Hero Motors Ltd 2004

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MOTORS

6th

ANNUAL REPORT

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MOTORSAnnual Report 2003-2004

BOARD OF DIRECTORSSh. O.P. Munjal Chairman

Managing Directorh. Pankaj Munjal

Sh. S.D. Khosla

Sh. G.P. Sood

Sh. Sandeep Dinodia

Sh. Yogesh Munjal

Sh. Ashok MunjalSh. Sunil Kant Munjal

CHIEF OPERATING OFFICER

Sh. P.V.V. Srinivasa Rao

FINANCIAL ADVISOR

Sh. A.K. Dewan

GENERAL MANA GER (ACCOUNTS)

Sh. Bhawnesh Vij

COMPANYSECRETARY

Sh. Ajay Pratap

AUDIT COMMITTEE

Sh. Sandeep Dinodia

Sh. G. P. Sood

AUDITORS

M/s B.D. Bansal & Co.

Chartered Accountants.

Amritsar, New Delhi, Ludhiana

COST AUDITORS

M/s. Ramanath Iyer & Co.

Cost Accountants, Delhi.

BANKERS

Punjab National Bank

Canara Bank

Citibank N.A.

ICICI Bank

REGISTERED OFFICE

601, International Trade Tower

Nehru Place, New Delhi-110019

WORKS

10km Stone, P.O. Dujana

Dadri, Dist Gautambudh Nagar,Ghaziabad. U.P.-203207











Annual Report 2003-2004

HERO MOTORS LIMITED

(Formerly known as Hero Au to Ltd.)NOTICE

Notice is hereby given that the 6th Annual General Meeting of the members of HERO MOTORS LIMITED will be held onWednesday, the 22nd day of December, 2004 at 9.30 AM at Tivoli Garden Resort, Chattarpur Mandir R oad, New Delhi-110030

to transa ct the following business:

ORDINARY BUSINESS

1. To receive, consider and adop t the Audited B alance Sh eet of the Com pany as at September 30, 2004 and the Profit &

Loss accou nt for the period ended on that date together with the reports of the D irectors and A uditors thereon.2. To appoint a director in place of Shri Yogesh Munjal, who retires by rotation and being eligible offers himself for re-

appointment.

3. To appoint a director in place of Shri Ashok Munjal, who retires by rotation and being eligible offers himself for re-

appointment.

4. To appoint Auditors and to fix their remuneration.

M/s. B.D.Bans al& Co., CharteredAccountants, the retiring auditors areeligible for appointment.

SPECIAL BUSINESSTo consider and, if thought fit, to pass, with or without modification(s), the following resolutions:

As Ordinary Resolutions:

5. Appointment of Sh.S.D. Khosla as Director

"RESOLVED THAT Shri S. D. Khosla who was appointed as an additional director of the Company by the Board ofDirectors in terms of Section 260 of the Companies A ct, 1956 w.e.f. August 30, 2004 and in respect of whom thecompany has received a notice from a member under Section 257 of the Companies Act, 1956, be and is herebyappointedas director of the Com pany, liable to retire by rotation."

6 Appointment of Sh.G.P. Sood as Director














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NOTES:

1. A Member entitled to attend and vote at the meeting is entitled to appoint any other person as his/her proxy toattend and vote (in case of poll) instead of himself/herself at the meeting. A proxy need not be a member of theCompany.

2. A proxy form is sent herewith. The proxy form duly completed must be received at the registered office ofthe Company not less than forty eight hours before the meeting.

3. The explanatory statement setting out the material facts concerning Special Business at items No. 5 to 8 of the

accompanying notice as required by section 173(2) of the Companies Act, 1956, is annexed hereto.

4. The Register of Members and Share Transfer Books of the company will remain closed from 15th December, 2004 to 22nd

December, 2004 (both days inclusive).

5. All documents referred to in the accompanying notice are open for inspection at the registered office of the company

during office hours upto the date of the Annual General Meeting.

6. Pursuant to the provisions of section 109A of the Companies Act, 1956, every shareholdersor joint holders may nominate,

in the prescribed manner, a person to whom all the rights in the shares shall vest in the event of death of the sole holder orall the joint holders.

