scooters india limited · (iii) scooters india limited has been a pioneer in bringing out various...

Scooters India Limited(A Government of India Enterprise)An ISO 9001 and ISO 14001 Company

36th ANNUAL REPORT2007-08

Any thing that moves

Moves better with "Vikram"

SCOOTERS INDIA LIMITED

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Contents Page No.

Board of Directors 3

Directors' Report 4

Management Discussion & Analysis 5

Corporate Governance Report 13

Auditors' Report 22

Comments of C & AG u/s 619(4) of the Companies Act. 1956 27

Management Replies to the Auditors' Report 28

Balance Sheet 30

Profit & Loss Account 31

Notes Annexed to and forming part of the accounts 44

Accounting Policies 54

Cash flow statement 59

Business Profile 61

Notice 62

SCOOTERS INDIA LTD.Serving the Common man Since 1972


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BOARD OF DIRECTORSFunctional DirectorShri Ajai Kumar - Chairman-cum-Managing Director w.e.f. 23.04.08Shri P. Muthusamy - Director (Finance) w.e.f. 12.09.06

(Addl. charge of Chairman & Managing Director from 13.04.2007 to 22.04.2008)Shri P. P. Sarkar - Director (Technical) w.e.f. 16.05.2007GOI, Nominee DirectorsShri Manoj Kumar Singh - GOI, Nominee Director w.e.f. 03.11.2006 to 22.05.2007Shri Shashank Goel - GOI, Nominee Director w.e.f. 22.05.2007 to 16.11.2007Shri Vikram Gulati - GOI, Nominee Director w.e.f. 16.11.2007Independent DirectorsShri S.K. Tripathi - Director w.e.f. 06.07.2007Shri P. K. Brahma - Director w.e.f. 08.02.2007Prof. S. Chakraborty - Director w.e.f. 31.01.2007

M/s Krishna Sharma & Co.,Chartered Accountants,Avanbhai Mansion,3, Vidhan Sabha Marg,Lucknow-226 001.

M/s Sanjay Rajiv & Company,Chartered Accountants,1st Floor, YMCA Complex,13, Rana Pratap Marg,Lucknow-226 001.

M/s Dhirendra Tripathi & Co.,Chartered Accountants,C-121, Indira Nagar,Lucknow-226 016.

M/s Jayaswal Associates,Chartered Accountants,A-160, IInd Floor,Vikas Marg, Shakarpur,Delhi-110 092.

M/s Suhas S. Marathe & Co.,Chartered Accountants,H-01, Manek Nagar,Pardeshi Ali,Panvel-410 206, Raigad.

M/s A.K. Mukherjee & Co.Chartered Accountants,58/1, Kali Banerjee Lane,Howrah-711 101.

M/s R. Balaji & Co.Chartered Accountants,New No.2, Balaji Street,Rangarajapuram,Chennai-600 024.

M/s K.S. Ramakrishna & Co.Chartered Accountants,285 & 286, 2nd Floor,Chenoy Trade Centre,'C' Block, Park Lane,Secunderabad-500 003.

INTERNAL AUDITORS

The Delhi Stock ExchangeAssociation Ltd.,DSE House,3/1 Asaf Ali Road,New Delhi - 110002

Bombay Stock Exchange Ltd.,1st Floor,Phiroze Jeejeebhoy Towers,Dalal Street,Mumbai - 400001

STOCK EXCHANGES

Statutory AuditorGirish Gupta & Associates,Chartered Accountants3/24, Vishal Khand,Gomti Nagar, Lucknow-226010.

Cost AuditorsShri R. N. TripathiC-121, Indira Nagar,Faizabad Road,Lucknow-226016.

BankersState Bank of IndiaIndian Overseas BankAllahabad Bank

Delhi Sales & Liaison Office64-65, Najafgarh RoadIndustrial Area,New Delhi-110015.

Registered Office & WorksLucknow-Kanpur Road,(16th Mile Stone),Post Bag No. 23 (GPO),(P.O.) Sarojini Nagar,Lucknow-226008.

Registrar & Transfer AgentSkyline Financial Services Pvt. Ltd.,123, Vinoba Puri, Lajpat Nagar - II,New Delhi - 110024.


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DIRECTORS' REPORT

Dear Shareholders,

The Board of Directors of your Company is pleased to present the 36th Annual Report on the businessand operations of the Company together with the audited Balance Sheet and Profit and Loss Accountand Auditors' Report thereon for the financial year ended 31st March, 2008.

1. PRODUCTION REVIEW :The production performance for the year is shown below in physical terms :

Description 2006-2007 2007-2008Three wheelers (in Nos) 15,162 11,512

2. SALES REVIEW :The Sales performance for the year is shown below :

2006-2007 2007-2008Description Physical Financial Physical Financial

(in Nos.) (Rs. in lakhs) (in Nos.) (Rs. in lakhs)Three Wheelers 15,239 17,056.59 12,221 13,477.22Spares - 875.65 - 902.88Petrol, Diesel, Lubricants etc. - 1,087.73 - 834.93Other Sales - 108.83 - 62.84

TOTAL - 19,128.80 - 15,277.87

3. FINANCIAL REVIEW :The salient features of the Company's financial results for the year under review are as follows:

(Rs. in Lakhs)2006-2007 2007-2008

a) Profit/(Loss) before Depreciation (836.36) (2,058.53)b) Depreciation 202.46 184.70c) Profit/(Loss) for the year (1038.82) (2,243.23)d) Prior period adjustment (1204.18) -e) Income Tax - -f) FBT 7.20 4.05

Net Profit/(Loss) (PAT) (2250.20) (2,247.28)

During the year under review the company registered a loss of Rs. 22.47 crores compared to Rs.22.50 crores in the previous years.

4. CONTRIBUTION TO NATIONAL EXCHEQUERThe company has contributed a sum of Rs. 3,752.39 lakhs to the exchequer during the period underreview.


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5. EXPORTSYour company has achieved exports of Rs. 41.03 lakhs during the period under review. The royaltyincome by way of foreign exchange remittances amounted to be Rs. 167 lakhs during the year.

6. MANAGEMENT DISCUSSION AND ANALYSIS:(A) Mission, Vision & Objective

Mission To improve the performance of the company so as to be competitive andprofitable.

Vision To fulfill customer's needs for economic and safe mode of road transportand quality engineering products through contemporary technologies.

Objective Providing economical and safe means of transportation with contemporarytechnology for movement of cargo and people.

Providing eco-friendly, flawless and reliable products to high quality to fulfilcustomer needs.

Achieving customers' satisfaction by providing products and services atcompetitive price.

Improving and upgrading present 3-wheeler products including engines toachieve growth in market share.

Improve productivity by skilful addition of Jigs & fixtures, wherever required,

servicing of old machines and replacing whenever necessary, introductingmodern manufacturing and quality assurance practice.

Empower employees of SIL with knowledge and skills to the extent that theywill be capable of managing sustained growth rate with minimal support.

(B) MARKET SCENARIO(i) The total number of 3 wheelers produced and sold in the domestic market by manufacturersin India during the year 2007-08 as against 2006-07 is given below :

Category ProductionSegment/Sub-segment Apr.06-Mar.07 Apr.07-Mar.08Passenger Carrier (in Nos) 3,85,562 3,67,676

Goods Carrier (in Nos) 1,70,564 1,32,916

Total : 5,56,126 5,00,592Sales

Passenger Carrier (in Nos) 2,37,175 2,32,132

Goods Carrier (in Nos) 1,66,735 1,32,571

Total : 4,03,910 3,64,703Note : Sales excludes Export of 1,43,896 Nos. in 2006-07 and 1,41,235 Nos. in 2007-08.

(ii) 3-Wheeler growth drivers are as under : Source-SIAM

Increased disposable income.Rapid urbanization with cities becoming larger increasing need for mobility.Need for economically viable transport solution.


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The domestic demand for 3-wheelers passengers version is driven by availability of permits.Increased demand from Semi-Urban & Rural Areas.Wider product range/choice available to customer.Real Price of products going down.Greater Finance Options.Apart from macro economic factors, major demand drivers have been :

High product maneuverability & driveability. Ideal for congested Indian roads and tropical condtions.

Self-employment opportunity for a large segment of youth.

The domestic demand of passenger version of 3-wheelers driven by availability of permits.

Greater acceptability due to eco-friendly & mass transportation mean.

(iii) Scooters India Limited has been a pioneer in bringing out various models of 3-wheelers runningon petrol, diesel, electric and gas for application as both passengers and load carrier versions.Company has played an important role in popularizing of 3-wheelers of larger capacities in thecountry.

The company continues to be leader in passenger carrier (6+1) segment of vehicles and hasa share of 55.35% in 2007-08 as against 51.71% in 2006-07. With various cities legislating infavour of CNG/LPG vehicles, the company has greared itself to introduce new products on CNG/LPG mode during 2008-09.

(C) Resources and Liquidity :The Cash Flow constraints due to cash losses could be managed due to better managementof working capital.

(D) Quality :Your company is an ISO 9001 : 2000 company. The company has taken several initiatives toensure that the best quality products are made available to its customers.

(E) Opportunities & threats :E.1. Opportunities :1. GDP growth is expected to be in the range of 8.53% (NCAER) showing development in infrastructureincluding roads connecting smaller towns to cities, which would facilitate running of smaller vehicles.

2. CNG and LPG would be fuel of choice due to low emission and this would give opportunity for3-wheelers run on LPG & CNG.

E.2 Threats :1. Smaller passenger vehicle and sub 1.0 ton load carriers on 4-wheels have been introduced/ isbeing introduced by other automobile companies.

2. Rise in cost of fuel and problems in issue of permits by Regional Transport Authorities shall continueto pose problem for growth of 3-wheeler industry.

(F) Outlook :i) Challenges faced by the Company :1) The need for consistency in quality demands for enhanced investment in R & D and upgradationof plant & machinery. Existing over-lived plant & machinery is a cause of concern.

2) Manpower cost in the company is high and so is the average age profile of the employees. Whileyour company needs to reduce its manpower cost at the same time it also needs to infuse freshblood.


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3) Through 3-Wheeler as industry continue to grow but increase in competition and availability of4-Wheeler in 1.0 ton category is expected to aggravate the extremely competitive scenario and impactthe volumes & margin.4) Emission and safety norms are getting continuously upgraded by authorities which call for productupgradation and investments.(ii) Strategic Road Map :When Auto sector in India has been showing impressive improvement for the past few years, theperformance of your company has not been impressive enough as is evident from the financial results.With the help of Govt. of India, a study was undertaken to address the various issues faced by thecompany. Based on the outcome of the report a short term project proposal of product improvement,manpower training and upgradation of facilities for testing and evaluation has been taken up by yourcompany at approved cost of Rs. 18.63 crores. The implementation of the project is expected tobring in 'no problem vehicle'; modification of existing 3-wheelers to comply with the changing emissionand safety rules; introduction of 3-wheeler upgrades to meet the market requirements; upgradationof CAE/CAD and Testing and evaluation facilities in addition to addressing various manufacturing andother issues. The project had already commenced w.e.f. 1.5.2007 and expected to be completedin 36 months.This is expected to result in improvement in operational efficiency of the company and also enablethe company to go for higher volume of production and sales to sustain itself in the long run.

7. EXPENDITURE ON ADVERTISEMENT AND PUBLICITY :An expenditure of Rs. 42.28 lakhs was incurred on account of advertisement and publicity duringthe year.

8. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THECOMPANY WHICH HAVE OCCURRED FROM 1.4.2008 TO DATE :No material change and commitments have been made by the company from 01-04-08 to date thathas adverse effect on the financial position of the company.

9. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGEEARNINGS AND OUTGO :Your company is an ISO 9001 : 2000 certified which focuses on quality management system.Information in accordance with provision of Section 217 (1) (e) of the Companies Act, 1956 regardingthe conservation of energy, technology absorption and foreign exchange earnings and outflow aregiven in Annexure - I to this report.

10. PARTICULARS OF EMPLOYEES :No employee of the company is getting salary more than the prescribed limits. Accordingly informationunder Sec. 217(2-A) of the Companies Act, 1956 read with the Companies (Particulars of Employees)Rules, 1975 be treated as NIL.

11. INDUSTRIAL RELATIONS :During the year under review, the industrial relations in the Company remained, by and large, peacefuland cordial.

12. VIGILANCE :Vigilance Group continues to function with particular emphasis on the aspects of preventive andcorrective vigilance. In selected areas, surprise checks and system studies were carried out andthe improvements suggested were implemented. Company also observed Vigilance Awareness weekfrom 12.11.2007 to 16.11.2007. The employees participated in various programmes enthusiastically.


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13. HUMAN RESOURCE DEVELOPMENT :Company treats its employees as key resources and facilitates their development and upgradationof their skills in both technical and managerial fields with due emphasis on Product upgradation,Quality & Environmental Management Systems, Motivational aspects, Attitudinal Change etc.

14. HINDI IMPLEMENTATION :Official Language implementation Committee monitors and reviews the progress of implementationof the Annual Programme issued by Department of Offical Language, Ministry of Home Affair,Government. of India. Hindi Divas is commemorated every year by observing offical language weekin the month of September. Various competitions are organized for employees and winners areorganized for employees and winners are felicitated.

15. RESERVATION FOR SCHEDULED CASTES & SCHEDULED TRIBES :As on 31.3.2008, the total strength of the Company was 1467. Out of these, 280 employees belongto Scheduled Castes and 01 employees to Scheduled Tribes.

16. DIRECTORS :During the year under report Shri Shashank Goel was appointed as GOI, Nominee Director viceShri Manoj Kumar Singh w.e.f. 22.05.2007. Shri Vikram Gulati was appointed as GOI, NomineeDirector, vice Shri Shashank Goel w.e.f. 16.11.2007.Shri Ajai Kumar has joined as Chairman-cum-Managing Director w.e.f. 23rd April 2008. Shri P.Muthusamy, Director (Finance), held the additional charge of Chairman-cum-Managing Directorfrom 13.04.2007 to 22.04.2008.

17. DIRECTORS' RESPONSIBILITY STATEMENT:Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respectto Directors' Responsibility Statement, it is hereby confirmed :(a) That in the preparation of the accounts for the financial year ended 31st March 2008, the applicable

accounting standards have been followed along with proper explanation relating to materialdepartures;

(b) That the Directors have selected such accounting policies and applied them consistently andmade judgements and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and of the profitor loss of the Company for the year under review;

(c) That the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(d) That the Directors have prepared the accounts for the financial year ended 31st March 2008on a 'going concern' basis.

