - - -
Long-term Unamortization Loan 34 - - - Total Owner’s Equity (Stockholder’s
Other Long-term Assets 35 - - - Equity 78 9,785,697.29 54,395,818.75 302,984,710.44
Total Intangible Assets and Total Debt and Owner’s
Other Assets 36 8,557,782.99 9,324,912.81 51,939,764.35 Equity (Stockholder’s Equity 79 90,814,696.73 91,808,451.69 511,373,075.91
- - -
Deferred Tax Item: - - -
Deferred Tax Debt 37 - - -

Total Assets 38 90,814,696.73 91,808,451.69 511,373,075.91

608
 MAHINDRA (CHINA) TRACTOR CO., LIMITED

Statement of Profit and Loss

Item Accumulative Accumulative
Amount From Amount From
June 2005 June 2005
to Mar.2006 2006
to Mar.2006
RMB RS

Revenue from Sales ............................................................. 1 53,294,236.76 296,848,898.75

Main Operation Cost ............................................................ 4 53,896,430.03 300,203,115.27
Tax and Affixation ................................................................ 5 - -
Profit from Sales .................................................................. 10 -602,193.27 -3,354,216.51
Plus:Profit from Other Operations ....................................... 11 72,641.34 404,612.26
Reduce:Sales Expenses ....................................................... 14 3,648,424.46 20,321,724.2
Administrative Expenses .................................................... 15 18,076,149.45 100,684,152.44
Financial Expenses .............................................................. 16 -1,311,401.07 -7,304,503.96
Operation Profit .................................................................... 18 -20,942,724.77 -116,650,976.97
Plus: Investment Income ..................................................... 19 - -
Subsidy Income ................................................................... 22 - -
Nonoperational Income ........................................................ 23 5,964.00 33,219.48
Reduce: Nonoperational Expenses ...................................... 25 35,877.48 199,837.56
Total Amount of Profit .......................................................... 27 -20,972,638.25 -116,817,595.05
Reduce: Income Tax ............................................................ 28 - - Net Profit
30 -20,972,638.25 -116,817,595.05
Inside Profit .......................................................................... 31 - -

Final Profit ............................................................................ 99 -20,972,638.25 116,817,595.05 1

609
MAHINDRA (CHINA) TRACTOR CO., LIMITED

Cash Flow Statement

Row Accumulation Accumulation
For Current Year For Current Year
RMB Rs
Cash Flow From Operating Activities
Cash Received From Sales And Service 1 57,877,451.22 322,377,403.30
Rental 3 - -
Refund Of Other Taxes And Levy Other Than Vat 4 - -
Other Cash Received Relating To Operations 8 464,802.02 2,588,947.25
Subtotal Of Cash Inflow 10 58,342,253.24 324,966,350.55
Cash Paid For Goods And Services 11 55,569,900.74 309,524,347.12
Cash Paid For Operating Leases 12 - -
Cash Paid To And On Behalf Of Employees 13 9,053,585.45 50,428,470.96
Vat Paid 14 3,486.13 19,417.74

Income Tax Paid 15 17,158.09 95,570.56

Other Taxes Paid 16 453,612.97 2,526,624.24
Others 18 12,023,539.38 66,971,114.35
Subtotal Of Cash Outflow 20 77,121,282.76 429,565,544.97
Net Cash Flow Made By Business Operation 21 -18,779,029.52 -104,599,194.43
Cash Flow From Investment: - -
Cash Received From Return Of Investment 22 - -
Cash Received From Distribution Of Dividend Or Profits 23 - -
Cash Received From Bond Interest Income 25 - -
Net Cash Received From Disposal Of Fixed Assets 26 - -
Net Cash Received From The Disposal Of Intangible Property 27 - -
Net Cash Received From The Disposal Of Other Long-term Assets 28 - -
Others 29 - -
Subtotal Of Cash Inflow 30 - -
Cash Paid To Acquire Fixed Assets 31 52,471,234.87 292,264,778.23
Cash Paid To Acquire Intangible Assets 33 9,515,745.20 53,002,700.76
Cash Paid To Acquire Other Long Term Assets 34 - -
Cash Paid To Acquire Equity Investment 35 - -
Cash Paid To Acquire Debt Investment 36 - -
Other Cash Paid Relating To Investing Activities 38 - -
Subtotal Of Cash Outflow 40 61,986,980.07 345,267,478.99
Net Cash Flow From Investment 41 -61,986,980.07 -345,267,478.99
Cash Flow From Financing - -
Proceeds From Issuing Shares 42 74,196,780.00 413,276,064.60
Proceeds From Issuing Bonds 43 - -
Proceeds From Borrowings 44 11,520,330.00 64,168,238.10
Other Proceeds Relating To Financing Activities 48 - -
Subtotal Of Cash Inflow 50 85,717,110.00 477,444,302.70
Cash Repayment Of Amount Borrowed 51 - -
Cash Payment Of Expenses On Any Financing Activities 52 - -
Cash Payment For Distribution Of Dividend Or Profits 53 - -
Cash Payment Of Interest Expenses 54 56,420.00 314,259.40
Cash Payment For Finance Leases 55 - -
Cash Payment For Reduction Of Registered Capital 56 - -
Other Cash Payment Relating To Financing Activities 58 - -
Subtotal Of Cash Outflow 60 56,420.00 314,259.40
Net Cash Flow From Financing Activities 61 85,660,690.00 477,130,043.30
Effect Of Fireign Exchange Rate Changes On Cash 70 290,493.65 1,618,049.63
Net Increase In Cash & Cash Equivalents 99 4,604,186.76 25,645,320.25

610
 MAHINDRA (CHINA) TRACTOR CO., LIMITED

M anufacture Cost in Detail Management Cost in Detail

Total Number Total Number
Item Line Total Number Total Number of Year of Year
this Year this Year RMB RS
Rmb Rs 1 Pay 1 7,055,502.04 39,299,146.36
1 Pay 1 538,691.26 3,000,510.32 2 Welfarism 2 627,987.50 3,497,890.38
2 Welfarism 2 75,416.76 420,071.35
3 Depreciation 3 2,903,187.88 16,170,756.49 3 Depreciation 3 815,558.95 4,542,663.35
4 Repairing Cost 5 151,345.07 842,992.04 4 Official Cost 5 184,603.41 1,028,240.99
5 Official Cost 6 7,679.51 42,774.87 5 Evection Cost 6 888,123.03 4,946,845.28
6 Water And Electricity Cost 7 211,428.96 1,177,659.31 6 Transport Cost 7 7,419.12 41,324.50
7 Machinery Meterial Cost 8 141,457.09 787,915.99 7 Insurance Cost 8 - -
8 Work Protection 9 25,711.26 143,211.72 8 Hire Cost 9 433,767.86 2,416,086.98
9 Evection Cost 10 17,606.33 98,067.26
10 Operation Cost 11 - - 9 Repairing Cost 10 253,599.99 1,412,551.94
12 - - 10 Consultation Cost 11 16,800.00 93,576.00
Others 13 796,062.39 4,434,067.51 11 Law Cost 12 34,800.00 193,836.00
1 Low Cost Meterial 14 505,144.65 2,813,655.70 12 13 - -
2 Trasport Cost 15 - - 13 Virescence Cost 14 185,043.30 1,030,691.18
3 Traffic Cost 16 161.00 896.77
14 Machinery Meterial Cost 15 64,744.45 360,626.59
4 Lunch 17 266,154.00 1,482,477.78
5 Data Cost 18 1,095.08 6,099.60 15 Low Cost Meterial Amortize 16 456,376.30 2,542,015.99
6 Cost of Cool and Warm 19 - - 16 Immeteriality Asset Amortize 17 186,899.06 1,041,027.76
7 Mail and Telecommunication Cost 20 11,791.66 65,679.55 17 18 3,933.33 21,908.65
8 Training Cost 21 - - 18 Bad Bebts Expense 19 798,969.25 4,450,258.72
9 Others 22 11,716.00 65,258.12 19 Researching Cost 20 404,271.11 2,251,790.08
23 - -
20 Technique Transfer Cost 21 - -
24 - -
21 Operation Cost 22 109,066.00 607,497.62
Manufacture Cost in Total 100 4,868,586.51 27,118,026.86 22 Labour Union Cost 23 130,225.20 725,354.36
23 Education Cost 24 104,035.99 579,480.46
24 Job Insurance Cost 25 57,704.01 321,411.34
Business Cost in Detail 25 Work Insurance Cost 26 840,540.30 4,681,809.47
Total Number Total Number 26 Tax 27 167,926.67 935,351.55
of Year of Year
House Tax 28 154,827.84 862,391.07
RMB RS Transport Tax 29 - -
1 Pay 1 462,702.81 2,577,254.65 Land Using Tax 30 - -
2 Welfarism 2 64,778.38 360,815.58 Stamp Tax 31 12,514.75 69,707.16
3 Operation Cost 3 50,733.90 282,587.82 Cost Adjusting - -
4 Packaging Cost 5 - -
5 Transport Cost 6 7,211.20 40,166.38 Impost 584.08 3,253.33
6 Load & Unload Cost 7 - - 32 - -
7 Insurance Cost 8 194,584.80 1,083,837.34 28 Others 33 4,248,252.58 23,662,766.87
8 Exhibit Cost 9 265,100.19 1,476,608.06 1 Traffic Allowance 34 323,500.00 1,801,895.00
9 Ad Cost 10 20,501.00 114,190.57 2 Guard Cost 35 271,806.41 1,513,961.70
10 Evection Cost 11 318,564.79 1,774,405.88
3 Water & Electrcity Cost 36 167,847.41 934,910.07
11 Hire Cost 12 - -
13 2,264,247.39 12,611,857.96 4 Road Maintaining Cost 37 64,025.00 356,619.25
1 14 1,720,207.80 9,581,557.45 5 Bridge Crossing Cost 38 23,804.00 132,588.28
2 Low Cost Meterial 15 5,560.41 30,971.48 6 Publication Cost 39 58,536.44 326,047.97
3 Meterial Cost 16 2,379.33 13,252.87 7 House Accumulation Fund 40 364,243.00 2,028,833.51
4 Repairing Cost 17 2,914.00 16,230.98 8 Post Cost 41 309,862.90 1,725,936.35
5 Custom Cost 18 - -
9 Lunch 42 177,714.00 989,866.98
6 Counterclaim Cost 19 - -
7 Market Research Cost 20 203,769.52 1,134,996.23 10 Bus Cost 43 203,750.00 1,134,887.50
8 Law & Consultation Cost 21 - - 11 Work Protection Cost 44 57,311.16 319,223.16
9 Traffic Cost 22 1,904.00 10,605.28 12 Employ Cost 45 8,375.00 46,648.75
10 Road Maintaining Cost 23 - - 13 Training Cost 47 - -
11 Official Cost 24 9,746.45 54,287.73 14 Traffic Cost 90 3,440.50 19,163.59
12 Work Protection Cost 25 272.22 1,516.27
13 Data Cost 26 8,545.10 47,596.21 15 Others 91 2,214,036.76 12,332,184.75
14 Lunch 27 22,260.00 123,988.20
15 Depreciation Cost 28 2,401.20 13,374.68 Management Cost in Total 100 18,076,149.45 100,684,152.44
16 Storage Cost 29 - -
17 Others 90 226,487.36 1,261,534.60
57,800.00 321,946.00
Business Cost in Total: 100 3,648,424.46 20,321,724.24

611
MAHINDRA (CHINA) TRACTOR CO., LIMITED
NOTES ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006
1. Statement of Compliance:
The financial statements of the Company have been prepared in accordance
with the International Financial Reporting Standards (“IFRS”) promulgated by
the International Accounting Standards Board (“IASB”). IFRS includes
International Accounting Standards (“IAS”) and related interpretations.
The Company maintains its accounting records and prepares its statutory
financial statements in accordance with PRC Accounting Standards for Enterprises
and the Accounting System for Enterprises (“Statutory Financial Statements”).
The accounting policies and basis adopted to the preparation of the Statutory
Financial Statements differ in certain respects from IFRS. The differences
arising from the restatement of the results of operations and the net assets for
compliance with IFRS are adjusted in financial statements but will not be taken
up in the accounting records of the Company.
2. Basis of Preparation:
The financial statements (Chinese edition) have been prepared in Renminbi
(“RMB”), the currency in which the majority of the Company’s transactions are
denominated.
According to the requirement of the Company, the financial statements (English
edition) have been prepared in both Renminbi and Indian Rupees at the rate as
1CNY = Rs. 5.57.
Except for certain financial instruments which are stated at their fair value, the
financial statements have been prepared on the historical cost basis.
3. Principal Accounting Policies:
(A) Property, Plant and Equipment:
(a) Owned Assets:
i) Measure:
Property, plant and equipment are stated at cost loss accumulated
depreciation and impairment losses. Subsequent expenditure is
recognised in the income statement as an expense as incurred.
ii) Depreciation:
Depreciation is charged to the income statement on a straight-line
basis cover the estimated useful lives of items of property, plant and
equipment. The estimated useful lives are as follows:
Description of Assets Year rate of Depreciation
Buildings 20 years 4.8%
Plant and Machinery 5-10 years 9.6% - 19.2%
Vehicles 6 years 16%
(B) Land use rights
Land use rights are measured as the prepaid lease payments. The prepaid
lease payments are amortised on a straight-line basis over the leased
periods of 50 years.
(C) Intangible assets
Acquired intangible assets are stated in the balance sheet at cost less
accumulated amortization and impairment losses. Amortization is charged
to the income statement on a straight-line basis over estimated useful life
of the intangible asset. The estimated useful lives are as follows:
Description of Assets Year rate of amortization
Trademark use rights 10 10%
Software 5 20%
Subsequent expenditure on an intangible asset after its purchase or its
completion is recognized as an expense.
(D) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost
comprises direct materials and where applicable, direct labour costs and
those overheads that have been incurred in bringing the inventories to their
present location and condition. Net realizable valuerepresents the estimated
selling price less all estimated costs to be incurred in marketing, selling and
distribution.
The raw material is measured as actual cost when it is purchased, it is
measured as standard cost when it is delivered. At the end of the month, the
material cost variance is calculated to amortisation. The finished product is
measured as actual cot when it is finished, it is measured as standard cost
612
when it delivered. At the end of the month, the finished product cost variance
is calculated to amortisation. Low-value consumables are charged to cost
expense on one-time base.
The carrying amounts of the inventories are reviewed periodically in order to
assess whether the recoverable amounts have declined below the carrying
amounts. These assets are tested for impairment whenever events or
changes in circumstances indicate that their recorded carrying amounts may
not be recoverable. When such a decline has occurred, the carrying amount
is reduced to the recoverable amount. The impairment is recognised as loss
immediately.
(E) Revenue:
Revenue from the sale of goods is recognised in the income statement
when the significant risks and rewards of ownership have been transferred
to the buyer.
(F) Expenses:
(a) Net Financing Costs:
Interest income is recognised in the income statement as it accrues,
taking into account the effective yield on the assets.
Interest expenses are recognised in the income statement using the
effective interest rate method.
(b) Borrowing Costs:
Borrowing costs are expensed in the income statement in the period in
which they are incurred, except to the extent that they are capitalised as
being directly attributable to the acquisition, construction or production
of an asset which necessarily takes a substantial period of time to get
ready for its intended use or sale.
The capitalisation of borrowing costs as part of the cost of a qualifying
asset commences when expenditures for the asset are being incurred,
borrowing costs are being incurred and activities that are necessary to
prepare the asset for its intended use or sale are in progress. Capitalisation
of borrowing costs is suspended or ceases when substantially all the
activities to prepare the qualifying asset for its intended use or sale are
interrupted or complete.
(G) Foreign Currency Transaction:
Transactions in foreign currencies are translated to RMB at the foreign
exchange rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are re-translated to RMB at the
rate on the balance sheet date. Profits and losses arising on exchange are
included in net profit or loss for the year.
(H) Retirement Benefit Costs:
The employees of the Company are members of a state-managed retirement
benefit schemes operated by the pre-government. The scheme undertakes
to assume the retirement benefit obligations of all existing and future
retirement employees of the Company. Contributions to these schemes are
charged to the income statement as incurred.
(I) Income Tax:
Income tax on the profit or loss for the year comprises current and deferred
tax. Income tax is recognised in the income statement except to the extent
that it relates to items recognised directly to equity, in which case it is
recognised in equity. The Company is a newly-established joint venture,
enjoying the preferential tax policy that the Income tax is free in the first and
the second year, is Rebated 50% from the third year to the fifth year of
taxable profit.
Current tax is the expected tax payable on the taxable income for the year
using tax rates enacted or substantially enacted at the balance sheet date,
and any adjustment of tax payable in respect of previous year.
Deferred tax is provided using the balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation
purposes. Initial recognition of assets or liabilities that affect neither accounting
nor taxable profit is regarded as temporary difference which is not provided
for. The amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantially enacted at the balance sheet date.
 MAHINDRA (CHINA) TRACTOR CO., LIMITED

A deferred tax asset is recognised only to the extent that it is probable that 5. Related Party Transactions:
future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable No. Nature of Amount Amount Name of
that the related tax benefit will be realised. Transactions (RMB) (Rs.) Company

Out of the two methods stipulated by the act, the Company follows tax 1 Finance:
payable method, i.e., based on actual payment of tax. Loan Corpus 5,214,950.00 29,047,271.50 MOICL

4. Capital Commitments: Unmatured Finance Charges 121,735.98 678,069.40 MOICL

The estimated amount of contracts remaining to be executed on capital account 2. Share Capital 59,678,512.00 332,409,311.84 MOICL
is RMB 1,028,147.18, Rs. 5,726,779.79 as on 31-03-2006. 3. Outstanding:
Other Receivable 386,560.01 2,153,139.26 M&M

613
MAHINDRA-BT INVESTMENT COMPANY (MAURITIUS) LIMITED

MAHINDRA BT INVESTMENT COMPANY

(MAURITIUS) LIMITED
Corporate Data
Appointed on
Directors Couldip Basanta Lala 9 May 2005
Abdool Fareed Soreefan 9 May 2005
Ulhas Narayan Yargop 9 May 2005
Zhooben Bhiwandiwala 21 June 2005
Frederick Becker 21 June 2005
Rupert Orchard 21 June 2005
Administrator International Financial
and Secretary Services Limited
IFS Court
Twenty Eight
Cybercity
Ebene
Republic of Mauritius
Registered Office IFS Court
(With effect from TwentyEight
05 December 2005) Cybercity
Ebene
Republic of Mauritius
(Upto 05 December 2005) 3rd Floor, Les Cascades
Edith Cavell Street
Port Louis
Republic of Mauritius
Auditors Grant Thornton
2nd Floor, Fairfax House
21, Mgr Gonin Street
Port Louis
Republic of Mauritius
Banker Standard Chartered Bank (Mauritius) Ltd.
Level & Happy World House
37, Sir William Newton Street
Port Louis
Republic of Mauritiuss

614

COMMENTARY OF THE DIRECTORS
FOR THE PERIOD ENDED 31 MARCH, 2006.
RESULTS
The results for the period are shown in the Income Statement and
related notes.
DIRECTORS
The present membership of the Board is set out on page 614.
DIRECTORS’ RESPONSIBILITIES
Company law requires the directors to prepare financial statements
for each financial year which present fairly the financial position,
financial performance and the cash flows of the Company. The
directors are also responsible for keeping accounting records
which:
• correctly record and explain the transactions of the Company;
• disclose with reasonable accuracy at any time the financial
position of the Company; and
• would enable them to ensure that the financial statements
comply with the Mauritius Companies Act 2001.
The directors confirm that they have complied with the above
requirements in preparing the financial statements.
AUDITORS
The auditors, Grant Thornton, have indicated their willingness to
continue in office.
CERTIFICATE FROM THE SECRETARY UNDER SECTION
166(d) OF THE MAURITIUS COMPANIES ACT 2001
We certify, to the best of our knowledge and belief, that we have
filed with the Registrar of Companies all such return as are
required of Mahindra-BT Investment Company (Mauritius)
Limited under the Mauritius Companies Act 2001, during the
financial period ended 31 March 2006.
For International Financial Services Limited
Secretary
Registered Office:
IFS Court
Twenty Eight
Cybercity
Ebene
Republic of Mauritius
Date: 5 May 2006
MAHINDRA-BT INVESTMENT COMPANY (MAURITIUS) LIMITED
AUDITORS’ REPORT
TO THE MEMBERS OF MAHINDRA-BT INVESTMENT
COMPANY (MAURITIUS) LIMITED
We have audited the financial statements of Mahindra-BT
Investment Company (Mauritius) Limited, “the Company”, on
pages 617 to 621, which have been prepared in accordance with
the accounting policies set out on pages 620.
This report is made solely to the Company’s shareholders, as a
body, in accordance with Section 205 of the Mauritius Companies
Act 2001. Our audit work has been undertaken so that we might
state to the Company’s shareholders those matters we are
required to state to them in an auditors’ report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company and
the Company’s shareholders as a body, for our audit work, for this
report, or for the opinion we have formed.
Directors’ Responsibilities:
The directors are responsible for the preparation of the financial
statements which are in accordance with and comply with the
Mauritius Companies Act 2001, and International Financial
Reporting Standards, and which present fairly the financial position
of the Company at 31 March 2006 and of its financial performance,
changes in equity and cash flows for the period then ended. They
are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Auditors’ Responsibilities:
It is our responsibility to form an independent opinion, based on
our audit, on those financial statements and to report our opinion
to you.
Basis of Opinion:
We conducted our audit in accordance with International Standards
on Auditing. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation
of the financial statements, and of whether the accounting
policies are appropriate to the Company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance as to whether the financial statements are free from
material misstatement. In forming our opinion, we also evaluated
the overall adequacy of the presentation of information in the
financial statements. We believe that our audit provides a
reasonable basis for our opinion.
We have no relationship with, or any interests in, the Company
other than in our capacity as auditors.
615
MAHINDRA-BT INVESTMENT COMPANY (MAURITIUS) LIMITED

Opinion: (iii) present fairly the financial position of the Company at

31st March 2006, and of its financial performance,
We have obtained all the information and explanations that we
changes in equity and cash flows for the period then
have required.
ended.
In our opinion:
(a) proper accounting records have been kept by the Company Grant Thornton
as far as appears from our examination of those records; and Chartered Accountants
(b) the financial statements on pages 617 to 621:
(i) have been prepared in accordance with and comply Y NUBEE, FCCA
with the Mauritius Companies Act 2001, and Signing Partner
International Financial Reporting Standards;
(ii) give a true and fair view of the matters to which they Date: 05 May 2006
relate; and Port Louis, Mauritius

616
 MAHINDRA-BT INVESTMENT COMPANY (MAURITIUS) LIMITED

BALANCE SHEET AT 31 MARCH, 2006

Notes 2006 2006

USD INR
(Note 1)

ASSETS:
Non-Current Assets:
Investment ............................................................................................. 5 2,290,339 102,286,540
Current Assets:
Prepayments .......................................................................................... 250 11,165
Cash at Bank .......................................................................................... 133,700 5,971,042
133,950 5,982,207
Total Assets .......................................................................................... 2,424,289 108,268,747
EQUITY AND LIABILITIES:
Capital and Reserves:
Stated Capital ......................................................................................... 6 2,400,000 107,184,000
Revenue Reserves ................................................................................. 17,162 766,455
2,417,162 107,950,455
Current Liabilities:
Payables and Accruals ........................................................................... 7,127 318,292
Total Equity and Liabilities ................................................................. 2,424,289 108,268,747

Approved by the Board on 5 May 2006 and signed on its behalf by:

Director Director

The Notes on pages 620 to 621 form an integral part of these financial statements.

617
MAHINDRA-BT INVESTMENT COMPANY (MAURITIUS) LIMITED

INCOME STATEMENT
For the period from 9 May 2005 (Date of Incorporation) to 31 March 2006

Notes 2006 2006

USD INR
(Note 1)

INCOME:
Bank Interest Income ............................................................................. 190 8,485
Dividend Income .................................................................................... 5 29,932 1,336,763
Option .................................................................................................... 3 1,000 44,600
31,122 1,389,908
EXPENSES:
Administration and Disbursement Costs ............................................... 5,287 236,117
Audit Fees .............................................................................................. 1,840 82,174
Directors’ Fees ....................................................................................... 1,250 55,825
Licence Fees .......................................................................................... 1,500 66,990
Secretarial Fees ..................................................................................... 1,250 55,825
Set up Costs .......................................................................................... 2,600 116,116
Bank Charges ......................................................................................... 233 10,406
13,960 623,453
OPERATING PROFIT ............................................................................ 17,162 766,455
Taxation .................................................................................................. 4 — —
PROFIT FOR THE PERIOD .................................................................... 17,162 766,455

The Notes on pages 620 to 621 form an integral part of these financial statements

618
 MAHINDRA-BT INVESTMENT COMPANY (MAURITIUS) LIMITED

STATEMENT OF CHANGES IN EQUITY

For the period from 9 May 2005 (Date of Incorporation) to 31 March 2006

Stated Revenue
Capital Reserves Total
USD USD USD

Issue of Shares ...................................................................................... 2,400,000 — 2,400,000

Profit for the period ................................................................................ — 17,162 17,162
At 31 March 2006 ................................................................................ 2,400,000 17,162 2,417,162

Stated Revenue
Capital Reserves Total
INR INR INR
(Note 1) (Note 1) (Note 1)

Issue of Shares ...................................................................................... 107,184,000 — 107,184,000

Profit for the period ................................................................................ — 766,455 766,455
At 31 March 2006 ................................................................................. 107,184,000 766,455 107,950,455
The Notes on pages 620 to 621 form an integral part of these financial statements.

CASH FLOW STATEMENT

For the period from 9 May 2005 (Date of Incorporation) to 31 March 2006
2006 2006
USD INR
(Note 1)
Cash Flows from Operating Activities:
Operating Profit for the period ............................................................... 17,162 766,455
Adjustments for:
Interest Income ...................................................................................... (190) (8,485)
16,972 757,970
Increase in Prepayments ....................................................................... (250) (11,165)
Increase in Payables and Accruals ......................................................... 7,127 318,292
Cash Flows from Operations .............................................................. 23,849 1,065,097
Interest Received ................................................................................... 190 8,485
Net Cash Flows from Operating Activities ........................................ 24,039 1,073,582
Cash Flows from Investing Activities:
Purchase of Investment ......................................................................... (2,290,339) (102,286,540)
Net Cash Flows Used in Investing Activities .................................... (2,290,339) (102,286,540)
Cash Flow from Financing Activities:
Issue of Shares ...................................................................................... 2,400,000 107,184,000
Net Cash from Financing Activities .................................................... 2,400,000 107,184,000
Net Increase in Cash and Cash Equivalents and at 31 March 2006 . 133,700 5,971,042
Cash and Cash Equivalents made-up of:
Cash at Bank .......................................................................................... 133,700 5,971,042

The Notes on pages 620 to 621 form an integral part of these financial statements.
619
MAHINDRA-BT INVESTMENT COMPANY (MAURITIUS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the period ended 31 March 2006
1. GENERAL
Mahindra-BT Investment Company (Mauritius) Limited, “the Company”, was
incorporated in the Republic of Mauritius under the Mauritius Companies Act
2001 on 9 May 2005 as a private company limited by shares and holds a Category
I Global Business Licence issued by the Financial Services Commission. The
Company’s registered office is IFS Court, TwentyEight, Cybercity, Ebene,
Republic of Mauritius.
The principal activity of the Company is to hold an investment in Tech Mahindra
Limited, an unquoted company incorporation in India.
The financial statements of the Company are expressed in United States Dollars
(“USD”). The Company’s business or other activity is carried out in a currency
other than the Mauritian Rupees, which is a requirement of the Financial
Services Development Act 2001. The Company’s functional currency is the
USD, the currency of the primary economic environment in which it operates.
INR amounts are included solely for convenience. These transactions should not
be construed as representations that the USD amounts actually represent, or
have been or could be converted into INR. As the amounts shown in INR are for
convenience only, that rate of 1 USD = INR 44.66 has been used for the purpose
of presentation of the INR amounts in the accompanying financial statements.
The exchange rate used at 31 March 2006 is the average of telegraphic transfer
buying and selling rates quoted by the Mumbai Branch of State Bank of India on
31 March 2006.
2. ACCOUNTING POLICIES
The financial statements are prepared in accordance with and comply with
International Financial Reporting Standards.
The principal accounting policies adopted in the preparation of these financial
statements are set out below. The preparation of financial statements in
accordance with International Financial Reporting Standards requires
Management to make certain assumptions and estimates that affect the
reported amounts of assets and liabilities, revenues and expenses and contingent
liabilities. Actual amounts could in certain cases differ from those assumptions
and estimates. Changes are taken into account with income statement effect
if new information comes to light.
(a) Basis of Accounting
The financial statements are prepared under the historical cost convention.
(b) Investment
The Company has classified its investment as available-for-sale.
Available-for-sale investments are valued at fair value and the resulting
temporary unrealised gains/(losses) (including unrealised foreign exchange
gains/(losses) on re-translation at the closing rate, if any) are reported as a
separate component of equity as “Investment Revaluation Reserve”, till the
underlying investment is sold or permanently written off, when the total
realised gains/(losses) are included in the Income Statement.
The carrying values of unquoted securities are determined using the present
value or other estimation and valuation techniques such as the net asset
value method and discounted cash flow analysis.
Available-for-sale investments whose fair values cannot be measured
3.
reliably are carried at cost, less impairment.
The valuation of investments may not necessarily represent the amounts
that may eventually be realised from sales or other dispositions.
(c) Cash and Cash Equivalents
Cash comprises cash at bank. Cash equivalents are short term, highly liquid
investments that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of change in value.
(d) Equity
Stated capital is determined using the nominal values of shares that have
been issued.
Revenue reserves include all current and prior results as disclosed in the
income statement.
4.
(e) Financial Instruments
Financial instruments carried on the Balance Sheet include investment, cash
and cash equivalents and payables and accruals. The particular recognition
620
methods adopted are disclosed in the individual policy statements associated
with each item.
Disclosures about financial instruments to which the Company is a party are
provided in Note 7.
(f) Deferred Taxation
Deferred Tax is provided, using the liability method, for all temporary
differences arising between the tax bases of assets and liabilities and their
carrying values for financial reporting purposes. Currently enacted tax rates
are used to determine deferred tax.
Deferred tax assets are recognised to the extent that it is probable that future
taxable profits will be available against which the temporary differences can
be utilised.
(g) Related Parties
Parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making
financial and operating policy decisions.
(h) Foreign Currencies
Foreign currency transactions are accounted for at the exchange rates
prevailing at the date of the transactions. Gains and losses resulting from the
settlement of such transactions and from the translation of monetary assets
and liabilities denominated in foreign currencies are recognised in the
income statement. Such balances are translated at year-end exchange rates
unless hedged by forward foreign exchange contracts, in which case the
rates specified in such forward contracts are used.
(i) Revenue Recognition
Interest income is recognised on the accrual basis unless collectibility is in
doubt. Dividend income is recognised when the Company’s right to receive
such dividend is established.
(j) Expense Recognition
All expenses are accounted for in the income statement on the accrual basis.
(k) Provisions
Provisions are recognised when the Company have a present legal or
constructive obligation as a result of past events, it is probable that an
outflow of resource embodying economic benefits will be required to settle
the obligation, and a reliable estimate of the amount of the obligation can be
made. At the time of the effective payment, the provision is deducted from
the corresponding expenses. All known risks at balance sheet date are
reviewed in detail and provision is made where necessary.
(l) Impairment of Assets
At each balance sheet date the Company reviews the carrying amounts of
its assets to determine whether there is any indication that those assets
have suffered any impairment loss. When an indication of impairment loss
exists, the carrying amount of the asset is assessed and written down to its
recoverable amount.
(m)Set-up Costs
Set-up costs are written off to the income statement in the period in which
they arise.
OPTION
The Company has entered into an option agreement with Mahindra & Mahindra
Limited (“MM”), British Telecommunications Plc (“BT”), SBC International Inc.
(“SBC”) and Tech Mahindra Limited (“TM”) whereby the Company has granted
to SBC an option to acquire its investment of 9,931,638 shares held in Tech
Mahindra Limited (See Note 5). SBC would be entitled to exercise the option on
terms and subject to the conditions of the option agreement. The Company has
granted the option to SBC in consideration of a non-refundable option commitment
fee of USD 1,000.
The option has to be exercised at latest on 30 April 2010, and the exercise of the
option is based on the cumulative revenue as stipulated in Professional Services
Agreement entered into between the Company and SBC. The shares would be
purchased at a fixed price of USD 3.5022 per share.
TAXATION
(a) Income Tax
The Company is a tax incentive company in Mauritius and under current laws
and regulations liable to pay income tax on its net income at a rate of 15%.
 MAHINDRA-BT INVESTMENT COMPANY (MAURITIUS) LIMITED

The Company is, however, entitled to a tax credit equivalent to the higher of Company’s assets which are denominated in INR.
actual foreign tax suffered and 80% of Mauritius tax payable in respect of its
foreign source income, thus reducing its maximum effective tax rate to 3%. (ii) Concentration risk
Capital gains from sales of units and securities are exempt from income tax At 31 March 2006, a significant portion of the Company’s total assets
in Mauritius. consisted of an investment in a company incorporated in India, which
At 31 March 2006, the Company had no income tax liability. involves certain considerations and risks not typically associated with an
investment in other more developed countries.
(b) Deferred Taxation
Deferred income tax is calculated on all temporary differences under the Further economic and political development in India could adversely
liability method at the rate of 3%. At 31 March 2006, the Company had no affect the value of the securities in which the Company has invested.
temporary differences and therefore no provision for deferred taxation is (iii) Liquidity risk
necessary.
Liquidity risk is managed by maintaining sufficient cash at the bank.
5. INVESTMENT
(iv) Interest rate risk
2006 2006
At 31 March 2006, the Company does not have any interest bearing
USD INR borrowings and is therefore not exposed to interest rate risk.
(Note 1)
(c) Currency Profile
(i) Unquoted investment at cost:
The currency profile of the Company’s financial assets and liabilities is as
Additions during the period and
follows:
at 31 March 2006 2,290,339 102,286,540
Financial Financial Financial Financial
Assets Liabilities Assets Liabilities
2006 2006 2006 2006
(ii) Details pertaining to the investment are as follows:
USD USD INR INR
Name of Investee Country of % Cost (Note 1) (Note 1)
Company Incorporation Holding 2006
Indian Rupee (INR) 2,290,339 — 102,286,540 —
USD
United States Dollars
Tech Mahindra Limited India 8.83% 2,290,339 (USD) 133,700 7,127 5,971,042 318,292
(iii) The directors consider the cost of the investment not to be in excess of its 2,424,039 7,127 108,257,582 318,292
fair value in view of the present and future potential of the investee company.
(iv) The Company received dividend income of INR 1,340,771, equivalent to 8. RELATED PARTY TRANSACTIONS
USD 29,932 from Tech Mahindra Limited during the period under review.
During the period ended 31 March 2006, the Company had transactions with
related parties. The nature, volume of transactions and balances with the related
6. STATED CAPITAL
parties are as follows:
2006 2006
Nature of Nature of Volume of Credit Balance at
USD INR
relationship Transactions Transactions 31 March 2006
(Note 1)
USD INR USD INR
Issued and Paid: (Note 1) (Note 1)
2,400,000 Ordinary shares Administrator Administra-
of USD 1 each 2,400,000 107,184,000 tion Fees 5,287 236,117 5,287 236,117

7. FINANCIAL INSTRUMENTS
(a) Values of Financial Instruments
The Company’s investment is valued as described in Note 2.
The Company’s other financial assets and liabilities include cash and cash
equivalents, payables and accruals whose carrying amounts approximate
their fair values.
(b) Financial risks
The Company’s investment activities expose it to the various types of risks
which are associated with the financial instruments and markets in which it
invests. The following is a summary of the main risks:
(i) Currency risk
Two directors of the Company, Messrs Couldip Basanta Lala and Abdool
Fareed Soreefan are also directors/officers of the International Financial
Services Limited (the “Administrator”) and hence deemed to have beneficial
interests in the Administration Agreement between the Company and the
Administrator.
The related party transactions were carried out at arm’s length and on commercial
terms.
9. CONTINGENT LIABILITIES
The Company has no material litigation claims outstanding, pending or threatened
against it, which could have a material adverse effect on the Company’s financial
position or results.

The Company invests in shares denominated in Indian Rupees (INR).
Consequently, the Company is exposed to the risk that the exchange
rate of the United States Dollars (USD) relative to the INR may change
in a manner which has a material effect on the reported values of the
10. HOLDING COMPANIES
The directors regard Mahindra Overseas Investment (Mauritius) Ltd., incorporated
in the Republic of Mauritius, as the Company’s immediate holding company and
Mahindra & Mahindra Limited, incorporated in India, as the Company’s ultimate
holding company.

621
MAHINDRA EUROPE S.R.L.

Report of the Directors
to the quota holders of Mahindra Europe Srl.
Dear Shareholders,
At the shareholders' meeting held on 31 May 2005, it was decided
to change the financial year of Mahindra Europe Srl from 1st
April to 31st March. Hence, these annual accounts are only for a
period of three months, from 1 January, 2006 to 31 March, 2006.
These annual accounts, show a loss of Euro 108,012.00
(Rs. 5,867,212).
Main business and operations:
transferred its legal and operations headquarters to a new location
which is more suitable and equipped to handle the increased
scale of operations in the coming years. During this period, an
agreement was reached with Export-Import Bank of India for
granting to the Company of a buyers credit line of US$ 3.5 million
at competitive rates to finance future activities.
Future Prospects:
Your Company has evolved plans to achieve the growth targets
for the financial year 2006-2007. We would consolidate our
position in Italy and France and commence operations in Spain
and certain other East European countries.

Your Company has continued and intensified the business of Directors:

distributing Mahindra motor vehicles in France & Italy. It has
also launched the Mahindra range of vehicles in Spain during The Directors of the Company during the year and to the date of
May, 2006. All the necessary activities including Market this report are as follows:
Research, vehicle validation and homologation have successfully
been completed. Name of Director Nationality
Pawan Goenka (Chairman) U.S.
Since becoming the subsidiary of Mahindra Overseas Investment
Pravin Shah Indian
Company (Mauritius) Ltd. on 31st May, 2005, focus is on
revitalising the distribution channels in Italy and France and Zhooben Bhiwandiwala Indian
developing distributor and dealer network in Spain and other East Angelantonio Molfetta Italian.
European countries.
Holding Company:
The delivery of Mahindra Goa range of new products was
postponed to the beginning of the business year 2006-07 and The Company's holding company is Mahindra Overseas
have commenced effective April, 06. Investment Company (Mauritius) Ltd., a company incorporated
under the laws of Republic of Mauritius.
Important events occurring during the business year
For and on behalf of the Board
During the short 2006 business year, which lasted for only three
months, to adapt to the new fiscal year, as envisaged by the
new by-laws, approved at the special shareholders' meeting of
31/5/2005, we continued to invest in building the Organisation Pawan Goenka
structure and distribution network keeping in mind the long term President
objectives. During this short business year the Company Madrid, 23rd May, 2006

622

Report of Auditors' to the Shareholders
We have audited the attached Financial statements of Mahindra
Europe Srl, comprising the Balance Sheet as at 31st March, 2006,
the Profit and Loss Account for the year ended 31st March, 2006
and the Notes to the Accounts. In our opinion these accounts
give a true and correct representation of the net assets and
financial sitution and of the operating result for this financial year,
and it corresponds to the accounting results.
Compiling Criteria
This balance sheet has been drawn up in abbreviated form, as the
requirements of Article 2435, paragraph 1, of the Italian Civil Code
are met; no Management Report has therefore been drawn up.
Nevertheless, balance sheet figures have been supplemented where
necessary with notes and tables in order to improve information to
shareholders and third parties. To complete this required information,
it is hereby specified that, pursuant to Article 2428, points 3) and 4),
of the Italian Civil Code, no own shares nor shares or stakes in
parent companies exist that are owned by the company, including
through a trust company or through a third party; also, neither own
shares nor shares or stakes in parent companies have been
purchased and/or alienated by the company during the financial year,
including through trust companies or third parties.
Evaluation criteria
The criteria adopted in drawing up the balance sheet at 31/03/
2006 do not depart from those used for the previous financial
year, especially as regards evaluation and consistency of
principles, except for the variations resulting from the
enforcements of the new principles introduced by the decree
law n. 6/2003 that includes the reform of Company laws.
Balance sheet items have been evaluated according to general
criteria of conservatism and accrual basis accounting, and under
the going concern assumption.
For the purposes of applying the conservatism principle, elements
making up each entry or item in the assets and liabilities statement
have been evaluated individually, to avoid compensation between
losses that should be recognised and profits that should not be
recognised as they have not been realised.
Under the accrual basis principle, the effect of operations and of
other events has been reported in the accounts and attributed to
the relevant financial year, rather than to the financial year in which
cash movements (receipts and payments) actually took place.
The continuous application of evaluation criteria over time is
necessary to ensure that the company’s balance sheets can be
compared over different financial years.
In particular, the following evaluation criteria were adopted in
drawing up the balance sheet.
Fixed assets
Intangible Fixed Assets
These are entered at the historical acquisition cost and reported
in such a way as to highlight the amount of funds.
Start-up and expansion costs, research, development and advertising
costs applicable to multiple years have been posted on the assets
MAHINDRA EUROPE S.R.L.
side and are amortised over 5 financial years; type-approval costs
for “Euro 3” vehicles are amortised over 3 financial years.
Tangible Fixed Assets
These are entered at the cost of acquisition and adjusted by the
corresponding amortisation funds.
Depreciation expenses, which are posted in the profits and
losses account, have been calculated bearing in mind the
utilisation, intended use and economical and technical duration
of assets.
Accounts Receivable
These are reported at their expected realisation value. It was not
necessary to establish an adjustments fund as credits are fixed
and due.
Accounts Payable
These are reported at their nominal value, which is modified in
the event of returns or invoicing adjustments.
Accruals and Deferrals
These have been computed according to the criteria of actual
accrual during the financial year.
Unsold stock
Raw materials, auxiliary materials and finished products are
entered at whichever is lower between the acquisition or
manufacturing cost and the realisation cost based on market
trends, by applying average costs for spare parts and accessories
and specific costs for motor vehicles.
Retirement allowance fund
These are payables towards employees actually accrued pursuant
to legislation and labour contracts in force, taking into account
all forms of ongoing remuneration.
Income Tax
Taxes are not appropriated because after the extra-accounts
calculation didn’t emerge any taxable income.
Recognised Receipts
Product sales receipts are recognised at the time of transferral
of ownership; this is normally at delivery or dispatch of goods.
Financial receipts and receipts from provision of services are
recognised on an accrual basis.
We have been requested to verify the arthmetical accuracy of
the translation of the audited statutory financial statements of
Mahindra Europe Srl presented in Euros into Indian Rupees. Euros
are translated for convenience into Indian Rupees at the exchange
rate of Rs. 54.32 = Euro 1 which is the average of the telegraphic
transfer buying and selling rates quoted by the Mumbai Branch
of State Bank of India on 31st March 2006.
For R. B. Audit Italia
Roberto Mallardo
Ariccia, Italy 24th May, 2006 Partner
623
MAHINDRA EUROPE S.R.L.

Balance Sheet as on 31-03-2006

3 months 3 months 12 months 12 months

ending 31/03/06 ending 31/03/06 ending 31/12/05 ending 31/12/05
Euros Rs Euros Rs

Assets
Fixed Assets .................................................................
Intangible ...................................................................... 173,440 9,421,261 161,248 8,758,991
Tangible ......................................................................... 57,588 3,128,180 44,456 2,414,850
Total Fixed assets ........................................................ 231,028 12,549,441 205,704 11,173,841
Current Assets
Stock ............................................................................. 1,540,265 83,667,195 1,526,399 82,913,994
Accounts Receivable ..................................................... 682,876 37,093,824 487,790 26,496,753
Caution Deposit ............................................................ 20,467 1,111,767 20,375 1,106,770
Liquid Balance ............................................................... 33,334 1,810,703 440,639 23,935,510
Total current assets ...................................................... 2,276,942 123,683,489 2,475,203 134,453,027
Total assets .................................................................. 2,507,970 136,232,930 2,680,907 145,626,868
Liabilities
Capital & Reserves ........................................................
Capital ........................................................................... 100,000 5,432,000 100,000 5,432,000
Share application ........................................................... 900,071 48,891,857 900,072 48,891,911
Operating loss ............................................................... (121,585) (6,604,497) (13,573) (737,285)
Total net worth ............................................................ 878,486 47,719,360 986,499 53,586,626
Current liabilities ...........................................................
Trade & others payable ................................................. 1,622,907 88,156,308 1,690,008 91,801,235
Other provisions ............................................................ 6,577 357,263 4,400 239,008
Total current liabilities ................................................ 1,629,484 88,513,571 1,694,408 92,040,243
Total Liabilities ............................................................ 2,507,970 136,232,930 2,680,907 145,626,868

624
 MAHINDRA EUROPE S.R.L.

Trading & P & L a/c

3 months 3 months 12 months 12 months

ending 31/03/06 ending 31/03/06 ending 31/12/05 ending 31/12/05
Euros Rs Euros Rs

A) Value of Production ................................................

Revenue from sales & service ............................... 697,190 37,871,361 4,941,512 268,422,932
Other receipts/ revenue .........................................
Sundry income ...................................................... 32,748 1,778,871 147,018 7,986,018

Total value of production .................................. 729,938 39,650,232 5,088,530 276,408,950

B) Cost of production ..................................................
Prime & auxilliary material consumed .................... 582,291 31,630,047 5,418,334 294,323,903
services .................................................................. 192,932 10,480,066 877,486 47,665,040
For external parties ................................................ 11,303 613,979 31,681 1,720,912
Personnel cost .......................................................
Salaries ................................................................... 33,559 1,822,925 71,880 3,904,522
Company contribution to welfare funds(payroll taxes) 8,767 476,223 21,907 1,189,988
Cost -final settlement ............................................. 2,177 118,255 4,294 233,250
Amortisation & Depreciation ..................................
Amortisation of intangible assets ........................... 11,686 634,784 34,008 1,847,315
Depreciation of Fixed Assets ................................. 2,563 139,222 4,540 246,613
Variation in Stock (11,366) (617,401) (1,415,324) (76,880,400)
Other Expenses 900 48,888 3,644 197,942
Total cost of production ................................... 834,812 45,346,988 5,052,450 274,449,084

Difference in value and cost of production. (A-B) (104,874) (5,696,756) 36,080 1,959,866
C) Financial -Income & expense .................................
Interest & other financial cost: ............................... 8 435 25 1,358
............................................................................... (3,147) (170,945) (34,972) (1,899,679)
Total financial income & expenses ................... (3,139) (170,510) (34,947) (1,898,321)
D) Extraordinary income & expenses. ........................
Income ................................................................... 1 54 —
Expense ................................................................. (1,737) (94,354)
Total extraordinary income & expenses. ........... 1 54 (1,737) (94,354)
Profit before tax(A-B±C±D) .................................... (108,012) (5,867,212) (604) (32,809)
22) Tax
a) Current tax .......................................................... 11,045 599,964
b) Deferred tax ....................................................... 1,924 104,512
23) Profit after tax ............................................ (108,012) (5,867,212) (13,573) (737,285)

625
MAHINDRA EUROPE S.R.L.

Assets B) Fixed Assets

A) Outstanding receivables from shareholders I. Intangible Fixed Assets
Euros
There are no entries for this item under total assets.
Balance at 31/03/2006 Balance at 31/12/2005 Changes
173.440 161.248 12.192
Rs
Balance at 31/03/2006 Balance at 31/12/2005 Changes
9.421.261 8.758.991 662.270
Total movement of Intangible Fixed Assets
Euros
Description Value Financial Year Financial Year Financial Year Value
of Costs 31/12/2005 Increases Decreases Depreciation 31/12/2005
Start-up and expansion 560 140 420
Industrial patent rights 464 29 435
Others 160.224 23.878 11.517 172.585
Rounding 161.248 23.878 11.686 173.440
Rs
Description Value Financial Year Financial Year Financial Year Value
of Costs 31/12/2005 Increases Decreases Depreciation 31/12/2005
Start-up and expansion 30,419 7,605 22,814
Industrial patent rights 25,204 1,575 23,629
Other 8,703,368 1,297,053 634,784 9,374,817
Rounding 8,758,991 1,297,053 643,964 9,421,261

The 23.878 Euro(Rs 1,297,053) increase concerns the “Thar” ,

“Bolero” and Euro 3 type-approval projects.
II. Tangible Fixed Assets
Industrial and Commercial Equipment
Euros
Balance at 31/03/2006 Balance at 31/12/2005 Changes Description Amount Amount
57.588 44.456 13.132 (euros) (Rs)
Rs Historical cost 20.028 1,087,091
Balance at 31/03/2006 Balance at 31/12/2005 Changes Depreciation from previous financial years (1.502) (81,589)
3,128,180 2,414,850 713,330 Balance at 31/12/2005 18.526 1,006,332
Acquisitions during the financial year 318 17,274
Plants and machinery Depreciation during the financial year (757) (41,120)
Description Amount Amount Balance at 31/03/2006 18.087 982,486
(euros) (Rs)
Other Goods
Historical cost 3.125 169,750
Historical cost 26.093 1,417,372
Depreciation from previous financial years (562) (30,528)
Depreciation from previous financial years (2.726) (148,076)
Balance at 31/12/2005 2.563 139,222
Balance at 31/12/2005 23.367 1,269,296
Acquisitions during the financial year 9.939 539,886
Acquisitions during the financial year 5.438 295,392
Depreciation during the financial year (328) (17,817)
Depreciation during the financial year (1.478) (80,285)
Balance at 31/03/2006 12.174 661,291
Balance at 31/03/2006 27.327 1,484,403
The increase in Plant & Machinery is due to additions of Specific
Machinery for workshop and alarm system.

626
 MAHINDRA EUROPE S.R.L.

The increase during this financial year concerns acquisitions of Euros

plants, equipment and other goods required for business. Description Amount
Vehicles 1.285.343
III. Financial Fixed Assets
Spares parts and accessories 252.422
Euros
Balance at 31/03/2006 Balance at 31/12/2005 Changes Advances to suppliers 2.500
18.646 20.040 (1.394) Total 1.540.265
Rs
Rs
Balance at 31/03/2006 Balance at 31/12/2005 Changes
1,012,851 1,088,573 (75,722) Description Amount
Vehicles 69,819,832
Receivables
Euros Spares parts and accessories 13,711,563
Description 31/12/2005 Increase Decrease 31/03/2006 Advances to suppliers 135,800
Others 20.040 1.394 18.646
Total 83,667,195
20.040 1.394 18.646
Rs II. Accounts Receivable
Description 31/12/2005 Increase Decrease 31/03/2006 Euro
Others 1,088,053 75,722 1,012,851 Balance at 31/03/2006 Balance at 31/12/2005 Changes
682.876 487.790 (195.086)
1,088,053 75,722 1,012,851
Rs
The Receivables from Others item amounting to Euros 18.646,00 Balance at 31/03/2006 Balance at 31/12/2005 Changes
is subdivided: 37,093,824 2,649,675 (10,597,072)
Caution Deposit Ariccia property Euros 16.500
The balance is thus subdivided by due dates.
Caution Deposit Lanuvio property Euros 2.100 Euros
Caution Deposit ENEL Euros 46 Description Within Over Over
12 months 12 months 5 years Total
The Receivables from Others item amounting to Rs 1,012,851 From clients 622.225 622.225
is subdivided: From parent
Caution Deposit Ariccia property Rs.896, 280 companies 21.350 21.350

Caution Deposit Lanuvio property Rs.114, 072 For tax credits 35.600 35.600
For advance taxes 838 838
Caution Deposit ENEL Rs. 2,499
Other accounts
receivable 2.863 2.863
C) Operating Assets
Rounding
I. Unsold Stocks 682.876 682.876
Euro
Balance at 31/03/2006 Balance at 31/12/2005 Changes Rs
1.540.265 1.526.399 13.866 Description Within Over Over
Rs 12 months 12 months 5 years Total
Balance at 31/03/2006 Balance at 31/12/2005 Changes From clients 33,799,262 33,799,262
83,667,195 82,913,994 753,201 From parent
companies 1,159,732 1,159,732
Evaluation criteria adopted are unchanged from the previous For tax credits 1,933,792 1,933,792
financial year and are explained in the first part of these Notes to For advance taxes 45,520 45,520
the Accounts. Other accounts
The value of unsold stocks at 31/03/2006 is composed as receivable 155,518 155,518
follows: Rounding
37,093,824 37,093,824

627
MAHINDRA EUROPE S.R.L.

Receivables from parent companies are charges for costs Other tax credits, at 31/03/2006, amounting to 35.600,00 Euro,
connected with repairs. are made up as follows:
Receivables from clients at 31/03/2006 are made up as follows: Euros
Euros Description Amount
Description Amount VAT Credit 30.683
Accounts receivable 622.225 Advance Withholding Tax paid 1.504
Invoices to be issued Others 3.413
Total 622.225 Total 35.600
Rs
Rs Description Amount
Description Amount VAT Credit 1,666,701
Accounts receivable 33,799,262 Advance Withholding Tax paid 81,697
Invoices to be issued Others 185,394
Total 33,799,262 Total 1,933,792

The reported VAT credit will be utilised during the next financial year.
The subdivision of accounts receivable at 31/03/2006 by geographic area is shown in the following table.
Euro
Receivables by From From From From Other Total
Geographic Area Clients Subsidiaries Affiliated Parent Accounts
Companies Companies Receivable
Italy 622.225 21.350 2.863 646.438
Total 622.225 21.350 2.863 646.438

Rs
Receivables by From From From From Other Total
Geographic Area Clients Subsidiaries Affiliated Parent Accounts
Companies Companies Receivable
Italy 33,799,262 1,159,732 155,518 35,114,512
Total 33,799,262 1,159,732 155,518 35,114,512

III.Financial Assets Description 31/03/2006 31/12/2005

There are no entries for this item under total assets. Bank and Postal Deposits 1,625,200 23,758,590
Cash and other securities on hand 185,503 176,920
IV. Liquid Assets
1,810,703 23,935,510
Euro
Balance at 31/03/2006 Balance at 31/12/2005 Changes The balance is composed of liquid assets and existing cash on
hand and securities at the close of the financial year.
33.334 440.639 (407.305)
D) Accruals and Deferrals
Description 31/03/2006 31/12/2005
Bank and Postal Deposits 29.919 437.382 Euro
Cash and other securities on hand 3.415 3.257 Balance at 31/03/2006 Balance at 31/12/2005 Changes
33.334 440.639 1.821 335 1.486
Rs Rs
Balance at 31/03/2006 Balance at 31/12/2005 Changes Balance at 31/03/2006 Balance at 31/12/2005 Changes
1,810,703 23,935,510 (22,124,807) 98,917 18,197 80,720

628
 MAHINDRA EUROPE S.R.L.

This item measures income and charges whose accrual is put Euros
forward or deferred with respect to when they are recognisable Description 31/12/2005 Increase Decrease 31/03/2006
in cash and/or documentary form and irrespective of the date of Capital 100.000 100.000
payment or collection of the relevant receipts and charges, which Legal Reserve 4 4
are common to two or more financial years and can be subdivided Extraordinary
according to a time criterion. Reserve 69 69
This item is composed as detailed below. Capital Payments 900.000 900.000
Payments to
Euros Cover Losses 1 (2)
Description Amount Profits (Losses)
carried forward 13.573 (13.573)
Insurance 335
Profits (Losses)
Others not significant value 1.486 in the Financial
1.821 Year (13.573) (108.012) (13.573) (108.012)
986.499 (108.012) 1 878.486
Rs. Details of net assets movements are shown in the following
Description Amount table. Rs.
Insurance 18,197 Description 31/12/2005 Increases Decreases 31/03/2006
Others not significant value 80,720 Capital 5,432,000 5,432,000
98,917 Legal Reserve 217 217
Extraordinary
Liabilities Reserve 3,748 3,748
A) Net Assets Capital
Payments 48,888,000 48,888,000
Euros Payments to
Balance at 31/03/2006 Balance at 31/12/2005 Changes Cover Losses 54 (108)
878.486 986.499 (108.013) Profits (Losses)
carried forward 737,285 (737,285)
Rs. Profits (Losses)
Balance at 31/03/2006 Balance at 31/12/2005 Changes in the Financial
47,719,360 53,586,286 (5,867,266) Year (737.285) (5867212) (737285) (5867212)
53586.626 (5,867,212) 54 47,719,360

Euros
Description Capital Legal Other Shareholder Losses Current Total
Reserve Reserves payment carried forward Profits/Losses
01/01/2004 10.000 72 10.072
Appropriation
of result 4 68 (72) 0
Payments to
cover losses 10.000 10.000
Current result (10.874) (10.874)
31/12/2004 10.000 4 68 10.000 0 (10.874) 9.198
Capital increase 90.000 90.000
Shareholder
Payment 900.874 900.874
Appropriation
of result (10.874) 10.874 0
Current Result (13.573) (13.573)
31/12/2005 100.000 4 68 900.000 0 (13.573) 986.499
Appropriation
of result (13573) 13573 0
Current Result (108.012) (108.012)
31/03/2006 100.000 4 68 900.000 (13573) (108.012) 878.486

629
MAHINDRA EUROPE S.R.L.

Rs.
Description Capital Legal Other Shareholder Losses Current Total
Reserve Reserves payment carried forward Profits/Losses
01/01/2004 543,200 3911 547,111
Appropriation
of result 217 3,694 (3911) 0
Payments to
cover losses 543,200 543,200
Current result (590,676) (590,676)
31/12/2004 543,200 217 3,694 543,200 0 (590,676) 499,635
Capital increase 4,888,800
Shareholder
Payment 48,935,476
Appropriation
of result (590,676) 590,676 0
Current Result (737,285) (737,285)
31/12/2005 54,32,000 217 3,694 48,888,000 0 53,586,626
Appropriation
of result 737,285 737,285 0
Current Result (5,867,212) (5,867,212)
31/03/2006 54,32,000 217 3,694 48,888,000 (737,285) (5,867,212) 47,719,360
The capital stock is composed of 100.000 shares worth one euro each. As far as the administrative body is aware, they are fully
disposable by the shareholders, as there are no pledges, charges or prejudicial entries in the record of shareholders.
Euros
Nature / Description Amount Possibility of Available Actual utilisation Actual utilisation
utilisation (*) share in the 3 previous in the 3 previous
financial years to financial years for
cover losses other reasons
Capital 100.000 B
Legal Reserve 4 B 4
Reserve prescribed by Articles A, B
Other Reserves 900.067 A, B, C 900.067
Profits (Losses) carried forward (13.573) A, B, C (13.573)
Total 886.498
Non-distributable Share
Remaining Distributable Share
(*) A: for capital increase; B: for covering losses; C: for distribution to shareholders
Rs.
Nature / Description Amount Possibility of Available Actual utilisation Actual utilisation
utilisation (*) share in the 3 previous in the 3 previous
financial years to financial years for
cover losses other reasons
Capital 5,432,000 B
Legal Reserve 217 B 217
Reserve prescribed by Articles A, B
Other Reserves 48,891,639 A, B, C 48,891,639
Profits (Losses) carried forward (737,285) A, B, C (737,285)
Total 48,154,571
Non-distributable Share
Remaining Distributable Share
(*) A: for capital increase; B: for covering losses; C: for distribution to shareholders

630
 MAHINDRA EUROPE S.R.L.

B) Funds for Liabilities and Charges Rs

The company has not chosen to appropriate amounts for
guarantees against sales on the domestic market, as no potential Description within Over Over Total
liabilities are expected. In fact in accordance with the commercial 12 months 12 months 5 years
agreement, is the Producer to be responsible for the warrantee Due to banks 32,721,282 32,721,282
on the vehicles sold into the competence areas.
Payables to suppliers 30,281,227 30,281,227
C) Employee Retirement Allowance Payables to parent
companies 21,410,391 21,410,391
Euros
Tax debts 893,347 893,347
Balance at 31/03/2006 Balance at 31/12/2005 Changes
Payables to social
6.577 4.400 2.177 security institutes 301,150 301,150
Rs. Other Accounts
Balance at 31/03/2006 Balance at 31/12/2005 Changes Payable 2,548,912 2,548,912
357,263 239,008 118,255 88,156,309 88,156,309

The change is composed as follows. Euros Payables to suppliers at 31/03/2006 are subdivided as follows:

Changes 31/12/2005 Increase Decrease 31/03/2006 Euros

Retirement Description Total
Allowance, Trade payables 471.366
movements Invoices receivable 86.094
during the 557.460
financial year 4.400 2.177 6.577
Rs. Rs
Description Total
Changes 31/12/2005 Increase Decrease 31/03/2006
Trade payables 25,604,601
Retirement
Allowance, Invoices receivable 4,676,626
movements 30,281,227
during the
Tax debts at 31/03/2006 are subdivided as follows:
financial year 239,008 118,255 357,263
The appropriated funds are actual company payables at 31/03/2006 Euros
towards employees on the books at that date, after advance Description Total
payments. Industrial relations are excellent, there are no labour
Financial year Taxes at 31.12.05 11.045
disputes. The labour contract applied is the commercial sector contract.
Withholding taxes on labour of
D) Liabilities employees and autonomous workers 5.401
Euros
Total 16.446
Balance at 31/03/2006 Balance at 31/12/2005 Changes
1.622.907 1.690.008 (67.101) Rs
Rs Description Total
Balance at 31/03/2006 Balance at 31/12/2005 Changes Financial year Taxes at 31.12.05 599,964
Withholding taxes on labour of
88,156,308 91,801,235 (3,644,926)
employees and autonomous workers 293,382
Debts are evaluated at nominal value and their due dates are Total 893,346
subdivided as follows. Euros
Debts from withholding taxes on labour of employees and
Description within Over Over Total autonomous workers have been fully paid at their due dates.
12 months 12 months 5 year
Due to banks 602.380 602.380 Payables to Social Security Institutes at 31/03/2006 are
subdivided as follows:
Payables to suppliers 557.460 557.460
Payables to parent Euros
companies 394.153 394.153 Description Total
Tax debts 16.446 16.446 Contributions to INPS for employees
Payables to social and collaborators 4.446
security institutes 5.544 5.544 Contributions to Inail 1.098
Other Accounts Payable 46.924 46.924
5.544
1.622.907 1.622.907

631
MAHINDRA EUROPE S.R.L.

Rs Profit and Loss Account

Description Total A) Production Value
Contributions to INPS for employees Euros
and collaborators 241,507
Balance at 31/03/2006 Balance at 31/12/2005 Changes
Contributions to Inail 59,643
729.938 5.088.530 (4.358.592)
301,150
Rs
Payables concerning contributions have been fully paid at their
due dates. Balance at 31/03/2006 Balance at 31/12/2005 Changes
39,650,232 276,408,950 (236,758,718)
Other Accounts Payable at 31/03/2006 are subdivided as follows:
value of the production is referred as already explained in the
Euros introduction, to the sole first quarter of the year.
Description Total Euros
Employees’ salaries 8.978 Description 31/03/2006 31/12/2005 Changes
Director’s Remuneration 7.828 Receipts from Sales
and Services 697.190 4.941.512 (4.244.322)
Collaborators’ Remunerations 7.329
Other Accounts Payable 22.789 Other Receipts and
Revenue 32.748 147.018 (114.270)
46.924
729.938 5.088.530 (4.358.592)
Rs
Rs
Description Total
Description 31/03/2006 31/12/2005 Changes
Employees’ salaries 487,685
Receipts from Sales
Director’s Remuneration 425,217 and Services 37,871,361 268,422,932 (230,551,571)
Collaborators’ Remunerations 398.111
Other Receipts and
Other Accounts Payable 1,237,898 Revenue 1,778,871 7,986,018 (6,207,146)
2,548,911 39,650,232 276,408,950 (236,758,718)
Salaries and remunerations for collaborators and for the Director
have been paid on time. Receipts by Category of Activity
Euros
E) Accruals and Deferrals
Category 31/03/2006 31/12/2005 Changes
Balance at 31/03/2006 Balance at 31/12/2005 Changes
Sales of vehicles
There are no entries for this item under net liabilities. and spare parts 696.039 4.961.476 (4.265.437)

Memorandum Accounts Provision of Services 1.500 10.550 (9.050)

Other 32.399 116.504 (84.105)
Description 31/03/2006 31/12/2005 Changes
729.938 5.088.530 (4.358.592)
Accrued liabilities for
leased property
Rs.
Guarantees and Category 31/03/2006 31/12/2005 Changes
Commitments 3.500.000 3.500.000
Sales of vehicles
Contingencies and spare parts 37,808,838 269,507,376 (231,698,538)
Reconciliation between Provision of Services 81,480 573,076 (491,596)
statutory and tax laws
Other 1,759,914 6,328,497 (4,568,584)
3.500.000 3.500.000
39,650,232 276,408,949 (236,758,717)
This amount is referred to a credit line in USD, issued by Exim
Bank to the Company, against the guarantee of the goods in
stock and accounts receivable towards clients.