7. Pursuant to the Scheme of Arrangement between Majestic Auto Ltd. (Transferor Company) and Hero Motors Ltd.

(Transferee Company),as sanctioned by Hon'ble High Court of Punjab & Haryana on 29th May, 2004 and by Hon'ble HighCourt of Delhi on 22nd July, 2004 read with revised order dated 30th July, 2004 the Ghaziabad unit of the Transferor

Company has been demerged from Majestic Auto Ltd. and merged with the Transferee Company i.e Hero Motors Ltd. with

effect from the appointed date i.e. 01.04.2003. In accordance with the Scheme of Arrangement 11,26,142 equity shares

have been allotted proportionately to the shareholders of Majestic Auto Ltd. on 06.10.2004.

8. In pursuanceof the option given to the persons entitled forO% FCDs as per the schemeof arrangement between Majestic

Auto Ltd. & Hero Motors Ltd., the entitlement of 0% FCDs of Rs. 35 Crore have been converted into 3,50,00,000 equity

shares of Rs. 10/each.

9. The name of the company has been changed from Hero Auto Ltd. to Hero Motors Ltd. vide fresh certificate of incorporation

dated 15th September, 2004 issued by Registrar of Companies, NCT of Delhi & Haryana,New Delhi.


























MOTORSAnnua l Report 2003-2004

None of the directors excep t Sh. S.D. Khosla is interested in passing of this resolution.

Item No.6Sh. G.P. Sood was appointed as an additional director of the com pany by the Board of Directors in their meeting held on 30thAugust, 2004 and holds office as such up to the forthcoming Annu al G eneral Meeting of the comp any.

Sh. G.P. Sood, a Post Graduate in political science and holding degree in Law has vast experience in Banking, Accounts &Finance. He is former Deputy General Manager of Bank of India, Hong Kong branch and has held the position of ChiefManager for Hongkong branches of Bank of India. Sh. G.P.Sood has also held the position of Chief Executive Officer ofCommonwealth Finance Corporation Ltd for Hongkong under the Management of Bank of India. Sh. G.P. Sood is an associatemember of Certificated Indian Institute of Bankers (CAI IB) and is holding the position of D irector in Majestic A utoLtd.

The compa ny has received a notice from a member under section 257 of the Comp anies Act,1956 proposing candidature ofSh. G.P. Sood as director of the company. The Board recommends his appointment at the forthcoming Annual GeneralMeeting.

None of the directors except Sh. G.P. Sood is interested in passing of this resolution.

Item No.7

Sh. Sandeep Dinodia was app ointed as an additional director of the company by the Board of D irectors in their meeting held on30th August, 2004 and holds office a s such upto the forthcoming Annual General Meeting of the company.

Sh. Sandeep Dinodia, is a fellow m ember of the "Institute of Chartered Accountants of India", and holds a Law degree fromDelhi University, along with an honors degree in commerce from Shri Ram College of Commerce, New Delhi. He is also amem ber of the Institute of Internal Aud itors, USA .

Sh. Sandeep Dinodia has vast experience in the field of Direct Taxes (Both National & International), Company Law, IndianGAAP, Management Assurance (Auditing), Corporate planning & business restructuring. He is a senior partner of S.R.Dinodia & Co., an eminent Chartered Accountants firm based in New Delhi.

The company has received a notice from a member u nder section 257 of the Companies Act,1956 proposing candidature ofSh. Sandeep Dinodia as director of the company. The Board recomm ends his appointment at the forthcoming Annu al General

Meeting.



















DIRECTORS' REPORT

Dear members,

Your Directors have pleasure in presenting the 6th Annual Report together with the Audited Statement of Accounts for the

period ended 30th

September, 2004.

