Annual Report 0102

8/2/2019 Annual Report 0102

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Contents Board of Directors 1

Highlights of Performance 2

Directors Report 5

Report on Corporate Governance 8

Management Discussion and Analysis Report 18Directors Responsibility Statement 23

Auditors Report to the Members 24

Balance Sheet 26

Profit and Loss Account 27

Statement on Significant Accounting Policies 28

Schedules to Balance Sheet 30

Schedules to Profit and Loss Account 36

Notes to the Accounts 39

Cash Flow Statement 45

Balance Sheet Abstract and Companys General Business Profile 47


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Board of Directors R J Shahaney, Chairman

D J Balaji Rao

P A Balasubramanian (Nominee of LIC)

P K Choksey

A K Das

D G Hinduja

H Klingele

E A Kshirsagar

F Sahami (Alternate : B D Punjabi)

R Sorce

R Seshasayee, Managing Director

R Jagannath, Deputy Managing Director

Executive Directors J N Amrolia

T Anantha Narayanan

K K S Bhalla

A S Mundkur

S Nagarajan

M Natraj

Secretary N Sundararajan

Auditors M S Krishnaswami & Rajan

Price Waterhouse

Cost Auditor Geeyes & Co.

Bankers Bank of America

Bank of Baroda

Bank of India

Canara Bank

Central Bank of India

Citibank N.A.

ICICI Bank Limited

Punjab National Bank

Standard Chartered Bank

Standard Chartered Grindlays Bank

State Bank of India

The Hongkong and Shanghai Banking

Corporation Limited

Registered Office 19, Rajaji Salai,

Chennai 600 001

Plants Chennai

Hosur, Tamil Nadu

Bhandara, Maharashtra

Alwar, Rajasthan

Hyderabad

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Vehicle Sales(Nos.) Engine Sales(Nos.)45 000

37 500

30 000

22 500

15 000

7 500

097-98 98-99 99-2000 2000-01 2001-02

31 547

29 741

37 859

12 000

10 000

8 000

6 000

4 000

2 000

097-98 98-99 99-2000 2000-01 2001-02

7 6117 185 6 004

Spare Parts & Others(Rs. million) Foreign Exchange Earnings(Rs. million)6 000

5 000

4 000

3 000

2 000

1 000

097-98 98-99 99-2000 2000-01 2001-02

2 520

2 145 2 145

2 400

2 000

1 600

1 200

800

400

097-98 98-99 99-2000 2000-01 2001-02

1 6571 786

1 613

Sales Value(Rs. million) Profit(Rs. million)30 000

25 000

20 000

15 000

10 000

5 000

097-98 98-99 99-2000 2000-01 2001-02

20 143 20 451

25 987

1 800

1 500

1 200

900

600

300

097-98 98-99 99-2000 2000-01 2001-02

207

233

933

184 204

785

Profit before Tax

Profit after Tax

32 475

6 311

5 139

1 717

26 067

917

29 673

5 258

5 492

26 304

1 019

1 322

923

1 657

Highlights of Performance

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Assets(Rs. million) Financed by(Rs. million)30 000

25 000

20 000

15 000

10 000

5 000

097-98 98-99 99-2000 2000-01 2001-02

30 000

25 000

20 000

15 000

10 000

5 000

097-98 98-99 99-2000 2000-01 2001-02

23 425

20 663 20 991

Earnings Per Share(Rupees) Dividend(%)12

10

8

6

4

2

097-98 98-99 99-2000 2000-01 2001-02

23 425

20 663 20 991

60

50

40

30

20

10

097-98 98-99 99-2000 2000-01 2001-02

1.54 1.71

6.60

1010

35

Fixed Assets Investments Net Current Assets Reserves & Surplus Share Capital Loan Funds

7.71

40

21 015 21 015 21 096

7.76

45

21 096

Deferred Tax

Highlights of Performance

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Dividend

The Directors recommend a dividend

of 45% (Rs.4.50/- per equity share of

Rs.10/-) subject to deduction of tax

as applicable for the year ended

March 31, 2002.

Sales

The general economic slowdown which

continued during the year adversely

affected the Commercial vehicle

industry. There was a significant drop in

demand for buses and a slowdown indemand in the Western and Southern

markets. These segments/areas have

traditionally been strong for your

companys products. This led to a drop

in your Companys market share in

medium and heavy duty vehicles

segment.

The total industry domestic sales of

civilian medium and heavy duty

commercial vehicles is estimated to have

grown by 1.7% in this year over theprevious year. However, your Company

registered a negative growth of 9.6%.

Directors Report

Part - I Performance/Operations

The Directors are happy to present the Annual Report of the Company togetherwith the audited Accounts for the year ended March 31, 2002.

Financial Results

2001-2002 2000-2001

(Rs. Million) (Rs. Million)

Profit Before Tax 1,322.06 1,019.41

Less : Provision for Taxation 399.50 102.60

922.56 916.81

Add : Transfer from/(to):

Investment Allowance Reserve 53.40

Debenture Redemption Reserve (24.59) (52.30)

Balance in Profit and Loss Account

Brought forward from previous year 736.44 642.77

General Reserve (300.00) (300.00)

Profit available for appropriation 1,334.41 1,260.68

Appropriation :

Proposed Dividend 535.18 475.72

Tax on Dividend 48.52

Surplus - Balance in Profit and Loss Account

Carried forward to next year..... 799.23 736.44

Exports

Your Companys exports during 2001-

2002 were 2,170 vehicles, compared to

2,411 in the previous year.

Production

During the year, production was better

aligned to meet market requirements.

There was improvement in quality as

well as productivity in several areas.

Profitability

The continued focus on inventory

reduction, process improvements and

control over raw material and

manufacturing costs helped the

Company, in addition to the improved

price realisation, to achieve improved

net profit for the year.

Dispute Regarding Central Sales Tax

The Companys appeal against the

disputed levy of Central Sales Tax by

the Government of Tamilnadu is

pending before the Supreme Court.Meanwhile, the Stay granted by it

continues to be in force. The adoption

of Value Added Tax across the country,

and the establishment of an

independent Dispute Resolut ion

Authority at all India level have both

been delayed, but are expected to

resolve this issue permanently in the

long run.

Industrial Relations

Industrial relations during the year were

good, barring a 29 day strike by the

workmen at Hosur. Long term wage

settlements have been concluded

peacefully in all the manufacturingunits. Cooperation between

Management and the Unions

continued, resulting in further

operational improvements, and better

productivity in several areas. Greater

degree of flexibility in manpower

deployment has been achieved.

Research and Development,

Technology Absorption, Energy

Conservation etc.

The progress made on other aspects of

R&D, Technology, Energy etc., are

furnished in Annexure - A to this

Report.

CNG Buses

Following the Supreme Court directive

in using CNG (Compressed Natural

Gas) for vehicles in Delhi, your

Company has supplied a large number

of buses during last year. Additional

orders are expected to be received inthe new f inancial year.

Part - II Corporate Matters

Corporate Governance

Your Directors are happy to report that

your Company has been fully compliant

from March 31, 2001 with the SEBI

Guidelines on Corporate Governance,

which have been incorporated in

Clause 49 of the Listing Agreement

with the Stock Exchanges. In manyareas, our operating practices exceed

the SEBI stipulations also.

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A detailed report on this subject forms

Annexure-B to this Report.

The Statutory Auditors of the Company

have examined the Companys

compliance, and have certified the

same, as required under the SEBI

Guidelines. Such certificate is

reproduced as Annexure - C to this

Report.

A separate Management Discussion

and Analysis Report covering a wide

range of issues relating to performance,outlook etc., is given as Annexure - D

to this Report.

The Directors Responsibility Statement

as required under Section 217 (2AA) is

furnished as Annexure - E to this

Report.

Directors

The present term of Mr R Seshasayee,

Managing Director is due to expire on

March 31,2003. However, consideringthe sustained good performance of the

Company during difficult times under

his stewardship, the Board of Directors

has decided, subject to the approval of

the shareholders at this General

Meeting, to foreclose/overlap the last

year of his current term and has

re-appointed him as Managing Director

for a period of five years from

April 1, 2002 to March 31, 2007

with a suitable revision in the terms

of remuneration. The necessaryresolutions relating to this

re-appointment are being placed before

the shareholders for approval.

Mr R Jagannath who was a Wholetime

Director on the Board from

April 1,1999 was redesignated as

Deputy Managing Director in July 2001,

consequent to increase in his

responsibilities. His earlier approved

term expired on March 31,2002. The

Board has re-appointed him as aDeputy Managing Director for a period

of one year from April 1, 2002 to

Directors Report

March 31, 2003. The necessary

resolutions relating to his

re-appointment are being placed

before the shareholders for approval.

Mr G Boschetti, who was a Director on

the Board resigned in March 2002,

consequent to his taking over as CEO

of FIAT Auto, Italy. Your Directors wish

to thank Mr G Boschetti for his valuable

guidance and leadership during his

association with the Company.