632
 MAHINDRA EUROPE S.R.L.

B) Production Costs Costs for raw materials, subsidiary materials, consumables

Euros and goods and Service Costs
Balance at 31/03/2006 Balance at 31/12/2005 Changes These concern acquisitions of vehicles and spare parts.
834.812 5.052.450 (4.217.638) Personnel Costs
Rs. This item comprises all expenses for employed personnel,
Balance at 31/03/2006 Balance at 31/12/2005 Changes including pay rises for merit, promotions, wage indexation rises,
45,346,988 274,449,084 (229,102,096) cost of unused holiday leave and statutory appropriations and
collective contracts.
Euros
Depreciation of Fixed Tangible Assets
Description 31/03/2006 31/12/2005 Changes
Regarding depreciation, it is specified that these have been
Raw materials,
calculated according to the asset’s useful lifetime and to its
subsidiary materials
exploitation during production.
and goods 582.291 5.418.334 (4.836.701)
Services 192.932 877.486 (684.554) Other Operating Expenses
Rent, hire purchase, These concern taxation other than income tax, subscriptions,
leasing and intellectual etc.
property charges 11.303 31.681 (20.378)
Wages and Salaries 33.559 71.880 (38.321) C) Financial Receipts and Charges Euros
Social Charges 8.767 21.907 (13.140) Balance at 31/03/2006 Balance at 31/12/2005 Changes
Retirement Allowance 2.177 4.294 (2.117) (3.139) (34.947) (31.808)
Depreciation of Intangible
Fixed Assets 11.686 34.008 (22.322) Description 31/03/2006 31/12/2005 Changes
Depreciation of Tangible Receipts other than
Fixed Assets 2.563 4.540 (1.977) the above 8 25 (17)
Variation in Left-over (Interest and other
Raw Material Stock (11.366) (1.415.324) 1.403.958 Financial Charges) (3.147) (34.972) 31.825
Other Operating Exchange Profits
Expenses 900 3.644 (2.744) (Losses)
834.812 5.052.450 (4.217.638) (3.139) (34.947) 31.808

Rs. Interest and others financial charges, are referred to expenses

and interests on the bank accounts at 31.03.2006
Description 31/03/2006 31/12/2005 Changes
Raw materials, Rs.
subsidiary materials Balance at 31/03/2006 Balance at 31/12/2005 Changes
and goods 31,630,047 294,323,903 (262,729,598)
(170,510) (1,898,321) (1,727,811)
Services 10,480,066 47,665,040 (37,184,973)
Rent, hire purchase, Description 31/03/2006 31/12/2005 Changes
leasing and intellectual
property charges 613,979 1,720,912 (1,106,933) Receipts other
than the above 435 1358 (923)
Wages and Salaries 1,822,925 3,904,522 (2,081,597)
(Interest and other
Social Charges 476,223 1,189,988 (713,765) Financial Charges) (170,945) (1,899,679) 1,728,734
Retirement Allowance 118,255 233,250 (114,995) Exchange Profits
Depreciation of Intangible (Losses)
Fixed Assets 634,784 1,847,315 (1,212,531) (170,510) (1,898,321) 1,727,811
Depreciation of Tangible
Fixed Assets 139,222 246,613 (107,391)
Variation in Left-over
Raw Material Stock (617,401) ( 76,880,400) 76,262,999
Other Operating
Expenses 48,888 197,942 (149,054)
45,346,988 274,449,084 (229,102,096)

633
MAHINDRA EUROPE S.R.L.

Other Financial Receipts Euros

Description Parent Subsidiary Affiliated
Companies Companies Companies Others Total
Bank and Postal
Interest 8 8
8 8
Rs.
Description Parent Subsidiary Affiliated
Companies Companies Companies Others Total
Bank and Postal
Interest 435 435
435 435
Interest and other Financial Charges Euros
Description Parent Subsidiary Affiliated
Companies Companies Companies Others Total
Bank Interest 243 243
Financial Charges 2.904 2.904
3.147 3.147
Rs.
Description Parent Subsidiary Affiliated
Companies Companies Companies Others Total
Bank Interest 13,200 13,200
Financial Charges 157,745 157,745
170,945 170,945

D) Value Adjustment of Financial Assets

There are no entries for this item under the Profit and Loss Rs.
Account. Balance at 31/03/2006 Balance at 31/12/2005 Changes
54 (94,354) 94,408
E) Extraordinary Receipts and Charges Euros
Balance at 31/03/2006 Balance at 31/12/2005 Changes Description 31/03/2006 31/12/2005
1 (1.737) 1.738 Capital Gains from
Alienations
Description 31/03/2006 31/12/2005
Capital Gains from Miscellaneous 54
Alienations Total Receipts 54
Miscellaneous 1 Capital Losses
Total Receipts 1 Financial Year
Capital Losses Taxes

Financial Year Theft suffered

Taxes Miscellaneous (94,354)
Theft suffered Total Charges (94,354)
Miscellaneous 54 (94,354)
Miscellaneous (1.737)
Total Charges (1.737)
1 (1.737)

634
 MAHINDRA EUROPE S.R.L.

Taxes on Financial Year Income Euros Depreciation of non-deductible

motor vehicles
Balance at 31/03/2006 Balance at 31/12/2005 Changes
Non-deductible Costs 12.159
12.969 (12.969)
Rs. Contingent Liabilities
Balance at 31/03/2006 Balance at 31/12/2005 Changes Entertainment Expenses for the year 05 746
704,476 (704,476) Tax Losses previous year
Taxable Income 96.599
Taxes are not appropriated because after the extra-accounts
calculation didn’t emerge any taxable income. Euros Current Taxes on Financial Year Income
Rs.
Taxes Balance at Balance at
Changes 31/03/2006 31/12/2005 Changes Description Value
Current Taxes: 11.045 (11.045) Results before taxes 5,867,212

IRES 1.184 (1.184) Theoretical Tax Charges (%)

IRAP 9.861 (9.861) Carrying of temporary differences from

previous financial years
Substitute Taxes
Entertainment Expenses for the years 03/04/05
Deferred (Advance)
Taxes 1.924 (1.924) Differences that will not be carried to
subsequent financial years
IRES 1.960 (1.960)
Depreciation of non-deductible motor vehicles
IRAP (36) 36
Non-deductible Costs 660,477
12.969 (12.969)
Rs. Contingent Liabilities

Taxes Balance at Balance at Entertainment Expenses for the year 05 40,523

Changes 31/03/2006 31/12/2005 Changes Tax Losses previous year
Current Taxes: 599,964 (599,964)
Taxable Income 5,247,258
IRES 64,315 (64,315)
Current Taxes on Financial Year Income
IRAP 535,650 (535,650)
Computation of taxable income for IRAP
Substitute Taxes Euros
Deferred (Advance) Description Value
Taxes 104,512 (104,512)
Difference between production value and costs 60.371
IRES 106,467 (106,467)
Costs not relevant for IRAP purposes 46.711
IRAP (1,956) 1956
Deductions 981
704,476 (704,476)
Taxable income for Irap 14.641
Taxes accruing in this financial year have been entered.
Current IRAP for this Financial Year
The reconciliation between the theoretical charge resulting from Rs.
the balance sheet and the theoretical tax charge is set out below:
Description Value
Reconciliation between balance sheet tax charges and
Difference between production value and costs 3,279,353
theoretical tax charges (IRES) Euros
Costs not relevant for IRAP purposes 2,537,342
Description Value
Deductions 53,288
Results before taxes 108.012
Theoretical Tax Charges (%) Taxable income for Irap 795,299
Carrying of temporary differences from previous Current IRAP for this Financial Year
financial years
Pursuant to point 14) of Article 2427 of the Italian Civil Code, the
Entertainment Expenses for the years 03/04/05 required information on deferred and advance taxation is reported:
Differences that will not be carried to subsequent
financial years

635
MAHINDRA EUROPE S.R.L.

Advance Taxation Other Information

Advance taxes have been accounted, as it is reasonable to expect Pursuant to the law, the total remuneration due to the Managing
a taxable income in the financial years to which the deductible Director is shown below.
temporary differences will be carried and for which advance taxes
Euros
have been entered, that will not be less than the total cancelled
differences. Title Remuneration
Managing Director 21.250

Rs.
Title Remuneration
Managing Director 1,154,300

636
 MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

Dir ectors’ Repor

Directors’ Reportt to the Members
Your Directors present their Second Report together with the Audited Accounts of your Company for the year ended 31st March, 2006.

Financial Results
(Rs. in lakhs)
Particulars For the year For the period
ended 31-3-2006 ended 31-3-2005

Income ................................................................................................... 4087.55 666.36

Profit before Depreciation, Interest, Commitment and Bank Charges

and Taxation ........................................................................................... 520.47 84.38

Less : Depreciation ................................................................................ (242.58) (32.24)

Profit before Interest and Taxation ........................................................ 277.89 52.14

Less : Interest, Commitment and Bank Charges ................................... (143.96) 17.02

Profit before Taxation ............................................................................. 133.93 35.12

Provision for Tax

Current Tax .................................................................................. (11.02) (2.90)

Deferred Tax ............................................................................... (46.54) (8.97)

Fringe Benefit Tax .................................................................................. (3.29) —

Profit after Tax ....................................................................................... 73.08 23.25

Review of Operations Directors

Your Company registered a turnover of Rs.4,087 lakhs during
the year under review which is higher by 28% compared to
annualised turnover of previous period. Your Company achieved
an export turnover aggregating Rs.3,19,59,654 for the year as
compared to Rs.1,12,07,023 for the previous year registering an
increase of 285%.
Additions to fixed assets by investing over Rs.1,300 lakhs in plant
& machinery and buildings have been made during the year to
improve capacity & product quality. The additional investments
will increase the existing annual capacity of 18 lakh Machined
Components to 30 lakh Machined Components. The full benefit
of the investments will be realized in the current year as the
Company is aggressively targetting the domestic and export
market. Computerized Numerical Control machines and other
quality control equipments, will increase the Company’s potential
to undertake export orders.
The Company has also initiated steps towards “Cellular
Manufacturing” to effectively control inventory carrying cost.
Dividend
Your Directors have not recommended any dividend for the year
with a view to conserve the resources of the Company for future
expansion programme.
Mr. Ramesh Virani and Mr. S. Durgashankar retire by rotation,
and being eligible, offer themselves for re-election.
Directors’ Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the
Operating Management, and after due enquiry, confirm that:-
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;
(ii) they have, in the selection of the accounting policies,
consulted the Statutory Auditors and these have been
applied consistently and reasonable and prudent judgements
and estimates have been made so as to give a true and fair
view of the state of affairs of the Company as at 31 st March,
2006 and of the profit of the Company for the year ended
on that date;
(iii) proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern
basis.

637
MAHINDRA SAR TRANSMISSION PRIVATE LIMITED
Corporate Social Responsibility Initiatives
As a socially responsible citizen, the Mahindra Group has
contributed not only to the economic well being of the
communities it interacts with, but has also enhanced their social
well being. Since its inception, the Mahindra Group has always
been engaged in activities which add value to the community
around us. A step forward was taken in this direction by the
announcement made on the occasion of the 60th Anniversary of
Mahindra & Mahindra Ltd. (M&M), that the Group would support
a range of Corporate Social Responsibility initiatives by
committing 1% of Profit after Tax (PAT) on a continuing basis.
The 1% PAT would specifically benefit the economically
disadvantaged and socially weaker sections of the society.
Accordingly, the Board of your Company has resolved to
contribute to recognised charitable and/or other Institutions,
including K. C. Mahindra Education Trust and/or Mahindra
Foundation, not related to the business of the Company or the
welfare of the employees towards Corporate Social
Responsibilities of the Company, such amounts which in the
aggregate in any financial year will not exceed 1% of the
Company’s estimated PAT for the year on a continuing basis
until further review by the Board.
Audit Committee
The Audit Committee of the Board of Directors of the Company
comprises Mr. Ramesh Virani (Chairman of the Committee), Mr.
Hemant Luthra and Mr. S. Durgashankar. The Committee met
twice during the year under review.
Remuneration Committee
The Remuneration Committee of the Board of Directors
comprises Mr. Hemant Luthra (Chairman of the Committee), Mr.
Ramesh Virani and Mr. S. Durgashankar. The Committee met
once during the year under review.
Auditors
Messrs A. F. Ferguson & Co., Chartered Accountants, retire as
Auditors of the Company at the forthcoming Annual General
Meeting and have given their consent for re-appointment. The
members will be required to appoint Auditors for the current
year and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
638
the above Auditors proposed to be re-appointed to the effect
that their re-appointment, if made, would be in conformity with
the limits specified in the said section.
Public Deposits and Loans/Advances
The Company has not accepted deposits from the public or its
employees during the year under review.
The Company has not made any loans/advances, which are
required to be disclosed in the annual accounts of the Company
pursuant to Clause 32 of the Listing Agreement with the Parent
Company, Mahindra & Mahindra Ltd.
Industrial Relations
Industrial relations remained cordial during the year under review.
Conservation of Energy, Technology Absorption and Foreign
Exchange Earnings and Outgo
The expenditure on power and fuel is not significant in relation
to the total expenses of the Company. However, the Company
constantly reviews the consumption of electricity rationalisation.
Rule 2B of the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, concerning technology
absorption is currently not applicable to the Company.
The particulars of foreign exchange earnings and outgo are given
in the Notes on Accounts.
Particulars of employees as required under section 217(2A)
of the Companies Act, 1956 and Rules framed there-under
As required under section 217(2A) of the Companies Act, 1956
and Rules there-under, a statement containing particulars of the
Company’s employees who were in receipt of remuneration of
not less than Rs. 24,00,000 during the year ended 31st March,
2006 or of not less than Rs. 2,00,000 per month during any part
thereof is given in the Annexure to this report.
For and on behalf of the Board
Hemant Luthra
Chairman
Mumbai, 28th April, 2006.
 MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

ANNEXURE TO THE DIRECTORS' REPORT

ADDITIONAL INFORMATION AS REQUIRED UNDER SECTION 217 (2A) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES
(PARTICULARS OF EMPLOYEES) RULES, 1975 AND FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED
31ST MARCH, 2006.

Name of the Designation/ Gross Remu- Qualification Age/ Date of Last employment held
employee Nature of neration received Experience commencement (organisation/designation)
duties (subject to Income (years) of employment
tax) (Rupees)

Mr. Shreyas Managing Director 27,86,428 B.Com. 36/16 14/01/2005 SAR Auto Products Ltd. -
R. Virani & Chief Executive Managing Director
Officer

Notes:
1) Nature of employment is contractual, subject to termination on 1 (one) month’s notice from either side.
2) Mr. Shreyas Virani, Managing Director & Chief Executive Officer, is related to Mr. Ramesh Virani, the Director of the Company.
3) No employee holds by himself or along with his spouse and dependent children 2% or more of the equity shares of the Company.
4) Employment terms and conditions are as per the Company’s rules.
5) Remuneration received as shown in the statement includes Salary, House Rent Allowance or value of perquisites for
accommodation, car perquisite value, reimbursement of medical expenses, employer’s contribution to Provident Fund,
Superannuation Fund and Gratuity Fund, premium for Mediclaim and all other allowances/perquisites as applicable.

For and on behalf of the Board

Hemant Luthra
Chairman
Mumbai, 28th April, 2006.

639
MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

AUDITOR’S REPORT
To the Members of Mahindra SAR Transmission Private Limited

1. We have audited the attached Balance Sheet of Mahindra
SAR Transmission Private Limited as at 31st March, 2006,
the Profit and Loss Account and also the cash flow statement
for the year ended on that date, annexed thereto. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those Standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by the management, as well as
evaluating the overall financial presentation. We believe that
our audit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor's Report) Order,
2003 issued by the Central Government of India in terms of
subsection (4A) of Section 227 of the Companies Act, 1956,
we enclose in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in
paragraph 3 above, we report that:
(i) we have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
(ii) in our opinion, proper books of account as required by
law have been kept by the Company so far as appears
from our examination of those books;
(iii) the Balance Sheet, Profit and Loss account an Cash
Flow statement dealt with by this report are in
agreement with the books of account;
(iv) In our opinion, the balance sheet, the profit and loss
account and the cash flow statement dealt with by this
report comply with the Accounting Standards referred
to in sub-section (3C) of Section 211 of the Companies
Act, 1956;
(v) On the basis of the written representations received
from the directors, as on 31st March, 2006, and taken
on record by the Board of directors, we report that none
of the directors is disqualified as on 31st March, 2006
from being appointed as a director in terms of clause (g)
of sub-section (1) of section 274 of the Companies Act,
1956;
(vi) In our opinion and to the best of our information and
according to the explanations given to us, the said
accounts give the information required by the
Companies Act, 1956, in the manner so required and
give a true and fair view in conformity with the
accounting principles generally accepted in India:-
(a) in the case of the Balance Sheet, of the state of
affairs of the Company as at 31st March, 2006;
(b) in the case of the Profit and Loss Account, of the
profit for the year ended on that date;
and
(c) in the case of the cash flow statement, of the cash
flows for the year ended on that date.
For A.F. Ferguson & Co.
Chartered Accountants
A.S. Varma
(Partner)
Mumbai, 28 April, 2006 Membership No. 15458

640

ANNEXURE TO THE AUDITORS' REPORT
of Mahindra SAR Transmission Private Limited for the year ended 31st March, 2006
(Referred to in paragraph (3) thereof)
(i) (a) The Company is maintaining proper records showing
full particulars, including quantitative details and
situation of fixed assets.
(b) Fixed assets have not been physically verified by the
management during the year but the company has a
system of verifying the fixed assets once every three
years. In our opinion the frequency of verification is at
reasonable intervals.
(c) During the year, in our opinion, a substantial part of
fixed assets has not been disposed off by the company.
(ii) (a) The inventory of the company has been physically
verified by the management as at the year end. In
respect of stocks lying with third parties, a substantial
portion has been confirmed by the third parties. In our
opinion the frequency of verification is reasonable.
(b) In our opinion and according to the information and
explanation given to us, the procedures of physical
verification of inventory followed by the management
were found reasonable and adequate in relation to the
size of company and the nature of its business.
(c) On the basis of our examination of records of inventory,
in our opinion, the company has maintained proper
records of inventory and the discrepancies noticed on
physical verification between the physical stocks and
the books records were not material in relation to the
operations of the company.
(iii) In our opinion and according to the information and
explanations given to us, the company has neither granted
nor taken any loans, secured or unsecured, to/from
companies, firms, or other parties covered in the register
maintained under Section 301 of the Companies Act, 1956
and therefore paragraph 4(iii) of the Order is not applicable.
(iv) In our opinion and according to information and explanations
given to us, having regard to the explanation that many of
the item are of a special nature and their prices cannot be
compared with alternative quotations, there are adequate
internal control system commensurate with the size of the
company and the nature of its business for purchase of
inventory, fixed assets and for the sales of goods. Further,
on the basis of our examination and according to the
information and explanations given to us we have neither
come across nor have we been informed of any instance of
major weakness in the aforesaid internal control system.
(v) (a) In our opinion and according to the information and
explanations given to us the particulars of contracts or
arrangements referred to in Section 301 of the
Companies Act, 1956 have been entered in the register
required to be maintained under that section.
MAHINDRA SAR TRANSMISSION PRIVATE LIMITED
(b) In our opinion and according to the information and
explanations given to us, having regard to comments
in (iv) above, the transactions made in pursuance of
the contracts or arrangements have been made at
prices, which are reasonable having regard to prevailing
market prices at the relevant time.
(vi) In our opinion and according to information and explanations
given to us, as the company has not accepted
deposits from the public, paragraph 4 (vi) of the Order is not
applicable.
(vii) In our opinion, the company has an internal audit system
commensurate with its size and nature of the business.
(viii) We have broadly reviewed the books of account maintained
by the company pursuant to the rules made by the Central
Government for the maintenance of cost records under
Section 209 (1)(d) of the Companies Act, 1956 and we are
of the opinion that prima facie the prescribed accounts and
records have maintained and are being made up. We have
not, however made a detailed examination of the records
with a view of determining whether they are accurate or
complete.
(ix) (a) According to the information and explanations given
to us and according to the books and records as
produced and examined by us, in our opinion, the
undisputed statutory dues including provident fund,
investor education and protection fund, employees’
state insurance, Income tax, Sales tax, Wealth tax,
Service tax, Customs duty, Excise duty, cess and
other material statutory dues as applicable have been
generally regularly deposited by the company during
the year with the appropriate authorities. According
to the information and explanations given to us, there
are no arrears of outstanding statutory dues as
mentioned above as at 31st March, 2006 for a period
of more than six months from the date they become
payable.
(b) According to the information and explanations given
to us, there are no dues of income tax, sales tax,
wealth tax, service tax, custom duty, excise duty,
cess which have not been deposited on account of
any dispute.
x) As the company has been registered for a period of less
than five years, as at 31st March, 2006, paragraph 4(x) of
the Order concerning any accumulated losses and cash
losses is not applicable to the company.
xi) In our opinion and according to the information and
explanations given to us, the company has not defaulted in
repayment of dues to a financial institution, bank or to
debenture holders during the year.
641
MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

xii) In our opinion and according to the information and xviii) The company has not made any preferential allotment of
explanations given to us, the company has not granted any share to parties and companies covered in the register
loans and advances on the basis of security by way of maintained under Section 301 of the Companies Act, 1956
pledge of shares, debentures and other securities. during the year.
xiii) The provisions of any special statute as specified under the xix) In our opinion and according to the explanation given to us,
clause (xiii) of the said Order are not applicable to the as the company has not issued any debentures during the
company. year, Clause (xix) of the said Order is not applicable to the
xiv) In our opinion and according to the information and company.
explanations given to us, the company is not a dealer or xx) The company has not raised any money by public issue
trader in securities. during the year.
xv) According to the information and explanations given to us, xxi) According to the information and explanation given to us
the company has not given any guarantees for loans taken during the year, no fraud on or by the company has been
by others from banks or financial institutions, the terms and noticed or reported.
conditions, whereof, in our opinion, are prejudicial to the
interest of the company.
xvi) In our opinion and according to the information and
explanation given to us, the term loans were applied for the For A.F. Ferguson & Co.
purpose for which the loans were obtained. Chartered Accountants
xvii) Based on the information and explanations given to us and
on an overall examination of the balance sheet of the A.S. Varma
company, in our opinion, funds raised on short term basis (Partner)
have not been used for long term investment. Mumbai, 28 April, 2006 Membership No. 15458

642
 MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

Balance Sheet as at 31st March, 2006

As at As at
Schedule 31-03-2006 31-03-2005
Rupees Rupees Rupees
I. SOURCES OF FUNDS:
SHAREHOLDERS’ FUNDS:
Capital ................................................................................. I 61,289,000 61,289,000
Reserves and Surplus ......................................................... II 123,378,084 116,069,583
184,667,084 177,358,583

Loan Funds: ....................................................................... III 279,261,762 98,325,548

Deferred Tax Liability [Net] (Note 16) .................................. 5,550,688 896,839
Total ............. 469,479,534 276,580,970

II. APPLICATION OF FUNDS:

FIXED ASSETS: .................................................................. IV
Gross Block ......................................................................... 333,528,602 184,865,666
Less: Depreciation .............................................................. 27,451,593 3,207,943
306,077,009 181,657,723
Capital Work-in-Progress and Advances ............................. 8,753,335 14,344,215
Net Block ............................................................................. 314,830,344 196,001,938

Net Current Assets:

Current Assets, Loans and Advances .............................. V 214,409,556 148,806,078
Less: Current Liabilities and Provisions .......................... VI 59,760,366 68,227,046
154,649,190 80,579,032
Total ............. 469,479,534 276,580,970

NOTES ON ACCOUNTS ............................................................ XII

Per our report attached For and on behalf of the Board

Hemant Luthra Chairman

For A.F. Ferguon & Co.
Chartered Accountants Ramesh D. Virani Vice-Chairman

Shreyas R. Virani Managing Director

A.S. Varma
Partner Jonathan Mapgaonkar Director

Mumbai, 28 April, 2006 Mumbai, 28 April, 2006

643
MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

Profit and Loss Account for the year ended 31st March, 2006

Year ended Period ended

Schedule 31-03-2006 31-03-2005
Rupees Rupees Rupees
INCOME:
Sales (Gross) ............................................................................... 457,987,569 71,852,951
Less: Excise Duty ....................................................................... 57,861,875 8,181,927
Sales (Net) ................................................................................... 400,125,694 63,671,024
Other Income .............................................................................. VII 8,629,469 2,965,347
Total ............. 408,755,163 66,636,371

EXPENDITURE:
Raw Materials, Finished and Semi-finished Products ................. VIII 232,068,060 31,691,585
Excise Duty ................................................................................. — 1,500,906
Personnel .................................................................................... IX 12,536,354 2,152,246
Interest, Commitment and Bank Charges .................................. X 14,395,664 1,701,642
Depreciation ................................................................................ 24,257,680 3,224,646
Other Expenses .......................................................................... XI 112,103,889 22,853,334
Total ............. 395,361,647 63,124,359
Profit before Taxation for the period ....................................... 13,393,516 3,512,012

Less: Provision for Taxation:

Current Tax ................................................................................. 1,102,241 290,000
Deferred Tax ............................................................................... 4,653,849 896,839
Fringe Benefit Tax ....................................................................... 328,925 —
Profit after Taxation for the period .......................................... 7,308,501 2,325,173
Add: Balance brought forward .................................................... — —

Less: Appropriations
Transfer from/(to Debenture Redemption Reserve ................ 2,325,173 (2,325,173)
Balance carried to Balance Sheet ............................................ 9,633,674 —
Earnings per equity share: (not annualised) Basic and Diluted
(Note 15) (Face Value Rs. 10 per equity share) .......................... 1.19 1.07

NOTES ON ACCOUNTS ............................................................ XII

Per our report attached For and on behalf of the Board

Hemant Luthra Chairman

For A.F. Ferguon & Co.
Chartered Accountants Ramesh D. Virani Vice-Chairman

Shreyas R. Virani Managing Director

A.S. Varma
Partner Jonathan Mapgaonkar Director

Mumbai, 28 April, 2006 Mumbai, 28 April, 2006

644
 MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

Cash Flow Statement

Year ended Period ended

31-03-2006 31-03-2005
Rupees Rupees Rupees
A. CASH FLOW OPERATING ACTIVITIES:
Net Profit before exceptional item and taxation ................. 13,393,516 3,512,012
Adjustments for:
Depreciation/Amortisation ........................................... 24,257,680 3,224,646
Provision for Doubtful Debts ....................................... 2,448 2,745,402
Loss on sale of fixed assets sold/scrapped/written off
(Net) ............................................................................ 87,378 (1,230,144)
Interest Income ........................................................... (95,160) (333,114)
Interest, Commitment and Finance charges ............... 14,395,664 1,371,549
Reversal of provision for Doubtful Debts .................... (2,583,089) —
36,064,921 5,778,339
Operating Profit before Working Capital changes ............... 49,458,437 9,290,351
Changes in:
Trade and other receivables ........................................ (65,939,747) 13,058,888
Inventories .................................................................. (6,543,003) (16,978,632)
Trade and other payables ............................................ (8,314,427) 6,962,760
(80,797,177) 3,043,016
Cash generated from operations ........................................ (31,338,740) 12,333,367
Income-taxes paid (net of refunds) ..................................... (2,502,915) (106,247)
NET CASH FROM OPERATING ACTIVITIES ....................... (33,841,655) 12,227,120
B. CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed assets ..................................................... (143,372,308) (56,845,022)
Sale of fixed assets ............................................................. 198,844 2,370,000
Interest Income ................................................................... 245,567 172,112
Acquisition of Business unit ................................................ — (75,000,101)
NET CASH USED IN INVESTING ACTIVITIES ..................... (142,927,897) (129,303,011)
C. CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of share capital ............................ — 145,101,800
Proceeds from borrowings ................................................. 180,936,214 —
Repayments of borrowings ................................................. — (15,836,153)
Interest, Commitment and Finance charge paid ................. (14,395,664) (1,371,549)
NET CASH USED IN FINANCING ACTIVITIES .................... 166,540,550 127,894,098
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS (A + B + C) ................................................. (10,229,002) 10,818,206
Opening Balance ................................................................. 13,270,820 —
Cash and Bank received on acquisition of business
undertaking ......................................................................... — 2,452,614
Closing Balance ................................................................... 3,041,818 13,270,820

Per our report attached For and on behalf of the Board

Hemant Luthra Chairman

For A.F. Ferguon & Co.
Chartered Accountants Ramesh D. Virani Vice-Chairman

Shreyas R. Virani Managing Director

A.S. Varma
Partner Jonathan Mapgaonkar Director

Mumbai, 28 April, 2006 Mumbai, 28 April, 2006

645
MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

Notes to the Cash Flow Statement:

31-03-2006 31-03-2005
Rupees Rupees
Cash and cash equivalents include:
Cash on hand .............................................................................. 271,000 38,440
Cheques on hand and cheques in transit .................................... 562,456 2,825,100
Balances with Scheduled Banks:
(i) On Current Account ............................................................ 1,089,186 3,523,435
(ii) On Fixed Deposit Account .................................................. 518,156 6,420,555
(iii) On Margin Account ............................................................. 601,020 463,290
3,041,818 13,270,820

2. Purchase of fixed assets include payments for items in capital work-in-progress and advances for purchase of fixed assets.

646
 MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

SCHEDULE – I As at As at SCHEDULE – III As at As at

SHARE CAPITAL (Note 3): 31-03-2006 31-03-2005 LOAN FUNDS: 31-3-2006 31-3-2005
Rupees Rupees Rupees Rupees Rupees
Authorised: (A) Secured (Note 5):
15,000,000 Equity Shares of Rs. 10 each ............ 150,000,000 150,000,000 (1) Debentures ..................... — 3,500,000
Total ............ 150,000,000 150,000,000 (2) Term Loans from Bank .... 105,140,233 19,335,079
Issued and Subscribed: (3) Loans and Advances on
6,128,900 Equity Shares of Rs. 10 each fully paid- cash credit account from
up ...................................................... 61,289,000 61,289,000 Banks .............................. 62,951,217 21,698,162
Total ............ 61,289,000 61,289,000 (4) Inland Outwards and
Drawer Bill Discounting
SCHEDULE – II As at As at with IDBI Bank ................ 42,211,393 —
RESERVES AND SURPLUS: 31-3-2006 31-3-2005 (5) Other Loans from Banks . — 1,232,021
Rupees Rupees Rupees 210,302,843 45,765,262
Securities Premium ...................... 113,744,410 —
Addition during the year ............... — 115,027,196 (B) Unsecured:
Less: Deductions during the year . — (1,282,786) (1) Sales Tax — Deferrment
113,744,410 113,744,410 (Note 6) ................................. 68,958,919 52,560,286
Debenture Redemption Reserve .. 2,325,173 — Total ..... 279,261,762 98,325,548
Addition during the year ............... — 2,325,173
Less: Transferred to Profit and
Loss Account ............................... 2,325,173 —
— 2,325,173
Profit and Loss Account ............... 9,633,674 —
Total ..... 123,378,084 116,069,583

647
 SCHEDULE – IV

648
FIXED ASSETS SCHEDULE (in Rupees)

GROSS BLOCK DEPRECIATION NET BLOCK

Description Balance as on Addition Deductions Balance as on Upto On On addi- On deduc- Total Depre- Deprecia-
of 1st April during the during the 31st March, 31st March, Opening tions during tions during ciation during tion as on As on 31st As on 31st
Assets 2005 year at cost year 2006 2005 Balance the year the year the year 31st March, March, March,
(A) (B) (C) (A+B-C) 2006 2006 2005

Land Free hold ............... 4,593,455 7,757,818 — 12,351,273 — — — — — — 12,351,273 4,593,455

Building
(A) Factory Building ...... 16,058,402 15,135,573 — 31,193,975 98,074 536,351 137,851 — 674,202 772,276 30,421,699 15,960,328
(B) Other Building ......... — 3,055,611 — 3,055,611 — 25,244 — — 25,244 25,244 3,030,367 —

16,058,402 34,249,586 98,074 33,452,066 15,960,328

Plant and Machinery ....... 151,102,774 109,849,016 245,079 260,706,711 2,961,098 15,607,730 6,654,172 11,743 22,250,159 25,211,257 235,495,453 148,141,676
Furniture and Fixture ...... 1,300,950 4,374,372 — 5,675,322 16,972 82,350 164,713 — 247,063 264,035 5,411,287 1,283,978
MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

Vehicles, etc.
Bus and Lorries .............. 1,355,839 1,988,812 — 3,344,651 20,868 153,345 60,971 — 214,316 235,184 3,109,467 1,334,971
Other vehicles ................ 2,297,620 41,800 3,396 2,336,024 45,449 218,074 3,345 191 221,228 266,677 2,069,347 2,252,171

3,653,459 5,680,675 66,317 5,178,814 3,587,142

Electric Fittings ............... 6,701,563 5,536,605 — 12,238,168 42,147 318,324 70,114 — 388,438 430,585 11,807,583 6,659,416
Computers ..................... 737,123 656,514 — 1,393,637 16,925 119,488 58,923 — 178,411 195,336 1,198,301 720,198
Office Equipment ........... 717,940 567,067 51,777 1,233,230 6,410 31,643 15,042 2,096 44,589 50,999 1,182,231 711,530
Total ............................... 184,865,666 148,963,188 300,252 333,528,602 3,207,943 17,067,305 7,190,375 14,030 24,243,650 27,451,593 306,077,009 181,657,723
Previous Year ................. — 186,022,225 1,156,559 184,865,666 — — 3,224,646 16,703 3,207,943 3,207,943 181,657,723 —
 MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

SCHEDULE – V As at As at SCHEDULE – VI As at As at
CURRENT ASSETS, LOANS AND ADVANCES: 31-03-2006 31-03-2005 CURRENT LIABILITIES AND PROVISIONS: 31-03-2006 31-03-2005
Rupees Rupees Rupees Rupees
(A) Current Assets: (A) Current Liabilities:*
Sundry Creditors:
Stores and Spares ................. 15,679,503 6,529,194 (i) Total outstanding Dues of
small scale industrial
Stock-in-Trade and Work -in- undertakings (Note 7) ...... 2,433,389 1,311,333
progress: (ii) Total outstanding Dues of
(i) Finished Goods ............... 4,888,705 13,559,023 creditors other than small
scale industrial undertaking 56,502,701 66,211,018
(ii) Work-in-progress ............. 58,750,393 55,344,618 58,936,090 67,522,351
(iii) Raw Materials and Com- (B) Provisions:
ponents ........................... 5,212,944 2,555,707 Provision for Gratuity ............ 291,624 96,861
Provision for Taxation ............ — 183,753
68,852,042 71,459,348 Provision for Fringe Benefit
84,531,545 77,988,542 Tax ........................................ 31,500 —
Provision for Leave
Encashment .......................... 501,152 424,081
Sundry Debtors:
Total ..... 59,760,366 68,227,046
Unsecured unless otherwise
stated: * There are no amounts due and outstanding to be credited to the Investor
Education and Protection Fund.
Outstanding over six months:
SCHEDULE – VII Year ended Period ended
Considered good ................... 1,391,379 2,430,460 OTHER INCOME: 31-03-2006 31-03-2005
Considered doubtful .............. 164,761 2,537,057 Rupees Rupees Rupees
1,556,140 4,967,517 Job Work Charges ........................ 3,447,747 1,269,423
Miscellaneous Income ................. 2,503,473 132,666
Other Debts, considered good 85,906,236 34,256,326 Provision for Doubtful Debts
Considered doubtful .............. — 208,345 written back ................................. 2,583,089 —
Profit on Fixed Assets sold ........... — 1,230,144
85,906,236 34,464,671
Interest Income [T.D.S.: Rs.
87,462,376 39,432,188 21,488 (2005: Rs. 89,112]) ........... 95,160 333,114
Less: Provision for doubtful Total ..... 8,629,469 2,965,347
debts ..................................... 164,761 2,745,402
87,297,615 36,686,786 SCHEDULE –VIII
RAW MATERIALS, FINISHED AND
SEMI-FINISHED PRODUCTS:
Cash and Balance Balances:
(A) Decrease/(Increase) in Stock
Cash on hand ........................ 271,000 2,825,100 of Finished Goods, Work-in-
Cheques on hand and cheques Progress Manufactured
in transit ................................ 562,456 38,440 Components:
Opening Stock:
(i) Finished Goods ............... 13,559,023 —
Balances with Scheduled Banks: (ii) Work-in-Progress ............. 55,344,618 —
(i) On Current Account ........ 1,089,186 3,523,435 68,903,641 —
(ii) On Fixed Deposit Account 518,156 6,420,555 Add: Stock taken over pursuant
to the Business Transfer
(iii) On Margin Account ......... 601,020 463,290 Agreement:
2,208,362 10,407,280 (i) Finished Goods ............... — 2,662,184
(ii) Work-in-Progress ............. — 49,681,199
3,041,818 13,270,820
— 52,343,383
(B) Loans and Advances: Less: Closing Stock
(Unsecured, considered good (i) Finished Goods ............... 4,888,705 13,559,023
(ii) Work-in-Progress ............. 58,750,393 55,344,618
unless otherwise stated):
63,639,098 68,903,641
Advance Tax ......................... 919,496 —
Decrease/(Increase) in Stock 5,264,543 (16,560,258)
Bills of Exchange ................... 30,198,168 —
(B) Consumption of Raw
Advances Recoverable in Cash Materials and Bought-out
or Kind for value to be received 4,195,466 16,287,916 Components:
Balance — Excise Duty ......... 4,225,448 4,572,014 Opening Sock ........................ 2,555,707 —
Add: Stock taken over pursuant
39,538,578 20,859,930 to the Business Transfer
Total ..... 214,409,556 148,806,078 Agreement ............................ — 3,871,672
Add: Purchase [including
outside processing charges Rs.
43,468,831 (2005: Rs.
8,355,509)] ............................ 229,460,754 46,935,878
232,016,461 50,807,550
Less: Closing Stock ............... 5,212,944 2,555,707
226,803,517 48,251,843
Total ..... 232,068,060 31,691,585

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MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

SCHEDULE – IX Year ended Period ended monetary items (other than those for acquisition of fixed assets from a
PERSONNEL: 31-03-2006 31-03-2005 country outside India) the exchange differences are recognised in the Profit
Rupees Rupees Rupees and Loss Account.
Salary, Wages, Bonus, etc. .......... 10,779,469 1,883,623 (D) Revenue Recognition:
Contribution to Provident Fund Sales of products and services are recognised when the products are
and Other Funds .......................... 877,567 156,559 despatched/shipped or services rendered.
Gratuity ........................................ 444,141 96,861
Welfare ........................................ 435,177 15,203 (E) Research and Development Expenses:
Total ..... 12,536,354 2,152,246 Revenue expenditure on Research and Development is charged to the Profit
and Loss Account in the year in which it is incurred. Capital expenditure
SCHEDULE – X incurred on a tangible asset is shown as addition to fixed assets.
INTEREST EXPENSES:
On Term Loans and Debentures .. 6,510,031 708,456 (F) Retirement Benefits:
On others ..................................... 6,960,179 663,093 Retirement benefits in respect of gratuity payable on retirement has been
provided for based on valuation as at the Balance Sheet date, made by
Finance Charges ........................... 925,454 330,093 independent actuary.
Total ..... 14,395,664 1,701,642
SCHEDULE – XI (G) Income Tax:
OTHER EXPENSES: Current tax is determined as the amount of tax payable to the taxation
authorities in respect of taxable income for the year.
Stores Consumed ........................ 9,674,791 1,469,039
Deferred tax is recognised, subject to the consideration of prudence, on
Tools Consumed .......................... 23,089,553 3,845,636
timing differences being differences between taxable income and accounting
Jobwork Charges ......................... 37,476,538 6,716,826 income, which originate in one period and are capable of reversal in one or
Power and Fuel ............................ 11,255,701 1,702,753 more subsequent periods. Deferred tax assets are not recognised on
unabsorbed depreciation and carry forward of losses unless there is a virtual
Rent ........................................ 150,000 32,500
certainty that sufficient taxable profits will be available against which such
Insurance ...................................... 1,387,506 176,849 deferred tax assets can be realised.
Repairs and Maintenance: (Note 22)
2. The Company was incorporated on 27th August, 2004, as Sar Transmission Pvt.
— Building ................................. 773,764 —
Ltd. The name of the Company was subsequently changed to Mahindra Sar
— Machinery ............................. 5,072,963 1,406,547 Transmission Pvt. Ltd. on 17th March, 2005. Figures of current year are not
— Others ................................... 758,410 126,608 comparable with previous period because of the fact that, last year being the first
year, Accounts were prepared for the period 27th August, 2004 to 31st March,
6,605,137 1,533,155
2005.
Freight outward ............................ 4,340,146 737,527
Provision for Doubtful Debts ........ 2,448 2,745,402 3. Share Capital:
Bad Debts .................................... 1,785,214 — (a) Issued and Subscribed Capital include:
Miscellaneous Expenses (Notes 2,993,161 Equity Shares allotted as fully paid-up for a consideration other
10 & 21) ....................................... 16,249,477 3,893,647 than cash to SAR Auto Products Ltd. pursuant to the Business Transfer
Agreement dated 14th January, 2005.
Loss on Sale of Asset (Net) .......... 87,378 —
Total 112,103,889 22,853,334 (b) Out of 6,128,900 Equity Shares, 3,125,739 Equity Shares are held by
Mahindra and Mahindra Limited, the Holding Company.

SCHEDULE – XII
NOTES ON ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006
1. Significant Accounting Policies:
(A) Fixed Assets:
(a) All Fixed Assets are carried at cost less depreciation, except for land,
which is freehold and is therefore stated at cost.
When an asset is scrapped or otherwise disposed off, the cost and
related depreciation are removed from the books of account and
resultant profit (including capital profit) or loss, if any, is reflected in the
Profit and Loss Account.
(b) Depreciation on assets is calculated on Straight Line Method at the rates
and in the manner prescribed in Schedule XIV to the Companies Act,
1956.
(B) Inventories:
Inventories are valued at cost or net realisable value, whichever is lower.
Cost is arrived at on a weighted average method and includes, where
appropriate, manufacturing overheads and excise duty. Stores and Spares
inventory is valued on FIFO basis.
(C) Foreign Exchange Transactions:
All foreign currency monetary items are translated at the relevant rates of
exchange prevailing at the year end. In respect of forward exchange
contracts the premium or discount arising at the inception of such a contract
is amortised as expense or income over the life of the contract. In case of
4. Land includes a sum of Rs. 1,332,128 in respect of Govt. Waste Land for which
transfer approval of Collector is pending.
5. Loans:
(a) Term Loans — During the year, the Company has taken a Term Loan of Rs.
10 crores from IDBI Bank Ltd., which is secured by first charge over the Plant
and Machinery and other assets created out of the said loan and collaterally
secured by equitable mortgage over Factory Land and Building and other
immovable fixed assets of the Company.
(b) Cash credit limits are secured by hypothecation of all current assets and
collaterally secured by second charge over present and future fixed assets
of the Company.
(c) Packing Credit and Foreign Bills Discounting/Purchase facilities are secured
by first charge over the current assets of the Company and second charge
over present and future fixed assets of the Company.
(d) Term Loan from Bank repayable within a year — Rs. 34,111,600 (2005: Rs.
15,600,000).
6. The Company has been issued eligibility certificate for sales tax incentive under
the Sales Tax Deferrement Scheme upto 16th July, 2007, for the maximum
entitlement amount of Rs. 96,403,000. Accordingly, the sales tax liability so
deferred amounting to Rs. 68,958,919 as at 31st March, 2006 (2005: Rs.
52,560,286) has been disclosed as long term liability under the head ‘Unsecured
Loans’. The accumulated deferred sales tax liability will be repayable in six equal
annual instalments starting from 31st May, 2008.

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 MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

7. (i) The identification of suppliers as Small Scale Industrial undertaking (SSIs) Related parties where control exists:
has been done on the basis of the information to the extent provided by the
Holding Company Mahindra & Mahindra Limited
suppliers to the Company. On this basis, the disclosure of total outstanding
dues of SSIs and the names of SSIs shown in Schedule VI has been made. Enterprise having significant influence SAR Auto Products Ltd.

(ii) Following are the names of Small Scale Industrial Undertakings (SSIs) to Other related parties with whom the Company has transaction, etc.:
whom the Company owes any sum together with interest and which are
outstanding for more than 30 days as on 31st March, 2006: Key Managerial Personnel (KMP)
Sl. Name of the SSIs Managing Director & CEO Mr. Shreyas R. Virani
No.
Enterprise in which MD is a director PPS Trading Co. Pvt. Ltd. (PPS)
1. ABC Gears
Enterprise in which MD is a Partner Viko Engineering Co. (VE)
2. Advance Mechanical Works
Disclosure of transactions between the Company and related parties and
8. Sales include export benefits of Rs. 357,629 (2005: Rs. 1,593,949). the status of outstanding balance as on 31st March, 2006:

Nature of Transactions Holding KMP VE PPS

9. Managerial Remuneration:
Company
Particulars Year ended Period ended*
Purchase:
31-03-2006 31-03-2005
Rupees Rupees Goods ............................. 1,228,601 — — —
Salary 836,371 187,500 (188,992) (—) (—) (—)

Contribution to provident and other funds 100,364 18,000 Processing Charges paid . 119,602 — 8,026,156 11,022,224
(12,000) (—) (2,004,198) (2,400,000)
Other perquisites and allowances 1,849,693 618,819
Total 2,786,428 824,319 Sales:
Goods ............................. 320,878,553 — 609,382 —
* For the period 14-01-2005 to 31-03-2005. (45,043,092) (—) (200,397) (901)
The remuneration to the managing director excludes the accrual for gratuity as
Other Income:
it is accrued for the Company as a whole.
Job work charges ............ 138,541 — — —
The terms and conditions of the appointment of the Managing Director (including
(150,285) (—) (—) (—)
remuneration), as per the approval letter dated 21st December, 2005, are
subject to the sanction of the Company in General Meeting. The appointment Provision for Doubtful Debts — — — —
as approved by the Central Government is for a period of three years with effect (2,583,089) (—) (—) (—)
from 14th January, 2005.
Amount written off .......... 1,785,214 — — —
(—) (—) (—) (—)
10. Miscellaneous Expenses include:
Outstanding:
(a) Amounts paid/payable to Auditors: Receivables ..................... 44,448,635 — — —
Particulars Year ended Period ended (18,421,634) (—) (—) (—)
31-03-2006 31-03-2005
Rupees Rupees Payables .......................... 1,187,071 338,706 276,193 196,824
(191,197) (656,320) (553,486) (981,320)
Audit Fees (including services tax) 220,400 110,200
Managerial Remuneration — 2,786,428 — —
(b) Expenditure in Research & Development incurred Rs. 556,382 (2005: (—) (824,319) (—) (—)
Rs. 60,983).
Other Transactions:

11. The estimated amount of contracts remaining to be executed on capital account Equity Contribution in cash
(net of advances) and not provided for as at 31st March, 2006 is Rs. 715,000 (including Premium) ........ — — — —
(2005: Rs. 803,854). (146,284,585) (—) (—) (—)

12. Contingent Liabilities not provided for: 15. Earnings Per Equity Share:
Earnings Per Equity Share (EPS) calculation (basic and diluted):
(a) Guarantees issued by the bank on behalf of the Company Rs. 512,290 (2005:
Rs. Nil). Particulars Unit Year ended Period ended
31-03-2006 31-03-2005
(b) Claimed against the Company not acknowledged as debt in respect of three
(a) Amount used as the numerator —
pending cases before the Labour Court from the ex-employees seeking
Profit after taxation Rupees 7,308,501 2,325,173
reinstatement and full back wages (amount not ascertainable) [2005:
amount not ascertainable]. (b) Weighted average number of equity
shares used as the denominator No 6,128,900 2,181,223
13. As the Company’s business activity falls within a single primary business (c) Nominal values of equity shares Rupees 10.00 10.00
segment namely manufacturing and selling of auto parts (transmission
components) the Company has, by applying the definitions of ‘Business (d) Earnings per equity share (Basic and
Segment’ and ‘Geographical Segment’, contained in Account Standard 17 Diluted) Rupees 1.19 1.07*
‘Segment Reporting’, conducted that there is neither more than one Business * Not annualised.
Segment nor more than one Geographical Segment, segment information as
per Accounting Standard 17 is not required to be disclosed.

14. As per Accounting Standard 18 ‘Related Party Disclosures’ issued by the

Institute of Chartered Accountants of India, the Company has identified all the
related parties having transactions during the year as per the details given below:

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MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

16. Deferred Taxes: 19. Expenditure in foreign currency:

The components of Deferred Tax Liability and Asset as at 31st March, 2006 Particulars Year ended Period ended
31-03-2006 31-03-2005
Year ended Period ended Rupees Rupees
31-03-2006 31-03-2005
Rupees Rupees Reimbursement of Expenses 1,426,614 279,920

Deferred Tax Liability:

20. Earnings in foreign exchange:
On fiscal allowances on fixed assets 11,662,313 1,936,908
Export of goods on F.O.B. Basis 31,959,654 11,207,023
11,662,313 1,936,908
Deferred Tax Assets:
21. The difference in foreign exchange debited to the Profit and Loss Account is
(i) Provision for Gratuity 98,160 35,444 Rs. 154,065 (2005: Rs. 522,636).
(ii) Provision for Doubtful Debts 55,459 1,004,625
(iii) Unabsorbed Depreciation# 5,958,006 — 22. Repairs and Maintenance includes machinery spares consumed Rs. 2,218,371
(2005: Rs. 732,584).
6,111,625 1,040,069
24. Derivative Instruments:
Net Deferred Tax Liability 5,550,688 896,839
The Company has not entered into any Forward Exchange Contracts [being a
# Considered, as there are compensatory timing differences the reversal of which derivative instrument], which are neither intended for trading, speculative nor
will result in sufficient future taxable income against which this can be realised. for hedge purposes.
The year end foreign exposures that have not been hedged by a derivative
17. Value of Materials Consumed: instrument or otherwise are given below:
Particulars Year ended Period ended Amounts receivables as at 31st March, 2006, in foreign currency on account
31-03-2006 31-03-2005 of the following:
Quantity Value Quantity Value Export of goods Rs. 5,988,963 USD 134,856.22
Rupees Rupees
Rs. 2,118,641 Pound 27,472.00
Forgings (Nos.) 1,349,742 164,282,483 385,658 36,445,834
Rs. 1,141,534 Euro 21,245.74
Round Bars (Kgs.) 192,807 7,476,774 18,163 782,979
The above disclosures have been made consequent to an announcement by the
Castings (Nos.) 159,552 11,575,429 46,666 2,667,521 Institute of Chartered Accountants of India in December 2005, which is
Sub Total 183,334,686 39,896,334 applicable to the financial periods ending on or after 31st March, 2006.
Therefore, figures for the previous year have not been disclosed.
Job work 43,468,831 8,355,509
25. Previous period’s figures are regrouped and reclassified, wherever necessary.
Total 226,803,517 48,251,843

Note: The consumption in value has been ascertained on the basis of opening
stock plus purchases less closing stock and includes the adjustment of
excesses and shortages as ascertained on physical count and write-off of
obsolete and unserviceable raw material and components.