1. FINANCIAL RESULTS

The salient features of the Company's financial results for the period under review are as follows:

(Rs. in lacs)

Sales and other income

Gross Profit/(Loss)

Depreciation

Profit/(Loss) before tax

Provision for taxes

Profit/(loss) after tax

Prior period item

Prior year tax adjustments

Profit/ (loss) brought forward

Profit/(loss) b/f from Demerger Scheme

Transitional cumulative amortisation

Transitional cumulative deferred Tax

Period ended

30.09.2004(18Months)

"Tesos.Ve"(3854.60)

(1748.79)

(5603.40)

(53.15)

(5656.55)

12.64

(0.80)

(111.19)

(966.98)

(92.86)

NIL

Year ended

31.03.2003

(12Months)

(117.45)

(116.13)

(233.58)

(472.35)

(705.93)

(0.13)

NIL

70.36

NIL

NIL

524.51



















b.) Further, during the period under review, company issued 4,95,00,000, 6%Non-cumulative Convertible Redeemable

Preference Shares of Rs. 10/- each on private placement basis.

5. DIVIDEND

Inview of the losses suffered during the period ended 18 months under review, your directors are unable to recommend

any dividend.

6. FUTURE PROSPECTS

In view of the emerging scenario world-over, the company is focusing on auto component business and trying to evolve as

an integrated system solution provider, means end-to-end solutions, or design to parts for the automobile industry in

domestic and international market. The company is in touch with leading international automobile manufactures to cater to

their need at low cost with high quality components. The company is also proposing to acquire sizeable chunk of domesticauto components business to strengthen its presence in auto component industry.

The company has been successfully supplying Swing Arms, Painted components, Chain Case, Cylinder Block, Main

Stand and Side Standto Hero Honda Motors Limited and plans toenhance volume ofthese components in the near future

apart from the exploring the possibilities of developing more components for them. The company is also exploring the

possibility of supplying cylinder, piston and crankshaft for compressor to other consumer durables industry.

Further, the company during the period signed long term supply agreement with leading overseas auto manufacturer. This

will give continuous business on sustainable basis.

In view of the sharp decline in the moped segment in the country, the company will be focusing on auto parts business for

the growth of the company.

7. DIRECTORS

Shri Yogesh Munjal and Shri Ashok Munjal retire by rotation at the ensuing Annual General Meeting and are eligible for re-

appointment. The Board recommends their re-appointment.

Shri S.D. Khosla. Shri G.P. Sood and Shri Sandeep Dinodia have been appointed as additional directors of the company

w.e.f 30.08.2004.Thecompany has received notice(s) fromthemember(s) proposing their candidature for theoffice of the

director of the company. The Board recommends their appointment at the Annual General Meeting.

Shri Pankaj Munjal has been appointed as Managing Director of the company w.e.f. 03.09.2004. The Board recommends

approval of appointment by the members at the ensuing Annual General Meeting.





























Motors Ltd., with effect from the appointed date i.e. 01.04.2003. The Scheme of Arrangement has become effective from27th August, 2004.

1 1 . CHANGE OF NAME OF THE COMPANY

The name of the company ha s been changed from Hero Auto Limited to Hero Motors Ltd. vide fresh certificate ofIncorporation dated 15th September, 2004 issued by Registrar of Companies, NCT of Delhi & Haryana, NewDelhi.

12. FIXED DEPOSITS

During the period under review the companyhas not invited or accepted any deposit under Section 58A of the Companies

Act, 1956, readwith Companies (Acceptance of Deposits) Rules, 1975.

13. CORPORATE GOVERNANCE

Your company has been practicing the principles of Corporate governance over the years. The Board of Directorssupports the broad principles of Corporate Governance in addition to the basic governance issue. The Board lays strongemphasis on transparency, accountability and integrity.