Mr R Sorce who was a Director on yourCompanys Board till March 2001 has

been re-appointed by the Board as a

Director in place of Mr G Boschetti.

Mr D J Balaji Rao, who was a Nominee

Director of ICICI Limited, ceased to be a

Director from March 18, 2002

consequent to withdrawal of his

nomination by ICICI Limited. In order to

continue to have the benefit of

Mr Balaji Raos experience and advice,

your Board has re-appointedMr Balaji Rao as an Independent

Director liable to retire by rotation and

also as member of the Audit

Committee with effect from

March 27, 2002.

Mr Balaji Rao retires at this Annual

General Meeting. A Notice under

Section 257 of the Companies

Act,1956 has been received from a

member proposing his re-appointment.

The necessary resolution for hisre-appointment is being placed before

the members for approval.

Mr A K Das, Mr F Sahami and

Mr H Klingele retire by rotation at the

forthcoming Annual General Meeting,

and are eligible for re-appointment.

The necessary resolutions are being

placed before the members for

approval.

Cost AuditorThe Government has stipulated Cost

Audit of the Companys records in

respect of commercial vehicles as well

as engines. M/s GEEYES & Co., Cost

Auditors have carried out this

assignments and their f indings are

satisfactory.

Auditors

M/s M S Krishnaswami & Rajan and

M/s Price Waterhouse retire at the

ensuing Annual General Meeting and

are eligible for re-appointment. The

Audit Committee of the Board has

recommended their re-appointment.The necessary resolution is being placed

before the Board for approval.

The Company has received

confirmation that their appointment

will be within the limits prescribed

under Section 224(1B) of the

Companies Act, 1956.

Other Information

The particulars of employees as

prescribed by the Companies(Disclosure of Particulars in the Report

of Board of Directors) Rules, 1988 are

furnished in the Annexure - F to this

Report.

Acknowledgement

The Directors wish to express their

appreciation of the continued

co-operation of the Central and State

Governments, Bankers, Financial

Institutions, Customers, Dealers and

Suppliers and also the valuableassistance and advice received from

major shareholders LRLIH Ltd., Hinduja

Group and IVECO. The Directors also

wish to thank all the employees for

their contribution, support and

continued co-operation through the

year.

On behalf of the Board of Directors

Chennai R J SHAHANEY

May 7, 2002 Chairman

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Annexure A to Directors Report

4. Expenditure on R & D :

(Rs. Million)

(a) Capital 111.85

(b) Revenue 140.83

(excluding depreciation)

Total 252.68

Total R & D Expenditure

as % of total turnover 0.96

Technology Absorption, Adaptation and Innovation

Low floor city bus is being evaluated inBangalore.

16 M long vestibule buses with new

coupling and bellows has been developed.

Heavy duty vehicles with 680 TCAC engine

meeting India 2000 norms have been

productionised.

Upgraded version of the 6 speed synchro

gear box has been produced as a pilot batch

for large scale validation before bulkproduction introduction.

(C) Foreign Exchange Earnings and Outgo

The details of earnings and outgo of foreign

exchange is given in Schedules 1.6 to 1.9 of Notes to

the Accounts. The Company continues to strive to

improve its export earnings.

(A) Conservation of Energy

The Companys thrust on energy conservation

measures continues, and utilisation of energy

continues to be optimised at all Plants through

continuous monitoring of processes. The Company

continues to take advice from experts on energy

conservation.

(B) Technology Absorption

Research and Development (R&D)

1. Specific areas in which R & D carried out by

the Company :

Buses fitted with Bharat Stage-II emission

norms of the 5.7 litre engine have been

developed and productionised. The

performance of these vehicles has been

good.

Optimisation and type approval tests on

5.7 litre engine at higher power ratings to

meet Bharat Stage-II emission norms

completed.

Optimisation work on the 6.5 litre engine to

meet Bharat Stage-II norms is in progress.

Design work of the 5.7 litre engine to meet

Euro-III norms has been completed.

Optimisation work expected to be completed

by early 2003.

Optimisation work on 3.9 litre 4 cylinder

engine to meet Bharat Stage-II norm is

nearing completion.

2. Benefits derived as a result of the above R & D :

Compliance with statutory norms and

increased customer acceptance.

3. Future Plan of Action :

To proactively work towards cleaner engines

and safer vehicles.

To strive to improve value to customers.

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Annexure B to Directors Report Report on Corporate Governance

1) ASHOK LEYLAND PHILOSOPHY ON CORPORATE GOVERNANCE

The Board of Directors and the Management of Ashok Leyland commit themselves to :

strive towards enhancement of shareholder value through

- sound business decisions

- prudent financial management, and

- high standards of ethics throughout the organisation.

ensure transparency and professionalism in all decisions and transactions of the Company.

achieve excellence in Corporate Governance by

- conforming to, and exceeding wherever possible, the prevalent mandatory guidelines on Corporate

Governance.

- regularly reviewing the Board processes and the Management systems for further improvement.

2) BOARD OF DIRECTORS

a) Composition : The Board of Directors of the Company, headed by a Non-executive Chairman, consisted of the

following Directors, as on March 31, 2002 categorised as indicated:

i) Non-executive Directors

a) Promoter Group Mr A K Das

Mr D G Hinduja

Mr H Klingele

Mr F Sahami (Alternate : Mr B D Punjabi)

Mr R Sorce

b) Connected with Associate

Companies Mr R J Shahaney (Chairman)

c) Independent Mr P A Balasubramanian (representing LIC as Shareholder)

Mr D J Balaji Rao

Mr P K Choksey

Mr E A Kshirsagar

ii) Managing Director Mr R Seshasayee

iii) Deputy Managing Director Mr R Jagannath

b) Attendance at Board Meetings and last A.G.M. and details of memberships of Directors in other Boards

and Board Committees

Details of Board Meetings held during the year 2001-02

The time gap between any two meetings did not exceed four months.

The last Annual General Meeting was held on July 24, 2001.

Date of Meeting Board Strength No. of Directors Present

April 24, 2001 12 10

July 24, 2001 12 10

Oct. 23, 2001 12 11

Jan. 25, 2002 12 10

March 6, 2002 11 9

March 27, 2002 12 4

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Name of the Director No. of Whether Other Boards Other Board

Board attended (excluding Committeesmeetings last A.G.M. Ashok Leyland) (excludingattended (Note 1) Ashok Leyland)

(Note 2)

Mr R J Shahaney 5 Yes 5 2

(of which 4 as (of which 1 asChairman) Chairman)

Mr D J Balaji Rao (Note 3) 5 Yes 5 7(of which 3 as

Chairman)

Mr P A Balasubramanian 4 No 1 1

Mr P K Choksey 5 Yes 5 6

(of which 1 as (of which 3 asChairman) Chairman)

Mr A K Das 3 Yes 9 4

Mr D G Hinduja 5 Yes 4 NIL

Mr H Klingele 4 Yes 1 NIL

Mr E A Kshirsagar 6 Yes 1 2

(of which 1 asChairman)

Mr F Sahami 5 Yes 2 1

Mr R Sorce (Note 4) Not Applicable NIL NIL

Mr R Seshasayee 6 Yes 7 4

(of which 1 asChairman)

Mr R Jagannath 5 Yes 2 NIL

Alternate Director :

Mr B D Punjabi 1 Not Applicable 4 2

Note 1 : Excludes Foreign Companies, Private Limited Companies and Alternate Directorships.

Note 2 : Only Remuneration Commit tee, Audit Committee, Shareholders/Investors Grievance Commit tee are reckoned

for this purpose.

Note 3 : Ceased to be a Nominee Director of ICICI on March 18, 2002 and appointed as an Independent Director

effective March 27, 2002.Note 4 : Appointed as Director effective March 6, 2002.

MEMBERSHIPS AS ON 31/ 3/2002 IN


Secretarial Standards relating to Board Meetings

The Institute of Company Secretaries of India (ICSI) have established Secretarial Standards (SS-1) relating to meetings of

the Board and Board Committees. At this stage, these Standards are only recommendatory, and are likely to be mandated

in due course. The secretarial and the operating practices of the Company are in full conformity with the above

Secretarial Standards.

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3) AUDIT COMMITTEE

a) Constitution

The Audit Commit tee of the Company was constituted in July 1987. The Terms of Reference since 1987 had

already covered most of the aspects stipulated by the SEBI Guidelines. These were comprehensively reviewed once

again in the year 2000, and the Audit Committee has been mandated with the same Terms of Reference as

specif ied in Clause 49 of the Listing Agreements with Stock Exchanges. The current Terms of Reference also fully

conform to the requirements of Section 292A of the Companies Act, 1956.

b) Composition, names of members and Chairperson

The composition of the Audit Committee is as follows :

Chairman - Mr P K Choksey

Members - Mr D J Balaji Rao (Ceased to be a Member w.e.f . 18/3/2002)(Appointed as a Member w.e.f. 27/3/2002)

Mr D G Hinduja

Mr E A Kshirsagar

Mr F Sahami (Alternate: Mr B D Punjabi)

c) Meetings and Attendance

Audit Committee Meetings held during the year 2001-02 and Attendance Details.