18. ADEQUACY OF INTERNAL CONTROL :SIL has proper and adequate system of internal controls to ensure that all activities are monitoredand controlled against any unauthorised use of disposition of assets, and that the transactionsare authorised, recorded and reported correctly.SIL ensures adherence to all internal control policies and procedures as well as compliance withall regulatory guidelines.

19. FIXED DEPOSITS :The Company has not accepted any deposits during the year.


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20. NO DEFAULT :The company has not defaulted in payment of Interest and/or in repayment of loans to any FinancialInstitution and / or to Banks and / or to Government of India during the period under review.

21. AUDITORS REPORT :M/s Girish Gupta & Associates have been appointed by the Comptroller and Auditor General ofIndia, as Statutory Auditors of the Company for the year 2007-08.

The Accounts of the Company were also submitted to the Comptroller & Auditor General of India fortheir report under Section 619(4) of the Companies Act 1956.

Management replies to the Auditor Report are attached as Annexure-III to this report.

22. COST AUDITOR :Shri R.N. Tripathi, Cost Accountant, Lucknow has been appointed as Cost Auditor of the Companyvide letter No. 52/412/CAB-89(CLB) dated 13th June, 2006 from the Government of India, Ministryof Law, Justice & Company Affairs, Deptt. of Company Affairs, for auditing cost records relatingto manufacture of Motor Vehicles for the financial year ending 31st March, 2008 and 31st March2009.

23. CORPORATE GOVERNANCE :A certificate from the auditors of the Company regarding compliance of conditions of CorporateGovernance as stipulated under Clause 49 of the Listing Agreement alongwith the reporton Corporate Governance is attached as Annexure-II to this report.

24. ACKNOWLEDGEMENT :The Board of Directors would like to express their grateful appreciation for the sincere supportand co-operation extended by its Bankers, Financial Institutions, Dealers and Suppliers. TheDirectors would also like to express their sincere thanks for the co-operation and advicereceived from Government of India, particularly, Department of Heavy Industry, the State Governmentand the local authorities for their continued support, co-operation and guidance.

Your Directors wish to place on record their deep sense of appreciation for the devoted services ofemployees, and to you, our Shareholders, the Directors are deeply grateful for the confidence and faithreposed in us.

For and on behalf of the Board

Ajai KumarChairman-cum-Managing Director

Place : LucknowDate : 30th July, 2008


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ANNEXURE -II. CONSERVATION OF ENERGY :

(a) Measures being takenCompressors

Stopping wastage of compressed air.Periodic servicing of suction filters, moisture traps, unloader and delivery valves.

WaterMonitoring of control of water wastage.Recycling of cooling water.

PowerControl of maximum demand in peak hours.Monitoring and control of power factor on regular basis.Monitoring and control of electricity consumption in different sections of the plant.By using low consumption accessories and equipments.Full capacity utilization of ovens and furnaces.

(b) Additional investment and proposalsInstallation of power monitoring equipments at 33 KV Sub station and plant.

(c&d) Impact of Energy Consumption Measures, Total energy consumption andenergy consumption per unit of production as per Form 'A' in respect ofindustries specified in the scheme thereto.The details are given in attached Annexure 1-A.

II. TECHNOLOGY ABSORPTION :Efforts made in technology absorption as per Form-B attached as Annexure I-B.

III. FOREIGN EXCHANGE EARNINGS AND OUTGO :(a) Efforts and initiative in relation to exports :

Foreign exchange on account of Royalty income has decreased from Rs. 248.71lakhs in the previous year to Rs. 167.32 lakhs in the current year. Foreign Exchangeearned by way of export of goods is Rs.20.62 lakhs in 2007-08 as compared toRs. 18.19 lakhs during previous year.

(b) Earnings and Outgo :(Rs. in lakhs)

2006-2007 2007-2008

Foreign Exchange earnings 266.90 187.94Foreign Exchange outgo 24.06 15.39


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ANNEXURE -IAForm - A

Form for Disclosure of particulars with respect to Conservation of Energy.

Description 2006-2007 2007-2008

A. Power and fuel consumption1. Electricity

a) PurchasedUnit* 7,226,810 6,272,400Total Amount (Rs.) 34,524,444 30,228,147Rate / Unit (Rs.) 4.78 4.819

b) Own Generationi) Through Diesel Generator

Unit* 2,160 1,590Units per litre of diesel oil 1.05 1.000Cost / Unit (Rs.) 23.02 35.00

ii) Through Steam Turbine / Gen. N.A. N.A.Unit* NIL NILUnit per litre of diesel oil NIL NILCost / Unit (Rs.) NIL NIL

2. Coal N.A. N.A.Quantity (Ton) NIL NILTotal Cost NIL NILAverage rate NIL NIL

3. (a) Furnace OilQuantity (Ton) 164.427 99.870Total Amount (Rs.) 3,614,086.46 2,198,982.5Average Rate per Kg. (Rs.) 21.98 22.02

(b) Light Diesel OilQuantity (Kilo litres) 84.00 96000Total Amount (Rs.) 2,495,547.62 2,117,740.20Average Rate per Kg. (Rs.) 29.71 22.06

4. Others / Internal generation N.A. N.A.(Please give details)

Quantity NIL NILTotal cost NIL NILRate / Unit NIL NIL

B. Consumption per unit of production

Description Standards 2006-2007 2007-2008(if any)

Production (in Nos.) - 15,162 11,512Electricity (Unit) - 476.78 544.857Furnace oil (Ton) - 0.011 0.00867Light Diesel oil (Kilo litres) - 0.005 0.00833Coal (Specify quality) - NIL NILOthers (Specify) - NIL NIL

*Unit denotes KWH


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Annexure I-BForm - B

Form for disclosure of particulars with respect to technology absorptionResearch and Development (R&D)

1. Specific areas in which R&D carried out bythe company

2. Benefits derived as a result of the aboveR&D

3. Future plan of action

4. Expenditure on R&DA) CapitalB) RecurringC) TotalD) Total R&D expenditure as a

percentage of total turnover

1. Efforts, in brief, made towards technologyabsorption, adaptation and innovation

2. Benefits derived as a result of the aboveefforts e.g. product improvement, costreduction, product development, importsubstitution etc.

3. In case of imported technology (importedduring the last 5 years reckoned from thebeginning of the financial year), followinginformation may be furnished:

A) Technology imported.B) Year of import.C) Has technology been fully

absorbed?D) If not fully absorbed, areas where

this has not taken place, reasonstherefore and future plans ofaction.

Technology absorption, adaptation and innovation

Development work carried out for making new productsoperating on alternate fuels (CNG / LPG), upgradationof the existing model to meet updated CMVR and alsoimprove reliability.

Vikram 1000-CG running on CNG being market seeded.

The company is working to design and improve system/sub-system for meeting future CMVR requirement.

Product improvement through technical consultancy.

NILRs. 21.01 lakhsRs. 21.01 lakhs0.14%

Officers and staff of R&D have been sponsored fordifferent training programmes relating to technologyabsorption and innovation.

Associative R&D has been carried out with differentorganisations and design houses like ARAI etc. forimprovement, development and product innovation.

Development of Alternate fuel vehicle & improvementin reliability and performance of existing products.

Nil


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Annexure - II

CORPORATE GOVERNANCE

The Company's philosophy of Corporate Governance is aimed at safeguarding and addingvalue to the interest of its various stakeholders including that of shareholders, lenders, employeesand public at large. SIL is committed to good Corporate Governance to ensure that all functionsof the Company are discharged in professionally sound and competent manner.

1.A)SIL’s PHILOSOPHY ON CORPORATE GOVERNANCE

Over the past few years, the transition in the Indian business environment, coupled withliberalization and changing market conditions, has led to a fundamental shift in theManagement’s approach to enhancing shareholder value. In this context corporategovernance has attained paramount importance for ensuring fairness, transparency,accountability & responsibility to all stakeholders. Company believes that all its operationsand actions must serve the underlying goal of enhancing overall shareholder value over asustained period of time.

B. Code of Business Conduct & Ethics

The Board of Directors of the company have adopted a Code of Conduct and Ethics forDirectors and Senior Management incorporating best practices in Corporate Governance.The Code is also available on website of the company www.scootersindia.com. In terms ofClause 49 of the Listing Agreement a confirmation from the CMD/CEO and CFO regardingcompliance with the code by all the Director and Senior Management is given in Annexure-II-A.

C. Whistle Blower Policy

Scooters India Limited has formulated a Whistle Blower Policy to establish procedures forthe submission of complaints or concerns regarding financial statement disclosures,accounting, internal accounting controls, auditing matters or unethical behaviour, actual orsuspected fraud or violations of the Company's Code Conduct.

D. CEO/CFO Certification

In terms of Clause 49 of the Listing Agreement the Certification by CMD/CEO and CFO ofthe financial statment has been obtained and attached as Annexure-II-A.

E. Compliance Certificate of the Auditors

Scooters India Limited has annexed to this report a Certificate obtained from the SatutoryAuditors M/s Girish Gupta & Associates regarding compliance of conditions of CorporateGovernance as stipulated in Clause 49 of the Listing Agreement. (Annexure-II-B)

2. BOARD OF DIRECTORS

The Board of Directors of the Company as on 31.3.2008 is comprised of three ExecutiveDirectors, three Independent Directors and one Director nominated by Govt. of India.


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A) List of DirectorsName of Director Tenure No.of No. of other

other committeeshipDirector

ship

Member Chairman

Wholetime Functional DirectorShri Ajai Kumar, CMD 23.4.2008 till date - - -

Shri P. Muthusamy, Director (Finance) 12.9.06 till date - 2 2

Shri P.P. Sarkar, Director (Technical) 16.5.07 till date - 1 -

Part-time Non Executive Director (Govt. Nominee)Shri Manoj Kumar Singh 3.11.06 - 22.5.07 - - -Shri Shashank Goel 22.5.07 - 16.11.07 - 1 -Shri Vikram Gulati 16.11.07 till date 1 - -Part time Independent DirectorShri S. Chakraborty 31.1.07 till date - 2 1Shri P.K. Brahma 8.2.07 till date - 1 -Shri S.K. Tripathi 6.7.07 till date - 1 -

B) Presence of Directors in Board Meetings and Annual General Meeting held duringthe year.

Sl. Name of BM BM BM BM BM BM AGMNo. Directors dated dated dated dated dated dated dated

30.4.07 31.7.07 26.9.07 29.10.07 20.12.07 24.1.08 26.9.07Total Strenghth 3 6 6 6 6 6 6

1. Shri P. Muthusamy P P P P P P P

2. Shri Manoj Kr. Singh A NA NA NA NA NA NA

3. Shri S. Chakraborty P A P A P P A

4. Shri P. K. Brahma A A P P P P P

5. Shri Shashank Goel NA P P P NA NA P

6. Shri P. P. Sarkar NA P P P P P P

7. Shri S. K. Tripathi NA P P A P A P

8. Shri Vikram Gulati NA NA NA NA P A NA

P = Present, A = Absent, NA = Not Applicable


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There has not been a gap of over four months between two Board Meetings and at least oneBoard Meeting was held in each quarter of the financial year.

C. Information supplied to the BoardThe board is presented with all the relevant information on various vital matters affecting theworking of the company, as well as those that require deliberation at the highest level.Extensive information is provided on various critical items such as :

production, sales and capital expenditure budgets and updates,sales, investments and financial performance statistics,review of zone-wise business,quarterly results of the company,staff matters including senior officers appointments and extensions,legal proceedings by or against the company including show cause demands,notices etc.share transfer and demat compliance,minutes of meetings of Audit Committee and other Committee of the Director,R & D efforts of the company,labour matters and human resources issues,any material default in financial obligation to and by the company or substantial non-payment for goods sold by the company,vigilance and related matters,write-off and disposal of capital items,legal compliance reporting system and other such matters,fatal or serious accidents dangerous occurrence, any material effluent or pollutionproblems,transactions involving payment towards goodwill, brand equity or intellectual property,parliamentary questions.

3. COMMITTEES OF THE BOARDA. Audit Committee :

Terms of referenceThe audit committee provides direction to the audit and risk management function in thecompany and monitors the quality of internal audit.The responsibilities of the audit committeeinclude overseeing the financial reporting process to ensure proper disclosure of financialstatements, recommending appointment/ removal of external auditors and fixing theirremuneration, reviewing the quarterly and annual financial statements before submission tothe board, reviewing findings of internal investigations, discussing the scope of audit withexternal auditors and looking into reasons of substantial defaults, if any, of non-payment tostakeholders. Apart from above, the Audit Committee functions in accordance with Clause49 of the Listing Agreement.Composition of Audit Committee

Sl.No. Name of Director Tenure1. Shri S. Chakraborty 31.1.2007 till date2. Shri P. K. Brahma 30.4.2007 till date3. Shri Shashank Goel 31.7.2007 to 16.11.20074. Shri S. K. Tripathi 26.4.2008 till date

Company secretary as secretary to the committee.


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Meeting and Attendance

Sl. Name of Director 30.4.07 30.7.07 26.9.07 29.10.07 24.1.081 Shri S. Chakraborty P P P A P2 Shri P. Muthusamy P P NA NA NA3 Shri Manoj Kr. Singh A NA NA NA NA4 Shri P. K. Brahma NA A P P P5 Shri Sashank Goel NA NA A P NA

P = Present, A = Absent, NA = Not ApplicableB. Shareholders/Investors Grievance Committee:

Present composition of shareholders/investors grievance committee is :Shri P. Muthusamy : Chairman of the CommitteeShri P. K. Brahma : MemberProf. S. Chakraborty : MemberCompany Secretary as Secretary to the Committee.Details of Shareholders Complaints

Complaints Received Complaints pending28 Nil

C. Share Transfer CommitteePresent composition of Share Transfer Committee is :Shri P. Muthusamy : Chairman of the CommitteeShri P. P. Sarkar : MemberProf. S. Chakraborty : MemberCompany Secretary as Secretary to the Committee.

4. General Body Meetings:The last three Annual General Meetings of the company were held as under :- Year Location Date Time

2004-2005 Sahakarita Bhawan, Lucknow. 27th Sept., 2005 3.00 p.m.2005-2006 Sahakarita Bhawan, Lucknow. 27

th Sept., 2006 3.00 p.m.

2006-2007 Sahakarita Bhawan, Lucknow. 26th Sept., 2007 3.00 p.m.Special Resolution (if any) & Postal Ballot

AGM Date Special Whether Put Through Details Person WhoResolution Postal Ballot of Voting Conducted

Pattern Postal Ballot

27.9.2005 ONE No N.A. N.A. 27.9.2006 ONE No N.A. N.A. 26.9.2007 ONE No N.A. N.A.

- Procedure for Postal Ballot is as per the guidelines.- No Special Resolution is proposed to be conducted through Postal Ballot.