14. AUDIT COMMITTEEOF THE BOARD

The Board has constituted the Audit Committee of the Board. The committee consists of the following directors:

Non Executive Directors

1. Sh. Sandeep Dinodia Chairman

2. Sh. S.D. Khosla

3. Sh. G.P. Sood

Executive Director

Sh. Pankaj Munjal

15. SHAREHOLDERSGRIEVANCE COMMITTEE

The Board has constituted the Shareholders Grievance Committee of the Board. The committee consists of the

following directors:

Non Executive Directors















18. EXIT OPTION TO MINORITY SHAREHOLDERS

As per the provision made in the Scheme of Arrangement between Majestic Auto Ltd. and Hero Motors Ltd., the minorityshareholders of Majestic Auto Ltd. have been given an exit option, through a group company, to continue or exit as equity

shareholders of Majestic Auto Ltd. and Hero Motors Ltd., subject to a maximum of 10% of the total paid upcapital of the

respective companies. In pursuance of this, an exit option by Group Company was given to the shareholders of Majestic

Auto Ltd. and Hero Motors Ltd. tocontinue or exit as equity shareholdersof Majestic Auto Ltd. and Hero Motors Ltd. Theexit option has been closed on the 25th October 2004. Total 259 shareholders have exercised the option, for which the

papers received from shareholders are being scrutinised.

19. COST RECORDS* COSTAUDITOR

The Company has maintained Cost Accounts Records asprescribed under Cost Accounting Rules 1968.

The directors have appointed M/s. Ramanath Iyer & Co. as Cost Auditors for the year 2004-2005 subject to the approval of

the Central Government.

20. AUDITOR'S REPORT

i.) As mentioned in para (xi) of the annexure to Auditors Report, the Company has suffered cash losses due to lowering

demand of mopeds in the country and the Company is taking adequate steps to improve the position by new business

orientations. Further, as mentioned in para (xviii), the use of long term funds is a temporary phenomenon for which

steps are being taken by the Company to address the same in view of new business orientations.

ii.) The other observations made in the Auditor's Report and in the notes to the accounts are self-explanatory and hence

do not call for any further commentST

21. INSURANCE

All properties and insurable assets of the Company including building, plant and machinery and stock have been

adequately insured, wherever necessary, and to the extent required.

22. OTHER COMPLIANCE

Th e Company has already taken and further initiated steps to strengthen the net worth by adding new line of business and

other measures. Though technically Section 23 of SICA is applicable to the company, however, the net worth of thecompany is positive significantly to the tune of Rs. 41 crores. The necessary compliance in this connection will be made to










A n n u a l R e p o r t 2003-2004

Annexure-A to Directors R eportStatement of Particulars of Employees pursuant to the provisions of section 217(2A) of the Companies Act,1956 and theCompanies (Particulars of Employees)Rules, 1975 forming part of the Director's Report for the period ended 30.09.2004

A. Employed throughout the Period

Name of theEmployee

Mr. P.V.V.Srinivasa Rat

Designation

Chief OperatingOfficer

Nature of Duty

As a Chief of operationsincluding Businessplanning, strategic

management, newprojects and productmarketingetc.

GrossRemuneration

44,16,931

Qualification

B.Tech

MB A

Experience(Years)

11

ShareHolding% (Nos.)

NIL

Date ofJoining

01.01.03

Age

36

Last Employmentheld beforeJoining Comp any

Associate VicePresident(Customer

Development)ElectroluxKelvinator

Limited

B. Part of the Period : NONE

Notes:

1. Information has been furnished on the basis of employees employed throughout the period, who were in receipt of remuneration for that period which, in theaggregate, was not less than Rs. 24,00,0007- (Rupees Twenty Four Lacs). None of the employee worked part of the Financial Year, wh o were in receipt ofremuneration for any part of that period at a rate which, in the aggregate was not less than Rs . 2,00,000 (Rupees Tw o Lacs) per month. There was no personemployed either throughout the financial year or part thereof,who was holding either himself or along with the spouse and dependen t children 2% or more of the

shares of the company and drawing in excess of the remuneration drawn by the Managing Director or Manager.

2. Remuneration includes salary, other allowances, payment and expenditure incurred on perquisites and Company's contribution to provident fund,superannuation fund and gratuity fund.

3. All appointments are / were noncontractual andterminablebynotice oneither side.

4. Mr. P.V.V. Srinivasa Rao is not relative of any director or manager of the company.

Annual Report period is 01.04.2003 to 30.09.2004 (18 Months)

w w w . r e p o r t j u n c t i o n . c o m













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Hero Motors Ltd 2004