Attendance : Date of the Meeting Committee No. of Directors

Strength present

April 24, 2001 5 5

Oct. 22, 2001 5 5

Jan. 24, 2002 5 4(* )

(* ) Mr D G Hinduja did not attend

Mr N Sundararajan, Company Secretary is the Secretary to the Committee.

Mr T Anantha Narayanan, Executive Director - Finance and Mr N Mohanakrishnan, General Manager -

Management Services and Internal Audit attended all the meetings of the Committee as Invitees.

The Statutory Auditors of the Company are invited to join the Audit Committee Meetings. The Audit Committee held

discussions with the Statutory Auditors on the Limited Review of the half-yearly accounts, the yearly Audit Plan,

matters relating to compliance of accounting standards, their observations arising from the annual audit of theCompanys accounts and other related matters.

4) REMUNERATION COMM ITTEE

a) The Remuneration Commit tee consists of Mr R J Shahaney (Chairman), Mr P K Choksey and Mr F Sahami.

The Committee is mandated with the following Terms of Reference :

- Determination of the quantum of commission and special allowance payable to the Managing/

Deputy Managing Director(s); and

- Finalisation of the annual increments payable to the Managing/Deputy Managing Director(s).


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Within the l imits approved by the shareholders, the above decisions are based on the overall performance and

financial results of t he Company during the relevant financial year, and also based on the assessment of thepersonal contribut ion and achievements of the concerned director(s).

b) The Committee met twice during the year (on April 24, 2001 and on Jan. 25, 2002) and all the members were

present at both meetings.

c) The Remuneration Policy of the Company is :

(i) For Managing / Deputy Managing Directors

The total remuneration, subject to shareholders approval, consists of

a fixed component consisting of salary, allowances and perquisites; the perquisites and benefits are in

line with the Company rules for senior managerial personnel.

a variable component linked to the performance of Company as well as of the individual Director

consisting of Commission and Special Allowance, as may be determined by the Remuneration Committee,

within the limits approved by the shareholders.(ii) For Non-executive Directors

Sitting Fees as permit ted under the Companies Act, 1956 (Rs.5000/- per meeting of the Board or any Statutory

Committee) plus reimbursement of actual travel and incidental expenses incurred for attending such meetings.

There is at present no other component of remuneration to Non-executive directors. Though the shareholders,

at the Annual General Meeting held on July 24, 2001, have approved the payment of Commission to the

Non-executive Directors of the Company, this has not been given effect to, in the financial year 2001-02.

d) The details of remuneration paid/payable to all the Directors for the year 2001-2002 are :

i) Non-executive Director(s) (Sitting Fees only for meetings of Board and Board Commit tees)

Rs. Rs.

Mr R J Shahaney 85,000 Mr H Klingele 20,000

Mr D J Balaji Rao 40,000 Mr E A Kshirsagar 45,000Mr P A Balasubramanian(* ) 20,000 Mr F Sahami 50,000

Mr P K Choksey 55,000 Mr R Sorce NIL

Mr A K Das 15,000 Mr B D Punjabi (Alt. Director) 5,000

Mr D G Hinduja 35,000

(* ) Amount paid directly to the Life Insurance Corporation of India, whom he represents.

ii) Managing / Deputy Managing Director(s) (No Sitt ing Fees)

Managing Director Deputy Managing Director

(Rs.) (Rs.)

a) Fixed Component

Salary 12,00,000 8,40,000

Perquisites (* * ) 17,67,199 11,14,702

b) Variable Component

Commission 24,00,000 8,40,000

Special Allowance 23,00,000 12,65,000

Total 76,67,199 40,59,702

(* * ) valued as per the Income Tax Rules. Does not include contribution to Provident Fund @12% and

Superannuation Fund @15% of the salary.

Both Mr Seshasayee and Mr Jagannath are under contract of employment with the Company. There are also contracts

corresponding to their appointment as Managing Director and Wholetime Director (and subsequently as Deputy

Managing Director) respectively, with 3 months' notice period f rom either side. There is no severance fees payable to

either of them.

The Company does not have any Stock Option scheme.

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5) SHAREHOLDERS/INVESTORS GRIEVANCE COMMITTEE

a) The Shareholders/Investors Grievance Committee has been functioning since August, 2000. Mr R J Shahaney is the

Chairman of the Committee; Mr R Seshasayee, Managing Director and Mr R Jagannath, Dy. Managing Director are

the other members.

b) Mr N Sundararajan, Company Secretary is the Compliance Officer nominated for this purpose.

c) The Committee reviews the system of dealing with and responding to correspondence from all categories of investors

viz., shareholders, debentureholders and fixed deposit holders. The details of complaint letters received f rom Stock

Exchanges, SEBI, Dept. of Company Affairs and responses thereto are reviewed by this Committee. The Committee

also reviews/approves init iatives for further improvements in investor servicing.

During the year 7 complaint letters were received from the above authorities, and 8562 letters were received frominvestors; all these were dealt with satisfactorily.

d) Detailed internal norms have been laid down as a Charter of Investor Services , specifying time-limits for responding

to investor correspondence, and these norms have been adhered to and are being further improved. The only few

letters which occasionally remain pending beyond the norms are due to inadequate documentation or clarifications

being awaited.

e) As on March 31, 2002, there were no requests pending/overdue beyond the due dates.

6) GENERAL BODY MEETINGS

a) Details of location and time of holding the last three AGMs.

Year Location Date & Time

50th AGM - 1999 Narada Gana Sabha, September 16, 1999

254 TTK Road, Chennai 18 11.00 a.m.

51st AGM - 2000 Narada Gana Sabha, May 30, 2000

254 TTK Road, Chennai 18 11.00 a.m.

52nd AGM - 2001 Rani Seethai Hall, July 24, 2001

603 Anna Salai, Chennai 6 10.45 a.m.

b) Some special resolut ions were approved at the above meetings. There has been no use of Postal Ballot so far.

7) DISCLOSURES

There have been no materially significant related party transactions with the Companys Promoters, Directors, the

Management, the Subsidiaries or relatives which may have potential conflict with the interests of the Company at large.

There have been no instances of non-compliance by the Company on any matters related to the capital markets, nor have

any penalty/strictures been imposed on the Company by the Stock Exchanges or SEBI or any other statutory authority on

such matters.

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8) MEANS OF COMMUNICATION

a) The Company commenced mailing of half-yearly reports to all shareholders from the half-year ending

September 30, 2001.

b) The quarterly results are being published in leading national English newspapers and in the vernacular (Tamil)

newspapers. The quarterly results are also displayed on the Companys website www.ashokleyland.com

c) The Companys website also displays off icial press/news releases.

Presentations made to institutional investors and to analysts are also displayed.

d) A Management Discussion and Analysis Report has been part of the Annual Report from the year 1998-1999

onwards.

9) GENERAL SHAREHOLDER INFORMATION

a. 53rd Annual General Meeting

Date and Time July 26, 2002 - 10.15 a.m.

Venue Narada Gana Sabha, 314 TTK Road, Chennai - 600 018.

b. Financial Calendar

Annual General Meeting July 26, 2002

Unaudited results for the quarter ending June 30, 2002 July 26, 2002

Unaudited results for the quarter/half-year ending September 30, 2002 Last week of Oct. 2002

Unaudited results for the quarter ending December 31, 2002 Last week of Jan. 2003

Audited Results for the year ending March 31, 2003 April / May 2003

c. Book Closure Date From July 9, 2002 to July 26, 2002

d. Dividend payment date From July 26, 2002 onwards

e. a) Listing of Equity Shares Madras, Mumbai, Ahmedabad, Kolkata, New Delhi and National

Stock Exchanges.

b) Listing of Global Depository London Stock Exchange

Receipts (GDRs)

The Listing Fee has been paid uptodate, to all the Stock Exchanges.

f. Stock Code

a) Trading Symbol at Madras Stock Exchange ALL

Bombay Stock Exchange (Physical) 477

(Demat) 500477

National Stock Exchange ASHOKLEY

Ahmedabad Stock Exchange 05550 ASHOKLEYL

Calcutta Stock Exchange (Physical) 11477

(Demat) 10011477

Delhi Stock Exchange 001159

b) Demat ISIN Numbers in Equity Shares INE 208A01011

NSDL & CDSL


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h. Registrar and Transfer Agents

All Securities Transfer work is done In-house.

i. Share Transfer System

The authority relating to share transfer has been delegated to the Share Transfer Committee which consists of

Mr R J Shahaney (Chairman), Mr P K Choksey, Mr R Seshasayee and Mr R Jagannath. The Committee met7 times during the year for approving transfers, transmissions etc. In addition, in order to further speed up

transfers, the Board has authorised the Managing Director to approve all rout ine transfers and transmissions of

shares. Such approval is being given by the Managing Director at fortnightly intervals (26 times during the

year). Presently, transfers, transmissions etc., are approved within 15 days (as against the Stock Exchange norm

of 30 days); requests for dematerialisation are confirmed within 10 days (as against the norm of 15 days).