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5. Remuneration policy :The following are the details of the remuneration paid to Directors for the year 2007-08:

(Amount in Rs.)

Name Designation Sitting Salary Benefits & Total& Fee Contribution

Period to PF/Pension/Others

Sri P. Muthusamy Director (Fin.) - 621,753.00 67,375.50 689,128.50

Sri P. P. Sarkar Director - 475,870.26 49,703.00 525,573.26(Tech.)

Total : - 1,097,623.26 117,078.50 1,214,701.00

Apart from the Sitting Fees which is paid in accordance with the Articles of Association ofthe company, all other remuneration paid to Directors are in compliance with Govt. ordersissued from time to time.

6. General Shareholder Information:Annual General Meeting :Date and Time : 29th September, 2008 at 3.00 p.m.Financial Calendar : 1st April, 2007 to 31st March, 2008Venue : Sahakarita Bhawan Auditorium, Lucknow-1.Book Closure date : 15th September, 2008 to 29th September, 2008.Listing of Equity : BSE, DSEStock code : 505141Registrar and transfer Agent : Sky Line Financial Services Limited

123, Vinoba Puri, Lajpat Nagar-II,New Delhi-110024

Dematerialization of Shares : CDSL - 330923As on 31.3.08 : NSDL - 843917Outstanding GDR / ADRs / : NILWarrants or any ConvertibleInstruments, Conversion Date andlikely impact on Equity

Plant Location : Lucknow- Kanpur Road (16th Mile Stone), Post Bag No. 23 (G.P.O) P.O. Sarojini Nagar, Lucknow-226 008.

Address for Investor : Lucknow- Kanpur RoadCorrespondence (16th Mile Stone), Post Bag No.23 (G.P.O)

P.O. Sarojini Nagar, Lucknow-226 008.


18

Stock Prices Script Code : 505141Company Name : Scooters India Ltd. For the period : April, 2007 to March, 2008

Months Open High Low Close No.of No.of Total T/O *SpreadPrice Price Price Price Shares Trades (Rs.) H-L C-O

April 2007 20.30 24.90 20.30 22.65 51824 260 1,185,296.00 4.60 2.35

May 2007 21.90 24.35 20.50 24.00 81113 445 1,838,885.00 3.85 2.10June 2007 24.70 26.80 21.65 22.75 64034 346 1,560,634.00 5.15 -1.95July 2007 22.20 28.20 22.00 24.45 179186 1007 4,262,925.00 6.20 2.25August 2007 23.35 28.80 22.05 28.80 126830 676 3,226,732.00 6.75 5.45September 07 32.00 42.70 26.35 29.10 3869596 12385 135,305,669.00 16.35 -2.90October 2007 28.05 30.10 23.00 28.40 257803 1758 6,908,823.00 7.10 0.35November 2007 30.25 45.65 26.35 34.60 891925 5795 33,091,617.00 19.30 4.35December 200735.00 39.35 33.50 38.95 228140 1161 8,536,870.00 5.85 3.95January 2008 40.85 51.20 26.65 26.65 302348 1747 13,470,968.00 24.55 -14.20February 2008 25.60 28.65 22.90 25.05 103023 573 2,600,594.00 5.75 -0.55March 2008 24.20 25.75 18.70 23.00 75572 378 1,660,050.00 7.05 -1.20

* Spread H-L-> High-Low C-O - > Close - Open

7. Disclosures:a) Disclosures on materially significant related party transactions i.e.

transactions of the Company of material nature, with its promoters, the directorsor the management, their subsidiaries or relatives etc. that may have potentialconflict with the interests of the company at large.Company had no related party transaction except remuneration paid to the Directors.

b) Details of non-compliance by the Company, penalties, structures imposed on theCompany by Stock Exchanges or SEBI, or any statutory authority, on any matterrelated to capital markets, during the last 3 years.None

c) No person has been denied access to Audit Committee

8. Means of communication:

a) Quarterly Results The Company has published quarterly(Approved in the meetings held on 30.4.07, results in Rastriya Swarup, Jansatta express,30.7.07, 29.10.07, 24.1.08) Financial Express and Swantra Bharat

b) Management Discussion and Analysis This forms part of the Directors’ Report,which is posted to the Shareholders of theCompany.

c) Web Site www.scootersindia.com

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


19

10. Distribution of shareholding as on March 31, 2008Shareholding of Share Holders Share Amount in RupeesNominal Value

Category Number % Physical NSDL CDSL TOTALUpto 5000 8663 94.71 6359750 2617220 1191520 101684905001 - 10000 286 3.13 695000 1301450 451540 244799010001 - 20000 101 1.1 440000 864010 305300 160931020001 - 30000 29 0.32 136000 404860 207100 74796030001 - 40000 19 0.21 37000 480580 186700 70428040001 - 50000 15 0.16 93500 485600 138650 71775050001 - 100000 21 0.23 358000 851280 322290 1531570100001 and above 13 0.14 410054900 1434170 506130 411995200TOTAL 9147 100 418174150 8439170 3309230 429922550

Category Percentage1. Central Government 95.382. Nationalised Banks & Financial Institutions 0.063. Corporate Bodies 0.454. Indian Public and Others 4.11

Total 100.00

11. Any Query on the Annual Report : Secretarial Department,Scooters India Limited,Lucknow - Kanpur Road,(16th Mile Stone), Post Bag No. 23 (G.P.O.),P.O. Sarojini Nagar, Lucknow-226 008.


Scooters India Ltd.Lucknow-226 008

9. Share Transfer System

The Company has signed agreement with both NSDL and CDSL on 18th Jan, 2002 and 25th

Feb.2002 respectively. The company has been allotted ISIN Code No. INE 959E01011 andsince then the trading of company's shares is being done in dematerialized form. Thecompany has appointed M/s Skyline Financial Services Pvt. Ltd. 123, Vinoba Puri, LajpatNagar-II, New Delhi-110024, as its Registrar and Transfer Agent (RTA).


20

Annexure-II-A

Certification in terms of clause 49 of the Listing Agreement

1. We have reviewed financial statements and the cash flow statement for the year 2007-08and that to the best of our knowledge and belief :

i) These statements do not contain any materially untrue statement or omit any materialfact or contain statements that might be misleading;

ii) These statements together present a true and fair view of the company's affairsand are in compliance with existing accounting standards, applicable laws andregulations.

2. There are, to the best of our knowledge and belief, no transactions entered into by thecompany during the year which are fraudulent, illegal or violative of the company's codeof conduct.

3. We accept responsibility for establishing and maintaining controls and that we haveevaluated the effectiveness of the internal control systems of the company and we havedisclosed to the auditors and the Audit Committee, deficiencies in the design or operationof internal controls, if any, of which we are aware and the steps we have taken or proposeto take to rectify these deficiencies.

4. We have indicated to the auditors and the Audit Committee :

(i) significant changes in internal control during the year ;

(ii) significant changes in accounting policies during the year and that the same havebeen disclosed in the notes to the financial statements; and

(iii) instances of significant fraud of which we have become aware and the involvementtherein, if any, of the management or and employee having a significant role in thecompany's internal control system.

5. We confirm that all Directors and Members of the Senior Management have affirmedcompliance with SIL's Code of Business Conduct & Ethics.

P. Muthusamy Ajai KumarDirector (F) / CFO C.M.D./ CEO

Place : LucknowDated : 28th July, 2008


21

CERTIFICATE

TO THE MEMBERS OF SCOOTERS INDIA LIMITEDON

CORPORATE GOVERNANCE

We have examined the compliance of conditions of Corporate Governance by Scooters IndiaLimited for the year ended 31st March, 2008 as stipulated in Clause 49 of the Listing Agreementof the said Company with Stock Exchange.

The compliance of conditions of Corporate Governance is responsibility of the management.Our examination was limited to a review of the procedures and implementation thereof adoptedby the Company for ensuring the compliance of the conditions of the Corporate Governance asstipulated in the said Clause. It is neither an audit nor an expression of opinion on the financialstatements of the Company.

In our opinion and to the best of our information and according to the explanations given to us,we certify that the Company has complied with the conditions of Corporate Governance asstipulated in the above mentioned Listing Agreement.

As required by the Guidance Note issued by the Institute of Chartered Accountants of India, wehave to state that no investor grievances were pending for a period exceeding one month as at31st March, 2008 against the Company as per the records maintained by the Company.

We further state that such compliance is neither an assurance as to the future viability of theCompany nor the effectiveness with which the management has conducted the affairs of theCompany.

For Girish Gupta & AssociatesChartered Accountants

Place : LucknowDate : 29th July, 2008.

Harjeet Singh BhatiaPartner

M.No. 403653

ANNEXURE - II-B


22

AUDITORS' REPORTTO THE MEMBERS, SCOOTERS INDIA LIMITED, LUCKNOW

We have audited the attached Balance Sheet of Scooters India Limited, as at 31st

March, 2008 and also the Profit & Loss Account and the Cash Flow Statement for theyear ended on that date annexed thereto. These financial statements are theresponsibility of the Company's management. Our responsibility is to express anopinion on these financial statements based on our audit.

1. We conducted our audit in accordance with auditing standards generally acceptedin India. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

2. As required by the Companies (Auditor's Report) order, 2003 as amended by theCompanies (Auditor's Report) (Amendment) Order, 2004 (the 'Order') issued bythe Central Government of India in terms of sub Section (4A) of section 227 of theCompanies Act, 1956, we enclose in the Annexure a statement on the mattersspecified in Paragraph 4 and 5 of the said order.

Further to our comments in the Annexure referred to in paragraph 2 above, wereport that:

(a) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by the law have been keptby the Company so far as it appears from our examination of those books.

(c) The Balance Sheet and the Profit & Loss Account dealt with by this report arein agreement with the books of account.

(d) In our opinion, the Balance Sheet and the Profit & Loss Account dealt with bythis report, comply with the Accounting Standards referred to in sub-section(3C) of section 211 of the Companies Act,1956.

(e) As per Notification No. GSR 829 (E) dated 21.10.2003 issued by the Departmentof Company Affairs, disqualification of Directors in terms of Clause (g) of Sub-section 1 of Section 274 of the Companies Act, 1956 is not applicable to theCompany being a Government Company.


23

(f) In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts read together with Accounting Policies andNotes thereon give the information required by the Companies Act, 1956 in themanner so required and subject to :

(i) Note No. 5 of schedule 19, regarding balances in debtors/creditors accounts,claims recoverable, advances, assets/material lying with third parties are subjectto adjustments, if any, and details of deposits not available, (ii) Note No. 17 (i)of schedule 19, regarding non-provision of Rs. 278.75 lacs for wage revision,pending approval from government and (iii) Note No. 18 (i) of schedule 19,regarding non provision of filing fee of Rs. 15.01 lacs

give a true and fair view in conformity with accounting principles generallyaccepted in India :

a) in the case of the Balance Sheet, of the state of affairs of the Company, asat 31st March, 2008;

b) in the case of the Profit & Loss Account, of the profit for the year ended onthat date; and

c) in the case of Cash Flow Statement, of the cash flows for the year ended onthat date.



Place : Lucknow Membership No.: 403653Date : 26th July, 2008


24

ANNEXURE TO THE AUDITOR'S REPORT

(Referred to in paragraph 2 of our report of even date)

(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) As informed, all the fixed assets have not been physically verified by themanagement during the year but there is a phased programme of verification whichin our opinion is reasonable having regard to the size of the Company and nature ofits business. No material discrepancies were noticed on such verification.

(c) As informed, the Company has not disposed of substantial part of fixed assetsduring the year thereby affecting the going concern status of the company.

(ii) (a) As explained to us, the physical verification of the inventory (excluding the inventorywith third parties) has been conducted by the management at year end. The frequencyof physical verification should be improved.

(b) In our opinion and according to information and explanations given to us, theprocedures of physical verification inventory followed by the management arereasonable and adequate in relation to the size of the Comany and the nature of itsbusiness.

(c) According to information and explanations given to us, the discrepancies noticedon physical verification of inventory conducted by the management at the year endas compared to book records were not material and have been properly dealt within the books of accounts.

(iii) (a) According to information and explanations given to us, the Company has not grantedany loan, secured or unsecured, to companies, firms or other parties covered inthe register maintained under section 301 in the Act.

(b) According to information and explanations given to us, the Company has not takenany loan, secured or unsecured, from Companies, firms and other parties coveredin the register maintained under section 301 of the Act.

(iv) In our opinion and according to information and explanations given to us, there areadequate internal control systems commensurate with the size of the Company andthe nature of its business for the purchase of inventory and fixed assets and also for thesale of goods. During the course of audit, we have not observed any major weaknessesin internal control system.

(v) According to information and explanations given to us, the company has not made anycontracts or arrangements that needs to be entered in register referred to in Section301 of the Act.


25

(vi) As informed and as per records, the Company has not accepted any deposits from thepublic during the year.

(vii) In our opinion, the Company has an internal audit system commensurate with the sizeand nature of its business.

(viii) We have broadly reviewed the accounts and records maintained by the Companypursuant to the order made by the Central Government for the maintenance of CostRecords under section 209 (I) (d) of the Act and are of the opinion that, prima facie, theprescribed accounts and records have been made and maintained. We have not, however,made a detailed examination of the records with a view to determine whether they areaccurate and complete.

(ix) (a) As per records, the Company is regular in depositing undisputed statutory duesincluding Provident Fund, Investor Education & Protection Fund, Employees StateInsurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, ExciseDuty, Cess and any other statutory dues, to the extent applicable to it, with theappropriate authorities and as informed no undisputed amounts were outstandingas at 31st March, 2008 for a period of more than six months from the date ofbecoming payable, except the following :

Sl. Name of the Statue Nature of the dues Period Amount No. (In Lacs)

1. Kerala Sales Tax Act State Sales Tax 92-93, 93-94 & 94-95 4.22

2. Bihar State Sales Tax Act State Sales Tax 2003-04 & 2005-06 0.26

Total 4.48

(b) The disputed statutory dues aggregating Rs. 158.92 lacs that have not beendeposited on account of matters pending before appropriate authorities are asunder:

Sl. Name of the Statue Nature of Forum where Period AmountNo. the dues dispute is pending (In Lakhs)

1. (a) States Sales Tax Sales Tax & Dy.Com. 77-78,86-87,87-88,92-93, 25.97Acts Interest (Appeal) 93-94,96-97,98-99 & 02-03

(b) States Sales Tax Entry Tax and Comm. of 97-98 to 2006-07 113.77Acts Penality Commercial Taxes

2. Central Sales Tax Central Sales Dy. Com. 92-93 & 93-94 11.30Act Tax (Appeal) 82-83 & 86-87

3. Central Sales Tax Central Asstt. Com 1993-94 7.88Act Sales Tax (C.T.) - V

Total : 158.92


26

(x) The Company has an accumulated losses of Rs. 2885.51 lacs at the end of the financialyear and has incurred cash losses in the financial year under report and and also inthe immediately preceding financial year. The accumulated losses of the company aremore than fifty percent of its net worth.