18. Value of Imported and Indigenous Material Consumed:

Particulars Year ended Period ended
31-03-2006 31-03-2005
Rupees % Rupees %
Raw Material and semi finished:
Imported — — — —
Indigenous 183,334,686 100% 39,896,334 100%
183,334,686 100% 39,896,334 100%

23. Information in respect of licensed and installed capacities, production, opening and closing stocks, and sale of components.

Sl. Class of Unit of Licensed Installed Actual

No. Goods Measu- Capacity Capacity Production Opening Stock Closing Stock Sales
rement per per annum [Note (ii)
annum [Note (i) below Quantity Value Quantity Value Quantity Value
Below] Rupees Rupees Rupees
1. Automotive Machined
Components Nos. N.A. 3,000,000 1,650,067 96,727 13,559,023 40,416 4,888,705 1,706,378 393,059,440
(1,800,000) (411,692) (23,428) (2,662,184) (96,727) (13,559,023) (338,393) (60,561,279)
2. Export Benefits 357,629
(1,593,949)
3. Scrap Sales 6,708,625
(1,515,796)
Total 400,125,694
(63,671,024)

Note: (i) The installed capacity has been certified by the management, which the Auditors have relied on without verification, as this is a technical matter.
(ii) Actual production includes production for captive consumption.

652
 MAHINDRA SAR TRANSMISSION PRIVATE LIMITED

26. ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956.
Balance Sheet Abstract and Company's General Business Profile

I. Registration Details:
Registration No. 0 4 – 4 4 6 5 5 State Code 0 4

Balance Sheet Date 3 1 0 3 2 0 0 6

Date Month Year

II. Capital raised during the year (Amount in Rs. Thousands):

Public Issue Rights Issue

N I L N I L
Bonus Issue Private Placement
N I L N I L
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)
Total Liabilities
Including Shareholders’ Funds Total Assets
5 2 9 2 4 0 5 2 9 4 0
Sources of Funds:
Paid-up Capital Reserves and Surplus
6 1 2 8 9 1 2 3 3 7 8
Secured Loans Unsecured Loans
2 1 0 3 0 3 6 8 9 5 9

Deferred Tax Liability (Net)

Application of Funds:
Net Fixed Assets
3 1 4 8 3
Net Current Assets
1 5 5 7 5
Accumulated Losses
5 5 5 1
Investments
1 –
Miscellaneous Expenditure
1 –
–

IV. Performance of Company (Amount in Rs. Thousands):

Turnover (Total Income) Total Expenditure

4 0 8 7 5 5 3 9 5 3 6 1
+ – Profit/Loss before Tax + – Profit/Loss after Tax
✓ 1 3 3 9 4 ✓ 7 3 0 9
Earning Per Share in Rupees Dividend Rate %
1 . 1 9 –

V. Generic Names of Three Principal Products/Services of the Company (as per monetary terms):
Item Code No. (ITC Code) 8 7 0 8 .
Product Description A U T O M O T I V E P A R T S

Signatures to Schedules I to XII For and on behalf of the Board

Hemant Luthra Chairman
Ramesh D. Virani Vice-Chairman
Shreyas R. Virani Managing Director
Jonathan Mapgaonkar Director
Mumbai, 28 April, 2006

653
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

DIRECTORS’ REPORT TO THE SHAREHOLDERS

Your Directors present their Sixth Report together with the audited accounts of your Company for the year ended 31st March, 2006.
Financial Results
(Rupees in lakhs)
2006 2005
Income ................................................................................................................................................ 1076.78 691.27
Profit/(Loss) before Depreciation, Interest, taxation ........................................................................... 69.08 (119.74)
Depreciation ........................................................................................................................................ (87.47) (91.54)
(Loss) before Interest, taxation ........................................................................................................... (18.39) (211.28)
Interest and Financial Charges ............................................................................................................ (2.28) (1.99)
(Loss) before taxation ......................................................................................................................... (20.67) (213.27)
Prior period Adjustments .................................................................................................................... – (4.56)
Provision for taxation for the year
– Fringe Benefit Tax (FBT) ................................................................................................................ (7.42) –
– Current Year Deferred Taxes ......................................................................................................... 2.61 (0.72)
(Loss) for the year after taxation ......................................................................................................... (25.48) (218.55)
Extra – Ordinary Expenses .................................................................................................................. (102.05) –
Balance of Loss brought forward from previous year ......................................................................... (1926.07) (1707.52)
Balance carried forward ...................................................................................................................... (2053.60) (1926.07)

Operations
The Income during the year increased significantly by 56% to
Rs.1,077 lakhs as compared to Rs. 691 lakhs during the previous
year. During the year, the Company was acquired by Mahindra
& Mahindra Limited (M&M) for which certain one-time cost
aggregating Rs.102.05 lakhs was incurred by the Company. The
Company earned an operating profit of Rs.69.08 lakhs but
registered a loss of Rs. 25.48 lakhs (prior to the above cited extra
ordinary expenses) during the current year against a loss of Rs.
218.55 lakhs in the previous year reflecting the turn-around
effort that the Company is presently engaged in. During the
year, your Company became a subsidiary of M&M and as on 31st
March, 2006, M&M held 99.03% of the shares of your Company.
The acquisition by M&M is expected to fuel growth of the
Company due to the synergy of operations with Mahindra’s
engineering services activities and the brand image of the
Mahindra Group.
The Company has started making significant inroads into the
aerospace sector and during the year has taken a pioneering and
seminal step forward in this space. It is in the process of executing
an order for manufacturing aircraft component sets for a 2-seater
aircraft for supply to a customer in Jordan at the behest of Australian
Principles for 24 sets of SKD units. The Company is presently
engaged in discussions to further expand its aerospace activities and
believes that aerospace vertical will form a significant part of the
Company’s business plans.
Directors
Consequent upon the transfer of shares to M&M the Company
has become a subsidiary of M&M. In view of the change in the
ownership of the Company, the composition of the Board was
restructured and on 16th February, 2006, Mr. Hemant Luthra,
Dr. Pawan Goenka, Mr. Ulhas N. Yargop and Mr. Prabal Banerji
were appointed as Additional Directors on the Board of the
Company. As per the provisions of section 260 of the Companies
Act, 1956, these Directors hold office only up to the date of the
forthcoming Annual General Meeting of the Company. The
Company has received notices from its members proposing all
the above persons as candidates for the office of Director.
Resolutions seeking approval of the shareholders for their
appointment have been incorporated in the Notice of the
forthcoming Annual General Meeting.
Mr. Cyrus D. Driver, Mr. Gaurav Mathur, Dr. B. R. Somashekar
and Dr. K. N. Raju resigned as Directors of the Company on 16th
February, 2006. The Board has placed on record its appreciation
of the services rendered by them as Directors.
Directors’ Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representations received from the Operating
Management, and after due enquiry, confirm that-
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;

654

(ii) they have, in the selection of the accounting policies, consulted
the Statutory Auditors and these have been applied
consistently and reasonable and prudent judgments and
estimates have been made so as to give a true and fair view
of the state of affairs of the Company as at 31st March, 2006
and of the loss of the Company for the year ended on that date;
(iii) proper and sufficient care has been taken for the maintenance
of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the
assets of the Company and for preventing and detecting
fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern
basis.
Capital
During the year under review, the Company issued and allotted
5,45,653 equity shares of Rs.10 each for cash at par, to the
employees of the Company under the ESOP Scheme, aggregating
Rs.54,56,530. Consequent upon the allotment of the shares, the
paid-up capital of the Company stands increased to Rs.4,50,30,110.
Subsidiaries
The Financial statements and other required details in terms of
section 212 of the Companies Act, 1956 pertaining to the wholly-
owned subsidiaries of your Company viz. (i) Plexion Technologies
Inc., USA; (ii) Plexion Technologies (U.K.) Limited, U.K.; and (iii)
Plexion Technologies GmbH, Germany are attached to the report.
Remuneration Committee
During the year under review, a Remuneration / Compensation
Committee of Directors was constituted to look into the entire
gamut of remuneration package for the Working Director(s) and
revise their remuneration suitably within the limits prescribed
under the Companies Act, 1956. The Committee is also authorised
to fix / review salaries, perquisites and other terms of remuneration
of the Working Director(s) of the Company subject to approvals
of shareholders, where necessary, decide on Commission payable
to Directors within the prescribed limits and to obtain the approval
of the Central Government whenever required.
The Committee presently comprises of Mr. Hemant Luthra as its
Chairman, Dr. Pawan Goenka, Mr. Ulhas N. Yargop and Mr.
Prabal Banerji.
Audit Committee
An Audit Committee comprising Mr. Ulhas N. Yargop (Chairman
of the Committee), Dr. Pawan Goenka and Mr. Prabal Banerji has
been constituted.
Auditors
Messrs Narayanan, Patil & Ramesh, Chartered Accountants,
retire as Auditors of the Company at the forthcoming Annual
General Meeting and have submitted their resignation as auditors
from the Company. The shareholders will be required to appoint
Auditors for the current year and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
Messrs B.K. Khare & Co., Chartered Accountants, to the effect
that their appointment, if made, would be in conformity with the
limits specified in the said section.
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED
Conservation of Energy, Technology Absorption and Foreign
Exchange Earnings & Outgo
The management has taken adequate measures to reduce energy
consumption by using energy efficient computer terminals.
Technology absorption and innovation is a continuous process in
the Company. As your Company progresses, necessary Research
& Development activities would be initiated to meet the technology
requirements for the future. Your Company continues to use the
latest technologies for improving the productivity and quality of its
services and products.
st
Foreign Exchange used and earned for the year ended 31
March, 2006
Rs. in lakhs
Particulars Year ended Year ended
31.03.06 31.03.05
Foreign exchange earnings
(including advances received
from customers) 641.19 860.25
Foreign exchange outflow
(including capital goods) 13.76 68.50
Human Resource Development & Industrial Relations
Your Company continues to regard and recognize its human
power as its best and most valuable asset. The Company’s
human resource policy is to build a strong performance driven
culture with highest sense of accountability and responsibility
with commensurate reward mechanisms linked to the individual
and organization performance. Continuous development of
knowledge, skills and competencies is imperative in the rapidly
changing business environment. Consequently your Company
continuously strives for skill upgradation of the employees.
Deposits and Loans/Advances
The Company has not accepted deposits from the public or its
employees during the year under review.
The Company has not made any loans/advances, which are
required to be disclosed in the annual accounts of the Company
pursuant to Clause 32 of the Listing Agreement with the parent
company, Mahindra & Mahindra Limited.
Particulars of Employees as required under section 217(2A)
of the Companies Act, 1956 and Rules made thereunder
As required under the provisions of section 217(2A) of the
Companies Act, 1956, read with the Companies (Particulars of
Employees), Rules, 1975, as amended, a statement containing
particulars of the Company’s employees who were in receipt of
remuneration of not less than Rs.24,00,000 during the year ended
31st March, 2006 or not less than Rs.2,00,000 per month during any
part of the said year is given in the Annexure to this Report.
For and on behalf of the Board
Hemant Luthra
Chairman
Mumbai, 27th April, 2006 .
655
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

Annexure to the Directors’ Report

Information as per section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975 and
st
forming part of the Directors’ Report for the period ended 31 March, 2006 :

S. Name Designation Qualification Age Date of Experience Remuneration Previous

No. (years) Joining (years) ( Rs.) Employment
& Designation
st
1 Dr. M. K. Padmanabhan President/Director Ph. D. 56 1 Nov., 2000 31 47,51,238 Calleo Consolidated -
Chief Exchange Officer
st
2 Dr. D. H. Bonde Chief Executive Ph. D. 55 1 Oct., 2000 25 44,38,800 DSQ Software Ltd. -
Officer/Director Sr. Vice President

NOTES:
1. Nature of employment is contractual.
2. The above employees are not related to any other Director.
3. No employee holds by himself/herself or along with his/her spouse and dependent children 2% or more of the equity shares of the
Company.
4. Terms and conditions of employment are as per Company’s Rules/Contract.
5. Gross remuneration received as shown in the statement includes Salary, Commission, Bonus, House Rent Allowance or value of
perquisites for accommodation, car perquisites value/allowances as applicable, employer’s contribution to Provident Fund and
Superannuation Scheme including group insurance premium, leave encashment, leave travel facility, reimbursement of medical
expenses and all allowances/perquisites and terminal benefits as applicable.
For and on behalf of the Board

Hemant Luthra
Chairman
Mumbai, 27th April, 2006.

656
 PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

AUDITORS' REPORT
To the members of Plexion Technologies (India) Private Limited
1. We have audited the attached Balance Sheet of Plexion d) In our opinion, the Balance Sheet and Profit and Loss
Technologies (India) Private Limited, as at 31st March 2006 Account dealt with this report comply with the
and the Profit & Loss Account for the year ended on that Accounting Standards referred to in Sub-section (3C)
date annexed thereto. These financial statements are the of Section 211 of the Companies Act, 1956.
responsibility of the company's management. Our
e) On the basis of written representations received from
responsibility is to express an opinion on these Financial
the Directors and taken on record by the Board of
Statements based on our audit.
Directors, we report that none of the Directors of the
2. We conducted our audit in accordance with Auditing company are disqualified as on 31.03.2006 from being
Standards generally accepted in India. Those Standards appointed as Directors of the company under clause
require that we plan and perform the audit to obtain (g) of sub section (1) of Section 274 of Companies Act,
reasonable assurance about whether the financial 1956.
statements are free of material misstatement. An audit
f) In our opinion and to the best of our information and
includes examining, on a test basis, evidence supporting
according to the explanations given to us, the accounts
the amounts and disclosures in the Financial Statements.
together with the notes thereon give the information
An audit also includes assessing the accounting principles
required under the Companies Act, 1956 in the manner
used and significant estimates made by management, as
so required and give a true and fair view in conformity
well as evaluating the overall financial statement
with the accounting Principles generally accepted in
presentation. We believe that our audit provides a
India:
reasonable basis for our opinion.
i) In the case of Balance Sheet, of the state of affairs
3. As required by the Companies (Auditors Report) Order, 2003,
of the company as at 31st March 2006.
issued by the Central Government of India, in terms of Sub-
section (4A) of Section 227 of the Companies Act, 1956, ii) In the case of Profit and Loss Account, of the
we enclose in the Annexure a statement on the matters Loss for the year ended on that date.
specified in paragraphs 4 and 5 of the said order.
4. Further to our comments in the Annexure referred to in
Paragraph 3 above, we report that:
a) We have obtained all the information and explanations, for Narayanan, Patil and Ramesh
which to the best of our knowledge and belief were Chartered Accountants
necessary for the purpose of our audit.
b) In our opinion, proper books of accounts as required
by Law have been kept by the Company so far as
appears from our examination of such books.
Patil Udaya Kumar
c) The Balance Sheet and Profit & Loss Account dealt Partner
with by this report are in agreement with the books of Membership No. 200/25589
account. Bangalore, 27th April, 2006

657
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED
ANNEXURE TO AUDITORS' REPORT
Annexure referred to in paragraph 3 of the Auditors' Report to
the members of PLEXION TECHNOLOGIES INDIA PRIVATE
LIMITED for the year ended 31st March 2006. We report that:
(i) (a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of Fixed Assets.
(b) All the fixed assets have been physically verified by
the management during the year and no material
discrepancies were noticed on such verification.
(c) During the year, the company has not disposed off
any major part of Plant & Machinery that would affect
the Going Concern status of the Company.
(ii) (a) The Inventory has been physically verified during the
year by the management. In our opinion, the
frequency of verification is reasonable.
(b) The procedures of physical verification of inventory
followed by the management are reasonable and
adequate in relation to the size of the company and
the nature of its business.
(c) According to the information and explanations given
to us the provision of Clause 4(ii)(c) is not applicable,
as the company has no inventory.
(iii) According to the information and explanations given to
us, the company has neither granted nor taken any loans,
secured or unsecured, to/from any companies, firms or
other parties covered in the register maintained under
section 301 of the Act. Hence provisions of clause 4(iii),
(a), (iii) (b), (iii) (c), (iii)(d), (iii)(e), (iii) (f), (iii)(g) are not
applicable.
(iv) In our opinion and according to the information and
explanations given to us, there are adequate internal control
procedures commensurate with the size of the company
and the nature of its business, with regard to purchase of
inventory, fixed assets and for the sale of goods to the
extent applicable to the company. During the course of
audit, we have not observed any continuing failure to correct
major weaknesses in internal control.
(v) (a) According to the information and explanations given
to us, we are of the opinion that the contracts or
arrangements that need to be entered into a register
in pursuance of section 301 of the Companies Act,
1956 have been so entered.
(b) In our opinion and according to the information and
explanations given to us, the transactions made in
pursuance of contracts or arrangements entered in
the register maintained under Section 301 of the
Companies Act, 1956 and exceeding the value of
rupees five lakhs in respect of any party during the
year have been made at the prices which are
reasonable having regard to prevailing market prices
at the relevant time.
658
(vi) According to the information and explanations given to us,
the company has not accepted deposits from the public
and hence, the directives issued by the Reserve Bank of
India and the provisions of Sections 58A and 58AA or any
other relevant provisions of the Act and the rules framed
there under, are not applicable to the Company.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
(viii) According to the information and explanations given to us
the provision of clause 4(viii) is not applicable.
(ix) (a) The company is regular in depositing with appropriate
authorities undisputed statutory dues including
Provident Fund, Income Tax, Wealth Tax, Service Tax,
Sales Tax, and any other statutory dues applicable to
it and as at the end of the financial year, there were
no undisputed dues outstanding for a period more
than six months.
(b) According to the information and explanations given
to us, no undisputed amounts payable in respect of
Provident Fund, Income Tax, Sales Tax, Wealth Tax,
Service Tax and other material statutory dues were
in arrears, as at 31.03.2006 for a period of more than
six months from the date they became payable.
According to the information and explanations given
to us, there are no dues of Income Tax, Sales Tax and
Wealth Tax which have not been deposited with
appropriate authorities on account of any dispute.
(x) In our opinion, the accumulated losses of the Company
are more than fifty percent of its net-worth as at 31.03.2006.
Further, the Company has not incurred cash losses during
the current year and the Company had incurred cash losses
during the immediately preceding financial year.
(xi) In our opinion, and according to the information and
explanations given to us, the Company is regular in
repayment of dues to financial institution or banks during
the year.
(xii) In our opinion, the company has not granted any loans and
advances on the basis of security by way of pledge of
shares, debentures and other securities. Hence,
maintenance of records is not applicable.
(xiii) In our opinion, the company is not a chit fund or nidhi mutual
benefit fund/society and therefore, the provisions of clause
4(xiii) of the Order are not applicable to the company.
(xiv) According to the information and explanations given to us,
the company is not dealing in or trading in shares, securities,
debentures and other investments and accordingly, the
provisions of clause 4(xiv) of the Order are not applicable
to the company.
(xv) According to the information and explanations given to us,
the company has not given guarantees for loans taken by
others from banks accordingly, the provisions of clause 4(xv)
of the Order is not applicable to the company.
 PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

(xvi) In our opinion and according to the information and (xx) According to the information and explanations given to us,
explanations given to us, the term loans from banks have the provisions of Clause 4(xx) of the Order are not applicable
been applied for the purpose for which they were raised. to the company since the company has not raised any
money through public issue of shares.
(xvii) According to the information and explanations given to us
and on an over all examination of the balance sheet of the (xxi) According to the information and explanations given to us,
company, we report that no funds raised on short-term no fraud on or by the company has been noticed or reported
basis have been used for long-term investment. during the course of our audit.
(xviii) According to the information and explanations given to us,
the company has not made any preferential allotment of
shares during the year to parties and companies covered for Narayanan, Patil and Ramesh
in the Register maintained under Section 301 of the Act Chartered Accountants
and therefore, the provisions of clause 4(xviii) of the Order
are not applicable to the company.
(xix) According to the information and explanations given to us, Patil Udaya Kumar
the Company has not issued any debenture and therefore, Partner
the provisions of clause 4(xix) of the Order are not applicable Membership No. 200/25589
to the company. Bangalore, 27th April, 2006

659
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

BALANCE SHEET AS AT 31ST MARCH 2006

SCHEDULE As at As At
31-Mar-06 31-Mar-05
(Rupees) (Rupees)
I. SOURCES OF FUNDS
1. Share Holders' Funds
a. Share Capital A 45,030,110 39,573,580
b. Reserves and Surplus B 197,866,900 197,866,900
2. Loan Funds
a. Secured Loans C 2,653,010 2,622,046
b. Unsecured Loans D 7,500,000 —

253,050,020 240,062,526

II. APPLICATION OF FUNDS

1. Fixed Assets E
Gross Block 59,765,159 54,523,014
Less : Depreciation 42,898,252 34,151,567
Net Block 16,866,907 20,371,447
2. Investments F 24,252,077 42,452,077
3. Deferred Tax Asset 535,715 274,282
4. Current Assets, Loans & Advances
a. Investories - Work in Progress 372,925 265,050
b. Sundary Debtors G 31,748,741 21,065,131
c. Cash & Bank Balances H 8,183,657 2,555,804
d. Loans and Advances I 6,817,652 6,267,044
Sub-Total ................................................................... 47,122,976 30,153,029
Less : Current Liabilities & Provisions ....................... J
a. Liabilities ................................................................ 38,056,378 43,614,396
b. Provisions .............................................................. 3,030,666 2,180,737
Sub-Total ................................................................... 41,087,044 45,795,133
Net Current Assets .................................................... 6,035,932 (15,642,104)
Miscellaneous Expenditure to the
extent not written off or adjusted
a. Profit & Loss Account ............................................ 205,359,389 192,606,824
Total Application of Funds ...................................... 253,050,020 240,062,526
Notes to Accounts ..................................................... Q

For and on behalf of the Board of Directors "As per our report of even date"
for Plexion Techologies (India) Pvt. Ltd. for Narayanan, Patil and Ramesh
Chartered Accountants
Mr. Hemant Luthra Dr. Pawan Goenka Patil Udaya Kumar
Chairman Director Partner
M No: 200/25589
Bangalore
Mr. Ulhas N. Yargop Mr. Prabal Banerji Date : April 27, 2006
Director Director

Dr. M.K. Padmanabhan Dr. D.H. Bonde Devika Sathyanarayana

Director Director Company Secretary
Mumbai
April 27, 2006

660
 PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

PROFIT & LOSS ACCOUNT

Particulars SCHEDULE For the year ended For the year ended
31-Mar-06 31-Mar-05
(Rupees) (Rupees)
I. INCOME
Income from Operations
Software / Engineering services - Export ................... K 103,182,094 62,041,060
Software / Engineering services - Inland ................... 3,516,753 4,403,020
Other Income ............................................................. L 871,221 2,417,888
Work in Progress ....................................................... 107,875 265,050
TOTAL (A) 107,677,943 69,127,018

II. EXPENDITURE
Direct Operating Expenses ........................................ M 58,003,266 49,067,171
General & Administrative Expenses .......................... N 40,612,423 30,560,218
Sales & Marketing Expenses ..................................... O 2,154,694 1,473,231
Interest & Financial charges ...................................... P 227,560 199,091
Depreciation ............................................................... E 8,746,685 9,153,496
TOTAL (B) .................................................................. 109,744,628 90,453,207

Profit /(Loss) for the period (A) - (B) ................................. (2,066,686) (21,326,189)
Add : Prior period adjustments ........................................ — (456,716)
Net Profit before Taxes .................................................... (2,066,686) (21,782,904)
Less : Provision for Taxation - FBT ................................... 742,312 —
Add : Current Year Deffered Taxes ................................... 261,433 (72,150)
Net Profit after Taxes ....................................................... (2,547,565) (21,855,054)
Less : Extra-ordinary Expenses ........................................ 10,205,000 —
Add : Balance Brought forward from previous year ......... (192,606,824) (170,751,770)
Balance transferred to balance sheet .............................. (205,359,389) (192,606,824)

Earnings Per Share

a. Basic Earnings Per Share ........................................... (3.13) (5.88)
b. Diluted Earnings Per Share ........................................ (2.54) (4.97)
Notes to Accounts Q

For and on behalf of the Board of Directors "As per our report of even date"
for Plexion Techologies (India) Pvt. Ltd. for Narayanan, Patil and Ramesh
Chartered Accountants

Mr. Hemant Luthra Dr. Pawan Goenka Patil Udaya Kumar

Chairman Director Partner
M No: 200/25589
Bangalore
Mr. Ulhas N. Yargop Mr. Prabal Banerji Date : April 27, 2006
Director Director

Dr. M.K. Padmanabhan Dr. D.H. Bonde Devika Sathyanarayana

Director Director Company Secretary
Mumbai
April 27, 2006

661
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006
Particulars 31/03/06 31/03/05
Rs. Rs. Rs.
A. CASH FLOW FROM OPERATING ACTIVITIES :
Net Profit/(Loss) before taxation ............................. (2,066,686) (21,782,904)
Adjustment for :
Depreciation/Amortisation ...................................... 8,746,685 9,153,496
Extra-ordinary items ............................................... (10,205,000) —
Interest Income ...................................................... (45,811) (42,563)
Interest and Finance Charges ................................ 180,730 70,734
Profit on sale of Fixed assets (net) ......................... — (47,889)
Profit on sale of Investments ................................. (825,410) (289,994)
(2,148,806) 8,843,784
Operating Profit before Working Capital Changes (4,215,492) (12,939,120)
Changes in :
Trade and other receivables ................................... (11,234,218) (8,928,643)
Inventories ............................................................. (107,875) (240,860)
Trade and other payables ....................................... (4,708,090) 36,718,537
(16,050,183) 27,549,034
Cash Generated from Operations ........................... (20,265,675) 14,609,914
Income Taxes Paid ..................................................... — —
Fringe Benefit Tax Paid .............................................. (742,312) —
Net cash from Operating activities ......................... (21,007,987) 14,609,914

B. CASH FLOW FROM INVESTING ACTIVITIES :

Purchase of fixed assets ........................................... (5,242,145) (12,524,095)
Sale of fixed assets .................................................... — 329,194
Purchase of Investments ........................................... — (16,500,000)
Sale of Current Investments ...................................... 18,200,000 —
Interest received / Profit on sale of Investment ........ 871,221 332,557
Net cash used in Investing activities ............................ 13,829,076 (28,362,344)
C. CASH FLOW FROM FINANCING ACTIVITIES :
Issue of Share Capital ................................................ 5,456,530 12,926,300
Inter corporate deposits (net) .................................... 7,500,000 —
Proceeds from borrowings ........................................ 1,100,000 2,573,000
Repayment of borrowings ......................................... (1,069,036) (545,608)
Interest and Finance Charges .................................... (180,730) (70,734)
Net cash used in Financing activities 12,806,764 14,882,957
Net increase/(Decrease) in Cash and Cash equivalents 5,627,854 1,130,528
Opening Balance ........................................................ 2,555,804 1,425,276
Closing Balance 8,183,657 2,555,804

As per our report attached to the Balance Sheet For and on behalf of the Board
For Narayanan, Patil and Ramesh Mr. Hemant Luthra Mr. Prabal Banerji
Chartered Accountants Chairman Director

Patil Udaya Kumar Dr. Pawan Goenka Dr. M.K. Padmanabhan

Partner Director Director
M No: 200/25589

Mr. Ulhas N. Yargop Dr. D.H. Bonde

Director Director

Bangalore Mumbai Devika Sathyanarayana

Date : 27 April, 2006 Date: April 27, 2006 Company Secretary

662
 PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

Schedules forming Part of Balance Sheet

(Rs.) (Rs.)
As At As At As At As At
31/03/06 31/03/05 31/03/06 31/03/05
Schedule 'B' for Reserves and Surplus
Schedule 'A' for Share Capital Shares Premium Account
Authorised Opening Balance 197,866,900 168,971,250
50,00,000 Equity shares of Rs. 10/- each 50,000,000 50,000,000 Add : Additions during the year — 28,895,650
(Previous year 50,00,000 equity shares
Closing Balance 197,866,900 197,866,900
of Rs. 10/- each)
Issued, Subscribed and Paid - up Schedules 'C' for Secured Loans
45,03,011 Equity shares of Rs. 10/- each 45,030,110 39,573,580 Vehicles loan from ICICI Bank Ltd. 2,653,010 2,622,046
(Previous year 39,57,358 equity shares (Secured against hypothecation of Vehicles)
of Rs. 10/- each) — — 2,653,010 2,622,046
Share Application Money Pending allotment Schedule 'D' for Unsecured Loans
45,030,110 39,573,580 Inter Company Loan taken from
Mahindra & Mahindra Ltd 7,500,000 —
7,500,000 —

Schedule 'E' for Fixed Assets (In Rs.)

Descriptions Gross Block Depreciation Net Block
Cost Additions Deletions Cost Upto the For the period Deletion Total As at As at
as at during during as at period during 31.03.2006 31.03.2005
01.04.2005 the period the period 31.03.2006 the period

Furniture & Fixtures 5,640,580 1,203,059 6,843,639 1,625,191 1,001,625 2,626,816 4,216,823 4,015,389

Office Equipments 1,500,681 390,939 1,891,620 1,307,929 253,112 1,561,041 330,579 192,752

Eletrical Installations 2,054,982 191,406 2,246,388 688,547 215,526 904,073 1,342,315 1,366,435
Computer Hard ware 14,931,938 1,890,163 16,822,101 13,421,869 1,396,866 14,818,735 2,003,366 1,510,069

Computer Software 26,513,003 352,778 26,865,781 16,348,841 4,949,516 21,298,357 5,567,424 10,164,162

Motor Vehicles 3,881,830 1,213,800 5,095,630 759,190 930,040 1,689,230 3,406,400 3,122,640

Total 54,523,014 5,242,145 — 59,765,159 34,151,567 8,746,685 — 42,898,252 16,866,907 20,371,447

Previous year 42,391,113 12,524,095 392,194 54,523,014 25,108,960 9,153,496 110,889 34,151,567 20,371,447 17,282,154

(Rs.) (Rs.)
As At As At As At As At
31/03/06 31/03/05 31/03/06 31/03/05

Schedule 'F' for Investments

(278737.88 units at Rs. 10.9545 per unit.
Long Term, at cost - Trade
Market Value Rs. 30,53,434)
In Wholly Owned Subsidiaries
Investment DSP Merrill Liquid Fund 200,000 200,000
Plexion Technologies Incorporated, USA
(11871.344 units at Rs. 17.1446 per unit.
(at diminished value) 16,913,637 16,913,637
Market Value Rs. 2,03529.44)
(590 Shares at US $ 1000 each.
Investment Gindlays Floating Rate — 600,000
Cost Rs. 28,149,527/-)
(55933.271 units at Rs. 11.0663 per unit.
Plexion Technologies (U.K.) Limited (at cost) 4,581,500 4,581,500
Market Value Rs. 6,18,974)
(65,000 Shared of GBP 1 each.)
Investment JM Floater Fund — 5,000,000
Plexion Technologies GmbH, Germany (at cost) 2,566,940 2,556,940
(465270.417 units at Rs. 10.9098 per unit.
(59,000 Shares of Euro 1 each.)
Market Value Rs. 50,76,007)
Current Investment, at lower of cost or
Investment PruICICI Liquid Fund — 1,100,000
Market Value - Non-Trade
(69734.058 units at Rs. 16.2962 per unit.
Investment - DSPML Floating Rate Fund — 2,700,000
Market Value Rs. 11,36,400)
(252198.740 units at Rs. 10.9783 per unit.
Investment Templetion Floating Rate — 2,500,000
Market Value Rs. 27,68,713)
(210899.275 units at Rs. 11.9635 per unit.
Investment HDFC Floating Rate — 1,500,000
Market Value Rs. 25,23,093)
(134950.338 units at Rs. 11.1297 per unit.
Investment Templetion TMA — 300,000
Market Value Rs. 15,01,957)
(826.620 units at Rs. 1656.9959 per unit.
Investment SBI Magnum Income Fund Floating — 1,500,000
Market Value Rs. 3,62,397)
(145243.282 units at Rs. 10.3443 per unit.
24,252,077 42,452,077
Market Value Rs. 15,02,440)
Investment Birla Floaters — 3,000,000

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PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

Schedules forming Part of Balance Sheet (Contd...)

(Rs.) (Rs.)
As At As At As At As At
31/03/06 31/03/05 31/03/06 31/03/05
Schedule 'G' for Sundry Debtors Schedule 'M' for Direct Operating Expenses
(Unsecured, considered good) Salary - Technical 33,010,293 24,272,015
Debts outstanding for a period Contribution to Provident & Other Funds 1,351,478 1,014,599
exceeding six months — 170,510
Staff Welfare 3,522,210 3,098,359
Other Debts 22,815,697 16,551,473
Communication Expenses 2,658,494 2,519,056
Unbilled Receivable 8,933,044 4,343,148
Training and Recruitment Expenses 675,404 979,286
31,748,741 21,065,131
Travelling Expenses - Domestic 602,646 89,830
Schedule 'H' for Cash & Bank Balances Travelling Expenses - Foreign 1,707,222 360,681
Cash in hand 27,591 26,708 Direct Expenses - Others 726,642 6,976,013
Cash at bank Engineering Contract related Expenses 10,766,423 4,893,835
With scheduled banks Power, Fuel & Water charges 2,837,833 2,520,363
-– in Current Accounts 7,250,875 1,480,170 Software expenses 7,990 2,245,022
– in Deposit Accounts 863,861 1,008,512 Clearing & Forwarding charges 136,631 98,112
– in EEFC USD Current Account 41,330 40,414 58,003,266 49,067,171
8,183,657 2,555,804
Schedule 'N' for General & Administrative Expenses
Schedule 'I' for Loans & Advances Books & Periodicals 19,440 19,252
Deposits 4,801,860 5,017,860 Brokerage for real estate — 417,260
Advances recoverable in cash or kind 970,404 223,255 Local conveyance & rental charges 2,682,533 634,456
Advances towards capital expenses 735,000 306,407 Entertainment & Hospitality 207,505 212,927
Income Tax refundable 38,801 7,330 Directors Fee - Board Meeting 10,000 10,000
Prepaid Expenses 271,587 712,192 Insurance 159,798 81,382
6,817,652 6,267,044 Membership & Subscriptions 40,400 10,279
Miscellaneous expenses 5,265 3,840
Schedule 'J' for Current Liabilities & Provisions Office Maintenance 1,243,653 1,104,680
Current Liabilities Office Rent 5,677,408 5,177,704
Sundry Creditors for Capital Goods 362,497 404,141 Office Shifting Expenses — 16,050
Sundry Creditors for Expenses 34,994,831 10,770,959 Postage and courier charges 71,053 54,814
Statutory Liabilities 1,210,682 1,518,534 Professional & Legal charges 2,444,419 5,883,710
Advace received from customers 1,488,368 30,920,762 Rates & Taxes 107,957 160,597
38,056,378 43,614,396 Repairs & Maintenance - Plant & Machinery 38,797 14,335
Provisions - Others 662,436 451,651
Employee retirement benefits 3,030,666 2,180,737 Salary - Management & Support Staff 23,713,454 14,652,619
3,030,666 2,180,737 Registration & Seminar Fees 309,838 119,768
41,087,044 45,795,133 Stationery & Consumables 1,154,468 701,456
Vehicle Maintenance 244,053 555,135
Schedules forming Part of Profit and Loss Watch & Ward 266,976 137,803
Audit Fees 322,946 140,500
Account As At
(Rs.)
As At Difference in Exchange Rates 1,230,024 —
31/03/06 31/03/05 40,612,423 30,560,218
Schedule 'K' for Income from Operations
Export Income Schedule 'O' for Sales & Marketing Expenses
Software/Engineering service rendered 36,729,684 42,512,392 Salary for Marketing Personnel 269,876 —
Marketing and Other Services 7,375,607 8,246,495 Postage & Courier 3,225 6,000
Sourcing and Training Services 2,664,150 2,720,240 Entertainment & Hosp. 351,392 141,148
Engineering Contract Revenue 47,596,309 5,949,000 Stationery & Consumables 15,000 3,495
Unbilled revenue 8,816,344 2,612,933
Travel Expenses - Domestic 215,895 31,840
103,182,094 62,041,060
Travel Expenses - Foreign 1,288,885 1,270,271
Schedule 'L' for Other Income Other Expenses 10,421 20,477
Interest on FD's & Margin Deposits 41,974 36,199 2,154,694 1,473,231
Interest - Others 3,837 6,364
Other Income — 103 Schedule 'P' for Interest & Financial Charges
Profit on Sale of Fixed Asset — 47,889 Bank Charges 46,830 128,356
Profit on Short Term Investment 825,410 289,994 Interest on Vehicle Loan 178,881 70,734
Difference in Exchange rates — 2,037,339 Interest on Corporate Loan 1,849 —
871,221 2,417,888 227,560 199,091

664

Schedule 'Q' to the Balance Sheet and Profit and Loss Account
I. Significant Accounting Policies
1. Basis for preparation
The financial statements have been prepared in accordance with the
Generally Accepted Accounting Principles (GAAP) under the historical cost
convention and on accrual basis and in accordance with the provisions of
the Companies Act, 1956 and the accounting standards issued by ICAI, as
adopted consistently by the Company.
2. Use of estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Examples of such
estimates include, estimates of expected contract costs to be incurred to
complete software development, provision for doubtful debts, and the
useful lives of fixed assets. Actual results could differ from those esti-
mates.
Management periodically assesses using external and internal sources
whether there is an indication that an asset may be impaired. Impairment
occurs where the carrying value exceeds the present value of future cash
flows expected arise from the continuing use of the asset and its eventual
disposal. The impairment loss to be expensed is determined as the excess
of the carrying amount over the higher of the asset's net sale price or
present value as determined above. Contingencies are recorded when it is
probable that a liability will be incurred, and the amount can be reasonably
estimated. Actual results could differ from these estimates.
3. Expenditure
Expenses are accounted on the accrual basis and provision is made for all
known losses and liabilities.
4. Fixed Assets
Fixed assets are stated at the cost of acquisition less accumulated
depreciation. Direct costs are capitalized.
5. Depreciation
Depreciation on fixed assets is provided using the straight-line method,
based on useful lives as estimated by the management. Depreciation is
charged on a pro rata basis for assets purchased/transfered during the year.
Individual assets costing less than Rs. 5,000/- are depreciated in full in the
year of purchase. The management's estimate of useful lives for the
various fixed assets is given below:
Computer Software 2-5 years
Office equipment 2-3 years
Computer hardware 3-4 years
Vehicles 5 years
Furniture & fixtures 6 years
Electrical equipment 7 years
6. Retirement benefits
Gratuity
In accordance with payment of Gratuity Act 1972, the company provides
for gratuity, a defined retirement benefit plan covering all employees based
on an actuarial valuation.
Provident Fund
The Company gives provident fund benefits to all eligible employees as per
the provisions of the Provident Fund Act, in which both the employer and
employee make matching monthly contributions.
Other Benefits
The Company also gives ESI benefits to all eligible employees as per the
provisions of the Employees State Insurance Act, in which both the
employer and employee make the required monthly contributions.
With respect to earned leave, the liability is recognized based on the
unavailed leave to the credit of the employee as on the date of Balance
Sheet on actual basis.
7. Foreign Currency Translation
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED
Export Revenues and collections deposited in foreign currency bank
accounts are recorded at the exchange rate as of the date of the respective
transactions. Expenditure in foreign currency is accounted at the exchange
rate prevalent when such expenditure is incurred. In the case of current
assets and current liabilities expressed in foreign currency, the exchange
rate prevalent on the Balance Sheet date is applied to restate the assets and
liabilities. Exchange differences arising on foreign currency transactions
are recognized as income or expenditure in the year in which they arise.
8. Revenue Recognition
a) Revenue from income on Software Engineering Services is recognised
upon completion of milestone described in customer orders wherever
payments are linked to such milestones. In cases where services are
rendered on a Time and Material basis without milestones, Revenue
is recognised upon completion of such services on a Time and Material
basis.
b) Revenue from income on Marketing support services is recognized on
the basis of services rendered by the company pursuant to Agree-
ments with Customers based on the rendering and completion of
services by such customers to their eventual clients.
c) Revenue from income on Sourcing and training is recognized on the
basis of services rendered by the company pursuant to Agreement
with Customers.
d) Unbilled revenue represents the amounts recognized, based on the
services performed as above, in advance of billing in accordance with
contract terms.
e) Revenue from Engineering Contracts are determined based on per-
centage completion method as the aggregate of the profits earned on
the projects completed/under completion and the cost of project work
done during the period. Profit so recognized in respect of individual
projects is adjusted to ensure that it does not exceed the estimated
overall profit margin. Loss on projects, if any, is fully provided for.
Stage of completion of the projects in progress is determined on the
basis of the proportion that the contract costs incurred in respect of
individual projects for work performed upto the period of the financial
statements bears to the estimated total project cost. Income recog-
nized as Engineering Contract Revenue during the period is based on
the lower of % of the costs incurred as determined above and stage
of completion as certified by the Engineering Department.
This necessarily involves making estimates by the company, some of
which are of technical nature, concerning wherever relevant, the
percentages of completion, costs to completion, the expected rev-
enues from the project activity and foreseeable losses to completion,
which have been relied by the auditors.
f) Revenue on interest on fixed deposits with banks is recognised on
accrual basis, considering amount outstanding and rate applicable.
Income from Dividends are recognized when right to receive the same
is established.
9. Income Tax and Deferred Taxes:
The differences that result between the profit offered for Income Taxes and
the profit as per the financial statements are identified, and thereafter a
deferred tax asset or deferred tax liability is recorded for timing differences,
namely the differences that originate in one accounting period and reverse
in another, based on the tax effect of the aggregate amount being
considered. The tax effect is calculate on the accumulated timing differ-
ences at the end of an accounting period based on prevailing enacted or
substantially enacted regulations. Deferred tax assets are recognized only
to the extent that there is virtual certainly supported by convincing evidence
that they will be realized and are reviewed for the appropriateness of their
respective carrying values at each balance sheet date.
10. Investments
Investments are classified into Current Investments and Long Term
Investments. Current investments are carried in the Balance Sheet at lower
of Cost or Fair Market Value as on the date of Balance Sheet. Long Term
Investments are stated at cost unless there is a decline, other than
temporary, in value thereof in which case the recorded value is reduced to
recognize the decline.
11. Employee Stock option scheme
The excess of fair market value (as determined by the Board) of the
665
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

underlying equity shares as of the date of the grant of the options over the 6. Related Party Disclosure
exercise price of the options, including up-front payments, if any, is A. Related parties during the year ending on 31.03.2006 is as follows:
recognized and amortized on a straight line basis over the vesting period.
Holding Company Mahindra & Mahindra Limited
12. Events occurring after the date of Balance Sheet Subsidiary Companies Plexion Technologies Incorporated, USA.
All material events occurring after the date of Balance Sheet which has a Plexion Technologies (U.K.) Limited, UK.
Plexion Technologies GmbH, Germany.
bearing on the current year financials are taken into cognizance.
Fellow Associate Automartindia Ltd.
13. Earnings per Share Companies Bristlecone Ltd.
Bristlecone Inc.
Basic earnings per share is computed by dividing net income by the
Mahindra Gesco Developers Ltd.
weighted average number of common stock outstanding during the period. Mahindra Acres Consulting Engineers Ltd.
The number of shares used in computing diluted earnings per share Mahindra Ashtech Ltd.
comprises the weighted average shares considered for deriving basic Mahindra Automotive Steels Pvt. Ltd.
earning per share, and also the weighted average number of equity shares Tech Mahindra Ltd.
Tech Mahindra GmbH
that could have been issued on the conversion of all dilutive potential equity
Tech Mahindra (Americas) Inc.
shares. The diluted potential equity shares are adjusted for the proceeds Mahindra-BT Investment Company
receivable, had the shares been actually issued at fair value (i.e., the (Mauritius) Ltd.
average market value of the outstanding shares). Diluted potential equity Tech Mahindra (Singapore) Pte. Ltd.
shares are deemed converted as of the beginning of the period, unless Tech Mahindra (Thailand) Ltd.
issued at a later date. Bristlecone India Ltd.
Bristlecone GmbH
II. NOTES ON ACCOUNTS Bristlecone Singapore Pte. Ltd.
Mahindra (China) Tractor Company Ltd.
1. Corporate Transaction: Mahindra Engg & Chem Products Ltd.
The Shareholders of the Company have entered into Agreements with M/ Mahindra Engineering Design &
Development Company Ltd. (MEDDCL)
s. Mahindra and Mahindra Limited (M&M), under which, upto March 31,
Mahindra Europe s.r.l.
2006, 99.03% of the shares of the Company have been sold to M&M under Mahindra Gujarat Tractor Ltd.
the terms of the Agreements entered into between the said Shareholders, Mahindra Holdings & Finance Ltd.
the Company and M&M. Consequent to the said Agreements and the Mahindra Holidays & Resorts India Ltd.
recording of the transfer of shares in favour of M&M, the company has Mahindra Holidays & Resorts (USA) Inc.
become a subsidiary of M&M. Mahindra Insurance Brokers Ltd.
Mahindra Infrastructure Developers Ltd.
2. Contingent Liabilities Mahindra Intertrade Ltd.
As of March 31, 2006, the company had issued a guarantee in favour of Bristlecone UK Ltd.
Mahindra International Ltd.
Customs Authorities, Bangalore for a value of Rs. 37.28 Lakhs. Mahindra World City Developers Ltd.
As of March 31, 2006, outstanding commitments under Capital Contracts Machindra Logisoft Business Solutions Ltd.
(net of advances) amounts to Rs. 29.40 Lakhs. Mahindra Middleeast Electrical Steel Service
Centre (FZE)
3. Managerial Remuneration to the Directors Mahindra & Mahindra Financial Services Ltd.
Mahindra & Mahindra South Africa (Pty) Ltd.
Amount in Rs. Mahindra Overseas Investment Company
Paritculars 2005-06 2004-05 (Mauritius) Ltd.
Mahindra Realty Ltd.
Salaries & Bonus 22,362,080 7,840,980 Mahindra Renault Pvt. Ltd.
Contribution to PF Nil Nil Mahindra Steel Service Centre Ltd.
Mahindra Shubhlabh Services Ltd.
Perquisites 349,084 284,298 Mahindra SAR Transmission Pvt. Ltd.
Total 22,711,164 8,125,278 Mahindra USA Inc.
Mahindra Ugine Steel Company Ltd.
4. Auditors Remuneration Mahindra World City (Jaipur) Ltd.
NBS International Ltd.
Remuneration to auditors are as below : Tech Mahindra (R & D Services) Ltd.
Amount in Rs. Tech Mahindra (R & D Services) Inc.
Particulars 2005-06 2004-05 Tech Mahindra (R & D Services) Pte. Ltd.
Stokes Group Limited
Towards Statutory Audit Fees 222,950 99,180 Jensand Limited
Towards Tax Audit Fees 28,060 27,550 Stokes Forgings Dudley Limited
Stokes Forgings Limited
Certification & other matters 47,141 29,805 Tech Mahindra Foundation
* The amounts shown above are including Service Tax. Mahindra Inframan Water Utilities Pvt. Ltd.
Mahindra Sona Ltd.
5. Wholly Owned Subsidiary Companies Mahindra Water Utilities Ltd.
PSL Erickson Ltd.
Plexion Technologies Inc. - USA Owens Corning (India) Ltd.
Siroplast Ltd.
The company has invested a sum of US $ 590,000 in its wholly owned Subsidiary in Mahindra Construction Company Ltd.
the US against which the said Subsidiary viz., Plexion Technologies Inc. has issued Officemartindia.com Ltd.
590 shares of US $ 1,000 each amounting to US $ 590,000 towards this investment. Rathna Bhoomi Enterprises Pvt. Ltd.
Kota Farm Services Ltd.
Plexion Technologies (U.K.) Ltd., United Kingdom Mriyalguda Farm Solution Ltd.
Mega One Stop Farm Services Ltd.
The company has invested a sum of GBP 65,000 in its wholly owned Subsidiary in Directors-Whole Time Dr. M K Padmanabhan
the UK against which the said Subsidiary viz., Plexion Technologies (U.K.) Limited has Dr. Dilip H Bonde
issued GBP 65,000 shares of GBP 1 each towards this investment. Directors-Others Mr. Hemant Luthra
Mr. Ulhas N Yargop
Plexion Technologies GmbH, Germany Dr. Pawan Kumar Goenka
Mr. Prabal Banerji
The company has invested a sum of Euro 59,000 in its Wholly Owned Subsidiary in Mr. Gaurav Mathur (Till 16/02/2006)
Germany against which the said Subsidiary viz., Plexion Technologies GmbH, has Mr. Cyrus Driver (Till 16/02/2006)
issued 59,000 Shares of Euro 1/- each amounting to Euro 59,000 towards this Dr. B. R. Somashekar (Till 16/02/2006)
investment. Dr. K. N. Raju (Till 16/02/2006)

666
 PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

B. Summary of Transactions with Related Parties are as below:

Rs. in Lakhs
Nature of Transaction Plexion, Plexion, Plexion MEDDCL Mahindra &
USA UK Germany Mahindra
Investments made by the company during the year Nil Nil Nil Nil Nil
Amount receivable / (payable) as on 31.03.2006 40.79 50.43 (14.88) 18.41 Nil
Amount Payble as Corporate Loan as on 31.03.2006 Nil Nil Nil Nil 75.02
(including accrued interest)
Services rendered during the year (net of taxes) 115.39 274.06 47.07 18.41 Nil

Managerial remuneration paid to the directors of the company are disclosed in Note 3. above.

7. Details of ESOP Number of equivalent share options granted, exercised and forfeited during the year
Plexion Technologies Employee Stock Option Plan 1: under "Plexion Technologies Employee Stock Option Plan 2" for employees of
This Plan was introduced during the Financial Year 2005-06. During the current Plexion Technologies (India) Private Limited.
year, the Company has not granted any fresh options under this scheme.
Number of equivalent share options granted, exercised and forfeited during the Particulars Year ended
year, under "Plexion Technologies Employee Stock Option Plan 1" for employees 31.03.2006 31.03.2005
of the Wholly Owned Subsidiary companies of the Company:
Equivalent shares Options outstanding at Nil Nil
Particulars Year ended the beginning of the year
31.03.2006 31.03.2005 Granted during the year 207,910 Nil
Equivalent Shares Options outstanding at 45,275 Nil Less: Exercised during the year 118,384 Nil
the beginning of the year
Forfeited during the year 910 Nil
Granted during the year Nil 45,650
Less: Exercised during the year 5,075 Nil Equivalent shares Options outstanding at 88,616 Nil
the end of the year
Forfeited during the year 4,075 375
Equivalent shares Options outstanding at 36,125 45,275 8. Quantitative Details
the end of the year The Company is primarily engaged in IT enable engineering services and
Number of equivalent share options granted, exercised and forfeited during the year Engineering Contract Business. The production and sales of engineering ser-
under "Plexion Technologies Employee Stock Option Plan 1" for employees (includ- vices cannot be expressed in any generic unit. However, the quantitative details
ing whole-time directors) of Plexion Technologies (India) Private Limited. with respect to Engineering Contract Business are given below.
Details of raw materials consumed:
Particulars Year ended
31.03.2006 31.03.2005 Description Unit 2005-06 2004-05
Quantity Value Quantity Value
Equivalent shares Options outstanding at 8,45,539 Nil
the beginning of the year MS Plates Kgs 30,854.29 1,234,557 27,458.32 974,490
Granted during the year Nil 846,289 Others 308.34 43,984 1,558.00 166,987
Less: Exercised during the year 3,86,844 Nil
Forfeited during the year 6,845 750 Total 31,162.63 1,278,541 29,016.32 1,141,477
Equivalent shares Options outstanding at 4,51,850 845,539
the end of the year Consumption :
Plexion Technologies Employee Stock Option Plan 2: Particulars 2005-06 2004-05
During the year, company has granted 55,040 equivalent shares as employee stock Value % Value %
options to the employees of the wholly owned subsidiaries of the Company as per
terms enunciated in the "Plexion Technologies Employee Stock Option Plan 2" and Indegenous 1,278,541 100% 1,141,477 100%
has forfeited 1,500 equivalent shares as employee stock options during the year. Imported 0 0% 0 0%
Also the company has granted 207,910 equivalent shares as employee stock option
to its own employees/directors as per the terms enunciated in the "Plexion Technolo- Total 1,278,541 100% 1,141,477 100%
gies Employee Stock Option Plan 2" and has forfeited 910 equivalent shares as
employee stock options during the year. 9. Extra-Ordinary Expenses shown Profit & Loss account:
The amortization during the current year on the basis of Fair Market Value of Shares During the current year, pursuant to the Corporate transaction entered into by the
on the date of grant, including the reversal on forfeited options, amounts to a sum shareholders of the company, the Company has incurred the sum Rs. 102.05
of Rs. Nil, since the Fair Market Value of Shares was lesser than the Excercise Price Lakhs in the nature of extra-ordinary items and the same is disclosed separately
of Options. Number of equivalent share options granted, exercised and forfeited in the Financial Statements. The amount spent is in the nature of legal fees for
during the year, under "Plexion Technologies Employee Stock Option Plan 2" for the transaction aggregating to the value of Rs. 1.40 lakhs and Continuance Bonus
employees of the Wholly Owned Subsidiary companies of the Company: payable by the Company to its two whole time Directors, pursuant to the
Corporate Transaction mentioned in Notes II (1) above, aggregating to the total
Particulars Year ended value of Rs. 100.65 Lakhs.
31.03.2006 31.03.2005 10. Details of Engineering Contracts in Progress:
Equivalent shares Options outstanding at Nil Nil During the current year, the Company has incurred expenses amounting to
the beginning of the year Rs. 67.04 Lakhs towards engineering contracts that are considered for revenue
Granted during the year 55,040 Nil recognition under percentage of completion method. Of this, Rs. 3.73 Lakhs has
been considered as work-in-progress. Revenues recognized during the current
Less: Exercised during the year 35,350 Nil
year with respect to such contracts amounted to Rs. 440.31 Lakhs.
Forfeited during the year 1,500 Nil
11. Transaction in foreign currency
Equivalent shares Options outstanding at 18,190 Nil
Earnings in foreign exchange (on cash basis) during the year is Rs. 641.19 Lakhs
the end of the year
including advance received from customer. (Previous year Rs. 860.25 Lakhs).

667
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

Expenditure in foreign exchange (on cash basis) are as follows: 14. Deferred Taxation
Amount in Rs. Lakhs
During the year, the Company has accounted for taxes on income as per AS 22-
Particulars Year ended Accounting for Taxes on Income, has accounted for Rs. 2.61 Lakhs towards
2005-2006 2004-2005 deferred tax asset, arising out of timing differences on account of depreciation
and has considered the same as a charge to profit and loss account.
A Towards purchase of capital goods Nil 4.92
B Towards revenue expenses 13.76 63.59 The company has during the year, unabsorbed depreciation and carry forward
losses in respect of its domestic division. In the absence of certainty of future
12. Operating Lease: taxable income from the domestic division, the company has not recognized any
deferred tax asset in respect of such unabsorbed depreciation or carried forward
The Company has taken various residential / commercial premises and plant and losses of its domestic division.
machinery on cancelable operating lease. These agreements are normally
renewed on expiry. These lease agreements provide for an option for the 15. Disclosure of EPS
Company to renew the lease period at the end of the non-cancellable lease Particulars Year ended
period. There are no exceptional / restrictive covenants in the lease agreements. 31-03-2006 31-03-2006
There are no contracts for non-cancellable operating leases and hence, disclo- Equity Share of par value Rs. 10/- each
sure as required by the Accounting Standard-19 are not applicable for the current Basic (3.13) (5.88)
year. Diluted (2.54) (4.97)
13. CIF Value of imports during the year is Rs. 3.62 Lacs. As at the end of the Number of shares used in computing
Financial year, there are no dues to SSIs which are more than Rs. 1 Lakh and earnings per share
outstanding for more than one month. Basic 4,067,853 3,715,989
Diluted 5,011,881 4,397,394

16. Segment Reporting

Based on the guiding principles given in Accounting Standard on ‘Segment Reporting’(AS 17) issued by the Institute of Chartered Accountants of India, the Company’s primary
business segment during the current year comprise of ‘IT enabled Engineering Services’ and ‘Engineering Contracts’. The segment revenue in the geographical segments
represents the secondary segment for disclosure.
Financial information about the primary business segment is presented in the table given below:
(i) Information about Primary Business Segments

Particulars IT Enabled Engineering Unallocated Total

Engineering Services Contracts Company

Rs. Rs. Rs. Rs.