Letters are sent to the shareholders after transfer of shares in their names giving an option for

dematerialisation of the physical shares. Physical shares are dematerialised and electronic credit is given to

those shareholders who opt for dematerialisation and in respect of other shareholders who have not opted for

dematerialisation, share certificates are despatched by Registered Post.

j. (i) Distribution of Shareholding as on March 31, 2002

No. of Shares Shareholders No. of Shares

Number % Number %

Upto 50 29181 36.57 991077 0.83

51-100 21270 26.65 1856533 1.56

101-200 16737 20.97 2568845 2.16

201-500 10116 12.68 3184042 2.68

501-1000 1694 2.12 1230253 1.04

1001-2000 476 0.59 681903 0.57

2001-5000 188 0.24 571853 0.48

5001-10000 57 0.07 412248 0.35

10001 & above 85 0.11 107432666 90.33

TOTAL 79804 100.00 118929420 100.00


g. Stock M arket Data

The Stock Exchange, Mumbai National Stock Exchange

Share Price Sensex Share Price S&P CNX Nifty

Month High Low High Low High Low High Low

(Rs.) (Rs.) (Rs.) (Rs.)

April 2001 65.00 40.70 3676.82 3096.51 64.50 40.75 1171.85 1000.10

May 2001 72.60 57.00 3759.96 3420.14 72.40 57.00 1207.00 1096.25

June 2001 68.65 53.00 3651.32 3287.94 68.95 53.20 1175.80 1060.05

July 2001 60.00 50.00 3513.79 3241.66 64.50 50.20 1127.15 1046.90

Aug 2001 67.50 55.70 3359.07 3241.12 67.50 57.60 1084.00 1051.75

Sep 2001 67.00 52.20 3267.93 2594.87 66.50 52.00 1059.90 849.95

Oct 2001 64.25 52.00 3083.65 2718.41 64.00 52.10 1000.95 884.65

Nov 2001 92.00 62.50 3377.81 3003.95 95.00 63.05 1097.60 973.55

Dec 2001 88.75 66.50 3500.20 3100.57 88.45 65.50 1132.65 1010.45

Jan 2002 79.25 64.10 3466.73 3236.76 79.20 64.10 1121.75 1052.05

Feb 2002 95.45 67.10 3758.11 3290.00 95.50 67.00 1205.95 1069.40

Mar 2002 94.25 76.00 3758.27 3506.55 93.95 77.00 1201.10 1117.85

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(ii) Pattern of Shareholding as on March 31, 2002

Sl.No CategoryNo. of No. of

%Holders Shares

1 Promoter LRLIH Ltd 1 60576675 50.93

(includes 16460007 shares in GDR form)

2 Resident Individuals 78539 12709373 10.69

3 Financial Institutions 14 26974164 22.68

4 Foreign Institutional Investors 20 7726018 6.50

5 Non-Resident Indians 220 88941 0.07

6 Corporate Bodies 921 1345773 1.13

7 Mutual Funds 31 3338452 2.81

8 Trusts 7 2332 0.00

9 Banks 50 322729 0.27

10 Others - GDR 1 5844963 4.91

TOTAL 79804 118929420 100.00

k. Dematerialisation of shares and liquidity

Shares of the Company can be held and traded in Electronic form. SEBI has stipulated the shares of the

Company for compulsory delivery in dematerialisation form only, by all investors from November 29, 1999.

As on March 31, 2002, 69301650 shares representing 58.27% of the shareholdings have been

dematerialised.Shares of the Company are actively traded in Mumbai and National Stock Exchanges, and hence have good

liquidity.

l. Outstanding GDR/ Warrants and Convertible Bonds, Conversion date and likely impact on the Equity

No GDR/Warrant is outstanding for conversion, and hence there is no impact on equit y.

m. Plant Locat ions

Ennore Hosur Unit I Hosur Unit II

Post Box No.3 175 Hosur Indl. Complex 77 Electronic Complex,

Ennore Hosur 635 126 Perandapalli Village

Chennai 600 057 Hosur 635 109

Bhandara Alwar Hyderabad

Plot No.1 MIDC Industrial Area, Plot No.SPL 298, Ductron Castings

Village Gadegaon, Matsya Indl. Area B-15, IDA-Uppal

Sakoli Taluk Alwar 301 030 Hyderabad 500 039

Bhandara 441 904 Rajasthan

AL Ambattur

3A/A&2 North Phase

Sidco Industrial Estate

Ambattur

Chennai 600 098

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n. Address for Correspondence

For all mat ters relat ing to Shares, Dy. Manager - Secretarial Tel : 91-44-433 1120/

Debentures, Annual Reports Ashok Leyland Limited 433 1128/1129

Building No.2, 7th Floor Fax : 91-44-433 8344

Khivraj Complex II e-mail : [email protected]

477-482 Anna Salai [email protected]

Nandanam

Chennai 600 035

For Fixed Deposits Manager Treasury Tel : 91-44-573 3001/

Ashok Leyland Limited 574 3233/573 3030

Ennore Fax : 91-44-573 3798

Chennai 600 057 e-mail : [email protected]@ale.global.net.in

NON MANDATORY REQUIREMENTS

1. Non-executive Chairman

The Company maintains the office of the Non-executive Chairman and reimburses expenses incurred in the performance

of his duties.

2. Remuneration Committee

The Company has constituted a Remuneration Commit tee; full details are furnished under Item 4 above.

3. Shareholder Rights

The statement of half yearly results is being published in the Press. The Company has commenced mailing half-yearly

reports to shareholders starting from the half-year ending September 30, 2001.

4. Postal Ballot

The Company has had no occasion to use the postal ballot so far.

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Annexure C to Directors Report

CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER

CLAUSE 49 OF THE LISTING AGREEMENT(S)

To the Members of

Ashok Leyland Limited

1. We have reviewed the compliance of conditions of Corporate Governance by Ashok Leyland Limited (the Company)

during the year ended March 31, 2002 with the relevant records and documents maintained by the Company, furnished to

us for our review and the report on Corporate Governance as approved by the Board of Directors.

2. The compliance of conditions of corporate governance is the responsibility of the management. Our review was limited to

procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate

Governance. We further state that such compliance is neither an assurance as to the future viability of the Company nor the

efficiency or effectiveness with which the management has conducted the affairs of the Company.

3. On the basis of our review and according to the information and explanations given to us, the conditions of Corporate

Governance as stipulated in Clause 49 of the listing agreement(s) with the Stock Exchange(s) have been complied with in all

material respects by the Company.

For M.S. KRISHNASWAMI & RAJAN S. DATTA

Partner

M.K. RAJAN For and on behalf of7 May, 2002 Partner PRICE WATERHOUSEChennai Chartered Accountants Chartered Accountants

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Annexure D to Directors Report - M anagement Discussion and Analysis Report

Globally an eventful year, 2001-02 was

a testing time for the economies of theworld. Indian GDP growth for the year

has been estimated at 5.2%. Though

lower than provided in the ninth 5-year

plan (1997-2002), given the global

context, this is no mean achievement.

Stacked against the previous years

growth rate of 4%, this also cues a

recovery.

The growth in GDP for 2001-02 stems

from estimates of a 5.7% growth rate

in agriculture and allied sectors and

6.5% growth in services. Sluggishness

in core industry and manufacturing

sectors continues to be a matter of

concern. Manufacturing growth fell

from 6.7% in 2000-01 to estimated

3.3% in 2001-02. Similar downward

trends have been estimated in

construction (from 6.8% to 2.9%) and

in mining & quarrying (from 3.7% to

1.4%).

Despite the welcome drop in interest

rates, industrial production sufferedfrom infrastructure constraints in power

and transport, lack of a clear policy

framework for private participation in

key infrastructure sectors and, of

immediate consequence, lack of

consumer demand, which in turn

inhibited investments.

A welcome development has been the

increasing focus on road development,

particularly the Golden Quadrilateral

programme, which is expected to

provide considerable impetus for

economic growth.

A. Commercial Vehicle Industry:

Trends and Developments

The growth in Commercial Vehicle (CV)

industry bears a direct relationship to

agriculture and industrial production.

The combined impact of growth trends

in various sectors resulted in a mere

2.5% increase in overall demand for

Medium and Heavy duty CVs

(M&HCVs) which comprise the principalmarket for the Companys products.