(xi) According to information and explanations given to us, the company has not grantedloans and advances on the basis of security by way of pledge of shares, debenturesor other securities.

(xii) In our opinion Company is not a Chit Fund or a Nidhi/Mutual Benefit Fund/Society.Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the company.

(xiii) In our opinion and according to information and explanations given to us, the companyis not dealing or trading in shares, securities, debentures and other investments.Accordingly the provisions of clause 4(xiv) of the Order are not applicable to theCompany.

(xiv) According to information and explanations given to us, the company has not given anyguarantee for the loans taken by others from bank or financial institution.

(xv) According to information and explanations given to us, the company has obtained anew term loan amounting to Rs. 160 lacs from Government of India, during the year.The Plan Loan from Government of India has been earmarked for capital expenditureand has been invested in Fixed Deposit for the time being.

(xvi) According to information and explanations given to us and on an overall examination ofthe Balance Sheet, we are of the opinion that funds raised on short term basis have,prima facie, not been used during the year for long term investment.

(xvii) According to information and explanations given to us, the company has not made anypreferential allotment of shares to parties and companies covered in the Registermaintained under section 301 of the Act.

(xviii) According to the information and explanations given to us, as the company has notissued any debentures, therefore, the question of creation of securities or charge inrespect of debentures issued is not applicable.

(xix) The Company has not raised any money by way of public issue during the year.(xx) Based upon the audit procedures performed and the information and explanation

given by the management, we report that no fraud on or by the company has beennoticed or reported during the year.



Place : Lucknow Membership No. 403653Dated : 26th July, 2008.


27

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDERSECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OFSCOOTERS INDIA LIMITED, LUCKNOW FOR THE YEAR ENDED 31st MARCH, 2008.

The preparation of financial statements of Scooters India Limited, Lucknowfor the year ended on 31 March, 2008 in accordance with the financial reportingframework prescribed under the Companies Act, 1956 is the responsibility of themanagement of the company. The statutory auditor appointed by the Comptroller andAuditor General of India under Section 619(2) of the Companies Act, 1956 isresponsible for expressing opinion on these financial statements under section 227of the Companies Act, 1956 based on independent audit in accordance with theauditing and assurance standards prescribed by their professional body the instituteof Chartered Accountants of India. This is stated to have been done by them videtheir Audit Report dated 26 July, 2008.

I on behalf of Comptroller & Auditor General of India have conducted asupplementary audit under section 619(3)(b) of the Companies Act.1956 of thefinancial statement of Scooters India Ltd. for the year ended 31st March, 2008. Thissupplementary audit has been carried out independently without access to the workingpapers (in case of non-review of working papers) of the statutory auditors and islimited primarily to inquiries of the statutory auditors and company personnel andselective examination of some of the accounting records. On the basis of my auditnothing significant has come to my knowledge which would give rise to any commentupon or supplement to Statutory Auditors report under section 619(4) of the CompaniesAct, 1956

For and on the behalf of theComptroller & Auditor General of India

Saroj PunhaniPrincipal Director of Commercial Audit& Ex-Officio Member, Audit Board - II,

New DelhiPlace : New DelhiDate : 21.08.2008


28

TO THE MEMBERS,SCOOTERS INDIA LIMITED, LUCKNOWWe have audited the attached Balance Sheet of Scooters IndiaLimited, as at 31st March, 2008 and also the Profit & LossAccount and the Cash Flow Statement for the year ended onthat date annexed thereto. These financial statements are theresponsibility of the Company's management. Our responsibilityis to express an opinion on these financial statements basedon our audit.1. We conducted our audit in accordance with auditing

standards generally accepted in India. Those standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financial statementsare free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used andsignificant estimates made by management as well asevaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for ouropinion.

2. As required by the Companies (Auditor's Report) order, 2003as amended by the Companies (Auditor's Report)(Amendment) Order, 2004 (the 'Order') issued by the CentralGovernment of India in terms of sub Section (4A) of section227 of the Companies Act, 1956, we enclose in the Annexurea statement on the matters specified in Paragraph 4 and 5of the said order.Further to our comments in the Annexure referred to inparagraph 2 above, we report that:(a) We have obtained all the information and explanations

which to the best of our knowledge and belief werenecessary for the purposes of our audit.

(b) In our opinion, proper books of account as required bythe law have been kept by the Company so far as itappears from our examination of those books.

(c) The Balance Sheet and the Profit & Loss Account dealtwith by this report are in agreement with the books ofaccount.

(d) In our opinion, the Balance Sheet and the Profit & Loss

COMMENTS MANAGEMENT REPLIES

REPLY TO AUDITORS' REPORTANNEXURE - III


29

Account dealt with by this report, comply with theAccounting Standards referred to in sub-section (3C) ofsection 211 of the Companies Act,1956.

(e) As per Notification No. GSR 829 (E) dated 21.10.2003issued by the Department of Company Affairs,disqualification of Directors in terms of Clause (g) ofSub-section 1 of Section 274 of the Companies Act,1956 is not applicable to the Company being aGovernment Company.

(f) In our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts read together with Accounting Policies andNotes thereon give the information required by theCompanies Act, 1956 in the manner so required andsubject to :(i) Note No. 5 of schedule 19, regarding balances in

debtors/creditors accounts, claims recoverable,advances, assets/material lying with third parties aresubject to adjustments, if any, and details of depositsnot available,

(ii) Note No. 17 (i) of schedule 19, regarding non-provision of Rs. 278.75 lacs for wage revision,pending approval from government and

(iii) Note No. 18 (i) of schedule 19, regarding nonprovision of filing fee of Rs. 15.01 lacs

give a true and fair view in conformity with accountingprinciles generally accepted in India;a) in the case of the Balance Sheet, of the state of affairs

of the Company, as at 31st March, 2008;b) in the case of the Profit & Loss Account, of the loss

for the year ended on that date; andc) in the case of Cash Flow Statement, of the cash flows

for the year ended on that date.For Girish Gupta & Associates

Chartered Accountants


Place : Lucknow Membership No.: 403653Date : 26th July, 2008 For and on behalf of Board of

Directors

Ajai KumarChairman cum Managing Director

Place : Lucknow Date : 26.07.2008

Appropriate disclosure hasbeen made vide Note No.5in Schedule 19 under Notesto Account.

Appropriate disclosure has beenmade vide Note No.17 (i) inSchedule 19 under Notes to Account.Appropriate disclosure hasbeen made vide Note No.18 (i)in Schedule 19 under Notes toAccount.


30

BALANCE SHEET AS AT MARCH 31, 2008

SCHEDULE AS AT AS AT31-3-2008 31-3-2007

Rs. Rs.

1. SOURCES OF FUNDSi) Shareholders' Funds

a) Capital 1 534,838,188 518,838,188b) Reserves & Surplus 2 926,083 926,083

535,764,271 519,764,271 ii) Loan Funds

a) Secured Loans 3 157,169,058 198,592,382b) Unsecured Loans 4 74,745,710 80,811,420

231,914,768 279,403,802

767,679,039 799,168,0732. APPLICATION OF FUNDS

i) Fixed Assetsa) Gross Block 5 546,526,083 528,554,677b) Less: Depreciation 357,364,464 339,034,442c) Net Block 189,161,619 189,520,235d) Capital work-in-progress 6 - 767,569

189,161,619 190,287,804ii) Investments 7 - -iii) Current Assets, Loans & Advances 8

a) Inventories 363,870,341 474,389,798b) Sundry Debtors 52,483,772 58,419,473c) Cash and Bank Balances 240,152,043 440,784,360d) Other Current Assets 6,896,317 13,024,678e) Loans and Advances 68,481,542 56,980,563

731,884,015 1,043,598,872

Less :Current Liabilities and Provisions 9

a) Liabilities 296,356,687 382,337,079b) Provisions 146,946,781 118,581,116

443,303,468 500,918,195

Net Current Assets 288,580,547 542,680,677Miscellaneous ExpenditureDeferred Revenue Expenditure 10 1,385,965 2,376,724Profit & Loss Account 288,550,908 63,822,868

767,679,039 799,168,073

Accounting Notes and Contingent Liabilities 19Schedule 1 to 10 alongwith accounting policy are integral part of the Balance-sheet.

C. S. Sundara Murthy P. Muthusamy Ajai KumarG.M. (Finance) Director (Finance) Chairman-cum-Managing Director


As per our separate report of even dateFor Girish Gupta & AssociatesChartered Accountants

Harjeet Singh Bhatia(Partner)

Membership No.403653


31






PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31,2008

SCHEDULE YEAR ENDED YEAR ENDED31-3-2008 31-3-2007

Rs. Rs.

INCOMESales 11 1,521,503,510 1,901,997,087Less : Excise 166,744,143 255,094,075 Net Sales 1,354,759,367 1,646,903,012Other Income 12 62,359,096 73,437,413Accretion / (Decretion) toWork-in-progress and Finished goods 13 -71,600,298 21,220,412

1,345,518,165 1,741,560,837 EXPENDITURE

Materials Consumed 14 818,628,759 1,121,482,262Cost of sales at Petrol Pump 14 81,872,772 107,058,136Employees' Remuneration and Benefits 15 417,103,874 379,204,931Other expenses of Manufacture, Administration,Selling & Distribution 16 199,489,711 192,026,468Depreciation 18,469,955 20,246,333Interest 17 39,260,227 32,719,889

1,574,825,298 1,852,738,019LESS :

Expenditure included in above capitalised 4,984,093 7,295,285 1,569,841,205 1,845,442,734

Profit/(Loss) for the year -224,323,040 -103,881,897Prior Year Adjustments (Net) 18 - 120,418,481 Profit/(Loss) After prior period Adjustments -224,323,040 -224,300,378

Fringe Benefit Tax 405,000 719,914Income Tax - - Profit/(Loss) after Tax -224,728,040 -225,020,292

Balance brought Forward from last year -63,822,868 141,197,424Add : Withdrawl of Reserve for Debts* 20,000,000 Balance carried to Balance Sheet -288,550,908 -63,822,868

Basic/Diluted Earnings Per Share (In Rs.) -5.23 -5.23Basic/Diluted Earnings Per Share Before Prior Period Items (In Rs.) -5.23 -2.43(Note 21 of Schedule 19)

Additional Information 20Schedule 11 to 19, alongwith accounting policy form an integral part of the Profit and Loss Account.


32

Schedules annexed to and forming part of the Balance Sheet as at March 31, 2008.SCHEDULE 1Share Capital

As at As at31.3.2008 31.3.2007

Rs. Rs.

Authorised Capital@

7,50,00,000 Equity Shares (Previous Year 7,50,00,000) 750,000,000 750,000,000 of Rs. 10 each.

Issued Capital42,995,500 Equity Shares(Previous year 42,995,500 ) of Rs. 10 each. 429,955,000 429,955,000

Subscribed and Paid up Capital42,992,255 Equity Shares* 429,922,550 429,922,550(Previous year 42,992,255) of Rs. 10 each.

Forfeited shares 15,638 15,638

Advance against Share Capital 104,900,000 88,900,000

534,838,188 518,838,188

@ Refer note no.18 of Schedule 19.*Of the subscribed and paid up capital 905,000 shares (Previous year 905,000 shares) of Rs.10each allotted to the Government of India during 1972-73 & 1975-76 as fully paid pursuant to acontract without payment being received in cash.

SCHEDULE 2Reserves and Surplus

As at As at31.3.2008 31.3.2007

Rs. Rs.

ReservesCapital Reserve 926,083 926,083

926,083 926,083

Surplus926,083 926,083


33

SCHEDULE 3Secured Loans

As at As at31.3.2008 31.3.2007

Rs. Rs.

Long Term Loan From :PICUP@ - 5,413,334@

Loans and advances from Banks*State Bank of India 119,142,991 95,670,091*Indian Overseas Bank 38,026,067 97,508,957*

157,169,058 198,592,382

@ 1. The long term interest free loan from PICUP against deferment of U.P. Trade Tax & C.S.T. as providedin Sanctioned Rehabilitation Scheme of B.I.F.R. was secured by hypothecation of fixed assets.

* Cash Credit facility from S.B.I. & I.O.B. are secured by hypothecation of inventories / book debts.OD facility from I.O.B is secured by T.D.R's.

SCHEDULE 4Unsecured Loans

As at As at31.3.2008 31.3.2007

Rs. Rs.

Loans from Government of India 74,745,710 80,811,420

Other Loans & Advances - -

From others - -

74,745,710 80,811,420

SCHEDULE 5

Fixed Assets Amount in Rs.

GROSS BLOCK AT COST DEPRECIATION NET BLOCK

As at Additions Ded./Adj./ As at As at Adjustment For the As at As at As atDescription 01.4.2007 during Transfers 31.3.2008 01.4.2007 ----------------------- year 31.3.2008 31.3.2008 01.4.2007

the year Additions Ded//Trf.

Lease Hold Land 1258111 - - 1258111 468296 - - 13979 482275 775836 789815

Building (includingRoads, Servicesand Tubewell) 39197583 - - 39197583 26265462 - - 1123121 27388583 11809000 12932121

Plant andMachinery* 261955633 7528166 - 269483799 126033077 - - 7402489 133435566 136048233 135922556

Special Tools 156910871 5139089 - 162049960 132986638 - - 7118371 140105009 21944951 23924233

HandlingEquipments 10807837 212278 - 11020115 7949721 - - 201851 8151572 2868543 2858116

Furniture/Fixture& Office Equipments 32457718 3352423 75000 35735141 25537808 - 48466 1894379 27383721 8351420 6919910

Electrical Equipments,Installation & Fittings 16360601 1958297 - 18318898 14594145 - - 115669 14709814 3609084 1766456

Vehicles # 9606323 158078 301925 9462476 5199295 - 91467 600096 5707924 3754552 4407028

Total 528554677 18348331 376925 546526083 339034442 - 139933 18469955 357364464 189161619 189520235

Previous year 519608836 9298193 352352 528554677 317554048 1234061 - 20246333 339034442 189520235 -

* Includes pattern & dies with others amounting to Rs. 966807 (Previous year 966807)# Includes Electric Vehicles with others amounting to Rs. Nil (Previous Year Rs. 2285516)Note : Amount of borrowing cost capitalised during the year is Nil. (Previous Year Rs. Nil)

SCO

OTER

S IN

DIA

LIMITED

3434

SCO

OTER

S IN

DIA

LIMITED


35

SCHEDULE 6

Capital Work-in-progress

As at As at31.3.2008 31.3.2007

Rs. Rs.