A. Revenue 51,581,794 55,117,053 871,221 107,570,068

B. Result
1 Segment Result/Operating Profit (24,901,260) 22,190,913 871,221 (1,839,126)
2 Unallocated Expenditure (net) — — 10,205,000 10,205,000
3 Interest Expense — — 227,560 227,560
4 Provision for Tax — — (742,312) (742,312)
5 Provision for Deferred Tax — — 261,433 261,433

C. Net Profit (24,901,260) 22,190,913 (10,042,218) (12,752,565)

D. Other Information
1. Segment Assets 73,363,761 15,413,914 205,359,389 294,137,064
2. Segment Liabilities 34,604,644 6,482,400 253,050,020 294,137,064
3. Capital Expenditure 3,769,636 1,472,509 — 5,242,145
4. Depreciation 8,491,156 255,529 — 8,746,685

E. Other Non Cash adjustments — — — —

(i) Information about Secondary Business Segments

Revenue by Geographical Market India Outside India Total

Rs. Rs. Rs.

A. External 3,400,053 103,298,794 106,698,847

B. Inter-segment — — —
Total 3,400,053 103,298,794 106,698,847
C. Carrying amount of segment assets 2,115,557 292,021,507 294,137,064
D. Additions to Fixed Assets 5,242,145 5,242,145

17. Previous Year's Figures are regrouped or reclassified, wherever necessary.

668
 PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

Balance Sheet abstract and company's

general business profile
Registration details Unsecured loans 7,500
ELRegistration No. 08/27846 Application of funds
Date of Incorporation 29th Sept, 2000 Net Fixed assets 16,867
Investments 24,252
Balance Sheet Date 31st March 2006
Deferred tax asset 536
In Rs/Thousands Net Current assets 6,036
Capital raised during the year Miscellaneous expenditure —
Public Issue NIL Accumulated losses 205,359
Rights Issue NIL
Performance of Company
Bonus Issue NIL
Turnover 107,678
Private Placement 5,457
Total Expenditure 109,745
Preferential offer of shares under ESOP scheme NIL
Profit / (Loss) before tax (2,067)
Position of mobilization and deployment of funds Profit / (Loss) after tax (2,548)
Total liabilities 253,050 Earnings per share (3.13)
Total assets 253,050 Dividend rate (%) - pro rata N/A
Sources of funds
Generic names of principal products / services of Company
Paid-up Capital 45,030
Item code no. (ITC code) 852499
Reserves and Surplus 197,867
Product description Software Engineering
Secured loans 2,653

For and on behalf of the Board of Directors "As per our report of even date"

for Plexion Techologies (India) Pvt. Ltd. for Narayanan, Patil and Ramesh
Chartered Accountants

Mr. Hemant Luthra Dr. Pawan Goenka Patil Udaya Kumar

Chairman Director Partner :
Bangalore
(April 27, 2006)

Mr. Ulhas N. Yargop Mr. Prabal Banerji

Director Director

Dr. M.K. Padmanabhan Dr. D.H. Bonde Devika Sathyanarayana

Director Director Company Secretary
Bangalore, April 27, 2006

669
 Statement regarding Subsidiary Companies pursuant to section 212(3) and 212(5) of the Companies Act, 1956

670
Sl. Name of the Subsidiary Financial Holding Company's interest Net aggregate amount of Net aggregate amount of Holding
No. Company year to as at close of financial year Subsidiary Company's Subsidiary Company's Company's interest
which of the Subsidiary Company Profits after deducting its Profits after deducting its as at Mar 31, 2006
accounts Shareholding losses or vice versa, losses or vice versa, incorporating
relate so far it concerns members so far it concerns members changes since
of Holding Company which of Holding Company which close of financial
are not dealt with in the are not dealt with in the year of the
Company's accounts Company's accounts Subsidiary
Company
(No. of Extent of For the period For previous For the period For previous
Shares) Holding (%) ended Mar financial ended financial
31,2006 years Mar 31, 2006 years
(See Note) (in Rs. lakhs) (in Rs. lakhs) (in Rs. lakhs)
(in Rs. lakhs)
PLEXION TECHNOLOGIES (INDIA) PRIVATE LIMITED

1 Plexion . 31-03-06 (590 shares of 100 (51.56) (122.96) Nil Nil No Change
Technologies Inc (US $ 1,000
each)
2 Plexion 31-03-06 (59,000 shares 100 9.58 (6.02) Nil Nil No Change
Technologies GmbH of Euro 1 each)
3 Plexion 31-03-06 (65,000 shares 100 25.36 8.95 Nil Nil No Change
Technologies (U.K.) Ltd. of GBP 1 each)

Note: The financial year of the above three subsidiaries has been changed from 31st December to 31st March consequent to the acquisition of the parent
Company by M&M Limited. Hence the above mentioned financial figures pertain to the period 1st January 2005 to 31st March 2006 i.e. 15 month period.
For and on behalf of the Board of Directors
for Plexion Technologies (India) Pvt. Ltd.
Mr. Hemant Luthra Dr. Pawan Goenka
Chairman Director
Mr. Ulhas N. Yargop Mr. Prabal Banerji
Director Director
Dr. M.K. Padmanabhan Dr. D.H. Bonde
Director Director

Mumbai, April 27, 2006


Report of the Director
for the Period 1 January 2006 to 31 March 2006
The director presents his report with the financial statements of
the company for the period 1 January 2006 to 31 March 2006.
PRINCIPAL ACTIVITY
The Principal activity of the company in the period under review
was that of provision of I.T. Services for the automotive and
aerospace industries.
DIRECTOR
P.M. Kandhadai was the sole director during the period under review.
The director holding office at 31 March 2006 did not hold any
beneficial interest in the issued share capital of the company at
1 January 2006 or 31 March 2006.
STATEMENT OF DIRECTOR'S RESPONSIBILITIES
The director is responsible for preparing the financial statements
in accordance with applicable law and United Kngdom Generally
Accepted Accounting Practice.
Company law requires the director to prepare financial statements
for each financial year which give a true and fair view of the
state of affairs of the company and of the profit or loss of the
company for that period. In preparing those financial statements,
the director is required to
- Select suitable accounting policies and then apply them
consistently;
- Make judgements and estimates that are reasonable and
prudent;
- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The director is responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the company and to enable him to ensure that the
financial statements comply with the Companies Act 1985. He
is also responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO
AUDITORS
So far as the director is aware, there is no relevant audit information
(as defined by Section 234ZA of the Companies Act 1985) of which
the company's auditors are unaware, and he has taken all the steps
that he ought to have taken as a director in order to make himself
aware of any relevant audit information and to establish that the
company's auditors are aware of that information.
AUDITORS
The auditors, KMA Associates, will be proposed for re-appointment
in accordance with Section 385 of the Companies Act 1985.
This report has been prepared in accordance with the special
provisions of Part VII of the Companies Act 1985 relating to small
companies.
On behlaf of the Board
P.M. Kandhadai - Director
Date : 24-04-2006
PLEXION TECHNOLOGIES (UK) LIMITED
Report of Independent Auditor's to the Shareholders of
Plexion Technologies (UK) Ltd.
We have audited the financial statements of Plexion Technologies
(U.K) Limited for the period ended 31 March 2006 on pages five
to nine. These financial statements have been prepared in
accordance with the accounting policies set out therein and the
requirements of the Financial Reporting Standard for Smaller
Entities (effective January 2005).
This report is made solely to the company's members, as a body,
in accordance with Section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
company's members those matters we are required to state to
them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the
company's members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of director and auditors
As described on page two the company's director is responsible
for the preparation of financial statements in accordance with
applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial
statements give a true and fair view and are properly prepared in
accordance with the Companies Act 1985. We also report to
you if, in our opinion, the Report of the Director is not consistent
with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information
and explanations we require for our audit, or if information
specified by law regarding director's remuneration and other
transactions is not disclosed.
We read the Report of the Director and consider the implications
for our report if we become aware of any apparent misstatements
within it.
Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the
significant estimates and judgements made by the director in
the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's
circumstances, consistently applied and adequately diclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
671
PLEXION TECHNOLOGIES (UK) LIMITED

We have undertaken the audit in accordance with the 2006 and of its profit for the period then ended; and
requirements of APB Ethical Standards including APB Ethical
Standard - Provisions Available to Small Entities, in the – have been properly prepared in accordance with the
circumstances set out in note eleven to the financial statements. Companies Act 1985.
We express our audit opinion in respect of the accounts in GBP
only, and our opinion does not extend to any other currency and
KMA Associates
is not subject to any exchange rate variations.
Chartered Accountants & Registered Auditors
Opinion KMA House
In our opinion the financial statements : 103 Devonshire Road
London
– give a true and fair view, in accordance with United Kingdom NW7 IEA
Generally Accepted Accounting Practice applicable to Smaller
Entities, of the state of the company's affairs as at 31 March Date: 24/04/06

672
 PLEXION TECHNOLOGIES (UK) LIMITED

Profit and Loss Account for the period 01.01.2006 to 31.03.2006

Notes Period Period

........................................................................................................ 01.01.06 to 31.03.06 01.01.05 to 31.12.05
........................................................................................................ £ Rs. £ Rs.

TURNOVER ............................................................................. 272,786 21,255,485 1,058,662 82,490,943

Cost of Sales ............................................................................ 216,231 16,848,720 833,841 64,972,891

.................................................................................................
Gross Profit ............................................................................. 56,555 4,406,766 224,821 17,518,052

Administrative Expenses ......................................................... 49,461 3,854,001 191,701 14,937,342

.................................................................................................

OPERATING PROFIT ............................................................... 2 7,094 552,764 33,120 2,580,710

Interest receivable and similar income .................................... 349 27,194 2,918 227,371
.................................................................................................
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION ................................................................ 7,443 579,959 36,038 2,808,081

Tax on profit on ordinary activities ........................................... 3 3,111 242,409 7,822 609,490

.................................................................................................
PROFIT FOR THE FINANCIAL PERIOD
AFTER TAXATION .................................................................. 4,332 337,549 28,216 2,198,591
.................................................................................................
RETAINED PROFIT FOR THE PERIOD ................................... 4,332 337,549 28,216 2,198,591
.................................................................................................

The notes form part of these fiancial statements

673
PLEXION TECHNOLOGIES (UK) LIMITED

Balance Sheet as at 31st March 2006

Notes 31.03.06 31.12.05
........................................................................................................ £ Rs. £ Rs.

FIXED ASSETS
Tagible assets ...................................................................... 4 9,533 742,811 11,111 865,769

CURRENT ASSETS ............................................................

Debtors ............................................................................... 5 162,225 12,640,572 110,881 8,639,848
Cash at bank ....................................................................... 89,772 6,995,034 106,779 8,320,220
............................................................................................
251,997 19,635,606 217,660 16,960,067
CREDITORS ........................................................................
Amounts falling due within one year .................................. 6 152,493 11,882,255 124,066 9,667,223
............................................................................................
NET CURRENT ASSETS ................................................... 99,504 7,753,352 93,594 7,292,844
............................................................................................

TOTAL ASSETS LESS CURRENT LIABILITIES ................ 109,037 8,496,163 104,705 8,158,614
............................................................................................
CAPITAL AND RESERVES .................................................
Called up share capital ........................................................ 65,000 5,064,800 65,000 5,064,800
Profit and loss account ........................................................ 44,037 3,431,363 39,705 3,093,814
............................................................................................
SHARE HOLDERS' FUNDS ............................................... 109,037 8,496,163 104,705 8,158,614

These financial statements have been prepared in accordance with the special provisions of Part VII of the Companies Act 1985
relating to small companies and with the Financial Reporting standard for Smaller Entities (effective January 2005).

On behalf of the Board

P. M. Kandhadai - Director

Approved by the board on 24-04-06

674
 PLEXION TECHNOLOGIES (UK) LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD 5. DEBTORS : AMOUNTS FALLING DUE WITHIN ONE YEAR
1 JANUARY 2006 TO 31 MARCH 2006 31.03.06 31.12.05
1. Accounting convention £ Rs. £ Rs.
The financial statements have been prepared under the historical cost convention
and in accordance with the Financial Reporting Standard for Smaller Entities (effective Trade debtors 160,313 12,491,589 108,070 8,420,814
January 2005). Other debtors 1,912 148,983 2,811 219,033
Turnover 162,225 12,640,572 110,881 8,639,848
Turnover reprsents net invoiced sales of goods, excluding value added tax.

Tangible Fixed Assets 6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Depreciation is provided at the following annual rates in order to write off each 31.03.06 31.12.05
asset over its estimated useful life. £ Rs. £ Rs.
Computer Software -25% on cost
Computer equipment -25% on cost Amounts owed to group
undertaking 64,723 5,043,216 32,978 2,569,646
Deferred Tax Taxation and social security 41,214 3,211,395 65,390 5,095,189
Deffered tax is recognised in respect of all timing differences that have originated Other creditors 46,556 3,627,644 25,698 2,002,388
but not reversed at the balance sheet date.
152,493 11,882,255 124,066 9,667,223
Foreign Currencies 7. CALLED UP SHARE CAPITAL
Assets and liabilities in foreign currencies are translated into sterling at the rates of
exchange ruling at the balance sheet date. Transactions in foreign currencies are Authorised : 31.03.06 31.12.05
translated into sterling at the rate of exchange ruling at the date of transaction. Number: Class : Nominal £ Rs. £ Rs.
Exchange difference are taken into account in arriving at the operating result. Value
Hire purchase and leasing commitments 1,000,000 Ordinary £1 1,000,000 77,920,000 1,000,000 77,920,000
Rentals paid under operating leases are charged to the profit and loss account as
incurred. Allotted,
issued and
2. OPERATING PROFIT fully paid 31.03.06 31.12.05
The operating profit is stated after charging : Number: Class : Nominal £ Rs. £ Rs.
Period Year ended Value
01.01.06 to 01.01.05 to
65,000 Ordinary £1 65,000 5,064,800 65,000 5,064,800
31.03.06 31.12.05
£ Rs. £ Rs.
8. RESERVES
Depreciation - owned assets 1,578 122,958 6,315 492,065 Profit and Loss account
Auditor's remuneration 2,000 155,840 2,500 194,800 £ Rs.
At 1, January 2006 39,705 3,093,814
— — — —
Retained profit for the period 4,332 337,549
Director's emoluments and
Other benefits etc. — — — — At 31 March 2006 44,037 3,431,363

3. TAXATION
9. ULTIMATE PARENT COMPANY
Analysis of the tax charge The company was a wholly owned subsidiary of Plexion Technologies (India)
The tax charge on the profit on ordinary activities Pvt. Ltd., a company incorporated in India throughout the year. Consolidated
for the period was as follows : group accounts are available from the Company Secretary, Plexion
Period Year ended Technologies (India) Pvt. Ltd., 2nd Floor, Rockline Center, #54, Richmond Road,
01.01.06 to 01.01.05 to Bangalore - 560 025, India.
31.03.06 31.12.05
The ultimate parent undertaking is Mahindra & Mahindra Ltd, a company
£ Rs. £ Rs.
incorporated in India.
Current tax :
UK corporation tax 3,111 242,409 7,822 609,490 10. RELATED PARTY DISCLOSURES
Tax on profit on During the year the company purchased I.T. services and other expenses from
ordinary activities 3,111 242,409 7,822 609,490 Plexion Technologies (India) Pvt. Ltd., the company's parent undertaking. The
fees charges to the company were at their normal market price and amounted
to £ 71,801 [Rs. 5,594,734] (2005 - £ 303,954 [Rs. 23,684,096]. At the balance
4. TANGIBLE FIXED ASSETS sheet date, the amount due to Plexion Technologies (India) Pvt. Ltd amounted
Computer Computer Total to £64,723 [Rs. 5,043,216] (2005 - £ 32,978 [Rs. 2,569,646] balance is interest
Software equipment free and repayable on demand.
£ £ £ Rs.
COST
11. APB ETHICAL STANDARD - PROVISIONS AVAILABLE FOR SMALL ENTI-
At 1 January 2006
TIES
and 31 March 2006 18,958 6,292 25,250 1,967,480
In common with many other businesses of our size and nature we use our
DEPRECIATION auditors to prepare and submit returns to the tax authorities and assist with the
At 1 January 2006 9,479 4,660 14,139 1,101,711 preparation of the financial statements.
Charge for period 1,185 393 1,578 122,958
12. FOREIGN CURRENCY TRANSLATION
At 31 March 2006 10,664 5,053 15,717 1,224,669
Foreign Currency amounts are translated for convenience into Indian Rupees
NET BOOK VALUE at the exchange rate of Rs. 77.92 = GBP 1 which is the average of the telegraphic
At 31 March 2006 8,294 1,239 9,533 742,811 transfer buying and selling rates quoted by the Mumbai Branch of State Bank
of India on 31st March 2006.
At 31 December 2005 9,479 1,632 11,111 865,769

675
PLEXION TECHNOLOGIES (UK) LIMITED

TRADING AND PROFIT AND LOSS ACCOUNT FOR THE PERIOD

1 JANUARY 2006 TO 31 MARCH 2006.
Period Year ended
01.01.06 to 01.01.05 to
31.03.06 31.12.05
£ Rs. £ Rs.

SALES 272,786 21,255,485 1,058,662 82,490,943

Cost of Sales
Purchases 71,801 5,594,734 303,954 23,684,096
Wages 132,261 10,305,777 488,311 38,049,193
Social Security 12,169 948,208 41,576 3,239,602
216,231 16,848,720 833,841 64,972,891

GROSS PROFIT 56,555 4,406,766 224,821 17,518,052

Other Income
Deposit account interest 349 27,194 2,918 227,371
56,904 4,433,960 227,739 17,745,423
Expenditure
Rent 3,278 255,422 9,905 771,798
Insurance 210 16,363 833 64,907
Light and heat — — 142 11,065
Hire of plant and machinery 1,167 90,933 3,000 233,760
Telephone 2,460 191,683 7,591 591,491
Post and Stationery 962 74,959 1,847 143,918
Advertising 81 6,312 346 26,960
Travel and subsistance 5,872 457,546 18,548 1,445,260
Motor expenses 2,483 193,475 9,903 771,642
Marketing Costs 11,516 897,327 51,906 4,044,516
Repairs and renewals 7,181 559,544 22,254 1,734,032
Sundry expenses 47 3,662 872 67,946
Accountancy 950 74,024 10,900 849,328
Legal and Professional fees 6,871 535,388 15,761 1,228,097
Consultancy fees 310 24,155 17,555 1,367,886
Staff Training — — 7,000 545,440
Auditors's remuneration 2,000 155,840 2,500 194,800
Entertainment 2,183 170,099 3,329 259,396
47,571 3,706,732 184,192 14,352,241

9,333 727,227 43,547 3,393,182

Finance costs
Bank charges 289 22,519 1,176 91,634
Exchange Gain 23 1,792 18 1,403
312 24,311 1,194 93,036
9,021 702,916 42,353 3,300,146
Depreciation
Software 1,185 92,335 4,740 369,341
Computer equipment 393 30,623 1,575 122,724
1,578 122,958 6,315 492,065
NET PROFIT 7,443 579,959 (6,315) (492,065)

This Page does not form part of the Statutory financial Statements.

676
 Plexion Technologies GmbH

Directors’ Report to the Shareholders

Your Directors have pleasure in presenting their Sixth Annual Report on the business and operations of your Company and the Audited
Financial Results for the period from January 01, 2006 to March 31, 2006.
FINANCIAL RESULTS
The financial results are for the period from January 01, 2006 to March 31, 2006 and those of the previous year are for the period from
January 01, 2005 to December 31, 2005.

................................................................................................ For the Period ended on For the year

................................................................................................ 31.03.2006 31.03.2006 31.12.2005 31.12.2005
................................................................................................ ¤ Rs. ¤ Rs.

Income from Operations .......................................................... 67,105 3,645,144 346,214 18,806,344

Profit before Depreciation and Taxation ...................................... 3,784 205,546 31,677 1,720,695
Less: Depreciation ...................................................................... — — (12,499) (678,946)

Profit before Taxation .................................................................. 3,784 205,546 19,178 1,041,749

Less: Provision for Taxation ........................................................ 1,690 91,801 3,635 197,453

Profit after Taxation .................................................................... 2,094 113,745 15,543 844,296

Add: Balance as per last Balance Sheet ..................................... 4,466 242,593 (11,077) (601,703)

Balance carried forward to Balance Sheet .................................. 6,560 356,338 4,466 242,593

OPERATIONS AND FUTURE PROSPECTS:

1. PRINCIPAL ACTIVITIES 5. BAD AND DOUBTFUL DEBTS
The principal activities of the Company are software Before the financial statements of the Company were made
development and providing IT enabled service viz CAD, out, the directors took reasonable steps to ascertain that
CAE, etc. action has been taken in relation to the writing off and
providing for bad and doubtful debts of the Company and
2. NOTES ON OPERATIONS have satisfied themselves that there were no known bad
Your directors are pleased to inform that your Company has or doubtful debts. At the date of this report, the directors of
been successful in entering into agreements with major the Company are not aware of any circumstances which
German Companies. We expect the business to grow would render it necessary to write off or provide for any
substantially in the coming years. bad and doubtful debts.

3. ISSUE OF SHARES AND DEBENTURES 6. CURRENT ASSETS

The Company was incorporated with an Authorised, Issued
and Paid up Share Capital of 25,000 Euros divided into 25,000
Equity Shares of 1 - Euro each, [Rs. 13,58,000 divided into
25,000 Equity Shares of Rs. 54.32 each]. The Company has
issued 34,000 Equity Shares of 1 - Euro each aggregating
to 34,000 Euros [34,000 Equity Shares of Rs. 54.32 each
aggregating to Rs.18,46,880]-under regularisation in
Handelsregister. No Debentures were issued during the
financial period.
4. DIVIDENDS
No dividends have been paid or declared or recommended
7.
by the Company since the date of incorporation. The
directors of the Company do not recommend any dividends
for the period under review.
Before the financial statements of the Company were made
out, the directors took reasonable steps to ascertain that
any current assets of the Company which were unlikely to
realise their book values in the ordinary course of business
have been written down to their estimated realisable values
and that adequate provisions have been made for the
diminution in value of such current assets. At the date of
this report, the directors of the Company are not aware of
any circumstances which would render the values
attributable to current assets in the financial statements of
the Company misleading.
CHARGES AND CONTINGENT LIABILITIES
At the date of this report :
a) There does not exist any charge on the assets of the
Company which has arisen since the end of the

677
Plexion Technologies GmbH
financial period which secures the liability of any other
person.
b) There does not exist any contingent liability of the
Company, which has arisen since the end of the
financial period.
8. OTHER CIRCUMSTANCES AFFECTING THE
FINANCIAL STATEMENTS
At the date of this report, the directors are not aware of any
circumstances not otherwise dealt with in this report or the
financial statements, which would render any amount stated
in the financial statements of the Company misleading.
9. UNUSUAL ITEMS
In the opinion of the directors, the results of the operations
of the Company have not been substantially affected by
any item, transaction or event of a material and unusual
nature during the financial period.
10. UNUSUAL ITEMS AFTER THE PERIOD END DATE
In the opinion of the directors, no item, transaction or event
of a material and unusual nature has arisen in the interval
between the end of the financial period and the date of this
report which would affect substantially the results of the
operations of the Company for the financial period for which
this report is made.
11. DIRECTORS' RESPONSIBILITY STATEMENT
The Directors state as an averment of responsibility that :
i. in the preparation of the annual accounts, the applicable
accounting standards have been followed;
ii. that the Directors have selected such accounting
policies and applied them consistently and made
678
judgements and estimates that were reasonable and
prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the period and
of the profit of the Company for the period;
iii. they have taken proper and sufficient care for the
maintenance of adequate accounting records for
safeguarding the assets of the Company and for
preventing and detecting frauds and other irregularities;
iv. the annual accounts have been prepared on a 'going
concern' basis.
12. AUDITORS
M/s. A.K. Verma & Associates, Chartered Accountants,
Auditors of the Company, have expressed their willingness
to accept re-appointment.
13. ACKNOWLEDGEMENTS
Your Directors would like to thank Investors, Financial
Institutions, Banks, Government authorities, our esteemed
Corporate clients and Customers. The service and co-
operation of employees, business/alliance partners and
technology partners are also earnestly appreciated. Finally
your Directors would like to take this opportunity to express
their gratitude to one and all of you for your faith and whole
hearted support which has always been a source of
inspiration for us to keep us on the move towards success,
to scale greater heights and achieve higher targets.
Vijay Verma
Director
Place: Frankfurt am Main
Date: 21.04.2006
 Plexion Technologies GmbH

AUDITOR'S REPORT
To,
The Members of Plexion Technologies GmbH
We have audited the attached Balance Sheet of Plexion
Technologies GmbH (the "Company") as at 31st March, 2006 and
the Profit and Loss Account of the Company for the period ended
on that date annexed thereto and report that :
a. We have obtained all the information and explanations which
to the best of our knowledge and belief were necessary for
the purpose of our audit.
b. In our opinion, proper books of account as required by law
have been kept by the Company so far as it appears from our
examinations of those books.
c. The Balance Sheet and Profit and Loss Account dealt with
by this Report are in agreement with the books of account.
d. In our opinion, the Balance Sheet and Profit and Loss Account
complies with the Accounting standards referred to in sub-
section (3C) of Section 211 of the Companies Act, 1956.
e. According to the information given to us, no director is
disqualified from being appointed as director under clause
(g) of sub-section 274 of the Companies Act, 1956.
f. In our opinion and to best of our information and according to
the explanation given to us, the said statement of accounts
read with the other notes thereon give the information
required by the Companies Act, 1956, in the manner so
required and give a true and fair view :
i) in the case of the Balance Sheet of the state of affairs of
the Company as at 31st March, 2006 and
ii) in the case of the Profit and Loss Account of the Profit of
the Company for the period ended on that date.

For: A.K. Verma & Associates

Chartered Accountants

Ashok K. Verma
Partner
(Membership No. 082084)

Place: Frankfurt am Main

Date: 21.04.2006

679
Plexion Technologies GmbH

BALANCE SHEET AS AT 31ST MARCH 2006

Particulars Schedule As at As at
........................................................................................................ 31st March 2006 31st December, 2005
........................................................................................................ ¤ Rs. ¤ Rs.

SOURCES OF FUNDS
1. SHAREHOLDERS' FUNDS:
a. Share Capital ........................................................ 1 59,000 3,204,880 59,000 3,204,880
b. Resurves and Surplus .......................................... 2 6,560 356,338 4,466 242,593

2. LOAN FUNDS
a. Secured Loans ..................................................... 0 0 0 0
b. Unsecured Loans ................................................. 0 0 0 0
Total Sources of Funds .......................................... 65,560 3,561,218 63,466 3,447,473

APPLICATION OF FUNDS
1. FIXED ASSETS 3
Gross Block .............................................................. 75,000 4,074,000 75,000 4,074,000
Less: Depreciation ................................................... 74,999 4,073,946 74,999 4,073,946
1 54 1 54
2. INVESTMENTS ....................................................... 0 0 0 0
3. CURRENT ASSETS, LOANS AND ADVANCES 4
a. Sundry Debtors .................................................... 43,875 2,383,295 47,060 2,556,299
b. Cash and Bank Balances ...................................... 12,145 659,737 5,603 304,355
c. Loans and Advances ............................................ 39,374 2,138,796 56,689 3,079,346
95,394 5,181,828 109,353 5,940,001
Less:
CURRENT LIABILITIES AND PROVISIONS 5
a. Current Liabilities ................................................. 19,994 1,086,099 7,721 419,405
b. Provisions ............................................................. 9,841 534,565 38,166 2,073,177
29,835 1,620,665 45,887 2,492,582
Net Current Assets .................................................. 65,559 3,561,164 63,466 3,447,419

4. MISCELLANEOUS EXPENDITURE TO THE

EXTENT NOT WRITTEN OFF OR ADJUSTED
a. Preliminary Expenses ........................................... 0 0 0 0
b. Profit & Loss Account .......................................... 0 0 0 0
Total Application of Funds ........................................ 65,560 3,561,218 63,466 3,447,473

Significant Accounting Policies 9

Notes forming Part of Accounts 10
SCHEDULES 1 TO 10 FROM AN INTEGRAL PART OF THE ACCOUNTS
This is the Balance Sheet referred to in our Report of even date attached.
For A. K. Ver
Ver ma & Associates
erma
Chartered Accountants

Ashok K. Verma
Partner (Membership No. 082084)
Place: Frankfurt am Main Vijay Verma
Date: 21.04.2006 Director

680
 Plexion Technologies GmbH

PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 01.01.2006 TO 31.03.2006

Particulars Schedule For the Period ended For the Year ended
........................................................................................................ 31st March 2006 31st December, 2005
........................................................................................................ ¤ Rs. ¤ Rs.

INCOME
Income from Services rendered .............................. 67,105 3,645,144 345,757 18,781,520
Income from other Sources ..................................... 0 0 457 24,824
Total Income 67,105 3,645,144 346,214 18,806,344

EXPENDITURE
Software Expenses .................................................. 6 5,876 319,184 30,551 1,659,530
Employment Expenses ............................................ 7 41,440 2,251,015 218,386 11,862,728
Administration and Other Expenses ........................ 8 16,005 869,398 65,600 3,563,392
Depreciation ............................................................. 0 0 12,499 678,946
Total Expenditure ................................................... 63,321 3,439,598 327,036 17,764,596

Profit/(Loss) for the Year ........................................ 3,784 205,546 19,178 1,041,749

Less: Provision for Taxes ......................................... 1,690 91,801 3,635 197,453

Profit after Tax ........................................................ 2,094 113,745 15,543 844,296

Add: Balance as per last Balance Sheet ................... 4,466 242,593 -11,077 -601,703

Balance carried to Balance Sheet ......................... 6,560 356,338 4,466 242,593

Significant Accounting Policies 9

Notes forming Part of Accounts 10

SCHEDULES 1 TO 10 FROM AN INTEGRAL PART OF THE ACCOUNTS

This is the Profit & Loss Account referred to in our Report of even date attached.
For A. K. Ver
Ver ma & Associates
erma
Chartered Accountants

Ashok K. Verma
Partner (Membership No. 082084)
Place: Frankfurt am Main Vijay Verma
Date: 21.04.2006 Director

681
Plexion Technologies GmbH

SCHEDULES TO BALANCE SHEET

Particulars As at As at
................................................................................. 31st March 2006 31st December, 2005
.............................................................................................. ¤ Rs. ¤ Rs.

Schedule - 1
AUTHORISED SHARE CAPITAL
59,000 (Previous year : 59,000) Equity
Shares of 1/ - ¤ each 59,000 3,204,880 59,000 3,204,880
59,000 3,204,880 59,000 3,204,880

ISSUED, SUBSCRIBED AND PAID UP CAPITAL

59,000 (Previous year: 59,000) Equity Shares

of 1/- ¤ each fully paid ......................................... 59,000 3,204,880 59,000 3,204,880
(Whole of the common stock is held by the
parent Company - Plexion Technologies (India)
Private Limited)
59,000 3,204,880 59,000 3,204,880

Schedule - 2
RESERVES AND SURPLUS
Profit and Loss Account :
Balance as per last Balance Sheet ............ 4,466 242,593 -11,077 -601,703
Loss: Profit for the year ............................ 2,094 113,745 15,543 844,296
Balance carried to Balance Sheet ............. 6,560 356,338 4,466 242,593

6,560 356,338 4,466 242,593

Schedule 3
Fixed Assets :
GROSS BLOCK DEPRECIATION NET BLOCK
Particulars 01.01.06 01.01.06 Additions Reduction 31.03.06 31.03.06 01.01.2006 01.01.06 Provided During the Year Reduction 31.03.06 31.03.06 31.03.06 31.03.06 31.12.05 31.12.05
• Rs. • Rs. • Rs. • Rs. • Rs. • Rs. • Rs.

EDV Software 75,000 4,074,000 - - 75,000 4,074,000 74,999 4,073,946 - - - 74,999 4,073,946 1 54 1 54

Total 75,000 4,074,000 - - 75,000 4,074,000 74,999 4,073,946 - - - 74,999 4,073,946 1 54 1 54

Previous Year 75,000 4,074,000 - - 75,000 4,074,000 62,500 33,95,000 12,499 678,946 - 74,999 4,073,946 1 54 12,500 679,000

682
 Plexion Technologies GmbH

SCHEDULES TO BALANCE SHEET

Particulars As at As at
31st March 2006 31st December, 2005
.............................................................................................. ¤ Rs. ¤ Rs.

Schedule - 4
CURRENT ASSETS
Sundry Debtors (Unsecured - Considered Good)
Outstanding for a period exceeding
six months ...................................................... - - - -
Others ............................................................. 43,875 2,383,295 37,460 2,034,827
Unbilled Receivables ...................................... - - 9,600 521,472
43,875 2,383,295 47,060 2,556,299

CASH AND BANK BALANCES

Currency :
Dresdner Bank AG, Frankfurt
(Maximum balance at any time
during the period 29,286.05 ¤ - ...................... 12,145 659,737 5,603 304,355
Previous year 139,852 ¤ )

Advances recoverable in cash or

in kind or for Value to be received
Tax Deducted at Source .................................. - - 145 7,876
Value-added Tax Recoverable ......................... 2,129 115,647 0 0
Advance to Suppliers (Associate Co) .............. 27,400 1,488,368 40,947 2,224,241
Advance Tax .................................................... 9,845 39,374 534,780 2,138,796 15,598 847,283
95,394 5,181,828 109,353 5,940,055

Schedule - 5
CURRENT LIABILITIES AND PROVISIONS
Current Liabilities
Sundry Creditors ............................................. 18,860 1,024,488 6 326
Other Liabilities ............................................... 1,134 19,994 61,609 1,086,097 7,715 419,079

Provisions
Provision for Expenses ................................... 4,516 245,309 34,531 1,875,724
Provision for Taxation ...................................... 5,325 9,841 289,254 534,563 3,635 197,453
29,835 1,620,661 45,887 2,492,582

683
Plexion Technologies GmbH

SCHEDULES TO PROFIT AND LOSS ACCOUNT

ParticularsParticulars ................................................... For the Period ended For the year ended
................................................................................. 31st March 2006 31st December, 2005
.............................................................................................. ¤ Rs. ¤ Rs.

Schedule - 6
SOFTWARE EXPENSES
Software Expenses ........................................ 5,876 319,184 30,551 1,659,530
5,876 319,184 30,551 1,659,530

Schedule - 7
EMPLOYMENT EXPENSES
Salary and Other Allowances .......................... 34,558 1,877,187 184,052 9,997,705
Contribution to German Social Security .......... 6,882 373,829 34,334 1,865,023
41,440 2,251,015 218,386 11,862,728

Schedule - 8
ADMINISTRATIVE AND OTHER EXPENSES
Travelling and Conveyance Expenses ............. 1,385 75,233 130 7,062
Accounting and Consultancy Fees ................. 5,646 306,706 15,060 818,059
Auditor's Remuneration :
Audit Fees ....................................................... 650 35,308 2,600 141,232
Out of Pocket Expenses ................................. 26 676 1,412 36,720 104 5,649
Bank and Other Charges ................................ 101 5,491 854 46,389
Membership and Subscription ........................ 215 11,679 266 14,449
Marketing & other allied services ................... 7,671 416,689 46,115 2,504,967
Entertainment Expenses ................................ - - 153 8,311
Postage ........................................................... 111 6,030 0 0
Telephone Expenses ....................................... 200 10,850 318 17,274

16,005 869,398 65,600 3,563,392

684
 Plexion Technologies GmbH

SIGNIFICANT ACCOUNTING POLICIES i. Quantitative Details

SCHEDULE - 9
1. Accounting Convention and Concepts :
The Company follows the Historical Cost Covention and the
Mercantile System of Accounting where the income and
expenditure are recognised on accrual basis. Adequate
provision is made for all known losses and liabilities.
2. Revenue Recognition :
In case of fixed price contracts, under which revenue is
recognised using the percentage of completion method of
accounting, unless work completed cannot be reasonably
estimated. Provisions for estimated losses on such
engagements are made during the year in which a loss
becomes probable and can be reasonably estimated. Unbilled
jobs represent recognised amount based on services
performed in advance of billing in accordance with contract
terms.
3. Fixed Assets :
Fixed assets are valued at cost less accumulated depreciation.
Cost includes all expenses incurred for aquisition of assets.
The Company is engaged in providing Software Solutions,
The production, procurement and sale of such software
cannot be expressed in any generic unit. Hence, it is not
possible to give the quantitative details as required under
paragraphs 3, 4C and 4D of Part II of Schedule VI of the
Companies Act, 1956.
ii. CIF Value of Imports - Nil (Previous Year Nil)
iii. Expenditures in Foreign Currency :
Transfer Pricing 13,547 Euro [Rs. 7,35,873/-] [Previous year
76,666 • [Rs. 41,64,497/-]]
iv. Earnings in Foreign Exchange :
Income from Software Development, Technical Services
and Royalities Nil (Previous Year Nil)
5) Related Party Disclosure :
Party Relationship
Plexion Technologies (india) Holding Company
Private Limited
Vijay Verma Managing Director

4. Depreciation : 6) Transactions with Related Party :

Depreciation on EDV - Software is provided on Straight-Line Nature of Transaction Plexion Technologies (india)
Method of depreciation on a pro rata basis at the 33.33% per Private Limited
year in accordance with the German Tax Laws.
Purchase or Sale of Materials 13,547 Euro [Rs. 7,35,873/-]
5. Foreign Currency Transactions : or Rendering of Services
i. Value of Fixed Assets is converted at the rate prevailing on Purchase of Capital Assets Nil
the date of remittance and acquisition.
ii. Monetary items denominated in foreign currency at the year- 7) FC amounts are translated for convenience into Indian
end are translated at the year end rates. Gain/loss on Rupees at the exchange rate of Rs. 54.32 = FC 1 which is
conversion is charged to Profit and Loss account. the average of the telegraphic transfer buying and selling
rates quoted by the Mumbai Branch of State Bank of India
iii. Transactions done during the year are converted at the rate on 31st March 2006.
prevailing on the date of transaction.
8) Figures for the previous year have been regrouped/ rearranged
wherever necessary.

SCHEDULE - 10
1. Estimated amount of contracts remaining to be executed on
capital account and not provided for: Nil (Previous year - Nil) For: A.K. Verma & Associates
Chartered Accountants
2. Contingent Liabilities in respect of:
Claims against the Company not acknowledged as debts: Nil
(Previous year - Nil)
Ashok K. Verma Vijay Verma
3 Remuneration to Wholetime Directors (Incl. Managing Partner (Director)
Director): 5,671¤ [Rs. 3,08,049] [Previous year 22,701¤ (Membership No. 082084)
(Rs, 12,33,118)] Since no commission is paid/payable to any
director, the computation of profit under Section 349 of the Place: Frankfurt am Main
Companies Act, 1956 has not been made. Date: 21.04.2006
4. Additional information pursuant to the provisions of
Paragraphs 3, 4C and 4D of Part II of Schedule VI to the
Companies Act, 1956.

685
PLEXION TECHNOLOGIES INC.

Directors’ Report

Your Directors present their Report together with the audited accounts of your Company for the period 1st January, 2006 to
31st March, 2006.

Financial Highlights:
Period ended For the year ended
Jan’06 to Mar’06 31st December 2005
US $ INR US $ INR
Income 192,575 8,600,400 1,116,635 49,868,919
(Loss) Before Tax (57,900) (2,585,814) (53,536) (2,390,918)
(Loss) After Tax (57,900) (2,585,814) (57,546) (2,570,004)

Review of Operations: allocations and willingness to invest in IT enabled Engineering

Services and the Company is poised to effectively exploit these
During the period, your Parent Company, viz., Plexion
opportunities.
Technologies (India) Private Limited became a subsidiary of
Mahindra & Mahindra Limited. The acquisition by Mahindra & The Board acknowledges the continued support the Company
Mahindra Limited is expected to fuel growth of the Company received from its parent holding company, Plexion Technologies
due to the synergy of operations with Mahindra's engineering (India) Private Limited.
services activities and the brand image of the Mahindra group.
Outlook for the current year:
Dr. M. K. Padmanabhan
The Management anticipates that both revenue growth and
Director
profitability of operations will be significantly enhanced during
the current year. There is a clear uptrend in the industry budget April 19, 2006.

686

Independent Auditor’s Report
To
The Board of Directors and
Stockholders of Plexion Technologies Incorporated
We have audited the accompanying balance sheet of Plexion
Technologies Incorporated (a Michigan corporation) as of March
31, 2006 and the related statements of operations, cash flows ad
changes in stockholder’s equity for the three months period then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining,
PLEXION TECHNOLOGIES INC.
on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Plexion
Technologies Incorporated as of Mach 31, 2006 and the results
of its operations, and its cash flows for the three months period
then ended in conformity with accounting principles generally
accepted in the United States of America.
Ram Associates
Hamilton, NJ
April 18, 2006
687
PLEXION TECHNOLOGIES INC.

Balance Sheet as at March 31, 2006

For the period ended For the year ended

3/31/2006 12/31/2005
US $ Rs US $ Rs
ASSETS:
Current assets
Cash ................................................................................. 8,353 373,045 10,857 484,874
Accounts receivable ......................................................... 237,979 10,628,142 243,140 10,858,632
Prepaid expenses ............................................................. 4,905 219,057 7,561 337,674
Other current assets ........................................................ 4,556 203,471 3,500 156,310
Total current assets .................................................... 255,793 11,423,715 265,058 11,837,490
Fixed assets
Property and equipments ................................................. 152,975 6,831,864 153,175 6,840,796
Accumulated depreciation ............................................... (78,916) (3,524,389) (72,322) (3,229,901)

Net fixed assets ......................................................... 74,059 3,307,475 80,853 3,610,895

Security deposits ............................................................. 5,318 237,502 5,318 237,502

TOTAL ASSETS .... 335,170 14,968,692 351,229 15,685,887

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable and accrued expenses ........................ 35,908 1,603,651 34,054 1,520,852
Other current liabilities ..................................................... 100,022 4,466,983 60,035 2,681,163
Total current liabilities ................................................. 135,930 6,070,634 94,089 4,202,015

Stockholders’ Equity
Common Stock-$1,000 per share par value-2,000 shares
authrized, 590 shares issued and outstanding ................. 590,000 26,349,400 590,000 26,349,400
Accumulated other comprehensive loss .......................... (13,712) (612,378) (13,712) (612,378)
Accumulated deficit ......................................................... (377,048) (16,838,964) (319,148) (14,253,150)
Total Stockholders’ Equity .......................................... 199,240 8,898,058 257,140 11,483,872
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY ..... 335,170 14,968,692 351,229 15,685,887

See accompanying notes to financial statements

688
 PLEXION TECHNOLOGIES INC.

Statement of operations for the three months period ended March 31, 2006

For the period ended For the year ended

3/31/2006 12/31/2005
US $ Rs US $ Rs

Net revenue ..................................................................... 192,575 8,600,400 1,116,635 49,868,919

Cost of revenue ............................................................... 130,603 5,832,730 757,105 33,812,309
Gross profit ...................................................................... 61,972 2,767,670 359,530 16,056,610

Operating expenses:
Selling, general and administrative expenses .................. 113,278 5,058,995 384,406 17,167,572

Net loss before depreciation and taxes ........................... (51,306) (2,291,326) (24,876) (1,110,962)
Depreciation ..................................................................... 6,594 294,488 28,660 1,279,956
Net loss before taxes ....................................................... (57,900) (2,585,814) (53,536) (2,390,918)
Income tax ....................................................................... — — 4,010 179,087
Net Loss ........................................................................... (57,900) (2,585,814) (57,546) (2,570,004)

See accompanying notes to financial statements

689
PLEXION TECHNOLOGIES INC.

Statement of changes in stockholders’ equity for the three months period ended March 31, 2006

Common stock Accumulated deficit Accumulated other Total stockholders'

comprehensive loss equity
Shares Amount

$ Rs. $ Rs. $ Rs. $ Rs.

Balance as at Dec 31, 2005 590 590,000 26,349,400 (319,148) (14,253,150) (13,712) (612,378) 257,140 11,483,872

Balance as at Dec 31, 2004 590 590,000 26,349,400 (261,602) (11,683,145) (13,712) (612,378) 314,686 14,053,877

Net loss for the period ended March 2006 (57,900) (2,585,814) (57,900) (2,585,814)

Net profit for the year 2005 (57,546) (2,570,004) (57,546) (2,570,004)

Balance at March 31, 2006 590 590,000 26,349,400 (377,048) (16,838,964) (13,712) (612,378) 199,240 8,898,058

Balance at March 31, 2005 590 590,000 26,349,400 (319,148) (14,253,150) (13,712) (612,378) 257,140 11,483,872

See accompanying notes to financial statements

690
 PLEXION TECHNOLOGIES INC.

Statement of Cash Flows for the three months period ended March 31, 2006

For the period ended For the year ended

3/31/2006 12/31/2005
US $ Rs US $ Rs

Cash flows from operating activities

Net loss ...................................................................... (57,900) (2,585,814) (57,546) (2,570,004)

Adjustments to reconcile net profit to net cash provided

by operating activities
Depreciation ............................................................... 6,594 294,488 28,660 1,279,956

Changes in assets and liabilities

(Increase)/Decrease in accounts receivable ............... 5,161 230,490 3,032 135,409
(Increase)/Decrease in prepaid expenses .................. 2,656 118,617 3,974 177,479
(Increase)/Decrease in other current assets .............. (1,056) (47,161) (1,400) (62,524)
Increase/(Decrease) in accounts payable and accrued
expenses .................................................................... 1,854 82,800 10,070 449,726
Increase/(Decrease) in other current liabilities ........... 39,987 1,785,819 10,100 451,066
Total adjustments ..................................................... 48,602 2,170,565 25,776 1,151,156
Net cash used in opeating activities ....................... (2,704) (120,761) (3,110) (138,893)

Cash flows from investing activities

Rebate on property and equipment ............................ 200 8,932 (16,327) (729,164)

Net cash prvided by investing activities ................. 200 8,932 (16,327) (729,164)

Cash flows from financing activities

Net decrease in cash .................................................. (2,504) (111,829) (19,437) (868,056)
Cash at the beginning of the year .............................. 10,857 484,874 30,294 1,352,930

Cash at the end of the year .............................................. 8,353 373,045 10,857 484,874

Supplementary disclosure of cash flows information

Cash paid during the year for interest ........................ — — — —
Taxes paid .................................................................. — — 5,470 244,290

See accompanying notes to financial statements

691
PLEXION TECHNOLOGIES INC.

Supplementary schedule cost of revenue for the three months ended March 31, 2006

For the period ended For the year ended

3/31/2006 12/31/2005
US $ Rs US $ Rs
Cost of revenue
Consultant Salaries ..................................................... 105,082 4,692,962 541,741 24,194,153
Consultancy charges .................................................. 2,944 131,479 — —
Payroll Taxes .............................................................. 9,019 402,789 43,565 1,945,613
Project Development – Off shore ............................... 13,558 605,500 171,799 7,672,543

Total ............................................................................ 130,603 5,832,730 757,105 33,812,309

See accompanying notes to financial statements

692
 PLEXION TECHNOLOGIES INC.

Supplementary schedule selling, general & administration expense for the three months ended
March 31, 2006
For the period ended For the year ended
3/31/2006 12/31/2005
US $ Rs US $ Rs
Selling, general and administration expense
Audit fees ................................................................... 4,000 178,640 5,500 245,630
Automobile expense .................................................. 590 26,349 3,452 154,166
Bank service charges ................................................. 148 6,610 280 12,505
Dues and subscription ................................................ — — 327 14,604
Equipment lease & rental ........................................... 691 30,860 3,171 141,617
Immigration expenses ................................................ 364 16,256 8,569 382,692
Insurance .................................................................... 17,419 777,933 78,584 3,509,561
Legal & professional fees ........................................... 1,650 73,689 26,076 1,164,554
License & permits ...................................................... 805 35,951 150 6,699
Office expense ........................................................... — — 3,209 143,314
Payroll others .............................................................. 13,925 621,891 75,107 3,354,279
Payroll processing fees .............................................. 546 24,384 2,013 89,901
Payroll tax ................................................................... 1,064 47,518 6,579 293,818
Penalties & settlement ............................................... 60 2,680 — —
Postage & delivery ..................................................... 1,089 48,635 1,036 46,268
Printing & reproduction .............................................. 75 3,350 778 34,745
Rent ............................................................................ 12,725 568,299 50,384 2,250,157
Repair and maintenance ............................................. 296 13,219 — —
Sales and marketing expenses .................................. 9,629 430,031 55,736 2,489,170
Software expense ...................................................... 2,656 118,617 18,951 846,352
Tax .............................................................................. 159 7,101 — —
Telephone ................................................................... 968 43,231 6,754 301,634
Training and sourcing ................................................. 36,000 1,607,760 12,000 535,920
Travel .......................................................................... 7,643 341,336 20,502 915,619
Utilities ....................................................................... 776 34,656 5,248 234,368

Total expenses ........................................................... 113,278 5,058,995 384,406 17,167,572

See accompanying notes to financial statements

693
PLEXION TECHNOLOGIES INC.

Notes to Financial Statements for the three months period ended March 31, 2006
Concentrations –
1) Organization and Description of Business:
For the period ended March 31, 2006, sales to four customers amounted to
Plexion Technologies Incorporated is in the business of providing Information
$161,094 [Rs. 7,194,458/-] (84% of net revenues) {previous year $869,809 [Rs.
Technology enabled engineering services that envelope CAD, CAE, e-Engineering
38,845,670/-] 77.90% of net revenue}. As of March 31, 2006, accounts receivable
and software engineering solutions for automotive, aerospace and manufacturing
due from these customers were $204,478 [Rs. 9,131,987/-] (86% of net accounts
industries. Plexion Technologies Incorporated is a 100% owned subsidiary of
receivables) {previous year $172,804 [Rs. 7,717,427/-] 70.78% of net revenue}
Plexion Technologies (India) Private Limited.
Property and Equipment –
By virtue of shares sales and purchase, on February 15th, 2006, 100% stock of
the parent Company Plexion Technologies (India) Private Limited, were purchased Property and equipment is stated at cost. The Company provides for depreciation
by Mahindra and Mahindra Ltd. from JP Morgan for agreed purchase price. There of property and equipment using the straight-line method over the estimated
is no change in existing management or operations of the Company. useful lives of the related assets ranging from 5 to 7 years. The company charges
repairs and maintenance costs that do not extend the lives of the assets, to
2) Summary of Significant Accounting Policies:
expense as incurred.
Accounting Policies -
At March 31, 2006 property and equipment consists of the following:
These financial statements are prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the United States of Particulars Mach '06 March '06 Dec '05 Dec '05
America ("GAAP"); consequently, revenue is recognized when services are $ Rs. $ Rs.
rendered rather than when received. Expenses and purchase of assets recognized
when incurred. Furniture and Fixtures 18,279 816,341 18,279 816,341

Use of Estimates - Office Equipments 1,34,696 6,015,523 134,896 6,024,455

The preparation of financial statements in conformity with generally accepted 1,52,975 6,831,864 153,175 6,840,796
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of Less: Accumulated Depreciation 78,916 3,524,389 72,322 3,229,901
contingent assets and liabilities at the date of the financial statements and the
Net Fixed Assets 74,059 3,307,475 80,853 3,610,895
reported amounts of revenues and expenses during the reporting period. These
estimates are often based on judgements, probabilities and assumptions that 3) Related Party:
management believes are reasonable but that are inherently uncertain and
unpredictable. As a result, actual results could differ from those estimates. Plexion Technologies Incorporated is a 100% owned subsidiary of Plexion
Technologies [India] Private Limited. As of March 31, 2006, accounts payable and
Management periodically evaluates estimates used in the preparation of the accrued expenses include $91,342 [Rs. 40,79,334/-] previous year $51,355
consolidated financial statements for continued reasonableness. Appropriate [Rs. 2,293,514/-] payable to Plexion Technologies (India) Private Limited
adjustments, if any, to the estimates used are made prospectively based on such
periodic evaluations. 4) Commitments:

Cash and Cash Equivalents – The company had entered into a certain equipment and facility lease agreement
commencing from June 1, 2004 and ending on May 31, 2008. The future
Cash and cash equivalents consist primarily of highly liquid investments with minimum rental payments under the leases are as follows:
maturities of three months or less from the date of purchase.
For the year ended March 31
Accounts Receivable –
2007 $53,702 Rs. 23,98,331/-
The Company extends credit to clients based upon management's assessment 2008 $36,838 Rs. 16,45,185/-
of their creditworthiness on an unsecured basis. The Company provides an
allowance for uncollectible accounts based on historical experience and 2009 $346 Rs. 15,452/-
management evaluation of trend analysis. No provision for bad debts is made for For the period ended March 31, 2006 rent expenses was $13,244
the period ended March 31, 2006. [Rs. 5,91,477/-] previous year $55,632 [Rs. 2,484,525/-]
Revenue Recognition – 5) FC amounts are translated for convenience into Indian Rupees at the exchange
The Company recognizes revenue on time-and-materials contracts as the rate of Rs. 44.66 = FC1 which is the average of the telegraphic transfer buying
services are performed for clients. Revenues on fixed-price contracts are and selling rates quoted by the Mumbai Branch of State Bank of India on 31st
recognized using the percentage of completion method. Percentage of completion March 2006.
is determined by relating the actual cost of work performed to date to the
estimated total cost for each contract. If the estimate indicates a loss on a
particular contract, a provision is made for the entire estimated loss without
reference to the percentage of completion. There was no fixed price contract
during the period ended March 31, 2006.