However, goods segment registered an

impressive 19% growth year-on-year,

buoyed essentially by demand fromconstruction industry. Predictably, there

was a clear shift in favour of

multi-axled vehicles due to reasons of

improved load availability and viability.

Conversely, market demand for the

classical 16 T GVW vehicle (4 x 2)

declined dramatically.

The demand for goods vehicles was

also marked by unprecedented

geographical skew. Whilst the southern

and western markets declined

considerably, the northern market grew

significantly, coming out, as it did, from

a prolonged recession in the past years.

Poor financial health of State Transport

Undertakings (STUs) prevented most of

them from placing orders for buses

though, given the age and condition of

the transport fleet, this is becoming

overdue. Although the Honourable

Supreme Court has ordered that bus

operators in the National Capital

Region should operate onlyCompressed Natural Gas (CNG)

powered buses, orders for CNG chassis

from bus operators were delayed

pending Honourable Supreme Courts

judgement on their appeals for

operating buses with diesel fuel as well.

Since the passenger segment and the

southern market have been the

traditional strongholds of the Company,

the adverse market movement posed a

major challenge to the management.

B. Business Review:

Domestic Market

To mitigate to some extent the adverse

market movement, the Company

focussed on expanding its market reach

in northern and eastern regions. This,

coupled with new product offerings,

has enabled the Company to register

increased market share in goods and

passenger segments in the northern

region.

During the year, the Company achieved

a market share of about 32.4% in the

M&HCV category, implying a drop of

3.8% over 2000-01. While the Companyretained the market share of 51% in

the passenger segment, in the goods

segment the market share dropped to

29% from 33%, primarily because of

adverse market shifts.

The STU segment, in which Ashok

Leyland has a dominant presence,

continued to reel under financial stress

and postponed purchases. Despite a

significant drop of 33% in the overall

passenger vehicle volumes, the

Company was able to retain its market

share largely due to a vastly improved

performance in the private passenger

market.

Defence Supplies

Defence continues to be a major

market segment, which to some extent

mitigates the problems from the cyclical

nature of the commercial vehicle

business. CKD sales to Defence

recorded a 27% increase in terms of

value. Supply of Truck Fire Fighting (TFF)

vehicles have commenced, apart from

continued supplies of Light Recovery

Vehicles and Stallion 4x4 vehicles.

Water Bowser is being developed to

meet Defence requirements.

Exports

Exports continue to be predominantly to

SAARC countries and, t raditionally, a

large portion of these sales has been to

Sri Lanka. The ethnic problems in Sri

Lanka continue to be an impediment to

sales. This has been offset to some

extent by higher sales to Bangladesh

and the Middle East. Low growth

prevalent in neighbouring countries has

resulted in lower off-take of vehicles.

The export market continues to be price

sensitive, especially in the Middle East,

where fierce competition is experienced

from Korean manufacturers.

Parts warehouse in Sharjah and the

South Africa branch are fullyoperational. Spare parts exports in

2001-02 have increased by 22% over

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that of 2000-01. Reflecting the overall

global slowdown, the Companysvehicle exports dropped by 10%

compared to 2000-01.

Engines

Shrinkage in the overall market for

industrial engines was experienced in

2001-02. Total sales declined in line

with the market drop of 17%. The

Company could increase its market

share marginally in the generator set

segment in which it participates, and

maintained its dominant presence inthe marine engine segment. The

Company is fully prepared to meet the

higher standards for emission norms

expected to be legislated for Industrial

Engines in the country from

January 2003.

Spare parts

Auto ancillaries increased their focus on

the spare parts market in order to fill

the unused capacities result ing from

lower off-take from OEMs.

Competition from auto ancillaries hasput greater pressure on parts sales,

which is already facing difficult times

because of the stagnant market

condit ions. Spare parts sales dropped by

17% over 2000-01 to Rs. 1,966 million

(excluding sales by way of CKD packs).

Technology Up-gradation

All the three engine platforms used by

the Company have been upgraded to

meet Bharat Stage-2 emission norms

already enforced for passenger vehiclesin the four metros since October 2001.

It is proposed to progress towards a

market-driven single engine platform,

which would facilitate standardisation

and cost-effective manufacture. As

mentioned last year, the Company

obtained contemporary rear axles

technology support from Dana

Corporation and ArvinMeritor,

both of USA.

Technology for the upgraded version of

5/6 speed synchromesh gearboxes hasbeen obtained from ZF Friedrichshafen

and development work has been

almost completed. These gearboxes will

be introduced during 2002-03.

Work has also been initiated to develop

engines to meet emission standards

beyond Bharat Stage-2. Having

assessed market requirements for

higher powered engines, the Company

has commenced development action

and will be able to offer suitable

options shortly.

A centralised R&D facility near Chennai

will be commissioned shortly. All chassis

engineering activities will be carried outfrom this centre. During the year

2001-02, the Company spent 1% of its

turnover on R&D.

The Company is adopting

contemporary technology to improve

driver and passenger safety. The

Companys commitment to

environment management is evident

from the fact that all the five vehicle

manufacturing units have been ISO

14001 certified. The Company is fully

conscious of various challenges and is

confident of fulf illing expectations of

the society, Government and its

customers.

Information Technology

The Company has upgraded IT

infrastructure at its manufacturing units

and marketing division, creating a

knowledge management focus among

employees. The Company is facilitating

its customer focus with IT for enhanced

communication and uniform data

sharing. The capital expenditure

planned has been estimated at Rs.521

million. All manufacturing units and the

marketing division will be inter-

connected and linked to the newly

developed Ennore Data Centre (for

centralised data processing) through

leased lines and radio frequency.

Customised software has been

developed for various transactions.

Development of e-Commerce withdealers and suppliers has been

completed and will be ready during

2002-03. The Company is also focusing

on the development of CustomerRelationship Management (CRM)

systems for enhancing its value addit ion

to customers.

Human Resources

Human capital management at Ashok

Leyland focuses equally on business

strategy and operations, through

people development and building a

positive work ethos closely aligned with

the business objectives. The HR

strategy, processes and systems havebeen increasingly focusing on change

management on the shop floor,

improving competitiveness, driving a

performance culture and continuously

enhancing the human capital through

training and development.

Central to change management has

been total employee involvement,

achieved through Cross-Functional

Teams (CFTs) and small group activities

promoted through a comprehensive

and continuous Company-widecommunication programme. 800 CFTs

were at work last year. They brought in

substantial economic gains and, more

importantly, proved the potential of

team format for purposeful innovation

and employee motivation.

The performance management system,

a vital tool in enhancing

competitiveness, establishes a clear

linkage of individual and business goals

with qualitative and quantitative

indices. One of the attitudinal gains is

the internalisation of the internal

customer concept, which ultimately

enables the Company to deliver

ultimate customer satisfaction.

Heightened employee involvement has

been a major determinant of the

Companys business success by mining

more value .

Wage sett lements were finalised for

unionised employees at Ennore and

Hosur II plants. New levels ofproductivity, flexibility and multi-tasking

are built into them together with

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substantial hikes in employee pay

packets. Some ground was covered inmaking the Company a thinner

organisation, with a Voluntary

Retirement Scheme (VRS) announced

towards the end of the year, which

resulted in the separation of about 645

employees from the Ennore plant.

C. Management of Risks

The Company is exposed to Business,

Asset and Financial risks:

Business risks include cyclical nature of

demand for CVs due to economic

slowdown, need for continuous

technological up-gradation to meet

emission standards / safety

requirements, usage of alternate fuels,

customers higher expectations for

better value and more intense

competition. All these risks are

continuously addressed in the business

plans, functional strategies and

management reviews acted upon.

Asset risks include threat to physicalassets through accidents, natural

calamities, obsolescence, riots,

terrorism etc. The Company has an

internal system to assess these risks,

define the limits of exposure for

operation and take appropriate

insurance cover. The Company has

taken loss of profit insurance cover, to

mitigate potential losses due to

interruption in operation due to

accidents / floods, etc.

Foreign exchange risks are inherent inexports of products, import of

materials, capital equipment and

technology, etc., and loans in foreign

currency. The Company has a well-

defined exposure management system

to review its exchange exposure and to

act to mitigate losses.

D. Internal Control Systems and

their Adequacy

The Management Committee

consisting of senior management meetsevery month to discuss various issues

that directly influence the business and

to take strategic decisions to ensure

that the Companys financial health andshareholders interests are protected.

The Companys systems and internal

controls address the following:

Operational efficiency

Protection and conservation of

resources

Accuracy and promptness in

financial reporting

Compliance with laws and

regulations

The Company has a well-defined

organisational structure, clearly defined

authority levels and well-documented

policy and guidelines facilitated by an IT

infrastructure at the manufacturing

units and marketing offices to ensure

process eff iciencies.

The Internal Audit department of the

Company carries out pre-audit and

post-audit checks, reviews and ensures

that audit observations are acted upon.