Plant and Machinery - 767,569 - 767,569

SCHEDULE 7

Investments

As at As at31.3.2008 31.3.2007

Rs. Rs.

Investment at cost ( Unquoted fully paid )*UP Instruments Limited 1,550,300 1,550,300155,030 Equity Shares of Rs.10 each.

UP Tyres & Tubes Limited 5,228,000 5,228,000522,800 Equity Shares of Rs. 10 each.

Co-operative Electric Supply Society Limited 57,000 57,0005,700 Equity Shares of Rs.10 each.

6,835,300 6,835,300

Less : Provision for estimated loss in value** 6,835,300 6,835,300 - -

* All investments are long term.** Refer Note No.4 of Schedule 19.


36

SCHEDULE 8Current Assets, Loans and Advances

As at As at31.3.2008 31.3.2007

Rs. Rs.

i) Inventories :Raw Materials* 90,762,326 123,936,405Stores and Spares 18,855,932 21,185,838Loose Tools and Consumables* 31,805,496 28,878,893Work-in-progress** 79,045,769 70,476,471Finished goods 149,974,290 230,143,886Material-in-transit 8,850,495 15,693,649Material under Inspection 64,238 -Disposal Stores 444,604 444,604Other Stocks 2,074,319 1,548,045

381,877,469 492,307,791Less : Provision for Inventory Obsolescence

a) General Provision @ 0.5% 567,747 783,886 b) Specific Provision @ 90% 15,655,688 15,350,414

: Provision for material lying with sub- Contractor doubtful of recovery 1,783,693 1,783,693

363,870,341 474,389,798

* Raw - materials, loose tools and consumables lying with sub - contractors / Licenceesamount to Rs. 9,254,880 (Previous year Rs.11,107,686)

** Includes Vehicles valuing Rs. 14,063,813 awaiting testing / duty paid (Previous YearRs. 6,886,554) against which 90% provision has been made.

ii) Sundry Debtors ( unsecured )Debts outstanding for a period exceeding 6 monthsConsidered good 14,564,454 27,460,066Considered doubtful 34,457,960 28,188,054

49,022,414 55,648,120Other debts considered good 37,919,318 30,959,407

86,941,732 86,607,527Less : Provision for doubtful debts 34,457,960 28,188,054

52,483,772 58,419,473

iii) Cash and Bank BalancesCash and stamps in hand 251,455 541,066Cheques in hand 11,736,569 26,382,116Term deposits with Scheduled Banks 200,339,299 392,131,797Balances with Scheduled Banks 27,824,720 21,729,381

240,152,043 440,784,360


37

SCHEDULE 8 Contd.

As at As at31.3.2008 31.3.2007

Rs. Rs.

iv) Other Current AssetsRoyalty receivable 4,322,767 6,890,197Interest accrued on term deposits 2,573,550 6,134,481

6,896,317 13,024,678

v) Loans and Advances(Advances recoverable in cash or kind or forvalue to be received)

Secured considered good 48,180 140,572Unsecured considered good :

1) a) Deposits 13,848,614 15,104,973b) Others # 54,584,748 41,735,018

2) Considered doubtful 10,407,628 10,428,347 78,889,170 67,408,910

Less : Provision for doubtful advances 10,407,628 10,428,347

68,481,542 56,980,563

Total ( i ) to ( v ) 731,884,015 1,043,598,872

# Include Due from DirectorsMaximum balance due from Directorsat any time during the year NIL 17,370Balance at the end of the year NIL NIL

- -


38

SCHEDULE 9Current Liabilities and Provisions

As at As at31.3.2008 31.3.2007

Rs. Rs.

i) Current LiabilitiesAcceptances 25,324,932 73,118,702Sundry Creditorsi) Total Dues of SSI undertakings) - -ii) Total Dues of Creditors other than SSI 147,431,207 169,014,758

Undertaking(s)Advances and Deposits 41,812,154 38,546,926Other Liabilities@ 77,972,765 99,113,158Interest accrued but not due on loans 1,888,319 2,543,534Amount Recovered from Workmen Housing Colony* 1,927,310 1,908,611

296,356,687 382,337,079 ii) Provisions

Gratuity 86,088,700 77,469,789Leave Encashment 60,858,081 41,111,327

146,946,781 118,581,116

443,303,468 500,918,195

@ Include Rs. 76,400 ( Previous year Rs. 76,400) on account of advance deposited byworkmen for allotment of House in Workmen's colony.

* The details are :Amount recovered so far from workmen 12,512,369 12,493,670Less : Expenditure on Workmen's Housing Colony 10,585,059 10,585,059

1,927,310 1,908,611

SCHEDULE 10Miscellaneous expenditure(To the extent not written off or adjusted)

As at As at31.3.2008 31.3.2007

Rs. Rs.Deferred Revenue ExpenditureOpening Balance 2,376,724 2,999,227Additions during the year - 434,208

2,376,724 3,433,435Less: Written off & charged to Profit & Loss Account 990,759 1,056,711

1,385,965 2,376,724 Profit & Loss AccountProfit & Loss balance brought forward -63,822,868 161,197,424Loss during the year -224,728,040 -225,020,292 Profit & Loss Debit Balance -288,550,908 -63,822,868


39

Schedules annexed to and forming part of the Profit & Loss Account for the year endedMarch 31, 2008SCHEDULE 11Sales

Year Ended Year Ended31.3.2008 31.3.2007

Rs. Rs.

Three-Wheeler* 1,347,721,700 1,705,659,032Spare-parts 90,288,436 87,565,058Petrol, Diesel, Lubricants etc.** 83,493,374 108,772,997

1,521,503,510 1,901,997,087

*Includes Excise Duty amounting Rs.166,744,143 (Previous year Rs. 255,094,075)**Includes 57,986 ltrs.of petrol, diesel,oil etc. value Rs.2,158,440 (Previous year 69,094 ltrs. valueRs.2,668,231) consumed for internal use.

SCHEDULE 12Other Income


Rs. Rs.

Miscellaneous ReceiptsSale of :

a) Empties 83,295 325,010b) Miscellaneous Items & Scrap 6,201,292 10,558,222

Interest on :a) Advance to suppliers / Dealers - 4,971b) Term deposits 34,715,435 28,884,370c) Others - 76,554

Royalty Received 17,141,197 24,870,921Profit on sale of fixed assets 48,466 -Gain in exchange rate - -Excess Provision written back 521,934 317,722Other receipts 3,647,477 8,399,643

Total 62,359,096 73,437,413


40

SCHEDULE 13Accretion / (Decretion) to Work-in-progress and Finished Goods


Rs. Rs.Opening StockFinished Goods 230,143,886 223,039,080Work-in-progress 70,476,471 67,100,644Less : material Adjustment A/c - 10,739,779

( A ) 300,620,357 279,399,945Closing StockFinished Goods 149,974,290 230,143,886Work-in-progress 79,045,769 70,476,471

( B ) 229,020,059 300,620,357

Accretion / (Decretion) ( B - A ) (71,600,298) 21,220,412

SCHEDULE 14Consumption of Materials


Rs. Rs.

(I) Consumption of Materials :a) Raw Materials and Components

Opening Stock 124,381,009 78,584,662Add : Purchases 786,185,086 1,167,293,643

910,566,095 1,245,878,305

b) Less :

i) Closing Stock 91,206,931 124,381,009ii) Shortages in inventory written off 730,405 15,034

91,937,336 124,396,043

c) Consumption of Materials ( a - b ) 818,628,759 1,121,482,262

(II) Petrol Pumpa) Opening Stock 1,192,949 1,116,749

Add : Purchases 81,962,067 107,155,97583,155,016 108,272,724

b) Less : i) Closing Stock 1,226,298 1,192,949 ii) Shortages written off 55,946 21,639

1,282,244 1,214,588

c) Cost of sales at Petrol Pump ( a - b ) 81,872,772 107,058,136


41

SCHEDULE 15

Employees’ Remuneration and Benefits


Rs. Rs.

Salaries , Wages and Bonus * 281,336,504 276,555,483Leave Encashment 35,057,769 16,102,492Contribution to PF 18,347,666 17,332,070Employer’s share of Pension Contribution 10,441,995 10,724,613Interest Subsidy on House Building Loans 404,183 345,629Contribution to ESI scheme 262,722 173,267Contribution to Employees’ Group Insurance 1,197,855 1,210,520Medical benefits 13,715,626 13,431,748Canteen expenses 4,908,293 5,028,803Transport expenses 8,450,410 8,133,784Rent ( Leasehold accommodation ) 10,335 10,140Gratuity 35,705,102 23,811,086Leave travel assistance 4,028,500 4,297,879Uniform 1,760,517 183,711Benevolent expenses 544,100 830,750Children education allowance 267,550 343,041Other expenses 664,747 689,915

Total 417,103,874 379,204,931

* Includes stipend paid to the trainees / apprentices Rs.7,459,308.02 (Previous year Rs.1,508,726.75).The above schedule includes payments to wholetime Directors (including Chairman-cum-Managing Director). The details of salaries etc. are as under :

2007-2008 2006-2007No. of Directors 2 2

Rs. Rs.

( I ) Salaries 1,120,290 995,745( ii ) Contribution to PF 117,023 103,499( iii ) Gratuity 350,000 64,191( iv ) Others (L.T.A., Leave Encashment, Group Insurance) 560,765 144,848


42

SCHEDULE 16

Other Expenses of Manufacture, Administration, Selling and Distribution


Rs. Rs.

Manufacturing expenses :Stores, Spares and Tools 28,780,351 34,799,653Power & Fuel 32,848,188 36,604,485Repairs : a) Plant and Machinery 7,374,399 5,875,349

b) Factory Building 702,454 1,524,428c) Non-Factory Building 675 14,154d) Others 3,089,305 2,817,454

Research and Development 2,101,234 2,628,491Fabrication Charges 19,688 -Excise Duty (Net) 21,756,640 3,424,344Cess Duty 194,256 -Education Cess 658,527 -

97,525,717 87,688,358

Administrative expenses :Rent 1,699,446 1,659,114Postage, Telegram & Telephone 2,293,029 2,741,597Directors' Sitting Fees 21,000 -Directors’ Travelling Expenses 740,066 539,367Travelling Expenses 4,965,360 5,524,213Printing and Stationery 1,463,871 1,738,138Board Meeting Expenses 15,535 1,171Legal Expenses 2,827,827 3,387,288Consultancy Charges 29,306,118 729,213Rates and Taxes 429,411 392,948Vehicle Running and Maintenance 328,488 303,959Bank Charges 1,442,287 1,786,977Insurance 472,030 471,995Miscellaneous Expenses 2,058,083 1,336,670

48,062,551 20,612,650


43

SCHEDULE 16 contd.


Rs. Rs.Selling and Distribution expenses :Demands and Interest on Taxes 196,850 1,458,451Advertisement 4,227,787 6,102,086Sales Promotion Expenses 64,887 3,410Freight & Packing Expenses 14,341,287 15,835,936Service Expenses ( Free Coupon/After Sales Service ) 11,426,932 12,456,084Cash Discount & Incentives 14,926,900 16,477,244Service Tax - 2,261,342Loss in Exchange Rate due to Fluctuation 175,979 245,923

45,360,622 54,840,476OthersBad and Doubtful Debts, Advances and others written off 188,965 234,353Deferred Revenue Expenditure Written Off 990,759 1,056,711Provision for Doubtful / Debts, Advances 7,109,968 25,321,464Provision for inventory obsolescence 251,129 2,215,456Loss in Value of Investment - 57,000

8,540,821 28,884,984

Total 199,489,711 192,026,468

SCHEDULE 17Interest


Rs. Rs.

Interest on Loans and Advances from :Government of India 9,357,641 9,024,220Banks 29,902,586 23,695,669

39,260,227 32,719,889

SCHEDULE 18Prior Period Adjustments


Rs. Rs.

Provision ForGratuity - 79,641,289Leave Encashment - 27,580,804Income Tax Expense for F.Y. 2004-05 - 1,223,927Depreciation - 1,234,061Expenditure on Repairs & Maintenance (Building) - 24,702Interest & Penalties on Taxes - 1,082,942Deposit with Sales Tax Authority - 5,022Fringe Benefit Tax - -868,498Liability for Cess on Turnover - -245,546Material Adjustment A/c - 10,739,778

- 120,418,481


44

SCHEDULE 19

Notes annexed to and forming part of the accounts

As at As at31.3.2008 31.3.2007

Rs. in Lakhs Rs. in Lakhs

1. Estimated amount of contracts (net of advances) 98.45 60.00remaining to be executed on Capital Accountsand not provided for.

2. Company is contingently liable for(i) Claims against the Company not

acknowledged as debts.(a) Consumer Forum Cases (Refer Note 20) 6.24 4.53(b) UP Govt. 98.55 98.55(c) One case of Private party 8.73 8.73(d) In connection with guarantee/ 958.39 958.39

Indemnity given by SIL andUPSIDC to OBC.

(ii) Unfavourable Arbitration award in 147.03 131.34the matter between OrdinanceFactory Board and the Company.(Refer Note 19)

(iii) Interest claimed by M/s UPSIC Indeterminate Indeterminate

(iv) Employees' Cases pending beforevarious Court(a) In Labour Court NIL 40.18(b) In Others Indeterminate Indeterminate

(v) The Workmen Housing Colony 2412.00 2412.00 (Refer Note No.6)

(vi) Wage revision (Refer Note No.17(i) 278.75 229.00

(vii) Bank Guarantee in favour of Sales NIL 7.33Tax Department, Chennai

3. Sales-tax assessment both under UPTT and CST have been completed upto financial year2004-05. The Income-tax assessment has been completed upto assessment year 2004-05(financial year ended on March 31, 2004). The company does not foresee any liability againstpending assessment.