694

Report of the directors
The directors present their report together with financial
statements for the period from 1 January 2006 to 31 March 2006.
Principal activities and business review
The principal activity of the group in the period under review was
that of the manufacture of forgings and general engineering.
Results and dividends
The trading results of the group for the period and financial
position of the company and the group are as shown in the
attached financial statements.
No dividends will be distributed for the period ended 31 March
2006 (year ended 31 December 2005: £nil).
Directors
The directors who served the company during the period are as
follows:
Mrs E A Horwood (resigned 3 January 2006)
C G Horwood (resigned 3 January 2006)
J Young
H H Luthra (appointed 3 January 2006)
Z Bhiwandiwala (appointed 3 January 2006)
S J Arora (appointed 3 January 2006)
The beneficial interests of the directors holding office at 31 March
2006 and their families in the shares of the company as at 31
March 2006 and 31 December 2005 were as follows:
31 March 2006 1 January 2006
Ordinary 10p shares
J Young 12,000 — It is the group policy that all customers who wish to trade on credit
The company is a 99.2% owned subsidiary of Mahindra &
Mahindra Limited.
Financial risk management objectives and policies
The group’s principal financial instruments comprise bank loans,
an invoice discounting facility, hire purchase contracts, cash and
short-term deposits. The main purpose of these financial
instruments is to raise finance for the group’s operations. The
group has various other financial instruments such as trade
debtors and trade creditors, which arise directly from its operations.
The group does not enter into derivative transactions.
It is, and has been throughout the period under review, the
group’s policy that no trading in financial instruments shall be
undertaken. The main risks arising from the group’s financial
instruments are interest rate risk, liquidity risk, commodity price
risk, foreign currency risk, and credit risk. The board reviews and
agrees policies for managing each of these risks and they are
STOKES GROUP LIMITED
summarised below.
Interest rate risk
The group’s exposure to market risk for changes in interest rates
relates primarily to the group’s long-term debt obligations. The
group’s policy is to manage its interest cost using a mix of fixed
and variable rate debt. The group’s policy is to utilise the undrawn
proportion of funds on it’s invoice discounting arrangement
before using it’s overdraft. The group exposure to interest rate
fluctuations on its borrowings is managed by the use of both fixed
and floating facilities. The group finances specific large plant
acquisitions via hire purchase contracts or loans secured
specifically on the assets being acquired.
Foreign currency risk
As a result of increased sales to customers outside the United
Kingdom the group’s profits can be affected significantly by
movements in euro exchange rates. The group does not seek to
hedge this exposure, instead it operates it’s invoice discounting
facility in both euros and sterling therefore enabling it to invoice
in both currencies where appropriate and where possible match
euro receivables with euro payables.
Commodity price risk
The group’s exposure to the price of steel is high, therefore
selling prices are monitored regularly to reduce the impact of such
risk.
Credit risk
The group trades with only recognised, creditworthy third parties.
terms are subject to credit vetting procedures. In addition,
receivable balances are monitored on an ongoing basis with the
result that the group’s exposure to bad debts is not significant.
Liquidity risk
The group’s objective is to maintain a balance between continuity
of funding and flexibility through the use of overdrafts, bank and
asset loans and hire purchase contracts.
Charitable donations
The group made charitable contributions of £Nil during the period
(year ended 31 December 2005: £Nil).
Employment policies
The group places emphasis on developing employment policies
designed to encourage the commitment of employees at all
levels. The group supports the employment of disabled persons
wherever possible, through recruitment, by retention of those
695
STOKES GROUP LIMITED
who become disabled during their employment and generally
through training, career development and promotion.
Health and safety
The group accepts its responsibility under the relevant legislation
and its policy is to do all that is reasonably practicable to ensure
the health, safety and welfare of employees whilst at work.
Disabled employees
Applications for employment by disabled persons are given full
and fair consideration for all vacancies in accordance with their
particular aptitudes and abilities. In the event of employees
becoming disabled, every effort is made to retrain them in order
that their employment with the group may continue.
It is the policy of the group that training, career development and
promotion opportunities should be available to all employees.
Directors’ responsibilities for the financial statements
The directors are responsible for preparing the financial statements
in accordance with applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting
Practice).
Company law requires the directors to prepare financial statements
for each financial year which give a true and fair view of the state
of affairs of the company and the group and of the profit or loss
of the group for that period. In preparing these financial statements,
the directors are required to:
696
— select suitable accounting policies and then apply them
consistently
— make judgements and estimates that are reasonable and
prudent
— state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
— prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the Companies Act 1985.
They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Auditors
Grant Thornton UK LLP offer themselves for reappointment as
auditors in accordance with section 385 of the Companies Act
1985.
ON BEHALF OF THE BOARD
K N Harrison
Secretary
Date: 1 May 2006

Report of the Independent Auditors to the members of Stokes Group Limited
We have audited the group and parent company financial
statements (the ‘’financial statements’’) of Stokes Group Limited
for the period from 1 January 2006 to 31 March 2006 which
comprise the principal accounting policies, the consolidated
profit and loss account, the consolidated and company balance
sheets, the consolidated cash flow statement and notes 1 to 30.
These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the company’s members, as a body,
in accordance with Section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to
them in an auditors’ report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members
as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report
and the financial statements in accordance with United Kingdom
law and Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) are set out in the Statement of
Directors’ Responsibilities.
Our responsibility is to audit the financial statements in accordance
with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view and are properly prepared in accordance
with the Companies Act 1985. We also report to you if, in our
opinion, the Directors’ Report is not consistent with the financial
statements, if the company has not kept proper accounting
records, if we have not received all the information and explanations
we require for our audit, or if information specified by law
regarding directors’ remuneration and other transactions is not
disclosed.
We read other information contained in the Annual Report, and
consider whether it is consistent with the audited financial
statements. This other information comprises only the Directors’
STOKES GROUP LIMITED
Report. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies
with the financial statements. Our responsibilities do not extend
to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and
judgments made by the directors in the preparation of the
financial statements, and of whether the accounting policies are
appropriate to the group’s and company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion the financial statements:
• give a true and fair view, in accordance with United Kingdom
Generally Accepted Accounting Practice, of the state of the
group’s and the parent company’s affairs as at 31 March
2006 and of the group’s loss for the period then ended; and
• have been properly prepared in accordance with the
Companies Act 1985
GRANT THORNTON UK LLP
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
BIRMINGHAM
Date: 1 May 2006
697
STOKES GROUP LIMITED
Principle Accounting Policies
For the period from 1 January 2006 to 31 March 2006
Basis of preparation
The financial statements have been prepared in accordance with
applicable United Kingdom accounting standards and under the
historical cost convention except that they have been modified to
include the revaluation of certain fixed assets.
The principal accounting policies of the company are set out
below, and have remained unchanged from the previous period.
Translation
Sterling amounts for the period ended 31 March 2006 and the
year ended 31 December 2005 are translated for convenience
into Indian Rupees at the exchange rate of 77.92 Rupees = £1
which is the average of the telegraphic transfer buying and selling
rates quoted by the Mumbai Branch of State Bank of India on 31
March 2006.
Basis of consolidation
The group financial statements consolidate those of the company
and of its subsidiary undertakings (see note 10) drawn up to 31
March 2006.
As permitted by Section 230 of the Companies Act 1985, a
separate profit and loss account for the company is not presented.
Turnover
Turnover is the total amount receivable by the group for goods
supplied, excluding VAT.
Negative goodwill
Negative goodwill is capitalised and amortised through the profit
and loss account in the period in which the non-monetary assets
acquired are recovered. In the case of fixed assets, this is the
period over which they are depreciated and in the case of current
assets, the period over which they are sold or otherwise realised.
Investments
Investments are included at cost less amounts written off.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost or valuation, net of
depreciation and any provision for impairment.
Depreciation is provided at the following annual rates in order to
write off each asset over its estimated useful life or, if held under
a finance lease, over the lease term, whichever is the shorter. The
rates generally applicable are:
Freehold property — 2% on cost
Plant and equipment — 10% to 50% on cost
Fixtures and fittings — 33.33% on cost
Computer equipment — 33.33% on cost
698
The transitional provisions of FRS 15 are being followed and the
valuation of freehold property has not been updated since the
date of the last revaluation which was 14 January 2002.
Grants
Government grants in respect of capital expenditure are credited
to a deferred income account and are released to the profit and
loss account by equal annual instalments over the expected
useful lives of the relevant assets.
Government grants of a revenue nature are credited to the profit
and loss account in the same period as the related expenditure.
Stocks
Stocks and work in progress are valued at the lower of cost and
net realisable value, after making due allowance for obsolete and
slow moving items.
Cost includes all direct expenditure and an appropriate proportion
of fixed and variable overheads.
Deferred taxation
Deferred tax is recognised on all timing differences where the
transactions or events that give the group an obligation to pay
more tax in the future, or a right to pay less tax in the future, have
occurred by the balance sheet date. Deferred tax assets are
recognised when it is more likely than not that they will be
recovered. Deferred tax is measured using rates of tax that have
been enacted or substantively enacted by the balance sheet date.
Foreign currencies
Assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into sterling at
the rate of exchange ruling at the date of the transaction.
Exchange differences are taken into account in arriving at the
operating result.
Hire purchase and leasing commitments
Assets obtained under hire purchase contracts or finance leases
are capitalised in the balance sheet. Those held under hire
purchase contracts are depreciated over their estimated useful
lives. Those held under finance leases are depreciated over their
estimated useful lives or the lease term, whichever is the shorter.
The interest element of leasing payments represents a constant
proportion of the capital balance outstanding and is charged to the
profit and loss account over the period of the lease. All other
leases are regarded as operating leases and the payments made
under them are charged to the profit and loss account on a
straight line basis over the lease term

Financial instruments
Financial liabilities and equity instruments are classified according
to the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual
interest in the assets of the entity after deducting all of its financial
liabilities.
Where the contractual obligations of financial instruments
(including share capital) are equivalent to a similar debt instrument,
those financial instruments are classed as financial liabilities.
Financial liabilities are presented as such in the balance sheet.
Finance costs and gains or losses relating to financial liabilities are
included in the profit and loss account. Finance costs are calculated
so as to produce a constant rate of return on the outstanding
liability.
Where the contractual terms of share capital do not have any
terms meeting the definition of a financial liability then this is
classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
STOKES GROUP LIMITED
Contributions to pension funds
Defined contribution scheme
The group operates defined contribution pension schemes.
Contributions payable for the period are charged in the profit and
loss account and represent the amount of the contributions
payable to the schemes in respect of the accounting period.
Defined benefit scheme
The defined benefit scheme in the UK previously operated is in
wind up. An agreement dated 4 June 2004 was entered into
containing details of the curtailment of the scheme and appropriate
disclosures have been made in note 26 to the financial statements.
Related parties transactions
The group is a >90% owned subsidiary of Mahindra & Mahindra
Limited, the consolidated accounts of which are publicly available.
Accordingly, the group has taken advantage of the exemption in
Financial Reporting Standard No 8 “Related party transactions”
and has not disclosed transactions with group undertakings.
699
STOKES GROUP LIMITED

Balance Sheet at 31 March 2006

31 March 31 March 31 December 31 December

2006 2006 2005 2005
Note £ Rupees £ Rupees

Fixed assets

Investments ......................................................... 1 2,494,986 194,409,309 2,494,986 194,409,309

Current assets

Debtors ................................................................ 2 396,136 30,866,917 396,235 30,874,631

Cash at bank and in hand ..................................... 32,141 2,504,427 7,027 547,544

428,277 33,371,344 403,262 31,422,175

Creditors: amounts falling due within one year 3 649,820 50,633,974 963,800 75,099,296
Net current liabilities .......................................... (221,543) (17,262,630) (560,538) (43,677,121)
Total assets less current liabilities and net assets 2,273,443 177,146,679 1,934,448 150,732,188

Capital and reserves

Called up share capital ......................................... 4 147,731 11,511,200 79,932 6,228,301

Share premium account ....................................... 5 1,303,196 101,545,032 1,032,000 80,413,440

Capital redemption reserve .................................. 5 40,068 3,122,099 40,068 3,122,099

Profit and loss account ......................................... 5 782,448 60,968,348 782,448 60,968,348

Equity shareholders’ funds ............................... 2,273,443 177,146,679 1,934,448 150,732,188

The financial statements were approved by the Board of Directors on 1 May 2006 and are signed on their behalf by:

J Young H H Luthra
Director Director

The accompanying accounting policies and notes form an integral part of these financial statements.

700
 STOKES GROUP LIMITED

Notes to the financial statements for the period from 1 January 2006 to 31 March 2006

1 FIXED ASSET INVESTMENTS 3 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Shares in Shares in 31 March 2006 31 December 2005

£ Rupees £
group group
Rupees
undertakings undertakings
£ Rupees Amounts owed to group
undertakings 649,820 50,633,974 963,800 75,099,296
Cost
At 1 January 2005 and 31 March 2006 ........ 2,494,986 194,409,309
4 CALLED UP SHARE CAPITAL
Net book amount
31 March 2006 31 December 2005
At 31 March 2006 and 31 December 2005 .. 2,494,986 194,409,309 £ Rupees £
Investments in subsidiaries are stated at cost less provisions for permanent Rupees
diminution in value at 31 March 2006. Subsidiaries are all wholly owned and Authorised:
registered in England and Wales. 2,400,000 (31 December
Subsidiaries Principal activity 2005: 1,200,000) Ordinary
shares of 10p each ............ 240,000 18,700,800 120,000 9,350,400
Parent company Stokes Group Limited:
Jensand Limited Services to industry and general 31 March 2006 31 December 2005
trading £ Rupees £
Stokes Forgings Dudley Limited Manufacture of forgings and Rupees
engineering products Allotted, issued and fully paid
Parent company Jensand Limited: 1,477,310 (31 December
Stokes Forgings Limited Manufacture of forgings and (2005: 799,320) Ordinary
engineering products shares of 10p each ............ 147,731 11,511,200 79,932 6,228,301

Allotments during the period

2 DEBTORS
Amounts owed by group
undertakings .....................
The company made an allotment of 50,000 ordinary shares at 0.50p per share by
31 March 2006 31 December 2005
way of a new issue on 3 January 2006. The premium on the shares issued of
£ Rupees £ Rupees
£20,000 (1,558,400 Rupees) has been transferred to the share premium account.
396,136 30,866,917 396,235 30,874,631 The company made an allotment of 627,990 ordinary shares at 0.50p per share
by way of a rights issue on 24 February 2006. The premium on the shares issued
of £251,196 (19,573,192 Rupees) has been transferred to the share premium
account. The company also increased its authorised share capital by 1,200,000
ordinary shares of 10p each on this date.

5 RESERVES
Share Capital
Premium redemption Profit and
account reserve Loss Account Totals
£ £ £ £
At 31 December 2005 ........................................................................ 1,032,000 40,068 782,448 1,854,516
Issue of shares ................................................................................... 271,196 - - 271,196
At 31 March 2006 .............................................................................. 1,303,196 40,068 782,448 2,125,712

Share Capital
Premium redemption Profit and
account reserve Loss Account Totals
Rupees Rupees Rupees Rupees
At 31 December 2005 ........................................................................ 80,413,440 3,122,099 60,968,348 144,503,887
Issue of shares ................................................................................... 21,131,592 - 21,131,592
At 31 March 2006 .............................................................................. 101,545,032 3,122,099 60,968,348 165,635,479

6 CONTINGENT LIABILITIES 7 CONTROLLING RELATED PARTY

The company is included in a multilateral guarantee of all group companies’ debt
purchase agreements under joint lending arrangements. At 31 March 2006
these borrowings amounted to £2,014,720 (156,986,982 Rupees) (31 December
2005: £720,707 (56,157,489 Rupees)).
The group was under the control of the Jennings family throughout the year
ended 31 December 2005 and up until 2 January 2006.
On 3 January 2006 98.6% of the issued share capital of the company was acquired
by Mahindra & Mahindra Limited which then became the ultimate controlling
related party. Following a rights issues on 24 February 2006 Mahindra & Mahindra
Limited increased their share ownership to 99.2% of the issued share capital.
Copies of Mahindra & Mahindra Limited’s accounts are available from Gateway
Building, Apollo Bunder, Mumbai 400 001.

701
STOKES FORGINGS DUDLEY LIMITED
Report of the directors
The directors present their report and the financial statements of
the company for the three month period from 1 January 2006 to
31 March 2006.
Principal activities and business review
The principal activity of the company during the period was that
of manufacturing of forgings and general engineering.
There was a profit for the three month period to 31 March 2006
after taxation amounting to £21,614 (1,684,163 Rupees) (year to
31 December 2005: loss £47,002 (3,662,396 Rupees) which has
been transferred to/from reserves.
Results and dividends
The trading results for the period and the company’s financial
position at the end of the period are shown in the attached
financial statements.
The directors have not recommended a dividend.
Directors
The directors who served the company during the period were as
follows:
H H Luthra (appointed 3 January 2006)
Z Bhiwandiwala (appointed 3 January 2006)
S J Arora (appointed 3 January 2006)
Mrs E A Horwood (resigned 3 January 2006)
A M Jennings (resigned 3 January 2006)
J Young
A Ledbury
The company is a wholly owned subsidiary of Stokes Group
Limited. The interests of J Young in the Stokes Group Limited are
shown in that company’s financial statements. Stokes Group
Limited is a 99.2% owned subsidiary of Mahindra & Mahindra
Limited.
Directors’ responsibilities
The directors are responsible for preparing the financial statements
in accordance with applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting
Practice).
Company law requires the directors to prepare financial statements
for each financial year which give a true and fair view of the state
of affairs of the company and of the profit or loss of the company
for that period. In preparing these financial statements, the
directors are required to:
— select suitable accounting policies and then apply them
consistently
702
— make judgements and estimates that are reasonable and
prudent
— prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the Companies Act 1985.
They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Financial risk management objectives and policies
The company’s principal financial instruments comprise bank
loans, an invoice discounting facility, hire purchase contracts,
cash and short-term deposits. The main purpose of these financial
instruments is to raise finance for the company’s operations. The
company has various other financial instruments such as trade
debtors and trade creditors, which arise directly from its operations.
The company does not enter into derivative transactions.
It is, and has been throughout the period under review, the
company’s policy that no trading in financial instruments shall be
undertaken. The main risks arising from the company’s financial
instruments are interest rate risk, commodity price risk, liquidity
risk, foreign currency risk, and credit risk. The board reviews and
agree policies for managing each of these risks and they are
summarised below.
Interest rate risk
The company’s exposure to market risk for changes in interest
rates relates primarily to the company’s long-term debt obligations.
The company’s policy is to manage its interest cost using a mix
of fixed and variable rate debt. The company’s policy is to utilise
the undrawn proportion of funds on it’s invoice discounting
arrangement before using it’s overdraft. The company exposure
to interest rate fluctuations on its borrowings is managed by the
use of both fixed and floating facilities. The company finances
specific large plant acquisitions via hire purchases contracts or
loans secured specifically on the assets being acquired.
Foreign currency risk
As a result of increased sales to customers outside the United
Kingdom the company’s profits can be affected by movements
in euro exchange rates. The company does not seek to hedge this
exposure, instead it operates it’s invoice discounting facility in
both euros and sterling therefore enabling it to invoice in both
currencies where appropriate and where possible match euro
receivables with euro payable.

Commodity price risk
The company’s exposure to the price of steel is high, therefore
selling prices are monitored regularly to reduce the impact of such
risk.
Credit risk
The company trades with only recognised, creditworthy third
parties. It is the company policy that all customers who wish to
trade on credit terms are subject to credit vetting procedures. In
addition, receivable balances are monitored on an ongoing basis
with the result that the company’s exposure to bad debts is not
significant.
Liquidity risk
The company’s objective is to maintain a balance between
continuity of funding and flexibility through the use of overdrafts,
bank and asset loans and hire purchase contracts.
Donations
During the period the company made no political or charitable
contributions.
STOKES FORGINGS DUDLEY LIMITED
Employment policies
The company places emphasis on developing employment policies
designed to encourage the commitment of employees at all
levels. The company supports the employment of disabled persons
wherever possible, through recruitment, by retention of those
who become disabled during their employment and generally
through training, career development and promotion.
Health and safety
The company accepts its responsibility under the relevant legislation
and its policy is to do all that is reasonably practical to ensure the
health, safety and welfare of employees whilst at work.
Auditors
Grant Thornton UK LLP offer themselves for reappointment as
auditors in accordance with section 385 of the Companies Act
1985.
BY ORDER OF THE BOARD
K N Harrison
Secretary
Date: 1 May 2006
703
STOKES FORGINGS DUDLEY LIMITED
Report of the independent auditors to the members of Stokes Forgings Dudley Limited
We have audited the financial statements of Stokes Forgings
Dudley Limited for the period from 1 January 2006 to 31 March
2006 which comprise the principal accounting policies, the profit
and loss account, the balance sheet and notes 1 to 26. These
financial statements have been prepared under the accounting
policies set out therein.
This report is made solely to the company’s members, as a body,
in accordance with Section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to
them in an auditors’ report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members
as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Directors’ Report
and the financial statements in accordance with United Kingdom
law and Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) are set out in the Statement of
Directors’ Responsibilities.
Our responsibility is to audit the financial statements in accordance
with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view and are properly prepared in accordance
with the Companies Act 1985. We also report to you if, in our
opinion, the Directors’ Report is not consistent with the financial
statements, if the company has not kept proper accounting
records, if we have not received all the information and explanations
we require for our audit, or if information specified by law
regarding directors’ remuneration and other transactions is not
disclosed.
We read the Directors’ Report and consider whether it is consistent
with the audited financial statements. We consider the implications
704
for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements.
Basis of opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies are
appropriate to the company’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion the financial statements:
• give a true and fair view, in accordance with United Kingdom
Generally Accepted Accounting Practice, of the state of the
company’s affairs as at 31 March 2006 and of its profit for the
period then ended; and
• have been properly prepared in accordance with the
Companies Act 1985.
GRANT THORNTON UK LLP
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
BIRMINGHAM
Date: 1 May 2006

Principal accounting policies
Basis of accounting
The financial statements have been prepared in accordance with
applicable United Kingdom accounting standards and under the
historical cost convention.
The principal accounting policies of the company are set out
below, and have remained unchanged from the previous period.
Sterling translation
Sterling amounts for the period ended 31 March 2006 and the
year ended 31 December 2005 are translated for convenience
into Indian Rupees at the exchange rate of 77.92 Rupees = £1
which is the average of the telegraphic transfer buying and selling
rates quoted by the Mumbai Branch of State Bank of India on 31
March 2006.
Cash flow statement
The directors have taken advantage of the exemption in Financial
Reporting Standard No 1 (Revised 1996) from including a cash
flow statement in the financial statements on the grounds that
the company is wholly owned and its parent publishes a
consolidated cash flow statement.
Related parties transactions
The company is a wholly owned subsidiary of Stokes Group
Limited, the consolidated accounts of which are publicly available.
Accordingly, the company has taken advantage of the exemption
in Financial Reporting Standard No 8 “Related party transactions”
and has not disclosed transactions with group undertakings.
Turnover
The turnover shown in the profit and loss account represents
amounts invoiced for goods sold during the year, exclusive of
Value Added Tax.
Goodwill
Negative goodwill is capitalised and amortised through the profit
and loss account in the period which the non-monetary assets
acquired are recovered. In the case of fixed assets this is the
period over which they are depreciated and in the case of current
assets, the period over which they are sold or otherwise released.
Fixed assets and depreciation
All fixed assets are initially recorded at cost.
Depreciation is provided at the following annual rates in order to
write off each asset over its estimated useful life or, if held under
a finance lease, over the lease term, whichever is the shorter. The
rates generally applicable are:
STOKES FORGINGS DUDLEY LIMITED
Plant & machinery — 10% to 50% on cost
Fixtures & fittings — 33% on cost
Motor vehicles — 25% on cost
Computer equipment — 33% on cost
Stocks and work in progress
Stocks and work in progress are valued at the lower of cost and
net realisable value, after making due allowance for obsolete and
slow moving items.
Cost includes all direct expenditure and an appropriate proportion
of fixed and variable overheads.
Hire purchase agreements
Assets held under hire purchase agreements are capitalised and
disclosed under tangible fixed assets at their fair value. The
capital element of the future payments is treated as a liability and
the interest is charged to the profit and loss account on a straight
line basis.
Finance lease agreements
Where the company enters into a lease which entails taking
substantially all the risks and rewards of ownership of an asset,
the lease is treated as a finance lease. The asset is recorded in the
balance sheet as a tangible fixed asset and is depreciated in
accordance with the above depreciation policies. Future
instalments under such leases, net of finance charges, are
included with creditors. Rentals payable are apportioned between
the finance element, which is charged to the profit and loss
account on a straight line basis, and the capital element which
reduces the outstanding obligation for future instalments.
Operating lease agreements
Rentals applicable to operating leases where substantially all of
the benefits and risks of ownership remain with the lessor are
charged against profits on a straight line basis over the period of
the lease.
Pension costs
The company operates defined contribution pension schemes.
Contributions payable for the period are charged in the profit and
loss account and represent the amount of the contributions
payable to the schemes in respect of the accounting period.
Deferred taxation
Deferred tax is recognised on all timing differences where the
transactions or events that give the company an obligation to pay
more tax in the future, or a right to pay less tax in the future, have
occurred by the balance sheet date. Deferred tax assets are
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STOKES FORGINGS DUDLEY LIMITED
recognised when it is more likely than not that they will be
recovered. Deferred tax is measured using rates of tax that have
been enacted or substantively enacted by the balance sheet date.
Foreign currencies
Assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into sterling at
the rate of exchange ruling at the date of the transaction.
Exchange differences are taken into account in arriving at the
operating result.
Financial instruments
Financial liabilities and equity instruments are classified according
to the substance of the contractual arrangements entered into.
706
An equity instrument is any contract that evidences a residual
interest in the assets of the entity after deducting all of its financial
liabilities.
Where the contractual obligations of financial instruments (including
share capital) are equivalent to a similar debt instrument, those
financial instruments are classed as financial liabilities. Financial
liabilities are presented as such in the balance sheet. Finance costs
and gains or losses relating to financial liabilities are included in the
profit and loss account. Finance costs are calculated so as to
produce a constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any
terms meeting the definition of a financial liability then this is
classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
 STOKES FORGINGS DUDLEY LIMITED

Profit and loss account

3 months ended Year ended

31 March 2006 31 December 2005
Note £ Rupees £ Rupees

Turnover ............................................................... 1 1,806,735 140,780,791 6,150,881 479,276,648

Cost of sales ........................................................ 1,547,404 120,573,720 5,272,751 410,852,758

Gross profit .......................................................... 259,331 20,207,071 878,130 68,423,890
Exceptional operating items ................................. 6 - - 35,868 2,794,835

Other operating charges ...................................... 2 224,322 17,479,170 880,566 68,613,702

Net operating expenses ....................................... 224,322 17,479,170 916,434 71,408,537

Operating profit/(loss) pre exceptional operating

operating items .................................................... 35,009 2,727,901 (2,436) (189,813)

Exceptional operating items ................................. - - (35,868) (2,794,834)

Operating profit/(loss) .......................................... 3 35,009 2,727,901 (38,304) (2,984,647)

Interest receivable ............................................... - - 873 68,024

Interest payable and similar charges ................... 7 (9,911) (772,265) (50,280) (3,917,818)
Profit on ordinary activities before taxation .......... 25,098 1,955,636 (87,711) (6,834,441)

Tax on profit/(loss) on ordinary activities .............. 8 (3,484) (271,473) 40,709 3,172,045

Retained profit/(loss) for the financial period ....... 23 21,614 1,684,163 (47,002) (3,662,396)

All of the activities of the company are classed as continuing.

The company has no recognised gains or losses other than the results for the period as set out above.

The accompanying accounting policies and notes form part of these financial statements.

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STOKES FORGINGS DUDLEY LIMITED

Balance Sheet

3 months ended Year ended

31 March 2006 31 December 2005
Note £ Rupees £ Rupees

Fixed assets

Intangible assets .................................................. 9 (36,842) (2,870,729) (51,219) (3,990,984)

Tangible assets .................................................... 10 276,620 21,554,230 300,888 23,445,193

............................................................................. 239,778 18,683,501 249,669 19,454,209
Current assets

Stocks .................................................................. 11 500,114 38,968,883 280,482 21,855,157

Debtors ................................................................ 12 1,975,968 153,967,427 1,282,504 99,932,712

Cash at bank ........................................................ 93,885 7,315,519 95 7,402

2,569,967 200,251,829 1,563,081 121,795,271

Creditors: amounts falling due within one year 13 2,159,621 168,277,668 1,630,344 127,036,404
Net current assets .............................................. 410,346 31,974,161 (67,263) (5,241,133)
Total assets less current liabilities .................... 650,124 50,657,662 182,406 14,213,076

Creditors: amounts falling due after more than

one year .............................................................. 14 664,641 51,788,827 199,549 15,548,859
(14,517) (1,131,165) (17,143) (1,335,783)

Provisions for liabilities and charges

Other provisions ................................................... 18 - - (18,988) (1,479,545)

(14,517) (1,131,165) (36,131) (2,815,328)
Capital and reserves

Called-up equity share capital .............................. 22 2 156 2 156

Profit and loss account ......................................... 23 (14,519) (1,131,320) (36,133) (2,815,484)

Shareholders’ funds ........................................... 24 (14,517) (1,131,165) (36,131) (2,815,328)

These financial statements were approved by the directors on 1 May 2006 and are signed on their behalf by:

J Young H H Luthra
Director Director

The accompanying accounting policies and notes form part of these financial statements.

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 STOKES FORGINGS DUDLEY LIMITED

5 Directors 3 months ended Year ended

Notes to the financial statements 31 March 2006 31 December 2005
£ Rupees £ Rupees
1 Turnover Remuneration in respect of
The turnover and profit/(loss) before tax are attributable to the one principal directors was as follows:
activity of the company. Emoluments receivable .... 12,500 974,000 50,000 3,896,000
A geographic analysis of turnover is given below: The remuneration of J Young was borne by Jensand Limited, a fellow subsidiary
3 months ended Year ended of the Stokes Group Limited for the year ended 31 December 2005 and by
31 March 2006 31 December 2005 Stokes Forgings Limited for the period ended 31 March 2006.
£ Rupees £ Rupees
United Kingdom ................ 1,708,506 133,126,787 5,974,249 465,513,482 6 Exceptional operating items 3 months ended Year ended
Europe ............................... 85,381 6,652,888 71,101 5,540,190 31 March 2006 31 December 2005
£ Rupees £ Rupees
USA ................................... - - 105,531 8,222,976
Redundancy costs ............. - - 35,868 2,794,835
Rest of World .................... 12,848 1,001,116 - -
1,806,735 140,780,791 6,150,881 479,276,648
7 Interest payable and 3 months ended Year ended
similar charges 31 March 2006 31 December 2005
2 Other operating charges
£ Rupees £ Rupees
3 months ended Year ended
Bank interest payable ........ - - 248 19,324
31 March 2006 31 December 2005
£ Rupees £ Rupees Hire purchase interest ....... 1,001 77,998 2,327 181,320
Distribution costs .............. 35,278 2,748,862 76,365 5,950,361 Loan interest ..................... 8,910 694,267 47,705 3,717,174
Administrative expenses ... 189,044 14,730,308 804,201 62,663,341 9,911 772,265 50,280 3,917,818
224,322 17,479,170 880,566 68,613,702
8 Taxation 3 months ended Year ended
3 Operating profit/(loss) 31 March 2006 31 December 2005
Operating profit/(loss) is stated after charging / (crediting): £ Rupees £ Rupees
(a) Analysis of charg in the period:
3 months ended Year ended
Deferred tax:
31 March 2006 31 December 2005
Reversal and origination
£ Rupees £ Rupees
of timing differences .. (3,484) (271,473) 40,709 3,172,045
Amortisation of negative goodwill (14,377) (1,120,255) (57,984) (4,518,113)
Depreciation of owned fixed assets 58,976 4,595,410 220,885 17,211,359 (b) Factors affecting current tax charge:
Depreciation of assets held under The tax assessed on the profit/(loss) on ordinary activities for the period is lower
under hire purchase agreements .. 5,502 428,716 12,443 1,066,491 than the standard rate of corporation tax in the UK of 30% (year ended 31
December 2005 - 30%).
Profit on disposal of fixed assets .. - - (39,000) (3,038,880)
3 months ended Year ended
Auditor’s remuneration: .............. 31 March 2006 31 December 2005
Audit fees ................................... 5,000 389,600 8,000 623,360 £ Rupees £ Rupees
Taxation fees .............................. 1,500 116,880 2,000 155,840 Profit on ordinary activities
before taxation .................. 25,098 1,955,636 (87,711) (6,834,441)
Operating lease costs: ...............
Profit/(loss) on ordinary
Land and buildings ..................... 19,608 1,527,855 75,000 5,844,000
activities at the standard
rate of tax .......................... 7,529 586,660 (26,313) (2,050,309)
4 Directors and employees
Expenses not deductible
The average number of staff employed by the company during the financial for tax purposes ................ - - 2,550 198,696
period amounted to: Income not allowable for
3 months Year ended tax purposes ..................... (4,313) (336,070) (17,395) (1,355,418)
ended ended Depreciation for period in
31 March 31 December excess of capital allowances 12,404 966,520 25,309 1,972,077
2006 2005 Utilisation of tax losses ..... (15,620) (1,217,110) - -
No. No.
Tax losses carried forward - - 15,849 1,234,954
Number of production staff .......................... 61 57
Total current tax ................ - - - -
Number of administrative staff .................... 13 13
74 70
9 Intangible fixed assets Negative Negative
The aggregate payroll costs of the above were: goodwill goodwill
£ Rupees
3 months ended Year ended
Cost:
31 March 2006 31 December 2005
At 1 January 2006 and 31 March 2006 ........ (278,323) (21,686,928)
£ Rupees £ Rupees
Wages and salaries ........... 430,655 33,556,638 1,403,119 109,331,032 Amortisation:
At 1 January 2006 ........................................ (227,104) (17,695,944)
Social security costs ......... 37,727 2,939,688 116,235 9,057,031
Charge for the period ................................... (14,377) (1,120,255)
Other pension costs .......... 9,515 741,409 37,773 2,943,272
At 31 March 2006 ........................................ (241,481) (18,816,199)
477,897 37,237,735 1,557,127 121,331,335
Net book value:
The above excludes redundancy costs of £35,969 (2,802,704 Rupees) for the At 31 March 2006 ........................................ (36,842) (2,870,729)
year ended 31 December 2005 that have been shown separately as exceptional At 31 December 2005 .................................. (51,219) (3,990,984)
operating items.

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STOKES FORGINGS DUDLEY LIMITED

10 Tangible fixed assets

Plant & Fixtures & Motor Computer
Machinery Fittings Vehicles Equipment Total
£ £ £ £ £
Cost:
At 1 January 2006 .............................................................................. 1,023,551 53,107 5,188 31,965 1,113,811
Additions ............................................................................................ 40,210 - - - 40,210
At 31 March 2006 .............................................................................. 1,063,761 53,107 5,188 31,965 1,154,021
Depreciation:
At 1 January 2006 .............................................................................. 731,631 51,164 1,621 28,507 812,923
Charge for the period ......................................................................... 61,401 310 366 2,401 64,478
At 31 March 2006 .............................................................................. 793,032 51,474 1,987 30,908 877,401
Net book value:
At 31 March 2006 .............................................................................. 270,729 1,633 3,201 1,057 276,620
At 31 December 2005 ........................................................................ 291,920 1,943 3,567 3,458 300,888

Included within the net book value of £276,620 is £74,055 (31 December 2005 - £79,557) relating to assets held under hire purchase agreements. The depreciation charged
to the financial statements in the period in respect of such assets amounted to £5,502 (year ended 31 December 2005 - £12,443).

Plant & Fixtures & Motor Computer

Machinery Fittings Vehicles Equipment Total
Rupees Rupees Rupees Rupees Rupees
Cost:
At 1 January 2006 .............................................................................. 79,755,094 4,138,097 404,249 2,490,713 86,788,153
Additions ............................................................................................ 3,133,163 - - - 3,133,163
At 31 March 2006 .............................................................................. 82,888,257 4,138,097 404,249 2,490,713 89,921,316
Depreciation:
At 1 January 2006 .............................................................................. 57,008,688 3,986,699 126,308 2,221,265 63,342,960
Charge for the period ......................................................................... 4,784,366 24,155 28,519 187,086 5,024,126
At 31 March 2006 .............................................................................. 61,793,054 4,010,854 154,827 2,408,351 68,367,086
Net book value:
At 31 March 2006 .............................................................................. 21,095,203 127,243 249,422 82,362 21,554,230
At 31 December 2005 ........................................................................ 22,746,406 151,398 277,941 269,448 23,445,193

Included within the net book value of 21,554,230 Rupees is 5,770,366 Rupees (31 December 2005 - 6,199,081 Rupees) relating to assets held under hire purchase
agreements. The depreciation charged to the financial statements in the period in respect of such assets amounted to 428,716 Rupees (year ended 31 December 2005
- 969,559 Rupees).

11 Stocks 13 Creditors: amounts falling due within one year

31 March 2006 31 December 2005 31 March 2006 31 December 2005
£ Rupees £ Rupees £ Rupees £ Rupees
Bank loan and invoice dis-
Raw materials ................... 92,428 7,201,990 57,076 4,447,362 counting ............................ 499,375 38,911,300 117,950 9,190,664
Work in progress and finished Trade creditors .................. 1,223,969 95,371,664 727,391 56,678,306
goods ................................ 348,146 27,127,536 157,886 12,302,477 Amounts owed to group
undertakings ..................... 98,121 7,645,588 547,988 42,699,225
Tooling .............................. 59,540 4,639,357 65,520 5,105,318 Other taxation and social
500,114 38,968,883 280,482 21,855,157 security ............................. 91,819 7,154,536 101,182 7,884,101
Amounts due under hire
purchase agreements ....... 25,793 2,009,791 25,353 1,975,506
Other creditors .................. 56,456 4,399,052 16,752 1,305,316
Accruals and deferred
income .............................. 164,088 12,785,736 93,728 7,303,286
2,159,621 168,277,668 1,630,344 127,036,404
12 Debtors The following liabilities disclosed under creditors falling due within one year are
31 March 2006 31 December 2005 secured by the company:
£ Rupees £ Rupees 31 March 2006 31 December 2005
£ Rupees £ Rupees
Trade debtors .................... 1,149,732 89,587,118 572,318 44,595,019 Bank loan and invoice dis-
Amounts owed by group counting ............................ 499,375 38,911,300 117,950 9,190,664
undertakings ..................... 653,157 50,893,993 654,012 50,960,615 Amounts due under hire
purchase agreements ....... 25,793 2,009,791 25,353 1,975,506
Prepayments ..................... 151,372 11,794,906 30,983 2,414,195 525,168 40,921,091 143,303 11,166,170
Deferred taxation (note 18) 21,707 1,691,410 25,191 1,962,883
Invoice discounting of £447,192 (34,845,201 Rupees) (31 December 2005: £nil)
1,975,968 153,967,427 1,282,504 99,932,712 represents debt purchase agreements with the company’s bankers. The
agreement is secured by way of a debenture over all of the company’s assets.
The amount owed by group undertakings are interest free. Interest is charged at 1.73% above the bank’s base rate.

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 STOKES FORGINGS DUDLEY LIMITED

14 Creditors: amounts falling due after more than one year The balance of the deferred taxation account consists of the tax effect of timing
31 March 2006 31 December 2005 differences in respect of:
£ Rupees £ Rupees 31 March 2006 31 December 2005
£ Rupees £ Rupees
Bank loan .......................... 135,939 10,592,368 147,902 11,524,524
Excess of taxation
Amounts owed to group
allowances over depreciation
undertakings ..................... 483,669 37,687,489 - -
on fixed assets .................. 21,107 1,644,658 8,703 678,138
Amounts due under hire Other timing differences ...... 600 46,752 638 49,713
purchase agreements ....... 45,033 3,508,970 51,647 4,024,335 Losses .............................. - 15,850 1,235,032
664,641 51,788,827 199,549 15,548,859 Deferred tax asset (note12) 21,707 1,691,410 25,191 1,962,883

The following liabilities disclosed under creditors falling due after more than one
year are secured by the company: 19 Leasing commitments
31 March 2006 31 December 2005 At 31 March 2006 the company had annual commitments under non-cancellable
£ Rupees £ Rupees operating leases as set out below:
Bank loan .......................... 135,939 10,592,368 147,902 11,524,524 31 March 2006 31 December 2005
Land & Building Land & Building
Amounts due under hire
£ Rupees £ Rupees
purchase agreements ....... 45,033 3,508,970 51,647 4,024,335
180,972 14,101,338 199,549 15,548,859 Operating leases which expire:
Within 2 to 5 years ............ 78,432 6,111,421 75,000 5,844,000
The bank loan is secured by way of debentures over all the company’s assets.
Interest is charged at 2.15% over the bank’s base rate. Hire purchase agreements
are secured against the assets provided under such agreements. 20 Contingent liabilities
The company is included in a multilateral guarantee of all group companies’ debt
15 Bank loan and invoice discounting purchase agreements under joint lending arrangements. At 31 March 2006
these borrowings amounted to £2,014,720 (156,986,982 Rupees) (31 December
The bank loan and invoice discounting liabilities are repayable as follows:
2005: £720,707 (56,157,489 Rupees)).
31 March 2006 31 December 2005
£ Rupees £ Rupees
21 Related party transactions
Amounts repayable:
The company has taken advantage of the exemption in Financial Reporting
In one year or less or on
Standard No 8 “Related party disclosures” and has not disclosed transactions
demand ............................. 499,375 38,911,300 52,455 4,087,294
with group undertakings.
In more than one year but
not more than two years ... 52,183 4,066,099 53,341 4,156,331
22 Share capital
In more than two years but
not more than five years ... 83,756 6,526,269 94,561 7,368,193 Authorised share capital:

635,314 49,503,668 200,357 15,611,818 31 March 2006 31 December 2005

£ Rupees £ Rupees

16 Commitments under finance leases and hire purchase agreements Ordinary shares of £1 each 1,000 77,920 1,000 77,920
Future commitments under finance leases and hire purchase agreements are as Allotted, called up and fully paid:
follows:
2006 2005
31 March 2006 31 December 2005 No. £ Rupees No. £ Rupees
£ Rupees £ Rupees
Amounts payable within 1 year 25,793 2,009,791 25,353 1,975,506 Ordinary shares of £1 each 2 2 156 2 2 156

Amounts payable between

1 and 2 years .................... 27,553 2,146,930 27,113 2,112,645 23 Profit and loss account
Amounts payable between 31 March 2006 31 December 2005
3 and 5 years .................... 17,480 1,362,040 24,534 1,911,690 £ Rupees £ Rupees
70,826 5,518,761 77,000 5,999,841
Balance brought forward ... (36,133) (2,815,483) 10,869 846,912

17 Pensions Retained profit/(accumulated

loss) for the financial period 21,614 1,684,163 (47,002) (3,662,396)
The company operates defined contribution schemes on behalf of its directors
and certain employees. The assets of the schemes are held separately from Balance carried forward .... (14,519) (1,131,320) (36,133) (2,815,484)
those of the company in independently administered funds. The charge for the
period to the profit and loss account was £9,515 (741,409 Rupees) (year ended
31 December 2005: £37,773 (2,943,272 Rupees)). 24 Reconciliation of movements in shareholders’ funds
3 months ended
18 Other provisions 3 months ended Year ended
Insurance Insurance 31 March 2006 31 December 2005
provision provision £ Rupees £ Rupees
£ Rupees
Profit/(loss) for the financial
At 1 January 2006 ........................................ 18,988 1,479,545 period/year ........................ 21,614 1,684,163 (47,002) (3,662,396)
Profit and loss account movement during Opening shareholders’
the period ..................................................... (18,988) (1,479,545) (deficit)/funds .................... (36,131) (2,815,328) 10,871 847,068
At 31 March 2006 ........................................ - - Closing shareholders’ deficit (14,517) (1,131,165) (36,131) (2,815,328)

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STOKES FORGINGS DUDLEY LIMITED

25 Capital commitments
There were no capital commitments at 31 March 2006 or 31 December 2005.

26 Ultimate parent company

The directors consider that up to 3 January 2006 the company’s immediate
parent undertaking and ultimate parent company was Stokes Group Limited.
From 3 January 2006 the ultimate parent company is Mahindra & Mahindra
Limited, a company registered in India, following its acquisition of 98.6% of the
share capital of Stokes Group Limited. Following a rights issues by Stokes Group
Limited on 24 February 2006 Mahindra & Mahnidra Limited increased their share
ownership to 99.2% of the issued share capital of that company.
Copies of Stokes Group Limited’s accounts are available from The Secretary,
Victor Works, Northcote Street, Walsall, West Midlands, WS2 8BH.
Copies of Mahindra & Mahindra Limited’s accounts are available from Gateway
Building, Apollo Bunder, Mumbai 400 001.

712

Report of the directors
The directors present their report and the financial statements
of the company for the three month period from 1 January 2006
to 31 March 2006.
Principal activities and business review
The principal activity of the company during the period was that
of provision of services to industry and general trading.
There was a profit for the three month period to 31 March 2006
after taxation amounting to £1,461 (113,842 Rupees) (year
ended 31 December 2005: loss £88,122 (6,866,466 Rupees))
which has been transferred to/from reserves.
Results and dividends
The trading results for the period and the company’s financial
position at the end of the period are shown in the attached
financial statements.
The directors have not recommended a dividend.
Directors
The directors who served the company during the period were
as follows:
J Young (appointed 3 January 2006)
H H Luthra (appointed 3 January 2006)
Z Bhiwandiwala (appointed 3 January 2006)
S J Arora (appointed 3 January 2006)
Mrs E A Horwood (resigned 3 January 2006)
A M Jennings (resigned 3 January 2006)
The company is a wholly owned subsidiary of Stokes Group
Limited. The interests of J Young in the Stokes Group Limited
are shown in that company’s financial statements. Stokes Group
Limited is a 99.2% owned subsidiary of Mahindra & Mahindra
Limited.
Directors’ responsibilities
The directors are responsible for preparing the financial
statements in accordance with applicable law and United
Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Company law requires the directors to prepare financial
statements for each financial year which give a true and fair
view of the state of affairs of the company and of the profit or
loss of the company for that period. In preparing these financial
statements, the directors are required to:
— select suitable accounting policies and then apply them
consistently
JENSAND LIMITED
— make judgements and estimates that are reasonable and
prudent
— prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure
that the financial statements comply with the Companies Act
1985. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Financial risk management objectives and policies
The company’s principal financial instruments comprise bank
loans, cash and short-term deposits. The main purpose of these
financial instruments is to raise finance for the company’s
operations. The company has various other financial instruments
such as trade creditors, which arise directly from its operations.
The company does not enter into derivative transactions.
It is, and has been throughout the period under review, the
company’s policy that no trading in financial instruments shall be
undertaken. The main risks arising from the company’s financial
instruments are interest rate risk and liquidity risk. The board
reviews and agrees policies for managing each of these risks
and they are summarised below.
Interest rate risk
The company’s exposure to market risk for changes in interest
rates relates primarily to the company’s long-term debt
obligations. The company’s policy is to manage its interest cost
using fixed rate debt. The company exposure to interest rate
fluctuations on its borrowings is managed by the use of fixed
facilities.
Liquidity risk
The company’s objective is to maintain continuity of funding
through the use of bank loans.
Auditors
Grant Thornton UK LLP offer themselves for reappointment as
auditors in accordance with section 385 of the Companies Act
1985.
By Order Of The Board
K N Harrison
Secretary
Date: 1 May 2006
713
JENSAND LIMITED
Report of the independent auditor to the members of Jensand Limited
We have audited the financial statements of Jensand Limited
for the period from 1 January 2006 to 31 March 2006 which
comprise the principal accounting policies, profit and loss
account, balance sheet and notes 1 to 19. These financial
statements have been prepared under the accounting policies
set out therein.
This report is made solely to the company’s members, as a
body, in accordance with Section 235 of the Companies Act
1985. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and
the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
The directors’ responsibilities for preparing the Directors’ Report
and the financial statements in accordance with United Kingdom
law and Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) are set out in the statement of
Directors’ Responsibilities.
Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial
statements give a true and fair view and are properly prepared
in accordance with the Companies Act 1985. We also report to
you if, in our opinion, the Directors’ Report is not consistent
with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information
and explanations we require for our audit, or if information
specified by law regarding directors’ remuneration and other
transactions is not disclosed.
We read the Directors Report and consider whether it is
consistent with the audited financial statements. We consider
the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the
financial statements.
714
Basis of opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in
the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion:
● the financial statements give a true and fair view, in
accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the company’s affairs
as at 31 March 2006 and of its profit for the period then
ended; and
● have been properly prepared in accordance with the
Companies Act 1985.
GRANT THORNTON UK LLP
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
BIRMINGHAM
Date: 1 May 2006

Prinicipal Accounting Policies
Basis of accounting
The financial statements have been prepared in accordance with
applicable United Kingdom accounting standards and under the
historical cost convention except that they have been modified
to include the revaluation of certain fixed assets.
The principal accounting policies of the company are set out
below, and have remained unchanged from the previous period.
Translation
Sterling amounts for the period ended 31 March 2006 and the
year ended 31 December 2005 are translated for convenience
into Indian Rupees at the exchange rate of 77.92 Rupees = £1
which is the average of the telegraphic transfer buying and
selling rates quoted by the Mumbai Branch of State Bank of
India on 31 March 2006.
Consolidation
The company was, at the end of the year, a wholly-owned
subsidiary of another company incorporated in the EEC and in
accordance with Section 228 of the Companies Act 1985, is
not required to produce, and has not published, consolidated
accounts.
Cash flow statement
The directors have taken advantage of the exemption in Financial
Reporting Standard No 1 (Revised 1996) from including a cash
flow statement in the financial statements on the grounds that
the company is wholly owned and its parent publishes a
consolidated cash flow statement.
Related parties transactions
The company is a wholly owned subsidiary of Stokes Group
Limited, the consolidated accounts of which are publicly
available. Accordingly, the company has taken advantage of the
exemption in Financial Reporting Standard No 8 “Related party
transactions” and has not disclosed transactions with group
undertakings.
Turnover
The turnover shown in the profit and loss account represents
amounts invoiced for services provided during the year,
exclusive of Value Added Tax.
Depreciation and fixed assets
Tangible fixed assets are stated at cost or valuation, net of
depreciation and any provision for impairment.
JENSAND LIMITED
Depreciation is provided at the following annual rates in order
to write off each asset over its estimated useful life. The rates
generally applicable are:
Freehold Property — 2% on cost
Plant & Machinery — 25% to 33% on cost
The transitional provisions of FRS 15 are being followed and
the valuation of freehold property has not been updated since
the date of the last revaluation which was 14 January 2002.
Pension costs
The company operates defined contribution pension schemes.
Contributions payable for the period are charged in the profit
and loss account and represent the amount of the contributions
payable to the scheme in respect of the accounting period.
Deferred taxation
Deferred tax is recognised on all timing differences where the
transactions or events that give the company an obligation to
pay more tax in the future, or a right to pay less tax in the future,
have occurred by the balance sheet date. Deferred tax assets
are recognised when it is more likely than not that they will be
recovered. Deferred tax is measured using rates of tax that
have been enacted or substantively enacted by the balance
sheet date.
Investments
Investments are included at cost less amounts written off.
Financial instruments
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences
a residual interest in the assets of the entity after deducting all
of its financial liabilities.
Where the contractual obligations of financial instruments
(including share capital) are equivalent to a similar debt
instrument, those financial instruments are classed as financial
liabilities. Financial liabilities are presented as such in the balance
sheet. Finance costs and gains or losses relating to financial
liabilities are included in the profit and loss account. Finance
costs are calculated so as to produce a constant rate of return
on the outstanding liability.
Where the contractual terms of share capital do not have any
terms meeting the definition of a financial liability then this is
classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
715
JENSAND LIMITED

Profit and Loss Account

3 months ended Year ended
31 March 2006 31 December 2005
Note £ Rupees £ Rupees

Turnover ..................................................................... 1 — — 180,000 14,025,600

Other operating charges ............................................ 2 1,326 103,321 (432,908) (33,732,191)

Other operating income ............................................ 3 — — 318,000 24,778,560

Operating profit ......................................................... 4 1,326 103,321 65,092 5,071,969

Interest receivable ..................................................... 6 135 10,519 1,786 139,165

Profit on ordinary activities before taxation .............. 1,461 113,840 66,878 5,211,134

Tax on profit on ordinary activities ............................ 7 — — (155,000) (12,077,600)

Profit/(loss) for the financial period ........................... 17 1,461 113,840 (88,122) (6,866,466)

All of the activities of the company are classed as continuing.

The company has no recognised gains or losses other than the results for the period as set out above.

The accompanying accounting policies and notes form part of these financial statements.

716
 JENSAND LIMITED

Balance Sheet
31 March 2006 31 December 2005
Note £ Rupees £ Rupees
Fixed assets
Tangible assets .................................................... 8 1,369,535 106,714,167 1,375,401 107,171,246
Investments ......................................................... 9 60,000 4,675,200 60,000 4,675,200
1,429,535 111,389,367 1,435,401 111,846,446
Current assets
Debtors : due within one year ............................. 10 2,073,153 161,540,082 2,654,042 206,802,953
Debtors : due after more than one year .............. 483,669 37,687,488 — —
Cash at bank ........................................................ 17,860 1,391,651 5,578 434,638
2,574,682 200,619,221 2,659,620 207,237,591
Creditors: amounts falling due within one year 11 508,746 39,641,488 574,384 44,756,001
Net current assets .............................................. 2,065,936 160,977,733 2,085,236 162,481,590
Total assets less current liabilities .................... 3,495,471 272,367,100 3,520,637 274,328,036

Creditors: amounts falling due after

more than one year ............................................ 12 813,241 63,367,739 839,868 65,442,515
............................................................................. 2,682,230 208,999,361 2,680,769 208,885,521

Provisions for liabilities

Deferred taxation ................................................. 14 155,000 12,077,601 155,000 12,077,601
............................................................................. 2,527,230 196,921,760 2,525,769 196,807,920

Capital and Reserves

Called-up equity share capital .............................. 16 60,000 4,675,200 60,000 4,675,200

Profit and Loss Account ...................................... 17 2,467,230 192,246,560 2,465,769 192,132,720
Shareholders’ funds ............................................. 18 2,527,230 196,921,760 2,525,769 196,807,920

These financial statements were approved by the directors on 1 May 2006 and are signed on their behalf by:

J Young H H Luthra
Director Director

The accompanying accounting policies and notes form part of these financial statements.

717
JENSAND LIMITED

Notes to the Financial Statements

1 Tur nover
urnover
The turnover and profit on ordinary activities before tax are attributable to the one principal activity of the company.
A geographic analysis of turnover is given below:
3 months ended Year ended
31 March 2006 31 December 2005
£ Rupees £ Rupees
United Kingdom ........................................................... — — 180,000 14,025,600
2 Other operating charges

3 months ended Year ended

31 March 2006 31 December 2005
£ Rupees £ Rupees

Administrative expenses ............................................. (1,326) (103,322) 432,908 33,732,191

3 Other operating income
3 months ended Year ended
31 March 2006 31 December 2005
£ Rupees £ Rupees

Management charges receivable ................................ — — 318,000 24,778,560

4 Operating profit

Operating profit is stated after charging:

3 months ended Year ended

31 March 2006 31 December 2005
£ Rupees £ Rupees
Depreciation of owned fixed assets ............................ 5,866 457,079 20,884 1,627,281
Loss on disposal of fixed assets ................................. — — 4,438 345,809
Auditor's remuneration:
Audit fees ..................................................................... — — 3,500 272,720
Taxation fees ................................................................ — — 2,525 196,748

All professional fees have been borne by Stokes Forgings Limited for the period ended 31 March 2006.

5 Directors and employees

The average number of staff employed by the company during the period amounted to:
3 months ended Year ended
31 March 2006 31 December 2005
No No
Number of management staff — 2

718
 JENSAND LIMITED

The aggregate payroll costs of the above were:

3 months ended Year ended
31 March 2006 31 December 2005
£ Rupees £ Rupees

Wages and salaries ...................................................... — — 152,851 11,910,150

Social security costs ..................................................... — — 18,320 1,427,494
Other pension costs ..................................................... — — 5,318 414,379
— — 176,489 13,752,023

The directors received no emoluments from the company during the three month period ended 31 March 2006 as these were
borne by Stokes Walsall Limited.

6 Interest receivable
3 months ended Year ended
31 March 2006 31 December 2005
£ Rupees £ Rupees

Bank interest receivable ............................................... 135 10,519 1,786 139,165

7 Taxation on or dinar
ordinar
dinaryy activities
3 months ended Year ended
31 March 2006 31 December 2005
£ Rupees £ Rupees

(a) Analysis of charge in the period

Deferred tax:
Reversal and origination of timing differences (note 14) — — 155,000 12,077,600

(b) Factors affecting current tax charge

The tax assessed on the profit/(loss) on ordinary activities for the period is lower than the standard rate of corporation tax in the
UK of 30% (year ended 31 December 2005 - 30%).

3 months ended Year ended

31 March 2006 31 December 2005
£ Rupees £ Rupees

Profit on ordinary activities before taxation .................. 1,461 113,840 66,878 5,211,134

Profit on ordinary activities by rate of tax 30%

(year ended 31 December 2005 : 30%) ....................... 438 34,129 20,063 1,563,309
Capital allowances for period in excess
of depreciation (9,128) (711,254) (2,965) (231,033)
Utilisation of tax losses — — (17,098) (1,332,276)
Carry forward of tax losses .......................................... 8,690 677,125 — —

Total current tax — — — —

719
JENSAND LIMITED

8 Tangible fixed assets

Fr eehold
Freehold Plant &
Property Machinery Total
£ £ £
Cost
At 1 January 2006 and 31 March 2006 ...................................................... 1,456,630 1,366 1,457,996
Depreciation
At 1 January 2006 ...................................................................................... 81,988 607 82,595
Charge for the period ................................................................................. 5,107 759 5,866
At 31 March 2006 ....................................................................................... 87,095 1,366 88,461
Net book value
At 31 March 2006 ....................................................................................... 1,369,535 — 1,369,535

At 31 December 2005 ................................................................................ 1,374,642 759 1,375,401

Freehold Plant &

Property Machinery Total
Rupees Rupees Rupees
Cost
At 1 January 2006 and 31 March 2006 ...................................................... 113,500,610 106,439 113,607,049
Depreciation
At 1 January 2006 ...................................................................................... 6,388,505 47,298 6,435,803
Charge for the period ................................................................................. 397,938 59,141 457,079

At 31 March 2006 ....................................................................................... 6,786,443 106,439 6,892,882

Net book value
At 31 March 2006 ....................................................................................... 106,714,167 - 106,714,167

At 31 December 2005 ................................................................................ 107,112,105 59,141 107,171,246

The cost of the freehold property is analysed as follows:

£ Rupees

Valuation in 1999 ........................................................................................ (143,278) (11,164,222)

Valuation in 2002 ........................................................................................ (135,000) (10,519,200)
Cost ............................................................................................................ 1,734,908 135,184,032

1,456,630 113,500,610

The transitional provisions of FRS 15 are being followed and the valuation of freehold property has not been updated since the date
of the last revaluation which was 14 January 2002.

720
 JENSAND LIMITED

9 Investments
Subsidiary Subsidiary
undertaking undertaking
£ Rupees
Cost or valuation
At 1 January 2006 and 31 March 2006 ............................................................................. 60,000 4,675,200

Net book value

At 31 March 2006 .............................................................................................................. 60,000 4,675,200

At 31 December 2005 ....................................................................................................... 60,000 4,675,200

The company owns 100% of the issued share capital of Stokes Forgings Limited. The aggregate capital and reserves and loss for
the financial period for Stokes Forgings Limited are as follows:

31 March 2006 31 December 2005

£ Rupees £ Rupees
Aggregate capital and reserves .................................... 748,301 58,307,614 952,978 74,256,046

3 months ended Year ended

31 March 2006 31 December 2005
£ Rupees £ Rupees
Loss for the period ....................................................... (204,677) (15,948,432) (465,307) (36,256,721)

Under the provision of section 248 of the Companies Act 1985 the company is exempt from preparing consolidated accounts and
has not done so, therefore the accounts show information about the company as an individual entity.

10 Debtors
31 March 2006 31 December 2005
£ Rupees £ Rupees

Amounts owed by group undertakings ........................ 2,073,153 161,540,082 2,654,042 206,802,953

Included in the above is an amount of £483,669 (37,687,488 Rupees) (31 December 2005 - £nil) due after more than one year.

11 Creditors: amounts falling due within one year

31 March 2006 31 December 2005
£ Rupees £ Rupees

Bank loan (note 12) ....................................................... 106,505 8,298,870 106,505 8,298,870

Trade creditors .............................................................. — — 54,253 4,227,394
Amounts owed to group undertakings ......................... 396,136 30,866,916 396,235 30,874,630
Other taxation and social security ................................ 6,105 475,702 17,391 1,355,107

508,746 39,641,488 574,384 44,756,001

721
JENSAND LIMITED

12 Cr editors: amounts falling due after mor

Creditors: moree than one year
31 March 2006 31 December 2005
£ Rupees £ Rupees
Bank loan ...................................................................... 813,241 63,367,739 839,868 65,442,515

The bank loan is secured by way of a debenture over all of the UK group’s assets. Interest is charged at 2.15% over the bank’s
base rate.