The Audit Committee of the Board of

Directors reviews the internal audit

reports and the adequacy of internal

controls.

E. Financial Performance

Revenues

Turnover for the year at Rs.26,304

million increased by 0.9% compared to

previous year, inspite of decrease in sale

of commercial vehicles by 8.6%. This

was achieved mainly through better

mix of vehicles sold and higher sale of

components / CKD packs.

Costs

Cost management continued to be one

of the major focus areas. The thrust

was on consolidating the gains

achieved so far, prioritising resource

allocations, improving productivity and

extracting more value from every

resource used. During the year, the

Company reduced material costs by

about 1.3%. While normal operating

expenses have remained fairly under

control, highest priority was accorded

to Research & Development.

Manpower cost went up during the

year due to wage sett lements at

Hosur II, Ennore and Hyderabad units,

besides incremental impact of the wage

settlements concluded at other units

Rs. Million

2001-02 2000-01 Inc / (Dec) %

Income

Sales 26,304 26,067 0.9

Other Income 180 105 70.5

Total 26,484 26,172 1.2

ExpenditureManufacturing Expenses 18,594 18,628 (0.2)

Employee Expenses 2,600 2,531 2.7

Other Expenses 2,189 2,090 4.7

Depreciation 954 884 7.9

Financial Expenses 825 1,020 (19.1)

Total 25,162 25,153 -

Profit Before Tax 1,322 1,019 29.7

Tax Provision - Current 307 102 200.1

- Deferred 92 - 100.0

Profit After Tax 923 917 1.0

Earnings Per Share (in Rs.) 7.76 7.71 0.6

Cash Earnings Per Share (in Rs.) 16.55 15.14 9.6

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during the previous year. Manpower

cost includes charge of Rs.29.68 milliontowards VRS. This does not, however,

include impact of VRS implemented for

unionised staff at Ennore unit in

April 2002.

Depreciation increased from Rs.884

million in the previous year to Rs.954

million due to full year impact of last

years additions as well as the charge

on additions during the year amounting

to Rs.1,613 million.

The financial expenses registered adecrease of over 19% compared to

previous year due to improved asset

management, reduced credit periods

for customers, better funding mix and

decline in interest rates.

Resources

During the year, the Company incurred

capital expenditure of Rs. 1,453 million

mainly towards investments in Cab

Panel Press Shop for upgraded

aggregates, R&D and InformationTechnology.

Net Current Assets as on 31.3.2002

stood at Rs. 9,825 million as against

the previous year level of Rs.10,223

million. Debtors have come down

substantially to Rs.4,928 million

compared to Rs.6,680 million as at

March 2001, due to tighter credit

policy and lower sales to STUs. Increase

in inventory level is mainly due to

higher level of finished vehicles carried

due to impasse in introduction of CNG

vehicles in National Capital Region

(NCR) and poor offtake of vehicles by

STUs. The high level of cash and bank

balance is due to substantial collections

from Debtors / Bill Discounting during

the last days of the financial year.

Liquidity

The Company enjoys AA- rating for

its long term borrowings and P1+

rating for its Commercial Paper

programme. The Company believes

that it has sufficient liquidity to meet its

working capital requirements and other

anticipated cash outflows.

The Company has considerably reduced

its foreign exchange exposure through

minimising imports and hedging

foreign currency loans. The Company

has been actively monitoring itscurrency / interest rate exposures

through a centralised Treasury

Department.

The Company registered a cash inflow

of Rs.2,507 million from operations.

Net of working capital requirements,

the Company earned a cash inflow of

Rs.3,700 million. After meeting capital

expenditure and other investment

outlays, the net cash inflow for the year

was Rs.1,196 million.

During the year, the Company

improved its PBT significantly by 30%

over previous year from Rs.1,019.41

million (3.9% of turnover) to

Rs.1,322.06 million (5.0% of turnover)

for a marginal 0.9% increase in

turnover. Provision for current taxation

has increased to Rs. 307 million for the

Rs. Million

2001-02 2000-01

Sources of Funds

Shareholders Funds 10,320 11,685

Loan Funds 8,884 9,330

Deferred Tax Liability-Net 1,892

Total 21,096 21,015

Application of Funds

Fixed Assets 10,098 9,613

Investments 1,173 1,179

Net current Assets 9,825 10,223

Total 21,096 21,015


Rs. Million

2001-02 2000-01

Profit from operations 2,507 2,489

(Inc.) / Dec.in Net Working Capital 1,193 1,058

Net cash flow from operating activities 3,700 3,547

Payment for Assets acquisition - net (1,171) (1,130)

Other Investing activities 260 (342)

Cashflow from Financing activities (1,593) (467)

Net Cash inflow / (Outflow) 1,196 1,608

current year as against Rs.102.60 million

in the previous year mainly due to

non-availability of carry forward losses.

However, in conformity with

Accounting Standard No.22 issued by

the Institute of Chartered Accountants

of India on Accounting for Deferred

Taxes on Income , provision of Rs.92.5

million has been made during the year

towards deferred tax liability. Profit

after tax, for the year after adjusting for

deferred taxation liability, works out toRs.922.56 million as against Rs.916.81

million for the previous year.

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F. Outlook

Six consecutive years of below 7% GDP

growth would seem to belie the promise

of the mid-1990s. At the same time,

the Indian economy has shown great

resilience in absorbing a series of

internal and external shocks: the East

Asian crisis of 1997-98, the triple blows

of oil price increase, the Orissa cyclone

and the Gujarat earthquake during

2000-01 and two consecutive years of

negative growth in agricultural

production. This inherent strength of

the economy and the latest signals

from some of the core sectors give rise

to a cautious optimism about the

current year.

Prospects of sustained GDP growth

over 7% can be realised only if fuelledby accelerated growth in agriculture

and infrastructure sectors. The

Governments initiatives to increase

credit flow, promotion of agricultural

product processing export zones,

increased allocation for irrigation

projects, the national highway

development, etc., should provide the

necessary impetus for sustained growth

in years to follow and may be expected

to fuel commercial vehicle industry

demand growth.

The Honourable Supreme Court

recently reaffirmed that operators in

the NCR should ply only CNG fuelled

buses and this is expected to generatefresh orders for the Company from the

Delhi Transport Corporation as well as

from private operators. Another

favourable augury is the resumption of

purchases by some of the STUs. Having

consolidated its presence in the growth

sectors of the commercial vehicle

industry, the Company is in a position

to derive benefits from the market

revival in the offing.


22


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Responsibility in relation to

financial statements

The financial statements have been

prepared in conformity, in all material

respects, w ith the generally accepted

accounting principles in India and the

accounting standards prescribed by

ICAI in a consistent manner and

supported by reasonable and prudent

judgements and estimates. The

Directors believe that the financial

statements reflect true and fair view of

the financial position as on 31.3.2002

and of the results of operations for the

year ended 31.3.2002.

The financial statements have been

audited by M/s M S Krishnaswami &

Rajan and Price Waterhouse in

accordance with generally accepted

auditing standards which include an

assessment of the systems of internal

controls and tests of transactions to the

extent considered necessary by them to

support their opinion.

Going Concern

In the opinion of the Directors, the

Company will be in a position to carry

on its existing commercial vehicles /

engines business and accordingly it is

considered appropriate to prepare the

financial statements on the basis of

going concern.

Maintenance of accounting records

& Internal controls

The company has taken proper andsufficient care for the maintenance of

adequate accounting records as

required by the Statute.

Annexure E to Directors Report Directors Responsibility Statement

Directors Responsibility Statement

as per section 217(2AA) of the

Companies Act, 1956

Directors have overall responsibility for

the Companys internal control system,which is designed to provide a

reasonable assurance for safeguarding

of assets, reliability of financial records

and for preventing and detecting fraud

and other irregularities.

The system of internal control is

monitored by internal audit function,

which encompasses the examination

and evaluation of the adequacy and

effectiveness of the system of internal

control and quality of performance in

carrying out assigned responsibilities.

Internal Audit Department interacts

with all levels of management and the

Statutory Auditors, and reports

significant issues to the Audit

Committee of the Board.

Audit Committee supervises financial

reporting process through review of

accounting and reporting practices,

financial and accounting controls and

financial statements. Audit Committee

also periodically interacts with internaland statutory auditors to ensure quality

and veracity of Companys accounts.

Internal Auditors, Audit Committee and

Statutory Auditors have full and free

access to all the information and

records as considered necessary to carry

out their responsibilities. All the issues

raised by them have been suitably

acted upon and followed up.

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Auditors Report to the Members

1. We have audited the attached

Balance Sheet of ASHOK LEYLANDLIM ITED as at March 31, 2002 and the

relative Profit and Loss Account for the

year ended that date, both signed by us

under reference to this report. These

financial statements are the

responsibility of the Companys

management. Our responsibility is to

express an opinion on these financial

statements based on our audit.