45

4. INVESTMENTS :

(a) The Government of India approved participation in the equity share capital of M/s U.P.Instruments Ltd. (A State Government Undertaking) to the extent of Rs.15.68 lakhs, i.e.,49% of equity share capital and the Company/Nominees have so far invested Rs.1,550,300towards equity share capital (Previous year Rs.1,550,300). The Company has beenintimated that all assets including land, building and plant & machinery of UPIL has beensold through Committee constituted by U.P. State Government. Accordingly, the possibleloss for the entire investment of Rs. 15.12 lakhs has been provided for in the Accounts.

(b) The Government of India approved participation in the equity shares of M/s UP Tyres & TubesLtd. (UPTT) (A State Government Undertaking) to the extent of Rs.52.28 lakhs, i.e., 49% of theirequity share capital and the Company / Nominees have so far invested Rs.52.28 lakhs towardsequity share capital (Previous year Rs.52.28 lakhs). As the net worth of UPTT has becomenegative, the estimated realisable value of the shares is considered as Nil. Accordingly, possibleloss in the investment (Rs.52.28 lakhs) has been provided for in the Accounts.

(c) The company invested Rs. 57,000 in the shares of The Co-operative Electric Supply SocietyLimited in the year 1984. In absence of any information regarding the net worth of thecompany, a provision for the same has been made.

5. The balances in the debtors/creditors accounts, claims recoverable, loans and advances,assets/materials with third parties are subject to adjustments, if any, on reconciliation,as most of the above balances have not been confirmed or are showing balances differentfrom SIL books. Details / confirmation of various deposits relating to Electricity, Customs-duty, Port Trust, Octroi, Sales-Tax, Landlord and certain parties are not available / obtained.

6. The Company is in physical possession of the land measuring 41 bigha, 3 biswa and18 biswansi acquired for workmen’s housing colony under "Own Your House Scheme".The compensation determined by the Land Acquisition Officer of U.P. Governmentamounting to Rs. 228,808.44 was paid by the Company. However, subsequently, someland owners entered into litigation for higher compensation before Nagar Mahapalika Tribunalagainst the State Government. The U.P. State Government has filed an appeal before theHon'ble High Court Challenging the order of the Tribunal and final decision is still awaited.The Company has also been impleaded as a party to the said appeal. The additionalliability on the part of the Company, if any, is not ascertainable.

As regards ceiling land measuring 24 bigha, 13 biswa and 16 biswansi, which is in physicalpossession of the Company, the Govt. of U.P. issued an order dated 3rd August 2000giving above land to the Company for the purpose of Workmen Housing colony under"Own Your House Scheme" on lease for 90 years in consideration @ Rs. 4000 per bigha,amounting to Rs. 4.55 lakhs including premium. Payment was made but returnedsubsequently by U.P. Government. Thereafter, U.P. Government revised their earlier ordervide their letter No. 919 (1) 1-12/2003-9151/87-92 dated 8.5.2003 demanding market priceof Rs. 24.12 crores, which was contested by the Company. A recovery notice for Rs.2412 lakhs in addition to collection charges was issued by Tehsildar, Lucknow.

Aggrieved by the recovery notice, Company filed a writ petition in Hon'ble High Court. TheCourt stayed recovery notice and ordered the Company to pay a sum of Rs. 4.55 lakhs toDistrict Magistrate, Lucknow. It has been complied with. Final decision of the Court is awaited.


46

As regards another Forest land for Workmen Housing colony under "Own Your House Scheme"measuring 4 bighas and 13 biswa, which is in physical possession of the Company, for 90years lease, the execution of conveyance deed with the State Government is pending due todelay in completion of procedural formalities by the Forest Department.

The land held for Workmen Housing colony under 'Own Your House Scheme" shall be transferredto workmen after complying with legal and other procedural formalities. Accordingly, the samehas not been included in our Fixed Assets Schedule.

7. The Company held no security in respect of material lying with third parties/contractors to thetune of Rs. 92.55 lakhs (Previous year Rs. 111.08 lakhs), Fixed Asset with third party amountingto Rs. 9.66 lakhs (Previous year Rs. 9.66 lakhs) & Electric Vehicles with third party amountingto Rs. 22.85 lakhs (Previous year Rs. 22.85 lakhs). Provision for material doubtful of recoveryamounting to Rs.17.84 lakhs (Previous year Rs. 17.84 lakhs) has been made.

8. The Company is in physical possession of property at 64-65, Najafgarh Road, New Delhiwhere Regional Office, North Region is located, leased out to Scooters India Limited byM/s Ganesh Flour Mills Ltd. (since nationalised and vested in H.V.O.C. Ltd.). The leaseagreement with M/s Ganesh Flour Mills Ltd. has expired in 1982-83. As there is nocontractual document between the two Companies and based on legal opinion, no liabilitytowards lease rent/royalty has been provided. The Company on record offered for onetime settlement of Rs. 53.80 lakhs for transfer of land which has not been provided in theaccounts pending clarity / decision in the matter.

9. The consumption of material is derived as a balancing figure by adding opening inventorywith purchases during the year and deducting closing inventory.

10. A version of three wheeler Vikram which is battery operated has been developed throughin-house R & D. Some of these vehicles are being run for Techno-Commercial Trials forassessing commercial viability partly by the company itself and partly through authorisedrepresentatives to whom these have been given on rentals. The income generated throughbattery operated vehicles have been accounted for as "other receipts".

11. (a) As on 31.03.2008 there is an outstanding of Rs. 111.01 lakhs (Previous year Rs.115.22 Lakhs) against M/s Amausi Motors Limited, Lucknow. Pursuant to theagreement entered into by the company for liquidating the balance, the outstandinghas come down during the year by Rs. 4.21 Lakhs (Previous year Rs. 46.36 lakhs).

(b) Legal proceedings are in progress for recovery of outstanding in case of 31 dealers,the amount involved as on 31-3-2008 is Rs. 340.76 Lakhs. (Previous year 27 dealersamounting to Rs. 274.94 lakhs).

12. Liability for Grauity & Leave Encashment has been determined by an actuary, apointedfor the purose, in conformity with the principles set out in Accounting Standard 15 thedetails of which are as hereunder.


47

(Rs. in Lakhs)

As at 31.03.2008 As at 31.03.2008

Amount To be Recognised Grauity Leavein Balance Sheet Encashment

Present Value of Funded Obligation 2942.10 1310.58Fair Value of Plan Assets -2081.21 -702.00Net Liability 860.89 608.58Amounts in Balance SheetLiability 860.89 608.58Assets - -Net Liability 860.89 608.58

Expenses to be Recognised in the statement of Profit & Loss

Current Service cost 100.47 84.83Interest on Defined Benefit Obligation 217.42 85.47Expected Return on Plan Assets -176.82 -59.81Net Actuarial Losses / (Gains) Recognised in year 211.74 209.22Total Included "Employees' Emoluments" 352.81 319.71Actual Return on Plan Assets 179.49 57.19

Reconciliation of Benefit Obligations & Plan Assets For the Period

Change in Defined Benefit ObligationOpening Defined Benefit Obligation 2717.80 1068.35Current Service Cost 100.48 84.83Interest Cost 217.42 85.47Actuarial Losses / (Gain) 214.40 206.61Benefits Paid -308.00 -134.68Closing Defined Benefit Obligation 2942.10 1310.58Change in Fair Value of AssetsOpening Fair Value of Plan Assets 1943.11 657.24Expected Return on Plan Assets 176.82 59.81Actuarial Gain / (Losses) 2.66 -2.62Contributions by Employer - -Benefits Paid -41.38 -12.43Closing Fair Value of Plan Assets 2081.21 702.00

Summary of the Actuarial AssumptionsDiscount Rate 7.75% 7.75%Expected Rate of Return on Assets 9.35% 8.80%Salary Escalation Rate - Senior Staff 7.71% 7.71%

- Junior Staff 7.71% 7.71%


48

13. The Company is principally engaged in the business of manufacturing and sale of motor vehicles

and spare-parts (Automobile). Accordingly, there are no other reportable segments as per

AS-17 on segment accounting.

14. The Company does not have any related party transaction as defined in Accounting

Standard-18.

15. As per guidelines issued under AS-28 "Impairment of Assets", the company has

assessed the recoverable amount of the relevant assets and found that no

indication of impairment exists in relation to assets as on 31-03-2008.

16. The Government of India, Ministry of Industry & Public Enterprises, Deptt. of Heavy Industry

released funds amounting to Rs. 160.00 lakhs each towards plan loan & equity during the

year. (previous year 260.00 lakhs).

17. (i) The proposal for the revision of wages of workmen which is to be given effect from

1-1-2002 but is to be implemented with effect from 1-8-2004, as per the agreed terms

with the workmen union, has been submitted to the Administrative Ministry for the

approval of Government of India. The approval is still awaited. The financial implication

of the proposal is estimated at Rs. 278.75 lakhs (previous year Rs. 229 lakhs) as on

31-3-2008. No provision has been made in the Annual Accounts pending approval from

Government of India. However adhoc recoverable advance amounting to Rs. 162.32

lakhs (previous year Rs. 129.96 lakhs) has been disbursed on this account.

(ii) In the absence of the decision on the recommendation of the Pay Committee for PSU

Officers and guidelines in respect of other employees, the Company could not ascertain

the quantum of impact, if any, due to pay revision due with effect from 1.1.2007 and

hence not provided for in the Accounts.

18. (i) The Company increased the authorised capital from Rs. 45 Crores to Rs. 75 Crores, in

its Annual General Meeting held on 25th September, 2004. The Company had filed Form

5 and Form 23 along with requisite filing fee of Rs. 1,500,500/- with Registrar of

Companies, Kanpur for its registration. The Registrar of Companies has returned the

filing fee and advised the Company to approach the Central Government, for exempting

filing fees in view of BIFR order under Section 632 in respect of previous increase from

Rs. 8 crores to Rs. 45 crores. The Administrative Ministry i.e. Ministry


49

of Heavy Industries & Public Enterprise, Department of Heavy Industry, vide letter

No. 3(6)/2005-PE-VI dated 16th May, 2005 has recommended Ministry of Law Justice

& Company Affairs for exemption for payment of filing fees in the first instance i.e.

from Rs. 8 crores to Rs. 45 crores. The Company has not made provision for filing fee

of Rs. 1,500,500/- in the Books of Accounts, pending receipt of final approval/clarification.

However, subsequent to implementation of MCA 21 the company's authorised capital

has been shown as Rs. 75 crore by Registrar of Companies.

(ii) Pending allotment of share to Central Government, the money received is classified as

advance against share capital.

19. An Arbitration award, in the matter between Ordinance Factory Board & the Company has

been issued by the sole arbitrator vide Order Dt. 23-12-2003. An appeal filed with Appellant

Authority has been rejected by Order Dt. 10-04-2007. The company has been permitted by

Committee of Disputes to file a review petition before the Law Secretary on the merits of the

case. Hence no provision is made in the books of accounts and its is shown as a contingent

liability.

20. The amount involved in three cases of Consumer forum is estimated at Rs. 6.24 lakhs. In

remaining 76 cases the amount is indeterminate.

21. Earnings per share (EPS) :

2007-08 2006-07

Profit as per Profit & Loss Account (Rs. In lakhs) -2247.28 -2250.20

Average number of Equity shares 42,992,255 42,992,255

(Face value Rs. 10 each)

Basic and diluted EPS (In Rupees) -5.23 -5.23

Basic and diluted EPS without Prior -5.23 -2.43

period Items (in Rupees)

22. In absence of information from vendors with regard to their registration (filing of memorandum)

under The Micro, Small Medium Enterprises Development Act, 2006, no disclosure have

been made in this regard.


50

23. Computation of deferred tax is tabulated below :

P a r t i c u l a r s As at As at31st March, 08 31st March, 07

(A) Deferred tax liability 1,678,665 2,263,239on account of timing difference withregard to depreciation

Total (A) 1,678,665 2,263,239

(B) Deferred tax Assetson account of timing difference :(a) Disallowance U/s 43B of the I.T. 28,365,665 41,639,488 Act.

(b) Unabsorbed depreciation, carry 22,509,572 245,069,235 forward of losses

Total (B) 50,875,237 286,708,723

Deferred Tax Assets (B-A) 49,196,572 284,445,484

In consideration of prudence, the above deferred tax assets aggregating to Rs. 49,196,572(Previous Year 284,445,484) has not been recognised by the Company in the financialstatements in the current year, since it is not virtually certain whether the Company will havesufficient taxable income in near future against which such deferred tax assets can be realised.The same would be considered at appropriate time keeping in view the availability of sufficientfuture taxable income against which Deferred Tax Assets can be realized.

24. Previous year's figures have been regrouped, rearranged and recast, wherever necessary,to make them comparable with those of the current year.

25. Figures have been rounded off to the nearest rupee.







51

SCHEDULE 20Additional Information pursuant to Schedule VI part II of the Companies Act, 1956Profit & Loss Account1. Licenced and installed capacity and production (In physical terms Unit - Nos.)

Installed Capacity Production

2007-08 2006-07 2007-08 2006-07

Three-wheeler 16,500 16,500 11,512 15,162

Installed Capacity as certified by the Management and relied upon by Auditors, being a technical matter.

2. Stock and Turnover for the year ended March 31, 2008Stocks

At commencement At Close Turnover

Nos. Rs. Nos. Rs. Nos. Rs.

Vikram Three Wheeler 2165 216702031 1426 138438299 12221 1347721700(2242) (209786491) (2165) (216702031) (15239) (1705659032)

Spares & Components - 13441656 - 11535991 - 90288436(-) (13252590) (-) (13441656) (-) (87565058)

Petrol Pump Stock* 31986 1192757 29372 1226298 2195417 83493374(Quantity in Ltrs.) (29817) (1116749) (31986) (1192757) (2763848) (108772997)

Explanatory Notes :* Includes value of empty drums containers etc lying in Petrol Pump stock.

(1) Figures in brackets relate to previous year.(2) NIL Vikram Three-wheelers (E.V.) was capitalised during the year (Previous Year-1 No. amounting to Rs.

202498).(3) Turnover excludes 30 Vikram three-wheeler (E.V.) dismantled during the year (Previous year NIL)(4) Petrol Pump turnover represents the sale of Diesel, Petrol & other Oil & Lubricants. The Company purchased

21,94,155 ltrs. of Diesel/Petrol during the year (Previous Year 27,66,574 ltrs). There has been evaporationloss of 1352.4 ltrs. (Previous Year 557.80 ltrs.)

(5) Turnover includes the following export sales

2007-2008 2006-2007

Nos. Rs. Nos. Rs.Vikram Three-Wheeler 14 1,394,641 - -Spares/components - 2,708,122 - 3,546,308

Note : Export sales includes deemed export of Rs. 20,41,136 (Previous Year Rs. 14,80,951).