13 Loan
Loan is repayable as follows:
31 March 2006 31 December 2005
£ Rupees £ Rupees
Amounts repayable:
In one year or less or on demand ................................. 106,505 8,298,870 106,505 8,298,870
In more than one year but not more than two years ... 106,505 8,298,870 106,505 8,298,870
In more than two years but not more than five years .. 319,515 24,896,609 319,515 24,896,609
In more than five years ................................................. 387,221 30,172,260 413,848 32,247,036

919,746 71,666,609 946,373 73,741,385

14 Deferred taxation
The movement in the deferred taxation provision during the period was:
31 March 2006 31 December 2005
£ Rupees £ Rupees
Amounts repayable:
Provision brought forward ............................................ 155,000 12,077,601 — —
Profit and loss account movement arising during the period — — 155,000 12,077,601

Provision carried forward .............................................. 155,000 12,077,601 155,000 12,077,601

The provision for deferred taxation consists of the tax effect of timing differences in respect of:
31 March 2006 31 December 2005
£ Rupees £ Rupees
Excess of taxation allowances over
depreciation on fixed assets ........................................ 155,000 12,077,601 155,000 12,077,601

15 Related party transactions

The company has taken advantage of the exemption in Financial Reporting Standard No 8 “Related party disclosures” and has not
disclosed transactions with group undertakings.

722
 JENSAND LIMITED

16 Shar
Sharee capital
Authorised share capital:
31 March 2006 31 December 2005
£ Rupees £ Rupees

60,000 Ordinary shares of £1 each 60,000 4,675,200 60,000 4,675,200

Allotted, called up and fully paid:

2006 2005
No £ Rupees No £ Rupees
Ordinary shares of £1 each 60,000 60,000 4,675,200 60,000 60,000 4,675,200

17 Profit and loss account

3 months ended Year ended
31 March 2006 31 December 2005
£ Rupees £ Rupees
Balance brought forward .............................................. 2,465,769 192,132,720 2,555,891 199,394,241
Retained profit/(accumulated loss)
for the financial period .................................................. 1,461 113,840 (88,122) (6,866,466)

Balance carried forward ................................................ 2,467,230 192,246,560 2,465,769 192,132,720

18 Reconciliation of movements in shareholders’ funds

3 Months Ended Year Ended
31 March 2006 31 December 2005
£ Rupees £ Rupees
Profit/(loss) for the financial period/year ....................... 1,461 113,840 (88,122) (6,866,466)
Opening shareholders’ funds ....................................... 2,525,769 196,807,920 2,613,891 203,674,386

Closing shareholders’ funds ......................................... 2,527,230 196,921,760 2,525,769 196,807,920

19 Ultimate parent company

The directors consider that up to 3 January 2006 the company’s immediate parent undertaking and ultimate parent company was
Stokes Group Limited.

From 3 January 2006 the ultimate parent company is Mahindra & Mahindra Limited, a company registered in India, following its
acquisition of 98.6% of the share capital of Stokes Group Limited. Following a rights issue by Stokes Group Limited on 24 February
2006 Mahindra & Mahindra Limited increased their share ownership to 99.2% of the issued share capital of that company.

Copies of Stokes Group Limited’s accounts are available from The Secretary, Victor Works, Northcote Street, Walsall, West
Midlands, WS2 8BH.

Copies of Mahindra & Mahindra Limited’s accounts are available from Gateway Building, Apollo Bunder, Mumbai 400 001.

723
STOKES FORGINGS LTD.
Report of the Directors
The directors present their report and the financial statements of
the company for the three month period from 1 January 2006 to
31 March 2006.
Principal activities and business review
The principal activity of the company during the period was that
of the manufacture of forgings and general engineering.
There was a loss for the three month period to 31 March 2006
after taxation amounting to £204,677 - (15,948,432 Rupees) (year
to 31 December 2005: £465,307 (36,256,722 Rupees)) which has
been transferred from reserves.
Results and dividends
The trading results for the period and the company's financial
position at the end of the period are shown in the attached
financial statements.
The directors have not recommended a dividend.
Directors
The directors who served the company during the period were as
follows:
H H Luthra (appointed 3 January 2006)
Z Bhiwandiwala (appointed 3 January 2006)
S J Arora (appointed 3 January 2006)
Mrs E A Horwood (resigned 3 January 2006)
J Young
G S Nicholls
The company is a wholly owned subsidiary of Jensand Limited,
which in turn is also a wholly owned subsidiary of Stokes Group
Limited. The interests of J Young in the Stokes Group Limited
are shown in that company's financial statements. G S Nicholls
held 10,000 shares in Stokes Group Limited, which he acquired
on 3 January 2006 and subsequently sold on the same day.
Stokes Group Limited is a 99.2% owned subsidiary of Mahindra
& Mahindra Limited.
Directors' responsibilities
The directors are responsible for preparing the financial statements
in accordance with applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting
Practice).
Company law requires the directors to prepare financial statements
for each financial year which give a true and fair view of the state
of affairs of the company and of the profit or loss of the company
for that period. In preparing these financial statements, the
directors are required to:
- select suitable accounting policies and then apply them
consistently
- make judgements and estimates that are reasonable and
prudent
724
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the Companies Act 1985.
They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Financial risk management objectives and policies
The company's principal financial instruments comprise bank
loans, an invoice discounting facility, hire purchase contracts,
cash and short-term deposits. The main purpose of these financial
instruments is to raise finance for the company's operations. The
company has various other financial instruments such as trade
debtors and trade creditors, which arise directly from its operations.
The company does not enter into derivative transactions.
It is, and has been throughout the period under review, the
company's policy that no trading in financial instruments shall be
undertaken. The main risks arising from the company's financial
instruments are interest rate risk, commodity price risk, liquidity
risk, foreign currency risk, and credit risk. The board reviews and
agrees policies for managing each of these risks and they are
summarised below.
Interest rate risk
The company's exposure to market risk for changes in interest
rates relates primarily to the company's long-term debt obligations.
The company's policy is to manage its interest cost using a mix
of fixed and variable rate debt. The company's policy is to utilise
the undrawn proportion of funds on it's invoice discounting
arrangement before using it's overdraft. The company exposure
to interest rate fluctuations on its borrowings is managed by the
use of both fixed and floating facilities. The company finances
specific large plant acquisitions via hire purchases contracts or
loans secured specifically on the assets being acquired.
Foreign currency risk
As a result of increased sales to customers outside the United
Kingdom the company's profits can be affected significantly by
movements in euro exchange rates. The company does not seek
to hedge this exposure, instead it operates it's invoice discounting
facility in both euros and sterling therefore enabling it to invoice
in both currencies where appropriate and where possible match
euro receivables with euro payables.
Commodity price risk
The company's exposure to the price of steel is high, therefore
selling prices are monitored regularly to reduce the impact of
such risk.
 STOKES FORGINGS LTD.

Credit risk persons wherever possible, through recruitment, by retention of

The company trades with only recognised, creditworthy third
parties. It is the company policy that all customers who wish to
trade on credit terms are subject to credit vetting procedures. In
addition, receivable balances are monitored on an ongoing basis
with the result that the company's exposure to bad debts is not
significant.
Liquidity risk
The company's objective is to maintain a balance between
continuity of funding and flexibility through the use of overdrafts,
bank and asset loans and hire purchase contracts.
Donations
During the period the company made no political or charitable
contributions.
those who become disabled during their employment and generally
through training, career development and promotion.
Health and safety
The company accepts its responsibility under the relevant
legislation and its policy is to do all that is reasonably practical to
ensure the health, safety and welfare of employees whilst at
work.
Auditors
Grant Thornton UK LLP offer themselves for reappointment as
auditors in accordance with section 385 of the Companies Act
1985.
By order of the board

Employment policies K N Harrison

The company places emphasis on developing employment policies Secretary
designed to encourage the commitment of employees at all
Date: 1 May 2006
levels. The company supports the employment of disabled

725
STOKES FORGINGS LTD.
Report of the independent auditors to the members of
Stokes Forgings Limited
We have audited the financial statements of Stokes Forgings
Limited for the period from 1 January 2006 to 31 March 2006
which comprise the principal accounting policies, the profit and
loss account, the balance sheet and notes 1 to 25. These financial
statements have been prepared under the accounting policies
set out therein.
This report is made solely to the company's members, as a body,
in accordance with Section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
company's members those matters we are required to state to
them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members
as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Directors' Report
and the financial statements in accordance with United Kingdom
law and Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) are set out in the Statement of
Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance
with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view and are properly prepared in accordance
with the Companies Act 1985. We also report to you if, in our
opinion, the Directors' Report is not consistent with the financial
statements, if the company has not kept proper accounting
records, if we have not received all the information and explanations
we require for our audit, or if information specified by law
regarding directors' remuneration and other transactions is not
disclosed.
We read the Directors' Report and consider whether it is consistent
with the audited financial statements. We consider the implications
for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements.
726
Basis of opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies are
appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion the financial statements:
- give a true and fair view, in accordance with United Kingdom
Generally Accepted Accounting Practice, of the state of the
company's affairs as at 31 March 2006 and of its loss for the
period then ended; and
- have been properly prepared in accordance with the
Companies Act 1985.
Grant Thornton UK LLP
Rgistered Auditors
Chartered Accountants
Birmingham
Date: 1 May 2006

Principal accounting Policies
Basis of accounting
The financial statements have been prepared in accordance with
applicable United Kingdom accounting standards and under the
historical cost convention.
The principal accounting policies of the company are set out
below, and have remained unchanged from the previous period.
Sterling translation
Sterling amounts for the period ended 31 March 2006 and the
year ended 31 December 2005 are translated for convenience
into Indian Rupees at the exchange rate of 77.92 Rupees = £1
which is the average of the telegraphic transfer buying and selling
rates quoted by the Mumbai Branch of State Bank of India on 31
March 2006.
Cash flow statement
The directors have taken advantage of the exemption in Financial
Reporting Standard No 1 (Revised 1996) from including a cash
flow statement in the financial statements on the grounds that
the company is wholly owned and its parent publishes a
consolidated cash flow statement.
Related parties transactions
The company is a wholly owned subsidiary of Jensand Limited
which is a wholly owned subsidiary of Stokes Group Limited, the
consolidated accounts of which are publicly available. Accordingly,
the company has taken advantage of the exemption in Financial
Reporting Standard No 8 "Related party transactions" and has not
disclosed transactions with group undertakings.
Turnover
The turnover shown in the profit and loss account represents
amounts invoiced for goods sold during the year, exclusive of
Value Added Tax.
Fixed assets and depreciation
Tangible fixed assets are stated at cost, net of depreciation and
any provision for impairment.
Depreciation is provided at the following annual rates in order to
write off each asset over its estimated useful life or, if held under
a finance lease, over the lease term, whichever is the shorter.
The rates generally applicable are:
Plant & machinery - 10% to 33% on cost
Fixtures & fittings - 33% on cost
Motor vehicles - 25% on cost
Stocks
Stocks and work in progress are valued at the lower of cost and
net realisable value, after making due allowance for obsolete and
slow moving items.
STOKES FORGINGS LTD.
Cost includes all direct expenditure and an appropriate proportion
of fixed and variable overheads.
Hire purchase agreements
Assets held under hire purchase agreements are capitalised and
disclosed under tangible fixed assets at their fair value. The
capital element of the future payments is treated as a liability and
the interest is charged to the profit and loss account on a straight
line basis.
Finance lease agreements
Where the company enters into a lease which entails taking
substantially all the risks and rewards of ownership of an asset,
the lease is treated as a finance lease. The asset is recorded in the
balance sheet as a tangible fixed asset and is depreciated in
accordance with the above depreciation policies. Future
instalments under such leases, net of finance charges, are
included with creditors. Rentals payable are apportioned between
the finance element, which is charged to the profit and loss
account on a straight line basis, and the capital element which
reduces the outstanding obligation for future instalments.
Operating lease agreements
Rentals applicable to operating leases where substantially all of
the benefits and risks of ownership remain with the lessor are
charged against profits on a straight line basis over the period of
the lease.
Pension costs
Defined contribution scheme
The company operates defined contribution pension schemes.
Contributions payable for the period are charged in the profit and
loss account and represent the amount of the contributions
payable to the scheme in respect of the accounting period.
Defined benefit scheme
The defined benefit scheme in the UK previously operated is in
wind up. An agreement dated 4 June 2004 was entered into
containing details of the curtailment of the scheme and appropriate
disclosures have been made in note 17 to the financial statements.
Deferred taxation
Deferred tax is recognised on all timing differences where the
transactions or events that give the company an obligation to pay
more tax in the future, or a right to pay less tax in the future, have
occurred by the balance sheet date. Deferred tax assets are
recognised when it is more likely than not that they will be
recovered. Deferred tax is measured using rates of tax that have
been enacted or substantively enacted by the balance sheet date.
Foreign currencies
Assets and liabilities in foreign currencies are translated into
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STOKES FORGINGS LTD.
sterling at the rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into sterling at
the rate of exchange ruling at the date of the transaction.
Exchange differences are taken into account in arriving at the
operating results.
Grants
Government grants in respect of capital expenditure are credited
to a deferred income account and are released to the profit and
loss account by equal annual instalments over the expected
useful economic lives of the relevant assets.
Government grants of a revenue nature are credited to the profit
and loss account in the same period as the related expenditure.
Investments
Investments are included at cost less amounts written off.
728
Financial instruments
Financial liabilities and equity instruments are classified according
to the substance of the contractual arrangements entered into. An
equity instrument is any contract that evidences a residual interest
in the assets of the entity after deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including
share capital) are equivalent to a similar debt instrument, those
financial instruments are classed as financial liabilities. Financial
liabilities are presented as such in the balance sheet. Finance costs
and gains or losses relating to financial liabilities are included in the
profit and loss account. Finance costs are calculated so as to
produce a constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any
terms meeting the definition of a financial liability then this is
classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
 STOKES FORGINGS LTD.

Profit and Loss Account

31 March 2006 31 December 2005

Note £ Rupees £ Rupees

Turnover ...................................................................... 1 5,259,884 409,850,161 19,784,669 1,541,621,408

Cost of sales ............................................................... 4,794,466 373,584,791 17,360,139 1,352,702,031

Gross profit ................................................................. 465,418 36,265,370 2,424,530 188,919,377

Exceptional operating items ........................................ 7 - - 396,742 30,914,137

Other operating charges ............................................. 2 534,760 41,668,499 2,476,637 192,979,554

Other operating income .............................................. 3 (3,880) (302,330) (118,220) (9,211,702)

Net operating expenses .............................................. 530,880 41,366,169 2,755,159 214,681,989

Operating (loss)/profit pre exceptional operating items (65,462) (5,100,799) 66,113 5,151,525

Exceptional operating items ........................................ - - (396,742) (30,914,137)

Operating loss ........................................................... 4 (65,462) (5,100,799) (330,629) (25,762,612)

Interest receivable ...................................................... 714 55,635 338 26,337

Interest payable and similar charges .......................... 8 (69,725) (5,432,972) (297,636) (23,191,797)

Loss on ordinary activities before taxation ............. (134,473) (10,478,136) (627,927) (48,928,072)

Tax on loss on ordinary activities ................................ 9 (70,204) (5,470,296) 162,620 12,671,350

Retained loss for the financial period ...................... 23 (204,677) (15,948,432) (465,307) (36,256,722)

All of the activities of the company are classed as continuing.

The company has no recognised gains or losses other than the results for the period as set out above.

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STOKES FORGINGS LTD.

Balance Sheet

3 months ended Year ended

31 March 2006 31 December 2005
Note £ Rupees £ Rupees

Fixed assets

Tangible assets 10 3,728,024 290,487,630 3,926,326 305,939,322

Current assets

Stocks 11 1,847,460 143,954,083 1,976,165 153,982,777

Debtors 12 5,384,144 419,532,500 4,226,885 329,358,879

Cash at bank and in hand 43,692 3,404,481 54,290 4,230,277

7,275,296 566,891,064 6,257,340 487,571,933

Creditors: amounts falling due within one year 13 8,990,466 700,537,111 7,583,951 590,941,462

Net current liabilities (1,715,170) (133,646,047) (1,326,611) (103,369,529)

Total assets less current liabilities 2,012,854 156,841,583 2,599,715 202,569,793

Creditors: amounts falling due after more than one year 14 1,236,981 96,385,560 1,594,737 124,261,907

775,873 60,456,023 1,004,978 78,307,886

Provisions for liabilities and charges

Other provisions 18 27,572 2,148,409 52,000 4,051,840

748,301 58,307,614 952,978 74,256,046

Capital and reserves

Called-up equity share capital 22 60,000 4,675,200 60,000 4,675,200

Share premium account 23 6,000 467,520 6,000 467,520

Profit and loss account 23 682,301 53,164,894 886,978 69,113,326

Shareholders' funds 24 748,301 58,307,614 952,978 74,256,046

These financial statements were approved by the directors on 1 May 2006 and are signed on their behalf by:

J Young H H Luthra
Director Director

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 STOKES FORGINGS LTD.

The aggregate payroll costs of the above were:

Notes to the Financial Statements 3 months ended Year ended
31March 2006 31 Decemebr 2005
1 — TURNOVER £ Rupees £ Rupees
The turnover and loss before tax are attributable to the one principal activity of the Wages and salaries 1,121,933 87,421,019 4,086,360 318,409,171
company. Social security costs 113,681 8,858,024 412,921 32,174,804
A geographic analysis of turnover is given below: Other pension costs 26,508 2,065,503 74,017 5,767,405
3 months ended Year ended 1,262,122 98,344,546 4,573,298 356,351,380
31March 2006 31 Decemebr 2005
£ Rupees £ Rupees The above excludes redundancy costs of £27,742 (2,161,657 Rupees) for the year
ended 31 December 2005 that have been shown separately as exceptional operating
United Kingdom 4,313,555 336,112,205 16,775,450 1,307,143,064 items.
Europe 946,329 73,737,956 2,691,944 209,756,276 6 — DIRECTORS
Remuneration in respect of directors was as follows:
Rest of World — — 317,275 24,722,068
3 months ended Year ended
5,259,884 409,850,161 19,784,669 1,541,621,408 31March 2006 31 Decemebr 2005
£ Rupees £ Rupees
2 — OTHER OPERATING CHARGES Emoluments receivable 53,017 4,131,085 78,183 6,092,019
3 months ended Year ended Value of company pension
31March 2006 31 Decemebr 2005 contributions to money
£ Rupees £ Rupees purchase schemes 3,027 235,864 4,653 362,562

Distribution costs 68,645 5,348,818 279,196 21,754,952 56,044 4,366,949 82,836 6,454,581
Administrative expenses 466,115 36,319,681 2,197,440 171,224,522 Three directors accrued benefits under company pension schemes during the period
ended 31 March 2006 (year ended 31 December 2005 - one).
534,760 41,668,499 2,476,637 192,979,554
7 — EXCEPTIONAL OPERATING ITEMS
3 months ended Year ended
3 — OTHER OPERATING INCOME 31March 2006 31 Decemebr 2005
3 months ended Year ended £ Rupees £ Rupees
31March 2006 31 Decemebr 2005 Redundancy costs — — (27,742) (2,161,657)
£ Rupees £ Rupees Cost of winding up the
Management charges defined benefit pension
receivable — — 109,700 8,574,824 scheme (note 17) — — (369,000) (28,752,480)

Other operating income 3,880 302,330 8,520 663,878 — — (396,742) (30,914,137)

3,880 302,330 118,220 9,238,702 8 — INTEREST PAYABLE AND SIMILAR CHARGES

3 months ended Year ended
31March 2006 31 Decemebr 2005
4 — OPERATING LOSS £ Rupees £ Rupees
Operating loss is stated after charging/(crediting):
Bank interest payable 31,799 2,477,778 96,567 7,524,501
3 months ended Year ended Hire purchase interest 6,446 502,272 60,802 4,737,692
31March 2006 31 Decemebr 2005 Loan interest 31,480 2,452,922 140,267 10,929,604
£ Rupees £ Rupees
Depreciation of owned 69,725 5,432,972 297,636 23,191,797
fixed assets 201,598 15,708,516 839,311 65,399,113
9 — TAXATION
Depreciation of assets 3 months ended Year ended
held under hire purchase 31March 2006 31 Decemebr 2005
agreements 16,732 1,303,758 61,864 4,820,443 £ Rupees £ Rupees
Grant release (3,880) 302,330 (8,520) (663,878) (a) Analysis of charge in
Profit on disposal of the period
fixed assets — — (12,000) (935,040) Deferred tax:
Auditor's remuneration: Origination and reversal
of timing differences 70,204 5,470,296 (162,660) (12,671,350)
Audit fees 10,000 779,200 15,290 1,191,397
(b) Factors affecting current tax charge
Taxation fees 2,000 155,840 5,000 389,600 The tax assessed on the loss on ordinary activities for the period is higher than the standard rate of
Operating lease costs: corporation tax in the UK of 30% (year ended 31 December 2005 - 30%).
Plant and equipment 22,183 1,728,499 40,810 3,179,915 3 months ended Year ended
31March 2006 31 Decemebr 2005
£ Rupees £ Rupees
5 — DIRECTORS AND EMPLOYEES Profit on ordinary activities
The average number of staff employed by the company during the financial period before taxation (134,473) (10,478,136) (627,927) (48,928,072)
amounted to:
Loss on ordinary activities
3 months ended Year ended at the standard rate of tax (40,342) (3,143,449) (188,378) (14,678,414)
31March 2006 31 Decemebr 2005
Expenses not deductible
No No for tax purposes 1,188 92,569 10,500 818,160
Number of production staff 164 167 Depreciation for period in
excess of capital allowances 19,244 1,499,492 91,904 7,161,160
Number of administrative staff 29 31
Tax losses carried forward 19,910 1,551,388 85,974 6,699,094
193 198
Total current tax (note 9(a)) - - - -

731
STOKES FORGINGS LTD.

10 — TANGIBLE FIXED ASSETS 13 — CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Plant & Fixtures & Motor 31March 2006 31 Decemebr 2005
Machinery fittings Vechicles Total £ Rupees £ Rupees
£ £ £ £
Bank loan and invoice
Cost discounting 2,357,521 183,698,036 1,542,583 120,198,067
At 1 January 2006 8,670,008 357,590 52,845 9,080,443 Trade creditors 2,666,849 207,800,874 1,670,144 130,137,620
Additions 20,028 - - 20,028 Amounts owed to group
At 31 March 2006 8,690,036 357,590 52,845 9,100,471 undertakings 2,726,310 212,434,075 2,824,385 220,076,079
Other taxation and social
Depreciation security 263,546 20,535,504 270,929 21,110,788
At 1 January 2006 4,816,631 297,852 39,634 5,154,117 Amounts due under hire
Charge for the period 201,259 13,533 3,538 218,330 purchase agreements 127,564 9,939,787 125,585 9,785,583
Other creditors 135,115 10,528,161 138,520 10,793,478
At 31 March 2006 5,017,890 311,385 43,172 5,372,447
Accruals and deferred income 713,561 55,600,674 1,011,805 78,839,847
Net book value 8,990,466 700,537,111 7,583,951 590,941,462
At 31 March 2006 3,672,146 46,205 9,673 3,728,024
The following liabilities disclosed under creditors falling due within one year are secured by the company:
At 31 December 2005 3,853,377 59,738 13,211 3,926,326
31March 2006 31 Decemebr 2005
£ Rupees £ Rupees
Included within the net book value of £3,728,024 is £503,235 (31 December 2005 - £519,966) relating to
assets held under hire purchase agreements. The depreciation charged to the financial statements in the Bank loan, overdraft and
period in respect of such assets amounted to £16,732 (year ended 31 December 2005 - £61,864). invoice discounting 2,357,521 183,698,036 1,542,583 120,198,067
Plant & Fixtures & Motor Amounts due under hire
Machinery fittings Vechicles Total purchase agreements 127,564 9,939,787 125,585 9,785,583
Rupees Rupees Rupees Rupees
2,485,085 193,637,823 1,668,168 129,983,650
Cost
At 1 January 2006 675,567,023 27,863,413 4,117,682 707,548,118 Invoice discounting of £1,567,528 - (122,141,782 Rupees) (31 December 2005: £721,593 (56,226,527
Rupees) represents debt purchase agreements with the company's bankers. The agreement is secured
Additions 1,560,582 - - 1,560,582
by way of a debenture over all the company's assets. Interest is charged at 1.73% above the bank's base
At 31 March 2006 677,127,605 27,863,413 4,117,682 709,108,700 rate.

14 — CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

Depreciation 31March 2006 31 Decemebr 2005
At 1 January 2006 375,311,888 23,208,628 3,088,280 401,608,796 £ Rupees £ Rupees
Charge for the period 15,682,101 1,054,491 275,682 17,012,274
Bank loan 657,572 51,238,010 714,265 55,655,529
At 31 March 2006 390,993,989 24,263,119 3,363,962 418,621,070 Amounts due under
hire purchase agreements 276,934 21,578,697 309,567 24,121,461
Net book value
Other creditors 302,475 23,568,853 570,905 44,484,917
At 31 March 2006 286,133,616 3,600,294 753,720 290,487,630
1,236,981 96,385,560 1,594,737 124,261,907
At 31 December 2005 300,255,135 4,654,785 1,029,402 305,939,322
Other creditors include contributions due to be made to the defined benefit scheme as set out in note 17.
Included within the net book value of 290,487,630 Rupees is 39,212,071 Rupees (31 December 2005:
The following liabilities disclosed under creditors falling due after more than one year are secured by the
40,515,751 Rupees) relating to assets held under hire purchase agreements. The depreciation charged
company:
to the financial statements in the period in respect of such assets amounted to 1,303,757 Rupees
(year ended 31 December 2005: 4,820,443 Rupees). 31March 2006 31 Decemebr 2005
£ Rupees £ Rupees
11 — STOCKS
Bank loan 657,572 51,238,010 714,265 55,655,529
31March 2006 31 Decemebr 2005
£ Rupees £ Rupees Amounts due under hire
purchase agreements 276,934 21,578,697 309,567 24,121,461
Raw materials 767,914 59,835,858 676,708 52,729,087
934,506 72,816,707 1,023,832 79,776,990
Work in progress and
finished goods 447,153 34,842,162 682,398 53,172,453 The bank loan and overdraft is secured by way of debentures over all the company's assets. Interest is
Tooling 632,393 49,276,063 617,059 48,081,237 charged on the bank loan at 2.15% over the bank's base rate.
1,847,460 143,954,083 1,976,165 153,982,777 15 – BANK LOAN, OVERDRAFT AND INVOICE DISCOUNTING
Bank loan, overdraft and invoice discounting are repayable as follows:
12 — DEBTORS 31 March 2006 31 December 2005
31March 2006 31 Decemebr 2005 £ Rupees £ Rupees
£ Rupees £ Rupees
Amounts repayable:
Trade debtors 4,238,819 330,288,776 2,958,051 230,491,334 In one year or less or
Amounts owed by group on demand 2,357,521 183,698,036 1,542,583 120,198,067
undertakings 747,941 58,279,563 1,028,119 80,111,032 In more than one year but
Other debtors - - 2,077 161,840 not more than two years 252,738 19,693,345 251,879 19,626,412
Prepayments 329,591 25,681,730 100,641 7,841,947 In more than two years but
not more than five years 404,834 31,544,665 462,386 36,029,117
Deferred taxation (note 18) 67,793 5,282,431 137,997 10,752,726
3,015,093 234,936,046 2,256,848 175,853,596
5,384,144 419,532,500 4,226,885 329,358,879

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 STOKES FORGINGS LTD.

Notes to the Financial Statements (Contd...) 20 – CONTINGENT LIABILITIES

The company is included in a multilateral guarantee of all group companies’ debt purchase agreements
16 – COMMITMENTS UNDER HIRE PURCHASE AGREEMENTS under joint lending arrangements. At 31 March 2006 these borrowings amounted to £2,014,720
Future commitments under hire purchase agreements are as follows: (156,986,982 Rupees) (31 December 2005 : £720,707 (56,157,489 Rupees)).
31 March 2006 31 December 2005 21 – RELATED PARTY TRANSACTIONS
£ Rupees £ Rupees The company has taken advantage of the exemption in Financial Reporting Standard No 8 “Related party
Amounts payable disclosures” and has not disclosed transactions with group undertakings.
within 1 year 127,564 9,939,787 125,585 9,785,583
During the year ended 31 December 2005 the company transacted with Jay Allied Assets Limited, a
Amounts payable between
company under the control of the Jennings family, the controlling related party throughout that year.
1 and 2 years 135,479 10,556,524 133,500 10,402,320
Amounts payable between During the year ended 31 December 2005 the company incurred expenses of £16,152 (1,258,564
Rupees) from this company. The balance outstanding at the 31 December 2005 was £4,635 (361,159
3 and 5 years 141,455 11,022,173 176,067 13,719,141
Rupees).
404,498 31,518,484 435,152 33,907,044 Jay Allied Assets Limited ceased to be a related party on 3 January 2006 as a result of the sale of the
17 – PENSIONS ordinary share capital of Stokes Group Limited to Mahindra & Mahindra Limited.
Defined contribution 22 – SHARE CAPITAL
The company operates defined contribution pension schemes. The assets of the scheme are held Authorised share capital:
separately from those of the company in independently administered funds. The pension cost charge 31 March 2006 31 December 2005
represents contributions paid by the company to the funds and these amounted to £26,508 (2,065,503 £ Rupees £ Rupees
Rupees) for the three months ended 31 March 2006 (year ended 31 December 2005: £74,017 (5,767,405
Rupees)). Ordinary shares of £1 each 75,000 5,844,000 75,000 5,844,000

Defined benefit Allotted, called up and fully paid:

2006 2005
A deficit of £nil (31 December 2005: £369,000 (28,752,480 Rupees)) has been recognised in the financial No £ Rupees No £ Rupees
statements, under FRS 17 ‘Retirement Benefits’, as a cost of winding up the scheme. The directors have
taken the view that the company was demonstrably committed to paying this deficit through the inclusion Ordinary shares of £1 each 60,000 60,000 4,675,200 60,000 60,000 4,675,200
of the payment in the sale and purchase agreement used by the Jennings family for the sale of 98.6%
of the company’s share capital to Mahindra & Mahindra Limited on 3 January 2006. 23 – RECONCILIATION OF SHAREHOLDERS’ FUNDS AND
The financial statements show a liability of £284,500 (22,168,240 Rupees) owed to the scheme at 31 MOVEMENT ON RESERVES
March 2006 (31 December 2005: £629,000 (49,011,680 Rupees)). Installments comprising a single Share premium Profit and loss Total share-
payment of £314,500 - 24,505,840 Rupees and three monthly installments of £10,000 (779,200 Rupees) Share capital account account holders’ funds
totaling £344,500 (26,843,440 Rupees), have been paid during the three month period to 31 March 2006 £ £ £ £
(year to 31 December 2005: monthly installments totaling £120,000 (9,350,400 Rupees)).
At 1 January 2006 60,000 6,000 886,978 952,978
Loss for the period — — (204,677) (204,677)
18 – OTHER PROVISIONS Insurance
provision At 31 March 2006 60,000 6,000 682,301 748,301
£ Rupees
Share premium Profit and loss Total share-
At 1 January 2006 52,000 4,051,840 Share capital account account holders’ funds
Profit and loss account movement during the period (24,428) (1,903,431) Rupees Rupees Rupees Rupees
At 31 March 2006 27,572 2,148,409 At 1 January 2006 4,675,200 467,520 69,113,326 74,256,046
Loss for the period — — (15,948,432) (15,948,432)
Provisions have been made in respect of the company’s insurance arrangements in relation to its
At 31 March 2006 4,675,200 467,520 53,164,894 58,307,614
employers liability on a claim by claim basis where incidents have occurred before the balance sheet date
and it is anticipated, based on professional advice, that a liability will arise. The company has an excess 24 – CAPITAL COMMITMENTS
on the policy of £350,000 (27,272,000 Rupees) for which a bank guarantee in favour of the insurance
underwriters is held as a counter indemnity. Amounts contracted for but not provided in the financial statements amounted to £71,655 (5,583,358
Rupees) (31 December 2005: £1,286 - 100,205 Rupees).
The provision for deferred taxation consists of the tax effect of timing differences in respect of:
31 March 2006 31 December 2005 25 – ULTIMATE PARENT COMPANY
£ Rupees £ Rupees The directors consider that the company’s immediate parent undertaking was Jensand Limited, and up
to 3 January 2006 its ultimate parent company was Stokes Group Limited. From 3 January 2006 the
Excess of taxation allowances over
ultimate parent company is Mahindra & Mahindra Limited, a company registered in India, following its
depreciation on fixed assets 427,333 33,297,787 440,569 34,329,137
acquisition of 98.6% of the share capital of Stokes Group Limited. Following a rights issues by Stokes
Other timing differences (409,776) (31,929,746) (389,866) (30,378,359)
Group Limited on 24 February 2006 Mahindra & Mahnidra Limited increased their share ownership to
Losses (85,350) (6,650,472) (188,700) (14,703,504)
99.2% of the issued share capital of that company.
Deferred tax asset (note 12) (67,793) (5,282,431) (137,997) (10,752,726) Copies of both Jensand Limited’s and Stokes Group Limited’s accounts are available from The Secretary,
Victor Works, Northcote Street, Walsall, West Midlands, WS2 8BH.
19 – LEASING COMMITMENTS Copies of Mahindra & Mahindra Limited’s accounts are available from Gateway Building, Apollo Bunder,
At 31 December 2005 the company had annual commitments under non-cancellable operating leases Mumbai 400 001.
as set out below:
Other Other
31 March 2006 31 December 2005
Land & Buildings Land & Buildings
£ Rupees £ Rupees
Operating leases which expire:
Within 1 year 3,366 262,279 — —
Within 2 to 5 years 16,605 1,293,862 21,093 1,643,567
19,971 1,556,141 21,093 1,643,567

733
MAHINDRA RENAULT PRIVATE LIMITED

DIRECTORS’ REPORT TO THE SHAREHOLDERS

Your Directors have pleasure in presenting their First Report together with the audited Accounts of your Company for the period ended
31st March, 2006.
Financial Results:
Particulars Rupees
Income ......................................................................................................................... ............. 9,708,756
Loss before Depreciation & Taxation ........................................................................................ (111 ,624,995)
Less : Depreciation ............................................................................................................. ...... 1,037,236
Less : Provision for tax - Current Tax ....................................................................................... 2,9 03,361
– Fringe Benefit Tax ....................................................................................................... 1,49 3,611
Loss carried forward ........................................................................................................... ...... (117,059,203)

The Company create awareness about the brand.

The Company was incorporated on 2nd June, 2005 under the
name Mahindra Renault Private Limited to carry on the business
of designing, manufacturing, marketing automotive vehicles and
related activities. The Company is set up as a Joint Venture
between Mahindra & Mahindra Limited and Renault s.a.s., France.
Your Company is a Subsidiary of M&M which holds 51% of the
paid-up share capital of the Company.
Performance Review
The Company commenced its business during the year by
carrying out trading of automobile components manufactured in
India. The manufacturing plant is being made functional with the
installation of all plant and machineries which is expected to be
completed in August 2006 when it will be ready for trial production
to be followed by commercial production. The management is
confident that sales of Logan could be launched in the first half
of 2007. The Company’s operations during the year ended with
a loss after tax of Rs.117,059,203.
Finance
Your Company proposes to finance the project cost by a suitable
mix of debt and equity funds. During the period ended 31st March,
2006, your Company made a preferential issue of 24,90,000
equity shares of the face value of Rs.10/- each at par and a rights
issue of 490,00,000 equity shares of Rs.10 each at par. The issued
and paid-up capital of the Company as at 31st March, 2006 is
Rs.5150 lakhs (Rs.515 million) comprising of 5,15,00,000 equity
shares of the face value of Rs.10/- each.
The Company is in the process of tying up the term loans with
the bankers.
Outlook for the Current Year
The Market outlook is positive. Prospective Dealers are quite
enthused with growth in the industry. There has been lately some
hardening of interest rates. If it persists, effect on market will
not be positive. However, overall, the outlook is bright. There
has been a slew of new launches and more are on the anvil in
the price ranges in which your Company is expected to compete.
Your Company is confident of meeting these challenges. During
the year, the Company proposes to run pre-launch campaigns to
Directors
Mr. Abeezar Faizullabhoy and Mr. Bahram Vakil were named in
the Articles of Association as the first Directors of the Company.
Mr. Faizullabhoy and Mr. Vakil have resigned from the Board
with effect from 30th September, 2005 and 2nd December, 2005,
respectively.
The Board of Directors at its Meetings held on 23rd June, 2005,
and 5th August, 2005, appointed Mr. Sylvain Bilaine and Mr.
Rajesh Jejurikar and Dr. Pawan Kumar Goenka as Additional
Directors.
Mr. Sylvain Bilaine has been appointed as Chairman of the Board
effective 30th September, 2005 and Mr. Rajesh Jejurikar has been
appointed as Managing Director of the Company effective 1st
October, 2005 for a period of three years.
Mr. Stephane Stoufflet and Mr. Rajan Wadhera were appointed
Additional Directors by the Board and Mr. Antoine Herteman was
appointed in the casual vacancy caused by the resignation of
Mr. Abeezar Faizullabhoy on 30th September, 2005.
Mr. Uday Phadke was appointed as Director in the vacancy
caused by the resignation of Mr. Bahram N. Vakil on 2nd
December, 2005.
Mr. Bilaine, Mr. Jejurikar, Dr. Goenka, Mr. Stoufflet, Mr.
Herteman, Mr.Wadhera and Mr. Phadke hold office up to the
date of the forthcoming Annual General Meeting.
The Company has received notices from members under section
257 of the Companies Act, 1956, signifying their intention to
propose Mr. Bilaine, Mr. Jejurikar, Dr. Goenka, Mr. Stoufflet, Mr.
Herteman, Mr.Wadhera and Mr. Phadke as candidates for office
of Director.
Directors’ Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the
Operating Management, and after due enquiry, confirm that:
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;

734

(ii) they have, in the selection of the accounting policies,
consulted the Statutory Auditors and these have been
applied consistently and reasonable and prudent judgments
and estimates have been made so as to give a true and fair
view of the state of affairs of the Company as at 31st March,
2006 and of the loss of the Company for the period ended
on that date;
(iii) proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern
basis.
Audit Committee
During the period under review an Audit Committee comprising
of Dr. Pawan Kumar Goenka, Mr. Rajesh Jejurikar and Mr.
Stephane Stoufflet was constituted. The Committee was re-
constituted to comprise of Mr. U. Y. Phadke, Dr. Pawan Kumar
Goenka and Mr. Stephane Stoufflet. Mr U. Y. Phadke is the
Chairman of the Committee.
Remuneration Committee
The Remuneration Committee presently comprises of Dr. Pawan
Kumar Goenka, Mr.U. Y. Phadke and Mr. Antoine Herteman.
Auditors
M/s. Deloitte Haskins & Sells, Chartered Accountants, the first
Auditors of the Company, who were appointed by the Board of
Directors, retire as Auditors of the Company at the forthcoming
Annual General Meeting and have given their consent for re-
appointment. The members will be required to appoint Auditors
for the current year and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
the above Auditors to the effect that their re-appointment, if made,
would be in conformity with the limits specified in the said section.
Public Deposits and Loans/Advances
MAHINDRA RENAULT PRIVATE LIMITED
The Company has not accepted any deposits from the public or
its employees during the period under review.
The Company has not made any loans/advances which require
to be disclosed in the annual accounts of the Company pursuant
to Clause 32 of the Listing Agreement with the parent company
– Mahindra & Mahindra Limited.
Conservation of Energy and Technology Absorption and
Foreign Exchange Earnings & Outgo
The expenditure on power and fuel is not significant in relation
to the total expenses of the Company. However, the Company
constantly reviews the consumption of electricity rationalization.
Rule 2B of the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988 concerning technology
absorption is currently not applicable to the Company.
The particulars of foreign exchange earnings and outgo are given
in the Notes to Accounts.
Particulars of employees as required under section 217(2A)
of the Companies Act, 1956 and Rules framed thereunder
As required under section 217(2A) of the Companies Act, 1956
and Rules thereunder, a statement containing particulars of the
Company’s employees who were in receipt of remuneration of
not less than Rs.24,00,000 during the period ended 31st March,
2006 or of not less than Rs.2,00,000 per month during any part
thereof is given in the Annexure to this report.
Acknowledgement
The Directors take this opportunity to place on record their sincere
appreciation for the valuable contribution and devotion by
employees of the Company at all levels. The Directors also
appreciate the co-operation given by Bankers and Government
Departments at all levels.
For and on behalf of the Board
Sylvain Bilaine
Mumbai, 27th April, 2006. Chairman
735
MAHINDRA RENAULT PRIVATE LIMITED

Annexure to the Directors’ Report

Additional Information as required under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 and
forming part of the Directors’ Report for the period ended 31st March, 2006.

Name of the Employee Designation / Qualification Gross Age Experience Date of Last employment
Nature of duties Remuneration (Years) (Years) Commencement held (Designation /
(subject to tax) of employment Organisation)
Rupees

Mr. Rajesh Jejurikar Managing Management 1,440,000 41 16 01-Oct-05 EVP-Marketing & Sales
Director Graduate Mahindra & Mahindra
Ltd *
Mr. Yves Gueguen Head of Degree in Telecom 17,660,471 47 20 30-Sep-05 General Manager,
Engineering Engineering Harness Engineering
Renault s.a.s
Mr. Gilles Dufour Head of ESIM, MBA 5,907,624 44 19 30-Sep-05 Worldwide X 90PPM
Purchase CESMA Renault s.a.s
Mr. Fabrice Delecroix Head of Engineer ENSCM 11,873,455 40 17 30-Sep-05 General Quality
Quality Manager
(DOUAi & Plant)
Renault s.a.s
Dr. Marie-Pierre Langlois Deputy Chief Phd in Finance 9,574,680 45 25 30-Sep-05 VP Finance (Rvi)
Financial Officer
(Cost Management
& Control)

* Mr Rajesh Jejurikar simultaneously holds the positions of Managing Director of the Company as well as EVP- Marketing & Sales, Mahindra &
Mahindra Limited.
Notes :
1. Remuneration, as shown above, includes salary, house rent allowance or value of perquisites for accommodation, leave travel facility and all other
allowances and perquisites as applicable.
2. None of the employees mentioned above is a relative of any Director of the Company.
3. No employee holds by himself/herself or alongwith his/her spouse and dependent children 2% or more of the equity shares of the Company.

For and on behalf of the Board

Sylvain Bilaine
Chairman
Mumbai, 27th April, 2006.

736
 MAHINDRA RENAULT PRIVATE LIMITED

Report of the Auditors to the Shareholders

1. We have audited the attached balance sheet of Mahindra Renault Private Limited as at 31st March, 2006, and also the profit and
loss account and the cash flow statement for the period 2nd June, 2005 (being the date of incorporation) to 31st March, 2006
annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by the management,
as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of sub-section
(4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs
4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(i) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the
purposes of our audit;

(ii) in our opinion, proper books of account as required by law have been kept by the company so far as appears from our
examination of those books;

(iii) the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books
of account;

(iv) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(v) on the basis of the written representations received from the directors as on 31st March, 2006, and taken on record by the
Board of Directors, we report that none of the directors are disqualified as on 31st March, 2006 from being appointed as a
director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

(vi) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the
information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2006;

(b) in the case of the profit and loss account of the loss for the period ended on that date;

and

(c) in the case of the cash flow statement, of the cash flows for the period ended on that date.

For Deloitte Haskins & Sells

Chartered Accountants

S.R. Tata
Partner
Mumbai, 27th April, 2006 Membership Number: 38320

737
MAHINDRA RENAULT PRIVATE LIMITED

Annexure to the Auditors’ Report of Mahindra Renault Private Limited for the period ended
31st March, 2006.
(Referred to in paragraph (3) thereof)

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

(b) In our opinion, the fixed assets have been physically verified by the management at reasonable intervals, having regard to
the size of the company and nature of the assets. No material discrepancies between the book records and the physical
inventory were noticed.

(c) During the period, in our opinion, a substantial part of the fixed assets has not been disposed off by the company.

(ii) (a) The inventory of the company lying with a third party, has been confirmed by the third party. In our opinion the frequency
of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedure of physical verification of inventory
followed by the management were found reasonable and adequate in relation to the size of the company and the nature of
its business.

(c) On the basis of our examination of records of inventory, in our opinion, the company has maintained proper records of
inventory. No material discrepancies were noticed between physical stocks and the books records of the company.

(iii) The company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms, or other parties listed in
the Register maintained under Section 301 of the Companies Act, 1956, and accordingly paragraph 4(iii)(b), (c), (d), (e), (f) and (g)
of the said Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system
commensurate with the size of the company and the nature of its business for the purchase of inventory and fixed assets and for
the sale of goods. Further, on the basis of our examination and according to the information and explanations given to us, we have
neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control system.

(v) In our opinion and according to the information and explanations given to us, there are no contracts or arrangements that need
to be entered in the Register, maintained under Section 301 of the Companies Act, 1956 and accordingly paragraph 4(v)(b) of the
Order is not applicable.

(vi) In our opinion and according to the information and explanations given to us, as the company has not accepted deposits from the
public, paragraph 4(vi) of the said Order is not applicable.

(vii) As the company is neither a listed company nor a company having a paid-up capital and reserves exceeding Rs. 50 lacs as at the
commencement of the financial year nor having an average annual turnover exceeding Rs. 5 crores for a period of three consecutive
financial years immediately preceding the current period, paragraph 4(vii) of the said Order concerning internal audit system is not
applicable.

(viii) Cost records has been prescribed by the Central Government under clause (d) of sub-section (1) of section 209 for products
proposed to be manufactured by the company. The company's activity during the period, were only in the nature of trading and
consequently paragraph 4(viii) of the said Order is not applicable.

(ix) (a) According to the information and explanations given to us and according to the books and records as produced and examined
by us, in our opinion, the undisputed statutory dues including provident fund, investor education and protection fund,
employees' state insurance, income tax, sales tax, wealth tax, service tax, customs duty, cess and other material statutory
dues as applicable have been regularly deposited by the company during the period with appropriate authorities.

(b) According to the information and explanations given to us, there are no dues on account of income-tax, sales tax, wealth
tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute.

738
 MAHINDRA RENAULT PRIVATE LIMITED

(x) As the company has been registered for a period less than five years as at 31st March, 2006, paragraph 4(x) of the said Order is
not applicable.

(xi) According to the information and explanations given to us, the company had no dues from any financial institution or bank or
debenture holder during the period and accordingly paragraph 4(xi) of the said Order is not applicable.

(xii) According to the information and explanations given to us, the company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.

(xiii) The provisions of any special statute as specified under paragraph 4(xiii) of the said Order are not applicable to the company.

(xiv) In our opinion and according to the information and explanations given to us, the company is not a dealer or trader in securities.

(xv) According to the informationand explanations given to us, the company has not given any guarantees for loans taken by others
from banks or financial institutions.

(xvi) In our opinion and according to the information and explanation given to us, as the company has not taken any term loans, paragraph
4(xvi) of the said Order is not applicable.

(xvii) Based on the information and explanations given to us and on an overall examination of the balance sheet of the company, in our
opinion, there are no funds raised on a short term basis which have been used for long term investment.

(xviii) The company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under
Section 301 of the Companies Act, 1956 during the period.

(xix) In our opinion and according to the informationand explanations given to us, as the company has no debentures outstanding at
any time during the period, paragraph 4(xix) of the said Order is not applicable to the company.

(xx) The company has not raised any money by public issue during the period.

(xxi) According to the information and explanations given to us, during the period, no fraud on or by the company has been noticed
or reported.

For Deloitte Haskins & Sells

Chartered Accountants

S.R. Tata
Partner
Mumbai, 27th April, 2006 Membership Number: 38320

739
MAHINDRA RENAULT PRIVATE LIMITED

Balance Sheet as at 31st March, 2006

2006
Schedule Rupees
I. SOURCES OF FUNDS:

Shareholders’ Funds:

Capital ................................................................................. I 515,000,000

Total ............. 515,000,000

II. APPLICATION OF FUNDS:

Fixed Assets ....................................................................... II 13,484,446

Capital work-in-progress (includes capital advances

Rs. 418,741,978) [Note 3] ................................................... 874,509,280

Net Block ............................................................................. 887,993,726

Net Current Assets:

Current Assets, Loans and Advances ................................. III 72,955,599

Less: Current Liabilities and Provisions .............................. IV (563,008,528)

(490,052,929)

Profit and Loss Account – Adverse Balance ....................... 117,059,203

Total.............. 515,000,000

Notes on Accounts ............................................................ VIII

Per our Report attached Sylvain Bilaine Chairman

Rajesh Jejurikar Managing Director

For Deloitte Haskins & Sells

}
Chartered Accountants Rajiv Krishnan Dr. Pawan Goenka
Chief Financial Officer
S.R. Tata Uday Phadke Directors
Partner Anil Kumar Saboo
Company Secretary Stephane Stoufflet

Mumbai: 27th April, 2006 Mumbai, 27th April, 2006

740
 MAHINDRA RENAULT PRIVATE LIMITED

Profit and Loss Account for the period from 2nd June, 2005 (being the date of
incorporation) to 31st March, 2006

2006
Schedule Rupees
SALES:
Traded ......................................................................................... 1,083,206
Less: Excise Duty on Sales ......................................................... —

Net Sales ..................................................................................... 1,083,206

Other Income .............................................................................. V 8,625,550

Net Income ................................................................................ 9,708,756

EXPENDITURE:
Materials for Resale .................................................................... VI 510,924
Other Expenses .......................................................................... VII 120,822,827
Depreciation ................................................................................ 1,037,236

122,370,987

Loss for the period before taxation ............................................. (112,662,231)

Less: Income tax expense : Current tax ..................................... (2,903,361)
: Fringe Benefit Tax ......................... (1,493,611) (4,396,972)

Loss after tax carried to Balance Sheet ...................................... (117,059,203)

Earnings Per Share [Basic/Diluted] (Note-8)

Face Value Rs. 10 Per Share ....................................................... (3.71)
Notes on Accounts .................................................................... VIII

Per our Report attached Sylvain Bilaine Chairman

Rajesh Jejurikar Managing Director

For Deloitte Haskins & Sells

}
Chartered Accountants Rajiv Krishnan Dr. Pawan Goenka
Chief Financial Officer
S.R. Tata Uday Phadke Directors
Partner Anil Kumar Saboo
Company Secretary Stephane Stoufflet

Mumbai: 27th April, 2006 Mumbai, 27th April, 2006

741
MAHINDRA RENAULT PRIVATE LIMITED

Cash Flow Statement for the period ended 31st March, 2006

2006
Particulars Rupees

A. CASH FLOW FROM OPERATING ACTIVITIES:

Net loss before tax .............................................................................. (112,662,231)
Adjustments for:
Depreciation .................................................................................... 1,037,236
Interest Income ............................................................................... (8,625,550)
Interest expense ............................................................................. 1,338,000 (6,250,314)
Operating Profit before Working Capital Changes ..................... (118,912,545)
Adjustments for:
Trade and Other Receivables .......................................................... (9,380,160)
Inventories ....................................................................................... (99,907)
Trade and Other Payables ............................................................... 121,928,444 112,448,377
Cash used for Operations ............................................................. (6,464,168)
Taxes paid (Income Tax + FBT) ....................................................... (4,419,427)
NET CASH USED IN OPERATING ACTIVITIES ............................... (10,883,595)

B. CASH FLOW FROM INVESTING ACTIVITIES:

Purchase of Fixed Assets (includes advances on capital account) ..... (449,358,083)
Interest Received ................................................................................ 8,559,061
NET CASH USED IN INVESTING ACTIVITIES ..................................... (440,799,022)

C. CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds from issue of Share Capital ................................................. 515,000,000
NET CASH FROM FINANCING ACTIVITIES ........................................ 515,000,000
Net Increase/(Decrease) in Cash and Cash Equivalents ..................... 63,317,383
CASH AND CASH EQUIVALENTS
Opening Balance ................................................................................. —
Closing Balance ................................................................................... 63,317,383

Notes on Accounts ............................................................................ VIII

Per our Report attached Sylvain Bilaine Chairman

Rajesh Jejurikar Managing Director

For Deloitte Haskins & Sells

}
Chartered Accountants Rajiv Krishnan Dr. Pawan Goenka
Chief Financial Officer
S.R. Tata Uday Phadke Directors
Partner Anil Kumar Saboo
Company Secretary Stephane Stoufflet

Mumbai: 27th April, 2006 Mumbai, 27th April, 2006

742
 MAHINDRA RENAULT PRIVATE LIMITED

Schedules forming part of Accounts for the year ended 31st March, 2006
SCHEDULE I 2006 SCHEDULE IV 2006
CAPITAL: Rupees CURRENT LIABILITIES AND PROVISIONS: Rupees Rupees
Authorised: (A) Current Liabilities
100,000,000 Equity Shares of Rs. 10 each ......................... 1,000,000,000 Sundry Creditors:
(i) Total outstanding dues of small scale
Total.......... 1,000,000,000 industrial undertakings —
(ii) Total outstanding dues to creditors other
Issued and Subscribed: than small scale industrial undertakings 562,686,774
51,500,000 Equity Shares of Rs. 10 each, fully paid up .... 515,000,000 562,686,774
Total.......... 515,000,000 562,686,774
Out of the above, 26,265,000 Equity Shares of Rs. 10/- each (B) Provisions:
fully paid-up, are held by Mahindra & Mahindra Limited, Provision for Taxation (net of advance payment) 10,784
the Holding Company. Provision for retirement benefits 310,970
321,754
SCHEDULE II Total ......... 563,008,528
FIXED ASSETS:

Additions Deductions Cost as at Depreciation Depreciation Depreciation Net Balance

Description of Assets during the during the 31st March, 2006 for the period on Deductions to 31st as at 31st
period at cost period March, 2006 March, 2006
Rupees Rupees Rupees Rupees Rupees Rupees Rupees
Plant and Machinery 11,206,578 59,237 11,147,341 887,294 816 886,478 10,260,863
Furniture and Fittings 1,577,334 — 1,577,334 149,526 — 149,526 1,427,808
Vehicles 1,796,191 — 1,796,191 416 — 416 1,795,775

Total 14,580,103 59,237 14,520,866 1,037,236 816 1,036,420 13,484,446

SCHEDULE III 2006 SCHEDULE V 2006

CURRENT ASSETS, OTHER INCOME: Rupees Rupees
LOANS AND ADVANCES: Rupees Rupees Rupees
(A) Current Assets: Interest on Fixed Deposits – (Gross) ............... 8,625,550
Stock in Trade 99,907 (Tax Deducted at Source Rs. 1,935,577) .........
Sundry Debtors: Total...... 8,625,500
Unsecured unless otherwise stated:
Outstanding
over six months : Considered good — SCHEDULE VI 2006
: Considered doubtful — MATERIALS OF RESALE: Rupees Rupees
— (A) (Increase) in Materials for Resale
Opening Stock ................................................. —
Other Debts : Considered good 1,113,364 Less: Closing Stock ......................................... 99,907
: Considered doubtful —
(99,907)
1,113,364 (B) Purchases of Materials for Resale 610,831
1,113,364 Total...... 510,924
Less: Provision for Doubtful Debts —
1,113,364 SCHEDULE VII 2006
Cash and Bank Balances: OTHER EXPENSES Rupees
Cash, cheques and stamps on hand 39,911
Balances with Schedules Banks: Salaries, Wages, Bonus, etc. ................................. 58,101,233
(i) On Current Account 3,277,472 Contribution to Provident and other funds ............. 587,569
(ii) On Fixed Deposit Accounts* 60,000,000 Gratuity ................................................................. 120,540
63,277,472 Welfare .................................................................. 460,365
63,317,383 Power and Fuel ..................................................... 495,515
* Unutilised monies from issue of shares Loss on cancellation of Forward Contracts (Net) ... 4,612,625
Other current assets Rent including lease rental .................................... 5,641,173
– Interest accrued on fixed deposits 66,489
Rates and Taxes .................................................... 15,515
(A) 64,597,143 Interest on Technical Assistance Fees .................. 1,338,000
(B) Loans and Advances Insurance ............................................................... 33,021
(Unsecured, considered good unless
otherwise stated): Repairs & Maintenance:
Advances recoverable in cash or in kind Buildings .......................................................... —
or for value to be received: Machinery ....................................................... —
Considered good 8,325,217 Others ............................................................. 816,789
Considered doubtful —
816,789
8,325,217
Less: Provision for Doubtful Advances — Advertisement ....................................................... 243,372
8,325,217 Brokerage .............................................................. 224,183
Payment towards Fringe Benefits Tax Freight Outward and Clearing Charges ................. 768,629
(Net of provision) 33,239 Business Promotion Expenses .............................. 1,244,820
(B) 8,358,456 Travelling Expenses ............................................... 16,080,959
Total... (A) + (B) 72,955,599 Books and Periodicals ........................................... 79,630
Registration and Documentation Charges ............. 7,633,223

743
MAHINDRA RENAULT PRIVATE LIMITED
SCHEDULE VII 2006
OTHER EXPENSES (Continued) Rupees
Domain Registration Charges ................................ 176,738
Other Registration Charges ................................... 104,143
Hotel Accomodation .............................................. 4,465,190
Software Expenses ............................................... 4,000,561
Training Expenses ................................................. 96,986
Hospitality Expenses ............................................. 221,124
Subscription and Membership .............................. 132,240
Audit Fees:
Auditors Remuneration .................................... 168,360
Out of Pocket Expenses .................................. 398
.................................................................. 168,758
Conveyance ........................................................... 189,877
Hire Charges ......................................................... 19,285
Recruitment Expenses .......................................... 726,950
Postage, Telephone, Fax ....................................... 2,015,145
Printing and Stationery .......................................... 579,439
Professional Fees .................................................. 8,980,385
Miscellaneous Expenses ....................................... 448,845
Total...... 120,822,827
SCHEDULE VIII
NOTES ON ACCOUNTS FOR THE PERIOD ENDED 31ST MARCH, 2006
1) Significant Accounting Policies:
(A) Tangible Fixed Assets:
(a) All tangible fixed assets are carried at cost less depreciation. In case of
liabilities in foreign currencies for the acquisition of fixed assets from a
country outside India, the exchange differences are adjusted to the cost
of such asset.
When an asset is scrapped or otherwise disposed off, the cost and related
depreciation are removed from the books of account and the resultant
profit or loss, if any, is reflected in the Profit and Loss Account.
(b) Depreciation on assets is calculated on Straight Line Method over the
estimated useful lives of the assets or the lives determined using the
rates and in the manner prescribed in Schedule XIV of the Companies
Act, 1956, whichever is shorter.
(B) Intangible Assets:
All intangible assets are initially measured at cost and amortised so as to
reflect the pattern in which the asset's economic benefits are consumed.
Development Expenditure:
The expenditure on technical services, the benefit of which is expected in
future years, will be capitalised and appropriately amortised on
commencement of production.
(C) Inventories:
Inventories are stated at cost or net realisable value, whichever is lower.
(D) Foreign Exchange Transactions:
All foreign currency monetary items are translated at the relevant rates of
exchange prevailing at the year end. In case of monetary items (other than
those for acquisition of fixed assets from a country outside India) the
exchange differences are recognised in the Profit and Loss Account.
In case of exchange differences arising on the acquisition of fixed assets
(tangible and intangible) from a country outside India, the exchange
differences are adjusted to the cost of such assets.
(E) Retirement Benefits:
Retirement Benefits in respect of gratuity and leave encashable at retirement/
cessation are provided for based on valuations, as at the Balance Sheet
date, made by independent actuaries.
744
(F) Taxes on Income:
Current tax is determined as the amount of tax payable in respect of taxable
income fo the year. Deferred tax is recognised, subject to consideration of
prudence, on timing differences, being the difference between taxable
income and accounting income that originate in one period and are capable
of reversal in one or more subsequent periods. Deferred tax assets arising
on account of unabsorbed depreciation or carry forward of tax losses are
recognised only to the extent that there is virtual certainty supported by
convincing evidence that sufficient future tax income will be available against
which such deferred tax assets can be realised.
(G) Leases:
1) The company's significant leasing arrangements are in respect of
operating leases for premises (residential, office, godowns) The leasing
arrangements, which are not non-cancellable, range between six
months and five years generally. The lease rentals payable are charged
as rent.
2) The Company is a Joint Venture, incorporated on 2nd June, 2005 between
Mahindra & Mahindra Limited & Renault s.a.s of France to produce and
market automotive vehicles and related parts. In view of the first year of
operations, the accounts have been prepared for a period commencing
from 2nd June, 2005 to 31st March, 2006 and there are no corresponding
previous years figures.
3) Capital Work-in-Progress includes Rs. 4,117,500 (Debit) on account of
foreign exchange fluctuation.
4) The identification of suppliers as Small Scale Industrial Undertaking (SSIs)
has been done on the basis of the information to the extent provided by
the suppliers to the Company. On this basis, no supplier has been
identified as a Small Scale Industrial Undertaking (SSIs).
5) Managerial Remuneration for the Managing Director included in the Profit
and Loss Account is Rs. 1,440,000 including perquisites Rs. 720,000.
6) The estimated amount of contracts remaining to be executed on capital
account and not provided for as at 31st March, 2006 is Rs, 2,404,478,515.
7) The company operates in a single segment, production and selling of
automotive vehicles and related parts.
8) Earnings per Share:
Amount used in numerator –
Balance of loss for the Period Rs. 117,059,203
Weighted average number of equity shares 31,568,118
Basic and Diluted earning per share (Rs.) (3.71)
(Face value of Rs. 10 per share)
9) As per Accounting Standard 18 "Related Party Disclosures" issued by
the Institute of Chartered Accountants of India, the Company has
identified all the related parties having transactions with the Company
during the period as per the details given below:
Related Party Disclosures:
a) Related Party where Control exist:
i) Holding Company : Mahindra & Mahindra Limited (also
a venturer is respect of which
Mahindra Renault Private Limited
is a joint venture)
b) Other Parties with whom transactions have taken place during the
period
i) Fellow Subsidiary : Bristlecone India Limited
ii) Joint Venture : Renault s.a.s, France (a venturer in
respect of which Mahindra Renault
Private Limited is a joint venture)
iii) Key Managerial Personnel : Mr. Rajesh Jejurikar
 MAHINDRA RENAULT PRIVATE LIMITED

Disclosure of transactions between the Company and related parties and the 12) Expenditure in foreign currencies (subject to deduction of tax at source
status of outstanding balance as on 31st March, 2006. where applicable)
1 Technical Assistance Fees Rs. 410,475,000
Sl. Nature of Holding Fellow Joint Key
No. Transactions Company Subsidiary Venture Managerial 2 Professional Fees Rs. 19,008,689
Personnel 3 Interest Rs. 1,338,000

1 Purchases: 4 Reimbursement of employee remuneration Rs. 26,729,136

Tangible Assets 28,183,571 29,499,470 5 Others Rs. 6,090,814

Intangible Assets 410,475,000 13) Earnings in foreign currencies:

2 Sales: Export of Goods on F.O.B. basis Rs. 1,083,206
Goods 1,083,206
3 Outstandings: 14) Derivative Instruments:
Receivables 1,113,362 The company has entered into Forward Exchange Contracts [being a derivative
instrument], which are not intended for trading or speculative purposes, but for
Payables 7,873,118 1,109,057 417,997,561 hedge purposes, to establish the amount of reporting currency required or
4 Managerial available at the settlement date of certain payables.
Remuneration 1,440,000 The following are the outstanding Forward Exchange Contracts entered into
(See Note 5) by the company as on 31st March, 2006:

5 Other Transactions: Currency Amount Buy/Sell Cross Currency

Equity Contribution 262,550,000 252,350,000 Euro 5,289,600* Buy US Dollar

(in cash) US Dollar 4,061,837 Buy Rupees

Professional Fees 7,071,165 * These forward cover contracts are against Technical Assistance and Engineering
Service Fees payable by the Company.
Expenses reimbursed 28,713,523 26,729,136
The year end foreign currency exposures that have not been hedged by a derivative
Software Expenditure 1,174,974 3,564,291 instrument or otherwise are given below:
Domain Expenditure 174,664 a. Amounts receivable in foreign currency on account of the following:
Interest 1,338,000
• Export of goods Rs. 11,13,362 (Euro 20,656)

10) Particulars in respect of traded goods: b. Amounts payable in foreign currency

on account of the following:
Class of Quantity Opening Purchases Closing Sales
Goods Stock Value Stock Value • Import of services Rs. 20,816,338 (Euro 380,346)
Value Value • Capital Imports
Bought Various — 610,831 99,907 1,083,206 [including Intangibles] Rs. 106,477,215 (Euro 1,945,500)
out spares parts • Interest Rs. 1,204,200 (Euro 22,003)
for resale
c. Capital Imports (including Intangibles) $ 2,264,088
11) Value of imports during the period (CIF basis) The above disclosures have been made consequent to an announcement by
Capital goods 98,010,218 the Institute of Chartered Accountants of India in December, 2005, which is
applicable to the financial periods ending on or after 31st March, 2006.