2. We have 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.

3.1 In our opinion and to the best of

our information and according to the

explanations given to us, the aforesaid

Balance Sheet and Profit and Loss

Account read with the Statement on

Significant Accounting Policies and

Notes to the Accounts, give the

information required by the CompaniesAct, 1956, (the Act) in the manner so

required and also 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 the affairs of the

Company as at March 31, 2002 ; and

b) in the case of the Profit and Loss

Account, of the profit for the year

ended that date.

and values based on valuation by an

approved valuer w ithout mentioning

their age. The fixed assets are being

physically verified under a phased

programme of verification which, in our

opinion, is reasonable and no material

discrepancies have been noticed on

such verification.

4.2 The fixed assets have not been

revalued during the year.

4.3 Finished goods, stores, spare

parts and raw materials including

components of the Company at all its

locations have been physically verified

by the Management at reasonable

intervals.

4.4 In our opinion, the procedures of

physical verification of the aforesaid

stocks followed by the Management

are reasonable and adequate in relation

to the size of the Company and the

nature of its business.

4.5 The discrepancies noticed onphysical verification of such stocks were

not material as compared to book

records.

4.6 In our opinion, the valuation of

the aforesaid stocks is fair and proper

in accordance with the normally

accepted accounting principles and is

on the same basis as in the preceding

year.

4.7 The Company has not taken any

loans, secured or unsecured, from

companies, firms or other parties listed

in the register maintained under

Section 301 of the Act.

4.8 The Company has not granted

any loans, secured or unsecured, to

companies, firms or other parties listed

in the register maintained under

Section 301 of the Act.

3.2 We have obtained all the

information and explanations which, tothe best of our knowledge and belief,

were necessary for the purposes of our

audit.

3.3 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.

3.4 The Balance Sheet and Profit and

Loss Account dealt with by this report

are in agreement with the books of

account.

3.5 In our opinion, the aforesaid

Balance Sheet and Profit and Loss

Account comply in all material respects

with the applicable Accounting

Standards issued by the Institute of

Chartered Accountants of India referred

to in sub-section (3C) of Section 211 of

the Act.

3.6 On the basis of written

representations received from the

directors, and taken on record by theBoard of Directors, we report that none

of the directors is prima facie

disqualified as on March 31, 2002 from

being appointed as a Director in terms

of Section 274 (1) (g) of the Act.

4. As required by the

Manufacturing and Other Companies

(Auditors Report) Order, 1988 issued by

the Government of India and on the

basis of such checks as we considered

appropriate and according to the

information and explanations given to

us, we further report that:

4.1 In our opinion, the Company is

maintaining proper records to show full

particulars including quantitative details

and situation of fixed assets except in

the case of furniture, fitt ings and

equipment acquired before 1.10.1973

where the records maintained show

quantitative details with their situation

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4.9 The parties to whom loans or

advances in the nature of loans havebeen given by the Company are

repaying the principal amounts as

stipulated and are also regular in

payment of interest in most cases. In

those cases where principal amounts

and/or interest are not being paid as

stipulated, reasonable steps have been

taken by the Company for recovery of

the principal and/or interest.

4.10 In our opinion, there is an

adequate internal control procedurecommensurate with the size of the

Company and the nature of its business

for the purchase of stores, raw

materials including components, plant

and machinery, equipment and other

assets, and for the sale of goods.

4.11 There were no transactions of

purchase of goods and materials and

sale of goods, materials and services

made in pursuance of contracts or

arrangements entered in the register

maintained under Section 301 of the

Act and aggregating during the year to

Rs.50,000 or more in respect of each

party.

4.12 The Company has a system of

determining unserviceable or damagedstores, raw materials and finished /

trading goods on the basis of technical

evaluation and on the aforesaid basis,

in our opinion, adequate amounts have

been written off such stocks in the

Accounts.

4.13 In the case of public deposits

received by the Company, the

provisions of Section 58A of the Act

and the rules framed thereunder, have

been complied with.

4.14 In our opinion, the Company is

maintaining reasonable records for the

sale and disposal of significant

realisable scrap. The Company does not

have any by-products.

4.15 In our opinion, the Company has

an internal audit system commensurate

with its size and nature of its business.

4.16 On the basis of the records

produced, we are of the opinion that

prima facie, the cost records andaccounts prescribed by the Government

of India under Section 209 (1) (d) of the

Act have been maintained by the

Auditors Report to the Members

For M.S. KRISHNASWAMI & RAJAN S. DATTA

Partner

M.K. RAJAN For and on behalf of7 May, 2002 Partner PRICE WATERHOUSEChennai Chartered Accountants Chartered Accountants

Company. However, we are not

required to carry out and have notcarried out any detailed examination of

such records and accounts.

4.17 The Company is regular in

depositing Provident Fund and

Employees State Insurance dues with

the appropriate authorities.

4.18 At the last day of the year, there

were no material amounts outstanding

in respect of undisputed income tax,

wealth tax, sales tax, customs duty and

excise duty which were due for morethan six months from the date they

became payable.

4.19 During the course of our

examination of the books of account

carried out in accordance with the

generally accepted auditing practices in

India, we have not come across any

personal expenses which have been

charged to Profit and Loss Account.

4.20 The Company is not a sick

industrial company within the meaningof Section 3(1)(o) of the Sick Industrial

Companies (Special Provisions)

Act, 1985.

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31 March,

2001

Schedules Rs. Million Rs. M illion Rs. Million

SOURCES OF FUNDS

Shareholders Funds

Capital 1.1 1,189.29 1,189.29

Reserves and Surplus 1.2 9,180.24 10,598.31

10,369.53 11,787.60

Loan Funds

Secured Loans 1.3 5,919.93 6,388.69

Unsecured Loans 1.4 2,964.56 2,941.39

8,884.49 9,330.08

Deferred Tax Liability - Net 1,891.50

Total 21,145.52 21,117.68

APPLICATION OF FUNDS

Fixed Assets 1.5

Gross Block 16,904.31 15,493.71

Less Depreciation 7,343.32 6,578.30

Net Block 9,560.99 8,915.41

Capital Work-in-Progress 537.35 697.54

10,098.34 9,612.95

Investments 1.6 1,173.38 1,179.64

Current Assets, Loans and Advances

Inventories 1.7 5,953.40 5,176.74

Sundry Debtors 1.8 4,928.46 6,679.52

Cash and Bank Balances 1.9 2,748.94 1,649.20

Loans and Advances 1.10 1,920.96 2,128.54

15,551.76 15,634.00

Less Current Liabilities and Provisions 1.11

Liabilities 4,938.81 4,670.80

Provisions 788.20 740.35

5,727.01 5,411.15

Net Current Assets 9,824.75 10,222.85

Miscellaneous Expenditure 1.12 49.05 102.24

Total 21,145.52 21,117.68

Statement on Signif icant Accounting Policies, Schedules 1.1 to 1.12 and

Notes to the Accounts form part of this Balance Sheet.

N. SUNDARARAJAN For and on behalf of the BoardCompany Secretary

T. ANANTHA NARAYANAN R. SESHASAYEE R.J. SHAHANEYExecutive Director - Finance Managing Director Chairman

This is the Balance Sheet referred to in our report of even date.

For M.S. KRISHNASWAMI & RAJAN S. DATTAPartner

M.K. RAJAN For and on behalf ofPartner PRICE WATERHOUSEChartered Accountants Chartered Accountants

7 May, 2002Chennai

Balance Sheet as at 31 M arch, 2002

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31 March,

2001

Schedules Rs. Million Rs. M illion Rs. Million

INCOME

Sales 2.1 26,304.48 26,066.63

Other Income 2.2 179.43 105.64

26,483.91 26,172.27

EXPENDITURE

Manufacturing and 2.3

Other Expenses 2.4 23,383.18 23,249.05

2.5

Depreciation 2.6 953.55 883.50

Financial Expenses 2.7 825.12 1,020.31

25,161.85 25,152.86

Profit Before Tax 1,322.06 1,019.41

Provision for Taxation Current 307.00 102.60

Deferred 92.50

Profit After Tax 922.56 916.81

Balance Profit from last year 736.44 642.77

Transfer from / (to) - Investment Allowance Reserve 53.40

- Debenture Redemption Reserve (613.34) (526.25)

588.75 473.95

- General Reserve (300.00) (300.00)

1,334.41 1,260.68

Proposed Dividend [Subject to Tax - for 2001-02] 535.18 475.72

Tax on Proposed Dividend 48.52

Balance Profit carried to Balance Sheet 799.23 736.44

Earnings Per Share (Face value Rs. 10) Rs. 7.76 Rs. 7.71

Statement on Signif icant Accounting Policies, Schedules 2.1 to 2.7 and

Notes to the Accounts form part of this Profit and Loss Account.