52

Schedule 20 contd.

3 C.I.F. Value of Imports, Expenditure and Earnings in foreign currencies.

2007-2008 2006-2007Rs. Rs.

A. C.I.F. Value of ImportsSpare parts/Components - -Capital goods - -Others 71,444 -

71,444 -B. Expenditure in foreign currencies

On account of royalty, know-how, professionalconsultation fees, interest, provisions and others. 1,539,313 2,406,327

1,539,313 2,406,327

C. Earnings in foreign currencies

Export of goods calculated on F.O.B. Basis* 2,061,627 1,819,435Royalty 16,732,397 24,870,921

18,794,024 26,690,356

Explanatory Notes :-1. Earnings in foreign currencies are after adjustment of gain or loss on exchange rates as applicable.* Export Sales does not include Deemed Export.

4 Details of Raw Materials consumed

(i) Raw Materials (including spare parts) and Components. 2007-2008 2006-2007

Materials Unit Qty. Value (Rs.) Qty. Value (Rs.)

Ferrous Kg. 2,931,223 85,826,847 4,077,465 106,795,865Mtrs. 75,971 22,214,551 111,887 28,405,116

Non-ferrous Kg. 188,159 24,401,256 230,813 30,193,417B.O.S.F. - - 214,816,764 - 301,464,352Tyres & Tubes Nos. 97,532 41,750,613 124,488 52,882,718Spare parts & Components - - 429,618,728 - 601,740,794

818,628,759 1,121,482,262

(ii) Value of imported and indigenous raw materials consumed (including spare-parts andcomponents)

2007-2008 2006-2007

Rs. % Rs. %(a) Imported (CIF, custom duty - - - - and other charges)(b) Indigenous 818,628,759 100.00 1,121,482,262 100.00


53

SCHEDULE 20 contd.5 Auditor's Remuneration

2007-2008 2006-2007Rs. Rs.

(a) Statutory Auditor's Audit fee 60,000 50,000(b) Fee for Certification 37,500 35,500

97,500 85,500

The above figures do not include service tax.







54

ACCOUNTING POLICIESAnnexed to and forming part of the Accounts

1. SYSTEM OF ACCOUNTING :

(i) Basic assumptions :

The accounts have been prepared under historical cost convention on accrual basisand as per applicable Mandatory Accounting Standards.

(ii) Going concern :

Accounts have been prepared on the principle applicable to a going concern.

(iii) Use of Estimates :

The preparation of financial statements requires management to make certain estimatesand assumptions that affect the amounts reported in the financial statement andnotes thereto. Differences between actual results and estimates are recognized inthe period in which they materialize.

2. DEPRECIATION :

Premium on leasehold land is amortised over the period of lease.

Depreciation on other fixed assets is charged on straight-line method in accordance withrates prescribed in Schedule XIV to the Companies Act, 1956 as amended from time totime, except.

(a) Plant, Machinery, Equipment and Jigs & Fixtures costing individually Rs. 5000 andbelow are depreciated fully in the year of purchase.

(b) In case of tools where estimated useful life is greater than five years but less than tenyears, depreciation is charged @ 20% as was being done prior to introduction ofSchedule XIV.

Depreciation is not provided on assets which have been declared surplus and are not inuse. These are distinctively shown under other Current Assets at net realisable value.

3. INVENTORIES :

(i) Raw materials, components, stores & spares, tools, consumables and other stocksare valued at cost (net of CENVAT) determined on FIFO Basis. Scrap and disposablegoods are valued at estimated realisable value.

(ii) Stock-in-trade is valued at lower of cost or realisable value.


55

(iii) Work-in-progress is valued at cost. Where the jobs are in progress their conversioncost is taken at 50% of the standard cost regardless of the stage of completion.Completed jobs pending inspection are valued at cost or realisable value whichever isless.

(iv) Customs duty on bonded material is allocated to the cost of goods and equipment.

(v) Expenditure on stationery, uniform, medicine etc. is charged off to revenue at the timeof receipt. But the stock remaining at the year end are credited to the revenue accountat cost and shown as closing stock.

4. FIXED ASSETS :

(i) Fixed Assets are stated at original cost and are inclusive of all expenses to bringthem to a state of use.

(ii) Land is valued at original cost.

(iii) The cost of the leasehold land is amortized over the lease span.

(iv) The tools manufactured departmentally costing individually Rs.5000 and below areaccounted for as revenue expenditure under relevant natural heads.

(v) Construction period expenses exclusively attributable to projects are capitalized.

(vi) Borrowing cost directly attributable in relation to acquisition, construction of assetsthat takes substantial period of time to get ready for its intended use are capitalisedas part of the cost of such assets upto the date when such assets are ready forintended use. Other borrowing costs are charged as expenses in Profit & Loss Accountin the year in which they are incurred.

5. INTANGIBLE ASSET :Intangible assets are stated at cost of acquisition less accumulated amortisation. TechnicalKnowhow is amortised over the useful life of the underlying plant. Computer Software isamortised over a period of 6 years. Amortisation is done on straight line basis.

6. INVESTMENTS :Investments are valued at cost. However, in case of permanent diminution in the value ofinvestments, suitable provision is made in the books of accounts.

7. CENVATCenvat credit on eligible Revenue / Capital purchase is taken on receipt of such materials.


56

8. PROVISION FOR REDUNDANCY/OBSOLESCENCE :A general provision for redundancy is made at 0.5% of the value of closing inventory of rawmaterials and components, loose tools, stores and spares excluding finished goods,W.I.P., gasoline in petrol pump, medicines, materials in bond and under inspection.Wherever necessary, additional provision for redundancy/obsolescence of inventory ismade in individual cases keeping in view their realisable value.

9. SALES :Sales are set up as per the Sale of Goods Act. They represent value of goods sold at theex-factory price plus incidentals like freight, insurance etc. embedded in the sale price.

10. DUTIES ON BONDED STOCK :Excise duty on finished stocks lying in bond is provided for, on the assessable valueapplicable for each product.

11. ACCOUNTING FOR INCOME AND EXPENDITURE :Income and expenditure are accounted for in the current year on accrual basis undernatural heads of account.

12. FOREIGN EXCHANGE VARIATION :Assets and liabilities, other than the non-monetary items which are carried in terms ofhistorical costs, relating to transactions involving foreign currency are converted at theexchange rates prevailing at the year end. Any loss or gain arising out of conversions isadjusted in the profit and loss account.

13. RETIREMENT BENEFITS :Contribution to Provident Fund is made to the company's provident fund trust. The fund iscompared to aggregate liability, is additionally contributed by the company and recognizedas expenses. Gratuity and Leave Encashment liability is ascertained on actuarial valuation.However, any deficit in funds managed by LIC as compared to the actuarial liability isrecognised as liability immediately.

The compensation payable under Voluntary Retirement Scheme is amortised equallyover a period of five financial years but not later than financial year ending on 31st March,2010.


57

14. RESEARCH AND DEVELOPMENT :Expenditure relating to product approvals including type approvals, consistency ofproduction approvals from testing agencies and materials specifically procured fordevelopment of products are charged as Research & Development Expenses and otherexpenditure of Research and Development are charged off to the Profit and Loss Accountunder natural heads of accounts. Expenditure which results in creation of capital assetsis taken to fixed assets and depreciation is provided as applicable. Prototype vehiclessubmitted to testing agencies are booked under finished goods.

15. JOBS DONE FOR INTERNAL USE :Jobs done for internal use are valued on the basis of technical estimates of materials andconversion cost and are distinctly shown as a consolidated deduction from expendituresincluded in Profit & Loss Account.

16. CAPITAL COMMITMENTS & CONTINGENT LIABILITIES :i) CONTINGENT LIABILITIES :

A. Show Cause Notices issued by various Government Authorities are not consideredas Obligation.

B. When the demand notices are raised against such show cause notices and aredisputed by the Company, these are classified as disputed obligations.

C. The treatment in respect of disputed obligations, in each case, are as under :a) a provision is recognised in respect of present obligations where the outflow

of resources is probable;b) all other cases are disclosed as contingent liabilities unless the possibility of

outflow of resources is remote.ii) CAPITAL COMMITMENTS :

Estimated amount of contracts remaining to be executed on capital accounts, ineach case, are considered for disclosure.

17. ACCOUNTING OF GOVERNMENT GRANT :

(i) Government Grant of revenue nature is accounted for in the Profit and Loss Accountunder the head other income to the extent the expenditure is charged to revenue asand when incurred.

(ii) In case of any specific Government grant the treatment in the books of accounts ismade on the basis of specific stipulation for the same.


58

18. TAXES ON INCOME :Provision for current tax is made in accordance with the provisions of the Income Tax Act,1961.

Deferred Tax on account of timing difference between taxable income and accountingincome is provided considering the tax laws enacted or substantively enacted up to theBalance Sheet date.

19. IMPAIRMENT OF FIXED ASSET :The carrying values of fixed assets of the identified cash generating units (CGU) arereviewed for impairment at each Balance Sheet date. When events or changes incircumstances indicate that the carrying values may not be recoverable and the carryingamount exceeds the estimated recoverable amount, the assets of the CGU are writtendown to the recoverable amount and the impairment loss is recognized in the profit andloss account.







59

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2008.

Particulars Current Year Previous year

Cash flow from operating activities :Rs. Rs.

Net Profit/(Loss) before Tax and extra ordinary items -224,323,040 -103,881,897Adjustment for :

Depreciation(i) For Current Year 18,330,022 20,246,333(ii) For Prior Period - 1,234,061Deffered Revenue Expenditure(i) Writen Off for The Year 990,759 1,056,711(ii) Addition For the Year - -434,208Provision for Loss in Value of Investment - 57,000Provision for Doubtful Debts 7,298,933 25,555,816Provision for inventory Obolesence 251,129 2,215,456Interest Income -34,715,435 -28,884,370Interest Paid 39,260,227 32,719,889(Profit)/Loss in exchange rate change 175,979 245,923(Profit)/Loss on sale of fixed assets 51,992 31,643,606 - 54,012,611

Operating profit before working capital changes -192,679,434 -49,869,286Adjustment for :

Trade receivables -1,363,231 158,163,350Inventories 110,268,328 -65,459,891Other current assets 6,128,360 32,726,295Loans & advances -11,500,979 -16,881,977Trade payables -57,614,727 45,917,751 59,940,586 168,488,363

Cash generated/(Loss) from operations : -146,761,683 118,619,077Less Taxes paid :Income Tax - -Fringe Benefit Tax -405,000 -719,914

Cash in flow/(outflow) before extra ordinary items -147,166,683 117,899,163Extra ordinary items :Prior Period Adjustment - -120,418,481(Loss) /Gain in exhange rate -175,979 -175,979 -245,923 -120,664,404

Net cash from operating activities -147,342,662 -2,765,241Cash flow from investing activities :

Increase in fixed assets / capital expenditure -17,580,762 -9,688,708Sale / Adjustments of fixed assets 324,933 -Interest Income 34,715,435 28,884,370

Net cash used in investing activities 17,459,606 19,195,662Cash flow from financing activities :

Interest paid -39,260,227 -32,719,889Increase in share capital 16,000,000 26,000,000Repayment of term loan to G.O.I. -22,065,710 -25,722,900Receipt of long term loan from G.O.I. 16,000,000 26,000,000Repayment of long term loan to PICUP -5,413,334 -56,386,858(Decrease) / Increase in cash credit limits -36,009,990 -58,709,786

Net cash used in financing activities -70,749,261 -121,539,433Net increase / (decrease) in cash and cash equivalents -200,632,317 -105,109,012Cash and cash equivalents (Opening balance) 440,784,360 545,893,372Cash and cash equivalents (Closing balance) 240,152,043 440,784,360


60

Notes to the Cash Flow Statement

1. Cash and Cash Equivalents

Cash and cash equivalents consist of cash and cheques on hand and balances with banks andinvestment in short term deposit accounts. Cash and cash equivalents included in the Cash FlowStatement comprise the following Balance Sheet amounts.

Cash and cash equivalents For the FY 2007-08 For the FY 2006-07as at 31st March'08/31st March'07Cash and stamps in hand 251,455 541,066Cheques in hand 11,736,569 26,382,116Term Deposits with Scheduled Banks 200,339,299 392,131,797Balance with Scheduled Banks 27,824,720 21,729,381Unsecured loans from scheduled banks/ ICDs/CPsCash and Cash Equivlents as restated 240,152,043 440,784,360Net change in cash and Cash equivalents -200,632,317 -105,109,012

2. Cash & Cash Equivalent includes :

(a) Term Deposits for Rs. 105,639,038 (Previous year Rs. 98,357,904) held against L.C. Margin.

(b) Term Deposits for Rs. NIL (Previous year Rs, 150,000,000) held against OD Limit with I.O.B.Lucknow

(c) Term Deposits for Rs. NIL (Previous year Rs. 733,100) held against Bank Guarantee, SalesTax Case with I.O.B. Chennai.

(d) Term Deposits for Rs. 3,766,948 (Previous year Rs. 3,507,312) for E.S.I. Case.

3. "Non-Cash items" comprise of provisions for inventory Obselences, Provisions for bad &Doubtful debts. depreciation, provision for loss in value of investment and write off DeferredRevenue Expenditure.



Place : LucknowDate : 26th July, 2008 Harjeet Singh Bhatia

PartnerMembership No. 403653


61

Additional information relating to Balance-Sheet abstract and Company's GeneralBusiness Profile as per Part IV of Schedule VI to the Companies Act, 1956, Annexed.

BALANCE-SHEET ABSTRACT & COMPANY'S GENERAL BUSINESS PROFILEI Registration details :

Registraton Number 3599 of 1972-73State Code 20 (Uttar Pradesh)Balance Sheet date 31.03.2008

II Capital raised during the year :Public Issue NILRight Issue NILBonus Issue NILPrivate placement NILAdvance against equity capital-G.O.I. 16,000,000

III Position of mobilisation and deployment of funds :Total liabilities 767,679,039Total assets 767,679,039

Sources of funds :a) Paid up capital 534,838,188b) Reserves and surplus 926,083c) Secured loans 157,169,058d) Unsecured loans 74,745,710

Application of funds :a) Net fixed assets 189,161,619b) Investments -c) Net current assets 288,580,547d) Miscellaneous expenditure 1,385,965e) Accumulated losses 288,550,908

IV Performance of company :a) Turnover 1,521,503,510b) Total expenditure 1,569,841,205c) Profit before tax -224,323,040d) Profit after tax -224,728,040e) Earning per share in rupees excluding advance received from Govt. of India -5.23f) Dividend rate (%) NIL

V Generic names of two principal products of the company :Product description ITC - CodeMotorised Three - Wheeler Chassis 870631Motorised Three - Wheelers 870310



Place : Lucknow Harjeet Singh BhatiaDate : 26th July, 2008 Partner

Membership No. 403653

62


NOTICENotice is hereby given that the 36th Annual General Meeting of the members of Scooters IndiaLimited will be held at 3.00 p.m. on Monday, the 29th September, 2008 at Sahkarita BhawanAuditorium, 14, Vidhan Sabha Marg, Lucknow to transact the following business :

Ordinary Business :

1. To receive, consider and adopt the Directors' Report, the Auditors' Report and the AuditedBalance Sheet and Profit & Loss Account of the Company for the year ended 31.03.2008.