745
MAHINDRA RENAULT PRIVATE LIMITED

SCHEDULE IX
BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE:

I. Registration Details:
Registration No. U 34100 MH 2005 PTC 153702 State Code 1 1
Balance Sheet Date 3 1 - 0 3 - 2 0 0 6

II. Capital Raised during the Year (Amount in Rs. Thousands)

Public Issue Rights Issue
N I L 4 9 0 0 0 0
Bonus Issue Private Placement
N I L 2 5 0 0 0

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities Total Assets
1 0 7 8 0 0 9 1 0 7 8 0 0 9
Sources of Funds
Paid-up Capital Reserves and Surplus
5 1 5 0 0 0 N I L
Secured Loans Unsecured Loans
N I L N I L
Application of Funds
Net Fixed Assets Investments
8 8 7 9 9 4 N I L
Net Current Assets Miscellaneous Expenditure
( 4 9 0 0 5 3 ) N I L
Accumulated Losses Deferred tax Asset
1 1 7 0 5 9 N I L

IV. Performance of the Company (Amount in Rs. Thousands)

Turnover (Total Income) Total Expenditure
9 7 0 9 1 2 2 3 7 1

+/– Profit/Loss Before Tax +/– Profit/Loss After Tax

– 1 1 2 6 6 2 – 1 1 7 0 5 9
Earning per share in Rs. Dividend
Basic and Diluted Rs. (–) Rs. 3.71 NIL

V. Generic names of three principal products/services of the Company (as per monetary terms)
Item Code No. (ITC Code) 8 7 0 3 2 2 9 9
Product Description P A S S E N G E R V E H I C L E S

Signature to Schedules I to IX

Sylvain Bilaine Chairman

Rajesh Jejurikar Managing Director

}
Rajiv Krishnan Dr. Pawan Goenka
Chief Financial Officer
Uday Phadke Directors
Anil Kumar Saboo
Company Secretary Stephane Stoufflet

Mumbai: 27th April, 2006

746
 MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

Directors’ Report to the Shareholders

TO THE MEMBERS
Mahindra Automotive Steels Limited
Your Directors have pleasure in presenting their 7th Annual Report and audited statement of accounts for the year ended 31st March,
2006
Financial Highlights
Rs. in lakhs
2005-06
Gross Income ....................................................................................................................................... 20,426.06
Profit before Interest, Depreciation, Contingency and tax ................................................................... 1,113.00
Less: Depreciation ............................................................................................................................... 534.68
Profit before Interest, Contingency and tax ......................................................................................... 578.32
Less: Interest and Finance cost ........................................................................................................... 841.49
Loss before Contingency provision and tax ......................................................................................... (263.17)
Less: Contingency provision ................................................................................................................ 919.23
Loss before tax .................................................................................................................................... (1,182.40)
Less: Provision for tax – Fringe Benefit Tax ......................................................................................... 12.33
Loss for the year .................................................................................................................................. (1,194.73)

Loss carried to Balance Sheet ............................................................................................................. (1,194.73)

The Company was not operational till year ended March, 2005 and only preliminary and preoperative expenses had been incurred since
inception.
Operations
In pursuit of its objective to carry on the business of forging, a the net resulted in a loss of Rs.11.94 crores.
Scheme of Arrangement (the Scheme) was entered into with
Amforge Industries Limited (AIL), a leading player in forging
industry for strategic acquisition of the latter’s plant at Chakan
(near Pune). The Chakan unit of AIL is engaged in manufacturing
crank shafts, connecting rods and stub axle forgings.
Pursuant to the Scheme which was approved by the High Court
of Judicature at Bombay on 21st March, 2006, the Chakan unit
of AIL was demerged and transferred to your Company with
effect from 1st April, 2005 . The Scheme resulted in accounting
of goodwill of Rs. 86.92 crores for your Company which amount
will be amortized over 5 years beginning with the current
financial year.
The Scheme also entailed an expansion of the capital base of
the Company by issue of one equity share and one preference
share to the equity shareholders of AIL for every one equity share
held in AIL as consideration for the business acquired under the
Scheme. In accordance with the Scheme the word ”Private”
was dropped from your Company’s name in the current year.
Arrangements are underway for listing the equity shares and
preference shares on the Bombay Stock Exchange Limited.
The gross income in the first year of operations amounted to
Rs. 204.26 crores and an operating profit of Rs.11.13 crores was
registered. After depreciation and accounting for the major
expenditure on business acquisition including provision for debt
guaranteed under the Scheme as well as previously anticipated
write off of obsolete items of stocks and doubtful book debts,
As a result of the transfer of the Chakan unit of AIL, your Company
has made a foray into the forging industry. This is a strategic
step which will help in synergizing resources in a meaningful
manner.
The general business environment in the industry has been
buoyant owing to high growth being witnessed in the automobile
sector. During the year, your Company set up a world class
machining unit at Chakan and the same was commissioned in
April, 2006.
Outlook
The demand in the automotive industry continues to be buoyant
and the Company is expected to achieve better turnover and
profitability in the coming years as a result of the organic and
inorganic growth envisaged.
Dividend
Your Directors have not recommended payment of dividend in
view of loss during the year.
Finance
Your Company became a direct subsidiary of Mahindra &
Mahindra Limited (M&M), effective from 2nd June, 2005 following
purchase by it from Mahindra Holdings & Finance Ltd., also its
subsidiary, of 10,160 equity shares held in the Company and

747
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)
additional direct acquisition of 82,11,866 equity shares of Rs. 10
each at a premium of Rs.87.42 per share aggregating
Rs. 80 crores. M&M also paid share application money to your
Company towards subscription of 49,78,444 number of equity
shares of Rs. 10 each at a premium of Rs. 87.42 each aggregating
Rs. 48.5 crores. The shares will be allotted to M&M pursuant to
the Scheme. The aforesaid amounts are being utilized for
financing capital expenditure of Chakan machining unit and a
part will also be applied towards redeeming the preference capital
issued pursuant to the Scheme.
In accordance with the Scheme the Authorised Share Capital of
the Company was re-organised and increased from
Rs. 40,00,00,000 (Rupees Forty Crores Only) to Rs. 78,94,26,386
(Rupees Seventy Eight Crores Ninety Four Lakhs Twenty Six
Thousand Three Hundred Eighty Six Only) comprising of
3,30,00,000 equity shares of Rs.10 each aggregating to
Rs. 33,00,00,000 (Rupees Thirty Three Crores Only) and
1,48,20,206, 4% non-cumulative, redeemable non convertible
preference shares of Rs. 31 each aggregating Rs. 45,94,26,386
(Rupees Forty Five Crores Ninety Four Lakhs Twenty Six
Thousand Three Hundred Eighty Six Only). Pursuant to the
Scheme, one equity share and one preference share will be
issued to the equity shareholders of Amforge Industries Ltd. (AIL)
for every one equity share held in AIL. Consequent upon the
aforesaid allotment of equity shares, your Company will cease
to be a subsidiary of M&M.
Directors’ Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the
Operating Management, and after due enquiry, confirm that:
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed;
(ii) they have, in the selection of the accounting policies,
consulted the Statutory Auditors and these have been applied
consistently and reasonable and prudent judgments and
estimates have been made so as to give a true and fair view
of the state of affairs of the Company as at 31st March, 2006
and of the loss of the Company for the year ended on that
date;
(iii) proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act,1956 for
safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern
basis.
Directors
Mr. Sanjay Joglekar, Mr. Romesh Kaul and Mr. Nikhilesh Panchal
were appointed as Additional Directors of the Company at the
Board Meeting held on 18th August, 2005.
Mr. S. Durgashankar and Mr. Sanjay Joglekar resigned as
Directors of the Company at the Board Meeting held on 28th
April, 2006. The Board has placed on record its appreciation of
the services rendered by Mr. S. Durgashankar and Mr. Sanjay
Joglekar during their tenure as Directors of the Company.
748
With a view to broad-base the Board and embarking on the wealth
of experience and expertise of the Directors, 5 directors were
appointed as Additional Directors of the Company
subsequent to the year end viz. Mr. Anand G. Mahindra,
Mr. V. K. Chanana, Mr. Zhooben Bhiwandiwala, Mr. Fali Mama
and Mr. Mohit Burman.
All the aforesaid Additional Directors hold office up to the date
of the forthcoming Annual General Meeting. The Company has
received notices from members signifying their intention to
propose Mr. Anand G. Mahindra, Mr. V. K. Chanana, Mr. Romesh
Kaul, Mr. Nikhilesh Panchal, Mr. Zhooben Bhiwandiwala, Mr. Fali
Mama and Mr. Mohit Burman as candidates for the office of
Director of the Company.
Mr. Anand G. Mahindra was also appointed as Chairman of the
Company.
Mr. Hemant Luthra retires by rotation and, being eligible, offers
himself for re-appointment.
Audit Committee
Subsequent to the year end, the Audit Committee was
constituted by the Company and the terms of reference were
approved by the Board. The Committee comprises of Mr. V. K.
Chanana (Chairman of the Committee), Mr. Nikhilesh Panchal,
Mr. Mohit Burman and Mr. R. R. Krishnan. A Meeting of the
Audit Committee was held for the purpose of reviewing and
recommending the Balance Sheet and Profit & Loss Account for
the year to the Board of Directors of the Company.
Remuneration Committee
Subsequent to the year end, the Remuneration Committee was
constituted by the Company and the terms of reference were
laid down. The Committee comprises of Mr. Anand G. Mahindra,
Mr. Hemant Luthra, Mr. V. K. Chanana, Mr. Nikhilesh Panchal
and Mr. Mohit Burman.
Auditors
During the year under review, M/s. CVK & Associates, Chartered
Accountants, resigned as Statutory Auditors of the Company.
The Company wishes to place on record its sincere appreciation
of the services rendered by them during their tenure.
M/s. B. K. Khare & Co., Chartered Accountants were appointed
as Statutory Auditors by the Company at its Extra-Ordinary
General Meeting held on 7th March, 2006. The said Auditors retire
at the forthcoming Annual General Meeting and have given their
consent for re-appointment. The members will be required to
appoint Auditors for the current year and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
the above Auditors proposed to be re-appointed to the effect
that their re-appointment, if made, would be in conformity with
the limits specified in the said section.
Public Deposits and Loans/Advances
The Company has not accepted any deposits from the public or
its employees during the year under review.
The Company has not made any loans/advances which are
required to be disclosed in the Annual Accounts of the Company
 MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

pursuant to Clause 32 of the Listing Agreement with the parent under section 217(1)(e) of the Companies Act, 1956 read with
company, Mahindra & Mahindra Limited. the Companies (Disclosure of Particulars in the Report of Board
of Directors) Rules, 1988 are provided in the Annexure to this
Industrial Relations Report.
Industrial Relations remained satisfactory during the year under
review. A productivity linked wage agreement was settled with Particulars of Employees as required under section 217(2A)
Workmen’s union in April, 2006. of the Companies Act, 1956 and Rules framed thereunder
The Company had no employee who was in receipt of
Safety, Health and Environmental Performance remuneration of not less than Rs. 24,00,000 during the year ended
The Company has undertaken various initiatives on safety and 31st March, 2006 or not less than Rs. 2,00,000 per month during
health issues and has initiated various programmes to bring about any part of the said year.
general awareness among the employees on the same.
The requirements relating to various environmental legislations
For and on behalf of the Board
and environment protection have been duly complied by the
Company.
Anand G. Mahindra
Conservation of Energy and Technology Absorption and
Mumbai, 28th April, 2006. Chairman
Foreign Exchange Earnings and Outgo
The particulars relating to energy conservation, technology
absorption, foreign exchange earnings and outgo, as required

749
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

Annexure to the Directors’ Report 3. Light Diesel Oil

Quantity (KL.) 2209.47
PARTICULARS AS PER THE COMPANIES (DISCLOSURE OF
PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) Total Amount (Rs.in Lakhs) 597.21
RULES, 1988 AND FORMING PART OF THE DIRECTORS’ Average Rate per KL.(Rs.) 27030
REPORT FOR THE YEAR ENDED 31ST MARCH, 2006. 4. Consumption per unit of Production
A. Conservation of Energy Production (Tons) 23761
a) During the year, the Company has taken the following
Fuel Used Units
initiatives for conservation of energy:
Electricity KWH/Ton 1149
(i) Electrical Energy
1. Automatic power factor controller installed at 2000 Furnace Oil Litre/Ton 13.60
KW heater to get maximum power factor. Light Diesel Oil Litre/Ton 94.81
2. ‘Conserve Air’ installed on air compressor and uniform
B. Technology Absorption
air pressure of 6.4 Kg/ Sq. cm from variable 7.0 Kg /
Sq. cm. I. Research & Development (R&D):
3. Two Reciprocating Compressors are replaced by two New Leco Spectrometer installed for material analysis.
Screw Compressors of same capacity with lower Upgradation of Metallurgical laboratory as per latest
power consumption. technology.
4. 32 Dia induction heater coil for 600 KW heater and 90 ZNC-EDM machine installed by replacing old EDM die
Dia coil for 2000 KW heater rectified with ‘perfect sinking machine.
coupling’ for reduced power consumption.
Image analyzer added to the Metallurgical Laboratory.
5. The illumination in the plant is improved by fixing fiber
transparent sheet which resulted in energy saving on Control cooling conveyor installed for micro alloy
use of flood lights during day time. forging.
6. Energy conservation team is formed and various Full plant converted for oil base graphite lubrication
corrective measures have been worked out, actions system to water based graphite.
are in process. 1000 T trimming press for 5000 T pressline and 630 T
(ii) Fuel Energy trim press for 2500 T pressline installed.
1. Optimum use of Diesel Generating set. Implementing of H11/H14 dies for better die life.
2. One of the heat treatment furnaces of 1 Ton / Hour Adopting Plunger technology from UK for improving
capacity converted from LDO to Furnace Oil. the yield.
b) Additional investments and proposals, if any, being II. Benefits derived as a result of the above efforts:
implemented for reduction of consumption of energy: Immediate analysis of incoming and outgoing material.
It is an ongoing process to upgrade the existing Better quality of die is ensured.
equipments from time to time in line with the new
developing technologies. Better understanding of microstructure as well as its
material quality.
c) Impact of the measures taken / to be taken at (a) &
Bend free forgings.
(b) above for reduction of energy consumption and
consequent impact on the cost of production of III. Future plans of action:
goods: Understanding better technology like flashless forging
Not ascertainable. for better yield product and more die life.
d) Total energy consumption and energy consumption per Automation of Production process.
unit of production as per Form – A of the Annexure to Better product-mix.
the Rules in respect of Industries specified in the IV. Most of the R&D work is carried out in-house.
Schedule.
V. Technology absorption, adaptation and innovation:
Power & Fuel consumption 2005-06
Not applicable.
1. Electricity Purchased
C. Foreign Exchange Earnings and Outgo:
Quantity (KWH in Lakhs) 272.99
Total Foreign Exchange earned Rs. 443.54 lakhs
Total Amount (Rs.in Lakhs) 1016.02
Average Rate Per Unit (Rs.) 3.72 Total Foreign Exchange used Rs. 2093.09 lakhs
2. Furnace Oil* For and on behalf of the Board
Quantity (Lakhs of Litres) 1.12
Total Amount (Rs.in Lakhs) 22.27 Anand G. Mahindra
Average Rate per Litre (Rs.) 19.88 Chairman
* used for part of the year. Mumbai, 28th April, 2006.

750

Auditors’ Report to the Members of Mahindra Automotive Steels Private Limited
1. We have audited the attached Balance Sheet of Mahindra
Automotive Steels Private Limited as at 31st March, 2006,
and also the Profit and Loss Account and the Cash Flow
Statment for the year ended on that date, in which are
incorporated all assets and liabilities of the demerged
undertaking (Chakan unit) of Amforge Industries Limited
effective from 1st April, 2005 in terms of Scheme of
Arrangement approved by High Court of Bombay, annxed
thereto. These financial statements are the responsibility
of the Company’s managment. Our responsibility is to
express an opinion on these financial statements based
on our audit.
2. We conducted our audit in accordance with auditing
standards generally accepted in India. Those Standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order,
2003, issued by the Central Government of India, in terms
Section 227(4A) of the Companies Act, 1956, we enclose
in the Annexure a statement on the matters specified in
the paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above,
we report that :
a) We have obtained all the information and
explanations, which to the best of our knowledge and
belief were necessary for the purposes of our audit;
b) In our opinion, proper books of account as required
by law have been kept by the Company so far as
appears from our examination of the books and proper
returns adequate for the purposes of our audit have
been received form the branches not visited by us;
c) The Balance Sheet, Profit and Loss Account and Cash
Flow Statement dealt with by this report are in
agreement with the books of account;
d) In our opinion, the Balance Sheet, Profit and Loss
Account and Cash Flow Statement dealt with by this
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)
report comply with the Accounting Standards referred
to in sub-section (3C) of Section 211 of the Companies
Act, 1956;
e) On the basis of the written representations received
from the Directors as on 31st March, 2006 and taken
on record by the Board of Directors, we report that
none of the Directors is disqualified as on 31st March,
2006 from being appointed as Director in terms of
clause (g) of sub-section (1) of Section 274 of the
Companies Act, 1956 on the said date;
f) The Accounts of the company for the year ended
31st March, 2005 have been audited by other auditors
and balances on that date have been considered as
opening balances for the purpose of these accounts.
g) Without qualifying our opinion, we invite attention to
Note No. 3 of Schedule 16, in accordnace with which
goodwill arising from the demerger will be amortised
from the next financial year over a period of five years
as in the opinion of the management on which we
have placed reliance the future economic benefits
arising therefrom will accrue accordingly.
h) In our opinion, and to the best of our information and
according to the explanations given to us, the said
accounts, read together with the Company’s
Accounting Policies and the Notes thereto, give the
information required by the Companies Act, 1956 in
the manner so required and give a true and fair view
in conformity with the accounting principles generally
accepted in India:
i) in the case of the Balance Sheet, of the state
of affairs of the Company as on 31st March,
2006;
ii) in the case of the Profit and Loss Account, of
the Loss of the Company for the year ended on
that date; and
iii) in the case of Cash Flow Statement, of the cash
flows for the year ended on that date.
For B. K. Khare & Co.
Chartered Accountants
Padmini Khare Kaicker
Place : Mumbai Partner
Dated : 28th April, 2006 M. No. 44784
751
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)
Annexure to the Auditors’ Report
Referred to in paragraph 1 of our Report of even date:
i. a) The Company is maintaining proper records showing
full particulars including quantitative details and
situation of fixed assets.
b) All the assets have not been physically verified by
the management during the year but there is a regular
programme of verification, which in our opinion, is
reasonable having regard to the size of the Company
and the nature of its assets. As explained to us, no
material discrepancies were noticed on verification.
c) During the year, Company has not disposed of any
substantial/major part of fixed assets.
ii. a) The Mangement has conducted physical verification
of inventory at reasonable intervals. In respect of
inventories lying with third parties, confirmations have
been received in respect of major portion of such
inventories. In our opinion, the frequency of
verification is reasonable.
b) In our opinion and according to the information and
explanations given to us, the procedures of physical
verification of inventory followed by the management
were found reasonable and adequate in relation to
the size of the Company and the nature of its business.
c) In our opinion and according to the information and
explanations given to us and on the basis of our
examination of the records of inventory, the Company
is maintaining proper records of inventory. The
discrepancies noticed on physical verification of
inventory as compared to the book records were not
material and have been properly dealt with in the
books of account.
iii. According to the information and explanations given to us
and to the best of our knowledge, the Company has neither
granted nor taken any loans, whether secured or unsecured
to/from companies, firms or other parties covered in the
Register maintained under Section 301 of the Companies
Act, 1956.
iv. In our opinion and according to the information and
explanations given to us, there are adequate internal control
procedures commensurate with the size of the Company
and nature of its business with regard to the purchase of
inventory and fixed assets, and for the sale of goods and
services. During the course of our audit, no major weakness
has been noticed in the internal controls.
v. a) In our opinion and according to the information and
explanations given to us, the particulars of contracts
or arrangements referred to in section 301 of the Act
have been entered in the register required to be
maintained under that section.
752
b) In our opinion and according to the information and
explanations given to us, the transactions have been
made at prices which are prima facie reasonable
having regard to the prevailing market prices at the
relevant time.
vi. In our opinion and according to the information and
explanations given to us, the Company has not accepted
any deposits from the public within the meaning of Section
58A and 58AA and any other relevant provisions of the
Companies Act, 1956.
vii. In view of the fact that the share capital of the company as
of the beginning of the year prior to demerger was less
than Rs.50 lacs on facts the requirements of internal audit
is not applicable to the company for the current year.
viii. We have broadly reviewed the books of accounts
maintained by the Company relating to the manfuacture of
forgings pursuant to the rules made by the Central
Government for the maintenance of cost records under
Section 209 (1) (d) of the Companies Act, 1956 and are of
the opinion that prima facie the prescribed accounts and
records have been maintained. We have not, however,
made a detailed examination of the records with a view to
determine whether they are accurate or complete.
ix. a) According to the records of the Company and
information and explanations given to us, the
Company has been regular in depositing undisputed
statutory dues including Provident Fund, Investor
Education and Protection Fund, Employees’ State
Insurance, Income-Tax, Sales-Tax, Wealth-Tax,
Service-Tax, Customs Duty, Excise Duty, cess and
other material statutory dues with the appropriate
authorities during the year. According to information
and explanations given to us, there are no arrears of
outstanding statutory dues as mentioned above as
at 31st March 2006 for a period of more than six
months from the date they became payable.
b) As on 31st March 2006, according to the records of
the Company and information and explanations given
to us, following are particulars of disputed dues on
account of excise duty and cess that have not been
deposited.
Name Nature Amount Period to Forum
of Statute of dues in Rs.lakhs which where
amount pending
relates
Central Excise 24.00 2003-04 CESTAT,
Excise Duty Mumbai
Act

x. The Company has accumulated losses, as at the end of
the year, which are not more than 50% of it’s net worth as
on 31.3.06. The Company has not incurred any cash losses
in the current and the immediately preceding financial year.
xi. Based on our audit procedures and on the basis of
information and explanations given by the management,
we are of the opinion that the Company has not defaulted
in the repayment of dues to financial institutions
and banks.
xii. According to the information and explanations given to us,
the Company has not granted any loans and advances on
the basis of security by way of pledge of shares, debentures
and other securities.
xiii. In our opinion and according to the information and
explanations given to us, the nature of activities of the
Company does not attract any Special Statute applicable
to Chit Fund, Nidhi or Mutual Benefit Fund/Societies.
xiv. The company is not dealing or trading in shares, securities
or any other investments.
xv. According to the information and explanations given to us,
the Company has not given any guarantee for loans taken
by others from banks and financial institutions, except
against loans including interest thereon amounting to
Rs.919.23 lakhs for which the company has made adequate
provision in the books of account in view of the likley default
by the principal debtor.
xvi. As informed to us the term loans availed by the Company
were applied for the purposes for which the loans were
obtained.
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)
xvii. According to information and explanation given to us, on
an overall examination of the balance sheet and the Cash
Flow Statement of the company, we report that funds raised
on short term basis have, prima facie, not been used during
the year for long term investment.
xviii. The Company has not made any preferential allotment to
parties and companies covered under register maintained
under Section 301 of the Companies Act, 1956.
xix. According to the information and explanations given to us,
the company has not issued any debentures during the
year.
xx. The Company has not raised money by making any
public issues during the year and hence the question of
disclosure and verification of end use of such money does
not arise.
xxi. To the best of our knowledge and belief and according
to the information and explanations given to us, no fraud
on or by the Company was noticed or reported during
the year.
For B. K. Khare & Co.
Chartered Accountants
Padmini Khare Kaicker
Place : Mumbai Partner
Dated : 28th April, 2006 M. No. 44784
753
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

Balance Sheet as at 31st March, 2006

Rupees (Lakhs)
Schedule 2006 2005
I. SOURCES OF FUNDS:
SHAREHOLDERS’ FUND :
Share Capital ............................................................. 1 822.19 1.01
Share Capital Suspense ............................................ 1A 6,076.26 —
Share Application Money .......................................... 4,850.00 —
Reserve & Surplus .................................................... 2 7,178.81 —
18,927.26 1.01
LOAN FUNDS
Secured Loans .......................................................... 3 4,663.86 —
Unsecured Loans ...................................................... 4 2,496.08 —
7,159.94 —
TOTAL ....................................................................... 26,087.20 1.01
II. APPLICATION OF FUNDS:
FIXED ASSETS :
Gross Block ............................................................... 14,947.64 —
Less : Depreciation ................................................... 3,094.23 —
Net Block ................................................................... 11,853.41 —
Capital Work in Progress ........................................ 4,324.15 —
Total Fixed Assets ..................................................... 5 16,177.56 —
INVESTMENTS .......................................................... 6 275.73 —
NET CURRENT ASSETS
Current Assets .......................................................... 7 14,105.84 1.11
Loans & Advances ................................................... 8 1,045.92 0.27
15,151.76 1.38
Less : Current Liabilities & Provisions ................... 9 6,712.58 21.28
Net Current Assets .................................................. 8,439.18 (19.90)

Miscellaneous Expenditure .................................... 10 — 20.91

(To the extent not written off or adjusted)
Profit & Loss Account ............................................... 1,194.73 —
TOTAL 26,087.20 1.01
Notes to Accounts 16

As per our Report of even date For and on behalf of Board of Directors
For B K Khare & Company

} }
Chartered Accountants Manoj Jain Hemant Luthra V. K. Chanana
Chief Financial Officer
Padmini Khare Kaicker R. R. Krishnan Directors Romesh Kaul Directors
Partner Payal Vyas
Membership No. 44784 Company Secretary Nikhilesh Panchal Fali Mama
Mumbai, 28th April, 2006. Mumbai, 28th April, 2006.

754
 MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

Profit and Loss Account for the year ended 31st March, 2006
Rupees (Lakhs)
Schedule 2006 2005
I. INCOME
Gross Sales ............................................................... 23,160.43 —
Less: Excise duty on Sales ........................................ 3,268.44 —
Net Sales ................................................................... 19,891.99 —
Other Income ............................................................ 11 534.07 —
20,426.06 —

II. EXPENDITURE
Material Consumption ............................................... 12 12,561.76 —
Personnel Expenses .................................................. 13 828.11 —
Other Expenses ........................................................ 14 5,923.19 —
Interest & Finance Cost ............................................ 15 841.49 —
Depreciation .............................................................. 534.68 —
20,689.23 —
Profit / (Loss) before Contingency Provision & Tax (263.17) —
Less: Contingency provision (Note 9 of Sch 16) ....... 919.23 —
Profit / (Loss) before tax ............................................ (1,182.40) —
Less: Provision for tax
Fringe Benefit Tax ..................................................... 12.33 —
Loss for the year carried to Balance Sheet ............... (1,194.73) —

Earning per Share (Note 24 of Sch 16)

(Face value of Rs.10 per Share)
Basic .......................................................................... (19.37)
Diluted ....................................................................... (4.60)

Notes on Accounts: 16

As per our Report of even date For and on behalf of Board of Directors
For B K Khare & Company

} }
Chartered Accountants Manoj Jain Hemant Luthra V. K. Chanana
Chief Financial Officer
Padmini Khare Kaicker R. R. Krishnan Directors Romesh Kaul Directors
Partner Payal Vyas
Membership No. 44784 Company Secretary Nikhilesh Panchal Fali Mama
Mumbai, 28th April, 2006. Mumbai, 28th April, 2006.

755
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

Cash Flow Statement for the year ended 31st March 2006
2006
Rs. Lakhs
Profit /(Loss) before Tax ...................................................................................................... (1,182.40)
Add: Adjustment for
Depreciation / Amortisation ................................................................................................ 534.67
Bad Debts / Provision for doubtful debts / Write offs / Write back (Net) .......................... 386.67
Interest (Expenses) ............................................................................................................. 841.49
Leave encashment ............................................................................................................. 4.32
Gratuity ............................................................................................................................... 7.97
Contingency ........................................................................................................................ 919.23
Misc. Expenses Write Off .................................................................................................. 20.91
Sub Total 1,532.86
Less: Adjustments for
Interest / Dividend Income ................................................................................................. 377.93
Profit / Loss on Sale of investment ..................................................................................... 116.77
Sub-Total 494.70
Operating Profit before Working Capital changes 1,038.16
Adjustments for
Trade & Other receivables .................................................................................................. (386.84)
Inventories .......................................................................................................................... 646.47
Trade Payables .................................................................................................................... 966.94
Other Liabilities ................................................................................................................... 157.42
Loans & Advances .............................................................................................................. (468.26)
Cash generated from Operations 915.73
Direct Taxes Paid (97.00)
Net cash from Operating Activities 1,856.89
Cash flow from Investing Activities
Purchase of Fixed Assets ................................................................................................... (4,614.20)
Purchase of Investments .................................................................................................... (275.73)
Profit / Loss on sale of investment ..................................................................................... 116.77
Interest / Dividend received ................................................................................................ 377.93
Net Cash from Investing Activities (4,395.23)
Cash flow from Financing Activities
Repayment of Term Loans .................................................................................................. (294.75)
Issue of Share Capital ......................................................................................................... 12,849.99
Repayment of Working Capital Loan .................................................................................. (370.24)
Repayment of Unsecured Loans ........................................................................................ (240.64)
Interest Paid ........................................................................................................................ (841.49)
Net Cash From Financing Acitivities 11,102.87

Net (Decrease) / Increase in Cash & Cash equivalents .................................................. 8,564.54

Opening Cash / Bank Balances ........................................................................................ 152.27
Closing Cash / Bank Balances .......................................................................................... 8,716.80
Notes :
1. The Cash Flow has been prepared under the “Indirect method” as set out in Accounting Standard 3 on Cash Flow statement issued by Institute
of Chartered Accountants of India.
2. Cash and cash equivalent represents cash and bank balances only
3. In absence of operations in Previous Year, there were no significant cash flow movements.
4. Opening balances of demerged undertaking at Chakan Unit of Amforge Industries Ltd. taken over by the Company as per Scheme of Arrangement
approved by the Honourable High Court, Mumbai are considered for Cash Flow Statement.

As per our Report of even date For and on behalf of Board of Directors
For B K Khare & Company

} }
Chartered Accountants Manoj Jain Hemant Luthra V. K. Chanana
Chief Financial Officer
Padmini Khare Kaicker R. R. Krishnan Directors Romesh Kaul Directors
Partner Payal Vyas
Membership No. 44784 Company Secretary Nikhilesh Panchal Fali Mama
Mumbai, 28th April, 2006. Mumbai, 28th April, 2006.

756
 MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

Schedules annexed to and forming part of financial statements as at 31st March, 2006
Rupees (Lakhs)
2006 2005 Rupees (Lakhs)
SCHEDULE 1 2006 2005
SHARE CAPITAL: SCHEDULE 2
Authorised : RESERVE & SURPLUS
3,30,00,000 (PY 4,00,00,000) Equity Share Premium Account ........................ —
shares of Rs.10/- .................................... 3,300.00 4,000.00 Additions : During the year ..................... 7,178.81 —
1,48,20,206 (PY Nil) 4% Non Cumulative 4,594.26 — (Rs.87.42/- per share on 82,11,866 Equity
Redeemable convertible . Shares)
Preference shares of Rs.31
each 7,178.81 —

7,894.26 4,000.00
Issued, Subscribed and Paid up : SCHEDULE 3
82,21,936 Equity shares (PY 10,070) SECURED LOANS
of Rs.10/- each full paid Term Loan from Banks ........................... 2,200.96 —
up. ..... 822.19 1.01 Term Loans from Financial Insitutions .... 895.14 —
(Of the above, 82,21,926 (amount repayable within one year
shares are held by Rs.509.82 PY NIL)
Mahindra & Mahindra Ltd., Working Capital Loan from Banks .......... 1,567.76 —
the holding company) ..... (Note 5 of Sch. 16)
822.19 1.01
4,663.86 —

SCHEDULE 1A SCHEDULE 4
SHARE CAPITAL SUSPENSE UNSECURED LAONS
1,48,20,206 Equity shares of Rs.10 each 1,482.00 — Interest free sales tax loan 1,994.65 —
1,48,20,206 4% Preference shares Short term Loan from Banks 501.43 —
of Rs. 31 each ........................................ 4,594.26 —
2,496.08 —
To be issued to the shareholders of
Amforge Industries Ltd. in pursuance of
the Scheme of Arrangement of Demerger
approved by The High Court of Mumbai.
(Refer Note No. 2 of Sch. 16)
6,076.26 —

SCHEDULE 5
FIXED ASSETS:
(Rupees Lakhs)
Description Gross Block Depreciation Net Block
As at* Addition As at As at Addition As at As at As at
1st April, During the 31st March, 1st April, During the 31st March, 31st March, 1st April,
2005 year 2006 2005 year 2006 2006 2005
Goodwill 8,692.64 — 8,692.64 — — — 8,692.64 8,692.64
Freehold Land 51.74 — 51.74 — — — 51.74 51.74
Leasehold Land — — — — — — — —
Building 883.65 76.46 960.11 158.95 27.26 186.21 773.90 724.70
Plant & Machinery** 4,742.04 337.68 5,079.72 2,373.54 496.69 2,870.23 2,209.49 2,368.50
Fruniture & Fittings 92.17 13.20 105.37 23.90 7.70 31.60 73.77 68.27
Vehicles 11.62 46.44 58.06 3.16 3.03 6.19 51.87 8.46
Grand Total 14,473.86 473.78 14,947.64 2,559.55 534.68 3,094.23 11,853.41 11,914.31

Previous Year 0 0 0 0 0 0 0 0
CAPITAL WORK-IN-PROGRESS
Plant & Machinery 3,696.64
Building 312.53
Capital Advance 298.18
Finance Cost 16.80

Total CWIP 4,324.15 —

Total Fixed Assets 16,177.56 11,914.31
* Opening balances of demerged undertaking at Chakan Unit of Amforge IndustriesLtd. taken over by the Company as per Scheme of Arrangement approved by the
Honourable High Court, Mumbai.
** Include assets for Rs.64.32 acquired under hire purchase arrangement.

757
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

SCHEDULE 9 Rupees (Lakhs)

SCHEDULE 6 Rupees (Lakhs) CURRENT LIABILITIES & PROVISIONS 2006 2005
INVESTMENTS: 2006 2005 Current Liabilities
Long Term Investments Sundry Creditors (Note 21 of Sch 16) ..... 5,115.39 —
(Non Trade, unquoted, valued at cost) Interest accured but not due on loans .... 31.36 —
50 fully paid up shares of Rs.10 Each in 0.01 — Other Liabilities ...................................... 559.62 21.28
The Saraswat Co-operative Bank Ltd. 5,706.37 21.28
(Previous year Nil)
Provisions
Current Investments Gratuity .................................................. 64.96 —
(Non Trade,Unquoted, valued at lower of Leave Encashment ................................. 22.02 —
cost and fair value) Contingencies ........................................ 919.23 —
27,26,814 unites of the face value of Rs.10 275.72 —
each in Standard Chartered Mutual Fund 1,006.21 —
(Previous year: Nil) 6,712.58 21.28
Total ...... 275.73 —
Market Value of Current Investment
Rs.276.11 (Previous Year: Nil) SCHEDULE 10 Rupees (Lakhs)
Movement of Investments during the year: Units Purchased Units Sold MISCELLANEOUS EXPENDITURE 2006 2005
Preliminary Expenses ............................. — 0.28
HSBC Mutual Fund 11891863 11891863
Pre-operative expenses .......................... — 20.63
Grindlays Mutual
Fund 14113795 14113795 — 20.91
HDFC Mutual Fund 10737602 10737602
Kotak Mutual Fund 11095003 11095003
ICICI Mutual Fund 9017078 9017078
Tata Liquid Fund 81104 81104 SCHEDULE 11 Rupees (Lakhs)
Templetion Mutual OTHER INCOME 2006 2005
Fund 142735 142735 Interest on deposits (TDS Rs. 84.67 lakhs 377.93 —
Standard Chartered (P. Y. Rs. Nil))
Mutual Fund 9889925 7163111 Profit on sale of Short Term Investments 116.77 —
Miscellaneous Income ........................... 39.37 —

SCHEDULE 7 Rupees (Lakhs)

534.07 —
CURRENT ASSETS: 2006 2005
Inventories [Refer Note 1 (iv) of Sch.16]
(Valued at Cost or net realisable value
whichever is lower) SCHEDULE 12 Rupees (Lakhs)
Raw Material & Components ................. 1,814.29 — MATERIAL CONSUMPTION 2006 2005
Work-in-Progress .................................... 378.39 — Raw Material and Components Consumed 12,237.21 —
Stores & Spares ..................................... 189.11 — Increase/(Decrease) in Stocks
Die steel blocks ...................................... 100.72 — Opening stock - Work in Progress .......... 573.50 —
Scrap ...................................................... 2.94 — Scrap ...................................................... 14.43 —
Finished Goods ...................................... 528.72 — Finished Goods ...................................... 646.67 —
Dies (at cost less amortisation/write off) 604.93 —
1,234.60 —
3,619.10 — Closing stock - Work in Progress ........... 378.39 —
Sundry Debtors (Unsecured) Scrap ...................................................... 2.94 —
Outstanding over six months Finished Goods ...................................... 528.72 —
Considered Good ................................... 229.97 — 910.05 —
Considered Doubtful .............................. 178.05 —
(Increase)/Decrease in Stocks ................ 324.55 —
408.02 —
12,561.76 —
Other Debts
Considered Good ................................... 1,539.97 —
Less : Provision for doubtful debts ......... 178.05 —
1,769.94 —
Cash & Bank Balances SCHEDULE 13 Rupees (Lakhs)
Cash on hand ........................................ 3.89 0.02 PERSONNEL EXPENSES 2006 2005
Balances with Scheduled Banks Salaries, Wages, Bonus etc .................... 708.64 —
In Current account .................................. 128.16 1.09 Contribution to Provident & other funds . 37.06 —
In Fixed Deposit account ........................ 8,477.96 — Staff Welfare expenses .......................... 82.41 —
In Margin money Deposit account ......... 106.79 —
828.11 —
8,716.80 1.11
14,105.84 1.11 SCHEDULE 14 Rupees (Lakhs)
OTHER EXPENSES 2006 2005
Manufacturing Expenses
Processing Charges ............................... 351.34 —
SCHEDULE 8 Rupees (Lakhs) Excise Duty ............................................ 114.50 —
LOANS & ADVANCES 2006 2005 Power, Fuel & Oil ................................... 1,923.17 —
(Unsecured, considered good) Dies Consumed / Amortised .................. 1322.89 —
Advances recoverable in cash or kind or Stores and Spares consumed ................ 268.36 —
for value to be received. ......................... 263.67 — Other Manufacturing Expenses ............. 105.42 —
Balance with Excise/Custom/Sales Tax Repairs & Maintenance
autorities ................................................ 493.25 — Plant & Machinery .................................. 498.71
Deposits ................................................. 204.33 0.27 Buildings ................................................. 7.02
Advance taxes (Net of Provision) ........... 84.67 — Others .................................................... 19.93 525.66 —
1,045.92 0.27 Total Manufacturing Expenses ............... 4,611.34 —

758
 MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

SCHEDULE 14 (Contd...) Rupees (Lakhs) b) Cost of Dies includes cost of die steel and appropriate labour and
Administrative & Selling expenses 2006 2005 manufacturing overheads and cost of renewal. The cost of dies is
Rent, Rates & Taxes ............................... 15.87 — amortised over a period of two years.
Insurance ................................................ 15.04 —
Freight & Packing ................................... 250.00 — v) Foreign Currency Transactions
Printing & Stationery .............................. 10.24 — a) Transactions in foreign currencies are recorded at the exchange rate
Telephone Expenses .............................. 10.01 — prevailing on the date of the transaction. Realised gains and losses and
Travelling & Conveyance ........................ 35.68 — also exchange differences arising on translation at year end exchange
Cash Discounts ...................................... 30.74 — rates of current assets and current liabilities outstanding at the end of
Corporate Expenses reimbursed ............ 180.00 — the year are recognized in the Profit and Loss Account.
Demerger Expenses .............................. 198.25 —
Bad Debts Written Off ........................... 142.38 — b) In the case of monetary items incurred for the acquisition of fixed assets
Old Balances Written Off ....................... 66.24 — from a country outside India, the exchange differences are adjusted to
Provision for Doubtful debts ................... 178.05 — the cost of such assets.
Preliminary / Pre-operative Expenses
vi) Intangible Assets :
Written Off ............................................. 20.91 —
Other Administrative & Selling Expenses 158.44 — All Intangible Assets are initially measured at cost and amortised so as to
reflect the pattern in which the asset’s economic benefits are consumed.
Total Administrative & Selling Expenses 1,311.85 —
Total Other Expenses 5,923.19 — vii) Revenue recognition
Sales of products and services are recognized when the products are
despatched or services rendered. Sales are exclusive of sales tax and net
of sales return and trade discounts.
SCHEDULE 15 Rupees (Lakhs)
Interest & Finance Cost 2006 2005 viii) Export Benefits
On Fixed Period Loans ........................... 475.76 —
On Others .............................................. 365.73 — Export Incentives in respect of exports made are recognized at a point of
reasonable certainty of ultimate collection.
841.49 —
ix) Retirement Benefits
Retirement Benfits in respect of gratuity and leave encashable at retirement/
cessation are provided for based on valuations, as at the Balance Sheet
date, made by independent actuaries.
x) Taxation
SCHEDULE 16
Current tax is determined as the amount of tax payable in respect of taxable
Notes forming part of the Accounts for the Year ended 31st March, 2006
income for the year. Deferred tax is recognized, subject to consideration of
1. Significant Accounting Policies : prudence, on timing differences, being the difference between taxable
income and accounting income that originate in one period and are capable
(i) Method of Accounting of reversal in one or more subsequent periods. Deferred tax assets are
The financial statements are prepared under the historical cost convention recognized only to the extend that there is virtual certainly supported by
as a going concern and on accrual basis. convincing evidence that sufficient future tax income will be available against
which such deferred tax assets can be realised.
(ii) Fixed Assets and Depreciation
2. In accordance with the Scheme of Arrangement and Demerger which was
(a) All Fixed Assets are stated at cost of less accumulated depreciation. approved by the Hon’ble Bombay High Court on March 21, 2006, the business
Cost of acquisition is inclusive of purchase price, levies and any directly undertaking of Chakan unit of Amforge Industrieis Ltd., herein after referred to
attributable cost of bringing the assets to its working condition for the as demerged undertaking has been demerged and vested in the Company
intended use. In case of borrowed funds and liabilities in foreign with effect from the appointed date i.e. April 1, 2005. The Scheme has
currencies for the acquisition of fixed assets from a country outside accordingly been given effect to in these accounts.
India, the exchange differences are adjusted to the cost of such asset.
The demerged undertaking is engaged in carrying on the business of
(b) When an assets is scrapped or otherwise disposed off, the cost and manufacture and sale of forging components and related activities.
related depreciation are removed from the books of account and
resultant profit (including capital profit) or loss, if any, is reflected in the In terms of the scheme, all the assets and liabilities of the demerged undertaking
Profit and Loss Account. have been accounted for at their carrying amounts on April 1, 2005. As per the
Scheme and in consideration of the above, the Company will issue 1,48,20,206
(c) Free hold land is stated at cost. Cost of leasehold land is amortized equity shares of Rs.10 each aggregating to Rs.1,482.02 lakhs and 1,48,20,206
over the period of lease. 4%, Non Cumulative Redeemable Non Convertible Preference Shares of Rs.31
(d) Depreciation on assets is calculated on Straight Line Method at the each aggregating to Rs.4,594.26 lakhs. These shares will be issued in the ratio
rates and in the manner prescribed in Schedule XIV to the Companies of one equity share & one preference share for every one equity share held by
Act, 1956. the shareholders of Amforge Industries Ltd. Pending allotment of these shares
have been disclosed under the head “Share Capital Suspense” in the Balance
(iii) Investments Sheet.
Investments held as long-term investments are stated at cost comprising Consequent upon giving effect to the Scheme of Demerger, an amount of
of acquisition and incidential expenses less permanent diminution in value, Rs.8,692.65 lakhs arising as Goodwill, being the difference between the
if any. aggregate value of equity shares and preference shares to be alloted and net
Investments other than long-term investments are classified as current book value of assets and liabilities of the Chakan undertaking as on April 1,
investments and valued at cost or fair value whichever is less. 2005, has been disclosed under “Goodwill”.

(iv) Inventories In view of the aforesaid demerger with effect from April 1, 2005 the figures for
the current year are not comparable with those of the previous year.
Inventories are stated at cost or net reliazable value, whichever is lower.
3. Goodwill arising on demerger has not been amortised in the current financial
a) Cost is arrived at year as the economic benefits there from are expected to accure over a period
of five years from the next financial year.
i) In case of Raw Material & Die Steel on actual basis.
4. During the year, company has made rights issue of 82,11,866 equity shares
ii) In case of stores & spares on a weighted average method.
of face value of Rs.10 each at a premium of Rs.87.42 per equity shares
iii) In case of WIP & FGs it includes material cost, labour, where in the ratio of 816 equity shares for every one equity share held as on
appropriate, manufacturing overheads & excise duty. June 2, 2005.

759
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

5. Borrowings And securities 11. Capacities and Production (Previous Year Nil)
Name of the Lender Type of Loan Repayment Schedule Unit Installed Capacity Production
Industrial Investment Long Term Loan (LTL) 14 equal quarterly install- (3 shifts basis)
Bank of India (IIBI) ments till September, Forging M. T. 40992 23761
2009.
12. Turnover, Operating and Closing Stocks : (Previous Year Nil)
Industrial Investment Funded Interest Term 12 equal quarterly install-
Bank of India (IIBI) Loan (FITL) (0% coupon ments till March, 2010 (Value in Rs. Lakhs)
bonds) Unit Turnover Opening Stock Closing Stock
Life Insurance Corpn. Long Term Loan (LTL) 14 equal quarterly install- Qty. Value Qty. Value Qty. Value
of India (LIC) ments till September,
2009. Forging M. T. 23500 23160.43 436 604.40 697 528.72

Life Insurance Corpn. Funded Interest Term 14 equal quarterly install- 13. Raw Materials & Components Consumed (Previous Year Nil)
of India (LIC) Loan (FITL) ments till September, M. T. Rs. in Lkahs
2009. Steel 33995 12237.21
Life Insurance Corpn. Funded Interest Term Single bullet payment in 14. Value of Raw Material and Components Consumed (Previous Year Nil)
of India (LIC) Loan (FITL) December, 2010
Rs. in Lakhs %
State Bank of India (SBI) Working Capital Term 56 equal monthly install-
Loan (WCTL) ments from October, 2007 Indigenous 12230.07 100
Imported 7.14 Negligible
State Bank of India (SBI) Funded Interest Term 64 equal monthly install-
Total 12237.21 100
Loan (FITL) ments from April 2006.
15. Value of Stores & Spares Consumed
South Indian Bank Ltd. Term Loan (TL) Within one year.
(SIBL) Rs. in Lakhs %
All the term lenders have 1st charge on immovable assets & 2nd charge on Indigenous 257.15 95.82
movable assets as on 01-04-2005. Whereas Working Capital lenders have 1st Imported 11.21 4.18
charge on movable assets & 2nd charge on immovable assets of the company. Total 268.36 100
The Documentation for creation of security, in respect of some of the Borrowings
is pending. 16. Value of Imports (C. I. F.) (Previous Year Nil)
Sr. Particulars Rs. in Lakhs
6. Contingent Liabilities not provided for
i) Stores and Spares 11.21
(Rs. in Lakhs) ii) Capital Goods 2032.44
Particulars As at 31st iii) Raw Material 7.14
March 2006 Total 2050.79
i) Bank Guarantees outstanding in favour of the 161.08
Government and other parties. 17. Earnings in Foreign Exchange (Previous Year NIL) Rs. in Lakhs

ii) Letters of Credit issued by banks on behalf of the 1222.37 Exports (F.O. B. Value) 443.54
Company and outstanding 18. Expenditure in Foreign Currency (Previous Year Nil)
iii) a) Towards Excise Duty demands in respect of which 53.62 Sr. Particulars Rs. in Lakhs
the Company has preferred an appeal
i) Foreign Travel 8.51
b) Towards SCN issued by Excise Department 66.98 ii) Technical Consultancy 33.79
iv) Claims against the Company not acknowledged 12.07 Total 42.30
as debts.
19. Assets acquired on hire purchase - CNC Machines:
In addition to the above, the Company has arrived Bill Discounting Facilities
under Bill Marketing Scheme, during the year from its customers in the amount i) The total minimum lease payments as at March 31, 2006 is Rs.15.00 lakhs
of Rs.2341.23 lakhs. (Previous Year Rs. Nil) maturing within one year and

7. The company has imported capital goods under the Export Promotion Capital ii) Present value of of minimum lease payments as at March 31, 2006 is
Goods (EPCG) scheme, of the Government of India, at concessional rates of Rs.14.52 Lakhs (previous Year Rs. Nil)
duty on an understanding to fulfill quantified exports against which future 20. The company has recognised deferred tax assets only to the extent that there
obligation aggregates to USD 104.79 lakhs, over a period of next eight years. are timing differences the reversal of which will absorb the aforesaid deferred
Non-fulfillment of such future obligations, if any, entails options/rights to the tax assets. In line with Accounting Stanard - 22 issued by the Institute of
Government to confiscate capital goods under the said licenses and other Chartered Accountants of India, (Accounting for Taxes on Income), on principles
penalties under the above referred scheme. of prudence, the company has not recognised in the accounts, deferred tax
8. Estimated value of contracts remaining to be executed on capital account (net assets aggregating Rs.557.94 lakhs as at 31st March, 2006.
of advances) and not provided for Rs.1406.95 lakhs. The major components of the Deferred Tax Assets as on 31st March, 2006
9. The Company has furnished a guarantee in respect of certain liabilities amounting based on the tax effects of the timing differences, are as follows.
to Rs.919.23 lakhs for which a provision has been made in the books of account, Sr. Particulars Current Year
in view of the likely default by the principal debtor. (Rs. in lakhs)
10. Auditors’ Remuneration A. Timing Difference of Depreciation between Taxation & 375.66
Books of Accounts
(Rs. in lakhs)
B. Unabsorbed Depreciation 4.71
Auditors Remuneration Current Year Previous year C. Carried Forward Business Losses 370.95
i) Audit Fees 5.00 0.09 Total 375.66
ii) Tax Audit Fees 1.00 0.00 21. The Company has an outstanding of Rs.29,68,140 (Previous Year Nil) payable
iii) Certifications/Limited Review Reports 0.00 0.02 to the small scale and ancillary undertakings (SSI).

iv) Service Tax 0.00* 0.01 The list of SSI units, where outstanding is more than 30 days and amount of
outstanding is more than Rs.1.00 lakh is given below :
Total 6.61 0.12 Shreeram Engineers
* Exclusive of service tax Rs.0.61 Jaybee Steel Treaters Pvt. Ltd.