Profit and Loss AccountFor the Year Ended 31 March, 2002

N. SUNDARARAJAN For and on behalf of the BoardCompany Secretary

T. ANANTHA NARAYANAN R. SESHASAYEE R.J. SHAHANEYExecutive Director - Finance Managing Director Chairman

This is the Profit and Loss Account referred to in our report of even date.

For M.S. KRISHNASWAMI & RAJAN S. DATTAPartner

M.K. RAJAN For and on behalf ofPartner PRICE WATERHOUSEChartered Accountants Chartered Accountants

7 May, 2002Chennai

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Statement on Significant Accounting Policies

1. Accounting Convention

Financial statements are prepared in

accordance with the generally accepted

accounting principles in India under

historical cost convention except so far

as they relate to revaluation of certain

land and buildings. Customs duty is

accounted as and when the liability for

payment arises.

2. Fixed Assets and Depreciation/

Amortisation

2.1 Cost of all civil works (includingelectrification and fittings) is capitalised

with the exception of alterations and

modifications of a capital nature to

existing structures where the cost of

such alteration or modification is

Rs. 1 Lakh and below. Cost of other

fixed assets, where it exceeds

Rs. 10,000 and the estimated useful

life is two years or more, is capitalised.

Cost of initial spares and tools is

capitalised along with the respective

assets. Cost of fixed assets is net of

credits under Cenvat Scheme. Interest

and other related costs, including

amortised costs of borrowings

attributable to major projects are

capitalised as part of the cost of the

respective assets.

2.2 Assets are depreciated/amortised

(100% or 95% of the cost as the case

may be) on straight line basis:

a) in respect of Leasehold Land, over

40 years or the period of the lease,

whichever is less;

b) in respect of Buildings and Plant

and Machinery (except technical know-

how fees) at the rates specified in

Schedule XIV to the Companies Act,

1956; and

c) in respect of other assets (including

technical know-how fees), over their

estimated useful lives, subject to

statutory requirements.

In respect of Leasehold Land and

Buildings subject to revaluation as at

31 December, 1984, depreciation/

amortisation is calculated on therespective revalued amounts, over the

balance useful life as determined by the

valuers in the case of buildings and as

per (a) above in the case of land.

2.3 Depreciation/Amortisation is

charged for the full year on the

additions made during the f irst half of

the year and for six months on the

additions made during the second half

of the year. Changes to the cost of an

asset in subsequent years aredepreciated/amortised in the same way

as done in the case of the original cost

of the asset. No depreciation is

provided for in respect of assets

disposed of during the year.

3. Investments

Current Investments are valued at cost

or market value whichever is lower.

Long Term Investments are stated at

cost less provision for diminution other

than temporary, if any, in value of suchinvestments.

4. Inventories

4.1 Inventories are valued at cost or net

realisable value whichever is lower; cost

is ascertained on the following basis:

Stores, Spares, Consumable tools,

Raw materials and components: on

monthly moving weighted average

basis. In respect of works-made

components, cost includes applicableproduction overheads.

Work-in-Progress, Finished / Trading

goods: under absorption costing

method.

4.2 Cost includes taxes and duties and

is net of credits under Cenvat Scheme.

4.3 Cost of patterns and dies is

amortised equally over five years.

4.4 Surplus / Obsolete / Slow moving

inventories are adequately providedfor.

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Statement on Significant Accounting Policies

over the period of such borrowings.

Premium paid on prepayment of anyborrowing is amortised over the

unexpired period thereof or sixty

months, whichever is less.

Compensation under Voluntary

Retirement Scheme is amortised over

thirty six months.

7. Revenue Recognition

Revenue from sale of products is

recognised on despatch or

appropriation of goods in accordance

with the terms of sale and is inclusive

of excise duty and export incentives,

but net of commission and rebate.

Revenue arising due to price escalation

claim is recognised in the period when

such claim is made in accordance with

terms of sale.

8. Government Grants

Grants in the form of Capital/

Investment subsidy are treated as

Capital Reserve. Incentives in the

nature of subsidies given by the

Government are reckoned in revenue in

the year of eligibility.

9. Research and Development

Expenditure on the design and

production of prototypes is charged to

revenue as incurred.

10. Retirement Benefits

Liabilities for gratuity to all employees

and for superannuation to the eligibleemployees are determined in

accordance with the schemes

administered by Life Insurance

Corporation of India and contributions

payable under the said schemes are

charged to revenue. Liability f or leave

encashment is provided on actuarial

basis.

5. Foreign Currency Transaction

5.1 All foreign currency transactions

are recorded at the rates prevailing on

the date of the transaction.

5.2 All foreign currency assets and

liabilities, other than investments and

those covered by forward contracts, are

restated at the exchange rate prevailing

at year end.

5.3 Investments outside India are

carried in the Balance Sheet at the rates

prevailing on the date of the

transaction. Foreign currency assets and

liabilities covered by forward contracts

are stated at the contracted rates.

5.4 Income / Expenditure of Over-

seas Branches are recognised at the

average rate prevailing during the

month in which transaction occurred.

5.5 Exchange differences arising on

booking of forward contracts are

recognised as income or expense over

the life of t he contract, except in

respect of liabilities incurred for

acquiring fixed assets, in which case

such dif ferences are adjusted to the

cost of the fixed assets.

5.6 All other exchange differences

arising out of actual purchase/sale of

foreign currencies (including

substitution of one foreign currency

loan by another) and those arising out

of restatement mentioned in 5.2 above

are:

(a) adjusted to the cost of fixedassets, if the foreign currency liability

concerned is contracted for acquisition

of fixed assets, and

(b) recognised as income/expense for

the period, in all other cases.

6. Amortisation of Deferred

Expenditure

Expenditure incurred on issue of

debentures / raising loans is amortised

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31 M arch, 31 March,

2002 2001

Rs. Million Rs. Million

1.1 CAPITAL

Authorised

150,000,000 Equity Shares of Rs. 10 each 1,500.00 1,500.00

Subscribed

118,929,420 Equity Shares of Rs. 10 each fully paid up 1,189.29 1,189.29

Add Forfeited Shares (Rs. 3,800)

1,189.29 1,189.29

1. Issued Capital

a) 33,005,163 Shares of Rs. 5 each, issued

earlier, consolidated and divided into

Shares of Rs. 10 each 165.03 165.03

b) 34,174,294 Shares of Rs. 10 each issued by

way of conversion of Debentures 341.74 341.74c) 32,315,724 Shares of Rs. 10 each issued through

Global Depository Receipts 323.16 323.16

d) 35,957,288 Shares of Rs. 10 each 359.57 359.57

1,189.50 1,189.50

2. Shares allotted under an agreement without payment being

received in cash 1,478,888 1,478,888

3. Shares allotted as fully paid up by way of Bonus Shares by

capitalisation out of General Reserve and from Share Premium account 6,230,811 6,230,811

4. LRLIH Ltd., the holding Company, holds 44,116,668 Equity

Shares of Rs. 10 each and 5,486,669 Global Depository

Receipts equivalent to 16,460,007 Equity Shares of Rs. 10 each31 March, Additions/ 31 M arch,

2001 (Deductions) 2002

1.2 RESERVES AND SURPLUS Rs. Million Rs. Million Rs. Million

Capital Reserve 8.95 8.95

Revaluation Reserve 271.66 (6.45)* 265.21

Share Premium 6,388.36 6,388.36

613.34

Debenture Redemption Reserve 1,059.58 (588.75) 1,084.17

300.00

General Reserve 2,133.32 (1,799.00)* * 634.32

Surplus - Balance in Profit and Loss Account 736.44 799.23

10,598.31 9,180.24

* Refer Note 3.7 (b) to the Accounts.

* * Refer Note 5 (a) to the Accounts.

Schedules to Balance Sheet

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Schedules to Balance Sheet (Continued)

31 M arch, 31 March,

2002 2001

Rs. Million Rs. Million

1.3 SECURED LOANS

Debentures 4,336.70 5,116.68

Term Loans

From Banks 1,430.00 400.00

From Financial Institutions 34.55 691.46

Post Shipment Credit 118.68 180.55

5,919.93 6,388.69

1. a) Debentures and Term Loans from Financial Institutions and Banks aggregating Rs. 5,766.70 Million (2000-01:

Rs. 5,666.68 Million) are secured by a f irst charge created on certain immovable properties and movable assets of the

Company.

b ) Debentures and Term Loans from Financial Institutions aggregating Rs. 34.55 Mill ion (2000-01: Rs.541.46 Million) are secured

by a second charge on certain immovable properties and movable assets of the Company.

c) In respect of Debenture series AL3 to AL6, issued during the year, formalities regarding creation of security are in progress.

d) Cash Credit facility is secured by a first charge on certain movable assets and goods-in-transit and book debts (excluding

deferred receivables) and also by a charge on the immovable properties subordinate to the existing charge created in favour

of the lenders.

e) Post Shipment Credit is secured by deposit of Bills of Exchange accepted by the customers and in certain cases is also

guaranteed by t

Annual Report 0102

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