2. To appoint a director in place of Mr. P. Muthusamy, who retires by rotation and beingeligible has offered himself for re-appointment.

3. To appoint a director in place of Mr. S. Chakraborty, who retires by rotation and beingeligible has offered himself for re-appointment.

4. To appoint a director in place of Mr. P.K. Brahma, who retires by rotation and beingeligible has offered himself for re-appointment.

5. To consider and, if thought fit, to pass, with or without modification, the following resolutionsas a Special Resolution :

"RESOLVED that pursuant to Section 224(8) (aa) of the Companies Act, 1956, andother applicable provisions, if any, of the Companies Act, 1956 and on the basisof the recommendation of the Audit Committee, the remuneration of the StatutoryAuditors appointed by Comptroller & Auditor General of India (C & AG) under section619(2) of the said act, be and is hereby approved to be fixed at Rs. 60,000/- for theyear 2007-2008 and 2008-2009".

Special Business :

6. To consider and if thought fit, to pass with or without modification(s), the following resolutionas an ordinary resolution :-

"Resolved that Shri Ajai Kumar be and is hereby appointed as a Director"

"RESOLVED FURTHER that appointment of Shri Ajai Kumar as the Chairman -cum-Managing Director of the company in the pay scale of Rs. 25750-650-30950 asper the order of the Govt. of India, Ministry of Heavy Industries & Public Enterprises,Deptt. Of Heavy Industries vide order No. 3-11/2007-PE VI dated on 26th March,2008 for a term of 5 years or till the date of his superannuation or until furtherorders whichever earlier be and is hereby approved."

7. To consider and, if thought fit, to pass with or without modifications, the following asan Ordinary Resolution :-

"Resolved that Shri Vikram Gulati be and is hereby appointed as Director."

63


8. To consider and, if thought fit, to pass with or without modifications, the following asSpecial Resolution :

"RESOLVED that pursuant to the provisions of section 31 of the Companies Act,1956 and other applicable provisions, if any, of the Companies Act, 1956, article116(3) of the Articles of Association of the company, be and is hereby amendedby way of deletion and replacement thereof by new Article 116(3) reading as under :

116(3) The fee payable to a Director (excluding a Managing Director or whole time Director,if any) for attending a meeting of the Board or Committee thereof, shall be suchsum as the Board may from time to time determine in accordance with the provisionsof the Act. The Director(s) appointed by the President, if he/they is/are an employee(s)of Govt. of India, he/they shall be paid according to Government Rules as prevailingin this regard.

By order of the Board of Directors


Place : LucknowDate : 29th August, 2008

64


NOTES :

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TOAPPOINT A PROXY, TO ATTEND AND VOTE INSTEAD OF HIMSELF. SUCH PROXY NEEDNOT BE A MEMBER OF THE COMPANY. PROXIES IN ORDER TO BE EFFECTIVE MUSTBE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THECOMMENCEMENT OF THE MEETING. THE PROXY FORM IS ENCLOSED AT THE ENDOF ANNUAL REPORT.

2. Only Members carrying the attendance slips or holders of valid proxies registered with theCompany will be permitted to attend the meeting. In case of shares held in joint namesor shares held under different registered folios wherein the name of the sole holder/first holderis same, only the first joint holder/sole holder or any proxy appointed by such holder, asthe case may be, will be permitted to attend the meeting.

3. The Register of Members and the Share Transfer Books of the Company will remain closedfrom 15.9.2008 to 29.9.2008 (both days inclusive).

4. Members seeking further information on Accounts or any matter contained in the Notice,are requested to write to the company at least 10 days before the meeting so that relevantinformation can be kept ready at the meeting.

5. Members/Proxies attending the meeting are requested to bring their copy of Annual Reportand exchange, the duly filled attendance slip attached, with entry slip for entrance to themeeting hall.

6. Members should notify change in their addresses, if any, specifying full address withPIN CODE to the Company's registered office quoting their registered Folio No.

7. If shares are held under more than one folio, the same may kindly be consolidated for convenientreference.

8. Entry to the Auditorium will be strictly against Entry Slip available at the counters at thevenue and against exchange of Attendance Slip.

9. Member can avail of nomination facility by filling Form 2 B, as prescribed under Companies(Central Governments) General Rules & Forms, 1956, with the Company. Blank forms willbe supplied on request.

65


EXPLANATORY STATEMENT UNDER SEC. 173(2) OF COMPANIES ACT. 1956 ATTACHEDTO THE NOTICE CONVENING THE 36TH ANNUAL GENERAL MEETING TO BE HELDON 29TH SEPT. 2008

Item No.6 - Shri Ajai Kumar has been appointed as Chairman-cum-Managing Director ofthe company as per the order of Govt. of India, Ministry of Heavy Industries & PublicEnterprises, Dept. of Heavy Industry, vide order No. 3-11/2007-PE VI dated 26th of March2008. The terms and conditions of his appointment are given below :

i) Period - The period of his appointment will be 5 years from 23.4.2008 in the firstinstance or till the date of his superannuation or until further orders, whichever eventoccurs earlier and in accordance with the provisions of the Companies Act.

ii) Pay - Shri Ajai Kumar will draw remuneration in the existing scale of Rs. 25750-650-30950 from the date of his assumption of office as Chairman-cum-Managing Director.

iii) Other Terms & Conditions - as per letter No. 3-11/2007-PE VI from Ministry ofHeavy Industries & Public Enterprises, Deptt. of Heavy Industry.

Notice in writing under section 257 of the Companies Act, 1956 along with a depositof Rs. 500/- has been received from a member signifying his intention of Proposing ShriAjai Kumar as candidate for the office of Director.

The Boards commends the resolution set out in the item No.6 of the notice for your approvalas an ordinary resolution. None of the Director except Shri Ajai Kumar is interested inthe above resolution.

Item No. 7 - Shri Vikram Gulati was appointed as a Director of the company, under article112 (f) of the Articles of Association of the Company, vide letter no. 26(2)2003-PE-VI dated16.11.2007 from Government of India, Ministry of Heavy Industries. Notice in writing undersection 257 of the Companies Act, 1956 along with a deposit of Rs. 500/- has been receivedfrom a member signifying his intention of Proposing Shri Vikram Gulati as candidate forthe office of Director.

The Boards commends the resolution set out in the item No.7 of the notice for your approvalas an ordinary resolution. None of the Director except Shri Vikram Gulati is interested inthe above resolution.

Item No. 8 - The present article 116(3) of the Articles of association prescribes that thesitting fees payable for attending each meeting of board or any committee thereof shallbe Rs. 100/- (which was increase to Rs. 1000/- vide special resolution passed in 32nd annualgeneral meeting dated 25.09.2004) or such other sum as the Company, in General Meeting,

66


may from time to time determine. If is proposed to alter the said article in the mannerprescribed in the item no.8 to this notice, to enable the board to fix sitting fees payableto non-functional directors, from time to time, within the limits prescribed by the CompaniesAct, 1956 or regulations made there under. Pursuant to the provisions of the Section 31of the Companies Act, 1956, the said alteration in the article of association requires theapproval of the shareholders of the company by way of the special resolution.

None of the directors except Shri S. Chakraborty, Shri P.K. Brahma & Shri S.K. Tripathiare concerned or interested in the said resolution.

The board commends the resolution proposed at item no.8 for your approval as a specialresolution.

By order of the Board of Directors


Place : LucknowDate : 29th August, 2008

67


Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, followinginformation is furnished about the Directors

Shri Ajai Kumar, M.Tech. (Mechanical), IIT-Kanpur, started his career with Oil & NaturalGas Corporation Limited and served in various positions and places. Before joining SILas CMD on 23rd April 2008 he was Dy. G.M. (Mech.) with the assignment of Head CentralWorkshop, ONGC, Sivasagar (Assam).

Shri P. Muthusamy - B.Com, AICWA, Started his career with Indian Oil CorporationLimited in 1981 and served in various positions in finance function. Later he joinedNumaligarh Refinery Ltd., a subsidiary of Bharat Petroleum Corporation Limited. Hehas joined the company as Director (Finance) w.e.f. 12.9.2006 and also held the additionalcharge of CMD w.e.f. 13.4.2007 to 22.4.2008.

Shri P.P. Sarkar - holds a B.Tech (Mech.) degree from Indian Institute of Technology,Kanpur and PGDBM degree from Indian Institute of Management, Kolkata. Prior to joiningthe organisation he has worked as Superintending Engineer in ONGC. He has joined thecompany as Director (Tech.) w.e.f. 16th May, 2007.

Shri Vikram Gulati - holds PGDM from MDI, Gurgaon and M.Sc. from Delhi University,Gold Medalist for CGPA in the MBA program. Presently he is Director in Departmentof Heavy Industry and Member Governing Council of Fluid Control Research Institute,Palaghat, Kerala. He is also Government of India, Nominee Director in Tyre corporationof India. He has joined the company as a Government of India, Nominee Director w.e.f.16.11.2007

Shri S. Chakraborty - holds a M. Stats. degree from ISI, Kolkata. He is the Directorof Jaipuria Institute of Management; Lucknow. He has been engaged in teaching, research,training and consultancy activities for nearly 35 years. He has joined the company asIndependent Director w.e.f. 31.1.2007.

Shri P.K. Brahma - holds M.A. (Eco.) from Presidency College (Calcutta University),Speciality in Banking and currency, Masters diploma in Public Administration (IIPA),M.Phil from JNU, PHD (incomplete) Lecturer in Economics in Vidyasagar College, Kolkatabefore joining Indian Audit and Accounts Service. He has joined the company asIndependent Director w.e.f. 8.2.2007.

Shri S.K. Tripathi - holds a post graduate degree in Physics from Lucknow University,joined the IAS-UP Cadre in 1966 and rose to senior positions during a career span ofalmost 38 years. He was also the MD/Chairman of several Public Sector Undertakingsand was recruited to the position of Secretary in various departments of the Govt. ofUP. He retired from IAS on 31st March, 2004 on attaining the age of superannuation. Hehas joined the company as Independent Director w.e.f. 6.7.2007.

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ckno

w -

Kanp

ur R

oad,

(16th

Mile

Sto

ne),

Pos

t Bag

No.

23

(G.P

.O.),

P.O

. Sar

ojin

i Nag

ar, L

uckn

ow -

226

008.

I/We

here

by r

ecor

d m

y/ou

r pr

esen

ce a

t th

e 36

th A

nnua

lG

ener

al M

eetin

g of

the

Com

pany

hel

d on

Mon

day,

29th

Sep

tem

ber,

2008

at

3.00

p.m

. at

Sah

akar

ita B

haw

anA

udito

riun,

14,

Vid

han

Sab

ha M

arg,

Luc

know

-226

001.

Nam

e of

the

Shar

ehol

der:

____

____

____

____

____

____

_(In

Blo

ck L

ette

rs)

Sign

atur

e of

the

:__

____

____

____

____

____

___

Shar

ehol

der

Nam

e of

the

Prox

y:

____

____

____

____

____

____

_(In

Blo

ck L

ette

rs)

Sign

atur

e of

the

Prox

y:

____

____

____

____

____

____

_

Not

es :

1.Yo

u ar

e re

ques

ted

to s

ign

and

hand

this

ove

r at t

heen

tranc

e.2.

If yo

u ar

e at

tend

ing

the

mee

ting

in p

erso

n or

by

prox

y,yo

ur c

opy

of th

e A

nnua

l Rep

ort m

ay p

leas

e be

bro

ught

by y

ou/y

our p

roxy

for r

efer

ence

at t

he m

eetin

g.

PRO

XYSC

OO

TER

S IN

DIA

LIM

ITED

(A G

over

nmen

t of I

ndia

Ent

erpr

ise)

Reg

iste

red

Offi

ce :

Luck

now

- Ka

npur

Roa

d,(1

6th M

ile S

tone

), P

ost B

ag N

o. 2

3 (G

.P.O

.),P.

O. S

aroj

ini N

agar

, Luc

know

- 22

6 00

8.

I/We

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edi

stric

t of..

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ing

a M

EM

BE

R/M

EM

BE

RS

of t

he a

bove

nam

ed C

ompa

nyhe

reby

app

oint

......

......

......

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......

......

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......

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of

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in th

edi

stric

t of..

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.....a

s m

y/ou

rpr

oxy

to v

ote

for

me/

us o

n m

y/ou

r be

half

at th

e 36

th A

nnua

lG

ener

al M

eetin

g of

the

Com

pany

to b

e he

ld o

n 29

th S

epte

mbe

r,20

08 a

nd a

t any

adj

ourn

men

t the

reof

.

Sign

ed th

is ..

......

......

......

... d

ay o

f ....

......

......

......

200

8.

NO

TE :T

HIS

PR

OX

Y F

OR

M D

ULY

FIL

LED

IN

MU

ST

BE

DE

PO

SIT

ED

AT

THE

RE

GIS

TER

ED

OFF

ICE

OF

THE

CO

MPA

NY

AT S

CO

OTE

RS

IND

IA L

IMIT

ED, P

OST

BO

XN

O. 2

3, S

AR

OJI

NIN

AG

AR

P.O

., LU

CK

NO

W-2

2600

8N

OT

LESS

TH

AN 4

8 H

OU

RS

BEFO

RE

THE

TIM

E FO

RH

OLD

ING

TH

E M

EETI

NG.

Affix

Re.

1re

venu

est

amp

Sign

atur

e

CU

T H

ERE

CUT HERE

Reg

d. F

olio

/ C

lient

ID N

o.Fo

rm o

f Pro

xyN

o. o

f Sha

res

held

Reg

d. F

olio

/ C

lient

ID N

o.At

tend

ance

Car

dN

o. o

f Sha

res

held

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