760
 MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

Shakun Auto Parts Pvt. Ltd. 39. Mahindra World City Developers Limited
Stride Engineers 40. Mahindra-BT Investment Company (Mauritius) Limited
United Engineering Works (with effect from 9th May, 2005)
S. R. Engineers 41. NBS International Limited
J. K. Engineers 42. Plexion Technologies (UK) Ltd.
(with effect from 15th February, 2006)
Laxmi Engineering
43. Plexion Technologies GmbH, Germany
Radiant Industries (with effect from 15th February, 2006)
Vijaya Engg. Company 44. Plexion Technologies Incorporated, USA
Forebros Tools (P) Ltd. (with effect from 15th February, 2006)
Sant Kruppa Engineering & Cutting Works 45. Plexion Technologies (India) Private Limited
(with effect from 15th February 2006)
22. In terms of Accounting Standard - 17 (Segment Reporting) issued by the Institute
of Chartered Accountants of India, the Company operates in only one segment 46. Stokes Forgings Dudley Limited
i.e. Forgings. (with effect from 3rd January, 2006)
47. Stokes Forgings Limited (with effect from 3rd January, 2006)
23. Related Party Disclosures as required by Accounting Standard – 18 issued by
the Institute of Chartered Accountants of India, are given below : 48. Stokes Group Limited (with effect from 3rd January, 2006)
49. Tech Mahindra (R&D Services) Limited
a) Enterprise controlling the Company:
(with effect from 28th November, 2005)
Mahindra & Mahindra Ltd.
50. Tech Mahindra (Americas) Inc.
b) Are under common control including fellow subsidiaries:
51. Tech Mahindra (GmbH)
Sr. Name of subsidiary company 52. Tech Mahindra (Singapore) Pte. Limited
1. Automart India Limited 53. Tech Mahindra Limited
2. Tech Mahindra (R&D) Services Pvt. Ltd. 54. Tech Mahindra (Thailand) Limited
(with effect from 28th November, 2005) (with effect from 21st February, 2006)
3. Tech Mahindra (R&D) Services Inc. 55. Tech Mahindra Foundation (with effect from 22nd March, 2006)
(with effect from 28th November, 2005) c) Transaction with related parties
4. Bristlecone Limited, Cayman islands
Sr. Nature of Transactions Enterprises Companies under
5. Bristlecone (Singapore) Pte. Limited controlling the common control
6. Bristlecone (UK) Limited Company including Fellow
7. Bristlecone GmBH subsidiaries
8. Bristlecone Inc. 1. Sales
9. Bristlecone India Limited Goods 3654.80 —
Scrap — 1327.90
10. Jensand Limited (3rd January, 2006)
2. Purchases
11. Mahindra & Mahindra Financial Services Limited Raw Material — 5762.80
12. Mahindra & Mahindra South Africa (Proprietary) Limited Capital goods 1782.04 —
13. Mahindra (China) Tractor Company Limited Services 58.86 —
(with effect from 13th May, 2005) 3. Payment of Rent — 22.00
14. Mahindra Acres Consulting Engineers Limited 4. Advance for expenses received — 0.50
15. Mahindra Ashtech Limited 5. Intercorporate Deposit accepted — 600.00
16. Mahindra Holdings & Finance Ltd. and refunded
6. Interest on ICD paid — 6.51
17. Mahindra Engineering & Chemical Products Ltd.
7. Interest on delayed payments 17.14 —
18. Mahindra Engineering Design & Development Co. Ltd.
8. Outstandings
19. Mahindra Europe s.r.l. (with effect from 30th May, 2005) Receivables 661.51 —
20. Mahindra Gesco Developers Ltd. Payables 38.50 1298.24
21. Mahindra Gujarat Tractor Limited 9. Advance for expenses payable — 21.65
22. Mahindra Holidays & Resorts (India) Limited 24. Earnings per Share
23. Mahindra Holidays & Resorts USA, Inc. Profit/(Loss) as per the P&L Account (Rs. in lakhs) (1194.73)
24. Mahindra Infrastructure Developers Limited Weighed Average Number of equity shares
25. Mahindra Insurance Brokers Limited outstanding during the year 61,68,970
Potential ordinary (equity) Shares 2,59,67,620
26. Mahindra International Limited
(with effect from 1st November, 2005). Basic Earnings per share (Rs.) (19.37)
Diluted Earnings per share (Rs.) (4.60)
27. Mahindra Intertrade Limited
28. Mahindra Logisoft Business Solutions Limited 25. Balances of Sundry Debtors and Creditors are subject to confirmation.
29. Mahindra Middleeast Electrical Steel Service Centre (FZC) 26. In the opinion of the Board, current assets, loans and advances have a value
30. Mahindra Overseas Investment Company (Mauritius) Limited not less than the amount at which they are stated.
31. Mahindra Realty Limited (with effect from 21st September, 2005) 27. Figures for the previous year have been regrouped and rearranged wherever
32. Mahindra Renault Private Limited necessary and are not comparable with those of the current year.
(with effect from 5th August, 2005)
For and on behalf of Board of Directors
33. Mahindra Sar Transmission Pvt. Ltd.
Hemant Luthra V. K. Channa
34.
35.
36.
Mahindra Shubhlabh Services Limited
Mahindra Steel Service Centre Limited
Mahindra Ugine Steel Company Limited
(with effect from 21st June, 2005)
R. R. Krishnan
Nikhilesh Panchal
} Directors
Dir ectors Romesh Kaul
Fali Mama
} Directors
Dir ectors

37. Mahindra USA ,Inc Payal Vyas Manoj Jain

Company Secretary Chief Financial Officer
38. Mahindra World City (Jaipur) Limited
(with effect from 26th August, 2005) Mumbai, 28 th April, 2006.

761
MAHINDRA AUTOMOTIVE STEELS LIMITED
(Formerly known as Mahindra Automotive Steels Private Limited)

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE:

(Information pursuant to Part IV of Schedule VI to the Company’s Act, 1956)

I. Registration Details:
Registration No. 1 1 - 1 2 1 2 8 5 of 1999 State Code 1 1
Balance Sheet Date 3 1 - 0 3 - 2 0 0 6

II. Capital Raised During the Year (Amount in Rupees Lakhs)

Public Issue Right Issue
N I L 8 2 1
Bonus Issue Private Placement
N I L N I L
III. Position of Mobilisation and Deployment of Funds (Amount in Rupees Lakhs)
Total Liabilities Total Assets
3 2 8 0 0 3 2 8 0 0
Sources of Funds
Paid-up Capital Reserves and Surplus
8 2 2 7 1 7 9
Share Application Money Share Capital suspense
4 8 5 0 6 0 7 6
Secured Loans Unsecured Loans
4 6 6 4 2 4 9 6
Application of Funds
Net Fixed Assets Capital WIP
1 1 8 5 3 4 3 2 4
Investments Net Current Assets
2 7 6 8 4 3 9
Accumulated Losses
1 1 9 5

IV. Performance of the Company (Amount in Rupees Lakhs)

Turnover/Income Total Expenditure
2 0 4 2 6 2 0 6 8 9
Net Loss Earning Per Share In Rupees
1 1 9 5 Baisc Diluted

Dividend (Rs. 19.37) (Rs. 4.60)

N I L

V. Generic Name of Principal Products/Services of the Company (As per Monetary Terms)
Item Code No. (ITC Code) 7 3 2 6 9 0
Product Description F O R G I N G S

For and on behalf of Board of Directors

Mr. Hemant Luthra

Payal Vyas
Company Secretary
Manoj Jain
Chief Financial Officer
Mr. R. R. Krishnan
Mr. Nikhilesh Panchal
Mr. V. K. Chanana
Mr. Romesh Kaul
Mr. Fali Mama
Mumbai, 28th April, 2006.
} Directors

762
 MAHINDRA INTERNATIONAL LIMITED

Directors’ Report to the Shareholders

Your Directors present the Twelfth Annual Report together with the audited accounts of your Company for the year ended
31st March, 2006.

FINANCIAL RESULTS
(Rs.)
2006
Income ......................................................................................................................... ............. 77,86,22,991
Profit before depreciation/amortization, interest & taxation ..................................................... 2,29,02,428
Less: Depreciation/Amortization ............................................................................................... 2,36,80,950
(Loss) before interest and taxation ........................................................................................... (7,78,522)
Less: Interest - others ........................................................................................................ ....... 65,205
(Loss) before tax for the year ................................................................................................. ... (8,43,727)
Less : Provision for taxation for the year .................................................................................. —
Provision for deferred taxation for the year ......................................................................... 20,95,000
Provision for fringe benefit tax ............................................................................................ 3,60,000
Provision for prior year tax................................................................................................... —
(Loss) for the year after taxation ............................................................................................. .. (32,98,727)
Balance carried to Balance Sheet ............................................................................................. (32,98,727)

Review of Operations
Pursuant to the Business Transfer Agreement dated 1 November,
2005, entered into with Mahindra & Mahindra Limited, your
Company has acquired the right to carry on the Light Commercial
Vehicle (LCV) business along with the Intellectual Property Rights
and Congeries of Rights in the LCV business. The aggregate
consideration of Rs.48,40,00,000 for the aforesaid business
acquisition comprised of:
Amount (Rs.)
Value of Technical Know – how /
Intellectual Property Rights
Non Compete Payment
Payment of Congeries of Rights
Total
The Consideration was discharged by issue of 4,84,00,000 equity
shares of Rs.10 each at par in the Company to Mahindra &
Mahindra Limited.
This was the first year of operations and your Company
commenced activity on November 1, 2005. During the period
under review, your Company sold 2008 vehicles and achieved
gross total income of Rs. 89,32,62,210. Profit for the period
before Depreciation, Amortization and Tax was Rs. 2,28,37,223.
Loss after Tax for the period was Rs. 32,98,727.
Changes in shareholding
As a progressive enterprise, your Company underwent two major
structural changes during the year. During 1st November, 2005 to
8th December, 2005, your Company was a wholly owned subsidiary
st of Mahindra & Mahindra Limited (M&M), which had initially
acquired 10,000 equity shares in the Company.
The holding company brought in joint venture partners and a
Joint Venture Agreement was entered into by the Company
with the holding company and the overseas companies, viz.
International Truck And Engine Corporation, International
Truck And Engine Mauritius Holding Ltd. (IMH) and International
Truck And Engine Corporation, Cayman Islands, Holding
Company.
9,30,00,000
In pursuance of the said Joint Venture Agreement, the Company
10,50,00,000 had allotted 19,65,600 and 4,84,00,000 equity shares of Rs.10
28,60,00,000 each to M&M and IMH respectively at a premium of Rs.10 per
48,40,00,000 share. Thus, M&M presently holds 51% of the enlarged paid-up
equity share capital and IMH the balance 49%. The Company
became a Public Company from 9th January, 2006, and it continues
to be a subsidiary of M&M.
CORPORATE GOVERNANCE
Constitution of the Board
The Board presently has 10 Directors comprising 5 Directors,
representing Mahindra & Mahindra Ltd. and 5 Directors
representing International Truck And Engine Mauritius Holding
Ltd., the joint venture partners.
The Directors have vast experience in matters related to
engineering, manufacturing, finance and general corporate
management, which will be of immense benefit to the Company.

763
MAHINDRA INTERNATIONAL LIMITED
Board Meetings
The Board Meetings are conducted at least once every quarter to
review the performance, the financial status of the Company, the
Statutory Compliance Certificates and matters relating to the
operations of the Company. Eleven Board Meetings were held
during the last financial year. These were well attended.
Directors
Mr. Arun Pande and Mr. Bahram Vakil were appointed as Additional
Directors at the Meeting of the Board of Directors of the Company
held on 2nd August, 2005. Mr. Deepak T. Kapur, Mr. John P.
Lamoureux and Mr. Bijesh Thakker were appointed as Additional
Directors at the Meeting of the Board of Directors of the Company
held on 9th December, 2005. Mr. Anand G. Mahindra, Mr.Bharat
Doshi, Mr. Archie L. Massicotte and Mr. Terry M. Endsley were
appointed as Additional Directors at the Meeting of the Board of
Directors of the Company held on 11th January, 2006.
Mr. P. N. Shah, Mr. Bahram Vakil and Mr. Bijesh Thakker resigned
as Directors of the Company effective 11th January, 2006. The
Board has placed on record its deep appreciation of the valuable
services rendered by Mr. P. N. Shah, Mr.Bahram Vakil and Mr.
Bijesh Thakker during their tenure as Director of the Company.
Dr. Pawan Kumar Goenka, Mr. Hemant Luthra and Mr. Waldey
Sanchez were appointed as Directors at the Meeting of the Board
of Directors of the Company held on 11th January, 2006, in the
vacancy caused by the resignation of Mr. P. N. Shah, Mr. Bahram
Vakil and Mr.Bijesh Thakker , respectively.
Mr. Mahindra, Mr. Pande, Mr. Doshi, Dr. Goenka, Mr. Luthra,
Mr.Kapur, Mr.Lamoureux, Mr. Massicotte, Mr. Endsley and Mr.
Sanchez hold office up to the date of the forthcoming Annual
General Meeting of the Company.
The Company has received notices from a member signifying his
intention to propose Mr. Mahindra, Mr. Pande, Mr. Doshi, Dr.
Goenka, Mr. Luthra, Mr.Kapur, Mr. Lamoureux, Mr. Massicotte,
Mr. Endsley and Mr. Sanchez as Directors of the Company at the
forthcoming Annual General Meeting
Mr. Arun Pande was appointed as a Managing Director of the
Company for a period of 5 Years effective from 1st November,
2005, without any remuneration, by the Board of Directors at its
Meeting held on 9th November, 2005. Pursuant to the approval of
the Remuneration Committee, the Board of Directors at its
Meeting held on 11th January, 2006, approved the remuneration
payable to Mr. Arun Pande w.e.f. 1st January, 2006 for a period of
3 years i.e. upto 31st December, 2008, subject to the requisite
approvals of the Members and the Central Government. Pursuant
to the approval of the Members obtained at the Extraordinary
General Meeting held on 6th February, 2006, the Company has
made an application to the Central Government for its approval for
the payment of remuneration to Mr. Arun Pande as a Managing
Director of the Company.
Audit Committee
The Audit Committee presently comprises Mr. Bharat Doshi
(Chairman of the Committee), Dr. Pawan Kumar Goenka, Mr.John
P. Lamoureux and Mr. Terry M. Endsley.
764
The Audit Committee met once during the year under review.
Remuneration Committee
The Remuneration Committee presently comprises Mr. Anand
G. Mahindra (Chairman), Dr. Pawan Kumar Goenka, Mr. Deepak
Kapur and Mr.Archie Massicotte. The Remuneration Committee
met once during the year under review.
Directors’ Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956, your
Directors, based on the representation received from the Operating
Management, and after due enquiry, confirm that:
(i) in the preparation of annual accounts, the applicable
accounting standards have been followed;
(ii) they have, in the selection of the accounting policies,
consulted the Statutory Auditors and these have been
applied consistently and reasonable and prudent judgements
and estimates have been made so as to give a true and fair
view of the state of affairs of the Company as at 31st March,
2006 and of the loss of the Company for the year ended on
that date;
(iii) proper and sufficient care has been taken for the maintenance
of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the
assets of the Company and for preventing and detecting
fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern
basis.
Auditors
Messrs V. R. Velhankar & Co., Chartered Accountants, tendered
their resignation as Statutory Auditors of the Company. Messrs
A. F. Ferguson & Co., Chartered Accountants, were appointed as
Auditors of the Company at the Extraordinary General Meeting
held on 9th November, 2005, in their place.
Messrs A. F. Ferguson & Co., Chartered Accountants, retire as
Auditors of the Company at the forthcoming Annual General
Meeting and have given their consent for re-appointment. The
shareholders will be required to elect Auditors for the current year
and fix their remuneration.
As required under the provisions of section 224 of the Companies
Act, 1956, the Company has obtained a written certificate from
Messrs A. F. Ferguson & Co., Chartered Accountants, to the
effect that their appointment, if made, would be in conformity
with the limits specified in the said section.
Public Deposits and Loans / Advances
The Company has not accepted deposits from the public or its
employees during the year under review.
The Company has not made any loans/advances, which are
required to be disclosed in the annual accounts of the Company
pursuant to Clause 32 of the Listing Agreement with the parent
company, Mahindra & Mahindra Ltd.
 MAHINDRA INTERNATIONAL LIMITED

Conservation of Energy, Technology Absorption and Foreign Company’s employees who were in receipt of remuneration of
Exchange Earnings and Outgo not less than Rs.24,00,000 during the year ended 31st March,
2006 or not less than Rs.2,00,000 per month during any part of
In view of the nature of activities which are being carried on by the
the said year is given in the Annexure to this Report.
Company, Rules 2A and 2B of the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988
concerning conservation of energy and technology absorption
respectively are not applicable to the Company.
The information on foreign exchange earnings and outgo is For and on behalf of the Board
furnished in the Notes on Accounts.
Particulars of Employes as required under section 217(2A) of
the Companies Act, 1956 and the rules made thereunder
Anand G. Mahindra
As required under section 217(2A) of the Companies Act, 1956 Chairman
and Rules thereunder, a statement containing particulars of the Mumbai, 29th May, 2006

Annexure to the Directors’ Report

Additional Information as required under section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of
Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended 31st March, 2006

Name of the Designation/ Gross Qualifications Expe- Age Date of Last Employment
Employee Nature of duties Remuneration rience (years) Commence- held (Organisation)
(subject to tax) (years) ment of and Designation)
(Rs.) Employment

Mr. Gregory Steen* Vice President - 6,38,896 Bachelors 20 40 05.01.2006 International Truck
Engineering and Masters in And Engine
Aerospace Engineering, Corporation,
Texas A&M University Senior Program
Manager

* Part of the year

NOTE :
1. Nature of employment is permanent, subject to termination on two month's notice on either side.
2. The above employee is not related to any Director of the Company.
3. No employee holds by himself/herself or alongwith his/her spouse and dependent children 2% or more of equity shares of the
Company.
4. Terms and conditions of employment are as per Company’s Rules.
5. Gross remuneration received as shown in the statement includes Salary, Bonus, House Rent Allowance or value of perquisites
for accommodation, car perquisites value/allowances applicable, employer's contribution to Provident Fund and Superannuation
Scheme including group insurance premium, leave travel facility, reimbursement of medical expenses and all allowances/perquisites
and terminal benifits as applicable.

For and on behalf of the Board

Anand G. Mahindra
Chairman
Mumbai, 29th May, 2006

765
MAHINDRA INTERNATIONAL LIMITED
Report of the Auditors to the Shareholders
1. We have audited the attached Balance Sheet of Mahindra
International Limited [formerly Mahindra International Private
Limited] as at 31st March, 2006 and also the Profit and Loss
Account and the Cash Flow Statement for the year ended on
that date annexed thereto. These financial statements are
the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor's Report) Order, 2003
issued by the Central Government of India in terms of Sub-
section (4A) of Section 227 of the Companies Act, 1956, we
enclose in the Annexure a statement on the matters specified
in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in
paragraph 3 above, we report that:
(i) we have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
(ii) in our opinion, proper books of account as required by
law have been kept by the Company so far as appears
from our examination of those books;
766
(iii) the Balance Sheet, Profit and Loss Account, and Cash
Flow Statement dealt with by this report are in agreement
with the books of account;
(iv) in our opinion, the Balance Sheet, Profit and Loss Account
and Cash Flow Statement dealt with by this report
comply with the Accounting Standards referred to
in Sub-section (3C) of Section 211 of the Companies
Act, 1956;
(v) on the basis of the written representations received
from the directors, as on 31st March, 2006, and taken on
record by the Board of Directors, we report that none of
the directors is disqualified as on 31st March, 2006 from
being appointed as a director in terms of Clause (g)
of Sub-section (1) of Section 274 of the Companies
Act, 1956;
(vi) in our opinion and to the best of our information and
according to the explanations given to us, the said
accounts give the information required by the Companies
Act, 1956, in the manner so required and give a true and
fair view in conformity with the accounting principles
generally accepted in India:
(a) in the case of the Balance Sheet, of the state of
affairs of the Company as at 31st March, 2006;
(b) in the case of Profit and Loss Account, of the loss for
the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash
flows for the year ended on that date.
For A.F. Ferguson & Co.
Chartered Accountants
R.A. Banga
Partner
Mumbai : 8th May, 2006. Membership No.: 37915

Annexure to the Auditors’ Report of Mahindra International Limited for the year ended
31st March, 2006. (Referred to in paragraph (3) thereof)
(i) (a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of fixed assets.
(b) In our opinion, the fixed assets have been physically
verified by management at reasonable intervals,
having regard to the size of the Company and nature
of the assets. No material discrepancies between the
book records and the physical inventory were noticed.
(c) During the year, in our opinion, a substantial part of
fixed assets has not been disposed off by the
Company.
(ii) (a) The inventory of the Company lying with third parties,
has been confirmed by third parties. In our opinion,
the frequency of verification is reasonable.
(b) In our opinion and according to the information and
explanations given to us, the procedure of physical
verification of inventory followed by the management
were found reasonable and adequate in relation to
the size of the Company and the nature of its
business.
(c) On the basis of our examination of records of
inventory, in our opinion, the Company has
maintained proper records of inventory. No material
discrepancies were noticed between physical stocks
and the book records of the company.
(iii) The Company has neither granted nor taken any loans,
secured or unsecured, to/from companies, firms or other
parties listed in the Register maintained under Section
301 of the Companies Act, 1956, and accordingly
paragraph 4(iii) (b), (c), (d), (e), (f) and (g) of the said Order,
are not applicable.
(iv) In our opinion and according to the information and
explanations given to us, having regard to the explanation
that many of the items are of a special nature and their
prices cannot be compared with alternative quotations,
there is an adequate internal control system
commensurate with the size of the Company and the
nature of its business for the purchase of inventory and
fixed assets and for the sale of goods and services.
Further, on the basis of our examination and according to
the information and explanations given to us, we have
neither come across nor have we been informed of any
instance of major weaknesses in the aforesaid internal
control system.
(v) (a) In our opinion and according to the information and
explanations given to us, the particulars of contracts
or arrangements referred to in Section 301 of the
Companies Act, 1956 have been entered in the
register required to be maintained under that Section.
MAHINDRA INTERNATIONAL LIMITED
(b) In our opinion and according to the information and
explanations given to us, having regard to the
comments in (iv) above, the transactions made in
pursuance of such contracts or arrangements in
respect of any such party during the year, have been
made at prices, which are reasonable having regard
to the prevailing market price at the relevant time.
(vi) In our opinion and according to the information and
explanations given to us, as the Company has not
accepted deposits from the public, paragraph 4(vi) of
the said Order is not applicable.
(vii) As the Company is neither a listed company nor a
company having a paid-up capital and reserves exceeding
Rs. 50 lacs as at the commencement of the financial year
nor having an average annual turnover exceeding Rs. 5
crore for a period of three consecutive financial years
immediately preceding the current year, paragraph 4(vii)
of the said Order concerning internal audit system is not
applicable.
(viii) We have broadly reviewed the books of account
maintained by the Company relating to the manufacture
of motor vehicles pursuant to the rules made by the
Central Government for the maintenance of cost records
under Section 209(1)(d) of the Companies Act, and we
are of the opinion that, prima facie , the prescribed
accounts and records have been maintained and are being
made up. We have not, however, made a detailed
examination of the records with a view of determining
whether they are accurate or complete.
(ix) (a) According to the information and explanations given
to us, and according to the books and records as
produced and examined by us, in our opinion, the
undisputed statutory dues including provident fund,
investor education and protection fund, employees’
state insurance, income-tax, sales-tax, wealth tax,
service tax, customs duty, cess and other material
statutory dues as applicable have been regularly
deposited by the Company during the year with the
appropriate authorities.
(b) According to the information and explanations given
to us, there are no dues on account of income-tax,
sales-tax, wealth tax, service tax, customs duty, excise
duty and cess which have not been deposited on
account of any dispute.
(x) The company's accumulated losses at the end of the
financial year are less than fifty percent of its net worth.
The Company has not incurred cash losses during the
current financial year and in the immediately preceding
financial year.
767
MAHINDRA INTERNATIONAL LIMITED
(xi) According to the information and explanations given to
us, the company had no dues from any financial institution
or bank or debenture holder during the year and
accordingly paragraph 4(xi) of the said Order is not
applicable.
(xii) According to the information and explanations given to
us, the Company has not granted any loans and advances
on the basis of security by way of pledge of shares,
debentures and other securities.
(xiii) The provisions of any special statute as specified under
Clause (xiii) of the said Order are not applicable to the
Company.
(xiv) In our opinion and according to the information and
explanations given to us, the Company is not a dealer or
trader in securities.
(xv) According to the information and explanations given to
us, the Company has not given any guarantee for loans
taken by others from banks or financial institutions.
(xvi) In our opinion and according to the information and
explanations given to us, the Company has not taken any
term loans, paragraph 4(xvi) of the said Order is not
applicable.
(xvii) Based on the information and explanations given to
768
us and on an overall examination of the Balance Sheet
of the Company, in our opinion, there are no funds raised
on a short term basis which have been used for long term
investment.
(xviii) The Company has not made any preferential allotment of
shares to parties and companies covered in the Register
maintained under Section 301 of the Companies Act, 1956
during the year.
(xix) In our opinion and according to the information and
explanations given to us, as the company has no
debentures outstanding at any time during the year,
paragraph 4(xix) of the said Order is not applicable to the
Company.
(xx) The Company has not raised any money by public issue
during the year.
(xxi) According to the information and explanations given to
us, during the year, no fraud on or by the Company has
been noticed or reported.
For A.F. Ferguson & Co.
Chartered Accountants
R.A. Banga
Partner
Mumbai : 8th May, 2006. Membership No.: 37915
 MAHINDRA INTERNATIONAL LIMITED

Balance Sheet as at 31st March, 2006

2006 2005
Schedule Rupees Rupees Rupees
I. SOURCES OF FUNDS:
SHAREHOLDERS’ FUNDS:
Capital ................................................................................. I 987,756,000 100,000
Reserves and Surplus ......................................................... II 498,865,961 —

1,486,621,961 100,000
DEFERRED TAX LIABILITY (Net) ........................................ 2,095,000 —
Total ............. 1,488,716,961 100,000

II. APPLICATION OF FUNDS:

FIXED ASSETS ................................................................... III 471,976,951 —
CAPITAL WORK-IN-PROGRESS
(Comprises of Capital Advances) ........................................ 8,052,728 —
480,029,679 —
INVESTMENTS .................................................................. IV 20,000,000 —

NET CURRENT ASSETS:

Current Assets, Loans and Advances ................................. V 1,674,058,968 25,537
Less: Current Liabilities and Provisions .............................. VI 685,371,686 1,653
988,687,282 23,884
MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT
WRITTEN OFF OR ADJUSTED) .......................................... — 76,116
Total ............. 1,488,716,961 100,000

NOTES ON ACCOUNTS .................................................... XI

per our report attached for and on behalf of the Board

Mr. Anand Mahindra Chairman

For A.F. Ferguson & Co. Mr. Arun Pande Managing Director
Chartered Accountants

}
Mr. Archie Massicotte
R.A. Banga Mr. Bharat Doshi
Partner
Mr. Deepak T. Kapur
Mr. Hemant Luthra
Directors
Mr. John P. Lamoureux
Dr. Pawan Kumar Goenka
Mr. Terry Endsley
Mr. Waldey Sanchez

Mumbai, 8th May, 2006 Chicago, 3rd May, 2006

769
MAHINDRA INTERNATIONAL LIMITED

Profit and Loss Account for the year ended 31st March, 2006

2006 2005
Schedule Rupees Rupees

SALES — Traded and Manufactured Goods ..................................................... 835,886,094 —

Less: Excise Duty on Sales ................................................................................ 114,639,219 —
Net Sales ........................................................................................................... 721,246,875
—
Income from Operations and Other Income ...................................................... VII 57,376,116 —
Net Income ....................................................................................................... 778,622,991 —

EXPENDITURE:
Raw Materials and Finished Products ................................................................ VIII 587,125,091 —
Excise Duty ........................................................................................................ 26,311,178 —
Personnel ........................................................................................................... IX 14,397,638 —
Depreciation/Amortisation ................................................................................. 23,680,950 —
Other Expenses ................................................................................................. X 130,677,923 —
782,192,780 —
Less: Cost of Manufactured Products Capitalised ............................................. 2,726,062 —
779,466,718 —
(Loss) Before Taxation ....................................................................................... (843,727) —
Less: Deferred Tax ............................................................................................. 2,095,000 —
Fringe Benefit Tax .............................................................................................. 360,000 —
(Loss) for the year .............................................................................................. (3,298,727) —
Balance of Profit for earlier years ....................................................................... — —
Balance for 2005–2006 and earlier years carried to Balance Sheet ................... (3,298,727) —

EARNINGS PER SHARE:

(Face Value Rs. 10/- per share) (Rupees)
Basic .......................................................................................................... (0.10) —
Diluted ........................................................................................................ (0.10) —

NOTES ON ACCOUNTS .................................................................................... XI

per our report attached for and on behalf of the Board

Mr. Anand Mahindra Chairman
Mr. Arun Pande Managing Director
For A.F. Ferguson & Co.

}
Chartered Accountants Mr. Archie Massicotte
Mr. Bharat Doshi
R.A. Banga
Partner Mr. Deepak T. Kapur
Mr. Hemant Luthra
Directors
Mr. John P. Lamoureux
Dr. Pawan Kumar Goenka
Mr. Terry Endsley
Mr. Waldey Sanchez

Mumbai, 8th May, 2006 Chicago, 3rd May, 2006

770
 MAHINDRA INTERNATIONAL LIMITED

Cash Flow Statement for the year ended 31st March, 2006
2006 2006 2005
Rupees Rupees Rupees
A. CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss Before Taxation ................................................... (843,727) —
Adjustments for:
Depreciation/Amortisation .................................................. 23,680,950 —
Investment Income ............................................................. (15,627,610) —
Profit on Sale of Investments (Net) ..................................... (2,621,624) —
5,431,716 —
Operating Profit before Working Capital Changes 4,587,989 —
Changes in:
Trade and Other Receivables .............................................. (335,481,394) —
Inventories .......................................................................... (467,024,454) —
Trade and Other Payables ................................................... 683,898,811 33
(118,607,037) 33
Miscellaneous Expenditure and Share Issue Expenses
incurred during the year ...................................................... (1,415,196) (2,653)
Cash Generated from Operation ......................................... (115,434,244) (2,620)
Income Taxes Paid (Net of Refunds) .................................. (2,118,374) —
NET CASH FROM OPERATING ACTIVITIES .................... (117,552,618) (2,620)
B. CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets ................................................... (11,998,563) —
Payments for Intangible Assets .......................................... (6,240,846) —
Purchase of Investments .................................................... (510,000,000) —
Sale of Investments ............................................................ 492,621,624 —
Interest Received ................................................................ 7,835,899 —
NET CASH USED IN INVESTING ACTIVITIES ................. (27,781,886) —
C. CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from the Issue of Share Capital (including Share
Premium) ............................................................................. 1,007,312,000 —
NET CASH (USED IN)/FROM FINANCING ACTIVITIES ...... 1,007,312,000 —
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 861,977,496 (2,620)
CASH AND CASH EQUIVALENTS:
Opening Balance ................................................................. 25,537 28,157
Closing Balance ................................................................... 862,003,033 25,537
Notes to the Cash Flow Statement for the year ended 31st March, 2006
Pursuant to the Business Transfer Agreement dated 1st November, 2005 entered into by the Company with Mahindra & Mahindra Ltd., the Company has acquired the right
to carry on the Light Commercial Vehicle (LCV) business along with the Intellectual Property Rights and Congeries of Rights in the LCV business.
The aggregate consideration of Rs. 484,000,000 for the aforesaid Business Transfer comprised of:
Rupees
Value of Technical Know-how/Intellectual Property Rights : 93,000,000
Non-Compete Payment : 105,000,000
Payment for Congeries of Rights : 286,000,000
The consideration is discharged by issue of 4,84,00,000 Equity Shares of Rs. 10.00 each at par.
This being a non-cash transaction does not form part of the cash flow.

per our report attached for and on behalf of the Board

Mr. Anand Mahindra Chairman
Mr. Arun Pande Managing Director
Mr. Archie Massicotte

}
For A.F. Ferguson & Co. Mr. Bharat Doshi
Chartered Accountants Mr. Deepak T. Kapur
Mr. Hemant Luthra
R.A. Banga Mr. John P. Lamoureux Directors
Partner Dr. Pawan Kumar Goenka
Mr. Terry Endsley
Mr. Waldey Sanchez
Mumbai, 8th May, 2006 Chicago, 3rd May, 2006

771
MAHINDRA INTERNATIONAL LIMITED

Schedules forming part of the Balance Sheet as at 31st March, 2006

SCHEDULE II 2005 Additions Deductions 2006
SCHEDULE I 2006 2005 RESERVES AND SURPLUS Rupees Rupees Rupees Rupees
SHARE CAPITAL [Note 2] Rupees Rupees 1. Securities Premium
Authorised: Account [Note 3] ........ — 503,656,000 1,491,312 502,164,688
2. Balance for the year
10,00,00,000 Equity Shares of Rs. 10/- each
2005–2006 as per
(2005: 5,00,000 Equity Shares of Rs. 10/-
Profit and Loss
each) .............................................................. 1,000,000,000 5,000,000
Account ...................... (3,298,727)
Total ..... 1,000,000,000 5,000,000
Total ..... 498,865,961
Issued and Subscribed:
9,87,75,600 Equity Shares of Rs. 10/- each fully
paid-up [ Of the above 4,84,00,000 Equity Shares
issued for consideration other than cash] [2005:
10,000 Equity Shares of Rs. 10/- each fully
paid-up] .......................................................... 987,756,000 100,000
Total ..... 987,756,000 100,000

SCHEDULE III
FIXED ASSETS
Description of Assets Cost as at Additions Deductions Cost/ Depreciation/ Depreciation/ Depreciation Depreciation/ Net Balance Net Balance
31st March, during during Professional Amortisation Amortisation on Amortisation as at 31st as at 31st
2005 the year the year Valuation to 31st for Deduction to 31st March, 2006 March, 2005
at cost/ as at 31st March, 2005 2005–2006 March, 2006
Professional March, 2006
Valuation
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
Technical Know-how ................................ — 93,000,000 — 93,000,000 — 6,458,333 — 6,458,333 86,541,667 —
Congeries of Rights .................................. — 286,000,000 — 286,000,000 — 11,916,667 — 11,916,667 274,083,333 —
Non-Compete Fees .................................. — 107,325,000 — 107,325,000 — 4,471,875 — 4,471,875 102,853,125 —
Software Expenditure ............................... — 3,915,846 — 3,915,846 — 510,804 — 510,804 3,405,042 —
Plant and Machinery ................................. — 5,417,055 — 5,417,055 — 323,271 — 323,271 5,093,784 —
Total ......................................................... — 495,657,901 — 495,657,901 — 23,680,950 — 23,680,950 471,976,951 —
Previous Year ........................................... — — — — — — — — — —

SCHEDULE IV 2006 2005 SCHEDULE V 2006 2005

INVESTMENTS Rupees Rupees CURRENT ASSETS, LOANS Rupees Rupees Rupees
(At Cost, unless otherwise specified) AND ADVANCES
(A) Current Assets:
Face Value
Per Unit Stock-in-Trade and Raw Materials:
Numbers Rupees (i) Finished Products pro-
duced and purchased
Units: for sales ..................... 168,213,536 —
Unquoted: (Non-trade) (ii) Raw Materials and
B o u g h t - o u t -
1,018,786.422 10 UTI Money Market Fund — Components .............. 298,810,918 —
Growth Plan 20,000,000 — 467,024,454 —
Total 20,000,000 — Sundry Debtors:
Unsecured unless otherwise stated:
Outstanding over six
months ............................ — —
The following are the movements in Units during the year: Other Debts: Considered
Good ............................... 270,829,754 —
Acquired Sold
Nos. Rs. Nos. Cash and Bank Balances:
Cash, Cheques and
1. Prudential ICICI Institutional Stamps on Hand .............. 44,956,337 —
Liquid Plan —Super Institutional Balances with Scheduled Banks:
Growth ..................................... 6,971,539.492 70,000,000 6,971,539.492 (i) On Current Account .. 81,323,036 25,537
(ii) On Fixed Deposit
2. Franklin Templeton Mutual Fund Account ..................... 735,723,660 —
— Institutional Plan — 817,046,696 25,537
Growth ..................................... 194,422.258 210,000,000 194,422.258 (B) Loans and Advances:
Advances recoverable in cash
3. UTI Liquid Cash Plan Institutional or kind or for value to be received:
Considered Good ............ 72,443,353 —
— Growth Option ..................... 132,838.348 150,000,000 132,838.348 Payments towards Income-
tax .................................. 1,758,374 —
4. UTI Money Market Fund —
Total ..... 1,674,058,968 25,537
Growth Plan ............................. 4,076,391.706 80,000,000 3,057,605.284

772
 MAHINDRA INTERNATIONAL LIMITED

SCHEDULE VI 2006 2006 2005 SCHEDULE XI

CURRENT LIABILITIES Rupees Rupees Rupees Note on Accounts for the year ended 31st March, 2006
AND PROVISIONS:*
(A) Current Liabilities: 1. Significant Accounting Policies:
Acceptances ......................... 8,722,229 — (A) Fixed Assets:
Sundry Creditors:
(i) Total Outstanding Dues of (a) Fixed Assets are carried at cost less depreciation.
Small Scale Industrial (b) Depreciation on assets is calculated on Straight Line Method over their
Undertakings ................... — — estimated useful lives or, where ever specified, lives based on the rates
(ii) Total Outstanding Dues of in the manner prescribed in Schedule XIV to the Companies Act, 1956,
Creditors other than Small whichever is lower, except for vehicles capitalised for Research and
Scale Industrial Undertakings 671,094,957 1,653 Development where the rate of 33.33% of cost is applied.
671,094,957 1,653
(B) Provisions: (B) Intangible Assets:
Provision: Others (Note 5) ..... 5,554,500 — All Intangible Assets are initially measured at cost and amortised so as to
Total ..... 685,371,686 1,653 reflect the pattern in which the asset’s economic benefits are consumed.
* There are no amounts due and outstanding to be credited to Investor Education (a) Technical Know-how:
and Protection Fund
The expenditure incurred is amortised equally over the estimated period
or benefit, not exceeding seventy-two months commencing from the
SCHEDULE VII 2006 2005
INCOME FROM OPERATION AND Rupees Rupees month of purchase of such Know-how.
OTHER INCOME : (b) Non-Complete:
Income from Services Rendered .................... 21,763,832 —
Exclusivity Fee [Note 6(a)] .............................. 16,000,000 — Non-Complete payments are amortised equally over the estimated
Interest on Fixed Deposit with Bank [Note 6(b)] 15,627,610 — period of benefit, not exceeding 120 months from the month of incurrence.
Profit on Sale of Current Investments (Net) ... 2,621,624 —
Other Income ................................................. 1,363,050 — (c) Congeries of Rights:
Total ..... 57,376,116 — Payment of Congeries of Rights is amortised equally over the estimated
period of benefit, not exceeding 120 months from the month of incurrence.
SCHEDULE VIII 2006 2005 (d) Software Expenditure:
RAW MATERIALS AND FINISHED PRODUCTS: Rupees Rupees
The Expenditure incurred is amortised over thirty-six months equally
(A) Decrease/(Increase) in Stock of Finished Goods:
Opening Stock of Finished Products — — commencing from the month in which the expenditure is incurred.
Less: Closing Stock of (C) Investments:
Finished Products ................. 168,213,536 —
All long term investments are valued at cost or lower, if written down.
Decrease/(Increase) in Stock .. (168,213,536) —
Current investments are valued at the lower of cost and fair value, determined
(B) Consumption of Raw
Materials and Bought-out by category of investment.
Components: (D) Inventories:
Opening Stock ...................... — —
Add: Purchase [including Inventories are stated at cost or net realisable value, whichever is lower.
outside processing charges Rs.
138,140,554] (2005: (E) Foreign Exchange Transactions:
Rs. Nil)] ................................. 1,040,191,120 — All foreign current monetary items are translated at the relevant rates of
Less: Closing Stock ............... 298,810,918 741,380,202 — exchange prevailing at the year end.
(C) Purchases of Bought-out In the case of monetary items (other than those for acquisition of fixed assets
Components for Sale ............ 13,958,425 — from a country outside India) the exchange differences are recognised in the
Total ..... 587,125,091 — Profit and Loss Account.
In the case of exchange difference arising on acquisition of fixed
SCHEDULE IX 2006 2005 assets (tangible and intangible) from a country outside India, the exchange
PERSONNEL: Rupees Rupees differences are adjusted to the cost of such assets.
Salaries, Wages, Bonus, etc. ........ 13,839,191 —
Contribution to Provident and other (F) Revenue Recognition:
Funds ........................................... 443,044 —
Welfare ......................................... 115,403 — Sales of products and services are recognised when the products are
shipped or services rendered.
Total ..... 14,397,638 —
Dividend from investments are recognised in the Profit and Loss Account
SCHEDULE X 2006 2005 when the right to receive payment is established.
OTHER EXPENSES: Rupees Rupees
Manufacturing Charges ................ 71,411,648 — (G) Retirement Benefits:
Rent including Lease Rentals ....... 630,000 — Retirement Benefits in respect of gratuity and leave encashment at retirement/
Rates and Taxes ........................... 29,250 — cessation are provided for based on arithmetical calculation.
Insurance ...................................... 146,939 —
Repairs and Maintenance others .. 136,561 — (H) Product Warranty:
Selling and Distribution Expenses .. 7,877,868 — In respect of Warranties given by the Company on sale of certain products,
Advertisement and Sales the estimated costs of these warranties are accrued at the time of sale. The
Promotion Expenses .................... 6,168,447 —
estimates for accounting of warranties are reviewed and revisions are made
Travelling Expenses ..................... 2,021,922 —
Freight Outward ........................... 14,049,241 — as required.
Miscellaneous Expenses .............. 16,941,503 — (I) Taxes on Income:
Research and Development
Expenses ...................................... 4,131,723 — Current tax is determined as the amount of tax payable in respect of taxable
Preliminary Expenses written off . 7,067,616 — income for the year. Deferred tax is recognised, subject to consideration of
Interest — Others ........................ 65,205 — prudence, on timing differences, being the difference between taxable
Total ..... 130,677,923 — income and accounting income that originate in one period and are capable
of reversal in one or more subsequent periods. Deferred tax assets arising

773
MAHINDRA INTERNATIONAL LIMITED

on account of unabsorbed depreciation or carry forward of tax losses are
recognised only to the extent that there is virtual certainty supported by
convincing evidence that sufficient future tax income will be available
against which such deferred tax assets can be realised.
(J) Segment Reporting:
The Company has single reportable segment, namely production and selling
of automotive vehicles and related parts.
6. (a) The Company shall exclusively provide services to International Truck &
Engine Corporation under the Engineering Services Agreement and
Components Sourcing Services Agreement. In consideration for the same
the Company shall receive a one time compensation of Rs. 8,000,000 under
each of the above agreements.
(b) Interest on Fixed Deposits includes tax deducted at source Rs. 1,758,374
(2005: Nil).

(K) Leases: 7. Miscellaneous Expenses include amounts paid/payable to Auditors (inclusive of

service tax where applicable) Rs. 224,480 (2005: Rs. 1,653).
The Company’s significant leasing arrangements are in respect of operating
leases for premises (residential). The leasing arrangement, which is not non- 8. The component of Deferred Tax liability and assets as at 31st March, 2006, are
cancellable, (range between 11 months and three years), and is usually as under:
renewable by mutual consent on agreed terms. The lease rentals payable are
charged as rent including lease rentals. 2006 2005
Rupees Rupees
2. Share Capital: Deferred Tax Liability:
(a) Pursuant to the Business Transfer Agreement dated 1st November, 2005, (i) On Fiscal Allowance of Fixed Assets 13,189,000 —
entered into by the Company with Mahindra & Mahindra Ltd., the Company Deferred Tax Asset:
has acquired the right to carry on the Light Commercial Vehicle (LCV)
business along with the intellectual property rights and Congeries of Rights (i) Unabsorbed Depreciation* 7,730,000 * —
in the LCV business. The aggregate consideration of Rs. 484,000,000 for the (ii) Others 3,364,000 —
aforesaid business transfer comprised of: 11,094,000 —
Value of Technical Know-how/
Intellectual Property Rights: Rs. 93,000,000 Deferred Tax Liability (Net) 2,095,000 —

Non-Compete Payment: Rs. 105,000,000 * Considered to the extent that there are compensating timing differences, the
Payment for Congeries of Rights: Rs. 286,000,000 reversal of which will result in sufficient income against which this can be realised.

The consideration is discharged by issue of 4,84,00,000 Equity Shares of Rs. 9. Earning Per Share: 2006 2005
10.00 each at par. Rupees Rupees
Accordingly, Issued and Subscribed Capital include 4,84,00,000 Ordinary Amount used as the numerator —
Shares allotted as fully paid-up without payment having been received in Balance of profit for the 2005–2006 (3,298,727) —
cash. Weighted average number of
(b) 5,03,75,600 Equity Shares are held by Mahindra & Mahindra Ltd., the Equity Shares used in computing
Holding Company (2005: Nil). Earning Per Share 31,647,569 10,000
Basic and Diluted Earning Per Share
3. Reserves and Surplus: (Rs.) (Face value of Rs. 10 per share) (0.10) —
2006 2005
Rupees Rupees 10. Related Party Transactions:

Movements during the year: (a) Related parties where control exist:

(i) Securities Premium Account (i) Holding Company : Mahindra & Mahindra Limited (also a
venturer in respect of which Mahindra
Additions, arising out of issue of shares 503,656,000 — International Limited is a joint venture)
Applied, in accordance with Section 78 (b) Other parties with whom transactions have taken place during the year:
of the Companies Act, 1956, towards:
(i) Companies having : International Truck & Engine
Writing-off of share issue expenses 1,491,312 — Significant Influence Corporation (a venturer in respect of
502,164,688 — which Mahindra International Limited is
a joint venture).
4. The identification of suppliers as Small Scale Industrial Undertaking (SSIs) has (ii) Fellow Subsidiaries:
been done on the basis of the information to the extent provided by the suppliers
to the Company. As on 31st March, 2006, there were no outstanding dues of Sl. Name of the Company Sl. Name of the Company
SSIs. No. No.
1. Mahindra Intertrade Limited 2. Bristlecone India Limited
5. Provision — Other includes provision for warranty Rs. 5,554,500. This relates to
warranty provision made in respect of sale of certain products, the estimated 3. Mahindra Ugine Steel
costs of which is accrued at the time of sale. The products are generally covered Company Limited
under a free warranty period ranging upto 4 years.
(iii) Associates:
The movement is above provisions is as follows: 2006
Rupees Sl. Name of the Company
Provisions: Warranty No.
Balance as at 1st April, 2005 Nil 1. Mahindra Sona Limited
Add: Provision made during the year 5,554,500
(iv) Key Management Personnel:
Less: Utilisation during the year Nil
Balance as at 31st March, 2006 5,554,500 Managing Director Mr. Arun Pande

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 MAHINDRA INTERNATIONAL LIMITED

(c) The related party transactions are as under:

Rupees
Sl. Nature of Holding Companies Fellow Associates Key
No. Transactions Company having Subsidiaries Management
Significant Personnel
Influence
1. Purchase:
Goods ................................................................................................... 499,215,426 — 21,045,783 6,482,900 —
(—) (—) (—) (—) (—)
Intangibles ............................................................................................ 484,000,000 — 3,915,846 — —
(—) (—) (—) (—) (—)
Capital Work-in-Process ....................................................................... 5,844,430 — — — —
(—) (—) (—) (—) (—)
Services ............................................................................................... 79,546,611 — — — —
(—) (—) (—) (—) (—)
2. Sales:
Goods ................................................................................................... 74,554,916 — — — —
(—) (—) (—) (—) (—)
Services ............................................................................................... — 21,763,832 — — —
(—) (—) (—) (—) (—)
3. Finance:
Inter Corporate Deposits received ....................................................... 12,500,000 — — — —
(—) (—) (—) (—) (—)
Inter Corporate Deposits repaid ........................................................... 12,500,000 — — — —
(—) (—) (—) (—) (—)
Interest Paid ......................................................................................... 65,205 — — — —
(—) (—) (—) (—) (—)
4. Other Transactions:
Reimbursements made to Parties ........................................................ 17,193,195 — — — —
(—) (—) (—) (—) (—)
Reimbursements received from Parties — 1,758,000 — — —
(—) (—) (—) (—) (—)
Other Income ....................................................................................... — — — — —
(—) (—) (—) (—) (—)
Other Expenses ................................................................................... — — — — —
(—) (—) (—) (—) (—)
Exclusivity Fees Received .................................................................... — 16,000,000 — — —
(—) (—) (—) (—) (—)
5. Outstandings:
Payable ................................................................................................. 276,692,133 — 3,126,559 1,198,454 —
(—) (—) (—) (—) (—)
Receivable ............................................................................................ — 29,911,200 — — —
(—) (—) (—) (—) (—)
6. Managerial Remuneration ........................................................................ — — — — —
(—) (—) (—) (—) (—)
Previous year’s figures are given in brackets.
The Significant related party transactions are as under
Sr. Nature of Transactions Parent & Companies having Amount Fellow Amount Associates Amount
No. Significant Influence Subsidiaries
1. Purchase — Goods/Services Mahindra & Mahindra Ltd. 578,762,037 Mahindra Ugine Steel 5,020,427 Mahindra Sona Ltd. 6,482,900
(—) Company Ltd. (—) (—)
Mahindra Intertrade Ltd. 16,025,356
(—)
2. Purchase of Intangible/ Mahindra & Mahindra Ltd. 489,844,430 Bristlecone India Ltd. 3,915,846
Capital Work-in-Process (—) (—)
3. Sale — Goods/Services International Truck and 21,763,832
Engine Corporation (—)
Mahindra & Mahindra Ltd. 74,554,916
(—)
4. Exclusively Fee International Truck & Engine 16,000,000
Corporation (—)

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MAHINDRA INTERNATIONAL LIMITED

13. Additional information pursuant to the provisions of paragraphs 3(i)(a) and (ii), 4C and 4D of Part II of Schedule VI to the Companies Act, 1956 — See Schedule XII. Previous
year’s figures are indicated below the current year’s figures.
14. During the current year the status of the Company has changed from Private Limited Company to Public Limited. Accordingly, the name of the Company has changed from
Mahindra International Private Limited to Mahindra International Limited.
15. The year end foreign currency exposure that have not been hedged by derivative instruments or otherwise are given below:
Amounts receivable in foreign currency on account of the following:
Rs. $
Services rendered 29,911,200 686,173

16. The net difference in foreign exchange credited to Profit and Loss Account is Rs. 401,488.
17. Additional information pursuant to the provisions of Part IV of Schedule VI to the Companies Act, 1956 — See Schedule XII.
18. Previous year’s figures have been regrouped/restated wherever necessary.

SCHEDULE XII
Additional information pursuant to the Provisions of Paragraphs 3(i)(a) and (ii) , 4C and 4D of Part II of Schedule VI to the Companies Act, 1956.
(A) PARTICULARS IN RESPECT OF GOODS MANUFACTURED:

Sl. Class of Goods Units of Actual Opening Stock Closing Stock Sales
No. Measure- Production
ment [Note (ii)] Quantity Value Quantity Value Quantity Value
Rupees Rupees Rupees
1. a. On Road Automobiles having four or more wheels
such as light, medium and heavy commercial
vehicles, covered under sub heading (5) of
Heading (7) of First Schedule [Note (i)
below] Nos. 2,415 — — 402 168,213,536 2008 817,482,147
(—) (—) (—) (—) (—) (—) (—)
2. Manufactured and Purchased Parts and
Accessories for Sale — — — — — — — 1,668,791
(—) (—) (—) (—) (—) (—) (—)
Total 819,150,938
(—)
Notes:
(i) The Company utilises the services of a third party manufacturer for assembly of the Light Commercial Vehicles. Consequently, the production disclosed above represents
vehicles manufactured by a third party manufacturer.
(ii) Actual production includes production for captive consumption.
(B) PARTICULARS IN RESPECT OF GOODS TRADED:

Sl. Class of Goods Units of Purchases Opening Stock Closing Stock Sales
No. Measurement Quantity Value Quantity Value Quantity Value Quantity Value
Rupees Rupees Rupees Rupees

1. Bought-out Spares for Resale 228,089 13,958,425 — — — — 228,089 16,735,156

(—) (—) (—) (—) (—) (—) (—) (—)
Total 13,958,425 — — 16,735,156
(—) (—) (—) (—)

(C) PARTICULARS OF RAW MATERIALS AND COMPONENTS CONSUMED:

Sl. Description Unit of Quantity Value

No. Measurement Rupees
1. Steel Items (Sheets, Tubes, etc.) .......................................................................................................... Nos. 72,614 25,952,048
(—) (—)
2. Paints .................................................................................................................................................... Litres 18,607 3,026,099
(—) (—)
3. Tyres and Tubes .................................................................................................................................... Nos. 31,461 * 44,537,118*
(—) (—)
4. Components other than Tyres and Tubes (including processing charges) [Note (ii)] ............................. 521,007,250
(—)
5. Material handling and transportation charges, etc. incurred on the above items not separately allocable 8,717,133
(—)
6. Processing Charges .............................................................................................................................. 138,140,554
* Includes items used for other than production, amounts not ascertained. (—)
TOTAL 741,380,202
(—)

Notes:
(i) The consumption in value has been ascertained on the basis of purchases less closing stock and includes the adjustment of excesses and shortages as ascertained on
physical count and write-off of obsolete and unserviceable raw materials and components.
(ii) The consumption in value shown against item 4 is a balancing figure based on the total consumption shown in the Profit and Loss Account.

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 MAHINDRA INTERNATIONAL LIMITED

(D) EARNINGS IN FOREIGN EXCHANGE:

2006 2005
Rupees Rupees
1. Commission on Components Sourcing
Services ................................................... 18,693,621 —
2. Exclusivity Fees ....................................... 16,000,000 —
3. Programme Management Fee for
Engineering Services ................................ 3,070,211 —
4. Others ...................................................... 1,758,000 —
Total ..... 39,521,832 —

(E) VALUE OF IMPORTED AND INDIGENOUS CONSUMPTION:

Raw Material and Components
Rupees %
1. Imported .................................................. — —
(—) (—)
2. Indigenously obtained .............................. 741,380,202 100%
(—) (—)
Total 741,380,202 100%
(—) (—)

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MAHINDRA INTERNATIONAL LIMITED

SCHEDULE XIII

ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956

Balance Sheet Abstract & Company's General Business Profile:

I. Registration Details:
Registration No. 1 1 – 7 9 0 9 8 State Code 1 1
Balance Sheet Date 3 1 0 3 2 0 0 6
Date Month Year

II. Capital Raised during the year (Amount in Rs. Thousands):

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement

N I L 9 8 7 6 5 6

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands):

Total Liabilities including Shareholders' Funds Total Assets

2 1 7 4 0 8 9 2 1 7 4 0 8 9
Sources of Funds:

Paid-up Capital Reserves and Surplus

9 8 7 7 5 6 4 9 8 8 6 6

Secured Loans Unsecured Loans

N I L N I L

Deferred Tax Liability (Net)

2 0 9 5

Application of Funds:

Net Fixed Assets

4 8 0 0 3 0

Investments Net Current Assets

2 0 0 0 0 9 8 8 6 8 7

Miscellaneous Expenditure Accumulated Losses

N I L N I L

IV. Performance of the Company (Amount in Rs. Thousands):

Turnover (Sales and Other Income) Total Expenditure
7 7 8 6 2 3 7 7 9 4 6 7

+ – Profit/(Loss) before Tax + – Profit/(Loss) after Tax

ü ( 8 4 4 ) ✓ ( 3 2 9 9 )

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 MAHINDRA INTERNATIONAL LIMITED

Earning Per Share in Rupees I Dividend Rate %

Basic Diluted
( 0 . 1 0 ) ( 0 . 1 0 ) N I L

V. Generic Name of Principal Product/Services of the Company (as per Monetary Terms):

Item Code No. (ITC Code) 8 7 0 2

Product Description MOTOR VEHICLES FOR THE TRANSPORT OF MORE THAN SIX PERSONS

EXCLUDING THE DRIVER

Item Code No. (ITC Code) 8 7 0 4

Product Description OTHER MOTOR VEHICLES PRINCIPALLY DESIGNED

FOR THE TRANSPORT

Icomputed on the basis of the weighted average number of shares outstanding during the year.

Signature to Schedule I & XIII

per our report attached for and on behalf of the Board

Mr. Anand Mahindra Chairman

For A.F. Ferguson & Co. Mr. Arun Pande Managing Director
Chartered Accountants

}
Mr. Archie Massicotte
R.A. Banga Mr. Bharat Doshi
Partner
Mr. Deepak T. Kapur
Mr. Hemant Luthra
Directors
Mr. John P. Lamoureux
Dr. Pawan Kumar Goenka
Mr. Terry Endsley
Mr. Waldey Sanchez

Mumbai, 8th May, 2006 Chicago, 3rd May, 2006

779
NOTES
NOTES
NOTES